THE BOMBAY FURNITURE COMPANY OF CANADA INC.
 
as Grantor
 

 
and
 

 
GE CANADA FINANCE HOLDING COMPANY
 
as Canadian Agent
 

 

 

 

 

 

 

 

 
AMENDED AND RESTATED
CANADIAN SECURITY AGREEMENT
MAY 25, 2007

 

 

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AMENDED AND RESTATED
CANADIAN SECURITY AGREEMENT
 
Amended and restated security agreement dated as of May 25, 2007 made by The
Bombay Furniture Company of Canada Inc., a corporation continued and existing
under the laws of the Province of Ontario (together with its successors and
permitted assigns, the “Grantor”) to and in favour of GE Canada Finance Holding
Company, individually and as agent (together with its successors and assigns,
the “Canadian Agent”) for itself and the Canadian Lenders under the Credit
Agreement.
 
RECITALS:
 

(a)  
The Borrowers, the Lenders, the Administrative Agent and the Canadian Agent are
parties to a credit agreement dated as of October 24, 2006 (as amended,
modified, extended, renewed, replaced, restated, supplemented or refinanced from
time to time, the “Credit Agreement”) pursuant to which the Lenders provided
revolving credit facilities to the Borrowers in accordance with the terms set
forth therein;

 

(b)  
In connection with the Credit Agreement, the Grantor executed and delivered in
favour of the Canadian Agent (for the benefit of the Secured Parties) a security
agreement dated as of October 24, 2006 (the “Original Security Agreement”)
pursuant to which the Grantor granted to the Canadian Agent (for the benefit of
the Secured Parties) a security interest in and to certain of the Grantor’s
personal property to secure the payment and performance by the Grantor of its
obligations under the Credit Agreement, the Original Security Agreement and the
other Loan Documents to which it is a party;

 

(c)  
The Borrowers, the Lenders, the Administrative Agent and the Canadian Agent are
parties to an amending agreement dated as of May 25, 2007 (the “Amending
Agreement”) pursuant to which the Lenders have agreed to make certain amendments
to the Credit Agreement as set forth therein;

 

(d)  
In connection with the Amending Agreement, the Grantor, the Lenders, the
Administrative Agent and the Canadian Agent have agreed to amend and restate the
Original Security Agreement to provide for such amendments on the terms set out
herein;

 

(e)  
It is a condition precedent to the effectiveness of the amendments contemplated
by the Amending Agreement that the Grantor execute and deliver this Agreement in
favour of the Canadian Agent (for the benefit of the Secured Parties); and

 

(f)  
The Grantor desires to grant a security interest in and to the Collateral (as
defined below) to the Canadian Agent (for the benefit of the Secured Parties) as
security for the payment and performance of the Grantor’s obligations under the
Credit Agreement, this Agreement and the other Loan Documents to which it is a
party.

 
In consideration of the foregoing and other good and valuable consideration, the
receipt and adequacy of which are acknowledged, the parties agree as follows.
 
 

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ARTICLE 1  
 
 
INTERPRETATION
 
Section 1.1  Defined Terms.
 
As used in this Agreement, the following terms have the following meanings:
 
“Account Debtor” means any Person who is or who may become obligated under, with
respect to, or on account of, an Account.
 
“Administrative Agent” means General Electric Capital Corporation, acting as
administrative agent and collateral agent for the Lenders under the Credit
Agreement and any successor agent appointed under the Credit Agreement, and its
successors and permitted assigns.
 
“Agreement” means this amended and restated security agreement and all schedules
attached hereto, as the same may be amended, restated, supplemented and
otherwise modified from time to time.
 
“Books” means all of the Grantor’s now owned or hereafter acquired books and
records (including all of its Records indicating, summarizing or evidencing its
assets (including the Collateral) or liabilities, all of the Grantor’s Records
relating to its business operations or financial condition, and all of the
Grantor’s goods or intangibles related to such information).
 
“Canadian Lender” means each Lender organized and operating under the laws of
Canada or a province thereof, which has a Canadian Revolving Credit Commitment,
holds Canadian Revolving Loans or participates in any Canadian Swing Loan.
 
“Collateral” has the meaning specified in Section 2.1.
 
“Collections” means all cash, cheques, credit card slips or receipts, notes,
instruments, and other items of payment (including insurance proceeds, proceeds
of cash sales, rental proceeds, and tax refunds) of the Grantor relating to,
arising out of, or forming part of, the Collateral.
 
“Contracts” means all contracts, licences and agreements to which the Grantor is
at any time a party or pursuant to which the Grantor has at any time acquired
rights, and includes (i) all rights of the Grantor to receive money due and to
become due to it in connection with a contract, licence or agreement, (ii) all
rights of the Grantor to damages arising out of, or for breach or default in
respect of, a contract, licence or agreement, and (iii) all rights of the
Grantor to perform and exercise all remedies in connection with a contract,
licence or agreement.
 
“Control Agreement” means an agreement, in form and substance satisfactory to
Canadian Agent, executed and delivered by the Grantor, the Canadian Agent, and
the applicable Securities Intermediary or bank, which agreement is sufficient to
give the Canadian Agent “control” over the subject Deposit Account or Investment
Property.
 
“Credit Agreement” has the meaning specified in the Recitals.
 
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“Deposit Account” means any chequing or other deposit account (including any
demand, time, savings, passbook, or similar account maintained with a bank).
 
“Expenses” means all expenses, costs and charges incurred by or on behalf of the
Secured Parties in connection with this Agreement, the Security Interest or the
Collateral, including all legal fees, court costs, receiver's or agent's
remuneration and other expenses of taking possession of, repairing, protecting,
insuring, preparing for disposition, realizing, collecting, selling,
transferring, delivering or obtaining payment for the Collateral, and of taking,
defending or participating in any action or proceeding in connection with any of
the foregoing matters or otherwise in connection with the Secured Parties'
interest in any Collateral, whether or not directly relating to the enforcement
of this Agreement or any other Loan Document to which the Grantor is a party.
 
“Intellectual Property” means domestic and foreign: (i) patents, applications
for patents and reissues, divisions, continuations, renewals, extensions and
continuations-in-part of patents or patent applications; (ii) proprietary and
non-public business information, including inventions (whether patentable or
not), invention disclosures, improvements, discoveries, trade secrets,
confidential information, know-how, methods, processes, designs, technology,
technical data, schematics, formulae and customer lists, and documentation
relating to any of the foregoing; (iii) copyrights, copyright registrations and
applications for copyright registration; (iv) mask works, mask work
registrations and applications for mask work registrations; (v) designs, design
registrations, design registration applications and integrated circuit
topographies; (vi) trade names, business names, corporate names, domain names,
website names and world wide web addresses, common law trade-marks, trade-mark
registrations, trade mark applications, trade dress and logos, and the goodwill
associated with any of the foregoing; (vii) computer software and programs (both
source code and object code form), all proprietary rights in the computer
software and programs and all documentation and other materials related to the
computer software and programs; and (viii) any other intellectual property and
industrial property.
 
