Document:

US Security Agreement

    

     

     

     

     

    GUARANTY
      AND SECURITY AGREEMENT

     

    Dated
      as
      of October 24,
      2006

     

     

    among

     

     

    THE
      BOMBAY COMPANY, INC.

     

     

    BBA
      HOLDINGS, INC.

     

     

    BOMBAY
      INTERNATIONAL, INC.

     

     

    

     

     

    and

     

     

    

     

     

    Each
      Other Grantor

     

     

    From
      Time
      to Time Party Hereto

     

     

    and

     

     

    GENERAL
      ELECTRIC CAPITAL CORPORATION, 

     

     

    as
      Administrative Agent and Collateral Agent

     

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    

     

     

    TABLE OF
      CONTENTS 

    

                                                                                                                                                                                           Page

    
      	
              ARTICLE
                I

            	
              DEFINED
                TERMS...........................................................................................

            	
              1

            
	
              Section
                1.1

            	
              Definitions.....................................................................................................

            	
              1

            
	
              Section
                1.2

            	
              Certain
                Other Terms........................................................................................

            	
              3

            
	
              ARTICLE
                II

            	
              GUARANTY...................................................................................................

            	
              3

            
	
              Section
                2.1

            	
              Guaranty.......................................................................................................

            	
              3

            
	
              Section
                2.2

            	
              Limitation
                of Guaranty......................................................................................

            	
              3

            
	
              Section
                2.3

            	
              Contribution...................................................................................................

            	
              3

            
	
              Section
                2.4

            	
              Authorization;
                Other Agreements.......................................................................

            	
              4

            
	
              Section
                2.5

            	
              Guaranty
                Absolute and Unconditional.................................................................

            	
              4

            
	
              Section
                2.6

            	
              Waivers........................................................................................................

            	
              5

            
	
              Section
                2.7

            	
              Reliance........................................................................................................

            	
              5

            
	
              ARTICLE
                III

            	
              GRANT
                OF SECURITY INTEREST.....................................................................

            	
              6

            
	
              Section
                3.1

            	
              Collateral.......................................................................................................

            	
              6

            
	
              Section
                3.2

            	
              Grant
                of Security Interest in Collateral.................................................................

            	
              7

            
	
              ARTICLE
                IV

            	
              REPRESENTATIONS
                AND WARRANTIES..........................................................

            	
              7

            
	
              Section
                4.1

            	
              Title;
                No Other Liens........................................................................................

            	
              7

            
	
              Section
                4.2

            	
              Perfection
                and Priority......................................................................................

            	
              7

            
	
              Section
                4.3

            	
              [Reserved].....................................................................................................

            	
              8

            
	
              Section
                4.4

            	
              Pledged
                Debt Instruments.................................................................................

            	
              8

            
	
              Section
                4.5

            	
              Instruments
                and Tangible Chattel Paper Formerly Accounts....................................

            	
              8

            
	
              Section
                4.6

            	
              Commercial
                Tort Claims...................................................................................

            	
              8

            
	
              Section
                4.7

            	
              Enforcement...................................................................................................

            	
              8

            
	
              Section
                4.8

            	
              Representations
                and Warranties of the Credit Agreement........................................

            	
              8

            
	
              ARTICLE
                V

            	
              COVENANTS.................................................................................................

            	
              8

            
	
              Section
                5.1

            	
              Maintenance
                of Perfected Security Interest; Further Documentation and
                Consents.......

            	
              8

            
	
              Section
                5.2

            	
              Pledged
                Debt Instruments.................................................................................

            	
              9

            
	
              Section
                5.3

            	
              Accounts.......................................................................................................

            	
              9

            
	
              Section
                5.4

            	
              Delivery
                of Instruments and Tangible Chattel Paper and Control 

            	 
	 	
              of
                Investment Property, Letter-of-Credit Rights and Electronic Chattel
                Paper...............

            	
              10

            
	
              Section
                5.5

            	
              Notices.........................................................................................................

            	
              10

            
	
              Section
                5.6

            	
              Notice
                of Commercial Tort Claims......................................................................

            	
              10

            
	
              Section
                5.7

            	
              Compliance
                with Credit Agreement.....................................................................

            	
              10

            
	
              ARTICLE
                VI

            	
              REMEDIAL
                PROVISIONS.................................................................................

            	
              11

            
	
              Section
                6.1

            	
              UCC
                and Other Remedies.................................................................................

            	
              11

            
	
              Section
                6.2

            	
              Accounts
                and Payments in Respect of General
                Intangibles.....................................

            	
              13

            
	
              Section
                6.3

            	
              Pledged
                Debt Instrument..................................................................................

            	
              14

            
	
              Section
                6.4

            	
              Proceeds
                to be Turned over to and Held by Administrative
                Agent...........................

            	
              14

            
	
              Section
                6.5

            	
              [Reserved].....................................................................................................

            	
              15

            
	
              Section
                6.6

            	
              Deficiency.....................................................................................................

            	
              15

            
	
              ARTICLE
                VII

            	
              THE
                ADMINISTRATIVE
                AGENT.............................................................................................

            	
              15

            
	
              Section
                7.1

            	
              Administrative
                Agent's Appointment as Attorney-in-Fact......................................

            	
              15

            
	 	 	 
	 	
                                                        
                  TABLE OF CONTENTS

            	 
	 	                                             
                       (continued)	 
	 	 	 
	
              Section
                7.2

            	
              Authorization
                to File Financing Statements..........................................................

            	
              16

            
	
              Section
                7.3

            	
              Authority
                of Administrative Agent.....................................................................

            	
              17

            
	
              Section
                7.4

            	
              Duty;
                Obligations and Liabilities.........................................................................

            	
              17

            
	
              ARTICLE
                VIII

            	
              MISCELLANEOUS..........................................................................................

            	
              17

            
	
              Section
                8.1

            	
              Reinstatement................................................................................................

