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3235-0059 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant o |
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Pier 1 Imports, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy
Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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þ No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (11-01) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
PIER 1 IMPORTS, INC.
100 Pier 1 Place
Fort Worth, Texas 76102
May 15, 2006
Dear Shareholder:
The Board of Directors and Management cordially invite you to
attend Pier 1s annual meeting of shareholders to be
held at 10:00 a.m., local time, on Thursday, June 22,
2006, at the Fort Worth Club, Trinity Room, 306 West
7th Street, Fort Worth, Texas. The formal notice of
the annual meeting of shareholders and proxy statement are
attached. Please read them carefully.
It is important that your shares be voted at the meeting in
accordance with your preference. If you do not plan to attend,
you may vote your proxy by telephone, Internet or mail. A
toll-free telephone number and web site address are included on
your proxy card. If you choose to vote by mail, please complete
the proxy card located in the envelopes address window by
indicating your vote on the issues presented and sign, date and
return the proxy card in the prepaid envelope provided. If you
are able to attend the meeting and wish to vote in person, you
may withdraw your proxy at that time.
Sincerely,
Marvin J. Girouard
Chairman and Chief Executive Officer
TABLE OF CONTENTS
PIER 1 IMPORTS, INC.
100 Pier 1 Place
Fort Worth, Texas 76102
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 22, 2006
Pier 1s annual meeting of shareholders will be held
on Thursday, June 22, 2006, at 10:00 a.m., local time,
at the Fort Worth Club, Trinity Room, 306 West
7th Street, Fort Worth, Texas for the following
purposes:
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(1) to elect seven directors to hold office until the next
annual meeting of shareholders; |
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(2) to vote on a proposal to approve the Pier 1
Imports, Inc. 2006 Stock Incentive Plan; and |
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(3) to transact any other business as may properly come
before the annual meeting or any adjournment. |
Only shareholders of record at the close of business on
April 24, 2006 will be entitled to vote at the annual
meeting. A complete list of shareholders entitled to vote will
be available for examination at Pier 1s offices at
100 Pier 1 Place, Fort Worth, Texas by any shareholder
during ordinary business hours for a period of ten days prior to
the date of the annual meeting.
To ensure that your vote will be counted, please complete, sign
and date the enclosed proxy card and return it promptly in the
enclosed prepaid envelope, whether or not you plan to attend the
annual meeting. Also, the enclosed proxy card contains
instructions on voting by telephone or by Internet instead of
executing and returning the proxy card. You may revoke your
proxy in the manner described in the accompanying proxy
statement at any time before it has been voted at the annual
meeting.
By Order of the Board of Directors,
Michael A. Carter
Senior Vice President and General Counsel,
Corporate Secretary
May 15, 2006
Fort Worth, Texas
PLEASE PROMPTLY SUBMIT YOUR PROXY BY MAIL,
TELEPHONE OR INTERNET WHETHER OR NOT YOU INTEND
TO BE PRESENT AT THE ANNUAL MEETING.
PIER 1 IMPORTS, INC.
100 Pier 1 Place
Fort Worth, Texas 76102
PROXY STATEMENT
For
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 22, 2006
The board of directors of Pier 1 Imports, Inc. is
soliciting proxies for the 2006 annual meeting of shareholders.
You are receiving this proxy statement because you own shares of
Pier 1 common stock that entitle you to vote at the
meeting. By use of a proxy, you can vote on the matters to be
decided at the meeting without actually attending the meeting in
person. Simply complete, sign, date and return the enclosed
proxy card in the envelope provided, and your shares will be
voted at the meeting in accordance with your instructions. If
you sign and return your proxy card with no instructions with
respect to a matter to be voted on, your shares will be voted in
accordance with the recommendation of the board of directors
contained in this proxy statement. The proxy card also contains
instructions on voting by telephone or by Internet instead of
signing and returning the proxy card. Submitting your proxy by
any of these methods will not affect your right to attend the
meeting and vote in person.
If you submit your proxy but later decide to change or revoke
the instructions you provided, you may do so at any time before
the proxies are voted at the meeting by notifying
Pier 1s corporate secretary in writing at
100 Pier 1 Place, Fort Worth, Texas 76102 that
you wish to revoke your proxy, by delivering a subsequent proxy
relating to the same shares, or by attending the annual meeting
and voting in person. Please note, however, that attendance at
the annual meeting will not, in and of itself, result in your
proxy being revoked.
Pier 1 will begin sending this proxy statement and the
enclosed proxy card to its shareholders on May 15, 2006.
ELECTION OF DIRECTORS
The shareholders will elect seven directors at the annual
meeting. In order to be elected, a nominee for director must
receive the vote of a majority of the shares of common stock
present in person or represented by proxy and entitled to vote
at the meeting. Those elected will serve on the board until the
next annual meeting and until their successors are elected and
qualify. The board of directors has nominated each person listed
below to stand for election.
The persons named in your proxy will vote your shares for the
election of these nominees unless you withhold authority to vote
for any of them. Although Pier 1 does not anticipate that
any of the nominees will be unable or unwilling to serve as a
director, in the event that is the case, the board may reduce
its size or choose a substitute for that nominee. The board of
directors recommends that you vote FOR each
of the following nominees.
Nominees for Directors
MARVIN J. GIROUARD
Marvin J. Girouard, age 66, has been a director of
Pier 1 since August 1988, has served as chairman and chief
executive officer since March 1999 and has been a member of the
executive committee since December 1998. From June 1998 to
February 1999, Mr. Girouard served as Pier 1s
president and chief executive officer and from August 1988 to
June 1998, Mr. Girouard served as Pier 1s
president and chief
operating officer. From May 1985 until August 1988, he served as
senior vice president of merchandising of Pier 1 Imports
(U.S.), Inc., one of Pier 1s wholly owned
subsidiaries. He is also a director of Brinker International,
Inc.
JAMES M. HOAK, JR.
James M. Hoak, Jr., age 62, has been a director of
Pier 1 since September 1991 and is chairman of the
nominating/corporate governance committee, chairman of the audit
committee and a member of the executive committee. He has served
as chairman of Hoak Media, LLC, a television broadcasting
company, since its formation in August 2003. He also has served
as chairman and a principal of Hoak Capital Corporation, a
private equity investment firm, since September 1991. He served
as chairman of Heritage Media Corporation, a broadcasting and
marketing services firm, from its inception in August 1987 until
its sale in August 1997. From February 1991 to January 1995, he
served as chairman and chief executive officer of Crown Media,
Inc., a cable television company. He is also a director of
Chaparral Steel Company, Da-Lite Screen Company, Inc. and
PanAmSat Corporation.
TOM M. THOMAS
Tom M. Thomas, age 64, has been a director of Pier 1
since September 1998, and is chairman of the executive
committee, chairman of the compensation committee and a member
of the nominating/corporate governance committee.
Mr. Thomas has been a shareholder of Winstead
Sechrest & Minick P.C., a law firm, since August 2005.
From September 2001 to July 2005, he was a senior partner of
Kolodey, Thomas & Blackwood, LLP, a law firm. He was
also senior partner of Thomas & Culp, LLP, a law firm,
from 1994 to August 2001.
JOHN H. BURGOYNE
John H. Burgoyne, age 64, has been a director of
Pier 1 since February 1999 and is a member of the
compensation committee. Mr. Burgoyne has served as
president of Burgoyne and Associates, an international
consulting firm, since March 1996. From May 1995 to March 1996,
Mr. Burgoyne served as the general manager of IBMs
Travel Industry sector for their Asia Pacific Region. Prior to
that time, he served as the president and general manager of IBM
China Corporation Ltd.
MICHAEL R. FERRARI
Michael R. Ferrari, age 66, has been a director of
Pier 1 since February 1999 and is a member of the audit
committee. He has served as senior vice president and managing
director of the higher education practice of EFL Associates, an
executive search firm, since May 2003. He is also the president
of Ferrari and Associates LLC, a higher education consulting
firm he established in May 2003. Dr. Ferrari was granted
the title of Chancellor Emeritus of Texas Christian University
by the universitys board of trustees on June 1, 2003,
and served as chancellor of T.C.U. and as professor of
management in the M. J. Neeley School of Business at T.C.U. from
July 1998 through May 2003. From 1985 to 1998, he served as
president of Drake University.
KAREN W. KATZ
Karen W. Katz, age 49, has been a director of Pier 1
since June 2001 and is a member of the compensation committee
and the nominating/corporate governance committee. She has
served as president and chief executive officer of Neiman Marcus
Stores since December 2002. From May 2000 to December 2002, she
served as president and chief executive officer of Neiman Marcus
Direct, a division of the Neiman Marcus Group. Prior to that
time, she served as executive vice president of stores for
Neiman Marcus Stores from February 1998 to May 2000 and senior
vice president and director of stores of Neiman Marcus Stores
from October 1996 to February 1998.
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TERRY E. LONDON
Terry E. London, age 56, has been a director of Pier 1
since September 2003 and is a member of the audit committee. He
established London Partners LLC, a private equity investment
firm, in August 2000 after serving as president and chief
executive officer of Gaylord Entertainment Company, a specialty
lodging and entertainment company, from May 1997 to August 2000.
Prior to that time, he served as chief financial and
administrative officer of Gaylord Entertainment from November
1991 to April 1997. He also serves as a director of Johnson
Outdoors, Inc.
MATTERS RELATING TO CORPORATE GOVERNANCE, BOARD STRUCTURE,
DIRECTOR COMPENSATION AND STOCK OWNERSHIP
Corporate Governance
The board of directors believes very strongly that good
corporate governance is a prerequisite to achieving business
success. In June 2000, the board of directors adopted formal,
written corporate governance guidelines, policies and procedures
designed to strengthen Pier 1s corporate governance.
In 2003, the board amended those guidelines to meet new
requirements of the Securities and Exchange Commission and the
New York Stock Exchange. Among other things, the enhanced
guidelines contain standards for determining whether a director
is independent, a code of business conduct and ethics applicable
to all of Pier 1s directors, officers and employees
and updated charters for each of the boards committees.
The nominating/corporate governance committee is responsible for
overseeing and reviewing the guidelines at least annually, and
recommending any proposed changes to the full board for its
approval. The Pier 1 Imports, Inc. Corporate Governance
Guidelines, Code of Business Conduct and Ethics and charters for
the audit, compensation and nominating/corporate governance
committees are available on Pier 1s web site at
www.pier1.com under the heading Investor Relations
Corporate Governance.
Director Independence
It is Pier 1s policy that the board of directors will
at all times consist of a majority of independent directors. In
addition, all members of the audit committee, compensation
committee and nominating/corporate governance committee must be
independent. To be considered independent, a director must
satisfy the independence requirements established by the NYSE.
The board will consider and apply all facts and circumstances
relating to a director in determining whether that director is
independent. The board has determined that six of the seven
current members of the board of directors are independent. They
are directors Hoak, Thomas, Burgoyne, Ferrari, Katz and London.
In considering the independence of Mr. Thomas, the board
considered all the relevant facts and circumstances, including
Mr. Thomas position as a shareholder of a law firm
that performs legal services for Pier 1. Among the relevant
facts and circumstances considered, it was noted that the fees
paid to this law firm in fiscal year 2006 constituted less than
2% of the total fees paid by Pier 1 for legal services
during that period; Mr. Thomas performs no legal services
for Pier 1; Mr. Thomas is paid a predetermined salary
pursuant to an employment agreement with this law firm, and his
compensation from this law firm is in no way determined by or
contingent upon the amount of legal fees Pier 1 pays to
this firm; Mr. Thomas is not an executive officer of this
law firm and beneficially owns substantially less than a 10%
equity interest in this law firm; and the fees paid by
Pier 1 to this law firm during the law firms last
fiscal year were substantially less than 2% of the law
firms gross revenues. Based upon these and the other
relevant facts and circumstances considered, the board
determined that the relationship between Pier 1 and the law
firm of which Mr. Thomas is a shareholder is not a material
relationship with Pier 1 as contemplated by the NYSE
director independence rules and that Mr. Thomas continues
to be an independent director under those rules.
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Directors Attendance at Board and Committee Meetings and at
the Annual Meeting of Shareholders
Pier 1s board of directors met eight times during
fiscal year 2006. Each director attended at least 75% of the
total number of board meetings and meetings of the board
committee or committees on which he or she served during fiscal
year 2006. Although Pier 1 has no formal policy on the
matter, all directors are encouraged to attend, and typically
have attended, Pier 1s annual meeting of
shareholders. Last year, all directors attended
Pier 1s annual meeting of shareholders except
Mrs. Katz who was out of the country.
Fees Paid to Directors
Each director who was not a Pier 1 employee received the
following cash compensation for services to the board during
fiscal year 2006:
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a fee of $33,000; |
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$1,750 for each board meeting attended in person; |
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$1,000 for each board meeting attended by telephone; |
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$750 for each committee meeting attended in person; and |
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$500 for each committee meeting attended by telephone. |
The chairman of the audit committee and chairman of the
compensation committee received additional compensation of
$12,500 during fiscal 2006. All of Pier 1s
independent directors participate in Pier 1s Director
Deferred Stock Program. That program provides that directors
must defer one-half, and may choose to defer up to all, of their
cash fees. Deferred fees are matched 50% by Pier 1 into an
equivalent value of deferred stock units. Directors receive
shares of Pier 1s common stock in exchange for their
deferred stock units when they leave the board. Three directors
deferred all of their cash fees last fiscal year, and three
directors, Messrs. Burgoyne, London and Ferrari, deferred
50% of their cash fees for all or a part of last fiscal year. On
March 23, 2006, the board of directors granted 5,000
deferred stock units to each of Messrs. Thomas and Hoak.
The units were awarded in recognition of their efforts and
service, in their role as members of the executive committee, in
connection with the sale of The Pier Retail Group Limited, a
former subsidiary of Pier 1, the convertible senior notes
transaction which closed on February 14, 2006, and other
matters. The awards were effective on April 3, 2006, and
were in lieu of fees for certain executive committee meetings.
Each non-employee director also receives an annual grant under
Pier 1s 1999 Stock Plan of stock options covering
6,000 shares of common stock which vest immediately.
Directors who are Pier 1 employees do not receive any
compensation for their board activities.
Board Committees
There are four standing committees of the board of directors.
They are the executive committee, the nominating/corporate
governance committee, the audit committee and the compensation
committee. A brief description of each committees
function, the number of meetings held last fiscal year and the
names of the directors who are members of the committees follows.
Executive Committee. The executive committee directs and
manages Pier 1s business and affairs in the intervals
between board meetings. In doing so, the committee has all of
the powers and authority of the full board in the management of
Pier 1s business, except for powers or authority that
may not be delegated to the committee as a matter of law or that
are delegated by the board to another committee. The executive
committee met on five occasions during the last fiscal year.
Executive committee members are directors Thomas (chairman),
Girouard and Hoak.
Nominating/ Corporate Governance Committee. The
nominating/corporate governance committee is responsible for
considering and making recommendations to the board regarding
nominees for election to the board and the membership of the
various board committees. The committee is also responsible for
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establishing and overseeing Pier 1s corporate
governance guidelines. In fulfilling its purpose, the committee
established and oversees the Pier 1 Imports, Inc. Corporate
Governance Guidelines described earlier in this proxy statement
and the Director Nomination Process which is set forth below.
The nominating/corporate governance committee met on two
occasions during the last fiscal year. Committee members are
directors Hoak (chairman), Thomas and Katz.
Audit Committee. The audit committee provides assistance
to the board in overseeing Pier 1s accounting,
auditing, financial reporting and systems of internal controls
regarding finance and accounting. As part of its duties, the
audit committee is directly responsible for the appointment,
compensation, retention and oversight of Pier 1s
independent auditors. The committee also reviews
Pier 1s quarterly and year-end financial statements.
The audit committee held 11 meetings during the last fiscal
year. Audit committee members are directors Hoak (chairman),
Ferrari and London. The board of directors has determined that
each member of the audit committee is an audit committee
financial expert, as defined by the SEC, and has accounting or
related financial management expertise within the meaning of
NYSE listing standards.
Compensation Committee. The compensation committee
recommends to the board adopting or amending Pier 1s
incentive-based compensation plans and sets compensation for
Pier 1s chief executive officer and executive vice
presidents. It also oversees the administration of the incentive
plans and other compensation and benefit plans and recommends to
the board compensation of Pier 1s directors and
changes in or the establishment of compensation and benefit
plans for Pier 1s employees. The committee held six
meetings during the last fiscal year. Compensation committee
members are directors Thomas (chairman), Burgoyne and Katz.
Meetings of Independent Directors without Management
Present
To empower Pier 1s independent directors to serve as
a more effective check on management, the independent directors
meet at regularly scheduled executive sessions without members
of Pier 1s management present. The independent
directors met without management present six times last fiscal
year. The chairman of the executive committee presides over
these meetings.
Procedures for Communicating with Directors
The board of directors has established a process by which
shareholders can send communications to board members.
Shareholders can send written communications to one or more
members of Pier 1s board, addressed to:
[Name of Board Member], Board of Directors
Pier 1 Imports, Inc.
c/o Corporate Secretary
100 Pier 1 Place
Fort Worth, Texas 76102
In addition, you may communicate with the chairman of the audit
committee, compensation committee and nominating/corporate
governance committee by sending an email to
auditchair@pier1.com, compchair@pier1.com, or
corpgovchair@pier1.com, respectively, as well as the independent
directors as a group by sending an email to
independentdirectors@pier1.com.
