Exhibit 10. 1

              DATED       2006    
 
  PIR TRADING, INC.     (1 )
 
           
 
  and        
 
           
 
  PIER 1 IMPORTS (U.S.), INC.     (2 )
 
           
 
  and        
 
           
 
  PALLI LIMITED     (3 )
 
           
 
  and        
 
           
 
  LAGERINN EHF     (4 )
 
           
 
 
 
       
 
  AGREEMENT        
 
  for the sale and purchase of the entire issued share capital of        
 
  The Pier Retail Group Limited        
 
           
 
 
 
       

Heatons llp
Manchester
Tel: 0161 835 8010
Fax: 0161 835 8015
LAG3.1

 

--------------------------------------------------------------------------------

 

CONTENTS

              1  
DEFINITIONS AND INTERPRETATION
    1   2  
SALE AND PURCHASE OF THE SHARES AND ASSIGNMENT OF INTERCOMPANY DEBT
    6   3  
CONSIDERATION
    7   4  
COMPLETION
    7   5  
2006 AUDITED ACCOUNTS
    10   6  
WARRANTIES
    10   7  
LIMITATION OF DEBT SELLER’S LIABILITY AND SELLER’S LIABILITY
    12   8  
PURCHASER’S AND PURCHASER’S GUARANTOR’S WARRANTIES AND PURCHASER’S GUARANTEE
    16   9  
RESTRICTIVE COVENANTS
    17   10  
ANNOUNCEMENTS AND CONFIDENTIALITY
    18   11  
FURTHER ASSURANCE
    19   12  
ASSIGNMENT
    20   13  
ENTIRE AGREEMENT
    20   14  
WAIVER, RIGHTS AND RELEASE
    20   15  
VARIATION
    21   16  
COSTS AND EXPENSES
    21   17  
SET OFF
    21   18  
NOTICES
    21   19  
COUNTERPARTS, LANGUAGE, INVALIDITY, COMPLETION
    22   20  
THIRD PARTY RIGHTS
    22   21  
GOVERNING LAW AND JURISDICTION
    22  

SCHEDULES

              1.  
The Group
    24   2.  
Properties
    28   3.  
Registered Intellectual Property Rights
    36   4.  
The Warranties
    37   5.  
Completion Requirements
    48  

AGREED FORM DOCUMENTS

      1.  
Accounts (included in the Disclosure Letter)
2.  
2006 Financial Statements
3.  
Co-existence Agreement
4.  
Deed of Assignment
5.  
Deed of Release
6.  
Debt Confirmation Deed
7.  
Index of Data Room Documents
8.  
Tax Deed
9.  
Director’s resignation letter
10.  
Press Release
11.  
Cover page of bundle to the Disclosure Letter

 

--------------------------------------------------------------------------------

 

THIS AGREEMENT is dated
                                                                                                                                                                                  2006
BETWEEN:

(1)   PIR TRADING, INC. whose principal place of trading is at 100 Pier 1 Place,
Fort Worth, Texas 76102, United States of America (the “Seller”);   (2)   PIER 1
IMPORTS (U.S.), INC. whose principal place of trading is at 100 Pier 1 Place,
Fort Worth, Texas 76102, United States of America (the “Debt Seller”);   (3)  
PALLI LIMITED (registered number 5508898) whose registered office is at 4th
Floor, 43-44 New Bond Street, London W1S 2SA (the “Purchaser”); and   (4)  
LAGERINN EHF (registered in Iceland with the Register of Enterprises under
480793 – 2699) whose registered office is situated at Sundaborg 7, 104
Reykjavik, Iceland (the “Purchaser’s Guarantor”).

BACKGROUND

(A)   The Company has an authorised share capital of £8,731,111 made up of
611,111 ordinary shares of £1 each and 8,120,000 preference shares of £1 each,
all of which are issued and fully paid or credited as fully paid (the “Shares”).
  (B)   Further particulars of the Company and its Subsidiaries at the date of
this Agreement are set out in Schedule 1.   (C)   The Seller has agreed to sell
the Shares to the Purchaser and the Purchaser has agreed to purchase the Shares
on the terms of this Agreement.   (D)   The Debt Seller has agreed to sell the
Intercompany Debt to the Purchaser and the Purchaser has agreed to purchase the
Intercompany Debt on the terms of this Agreement.   (E)   The Purchaser’s
Guarantor is willing to guarantee the obligations of the Purchaser under this
Agreement and the other Transaction Documents.

IT IS AGREED AS FOLLOWS:

1   DEFINITIONS AND INTERPRETATION   1.1   In this Agreement the following words
and expressions shall have the following meaning:

     
“2006 Audited Accounts”
  has the meaning set out in clause 5.2;
 
   
“2006 Financial Statements”
  means the draft financial statements of the Company as at 25 February 2006 in
the Agreed Form;
 
   
“Accounts”
  the audited consolidated balance sheet of the Group as at the Accounts Date
and the audited consolidated profit and loss account for the year ended on that
date for the Group including the notes and directors’ report relating to them, a
copy of which is included in the

 

--------------------------------------------------------------------------------

 

     
 
  Disclosure Documents;
 
   
“Accounts Date”
  26.02.05;
 
   
“Accounting Standards”
  statements of standard accounting practice (including financial reporting
standards) adopted or issued by the ASB;
 
   
“Agreement”
  this Agreement including its recitals and the schedules but not the Tax Deed;
 
   
“Agreed Form”
  agreed and initialled by, or on behalf of, the Seller and the Purchaser;
 
   
“ASB”
  The Accounting Standards Board;
 
   
“Auditors”
  Ernst & Young LLP, Apex Plaza, Reading, Berkshire RG1 1YE;
 
   
“Business Day”
  any day except a Saturday or Sunday on which banks are generally open in
London, New York and Fort Worth for normal business;
 
   
“Co-existence Agreement”
  the agreement of the same date as this Agreement concerning brand co-existence
in the Agreed Form;
 
   
“Company”
  The Pier Retail Group Limited a company incorporated and registered in England
and Wales with company number 2650000 whose registered office is at 9-12 North
Central 127 Milton Park, Abingdon, Oxfordshire, OX14 4SA;
 
   
“Completion”
  completion of the sale and purchase of the Shares and assignment of the
Intercompany Debt pursuant to this Agreement;
 
   
“Completion Date”
  the date of this Agreement;
 
   
“Concession Properties”
  means those properties the subject of concession agreements as briefly
described in Part 2 of Schedule 2;
 
   
“Data Room Documents”
  the documents and information made available to the Purchaser and/or its
advisers in the data room provided by IntraLinks prior to the signing of this
Agreement as referred to in the data room index in the Agreed Form, which is
annexed to the Disclosure Letter;

2

--------------------------------------------------------------------------------

 

     
“Debt Confirmation Deed”
  the debt confirmation deed in the Agreed Form between the Debt Seller and
certain of the Group Companies;
 
   
“Deed of Assignment”
  the deed of assignment in relation to the Intercompany Debt, in the Agreed
Form;
 
   
“Deed of Release”
  the deed of release between the Debt Seller and certain of the Group Companies
in the Agreed Form;
 
   
“Directors”
  the directors named in Schedule 1;
 
   
“Disclosed”
  fairly disclosed to the Purchaser in any of the Disclosure Documents;
 
   
“Disclosure Documents”
  the Disclosure Letter (including the two identical bundles of documents
collated by or on behalf of the Seller, the outside covers of each of which have
been signed for identification by or on behalf of the Seller and the Purchaser)
and the Data Room Documents;
 
   
“Disclosure Letter”
  the letter of the same date as this Agreement from the Seller to the
Purchaser;
 
   
“Encumbrance”
  any (other than by virtue of this Agreement) right to acquire, option, right
of pre-emption, mortgage, charge, pledge, lien, or other form of security or
encumbrance or security agreement and any agreement to create any of the
foregoing;
 
   
“GAAP”
  generally accepted accounting principles and practices in the United Kingdom
including all Accounting Standards, Financial Reporting Standards and abstracts
of the Urgent Issues Task Force of the ASB;
 
   
“Group”
  together the Company and the Subsidiaries and “Group Company” shall be a
reference to the Company or any of the Subsidiaries as the case may be;
 
   
“Indebtedness”
  in relation to the Group, all borrowings and indebtedness in the nature of
debt but excluding trade creditors arising in the ordinary course of business
and off balance sheet finance arrangements, lease purchase arrangement, contract
hire and/or hire purchase arrangements;
 
   
“Intellectual Property
Rights”
  has the meaning given in paragraph 21 of Part 1 of Schedule 4;
 
   
“Intercompany Debt”
  the amount stipulated in the Deed of Assignment owing by the Company to the
Debt Seller immediately prior to Completion being the aggregate amount of all

3

--------------------------------------------------------------------------------

 

     
 
  Indebtedness of whatever nature owing by the Group Companies to the Debt
Seller, immediately prior to Completion;
 
   
“Intercompany Debt Consideration”
  the Provisional Intercompany Debt Consideration after adjustment (if any)
pursuant to clause 5;
 
   
“Pension Schemes”
  agreements for the payment of any pensions, allowances, lump sums or other
like benefits on retirement for the benefit of any present or former director,
officer or employee of the Group or for the benefit of the dependents of any
such persons;
 
   
“Prohibited Area”
  the United Kingdom;
 
   
“Properties”
  has the meaning given in paragraph 13 of Part 1 of Schedule 4;
 
   
“Provisional Cash
Consideration”
  the sum of £8,540,196 payable in cash on Completion pursuant to clause 3;
 
   
“Provisional
Intercompany Debt
Consideration”
  £8,540,195;
 
   
"Purchaser’s Group”
  the Purchaser, all its subsidiary undertakings and parent undertakings and all
the other subsidiary undertakings of each of its parent undertakings (other than
the Group Companies) at the relevant time;
 
   
“Purchaser’s Solicitors”
  Heatons LLP of Freetrade Exchange, 37 Peter Street, Manchester, M2 5GB;
 
   
“Seller’s Group”
  Pier 1 Imports, Inc. and all its subsidiary undertakings (other than the Group
Companies) at the relevant time;
 
   
“Seller’s Solicitors”
  Allen & Overy LLP of One New Change, London, EC4M 9QQ;
 
   
“Subsidiary”
  a subsidiary of the Company details of which are set out in Part 2 of
Schedule 1 and “Subsidiaries” shall be construed accordingly;  
“Tax”
  (a) all forms of taxation and statutory, governmental, state, federal,
provincial, local government or municipal charges, duties, imposts,
contributions, levies, withholdings or liabilities in each case having the
character of taxation wherever chargeable and whether of the UK or any other
jurisdiction; and (b) any penalty, fine, surcharge, interest, charges or costs
payable in connection with any taxation within (a) above;

4

--------------------------------------------------------------------------------

 

     
“Tax Authority”
  HM Revenue & Customs, Department of Social Security and any other governmental
or other authority whatsoever competent to impose any Tax whether in the United
Kingdom or elsewhere;
 
   
“Tax Deed”
  the deed of the same date as this Agreement, containing certain taxation
covenants given by the Seller in the Agreed Form;
 
   
“Tax Statute”
  any directive, statute, enactment, law or regulation, wheresoever enacted or
issued, coming into force or entered into providing for or imposing any Tax (and
shall include orders, regulations, instruments, bye-laws or other subordinate
legislation made under the relevant statute or statutory provision, and any
directive, statute, enactment, law, order, regulation or provision which amends,
extends, consolidates or replaces the same or which has been amended, extended,
consolidated or replaced by the same) except to the extent that any such
directive, statute, enactment, law, regulation, order, instrument, bye-law,
subordinate legislation or provision made or enacted after the date of this
Agreement would create or increase any liability of the Seller under this
Agreement or the Tax Deed;
 
   
“Tax Warranties”
  the Warranties set out in Part 2 of Schedule 4;
 
   
“Transaction Documents”
  this Agreement, the Tax Deed, the Deed of Assignment, and the Co-existence
Agreement;
 
   
“UK Companies”
  together The Pier Retail Group Limited, The Pier (Retail) Limited and Pier
Direct Limited (and “UK Company” shall be a reference to any of them as the case
may be);
 
   
“Warranties”
  the warranties set out in clause 6.1 and Schedule 4;
 
   
"Warranty Claim”
  a claim by the Purchaser the basis of which is that a Warranty is, or is
alleged to be, untrue or inaccurate;
 
   
“Working Capital
Reference Amount”
  £4,689,000.