            	
              17

            
	
              Section
                8.2

            	
              Release
                of Collateral........................................................................................

            	
              18

            
	
              Section
                8.3

            	
              Independent
                Obligations....................................................................................

            	
              18

            
	
              Section
                8.4

            	
              No
                Waiver by Course of Conduct.....................................................................

            	
              18

            
	
              Section
                8.5

            	
              Amendments
                in Writing....................................................................................

            	
              19

            
	
              Section
                8.6

            	
              Additional
                Grantors; Joinder Agreements.............................................................

            	
              19

            
	
              Section
                8.7

            	
              Notices.........................................................................................................

            	
              19

            
	
              Section
                8.8

            	
              Successors
                and Assigns..................................................................................

            	
              19

            
	
              Section
                8.9

            	
              Counterparts..................................................................................................

            	
              19

            
	
              Section
                8.10

            	
              Severability....................................................................................................

            	
              19

            
	
              Section
                8.11

            	
              Governing
                Law................................................................................................

            	
              19

            
	
              Section
                8.12

            	
              Waiver
                of Jury Trial..........................................................................................

            	
              19

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

     

     

    ANNEX

     

    Annex 1 Form
      of
      Joinder Agreement

    

     

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    GUARANTY
      AND SECURITY AGREEMENT, dated
      as
      of October 24, 2006, by The Bombay Company, Inc. (the “Parent”)
      and
      each of the other entities listed on the signature pages hereof or that becomes
      a party hereto pursuant to Section 8.6
      (together with the Parent, the “Grantors”),
      in
      favor of General Electric Capital Corporation (“GE
      Capital”),
      as
      administrative agent and collateral agent (in such capacity, together with
      its
      successors and permitted assigns, the “Administrative
      Agent”)
      for
      the Lenders and the L/C Issuers and each other Secured Party (each as defined
      in
      the Credit Agreement referred to below).

     

    W
      I T N E
      S S E T H:

     

    WHEREAS,
      pursuant to the Credit Agreement dated as of October 24, 2006 (as the same
      may
      be amended, restated, amended and restated, supplemented, replaced or otherwise
      modified from time to time, the “Credit
      Agreement”)
      among
      the Borrowers, the Lenders, the L/C Issuers from time to time party thereto,
      the
      Administrative Agent and GE Canada Finance Holding Company (“GE
      Canada”),
      as
      Canadian agent (in such capacity, the “Canadian
      Agent”),
      the
      Lenders and the L/C Issuers have severally agreed to make extensions of credit
      to the Borrowers upon the terms and subject to the conditions set forth therein;
      

     

    WHEREAS,
      each
      Grantor (only in its individual capacity as Guarantor, and not in its capacity
      as a Borrower) has agreed to guaranty the Obligations (as defined in the Credit
      Agreement) of the Borrowers;

     

    WHEREAS,
      each Grantor will derive substantial direct and indirect benefits from the
      making of the extensions of credit under the Credit Agreement; and

     

    WHEREAS,
      it is a
      condition precedent to the obligation of the Lenders and the L/C Issuers to
      make
      their respective extensions of credit to the Borrowers under the Credit
      Agreement that the Grantors shall have executed and delivered this Agreement
      to
      the Administrative Agent;

     

    NOW,
      THEREFORE,
      in
      consideration of the premises and to induce the Lenders, the L/C Issuers, the
      Administrative Agent, and the Canadian Agent to enter into the Credit Agreement
      and to induce the Lenders and the L/C Issuers to make their respective
      extensions of credit to the Borrowers thereunder, each Grantor hereby agrees
      with the Administrative Agent as follows:

     

    ARTICLE I  

     

    

     

    DEFINED
      TERMS

     

    Section 1.1  Definitions.
      (a)
      Capital
      terms used herein without definition are used as defined in the Credit
      Agreement.

     

    (b)  The
      following terms have the meanings given to them in the UCC and terms used herein
      without definition that are defined in the UCC have the meanings given to them
      in the UCC (such meanings to be equally applicable to both the singular and
      plural forms of the terms defined): “account”,
      “account
      debtor”,
      “chattel
      paper”,
      “commercial
      tort claim”,
      “documents”,
      “deposit
      account”,
      “electronic
      chattel paper”,
      “general
      intangible”,
      “instruments”,
      “inventory”,
      “investment
      property”,
      “letter-of-credit
      right”,
      “proceeds”,
      “record”,
      “securities
      account”,
      “security”,
      “supporting
      obligation”
and
      “tangible
      chattel paper”.

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    (c)  The
      following terms shall have the following meanings:

     

    “Agreement”
means
      this Guaranty and Security Agreement.

     

    “Collateral”
has
      the
      meaning specified in Section 3.1.

     

    “Excluded
      Deposit Account”
means
      deposit accounts containing payroll obligations, tax liabilities and third
      party
      funds and not funds related to the Collateral.

     

    “Excluded
      Property”
means
      any Permit, lease, license, contract, instrument or other agreement held by
      any
      Grantor that prohibits or requires the consent of any Person other than the
      Borrowers and their Affiliates as a condition to the creation by such Grantor
      of
      a Lien thereon, or any Permit, lease, license contract or other agreement held
      by any Grantor to the extent that any Requirement of Law applicable thereto
      prohibits the creation of a Lien thereon, but only to the extent, and for so
      long as, such prohibition is not terminated or rendered unenforceable or
      otherwise deemed ineffective by the UCC or any other Requirement of Law;
provided,
      however,
      “Excluded
      Property”
shall
      not include any proceeds, substitutions or replacements of Excluded Property
      (unless such proceeds, substitutions or replacements would constitute Excluded
      Property).

     

    “Guaranteed
      Obligations”
has
      the
      meaning set forth in Section 2.1.

     

    “Guarantor”
means
      each Grantor only in their capacity as Guarantors and not in their capacities
      as
      Borrowers.

     

    “Guaranty”
means
      the guaranty of the Guaranteed Obligations made by the Guarantors as set forth
      in this Agreement.