“Instruments” means (i) a bill, note or cheque within the meaning of the Bills
of Exchange Act (Canada) or any other writing that evidences a right to the
payment of money and is of a type that in the ordinary course of business is
transferred by delivery with any necessary endorsement or assignment, or (ii) a
letter of credit and an advice of credit if the letter or advice states that it
must be surrendered upon claiming payment thereunder, or (iii) chattel paper or
any other writing that evidences both a monetary obligation and a security
interest in or a lease of specific goods, or (iv) documents of title or any
other writing that purports to be issued by or addressed to a bailee and
purports to cover such goods in the bailee’s possession as are identified or
fungible portions of an identified mass, and that in the ordinary course of
business is treated as establishing that the Person in possession of it is
entitled to receive, hold and dispose of the document and the goods it covers,
or (v) any document or writing commonly known as an instrument.
 
“Investment Property” means a Security, whether certificated or uncertificated,
Security Entitlement, Securities Account, Futures Contract or Futures Account,
and any and all supporting obligations in respect thereof.
 
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“Lease” means any lease or other agreement, no matter how styled or structured,
pursuant to which the Grantor is entitled to the use or occupancy of any space.
 
“Leasehold” means any lease, leasehold estate or interest of the Grantor in each
of the properties at or upon which the Grantor conducts business, offers any
inventory for sale, or maintains any of the Collateral, whether or not for
retail sale, together with the Grantor’s interest in any of the improvements and
fixtures located upon or appurtenant to each such estate or interest, including,
without limitation, any rights of the Grantor to payment, proceeds or value of
any kind or nature realized upon the sale, transfer or assignment of any such
estate or interest, whether or not such sale, assignment or transfer occurs
during any case commenced under any bankruptcy proceeding.
 
“Lenders” means, collectively, the financial institutions listed on the
signature pages of the Credit Agreement as Lenders, including the Canadian
Lenders, any Person who may become a Lender pursuant to the Credit Agreement,
and their respective successors and assigns.
 
“Loan Documents” means, collectively, the Credit Agreement, this Agreement and
each other Loan Document (as such term is defined in the Credit Agreement).
 
“Negotiable Collateral” means collectively, letters of credit, letter of credit
rights, instruments, promissory notes, drafts, documents of title, documents,
and chattel paper (including electronic chattel paper and tangible chattel
paper), and any and all supporting obligations in respect thereof arising from
the sale of Inventory or Accounts.
 
“Original Security Agreement” has the meaning specified the Recitals.
 
“Permits” means all permits, licences, waivers, exemptions, consents,
certificates, authorizations, approvals, franchises, rights-of-way, easements
and entitlements that the Grantor has, requires or is required to have, to own,
possess or operate any of its property or to operate and carry on any part of
its business.
 
“Person” means a natural person, partnership, limited partnership, limited
liability partnership, corporation, limited liability corporation, unlimited
liability company, joint stock company, trust, unincorporated association, joint
venture or other entity or Governmental Entity, and pronouns have a similarly
extended meaning.
 
“PPSA” means the Personal Property Security Act (Ontario), as in effect from
time to time, including any amendments thereto and any statute substituted
therefor and amendments thereto.
 
“Record” means information that is inscribed on a tangible medium or which is
stored in an electronic or other medium and is retrievable in perceivable form.
 
“Restricted Asset” has the meaning specified in Section 2.6.
 
“Secured Parties” means, collectively, the Canadian Agent and the Canadian
Lenders.
 
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“Secured Obligations” means the Obligations (as defined in the Credit Agreement)
of the Grantor including, without limitation, any and all indebtedness,
liabilities and obligations, now or hereafter existing, direct or indirect,
absolute or contingent, as principal or surety, of the Grantor to the Canadian
Agent and the other Secured Parties or any of them arising under, by virtue of
or otherwise in connection with this Agreement, the Credit Agreement or any
other Loan Document, including all Expenses incidental thereto.
 
“Securities” means:
 

(a)  
a document that is (i) issued in bearer, order or registered form, (ii) of a
type commonly dealt in upon securities exchanges or markets or commonly
recognized in any area in which it is issued or dealt in as a medium for
investment, (iii) one of a class or series or by its terms is divisible into a
class or series of documents, and (iv) evidence of a share, participation or
other interest in property or in any enterprise or is evidence of an obligation
of the issuer and includes an uncertificated security; and

 

(b)  
a share, participation or other interest in a Person.

 
“Security Interest” has the meaning specified in Section 2.2(1).
 
“U.S. Advances” means, at any time, in each case to the extent outstanding at
such time, U.S. Revolving Loans and Swing Loans made by the U.S. Lenders to the
U.S. Borrowers and the L/C Obligations for all Letters of Credit issued by GE
Capital at the request of the Parent.
 
Section 1.2  Incorporated Terms.
 
Whenever the terms “Accessions”, “Account”, “Certificated Security”, “Chattel
Paper”, “Consumer Goods”, “Document of Title”, “Equipment”, “Futures Account”,
“Futures Contract”, “Futures Intermediary”, “Goods”, “Intangible”, “Inventory”,
“Money”, “Proceeds”, “Securities Account”, “Securities Intermediary”, “Security
Entitlement” and “Uncertificated Security” are used herein, they shall be
interpreted in accordance with their respective meanings in the PPSA.
Capitalized terms used in this Agreement but not defined have the meanings given
to them in the Credit Agreement.
 
Section 1.3  No Implied Subordination.
 
Any reference herein or in any other Loan Document to a Permitted Lien is not
intended to subordinate or postpone, and shall not be interpreted as
subordinating or postponing, or as any agreement to subordinate or postpone, any
Lien created by this Agreement, or any of the other Loan Documents, to any
Permitted Lien.
 
Section 1.4  Certain Phrases, etc.
 
In this Agreement the words “including”, “includes” and “include” mean
“including (or includes or include) without limitation”. The expressions
“Article”, “Section” and other subdivision followed by a number mean and refer
to the specified Article, Section or other subdivision of this Agreement.
 
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Section 1.5  Gender and Number.
 
Any reference in this Agreement to gender includes all genders. Words importing
the singular number only include the plural and vice versa.
 
Section 1.6  Headings, etc.
 
The division of this Agreement into Articles, Sections and other subdivisions
and the insertion of headings are for convenient reference only and do not
affect its interpretation.
 
Section 1.7  Schedules.
 
The schedules attached to this Agreement form an integral part of it for all
purposes of it.
 
Section 1.8  References.
 
Any reference to this Agreement, refers to this Agreement as the same may have
been or may from time to time be amended, modified, extended, renewed, restated,
replaced or supplemented and shall include all schedules to it. Except as
otherwise provided in this Agreement, any reference in this Agreement to a
statute refers to such statute and all rules and regulations made under it as
the same may have been or may from time to time be amended or re-enacted.
 