Communications are distributed to the board or to the individual
director or directors, as appropriate, depending on the subject
matter and facts and circumstances outlined in the
communication. Communications that are not related to the duties
and responsibilities of the board will not be distributed,
including:
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spam; |
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junkmail and mass mailings; |
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product complaints; |
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product inquiries; |
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new product suggestions; |
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resumes and other forms of job inquiries; |
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surveys; and |
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business solicitations or advertisements. |
In addition, Pier 1 will not distribute unsuitable material
to its directors, including material that is unduly hostile,
threatening or illegal, although any communication that is
filtered out is available to any independent director upon
request.
Director Nomination Process
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Board Member Qualification Criteria |
The nominating/corporate governance committee has adopted
Board Member Qualification Criteria which set forth the
attributes and qualifications considered by the committee in
evaluating nominees for director. The primary qualities and
characteristics the committee looks for in nominees for director
are:
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management and leadership experience; |
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relevant knowledge and diversity of background and
experience; and |
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personal and professional ethics, integrity and professionalism. |
The committee also believes that the board should be composed of
individuals who have achieved a high level of distinction in
business, law, education or public service and who possess one
or more of the following specific qualities or skills:
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financial expertise; |
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general knowledge of the retail industry; |
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information technology experience; |
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international business experience; and |
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CEO, CFO or other senior management experience. |
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Internal Process for Identifying Candidates |
Members of the nominating/corporate governance committee or
other Pier 1 directors or executive officers may, from time
to time, identify potential candidates for nomination to
Pier 1s board. All proposed nominees, including
candidates recommended for nomination by shareholders in
accordance with the procedures described below, will be
evaluated in light of the Board Member Qualification Criteria
and the projected needs of the board at the time. As set
forth in the committees charter, the committee may retain
a search firm to assist in identifying potential candidates for
nomination to the board of directors. The search firms
responsibilities may include identifying and evaluating
candidates believed to possess the qualities and characteristics
set forth in the Board Member Qualification Criteria, as
well as providing background information on potential nominees
and interviewing and screening nominees if requested to do so by
the committee.
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Shareholder Recommendations for Directors |
The nominating/corporate governance committee will consider
candidates recommended by shareholders for election to
Pier 1s board. A shareholder who wishes to recommend
a candidate for evaluation by the committee should forward the
candidates name, business or residence address, principal
occupation or employment and a description of the
candidates qualifications to the Chairman of the
Nominating/
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Corporate Governance Committee, in care of the Corporate
Secretary, Pier 1 Imports, Inc., 100 Pier 1 Place,
Fort Worth, Texas 76102.
In order for a candidate proposed by a shareholder to be
considered by the committee for inclusion as a board nominee at
the 2007 annual meeting of shareholders, the candidate must meet
the Board Member Qualification Criteria described above
and must be expressly interested and willing to serve as a
Pier 1 director. In addition, the corporate secretary
must receive the request for consideration and all required
information no later than 5:00 p.m., local time, on
January 15, 2007. Proposals should be sent via registered,
certified or express mail. The corporate secretary will send
properly submitted shareholder recommendations to the chairman
of the committee. Individuals recommended to the committee by
shareholders in accordance with these procedures will be
evaluated by the committee in the same manner as individuals who
are recommended through other means.
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Shareholder Nominations of Directors |
Pier 1s
by-laws also permit a
shareholder to propose a candidate at an annual meeting of
shareholders who is not otherwise nominated by the board of
directors through the process described above if the shareholder
complies with the advance notice, information and consent
provisions contained in the
by-laws. To comply with
the advance notice provision of the
by-laws, a shareholder
who wishes to nominate a director at the 2007 annual meeting
must provide Pier 1 written notice no earlier than
March 24, 2007 and no later than April 23, 2007. You
may contact Pier 1s corporate secretary to obtain the
specific information that must be provided with the advance
notice.
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Nominees for Election at the 2006 Annual Meeting |
No nominees for election to the board of directors at
Pier 1s 2006 annual meeting of shareholders were
submitted by shareholders.
Security Ownership of Management
The following table indicates the ownership of
Pier 1s common stock by each director and nominee,
each executive officer named in the Summary Compensation Table,
and all directors and executive officers as a group, as of
April 24, 2006:
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Shares | |
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Percent | |
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Beneficially | |
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of | |
Name |
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Owned(1)(2) | |
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Class | |
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John H. Burgoyne
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51,437 |
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* |
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Michael R. Ferrari
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49,900 |
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* |
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Marvin J. Girouard
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3,099,413 |
(3) |
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3.5 |
% |
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James M. Hoak, Jr.
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164,939 |
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* |
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Jay R. Jacobs
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452,437 |
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* |
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Karen W. Katz
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35,000 |
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* |
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Terry E. London
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17,000 |
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* |
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Phil E. Schneider
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676,789 |
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* |
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Tom M. Thomas
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18,000 |
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* |
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Charles H. Turner
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551,418 |
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* |
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David A. Walker
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534,557 |
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* |
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E. Mitchell Weatherly
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647,238 |
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* |
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All directors and executive officers as a group
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6,317,602 |
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6.9 |
% |
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(1) |
The table includes shares acquired through and held by
Pier 1s Stock Purchase Plan through April 24,
2006. The table also includes shares issuable within
60 days of April 24, 2006 to Mr. Burgoyne
(47,000 shares), Mr. Ferrari (47,000 shares),
Mr. Girouard (2,161,250 shares), |
7
|
|
|
Mr. Hoak (62,250 shares), Mr. Jacobs
(427,500 shares), Mrs. Katz (35,000 shares),
Mr. London (17,000 shares), Mr. Schneider
(621,000 shares), Mr. Thomas (18,000 shares),
Mr. Turner (507,000 shares), Mr. Walker
(496,300 shares), Mr. Weatherly (612,000 shares)
and to all directors and executive officers as a group
(5,052,550 shares), upon the exercise of stock options
granted pursuant to Pier 1s stock option plans. |
|
|
(2) |
Unless otherwise indicated, the beneficial owner has sole voting
and investment power with respect to his or her shares. |
|
(3) |
Includes 938,163 shares owned beneficially with sole voting
power only. |
|
|
|
|
* |
Represents less than 1% of the outstanding shares of the class. |
Security Ownership of Certain Beneficial Owners
The following table indicates the ownership by each person who
is known by Pier 1 as of April 24, 2006 to own
beneficially 5% or more of Pier 1s common stock:
|
|
|
|
|
|
|
|
|
Name and |
|
Shares |
|
|
Address of |
|
Beneficially |
|
Percent |
Beneficial Owner |
|
Owned |
|
of Class |
|
|
|
|
|
|
|
|
|
FMR Corp.
|
|
|
13,013,030 |
(1) |
|
|
14.99% |
|
82 Devonshire Street
|
|
|
|
|
|
|
|
|
Boston, MA 02109
|
|
|
|
|
|
|
|
|
|
|
|
|
Royce & Associates, LLC
|
|
|
10,065,200 |
(2) |
|
|
11.59% |
|
1414 Avenue of the Americas
|
|
|
|
|
|
|
|
|
New York, NY 10019
|
|
|
|
|
|
|
|
|
|
|
|
|
Jakup a Dul Jacobsen
|
|
|
8,594,200 |
(3) |
|
|
9.9% |
|
Sundaborg 7
|
|
|
|
|
|
|
|
|
Reykjavik, Iceland
|
|
|
|
|
|
|
|
|
|
|
|
|
Franklin Resources, Inc.
|
|
|
5,572,230 |
(4) |
|
|
6.4% |
|
One Franklin Parkway
|
|
|
|
|
|
|
|
|
San Mateo, CA 94403
|
|
|
|
|
|
|
|
|
|
|
(1) |
The beneficial owner has sole voting power over 562,900 of the
shares listed and sole dispositive power over all of the shares
listed. This information was obtained from the beneficial
owners Schedule 13G (Amendment No. 1) filed with
the Securities and Exchange Commission on April 10, 2006. |
|
(2) |
The beneficial owner has sole voting power and sole dispositive
power over all of the shares listed. This information was
obtained from the beneficial owners Schedule 13G
(Amendment No. 2) filed with the Securities and Exchange
Commission on January 31, 2006. |
|
(3) |
This information was obtained from a Schedule 13D
(Amendment No. 1) filed with the Securities and Exchange
Commission on March 22, 2006 by Jakup a Dul Jacobsen,
Lagerinn ehf and Kaupthing Bank hf. as beneficial owners of
the shares listed. The filing indicates that the beneficial
owners Jakup a Dul Jacobsen and Lagerinn ehf have shared voting
power and shared dispositive power over all the shares listed
and Kaupthing Bank has shared voting power and shared
dispositive power over 4,251,800 of the shares listed. |
|
(4) |
This information was obtained from a Schedule 13G filed
with the Securities and Exchange Commission on February 13,
2006 by Franklin Resources, Inc., Charles B. Johnson and Rupert
H. Johnson, Jr. as beneficial owners of the shares listed.
The filing indicates that Franklin Resources, Inc., Charles B.
Johnson and Rupert H. Johnson, Jr. have no sole or shared
voting power and no sole or shared dispositive power over any of
the shares listed. However, certain subsidiaries of Franklin
Resources, Inc. beneficially own all of the shares listed and
have the following voting and dispositive power: Franklin
Templeton Investments Corp. has sole voting power over 2,161,200
of the shares listed, sole dispositive power over 2,152,450 of
the shares listed, and shared dispositive power over 8,750 of
the shares listed; Franklin Advisory Services, LLC has sole
voting power over 1,587,600 of |
8
|
|
|
the shares listed and sole dispositive power over 1,595,100 of
the shares listed; Templeton Investment Counsel, LLC has sole
voting power and sole dispositive power over 1,480,520 of the
shares listed; Franklin Templeton Investment Management Limited
has sole voting power and sole dispositive power over 272,420 of
the shares listed; and Templeton Global Advisors Limited has
sole voting power and sole dispositive power over 62,990 of the
shares listed. |
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires Pier 1s directors and executive officers,
and persons who own more than 10% of a registered class of
Pier 1s equity securities, to file with the SEC and
the NYSE reports disclosing their ownership and changes in
ownership of Pier 1s common stock or other equity
securities. Pier 1s officers, directors and greater
than 10% shareholders are required by SEC regulations to furnish
Pier 1 with copies of all Section 16(a) forms they
file. To Pier 1s knowledge, all Section 16(a)
filing requirements applicable to Pier 1s officers,
directors and greater than 10% beneficial owners during the last
fiscal year were observed.
EXECUTIVE COMPENSATION
The following table sets forth a summary of the compensation
with respect to the past three fiscal years for services
rendered in all capacities to Pier 1 and its subsidiaries
by Pier 1s chief executive officer and five other
most highly compensated executive officers.
Summary Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Compensation | |
|
Long-Term Compensation | |
|
|
|
|
|
|
| |
|
| |
|
|
|
|
|
|
|
|
Other | |
|
|
|
Securities | |
|
All | |
Name and |
|
Fiscal | |
|
|
|
Annual | |
|
Restricted Stock | |
|
Underlying | |
|
Other | |
Principal Position |
|
Year | |
|
Salary | |
|
Bonus |
|
Compensation(1) | |
|
Awards(2) | |
|
Options (#) | |
|
Compensation(3) | |
|
|
| |
|
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Marvin J. Girouard
|
|
|
2006 |
|
|
$ |
1,000,000 |
|
|
$ |
|
|
|
$ |
166,126 |
|
|
$ |
|
|
|
|
200,000 |
|
|
$ |
242,829 |
|
|
Chairman and Chief
|
|
|
2005 |
|
|
|
1,000,000 |
|
|
|
|
|
|
|
57,239 |
|
|
|
|
|
|
|
300,000 |
|
|
|
235,466 |
|
|
Executive Officer
|
|
|
2004 |
|
|
|
950,000 |
|
|
|
|
|
|
|
97,633 |
|
|
|
|
|
|
|
300,000 |
|
|
|
331,021 |
|
|
|
|
|
Charles H. Turner
|
|
|
2006 |
|
|
|
365,000 |
|
|
|
|
|
|
|
27,368 |
|
|
|
256,500 |
|
|
|
20,000 |
|
|
|
36,475 |
|
|
Executive Vice President, |
|
|
2005 |
|
|
|
365,000 |
|
|
|
|
|
|
|
54,290 |
|
|
|
|
|
|
|
100,000 |
|
|
|
37,114 |
|
|
Finance, Chief Financial
|
|
|
2004 |
|
|
|
345,000 |
|
|
|
|
|
|
|
28,751 |
|
|
|
|
|
|
|
100,000 |
|
|
|
32,921 |
|
|
Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay R. Jacobs
|
|
|
2006 |
|
|
|
365,000 |
|
|
|
|
|
|
|
33,998 |
|
|
|
256,500 |
|
|
|
20,000 |
|
|
|
45,072 |
|
|
Executive Vice President,
|
|
|
2005 |
|
|
|
365,000 |
|
|
|
|
|
|
|
31,169 |
|
|
|
|
|
|
|
100,000 |
|
|
|
43,494 |
|
|
Merchandising
|
|
|
2004 |
|
|
|
345,000 |
|
|
|
|
|
|
|
39,247 |
|
|
|
|
|
|
|
100,000 |
|
|
|
40,873 |
|
|
|
|
|
E. Mitchell Weatherly
|
|
|
2006 |
|
|
|
325,000 |
|
|
|
|
|
|
|
29,293 |
|
|
|
256,500 |
|
|
|
20,000 |
|
|
|
40,979 |
|
|
Executive Vice
|
|
|
2005 |
|
|
|
280,000 |
|
|
|
|
|
|
|
47,754 |
|
|
|
|
|
|
|
100,000 |
|
|
|
36,014 |
|
|
President, Stores
|
|
|
2004 |
|
|
|
265,000 |
|
|
|
|
|
|
|
35,364 |
|
|
|
|
|
|
|
100,000 |
|
|
|
31,801 |
|
|
|
|
|
Phil E. Schneider
|
|
|
2006 |
|
|
|
275,000 |
|
|
|
|
|
|
|
38,853 |
|
|
|
256,500 |
|
|
|
20,000 |
|
|
|
31,023 |
|
|
Executive Vice
|
|
|
2005 |
|
|
|
275,000 |
|
|
|
|
|
|
|
28,613 |
|
|
|
|
|
|
|
100,000 |
|
|
|
31,182 |
|
|
President, Marketing
|
|
|
2004 |
|
|
|
260,000 |
|
|
|
|
|
|
|
36,420 |
|
|
|
|
|
|
|
100,000 |
|
|
|
28,468 |
|
|
|
|
|
David A. Walker
|
|
|
2006 |
|
|
|
275,000 |
|
|
|
|
|
|
|
25,669 |
|
|
|
256,500 |
|
|
|
20,000 |
|
|
|
25,271 |
|
|
Executive Vice President, |
|
|
2005 |
|
|
|
275,000 |
|
|
|
|
|
|
|
25,729 |
|
|
|
|
|
|
|
100,000 |
|
|
|
25,421 |
|
|
Logistics and Allocations
|
|
|
2004 |
|
|
|
260,000 |
|
|
|
|
|
|
|
27,546 |
|
|
|
|
|
|
|
100,000 |
|
|
|
25,014 |
|
|
|
(1) |
Includes reimbursements for club dues, automobile expenses,
financial planning expenses, medical expenses, granting of cash
awards, and tax reimbursements. Except for amounts paid to
Messrs. Turner and Weatherly in fiscal year 2005, the total
amount of perquisites paid to each named executive officer did
not exceed the lesser of $50,000 or 10% of such executives
salary and bonus for each fiscal year reported. During fiscal
year 2005, Pier 1 reimbursed Mr. Turner $10,800 for
automobile expenses and $19,998 for medical expenses and
Mr. Weatherly $10,800 for automobile expenses and $16,433
for medical expenses. |
|
(2) |
Dollar value of restricted stock is computed using the closing
market price of the common stock on the date of grant of the
restricted stock. Recipients of such restricted stock awards
will receive cash |
9
|
|
|
dividends paid on such stock. The restricted stock grants for
the 2006 fiscal year to Messrs. Turner
(18,000 shares), Jacobs (18,000 shares), Weatherly
(18,000 shares), Schneider (18,000 shares) and Walker
(18,000 shares) will vest 33% on the first anniversary of
the date of grant, 33% on the second anniversary of the date of
grant and 34% on the third anniversary of the date of grant. The
total amount and dollar value of restricted stock held at
February 25, 2006, were Mr. Turner 18,000 shares
($189,180), Mr. Jacobs 18,000 shares ($189,180),
Mr. Weatherly 18,000 shares ($189,180),
Mr. Schneider 18,000 shares ($189,180) and
Mr. Walker 18,000 shares ($189,180). |
|
(3) |
Includes in fiscal year 2006 Pier 1s matching
contributions accrued under Pier 1s 401(k) Retirement
Plan of $6,300 for Mr. Girouard, $6,300 for
Mr. Turner, $6,300 for Mr. Jacobs, $6,560 for
Mr. Weatherly, $5,500 for Mr. Schneider and $4,125 for
Mr. Walker; matching contributions accrued under
Pier 1s Benefit Restoration Plans of $30,000 for
Mr. Girouard, $7,019 for Mr. Turner, $10,950 for
Mr. Jacobs, $9,750 for Mr. Weatherly, $8,250 for
Mr. Schneider and $8,250 for Mr. Walker; matching
contributions accrued under Pier 1s Stock Purchase
Plan of $100,000 for Mr. Girouard, $18,250 for
Mr. Turner, $18,250 for Mr. Jacobs, $16,250 for
Mr. Weatherly, $8,250 for Mr. Schneider and $6,500 for
Mr. Walker; above-market earnings accrued on the Benefit
Restoration Plan of $56,587 for Mr. Girouard, $4,906 for
Mr. Turner, $9,572 for Mr. Jacobs, $8,419 for
Mr. Weatherly, $9,023 for Mr. Schneider and $6,396 for
Mr. Walker; and above-market earnings on compensation
deferred by Mr. Girouard of $49,942. |
Employment Related Contracts, Severance and
Change-in-Control
Agreements.