     

    “Permit”
means,
      with respect to any Person, any permit, approval, authorization, license,
      registration, certificate, concession, grant, franchise, variance or permission
      from, and any other Contractual Obligations with, any Governmental Authority,
      in
      each case whether or not having the force of law and applicable to or binding
      upon such Person or any of its property or to which such Person or any of its
      property is subject. 

     

    “Pledged
      Debt Instruments”
means
      all right, title and interest of any Grantor in instruments or promissory notes
      constituting Collateral and evidencing any Indebtedness owed to such Grantor
      or
      other obligations, and any distribution of property made on, in respect of
      or in
      exchange for the foregoing from time to time, exceeding $100,000 in the
      aggregate including all Indebtedness described on Schedule I
      of the
      Perfection Certificate issued by the obligors named therein. 

     

    “Security
      Cash Collateral Account”
means
      a
      Cash Collateral Account that is not a L/C Cash Collateral Account.

     

    “Software”
means
      all software including (a) all computer programs, including source code and
      object code versions, (b) all data, databases and compilations of data, whether
      machine readable or otherwise, and (c) all documentation, training materials
      and
      configurations related to any of the foregoing.

     

    “Subsidiary
      Guarantor”
means
      any Guarantor that is a Subsidiary of the Parent.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    “UCC”
means
      the Uniform Commercial Code as from time to time in effect in the State of
      New
      York; provided,
      however,
      that,
      in the event that, by reason of mandatory provisions of any applicable
      Requirement of Law, any of the attachment, perfection or priority of the
      Administrative Agent’s or any other Secured Party’s security interest in any
      Collateral is governed by the Uniform Commercial Code of a jurisdiction other
      than the State of New York, “UCC”
shall
      mean the Uniform Commercial Code as in effect in such other jurisdiction for
      purposes of the provisions hereof relating to such attachment, perfection or
      priority and for purposes of the definitions related to or otherwise used in
      such provisions.

     

    Section 1.2  Certain
      Other Terms.
      (a)
      The
      meanings given to terms defined herein shall be equally applicable to both
      the
      singular and plural forms of such terms. The terms “herein”,
      “hereof”
and
      similar terms refer to this Agreement as a whole and not to any particular
      Article, Section or clause in this Agreement.
      References herein to an Annex, Article, Section or clause refer to the
      appropriate Annex to, or Article, Section or clause in this
      Agreement.
      Where
      the context requires, provisions relating to any Collateral when used in
      relation to a Grantor shall refer to such Grantor’s Collateral or any relevant
      part thereof.

     

    (b)  Section
      1.5
      (Interpretation)
      of the
      Credit Agreement is applicable to this Agreement as and to the extent set forth
      therein.

     

    ARTICLE II  

     

     

    GUARANTY

     

    Section 2.1  Guaranty.
      To
      induce the Lenders to make the Loans and the L/C Issuers to Issue Letters of
      Credit, each Guarantor hereby, jointly and severally, absolutely,
      unconditionally and irrevocably guarantees, as primary obligor and not merely
      as
      surety, the full and punctual payment when due, whether at stated maturity
      or
      earlier, by reason of acceleration, mandatory prepayment or otherwise in
      accordance with any Loan Document, of all the Obligations of the Borrowers
      (including Bombay Canada) whether existing on the date hereof or hereinafter
      incurred or created (other than, in the case of the Guarantors that are
      Borrowers, the Obligations owing by it in its capacity as a Borrower) (the
      “Guaranteed
      Obligations”).
      This
      Guaranty by each Guarantor hereunder constitutes a guaranty of payment and
      not
      of collection.

     

    Section 2.2  Limitation
      of Guaranty.
      Any
      term or provision of this Guaranty or any other Loan Document to the contrary
      notwithstanding, the maximum aggregate amount for which any Subsidiary Guarantor
      shall be liable hereunder shall not exceed the maximum amount for which such
      Subsidiary Guarantor can be liable without rendering this Guaranty or any other
      Loan Document, as it relates to such Subsidiary Guarantor, subject to avoidance
      under applicable Requirements of Law relating to fraudulent conveyance or
      fraudulent transfer (including the Uniform Fraudulent Conveyance Act, the
      Uniform Fraudulent Transfer Act and Section 548 of title 11 of the United
      States Code or any applicable provisions of comparable Requirements of Law)
      (collectively, “Fraudulent
      Transfer Laws”). Any
      analysis
      of the
      provisions of this Guaranty for purposes of Fraudulent Transfer Laws
      shall
      take
      into account the right of contribution established in Section 2.3
      and, for
      purposes of such analysis, give effect to any discharge of intercompany debt
      as
      a result of any payment made under the Guaranty.

     

    Section 2.3  Contribution.
      To the
      extent that any Subsidiary Guarantor shall be required hereunder to pay any
      portion of any Guaranteed Obligation exceeding the greater of (a) the
      amount of the economic benefit actually received by such Subsidiary Guarantor
      from the Loans and other Obligations and (b) the amount such Subsidiary
      Guarantor would otherwise have paid if such Subsidiary Guarantor had paid the
      aggregate amount of the Guaranteed Obligations (excluding the amount thereof
      repaid by the Borrowers) in the same proportion as such Subsidiary Guarantor’s
      net worth on the date enforcement is sought hereunder bears to the aggregate
      net
      worth of all the Subsidiary Guarantors on such date, then such Subsidiary
      Guarantor shall be reimbursed by such other Subsidiary Guarantors for the amount
      of such excess, pro rata, based on the respective net worth of such other
      Subsidiary Guarantors on such date.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    Section 2.4  Authorization;
      Other Agreements.
      The
      Secured Parties are hereby authorized, without notice to or demand upon any
      Guarantor and without discharging or otherwise affecting the obligations of
      any
      Guarantor hereunder and without incurring any liability hereunder, from time
      to
      time, to do each of the following:

     

