UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
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For the quarterly period ended November 29, 2008 |
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OR |
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from to |
Commission file number 001-07832
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PIER 1 IMPORTS, INC. |
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(Exact name of registrant as specified in its charter) |
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Delaware |
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75-1729843 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification Number) |
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100 Pier 1 Place, Fort Worth, Texas 76102 |
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(Address of principal executive offices, including zip code) |
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(817) 252-8000 |
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(Registrants telephone number, including area code) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x . No o .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
o |
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Accelerated filer |
x |
Non-accelerated filer |
o |
(Do not check if a smaller reporting company) |
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Smaller reporting company |
o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.
Class |
|
Shares outstanding as of December 30, 2008 |
Common Stock, $1.00 par value |
|
89,265,194 |
PIER 1 IMPORTS, INC.
2
PIER I IMPORTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except share amounts)
(unaudited)
|
|
Three Months Ended |
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Nine Months Ended |
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||||||||
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November 29, |
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December 1, |
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November 29, |
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December 1, |
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||||
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2008 |
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2007 |
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2008 |
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2007 |
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||||
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||||
Net sales |
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$ |
300,906 |
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$ |
374,181 |
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$ |
931,420 |
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$ |
1,075,122 |
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||||
Operating costs and expenses: |
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||||
Cost of sales (including buying and store occupancy costs) |
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213,015 |
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248,286 |
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669,788 |
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774,525 |
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||||
Selling, general and administrative expenses |
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115,339 |
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123,698 |
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331,750 |
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373,279 |
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||||
Depreciation and amortization |
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7,321 |
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10,347 |
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23,511 |
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31,349 |
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||||
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335,675 |
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382,331 |
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1,025,049 |
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1,179,153 |
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||||
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||||
Operating loss |
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(34,769 |
) |
(8,150 |
) |
(93,629 |
) |
(104,031 |
) |
||||
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Nonoperating (income) and expenses: |
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||||
Interest and investment income |
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(1,274 |
) |
(1,624 |
) |
(3,616 |
) |
(6,994 |
) |
||||
Interest expense |
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3,804 |
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3,759 |
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11,105 |
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11,716 |
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||||
Other income |
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(632 |
) |
(674 |
) |
(1,920 |
) |
(1,327 |
) |
||||
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1,898 |
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1,461 |
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5,569 |
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3,395 |
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||||
Loss before income taxes |
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(36,667 |
) |
(9,611 |
) |
(99,198 |
) |
(107,426 |
) |
||||
Income tax provision |
|
188 |
|
351 |
|
637 |
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2,323 |
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||||
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||||
Net loss |
|
$ |
(36,855 |
) |
$ |
(9,962 |
) |
$ |
(99,835 |
) |
$ |
(109,749 |
) |
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||||
Loss per share: |
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|
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|
|
|
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||||
Basic and diluted |
|
$ |
(0.41 |
) |
$ |
(0.11 |
) |
$ |
(1.12 |
) |
$ |
(1.25 |
) |
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Average shares outstanding during period: |
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|
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|
|
|
|
|
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||||
Basic and diluted |
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88,885 |
|
88,178 |
|
88,761 |
|
87,991 |
|
The accompanying notes are an integral part of these financial statements.
3
PIER 1 IMPORTS, INC.
(in thousands except per share amounts)
(unaudited)
|
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November 29, |
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March 1, |
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December 1, |
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|||
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2008 |
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2008 |
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2007 |
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|||
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ASSETS |
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Current assets: |
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Cash and cash equivalents, including temporary investments of $105,897, $87,837 and $74,107, respectively |
|
$ |
117,438 |
|
$ |
93,433 |
|
$ |
82,652 |
|
Accounts receivable, net |
|
22,776 |
|
23,121 |
|
28,224 |
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|||
Inventories |
|
398,724 |
|
411,709 |
|
432,782 |
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|||
Income tax receivable |
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2,788 |
|
13,632 |
|
14,150 |
|
|||
Prepaid expenses and other current assets |
|
46,099 |
|
41,445 |
|
47,093 |
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|||
Total current assets |
|
587,825 |
|
583,340 |
|
604,901 |
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|||
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Office building and related assets |
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80,539 |
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81,698 |
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|||
Other properties, net of accumulated depreciation of $427,702, $408,609 and $406,447, respectively |
|
95,977 |
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114,952 |
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122,337 |
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Other noncurrent assets |
|
38,655 |
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43,073 |
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44,640 |
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|||
|
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$ |
722,457 |
|
$ |
821,904 |
|
$ |
853,576 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
98,372 |
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$ |
106,084 |
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$ |
138,871 |
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Gift cards and other deferred revenue |
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51,407 |
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63,101 |
|
63,051 |
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|||
Accrued income taxes payable |
|
5,123 |
|
5,000 |
|
3,200 |
|
|||
Other accrued liabilities |
|
113,445 |
|
101,817 |
|
112,295 |
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|||
Total current liabilities |
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268,347 |
|
276,002 |
|
317,417 |
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|||
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Long-term debt |
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184,000 |
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184,000 |
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184,000 |
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Other noncurrent liabilities |
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98,511 |
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94,158 |
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98,491 |
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|||
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Shareholders equity: |
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Common stock, $1.00 par, 500,000,000 shares authorized, 100,779,000 issued |
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100,779 |
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100,779 |
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100,779 |
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|||
Paid-in capital |
|
124,114 |
|
126,795 |
|
126,245 |
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|||
Retained earnings |
|
136,259 |
|
236,094 |
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222,356 |
|
|||
Cumulative other comprehensive (loss) income |
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(1,880 |
) |
373 |
|
2,343 |
|
|||
Less 11,661,000, 12,172,000 and 12,281,000 common shares in treasury, at cost, respectively |
|
(187,673 |
) |
(196,297 |
) |
(198,055 |
) |
|||
|
|
171,599 |
|
267,744 |
|
253,668 |
|
|||
Commitments and contingencies |
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|
|
|
|
|
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|||
|
|
$ |
722,457 |
|
$ |
821,904 |
|
$ |
853,576 |
|
The accompanying notes are an integral part of these financial statements.
4
PIER 1 IMPORTS, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Nine Months Ended |
|
||||
|
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November 29, |
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December 1, |
|
||
|
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2008 |
|
2007 |
|
||
Cash flow from operating activities: |
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|
|
|
|
||
Net loss |
|
$ |
(99,835 |
) |
$ |
(109,749 |
) |
Adjustments to reconcile to net cash used in operating activities: |
|
|
|
|
|
||
Depreciation and amortization |
|
32,783 |
|
41,248 |
|
||
(Gain) loss on disposal of fixed assets |
|
94 |
|
(1,130 |
) |
||
Loss on impairment of fixed assets and other long-lived assets |
|
4,606 |
|
4,164 |
|
||
Stock-based compensation expense |
|
4,215 |
|
4,416 |
|
||
Deferred compensation |
|
3,156 |
|
2,692 |
|
||
Lease termination expense |
|
4,557 |
|
10,991 |
|
||
Amortization of deferred gains |
|
(4,744 |
) |
(1,628 |
) |
||
Other |
|
(1,509 |
) |
1,022 |
|
||
Changes in cash from: |
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|
|
|
|
||
Inventories |
|
12,985 |
|
(72,719 |
) |
||
Accounts receivable, prepaid expenses and other current assets |
|
(11,732 |
) |
(16,919 |
) |
||
Income tax receivable |
|
13,847 |
|
25,467 |
|
||
Accounts payable and accrued expenses |
|
(28,748 |
) |
27,075 |
|
||
Accrued income taxes payable |
|
(931 |
) |
582 |
|
||
Defined benefit plan liabilities |
|
(89 |
) |
(6,282 |
) |
||
Other noncurrent assets |
|
1,224 |
|
406 |
|
||
Other noncurrent liabilities |
|
(770 |
) |
(2,195 |
) |
||
Net cash used in operating activities |
|
(70,891 |
) |
(92,559 |
) |
||
|
|
|
|
|
|
||
Cash flow from investing activities: |
|
|
|
|
|
||
Capital expenditures |
|
(11,326 |
) |
(5,557 |
) |
||
Proceeds from disposition of properties |
|
102,455 |
|
4,282 |
|
||
Proceeds from sale of restricted investments |
|
1,483 |
|
6,373 |
|
||
Purchase of restricted investments |
|
(944 |
) |
(589 |
) |
||
Collection of notes receivable |
|
1,500 |
|
1,500 |
|
||
Net cash provided by investing activities |
|
93,168 |
|
6,009 |
|
||
|
|
|
|
|
|
||
Cash flow from financing activities: |
|
|
|
|
|
||
Proceeds from stock options exercised, stock purchase plan and other, net |
|
1,728 |
|
3,022 |
|
||
Debt issuance costs |
|
|
|
(998 |
) |
||
Net cash provided by financing activities |
|
1,728 |
|
2,024 |
|
||
|
|
|
|
|
|
||
Change in cash and cash equivalents |
|
24,005 |
|
(84,526 |
) |
||
Cash and cash equivalents at beginning of period |
|
93,433 |
|
167,178 |
|
||
Cash and cash equivalents at end of period |
|
$ |
117,438 |
|
$ |
82,652 |
|
The accompanying notes are an integral part of these financial statements.
5
PIER 1 IMPORTS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
FOR THE NINE MONTHS ENDED NOVEMBER 29, 2008
(in thousands)
(unaudited)
|
|
|
|
|
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Cumulative |
|
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|
||||||
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Common Stock |
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Other |
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Total |
|
||||||||
|
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Outstanding |
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Paid-in |
|
Retained |
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Comprehensive |
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Treasury |
|
Shareholders |
|
||||||
|
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Stock |
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Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Stock |
|
Equity |
|
||||||
|
|
|
|
|
|
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|
|
|
|
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||||||
Balance March 1, 2008 |
|
88,607 |
|
$ |
100,779 |
|
$ |
126,795 |
|
$ |
236,094 |
|
$ |
373 |
|
$ |
(196,297 |
) |
$ |
267,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||||
Comprehensive loss: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||||
Net loss |
|
|
|
|
|
|
|
(99,835 |
) |
|
|
|
|
(99,835 |
) |
||||||
|
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|
|
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|
|
|
|
|
|
|
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|
||||||
Other comprehensive income (loss): |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pension adjustments |
|
|
|
|
|
|
|
|
|
1,101 |
|
|
|
1,101 |
|
||||||
|
|
|
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|
|
|
|
|
|
|
|
|
|
||||||
Currency translation adjustments |
|
|
|
|
|
|
|
|
|
(3,354 |
) |
|
|
(3,354 |
) |
||||||
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|
|
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|
||||||
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
(102,088 |
) |
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Restricted stock compensation |
|
283 |
|
|
|
(3,199 |
) |
|
|
|
|
4,563 |
|
1,364 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock option compensation expense |
|
|
|
|
|
2,851 |
|
|
|
|
|
|
|
2,851 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Exercise of stock options, stock purchase plan and other |
|
228 |
|
|
|
(2,333 |
) |
|
|
|
|
4,061 |
|
1,728 |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance November 29, 2008 |
|
89,118 |
|
$ |
100,779 |
|
$ |
124,114 |
|
$ |
136,259 |
|
$ |
(1,880 |
) |
$ |
(187,673 |
) |
$ |
171,599 |
|
The accompanying notes are an integral part of these financial statements.
6
PIER 1 IMPORTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED NOVEMBER 29, 2008
AND DECEMBER 1, 2007
(unaudited)
Throughout this report, references to the Company include Pier 1 Imports, Inc. and all its consolidated subsidiaries. The accompanying unaudited financial statements should be read in conjunction with the Form 10-K for the year ended March 1, 2008. All adjustments that are, in the opinion of management, necessary for a fair presentation of the financial position as of November 29, 2008, and the results of operations and cash flows for the three and nine months ended November 29, 2008 and December 1, 2007 have been made and consist only of normal recurring adjustments, except as otherwise described herein. The results of operations for the three and nine months ended November 29, 2008 and December 1, 2007, are not indicative of results to be expected for the fiscal year because of, among other things, seasonality factors in the retail business. Historically, the strongest sales of the Companys products have occurred during the holiday season beginning in November and continuing through December. The Company conducts business as one operating segment. The classification of certain amounts previously reported in the consolidated statements of cash flows for the nine months ended December 1, 2007, has been modified to conform to the November 29, 2008 method of presentation.
Note 1 Loss per share
Basic loss per share amounts were determined by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted loss per share amounts were similarly computed, but would have included the effect, if dilutive, of the Companys weighted average number of stock options outstanding and shares of unvested restricted stock. As the effect would have been antidilutive, all 12,933,535 and 13,724,660 stock options outstanding and shares of unvested restricted stock were excluded from the computation of the third quarter and year-to-date loss per share for fiscal 2009 and fiscal 2008, respectively. Loss per share for the three and nine months ended November 29, 2008 and December 1, 2007 was calculated as follows (in thousands except per share amounts):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
November 29, |
|
December 1, |
|
November 29, |
|
December 1, |
|
||||
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net loss, basic and diluted |
|
$ |
(36,855 |
) |
$ |
(9,962 |
) |
$ |
(99,835 |
) |
$ |
(109,749 |
) |
|
|
|
|
|
|
|
|
|
|
||||
Average shares outstanding: |
|
|
|
|
|
|
|
|
|
||||
Basic and diluted |
|
88,885 |
|
88,178 |
|
88,761 |
|
87,991 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share: |
|
|
|
|
|
|
|
|
|
||||
Basic and diluted |
|
$ |
(0.41 |
) |
$ |
(0.11 |
) |
$ |
(1.12 |
) |
$ |
(1.25 |
) |
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 2 Comprehensive loss
The components of comprehensive loss for the three and nine months ended November 29, 2008 and December 1, 2007 were as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
November 29, |
|
December 1, |
|
November 29, |
|
December 1, |
|
||||
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net loss |
|
$ |
(36,855 |
) |
$ |
(9,962 |
) |
$ |
(99,835 |
) |
$ |
(109,749 |
) |
Currency translation adjustments |
|
(2,223 |
) |
202 |
|
(3,354 |
) |
806 |
|
||||
Pension adjustments |
|
335 |
|
(871 |
) |
1,101 |
|
(871 |
) |
||||
|
|
|
|
|
|
|
|
|
|
||||
Total comprehensive loss |
|
$ |
(38,743 |
) |
$ |
(10,631 |
) |
$ |
(102,088 |
) |
$ |
(109,814 |
) |
Note 3 Stock-based compensation
The Company accounts for share-based compensation transactions in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R requires all companies to measure and recognize compensation expense at an amount equal to the fair value of share-based payments granted under compensation arrangements. The fair values for options granted during the respective periods were estimated as of the date of grant using the Black-Scholes option-pricing model and are amortized on a straight-line basis as compensation expense over the vesting periods of the options. For the three and nine months ended November 29, 2008, the Company recorded stock-based compensation expense (benefit) related to stock options and restricted stock of ($287,000), or less than ($0.01) per share, and $4,215,000, or $0.05 per share, respectively. For the three and nine months ended December 1, 2007, the Company recorded stock-based compensation expense related to stock options and restricted stock of $1,235,000, or $0.01 per share, and $4,416,000, or $0.05 per share, respectively. During the third quarter of fiscal 2009, the Company reversed $1,420,000 in stock-based compensation expense related to a performance stock option grant, which was no longer considered probable to vest. The Company recognized no net tax benefit related to stock-based compensation during the first nine months of fiscal 2009 or fiscal 2008 as a result of the Companys valuation allowance on all deferred tax assets in both years.
During the third quarter of fiscal 2009, the Company granted 30,000 stock options with an exercise price of $4.24 and a grant date fair value of $2.27 per share. As of November 29, 2008, there was approximately $3,345,000 of total unrecognized compensation expense related to unvested stock option awards that is expected to be recognized over a weighted average period of 2.24 years and $3,274,000 of total unrecognized compensation expense related to restricted stock that is expected to be recognized over a weighted average period of 1.96 years. The above amounts of unrecognized compensation expense do not include performance-based grants of stock options and restricted stock which are not expected to vest.
