Exhibit 10.1


                      SECOND AMENDMENT TO CREDIT AGREEMENT
                      ------------------------------------

     This Second Amendment to Credit Agreement (this "Second Amendment") is made
as of the 31st day of May, 2007 by and among

     PIER 1 IMPORTS (U.S.), INC. (in such capacity, the "Borrower"),  a Delaware
corporation  with its  principal  executive  offices  at 100 Pier 1 Place,  Fort
Worth, Texas 76102; and

     BANK OF AMERICA,  N.A., a national banking  association with offices at 100
Federal Street,  Boston,  Massachusetts  02110, 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 100
Federal  Street,  Boston,  Massachusetts  02110,  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, a Delaware limited  liability  company
with offices at One Boston Place - 19th Floor,  Boston,  Massachusetts 02109, as
Syndication Agent; and

     JPMORGAN CHASE BANK, N.A., a national  banking  association with offices at
2200 Ross Avenue, 6th Floor, Dallas, Texas 75201, as Documentation Agent;

in  consideration  of the mutual  covenants  herein contained and benefits to be
derived herefrom.

                                   WITNESSETH
                                   ----------

     WHEREAS,  the Borrower,  Pier 1 Kids, Inc., 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 as of July 28,  2006 (as  amended,
modified,  supplemented,  restated or otherwise modified and in effect from time
to time, the "Credit Agreement"); and

     WHEREAS, Pier 1 Kids, Inc. has merged with and into the Borrower; 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.

                                       1
<PAGE>


2.   Amendment to Article I. The provisions of Article I of the Credit Agreement
     are hereby amended as follows:

     (a)  The  definition  of  "Applicable  Margin"  is  hereby  deleted  in its
          entirety and the following substituted in its stead:

     "Applicable Margin" means:

          (a) From and after the Second Amendment Effective Date until the first
     Adjustment Date after the Second Amendment  Effective Date, the percentages
     set forth in Level III of the Pricing Grid below; and

          (b) On the first day of each January,  April, July and October of each
     year (each, an "Adjustment Date"),  commencing July 1, 2007, the Applicable
     Margin shall be determined  from such Pricing Grid based upon Average Daily
     Availability  for the most  recently  ended three month period  immediately
     preceding such  Adjustment  Date;  provided that, upon the occurrence of an
     Event of Default,  upon written notice from the  Administrative  Agent, the
     Applicable Margin shall be immediately increased to that set forth in Level
     I (even if the  Average  Daily  Availability  requirements  for a different
     Level have been met) and interest shall accrue at the Default Rate.

     --------------------- ----------------------------------
     Level  Average Daily  LIBO Applicable     Prime Rate
            Availability       Margin       Applicable Margin
     --------------------- ----------------------------------
     I      Less than or   1.50%            0%
              equal to
            $85,000,000
     --------------------- ----------------------------------
     II     Greater than   1.25%            0%
            $85,000,000
            but less than
            or equal to
            $160,000,000
     --------------------- ----------------------------------
     III    Greater than   1.00%            0%
            $160,000,000
            but less than
            or equal to
            $245,000,000
     --------------------- ----------------------------------
     IV     Greater than   0.75%            0%
            $245,000,000
     --------------------- ----------------------------------

                                       2
<PAGE>


     (b) The  definition of "Borrowing  Base" is hereby  deleted in its entirety
     and the following substituted in its stead:

     "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) (A) until the provisions of clause (B) become effective, the Cost
     of  Eligible  Inventory,  net  of  Inventory  Reserves  multiplied  by  the
     Inventory  Advance  Rate;  and (B) upon  the  completion  of the  appraisal
     described  in the final  sentence  of Section  5.08(b),  from and after the
     delivery of the  Borrowing  Base  Certificate  in August,  2007,  Appraised
     Inventory  Value  of  Eligible   Inventory,   net  of  Inventory  Reserves,
     multiplied by the Appraisal Percentage;

     plus
     ----

          (iii) the Private  Label Credit Card Advance  Rate  multiplied  by the
     Appraisal Value of Eligible Private Label Receivables;

     plus
     ----

          (iv) the lesser of (A) the FMV of Eligible  Real Estate  multiplied by
     the Real Estate Advance Rate; or (B) that amount which is not more than 25%
     of the aggregate  amounts then available  under clauses (i) through (iv) of
     this definition;

     minus
     -----

          (v) the then amount of all Availability Reserves and Realty Reserves.