 
ARTICLE 2  
 
 
SECURITY
 
Section 2.1  Grant of Security.
 
Subject to Section 2.6, the Grantor grants to the Canadian Agent, for the
benefit of the Secured Parties, a security interest in, and assigns, mortgages,
charges, hypothecates and pledges to the Canadian Agent, for the benefit of the
Secured Parties, all of the Grantor’s now owned or hereafter acquired right,
title and interest in and to the currently existing and hereafter acquired or
arising personal property of the Grantor, including (collectively the
“Collateral”):
 
(a)  Accounts;
 
(b)  Books;
 
(c)  Chattel Paper;
 
(d)  Contracts;
 
(e)  Deposit Accounts relating to the Collateral (it being understood and agreed
that Deposit Accounts relating to payroll obligations, tax liabilities and third
party funds shall not be deemed to relate to the Collateral);
 
(f)  Documents of Title;
 
(g)  Equipment;
 
(h)  Goods;
 
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(i)  Instruments;
 
(j)  Intangibles;
 
(k)  Intellectual Property;
 
(l)  Inventory;
 
(m)  Investment Property;
 
(n)  Leases and Leaseholds;
 
(o)  Money or other assets that now or hereafter come into the possession,
custody, or control of any Secured Party;
 
(p)  Negotiable Collateral;
 
(q)  Permits;
 
(r)  Securities;
 
(s)  all substitutions and replacements of and increases, additions and, where
applicable, accessions to the property described in Sections 2.1(a) through
2.1(r) inclusive; and
 
(t)  all Proceeds in any form derived directly or indirectly from any dealing
with all or any part of the property described in Sections 2.1(a) through 2.1(r)
inclusive, including the proceeds of such Proceeds and including proceeds of
insurance covering any and all of the foregoing, and any and all Collateral,
money, or other tangible or intangible property resulting from the sale,
exchange, collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof, wherever located.
 
Section 2.2  Secured Obligations.
 

(1)  
The security interest, assignment, mortgage, charge, hypothecation and pledge
granted by this Agreement (collectively, the “Security Interest”) secures the
due payment and performance by the Grantor of all of the Secured Obligations.
Any reference in this Agreement or in the Loan Documents to which the Grantor is
a party to the Secured Obligations shall include all amendments, changes,
extensions, modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable, both prior and subsequent to
any Insolvency Proceeding.

 

(2)  
Notwithstanding any provision to the contrary in any Loan Document, (i) all
Obligations of the Grantor under this Agreement and the other Loan Documents are
separate and individual Obligations of the Grantor from the Obligations of the
U.S. Borrowers, (ii) the Grantor shall not have any liabilities in respect of
U.S. Advances made by the U.S. Lenders to the U.S. Borrowers or in respect of
any other Obligations of the U.S. Borrowers to the Agents or Lenders arising
from or related to U.S. Advances, and (iii) the assets of the Grantor shall not
serve at any time, directly or indirectly, as security for the performance of
the U.S. Borrowers in respect of U.S. Advances, made to the U.S Borrowers.

 
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Section 2.3  Other Collateral 
 
The Grantor agrees to take the following actions at any time and solely if
proceeds or products of the Collateral constitutes any of the following:
 

(a)  
in the event that any Collateral, including Proceeds of such Collateral, is
evidenced by or consists of Negotiable Collateral, and if and to the extent that
the Canadian Agent determines that perfection or priority of the Canadian
Agent’s Security Interest is dependent on or enhanced by possession, the
Grantor, immediately upon the request of the Canadian Agent, shall endorse and
deliver physical possession of such Negotiable Collateral to the Canadian Agent
accompanied by such instruments of transfer or assignment duly executed in blank
as the Canadian Agent may from time to time specify.

 

(b)  
if the Grantor shall acquire any Certificated Securities, the Grantor shall
forthwith endorse, assign and deliver the same to the Canadian Agent,
accompanied by such instruments of transfer or assignment duly executed in blank
as the Canadian Agent may from time to time specify. If any Securities now or
hereafter acquired by the Grantor are uncertificated and are issued to the
Grantor or its nominee directly by the issuer thereof, the Grantor shall
immediately notify the Canadian Agent thereof and, at the Canadian Agent’s
request and option, either (a) cause the issuer to enter into a Control
Agreement, or (b) pursuant to an agreement in form and substance satisfactory to
the Canadian Agent, arrange for the Canadian Agent to become the registered
owner of such Securities. If any Securities, whether certificated or
uncertificated, or other Investment Property now or hereafter acquired by the
Grantor are held by the Grantor or its nominee through a Securities Intermediary
or Futures Intermediary, the Grantor shall immediately notify the Canadian Agent
thereof and, at the Canadian Agent’s request and option, either (i) cause such
Securities Intermediary or (as the case may be) Futures Intermediary to enter
into a Control Agreement, or (ii) pursuant to an agreement in form and substance
satisfactory to the Canadian Agent, in the case of financial assets or other
Investment Property held through a Securities Intermediary, arrange for the
Canadian Agent to become the entitlement holder with respect to such Investment
Property, with the Grantor being permitted, only with the consent of the
Canadian Agent, to exercise rights to withdraw or otherwise deal with such
Investment Property. The provisions of this Section 2.3(b) shall not apply to
any financial assets credited to a Securities Account for which the Canadian
Agent is the Securities Intermediary.

 

Section 2.4  
Collection of Accounts.

 
At any time after the occurrence and during the continuation of an Event of
Default, the Canadian Agent or the Canadian Agent’s designee may (a) notify
Account Debtors of the Grantor that the Grantor’s Accounts have been assigned to
the Canadian Agent or that the Canadian Agent has a security interest therein,
or (b) collect the Grantor’s Accounts directly and charge the collection costs
and expenses to the Grantor. The Grantor agrees that it will hold in trust for
the Secured Parties, as the Secured Parties’ trustee, any of its
 
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Collections that it receives without commingling the same with other funds of
the Grantor and immediately will deliver such Collections to the Canadian Agent
in their original form as received by the Grantor, together with any necessary
endorsements or assignments.
 
Section 2.5  Attachment.
 
The Grantor acknowledges that (i) value has been given, (ii) it has rights in
the Collateral (other than after-acquired Collateral), (iii) it has not agreed
to postpone the time of attachment of the Security Interest, and (iv) it has
received a duplicate original copy of this Agreement.
 
Section 2.6  Scope of Security Interest.
 

