exv10w1



 






EXHIBIT 10.1




PIER 1

UMBRELLA TRUST





 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	PAGE	 
	PREAMBLE	 	 	2	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	ARTICLE I Effective Date; Duration	 	 	4	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	1.01	 	 	Effective Date and Trust Year
	 	 	4	 
	 	 	 	 	 	1.02	 	 	Duration
	 	 	4	 
	 	 	 	 	 	1.03	 	 	Irrevocability
	 	 	5	 
	 	 	 	 	 	1.04	 	 	Special Circumstance
	 	 	6	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	ARTICLE II Trust Fund and Funding Policy	 	 	8	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	2.01	 	 	Contributions
	 	 	8	 
	 	 	 	 	 	2.02	 	 	Investments and Valuation
	 	 	12	 
	 	 	 	 	 	2.03	 	 	Subtrusts
	 	 	17	 
	 	 	 	 	 	2.04	 	 	Recapture of Excess Assets
	 	 	17	 
	 	 	 	 	 	2.05	 	 	Substitution of Other Property
	 	 	18	 
	 	 	 	 	 	2.06	 	 	Administrative Powers of Trustee
	 	 	19	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	ARTICLE III Administration	 	 	22	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	3.01	 	 	Committee; Company Representatives
	 	 	22	 
	 	 	 	 	 	3.02	 	 	Payment of Benefits
	 	 	23	 
	 	 	 	 	 	3.03	 	 	Disputed Claims
	 	 	25	 
	 	 	 	 	 	3.04	 	 	Records
	 	 	25	 
	 	 	 	 	 	3.05	 	 	Accountings
	 	 	25	 
	 	 	 	 	 	3.06	 	 	Expenses and Fees
	 	 	26	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	ARTICLE IV Liability	 	 	26	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	4.01	 	 	Indemnity
	 	 	26	 
	 	 	 	 	 	4.02	 	 	Bonding
	 	 	27	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	ARTICLE V Insolvency	 	 	27	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	5.01	 	 	Determination of Insolvency
	 	 	27	 
	 	 	 	 	 	5.02	 	 	Rights of Creditors
	 	 	27	 
	 	 	 	 	 	5.03	 	 	Effect of Insolvency
	 	 	28	 
	 	 	 	 	 	5.04	 	 	Termination of Insolvency Status
	 	 	28	 
	 	 	 	 	 	5.05	 	 	Creditors’ Claims During Solvency
	 	 	28	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	ARTICLE VI Successor Trustees	 	 	29	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	6.01	 	 	Resignation and Removal
	 	 	29	 
	 	 	 	 	 	6.02	 	 	Appointment of Successor
	 	 	29	 
	 	 	 	 	 	6.03	 	 	Accountings; Continuity
	 	 	30	 






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	 	 	 	 	 	 	 	 	 	 	PAGE	 
	ARTICLE VII General Provisions	 	 	30	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	7.01	 	 	Interests Not Assignable
	 	 	30	 
	 	 	 	 	 	7.02	 	 	Amendment
	 	 	31	 
	 	 	 	 	 	7.03	 	 	Applicable Law
	 	 	31	 
	 	 	 	 	 	7.04	 	 	Agreement Binding on All Parties
	 	 	31	 
	 	 	 	 	 	7.05	 	 	Notices and Directions
	 	 	31	 
	 	 	 	 	 	7.06	 	 	No Implied Duties
	 	 	32	 
	 	 	 	 	 	7.07	 	 	Gender. Singular and Plural
	 	 	32	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	ARTICLE VIII INSURER	 	 	32	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 	8.01	 	 	Insurer Not a Party
	 	 	32	 
	 	 	 	 	 	8.02	 	 	Authority of Trustee
	 	 	32	 
	 	 	 	 	 	8.03	 	 	Contract Ownership
	 	 	32	 
	 	 	 	 	 	8.04	 	 	Limitation of Liability:
	 	 	33	 
	 	 	 	 	 	8.05	 	 	Change of Trustee
	 	 	33	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 
	APPENDIX A	 	Assumptions and Methodology for Calculations
Required Under 2.01 and 2.04	 	 	 	 






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INDEX OF TERMS




	 	 	 	 	 	 	 
	TERM	 	SECTION	 	PAGE	 
	 
	Act
	 	1.04-3(a)	 	 	7	 
	 
	 		 	 		 
	Board

	 	1.03-2	 	 	5	 
	 
	Change in Control	 	 	 	 
	 
	 	1.04-3	 	 	7	 
	Company
	 	 	 	 	 	 
	 
	 	Heading	 	 	2	 
	Contracts
	 	 	 	 	 	 
	 
	 	2.02-1	 	 	12	 
	Default
	 	 	 	 	 	 
	 
	 	1.04-5	 	 	7	 
	ERISA
	 	 	 	 	 	 
	 
	 	Preamble	 	 	4	 
	Excess Assets
	 	 	 	 	 	 
	 
	 	2.04-2	 	 	18	 
	Insurer
	 	 	 	 	 	 
	 
	 	2.02-1	 	 	12	 
	Investment Manager
	 	 	 	 	 	 
	 
	 	2.02-4	 	 	14	 
	Participants
	 	 	 	 	 	 
	 
	 	Preamble	 	 	2	 
	Payment Schedule
	 	 	 	 	 	 
	 
	 	2.01-5	 	 	10	 
	Pier 1
	 	 	 	 	 	 
	 
	 	Heading	 	 	1	 
	Pier 1 (U.S.)
	 	 	 	 	 	 
	 
	 	Heading	 	 	1	 
	Plans
	 	 	 	 	 	 
	 
	 	Preamble	 	 	2	 
	Potential Change in Control	 	 	 	 
	 
	 	2.01-7	 	 	11	 
	Segregated Fund
	 	 	 	 	 	 
	 
	 	2.02-4	 	 	14	 






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	TERM	 	SECTION	 	PAGE	 
	 
	SERP
	 	 	 	 	 	 
	 
	 	Preamble	 	 	2	 
	Solvency
	 	 	 	 	 	 
	 
	 	5.05-2	 	 	29	 
	Special Circumstance	 	 	 	 
	 
	 	1.04-2	 	 	6	 
	Subtrust
	 	 	 	 	 	 
	 
	 	2.03-1	 	 	17	 
	Tax Funding
	 	 	 	 	 	 
	 
	 	1.03-3	 	 	6	 
	Trust Agreement
	 	 	 	 	 	 
	 
	 	Heading	 	 	1	 
	Trustee
	 	 	 	 	 	 
	 
	 	Heading	 	 	1	 
	Written Consent of Participants	 	 	 	 
	 
	 	1.03-4	 	 	6	 







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PIER 1




UMBRELLA TRUST




December 21, 2005




     This Trust Agreement (herein so called) is made and entered into by and between Pier 1
Imports, Inc., a Delaware corporation (“Pier 1”); Pier 1 Imports (U.S.), Inc., a Delaware
corporation (“Pier 1 (U.S.)”); and Pier 1 Services Company (“Pier 1 Services”) on the one hand, and
Wachovia Bank National Association (the “Trustee”), on the other hand. This Trust Agreement is a
restatement of the trust agreement dated February 12, 1992 between Pier 1 and Pier 1 (U.S.) and
Security Pacific Bank Oregon, the predecessor in interest to the Trustee (the “Prior Trust
Agreement”).



     The term “Company,” when used herein, means Pier 1 (U.S.), Pier 1 Services and any parent,
subsidiary or affiliate of Pier 1 participating in the Plan. For purposes of this trust, Pier 1
(U.S.), Pier 1 Services and each participating parent, subsidiary or affiliate shall be considered
separate Companies and each separate corporation shall be treated as the Company only with respect
to its own employees and its own contributions to the trust.



     The Company hereby establishes with the Trustee a trust to hold all monies and other property,
together with the income thereon, as shall be paid or transferred to it hereunder in accordance
with the terms and conditions of this Trust Agreement. The Trustee hereby accepts the trust
established under this Trust Agreement and agrees to hold, IN TRUST, all monies and other property
transferred to it hereunder for the uses and purposes and upon the terms and conditions set forth
herein, and the Trustee further agrees to discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust Agreement. If there is more than one trust
with separate Trustees, each Trustee shall have liability only for the trust for which it is
Trustee, and the Trustees shall not be deemed to be co-Trustees.