     (c) The definition of "Issuing Banks" is hereby deleted in its entirety and
the following substituted in its stead:

     "Issuing Banks" means, individually and collectively, in its capacity as an
     issuer of Letters of Credit hereunder,  any Lender (or any Person who was a
     Lender  (or an  Affiliate  of such  Lender  at such  time)  at the  time of
     issuance of the Letter of Credit). Any Lender, as Issuing Bank, may, in its
     discretion,  arrange  for one or more  Letters  of  Credit  to be issued by
     Affiliates  of such Issuing  Bank,  in which case the term  "Issuing  Bank"
     shall include any such  Affiliate  with respect to Letters of Credit issued
     by such Affiliate

     (d) The  definition of "Letter of Credit" is hereby deleted in its entirety
and the following substituted in its stead:

                                       3
<PAGE>


     "Letter  of Credit"  means a letter of credit  that is issued by an Issuing
     Bank pursuant to this Agreement for the account of a Borrower, constituting
     either a Standby Letter of Credit or Commercial Letter of Credit, issued in
     connection  with the  purchase  of  Inventory  by a Borrower  and for other
     purposes  for which such  Borrower  has  historically  obtained  letters of
     credit,  or for any other  purpose  that is  reasonably  acceptable  to the
     Administrative  Agent,  and in form reasonably  satisfactory to the Issuing
     Bank,  provided  that any  Letter  of Credit  issued by a Person  who was a
     Lender  (or an  Affiliate  of such  Lender  at such  time)  at the  time of
     issuance of a Letter of Credit, but is no longer a Lender,  shall be deemed
     a Letter of Credit  hereunder  (other than for purposes of Sections 2.19(c)
     and (d)) only until (i) such  Letter of Credit has  expired  without  being
     drawn, been returned undrawn, or has been otherwise terminated, or (ii) the
     amounts  available  thereunder have been drawn and such Person has received
     reimbursement  for such  drawing.  Letters of Credit may permit  payment by
     presentation  of  either a sight  draft or a time  draft  (not to exceed 90
     days) as selected by the  Borrower.  Without  limiting the  foregoing,  all
     Existing  Letters of Credit shall be deemed to have been issued  hereunder.
     All Banker's  Acceptances and all Existing  Letters of Credit shall for all
     purposes be deemed to be, and shall be subject to all  provisions  relating
     to, "Letters of Credit" hereunder.

     (e) The definition of "Maturity Date" is hereby deleted in its entirety and
the following substituted in its stead:

     "Maturity Date" means May 31, 2012.

     (f) The  definitions of "Lead  Borrower" and "Borrowers" are hereby deleted
in their entirety and the following substituted in their stead:

     "Borrower"  means Pier 1  Imports,  (U.S.),  Inc.  All  references  in this
     Agreement to "Lead Borrower" or to "Borrowers"  shall mean and refer to the
     Borrower.

     (g) The  definition  of  "Permitted  Dispositions"  is  hereby  amended  as
follows:

          (i) by deleting  clause (b) thereof in its entirety  and  substituting
     the following in its stead:

