Document:

exv10w3

 

Exhibit 10.3

CUSTODIAL AGREEMENT

          THIS CUSTODIAL AGREEMENT is made as of April 1, 2005 (as amended, modified or supplemented
from time to time, this “Agreement”), by and among CATERPILLAR FINANCIAL SERVICES CORPORATION, as
originator and as servicer (the “Originator” and the “Servicer”, respectively), CATERPILLAR
FINANCIAL FUNDING CORPORATION, as seller (the “Seller”), CATERPILLAR FINANCIAL ASSET TRUST 2005-A
(the “Trust”), U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Indenture Trustee”), and U.S. BANK
NATIONAL ASSOCIATION, as custodian (the “Custodian”).

RECITALS

          WHEREAS, before the Closing Date the Originator is the owner of the Receivables;

          WHEREAS, pursuant to the Purchase Agreement, the Originator will sell the Receivables to the
Seller;

          WHEREAS, pursuant to the Sale and Servicing Agreement, the Seller will sell the Receivables
acquired pursuant to the Purchase Agreement to the Trust;

          WHEREAS, pursuant to the Indenture, the Trust will Grant to the Indenture Trustee, as trustee
all of the Trust’s right, title and interest in, to and under the Receivables and the other assets
of the Trust;

          WHEREAS, during such time as the Originator, the Seller, the Trust or the Indenture Trustee
owns or has an interest in the Receivables, such Person or Persons shall be referred to herein as
the “Receivables Holder,” and the Custodian shall hold all Receivables for the benefit of the
Originator, the Seller, the Trust and the Indenture Trustee during such time as such Person is a
Receivables Holder;

          WHEREAS, in connection with the foregoing, the parties hereto desire to provide for the
custody and management of the Receivables transferred pursuant to the Purchase Agreement, the Sale
and Servicing Agreement and the Indenture (each, a “Transfer”);

          WHEREAS, the Custodian is a financial institution regulated by the Comptroller of the Currency
of the United States;

          WHEREAS, the Originator, the Seller, the Trust and the Indenture Trustee, during such time as
each such Person is a Receivables Holder, desire to have the Custodian (i) hold the Receivables as
custodian for each such party, (ii) take possession of the Contracts and the Receivable Files
related to the Receivables, along with certain other documents specified in this Agreement, as the
custodian for, and bailee of, such Receivables Holder in accordance with the terms and conditions
of this Agreement, and (iii) retain possession of the Contracts and Receivable Files and such other
documents as custodian for and bailee of the Indenture Trustee; and the Custodian is willing and
able to perform the duties and obligations of a custodian and bailee as set forth herein; and

 

 

          WHEREAS, the Servicer will act as servicer of the Receivables pursuant to the Sale and
Servicing Agreement.

          NOW, THEREFORE, in consideration of the premises and the mutual agreements hereinafter set
forth, the Originator, the Servicer, the Seller, the Trust, the Indenture Trustee and the Custodian
hereby agree as follows:

ARTICLE I

DEFINITIONS

          Section 1.1. Definitions. Certain capitalized terms used in this Agreement and not
otherwise defined herein shall have the respective meanings assigned them in the Sale and Servicing
Agreement, dated as of April 1, 2005 (as amended, modified or supplemented from time to time, the
“Sale and Servicing Agreement”), among the Trust, the Seller and the Servicer or in the Indenture,
dated as of April 1, 2005 (as amended, modified or supplemented from time to time, the
“Indenture”), between the Trust and the Indenture Trustee. All references in this Agreement to
Articles, Sections, Subsections and Exhibits are to the same contained in or attached to this
Agreement unless otherwise specified. All terms defined in this Agreement shall have the defined
meanings when used in any certificate, notice or other document made or delivered pursuant hereto
unless otherwise defined therein. As used in this Agreement and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms partly defined in this
Agreement or in any such certificate or other document to the extent not defined, shall have the
respective meanings given to them under generally accepted accounting principles. To the extent
that the definitions of accounting terms in this Agreement or in any such certificate or other
document are inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any such certificate or other
document shall control. The words “hereof,” “herein,” “hereunder,” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; the term “including” shall mean “including without limitation”; and
the term “or” is not exclusive. The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well as to the feminine
and neuter genders of such terms.

          Section 1.2. Interpretation of the Agreement. In interpreting any mistake or
ambiguity contained herein, the parties hereto agree to resolve any such mistakes or ambiguities in
favor of the Indenture Trustee.

ARTICLE II

CUSTODIAL ARRANGEMENT

          Section 2.1. Appointment as Custodian. Subject to the terms and conditions hereof,
the Seller, the Trust and the Indenture Trustee, as their interests may appear, hereby appoint U.S.
Bank National Association, and U.S. Bank National Association hereby accepts

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such appointment, as Custodian to maintain custody of the Receivables, the Contracts
and the Receivable Files during such time as each such Person is a Receivables Holder.

          Section 2.2. Maintenance of Office. The Custodian agrees to maintain each Receivable
File identified in Section 3.03 of the Sale and Servicing Agreement and Section
2.04 of the Purchase Agreement at its office located at 4040 S. Eastern Avenue, Suite 344, Las
Vegas, Nevada 89119, or at such of its other offices in Nevada as Custodian shall designate from
time to time after giving the Originator, the Seller, the Trust, each of the Rating Agencies and
the Indenture Trustee prior written notice, which office shall be maintained separate from the
offices of the Originator, the Seller and the Servicer and shall be at all times under the
exclusive dominion of the Custodian. None of the Custodian’s employees shall be employees of the
Originator, the Seller, the Servicer or any of the Servicer’s Affiliates.

ARTICLE III

CUSTODIAL ARRANGEMENT

          Section 3.1. Transfer of Receivables; Delivery of Documents. Within 30 days of the
Closing Date, the Originator shall deliver, or cause to be delivered, to the Custodian, the
Receivable Files, including the Original Contract evidencing each Receivable.

          On the date on which the Originator delivers the Receivable Files to the Custodian (the
“Delivery Date”), the Originator shall deliver to the Custodian a transfer certificate in
form of Exhibit C (a “Transfer Certificate”), acknowledging the Transfer of the
Receivables from the Originator to the Seller pursuant to the Purchase Agreement. Upon its receipt
of such Transfer Certificate, the Custodian shall acknowledge such Transfer Certificate (as
provided thereon) and deliver to the Seller a Custodian Certification (as defined in Section
3.2) (the “Seller’s Custodian Certification”) certifying that it is holding the
Receivable Files delivered to it by the Originator on behalf of the Seller.

          Upon receipt of the Seller’s Custodian Certification, the Seller shall deliver to the
Custodian a Transfer Certificate acknowledging the Transfer of the Receivables from the Seller to
the Trust pursuant to the Sale and Servicing Agreement. Upon its receipt of such Transfer
Certificate, the Custodian shall acknowledge such Transfer Certificate as provided thereon and
deliver to the Trust a Custodian Certification (the “Trust’s Custodian Certification”)
certifying that it is holding the Receivable Files delivered to it by the Originator on behalf of
the Trust.

          Upon receipt of the Trust’s Custodian Certification, the Trust shall deliver to the Custodian
a Transfer Certificate acknowledging the Transfer of the Receivables from the Trust to the
Indenture Trustee pursuant to the Indenture. Upon its receipt of such Transfer Certificate, the
Custodian shall acknowledge such Transfer Certificate as provided thereon and deliver to the
Indenture Trustee a Custodian Certification (the “Trustee’s Custodian Certification”)
certifying that it is holding the Receivable Files delivered to it by the Originator on behalf of
the Indenture Trustee.

          Custodian hereby acknowledges receipt of the Purchase Agreement, the Sale and Servicing
Agreement and the Indenture. Custodian further acknowledges that, on the Delivery

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Date and pursuant to this Agreement, the Purchase Agreement, the Sale and Servicing Agreement
and the Indenture, Custodian will be given possession of the Receivable Files relating to the
Receivables constituting a portion of the Collateral, each of which Receivables will be described
specifically on Schedule A to each of the Purchase Agreement, the Sale and Servicing Agreement and
the Indenture, a copy of which will be delivered to Custodian simultaneously with the delivery of
the Receivable Files relating thereto. On and after the Delivery Date and the completion of the
Transfers described above, and so long as this Agreement shall remain in effect, Custodian shall
hold the Receivable Files now and thereafter, from time to time, in its sole custody and control as
custodian for and bailee of the Indenture Trustee, as trustee, unless and until released from the
lien of the Indenture and otherwise in accordance with the Sale and Servicing Agreement, in which
event, Custodian shall hold the Receivables and the Receivable Files as trustee and bailee for the
benefit of the applicable Receivables Holder.

          Section 3.2. Certification. Custodian shall hold all documents in each Receivable
File on behalf of the Indenture Trustee pursuant to this Agreement. Upon consummation of a
Transfer in accordance with terms hereof, Custodian shall, with respect to the Receivables
transferred to a Receivables Holder in connection with a Transfer, number, execute and deliver to
the applicable Receivables Holder (with a copy to the Servicer) one or more certifications (each, a
“Custodian Certification”) in the form attached as Exhibit A. Upon issuance of a
Custodian Certification with respect to any Transfer, the Custodian Certification relating to such
Receivable previously delivered shall be deemed and marked cancelled with respect to such
Receivable.