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PREAMBLE




     The Company
has adopted the following plans (each a “Plan” and
collectively the “Plans”), which shall be subject to this
trust:




	 	•	 	Pier 1 Imports, Inc. Supplemental Executive Retirement Plan (the “SERP”)
	 
	 	•	 	Pier 1 Imports, Inc. Supplemental Retirement Plan (the “SRP”)
	 
	 	•	 	Pier 1 Benefit Restoration Plan I (the “BRP I”)
	 
	 	•	 	Pier 1 Benefit Restoration Plan II (the “BRP II”)





     References in this Trust Agreement to the “Committee” which relate to a particular Plan shall
refer to the administrative person or body which administers that Plan and, if the reference does
not relate to a particular Plan, shall refer to all of such Committees. If, however, the Company
appoints a separate administrative person or body to administer this Trust Agreement, references in
this Trust Agreement to the Committee shall refer to such administrative person or body which is
appointed to administer this Trust Agreement, unless the context clearly indicates otherwise.



     The participants who are covered by this Trust Agreement (“Participants”) shall be all persons
who are participants in one or more of the Plans prior to a Special Circumstance, unless the
Company specifically designates only specified individuals or groups as Participants covered by
this Trust Agreement. After a person becomes a Participant covered by this Trust Agreement, such
person will continue to be a Participant at all times thereafter (including after retirement or
other termination of service) until all benefits payable to such Participant under all Plans in
which he is a participant have been paid, the Participant ceases to be entitled to benefits from
any of the Plans, or the Participant’s death, whichever occurs first. The term “Participants”
shall not include any beneficiaries of Participants.



     At any time prior to a Special Circumstance, the Company may, by written notice to and consent
of the Trustee, cause additional plans to become Plans subject to this Trust Agreement or



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cause
additional participants in one or more of the Plans to become Participants covered by this Trust
Agreement. Upon and after a Special Circumstance, the Company may not add any additional plans or
participants to this Trust Agreement.



     The Company shall provide the Trustee with certified copies of the following items: (i) the
documents for all Plans; (ii) all amendments to all Plans promptly upon their adoption; and (iii)
lists and specimen signatures of the members of the Committee(s) which administer the Plans and
this Trust Agreement and any other Company representatives authorized to take action in regard to
the administration of the Plans and this trust, including any changes in the members of such
Committee(s) and of such other representatives promptly following any such change. The Company
shall also provide the Trustee at least annually with a list of all Participants in each of the
Plans who are covered by this Trust Agreement.



     The purpose of this trust is to give Participants greater security by placing assets in trust
for use only to pay benefits under the Plans to Participants or, if the Company becomes insolvent,
to pay creditors. The Company shall continue to be liable to Participants to make all payments
required under the terms of the Plans to the extent such payments are not made from this trust.
Distributions made from this trust to Participants or their beneficiaries shall, to the extent of
such distributions, satisfy the Company’s obligations to pay benefits to Participants and their
beneficiaries under the Plans. The Trustee shall have no responsibility for the tax effects of the
establishment, maintenance or operation of this trust or for filing any tax returns or reports
(other than Form 1041 and Schedule K-l for the trust).



     The Trust is intended to be a grantor trust, of which the Company is the grantor (within the
meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, (the “Code”)) and shall be construed accordingly. The Company hereby agrees to
report all items of income, deductions and credits of the trust on its own income tax returns; and
the Company shall have no right to any distributions from the trust or any claim against the trust
for funds necessary to pay any income taxes which the Company is required to pay on account of
reporting the income of the trust on its income tax returns. No contribution to
or income of the trust is intended to be taxable to Participants until benefits are
distributed to them.



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     The principal of the Trust, and any earnings thereon, shall be held separate and apart from
other funds of the Company and shall be used exclusively for the uses and purposes of Plan
participants and general creditors as herein set forth. Participants of the Plans and their
beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plans and this Trust Agreement shall be mere unsecured
contractual rights of participants of the Plans and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the Company’s general creditors under
federal and state law in the event of Insolvency, as defined in Section 5.01 herein.



     The Plans are intended to be “unfunded” and maintained “primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated employees” for
purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and as such
are intended not to be covered by Parts 2 through 4 of Subtitle B of Title I of ERISA (relating to
participation and vesting, funding and fiduciary responsibility). The existence of this trust is
not intended to alter this characterization of the Plans.



ARTICLE I  




Effective Date; Duration




     1.01 Effective Date and Trust Year



          This restatement of the Prior Trust Agreement shall become effective as of the date set forth
on page 1 above. For tax purposes the trust year shall coincide with the Company’s tax year. For
financial reporting purposes the trust year shall coincide with the Company’s fiscal year. The
Company shall report any change in its fiscal year to the Trustee.




     1.02 Duration



          This trust shall continue in effect until all assets of the trust fund are exhausted through
distribution of benefits to Participants, payment to creditors in the event of insolvency, payment
of fees and expenses of the Trustee, and return of remaining funds to the Company pursuant to
1.03-1. Notwithstanding the foregoing, this trust shall terminate on the day before

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twenty-one
years after the death of the last survivor of all present or future Participants who are now living
and those persons now living who are designated as beneficiaries of any such Participants in
accordance with the terms of any of the Plans.




     1.03 Irrevocability



          1.03-1 Except as otherwise provided in this 1.03, the trust shall be irrevocable until all
benefits payable under the Plans to Participants who are covered by this Trust Agreement are paid.
The Trustee shall then return to the Company any assets remaining in the trust.




          1.03-2 If the existence of this trust or any Subtrust (as such term is hereinafter defined) is
held to be ERISA Funding or Tax Funding by a federal court and appeals from that holding are no
longer timely or have been exhausted, this trust or such Subtrust shall terminate. The board of
directors of Pier 1 (the “Board”) may also terminate this trust or any Subtrust if it determines,
based on an opinion of legal counsel which is satisfactory to the Trustee, that either (i) judicial
authority or the opinion of the U.S. Department of Labor, Treasury Department or Internal Revenue
Service (as expressed in proposed or final regulations, advisory opinions or rulings, or similar
administrative announcements) creates a significant risk that the trust or any Subtrust will be
held to be ERISA Funding or Tax Funding or (ii) ERISA, the Code or any other applicable law or
regulation requires the trust or any Subtrust to be amended in a way that creates a significant
risk that the trust or such Subtrust will be held to be ERISA Funding or Tax Funding, and failure
to so amend the trust or such Subtrust could subject the Company to material penalties. Upon any
such termination provided for in this Section 1.03-2, the assets of each terminated Subtrust
remaining after payment of the Trustee’s fees and expenses shall be distributed as follows:





     (a) Such assets shall be transferred directly by the Trustee to a new trust
established by the Company which is not deemed to be ERISA Funding or
Tax Funding, but which is similar in all other respects to this trust, if the
Company determines that it is possible to establish such a trust.




     (b) If the Company determines that it is not possible to establish the trust in
(a) above, then the assets shall be distributed to the Company.



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          Notwithstanding the foregoing, the Trustee shall distribute benefits under the Plans to a
Participant to the extent that a federal court has held that the interest of the Participant in
this trust causes such benefits to be includible for federal income tax purposes in the gross
income of the Participant prior to actual payment of such benefits to the Participant and appeals
from that holding are no longer timely or have been exhausted. The provisions of this paragraph
shall also apply to any beneficiary of a Participant.




          1.03-3 This trust is “Tax Funding” if it causes the interest of a Participant in this trust to
be includible for federal income tax purposes in the gross income of the Participant prior to
actual payment of benefits under the Plans to the Participant.




          This trust is “ERISA Funding” if it prevents any of the Plans from meeting the “unfunded”
criterion of the exceptions to application of the provisions of Parts 2 through 4 of Subtitle B of
Title I of ERISA for plans that are unfunded and maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated employees.




          1.03-4 “Written Consent of Participants” means, for the purposes of this Trust Agreement,
consent in writing, obtained by the Committee, of Participants who (i) are a majority in number and
(ii) have more than fifty percent (50%) in value of the accrued and vested benefits, of the
Participants in each Subtrust under this Trust Agreement on the date of such consent.