               (b) in addition to Dispositions of Inventory  described in clause
          (f) of this  definition,  bulk  sales  or  other  dispositions  of the
          Borrowers'  Inventory  not in the  ordinary  course of  business in an
          amount  not to exceed  (i) in any  Fiscal  Year of the  Parent and its
          Subsidiaries,  10% of the Cost of the Borrowers' Eligible Inventory as
          of the first day of such Fiscal Year,  and (ii) in the aggregate  from
          and after the Second Amendment  Effective Date, 25% of the Cost of the
          Borrowers'  Inventory  as of the end of the fiscal  month  immediately
          preceding the Second Amendment Effective Date, provided that all sales
          of  Inventory  in  connection  with stores that are closed  within any
          twelve month period  (other than those stores  listed on Schedule 1.11
          hereof)  which are in the  aggregate  in  excess of 10% of the  stores
          operated  as of  the  Second  Amendment  Effective  Date  shall  be in
          accordance   with   liquidation   agreements  and  with   professional
          liquidators reasonably acceptable to the Administrative Agent;

                                       4
<PAGE>


          (ii) by deleting  clause (e) thereof in its entirety and  substituting
     the following in its stead:

          (e) (i) sales,  sale-leaseback transactions and dispositions of assets
          of  Real  Estate  included  in the  Borrowing  Base  as long as (A) no
          Default or Event of Default then exists or would arise therefrom,  and
          (B)  the  Borrower  has  furnished  the   Administrative   Agent  with
          projections  for the 180 day period  after  such sale or  disposition,
          reasonably  satisfactory to the  Administrative  Agent,  demonstrating
          that Availability is projected on a pro forma basis to be at all times
          at  least  30%  of  the  Borrowing  Base;  (ii)  any  other  sales  or
          sale-leaseback  transactions  and  dispositions  of any real  property
          owned by any of the Loan Parties  (other than Real Estate  included in
          the Borrowing Base, as to which clause (e)(i) of this definition shall
          apply),  and  (iii) as long as no  Default  or Event of  Default  then
          exists or would arise therefrom, sales, leases and dispositions of any
          oil, gas and other minerals on, in or under any Real Estate;

     (iii) by relettering  clause (f) as clause (g) and adding the following new
clause (f):

          (f)  Dispositions of Inventory in an amount not to exceed  $32,500,000
          at Cost and more particularly described in Schedule 1.10 hereof.

     (h) The  following  new  definitions  are hereby  inserted  into the Credit
Agreement in appropriate alphabetical order:

          (i) "Appraisal Percentage" means 90%.

          (ii) "Appraised  Inventory Value" means the net appraised  liquidation
     value (which is  expressed  as a  percentage)  of the  Borrower's  Eligible
     Inventory  as set  forth  in  the  Borrower's  inventory  stock  ledger  as
     determined  from  time  to  time  by an  independent  appraiser  reasonably
     satisfactory to the Administrative Agent.

                                       5
<PAGE>


          (iii) "Banker's Acceptance" means a time draft or bill of exchange (in
     each case, payable not more than 90 days duration from acceptance) relating
     to a  Commercial  Letter of Credit  which has been  accepted  by an Issuing
     Bank.

          (iv) "Convertible Notes" means the 6.375% convertible senior notes due
     2036 issued by Pier 1 Imports, Inc. in February 2006.

          (v) "Deed of Trust" means the Deeds of Trust,  Security Agreements and
     Assignments  executed by the Loan Party  owning the Real Estate  encumbered
     thereby for the benefit of the Collateral Agent and the Credit Parties.

          (vi)  "Eligible  Real  Estate"  means Real  Estate  acceptable  to the
     Administrative  Agent  in its  reasonable  discretion  to be  eligible  for
     inclusion in the  calculation of the Borrowing  Base, and without  limiting
     the foregoing, satisfies each of the following conditions:

          a)   a Loan Party owns fee title  thereto  and is  occupied  by a Loan
               Party and/or a lessee of a Loan Party;

          b)   the  applicable  Loan Party has  executed  and  delivered  to the
               Collateral Agent such Deeds of Trust and other security documents
               as the Collateral Agent may reasonably request;

          c)   the applicable  Loan Party shall have delivered to the Collateral
               Agent a Title  Insurance  Policy  issued  by the  Title  Company,
               environmental studies, and other real estate items, as reasonably
               required  by, and  reasonably  satisfactory  to,  the  Collateral
               Agent,  including,  but not limited to,  those items  required by
               FIRREA;