1.2   The terms “holding company” and “subsidiary” shall have the meaning given
to them in sections 736 and 736A of the CA 85.   1.3   The following references
shall have the following meanings: “CA 85” means the Companies Act 1985; “CAA”
means the Capital Allowances Act 2001;“FSMA 2000” means the Financial Services
and Markets Act 2000; “LPA” means Law of Property (Miscellaneous Provisions) Act
1994; “TA 88” means Income and Corporation Taxes

5

--------------------------------------------------------------------------------

 

    Act 1988; “TCGA” means Taxation of Chargeable Gains Act 1992; “TMA” means
Taxes Management Act 1970; “VAT” means Value Added Tax; “VATA” means Value Added
Tax Act 1994.   1.4   “Control” in relation to a body corporate, means the power
of a person to secure that the affairs of the body corporate are conducted in
accordance with the wishes of that person (a) by means of the holding of shares,
or the possession of voting power, in or in relation to that or any other body
corporate or (b) by virtue of any powers conferred by the constitutional or
corporate documents, or any other document, regulating that or any other body
corporate. A “Change of Control” occurs if a person who Controls any body
corporate ceases to do so or if another person acquires Control of it.   1.5  
The table of contents and headings in this Agreement are inserted for
convenience only and shall not affect its construction.   1.6   Expressions in
the singular shall include the plural and references to any gender shall include
all other genders.   1.7   References to persons shall include bodies corporate,
unincorporated associations and partnerships.   1.8   References to the word
“include” or “including” are to be construed without limitation.   1.9   Except
where the context otherwise requires, references to recitals, schedules and
clauses are to recitals and schedules to and clauses of this Agreement. Except
where the context otherwise requires, references within a schedule to paragraphs
are to paragraphs of that schedule.   1.10   References in this Agreement to any
statute, statutory provision, EC Directive or treaty include a reference to that
statute, statutory provision, EC Directive or treaty as amended, extended,
consolidated or replaced from time to time (whether before or after the date of
this Agreement) (and includes any subordinate legislation made under the
relevant statute, statutory provision, EC Directive or treaty) except to the
extent that any statute, statutory provision, EC Directive, treaty or
subordinate legislation made, enacted, amended, extended, consolidated or
replaced after the date of this Agreement would create or increase any liability
of the Seller or the Debt Seller under this Agreement or the Tax Deed.   1.11  
Any reference to writing or written includes faxes and any non-transitory form
of visible reproduction or words (but not e-mail).   2   SALE AND PURCHASE OF
THE SHARES AND ASSIGNMENT OF INTERCOMPANY DEBT   2.1   The Seller shall sell the
Shares and the Purchaser shall purchase the Shares from the Seller with all
rights attaching to them at the date of this Agreement.   2.2   The Shares are
sold to the Purchaser with full title guarantee as defined in the LPA.   2.3  
Title to and beneficial ownership of the Shares shall pass to the Purchaser on
Completion. The Purchaser shall be entitled to receive all dividends and
distributions declared, paid or made by the Company on or after the date of this
Agreement.

6

--------------------------------------------------------------------------------

 

2.4   The Purchaser shall not be obliged to complete the purchase of any of the
Shares unless the purchase of all of the Shares is completed simultaneously.  
2.5   The Seller waives any rights of pre-emption or other restrictions on
transfer in respect of the Shares or any of them conferred on it under the
articles of association of the Company or otherwise.   2.6   The Debt Seller
shall assign to the Purchaser the benefit of the Intercompany Debt and the
Purchaser shall accept the assignment of the Intercompany Debt at Completion
pursuant to the Deed of Assignment.   2.7   Without prejudice to the rights of
any member of the Seller’s Group under any of the Transaction Documents, the
Deed of Release and/or the Debt Confirmation Deed, the Seller on behalf of
itself and each other member of the Seller’s Group waives all and any claims
against each Group Company which any member of the Seller’s Group may have of
whatsoever nature and which arose prior to the date of this Agreement.   3  
CONSIDERATION   3.1   The consideration for the Shares shall be the sum of £1 to
be paid to the Seller in cash on Completion.   3.2   The consideration for the
assignment of the Intercompany Debt shall be the Intercompany Debt Consideration
of which the Provisional Intercompany Debt Consideration shall be paid by the
Purchaser to the Debt Seller in accordance with clause 3.3.1.   3.3   The
Intercompany Debt Consideration shall be paid by the Purchaser to the Debt
Seller as follows:

  3.3.1   £8,540,195, being the Provisional Intercompany Debt Consideration,
shall be paid in cash on Completion; and     3.3.2   that amount shall be
subject to adjustment in accordance with clause 5.

4   COMPLETION   4.1   Completion shall take place at the Seller’s Solicitors’
offices immediately after the execution and exchange on the Completion Date.  
4.2   At Completion:

  4.2.1   the Seller shall comply with and perform all of its obligations listed
in Schedule 5;     4.2.2   the Purchaser shall:-

  4.2.2.1   pay the Provisional Cash Consideration by way of electronic transfer
to the Seller’s Solicitors who are irrevocably authorised to receive the same
and whose receipt shall be an effective discharge of the Purchaser’s obligation
to pay such sum and the Purchaser shall not be concerned to see to the
application or be answerable for the loss or misapplication of such sum;

7

--------------------------------------------------------------------------------

 

  4.2.2.2   deliver to the Seller a copy of the minutes of a meeting of the
directors of the Purchaser authorising the execution by the Purchaser of this
Agreement, the Tax Deed, the Deed of Assignment and the Co-existence Agreement
and a copy of the minutes of the meeting of the directors of the Purchaser’s
Guarantor authorising the execution by the Purchaser’s Guarantor of this
Agreement;     4.2.2.3   deliver to the Seller a counterpart of the Tax Deed
duly executed as a deed by the Purchaser;     4.2.2.4   deliver to the Seller a
counterpart of the Deed of Assignment duly executed by the Purchaser;    
4.2.2.5   deliver to the Seller a counterpart of the Co-existence Agreement duly
executed by the Purchaser; and     4.2.2.6   deliver to the Seller a counterpart
of the Disclosure Letter duly executed by the Purchaser.

4.3   If on Completion the Seller or the Purchaser fails to comply with any of
its obligations under clause 4.2.1 or 4.2.2 (as applicable) then the other shall
not be obliged to complete this Agreement and may at its absolute discretion:-

  4.3.1   defer Completion to a date not more than 28 days after the Completion
Date in which case this clause 4.3 shall apply to Completion as so deferred;    
4.3.2   proceed to Completion so far as practicable and without prejudice to its
rights under the Agreement; or     4.3.3   waive all or any of the defaulting
party’s obligations under clause 4.2.1 or 4.2.2 (as applicable).

4.4   The Seller shall procure that on Completion each Group Company is released
from all guarantees and indemnities given by that Group Company prior to the
date of this Agreement in respect of any liability or obligation of any member
of the Seller’s Group and pending such release the Seller shall indemnify that
Group Company against all liabilities under the guarantees and indemnities.  
4.5   The Purchaser shall procure that as from Completion each member of the
Seller’s Group is released from all guarantees and indemnities which have been
given by that member prior to the date of this Agreement in respect of any
liability or obligation of any Group Company, and pending such release the
Purchaser shall indemnify that member of the Seller’s Group against all
liabilities under those guarantees and indemnities.   4.6   Immediately
following Completion the Seller shall, without delay send to the Purchaser, all
records, correspondence, documents, files, memoranda and other papers owned by
any Group Company which are in the Seller’s possession or direct control
relating to the Group or operations of the Group which are not kept at any of
the Properties, provided that the Seller shall be entitled to retain copies of
any records, documentation and information which the Seller would be entitled to
request in accordance with the provisions of Clause 11.2.

8

--------------------------------------------------------------------------------

 

4.7   Within 10 days following Completion, the Seller will pay to the Purchaser:

  4.7.1   the amount of any payments due to be paid (before any deductions) to
Alison Richards, John Higgins, Fiona Robinson and Fiona Strang (together, the
“Bonus Employees") (being employees within the Group) by the Seller within
30 days of Completion in accordance with the bonus letter agreements between the
Seller and each of the Bonus Employees dated 13 March 2006 and referred to in
the Disclosure Letter (the “Payments”); and     4.7.2   the amount of secondary
Class I National Insurance contributions for which the relevant Group Company
employing each Bonus Employee will be liable as a result of the Payments (the
“Secondary NICs”).

4.8   The Purchaser:

  4.8.1   within 10 days following receipt of payment from the Seller under
clause 4.7, will discharge the Seller’s liability to the Bonus Employees in
respect of the Payments, as agent of the Seller; and     4.8.2   will procure
the payment to the relevant tax authority within the required time period for
the Payments (in the case of the amounts referred to in sub-clause 4.8.2.1 as
agent of the Seller), of the amount of:

  4.8.2.1   any income tax to be deducted under the PAYE system (and the amount
of any primary Class 1 National Insurance contributions payable) in respect of
the Payments; and     4.8.2.2   the Secondary NICs.

4.9 For the avoidance of doubt, the Seller will have no further liability under
this Agreement and/or the Tax Deed or otherwise for any income tax to be
deducted under the PAYE system, primary Class 1 National Insurance contributions
or secondary Class 1 National Insurance contributions due in respect of the
Payments.   4.10 The Seller agrees to indemnify the Purchaser (for itself and as
trustee for each Group Company) from and against any liability, claim, loss or
cost (reasonably and properly incurred) arising out of the exercise of any
options granted by Pier 1 Imports, Inc. prior to the date of this Agreement to
any employee of any of the Group Companies over any shares in Pier 1 Imports,
Inc. provided that:

  4.10.1   the Purchaser shall (and shall procure that the Group Companies) use
their reasonable endeavours following the exercise of any such options to
mitigate any such liability, claim, loss or cost;     4.10.2   this indemnity
shall not apply to the extent of any income tax under the PAYE system and
primary Class I National Insurance contributions in respect of the exercise of
any such option; and     4.10.3   no liability shall attach to the Seller under
this clause 4.10 to the extent that the same loss has been recovered under any
other provision of this Agreement or the Tax Deed (or vice versa) and
accordingly, the Purchaser shall only recover once in respect of the same loss.

9

--------------------------------------------------------------------------------

 

5   2006 AUDITED ACCOUNTS   5.1   As soon possible after Completion, the
Purchaser shall procure that:

  5.1.1   the Company instructs the Auditors to undertake the audit of the 2006
Financial Statements applying the specific accounting principles, policies and
practices applied in the preparation of the Accounts on a basis consistent with
the audit of the Accounts; and     5.1.2   following completion of the audit,
the board of directors of the Company shall approve the resulting accounts as
the statutory accounts of the Company as at 25 February 2006 and that any two
directors of the Company sign such accounts.

5.2   The accounts of the Company prepared and signed in accordance with clause
5.1 shall, once the Auditors have signed their audit report on such accounts, be
the “2006 Audited Accounts” and the amount set out in the consolidated balance
sheet included in those accounts as Net Current Assets as at 25 February 2006
shall be the “Working Capital Amount”.   5.3   The Purchaser shall send a copy
of the 2006 Audited Accounts to the Seller within five Business Days of the
audit report on those accounts being signed in accordance with clause 5.2.   5.4
  If the Working Capital Amount is greater than the Working Capital Reference
Amount, the Purchaser shall pay an amount equal to that excess to the Debt
Seller as an adjustment to the Provisional Intercompany Debt Consideration. If
the Working Capital Amount is less than the Working Capital Reference Amount,
the Debt Seller shall repay an amount equal to that shortfall to the Purchaser
as an adjustment to the Provisional Intercompany Debt Consideration.   5.5   Any
amount payable by the Debt Seller or the Purchaser (as applicable) in accordance
with the provisions of clause 5.4 shall (a) in the case of any amount to be paid
by the Purchaser, be paid within 10 Business Days after the date on which the
audit report on the 2006 Audited Accounts is signed, and (b) in the case of any
amount to be repaid by the Debt Seller, be paid within 10 Business Days
following receipt by the Debt Seller of a copy of the 2006 Audited Accounts from
the Purchaser.   5.6   In the case of any amount payable in accordance with the
provisions of clause 5.5, any payment shall be made by the relevant party to the
other party’s solicitors (being, the Purchaser’s Solicitors or the Seller’s
Solicitors, as applicable) who are irrevocably authorised to receive the same
and whose receipt shall be an effective discharge of (as applicable) the Debt
Seller’s or the Purchaser’s obligation to pay such amount. Any such amount shall
be paid by electronic transfer in immediately available funds.   6   WARRANTIES
  6.1   The Seller warrants to the Purchaser that except as Disclosed each of
the statements set out in Schedule 4 is true and accurate. The Purchaser has
entered into this Agreement and the Deed of Assignment upon the basis of and in
reliance upon the Warranties.   6.2   Without prejudice to Clause 13.3 the
Purchaser acknowledges and agrees that:

10

--------------------------------------------------------------------------------

 

  6.2.1   the Warranties are the only representations, warranties or other
assurances of any kind given by or on behalf of the Seller and on which the
Purchaser may rely in entering into this Agreement;     6.2.2   no other
statement, promise or forecast made by or on behalf of the Seller may form the
basis of, or be pleaded in connection with, any claim by the Purchaser under or
in connection with this Agreement; and     6.2.3   it does not have at the date
of this Agreement actual knowledge of any fact which is inconsistent with any of
the Warranties or makes any of them untrue or inaccurate.