     1.04 Special Circumstance



          1.04-1 Upon the occurrence of a Special Circumstance described in 1.04-2, the trust assets
shall be held for Participants who had accrued benefits under the Plans before the
Special Circumstance occurred, including benefits accrued for such Participants after the
Special Circumstance. However, the occurrence of a Special Circumstance shall not alter in any
manner the timing or form of benefit payments under the Plans.




          1.04-2 A “Special Circumstance” shall mean a Change in Control (as defined in 1.04-3) or a
Default (as defined in 1.04-5).




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          1.04-3 A “Change in Control” shall be deemed to occur if:





     (a) any “person” (as defined in Section 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934 (the “Act”)) becomes the “beneficial owner” (as defined in
Rules 13(d)-3 and 13(d)-5 under the Act) of securities of Pier 1, or of a
corporation directly or indirectly holding securities of the Company, in either case
representing 35% or more of the voting power of the outstanding securities of Pier 1
having the right under ordinary circumstances to vote at an election of the Board;
or




     (b) there shall occur a change in the composition of a majority of the Board
within a two-year period which change shall not have been affirmatively approved by
a majority of such Board as constituted immediately prior to the commencement of
such period; or




     (c) at any meeting of the stockholders of Employer called for the purpose of
electing directors, a majority of persons nominated by the Board for election as
directors shall fail to be elected.



          Notwithstanding the foregoing, a Change in Control shall not be deemed to occur as a result of
any occurrence described in (a) above, if directors who were a majority of the members of the Board
prior to such occurrence determine that the occurrence shall not constitute a Change in Control
within one year after the transaction and furnish written notice to the Trustee of such
determination.




          1.04-4 For purposes of this Trust Agreement, a Change in Control shall also
be deemed to have occurred when the Trustee makes a reasonable determination to that effect on
its own initiative or upon receipt by the Trustee of written notice to that effect from the
Company. The Chief Executive Officer of the Company or the Board shall furnish written notice to
the Trustee when a Change in Control occurs under 1.04-3.




          1.04-5 A “Default” shall mean a failure by the Company to contribute, within 30 days of
receipt of written notice from the Trustee, any of the following amounts:




7









 









     (a) The full amount of any insufficiency in assets of any Subtrust that is
required to pay any premiums or loan interest payments on insurance contracts which
are held in the Subtrust; or




     (b) The full amount of any insufficiency in assets of any Subtrust that is
required to pay any Plan benefit that is payable upon a direction from the Committee
pursuant to 3.02-3 or upon resolution of a disputed claim pursuant to 3.03-2 and
that is not paid directly by the Company.


If, after the occurrence of a Default, the Company at any time cures such Default by contributing
to the trust all amounts which are then required under subparagraphs (a) and (b) above, it shall
then cease to be deemed that a Default has occurred or that a Special Circumstance has occurred by
reason of such Default.




ARTICLE II  




Trust Fund and Funding Policy




2.01 Contributions




          2.01-1 In its discretion and notwithstanding any other provision hereof, the Company may at
any time contribute to the trust such amounts or assets as the Committee may reasonably decide are
necessary to provide security for all benefits under all Plans which are payable to Participants
covered by this trust and to provide for future administration and operation expenses of the trust,
including, but not limited to, the contributions specifically permitted at 2.01-3.




          2.01-2 Whenever the Company makes a contribution to the trust, the Company shall designate
which of the Plans and which Subtrust(s) to which such contribution (or designated portions
thereof) shall be allocated. The Company may also make contributions to a special reserve for
payment of future fees and expenses of the Trustee and future trust fees and expenses for legal and
administrative proceedings. The Company shall designate a separate Subtrust to receive such
contributions, which shall be distinct from the other Subtrusts established for the Plans.




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          2.01-3 The Company may, upon the occurrence of a Special Circumstance (as defined in 1.04-2)
or a Potential Change in Control (as defined in 2.01-7), contribute to the trust all or a portion
of the sum of the following:





     (a) The present value of the remaining premiums and the interest on any policy
loans on insurance contracts held in the trust.




     (b) The amount by which the present value of all benefits (vested and unvested)
payable under the Plans on a pre-tax basis to Participants covered by this trust
exceeds the value of all trust assets. Each Participant’s benefit under any of the
Plans for purposes of calculating present value shall be the highest benefit the
Participant would have accrued under the Plan within the 24 months following such
event, assuming that the Participant’s service continues for 24 months at the same
rate of compensation, that the Participant continues to make future deferrals under
deferred compensation plans in accordance with his prior elections, and that the
Participant is terminated at a time when he is entitled to receive any benefit
enhancement provided by the Plan upon a Change in Control. Any benefit enhancement
or right with respect to the Plans, which is provided under employment or severance
agreements of Participants, shall be taken into account in making the foregoing
calculation.




     (c) The present value of a reasonable estimate provided by the Trustee of its
fees and expenses due over the remaining duration of the trust. Such amount may be
presumed to be equal to 1% of the present value of all accrued benefits (vested and
unvested) payable under the Plans on a pre-tax basis to
Participants covered by this trust.




     (d) The present value of a reasonable estimate provided by the Trustee of the
anticipated fees and expenses for the purpose of commencing or defending lawsuits or
legal or administrative proceedings over the remaining duration of the trust. Such
amount may be presumed to be equal to 2% of the present value of all accrued
benefits (vested and unvested) payable under the Plans on a pre-tax basis to
Participants covered by this trust.



9









 





          2.01-4 The calculations under 2.01-3 shall be based on the terms of the Plans and the
actuarial assumptions and methodology set forth in Appendix A attached hereto. Before a Special
Circumstance, Appendix A may be revised by the Committee from time to time. After a Special
Circumstance, Appendix A may be revised only with the Written Consent of Participants.




          2.01-5 Whenever the Company makes a contribution to the trust pursuant to 2.01-3, it shall
furnish the Trustee with a written statement setting forth the computation of any and all amounts
contributed under subparagraphs (a), (b), (c) and (d) of 2.01-3.




          Whenever a Special Circumstance occurs or the Company makes a contribution pursuant to 2.01-3,
the Company shall deliver to the Trustee, contemporaneously with or immediately prior to such
event, a schedule (the “Payment Schedule”) indicating the amounts payable under each of the Plans
in respect of each Participant, the form in which such amounts are to be paid (as provided for or
available under the Plans) and the time of commencement for payment of such amounts. The Payment
Schedule shall include any other necessary instructions with respect to benefits (including legal
expenses) payable under the Plans and any conditions with respect to any Participant’s entitlement
to, and the Company’s obligation to provide, such benefits, and such instructions may be revised
from time to time to the extent so provided under the Plans or this Trust Agreement.




          A modified Payment Schedule shall be delivered by the Company to the Trustee at each time that
(i) additional amounts are paid by the Company to the Trustee pursuant to 2.01-3, (ii) Excess
Assets are returned to the Company pursuant to 2.04, and (iii) any event occurs that
requires a modification of the Payment Schedule. The Company shall also furnish a Payment
Schedule or modified Payment Schedule for any or all Plan(s) upon request by the Trustee at any
other time. Whenever the Company is required to deliver to the Trustee a Payment Schedule or a
modified Payment Schedule, the Company shall also deliver at the same time to each Participant the
respective portion of the Payment Schedule or modified Payment Schedule that sets forth the amount
payable to that Participant.




          2.01-6 Any contribution to the trust which is made by the Company under 2.01-3 on account of a
Potential Change in Control shall be returned to the Company following




10









 







one year after delivery of
such contribution to the Trustee unless a Change in Control shall have occurred during such
one-year period, if the Company requests such return within 60 days after such one-year period. If
no such request is made within this 60-day period, the contribution shall become a permanent part
of the trust fund. The one-year period shall recommence in the event of and upon the date of any
subsequent Potential Change in Control.