          d)   the Collateral Agent has a perfected  first-priority lien in such
               Real Estate for the benefit of the Credit Parties;

          e)   such Real Estate has been  appraised  by a third party  appraiser
               reasonably acceptable to the Administrative Agent;

          f)   such Real  Estate is free and clear of any Lien  other than Liens
               set forth in the Title Insurance  Policy  furnished for such Real
               Estate; and

          g)   as  to  which   the   mortgagor   is  in   compliance   with  the
               representations,  warranties  and covenants set forth in the Deed
               of Trust  relating to such  property,  unless the  Administrative
               Agent,  in its  discretion,  otherwise  determines  to waive this
               requirement in the determination of Eligible Real Estate.

                                       6
<PAGE>


          (vii) "FIRREA" means The Financial  Institutions Reform,  Recovery and
     Enforcement Act of 1989, as amended,  and the rules and regulations adopted
     pursuant thereto.

          (viii) "FMV" means,  as to any Eligible  Real Estate,  the fair market
     value  of such  Eligible  Real  Estate  determined  in  accordance  with an
     independent  appraisal reasonably  acceptable to the Administrative  Agent,
     which appraisal shall assume,  among other things,  a marketing time of not
     greater than six (6) months.

          (ix) "Real Estate Advance Rate": means 50%.

          (x) "Realty Reserves" means such reserves as the Administrative  Agent
     from  time to time  determines  in the  Administrative  Agent's  reasonable
     discretion as being  appropriate to reflect the  impediments to the Agents'
     ability to realize upon any  Eligible  Real  Estate.  Without  limiting the
     generality  of the  foregoing,  Realty  Reserves  may include  (but are not
     limited to)  reserves for (i)  environmental  remediation,  (ii)  municipal
     taxes  and  assessments  having  priority  over the Lien of the  Collateral
     Agent,  (iii) major repairs not covered by insurance,  and (iv) remediation
     of title defects.

          (xi) "Second Amendment Effective Date" means May 31, 2007.

          (xii) `Title Insurance  Company" means Chicago Title Insurance Company
     or such other company as the Agents and the Borrower may agree.

          (xiii) "Title  Insurance  Policy" means, in relation to each parcel of
     Real Estate  subject to a Deed of Trust,  an ALTA  standard form (or if the
     Real Estate is not in a state that issues ATLA policies,  in the equivalent
     standard  form for such state) title  insurance  policy issued by the Title
     Insurance  Company (with such reinsurance or co-insurance as the Agents may
     require,  any such  reinsurance to be with direct access  endorsements)  in
     such amount as may be determined by the Agents (not  exceeding $65 million)
     insuring the priority of the Deed of Trust of such Real Estate and that one
     of the Loan Parties holds marketable (or in Texas, indefeasible) fee simple
     or leasehold  title to such Real Estate,  subject only to the  encumbrances
     permitted by such Deed of Trust and which shall not contain  exceptions for
     mechanics liens,  persons in occupancy or matters which would be shown by a
     survey (except as may be permitted by such Deed of Trust), shall not insure
     over any matter except to the extent that any such affirmative insurance is
     acceptable to the Agents in their reasonable discretion,  and shall contain
     such  endorsements  and  affirmative  insurance  as  the  Agents  in  their
     reasonable  discretion  may  require,  including  but  not  limited  to (a)
     comprehensive endorsement,  (b) variable rate of interest endorsement,  (c)
     usury   endorsement,   (d)  revolving   credit   endorsement,   (e)  tie-in
     endorsement, and (f) doing business endorsement.

                                       7
<PAGE>


3.   Amendments  to  Article  II.  The  provisions  of  Article II of the Credit
     Agreement are hereby amended as follows:

     (a) The  provisions of Section  2.01(a)(ii)  are hereby amended by deleting
the  number  "$200,000,000"   appearing  therein  and  substituting  the  number
"$250,000,000" in its stead.