6.3   Clause 6.1 shall apply as if:

  6.3.1   none of the Warranties, other than those set out in sub-paragraphs
3.5, 8.1 and paragraphs 13 and 15 of Schedule 4, relate in any way to the
Properties or any of them;     6.3.2   none of the Warranties, other those that
set out in sub-paragraphs 3.5 and 8.1, paragraph 15 and the Tax Warranties set
out in Part 2 of Schedule 4, relate in any way to Tax; and     6.3.3   none of
the Warranties, other than those set out in sub-paragraphs 3.5, 8.1 and
paragraph 21 of Schedule 4, relate in any way to any Intellectual Property Right
or any agreement or other arrangement in connection with any Intellectual
Property Right.

6.4   Where any of the Warranties is made or given “so far as the Seller is
aware” or “to the best of the Seller’s knowledge, information or belief” or any
similar expression, such Warranty shall be construed to refer to the actual
knowledge of the Seller after making careful enquiry of Alison Richards and John
Higgins and no other person.   6.5   The Seller agrees, in the absence of fraud,
dishonesty or wilful concealment by or on behalf any Group Company or any of its
employees or directors, to waive any and all rights or claims which it might
otherwise have in respect of any misrepresentation, inaccuracy or omission in or
from any information or advice supplied by any Group Company or its officers,
employees or agents in connection with the giving of Warranties, the Tax Deed
and/or the preparation of the Disclosure Letter and the Data Room Documents.  
6.6   Each of the Warranties shall be separate and independent and save as
expressly otherwise provided shall not be limited by reference to any other
Warranty or by anything in this Agreement or the Tax Deed.   6.7   The rights of
the Purchaser in respect of a breach of any of the Warranties shall not be
affected by Completion.   6.8   Notwithstanding any of the other provisions of
this Agreement the Warranties and any Warranty Claim shall be subject to the
limitations and other provisions set out in clause 7.   6.9   Any payment made
by the Seller in satisfaction of a Warranty Claim or in satisfaction of a claim
by the Purchaser under the Tax Deed shall be deemed to be a reduction in the

11

--------------------------------------------------------------------------------

 

    Intercompany Debt Consideration.   7   LIMITATION OF DEBT SELLER’S LIABILITY
AND SELLER’S LIABILITY   7.1   Notwithstanding any of the other provisions of
this Agreement or the Tax Deed, the liability of the Seller in respect of claims
under the Warranties or a claim under the Tax Deed shall be limited according to
the provisions of this clause.   7.2   If the Purchaser or any Group Company
becomes aware of a matter or circumstance which is likely to give rise to a
Warranty Claim, the Purchaser shall give notice to the Seller specifying that
matter or circumstance in reasonable detail (including, without limitation, the
Purchaser’s estimate, on a without prejudice basis, of the amount of such claim)
as soon as reasonably practicable after it or the relevant Group Company (as the
case may be) becomes aware of that matter or circumstance. The Seller shall not
be liable for any losses in respect of a Warranty Claim to the extent that they
are increased, or are not reduced, as a result of any failure by the Purchaser
to give notice as contemplated by this paragraph.   7.3   The Seller shall not
be liable under the Warranties to the extent that:

  7.3.1   the facts which might result in a Warranty Claim or possible Warranty
Claim were Disclosed;     7.3.2   the subject of the Warranty Claim is allowed
or provided for or reserved or otherwise taken into account in the Accounts or
the 2006 Audited Accounts or has been included in calculating creditors or
deducted in calculating debtors in the Accounts or the 2006 Audited Accounts or
to the extent such matter was specifically referred to in the notes to the
Accounts or the 2006 Audited Balance Sheet;     7.3.3   the loss has been
recovered under the Tax Deed; or     7.3.4   a Warranty Claim arises or is
increased:

  7.3.4.1   wholly or partly from a voluntary act or omission of any member of
the Purchaser’s Group after Completion which (a) is not in the ordinary course
of business, (b) could reasonably have been avoided, and (c) which the Purchaser
or any Group Company was aware would be likely to give rise to a Warranty Claim;
or     7.3.4.2   wholly or partly from an act or omission compelled by law; or  
  7.3.4.3   as a result of any increase in rates of Tax since the Completion
Date; or     7.3.4.4   wholly or partly as a result of the passing or coming
into force of or any change in any enactment, law, regulation, directive or
requirement or any practice of any government, government department or agency
or regulatory body (including extra-statutory concessions of HM Revenue &
Customs) after the Completion Date whether or not having retrospective effect;
or

12

--------------------------------------------------------------------------------

 

  7.3.4.5   wholly or partly from any change after Completion of the date to
which any Group Company makes up its accounts or in the bases, methods,
principles or policies of accounting of any Group Company; or     7.3.4.6  
wholly or partly from any failure or omission by any Group Company to make any
valid claim, election, surrender or disclaimer, to give any valid notice or
consent or to do any other thing under the provisions of any enactment or
regulation relating to Tax after Completion, the making, giving or doing of
which was taken into account in computing the provisions for Tax in the Accounts
or in the 2006 Audited Accounts; or     7.3.4.7   any claim, election, surrender
or disclaimer made or notice or consent given after Completion by any Group
Company or any member of the Purchaser’s Group under the provisions of any
enactment or regulation relating to Tax other than any claim, election,
surrender, disclaimer, notice or consent assumed to have been made, given or
done in computing the amount of any allowance, provision or reserve in the
Accounts or the 2006 Audited Accounts or which is made at the prior request of
the Seller pursuant to its rights under the Tax Deed; or     7.3.4.8   wholly or
partly from a cessation, or any change in the nature or conduct, of any trade
carried on by any Group Company at Completion, being a cessation or change
occurring on or after Completion.

7.4   The Seller shall not be liable in respect of any Warranty Claim or claim
under the Tax Deed unless the amount of damages or payment to which the
Purchaser would, but for this subparagraph, be entitled as a result of the
Warranty Claim or such claim is at least £2,000.   7.5   If more than one
Warranty Claim or claim under the Tax Deed arises from, or is caused by, the
same or substantially the same matter, matters, circumstance or circumstances,
those Warranty Claims or claims shall be aggregated for the purposes of
subparagraph 7.4.   7.6   The liability of the Seller in respect of any Warranty
Claim or a claim under the Tax Deed shall not arise unless the amount of the
Seller’s liability in respect of such Warranty Claim or a claim under the Tax
Deed when aggregated with the amount of the Seller’s liability in respect of any
other such Warranty Claim and/or a claim under the Tax Deed made against the
Seller exceeds £200,000 in which event the whole amount of the Seller’s
liability in respect of such Warranty Claim(s) or claim(s) under the Tax Deed
(and not just the excess) shall be recoverable subject to the other terms of
this Agreement and/or the Tax Deed.   7.7   The liability of the Seller in
respect of all Warranty Claims and claims under the Tax Deed shall not when
taken together exceed £4,000,000.   7.8   The liability of the Seller in respect
of any Warranty Claim other than under the Tax Warranties shall cease six months
after Completion and the liability of the Seller in respect of any claim under
the Tax Warranties or any claim under the Tax Deed shall

13

--------------------------------------------------------------------------------

 

    cease on the sixth anniversary of Completion except in respect of any
Warranty Claim of which notice is given to the Seller as contemplated by clause
7.2 or in respect of a claim under the Tax Deed of which notice is given to the
Seller as contemplated by clause 8.1 of the Tax Deed (in each case before the
relevant date). The liability of the Seller in respect of any Warranty Claim
shall terminate if proceedings in respect of it have not been commenced within
six months after the giving of notice of that Warranty Claim as contemplated by
clause 7.2 unless that Warranty Claim arises as a result of, or in connection
with, a Third Party Claim (as defined in clause 7.10) and the Seller shall have
assumed conduct of that Third Party Claim in accordance with clause 7.10. The
liability of the Seller in respect of any claim under the Tax Deed shall
terminate if proceedings in respect of it have not been commenced within six
months after the giving of notice of that claim as contemplated by clause 8.1 of
the Tax Deed unless the Seller shall have assumed conduct of the claim as
contemplated by clause 8.3 of the Tax Deed.   7.9   Nothing in clauses 7.4 to
7.8 (inclusive), applies to a Warranty Claim that arises as a result of fraud by
the Seller (which has been judicially determined) in respect of the negotiation
and preparation of this Agreement, the Tax Deed, the Deed of Assignment, the
Disclosure Letter and/or the Data Room Documents.   7.10   If a Warranty Claim
arises as a result of, or in connection with, a liability or alleged liability
of a Group Company to a third party (a “Third Party Claim”), then (without
prejudice to the provisions of the Tax Deed in relation to any matter which is
the subject of a claim under it) the Seller may, at any time before any final
compromise or agreement, or expert determination or non-appealable decision of a
court or tribunal of competent jurisdiction, is made in respect of the Third
Party Claim or the Third Party Claim is otherwise disposed of, give notice to
the Purchaser that it elects to assume the conduct of any dispute, compromise,
defence or appeal of the Third Party Claim and of any incidental negotiations on
the following terms:

  7.10.1   the Seller shall indemnify the Purchaser and each relevant Group
Company to the Purchaser’s reasonable satisfaction against all liabilities,
charges, costs and expenses which they may incur in taking any such action as
the Seller may request pursuant to subparagraphs 7.10.2 and 7.10.3 below;    
7.10.2   the Purchaser shall procure that each relevant Group Company at the
cost of the Seller makes available to the Seller on reasonable notice and at
reasonable times such persons and all such information as the Seller may
reasonably request for assessing, contesting, disputing, defending, appealing or
compromising the Third Party Claim;     7.10.3   the Purchaser shall procure
that each relevant Group Company takes such action to assess, contest, dispute,
defend, appeal or compromise the Third Party Claim as the Seller may request and
does not make any admission of liability, agreement, settlement or compromise in
relation to the Third Party Claim without the prior written approval of the
Seller save where to do so would materially prejudice the commercial interests
of the Purchaser’s Group;     7.10.4   the Seller shall keep the Purchaser
informed of the progress of the Third Party Claim and provide the Purchaser with
copies of all material documents and such other information in its possession as
may be requested by the Purchaser (acting reasonably); and

14

--------------------------------------------------------------------------------

 

  7.10.5   the Purchaser will be free to pay or settle any Third Party Claims on
such terms as the Purchaser reasonably considers appropriate (subject to the
other provisions of this clause 7) in the event that the Seller fails to comply
in any material respect with the provisions of clauses 7.10.1, 7.10.2 and
7.10.4.

7.11   If a Warranty Claim arises as a result of, or in connection with, a Third
Party Claim, the Purchaser shall, until the earlier of such time as the Seller
shall give any notice as contemplated by clause 7.10 and such time as any final
compromise or agreement, or expert determination or non-appealable decision of a
court or tribunal of competent jurisdiction, is made in respect of the Third
Party Claim or the Third Party Claim is otherwise finally disposed of, keep, or
procure that each relevant Group Company keeps, the Seller promptly informed of
the progress of the Third Party Claim and provide, or procure that each relevant
Group Company provides, the Seller with copies of all relevant documents and
such other information in the Purchaser’s or a Group Company’s possession as may
be requested by the Seller.   7.12   Nothing in clauses 7.10 or 7.11 shall
require the provision by any person of any information to the extent such
provision would contravene any applicable law or regulation or would breach any
duty of confidentiality owed to any third party. If any information is provided
by any person (the “Provider”) to any other person (the “Recipient”) pursuant to
either of those clauses:

  7.12.1   that information shall only be used by the Recipient in connection
with the Third Party Claim and clause 10 of this Agreement shall in all other
respects apply to that information; and     7.12.2   to the extent that
information is privileged:

  7.12.2.1   no privilege shall be waived by reason of or as a result of its
being provided to the Recipient; and     7.12.2.2   if a third party requests
disclosure by the Recipient in relation to that information, if the Recipient is
the Seller or the Purchaser, the Recipient shall or, if the Recipient is a Group
Company, the Purchaser shall procure that the Recipient shall, promptly notify
the Provider and, to the extent it can do so, itself assert privilege in
opposition to that disclosure request.

