$125,000,000
 
 
CREDIT AGREEMENT
 
Dated as of October 24, 2006
 
among
 
THE BOMBAY COMPANY, INC.
 
EACH OF ITS SUBSIDIARIES THAT ARE SIGNATORIES HERETO,
 
as Borrowers
 
THE LENDERS AND L/C ISSUERS PARTY HERETO,
 
GENERAL ELECTRIC CAPITAL CORPORATION,
 
as Administrative Agent and Collateral Agent
 
and
 
GE CANADA FINANCE HOLDING COMPANY,
 
as Canadian Agent
 
 
♦ ♦ ♦
 
 
GE CAPITAL MARKETS, INC.,
 
 
as Sole Lead Arranger and Bookrunner
 
 
 

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Page
ARTICLE I
DEFINITIONS, INTERPRETATION AND ACCOUNTING
TERMS......................................
1
Section 1.1
Defined
Terms.................................................................................................................................
1
Section 1.2
UCC
Terms......................................................................................................................................
33
Section 1.3
Accounting Terms and
Principles...............................................................................................
33
Section 1.4
Interpretation..................................................................................................................................
34
ARTICLE II
THE
FACILITIES............................................................................................................................
35
Section 2.1
Revolving Credit
Commitments....................................................................................................
35
Section 2.2
Borrowing
Procedures...................................................................................................................
37
Section 2.3
Swing
Loans....................................................................................................................................
41
Section 2.4
Letters of
Credit..............................................................................................................................
44
Section 2.5
Reduction and Termination of the
Commitments......................................................................
47
Section 2.6
Repayment of
Loans......................................................................................................................
47
Section 2.7
Optional
Prepayments...................................................................................................................
47
Section 2.8
Mandatory
Prepayments...............................................................................................................
47
Section 2.9
Interest.............................................................................................................................................
48
Section 2.10
Conversion and Continuation
Options.......................................................................................
49
Section 2.11
Fees..................................................................................................................................................
50
Section 2.12
Application of
Payments...............................................................................................................
50
Section 2.13
Payments and
Computations........................................................................................................
52
Section 2.14
Evidence of
Debt............................................................................................................................
54
Section 2.15
Suspension of Eurodollar Rate
Option.......................................................................................
55
Section 2.16
Breakage Costs; Increased Costs; Capital
Requirements........................................................
56
Section 2.17
Taxes................................................................................................................................................
57
Section 2.18
Substitution of
Lenders.................................................................................................................
59
ARTICLE III
CONDITIONS TO LOANS AND LETTERS OF
CREDIT.........................................................
60
Section 3.1
Conditions Precedent to Initial Loans and Letters of
Credit...................................................
60
Section 3.2
Conditions Precedent to Each Loan and Letter of
Credit.........................................................
63
Section 3.3
Determinations of Initial Borrowing
Conditions........................................................................
63
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES.............................................................................
63
Section 4.1
No
Encumbrances..........................................................................................................................
63
Section 4.2
Accounts.........................................................................................................................................
64
 
 
 
 
 TABLE OF CONTENTS
 
 
(Continued)
 
 
 
 
Section 4.3
Eligible
Inventory...........................................................................................................................
64
Section 4.4
Location of
Inventory....................................................................................................................
64
Section 4.5
Inventory
Records.........................................................................................................................
64
Section 4.6
Name, Jurisdiction of Incorporation; Location of Chief Executive
 
 
Office; FEIN; Organizational ID
Number....................................................................................
64
Section 4.7
Due Organization and Qualification;
Subsidiaries....................................................................
65
Section 4.8
Due Authorization; No
Conflict...................................................................................................
65
Section 4.9
Litigation..........................................................................................................................................
66
Section 4.10
No Material Adverse
Effect..........................................................................................................
66
Section 4.11
Fraudulent
Transfer.......................................................................................................................
67
Section 4.12
Canadian Benefit Plans and Canadian Pension
Plans..............................................................
67
Section 4.13
ERISA...............................................................................................................................................
67
Section 4.14
Environmental
Condition..............................................................................................................
67
Section 4.15
Brokerage
Fees...............................................................................................................................
68
Section 4.16
Intellectual
Property.......................................................................................................................
68
Section 4.17
Leases..............................................................................................................................................
68
Section 4.18
Deposit
Accounts..........................................................................................................................
68
Section 4.19
Complete
Disclosure......................................................................................................................
68
Section 4.20
Credit Card
Receipts......................................................................................................................
68
Section 4.21
Holding Company and Investment Company
Acts..................................................................
69
Section 4.22
Absence of Financing Statements,
etc.......................................................................................
69
Section 4.23
Certain
Transactions......................................................................................................................
69
Section 4.24
Regulations U and
X......................................................................................................................
69
Section 4.25
Labor
Relations...............................................................................................................................
69
Section 4.26
Indebtedness...................................................................................................................................
70
Section 4.27
Payment of
Taxes............................................................................................................................
70
Section 4.28
Foreign Assets Control Regulations,
Etc...................................................................................
70
Section 4.29
No Burdensome Obligations; No
Defaults.................................................................................
70
ARTICLE V
REPORTING
COVENANTS..........................................................................................................
71
Section 5.1
Accounting System;
Access........................................................................................................
71
Section 5.2
Collateral
Reporting........................................................................................................................
71
Section 5.3
Financial Statements, Reports,
Certificates................................................................................
71
 
 
 
 
TABLE OF CONTENTS
 
 
 (continued)   
 
 
 
 
Section 5.4
Right to Inspect; Inventories, Appraisals Audits and
Assessments....................................
73
ARTICLE VI
AFFIRMATIVE
COVENANTS.....................................................................................................
76
Section 6.1
Returns.............................................................................................................................................
76
Section 6.2
Maintenance of
Properties............................................................................................................
76
Section 6.3
Taxes.................................................................................................................................................
76
Section 6.4
Insurance.........................................................................................................................................
77
Section 6.5
Location of
Inventory....................................................................................................................
77
Section 6.6
Compliance with Laws,
Etc............................................................................................................
77
Section 6.7
Leases...............................................................................................................................................
77
Section 6.8
Existence...........................................................................................................................................
78
Section 6.9
Environmental..................................................................................................................................
78
Section 6.10
Disclosure
Updates........................................................................................................................
78
Section 6.11
Formation of
Subsidiaries..............................................................................................................
78
Section 6.12
Additional Collateral
Covenants..................................................................................................
79
Section 6.13
Investment Proceeds,
Etc..............................................................................................................
79
Section 6.14
Immediate Notice to the Administrative
Agent..........................................................................
79
Section 6.15
Inactive
Subsidiaries......................................................................................................................
80
Section 6.16
Further
Assurances........................................................................................................................
80
Section 6.17
Governing
Documents...................................................................................................................
80
Section 6.18
Deposit Accounts; Securities Accounts and Cash Collateral
Accounts..............................
81
Section 6.19
Release of Eligible Real
Property..................................................................................................
83
Section 6.20
Canadian Pension Plans and Benefit
Plans.................................................................................
83
Section 6.21
Grant of Non-Exclusive
License....................................................................................................
83
ARTICLE VII
NEGATIVE
COVENANTS.............................................................................................................
85
Section 7.1
Indebtedness...................................................................................................................................
85
Section 7.2
Liens.................................................................................................................................................
86
Section 7.3
Restrictions on Negative Pledges and Upstream
Limitation....................................................
86
Section 7.4
Restrictions on Fundamental
Changes.......................................................................................
86
Section 7.5
Disposal of Assets; Sale and
Leaseback....................................................................................
87
Section 7.6
Change Name; Change Governing
Documents..........................................................................
87
Section 7.7
Prepayments and
Amendments....................................................................................................
88
 
 
 
 
 TABLE OF CONTENTS
 
 
 (continued)
 
 
 
 
Section 7.8
Consignments..................................................................................................................................
88
Section 7.9
Distributions....................................................................................................................................
88
Section 7.10
Accounting
Methods.....................................................................................................................
89
Section 7.11
Investments,
Acquisitions............................................................................................................
89
Section 7.12
Transactions with
Affiliates..........................................................................................................
89
Section 7.13
Suspension.......................................................................................................................................
89
Section 7.14
Use of
Proceeds...............................................................................................................................
89
Section 7.15
Inventory with
Bailees....................................................................................................................
89
Section 7.16
Store Openings and
Closings........................................................................................................
90
Section 7.17
Securities
Accounts........................................................................................................................
90
Section 7.18
Deposit Accounts, Credit Card Agreements,
etc.......................................................................
90
Section 7.19
Employee Benefit
Plans..................................................................................................................
90
Section 7.20
Margin
Regulations........................................................................................................................
91
ARTICLE VIII
EVENTS OF
DEFAULT..................................................................................................................
91
Section 8.1
Definition..........................................................................................................................................
91
Section 8.2
Remedies...........................................................................................................................................
93
Section 8.3
Actions in Respect of Letters of
Credit.......................................................................................
94
ARTICLE IX
THE ADMINISTRATIVE
AGENT................................................................................................
94
Section 9.1
Appointment and
Duties...............................................................................................................
94
Section 9.2
Binding
Effect..................................................................................................................................
95
Section 9.3
Use of
Discretion.............................................................................................................................
95
Section 9.4
Delegation of Rights and
Duties...................................................................................................
96
Section 9.5
Reliance and
Liability......................................................................................................................
96
Section 9.6
Agent
Individually..........................................................................................................................
97
Section 9.7
Lender Credit
Decision...................................................................................................................
97
Section 9.8
Expenses;
Indemnities....................................................................................................................
97
Section 9.9
Resignation of Administrative Agent or L/C
Issuer..................................................................
98
Section 9.10
Release of Collateral or
Guarantors..............................................................................................
99
Section 9.11
Additional Secured
Parties............................................................................................................
99
ARTICLE X
MISCELLANEOUS.........................................................................................................................
100
Section 10.1
Amendments, Waivers,
Etc...........................................................................................................
100
 
 
 
 
 TABLE OF CONTENTS
 
 
 (continued)
 
 
 
 
Section 10.2
Assignments and Participations; Binding
Effect.......................................................................
101
Section 10.3
Costs and
Expenses........................................................................................................................
104
Section 10.4
Indemnities.......................................................................................................................................
104
Section 10.5
Survival.............................................................................................................................................
105
Section 10.6
Limitation of Liability for Certain
Damages.................................................................................
105
Section 10.7
Lender-Creditor
Relationship........................................................................................................
105
Section 10.8
Right of
Setoff..................................................................................................................................
106
Section 10.9
Sharing of Payments,
Etc...............................................................................................................
106
Section 10.10
Marshaling; Payments Set
Aside.................................................................................................
106
Section 10.11
Notices..............................................................................................................................................
107
Section 10.12
Electronic
Transmissions...............................................................................................................
109
Section 10.13
Governing
Law.................................................................................................................................
110
Section 10.14
Jurisdiction.......................................................................................................................................
110
Section 10.15
Waiver of Jury
Trial........................................................................................................................
111
Section 10.16
Severability.......................................................................................................................................
111
Section 10.17
Execution in
Counterparts..............................................................................................................
111
Section 10.18
Entire
Agreement.............................................................................................................................
111
Section 10.19
Use of
Name.....................................................................................................................................
111
Section 10.20
Non-Public Information;
Confidentiality.....................................................................................
112
Section 10.21
Judgment
Currency.........................................................................................................................
112
Section 10.22
Patriot Act
Notice............................................................................................................................
112

 
 

--------------------------------------------------------------------------------

SCHEDULES
 
Schedule I - Commitments
Schedule 4.7 -  Subsidiaries
Schedule 4.9 - Litigation
Schedule 4.14 - Environmental Condition
Schedule 4.20 - Credit Card Receipts
Schedule 5.2 - Collateral Reporting
Schedule 7.1 - Existing Indebtedness
Schedule 7.2 - Existing Liens
Schedule 7.12 - Affiliates
Schedule 7.16 - Store Openings and Closings

EXHIBITS
 
Exhibit A - Form of Assignment
Exhibit B - Form of Note
Exhibit C - Form of Notice of Borrowing
Exhibit D - Form of Swingline Request
Exhibit E - Form of L/C Request
Exhibit F - Form of Notice of Conversion or Continuation
Exhibit G - Form of Compliance Certificate
Exhibit H - Form of Guaranty and Security Agreement
Exhibit I - Borrowing Base Certificate

 

--------------------------------------------------------------------------------

This CREDIT AGREEMENT, dated as of October 24, 2006, is entered into among THE
BOMBAY COMPANY, INC., a Delaware corporation (the “Parent”), each of Parent’s
Subsidiaries identified on the signature pages hereof (such Subsidiaries,
together with Parent, are referred to hereinafter each individually, as a
“Borrower”, and collectively, as the “Borrowers”), the Lenders (as defined
below), the L/C Issuers (as defined below), GENERAL ELECTRIC CAPITAL CORPORATION
(“GE Capital”), as administrative agent and collateral agent for the Lenders and
the L/C Issuers (in such capacity, and together with its successors and
permitted assigns, the “Administrative Agent”) and GE CANADA FINANCE HOLDING
COMPANY (“GE Canada”), as Canadian agent (in such capacity, the “Canadian
Agent”).
 
The parties hereto agree as follows:
 
ARTICLE I  
 
 
DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS
 
Section 1.1  Defined Terms. As used in this Agreement, the following terms have
the following meanings:
 
“Accounts” means an “account” (as defined under the UCC) and any and all
supporting obligations in respect thereof.
 
“Account Debtor” means any Person who is or who may become obligated under, with
respect to, or on account of, an Account.
 
“Adjusted Availability” means as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount as determined by the Administrative Agent at any time, in its Permitted
Discretion, equal to the remainder of (a) the Aggregate Borrowing Base minus (b)
the sum of the U.S. Revolving Credit Outstandings and the Canadian Revolving
Credit Outstandings (in each case, determined after giving effect to all
sublimits and Reserves then applicable hereunder).
 
“Administrative Agent” means GE Capital, solely in its capacity at the
administrative agent and collateral agent for the Lenders and the L/C Issuers.
 
“Affected Lender” has the meaning specified in Section 2.18(b).
 
“Affiliate” means, as applied to any Person, any other Person who, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person; provided, however, no Secured Party shall be deemed an Affiliate of the
Group Members. For purposes of this definition, “control” means the possession,
directly or indirectly, of the power to direct the management and policies of a
Person, whether through the ownership of Stock, by contract, or otherwise;
provided, however, that, for purposes of Section 7.12 hereof: (a) any Person
which owns directly or indirectly 20% or more of the Voting Stock of a Person or
20% or more of the partnership or other ownership interests of a Person (other
than as a limited partner of such Person) shall be deemed to control such
Person; and (b) each director (or comparable manager) of a Person shall be
deemed to be an Affiliate of such Person.
 
1

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“Agent” means the Administrative Agent and the Canadian Agent or, as the context
requires, either of them.
 
“Aggregate Borrowing Base” means as of any date of determination, an amount
equal to the U.S. Borrowing Base plus the Canadian Borrowing Base.
 
“Agreement” means this Credit Agreement.
 
“Applicable Margin” means, with respect to Revolving Loans, Swing Loans,
Canadian Swing Loans and the Unused Commitment Fee, a percentage equal to (a)
during the period commencing on the Closing Date and ending 5 Business Days
after the receipt by the Administrative Agent of the Compliance Certificate for
the Fiscal Year ending January, 2007 required to be delivered pursuant to
Section 5.3, with respect to (i) Loans, Swing Loans and Canadian Swing Loans
maintained as Base Rate Loans a rate equal to 0.0% per annum and (ii) Loans
maintained as Eurodollar Rate Loans, a rate equal to 1.25% per annum and (b)
thereafter, as of each date of determination (and until the next such date of
determination), a per annum percentage equal to the per annum percentage set
forth below in the applicable column opposite the level corresponding to the
average Adjusted Availability for the most recently ended Fiscal Quarter:
 
 
LEVEL
 
 
AVERAGE ADJUSTED AVAILABILITY
 
 
BASE RATE LOANS
 
 
EURODOLLAR RATE LOANS
 
 
UNUSED COMMITMENT FEE
 
 
REVOLVING LOANS, SWING LOANS AND CANADIAN SWING LOANS
 
 
REVOLVING LOANS
 
 
I
 
 
Greater than $50,000,000
 
 
0%
 
 
1.00%
 
 
0.20%
 
 
II
 
 
Less than or equal to $50,000,000 and or greater than $35,000,000
 
 
0%
 
 
1.25%
 
 
0.20%
 
 
III
 
 
Less than or equal to $35,000,000 and or greater than $25,000,000
 
 
0%
 
 
1.50%
 
 
0.20%
 
 
IV
 
 
Less than or equal to $25,000,000
 
 
0%
 
 
1.75%
 
 
0.20%
 

Each date of determination for the “Applicable Margin” shall be the date that is
5 Business Days after delivery by the Borrower to the Administrative Agent of a
new Compliance Certificate with respect to each Fiscal Quarter pursuant to
Section 5.3. Notwithstanding anything to the contrary set forth in this
Agreement, the Applicable Margin shall equal the percentage set forth in the
appropriate column opposite Level IV in the table above, effective immediately
upon failure to deliver a Compliance Certificate pursuant to Section 5.3 until
the date immediately following the date on which the Compliance Certificate is
delivered.
 
“Appraised Value” means the fair market value as determined by an appraisal
report conforming to the Financial Institutions Reform, Recovery and Enforcement
Act of 1989, as amended, in form and substance and from independent appraisers
satisfactory to the Administrative Agent in its Permitted Discretion.
 
“Approved Customs Broker” means a customs broker selected by the Borrowers
acceptable to the Administrative Agent in its Permitted Discretion (and which
may be affiliated with one of the Lenders, the Administrative Agent or the
Canadian Agent) to perform port of entry services, to accept and process
inventory imported by a U.S. Borrower and who has executed and delivered a
customs broker agreement in form and substance satisfactory to the
Administrative Agent in its Permitted Discretion, duly executed and delivered to
the Administrative Agent by a Customs Broker and the applicable Borrower.
 
2

--------------------------------------------------------------------------------

“Approved Fund” means, with respect to any Lender, any Person (other than a
natural Person) that (a) is or will be engaged in making, purchasing, holding or
otherwise investing in commercial loans and similar extensions of credit in the
ordinary course of its business and (b) is advised or managed by (i) such
Lender, (ii) any Affiliate of such Lender or (iii) any Person (other than an
individual) or any Affiliate of any Person (other than an individual) that
administers or manages such Lender.
 
“Approved Inventory Servicer” means RGIS Inventory Specialists, Western
Inventory Service, Washington Inventory Service and any other third parties
acceptable to the Administrative Agent in its Permitted Discretion (and which
may be affiliated with one of the Lenders).
 
“Assignment” means an assignment agreement entered into by a Lender, as
assignor, and any prospective assignee thereof and accepted by the
Administrative Agent, in substantially the form of Exhibit A.
 
“Availability” means, as of any date of determination, if such date is a
Business Day, and determined at the close of business on the immediately
preceding Business Day, if such date of determination is not a Business Day, the
amount as determined by the Administrative Agent at any time, in its Permitted
Discretion equal to (a) the lesser of (i) the sum of the Maximum Revolver Amount
and the Maximum Canadian Revolver Amount and (ii) the Aggregate Borrowing Base,
minus (b) the sum of the U.S. Revolving Credit Outstandings and the Canadian
Revolving Credit Outstandings (in each case, determined after giving effect to
all sublimits and Reserves then applicable hereunder).
 
“Bailee Acknowledgment” means a record in form and substance satisfactory to the
Administrative Agent authenticated by any bailee, warehouseman or other third
party in possession of any inventory acknowledging that it holds possession of
the applicable inventory for the benefit of the Administrative Agent, on behalf
of the Secured Parties.
 
“Bankruptcy Code” means title 11 of the United States Bankruptcy Code, as in
effect from time to time.
 
“Base Rate” means, at any time, a rate per annum equal to the higher of (a) the
rate last quoted by The Wall Street Journal as the “base rate on corporate loans
posted by at least 75% of the nation’s largest banks” in the United States or,
if The Wall Street Journal ceases to quote such rate, the highest per annum
interest rate published by the Federal Reserve Board in Federal Reserve
Statistical Release H.15 (519) (Selected Interest Rates) as the “bank prime
loan” rate or, if such rate is no longer quoted therein, any similar rate quoted
therein (as determined by the Administrative Agent) or any similar release by
the Federal Reserve Board (as determined by the Administrative Agent) and (b)
the sum of 0.5% per annum and the Federal Funds Rate.
 
“Base Rate Loan” means any Loan that bears interest based on the Base Rate.
 
“Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of
ERISA) subject to Title IV of ERISA for which any Borrower or any Subsidiary or
ERISA Affiliate of any Borrower has been an “employer” (as defined in
Section 3(5) of ERISA) within the past six years.
 
3

--------------------------------------------------------------------------------

“Bombay Canada” means The Bombay Furniture Company of Canada Inc., a corporation
continued under the laws of the Province of Ontario.
 
“Bombay Office Complex” Real Property located in Tarrant County, Texas with the
legal description known as Lot 1, Block A, Bombay Addition to the City of Fort
Worth, Tarrant County, Texas, according to plat recorded in Cabinet A, Page
10625, Plat Records of Tarrant County Texas, the office buildings and
improvements thereon, the fixtures thereon and the related equipment.
 
“Books” means all of each Group Member’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 each Group Member’s
Records relating to its or their business operations or financial condition, and
all of each Group Member’s goods or general intangibles related to such
information).
 
“Borrower” has the meaning specified in the preamble.
 
“Borrowing” means a borrowing consisting of Loans (other than Swing Loans and
Loans deemed made pursuant to Section 2.3 or 2.4) made in one Facility on the
same day by the Lenders according to their respective Commitments under such
Facility.
 
“Borrowing Base” means as the context may require, the U.S. Borrowing Base,
and/or the Canadian Borrowing Base.
 
“Borrowing Base Certificate” means a certificate in the form of Exhibit I, with
respect to the Aggregate Borrowing Base and as such form may be revised from
time to time by the Administrative Agent.
 
“Business Day” means any day of the year that is not a Saturday, Sunday or a day
on which banks are required or authorized to close in New York City, New York,
the State of Texas or, in respect of any Canadian Revolving Loan or Canadian
Swing Loan, Toronto, Canada, and, when determined in connection with notices and
determinations in respect of any Eurodollar Rate or Eurodollar Rate Loan or any
funding, conversion, continuation, Interest Period or payment of any Eurodollar
Rate Loan, that is also a day on which dealings in Dollar deposits are carried
on in the London interbank market.
 
“Canadian Agent” means GE Canada, solely in its capacity as agent for the
Canadian Lenders hereunder and any other holders of Obligations related to the
Canadian Revolving Loans and the Canadian Swing Loans and any successor thereto.
 
“Canadian Benefit Plans” means any plan, fund, program, or policy, whether oral
or written, formal or informal, funded or unfunded, insured or uninsured,
providing employee benefits, including medical, hospital care, dental, sickness,
accident, disability, life insurance, pension, retirement or savings benefits,
under which Bombay Canada has any liability with respect to any employee or
former employee, but excluding any Canadian Pension Plans.
 
4

--------------------------------------------------------------------------------

“Canadian Borrowing Base” means, with respect to Bombay Canada, as of any date
of determination, an amount equal to:
 
(a)  92.5% of the Net Retail Liquidation Value of Eligible Inventory owned by
Bombay Canada; provided, however, that  during the Seasonal Period, the advance
rate shall be of 97.5% of the Net Retail Liquidation Value of Eligible Inventory
owned by Bombay Canada, plus,
 
(b)  90.0% of the face amount of Eligible Accounts of Bombay Canada, plus,
 
(c)  90.0% of the face amount of Eligible Credit Card Receivables of Bombay
Canada, minus,
 
(d)  the aggregate of such Reserves as may have been established by the
Administrative Agent.
 
“Canadian Eligible In-Transit Inventory” means inventory of Bombay Canada that
does not qualify as Eligible Inventory under clause (b) of the definition of
Eligible Inventory solely because it is not at a location in Canada set forth on
Schedule 4(b) of the Perfection Certificate or in transit among such locations
in Canada and that meets the following criteria, which criteria may be revised
by the Administrative Agent in its Permitted Discretion from time to time after
the Closing Date:
 
(a) the inventory was the subject of a Qualified Import Letter of Credit, or was
paid for in full by Bombay Canada;
 
(b) such inventory currently is in transit (whether by vessel, air, or land) to
a location set forth on Schedule 4(b) of the Perfection Certificate in Canada
that is the subject of a Bailee Acknowledgment or a Collateral Access Agreement;
 
(c) title to such inventory has passed to Bombay Canada;
 
(d) such inventory is insured against types of loss, damage, hazards, and risks,
and in amounts, satisfactory to the Administrative Agent in its Permitted
Discretion;
 
(e) Bombay Canada has provided a certificate to the Canadian Agent that
certifies that, to the best knowledge of Bombay Canada, such inventory meets all
of Bombay Canada’s representations and warranties contained in the Loan
Documents concerning Eligible Inventory, that Bombay Canada know of no reason
why such inventory would not be accepted by Bombay Canada when it arrives in
Canada, and that the shipment as evidenced by the documents conforms to the
related order documents; and
 
(f) if subject to a Qualified Import Letter of Credit, the Underlying Letter of
Credit has been drawn upon and the Underlying Issuer has honored such drawing
and the Administrative Agent has honored its obligations to the Underlying
Issuer under the applicable Qualified Import Letter of Credit.
 
“Canadian Lender” means each Lender which (a) is incorporated and operating
under the laws of Canada or a province thereof or which is an authorized foreign
bank within the meaning of Part I, section 2 of the Bank Act (Canada) and
amounts paid or credited to or by it under this Agreement and the other Loan
Documents are in respect of its Canadian banking business, and (b) has a
Canadian Revolving Credit Commitment holds Canadian Revolving Loans or
participates in any Canadian Swing Loan.
 
5

--------------------------------------------------------------------------------

“Canadian Non-Funding Lender” has the meaning specified in Section 2.2B(c).
 
“Canadian Pension Plans” means each pension plan required to be registered under
Canadian federal or provincial law that is maintained or contributed to by
Bombay Canada for its employees or former employees, but does not include the
Canada Pension Plan or the Quebec Pension Plan as maintained by the Government
of Canada or the Province of Quebec, respectively.
 
“Canadian Priority Payables” means, at any time with respect to Bombay Canada:
 
(a) the amount past due and owing by Bombay Canada, or the accrued amount for
which Bombay Canada has an obligation to remit to a Governmental Authority or
other Person pursuant to any applicable law, rule or regulation, in respect of
(i) pension fund obligations; (ii) unemployment insurance; (iii) goods and
services taxes, sales taxes, employee income taxes and other taxes payable or to
be remitted or withheld; (iv) workers’ compensation; (v) vacation pay; and (vi)
other like charges and demands; in each case, in respect of which any
Governmental Authority or other Person may claim a security interest, lien,
trust or other claim ranking or capable of ranking prior to or pari passu with
one or more of the Liens granted in the Loan Documents; and
 
(b) the amount equal to the percentage applicable to inventory in the
calculation of the Canadian Borrowing Base multiplied by the aggregate value of
the Eligible Inventory which the Administrative Agent, in good faith, considers
is or may be subject to a right of a supplier to repossess goods pursuant to
Section 81.1 of the Bankruptcy and Insolvency Act (Canada) or any applicable
laws granting revendication or similar rights to unpaid suppliers or any similar
laws of Canada or any other applicable jurisdiction, in each case, where such
supplier’s right ranks or is capable of ranking prior to or pari passu with one
or more of the Liens granted in the Loan Documents.
 
“Canadian Revolving Credit Commitment” means, with respect to each Canadian
Lender, the commitment of such Canadian Lender to make Canadian Revolving Loans
and acquire interests in other Canadian Revolving Credit Outstandings, which
commitment is in the amount set forth opposite such Canadian Lender’s name on
Schedule I under the caption “Canadian Revolving Credit Commitment”, as amended
to reflect Assignments and as such amount may be reduced pursuant to this
Agreement. The aggregate amount of the Canadian Revolving Credit Commitments on
the date hereof equals $18,000,000.
 
“Canadian Revolving Credit Facility” means the Canadian Revolving Credit
Commitments and the provisions herein related to the Canadian Revolving Loans
and Canadian Swing Loans.
 
“Canadian Revolving Credit Outstandings” means, at any time, the sum of, in each
case to the extent outstanding at such time, the aggregate principal amount of
the Canadian Revolving Loans and Canadian Swing Loans.
 
“Canadian Revolving Loan” has the meaning specified in Section 2.1B.
 
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“Canadian Security Documents” means each of the various Canadian security
agreements by and among Bombay Canada and the Canadian Agent, and any and all
acknowledgments of security, or similar agreements made in favor of the Canadian
Agent by Bombay Canada, and any agreement delivered on or after the Closing Date
(including by way of supplement to the foregoing) by any Person granting a Lien
on the assets of such Person to secure all or any part of the Obligations of, or
any bond issued by, Bombay Canada to the Canadian Agent, including, without
limitation, any security granted by Bombay Canada pursuant to the laws of the
Province of Quebec, in each case as amended, supplemented or modified from time
to time in accordance with its terms.
 
“Canadian Swing Loan” has the meaning specified in Section 2.3B(a).
 
“Canadian Swingline Commitment” means $2,000,000.
 
“Canadian Swingline Lender” means, each in its capacity as Canadian Swingline
Lender hereunder, GE Canada or, upon the resignation of GE Canada as Canadian
Agent hereunder, any Canadian Lender (or Affiliate or Approved Fund of any
Canadian Lender) that agrees, with the approval of the Canadian Agent (or, if
there is no such successor Canadian Agent, the Required Lenders) and the Parent,
to act as the Canadian Swingline Lender hereunder.
 
“Capital Lease” means, with respect to any Person, any lease of, or other
arrangement conveying the right to use, any property (whether real, personal or
mixed) by such Person as lessee that has been or should be accounted for as a
capital lease on a balance sheet of such Person prepared in accordance with
GAAP.
 
“Cash Collateral Account” means a deposit account or securities account in the
name of the Borrowers and under the sole control (as defined in the applicable
UCC) of the Administrative Agent and (a) in the case of a deposit account, from
which the Borrower may not make withdrawals except as permitted by the
Administrative Agent and (b) in the case of a securities account, with respect
to which the Administrative Agent shall be the entitlement holder and the only
Person authorized to give entitlement orders with respect thereto.
 
“Cash Dominion Event” means (a) the occurrence and continuance of any Event of
Default, or (b) the period commencing with each failure by the Borrowers to
maintain Adjusted Availability in an amount of less than (i) ten percent (10%)
of the Aggregate Borrowing Base for a period of 5 consecutive Business Days or
(ii) five percent (5%) of the Aggregate Borrowing Base at any time and, in each
case, ending with the occurrence of a Cash Dominion Reversion; provided, however
that (y) no more than 2 Cash Dominion Reversions may occur in any 12 month
period and (z) if an additional Cash Dominion Event occurs during such 12 month
period, no further Cash Dominion Reversions may occur through and including the
Scheduled Maturity Date.
 
“Cash Dominion Reversion” means that the Borrowers shall have maintained
Adjusted Availability in an amount of not less than fifteen percent (15%) of the
Aggregate Borrowing Base for a period of 30 consecutive Business Days as
evidenced by a Compliance Certificate delivered to the Administrative Agent;
provided, however that (a) no more than 2 Cash Dominion Reversions may occur in
any 12 month period and (b) if an additional Cash Dominion Event occurs during
such 12 month period, no further Cash Dominion Reversions may occur through and
including the Scheduled Maturity Date.
 
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“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within 1 year from the date of acquisition thereof, (b) marketable
direct obligations issued by any state of the United States or any political
subdivision of any such state or any public instrumentality thereof maturing
within 1 year from the date of acquisition thereof and, at the time of
acquisition, having the highest rating obtainable from either S&P or Moody’s,
(c) commercial paper maturing no more than 270 days from the date of acquisition
thereof and, at the time of acquisition, having a rating of A-2 or P-2, or
better, from S&P or Moody’s, (d) commercial notes and bonds, or variable rate
demand notes issued by any commercial institution with a rating of not less than
A, as determined by S&P or Moody’s, (e) certificates of deposit or bankers’
acceptances maturing within 1 year from the date of acquisition thereof either
(i) issued by any bank organized under the laws of the United States or any
state thereof which bank has a rating of A or A2, or better, from S&P or
Moody’s, or (ii) certificates of deposit less than or equal to $100,000 in the
aggregate issued by any other bank insured by the Federal Deposit Insurance
Corporation, (f) Eurodollar deposits, and (g) money market or other mutual funds
substantially all of whose assets comprise securities of the types described in
preceding clauses (a)-(f) above.
 
“Cash Management Bank” has the meaning specified in Section 6.18(a).
 
“CERCLA” means the United States Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. §§ 9601 et seq.).
 
“Change of Control” means (a) any “person” or “group” (within the meaning of
Sections 13(d) and 14(d) of the United States Securities and Exchange Act of
1934, as amended), becomes the beneficial owner (as defined in Rule 13d-3 under
such Exchange Act), directly or indirectly, of 50%, or more, of the Voting Stock
of Parent, or (b) a majority of the members of the Board of Directors do not
constitute Continuing Directors.
 
“Closing Date” means the first date on which any Loan is made or any Letter of
Credit is Issued.
 
“Code” means the U.S. Internal Revenue Code of 1986.
 
“Collateral” means all property and interests in property and proceeds thereof
now owned or hereafter acquired by any Loan Party in or upon which a Lien is
granted or purported to be granted pursuant to any Loan Document.
 
“Collateral Access Agreement” means a waiver or consent in form and substance
satisfactory to the Administrative Agent executed by any lessor of Real Property
leased by a Borrower (exclusive of retail store locations) or any other Person
having a Lien upon, or having rights or interests in the inventory pledged
hereunder or a Bailee Acknowledgment.
 
“Collections” means all cash, checks, 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 Borrowers.
 
“Commitment” means, with respect to any Lender, such Lender’s Revolving Credit
Commitment.
 
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“Compliance Certificate” means a certificate substantially in the form of
Exhibit G.
 
“Concentration Account” means an account designated as such on Schedule 8 of the
Perfection Certificate.
 
“Continuing Director” means (a) any member of the Board of Directors who was a
director of Parent on the Closing Date, and (b) any individual who becomes a
member of the Board of Directors after the Closing Date if such individual was
appointed or nominated for election to the Board of Directors by a majority of
the then Continuing Directors.
 
“Contractual Obligation” means, with respect to any Person, any provision of any
Security issued by such Person or of any document or undertaking (other than a
Loan Document) to which such Person is a party or by which it or any of its
property is bound or to which any of its property is subject.
 
“Control Agreement” means, with respect to any deposit account, any securities
account, commodity account, securities entitlement or commodity contract (except
for accounts designated as “Store Accounts” on Schedule 8 of the Perfection
Certificate), an agreement, in form and substance satisfactory to the
Administrative Agent, among the Administrative Agent, the financial institution
or other Person at which such account is maintained or with which such
entitlement or contract is carried and the Loan Party maintaining such account,
effective to grant “control” (as defined under the applicable UCC) over such
account to the Administrative Agent.
 
“Controlled Deposit Account” means each deposit account (including all funds on
deposit therein) that is the subject of an effective Control Agreement and that
is maintained by any Loan Party with a financial institution.
 
“Controlled Securities Account” means each securities account or commodity
account (including all financial assets held therein and all certificates and
instruments, if any, representing or evidencing such financial assets) that is
the subject of an effective Control Agreement and that is maintained by any Loan
Party with a securities intermediary or commodity intermediary.
 
“Copyrights” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to copyrights and
all mask work, database and design rights, whether or not registered or
published, all registrations and recordations thereof and all applications in
connection therewith.
 
“Corporate Chart” means a document in form reasonably acceptable to the
Administrative Agent and setting forth, as of a date set forth therein, for each
Person that is a Loan Party, that is subject to Section 6.11 or that is a
Subsidiary or joint venture of any of them, (a) the full legal name of such
Person, (b) the jurisdiction of organization and any organizational number and
tax identification number of such Person, (c) the location of such Person’s
chief executive office (or, if applicable, sole place of business) and (d) the
number of shares of each class of Stock of such Person (other than Parent)
authorized, the number outstanding and the number and percentage of such
outstanding shares for each such class owned, directly or indirectly, by any
Loan Party or any Subsidiary of any of them.
 
“Cost” means the calculated cost of purchases, as determined from invoices
received by a Borrower, such Borrower’s purchase journal or stock ledger, based
upon such Borrower’s accounting practices known to the Administrative Agent,
which practices are in effect on the date on which this Agreement was executed
or subsequently adopted with the written approval of the Administrative Agent.
“Cost” does not include the value of any capitalized costs unrelated to the
acquisitions of inventory used in the Borrowers’ calculation of cost of goods
sold, but may include other charges used in such Borrower’s determination of
cost of goods sold and bringing goods to market, all within the Administrative
Agent’s Permitted Discretion and in accordance with GAAP.
 
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“Credit Card Agreements” means those certain credit card receipts agreements,
each in form and substance reasonably satisfactory to the Administrative Agent
and each of which is among the Administrative Agent, the applicable Borrower and
the applicable Credit Card Processors.
 
“Credit Card Issuer” means collectively (a) MasterCard or Visa bank credit or
debit cards or other bank credit or debit cards issued through MasterCard
International, Inc., Visa, U.S.A., Inc. or Visa International, American Express,
Discover, and Diners Club (or their respective successors), and (b) private
label credit cards of the Borrowers; provided, however, Accounts due from
private label credit card issuers shall not be included in Eligible Credit Card
Receivables unless and until (i) the Administrative Agent has completed a review
of such Accounts, including, without limitation, any agreements between a
Borrower and a private label credit card provider, the results of which shall be
satisfactory to the Administrative Agent in its reasonable discretion, and (ii)
the Administrative Agent has notified the Parent of its consent to such
inclusion and to the amount of any Reserves which shall be taken in connection
with such inclusion. Accordingly, the Borrowers acknowledge and agree that
Accounts due from private label credit card issuers shall not be included in the
calculation of the U.S. Borrowing Base or the Canadian Borrowing Base on the
Closing Date.
 
“Credit Card Processor” means any Person that acts as a credit card
clearinghouse or processor with respect to any sales transactions involving
credit card purchases by customers using credit cards issued by any Credit Card
Issuer.
 
“Default” means any Event of Default and any event that, with the passing of
time or the giving of notice or both, would become an Event of Default.
 
“Disclosure Documents” means, collectively, (a) all confidential information
memoranda and related materials prepared in connection with the syndication of
the Facilities and (b) all other documents filed by any Group Member with the
United States Securities and Exchange Commission.
 
“Documentary Letter of Credit” means any Letter of Credit that is drawable upon
presentation of documents evidencing the sale or shipment of goods purchased by
any Borrower in the ordinary course of its business.
 
“Dollars” and the sign “$” each mean the lawful money of the United States of
America.
 
“Domestic Person” means any “United States person” under and as defined in
Section 770l(a)(30) of the Code.
 
“E-Fax” means any system used to receive or transmit faxes electronically.
 
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“Electronic Transmission” means each document, instruction, authorization, file,
information and any other communication transmitted, posted or otherwise made or
communicated by e-mail or E-Fax, or otherwise to or from an E-System or other
equivalent service.
 
“Eligible Accounts” means those Accounts created by Wholesale in the ordinary
course of its business in connection with or that arise out of its sale of goods
on a whole-sale basis, that comply with each of the representations and
warranties respecting Eligible Accounts made in the Loan Documents, and that are
not excluded as ineligible by virtue of one or more of the excluding criteria
set forth below; provided, however, that such criteria may be revised from time
to time by the Administrative Agent in the Administrative Agent’s Permitted
Discretion. In determining the amount to be included, Eligible Accounts shall be
calculated net of customer deposits and unapplied cash. Eligible Accounts shall
not include the following:
 
(a) Accounts that the Account Debtor has failed to pay within 60 days of
original invoice date or Accounts with selling terms of more than 60 days;
 
(b) Accounts owed by an Account Debtor (or its Affiliates) where 50% or more of
all Accounts owed by that Account Debtor (or its Affiliates) are deemed
ineligible under clause (a) above;
 
(c) Accounts with respect to which the Account Debtor is an Affiliate of a U.S.
Borrower or an employee or agent of a U.S. Borrower or any Affiliate of a U.S.
Borrower;
 
(d) Accounts arising in a transaction wherein goods are placed on consignment or
are sold pursuant to a guaranteed sale, a sale or return, a sale on approval, a
bill and hold, or any other terms by reason of which the payment by the Account
Debtor may be conditional;
 
(e) Accounts that are not payable in Dollars;
 
(f) Accounts with respect to which the Account Debtor either (i) does not
maintain its chief executive office in the United States, or (ii) is not
organized under the laws of the United States or any state thereof, or (iii) is
the government of any foreign country or sovereign state, or of any state,
province, municipality, or other political subdivision thereof, or of any
department, agency, public corporation, or other instrumentality thereof, unless
(y) the Account is supported by an irrevocable letter of credit satisfactory to
the Administrative Agent (as to form, substance, and issuer or domestic
confirming bank) that has been delivered to the Administrative Agent and is
directly drawable by the Administrative Agent, or (z) the Account is covered by
credit insurance in form, substance, and amount, and by an insurer, satisfactory
to the Administrative Agent;
 
(g) Accounts with respect to which the Account Debtor is either (i) the United
States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which Wholesale has complied,
to the reasonable satisfaction of the Administrative Agent, with the Assignment
of Claims Act, 31 USC § 3727), or (ii) any state of the United States;
 
(h) Accounts with respect to which the Account Debtor is a creditor of
Wholesale, has or has asserted a right of setoff, or has disputed its obligation
to pay all or any portion of the Account, to the extent of such claim, right of
setoff, or dispute;
 
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(i) Accounts with respect to an Account Debtor whose total obligations owing to
Wholesale exceed 10% (such percentage, as applied to a particular Account
Debtor, being subject to reduction by the Administrative Agent in its Permitted
Discretion if the creditworthiness of such Account Debtor deteriorates) of all
Eligible Accounts, to the extent of the obligations owing by such Account Debtor
in excess of such percentage; provided, however, that, in each case, the amount
of Eligible Accounts that are excluded because they exceed the foregoing
percentage shall be determined by the Administrative Agent based on all of the
otherwise Eligible Accounts prior to giving effect to any eliminations based
upon the foregoing concentration limit;
 
(j) Accounts with respect to which the Account Debtor is subject to an
Insolvency Proceeding, is not Solvent, has gone out of business, or as to which
Wholesale has received notice of an imminent Insolvency Proceeding or a material
impairment of the financial condition of such Account Debtor;
 
(k) Accounts, the collection of which, Agent, in its Permitted Discretion,
believes to be doubtful by reason of the Account Debtor’s financial condition;
 
(l) Accounts that are not subject to a valid and perfected first priority Lien
in favor of the Administrative Agent;
 
(m) Accounts with respect to which (i) the goods giving rise to such Account
have not been shipped and billed to the Account Debtor, or (ii) the services
giving rise to such Account have not been performed and billed to the Account
Debtor; or
 
(n) Accounts that represent the right to receive progress payments or other
advance billings that are due prior to the completion of performance by the
Wholesale of the subject contract for goods or services.
 
