PIER 1 BENEFIT RESTORATION PLAN II

PIER 1

BENEFIT RESTORATION PLAN II

AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2009

The Pier 1 Benefit Restoration Plan was established effective as of April 1, 1990, by the Company.  The purpose of the Pier 1 Benefit Restoration Plan is to permit select members of management and highly compensated employees of the Company to defer current compensation.  In addition, the Company desires and intends by the adoption and maintenance of this Benefit Restoration Plan to recognize the value to the Company of the past and present services of employees covered by the Benefit Restoration Plan and to encourage and assure their continued service to the Company by making more adequate provision for their future retirement security.  The Pier 1 Benefit Restoration Plan was previously amended and restated effective as of December 20, 1991 and was amended and restated again effective as of July 1, 1995.  Subsequent to July 1, 1995 the Pier 1 Benefit Restoration Plan was amended six (6) times. Effective as of January 1, 2005, the portion of the Pier 1 Benefit Restoration Plan which is subject to certain deferred compensation taxation laws was separated from the portion which is not subject to such laws, was renamed the Pier 1 Benefit Restoration Plan II and was amended and restated.  Effective as of January 1, 2009, the Pier 1 Benefit Restoration Plan II is hereby amended and restated as hereinafter set forth in this instrument.

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PIER 1

BENEFIT RESTORATION PLAN II

TABLE OF CONTENTS

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ARTICLE I

TITLE, EFFECTIVE DATE AND PURPOSE OF RESTATEMENT

Section 1.01                                 Title.   This Plan shall be known as the Pier 1 Benefit Restoration Plan II (hereinafter referred to as the “Plan”).

Section 1.02                                 Effective Date.   The original effective date of this Plan was April 1, 1990.  The effective date of this restatement is January 1, 2009.

Section 1.03                                 Purpose of Restatement.   The purpose of this January 1, 2009 restatement is to cause the Plan to comply with the final regulations and requirements of Sections 409A(a)(2), (3) and (4) of the Code.  The Plan is to be construed and interpreted in accordance with such purpose.

ARTICLE II

DEFINITIONS AND CONSTRUCTION OF THE PLAN DOCUMENTS

As used herein, the following words and phrases shall have the meanings specified below unless a different meaning is clearly required by the context:

Section 2.01                                 Beneficiary.   “Beneficiary” shall mean the person or persons designated by a Participant as being entitled to receive any benefits under this Plan.

Section 2.02                                 Board of Directors.   The term “Board of Directors” shall mean the Board of Directors of Pier 1 Imports, Inc.

Section 2.03                                 Code.   “Code” shall mean the Internal Revenue Code of 1986, as amended.

Section 2.04                                 Committee.   “Committee” means the Compensation Committee of the Board of Directors of Pier 1 Imports, Inc. or such other committee as may be designated by such board.  The Committee shall be the plan administrator for purposes of ERISA and shall manage and administer the Plan in accordance with this document, except for the administrative functions required to be performed by the Company as set forth in this document.

Section 2.05                                 Compensation.   “Compensation” shall mean Compensation, as defined in the 401(k) Plan; provided, however, that (i) no limit on annual compensation, pursuant to Code Section 401(a)(17), shall apply, and (ii) “Compensation” shall not include any forms of bonus payment other than annual Fiscal Year bonus payments.

Section 2.06                                 Company.   “Company” shall mean and include the “Employer” and/or “Adopting Employers”, as such terms are defined in the Pier 1 Associates’ 401(k) Plan.

Section 2.07                                 Compensation Deferral Agreement.   “Compensation Deferral Agreement” means the written form of agreement referred to in Section 3.02 hereof which is prescribed by the Company and executed and submitted by a Participant to the Company before the relevant Election Date.

