Document:

March 28, 2012

 

VIA EMAIL

 

Cornerstone Community
Bank

640 I Lee Highway Suite
119

Chattanooga,37421

 

Attention: Gary
Petty, Chief Financial Officer-SVP

 

		RE:	Cornerstone Bancshares,
Inc. ("Borrower")
	 	 	Midland Nos. 030281914 & 030281915 ("Loans") 
	 	 	Current Principal Balance: $2,61
0,000  

 

Dear
Gary:

 

Midland Loan Services,
a division of PNC Bank, N.A.("Midland") is the Servicer for the FDIC as receiver for Silverton Bank, N.A. ("Lender")
of the above-referenced loan.

 

Please be advised
that the Lender has agreed to provide a one year waiver of the covenant compliance thresholds for 2012. The one year covenant
waiver is conditional upon the following:

 

		I.	The Borrower will continue
to submit quarterly Covenant Compliance Certificates to the Receivership.

		2.	Cornerstone Community Bank
will agree to limit its dividend payments to amounts necessary to service the subject loan and pay income taxes.

		3.	The
Borrower wi ll pay a processing fee equal to $25,000.

 

We trust that this meets
with your satisfaction.

 

 

	 	Very truly yours, 	 
	 	 	 
	 	MIDLAND LOAN SERVICES	 
	 	 	 
	 	/s/
    Scott Dunkely	 
	 	Scott Dunkley	 
	 	A VP Asset Management	 

  

    	 

    	 	

    
 

Cornerstone

312912011 Waiver Letter

Page 2

 

  

  

	 	AGREED AND ACCEPTED BY: 	 
	 	 	 
	 	Cornerstone Bancshares, Inc.	 
	 	 	 
	By 	/s/ Gary W. Petty, Jr.	 
	 	Name:  Gary W.
Petty, Jr.	 
	 	Title:    Chief Financial
Officer	 
	 	Date:    March 28, 2012Exhibit 10.1
    

    

    

    
      EMPLOYMENT AGREEMENT
    

    
      (SECOND RENEWAL AND EXTENSION)

    

    
      This EMPLOYMENT AGREEMENT (Second Renewal and Extension) (this “Agreement”),
      dated as of June 13, 2012, is by and between ALEXANDER W. SMITH (“Executive”)
      and Pier 1 Imports, Inc., a Delaware corporation (the “Company”).
    

    
      RECITALS
    

    
      The Company and Executive entered into that certain Employment Agreement
      dated as of February 19, 2007 (such Employment Agreement, as amended on
      October 6, 2008, the “Employment Agreement”) which had an
      initial three-year term of which expired on February 27, 2010 (the “Initial
      Term”), and the Company and Executive renewed and extended the
      Employment Agreement, with such changes in terms and conditions as were
      agreed to by the Company and Executive, effective as of February 28,
      2010 (the “First Renewal”), with a three-year term which
      expires on March 2, 2013 (the “Second Term”).
    

    
      The Company and Executive desire to set forth the terms and conditions
      under which Executive shall continue to be employed after the Second
      Term, and upon which Executive shall be compensated by the Company.
    

    
      The Company desires to continue to employ Executive as President and
      Chief Executive Officer of the Company for the period and upon the terms
      and conditions hereinafter set forth.
    

    
      Executive desires to serve in such capacities for such period and upon
      such terms.
    

    
      In consideration of the foregoing recitals, the mutual promises and
      agreements hereinafter set forth, and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby
      acknowledged, the Company and Executive agree as follows:
    

    
      AGREEMENT
    

    
      1.  EFFECTIVE DATE; TERM OF AGREEMENT.  This Agreement shall become
      effective as of March 3, 2013 (the “Effective Date”),
      except as otherwise provided herein. Executive’s employment shall
      continue on the terms provided herein until the close of the Company’s
      fiscal year on February 27, 2016 (the “Third Term”), unless
      earlier terminated as provided herein.  Unless earlier terminated as
      provided herein, the Third Term automatically shall renew on February
      28, 2016, and on the day immediately following the close of each of the
      Company’s fiscal years thereafter, on terms no less favorable to
      Executive, but in each such case, if any, for an additional term of one
      Company fiscal year (each such one Company fiscal year period, a “Renewal
      Term,” or, if more than one, “Renewal Terms,” and
      the Third Term collectively with any Renewal Term or all Renewal Terms,
      as the case may be, the “Term”), unless either Executive or
      the Company gives the other party a Notice of Termination (as defined in
      Section 6(h) hereof) at least sixty (60) days prior to the expiration of
      the Third Term or any Renewal Term that the Term of the Agreement shall
      not be extended further.  The period ending on the day on which
      Executive’s employment with the Company ends, whether at the end of the
      Term or on such earlier date as may be provided herein, is hereinafter
      called the “Employment Period”.  
    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    

    

    
      2.  DEFINITIONS.
    

    
          (a)  Off-Price Family Apparel
      and/or Off-Price Home Fashions or Furniture Business.  For purposes
      of this Agreement, the term “Off-Price Family Apparel and/or
      Off-Price Home Fashions or Furniture Business” shall mean a retail
      business (however organized or conducted, including any on-line
      operations) that sells predominantly branded and/or designer merchandise
      of third parties consisting of family apparel, home fashions and/or
      furnishings at prices significantly less than or discounted from those
      of specialty stores and/or department stores and does not operate a
      conventional or full-markup business or store.  By way of illustration,
      an “Off-Price Family Apparel and/or Off-Price Home Fashions or
      Furniture Business” shall include such businesses as The TJX
      Companies, Inc. and Ross Stores, Inc.
    