          2.01-7 “Potential Change in Control” shall be deemed to occur if:





     (a) Any person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, as defined in Section 13(d)(3) of the
Act, delivers to the Company a statement containing the information required by
Schedule 13-D under the Act, or any amendment to any such statement, that shows that
such person has acquired, directly or indirectly, the beneficial ownership of (i)
more than 10% of any class of equity security of the Company entitled to vote as
single class in the election or removal from office of directors, or (ii) more than
10% of the voting power of any group of classes of equity securities of the Company
entitled to vote as a single class in the election or removal from office of
directors;




     (b) The Company becomes aware that preliminary or definitive copies of a proxy
statement and information statement or other information have been filed with the
Securities and Exchange Commission pursuant to Rule 14a-6, Rule 14c-5, or Rule 14f-l
under the Act relating to a Potential Change in Control of the
Company;




     (c) Any person delivers to the Company pursuant to Rule 14d-3 under the Act a
Tender Offer Statement relating to Voting Securities of the Company;




     (d) Any person (other than the Company) publicly announces an intention to take
actions which if consummated would constitute a Change in Control;




     (e) The Company enters into an agreement or arrangement, the consummation of
which would result in the occurrence of a Change in Control;



11









 






     (f) The Board approves a proposal, or the Company enters into an agreement,
which if consummated would constitute a Change in Control; or




     (g) The Board adopts a resolution to the effect that, for purposes of this
Trust Agreement, a Potential Change in Control has occurred.


Notwithstanding the foregoing, a Potential Change in Control shall not be deemed to occur as a
result of any event described in (a) through (f) above, if directors who were a majority of the
members of the Board prior to such event determine that the event shall not constitute a Potential
Change in Control and furnish written notice to the Trustee of such determination.




          2.01-8 The Trustee shall accept the contributions made by the Company and hold them as a trust
fund for the payment of benefits under the Plans. The Trustee shall not be responsible for
determining the required amount of contributions or for collecting any contribution not voluntarily
paid, nor shall the Trustee be responsible for the adequacy of the trust fund to meet and discharge
all liabilities under the Plans. Contributions may be in cash or in other assets acceptable to the
Trustee specified in 2.02.




     2.02 Investments and Valuation



          2.02-1 The trust fund may be invested in insurance contracts (“Contracts”). Such Contracts
may be purchased by the Company and transferred to the Trustee as in-kind contributions or may be
purchased by the Trustee with the proceeds of cash
contributions (or may be purchased upon direction by the Committee pursuant to 2.02-2 or an
Investment Manager pursuant to 2.02-4). The Trustee shall have the power to exercise all rights,
privileges, options and elections granted by or permitted under any Contract or under the rules of
the insurance company issuing the Contract (“Insurer”), including the right to obtain policy loans
against the cash value of the Contract. Prior to a Special Circumstance, the exercise by the
Trustee of any incidents of ownership under any Contract shall be subject to the direction of the
Committee. The Committee may from time to time direct the Trustee in writing as to the designation
of the beneficiary of a Participant under a Contract for any part of the death benefits payable to
such beneficiary thereunder, and the Trustee shall promptly file such designation with the Insurer.





12









 








          Notwithstanding anything contained herein to the contrary, neither the Company nor the Trustee
shall be liable for the refusal of any Insurer to issue or change any Contract or Contracts or to
take any other action requested by the Trustee; nor for the form, genuineness, validity,
sufficiency or effect of any Contract or Contracts held in the trust; nor for the act of any person
or persons that may render any such Contract or Contracts null and void; nor for failure of any
Insurer to pay the proceeds of any such Contract or Contracts as and when the same shall become due
and payable; nor for any delay in payment resulting from any provision contained in any such
Contract or Contracts; nor for the fact that for any reason whatsoever (other than its own
negligence or willful-misconduct) any Contracts shall lapse or otherwise become uncollectible.




          2.02-2 Prior to a Special Circumstance, the Trustee shall invest the trust fund in accordance
with written directions by the Committee, including directions for exercising rights, privileges,
options and elections pertaining to Contracts and for borrowing from Contracts or other borrowing
by the Trustee. The Trustee shall act only as an administrative agent in carrying out directed
investment transactions and shall not be responsible for the investment decision. If a directed
investment transaction violates any duty to diversify, to maintain liquidity or to meet any other
investment standard under this trust or applicable law, the entire responsibility shall rest upon
the Company. The Trustee shall be fully protected in acting upon or complying with any investment
objectives, guidelines, restrictions or directions provided in accordance with this paragraph.




          After a Special Circumstance the Committee shall no longer be entitled to direct the Trustee
with respect to the investment of the trust fund, unless the Written Consent of Participants is
obtained for the Committee to continue to have this right pursuant to 2.02-2. If such Written
Consent of Participants is not obtained, the trust fund shall be invested by the Trustee pursuant
to 2.02-3 or by an Investment Manager appointed by the Company pursuant to 2.02-4.




          The Committee may not direct the Trustee to make any investments, and the Company may not make
any contributions to the trust fund, which are not permissible investments under 2.02-2 and 2.02-3.





13









 








          Notwithstanding the foregoing, no investments shall be made at any time in any securities,
instruments, accounts or real property of the Company or its affiliates, and the Trustee may not
loan trust fund assets to the Company or its affiliates, or permit the Company or its affiliates to
pledge trust fund assets as collateral for loans to the Company.




          2.02-3 If the Committee so directs in writing, or at the Trustee’s discretion following a
Special Circumstance, the Trustee shall invest and reinvest the assets of the trust fund as the
Trustee, in its sole discretion, may deem appropriate, in accordance with applicable law. The
permissible investments shall be limited to the following:





     (a) Insurance or annuity contracts; or




     (b) Preferred or common stocks, bonds, notes, debentures, commercial paper,
certificates of deposit, money market funds, obligations of governmental bodies, or
other securities; or




     (c) Interest-bearing savings or deposit accounts with any federally-insured
bank or savings and loan association (including the Trustee or an affiliate of the
Trustee); or




     (d) Shares in, or certificates of participation issued by investment companies,
investment trusts, mutual funds, or common or pooled investment funds (including any
common or pooled investment fund now or hereafter
maintained by the Trustee or any affiliate of the Trustee).



          2.02-4 Prior to a Special Circumstance the Company may appoint one or more investment managers
(“Investment Manager”) subject to the following provisions:





     (a) The Company may appoint one or more Investment Managers to manage
(including the power to acquire and dispose of) a specified portion of the assets of
the trust (hereinafter referred to as that Investment Manager’s “Segregated Fund”).
Any Investment Manager so appointed must be either (A) an investment adviser
registered as such under the Investment Advisers Act of 1940, (B) a bank, as defined
in that Act, or (C) an insurance company qualified to



14









 






perform services in the
management, acquisition or disposition of the assets of trusts under the laws of
more than one state; and any Investment Manager so appointed must acknowledge in
writing to the Company and to the Trustee that it is a fiduciary with respect to the
Plans. The Trustee, until notified in writing to the contrary, shall be fully
protected in relying upon any written notice of the appointment of an Investment
Manager furnished to it by the Company. In the event of any vacancy in the office of
Investment Manager, the Trustee shall be deemed to be the Investment Manager of that
Investment Manager’s Segregated Fund until an Investment Manager thereof shall have
been duly appointed; and in such event, until an Investment Manager shall have been
so appointed and qualified, references herein to the Trustee’s acting in respect of
that Segregated Fund pursuant to direction from the Investment Manager shall be
deemed to authorize the Trustee to act in its own discretion in managing and
controlling the assets of that Segregated Fund, and subparagraphs, (b) and (c) below
shall have no effect with respect thereto and shall be disregarded.




     (b) Each Investment Manager appointed pursuant to subparagraph (a) above shall
have exclusive authority and discretion to manage and control the assets of its
Segregated Fund and may invest and reinvest the assets of the Segregated Fund in any
investments in which the Trustee is authorized to invest
under 2.02-3, subject to the terms and limitations of any written instruments
pertaining to its appointment as Investment Manager. Copies of any such written
instruments shall be furnished to the Trustee. In addition, each Investment Manager
from time to time and at any time may delegate to the Trustee (or in the event of
any vacancy in the office of Investment Manager, the Trustee may exercise in respect
of that Investment Manager’s Segregated Fund) discretionary authority to invest and
reinvest otherwise uninvested cash held in its Segregated Fund temporarily in bonds,
notes or other evidences of indebtedness issued or fully guaranteed by the United
States of America or any agency or instrumentality thereof, or in other obligations
of a short-term nature, including prime commercial obligations or part interests
therein or in units of any common trust fund maintained by the Trustee or its
affiliates which are invested primarily in cash equivalents.