7.13   Nothing in this Agreement shall be deemed to relieve the Purchaser from
any common law duty to mitigate any loss or damage incurred by it as a result of
any of the Warranties being untrue or inaccurate.   7.14   No liability shall
attach to the Seller in respect of a Warranty Claim to the extent that the same
loss has been recovered by the Purchaser under any other terms of this
Agreement, the Tax Deed or any other document entered into pursuant to this
Agreement and accordingly the Purchaser may only recover once in respect of the
same loss.   7.15   If the matter or circumstance giving rise to a Warranty
Claim is capable of remedy, the Seller shall have no liability in respect of
that Warranty Claim if the relevant matter or circumstance is remedied within
30 days after the date on which the Seller is given notice as contemplated by
clause 7.2 in relation to that matter or circumstance. The

15

--------------------------------------------------------------------------------

 

    Purchaser shall procure that the Seller is given the opportunity in that
30 day period to remedy the relevant matter or circumstance and shall, without
prejudice to clause 7.11, provide, and shall procure that each relevant Group
Company shall provide, all reasonable assistance to the Seller to remedy the
relevant matter or circumstance.   7.16   Without prejudice to the Purchaser’s
duty to mitigate any loss in respect of any of the Warranties being untrue or
inaccurate, if in respect of any matter which would otherwise give rise to a
Warranty Claim, any of the Group Companies is entitled to claim under any policy
of insurance the Purchaser shall procure that it shall use its reasonable
endeavours to pursue such recovery right and the amount of any insurance monies
received by that Group Company shall reduce pro tanto or extinguish that
Warranty Claim provided always that the Purchaser shall be under no obligation
to recover from its insurers prior to recovery from the Seller in respect of any
such Warranty Claim.   7.17   If the Seller shall make any payment to the
Purchaser in relation to any Warranty Claim and the Purchaser (or any Group
Company) subsequently receives from a third party (other than a Group Company)
any amount referable to the subject matter of the Warranty Claim, the Purchaser
shall, once it or any Group Company has received such amount, repay (after
deducting the reasonable costs and expenses of the Purchaser or any Group
Company reasonably incurred in recovering such amount and any Tax payable on it)
to the Seller the lesser of:

  7.17.1   a sum equal to such amount; and     7.17.2   the amount previously
paid by the Seller to the Purchaser in respect of such Warranty Claim.

7.18   The Debt Seller shall have no liability under the Warranties or the Tax
Deed.   8   PURCHASER’S AND PURCHASER’S GUARANTOR’S WARRANTIES AND PURCHASER’S
GUARANTEE   8.1   Each of the Purchaser and the Purchaser’s Guarantor warrants
to the Seller and the Debt Seller that:

  8.1.1   It has the power to execute and deliver this Agreement, and each of
the other Transaction Documents to which it is or will be a party, and to
perform its obligations under each of them and has taken all action necessary to
authorise such execution and delivery and the performance of such obligations;  
  8.1.2   this Agreement constitutes, and each of the other Transaction
Documents to which it is or will be a party will, when executed, constitute
legal, valid and binding obligations of the Purchaser and the Purchaser’s
Guarantor, as the case may be, in accordance with its terms;     8.1.3   the
execution and delivery by the Purchaser or the Purchaser’s Guarantor, as the
case may be of this Agreement and of each of the other Transaction Documents to
which it is or will be a party and the performance of the obligations of the
Purchaser or the Purchaser’s Guarantor, as the case may be, under it and each of
them do not and will not conflict with or constitute a default under any
provision of:

16

--------------------------------------------------------------------------------

 

  8.1.3.1   any agreement or instrument to which the Purchaser or the
Purchaser’s Guarantor is a party; or     8.1.3.2   the constitutional documents
of the Purchaser or the Purchaser’s Guarantor; or     8.1.3.3   any law, lien,
lease, order, judgment, award, injunction, decree, ordinance or regulation or
any other restriction of any kind or character by which the Purchaser or the
Purchaser’s Guarantor is bound.

8.2   The Purchaser’s Guarantor as primary obligator unconditionally and
irrevocably guarantees by way of continuing guarantee to each of the Seller and
of the Debt Seller the payment and performance when due of amounts payable by
and obligations of the Purchaser under any of this Agreement and the other
Transaction Documents.   8.3   The Purchaser’s Guarantor’s obligation under this
clause:

  8.3.1   constitute direct, primary and unconditional obligations to pay on
demand by the Seller or the Debt Seller (as applicable) any sum which the
Purchaser is liable to pay under this Agreement or any of the other Transaction
Documents and to perform on demand any obligations of the Purchaser under this
Agreement or any of the other Transaction Documents without requiring the Seller
or the Debt Seller (as applicable) first to take steps against the Purchaser or
any other person; and     8.3.2   shall not be affected by any matter or thing
which but for this provision might operate to affect or prejudice those
obligations, including without limitation:

  8.3.2.1   any time or indulgence granted to, or composition with, the
Purchaser or any other person; or     8.3.2.2   the taking, variation, renewal
or release of, or refusal or neglect to perfect or enforce any right, remedy or
security against the Purchaser or any other person; or     8.3.2.3   any legal
limitation, disability or other circumstance relating to the Purchaser or any
unenforceability or invalidity of any obligation of the Purchaser under this
Agreement or any other Transaction Document.

9   RESTRICTIVE COVENANTS   9.1   As further consideration for the Purchaser
agreeing to purchase the Shares on the terms contained in this Agreement and
with the intent of assuring to the Purchaser the full benefit and value of the
goodwill and connections of the business of the Group, the Seller covenants with
the Purchaser, that it shall not, and shall procure that each member of the
Seller’s Group shall not, without the prior written consent of the Purchaser:-

  9.1.1   for 18 months after Completion, carry on, or be concerned or
interested in any way within the Prohibited Area in any retail business which is
in any

17

--------------------------------------------------------------------------------

 

      way in competition with the business of the Group as carried on at the
date of this Agreement; or     9.1.2   save in response to an unsolicited
request from any such person or in response to a bona fide recruitment
advertisement, for 18 months after Completion offer employment to or offer to
conclude any contract of services with an employee of a Group Company holding an
executive or managerial post or entice or endeavour to entice any such employee
to terminate his/her employment with a Group Company provided always that this
clause 9.1.2 shall only apply in relation to persons who were employed by a
Group Company at Completion and who were still so employed immediately prior to
the relevant breach of this clause 9.1.2.

9.2   Each undertaking contained in this clause 9.1 shall be read and construed
independently of the other undertakings and shall be an entirely separate and
severable undertaking.   9.3   Clause 9.1 shall not prevent the Seller or any
member of the Seller’s Group from holding for investment purposes only any units
of an authorised unit trust and/or up to 29.9% of any class of the issued share
or loan capital of any company traded on a recognised investment exchange (as
defined in the FSMA 2000).   9.4   The covenants in this clause apply to actions
carried out by the Seller in any capacity and whether directly or indirectly, or
jointly with any other person or corporate entity.   9.5   Nothing in this
clause 9 shall prohibit the Seller or any other member of the Seller’s Group
from (a) carrying on any business via its website at www.pier1.com or any other
website permitted under the Co-existence Agreement (or otherwise responding to
or satisfying any customer order not solicited from within the United Kingdom)
or (b) from acquiring within the Prohibited Area any goods intended for use or
sale in the business of any member of the Seller’s Group carried on from outside
the Prohibited Area.   9.6   Whilst the undertakings in clause 9.1 are
considered by the parties to be reasonable in all the circumstances, if any one
or more should for any reason be held to be invalid but would have been held to
be valid if part of the wording was deleted, then the above undertakings shall
apply with the minimum modifications necessary to make them valid and effective.
  9.7   Notwithstanding any of the other provisions of this clause 9, clause 9.1
shall cease to apply if there shall be a Change of Control of Pier 1 Imports,
Inc. or if Pier 1 Imports, Inc. should be a party to any merger or any form of
business contribution.   10   ANNOUNCEMENTS AND CONFIDENTIALITY   10.1   Subject
to clause 10.3 and except as required by law or by any legal or regulatory
authority, no announcements, circulars or other communications concerning the
transactions referred to in this Agreement or any ancillary matter shall be made
unless in a form agreed between the Seller and the Purchaser.   10.2   Subject
to clause 10.3 each party shall (without limit in time) keep and procure the
confidentiality of all information belonging to the other party which it has
obtained as a result of the negotiations leading to and the entering into of
this Agreement and shall

18

--------------------------------------------------------------------------------

 

    not directly or indirectly reveal, report, publish, disclose or transfer or
use information belonging to the other party for its own or any other purposes.
  10.3   The restrictions on announcements, circulars and other communications
and obligations of confidentiality in this clause 10 shall not apply where the
information is in the public domain other than as a result of a breach of the
obligations of confidentiality under this clause 10 or to the extent that any
disclosure of information:-

  10.3.1   is expressly permitted by this Agreement or the Tax Deed or required
for the proper performance of this Agreement or the Tax Deed (or the enforcement
or defence of any claim under this Agreement or the Tax Deed); or     10.3.2  
is made with the prior consent in writing of the party to whose affairs such
information relates; or     10.3.3   is made:

  10.3.3.1   in compliance with any requirement of law;     10.3.3.2   in
compliance with a requirement (regardless of the timing of that requirement) of
the New York Stock Exchange and/or the US Securities and Exchange Commission;  
  10.3.3.3   in a Form 8-K, 10-Q, 10-K, a proxy statement, or notice of annual
meeting of shareholders filed by Pier 1 Imports, Inc. or a Schedule 13D or an
amendment thereto filed by the Purchaser’s Guarantor or any of its shareholders
or affiliates to report or disclose the Completion of the transactions
contemplated by this Agreement pursuant to applicable United States federal
securities laws;     10.3.3.4   in compliance with any applicable regulatory
authority to which the party is subject; or     10.3.3.5   in order to obtain
tax or other clearances or consents from the HM Revenue & Customs or other
relevant taxing or regulatory authorities.

10.4   The restrictions contained in this clause 10 shall continue to apply
after Completion without limit in time.   10.5   Press releases of each of the
Seller and the Purchaser in the Agreed Form relating to the transaction which is
the subject of this Agreement have been agreed between the Seller and the
Purchaser upon the execution and exchange of this Agreement, for issue following
Completion.   11   FURTHER ASSURANCE   11.1   Each of the Purchaser and the
Seller will (at its own expense) promptly execute and deliver all such
documents, and do all such things, as the other may from time to time

19

--------------------------------------------------------------------------------

 

    reasonably require for the purpose of giving full effect to the provisions
of this Agreement, the Tax Deed and the Deed of Assignment.   11.2  
Notwithstanding any other provision of this Agreement, following Completion the
Purchaser shall provide as soon as practicable and shall procure that each of
the Group Companies provide as soon as practicable, copies of such records,
information and documentation relating to the administration, business and/or
operations of the Group Companies prior to Completion as may reasonably be
requested by the Seller or any other member of the Seller’s Group in connection
with any matters relating to the operation or administration of the Seller’s
Group including, but not limited to, tax, accounting, legal, regulatory or any
other matters. Furthermore, the Purchaser undertakes to and to procure that each
of the Group Companies retain all such records, information and documentation
and not to destroy any of them without the prior consent of the Seller (such
consent not to be unreasonably withheld or delayed).   11.3   The Purchaser
undertakes that it will procure that each Group Company will not become
insolvent, stop payment of or be unable to pay its debts within the meaning of
the Insolvency Act 1986 or otherwise cease to carry on business as a going
concern, for at least one year following the date of the signing of the audit
opinion in respect of the 2006 Audited Accounts (as contemplated by clause 5.2).
  12   ASSIGNMENT       No party, may assign the benefit of its rights under
this Agreement, the Tax Deed or the Deed of Assignment whether absolutely or by
way of security or deal in any way with any interest it has under this
Agreement, the Tax Deed or the Deed of Assignment without the prior written
consent of the Seller and the Purchaser.   13   ENTIRE AGREEMENT   13.1   This
Agreement together with the Transaction Documents constitute the whole and only
agreement between the parties relating to the transactions contemplated by the
Transaction Documents and supersede and extinguish any drafts, agreements,
undertakings, representations, warranties and arrangements of any nature
whatsoever, made before the entering into of this Agreement whether or not in
writing, between any of the parties.   13.2   Each party acknowledges that in
agreeing to enter into this Agreement and the other Transaction Documents it has
not relied on any representation, warranty, collateral contract or other
assurance (except those repeated in this Agreement) made by or on behalf of any
other party before the entering into of this Agreement. Each party waives all
rights and remedies which, but for this subclause, might otherwise be available
to it in respect of any such representation, warranty, collateral contract or
other assurance.   13.3   Nothing in this Agreement or in any other Transaction
Document shall be read or construed as excluding any liability or remedy as a
result of fraud.   14   WAIVER, RIGHTS AND RELEASE   14.1   Any waiver of any
right, power or remedy under this Agreement or the Tax Deed must

