FIRST AMENDMENT TO CREDIT AGREEMENT
          This First Amendment to Credit Agreement (this “First Amendment”) is
made as of the 28th day of July, 2006 by and among
          PIER 1 IMPORTS (U.S.), INC. (in such capacity, the “Lead Borrower”), a
Delaware corporation with its principal executive offices at 100 Pier 1 Place,
Fort Worth, Texas 76102, for itself and as agent for Pier 1 Kids, Inc. (the
“Borrowers”); and
          BANK OF AMERICA, N.A., a national banking association with offices at
40 Broad Street, Boston, Massachusetts 02109, as administrative agent (in such
capacity, the “Administrative Agent”) for its own benefit and the benefit of the
other Credit Parties; and
          BANK OF AMERICA, N.A., a national banking association with offices at
40 Broad Street, Boston, Massachusetts 02109, as collateral agent (in such
capacity, the “Collateral Agent”) for its own benefit and the benefit of the
other Credit Parties;
          The LENDERS party hereto;
          WELLS FARGO RETAIL FINANCE, LLC, a Delaware limited liability company
with offices at One Boston Place — 19th Floor, Boston, Massachusetts 02109 and
WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association with offices
at 1133 Avenue of the Americas, New York, New York 10036, as Co-Syndication
Agents; and
          HSBC BANK USA, NA, a national banking association with offices at 452
Fifth Avenue, 5th Floor, New York, New York and JPMORGAN CHASE BANK, N.A., a
national banking association with offices at 2200 Ross Avenue, 6th Floor,
Dallas, Texas 75201, as Co-Documentation Agents;
in consideration of the mutual covenants herein contained and benefits to be
derived herefrom.
WITNESSETH
          WHEREAS, the Lead Borrower, the Borrowers, the Lenders, the
Administrative Agent, the Collateral Agent and the Issuing Bank entered into a
Credit Agreement dated as of November 22, 2005 (as amended, modified,
supplemented, restated or otherwise modified and in effect from time to time,
the “Credit Agreement”); and
          WHEREAS, the parties desire to amend the terms and conditions of the
Credit Amendment as set forth herein.
          NOW THEREFORE, it is hereby agreed as follows:

1.   Definitions. All capitalized terms used herein and not otherwise defined
shall have the same meaning herein as in the Credit Agreement.

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2.   Amendment to Article I. The definition of “Borrowing Base” contained in
Section 1.01 of the Credit Agreement is hereby amended and restated in its
entirety to read as follows:

          “Borrowing Base” means, at any time of calculation, an amount equal
to:
          (i) the face amount of Eligible Credit Card Receivables multiplied by
the Credit Card Advance Rate;
plus
          (ii) the Cost of Eligible Inventory, net of Inventory Reserves,
multiplied by the Inventory Advance Rate;
plus
          (iii) the Private Label Credit Card Advance Rate multiplied by the
Appraised Value of Eligible Private Label Receivables;
minus
the then amount of all Availability Reserves.

3.   Amendment to Article I. The definition of “Permitted Dispositions”
contained in Section 1.01 of the Credit Agreement is hereby amended by adding
the following subsection (g) at the end thereof:

(g) any Private Label Receivables Sale.

4.   Amendment to Article I. The provisions of Article I of the Credit Agreement
are hereby amended by the addition of the following definitions in alphabetical
order in Section 1.01:

          “Appraised Value” means the net appraised liquidation value of the
Borrowers’ Eligible Private Label Receivables, which may be expressed as a
ratio, as determined from time to time by an independent appraiser satisfactory
to the Administrative Agent. Until October 31, 2006 the Appraised Value will be
100% of the book value of the Borrowers’ Eligible Private Label Receivables.
          “Eligible Private Label Receivables” means Private Label Receivables,
in each case reasonably acceptable to the Administrative Agent as arise in the
ordinary course of business, which have been earned by performance and are
deemed by the Administrative Agent in its reasonable discretion to be eligible
for inclusion in the calculation of Availability. Without limiting the
foregoing, none of the following shall be deemed to be Eligible Private Label
Receivables:

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  (a)   Accounts that are more than thirty (30) days past the contractual due
date therefor;     (b)   Accounts with respect to which the Borrowers do not
have good, valid and marketable title thereto, free and clear of any Lien (other
than Liens granted to the Collateral Agent, for its benefit and the ratable
benefit of the Lenders pursuant to the Security Documents);     (c)   Accounts
that are not subject to a first priority security interest in favor of the
Collateral Agent, for the benefit of itself and the Lenders;     (d)   Accounts
which are disputed, are with recourse, or with respect to which a claim,
counterclaim, offset or chargeback has been asserted (to the extent of such
claim, counterclaim, offset or chargeback);     (e)   Accounts which are
evidenced by a promissory note or other instrument for the payment of money;    
(f)   Accounts as to which the obligor thereon has died or been declared
incompetent, or (i) has voluntarily commenced any proceeding or filed any
petition seeking liquidation, reorganization or other relief under any federal
or state bankruptcy, insolvency, receivership or similar law now or hereafter in
effect, (ii) has applied for or consented to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official, (iii) has
made a general assignment for the benefit of creditors, (iv) shall have become
unable, admitted in writing its inability or failed generally to pay his debts
as they become due; or (v) an involuntary proceeding shall have been commenced
or an involuntary petition shall be filed against such obligor seeking any of
the foregoing;     (g)   Accounts which have been classified as counterfeit,
canceled or fraudulent or for which any card issued in connection therewith has
been stolen or lost;     (h)   Accounts which have been charged-off;     (i)  
Accounts with respect to which the obligor is subject to any consumer credit
counseling;     (j)   Accounts as to which all of the representations,
warranties, covenants, and agreements contained in any Loan Document are not
correct or have been breached; or     (k)   Accounts which the Administrative
Agent determines in its reasonable discretion to be uncertain of collection.

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          The Private Label Credit Card Advance Rate, eligibility standards,
reserves, reporting requirements and other structural features related to
Eligible Private Label Receivables may be reset by the Administrative Agent, in
its discretion, after receipt of any appraisals of the Private Label Receivables
or any commercial finance examinations with respect thereto. The Borrowers and
the Facility Guarantors shall provide such additional instruments and documents
to the Administrative Agent as the Administrative Agent and its counsel may
reasonably request in connection with any of the foregoing matters.
          “Private Label Credit Card Advance Rate” means (i) 50% through
October 31, 2006, and (ii) thereafter, (A) if an appraisal of the Private Label
Receivables has been completed, satisfactory to the Administrative Agent, in its
discretion, 85% (subject to the penultimate sentence of the definition of
Eligible Private Label Receivables and subject to the approval of the Lenders),
or (B) if a satisfactory appraisal and commercial finance examination of the
Private Label Receivables has not been received by the Administrative Agent, 0%.
          “Private Label Receivables” means Accounts due to the Borrowers
arising from the use of the Borrowers’ private label credit card.
          “Private Label Receivables Sale” means the sale or other disposition
of the Borrowers’ private label credit card portfolio to a third party, provided
that the Net Proceeds therefrom are at least equal to the amounts available to
be advanced against Eligible Private Label Receivables under the Borrowing Base
.

5.   Amendment to Article V. Section 5.08 of the Credit Agreement is hereby
amended by the addition of the following subsection (d):

          (d) In the event that Eligible Private Label Receivables are included
in the Borrowing Base for a period of more than one (1) year after the date of
their initial inclusion in the Borrowing Base, each Loan Party will, and will
cause its Material Subsidiaries, from time to time upon the request of any
Agent, to permit any Agent or professionals retained by the Agents, subject to
reasonable prior notice and during normal business hours prior to the occurrence
of an Event of Default, to conduct one (1) appraisal and one (1) commercial
finance examination in any twelve (12) month period of the Borrowers’ Private
Label Receivables (provided that the Agents, in their reasonable discretion, if
any Event of Default exists, may cause such additional Private Label Receivables
appraisals and commercial finance examinations to be taken as such Agents
reasonably determine (each, at the expense of the Loan Parties)).

6.   Amendment to Article VI. Section 6.15 of the Credit Agreement is hereby
deleted.   7.   Amendment to Article VII. Section 7.01(s) of the Credit
Agreement is hereby deleted.   8.   Conditions to Effectiveness. This First
Amendment shall not be effective until each of the following conditions
precedent have been fulfilled to the satisfaction of the Administrative Agent:

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        (a) This First Amendment shall have been duly executed and delivered by
the Borrowers, the Facility Guarantors, the Administrative Agent, the Collateral
Agent and the Lenders. The Administrative Agent shall have received a fully
executed copy hereof and of each other document required hereunder.
        (b) The Borrowers shall have paid to the Administrative Agent, for the
benefit of the Lenders, an amendment fee in the amount of $243,750.
        (c) No Default or Event of Default shall have occurred and be
continuing, both before and immediately after giving effect to the execution of
this First Amendment.