    (a)  (i)
      modify, amend, supplement or otherwise change, (ii) accelerate or otherwise
      change the time of payment or (iii) waive or otherwise consent to noncompliance
      with, any Guaranteed Obligation or any Loan Document;

     

    (b)  apply
      to
      the Guaranteed Obligations any sums by whomever paid or however realized to
      any
      Guaranteed Obligation in such order as provided in the Loan
      Documents;

     

    (c)  refund
      at
      any time any payment received by any Secured Party in respect of any Guaranteed
      Obligation;

     

    (d)  (i)
      Sell,
      exchange, enforce, waive, substitute, liquidate, terminate, release, abandon,
      fail to perfect, subordinate, accept, substitute, surrender, exchange, affect,
      impair or otherwise alter or release any Collateral for any Guaranteed
      Obligation or any other guaranty therefor in any manner, (ii) receive, take
      and
      hold additional Collateral to secure any Guaranteed Obligation, (iii) add,
      release or substitute any one or more other Guarantors, makers or endorsers
      of
      any Guaranteed Obligation or any part thereof and (iv) otherwise deal in any
      manner with the Borrowers and any other Guarantor, maker or endorser of any
      Guaranteed Obligation or any part thereof; and

     

    (e)  settle,
      release, compromise, collect or otherwise liquidate the Guaranteed
      Obligations.

     

    Section 2.5  Guaranty
      Absolute and Unconditional.
      Each
      Guarantor hereby waives and agrees not to assert any defense, whether arising
      in
      connection with or in respect of any of the following or otherwise, and hereby
      agrees that its obligations under this Guaranty are irrevocable, absolute and
      unconditional and shall not be discharged as a result of or otherwise affected
      by any of the following (which may not be pleaded and evidence of which may
      not
      be introduced in any proceeding with respect to this Guaranty, in each case
      except as otherwise agreed in writing by the Administrative Agent):

     

    (a)  the
      invalidity or unenforceability of any obligation of the Borrowers or any other
      Guarantor under any Loan Document or any other agreement or instrument relating
      thereto (including any amendment, consent or waiver thereto), or any security
      for, or other guaranty of, any Guaranteed Obligation or any part thereof, or
      the
      lack of perfection or continuing perfection or failure of priority of any
      security for the Guaranteed Obligations or any part thereof;

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    (b)  the
      absence of (i) any attempt to collect any Guaranteed Obligation or any part
      thereof from the Borrowers or any other Guarantor or other action to enforce
      the
      same or (ii) any action to enforce any Loan Document or any Lien
      thereunder;

     

    (c)  the
      failure by any Person to take any steps to perfect and maintain any Lien on,
      or
      to preserve any rights with respect to, any Collateral;

     

    (d)  any
      workout, insolvency, bankruptcy proceeding, reorganization, arrangement,
      liquidation or dissolution by or against the Borrowers, any other Guarantor
      or
      any of the Borrowers’ other Subsidiaries or any procedure, agreement, order,
      stipulation, election, action or omission thereunder, including any discharge
      or
      disallowance of, or bar or stay against collecting, any Guaranteed Obligation
      (or any interest thereon) in or as a result of any such proceeding;

     

    (e)  any
      foreclosure, whether or not through judicial sale, and any other Sale of any
      Collateral or any election following the occurrence of an Event of Default
      by
      any Secured Party to proceed separately against any Collateral in accordance
      with such Secured Party’s rights under any applicable Requirement of Law;
      or

     

    (f)  any
      other
      defense, setoff, counterclaim or any other circumstance that might otherwise
      constitute a legal or equitable discharge of the Borrowers, any other Guarantor
      or any of the Borrowers’ other Subsidiaries, in each case other than the payment
      in full of the Guaranteed Obligations.

     

    Section 2.6  Waivers.
      Each
      Guarantor hereby unconditionally and irrevocably waives and agrees not to assert
      any claim, defense, setoff or counterclaim based on diligence, promptness,
      presentment, requirements for any demand or notice hereunder including any
      of the following: (a) any demand for payment or performance and protest and
      notice of protest, (b) any notice of acceptance, (c) any presentment, demand,
      protest or further notice or other requirements of any kind with respect to
      any
      Guaranteed Obligation (including any accrued but unpaid interest thereon)
      becoming immediately due and payable and (d) any other notice in respect of
      any
      Guaranteed Obligation or any part thereof, and any defense arising by reason
      of
      any disability or other defense of the Borrowers or any other Guarantor. Each
      Guarantor further unconditionally and irrevocably agrees not to (x) enforce
      or
      otherwise exercise any right of subrogation or any right of reimbursement or
      contribution or similar right against the Borrowers or any other Guarantor
      by
      reason of any Loan Document or any payment made thereunder or (y) assert any
      claim, defense, setoff or counterclaim it may have against any other Loan Party
      or set off any of its obligations to such other Loan Party against obligations
      of such Loan Party to such Guarantor. No obligation of any Guarantor hereunder
      shall be discharged other than by complete performance.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    Section 2.7  Reliance.
      Each
      Guarantor hereby assumes responsibility for keeping itself informed of the
      financial condition of the Borrowers, each other Guarantor and any other
      guarantor, maker or endorser of any Guaranteed Obligation or any part thereof,
      and of all other circumstances bearing upon the risk of nonpayment of any
      Guaranteed Obligation or any part thereof that diligent inquiry would reveal,
      and each Guarantor hereby agrees that no Secured Party shall have any duty
      to
      advise any Guarantor of information known to it regarding such condition or
      any
      such circumstances. In the event any Secured Party, in its sole discretion,
      undertakes at any time or from time to time to provide any such information
      to
      any Guarantor, such Secured Party shall be under no obligation to
      (a) undertake any investigation not a part of its regular business routine,
      (b) disclose any information that such Secured Party, pursuant to accepted
      or reasonable commercial finance or banking practices, wishes to maintain
      confidential or (c) make any future disclosures of such information or any
      other information to any Guarantor.

