Canadian Security Agreement


     

    THE
      BOMBAY FURNITURE COMPANY OF CANADA INC.

     

    as
      Grantor

     

    


     

    and

     

    


     

    GB
      MERCHANT PARTNERS, LLC

     

    as
      Administrative Agent

     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    


     

    CANADIAN
      SECURITY AGREEMENT

    AS
      OF MAY 25, 2007

    


     

    


     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    CANADIAN
      SECURITY
      AGREEMENT

     

    Security
      agreement dated as of May 25, 2007 made by The
      Bombay Furniture Company of Canada Inc., a corporation continued and existing
      under the laws of the Province of Ontario (together with its successors and
      permitted assigns, the “Grantor”)
      to and
      in favour of GB Merchant Partners, LLC, individually
      and as administrative agent (together with its successors and assigns, the
      “Agent”)
      for
      itself and the Secured Parties under the Loan Agreement.

     

    RECITALS:

     

    
      	(a)  	
              The
                Agent and the Lenders have
                agreed to make a Loan to the Grantor on the terms and conditions
                contained
                in the Loan Agreement; and 

            


    

     

    
      	(b)  	
              It
                is a condition precedent to the Loan to the Grantor under the Loan
                Agreement that the Grantor execute and deliver this Agreement in
                favour of
                the Agent as security for the payment and performance of the Grantor’s
                Obligations.

            


    

     

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

     

     

    ARTICLE 1  

     

     

    INTERPRETATION

     

    Section 1.1  Defined
      Terms.

     

    As
      used
      in this Agreement, the following terms have the following meanings:

     

    “Account
      Debtor”
means
      any Person who is or who may become obligated under, with respect to, or on
      account of, an Account.

     

    “Agent”
means
      GB Merchant Partners, LLC, acting as administrative agent and collateral agent
      for the Secured Parties and any successor agent appointed under the Loan
      Agreement, and its successors and permitted assigns.

     

    “Agreement”
means
      this security agreement and all schedules attached hereto, as the same may
      be
      amended, restated, supplemented and otherwise modified from time to
      time.

     

    “Books” means
      all
      of the Grantor’s now owned or hereafter acquired books and records (including
      all of its Records indicating, summarizing or evidencing its assets (including
      the Collateral) or liabilities, all of the Grantor’s Records relating to its
      business operations or financial condition, and all of the Grantor’s goods or
      intangibles related to such information).

     

    “Collateral”
has
      the
      meaning specified in Section 2.1.

     

    “Collections”
means
      all cash, cheques, credit card slips or receipts, notes, instruments, and other
      items of payment (including insurance proceeds, proceeds of cash sales, rental
      proceeds, and tax refunds) of the Grantor relating to, arising out of, or
      forming part of, the Collateral.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Contracts”
means
      all contracts, licences and agreements to which the Grantor is at any time
      a
      party or pursuant to which the Grantor has at any time acquired rights, and
      includes (i) all rights of the Grantor to receive money due and to become due
      to
      it in connection with a contract, licence or agreement, (ii) all rights of
      the
      Grantor to damages arising out of, or for breach or default in respect of,
      a
      contract, licence or agreement, and (iii) all rights of the Grantor to perform
      and exercise all remedies in connection with a contract, licence or
      agreement.

     

    “Control
      Agreement”
means
      an agreement, in form and substance satisfactory to Agent, executed and
      delivered by the Grantor, the Agent, and the applicable Securities Intermediary
      or bank, which agreement is sufficient to give the Agent “control” over the
      subject Deposit Account or Investment Property.

     

    “Deposit
      Account”
means
      any chequing or other deposit account (including any
      demand, time, savings, passbook, or similar account maintained with a
      bank).

     

    “Expenses”
      means
      all expenses, costs and charges incurred by or on behalf of the Secured Parties
      in connection with this Agreement, the Security Interest or the Collateral,
      including all legal fees, court costs, receiver's or agent's remuneration and
      other expenses of taking possession of, repairing, protecting, insuring,
      preparing for disposition, realizing, collecting, selling, transferring,
      delivering or obtaining payment for the Collateral, and of taking, defending
      or
      participating in any action or proceeding in connection with any of the
      foregoing matters or otherwise in connection with the Secured Parties' interest
      in any Collateral, whether or not directly relating to the enforcement of this
      Agreement or any other Loan Document to which the Grantor is a
      party.