(1)  
To the extent that an assignment of amounts payable and other proceeds arising
under or in connection with, or the grant of a security interest in any
agreement, licence, permit or quota of the Grantor, or the grant of any licence
as contemplated in Section 2.7, would result in the termination of such
agreement, licence, permit or quota (each, a “Restricted Asset”), the Grantor
shall hold as trustee all proceeds arising under or in connection with the
Restricted Asset in trust for the Canadian Agent, for the benefit of the Secured
Parties, and the Security Interest will constitute a trust created in favour of
the Canadian Agent, for the benefit of the Secured Parties, on the following
basis:

 

(i)  
until the Security Interest is enforceable, the Grantor is entitled to receive
all such proceeds; and

 

(ii)  
whenever the Security Interest is enforceable, (A) all rights of the Grantor to
receive such proceeds cease and all such proceeds will be immediately paid over
to the Canadian Agent for the benefit of the Secured Parties, and (B) the
Grantor will take all actions requested by the Canadian Agent to collect and
enforce payment and other rights arising under the Restricted Asset.

 

(2)  
The Grantor will use all commercially reasonable efforts to obtain the consent
of each other party to any and all Restricted Assets to the assignment of such
Restricted Asset to the Canadian Agent in accordance with this Agreement.

 

(3)  
The Security Interest does not extend to Consumer Goods.

 

(4)  
The Security Interest does not extend or apply to the last day of the term of
any lease or sublease of real property or any agreement for a lease or sublease
of real property, now held or hereafter acquired by the Grantor, but the Grantor
will stand possessed of any such last day upon trust to assign and dispose of it
as the Canadian Agent may reasonably direct.

 

(5)  
The Canadian Agent will not seek to perfect the Security Interest in Leases and
Leaseholds absent the occurrence of an Event of Default; however, following the
occurrence and during the continuance of an Event of Default, and upon the
receipt of a written request by the Canadian Agent, the Grantor shall endeavour
to take such action as may reasonably be necessary to perfect the Security
Interest in, or obtain any necessary landlord consents in respect of, Leases and
Leaseholds.

 
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Section 2.7  Grant of Non-Exclusive Licence.
 
For the purpose of enabling the Canadian Agent to exercise its rights and
remedies under Article 3 (including, without limitation, in order to take
possession of, hold, preserve, process, assemble, prepare for sale, market for
sale, sell or otherwise dispose of the Collateral) at such time as the Canadian
Agent shall be lawfully entitled to exercise its rights and remedies under
Article 3, the Grantor hereby (i) grants to the Canadian Agent, for the benefit
of the Secured Parties, a royalty free, non-exclusive, irrevocable, worldwide
license, such license being with respect to the Canadian Agent’s exercise of its
rights and remedies under Article 3 including, without limitation, in connection
with any completion of the manufacture of Inventory or any sale or other
disposition of Inventory (a) to use, apply, and affix any trademark, trade name,
logo, or the like in which the Grantor now or hereafter has rights, (b) to use,
license or sublicense any Intellectual Property, computer software now owned,
held or hereafter acquired by the Grantor, including in such license access to
all media such and to the extent to which any of the licensed items may be
recorded or stored and to all computer software programs such and to the extent
used for the compilation or print out thereof, provided that the Canadian
Agent’s use of the property described in this Section 2.7 will comply with all
applicable law and the terms of any such right of use, and (c) to use any and
all furniture, fixtures and equipment contained in any premises owned, operated,
leased, sub-leased or otherwise occupied by the Grantor in connection with the
exercise of the Canadian Agent’s rights and remedies under Article 3, and (ii)
without limiting the provisions of Article 3, agrees to provide the Canadian
Agent and/or its agents with access to, and the right to use, any such premises
owned, operated, leased, sub-leased or otherwise occupied by the Grantor.
 
Section 2.8  Care and Custody of Collateral.
 
(1)
The Canadian Agent and the other Secured Parties have no obligation to keep
Collateral in their respective possession identifiable.

 
(2)
The Canadian Agent may, upon the occurrence and during the continuance of an
Event of Default, (i) notify any Person obligated on an account or on chattel
paper or any Grantor on an instrument to make payments to the Canadian Agent,
whether or not the Grantor was previously making collections on such accounts,
chattel paper, instruments, and (ii) assume control of any proceeds arising from
the Collateral.

 
(3)
The Canadian Agent has no obligation to collect dividends, distributions or
interest payable on, or exercise any option or right in connection with, any
Securities or Instruments. The Canadian Agent has no obligation to protect or
preserve any Securities or Instruments from depreciating in value or becoming
worthless and is released from all responsibility for any loss of value. In the
physical keeping of any Securities, the Canadian Agent is only obliged to
exercise the same degree of care as it would exercise with respect to its own
Securities kept at the same place.

 
Section 2.9  Rights of the Grantor.
 

(1)  
Until the occurrence of an Event of Default which is continuing, the Grantor is
entitled to vote the Securities that are part of the Collateral and to receive
all dividends and distributions on such Securities. Upon the occurrence and
during the continuance of an Event of Default, all rights of the Grantor to vote
(under any proxy given by the Canadian Agent (or its nominee) or otherwise) or
to receive distributions or dividends cease and all such rights become vested
solely and absolutely in the Canadian Agent.

 
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(2)  
Any distributions or dividends received by the Grantor contrary to
Section 2.9(1) or any other moneys or property received by the Grantor after the
Security Interest is enforceable will be received as trustee for the Canadian
Agent and the Secured Parties and shall be immediately paid over to the Canadian
Agent.

 
Section 2.10  Expenses.
 
The Grantor is liable for and will pay on demand by the Canadian Agent any and
all Expenses.
 
 
ARTICLE 3  
 
 
ENFORCEMENT
 
Section 3.1  Enforcement.
 
The Security Interest becomes and is enforceable against the Grantor upon the
occurrence and during the continuance of an Event of Default.
 
Section 3.2  Remedies.
 
Whenever the Security Interest is enforceable, the Canadian Agent may realize
upon the Collateral and enforce the rights of the Canadian Agent and the Secured
Parties by:
 

(a)  
entry onto any premises where Collateral consisting of tangible personal
property may be located;

 

(b)  
entry into possession of the Collateral by any method permitted by law;

 

(c)  
sale, grant of options to purchase, lease or dispose of all or any part of the
Collateral;

 

(d)  
holding, storing and keeping idle or operating all or any part of the
Collateral;

 

(e)  
exercising and enforcing all rights and remedies of a holder of the Securities
and Instruments as if the Canadian Agent were the absolute owner thereof
(including, if necessary, causing the Collateral to be registered in the name of
the Canadian Agent or its nominee if not already done);

 

(f)  
collection of any proceeds arising in respect of the Collateral;

 

(g)  
collection, realization or sale of, or other dealing with, the Accounts;

 

(h)  
license or sublicense, whether on an exclusive or nonexclusive basis, any
Intellectual Property for such term and on such conditions and in such manner as
the Canadian Agent in its sole judgment determines (taking into account such
provisions as may be necessary to protect and preserve such Intellectual
Property);

 
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(i)  
instruction to any bank which has entered into a Control Agreement with the
Canadian Agent to transfer all moneys, securities and instruments held by such
bank to an account maintained with or by the Canadian Agent;

 