    
          (b)  Specialty Home Fashions or
      Furniture Business.  For purposes of this Agreement, the term “Specialty
      Home Fashions or Furniture Business” shall mean a retail business
      (however organized or conducted, including any on-line operations) that
      operates a conventional or full-markup store and sells predominantly its
      own branded merchandise consisting of furniture, decorative accessories,
      housewares, bed and bath, and seasonal goods, or any other category of
      merchandise sold by the Company at the end of the Term that is
      manufactured specifically for the business, requires a significant
      degree of handcraftsmanship and, in the case of the Company, is mostly
      imported directly from foreign suppliers.  By way of illustration, a “Specialty
      Home Fashions or Furniture Business” shall include such businesses
      as the Company, Restoration Hardware, Inc., Kirkland’s, Inc., Cost Plus,
      Inc., which includes stores under the names “World Market” and “Cost
      Plus World Market,” Williams-Sonoma, Inc., Pottery Barn, Inc. and Bed,
      Bath & Beyond Inc.
    

    
      3.  SCOPE OF EMPLOYMENT.
    

    
          (a)  Nature of Services.  Executive
      shall hold the title of President and Chief Executive Officer of the
      Company and shall report to the Board of Directors of the Company (the “Board”).  Executive
      shall diligently perform the duties and responsibilities of President
      and Chief Executive Officer of the Company and such additional executive
      duties and responsibilities as shall from time to time be assigned to
      Executive by the Board.  In addition, Executive will continue as a
      director and as an officer of each subsidiary and affiliate of the
      Company designated by the Board, provided that Executive shall not be
      obligated to become or remain a director or an officer of any Company
      subsidiary or affiliate (i) if the organizational documents of which do
      not provide indemnification provisions reasonably satisfactory to
      Executive or (ii) which is not covered by the Company’s directors’ and
      officers’ liability insurance policy.
    

    
          (b)  Extent of Services.  Except
      for illnesses and vacation periods, Executive shall devote substantially
      all his working time and attention and his best efforts to the
      performance of his duties and responsibilities under this
      Agreement.  However, Executive may (i) make any passive investments
      where he is not obligated or required to, and shall not in fact, devote
      any managerial efforts, (ii) participate in charitable or community
      activities or in trade or professional organizations, or (iii) subject
      to Board approval (which approval shall not be unreasonably withheld or
      withdrawn) and compliance with the corporate governance policies of the
      Company, hold directorships in public companies, except only that the
      Board shall have the right to limit such services as a director or such
      participation whenever the Board shall reasonably believe that the time
      spent on such activities infringes in any material respect upon the time
      required by Executive for the performance of his duties under this
      Agreement or is otherwise incompatible with those duties.  Executive
      will not take personal advantage of any business opportunities that
      arise during the Employment Period that may benefit the Company, its
      subsidiaries and affiliates.  Executive will promptly report all
      material facts regarding such opportunities to the Board.  Executive
      will at all times abide by all of the Company’s Bylaws, policies,
      practices, procedures, guidelines and rules.
    

    
      
        

        

      

      
        
          -2-
        

        
          

        

      

      
        

        

      

    

    

    

    
          (c)  Board Membership.  At all
      times during the Employment Period, the Company will use its reasonable
      efforts to cause the Board, or an authorized committee thereof, to
      nominate Executive for election to the Board at each annual meeting of
      stockholders of the Company held during the Employment Period, and, if
      nominated, to cause the Board to recommend his election to the
      stockholders of the Company.
    

    
      4.  COMPENSATION AND BENEFITS.
    

    
          (a)  Base Salary.  Executive
      will be paid a base salary (“Base Salary”) at the rate
      hereinafter specified, such Base Salary to be paid in the same manner
      and at the same times as the Company shall pay base salary to other
      executive employees.  The rate at which Executive’s Base Salary shall be
      paid shall be $1,250,000 per calendar year, which may be adjusted at any
      time and/or from time to time by the Compensation Committee of the Board
      (“Committee”) as it deems appropriate in its sole
      discretion.
    

    
          (b)  Annual Incentive Award.  During
      the Employment Period and for the Company’s fiscal years occurring
      during the Employment Period, Executive will participate in, and
      Executive’s short-term cash incentive award will be determined by, the
      senior management short-term incentive cash award plan of the Company
      (the “Annual Incentive Award”) as adopted by the Board or
      Committee, as the case may be, from time to time, and then in effect,
      provided that for purposes of any such plan, Executive’s incentive
      target for each fiscal year shall be 115% of the Executive’s Base
      Salary.  Because the Annual Incentive Award is a “Performance Award”
      under the Company’s 2006 Stock Incentive Plan, as restated and amended
      (the “Stock Incentive Plan”), and no such award may be paid
      to any one individual during any calendar year in excess of a certain
      amount stated in the Stock Incentive Plan (“Performance Award
      Maximum”), which is currently $3 million, if any amount of the
      Annual Incentive Award in any calendar year exceeds the Performance
      Award Maximum (or exceeds a lesser amount that would cause the award
      when considered in conjunction with all other awards to be paid in the
      calendar year to exceed the Performance Award Maximum), then the Annual
      Incentive Award amount shall be reduced to the Performance Award Maximum
      (or such lesser amount).  The amount of any such excess for such
      calendar year shall be deferred and paid to the Executive immediately
      upon the expiration of the six (6) month period following the date of
      Executive’s “separation from service” (as such term is defined by
      Section 409A of the Code, and the regulations promulgated
      thereunder).  Any amounts deferred under this sub-section (b) shall be
      credited monthly with an amount of interest equal to an annual rate of
      3%.
    

