PIER 1 IMPORTS, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

EX-10.5 6 a09-1100_1ex10d5.htm EX-10.5

Exhibit 10.5

PIER 1 IMPORTS, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

RESTATED AS OF JANUARY 1, 2009

TABLE OF CONTENTS

		PAGE

ARTICLE I —PURPOSE		1
ARTICLE II —DEFINITIONS		1
2.1	Beneficiary	1
2.2	Board	1
2.3	Cause	1
2.4	Change of Control of the Employer	2
2.5	Code	2
2.6	Committee	2
2.7	Compensation	2
2.8	Early Retirement Date	3
2.9	Employer	3
2.10	Good Reason	3
2.11	Highest Average Compensation	3
2.12	Normal Retirement Date	3
2.13	Participant	4
2.14	Pier 1	4
2.15	Regulations	4
2.16	Retirement	4
2.17	Separation from Service	4
2.18	Supplemental Retirement Benefit	4
2.19	Termination	5
2.20	Total and Permanent Disability	5
2.21	Years of Credited Service	5
2.22	Years of Plan Participation	5
ARTICLE III —PARTICIPATION AND VESTING		5
3.1	Participation	5
3.2	Supplemental Retirement Benefit Vesting	5
ARTICLE IV —SUPPLEMENTAL RETIREMENT BENEFITS		6
4.1	Benefit	6
4.2	Retirement; Disability; Death	6
4.3	Adjustments for Normal Retirement Benefit	7
4.4	Adjustments for Early Retirement Benefit	7
4.5	Termination	7
4.6	Form of Benefit Payment	7
4.7	Payments	8
4.8	Withholding; Payroll Taxes	9
4.9	Payment to Guardian	9
4.10	Major Medical and Hospitalization Insurance Coverage	9
ARTICLE V —BENEFICIARY DESIGNATION		10
5.1	Beneficiary Designation	10
5.2	Amendments	11
5.3	No Beneficiary Designation	11
5.4	Effect of Payment	11

5.5	Death of Beneficiary	11
ARTICLE VI —ADMINISTRATION		11
6.1	Committee; Duties	11
6.2	Agents	11
6.3	Binding Effect of Decisions	12
6.4	Indemnity of Committee	12
ARTICLE VII —CLAIMS PROCEDURES		12
7.1	Claim	12
7.2	Denial of Claim	12
7.3	Review of Claim	12
7.4	Final Decision	12
ARTICLE VIII —TERMINATION, SUSPENSION OR AMENDMENT		13
8.1	Amendment or Termination	13
8.2	Successor Employer	13
ARTICLE IX —MISCELLANEOUS		13
9.1	Unsecured General Creditor	13
9.2	Trust Fund	13
9.3	Nonassignability	13
9.4	Not a Contract of Employment	14
9.5	Suicide	14
9.6	Participant’s Cooperation	14
9.7	Domestic Relations Order	14
9.8	Terms	14
9.9	Captions	14
9.10	Governing Law	14
9.11	Validity	15
9.12	Successors	15
9.13	Notice	15

PIER 1 IMPORTS, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

ARTICLE 1—PURPOSE

The purpose of this Supplemental Executive Retirement Plan (hereinafter referred to as the “Plan”) is to provide supplemental retirement benefits for a select group of management or highly compensated employees of Pier 1 Imports, Inc. It is intended that the Plan will aid in retaining and attracting employees of exceptional ability by providing such individuals with these benefits. This Plan was originally effective as of May 1, 1986, was restated effective as of December 5, 2002, was restated effective as of January 1, 2005, and now is restated effective January 1, 2009. This restatement of the Plan shall only apply with respect to Participants who are actively employed by the Employer after December 31, 2004. With respect to Participants who terminated employment with the Employer prior to December 5, 2002, the Plan provisions in effect as of the date of the Participant’s termination of employment will continue to apply with respect to that Participant. The prior provisions of the Plan as in effect as of December 31, 2004 will continue to apply with respect to Participants who terminated employment with the Employer after December 4, 2002 and prior to January 1, 2005. Further, the prior provisions of the Plan as in effect as of December 31, 2004 will continue to apply with respect to any portion of a Participant’s Plan benefit which will not constitute compensation which is deferred after December 31, 2004 for purposes of Section 409A of the Code.

