Pier 1 2011 Annual Report Download - page 138

(11) Under the 2006 plan, upon a corporate change (as defined in the plan) the vesting of options may be
accelerated, the options may be surrendered for a cash payment or adjusted at the discretion of the
administrative committee, or the administrative committee may determine to make no changes to the options.
Assuming that upon a corporate change an acceleration of the vesting of the options granted under the 2006
plan occurred, the dollar value shown is the NYSE closing price on February 25, 2011 of $9.78 less the
exercise price times the number of shares that could be acquired upon exercise of the options. The exercise
term would be determined by the administrative committee.
(12) Upon the death or disability of an optionee, the options granted under the 1999 plan and the 2006 plan become
fully exercisable to the extent of all unexercised shares, and may be exercised by the optionee, or, in the case of
death, by the optionee’s estate, until the earlier of (a) the expiration of the option term, or (b) the first
anniversary date of such death or disability. The dollar value shown is the NYSE closing price on February 25,
2011 of $9.78 less the exercise price times the number of shares that could be acquired upon exercise of the
options.
(13) If Mr. Smith’s employment ended as of the end of fiscal 2011 due to a voluntary good reason termination or an
involuntary without cause termination, then pursuant to his employment agreement Mr. Smith would be
entitled to receive through the term of the agreement his compensation and benefits and all restricted stock
which has been granted would vest.
Under Section 4999 of the Internal Revenue Code, a termination of employment which is within one year after
the date of a change in control is presumed to be, unless otherwise rebutted, an event which is closely
associated with a change in control such that payments made on account of the termination of employment
could be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code. The benefits
payments to be made to Mr. Smith and the vesting of restricted stock occurring on account of Mr. Smith’s
termination of employment, if occurring within a year of a change in control, commonly referred to as a
“double trigger,” could be subject to such excise tax. Assuming the preceding, Pier 1 Imports is obligated under
Mr. Smith’s employment agreement to pay Mr. Smith an additional amount such that after payment by
Mr. Smith of all taxes (including the excise tax and any interest and penalties imposed on such taxes) imposed
on such benefits payments, Mr. Smith retains an amount equal to the excise tax imposed on such benefits
payments. A change in control of Pier 1 Imports is specifically excluded as grounds by either Pier 1 Imports or
Mr. Smith to terminate the employment agreement and a change in control of Pier 1 Imports does not constitute
“good reason” under that agreement.
In the event of Mr. Smith’s disability which results in termination of employment, then pursuant to his
employment agreement Mr. Smith would be entitled to receive 13 weeks of compensation and benefits. After
the 13-week period Mr. Smith would participate in any Pier 1 Imports short-term or long-term disability plans
for which he is eligible.
A complete description of Mr. Smith’s employment agreement is described in the Compensation Discussion
and Analysis above under the caption “Executive Compensation Components – Chief Executive Officer
Employment Agreement.”
54