Section 2.08                                 Election Date.   The “Election Date” is the date established by the Company as the date on or before which an Executive must submit a valid Compensation Deferral Agreement to the Company.  The applicable Election Dates for an Executive who has been designated by the Committee as eligible to participate in the Plan are as follows: (i) in the case of the first Taxable Year in which an Executive initially becomes eligible to participate in the Plan, a date which is no later than the thirtieth (30th) day immediately following the date the Executive initially became eligible to participate in the

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Plan, and (ii) for any Taxable Year following the first Taxable Year in which an Executive becomes eligible to participate in the Plan, a date which is no later than the last day of the immediately preceding Taxable Year.  For purposes of the preceding sentence:

(1)                                   A Participant who terminates employment with the Company and who is thereafter reemployed by the Company and designated upon such reemployment or thereafter as eligible to participate in the Plan shall upon such designation be deemed to be initially eligible to participate in the Plan;

(2)                                   A Participant who voluntarily suspends his deferrals of Compensation under the Plan and who thereafter desires to resume such Compensation deferrals shall not be deemed to be initially eligible to participate in the Plan; and

(3)                                   A Participant who ceases to be eligible to participate in the Plan for any reason but who remains employed with the Company and thereafter again becomes eligible to participate in the Plan shall not be deemed to be initially eligible to participate in the Plan.

Section 2.09                                 ERISA. “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Section 2.10                                 Executive. “Executive” shall mean any management employee or highly compensated employee of the Company.

Section 2.11                                 Fiscal Year. “Fiscal Year” shall mean the Company’s fiscal year.

Section 2.12                                 401(k) Plan. “401(k) Plan” shall mean the Pier 1 Associates 401(k) Plan, as it shall be amended from time to time.

Section 2.13                                 Participant. “Participant” means an Executive who is participating in the Plan within the meaning of Article III hereof.

Section 2.14                                 Plan. “Plan” means this Pier 1 Benefit Restoration Plan II, described in this instrument, as amended from time to time.

Section 2.15                                 Plan Year.  The “Plan Year” is the calendar year.

Section 2.16                                 Restoration Account.  “Restoration Account” is the account described in Article V as a bookkeeping record for each Participant of this Plan.  A Participant’s Restoration Account shall consist of amounts attributable to Compensation deferrals for Taxable Years from and after December 31, 2004 and of amounts credited as of December 31, 2004 to their Restoration Accounts under the Pier 1 Benefit Restoration Plan document as then in effect which for any reason are considered as amounts deferred after December 31, 2004 for purposes of Section 409A of the Code. A Participant’s Restoration Account may, at the discretion of the Company, include one or more sub-accounts to reflect the amounts credited to a Participant under the various terms of this Plan.

Section 2.17                                 Taxable Year.  “Taxable Year” is a twelve (12) consecutive month period beginning January 1 and ending December 31.

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ARTICLE III

ELIBIBILITY

Section 3.01                                 Eligibility.  Eligibility for participation in this Plan shall be determined by the Company, in its sole discretion; provided, however, that no Executive shall be selected for participation in this Plan unless he qualifies as a member of a select group of management or as a highly compensated employee of the Company within the meaning of Section 201(2) of ERISA, and such Executive has met the eligibility service requirement of the 401(k) Plan.

Section 3.02                                 Participation.  An Executive, after having been notified by the Company that he is eligible for participation, shall complete and timely return to the Company a duly executed Compensation Deferral Agreement.  No Compensation Deferral Agreement shall be effective before acceptance by the Company.

Section 3.03                                 Subsequent Eligibility.  If deferrals of Compensation are stopped, pursuant to Section 4.05 or Section 4.08 hereof, such Participant shall lose his eligibility for participation in this Plan until he is again selected by the Company pursuant to Section 3.01 hereof.

ARTICLE IV

DEFERRAL OF COMPENSATION

Section 4.01                                 Compensation Deferral.  Through the timely delivery to the Company of an executed Compensation Deferral Agreement a Participant shall defer the receipt of a dollar amount of Compensation otherwise payable to the Participant in the future for services that have yet to be rendered.  The dollar amount of Compensation deferred may not exceed twenty percent (20%) of the Participant’s Compensation per Plan Year.  Amounts so deferred shall be credited to such Participant’s Restoration Account.

Section 4.02                                 Company Matching Contribution.  With respect to Compensation deferred under Section 4.01, the Company shall credit to a Participant’s Restoration Account an additional amount equal to the sum of (i) one hundred percent (100%) of the first one percent (1%) of a Participant’s elected Compensation deferral, and (ii) fifty percent (50%) of the next four percent (4%) of the Participant’s elected Compensation deferral.  The foregoing sum shall be credited to such Participant’s Restoration Account.