Notwithstanding the foregoing, that portion of the U.S. Borrowing Base
attributable to Eligible Accounts shall not exceed $5,000,000 at any time. In
addition, Eligible Accounts shall not be included in the calculation of the U.S.
Borrowing Base, unless and until (i) the Administrative Agent has completed a
review of such Accounts, the results of which shall be satisfactory to the
Administrative Agent in its reasonable discretion, and (ii) the Administrative
Agent has notified U.S. Borrower in writing of its consent to such inclusion and
to the amount of any Reserves which shall be taken in connection with such
inclusion. Accordingly, U.S. Borrowers acknowledge and agree that Eligible
Accounts shall not be included in the calculation of the U.S. Borrowing Base on
the Closing Date.
 
“Eligible Credit Card Receivables” means Accounts (other than Eligible Accounts)
due to a Borrower on a non recourse basis from a Credit Card Issuer or Credit
Card Processor arising in the ordinary course of business and net of such Credit
Card Issuer’s or Credit Card Processor’s expenses and chargebacks, which have
been earned by performance and are not deemed by the Administrative Agent, in
its Permitted Discretion, to be ineligible for inclusion in the calculation of
the Borrowing Base by virtue of one or more of the excluding criteria set forth
below. Unless otherwise approved in writing by the Administrative Agent, none of
the following shall be deemed to be Eligible Credit Card Receivables:
 
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(a) Accounts that have been outstanding for more than 5 Business Days from the
date of sale;
 
(b) Accounts with respect to which a Borrower does not have good, valid and
marketable title thereto, free and clear of any Lien (other than Liens granted
to the Administrative Agent, for its benefit and the ratable benefit of the
relevant Lenders, pursuant to the Loan Documents);
 
(c) Accounts that are not subject to a first priority security interest in favor
of the Administrative Agent, for the benefit of itself and Lenders;
 
(d) Accounts which are disputed, subject to recourse against a Borrower, or with
respect to which a claim, counterclaim, offset or chargeback has been asserted
(to the extent of such claim, counterclaim, offset or chargeback); or
 
(e) Accounts, the collection of which, the Administrative Agent, in its
Permitted Discretion, believes to be doubtful by reason of the Account Debtor’s
financial condition.
 
“Eligible Inventory” means (a) Eligible In-Transit Inventory, and (b) inventory
of the relevant Borrower consisting of finished goods held for sale in the
ordinary course of such Borrowers’ business located at one of such Borrower’s
business locations set forth on Schedule 4(b) of the Perfection Certificate (or
in-transit between any such locations), that complies with each of the
representations and warranties respecting Eligible Inventory made by such
Borrower in the Loan Documents, and that is not excluded as ineligible by virtue
of one or more of the excluding criteria set forth below, which criteria may be
fixed and revised from time to time by the Administrative Agent in its Permitted
Discretion to address the results of any audit or appraisal performed by the
Administrative Agent from time to time after the Closing Date. In determining
the value of Eligible Inventory, inventory shall be valued at the lower of Cost
or market on a basis consistent with the Borrower’s accounting practices.
 
An item of inventory (that is not Eligible In-Transit Inventory) shall not be
included in Eligible Inventory if:
 
(a) a Borrower does not have good, valid and marketable title thereto (including
inventory acquired on consignment);
 
(b) (i) in the case of the U.S. Borrowers, it is not located at one of the
locations in the United States set forth on Schedule 4(b) of the Perfection
Certificate or in transit from one such location to another such location, as
such locations are updated by the U.S. Borrowers from time to time by written
notice to the Administrative Agent, and (ii) in the case of Bombay Canada, it is
not located at one of the locations in Canada set forth on Schedule 4(b) of the
Perfection Certificate or in transit from one such location to another such
location, as such locations are updated by Bombay Canada from time to time by
written notice to the Administrative Agent;
 
(c) except with respect to inventory described in clause (b) of Section 6.5, it
is located at a warehouse, distribution center or other real property (other
than a retail store location) leased by a Borrower or in a fulfillment center or
contract warehouse, in each case, unless it is subject to a Collateral Access
Agreement executed by the lessor, fulfillment services provider or other
applicable third party;
 
(d) it is located in a contract warehouse or is otherwise stored with a bailee,
warehouseman or similar third party unless it is subject to a Bailee
Acknowledgment executed by the bailee, warehouseman, or other third party, as
the case may be, and unless it is segregated or otherwise separately
identifiable from goods of others, if any, stored on the premises;
 
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(e) it is not subject to a valid and perfected first priority security the
Administrative Agent’s Lien;
 
(f) it consists of goods returned or rejected by a Borrower’s customers unless
such goods are repackaged and saleable in the ordinary course of such Borrower’s
business; or
 
(g) other than saleable clearance goods arising in the ordinary course of
business consistent with past practice, consists of goods that are obsolete or
slow moving (for example, more than 18 months old), custom items,
work-in-process, raw materials, or goods that constitute spare parts, packaging
and shipping materials, supplies used or consumed in a Borrower’s business, bill
and hold goods, defective goods, and “seconds,” or inventory acquired on
consignment.
 
“Eligible In-Transit Inventory” means collectively, Canadian Eligible In-Transit
Inventory and U.S. Eligible In-Transit Inventory. Notwithstanding the foregoing,
that portion of the Aggregate Borrowing Base attributable to Eligible In-Transit
Inventory shall not exceed twenty percent (20%) of the Aggregate Borrowing Base
at any time.
 
“Eligible Real Property” means the Real Property consisting of the Bombay Office
Complex and which is subject to the Mortgage and a Lien in favor of the
Administrative Agent for the benefit of the relevant Secured Parties and upon
which no other Liens exist, other than Permitted Liens.
 
“Environmental Actions” means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, judicial or administrative
proceeding, judgment, letter, or other communication, each, by or from any
Governmental Authority, or any third party involving (x) violations of
Environmental Laws or (y) releases of Hazardous Materials from (a) any assets,
properties, or businesses of any Borrower or any predecessor in interest, (b)
from adjoining properties or businesses, or (c) from or onto any facilities
which received Hazardous Materials generated by any Borrower or any predecessor
in interest.
 
“Environmental Law” means any applicable federal, state, provincial, foreign or
local statute, law, rule, regulation, ordinance, code, binding and enforceable
guideline, binding and enforceable written policy or rule of common law now or
hereafter in effect and in each case as amended, or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, to the extent binding on the Borrowers,
relating to the environment, employee health and safety, or Hazardous Materials,
including CERCLA; RCRA; the Federal Water Pollution Control Act, 33 USC §1251
et seq. the Toxic Substances Control Act, 15 USC §2601 et seq. the Clean Air
Act, 42 USC §7401 et seq.; the Safe Drinking Water Act, 42 USC §3803 et seq.;
the Oil Pollution Act of 1990, 33 USC §2701 et seq.; the Emergency Planning and
the Community Right-to-Know Act of 1986, 42 USC §11001 et seq.; the Hazardous
Material Transportation Act, 49 USC §1801 et seq.; and the Occupational Safety
and Health Act, 29 USC §651 et seq. (to the extent it regulates occupational
exposure to Hazardous Materials); any state and local or foreign counterparts or
equivalents, in each case as amended from time to time.
 
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“Environmental Liabilities and Costs” means all liabilities, monetary
obligations, Remedial Actions, losses, damages, punitive damages, consequential
damages, treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts, or consultants, and costs of
investigation and feasibility studies), fines, penalties, sanctions, and
interest incurred as a result of any claim or demand by any Governmental
Authority or any third party, and which relate to any Environmental Action.
 
“Environmental Lien” means any Lien in favor of any Governmental Authority for
Environmental Liabilities and Costs.
 
“ERISA” means the United States Employee Retirement Income Security Act of 1974.
 
“ERISA Affiliate” means any Person which is under common control, or treated as
a single employer, with a Borrower under §414 of the Code.
 
“ERISA Reportable Event” means a reportable event with respect to a Guaranteed
Pension Plan within the meaning of §4043 of ERISA and the regulations
promulgated thereunder.
 
“E-Signature” means the process of attaching to or logically associating with an
Electronic Transmission an electronic symbol, encryption, digital signature or
process (including the name or an abbreviation of the name of the party
transmitting the Electronic Transmission) with the intent to sign, authenticate
or accept such Electronic Transmission.
 
“E-System” means any electronic system, including Intralinks® and any other
Internet or extranet-based site, whether such electronic system is owned,
operated or hosted by the Administrative Agent, any of its Related Persons or
any other Person, providing for access to data protected by passcodes or other
security system.
 
“Eurodollar Base Rate” means, with respect to any Interest Period for any
Eurodollar Rate Loan, the rate determined by the Administrative Agent to be the
offered rate for deposits in Dollars for the applicable Interest Period
appearing on the Dow Jones Markets Telerate Page 3750 as of 11:00 a.m. (London
time) on the second full Business Day next preceding the first day of each
Interest Period. In the event that such rate does not appear on the Dow Jones
Markets Telerate Page 3750 (or otherwise on the Dow Jones Markets screen) at
such time, the “Eurodollar Base Rate” shall be determined by reference to such
other comparable publicly available service for displaying the offered rate for
deposit in Dollars in the London interbank market as may be selected by the
Administrative Agent and, in the absence of availability, such other method to
determine such offered rate as may be selected by the Administrative Agent in
its sole discretion.
 
“Eurodollar Rate” means, with respect to any Interest Period and for any
Eurodollar Rate Loan, an interest rate per annum determined as the ratio of (a)
the Eurodollar Base Rate with respect to such Interest Period for such
Eurodollar Rate Loan to (b) the difference between the number one and the
Eurodollar Reserve Requirements with respect to such Interest Period and for
such Eurodollar Rate Loan.
 
“Eurodollar Rate Loan” means any Loan that bears interest based on the
Eurodollar Rate.
 
“Eurodollar Reserve Requirements” means, with respect to any Interest Period and
for any Eurodollar Rate Loan, a rate per annum equal to the aggregate, without
duplication, of the maximum rates (expressed as a decimal number) of reserve
requirements in effect 2 Business Days prior to the first day of such Interest
Period (including basic, supplemental, marginal and emergency reserves) under
any regulations of the Federal Reserve Board or other Governmental Authority
having jurisdiction with respect thereto dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as “eurocurrency
liabilities” in Regulation D of the Federal Reserve Board) maintained by a
member bank of the United States Federal Reserve System.
 
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“Event of Default” has the meaning specified in Section 8.1.
 
“Excluded Foreign Subsidiary” means any Subsidiary that is not a Domestic
Person.
 
“Existing Agent” means Wells Fargo Retail Finance, LLC, in its capacity as
administrative agent under the Existing Credit Agreement.
 
“Existing Credit Agreement” means that certain Credit Agreement, dated as of
September 29, 2004, as amended, among the Borrower, the institutions party
thereto as lenders and issuers and the Existing Agent.
 
“Facilities” means the U.S. Revolving Credit Facility and the Canadian Revolving
Credit Facility.
 
“Federal Funds Rate” means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as determined by the Administrative
Agent in its sole discretion.
 
“Federal Reserve Board” means the Board of Governors of the United States
Federal Reserve System and any successor thereto.
 
“Fee Letter” means the letter agreement, dated as of September 14, 2006,
addressed to the Parent from the Administrative Agent and accepted by the
Parent, with respect to certain fees to be paid from time to time to the
Administrative Agent and its Related Persons.
 
“FEIN” means Federal Employer Identification Number.
 
“Financial Statement” means each financial statement delivered pursuant to
Sections 4.10 and 5.3.
 
“Fiscal Period” means one of three fiscal periods in a Fiscal Quarter, the first
of such periods comprised of four weeks, the second of such periods comprised of
five weeks, and the third of such periods comprised of four weeks, with each of
the weeks in a Fiscal Quarter ending on the close of business on a Saturday
(except that the last fiscal period in the last Fiscal Quarter of a 53 week year
shall be five weeks). There are twelve Fiscal Periods in a Fiscal Year.
 
“Fiscal Quarter” means one of four thirteen or fourteen week quarters in a
Fiscal Year, with the first of such quarters beginning on the first day of a
Fiscal Year and ending on the Saturday of the last week in such quarter.
 
“Fiscal Year” means the fifty-two or fifty-three week period ending on the
Saturday closest to the last day of January of any calendar year.
 
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“GAAP” means generally accepted accounting principles in the United States of
America, as in effect from time to time, set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants, in the statements and pronouncements of the
Financial Accounting Standards Board and in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession that are applicable to the circumstances as of the date of
determination. Subject to Section 1.3, all references to “GAAP” shall be to GAAP
applied consistently with the principles used in the preparation of the
Financial Statements described in Sections 4.10 and 5.3.
 
“GE Canada” has the meaning specified in the preamble.
 
“GE Capital” has the meaning specified in the preamble.
 
“Governmental Authority” means any nation, sovereign or government, any state,
province or other political subdivision thereof, any agency, authority or
instrumentality thereof and any entity or authority exercising executive,
legislative, taxing, judicial, regulatory or administrative functions of or
pertaining to government, including any central bank regulatory body,
arbitrator, public sector entity, supra-national entity (including the European
Union and the European Central Bank) and any self-regulatory organization
(including the National Association of Insurance Commissioners).
 
“Governing Documents” means, with respect to any Person, collectively and, in
each case, together with any modification of any term thereof, (a) the articles
of incorporation, certificate of incorporation, constitution or certificate of
formation of such Person, (b) the bylaws, operating agreement or joint venture
agreement of such Person, (c) any other constitutive, organizational or
governing document of such Person, whether or not equivalent, and (d) any other
document setting forth the manner of election or duties of the directors,
officers or managing members of such Person or the designation, amount or
relative rights, limitations and preferences of any Stock of such Person.
 
“Group Members” means, collectively, any Borrower and its Subsidiaries.
 
“Guaranteed Pension Plan” means any employee pension benefit plan within the
meaning of §3(2) of ERISA maintained or contributed to by any Borrower or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
 
“Guarantor” means each Wholly Owned Subsidiary of the Borrower party to the
Guaranty and Security Agreement and each other Person that enters into any
Guaranty Obligation with respect to any Obligation of any Loan Party; provided,
that an Excluded Foreign Subsidiary shall not guaranty the Obligations of the
U.S. Borrowers.
 
“Guaranty and Security Agreement” means a guaranty and security agreement, in
substantially the form of Exhibit H, among the Administrative Agent, the U.S.
Borrowers and other Guarantors from time to time party thereto.
 
“Guaranty Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of such Person for any Indebtedness, lease,
dividend or other obligation (the “primary obligation”) of another Person (the
“primary obligor”), if the purpose or intent of such Person in incurring such
liability, or the economic effect thereof, is to guarantee such primary
obligation or provide support, assurance or comfort to the holder of such
primary obligation or to protect or indemnify such holder against loss with
respect to such primary obligation, including (a) the direct or indirect
guaranty, endorsement (other than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of any primary obligation, (b) the incurrence of reimbursement
obligations with respect to any letter of credit or bank guarantee in support of
any primary obligation, (c) the existence of any Lien, or any right, contingent
or otherwise, to receive a Lien, on the property of such Person securing any
part of any primary obligation and (d) any liability of such Person for a
primary obligation through any Contractual Obligation (contingent or otherwise)
or other arrangement (i) to purchase, repurchase or otherwise acquire such
primary obligation or any security therefor or to provide funds for the payment
or discharge of such primary obligation (whether in the form of a loan, advance,
stock purchase, capital contribution or otherwise), (ii) to maintain the
solvency, working capital, equity capital or any balance sheet item, level of
income or cash flow, liquidity or financial condition of any primary obligor,
(iii) to make take-or-pay or similar payments, if required, regardless of
non-performance by any other party to any Contractual Obligation, (iv) to
purchase, sell or lease (as lessor or lessee) any property, or to purchase or
sell services, primarily for the purpose of enabling the primary obligor to
satisfy such primary obligation or to protect the holder of such primary
obligation against loss or (v) to supply funds to or in any other manner invest
in, such primary obligor (including to pay for property or services irrespective
of whether such property is received or such services are rendered); provided,
however, that “Guaranty Obligations” shall not include (x) endorsements for
collection or deposit in the ordinary course of business and (y) product
warranties given in the ordinary course of business. The outstanding amount of
any Guaranty Obligation shall equal the outstanding amount of the primary
obligation so guaranteed or otherwise supported or, if lower, the stated maximum
amount for which such Person may be liable under such Guaranty Obligation.
 
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“Hazardous Material” means (a) substances that are defined or listed in, or
otherwise classified pursuant to, any applicable laws or regulations as
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic
substances,” or any other formulation intended to define, list, or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP
toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas,
natural gas liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of crude oil,
natural gas, or geothermal resources, (c) any flammable substances or explosives
or any radioactive materials, and (d) asbestos in any form or electrical
equipment that contains any oil or dielectric fluid containing levels of
polychlorinated biphenyls in excess of 50 parts per million.
 
“Hedging Agreement” means any Interest Rate Contract, foreign exchange, swap,
option or forward contract, spot, cap, floor or collar transaction, any other
derivative instrument and any other similar speculative transaction and any
other similar agreement or arrangement designed to alter the risks of any Person
arising from fluctuations in any underlying variable.
 
“Indebtedness” means, as to any Person means, without duplication: (a) all
obligations for borrowed money, (b) all obligations evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement or other
obligations in respect of letters of credit, bankers acceptances, interest rate
swaps, or other financial products, (c) all obligations as a lessee under
Capital Leases, (d) all obligations or liabilities of others secured by a Lien
on any asset of a Person or its Subsidiaries, irrespective of whether such
obligation or liability is assumed, (e) all obligations to pay the deferred
purchase price of assets (other than trade payables incurred in the ordinary
course of business), (f) all obligations owing under Hedging Agreements or
similar agreements, (g) all sales by such Person of (i) accounts or general
intangibles for money due or to become due, (ii) chattel paper, instruments or
documents creating or evidencing a right to payment of money, or (iii) other
receivables (collectively “receivables”), whether pursuant to a purchase
facility or otherwise, other than in connection with the disposition of the
business operations of such Person relating thereto or a disposition of
defaulted receivables for collection and not as a financing arrangement, and
together with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith, (h) every obligation of such Person (an “equity related purchase
obligation”) to purchase, redeem, retire or otherwise acquire for value any
shares of Stock issued by such Person or any rights measured by the value of
such Stock, (i) every obligation in respect of Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent that such Person is liable therefor as a result of such Person’s
ownership interest in or other relationship with such entity, except to the
extent that the terms of such Indebtedness provide that such Person is not
liable therefor and such terms are enforceable under applicable law, (j) any
obligation guaranteeing or intended to guarantee (whether directly or indirectly
guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation
of any other Person that constitutes Indebtedness under any of clauses (a)
through (i) above, and (k) every obligation of such Person under any Synthetic
Lease.
 
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“Indemnified Matter” has the meaning specified in Section 10.4.
 
“Indemnitee” has the meaning specified in Section 10.4.
 
“Initial Projections” means those financial projections, dated August 24, 2006
covering the Fiscal Years ending in January 2007 and January 2008 and delivered
to the Administrative Agent by the Borrower prior to the date hereof.
 
“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of the Bankruptcy Code, the Bankruptcy and Insolvency Act
(Canada), the Companies’ Creditors Arrangement Act (Canada), or under any other
state or federal bankruptcy or insolvency law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally or
with creditors, or proceedings seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, or other similar relief.
 
“Intellectual Property” means all rights, title and interests in or relating to
intellectual property and industrial property arising under any Requirement of
Law and all IP Ancillary Rights relating thereto, including all Copyrights,
Patents, Trademarks, Internet Domain Names, Trade Secrets and IP Licenses.
 
“Interest Period” means, with respect to any Eurodollar Rate Loan, the period
commencing on the date such Eurodollar Rate Loan is made or converted to a
Eurodollar Rate Loan or, if such loan is continued, on the last day of the
immediately preceding Interest Period therefor and, in each case, ending 7 days
or 1, 2, 3 or 6 months thereafter, as selected by the Borrower pursuant hereto;
provided, however, that (a) if any Interest Period would otherwise end on a day
that is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day, unless the result of such extension would be to extend
such Interest Period into another such Business Day falls in the next calendar
month, in which case such Interest Period shall end on the immediately preceding
Business Day, (b) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month, (c) the Borrower may not select any Interest
Period for Eurodollar Rate Loans ending after the Scheduled Maturity Date, (d)
the Borrower may not select any Interest Period in respect of Eurodollar Rate
Loans having an aggregate principal amount of less than $1,000,000 and (e) there
shall be outstanding at any one time no more than 10 Interest Periods.
 
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“Interest Rate Contracts” means all interest rate swap agreements, interest rate
cap agreements, interest rate collar agreements and interest rate insurance.
 
“Internet Domain Names” means all rights, title and interests (and all related
IP Ancillary Rights) arising under any Requirement of Law in or relating to
Internet domain names.
 
“Inventory Reserves” means such reserves as may be established from time to time
by Administrative Agent in its Permitted Discretion with respect to the
determination of the saleability, at retail, of the Eligible Inventory or which
reflect such other factors as affect the market value of the Eligible Inventory.
Without limiting the generality of the foregoing, Inventory Reserves may include
(but are not limited to) (a) reserves based on obsolescence or inventory
shrinkage, (b) the estimated reclamation claims of unpaid sellers of inventory
sold to a Borrower, (c) change in inventory character, composition or mix, (d)
imbalance of inventory, retail markdowns or markups inconsistent with prior
period practice and performance, current business plans, or advertising calendar
and planned advertising events, (e) the change in the Net Retail Liquidation
Value of the inventory, or (f) as reasonably required by the Administrative
Agent to protect Collateral value based upon changes to the ordinary course of
business of the Borrowers.
 
“Investment” means, with respect to any Person, any investment by such Person in
any other Person (including Affiliates) in the form of loans, guarantees,
advances, or capital contributions (excluding (a) commission, travel, and
similar advances to officers and employees of such Person made in the ordinary
course of business, and (b) bona fide Accounts arising in the ordinary course of
business consistent with past practice), purchases or other acquisitions of
Indebtedness, Stock, or all or substantially all of the assets of such other
Person (or of any division or business line of such other Person), and any other
items that are or would be classified as investments on a balance sheet prepared
in accordance with GAAP.
 
“IP Ancillary Rights” means, with respect to any other Intellectual Property, as
applicable, all foreign counterparts to, and all divisionals, reversions,
continuations, continuations-in-part, reissues, reexaminations, renewals and
extensions of, such Intellectual Property and all income, royalties, proceeds
and Liabilities at any time due or payable or asserted under or with respect to
any of the foregoing or otherwise with respect to such Intellectual Property,
including all rights to sue or recover at law or in equity for any past, present
or future infringement, misappropriation, dilution, violation or other
impairment thereof, and, in each case, all rights to obtain any other IP
Ancillary Right.
 
“IP License” means all Contractual Obligations (and all related IP Ancillary
Rights), whether written or oral, granting any right title and interest in or
relating to any Intellectual Property.
 
“IRS” means the Internal Revenue Service of the United States and any successor
thereto.
 
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“Issue” means, with respect to any Letter of Credit, to issue, extend the
expiration date of, renew (including by failure to object to any automatic
renewal on the last day such objection is permitted), increase the face amount
of, or reduce or eliminate any scheduled decrease in the face amount of, such
Letter of Credit, or to cause any Person to do any of the foregoing. The terms
“Issued” and “Issuance” have correlative meanings.
 
“ITA” means the Income Tax Act (Canada).
 
“L/C Cash Collateral Account” means any Cash Collateral Account (a) specifically
designated as such by the Borrower in a notice to the Administrative Agent and
(b) from and after the effectiveness of such notice, not containing any funds
other than those required under the Loan Documents to be placed therein.
 
“L/C Issuer” means (a) GE Capital or any of its Affiliates and (b) each Person
that hereafter becomes an L/C Issuer with the approval of, and pursuant to an
agreement with and in form and substance satisfactory to, the Administrative
Agent and the Borrower, in each case in their capacity as L/C Issuers hereunder
and together with their successors.
 
“L/C Obligations” means, for any Letter of Credit at any time, the sum of, each
expressed in Dollars, (a) the L/C Reimbursement Obligations at such time for
such Letter of Credit and (b) the aggregate maximum undrawn face amount of such
Letter of Credit outstanding at such time.
 
“L/C Reimbursement Agreement” has the meaning specified in Section 2.4(a).
 
“L/C Reimbursement Date” has the meaning specified in Section 2.4(e).
 
“L/C Reimbursement Obligation” means, for any Letter of Credit, the obligation
of the Borrower to the L/C Issuer thereof, as and when matured, to pay all
amounts drawn under such Letter of Credit in Dollars or other applicable
currency.
 
“L/C Request” has the meaning specified in Section 2.4(b).
 
“L/C Sublimit” means $75,000,000.
 
“L/C Undertaking” means the L/C Issuer’s commitment to issue Letters of Credit
for the account of U.S. Borrowers under Section 2.4(a) or to acquire
participations under Section 2.4(c).
 
“Lender” means, collectively, the Swingline Lender, the Canadian Swingline
Lender and any other financial institution or other Person that (a) is listed on
the signature pages hereof as a “Lender” or (b) from time to time becomes a
party hereto by execution of an Assignment, in each case together with its
successors.
 
“Lender Group” means, individually and collectively, each Lender, the Canadian
Agent and the Administrative Agent.
 
“Letter of Credit” means any letter of credit Issued pursuant to Section 2.4.
 
“Liabilities” means all claims, actions, suits, judgments, damages, losses,
liabilities, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, taxes, commissions, charges, disbursements and expenses, in each case of
any kind or nature (including interest accrued thereon or as a result thereto
and fees, charges and disbursements of financial, legal and other advisors and
consultants), whether joint or several, whether or not indirect, contingent,
consequential, actual, punitive, treble or otherwise.
 
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“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest or other security arrangement and any other preference,
priority or preferential arrangement of any kind or nature whatsoever, including
any conditional sale contract or other title retention agreement, the interest
of a lessor under a Capital Lease and any synthetic or other financing lease
having substantially the same economic effect as any of the foregoing.
 
“Loan” means any loan made or deemed made by any Lender hereunder.
 
“Loan Account” means the account identified in Section 2.13.
 
“Loan Documents” means, collectively, this Agreement, any Notes, the Guaranty
and Security Agreement, the Mortgages, the Control Agreements, the Canadian
Security Documents, the Fee Letter, the L/C Reimbursement Agreements, any
Perfection Certificates and, when executed, each document executed by a Loan
Party and delivered to the Administrative Agent, any Lender or any L/C Issuer in
connection with or pursuant to any of the foregoing or the Obligations, together
with any modification of any term, or any waiver with respect to, any of the
foregoing.
 
“Loan Party” means each Borrower and each Guarantor.
 
“Material Adverse Effect” means (a) a material adverse change in the business,
operations, results of operations, assets, liabilities or financial condition of
the Group Members taken as a whole, (b) a material impairment of a Borrower’s
ability to perform its obligations under the Loan Documents to which it is a
party or of the Secured Parties ability to enforce the Obligations or realize
upon the Collateral or (c) a material impairment of the validity,
enforceability, attachment, perfection or priority of Agents’ Liens with respect
to the Collateral.
 
“Material Environmental Liabilities” means Environmental Liabilities exceeding
$7,000,000 in the aggregate.
 
“Maximum Canadian Revolver Amount” means the aggregate amount of all Canadian
Revolving Loans and Canadian Swing Loans that may be borrowed by or made to
Bombay Canada under this Agreement; provided, however, that the Maximum Canadian
Revolver Amount shall in no event exceed $18,000,000.
 
“Maximum Revolver Amount” means the aggregate amount of all Loans that may be
borrowed by or made to, and Letters of Credit that may be issued for the account
of, any Borrower under this Agreement; provided, however, that the Maximum
Revolver Amount shall in no event exceed $125,000,000.
 
“Minimum Availability Amount” means, as of any date of determination, 7.5% of
the Aggregate Borrowing Base.
 
“Moody’s” means Moody’s Investors Service, Inc., or its successor.
 
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“Mortgage” means any mortgage, deed of trust or other document executed or
required herein to be executed by any Loan Party and granting a Lien over
Eligible Real Property in favor of the Administrative Agent as security for the
Obligations.
 
“Mortgage Supporting Documents” means, with respect to any Mortgage, each
document (including title policies or marked-up unconditional insurance binders
(in each case, together with copies of all documents referred to therein), maps,
ALTA (or TLTA, if applicable) as-built surveys (in form and as to a date that is
sufficiently acceptable to the title insurer issuing title insurance to the
Administrative Agent for such title insurer to deliver endorsements to such
title insurance as reasonably requested by the Administrative Agent),
environmental assessments and reports and evidence regarding recording and
payment of fees, insurance premium and taxes) that the Administrative Agent may
reasonably request, to create, register, perfect, maintain, evidence the
existence, substance, form or validity of or enforce a valid Lien on the
Eligible Real Property in favor of the Administrative Agent for the benefit of
the Secured Parties, subject only to such Permitted Liens.
 
“Multiemployer Plan” means any multiemployer plan within the meaning of §3(37)
of ERISA maintained or contributed to by any Borrower or any ERISA Affiliate.
 
“Net Cash Proceeds” means proceeds received in cash from (a) any Sale of, or
Property Loss Event with respect to, property, net of (i) the customary
out-of-pocket cash costs, fees and expenses paid or required to be paid in
connection therewith, (ii) taxes paid or reasonably estimated to be payable as a
result thereof and (iii) any amount required to be paid or prepaid on
Indebtedness (other than the Obligations and Indebtedness owing to any Group
Member) secured by the property subject thereto or (b) any sale or issuance of
Stock or incurrence of Indebtedness, in each case net of brokers’, advisors’ and
investment banking fees and other customary out-of-pocket underwriting
discounts, commissions and other customary out-of-pocket cash costs, fees and
expenses, in each case incurred in connection with such transaction; provided,
however, that any such proceeds received by any Subsidiary of the Borrower that
is not a Wholly Owned Subsidiary of the Borrower shall constitute “Net Cash
Proceeds” only to the extent of the aggregate direct and indirect beneficial
ownership interest of the Borrower therein.
 
“Net Liquidation Percentage” means, at any date of determination, the percentage
of the Cost value of the Borrowers’ Eligible Inventory that is estimated to be
recoverable in an orderly liquidation of such Eligible Inventory, net of
liquidation expenses, such percentage to be as determined from time to time by
the Administrative Agent, in its Permitted Discretion, or by a qualified
appraisal company selected by the Administrative Agent.
 
“Net Retail Liquidation Value” means, at any date of determination, the result
(expressed in Dollars) of the Net Liquidation Percentage times the Cost value of
Eligible Inventory as of such date.
 
“Non-Funding Lender” means a U.S. Non-Funding Lender and/or a Canadian
Non-Funding Lender, as the case may be.
 
“Note” means a promissory note of the Borrower, in substantially the form of
Exhibit B, payable to the order of a Lender in any Facility in a principal
amount equal to the amount of such Lender’s Commitment under such Facility.
 
“Notice of Borrowing” has the meaning specified in Section 2.2.
 
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“Notice of Conversion or Continuation” has the meaning specified in
Section 2.10.
 
“Obligations” means, with respect to any Loan Party, all amounts, obligations,
liabilities, covenants and duties of every type and description owing by such
Loan Party to the Administrative Agent, the Canadian Agent, any Lender, any L/C
Issuer, any other Indemnitee, any participant, whether direct or indirect
(regardless of whether acquired by assignment), absolute or contingent, due or
to become due, whether liquidated or not, now existing or hereafter arising and
however acquired, and whether or not evidenced by any instrument or for the
payment of money, including, without duplication, (a) if such Loan Party is the
Borrower, all Loans and L/C Obligations, (b) all interest, whether or not
accruing after the filing of any petition in bankruptcy or the commencement of
any insolvency, reorganization or similar proceeding, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding, and (c) all
other fees, expenses (including fees, charges and disbursement of counsel),
interest, commissions, charges, costs, disbursements, indemnities and
reimbursement of amounts paid and other sums chargeable to such Loan Party under
any Loan Document (including those payable to L/C Issuers as described in
Section 2.11).
 
“Overadvances” has the meaning specified in Section 2.1A(c).
 
“Parent” has the meaning specified in the preamble.
 
“Patents” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to letters patent
and applications therefor.
 
“PBGC” means the Pension Benefit Guaranty Corporation created by §4002 of ERISA
and any successor entity or entities having similar responsibilities.
 
“Perfection Certificate” means, collectively, (a) the Perfection Certificate
submitted by Parent to the Administrative Agent with respect to each Group
Member, together with the U.S. Borrowers’ completed responses to the inquiries
set forth therein, and (b) the Perfection Certificate submitted by Bombay Canada
to the Administrative Agent with respect to Bombay Canada, together with Bombay
Canada’s completed responses to the inquiries set forth therein, the form and
substance of each such responses to be satisfactory to the Administrative Agent,
in each case, together with any amendments, modifications or supplements
thereto.
 
“Permitted Acquisition” means acquisitions of all or substantially all of the
assets of a Person in or of any division or business line of a Person or Stock
of a Person; provided, (a) the Administrative Agent shall receive at least 3
Business Days prior written notice of such acquisition, which notice shall
include a reasonably detailed description of such acquisition, (b) such assets
are located in the United States or Canada (except that such location
requirement shall not apply to acquisitions of assets or stores from a licensee
or franchisee of any Group Member) and are those assets of a business that would
comply with Section 6.2(d), and which business would not subject any Agent or
any Lender to regulatory or third party approvals in connection with the
exercise of its rights and remedies under this Agreement or any Loan Documents,
(c) no Default or Event of Default exists prior to or immediately after giving
effect to such acquisition, (d) the Administrative Agent is granted a valid
first priority perfected Lien in the assets so acquired to the extent and in the
manner contemplated by the Loan Documents (subject to any Permitted Liens) and
the applicable Group Member shall have delivered to the Administrative Agent
evidence reasonably satisfactory to the Administrative Agent that all Liens with
respect to the assets so acquired, other than Permitted Liens, have been
discharged in full, (e) the seller of such assets or Stock is not an Affiliate
of any Group Member, (f) the terms of such acquisition are on an arms length
basis, (g) Section 6.11 is complied with at the time of consummation of such
acquisition (or concurrently therewith), (h) the board of directors and (if
required by applicable law) the shareholders, or the equivalent thereof, of the
business to be acquired has approved such acquisition, (i) the applicable Group
Member shall have delivered to Administrative Agent evidence satisfactory to the
Administrative Agent that such Group Member has completed such acquisition in
accordance with the terms of the contracts and agreements entered into by such
Person in connection with such acquisition, and (ii) certified copies of all
such documents shall have been delivered to the Administrative Agent, (i) no
additional Indebtedness, contingent obligations or other liabilities shall be
incurred assumed or otherwise be reflected on a consolidated balance sheet of
the Borrowers after giving effect to such acquisition, except, (i) Loans made or
Letters of Credit issued hereunder, (ii) ordinary course trade payables, accrued
expenses and unsecured Indebtedness of the Borrowers and (iii) Indebtedness
otherwise permitted under Section 7.1, and (j) after giving effect to any such
acquisition, Availability shall not be less than $25,000,000 and the Parent
shall have delivered to the Administrative Agent a Compliance Certificate and
Projections demonstrating that the Borrowers shall have Availability of at least
$25,000,000 at all times for the 2 Fiscal Quarters immediately succeeding such
acquisition.
 
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“Permitted Discretion” means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.
 
“Permitted Dispositions” means (a) sales or other dispositions by any Group
Member of Equipment that is substantially worn, damaged, or obsolete in the
ordinary course of business, (b) sales by any Group Member of inventory to
buyers in the ordinary course of business, (c) the use or transfer of money or
Cash Equivalents by any Group Member in a manner that is not prohibited by the
terms of this Agreement or the other Loan Documents, (d) the licensing by any
Group Member, on a non-exclusive basis, of Intellectual Property in the ordinary
course of business, (e) a disposition between the Borrowers, (f) the surrender
or waiver of contract rights or the disposition, settlement, release or
surrender of contract, tort or other claims of any kind in the ordinary course
of business, (g) any disposition of defaulted receivables that arose in the
ordinary course of business for collection, (h) the entering into of real
property leases in respect of any portion of the Bombay Office Complex in the
ordinary course of business and (i) the sale of the Eligible Real Property, so
long as the Net Cash Proceeds are applied in accordance with Section 2.8(a).
 
“Permitted Investments” means (a) Investments in cash and Cash Equivalents, (b)
Investments in negotiable instruments for collection, (c) advances made in
connection with purchases of goods or services in the ordinary course of
business, (d) Investments received in settlement of amounts due to any Group
Member effected in the ordinary course of business or owing to a Group Member as
a result of Insolvency Proceedings involving an Account Debtor or upon the
foreclosure or enforcement of any Lien in favor of any Group Member, (e) (i)
Investments in a Borrower, (ii) Investments in a Subsidiary of a Borrower, and
(iii) to the extent otherwise permitted hereunder, Investments in any Person
who, simultaneously with such Investment, becomes a Subsidiary of Parent and
complies with Section 6.11 hereof; provided, however, that after giving effect
to any such Permitted Investments pursuant to clauses (e) (ii) and (iii) above,
Availability shall not be less than $25,000,000 and the Parent shall have
delivered to the Administrative Agent a Compliance Certificate and Projections
demonstrating that Borrowers shall have Availability of at least $25,000,000 at
all times for the 2 Fiscal Quarters immediately succeeding such Permitted
Investments, (f) Investments in The Bombay Furniture Company, Inc. in an amount
not to exceed $5,000,000 in any Fiscal Year; (g) Investments the net aggregate
book value of which does not at any time exceed the amount of $1,000,000 and (h)
so long as the U.S. Revolving Credit Outstandings and Canadian Revolving Credit
Outstandings are equal to $0, investments in (i) commercial notes and bonds or
variable rate demand notes, issued by any commercial institution with a rating
of not less than A, as determined by S&P or Moody’s, (ii) Eurodollar deposits,
and (iii) money market or other mutual funds substantially all of whose assets
comprise securities of the types described in the definition of “Cash
Equivalents” or clause (h) hereof; provided, that notwithstanding the foregoing,
no such Investments shall be permitted (i) after the occurrence of a Default or
Event of Default, and (ii) unless such Investments are pledged to the
Administrative Agent as additional Collateral for the Obligations pursuant to
such agreements as may be required by the Administrative Agent in its Permitted
Discretion.
 
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“Permitted Liens” means (a) Liens held by the Administrative Agent or Canadian
Agent for the benefit of the Administrative Agent, the Canadian Agent and
Lenders, as applicable (b) Liens for unpaid taxes that either (i) are not yet
delinquent, or (ii) do not constitute an Event of Default hereunder and are the
subject of Permitted Protests, (c) Liens set forth on Schedule 7.2, (d) the
interests of lessors under operating leases, (e) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Permitted Purchase Money Indebtedness and so long as such Lien
attaches only to the asset purchased or acquired and the proceeds thereof, (f)
Liens arising by operation of law including those in favor of warehousemen,
landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in
the ordinary course of the Borrowers’ business and not in connection with the
borrowing of money, and which Liens either (i) are for sums not yet delinquent,
or (ii) are the subject of Permitted Protests, (g) Liens arising from deposits
made in connection with obtaining worker’s compensation or other unemployment
insurance, (h) Liens or deposits to secure performance of bids, tenders, or
leases incurred in the ordinary course of business and not in connection with
the borrowing of money, (i) Liens granted as security for surety or appeal bonds
in connection with obtaining such bonds in the ordinary course of business, (j)
Liens resulting from any judgment or award that is not an Event of Default
hereunder, (k) with respect to any Real Property, easements, rights of way,
minor encroachments, and zoning restrictions that do not materially interfere
with or impair the use or operation thereof, (l) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods, (m) Liens resulting from the
filing of precautionary UCC financing statements, PPSA registration statements
or registrations in Quebec, Canada relating to operating leases of any Loan
Party which are entered into in the ordinary course of business and which are
limited solely to the assets subject thereto, and (n) Liens securing Permitted
Office Building Indebtedness so long as such Lien attaches only to the Bombay
Office Complex and the proceeds thereof (including insurance proceeds) and Liens
on money placed in an escrow account in connection with sale leaseback
transactions permitted by Section 7.5.
 
“Permitted Office Building Indebtedness” means, following the release of the
Eligible Real Property in accordance with Section 6.19, Indebtedness incurred by
a U.S. Borrower or any of its Subsidiaries in an aggregate principal amount at
any time outstanding not to exceed 90% of the appraised value (based upon an
independent third-party appraisal) of the portion of the Bombay Office Complex
securing such Indebtedness on terms reasonably acceptable to the Administrative
Agent.
 
“Permitted Protest” means the right of Parent or any of its Subsidiaries, as
applicable, to protest any Lien (other than any such Lien that secures the
Obligations), taxes (other than payroll taxes or taxes that are the subject of a
United States federal tax lien), or rental payment; provided that (a) a reserve
with respect to such obligation is established on the Books in such amount as is
required under GAAP, (b) any such protest is instituted promptly and prosecuted
diligently by Parent or any of its Subsidiaries, as applicable, in good faith,
and (c) the Administrative Agent is satisfied that, while any such protest is
pending, there will be no impairment of the enforceability, validity, perfection
or priority of any of the Administrative Agent’s Liens.
 
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“Permitted Purchase Money Indebtedness” means, as of any date of determination,
Purchase Money Indebtedness incurred after the Closing Date in an aggregate
amount outstanding at any one time not in excess of $2,000,000. In no event
shall Permitted Purchase Money Indebtedness include Indebtedness incurred for
the purpose of financing all or any part of the acquisition Cost of any
inventory.
 
“Person” means any individual, partnership, corporation (including a business
trust and a public benefit corporation), joint stock company, estate,
association, firm, enterprise, trust, limited liability company, unincorporated
association, joint venture and any other entity or Governmental Authority.
 
“PPSA” means the Personal Property Security Act (Ontario), or, where the context
requires, the legislation of other provinces or territories in Canada relating
to security in personal property generally, including Accounts and inventory, as
adopted by and in effect from time to time in such provinces or territories in
Canada, as applicable.
 
“Projections” means, collectively, the Initial Projections and any document
delivered pursuant to Section 5.3(c).
 
“Property Loss Event” means, with respect to any property, any loss of or damage
to such property or any taking of such property or condemnation thereof.
 
“Pro Rata Outstandings”, of any Lender at any time, means the sum of (i) the
outstanding principal amount of Revolving Loans owing to such Lender and (ii)
the amount of the participation of such Lender in the L/C Obligations
outstanding with respect to all Letters of Credit.
 