          Section 3.3. Release of Receivable Files. From time to time and as provided in the
Sale and Servicing Agreement, Custodian is hereby authorized, upon written request of Servicer
(with the approval of the Indenture Trustee, which approval shall not be unreasonably withheld) in
the form annexed as Exhibit B, to release to the Servicer the Receivable File related to
any Receivable or the specific documents identified in such request to the Servicer. All documents
so released to the Servicer shall be held by it in trust for the benefit of the Indenture Trustee.
Servicer shall return the Receivable File, or such other documents which have been released to
Servicer, to Custodian when Servicer’s need therefor in connection with a foreclosure,
modification, termination or repossession no longer exists, unless the Receivable shall be
satisfied in full or liquidated, in which case, upon receipt of a certification to such effect from
Servicer to Custodian in the form annexed as Exhibit B, the related Receivable File shall
be released by Custodian to Servicer, and Custodian shall thereupon reflect any such liquidation on
the related Receivable. Pursuant to Section 4.07 of the Sale and Servicing Agreement, (i)
the Servicer shall return a Receivable File released to it within five Business Days of such
release and (ii) if such Receivable File has not been returned to the Custodian within such five
Business Day period, the Servicer shall repurchase the related Receivable.

          Notwithstanding anything herein or in any other Basic Document to the contrary, (i) the
Servicer shall return any Receivable File released to it in connection with a modification or
extension of a Receivable to the Custodian on the same day such file is released and (ii) the
Custodian shall not release a Receivable File to the Servicer in connection with a modification or
extension of a Receivable if, after giving effect to the release of such Receivable File, the
aggregate Principal Balance of all Receivables having released Receivable Files in connection with
modifications and extensions exceeds $500,000.

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          Section 3.4. Purchase; Payment In Full. Upon the purchase of any Receivable pursuant
to Section 3.02, 3.05 or 4.07 of the Sale and Servicing Agreement or
Section 6.02 of the Purchase Agreement, or upon the payment in full of any Receivable,
which shall be evidenced by Custodian’s receipt of the request for release in the form annexed
hereto as Exhibit B, Custodian shall promptly release the related Receivable File to
Servicer and the security interest in such Receivable and related Receivable File granted by the
Trust to the Indenture Trustee pursuant to the Indenture shall terminate without any further action
by the Custodian, the Originator, the Seller or the Indenture Trustee.

          Section 3.5. Other Duties of Custodian. The Custodian shall have and perform the
other following powers and duties:

     (a) Safekeeping. To segregate the Receivables and Receivable Files from all
other receivables, leases and installment sale contracts and similar records in its
possession, to identify the Receivable Files as being held and to hold the Receivable Files
for and on behalf of the Receivables Holders (which, on and after the Delivery Date, shall
be the Indenture Trustee), to maintain accurate records pertaining to each Contract and
Receivable in the Receivable Files, to provide monthly a list of all Receivable Files held
by it, together with a current exception report, and to provide such information as is
necessary to enable the Servicer to deliver the reports and notifications required by
Section 4.09 of the Sale and Servicing Agreement. Custodian will promptly report to
the Indenture Trustee any failure on its part to hold the Receivable Files as herein
provided and promptly take appropriate action to remedy any such failure.

     (b) Administration; Reports. In general, to attend to all non-discretionary
details in connection with maintaining custody of the Receivable Files on behalf of the
Receivables Holders as may be expressly provided herein or as may be required or customary
for a custodian or bailee. In addition, Custodian shall assist the Indenture Trustee and
the Servicer (at Servicer’s cost) generally in the preparation of reports to holders or to
regulatory bodies to the extent necessitated by Custodian’s custody of the Receivable Files.

          Section 3.6. Access to Records. Custodian shall permit the Indenture Trustee and its
duly authorized agents, attorneys or auditors to inspect the Receivable Files and the books and
records maintained by the Custodian pursuant hereto at such reasonable times as they may reasonably
request, subject only to compliance with the terms of the Sale and Servicing Agreement.

          Section 3.7. Instructions; Authority to Act. The Custodian shall be deemed to have
received proper instructions with respect to the Receivable Files upon its receipt of written
instructions signed by a Responsible Officer of the Indenture Trustee and may conclusively rely on
such instructions. In addition, the Custodian may conclusively rely upon any release request
delivered to it in the form attached as Exhibit B duly executed by an authorized officer of
the Servicer as set forth on Annex 1 to Exhibit B and, if required by the terms thereof, by the
Indenture Trustee.

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ARTICLE IV

OWNERSHIP AND TRANSFER OF RECEIVABLES

          Section 4.1. Transfer of Receivables. The delivery of Receivables in connection with
any Transfer shall occur in the following manner:

     (i) Upon receipt of a Transfer Certificate, Custodian shall deliver a Custodian
Certification certifying that it is holding the Receivable Files delivered to it on
behalf of the transferee referred to in such Transfer Certificate;

     (ii) Custodian shall within 15 days of its receipt of the delivery of the
Receivable Files:

     (a) determine whether each Receivable File listed on the Schedule of
Receivables has been delivered to Custodian, and whether Custodian is able
to deliver a Custodian Certification certifying that it is in possession of
each Receivable File;

     (b) promptly advise the applicable Receivables Holder, the Indenture
Trustee, the Originator, the Servicer, the Seller and each of the Rating
Agencies by telephone or by facsimile transmission if it determines that any
Receivable File referred to in clause (a) above has not been so delivered
and take no further action under this Section 4.1 until it
determines that such Receivable File has been so delivered; and

     (c) upon determining that such Receivable File has been so delivered,
Custodian shall issue and deliver to applicable Receivables Holder a
Custodian Certification certifying that it is in possession of each
Receivable File.

          Section 4.2. Substitution and Purchase of Receivables. The purchase of Receivables
pursuant to Section 6.02 of the Purchase Agreement and Section 3.02, Section
3.05(b) or Section 4.07 of the Sale and Servicing Agreement shall occur in the
following manner:

     (i) On or before the date of such purchase, the Servicer shall send the
Indenture Trustee notice, with a copy to Custodian, indicating the Receivables to be
purchased and the aggregate purchase prices to be paid on such date.

     (ii) Upon receiving written confirmation in the form annexed as Exhibit
B, from the Seller and the Trust that they have received the applicable Purchase
Amount, Custodian shall return to the applicable party (as identified to the
Custodian by the Indenture Trustee) Receivable Files related to the Receivables
purchased on such date.

          Section 4.3. No Service Charge for Transfer of Receivables. No service charge shall
be made for any transfer of Receivables, but Custodian may require payment
from the

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relevant transferor (other than the Indenture Trustee) of a sum sufficient to cover
any tax or governmental charge that may be imposed in connection with any transfer of Receivables.

          Section 4.4. Defeasance. When a Receivable is purchased by the Servicer, the Seller
or the Originator pursuant to the terms of the Purchase Agreement and the Sale and Servicing
Agreement, the applicable Receivables Holder’s interest in such Receivable and all Collateral with
respect to such Receivable shall terminate, such Receivable and related Collateral shall be
conveyed to the Servicer, the Seller or the Originator, as applicable, and the Receivables Holder’s
rights, title and interest therein shall cease, and the Indenture Trustee shall execute such
instruments acknowledging termination and discharge of such pledge and security interest as are
required by applicable law.

ARTICLE V

CUSTODIAN

          Section 5.1. Representations, Warranties and Covenants of Custodian. Custodian hereby
represents and warrants to, and covenants with, the Originator, the Seller, the Servicer, the Trust
and the Indenture Trustee, that as of the date of each Custodian Certification:

     (i) Custodian is duly organized, validly existing and in good standing under
the laws of the United States;

     (ii) Custodian has the full power and authority to hold each Receivable, to
hold title to the Receivables as custodian on behalf of the Receivables Holders, and
to execute, deliver and perform, and to enter into and consummate all transactions
contemplated by this Agreement, has duly authorized the execution, delivery and
performance of this Agreement, has duly executed and delivered this Agreement, and
this Agreement constitutes a legal, valid and binding obligation of Custodian,
enforceable against it in accordance with its terms, except as enforcement of such
terms may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally and by the availability of equitable
remedies;

     (iii) Neither the execution and delivery of this Agreement, the delivery of
Receivables to Custodian, the issuance of the Custodian Certifications, the
consummation of the transactions contemplated hereby or thereby, nor the fulfillment
of or compliance with the terms and conditions of this Agreement will conflict with
or result in a breach of any of the terms, conditions or provisions of Custodian’s
charter or bylaws or any agreement or instrument to which Custodian is now a party
or by which it is bound, or constitute a default or result in an acceleration under
any of the foregoing, or result in the violation of any law, rule, regulation,
order, judgment or decree to which Custodian or its property is subject; except that
no representation or warranty is made as to compliance with laws and regulations,
other than those of the United States and the State of
Illinois, relating to qualifications, licensure or regulation of custodians of
receivables originated in states other than Illinois;

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     (iv) Custodian does not believe, nor does it have any reason or cause to
believe, that it cannot perform each and every covenant contained in this Agreement;

     (v) To Custodian’s knowledge after due inquiry, there is no litigation pending
or threatened, which if determined adversely to Custodian, would adversely affect
the execution, delivery or enforceability of this Agreement, or any of the duties or
obligations of Custodian hereunder, or which would have a material adverse effect on
the financial condition of Custodian;

     (vi) No consent, approval, authorization or order of any court or governmental
agency or body is required for the execution, delivery and performance by Custodian
of or compliance by Custodian with this Agreement or the consummation of the
transactions contemplated hereby; except that no representation or warranty is made
as to consents, approvals, authorizations or orders of any courts or governmental
agencies or bodies, other than those of the United States and the State of Illinois,
relating to qualifications, licensure or regulation of custodians of receivables
originated in states other than Illinois;

     (vii) Upon written request of the Indenture Trustee, Custodian shall take such
steps as requested by the Indenture Trustee to protect or maintain any interest in
any Receivable; and

     (viii) The Custodian has not been notified by any party other than the
Originator, the Seller, the Trust and the Indenture Trustee that any such third
party claims an interest in the Receivables or the Receivable Files nor is any such
party requesting the Custodian to act as a bailee with respect to the Receivables or
the Receivable Files.