20

--------------------------------------------------------------------------------

 

    be in writing and will only apply to the person to whom the waiver is
addressed and for the circumstances for which it is given.   14.2   Subject to
any express limitation in this Agreement or the Tax Deed, no failure to exercise
or delay in exercising any right or remedy provided under this Agreement or the
Tax Deed constitutes a waiver of such right or remedy or will prevent any future
exercise in whole or in part thereof.   14.3   Subject to any express limitation
in this Agreement or the Tax Deed, no single or partial exercise of any right or
remedy under this Agreement or the Tax Deed shall preclude or restrict the
further exercise of any such right or remedy.   15   VARIATION       No
variation to this Agreement or the Tax Deed shall be of any effect unless it is
agreed in writing and signed by the Seller and the Purchaser.   16   COSTS AND
EXPENSES       Save as otherwise stated in this Agreement or the Tax Deed, each
party shall pay its own costs and expenses in relation to the negotiation,
preparation, execution and carrying into effect of this Agreement and the other
Transaction Documents.   17   SET OFF       All payments to be made under this
Agreement and/or the Tax Deed shall be made in full without any set-off or
counterclaim and free from any deduction or withholding save as may be required
by law.   18   NOTICES   18.1   All notices given under this Agreement or the
Tax Deed shall, unless expressly provided otherwise, be in writing. Notices
shall either be delivered by hand or sent by first class pre-paid post or by
airmail (if overseas) or sent by fax. Delivery by courier shall be regarded as
delivery by hand.   18.2   Notices shall be sent to the address or the fax
number set out below and shall be marked for the attention of the relevant
person named in clause 18.4 below.   18.3   Any notice to be given under this
Agreement or the Tax Deed shall be deemed to have been properly given if it is
given in accordance with this clause 18.   18.4   The addresses for service of
notice are:-

    Seller and/or the Debt Seller – address as set on page 1 of this Agreement,
fax number 001 817 334 0191. For the attention of the Group Counsel’s Office,  
    with a copy to Allen & Overy LLP, One New Change London EC4M 9QQ, fax
number: 0207 330 9999. For the attention of: Ian Stanley.       Purchaser and/or
the Purchaser’s Guarantor – C/O Lagerinn ehf, Sundaborg 7, 104 Reykjavik, fax
number: +354-533-1082 . For the attention of Sigurður Berntsson.

21

--------------------------------------------------------------------------------

 

    Or, in each case, at such other address or to such other fax number or
personnel as may be notified to the other parties in writing in accordance with
this clause.

18.5   A notice under this Agreement or the Tax Deed shall be deemed to have
been served:

    18.5.1 if delivered by hand in accordance with this clause at the time of
delivery;       18.5.2 if sent by first class pre-paid post in accordance with
this clause two clear Business Days after the time of posting or, if sent by
airmail in accordance with this clause, five clear Business Days after such
time;       18.5.3 if sent by fax to the number referred to in clause 18.4, at
the time of completion of transmission by the sender.       If a notice is
deemed delivered outside normal business hours (being 9.30am to 5.30pm on a
Business Day) under the preceding provisions of this clause then it shall be
deemed to have been delivered at 9.30am on the next Business Day.

18.6   In proving service, it shall be sufficient to show that delivery by hand
was made or that the envelope containing the communication was properly
addressed and posted as a first class pre-paid letter (or, if overseas, by
airmail) or that the fax was despatched and a confirmatory report received, in
each case in accordance with this clause.   19   COUNTERPARTS, LANGUAGE,
INVALIDITY, COMPLETION   19.1   This Agreement and the Tax Deed may be executed
in any number of counterparts and by any of the parties on different
counterparts, but shall not be effective until each party has executed at least
one counterpart. Each counterpart shall constitute an original of this Agreement
(or the Tax Deed, as the case may be) but all the counterparts shall together
constitute one and the same Agreement (or the Tax Deed as the case may be).  
19.2   This Agreement is written in the English language, which shall prevail in
the event of any translation.   19.3   Each of the provisions of this Agreement
and the Tax Deed is severable. If any provision is or becomes illegal, invalid
or unenforceable in any respect under the law of any jurisdiction, the legality,
validity or enforceability in that jurisdiction of the remaining provisions of
this Agreement (or the Tax Deed, as the case may be) shall not in any way be
affected or impaired thereby.   19.4   This Agreement together with the other
Transaction Documents shall, to the extent that they remain to be performed,
continue in full force and effect notwithstanding Completion.   20   THIRD PARTY
RIGHTS       The terms of each of this Agreement, the Tax Deed and the Deed of
Assignment may only be enforced by the parties to each such document and no
person who is not such a party may enforce any of the terms of that document
under the Contracts (Rights of Third Parties) Act 1999.   21   GOVERNING LAW AND
JURISDICTION

22

--------------------------------------------------------------------------------

 

21.1   This Agreement and the Tax Deed shall be governed by and construed in
accordance with English law.   21.2   This Agreement and the Tax Deed shall be
subject to the exclusive jurisdiction of the Courts of England and Wales.   AS
WITNESS the hands of the parties or their duly authorised representatives on the
date first appearing at the head of this Agreement.

23

--------------------------------------------------------------------------------

 

SCHEDULE 1
The Group
Part 1
The Company

         
Place and Date of Incorporation:
  United Kingdom 30.09.1991
 
       
Registered Number:
  2650000    
 
       
Registered Address:
  9-12 North Central 127, Milton Park, Abingdon, Oxfordshire, OX14 4SA
 
       
Authorised Share Capital:
  £8,731,111 divided into 611,111 ordinary shares and 8,120,000 preference
shares, all of £1 each
 
       
Issued Share Capital:
  £8,731,111 divided into 611,111 ordinary shares and 8,120,000 preference
shares, all of £1 each
 
       
Directors:
  Michael Arthur Carter
 
  Marvin James Girouard
 
  Alison Hazel Richards
 
  Charles Hawthorne Turner IV
 
       
Secretary:
  John Francis Higgins
 
       
Auditors:
  Ernst & Young LLP
 
       
Bankers:
  HSBC Bank plc
 
       
Accounting Reference Date:
  26 February

24

--------------------------------------------------------------------------------

 

Part 2
The Subsidiaries
The Pier (Retail) Limited

         
Place and Date of Incorporation:
  United Kingdom 13.09.1988
 
       
Registered Number:
  2295588    
 
       
Registered Address:
  9-12 North Central 127, Milton Park, Abingdon, Oxfordshire, OX14 4SA
 
       
Authorised Share Capital:
  £400,000 divided into 400,000 ordinary shares of £1 each
 
       
Issued Share Capital:
  £200,000 divided into 200,000 ordinary shares of £1 each
 
       
Directors:
  Michael Arthur Carter
 
  Marvin James Girouard
 
  Alison Hazel Richards
 
  Charles Hawthorne Turner IV
 
  John Francis Higgins
 
       
Secretary:
  John Francis Higgins
 
       
Auditors:
  Ernst & Young LLP
 
       
Bankers:
  HSBC Bank plc
 
       
Accounting Reference Date:
  26 February

25

--------------------------------------------------------------------------------

 

Part 2
The Subsidiaries
Pier Direct Limited

         
Place and Date of Incorporation:
  United Kingdom 07.04.1992
 
       
Registered Number:
  2704568    
 
       
Registered Address:
  9-12 North Central 127, Milton Park, Abingdon, Oxfordshire, OX14 4SA
 
       
Authorised Share Capital:
  £1,000 divided into 1,000 ordinary shares of £1 each
 
       
Issued Share Capital:
  £2 divided into 2 ordinary shares of £1 each
 
       
Directors:
  Michael Arthur Carter
 
  Marvin James Girouard
 
  Alison Hazel Richards
 
  Charles Hawthorne Turner IV
 
       
Secretary:
  John Francis Higgins
 
       
Auditors:
  N/A    
 
       
Bankers:
  N/A    
 
       
Accounting Reference Date:
  01 March

26

--------------------------------------------------------------------------------

 

Part 2
The Subsidiaries
The Pier (Retail) Ireland Limited

     
Place and Date of Incorporation:
  Republic of Ireland 04.11.2003 
 
   
Registered Number:
  377640 
 
   
Registered Address:
  2 Harbourmaster Place, International Financial Services Centre, Dublin 1,
Ireland 
 
   
Authorised Share Capital:
  €1,000 divided into 1,000 ordinary shares of €1 each 
 
   
Issued Share Capital:
  €1,000 divided into 1,000 ordinary shares of €1 each 
 
   
Directors:
  Michael Arthur Carter
 
  Marvin James Girouard
 
  Alison Hazel Richards
 
  Charles Hawthorne Turner IV
 
   
Secretary:
  John Francis Higgins
 
   
Auditors:
  Ernst & Young LLP
 
   
Bankers:
  HSBC Bank plc
 
   
Accounting Reference Date:
  26 February

27

--------------------------------------------------------------------------------

 

SCHEDULE 2
Part 1
Properties

                                          Current Base                        
Rent/Rack                         Rent                         excluding        
                payments in                         respect of                  
      turnover for                     Date of   the current                    
current rent   turnover             Property   Date of Lease   memoranda  
period   Parties   Term    
1.  Ground Floor and basement 200 and 203 Tottenham Court Road, London W1T 7PL
  23 April 1992   25 March 2002   £349,500   Novoquote Ltd (1)
The Pier (Retail) Limited (2)   20 years (less 5 days) from 25 March 1992    
 
                           
2.  Unit C, Broadway Corner, Bromley, Kent BR1 1LW
  Only Agreement for lease provided with form of agreed lease attached.   24
June 2002   £125,000   Parties to the Agreement for Lease:

(1) Scottish Mutual Assurance Plc
(2) The Pier (Retail) Ltd
(3) The Pier Retail Group Ltd
(Surety) and dated 27 March 1997            
 
                           
3.  Units S2 and S3 The Bentall Centre Kingston upon Thames KT1 1TR
  18 April 1997   1 August 2002   £169,750   The Norwich Union Life Insurance
Society (1) The Pier (Retail) Limited (2) The Pier Retail Group Limited (3)
(Surety)   25 years from 1 August 1992    
 
                           
4.  Unit UG16 and Unit UG17 together with Storage Area B8
  25 November 1997   1 March 2003   £113,000   The Norwich Union Life and
Pensions Ltd (1)   25 years from 1 March 1993    

28

--------------------------------------------------------------------------------

 

                                          Current Base                        
Rent/Rack                         Rent                         excluding        
                payments in                         respect of                  
      turnover for                     Date of   the current                    
current rent   turnover             Property   Date of Lease   memoranda  
period   Parties   Term    
The Galleries, Bristol BS4 7SL
              The Pier (Retail) Ltd (2) The Pier Retail Group Limited (Surety)  
         
 
                           
5.  The premises intended to be known as Unit MS5 on the lower and middle levels
of the Pavilions Shopping Centre, High St. Birmingham
  24 August 1993   24 June 2003   £118,000   Royal Life Insurance Ltd (1) The
Pier (Retail) Ltd
(2)  The Pier Retail Group Ltd (Surety)   24 June 1993 – 28 September 2012    
 
                           
6.  Ground Floor 91-95 and 85-95 basement Kings Road, Chelsea, London SW3
  4 October 1993   4 October 2003   £332,500   Pearl Assurance PLC (1)
The Pier (Retail) Ltd (2)
The Pier Retail Group Ltd (3) (Surety)   20 years from 4 October 1993    
 