Pier 1 has entered into Post-Employment Consulting
Agreements with Messrs. Girouard, Turner, Jacobs,
Weatherly, Schneider and Walker. Those agreements provide that
if Pier 1 terminates the executives employment prior
to retirement other than for cause, or if the
executive terminates his employment with Pier 1 for
good reason, as defined in the agreements,
Pier 1 will retain the executive as a consultant for up to
two years, depending on the executives number of years of
service as an officer, and will pay the executive a monthly
consulting fee equal to one-twelfth of his annual base salary
immediately prior to his termination. Pier 1 will also pay
the executive 50% of his cost for continuing medical and dental
insurance coverage. If the executive enters into employment
during the consulting period that provides compensation equal to
or greater than the amount of the consulting fees, Pier 1
will pay the executive an immediate one-time payment in the
amount of 50% of the difference between the total fees that
otherwise would have been payable during the term of the
consulting agreement and the aggregate fees actually paid prior
to reemployment. If the executive enters into employment during
the consulting period that provides compensation less than the
consulting fees, Pier 1 will reduce the monthly consulting
fee by the amount of the monthly compensation for reemployment,
and at the end of the consulting period will pay the executive
50% of the difference between the total fees that otherwise
would have been payable during the term of the consulting
agreement and the aggregate fees actually paid.
Pier 1 also has two supplemental retirement plans to aid in
attracting and retaining key executives. Messrs. Girouard
and Weatherly are fully vested in a plan, adopted by Pier 1
in 1986, which provides that upon death, disability, termination
of employment within 24 months of a Change of Control, as
defined in the plan, of Pier 1 (other than a termination
for cause, by the participant other than for
good reason and certain other reasons as defined in
the plan), retirement or other termination (commencing no
earlier than at retirement age of 65), a participant will
receive annual benefits over a period of 15 years (or a
discounted lump-sum at the time of retirement in lieu of annual
benefits) which, when added to Social Security retirement
benefits, generally equal his target percentage of 50% of the
average of his highest annual salary and bonus for any three
years, increased by 6% per year for 15 years. If a
participant has at least 10 years of plan participation and
retires at or after age 55 and before age 65, his
benefit is reduced by 5% for each year his retirement precedes
age 65. If a participant retires after age 65, the
percentage of his highest average annual salary and bonus (prior
to age 65) used to calculate his benefit is increased above
50% by 5% for each year of service after age 65, to a total
not greater than 65%. In addition to the benefits described
above, each participant in the plan in the event of termination
of employment has the right to participate, during the
15 years after the participant reaches age 65, in any
major medical and
10
hospitalization insurance coverage made available generally to
Pier 1 employees and their dependents. In the event of
retirement, including retirement as a result of a Change of
Control, with respect to each participant who is actively
employed by Pier 1 after December 5, 2002, such
participant has the right to participate during his lifetime in
any major medical and hospitalization insurance coverage made
available generally to Pier 1 employees and dependents.
The following table shows, for various levels of average annual
compensation, the computed annual benefit and the alternative
lump-sum benefit, payable at age 65, discounted at a rate
equal to the lesser of the Pension Benefit Guaranty Corporation
interest rate for immediate annuities (PBGC rate) or a
24-month rolling
average of the PBGC rate, and less a calculated Social Security
retirement benefit.
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed | |
Average Annual |
|
Annual | |
|
Lump-Sum | |
Compensation |
|
Benefit | |
|
Benefit | |
|
|
| |
|
| |
$ 300,000
|
|
$ |
206,654 |
|
|
$ |
2,530,627 |
|
|
|
|
|
400,000
|
|
|
284,240 |
|
|
|
3,480,732 |
|
|
|
|
|
500,000
|
|
|
361,827 |
|
|
|
4,430,837 |
|
|
|
|
|
600,000
|
|
|
439,413 |
|
|
|
5,380,943 |
|
|
|
|
|
700,000
|
|
|
517,000 |
|
|
|
6,331,048 |
|
|
|
|
|
800,000
|
|
|
594,586 |
|
|
|
7,281,154 |
|
|
|
|
|
1,000,000
|
|
|
749,760 |
|
|
|
9,181,365 |
|
|
|
|
|
1,200,000
|
|
|
904,933 |
|
|
|
11,081,575 |
|
|
|
|
|
1,500,000
|
|
|
1,137,692 |
|
|
|
13,931,891 |
|
|
|
|
|
1,600,000
|
|
|
1,215,279 |
|
|
|
14,881,997 |
|
|
|
|
|
1,800,000
|
|
|
1,370,452 |
|
|
|
16,782,208 |
|
|
|
|
|
2,000,000
|
|
|
1,525,625 |
|
|
|
18,682,418 |
|
|
|
|
|
2,200,000
|
|
|
1,680,798 |
|
|
|
20,582,629 |
|
|
|
|
|
2,400,000
|
|
|
1,835,971 |
|
|
|
22,482,840 |
|
The applicable average annual compensation as determined under
the plan for Mr. Girouard is $2,312,125 and for
Mr. Weatherly is $501,458. All participants in the plan
have elected to receive benefits in a lump-sum distribution
rather than annual benefits.
Pier 1 established a trust to hold funds to settle
obligations under this plan. The trust assets are consolidated
in Pier 1s financial statements and consist of
interest yielding investments aggregating $22,379,000 at
February 25, 2006. These investments are restricted and may
only be used to satisfy retirement obligations under the plan,
which are expected to aggregate approximately $34,912,077
through fiscal year 2016. Contributions to the trust are made at
the discretion of the compensation committee.
Messrs. Turner, Jacobs, Schneider and Walker and one other
executive officer participate in a supplemental retirement plan
adopted by Pier 1 in 1995, which provides that upon death,
disability, retirement (including retirement as a result of a
Change of Control, as defined in the plan, of Pier 1 [other
than a termination for cause by the participant,
other than for good reason and certain other reasons
as defined in the plan]) or other termination (not for
cause and commencing no earlier than at retirement
age of 65), a participant will receive a life annuity based on
annual benefits which, when added to Social Security retirement
benefits, generally equal a percentage (not to exceed a maximum
of 60%) of the participants highest average annual salary
and bonus (based on a three-year average). If a participant has
at least 10 years of plan participation and retires at or
after age 55 and before age 65, his benefit is reduced
by 5% for each year his retirement precedes age 65.
Benefits vest for each participant at the rate of 10% per
year of participation in the plan. Further, benefits accrue for
each participant at a rate of 5% per year of credited
service with Pier 1. The years of participation in the plan
are: for Mr. Turner 10 years, for Mr. Jacobs
10 years, for Mr. Schneider 10 years and for
Mr. Walker 5 years; and the years
11
of credited service are: for Mr. Turner 15 years, for
Mr. Jacobs 29 years, for Mr. Schneider
21 years and for Mr. Walker 37 years. In addition
to the benefits described above, each participant in this plan
in the event of termination of employment, other than for cause,
has the right to participate, during the 15 years after the
participant reaches age 65, in any major medical and
hospitalization insurance coverage made available generally to
Pier 1 employees and their dependents. In the event of
retirement, including retirement as a result of a Change of
Control, with respect to each participant who is actively
employed by Pier 1 after December 5, 2002, such
participant has the right to participate during his or her
lifetime in any major medical and hospitalization insurance
coverage made available generally to Pier 1 employees and
dependents. Retirement obligations under this plan are expected
to aggregate approximately $1,022,417 through fiscal year 2016.
The following table shows for various levels of average annual
compensation the computed annual benefit payable at age 65
including current maximum annual Social Security retirement
benefits.
|
|
|
|
|
|
|
Computed | |
Average Annual |
|
Annual | |
Compensation |
|
Benefit(1) | |
|
|
| |
$ 300,000
|
|
$ |
180,000 |
|
|
|
|
|
400,000
|
|
|
240,000 |
|
|
|
|
|
500,000
|
|
|
300,000 |
|
|
|
|
|
600,000
|
|
|
360,000 |
|
|
|
|
|
700,000
|
|
|
420,000 |
|
|
|
|
|
800,000
|
|
|
480,000 |
|
|
|
|
|
1,000,000
|
|
|
600,000 |
|
|
|
|
|
1,200,000
|
|
|
720,000 |
|
|
|
|
|
1,500,000
|
|
|
900,000 |
|
|
|
|
|
1,600,000
|
|
|
960,000 |
|
|
|
|
|
1,800,000
|
|
|
1,080,000 |
|
|
|
|
|
2,000,000
|
|
|
1,200,000 |
|
|
|
(1) |
Assuming full vesting and accrual. |
The applicable average annual compensation for Mr. Turner
is $681,333, for Mr. Jacobs is $681,333, for
Mr. Schneider is $500,583 and for Mr. Walker is
$493,833.
Pier 1s 1999 Stock Plan provides that options granted
to employees under the plan, including the named executive
officers, immediately become fully exercisable in the event of a
Change of Control, as defined in the plan, unless the board of
directors determines otherwise prior to the Change of Control.
Option Grants in the Last Fiscal Year
The following table sets forth information relating to stock
options granted during the fiscal year ended February 25,
2006 to the executive officers named in the Summary Compensation
Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
% of Total | |
|
|
|
|
|
|
|
|
Securities | |
|
Options | |
|
|
|
|
|
|
|
|
Underlying | |
|
Granted to | |
|
|
|
|
|
|
|
|
Options | |
|
Employees in | |
|
Exercise Price | |
|
Expiration | |
|
Grant Date | |
Name |
|
Granted(1) | |
|
Fiscal Year | |
|
(per share)(2) | |
|
Date | |
|
Present Value(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
Marvin J. Girouard
|
|
|
200,000 |
|
|
|
13.88 |
% |
|
$ |
14.25 |
|
|
|
07/01/15 |
|
|
$ |
950,000 |
|
|
|
|
|
Charles H. Turner
|
|
|
20,000 |
|
|
|
1.39 |
|
|
|
14.25 |
|
|
|
07/01/15 |
|
|
|
95,000 |
|
|
|
|
|
Jay R. Jacobs
|
|
|
20,000 |
|
|
|
1.39 |
|
|
|
14.25 |
|
|
|
07/01/15 |
|
|
|
95,000 |
|
|
|
|
|
E. Mitchell Weatherly
|
|
|
20,000 |
|
|
|
1.39 |
|
|
|
14.25 |
|
|
|
07/01/15 |
|
|
|
95,000 |
|
|
|
|
|
Phil E. Schneider
|
|
|
20,000 |
|
|
|
1.39 |
|
|
|
14.25 |
|
|
|
07/01/15 |
|
|
|
95,000 |
|
|
|
|
|
David A. Walker
|
|
|
20,000 |
|
|
|
1.39 |
|
|
|
14.25 |
|
|
|
07/01/15 |
|
|
|
95,000 |
|
12
|
|
(1) |
All options were granted on July 1, 2005 and become
exercisable in annual installments of 25% on each of the four
anniversaries of the date of grant, except that all options
become fully exercisable upon retirement, death, disability and
certain change in control events. The administrative
committee of the stock option plan may permit an employee to
tender previously owned shares to pay the exercise price of an
option and may permit an employee to satisfy his income tax
withholding obligations up to the minimum statutory rate by the
delivery of previously owned shares or the withholding of shares
otherwise issuable upon exercise of the option. Options will
terminate at the time of termination of employment if the
termination is for cause or for resignation without
Pier 1s consent; or the earlier of expiration of the
option term or three months after termination in the case of any
other termination, one year after death or disability, or three
years after retirement. |
|
(2) |
Exercise price is equal to the current market value at the date
of grant. |
|
(3) |
The present value of options on the date of grant was determined
using a variation of the Black-Scholes option pricing model. The
estimated values under the Black-Scholes option pricing model
are based on the following assumptions at the time of grant: an
exercise price equal to the fair market value of the underlying
common stock; option term of five years; interest rate of 3.84%,
which represents the interest rate at such option grant date of
U.S. treasury securities having a five-year maturity; an
expected dividend yield of 2.2% per year and a projected
stock price volatility factor of 40%, which is estimated based
on Pier 1s historical common stock prices. For
purposes of determining these option valuations, a term of
5 years was used for the length of the option term rather
than the actual ten-year option term. Five years approximates
the historical average length of time from grant date to
exercise date for all options previously granted by Pier 1.
These assumptions were made as of the time of grant and may or
may not be valid assumptions at later points in time. The actual
value, if any, that an executive may realize from the options
will be the excess of the market price of Pier 1s
common stock on the day of exercising the options over the
exercise price of the options. The actual value may differ
significantly from the value estimated in the table. |
Aggregate Option Exercises in the Last Fiscal Year and Fiscal
Year-End Option Values
The following table provides information relating to the
exercise of stock options by the executive officers named in the
Summary Compensation Table during the last fiscal year, and the
number and value of exercisable and unexercisable stock options
held by those officers at February 25, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
|
|
|
|
|
|
Securities | |
|
Value of Unexercised |
|
|
|
|
|
|
Underlying | |
|
In-the-Money |
|
|
|
|
|
|
Unexercised Options | |
|
Options |
|
|
|
|
|
|
at Fiscal Year-End | |
|
at Fiscal Year-End(2) |
|
|
Shares Acquired | |
|
Value | |
|
| |
|
|
Name |
|
on Exercise | |
|
Realized(1) | |
|
Exercisable | |
|
Unexercisable | |
|
Exercisable | |
|
Unexercisable |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Marvin J. Girouard
|
|
|
|
|
|
$ |
|
|
|
|
2,161,250 |
|
|
|
200,000 |
|
|
$ |
2,709,984 |
|
|
$ |
|
|
|
|
|
|
Charles H. Turner
|
|
|
|
|
|
|
|
|
|
|
507,000 |
|
|
|
20,000 |
|
|
|
173,100 |
|
|
|
|
|
|
|
|
|
Jay R. Jacobs
|
|
|
|
|
|
|
|
|
|
|
427,500 |
|
|
|
20,000 |
|
|
|
187,088 |
|
|
|
|
|
|
|
|
|
E. Mitchell Weatherly
|
|
|
|
|
|
|
|
|
|
|
612,000 |
|
|
|
20,000 |
|
|
|
524,525 |
|
|
|
|
|
|
|
|
|
Phil E. Schneider
|
|
|
|
|
|
|
|
|
|
|
621,000 |
|
|
|
20,000 |
|
|
|
664,975 |
|
|
|
|
|
|
|
|
|
David A. Walker
|
|
|
25,000 |
|
|
|
188,888 |
|
|
|
496,300 |
|
|
|
20,000 |
|
|
|
366,976 |
|
|
|
|
|
|
|
(1) |
Computed as the difference between the option exercise prices
and the market price of the common stock at the date of exercise. |
|
(2) |
Computed as the difference between the option exercise prices
and $10.51 (the closing price of the common stock at fiscal
year-end). |
13
Equity Compensation Plan Information
The following table sets forth certain information regarding
Pier 1s equity compensation plans as of
February 25, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of | |
|
|
Number of | |
|
|
|
Securities Remaining | |
|
|
Securities to | |
|
|
|
Available for Future | |
|
|
be Issued Upon | |
|
Weighted-Average | |
|
Issuance Under | |
|
|
Exercise of | |
|
Exercise Price of | |
|
Equity Compensation | |
|
|
Outstanding Options, | |
|
Outstanding Options, | |
|
Plans (Excluding | |
|
|
Warrants and | |
|
Warrants and | |
|
Securities Reflected | |
Plan Category |
|
Rights(1) | |
|
Rights(1) | |
|
in the First Column)(2) | |
|
|
| |
|
| |
|
| |
Equity compensation plans approved by shareholders
|
|
|
12,738,025 |
|
|
$ |
15.41 |
|
|
|
555,794 |
|
|
|
|
|
Equity compensation plans not approved by shareholders(3)
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
Total:
|
|
|
12,738,025 |
|
|
$ |
15.41 |
|
|
|
555,794 |
|
|
|
(1) |
Pier 1 has not granted warrants or rights applicable to
this chart. |
|
(2) |
Includes 65,592 shares which may be awarded under the terms
of Pier 1s Management Restricted Stock Plan.
Pier 1s Stock Purchase Plan permits all participants
to elect to have up to 10% of their compensation deducted and
used to purchase Pier 1 common stock monthly at market
values. Pier 1 provides matching contributions of 10% to
50% of each participants deduction, depending on the
participants length of service, except that any
participant who received contributions at a rate of 50% or more
at the close of business on October 31, 1985 remains at
that rate. There is no limit as to the number of shares that can
be purchased under the Stock Purchase Plan. |
|
(3) |
Pier 1 does not have any equity compensation plans which
have not been approved by its shareholders. |
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Pier 1s compensation committee is composed of
directors Thomas, Burgoyne and Katz. Each member of the
compensation committee is an independent director as defined in
the listing standards of the NYSE. The committee oversees
Pier 1s incentive-based compensation plans and makes
recommendations to the full board on establishing and amending
incentive-based compensation plans and on matters relating to
other compensation and benefit plans for Pier 1s
chief executive officer and executive vice presidents. These
responsibilities are reflected in the committees charter,
which is periodically reviewed and revised by the board and the
committee. In fulfilling its responsibilities, the committee has
the authority to engage an outside consulting firm or firms to
assist in its evaluation of compensation. In fiscal year 2006,
Pier 1 employed Hewitt Associates to conduct a study of the
compensation paid to Pier 1s chief executive officer
and executive vice presidents. The study included comparisons of
base pay, annual incentive targets and long-term awards provided
for these executives to a peer group of companies. The committee
determined that the chief executive officer and executive vice
presidents would not receive a base pay increase for fiscal year
2006, except that Mr. Weatherly received an increase in
base salary due to his promotion from Executive Vice President,
Human Resources to Executive Vice President, Stores.