9.   Miscellaneous.

        (a) Except as provided herein, all terms and conditions of the Credit
Agreement and the other Loan Documents remain in full force and effect. The Loan
Parties hereby ratify, confirm, and reaffirm all of the representations,
warranties and covenants therein contained.
        (b) The Loan Parties hereby acknowledge and agree that they have no
offsets, defenses, claims, or counterclaims against the Agents or any Lender or
the Issuing Bank, or any of their respective officers, directors, employees,
attorneys, representatives, predecessors, successors, or assigns with respect to
the Loan Documents, the Obligations, or otherwise, and that if the Loan Parties
now have, or ever did have, any offsets, defenses, claims, or counterclaims
against the Agents or any Lender or the Issuing Bank, or any of their respective
officers, directors, employees, attorneys, representatives, predecessors,
successors, or assigns, whether known or unknown, at law or in equity, all of
them are hereby expressly WAIVED, and the Loan Parties hereby RELEASE the Agents
and each Lender and the Issuing Bank, and each of their respective officers,
directors, employees, attorneys, representatives, predecessors, successors, and
assigns from any liability therefor.
        (c) The Borrowers shall pay all reasonable out-of-pocket costs and
expenses incurred by the Administrative Agent in connection with this First
Amendment, including, without limitation, all reasonable attorneys’ fees.
        (d) This First Amendment may be executed in several counterparts and by
each party on a separate counterpart, each of which when so executed and
delivered, shall be an original, and all of which together shall constitute one
instrument.
        (e) This First Amendment expresses the entire understanding of the
parties with respect to the matters set forth herein and supersedes all prior
discussions or negotiations hereon.

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     (f) By executing this First Amendment, the undersigned Facility Guarantors
hereby consent to the First Amendment to Credit Agreement and acknowledge that
their Guarantee remains in full force and effect.
[SIGNATURE PAGES FOLLOW]

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     IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
be executed and their seals to be hereto affixed as the date first above
written.
     BORROWERS:

            PIER 1 IMPORTS (U.S.), INC.
      By:           Name:   Charles H. Turner        Title:   Executive Vice
President and CFO     

            PIER 1 KIDS, INC.
      By:           Name:   Charles H. Turner        Title:   Executive Vice
President     

            FACILITY GUARANTORS:

PIER 1 IMPORTS, INC.
      By:           Name:   Charles H. Turner        Title:   Executive Vice
President, CFO and Treasurer     

            PIER 1 ASSETS, INC.
      By:           Name:   Charles H. Turner        Title:   Executive Vice
President, CFO and Treasurer     

            PIER 1 LICENSING, INC.
      By:           Name:   Charles H. Turner        Title:   Executive Vice
President and CFO   

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            PIER 1 HOLDINGS, INC.
      By:         Name:   Charles H. Turner      Title:   Executive Vice
President and CFO     

             
 
                PIER 1 SERVICES COMPANY, a Delaware statutory trust    
 
           
 
  By:   Pier 1 Holdings, Inc., Managing Trustee    
 
           
 
  By:        
 
     
 
   
 
  Name:   Charles H. Turner         Title: Executive Vice President and CFO    
 
                PIER 1 VALUE SERVICES, LLC    
 
           
 
  By:   Pier 1 Imports (U.S.), Inc., its sole member and manager    
 
           
 
  By:        
 
           
 
  Name:   Charles H. Turner    
 
  Title:   Executive Vice President and CFO    

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      BANK OF AMERICA, N.A.    
 
      As Administrative Agent, as Collateral Agent, as Swingline Lender, and as
Lender    
 
           
 
  By:        
 
     
 
   
 
      Name: Stephen J. Garvin    
 
      Title: Managing Director      
 
      Address:    
 
      40 Broad Street, 10th Floor    
 
      Boston, Massachusetts 02109    
 
      Attn: Stephen J. Garvin    
 
      Telephone: (617) 434-9399    
 
      Telecopy: (617) 434-4339    

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                WELLS FARGO RETAIL         FINANCE, LLC,         As
Co-Syndication Agent and as Lender    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
  Address:        
 
  Telephone:        
 
  Telecopy:        
 
                WACHOVIA BANK, NATIONAL ASSOCIATION,         As Co-Syndication
Agent and as Lender    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
  Address:        
 
  Telephone:        
 
  Telecopy:        
 
                HSBC BANK USA, NA,         As Co-Documentation Agent and as
Lender    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
  Address:        
 
  Telephone:        
 
  Telecopy:        
 
                JPMORGAN CHASE BANK, N.A.,         As Co-Documentation Agent and
as Lender    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
  Address:        
 
  Telephone:        
 
  Telecopy:        

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                  GENERAL ELECTRIC CAPITAL CORPORATION,         As Lender    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
  Address:        
 
  Telephone:        
 
  Telecopy:        
 
                CITICORP USA, INC.,         As Lender    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
  Address:        
 
  Telephone:        
 
  Telecopy:        
 
                SUNTRUST BANK,         As Lender    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Title:        
 
           
 
  Address:        
 
  Telephone:        
 
  Telecopy:        

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