“Pro Rata Share” means, with respect to any Lender and any Facility or
Facilities at any time, the percentage obtained by dividing (a) the sum of the
Commitments (or, if such Commitments in any such Facility are terminated, the
Pro Rata Outstandings therein) of such Lender then in effect under such
Facilities by (b) the sum of the Commitments (or, if such Commitments in any
such Facility are terminated, the Pro Rata Outstandings therein) of all Lenders
then in effect under such Facilities; provided, however, that, if there are no
Commitments and no Pro Rata Outstandings in any of such Facilities, such
Lender’s Pro Rata Share in such Facilities shall be determined based on the Pro
Rata Share in such Facilities most recently in effect, after giving effect to
any subsequent assignment and any subsequent non-pro rata payments of any Lender
pursuant to Section 2.18.
 
“Purchase Money Indebtedness” means Indebtedness (other than the Obligations,
but including obligations in respect of Capital Leases), incurred at the time
of, or within 20 days after, the acquisition of any fixed assets, including,
without limitation, software, for the purpose of financing all or any part of
the acquisition cost thereof, together with any refinancings thereof under
Section 7.1(c).
 
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“Qualified Import Letter of Credit” means a Letter of Credit that (a) is issued
to facilitate the purchase by a U.S. Borrower of Eligible Inventory, (b) is in
form and substance acceptable to the Administrative Agent, and (c) is issued to
support an Underlying Letter of Credit that only is drawable by the beneficiary
thereof by the presentation of, among other documents, a negotiable document of
title that (x) is in the name of the Administrative Agent, a U.S. Borrower or an
Approved Customs Broker and has not been consigned to any third parties other
than to the Administrative Agent, a U.S. Borrower or an Approved Customs Broker
(either directly or by means of endorsements), and (y) was issued by the carrier
or consolidator respecting the subject inventory.
 
“Real Property” means any estates or interests in real property now owned or
hereafter acquired by any Borrower or a Subsidiary of any Borrower and the
improvements 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.
 
“Register” has the meaning specified in Section 2.14(b).
 
“Related Person” means, with respect to any Person, each Affiliate of such
Person and each director, officer, employee, consultant, agent, trustee,
representative, attorney, accountant and each insurance, environmental, legal,
financial and other advisor (including those retained in connection with the
satisfaction or attempted satisfaction of any condition set forth in
Article III) of or to such Person or any of its Affiliates, together with, if
such Person is the Administrative Agent, each other Person or individual
designated, nominated or otherwise mandated by or helping the Administrative
Agent pursuant to and in accordance with Section 9.4 or any comparable provision
of any Loan Document.
 
“Related Transactions” means the refinancing of the Existing Credit Agreement
and the payment of all related fees, costs and expenses.
 
“Remedial Action” means all actions taken to (a) clean up, remove, remediate,
contain, treat, monitor, assess, evaluate, or in any way address Hazardous
Materials in the indoor or outdoor environment, (b) prevent or minimize a
release or threatened release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor or
outdoor environment, (c) perform any pre-remedial studies, investigations, or
post-remedial operation and maintenance activities, or (d) conduct any other
actions authorized by 42 USC §9601.
 
“Required Lenders” means, at any time, Lenders having at such time in excess of
50% of the sum of the aggregate Revolving Credit Commitments (or, if such
Commitments are terminated, the sum of the amounts of the participations in
Swing Loans, the principal amount of unparticipated portions of the Swing Loans
and the Pro Rata Outstandings in the Facilities) then in effect, ignoring, in
such calculation, the amounts held by any Non-Funding Lender.
 
“Requirements of Law” means, with respect to any Person, collectively, the
common law and all federal, state, provincial, local, foreign, multinational or
international laws, statutes, codes, treaties, standards, rules and regulations,
guidelines, ordinances, orders, judgments, writs, injunctions, decrees
(including administrative or judicial precedents or authorities) and the
interpretation or administration thereof by, and other determinations,
directives, requirements or requests of, any Governmental Authority, in each
case whether or not having the force of law and that are applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
 
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“Reserves” means such reserves as the Administrative Agent, from time to time
determines in its Permitted Discretion as being appropriate to reflect
impediments to the Secured Parties’ ability to realize upon the Collateral,
including, without limitation Canadian Priority Payables and Inventory Reserves.
 
“Responsible Officer” means, with respect to any Person, any of the president,
chief executive officer, chief financial officer, treasurer, assistant
treasurer, controller, managing member or general partner of such Person but, in
any event, with respect to financial matters, any such officer that is
responsible for preparing the Financial Statements delivered hereunder and, with
respect to the Corporate Chart and other documents delivered pursuant to
Section 5.3(h), documents delivered on the Closing Date and documents delivered
pursuant to Section 6.10, the secretary or assistant secretary of such Person or
any other officer responsible for maintaining the corporate and similar records
of such Person.
 
“Revolving Credit Commitment” means the U.S. Revolving Credit Commitment and/or
the Canadian Revolving Credit Agreement, as the case may be.
 
“Revolving Credit Termination Date” shall mean the earliest of (a) the Scheduled
Maturity Date, (b) the date of termination of the Revolving Credit Commitments
pursuant to Section 2.5 or 8.2 and (c) the date on which the Obligations become
due and payable pursuant to Section 8.2.
 
“Revolving Loan” means the U.S. Revolving Loan and/or the Canadian Revolving
Loan, as the case may be.
 
“S&P” means Standard & Poor’s Rating Services, or its successor.
 
“Seasonal Period” means the period commencing on September 1 through and
including December 15 of each Fiscal Year.
 
“Scheduled Maturity Date” means the 5th anniversary of the Closing Date.
 
“SEC” means the United States Securities and Exchange Commission and any
successor thereto.
 
“Secured Parties” means the Lenders, the L/C Issuers, the Administrative Agent,
each other Indemnitee and any other holder of any Obligation of any Loan Party.
 
“Security” means all Stock, Stock Equivalents, voting trust certificates, bonds,
debentures, instruments and other evidence of Indebtedness, whether or not
secured, convertible or subordinated, all certificates of interest, share or
participation in, all certificates for the acquisition of, and all warrants,
options and other rights to acquire, any Security.
 
“Sell” means, with respect to any property, to sell, convey, transfer, assign,
license, lease or otherwise dispose of, any interest therein or to permit any
Person to acquire any such interest, including, in each case, through a sale and
leaseback transaction or through a sale, factoring at maturity, collection of or
other disposal, with or without recourse, of any notes or accounts receivable.
Conjugated forms thereof and the noun “Sale” have correlative meanings.
 
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“Solvent” means, with respect to any Person (a) as of any date of determination,
that, as of such date, (i) the value of the assets of such Person (both at fair
value and present fair saleable value) is greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person,
and (ii) such Person is able to pay all liabilities of such Person as such
liabilities mature and (b) that, as of the Closing Date, such Person does not
have unreasonably small capital. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities shall be computed at the
amount that, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability.
 
“Standby Letter of Credit” means any Letter of Credit that is not a Documentary
Letter of Credit.
 
“Stock” means all shares of capital stock (whether denominated as common stock
or preferred stock), equity interests, beneficial, partnership or membership
interests, joint venture interests, participations or other ownership or profit
interests in or equivalents (regardless of how designated) of or in a Person
(other than an individual), whether voting or non-voting.
 
“Stock Equivalents” means all securities convertible into or exchangeable for
Stock or any other Stock Equivalent and all warrants, options or other rights to
purchase, subscribe for or otherwise acquire any Stock or any other Stock
Equivalent, whether or not presently convertible, exchangeable or exercisable.
 
“Store Accounts” means an account designated as such on Schedule 8 of the
Perfection Certificate.
 
“Subsidiary” means, with respect to any Person, any corporation, partnership,
joint venture, limited liability company, association or other entity, the
management of which is, directly or indirectly, controlled by, or of which an
aggregate of more than 50% of the outstanding Voting Stock is, at the time,
owned or controlled directly or indirectly by, such Person or one or more
Subsidiaries of such Person.
 
“Substitute Lender” has the meaning specified in Section 2.18(b).
 
“Swingline Commitment” means $15,000,000.
 
“Swingline Lender” means, each in its capacity as Swingline Lender hereunder,
GE Capital or, upon the resignation of GE Capital as the Administrative Agent
hereunder, any U.S. Lender (or Affiliate or Approved Fund of any U.S. Lender)
that agrees, with the approval of the Administrative Agent (or, if there is no
such successor the Administrative Agent, the Required Lenders) and the Parent,
to act as the Swingline Lender hereunder.
 
“Swingline Request” has the meaning specified in Section 2.3A(b).
 
“Swing Loan” has the meaning specified in Section 2.3A(a).
 
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“Synthetic Lease” means any lease of goods or other property, whether real or
personal, which is treated as an operating lease under GAAP and as a loan or
financing for United States income tax purposes.
 
“Taxes” has the meaning specified in Section 2.17.
 
“Title IV Plan” means a pension plan subject to Title IV of ERISA, other than a
Multiemployer Plan, to which any ERISA Affiliate incurs or otherwise has any
obligation or liability, contingent or otherwise.
 
“Trademarks” means all rights, title and interests (and all related IP Ancillary
Rights) arising under any Requirement of Law in or relating to trademarks, trade
names, corporate names, company names, business names, fictitious business
names, trade styles, service marks, logos and other source or business
identifiers and, in each case, all goodwill associated therewith, all
registrations and recordations thereof and all applications in connection
therewith.
 
“Trade Secrets” means all right, title and interest (and all related IP
Ancillary Rights) arising under any Requirement of Law in or relating to trade
secrets.
 
“UCC” means the Uniform Commercial Code of any applicable jurisdiction and, if
the applicable jurisdiction shall not have any Uniform Commercial Code, the
Uniform Commercial Code as in effect in the State of New York.
 
“Underlying Issuer” means a third Person which is the beneficiary of an L/C
Undertaking and which has issued a letter of credit at the request of the L/C
Issuer for the account of any U.S. Borrowers, and in the case of a proposed
Qualified Import Letter of Credit, has agreed, in writing, to hold documents of
title as agent for the Administrative Agent.
 
“Underlying Letter of Credit” means a letter of credit that has been issued by
an Underlying Issuer.
 
“United States” means the United States of America.
 
“Unused Commitment Fee” has the meaning specified in Section 2.11.
 
“U.S. Borrowers” means Borrowers other than Bombay Canada.
 
“U.S. Borrowing Base” means, as of any date of determination, an amount equal
to:
 
(a) 92.5% of the Net Retail Liquidation Value of Eligible Inventory owned by the
U.S. Borrowers; provided, however, that  during the Seasonal Period, the advance
rate shall be of 97.5% of the Net Retail Liquidation Value of Eligible Inventory
owned by the U.S. Borrowers, plus
 
(b) 90% of the face amount of Eligible Accounts of the U.S. Borrower, plus
 
(c) 90% of the face amount of Eligible Credit Card Receivables of the U.S.
Borrowers, plus
 
(d) 75 % of the Appraised Value of Eligible Real Property of the U.S. Borrowers,
minus
 
(e) the aggregate of such Reserves as may have been established by the
Administrative Agent.
 
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“U.S. Eligible In-Transit Inventory” means inventory of the U.S. Borrowers that
does not qualify as Eligible Inventory under clause (b) of the definition of
Eligible Inventory solely because it is not at a location in the United States
set forth on Schedule 4(b) of the Perfection Certificate or in transit among
such locations in the United States and that meets the following criteria, which
criteria may be revised by the Administrative Agent in its Permitted Discretion
from time to time after the Closing Date:
 
(a) the inventory was the subject of a Qualified Import Letter of Credit, or was
paid for in full by a U.S. Borrower;
 
(b) such inventory currently is in transit (whether by vessel, air, or land) to
a location set forth on Schedule 4(b) of the Perfection Certificate  in the
United States that is the subject of a Bailee Acknowledgment or a Collateral
Access Agreement;
 
(c) title to such inventory has passed to the applicable U.S. Borrower;
 
(d) such inventory is insured against types of loss, damage, hazards, and risks,
and in amounts, satisfactory to the Administrative Agent in its Permitted
Discretion;
 
(e) the Parent has provided a certificate to the Administrative Agent that
certifies that, to the best knowledge of the Borrowers, such inventory meets all
of the Borrowers’ representations and warranties contained in the Loan Documents
concerning Eligible Inventory, that the Borrowers know of no reason why such
inventory would not be accepted by the applicable Borrower when it arrives in
the United States, and that the shipment as evidenced by the documents conforms
to the related order documents; and
 
(f) if subject to a Qualified Import Letter of Credit, the Underlying Letter of
Credit has been drawn upon and the Underlying Issuer has honored such drawing
and the Administrative Agent has honored its obligations to the Underlying
Issuer under the applicable Qualified Import Letter of Credit.
 
“U.S. Lender” means each Lender that has a U.S. Revolving Credit Commitment,
holds a U.S. Revolving Loan or participates in any Swing Loan or Letter of
Credit.
 
“U.S. Lender Party” means each of the Administrative Agent, each Lender, each
L/C Issuer and each participant, in each case that is a Domestic Person.
 
“U.S. Non-Funding Lender” has the meaning specified in Section 2.2A(c).
 
“U.S. Revolving Credit Commitment” means, with respect to each U.S. Lender, the
commitment of such Lender to make U.S. Revolving Loans and acquire interests in
other U.S. Revolving Credit Outstandings, which commitment is in the amount set
forth opposite such U.S. Lender’s name on Schedule I under the caption “U.S.
Revolving Credit Commitment”, as amended to reflect Assignments and as such
amount may be reduced pursuant to this Agreement. The aggregate amount of the
U.S. Revolving Credit Commitments on the date hereof equals $125,000,000.
 
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“U.S. Revolving Credit Facility” means the U.S. Revolving Credit Commitments and
the provisions herein related to the U.S. Revolving Loans, Swing Loans and
Letters of Credit.
 
“U.S. Revolving Credit Outstandings” means, at any time, the sum of, in each
case to the extent outstanding at such time, (a) the aggregate principal amount
of the U.S. Revolving Loans and Swing Loans and (b) the L/C Obligations for all
Letters of Credit.
 
“U.S. Revolving Loan” has the meaning specified in Section 2.1A(a).
 
“Voting Stock” means Stock of any Person having ordinary power to vote in the
election of members of the board of directors, managers, trustees or other
controlling Persons, of such Person (irrespective of whether, at the time, Stock
of any other class or classes of such entity shall have or might have voting
power by reason of the occurrence of any contingency).
 
“Wholesale” means Bombay International, Inc.
 
“Wholly Owned Subsidiary” of any Person means any Subsidiary of such Person, all
of the Stock of which (other than nominal holdings and director’s qualifying
shares) is owned by such Person, either directly or through one or more Wholly
Owned Subsidiaries of such Person.
 
Section 1.2  UCC Terms. The following terms have the meanings given to them in
the applicable UCC: “commodity account”, “commodity contract”, “commodity
intermediary”, “deposit account”, “entitlement holder”, “entitlement order”,
“equipment”, “financial asset”, “general intangible”, “goods”, “instruments”,
“inventory”, “securities account”, “securities intermediary”, “security
entitlement” and “supporting obligations”.
 
Section 1.3  Accounting Terms and Principles.
 
(a)  GAAP. If any change in any accounting practice is required by GAAP (or any
successor of the foregoing) in order for such principle or practice to continue
as a generally accepted accounting principle or practice, all reports and
financial statements required hereunder or in connection herewith may be
prepared in accordance with such change, but all calculations and determinations
to be made hereunder may be made in accordance with such change only after
notice of such change is given to each Lender, and the Borrowers, the Required
Lenders and the Administrative Agent agree to such change. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP
applied on a consistent basis by the accounting entity to which they refer. When
used herein, the term “financial statements” shall include the notes and
schedules thereto. Whenever the term “Borrowers” or the term “Parent” is used in
respect of a financial covenant or a related definition, it shall be understood
to mean Parent and its Subsidiaries on a consolidated basis unless the context
clearly requires otherwise. Unless otherwise expressly provided herein or unless
Required Lenders otherwise consent, all financial statements and reports
furnished to any Agent or any Lender hereunder shall be prepared, all financial
computations and determinations pursuant hereto shall be made, and all terms of
an accounting or financial nature shall be construed, in accordance with GAAP.
 
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(b)  Permitted Acquisitions. Notwithstanding anything to the contrary contained
herein, the assets of any Person acquired in a Permitted Acquisition shall not
be included in the Borrowing Base unless such Person shall comply with its
obligations under Section 6.11, as applicable, and the Administrative Agent
shall have received an appraisal and audit in form and substance satisfactory to
it.
 
Section 1.4  Interpretation.
 
(a)  Certain Terms. Except as set forth in any Loan Document, all accounting
terms not specifically defined herein shall be construed in accordance with
GAAP. The terms “herein”, “hereof” and similar terms refer to this Agreement as
a whole. In the computation of periods of time from a specified date to a later
specified date in any Loan Document, the terms “from” means “from and including”
and the words “to” and “until” each mean “to but excluding” and the word
“through” means “to and including.” In any other case, the term “including” when
used in any Loan Document means “including without limitation.” The term
“documents” means all writings, however evidenced and whether in physical or
electronic form, including all documents, instruments, agreements, notices,
demands, certificates, forms, financial statements, opinions and reports. The
term “incur” means incur, create, make, issue, assume or otherwise become
directly or indirectly liable in respect of or responsible for, in each case
whether directly or indirectly, and the terms “incurrence” and “incurred” and
similar derivatives shall have correlative meanings.
 
(b)  Certain References. Unless otherwise expressly indicated, references (i) in
this Agreement to an Exhibit, Schedule, Article, Section or clause refer to the
appropriate Exhibit or Schedule to, or Article, Section or clause in, this
Agreement and (ii) in any Loan Document, to (A) any agreement shall include,
without limitation, all exhibits, schedules, appendixes and annexes to such
agreement and, unless the prior consent of any Secured Party required therefor
is not obtained, any amendment, restatement, amendment and restatement or other
modification of such agreement, (B) any statute shall be to such statute as
amended or otherwise modified from time to time and to any successor legislation
thereto, in each case as in effect at the time any such reference is operative
and (C) any time of day shall be a reference to New York time. Titles of
articles, sections, clauses, exhibits, schedules and annexes contained in any
Loan Document are without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto. Unless otherwise
expressly indicated, the meaning of any term defined (including by reference) in
any Loan Document shall be equally applicable to both the singular and plural
forms of such term.
 
ARTICLE II  
 

 
THE FACILITIES
 
Section 2.1  Revolving Credit Commitments.
 
Section 2.1A U.S. Revolver Loans. (a) On the terms and subject to the conditions
contained in this Agreement, each U.S. Lender severally, but not jointly, agrees
to make loans in Dollars (each a “U.S. Revolving Loan”) to the U.S. Borrowers
from time to time on any Business Day during the period from the date hereof
until the Revolving Credit Termination Date in an aggregate principal amount at
any time outstanding for all such Loans by such U.S. Lender not to exceed such
U.S. Lender’s Pro Rata Share of an amount equal to the lesser of (i) the Maximum
Revolver Amount, minus the sum of (x) U.S. Revolving Credit Outstandings, (y)
Canadian Revolving Credit Outstandings, and (z) the Minimum Availability Amount
or (ii) except for Overadvances, the U.S. Borrowing Base less U.S. Revolving
Credit Outstandings less the Minimum Availability Amount. Within the limits set
forth in the first sentence of this clause (a), amounts of U.S. Revolving Loans
repaid may be reborrowed under this Section 2.1A.
 
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(b) Anything to the contrary in this Section 2.1A notwithstanding, the
Administrative Agent shall have the right without declaring an Event of Default,
to reduce its inventory advance rates or establish Reserves in such amounts, and
with respect to such matters, as the Administrative Agent in its Permitted
Discretion shall deem necessary or appropriate, against the U.S. Borrowing Base,
including Reserves with respect to (i) sums that the U.S. Borrowers are required
to pay (such as taxes, assessments, insurance premiums, or, in the case of
leased assets, rents or other amounts payable under such leases) and has failed
to pay under any Section of this Agreement or any other Loan Document, (ii)
amounts as determined by the Administrative Agent in its Permitted Discretion
based on noncompliance with the covenants set forth in Articles 6 and 7 (without
duplication as to the Canadian Borrowing Base), and (iii) amounts owing by the
U.S. Borrowers or their Subsidiaries to any Person to the extent secured by a
Lien on, or trust over, any of the Collateral (other than any existing Permitted
Lien set forth on Schedule 7.2 which is specifically identified thereon as
entitled to have priority over the Administrative Agent’s Liens), which Lien or
trust, in the Permitted Discretion of the Administrative Agent likely would have
a priority superior to the Administrative Agent’s Liens (such as Liens or trusts
in favor of landlords, warehousemen, carriers, mechanics, materialmen, laborers,
or suppliers, or Liens or trusts for ad valorem, excise, sales, or other taxes
where given priority under applicable law) in and to such item of the
Collateral.
 
(c) Anything in this Agreement to the contrary notwithstanding, in its
discretion the Administrative Agent may (or may authorize the Swingline Lender
to) or may cause the Canadian Agent or the Canadian Swingline Lender to, but
shall have absolutely no obligation to, make Loans to the U.S. Borrowers on
behalf of U.S. Lenders or to Bombay Canada on behalf of the Canadian Lenders in
amounts that cause the U.S. Revolving Credit Outstandings to exceed the U.S.
Borrowing Base less the Minimum Availability Amount or the Canadian Revolving
Credit Outstandings to exceed the Canadian Borrowing Base (any such excess
Revolving Loans are herein referred to collectively as “Overadvances”);
provided, that (i) no such event or occurrence shall cause or constitute a
waiver of the Administrative Agent’s, the Swingline Lender’s, U.S. Lenders’, the
Canadian Agent’s or the Canadian Lenders’ right to refuse to make any further
Overadvances, Swing Loans, U.S. Revolving Loans, Canadian Revolving Loans or
Canadian Swing Loans, or incur any L/C Obligations, as the case may be, at any
time that an Overadvance exists, and (ii) no Overadvance shall result in a
Default or Event of Default based on the Borrowers’ failure to comply with
Section 2.8(b) for so long as the Administrative Agent permits such Overadvance
to be outstanding, but solely with respect to the amount of such Overadvance. In
addition, Overadvances may be made even if the conditions to lending set forth
in Section 3.2 have not been met. All Overadvances shall constitute Base Rate
Loans, shall bear interest at the rate set forth in Section 2.9(c) and shall be
payable on the earlier of demand or the Revolving Credit Termination Date. The
authority of the Administrative Agent to make, or to cause the Canadian Agent,
the Swingline Lender or the Canadian Swingline Lender to make, Overadvances is
limited to an aggregate amount not to exceed ten percent (10%) of the Aggregate
Borrowing Base (exclusive of amounts charged to the Loans for interest, fees or
expenses due to the Agents, the Lenders or the L/C Issuer or any Indemnified
Person under the terms of this Agreement) and shall not cause the aggregate U.S.
Revolving Credit Outstandings and the Canadian Revolving Credit Outstandings to
exceed the Maximum Revolver Amount less the Minimum Availability Amount. In the
event that the Administrative Agent or Swingline Lender makes an Overadvance to
the U.S. Borrowers or the Canadian Agent or the Canadian Swingline Lender makes
an Overadvance to Bombay Canada, irrespective of whether the conditions to
lending set forth in Section 3.2 have been met, the U.S. Lenders and/or the
Canadian Lenders, as the case may be, agree to reimburse the Administrative
Agent or the Canadian Agent, as applicable, or to purchase a participation
therein, in accordance with such Lender’s Pro Rata Share of the Overadvance as
if such Overadvance were a Swing Loan or Canadian Swing Loan.
 
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Section 2.1B Canadian Revolver Loans. (a) On the terms and subject to the
conditions contained in this Agreement, each Canadian Lender severally, but not
jointly, agrees to make loans in Dollars (each a “Canadian Revolving Loan”) to
Bombay Canada from time to time on any Business Day during the period from the
date hereof until the Revolving Credit Termination Date in an aggregate
principal amount at any time outstanding for all such Loans by such Canadian
Lender not to exceed an amount equal to the lesser of (i) the Maximum Canadian
Revolver Amount less Canadian Revolving Credit Outstandings, or (ii) the
Canadian Borrowing Base less Canadian Revolving Credit Outstandings or (iii) the
Maximum Revolver Amount minus the sum of U.S. Revolving Credit Outstandings,
Canadian Revolving Credit Outstandings and the Minimum Availability Amount.
Within the limits set forth in the first sentence of this clause (a), amounts of
Canadian Revolving Loans repaid may be reborrowed under this Section 2.1B.
 
(b) Anything to the contrary in this Section 2.1B notwithstanding, the
Administrative Agent shall have the right without declaring an Event of Default,
to reduce its inventory advance rates or establish Reserves in such amounts, and
with respect to such matters, as the Administrative Agent in its Permitted
Discretion shall deem necessary or appropriate, against the Canadian Borrowing
Base, including Reserves with respect to (i) sums that Bombay Canada is required
to pay (such as taxes, assessments, insurance premiums, or, in the case of
leased assets, rents or other amounts payable under such leases) and has failed
to pay under any Section of this Agreement or any other Loan Document, (ii)
amounts as determined by the Administrative Agent in its Permitted Discretion
based on noncompliance with the covenants set forth in Articles 6 and 7 (without
duplication as to the U.S. Borrowing Base), and (iii) Canadian Priority
Payables, and (iv) amounts owing by Bombay Canada to any Person to the extent
secured by a Lien on, or trust over, any of the Collateral (other than any
existing Permitted Lien set forth on Schedule 7.2 which is specifically
identified thereon as entitled to have priority over the Administrative Agent’s
Liens), which Lien or trust, in the Permitted Discretion of the Administrative
Agent likely would have a priority superior to the Administrative Agent’s Liens
(such as Liens or trusts in favor of landlords, warehousemen, carriers,
mechanics, materialmen, laborers, or suppliers, or Liens or trusts for ad
valorem, excise, sales, or other taxes where given priority under applicable
law) in and to such item of the Collateral.
 
Section 2.2  Borrowing Procedures
 
Section 2.2A U.S. Borrowing Procedures.
 
(a)  Notice From the U.S. Borrower. Each Borrowing of a U.S. Revolving Loan
shall be made on notice given by the Parent to the Administrative Agent not
later than 1:00 p.m. on (i) the date of the proposed Borrowing if such date is a
Business Day (or the next succeeding Business Day if such date is not a Business
Day), in the case of a Borrowing of Base Rate Loans and (ii) the third Business
Day prior to the date of the proposed Borrowing, in the case of a Borrowing of
Eurodollar Rate Loans. Each such notice may be made in a writing substantially
in the form of Exhibit C (a “Notice of Borrowing”) duly completed or by
telephone if confirmed promptly, but in any event within one Business Day and
prior to such Borrowing, with such a Notice of Borrowing. Loans shall be made as
Base Rate Loans unless, outside of a suspension period pursuant to Section 2.15,
the Notice of Borrowing specifies that all or a portion thereof shall be
Eurodollar Rate Loans. Each Borrowing of Eurodollar Rate Loans shall be in an
aggregate amount that is an integral multiple of $1,000,000.
 
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(b)  Notice to Each U.S. Lender. The Administrative Agent shall give to each
U.S. Lender prompt notice of the Administrative Agent’s receipt of a Notice of
Borrowing and, if Eurodollar Rate Loans are properly requested in such Notice of
Borrowing, prompt notice of the applicable interest rate. Each U.S. Lender
shall, before 2:00 p.m. on the date of the proposed Borrowing, make available to
the Administrative Agent at its address referred to in Section 10.11, such U.S.
Lender’s Pro Rata Share of such proposed Borrowing. Upon fulfillment or due
waiver (i) on the Closing Date, of the applicable conditions set forth in
Section 3.1 and (ii) on the Closing Date and any time thereafter, of the
applicable conditions set forth in Section 3.2, the Administrative Agent shall
make such funds available to the U.S. Borrower.
 
(c)  Non-Funding Lenders. Unless the Administrative Agent shall have received
notice from any U.S. Lender prior to the date such U.S. Lender is required to
make any payment hereunder with respect to any U.S. Revolving Loan or any
participation in any Swing Loan or Letter of Credit that such U.S. Lender will
not make such payment (or any portion thereof) available to the Administrative
Agent, the Administrative Agent may assume that such U.S. Lender has made such
payment available to the Administrative Agent on the date such payment is
required to be made in accordance with this Article II and the Administrative
Agent may, in reliance upon such assumption, make available to the U.S. Borrower
on such date a corresponding amount. The U.S. Borrower agrees to repay to the
Administrative Agent on demand such amount (until repaid by such U.S. Lender)
with interest thereon for each day from the date such amount is made available
to the U.S. Borrower until the date such amount is repaid to the Administrative
Agent, at the interest rate applicable to the Obligation that would have been
created when the Administrative Agent made available such amount to the U.S.
Borrower had such U.S. Lender made a corresponding payment available; provided,
however, that such payment shall not relieve such U.S. Lender of any obligation
it may have to the U.S. Borrower, the Swingline Lender or any L/C Issuer and any
payment by the U.S. Borrower shall be without prejudice to any claim the U.S.
Borrower may have against a U.S. Non-Funding Lender (as defined below). In
addition, any U.S. Lender that shall not have made available to the
Administrative Agent any portion of any payment described above (any such U.S.
Lender, a “U.S. Non-Funding Lender”) agrees to pay such amount to the
Administrative Agent on demand together with interest thereon, for each day from
the date such amount is made available to the U.S. Borrower until the date such
amount is repaid to the Administrative Agent, at the Federal Funds Rate for the
first Business Day and thereafter (i) in the case of a payment in respect of a
U.S. Revolving Loan, at the interest rate applicable at the time to such U.S.
Revolving Loan and (ii) otherwise, at the interest rate applicable to Base Rate
Loans under the U.S. Revolving Credit Facility. Such repayment shall then
constitute the funding of the corresponding Loan (including any Loan deemed to
have been made hereunder with such payment) or participation. The existence of
any U.S. Non-Funding Lender shall not relieve any other U.S. Lender of its
obligations under any Loan Document, but no other U.S. Lender shall be
responsible for the failure of any U.S. Non-Funding Lender to make any payment
required under any Loan Document. If the U.S. Borrower and such U.S. Non-Funding
Lender shall pay such interest to the Administrative Agent for the same or an
overlapping period, the Administrative Agent shall promptly remit to the U.S.
Borrower the amount of any excess paid by the U.S. Borrower for such period.
 
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(d)  Joint and Several Liability.
 
(i)  Notwithstanding any provision to the contrary in any Loan Document, all
Obligations of the U.S. Borrowers under this Agreement are joint and several
Obligations of the U.S. Borrowers in consideration of the financial
accommodations to be provided by the Administrative Agent and Lenders under this
Agreement, for the mutual benefit, directly and indirectly, of each Borrower
(including Bombay Canada) and in consideration of the undertakings of the other
U.S. Borrowers to accept joint and several liability for the Obligations.
 
(ii)  Each U.S. Borrower, jointly and severally, hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor, joint
and several liability with the other U.S. Borrowers, with respect to the payment
and performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.2(A)(d)), it being the intention of
U.S. Borrowers that all the Obligations (including those of Bombay Canada) shall
be the joint and several obligations of U.S. Borrowers without preferences or
distinction among them.
 
(iii)  If and to the extent that any of Borrowers shall fail to make any payment
with respect to any of the Obligations as and when due or to perform any of the
Obligations in accordance with the terms thereof, then in each such event, the
other U.S. Borrowers will make such payment with respect to, or perform, such
Obligation.
 
(iv)  The provisions of Sections 2.2 through Section 2.7 of the Guaranty and
Security Agreement are hereby incorporated except that Subsidiary Guarantor
shall mean U.S. Borrowers which are Subsidiaries of the Parents, Guarantor shall
refer to the U.S. Borrowers, Guaranteed Obligations shall refer to the
Obligations, and Guaranty shall refer to this Section 2.2(A)(d) mutatis
mutandis.
 
(v)  The provisions of this Section 2.2(A)(d) are made for the benefit of the
Secured Parties, and assigns, and may be enforced by it or them from time to
time against any or all U.S. Borrowers as often as occasion therefore may arise
and without requirement on the part of any such Secured Parties first to marshal
any of its or their claims or to exercise any of its or their rights against any
of the other U.S. Borrowers or to exhaust any remedies available to it or them
against any of the other Borrowers or to resort to any other source or means of
obtaining payment of any of the Obligations hereunder or to elect any other
remedy. The provisions of this Section 2.2(A)(d) shall remain in effect until
all of the Obligations shall have been paid in full or otherwise fully
satisfied. If at any time, any payment or any part thereof, made in respect of
any of the Obligations, is rescinded or must otherwise be restored or returned
by Secured Party upon the insolvency, bankruptcy or reorganization of any of
Borrowers, or otherwise, the provisions of this Section 2.2(A)(d) will forthwith
be reinstated in effect, as though such payment had not been made.
 
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(vi)  Each U.S. Borrower hereby agrees that it will not enforce any of its
rights of contribution or subrogation against the Borrowers with respect to any
liability incurred by it hereunder or under any of the other Loan Documents, any
payments made by it to any Secured Party with respect to any of the Obligations
or any collateral security therefore until such time as all of the Obligations
have been paid in full in cash. Any claim which any Borrower may have against
any other Borrower with respect to any payments to any Secured Party hereunder
or under any other Loan Documents are hereby expressly made subordinate and
junior in right of payment, without limitation as to any increases in the
Obligations arising hereunder or thereunder, to the prior payment in full in
cash of the Obligations and, in the event of any insolvency, bankruptcy,
receivership, liquidation, reorganization or other similar proceeding under the
laws of any jurisdiction relating to any Borrower, its debts or its assets,
whether voluntary or involuntary, all such Obligations shall be paid in full in
cash before any payment or distribution of any character, whether in cash,
securities or other property, shall be made to any other Borrower therefor.
 
(vii)  Each U.S. Borrower hereby agrees that, after the occurrence and during
the continuance of any Default or Event of Default, the payment of any amounts
due with respect to the indebtedness owing by any Borrower to any other Borrower
is hereby subordinated to the prior payment in full in cash of the Obligations.
Each Borrower hereby agrees that after the occurrence and during the continuance
of any Default or Event of Default, such Borrower will not demand, sue for or
otherwise attempt to collect any indebtedness of any other Borrower owing to
such Borrower until the Obligations shall have been paid in full in cash. If,
notwithstanding the foregoing sentence, such Borrower shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by such Borrower as trustee for Agent, and such
Borrower shall deliver any such amounts to Agent for application to the
Obligations in accordance with Section 2.3(b)
 
Section 2.2B Canadian Borrowing Procedures.
 
(a) Notice From Bombay Canada. Each Borrowing of a Canadian Revolving Loan shall
be made on notice given by Bombay Canada to the Canadian Agent, with a copy to
the Administrative Agent, not later than 1:00 p.m. on (i) the date of the
proposed Borrowing if such date is a Business Day (or the next succeeding
Business Day if such date is not a Business Day), in the case of a Borrowing of
Base Rate Loans and (ii) the third Business Day prior to the date of the
proposed Borrowing, in the case of a Borrowing of Eurodollar Rate Loans. Each
such notice may be made in a written Notice of Borrowing duly completed or by
telephone if confirmed promptly, but in any event within one Business Day and
prior to such Borrowing, with such a Notice of Borrowing. Loans shall be made as
Base Rate Loans unless, outside of a suspension period pursuant to Section 2.15,
the Notice of Borrowing specifies that all or a portion thereof shall be
Eurodollar Rate Loans. Each Borrowing of Eurodollar Rate Loans shall be in an
aggregate amount that is an integral multiple of $1,000,000.
 
(b) Notice to Each Canadian Lender. The Canadian Agent shall give to each
Canadian Lender prompt notice of the Canadian Agent’s receipt of a Notice of
Borrowing and, if Eurodollar Rate Loans are properly requested in such Notice of
Borrowing, prompt notice of the applicable interest rate. Each Canadian Lender
shall, before 2:00 p.m. on the date of the proposed Borrowing, make available to
the Canadian Agent at its address referred to in Section 10.11, such Canadian
Lender’s Pro Rata Share of such proposed Borrowing. Upon fulfillment or due
waiver (i) on the Closing Date, of the applicable conditions set forth in
Section 3.1 and (ii) on the Closing Date and any time thereafter, of the
applicable conditions set forth in Section 3.2, the Canadian Agent shall make
such funds available to the Bombay Canada.
 
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(c) Non-Funding Lenders. Unless the Canadian Agent shall have received notice
from any Canadian Lender prior to the date such Canadian Lender is required to
make any payment hereunder with respect to any Canadian Revolving Loan or any
participation in any Canadian Swing Loan that such Canadian Lender will not make
such payment (or any portion thereof) available to the Canadian Agent, the
Canadian Agent may assume that such Canadian Lender has made such payment
available to the Canadian Agent on the date such payment is required to be made
in accordance with this Article II and the Canadian Agent may, in reliance upon
such assumption, make available to Bombay Canada on such date a corresponding
amount. Bombay Canada agrees to repay to the Canadian Agent on demand such
amount (until repaid by such Canadian Lender) with interest thereon for each day
from the date such amount is made available to Bombay Canada until the date such
amount is repaid to the Canadian Agent, at the interest rate applicable to the
Obligation that would have been created when the Canadian Agent made available
such amount to Bombay Canada had such Canadian Lender made a corresponding
payment available; provided, however, that such payment shall not relieve such
Canadian Lender of any obligation it may have to Bombay Canada or the Canadian
Swingline Lender. In addition, any Canadian Lender that shall not have made
available to the Canadian Agent any portion of any payment described above (any
such Canadian Lender, a “Canadian Non-Funding Lender”) agrees to pay such amount
to the Canadian Agent on demand together with interest thereon, for each day
from the date such amount is made available to Bombay Canada until the date such
amount is repaid to the Canadian Agent, at the Federal Funds Rate for the first
Business Day and thereafter (i) in the case of a payment in respect of a
Canadian Revolving Loan, at the interest rate applicable at the time to such
Canadian Revolving Loan and (ii) otherwise, at the interest rate applicable to
Base Rate Loans under the Canadian Revolving Credit Facility. Such repayment
shall then constitute the funding of the corresponding Canadian Revolving Loan
(including any Canadian Revolving Loan deemed to have been made hereunder with
such payment) or participation. The existence of any Canadian Non-Funding Lender
shall not relieve any other Canadian Lender of its obligations under any Loan
Document, but no other Canadian Lender shall be responsible for the failure of
any Canadian Non-Funding Lender to make any payment required under any Loan
Document.
 
(d) Separate Obligations of Bombay Canada. Notwithstanding any provision to the
contrary in any Loan Document, (i) all Obligations of Bombay Canada under this
Agreement and the other Loan Documents are separate and individual Obligations
of Bombay Canada from the Obligations of the U.S. Borrowers, (ii) Bombay Canada
shall not have any liabilities in respect of U.S. Revolving Loans, Swing Loans
or L/C Obligations made by the U.S. Lenders to the U.S. Borrowers or in respect
of any other Obligations, including without limitation any indemnity liabilities
or liabilities for costs or protective advances, of the U.S. Borrowers to Agent
or Lenders arising from or related to U.S. Revolving Loan, Swing Loans or L/C
Obligations, and (iii) the assets of Bombay Canada shall not serve at any time,
directly or indirectly, as security for the payment and performance of the
Obligations of the U.S. Borrowers under the Loan Documents.
 
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Section 2.3  Swing Loans.
 
Section 2.3A Swing Loans (a) Availability. On the terms and subject to the
conditions contained in this Agreement, the Swingline Lender may, in its sole
discretion, make loans in Dollars (each a “Swing Loan”) available to the U.S.
Borrower under the U.S. Revolving Credit Facility from time to time on any
Business Day during the period from the date hereof until the Revolving Credit
Termination Date in an aggregate principal amount at any time outstanding not to
exceed its Swingline Commitment; provided, however, that the Swingline Lender
may not make any Swing Loan (i) to the extent that after giving effect to such
Swing Loan, the aggregate U.S. Revolving Credit Outstandings would exceed the
lesser of (x) aggregate U.S. Revolving Credit Commitments minus the Minimum
Availability Amount and (y) except for Overadvances, the U.S. Borrowing Base
minus the Minimum Availability Amount and (ii) in the period commencing on the
first Business Day after it receives notice from the Administrative Agent or the
Required Lenders that one or more of the conditions precedent contained in
Section 3.2 are not satisfied and ending when such conditions are satisfied or
duly waived. In connection with the making of any Swing Loan, the Swingline
Lender may but shall not be required to determine that, or take notice whether,
the conditions precedent set forth in Section 3.2 have been satisfied or waived.
Each Swing Loan shall be a Base Rate Loan and must be repaid in full on the
earliest of (i) the funding date of any Borrowing of U.S. Revolving Loans and
(ii) the Revolving Credit Termination Date. Within the limits set forth in the
first sentence of this clause (a), amounts of Swing Loans repaid may be
reborrowed under this clause (a).
 
(b) Borrowing Procedures. In order to request a Swing Loan, the U.S. Borrowers
shall give to the Administrative Agent a notice to be received not later than
1:00 p.m. on the day of the proposed borrowing, which may be made in a writing
substantially in the form of Exhibit D duly completed (a “Swingline Request”) or
by telephone if confirmed promptly but, in any event, prior to such borrowing,
with such a Swingline Request. In addition, if any Notice of Borrowing requests
a Borrowing of Base Rate Loans, the Swingline Lender may, notwithstanding
anything else to the contrary in Section 2.2A, make a Swing Loan available to
the U.S. Borrowers in an aggregate amount not to exceed such proposed Borrowing,
and the aggregate amount of the corresponding proposed Borrowing shall be
reduced accordingly by the principal amount of such Swing Loan. The
Administrative Agent shall promptly notify the Swingline Lender of the details
of the requested Swing Loan. Upon receipt of such notice and subject to the
terms of this Agreement, the Swingline Lender may make a Swing Loan available to
the U.S. Borrowers by making the proceeds thereof available to the
Administrative Agent and, in turn, the Administrative Agent shall make such
proceeds available to the U.S. Borrowers on the date set forth in the relevant
Swingline Request.
 