    
      
        

        

      

      
        
          -3-
        

        
          

        

      

      
        

        

      

    

    

    

    
          (c)  Restricted Stock Awards.  For
      purposes of this Agreement, all restricted shares granted to the
      Executive under this Agreement shall be referred to collectively as the “Restricted
      Stock.”  All restricted stock granted to Executive pursuant to the
      First Renewal shall continue to vest according to the terms set out in
      the First Renewal and original grant documents.  The Company shall grant
      Executive additional awards under the Stock Incentive Plan of restricted
      shares of the Company’s common stock, par value $0.001 per share (the “Common
      Stock”), subject to the terms and conditions set forth in this
      Agreement.
    

    
                 (i)  Terms
      of Restricted Stock Awards.  On the Effective Date, which is the
      first day of the Company’s 2014 fiscal year, and on the first day of
      each of the two following fiscal years of the Company (provided
      Executive is employed by the Company on each such date), the Company
      will grant Executive, under the Stock Incentive Plan, 375,000 shares of
      Restricted Stock as follows:
    

    
      ●               180,000
      shares will be granted pursuant to the approved form of restricted stock
      agreement used by the Company for service-based restricted stock grants
      under the Stock Incentive Plan, which shall, notwithstanding the
      provisions of such form, include the terms of such Restricted Stock as
      provided in this Agreement. One-third of such shares will become vested,
      unrestricted shares of Common Stock respectively on the last day of the
      Company fiscal year in which the grant occurred and on the last day of
      each of the following two (2) Company fiscal years, in each case
      conditioned upon the Executive being employed by the Company on the last
      day of each such respective Company fiscal year (except as otherwise
      provided in Sections 7(b) and 7(d) herein).
    

    
      ●               A
      maximum of 75,000 shares will be granted (the “TSR
      Performance-Based Shares”) pursuant to the approved form of
      restricted stock agreement used by the Company for total shareholder
      return performance-based restricted stock grants under the Stock
      Incentive Plan, which shall, notwithstanding the provisions of such
      form, include the terms of such Restricted Stock as provided in this
      Agreement. All, a portion, or none of such shares will become vested,
      unrestricted shares of Common Stock following the last day of the
      Company’s third fiscal year beginning on the date of grant of such
      75,000 shares of Restricted Stock (i) based upon the Company’s
      percentile rank of the Company’s annual equivalent return of the
      Company’s total shareholder return within the percentile rankings of the
      annual equivalent return of the total shareholder return of each
      constituent company within a peer group of companies over the same
      three-year period and (ii) conditioned upon the Executive being employed
      by the Company on the last day of such third fiscal year of the Company
      (except as otherwise provided in Sections 7(b) and 7(d) herein).
    

    
      ●               120,000
      shares will be granted (the “EBITDA Performance-Based Shares”)
      pursuant to the approved form of restricted stock agreement used by the
      Company for EBITDA performance-based restricted stock grants under the
      Stock Incentive Plan, which shall, notwithstanding the provisions of
      such form, include the terms of such Restricted Stock as provided in
      this Agreement. All, a portion, or none of one-third of such shares will
      become vested, unrestricted shares of Common Stock on the last day of
      each Company fiscal year over a three-fiscal-year period beginning on
      the date of grant upon (i) the Company satisfying certain EBITDA (as
      hereinafter defined) targets for the Company fiscal year in which the
      grant occurs and for each of the following two (2) Company fiscal years,
      which targets are to be established by the Board or the Committee prior
      to or within the first quarter of each such fiscal year, and
      (ii) conditioned upon the Executive being employed by the Company on the
      last day of each such respective Company fiscal year (except as
      otherwise provided in Sections 7(b) and 7(d) herein).
    

    
      
        

        

      

      
        
          -4-
        

        
          

        

      

      
        

        

      

    

    

    

    
                 (ii)  “EBITDA”
      Defined.  “EBITDA” shall mean the Company’s
      adjusted consolidated operating cash earnings before interest, taxes,
      depreciation and amortization from all domestic and international
      operations, but not including discontinued operations, unusual or
      non-recurring charges or recurring non-cash items, each as determined by
      the Committee.
    

    
                (iii)  EBITDA
      Vesting.  With respect to any EBITDA Performance-Based Shares that
      vest based on satisfying an EBITDA target for a given fiscal year,
      vesting shall occur pursuant to the following schedule:
    

    
                100% of the EBITDA target – 40,000 shares;
    

    
                96% of the EBITDA target – 36,000 shares;
    

    
                92% of the EBITDA target – 32,000 shares;
    

    
                88% of the EBITDA target – 28,000 shares;
    

    
                84% of the EBITDA target – 24,000 shares;
    

    
                80% of the EBITDA target – 20,000 shares; and
    

    
                Less than 80% of the EBITDA target – None.
    

    
      Additionally, vesting of shares between the fixed percentage points of
      the EBITDA target for a given Company fiscal year shall be
      interpolated.  For example, if 94% of the EBITDA target is achieved,
      then 34,000 shares would vest.
    