     

    “Instruments”
      means
      (i) a bill, note or cheque within the meaning of the Bills
      of Exchange Act (Canada)
      or any other writing that evidences a right to the payment of money and is
      of a
      type that in the ordinary course of business is transferred by delivery with
      any
      necessary endorsement or assignment, or (ii) a letter of credit and an advice
      of
      credit if the letter or advice states that it must be surrendered upon claiming
      payment thereunder, or (iii) Chattel Paper or any other writing that evidences
      both a monetary obligation and a security interest in or a lease of specific
      goods, or (iv) documents of title or any other writing that purports to be
      issued by or addressed to a bailee and purports to cover such goods in the
      bailee’s possession as are identified or fungible portions of an identified
      mass, and that in the ordinary course of business is treated as establishing
      that the Person in possession of it is entitled to receive, hold and dispose
      of
      the document and the goods it covers, or (v) any document or writing commonly
      known as an instrument.

     

    “Intellectual
      Property”
means
      domestic and foreign: (i) patents, applications for patents and reissues,
      divisions, continuations, renewals, extensions and continuations-in-part of
      patents or patent applications; (ii) proprietary and non-public business
      information, including inventions (whether patentable or not), invention
      disclosures, improvements, discoveries, trade secrets, confidential information,
      know-how, methods, processes, designs, technology, technical data, schematics,
      formulae and customer lists, and documentation relating to any of the foregoing;
      (iii) copyrights, copyright registrations and applications for copyright
      registration; (iv) mask works, mask work registrations and applications for
      mask
      work registrations; (v) designs, design registrations, design registration
      applications and integrated circuit topographies; (vi) trade names, business
      

     

    
      
        
        

      

      
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    names,
      corporate names, domain names, website names and world wide web addresses,
      common law trade-marks, trade-mark registrations, trade mark applications,
      trade
      dress and logos, and the goodwill associated with any of the foregoing; (vii)
      computer software and programs (both source code and object code form), all
      proprietary rights in the computer software and programs and all documentation
      and other materials related to the computer software and programs; and (viii)
      any other intellectual property and industrial property. 

     

    “Investment
      Property”
means
      a
      Security, whether certificated or uncertificated, Security Entitlement,
      Securities Account, Futures Contract or Futures Account, and any and all
      supporting obligations in respect thereof.

     

    “Lease”
means
      any lease or other agreement, no matter how styled or structured, pursuant
      to
      which the Grantor is entitled to the use or occupancy of any space.

     

    “Leasehold”
means
      any lease, leasehold estate or interest of the Grantor in each of the properties
      at or upon which the Grantor conducts business, offers any inventory for sale,
      or maintains any of the Collateral, whether or not for retail sale, together
      with the Grantor’s interest in any of the improvements and fixtures located upon
      or appurtenant to each such estate or interest, including, without limitation,
      any rights of the Grantor to payment, proceeds or value of any kind or nature
      realized upon the sale, transfer or assignment of any such estate or interest,
      whether or not such sale, assignment or transfer occurs during any case
      commenced under the Bankruptcy Code.

     

    “Lenders”
means,
      collectively, the financial institutions listed on the signature pages of the
      Loan Agreement as Lenders, including the Secured Parties, any Person who may
      become a Lender pursuant to the Loan Agreement, and their respective successors
      and assigns.

     

    “Liens”
means
      security interests, mortgages, pledges, liens, hypothecs, charges, security
      agreements or other encumbrances or other arrangements that in substance secure
      payment or performance of an obligation, statutory and other non-consensual
      liens or encumbrances and includes leases, title retention agreements,
      restrictions, development or similar agreements, rights-of-way, title defect,
      adverse claims or interests (including any adverse claim), trusts or deemed
      trusts, options to acquire or the interests of a vendor or lessor under any
      conditional sale agreement or capital lease, and “Lien”
means
      any one of such Liens.

     

    “Loan
      Agreement”
means
      that certain Term Loan Agreement dated as of May 25, 2007 among The Bombay
      Company, Inc., each of its Subsidiaries party thereto, the Lenders party thereto
      and GB Merchant Partners LLC as Agent, as amended, modified, extended, renewed,
      restated, replaced or supplemented from time to time.

