Pier 1 2014 Annual Report Download - page 117

EXECUTIVE COMPENSATION
Pursuant to Mr. Smith’s employment agreement, Mr. Smith received 375,000 shares of restricted stock on March 3, 2013 and
March 2, 2014, and will receive 375,000 shares of restricted stock on 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 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 Goals established
by the compensation committee for the respective fiscal year, provided that Mr. Smith is employed on the last day of each
such fiscal year. If the 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 — 40,000 shares (100%);
96% of the Profit Goal — 36,000 shares (90%);
92% of the Profit Goal — 32,000 shares (80%);
88% of the Profit Goal — 28,000 shares (70%);
84% of the Profit Goal — 24,000 shares (60%); and
80% of the Profit Goal — 20,000 shares (50%).
Over each three-year performance (vesting) period, if the Profit Goal is not satisfied for any two consecutive fiscal years, those
performance-based shares that do not vest in the first of such two fiscal years may still vest if the sum of consecutive years’
Realized Profits equals or exceeds the sum of the individual consecutive fiscal years’ Profit Goals at the 100% level. Further,
over each three-year performance (vesting) period, if the Profit Goal is not satisfied in any fiscal year, those performance-
based shares that do not vest may still vest if the sum of the three years’ Realized Profits equals or exceeds the sum of the
three individual years’ Profit Goals at the 100% level. The Realized Profit for fiscal 2014 was $230,600,000 and, as a result,
only 60.4% of the shares for fiscal 2014 vested, as described above, upon the date of filing of Pier 1 Imports’ Annual Report
on Form 10-K. The balance of the shares that did not vest in fiscal 2014 may vest in fiscal 2015 or 2016 under this
arrangement.
•75,000 (30,000 at target) of the 375,000 shares of restricted stock are TSR performance-based and cliff vest within the
ranges shown on Table 6 following the last day of Pier 1 Imports’ third fiscal year beginning on the date on which the award
was 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 (at the threshold percentile rank of 41%, 15,000 shares vest; 30,000 shares vest at the target
percentile rank of 50-55%; and 75,000 shares vest at percentile rank of 91% or above), 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.
Mr. Smith’s employment agreement does not provide 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 employment agreement continues the following terms from Mr. Smith’s prior employment agreement:
•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
•Non-solicitation and non-competition agreements binding Mr. Smith for one year following termination of employment.
Under Mr. Smith’s employment agreement, should Mr. Smith’s employment be terminated by Pier 1 Imports without cause or by
Mr. Smith with good reason (as such terms are defined in the agreement), then any and all of Mr. Smith’s outstanding restricted
stock that has been issued and has not vested will vest. In addition, Mr. Smith will be paid a severance amount equal to two
times Mr. Smith’s then-existing base salary. Upon a non-renewal of the employment agreement by Pier 1 Imports, Mr. Smith will
be paid the severance amount described in the preceding sentence, and any and all of Mr. Smith’s outstanding restricted stock
that has been issued and has not vested will vest.
PIER 1 IMPORTS, INC. 2014 Proxy Statement 39