Pier 1s overall philosophy on management compensation
is that senior executives compensation should be
structured in a way that provides strong incentives for
long-term success and performance. In addition to base salary,
executive compensation may include a bonus, stock options,
restricted stock, benefits and perquisites. Pier 1s
incentive programs include both short-term bonus plans to reward
annual performance and long-term, stock-based plans to reward
increases in shareholder value and to align managements
interests with those of Pier 1s shareholders.
Pier 1s goal is to have more than half of potential
senior executive compensation come from Pier 1s
performance-based compensation plans. As a senior
executives level of responsibility increases, a greater
portion of that executives potential compensation comes
from performance-based programs, with larger percentages of
potential compensation directly related to the price of
Pier 1s common stock.
14
When determining senior executives compensation, the
committee also considers the effect of limitations on
deductibility of compensation for federal income tax purposes.
Section 162(m) of the Internal Revenue Code generally
prohibits public companies like Pier 1 from deducting from
corporate income all compensation paid to the chief executive
officer or any of the four other most highly compensated
officers that exceeds for each officer $1,000,000 during the tax
year. Qualifying performance-based compensation paid pursuant to
plans approved by shareholders is not subject to this deduction
limitation. The committee attempts to preserve the federal tax
deductibility of compensation to the extent reasonably
practicable when doing so is consistent with the executive
compensation objective and goals mentioned above. While the
committee is aware of and understands the requirements of
Section 162(m), it does not believe that compensation
decisions should be based solely upon the amount of compensation
that is deductible for federal income tax purposes. Accordingly,
the committee reserves the right to approve elements of
compensation for certain officers that are not fully deductible.
For fiscal year 2006, the only officer who received compensation
that was not fully deductible was Pier 1s chief
executive officer.
The committee reviews and approves the level of base salary paid
to the chief executive officer and the executive vice
presidents. Base salary is based primarily upon
Pier 1s competitiveness in the retail industry,
Pier 1s profitability and the individual performance
of the executive during that year. In determining
Pier 1s competitiveness, the committee establishes a
peer group of companies for comparative purposes. In determining
an executives compensation, the committee also considers
other factors it believes are relevant to the determination, but
it does not assign specific weights to the different factors.
The committee believes that the base salaries paid to the chief
executive officer and executive vice presidents during fiscal
year 2006 were both fair and reasonable.
During the 2006 fiscal year, Pier 1 maintained an annual
bonus plan for the chief executive officer and the executive
vice presidents. Under that plan, bonus awards are paid if
Pier 1 attains certain targeted levels of pretax income.
The committee believes that pretax income is an important
financial measurement when determining shareholder value. The
committee periodically establishes percentages of target
incentives to be paid when certain pretax income levels are met.
Pretax income levels are established based on percentages of
pretax profit during a period of not less than one fiscal
quarter nor more than one fiscal year, as determined by the
committee. Target incentives are expressed as a percentage of
the base salary of participants and are competitive when
compared to Pier 1s peer group.
The target bonus for the chief executive officer remained at
100% of his base salary for the fiscal year 2006 plan. The
target bonuses for the executive vice presidents remained at 75%
of base salaries for the period. Pier 1s committee
believes that the targeted levels of pretax income and related
target bonuses set for the chief executive officer and executive
vice presidents during fiscal year 2006 were both fair and
reasonable. The minimum level of pretax income, however, was not
achieved in fiscal year 2006; therefore, the chief executive
officer and executive vice presidents did not receive bonuses
under the plan.
Pier 1 provides long-term incentives to executives and key
employees through the grant of stock options and restricted
stock awards. Under Pier 1s stock option plan,
executives and other key employees may be awarded options to
purchase Pier 1 stock at a purchase price equal to the fair
market value of the stock on the date of grant. Awards under
Pier 1s stock option plans are designed with the
intention of both promoting Pier 1s success and
retaining the executive or employee by giving value to the
executive or employee only when there is a corresponding
increase in value to all shareholders. Under Pier 1s
restricted stock plan, executives may receive restricted stock
awards, subject to a length of service restriction.
Pier 1s restricted stock and stock option plans
provide an effective retention tool while at the same time
establish an incentive that links the interest of executives to
that of all shareholders. The committee believes that the stock
options and restricted stock awarded to Pier 1s chief
executive officer and executive vice presidents during fiscal
year 2006 were both fair and reasonable.
The committee also believes that the relative amounts of chief
executive officer compensation and compensation paid to
Pier 1s other executives demonstrates internal pay
equity and is reasonable and consistent with external
compensation differences in Pier 1s peer group and
reference labor market.
15
In the future, the committee intends to use other incentives
such as performance-based restricted stock in conjunction with
stock option and time-based restricted stock awards as part of
long-term compensation. The grants to executives and key
employees are intended to reward them for Pier 1s
performance and provide incentives for the executives and key
employees to remain with Pier 1.
The compensation committee and the board of directors believe
that attracting, retaining and motivating Pier 1s
employees, and particularly Pier 1s senior
management, are essential to Pier 1s performance. The
committee will continue to administer and develop
Pier 1s compensation programs in a manner designed to
achieve these objectives.
|
|
|
COMPENSATION COMMITTEE |
|
|
Tom M. Thomas, Chairman |
|
John H. Burgoyne |
|
Karen W. Katz |
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION;
CERTAIN RELATED PARTY TRANSACTIONS
During the fiscal 2006 year, the compensation committee was
composed of directors Thomas, Burgoyne and Katz, none of whom is
an employee of Pier 1. No member of the committee served on
the board of directors of any other company that either employs
an executive who is a director of Pier 1 or includes on its
board of directors another member of Pier 1s board.
Mr. Girouards son, Mark Girouard, is employed by
Pier 1 Services Company, a Pier 1 subsidiary. He is
the Manager of Strategic Analysis in the finance department. In
fiscal 2006, he was paid annual compensation less than $100,000.
Mark Girouard is not an officer of Pier 1 and did not
report directly to Marvin Girouard.
Tom Thomas, a director of the company, is a shareholder of
Winstead Sechrest & Minick P.C., a law firm that
Pier 1 retained during the last fiscal year and proposes to
retain during the current fiscal year. Mr. Thomas is not an
executive officer of this law firm and beneficially owns
substantially less than a 10% equity interest in this law firm.
The fees paid by Pier 1 to this law firm during the law
firms last fiscal year were substantially less than 2% of
the law firms gross revenues.
On March 20, 2006, Pier 1 sold its subsidiary, The
Pier Retail Group Limited, to Palli Limited for approximately
$15 million. Palli Limited is a wholly owned subsidiary of
Lagerinn ehf, an Iceland corporation owned by Jakup a Dul
Jacobsen. Collectively, as of that date, Lagerinn ehf,
Mr. Jacobsen and Kaupthing Bank hf beneficially owned
approximately 9.9% of Pier 1s common stock. This
information regarding security ownership was obtained from a
Schedule 13D filed with the Securities and Exchange
Commission on February 6, 2006 by Jakup a Dul Jacobsen,
Lagerinn ehf and Kaupthing Bank hf. Except for the ownership of
Pier 1s common stock, Mr. Jacobsen, Lagerinn ehf and
Kaupthing Bank are not otherwise affiliated with Pier 1.
AUDIT COMMITTEE REPORT
Each member of the audit committee is an independent director,
as defined in the listing standards of the NYSE. In accordance
with the committees written charter, the committee assists
the board in overseeing the quality and integrity of
Pier 1s accounting, auditing and financial reporting
practices. In performing its oversight function, the committee
reviewed and discussed Pier 1s audited consolidated
financial statements as of and for the fiscal year ended
February 25, 2006 with management and Pier 1s
independent auditors, including a discussion of the quality, not
just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of
disclosures in the financial statements. The committee also
discussed with Pier 1s independent auditors all
matters required by
16
generally accepted auditing standards, including those described
in Statement on Auditing Standards No. 61,
Communication with Audit Committees and, with and
without management present, discussed and reviewed the results
of the independent auditors examination of the
consolidated financial statements.
The committee obtained from the independent auditors a formal
written statement describing all relationships between the
auditors and Pier 1 that might affect the auditors
independence consistent with Independence Standards Board
Standard No. 1, Independence Discussions with Audit
Committees. The committee also discussed with the auditors
any relationships that may have an impact on their objectivity
and independence and satisfied ourselves that the auditors are
independent. The committee also considered whether the provision
of non-audit services by Ernst & Young LLP,
Pier 1s independent auditors for fiscal 2006, to
Pier 1 is compatible with maintaining Ernst &
Young LLPs independence.
Based on the above-mentioned review and discussions with
management and the independent auditors, the committee
recommended to the board of directors that Pier 1s
audited consolidated financial statements be included in
Pier 1s Annual Report on
Form 10-K for the
fiscal year ended February 25, 2006, for filing with the
SEC.
|
|
|
AUDIT COMMITTEE |
|
|
James M. Hoak, Jr., Chairman |
|
Michael R. Ferrari |
|
Terry E. London |
PIER 1 STOCK PERFORMANCE GRAPH
The following graph compares the five-year cumulative total
shareholder return for Pier 1 common stock against the
Standard & Poors 500 Stock Index and the Dow
Jones Industrial Average. The annual changes for the five-year
period shown on the graph are based on the assumption, as
required by SEC rules, that $100 had been invested in
Pier 1 stock and in each index on March 3, 2001 and
that all quarterly dividends were reinvested at the average of
the closing stock prices at the beginning and end of the
quarter. The total cumulative dollar returns shown on the graph
represent the value that such investments would have had on
February 25, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3/3/2001 | |
|
3/2/2002 | |
|
3/1/2003 | |
|
2/28/2004 | |
|
2/26/2005 | |
|
2/25/2006 | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
|
|
Pier 1 Imports, Inc.
|
|
|
100.00 |
|
|
|
163.95 |
|
|
|
130.92 |
|
|
|
194.64 |
|
|
|
153.42 |
|
|
|
92.23 |
|
|
|
|
|
S&P 500 Index
|
|
|
100.00 |
|
|
|
92.97 |
|
|
|
70.29 |
|
|
|
97.36 |
|
|
|
104.82 |
|
|
|
113.65 |
|
|
|
|
|
S&P Retail Stores Composite Index
|
|
|
100.00 |
|
|
|
120.31 |
|
|
|
85.79 |
|
|
|
133.13 |
|
|
|
146.52 |
|
|
|
155.27 |
|
17
PROPOSAL TO APPROVE THE PIER 1 IMPORTS, INC. 2006 STOCK
INCENTIVE PLAN
The board of directors on March 23, 2006 unanimously
approved the adoption of the Pier 1 Imports, Inc. 2006
Stock Incentive Plan and unanimously recommends that the
Pier 1 shareholders vote FOR approval of
the adoption of the plan. If a proxy card is signed and returned
but no direction is made, the proxy card will be voted
FOR its adoption. The affirmative vote of holders of
a majority of the shares of common stock present in person or
represented by proxy and entitled to vote at the annual meeting
is required to approve the proposed plan.
General
The purpose of the plan is to promote the interests of
Pier 1 and its shareholders by encouraging employees of
Pier 1 and its non-employee directors to acquire or
increase their equity interest in Pier 1, and to relate
compensation to performance goals of Pier 1, thereby giving
them an added incentive to work towards the continued growth and
success of Pier 1. The board of directors also contemplates
that through the plan, Pier 1 will be better able to
compete for the services of personnel needed for growth and
success. However, nothing in the plan will operate or be
construed to prevent Pier 1 from granting awards outside of
such plan. In the opinion of Pier 1, the plan is not
subject to any of the provisions of the Employee Retirement
Income Security Act of 1974.
The full text of the plan is set forth in Appendix A to
this proxy statement. Certain features of the plan are
summarized below, but this summary is qualified in its entirety
by reference to the full text of the plan.
Types of Awards
The plan permits the granting of the following types of awards
to employees and directors: stock options to purchase shares of
common stock, which may be either incentive stock options within
the meaning of Section 422 of the Internal Revenue Code of
1986, or options that do not constitute incentive stock options;
restricted stock awards; restricted stock unit awards;
performance awards; and phantom stock awards, as summarized
below. The plan also provides for granting deferred stock units
to directors who are not employees of Pier 1.
Effective Date and Duration of the Plan
The plan was adopted by the board of directors effective
March 23, 2006, subject to approval by Pier 1s
shareholders. No awards will be granted under the plan prior to
approval of the plan by Pier 1s shareholders. Except
with respect to awards then outstanding, if not sooner
terminated, the plan will terminate on March 23, 2016, and
no further awards may be granted after such date.
Administration
The plan will be administered by a committee appointed by the
board of directors, or any duly appointed subcommittee of such
committee and shall be comprised solely of two or more outside
directors within the meaning of the term outside
directors as used in Section 162(m) of the Internal
Revenue Code of 1986, and applicable interpretive authority
thereunder and within the meaning of the term Non-Employee
Director as defined in
Rule 16b-3 of the
Securities Exchange Act of 1934, as amended. Subject to the
terms and conditions of the plan, the committee has authority to
determine which employees or directors receive awards under the
plan and when, to determine the type and terms of an award and
to determine the number of shares to be issued pursuant to such
awards (within the limits of the plan), to interpret the plan
and all awards and to administer the plan. Such committee, in
its sole discretion, may delegate any or all of its power and
duties under the plan to the chief executive officer or to an
officer or a group of officers of Pier 1, subject to such
limitations on such delegated powers and duties as such
committee may impose; provided, however, that the committee may
not delegate its powers
18
if such delegation would result or potentially result in an
award which is intended to qualify as performance-based
compensation for purposes of Section 162(m) failing to so
qualify.
Shares Subject to the Plan
The aggregate number of shares of common stock that may be
issued under the plan will not exceed 1,500,000 shares plus
the number of shares (not to exceed 560,794) which remained
available for grant under the Pier 1 1999 Stock Plan and
the Pier 1 Management Restricted Stock Plan, increased by
the number of shares (not to exceed 11,186,150) subject to
outstanding awards under the Pier 1 1999 Stock Plan and the
Pier 1 Management Restricted Stock Plan that cease for any
reason to be subject to such awards, subject to adjustment in
the event of stock splits and certain other corporate events.
The aggregate maximum number of shares of common stock that may
be issued under the plan through incentive stock options will
not exceed 2,060,794 shares. The maximum number of shares
of common stock that may be subject to awards denominated in
shares of common stock granted to any one individual during any
calendar year may not exceed 375,000 shares and the maximum
amount of compensation that may be paid under all performance
awards denominated in cash (including the fair market value of
any shares paid in satisfaction of such performance awards)
granted to any one individual during any calendar year may not
exceed $3 million. To the extent that an award lapses or
the rights of its holder terminate, any shares subject to such
award will again be available for the grant of an award under
the plan. Such shares of common stock may be authorized but
unissued shares or reacquired shares.
Eligibility for Participation
Incentive stock options may be granted only to individuals who
are employees (whether or not they are directors) of Pier 1
or any parent of subsidiary corporation (within the meaning of
Section 424 of the Internal Revenue Code of 1986) of
Pier 1 and directors deferred stock unit awards may only be
granted to Pier 1 directors who are not employees of
Pier 1. All other awards may be granted to either employees
or non-employee directors of Pier 1.
Stock Options
The committee has the authority to grant options that will be
evidenced by an option agreement in such form as the committee
may from time to time approve subject to the terms of the plan.
The committee also has the authority to determine whether
options granted to employees will be incentive stock options or
nonqualified options. The committee may, with the consent of the
person or persons entitled to exercise an option, amend an
option, except that no such amendment shall reduce the exercise
price of any option. The committee may at any time or from time
to time, in its discretion, accelerate the time or times at
which such option may be exercised to any earlier time or times.
The price at which shares of common stock may be purchased upon
the exercise of an option shall be determined by the committee
but such purchase price shall not be less than the fair market
value per share of common stock at the time of the grant based
on its closing price reported by the NYSE on the date such
option is granted. The plan expressly prohibits the repricing of
options without approval of the shareholders of Pier 1
except in the event of adjustments for stock splits and other
corporate events.
No option may be exercised ten years after the date of the grant.
Restricted Stock and Restricted Stock Unit Awards
The plan authorizes the committee to grant awards in the form of
restricted shares of Pier 1 common stock and restricted
stock units. Such awards shall be subject to an obligation to
forfeit the units and forfeit and surrender the shares to
Pier 1 based upon forfeiture restrictions. The forfeiture
restrictions for an award will be determined by the committee,
and the committee may provide that such restrictions lapse upon
attainment of one or more performance measures, continued
employment or service for a specified time, the occurrence of
any event or the satisfaction of any other condition specified
by the committee, or a combination of any of the foregoing. In
no event will such restrictions lapse in full prior to a one-year
19
period following the grant in the case of restrictions that
lapse upon the attainment of performance measures or a
three-year period from the date of grant in the case of
restrictions which lapse upon other than the attainment of
performance measures. At the time an award is made, Pier 1
and the participant will enter into an agreement setting forth
the matters contemplated by the plan and such other matters as
the committee may determine to be appropriate.