    
      If the Company’s aggregate consolidated EBITDA for any consecutive
      fiscal years occurring during a three-fiscal-year period applicable to a
      grant of EBITDA Performance-Based Shares equals or exceeds the sum of
      the EBITDA targets for those fiscal years, then any portion of any
      Performance-Based Shares that did not vest in the first fiscal year
      shall vest at the time the Performance-Based Shares vest for the second
      fiscal year.  Further, if the Company’s aggregate consolidated EBITDA
      for a three-fiscal-year period applicable to a grant of EBITDA
      Performance-Based Shares equals or exceeds the sum of the EBITDA targets
      for those three fiscal years, then all of the shares subject to that
      grant that did not vest shall vest at the time the EBITDA
      Performance-Based Shares vest for the third fiscal year.
    

    
      
        

        

      

      
        
          -5-
        

        
          

        

      

      
        

        

      

    

    

    

    
      Further, notwithstanding any other provision of this Agreement to the
      contrary, in the event that the Executive is employed by the Company as
      of the end of any Company fiscal year, the Executive shall be entitled
      to the vesting of the EBITDA Performance-Based Shares for that fiscal
      year, as set forth above, regardless of whether the Executive’s
      employment terminates prior to the formal determination of vesting
      (i.e., based on EBITDA calculations) for such fiscal year, as set forth
      in this Section 4(c).  The formal determination of vesting by the
      Company with respect to the achieving of the performance targets for
      vesting of the EBITDA Performance-Based Shares shall occur upon the
      filing of the Company’s Annual Report on Form 10-K with the Securities
      and Exchange Commission for each respective Company fiscal year.
    

    
      The Company shall use its best efforts to ensure that sufficient
      authorized and unissued or treasury shares of Common Stock are available
      for grant under the Stock Incentive Plan to issue the Restricted Stock,
      including, if necessary, attaining the approval by the Company’s
      shareholders of any amendments to increase the number of shares of
      Common Stock available for grant under the Stock Incentive Plan.
    

    
          (d)  Company’s Supplemental
      Retirement Plan.  Executive is a participant and will continue to
      participate in the Pier 1 Imports, Inc. Supplemental Retirement Plan (as
      then in effect) subject to its terms and provisions.
    

    
           (e)  Additional Benefits;
      Perquisites.  Executive will be eligible to participate in all
      welfare and fringe benefit plans (other than the supplemental executive
      retirement plan adopted by the Company in 1986, as restated January 1,
      2009) under which senior executives are currently entitled to
      participate and receive benefits, and to receive all perquisites which
      the Company provides to its senior executives, in accordance with the
      terms thereof.  Notwithstanding the foregoing, the Executive shall
      receive a number of days of vacation as approved by the Committee during
      each fiscal year of the Company during the Term rather than the vacation
      earned under the Company’s vacation policy.  Executive shall be entitled
      to indemnification from the Company pursuant to any and all Company
      policies (including insurance policies), procedures and/or by-laws to
      the maximum extent allowed by law.  The Company will pay Executive’s
      attorneys, Edwards Wildman Palmer LLP, in respect of costs incurred by
      Executive commencing on or after January 1, 2012 in association with the
      negotiation and implementation of this Agreement, provided that the
      payment of such costs by the Company shall not exceed $30,000.00.  
    

    
      5.  REPRESENTATIONS AND WARRANTIES.
    

    
           (a)  By the Company.  The
      Company represents and warrants to Executive that (i) the execution of
      this Agreement, the grant of the Restricted Stock contemplated hereby,
      and the issuance of the Restricted Stock have been or will be duly
      authorized by all requisite corporate action(s) of the Company; (ii) the
      execution, delivery and performance of this Agreement by the Company
      does not and will not violate any law, regulation, order, judgment or
      decree or any agreement, plan or corporate governance document of the
      Company; and (iii)  upon the execution and delivery of this Agreement by
      Executive, this Agreement will be the valid and binding obligation of
      the Company, enforceable in accordance with its terms, except to the
      extent enforceability may be limited by applicable bankruptcy,
      insolvency or similar laws affecting the enforcement of creditors’
      rights generally and by the effect of general principles of equity
      (regardless of whether enforceability is considered in a proceeding in
      equity or at law).
    

    
      
        

        

      

      
        
          -6-
        

        
          

        

      

      
        

        

      

    

    

    

    
           (b)  By Executive.  Executive
      represents and warrants to the Company that (i) Executive has the power,
      authority, and capacity to execute and deliver this Agreement and to
      perform his obligations under this Agreement, and that the execution and
      delivery of this Agreement by Executive do not, and the performance of
      his obligations under this Agreement will not, violate any law,
      regulation, order, judgment or decree, or breach, violate or conflict
      with any agreement to which Executive is a party or by which he is
      bound, and (ii) upon the execution and delivery of this Agreement by the
      Company, this Agreement will be the valid and binding obligation of
      Executive, enforceable in accordance with its terms, except to the
      extent enforceability may be limited by applicable bankruptcy,
      insolvency or similar laws affecting the enforcement of creditors’
      rights generally and by the effect of general principles of equity
      (regardless of whether enforceability is considered in a proceeding in
      equity or at law).
    

    
      6.  TERMINATION OF EMPLOYMENT.
    

    
           (a)  By the Company.  The
      Company shall have the right to remove Executive from office and
      discharge Executive as an employee upon written notice to Executive at
      any time and for any reason, with or without Cause (as hereinafter
      defined).  The date on which Executive is discharged as an employee by
      the Company shall be the last day of the Employment Period.
    

    
           (b)  By Executive.  Executive
      shall have the right to resign as an employee of the Company upon
      written notice to the Company at any time, with or without Good Reason
      (as hereinafter defined).  The date on which Executive resigns as an
      employee of the Company shall be the last day of the Employment Period.
    