The purpose of this January 1, 2009 restatement is to cause the Plan to continue to comply with the requirements of Sections 409A(a)(2), (3) and (4) of the Code and the Regulations promulgated thereunder. The Plan is to be construed and interpreted in accordance with such purpose.

ARTICLE II—DEFINITIONS

For the purposes of this Plan, the following terms shall have the meanings indicated unless the context clearly indicates otherwise:

2.1 Beneficiary

“Beneficiary” means the person, persons or entity entitled under Article V to receive Plan benefits after a Participant’s death.

2.2 Board

“Board” means the Board of Directors of Pier 1 Imports, Inc.

2.3 Cause

“Cause” means that the Participant:

(a) Has misappropriated, stolen or embezzled funds of the Employer; or

(b) Has committed an act of deceit, fraud, dereliction of duty, or gross or willful misconduct; or

(c) Has been convicted of either a felony or a crime involving moral turpitude or entered a plea of nolo contendre in response to an indictment for such crime or felony; or

(d) Has intentionally disclosed confidential information of the Employer except when such disclosure is made pursuant to the direction of the Employer or in accordance with Employer policy; or

(e) Has engaged in competitive behavior against the Employer, has purposely aided a competitor of the Employer or has misappropriated or aided in misappropriating a material opportunity of the Employer.

2.4 Change of Control of the Employer

“Change of Control of the Employer” shall be deemed to have occurred if:

(a) Any “person” (as defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934 (the “Act”)) becomes the “beneficial owner” (as defined in Rules 13(d) 3 and 13(d) 5 under the Act) of securities of Pier 1, representing thirty-five percent (35%) or more of the voting power of the outstanding securities of Pier 1 having the right under ordinary circumstances to vote at an election of the Board of Directors of Pier 1; or

(b) There shall occur a change in the composition of a majority of the Board of Directors within a two (2) year period which change shall not have been affirmatively approved by a majority of the Board of Directors as constituted immediately prior to the commencement of such period; or

(c) At any meeting of the stockholders of Employer called for the purpose of electing directors, a majority of persons nominated by the Board of Directors for election as directors shall fail to be elected; and

the transaction or event described in (a), (b) or (c) above, whichever may have occurred, also constitutes a “change in the ownership or effective control” of the Employer within the meaning of Section 409A(a)(2)(v) of the Code and the Regulations.

2.5 Code

“Code” means the Internal Revenue Code of 1986, as amended.

2.6 Committee

“Committee” means the Compensation Committee of Pier 1 or any other Committee chosen by the Board.

2.7 Compensation

“Compensation” for a calendar year means the sum of (i) the rate at which salary is being paid to a Participant as of the last day of that calendar year, (ii) any bonuses actually paid to a Participant during that calendar year excluding bonuses that were first payable during and deferred from a previous calendar

year, and (iii) any bonuses that were payable to a Participant during that calendar year which were deferred for payment to a subsequent year.

2.8 Early Retirement Date

“Early Retirement Date” means the first day of the month coincidental with or next following the date on which a Participant has a Separation from Service, if the date of such Separation from Service occurs after the Participant’s attainment of age fifty-five (55) and completion of ten (10) Years of Plan Participation.

2.9 Employer

“Employer” means any of Pier 1, its subsidiaries, including a trust directly or indirectly owned by Pier 1, and each of their respective successors.

2.10 Good Reason

“Good Reason” means, without the written consent of the Participant:

(a) A reduction in the Participant’s base salary or a reduction in the Participant’s benefits received from the Employer (other than in connection with an across-the-board reduction in salaries and/or benefits for similarly situated employees of the Employer or pursuant to the Employer’s standard retirement policy), in each case as in effect immediately prior to a Change of Control; or

(b) The relocation of the Participant’s full-time office to a location greater than fifty (50) miles from the Employer’s current corporate office; or

(d) The failure by the Employer to obtain the assumption of this Plan by any successor as contemplated in this Plan.