(j)  
application of any moneys constituting Collateral or proceeds thereof in
accordance with Section 5.11;

 

(k)  
appointment by instrument in writing of a receiver (which term as used in this
Agreement includes a receiver and manager) or agent of all or any part of the
Collateral and removal or replacement from time to time of any receiver or
agent;

 

(l)  
institution of proceedings in any court of competent jurisdiction for the
appointment of a receiver of all or any part of the Collateral;

 

(m)  
institution of proceedings in any court of competent jurisdiction for sale or
foreclosure of all or any part of the Collateral;

 

(n)  
filing of proofs of claim and other documents to establish claims to the
Collateral in any proceeding relating to the Grantor;

 

(o)  
dealing with the Contracts and Permits or any one or more of them to the same
extent as the Grantor may do, including enforce, realize, sell, assign,
transfer, and require continued performance under or otherwise deal with any one
or more of them, all on such terms and conditions and at such time or times as
may seem advisable to the Canadian Agent; and

 

(p)  
any other remedy or proceeding authorized or permitted under the PPSA and any
other applicable statute or otherwise by contract, law or in equity.

 
Section 3.3  Additional Rights.
 
In addition to the remedies set forth in Section 3.2 and elsewhere in this
Agreement, whenever the Security Interest is enforceable, the Canadian Agent
may:
 

(a)  
require the Grantor, at the Grantor's expense, to assemble the Collateral at a
place or places designated by notice in writing and the Grantor agrees to so
assemble the Collateral immediately upon receipt of such notice;

 

(b)  
require the Grantor, by notice in writing, to disclose to the Canadian Agent the
location or locations of the Collateral and the Grantor agrees to promptly make
such disclosure when so required;

 

(c)  
repair, process, modify, complete or otherwise deal with the Collateral and
prepare for the disposition of the Collateral, whether on the premises of the
Grantor or otherwise;

 

(d)  
redeem any prior security interest against any Collateral, procure the transfer
of such security interest to itself, or settle and pass the accounts of the
prior mortgagee, chargee or encumbrancer (any accounts to be conclusive and
binding on Grantor);

 
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(e)  
pay any liability secured by any Lien against any Collateral (the Grantor will
immediately on demand reimburse the Canadian Agent for all such payments);

 

(f)  
carry on all or any part of the business of the Grantor and, to the exclusion of
all others including the Grantor, enter upon, occupy and use all or any of the
premises, buildings, and other property of or used by the Grantor for such time
as the Canadian Agent sees fit, free of charge, and the Canadian Agent and the
Secured Parties are not liable to the Grantor for any act, omission or
negligence (other than their own gross negligence or wilful misconduct) in so
doing or for any rent, charges, depreciation or damages incurred in connection
with or resulting from such action;

 

(g)  
borrow for the purpose of carrying on the business of the Grantor or for the
maintenance, preservation or protection of the Collateral and grant a security
interest in the Collateral, whether or not in priority to the Security Interest,
to secure repayment;

 

(h)  
commence, continue or defend any judicial or administrative proceedings for the
purpose of protecting, seizing, collecting, realizing or obtaining possession or
payment of the Collateral, and give good and valid receipts and discharges in
respect of the Collateral and compromise or give time for the payment or
performance of all or any part of the accounts or any other obligation of any
third party to the Grantor; and

 

(i)  
at any public sale, and to the extent permitted by law on any private sale, bid
for and purchase any or all of the Collateral offered for sale and upon
compliance with the terms of such sale, hold, retain and dispose of such
Collateral without any further accountability to the Grantor or any other Person
with respect to such holding, retention or disposition, except as required by
law. In any such sale to the Canadian Agent, the Canadian Agent may, for the
purpose of making payment for all or any part of the Collateral so purchased,
use any claim for Secured Obligations then due and payable to it as a credit
against the purchase price.

 
Section 3.4  Exercise of Remedies.
 
The remedies under Section 3.2 and Section 3.3 may be exercised from time to
time separately or in combination and are in addition to, and not in
substitution for, any other rights of the Canadian Agent and the Secured Parties
however arising or created. The Canadian Agent and the Secured Parties are not
bound to exercise any right or remedy, and the exercise of rights and remedies
is without prejudice to the rights of the Canadian Agent and the Secured Parties
in respect of the Secured Obligations including the right to claim for any
deficiency.
 
Section 3.5  Receiver's Powers.
 

(1)  
Any receiver appointed by the Canadian Agent is vested with the rights and
remedies which could have been exercised by the Canadian Agent in respect of the
Grantor or the Collateral and such other powers and discretions as are granted
in the instrument of appointment and any supplemental instruments. The identity
of the receiver, its replacement and its remuneration are within the sole and
unfettered discretion of the Canadian Agent.

 
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(2)  
Any receiver appointed by the Canadian Agent will act as agent for the Canadian
Agent for the purposes of taking possession of the Collateral, but otherwise and
for all other purposes (except as provided below), as agent for the Grantor. The
receiver may sell, lease, or otherwise dispose of Collateral as agent for the
Grantor or as agent for the Canadian Agent as the Canadian Agent may determine
in its discretion. The Grantor agrees to ratify and confirm all actions of the
receiver acting as agent for the Grantor, and to release and indemnify the
receiver in respect of all such actions save and except for any wilful
misconduct or gross negligence of such receiver.

 

(3)  
The Canadian Agent, in appointing or refraining from appointing any receiver,
does not incur liability to the receiver, the Grantor or otherwise and is not
responsible for any wilful misconduct or gross negligence of such receiver.

 
Section 3.6  Appointment of Attorney.
 
The Grantor hereby irrevocably constitutes and appoints the Canadian Agent (and
any officer of the Canadian Agent) the true and lawful attorney of the Grantor.
As the attorney of the Grantor, the Canadian Agent has the power to exercise for
and in the name of the Grantor with full power of substitution, upon the
occurrence and during the continuance of an Event of Default, any of the
Grantor's right (including the right of disposal), title and interest in and to
the Collateral including the execution, endorsement, delivery and transfer of
the Collateral to the Canadian Agent, its nominees or transferees, and the
Canadian Agent and its nominees or transferees are hereby empowered to exercise
all rights and powers and to perform all acts of ownership with respect to the
Collateral to the same extent as the Grantor might do. All acts of the attorney
are ratified and approved, and the attorney is not liable for any act, failure
to act or any other matter or thing, except for its own gross negligence or
wilful misconduct. This power of attorney is irrevocable, is coupled with an
interest, has been given for valuable consideration (the receipt and adequacy of
which is acknowledged) and survives, and does not terminate upon, the
bankruptcy, dissolution, winding up or insolvency of the Grantor. This power of
attorney extends to and is binding upon the Grantor’s successors and permitted
assigns. The Grantor authorizes the Canadian Agent to delegate in writing to
another person any power and authority of the Canadian Agent under this power of
attorney as may be necessary or desirable in the opinion of the Canadian Agent,
and to revoke or suspend such delegation.
 