    
          (c)  Death, Disability, and
      Incapacity.  Upon the death, Disability or Incapacity of Executive,
      the date of any such event shall be the last day of the Employment
      Period.
    

    
                 (i)  “Disability”
      shall have the meaning given it in the Company’s long-term disability
      plan.  In the event of Executive’s Disability, the date on which the
      Disability is determined to have begun shall be the last day of the
      Employment Period.
    

    
                 (ii)  “Incapacity”
      shall mean a disability (other than Disability within the meaning of
      above) or other impairment of health that renders Executive unable, with
      or without reasonable accommodation, to perform his duties to the
      reasonable satisfaction of the Board which continues for a period of six
      consecutive months during the Employment Period.  Executive’s employment
      shall be deemed to be terminated for Incapacity upon the date the
      Company gives Executive a Notice of Termination pursuant to Section 6(h)
      hereof, which Notice of Termination shall not be given until after the
      six-month period for establishing Incapacity, as set forth above, has
      lapsed.  The date of such Notice of Termination shall be the last day of
      the Employment Period.
    

    
           (d)  “Cause” Defined.  “Cause”
      shall mean (i) Executive’s conviction of either (A) a felony (excluding
      traffic violations) or (B) any crime in connection with his employment
      by the Company that causes the Company a substantial and material
      financial detriment; (ii) Executive’s commission of any other act
      involving dishonesty or fraud with respect to the Company;
      (iii) Executive’s substantial and repeated failure to perform duties as
      reasonably directed by the Board that are permitted by law and necessary
      to implement policies or procedures or other actions adopted, authorized
      or approved by the Board, which failure is not cured to the Board’s
      reasonable satisfaction within 30 days after written notice thereof is
      provided to Executive; (iv) Executive’s gross negligence or willful
      misconduct with respect to his performance under this Agreement which
      results in a substantial and material financial detriment to the
      Company; or (v) any material breach by Executive of this Agreement which
      is not cured to the Board’s reasonable satisfaction within 30 days after
      written notice thereof to Executive from the Board.  
    

    
      
        

        

      

      
        
          -7-
        

        
          

        

      

      
        

        

      

    

    

    

    
           (e)  “Good Reason” Defined.  “Good
      Reason” shall mean: (i) any reduction in Executive’s compensation
      opportunity as set forth in Section 4 of this Agreement (including but
      not limited to Base Salary, Annual Incentive Award and Restricted Stock
      Awards); (ii) the greater than de minimis reduction or material adverse
      modification of Executive’s authority or duties, such as a substantial
      diminution or adverse modification in Executive’s status or
      responsibilities, from the authorities being exercised and duties being
      performed by Executive as of the Effective Date (and as such authorities
      and duties may be increased from time to time thereafter), or (iii) any
      material breach by the Company of this Agreement which is not cured to
      Executive’s reasonable satisfaction within 30 days after written notice
      thereof to the Board from Executive.  Notwithstanding the foregoing, any
      of the circumstances described above may not serve as a basis for
      resignation for Good Reason by Executive unless Executive has provided
      written notice to the Company that such circumstance exists within 30
      days of Executive’s learning of such circumstance and the Company has
      failed to cure such circumstance, if curable, within 30 days following
      such notice; and provided further, that Executive did not previously
      consent in writing to the action leading to Executive’s claim of
      resignation for Good Reason.  For the avoidance of doubt, the failure of
      the Company to meet or exceed EBITDA targets with respect to the vesting
      of EBITDA Performance-Based Shares, the failure of the Company to
      satisfy a certain level of percentile rank with respect to the vesting
      of TSR Performance-Based Shares, or any percentage of either, shall be
      deemed not to be a reduction in Executive’s compensation opportunity as
      set forth in Section 4 of this Agreement for the purpose of clause (i)
      of the first sentence of this Section 6(e).
    

    
           (f)  Change in Control.  This
      Agreement cannot be terminated by either the Company or Executive as a
      result of a change in control of the Company, and a change in control of
      the Company does not constitute a Good Reason.
    

    
           (g)  Required Resignations.  Whenever
      Executive’s employment is terminated, Executive shall immediately tender
      his resignation as a director and as an officer or other position he
      shall hold with the Company and any subsidiary or affiliated
      corporations or entities.
    

    
           (h)  Notice of Termination.  Any
      termination of employment by the Company or by Executive shall be
      communicated by a written Notice of Termination to the other party in
      accordance with Section 12 hereof.  For purposes of this Agreement, a “Notice
      of Termination” shall mean a notice which shall indicate the
      specific termination provision in the Agreement relied upon and shall
      set forth in reasonable detail the facts and circumstances claimed to
      provide a basis for termination of employment under the provision so
      indicated.
    

    
      
        

        

      

      
        
          -8-
        

        
          

        

      

      
        

        

      

    

    

    

    
      7.  PAYMENTS, VESTING AND BENEFITS ON TERMINATION.
    

    
           (a)  On Account of the Death
      of the Executive, by the Company for Cause, by Executive without Good
      Reason.  If Executive’s employment is terminated on account of the
      death of the Executive, by the Company for Cause or by Executive without
      Good Reason, Executive’s Base Salary, Annual Incentive Award and other
      benefits specified in Section 4 shall cease at the time of such
      termination, to the extent permitted by law, and all Restricted Stock,
      to the extent not vested, shall terminate and be forfeited by the
      Executive.  Notwithstanding the foregoing, Executive shall be entitled
      to receive payment of any amount of Annual Incentive Award that had
      previously been deferred as provided under Section 4(b) above.    
    