Performance Awards
The committee may grant performance awards that may be paid in
shares of common stock, cash or a combination of both. All
employees and directors are eligible to receive performance
awards. The committee shall establish the number of shares
subject to or the maximum cash value of the performance award,
as applicable, and the performance period over which the
performance applicable to the award shall be measured and the
performance measures which constitute the business criteria on
which the performance goal for a performance award is based. The
performance measures established by the committee for a
performance award shall be based upon (1) the fair market
value of common stock, (2) Pier 1s earnings per
share, (3) Pier 1s or an affiliates market
share, (4) the market share of a business unit of
Pier 1 designated by the committee,
(5) Pier 1s or an affiliates sales,
(6) the sales of a business unit of Pier 1 designated
by the committee, (7) the net income (before or after
taxes) of Pier 1, an affiliate or any business unit of
Pier 1 designated by the committee, (8) the cash flow
or return on investment of Pier 1, an affiliate or any
business unit of Pier 1 designated by the committee,
(9) the earnings before or after interest, taxes,
depreciation, and/or amortization of Pier 1, an affiliate
or any business unit of Pier 1 designated by the committee,
(10) the economic value added, (11) the return on
capital, assets or stockholders equity achieved by
Pier 1 or an affiliate, or (12) the total
shareholders return achieved by Pier 1. In the case
of a performance award which is intended to be performance-based
compensation for purposes of Section 162(m) of the Internal
Revenue Code of 1986, the performance measures will be
established either prior to the beginning of the awards
performance period or within the first 90 days of such
performance period provided that the outcome of the performance
measures being established is then substantially uncertain. In
no event shall a performance award vest prior to the expiration
of a one-year period following the grant thereof. At the time an
award is made, Pier 1 and the participant will enter into
an agreement setting forth the matters contemplated by the plan
and such other matters as the committee may determine to be
appropriate.
Phantom Stock Awards
The committee may grant phantom stock awards, which are rights
to receive shares of common stock (or cash equal to the fair
market value of a specified number of shares of common stock),
or rights to receive an amount equal to any appreciation in the
fair market value of common stock over a specified period of
time, which vest over a period of time as established by the
committee, without satisfaction of any performance criteria or
objectives. A phantom stock award may include a stock
appreciation right that is granted independently of an option or
a stock appreciation right that is granted in tandem with an
option. Any phantom stock award which is a stock appreciation
right will have a maximum term of ten years and shall represent
an award that measures appreciation only with reference to
appreciation over the fair market value of the stock which is
subject to the award as of the date of its grant. At the time an
award is made, Pier 1 and the participant will enter into
an agreement setting forth the matters contemplated by the plan
and such other matters as the committee may determine to be
appropriate.
Director Deferred Stock Unit Awards
The plan provides for participation by non-employee directors in
a deferred stock program. Each non-employee director (other than
certain directors who made irrevocable elections in 1999 not to
participate) must mandatorily defer 50% of all of their cash
fees into a deferred stock account maintained by Pier 1.
Such directors may elect to defer all or any portion of the
remaining 50% of their cash fees provided that such deferral
election for a taxable year is made prior to the beginning of
such taxable year. All deferrals will be credited as deferred
stock units. The number of deferred stock units issued is based
on 150% of the
20
amount of cash fees deferred and the fair market value of
Pier 1s common stock on the date of crediting the
deferred fee. When a board members position as a director
terminates, the deferred stock units are exchanged into common
stock and delivered to the departing director. Under the plan,
deferred stock units are credited with dividends paid on
Pier 1s common stock.
Amendment and Termination of the Plan
The board of directors may terminate the plan at any time with
respect to any shares of common stock for which awards have not
been granted. The board of directors shall have the right to
alter or amend the plan or any part thereof from time to time;
provided that no change in the plan may be made that would
impair the rights of a participant with respect to an award
previously granted without the consent of the participant, and
provided, further, that the board of directors may not, without
approval of the shareholders, increase the maximum aggregate
number of shares that may be issued, increase the maximum number
of shares that may be issued through incentive stock options,
change the class of individuals eligible to receive awards, or
amend or delete the provisions of the plan which contain
restrictions on re-pricing of options.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
In General
The plan is not qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended.
The following summary is based on the applicable provisions of
the Internal Revenue Code of 1986, as amended, as currently in
effect and the income tax regulations and proposed income tax
regulations thereunder.
Status of Option
Options granted under the plan may be either incentive stock
options or nonqualified options. Under certain circumstances, an
incentive stock option may be treated as a nonqualified option.
The tax consequences both to the optionee and to Pier 1
differ depending on whether an option is an incentive stock
option or a nonqualified option.
Nonqualified Options
No federal income tax is imposed on the optionee upon the grant
of a nonqualified option. Upon exercise of a nonqualified
option, the optionee will be treated as receiving compensation
which is taxable as ordinary income in the year of exercise. The
amount recognized as ordinary income upon such exercise is the
excess of the fair market value of the shares of common stock at
the time of exercise over the exercise price paid for such
common stock. At the time common stock received upon exercise of
a nonqualified option is disposed of, any difference between the
fair market value of the shares of common stock at the time of
exercise and the amount realized on the disposition would be
treated as capital gain or loss. The gain, if any, realized upon
such a disposition will be treated as long-term or short-term
capital gain, depending on the holding period of the shares of
common stock. Any loss realized upon such a disposition will be
treated as a long-term or short-term capital loss, depending on
the holding period of the shares of common stock.
Upon the optionees exercise of a nonqualified option, and
subject to the application of Section 162(m) of the
Internal Revenue Code of 1986, as amended, as discussed below,
Pier 1 may claim a deduction for the compensation paid
at the same time and in the same amount as compensation is
treated as being received by the optionee, assuming Pier 1
satisfies the federal income tax reporting requirements with
respect to such compensation. Pier 1 is not entitled to any
tax deduction in connection with a subsequent disposition by the
optionee of the shares of common stock.
21
If the shares of common stock received upon the exercise of a
nonqualified option are transferred to the optionee subject to
certain restrictions, then the taxable income realized by the
optionee, unless the optionee elects otherwise, and
Pier 1s tax deduction (assuming federal income tax
reporting requirements are satisfied) should be deferred and
should be measured at the fair market value of the shares at the
time the restrictions lapse. The insider trading restriction
imposed on officers, directors and 10% shareholders by
Section 16(b) of the Securities Exchange Act of 1934 is
such a restriction during the period prescribed thereby if other
shares have been purchased by such an individual within six
months of the exercise of a nonqualified option.
Incentive Stock Options
No federal income tax is imposed on the optionee upon the grant
of an incentive stock option. The optionee would recognize no
taxable income upon exercise of an incentive stock option if the
optionee (a) does not dispose of the shares of common stock
acquired pursuant to the exercise of an incentive stock option
within two years from the date the option was granted or within
one year after the shares of common stock were transferred to
the optionee (the Holding Period) and (b) is an
employee of either (i) the company granting the option,
(ii) a subsidiary of such corporation or (iii) a
corporation which has assumed such option of another corporation
as a result of a corporate reorganization, merger or similar
transaction. Such employment must continue for the entire time
from the date the option was granted until three months before
the date of exercise, or 12 months before the date of
exercise if employment ceases due to permanent and total
disability. If common stock received upon exercise of an
incentive stock option is disposed of after completion of the
Holding Period, any difference between the exercise price paid
for such common stock and the amount realized on the disposition
would be treated as a capital gain or loss. The gain, if any,
realized upon such a disposition will be treated as a long-term
capital gain. Any loss realized upon such a disposition will be
treated as a long-term capital loss. Pier 1 would not be
entitled to any deduction in connection with the grant or
exercise of the option or the disposition of the shares of
common stock so acquired.
If, however, an optionee disposes of shares of common stock
acquired pursuant to exercise of an incentive stock option
before the Holding Period has expired (a Disqualifying
Disposition), the optionee would be treated as having
received, at the time of disposition, compensation taxable as
ordinary income. In such event, subject to the application of
Section 162(m) of the Internal Revenue Code of 1986, as
amended, as discussed below, Pier 1 may claim a
deduction for compensation paid at the same time and in the same
amount as compensation is treated as being received by the
optionee. The amount treated as compensation is the lesser of
(i) the excess of the fair market value of the common stock
at the time of exercise over the exercise price or (ii) the
excess of the amount realized on disposition over the exercise
price. The balance of the gain, if any, realized upon such a
disposition will be treated as long-term or short-term capital
gain depending on the holding period. If the amount realized at
the time of the disposition is less than the exercise price, the
optionee will not be required to treat any amount as ordinary
income, provided that the disposition is of a type that would
give rise to a recognizable loss. In such event, the loss will
be treated as a long-term or sort-term capital loss depending
upon the holding period. A disposition generally includes a
sale, exchange or gift, but does not include certain other
transfers, such as by reason of death or a pledge or exchange of
shares described in Section 424(c) of the Internal Revenue
Code of 1986, as amended.
Restricted Stock and Restricted Stock Unit Awards
An employee who has been granted restricted stock or restricted
stock units will not realize taxable income at the time of
grant, and Pier 1 will not be entitled to a deduction at
that time, assuming that the forfeiture restrictions constitute
a substantial risk of forfeiture for federal income tax
purposes. Upon lapse of the forfeiture restrictions (i.e., as
shares or units become vested), the employee will realize
ordinary income in an amount equal to the fair market value of
the shares or units at such time, and subject to
Section 162(m) of the Internal Revenue Code, Pier 1
will be entitled to a corresponding deduction. Dividends on
restricted stock paid to an employee during the forfeiture
restriction period will also be
22
compensation income to the employee and deductible as such by
Pier 1. An employee who has been awarded restricted stock
may elect to be taxed at the time of grant of the restricted
stock award on the market value of the shares subject to the
award, in which case (i) subject to Section 162(m) of
the Internal Revenue Code of 1986, as amended, as discussed
below, Pier 1 will be entitled to a deduction at the same
time and in the same amount, (ii) dividends paid to the
employee during the forfeiture restriction period will be
taxable as dividends to him and not deductible by Pier 1,
and (iii) there will be no further federal income tax
consequences when the forfeiture restrictions lapse. An employee
who has been awarded restricted stock units may not elect to be
taxed at the time of the grant of the restricted stock unit
award.
Performance Awards
An employee who has been granted a performance share award will
not realize taxable income at the time of the grant and
Pier 1 will not be entitled to a tax deduction at that
time. The employee will realize ordinary income at the time the
award is paid equal to the amount of cash paid or the value of
shares delivered in payment of the award. At that time,
Pier 1 will have a corresponding tax deduction which may or
may not be subject to Section 162(m) of the Internal
Revenue Code of 1986, as amended, as discussed below, depending
upon whether the award was intended to qualify as and did, in
fact, qualify as performance-based compensation for purposes of
such Internal Revenue Code section.
Stock Appreciation Rights and Phantom Stock
The amount received upon exercise of a stock appreciation right
or upon receipt of cash or stock pursuant to an award of phantom
stock is included in taxable income at the time the cash or
stock is received. In the case of receipt of stock the amount
included in income is fair market value of the stock received.
Subject to Section 162(m) of the Internal Revenue Code of
1986, as amended, as discussed below, Pier 1 will be
entitled to a deduction at the same time and in the same amount
as the income recognized by the plan participant.
Director Deferred Stock Units
The portion of a directors cash fee which is automatically
and mandatorily deferred will not be includible in taxable
income when earned and Pier 1 will not be entitled to a
deduction with respect to the deferred directors fees at
that time. Provided that a directors cash fee deferral
election is made prior to the beginning of the taxable year in
which the directors services for which the fees will be
earned are performed and provided further that such deferral
election is irrevocable, the directors fees deferred by a
director on an elective basis will not be includible in taxable
income when earned and Pier 1 will not be entitled to a
deduction with respect to such fees at that time. The crediting
of director deferred stock units with respect to deferred
directors fees will not result in taxable income to the
director when credited and Pier 1 will not be entitled to a
deduction at that time. The crediting of dividend amounts as
additional director deferred stock units will not result in
taxable income to a director when credited and Pier 1 will
not be entitled to a deduction at that time. At the time that
deferred stock units are exchanged into shares which are
delivered to a director, the director will recognize taxable
income in an amount equal to the value of the shares delivered
and Pier 1 will be entitled to a deduction at that time.
Withholding for Taxes
No issuance of common stock under the plan may be made until
arrangements satisfactory to Pier 1 have been made for the
withholding of taxes. As to awards that are payable in shares of
common stock, to the extent provided in the award agreement, a
participant may direct Pier 1 to withhold a number of
shares of common stock from such award having an aggregate fair
market value equal to the amount of any tax required to be
withheld with respect to such award.
23
Additional Tax Consequences
Under Section 4999 of the Internal Revenue Code of 1986, as
amended, golden parachute provisions may apply sanctions with
respect to a participant who receives certain payments or
benefits in the nature of compensation contingent on the change
of ownership or effective control of Pier 1. These include
imposition of a golden parachute penalty tax upon the recipient
of such compensation and non-deductibility of such compensation
by Pier 1, in each case to the extent that it constitutes
an excess golden parachute payment. Certain of the
actions which the plan empowers the committee to take with
respect to awards upon the occurrence of a corporate change
affecting Pier 1 (such as acceleration of vesting or
effecting of payments, distributions or issuance of stock) may
be subject to these golden parachute sanction provisions. The
plan does not prohibit the committee from including in the
agreement pursuant to which an award under the plan is granted a
provision which obligates Pier 1 to pay a participant who
may receive a benefit which is subject to the golden parachute
penalty tax (generally, an officer or highly compensated
employee) a gross-up
payment from Pier 1 so that the amount of the
net benefit received by such participant will equal
the amount that would have been received in the absence of
applicability of the golden parachute sanction penalty tax.
Section 280G of the Internal Revenue Code of 1986, as
amended, disallows a deduction to Pier 1 for amounts
subject to the golden parachute penalty tax under
Section 4999.
Section 162(m) of the Internal Revenue Code of 1986, as
amended, places a $1 million cap on the deductible
compensation that may be paid to certain executives of publicly
traded corporations. Amounts that qualify as
performance-based compensation under
Section 162(m)(4)(C) are exempt from the cap and do not
count toward the $1 million limit. Generally, options
granted with an exercise price at least equal to the fair market
value of the stock on the date of the grant will qualify as
performance-based compensation. Other awards may or may not so
qualify, depending on their terms.
OTHER BUSINESS
Pier 1 does not plan to act on any matters at the meeting
other than those described in this proxy statement. If any other
business should properly come before the meeting, the persons
named in the proxy will vote in accordance with their best
judgment.
Relationship with Independent Auditors
Pursuant to its charter, the audit committee is directly
responsible for the appointment, compensation, retention and
oversight of Pier 1s independent auditors. The audit
committee plans to select auditors for the 2007 fiscal year at a
committee meeting which will precede the annual meeting.
The audit committee appointed Ernst & Young LLP as
Pier 1s auditors for fiscal year 2006. A
representative of Ernst & Young LLP is expected to be
present at the annual meeting and will be given the opportunity
to make a statement if he or she so desires and to respond to
appropriate questions from shareholders.
Independent Auditor Fees
The following table presents fees incurred for professional
services rendered by Ernst & Young LLP,
Pier 1s independent auditors, for fiscal years ended
February 25, 2006 and February 26, 2005.
|
|
|
|
|
|
|
|
|
|
|
February 25, 2006 | |
|
February 26, 2005 | |
|
|
| |
|
| |
Audit Fees(1)
|
|
$ |
1,269,396 |
|
|
$ |
1,035,535 |
|
|
|
|
|
Audit-Related Fees(2)
|
|
|
51,227 |
|
|
|
54,100 |
|
|
|
|
|
Tax Fees(3)
|
|
|
229,468 |
|
|
|
187,000 |
|
|
|
|
|
|
|
|
Total Fees
|
|
$ |
1,550,091 |
|
|
$ |
1,276,635 |
|
|
|
|
|
|
|
|
24
|
|
(1) |
Includes fees for services related to the annual audit of the
consolidated financial statements, required statutory audits,
reviews of Pier 1s quarterly reports on
Form 10-Q and the
auditors report on Pier 1s internal control
over financial reporting, as required under Section 404 of
the Sarbanes-Oxley Act of 2002. |
|
(2) |
Includes fees for services related to employee benefit plan
audit and agreed-upon procedures related to the securitization
of Pier 1s proprietary credit card receivables. |
|
(3) |
Includes fees for services related to tax compliance, tax advice
and tax planning. |
Pre-approval of Nonaudit Fees
The audit committee has adopted a policy that requires advance
approval of all audit, audit-related, tax and other services
performed by the independent auditor. The policy provides for
pre-approval by the audit committee of specifically defined
audit, audit related and tax services. Unless the specific
service has been previously pre-approved with respect to that
year, the audit committee must approve the permitted service
before the independent auditor is engaged to perform it. The
audit committee has delegated to the chairman of the audit
committee authority to approve permitted services up to
$50,000 per engagement provided that the chairman reports
any pre-approval decisions to the committee at its next
scheduled meeting.
Shareholder Proposals for 2007 Annual Meeting
To be included in the proxy statement relating to the 2007
annual meeting of shareholders, shareholder proposals must be
received by Pier 1s corporate secretary no later than
5:00 p.m., local time, January 15, 2007.
In order to bring a matter before the 2007 annual meeting of
shareholders that is not contained in the proxy statement,
including the nomination of an individual for election as a
director, a shareholder must comply with the advance notice
provisions of Pier 1s
by-laws.
Pier 1s
by-laws require that it
receive notice of the matter no earlier than March 24,
2007, and no later than April 23, 2007. You may contact
Pier 1s corporate secretary to find out what specific
information regarding the matter must be included with the
advance notice.
Proxy Solicitation
Pier 1 has hired Mellon Investor Services, LLC to assist it
in soliciting proxies. Pier 1 will pay all costs associated
with the solicitation, including Mellons fees, which it
expects to be $7,500 or less, and all mailing and delivery
expenses. In addition to solicitations by mail,
Pier 1s officers and employees may solicit proxies
personally and by telephone or other means, for which they will
receive no compensation beyond their normal compensation.
Pier 1 may also make arrangements with brokerage houses and
other custodians, nominees and fiduciaries to forward
solicitation material to the beneficial owners of stock held of
record by such persons, and it will reimburse them for their
reasonable
out-of-pocket and
clerical expenses.