Section 4.03                                 Initial Compensation Deferral Agreement.  An Executive selected to participate in the Plan pursuant to Section 3.02, must submit a written Compensation Deferral Agreement to the Company on or before the applicable Election Date following such Executive’s initial eligibility.  A valid Compensation Deferral Agreement submitted on or before the applicable Election Date following the Executive’s initial eligibility shall cause Compensation to be deferred beginning the first day of the first full payroll period coincident with or immediately following the date the Compensation Deferral Agreement is submitted by the eligible Executive to the Company.  An Executive who has been selected to participate in the Plan pursuant to Section 3.02 but who declines to participate at that time may thereafter submit a written Compensation Deferral Agreement to the Company for a subsequent Taxable Year as his initial Compensation Deferral Agreement provided that he is still eligible for Plan participation and provided that such agreement is submitted prior to the beginning of such Taxable Year.  Such Compensation Deferral Agreement shall cause Compensation to be deferred beginning the first day of the first full payroll period coincident with or immediately following the January 1 of such Taxable Year and shall be effective for all full payroll periods beginning in such Taxable Year.  In no event, however, may a Compensation Deferral Agreement provide for deferral of Compensation that has been earned as of the date the Compensation Deferral Agreement is executed by the Participant.

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Section 4.04                                 Duration of a Compensation Deferral Agreement.  A Compensation Deferral Agreement shall remain in effect until revoked or modified by the execution of a new Compensation Deferral Agreement by the Participant.

Section 4.05                                 Compensation Deferral Agreement Changes.  On or before the applicable Election Date for a Taxable Year, a Participant may elect by a written Compensation Deferral Agreement submitted to the Company to stop, increase or decrease the amount of Compensation deferrals for such Taxable Year.  A Compensation deferral change elected by a Participant with respect to a Taxable Year shall be effective for all full payroll periods beginning in such Taxable Year.  No change in Compensation deferrals will be permitted for any Taxable Year after the beginning of such Taxable Year or commencement date for such deferrals in the case of initial eligibility to participate in the Plan.

Section 4.06                                 Compensation Deferral Suspension.  Any Participant who elects a “cash-out” distribution of his Restoration Account balance under the Pier 1 Benefit Restoration Plan I pursuant to Section 6.01 thereof shall (i) forfeit that amount of deferred Compensation, Company matching contributions and earnings under this Plan as are necessary to preserve the status of the “cash-out” distribution provision of the Pier 1 Benefit Restoration Plan I as a benefit that has not been materially modified for purposes of Section 409A of the Code, and (ii) have his participation under this Plan suspended in accordance with the terms of Section 6.01 of the Pier 1 Benefit Restoration Plan I.  The Participant’s participation under this Plan shall be automatically resumed in accordance with the terms of Section 6.01 of the Pier 1 Benefit Restoration Plan I.

Section 4.07                                 Annual Bonus Deferrals. Compensation deferrals for annual bonus amounts which are payable with respect to any Fiscal Year beginning after the Taxable Year in which the Executive first becomes eligible to participate in the Plan will be effected based upon his Compensation deferral election made prior to the beginning of the Taxable Year in which such Fiscal Year begins.  The annual bonus amount on which Compensation deferrals are to be effected for the Fiscal Year beginning in the Taxable Year in which an Executive first became eligible to and first elected to participate in the Plan shall be reduced to reflect the portion of such annual bonus payment, if any, which is based upon service completed by such Executive prior to the date of his Compensation deferral election.

Section 4.08                                 Change in Employment Status.  Compensation deferrals shall stop for any Participant who has a change in employment status and continuation of his Compensation deferrals would cause this Plan to cease to be a plan which covers a select group of management or highly compensated employees within the meaning of Section 201(2) of ERISA.

ARTICLE V

RESTORATION ACCOUNT

Section 5.01                                 Restoration Account.  Each Participant’s Restoration Account shall as of January 1, 2005 be credited with the dollar amoun