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

  



 


i

















 


	
  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

  



 


ii

















 


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


 


1

















 


(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 


 


2

















 


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


 


(c)                                  A reduction in
the Participant’s corporate title as in effect immediately prior to a Change of
Control; 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).


 


3

















 


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


 


(c)                                  Because of the
Participant’s death; 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.


 


4

















 


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

  	
   

  



 


5

















 


(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.


 


(c)                                  Sum
the annual amounts determined in (b).


 


(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 


 


6

















 


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:


 


7
















 


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


 


(b)                                 A
lump sum;


 


(c)                                  An
annuity for the life of the Participant; or


 


(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 


 


8

















 


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


 


9

















 


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.


 


10

















 


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


 


(c)                                  If
the Participant shall have no surviving spouse or children, then to the
Participant’s estate.


 


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.


 


11

















 


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.


 


(c)          An explanation of the
Plan’s claims review procedure.


 


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.


 


12

















 


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 


 


13

















 


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.


 


14

















 


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

  
				



 


15