     

    “Loan
      Documents”
means,
      collectively, the Loan Agreement, this Agreement and each other Loan Document
      (as such term is defined in the Loan Agreement).

     

    “Negotiable
      Collateral” means
      collectively, letters of credit, letter of credit rights, instruments,
      promissory notes, drafts, documents of title, documents, and chattel paper
      

     

    
      
        
        

      

      
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    (including
      electronic chattel paper and tangible chattel paper), and any and all supporting
      obligations in respect thereof arising from the sale of Inventory or
      Accounts.

     

    “Permits”
means
      all permits, licences, waivers, exemptions, consents, certificates,
      authorizations, approvals, franchises, rights-of-way, easements and entitlements
      that the Grantor has, requires or is required to have, to own, possess or
      operate any of its property or to operate and carry on any part of its
      business.

     

    “Person”
means
      a
      natural person, partnership, limited partnership, limited liability partnership,
      corporation, limited liability corporation, unlimited liability company, joint
      stock company, trust, unincorporated association, joint venture or other entity
      or Governmental Entity, and pronouns have a similarly extended
      meaning.

     

    “PPSA”
means
      the Personal
      Property Security Act,
      R.S.O.
      1990, c.P.10; (Ontario), as in effect from time to time, including any
      amendments thereto and any statute substituted therefor and amendments
      thereto.

     

    “Record”
means
      information that is inscribed on a tangible medium or which is stored in an
      electronic or other medium and is retrievable in perceivable form.

     

    “Restricted
      Asset”
has
      the
      meaning specified in Section 2.6.

     

    “Secured
      Parties”
has
      the
      meaning set out in the Loan Agreement.

     

    “Secured
      Obligations”
means
      the Obligations (as defined in the Loan Agreement) of the Grantor including,
      without limitation, any and all indebtedness, liabilities and obligations,
      now
      or hereafter existing, direct or indirect, absolute or contingent, as principal
      or surety, of the Grantor to the Agent and the other Secured Parties or any
      of
      them arising under, by virtue of or otherwise in connection with this Agreement,
      the Loan Agreement or any other Loan Document, including all Expenses incidental
      thereto.

     

    “Securities”
      means:

     

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

     

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

     

    “Security
      Interest”
has
      the
      meaning specified in Section 2.2.

     

    Section 1.2  Incorporated
      Terms.

     

    Whenever
      the terms “Accessions”,
      “Account”,
      “Certificated
      Security”,
      “Chattel
      Paper”,
      “Consumer
      Goods”,
      “Document
      of Title”,
      “Equipment”,
      “Futures
      Account”,
      “Futures
      Contract”,
      “Futures
      Intermediary”,
      “Goods”,
      “Intangible”,
      “Inventory”,
      “Money”,
      “Proceeds”,
      “Securities
      Account”,
      “Securities
      Intermediary”,
      “Security
      Entitlement”,
      and


     

    
      
        
        

      

      
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“Uncertificated
        Security”
are
        used herein, they shall be interpreted in accordance with their respective
        meanings in the PPSA. Capitalized terms used in this Agreement but not defined
        have the meanings given to them in the Loan Agreement.

    

     

    Section 1.3  No
      Implied Subordination.

     

    Any
      reference herein or in any other Loan Document to a Permitted Lien is not
      intended to subordinate or postpone, and shall not be interpreted as
      subordinating or postponing, or as any agreement to subordinate or postpone,
      any
      Lien created by this Agreement, or any of the other Loan Documents, to any
      Permitted Lien.

     

    Section 1.4  Certain
      Phrases, etc.

     

    In
      this
      Agreement the words “including”,
      “includes”
and
      “include” mean
      “including (or includes or include) without limitation”. The expressions
“Article”,
      “Section”
and
      other subdivision followed by a number mean and refer to the specified Article,
      Section or other subdivision of this Agreement. 

     

    Section 1.5  Gender
      and Number.

     

    Any
      reference in this Agreement to gender includes all genders. Words importing
      the
      singular number only include the plural and vice versa.

     

    Section 1.6  Headings,
      etc.

     

    The
      division of this Agreement into Articles, Sections and other subdivisions and
      the insertion of headings are for convenient reference only and do not affect
      its interpretation.

     

    Section 1.7  Schedules.