          Custodian makes no representations or warranties as to the validity, legality, sufficiency,
enforceability, perfection, genuineness or prior recorded status of any of the documents contained
in each Receivable File or the collectability, insurability, effectiveness or suitability of any
Receivable.

          Section 5.2. Charges and Expenses. The Seller will pay all fees of Custodian in
connection with the performance of its duties hereunder in accordance with written agreements to be
entered into from time to time between the parties hereto and Custodian, including fees and
expenses of counsel incurred by Custodian in the performance of its duties hereunder; provided,
however, that (i) Custodian shall in no event acquire any lien upon any Receivable deposited under
this Agreement or the Purchase Agreement or the Sale and Servicing Agreement, or any claim against
any Receivables Holder by reason of the failure of the Seller to pay any of such charges or
expenses and (ii) in the event the Seller fails to pay the fees and expenses of Custodian as set
forth in such written agreements, Custodian shall have no obligation to take actions or incur costs
in connection with this Agreement unless the Seller or
another Person has made adequate provision for payment of Custodian’s fees and expenses. The
Seller shall indemnify the Custodian against payment of any documentary stamp taxes, intangible
taxes and

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other similar taxes, penalties and interest incurred in connection with the Receivables
and the transactions contemplated hereby.

          Section 5.3. No Adverse Interests. Custodian covenants and warrants to the
Originator, the Seller, the Servicer, the Trust and the Indenture Trustee, that as of the date of
each Custodian Certification: (i) it holds no adverse interest, by way of security or otherwise,
in any Receivable; and (ii) the execution of this Agreement and the creation of the custodial
relationship hereunder does not create any interest, by way of security or otherwise, of Custodian
in or to any Receivable, other than Custodian’s rights as custodian hereunder.

          Section 5.4. Inspections. Upon reasonable prior written notice to Custodian, the
Servicer, the Seller, the Indenture Trustee, the Trust and such Person’s agents, accountants,
attorneys and auditors will be permitted during normal business hours to examine Custodian’s
documents, records and other papers in possession of or under the control of Custodian relating to
the Receivables.

          Section 5.5. Insurance. Custodian shall, at its own expense, maintain at all times
during the existence of this Agreement and keep in full force and effect, (1) fidelity insurance,
(2) theft of documents insurance, and (3) forgery insurance subject to deductibles, all as is
customary for amounts and with insurance companies reasonably acceptable to the Servicer and the
Indenture Trustee. A certificate of the respective insurer as to each such policy or a blanket
policy for such coverage shall be furnished to the Servicer or the Indenture Trustee, upon request,
containing the insurer’s statement or endorsement that such insurance shall not terminate prior to
receipt by such party, by registered mail, of 10 days advance notice thereof.

          Section 5.6. Limitation of Liability. Custodian assumes no obligation, and shall be
subject to no liability, under this Agreement, except for its negligence or willful misconduct in
the performance of the obligations and duties as are specifically set forth herein. Custodian
shall not be liable for any action or non-action by it in reliance on advice of counsel believed by
it in good faith to be competent to give such advice. Custodian may rely and shall be protected in
acting upon any written notice, order, request, direction or other document believed by it to be
genuine and to have been signed or presented by the proper party or parties. Except with respect
to the willful misconduct of the Custodian, neither the Custodian nor its directors, officers and
agents shall be held liable for any indirect or consequential damages resulting from any action
taken or omitted to be taken by it or them under or in connection with this Agreement, even if
advised of the possibility of such damages. The provisions of this Section 5.6 shall survive the
termination of this Agreement.

          Section 5.7. Indemnification. Servicer agrees to indemnify Custodian against, and to
hold it harmless from, any liabilities, and any related out-of-pocket expenses, which it may incur
in connection with this Agreement, the Sale and Servicing Agreement, the Purchase Agreement or the
Custodian Certifications, other than any liabilities and expenses arising out of Custodian’s
negligence or willful misconduct. The Custodian agrees to indemnify, defend and hold harmless the
Indenture Trustee against any liability to Noteholders
or Certificateholder arising out of the negligence or willful misconduct of the Custodian (a)
in the preparation or execution of any Custodian Certification or (b) resulting in the loss of
Receivable Files in the custody of the Custodian. This indemnity shall include indemnification as
to reasonable

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attorneys’ fees and costs, whether or not suit be brought, and including such fees
and costs on appeal. The Indenture Trustee shall give prompt written notice to the Custodian of
any claim for which indemnity is or may be sought and shall afford to the Custodian the opportunity
to defend such claim.

          Section 5.8. Further Rights of Custodian.

     (a) If the Custodian is at any time uncertain of its obligations hereunder, the
Custodian, upon prior written notice to the Indenture Trustee, the Trust, the Originator,
the Seller and the Servicer, may refrain from taking any action with respect to such matter
until such uncertainty is removed. If conflicting demands are made on the Custodian with
respect to any matter, the Indenture Trustee’s demand shall control, except during the
period prior to the issuance of the Trustee’s Custodian Certification pursuant to Section
3.1 hereof, when the applicable Receivables Holder’s demand shall control and the Custodian
shall have the right to rely on such controlling demand. The Custodian shall have the right
in any such case to interplead any or all of the documents contained in the Receivable Files
in a court of competent jurisdiction and, upon delivery thereof, shall have no further
obligations thereunder with respect to such documents.

     (b) The obligations of the Custodian shall be determined solely by the express
provisions of this Agreement. No representation, warranty, covenant or obligation of the
Custodian shall be implied with respect to this Agreement or the Custodian’s service
hereunder. Without limiting the generality of the foregoing statement, except as
specifically required herein, the Custodian shall be under no obligation to inspect, review
or examine the Receivable Files to determine that the contents thereof are complete,
genuine, enforceable or appropriate for the represented purpose or that they have been
actually recorded or filed in required offices or that they are other than what they purport
to be on their face.

     (c) No provision of this Agreement shall require the Custodian to spend or risk its own
funds or otherwise incur financial liability in performance of its duties under this
Agreement unless, pursuant to Section 5.2 hereof, adequate provision has been made for the
reimbursement of the Custodian’s expenses hereunder.

ARTICLE VI

MISCELLANEOUS PROVISIONS

          Section 6.1. Amendment. This Agreement may be amended from time to time by Custodian,
the Originator, the Seller, the Servicer, the Trust and the Indenture Trustee by written agreement
signed by such parties and upon satisfaction of the Rating Agency Condition.

          Section 6.2. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS (OTHER THAN SECTION 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS OF LAW), AND

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THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS.

          Section 6.3. Notices. All demands, notices and communication hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at or mailed by
overnight mail, certified mail or registered mail, postage prepaid, to (i) in the case of the
Servicer and the Originator, Caterpillar Financial Services Corporation, 2120 West End Avenue,
Nashville, Tennessee 37203-0001, (ii) in the case of the Seller, Caterpillar Financial Funding
Corporation, 4040 S. Eastern Avenue, Suite 344, Las Vegas, Nevada 89119, (iii) in the case of the
Trust, c/o Chase Bank USA, National Association, as Owner Trustee, c/o JPMorgan Chase, N.A., 500
Stanton Christiana Road, OPS4, 3rd Floor, Newark, Delaware 19713, with a copy to the Administrator,
Caterpillar Financial Services Corporation, 2120 West End Avenue, Nashville, Tennessee 37203-0001,
(iv) in the case of the Indenture Trustee, U.S. Bank National Association, 209 South LaSalle
Street, Suite 300, Chicago, Illinois 60604, (v) in the case of the Custodian, U.S. Bank National
Association, 209 South LaSalle Street, Suite 300, Chicago, Illinois 60604, and (vi) in the case of
the Rating Agencies, at their respective addresses set forth in the Sale and Servicing Agreement,
and, in each such case, at such other addresses as may hereafter be furnished to each party hereto
in writing.

          Section 6.4. Severability of Provisions. If any one or more of the covenants,
agreements, provisions or terms of this Agreement shall be for any reason whatsoever held invalid,
then such covenants, agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of this Agreement and shall in no way affect the
validity or enforceability of the other covenants, agreements, provisions or terms of this
Agreement.

          Section 6.5. No Partnership. Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between Custodian and the other parties hereto.

          Section 6.6. Termination of Agreement. This Agreement shall be terminated upon
termination of the Sale and Servicing Agreement or at the option of Indenture Trustee on 30 days
written notice to Custodian, the Servicer, the Seller, the Trust and the Originator. Concurrently
with, or as soon as practicable after, the termination of this Agreement, Custodian shall redeliver
the Receivable Files to the Indenture Trustee at such place as the Indenture Trustee may reasonably
designate and until such redelivery, Custodian shall hold such Receivable Files in its sole custody
and control as custodian for and bailee of the Indenture Trustee. In connection with the
administration of this Agreement, Custodian and the Indenture Trustee may agree from time to time
upon the interpretation of the provisions of this Agreement, as such interpretation may in their
opinion be consistent with the general tenor and purposes of this Agreement, any such
interpretation to be signed and annexed hereto.

          Section 6.7. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which counterparts shall be deemed to be an original, and such
counterparts shall constitute but one and the same instrument.

11

 

          Section 6.8. Assignment. No party hereto shall sell, pledge, assign or otherwise
transfer this Agreement without the prior written consent of the other parties hereto and
satisfaction of the Rating Agency Condition.