Voting Securities
Shareholders of record on April 24, 2006 will be entitled
to vote at the meeting. On that date, 87,083,398 shares of
Pier 1s common stock were outstanding and entitled to
vote at the meeting. Each share of common stock entitles the
holder to one vote on each matter voted on at the meeting. An
abstention, if allowed for a proposal, will not be counted as
voting for a matter, and, therefore, will have the same effect
as a vote against the matter. Unless otherwise stated herein or
on the proxy card, broker non-votes will not be counted as a
vote either for or against the matter.
25
Voting by Plan Administrator
The enclosed proxy card also covers shares of Pier 1 common
stock held for participants in Pier 1s Stock Purchase
Plan and will serve as voting instructions for the plan
administrator.
Quorum
Shareholders representing a majority of the shares of
Pier 1s common stock outstanding as of April 24,
2006 must be present at the annual meeting in order to conduct
business at the meeting.
YOUR VOTE IS IMPORTANT
You are encouraged to let us know your preference by completing
and returning the enclosed proxy card or by voting by telephone
or the Internet.
Michael A. Carter
Senior Vice President and General Counsel,
Corporate Secretary
May 15, 2006
26
APPENDIX A
PIER 1 IMPORTS, INC.
2006 STOCK INCENTIVE PLAN
I. PURPOSE OF THE PLAN
The purpose of the PIER 1 IMPORTS, INC. 2006 STOCK INCENTIVE
PLAN (the Plan) is to provide a means through
which PIER 1 IMPORTS, INC., a Delaware corporation (the
Company), and its Affiliates may attract able
persons to serve as Directors or to enter the employ of the
Company and its Affiliates and to provide a means whereby those
individuals upon whom the responsibilities of the successful
administration and management of the Company and its Affiliates
rest, and whose present and potential contributions to the
Company and its Affiliates are of importance, can acquire and
maintain stock ownership, thereby strengthening their concern
for the welfare of the Company and its Affiliates. A further
purpose of the Plan is to provide such individuals with
additional incentive and reward opportunities designed to
enhance the profitable growth of the Company and its Affiliates.
Accordingly, the Plan provides for granting Incentive Stock
Options, options that do not constitute Incentive Stock Options,
Restricted Stock Awards, Restricted Stock Unit Awards,
Performance Awards, and Phantom Stock Awards, or any combination
of the foregoing, as is best suited to the circumstances of the
particular employee or Director as provided herein. The Plan
also provides for granting Director Deferred Stock Units to
Directors who are not employees of the Company.
II. DEFINITIONS
The following definitions shall be applicable throughout the
Plan unless specifically modified by any paragraph:
|
|
|
(a) Affiliate means any corporation,
partnership, limited liability company or partnership,
association, trust or other organization which, directly or
indirectly, controls, is controlled by, or is under common
control with, the Company. For purposes of the preceding
sentence, control (including, with correlative
meanings, the terms controlled by and under
common control with), as used with respect to any entity
or organization, shall mean the possession, directly or
indirectly, of the power (i) to vote more than fifty
percent (50%) of the securities having ordinary voting power for
the election of directors of the controlled entity or
organization, or (ii) to direct or cause the direction of
the management and policies of the controlled entity or
organization, whether through the ownership of voting securities
or by contract or otherwise. |
|
|
(b) Award means, individually or
collectively, any Option, Restricted Stock Award, Restricted
Stock Unit Award, Performance Award, Phantom Stock Award or
Director Deferred Stock Unit Award. |
|
|
(c) Board means the Board of Directors
of the Company. |
|
|
(d) Code means the Internal Revenue Code
of 1986, as amended. Reference in the Plan to any section of the
Code shall be deemed to include any amendments or successor
provisions to such section and any regulations under such
section. |
|
|
(e) Committee means a committee of the
Board that is selected by the Board as provided in
Paragraph IV(a). |
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(f) Common Stock means the common stock,
par value $1.00 per share, of the Company or any security
into which such common stock may be changed by reason of any
transaction or event of the type described in Paragraph XII. |
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(g) Company means Pier 1 Imports,
Inc., a Delaware corporation. |
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(h) Corporate Change shall mean any of
the following events: (i) a merger or consolidation to
which the Company is a party if the individuals and entities who
were stockholders of the Company |
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immediately prior to the effective date of such merger or
consolidation have beneficial ownership (as defined in
Rule 13d-3 under
the Exchange Act) of less than fifty percent (50%) of the total
combined voting power for election of directors of the surviving
corporation or other entity following the effective date of such
merger or consolidation; (ii) the acquisition or holding of
direct or indirect beneficial ownership (as defined in
Rule 13d-3 under
the Exchange Act) of securities of the Company representing in
the aggregate thirty percent (30%) or more of the total combined
voting power of the Companys then issued and outstanding
voting securities by any person, entity or group of associated
persons or entities acting in concert, other than any employee
benefit plan of the Company or of any subsidiary of the Company
or any entity holding such securities for or pursuant to the
terms of any such plan; (iii) the election of members of
the Board at a meeting of stockholders or by written consent,
the majority of which were not nominated by the Board;
(iv) the sale of all or substantially all of the assets of
the Company to any person or entity that is not a wholly owned
subsidiary of the Company; or (v) the approval by the
stockholders of the Company of any plan or proposal for the
liquidation of the Company or of its subsidiaries (other than
into the Company). |
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(i) Director means an individual who is
a member of the Board. |
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(j) Director Compensation Payment means
a payment to a Director of a Directors retainer fee or a
Directors meeting fee. |
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(k) Director Deferred Stock Unit Award
means an Award of deferred stock units granted under
Paragraph XI of the Plan. |
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(l) Effective Date means the date of the
Plans adoption by the Board. |
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(m) An employee means any person
(including a Director) in an employment relationship with the
Company or any Affiliate. |
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(n) Exchange Act means the Securities
Exchange Act of 1934, as amended. |
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(o) Fair Market Value means, as of any
specified date, the fair market value of the Common Stock as
determined by the Committee based upon its closing sale price
reported by the New York Stock Exchange on that date. |
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(p) Incentive Stock Option means an
incentive stock option within the meaning of section 422 of
the Code. |
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(q) Option means an Award granted under
Paragraph VII of the Plan and includes both Incentive Stock
Options to purchase Common Stock and options that do not
constitute Incentive Stock Options to purchase Common Stock. |
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(r) Option Agreement means a written
agreement between the Company and a Participant with respect to
an Option. |
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(s) Participant means an employee or
Director who has been granted an award. |
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(t) Performance Award means an Award
granted under Paragraph IX of the Plan. |
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(u) Performance Award Agreement means a
written agreement between the Company and a Participant with
respect to a Performance Award. |
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(v) Performance Measures means
performance measures established by the Committee that are based
on (1) the Fair Market Value of Common Stock, (2) the
Companys earnings per share, (3) the Companys
or an Affiliates market share, (4) the market share
of a business unit of the Company designated by the Committee,
(5) the Companys or an Affiliates sales,
(6) the sales of a business unit of the Company designated
by the Committee, (7) the net income (before or after
taxes) of the Company, an Affiliate or any business unit of the
Company designated by the Committee, (8) the cash flow or
return on investment of the Company, an Affiliate or any
business unit of the Company designated by the Committee,
(9) the earnings before or after interest, taxes,
depreciation, and/or amortization of the Company, an Affiliate
or any business unit of the Company |
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designated by the Committee, (10) the economic value added,
(11) the return on capital, assets or stockholders
equity achieved by the Company or an Affiliate, or (12) the
total stockholders return achieved by the Company.
Performance Measures established for an Award may thereafter be
subject to adjustment for specified significant extraordinary
items or events, including but not limited to (1) asset
write-downs; (2) litigation or claim judgments or
settlements; (3) the effect of changes in tax laws,
accounting principles or other laws or provisions affecting
reported results; (4) any reorganization and restructuring
programs; (5) extraordinary nonrecurring items as described
in Accounting Principles Board Opinion No. 30 and/or in
managements discussion and analysis of financial condition
and results of operations appearing in the Companys annual
report to shareholders for the applicable year;
(6) acquisitions or divestitures; and (7) foreign
exchange gains and losses. To the extent any such adjustment is
to be effected with respect to an Award, it shall be prescribed
in a form that meets the requirements of section 162(m) of
the Code for deductibility if the Committee, in its sole
discretion, determines that loss of deductibility is a
significant exposure for the Company. The Performance Measures
may be absolute, relative to one or more other companies, or
relative to one or more indexes, and may be contingent upon
future performance of the Company or any Affiliate, division, or
department thereof. |
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(w) Phantom Stock Award means an Award
granted under Paragraph X of the Plan. |
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(x) Phantom Stock Award Agreement means
a written agreement between the Company and a Participant with
respect to a Phantom Stock Award. |
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(y) Plan means the Pier 1 Imports,
Inc. 2006 Stock Incentive Plan, as amended from time
to time. |
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(z) Prior Plans means the Pier 1
Imports, Inc. 1999 Stock Plan and the Pier 1 Imports, Inc.
Management Restricted Stock Plan. |
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(aa) Restricted Stock Award means an
Award of restricted stock granted under Paragraph VIII of
the Plan. |
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(bb) Restricted Stock Award Agreement
means a written agreement between the Company and a
Participant with respect to a Restricted Stock Award. |
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(cc) Restricted Stock Unit Award means
an Award of restricted stock units granted under
Paragraph VIII of the Plan. |
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(dd) Restricted Stock Unit Award Agreement
means a written agreement between the Company and a
Participant with respect to a Restricted Stock Unit Award. |
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(ee) Rule 16b-3
means SEC
Rule 16b-3
promulgated under the Exchange Act, as such may be amended from
time to time, and any successor rule, regulation or statute
fulfilling the same or a similar function. |
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(ff) Stock Appreciation Right means a
right to acquire, upon exercise of the right, Common Stock
and/or, in the sole discretion of the Committee, cash having an
aggregate value equal to the then excess of the Fair Market
Value of the shares with respect to which the right is exercised
over the exercise price therefor. |
III. EFFECTIVE DATE AND DURATION
OF THE PLAN
The Plan shall become effective upon the date of its adoption by
the Board, provided the Plan is approved by the stockholders of
the Company within twelve (12) months thereafter.
Notwithstanding any provision in the Plan, no Option shall be
granted, no Restricted Stock Award shall be granted, no
Restricted Stock Unit Award shall be granted, no Director
Deferred Stock Unit Award shall be granted and no Performance
Award or Phantom Stock Award shall be granted prior to such
stockholder approval. No further Awards may be granted under the
Plan after ten (10) years from the date the Plan is adopted
by the Board. The Plan shall remain in effect until all Options
granted under the Plan have been exercised
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or expired, all Restricted Stock Awards and all Restricted Stock
Unit Awards granted under the Plan have vested or been
forfeited, all Performance Awards and Phantom Stock Awards have
been satisfied, expired, or forfeited and all Director Deferred
Stock Unit Awards have been satisfied.
IV. ADMINISTRATION
(a) Composition of Committee. The Plan
shall be administered by a committee of, and appointed by, the
Board or any duly appointed subcommittee of the Committee, that
shall be comprised solely of two (2) or more outside
Directors (within the meaning of the term outside
directors as used in section 162(m) of the Code and
applicable interpretive authority thereunder and within the
meaning of the term Non-Employee Director as defined
in Rule 16b-3).
(b) Powers. Subject to the express
provisions of the Plan, the Committee shall have authority, in
its discretion, to determine which employees or Directors shall
receive an Award, the time or times when such Award shall be
made, the type of Award that shall be made, the number of shares
to be subject to each Option, Restricted Stock Award or
Restricted Stock Unit Award, the number of shares subject to or
the value of each Performance Award, and the value of each
Phantom Stock Award. In making such determinations, the
Committee shall take into account the nature of the services
rendered by the respective employees or Directors, their present
and potential contribution to the Companys success and
such other factors as the Committee in its sole discretion shall
deem relevant.
(c) Additional Powers. The Committee
shall have such additional powers as are delegated to it by the
other provisions of the Plan. Subject to the express provisions
of the Plan, this shall include the power to construe the Plan
and the respective agreements executed hereunder, to prescribe
rules and regulations relating to the Plan, and to determine the
terms, restrictions and provisions of the agreement relating to
each Award, including such terms, restrictions and provisions as
shall be requisite in the judgment of the Committee to cause
designated Options to qualify as Incentive Stock Options, and to
make all other determinations necessary or advisable for
administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan
or in any agreement relating to an Award in the manner and to
the extent it shall deem expedient to carry it into effect. The
determinations of the Committee on the matters referred to in
this Paragraph IV shall be conclusive.
(d) Delegation of Powers. The
Committee may from time to time and in its sole discretion
delegate any and all of its powers to the Chief Executive
Officer of the Company or to an officer or a group of officers
of the Company; provided, however, that the Committee shall not
delegate any powers or responsibilities if such delegation would
result or potentially result in an Award which is intended to
qualify as performance-based compensation for purposes of
section 162(m) of the Code failing to qualify as such
performance-based compensation. The powers of delegation
pursuant to this paragraph include but are not limited to the
Committees powers to administer the Plan, to interpret
provisions of the Plan and to grant Awards under the Plan,
insofar as such administration, interpretation and power to
grant Awards relates to any person who is not subject to
Section 16 of the Exchange Act (including any successor
section to the same or similar effect). The Committee may revoke
any delegation of its powers at any time and may put any
conditions or restrictions on any powers which it has delegated
as it determines in its sole discretion. In the event of any
conflict in a determination or interpretation under the Plan as
between the Committee and a person or group of persons to whom
powers of determination or interpretation have been delegated by
the Committee, the determination or interpretation, as
applicable, of the Committee shall be conclusive.
V. SHARES SUBJECT TO THE PLAN;
AWARD LIMITS; GRANT OF AWARDS
(a) Shares Subject to the Plan and Award
Limits. Subject to adjustment in the same manner as
provided in Paragraph XII(b), the aggregate number of
shares of Common Stock that may be issued under the Plan shall
not exceed (i) 1,500,000 shares plus (ii) the
number of shares of Common Stock (not to exceed 560,794) which
remained available for grant under the Prior Plans as of the
Effective Date
A-4
increased by the number of shares of Common Stock (not to exceed
11,186,150 shares) subject to outstanding awards, as of the
Effective Date, under the Prior Plans that on or after the
Effective Date cease for any reason to be subject to such awards
(other than by reason of exercise or settlement of the awards to
the extent they are exercised for or settled in vested and
nonforfeitable shares of Common Stock). The aggregate maximum
number of shares of Common Stock that may be issued under the
Plan through Incentive Stock Options shall not exceed
2,060,794 shares. Shares shall be deemed to have been
issued under the Plan only to the extent actually granted
pursuant to an Award; provided, however, that the Committee
shall not grant any Award which potentially will result in the
issuance of shares of Common Stock if such issuance would cause
the Plan to exceed the limits described in the preceding two
sentences if all Options then outstanding were exercised in full
by participants. To the extent that an Award lapses or the
rights of its holder terminate, any shares of Common Stock
subject to such Award shall again be available for the grant of
an Award under the Plan. In addition, shares issued under the
Plan and forfeited back to the Plan, shares surrendered in
payment of the exercise price or purchase price of an Award, and
shares withheld for payment of applicable employment taxes
and/or withholding obligations associated with an Award shall
again be available for the grant of an Award under the Plan.
Notwithstanding any provision in the Plan to the contrary, the
maximum number of shares of Common Stock that may be subject to
Awards denominated in shares of Common Stock granted to any one
individual during any calendar year may not exceed
375,000 shares of Common Stock (subject to adjustment in
the same manner as provided in Paragraph XII(b)) and the
maximum amount of compensation that may be paid under all
Performance Awards denominated in cash (including the Fair
Market Value of any shares of Common Stock paid in satisfaction
of such Performance Awards) granted to any one individual during
any calendar year may not exceed $3 million. The
limitations set forth in the preceding sentence shall be applied
in a manner that will permit awards that are intended to provide
performance-based compensation for purposes of
section 162(m) of the Code to satisfy the requirements of
such section, including, without limitation, counting against
such maximum number of shares, to the extent required under
section 162(m) of the Code and applicable interpretive
authority thereunder, any shares subject to Options that are
canceled or repriced.
(b) Grant of Awards. The Committee may from
time to time grant Awards to one or more employees or Directors
determined by it to be eligible for participation in the Plan in
accordance with the terms of the Plan.
(c) Stock Offered. Subject to the limitations
set forth in Paragraph V(a), the stock to be offered
pursuant to the grant of an Award may be authorized but unissued
Common Stock or Common Stock previously issued and outstanding
and reacquired by the Company. Any of such shares which remain
unissued and which are not subject to outstanding Awards at the
termination of the Plan shall cease to be subject to the Plan
but, until termination of the Plan, the Company shall at all
times make available a sufficient number of shares to meet the
requirements of the Plan.
VI. ELIGIBILITY
Awards may be granted only to persons who, at the time of grant,
are employees or Directors. An Award may be granted on more than
one occasion to the same person, and, subject to the limitations
and restrictions set forth in the Plan, such Award may include
an Incentive Stock Option, an Option that is not an Incentive
Stock Option, a Restricted Stock Award, a Restricted Stock Unit
Award, a Performance Award, a Phantom Stock Award, a Director
Deferred Stock Unit Award or any combination thereof.
VII. STOCK OPTIONS
(a) Option Period. The term of each Option
shall be as specified by the Committee at the date of grant, but
in no event shall an Option be exercisable after the expiration
of ten (10) years from the date of grant.
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(b) Limitations on Exercise of Option. An
Option shall be exercisable in whole or in such installments and
at such times as determined by the Committee.