    
           (b)  By the Company without
      Cause, or by Executive for Good Reason.  If Executive’s employment
      is terminated by the Company without Cause or by Executive for Good
      Reason, Executive shall be entitled to receive or continue receiving any
      and all compensation and benefits, as set forth in Section 4 above, to
      the extent permitted by law, through the date that is the last day of
      the Employment Period, along with any amount of Annual Incentive Award
      that had previously been deferred as provided under Section 4(b),
      provided that any portion of the Restricted Stock which has been granted
      but has not otherwise become vested and unrestricted as of the
      termination date shall become vested and unrestricted as of such
      termination date.  Except as provided in Sections 9 and 13, in addition
      to the compensation and benefits set forth herein, the Company shall pay
      to the Executive a severance amount in cash on the last day of the month
      of the month following the termination date equal to two (2) times the
      Executive’s Base Salary.
    

    
      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 an 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)(l)(iv).
    

    
           (c)  By the Company for
      Disability or Incapacity.  If Executive’s employment is terminated
      by the Company by reason of Disability or Incapacity, Executive shall be
      entitled to receive or continue receiving any and all compensation and
      benefits as set forth in Section 4 of this Agreement for a period of
      thirteen (13) weeks following the date on which such Disability is
      determined to have begun or thirteen (13) weeks following the Company’s
      termination of the Executive’s employment due to Incapacity, and
      Executive will be entitled to receive any amount of Annual Incentive
      Award that had previously been deferred as provided in Section
      4(b).  Any Restricted Stock which has not vested on or before the date
      of termination of employment due to Disability or Incapacity shall
      terminate and be forfeited by Executive.  Executive shall be entitled to
      receive all disability or incapacity payments provided to senior
      executives under the Company’s then-existing policies of insurance.
    

    
      
        

        

      

      
        
          -9-
        

        
          

        

      

      
        

        

      

    

    

    

    
           (d)  By Expiration of the
      Term – Non-Renewal by the Company.  If the Company elects not
      to renew the Term by providing the appropriate Notice of Termination to
      the Executive prior to the expiration of the Third Term or any Renewal
      Term(s) thereafter as set forth in Section 1 (the “Non-Renewal”),
      and therefore Executive’s employment is terminated by reason of
      expiration of the Term, the Company, except as provided in Sections 9
      and 13, shall pay to the Executive a severance amount in cash on the
      last day of the month of the month following the last day of the Term
      equal to two (2) times the Executive’s Base Salary.  Additionally,
      upon the Non-Renewal by the Company, all Restricted Stock which has been
      granted but has not otherwise become vested and unrestricted shall
      become vested and unrestricted on the expiration of the Term, and
      Executive shall be entitled to receive any amount of Annual Incentive
      Award that had previously been deferred as provided in Section 4(b).
    

    
           (e)  By Expiration of the
      Term – Non-Renewal by Executive.  If the Executive elects not
      to renew the Term by providing the appropriate Notice of Termination to
      the Company prior to the expiration of the Third Term or any Renewal
      Term(s) thereafter as set forth in Section 1 and therefore Executive’s
      employment is terminated by reason of the expiration of the
      Term,  Executive’s Base Salary, Annual Incentive Award and other
      benefits specified in Section 4 shall cease at the expiration of the
      Term, to the extent permitted by law, and all Restricted Stock, to the
      extent not vested, shall terminate and be forfeited by the
      Executive.  Notwithstanding the foregoing, Executive shall be entitled
      to receive any amount of Annual Incentive Award that had previously been
      deferred as provided in Section 4(b).  
    

    
      8.  AGREEMENT NOT TO SOLICIT OR COMPETE.
    

    
           (a)  Non-Solicitation.  Upon
      the termination of employment at any time, then for a period of one year
      beginning on the day following the end of the Employment Period,
      Executive shall not under any circumstances employ, solicit the
      employment of, or accept unsolicited the services of, any “protected
      person” or recommend the employment of any “protected person” to any
      other business organization.  A “protected person”
      shall be a person known by Executive to be employed by the Company or
      its Subsidiaries (as defined below) or to have been employed by Company
      or its Subsidiaries within six months prior to the commencement of
      conversations with such person with respect to employment.  The term “Subsidiary”
      as used in this Section 8 means a corporation or other entity more than
      50 percent of whose outstanding securities or interests representing the
      right, other than as affected by events of default, to vote for the
      election of directors or otherwise select a similar governing body is
      owned by the Company and/or one or more of the Company’s other
      Subsidiaries.
    

    
      As to (i) each “protected person” to whom the foregoing applies,
      (ii) each limitation on (A) employment, (B) solicitation and
      (C) unsolicited acceptance of services, of each “protected person” and
      (iii) each month of the period during which the provisions of this
      Section 8(a) apply to each of the foregoing, the provisions set forth in
      this subsection (a) are deemed to be separate and independent agreements
      and in the event of unenforceability of any such agreement, such
      unenforceable agreement shall be deemed automatically deleted from the
      provisions hereof and such deletion shall not affect the enforceability
      of any other provision of this Section 8(a) or any other term of this
      Agreement.
    