Section 3.7  Dealing with the Collateral.
 

(1)  
The Canadian Agent and the Secured Parties are not obliged to exhaust their
recourse against the Grantor or any other Person or against any other security
they may hold in respect of the Secured Obligations before realizing upon or
otherwise dealing with the Collateral in such manner as the Canadian Agent may
consider desirable.

 

(2)  
The Canadian Agent and the Secured Parties may grant extensions or other
indulgences, take and give up securities, accept compositions, grant releases
and discharges and otherwise deal with the Grantor and with other Persons,
sureties or securities as they may see fit without prejudice to the Secured
Obligations, the liability of the Grantor or the rights of the Canadian Agent
and the Secured Parties in respect of the Collateral.

 

(3)  
Except as otherwise provided by law or this Agreement, the Canadian Agent and
the Secured Parties are not (i) liable or accountable for any failure to
collect, realize or obtain payment in respect of the Collateral, (ii) bound to
institute proceedings for the purpose of collecting, enforcing, realizing or
obtaining payment of the Collateral or for the purpose of preserving any rights
of any persons in respect of the Collateral, (iii) responsible for any loss
occasioned by any sale or other dealing with the Collateral or by the retention
of or failure to sell or otherwise deal with the Collateral, or (iv) bound to
protect the Collateral from depreciating in value or becoming worthless.

 
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Section 3.8  Standards of Sale.
 
Without prejudice to the ability of the Canadian Agent to dispose of the
Collateral in any manner which is commercially reasonable, the Grantor
acknowledges that:
 

(a)  
the Collateral may be disposed of in whole or in part;

 

(b)  
the Collateral may be disposed of by public auction, public tender or private
contract, with or without advertising and without any other formality;

 

(c)  
any assignee of such Collateral may be the Canadian Agent, a Secured Party or a
customer of any such Person;

 

(d)  
any sale conducted by the Canadian Agent will be at such time and place, on such
notice and in accordance with such procedures as the Canadian Agent, in its sole
discretion, may deem advantageous;

 

(e)  
the Collateral may be disposed of in any manner and on any terms necessary to
avoid violation of applicable law (including compliance with such procedures as
may restrict the number of prospective bidders and purchasers, require that the
prospective bidders and purchasers have certain qualifications, and restrict the
prospective bidders and purchasers to persons who will represent and agree that
they are purchasing for their own account for investment and not with a view to
the distribution or resale of the Collateral) or in order to obtain any required
approval of the disposition (or of the resulting purchase) by any governmental
or regulatory authority or official;

 

(f)  
a disposition of the Collateral may be on such terms and conditions as to credit
or otherwise as the Canadian Agent, in its sole discretion, may deem
advantageous; and

 

(g)  
the Canadian Agent may establish an upset or reserve bid or price in respect of
the Collateral.

 
Section 3.9  Dealings by Third Parties.
 

(1)  
No Person dealing with the Canadian Agent, any of the Secured Parties or an
agent or receiver is required to determine (i) whether the Security Interest has
become enforceable, (ii) whether the powers which such Person is purporting to
exercise have become exercisable, (iii) whether any money remains due to the
Canadian Agent or the Secured Parties by the Grantor, (iv) the necessity or
expediency of the stipulations and conditions subject to which any sale or lease
is made, (v) the propriety or regularity of any sale or other dealing by the
Canadian Agent or any Secured Party with the Collateral, or (vi) how any money
paid to the Canadian Agent or the Secured Parties has been applied.

 
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(2)  
Any bona fide purchaser of all or any part of the Collateral from the Canadian
Agent or any receiver or agent will hold the Collateral absolutely, free from
any claim or right of whatever kind, including any equity of redemption, of the
Grantor, which it specifically waives (to the fullest extent permitted by law)
as against any such purchaser together with all rights of redemption, stay or
appraisal which the Grantor has or may have under any rule of law or statute now
existing or hereafter adopted.

 
Section 3.10  Registration Rights.
 
If the Canadian Agent determines to exercise its right to sell any or all of the
Securities that are Collateral, and if in the opinion of the Canadian Agent it
is necessary or advisable to have any such Securities:
 

(a)  
qualified for distribution by prospectus pursuant to the applicable securities
legislation in any or all provinces and territories of Canada, the Grantor will
cause the issuer thereof to (i) use its best efforts to file, and obtain a
receipt from the applicable securities regulatory authorities, for a preliminary
and final prospectus offering for sale such number of Securities as the Canadian
Agent directs; and (ii) execute and deliver, and cause the directors and
officers of such issuer to execute and deliver, all such certificates,
instruments and documents, and do or cause to be done all such other acts as may
be, in the opinion of the Canadian Agent, necessary or advisable to qualify such
Securities for distribution by prospectus pursuant to the applicable securities
legislation in any or all provinces of Canada; or

 

(b)  
sold or registered under the provisions of the U.S. Securities Act of 1933, as
amended, the Grantor will cause the issuer thereof to (i) execute and deliver,
and cause the directors and officers of such issuer to execute and deliver, all
such instruments and documents, and do or cause to be done all such other acts
as may be, in the opinion of the Canadian Agent, necessary or advisable to
register the Securities pledged hereunder, or that portion thereof to be sold,
under the provisions of the U.S. Securities Act of 1933, as amended, (ii) use
its best efforts to cause the registration statement relating thereto to become
effective and to remain effective for a period of one year from the date of the
first public offering of the Securities pledged hereunder, or that portion
thereof to be sold, and (iii) make all amendments thereto and/or to the related
prospectus which, in the opinion of the Canadian Agent, are necessary or
advisable, all in conformity with the requirements of the U.S. Securities Act of
1933, as amended, and the rules and regulations applicable thereto.

 

(c)  
The Grantor agrees to cause such issuer to comply with the provisions of the
securities legislation in effect in any or all of the provinces of Canada, the
U.S. Securities Act of 1933, as amended, and the securities or “Blue Sky” laws
of any jurisdictions outside Canada, in each case, which the Canadian Agent
designates.

 
 
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ARTICLE 4  
 
 
REPRESENTATIONS, WARRANTIES AND COVENANTS
 
Section 4.1  General Representations, Warranties and Covenants.
 
The Grantor represents and warrants in all material respects and covenants and
agrees, acknowledging and confirming that the Canadian Agent and each Secured
Party is relying on such representations, warranties, covenants and agreements,
that:
 

(a)  
Ownership of Collateral. The Grantor is the sole owner of each item of the
Collateral upon which it purports to grant a Security Interest hereunder, and
has good and marketable title thereto free and clear of any and all Liens other
than Permitted Liens.