Note 4 Costs associated with exit activities
As part of the ordinary course of business, the Company terminates leases prior to their expiration when certain stores or distribution center facilities are closed or relocated as deemed necessary by the evaluation of its real estate portfolio. These decisions are based on store profitability, lease renewal obligations, relocation space availability, local market conditions and prospects for future profitability. In connection with these lease terminations, the Company has recorded estimated liabilities in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. At the time of closure, neither the write-off
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
of fixed assets nor the write-down of inventory related to such stores was material. Additionally, employee severance costs associated with these closures were not significant. The estimated liabilities were recorded based upon the Companys remaining lease obligations less estimated subtenant rental income. Revisions during the periods presented related to changes in estimated buyout terms or subtenant receipts expected on closed facilities. Expenses related to lease termination obligations are included in selling, general and administrative expenses in the Companys consolidated statements of operations. The following table represents a rollforward of the liability balances for the nine months ended November 29, 2008 and December 1, 2007 related to these closures (in thousands):
|
|
Nine Months Ended |
|
||||
|
|
November 29, |
|
December 1, |
|
||
|
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
||
Beginning of period |
|
$ |
5,628 |
|
$ |
2,436 |
|
|
|
|
|
|
|
||
Original charges |
|
3,839 |
|
11,442 |
|
||
Revisions |
|
718 |
|
(451 |
) |
||
Cash payments |
|
(4,192 |
) |
(4,595 |
) |
||
|
|
|
|
|
|
||
End of period |
|
$ |
5,993 |
|
$ |
8,832 |
|
Included in the table above are lease termination costs related to the closure of all of the Companys clearance and Pier 1 Kids stores and the direct to consumer channel during fiscal 2008. Revisions of the lease termination costs associated with these closures were $391,000 and $642,000, or less than $0.01 per share for each period, during the three and nine months ended November 29, 2008, respectively. Cash outflows related to these lease terminations were $2,129,000 for fiscal 2009 year-to-date.
Note 5 Asset impairment
The Company recorded impairment charges of $4,606,000, or $0.05 per share, during the third quarter and first nine months of fiscal 2009. The Company did not record any impairment charges during the third quarter of fiscal 2008, but recorded $4,164,000, or $0.05 per share, for the first nine months of fiscal 2008. These impairment charges related to long-lived assets and intangible assets at underperforming stores and were based on future cash flow projections for those stores. These cash flows were estimated based on managements estimate of future sales, merchandise margins, and expenses over the remaining expected terms of the leases. Estimates used in the third quarter were updated from those used in prior periods to incorporate actual results experienced during the quarter. In the event that actual future results are worse than managements current estimates, additional charges for asset impairments may be recorded and such charges could have a significant impact on the Companys balance sheet and statement of operations. These impairment charges were included in selling, general and administrative expenses.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6 Long-term debt and available credit
Long-term debt is summarized as follows at November 29, 2008 and December 1, 2007 (in thousands):
|
|
November 29, |
|
December 1, |
|
||
|
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
||
Industrial revenue bonds |
|
$ |
19,000 |
|
$ |
19,000 |
|
6.375% convertible senior notes |
|
165,000 |
|
165,000 |
|
||
|
|
184,000 |
|
184,000 |
|
||
Less - portion due within one year |
|
|
|
|
|
||
|
|
|
|
|
|
||
Long-term debt |
|
$ |
184,000 |
|
$ |
184,000 |
|
The Company has $19,000,000 in industrial revenue bond loan agreements, which have been outstanding since 1987. Proceeds were used to construct warehouse/distribution facilities. The loan agreements and related tax-exempt bonds mature in the year 2026. The Companys interest rates on the loans are based on the bond interest rates, which are market driven, reset weekly and are similar to other tax-exempt municipal debt issues.
In February 2006, the Company issued $165,000,000 of 6.375% convertible senior notes due 2036 (the Notes) in a private placement, and subsequently registered the Notes with the Securities and Exchange Commission in June 2006. The Notes are governed by an Indenture dated February 14, 2006 (the Indenture). The Notes bear interest at a rate of 6.375% per year until February 15, 2011 and at a rate of 6.125% per year thereafter. Interest is payable semiannually in arrears on February 15 and August 15 of each year, and commenced August 15, 2006. The Notes are convertible into cash and, if applicable, shares of the Companys common stock based on an initial conversion rate, subject to adjustments, of 65.8328 shares per $1,000 principal amount of Notes (which represents an initial conversion price of approximately $15.19 per share representing a 40% conversion premium at issuance). Holders of the Notes may convert their Notes only under the following circumstances: (1) during any fiscal quarter (and only during such fiscal quarter) commencing after May 27, 2006, if the last reported sale price of the Companys common stock for at least 20 trading days during the period of 30 consecutive trading days ending on the last trading day of the preceding fiscal quarter is greater than or equal to 130% of the applicable conversion price on such last trading day; (2) if the Company has called the Notes for redemption; or (3) upon the occurrence of specified corporate transactions. In general, upon conversion of a Note, a holder will receive cash equal to the lesser of the principal amount of the Note or the conversion value of the Note, plus common stock of the Company for any conversion value in excess of the principal amount. The Company may redeem the Notes at its option on or after February 15, 2011 for cash at 100% of the principal amount.
The holders of the Notes can, at their option, require the Company to purchase all or a portion of their Notes at a repurchase price in cash equal to 100% of the principal amount of the repurchased Notes at February 15, 2011, February 15, 2016, February 15, 2021, February 15, 2026 and February 15, 2031, or if a fundamental change occurs. Fundamental change is defined in the Indenture and will be deemed to have occurred upon (1) certain changes in beneficial ownership of the Companys common equity as described in the Indenture, (2) certain share exchanges, consolidations, mergers, or asset transactions as described in the Indenture, (3) Continuing Directors as defined in the Indenture ceasing to constitute at least a majority of the Companys board of directors, (4) the Companys stockholders approving any plan or proposal for the Companys liquidation or dissolution, or (5) the Companys common stock ceasing to be listed on a national securities exchange or quoted on the Nasdaq National Market or another established automated over-the-counter trading market in the United States.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company has a $325,000,000 secured credit facility, which matures in May 2012 and is secured by the Companys eligible merchandise inventory, and third-party credit card receivables. As of November 29, 2008, the Company had no outstanding cash borrowings and had utilized $93,000,000 in letters of credit and bankers acceptances. Should the availability under this facility be less than $32,500,000, the Company will be required to comply with certain financial covenants as stated in the agreement. The Company does not anticipate falling below this minimum availability in the foreseeable future. As of November 29, 2008, the Companys calculated borrowing base was $275,100,000. After excluding the required minimum $32,500,000 and the $93,000,000 in utilized letters of credit and bankers acceptances from the borrowing base, $149,600,000 remained available for cash borrowings. The Company was in compliance with required debt covenants stated in the agreement at the end of the third quarter of fiscal 2009.
Note 7 Condensed financial statements
The Companys 6.375% convertible senior notes (the Notes) are fully and unconditionally guaranteed, on a joint and several basis, by all of the Companys material domestic consolidated subsidiaries (the Guarantor Subsidiaries). The subsidiaries that do not guarantee such Notes are comprised of the Companys foreign subsidiaries and certain other insignificant domestic consolidated subsidiaries (the Non-Guarantor Subsidiaries). Each of the Guarantor Subsidiaries is wholly owned. In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, condensed consolidating financial information is presented below.
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Three Months Ended November 29, 2008
(in thousands)
(unaudited)
|
|
Pier 1
|
|
Guarantor
|
|
Non-
|
|
Eliminations |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net sales |
|
$ |
|
|
$ |
298,856 |
|
$ |
3,790 |
|
$ |
(1,740 |
) |
$ |
300,906 |
|
Cost of sales (including buying and store occupancy costs) |
|
|
|
211,351 |
|
3,425 |
|
(1,761 |
) |
213,015 |
|
|||||
Selling, general and administrative (including depreciation and amortization) |
|
489 |
|
122,107 |
|
64 |
|
|
|
122,660 |
|
|||||
Operating income (loss) |
|
(489 |
) |
(34,602 |
) |
301 |
|
21 |
|
(34,769 |
) |
|||||
Nonoperating (income) expenses |
|
(96 |
) |
2,153 |
|
(159 |
) |
|
|
1,898 |
|
|||||
Income (loss) before income taxes |
|
(393 |
) |
(36,755 |
) |
460 |
|
21 |
|
(36,667 |
) |
|||||
Provision for income taxes |
|
|
|
188 |
|
|
|
|
|
188 |
|
|||||
Net income (loss) after income taxes |
|
(393 |
) |
(36,943 |
) |
460 |
|
21 |
|
(36,855 |
) |
|||||
Net income (loss) from subsidiaries |
|
(36,483 |
) |
460 |
|
|
|
36,023 |
|
|
|
|||||
Net income (loss) |
|
$ |
(36,876 |
) |
$ |
(36,483 |
) |
$ |
460 |
|
$ |
36,044 |
|
$ |
(36,855 |
) |
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Three Months Ended December 1, 2007
(in thousands)
(unaudited)
|
|
Pier 1
|
|
Guarantor
|
|
Non-
|
|
Eliminations |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net sales |
|
$ |
|
|
$ |
372,020 |
|
$ |
11,760 |
|
$ |
(9,599 |
) |
$ |
374,181 |
|
Cost of sales (including buying and store occupancy costs) |
|
|
|
246,857 |
|
11,002 |
|
(9,573 |
) |
248,286 |
|
|||||
Selling, general and administrative (including depreciation and amortization) |
|
419 |
|
133,592 |
|
34 |
|
|
|
134,045 |
|
|||||
Operating income (loss) |
|
(419 |
) |
(8,429 |
) |
724 |
|
(26 |
) |
(8,150 |
) |
|||||
Nonoperating (income) expenses |
|
298 |
|
1,319 |
|
(156 |
) |
|
|
1,461 |
|
|||||
Income (loss) before income taxes |
|
(717 |
) |
(9,748 |
) |
880 |
|
(26 |
) |
(9,611 |
) |
|||||
Provision for income taxes |
|
|
|
351 |
|
|
|
|
|
351 |
|
|||||
Net income (loss) after income taxes |
|
(717 |
) |
(10,099 |
) |
880 |
|
(26 |
) |
(9,962 |
) |
|||||
Net income (loss) from subsidiaries |
|
(9,219 |
) |
880 |
|
|
|
8,339 |
|
|
|
|||||
Net income (loss) |
|
$ |
(9,936 |
) |
$ |
(9,219 |
) |
$ |
880 |
|
$ |
8,313 |
|
$ |
(9,962 |
) |
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Nine Months Ended November 29, 2008
(in thousands)
(unaudited)
|
|
Pier 1
|
|
Guarantor
|
|
Non-
|
|
Eliminations |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net sales |
|
$ |
|
|
$ |
925,124 |
|
$ |
11,641 |
|
$ |
(5,345 |
) |
$ |
931,420 |
|
Cost of sales (including buying and store occupancy costs) |
|
|
|
664,897 |
|
10,624 |
|
(5,733 |
) |
669,788 |
|
|||||
Selling, general and administrative (including depreciation and amortization) |
|
3,199 |
|
351,904 |
|
158 |
|
|
|
355,261 |
|
|||||
Operating income (loss) |
|
(3,199 |
) |
(91,677 |
) |
859 |
|
388 |
|
(93,629 |
) |
|||||
Nonoperating (income) expenses |
|
(1,285 |
) |
7,198 |
|
(344 |
) |
|
|
5,569 |
|
|||||
Income (loss) before income taxes |
|
(1,914 |
) |
(98,875 |
) |
1,203 |
|
388 |
|
(99,198 |
) |
|||||
Provision for income taxes |
|
|
|
627 |
|
10 |
|
|
|
637 |
|
|||||
Net income (loss) after income taxes |
|
(1,914 |
) |
(99,502 |
) |
1,193 |
|
388 |
|
(99,835 |
) |
|||||
Net income (loss) from subsidiaries |
|
(98,309 |
) |
1,193 |
|
|
|
97,116 |
|
|
|
|||||
Net income (loss) |
|
$ |
(100,223 |
) |
$ |
(98,309 |
) |
$ |
1,193 |
|
$ |
97,504 |
|
$ |
(99,835 |
) |
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Nine Months Ended December 1, 2007
(in thousands)
(unaudited)
|
|
Pier 1
|
|
Guarantor
|
|
Non-
|
|
Eliminations |
|
Total |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net sales |
|
$ |
|
|
$ |
1,070,012 |
|
$ |
29,828 |
|
$ |
(24,718 |
) |
$ |
1,075,122 |
|
Cost of sales (including buying and store occupancy costs) |
|
|
|
771,628 |
|
27,770 |
|
(24,873 |
) |
774,525 |
|
|||||
Selling, general and administrative (including depreciation and amortization) |
|
1,362 |
|
403,112 |
|
154 |
|
|
|
404,628 |
|
|||||
Operating income (loss) |
|
(1,362 |
) |
(104,728 |
) |
1,904 |
|
155 |
|
(104,031 |
) |
|||||
Nonoperating (income) expenses |
|
(1,355 |
) |
5,227 |
|
(477 |
) |
|
|
3,395 |
|
|||||
Income (loss) before income taxes |
|
(7 |
) |
(109,955 |
) |
2,381 |
|
155 |
|
(107,426 |
) |
|||||
Provision for income taxes |
|
|
|
2,117 |
|
206 |
|
|
|
2,323 |
|
|||||
Net income (loss) after income taxes |
|
(7 |
) |
(112,072 |
) |
2,175 |
|
155 |
|
(109,749 |
) |
|||||
Net income (loss) from subsidiaries |
|
(109,897 |
) |
2,175 |
|
|
|
107,722 |
|
|
|
|||||
Net income (loss) |
|
$ |
(109,904 |
) |
$ |
(109,897 |
) |
$ |
2,175 |
|
$ |
107,877 |
|
$ |
(109,749 |
) |
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING CONDENSED BALANCE SHEET
November 29, 2008
(in thousands)
(unaudited)
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING CONDENSED BALANCE SHEET
March 1, 2008
(in thousands)
(unaudited)
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING CONDENSED BALANCE SHEET
December 1, 2007
(in thousands)
(unaudited)
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Nine Months Ended November 29, 2008
(in thousands)
(unaudited)
|
|
Pier 1 |
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|||||
|
|
Imports, Inc. |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Total |
|
|||||
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
5,458 |
|
$ |
(76,708 |
) |
$ |
359 |
|
$ |
|
|
$ |
(70,891 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Capital expenditures |
|
|
|
(11,326 |
) |
|
|
|
|
(11,326 |
) |
|||||
Proceeds from disposition of properties |
|
|
|
102,455 |
|
|
|
|
|
102,455 |
|
|||||
Proceeds from sale of restricted investments |
|
|
|
1,483 |
|
|
|
|
|
1,483 |
|
|||||
Purchase of restricted investments |
|
|
|
(944 |
) |
|
|
|
|
(944 |
) |
|||||
Collections of note receivable |
|
|
|
1,500 |
|
|
|
|
|
1,500 |
|
|||||
Capitalization of subsidiary |
|
|
|
(250 |
) |
250 |
|
|
|
|
|
|||||
Net cash provided by investing activities |
|
|
|
92,918 |
|
250 |
|
|
|
93,168 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Proceeds from stock options exercised, stock purchase plan and other, net |
|
1,728 |
|
|
|
|
|
|
|
1,728 |
|
|||||
Advances (to) from subsidiaries |
|
(17,135 |
) |
8,770 |
|
8,365 |
|
|
|
|
|
|||||
Net cash (used in) provided by financing activities |
|
(15,407 |
) |
8,770 |
|
8,365 |
|
|
|
1,728 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Change in cash and cash equivalents |
|
(9,949 |
) |
24,980 |
|
8,974 |
|
|
|
24,005 |
|
|||||
Cash and cash equivalents at beginning of period |
|
53,030 |
|
26,824 |
|
13,579 |
|
|
|
93,433 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
43,081 |
|
$ |
51,804 |
|
$ |
22,553 |
|
$ |
|
|
$ |
117,438 |
|
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Nine Months Ended December 1, 2007
(in thousands)
(unaudited)
|
|
Pier 1 |
|
Guarantor |
|
Non-Guarantor |
|
|
|
|
|
|||||
|
|
Imports, Inc. |
|
Subsidiaries |
|
Subsidiaries |
|
Eliminations |
|
Total |
|
|||||
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
|
$ |
7,844 |
|
$ |
(103,899 |
) |
$ |
3,496 |
|
$ |
|
|
$ |
(92,559 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Capital expenditures |
|
|
|
(5,557 |
) |
|
|
|
|
(5,557 |
) |
|||||
Proceeds from disposition of properties |
|
|
|
4,282 |
|
|
|
|
|
4,282 |
|
|||||
Proceeds from sale of restricted investments |
|
|
|
6,373 |
|
|
|
|
|
6,373 |
|
|||||
Purchase of restricted investments |
|
|
|
(589 |
) |
|
|
|
|
(589 |
) |
|||||
Collections of note receivable |
|
|
|
1,500 |
|
|
|
|
|
1,500 |
|
|||||
Net cash provided by investing activities |
|
|
|
6,009 |
|
|
|
|
|
6,009 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|||||
Proceeds from stock options exercised, stock purchase plan and other, net |
|
3,022 |
|
|
|
|
|
|
|
3,022 |
|
|||||
Debt issuance costs |
|
|
|
(998 |
) |
|
|
|
|
(998 |
) |
|||||
Advances (to) from subsidiaries |
|
(105,927 |
) |
109,548 |
|
(3,621 |
) |
|
|
|
|
|||||
Net cash (used in) provided by financing activities |
|
(102,905 |
) |
108,550 |
|
(3,621 |
) |
|
|
2,024 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Change in cash and cash equivalents |
|
(95,061 |
) |
10,660 |
|
(125 |
) |
|
|
(84,526 |
) |
|||||
Cash and cash equivalents at beginning of period |
|
111,163 |
|
43,699 |
|
12,316 |
|
|
|
167,178 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents at end of period |
|
$ |
16,102 |
|
$ |
54,359 |
|
$ |
12,191 |
|
$ |
|
|
$ |
82,652 |
|
Note 8 Defined benefit plans
The Company maintains supplemental retirement plans (the Plans) for certain of its executive officers. The Plans provide that upon death, disability, reaching retirement age, and certain termination events, a participant will receive benefits based on highest compensation, years of service and years of plan participation. Benefit costs are determined using actuarial cost methods to estimate the total benefits ultimately payable to executive officers and this cost is allocated to the respective service periods.