          Section 6.9. Headings. Section headings are for reference purposes only and shall not
be construed as a part of this Agreement.

          Section 6.10. Advice of Counsel. Custodian shall be entitled to rely and act upon
advice of counsel with respect to its performance hereunder as Custodian and shall be without
liability for any action reasonably taken pursuant to such advice, provided that such action is not
in violation of application federal or state law. This paragraph shall not negate Custodian’s
obligations under Section 5.7.

          Section 6.11. No Petition. Custodian, by entering into this Agreement, hereby
covenants and agrees that it will not at any time (whether or not this Agreement has been
terminated) institute against the Seller or the Trust, or join in any institution against the
Seller or the Trust of, any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state bankruptcy or similar
law in connection with any obligations relating to the Certificate, the Notes, this Agreement or
any of the other Basic Documents.

          Section 6.12. Resignation of Custodian.

     (a) The Custodian may at any time resign and terminate its obligations under this
Agreement upon at least 90 days’ prior written notice to the Servicer and the Indenture
Trustee. The Custodian may be removed at any time at the written request of the Indenture
Trustee. In the event of such resignation or removal, the Indenture Trustee shall appoint a
successor custodian acceptable to the Servicer, which appointment must satisfy the Rating
Agency Condition. If the Indenture Trustee fails to appoint a successor custodian within 30
days, the Servicer shall appoint a successor custodian. In no event shall the resignation
of the Custodian be effective until a successor custodian is duly appointed hereunder. One
original counterpart of such instrument of appointment shall be delivered to each of the
Servicer, the Custodian and the successor custodian. The Servicer shall notify the Rating
Agencies of any such resignation or removal and the appointment of a successor custodian.

     (b) In the event of any resignation, the Custodian shall promptly transfer to the
successor custodian (or to the Indenture Trustee if no successor custodian has been
appointed) all of the Receivables (including the Receivable Files) in its possession under
this Agreement and take such other action as may be requested by the Indenture Trustee to
effect the transfer of the Custodian’s Receivable Files to the successor custodian, which
shall provide a written receipt for all such transferred documents and instruments.
On completion of such transfer, the Custodian shall be relieved of all further
responsibilities and obligations hereunder.

12

 

          Section 6.13. Limitation of Liability of Indenture Trustee and Owner Trustee.

     (a) Notwithstanding anything contained herein to the contrary, in no event shall U.S.
Bank National Association in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the Issuer
hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as
to all of which recourse shall be had solely to the assets of the Issuer.

     (b) Notwithstanding anything contained herein to the contrary, this instrument has been
countersigned by Chase Bank USA, National Association, not in its individual capacity but
solely as Owner Trustee, and in no event shall Chase Bank USA, National Association have any
liability for the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant
hereto, as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement, in the performance of any duties or obligations of the
Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of,
the terms and provisions of Article VI, VII and VIII of the Trust Agreement.

[Signature Pages Follow]

13

 

          IN WITNESS WHEREOF, the parties hereto have caused their names to be signed hereto by their
respective officers thereunto duly authorized, all as of the day and year first above written.

	 	 	 	 	 
	 	 	ORIGINATOR
	 
	 	 	 	 
	 	 	CATERPILLAR FINANCIAL SERVICES
	 	 	CORPORATION
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	 	 	     Name:
	

	 	 	 	     Title:
	 
	 	 	 	 
	 	 	SERVICER
	 
	 	 	 	 
	 	 	CATERPILLAR FINANCIAL SERVICES
	 	 	CORPORATION, as Servicer
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	 	 	     Name:
	

	 	 	 	     Title:
	 
	 	 	 	 
	 	 	SELLER
	 
	 	 	 	 
	 	 	CATERPILLAR FINANCIAL FUNDING
	 	 	CORPORATION, as Seller
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	 
	

	 	 	 	     Name:
	

	 	 	 	     Title:

Custodial Agreememt

 

 

	 	 	 	 	 
	 	 	TRUST
	 
	 	 	 	 
	 	 	CATERPILLAR FINANCIAL ASSET TRUST
	 	 	2005-A
	 
	 	 	 	 
	

	 	By:
	 	CHASE BANK USA, NATIONAL ASSOCIATION, not

in its individual capacity but solely as

Owner Trustee under the Trust Agreement
	 
	 	 	 	 
	

	 	By:
	 	/s/ John Cashin
	

	 	 	 	 
	

	 	 	 	     Name: John Cashin
	

	 	 	 	     Title: Vice President
	 
	 	 	 	 
	 	 	INDENTURE TRUSTEE
	 
	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION, as
	 	 	Indenture Trustee
	 
	 	 	 	 
	

	 	By:
	 	/s/ Melissa Rosal
	

	 	 	 	 
	

	 	 	 	     Name: Melissa Rosal
	

	 	 	 	     Title: Vice President
	 
	 	 	 	 
	 	 	CUSTODIAN
	 
	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION, as
	 	 	Custodian
	 
	 	 	 	 
	

	 	By:
	 	/s/ Melissa Rosal
	

	 	 	 	 
	

	 	 	 	     Name: Melissa Rosal
	

	 	 	 	     Title: Vice President

Custodial Agreememt

 

 

EXHIBIT A

CUSTODIAN CERTIFICATION

Certification No.          

[DATE]

	 	 	 
	To:

	 	[SELLER]
	

	 	[TRUST]
	

	 	[INDENTURE TRUSTEE]

	 	 	 	 	 
	

	 	Re:
	 	Custodial Agreement, dated as of April 1, 2005 (the
“Custodial Agreement”), by and among Caterpillar Financial Services
Corporation (the “Originator”), Caterpillar Financial Services Corporation, as
Servicer (the “Servicer”), Caterpillar Financial Funding Corporation (the
“Seller”), Caterpillar Financial Asset Trust 2005-A (the “Trust”), U.S. Bank
National Association, as Indenture Trustee (the “Indenture Trustee”) and
U.S. Bank National Association, as Custodian (the “Custodian”)

Gentlemen:

          [In accordance with the provisions of Section 4.1 of the above-referenced Custodial
Agreement, the Custodian hereby certifies (i) that it has received the Receivable Files delivered
to it by the Originator, and (ii) that as to each Receivable, Custodian holds such Receivable and
the other documents in the related Receivable File in its name as custodian solely on behalf of and
for the benefit of [the Seller] [the Trust] [the Indenture Trustee], without written notice (a) of
any adverse claims, liens or encumbrances, (b) that any Receivable was overdue or has been
dishonored, (c) of evidence on the face of any Receivable or other document in the Receivable File
of any security interest therein, or (d) of any defense against or claim to the Receivable by any
other party.] [In accordance with the provisions of Section 4.1 of the above-referenced
Custodial Agreement, the Custodian hereby certifies that it has received all of the Receivable
Files identified on the Receivable Schedule (the “Receivable Schedule”) attached hereto dated as of
April 1, 2005. The undersigned, as Custodian, confirms that the Receivable number in each
Receivable File conforms to the respective Receivable number listed on the Receivable Schedule.]
Capitalized terms used herein without definition shall have the meanings ascribed to them in the
Custodial Agreement.

          Custodian makes no representations or warranties as to the validity, legality, sufficiency,
enforceability, genuineness or prior recorded status of any of the documents contained in each
Receivable File or the collectability, insurability, effectiveness or suitability of any
Receivable.

A-1

 

          [Upon repurchase of the Receivables to which this Custodian Certification relates and payment
of the applicable repurchase price, the Receivables to which this Custodian Certification relates
shall be returned and released by Custodian to the Person paying such repurchase price, and this
Custodian Certification shall be and be deemed to be canceled by Custodian and of no force and
effect.]

	 	 	 	 	 
	 	 	 
	 	 	as Custodian
	 
	 	 	 	 
	

	 	By	 	 
	

	 	 	 	 
	

	 	 	 	Name:
	

	 	 	 	Title:

A-2

 

EXHIBIT B

REQUEST FOR RELEASE OF DOCUMENTS

[DATE]

To:     [Custodian]

	 	 	 	 	 
	

	 	Re:
	 	Custodial Agreement, dated as of April 1, 2005, by and among
Caterpillar Financial Services Corporation (the “Originator”), Caterpillar
Financial Services Corporation, as Servicer (the “Servicer”), Caterpillar
Financial Funding Corporation (the “Seller”), Caterpillar Financial Asset Trust
2005-A (the “Trust”), U.S. Bank National Association, as Indenture Trustee (the
“Indenture Trustee”) and U.S. Bank National Association, as Custodian (“Custodian”)                              

          In connection with the administration of the Receivables held by you as Custodian under the
above-referenced Custodial Agreement, [___], on behalf of [___], requests the release,
and acknowledges receipt, of the following for the Receivable described below, for the reason
indicated:

	 	 	 	 	 	 	 	 	 	 	 
	A.	 	Documents Released	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	1a.	 	 	Installment Sale Contract or Lease   b.      Principal Balance          
	

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	2.	 	 	Other documents:	 	 
	

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 	 	 
	B.	 	Obligor’s Name, Address & Zip Code:
	 
	 	 	 	 	 	 	 	 
	C.	 	Receivable Number:
	 
	 	 	 	 	 	 	 	 
	D.	 	Reason for Requesting Documents (check one)
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	1.	 	 	Receivable Paid in Full.
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	2.	 	 	Receivable Repurchased Pursuant to the Purchase Agreement or the Sale and
Servicing Agreement.
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	3.	 	 	Receivable Liquidated.
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	4.	 	 	Receivable in Foreclosure or Repossession Proceedings.
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	5.	 	 	Receivable to be modified or extended.
	