                           
7.  The Ground Floor of no.’s 16 and 17 and parts of the first and second floors
of no.’s 16,17, 17A, 18 and 19 North St. Brighton, East Sussex
  7 April 1994       £87,500

(NB A referee’s award has just increased the rent to £130,000)   Hanningtons Ltd
(1)
The Pier (Retail )Ltd (2)   20 years from 29 September 1993    
 
                           
8.  Unit Numbers MSU1 and MSU2 and stock unit No. MSU2 of the Queens Arcade
Cardiff
  11 October 1995   25 December 2005   £193,000   Record hold Ltd (1)
The Pier (Retail) Ltd (2)
The Pier Retail Group Ltd (3) (Surety)   25 year from 25 December 1993    
 
                           
9.  6a Tunsgate Square, Guildford GU1 3QZ
  11 September 1995   29 September 2000   £90,000   Lynton Plc (1)
The Pier (Retail) Ltd (2)   20 years from 11 September 1995    
 
                           
10. Unit 218, Centre Court Shopping Centre, Wimbledon, London SW19 8YA
  14 August 1986   24 June 2000   £92,095   The Standard Life Assurance Company
(1)
The Pier (Retail) Ltd (2)   15 years from 24 June 1995    

29

--------------------------------------------------------------------------------

 

                                          Current Base                        
Rent/Rack                         Rent                         excluding        
                payments in                         respect of                  
      turnover for                     Date of   the current                    
current rent   turnover             Property   Date of Lease   memoranda  
period   Parties   Term    
11. 18-19 together with the basement and sub-basement of 20, The Arcade,
Bournemouth, Dorset BH1 2AF
  19 January 1996   29 September 2000   £84,600   The Prudential Assurance
Company Ltd (1)
The Pier (Retail) Ltd (2)   15 years from 25 December 1995    
 
                           
12. Basement Ground and 1st floor of 147 Buchanan Street, Glasgow G1 2JX
  Registered 3 May 1996   14 November 2003   £325,000   The Scottish Life
Assurance Co. (1)
The Pier (Retail) Ltd (2)   24 November 1995 to 23 November 2020 continuing on a
month by month basis thereafter until terminated by 1 month’s prior notice)    
 
                           
13. Unit 10, Ground, 1st and 2nd floors of The Academy, Belmont Street, Aberdeen
AB10 1LB
  Registered 5 October 1998       £118,568.72   Jarlaw the Academy Ltd (1)
The Pier (Retail) Ltd (2)   15 years from 2 June 1998 to 1 June 2013    
 
                           
14. Unit 76, 77, 78 and 78a, The Trafford Centre, Manchester M17 8AR
  20 November 2003   3 August 2003   £200,000
(in addition £10,200 is paid quarterly on account of estimated turnover)   The
Trafford Centre Ltd (1)
The Pier (Retail) Ltd (2)   2 August 2003 to 2 August 2018    
 
                           
15. 2, 3, 4 and 5 Theatre Walk, The Headrow Shopping Centre, The Headrow, Leeds
West Yorkshire LS1 6JE
  13 August 1998       £89,904   Britel Fund Trustees Ltd (1)
The Pier (Retail) Ltd (2)   13 August 1998 to 12 August 2013    
 
                           
16. Unit 87 (239-240) The Victoria Centre, Nottingham NG1 8QT
  13 December 1999   24 June 2003   £150,000   Dusco (UK) Ltd (1)
The Pier (Retail) Ltd (2)   15 years and One quarter from 24 June 1998    
 
                           
16.A Storage Unit 284 Victoria Centre Nottingham NG1 8QT
  13 December 1999   24 June 2003   £5,000   Dusco (UK) Ltd (1)
The Pier (Retail) Ltd (2)   15 years and One quarter from 24 June 1998    

30

--------------------------------------------------------------------------------

 

                                          Current Base                        
Rent/Rack                         Rent                         excluding        
                payments in                         respect of                  
      turnover for                     Date of   the current                    
current rent   turnover             Property   Date of Lease   memoranda  
period   Parties   Term    
17. EVU006 Upper Level, Wintergarden, Bluewater, Stone DA9 9SF
  14 May 1999       £178,450.52
(in addition £3,718 is paid quarterly on account of estimated turnover)   Blueco
Ltd (1)
The Pier (Retail) Ltd (2)   15 years from 25 December 1998    
 
                           
18. Unit Lower Ground Level & Riverside Level Holybrook Walk, The Oracle,
Reading, Berkshire RG1 2AQ
  2 April 2001       £200,000   Oracle Shopping Centre Ltd (1)
Oracle Nominees Ltd (2)
The Pier (Retail) Ltd (3)
The Pier Retail Group Ltd (4) (Surety)
  15 years from 24 June 1999    
 
                           
18A Storage Reading Unit
for Unit L30 at Riverside level
in the Oracle
  2 April 2001       £1,960   Oracle Shopping Centre Ltd (1)
Oracle Nominees Ltd (2)
The Pier (Retail) Ltd (3)
The Pier Retail Group Ltd (4) (Surety)   Expires 23 June 2014    
 
                           
19. Level 1 & 2 Eldon Gardens Shopping Centre, Percy Street, Newcastle Upon
Tyne, Tyne & Wear NE1 7RA
  6 November 2000       £50,000   Capital and Regional Retail (Northern) Ltd (1)
The Pier (Retail) Ltd (2)   15 years expiring 28 September 2015    
 
                           
20. 19-25 Pepper Row and Paddock Row, Grosvenor Shopping Centre, Chester CH1 1EA
  24 March 2000       £115,000
(NB rent
review has
just been
agreed at
£140,000)   The Equitable Life Assurance Society (1) The Pier (Retail) Ltd (2)
The Pier Retail Group Ltd (3) (Surety)   15 years from 25 December 1999    
 
                           
20.A Unit 17 Paddock Row Grosvenor Shopping Centre, Chester
  14 August 2003       £45,000   Mall Nominee One Ltd and Mall Nominee Two Ltd
(1)
The Pier (Retail) Ltd (2)
The Pier Retail Group Ltd (3)   The lease is co-terminous with the lease of
19-25 Pepper Road    

31

--------------------------------------------------------------------------------

 

                                          Current Base                        
Rent/Rack                         Rent                         excluding        
                payments in                         respect of                  
      turnover for                     Date of   the current                    
current rent   turnover             Property   Date of Lease   memoranda  
period   Parties   Term    
21. Unit 3 104 George Street, and 25-33 Castle Street Edinburgh EH2 3DF
  Registered 5 September 2001       £150,000
(NB A Calderbank offer to increase the rent to £215,000 has just been agreed)  
Pearl (Castle St./George St.) Ltd. (1)
The Pier (Retail) Ltd (2)   15 years    
 
                           
22. Unit 65/66 Festival Place, Upper Ground Floor, Basingstoke, Hampshire RG21
7LJ
  24 October 2003   N/A   £142,137   Grosvenor Basingstoke Properties Ltd and
Grosvenor Basingstoke Management Ltd (1) The Pier (Retail) Ltd (2)   From 29
September 2003 to 29 February 2004 amended in a deed of rectification 20
April 2004 to 5 years from 1 March 2004    
 
                           
23. Unit U78B Upper Mall, Merry Hill Shopping Centre, Brierley Hill, West
Midlands DY5 1SS
  12 May 2004   N/A   £210,000   Chelsfield MH Investments Ltd (1)
The Pier (Retail) Ltd (2)
The Pier Retail Group Ltd (3) (Surety)   10 years commencing 17 October 2003    
 
                           
24. Units 1 and 1a 70 Queen’s Road, Clifton, Bristol BS8 1QU
  29 September 2003   N/A   £105,000   Serput Nominee 11 Ltd and Serput Nominee
12 Ltd (1)
The Pier (Retail) Ltd (2)   15 years ending 28 September 2018    
 
                           
24A (Storage, Clifton) Unit 2 Part
Basement, 70 Queens Road,
Clifton, Bristol B58 1QU
  10 January
 1985       £8,000   Johnsons Central Retail Ltd (1)
J Hepworth & Son plc (2)   Expires 13 February 2008        

32

--------------------------------------------------------------------------------

 

                                          Current Base                        
Rent/Rack                         Rent                         excluding        
                payments in                         respect of                  
      turnover for                     Date of   the current                    
current rent   turnover             Property   Date of Lease   memoranda  
period   Parties   Term    
25. Unit LSU5 Centrale Shopping Centre, Croydon, Surrey CR0 1TY
  15 November 2004   N/A   £160,000   St. Martin Property Investments Ltd (1)
The Pier (Retail) Ltd (2)
Pier Retail Group Ltd (3)
(Surety)   15 years from 23 September 2003    
 
                           
26. Unit 1.268/1.269 and Mezzanine 24 Redpath Way, Metro Centre, Gateshead, Tyne
& Wear NE11 9HX
  27 January 2005   N/A   £190,000   CSC Metrocentre Ltd (1)
The Pier (Retail) Ltd (2)
Pier Retail Group Ltd (3)
(Surety)   15 years and One quarter to 28 September 2019    
 
                           
27. Unit 3, 2-14 Fitzroy Street, Cambridge CB1 1EW
  Undated   N/A   £175,000   The Master or keeper and fellows and Scholars of
Jesus College Cambridge (1)
The Pier (Retail) Ltd (2)   15 years plus broken quarter expiring 24 March 2020
   
 
                           
28. Unit 32, Fishergate Walk, The Mall, St George, Preston PR1 2TU
  1 August 2005   N/A   £130,000   The Nominee One Ltd and Mall Nominee Two Ltd
(1)
The Pier (Retail) Ltd (2)
The Pier Retail Group Ltd (3) (Surety)   10 years from 1 August 2005    
 
                           
29. 401 Chapelfield Plain, Chapelfield, Norwich NR2 1SZ
  Agreement for lease dated 19 August 2004   N/A   £163,500   Parties to
Agreement for Lease:
Lend Lease Norwich Ltd (1)
The Chapelfield Partnership (2)
The Pier (Retail) Ltd (3)            
 
                           
30. North 9, 10, 11 & 12 Central 127
Milton Park
(9 and 11 First Floor, 10 and 12 ground)
  26 May 2005   N/A   £173,000   MEPC Milton Park Ltd (1)
The Pier (Retail) Ltd (2)   1 January 2005 to 23 June 2017    

33

--------------------------------------------------------------------------------

 

                                          Current Base                        
Rent/Rack                         Rent                         excluding        
                payments in                         respect of                  
      turnover for                     Date of   the current                    
current rent   turnover             Property   Date of Lease   memoranda  
period   Parties   Term    
31. Unit 170
Milton Park
Abingdon
  12 July 2002   N/A   £525,000   MEPC Milton Park Ltd (1)
The Pier (Retail) Ltd (2)   15 years from 24 June 2002    
 
                           
32. Unit 173
Milton Park
Abingdon
  Undated   N/A   £310,200   Mastercase Service and Distribution Ltd (1)
The Pier (Retail) Ltd (2)   Expiry 25 February 2008    
 
                           
33. Unit 167 (B)
(West) Milton Park, Abingdon
  18 August 2004   N/A   £12,800   MEPC Milton Park Limited (1)
The Pier (Retail) Ltd (2)   24 June 2005 to 25 December 2005    
 
                           
34. Unit 167 (B)
(East) Milton Park Abingdon
  27 October 2005   N/A   £18,000   MEPC Milton Park No.1 Ltd and MEPC Milton
Park No.2 Ltd (1)
The Pier (Retail) Ltd (2)   1 July 2005 to 25 December 2005    
 
                           
35. 2nd floor
Goodge Place
London WIT 4SF
  27 September 2005   N/A   £10,500   Joan M.Leasor (1)
The Pier (Retail) Ltd (2)   5 years from 27 September 2005    

Part 2 – Concession Properties

      Concessionaire   Property
Debenhams
  The Pier at Debenhams, 36 Prospect Street, Hull, East Yorkshire
 
   
Debenhams
  The Pier at Debenhams Market Place, Romford, Essex
 
   
Debenhams
  The Pier at Debenhams Market Street, Manchester
 
   
Debenhams
  The Pier at Debenhams The Parade, Swindon, Wiltshire
 
   
Debenhams
  The Pier at Debenhams Eastgate Centre, Basildon, Essex
 
   
Debenhams
  The Pier at Debenhams 44-46 Palmerston Road, Southsea

34

--------------------------------------------------------------------------------

 