(c) Special Limitations on Incentive Stock
Options. An Incentive Stock Option may be granted only
to an individual who is employed by the Company or any parent or
subsidiary corporation (as defined in section 424 of the
Code) at the time the Option is granted. To the extent that the
aggregate Fair Market Value (determined at the time the
respective Incentive Stock Option is granted) of stock with
respect to which Incentive Stock Options are exercisable for the
first time by an individual during any calendar year under all
incentive stock option plans of the Company and its parent and
subsidiary corporations exceeds $100,000, such Incentive Stock
Options shall be treated as Options which do not constitute
Incentive Stock Options. The Committee shall determine, in
accordance with applicable provisions of the Code, Treasury
Regulations and other administrative pronouncements, which of a
Participants Incentive Stock Options will not constitute
Incentive Stock Options because of such limitation and shall
notify the Participant of such determination as soon as
practicable after such determination. No Incentive Stock Option
shall be granted to an individual if, at the time the Option is
granted, such individual owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of the Company or of its parent or subsidiary
corporation, within the meaning of section 422(b)(6) of the
Code, unless (i) at the time such Option is granted the
option price is at least one hundred ten percent (110%) of the
Fair Market Value of the Common Stock subject to the Option and
(ii) such Option by its terms is not exercisable after the
expiration of five years from the date of grant. Except as
otherwise provided in sections 421 or 422 of the Code, an
Incentive Stock Option shall not be transferable otherwise than
by will or the laws of descent and distribution, and shall be
exercisable during the Participants lifetime only by such
Participant or the Participants guardian or legal
representative.
(d) Option Agreement. Each Option shall be
evidenced by an Option Agreement in such form and containing
such provisions not inconsistent with the provisions of the Plan
as the Committee from time to time shall approve, including,
without limitation, provisions to qualify an Option as an
Incentive Stock Option under section 422 of the Code. Each
Option Agreement shall specify the effect of termination of
employment or service as a Director (by retirement, disability,
death or otherwise), as applicable, on the exercisability of the
Option. An Option Agreement may provide for the payment of the
option price, in whole or in part, by the delivery of a number
of shares of Common Stock (plus cash if necessary) having a Fair
Market Value equal to such option price. Moreover, an Option
Agreement may provide for a cashless exercise or
net share exercise of the Option by establishing
procedures satisfactory to the Committee with respect thereto.
The terms and conditions of the respective Option Agreements
need not be identical. Subject to the consent of the
Participant, the Committee may, in its sole discretion, amend an
outstanding Option Agreement from time to time in any manner
that is not inconsistent with the provisions of the Plan
(including, without limitation, an amendment that accelerates
the time at which the Option, or a portion thereof, may be
exercisable).
(e) Option Price and Payment. The price at
which a share of Common Stock may be purchased upon exercise of
an Option shall be determined by the Committee but, subject to
adjustment as provided in Paragraph XII(b), such purchase
price shall not be less than the Fair Market Value of a share of
Common Stock on the date such Option is granted. The Option or
portion thereof may be exercised by delivery of an irrevocable
notice of exercise to the Company, as specified by the
Committee. The purchase price of the Option or portion thereof
shall be paid in full in the manner prescribed by the Committee.
Separate stock certificates shall be issued by the Company for
those shares acquired pursuant to the exercise of an Incentive
Stock Option and for those shares acquired pursuant to the
exercise of any Option that does not constitute an Incentive
Stock Option.
(f) Restrictions on Repricing of Options.
Except as provided in Paragraph XII, the Committee may not,
without approval of the stockholders of the Company, amend any
outstanding Option Agreement to lower the option price (or
cancel and replace any outstanding Option Agreement with Option
Agreements having a lower option price).
A-6
(g) Stockholder Rights and Privileges. The
Participant shall be entitled to all the privileges and rights
of a stockholder only with respect to such shares of Common
Stock as have been purchased upon exercise of the Option and for
which certificates of stock have been registered in the
Participants name.
(h) Options and Rights in Substitution for Options
Granted by Other Employers. Options and Stock
Appreciation Rights may be granted under the Plan from time to
time in substitution for options and such rights held by
individuals providing services to corporations or other entities
who become employees or Directors as a result of a merger or
consolidation or other business transaction with the Company or
any Affiliate.
VIII. RESTRICTED STOCK AND
RESTRICTED STOCK UNIT AWARDS
(a) Forfeiture Restrictions To Be Established by the
Committee. Restricted Stock Unit Awards and shares of
Common Stock that are the subject of a Restricted Stock Award
shall be subject to restrictions on disposition by the
Participant and an obligation of the Participant to forfeit the
units or forfeit and surrender the shares to the Company under
certain circumstances (the Forfeiture Restrictions).
The Forfeiture Restrictions shall be determined by the Committee
in its sole discretion, and the Committee may provide that the
Forfeiture Restrictions applicable to an Award shall lapse upon
(i) the attainment of one or more Performance Measures,
(ii) the Participants continued employment with the
Company or continued service as a Director for a specified
period of time, (iii) the occurrence of any event or the
satisfaction of any other condition specified by the Committee
in its sole discretion, or (iv) a combination of any of the
foregoing. Each Restricted Stock Award and each Restricted Stock
Unit Award may have different Forfeiture Restrictions, in the
discretion of the Committee. In no event shall the Forfeiture
Restrictions with respect to a Restricted Stock Award or a
Restricted Stock Unit Award lapse in full prior to the
expiration of (i) a one-year period following the grant of
the Award in the case of Forfeiture Restrictions that lapse upon
the attainment of one or more Performance Measures or
(ii) a three-year period from the date of grant of the
Award in the case of Forfeiture Restrictions which lapse upon
other than the attainment of one or more Performance Measures.
In the case of a Restricted Stock Award or Restricted Stock Unit
Award under which the Forfeiture Restrictions lapse upon the
attainment of one or more Performance Measures, the Committee
shall establish the Performance Measures applicable to such
Award either (i) prior to the beginning of the performance
period or (ii) within ninety (90) days after the
beginning of the Awards performance period if the outcome of the
performance targets is substantially uncertain at the time such
targets are established, but not later than the date that
twenty-five percent (25%) of the Awards performance period has
elapsed.
(b) Restricted Stock Award Terms and
Conditions. Common Stock awarded pursuant to a
Restricted Stock Award shall be represented by a stock
certificate registered in the name of the Participant or
designated for such Participant on the records of the transfer
agent for Common Stock. Each stock certificate issued with
respect to a Restricted Stock Award shall bear the following or
a similar legend: The transferability of this certificate
and the shares of Common Stock represented hereby are subject to
the terms, conditions and restrictions (including forfeiture)
contained in the Pier 1 Imports, Inc. 2006 Stock Incentive
Plan and the Restricted Stock Award Agreement entered into
between the registered owner and Pier 1 Imports, Inc. A
copy of such plan and agreement is on file in the office of
Pier 1 Imports, Inc., 100 Pier 1 Place,
Fort Worth, Texas 76102. Unless provided otherwise in
a Restricted Stock Award Agreement, the Participant shall have
the right to receive dividends with respect to Common Stock
subject to a Restricted Stock Award, to vote Common Stock
subject thereto and to enjoy all other stockholder rights,
except that (i) the Participant shall not be entitled to
delivery of the stock certificate until the Forfeiture
Restrictions have expired, (ii) the Company shall retain
custody of the stock until the Forfeiture Restrictions have
expired, (iii) the Participant may not sell, transfer,
pledge, exchange, hypothecate or otherwise dispose of the stock
until the Forfeiture Restrictions have expired, (iv) a
breach of the terms and conditions established by the Committee
pursuant to the Restricted Stock Award Agreement shall cause a
forfeiture of the Restricted Stock Award, and (v) with
respect to the payment of any dividend with respect to shares of
Common Stock subject to a Restricted Stock Award directly to the
Participant, each such dividend shall be paid at the same time
as are paid dividends to stockholders of
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such class of shares. At the time of such Award, the Committee
may, in its sole discretion, prescribe additional terms,
conditions or restrictions relating to Restricted Stock Awards,
including, but not limited to, rules pertaining to the
termination of employment or service as a Director (by
retirement, disability, death or otherwise) of a Participant
prior to expiration of the Forfeitures Restrictions. Such
additional terms, conditions or restrictions shall be set forth
in a Restricted Stock Award Agreement made in conjunction with
the Award.
(c) Payment for Restricted Stock. The
Committee shall determine the amount and form of any payment for
Common Stock received pursuant to a Restricted Stock Award,
provided that in the absence of such a determination, a
Participant shall not be required to make any payment for Common
Stock received pursuant to a Restricted Stock Award, except to
the extent otherwise required by law.
(d) Restricted Stock Unit Award Terms and
Conditions. A Restricted Stock Unit Award is a right to
receive cash or shares of Common Stock based upon a bookkeeping
entry referencing a value expressed by reference to shares of
Common Stock and subject to forfeiture pursuant to Forfeiture
Restrictions. A Participant shall have no right to receive
dividends or any other right and privilege of a shareholder with
respect to Common Stock which is the measure of a Restricted
Stock Unit Award. At the time of grant of a Restricted Stock
Unit Award, the Committee may, in its sole discretion prescribe
additional terms, conditions or restrictions relating to the
Awards, including, but not limited to, rules pertaining to the
termination of employment or service as a Director (by
retirement, disability, death or otherwise) of a Participant
prior to expiration of the Forfeitures Restrictions. Such
additional terms, conditions or restrictions shall be set forth
in a Restricted Stock Unit Award Agreement made in conjunction
with the Award.
(e) Committees Discretion to Accelerate Vesting
of Restricted Stock Awards and Restricted Stock Unit
Awards. Except as it would cause Plan failure under
Section 409A of the Code, the Committee may, in its
discretion and as of a date determined by the Committee, fully
vest any or all Common Stock awarded to a Participant pursuant
to a Restricted Stock Award or any or all Restricted Stock Unit
Awards of a Participant which are then still subject to
Forfeiture Restrictions and, upon such vesting, all Forfeiture
Restrictions applicable to such Restricted Stock Award or
Restricted Stock Unit Awards shall terminate as of such date.
Any action by the Committee pursuant to this subparagraph may
vary among individual Participants and may vary among the
Restricted Stock Awards or Restricted Stock Unit Awards held by
any individual Participant. Notwithstanding the preceding
provisions of this subparagraph and except as permitted pursuant
to paragraph (c) of Section XII regarding a
Corporate Change, the Committee may not take any action
described in this subparagraph with respect to a Restricted
Stock Award or a Restricted Stock Unit Award that has been
granted to a covered employee (within the meaning of
Treasury Regulation section 1.162-27(c)(2)) if such Award
has been designed to meet the exception for performance-based
compensation under section 162(m) of the Code or with
respect to a Restricted Stock Unit Award that would result in
adverse tax consequence of the Award holder under
Section 409A of the Code.
(f) Restricted Stock Award Agreements and Restricted
Stock Unit Award Agreements. At the time any Award is
made under this Paragraph VIII, the Company and the
Participant shall enter into a Restricted Stock Award Agreement
or Restricted Stock Unit Award Agreement, as applicable, setting
forth each of the matters contemplated hereby and such other
matters as the Committee may determine to be appropriate. The
terms and provisions of the respective Restricted Stock Award
Agreements or Restricted Stock Unit Award Agreements, as
applicable, need not be identical. Subject to the consent of the
Participant and the restriction set forth in the last sentence
of subparagraph (e) above, the Committee may, in its
sole discretion, amend an outstanding Restricted Stock Award
Agreement from time to time in any manner that is not
inconsistent with the provisions of the Plan.
IX. PERFORMANCE AWARDS
(a) Performance Period. The Committee shall
establish, with respect to and at the time of each Performance
Award, whether the Award is to be an Award of shares of Common
Stock or a cash Award,
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the number of shares of Common Stock subject to or the maximum
cash value of the Performance Award, as applicable, and the
performance period over which the performance applicable to the
Performance Award shall be measured.
(b) Performance Measures. A Performance Award
shall be awarded to a Participant contingent upon future
performance of the Company or any Affiliate, division, or
department thereof during the performance period. The Committee
shall establish the Performance Measures applicable to a
Performance Award either (i) prior to the beginning of the
performance period or (ii) within ninety (90) days
after the beginning of the performance period if the outcome of
the performance targets is substantially uncertain at the time
such targets are established, but not later than the date that
twenty-five percent (25%) of the performance period has elapsed.
The Committee, in its sole discretion, may provide for an
adjustable Performance Award value based upon the level of
achievement of Performance Measures and/or provides for a
reduction in the value of a Performance Award during the
performance period. In no event shall a Performance Award vest
in full prior to the expiration of a one-year period following
the grant of the Award.
(c) Awards Criteria. In determining the value
of Performance Awards, the Committee shall take into account a
Participants responsibility level, performance, potential,
other Awards, and such other considerations as it deems
appropriate. The Committee, in its sole discretion, may provide
for a reduction in the value of a Participants Performance
Award during the performance period.
(d) Payment. Following the end of the
performance period for a Performance Award and in no event later
than ten (10) years after the date of grant of such
Performance Award, the holder of the Performance Award shall be
entitled to receive payment of an amount not exceeding the
number of shares of Common Stock subject to or the maximum cash
value of the Performance Award, as applicable, based on the
achievement of the performance measures for such performance
period, as determined and certified in writing by the Committee.
Payment of a Performance Award for a performance period shall be
in full immediately following the end of such performance period
but in no event later than the fifteenth day of the third
calendar month after the later of the calendar year immediately
following the calendar year with which or with in which the
performance period ends or the taxable year of the Company
immediately following the taxable year at the Company with which
or within which the performance period ends and may be made in
cash, Common Stock, or a combination thereof, as determined by
the Committee. If a Performance Award covering shares of Common
Stock is to be paid in cash, such payment shall be based on the
Fair Market Value of the Common Stock on the payment date or
such other date as may be specified by the Committee in the
Performance Award Agreement. If a cash Performance Award is to
be paid in shares of Common Stock, the number of shares of such
payment shall be determined based upon the Fair Market Value of
the Common Stock on the date of payment or such other date as
may be specified by the Committee in the Performance Award
Agreement.
(e) Termination of Award. A Performance Award
shall terminate if the Participant does not remain continuously
in the employ of the Company and its Affiliates or does not
continue to serve as a Director for the Company at all times
during the applicable performance period, except as may be
determined by the Committee.
(f) Performance Award Agreements. At the time
any Award is made under this Paragraph IX, the Company and
the Participant shall enter into a Performance Award Agreement
setting forth each of the matters contemplated hereby, and such
additional matters as the Committee may determine to be
appropriate. The terms and provisions of the respective
Performance Award Agreements need not be identical.
X. PHANTOM STOCK AWARDS
(a) Phantom Stock Awards. Phantom Stock
Awards are rights to receive shares of Common Stock (or the Fair
Market Value thereof), or rights to receive an amount equal to
any appreciation or increase in the Fair Market Value of Common
Stock over a specified period of time, which vest over a period
of time
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as established by the Committee, without satisfaction of any
performance criteria or objectives. The Committee may, in its
discretion, require payment or other conditions of the
Participant respecting any Phantom Stock Award. A Phantom Stock
Award may include, without limitation, a Stock Appreciation
Right that is granted independently of an Option or a Stock
Appreciation Right that is granted in tandem with an Option. Any
Phantom Stock Award which is a Stock Appreciation Right shall
have a maximum term of ten years and shall represent an Award
that measures appreciation or increase in the Fair Market Value
of Common Stock only with reference to appreciation over the
Fair Market Value of the Common Stock which is the subject of
the Award as of the date of grant thereof.
(b) Award Period. The Committee shall
establish, with respect to and at the time of each Phantom Stock
Award, a period over which the Award shall vest with respect to
the Participant; provided, however, no Phantom Stock Award will
vest in full prior to the expiration of a three year period from
the date of its grant.
(c) Awards Criteria. In determining the value
of Phantom Stock Awards, the Committee shall take into account a
Participants responsibility level, performance, potential,
other Awards, and such other considerations as it deems
appropriate.
(d) Payment. Following the end of the vesting
period for a Phantom Stock Award (or at such other time as the
applicable Phantom Stock Award Agreement may provide) or upon an
exercise by a Participant of a payment right and in no event
later than ten (10) years after the date of grant of such
Phantom Stock Award, the holder of the Phantom Stock Award shall
be entitled to receive payment of an amount, not exceeding the
maximum value of the Phantom Stock Award, based on the then
vested or exercised value of the Award. Payment of a Phantom
Stock Award may be made in cash, Common Stock, or a combination
thereof as determined by the Committee. Payment shall be made in
a lump sum as soon as practicable following vesting or exercise
of the Award but in no event later than the fifteenth day of the
third calendar month after the later of the calendar year
immediately following the calendar year in which such vesting
occurred or the taxable year of the Company immediately
following the taxable year of the Company with which or within
such vesting occurred. Any payment to be made in cash shall be
based on the Fair Market Value of the Common Stock on the
payment date or such other date as may be specified by the
Committee in the Phantom Stock Award Agreement.
(e) Termination of Award. A Phantom Stock
Award shall terminate if the Participant does not remain
continuously in the employ of the Company and its Affiliates or
does not continue to serve as a Director for the Company at all
times during the applicable vesting period, except as may be
otherwise determined by the Committee.
(f) Phantom Stock Award Agreements. At the
time any Award is made under this Paragraph X, the Company
and the Participant shall enter into a Phantom Stock Award
Agreement setting forth each of the matters contemplated hereby,
and such additional matters as the Committee may determine to be
appropriate. The terms and provisions of the respective Phantom
Stock Award Agreements need not be identical.