	 	 	 	 	 	 	 	 

          If box 1, 2 or 3 above is checked, and if all or part of Receivable File was
previously released to us, please release to us our previous receipt on file

B-1

 

with you, as well as any additional documents in your possession relating to
the above specified Receivable. If box 1, 2 or 3 is checked, evidence of receipt of
payment by the Indenture Trustee is required prior to release.

          If box 4 or 5 above is checked, upon our return of all of the above documents
to you as Custodian, please acknowledge your receipt by signing in the space
indicated below, and returning this form.

          If box 5 above is checked, after giving effect to such release, the aggregate
Principal Balance of all Receivables released in connection with modifications and
extensions shall not exceed $500,000. In addition, upon return of the Receivable
File, we are deemed to certify that the Receivable File as returned contains the
related Receivable as so modified and extended.

          If box 1, 2 or 3 above is checked, this request is only valid if also executed
by the Seller and the Indenture Trustee.

          Documents released hereby in connection with a modification or extension must be returned to
the Custodian on the same Business Day of release.

	 	 	 	 	 
	 	 	CATERPILLAR FINANCIAL SERVICES
	 	 	CORPORATION, as Servicer
	 
	 	 	 	 
	

	 	By	 	 
	

	 	 	 	 
	

	 	 	 	Name:
	

	 	 	 	Title:
	

	 	 	 	Date:
	 
	 	 	 	 
	 	 	[                                                                                                    ]
	 
	 	 	 	 
	 	 	 
	

	 	By	 	 
	

	 	 	 	 
	

	 	 	 	Name:
	

	 	 	 	Title:
	

	 	 	 	Date:

	 	 	 	 	 
	Documents returned to Custodian:	 	 
	 
	 	 	 	 
	 	 	 
	as Custodian	 	 
	 
	 	 	 	 
	By
	 	 	 	 
	

	 	 	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 
	

	 	Date:	 	 

B-2

 

ANNEX 1

Authorized Officers of Servicer

B-3

 

EXHIBIT C

TRANSFER CERTIFICATE

	 	 	 
	U.S. Bank National Association,
	 	 
	as Custodian under the
	 	 
	Custodial Agreement (defined below)

	 	[DATE]
	209 South LaSalle Street, Suite 300,
	 	 
	Chicago, Illinois 60604
	 	 

	 	 	 
	Re:

	 	Custodial Agreement, dated as of April 1, 2005 (the “Custodial
Agreement”), by and among Caterpillar Financial Services Corporation (the
“Originator”), Caterpillar Financial Services Corporation, as Servicer (the
“Servicer”), Caterpillar Financial Funding Corporation (the “Seller”),
Caterpillar Financial Asset Trust 2005-A (the “Trust”), U.S. Bank National
Association, as Indenture Trustee (the “Indenture Trustee”) and U.S. Bank
National Association, as Custodian (“Custodian”)

To whom it may concern:

          Pursuant to Sections 3.1 and 4.1 of the above-referenced Custodial Agreement (capitalized
terms used herein but not otherwise defined shall have the same meanings assigned to such terms in
the Custodial Agreement), we hereby advise you of the Transfer by the undersigned to [the
Seller][the Trust][the Indenture Trustee] of the Receivables identified on the Receivable
Schedule[s] attached [hereto] [to the [Seller’s Custodian Certification] [Trust’s Custodian
Certification] with respect to the undersigned which we are delivering to you for cancellation].
You are instructed to hold such Receivables for [the Seller] [the Trust] [the Indenture Trustee]
and to deliver to [the Seller][the Trust][the Indenture Trustee] a [Seller’s] [Trust’s] [Trustee’s]
Custodian Certification acknowledging that you hold such Receivables.

	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 
	

	 	By	 	 
	

	 	 	 	 
	

	 	 	 	Name:
	

	 	 	 	Title:

The Custodian hereby acknowledges receipt of the foregoing
instructions and agrees to hold such Receivables solely for
[the Seller] [the Trust] [the Indenture Trustee] pursuant to
the Custodial Agreement.

	 	 	 	 	 
	U.S. BANK NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	

	 	

	 	 
	

	 	Name:	 	 
	

	 	Title:	 	 

C-1

 

CUSTODIAL AGREEMENT

among

CATERPILLAR FINANCIAL SERVICES CORPORATION

Originator and Servicer

CATERPILLAR FINANCIAL FUNDING CORPORATION

Seller

CATERPILLAR FINANCIAL ASSET TRUST 2005-A

Issuer

and

U.S. BANK NATIONAL ASSOCIATION

Indenture Trustee and Custodian

Dated as of April 1, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I DEFINITIONS
	 	 	2	 
	Section 1.1. Definitions
	 	 	2	 
	Section 1.2. Interpretation of the Agreement
	 	 	2	 
	ARTICLE II CUSTODIAL ARRANGEMENT
	 	 	2	 
	Section 2.1. Appointment as Custodian
	 	 	2	 
	Section 2.2. Maintenance of Office
	 	 	2	 
	ARTICLE III CUSTODIAL ARRANGEMENT
	 	 	3	 
	Section 3.1. Transfer of Receivables; Delivery of Documents
	 	 	3	 
	Section 3.2. Certification
	 	 	4	 
	Section 3.3. Release of Receivable Files
	 	 	4	 
	Section 3.4. Purchase; Payment In Full
	 	 	5	 
	Section 3.5. Other Duties of Custodian
	 	 	5	 
	Section 3.6. Access to Records
	 	 	6	 
	Section 3.7. Instructions; Authority to Act
	 	 	6	 
	ARTICLE IV OWNERSHIP AND TRANSFER OF RECEIVABLES
	 	 	6	 
	Section 4.1. Transfer of Receivables
	 	 	6	 
	Section 4.2. Substitution and Purchase of Receivables
	 	 	7	 
	Section 4.3. No Service Charge for Transfer of Receivables
	 	 	7	 
	Section 4.4. Defeasance
	 	 	7	 
	ARTICLE V CUSTODIAN
	 	 	7	 
	Section 5.1. Representations, Warranties and Covenants of Custodian
	 	 	7	 
	Section 5.2. Charges and Expenses
	 	 	9	 
	Section 5.3. No Adverse Interests
	 	 	9	 
	Section 5.4. Inspections
	 	 	9	 
	Section 5.5. Insurance
	 	 	9	 
	Section 5.6. Limitation of Liability
	 	 	10	 
	Section 5.7. Indemnification
	 	 	10	 
	Section 5.8. Further Rights of Custodian
	 	 	10	 
	ARTICLE VI MISCELLANEOUS PROVISIONS
	 	 	11	 

i

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page	 
	Section 6.1. Amendment
	 	 	11	 
	Section 6.2. Governing Law
	 	 	11	 
	Section 6.3. Notices
	 	 	11	 
	Section 6.4. Severability of Provisions
	 	 	11	 
	Section 6.5. No Partnership
	 	 	12	 
	Section 6.6. Termination of Agreement
	 	 	12	 
	Section 6.7. Counterparts
	 	 	12	 
	Section 6.8. Assignment
	 	 	12	 
	Section 6.9. Headings
	 	 	12	 
	Section 6.10. Advice of Counsel
	 	 	12	 
	Section 6.11. No Petition
	 	 	12	 
	Section 6.12. Resignation of Custodian
	 	 	12	 
	Section 6.13. Limitation of Liability of Indenture Trustee and Owner Trustee
	 	 	13	 

	EXHIBIT A CUSTODIAN CERTIFICATION
	 	 	A-1	 
	EXHIBIT B REQUEST FOR RELEASE OF DOCUMENTS
	 	 	B-1	 
	EXHIBIT C TRANSFER CERTIFICATE
	 	 	C-1	 
	 	 	 	 	 

ii

 

An extra section break has been inserted above this paragraph. Do not delete this section break if
you plan to add text after the Table of Contents/Authorities. Deleting this break will cause Table
of Contents/Authorities headers and footers to appear on any pages following the Table of
Contents/Authorities.

3exv10w2

 

EXHIBIT 10.2

PIER 1 IMPORTS, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

Effective May 1, 1986

Restated as of December 5, 2002

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE	 
	ARTICLE I —PURPOSE
	 	1	 
	 
	 	 	 	 
	ARTICLE II —DEFINITIONS
	 	1	 
	 
	 	 	 	 
	2.1 
	Beneficiary	 	1	 
	2.2 
	Board	 	1	 
	2.3 
	Cause	 	1	 
	2.4 
	Change of Control of the Employer	 	2	 
	2.5 
	Committee	 	2	 
	2.6 
	Compensation	 	2	 
	2.7 
	Deferred Retirement Date	 	2	 
	2.8 
	Early Retirement Date	 	2	 
	2.9 
	Employer	 	3	 
	2.10 
	Good Reason	 	3	 
	2.11 
	Highest Average Compensation	 	3	 
	2.12 
	Normal Retirement Date	 	3	 
	2.13 
	Participant	 	3	 
	2.14 
	Pier 1	 	4	 
	2.15 
	Retirement	 	4	 
	2.16 
	Supplemental Retirement Benefit	 	4	 
	2.17 
	Termination	 	4	 
	2.18 
	Total and Permanent Disability	 	4	 
	2.19 
	Years of Credited Service	 	4	 
	2.20 
	Years of Plan Participation	 	5	 
	 