2.11 Highest Average Compensation

“Highest Average Compensation” means the sum of the Participant’s Compensation for his highest paid three (3) full calendar years of employment with Employer prior to termination of employment (whether or not such years are consecutive) divided by three (3); provided, however, that if the Participant has been employed for less than three (3) full calendar years, the “Highest Average Compensation” shall be determined by using the sum of the Participant’s Compensation for his number of completed months of employment divided by the number of his actual completed months of employment multiplied by twelve (12).

2.12 Normal Retirement Date

“Normal Retirement Date” means the first day of the month coincidental with or next following the date on which a Participant has a Separation form Service, if the date of such Separation from Service occurs on or after such Participant attains age sixty-five (65).

2.13 Participant

“Participant” means any individual who is participating or has participated in this Plan pursuant to Article III.

2.14 Pier 1

“Pier 1” means Pier 1 Imports, Inc., a Delaware corporation and its successors.

2.15 Regulations

“Regulations” means the final regulations issued by the United States Department of the Treasury on April 10, 2007 regarding the application of Section 409A of the Code.

2.16 Retirement

“Retirement” means the Participant’s Normal Retirement Date or Early Retirement Date other than by reason of death or Total and Permanent Disability. Retirement shall also mean the date as of which a Participant has a Separation from Service within twenty-four (24) months (or, if less, any time of termination restriction imposed for purposes of Section 409A(a)(2)(A)(v) of the Code) of a Change of Control of the Employer unless such Separation from Service is:

(a) By the Employer for Cause; or

(b) Because of Total and Permanent Disability; or

(d) By the Participant other than:

For Good Reason; or

Upon the Participant’s voluntary separation from employment after his/her Normal Retirement Date or Early Retirement Date.

2.17 Separation from Service

“Separation from Service” of a Participant means a termination of the Participant’s employment with the Employer provided that it constitutes a “separation from service” under Section 1.409A-1(h) of the Regulations. In the event that a Participant is not deemed to have incurred a termination of employment with the Employer by virtue of a military leave, sick leave or other bona fide leave of absence under Section 1.409A-1(h) of the Regulations, the Participant will be deemed to have experienced a separation from service at the time and to the extent required under Section 1.409A-1(h) of the Regulations.

2.18 Supplemental Retirement Benefit

“Supplemental Retirement Benefit” means the benefit determined under Article IV of this Plan.

2.19 Termination

“Termination” means a Participant’s Separation from Service for any reason other than Retirement, death or Total and Permanent Disability.

2.20 Total and Permanent Disability

“Total and Permanent Disability” means a Participant (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, or (ii) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident and health plan covering employees of the Employer. The Committee’s decision as to total and permanent disability will be based upon medical reports and/or other evidence satisfactory to the Committee.

2.21 Years of Credited Service

“Years of Credited Service” means the years of credited vesting service with the Employer, determined in accordance with the provisions of the Pier 1 Associates’ 401 (k) Plan, or any successor tax-qualified retirement plan.

2.22 Years of Plan Participation

“Years of Plan Participation” means the total number of full years in which a Participant has participated in the Plan.

ARTICLE III—PARTICIPATION AND VESTING

3.1 Participation

Participation in this Plan shall be limited to those employees of the Employer nominated by the Chief Executive Officer of Pier 1 and approved by the Committee and by the Board, and who elect to participate in this Plan by executing a Participation Agreement in the form designated by the Committee. Plan Participation Agreements may vary in terms and provisions. To the extent that a Participant’s Plan Participation Agreement varies the terms of the Plan as applied to that Participant, the terms of the Participation Agreement shall control over the Plan.