    
      
        

        

      

      
        
          -10-
        

        
          

        

      

      
        

        

      

    

    

    

    
           (b)  Non-Competition.  During
      the course of his employment, Executive will have learned many trade
      secrets of the Company and its Subsidiaries and will have access to
      confidential information and business plans for the Company and its
      Subsidiaries.  Therefore, beginning on the day following the end of the
      Employment Period and continuing for a period of one year thereafter,
      Executive will not engage, either as a principal, employee, partner,
      consultant, officer, director or investor (other than a less-than-1%
      stock interest in a corporation), in a business which is a competitor of
      the Company and its Subsidiaries.  For purposes of this Section 8(b), a
      business shall be deemed a “competitor” of the Company and
      its Subsidiaries only if it engages in the Specialty Home Fashions or
      Furniture Business.  For purposes of clarity, any business that engages
      primarily in the Off-Price Family Apparel and/or Off-Price Home Fashions
      or Furniture Business and/or that engages primarily in the family
      apparel business (such as Talbot’s, Inc. or The Limited Stores, Inc.),
      but not in the Specialty Home Fashions or Furniture Business, shall not
      be deemed a “competitor” of the Company and its Subsidiaries.  Executive
      agrees that if, at any time, pursuant to action of any court,
      administrative or governmental body or other arbitral tribunal, the
      operation of any part of this Section 8(b) shall be determined to be
      unlawful or otherwise unenforceable, then the coverage of this
      Section 8(b) shall be deemed to be restricted as to duration,
      geographical scope or otherwise, as the case may be, to the extent, and
      only to the extent, necessary to make this Section 8(b) lawful and
      enforceable in the particular jurisdiction in which such determination
      is made.
    

    
           (c)  Return of Information.  Upon
      termination of the Employment Period for any reason other than the death
      of Executive, Executive shall immediately return all trade secrets,
      confidential information and business plans of the Company, contained in
      any format, and shall execute a certificate certifying that he has
      returned all such items in his possession or under his control.
    

    
      9.  PARACHUTE PAYMENT.  In the event that the severance and other
      benefits provided for in this Agreement or otherwise payable or provided
      to Executive (i) constitute “parachute payments” within the meaning of
      Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”),
      and (ii) but for this Section 9, would be subject to the excise tax
      imposed by Section 4999 of the Code (the “Excise Tax”),
      then the Executive’s benefits shall be either (a) delivered in full, or
      (b) delivered as to such lesser extent which would result in no portion
      of such benefits being subject to the Excise Tax, whichever of the
      foregoing amounts, taking into account the applicable federal, state and
      local income taxes and the Excise Tax, results in the receipt by the
      Executive on an after-tax basis, of the greatest amount of benefits,
      notwithstanding that all or some portion of such benefits may be taxable
      under Section 4999 of the Code.
    

    
      Unless the Company and Executive otherwise agree in writing, any
      determination required under this Section 9 will be made in writing by a
      national “Big Four” accounting firm selected by the Company or such
      other person or entity to which the parties mutually agree (the “Accountants”),
      whose determination will be conclusive and binding upon the Executive
      and the Company for all purposes.  For purposes of making the
      calculations required by this Section 9, the Accountants may make
      reasonable assumptions and approximations concerning applicable taxes
      and may rely on reasonable, good faith interpretations concerning the
      application of Sections 280G and 4999 of the Code.  The Company and
      Executive shall furnish to the Accountants such information and
      documents as the Accountants may reasonably request in order to make a
      determination under this Section.  The Company shall bear all costs the
      Accountants may reasonably incur in connection with any calculations
      contemplated by this Section 9.  Any reduction in payments and/or
      benefits required by this Section 9 shall occur in the following order:
      (1) any cash payments, (2) any taxable benefits, (3) any nontaxable
      benefits, and (4) any vesting of equity awards, in each case to the
      extent necessary to maximize the retained payments.
    

    
      
        

        

      

      
        
          -11-
        

        
          

        

      

      
        

        

      

    

    

    

    
      The Accountants shall provide their calculations, together with detailed
      supporting documentation, to the Company and Executive within thirty
      (30) calendar days after the date on which the Accountants have been
      engaged to make such determinations or such other time as requested by
      the Company or Executive.  If the Accountants determine that no Excise
      Tax is payable with respect to a payment or benefit, it shall furnish
      the Company and Executive with an opinion reasonably acceptable to
      Executive that no Excise Tax will be imposed with respect to such
      payment or benefit.  Any good faith determination of the Accountants
      made hereunder shall be final, binding and conclusive upon the Company
      and Executive.
    

    
      10.  HSR.  Prior to any acquisition of Common Stock, whether by way of
      open market purchase, vesting of Restricted Stock, conversion or
      exercise of options or warrants, or otherwise, and whether or not
      contemplated by this Agreement (“Acquisition”), Executive
      and Company will take commercially reasonable efforts in respect of any
      Acquisition to ensure that Executive complies with the requirements of
      the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR
      Act”), 15 U.S.C. § 18a, including making any filings required under
      the HSR Act, paying the necessary filing fees, which will be the sole
      responsibility of the Executive to pay, and observing the statutory
      waiting period(s).  Subject to the foregoing, Executive will provide at
      least 60 days’ written notice to the Company prior to any Acquisition
      that would require a filing under the HSR Act.
    

    
      11.  ASSIGNMENT.  The rights and obligations of the Company shall inure
      to the benefit of and shall be binding upon the successors and assigns
      of the Company. The rights and obligations of Executive are not
      assignable.
    

    
      12.  NOTICES.  All notices and other communications required hereunder
      shall be in writing and shall be given by mailing the same by certified
      or registered mail, return receipt requested, postage prepaid.  If sent
      to the Company the same shall be mailed to the Company at 100 Pier 1
      Place, Fort Worth, Texas 76102, Attention: Chairman of the Board, or
      other such address as the Company may hereafter designate by notice to
      Executive; and if sent to Executive, the same shall be mailed to
      Executive at his address set forth in the records of the Company or at
      such other address as Executive may hereafter designate by notice to the
      Company.  Notice shall be deemed given on the date shown on the
      applicable return receipt.
    