	 	 	 	 
	ARTICLE III —PARTICIPATION AND VESTING
	 	5	 
	 
	 	 	 	 
	3.1 
	Participation	 	5	 
	3.2 
	Supplemental Retirement Benefit Vesting	 	5	 
	 
	 	 	 	 
	ARTICLE IV —SUPPLEMENTAL RETIREMENT BENEFITS
	 	6	 
	 
	 	 	 	 
	4.1 
	Benefit	 	6	 
	4.2 
	Retirement; Disability; Death	 	6	 
	4.3 
	Adjustments for Deferred Retirement Benefit	 	6	 
	4.4 
	Adjustments for Early Retirement Benefit	 	7	 
	4.5 
	Termination	 	7	 
	4.6 
	Form of Benefit Payment	 	7	 
	4.7 
	Withholding; Payroll Taxes	 	8	 
	4.8 
	Payments	 	8	 
	4.9 
	Payment to Guardian	 	8	 
	4.10 
	Major Medical and Hospitalization Insurance Coverage	 	9	 
	 
	 	 	 	 
	ARTICLE V —BENEFICIARY DESIGNATION
	 	9	 
	 
	 	 	 	 
	5.1 
	Beneficiary Designation	 	9	 

(i)

 

	 	 	 	 	 
	 	 	PAGE	 
	5.2 
	Amendments	 	9	 
	5.3 
	No Beneficiary Designation	 	10	 
	5.4 
	Effect of Payment	 	10	 
	5.5 
	Death of Beneficiary	 	10	 
	 
	 	 	 	 
	ARTICLE VI —ADMINISTRATION
	 	10	 
	 
	 	 	 	 
	6.1 
	Committee; Duties	 	10	 
	6.2 
	Agents	 	10	 
	6.3 
	Binding Effect of Decisions	 	11	 
	6.4 
	Indemnity of Committee	 	11	 
	 
	 	 	 	 
	ARTICLE VII —CLAIMS PROCEDURES
	 	11	 
	 
	 	 	 	 
	7.1 
	Claim	 	11	 
	7.2 
	Denial of Claim	 	11	 
	7.3 
	Review of Claim	 	11	 
	7.4 
	Final Decision	 	11	 
	 
	 	 	 	 
	ARTICLE VIII —TERMINATION, SUSPENSION OR AMENDMENT
	 	12	 
	 
	 	 	 	 
	8.1 
	Amendment or Termination	 	12	 
	8.2 
	Successor Employer	 	12	 
	 
	 	 	 	 
	ARTICLE IX —MISCELLANEOUS
	 	12	 
	 
	 	 	 	 
	9.1 
	Unsecured General Creditor	 	12	 
	9.2 
	Trust Fund	 	12	 
	9.3 
	Nonassignability	 	13	 
	9.4 
	Not a Contract of Employment	 	13	 
	9.5 
	Suicide	 	13	 
	9.6 
	Participant’s Cooperation	 	13	 
	9.7 
	Terms	 	13	 
	9.8 
	Captions	 	13	 
	9.9 
	Governing Law	 	14	 
	9.10 
	Validity	 	14	 
	9.11 
	Successors	 	14	 
	9.12 
	Notice	 	14	 

(ii)

 

PIER 1 IMPORTS, INC.

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

ARTICLE I —PURPOSE

     The purpose of this Supplemental Executive Retirement Plan (hereinafter referred to as the
“Plan”) is to provide supplemental retirement benefits for a select group of management or highly
compensated employees of Pier 1 Imports, Inc. It is intended that the Plan will aid in retaining
and attracting employees of exceptional ability by providing such individuals with these benefits.
This Plan was originally effective as of May 1, 1986. This restatement of the Plan shall only
apply with respect to Participants who are actively employed by the Employer after December 5,
2002. The prior provisions of the Plan will continue to apply with respect to Participants who
terminated employment with the Employer prior to December 5, 2002.

ARTICLE II —DEFINITIONS

     For the purposes of this Plan, the following terms shall have the meanings indicated unless
the context clearly indicates otherwise:

2.1 Beneficiary

     “Beneficiary” means the person, persons or entity entitled under Article V to receive Plan
benefits after a Participant’s death.

2.2 Board

     “Board” means the Board of Directors of Pier 1 Imports, Inc.

2.3 Cause

     “Cause” means that the Participant:

     (a) Has misappropriated, stolen or embezzled funds of the Employer; or

     (b) Has committed an act of deceit, fraud, dereliction of duty, or gross or willful
misconduct; or

     (c) Has been convicted of either a felony or a crime involving moral turpitude or
entered a plea of nolo contendre in response to an indictment for such crime or felony; or

     (d) Has intentionally disclosed confidential information of the Employer except when
such disclosure is made pursuant to the direction of the Employer or in accordance with
Employer policy; or

PAGE 1 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

     (e) Has engaged in competitive behavior against the Employer, has purposely aided a
competitor of the Employer or has misappropriated or aided in misappropriating a material
opportunity of the Employer.

2.4 Change of Control of the Employer

     “Change of Control of the Employer” shall be deemed to have occurred if:

     (a) Any “person” (as defined in Sections 3(a)(9) and 13(d)(3) of the Securities
Exchange Act of 1934 (the “Act”)) becomes the “beneficial owner” (as defined in Rules
13(d)-3 and 13(d)-S under the Act) of securities of Pier 1, 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 of Directors of Pier 1; or

     (b) There shall occur a change in the composition of a majority of the Board of
Directors within a two (2) year period which change shall not have been affirmatively
approved by a majority of the Board of Directors as constituted immediately prior to the
commencement of such period; or

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

2.5 Committee

     “Committee” means the Employees Retirement Plan Committee appointed to administer the
Employees Retirement Plan for the employees of Pier 1 Imports, Inc. or any successor tax-qualified
retirement plan, or any other Committee chosen by the Board.

2.6 Compensation

     “Compensation” for a calendar year means the sum of (i) the rate at which salary is being paid
to a Participant as of the last day of that calendar year, (ii) any bonuses actually paid to a
Participant during that calendar year excluding bonuses that were first payable during and deferred
from a previous calendar year and (iii) any bonuses that were payable to a Participant during that
calendar year which were deferred for payment to a subsequent year.

2.7 Deferred Retirement Date

     “Deferred Retirement Date” means the first day of the month coincident with or next following
the date that the Participant terminates employment with the Employer after the Participant’s
Normal Retirement Date.

2.8 Early Retirement Date

     “Early Retirement Date” means the first day of the month coincidental with or next following
the date on which a Participant terminates employment with the Employer, if such

PAGE 2 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

termination date occurs after the Participant’s attainment of age fifty-five (55) and
completion of ten (10) Years of Plan Participation.

2.9 Employer

     “Employer” means any of Pier 1, its subsidiaries, including a trust directly or indirectly
owned by Pier 1 and each of their respective successors.

2.10 Good Reason

     “Good Reason” means, without the written consent of the Participant:

     (a) A reduction in the Participant’s base salary or a reduction in the Participant’s
benefits received from the Employer (other than in connection with an across-the-board
reduction in salaries and/or benefits for similarly situated employees of the Employer or
pursuant to the Employer’s standard retirement policy), in each case as in effect
immediately prior to a Change of Control; or

     (b) The relocation of the Participant’s full-time office to a location greater than
fifty (50) miles from the Employer’s current corporate office; or

     (c) A reduction in the Participant’s corporate title as in effect immediately prior to
a Change of Control; or

     (d) The failure by the Employer to obtain the assumption of this agreement by any
successor as contemplated in this Plan.

2.11 Highest Average Compensation

     “Highest Average Compensation” means the sum of the Participant’s Compensation for his highest
paid three (3) full calendar years of employment with Employer prior to termination of employment
(whether or not such years are consecutive) divided by three (3); provided, however, that if the
Participant has been employed for less than three (3) full calendar years, the “Highest Average
Compensation” shall be determined by using the sum of the Participant’s Compensation for his number
of completed months of employment divided by the number of his actual completed months of
employment multiplied by twelve (12).

2.12 Normal Retirement Date

     “Normal Retirement Date” means the first day of the month coincidental with or next following
the date on which a Participant attains age sixty-five (65).

2.13 Participant

     “Participant” means any individual who is participating or has participated in this Plan
pursuant to Article III.

PAGE 3 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

2.14 Pier 1

     “Pier 1” means Pier 1 Imports, Inc., a Delaware corporation and its successors.

2.15 Retirement

     “Retirement” means separation from employment with the Employer at the Participant’s Normal
Retirement Date or Deferred Retirement Date or Early Retirement Date. Retirement shall also mean
the date as of which a Participant separates from employment within twenty-four (24) months of a
Change of Control of the Employer due to termination of the employment of a Participant without
regard to Years of Credited Service unless such separation is:

	 	(a)  	By the Employer for Cause; or
	 
	 	(b)  	Because of Total and Permanent Disability; or
	 
	 	(c)  	Because of the Participant’s death; or
	 
	 	(d)  	By the Participant other than:
	 
	 	   	For Good Reason; or
	 
	 	   	Upon the Participant’s voluntary separation from employment after his/her
Normal Retirement Date, Deferred Retirement Date or Early Retirement Date.

2.16 Supplemental Retirement Benefit

     “Supplemental Retirement Benefit” means the benefit determined under Article IV of this Plan.

2.17 Termination

     “Termination” means separation from employment with the Employer for any reason other than
Retirement, death or Total and Permanent Disability.

2.18 Total and Permanent Disability

     “Total and Permanent Disability” means a physical or mental condition which has resulted in
the Participant being eligible for benefits under the Employer’s group long-term disability income
plan.

2.19 Years of Credited Service

     “Years of Credited Service” means the years of credited vesting service with the Employer,
determined in accordance with the provisions of The Employees Retirement Plan of the Employer, or
any successor tax-qualified retirement plan.

PAGE 4 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

2.20 Years of Plan Participation

     “Years of Plan Participation” means the total number of full years in which a Participant has
participated in the Plan.

