PIER 1 IMPORTS, INC. SUPPLEMENTAL RETIREMENT PLAN

 

TABLE OF CONTENTS

 

					PAGE
ARTICLE I —PURPOSE					1
ARTICLE II —DEFINITIONS					1
2.1		Actuarial Equivalent			1
2.2		Beneficiary			1
2.3		Board			1
2.4		Cause			1
2.5		Change of Control of the Employer			2
2.6		Code			2
2.7		Committee			2
2.8		Compensation			2
2.9		Early Retirement Date			2
2.10		Employer			2
2.11		Good Reason			3
2.12		Highest Average Compensation			3
2.13		Normal Retirement Date			3
2.14		Participant			3
2.15		Pier 1			3
2.16		Regulations			3
2.17		Retirement			3
2.18		Separation from Service			4
2.19		Supplemental Retirement Benefit			4
2.20		Target Amount			4
2.21		Termination			4
2.22		Total and Permanent Disability			4
2.23		Years of Credited Service			5
2.24		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			Normal Retirement Benefit		6
4.3			Early Retirement Benefit		6
4.4			Change of Control Benefit		6
4.5			Disability Retirement Benefit		6
4.6			Termination Benefit		7
4.7			Form of Benefit Payment		7
4.8			Commencement of Payments		7
4.9			Withholding; Payroll Taxes		8
4.10			Payment to Guardian		8
4.11			Major Medical and Hospitalization Insurance Coverage		8
ARTICLE V — SURVIVOR BENEFITS					9
5.1			Death Prior to Commencement of Benefits		9
5.2			Death After Commencement of Benefits		10

 

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5.3		Suicide; Misrepresentation		10
5.4		Effect of Payment		10
ARTICLE VI —BENEFICIARY DESIGNATION				10
6.1		Death of Participant		10
6.2		Amendments		10
6.3		No Beneficiary Designation		10
6.4		Effect of Payment		11
6.5		Death of Beneficiary		11
ARTICLE VII —ADMINISTRATION				11
7.1		Committee; Duties		11
7.2		Agents		11
7.3		Binding Effect of Decisions		11
7.4		Indemnity of Committee		11
ARTICLE VIII —CLAIMS PROCEDURE				11
8.1		Claim		11
8.2		Denial of Claim		12
8.3		Review of Claim		12
8.4		Final Decision		12
ARTICLE IX —TERMINATION, SUSPENSION OR AMENDMENT				12
9.1		Amendment or Termination		12
9.2		Successor Employer		12
ARTICLE X —MISCELLANEOUS				13
10.1		Unsecured General Creditor		13
10.2		Trust Fund		13
10.3		Nonassignability		13
10.4		Not a Contract of Employment		13
10.5		Participant’s Cooperation		13
10.6		Domestic Relations Order		14
10.7		Captions		14
10.8		Governing Law		14
10.9		Validity		14
10.10		Successors		14
10.11		Notice		14

 

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PIER 1 IMPORTS, INC.

 

SUPPLEMENTAL RETIREMENT PLAN

 

ARTICLE I—PURPOSE

 

The purpose of this Supplemental 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 September 28, 1995, was restated effective as of December 5, 2002, was restated effective as of January 1, 2005, was amended effective as of January 1, 2006, and now is restated effective January 1, 2009.  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.  The accrual of benefits for Participants who have terminated employment with the Employer will be governed by the provisions of the Plan as in effect on the date of their termination.

 

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          Actuarial Equivalent

 

“Actuarial Equivalent” means equivalence in value between two (2) or more forms and/or times of payment based on the applicable mortality table prescribed by the Secretary of the United States Department of the Treasury (“Treasury”) or his delegate in accordance with Internal Revenue Code Section 417(e)(3)(A)(ii), and an interest rate equal to the twenty-four (24) month rolling average of 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”), using the current rate as of the beginning of the month in which the calculation is made and the twenty-three (23) previous months.

 

2.2          Beneficiary

 

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

 

2.3          Board

 

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

 

2.4          Cause

 

“Cause” means that the Participant:

 

(a)           Misappropriated, has stolen or embezzled funds of the Employer; or

 

(b)           Committed an act of deceit, fraud, or willful misconduct or otherwise acted in bad faith, adverse to the best interests of the Employer.

 

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2.5          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.

 

2.6          Code

 

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

 

2.7          Committee

 

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

 

2.8          Compensation

 

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

 

2.9          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 on or after such Participant’s attainment of age fifty-five (55) and completion of ten (10) Years of Plan Participation.

 

2.10        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.

 

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2.11        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.

 

2.12        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).

 

2.13        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 from Service, if the date of such Separation from Service occurs on or after such Participant’s attainment of age sixty-five (65).

 

2.14        Participant

 

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

 

2.15        Pier 1

 

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

 

2.16        Regulations

 

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

 

2.17        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

 

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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 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.

 

2.18        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.

 

2.19        Supplemental Retirement Benefit

 

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

 

2.20        Target Amount

 

“Target Amount” means sixty percent (60%) of Highest Average Compensation multiplied by a fraction, the numerator of which is the Participant’s actual Years of Credited Service, not to exceed twenty (20), and the denominator of which is twenty (20).

 

2.21        Termination

 

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

 

2.22        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.

 

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2.23        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.

 

2.24        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 Benefit based upon Years of Plan Participation under the following schedule:

 

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

 

(b)           Conditions for Immediate Vesting.  Regardless of a Participant’s actual Years of Plan Participation, 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.

 

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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 sixty percent (60%) of the Participant’s Highest Average Compensation. The computation of said Supplemental Retirement Benefit shall be made in accordance with the provisions of Articles IV and V, as applicable, but in no event shall the amount of the Supplemental Retirement Benefit paid annually to any Participant exceed five hundred thousand dollars ($500,000.00). Notwithstanding the above, a Participant who is terminated for Cause shall forfeit any right to receive benefits under the Plan.

 

4.2                               Normal Retirement Benefit

 

Upon a Normal Retirement Date, Employer shall pay to the Participant a monthly Supplemental Retirement Benefit from this Plan equal to one-twelfth (1/12th) of the following annual amounts:

 

(a)           The Target Amount; less

 

(b)           The Participant’s primary Social Security benefit payable at Retirement.

 

4.3                               Early Retirement Benefit

 

Upon an Early Retirement Date but before his Normal Retirement Date, Employer shall pay to the Participant the monthly Supplemental Retirement Benefit calculated under Section 4.2 above except:

 

(a)           The Target Amount 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(b) 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 the Participant’s attainment of age sixty-five (65).

 

4.4                               Change of Control Benefit

 

If a Participant has a Retirement event as a result of a Change of Control of the Employer, Employer shall pay to the Participant the monthly Supplemental Retirement Benefit calculated under Section 4.2 above except the offset required by Subsection 4.2(b) shal