The Plans are not funded and thus have no plan assets. The actuarial assumptions used to calculate benefit costs are reviewed annually, or in the event of a material change in the Plans or participation in the Plans. The components of net periodic benefit costs for the three and nine months ended November 29, 2008 and December 1, 2007 were as follows (in thousands):
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
November 29, |
|
December 1, |
|
November 29, |
|
December 1, |
|
||||
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||
Components of net periodic benefits cost: |
|
|
|
|
|
|
|
|
|
||||
Service cost |
|
$ |
261 |
|
$ |
175 |
|
$ |
630 |
|
$ |
255 |
|
Interest cost |
|
234 |
|
234 |
|
688 |
|
600 |
|
||||
Amortization of unrecognized prior |
|
|
|
|
|
|
|
|
|
||||
service costs |
|
138 |
|
121 |
|
413 |
|
199 |
|
||||
Amortization of net actuarial loss |
|
187 |
|
36 |
|
292 |
|
109 |
|
||||
Settlement charge |
|
|
|
|
|
|
|
1,065 |
|
||||
Curtailment charge |
|
|
|
145 |
|
368 |
|
145 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net periodic benefit cost |
|
$ |
820 |
|
$ |
711 |
|
$ |
2,391 |
|
$ |
2,373 |
|
Note 9 Income taxes
The Company continues to provide a valuation allowance against all deferred tax assets. As a result, the Company did not record a federal or state tax benefit on its operating loss for the three or nine months ended November 29, 2008. Minimal provisions for state and foreign income tax were made for the period.
Note 10 Sale of office building and related assets
Note 11 Reclassification
The Companys home office building and related assets were reclassified during the first quarter of fiscal 2009 to noncurrent assets from assets held for sale which were included in current assets at March 1, 2008. This reclassification on the balance sheet was made in all prior periods presented to reflect the fact that the Company entered into a lease for a portion of the building when the sale transaction was completed, and therefore the building did not meet the definition of assets held for sale at the balance sheet dates. Depreciation was recorded on the assets through the date of sale and the reclassification had no impact on the results of operations or statement of cash flows in any period presented. As stated in Note 10 of the Notes to Consolidated Financial Statements above, the office building and related assets were sold on June 9, 2008.
Note 12 Subsequent event
On December 15, 2008, the Company received notice from NYSE Regulation, Inc. (NYSE Regulation) that the Company was not in compliance with the New York Stock Exchange (NYSE) continued listing standard under Section 802.01C of the NYSE Listed Company Manual due to the fact that the average closing share price of the Companys common stock over a consecutive 30-day trading period was less than $1.00 per share.
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company notified NYSE Regulation within the required ten business days that it intends to cure the deficiency and that its Board of Directors has met and is considering all strategic measures to cure the non-compliance with the listing standard. Under the NYSE rules, the Company has six months from December 15, 2008 to achieve compliance with the mentioned continued listing standard, subject to on-going reassessment. The Companys stock remains listed on the NYSE.
Note 13 - New accounting pronouncements
In May 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which clarifies that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants . Additionally, this FSP specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entitys nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This FSP will be applied retrospectively to all periods presented. FSP APB 14-1 is effective for the Company at the beginning of fiscal year 2010. The Company is currently evaluating the impact of the adoption on its financial statements.
20
PART I
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of financial condition, results of operations, and liquidity and capital resources should be read in conjunction with the Companys consolidated financial statements as of March 1, 2008, and for the year then ended, and related Notes and Managements Discussion and Analysis of Financial Condition and Results of Operations, all contained in the Companys Annual Report on Form 10-K for the year ended March 1, 2008.
Management Overview
Pier 1 Imports, Inc. (together with its consolidated subsidiaries, the Company) is a global importer and is one of North Americas largest specialty retailers of imported decorative home furnishings and gifts. The Company directly imports merchandise from over 50 countries, and sells a wide variety of decorative accessories, furniture collections, wicker, bed and bath products, candles, housewares and other seasonal assortments in its stores. The Company conducts business as one operating segment and operates stores in the United States and Canada under the name Pier 1 Imports. As of November 29, 2008, the Company operated 1,108 stores in the United States and Canada.
Since August 2008, the economy has continued to deteriorate as a result of the disruption in the credit and financial markets which has created an environment of uncertainty for consumers. During times of economic turmoil, consumers tend to sacrifice purchases of discretionary items, including the Companys products, which has adversely affected the Companys sales and financial condition. The difficult economic situation in the United States and other countries is not expected to end in the near future and consumer confidence and spending will most likely remain depressed and possibly deteriorate even further.
The Companys financial performance from a sales and income perspective during the third quarter was disappointing. In the current environment, the Company must focus on retail metrics such as customer traffic, conversion, merchandise margin rates, and units per transaction to determine the progress the Company is making in re-connecting with its customers.
The results of operations for the three and nine months ended November 29, 2008 and December 1, 2007 are not indicative of results to be expected for the fiscal year because of, among other things, seasonality factors in the retail business. Historically, the strongest sales of the Companys products have occurred during the holiday season beginning in November and continuing through December. Comparable store sales for December of fiscal 2009 declined by approximately 10% from the same month last year. Excluding the effect of currency conversion rates on the Companys Canadian stores, comparable store sales would have been an estimated 150 basis points more favorable during December. Comparable store sales for the Companys stores in the United States declined approximately 8%.
Despite the slowdown in the economy, the Company anticipates that it will be able to maintain merchandise margins. The Company believes that it can reduce costs in the supply chain as a result of declining fuel costs and increased ocean freight carriers capacity. Another opportunity for the Company is in its real estate costs, and the Company will be negotiating with landlords to continue to achieve reductions in rental rates on its stores.
Management believes the Company has sufficient liquidity to withstand the economic downturn, but knows that it must be cautious in the short term. While the recession has slowed the Companys turnaround speed and increased its timeline, the Companys overall strategy remains the same. Until management sees signs of an upturn, however, it will buy carefully, manage inventories, and make the Companys product more compelling through increased use of promotional activity without impairing the Pier 1 Imports brand position. In addition, the Company will continue to focus on its ongoing mission to maximize its revenues, while continuing to seek out ways to reduce its cost base and preserve its liquidity.
21
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
Results of Operations
Management reviews a number of key performance indicators to evaluate the Companys financial performance. The following table summarizes those key performance indicators for the three and nine months ended November 29, 2008 and December 1, 2007:
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||
|
|
November 29, |
|
December 1, |
|
November 29, |
|
December 1, |
|
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
Key Performance Indicators |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales decline |
|
(19.6 |
)% |
(7.1 |
)% |
(13.4 |
)% |
(6.5 |
)% |
Comparable stores sales decline |
|
(17.8 |
)% |
(1.7 |
)% |
(8.9 |
)% |
(3.5 |
)% |
Merchandise margins as a % of sales |
|
52.5 |
% |
53.0 |
% |
51.0 |
% |
48.6 |
% |
Gross profit as a % of sales |
|
29.2 |
% |
33.6 |
% |
28.1 |
% |
28.0 |
% |
Selling, general and administrative expenses as a % of sales |
|
38.3 |
% |
33.1 |
% |
35.6 |
% |
34.7 |
% |
Operating loss as a % of sales |
|
(11.6 |
)% |
(2.2 |
)% |
(10.1 |
)% |
(9.7 |
)% |
Net loss as a % of sales |
|
(12.2 |
)% |
(2.7 |
)% |
(10.7 |
)% |
(10.2 |
)% |
|
|
For the period ended |
|
|
|
|
|
||||
|
|
November 29, |
|
December 1, |
|
|
|
|
|
||
|
|
2008 |
|
2007 |
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
||
Sales per average retail square foot (1) |
|
$ |
154 |
|
$ |
166 |
|
|
|
|
|
Inventory per retail square foot |
|
$ |
46 |
|
$ |
49 |
|
|
|
|
|
Total retail square footage (in thousands) |
|
8,705 |
|
8,866 |
|
|
|
|
|
||
Total retail square footage decline |
|
|
|
|
|
|
|
|
|
||
from the same period last year |
|
(1.8 |
)% |
(5.7 |
)% |
|
|
|
|
(1) Calculated using a rolling 12-month total of store sales over a 13-month retail square footage weighted average.
Net Sales Net sales consisted almost entirely of sales to retail customers, net of discounts and returns, but also included delivery service revenues and wholesale sales and royalties. Sales by retail concept during the period were as follows (in thousands):
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
November 29, |
|
December 1, |
|
November 29, |
|
December 1, |
|
||||
|
|
2008 |
|
2007 |
|
2008 |
|
2007 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Stores |
|
$ |
298,067 |
|
$ |
371,211 |
|
$ |
921,703 |
|
$ |
1,051,993 |
|
Direct to consumer |
|
|
|
|
|
|
|
8,367 |
|
||||
Other (1) |
|
2,839 |
|
2,970 |
|
9,717 |
|
14,762 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Net sales |
|
$ |
300,906 |
|
$ |
374,181 |
|
$ |
931,420 |
|
$ |
1,075,122 |
|
(1) Other sales consisted primarily of wholesale sales and royalties received from franchise stores, Grupo Sanborns, S.A. de C.V., and other third parties.
22
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
Net sales for the third quarter of fiscal 2009 were $300.9 million, down 19.6% or $73.3 million from last years third quarter net sales of $374.2 million. Net sales declined $143.7 million or 13.4% from $1,075.1 million to $931.4 million during the nine-month period ended November 29, 2008 when compared to the same period last year. Comparable store sales for the quarter and year-to-date periods declined 17.8% and 8.9%, respectively. The decrease in comparable store sales was due to a slowdown in consumer spending, resulting in a decline in customer traffic and a decrease in average ticket partly offset by increases in conversion rates and units per transaction during the quarter. In addition, the Companys net sales from Canadian stores were impacted by the fluctuation in currency conversion rates which had an unfavorable impact of 120 basis points on comparable store sales calculation during the third quarter of fiscal 2009 and an insignificant impact on the year-to-date calculation. Sales for the nine-month period were comprised of the following incremental components (in thousands):
|
|
Net Sales |
|
|
|
|
|
|
|
Net sales for the nine months ended December 1, 2007 |
|
$ |
1,075,122 |
|
|
|
|
|
|
Incremental sales growth (decline) from: |
|
|
|
|
Stores opened during fiscal 2008 |
|
2,634 |
|
|
Comparable stores |
|
(89,649 |
) |
|
Closed stores and other |
|
(56,687 |
) |
|
|
|
|
|
|
Net sales for the nine months ended November 29, 2008 |
|
$ |
931,420 |
|
The decline in total sales was the result of the slowdown in consumer spending as discussed above. Additionally, sales were negatively affected by a net decrease of 20 stores compared to the same period in the prior year. Total store count as of November 29, 2008 was 1,108, compared to 1,128 stores a year ago.
A summary reconciliation of the Companys stores open at the beginning of fiscal 2009 to the number open at the end of the third quarter follows (openings and closings include relocated stores):
|
|
United States |
|
Canada |
|
Total |
|
|
|
|
|
|
|
|
|
Open at March 1, 2008 |
|
1,034 |
|
83 |
|
1,117 |
|
Openings |
|
1 |
|
|
|
1 |
|
Closings |
|
(9 |
) |
(1 |
) |
(10 |
) |
Open at November 29, 2008 (1) |
|
1,026 |
|
82 |
|
1,108 |
|
|
|
|
|
|
|
|
|
(1) The Company supplies merchandise and licenses the Pier 1 name to Grupo Sanborns, S.A. de C.V. and Sears Roebuck de Puerto Rico, Inc. which sell Pier 1 Imports merchandise primarily in a store within a store format. At November 29, 2008, there were 34 and seven locations in Mexico and Puerto Rico, respectively.
Gross Profit Gross profit after related buying and store occupancy costs, expressed as a percentage of sales, decreased 440 basis points to 29.2% for the third quarter of fiscal 2009, and increased 10 basis points to 28.1% for the first nine months of fiscal 2009. The decrease in gross profit as a percentage of sales for the third quarter of fiscal 2009 was primarily the result of the increase associated with the Companys store occupancy costs as a percentage of sales. As a percentage of sales, merchandise margins decreased 50 basis points for the third quarter and increased 240 basis points for the nine-month period ended November 29, 2008, from the comparable periods a year ago. Merchandise margins during the quarter remained strong despite lower than anticipated sales, and the Company will continue to focus on managing inventory levels.
Store occupancy costs for the quarter were $70.1 million, a $2.3 million decrease compared to last years third quarter store occupancy expense of $72.4 million. Year-to-date, store occupancy costs were $213.5 million, a decrease of $8.5 million compared to the same period last year.