     

    ARTICLE III  

     

     

    GRANT
      OF
      SECURITY INTEREST

     

    Section 3.1  Collateral.
      For the
      purposes of this Agreement, all of the following property now owned or at any
      time hereafter acquired by a Grantor or in which a Grantor now has or at any
      time in the future may acquire any right, title or interests is collectively
      referred to as the “Collateral”:

     

    (a)  all
      accounts;

     

    (b)  all
      inventory;

     

    (c)  all
      documents evidencing, relating to or pertaining to the other property described
      in this Section
      3.1;

     

    (d)  all
      general intangibles evidencing, relating to or pertaining to the other property
      described in this Section
      3.1;

     

    (e)  all
      securities accounts and deposit accounts (other than Excluded Deposit Accounts),
      including Store Accounts, Concentration Accounts, the Cash Collateral Account
      and all deposits and credits therein;

     

    (f)  all
      investment property relating to or pertaining to the other property described
      in
      this Section
      3.1;

     

    (g)  all
      letters of credit, letter-of-credit rights, instruments, promissory notes,
      drafts and chattel paper (including electronic chattel paper and tangible
      chattel paper) evidencing, relating to or pertaining to the other property
      in
      this Section
      3.1;

     

    (h)  all
      supporting obligations with respect to any of the foregoing;

     

    (i)  all
      Software to process, assemble, prepare for sale, market for Sale or to Sell
      or
      otherwise dispose of any of the foregoing;

     

    (j)  all
      Books
      and records pertaining to the other property described in this Section 3.1;

     

    (k)  the
      commercial tort claims arising from the purchase or sale of inventory or arising
      from accounts described on the Perfection Certificate and on any supplement
      thereto received by the Administrative Agent pursuant to Section 5.6;

     

    (l)  all
      money
      or other assets of such Grantor held by any Secured Party, including all
      property of every description, in the custody of or in transit to such Secured
      Party for any purpose, including safekeeping, collection or pledge, for the
      account of such Grantor or as to which such Grantor may have any right or power,
      including but not limited to cash; and

     

    
      
         

      

      
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    (m)  to
      the
      extent not otherwise included, all proceeds of the foregoing including the
      proceeds of insurance, all property or money resulting from the Sale of any
      of
      the foregoing and all other rights to payment not included in the
      foregoing;

     

    provided, however, that
      “Collateral”
shall
      not include any Excluded Property; and provided,
      further,
      that if
      and when any property shall cease to be Excluded Property, such property shall
      be deemed at all times from and after the date hereof to constitute
      Collateral.

     

    Section 3.2  Grant
      of Security Interest in Collateral.
      Each
      Grantor, as collateral security for the prompt and complete payment and
      performance when due (whether at stated maturity, by acceleration or otherwise)
      of the Obligations of such Grantor (the “Secured
      Obligations”),
      hereby mortgages, pledges and hypothecates to the Administrative Agent for
      the
      benefit of the Secured Parties, and grants to the Administrative Agent for
      the
      benefit of the Secured Parties a Lien on and security interest in, all of its
      right, title and interest in, to and under the Collateral of such Grantor;
      provided,
      however,
      that,
      if and when any property that at any time constituted Excluded Property becomes
      Collateral, the Administrative Agent shall have, and at all times from and
      after
      the date hereof be deemed to have had, a security interest in such
      property.

     

    ARTICLE IV  

     

     

    REPRESENTATIONS
      AND WARRANTIES

     

    To
      induce
      the Lenders, the L/C Issuers and the Administrative Agent to enter into the
      Loan
      Documents, each Grantor hereby represents and warrants, in all material
      respects, to each of the following to the Administrative Agent, the Lenders,
      the
      L/C Issuers and the other Secured Parties:

     

    Section 4.1  Title;
      No Other Liens.
      Such
      Grantor (a) is the record and beneficial owner of the Collateral pledged by
      it
      hereunder constituting instruments and (b) has rights in or the power to
      transfer each other item of Collateral in which a Lien is granted by it
      hereunder, free and clear of any other Lien (except for Permitted
      Liens).

     

    Section 4.2  Perfection
      and Priority.
      The
      security interest granted pursuant to this Agreement constitutes a valid and
      continuing perfected security interest in favor of the Administrative Agent
      in
      all Collateral subject, for the following Collateral, to the occurrence of
      the
      following: (i) in the case of all Collateral in which a security interest may
      be
      perfected by filing a financing statement under the UCC, the completion of
      the
      filings and other actions specified in Section
      12
      of the
      Perfection Certificate (which, in the case of all filings and other documents
      referred to on such Perfection Certificate, have been delivered to the
      Administrative Agent in completed and duly authorized form), (ii) with respect
      to any deposit account, the execution of Control Agreements, and (iii)  in
      the case of electronic chattel paper, the completion of all steps necessary
      to
      grant control to the Administrative Agent over such electronic chattel paper.
      Such security interest shall be prior to all other Liens on the Collateral
      except for Permitted Liens having priority over the Administrative Agent’s Lien
      by operation of law or unless otherwise permitted by any Loan Document upon
      (i)
      in the case of all Pledged Debt Instruments, the delivery thereof to the
      Administrative Agent of such Pledged Debt Instruments consisting of instruments,
      properly endorsed for transfer to the Administrative Agent or in blank, (ii)
      in
      the case of all other instruments and tangible chattel paper that are not
      Pledged Debt Instruments, the delivery thereof to the Administrative Agent
      of
      such instruments and tangible chattel paper.
      Except
      as set forth in this Section 4.2,
      all
      actions by each Grantor necessary or desirable to protect and perfect the Lien
      granted hereunder on the Collateral have been duly taken.

     

    
      
         

      

      
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    Section 4.3  [Reserved]

     

    Section 4.4  Pledged
      Debt Instruments.
      As
      of the
      Closing Date, all Pledged Debt Instruments, if any, to the extent they exceed
      $100,000 in the aggregate, have been delivered to the Administrative Agent
      in
      accordance with Section 5.3(a).