     (b) The  provisions of Section  2.02(b) are hereby  amended by deleting the
word "and" at the end of clause (v), renumbering clause (vi) as clause (vii) and
inserting the following new clause (vi):

     (vi) The  Borrowers  and the  Administrative  Agent shall have agreed on an
amendment to the "Average Daily Availability" levels in Pricing Grid included in
the definition of "Applicable Margin" to reflect the increased Commitments.

     (c) The  provisions of Section  2.13(a) are hereby  amended by deleting the
number  "$200,000,000"  appearing in clause (i) of the first proviso thereto and
substituting the number "$250,000,000" in its stead.

4.   Amendments  to  Article  V.  The  provisions  of  Article  V of the  Credit
     Agreement are hereby amended as follows:

     (a) Section 5.01 is hereby amended by deleting the word "and" at the end of
clause (i), relettering clause (j) as clause (k) and inserting the following new
clause (j):

     (j) as soon as  available,  but in any event at least 30 days after the end
     of each Fiscal Year of the Parent,  forecasts prepared by management of the
     Parent,  in  form  satisfactory  to the  Administrative  Agent,  of (i) the
     forecasted  consolidated  balance sheets of the Parent and its Subsidiaries
     as of the end of the immediately following Fiscal Year, (ii) the forecasted
     consolidated  statements  of income or  operations  and  consolidated  cash
     forecasts on a quarterly basis, and (iii)  Availability on a monthly basis,
     in each case,  for the  immediately  following  Fiscal Year  (including the
     Fiscal Year in which the Maturity Date occurs).

     (b) Section 5.08(b) is hereby amended as follows:

          (i) By  deleting  the words  "after  the  occurrence  and  during  the
     continuance  of a Cash  Dominion  Event" at the  beginning  of  clause  (y)
     thereto.

          (ii) By adding the following new sentence at the end of such section:

                                       8
<PAGE>


          In any event, and without  limiting the foregoing,  the Borrower shall
          permit the  Administrative  Agent to undertake  and  complete,  at the
          Borrower's  expense,  an appraisal of the  Borrower's  Inventory on or
          before July 31, 2007. Further,  the Administrative Agent may undertake
          one (1) appraisal of any Real Estate included in the Borrowing Base in
          each calendar year at the expense of the Loan Parties  (provided  that
          the  Administrative  Agent may, in its reasonable  discretion,  if any
          Event of Default exists, cause additional Real Estate appraisals to be
          undertaken as the Administrative Agent reasonably determines (each, at
          the expense of the Loan Parties)).

     (c) Section 5.11 is hereby amended by deleting the final  sentence  thereof
and substituting the following in its stead:

          No part of the proceeds of any Loan will be used,  whether directly or
          indirectly, (i) for any purpose that entails a violation of any of the
          regulations of the Board,  including  Regulations U and X, or (ii) for
          the  purchase,   repayment,   redemption,   retirement,   acquisition,
          cancellation or termination of the Convertible Notes.

     5.  Amendment to Article VI. The  provisions  of Section 6.10 of the Credit
Agreement are hereby deleted in their entirety and the following  substituted in
their stead:

          If  Availability  is at any time in less than or equal to ten  percent
          (10%) of the Revolving  Credit Ceiling,  the Borrower shall not permit
          the Fixed Charge Coverage Ratio,  calculated on a trailing twelve (12)
          month basis,  to be less than 1.10:  1.00.  Such Fixed Charge Coverage
          Ratio shall be first tested as of the Fiscal Month ending  immediately
          prior to the date that Availability is first less than or equal to ten
          percent (10%) of the Revolving  Credit Ceiling,  and shall continue to
          be tested monthly until Availability has exceeded ten percent (10%) of
          the  Revolving  Credit  Ceiling  on each  day for two (2)  consecutive
          Fiscal Months.  To the extent that the Fixed Charge  Coverage Ratio is
          being tested in accordance  herewith,  within  fifteen (15) days after
          the end of each Fiscal Month of the Parent,  the Lead  Borrower  shall
          furnish the  Administrative  Agent with  Consolidated  balance sheets,
          Consolidated  statements of operations,  and cash flows of the Parent,
          as of the end of and for such Fiscal Month and the elapsed  portion of
          the Fiscal Year,  setting forth in each case in  comparative  form the
          Consolidated figures for the previous Fiscal Year.