      Concessionaire   Property
Debenhams
  The Pier at Debenhams Queens Buildings, Southampton, Hampshire
 
   
Debenhams
  The Pier at Debenhams 2 The Moor, Sheffield
 
   
Debenhams
  The Pier at Debenhams The Potteries Shopping Centre, Lamb St. Hanley, Stoke on
Trent
 
   
Debenhams
  The Pier at Debenhams Clapham Junction, London
 
   
Debenhams
  The Pier at Debenhams 334-348 Oxford St., London
 
   
Debenhams
  The Pier at Debenhams Royal Parade, Plymouth, Devon
 
   
Homebase
  The Pier at Homebase, Almonvale South Retail Park, Livingston,
West Lothian
 
   
Homebase
  The Pier at Homebase, Meols Cop Retail park, Meols Cop Road,
Southport, Merseyside
 
   
Roches
  The Pier at Roches, Blanchardstown Centre Blanchardstown, Dublin
 
   
Roches
  The Pier at Roches, Henry Street, Dublin, Eire

35

--------------------------------------------------------------------------------

 

SCHEDULE 3
Registered Intellectual Property Rights

                              REGISTERED                   COUNTRY OF     TRADE
MARK   CLASS(ES)   NUMBER   REGISTRATION   FILING DATE
PIER
  20         1116416     UK     25.06.1979  
 
                           
THE PIER
  16, 18, 20, 21, 24, 27, 28, 35, 36         2016131B     UK     31.03.1995  
 
                           
THE PIER
  20, 21, 24, 35         227496     IRELAND     10.04.2003  

36

--------------------------------------------------------------------------------

 

SCHEDULE 4
The Warranties
Part 1
General Warranties

1   Disclosure and Information   1.1   The information set out in Schedules 1
and 2 is true and accurate.   2   The Seller   2.1   Each of the Seller and the
Debt Seller has full power to enter into and perform this Agreement and the
other Transaction Documents to which each is a party.   2.2   This Agreement and
the other Transaction Documents to which the Seller and the Debt Sellers are a
party constitute (or will when executed constitute), valid, legal and binding
obligations on the Seller and/or the Debt Seller (as the case may be) in
accordance with their terms.   2.3   The Seller is the sole, legal and
beneficial owner of the Shares and is entitled to sell and transfer the Shares
to the Purchaser on the terms set out in this Agreement.   2.4   The Seller and
the Debt Seller are not insolvent nor unable to pay their debts within the
meaning of the Insolvency Act or any other analogous statute applicable to
either of them in any other jurisdiction.   3   The Company   3.1   No Group
Company:

  3.1.1   holds or beneficially owns, or has agreed to acquire any shares,
debentures or other securities of any other body corporate (whether incorporated
in the United Kingdom or elsewhere) other than the Subsidiaries;     3.1.2   is
or has agreed to become a member of any partnership, joint venture, consortium
or other unincorporated association (other than a recognised trade association);
    3.1.3   has a branch, place of business or substantial assets outside the
United Kingdom and the Republic of Ireland or any permanent establishment (as
that expression is defined in any relevant Order in Council made pursuant to
section 788, TA 88) in any country outside the United Kingdom or the Republic of
Ireland.

3.2   No Group Company has received written notice from any governmental or
regulatory body that it is in violation of, or in default with respect to, any
law or regulation where such violation or default would have a material adverse
effect on the assets or financial position of the Group.

37

--------------------------------------------------------------------------------

 

3.3   No Group Company carries on business under any name other than its
corporate name or the “The Pier” or “Pier”.   3.4   No Group Company has granted
a power of attorney which remains in force.   3.5   So far as the Seller is
aware, each Group Company is conducting and has at all material times within the
five years prior to the date of this Agreement conducted its business in
accordance with all applicable laws and regulations of the country in which it
is incorporated and/or conducts business, excluding any breach of law or
regulation which is or was not material in the context of the business of the
Group.   4   Insolvency   4.1   So far as the Seller is aware, no Group Company
is insolvent nor unable to pay its debts within the meaning of the Insolvency
Act 1986.   4.2   So far as the Seller is aware, no step has been taken to
initiate any process by or under which:

  4.2.1   some or all of the creditors of any Group Company accept, by agreement
or in pursuance of a court order, an amount less than the sums owing to them in
satisfaction of those sums with a view to preventing the dissolution of any
Group Company; or     4.2.2   a person is appointed to manage the affairs,
business and assets of any Group Company on behalf of the Company’s creditors;
or     4.2.3   the holder of a charge over any Group Company’s assets is
appointed to control the business and assets of such Group Company.

4.3   In relation to any Group Company:

  4.3.1   no administrator has been appointed;     4.3.2   no documents have
been filed with the court for the appointment of an administrator; and     4.3.3
  no Group Company has received written notice of any intention to appoint an
administrator in respect of that Group Company.

4.4   No Group Company has received written notice that any process has been
initiated which would lead to the Company being dissolved and its assets being
distributed among the relevant company’s creditors, shareholders or other
contributors.   5   The Shares   5.1   The Shares constitute the whole of the
allotted and issued share capital of the Company and are fully paid.   5.2   The
Shares and the issued shares of each Group Company are free from any
Encumbrance.   5.3   No Group Company has at any time in the last five years:

38

--------------------------------------------------------------------------------

 

  5.3.1   repaid, redeemed or purchased (or agreed to repay, redeem or purchase)
any of its own shares, or otherwise reduced (or agreed to reduce) its issued
share capital or any class of it or capitalised (or agreed to capitalise) in the
form of shares, debentures or other securities or in paying up any amounts
unpaid on any shares, debentures or other securities, any profits or reserves of
any class or description or passed (or agreed to pass) any resolution to do so;
or     5.3.2   directly or indirectly provided any financial assistance for the
purpose of the acquisition of shares in the Company or for the purpose of
reducing or discharging any liability incurred in such an acquisition, pursuant
to sections 155, CA 85.

5.4   No right has been granted to any person which remains outstanding to
require any Group Company to issue any share capital and no Encumbrance has been
created in favour of any person in respect of any unissued shares or other
unissued securities of any Group Company.   5.5   No commitment has been given
by any Group Company to create an Encumbrance in respect of the Shares or the
issued shares of any of the Subsidiaries (or any unissued shares or other
unissued securities of the Company or any of its Subsidiaries) or for any of
them to issue any share capital and no person has claimed any rights in
connection with any of those things where such claim remains outstanding.   6  
Subsidiaries   6.1   The Subsidiaries are the only subsidiaries of the Company.
  6.2   The particulars of the Subsidiaries set out in Schedule 1 are true and
accurate.   6.3   The Company and/or one of the Subsidiaries is the legal and
beneficial owner of the shares in each of the Subsidiaries.   6.4   The shares
in the Subsidiaries are free from all Encumbrances.   6.5   The issued shares of
each of the Subsidiaries are fully paid up.   7   Constitutional and Corporate
Documents   7.1   The copy of the memorandum and articles of association of the
Company in the Disclosure Documents is true and complete.   7.2   Each Group
Company has at all times carried on its business and affairs in all respects in
accordance with its memorandum and articles of association.   7.3   So far as
the Seller is aware, the Company has not received a written notice or allegation
that any of the register of members or statutory books of the Company are
incorrect or should be rectified.   8   Accounts   8.1   The Accounts:

  8.1.1   have been prepared in accordance with the Companies Act and GAAP; and

39

--------------------------------------------------------------------------------

 

    8.1.2 show a true and fair view of the state of affairs of the Company at
the Accounts Date and of the profit and losses of          the Company for the
financial period to which the Accounts relate.

8.2   The Accounts have been filed in accordance with the requirements of the
Companies Act.   9   Financial and other records   9.1   No Group Company has
received any written notice that any of the accounts, books, ledgers and other
financial records of the Company have not been properly maintained or do not
contain accurate records of all matters required to be entered in them by the
Companies Act.   9.2   All such accounts, books, ledgers and records are in the
possession or under the control of the Company or one of the Subsidiaries.   9.3
  All material records and information recorded, stored, maintained, operated,
or held by any means (including any electronic, mechanical or photographic
process, whether computerised or not) which belong to the Company are under its
control or the control of one of the Subsidiaries.   9.4   Details of the terms
of all outstanding bank and other loan facilities made available to the Group
Companies (excluding any trade credit arrangements in the ordinary course of the
business of the Group) have been provided to the Purchaser in the Disclosure
Documents.   9.5   No Group Company has any indebtedness owed to any bank or
other financial institution which is outstanding at the date of this Agreement.
  10   Position since 25 February 2006       Since 25 February 2006, the
Company:   10.1   has carried on its business in the ordinary course and as a
going concern;   10.2   has not declared, made or paid any dividend and no loan
capital of the Company has been repaid in whole or in part or has become due ;  
10.3   has not made any change to the remuneration, terms of employment,
emoluments or pension benefits of any present or former director, officer or
employee of the Company who on the Accounts Date was entitled to remuneration in
excess of £75,000 per annum;   10.4   has not appointed or employed any
additional director, officer or employee entitled to remuneration in excess of
£75,000;   10.5   has not entered into contracts involving capital expenditure
in an amount exceeding £80,000 in the aggregate other than in the ordinary
course of business;   10.6   has not borrowed or raised any money or entered
into any financial facility (except such borrowings from bankers as are within
the amount of any overdraft facility which was available to the Company at 25
February 2006) or since 25 February 2006

40

--------------------------------------------------------------------------------

 

    received any notice from any banker that such banker wishes to renegotiate
any overdraft facility available to the Company at 25 February 2006; and   10.7
  has not made any change to its accounting reference date.   11   Finance  
11.1   No guarantee, mortgage, charge, pledge, lien, assignment or other
security agreement which is outstanding has been given by or entered into by the
Company in respect of borrowings of the Company.   11.2   The total amount
borrowed by the Company does not exceed any limitations on the borrowing powers
contained:

  11.2.1   in the memorandum and articles of association of the Company; or    
11.2.2   in any debenture or other deed or document binding on the Company.

11.3   There are no debts owing to the Company other than debts that have arisen
in the ordinary course of business.   11.4   So far as the Seller is aware, the
Company has not given or entered into any guarantee, mortgage, charge, pledge,
lien, assignment or other security agreement which is outstanding in respect of
the indebtedness, or for the default in the performance of any obligation, of
any person not being a Group Company.   11.5   So far as the Seller is aware,
the Company is not subject to any arrangement for receipt or repayment of any
grant, subsidy or financial assistance from any government department or other
body.   12   Transactions with the Seller, Directors and Connected Persons  
12.1   Upon execution and exchange of the Debt Confirmation Deed, the Deed of
Release and Deed of Assignment there will be no outstanding indebtedness between
any Group Company and any member of the Seller’s Group.   13   The Properties  
13.1   In this Agreement these definitions apply:       “Previously-owned Land
and Buildings”: land and/or buildings that has, at any time before the date of
this Agreement, been owned (under whatever tenure) and/or occupied and/or used
by the Company but is either no longer owned, occupied or used by the Company,
or is owned, occupied or used by the Company but pursuant to a different lease,
licence, transfer or conveyance.       “Properties”: the land and buildings
short particulars of which are set out in Part 1 of Schedule 2 and Property
means each and every one of them and any part or parts of them.   13.2   The
Properties and the Concession Properties are the only land and buildings owned,
used or occupied by any Group Company. The Sellers are not aware of any matter
or circumstance which threatens the use and occupation of the Properties for
their existing use which would be material in the context of the Group taken as
a whole.