3.2 Supplemental Retirement Benefit Vesting

(a) Vesting Percentage. Each Participant shall become vested in a Supplemental Retirement Plan Benefit based upon the following schedule:

Years of Credited Service	Vesting Percentage
Less than 1	0	%
1 but less than 2	10
2 but less than 3	20
3 but less than 4	30
4 but less than 5	40
5 but less than 6	50
6 but less than 7	60
7 but less than 8	70
8 but less than 9	80
9 but less than 10	90
l0 or more	100

(b) Prior Years of Credited Service. For purposes of this Plan, Years of Credited Service earned prior to the May 1, 1986 date of Plan adoption by the Employer shall be limited to five (5).

(c) Conditions for Immediate Vesting. Regardless of a Participant’s actual Years of Credited Service or age, a Participant shall be one hundred percent (100%) vested in a Supplemental Retirement Benefit upon Retirement, Separation from Service due to Total and Permanent Disability, or death.

(d) Initial Participants. Notwithstanding anything in this Article to the contrary, any employee of the Employer who becomes a Participant in this Plan within thirty (30) days of the original May 1, 1986 effective date of this Plan shall be at least fifty percent (50%) vested in any Plan Benefits herein upon attaining age fifty-five (55).

ARTICLE IV—SUPPLEMENTAL RETIREMENT BENEFITS

4.1 Benefit

Upon incurring a Separation from Service, a Participant shall receive a Supplemental Retirement Benefit from this Plan which, along with the Participant’s benefits from primary Social Security, shall equal approximately fifty percent (50%) of the Participant’s Highest Average Compensation. The computation of said Supplemental Retirement Benefit shall be made in accordance with the following provisions of this Article IV.

4.2 Retirement; Disability; Death

Upon Retirement, Total and Permanent Disability, or death prior to the commencement of benefits under this Plan, the Employer shall pay to the Participant or, in the case of Participant’s death, his Beneficiary a Supplemental Retirement Benefit calculated as follows:

(a) Fifty percent (50%) times the Participant’s Highest Average Compensation.

(b) Increase the amount determined in (a) by six percent (6%) compounded annually for fifteen (15) years.

(d) The sum of a Participant’s primary Social Security benefit determined at the time of and according to the laws in effect at the Participant’s Retirement date increased two percent (2%) compounded annually for fifteen (15) years. However, if a Participant has a Separation from Service before the Normal Retirement Date, the primary Social Security benefit shall be determined based upon the primary Social Security benefit the Participant would have received at the Normal Retirement Date based upon the assumption the Participant will

receive no future compensation after the date of Separation from Service and based upon the relevant Social Security law at the time of Separation from Service.

(e) (c) offset by (d) divided by one hundred eighty (180).

4.3 Adjustments for Normal Retirement Benefit

Upon a Participant’s Normal Retirement Date, the Employer shall pay to the Participant a Supplemental Retirement Benefit as calculated in paragraph 4.2 above, but adjusted as follows:

(a) The percentage of Highest Average Compensation set forth in paragraph 4.2(a) shall be increased by five (5) percentage points for each Year of Credited Service performed past the Participant’s Normal Retirement Date, but in no event shall the increase be more than fifteen (15) percentage points;

(b) The calculation of Highest Average Compensation shall not take into consideration any Compensation earned after the Participant attains age 65; and

(c) The Participant shall forfeit twenty percent (20%) of the Supplemental Retirement Benefit otherwise due for each Year of Credited Service performed past the Participant’s attained age seventy (70).

4.4 Adjustments for Early Retirement Benefit

Upon a Participant’s Early Retirement Date that occurs before his Normal Retirement Date, the Employer shall pay to the Participant a Supplemental Retirement Benefit as calculated under Section 4.2 above except:

(a) The sum amount described in subsection 4.2(c) shall be reduced by five-twelfths percent (5/12%) for each full calendar month by which the Participant’s Early Retirement Date precedes the Participant’s attainment of age sixty-five (65); and

(b) The offset required by subsection 4.2(d) shall be determined using the Social Security Act in effect at Early Retirement Date and assuming zero (0) future earnings from the Participant’s Early Retirement Date to his attainment of age sixty-five (65).