15









 






     (c) Unless the Trustee knowingly participates in, or knowingly undertakes to
conceal, an act or omission of an Investment Manager, knowing such act or omission
to be a breach of the fiduciary responsibility of the Investment Manager with
respect to the Plans, the Trustee shall not be liable for any act or omission of any
Investment Manager and shall not be under any obligation to invest or otherwise
manage the assets of the Plans that are subject to the management of any Investment
Manager. Without limiting the generality of the foregoing, the Trustee shall not be
liable by reason of its taking or refraining from taking at the direction of an
Investment Manager any action in respect of that Investment Manager’s Segregated
Fund. The Trustee shall be under no duty to question or to make inquiries as to any
direction or order or failure to give direction or order by any Investment Manager;
and the Trustee shall be under no duty to make any review of investments acquired
for the trust at the direction or order of any Investment Manager and shall be under
no duty at any time to make any recommendation with respect to disposing of or
continuing to retain any such investment.



          2.02-5 The values of all assets in the trust fund shall be reasonably
determined by the Trustee at such times as reasonably directed in writing by the Committee. At
any time before or after a Special Circumstance, the Trustee shall have the right, when and if
reasonably necessary for purposes of carrying out the purposes of this Trust Agreement, to secure
confirmation of value by a qualified independent party for all property of the trust fund,
including any property to be substituted for other property of the trust fund pursuant to 2.05, but
excluding insurance or annuity contracts and publicly-traded property for which market quotations
are readily available. Before a Special Circumstance the Company may designate such qualified
independent party or parties to determine the fair market value of the assets in the trust fund.




          Any insurance or annuity contracts held in the trust fund shall be valued at their cash
surrender values, except for purposes of substituting other property for such Contracts






16









 







pursuant to
2.05-2. All assets of the trust fund shall be valued at their fair market values net of all
liabilities to which the assets are subject.




     2.03 Subtrusts



          2.03-1 Upon direction from the Company, the Trustee shall establish a separate subtrust
(“Subtrust”) for each of the Plans to which it shall credit contributions it receives which are
earmarked for that Plan and Subtrust. The Trustee shall also establish a separate Subtrust to
which it shall credit any contributions it receives which are earmarked to the special reserve for
payment of future fees and expenses of the Trustee and future trust fees and expenses for legal and
administrative proceedings. Each Subtrust shall reflect an undivided interest in assets of the
trust fund and shall not require any segregation of particular assets, except that an insurance or
annuity contract covering benefits of a particular Plan shall be held in the Subtrust for the Plan.
All contributions shall be designated by the Company for a particular Subtrust.




          2.03-2 The Trustee shall allocate investment earnings and losses and expenses of the trust
fund among the Subtrusts in proportion to their balances, except that changes in the value of an
insurance contract (including premiums and interest on loans on an insurance contract) shall be
allocated to the Subtrust for which it is held. Payments to creditors during Insolvency
Administration under 5.02 shall be charged against the Subtrusts in proportion to
their balances, except that payment of Plan benefits to a Participant as a general creditor
shall be charged against the Subtrust for that Plan.




          2.03-3 Assets allocated to a Subtrust for one Plan may not be utilized to provide benefits
under any other Plans until all benefits under such Plan have been paid in full, except that Excess
Assets of a Subtrust may be transferred to other Subtrusts pursuant to 2.04-5.




     2.04 Recapture of Excess Assets



          2.04-1 In the event one or more Subtrusts shall hold Excess Assets, the Committee, at its
option, may direct the Trustee to return part or all of such Excess Assets to the Company or
Companies for which the Subtrust or Subtrusts are maintained.





17









 








          2.04-2 “Excess Assets” are assets of a Subtrust exceeding one hundred ten percent (110%) of
the amounts described in subparagraphs; (a), (b), (c) and (d) of 2.01-3 determined by the Committee
with respect to such Subtrust.




          2.04-3 The calculation required by 2.04-2 shall be based on the terms of the Plans and the
actuarial assumptions and methodology set forth in Appendix A. Before a Special Circumstance, the
calculation shall be made by the Company or a qualified actuary or consultant selected by the
Committee. After a Special Circumstance, the calculation shall be made by a qualified actuary or
consultant selected by the Committee with the Written Consent of Participants.




          2.04-4 Excess Assets shall be returned to the Company in any order of priority directed by the
Committee.




          2.04-5 If any Subtrust holds Excess Assets, the Committee may direct the Trustee to transfer
such Excess Assets to other Subtrusts, either ratably in proportion to the unfunded liabilities to
Participants for Plan benefits of all other Subtrusts or first to the other Subtrust(s) with the
largest percentage of such unfunded liabilities.




          In determining Excess Assets for a Subtrust each Subtrust for a Plan shall bear its allocable
share of the amounts described in subparagraphs (a) and (b) of 2.01-3, which relate to
that Plan.




     2.05
Substitution of Other Property



          2.05-1 The Company shall have the power to reacquire part or all of the assets or collateral
held in the trust fund at any time, by simultaneously substituting for it other readily marketable
property of equivalent value, net of any costs of disposition; provided that, if the trust holds
Excess Assets, the property which is substituted shall not be required to be of equivalent value,
but only of sufficient value so that the trust will retain Excess Assets of not less than $10,000
after such substitution. The property which is substituted must be among the types of investments
authorized under 2.02 and may not be less liquid or marketable or less well secured than the
property for which it is substituted, as determined by the Trustee. Such power is exercisable in a
nonfiduciary capacity and may be exercised without the approval or consent of Participants or any
other person.





18









 








          2.05-2 Except for insurance contracts, the value of any assets reacquired under 2.05-1 shall
be determined as provided in 2.02-5. The value of any insurance contract reacquired under 2.05-1
shall be the present value of future projected cash flow or benefits payable under the Contract,
but not less than the cash surrender value. The projection shall include death benefits based on
reasonable mortality assumptions, including known facts specifically relating to the health of the
insured and the terms of the Contract to be reacquired. The Trustee may rely on any values
provided by the insurer and shall have no duty to review or investigate the values so provided.




          2.05-3 The Company shall pay all costs incurred in valuing the assets of the trust fund
pursuant to the Trust Agreement, including any assets to be substituted for other assets of the
trust fund pursuant to 2.02-5 and 2.05. If not so paid, these costs shall be paid from the trust
fund.




     2.06 Administrative Powers of Trustee



          2.06-1 Subject in all respects to applicable provisions of all applicable law and this Trust
Agreement, including but not limited to provisions relating to the investment of the trust fund,
the Trustee shall have the rights, powers and privileges of an absolute owner when
dealing with property of the trust, including (without limiting the generality of the
foregoing) the powers listed below:





     (a) To sell, convey, transfer, exchange, partition, lease, and otherwise
dispose of any of the assets of the trust at any time held by the Trustee under this
Trust Agreement;




     (b) To exercise any option, conversion privilege or subscription right given
the Trustee as the owner of any security held in the trust; to vote any corporate
stock either in person or by proxy, with or without power of substitution; to
consent to or oppose any reorganization, consolidation, merger, readjustment of
financial structure, sale, lease or other disposition of the assets of any
corporation or other organization, the securities of which may be an asset of



19









 






the
trust; and to take any action in connection therewith and receive and retain any
securities resulting therefrom;




     (c) To deposit any security with any protective or reorganization committee,
and to delegate to such committee such power and authority with respect thereto as
the Trustee may deem proper, and to agree to pay out of the trust such portion of
the expenses and compensation of such committee as the Trustee, in its discretion,
shall deem appropriate;




     (d) To cause any property of the trust to be issued, held or registered in the
name of the Trustee as trustee, or in the name of one or more of its nominees, or
one or more nominees of any system for the central handling of securities, or in
such form that title will pass by delivery, provided that the records .of the
Trustee shall in all events indicate the true ownership of such property, or to
deposit any securities held in the trust with a securities depository;