     

    Section 4.5  Instruments
      and Tangible Chattel Paper Formerly Accounts.
      No
      amount payable to such Grantor under or in connection with any account is
      evidenced by any instrument or tangible chattel paper that has not been
      delivered to the Administrative Agent, properly endorsed for transfer, to the
      extent delivery is required by Section 5.5(a).

     

    Section 4.6  Commercial
      Tort Claims.
      The
      only commercial tort claims of any Grantor existing on the date hereof and
      constituting Collateral (regardless of whether the amount, defendant or other
      material facts can be determined and regardless of whether such commercial
      tort
      claim has been asserted, threatened or has otherwise been made known to the
      obligee thereof or whether litigation has been commenced for such claims) are
      those listed on the Perfection Certificate, which sets forth such information
      separately for each Grantor.

     

    Section 4.7  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
      Administrative 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.

     

    Section 4.8  Representations
      and Warranties of the Credit Agreement.
      The
      representations and warranties as to such Grantor and its Subsidiaries made
      by
      the Borrowers in Article
      IV
      of the
      Credit Agreement are true and correct in all material respects on each date
      as
      required by Section
      3.2(b)
      of the
      Credit Agreement.

     

    ARTICLE V  

     

     

    COVENANTS

     

    Each
      Grantor agrees with the Administrative Agent to the following, as long as any
      Obligation or Commitment remains outstanding and, in each case, unless the
      Required Lenders otherwise consent in writing:

     

    Section 5.1  Maintenance
      of Perfected Security Interest; Further Documentation and
      Consents.
      (a) Generally.
      Such
      Grantor shall (i) not use or permit any Collateral to be used unlawfully or
      in
      violation of any provision of any Loan Document, any material Requirement of
      Law
      or any policy of insurance covering the Collateral and (ii) not enter into
      any
      Contractual Obligation or undertaking restricting the right or ability of such
      Grantor or the Administrative Agent to Sell any Collateral (except for those
      set
      forth in the Loan Documents).

     

    (b)  Such
      Grantor shall maintain the security interest created by this Agreement as a
      perfected security interest having at least the priority described in
Section 4.2
      and
      shall defend such security interest and such priority against the claims and
      demands of all Persons.

     

    
      
         

      

      
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    (c)  At
      any
      time and from time to time, upon the written request of the Administrative
      Agent, such Grantor shall, for the purpose of obtaining or preserving the full
      benefits of this Agreement and of the rights and powers herein granted, (i)
      promptly and duly execute and deliver, and have recorded, such further
      documents, including an authorization to file (or, as applicable, the filing)
      of
      any financing statement or amendment under the UCC (or other filings under
      similar Requirements of Law) in effect in any jurisdiction with respect to
      the
      security interest created hereby and (ii) take such further action as the
      Administrative Agent may reasonably request, including (A) using its reasonable
      commercial efforts to secure all approvals necessary or appropriate for the
      assignment to or for the benefit of the Administrative Agent of any Contractual
      Obligation, held by such Grantor and to enforce the security interests granted
      hereunder and (B) executing and delivering any Control Agreements in form and
      substance acceptable to the Administrative Agent with respect to deposit
      accounts and securities accounts required by the Credit Agreement.

     

    (i)  [Reserved]

     

    Section 5.2  Pledged
      Debt
      Instruments.
      (a) Delivery
      of Pledged Debt Instruments.
      Such
      Grantor shall deliver to the Administrative Agent, in suitable form for transfer
      and in form and substance satisfactory to the Administrative Agent, all Pledged
      Debt Instruments to the extent they exceed $100,000 in the
      aggregate.

     

    (b)  Event
      of Default.
      During
      the continuance of an Event of Default, the Administrative Agent shall have
      the
      right, at any time in its discretion and without notice to the Grantor, to
      exchange any Pledged Debt Instrument for instruments of smaller or larger
      denominations.

     

    (c)  Cash
      Distributions with respect to Pledged Debt Instrument.
      Except
      as provided in Article VI,
      such
      Grantor shall be entitled to receive all cash distributions paid in respect
      of
      the Pledged Debt Instruments.

     

    Section 5.3  Accounts.
      (a)
      Such
      Grantor shall not, other than in the ordinary course of business, (i) grant
      any
      extension of the time of payment of any account, (ii) compromise or settle
      any
      account for less than the full amount thereof, (iii) release, wholly or
      partially, any Person liable for the payment of any account, (iv) allow any
      credit or discount on any account or (v) amend, supplement or modify any account
      in any manner that could adversely affect the value thereof.

     

    (b)  The
      Administrative Agent shall have the right to make test verifications of the
      Accounts in any manner and through any medium that it reasonably considers
      advisable, and such Grantor shall furnish all such assistance and information
      as
      the Administrative Agent may reasonably require in connection therewith. At
      any
      time and from time to time, upon the Administrative Agent’s request, such
      Grantor shall cause independent public accountants or others satisfactory to
      the
      Administrative Agent to furnish to the Administrative Agent reports showing
      reconciliations, aging and test verifications of, and trial balances for, the
      accounts; provided,
      however,
      that
      unless a Default shall be continuing, the Administrative Agent shall request
      no
      more than two such reports during any calendar year.

     

    
      
         

      

      
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    Section 5.4  Delivery
      of Instruments and Tangible Chattel Paper and Control of Investment Property,
      Letter-of-Credit Rights and Electronic Chattel Paper.
      (a)
      If any
      amount in excess of $100,000 payable under or in connection with any Collateral
      owned by such Grantor shall be or become evidenced by an instrument or tangible
      chattel paper other than such instrument delivered in accordance with
Section 5.3(a)
      and in
      the possession of the Administrative Agent, such Grantor shall mark all such
      instruments and tangible chattel paper with the following legend: “This writing
      and the obligations evidenced or secured hereby are subject to the security
      interest of General Electric Capital Corporation, as Administrative Agent” and,
      at the request of the Administrative Agent, shall immediately deliver such
      instrument or tangible chattel paper to the Administrative Agent, duly indorsed
      in a manner satisfactory to the Administrative Agent.