ARTICLE III —PARTICIPATION AND VESTING

3.1 Participation

     Participation in this Plan shall be limited to those employees of the Employer nominated by
the Chief Executive Officer of Pier 1 and approved by the Committee and by the Board, and who elect
to participate in this Plan by executing a Participation Agreement in the form designated by the
Committee.

3.2 Supplemental Retirement Benefit Vesting

     (a) Vesting Percentage. Each Participant shall become vested in a Supplemental
Retirement Plan Benefit based upon the following schedule:

	 	 	 	 	 
	 	 	Vesting	 
	Years of Credited Service	 	Percentage	 
	 
	Less than 1
	 	 	0	%
	1 but less than 2
	 	 	10	 
	2 but less than 3
	 	 	20	 
	3 but less than 4
	 	 	30	 
	4 but less than 5
	 	 	40	 
	5 but less than 6
	 	 	50	 
	6 but less than 7
	 	 	60	 
	7 but lass than 8
	 	 	70	 
	8 but less than 9
	 	 	80	 
	9 but less than 10
	 	 	90	 
	l0 or more
	 	 	100	 
	 

     (b) Prior Years of Credited Service. For purposes of this Plan, Years of Credited
Service earned prior to the May 1, 1986 date of Plan adoption by the Employer shall be
limited to five (5),

     (c) Conditions for Immediate Vesting. Regardless of a Participant’s actual Years of
Credited Service or age, a Participant shall be one hundred percent (100%) vested in a
Supplemental Retirement Benefit upon Retirement, termination of employment due to Total and
Permanent Disability, or death.

PAGE 5 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

     (d) Initial Participants. Notwithstanding anything in this Article to the contrary,
any employee of the Employer who becomes a Participant in this Plan within 30 days of the
original May 1, 1986 effective date of this Plan shall be at least fifty percent (50%)
vested in any Plan Benefits herein upon attaining age fifty-five (55).

ARTICLE IV —SUPPLEMENTAL RETIREMENT BENEFITS

4.1 Benefit

     Upon separation from employment, a Participant shall receive a Supplemental Retirement Benefit
from this Plan which, along with the Participant’s benefits from primary Social Security, shall
equal approximately fifty percent (50%) of the Participant’s Highest Average Compensation. The
computation of said Supplemental Retirement Benefit shall be made in accordance with the following
provisions of this Article IV.

4.2 Retirement; Disability; Death

     If a Participant separates from employment due to Retirement, Total and Permanent Disability,
or death prior to the commencement of benefits under this Plan, the Employer shall pay to the
Participant a Supplemental Retirement Benefit calculated as follows:

     (a) Fifty percent (50%) times the Participant’s Highest Average Compensation.

     (b) Increase the amount determined in (a) by six percent (6%) compounded annually for
fifteen (15) years.

     (c) Sum the annual amounts determined in (b).

     (d) The sum of a Participant’s primary Social Security benefit determined at the time
of and according to the laws in effect at the Participant’s Retirement date increased two
percent (2%) compounded annually for fifteen (15) years. However, if a Participant
separates from employment before the Normal Retirement Date, the primary Social Security
benefit shall be determined based upon the primary Social Security benefit the Participant
would have received at the Normal Retirement Date based upon the assumption the Participant
will receive no future compensation after the date of separation from employment and based
upon the relevant Social Security law at the time of separation from employment.

     (e) (c) offset by (d) divided by one hundred eighty (180).

4.3 Adjustments for Deferred Retirement Benefit

     If the Participant separates from employment at a Deferred Retirement Date, the Employer shall
pay to the Participant a Supplemental Retirement Benefit as calculated in paragraph 4.2 above, but
adjusted as follows:

PAGE 6 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

     (a) The percentage of Highest Average Compensation set forth in paragraph 4.2(a) shall
be increased by five (5) percentage points for each Year of Credited Service performed past
the Participant’s Normal Retirement Date, but in no event shall the increase be more than
fifteen (15) percentage points;

     (b) The calculation of Highest Average Compensation shall not take into consideration
any Compensation earned after the Participant attains age 65; and

     (c) The Participant shall forfeit twenty percent (20%) of the Supplemental Retirement
Benefit otherwise due for each Year of Credited Service performed past the Participant’s
attained age seventy (70).

4.4 Adjustments for Early Retirement Benefit

     If a Participant separates from employment at an Early Retirement Date but before his Normal
Retirement Date, the Employer shall pay to the Participant a Supplemental Retirement Benefit as
calculated under Section 4.2 above except:

     (a) The sum amount described in subsection 4.2(c) shall be reduced by five-twelfths
percent (5/12%) for each full calendar month by which the Participant’s Early Retirement
Date precedes the Participant’s attainment of age sixty-five (65); and

     (b) The offset required by subsection 4.2(d) shall be determined using the Social
Security Act in effect at Early Retirement Date and assuming zero (0) future earnings from
the Participant’s Early Retirement Date to his attainment of age sixty-five (65).

4.5 Termination

     If a Participant separates from employment due to Termination, the Employer shall pay to the
Participant the Supplemental Retirement Benefit calculated under paragraph 4.2 above, multiplied by
the vesting percentage of benefit as provided in paragraph 3.2 above.

4.6 Form of Benefit Payment

     Effective as of December 20, 1991, each Participant shall, upon becoming a Participant,
irrevocably elect in writing that his or her benefits under this Plan be paid in one of the
following forms:

     (a) Equal monthly installments paid over a period of one hundred eighty (180) months;

     (b) A lump sum;

     (c) An annuity for the life of the Participant; or

     (d) A joint and survivor annuity over the lives of Participant and the Participant’s
Beneficiary.

PAGE 7 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

     Those individuals who are already Participants on December 20, 1991, but who are not yet
receiving benefits under this Plan, shall within ten (10) days after such date irrevocably elect in
writing one of the foregoing forms for the payment of his or her benefits under this Plan. The
forms of payment specified in subparagraphs (b), (c) and (d) above shall be the actuarial and
financial equivalents of the form of payment specified in subparagraph (a) above.

     For purposes of determining actuarial equivalence, the benefits referred to in subparagraphs
(b), (c) and (d) above shall be discounted at a rate equal to the lesser of (i) the Pension Benefit
Guaranty Corporation interest rate for immediate annuities, as published in Appendix B to Part 2619
of Title 29 of the Code of Federal Regulations, or any successor or replacement rate (the “PBGC
rate”) in effect on January 1 of each year; or (ii) a twenty-four (24) month rolling average of the
PBGC rate, using the current rate as of the beginning of the month in which the calculation is made
and the twenty-three (23) previous months.

     Beginning January 1, 1996, the vested, accrued benefit shall be calculated as of January 1 of
each year for each Participant, and in no event shall the vested, accrued benefit be less than such
benefit calculated for a previous year. For example, if a Participant has elected a lump-sum
benefit and the lump-sum benefit as of January 1, 1996 is $750.000 but, due to an increase in the
discount rate, drops to $700,000 as of January 1, 1997, the Participant’s vested, accrued lump-sum
benefit as of January 1, 1997 would be $750,000.

4.7 Withholding; Payroll Taxes

     To the extent required by the law in effect at the time payments are made, the Employer shall
withhold from payments made hereunder any taxes required to be withheld from a Participant’s wages
by the federal, state or local government.

4.8 Payments

     Any benefit due under this Article shall be paid as set forth below:

     (a) Supplemental Retirement Benefits due as a result of a Participant’s Retirement
shall be paid within thirty (30) days of the earlier of the date of such Retirement or
death:

     (b) Supplemental Retirement Benefits due as a result of Termination or Total and
Permanent Disability shall be paid within thirty (30) days of the earlier of the
Participant’s attaining age sixty-five (65) or death;

     (c) Supplemental Retirement Benefits due as a result of death shall be paid within
thirty (30) days of the death of the Participant.

4.9 Payment to Guardian

     If a Plan benefit is payable to a minor or a person declared incompetent or to a person
incapable of handling the disposition of property, the Committee may direct payment of such Plan
benefit to the guardian, legal representative or person having the care and custody of such minor,
incompetent or person. The Committee may require proof of incompetency, minority,

PAGE 8 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

incapacity or guardianship as it may deem appropriate prior to distribution of the Plan
benefit. Such distribution shall completely discharge the Committee and Employer from all
liability with respect to such benefit.

4.10 Major Medical and Hospitalization Insurance Coverage

     If a Participant separates from employment by reason of Retirement or Total and Permanent
Disability, such Participant (for himself and his dependents) shall have the right to medical
benefit coverage to be provided by the Employer until the death of the Participant; provided,
however, that if the Participant is survived by a spouse, such spouse shall have the right to
continued medical coverage for a period of thirty-six months from the Employer on the same basis as
the Participant would have had if he had survived. Such coverage shall be comparable to the
Employer-provided major medical and hospitalization insurance coverage, if any, made available
generally to the Employer’s active employees and their dependents. Such coverage will only be
provided if the Participant pays, or reimburses the Employer for, a portion of the total premium
for such major medical coverage equal to the amount such Participant would have been required to
pay or reimburse the Employer had he been covered as an active employee of the Employer. Premium
payments or reimbursements required to be paid by a Participant pursuant to this Section 4.10 shall
be made by the Participant at such times and in such form as the Employer shall establish pursuant
to reasonable payment methods.

     If a Participant separates from employment for any reason other than Retirement or Total and
Permanent Disability, such Participant (for the Participant and the Participant’s dependents) shall
have the right to participate, during the fifteen (15) years immediately after the date such
Participant attains age sixty-five (65), in the Employer-provided major medical coverage, if any,
made available generally to the Employer’s active employees and their dependents; provided,
however, that such Participant pays, or reimburses the Employer for, the total premium (i.e.,
Employer and employee portions) for such major medical coverage at such times as the Employer’s
active employees pay their respective contributions for such major medical coverage.