 

(b)  
Perfection and Priority. This Agreement (i) constitutes a legal, valid and
binding obligation of the Grantor, enforceable against the Grantor in accordance
with its terms subject only to bankruptcy, insolvency, reorganization,
moratorium and other similar laws of general application affecting creditors’
rights and the discretion exercisable by courts of competent jurisdiction in
respect of the availability of equitable remedies, and (ii) is effective to
create a valid and continuing Security Interest on and, upon the filing of the
appropriate financing statements, a perfected Security Interest in favour of the
Canadian Agent, for the benefit of the Secured Parties, on the Collateral with
respect to which a security interest may be perfected by filing pursuant to the
PPSA. The Security Interest is prior to all other Liens, except Permitted Liens
having priority over the Canadian Agent’s Lien by operation of law or unless
otherwise permitted by any Loan Document. Except as set forth in this Section
4.1(b), all action by the Grantor necessary or desirable to protect and perfect
such Security Interest on each item of the Collateral has been duly taken.

 

(c)  
Continuous Perfection. Schedule A sets out the Grantor's place of business or,
if more than one, the Grantor’s chief executive office. Such place of business
or chief executive office, as the case may be, has been located at such address
for the sixty days immediately preceding the date of this Agreement. Schedule A
also sets out the address at which the books and records of the Grantor are
located, the address at which senior management of the Grantor are located and
conduct their deliberations and make their decisions with respect to the
business of the Grantor and the address from which the invoices and accounts of
the Grantor are issued. The Grantor will not change the location of any of these
items, people or addresses without providing at least thirty (30) days prior
written notice to the Canadian Agent. Except for sales of inventory made in the
ordinary course of business, the Collateral, to the extent not delivered to the
Canadian Agent pursuant to Section 2.3, has been kept for the sixty days
immediately preceding the date of this Agreement and will be kept at those
locations listed on Schedule A, and the Grantor will not remove the Collateral
from such locations, without providing at least thirty (30) days prior written
notice to the Canadian Agent. The Grantor will not change its name in any manner
without providing at least thirty (30) days prior written notice to the Canadian
Agent. The Grantor has not operated under any trade name, fictitious name or
other name in the last 12 months other than The Bombay Furniture Company of
Canada Inc., La Compagnie de Mobilier Bombay du Canada Inc., The Bombay Company,
La Compagnie Bombay, Bombay, and BombayKIDS.

 
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(d)  
Enforcement. No Permit, notice to or filing with any Governmental Authority or
any other Person or any consent from any Person is required for the exercise by
the Canadian Agent of its rights provided for in this Agreement or the
enforcement of remedies in respect of the Collateral pursuant to this Agreement,
including the transfer of any Collateral, except any approvals that may be
required to be obtained from any bailees or landlords to collect the Collateral.

 

(e)  
Restriction on Disposition. The Grantor will not sell, assign, convey, exchange,
lease, release or abandon, or otherwise dispose of, any Collateral except as
expressly permitted in Section 7.5 of the Credit Agreement.

 

(f)  
Negative Pledge. The Grantor will not create or suffer to exist, any Lien on the
Collateral, except for Permitted Liens.

 

(g)  
Notice. The Grantor shall promptly notify the Canadian Agent in writing of its
acquisition of any interest hereafter in property constituting Collateral that
is of a type where a security interest or lien must be or may be registered,
recorded or filed under, or notice thereof given under, any statute or
regulation.

 

(h)  
Securities and Instruments.

 

(i)  
No Person has or will have any written or oral option, warrant, right, call,
commitment, conversion right, right of exchange or other agreement or any right
or privilege (whether by law, pre-emptive or contractual) capable of becoming an
option, warrant, right, call, commitment, conversion right, right of exchange or
other agreement to acquire any right or interest in any of the Securities and
Instruments that are Collateral.

 

(ii)  
The Securities and Instruments that are Collateral constitute, where applicable,
the legal, valid and binding obligation of the obligor of such Securities and
Instruments, enforceable in accordance with their terms, subject only to any
limitation under applicable laws relating to (x) bankruptcy, insolvency,
fraudulent conveyance, arrangement, reorganization or creditors’ rights
generally, and (y) the discretion that a court may exercise in the granting of
equitable remedies.

 

(iii)  
The pledge, assignment and delivery to the Canadian Agent of the Collateral
consisting of Certificated Securities pursuant to this Agreement creates a valid
and perfected first priority security interest in such Certificated Securities,
and the proceeds of them. Such Securities and the proceeds from them are not
subject to any prior Lien or any agreement purporting to grant to any third
party a Lien on the property or assets of the Grantor which would include the
Securities. The Canadian Agent is entitled to all the rights, priorities and
benefits afforded by the PPSA or other relevant personal property securities
legislation as enacted in any relevant jurisdiction to perfect security
interests in respect of such Collateral.

 
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(i)  
Perfection and Protection of Security Interest. The Grantor will perform,
execute and deliver, all acts, agreements and other documents requested by the
Canadian Agent at any time to register, file, signify, publish, perfect,
maintain, protect, and enforce the Security Interest including (i) executing,
recording and filing of financing or other statements, in form and substance
satisfactory to the Canadian Agent and paying all taxes, fees and other charges
payable, (ii) placing notations on its books of account to disclose the Security
Interest, and (iii) taking such other steps as are deemed necessary by the
Canadian Agent to maintain the Security Interest.

 

(j)  
Representations and Warranties of the Credit Agreement. The representations and
warranties made by the Grantor in Article IV of the Credit Agreement are true
and correct in all material respects on each date as required by Section 3.2(b)
of the Credit Agreement.

 

(k)  
Compliance with Credit Agreement. The Grantor agrees to comply with all
covenants and other provisions applicable to it under the Credit Agreement,
including Sections 2.17, 10.3 and 10.4 of the Credit Agreement.

 
 
ARTICLE 5  
 
 
GENERAL
 
Section 5.1  Notices.
 
Any notices, directions or other communications provided for in this Agreement
must be in writing and given in accordance with the Credit Agreement.
 
Section 5.2  Discharge.
 
The Security Interest will be discharged upon, but only upon, (i) full and
indefeasible payment and performance of the Secured Obligations, and (ii) the
Canadian Agent and the Secured Parties having no obligations under any Loan
Document. Upon discharge of the Security Interest and at the request and expense
of the Grantor, the Canadian Agent will execute and deliver to the Grantor such
releases, discharges, financing statements and other documents or instruments as
the Grantor may reasonably require and the Canadian Agent will redeliver to the
Grantor, or as the Grantor may otherwise direct the Canadian Agent, any
Collateral in its possession.
 
Section 5.3  No Merger, Survival of Representations and Warranties.
 
This Agreement does not operate by way of merger of any of the Secured
Obligations and no judgment recovered by the Canadian Agent or any of the
Secured Parties will operate by way of merger of, or in any way affect, the
Security Interest, which is in addition to, and not in substitution for, any
other security now or hereafter held by the Canadian Agent and the Secured
Parties in respect of the Secured Obligations.
 
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Section 5.4  Further Assurances.
 