    
      13.  WITHHOLDING; CERTAIN TAX MATTERS.  Anything to the contrary
      notwithstanding, (a) all payments required to be made by the Company
      hereunder to Executive shall be subject to the withholding of such
      amounts, if any, relating to tax and other payroll deductions as the
      Company may reasonably determine it should withhold pursuant to any
      applicable law or regulation.  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) of the Code, at the time of his
      “separation from service” with the Company, and if any payment or
      benefit to which he shall become entitled 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) of the Code, 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 Section 409A of the Code, 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 Section 409A(a)(2) of the
      Code.  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 of the Company 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.
    

    
      
        

        

      

      
        
          -12-
        

        
          

        

      

      
        

        

      

    

    

    

    
      14.  GOVERNING LAW.  This Agreement and the rights and obligations of
      the parties hereunder shall be governed by the laws of the State of
      Texas.
    

    
      15.  ARBITRATION.  In the event that there is any claim or dispute
      arising out of or relating to this Agreement, or the breach thereof, and
      the parties hereto shall not have resolved such claim or dispute by
      negotiation or mediation, then such claim or dispute shall be settled
      exclusively by binding arbitration in Fort Worth, Texas, in accordance
      with the Texas Arbitration Act and the Employment Arbitration Rules and
      Mediation Procedures of the American Arbitration Association then in
      effect.  The arbitration shall be presided over by a panel of three
      neutral arbitrators, all three of whom will be selected by mutual
      agreement of Executive and the Company, or, in the absence of such
      agreement, by a court of competent jurisdiction.  Judgment upon the
      award rendered by such arbitrators shall be entered by a district court
      sitting in Tarrant County, Texas, upon the application of either
      party.  Any issues that cannot be arbitrated, or any relief that must be
      sought in any court, will be brought exclusively in any state district
      court sitting in Tarrant County, Texas.
    

    
      16.  EMPLOYING SUBSIDIARY.  Executive understands and agrees that
      Executive will, as are the majority of the administrative services
      employees of the Company, be an employee of the Company’s wholly owned
      subsidiary, Pier 1 Services Company, a Delaware statutory trust (“Pier 1
      Services”), and that all compensation will be paid from Pier 1
      Services.  Accordingly, Pier 1 Services is joining as a party to this
      Agreement in its limited capacity as being the subsidiary from which all
      payments of cash compensation and other cash payments called for under
      this Agreement will be made.  All references to the Company in
      Sections 6(a) and 6(b) above shall be deemed to refer to, in addition to
      the Company, Pier 1 Services and to all other Subsidiaries of the
      Company, if any, for which Executive is serving as an employee.
    

    
      17.  ENTIRE AGREEMENT.  This Agreement represents the entire agreement
      between the parties relating to the terms of Executive’s employment by
      the Company during the Term and supersedes all prior written or oral
      agreements between them, except that any prior agreement(s) concerning
      any of the following: (i) the terms of Executive’s participation in the
      Pier1 Imports, Inc. Supplemental Retirement Plan, (ii) any stock options
      that Executive has been granted, and (iii) any restricted stock that
      Executive has been granted under the First Renewal or any Restricted
      Stock that Executive has been granted under this Agreement, shall be
      valid and in full force and effect according to their terms and, as
      applicable, the terms under the First Renewal (which for this purpose
      shall be deemed to be in effect) or the terms of this Agreement,
      following the execution of this Agreement.
    

    
      
        

        

      

      
        
          -13-
        

        
          

        

      

      
        

        

      

    

    

    

    
      18.  EXECUTION OF AGREEMENT.  This Agreement may be executed in one or
      more counterparts, each of which will be deemed to be an original copy
      of this Agreement and all of which, when taken together, will be deemed
      to constitute one and the same agreement.  The exchange of copies of
      this Agreement and of signature pages by facsimile transmission shall
      constitute effective execution and delivery of this Agreement as to the
      parties and may be used in lieu of the original Agreement for all
      purposes.  Signatures of the parties transmitted by facsimile shall be
      deemed to be their original signatures for all purposes.
    

    	
           
        	
          EXECUTIVE
        	

        
	

        	

        	

        	

        	
           
        
	

        	
          
            /s/ Alex Smith
          

        	

        
	

        	
          Alexander W. Smith
        	

        
	

        	

        	

        	

        	
           
        
	

        	

        	

        	

        	
           
        
	

        	
          
            PIER 1 IMPORTS, INC.
          

        	

        
	

        	

        	

        	

        	
           
        
	

        	
          By:
        	
          
            /s/ Michael R. Ferrari
          

        	

        
	

        	

        	
          
            Michael R. Ferrari
          

        	

        
	

        	

        	
          Chairman of the Board of Directors
        	

        
	

        	

        	

        	

        	
           
        
	

        	

        	

        	

        	
           
        
	

        	
          
            PIER 1 SERVICES COMPANY
          

        	

        
	

        	

        	

        	

        	
           
        
	

        	
          By:
        	
          Pier 1 Holdings, Inc., its managing trustee
        	

        
	

        	

        	

        	

        	
           
        
	

        	

        	
          By:
        	
          
            /s/ Michael R. Ferrari
          

        	

        
	

        	

        	

        	
          
            Michael R. Ferrari
          

        	

        
	

        	

        	

        	
          Authorized Signatory
        	

        

    

    
      -14-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00205-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00205-of-00352.parquet"}]]