ARTICLE V—BENEFICIARY DESIGNATION

5.1 Beneficiary Designation

     Each Participant shall have the right, at any time, to designate any person or persons as his
Beneficiary or Beneficiaries (both primary and contingent) to whom payment under this Plan shall be
paid in the event of death prior to complete distribution to the Participant of the benefits due
under the Plan. Each Beneficiary designation shall be in a written form prescribed by the
Committee and will be effective only when filed with the Committee during the Participant’s
lifetime. If a Participant’s Compensation is community property, any Beneficiary designation shall
be valid or effective only as permitted under applicable law.

5.2 Amendments

     Any Beneficiary designation may be changed by a Participant without the consent of any
designated Beneficiary by the filing of a new Beneficiary designation with the Committee. The

PAGE 9 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

filing of a new Beneficiary designation form will cancel all Beneficiary designations
previously filed.

5.3 No Beneficiary Designation

     If any Participant fails to designate a Beneficiary in the manner provided above, or if the
Beneficiary designated by a deceased Participant predeceases the Participant, the Committee, in its
discretion, shall direct the Employer to distribute such Participant’s benefits (or the balance
thereof) as follows:

     (a) To the Participant’s surviving spouse, if any; or

     (b) If the Participant shall have no surviving spouse, then to the Participant’s
children in equal shares, by right of representation; or

     (c) If the Participant shall have no surviving spouse or children, then to the
Participant’s estate.

5.4 Effect of Payment

     Payment to the Beneficiary shall completely discharge Employer’s obligations under this Plan.

5.5 Death of Beneficiary

     Following commencement of payment of Plan benefits, if the Beneficiary designated by a
deceased Participant dies before receiving complete distribution of the benefits, the Committee
shall direct the Employer to distribute the balance of such benefits:

     (a) As designated by the Beneficiary in accordance with the provisions in paragraph 5.1
above; or

     (b) If the Beneficiary shall not have made such designation, then to the Beneficiary’s
estate.

ARTICLE VI—ADMINISTRATION

6.1 Committee; Duties

     This Plan shall be administered by the Committee. Members of the Committee may be
Participants under this Plan.

6.2 Agents

     The Committee may appoint an individual to be the Committee’s agent with respect to the
day-to-day administration of the Plan. In addition, the Committee may, from time to time, employ
other agents and delegate to them such administrative duties as it sees fit, and may from time to
time consult with counsel who may be counsel to the Employer.

PAGE 10 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

6.3 Binding Effect of Decisions

     The decision or action of the Committee with respect to any question arising out of or in
connection with the administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and binding upon all persons having any interest
in the Plan.

6.4 Indemnity of Committee

     The Company shall indemnify and hold harmless the members of the Committee against any and all
claims, loss, damage, expense or liability arising from any action or failure to act with respect
to this Plan, except in the case of gross negligence or willful misconduct by the Committee.

ARTICLE VII —CLAIMS PROCEDURES

7.1 Claim

     Any person claiming a benefit, requesting an interpretation or ruling under the Plan, or
requesting information under the Plan shall present the request in writing to the Committee which
shall respond in writing as soon as practicable.

7.2 Denial of Claim

     If the claim or request is denied, the written notice of denial shall be made within ninety
(90) days of the date of receipt of such claim or request by the Committee and shall state:

 (a) The reason for denial, with specific reference to the Plan provisions on which the denial
is based.

 (b) A description of any additional material or information required and an explanation of why
it is necessary.

 (c) An explanation of the Plan’s claims review procedure.

7.3 Review of Claim

     Any person whose claim or request is denied or who has not received a response within ninety
(90) days may request review by notice given in writing to the Committee within sixty (60) days of
receiving a response or one hundred fifty (150) days from the date the claim was received by the
Committee. The claim or request shall be reviewed by the Committee who may, but shall not be
required to, grant the claimant a hearing. On review, the claimant may have representation,
examine pertinent documents, and submit issues and comments in writing.

7.4 Final Decision

     The decision on review shall normally be made within sixty (60) days after the Committee’s
receipt of a request for review. If an extension of time is required for a hearing or

PAGE 11 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

other special circumstances, the claimant shall be notified and the time shall be one hundred
twenty (120) days after the Committee’s receipt of a request for review. The decision shall be in
writing and shall state the reason and the relevant Plan provisions. All decisions on review shall
be final and bind all parties concerned.

ARTICLE VIII—TERMINATION, SUSPENSION OR AMENDMENT

8.1 Amendment or Termination

     The Board may, in its sole discretion, amend or terminate this Plan at any time, in whole or
in part; provided, however, that no such amendment or termination shall adversely affect the
benefits of Participants which have vested in accordance with paragraph 3.2 above prior to such
action, the benefits of any Participant who has previously retired, or the benefits of any
Beneficiary of a Participant who has died; provided further, however, that the amendment or
termination of this Plan shall not alter in any manner the timing or form of benefit payments under
this Plan.

8.2 Successor Employer

     The provisions of this Plan shall be binding upon and inure to the benefit of any successor or
assign of the Employer. If a successor Employer amends or terminates this Plan, no such amendment
or termination shall adversely affect the benefits of Participants which have vested in accordance
with paragraph 3.2 above prior to such action, the benefits of any Participant who has previously
retired, or the benefits of any Beneficiary of a Participant who has previously died.

ARTICLE IX—MISCELLANEOUS

9.1 Unsecured General Creditor

     Benefits to be provided under this Plan are unfunded obligations of the Employer.
Participants and their Beneficiaries, heirs, successors, and assigns shall have no secured interest
or claim in any property or assets of Employer, nor shall they be Beneficiaries of, or have any
rights, claims or interests in any life insurance policies, annuity contracts or the proceeds
therefrom owned or which may be acquired by Employer (“Policies”). Except as provided in paragraph
9.2, such Policies or other assets of Employer shall not be held under any trust for the benefit of
Participants, their Beneficiaries, heirs, successors or assigns, or be considered in any way as
collateral security for the fulfilling of the obligations of Employer under this Plan.

9.2 Trust Fund

     Employer shall be responsible for the payment of all benefits provided under the Plan. At its
discretion, Employer may establish one (1) or more trusts, with such trustees as the Board may
approve, for the purpose of providing for the payment of such benefits. Although such a trust
shall be irrevocable, its assets shall be held for payment of all Employer’s general creditors in
the event of insolvency. To the extent any benefits provided under the Plan are paid from any

PAGE 12 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

such trust, Employer shall have no further obligation to pay them. If not paid from the
trust, such benefits shall remain the obligation of Employer.

9.3 Nonassignability

     Neither a Participant nor any other person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise encumber, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or any part thereof. No part of the amounts
payable shall, prior to actual payment, be subject to seizure or sequestration for the payment of
any debts, judgments, alimony or separate maintenance owed by a Participant or any other person,
nor be transferable by operation of law in the event of a Participant’s or any other person’s
bankruptcy or insolvency.

9.4 Not a Contract of Employment

     The terms and conditions of this Plan shall not be deemed to constitute a contract of
employment between Employer and the Participant, and the Participant (or his Beneficiary) shall
have no rights against the Employer except as may otherwise be specifically provided herein.
Moreover, nothing in this Plan shall be deemed to give a Participant the right to be retained in
the service of Employer or to interfere with the right of Employer to discipline or discharge him
at any time.

9.5 Suicide

     Notwithstanding the provisions of Article IV, no benefit shall be paid to a Beneficiary if the
Participant’s death occurs as a result of suicide during the twelve (12) successive calendar months
beginning with the calendar month following the commencement of an individual’s participation in
this Plan.

9.6 Participant’s Cooperation

     A Participant will cooperate with Employer by furnishing any and all information requested by
Employer in order to facilitate the payment of benefits hereunder, and by taking such physical
examinations and such other action as may be requested by Employer.

9.7 Terms

     Whenever any words are used herein in the masculine, they shall be construed as though they
were used in the feminine in all cases where they would so apply; and wherever any words are used
herein in the singular or in the plural, they shall be construed as though they were used in the
plural or the singular, as the case may be, in all cases where they would so apply.

9.8 Captions

     The captions of the articles, sections and paragraphs of this Plan are for convenience only
and shall not control or affect the meaning or construction of any of its provisions.

PAGE 13 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

 

9.9 Governing Law

     The provisions of this Plan shall be construed and interpreted according to the laws of the
State of Delaware.

9.10 Validity

     In case any provision of this Plan shall be illegal or invalid for any reason, said illegality
or invalidity shall not affect the remaining parts hereof, but this Plan shall be construed and
enforced as if such illegal and invalid provision had never been inserted herein.

9.11 Successors

     The provisions of this Plan shall bind and inure to the benefit of Employer and its successors
and assigns. The term successors as used herein shall include any corporate or other business
entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or
substantially all of the business and assets of Employer, and successors of any such corporation or
other business entity.

9.12 Notice

     Any notice or filing required or permitted to be given to the Committee under the Plan shall
be sufficient if in writing and hand delivered, or sent by registered or certified mail, to any
member of the Committee, the President of the Employer, or the Employer’s Statutory Agent. Such
notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of
three (3) days following the date shown on the postmark or on the receipt for registration or
certification.

PIER 1 IMPORTS, INC.

	 	 	 
	By:
	 	 
	

	 	

	

	 	     E. Mitchell Weatherly
	

	 	     Executive Vice President – Human Resources

PAGE 14 – SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

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