The Grantor will do all acts and things and execute and deliver, or cause to be
executed and delivered, all documents and instruments that the Canadian Agent
may require and take all further steps relating to the Collateral or any other
property or assets of the Grantor that the Canadian Agent may require for (i)
protecting the Collateral, (ii) perfecting the Security Interest, and (iii)
exercising all powers, authorities and discretions conferred upon the Canadian
Agent. After the Security Interest becomes enforceable, the Grantor will do all
acts and things and execute and deliver all transfers, assignments and
instruments that the Canadian Agent may require for facilitating the sale or
other disposition of the Collateral in connection with its realization.
 
Section 5.5  Supplemental Security.
 
This Agreement is in addition and without prejudice to and supplemental to all
other security now held or which may hereafter be held by the Canadian Agent or
the Secured Parties.
 
Section 5.6  Successors and Assigns.
 
This Agreement is binding on the Grantor, its successors and assigns, and enures
to the benefit of the Canadian Agent and its successors and assigns. This
Agreement may be assigned by the Canadian Agent without the consent of, or
notice to, the Grantor, to such Person as the Canadian Agent may determine and,
in such event, such Person will be entitled to all of the rights and remedies of
the Canadian Agent as set forth in this Agreement or otherwise. In any action
brought by an assignee to enforce any such right or remedy, the Grantor will not
assert against the assignee any claim or defence which the Grantor now has or
may have against the Canadian Agent or any of the Secured Parties. The Grantor
may not assign, transfer or delegate any of its rights or obligations under this
Agreement without the prior written consent of the Canadian Agent which may be
unreasonably withheld.
 
Section 5.7  Amalgamation
 
The Grantor acknowledges and agrees that in the event it amalgamates with any
other corporation or corporations, it is the intention of the parties that the
Security Interest (i) extends to all of the property and undertaking that each
of the amalgamating corporations and the amalgamated corporation then has, or
thereafter acquires, any right, title, interest in and all right, title and
interest that each of the amalgamating corporations and the amalgamated
corporation then has, or thereafter acquires or has, in any property and
undertaking; and (ii) secures the payment and performance of all debts,
liabilities and obligations, present or future, direct or indirect, absolute or
contingent, matured or unmatured, at any time or from time to time due or
accruing due and owing by or otherwise payable by each of the amalgamating
corporations and the amalgamated corporation to the Secured Parties at the time
of amalgamation and any such obligations of the amalgamated corporation to the
Secured Parties arising after the amalgamation. The Security Interest attaches
to the additional collateral at the time of amalgamation and to any collateral
thereafter owned or acquired by the amalgamated corporation when such becomes
owned or is acquired. Upon any such amalgamation, the defined term “Grantor”
means, collectively, each of the amalgamating corporations and the amalgamated
corporation, the defined term “Collateral” means all of the property and
undertaking and interests described in (i) above, and the defined term “Secured
Obligations” means the obligations described in (ii) above.
 
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Section 5.8  Severability.
 
If any court of competent jurisdiction from which no appeal exists or is taken,
determines any provision of this Agreement to be illegal, invalid or
unenforceable, that provision will be severed from this Agreement and the
remaining provisions will remain in full force and effect.
 
Section 5.9  Amendment.
 
This Agreement may only be amended, supplemented or otherwise modified by
written agreement executed by the Canadian Agent (with the consent of the
Required Lenders) and the Grantor.
 
Section 5.10  Waivers, etc.
 

(1)  
No consent or waiver by the Canadian Agent or the Secured Parties in respect of
this Agreement is binding unless made in writing and signed by an authorized
officer of the Canadian Agent (with the consent of the Required Lenders). Any
consent or waiver given under this Agreement is effective only in the specific
instance and for the specific purpose for which given. No waiver of any of the
provisions of this Agreement constitutes a waiver of any other provision.

 

(2)  
A failure or delay on the part of the Canadian Agent or the Secured Parties in
exercising a right under this Agreement does not operate as a waiver of, or
impair, any right of the Canadian Agent or the Secured Parties however arising.
A single or partial exercise of a right on the part of the Canadian Agent or the
Secured Parties does not preclude any other or further exercise of that right or
the exercise of any other right by the Canadian Agent or the Secured Parties.

 
Section 5.11  Application of Proceeds of Security.
 
All monies collected by the Canadian Agent upon the enforcement of the Canadian
Agent’s or the Secured Parties’ rights and remedies under this Agreement and the
Liens created hereby, including any sale or other disposition of the Collateral,
together with all other monies received by the Canadian Agent and the Secured
Parties under this Agreement, will be applied as provided in the Credit
Agreement.  To the extent any other Loan Document requires proceeds of
collateral under such Loan Document to be applied in accordance with the
provisions of this Agreement, the Canadian Agent or holder under such other Loan
Document shall apply such proceeds in accordance with this Section.
 
Section 5.12  Conflict
 
In the event of any conflict between the provisions of this Agreement and the
provisions of the Credit Agreement which cannot be resolved by both provisions
being complied with, the provisions contained in the Credit Agreement will
prevail to the extent of such conflict.
 
Section 5.13  Governing Law; Jurisdiction
 
This Agreement will be governed by, interpreted and enforced in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable
therein. Without prejudice to the ability of the Canadian Agent to enforce this
Agreement in any other proper jurisdiction, the Grantor irrevocably submits and
attorns to the non-exclusive
 
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jurisdiction of the courts of such Province. The parties irrevocably waive any
objection (including any claim of inconvenient forum) that any of them may now
or hereafter have to the venue of any legal proceeding arising out of or
relating to this Agreement in the courts of such Province.
 
Section 5.14  Amendment and Restatement
 
This Agreement amends, restates and supersedes in its entirety, the Original
Security Agreement. All references to the Original Security Agreement in any
agreement, document or instrument that is or shall have been executed by the
Grantor and that becomes or remains effective on or after the date hereof, shall
hereafter be a reference to this Agreement.
 
[SIGNATURE PAGE FOLLOWS]
 
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IN WITNESS WHEREOF the Grantor has executed this Agreement as of the date first
above written.
 

   
THE BOMBAY FURNITURE COMPANY OF CANADA INC.,
as Grantor 
 
 
By:_________________________________________
 
   Name: Elaine Crowley
Title: Vice President
 

 

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SCHEDULE A
 
LOCATIONS OF COLLATERAL
 

 
Chief Executive Office:
 
3475 Steeles Avenue East, Brampton, Ontario L6T 5W4
 
Locations of Collateral and Places of Business:
 
See Attachment 1
 

 
Locations of Books and Records:
 
550 Bailey Avenue, Fort Worth, TX 76107
 

 
Locations of Senior Management:
 
3475 Steeles Avenue East, Brampton, Ontario L6T 5W4
 
550 Bailey Avenue, Fort Worth, TX 76107
 

 
Address from which Invoices and Accounts are sent:
 
550 Bailey Avenue, Fort Worth, TX 76107
 
3475 Steeles Avenue East, Brampton, Ontario L6T 5W4