     (e) To renew or extend the time of payment of any obligation due or to become
due;




     (f) To commence or defend lawsuits or legal or administrative proceedings; to
compromise, arbitrate or settle claims, debts or damages in favor
of or against the trust, to deliver or accept, in either total or partial
satisfaction of any indebtedness or other obligation, any property; to continue to
hold for such period of time as the Trustee may deem appropriate any property so
received; and to pay all costs and reasonable attorneys’ fees in connection
therewith out of the assets of the trust;




     (g) To foreclose any obligation by judicial proceeding or otherwise;




     (h) To manage any real property in the trust in the same manner as if the
Trustee were the absolute owner thereof, including the power to lease the same for
such term or terms within or beyond the existence of the trust and upon such
conditions as the Trustee may deem proper; and to grant options to purchase or
acquire options to purchase any real property;



20









 






     (i) To appoint one or more persons or entities as ancillary trustee or
sub-trustee for the purpose of investing in and holding title to real or personal
property or any interest therein; provided that any such ancillary trustee or
sub-trustee shall act with such power, authority, discretion, duties, and functions
of the Trustee as shall be specified in the instrument establishing such ancillary
trust or sub-trust, including (without limitation) the power, to receive, hold and
manage property, real or personal, or undivided interests therein; and the Trustee
may pay the reasonable expenses and compensation of such ancillary trustees or sub-
trustees out of the trust;




     (j) To hold such part of the assets of the trust uninvested for such limited
periods of time as may be necessary for purposes of orderly trust administration or
pending required directions, without liability for payment of interest;




     (k) To determine how all receipts and disbursements shall be credited, charged
or apportioned as between income and principal, and the decision of the Trustee
shall be final and not subject to question by any Participant or beneficiary of the
trust; and




     (l) Generally to do all acts, whether or not expressly authorized, which the
Trustee may deem necessary or desirable for the orderly administration or protection
of the trust fund; provided, however, that the Trustee shall not be authorized to
operate or conduct a trade or business using assets of the trust fund.



          2.06-2 The Company shall from time to time pay taxes (references in this Trust Agreement to
the payment of taxes shall include interest and applicable penalties) of any and all kinds
whatsoever which at any time are lawfully levied or assessed upon or become payable in respect of
the trust fund, the income or any property forming a part thereof, or any security transaction
pertaining thereto. To the extent that any taxes levied or assessed upon the trust fund are not
paid by the Company or contested by the Company pursuant to the last sentence of this paragraph,
the Trustee shall pay such taxes out of the trust fund. If requested by the Company, the Trustee
shall, at the Company’s expense, contest the validity of such taxes in




21









 







any manner deemed
appropriate by the Company or its counsel, but only if it has received an indemnity bond or other
security satisfactory to it to pay any expenses of such contest. Alternatively, the Company may
itself contest the validity of any such taxes.




          2.06-3 Notwithstanding any provisions in the Plans or this Trust Agreement to the contrary,
the Company may direct the Trustee to withhold any benefits payable to a beneficiary as a result of
the death of the Participant or any other beneficiary until such time as (a) the Company is able to
determine whether a generation-skipping transfer tax, as defined in Chapter 13 of the Code, or any
substitute provision therefor, is or may become payable by the Company or Trustee as a result of
benefit payments to the beneficiary; and (b) the Company has determined the amount of
generation-skipping transfer tax that is or may become due, including interest thereon. If any
such tax is or may become payable, the Trustee at the direction of the Company shall reduce the
benefits otherwise payable hereunder to such beneficiary by such amounts as the Company or Trustee
reasonably believes are necessary to pay any generation-skipping transfer tax and interest thereon
which is or may become due.




          Any excess amounts so withheld from a beneficiary, which are not used to pay
generation-skipping transfer tax and interest thereon, shall be payable to the beneficiary as soon
as there is a final determination of the applicable generation-skipping transfer tax and interest
thereon. Whenever any amounts which were withheld are paid to any beneficiary, interest shall be
payable by the Company or, upon direction of the Company, from the trust to such beneficiary for
the period of time between the date when such amounts would otherwise have been paid to the
beneficiary and the date when such amounts are actually paid to the beneficiary after the
aforementioned generation-skipping transfer tax determinations are made and the amount of benefits
payable to the beneficiary is finally determined. Interest shall be payable at the same rate as
provided under 5.03-2.




ARTICLE III




Administration 




     3.01 Committee; Company Representatives



          3.01-1 The Committee is the plan administrator for the Plans and has general responsibility to
interpret the Plans and determine the rights of Participants and beneficiaries.




22









 








          3.01-2 The Trustee shall be given the names and specimen signatures of the members of the
Committee and any other Company representatives authorized to take action in regard to the
administration of the Plans and this trust. The Trustee shall accept and rely upon the names and
signatures until notified of any change. Instructions to the Trustee shall be signed for the
Committee, by the Chairman or such other person as the Committee may designate and for the Company
by any officer or such other representative as the Company may designate.




     3.02 Payment of Benefits



          3.02-1 Subject to the other provisions of this trust, including but not limited to 3.02-3
hereof, the Trustee shall pay benefits to Participants and beneficiaries on behalf of the Company
in satisfaction of its obligations under the Plans. The Trustee shall advise the Company whenever
the assets of the trust or Subtrust, other than insurance contracts or amounts needed to pay future
premiums or loan interest payments on insurance contracts, are insufficient to make payments of
benefits under the Plans to Participants when due. Benefit payments from a Subtrust shall be made
in full until the assets of the Subtrust are exhausted. Payments due on the date the Subtrust is
exhausted shall be covered pro rata. The Company’s obligation shall not be limited to the trust
fund, and a Participant or beneficiary shall have a claim against the Company
for any payment not made by the Trustee.




          The Company shall pay benefits directly to Participants and beneficiaries in satisfaction of
its obligations under a Plan whenever either (i) the assets of the Subtrust are not then sufficient
to satisfy any then applicable contribution or funding requirements imposed under 2.01, or (ii)
there are no assets in the Subtrust other than insurance or annuity contracts earmarked for other
Participants or beneficiaries. If the Company fails to make any such required payments when due,
after 60 days written notice to the Company to permit the Company to make any such payments, the
Trustee shall pay benefits to Participants and beneficiaries under any Plan from the assets of the
Subtrust for that Plan, if any.




          3.02-2 A Participant’s entitlement to benefits under the Plans shall be determined by the
Committee. Any benefit enhancement or right with respect to the Plans, which is provided under
employment or severance agreements of Participants, shall be taken into account in making the
foregoing determination. Any claim for such benefits shall be considered




23









 







and reviewed under the
claims procedures established for the Plans.




          3.02-3 The Trustee shall make payments in accordance with written directions from the
Committee or agent designated by the Committee, except as provided in 3.03. The Trustee may request
such directions from the Committee or consultant designated by the Committee. If the Committee or
consultant designated by the Committee fails to furnish written directions to the Trustee, within
15 days after receiving a written request for directions from the Trustee, the Trustee shall make
payments in accordance with the most recent Payment Schedule furnished to it by the Company or
withhold payment until it receives written direction from the Committee.




          The Committee or a third party record-keeper designated by the Committee shall make any
required income tax withholding and shall pay amounts withheld to taxing authorities on the
Company’s behalf or determine that such amounts have been paid by the Company.




          3.02-4 The Trustee shall use the assets of the trust or any Subtrust to make benefit payments
or other payments in the following order of priority:





     (a) Cash contributions from the Company which are specifically
designated to enable the Trustee to make such benefit payments or other
payments when due;




     (b) Cash and cash equivalents of the trust or Subtrust;




     (c) All taxable investments of the trust or Subtrust (other than cash and cash
equivalents and Contracts with Insurers), in such order as the Trustee may
determine;




     (d) All non-taxable investments of the trust or Subtrust (other than cash and
cash equivalents and Contracts with Insurers), in such order as the Trustee may
determine; and




     (e) Contracts with Insurers held in the trust or Subtrust, in such order and
manner (for example, making tax-free withdrawals prior to any taxable withdrawals
from Contracts) as the Committee may determine. As directed by



24









 






the Committee, the
Trustee shall make tax-free withdrawals prior to any taxable withdrawals from
Contracts; shall make withdrawals from Contracts to the premium vanish point before
surrendering any Contracts; and shall surrender Contracts, only if necessary,
proceeding, in order of Contracts on insureds from the youngest to the oldest ages
based on the insured’s age on the date of surrender of the Contract. Notwithstanding
the foregoing, the Trustee may use the assets of the trust or any Subtrust in any
other order of priority directed by the Committee with the Written Consent of
Participants affected thereby.



