Pier 1 2011 Annual Report Download - page 61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Restricted stock grants – On December 15, 2009, the Board of Directors approved a renewal and
extension of the CEO’s initial employment agreement dated February 19, 2007. The employment agreement set
forth that a total of 1,500,000 shares of restricted stock will be awarded over a period of more than three years.
On December 18, 2009, the Company granted 375,000 service-based restricted shares that vest equally over a
three-year period on the anniversary date of the grant. On the first day of the 2011 fiscal year the Company
granted, and on the first day of each of the two following fiscal years the Company will grant, the CEO 187,500
service-based awards that vest equally over a three-year period on the last day of each respective fiscal year. In
accordance with the accounting guidance on equity compensation, all 937,500 shares of the time-based restricted
stock included in the renewed and extended employment agreement were granted for accounting purposes as of
the date of the agreement, or December 15, 2009. As of February 26, 2011, only 562,500 of these shares have
been legally granted to the CEO; however, the Company is obligated to grant the remaining 375,000 shares in the
future in accordance with his employment agreement.
On the first day of the 2011 fiscal year the Company granted, and on the first day of each of the two
following fiscal years the Company will grant, the CEO 187,500 performance-based awards that vest equally
over a period of three fiscal years if the Company achieves certain fiscal year performance targets as defined by
the renewed and extended agreement. Shares that do not vest because performance targets are not met during one
fiscal year may vest in future fiscal years if certain levels of performance targets are achieved. The vesting of
performance-based shares will occur on the date the Company’s Form 10-K is filed with the Securities and
Exchange Commission for each respective fiscal year. In accordance with accounting guidelines, only the first
one-third of these performance-based shares had a grant date in fiscal 2011 because the performance targets for
future fiscal years had not been established. The CEO must be employed by the Company on the last day of each
respective fiscal year in order for both the time-based and performance-based shares to vest. These shares could
also vest under certain termination events.
During fiscal 2011, the Company granted long-term incentive awards under the 2006 Plan to employees.
The fiscal 2011 long-term incentive awards were comprised of restricted stock grants that were generally equally
divided between time-based and performance-based shares. The time-based awards vest 33%, 33% and 34% each
year over a three-year period beginning on the first anniversary of the grant date provided that the participant is
employed on the vesting date. The performance-based shares vest 33% upon the Company satisfying certain
performance targets in fiscal 2011 and will vest 33% and 34% for each of the following two fiscal years,
respectively, upon the Company satisfying certain performance targets for the respective fiscal year, provided
that vesting for each fiscal year is conditioned upon the participant being employed on the date of filing of the
Company’s annual report on Form 10-K with the SEC for the applicable fiscal year. Over each three-year
performance (vesting) period, if the performance targets are not satisfied in any fiscal year, those shares that do
not vest may still vest if the sum of consecutive years’ performance target equals or exceeds the sum of the
individual consecutive fiscal year performance targets.
As of February 26, 2011 and February 27, 2010, the Company had 1,657,984 and 1,237,810 unvested
shares of restricted stock awards outstanding, respectively. During fiscal 2011, 836,000 shares of restricted stock
were granted, 371,612 shares of restricted stock vested, and 44,214 shares of restricted stock were cancelled.
During fiscal 2010, 937,500 shares of restricted stock were granted, 217,517 shares of restricted stock vested, and
74,571 shares of restricted stock were cancelled. The weighted average fair market value at the date of grant of
the restricted stock shares granted during fiscal 2011 was $8.38 and is being expensed over the requisite service
period (this amount does not include restricted shares that the Company will begin expensing in future fiscal
years when performance targets are set).
Compensation expense for restricted stock was $3,802,000 or $0.03 per share, $1,762,000, or $0.02 per
share, and $1,649,000, or $ 0.02 per share, in fiscal 2011, 2010, and 2009, respectively. As of February 26, 2011,
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