     

    The
      schedules attached to this Agreement form an integral part of it for all
      purposes of it.

     

    Section 1.8  References.

     

    Any
      reference to this Agreement, refers to this Agreement as the same may have
      been
      or may from time to time be amended, modified, extended, renewed, restated,
      replaced or supplemented and shall include all schedules to it. Except
      as
      otherwise provided in this Agreement, any reference in this Agreement to a
      statute refers to such statute and all rules and regulations made under it
      as
      the same may have been or may from time to time be amended or
      re-enacted.

     

     

    ARTICLE 2  

     

    SECURITY

     

    Section 2.1  Grant
      of Security.

     

    Subject
      to Section 2.6, the Grantor grants to the Agent, for the benefit of the Secured
      Parties, a security interest in, and assigns, mortgages, charges, hypothecates
      and pledges to the Agent, for the benefit of the Secured Parties, all of the
      Grantor’s now owned or hereafter acquired right, title and interest in and to
      the currently existing and hereafter acquired or arising personal property
      of
      the Grantor, including (collectively the “Collateral”):
      

     

    
      	(a)  	
              Accounts;

            


    

     

    
      
        
        

      

      
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      	(b)  	
              Books;

            


    

     

    
      	(c)  	
              Chattel
                Paper;

            


    

     

    
      	(d)  	
              Contracts;

            


    

     

    
      	(e)  	
              Deposit
                Accounts relating to the Collateral (it being understood and agreed
                that
                Deposit Accounts relating to payroll obligations, tax liabilities
                and
                third party funds shall not be deemed to relate to the
                Collateral);

            


    

     

    
      	(f)  	
              Documents
                of Title;

            


    

     

    
      	(g)  	
              Equipment;

            


    

     

    
      	(h)  	
              Goods;

            


    

     

    
      	(i)  	
              Instruments;

            


    

     

    
      	(j)  	
              Intangibles;
                

            


    

     

    
      	(k)  	
              Intellectual
                Property;

            


    

     

    
      	(l)  	
              Inventory;

            


    

     

    
      	(m)  	
              Investment
                Property;

            


    

     

    
      	(n)  	
              Money
                or other assets that now or hereafter come into the possession, custody,
                or control of any Secured Party;

            


    

     

    
      	(o)  	
              Negotiable
                Collateral;

            


    

     

    
      	(p)  	
              Permits;

            


    

     

    
      	(q)  	
              Securities;

            


    

     

    
      	(r)  	
              all
                Leases and Leaseholds;

            


    

     

    
      	(s)  	
              all
                substitutions and replacements of and increases, additions and, where
                applicable, accessions to the property described in Sections 2.1(a)
                through 2.1(p) inclusive; and

            


    

     

    
      	(t)  	
              all
                Proceeds in any form derived directly or indirectly from any dealing
                with
                all or any part of the property described in Sections 2.1(a) through
                2.1(p) inclusive, including the proceeds of such Proceeds and including
                proceeds of insurance covering any and all of the foregoing, and
                any and
                all Collateral, money, or other tangible or intangible property resulting
                from the sale, exchange, collection, or other disposition of any
                of the
                foregoing, or any portion thereof or interest therein, and the proceeds
                thereof, wherever located.

            


    

     

    
      
        
        

      

      
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    Section 2.2  Secured
      Obligations.

     

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

     

    Section 2.3  Other
      Collateral 

     

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

     

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

            


    

     

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

            


    

     

    
      
        
        

      

      
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      	Section 2.4  	
              Collection
                of Accounts

            


    

     

    At
      any
      time after the occurrence and during the continuation of an Event of Default,
      the Agent or the Agent’s designee may (a) notify Account Debtors of the Grantor
      that the Grantor’s Accounts have been assigned to the Agent or that the Agent
      has a security interest therein, or (b) collect the Grantor’s Accounts directly
      and charge the collection costs and expenses to the Grantor. The Grantor agrees
      that it will hold in trust for the Secured Parties, as the Secured Parties’
trustee, any of its Collections that it receives without commingling the same
      with other funds of the Grantor and immediately will deliver such Collections
      to
      the Agent in their original form as received by the Grantor, together with
      any
      necessary endorsements or assignments.

     

    Section 2.5  Attachment.