(c ) Refinancing Swing Loans. The Swingline Lender may at any time forward a
demand to the Administrative Agent (which the Administrative Agent shall, upon
receipt, forward to each U.S. Lender) that each U.S. Lender pay to the
Administrative Agent, for the account of the Swingline Lender, such U.S.
Lender’s Pro Rata Share of all or a portion of the outstanding Swing Loans. Each
U.S. Lender shall pay such Pro Rata Share to the Administrative Agent for the
account of the Swingline Lender. Upon receipt by the Administrative Agent of
such payment (other than during the continuation of any Event of Default under
Section 8.1(e)), such U.S. Lender shall be deemed to have made a U.S. Revolving
Loan to the U.S. Borrowers, which, upon receipt of such payment by the Swingline
Lender from the Administrative Agent, the U.S. Borrowers shall be deemed to have
used in whole to refinance such Swing Loan. In addition, regardless of whether
any such demand is made, upon the occurrence of any Event of Default under
Section 8.1(e), each U.S. Lender shall be deemed to have acquired, without
recourse or warranty, an undivided interest and participation in each Swing Loan
in an amount equal to such U.S. Lender’s Pro Rata Share of such Swing Loan. If
any payment made by any U.S. Lender as a result of any such demand is not deemed
a U.S. Revolving Loan, such payment shall be deemed a funding by such U.S.
Lender of such participation. Such participation shall not be otherwise required
to be funded. Upon receipt by the Swingline Lender as a U.S. Lender of any
payment from any U.S. Lender pursuant to this clause (c) with respect to any
portion of any Swing Loan, the Swingline Lender shall as a U.S. Lender promptly
pay over to such U.S. Lender all payments of principal (to the extent received
after such payment by such U.S. Lender) and interest (to the extent accrued with
respect to periods after such payment) received by the Swingline Lender as a
U.S. Lender with respect to such portion.
 
(d) Obligation to Fund Absolute. Each U.S. Lender’s obligations pursuant to
clause (c) above shall be absolute, unconditional and irrevocable and shall be
performed strictly in accordance with the terms of this Agreement under any and
all circumstances whatsoever, including (A) the existence of any setoff, claim,
abatement, recoupment, defense or other right that such U.S. Lender, any
Affiliate thereof or any other Person may have against the Swingline Lender as a
U.S. Lender, any other Secured Party or any other Person, (B) the failure of any
condition precedent set forth in Section 3.2 to be satisfied or the failure of
the U.S. Borrowers to deliver any notice set forth in Section 2.2A(a) (each of
which requirements the U.S. Lenders hereby irrevocably waive) and (C) any
adverse change in the condition (financial or otherwise) of any Loan Party.
 
Section 2.3B Canadian Swing Loans (a) Availability. On the terms and subject to
the conditions contained in this Agreement, the Canadian Swingline Lender may,
in its sole discretion, make loans in Dollars (each a “Canadian Swing Loan”)
available to Bombay Canada under the Canadian Revolving Credit Facility from
time to time on any Business Day during the period from the date hereof until
the Revolving Credit Termination Date in an aggregate principal amount at any
time outstanding not to exceed its Canadian Swingline Commitment; provided,
however, that the Canadian Swingline Lender may not make any Canadian Swing Loan
(x) to the extent that after giving effect to such Canadian Swing Loan, the
aggregate Canadian Revolving Credit Outstandings would exceed the lesser of
(1) the aggregate Canadian Revolving Credit Commitments and (2) the Canadian
Borrowing Base and (y) in the period commencing on the first Business Day after
it receives notice from the Administrative Agent or the Required Lenders that
one or more of the conditions precedent contained in Section 3.2 are not
satisfied and ending when such conditions are satisfied or duly waived. In
connection with the making of any Canadian Swing Loan, the Canadian Swingline
Lender may but shall not be required to determine that, or take notice whether,
the conditions precedent set forth in Section 3.2 have been satisfied or waived.
Each Canadian Swing Loan shall be a Base Rate Loan and must be repaid in full on
the earliest of (i) the funding date of any Borrowing of Canadian Revolving
Loans and (ii) the Revolving Credit Termination Date. Within the limits set
forth in the first sentence of this clause (a), amounts of Canadian Swing Loans
repaid may be reborrowed under this clause (a).
 
(b) Borrowing Procedures. In order to request a Canadian Swing Loan, Bombay
Canada shall give to the Canadian Agent a duly completed Swingline Request to be
received not later than 1:00 p.m. on the day of the proposed borrowing or by
telephone if confirmed promptly but, in any event, prior to such borrowing, with
such a Swingline Request. In addition, if any Notice of Borrowing requests a
Borrowing of Canadian Revolving Loans as Base Rate Loans, the Canadian Swingline
Lender may, notwithstanding anything else to the contrary in Section 2.2, make a
Canadian Swing Loan available to Bombay Canada in an aggregate amount not to
exceed such proposed Borrowing, and the aggregate amount of the corresponding
proposed Borrowing shall be reduced accordingly by the principal amount of such
Canadian Swing Loan. The Canadian Agent shall promptly notify the Canadian
Swingline Lender of the details of the requested Canadian Swing Loan. Upon
receipt of such notice and subject to the terms of this Agreement, the Canadian
Swingline Lender may make a Canadian Swing Loan available to Bombay Canada by
making the proceeds thereof available to the Canadian Agent and, in turn, the
Canadian Agent shall make such proceeds available to Bombay Canada on the date
set forth in the relevant Swingline Request.
 
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(c) Refinancing Swing Loans. The Canadian Swingline Lender may at any time
forward a demand to the Canadian Agent (which the Canadian Agent shall, upon
receipt, forward to each Canadian Lender) that each Canadian Lender pay to the
Canadian Agent, for the account of the Canadian Swingline Lender, such Canadian
Lender’s Pro Rata Share of all or a portion of the outstanding Canadian Swing
Loans. Each Canadian Lender shall pay such Pro Rata Share to the Canadian Agent
for the account of the Canadian Swingline Lender. Upon receipt by the Canadian
Agent of such payment (other than during the continuation of any Event of
Default under Section 8.1(e)), such Canadian Lender shall be deemed to have made
a Canadian Revolving Loan to Bombay Canada, which, upon receipt of such payment
by the Canadian Swingline Lender from the Canadian Agent, Bombay Canada shall be
deemed to have used in whole to refinance such Canadian Swing Loan. In addition,
regardless of whether any such demand is made, upon the occurrence of any Event
of Default under Section 8.1(e), each Canadian Lender shall be deemed to have
acquired, without recourse or warranty, an undivided interest and participation
in each Canadian Swing Loan in an amount equal to such Canadian Lender’s Pro
Rata Share of such Canadian Swing Loan. If any payment made by any Canadian
Lender as a result of any such demand is not deemed a Canadian Revolving Loan,
such payment shall be deemed a funding by such Canadian Lender of such
participation. Such participation shall not be otherwise required to be funded.
Upon receipt by the Canadian Swingline Lender of any payment from any Canadian
Lender pursuant to this clause (c) with respect to any portion of any Canadian
Swing Loan, the Canadian Swingline Lender shall promptly pay over to such
Canadian Lender all payments of principal (to the extent received after such
payment by such Lender) and interest (to the extent accrued with respect to
periods after such payment) received by the Canadian Swingline Lender with
respect to such portion.
 
(d) Obligation to Fund Absolute. Each Canadian Lender’s obligations pursuant to
clause (c) above shall be absolute, unconditional and irrevocable and shall be
performed strictly in accordance with the terms of this Agreement under any and
all circumstances whatsoever, including (A) the existence of any setoff, claim,
abatement, recoupment, defense or other right that such Canadian Lender, any
Affiliate thereof or any other Person may have against the Canadian Swingline
Lender, any other Secured Party or any other Person, (B) the failure of any
condition precedent set forth in Section 3.2 to be satisfied or the failure of
Bombay Canada to deliver any notice set forth in Section 2.2B(a) (each of which
requirements the Canadian Lenders hereby irrevocably waive) and (C) any adverse
change in the condition (financial or otherwise) of any Loan Party.
 
Section 2.4  Letters of Credit. (a) Commitment and Conditions. On the terms and
subject to the conditions contained herein, each L/C Issuer agrees to Issue, or
cause to be Issued, at the request of the Parent, in accordance with such L/C
Issuer’s usual and customary business practices, and for the account of the U.S.
Borrowers (or, as long as the U.S. Borrowers remain responsible for the payment
in full of all amounts drawn thereunder and related fees, costs and expenses,
for the account of any Group Member) Letters of Credit from time to time on any
Business Day during the period from the Closing Date through the earlier of the
Revolving Credit Termination Date and seven days prior to the Scheduled Maturity
Date; provided, however, that such L/C Issuer shall not be under any obligation
to Issue any Letter of Credit upon the occurrence of any of the following, after
giving effect to such Issuance:
 
(i)  (x) the U.S. Revolving Credit Outstandings would exceed the lesser of
(1) aggregate U.S. Revolving Credit Commitments minus the Minimum Availability
Amount or (2) the U.S. Borrowing Base minus the Minimum Availability Amount or
(y) the L/C Obligations for all Letters of Credit would exceed the L/C Sublimit;
 
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(ii)  the expiration date of such Letter of Credit (x) is not a Business Day,
(y) is more than one year after the date of issuance thereof or (z) is later
than 7 days prior to the Scheduled Maturity Date; provided, however, that any
Letter of Credit with a term not exceeding one year may provide for its renewal
for additional periods not exceeding one year as long as (1) each of the U.S.
Borrowers and such L/C Issuer have the option to prevent such renewal before the
expiration of such term or any such period and (2) neither such L/C Issuer nor
the U.S. Borrowers shall permit any such renewal to extend such expiration date
beyond the date set forth in this clause (a); or
 
(iii)  (x) any fee due in connection with, and on or prior to, such Issuance has
not been paid, (y) such Letter of Credit is requested to be Issued in a form
that is not acceptable to such L/C Issuer or (z) such L/C Issuer shall not have
received, each in form and substance reasonably acceptable to it and duly
executed by the U.S. Borrowers (and, if such Letter of Credit is issued for the
account of any other Group Member, such Group Member), the documents that such
L/C Issuer generally uses in the ordinary course of its business for the
Issuance of letters of credit of the type of such Letter of Credit
(collectively, the “L/C Reimbursement Agreement”).
 
For each such Issuance, the applicable L/C Issuer may, but shall not be required
to, determine that, or take notice whether, the conditions precedent set forth
in Section 3.2 have been satisfied or waived in connection with the Issuance of
any Letter of Credit; provided, however, that no Letter of Credit shall be
Issued during the period starting on the first Business Day after the receipt by
such L/C Issuer of notice from the Administrative Agent or the Required Lenders
that any condition precedent contained in Section 3.2 is not satisfied and
ending on the date all such conditions are satisfied or duly waived.
 
(b)  Notice of Issuance. The U.S. Borrowers shall give the relevant L/C Issuer
and the Administrative Agent a notice of any requested Issuance of any Letter of
Credit, which shall be effective only if received by such L/C Issuer and the
Administrative Agent not later than 11:00 a.m. on the third Business Day prior
to the date of such requested Issuance. Such notice may be made in a writing
substantially the form of Exhibit E duly completed or in a writing in any other
form acceptable to such L/C Issuer or by electronic means agreed among the L/C
Issuer, the Administrative Agent and the Parent (an “L/C Request”) or by
telephone if confirmed promptly, but in any event within one Business Day and
prior to such Issuance, with such an L/C Request.
 
(c)  Reporting Obligations of L/C Issuers. Each L/C Issuer agrees to provide the
Administrative Agent (which, after receipt, the Administrative Agent shall
provide to each U.S. Lender), in form and substance satisfactory to the
Administrative Agent, each of the following on the following dates: (i) on or
prior to (x) any Issuance of any Letter of Credit by such L/C Issuer, (y) any
drawing under any such Letter of Credit or (z) any payment (or failure to pay
when due) by the U.S. Borrowers of any related L/C Reimbursement Obligation,
notice thereof, which shall contain a reasonably detailed description of such
Issuance, drawing or payment, (ii) upon the request of the Administrative Agent
(or any U.S. Lender through the Administrative Agent), copies of any Letter of
Credit Issued by such L/C Issuer and any related L/C Reimbursement Agreement and
such other documents and information as may reasonably be requested by the
Administrative Agent and (iii) on the first Business Day of each calendar week,
a schedule of the Letters of Credit Issued by such L/C Issuer, in form and
substance reasonably satisfactory to the Administrative Agent, setting forth, as
of the last Business Day of the previous calendar week, the L/C Obligations for
all such Letters of Credit, listing separately the L/C Obligations for each
Documentary Letter of Credit and Standby Letter of Credit.
 
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(d)  Acquisition of Participations. Upon any Issuance of a Letter of Credit in
accordance with the terms of this Agreement resulting in any increase in the L/C
Obligations, each U.S. Lender shall be deemed to have acquired, without recourse
or warranty, an undivided interest and participation in such Letter of Credit
and the related L/C Obligations in an amount equal to such U.S. Lender’s Pro
Rata Share of such L/C Obligations.
 
(e)  Reimbursement Obligations of the U.S. Borrowers. The L/C Issuer shall
promptly notify the Administrative Agent of the incurrence by the L/C Issuer of
an L/C Reimbursement Obligation. Upon the incurrence by the L/C Issuer of an L/C
Reimbursement Obligation, the L/C Reimbursement Obligation shall be payable on
demand by the U.S. Borrowers with interest thereon computed (i) from the date on
which such L/C Reimbursement Obligation arose to the first Business Day after
the Parent receives notice from the L/C Issuer that payment has been made under
such Letter of Credit or that such L/C Reimbursement Obligation is otherwise due
(the “L/C Reimbursement Date”), at the interest rate applicable during such
period to U.S. Revolving Loans that are Base Rate Loans and (ii) thereafter
until payment in full, at the interest rate applicable during such period to
past due U.S. Revolving Loans that are Base Rate Loans. The Administrative Agent
shall forward a copy of the notice described in this clause (e) above to each
U.S. Lender.
 
(f)  Reimbursement Obligations of the U.S. Lenders. Upon receipt of the notice
described in clause (e) above from the Administrative Agent, each U.S. Lender
shall pay to the Administrative Agent for the account of such L/C Issuer its Pro
Rata Share of such L/C Reimbursement Obligation. By making such payment (other
than during the continuation of an Event of Default under Section 8.1(e)), such
Lender shall be deemed to have made a U.S. Revolving Loan to the U.S. Borrowers,
which, upon receipt thereof by such L/C Issuer, the U.S. Borrowers shall be
deemed to have used in whole to repay such L/C Reimbursement Obligation. Any
such payment that is not deemed a U.S. Revolving Loan shall be deemed a funding
by such U.S. Lender of its participation in the applicable Letter of Credit and
the related L/C Obligations. Such participation shall not otherwise be required
to be funded. Upon receipt by any L/C Issuer of any payment from any U.S. Lender
pursuant to this clause (f) with respect to any portion of any L/C Reimbursement
Obligation, such L/C Issuer shall promptly pay over to such U.S. Lender all
payments received after such payment by such L/C Issuer with respect to such
portion.
 
(g)  Obligations Absolute. The obligations of the U.S. Borrowers and the U.S.
Lenders pursuant to clauses (d), (e) and (f) above shall be absolute,
unconditional and irrevocable and performed strictly in accordance with the
terms of this Agreement irrespective of (i) (x) the invalidity or
unenforceability of any term or provision in any Letter of Credit, any document
transferring or purporting to transfer a Letter of Credit, any Loan Document
(including the sufficiency of any such instrument), or any modification to any
provision of any of the foregoing, (y) any document presented under a Letter of
Credit being forged, fraudulent, invalid, insufficient or inaccurate in any
respect or failing to comply with the terms of such Letter of Credit or (z) any
loss or delay, including in the transmission of any document, (ii) the existence
of any setoff, claim, abatement, recoupment, defense or other right that any
Person (including any Group Member) may have against the beneficiary of any
Letter of Credit or any other Person, whether in connection with any Loan
Document or any other Contractual Obligation or transaction, or the existence of
any other withholding, abatement or reduction, (iii) in the case of the
obligations of any U.S. Lender, (x) the failure of any condition precedent set
forth in Section 3.2 to be satisfied (each of which conditions precedent the
U.S. Lenders hereby irrevocably waive) or (y) any adverse change in the
condition (financial or otherwise) of any Loan Party and (iv) any other act or
omission to act or delay of any kind of any Secured Party or any other Person or
any other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might, but for the provisions of this Section 2.4, constitute a
legal or equitable discharge of any obligation of the Borrowers or any U.S.
Lender hereunder.
 
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(h)  Limitation of L/C Issuer’s Liability. No action taken or omitted to be
taken by the relevant L/C Issuer under or in connection with any Letter of
Credit, none of the circumstances set forth in clause (g) above and no other
circumstance shall result in any liability of such L/C Issuer to any Group
Member or any other Secured Party in the absence of gross negligence or willful
misconduct by such L/C Issuer. In determining whether documents presented under
a Letter of Credit comply with the terms thereof, the L/C Issuer may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
In making any payment under any Letter of Credit, the L/C Issuer may rely
exclusively on the documents presented to it under such Letter of Credit as to
any and all matters set forth therein, and any noncompliance in any immaterial
respect of the documents presented under such Letter of Credit with the terms
thereof shall, in each case, be deemed not to constitute willful misconduct or
gross negligence of the L/C Issuer.
 
(i)  Applicable Rules. Unless otherwise expressly agreed by the applicable L/C
Issuer and the Borrowers, (i) the rules of the “International Standby Practices
1998” published by the Institute of International Banking Law and Practice (or
such later version thereof as may be in effect at the time of determination)
shall apply to each standby Letter of Credit and (ii) the rules of the Uniform
Customs and Practices for Documentary Credits (UCP500), as most recently
published by the International Chamber of Commerce at the time of determination
and together with supplements and revisions thereto published by the
International Chamber of Commerce from time to time, shall apply to each
documentary Letter of Credit.
 
(j)  Conflicts. In the event of a conflict between the terms of any L/C
Reimbursement Agreement and this Agreement, the terms of this Agreement shall
govern.
 
Section 2.5  Reduction and Termination of the Commitments.
 
(a)  Optional. The U.S. Borrowers may, upon notice to the Administrative Agent,
terminate in whole or reduce in part ratably any unused portion of the U.S.
Revolving Credit Commitments; provided, however, that each partial reduction
shall be in an aggregate amount that is an integral multiple of $1,000,000.
Bombay Canada may, upon notice to the Canadian Agent, terminate in whole or
reduce in part ratably any unused portion of the Canadian Revolving Credit
Commitments; provided, however, that each partial reduction shall be in an
aggregate amount that is an integral multiple of $1,000,000.
 
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(b)  Mandatory. All outstanding Commitments shall terminate on the Scheduled
Maturity Date.
 
Section 2.6  Repayment of Loans. The U.S. Borrowers promise to repay the entire
unpaid principal amount of the U.S. Revolving Loans and the Swing Loans and
Bombay Canada promises to repay the entire unpaid principal amount of the
Canadian Revolving Loans and the Canadian Swing Loans on the Scheduled Maturity
Date.
 
Section 2.7  Optional Prepayments. The Borrowers may prepay the outstanding
principal amount of any Loan in whole or in part at any time (together with any
breakage costs that may be owing pursuant to Section 2.16(a) after giving effect
to such prepayment).
 
Section 2.8  Mandatory Prepayments.
 
(a)  Asset Sales and Property Loss Events. Upon receipt on or after the Closing
Date by any Loan Party or any of its Subsidiaries of Net Cash Proceeds arising
from (i) any Sale of the Eligible Real Property or (ii) any Property Loss Event
with respect to the Eligible Real Property, the U.S. Borrowers shall immediately
pay or cause to be paid to the Administrative Agent an amount such that the U.S.
Revolving Credit Outstandings shall be equal to or less than the amount of the
U.S. Borrowing Base (without regard to the Eligible Real Property) minus the
Minimum Availability Amount; provided, however, that in the event of a partial
Property Loss Event, (i) the U.S. Borrowers shall immediately pay or cause to be
paid the insurance proceeds associated with such loss to a segregated account
over which the Administrative Agent has a valid perfected Lien for use by the
Borrowers solely to repair such loss or damage to property and (ii) the
Borrowers shall not be required to pay or cause such proceeds to be paid to the
Administrative Agent to the extent (A) the Borrowers reinvest or commit to
reinvest such proceeds within 9 months of the occurrence of the partial Property
Loss Event and (B) as long as the Borrower is diligently pursuing to repair the
loss or damage to such Eligible Real Property. The Borrowers shall deliver to
the Administrative Agent within 21 days of such partial Property Loss Event an
updated appraisal with respect to such Eligible Real Property.
 
(b)  Excess Outstandings. On any date on which (i) the aggregate principal
amount of U.S. Revolving Credit Outstandings exceeds the lesser of (x) aggregate
U.S. Revolving Credit Commitments at such time minus the Minimum Availability
Amount and (y) the U.S. Borrowing Base minus the Minimum Availability Amount or
(ii) the L/C Obligations for all Letters of Credit exceeds the L/C Sublimit, the
U.S. Borrowers shall pay to the Administrative Agent an amount equal to such
excess. On any date on which the aggregate principal amount of Canadian
Revolving Credit Outstandings exceeds the lesser of (x) the aggregate Canadian
Revolving Credit Commitments at such time and (y) the Canadian Borrowing Base,
Bombay Canada shall pay to the Canadian Agent an amount equal to such excess.
Notwithstanding the foregoing, any Overadvance made in accordance with Section
2.1A(c) shall be repaid in accordance with such Section 2.1A(c).
 
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(c)  Application of Payments. Any payments made to the Administrative Agent
and/or the Canadian Agent pursuant to this Section 2.8 shall be applied to the
Obligations in accordance with Section 2.12(b).
 
Section 2.9  Interest. (a) Rate. All Loans and the outstanding amount of all
other Obligations shall bear interest, in the case of Loans, on the unpaid
principal amount thereof from the date such Loans are made and, in the case of
such other Obligations, from the date such other Obligations are due and payable
until, in all cases, paid in full, except as otherwise provided in clause (c)
below, as follows: (i) in the case of Base Rate Loans, at a rate per annum equal
to the sum of the Base Rate and the Applicable Margin, each as in effect from
time to time, (ii) in the case of Eurodollar Rate Loans, at a rate per annum
equal to the sum of the Eurodollar Rate and the Applicable Margin, each as in
effect for the applicable Interest Period and (iii) in the case of other
Obligations, at a rate per annum equal to the sum of the Base Rate and the
Applicable Margin for Revolving Loans that are Base Rate Loans, each as in
effect from time to time.
 
(b)  Payments. Interest accrued shall be payable in arrears (i) if accrued on
the principal amount of any Loan, (A) at maturity (whether by acceleration or
otherwise), and (B)(1) if such Loan is a Base Rate Loan (including a Swing Loan
or a Canadian Swing Loan), on the last day of each calendar month commencing on
the first such day following the making of such Loan, (2) if such Loan is a
Eurodollar Rate Loan, on the last day of each Interest Period applicable to such
Loan and, if applicable, on each date during such Interest Period occurring
every 3 months from the first day of such Interest Period and (ii) if accrued on
any other Obligation, on demand from and after the time such Obligation is due
and payable (whether by acceleration or otherwise).
 
(c)  Default Interest. Notwithstanding the rates of interest specified in
clause (a) above or elsewhere in any Loan Document, effective immediately upon
(i) the occurrence of any Event of Default under Section 8.1(a) or 8.1(e)(ii) or
(ii) the delivery of a notice by the Administrative Agent or the Required
Lenders to the Borrowers during the continuance of any other Event of Default
and, in each case, for as long as such Event of Default shall be continuing, the
principal balance of all Obligations (including any Obligation that bears
interest by reference to the rate applicable to any other Obligation) then due
and payable shall, subject to the Interest Act (Canada), bear interest at a rate
that is 2% per annum in excess of the interest rate applicable to such
Obligations from time to time, payable on demand or, in the absence of demand,
on the date that would otherwise be applicable.
 
(d)  Limitation on Interest. If any provision of this Agreement or of any of the
other Loan Documents would obligate any Borrower or any other Loan Party to make
any payment of interest or other amount payable to any Lender in an amount or
calculated at a rate which would be prohibited by law or would result in a
receipt by such Lender of interest at a criminal rate (as such terms are
construed under the Criminal Code (Canada)) then, notwithstanding such
provisions, such amount or rate shall be deemed to have been adjusted with
retroactive effect to the maximum amount or rate of interest, as the case may
be, as would not be so prohibited by law or so result in a receipt by such
Lender of interest at a criminal rate, such adjustment to be effected, to the
extent necessary, as follows: (1) firstly, by reducing the amount or rate of
interest required to be paid to such Lender under this Section 2.9, and (2)
thereafter, by reducing any fees, commissions, premiums and other amounts
required to be paid to such Lender which would constitute “interest” for
purposes of Section 347 of the Criminal Code (Canada). Notwithstanding the
foregoing, and after giving effect to all adjustments contemplated thereby, if a
Lender shall have received an amount in excess of the maximum permitted by that
section of the Criminal Code (Canada), such Borrower shall be entitled, by
notice in writing to such Lender, to obtain reimbursement from such Lender in an
amount equal to such excess and, pending such reimbursement, such amount shall
be deemed to be an amount payable by such Lender to such Borrower. Any amount or
rate of interest referred to in this Section 2.9(d) shall be determined in
accordance with generally accepted actuarial practices and principles as an
effective annual rate of interest over the term that the applicable Loan remains
outstanding on the assumption that any charges, fees or expenses that fall
within the meaning of “interest” (as defined in the Criminal Code (Canada))
shall, if they relate to a specific period of time, be pro-rated over that
period of time and otherwise be pro-rated over the period from the Closing Date
to the Revolving Credit Termination Date and, in the event of a dispute, a
certificate of a Fellow of the Canadian Institute of Actuaries appointed by
Agent shall be conclusive for the purposes of such determination.
 
 
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(e)  Interest Act (Canada). For purposes of disclosure pursuant to the Interest
Act (Canada), the annual rates of interest or fees to which the rates of
interest or fees provided in this Agreement and the other Loan Documents (and
stated herein or therein, as applicable, to be computed on the basis of a 360
day year or any other period of time less than a calendar year) are equivalent
are the rates so determined multiplied by the actual number of days in the
applicable calendar year and divided by 360 or such other period of time,
respectively.
 
Section 2.10  Conversion and Continuation Options. (a) Option. The Borrowers may
elect (i) in the case of any Eurodollar Rate Loan, (A) to continue such
Eurodollar Rate Loan or any portion thereof for an additional Interest Period on
the last day of the Interest Period applicable thereto and (B) to convert such
Eurodollar Rate Loan or any portion thereof into a Base Rate Loan at any time on
any Business Day, subject to the payment of any breakage costs required by
Section 2.16(a), and (ii) in the case of Base Rate Loans (other than Swing Loans
or Canadian Swing Loans), to convert such Base Rate Loans or any portion thereof
into Eurodollar Rate Loans at any time on any Business Day upon 3 Business Days’
prior notice; provided, however, that, (A) for each Interest Period, the
aggregate amount of Eurodollar Rate Loans having such Interest Period must be an
integral multiple of $1,000,000 and (B) no conversion in whole or in part of
Base Rate Loans to Eurodollar Rate Loans and no continuation in whole or in part
of Eurodollar Rate Loans shall be permitted at any time at which (1) an Event of
Default shall be continuing and the Administrative Agent or the Required Lenders
shall have determined in their sole discretion not to permit such conversions or
continuations or (2) such continuation or conversion would be made during a
suspension imposed by Section 2.15.
 
(b)  Procedure. Each such election shall be made by giving the Administrative
Agent or the Canadian Agent, as applicable, at least 3 Business Days’ prior
notice in substantially the form of Exhibit F (a “Notice of Conversion or
Continuation”) duly completed. The Administrative Agent or the Canadian Agent in
respect of Canadian Lenders shall promptly notify each Lender of its receipt of
a Notice of Conversion or Continuation and of the options selected therein. If
the Administrative Agent or Canadian Agent does not receive a timely Notice of
Conversion or Continuation from the Borrowers containing a permitted election to
continue or convert any Eurodollar Rate Loan, then, upon the expiration of the
applicable Interest Period, such Loan shall be automatically converted to a Base
Rate Loan. Each partial conversion or continuation shall be allocated ratably
among the Lenders in the applicable Facility in accordance with their Pro Rata
Share.
 
 
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Section 2.11  Fees. (a) Unused Commitment Fee. The Borrowers agree to pay to
each Lender a commitment fee on the actual daily amount by which the Revolving
Credit Commitment of such Lender exceeds its Pro Rata Share of the sum of (i)
the aggregate outstanding principal amount of Revolving Loans and (ii) in the
case of the U.S. Lenders, the outstanding amount of the L/C Obligations for all
Letters of Credit (the “Unused Commitment Fee”) from the date hereof through the
Revolving Credit Termination Date at a rate per annum equal to the Applicable
Margin Unused Commitment Fee, payable in arrears (x) on the last day of each
calendar month and (y) on the Revolving Credit Termination Date.
 
(b)  Letter of Credit Fees. The U.S. Borrowers agree to pay, with respect to all
Documentary Letters of Credit and Standby Letters of Credit issued by any L/C
Issuer, (i) to such L/C Issuer, certain fees, documentary and processing charges
as separately agreed between the U.S. Borrowers and such L/C Issuer or otherwise
in accordance with such L/C Issuer’s standard schedule in effect at the time of
determination thereof and (ii) to the Administrative Agent, for the benefit of
the U.S. Lenders according to their Pro Rata Shares, a fee accruing at a rate
per annum equal to the Applicable Margin for Revolving Loans that are Eurodollar
Rate Loans on the Dollar Equivalent on the maximum undrawn face amount of such
Letters of Credit, payable in arrears (A) on the last day of each calendar
month, ending after the issuance of such Letter of Credit and (B) on the
Revolving Credit Termination Date; provided, however, that the fee payable under
this clause (ii) shall be increased by two percent per annum and shall be
payable, in addition to being payable on any date it is otherwise required to be
paid hereunder, on demand effective immediately upon (A) the occurrence of any
Event of Default under Section 8.1(a) or 8.1(e)(ii) or (B) the delivery of a
notice by the Administrative Agent or the Required Lenders to the Borrowers
during the continuance of any other Event of Default and, in each case, for as
long as such Event of Default shall be continuing.
 
(c)  Additional Fees. The Borrowers shall pay to the Administrative Agent or
Canadian Agent, as applicable, and their Related Persons the fees described in
the Fee Letter.
 
Section 2.12  Application of Payments. (a) Application of Voluntary Prepayments.
Unless otherwise provided in this Section 2.12 or elsewhere in any Loan
Document, (i) all payments and any other amounts received by the Administrative
Agent from or for the benefit of the U.S. Borrowers shall be applied to repay
the Obligations as the U.S. Borrowers designate, and (ii) all payments and other
amounts received by the Canadian Agent from or for the benefit of Bombay Canada
shall be applied to repay the Obligations as Bombay Canada designates.
 
(b)  Application of Mandatory Prepayments. Subject to the provisions of clause
(c) below with respect to the application of payments during the continuance of
an Event of Default, (i) in the case of a payment pursuant to Section 2.8(a),
first to the Swing Loans, second to the U.S. Revolving Loans and third to
provide cash collateral to the extent and in the manner contemplated by Section
8.3 and (ii) in all other cases, any payment made by the U.S. Borrowers to the
Administrative Agent or by Bombay Canada to the Canadian Agent pursuant to
Section 2.8 or any other prepayment of the Obligations required to be applied in
accordance with this clause (b) shall be applied (A) in the case of payments by
the Canadian Borrower, first, to repay the outstanding principal balance of the
Canadian Swing Loans, second, to repay the outstanding principal balance of the
Canadian Revolving Loans and, then, any excess shall be retained by the Canadian
Borrower and (B) in the case of the U.S. Borrowers, first, to repay the
outstanding principal balance of the Swing Loans, second, to repay the
outstanding principal balance of the U.S. Revolving Loans, third, to provide
cash collateral to the extent and in the manner in Section 8.3 and, then, any
excess shall be retained by the U.S. Borrowers.
 
 
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(c)  Application of Payments During an Event of Default. (i) The U.S. Borrowers
hereby irrevocably waive, and, subject to Section 2.2B(d), agree to cause each
Loan Party and each other Group Member (which shall not include Bombay Canada)
to waive, the right to direct the application during the continuance of an Event
of Default of any and all payments in respect of any of their Obligations and
any proceeds of their Collateral and agree that, notwithstanding the provisions
of clause (a) above, the Administrative Agent may, and, upon either (A) the
direction of the Required Lenders or (B) the termination of any U.S. Revolving
Credit Commitment or the acceleration of any of their Obligations pursuant to
Section 8.2, shall, apply all payments in respect of any of their Obligations,
all funds on deposit in any Cash Collateral Account and all other proceeds of
their Collateral (i) first, to pay Obligations in respect of any cost or expense
reimbursements, fees or indemnities then due to the Administrative Agent, (ii)
second, to pay Obligations in respect of any cost or expense reimbursements,
fees or indemnities then due to the U.S. Lenders and the L/C Issuers, (iii)
third, to pay interest then due and payable in respect of the U.S. Revolving
Loans and L/C Reimbursement Obligations, (vi) fourth, to repay the outstanding
principal amounts of the U.S. Revolving Loans and L/C Reimbursement Obligations,
to provide cash collateral for Letters of Credit in the manner and to the extent
described in Section 8.3 and (vii) fifth, to the ratable payment of all other of
their Obligations.
 
(ii) Subject to Section 2.2B(d), Bombay Canada hereby irrevocably waives the
right to direct the application during the continuance of an Event of Default of
any and all payments in respect of any of its Obligations and any proceeds of
its Collateral and agree that, notwithstanding the provisions of clause (a)
above, the Canadian Agent may, and, upon either (A) the direction of the
Required Lenders or (B) the termination of any Canadian Revolving Credit
Commitment or the acceleration of any of its Obligations pursuant to
Section 8.2, shall, apply all payments in respect of any of its Obligations, all
funds on deposit in any Cash Collateral Account and all other proceeds of its
Collateral (i) first, to pay Obligations in respect of any cost or expense
reimbursements, fees or indemnities then due to the Canadian Agent, (ii) second,
to pay Obligations in respect of any cost or expense reimbursements, fees or
indemnities then due to the Canadian Lenders, (iii) third, to pay interest then
due and payable in respect of Canadian Revolving Loans and Canadian Swing Loans,
(iv) fourth, to repay the outstanding principal amounts of the Canadian
Revolving Loans and Canadian Swing Loans, and (v) fifth, to the ratable payment
of all other of its Obligations.
 
(d)  Application of Payments Generally. All repayments of any Revolving Loans
shall be applied first, to repay such Loans outstanding as Base Rate Loans and
then, to repay such Loans outstanding as Eurodollar Rate Loans, with those
Eurodollar Rate Loans having earlier expiring Interest Periods being repaid
prior to those having later expiring Interest Periods. If sufficient amounts are
not available to repay all outstanding Obligations described in any priority
level set forth in this Section 2.12, the available amounts shall be applied,
unless otherwise expressly specified herein, to such Obligations ratably based
on the proportion of the Secured Parties’ interest in such Obligations expressed
in Dollars. Any priority level set forth in this Section 2.12 that includes
interest shall include all such interest, whether or not accruing after the
filing of any petition in bankruptcy or the commencement of any insolvency,
reorganization or similar proceeding, and whether or not a claim for post-filing
or post-petition interest is allowed in any such proceeding.
 
 
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Section 2.13  Payments and Computations. (a) Procedure. (i) The U.S. Borrowers
shall make each payment under any Loan Document not later than 1:00 p.m. on the
day when due to the Administrative Agent by wire transfer to the following
account (the “Loan Account”) (or at such other account or by such other means to
such other address as the Administrative Agent shall have notified the U.S.
Borrowers in writing within a reasonable time prior to such payment) in
immediately available Dollars and without setoff or counterclaim:
 
ABA No.: 021-001-033
 
Account No.: 50279513 
 
Deutsche Bank Trust Company Americas, New York, New York
 
Account Name: GECC CFS CIF Collection Account,
 
Reference: Bombay Company, Inc. - CFN9184
 
The Administrative Agent shall promptly thereafter cause to be distributed
immediately available funds relating to the payment of principal, interest or
fees to the U.S. Lenders, in accordance with the application of payments set
forth in Section 2.12. The U.S. Lenders shall make any payment under any Loan
Document in immediately available Dollars and without setoff or counterclaim.
Each U.S. Lender shall make each payment for the account of any L/C Issuer or
Swingline Lender required pursuant to Section 2.3 or 2.4 (A) if the notice or
demand therefor was received by such Lender prior to 1:00 p.m. on any Business
Day, on such Business Day and (B) otherwise, on the Business Day following such
receipt. Payments received by the Administrative Agent after 1:00 p.m. shall be
deemed to be received on the next Business Day.
 
(ii) Bombay Canada shall make each payment under any Loan Document not later
than 1:00 p.m. on the day when due to the Canadian Agent by wire transfer to the
following account (or at such other account or by such other means to such other
address as the Canadian Agent shall have notified Bombay Canada in writing
within a reasonable time prior to such payment) in immediately available Dollars
and without setoff or counterclaim:
 
SWIFT Code: ROYCCAT2
 
Account No.: 120-932-9
 
Royal Bank of Canada, 200 Bay Street, Main Branch, Toronto, Ontario
 
Reference: Bombay Company Inc. CND1052
 
Branch No. 00002
 
Bank No. 00003
 
The Canadian Agent shall promptly thereafter cause to be distributed immediately
available funds relating to the payment of principal, interest or fees to the
Canadian Lenders, in accordance with the application of payments set forth in
Section 2.12. The Canadian Lenders shall make any payment under any Loan
Document in immediately available Dollars and without setoff or counterclaim.
Each Canadian Lender shall make payment for the account of the Canadian
Swingline Lender required hereunder pursuant to Section 2.3 (A) if the notice of
demand therefore was received by such Lender prior to 11:00 a.m. on any Business
Day, on such Business Day and (B) otherwise, on the Business Day following such
receipt. Payments received by the Canadian Agent after 1:00 p.m. shall be deemed
to be received on the next Business Day.
 
 
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(b)  Computations of Interests and Fees. All computations of interest and of
fees shall be made by the Administrative Agent and the Canadian Agent on the
basis of a year of 360 days (or, in the case of Base Rate Loans whose interest
rate is calculated based on the rate set forth in clause (a) of the definition
of “Base Rate”, 365/366 days), in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest and fees are payable. Each determination of an interest rate
or the amount of a fee hereunder shall be made by the Administrative Agent and
the Canadian Agent (including determinations of a Eurodollar Rate or Base Rate
in accordance with the definitions of “Eurodollar Rate” and “Base Rate”,
respectively) and shall be conclusive, binding and final for all purposes,
absent manifest error.
 
(c)  Payment Dates. Whenever any payment hereunder shall be stated to be due on
a day other than a Business Day, the due date for such payment shall be extended
to the next succeeding Business Day without any increase in such payment as a
result of additional interest or fees; provided, however, that such interest and
fees shall continue accruing as a result of such extension of time.
 
(d)  Advancing Payments. (i) Unless the Administrative Agent shall have received
notice from the U.S. Borrowers to the U.S. Lenders prior to the date on which
any payment is due hereunder that the U.S. Borrowers will not make such payment
in full, the Administrative Agent may assume that the U.S. Borrowers has made
such payment in full to the Administrative Agent on such date and the
Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each U.S. Lender on such due date an amount equal to the amount
then due such U.S. Lender. If and to the extent that the U.S. Borrowers shall
not have made such payment in full to the Administrative Agent, each U.S. Lender
shall repay to the Administrative Agent on demand such amount distributed to
such U.S. Lender together with interest thereon (at the Federal Funds Rate for
the first Business Day and thereafter, at the rate applicable to Base Rate Loans
under the applicable Facility) for each day from the date such amount is
distributed to such U.S. Lender until the date such U.S. Lender repays such
amount to the Administrative Agent.
 
(ii) Unless the Canadian Agent shall have received notice from Bombay Canada to
the Canadian Lenders prior to the date on which any payment is due hereunder
that Bombay Canada will not make such payment in full, the Canadian Agent may
assume that Bombay Canada has made such payment in full to the Canadian Agent on
such date and the Canadian Agent may, in reliance upon such assumption, cause to
be distributed to each Canadian Lender on such due date an amount equal to the
amount then due such Canadian Lender. If and to the extent that Bombay Canada
shall not have made such payment in full to the Canadian Agent, each Canadian
Lender shall repay to the Canadian Agent on demand such amount distributed to
such Canadian Lender together with interest thereon (at the Federal Funds Rate
for the first Business Day and thereafter, at the rate applicable to Base Rate
Loans under the applicable Facility) for each day from the date such amount is
distributed to such Canadian Lender until the date such Canadian Lender repays
such amount to the Canadian Agent.
 
(e)  The Administrative Agent is authorized to, and in its sole discretion may,
make Loans (or cause the Canadian Agent to make Loans) on behalf of each
Borrower which the Administrative Agent, in its Permitted Discretion, deems
necessary or desirable (i) to preserve or protect the Collateral, (ii) to
enhance the likelihood of repayment of the Obligations, (iii) pay any other
amount due under this Agreement or the other Loan Documents including all fees,
costs, charges, expenses and interest owing by the Borrowers under this
Agreement and the other Loan Documents if and to the extent the Borrowers fail
to pay promptly such amounts as and when due, in each case even if the amount of
such charges would exceed cause the U.S. Revolving Credit Outstanding to exceed
the U.S. Borrowing Base, the Canadian Revolving Credit Outstandings to exceed
the Canadian Borrowing Base or the sum of the U.S. Revolving Outstandings and
the Canadian Revolving Credit Outstandings to exceed to the Aggregate Borrowing
Base, after giving effect to such charges. Amounts advanced under this Section
2.13(e) are payable on demand by the Administrative Agent to the Parent.
 
 
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Section 2.14  Evidence of Debt. (a) Records of Lenders. Each Lender shall
maintain in accordance with its usual practice accounts evidencing Indebtedness
of the Borrowers to such Lender resulting from each Loan of such Lender from
time to time, including the amounts of principal and interest payable and paid
to such Lender from time to time under this Agreement. In addition, each Lender
having sold a participation in any of its Obligations, acting as agent of the
Borrowers solely for this purpose and solely for tax purposes, shall establish
and maintain at its address referred to in Section 10.11 (or at such other
address as such Lender shall notify the Parent) a record of ownership, in which
such Lender shall register by book entry (i) the name and address of each such
participant (and each change thereto, whether by assignment or otherwise) and
(ii) the rights, interest or obligation of each such participant in any
Obligation, in any Commitment and in any right to receive any payment hereunder.
 
(b)  Records of the Administrative Agent. The Administrative Agent, acting as
agent of the U.S. Borrowers and the Canadian Agent, acting as agent of Bombay
Canada, solely for tax purposes and solely with respect to the actions described
in this Section 2.14, shall establish and maintain at its address referred to in
Section 10.11 (or at such other address as such Agent may notify the Borrowers)
(i) a record of ownership (the “Register”) in which such Agent agrees to
register by book entry the interests (including any rights to receive payment
hereunder) of such Agent, each relevant Lender and each L/C Issuer in the U.S.
Revolving Credit Outstandings or the Canadian Revolving Credit Outstandings,
each of their obligations under this Agreement to participate in each Loan,
Letter of Credit and L/C Reimbursement Obligation, and any assignment of any
such interest, obligation or right and (ii) accounts in the Register in
accordance with its usual practice in which it shall record (A) the names and
addresses of the relevant Lenders and the L/C Issuers (and each change thereto
pursuant to Section 2.18 and Section 10.2), (B) the Commitments of each relevant
Lender, (C) the amount of each relevant Loan and each funding of any
participation described in clause (i) above, for Eurodollar Rate Loans, the
Interest Period applicable thereto, (D) the amount of any principal or interest
due and payable or paid, (E) the amount of the L/C Reimbursement Obligations due
and payable or paid and (F) any other payment received by such Agent from the
relevant Borrowers and its application to the Obligations.
 
