Pier 1 2013 Annual Report Download - page 120

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Also, pursuant to the second renewal and extension, Mr. Smith received 375,000 shares of restricted stock on
March 3, 2013, and will receive 375,000 shares of restricted stock on March 2, 2014 and March 1, 2015. The
restricted stock vests as follows:
• 120,000 of the 375,000 shares of restricted stock are Profit Goal performance-based and vest 40,000
shares upon Pier 1 Imports satisfying the Profit Goal target established by the compensation
committee for the fiscal year in which the shares were received and 40,000 shares in each of the
following two fiscal years upon Pier 1 Imports satisfying the Profit Goal target established by the
compensation committee for the respective fiscal year (each Profit Goal achievement to be
determined upon the filing of Pier 1 Imports’ annual report on Form 10-K for the applicable fiscal
year) and provided that for each fiscal year Mr. Smith is employed on the last day of each such fiscal
year. If the targeted Profit Goal for a particular fiscal year is partially met, then the number of shares
that could vest is adjusted as follows (with interpolation between the target levels):
100% of the Profit Goal target – 40,000 shares (100%);
96% of the Profit Goal target – 36,000 shares (90%);
92% of the Profit Goal target – 32,000 shares (80%);
88% of the Profit Goal target – 28,000 shares (70%);
84% of the Profit Goal target – 24,000 shares (60%); and
80% of the Profit Goal target – 20,000 shares (50%).
Over each three-year performance (vesting) period, if the targeted Profit Goal is not satisfied in any
fiscal year, those performance-based shares that do not vest may still vest if the sum of consecutive
years’ Profit Goals equals or exceeds the sum of the individual consecutive fiscal year Profit Goal
targets;
• 75,000 of the 375,000 shares of restricted stock are TSR performance-based and cliff vest within the
ranges shown on Table 7 for 30,000 target shares following the last day of Pier 1 Imports’ third fiscal
year beginning on the date on which the 75,000 shares were received (a) based upon the percentile
rank of the annual equivalent return of Pier 1 Imports’ TSR within the percentile ranking of the
annual equivalent return of the TSR of each constituent company within a peer group of companies
over the same three-year period, and (b) conditioned upon Mr. Smith’s being employed by Pier 1
Imports on the last day of such third fiscal year; and
• 180,000 of the 375,000 shares of restricted stock are time-based and vest 60,000 shares per year on
the last day of the fiscal year in which the shares were received and on the last day of the following
two fiscal years, provided Mr. Smith is employed on the last day of each such fiscal year.
The first renewal and extension, which expired March 2, 2013, continued the terms from Mr. Smith’s initial
employment agreement, which provided for gross-up payments designed to offset the impact of the excise tax
imposed by Section 4999 of the Internal Revenue Code on payments contingent upon a change in control of Pier 1
Imports. The second renewal and extension, which became effective March 3, 2013, does not provide for any such
gross-up payments.
The second renewal and extension continues the following terms from Mr. Smith’s first renewal and extension:
• A change in control of Pier 1 Imports as grounds for either Pier 1 Imports or Mr. Smith to terminate
the agreement is specifically excluded, and a change in control of Pier 1 Imports does not constitute a
“Good Reason” under the agreement. However, under the Pier 1 Imports, Inc. Supplemental
Retirement Plan, as discussed in footnote #1 to the table included under the caption “Potential
Payments upon Termination or Change in Control” below, Mr. Smith (similar to certain other
participants) would be entitled to receive the present value of the lump-sum amount of the actuarial
equivalent of his benefit assuming that Mr. Smith is involuntarily terminated other than for cause, or
leaves the employment of Pier 1 Imports for good reason (as defined in the plan), within 24 months
of a change in control (as defined in the plan) of Pier 1 Imports; and
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