     

    The
      Grantor acknowledges that (i) value has been given, (ii) it has rights in the
      Collateral (other than after-acquired Collateral), (iii) it has not agreed
      to
      postpone the time of attachment of the Security Interest, and (iv) it has
      received a duplicate original copy of this Agreement.

     

    Section 2.6  Scope
      of Security Interest.

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

    
      
        
        

      

      
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    Section 2.7  Grant
      of Non-Exclusive Licence.

     

    For
      the
      purpose of enabling the Agent to exercise its rights and remedies under Article
      3 (including, without limitation, in order to take possession of, hold,
      preserve, process, assemble, prepare for sale, market for sale, sell or
      otherwise dispose of the Collateral) at such time as the Agent shall be lawfully
      entitled to exercise its rights and remedies under Article 3, the Grantor hereby
      (i) grants to the Agent, for the benefit of the Secured Parties, a royalty
      free,
      non-exclusive, irrevocable, worldwide license, such license being with respect
      to the Agent’s exercise of its rights and remedies under Article 3 including,
      without limitation, in connection with any completion of the manufacture of
      Inventory or any sale or other disposition of Inventory (a) to use, apply,
      and
      affix any trademark, trade name, logo, or the like in which the Grantor now
      or
      hereafter has rights, (b) to use, license or sublicense any Intellectual
      Property, computer software now owned, held or hereafter acquired by the
      Grantor, including in such license access to all media such and to the extent
      to
      which any of the licensed items may be recorded or stored and to all computer
      software programs such and to the extent used for the compilation or print
      out
      thereof, provided that the Agent’s use of the property described in this
Section 2.7
      will
      comply with all applicable law and the terms of any such right of use, and
      (c)
      to use any and all furniture, fixtures and equipment contained in any premises
      owned, operated, leased, sub-leased or otherwise occupied by the Grantor in
      connection with the exercise of the Agent’s rights and remedies under Article 3,
      and (ii) without limiting the provisions of Article 3, agrees to provide the
      Agent and/or its agents with access to, and the right to use, any such premises
      owned, operated, leased, sub-leased or otherwise occupied by the
      Grantor.

     

    Section 2.8  Care
      and Custody of Collateral.

     

    
      	
              (1)

            	
              The
                Agent and the other Secured Parties have no obligation to keep Collateral
                in their respective possession
                identifiable.

            


    

     

    
      	
              (2)

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

            


    

     

    
      	
              (3)

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

            


    

     

    Section 2.9  Rights
      of the Grantor.

     

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

            


    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

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

            


    

     

    Section
      2.10  Expenses.

     

    The
      Grantor is liable for and will pay on demand by the Agent any and all Expenses.
      

     

     

    ARTICLE 3  

     

    ENFORCEMENT

     

    Section 3.1  Enforcement.

     

    The
      Security Interest becomes and is enforceable against the Grantor upon the
      occurrence and during the continuance of an Event of Default.

     

    Section 3.2  Remedies.

     

    Whenever
      the Security Interest is enforceable, the Agent may realize upon the Collateral
      and enforce the rights of the Agent and the Secured Parties by:

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

    Section 3.3  Additional
      Rights.

     

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

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

            


    

     

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

            


    

     

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


            


    

     

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

            


    

     

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

            


    

     

    Section 3.4  Exercise
      of Remedies.

     

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

     

    Section 3.5  Receiver's
      Powers.

     

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

            


    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

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

            


    

     

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

            


    

     

    Section 3.6  Appointment
      of Attorney.

     

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

     

    Section 3.7  Dealing
      with the Collateral.

     

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

            


    

     

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

            


    

     

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

            


    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    Section 3.8  Standards
      of Sale.

     

    Without
      prejudice to the ability of the Agent to dispose of the Collateral in any manner
      which is commercially reasonable, the Grantor acknowledges that:

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

    Section 3.9  Dealings
      by Third Parties.

     

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

            


    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

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

            


    

     

    Section 3.10  Registration
      Rights.

     

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

     

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

            


    

     

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


            


    

     

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

            


    

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    ARTICLE 4  

     

    REPRESENTATIONS,
      WARRANTIES AND COVENANTS

     

    Section 4.1  General
      Representations, Warranties and Covenants.