4.5 Termination

If a Participant has a Separation from Service due to Termination, the Employer shall pay to the Participant the Supplemental Retirement Benefit calculated under paragraph 4.2 above, multiplied by the vesting percentage of benefit as provided in paragraph 3.2 above.

4.6 Form of Benefit Payment

Each Participant shall, upon becoming a Participant, irrevocably elect in writing that his or her Retirement, Total and Permanent Disability or Termination Plan benefits be paid in one of the following forms:

(a) Equal monthly installments paid over a period of one hundred eighty (180) months;

(b) A lump sum;

(d) A joint and survivor annuity over the lives of Participant and the Participant’s Beneficiary with payment continued to the survivor at one hundred percent (100%).

The forms of payment specified in subparagraphs (b), (c) and (d) above shall be the actuarial and financial equivalents of the form of payment specified in subparagraph (a) above. For purposes of determining actuarial equivalence, the benefits referred to in subparagraphs (b), (c) and (d) above shall be discounted at a rate equal to the lesser of (i) the Pension Benefit Guaranty Corporation interest rate for immediate annuities, as published in Appendix B to Part 2619 of Title 29 of the Code of Federal Regulations, or any successor or replacement rate (the “PBGC rate”) in effect on January 1 of each year; or (ii) a twenty-four (24) month rolling average of the PBGC rate, using the current rate as of the beginning of the month in which the calculation is made and the twenty-three (23) previous months.

The vested, accrued benefit shall be calculated as of January 1 of each year for each Participant, and in no event shall the vested, accrued benefit be less than such benefit calculated for a previous year. For example, if a Participant has elected a lump-sum benefit and the lump-sum benefit as of January 1, 1996 is $750,000 but, due to an increase in the discount rate, drops to $700,000 as of January 1, 1997, the Participant’s vested, accrued lump-sum benefit as of January 1, 1997 would be $750,000.

If a Participant dies prior to the commencement of benefits under this Plan, such Participant’s benefits shall be paid in the form elected pursuant to this Section 4.6.

4.7 Payments

Any benefit due under this Article shall be paid as set forth below:

(a) Supplemental Retirement Benefits due as a result of a Participant’s Retirement shall be paid or commence within thirty (30) days of the date of such Retirement;

(b) Supplemental Retirement Benefits due as a result of Termination or Total and Permanent Disability shall be paid or commence within thirty (30) days of the date of the Participant’s attaining age sixty-five (65);

(c) Supplemental Retirement Benefits due as a result of death shall be paid or commence within thirty (30) days of the death of the Participant.

In no event shall a Participant be permitted directly or indirectly to designate the taxable year of commencement of payment of benefits under the Plan.

Notwithstanding the foregoing, in the case of any Participant who is a “key employee” as such term is defined in Section 416(i) of the Code without regard to paragraph (5) thereof, and with respect to any portion of such Participant’s Plan benefit which would constitute compensation which is deferred after December 31, 2004 for purposes of Section 409A of the Code, no distribution may be made of any such portion from the Plan to such Participant as a result of his Separation from Service before the date

which is six (6) months after the date of such Separation from Service (or, if earlier, the date of death of the Participant following such Separation from Service) unless such Separation from Service was by reason of any of the events described in Sections 409A(a)(2)(A)(ii), (iii), (iv), (v) or (vi) of the Code. In the event of any such payment deferral:

(a) If the payment to the Participant is a lump sum, such lump sum amount shall be determined as if it was paid as originally provided under the Plan and such amount shall include through the date of actual payment interest on such amount at an annual rate equal to the interest rate then payable pursuant to the Pier 1 Benefit Restoration Plan II; and

(b) If the Participant’s Plan benefit is to be made in a form other than a lump sum, the periodic payment amount shall be determined as if payments commenced as originally provided under the Plan and the first payment to the Participant shall include an amount equal to the sum of the periodic payments which would have been paid to such Participant but for the payment deferral mandated pursuant to Section 409A(a)(2)(B)(i) of the Code.

4.8 Withholding; Payroll Taxes

To the extent required by the law in effect at the time payments are made, the Employer shall withhold from payments made hereunder any taxes required to be withheld from a Participant’s wages by the federal, state or local government.