23
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
Operating Expenses, Depreciation, Interest and Income Taxes Selling, general and administrative expenses for the third quarter of fiscal 2009 were $115.3 million, or 38.3% of sales, a decrease of $8.4 million from the same quarter last year. Year-to-date selling, general and administrative expenses were $331.8 million, or 35.6% of sales, a decrease of $41.5 million. Selling, general and administrative expenses for the quarter and year-to-date periods included the following charges summarized in the tables below (in thousands):
|
|
November 29, 2008 |
|
December 1, 2007 |
|
Increase / |
|
|||||||
Quarter |
|
Expense |
|
% of Sales |
|
Expense |
|
% of Sales |
|
(Decrease) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Store payroll |
|
$ |
55,249 |
|
18.4 |
% |
$ |
58,886 |
|
15.7 |
% |
$ |
(3,637 |
) |
Marketing |
|
19,834 |
|
6.6 |
% |
16,922 |
|
4.5 |
% |
2,912 |
|
|||
Store supplies, services and other |
|
8,372 |
|
2.8 |
% |
9,429 |
|
2.5 |
% |
(1,057 |
) |
|||
Variable costs |
|
83,455 |
|
27.7 |
% |
85,237 |
|
22.8 |
% |
(1,782 |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Administrative payroll (excluding severance) |
|
12,349 |
|
4.1 |
% |
19,482 |
|
5.2 |
% |
(7,133 |
) |
|||
Lease termination costs and impairments |
|
6,185 |
|
2.1 |
% |
6,171 |
|
1.6 |
% |
14 |
|
|||
Severance and other |
|
552 |
|
0.2 |
% |
310 |
|
0.1 |
% |
242 |
|
|||
Other relatively fixed expenses |
|
12,798 |
|
4.3 |
% |
12,498 |
|
3.3 |
% |
300 |
|
|||
|
|
31,884 |
|
10.6 |
% |
38,461 |
|
10.3 |
% |
(6,577 |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
115,339 |
|
38.3 |
% |
$ |
123,698 |
|
33.1 |
% |
$ |
(8,359 |
) |
|
|
November 29, 2008 |
|
December 1, 2007 |
|
Increase / |
|
|||||||
Year-to-Date |
|
Expense |
|
% of Sales |
|
Expense |
|
% of Sales |
|
(Decrease) |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Store payroll |
|
$ |
161,413 |
|
17.3 |
% |
$ |
170,708 |
|
15.9 |
% |
$ |
(9,295 |
) |
Marketing |
|
42,276 |
|
4.5 |
% |
51,509 |
|
4.8 |
% |
(9,233 |
) |
|||
Store supplies, services and other |
|
23,847 |
|
2.6 |
% |
28,595 |
|
2.7 |
% |
(4,748 |
) |
|||
Variable costs |
|
227,536 |
|
24.4 |
% |
250,812 |
|
23.3 |
% |
(23,276 |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
Administrative payroll (excluding severance) |
|
52,407 |
|
5.6 |
% |
61,422 |
|
5.7 |
% |
(9,015 |
) |
|||
Lease termination costs and impairments |
|
9,163 |
|
1.0 |
% |
15,155 |
|
1.4 |
% |
(5,992 |
) |
|||
Severance and other |
|
3,691 |
|
0.4 |
% |
5,420 |
|
0.5 |
% |
(1,729 |
) |
|||
Acquisition costs |
|
1,660 |
|
0.2 |
% |
|
|
0.0 |
% |
1,660 |
|
|||
(Gain) loss on sale of fixed assets |
|
94 |
|
0.0 |
% |
(1,130 |
) |
(0.1 |
)% |
1,224 |
|
|||
Other relatively fixed expenses |
|
37,199 |
|
4.0 |
% |
41,600 |
|
3.9 |
% |
(4,401 |
) |
|||
|
|
104,214 |
|
11.2 |
% |
122,467 |
|
11.4 |
% |
(18,253 |
) |
|||
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
$ |
331,750 |
|
35.6 |
% |
$ |
373,279 |
|
34.7 |
% |
$ |
(41,529 |
) |
Expenses that fluctuate proportionately to some degree with sales and number of stores, such as store payroll, marketing, store supplies and other related expenses, decreased $1.8 million from the same quarter last year and $23.3 million year-to-date. Store payroll dollars decreased $3.6 million for the quarter and $9.3 million year-to-date primarily as a result of a decrease in total number of stores as well as a planned reduction in store staffing levels. Marketing expenditures increased $2.9 million for the quarter, primarily as a result of the re-introduction of a national cable television campaign that began on November 17 th of this year compared to a complete phase out of national television advertising after the second quarter last year. Marketing expenditures decreased $9.2 million year-to-date as a result of an absence of television
24
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
advertising for most of fiscal 2009, as well as a shift in marketing expenditures to the last part of fiscal 2009, when marketing dollars will have the most impact during the holiday selling season. The Company anticipates total marketing expenditures for fiscal 2009 to be approximately 4.5% of sales. Other variable expenses, primarily supplies and equipment rental, decreased $1.1 million for the quarter and $4.7 million for the year-to-date period.
Relatively fixed selling, general and administrative expenses decreased $6.6 million from the same quarter last year. Administrative payroll decreased $7.1 million for the quarter when compared to the same period in the prior year, primarily as a result of decreases in stock option expense and home office management bonus, including a third quarter reversal of $4.7 million relating to a performance stock option grant and management bonus previously accrued in the first half of the current year. For the year-to-date period, relatively fixed selling, general and administrative expenses decreased $18.3 million from the same period last year. Administrative payroll decreased $9.0 million when compared to the same period last year, primarily for the same reasons discussed for the third quarter above. Lease termination costs and impairments were $6.0 million less than the same period last year. Severance, outplacement and other costs decreased $1.7 million, primarily as a result of expenses incurred in the prior year related to reductions in work force without a comparable reduction in the current year. Other relatively fixed expenses decreased $4.4 million and resulted primarily from the Companys continued initiative to manage and control expenses. These decreases were partially offset by $1.7 million in expenses related to the Companys withdrawn proposal to acquire all of the outstanding common stock shares of Cost Plus, Inc. and a $1.2 million decrease in gains recorded on the sale of fixed assets.
Depreciation and amortization expense for the third quarter and year-to-date periods was $7.3 million and $23.5 million, respectively, compared to $10.3 million and $31.3 million for the same periods last year. The decreases were primarily the result of the sale of the home office building and related assets during the second quarter of fiscal 2009, the impairment of certain store assets, certain assets becoming fully depreciated, reduced capital spending in recent years, and store closures.
The operating loss for the quarter was $34.8 million compared to $8.2 million for last years third quarter. For the first nine months of fiscal 2009, operating losses totaled $93.6 million compared to $104.0 million for the same period last year.
Net nonoperating expense increased $2.2 million for the nine months ended November 29, 2008 primarily as a result of a decrease in interest and investment income because of a decline in average interest rates during fiscal 2009.
The Company continues to provide a valuation allowance against all deferred tax assets. As a result, the Company did not record a federal tax benefit on its operating loss for the first nine months of fiscal 2009. Minimal provisions for state and foreign income tax were made for the period. As of November 29, 2008, the Company had tax loss carryforwards of greater than $200.0 million. These loss carryforwards, with expirations beginning in fiscal year 2027, can be utilized to offset future income for United States federal income tax purposes.
Inventory Inventory levels at the end of the third quarter of fiscal 2009 were $398.7 million, down $13.0 million, or 3.2%, from inventory levels at the end of fiscal 2008. At the end of the third quarter of fiscal 2009, inventory per retail square foot was $46 compared to $49 at the end of the third quarter of fiscal 2008 and
25
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
$47 at fiscal 2008 year end. Inventory levels decreased $34.1 million, or 7.9%, from the third quarter of fiscal 2008. The decrease from both fiscal 2008 year end and the third quarter of fiscal 2008 was due in part to a planned decline in inventory levels at the distribution centers as the Company continued to shift inventory to the stores, which allowed the Company to exit approximately 350,000 square feet of outside distribution center space during the second quarter of fiscal 2009. Current inventory levels are in line with the Companys plan for the fiscal year. The Company expects to end the fiscal year with inventory levels of approximately $350 million, or approximately $40 per retail square foot, compared to $412 million at fiscal 2008 year end.
The Company ended the third quarter of fiscal 2009 with $117.4 million in cash and temporary investments compared to $82.7 million a year ago. Operating activities in the first nine months of fiscal 2009 used $70.9 million of cash, primarily the result of the Companys net loss for the first nine months of fiscal 2009, a reduction in accounts payable and accrued expenses and an increase in accounts receivable, prepaid expenses and other current assets. These operating outflows were partially offset by a reduction in inventory and the collection of a federal income tax refund, including related interest.
During the first nine months of fiscal 2009, investing activities provided $93.2 million compared to $6.0 million during the same period last year. During the second quarter of fiscal 2009, the Company sold its corporate headquarters building and accompanying land to Chesapeake Plaza, L.L.C., an affiliate of Chesapeake Energy Corporation, for net proceeds of approximately $102.4 million. The Company collected $1.5 million of a note receivable related to the fiscal 2007 sale of Pier 1 National Bank. Proceeds from the sale of investments restricted for the payment of certain retirement obligations provided $1.5 million, partially offset by contributions of $0.9 million to purchase similar restricted investments. These cash inflows were partially offset by capital expenditures of $11.3 million in fiscal 2009 compared to $5.6 million in fiscal 2008, consisting primarily of $5.3 million for fixtures, equipment, and leasehold improvements for stores, $3.2 million related to home office leasehold improvements, $1.9 million for information systems enhancements and $0.9 million related to the Companys distribution centers. Total capital expenditures for fiscal 2009 are expected to be approximately $14 to $15 million.
Financing activities for the first nine months of fiscal 2009 provided a net $1.7 million of the Companys cash, primarily related to the Companys stock purchase plan.
At the end of the third quarter, the Companys minimum operating lease commitments remaining for fiscal 2009 were $58.0 million. The present value of total existing minimum operating lease commitments discounted at 10% was $773.9 million at the fiscal 2009 third quarter-end.
As part of the sale of the Companys home office building and accompanying land, the Company entered into a lease agreement to rent office space in the building. The lease has a primary term of seven years beginning on June 9, 2008, with one three-year renewal option and provisions for terminating the lease at the end of the fifth lease year. The estimated impact of this lease on the Companys contractual obligations, as presented in the Companys Annual Report on Form 10-K for the year ended March 1, 2008, is an increase in operating leases of approximately $4.7 million, $12.2 million, $13.1 million and $4.4 million for the periods of less than one year, one to three years, three to five years and more than five years, respectively.
On December 15, 2008, the Company received notice from NYSE Regulation, Inc. (NYSE Regulation) that the Company was not in compliance with the New York Stock Exchange (NYSE) continued listing standard under Section 802.01C of the NYSE Listed Company Manual due to the fact that the average closing share price of the Companys common stock over a consecutive 30-day trading period was less
26
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
than $1.00 per share. The Companys business operations, Securities and Exchange Commission reporting requirements, credit agreement, and other debt obligations were not affected by this notification.
The Company notified NYSE Regulation within the required ten business days that it intends to cure the deficiency and that its Board of Directors has met and is considering all strategic measures to cure the non-compliance with the listing standard. Under the NYSE rules, the Company has six months from December 15, 2008 to achieve compliance with the mentioned continued listing standard, subject to on-going reassessment. The Companys stock remains listed on the NYSE.
Working capital requirements are expected to be funded from available cash balances, cash generated from the operations of the Company, and if required, borrowings against lines of credit. The Companys bank facilities at the end of the third quarter of fiscal 2009 included a $325 million credit facility, which was secured by the Companys eligible merchandise inventory and third-party credit card receivables. As of November 29, 2008, the Company had no outstanding cash borrowings and had utilized $93.0 million in letters of credit and bankers acceptances. Should the availability under such facility be less than $32.5 million, the Company will be required to comply with certain financial covenants as stated in the agreement. The Company does not anticipate falling below this minimum availability in the foreseeable future. As of November 29, 2008, the Companys calculated borrowing base was $275.1 million. After excluding the required minimum $32.5 million and the $93.0 million in utilized letters of credit and bankers acceptances from the borrowing base, $149.6 million remained available for cash borrowings. The Company was in compliance with required debt covenants stated in the agreement at the end of the third quarter of fiscal 2009.
As discussed in Note 6 to the consolidated financial statements, the definition of a fundamental change under the Companys convertible senior notes (the Notes) includes the Companys common stock ceasing to be listed on a national securities exchange or quoted on the Nasdaq National Market or another established automated over-the-counter trading market in the United States. The Company believes that it will continue to be able to satisfy the above requirement for the listing or quotation of its common stock. If the Company is, however, unable to comply with this provision of the Notes, the holders of the Notes could, at their option, require the Company to repurchase all or a portion of their Notes. Such an event could have a material adverse effect on the Company if the Company does not have sufficient cash, is unable to raise sufficient additional capital for such repurchases, or is otherwise unable to refinance the Notes.
From time to time the Company may seek to retire or purchase its outstanding Notes through cash purchases and/or exchanges for equity securities, in open market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will depend on prevailing market conditions, the Companys liquidity requirements, contractual restrictions and other factors. The amounts involved will be subject to compliance with all debt agreements and may be material.
As of the end of the third quarter, cash and cash equivalents were $117.4 million. Including credit card receivables of $14.7 million as of the end of the quarter, the Company began the fourth quarter with approximately $132.1 million in cash and cash equivalents. Additionally, the Company has $149.6 million available for borrowing under its secured credit facility, giving the Company total liquidity of $281.7 million at the beginning of the fourth quarter of fiscal 2009. Given the Companys cash position and the various liquidity options available, the Company believes it has sufficient liquidity to fund ongoing operational obligations and capital expenditure requirements.
The Companys key drivers of cash flows are sales, management of inventory levels, vendor payment terms, management of expenses, and capital expenditures. The difficult economic situation faced by the
27
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
United States is not expected to end in the near future and consumer confidence and spending could remain depressed and possibly deteriorate even further. Therefore, a long-term decline in consumer spending could have a material adverse effect on the Companys financial condition and ability to generate cash flows from operations. The Company may become dependent on the availability of adequate capital to fund its operations, carry out its turnaround strategy, or refinance existing indebtedness if necessary. Recent disruption in the global credit and equity markets and future disruptions in the financial markets could adversely affect the Companys ability to enter into new financing agreements, refinance the Companys current indebtedness if necessary, or obtain funding through the issuance of the Companys securities.
New Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement), which clarifies that convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) are not addressed by paragraph 12 of APB Opinion No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants . Additionally, this FSP specifies that issuers of such instruments should separately account for the liability and equity components in a manner that will reflect the entitys nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. This FSP will be applied retrospectively to all periods presented. FSP APB 14-1 is effective for the Company at the beginning of fiscal year 2010. The Company is currently evaluating the impact of the adoption on its financial statements.
Forward-looking Statements
Certain matters discussed in this quarterly report, except for historical information contained herein, may constitute forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions. These statements encompass information that does not directly relate to any historical or current fact and often may be identified with words such as anticipates, believes, expects, estimates, intends, plans, projects and other similar expressions. Managements expectations and assumptions regarding planned store openings and closings, financing of Company obligations from operations, results from its new marketing, merchandising and store operations strategies, and other future results are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. Risks and uncertainties that may affect Company operations and performance include, among others, the effects of terrorist attacks or other acts of war, conflicts or war involving the United States or its allies or trading partners, labor strikes, weather conditions or natural disasters, volatility of fuel and utility costs, the on-going recession and related financial crisis and the actions taken by the United States and other countries to stimulate the economy or to prevent the worsening of the financial crisis, the general strength of the economy and levels of consumer spending, consumer confidence, the availability of suitable sites for locating stores and distribution facilities, availability of a qualified labor force and management, the availability and proper functioning of technology and communications systems supporting the Companys key business processes, the ability of the Company to import merchandise from foreign countries without significantly restrictive tariffs, duties or quotas, and the ability of the Company to source, ship and deliver items of acceptable quality to its United States distribution centers at reasonable prices and rates and in a timely fashion. The foregoing risks and uncertainties are in addition to others, if any, discussed elsewhere in this quarterly report. The Company assumes no obligation to update or otherwise revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied will not be realized. Additional information concerning these risks and uncertainties is contained in the Companys Annual Report on Form 10-K for the fiscal year
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations. (continued)
ended March 1, 2008, as filed with the Securities and Exchange Commission.
Impact of Inflation
Inflation has not had a significant impact on the operations of the Company.
29
PART I
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
There are no material changes to the Companys exposure to market risk as disclosed in its Form 10-K filed for the fiscal year ended March 1, 2008. Although changes in the fair value of the Companys convertible senior notes do not affect the Companys financial position, results of operations or cash flows, these Notes are currently trading at a substantial discount as compared to their face value of $165.0 million.
Item 4. Controls and Procedures.
As required by Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the Exchange Act), an evaluation was conducted under the supervision and with the participation of the Companys management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys disclosure controls and procedures as of November 29, 2008, and based on this evaluation the Chief Executive Officer and Chief Financial Officer have concluded, with reasonable assurance, that the Companys disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed by the Company in its reports filed or furnished under the Exchange Act is (a) accumulated and communicated to management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure, and (b) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms.
