Exhibit 10.19.3


 


FIRST
AMENDMENT TO


EMPLOYMENT
AGREEMENT


 


THIS
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”) is made and entered
into this 6th day of October, 2008, by and between Pier 1 Imports, Inc.,
a Delaware corporation, with offices at 100 Pier 1 Place, Fort Worth, Texas
76102 (the “Company”), and Alexander W. Smith, an individual (the “Executive”).


 


WITNESSETH:


 


WHEREAS,
the Company and the Executive entered into an Employment Agreement dated February 19,
2007 (the “Agreement”); and


 


WHEREAS,
the Executive is currently employed by the Company through its wholly owned
subsidiary Pier 1 Services Company and serves the Company in the capacity of President
and Chief Executive Officer; and


 


WHEREAS,
the Board of Directors of the Company has authorized an amendment to the
Agreement to align the vesting of the first 1,000,000 shares of
Option 2 with the Company’s annual performance incentive bonus plan for fiscal
2009;


 


NOW,
THEREFORE, FOR AND IN CONSIDERATION of the premises, the mutual covenants and
obligations hereinafter set forth, and other and good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:


 


1.
The vesting schedule for the first 1,000,000 shares of Option 2 as set forth in
Section 4(c)(ii) of the Agreement is deleted in its entirety and the
following is substituted in its place:


 


100%
of the 2009 EBITDA Target – 1,000,000 shares;


 


96% of the 2009 EBITDA
Target - 900,000 shares;


 


92% of the 2009 EBITDA
Target – 800,000 shares;


 


88% of the 2009 EBITDA
Target – 700,000 shares;


 


84% of the 2009 EBITDA
Target – 600,000 shares; and


 


80% of the 2009 EBITDA
Target – 500,000 shares.


 


Additionally, vesting of
shares between the fixed percentage points of the 2009 EBITDA Target stated
above shall be interpolated. In other words as an example if 94% of the 2009
EBITDA Target were achieved, then 850,000 shares of Option 2 would vest.


 


In
conjunction with entering into the Agreement, the parties effective February 19,
2007 also entered into a Non-Qualified Stock Option Agreement with respect to
Option 2 in the form


 


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attached to the Agreement as Exhibit B. The parties agree to enter
into a similar amendment of that Non-Qualified Stock Option Agreement to
reflect the amended vesting schedule shown above.


 


2. Notwithstanding anything
in the Agreement to the contrary, if the Executive is a “specified employee” as
such term is defined in Section 409A(2)(B) at the time of his “separation
from service” with the Company and if any payment or benefit to which he shall
become entitled to under this Agreement would be considered deferred
compensation subject to interest and additional tax imposed pursuant to Section 409A(a) of
the Code as a result of the application of Section 409A(a)(2)(B)(i), no
distribution may be made of any such payment to the Executive and no such
in-kind benefits or reimbursement of expenses may be provided to the Executive
prior to the earlier of (i) the expiration of the six (6) month
period following the date of Executive’s “separation from service” (as such
term is defined by Code Section 409A and the regulations promulgated
thereunder), or (ii) the date of Executive’s death, but only to the extent
such delayed commencement is otherwise required in order to avoid a prohibited
distribution under Code Section 409A(a)(2). The payments and benefits to
which Executive would otherwise be entitled during the first six (6) months
following his separation from service shall be accumulated and paid or
provided, as applicable, in a lump sum, on the first payroll date that is six (6) months
and one day following Executive’s separation from service and any remaining
payments or benefits will be paid in accordance with the normal payment dates
specified for them herein.  Each payment
pursuant to the Agreement that is due at a different time shall be considered
to be a separate payment for purposes of Section 409A of the Code.


 


3.  The following language is added at the end of
Section 7(b) of the Agreement:


 


“Cash
compensation payments paid by the Company to the Executive pursuant to this Section 7(b) if
the Executive’s employment is terminated by the Company without Cause or by the
Executive for Good Reason shall be paid on the last day of each month and each
such payment shall be equal to the amount of cash compensation Executive would
have been entitled to receive during such month had his employment with the
Company not been terminated. Any in-kind benefits and/or expense reimbursements
required to be provided or paid by the Company to the Executive pursuant to
this Section 7(b) if Executive’s employment is terminated by the
Company without Cause or by the Executive for Good Reason shall be paid only if
otherwise provided by a in-kind benefit arrangement or expense reimbursement
arrangement which is generally provided by the Company to its executives and
shall only be paid in accordance with the terms and provisions of such
arrangement, which terms and provisions shall upon termination of Executive’s
employment be amended, if necessary, to cause the payment or provision of such
in-kind benefits and expense reimbursements to satisfy the rules described
in Treasury Regulation § 1.409A-3(i)(1)(iv).”


 


4. The following language is
added as a second paragraph to Section 10(a) of the agreement:


 


“The
Gross-Up Payment paid by the Company to the Executive pursuant to this Section 10
with respect to any Excise Tax owed by Executive in connection with any of the
Total Payments will be paid as soon as practicable following the Executive’s
written notification to the Company of his payment of such Excise Tax and shall
in no event be made later than the end of the taxable year of the Executive
next following the Executive’s taxable year in which the Executive remits the
Excise Tax.”


 


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5.
All capitalized terms used in this Amendment, unless specifically defined
herein, have the same meanings as attributed to them in the Agreement. Except
as amended by this Amendment, the Agreement is ratified and remains unchanged.
If there is a conflict between the provisions of this Amendment and the
provisions of the Agreement, this Amendment controls.


 


IN
WITNESS WHEREOF, the Executive has executed this Amendment, and the Company has
caused its duly authorized corporate officer to execute this Amendment as of
the dates set forth below, to be effective the date of last signing.
Additionally, Pier 1 Services Company joins in this Amendment to the extent of
its joinder in the Agreement.


 


 


	
  COMPANY:

  	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  	
   

  
	
  Pier 1 Imports, Inc., a Delaware corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
              /S/

  	
   

  	
                   /S/

  
	
   

  	
  Tom M. Thomas

  	
   

  	
  Alexander W. Smith

  
	
  Its:

  	
  Chairman of the Board

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date: October 6, 2008

  
	
   

  	
   

  	
   

  
	
  Pier 1 Services Company

  	
   

  	
   

  
	
  By:

  	
  Pier 1 Holdings, Inc,

  	
   

  	
   

  
	
   

  	
  its managing trustee

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
                   /S/

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Tom M. Thomas, Authorized Signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Date: October 1, 2008

  	
   

  	
   

  



 


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