(c)  Registered Obligations. Notwithstanding anything to the contrary contained
in this Agreement, the Loans (including any Notes evidencing such Loans and, in
the case of U.S. Revolving Loans, the corresponding obligations to participate
in L/C Obligations and Swing Loans and in the case of Canadian Revolving Loans,
the corresponding obligations to participate in Canadian Swing Loans) and the
L/C Reimbursement Obligations are registered obligations, the right, title and
interest of the Lenders and the L/C Issuers and their assignees in and to such
Loans or L/C Reimbursement Obligations, as the case may be, shall be
transferable only upon notation of such transfer in the Register and no
assignment thereof shall be effective until recorded therein. This Section 2.14
and Section 10.2 shall be construed so that the Loans and L/C Reimbursement
Obligations are at all times maintained in “registered form” within the meaning
of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code and any related
regulations (and any successor provisions).
 
 
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(d)  Prima Facie Evidence. The entries made in the Register and in the accounts
maintained pursuant to clauses (a) and (b) above shall, to the extent permitted
by applicable Requirements of Law, be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided, however, that no error in
such account and no failure of any Lender or the Administrative Agent or the
Canadian Agent to maintain any such account shall affect the obligations of any
Loan Party to repay the Loans in accordance with their terms. In addition, the
Loan Parties, the Administrative Agent, the Canadian Agent, the Lenders and the
L/C Issuers shall treat each Person whose name is recorded in the Register as a
Lender or L/C Issuer, as applicable, for all purposes of this Agreement.
Information contained in the Register with respect to any Lender or any L/C
Issuer shall be available for access by the Borrowers, the Administrative Agent,
the Canadian Agent, such Lender or such L/C Issuer at any reasonable time and
from time to time upon reasonable prior notice. No Lender or L/C Issuer shall,
in such capacity, have access to or be otherwise permitted to review any
information in the Register other than information with respect to such Lender
or L/C Issuer unless otherwise agreed by the Administrative Agent.
 
(e)  Notes. Upon any Lender’s request, the Borrowers shall promptly execute and
deliver Notes to such Lender evidencing the Loans of such Lender in a Facility
and substantially in the form of Exhibit B; provided, however, that only one
Note for each Facility shall be issued to each Lender, except (i) to an existing
Lender exchanging existing Notes to reflect changes in the Register relating to
such Lender, in which case the new Notes delivered to such Lender shall be dated
the date of the original Notes and (ii) in the case of loss, destruction or
mutilation of existing Notes and similar circumstances. Each Note, if issued,
shall only be issued as means to evidence the right, title or interest of a
Lender or a registered assignee in and to the related Loan, as set forth in the
Register, and in no event shall any Note be considered a bearer instrument or
obligation.
 
Section 2.15  Suspension of Eurodollar Rate Option. Notwithstanding any
provision to the contrary in this Article II, the following shall apply:
 
(a)  Interest Rate Unascertainable, Inadequate or Unfair. In the event that (A)
the Administrative Agent determines that adequate and fair means do not exist
for ascertaining the applicable interest rates by reference to which the
Eurodollar Rate is determined or (B) the Required Lenders, as applicable, notify
the Administrative Agent that the Eurodollar Rate for any Interest Period will
not adequately reflect the cost to the Lenders of making or maintaining such
Loans for such Interest Period, the Administrative Agent shall promptly so
notify the Parent and the Lenders, whereupon the obligation of each Lender to
make or to continue Eurodollar Rate Loans shall be suspended as provided in
clause (c) below until the Administrative Agent shall notify the Parent that the
Required Lenders, as applicable, have determined that the circumstances causing
such suspension no longer exist.
 
(b)  Illegality. If any Lender determines that the introduction of, or any
change in or in the interpretation of, any Requirement of Law after the date of
this Agreement shall make it unlawful, or any Governmental Authority shall
assert that it is unlawful, for any Lender or its applicable lending office to
make Eurodollar Rate Loans or to continue to fund or maintain Eurodollar Rate
Loans, then, on notice thereof and demand therefor by such Lender to the Parent
through the Administrative Agent, the obligation of such Lender to make or to
continue Eurodollar Rate Loans shall be suspended as provided in clause (c)
below until such Lender shall, through the Administrative Agent, notify the
Parent that it has determined that it may lawfully make Eurodollar Rate Loans.
 
 
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(c)  Effect of Suspension. If the obligation of any Lender to make or to
continue Eurodollar Rate Loans is suspended, (A) the obligation of such Lender
to convert Base Rate Loans into Eurodollar Rate Loans shall be suspended, (B)
such Lender shall make a Base Rate Loan at any time such Lender would otherwise
be obligated to make a Eurodollar Rate Loan, (C) the Parent may revoke any
pending Notice of Borrowing or Notice of Conversion or Continuation to make or
continue any Eurodollar Rate Loan or to convert any Base Rate Loan into a
Eurodollar Rate Loan and (D) each Eurodollar Rate Loan of such Lender shall
automatically and immediately (or, in the case of any suspension pursuant to
clause (a) above, on the last day of the current Interest Period thereof) be
converted into a Base Rate Loan.
 
Section 2.16  Breakage Costs; Increased Costs; Capital Requirements.
(a) Breakage Costs. The Borrowers shall compensate each Lender, upon demand from
such Lender to Parent (with copy to the Administrative Agent), for all
Liabilities (including, in each case, those incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to prepare to fund, to fund or to maintain the Eurodollar Rate Loans of such
Lender to such Borrower but excluding any loss of the Applicable Margin on the
relevant Loans) that such Lender may incur (A) to the extent, for any reason
other than solely by reason of such Lender being a Non-Funding Lender, a
proposed Borrowing, conversion into or continuation of Eurodollar Rate Loans
does not occur on a date specified therefor in a Notice of Borrowing or a Notice
of Conversion or Continuation or in a similar request made by telephone by the
Parent, (B) to the extent any Eurodollar Rate Loan is paid (whether through a
scheduled, optional or mandatory prepayment) or converted to a Base Rate Loan
(including because of Section 2.15) on a date that is not the last day of the
applicable Interest Period or (C) as a consequence of any failure by the each
relevant Borrower to repay Eurodollar Rate Loans when required by the terms
hereof. For purposes of this clause (a), each Lender shall be deemed to have
funded each Eurodollar Rate Loan made by it using a matching deposit or other
borrowing in the London interbank market.
 
(b)  Increased Costs. If at any time any Lender or L/C Issuer determines that,
after the date hereof, the adoption of, or any change in or in the
interpretation, application or administration of, or compliance with, any
Requirement of Law (other than any imposition or increase of Eurodollar Reserve
Requirements) from any Governmental Authority shall have the effect of (i)
increasing the cost to such Lender of making, funding or maintaining any
Eurodollar Rate Loan or to agree to do so or of participating, or agreeing to
participate, in extensions of credit, (ii) increasing the cost to such L/C
Issuer of Issuing or maintaining any Letter of Credit or of agreeing to do so or
(iii) imposing any other cost to such Lender or L/C Issuer with respect to
compliance with its obligations under any Loan Document, then, upon demand by
such Lender or L/C Issuer (with copy to the Administrative Agent), the Borrowers
shall pay to the Administrative Agent for the account of such Lender or L/C
Issuer amounts sufficient to compensate such Lender or L/C Issuer for such
increased cost.
 
 
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(c)  Increased Capital Requirements. If at any time any Lender or L/C Issuer
determines that, after the date hereof, the adoption of, or any change in or in
the interpretation, application or administration of, or compliance with, any
Requirement of Law (other than any imposition or increase of Eurodollar Reserve
Requirements) from any Governmental Authority regarding capital adequacy,
reserves, special deposits, compulsory loans, insurance charges against property
of, deposits with or for the account of, Obligations owing to, or other credit
extended or participated in by, any Lender or L/C Issuer or any similar
requirement (in each case other than any imposition or increase of Eurodollar
Reserve Requirements) shall have the effect of reducing the rate of return on
the capital of such Lender’s or L/C Issuer (or any corporation controlling such
Lender or L/C Issuer) as a consequence of its obligations under or with respect
to any Loan Document or Letter of Credit to a level below that which, taking
into account the capital adequacy policies of such Lender, L/C Issuer or
corporation, such Lender, L/C Issuer or corporation could have achieved but for
such adoption or change, then, upon demand from time to time by such Lender or
L/C Issuer (with a copy of such demand to the relevant Agent), the Borrowers
shall pay to the relevant Agent for the account of such Lender amounts
sufficient to compensate such Lender for such reduction.
 
(d)  Compensation Certificate. Each demand for compensation under this
Section 2.16 shall be accompanied by a certificate of the Lender or L/C Issuer
claiming such compensation, setting forth the amounts to be paid hereunder,
which certificate shall be conclusive, binding and final for all purposes,
absent manifest error. In determining such amount, such Lender or L/C Issuer may
use any reasonable averaging and attribution methods. The Borrower shall pay
such Lender or L/C Issuer, as the case may be, the amount shown due on any such
certificate within 10 days after receipt thereof.
 
Section 2.17  Taxes.
 
(a)  Except as otherwise provided herein, all payments made by the Borrowers
hereunder or under any Note or other Loan Document will be made free and clear
of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, assessments and all interest, penalties or similar
obligations with respect thereto, but excluding any tax imposed by any
jurisdiction or by any political subdivision or taxing authority thereof or
therein measured by or based on the net income or net profits of a Lender
(including branch profits taxes) and franchise taxes imposed in lieu of net
income taxes, imposed on any Lender as a result of a present or former
connection between such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than such connection arising solely from any Lender
having executed, delivered or performed its obligations or received a payment
under, or enforced, any Loan Document) and all interest, penalties or similar
liabilities with respect to such excluded taxes (all such non-excluded taxes,
levies, imposts, duties, assessments or other charges being referred to
collectively as “Taxes”). If any Taxes are so levied or imposed, each Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement or
under any Note, including any amount paid pursuant to this Section 2.17(a) after
withholding or deduction for or on account of any Taxes, will not be less than
the amount provided for herein; provided, however, that the Borrowers shall not
be required to increase any such amounts, but only to the extent in excess of
the amount that would have been withheld had the Lender delivered the forms
required by clause (c) of this Section 2.17, payable to the Administrative Agent
or any Lender that is not organized under the laws of the United States, if such
Person fails to comply with the other requirements of this Section 2.17;
provided, further, that this proviso shall not apply to (i) the Canadian Agent,
any Canadian Lender or the Canadian Swingline Lender or (ii) Taxes that are
imposed on amounts payable to a Lender or Secured Party at the time such Lender
or Secured Party becomes a party hereto (or designates a new lending office),
except to the extent that such Lender or Secured Party (or its respective
assignor, if any) was entitled, at the time of designation of a new lending
office (or assignment), to receive additional amounts from the Borrower with
respect to such withholding tax pursuant to Section 2.17. After a party hereto
learns of the imposition of Taxes, such party will act in good faith to promptly
notify the other parties hereto of their respective obligations hereunder. The
Borrowers will furnish to the Administrative Agent as promptly as possible after
the date the payment of any Taxes are due pursuant to applicable law original or
certified copies of tax receipts evidencing such payment by the Borrowers.
 
 
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(b)  If any Taxes shall be required by law to be deducted or withheld from or in
respect of any amount payable under any Loan Document to any Secured Party (i)
such amount shall be increased as necessary to ensure that, after all required
deductions or withholdings for Taxes are made (including deductions applicable
to any increases to any amount under this Section 2.17), such Secured Party
receives the amount it would have received had no such deductions or
withholdings been made, (ii) the relevant Loan Party shall make such deductions
or withholdings, (iii) the relevant Loan Party shall timely pay the full amount
deducted or withheld to the relevant taxing authority or other authority in
accordance with applicable Requirements of Law and (iv) within 30 days after
such payment is made, the relevant Loan Party shall deliver to the
Administrative Agent an original or certified copy of a receipt evidencing such
payment; provided, however, the amount payable shall not be increased hereunder
if the Secured Party fails to comply with the other requirements of this Section
2.17, but only to the extent in excess of the amount that would have been
withheld had the Lender delivered the forms required by clause (c) of this
Section 2.17.
 
(c)  If any Lender having a U.S. Revolving Credit Commitment claims exemption
from, or a reduction of, U.S. withholding tax, such Lender agrees with and in
favor of the Administrative Agent and the Borrowers, to deliver to the
Administrative Agent and the Parent:
 
(i)  if such Lender claims an exemption from withholding tax pursuant to its
portfolio interest exception, (A) a statement of Lender, signed under penalty of
perjury, that it is not a (I) a “bank” as described in Section 881(c)(3)(A) of
the Code, (II) a 10% shareholder of a Borrower (within the meaning of Section
871(h)(3)(B) of the Code), or (III) a controlled foreign corporation related to
a Borrower within the meaning of Section 864(d)(4) of the Code, and (B) two
properly completed and executed copies of IRS Form W-8BEN (or successor form),
before the first payment of any interest under this Agreement and at any other
time reasonably requested by the Administrative Agent or the Parent;
 
(ii)  if such Lender claims an exemption from, or a reduction of, withholding
tax under a United States tax treaty, two properly completed and executed copies
of IRS Form W-8BEN (or successor form) before the first payment of any interest
under this Agreement and at any other time reasonably requested by the
Administrative Agent or the Parent;
 
(iii)  if such Lender claims that interest paid under this Agreement is exempt
from United States withholding tax because it is effectively connected with a
United States trade or business of such Lender, two properly completed and
executed copies of IRS Form W-8ECI (or successor form) before the first payment
of any interest is due under this Agreement and at any other time reasonably
requested by the Administrative Agent or the Parent;
 
 
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(iv)  if such Lender claims exemption from backup withholding under the Code,
two properly completed and executed copies of IRS Form W-9 (or successor form)
before the first payment under this Agreement and at any other time reasonably
requested by the Administrative Agent or the Parent;
 
(v)  such other form or forms as may be required under the Code or other laws of
the United States as a condition to exemption from, or reduction of, United
States withholding tax.
 
Such Lender agrees promptly to notify the Administrative Agent and the Parent of
any change in circumstances which would modify or render invalid any claimed
exemption or reduction. Each Lender having sold, assigned, granted or otherwise
transferred a participation in any of its Obligations shall collect from such
participant the documents described in this clause (c) and provide them to the
Borrowers and the Administrative Agent.
 
(d)  If any Lender claims exemption from, or reduction of, withholding tax under
a United States tax treaty by providing IRS Form W-8BEN and such Lender sells,
assigns, grants a participation in, or otherwise transfers all or part of the
Obligations of the Borrowers to such Lender, such Lender agrees to notify the
Administrative Agent of the percentage amount in which it is no longer the
beneficial owner of Obligations of the Borrowers to such Lender. To the extent
of such percentage amount, the Administrative Agent will treat such Lender’s IRS
Form W-8BEN as no longer valid.
 
(e)  If any Lender is entitled to a reduction in the applicable withholding tax,
the Administrative Agent may withhold from any interest payment to such Lender
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by clause (c) of
this Section 2.17 are not delivered to the Administrative Agent, then the
Administrative Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax, and neither the Administrative Agent nor any
Borrower shall have a duty under this Section 2.17 to indemnify the Lender in
respect of the Taxes so withheld to the extent that they exceed the amount that
would have been withheld had the Lender delivered the forms required by clause
(c) of this Section 2.17.
 
(f)  The Borrowers shall reimburse and indemnify, within 30 days after receipt
of demand therefor (with copy to the Administrative Agent), each Lender for all
Taxes (including any imposed by any jurisdiction on amounts payable under this
Section 2.17) paid by such Lender and any Liabilities arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally asserted. A
certificate of the Lender (or of the Administrative Agent on behalf of such
Lender) claiming any compensation under this clause (f), setting forth the
amounts to be paid thereunder and delivered to the Parent with copy to the
Administrative Agent shall be conclusive, binding and final for all purposes,
absent manifest error. In determining such amount, the Administrative Agent and
such Lender may use any reasonable averaging and attribution methods.
 
 
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(g)  If the IRS or any other Governmental Authority of the United States or
other jurisdiction asserts a claim that the Administrative Agent did not
properly withhold tax from amounts paid to or for the account of any Lender
(because the appropriate form was not delivered, was not properly executed, or
because such Lender failed to notify the Administrative Agent of a change in
circumstances which rendered the exemption from, or reduction of, withholding
tax ineffective, or for any other reason) such Lender shall indemnify and hold
the Administrative Agent harmless for all amounts paid, directly or indirectly,
by the Administrative Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Administrative Agent under this Section 2.17, together with all
costs and expenses (including attorneys fees and expenses). The obligation of
the Lenders under this subsection shall survive the payment of all Obligations
and the resignation or replacement of the Administrative Agent. No Borrower
shall be liable under this Section 2.17 for amounts paid by Lender pursuant to
this clause (g).
 
(h)  Mitigation. Any Lender claiming any additional amounts payable pursuant to
this Section 2.17 shall use its reasonable efforts (consistent in its sole
discretion with its internal policies and Requirements of Law) to change the
jurisdiction of its lending office if such a change would reduce any such
additional amounts (or any similar amount that may thereafter accrue) and would
not, in the sole determination of such Lender, be otherwise disadvantageous to
such Lender.
 
Section 2.18  Substitution of Lenders. (a) Designation of a Different Lending
Office. if any Lender requests compensation under clause (b) or (c) of Section
2.16, or requires the Borrower to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.17,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to clause (b) or (c) of Section 2.16 or
Section 2.17, as the case may be, in the future and (ii) would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by any Lender in connection with any such
designation or assignment.
 
(b)  Substitution Right. In the event that any Lender in any Facility that is
not the Administrative Agent or an Affiliate of the Administrative Agent (an
“Affected Lender”), (i) makes a claim under clause (b) or (c) of Section 2.16,
(ii) notifies the Borrowers pursuant to Section 2.15(b) that it becomes illegal
for such Lender to continue to fund or make any Eurodollar Rate Loan in such
Facility, (iii) makes a claim for payment pursuant to Section 2.17, (iv) becomes
a Non-Funding Lender with respect to such Facility or (v) does not consent to
any amendment, waiver or consent to any Loan Document for which the consent of
the Required Lenders is obtained but that requires the consent of other Lenders
in such Facility, the Borrowers may either pay in full such Affected Lender with
respect to amounts due in such Facility with the consent of the Administrative
Agent or substitute for such Affected Lender in such Facility any Lender or any
Affiliate or Approved Fund of any Lender or any other Person acceptable (which
acceptance shall not be unreasonably withheld or delayed) to the Administrative
Agent (in each case, a “Substitute Lender”).
 
 
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(c)  Procedure. To substitute such Affected Lender or pay in full the
Obligations owed to such Affected Lender under such Facility, the Parent shall
deliver a notice to the Administrative Agent, or if pertaining to a Canadian
Lender, the Canadian Agent, and such Affected Lender. The effectiveness of such
payment or substitution shall be subject to the delivery to the relevant Agent
by the Borrowers (or, as may be applicable in the case of a substitution, by the
Substitute Lender) of (i) payment for the account of such Affected Lender, of,
to the extent accrued through, and outstanding on, the effective date for such
payment or substitution, all Obligations owing to such Affected Lender with
respect to such Facility (including those that will be owed because of such
payment and all Obligations that would be owed to such Lender if it was solely a
Lender in such Facility), (ii) in the case of a payment in full of the
Obligations owing to such Affected Lender in the Revolving Credit Facility,
payment of any amount that, after giving effect to the termination of the
Commitment of such Affected Lender, is required to be paid pursuant to
Section 2.8(b) and (iii) in the case of a substitution, (A) payment of the
assignment fee set forth in Section 10.2(c) and (B) an assumption agreement in
form and substance satisfactory to the relevant Agent whereby the Substitute
Lender shall, among other things, agree to be bound by the terms of the Loan
Documents and assume the Commitment of the Affected Lender under such Facility.
 
(d)  Effectiveness. Upon satisfaction of the conditions set forth in clause (b)
above, the Administrative Agent shall record such substitution or payment in the
Register, whereupon (i) in the case of any payment in full in any Facility, such
Affected Lender’s Commitments in such Facility shall be terminated and (ii) in
the case of any substitution in any Facility, (A) the Affected Lender shall sell
and be relieved of, and the Substitute Lender shall purchase and assume, all
rights and claims of such Affected Lender under the Loan Documents with respect
to such Facility, except that the Affected Lender shall retain such rights
expressly providing that they survive the repayment of the Obligations and the
termination of the Commitments, (B) the Substitute Lender shall become a
“Lender” hereunder having a Commitment in such Facility in the amount of such
Affected Lender’s Commitment in such Facility and (C) the Affected Lender shall
execute and deliver to the Administrative Agent an Assignment to evidence such
substitution and deliver any Note in its possession with respect to such
Facility; provided, however, that the failure of any Affected Lender to execute
any such Assignment or deliver any such Note shall not render such sale and
purchase (or the corresponding assignment) invalid.
 
ARTICLE III  
 

 
CONDITIONS TO LOANS AND LETTERS OF CREDIT
 
Section 3.1  Conditions Precedent to Initial Loans and Letters of Credit. The
obligation of each Lender to make any Loan on the Closing Date and the
obligation of each L/C Issuer to Issue any Letter of Credit on the Closing Date
is subject to the satisfaction or due waiver of each of the following conditions
precedent on or before November 30, 2006:
 
(a)  Certain Documents. The Administrative Agent shall have received on or prior
to the Closing Date each of the following, each dated the Closing Date unless
otherwise agreed by each Agent, in form and substance satisfactory to each Agent
and each Lender:
 
(i)  this Agreement duly executed by the Borrowers and, for the account of each
Lender having requested the same by notice to the relevant Agent and the Parent
received by each at least 3 Business Days prior to the Closing Date (or such
later date as may be agreed by the Parent), Notes in each applicable Facility
conforming to the requirements set forth in Section 2.14(e);
 
 
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(ii)  the Guaranty and Security Agreement and Canadian Security Documents, duly
executed by each Borrower and Guarantor party thereto, together with (A) copies
of UCC, PPSA and other appropriate search reports and of all effective prior
filings listed therein, together with evidence of the termination of such prior
filings and other documents with respect to the priority of the security
interest of the Administrative Agent in the Collateral, in each case as may be
reasonably requested by the Administrative Agent, and (B) all Control Agreements
that, in the reasonable judgment of the Administrative Agent, are required for
the Loan Parties to comply with the Loan Documents as of the Closing Date, each
duly executed by, in addition to the applicable Loan Party, the applicable
financial institution;
 
(iii)  a Mortgage for the Eligible Real Property, together with all Mortgage
Supporting Documents relating thereto;
 
(iv)  duly executed favorable opinions of counsel to the Loan Parties from (a)
Michael J. Veitenheimer, general counsel to the Parent, (b) Thompson & Knight
LLP, special U.S. counsel to the Group Members, and (c) Fraser Milner Casgrain
LLP, special Canadian counsel to the Group Members, each addressed to the
Agents, the L/C Issuers and the Lenders and addressing such matters as the
Administrative Agent may reasonably request;
 
(v)  a copy of each Governing Document of each Loan Party that is on file with
any Governmental Authority in any jurisdiction, certified as of a recent date by
such Governmental Authority, together with, if applicable, certificates
attesting to the good standing of such Loan Party in such jurisdiction and each
other jurisdiction where such Loan Party is qualified to do business as a
foreign entity or where such qualification is necessary (and, if appropriate in
any such jurisdiction, related tax certificates);
 
(vi)  a certificate of the secretary or other Responsible Officer of each Loan
Party in charge of maintaining Books and records of such Loan Party certifying
as to (A) the names and signatures of each officer of such Loan Party authorized
to execute and deliver any Loan Document, (B) the Governing Documents of such
Loan Party attached to such certificate are complete and correct copies of such
Governing Documents as in effect on the date of such certification (or, for any
such Governing Document delivered pursuant to clause (v) above, that there have
been no changes from such Governing Document so delivered) and (C) the
resolutions of such Loan Party’s board of directors or other appropriate
governing body approving and authorizing the execution, delivery and performance
of each Loan Document to which such Loan Party is a party;
 
(vii)  a certificate of a Responsible Officer of the Parent to the effect that
(A) each condition set forth in Section 3.2(b) has been satisfied and (B) both
the Loan Parties taken as a whole and the Borrowers are Solvent after giving
effect to the initial Loans and Letters of Credit, the consummation of the
Related Transactions, the application of the proceeds thereof in accordance with
Section 7.14 and the payment of all estimated legal, accounting and other fees
and expenses related hereto and;
 
 
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(viii)  insurance certificates in form and substance satisfactory to the
Administrative Agent demonstrating that the insurance policies required by
Section 6.4 are in full force and effect and have all endorsements required by
such Section 6.4;
 
(ix)  the Corporate Chart;
 
(x)  the Perfection Certificate; and
 
(xi)  such other documents and information as any Lender through the
Administrative Agent or the Canadian Agent may reasonably request.
 
(b)  Fee and Expenses. There shall have been paid to the Administrative Agent,
for the account of the Administrative Agent, its Related Persons, any L/C Issuer
or any Lender, as the case may be, all fees and all reimbursements of costs or
expenses, in each case due and payable under any Loan Document on or before the
Closing Date.
 
(c)  Consents. Each Group Member shall have received all consents and
authorizations required pursuant to any material Contractual Obligation with any
other Person and shall have obtained all Permits of, and effected all notices to
and filings with, any Governmental Authority, in each case, as may be necessary
in connection with the consummation of the transactions contemplated in any Loan
Document or Related Document (including the Related Transactions).
 
(d)  Cash Management. The Administrative Agent shall have received evidence
that, as of the Closing Date, the procedures with respect to cash management
required by the Loan Documents have been established and are currently being
maintained by each Loan Party, together with Control Agreements executed by such
Loan Party in connection therewith.
 
(e)  Refinancing of Existing Credit Agreement. (i) All obligations under the
Existing Credit Agreement shall have been repaid in full, (ii) the Existing
Credit Agreement and all Loan Documents (as defined therein) shall have been
terminated on terms satisfactory to the Administrative Agent and (iii) the
Administrative Agent shall have received a payoff letter duly executed and
delivered by the Borrowers and the Existing Agent or other evidence of such
termination in each case in form and substance satisfactory to the
Administrative Agent.
 
(f)  Adjusted Availability Requirement. The Borrowers shall have Adjusted
Availability of not less than $30,000,000.
 
(g)  Initial Appraisals. The Administrative Agent shall have received
appraisals, conducted by appraisers retained by the Administrative Agent, of all
inventory of the Borrowers and the Eligible Real Property, each in form and
substance satisfactory to the Administrative Agent.
 
Section 3.2  Conditions Precedent to Each Loan and Letter of Credit. The
obligation of each Lender on any date (including the Closing Date) to make any
Loan and of each L/C Issuer on any date (including the Closing Date) to Issue
any Letter of Credit is subject to the satisfaction of each of the following
conditions precedent:
 
 
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(a)  Request. The relevant Agent (and, in the case of any Issuance, the relevant
L/C Issuer) shall have received, to the extent required by Article II, a
written, timely and duly executed and completed Notice of Borrowing, Swingline
Request or, as the case may be, L/C Request.
 
(b)  Representations and Warranties; No Defaults. The following statements shall
be true on such date, both before and after giving effect to such Loan or, as
applicable, such Issuance: (i) the representations and warranties set forth in
any Loan Document shall be true and correct in all material respects on and as
of such date or, to the extent such representations and warranties expressly
relate to an earlier date, on and as of such earlier date and (ii) no Default
shall be continuing.
 
The representations and warranties set forth in any Notice of Borrowing,
Swingline Request or L/C Request (or any certificate delivered in connection
therewith) shall be deemed to be made again on and as of the date of the
relevant Loan or Issuance and the acceptance of the proceeds thereof or of the
delivery of the relevant Letter of Credit.
 
Section 3.3  Determinations of Initial Borrowing Conditions. For purposes of
determining compliance with the conditions specified in Section 3.1, each Lender
shall be deemed to be satisfied with each document and each other matter
required to be satisfactory to such Lender unless, prior to the Closing Date,
the Administrative Agent receives notice from such Lender specifying such
Lender’s objections and such Lender has not made available its Pro Rata Share of
any Borrowing scheduled to be made on the Closing Date.
 
ARTICLE IV  
 
 
REPRESENTATIONS AND WARRANTIES
 
To induce the Lenders, the L/C Issuers and the Administrative Agent to enter
into the Loan Documents, each Borrower (and, to the extent set forth in any
other Loan Document, each other Loan Party) represents and warrants, in all
material respects, to each of them each of the following on and as of each date
applicable pursuant to Section 3.2:
 
Section 4.1  No Encumbrances. Each Group Member (a) has good and valid title to
its personal property assets and good and marketable title to its owned Real
Property (subject to exceptions that do not, in the aggregate, materially impair
the use of the personal property and Real Property of Borrowers taken as a
whole), and in the case of the Collateral, free and clear of Liens except for
Permitted Liens. All other information set forth on the Perfection Certificates
pertaining to the Collateral is accurate and complete. There has been no change
in any of such information since the date on which the Perfection Certificates
were signed by Borrowers except as otherwise permitted under this Agreement.
 
Section 4.2  Accounts. The Eligible Accounts are bona fide existing payment
obligations of Account Debtors created by the sale and delivery of inventory or
the rendition of services to such Account Debtors in the ordinary course of
Borrowers’ business, owed to Borrowers without any known defenses, disputes,
offsets, counterclaims, or rights of return or cancellation (other than
contingent customer rights of return arising in the ordinary course of
business). As to each Account that is identified by Parent as an Eligible Credit
Card Receivable in a Borrowing Base Certificate submitted to the Administrative
Agent, such Account is not excluded as ineligible by virtue of one or more of
the excluding criteria set forth in the definition of Eligible Credit Card
Receivable.
 
 
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Section 4.3  Eligible Inventory. All Eligible Inventory is of good and
merchantable quality, free from known defects (other than saleable clearance
goods arising in the ordinary course of business consistent with past practice).
As to each item of inventory that is identified by Parent as Eligible Inventory
in a Borrowing Base Certificate submitted to the Administrative Agent, such
inventory is not excluded as ineligible by virtue of one or more of the
excluding criteria set forth in the definition of Eligible Inventory.
 
Section 4.4  Location of Inventory. The inventory of each Group Member is stored
or located only at, or in-transit between, the locations identified on Schedule
4(a) of the Perfection Certificates or is stored with a bailee, warehouseman, or
similar party, subject to a Bailee Acknowledgement or Collateral Access
Agreement, except as otherwise permitted pursuant to Section 6.5 from September
1 to December 31 of any Fiscal Year. Other than with respect to Eligible
In-Transit Inventory, all of the Eligible Inventory of each Group Member is used
or held for use in such Group Member’s business and is fit for such purposes.
 
Section 4.5  Inventory Records. Each Borrower keeps correct and accurate records
itemizing and describing the type, quality, and quantity of its and its
Subsidiaries’ inventory and the book value thereof.
 
Section 4.6  Name, Jurisdiction of Incorporation; Location of Chief Executive
Office; FEIN; Organizational ID Number. (a) The legal name and jurisdiction of
organization of each Group Member is set forth on the Perfection Certificate.
 
(b)  The chief executive office of each Group Member is located at the address
indicated on the Perfection Certificate.
 
(c)  Each Group Member’s FEIN and organizational identification number, if any,
are identified on the Perfection Certificate.
 
(d)  Each Borrower has previously delivered to the Administrative Agent a
Perfection Certificate. Each Borrower represents and warrants to the Lender
Group that: (i) such Borrower’s exact legal name is that indicated on the
applicable Perfection Certificate and on the signature page hereof; (ii) such
Borrower is an organization of the type, and is organized in the jurisdiction,
set forth in the applicable Perfection Certificate; (iii) the applicable
Perfection Certificate accurately sets forth such Borrower’s organizational
identification number or accurately states that such Borrower has none; (iv) the
applicable Perfection Certificate accurately sets forth such Borrower’s place of
business or, if more than one, its chief executive office, as well as such
Borrower’s mailing address, if different; (v) all other information set forth on
the applicable Perfection Certificate pertaining to such Borrower is accurate
and complete as of the date hereof; and (vi) there has been no change in any of
such information since the date on which the applicable Perfection Certificate
was signed by such Borrower.
 
 
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Section 4.7  Due Organization and Qualification; Subsidiaries. (a) Each Borrower
is (i) duly organized and existing and in good standing under the laws of the
jurisdiction of its organization and (ii) has all requisite corporate (or the
equivalent company) power to own its property and conduct its business as now
conducted and as presently contemplated and (iii) qualified to do business in
any state or province where the failure to be so qualified reasonably could be
expected to cause a Material Adverse Effect.
 
(b)  Set forth on Schedule 4.7 (as such Schedule may be updated with the written
consent of the Administrative Agent), is a complete and accurate description of
the authorized capital Stock of each Borrower, by class, and, as of the Closing
Date, a description of the number of shares of each such class that are issued
and outstanding and, other than with respect to Parent, the owner of such Stock.
Other than as described on Schedule 4.7 and except for employee and director
stock options and deferred director units there are no subscriptions, options,
warrants, or calls relating to any shares of each Borrower’s capital Stock,
including any right of conversion or exchange under any outstanding security or
other instrument. No Borrower is subject to any obligation (contingent or
otherwise) to repurchase or otherwise acquire or retire any shares of its
capital Stock or any security convertible into or exchangeable for any of its
capital Stock.
 
(c)  Set forth on Schedule 4.7 (as such Schedule may be updated with the written
consent of the Administrative Agent), is a complete and accurate list of each
Borrower’s direct and indirect Subsidiaries, showing: (i) the jurisdiction of
their organization; (ii) the number of shares of each class of common and
preferred Stock authorized for each of such Subsidiaries; and (iii) the number
and the percentage of the outstanding shares of each such class owned directly
or indirectly by the applicable Borrower. All of the outstanding capital Stock
of each such Subsidiary has been validly issued and is fully paid and
non-assessable.
 
(d)  Except as set forth on Schedule 4.7, there are no subscriptions, options,
warrants, or calls relating to any shares of any Borrower’s Subsidiaries’
capital Stock, including any right of conversion or exchange under any
outstanding security or other instrument. No Group Member is subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of any Borrower’s Subsidiaries’ capital Stock or any security
convertible into or exchangeable for any such capital Stock.
 
Section 4.8  Due Authorization; No Conflict. (a) As to each Borrower, the
execution, delivery, and performance by such Borrower of this Agreement and the
other Loan Documents to which it is a party and the transactions contemplated
hereby and thereby are within the corporate (or the equivalent) authority of
such Borrower and have been duly authorized by all necessary action on the part
of such Borrower.
 
(b)  As to each Borrower, the execution, delivery, and performance by such
Borrower of this Agreement and the other Loan Documents to which it is a party
do not and will not (i) violate any provision of federal, state, or local,
statute, law, rule or regulation applicable to any Borrower or any order,
judgment, decree, writ, injunction, license or permit of any court or other
Governmental Authority binding on any Borrower unless such violation could not
reasonably be expected to cause a Material Adverse Effect, (ii) violate any
provision of the Governing Documents of any Borrower or require any approval of
any Borrower’s interest holder, (iii) conflict with, result in a breach of, or
constitute (with due notice or lapse of time or both) a default under any
material Contractual Obligation of any Borrower unless such violation could not
reasonably be expected to cause a Material Adverse Effect or the termination of
such contract, (iv) result in or require the creation or imposition of any Lien
of any nature whatsoever upon any properties or assets of any Borrower, other
than Permitted Liens unless the imposition of such Lien could not reasonably be
expected to cause a Material Adverse Effect, or (v) require any approval of any
Person under any material Contractual Obligation of any Borrower, other than
consents or approvals that have been obtained and that are still in force and
effect.
 
 
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(c)  Other than the filing of UCC financing statements, PPSA registration
statements and registrations in Quebec, Canada, the execution, delivery, and
performance by each Borrower of this Agreement and the other Loan Documents to
which such Borrower is a party do not and will not require any registration
with, consent, or approval of, or notice to, or other action with or by, any
Governmental Authority, other than consents or approvals that have been obtained
and that are still in force and effect.
 
(d)  As to each Borrower, this Agreement and the other Loan Documents to which
such Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by such Borrower will be the legally valid
and binding obligations of such Borrower, enforceable against such Borrower in
accordance with their respective terms, except as enforcement may be limited by
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws relating to or limiting creditors’ rights generally.
 
(e)  The Administrative Agent’s Liens are validly created, perfected and first
priority Liens, subject only to Permitted Liens.
 
Section 4.9  Litigation. (a) Other than those matters disclosed on Schedule 4.9
and immaterial matters where the amount in controversy is less than $250,000,
there are no actions, suits, or proceedings or investigations pending or, to the
best knowledge of Borrowers, threatened against any Group Member, except for (a)
matters that are fully covered by insurance (subject to customary deductibles),
and (b) matters arising after the Closing Date, reasonably could not be expected
to result in a Material Adverse Effect.
 
(b)  There are no actions, suits, proceedings or investigations pending or, to
the best knowledge of the Borrowers, threatened against any Group Member that
question the validity or enforceability of this Agreement or any other Loan
Document or any action taken or to be taken by the Borrowers in connection
therewith.
 
Section 4.10  No Material Adverse Effect. All financial statements relating to
any Group Member that have been delivered by the Borrowers to the Lender Group
have been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and present fairly in all material respects, each Group
Member’s financial condition as of the date thereof and results of operations
for the period then ended. There has not been a Material Adverse Effect with
respect to any Group Member since the date of the latest financial statements
submitted to the Lender Group on or before the Closing Date.
 
Section 4.11  Fraudulent Transfer. (a) The Group Members, taken as a whole, are
Solvent.
 
(b)  No transfer of property is being made by any Group Member and no obligation
is being incurred by any Group Member in connection with the transactions
contemplated by this Agreement or the other Loan Documents with the intent to
hinder, delay, or defraud either present or future creditors of any such Group
Member.
 
 
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Section 4.12  Canadian Benefit Plans and Canadian Pension Plans. Bombay Canada
does not maintain or contribute to any Canadian Benefit Plan or Canadian Pension
Plan.
 
Section 4.13  ERISA. None of the Group Members or any of their ERISA Affiliates
maintains or contributes, or in the prior six years has maintained or
contributed, to any Benefit Plan.
 
Section 4.14  Environmental Condition. Except as set forth on Schedule 4.14 and
except for other matters that could not reasonably be expected to result in a
Material Adverse Effect, (a) to the Borrowers’ knowledge, none of the Group
Members’ properties or assets has ever been used by any Group Member, or by
previous owners or operators in the disposal of, or to produce, store, handle,
treat, release, or transport, any Hazardous Materials, where such production,
storage, handling, treatment, release or transport was in violation of any
applicable Environmental Law, (b) to the Borrowers’ knowledge, none of the Group
Members’ owned Real Property has ever been designated or identified in any
manner pursuant to any environmental protection statute as a Hazardous Materials
disposal site, (c) no Group Member has received notice that a Lien arising under
any Environmental Law has attached to any revenues or to any Real Property owned
or operated by any Group Member, and (d) no Group Member has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or provincial governmental agency concerning any action or
omission by any Group Member resulting in the releasing or disposing of
Hazardous Materials into the environment in violation of any applicable
Environmental Law.
 
Section 4.15  Brokerage Fees. No Group Member has utilized the services of any
broker or finder in connection with obtaining financing from the Lender Group
under this Agreement and no brokerage commission or finders fee is payable by
any Group Member in connection herewith.
 
Section 4.16  Intellectual Property. Each Group Member owns, or holds licenses
in, all Intellectual Property that is necessary to the conduct of its business
as currently conducted, except where the failure to do so, in the aggregate,
would not result in a Material Adverse Effect.
 
Section 4.17  Leases. Except where the failure to do so would not cause a
Material Adverse Effect, the Group Members enjoy peaceful and undisturbed
possession under all leases (including Capital Leases) material to their
business and to which they are a party or under which they are operating. Except
to the extent that such default would not cause a Material Adverse Effect, each
of such leases is valid and subsisting and no material default by any Group
Member exists under such lease.
 
Section 4.18  Deposit Accounts. Set forth on Schedule 8 to the Perfection
Certificate are all deposit accounts and securities accounts of each Group
Member, including, with respect to each bank or securities intermediary (i) the
name and address of such Person, (ii) the account numbers of the deposit
accounts or securities accounts maintained with such Person and (iii) whether
such account is a “Store Account”, a “Concentration Account” or another account
and if such account is another account, setting forth the purpose of such
account.
 
Section 4.19  Complete Disclosure. All factual information (taken as a whole)
furnished by or on behalf of any Group Member in writing to the Administrative
Agent or any Lender (including all information contained in the Schedules hereto
or in the other Loan Documents) for purposes of or in connection with this
Agreement, the other Loan Documents or any transaction contemplated herein or
therein is, and all other such factual information (taken as a whole) hereafter
furnished by or on behalf of any Group Member in writing to the Administrative
Agent or any Lender will be, true and accurate in all material respects on the
date as of which such information is dated or certified and not incomplete by
omitting to state any fact necessary to make such information (taken as a whole)
not misleading in any material respect (other than industry-wide risks normally
associated with the types of businesses conducted by the Group Members) at such
time in light of the circumstances under which such information was provided. On
the Closing Date, the Projections represent, and as of the date on which any
other Projections are delivered to the Administrative Agent, such additional
Projections represent the Borrowers’ good faith reasonable estimate of the Group
Members’ future performance for the periods covered thereby it being understood
that such Projections as to future events are not to be viewed as facts and that
actual results during the period or period covered by Projections may differ
from the projected results and no assurance can be given that the Projections
will be realized.
 
 
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Section 4.20  Credit Card Receipts. Schedule 4.20 sets forth each of the
Borrowers’ Credit Card Issuers, Credit Card Processors and all arrangements to
which the Borrowers are a party with respect to the payment to the Borrowers of
the proceeds of all credit card charges for sales by the Borrowers, including a
description of each Credit Card Agreement.
 
Section 4.21  Holding Company and Investment Company Acts. No Group Member is a
“holding company”, or a “subsidiary company” of a “holding company, or an
“affiliate” of a “holding company”, as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is it an “investment company”, or an
“affiliated company” or a “principal underwriter” of an “investment company”, as
such terms are defined in the Investment Company Act of 1940.
 
Section 4.22  Absence of Financing Statements, etc. Except with respect to
Permitted Liens, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry or other public office, that purports to cover, affect
or give notice of any present or possible future Lien on any Collateral.
 
Section 4.23  Certain Transactions. None of the officers, directors, or
employees of any Group Member is presently a party to any transaction with any
Group Member (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Borrowers, any
corporation, partnership, trust or other entity in which any officer, director,
or any such employee has a substantial interest or is an officer, director,
trustee or partner.
 