4.9 Payment to Guardian

If a Plan benefit is payable to a minor or a person declared incompetent or to a person incapable of handling the disposition of property, the Committee may direct payment of such Plan benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or person. The Committee may require proof of incompetency, minority, incapacity or guardianship as it may deem appropriate prior to distribution of the Plan benefit. Such distribution shall completely discharge the Committee and Employer from all liability with respect to such benefit.

4.10 Major Medical and Hospitalization Insurance Coverage

Upon Retirement or Total and Permanent Disability, a Participant (for himself and his dependents) shall have the right to medical reimbursement benefits to be provided by the Employer until the death of the Participant; provided, however, that if the Participant is survived by a spouse, such spouse shall have the right to continued medical reimbursement benefits for a period of thirty-six (36) months from the Employer on the same basis as the Participant would have had if he had survived. Such benefits shall be comparable to the Employer-provided major medical and hospitalization insurance coverage, if any, made available generally to the Employer’s active employees and their dependents. Such benefits will only be provided if the Participant pays, or reimburses the Employer for, a portion of the total premium for such major medical coverage equal to the amount such Participant would have been required to pay, or reimburse the Employer, had he been covered as an active employee of the Employer. Premium payments or reimbursements required to be paid by a Participant pursuant to this Section 4.10 shall be made by the Participant at such times and in such form as the Employer shall establish pursuant to reasonable payment methods.

Upon Separation from Service due to Termination, a Participant (for the Participant and the Participant’s dependents) shall have the right to participate, during the fifteen (15) years immediately

after the date such Participant attains age sixty-five (65), in the Employer provided medical reimbursement benefits, if any, made available generally to the Employer’s active employees and their dependents; provided, however, that such Participant pays, or reimburses the Employer for, the total premium (i.e., Employer and employee portions) for such major medical coverage at such times as the Employer’s active employees pay their respective contributions for such major medical coverage.

Notwithstanding the foregoing but to the extent and only to the extent required by Section 409A(a)(2)(B)(i) of the Code, in the case of any Participant who is a “key employee” as such term is defined in Section 416(i) of the Code without regard to paragraph (5) thereof, medical benefit coverage and/or medical benefit payments may not be provided and/or paid to such Participant as a result of his Separation from Service before the date which is six (6) months after the date of such Separation from Service (or, if earlier, the date of death of the Participant following such Separation from Service) unless such Separation from Service was by reason of any of the events described in Sections 409A(a)(2)(A)(ii), (iii), (iv), (v) or (vi) of the Code. Should the restriction described in this Paragraph be required to be imposed and become applicable with respect to a Participant, upon the lapse of the six (6) month deferral restriction, medical coverage and/or medical benefit payments shall be made retroactively available to such Participant (for the Participant and the Participant’s dependents) to the date that they otherwise would have been available under this Section 4.10 and on the basis as contemplated by this Section 4.10.

Medical reimbursement benefits provided pursuant to this Section 4.10 shall be subject to the following rules:

(a) The reimbursement arrangement provides an objectively determinable and nondiscretionary definition of the expenses that are eligible for reimbursement under such arrangement;

(b) The reimbursement arrangement provides an objective and specifically prescribed period during which such reimbursements will be provided (which can be the lifetime of the employee or former employee);

(c) The amount of reimbursable expenses for one year cannot affect the amount of reimbursable expenses for another year (i.e., carryovers of unused expense amounts are impermissible);

(d) The reimbursements under the arrangement are made no later than the last day of the taxable year following the year in which the reimbursable expense was incurred; and

(e) The participant’s right to a reimbursement may not be subject to liquidation or exchange.

ARTICLE V—BENEFICIARY DESIGNATION

5.1 Beneficiary Designation

Each Participant shall have the right, at any time, to designate any person or persons as his Beneficiary or Beneficiaries (both primary and contingent) to whom payment under this Plan shall be paid in the event of death prior to complete distribution to the Participant of the benefits due under the Plan. Each Beneficiary designation shall be in a written form prescribed by the Committee and will be effective only when filed with the Committee during the Participant’s lifetime. If a Participant’s Compensation is community property, any Beneficiary designation shall be valid or effective only as permitted under applicable law.