     

    The
      Grantor represents and warrants in all material respects and covenants and
      agrees, acknowledging and confirming that the Agent and each Secured Party
      is
      relying on such representations, warranties, covenants and agreements,
      that:

     

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

            


    

     

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


            


    

     

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

            


    

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

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

            


    

     

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

            


    

     

    
      	(f)  	
              Leases
                and Leaseholds. The
                Grantor shall not authorize or permit any assignment, pledge, Lien,
                security interest, encumbrance, restriction or any hypothecation
                of any
                Lease or Leasehold Interest, except as shall be permitted under the
                Loan
                Agreement.

            


    

     

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

            


    

     

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

            


    

     

    
      	(i)  	
              Securities
                and Instruments.

            


    

     

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

            


    

     

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

            


    

     

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

            


    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

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

            


    

     

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

            


    

     

    
      	(l)  	
              Compliance
                with Loan Agreement.
                The Grantor agrees to comply with all covenants and other provisions
                applicable to it under the Loan
                Agreement.

            


    

     

     

    ARTICLE 5  

     

    GENERAL

     

    Section 5.1  Notices.

     

    Any
      notices, directions or other communications provided for in this Agreement
      must
      be in writing and given in accordance with the Loan Agreement.

     

    Section 5.2  Discharge.

     

    The
      Security Interest will be discharged upon, but only upon, (i) full and
      indefeasible payment and performance of the Secured Obligations, and (ii) the
      Agent and the Secured Parties having no obligations under any Loan Document.
      Upon discharge of the Security Interest and at the request and expense of the
      Grantor, the Agent will execute and deliver to the Grantor such releases,
      discharges, financing statements and other documents or instruments as the
      Grantor may reasonably require and the Agent will redeliver to the Grantor,
      or
      as the Grantor may otherwise direct the Agent, any Collateral in its
      possession.

     

    Section 5.3  No
      Merger, Survival of Representations and Warranties.

     

    This
      Agreement does not operate by way of merger of any of the Secured Obligations
      and no judgment recovered by the Agent or any of the Secured Parties will
      operate by way of merger of, or in any way affect, the Security Interest, which
      is in addition to, and not in substitution for, any other security now or
      hereafter held by the Agent and the Secured Parties in respect of the Secured
      Obligations.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    Section 5.4  Further
      Assurances.

     

    The
      Grantor will do all acts and things and execute and deliver, or cause to be
      executed and delivered, all documents and instruments that the Agent may require
      and take all further steps relating to the Collateral or any other property
      or
      assets of the Grantor that the Agent may require for (i) protecting the
      Collateral, (ii) perfecting the Security Interest, and (iii) exercising all
      powers, authorities and discretions conferred upon the Agent. After the Security
      Interest becomes enforceable, the Grantor will do all acts and things and
      execute and deliver all transfers, assignments and instruments that the Agent
      may require for facilitating the sale or other disposition of the Collateral
      in
      connection with its realization. 

     

    Section 5.5  Supplemental
      Security.

     

    This
      Agreement is in addition and without prejudice to and supplemental to all other
      security now held or which may hereafter be held by the Agent or the Secured
      Parties.

     

    Section 5.6  Successors
      and Assigns.

     

    This
      Agreement is binding on the Grantor, its successors and assigns, and enures
      to
      the benefit of the Agent and its successors and assigns. This Agreement may
      be
      assigned by the Agent without the consent of, or notice to, the Grantor, to
      such
      Person as the Agent may determine and, in such event, such Person will be
      entitled to all of the rights and remedies of the Agent as set forth in this
      Agreement or otherwise. In any action brought by an assignee to enforce any
      such
      right or remedy, the Grantor will not assert against the assignee any claim
      or
      defence which the Grantor now has or may have against the Agent or any of the
      Secured Parties. The Grantor may not assign, transfer or delegate any of its
      rights or obligations under this Agreement without the prior written consent
      of
      the Agent which may be unreasonably withheld.