Section 4.24  Regulations U and X. No Group Member is engaged in principally, or
as one of its important activities in, and no portion of the proceeds of any
Borrowing of any Loan is to be used, and no portion of any Letter of Credit is
to be obtained, for the purpose of purchasing or carrying any “margin security”
or “margin stock” as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
 
Section 4.25  Labor Relations. No Borrower has been or is presently a party to
any collective bargaining or other labor contract. No event has occurred or
circumstance exists which is likely to provide the basis for any work stoppage
or other labor dispute. The Borrowers have complied in all material respects
with all applicable laws, decrees, orders, judgments, statutes, laws, rules and
regulations relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing including all applicable provisions of the federal
Fair Labor Standards Act, as amended. There is not presently pending and, to the
Borrowers’ knowledge, there is not threatened any of the following:
 
 
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(a)  any strike, slowdown, picketing, or work stoppage;
 
(b)  any proceeding against or affecting the Borrowers relating to the alleged
violation of any applicable law, decree, order, judgment, statute, law, rule or
regulation pertaining to labor relations or before National Labor Relations
Board, the Equal Employment Opportunity Commission, or any comparable
governmental body, organizational activity, or other labor or employment dispute
against or affecting the Borrowers, which, if determined adversely to the
Borrowers would cause a Material Adverse Effect;
 
(c)  any lockout of any employees by the Borrowers (and no such action is
contemplated by the Borrowers); or
 
(d)  any application for the certification of a collective bargaining agent.
 
Section 4.26  Indebtedness. Set forth on Schedule 7.1 is a true and complete
list of all Indebtedness of each Borrower outstanding immediately prior to the
Closing Date that is to remain outstanding after the Closing Date and such
Schedule accurately reflects the aggregate principal amount of such
Indebtedness.
 
Section 4.27  Payment of Taxes. All tax returns, reports and declarations
required to be filed by the Borrowers by any jurisdiction to which any of them
is subject have been timely filed, except where the failure to so file could not
reasonably be expected to have a Material Adverse Effect. All taxes and other
governmental assessments and charges upon the Borrowers or their properties,
assets, income and franchises (including real property taxes and payroll taxes)
but not subject of a Permitted Protest have been paid prior to delinquency
except where the failure to so pay could not reasonably be expected to have a
Material Adverse Effect. The Borrowers have set aside on their books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and none of the officers of any Borrower know of any basis for
any such claim. The Borrowers do not intend to treat any Loans, Letters of
Credit and/or related transactions hereunder as being a “reportable transaction”
(within the meaning of Treasury Regulation Section 1.6011-4).
 
Section 4.28  Foreign Assets Control Regulations, Etc. None of the requesting or
borrowing of the Loans, the requesting or issuance, extension or renewal of any
Credit Instrument or the use of the proceeds of any thereof will violate the
Trading With the Enemy Act (50 USC §1 et seq., as amended) (the “Trading With
the Enemy Act”) or any of the foreign assets control regulations of the United
States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) (the
“Foreign Assets Control Regulations”) or any enabling legislation or executive
order relating thereto (which for the avoidance of doubt shall include, but
shall not be limited to (a) Executive Order 13224 of September 21, 2001 Blocking
Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) (the “Executive Order”)
and (b) the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56)).
Furthermore, none of Group Members or any of their Affiliates (a) is or will
become a “blocked person” as described in the Executive Order, the Trading With
the Enemy Act or the Foreign Assets Control Regulations or (b) engages or will
engage in any dealings or transactions, or be otherwise associated, with any
such “blocked person.”
 
 
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Section 4.29  No Burdensome Obligations; No Defaults. No Group Member is a party
to any Contractual Obligation, no Group Member has Governing Documents
containing obligations, and, to the knowledge of any Group Member, there are no
applicable Requirements of Law, in each case the compliance with which would
have, in the aggregate, a Material Adverse Effect. No Group Member (and, to the
knowledge of each Group Member, no other party thereto) is in default under or
with respect to any Contractual Obligation of any Group Member, other than those
that would not, in the aggregate, have a Material Adverse Effect.
 
ARTICLE V  
 
 
REPORTING COVENANTS
 
Each Borrower (and, to the extent set forth in any other Loan Document, each
other Loan Party) agrees with the Lenders, the L/C Issuers and the Agents to
each of the following, as long as any Obligation or any Commitment remains
outstanding, the Borrowers shall and shall cause each of their respective
Subsidiaries to do all of the following:
 
Section 5.1  Accounting System; Access. Maintain a system of accounting that
enables the Borrowers to produce financial statements in accordance with GAAP
and maintain records pertaining to the Collateral that contain information as
from time to time reasonably may be requested by the Administrative Agent. The
Borrowers also shall keep an inventory reporting system that shows all
additions, sales, claims, returns, and allowances with respect to the inventory.
The Borrowers shall further (a) maintain adequate accounts and reserves for all
taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties and the properties of its Subsidiaries,
contingencies and other reserves and (b) at all times engage independent
certified public accountants satisfactory to the Administrative Agent as the
independent certified public accountants of the Parent and its Subsidiaries and
will not permit more than 90 days to elapse between the cessation of such firm’s
(or any successor firm’s) engagement as the independent certified public
accountants of the Parent and its Subsidiaries and the appointment in such
capacity of a successor firm registered with the Public Company Accounting
Oversight Board.
 
Section 5.2  Collateral Reporting.
 
(a)  Provide the Administrative Agent (and if so requested by the Administrative
Agent, with copies for each Lender) the documents set forth on Schedule 5.2 in
accordance with the delivery schedule set forth thereon; and
 
(b)  concurrently with each delivery of a Compliance Certificate pursuant to
Section 5.3(a)(iii), provide the Administrative Agent (and if so requested by
the Administrative Agent, with copies for each Lender) with an updated
Perfection Certificate illustrating all changes to the information set forth in
the Perfection Certificate previously delivered pursuant to Section 3.1(a)(x) or
this Section 5.2(b) (including such updates and amendments required by Section
4.4, 4.6, 4.18, 6.5 or 6.18 of this Agreement or the Guaranty and Security
Agreement or any other provision of any Loan Document, except if such
information is otherwise required to be provided under this Agreement);
provided, that delivery of an updated Perfection Certificate shall not cure any
Default or Event of Default occurring as a result of failure of the Group
Members to give any prior notice or obtain any consent required under this
Agreement.
 
 
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Section 5.3  Financial Statements, Reports, Certificates. Deliver to the
Administrative Agent, with copies to each Lender:
 
(a)  as soon as available, but in any event within 45 days after the end of each
of the 11 Fiscal Periods during each of Parent’s Fiscal Years,
 
(i)  a company prepared consolidated balance sheet, income statement, and
statement of cash flow covering Parent’s and its Subsidiaries’ operations during
such period, in each case setting forth in comparative form the figures for the
corresponding period in the prior Fiscal Year;
 
(ii)  a certificate signed by the chief financial officer of Parent to the
effect that:
 
(A)  the financial statements delivered hereunder have been prepared in
accordance with GAAP (except for the lack of footnotes and being subject to
year-end audit adjustments) and fairly present in all material respects the
financial condition of Parent and its Subsidiaries;
 
(B)  the representations and warranties of the Borrowers contained in this
Agreement and the other Loan Documents are true and correct in all material
respects on and as of the date of such certificate, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date); and
 
(C)  there does not exist any condition or event that constitutes a Default or
Event of Default (or, to the extent of any non-compliance, describing such
non-compliance as to which he or she may have knowledge and what action the
Borrowers have taken, are taking, or propose to take with respect thereto).
 
(iii)  a Compliance Certificate.
 
(b)  As soon as available, but in any event within 90 days after the end of each
of Parent’s Fiscal Years, consolidated financial statements of Parent and its
Subsidiaries for each such Fiscal Year, audited by independent certified public
accountants reasonably acceptable to the Administrative Agent and certified by
such accountants to have been prepared in accordance with GAAP (such audited
financial statements to include a balance sheet, income statement, and statement
of cash flow and, a copy of any “final” management letter delivered to Parent,
its board of directors or any committees thereof), together with a certificate
signed by the chief financial officer of Parent certifying as to the matters set
forth in Section 5.3(a)(ii)(A)-(C) and a Compliance Certificate;
 
 
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(c)  as soon as available, but in any event within 90 days after the end of each
of Parent’s Fiscal Years, copies of the Borrowers’ Projections, in form and
substance (including as to scope and underlying assumptions) satisfactory to the
Administrative Agent, in its sole discretion, for the forthcoming Fiscal Year,
on a month by month basis, certified by the chief financial officer of Parent as
being such officer’s good faith reasonable estimate of the financial performance
of Parent and its Subsidiaries during the period covered thereby, it being
understood that such Projections as to future events are not to be viewed as
facts and that actual results during the period or periods covered by any
Projections may differ from the projected results and no assurance can be given
that the Projections will be realized;
 
(d)  if and when filed by any Borrower,
 
(i)  Form 10-Q quarterly reports, Form 10-K annual reports, and Form 8-K current
reports;
 
(ii)  any other filings made by any Borrower with the SEC;
 
(iii)  upon request by the Administrative Agent, in its Permitted Discretion,
copies of the Borrowers’ federal income tax returns, and any amendments thereto,
filed with the Internal Revenue Service; and
 
(iv)  any other information that is provided by Parent to its shareholders
generally;
 
provided, that for purposes of this clause (d), any information to be delivered
hereunder shall be deemed to have been delivered when posted on the Parent’s
website or otherwise made available on the website of the SEC;

(e)  as soon as a Borrower has knowledge of any event or condition that
constitutes a Default or an Event of Default, notice thereof together with a
reasonably detailed description thereof and a statement of the curative action
that the Borrowers propose to take with respect thereto;
 
(f)  promptly after the commencement thereof, but in any event within 10
Business Days after the service of process with respect thereto on any Group
Member, notice of all actions, suits, or proceedings brought by or against any
Group Member before any Governmental Authority which, if determined adversely to
such Group Member, reasonably could be expected to result in a Material Adverse
Effect;
 
(g)  upon the request of the Administrative Agent in its Permitted Discretion,
any other report reasonably requested relating to the financial condition of any
Group Member; provided, that such reports shall not be overly burdensome for any
Borrower to prepare; and
 
(h)  as part of the Compliance Certificate delivered pursuant to clause (a)(iii)
above, each in form and substance satisfactory to the Administrative Agent, a
certificate by the Responsible Officer of the Parent certifying that (i) the
Corporate Chart attached thereto (or the last Corporate Chart delivered pursuant
to this clause (h)) is correct and complete as of the date of such Compliance
Certificate, (ii) the Loan Parties have delivered all documents (including an
updated Perfection Certificate as to locations of Collateral) they are required
to deliver pursuant to any Loan Document on or prior to the date of delivery of
such Compliance Certificate and (iii) complete and correct copies of all
documents modifying any term of any Governing Document of any Group Member or
any Subsidiary or joint venture thereof on or prior to the date of delivery of
such Compliance Certificate have been delivered to the Administrative Agent or
are attached to such certificate.
 
 
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In addition to the financial statements referred to above, the Borrowers agree
to deliver financial statements prepared on both a consolidated and
consolidating basis; provided, that (a) only Parent’s consolidated financial
statements shall be audited, (b) consolidating financial statements shall be
prepared without footnotes, and (c) the Borrowers shall only be required to
deliver balance sheets and income statements on a consolidating basis. Parent
agrees to cooperate with the Administrative Agent to allow the Administrative
Agent to consult with its independent certified public accountants if the
Administrative Agent reasonably requests the right to do so (and the
Administrative Agent shall notify Parent as to the timing of such consultation
and permit Parent to be present thereat or to otherwise participate therein) and
that, in such connection, their independent certified public accountants are
authorized to communicate with the Administrative Agent and to release to the
Administrative Agent whatever financial information concerning any Group Member
that the Administrative Agent reasonably may request.
 
Section 5.4  Right to Inspect; Inventories, Appraisals Audits and Assessments.
 
(a)  The Administrative Agent (through any of its affiliates or any its or their
respective officers, employees, or agents) shall have the right, from time to
time hereafter (which shall be at reasonable times following reasonable notice
to Parent, prior to the occurrence of and during the continuation of an Event of
Default) to (i) visit and inspect the property of each Borrower and examine the
Books and make copies or abstracts thereof and to check, test, and appraise the
Collateral in order to verify the Borrowers’ financial condition or the amount,
quality, value, condition of, or any other matter relating to, the Collateral;
(ii) discuss the affairs, finances and accounts of each Borrower with the Chief
Financial Officer, the Treasurer or any Assistant Treasurer or any other Persons
designated by such officers and (iii) communicate directly with any registered
certified public accountants (including the Borrowers’ accountants) of any
Borrower, and such accountants shall be authorized to communicate directly with
the Administrative Agent, the Lenders, the L/C Issuers and their respective
affiliates and to disclose to the Administrative Agent, the Lenders, the L/C
Issuers or their respective affiliates, all financial statements and other
documents and information as they might have and the Administrative Agent or any
Lender or any L/C Issuer reasonably requests with respect to any Borrower.
 
(b)  Without limiting the generality of the foregoing:
 
(i)  At the Borrowers’ expense, an Approved Inventory Servicer shall conduct
physical inventories at, at least 95% of the Borrowers’ store locations 1 time
per Fiscal Year, and at each of the Borrowers’ distribution centers at least 1
time per Fiscal Year at such times as shall be determined by the Borrowers with
notice to the Administrative Agent. The Administrative Agent, at the expense of
the Borrowers, may participate in and/or observe each physical count and/or
inventory of so much of the Collateral as consists of inventory which is
undertaken on behalf of the Borrowers at each of the Borrowers’ distribution
centers and at not more than 10% of the Borrowers’ store locations. The Parent
shall provide the Administrative Agent with the preliminary inventory levels at
each store of each Borrower within 15 Business Days following the completion of
such inventory. The Parent, within 45 days following the completion of each such
physical inventory, in the aggregate, shall provide the Administrative Agent
with an aggregate reconciliation of the results of such inventory and shall post
such results to Borrowers’ stock ledger and general ledger, as applicable. The
Administrative Agent, in its Permitted Discretion, if Adjusted Availability is
less than 10% of the Aggregate Borrowing Base, may, and shall at the Required
Lender’s direction, cause 1 additional inventory per Fiscal Year to be taken (at
the expense of Borrowers).
 
 
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(ii)  At the Borrowers’ expense, upon the request of the Administrative Agent
from time to time, the Borrowers will obtain and deliver to the Administrative
Agent, or, if the Administrative Agent so elects, will cooperate with the
Administrative Agent in the Administrative Agent’s obtaining, a report of an
independent collateral auditor satisfactory to the Administrative Agent (which
may be affiliated with one of Lenders) with respect to the Books and Accounts
and inventory components included in the Aggregate Borrowing Base, which report
shall indicate whether or not the information set forth in the Borrowing Base
Certificate most recently delivered is accurate and complete in all material
respects based upon a review by such auditors of the Accounts (including
verification with respect to the amount, aging, identity and credit of the
respective account debtors and the billing practices of the Borrowers) and
inventory (including verification as to the value, location and respective
types); provided, however, that the Borrowers shall not be obligated to pay for
more than 2 commercial finance exams in any 12 month period unless Adjusted
Availability is less than 10% of the Aggregate Borrowing Base, in which case,
the Borrowers shall be obligated to pay for 4 commercial finance exams in such
12 month period; provided, further, that the Borrower shall be obligated to pay
for any additional commercial finance exams conducted in connection with the
Borrowers request to add Eligible Accounts of Wholesale, Accounts with respect
to private label credit cards, or Accounts with respect to Permitted
Acquisitions to the U.S. Borrowing Base.
 
(iii)  The Administrative Agent may from time to time obtain inventory
appraisals conducted by such appraisers as are satisfactory to the
Administrative Agent or conduct inventory appraisals (in all events, at the
Borrowers’ expense). If the Administrative Agent determines that there have been
changes in markdowns, inventory mix and composition, accounting methods or any
other factors affecting the value of the Collateral, the Administrative Agent
may in its Permitted Discretion have the inventory reappraised by a qualified
appraisal company selected by the Administrative Agent from time to time after
the Closing Date for the purpose of redetermining the Net Liquidation Percentage
of the Eligible Inventory portion of the Collateral and, as a result,
redetermining the Aggregate Borrowing Base; provided, however, that the
Borrowers shall not be obligated to pay for more than 2 inventory appraisals in
any 12 month period unless the Adjusted Availability is less than 10% of the
Aggregate Borrowing Base, in which case, the Borrowers shall be obligated to pay
for 4 inventory appraisals in such 12 month period; provided, further, that the
Borrowers shall be obligated to pay for any additional inventory appraisals (A)
conducted in connection with the Borrowers request to add inventory with respect
to Permitted Acquisitions to the U.S. Borrowing Base and (B) with respect to
inventory at a port of entry in a State of the United States or from a third
party location to a location set forth on Schedule 4(b) of the Perfection
Certificate.
 
 
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(iv)  At the Borrowers’ expense, upon the request of the Administrative Agent,
the Borrowers will obtain and deliver to the Administrative Agent, or, if the
Administrative Agent so elects, will cooperate with the Administrative Agent in
the Administrative Agent’s obtaining, 1 real property appraisal in any 12 month
period from an independent real estate appraiser satisfactory to the
Administrative Agent (which may be affiliated with one of Lenders) with respect
to the Eligible Real Property; provided, however, that if the Adjusted
Availability is less than 10% of the Aggregate Borrowing Base, the Borrowers
shall be obligated to pay for 1 “desktop” review of the most recent real
property appraisal; provided, further, that (A) the Borrowers shall be obligated
to pay for any real property appraisals conducted in connection with the
Borrowers request to add Eligible Real Property, or Real Property acquired
pursuant to Permitted Acquisitions, to the Borrowing Base and (B) any real
property appraisal obtained in accordance with Section 2.8(a) shall not be
subject to this clause (iv).
 
(v)  Upon the request of the Administrative Agent from time to time, the
Borrowers shall furnish statements and schedules further identifying and
describing the Collateral and such other documents in connection with the
Collateral as the Administrative Agent may reasonably request, all in reasonable
detail and in form and reasonably satisfactory to the Administrative Agent.
 
ARTICLE VI  
 
 
AFFIRMATIVE COVENANTS
 
Each Borrower (and, to the extent set forth in any other Loan Document, each
other Loan Party) agrees with the Lenders, the L/C Issuers and the Agents, as
long as any Obligation or any Commitment remains outstanding, the Borrowers
shall and shall cause each of their respective Subsidiaries to do each of the
following:
 
Section 6.1  Returns. Account for returns of inventory and customer credits and
record the effects thereof on the general ledger on the same basis and in
accordance with the usual and customary practices of the applicable Borrower, as
they exist at the time of the execution and delivery of this Agreement except
where failure to do so could not reasonably be expected to result in a Material
Adverse Effect.
 
Section 6.2  Maintenance of Properties.
 
(a)  At all times preserve and keep in full force and effect each Borrower’s
valid existence and good standing and any rights and franchises material to the
Borrowers’ business;
 
(b)  Maintain and preserve all of their properties which are necessary or useful
in the proper conduct to their business in good working order and condition,
ordinary wear and tear excepted;
 
(c)  Cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Borrowers may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times;
 
(d)  Continue to engage in the businesses of selling home furnishings at the
retail and wholesale level, and related businesses; and
 
 
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(e)  Comply at all times with the provisions of all leases to which it is a
party as lessee, so as to prevent any loss or forfeiture thereof or thereunder;
 
provided, that nothing in this Section 6.2 shall prevent the Borrowers from
discontinuing the operation and maintenance of any of their properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
relevant Borrower, desirable in the conduct of its or their business and that do
not in the aggregate cause a Material Adverse Effect.

Section 6.3  Taxes. Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against the Group
Members, or any of their respective assets to be paid in full, before
delinquency or before the expiration of any extension period, as well as all
claims for labor materials or supplies that if unpaid might by law become a Lien
or charge upon its property, except to the extent that the validity of such
assessment or tax shall be the subject of a Permitted Protest. The Borrowers
will and will cause their Subsidiaries to make timely payment or deposit of all
tax payments and withholding taxes required of them by applicable laws,
including those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish the
Administrative Agent with proof satisfactory to the Administrative Agent
indicating that the applicable Group Member has made such payments or deposits.
 
Section 6.4  Insurance. At the Borrowers’ expense, maintain in full force and
effect all policies of insurance respecting the Group Members’ assets wherever
located, covering loss or damage by fire, theft, explosion, and other hazards
and risks and also shall maintain business interruption, public liability,
product liability, property damage, other casualty, workers’ compensation
insurance, as well as insurance against larceny, embezzlement, and criminal
misappropriation, all as ordinarily are insured against by other Persons engaged
in the same or similar business and with financially sound and reputable
insurance companies or associations. All such policies of insurance shall be in
such amounts which are customary for Persons engaged in the same or similar
business and with nationally recognized insurance companies. The Borrowers shall
deliver copies of all such policies to the Administrative Agent with a
satisfactory lender’s loss payable endorsement naming the relevant Agent as loss
payee (with respect to the Collateral) or additional insured, as appropriate.
Each such policy of insurance or endorsement shall contain a clause requiring
the insurer to give not less than 30 days prior written notice to the
Administrative Agent in the event of cancellation of the policy for any reason
whatsoever.
 
Section 6.5  Location of Inventory. Keep each Group Member’s inventory (other
than Eligible In-Transit Inventory) only at the locations identified on Schedule
4(b) of the Perfection Certificate and their chief executive offices only at the
locations identified on Section 2(b) of the Perfection Certificate; provided,
however, that (a) Parent may amend Section 2(b) and Schedule 4(b) of the
Perfection Certificate so long as such amendment occurs by written notice to the
Administrative Agent not less than 30 days prior to the date on which such
inventory is moved to such new location or such chief executive office is
relocated, so long as such new location is within the United States or Canada
(other than Eligible In-Transit Inventory), which amendment shall be included in
any Perfection Certificate delivered pursuant to Section 5.2, and so long as, at
the time of such written notification, the applicable Borrower provides any
financing statements or other documents necessary to perfect and continue the
Administrative Agent’s Liens on such assets and also provides a Collateral
Access Agreement with respect thereto if such location is a warehouse,
distribution center, fulfillment center, contract warehouse or other real
property (other than a retail store location) leased by a Borrower, and (b) each
Group Member may keep inventory during the period from September 1 to December
31 of each year at warehouses leased by such Persons or in a fulfillment center
or contract warehouse, in each case without a Collateral Access Agreement, in an
aggregate amount not to exceed 5% of the Cost of Eligible Inventory.
 
 
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Section 6.6  Compliance with Laws, Etc. Comply with all Requirements of Law, and
orders of any Governmental Authority, and make all necessary filings with, and
give all appropriate notices to, Governmental Authorities, including the Fair
Labor Standards Act and the Americans With Disabilities Act, and with all
Contractual Obligations and Permits, other than laws, rules, regulations,
orders, Contractual Obligations and Permits the non-compliance with which,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
 
Section 6.7  Leases. Pay when due all rents and other amounts payable under any
leases to which any Group Member is a party or by which any Group Member’s
properties and assets are bound, unless such payments are the subject of a
Permitted Protest or unless nonpayment of such rents and other amounts
individually or in the aggregate could not reasonably be expected to result in a
Material Adverse Effect.
 
Section 6.8  Existence. At all times preserve and keep in full force and effect
each Group Member’s valid existence and good standing and any rights and
franchises material to their businesses except as otherwise permitted pursuant
to Section 7.4.
 
Section 6.9  Environmental. Except for such Environmental Liens, failures to
comply, releases, Environmental Actions, notices, citations or orders which
individually or in the aggregate could not reasonably be expected to result in a
Material Adverse Effect (a) keep any property either owned or operated by any
Group Member free of any Environmental Liens or post bonds or other financial
assurances sufficient to satisfy the obligations or liability evidenced by such
Environmental Liens, (b) comply with all applicable Environmental Laws and
provide to the Administrative Agent documentation of such compliance which Agent
reasonably requests, (c) promptly notify the Administrative Agent of any release
of a Hazardous Material of any reportable quantity from or onto property owned
or operated by any Group Member and take any Remedial Actions required to abate
said release or otherwise to come into compliance with applicable Environmental
Law, and (d) promptly, but in any event within 5 days of its receipt thereof,
provide the Administrative Agent with written notice of any of the following:
(i) notice that an Environmental Lien has been filed against any of the real or
personal property of any Group Member, (ii) commencement of any Environmental
Action or notice that an Environmental Action will be filed against any Group
Member, and (iii) notice of a violation, citation, or other administrative order
which reasonably could be expected to result in a Material Adverse Effect.
 
Section 6.10  Disclosure Updates. Promptly and in no event later than 5 Business
Days after obtaining knowledge thereof, notify the Administrative Agent if any
written information, exhibit, or report furnished to the Lender Group contained
any untrue statement of a material fact or omitted to state any material fact
necessary to make the statements contained therein not misleading in any
material respect (other than industry-wide risks normally associated with the
types of businesses conducted by the Group Members) in light of the
circumstances in which made; provided, that Projections, Perfection Certificates
and Schedules furnished to the Lender Group shall be deemed to be updated as and
when delivered pursuant to and in accordance with the terms hereof. The
foregoing to the contrary notwithstanding, any notification pursuant to the
foregoing provision will not cure or remedy the effect of the prior untrue
statement of a material fact or omission of any material fact nor shall any such
notification have the affect of amending or modifying this Agreement, any
Perfection Certificate or any of the Schedules hereto.
 
 
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Section 6.11  Formation of Subsidiaries; Further Assurances. (a) At the time
that any Borrower forms any direct or indirect Subsidiary or acquires any direct
or indirect Subsidiary after the Closing Date, such Borrower shall (i) cause
such new Subsidiary to provide to the Administrative Agent a joinder to this
Agreement and the Guaranty and Security Agreement or the Canadian Security
Documents, as applicable, allonges to Notes, and other security documents, as
well as appropriate UCC-1 financing statements, PPSA or other relevant filings
in such jurisdictions as may be required by the Loan Documents or applicable
Requirements of Law or as the Administrative Agent may otherwise reasonably
request, all in form and substance satisfactory to the Administrative Agent
(including being sufficient to grant the Administrative Agent a first priority
Lien (subject to Permitted Liens) in and to the assets of such newly formed or
acquired Subsidiary in scope similar to the collateral granted hereunder); and
(ii) provide to the Administrative Agent all other documentation, including one
or more opinions of counsel satisfactory to the Administrative Agent, which in
its opinion is appropriate with respect to the execution and delivery of the
applicable documentation referred to above. (b) The Borrower shall take all
other actions necessary or advisable to ensure the validity or continuing
validity of any guaranty for any Obligation or any Lien securing any Obligation,
to perfect, maintain, evidence or enforce any Lien securing any Obligation or to
ensure such Liens have the same priority as that of the Liens on similar
Collateral set forth in the Loan Documents executed on the Closing Date (or, for
Collateral located outside the United States, a similar priority acceptable to
the Administrative Agent). Any document, agreement, or instrument executed or
issued pursuant to this Section 6.11 shall be a Loan Document.
 
Section 6.12  Additional Collateral Covenants. Except for Permitted Liens, be
the owners of the Collateral free from any right or claim of any other Person or
any Lien, and shall defend the same against all claims and demands of all
Persons at any time claiming the same or any interests therein adverse to the
Administrative Agent or any Lender. The Borrowers may grant such allowances,
discounts or other adjustments to the Borrowers’ Account Debtors as the
Borrowers may reasonably deem to accord with sound business practice pursuant to
past practices.
 
Section 6.13  Investment Proceeds, Etc. The proceeds of any funds received by
any Borrower whether or not from ordinary course business operations (including,
without limitation, tax refunds, damage awards, or insurance or condemnation
proceeds) with respect to the Collateral shall be deposited directly into the
Cash Collateral Account to be applied on account of the Obligations in
accordance with Section 2.12 if a Cash Dominion Event has occurred and is
continuing.
 
Section 6.14  Immediate Notice to the Administrative Agent.
 
(a)  The Parent shall provide the Administrative Agent with written notice
promptly upon the occurrence of any of the following events, which written
notice shall state with reasonable particularity the facts and circumstances of
the event for which such notice is being given:
 
 
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(i)  The completion of any physical count of all or a material portion of the
Borrowers’ inventory (together with a copy of the results thereof certified by
the Parent);
 
(ii)  Any failure by the Borrowers to pay rent on a timely basis at 20% or more
of any of the Borrowers’ locations, and as and when such rent payment is due;
 
(iii)  Any Material Adverse Effect;
 
(iv)  The occurrence of any Default or Event of Default;
 
(v)  Any setoff, claims, withholdings or other defenses to which any of the
Collateral, or the Administrative Agent’s rights with respect to the Collateral,
are subject; or
 
 
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(vi)  The obtaining of an organization identification number by any Borrower
which did not have one on the Closing Date, together with such number.
 
(b)  The Parent shall:
 
(i)  Provide the Administrative Agent, when so distributed, with copies of any
materials distributed to the shareholders of any Borrower (provided, that for
purposes of this clause (i), any materials to be delivered hereunder shall be
deemed to have been delivered when posted on the Parent’s website or otherwise
made available on the website of the SEC);
 
(ii)  Add the Administrative Agent as an addressee on all mailing lists
maintained by or for Borrowers;
 
(iii)  At the reasonable request of the Administrative Agent, from time to time,
provide the Administrative Agent with copies of all requested advertising
(including copies of all print advertising and duplicate tapes of all requested
video and radio advertising);
 
(iv)  At the request of the Administrative Agent, provide the Administrative
Agent, following review by the Audit and Finance Committee of the Parent’s Board
of Directors, with a copy of any management letter or similar communications
from any accountant of the Borrowers; and
 
(v)  Provide the Administrative Agent with details of all credit card
arrangements to which any Group Member is from time to time a party, including
details relating to such Group Member’s compliance with the terms of payment to
the applicable the Cash Collateral Account of the proceeds of all credit card
charges for sales by such Group Member.
 
(vi)  The Parent shall provide the Administrative Agent with (a) prior written
notice of any entity’s becoming or ceasing to be a Subsidiary and (b) prompt
written notice of any entity’s becoming or ceasing to be an Affiliate (other
than a Subsidiary).
 
Section 6.15  Certain Subsidiaries. The Parent shall not permit Bailey Street
Trading Company and BMAJ, Inc. to engage in any trade or business or own any
assets or incur any Indebtedness to any Person. The Bombay Furniture Company,
Inc. shall not engage in any business or activity other than managing the
foreign offices of the Group Members and holding immaterial assets incidental
thereto.
 
Section 6.16  Further Assurances. Cooperate with Lenders and the Administrative
Agent and execute such further instruments and documents as Lenders or the
Administrative Agent shall reasonably request to carry out to their satisfaction
the transactions contemplated by this Agreement and the other Loan Documents.
 
Section 6.17  Governing Documents. Deliver to the Administrative Agent complete
and correct copies of all documents modifying any term of any Governing Document
of any Group Member or joint venture thereof on or prior to the date of delivery
of any Compliance Certificate delivered pursuant to Section 5.3(a)(iii).
 
Section 6.18  Deposit Accounts; Securities Accounts and Cash Collateral
Accounts.
 
(a)  The Borrowers shall (i) establish and maintain cash management services of
a type and on terms satisfactory to the Administrative Agent at one or more of
the banks (a “Cash Management Bank”) set forth on Schedule 8 of the Perfection
Certificate, (ii) promptly, and in any event no later than the first Business
Day after the date of receipt thereof, cause all Collections of Borrowers or
cash proceeds of Accounts of Borrowers to be deposited only into Store Accounts
or Concentration Accounts, each set forth on Schedule 8 of the Perfection
Certificate and (iii) direct all Cash Management Banks with Store Accounts to
(A) so long as no Cash Dominion Event has occurred and is continuing, cause all
Collections of Borrowers in an amount greater than $50,000 to be transferred no
less frequently than twice each week, to and only to, a Concentration Account or
a Cash Collateral Account, and (B) after the occurrence and during the
continuance of a Cash Dominion Event cause all Collections of Borrowers in an
amount greater than $10,000 then held in each such Store Account to be
transferred no less frequently than once each day to, and only to, a
Concentration Account or a Cash Collateral Account. If, notwithstanding the
provisions of this Section 6.18, after the occurrence and during the continuance
of a Cash Dominion Event, any Borrower receives or otherwise has dominion over
or control of any Collections, such Borrower shall hold such Collections in
trust for the Administrative Agent or the Canadian Agent, as the case may be,
and shall not commingle such Collections with any of Borrowers’ other funds or
deposit such Collections in any account of Borrowers except as instructed by the
Administrative Agent or the Canadian Agent, as the case may be.
 
(b)  Borrowers shall establish and maintain Control Agreements with the
Administrative Agent or the Canadian Agent, as applicable, and each Cash
Management Bank with respect to each Concentration Account. Each such Control
Agreement shall provide, among other things, that after the occurrence and
during the continuance of a Cash Dominion Event, (i) upon notice from the
Administrative Agent or the Canadian Agent, as applicable, the Cash Management
Bank will comply with instructions of the Administrative Agent or the Canadian
Agent, as applicable, directing the disposition of funds in the Concentration
Account without further consent by Borrowers, (ii) the Cash Management Bank has
no rights of setoff or recoupment or any other claim against the applicable
Concentration Account, other than for payment of its service fees and other
charges directly related to the administration of such Concentration Account and
for returned checks or other items of payment, and (iii) it immediately will
forward by daily sweep all amounts in the applicable Concentration Accounts to a
Cash Collateral Account designated by the Administrative Agent or the Canadian
Agent, as applicable.
 
 
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(c)  Borrowers shall establish and maintain Credit Card Agreements with the
Administrative Agent or the Canadian Agent, as applicable, and each Credit Card
Processor. Each such Credit Card Agreement shall provide, among other things,
that each such Credit Card Processor shall transfer all proceeds due with
respect to credit card charges for sales (net of expenses and chargebacks of the
Credit Card Issuer or Credit Card Processor) by Borrowers received by it (or
other amounts payable by such Credit Card Processor) into a designated
Concentration Account on a daily basis. Borrowers shall not attempt to change
any direction or designation set forth in the Credit Card Agreements regarding
payment of charges without the prior written consent of the Administrative Agent
or the Canadian Agent, as applicable.
 
(d)  So long as no Cash Dominion Event has occurred and is continuing, the
Parent may amend Schedule 8 of the Perfection Certificate to add or replace a
Cash Management Bank or deposit account; provided, however, that (i) such
prospective Cash Management Bank shall be satisfactory to the Administrative
Agent and the Administrative Agent shall have consented in writing in advance to
the opening of such deposit account with the prospective Cash Management Bank,
and (ii) prior to the time of the opening of any Concentration Account,
Borrowers and such prospective Cash Management Bank shall have executed and
delivered to the Administrative Agent or the Canadian Agent, as applicable, a
Control Agreement in accordance with clause (b) above. Borrowers shall close any
of their deposit accounts (and establish replacement cash management accounts in
accordance with the foregoing sentence) promptly and in any event within 30 days
of notice from the Administrative Agent or the Canadian Agent, as applicable,
that the creditworthiness of any Cash Management Bank is no longer acceptable in
the Administrative Agent’s or the Canadian Agent’s reasonable judgment, or as
promptly as practicable and in any event within 60 days of notice from the
Administrative Agent or the Canadian Agent, as applicable, that the operating
performance, funds transfer, or availability procedures or performance of the
Cash Management Bank with respect to Concentration Accounts or the
Administrative Agent’s or the Canadian Agent’s liability under any Control
Agreement with such Cash Management Bank is no longer acceptable in the
Administrative Agent’s or the Canadian Agent’s reasonable judgment. If,
notwithstanding the provisions of this Section 6.18, after the occurrence and
during the continuance of a Cash Dominion Event, any Borrower receives or
otherwise has dominion over or control of any Collections, such Borrower shall
hold such Collections in trust for the Administrative Agent or the Canadian
Agent, as applicable, and shall not commingle such Collections with any of the
Borrowers’ other funds or deposit such Collections in any account of the
Borrowers except as instructed by the Administrative Agent or the Canadian
Agent, as applicable.
 
 
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(e)  After the occurrence and during the continuance of a Cash Dominion Event,
the deposit accounts shall be cash collateral accounts, with all cash, checks
and similar items of payment in such accounts securing payment of the
Obligations, and in which Borrowers have granted a Lien on each deposit account
to the Administrative Agent or the Canadian Agent pursuant to the Loan
Documents.
 
(f)  Following the occurrence of a Cash Dominion Event, the Borrowers agree that
they will not, and will not permit their Subsidiaries to, transfer assets out of
any of their deposit accounts or securities accounts. Following the occurrence
of a Cash Dominion Event, the Borrowers agree that they will and will cause
their Subsidiaries to take any or all reasonable steps that the Administrative
Agent requests in order for the Administrative Agent to obtain control in
accordance with the UCC with respect to any of its or their securities accounts,
deposit accounts, electronic chattel paper, investment property, and
letter-of-credit rights. No arrangement contemplated hereby or by any Control
Agreement in respect of any deposit accounts, securities accounts or other
investment property shall be modified by Borrowers without the prior written
consent of the Administrative Agent. Upon the occurrence and during the
continuance of a Default or Event of Default, the Administrative Agent may
notify any bank or securities intermediary to liquidate the applicable deposit
account or securities account or any related investment property maintained or
held thereby and remit the proceeds thereof to a Cash Collateral Account
identified by the Administrative Agent.1
 
(g)  Neither the Administrative Agent nor the Canadian Agent shall have any
responsibility for, or bear any risk of loss of, any investment or income of any
funds in any deposit account. From time to time after funds are deposited in any
Cash Collateral Account, the Administrative Agent or the Canadian Agent, as
applicable, may apply funds then held in such Cash Collateral Account to the
payment of Obligations in accordance with Section 2.12. No Group Member and no
Person claiming on behalf of or through any Group Member shall have any right to
demand payment of any funds held in any Cash Collateral Account at any time
prior to the termination of all Commitments and the payment in full of all
Obligations and, in the case of L/C Cash Collateral Accounts, the termination of
all outstanding Letters of Credit.
 
Section 6.19  Release of Eligible Real Property. On or after the date that is 6
months after the Closing Date, following the Parent’s written request therefor,
the Administrative Agent shall release its Lien upon the Eligible Real Property,
at the expense of the Borrowers, so long as (a) Borrowers shall have provided
the Administrative Agent with fifteen (15) Business Days’ prior notice thereof;
(b) Borrowers shall have complied with Section 2.8(a), if applicable; (c) at the
time of such request and after giving effect thereto no Default or Event of
Default shall have occurred and be continuing and (d) Adjusted Availability at
the time of such request and after giving effect thereto shall be not less than
20% of the Aggregate Borrowing Base on such date and for the next two Fiscal
Periods succeeding the Fiscal Period in which such release shall occur.
 
Section 6.20  [Reserved].
 
 
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Section 6.21  Grant of Non-Exclusive License. For the purpose of enabling the
Administrative Agent to exercise the Administrative Agent’s rights and remedies
under Section 8 of this Agreement and Section 6.1 of the Guaranty and Security
Agreement (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 Administrative Agent
shall be lawfully entitled to exercise such rights and remedies under Section 8
of this Agreement and Section 6.1 of the Guaranty and Security Agreement, each
U.S. Borrower hereby (a) grants to the Administrative Agent and its agents, for
the benefit of each Secured Party, a royalty free, non-exclusive, irrevocable
worldwide license, such license being with respect to the Administrative Agent’s
exercise of its rights and remedies under Section 8 of this Agreement and
Section 6.1 of the Guaranty and Security Agreement including, without
limitation, in connection with any completion of the manufacture of inventory or
any sale or other disposition of inventory (i) to use, apply, and affix any
trademark, trade name, logo, or the like in which any U.S. Borrower now or
hereafter has rights, (ii) to use, license or sublicense any Intellectual
Property or computer software now owned, held or hereafter acquired by such U.S.
Borrower, 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 each Agent’s use of the property described in clauses
(i) and (ii) above will comply with all Requirements of Law, and (iii) to use
any and all furniture, fixtures and equipment contained in any premises owned or
occupied by any U.S. Borrower in connection with the exercise of each Agent’s
rights and remedies under Section 8 of this Agreement and Section 6.1 of the
Guaranty and Security Agreement, and (b) agrees to provide the Administrative
Agent and/or its agents with access to, and the right to use, any such premises
owned or occupied by any U.S. Borrower.
 
Section 6.22  Post-Closing Covenants. (a) The Borrowers shall, within 45 days
after the Closing Date (or such later date as shall be acceptable to the
Administrative Agent in its sole discretion), deliver such Collateral Access
Agreements as the Administrative Agent shall request in its Permitted
Discretion.
 
(b) The Borrowers shall, no later than February 3, 2007 (or such later date as
shall be acceptable to the Administrative Agent in its Permitted Discretion),
deliver to the Administrative Agent evidence that (i) the bank account number
978328656215 at the Bank of Nova Scotia has been rendered inactive, (ii) the
bank account number 978320144911 at the Bank of Nova Scotia either (A) has been
rendered inactive or (B) is functioning solely as a Store Account and all
amounts therein are swept into an account over which there is a Control
Agreement and (iii) all payments from credit cards and Canadian Store Accounts
are swept on a daily basis into an account at the Royal Bank of Canada over
which the Canadian Agent has a valid perfected Lien pursuant to a Control
Agreement.
 