5.2 Amendments

Any Beneficiary designation may be changed by a Participant without the consent of any designated Beneficiary by the filing of a new Beneficiary designation with the Committee. The filing of a new Beneficiary designation form will cancel all Beneficiary designations previously filed.

5.3 No Beneficiary Designation

If any Participant fails to designate a Beneficiary in the manner provided above, or if the Beneficiary designated by a deceased Participant predeceases the Participant, the Committee, in its discretion, shall direct the Employer to distribute such Participant’s benefits (or the balance thereof) as follows:

(a) To the Participant’s surviving spouse, if any; or

(b) If the Participant shall have no surviving spouse, then to the Participant’s children in equal shares, by right of representation; or

5.4 Effect of Payment

Payment to the Beneficiary shall completely discharge Employer’s obligations under this Plan.

5.5 Death of Beneficiary

Following commencement of payment of Plan benefits, if the Beneficiary designated by a deceased Participant dies before receiving complete distribution of the benefits, the Committee shall direct the Employer to distribute the balance of such benefits:

(a) As designated by the Beneficiary in accordance with the provisions in paragraph 5.1 above; or

(b) If the Beneficiary shall not have made such designation, then to the Beneficiary’s estate.

ARTICLE VI—ADMINISTRATION

6.1 Committee; Duties

This Plan shall be administered by the Committee. Members of the Committee may be Participants under this Plan.

6.2 Agents

The Committee may appoint an individual to be the Committee’s agent with respect to the day-to-day administration of the Plan. In addition, the Committee may, from time to time, employ other agents and delegate to them such administrative duties as it sees fit, and may from time to time consult with counsel who may be counsel to the Employer.

6.3 Binding Effect of Decisions

The decision or action of the Committee with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder shall be final and binding upon all persons having any interest in the Plan.

6.4 Indemnity of Committee

The Company shall indemnify and hold harmless the members of the Committee against any and all claims, loss, damage, expense or liability arising from any action or failure to act with respect to this Plan, except in the case of gross negligence or willful misconduct by the Committee.

ARTICLE VII—CLAIMS PROCEDURES

7.1 Claim

Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or requesting information under the Plan shall present the request in writing to the Committee which shall respond in writing as soon as practicable.

7.2 Denial of Claim

If the claim or request is denied, the written notice of denial shall be made within ninety (90) days of the date of receipt of such claim or request by the Committee and shall state:

(a) The reason for denial, with specific reference to the Plan provisions on which the denial is based.

(b) A description of any additional material or information required and an explanation of why it is necessary.

7.3 Review of Claim

Any person whose claim or request is denied or who has not received a response within ninety (90) days may request review by notice given in writing to the Committee within sixty (60) days of receiving a response or one hundred fifty (150) days from the date the claim was received by the Committee. The claim or request shall be reviewed by the Committee who may, but shall not be required to, grant the claimant a hearing. On review, the claimant may have representation, examine pertinent documents, and submit issues and comments in writing.

7.4 Final Decision

The decision on review shall normally be made within sixty (60) days after the Committee’s receipt of a request for review. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time shall be one hundred twenty (120) days after the Committee’s receipt of a request for review. The decision shall be in writing and shall state the reason and the relevant Plan provisions. All decisions on review shall be final and bind all parties concerned.

ARTICLE VIII—TERMINATION, SUSPENSION OR AMENDMENT

8.1 Amendment or Termination

The Board may, in its sole discretion, amend or terminate this Plan at any time, in whole or in part; provided, however, that no such amendment or termination shall adversely affect the benefits of Participants which have vested in accordance with paragraph 3.2 above prior to such action, the benefits of any Participant who has had a Separation from Service, or the benefits of any Beneficiary of a Participant who has died; provided further, however, that the amendment or termination of this Plan shall not alter in any manner the timing or form of benefit payments under this Plan.