41

--------------------------------------------------------------------------------

 

    There are no material and current disputes with landlords in relation to
non-compliance with the provisions of leases of the Properties.   13.3   There
are no current arrears of rent and other sums due to the landlord under the
leases of the Properties.   13.4   The information contained within Schedule 2
in relation to the current rents (but without in all cases completing rent
review memoranda to document those rents) and rent review dates is true and
accurate and not misleading.   13.5   So far as the Seller is aware the Company
does not have any right of ownership, right of use, option, right of first
refusal or contractual obligation to purchase, or any other legal or equitable
right affecting any land and buildings other than the Properties and the
Concession Properties.   13.6   So far as the Seller is aware neither the
Company nor any company that is a Subsidiary has any actual or contingent
liability in respect of Previously-owned Land and Buildings.   14   Insurance  
14.1   Summary particulars of the insurance policies maintained by the Group
(excluding any policies where the Group participates under a policy provided for
the Seller’s Group and the Group), as set out in the Disclosure Documents, are
accurate in all material respects.   14.2   There are no outstanding claims
under, or in respect of the validity of, any of the insurance policies which are
material in the context of the business of the Group as a whole.   15  
Litigation and Investigations   15.1   So far as the Seller is aware, the
Company is not engaged in any litigation, administrative, mediation or
arbitration proceedings (except for debt collection in the normal course of
business) which is material to the business of the Group.   15.2   The Seller
has not received any written notice that the Company is the subject of any
outstanding investigation, inquiry or enforcement proceedings by any
governmental, administrative or regulatory body.   15.3   No such proceedings,
investigation or inquiry as are mentioned in paragraph 15.1 or 15.2 have been
notified to the Seller and the Seller is not aware of any circumstances likely
to give rise to any such proceedings, investigation or inquiry.   16   Contracts
  16.1   In this Agreement this definition applies:       “Material Contract”:
an agreement to which the Company is a party or is bound by and which is of
material importance to the business or profits of the Group other than any
agreement relating to the Properties or the Concession Properties.   16.2  
Except for the agreements and arrangements Disclosed, the Company is not a party
to or subject to any agreement which:

42

--------------------------------------------------------------------------------

 

  16.2.1   is a Material Contract which is not in the ordinary course of
business of the Company; or

  16.2.2   is a Material Contract which may be terminated as a result of any
Change of Control of the Company.

17   Licences and Consents   17.1   So far as the Seller is aware, each Group
Company has all necessary licences, consents, permits and authorities necessary
to carry on its business now carried on by it in the places and in the manner is
which that business is now carried on, all of which are valid and subsisting.  
17.2   So far as the Seller is aware, no Group Company has received written
notice that it is at the date of this agreement materially in default under any
licence, consent, permit or authority which is material to the business or
operations of the Group.   18   Consequence of acquisition of Shares by
Purchaser       The acquisition of the Shares by the Purchaser or compliance
with the terms of this Agreement do not entitle anyone to receive from the
Company any finder’s fee, brokerage or other commission in connection with the
purchase of the Shares by the Purchaser.   19   Employees   19.1   In this
Agreement these definitions apply:       “Employee”: any person employed by a
Group Company;       “Representative Body” means any trade union or works
council representing any workers of any Group Company; and trade union has the
same meaning as in the Trade Union and Labour Relations (Consolidation) Act
1992;       “Worker”: has the same meaning as in section 230 of the Employment
Rights Act 1996.   19.2   The names of each person who is a Director of each of
the Group Companies are set out in Schedule 1.   19.3   The Seller has Disclosed
to the Purchaser the following particulars for each Employee:

  19.3.1   their job title and department;     19.3.2   their base salary and
summary details of any contractual benefits and privileges provided;     19.3.3
  the commencement date of their contract and the date on which their continuous
service began;     19.3.4   the type of contract (whether full or part-time or
other).

19.4   All contracts of employment for all Employees are terminable on three
months’ notice or less by either the relevant Group Company or relevant
Employee.

43

--------------------------------------------------------------------------------

 

19.5   No Employees are currently on secondment, maternity, paternity or
adoption leave.   19.6   No notice is outstanding to terminate the contract of
employment of any Director (whether given by the Group Company or by the
Director) and, so far as the Seller is aware, no material dispute is outstanding
between:

  19.6.1   any Group Company and a material number or category of its current or
former Employees relating to their employment or its termination; or     19.6.2
  the Company and a material number or category of any of its current or former
Workers relating to their contract or its termination.

19.7   So far as the Seller is aware, the acquisition of the Shares by the
Purchaser or compliance with the terms of this Agreement will not enable any
Directors or senior Employees of any Group Company to terminate their employment
or receive any payment or other benefit from any Group Company.   19.8   Except
as Disclosed, so far as the Seller is aware, no Group Company is involved in any
material industrial or trade dispute or negotiation regarding a claim with any
Representative Body and is not aware of anything that would be likely to give
rise to such a dispute or claim.   19.9   Particulars of all material workforce
agreements reached under the Trade Union and Labour Relations (Consolidation)
Act 1992 and all collective bargaining or procedural or other agreements or
arrangements with any Representative Body that relate to any employees of any
Group Company are contained in the Disclosure Letter.   19.10   No commitment
has been given by any member of the Seller’s Group in connection with the issue
of any share capital in any Group Company to any Employee.   20   Pension
Schemes   20.1   The Disclosure Documents contain summary particulars of all
Pension Schemes of each Group Company and no Group Company is under an
obligation (legally binding or otherwise) to provide pensions, gratuities,
superannuation allowance or other “relevant benefits” as defined in section
612(1) of the 1988 Taxes Act, to or for any past or present officer or employee
of the Company or his dependants nor does it contribute to any scheme or
arrangement for the provision of any other retirement, pension or death benefit
except in respect of the Pension Schemes referred to in the Disclosure
Documents.   21   Intellectual Property   21.1   In this Agreement this
definition applies:       “Intellectual Property Rights”: (i) copyright,
patents, database rights and rights in trade marks, designs, know-how and
confidential information (whether registered or unregistered), (ii) applications
for registration, and rights to apply for registration, of any of the foregoing
rights and (iii) all other intellectual property rights and equivalent or
similar forms of protection existing anywhere in the world.   21.2   Particulars
are set out in Schedule 3 of all registered Intellectual Property Rights
(including applications for such rights) owned or used by the Company.

44

--------------------------------------------------------------------------------

 

21.3   Pier 1 Licensing, Inc. is the registered proprietor of (or applicant for)
the Intellectual Property Rights set out in Schedule 3 and has not granted any
rights in respect thereof save for the licences dated 30 June 1997 and 13
January 1997.   21.4   The Company does not require any Intellectual Property
Rights other than those identified in Schedule 3 in order to carry on its
business as carried on at the date of this Agreement-.   21.5   In respect of
the Intellectual Property Rights set out in Schedule 3:

  21.5.1   all application and renewal fees required for the maintenance or
protection of such rights have been paid;     21.5.2   so far as the Seller is
aware, there are no claims, disputes or proceedings, pending or threatened, in
relation to the ownership or use of such rights.

21.6   So far as the Seller is aware, there has been no, and is no current,
material infringement by any third party of any Intellectual Property Rights set
out in Schedule 3.   21.7   So far as the Seller is aware, the carrying on of
the business of the Group as carried on at the date of this Agreement using the
Intellectual Property Rights set out in Schedule 3 does not infringe the
Intellectual Property Rights of any third party.

Part 2
Tax Warranties

22   Compliance and General   22.1   All notices, returns (including any land
transaction returns), reports, accounts, computations, statements, assessments
and registrations and any other necessary information submitted by the Group
Companies to any Tax Authority for the purposes of Tax have been made on a
proper basis, punctually submitted, were accurate and complete when supplied and
remain accurate and complete in all material respects and none of the above is,
or so far as the Seller is aware is likely to be, the subject of any material
dispute with any Tax Authority.   22.2   All Tax which the Group Companies are
liable to pay prior to Completion has been so paid.   22.3   No Group Company
has within the period of twelve months ending on the Completion Date of this
Agreement paid or become liable to pay any penalty, fine, surcharge or interest
charged by virtue of the provisions of the TMA or any other Tax Statute.   22.4
  So far as the Seller is aware, the Group Companies have sufficient records
relating to past events to permit accurate calculation of the Tax liability or
relief which would arise upon a disposal or realisation on Completion of each
asset owned by the Group Companies at the Accounts Date or acquired by the Group
Companies since that date but before Completion.

45

--------------------------------------------------------------------------------

 

23   Foreign Issues   23.1   The Group Companies have and have for the last
seven years (or, if later, since their date of incorporation) been resident for
Tax purposes only in the jurisdiction in which they were incorporated and have
never had a permanent establishment in any other jurisdiction.   24   Groups  
24.1   No UK Company has within the last six years been a member of any group of
companies for the purposes of s.170 TCGA any member of which was resident in the
UK for UK tax purposes other than the UK Companies.   25   Close companies  
25.1   No UK Company has within the last three years been a close
investment-holding company as defined in section 13A, TA 88.   26   VAT   26.1  
Each Group Company is a taxable person duly registered for the purposes of VAT.
  26.2   Each Group Company has complied with all statutory provisions, rules,
regulations, orders and directions in respect of VAT and has promptly submitted
accurate returns. Each Group Company maintains full and accurate VAT records,
has never been subject to any interest, forfeiture, surcharge or penalty nor
been given any notice under sections 59 or 64, VATA nor been given a warning
within section 76(2), VATA nor has any Group Company been required to give
security under paragraph 4 of Schedule 11, VATA.   26.3   Each Group Company is
not and has not been for VAT purposes a member of any group of companies and no
act or transaction has been effected in consequence whereof each Group Company
is or may be held liable for any VAT arising from supplies made by another
company and no direction has been given nor will be given by H M Revenue &
Customs under Schedule 9A, VATA as a result of which any Group Company would be
treated for the purposes of VAT as a member of a group.   26.4   For the
purposes of paragraph 3(7) of Schedule 10 VATA, the UK Companies or their
relevant associates have exercised the election to waive exemption from VAT
(pursuant to paragraph 2 of Schedule 10 VATA) only in so far as detailed (as
having been the subject of such an election) in the Disclosure Documents: and

  26.4.1   all things necessary for the election to have effect have been done
and in particular any notification and information required by paragraph 3(6) of
Schedule 10 VATA 1994 has been given and any permission required by paragraph
3(9) of Schedule 10 VATA has been properly obtained; and     26.4.2   no
election has or will be disapplied or rendered ineffective by virtue of the
application of the provisions of paragraph 2 (3AA) of Schedule 10 VATA.

26.5   No UK Company owns any assets which are capital items subject to the
capital goods scheme under Part XV of the VAT Regulations 1995.

46

--------------------------------------------------------------------------------

 

26.6   No UK Company has made any claim for bad debt relief under section 36,
VATA which remains outstanding.   27   Stamp duty and stamp duty land tax   27.1
  All stampable documents to which any Group Company is a party have been duly
stamped or stamped with a particular stamp denoting that no stamp duty is
chargeable.   27.2   Neither entering into this Agreement nor Completion will
result in the withdrawal of any stamp duty or stamp duty land tax relief granted
on or before Completion which will affect any Group Company.

47

--------------------------------------------------------------------------------

 

SCHEDULE 5
Completion Requirements
Seller’s Obligations

1   On Completion, the Seller shall deliver or procure the delivery to the
Purchaser or its representatives of:   1.1   The Debt Confirmation Deed, the
Deed of Release and the Deed Assignment duly executed by the Debt Seller (and
forms 403a in respect of any security over any assets of any Group Company
granted to the Debt Seller);   1.2   The Tax Deed duly executed as a deed by the
Seller;   1.3   Transfers of the Shares duly executed by the registered holders
in favour of the Purchaser;   1.4   The relevant share certificates for the
Shares in the names of the registered holders or an indemnity for any lost
certificates;   1.5   In respect of each UK Company:

  1.5.1   the statutory registers and minute books;     1.5.2   common seal (if
any);     1.5.3   the certificate of incorporation; and     1.5.4   any
certificates of incorporation on change of name;

1.6   The written resignations in the Agreed Form of M J Girouard, C H Turner
and M A Carter as Directors of the Group Companies such resignations to take
effect from Completion;   1.7   The Co-existence Agreement duly executed by the
Seller, Pier 1 Licensing, Inc. and the Company; and   1.8   Minutes of the board
meetings held under paragraph 2 of this Schedule.   2   On Completion, the
Seller shall cause a board meeting of each Group Company to be held at which the
matters mentioned below will take place:   2.1   In the case of the Company
only, a resolution to register the transfers of Shares will be passed, subject
to the transfers being stamped at the cost of the Purchaser;   2.2   Sigurður
Berntsson, Jákup á Dul Jacobsen and Jonathan Eeles shall be appointed additional
directors; and   2.3   The resignations referred to in paragraphs 1.6 above
shall be tendered and accepted so as to take effect at the close of the meeting.

48

--------------------------------------------------------------------------------

 

         
SIGNED by
       
 
 
 
   
PIR TRADING, INC.
       
 
       
SIGNED by
       
PIER 1 IMPORTS (U.S.), Inc.
 
 
   
 
       
SIGNED by
       
PALLI LIMITED
 
 
   
 
       
SIGNED by
       
 
 
 
   
LAGERINN ehf
       
acting by its attorney
       

49