     6.  Amendment  to Article  IX. The  provisions  of Article IX of the Credit
Agreement are hereby amended as follows:

                                       9
<PAGE>


     (a) The provisions of Section 9.01 are hereby amended to delete the address
appearing in clause (b) thereof and substitute  the address 100 Federal  Street,
Boston, Massachusetts 02110 in its stead.

     (b) The provisions of Section  9.02(b)(ii) are hereby amended by adding the
following at the end thereof:

          provided  that  the  foregoing  shall  not  limit  the  rights  of the
          Administrative  Agent to amend the  Pricing  Grid in  accordance  with
          Section 2.02(b)(vi) hereof;

     (c) The  provisions  of Section  9.04(b)  are hereby  amended by adding the
following at the end of the first proviso thereto:

          provided  further that no such consent of the Lead  Borrower  shall be
          required in connection with the assignment of up to $50,000,000 of the
          Commitments  of Bank of  America,  N.A.  after  the  Second  Amendment
          Effective Date;

     (d) The  following  new  Section  9.19 is  hereby  inserted  in the  Credit
Agreement:

          SECTION  9.19 Real  Estate  Release.  Notwithstanding  anything to the
          contrary in this  Agreement  or any of the other Loan  Documents,  the
          Administrative  Agent and Lenders  shall release all Liens on any Real
          Estate that is  Collateral  upon request by Borrower (a) in connection
          with a Permitted Disposition described in clauses (e)(i) or (e)(ii) of
          the  definition of such term,  (b) the  Obligations  have been paid in
          full and the  Commitments  have  terminated,  or (c) if no  Default or
          Event of Default then exists or would arise therefrom and the Borrower
          has furnished the  Administrative  Agent with  projections for the 180
          day  period  after  such  release,   reasonably  satisfactory  to  the
          Administrative Agent,  demonstrating that Availability is projected on
          a pro forma  basis to be at all  times at least  30% of the  Borrowing
          Base.

     7. Amendment to Schedules. The Schedules are hereby amended by

     (a) deleting  Schedule 1.1 and  substituting a new Schedule 1.1 in the form
annexed hereto in its stead.

     (b) adding new Schedules 1.10 and 1.11 in the form annexed hereto.

     8.  Conditions  to  Effectiveness.  This  Second  Amendment  shall  not  be
effective until each of the following conditions precedent has been fulfilled to
the satisfaction of the Administrative Agent:

                                       10
<PAGE>


     (a) This Second  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) All  necessary  consents and approvals to this Second  Amendment  shall
have been obtained.

     (c) The Agents  shall have  received  legal  opinions  from  counsel to the
Borrower reasonably satisfactory in form and substance to the Agents.

     (d) The Borrowers shall have paid to the Administrative  Agent, (i) for the
benefit of the  Lenders,  an amendment  fee in the amount of $406,250,  and (ii)
those fees described in an Amendment Fee Letter of even date herewith.

     (e) The Agents shall have completed of due diligence, including real estate
title  examinations by Rattikin Title Company or such other company as the Agent
and the Borrower may agree),  real estate appraisals,  and Phase I environmental
site  assessments  from  Benchmark  Environmental  (or such other company as the
Agent and the  Borrower  may agree),  the  results of which shall be  reasonably
satisfactory to the Agents.

     (f) The Agents shall have filed all deeds of trust and shall have given all
such  notices as may be necessary  for the Agents to perfect  their liens in the
Real Estate included in the Borrowing Base for itself and for the benefit of the
Lenders and to assure its first priority status therein.