There has not been any change in the Companys internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
The Company is a party to various legal proceedings and claims in the ordinary course of its business. The Company believes that the outcome of these matters will not have a material adverse effect on its consolidated financial position, results of operations or liquidity.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, readers should carefully consider the risk factors disclosed in the Companys Annual Report on 10-K for the fiscal year ended March 1, 2008. The Company is updating their risk factors to include the following:
The recent deterioration of the United States economy and its impact on consumer confidence and spending could adversely impact the Companys results of operations.
The United States economy is in a deep recession and is suffering from a near collapse of the credit and financial markets. The market value of domestic and foreign companies has declined significantly since August 2008, which has adversely affected the savings and investments of United States consumers. Consumer confidence and spending have deteriorated significantly as a result of this current market turmoil. The difficult economic situation faced in the United States and other countries is not expected to end in the near future and consumer confidence and spending could remain depressed and possibly deteriorate even further. During times of economic uncertainty, consumers tend to sacrifice purchases of discretionary items, including the Companys products, which could continue to adversely impact the Companys financial results and turnaround plan.
30
The disruption in the global credit and equity markets could adversely impact the Companys ability to obtain financing on acceptable terms or could increase the cost of obtaining credit.
The Company may become dependent on the availability of adequate capital to fund its operations, carry out its turnaround strategy, or refinance existing indebtedness if necessary. Recent disruption in the global credit and equity markets and future disruptions in the financial markets could adversely affect the Companys ability to enter into new financing agreements, refinance the Companys current indebtedness if necessary, or obtain funding through the issuance of the Companys securities. A continued decline in economic conditions could also result in continued difficulties for financial institutions and other parties that the Company does business with, which could potentially affect the Companys ability to access financing under existing arrangements or to otherwise recover amounts as they become due under the Companys contractual agreements. The inability of the Company to obtain financing, as needed, on acceptable terms in order to finance its operations may have a material adverse impact on the Companys business, its financial condition and results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Under the Companys secured credit facility, the Company would not be restricted from paying dividends unless the availability under the credit facility is less than 30% of the Companys calculated borrowing base. The Company is not required to comply with financial covenants under its secured credit facility unless the availability under such agreement is less than $32.5 million.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The information required by this Item was previously reported by the Company on its Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2008.
As noted in the Companys Proxy Statement for Annual Meeting of Shareholders dated May 15, 2008, the Companys Board of Directors authorized (i) elimination of all reimbursements under the Pier 1 Executive Health Expense Reimbursement Plan (the Plan) effective March 1, 2008, and (ii) the Company to terminate the Plan after administration of claims under the Plan through March 1, 2008. Effective January 5, 2009 the Company terminated the Plan. A copy of the Termination of Pier 1 Executive Health Reimbursement Plan is attached as Exhibit 10.8.
The Exhibit Index following the signature page to this Quarterly Report on Form 10-Q lists the exhibits furnished as required by Item 601 of Regulation S-K and is incorporated herein by reference.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PIER 1 IMPORTS, INC. (Registrant)
Date: |
January 6, 2009 |
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By: |
/s/ Alexander W. Smith |
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Alexander W. Smith, President and |
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Chief Executive Officer |
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Date: |
January 6, 2009 |
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By: |
/s/ Charles H. Turner |
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Charles H. Turner, Executive Vice President and |
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Chief Financial Officer |
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Date: |
January 6, 2009 |
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By: |
/s/ Laura A. Schack |
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Laura A. Schack, Principal Accounting Officer |
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EXHIBIT INDEX
Exhibit No. |
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Description |
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3(i) |
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Certificate of Incorporation and Amendments thereto, incorporated herein by reference to Exhibit 3(i) to Registrants Quarterly Report on Form 10-Q for the quarter ended May 30, 1998. |
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3(ii) |
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Bylaws of the Company as amended to date, incorporated herein by reference to Exhibit 3(ii) to Registrants Annual Report on Form 10-K for the year ended February 26, 2005. |
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10.1* |
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Summary Plan Description of Pier 1 Imports Limited Severance Plan, Restated as of January 1, 2009. |
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10.2* |
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Pier 1 Umbrella Trust Amendment No. 1, effective January 1, 2009. |
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10.3* |
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Pier 1 Benefit Restoration Plan II, as amended and restated effective January 1, 2009. |
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10.4* |
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Pier 1 Imports, Inc. Supplemental Retirement Plan, Restated as of January 1, 2009. |
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10.5* |
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Pier 1 Imports, Inc. Supplemental Executive Retirement Plan, Restated as of January 1, 2009. |
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10.6* |
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First Amendment dated December 15, 2008 to Pier 1 Imports, Inc. 2006 Stock Incentive Plan (Omnibus Plan) Restated as Amended Through March 25, 2008. |
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10.7* |
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Pier 1 Imports Non-Employee Director Compensation Plan adopted June 24, 1999 as amended through December 15, 2008. |
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10.8* |
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Termination of Pier 1 Executive Health Expense Reimbursement Plan, effective January 5, 2009. |
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31.1* |
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Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a). |
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31.2* |
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Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a). |
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32.1* |
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Section 1350 Certifications. |
*Filed herewith
Exhibit 10.1
SUMMARY PLAN DESCRIPTION OF
PIER 1 IMPORTS LIMITED SEVERANCE PLAN
Restated as of January 1, 2009
NATURE AND PURPOSE OF PLAN:
The Pier 1 Imports Limited Severance Plan (the Plan) is a welfare benefit plan which is intended to provide severance benefits to certain employees of Pier 1 Imports, Inc. and its subsidiaries and affiliates (the Employer).
PLAN BENEFIT ELIGIBILITY:
Employers regular employees who are involuntarily terminated as a result of any reduction in force in connection with a reorganization of the Employers corporate home office and/or field operations are eligible for Plan severance benefits. Certain officers of Employer who have individual employment agreements or post-employment consulting agreements may not be eligible for Plan severance benefits.
YOUR PLAN CONTRIBUTIONS:
You do not have to pay anything for your Plan coverage.
DEFINITION OF A YEAR OF SERVICE:
The amount of your Plan benefits is based in part upon your total Years of Service with the Employer. A Year of Service is each twelve consecutive month period of continuous employment with the Employer determined from your most recent date of hire by the Employer. For purposes of determining your Years of Service, any partial year is disregarded.
PLAN BENEFITS:
Your Plan severance pay generally will be as follows:
· If you are classified by the Employer as a non-exempt employee, your Plan severance pay amount is equal to one Weeks Base Pay (defined below) for each of your Years of Service up to a maximum of thirteen Weeks Base Pay. If you have twenty or more Years of Service, your Plan severance pay amount is equal to twenty Weeks Base Pay.
· If you are classified by the Employer as an exempt employee, your Plan severance pay amount is equal to two Weeks Base Pay for each of your Years of Service up to a maximum of twenty Weeks Base Pay. If you have twenty or more Years of Service, your Plan severance pay amount is equal to twenty-eight Weeks Base Pay.
· If you are classified by the Employer as an exempt employee and you hold a director level position at the time of termination, your Plan severance pay amount is equal to three Weeks Base Pay for each of your Years of Service up to a maximum of twenty Weeks Base Pay. If you have twenty or more Years of Service, your Plan severance pay amount is equal to twenty-eight Weeks Base Pay.
· If you are classified by the Employer as an exempt employee and you are an officer of the Employer at the time of termination, your Plan severance pay amount is equal to three Weeks Base Pay for each of your Years of Service up to a maximum of thirty-six Weeks Base Pay. If
1
you have twenty or more Years of Service, your Plan severance pay amount is equal to forty-two Weeks Base Pay.
In all cases, your severance pay amount will be reduced by any pay in lieu of notice which the Employer pays to you in connection with your termination of employment. If you become entitled to a Plan severance pay benefit, your Plan severance pay will be paid to you in a lump sum cash payment as soon as practicable after your employment with the Employer is terminated and the release described below is effective and in no event later than the fifteenth day of the third calendar month immediately following the calendar year in which your employment with the Employer is terminated.
For purposes of the foregoing schedule, your Week Base Pay is the result obtained by dividing the annual amount of your base salary or regular hourly pay as in effect immediately preceding the date of your involuntary termination by fifty-two; provided, however, regular hourly pay for non-exempt employees who work in field operations will be based on average weekly hours worked during the six months preceding the date of termination. Your Week Base Pay will not be based upon any overtime pay, bonuses, benefits or incentive or other special compensation.
Notwithstanding the foregoing, the Employer may, on a case-by-case basis with respect to any individual covered employee or group of covered employees and in its sole and absolute discretion (i) decrease or increase the severance pay amount (including, without limitation, a deduction to zero) payable under the Plan to such individual covered employee or group of covered employees, and/or (ii) include or exclude certain other severance benefits, such as outplacement services, available under the Plan to such individual covered employee or group of covered employees. Further, the Employer may on a case-by-case basis and in its sole and absolute discretion waive any condition or rule imposed under the Plan as a condition for eligibility for severance pay benefits under the Plan.
RELEASE AGREEMENT:
As an absolute condition to your entitlement to any Plan severance benefits, you will be required to release the Employer, in a form required by Employer, from any and all claims and causes of action which you may have against any of them and to agree to certain confidentiality and nondisclosure agreements.
HOW TO FILE A CLAIM:
Generally, the Employers administrative staff will automatically determine if you are eligible for Plan severance benefits, notify you that you are and distribute your Plan severance benefit to you after you have delivered the required release. If your employment with the Employer has terminated, and you believe that you are entitled to Plan benefits and have not received them (or any confirmation that you will receive them), a claim for benefits under the Plan may be made by written notice to the Plan Administrator.
CLAIMS PROCEDURES:
For purposes of these procedures, the term Adverse Benefit Determination refers to any denial, reduction or termination of or failure to provide or make payment (in whole or in part) for a Plan benefit, including any denial, reduction, termination or failure to provide or make payment that is based on a determination of a Claimants eligibility to participate in the Plan and the term Claimant refers to a person (or an authorized representative) who has filed or desires to file a claim for a Plan benefit.
In any case of an Adverse Benefit Determination of a claim for a Plan benefit, the Plan Administrator shall furnish written notice to the affected Claimant within a reasonable period of time but not later than ninety days after receipt of such claim for Plan benefits. Any notice that denies a benefit claim of a Claimant in whole or in part shall, in a manner calculated to be understood by the Claimant:
· State the specific reason or reasons for the Adverse Benefit Determination;
· Provide specific reference to pertinent Plan provisions on which the Adverse Benefit Determination is based;
· Describe any additional material or information necessary for the Claimant to perfect the
2
claim and explain why such material or information is necessary; and
· Describe the Plans review procedures and the time limits applicable to such procedures, including a statement of the Claimants right to bring a civil action under section 502(a) of The Employee Retirement Income Security Act of 1974, as amended (ERISA) following an Adverse Benefit Determination on review.
A Claimant has the right to have an Adverse Benefit Determination reviewed in accordance with the following claims review procedure:
· The Claimant must submit a written request for such review to the Plan Administrator not later than 60 days following receipt by the Claimant of the Adverse Benefit Determination notification;
· The Claimant shall have the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits to the Plan Administrator;
· The Claimant shall have the right to have all comments, documents, records, and other information relating to the claim for benefits that have been submitted by the Claimant considered on review without regard to whether such comments, documents, records or information was considered in the initial benefit determination; and
· The Claimant shall have reasonable access to, and copies of, all documents, records, and other information relevant to the claim for benefits free of charge upon request, including (a) documents, records or other information relied upon for the benefit determination, (b) documents, records or other information submitted, considered or generated without regard to whether such documents, records or other information were relied upon in making the benefit determination, and (c) documents, records or other information that demonstrates compliance with the standard claims procedure.
Notice of the Plan Administrators final benefit determination regarding an Adverse Benefit Determination will be furnished in writing or electronically to the Claimant after a full and fair review. Notice of an Adverse Benefit Determination upon review will:
· State the specific reason or reasons for the Adverse Benefit Determination;
· Provide specific reference to pertinent Plan provisions on which the Adverse Benefit Determination is based;
· State that the Claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the Claimants claim for benefits including (a) documents, records or other information relied upon for the benefit determination, (b) documents, records or other information submitted, considered or generated without regard to whether such documents, records or other information were relied upon in making the benefit determination, and (c) documents, records or other information that demonstrates compliance with the standard claims procedure; and
· Describe the Claimants right to bring an action under section 502(a) of ERISA.
The Plan Administrator shall notify a Claimant of its determination on review with respect to the Adverse Benefit Determination of the Claimant within a reasonable period of time but not later than sixty days after the receipt of the Claimants request for review.
Completion of the claims procedures described in this Article will be a condition precedent to the commencement
3
of any legal or equitable action in connection with a claim for benefits under the Plan by a Claimant or by any other person or entity claiming rights individually or through a Claimant.
TERMINATION OF PLAN COVERAGE:
Your coverage under the Plan (and, therefore, your potential eligibility for Plan severance benefits) terminates as of the date you terminate your employment with the Employer voluntarily, by reason of death or disability or by retirement at or after the age of 55, or on the date your employment is involuntarily terminated for cause.
PLAN AMENDMENT OR TERMINATION:
The Employer may terminate, amend or modify the Plan in whole or in part at any time. Circumstances which might cause the Employer to amend or terminate the Plan include, but are not limited to, changes in law mandating that the Plan be revised in certain respects, a determination by the Employer that the Plans provisions or some of them may no longer be suitable as a result of changes in the circumstances of the Employer or of its employees or changes in financial circumstances such as significant increases in the cost of continuing the Plan or significant adverse changes in the Employers financial circumstances.
YOUR RIGHTS UNDER ERISA:
As a participant in the Plan you are entitled to certain rights and protections under ERISA. ERISA provides that all Plan participants shall be entitled to:
Receive Information About Your Plan and Benefits
Examine, without charge, at the Plan administrators office and at other specified locations, such as worksites and union halls, all documents governing the Plan, including insurance contracts and collective bargaining agreements, and a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Pension and Welfare Benefit Administration.
Obtain, upon written request to the Plan administrator, copies of documents governing the operation of the Plan, including insurance contracts and collective bargaining agreements, and copies of the latest annual report (Form 5500 Series) and updated summary Plan description. The administrator may make a reasonable charge for the copies.
Receive a summary of the Plans annual financial report. The Plan administrator is required by law to furnish each participant with a copy of this summary annual report.
Prudent Actions by Plan Fiduciaries
In addition to creating rights for Plan participants ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate your Plan, called fiduciaries of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your employer, your union, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a (pension, welfare) benefit or exercising your rights under ERISA.
Enforce Your Rights
If your claim for a welfare benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of Plan documents or the latest annual report from the Plan and do not receive them within 30 days, you may file
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suit in a Federal court. In such a case, the court may require the Plan administrator to provide the materials and pay you up to $110 1 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. In addition, if you disagree with the Plans decision or lack thereof concerning the qualified status of a domestic relations order or a medical child support order, you may file suit in Federal court. If it should happen that Plan fiduciaries misuse the Plans money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.
Assistance with Your Questions
If you have any questions about your Plan, you should contact the Plan administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan administrator, you should contact the nearest office of the Pension and Welfare Benefits Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Pension and Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Pension and Welfare Benefits Administration.
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NAME OF PLAN: |
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Pier 1 Imports Limited Severance Plan |
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PLAN YEAR: |
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January 1 through December 31 |
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TYPE OF PLAN: |
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Severance benefit welfare plan |
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PLAN SPONSOR: |
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Pier 1 Imports, Inc. |
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Address: |
100 Pier 1 Place |
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Fort Worth, Texas 76102 |
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Telephone Number: 817-252-8000 |
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EMPLOYER IDENTIFICATION NUMBER: |
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75-1729843 |
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PLAN NUMBER: |
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501 |
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PLAN ADMINISTRATOR: |
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Pier 1 Imports, Inc. |
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FUNDING: |
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Benefits under the Plan are paid out of the general assets of the Employer. |
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AGENT FOR SERVICE OF LEGAL PROCESS: |
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The Plan Sponsor or the Plan Administrator. Process may be served at the addresses specified above. |
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TYPE OF ADMINISTRATION: |
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The Plan is administered by the Employer. |
1 This dollar amount is adjusted from time to time. You can get information at any time as to the then current dollar amount upon request to the Plan administrator.