     

    Section 5.7  Amalgamation

     

    The
      Grantor acknowledges and agrees that in the event it amalgamates with any other
      corporation or corporations, it is the intention of the parties that the
      Security Interest (i) extends to all of the property and undertaking that each
      of the amalgamating corporations and the amalgamated corporation then has,
      or
      thereafter acquires, any right, title, interest in and all right, title and
      interest that each of the amalgamating corporations and the amalgamated
      corporation then has, or thereafter acquires or has, in any property and
      undertaking; and (ii) secures the payment and performance of all debts,
      liabilities and obligations, present or future, direct or indirect, absolute
      or
      contingent, matured or unmatured, at any time or from time to time due or
      accruing due and owing by or otherwise payable by each of the amalgamating
      corporations and the amalgamated corporation to the Secured Parties at the
      time
      of amalgamation and any such obligations of the amalgamated corporation to
      the
      Secured Parties arising after the amalgamation. The Security Interest attaches
      to the additional collateral at the time of amalgamation and to any collateral
      thereafter owned or acquired by the amalgamated corporation when such becomes
      owned or is acquired. Upon any such amalgamation, the defined term “Grantor”
means, collectively, each of the amalgamating corporations and the amalgamated
      corporation, the defined term “Collateral” means all of the property and
      undertaking and interests described in (i) above, and the defined term “Secured
      Obligations” means the obligations described in (ii) above.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    Section 5.8  Severability.

     

    If
      any
      court of competent jurisdiction from which no appeal exists or is taken,
      determines any provision of this Agreement to be illegal, invalid or
      unenforceable, that provision will be severed from this Agreement and the
      remaining provisions will remain in full force and effect.

     

    Section 5.9  Amendment.

     

    This
      Agreement may only be amended, supplemented or otherwise modified by written
      agreement executed by the Agent (with the consent of the Required Lenders)
      and
      the Grantor.

     

    Section 5.10  Waivers,
      etc.

     

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

            


    

     

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

            


    

     

    Section 5.11  Application
      of Proceeds of Security.

     

    All
      monies collected by the Agent upon the enforcement of the Agent’s or the Secured
      Parties’ rights and remedies under this Agreement and the Liens created hereby,
      including any sale or other disposition of the Collateral, together with all
      other monies received by the Agent and the Secured Parties under this Agreement,
      will be applied as provided in the Loan Agreement.  To
      the
      extent any other Loan Document requires proceeds of collateral under such Loan
      Document to be applied in accordance with the provisions of this Agreement,
      the
      Agent or holder under such other Loan Document shall apply such proceeds in
      accordance with this Section.

     

    Section 5.12  Conflict

     

    In
      the
      event of any conflict between the provisions of this Agreement and the
      provisions of the Loan Agreement which cannot be resolved by both provisions
      being complied with, the provisions contained in the Loan Agreement will prevail
      to the extent of such conflict. 

     

    Section 5.13  Governing
      Law;
      Jurisdiction

     

    This
      Agreement will be governed by, interpreted and enforced in accordance with
      the
      laws of the Province of Ontario and the federal laws of Canada applicable
      therein. Without prejudice to the ability of the Agent to enforce this Agreement
      in any other proper jurisdiction, the Grantor irrevocably submits and attorns
      to
      the non-exclusive jurisdiction of the courts of such Province. The parties
      irrevocably waive any objection (including any claim of inconvenient forum)
      that
      any of them may now or hereafter have to the venue of any legal proceeding
      arising out of or relating to this Agreement in the courts of such Province.
      

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF the
      Grantor has executed this Agreement as of the date first above written.


     

    
      	 	 	
              THE
                BOMBAY FURNITURE COMPANY OF CANADA INC.,
                

              as
                Grantor 

               

            
	
               

              By:_________________________________

               

            	 
	 Name:
              Elaine Crowley
              Title:
                Vice President

            	
               

              
              

            


    

    


     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    




    SCHEDULE
      A

     

    LOCATIONS
      OF COLLATERAL

     

    


     

    Chief
      Executive Office:

     

    3475
      Steeles Avenue East,
      Brampton,
      Ontario L6T 5W4

     

    Locations
      of Collateral and Places of Business:

     

    See
      Attachment 1

     

    


     

    Locations
      of Books and Records:

     

    550
      Bailey Avenue, Fort Worth, TX 76107

     

    


     

    Locations
      of Senior Management:

     

    3475
      Steeles Avenue East,
      Brampton,
      Ontario L6T 5W4

     

    550
      Bailey Avenue, Fort Worth, TX 76107

     

    


     

    Address
      from which Invoices and Accounts are sent:

     

    550
      Bailey Avenue, Fort Worth, TX 76107

     

    3475
      Steeles Avenue East,
      Brampton,
      Ontario L6T 5W4