 
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ARTICLE VII  
 
 
NEGATIVE COVENANTS
 
Each Borrower (and, to the extent set forth in any other Loan Document, each
other Loan Party) agrees with the Lenders, the L/C Issuers and the Agents, as
long as any Obligation or any Commitment remains outstanding, no Borrower shall,
nor shall it permit any Group Member to:
 
Section 7.1  Indebtedness. Create, incur, assume, suffer to exist, guarantee, or
otherwise become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
 
(a)  the Obligations;
 
(b)  Indebtedness set forth on Schedule 7.1;
 
(c)  Permitted Purchase Money Indebtedness;
 
(d)  refinancings, renewals, or extensions of Indebtedness permitted under
clauses (b) and (c) of this Section 7.1 (and continuance or renewal of any
Permitted Liens associated therewith) so long as: (i) the terms and conditions
of such refinancings, renewals, or extensions do not, in the Administrative
Agent’s Permitted Discretion, materially impair the prospects of repayment of
the Obligations by the Borrowers or materially impair the Borrowers’
creditworthiness, (ii) such refinancings, renewals, or extensions do not result
in an increase in the then extant principal amount of, or interest rate with
respect to, the Indebtedness so refinanced, renewed, or extended or add one or
more Borrower as liable with respect thereto if such additional Borrowers were
not liable with respect to the original Indebtedness, (iii) such refinancings,
renewals, or extensions do not result in a shortening of the average weighted
maturity of the Indebtedness so refinanced, renewed, or extended, nor are they
on terms or conditions, that, taken as a whole, are materially more burdensome
or restrictive to the applicable Borrower, (iv) if the Indebtedness that is
refinanced, renewed, or extended was subordinated in right of payment to the
Obligations, then the terms and conditions of the refinancing, renewal, or
extension Indebtedness must include subordination terms and conditions that are
at least as favorable to the Lender Group as those that were applicable to the
refinanced, renewed, or extended Indebtedness, and (v) the Indebtedness that is
refinanced, renewed, or extended is not recourse to any Person that is liable on
account of the Obligations other than those Persons which were obligated with
respect to the Indebtedness that was refinanced, renewed, or extended;
 
(e)  at any time following the release of the Eligible Real Property in
accordance with Section 6.19, Permitted Office Building Indebtedness and all
refinancings, renewals, or extensions thereof (and continuance or renewal or any
Permitted Liens associated therewith);
 
(f)  endorsement of instruments or other payment items for deposit;
 
(g)  Indebtedness composing Permitted Investments;
 
(h)  Indebtedness of a Borrower to another Borrower;
 
 
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(i)  Indebtedness of a Group Member in respect of Hedging Agreements entered
into by such Person with the purpose and effect of fixing interest rates on a
principal amount of Indebtedness of such Person that is accruing interest at a
variable rate; provided, that each such contract is with a counterparty or has a
guarantor of the obligation of the counterparty who at the time the contract is
made has long-term obligations rated A or Aa3 or better, respectively, by S&P
and Moody’s; and
 
(j)  other unsecured Indebtedness of any Group Member, in an aggregate amount
not to exceed at any time $2,000,000.
 
Section 7.2  Liens. Create, incur, assume, or suffer to exist, directly or
indirectly, any Lien on or with respect to any of its assets, of any kind,
whether now owned or hereafter acquired, or any income or profits therefrom,
except for Permitted Liens (including Liens that are replacements of Permitted
Liens to the extent that the original Indebtedness is refinanced, renewed, or
extended under Section 7.1(d) or (e) and so long as the replacement Liens only
encumber those assets that secured the refinanced, renewed, or extended
Indebtedness).
 
Section 7.3  Restrictions on Negative Pledges and Upstream Limitation.
 
(a)  Enter into or permit to exist any arrangement or agreement (excluding this
Agreement and the other Loan Documents) which directly or indirectly prohibits
any Group Member from creating, assuming or incurring any Lien upon its
properties, revenues or assets or those of any of their Subsidiaries whether now
owned or hereafter acquired; or
 
(b)  Enter into any agreement, contract or arrangement (excluding this Agreement
and the other Loan Documents) restricting the ability of any Subsidiary of any
Borrower to pay or make dividends or distributions in cash or kind to the
Borrowers, to make loans, advances or other payments of whatsoever nature to the
Borrowers, or to make transfers or distributions of all or any part of its
assets to the Borrowers;
 
in each case other than (i) restrictions on specific assets which assets are the
subject of Permitted Purchase Money Indebtedness or at any time following the
release of the Eligible Real Property in accordance with Section 6.19, Permitted
Office Building Indebtedness, (ii) customary anti-assignment provisions
contained in leases and licensing agreements entered into by such Group Member
in the ordinary course of its business and (iii) customary restrictions
contained in asset sale agreements limiting the transfer of such assets pending
the closing of such sale.

Section 7.4  Restrictions on Fundamental Changes. (a) Enter into any merger or
consolidation, (b) liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or (c) convey, sell, lease, license, assign,
transfer, or otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its assets, except:
 
(i)  any Borrower may be merged with or into another Borrower, or be liquidated,
wound up or dissolved, or all or any part of its business, property or assets
may be conveyed, sold, leased, transferred or otherwise disposed of, in one
transaction or a series of transactions, to any Borrower; provided, that (A) at
the time of any such event, no Event of Default shall exist or shall result from
such event and (B) in the case of such an event, a Borrower shall be the
continuing or surviving Person;
 
 
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(ii)  (A) any Subsidiary of a Borrower that is a Domestic Person may be merged
with or into another Subsidiary of a Borrower that is a Domestic Person, or be
liquidated, wound up or dissolved, or all or any part of its business, property
or assets may be conveyed, sold, leased, transferred or otherwise disposed of,
in one transaction or a series of transactions, to any Subsidiary of a Borrower
that is a Domestic Person; provided, that at the time of any such event no Event
of Default shall exist or shall result from such event, and (B) any Subsidiary
of a Borrower that is a Domestic Person may be merged with and into a Borrower,
or be liquidated, wound up or dissolved, or all or any part of its business,
property or assets may be conveyed, sold, leased, transferred or otherwise
disposed of, in one transaction or a series of transactions, to any Borrower;
provided, that (1) at the time of any such event, no Event of Default shall
exist or shall result from such event, (2) a Borrower shall be the continuing or
surviving Person, and (3) the Borrowers shall have obtained the Administrative
Agent’s prior written consent;
 
(iii)  in connection with (A) sales or closures of stores or distribution
centers in the normal course of business, and (B) dispositions of inventory and
other assets located at such locations (or used in connection with the operation
thereof) and related non-depreciated leasehold interests related thereto, in
each case on reasonable terms consistent with such Person’s usual practice in
connection with such sales or closures; provided, that the proceeds of such
sales and dispositions of inventory closures are used to repay or prepay the
Obligations pursuant to Section 2.8;
 
(iv)  the sale, in one transaction or a series of transactions, of the Bombay
Office Complex;
 
(v)  dispositions permitted by Section 7.5; and
 
(vi)  any other disposition of assets in any Fiscal Year for full and fair
consideration as long as the value of such assets does not exceed $1,000,000.
 
Section 7.5  Disposal of Assets; Sale and Leaseback. Other than Permitted
Dispositions, and dispositions permitted by Section 7.4, convey, sell, lease,
license, assign, transfer, or otherwise dispose of any of the assets of any
Group Member. The Borrowers will not, and will not permit any of their
Subsidiaries to, enter into any arrangement, directly or indirectly, whereby any
Group Member shall sell or transfer any property owned by it in order then or
thereafter to lease such property or lease other property that any Group Member
intends to use for substantially the same purpose as the property being sold or
transferred other than (a) sale leaseback transactions (in one transaction or a
series of transactions) in respect of the Bombay Office Complex and (b) other
sale leaseback transactions not to exceed $2,500,000 in the aggregate at any
time.
 
Section 7.6  Change Name; Change Governing Documents. (a) Change any Group
Member’s name, FEIN, organizational identification number, type of organization,
jurisdiction of organization or other legal structure or relocate any Group
Member’s chief executive office to a new location, without the consent of the
Administrative Agent (not to be unreasonably withheld so long as, at the time of
such request for consent, such Group Member provides any financing statements
necessary to perfect and continue perfected the Administrative Agent’s Liens or
any constitutive documents resulting from such change); provided, however, that
a Group Member may change its name or chief executive office location upon at
least 30 days prior written notice by Parent to the Administrative Agent of such
change and so long as, at the time of such written notification, such Group
Member provides any financing statements necessary to perfect and continue
perfected the Administrative Agent’s Liens; provided, further, that no Group
Member shall change its name, identity or corporate or organizational structure
in any manner that might make any financing statement filed in connection
herewith or any other Loan Document materially misleading within the meaning of
section 46(4) of the PPSA (or any comparable provision then in effect) except
upon prior written notice to the Administrative Agent and after the
Administrative Agent’s written acknowledgement that any reasonable action
requested by the Administrative Agent in connection therewith, including to
continue the perfection of any Liens in favor of the Administrative Agent, on
behalf of the Lenders; or
 
 
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(b) Change, waive or otherwise modify any Governing Document of, or otherwise
change the capital structure of, any Group Member (including the terms of any of
their outstanding Stock or Stock Equivalents), in each case except for those
modifications and waivers that (i) do not elect, or permit the election, to
treat the Stock Equivalents of any limited liability company (or similar entity)
as certificated and (ii) do not materially affect the rights and privileges of
any Group Member and do not materially affect the interests of any Secured Party
under the Loan Documents or in the Collateral.
 
Section 7.7  Prepayments and Amendments. Except in connection with a refinancing
permitted by Section 7.1(d),
 
(a)  prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of
any Group Member, other than the Obligations in accordance with this Agreement;
or
 
(b)  directly or indirectly, amend, modify, alter, increase, or change any of
the terms or conditions of any agreement, instrument, document, indenture, or
other writing evidencing or concerning Indebtedness permitted under Section
7.1(b) or (c).
 
Section 7.8  Consignments. Consign any of their inventory or sell any of their
inventory on bill and hold, sale or return, sale on approval, or other
conditional terms of sale, except for (a) consignments of inventory not to
exceed the aggregate Cost amount of $1,000,000 at any time, and (b) rights of
purchasers to return inventory pursuant to any Group Member’s return policy.
 
Section 7.9  Distributions. Other than distributions or declaration and payment
of dividends by a Borrower to another Borrower, make any distribution or declare
or pay any dividends (in cash or other property, other than common Stock or
options or rights with respect to common Stock) on, or purchase, acquire,
redeem, or retire any of any Borrower’s Stock, of any class, whether now or
hereafter outstanding; provided, however, that (a) the Borrowers may purchase,
acquire, redeem or retire any of the Borrowers’ Stock or may pay cash dividends
on any Borrowers’ Stock so long as (i) at the time of such purchase, acquisition
redemption, retirement, payment and after giving effect thereto, no Default or
Event of Default shall have occurred and be continuing and (ii) immediately
after giving effect thereto, Availability shall be at least equal to $25,000,000
and the Parent shall have delivered to the Administrative Agent a Compliance
Certificate and Projections evidencing the maintenance of Availability of at
least $25,000,000 for the 2 Fiscal Quarters then ended immediately prior to such
purchase, acquisition, redemption or retirement of any Borrower’s Stock and (b)
Borrowers may make distributions or declare and pay any dividends on and may
purchase, acquire, redeem, or retire any Borrower’s Stock in a substantially
contemporaneous exchange for common Stock or other common equity interests of
such Borrower (including as a result of new issuances of common Stock or common
equity interests).
 
 
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Section 7.10  Accounting Methods. Modify or change their Fiscal Year or their
method of accounting (other than as may be required to conform to GAAP).
 
Section 7.11  Investments, Acquisitions. Except for Permitted Investments and
Permitted Acquisitions, directly or indirectly, make or acquire any Investment,
or incur any liabilities (including contingent obligations) for or in connection
with any Investment; provided, however, that such Investments will be considered
Investments permitted by this Section 7.11 only if all actions have been taken
to the satisfaction of the Administrative Agent to provide to the Administrative
Agent, for the benefit of Lenders and the Administrative Agent, a first priority
perfected security interest in all of such Investments free of all Liens other
than Permitted Liens.
 
Section 7.12  Transactions with Affiliates. Engage in any transaction with any
Affiliate (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any such
Affiliate or, to the knowledge of the Borrowers, any corporation, partnership,
trust or other entity in which any such Affiliate has a substantial interest or
is an officer, director, trustee or partner, on terms more favorable to such
Person than would have been obtainable on an arm’s-length basis in the ordinary
course of business except (a) reasonable and customary fees and other
consideration paid to members of the board of directors of Parent and (b)
compensation and benefit arrangements for officers and other employees of any
Group Member entered into in the ordinary course of business and (c)
transactions among Parent and its wholly-owned Subsidiaries in the ordinary
course of business consistent with past practices. Each Affiliate of the
Borrowers is listed on Schedule 7.12 (as such Schedule may be updated from time
to time).
 
Section 7.13  Suspension. Suspend or go out of a substantial portion of their
business, other than in relation to Permitted Dispositions or transactions
expressly permitted by Sections 7.4 and 7.5.
 
Section 7.14  Use of Proceeds. Use the proceeds of the Loans for any purpose
other than (a) on the Closing Date, (i) to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses owing to the lenders
under the Existing Credit Agreement, and (ii) to pay transactional fees, costs,
and expenses incurred in connection with this Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby, and (b)
thereafter, consistent with the terms and conditions hereof, for its lawful and
permitted purposes.
 
Section 7.15  Inventory with Bailees. Unless the Administrative Agent has
granted its prior written consent and the Borrowers have delivered to the
Administrative Agent a Bailee Acknowledgment with respect to the applicable
inventory, no inventory shall at any time now or hereafter be stored with a
bailee, warehouseman, or similar party (other than inventory located at retail
locations).
 
 
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Section 7.16  Store Openings and Closings. Other than in respect of the store
closings set forth on Schedule 7.16, open or close any location at which the
Borrowers maintain, offer for sale or store any of the Collateral unless the
Borrowers have provided the Administrative Agent at least 30 days’ prior written
notice of such opening or closing and (a) in the case of any such opening, such
opening results in no more than a 24 store difference in the projected store
openings set forth in the Projections or (b) in the case of any such closing,
such closing results in no more than a 24 store difference in the projected
store openings set forth in the Projections.
 
Section 7.17  Securities Accounts. Establish or maintain any securities account
unless the Administrative Agent shall have received a Control Agreement in
respect of such securities account in compliance with Section 6.18. No Borrower
shall transfer assets out of any securities account; provided, however, that, so
long as no Cash Dominion Event has occurred and is continuing or would result
therefrom, the Borrowers may use such assets (and the proceeds thereof) to the
extent not prohibited by this Agreement.
 
Section 7.18  Deposit Accounts, Credit Card Agreements, etc. (a) Establish any
bank accounts, credit card clearinghouse or processors, other than those deposit
accounts, securities accounts, Credit Card Agreements and other accounts, all
listed on Schedule 8 of the Perfection Certificate or Schedule 4.20, without
providing advance written notice to the Administrative Agent, provided that, in
the case of securities accounts and deposit accounts, the Borrowers shall
provide the Administrative Agent with Control Agreements simultaneously with the
opening of such new accounts, (b) violate directly or indirectly any Control
Agreement with respect to a Controlled Deposit Account or a Controlled
Securities Account or other bank agency or lock box agreement in favor of the
Administrative Agent for the benefit of the Lender Group with respect to such
account, (c) deposit into any of the payroll accounts listed on Schedule 8 of
the Perfection Certificate any amounts in excess of amounts necessary to pay
current payroll obligations from such accounts or (d) change any direction or
designation relating to any Credit Card Processor.
 
Section 7.19  Employee Benefit Plans.
 
(a)  Engage in any “prohibited transaction” within the meaning of §406 of ERISA
or §4975 of the Code which could reasonably be expected to result in a Material
Adverse Effect; or
 
(b)  permit any Guaranteed Pension Plan to incur an
“accumulated funding deficiency”, as such term is defined in §302 of ERISA,
whether or not such deficiency is or may be waived; or
 
(c)  fail to contribute to any Guaranteed Pension Plan to an extent which, or
terminate any Guaranteed Pension Plan in a manner which, could result in the
imposition of a lien or encumbrance on the assets of any Group Member pursuant
to §302(f) or §4068 of ERISA; or
 
(d)  amend any Guaranteed Pension Plan in circumstances requiring the posting of
security pursuant to §307 of ERISA or §401(a)(29) of the Code; or
 
 
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(e)  establish, maintain, contribute to, or have any obligation or liability,
contingent or otherwise, with respect to a Benefit Plan, Canadian Benefit Plan
or Canadian Pension Plan; or
 
(f)  permit or take any action which would result in the aggregate benefit
liabilities (with the meaning of §4001 of ERISA) of all Guaranteed Pension Plans
exceeding the value of the aggregate assets of such Plans, disregarding for this
purpose the benefit liabilities and assets of any such Plan with assets in
excess of benefit liabilities, by more than $250,000.
 
Section 7.20  Margin Regulations. Use all or any portion of the proceeds of any
credit extended hereunder to purchase or carry margin stock (within the meaning
of Regulation U of the Federal Reserve Board) in contravention of Regulation U
of the Federal Reserve Board.
 
ARTICLE VIII  
 
EVENTS OF DEFAULT
 
Section 8.1  Definition. Each of the following shall be an Event of Default:
 
(a)  any Borrower shall fail to pay (i) when due any installment of principal
whether at the stated date of maturity or any accelerated date of maturity or at
any other date fixed for payment of the Obligations, (ii) when due any L/C
Reimbursement Obligation payable to any L/C Issuer, and (iii) any interest
(including any interest which, but for the provisions of the Bankruptcy Code,
would have accrued on such amounts), fees under any Loan Document or any other
Obligation not set forth in the preceding clauses (i) or (ii) herein (x) so long
as any Cash Dominion Event shall not have occurred, within 5 days after the date
due, and (y) when the same shall be due and payable at any time any Cash
Dominion Event shall have occurred;
 
(b)  (i) any Group Member shall fail to comply with any of the provisions
contained in Sections 5.2 (with respect to delivery of the Borrowing Base
Certificate), 6.8, 6.14(a)(iii), 6.14(a)(iv), 6.18, or Article VII; (ii) any
Group Member shall fail to comply with any of the provisions contained in
Sections 5.2 (other than with respect to delivery of the Borrowing Base
Certificate) or 6.4 for 5 Business Days, (iii) any Group Member shall fail to
perform any term, covenant or agreement contained herein or in any of the other
Loan Documents (other than those specified elsewhere in this Article VIII) for
20 days after written notice of such failure has been given to the Parent by the
Administrative Agent; and (iv) any representation or warranty of any Group
Member in this Agreement or any of the other Loan Documents or any Record or in
any other document or instrument delivered pursuant to or in connection with
this Agreement shall prove to have been false in any material respect upon the
date when made or deemed to have been made or repeated;
 
(c)  if any material portion of any Group Member’s assets is attached, seized,
subject to a writ or distress warrant, levied upon, or comes into the possession
of any third Person and the same is not discharged for 30 days or more;
 
(d)  if an Insolvency Proceeding is commenced by any Group Member;
 
 
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(e)  if an Insolvency Proceeding is commenced against any Group Member, and any
of the following events occur: (i) the applicable Group Member consents to the
institution of the Insolvency Proceeding against it, (ii) the petition
commencing the Insolvency Proceeding is not timely controverted; provided,
however, that, during the pendency of such period, each Lender and the L/C
Issuer shall be relieved of its obligations to extend credit hereunder, (iii)
the petition commencing the Insolvency Proceeding is not dismissed within 60
calendar days of the date of the filing thereof; provided, however, that, during
the pendency of such period, each Lender and each L/C Issuer shall be relieved
of its obligation to extend credit hereunder, (iv) a trustee, custodian,
liquidator, monitor, receiver or receiver manager is appointed to take
possession of all or any substantial portion of the properties or assets of, or
to operate all or any substantial portion of the business of, any Group Member,
(v) an order for relief shall have been entered therein, (vi) any Group Member
shall generally not pay its debts as such debts become due, shall admit in
writing its inability to pay its debts generally or shall make a general
assignment for the benefit of creditors or (vii) any Group Member shall take any
corporate or similar action or any other action to authorize any action
described in clause (i) or (vi) above;
 
(f)  if any Group Member is enjoined, restrained, or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
 
(g)  if a notice of Lien, levy, or assessment is filed of record with respect to
any Group Member’s assets by any Governmental Authority, or if any taxes or
debts owing at any time hereafter to any one or more of such entities becomes a
Lien, whether choate or otherwise, upon any Group Member’s assets and the same
is not paid prior to becoming delinquent;
 
(h)  if any Group Member suffers the entry against it of a final judgment for
the payment of money in excess of $1,000,000 (not covered by insurance) and such
judgment is unstayed and undischarged for a period of thirty consecutive days
after the date of entry thereof;
 
(i)  if there is a default in any material agreement to which any Group Member
is a party relative to such Person’s Indebtedness involving an aggregate amount
of $10,000,000, or more, and such default (i) occurs at the final maturity of
the obligations thereunder, or (ii) results in a right by the other party
thereto, irrespective of whether exercised, to accelerate the maturity of the
applicable Group Member’s obligations thereunder, or to terminate such
agreement;
 
(j)  if any Group Member makes any payment on account of Indebtedness that has
been contractually subordinated in right of payment to the payment of the
Obligations, except to the extent such payment is permitted by the terms of the
subordination provisions application to such Indebtedness;
 
(k)  if any of the Loan Documents shall be cancelled, terminated, revoked or
rescinded or Agents’ Liens the Collateral with a value in excess of $5,000,000
shall cease to be perfected, or shall cease to have the priority contemplated by
the Loan Documents, in each case otherwise than in accordance with the terms
thereof or with the express prior written agreement, consent or approval of the
Lenders, or any action at law, suit or in equity or other legal proceeding to
cancel, revoke or rescind any of the Loan Documents shall be commenced by or on
behalf of any Group Member or any of their respective stockholders, or any court
or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order, decree
or ruling to the effect that, any one or more of the Loan Documents is illegal,
invalid or unenforceable in accordance with the terms thereof;
 
 
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(l)  any Borrower or any ERISA Affiliate incurs any liability to the PBGC or a
Guaranteed Pension Plan pursuant to Title IV of ERISA in an aggregate amount
exceeding $1,000,000, or any Borrower or any ERISA Affiliate is assessed
withdrawal liability pursuant to Title IV of ERISA by a Multiemployer Plan
requiring aggregate annual payments exceeding $1,000,000, or any of the
following occurs with respect to a Guaranteed Pension Plan: (i) an ERISA
Reportable Event, or a failure to make a required installment or other payment
(within the meaning of § 302(f)(1) of ERISA), provided that the Administrative
Agent determines in its Permitted Discretion that such event (x) could be
expected to result in liability of any Borrower or any of its Subsidiaries to
the PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding
$1,000,000 and (y) could constitute grounds for the termination of such
Guaranteed Pension Plan by the PBGC, for the appointment by the appropriate
United States District Court of a trustee to administer such Guaranteed Pension
Plan or for the imposition of a lien in favor of such Guaranteed Pension Plan;
or (ii) the appointment by a United States District Court of a trustee to
administer such Guaranteed Pension Plan; or (iii) the institution by the PBGC of
proceedings to terminate such Guaranteed Pension Plan;
 
(m)  any Group Member shall be indicted for a state or federal crime, or any
civil or criminal action shall otherwise have been brought or threatened against
any Group Member, a punishment for which in any such case could include the
forfeiture of any assets of such Group Member not included in the Aggregate
Borrowing Base or any assets of such Group Member not included in the Aggregate
Borrowing Base but having a fair market value in excess of $5,000,000; or
 
(n)  a Change of Control shall occur.
 
Section 8.2  Remedies. During the continuance of any Event of Default, the
Administrative Agent may, and, at the request of the Required Lenders, shall, in
each case by notice to the Borrowers and in addition to any other right or
remedy provided under any Loan Document or by any applicable Requirement of Law,
do each of the following: (a) declare all or any portion of the Commitments
terminated, whereupon the Commitments shall immediately be reduced by such
portion or, in the case of a termination in whole, shall terminate together with
any obligation any Lender may have hereunder to make any Loan and any L/C Issuer
may have hereunder to Issue any Letter of Credit or (b) declare immediately due
and payable all or part of any Obligation (including any accrued but unpaid
interest thereon), whereupon the same shall become immediately due and payable,
without presentment, demand, protest or further notice or other requirements of
any kind, all of which are hereby expressly waived by Parent and the Borrowers
(and, to the extent provided in any other Loan Document, other Loan Parties);
provided, however, that, effective immediately upon the occurrence of the Events
of Default specified in Section 8.1(e)(ii), (x) the Commitments of each Lender
to make Loans and the commitment of each L/C Issuer to Issue Letters of Credit
shall each automatically be terminated and (y) each Obligation (including in
each case any accrued all accrued but unpaid interest thereon) shall
automatically become and be due and payable, without presentment, demand,
protest or further notice or other requirement of any kind, all of which are
hereby expressly waived by the Borrowers (and, to the extent provided in any
other Loan Document, any other Loan Party).
 
 
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Section 8.3  Actions in Respect of Letters of Credit. At any time (a) upon the
Revolving Credit Termination Date, (b) after the Revolving Credit Termination
Date when the aggregate funds on deposit in L/C Cash Collateral Accounts shall
be less than 103% of the L/C Obligations for all Letters of Credit at such time
and (c) as required by Section 2.12(c), the U.S. Borrowers shall pay to the
Administrative Agent in immediately available funds at the Administrative
Agent’s office referred to in Section 10.11, for deposit in a L/C Cash
Collateral Account, the amount required so that, after such payment, the
aggregate funds on deposit in the L/C Cash Collateral Accounts equals or exceeds
103% of the L/C Obligations for all Letters of Credit at such time (not to
exceed, in the case of clause (c) above, the payment to be applied pursuant to
Section 2.12(c) to provide cash collateral for Letters of Credit).
 
ARTICLE IX  
 
THE ADMINISTRATIVE AGENT
 
Section 9.1  Appointment and Duties. (a) Appointment of Agents. Each Lender and
each L/C Issuer hereby appoints GE Capital (together with any successor
Administrative Agent pursuant to Section 9.9) as the Administrative Agent
hereunder and authorizes the Administrative Agent to (i) execute and deliver the
Loan Documents and accept delivery thereof on its behalf from any Group Member,
(ii) take such action on its behalf and to exercise all rights, powers and
remedies and perform the duties as are expressly delegated to the Administrative
Agent under such Loan Documents and (iii) exercise such powers as are reasonably
incidental thereto. Each Lender hereby appoints GE Canada Finance Holding
Company (together with any successor Canadian Agent pursuant to Section 9.9) as
the Canadian Agent hereunder and authorizes the Canadian Agent to (i) execute
and deliver the Loan Documents and accept delivery thereof on its behalf from
any Group Member, (ii) take such action on its behalf and to exercise all
rights, powers and remedies and perform the duties as are expressly delegated to
the Canadian Agent under such Loan Documents and (iii) exercise such powers as
are reasonably incidental thereto.
 
(b)  Duties as Collateral and Disbursing Agent. Without limiting the generality
of clause (a) above, the Agents shall have the sole and exclusive right and
authority (to the exclusion of the Lenders and L/C Issuers), and are hereby
authorized, to (i) act as the disbursing and collecting agent for the Lenders
and the L/C Issuers with respect to all payments and collections arising in
connection with the Loan Documents (including in any Insolvency Proceeding
described in Section 8.1(e)(ii) or any other bankruptcy, insolvency or similar
proceeding), and each Person making any payment in connection with any Loan
Document to any Secured Party is hereby authorized to make such payment to the
Administrative Agent, in the case of an obligation of the U.S. Borrowers, and
the Canadian Agent, in the case of an obligation of Bombay Canada, (ii) file and
prove claims and file other documents necessary or desirable to allow the claims
of the Secured Parties with respect to any Obligation in any proceeding
described in Section 8.1(e)(ii) or any other bankruptcy, insolvency or similar
proceeding (but not to vote, consent or otherwise act on behalf of such Secured
Party), (iii) act as collateral agent for each Secured Party for purposes of the
perfection of all Liens created by such agreements and all other purposes stated
therein, (iv) manage, supervise and otherwise deal with the Collateral, (v) take
such other action as is necessary or desirable to maintain the perfection and
priority of the Liens created or purported to be created by the Loan Documents,
(vi) except as may be otherwise specified in any Loan Document, exercise all
remedies given to the Administrative Agent, the Canadian Agent and the other
Secured Parties with respect to the Collateral, whether under the Loan
Documents, applicable Requirements of Law or otherwise and (vii) execute any
amendment, consent or waiver under the Loan Documents on behalf of any Lender
that has consented in writing to such amendment, consent or waiver; provided,
however, that the Administrative Agent and the Canadian Agent hereby appoint,
authorize and direct each other, each Lender and L/C Issuer to act as collateral
sub-agent for the Administrative Agent, the Canadian Agent, the Lenders and the
L/C Issuers for purposes of the perfection of all Liens with respect to the
Collateral, including any deposit account maintained by a Loan Party with, and
cash and Cash Equivalents held by, such Lender or L/C Issuer, and may further
authorize and direct each other, the Lenders and the L/C Issuers to take further
actions as collateral sub-agents for purposes of enforcing such Liens or
otherwise to transfer the Collateral subject thereto to the Administrative Agent
or the Canadian Agent, as applicable, and each Lender and L/C Issuer hereby
agrees to take such further actions to the extent, and only to the extent, so
authorized and directed.
 
 
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(c)  Limited Duties. Under the Loan Documents, the Administrative Agent and the
Canadian Agent (i) is acting solely on behalf of the Lenders and the L/C Issuers
(except to the limited extent provided in Section 2.14(b) with respect to the
Register and in Section 9.11), with duties that are entirely administrative in
nature, notwithstanding the use of the defined term “Administrative Agent”,
“Canadian Agent” and Agent” the terms “agent”, “administrative agent” “Canadian
agent”, and “collateral agent” and similar terms in any Loan Document to refer
to the Administrative Agent, which terms are used for title purposes only, (ii)
is not assuming any obligation under any Loan Document other than as expressly
set forth therein or any role as agent, fiduciary or trustee of or for any
Lender, L/C Issuer or any other Secured Party and (iii) shall have no implied
functions, responsibilities, duties, obligations or other liabilities under any
Loan Document, and each Lender and L/C Issuer hereby waives and agrees not to
assert any claim against the Administrative Agent or the Canadian Agent based on
the roles, duties and legal relationships expressly disclaimed in clauses (i)
through (iii) above.
 
Section 9.2  Binding Effect. Each Lender and each L/C Issuer agrees that (i) any
action taken by the Administrative Agent, the Canadian Agent, or the Required
Lenders (or, if expressly required hereby, a greater proportion of the Lenders)
in accordance with the provisions of the Loan Documents, (ii) any action taken
by the Administrative Agent or Canadian Agent in reliance upon the instructions
of the Required Lenders (or, where so required, such greater proportion) and
(iii) the exercise by the Administrative Agent the Canadian Agent or the
Required Lenders (or, where so required, such greater proportion) of the powers
set forth herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the Secured
Parties.
 
Section 9.3  Use of Discretion. (a) No Action without Instructions. Neither the
Administrative Agent nor the Canadian Agent shall be required to exercise any
discretion or take, or to omit to take, any action, including with respect to
enforcement or collection, except any action it is required to take or omit to
take (i) under any Loan Document or (ii) pursuant to instructions from the
Required Lenders.
 
(b)  Right Not to Follow Certain Instructions. Notwithstanding clause (a) above,
neither the Administrative Agent nor the Canadian Agent shall be required to
take, or to omit to take, any action (i) unless, upon demand, the requesting
Agent receives an indemnification satisfactory to it from the Lenders (or, to
the extent applicable and acceptable to such Agent, any other Secured Party)
against all Liabilities that, by reason of such action or omission, may be
imposed on, incurred by or asserted against Agent or any of its Related Person
thereof or (ii) that is, in the opinion of such Agent or its counsel, contrary
to any Loan Document or applicable Requirement of Law.
 
 
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Section 9.4  Delegation of Rights and Duties. The Agents may, upon any term or
condition it specifies, delegate or exercise any of its rights, powers and
remedies under, and delegate or perform any of its duties or any other action
with respect to, any Loan Document by or through any trustee, co-agent,
employee, attorney-in-fact and any other Person (including any Secured Party).
Any such Person shall benefit from this Article IX to the extent provided by
such Agent.
 
Section 9.5  Reliance and Liability. (a) The Agents may, without incurring any
liability hereunder, (i) treat the payee of any Note as its holder until such
Note has been assigned in accordance with Section 10.2(e), (ii) rely on the
Register to the extent set forth in Section 2.14, (iii) consult with any of its
Related Persons and, whether or not selected by it, any other advisors,
accountants and other experts (including advisors to, and accountants and
experts engaged by, any Loan Party) and (iv) rely and act upon any document and
information (including those transmitted by Electronic Transmission) and any
telephone message or conversation, in each case believed by it to be genuine and
transmitted, signed or otherwise authenticated by the appropriate parties.
 
(b)  None of the Agents and their Related Persons shall be liable for any action
taken or omitted to be taken by any of them under or in connection with any Loan
Document, and each Lender, L/C Issuer, and the Borrowers hereby waive and shall
not assert (and each of the Borrowers shall cause each other Loan Party to waive
and agree not to assert) any right, claim or cause of action based thereon,
except to the extent of liabilities resulting primarily from the gross
negligence or willful misconduct of the relevant Agent or, as the case may be,
such Related Person (each as determined in a final, non-appealable judgment by a
court of competent jurisdiction) in connection with the duties expressly set
forth herein. Without limiting the foregoing, the Agents:
 
(i)  shall not be responsible or otherwise incur liability for any action or
omission taken in reliance upon the instructions of the Required Lenders or for
the actions or omissions of any of its Related Persons selected with reasonable
care (other than employees, officers and directors of such Agent, when acting on
behalf of such Agent);
 
(ii)  shall not be responsible to any Secured Party for the due execution,
legality, validity, enforceability, effectiveness, genuineness, sufficiency or
value of, or the attachment, perfection or priority of any Lien created or
purported to be created under or in connection with, any Loan Document;
 
(iii)  makes no warranty or representation, and shall not be responsible, to any
Secured Party for any statement, document, information, representation or
warranty made or furnished by or on behalf of any Loan Party or any Loan Party’s
Related Person in connection with any Loan Document or any transaction
contemplated therein or any other document or information with respect to any
Loan Party, whether or not transmitted or (except for documents expressly
required under any Loan Document to be transmitted to the Lenders) omitted to be
transmitted by the relevant Agent, including as to completeness, accuracy, scope
or adequacy thereof, or for the scope, nature or results of any due diligence
performed by the Agents in connection with the Loan Documents; and
 
 
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(iv)  shall not have any duty to ascertain or to inquire as to the performance
or observance of any provision of any Loan Document, whether any condition set
forth in any Loan Document is satisfied or waived, as to the financial condition
of any Loan Party or as to the existence or continuation or possible occurrence
or continuation of any Default or Event of Default and shall not be deemed to
have notice or knowledge of such occurrence or continuation unless it has
received a notice from the Borrower, any Lender or L/C Issuer describing such
Default or Event of Default clearly labeled “notice of default” (in which case
the relevant Agent shall promptly give notice of such receipt to all Lenders);
 
and, for each of the items set forth in clauses (i) through (iv) above, each
Lender, L/C Issuer and the Borrowers hereby waives and agrees not to assert (and
each of the Borrowers shall cause each other Loan Party to waive and agree not
to assert) any right, claim or cause of action it might have against the Agents
based thereon.

Section 9.6  Agent Individually. The Agents and their Affiliates may make loans
and other extensions of credit to, acquire Stock and Stock Equivalents of,
engage in any kind of business with, any Loan Party or Affiliate thereof as
though it were not acting as an Agent and may receive separate fees and other
payments therefor. To the extent the Agents or any of their Affiliates makes any
Loan or otherwise becomes a Lender hereunder, it shall have and may exercise the
same rights and powers hereunder and shall be subject to the same obligations
and liabilities as any other Lender and the terms “Lender”, “Canadian Lender”,
“U.S. Lender”, “Required Lender” and any similar terms shall, except where
otherwise expressly provided in any Loan Document, include, without limitation,
the relevant Agent or such Affiliate, as the case may be, in its individual
capacity as Lender, Canadian Lender or U.S. Lender or as one of the Required
Lenders, respectively.
 
Section 9.7  Lender Credit Decision. Each Lender and each L/C Issuer
acknowledges that it shall, independently and without reliance upon the Agents,
any Lender or L/C Issuer or any of their Related Persons or upon any document
(including the Disclosure Documents) solely or in part because such document was
transmitted by any Agent or any of its Related Persons, conduct its own
independent investigation of the financial condition and affairs of each Loan
Party and make and continue to make its own credit decisions in connection with
entering into, and taking or not taking any action under, any Loan Document or
with respect to any transaction contemplated in any Loan Document, in each case
based on such documents and information as it shall deem appropriate. Except for
documents expressly required by any Loan Document to be transmitted by any Agent
to the Lenders or L/C Issuers, the Agents shall not have any duty or
responsibility to provide any Lender or L/C Issuer with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of any Loan Party or any Affiliate of
any Loan Party that may come in to the possession of either Agent or any of its
Related Persons.
 
Section 9.8  Expenses; Indemnities. (a) Each Lender agrees to reimburse the
Agents and each of its Related Persons (to the extent not reimbursed by any Loan
Party) promptly upon demand for such Lender’s Pro Rata Share with respect to the
Facilities of any costs and expenses (including fees, charges and disbursements
of financial, legal and other advisors and Taxes paid in the name of, or on
behalf of, any Loan Party) that may be incurred by the Agents or any of their
Related Persons in connection with the preparation, syndication, execution,
delivery, administration, modification, consent, waiver or enforcement (whether
through negotiations, through any work-out, bankruptcy, restructuring or other
legal or other proceeding or otherwise) of, or legal advice in respect of its
rights or responsibilities under, any Loan Document.
 
 
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(b)  Each Lender further agrees to indemnify the Agents and each of their
Related Persons (to the extent not reimbursed by any Loan Party), from and
against such Lender’s aggregate Pro Rata Share with respect to the Facilities of
the Liabilities (including taxes, interests and penalties imposed for not
properly withholding or backup withholding on payments made to on or for the
account of any Lender) that may be imposed on, incurred by or asserted against
the Agents or any of their Related Persons in any matter relating to or arising
out of, in connection with or as a result of any Loan Document, any Related
Document or any other act, event or transaction related, contemplated in or
attendant to any such document, or, in each case, any action taken or omitted to
be taken by any Agent or any of its Related Persons under or with respect to any
of the foregoing; provided, however, that no Lender shall be liable to any Agent
or any of its Related Persons to the extent such liability has resulted from the
gross negligence or willful misconduct of such Agent or, as the case may be,
such Related Person.
 
Section 9.9  Resignation of Administrative Agent or L/C Issuer.
 
(a)  Either Agent may resign at any time by delivering notice of such
resignation to the Lenders and the Parent, effective on the date set forth in
such notice (or provided such effective date is at least 30 days after the date
of such notice). If an Agent delivers any such notice, the Required Lenders
shall have the right to appoint a successor Administrative Agent or Canadian
Agent. If, within 30 days after the retiring Agent has given notice of
resignation, no successor Administrative Agent or Canadian Agent has been
appointed by such Lenders that has accepted such appointment, then the retiring
Agent may, on behalf of the Lenders, appoint a successor Administrative Agent or
Canadian Agent, as applicable from among the relevant Lenders. Each appointment
under this clause (a) shall be subject to the prior consent of the Parent, which
may not be unreasonably withheld but shall not be required during the
continuance of a Default.
 
(b)  Effective immediately upon its resignation, (i) the retiring Agent shall be
discharged from its duties and obligations under the Loan Documents, (ii) the
relevant Lenders shall assume and perform all of the duties of such Agent until
a successor Agent shall have accepted a valid appointment hereunder, (iii) the
retiring Agent and its Related Persons shall no longer have the benefit of any
provision of any Loan Document other than with respect to any actions taken or
omitted to be taken while such retiring Agent was, or because such Agent had
been, validly acting as Administrative Agent or Canadian Agent, as the case may
be, under the Loan Documents and (iv) subject to its rights under Section 9.3,
the retiring Administrative Agent shall take such action as may be reasonably
necessary to assign to the successor Administrative Agent its rights as
Administrative Agent under the Loan Documents. Effective immediately upon its
acceptance of a valid appointment as Administrative Agent or Canadian Agent, as
the case may be, a successor Administrative Agent or Canadian Agent shall
succeed to, and become vested with, all the rights, powers, privileges and
duties of the retiring Administrative Agent or Canadian Agent under the Loan
Documents.
 
 
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(c)  Any L/C Issuer may resign at any time by delivering notice of such
resignation to the Administrative Agent, effective on the date set forth in such
notice or, if no such date is set forth therein, on the date such notice shall
be effective. Upon such resignation, the L/C Issuer shall remain an L/C Issuer
and shall retain its rights and obligations in its capacity as such (other than
any obligation to Issue Letters of Credit but including the right to receive
fees or to have Lenders participate in any L/C Reimbursement Obligation thereof)
with respect to Letters of Credit issued by such L/C Issuer prior to the date of
such resignation and shall otherwise be discharged from all other duties and
obligations under the Loan Documents.
 
Section 9.10  Release of Collateral or Guarantors. Each Lender and L/C Issuer
hereby consents to the release and hereby directs the Administrative Agent and
the Canadian Agent, as applicable, to release (or, in the case of clause (b)(ii)
below, release or subordinate) the following:
 
(a)  any Subsidiary of a Borrower from its guaranty of any Obligation of any
Loan Party or any Borrower (other than Parent) if all of the Securities of such
Person owned by any Group Member are Sold in a Sale permitted under the Loan
Documents (including pursuant to a waiver or consent), to the extent that, after
giving effect to such Sale, such Person would not be required to guaranty any
Obligations pursuant to Section 6.11 or be a Borrower hereunder; and
 
(b)  any Lien held by an Agent for the benefit of the Secured Parties against
(i) any Collateral that is Sold by a Loan Party in a Sale permitted by the Loan
Documents (including pursuant to a valid waiver or consent), to the extent all
Liens required to be granted in such Collateral pursuant to Section 6.11 after
giving effect to such Sale have been granted, (ii) any property subject to a
Lien permitted hereunder in reliance upon Section 7.2 and (iii) all of the
Collateral and all Loan Parties, upon (A) termination of the Commitments, (B)
payment and satisfaction in full of all Loans, all L/C Reimbursement Obligations
and all other Obligations that the Agents have been notified in writing are then
due and payable, (C) deposit of cash collateral with respect to all contingent
Obligations (or, in the case of any L/C Obligation, a back-up letter of credit
has been issued), in amounts and on terms and conditions and with parties
satisfactory to the Agents and each Indemnitee that is owed such Obligations and
(D) to the extent requested by the Agents, receipt by the Secured Parties of
liability releases from the Loan Parties each in form and substance acceptable
to the Agent.
 
Each Lender and L/C Issuer hereby directs the Agents, and the Agents hereby
agree, upon receipt of reasonable advance notice from the Parent, to execute and
deliver or file such documents and to perform other actions reasonably necessary
to release the guaranties and Liens when and as directed in this Section 9.10.
 
 
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Section 9.11  Additional Secured Parties. The benefit of the provisions of the
Loan Documents directly relating to the Collateral or any Lien granted
thereunder shall extend to and be available to any Secured Party that is not a
Lender or L/C Issuer as long as, by accepting such benefits, such Secured Party
agrees, as among the Administrative Agent or the Canadian Agent, as applicable,
and all other Secured Parties, that such Secured Party is bound by (and, if
requested by the relevant Agent, shall confirm such agreement in a writing in
form and substance acceptable to the relevant Agent) this Article IX,
Section 10.8 (Right of Setoff), Section 10.9 (Sharing of Payments) and
Section 10.20 (Confidentiality) and the decisions and actions of the relevant
Agent and the Required Lenders to the same extent a Lender is bound; provided,
however, that, notwithstanding the foregoing, (a) such Secured Party shall be
bound by Section 9.8 only to the extent of Liabilities, costs and expenses with
respect to or otherwise relating to the Collateral held for the benefit of such
Secured Party, in which case the obligations of such Secured Party thereunder
shall not be limited by any concept of Pro Rata Share or similar concept, (b)
each of the Agents, the Lenders and the L/C Issuers shall be entitled to act at
its sole discretion, without regard to the interest of such Secured Party,
regardless of whether any Obligation to such Secured Party thereafter remains
outstanding, is deprived of the benefit of the Collateral, becomes unsecured or
is otherwise affected or put in jeopardy thereby, and without any duty or
liability to such Secured Party or any such Obligation and (c) such Secured
Party shall not have any right to be notified of, consent to, direct, require or
be heard with respect to, any action taken or omitted in respect of the
Collateral or under any Loan Document.
 