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Exhibit 10.2
PIER 1 UMBRELLA TRUST
AMENDMENT NO. 1
This Amendment No. 1 (Amendment) is made to the Pier 1 Umbrella Trust dated December 21, 2005 (the Trust Agreement) by and between Pier 1 Imports, Inc., Pier 1 Imports (U.S.), Inc., and Pier 1 Services Company on the one hand, and Wachovia Bank National Association, on the other hand. This Amendment No. 1 is made effective January 1, 2009.
RECITALS
This Amendment is entered into with reference to the following facts:
A. The Trust Agreement may be amended pursuant to Section 7.02-1 without the Written Consent of Participants if such amendment is necessary to comply with any laws, regulations or other legal requirements.
B. The Company and the Trustee now desire to amend the Trust Agreement in order to comply with the requirements of Section 409A of the Code and the final Treasury regulations promulgated thereunder.
AGREEMENT
The Company and the Trustee hereby agree:
1. The Company and the Trustee incorporate the above recitals into this Amendment and affirm such recitals are true and correct. All capitalized terms used in this Amendment, unless specifically defined herein, have the same meanings attributed to them in the Trust Agreement.
2. Except as amended by this Amendment, the Trust Agreement remains unchanged and in full force and effect. If there is any conflict between the provisions of the Trust Agreement and the provisions of this Amendment, the provisions of this Amendment shall control.
3. The following sentence is hereby added to the end of Section 3.03-1 of the Trust Agreement:
In the event of any payment by the Trustee pursuant to this paragraph, the Trustee shall act in accordance with the terms of the subject Plan with respect to the timing and form of benefit payment.
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IN WITNESS WHEREOF, the Company and the Trustee have caused this Amendment No.1 to be executed by their respective duly authorized officers effective January 1, 2009.
PIER 1 IMPORTS (U.S.), INC., |
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PIER 1 IMPORTS, INC., |
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a Delaware corporation |
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a Delaware corporation |
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By: |
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By: |
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Its: Executive Vice President |
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Its: Executive Vice President |
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Date: December , 2008 |
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Date: December , 2008 |
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TRUSTEE: |
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PIER 1 SERVICES COMPANY, |
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WACHOVIA BANK NATIONAL |
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a Delaware statutory trust |
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ASSOCIATION |
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By: Pier 1 Holdings, Inc., |
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Its Managing Trustee |
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By: |
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Its: Executive Vice President |
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Its: |
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Date: December , 2008 |
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Date: December , 2008 |
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Exhibit 10.3
PIER 1
BENEFIT RESTORATION PLAN II
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2009
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.
i
PIER 1
BENEFIT RESTORATION PLAN II
TABLE OF CONTENTS
ARTICLE |
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PAGE |
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I |
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Title, Effective Date and Purpose of Restatement |
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II |
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Definitions and Construction of the Plan Documents |
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III |
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Eligibility |
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IV |
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Deferral of Compensation |
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V |
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Restoration Account |
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VI |
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Distribution |
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Beneficiary |
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Administration of the Plan |
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Claims Procedure |
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Nature of Companys Obligation |
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XI |
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Miscellaneous |
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ii
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 Companys 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 Participants 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 Participants 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 Participants Compensation per Plan Year. Amounts so deferred shall be credited to such Participants Restoration Account.
Section 4.02 Company Matching Contribution. With respect to Compensation deferred under Section 4.01, the Company shall credit to a Participants Restoration Account an additional amount equal to the sum of (i) one hundred percent (100%) of the first one percent (1%) of a Participants elected Compensation deferral, and (ii) fifty percent (50%) of the next four percent (4%) of the Participants elected Compensation deferral. The foregoing sum shall be credited to such Participants 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 Executives initial eligibility. A valid Compensation Deferral Agreement submitted on or before the applicable Election Date following the Executives 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 Participants 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 Participants Restoration Account shall as of January 1, 2005 be credited with the dollar amount equal to the portion of his Restoration Account as of December 31, 2004 which constitutes amounts deferred after December 31, 2004 for purposes of Section 409A of the Code. Thereafter, Compensation elected to be deferred by a Participant under a written Compensation Deferral Agreement and Company matching contributions shall be credited in a dollar amount to the Restoration Account of such Participant.
Section 5.02 Interest. Each Participants Restoration Account balance shall be credited at least quarterly with an amount of interest at an annual rate equal to Moodys Corporate Bond Index, or comparable index if Moodys Corporate Bond Index is no longer available, plus 1% where the Index is averaged on a daily basis for a period determined by the Committee from time to time.
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ARTICLE VI
DISTRIBUTION
Section 6.01 Distributions. If a Participant has not elected installment payments pursuant to and in accordance with Section 6.04, then upon the termination of a Participants employment with the Company for any reason (including death), the Participants vested portion of his Restoration Account balance shall be valued and paid to him (or his Beneficiary) in accordance with Section 6.04 and the non-vested portion of such Restoration Account balance plus interest earned and accrued on such amount, if any, shall be forfeited. For purposes of the Plan, a Participant will only be deemed to have terminated employment with the Company if the facts and circumstances are such that he has had a separation from service with the Company pursuant to guidance issued by the Internal Revenue Service under Section 409A of the Code.
Section 6.02 Nonforfeitable Right to Employee Contributions. Except as set forth in Section 4.06 hereof, the Participant shall have a one hundred percent (100%) nonforfeitable and vested right to the value of his Restoration Account attributable to his Compensation deferrals under Section 4.01 hereof and the interest earned on such deferrals under Section 5.02 hereof.
Section 6.03 Vesting of Company Matching Contributions. A Participant is vested in any Company matching contributions arising under Section 4.02 of this Plan (plus interest thereon pursuant to Section 5.02) according to the provisions of the 401(k) Plan that are applicable to the vesting of Employer matching contributions under such 401(k) Plan, irrespective of whether a Participant is actually participating in the 401(k) Plan.
Section 6.04 Time and Form of Distributions. Unless a Participant has elected an installment form of payment and such election satisfies the conditions and provisions of this Section 6.04, the distribution of the vested portion of a Participants Restoration Account shall be made in cash only in the form of a single lump sum payment equaling the value (determined as of the date of such Participants termination of employment with the Company) of the Participants vested portion of his Restoration Account plus interest accrued on such amount through the date of distribution. A Participants lump sum distribution payment will be made no later than ninety (90) days following the date the Participants employment with the Company is terminated regardless of whether an account distribution form is received from the Participant. In no event shall a Participant be permitted directly or indirectly to designate the taxable year of payment of such benefit.
The distribution of a Participants Restoration Account may be made to such Participant in the form of annual installments over a period of five (5) years commencing as described below provided that such election will be effective only if:
(1) Such Participant has attained the age of fifty-five (55) as of the date of his termination of employment with the Company; and
(2) Such Participant is fully vested in his Restoration Account as of the date of his termination of employment with the Company.
Subject to the special election right described in Section 6.05 below, a Participants election to receive distribution of his Restoration Account in the form of annual installments must be made at the time that he first elects to effect Compensation deferrals under the Plan, shall be non-revocable and shall be made in writing on a form prescribed by the Company and filed with the Benefits Department of the Company. Provided that the above conditions are satisfied, the Participants Restoration Account will be
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valued as of the date of the Participants termination of employment with the Company. The Restoration Account as valued shall be distributed in five (5) equal annual installments to the Participant. The first annual installment will be made no later than ninety (90) days from the date the Participants employment with the Company is terminated. In no event shall a Participant be permitted directly or indirectly to designate the taxable year of payment of such benefit. Each subsequent annual installment payment will be made no later than ninety (90) days following December 31st of each year beginning with the year of the initial distribution. The undistributed balance of a Participants Restoration Account shall be credited with interest in accordance with Section 5.02 on the same basis and in the same manner as interest is credited on the Restoration Accounts of Participants who are active employees of the Company, and each annual installment shall include the interest accrued on the undistributed balance through the date of distribution of such payment.
Section 6.05 Special Election Right. If a Participant failed to elect distribution of his Restoration Account in the form of annual installments at the time described in Section 6.04, such Participant may thereafter make a non-revocable election in writing on a form prescribed by the Company and filed with the Benefits Department of the Company to receive payment of his Restoration Account in the form of installment payments provided that such election will not take effect until at least twelve (12) months after the date on which it filed with the Benefits Department of the Company and will be effective only if:
(1) Such Participant has attained the age of fifty-five (55) as of the date of his termination of employment with the Company; and
(2) Such Participant is fully vested in his Restoration Account as of the date of his termination of employment with the Company.
(3) Such Participant remains employed with the Company for at least twelve (12) months after the election is filed with the Company.
Provided that the above conditions are satisfied, the Participants Restoration Account will be valued as of the date of commencement of such Participants Restoration Account installment distributions. The Restoration Account as valued shall be distributed in five (5) equal annual installments to the Participant. The first annual installment will be made no later than ninety (90) days from:
(1) the date the Participants employment with the Company is terminated if such termination was by reason of death or disability within the meaning of Section 409A(2)( C) of the Code; or
(2) the fifth anniversary of the date of the Participants termination of employment if such termination was for any reason other than death or disability within the meaning of Section 409A(2)( C) of the Code.
In no event shall a Participant be permitted directly or indirectly to designate the taxable year of payment of such first annual installment. Each subsequent annual installment payment will be made no later than ninety (90) days following December 31st of each year beginning with the year of the initial distribution. The undistributed balance of a Participants Restoration Account shall be credited with interest in accordance with Section 5.02 on the same basis and in the same manner as interest is credited on the Restoration Accounts of Participants who are active employees of the Company, and each annual installment shall include the interest accrued on the undistributed balance through the date of distribution of such payment.
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Section 6.06 Loans. No loans to Participants of amounts in a Participants Restoration Account shall be permitted.
Section 6.07 Key Employee Distributions. Notwithstanding any other provisions of this Article VI, 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, no distribution may be made from the Plan to such Participant as a result of his separation from service with the Company 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.
Section 6.08 Hardship Withdrawals. A Participant who has incurred an unforeseeable emergency (as hereinafter described) may, with the consent of the Company in its sole discretion, withdraw from his Restoration Account an amount not in excess of the amount necessary to satisfy such emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, which maximum amount shall be determined after taking into account the extent to which such hardship is or may be relieved through reimbursement of compensation by insurance or otherwise or by liquidation of the Participants assets (to the extent that the liquidation of such assets would not itself cause severe financial hardship). Any such withdrawal may be requested by submitting a written request to the Company which shall include such information as the Company may request in order to determine if the requirements described in this Section 6.08 are satisfied such that the withdrawal may be approved. For purposes of this Section 6.08, the term unforeseeable emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participants spouse or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participants property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.
ARTICLE VII
BENEFICIARY
Section 7.01 Beneficiaries. If a Participant is participating in the 401(k) Plan, except as otherwise provided below, at any relevant time for purposes of this Plan a Participants Beneficiaries (and their respective shares and priorities) shall be those Beneficiaries (and their respective shares and priorities) then currently designated pursuant to the 401(k) Plan or specially designated by the Participant pursuant to the 401(k) Plan, as the case may be. To the extent that a Participant is not participating in the 401(k) Plan, and except as otherwise provided below, a Participant may designate a Beneficiary or Beneficiaries pursuant to a beneficiary designation form. A beneficiary election form will be provided to a Participant who is not participating in the 401(k) Plan upon written request by the Participant to the Company. If a Participant fails to have a beneficiary pursuant to the 401(k) Plan or fails to deliver to the Company a beneficiary election form for this Plan, the Company shall have the right to distribute the vested portion of such Participants Restoration Account to the respective estate of such Participant.
Section 7.02 Proper Beneficiary. If the Company is in doubt as to the proper Beneficiary to receive payments hereunder, the Company shall have the right to withhold such payments until the matter is finally adjudicated. However, any payment made by the Company, in good faith and in accordance with this Plan, shall fully discharge the Company from all further obligations with respect to that payment.
Section 7.03 Minor or Incompetent Beneficiary. In making any payments to or for the benefit of any minor or an incompetent Participant or Beneficiary, the Company, in its sole and absolute discretion may make a distribution to a legal or natural guardian of a minor or a court appointed guardian
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or representative of such incompetent. The receipt by a guardian or a court appointed guardian or representative shall be a complete discharge to the Company and Committee. Neither the Committee nor the Company shall have any responsibility to see to the proper application of any payments so made.
ARTICLE VIII
ADMINISTRATION OF THE PLAN
Section 8.01 Majority Vote. All resolutions or other actions taken by the Committee shall be made or taken according to the procedures in effect for resolutions or actions by the Plan Administrator of the 401(k) Plan.
Section 8.02 Finality of Determination. Subject to the Plan, the Company shall, from time to time, establish forms and procedures for the administration of the Plan. Except as herein otherwise expressly provided, the Committee shall have the exclusive right to interpret the Plan and to decide any and all matters arising thereunder or in connection with the administration of the Plan, and it shall endeavor to act, whether by general rules or by particular decisions, so as not to discriminate in favor of or against any person. The decisions, actions and records of the Committee shall be conclusive and binding upon the Company and all persons having or claiming to have any right or interest in or under the Plan.
Section 8.03 Certificates and Reports. The members of the Committee and the officers and directors of the Company shall be entitled to rely on all certificates and reports made by any duly appointed accountants, and on all opinions given by any duly appointed legal counsel, which legal counsel may be counsel for the Company.
Section 8.04 Indemnification and Exculpation. The Company shall indemnify and save harmless each member of the Committee against any and all expenses and liabilities arising out of his membership and service on the Committee. Expenses against which a member of the Committee shall be indemnified hereunder shall include, without limitation, the amount of any settlement or judgment, costs, counsel fees, and related charges reasonably incurred in connection with a claim asserted, or a proceeding brought or settlement thereof. The foregoing right of indemnification shall be in addition to any other rights to which any such member of the Committee may be entitled as a matter of law.
Section 8.05 Expenses. The expenses of administering the Plan shall be borne by the Company.
ARTICLE IX
CLAIMS PROCEDURE
Section 9.01 Written Claim. Retirement benefits and the value of a Participants Restoration Account shall be paid in accordance with the provisions of this Plan and any applicable Compensation Deferral Agreement. The Participant, or a designated Beneficiary or any other person claiming through the Participant shall make a written request for benefits under this Plan. This written claim shall be mailed or delivered to the Company.
Section 9.02 Denied Claim. If the claim is denied, in full or in part, the Company shall provide a written notice within ninety (90) days setting forth the specific reasons for denial, and any additional material or information necessary to perfect the claim, and an explanation of why such material or information is necessary, and appropriate information and explanation of the steps to be taken if a review of the denial is desired.
8
Section 9.03 Review Procedure. If the claim is denied and review is desired, the Participant (or Beneficiary) shall notify the Committee in writing within sixty (60) days after receipt of the written notice of denial (a claim shall be deemed denied if the Committee does not take any action within the aforesaid ninety (90) day period). In requesting a review, the Participant or his Beneficiary may request a review of the Plan or other pertinent documents, may submit any written issues and comments, may request an extension of time for such written submission of issues and comments, and may request that a hearing be held before the Committee, but the decision to hold a hearing shall be within the sole discretion of the Committee.
Section 9.04 Committee Review. The decision on the review of the denied claim shall be rendered by the Committee within sixty (60) days after the receipt of the request for review (if a hearing is not held) or within sixty (60) days after the hearing if one is held. The decision shall be written and shall state the specific reasons for the decision including reference to specific provisions of this Plan or a Compensation Deferral Agreement on which the decision is based.
ARTICLE X
NATURE OF COMPANYS OBLIGATION
Section 10.01 Companys Payment Obligation. The Companys obligations under this Plan shall be an unfunded and unsecured promise to pay. The Company shall not be obligated under any circumstances to fund its financial obligations under this Plan.