     

    (b)  Such
      Grantor shall not grant “control” (within the meaning of such term under Article
      9-106 of the UCC) over any investment property or deposit account to any Person
      other than the Administrative Agent. 

     

    (c)  If
      any
      amount in excess of $100,000 payable under or in connection with any Collateral
      owned by such Grantor shall be or become evidenced by electronic chattel paper,
      such Grantor shall take all steps necessary to grant the Administrative Agent
      control of all such electronic chattel paper for the purposes of Section 9-105
      of the UCC (or any similar section under any equivalent UCC) and all
      "transferable records" as defined in each of the Uniform Electronic Transactions
      Act and the Electronic Signatures in Global and National Commerce
      Act.

     

    Section 5.5  Notices.
      Such
      Grantor shall promptly notify the Administrative 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 federal statute
      or
      regulation.

     

    Section 5.6  Notice
      of Commercial Tort Claims.
      Such
      Grantor agrees that, if it shall acquire any interest in any commercial tort
      claim that constitutes Collateral (whether from another Person or because such
      commercial tort claim shall have come into existence constituting Collateral),
      (i) such Grantor shall, immediately upon such acquisition, deliver to the
      Administrative Agent, in each case in form and substance satisfactory to the
      Administrative Agent, a notice of the existence and nature of such commercial
      tort claim and a supplement to Schedule 9
      of the
      Perfection Certificate containing a specific description of such commercial
      tort
      claim, (ii) Section 3.1
      shall
      apply to such commercial tort claim and (iii) such Grantor shall execute and
      deliver to the Administrative Agent, in each case in form and substance
      satisfactory to the Administrative Agent, any document, and take all other
      action, deemed by the Administrative Agent to be reasonably necessary or
      appropriate for the Administrative Agent to obtain, on behalf of the Lenders,
      a
      perfected security interest having at least the priority set forth in
Section 4.2
      in all
      such commercial tort claims. Any supplement to Schedule 9
      of the
      Perfection Certificate delivered pursuant to this Section 5.6
      shall,
      after the receipt thereof by the Administrative Agent, become part of the
      Perfection Certificate for all purposes hereunder other than in respect of
      representations and warranties made prior to the date of such
      receipt.

     

    Section 5.7  Compliance
      with Credit Agreement.
      Such
      Grantor agrees to comply with all covenants and other provisions applicable
      to
      it under the Credit Agreement, including Sections
      2.17,
      10.3
      and
10.4
      of the
      Credit Agreement and agrees to the same submission to jurisdiction as that
      agreed to by the Borrowers in the Credit Agreement.

     

    
      
         

      

      
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    ARTICLE VI  

     

     

    REMEDIAL
      PROVISIONS

     

    Section 6.1  UCC
      and Other Remedies. (a) UCC
      Remedies.
      During
      the continuance of an Event of Default, the Administrative Agent may exercise,
      in addition to all other rights and remedies granted to it in this Agreement
      and
      in any other instrument or agreement securing, evidencing or relating to any
      Secured Obligation, all rights and remedies of a secured party under the UCC
      or
      any other applicable law.

     

    (b)  Disposition
      of Collateral.
      Without
      limiting the generality of the foregoing, the Administrative Agent may, without
      demand of performance or other demand, presentment, protest, advertisement
      or
      notice of any kind (except any notice required by law referred to below) to
      or
      upon any Grantor or any other Person (all and each of which demands, defenses,
      advertisements and notices are hereby waived), during the continuance of any
      Event of Default (personally or through its agents or attorneys), (i) enter
      upon
      the premises where any Collateral is located, without any obligation to pay
      rent, through self-help, without judicial process, without first obtaining
      a
      final judgment or giving any Grantor or any other Person notice or opportunity
      for a hearing on the Administrative Agent's claim or action, (ii) collect,
      receive, appropriate and realize upon any Collateral and (iii) Sell, grant
      option or options to purchase and deliver any Collateral (enter into Contractual
      Obligations to do any of the foregoing), in one or more parcels at public or
      private sale or sales, at any exchange, broker’s board or office of any Secured
      Party or elsewhere upon such terms and conditions as it may deem advisable
      and
      at such prices as it may deem best, for cash or on credit or for future delivery
      without assumption of any credit risk. The Administrative Agent shall have
      the
      right, upon any such public sale or sales and, to the extent permitted by the
      UCC and other applicable Requirements of Law, upon any such private sale, to
      purchase the whole or any part of the Collateral so sold, free of any right
      or
      equity of redemption of any Grantor, which right or equity is hereby waived
      and
      released.

     

    (c)  Management
      of the Collateral.
      Each
      Grantor further agrees, that, during the continuance of any Event of Default,
      (i) at the Administrative Agent’s request, it shall assemble the Collateral and
      make it available to the Administrative Agent at places that the Administrative
      Agent shall reasonably select, whether at such Grantor’s premises or elsewhere,
      (ii) without limiting the foregoing, the Administrative Agent also has the
      right
      to require that each Grantor store and keep any Collateral pending further
      action by the Administrative Agent and, while any such Collateral is so stored
      or kept, provide such guards and maintenance services as shall be necessary
      to
      protect the same and to preserve and maintain such Collateral in good condition,
      (iii) until the Administrative Agent is able to Sell any Collateral, the
      Administrative Agent shall have the right to hold or use such Collateral to
      the
      extent that it deems appropriate for the purpose of preserving the Collateral
      or
      its value or for any other purpose deemed appropriate by the Administrative
      Agent and (iv) the Administrative Agent may, if it so elects, seek the
      appointment of a receiver or keeper to take possession of any Collateral and
      to
      enforce any of the Administrative Agent's remedies (for the benefit of the
      Secured Parties), with respect to such appointment without prior notice or
      hearing as to such appointment. The Administrative Agent shall not have any
      obligation to any Grantor to maintain or preserve the rights of any Grantor
      as
      against third parties with respect to any Collateral while such Collateral
      is in
      the possession of the Administrative Agent.