     3.03 Disputed Claims



          3.03-1 A Participant covered by this Trust whose claim has been denied by the Committee, or
who has received no response to the claim within 30 days after submission, may submit the claim to
the Trustee. The Trustee shall give written notice of the claim to the Committee. If the Trustee
receives no written response from the Committee within 30 days after the date the Committee is
given written notice of the claim, the Trustee shall pay the Participant the amount claimed.




     3.04 Records



          3.04-1 The Trustee shall keep complete records on the trust fund open to inspection by the
Company, Committee and Participants at all reasonable times. In addition to accountings required
below, the Trustee shall furnish to the Company, Committee and Participants any information
reasonably requested about the trust fund.




     3.05 Accountings



          3.05-1 The Trustee shall furnish the Company with a complete statement of accounts annually
within 60 days after the end of the trust year showing assets and liabilities and income and
expense for the year of the trust and each Subtrust. The Trustee shall also furnish the Company
with accounting statements at such other times as the Company may reasonably request. The form and
content of the statement of accounts shall be sufficient for the Company to include in computing
its taxable income and credits the income, deductions and credits against tax that are attributable
to the trust fund.




25









 








          3.05-2 The Company may object to an accounting within 180 days after it is furnished and
require that it be settled by audit by a qualified, independent certified public accountant. The
auditor shall be chosen by the Trustee from a list of at least five such accountants furnished by
the Company at the time the audit is requested. Either the Company or the Trustee may require that
the account be settled by a court of competent jurisdiction, in lieu of or in conjunction with the
audit. All expenses of any audit or court proceedings, including reasonable attorneys’ fees, shall
be allowed as administrative expenses of the trust.




          3.05-3 If the Company does not object to an accounting within the time provided, the account
shall be settled for the period covered by it.




          3.05-4 When an account is settled, it shall be final and binding on all parties, including all
Participants and persons claiming through them.




     3.06 Expenses and Fees



          3.06-1 The Trustee shall be reimbursed for all reasonable expenses and shall be paid a
reasonable fee fixed by agreement with the Company from time to time. No increase in the fee shall
be effective before 60 days after the Trustee gives written notice to the Company of
the increase. The Trustee shall notify the Company periodically of expenses and fees.




          3.06-2 The Company shall pay trustee and other administrative and valuation fees and expenses
incurred pursuant to this Trust Agreement, including reasonable fees for legal counsel in the event
the Trustee deems it necessary or proper to obtain the advice of counsel. If not so paid, these
fees and expenses shall be paid from the trust fund. The cost of any litigation relating to this
trust shall be an administrative expense.




ARTICLE IV




Liability




     4.01 Indemnity



          4.01-1 Subject to such limitations as may be imposed by applicable law, the Company shall
indemnify and hold harmless the Trustee from any claim, loss, liability or expense arising from any
action or inaction in administration of this trust based on direction or




26









 







information received from
the Company, Committee or any Investment Manager; provided, however, that the foregoing indemnity
shall not apply to any such claims, losses, liabilities or expenses arising from willful misconduct
or bad faith of the Trustee.




     4.02 Bonding



          4.02-1 The Trustee need not give any bond or other security for performance of its duties
under this trust.




ARTICLE V  




Insolvency 




     5.01 Determination of Insolvency



          The Trustee shall cease payment of benefits to Plan participants and their beneficiaries if
the Company is Insolvent. The Company shall be considered “Insolvent” for purposes of this Trust
Agreement if (1) the Company is unable to pay its debts as they become due, or (2) the Company is
subject to a pending proceeding as a debtor under the United States Bankruptcy Code.




     5.02 Rights of Creditors



          At all times during the continuance of this Trust, as provided in Section 1.02 hereof, the
principal and income of the Trust shall be subject to claims of general creditors of the Company
under federal and state law as set forth below.




          5.02-1 The Board of Directors and the Chief Executive Officer of the Company shall have the
duty to inform the Trustee in writing of the Company’s Insolvency. If a person claiming to be a
creditor of the Company alleges in writing to the Trustee that the Company has become Insolvent,
the Trustee shall determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries.




          5.02-2 Unless the Trustee has actual knowledge of the Company’s Insolvency, or has received
notice from the Company or a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the




27









 







Company is Insolvent. The Trustee
may in all events rely on such evidence concerning the Company’s solvency as may be furnished to
the Trustee and that provides the Trustee with a reasonable basis for making a determination
concerning the Company’s solvency.




     5.03 Effect of Insolvency



          If at any time the Trustee has determined that the Company is Insolvent, the Trustee shall
discontinue payments to Participants or their beneficiaries and shall hold the assets of the Trust
for the benefit of the Company’s general creditors. Nothing in this Trust Agreement shall in any
way diminish any rights of Participants under the Plans or their beneficiaries to pursue their
rights as general creditors of the Company with respect to benefits due under the Plans or
otherwise.




     5.04 Termination of Insolvency Status



          The Trustee shall resume the payment of benefits to Participants under the Plans or their
beneficiaries in accordance with Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent (or is no longer Insolvent). Provided that there are
sufficient assets, if the Trustee discontinues the payment of benefits from the Trust pursuant
to Section 5.03 hereof and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due to Participants or their
beneficiaries under the terms of the Plans for the period of such discontinuance, less the
aggregate amount of any payments made to Participants or their beneficiaries by the Company in lieu
of the payments provided for hereunder during any such period of discontinuance.




     5.05 Creditors’ Claims During Solvency



          5.05-1 During periods of Solvency the Trustee shall hold the trust fund exclusively to pay
Plan benefits and fees and expenses of the trust until all benefits under all Plans have been paid.
Creditors of the Company shall not be paid during Solvency from the trust fund, which may not be
seized by or subjected to the claims of such creditors in any way.




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     5.05-2 A period of Solvency is any period not covered by 5.02.



ARTICLE VI




Successor Trustees 




     6.01 Resignation and Removal



          6.01-1 The Trustee may resign at any time by notice to the Company, which shall be effective
60 days after such notice is given, unless the Company and the Trustee agree otherwise.




          6.01-2 The Trustee may be removed by the Company on 60 days written notice or such shorter
notice as may be accepted by the Trustee. However, after a Special Circumstance the Trustee may be
removed only with the Written Consent of Participants.




          6.01-3 When resignation or removal is effective, the Trustee shall begin transfer of assets to
the successor Trustee immediately. The transfer shall be completed within 60
days, unless the Company extends the time limit.




          6.01-4 If the Trustee resigns or is removed, the Company shall appoint a successor by the
effective date of resignation or removal under 6.01-1 or 6.01-2. After a Special Circumstance a
successor Trustee may be appointed only with the Written Consent of Participants. If no such
appointment has been made, the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of the Trustee in connection with such
court proceeding shall be allowed as administrative expenses of the trust.




     6.02 Appointment of Successor



          6.02-1 The Company may appoint any national or state bank or trust company that is unrelated
to the Company as a successor to replace the Trustee upon resignation or removal. The appointment
shall be effective when accepted in writing by the new Trustee, which shall have all of the rights
and powers of the former Trustee, including ownership rights in the trust assets. The former
Trustee shall execute any instruments necessary or reasonably requested by the Company or the
successor Trustee to evidence the transfer. After a Special Circumstance




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a successor Trustee may be
appointed only with the Written Consent of Participants.




          6.02-2 The successor Trustee need not examine the records and acts of any prior Trustee and
may retain or dispose of existing trust assets, subject to the other provisions of this Trust
Agreement. The successor Trustee shall not be responsible for, and the Company shall indemnify and
hold harmless the successor Trustee from any claim or liability because of, any action or inaction
of any prior Trustee or any other past event, any existing condition or any existing assets.