Section 10.02 Creditor Status. Any assets which the Company may acquire or set aside to help cover its financial liabilities are and must remain general assets of the Company subject to the claims of its creditors. Neither the Company nor this Plan gives the Participant any beneficial ownership interest in any asset of the Company. All rights of ownership in any such assets are and remain in the Company and Participants and their beneficiaries shall have only the rights of general creditors of the Company.
Section 10.03 No Promise of Employment. Neither this Plan nor any agreement or writing executed pursuant hereto, including, but not limited to, any Compensation Deferral Agreement, shall be construed to promise or guarantee future employment of any person.
Section 10.04 No Guarantee of Tax Deferral. Neither this Plan nor any agreement or writing executed pursuant hereto, shall be construed as a representation or assurance that any amounts in a Participants Restoration Account shall not be subject to taxation until such amounts are paid or distributed to such Participant or any of his Beneficiaries.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Written Notice. Any notice which shall be or may be given under the Plan or a Compensation Deferral Agreement shall be in writing and shall be mailed by United States mail, postage prepaid. If notice is to be given to the Company, such notice shall be addressed to the Company, Attn: Pier 1 Benefit Restoration Plan, at the address of the Companys principal offices. If notice is to be given to the Committee, such notice shall be addressed to the Committee of the Pier 1 Benefit Restoration Plan, at the address of the Companys principal offices. If notice is to be given to a Participant, such notice shall be addressed to the address shown in such Participants Compensation Deferral Agreement.
Section 11.02 Change of Address. Any party may, from time to time, change the address to which notices shall be mailed by giving written notice of such new address.
9
Section 11.03 Merger, Consolidation or Acquisition. The Plan shall be binding upon the Company, its assigns, and any successor Company which shall succeed to substantially all of its assets and business through merger, acquisition or consolidation, and upon a Participant, his Beneficiary, assigns, heirs, executors and administrators.
Section 11.04 Amendment and Termination. The Company retains the sole and unilateral right to terminate, amend, modify, or supplement this Plan, in whole or in part, at any time. This right includes the right to make retroactive amendments. However, no Company action under this right shall reduce the amount of the Restoration Account, whether vested or not, of any Participant or his Beneficiary.
Section 11.05 Nontransferability. Except insofar as prohibited by applicable law, no sale, transfer, alienation, assignment, pledge, collateralization or attachment of any benefits under this Plan shall be valid or recognized by the Company. Neither the Participant, his spouse, or designated Beneficiary shall have any power to hypothecate, mortgage, commute, modify, or otherwise encumber in advance of any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony maintenance, owed by the Participant or his Beneficiary, or be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise.
Section 11.06 Legal Fees. All reasonable legal fees incurred by any Participant (or former Participant) or Beneficiary to successfully enforce his valid rights under this Plan shall be paid by the Company in addition to sums due under this Plan.
Section 11.07 Withholding for Taxes. The Company shall be entitled to withhold from payments due under the Plan or from other payments of Compensation to a Participant any and all taxes of any nature required by any government to be withheld from compensation paid to employees.
Section 11.08 Domestic Relations Orders. All or any portion of a Participants 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.
Section 11.09 Gender and Number. Wherever the context so requires, masculine pronouns include the feminine and singular words shall include the plural.
Section 11.10 Applicable Law. This Plan shall be governed by the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its duly authorized officer effective as of January 1, 2009.
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Pier 1 Imports, Inc. for itself and on
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By: |
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Title: |
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December , 2008 |
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10
Exhibit 10.4
PIER 1 IMPORTS, INC.
SUPPLEMENTAL RETIREMENT PLAN
RESTATED AS OF JANUARY 1, 2009
TABLE OF CONTENTS
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PAGE |
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ARTICLE I PURPOSE |
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1 |
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ARTICLE II DEFINITIONS |
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1 |
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2.1 |
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Actuarial Equivalent |
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1 |
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2.2 |
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Beneficiary |
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1 |
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2.3 |
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Board |
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1 |
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2.4 |
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Cause |
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1 |
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2.5 |
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Change of Control of the Employer |
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2 |
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2.6 |
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Code |
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2 |
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2.7 |
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Committee |
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2 |
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2.8 |
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Compensation |
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2 |
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2.9 |
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Early Retirement Date |
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2 |
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2.10 |
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Employer |
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2 |
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2.11 |
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Good Reason |
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3 |
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2.12 |
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Highest Average Compensation |
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3 |
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2.13 |
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Normal Retirement Date |
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3 |
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2.14 |
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Participant |
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3 |
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2.15 |
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Pier 1 |
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3 |
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2.16 |
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Regulations |
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3 |
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2.17 |
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Retirement |
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3 |
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2.18 |
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Separation from Service |
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4 |
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2.19 |
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Supplemental Retirement Benefit |
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4 |
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2.20 |
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Target Amount |
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4 |
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2.21 |
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Termination |
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4 |
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2.22 |
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Total and Permanent Disability |
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4 |
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2.23 |
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Years of Credited Service |
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5 |
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2.24 |
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Years of Plan Participation |
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5 |
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ARTICLE III PARTICIPATION AND VESTING |
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5 |
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3.1 |
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Participation |
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5 |
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3.2 |
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Supplemental Retirement Benefit Vesting |
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5 |
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ARTICLE IV SUPPLEMENTAL RETIREMENT BENEFITS |
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6 |
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4.1 |
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Benefit |
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6 |
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4.2 |
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Normal Retirement Benefit |
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6 |
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4.3 |
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Early Retirement Benefit |
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6 |
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4.4 |
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Change of Control Benefit |
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6 |
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4.5 |
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Disability Retirement Benefit |
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6 |
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4.6 |
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Termination Benefit |
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7 |
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4.7 |
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Form of Benefit Payment |
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7 |
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4.8 |
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Commencement of Payments |
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7 |
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4.9 |
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Withholding; Payroll Taxes |
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8 |
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4.10 |
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Payment to Guardian |
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8 |
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4.11 |
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Major Medical and Hospitalization Insurance Coverage |
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8 |
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ARTICLE V SURVIVOR BENEFITS |
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9 |
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5.1 |
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Death Prior to Commencement of Benefits |
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9 |
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5.2 |
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Death After Commencement of Benefits |
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10 |
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5.3 |
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Suicide; Misrepresentation |
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10 |
5.4 |
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Effect of Payment |
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10 |
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ARTICLE VI BENEFICIARY DESIGNATION |
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10 |
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6.1 |
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Death of Participant |
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10 |
6.2 |
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Amendments |
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10 |
6.3 |
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No Beneficiary Designation |
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10 |
6.4 |
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Effect of Payment |
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11 |
6.5 |
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Death of Beneficiary |
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11 |
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ARTICLE VII ADMINISTRATION |
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11 |
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7.1 |
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Committee; Duties |
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11 |
7.2 |
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Agents |
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11 |
7.3 |
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Binding Effect of Decisions |
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11 |
7.4 |
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Indemnity of Committee |
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11 |
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ARTICLE VIII CLAIMS PROCEDURE |
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11 |
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8.1 |
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Claim |
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11 |
8.2 |
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Denial of Claim |
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12 |
8.3 |
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Review of Claim |
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12 |
8.4 |
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Final Decision |
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12 |
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ARTICLE IX TERMINATION, SUSPENSION OR AMENDMENT |
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12 |
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9.1 |
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Amendment or Termination |
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12 |
9.2 |
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Successor Employer |
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12 |
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ARTICLE X MISCELLANEOUS |
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13 |
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10.1 |
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Unsecured General Creditor |
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13 |
10.2 |
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Trust Fund |
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13 |
10.3 |
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Nonassignability |
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13 |
10.4 |
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Not a Contract of Employment |
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13 |
10.5 |
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Participants Cooperation |
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13 |
10.6 |
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Domestic Relations Order |
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14 |
10.7 |
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Captions |
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14 |
10.8 |
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Governing Law |
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14 |
10.9 |
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Validity |
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14 |
10.10 |
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Successors |
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14 |
10.11 |
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Notice |
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14 |
ii
PIER 1 IMPORTS, INC.
SUPPLEMENTAL RETIREMENT PLAN
ARTICLE IPURPOSE
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 IIDEFINITIONS
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 Participants 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.
1
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 Participants 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.
2
2.11 Good Reason
Good Reason means, without the written consent of the Participant:
(a) A reduction in the Participants base salary or a reduction in the Participants 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 Employers standard retirement policy), in each case as in effect immediately prior to a Change of Control; or
(b) The relocation of the Participants full-time office to a location greater than fifty (50) miles from the Employers current corporate office; or
(c) A reduction in the Participants 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 Participants 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 Participants 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 Participants 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 Participants 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
3
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 |
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(b) |
Because of Total and Permanent Disability; or |
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(c) |
Because of the Participants death; or |
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(d) |
By the Participant other than: |
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For Good Reason; or |
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Upon the Participants 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 Participants 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 Participants actual Years of Credited Service, not to exceed twenty (20), and the denominator of which is twenty (20).
2.21 Termination
Termination means a Participants 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 Committees decision as to total and permanent disability will be based upon medical reports and/or other evidence satisfactory to the Committee.
4
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 IIIPARTICIPATION 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 Participants 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
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Vesting
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Less than 1 |
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0 |
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1 but less than 2 |
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10 |
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2 but less than 3 |
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20 |
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3 but less than 4 |
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30 |
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4 but less than 5 |
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40 |
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5 but less than 6 |
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50 |
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6 but less than 7 |
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60 |
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7 but less than 8 |
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70 |
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8 but less than 9 |
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80 |
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9 but less than 10 |
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90 |
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l0 or more |
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100 |
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(b) Conditions for Immediate Vesting. Regardless of a Participants 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.
5
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 Participants benefits from primary Social Security, shall equal approximately sixty percent (60%) of the Participants 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 Participants 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 Participants Early Retirement Date precedes the Participants 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 Participants Early Retirement Date to the Participants 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) shall be determined using the Social Security Act in effect at the date of Retirement due to a Change of Control and assuming zero (0) future earnings from the Participants Retirement date to the Participants attainment of age sixty-five (65).
4.5 Disability Retirement Benefit
If a Participant has a Separation from Service due to Total and Permanent Disability on or before the Participants attainment of age fifty-five (55), Employer shall pay to the Participant the monthly Supplemental Retirement Benefit calculated under Section 4.3, and the time period from the separation date to the date the Participant would attain the age of fifty-five (55) shall be included in the determination of Years of Credited Service. If a Participant has a Separation from Service due to Total and Permanent Disability after the Participants attainment of age fifty-five (55), Employer shall pay to the Participant the monthly Supplemental Retirement Benefit calculated under Section 4.2, and the time
6
period from the separation date to the date the Participant would attain the age of sixty-five (65) shall be included in the determination of Years of Credited Service.
4.6 Termination Benefit
If a Participant has a Separation from Service due to Termination, Employer shall pay to the Participant the monthly Supplemental Retirement Benefit calculated under Section 4.2 above except:
(a) The offset required by Subsection 4.2(b) shall be determined using the Social Security Act in effect at Termination and assuming level earnings to the Participants attainment of age sixty-five (65); and
(b) The benefit shall be multiplied by the vesting percentage provided in Section 3.2 above.
4.7 Form of Benefit Payment
The Supplemental Retirement Benefit determined under Article IV shall be paid in the basic form provided below unless the Participant elects an alternative form in the form of payment designation. Any alternative form shall be the Actuarial Equivalent of the basic form of benefit payment. The basic and alternative forms of payments are as follows:
(a) Basic Form of Benefit Payment. A monthly single life annuity for the Participants life.
(b) Alternative Forms of Benefit Payment.
(i) A monthly joint and survivor annuity with payment continued to the survivor at one hundred percent (100%); or
(ii) A monthly joint and survivor annuity with payment continued to the survivor at fifty percent (50%) of the amount paid to the Participant.
A Participant desiring payment of his Plan benefit in a form other than the basic form of payment described in (a) above must elect the alternative form of payment he desires prior to the commencement of the benefit payment. Such election shall be in writing and shall extend on a uniform basis to any Supplemental Retirement Benefit paid under the Plan to the Participant. A Participant may change his Plan Supplemental Retirement Benefit payment form election and make a new election prior to commencement of payment of his Plan benefits. At commencement of payment of a Participants Supplemental Retirement Benefit, his form of payment election shall become irrevocable. Notwithstanding the above, whenever the lump sum equivalent of the benefit is not greater than the applicable dollar amount under Section 402(g)(1)(B) of the Code, the benefit shall be paid in a lump sum.
4.8 Commencement of Payments
Benefits payable to a Participant under Sections 4.2, 4.3, 4.4 and 4.5 shall commence as soon as practicable but not later than sixty (60) days after the date of the Participants Separation from Service. Benefits payable to a Participant under Section 4.6 as a result of Termination shall commence on the first day of the month coincidental with or next following the date on which the Participant attains age sixty-five (65). 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. All payments shall be made as of the first day of the month.
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Notwithstanding this Section 4.8, 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 Participants 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 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 the periodic payment amount shall be determined as if its 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.
4.9 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 Participants wages by the federal, state or local government.
4.10 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 incompetence, 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.
4.11 Major Medical and Hospitalization Insurance Coverage
If a Participant has a Separation from Service due to Retirement or Total and Permanent Disability, such 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 Employers 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 4.11 shall be made by the Participant at such times and in such form as the Employer shall establish pursuant to reasonable payment methods.
Upon Termination of a Participant , such Participant (for the Participant and the Participants dependents) shall have the right to participate, during the fifteen (15) years immediately after the date such Participant attains age sixty-five (65), in the Employer provided medical reimbursement benefits, if any, made available generally to the Employers 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 Employers active employees pay their respective contributions for such major medical coverage.
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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 Participants dependents) to the date that they otherwise would have been available under this Section 4.11 and on the basis as contemplated by this Section 4.11.
Medical reimbursement benefits provided pursuant to this Section 4.11 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 participants right to a reimbursement may not be subject to liquidation or exchange.
ARTICLE V SURVIVOR BENEFITS
5.1 Death Prior to Commencement of Benefits
(a) Death at or After Age 55. If a Participant dies after attainment of age fifty-five (55) and completion of ten (10) Years of Plan Participation but prior to a Separation of Service, Employer shall pay a survivor benefit to the Participants Beneficiary equal to the Retirement benefit that would have been provided had the Participant had a Separation from Service by reason of Retirement on the day before the Participants death with a fifty percent (50%) joint and survivor annuity form.
(b) Death Prior to Age 55. If a Participant dies prior to attainment of age fifty-five (55) and completion of ten (10) Years of Plan Participation but prior to a Separation of Service, Employer shall pay a survivor benefit to the Participants Beneficiary equal to the Termination benefit that would have been provided had the Participant elected a fifty percent (50%) joint and survivor annuity form, had a Separation from Service on the date prior to his death and survived until the age of sixty-five (65).
(c) Time of Payment. Any benefits payable to a Beneficiary under this section shall commence as soon as practicable after the appropriate application for benefits has been made but not later than sixty (60) days after the date of the Participants death. In no event shall a Participant or Beneficiary be permitted to directly or indirectly designate the taxable year of commencement of payment of death benefits under the Plan. All payments shall be made as of the first day of the month.
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5.2 Death After Commencement of Benefits
If a Participant dies after benefit payments have commenced under Article IV, a survivor benefit shall be paid to the Participants Beneficiary only if, and to the extent, provided for by the form of payment under which the Participant was receiving a Supplemental Retirement Benefit, pursuant to Section 4.7.
5.3 Suicide; Misrepresentation
No benefit shall be paid to a surviving spouse if the Participants death occurs as a result of suicide during the twelve (12) calendar months beginning with the calendar month following commencement of participation in this Plan. The Committee may deny payment if death occurs within twelve (12) months beginning with the calendar month following commencement of participation in this Plan or if the Participant has made a material misrepresentation in any form or document provided by the Participant to or for the benefit of Employer.
5.4 Effect of Payment
Payment to the surviving spouse shall completely discharge Employers obligations under this Plan.
ARTICLE VIBENEFICIARY DESIGNATION
6.1 Death of Participant
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 Participants lifetime. If a Participants Compensation is community property, any Beneficiary designation shall be valid or effective only as permitted under applicable law.