     (g) Any other information  (financial or otherwise) reasonably requested by
the Agents  shall  have been  received  by,  and shall be in form and  substance
reasonably  satisfactory  to the Agents.  Without  limiting the  foregoing,  the
Agents shall have received a satisfactory  Title Insurance Policy from the Title
Insurance  Company  insuring the Agents' interest in the Real Estate included in
the Borrowing Base  containing  such  endorsements  as the Agents may reasonably
require.

     (h) No material misstatements in or omissions from the materials previously
furnished to the Agents for its review.  The Agents must be  satisfied  that any
financial statements delivered to them fairly present the business and financial
condition  of the  Borrower  and its  Subsidiaries,  and that  there has been no
material adverse change in the assets, business,  financial condition, income or
prospects  of  the  Borrower  since  the  date  of  the  most  recent  financial
information delivered to the Agents.

     (i) There shall not exist any litigation or other  proceeding the result of
which could  reasonably  be expected  to have a material  adverse  effect on the
Borrower.

     (j) The absence of any default of any material contract or agreement of the
Borrower or any of its Subsidiaries

                                       11
<PAGE>


     (k) No Default or Event of Default shall have  occurred and be  continuing,
both before and immediately  after giving effect to the execution of this Second
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,  other than  representations  and
warranties that relate solely to an earlier date.

     (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 Second Amendment,
including,  without limitation, all reasonable attorneys' fees (which attorneys'
fees, exclusive of out-of-pocket expenses, shall not exceed $25,000).

     (d) This Second  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) NOTICE OF INDEMNIFICATION:  THE BORROWER AND FACILITY GUARANTORS HEREBY
ACKNOWLEDGE  AND AGREE  THAT THE CREDIT  AGREEMENT  AND THE  SECURITY  DOCUMENTS
CONTAIN CERTAIN INDEMNIFICATION PROVISIONS (INCLUDING, WITHOUT LIMITATION, THOSE
CONTAINED IN SECTION 9.03 OF THE CREDIT  AGREEMENT  AND  SUBPARAGRAPHS  6(c) AND
26(b) OF THE DEED OF TRUST,  WHICH IN CERTAIN  CIRCUMSTANCES,  COULD  INCLUDE AN
INDEMNIFICATION  OF THE  AGENTS  AND THE CREDIT  PARTIES  FROM  CLAIMS OR LOSSES
ARISING AS A RESULT OF THE AGENTS' AND THE CREDIT  PARTIES' OWN NEGLIGENCE OR ON
ACCOUNT OF CLAIMS OF STRICT LIABILITY.

                                       12
<PAGE>


     (f) This Second Amendment expresses the entire understanding of the parties
with  respect  to  the  matters  set  forth  herein  and  supersedes  all  prior
discussions or negotiations hereon.

     (g) By executing this Second Amendment, the undersigned Facility Guarantors
hereby consent to the Second  Amendment to Credit Agreement and acknowledge that
their Guarantee remains in full force and effect.


                            [SIGNATURE PAGES FOLLOW]


                                       13
<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Second 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


                              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

                                       14
<PAGE>


                              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

                                       15
<PAGE>


                              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


                                       16
<PAGE>


                              WELLS FARGO RETAIL
                              FINANCE, LLC,
                              As Syndication Agent and as Lender


                              By:_________________________________
                              Name:______________________________
                              Title:_______________________________
                              Address: One Boston Place, 18th fl Boston MA 02108
                              Telephone:
                              Telecopy:


                              JPMORGAN CHASE BANK, N.A.,
                              As Documentation Agent and as Lender


                              By:_________________________________
                              Name:______________________________
                              Title:_______________________________
                              Address:
                              Telephone:
                              Telecopy:


                                       17
<PAGE>


                              GENERAL ELECTRIC CAPITAL CORPORATION,
                              As Lender


                              By:_________________________________
                              Name:______________________________
                              Title:_______________________________
                              Address:
                              Telephone:
                              Telecopy:


                              SUNTRUST BANK,
                              As Lender


                              By:_________________________________
                              Name:______________________________
                              Title:_______________________________
                              Address:
                              Telephone:
                              Telecopy:


                                       18