XI. DIRECTOR DEFERRED STOCK UNIT
AWARDS
(a) Director Deferred Stock. A Director
Deferred Stock Unit Award provides deferral of part or all of a
Directors Director Compensation Payment into deferred
stock units. Director Deferred Stock Unit Awards shall only be
available to Directors who are not employees. A Director
Deferred Stock Unit Award is a right to receive shares of Common
Stock based upon a bookkeeping entry referencing a value
expressed by reference to shares of Common Stock. Each Director
who is not an employee (other than certain Directors who made
irrevocable elections in 1999 not to participate under the
Pier 1 Imports, Inc. Deferred Stock Program) shall, in lieu
of being paid fifty percent (50%) of a Director Compensation
Payment in cash, be awarded deferred stock units in an amount
equal to 1.5 times the dollar amount of such Director
Compensation Payment divided by the Fair Market Value of a share
of Common Stock determined as of the date that such deferred
Director Compensation Payment amount would otherwise
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have been paid to the Director in cash. Any Director who is
receiving automatic Director Deferred Stock Unit Awards may
elect by executing and filing with the Committee the form
prescribed by the Committee for such election to have all or any
portion of the remaining fifty percent (50%) of such
Directors Director Compensation Payment credited to such
Director in the form of deferred stock units in lieu of being
paid to such Director in cash in an amount determined by
dividing 1.5 times the amount of cash that would otherwise have
been payable with respect to a Director Compensation Payment by
the Fair Market Value of a share of Common Stock determined as
of the date that such deferred Director Compensation Payment
amount would otherwise have been paid to the Director in cash.
Any such election shall be made in increments of $1,000 and must
be made on or before the December 31 of the calendar year
prior to the calendar year in which the services for the
Director Compensation Payment which such Director is deferring
into deferred stock units will be rendered and any such election
shall be irrevocable as of such December 31.
(b) Dividends. Each time that a dividend is
paid on Common Stock (other than a dividend of capital stock of
the Company), a Director who is then credited with deferred
stock units shall be credited with additional deferred stock
units equal to the product of the dividend payment amount (or,
if other than in cash, the Fair Market Value thereof) per share
multiplied by the number of deferred stock units credited to
such Director as of the record date for the dividend, divided by
the Fair Market Value of the Common Stock on the dividend
payment date.
(c) Director Deferred Stock Unit Award
Payouts. At the time that a Director terminates such
Directors service as a Director, the deferred stock units
then credited to such Director shall be exchanged for whole
shares of Common Stock which will be distributed to such
Director. The value of any fractional share of deferred stock
unit shall be paid in cash based upon the Fair Market Value of
the Common Stock on the date of the termination of the
Directors service as a Director. The transfer of shares of
Common Stock (and payment of cash in lieu of fractional shares)
to a Director in payment of such Directors deferred stock
units shall be effected on the first of the month following the
ninetieth day after the date such Director terminated such
Directors position as a Director of the Company; provided,
however, that such payment and transfer shall be deferred for a
period of six (6) months after the date of such termination
(or, if earlier, the date of death of the Director following
such termination) unless such termination was by reason of any
of the events described in Sections 409A(a)(2)(A)(ii),
(iii), (iv), (v) or (vi) of the Code if such transfer
(or payment) is a transfer (or payment) of amounts which would
be considered to be compensation which was deferred after
December 31, 2004.
XII. RECAPITALIZATION OR
REORGANIZATION
(a) No Effect on Right or Power. The
existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the
Companys or any Affiliates capital structure or its
business, any merger or consolidation of the Company or any
Affiliate, any issue of debt or equity securities ahead of or
affecting Common Stock or the rights thereof, the dissolution or
liquidation of the Company or any Affiliate or any sale, lease,
exchange or other disposition of all or any part of its assets
or business or any other corporate act or proceeding.
(b) Subdivision or Consolidation of Shares; Stock
Dividends; and Recapitalizations. The shares with
respect to which Awards may be granted are shares of Common
Stock as presently constituted, but if, and whenever, prior to
the expiration of an Award theretofore granted, the Company
shall effect a subdivision or consolidation of shares of Common
Stock or the payment of a stock dividend on Common Stock without
receipt of consideration by the Company, the number of shares of
Common Stock covered by an Award (i) in the event of an
increase in the number of outstanding shares shall be
proportionately increased, and the purchase price per share
shall be proportionately reduced, and (ii) in the event of
a reduction in the number of outstanding shares shall be
proportionately reduced, and the purchase price per share shall
be proportionately increased. Any fractional share resulting
from such adjustment shall be rounded up to the next whole
share. If the Company recapitalizes, reclassifies its capital
stock, or
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otherwise changes its capital structure (a
recapitalization), the number and class of shares of
Common Stock covered by an Award theretofore granted shall be
adjusted so that such Award shall thereafter cover the number
and class of shares of stock and securities to which the
Participant would have been entitled pursuant to the terms of
the recapitalization if, immediately prior to the
recapitalization, the Participant had been the holder of record
of the number of shares of Common Stock then covered by such
Award.
(c) Corporate Changes. Before or no later
than thirty (30) days after a Corporate Change, the
Committee, acting in its sole discretion without the consent or
approval of any Participant, shall effect one or more of the
following alternatives, which alternatives may vary among
individual Participants and which may vary among Options held by
any individual Participant: (1) accelerate the time at
which Options then outstanding may be exercised so that such
Options may be exercised in full for a limited period of time on
or before a specified date (before or after such Corporate
Change) fixed by the Committee, after which specified date all
unexercised Options and all rights of Participants thereunder
shall terminate, (2) require the mandatory surrender to the
Company by all or selected Participants of some or all of the
outstanding Options held by such Participants (irrespective of
whether such Options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate
Change, specified by the Committee, in which event the Committee
shall thereupon cancel such Options and the Company shall pay
(or cause to be paid) to each Participant an amount of cash per
share equal to the excess, if any, of the amount calculated in
Subparagraph (d) below (the Change of Control
Value) of the shares subject to such Option over the
exercise price(s) under such Options for such shares, or
(3) make such adjustments to Options then outstanding as
the Committee deems appropriate to reflect such Corporate Change
(provided, however, that the Committee may determine in its sole
discretion that no adjustment is necessary to Options then
outstanding), including, without limitation, adjusting an Option
to provide that the number and class of shares of Common Stock
covered by such Option shall be adjusted so that such Option
shall thereafter cover securities of the surviving or acquiring
corporation or other property (including, without limitation,
cash) as determined by the Committee in its sole discretion. In
exercising its powers to adjust Options as a result of a result
of a corporate change pursuant to this subparagraph (c),
the Committee shall exercise its best efforts to effect
adjustments in a way that does not cause Options to become
deferred compensation for purposes of the requirements imposed
under section 409(a) of the Code. In the event of a
Corporate Change, the Committee, acting at its sole discretion
without the consent or approval of any Participant, may cause
the Forfeiture Restrictions then remaining applicable with
respect to all or selected Restricted Stock Awards or Restricted
Stock Unit Awards to lapse as of a date before or after such
Corporate Change as specified by the Committee. In the event of
a Corporate Change, the Committee, acting in its sole discretion
without the consent or approval of any Participant, may require
the mandatory surrender to the Company by all or selected
Participants of some or all of the outstanding Performance
Awards or Phantom Stock Awards, as of a date before or after
such Corporate Change specified by the Committee, in which event
the Committee shall thereupon cancel such Performance Awards and
Phantom Stock Awards and the Company shall pay (or cause to be
paid) to each Participant an amount of cash equal to the maximum
value (which maximum value may be determined, if applicable and
in the discretion of the Committee, based on the then Fair
Market Value of the Common Stock) of such Performance Award or
Phantom Stock Award which, in the event the applicable
performance or vesting period set forth in such Performance
Award or Phantom Stock Award has not been completed, shall be
multiplied by a fraction, the numerator of which is the number
of days during the period beginning on the first day of the
applicable performance or vesting period and ending on the date
of the surrender, and the denominator of which is the aggregate
number of days in the applicable performance or vesting period.
Provisions of this Subparagraph (c) notwithstanding,
the Committee may not and cannot take action pursuant to this
Subparagraph (c) with respect to Awards which
constitute deferred compensation that is subject to
Section 409A of the Code unless (i) the Corporate
Change in issue is a change in control event as such
term is described in proposed or final Treasury Regulations
promulgated pursuant to Section 409A of the Code and
(ii) the action taken by the Committee constitutes an
acceleration which is a permissible acceleration under proposed
or final Treasury Regulations promulgated pursuant to
Section 409A of the Code. Further, nothing in this
Subparagraph (c) shall be interpreted to invalidate or
otherwise adversely affect any provision in an individual
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Award agreement regarding the effect of a Corporate Change upon
the Award evidenced by such agreement and the Committee can
exercise powers conferred upon the Committee pursuant to this
Subparagraph (c) with respect to such Award only in a
way which is consistent with and complimentary to any specific
Corporate Change provisions of such Award Agreement.
(d) Change of Control Value. For the purposes
of clause (2) in Subparagraph (c) above, the
Change of Control Value shall equal the amount
determined in clause (i), (ii) or (iii), whichever is
applicable, as follows: (i) the per share price offered to
stockholders of the Company in any such merger, consolidation,
sale of assets or dissolution transaction, (ii) the price
per share offered to stockholders of the Company in any tender
offer or exchange offer whereby a Corporate Change takes place,
or (iii) if such Corporate Change occurs other than
pursuant to a tender or exchange offer, the Fair Market Value
per share of the shares into which such Options being
surrendered are exercisable, as determined by the Committee as
of the date determined by the Committee to be the date of
cancellation and surrender of such Options. In the event that
the consideration offered to stockholders of the Company in any
transaction described in this Subparagraph (d) or
Subparagraph (c) above consists of anything other than
cash, the Committee shall determine the fair cash equivalent of
the portion of the consideration offered which is other than
cash.
(e) Other Changes in the Common Stock. In the
event of changes in the outstanding Common Stock by reason of
recapitalizations, reorganizations, mergers, consolidations,
combinations, split-ups, split-offs, spin-offs, exchanges or
other relevant changes in capitalization or distributions to the
holders of Common Stock occurring after the date of the grant of
any Award and not otherwise provided for by this
Paragraph XII, such Award and any agreement evidencing such
Award shall be subject to adjustment by the Committee at its
sole discretion as to the number and price of shares of Common
Stock or other consideration subject to such Award. In the event
of any such change in the outstanding Common Stock or
distribution to the holders of Common Stock, or upon the
occurrence of any other event described in this
Paragraph XII, the aggregate number of shares available
under the Plan, the aggregate number of shares that may be
issued under the Plan through Incentive Stock Options, and the
maximum number of shares that may be subject to Awards granted
to any one individual may be appropriately adjusted to the
extent, if any, determined by the Committee, whose determination
shall be conclusive.
(f) Stockholder Action. Any adjustment
provided for in the above Subparagraphs shall be subject to any
required stockholder action.
(g) No Adjustments Unless Otherwise Provided.
Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities
convertible into shares of stock of any class, for cash,
property, labor or services, upon direct sale, upon the exercise
of rights or warrants to subscribe therefor, or upon conversion
of shares or obligations of the Company convertible into such
shares or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of shares of
Common Stock subject to Awards theretofore granted or the
purchase price per share, if applicable.
XIII. AMENDMENT AND TERMINATION
OF THE PLAN
The Board in its discretion may terminate the Plan at any time
with respect to any shares of Common Stock for which Awards have
not theretofore been granted. The Board shall have the right to
alter or amend the Plan or any part thereof from time to time;
provided that no change in the Plan may be made that would
impair the rights of a Participant with respect to an Award
theretofore granted without the consent of the Participant, and
provided, further, that the Board may not, without approval of
the stockholders of the Company, (a) amend the Plan to
increase the maximum aggregate number of shares that may be
issued under the Plan, increase the maximum number of shares
that may be issued under the Plan through Incentive Stock
Options or change the class of individuals eligible to receive
Awards under the Plan, or (b) amend or delete
Paragraph VII(f).
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XIV. MISCELLANEOUS
(a) No Right To An Award. Neither the
adoption of the Plan nor any action of the Board or of the
Committee shall be deemed to give any individual any right to be
granted an Option, a right to a Restricted Stock Award, a right
to a Restricted Stock Unit, a right to a Performance Award, a
right to a Phantom Stock Award, or any other rights hereunder
except as may be evidenced by an Award agreement duly executed
on behalf of the Company, and then only to the extent and on the
terms and conditions expressly set forth therein. The Plan shall
be unfunded. The Company shall not be required to establish any
special or separate fund or to make any other segregation of
funds or assets to assure the performance of its obligations
under any Award.
(b) No Employment/ Membership Rights
Conferred. Nothing contained in the Plan shall
(i) confer upon any employee any right with respect to
continuation of employment or of a consulting or advisory
relationship with the Company or any Affiliate or
(ii) interfere in any way with the right of the Company or
any Affiliate to terminate his or her employment or consulting
or advisory relationship at any time. Nothing contained in the
Plan shall confer upon any Director any right with respect to
continuation of membership on the Board.
(c) Other Laws; Withholding. The Company
shall not be obligated to issue any Common Stock pursuant to any
Award granted under the Plan at any time when the shares covered
by such Award have not been registered under the Securities Act
of 1933, as amended, and such other state and federal laws,
rules and regulations as the Company or the Committee deems
applicable and, in the opinion of legal counsel for the Company,
there is no exemption from the registration requirements of such
laws, rules and regulations available for the issuance and sale
of such shares. No fractional shares of Common Stock shall be
delivered, nor shall any cash in lieu of fractional shares be
paid. The Company shall have the right to deduct in connection
with all Awards any taxes required by law to be withheld and to
require any payments required to enable it to satisfy its
withholding obligations.
(d) Section 409A Acceleration. The
Committee may at any time cause the acceleration and payment of
an amount under an Award at any time such Award fails to meet
the requirements of Section 409A of the Code; provided,
however, that the accelerated payment shall not exceed the
amount required to be included in income of the Award holder as
a result of such failure to comply with the requirements of
Section 409A of the Code.
(e) No Restriction on Corporate Action.
Nothing contained in the Plan shall be construed to prevent the
Company or any Affiliate from taking any action which is deemed
by the Company or such Affiliate to be appropriate or in its
best interest, whether or not such action would have an adverse
effect on the Plan or any Award made under the Plan. No
Participant, beneficiary or other person shall have any claim
against the Company or any Affiliate as a result of any such
action.
(f) Restrictions on Transfer. An Award (other
than an Incentive Stock Option, which shall be subject to the
transfer restrictions set forth in Paragraph VII(c)) shall
not be transferable otherwise than (i) by will or the laws
of descent and distribution, (ii) pursuant to a qualified
domestic relations order as defined by the Code or Title I
of the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder, or (iii) with the consent
of the Committee, but in no event can any Award granted
hereunder be transferred for value.
(g) Governing Law. The Plan shall be governed
by, and construed in accordance with, the laws of the State of
Delaware, without regard to conflicts of laws principles thereof.
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Gregory S. Humenesky |
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Executive Vice President, Human Resources |
A-14
PIER 1 IMPORTS, INC.
100 Pier 1 Place, Fort Worth, Texas 76102
PROXY
The board of directors solicits this proxy for use at the Annual Meeting of Shareholders, June
22, 2006
The shareholder whose signature appears on the reverse side of this proxy card hereby appoints
MARVIN J. GIROUARD, BRUCE A. CHEATHAM and MICHAEL A. CARTER, and each of them, proxies with full
power of substitution, to represent and to vote as set forth on this proxy card all the shares of
the common stock of Pier 1 Imports, Inc. held of record by the shareholder on April 24, 2006, at
the Annual Meeting of Shareholders to be held at 10:00 a.m. local time on June 22, 2006 at the Fort
Worth Club, Trinity Room, 306 West 7th Street, Fort Worth, Texas, and any adjournment thereof.
This proxy, when properly executed, will be voted in the manner directed by the shareholder.
If no direction is made, this proxy will be voted (i) FOR the election of the directors
nominated, and (ii) FOR the proposal to approve Pier 1s 2006 Stock Incentive Plan.
You are encouraged to specify your choices by marking the appropriate box (SEE REVERSE SIDE)
but you need not mark any boxes if you wish to vote in accordance with the board of directors
recommendations. The proxies cannot vote your shares unless you sign and return this card or vote
by telephone or the Internet.
(Continued and to be signed and dated on the reverse side)
Address Change/Comments (Mark the corresponding box on the reverse side)
FOLD AND DETACH HERE
Please Mark Here for
Address Change or Comments o
SEE REVERSE SIDE
Proposal 1. Election of Directors
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FOR
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FOR all nominees listed
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WITHHOLD |
all nominees
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immediately below
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AUTHORITY |
listed
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except withhold authority
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to vote for all |
immediately
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for nominee(s) as set forth
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nominees listed |
below
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below as exceptions
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immediately below |
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Nominees: 01 Marvin J. Girouard, 02 James M. Hoak, Jr., 03 Tom M. Thomas, 04 John H. Burgoyne, 05
Michael R. Ferrari, 06 Karen W. Katz and 07 Terry E. London
INSTRUCTIONS: Please mark only one box above. If you mark the middle box, please list your
exception(s) by name on the line below.
Proposal 2. Proposal to approve Pier 1s 2006 Stock Incentive Plan.
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FOR
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AGAINST
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ABSTAIN |
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Proposal 3. |
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In their discretion, the proxies are authorized to vote as described in the proxy statement and upon such other
business as may properly come before the meeting or any adjournment thereof. |
PLEASE DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
FOLD AND DETACH HERE
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
Internet
http://www.proxyvoting.com/pir
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site.
OR
Telephone
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
OR
Mail
Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
You can view the Annual Report and Proxy Statement on the Internet at
www.pier1.com/investorrelations.