ARTICLE X  
 
MISCELLANEOUS
 
Section 10.1  Amendments, Waivers, Etc. (a) No amendment or waiver of any
provision of any Loan Document (other than the Fee Letter, the Control
Agreements and the L/C Reimbursement Agreement) and no consent to any departure
by any Loan Party therefrom shall be effective unless the same shall be in
writing and signed (i) in the case of an amendment, consent or waiver to cure
any ambiguity, omission, defect or inconsistency or granting a new Lien for the
benefit of the Secured Parties or extending an existing Lien over additional
property, by the Administrative Agent and the Parent, (ii) in the case of any
other waiver, or consent, by the Required Lenders (or by the Administrative
Agent with the consent of the Required Lenders) and (3) in the case of any other
amendment, by the Required Lenders (or by the Administrative Agent with the
consent of the Required Lenders) and the Borrowers; provided, however, that no
amendment, consent or waiver described in clauses (2) or (3) above shall, unless
in writing and signed by each Lender directly affected thereby (or by the
Administrative Agent with the consent of such Lender), in addition to any other
Person the signature of which is otherwise required pursuant to any Loan
Document, do any of the following:
 
(i)  waive any condition specified in Section 3.1, except any condition
referring to any other provision of any Loan Document;
 
(ii)  increase the Commitment of such Lender or subject such Lender to any
additional obligation;
 
(iii)  reduce (including through release, forgiveness, assignment or otherwise)
(A) the principal amount of, the interest rate on, or any obligation of the
Borrower to repay (whether or not on a fixed date), any outstanding Loan owing
to such Lender, (B) any fee or accrued interest payable to such Lender or (C) if
such Lender is a Revolving Credit Lender, any L/C Reimbursement Obligation or
any obligation of the Borrowers to repay (whether or not on a fixed date) any
L/C Reimbursement Obligation; provided, however, that this clause (iii) does not
apply to (x) any change to any provision increasing any interest rate or fee
during the continuance of an Event of Default or to any payment of any such
increase, (y) any modification to the definition of Adjusted Availability or
principally used therein or (z) any reduction occurring as a result of a
conversion of any Obligation to a different currency or a change in the manner
or timing of such conversion;
 
 
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(iv)  waive or postpone any scheduled maturity date or other scheduled date
fixed for the payment, in whole or in part, of principal of or interest on any
Loan or fee owing to such Lender or for the reduction of such Lender’s
Commitment; provided, however, that this clause (iv) does not apply to any
change to mandatory prepayments, including those required under Section 2.8, or
to the application of any payment, including as set forth in Section 2.12;
 
(v)  except as provided in Section 10.9,2 release all or substantially all of
the Collateral or any Borrower or any Guarantor from its guaranty of any
Obligation of the Borrowers;
 
(vi)  reduce or increase the proportion of Lenders required for the Lenders (or
any subset thereof) to take any action hereunder or change the definition of the
terms “Required Lenders”, “Pro Rata Share” or “Pro Rata Outstandings”; or
 
(vii)  amend Section 9.10, Section 10.9 or this Section 10.1;
 
and provided, further, that (x) no amendment, waiver or consent shall affect the
rights or duties under any Loan Document of, or any payment to, any Agent (or
otherwise modify any provision of Article IX or the application thereof), the
Swingline Lender, the Canadian Swingline Lender, any L/C Issuer that has been
granted an option pursuant to Section 10.2(f) unless in writing and signed by
the affected Agent, the Swingline Lender, the Canadian Swingline Lender, such
L/C Issuer or, as the case may be, in addition to any signature otherwise
required and (y) the consent of the Borrowers shall not be required to change
any order of priority set forth in Section 2.12.

(b)  Each waiver or consent under any Loan Document shall be effective only in
the specific instance and for the specific purpose for which it was given. No
notice to or demand on any Loan Party shall entitle any Loan Party to any notice
or demand in the same, similar or other circumstances. No failure on the part of
any Secured Party to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right.
 
Section 10.2  Assignments and Participations; Binding Effect. (a) Binding
Effect. This Agreement shall become effective when it shall have been executed
by the Borrowers, the Canadian Agent and the Administrative Agent and when the
relevant Agent shall have been notified by each Lender and L/C Issuer that such
Lender or L/C Issuer has executed it. Thereafter, it shall be binding upon and
inure to the benefit of the Borrowers (in each case except for Article IX), the
Administrative Agent, the Canadian Agent, each Lender and L/C Issuer and, to the
extent provided in Section 9.11, each other Indemnitee and Secured Party and, in
each case, their respective successors and permitted assigns. None of the
Borrowers, the Canadian Agent, any L/C Issuer or the Agents (except to a
successor Administrative Agent named pursuant to Section 9.10 or otherwise to
facilitate the transaction contemplated in such Section 9.10) shall have the
right to assign any rights or obligations hereunder or any interest herein.
 
 
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(b)  Right to Assign. Each Lender may sell, transfer, negotiate or assign all or
a portion of its rights and obligations hereunder (including all or a portion of
its Commitments and its rights and obligations with respect to Loans and Letters
of Credit) to (i) in the case of the U.S. Lenders, any existing U.S. Lender,
(ii) any Affiliate or Approved Fund of any such Lender or (iii) any other Person
acceptable (which acceptance shall not be unreasonably withheld or delayed) to
the Administrative Agent (in the case of the U.S. Lenders) or the Canadian Agent
(in the case of the Canadian Lenders) and, as long as no Event of Default is
continuing, the Parent; provided, however, that (x) such Sales do not have to be
ratable between the Facilities but must be ratable among the obligations owing
to and owed by such Lender with respect to a Facility and (y) for each Facility,
the aggregate outstanding principal amount (determined as of the effective date
of the applicable Assignment) of the Loans, Commitments and L/C Obligations
subject to any such Sale shall be an integral multiple of $1,000,000, unless
such Sale is made to an existing Lender or an Affiliate or Approved Fund of any
existing Lender, is of the assignor’s (together with its Affiliates and Approved
Funds) entire interest in such Facility or is made with the prior consent of the
Borrowers and the Administrative Agent; provided further, that in the case of an
assignment by a Canadian Lender under this Section 10.2(b), the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as all other Lenders hereunder; provided, that prior to the
occurrence of an Event of Default that is continuing, if such assignee is a
non-resident of Canada for purposes of Part XIII of the ITA in respect of any
payment that may be made by a Loan Party under any Loan Document, such assignee
shall not be entitled to any gross-up payment or indemnification pursuant to
Section 2.17 (Taxes) from any Loan Party on account of any Canadian withholding
taxes (including interest and penalties in respect thereof) exigible on any such
payment.
 
(c)  Procedure. The parties to each Sale made in reliance on clause (b) above
(other than those described in clause (e) or (f) below) shall execute and
deliver to the Administrative Agent or the Canadian Agent, as the case may be,
(which shall keep a copy thereof) an Assignment, together with any existing Note
subject to such Sale (or any affidavit of loss therefor acceptable to the
relevant Agent), any tax forms required to be delivered pursuant to
Section 2.17(a) and payment by the assignee of an assignment fee in the amount
of $3,500. Upon receipt of all the foregoing, and conditioned upon such receipt
and upon the relevant Agent consenting to such Assignment, from and after the
effective date specified in such Assignment, the Agents shall record or cause to
be recorded in the Register the information contained in such Assignment.
 
(d)  Effectiveness. Effective upon the entry of such record in the Register,
(i) such assignee shall become a party hereto and, to the extent that rights and
obligations under the Loan Documents have been assigned to such assignee
pursuant to such Assignment, shall have the rights and obligations of a Lender,
(ii) any applicable Note shall be transferred to such assignee through such
entry and (iii) the assignor thereunder shall, to the extent that rights and
obligations under this Agreement have been assigned by it pursuant to such
Assignment, relinquish its rights (except for those surviving the termination of
the Commitments and the payment in full of the Obligations) and be released from
its obligations under the Loan Documents, other than those relating to events or
circumstances occurring prior to such assignment (and, in the case of an
Assignment covering all or the remaining portion of an assigning Lender’s rights
and obligations under the Loan Documents, such Lender shall cease to be a party
hereto except that each Lender agrees to remain bound by Article IX,
Section 10.8 and Section 10.9 to the extent provided in Section 9.11).
 
 
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(e)  Grant of Security Interests. In addition to the other rights provided in
this Section 10.2, each Lender may grant a security interest in, or otherwise
assign as collateral, any of its rights under this Agreement, whether now owned
or hereafter acquired (including rights to payments of principal or interest on
the Loans), to (A) any federal reserve bank (pursuant to Regulation A of the
Federal Reserve Board), without notice to the Administrative Agent or (B) any
holder of, or trustee for the benefit of the holders of, such Lender’s
Securities by notice to the Administrative Agent; provided, however, that no
such holder or trustee, whether because of such grant or assignment or any
foreclosure thereon (unless such foreclosure is made through an assignment in
accordance with clause (b) above), shall be entitled to any rights of such
Lender hereunder and no such Lender shall be relieved of any of its obligations
hereunder.
 
(f)  Participants. In addition to the other rights provided in this
Section 10.2, each Lender may without notice to or consent from the Agents or
the Borrowers, sell participations to one or more Persons in or to all or a
portion of its rights and obligations under the Loan Documents (including all
its rights and obligations with respect to the, Revolving Loans and Letters of
Credit); provided, however, that, whether as a result of any term of any Loan
Document or of such grant or participation, (i) no such participant shall have a
commitment, or be deemed to have made an offer to commit, to make Loans
hereunder, and, except as provided in the applicable option agreement, none
shall be liable for any obligation of such Lender hereunder, (ii) such Lender’s
rights and obligations, and the rights and obligations of the Loan Parties and
the Secured Parties towards such Lender, under any Loan Document shall remain
unchanged and each other party hereto shall continue to deal solely with such
Lender, which shall remain the holder of the Obligations in the Register, except
that (A) each such participant shall be entitled to the benefit of Sections 2.16
and 2.17, but only to the extent (x) such participant delivers the tax forms
such Lender is required to collect pursuant to Section 2.17(a) and then only to
the extent of any amount to which such Lender would be entitled in the absence
of any such grant or participation and (y) that prior to an Event of Default,
each such participant in the Canadian Revolving Credit Commitment that it is a
non-resident of Canada in respect of any payment made by Bombay Canada to such
participant under the Loan Documents for the purposes of Part XIII of the ITA
shall not be entitled to any payment of any additional amount or indemnification
pursuant to Section 2.17 from any Loan Party on account of any Canadian
withholding taxes (including interest and penalties in respect thereof) exigible
on any such payment; provided, however, that in no case shall participant have
the right to enforce any of the terms of any Loan Document, and (iii) the
consent of such participant shall not be required (either directly, as a
restraint on such Lender’s ability to consent hereunder or otherwise) for any
amendments, waivers or consents with respect to any Loan Document or to exercise
or refrain from exercising any powers or rights such Lender may have under or in
respect of the Loan Documents (including the right to enforce or direct
enforcement of the Obligations), except for those described in clauses (iii) and
(iv) of Section 10.1(a) with respect to amounts, or dates fixed for payment of
amounts, to which such participant would otherwise be entitled and, except for
those described in Section 10.1(a)(v) (or amendments, consents and waivers with
respect to Section 9.10 to release all or substantially all of the Collateral).
 
 
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Section 10.3  Costs and Expenses. Any action taken by any Loan Party under or
with respect to any Loan Document, even if required under any Loan Document or
at the request of any Secured Party, shall be at the expense of such Loan Party,
and no Secured Party shall be required under any Loan Document to reimburse any
Loan Party or Group Member therefor except as expressly provided therein. In
addition, the Borrowers agree to pay or reimburse upon demand (a) the Agents for
all reasonable out-of-pocket costs and expenses incurred by it or any of its
Related Persons in connection with the investigation, development, preparation,
negotiation, syndication, execution, interpretation or administration of, any
modification of any term of or termination of, any Loan Document, any commitment
or proposal letter therefor, any other document prepared in connection therewith
or the consummation and administration of any transaction contemplated therein
(including periodic audits in connection therewith and environmental audits and
assessments), in each case including the reasonable fees, charges and
disbursements of legal counsel to the Agents or such Related Persons, fees,
costs and expenses incurred in connection with Intralinks® or any other E-System
and allocated to the Facilities by the Agents in its sole discretion and fees,
charges and disbursements of the auditors, appraisers, printers and other of
their Related Persons retained by or on behalf of any of them or any of their
Related Persons, (b) the Agents for all reasonable costs and expenses incurred
by it or any of its Related Persons in connection with internal audit reviews,
field examinations and Collateral examinations (which shall be reimbursed, in
addition to the out-of-pocket costs and expenses of such examiners, at the per
diem rate per individual charged by the Agents for its examiners) and (c) each
of the Agents, its Related Persons, and each Lender and L/C Issuer for all costs
and expenses incurred in connection with (i) any refinancing or restructuring of
the credit arrangements provided hereunder in the nature of a “work-out”, (ii)
the enforcement or preservation of any right or remedy under any Loan Document,
any Obligation, with respect to the Collateral or any other related right or
remedy or (iii) the commencement, defense, conduct of, intervention in, or the
taking of any other action with respect to, any proceeding (including any
bankruptcy or insolvency proceeding) related to any Group Member, Loan Document,
Obligation or Related Transaction (or the response to and preparation for any
subpoena or request for document production relating thereto), including
reasonable fees and disbursements of counsel (including allocated costs of
internal counsel).
 
Section 10.4  Indemnities. (a) The Borrowers agree to indemnify, hold harmless
and defend the Agents, each Lender, each L/C Issuer, each Person that each L/C
Issuer causes to Issue Letters of Credit hereunder and each of their respective
Related Persons (each such Person being an “Indemnitee”) from and against all
Liabilities (including brokerage commissions, fees and other compensation) that
may be imposed on, incurred by or asserted against any such Indemnitee in any
matter relating to or arising out of, in connection with or as a result of (i)
any Loan Document, any Related Document, any Disclosure Document, any Obligation
(or the repayment thereof), any Letter of Credit, the use or intended use of the
proceeds of any Loan or the use of any Letter of Credit, any Related
Transaction, or any securities filing of, or with respect to, any Group Member,
(ii) any commitment letter, proposal letter or term sheet with any Person or any
Contractual Obligation, arrangement or understanding with any broker, finder or
consultant, in each case entered into by or on behalf of the Borrowers, any
Group Member or any Affiliate of any of them in connection with any of the
foregoing and any Contractual Obligation entered into in connection with any
E-Systems or other Electronic Transmissions, (iii) any actual or prospective
investigation, litigation or other proceeding, whether or not brought by any
such Indemnitee or any of its Related Persons, any holders of Securities or
creditors (and including attorneys’ fees in any case), whether or not any such
Indemnitee, Related Person, holder or creditor is a party thereto, and whether
or not based on any securities or commercial law or regulation or any other
Requirement of Law or theory thereof, including common law, equity, contract,
tort or otherwise, or (iv) any other act, event or transaction related,
contemplated in or attendant to any of the foregoing (collectively, the
“Indemnified Matters”); provided, however, that the Borrowers shall not have any
liability under this Section 10.4 to any Indemnitee with respect to any
Indemnified Matter, and no Indemnitee shall have any liability with respect to
any Indemnified Matter other than (to the extent otherwise liable), to the
extent such liability has resulted from the gross negligence or willful
misconduct of such Indemnitee, as determined by a court of competent
jurisdiction in a final non-appealable judgment or order. Furthermore, each
Borrower waives and agrees not to assert against any Indemnitee, and shall cause
each other Loan Party to waive and not assert against any Indemnitee, any right
of contribution with respect to any Liabilities that may be imposed on, incurred
by or asserted against any Related Person.
 
 
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(b)  Without limiting the foregoing, “Indemnified Matters” includes all
Environmental Liabilities, including those arising from, or otherwise involving,
any property of any Related Person or any actual, alleged or prospective damage
to property or natural resources or harm or injury alleged to have resulted from
any release of Hazardous Materials on, upon or into such property or natural
resource or any property on or contiguous to any real property of any Related
Person, whether or not, with respect to any such Environmental Liabilities, any
Indemnitee is a mortgagee pursuant to any leasehold mortgage, a mortgagee in
possession, the successor-in-interest to any Related Person or the owner, lessee
or operator of any property of any Related Person through any foreclosure
action, in each case except to the extent such Environmental Liabilities (i) are
incurred solely following foreclosure by any Secured Party or following any
Secured Party having become the successor-in-interest to any Loan Party and
(ii) are attributable solely to acts of such Indemnitee.
 
Section 10.5  Survival. Any indemnification or other protection provided to any
Indemnitee pursuant to any Loan Document (including pursuant to Section 2.17,
Section 2.16, Article IX, Section 10.3, Section 10.4 or this Section 10.5) and
all representations and warranties made in any Loan Document shall (A) survive
the termination of the Commitments and the payment in full of other Obligations
and (B) inure to the benefit of any Person that at any time held a right
thereunder (as an Indemnitee or otherwise) and, thereafter, its successors and
permitted assigns.
 
Section 10.6  Limitation of Liability for Certain Damages. In no event shall any
Indemnitee be liable on any theory of liability for any special, indirect,
consequential or punitive damages (including any loss of profits, business or
anticipated savings). Each Borrower hereby waives, releases and agrees (and
shall cause each other Loan Party to waive, release and agree) not to sue upon
any such claim for any special, indirect, consequential or punitive damages,
whether or not accrued and whether or not known or suspected to exist in its
favor.
 
Section 10.7  Lender-Creditor Relationship. The relationship between the
Lenders, the L/C Issuers and the Agents, on the one hand, and the Loan Parties,
on the other hand, is solely that of lender and creditor. No Secured Party has
any fiduciary relationship or duty to any Loan Party arising out of or in
connection with, and there is no agency, tenancy or joint venture relationship
between the Secured Parties and the Loan Parties by virtue of, any Loan Document
or any transaction contemplated therein.
 
 
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Section 10.8  Right of Setoff. Each Agent, each Lender, each L/C Issuer and each
Affiliate (including each branch office thereof) of any of them is hereby
authorized, without notice or demand (each of which is hereby waived by each
Borrower), at any time and from time to time during the continuance of any Event
of Default and to the fullest extent permitted by applicable Requirements of
Law, to set off and apply any and all deposits (whether general or special, time
or demand, provisional or final) at any time held and other Indebtedness, claims
or other obligations at any time owing by the relevant Agent, such Lender, such
L/C Issuer or any of their respective Affiliates to or for the credit or the
account of any Borrower against any Obligation of any Loan Party now or
hereafter existing, whether or not any demand was made under any Loan Document
with respect to such Obligation and even though such Obligation may be
unmatured. Each Agent, each Lender and each L/C Issuer agrees promptly to notify
the Borrowers and the Agents after any such setoff and application made by such
Lender or its Affiliates; provided, however, that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
under this Section 10.8 are in addition to any other rights and remedies
(including other rights of setoff) that the Agents, the Lenders and the L/C
Issuers and their Affiliates and other Secured Parties may have.
 
Section 10.9  Sharing of Payments, Etc. If any Lender, directly or through an
Affiliate or branch office thereof, obtains any payment of any Obligation of any
Loan Party (whether voluntary, involuntary or through the exercise of any right
of setoff or the receipt of any Collateral or “proceeds” (as defined under the
applicable UCC) of Collateral) other than pursuant to Sections 2.16, 2.17 and
2.18 and such payment exceeds the amount such Lender would have been entitled to
receive if all payments had gone to, and been distributed by, the Agents in
accordance with the provisions of the Loan Documents, such Lender shall purchase
for cash from other Secured Parties such participations in their Obligations as
necessary for such Lender to share such excess payment with such Secured Parties
to ensure such payment is applied as though it had been received by the Agents
and applied in accordance with this Agreement (or, if such application would
then be at the discretion of the Borrowers, applied to repay the Obligations in
accordance herewith); provided, however, that (a) if such payment is rescinded
or otherwise recovered from such Lender or L/C Issuer in whole or in part, such
purchase shall be rescinded and the purchase price therefor shall be returned to
such Lender or L/C Issuer without interest and (b) such Lender shall, to the
fullest extent permitted by applicable Requirements of Law, be able to exercise
all its rights of payment (including the right of setoff) with respect to such
participation as fully as if such Lender were the direct creditor of the
Borrowers in the amount of such participation.
 
Section 10.10  Marshaling; Payments Set Aside. No Secured Party shall be under
any obligation to marshal any property in favor of any Loan Party or any other
party or against or in payment of any Obligation. To the extent that any Secured
Party receives a payment from the Borrowers, from the proceeds of the
Collateral, from the exercise of its rights of setoff, any enforcement action or
otherwise, and such payment is subsequently, in whole or in part, invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee, receiver or any other party, then to the extent of such recovery, the
obligation or part thereof originally intended to be satisfied, and all Liens,
rights and remedies therefor, shall be revived and continued in full force and
effect as if such payment had not occurred.
 
 
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Section 10.11  Notices. (a) Addresses. All notices, demands, requests,
directions and other communications required or expressly authorized to be made
by this Agreement shall, whether or not specified to be in writing but unless
otherwise expressly specified to be given by any other means, be given (i) in
writing and addressed to:
 
(A)  if to Parent or any Borrower, to:
 
The Bombay Company, Inc.
550 Bailey Avenue
Suite 700
Fort Worth, TX 76107
Attention: Elaine D. Crowley
Fax: (817) 332-7066

with copy to:
 
Thompson & Knight LLP
1700 Pacific Ave, Suite 3300
Dallas, Texas 75201
Attention: Fred W. Fulton, Esq.
Fax: (214) 880-3155
 
(B)  if to the Administrative Agent or the Swingline Lender, to:
 
General Electric Capital Corporation
401 Merritt 7
P.O. Box 5201
Norwalk, Connecticut 06856-5201
Attention: Bombay Account Manager
Tel: (203) 956-4406
Fax: (203) 956-4009
 
with copy to:
 
General Electric Capital Corporation
500 West Monroe Street, 12th Floor
Chicago, Illinois 60661
Attention: Bombay Account Manager
Tel: (312) 463-2251
Fax: (312) 441-6817
 
and:
 
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: Angela L. Fontana, Esq.
Tel: (214) 746-7895
Fax: (214) 746-7777
 
 
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(C)  if to the Canadian Agent or the Canadian Swingline Lender, to:
 
GE Canada Finance Holding Company
123 Front Street West, Suite 1400
Toronto, Ontario
Attention: Bombay Account Manager
Tel: (416) 202.6219
Fax: (416) 202.6226
 
with copy to:
 
Weil, Gotshal & Manges LLP
200 Crescent Court, Suite 300
Dallas, Texas 75201
Attention: Angela L. Fontana, Esq.
Tel: (214) 746-7895
Fax: (214) 746-7777
 
otherwise to the party to be notified at its address specified on the signature
page of any applicable Assignment, (ii) posted to Intralinks® (to the extent
such system is available and set up by or at the direction of the Administrative
Agent prior to posting) in an appropriate location by uploading such notice,
demand, request, direction or other communication to www.intralinks.com, faxing
it to 866-545-6600 with an appropriate bar-coded fax coversheet or using such
other means of posting to Intralinks® as may be available and reasonably
acceptable to the Administrative Agent prior to such posting, (iii) posted to
any other E-System set up by or at the direction of the Administrative Agent in
an appropriate location or (iv) addressed to such other address as shall be
notified in writing (A) in the case of the Borrowers, the Agents, the Swingline
Lender and the Canadian Swingline Lender, to the other parties hereto and (B) in
the case of all other parties, to the Borrowers and the Administrative Agent.
Transmission by electronic mail (including E-Fax, even if transmitted to the fax
numbers set forth in clause (i) above) shall not be sufficient or effective to
transmit any such notice under this clause (a) unless such transmission is an
available means to post to any E-System.
 
(b)  Effectiveness. All communications described in clause (a) above and all
other notices, demands, requests and other communications made in connection
with this Agreement shall be effective and be deemed to have been received (i)
if delivered by hand, upon personal delivery, (ii) if delivered by overnight
courier service, one Business Day after delivery to such courier service, (iii)
if delivered by mail, when deposited in the mails, (iv) if delivered by
facsimile (other than to post to an E-System pursuant to clause (a)(ii) or
(a)(iii) above), upon sender’s receipt of confirmation of proper transmission,
and (v) if delivered by posting to any E-System, on the later of the date of
such posting in an appropriate location and the date access to such posting is
given to the recipient thereof in accordance with the standard procedures
applicable to such E-System; provided, however, that no communications to any
Agent pursuant to Article II or Article IX shall be effective until received by
such Agent.
 
Section 10.12  Electronic Transmissions. (a) Authorization. Subject to the
provisions of Section 10.11(a), each Agent, the Borrowers, the Lenders, the L/C
Issuers and each of their Related Persons is authorized (but not required) to
transmit, post or otherwise make or communicate, in its sole discretion,
Electronic Transmissions in connection with any Loan Document and the
transactions contemplated therein. Each Borrower and each Secured Party hereby
acknowledges and agrees, and each Borrower shall cause each other Group Member
to acknowledge and agree, that the use of Electronic Transmissions is not
necessarily secure and that there are risks associated with such use, including
risks of interception, disclosure and abuse and each indicates it assumes and
accepts such risks by hereby authorizing the transmission of Electronic
Transmissions.
 
 
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(b)  Signatures. Subject to the provisions of Section 10.11(a), (i)(A) no
posting to any E-System shall be denied legal effect merely because it is made
electronically, (B) each E-Signature on any such posting shall be deemed
sufficient to satisfy any requirement for a “signature” and (C) each such
posting shall be deemed sufficient to satisfy any requirement for a “writing”,
in each case including pursuant to any Loan Document, any applicable provision
of any UCC, the federal Uniform Electronic Transactions Act, the Electronic
Signatures in Global and National Commerce Act and any substantive or procedural
Requirement of Law governing such subject matter, (ii) each such posting that is
not readily capable of bearing either a signature or a reproduction of a
signature may be signed, and shall be deemed signed, by attaching to, or
logically associating with such posting, an E-Signature, upon which each Secured
Party and Loan Party may rely and assume the authenticity thereof, (iii) each
such posting containing a signature, a reproduction of a signature or an
E-Signature shall, for all intents and purposes, have the same effect and weight
as a signed paper original and (iv) each party hereto or beneficiary hereto
agrees not to contest the validity or enforceability of any posting on any
E-System or E-Signature on any such posting under the provisions of any
applicable Requirement of Law requiring certain documents to be in writing or
signed; provided, however, that nothing herein shall limit such party’s or
beneficiary’s right to contest whether any posting to any E-System or
E-Signature has been altered after transmission.
 
(c)  Separate Agreements. All uses of an E-System shall be governed by and
subject to, in addition to Section 10.11 and this Section 10.12, separate terms
and conditions posted or referenced in such E-System and related Contractual
Obligations executed by Secured Parties and Group Members in connection with the
use of such E-System.
 
(d)  Limitation of Liability. All E-Systems and Electronic Transmissions shall
be provided “as is” and “as available”. None of the Agents nor any of their
respective Related Persons warrants the accuracy, adequacy or completeness of
any E-Systems or Electronic Transmission, and each disclaims all liability for
errors or omissions therein. No Warranty of any kind is made by the Agents nor
any of their respective Related Persons in connection with any E-Systems or
Electronic Communication, including any warranty of merchantability, fitness for
a particular purpose, non-infringement of third-party rights or freedom from
viruses or other code defects.  Each Borrower and each Secured Party agrees (and
Borrower shall cause each other Loan Party to agree) that the Agents have no
responsibility for maintaining or providing any equipment, software, services or
any testing required in connection with any Electronic Transmission or otherwise
required for any E-System.
 
Section 10.13  Governing Law. This Agreement, each other Loan Document that does
not expressly set forth its applicable law, and the rights and obligations of
the parties hereto and thereto shall be governed by, and construed and
interpreted in accordance with, the law of the State of New York.
 
 
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Section 10.14  Jurisdiction. (a) Submission to Jurisdiction. Any legal action or
proceeding with respect to any Loan Document may be brought in the courts of the
State of New York located in the City of New York, Borough of Manhattan, or of
the United States of America for the Southern District of New York and, by
execution and delivery of this Agreement, each Borrower hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The parties hereto (and, to the extent set
forth in any other Loan Document, each other Loan Party) hereby irrevocably
waive any objection, including any objection to the laying of venue or based on
the grounds of forum non conveniens, that any of them may now or hereafter have
to the bringing of any such action or proceeding in such jurisdictions.
 
(b)  Service of Process. Each Borrower (and, to the extent set forth in any
other Loan Document, each other Loan Party) hereby irrevocably waives personal
service of any and all legal process, summons, notices and other documents and
other service of process of any kind and consents to such service in any suit,
action or proceeding brought in the United States of America with respect to or
otherwise arising out of or in connection with any Loan Document by any means
permitted by applicable Requirements of Law, including by the mailing thereof
(by registered or certified mail, postage prepaid) to the address of each
Borrower specified in Section 10.11 (and shall be effective when such mailing
shall be effective, as provided therein). Each Borrower (and, to the extent set
forth in any other Loan Document, each other Loan Party) agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Bombay Canada hereby irrevocably appoints CT Corporation
System, in New York, New York (the “Process Agent”), with an office on the date
hereof at 111 8th Avenue, 13th Floor, New York, NY 10011, as its agent and true
and lawful attorney-in-fact in its name, place and stead to accept on behalf of
Bombay Canada and its property service of copies of the summons and complaint
and any other process which may be served in any such suit, action or proceeding
brought in the State of New York. Such appointment shall be irrevocable as long
as the Loans are outstanding, except that if for any reason the Process Agent
appointed hereby ceases to act as such, Bombay Canada will, by an instrument
reasonably satisfactory to the Administrative Agent, appoint another Person in
the Borough of Manhattan, New York as such Process Agent subject to the approval
of the Administrative Agent (not to be unreasonably withheld). Bombay Canada
hereby further irrevocably consents to the service of process in any suit,
action or proceeding in said courts by the mailing thereof by any Agent or any
Lender by registered or certified mail, postage prepaid, at its address set
forth beneath its signature hereto. Bombay Canada covenants and agrees that it
shall take any and all reasonable action, including the execution and filing of
any and all documents, that may be necessary to continue the designation of a
Process Agent pursuant to this Section 10.14(b) in full force and effect and to
cause the Process Agent to act as such.
 
(c)  Non-Exclusive Jurisdiction. Nothing contained in this Section 10.14 shall
affect the right of the Agents or any Lender to serve process in any other
manner permitted by applicable Requirements of Law or commence legal proceedings
or otherwise proceed against any Loan Party in any other jurisdiction.
 
Section 10.15  Waiver of Jury Trial. Each party hereto hereby irrevocably waives
trial by jury in any suit, action or proceeding with respect to, or directly or
indirectly arising out of, under or in connection with, any Loan Document or the
transactions contemplated therein or related thereto (whether founded in
contract, tort or any other theory). Each party hereto (A) certifies that no
other party and no Related Person of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (B) acknowledges that it and the other
parties hereto have been induced to enter into the Loan Documents, as
applicable, by the mutual waivers and certifications in this Section 10.15.
 
 
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Section 10.16  Severability. Any provision of any Loan Document being held
illegal, invalid or unenforceable in any jurisdiction shall not affect any part
of such provision not held illegal, invalid or unenforceable, any other
provision of any Loan Document or any part of such provision in any other
jurisdiction.
 
Section 10.17  Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart. Delivery of an executed signature page of this Agreement by
facsimile transmission or Electronic Transmission shall be as effective as
delivery of a manually executed counterpart hereof.
 
Section 10.18  Entire Agreement. The Loan Documents embody the entire agreement
of the parties and supersede all prior agreements and understandings relating to
the subject matter thereof and any prior letter of interest, commitment letter,
fee letter, confidentiality and similar agreements involving any Loan Party and
any of the Agents, any Lender or any L/C Issuer or any of their respective
Affiliates relating to a financing of substantially similar form, purpose or
effect. In the event of any conflict between the terms of this Agreement and any
other Loan Document, the terms of this Agreement shall govern (unless such terms
of such other Loan Documents are necessary to comply with applicable
Requirements of Law, in which case such terms shall govern to the extent
necessary to comply therewith).
 
Section 10.19  Use of Name. Each Borrower agrees, and shall cause each other
Loan Party to agree, that it shall not, and none of its Affiliates shall, issue
any press release or other public disclosure (other than any document filed with
any Governmental Authority relating to a public offering of the Securities of
any Loan Party) using the name, logo or otherwise referring to GE Capital or of
any of its Affiliates, the Loan Documents or any transaction contemplated
therein to which the Secured Parties are party without at least 2 Business Days’
prior notice to GE Capital and without the prior consent of GE Capital except to
the extent required to do so under applicable Requirements of Law and then, only
after consulting with GE Capital prior thereto.3
 
Section 10.20  Non-Public Information; Confidentiality. (a) Each Lender and
L/C Issuer acknowledges and agrees that it may receive material non-public
information hereunder concerning the Loan Parties and their Affiliates and
Securities and agrees to use such information in compliance with all relevant
policies, procedures and Contractual Obligations and applicable Requirements of
Laws (including United States federal and state security laws and regulations).
 
 
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(b)  Each Lender, L/C Issuer and Agent agrees to use all reasonable efforts to
maintain, in accordance with its customary practices, the confidentiality of
information obtained by it pursuant to any Loan Document and designated in
writing by any Loan Party as confidential, except that such information may be
disclosed (i) with the Borrowers’ consent, (ii) to Related Persons of such
Lender, L/C Issuer or Agent, as the case may be, or to any Person that any L/C
Issuer causes to Issue Letters of Credit hereunder, that are advised of the
confidential nature of such information and are instructed to keep such
information confidential, (iii) to the extent such information presently is or
hereafter becomes available to such Lender, L/C Issuer or Agent, as the case may
be, on a non-confidential basis from a source other than any Loan Party, (iv) to
the extent disclosure is required by applicable Requirements of Law or other
legal process or requested or demanded by any Governmental Authority, (v) to the
extent necessary or customary for inclusion in league table measurements or in
any tombstone or other advertising materials (and the Loan Parties consent to
the publication of such tombstone or other advertising materials by the Agents,
any Lender, any L/C Issuer or any of their Related Persons), (vi) to the
National Association of Insurance Commissioners or any similar organization, any
examiner or any nationally recognized rating agency or otherwise to the extent
consisting of general portfolio information that does not identify borrowers,
(vii) to current or prospective assignees, grantees of any option described in
Section 10.2(f) or participants, direct or contractual counterparties to any
Hedging Agreement permitted hereunder and to their respective Related Persons,
in each case to the extent such assignees, participants, counterparties or
Related Persons agree to be bound by provisions substantially similar to the
provisions of this Section 10.20 and (viii) in connection with the exercise of
any remedy under any Loan Document. In the event of any conflict between the
terms of this Section 10.20 and those of any other Contractual Obligation
entered into with any Loan Party (whether or not a Loan Document), the terms of
this Section 10.20 shall govern.
 
Section 10.21  Judgment Currency. If for the purpose of obtaining judgment in
any court it is necessary to convert a sum due hereunder in Dollars into another
currency (in this Section 10.21 called the “judgment currency”), the rate of
exchange that shall be applied shall be that at which in accordance with normal
banking procedures the Agents could purchase such Dollars in New York, New York
with the judgment currency on the Business Day next preceding the day on which
such judgment is rendered. The obligation of the Borrowers in respect of any
such sum due from it to the Agents or any Lender hereunder (in this
Section 10.21 called an “Entitled Person”) shall, notwithstanding the rate of
exchange actually applied in rendering such judgment, be discharged only to the
extent that on the Business Day following receipt by such Entitled Person of any
sum adjudged to be due hereunder in the judgment currency, such Entitled Person
may in accordance with normal banking procedures purchase and transfer Dollars
to New York, New York with the amount of the judgment currency so adjudged to be
due; and the Borrowers hereby, as a separate obligation and notwithstanding any
such judgment, agrees, to the fullest extent that it may effectively do so to
indemnify such Entitled Person against, and to pay such Entitled Person on
demand, in Dollars, the amount (if any) by which the sum originally due to such
Entitled Person in Dollars hereunder exceeds the amount of the Dollars so
purchased and transferred. If the amount of Dollars so purchased exceeds the sum
originally due to the Entitled Person, such Entitled Person shall remit such
excess to the Borrowers.
 
 
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Section 10.22  Patriot Act Notice. Each Lender subject to the USA Patriot Act of
2001 (31 U.S.C. 5318 et seq.) hereby notifies the Borrowers that, pursuant to
Section 326 thereof, it is required to obtain, verify and record information
that identifies the Borrowers, including the name and address of the Borrowers
and other information allowing such Lender to identify the Borrowers in
accordance with such act.
 
[SIGNATURE PAGES FOLLOW]

 
 
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1 Canadian counsel to provide language for perfection in Canada.
 
2 Add any section in any Loan Document that could provide for release of
substantially all of the Collateral, if any.
 
3 Reciprocal provision re: use of name of the Borrowers to come.
 
 
 
 
 
 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
 
THE BOMBAY COMPANY, INC.
 
as Parent and a Borrower
 

 
By:
/s/ Elaine D. Crowley
 

 
Name: Elaine D. Crowley
 
Title: Senior Vice President, Chief Financial Officer and Treasurer
 
BBA HOLDINGS, INC.
 
as a Borrower
 

 
By:
/s/ Jeffrey J. Walker
 

 
Name: Jeffrey J. Walker
 
Title: President
 
BOMBAY INTERNATIONAL, INC.
 
as a Borrower
 

 
By:
/s/ Elaine D. Crowley
 

 
Name: Elaine D. Crowley
 
Title: Vice President
 

 
THE BOMBAY FURNITURE COMPANY OF CANADA INC.
 
as a Borrower
 
By:
/s/ Elaine D. Crowley

 
Name: Elaine D. Crowley
 
Title: Vice President
 

 

 
 

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GENERAL ELECTRIC CAPITAL CORPORATION
 
as Administrative Agent, L/C Issuer, Swingline Lender and Lender
 

 
By:
/s/ Kristina M. Miller
 

 
Name: Kristina M. Miller
 
Title: Duly Authorized Signatory
 

 
 
 

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GE CANADA FINANCE HOLDING COMPANY
 
as Canadian Agent and as Canadian Lender
 
By:/s/ Jack Morrone
 
Name: Jack Morrone
 
Title: Senior Vice President
 

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SCHEDULE I
Commitments

U.S. Revolving Credit Commitment:

General Electric Capital Corporation   $125,000,000

Canadian Revolving Credit Commitment:

GE Canada Finance Holding Company  $18,000,000

 
 
 

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SCHEDULE 4.7
Subsidiaries

See attached

 
 
 

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SCHEDULE 4.9
Litigation

See attached

 
 
 

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SCHEDULE 4.14
Environmental Condition

See attached

 
 

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SCHEDULE 4.20
Credit Card Receipts

See attached

 
 
 

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SCHEDULE 5.2
Collateral Reporting

Borrowers shall provide Administrative Agent (and if so requested by
Administrative Agent, with copies for each Lender) with the following documents
at the following times in form satisfactory to Administrative Agent:
 
(a)  Weekly Reports.
 
(i)  Borrowing Base Certificate. If, at any time, Adjusted Availability is less
than 20% of the Aggregate Borrowing Base, Parent shall provide to Administrative
Agent, on Wednesday of each week, a signed Borrowing Base Certificate (in the
form of Exhibit I, as such form may be revised from time to time by
Administrative Agent); provided, however, that Parent, may, in its discretion,
provide to Administrative Agent a Borrowing Base Certificate more frequently
than as set forth herein. Such Certificate may be sent to Administrative Agent
electronically (with an electronic signature) or by facsimile transmission;
provided, further, that in each case, upon request by Administrative Agent, the
original thereof is forwarded to Administrative Agent on the date of such
transmission. No adjustments to the Borrowing Base Certificate may be made
without supporting documentation and such other documentation as may be
reasonably requested by Administrative Agent from time to time.
 
(ii)  If, at any time, Adjusted Availability is less than 20% of the Aggregate
Borrowing Base, a collateral activity summary or “roll forward” inventory
report.
 
(b)  Monthly Reports. Monthly, Parent shall provide to Administrative Agent
original counterparts of (each in such form as Agent from time to time may
specify):
 
(i)  Within 15 days of the end of each Fiscal Period for the immediately
preceding Fiscal Period or on the next Business Day, in the event the 15th day
does not fall on a Business Day:
 
(A)  at all times other than as set forth in clause (a)(i) above, a Borrowing
Base Certificate (in the form of Exhibit I, as such form may be revised from
time to time by Agent); provided, however, that Parent, may, in its discretion,
provide to Administrative Agent a Borrowing Base Certificate more frequently
than as set forth herein. Such Borrowing Base Certificate may be sent to
Administrative Agent electronically (with an electronic signature) or by
facsimile transmission; provided, that in each case, upon request by
Administrative Agent, the original thereof is forwarded to Administrative Agent
on the date of such transmission. No adjustments to the Borrowing Base
Certificate may be made without supporting documentation and such other
documentation as may be reasonably requested by Administrative Agent from time
to time;
 
 
 

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(B)  Top 10 Vendor Purchases report;
 
(C)  sales audit report and inventory summary by location and merchandise class;
 
(D)  inventory certificate;
 
(E)  state of store activity; and
 
(F)  a collateral activity summary or “roll forward” inventory report.
 
(ii)  Within 45 days of the end of each Fiscal Period for the immediately
preceding Fiscal Period or on the next Business Day, in the event the 45th day
does not fall on a Business Day:
 
(A)  reconciliation of the stock ledger to the general ledger and the
calculation of Availability; and
 
(B)  rent, tax and insurance compliance certificate.
 
(iii)  For purposes of items(c)(i) and (c)(ii) above, the first “preceding
month” in respect of which the items required by that Section shall be provided
shall be October, 2006.
 
In addition, each Borrower agrees to use its commercially reasonable efforts to
assist Administrative Agent with the facilitation and implementation of a system
of electronic collateral reporting in order to provide electronic reporting of
each of the items set forth above.

 

 
 

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SCHEDULE 7.1
Existing Indebtedness

See attached

 
 
 

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SCHEDULE 7.2
 
Existing Liens

See attached

 
 
 

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SCHEDULE 7.13
Affiliates

See attached

 
 
 

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SCHEDULE 7.16
Scheduled Store Closings

See attached