8.2 Successor Employer

The provisions of this Plan shall be binding upon and inure to the benefit of any successor or assign of the Employer. If a successor Employer amends or terminates this Plan, no such amendment or termination shall adversely affect the benefits of Participants which have vested in accordance with paragraph 3.2 above prior to such action, the benefits of any Participant who has previously retired, or the benefits of any Beneficiary of a Participant who has previously died.

ARTICLE IX—MISCELLANEOUS

9.1 Unsecured General Creditor

Benefits to be provided under this Plan are unfunded obligations of the Employer. Participants and their Beneficiaries, heirs, successors, and assigns shall have no secured interest or claim in any property or assets of Employer, nor shall they be Beneficiaries of, or have any rights, claims or interests in any life insurance policies, annuity contracts or the proceeds therefrom owned or which may be acquired by Employer (“Policies”). Except as provided in paragraph 9.2, such Policies or other assets of Employer shall not be held under any trust for the benefit of Participants, their Beneficiaries, heirs, successors or assigns, or be considered in any way as collateral security for the fulfilling of the obligations of Employer under this Plan.

9.2 Trust Fund

Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, Employer may establish one (1) or more trusts, with such trustees as the Board may approve, for the purpose of providing for the payment of such benefits. Although such a trust shall be irrevocable, its assets shall be held for payment of all Employer’s general creditors in the event of insolvency. To the extent any benefits provided under the Plan are paid from any such trust, Employer shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of Employer. In no event shall any provision of this Plan be interpreted to provide, or of any trust established pursuant to this Section 9.2 provide or be interpreted to provide, that any assets of the Employer (whether placed in trust or not) will become restricted to the provision of benefits under the Plan in connection with a change in the Employer’s financial health and in no event will any assets of the Employer, in fact, be so restricted.

9.3 Nonassignability

Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate or convey in advance of actual receipt

the amounts, if any, payable hereunder, or any part thereof. No part of the amounts payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency.

9.4 Not a Contract of Employment

The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between Employer and the Participant, and the Participant (or his Beneficiary) shall have no rights against the Employer except as may otherwise be specifically provided herein. Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of Employer or to interfere with the right of Employer to discipline or discharge him at any time.

9.5 Suicide

Notwithstanding the provisions of Article IV, no benefit shall be paid to a Beneficiary if the Participant’s death occurs as a result of suicide during the twelve (12) successive calendar months beginning with the calendar month following the commencement of an individual’s participation in this Plan.

9.6 Participant’s Cooperation

A Participant will cooperate with Employer by furnishing any and all information requested by Employer in order to facilitate the payment of benefits hereunder, and by taking such physical examinations and such other action as may be requested by Employer.

9.7 Domestic Relations Orders

All or any portion of a Participant’s Plan benefit will be paid to an individual other than such Participant pursuant to and in accordance with the provisions of a domestic relations order but only if such domestic relations order satisfies all of the requirements to be a “qualified domestic relations order” within the meaning of Section 414(p) of the Code and only if the timing of payment or payments under the order comply with the distribution timing requirements of Section 409A of the Code.

9.8 Terms

Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used herein in the singular or in the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply.

9.9 Captions

The captions of the articles, sections and paragraphs of this Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.

9.10 Governing Law

The provisions of this Plan shall be construed and interpreted according to the laws of the State of Delaware.

9.11 Validity

In case any provision of this Plan shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and enforced as if such illegal and invalid provision had never been inserted herein.

9.12 Successors

The provisions of this Plan shall bind and inure to the benefit of Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of Employer, and successors of any such corporation or other business entity.

9.13 Notice

Any notice or filing required or permitted to be given to the Committee under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, to any member of the Committee, the President of the Employer, or the Employer’s Statutory Agent. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of three (3) days following the date shown on the postmark or on the receipt for registration or certification.

PIER 1 IMPORTS, INC.


By:
		Gregory S. Humenesky
		Executive Vice President – Human Resources

Date:	December , 2008