     6.03 Accountings; Continuity



          6.03-1 A Trustee who resigns or is removed shall submit a final accounting to the Company as
soon as practicable. The accounting shall be received and settled as provided in 3.05 for regular
accountings.




          6.03-2 No resignation or removal of the Trustee or change in identity of the Trustee for any
reason shall cause a termination of the Plans or this trust.




ARTICLE VII




General Provisions




     7.01 Interests Not Assignable



          7.01-1 The interest of a Participant in the trust fund may not be assigned, pledged or
otherwise encumbered, seized by legal process, transferred or subjected to the claims of the
Participant’s creditors in any way.




          7.01-2 The Company may not create a security interest in the trust fund in favor of any of its
creditors. The Trustee shall not make payments from the trust fund of any amounts to creditors of
the Company other than Participants, except as provided in 5.02.




          7.01-3 The Participants shall have no interest in the assets of the trust fund beyond the
right to receive payment of Plan benefits and reimbursement of expenses from such assets subject to
the instructions during Insolvency referred to in 5.02. During Insolvency Administration the
Participants’ rights to trust assets shall not be superior to those of any other general creditors
of the Company.




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     7.02 Amendment



          7.02-1 The Company and the Trustee may amend this Trust Agreement at any time, except to make
it revocable, after it has become irrevocable, by a written instrument executed by both parties.
Except as provided below, any such amendment after a Special Circumstance or more than two years
after February 12, 1992 may be made only with the Written Consent of Participants. Notwithstanding
the foregoing, any such amendment may be made by written agreement of the Company and the Trustee
without the Written Consent of Participants if such amendment will not have a material adverse
effect on the rights of any Participant hereunder or, prior to a Special Circumstance, is necessary
to comply with any laws, regulations or other legal requirements.




     7.03 Applicable Law



          7.03-1 THIS TRUST SHALL BE GOVERNED, CONSTRUED AND ADMINISTERED ACCORDING TO THE LAWS OF THE
STATE OF TEXAS, EXCEPT AS PREEMPTED BY ERISA.




     7.04 Agreement Binding on All Parties



          7.04-1 This Trust Agreement shall be binding upon the heirs, personal representatives,
successors and assigns of any and all present and future parties.




     7.05 Notices and Directions



          7.05-1 Any notice or direction under this Trust Agreement shall be in writing and shall be
deemed given when actually delivered or, if mailed, when deposited postpaid as first-class mail.
Mail to a party shall be directed to the address stated below or to such other address as either
party may specify by notice to the other party. Notices to the Committee shall be sent to the
address of the Company. Notices to Participants who have submitted claims under 3.03 shall be
mailed to the address shown in the claim submission. Until notice is given to the contrary, notices
to the Company and the Trustee shall be addressed as follows:




	 	 	 
	Company:

	 	Pier 1 Imports, Inc.
	 

	 	100 Pier 1 Place
	 

	 	Fort Worth, Texas 76102
	 

	 	Attention: General Counsel






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	Trustee:

	 	Wachovia Bank National Association
	 

	 	Executive Benefits Group
	 

	 	One West Fourth Street NC 6251
	 

	 	Winston – Salem, North Carolina 27101
	 

	 	Attention: Account Officer for Pier 1 Imports






     7.06 No Implied Duties



          7.06-1 The duties of the Trustee shall be those stated in this trust, and no other duties
shall be implied.




     7.07 Gender. Singular and Plural



          7.07-1 All pronouns and any variations thereof shall be deemed to refer to the masculine or
feminine, as the identity of the person or persons may require. As the context may require, the
singular may be read as the plural and the plural as the singular.




ARTICLE VIII  




INSURER




     8.01 Insurer Not a Party



          8.01-1 The Insurer shall not be deemed to be a party to this Trust Agreement, and its
obligations shall be measured and determined solely by the terms of its Contracts and other
agreements executed by it.




     8.02 Authority of Trustee



          8.02-1 The Insurer shall accept the signature of the Trustee on any documents or papers
executed in connection with such Contracts. Such signature shall be conclusive proof to the Insurer
that the person on whose life an application is being made is eligible to have such Contract issued
on his life and is eligible for a Contract of the type and amount requested.




     8.03 Contract Ownership



          8.03-1 The Insurer shall deal with the Trustee as the sole and absolute owner of the trust’s
interests in such Contracts and shall have no obligation to inquire whether any action or failure
to act on the part of the Trustee is in accordance with or authorized by the terms
 

32









 







of the Plans or
this Trust Agreement.




     8.04 Limitation of Liability:



          8.04-1 The Insurer shall be fully discharged from any and all liability for any action taken
or any amount paid in accordance with the direction of the Trustee and shall have no obligation to
see to the proper application of the amounts so paid. The Insurer shall have no liability for the
operation of this Trust Agreement or the Plans, whether or not in accordance with their terms and
provisions.




     8.05 Change of Trustee



          8.05-1 The Insurer shall be fully discharged from any and all liability for dealing with a
party or parties indicated on its records to be the Trustee until such time as it shall receive at
its home office written notice of the appointment and qualification of a successor Trustee.




          IN WITNESS WHEREOF, the Company and the Trustee have caused this Trust Agreement to be
executed by their respective duly authorized officers as of the date
set forth on page 1 above.




	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	PIER 1 IMPORTS (U.S.), INC.,	 	PIER 1 IMPORTS, INC.,
	a Delaware corporation	 	a Delaware corporation
	 
	 	 	 	 	 	 
	By

	 	 	 	By	 	 
	 

	 	 
	 	 	 	 
	Its

	 	 	 	Its	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	TRUSTEE:
	PIER 1 SERVICES COMPANY	 	WACHOVIA BANK NATIONAL
	 	 	 	 	ASSOCIATION
	 
	 	 	 	 	 	 
	By Pier 1 Holdings, Inc.	 	 	 	 
	Its Managing Trustee	 	 	 	 
	 
	 	 	 	 	 	 
	By

	 	 	 	By	 	 
	 

	 	 
	 	 	 	 
	Its

	 	 	 	Its	 	 
	 

	 	 
	 	 	 	 





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APPENDIX A




Assumptions and Methodology for




Calculations Required Under 2.01 and 2.04





	1.	 	The liability for benefits under each Plan will be calculated using the following two
different assumptions as to when Participants terminate service:






	 	(a)	 	As of the applicable date under 2.01-3 or 2.04.
	 
	 	(b)	 	24 months after the applicable date, assuming future compensation continues at
current levels, and future deferrals under deferred compensation plans continue
pursuant to prior elections.






	 	 	The liability for accrued benefits under each Plan will be the greater of the liabilities
calculated in accordance with (a) and (b) above.






	2.	 	Calculations will be based upon the most valuable optional form of payment available to the
Participant.






	3.	 	The liability for benefits under deferred compensation or defined contribution Plans shall be
equal to the deferral or other account balances (vested and unvested) of Participants as of
the applicable date, plus projected deferrals expected to be made within 24 months after the
applicable date pursuant to prior elections. Account balances of Participants
under a Plan shall be calculated based on crediting the highest rate of interest which may
become payable to Participants under the Plan.






	4.	 	The liability for benefits under other Plans shall be equal to the present value of accrued
benefits (vested and unvested) of Participants as of the relevant dates under l (a) or (b)
above, discounted to the applicable date at a percentage per annum equal to that percentage
used by the Pension Benefit Guaranty Corporation in determining the present value of accrued
benefits in connection with the termination of defined benefit plans (referred to in this
Appendix A as the “PBGC Rate”).






	5.	 	The liability for benefits under all Plans shall also include the present value (discounted
to the applicable date at 5% per annum) of any survivor benefits which exceed the account
balances or other accrued benefits of Participants and are not covered by death benefits
payable under insurance contracts held in the trust.






	6.	 	No mortality is assumed prior to the commencement of benefits, except for purposes of
calculating any additional accrued liability under 5 above. Future mortality is assumed to
occur in accordance with the 1983 Group Annuity Table Male Rates after the commencement of
benefits.






	7.	 	The present value of amounts under subparagraphs (a), (c) and (d) of 2.01-3 shall be
determined using the PBGC Rate.




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	8.	 	Where left undefined above, calculations will be performed in accordance with generally
accepted actuarial principles.






35