6.2 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.
6.3 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 Participants benefits (or the balance thereof) as follows:
(a) To the Participants surviving spouse, if any; or
(b) If the Participant shall have no surviving spouse, then to the Participants children in equal shares, by right of representation; or
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(c) If the Participant shall have no surviving spouse or children, then to the Participants estate.
6.4 Effect of Payment
Payment to the Beneficiary shall completely discharge Employers obligations under this Plan.
6.5 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 Section 6.1 above; or
(b) If the Beneficiary shall not have made such designation, then to the Beneficiarys estate.
ARTICLE VII ADMINISTRATION
7.1 Committee; Duties
This Plan shall be administered by the Committee. Members of the Committee may be Participants under this Plan.
7.2 Agents
The Committee may appoint an individual to be the Committees 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.
7.3 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.
7.4 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 VIIICLAIMS PROCEDURE
8.1 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.
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8.2 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 Plans claims review procedure.
8.3 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.
8.4 Final Decision
The decision on review shall normally be made within sixty (60) days after the Committees 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 Committees 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.
ARTICLE IXTERMINATION, SUSPENSION OR AMENDMENT
9.1 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 Section 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.
9.2 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 Section 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.
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ARTICLE XMISCELLANEOUS
10.1 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 Section 10.2, 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.
10.2 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 Employers 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 10.2 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 Employers financial health and in no event will any assets of the Employer, in fact, be so restricted.
10.3 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 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 Participants or any other persons bankruptcy or insolvency.
10.4 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.
10.5 Participants 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.
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10.6 Domestic Relations Orders
All or any portion of a Participants 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.
10.7 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.
10.8 Governing Law
The provisions of this Plan shall be construed and interpreted according to the laws of the State of Delaware.
10.9 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.
10.10 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.
10.11 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 Employers 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.
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PIER 1 IMPORTS, INC. |
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By: |
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Gregory S. Humenesky |
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Executive Vice President, Human Resources |
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Date: |
December , 2008 |
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Exhibit 10.5
PIER 1 IMPORTS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TABLE OF CONTENTS
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PAGE |
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ARTICLE I PURPOSE |
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1 |
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ARTICLE II DEFINITIONS |
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1 |
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2.1 |
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Beneficiary |
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1 |
2.2 |
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Board |
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1 |
2.3 |
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Cause |
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1 |
2.4 |
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Change of Control of the Employer |
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2 |
2.5 |
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Code |
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2 |
2.6 |
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Committee |
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2 |
2.7 |
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Compensation |
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2 |
2.8 |
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Early Retirement Date |
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3 |
2.9 |
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Employer |
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3 |
2.10 |
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Good Reason |
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3 |
2.11 |
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Highest Average Compensation |
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3 |
2.12 |
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Normal Retirement Date |
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3 |
2.13 |
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Participant |
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4 |
2.14 |
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Pier 1 |
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4 |
2.15 |
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Regulations |
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4 |
2.16 |
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Retirement |
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4 |
2.17 |
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Separation from Service |
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4 |
2.18 |
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Supplemental Retirement Benefit |
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4 |
2.19 |
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Termination |
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5 |
2.20 |
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Total and Permanent Disability |
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5 |
2.21 |
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Years of Credited Service |
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5 |
2.22 |
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Years of Plan Participation |
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5 |
ARTICLE III PARTICIPATION AND VESTING |
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5 |
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3.1 |
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Participation |
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5 |
3.2 |
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Supplemental Retirement Benefit Vesting |
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5 |
ARTICLE IV SUPPLEMENTAL RETIREMENT BENEFITS |
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6 |
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4.1 |
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Benefit |
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6 |
4.2 |
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Retirement; Disability; Death |
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6 |
4.3 |
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Adjustments for Normal Retirement Benefit |
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7 |
4.4 |
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Adjustments for Early Retirement Benefit |
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7 |
4.5 |
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Termination |
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7 |
4.6 |
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Form of Benefit Payment |
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4.7 |
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Payments |
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4.8 |
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Withholding; Payroll Taxes |
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4.9 |
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Payment to Guardian |
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9 |
4.10 |
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Major Medical and Hospitalization Insurance Coverage |
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ARTICLE V BENEFICIARY DESIGNATION |
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10 |
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5.1 |
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Beneficiary Designation |
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10 |
5.2 |
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Amendments |
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11 |
5.3 |
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No Beneficiary Designation |
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11 |
5.4 |
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Effect of Payment |
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11 |
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5.5 |
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Death of Beneficiary |
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11 |
ARTICLE VI ADMINISTRATION |
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6.1 |
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Committee; Duties |
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6.2 |
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Agents |
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6.3 |
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Binding Effect of Decisions |
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12 |
6.4 |
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Indemnity of Committee |
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ARTICLE VII CLAIMS PROCEDURES |
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7.1 |
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Claim |
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7.2 |
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Denial of Claim |
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7.3 |
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Review of Claim |
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7.4 |
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Final Decision |
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ARTICLE VIII TERMINATION, SUSPENSION OR AMENDMENT |
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8.1 |
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Amendment or Termination |
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8.2 |
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Successor Employer |
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ARTICLE IX MISCELLANEOUS |
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9.1 |
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Unsecured General Creditor |
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9.2 |
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Trust Fund |
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9.3 |
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Nonassignability |
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13 |
9.4 |
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Not a Contract of Employment |
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14 |
9.5 |
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Suicide |
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14 |
9.6 |
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Participants Cooperation |
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14 |
9.7 |
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Domestic Relations Order |
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9.8 |
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Terms |
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14 |
9.9 |
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Captions |
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9.10 |
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Governing Law |
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9.11 |
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Validity |
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15 |
9.12 |
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Successors |
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15 |
9.13 |
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Notice |
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15 |
ii
PIER 1 IMPORTS, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE 1PURPOSE
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 Participants 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 Participants 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 IIDEFINITIONS
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 Participants 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
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(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
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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 Participants 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 Participants base salary or a reduction in the Participants 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 Employers standard retirement policy), in each case as in effect immediately prior to a Change of Control; or
(b) The relocation of the Participants full-time office to a location greater than fifty (50) miles from the Employers current corporate office; or
(c) A reduction in the Participants 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 Participants 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 Participants 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).
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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 Participants 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 Participants death; or
(d) By the Participant other than:
For Good Reason; or
Upon the Participants 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 Participants 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 Participants 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 Committees 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.
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 Participants 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 Participants 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).
4.1 Benefit
Upon incurring a Separation from Service, a Participant shall receive a Supplemental Retirement Benefit from this Plan which, along with the Participants benefits from primary Social Security, shall equal approximately fifty percent (50%) of the Participants 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 Participants death, his Beneficiary a Supplemental Retirement Benefit calculated as follows:
(a) Fifty percent (50%) times the Participants 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 Participants primary Social Security benefit determined at the time of and according to the laws in effect at the Participants 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 Participants 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 Participants 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 Participants attained age seventy (70).
4.4 Adjustments for Early Retirement Benefit
Upon a Participants 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 Participants Early Retirement Date precedes the Participants 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 Participants 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 Participants 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 Participants 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 Participants 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 Participants 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 Participants 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 Participants 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 Participants 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 Participants 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 Employers 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 Participants 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 Employers 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 Employers 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 Participants 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 participants right to a reimbursement may not be subject to liquidation or exchange.
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 Participants lifetime. If a Participants 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 Participants benefits (or the balance thereof) as follows:
(a) To the Participants surviving spouse, if any; or
(b) If the Participant shall have no surviving spouse, then to the Participants children in equal shares, by right of representation; or
(c) If the Participant shall have no surviving spouse or children, then to the Participants estate.
5.4 Effect of Payment
Payment to the Beneficiary shall completely discharge Employers 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 Beneficiarys estate.
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 Committees 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.
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 Plans 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 Committees 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 Committees 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
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.
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 Employers 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 Employers 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 Participants or any other persons 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 Participants death occurs as a result of suicide during the twelve (12) successive calendar months beginning with the calendar month following the commencement of an individuals participation in this Plan.
9.6 Participants 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 Participants 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 Employers 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.
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PIER 1 IMPORTS, INC. |
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By: |
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|
|
|
Gregory S. Humenesky |
|
|
|
Executive Vice President Human Resources |
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||
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Date: |
December , 2008 |
|
15
Exhibit 10.6
FIRST AMENDMENT TO PIER 1 IMPORTS, INC.
2006 STOCK INCENTIVE PLAN (OMNIBUS PLAN)
RESTATED AS AMENDED THROUGH MARCH 25, 2008
WHEREAS , Pier 1 Imports, Inc. has heretofore adopted the Pier 1 Imports, Inc. 2006 Stock Incentive Plan (the Plan) effective March 23, 2006;
WHEREAS , the Plan was restated as amended through March 25, 2008;
NOW, THEREFORE , the Plan is amended as follows:
1. Subsection (a) of Paragraph XI of the Plan is replaced with the following for Director Deferred Stock Unit Awards credited after December 31, 2008:
(a) Director Deferred Stock . A Director Deferred Stock Unit Award provides deferral of part or all of a Directors Director Compensation Payment into deferred stock units. Director Deferred Stock Unit Awards shall only be available to Directors who are not employees. A Director Deferred Stock Unit Award is a right to receive shares of Common Stock based upon a bookkeeping entry referencing a value expressed by reference to shares of Common Stock. Each Director who is not an employee may elect, in lieu of being paid any portion of a Director Compensation Payment in cash, to be awarded deferred stock units in an amount equal to the dollar amount of such Director Compensation Payment divided by the Fair Market Value of a share of Common Stock determined as of the date that such deferred Director Compensation Payment amount would otherwise have been paid to the Director in cash. Any such election shall be made in whole percentages, on a form prescribed by the Company, at the same percentage for all components of the Director Compensation Payment (i.e., such percentage would apply equally to the Director Annual Retainer Payment and any other fees included in the Director Compensation Payment). Any such election must be made on or before the December 31 of the calendar year prior to the calendar year or fiscal year in which the services for the Director Compensation Payment which such Director is deferring into deferred stock units will be rendered, and any such election shall be irrevocable as of such December 31. Notwithstanding the foregoing, the election described in the preceding sentence by an individual who has first become elected as a Director may be made before or within the 30-day period immediately following his or her election as a Director provided that the deferral effected by such election will only apply with respect to compensation earned for services rendered as a Director after the date such election was made. Any deferral portion of such Director Compensation Payment credited to such Director in the form of deferred stock units, in lieu of being paid to such Director in cash, shall be awarded additional deferred stock units in an amount equal to .25 times the dollar amount of the deferred portion of
the Director Annual Retainer Payment divided by the Fair Market Value of a share of Common Stock determined as of the date that such deferred Director Compensation Payment amount would otherwise have been paid to the Director in cash.
2. The following sentence shall be added to the end of subsection (c) of Paragraph XI of the Plan:
Deferred stock units shall be paid in cash within such thirty (30) day period to the extent applicable Plan limitations at such time preclude Plan distributions of Common Stock.
3. All terms used in this First Amendment, unless specifically defined herein, have the same meanings attributed to them in the Plan. As amended hereby, the Plan is specifically ratified and reaffirmed.
IN WITNESS WHEREOF , the party hereto has caused this First Amendment to be executed effective as of December 15, 2008.
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PIER 1 IMPORTS, INC . |
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By: |
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Michael A. Carter |
Exhibit 10.7
PIER 1 IMPORTS
NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
ADOPTED JUNE 24, 1999
AS AMENDED DECEMBER 15, 2008
Cash Compensation (payable in advance at beginning of each fiscal year on the first business day of such fiscal year)
· |
|
Non-Employee Director Annual Retainer |
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$ |
150,000 |
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· |
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Audit Committee Chair Annual Retainer |
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$ |
25,000 |
|
· |
|
Compensation Committee Chair Annual Retainer |
|
$ |
25,000 |
|
· |
|
Nominating/Corporate Governance Committee Chair Annual Retainer |
|
$ |
10,000 |
|
· |
|
Non-Executive Chairman of the Board Annual Retainer |
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$ |
75,000 |
|
Director Deferred Stock Units
· Pursuant to the Director Deferred Stock Unit Awards program set forth in the Pier 1 Imports, Inc. 2006 Stock Incentive Plan , as amended (the Plan).
· Each Non-Employee Director may elect to defer up to 100% (in whole percentages) of their cash fees (i.e., director, committee chair and chairman annual retainers) for the period January 1, 2009 through February 28, 2009 into an equivalent value of deferred stock units (up to the Plans maximum calendar year limit of 375,000 units per individual), provided that any such deferral election is made on or before and becomes irrevocable as of December 31, 2008. These fees are payable January 2, 2009.
· Each Non-Employee Director may elect to defer up to 100% (in whole percentages) of their cash fees (i.e., director, committee chair and chairman annual retainers) for an upcoming fiscal year into an equivalent value of deferred stock units (up to the Plans maximum calendar year limit of 375,000 units per individual), provided that any such deferral election is made on or before and becomes irrevocable as of the December 31 immediately preceding such fiscal year and is effective for the entire fiscal year.
· Deferrals of the director annual retainer (other than the portion of the deferral representing committee chair or chairman annual retainers) are credited with an additional 25% of the deferred amount.
· At the time a Non-Employee Director ceases to be a Director of the Company, the deferred stock units credited to such Director at that time shall be adjusted by Pier 1 Imports to remove from the credited amount (i) any portion of the deferred stock units applicable to the time period following the Director ceasing to be a Director of the Company, plus (ii) an amount of deferred stock units equal to any cash compensation paid to the Non-Employee Director for such time period (such units to be valued as of the cash compensation payment date). The adjusted amount of deferred stock units will be converted on a share-to-share basis and paid to the Non-Employee Director in the form of a single distribution of Pier 1 Imports, Inc. common stock within 30 days, except that deferred units will be paid in cash to the extent that applicable Plan limitations at such time preclude Plan distributions of Pier 1 Imports, Inc. common stock.
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Exhibit 10.8
TERMINATION OF PIER 1 EXECUTIVE HEALTH
EXPENSE
REIMBURSEMENT PLAN
WHEREAS , the Pier 1 Executive Health Expense Reimbursement Plan (the Plan) was restated on March 27, 2007; and
WHEREAS , on January 24, 2008, the Compensation Committee of the Board of Directors of Pier 1 Imports, Inc. (the Company) approved a resolution (i) eliminating all reimbursements under the Plan effective March 1, 2008 and (ii) authorizing the Company to terminate the Plan after administration of claims under the Plan through March 1, 2008;
NOW THEREFORE :
A. Effective as of March 1, 2008, the Plan will not reimburse for medical services or any other services provided after such date.
B. Effective as of January 5, 2009, the Plan is terminated.
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Pier 1 Imports, Inc., |
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a Delaware corporation |
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By: |
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Gregory S. Humenesky |
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Executive Vice President |
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January 5, 2009 |
Exhibit 31.1
Certification of the Chief Executive Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
I, Alexander W. Smith, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Pier 1 Imports, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
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January 6, 2009 |
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By: |
/s/ Alexander W. Smith |
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Alexander W. Smith, President and |
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Chief Executive Officer |
Exhibit 31.2
Certification of the Chief Financial Officer Pursuant to Exchange Act Rule 13a-14(a)/15d-14(a)
I, Charles H. Turner, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Pier 1 Imports, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: |
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January 6, 2009 |
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By: |
/s/ Charles H. Turner |
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Charles H. Turner, Executive Vice President and |
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Chief Financial Officer |
Exhibit 32.1
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Each of the undersigned officers of Pier 1 Imports, Inc., hereby certifies that:
1. The Quarterly Report of Pier 1 Imports, Inc. for the period ended November 29, 2008 fully complies with the requirements of sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the above-mentioned report fairly presents, in all material respects, the financial condition and results of operations of Pier 1 Imports, Inc. for the period covered by the report.
Date: |
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January 6, 2009 |
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By: |
/s/ Alexander W. Smith |
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Alexander W. Smith, President and |
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Chief Executive Officer |
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Date: |
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January 6, 2009 |
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By: |
/s/ Charles H. Turner |
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Charles H. Turner, Executive Vice President and |
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Chief Financial Officer |