     

    
      
         

      

      
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    (d)  Application
      of Proceeds.
      The
      Administrative Agent shall apply the cash proceeds of any action taken by it
      pursuant to this Section 6.1,
      after
      deducting all reasonable costs and expenses of every kind incurred in connection
      therewith or incidental to the care or safekeeping of any Collateral or in
      any
      way relating to the Collateral or the rights of the Administrative Agent and
      any
      other Secured Party hereunder, including reasonable attorneys’ fees and
      disbursements, to the payment in whole or in part of the Secured Obligations,
      as
      set forth in the Credit Agreement, and only after such application and after
      the
      payment by the Administrative Agent of any other amount required by any
      Requirement of Law, need the Administrative Agent account for the surplus,
      if
      any, to any Grantor.

     

    (e)  Direct
      Obligation.
      Neither
      the Administrative Agent nor any other Secured Party shall be required to make
      any demand upon, or pursue or exhaust any right or remedy against, any Grantor,
      any other Loan Party or any other Person with respect to the payment of the
      Obligations or to pursue or exhaust any right or remedy with respect to any
      Collateral therefor or any direct or indirect guaranty thereof. All of the
      rights and remedies of the Administrative Agent and any other Secured Party
      under any Loan Document shall be cumulative, may be exercised individually
      or
      concurrently and not exclusive of any other rights or remedies provided by
      any
      Requirement of Law. To the extent it may lawfully do so, each Grantor absolutely
      and irrevocably waives and relinquishes the benefit and advantage of, and
      covenants not to assert against the Administrative Agent or any Lender, any
      valuation, stay, appraisement, extension, redemption or similar laws and any
      and
      all rights or defenses it may have as a surety, now or hereafter existing,
      arising out of the exercise by them of any rights hereunder. If any notice
      of a
      proposed sale or other disposition of any Collateral shall be required by law,
      such notice shall be deemed reasonable and proper if given at least 10 days
      before such sale or other disposition.

     

    (f)  Commercially
      Reasonable.
      To the
      extent that applicable Requirements of Law impose duties on the Administrative
      Agent to exercise remedies in a commercially reasonable manner, each Grantor
      acknowledges and agrees that it is not commercially unreasonable for the
      Administrative Agent to do any of the following:

     

    (i)  fail
      to
      incur significant costs, expenses or other Liabilities reasonably deemed as
      such
      by the Administrative Agent to prepare any Collateral for disposition or
      otherwise to complete raw material or work in process into finished goods or
      other finished products for disposition;

     

    (ii)  fail
      to
      obtain Permits, or other consents, for access to any Collateral to Sell or
      for
      the collection or Sale of any Collateral, or, if not required by other
      Requirements of Law, fail to obtain Permits or other consents for the collection
      or disposition of any Collateral;

     

    (iii)  fail
      to
      exercise remedies against account debtors or other Persons obligated on any
      Collateral or to remove Liens on any Collateral or to remove any adverse claims
      against any Collateral;

     

    (iv)  advertise
      dispositions of any Collateral through publications or media of general
      circulation, whether or not such Collateral is of a specialized nature or to
      contact other Persons, whether or not in the same business as any Grantor,
      for
      expressions of interest in acquiring any such Collateral;

     

    
      
         

      

      
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    (v)  exercise
      collection remedies against account debtors and other Persons obligated on
      any
      Collateral, directly or through the use of collection agencies or other
      collection specialists, hire one or more professional auctioneers to assist
      in
      the disposition of any Collateral, whether or not such Collateral is of a
      specialized nature or, to the extent deemed appropriate by the Administrative
      Agent, obtain the services of other brokers, investment bankers, consultants
      and
      other professionals to assist the Administrative Agent in the collection or
      disposition of any Collateral, or utilize Internet sites that provide for the
      auction of assets of the types included in the Collateral or that have the
      reasonable capacity of doing so, or that match buyers and sellers of assets
      to
      dispose of any Collateral;

     

    (vi)  dispose
      of assets in wholesale rather than retail markets;

     

    (vii)  disclaim
      disposition warranties, such as title, possession or quiet enjoyment;
      or

     

    (viii)  purchase
      insurance or credit enhancements to insure the Administrative Agent against
      risks of loss, collection or disposition of any Collateral or to provide to
      the
      Administrative Agent a guaranteed return from the collection or disposition
      of
      any Collateral.

     

    Each
      Grantor acknowledges that the purpose of this Section 6.1
      is to
      provide a non-exhaustive list of actions or omissions that are commercially
      reasonable when exercising remedies against any Collateral and that other
      actions or omissions by the Secured Parties shall not be deemed commercially
      unreasonable solely on account of not being indicated in this Section 6.1.
      Without
      limitation upon the foregoing, nothing contained in this Section 6.1
      shall be
      construed to grant any rights to any Grantor or to impose any duties on the
      Administrative Agent that would not have been granted or imposed by this
      Agreement or by applicable Requirements of Law in the absence of this
Section 6.1.

     

    (g)  furniture,
      fixtures and equipment contained in an premise owned or occupied by any
      Grantor.

     

    Section 6.2  Accounts
      and Payments in Respect of General Intangibles.
      (a)
      In
      addition to, and not in substitution for, any similar requirement in the Credit
      Agreement, if required by the Administrative Agent at any time during the
      continuance of an Event of Default, any payment of accounts or payment in
      respect of general intangibles constituting Collateral, when collected by any
      Grantor, shall be promptly (and, in any event, within 2 Business Days) deposited
      by such Grantor in the exact form received, duly indorsed by such Grantor to
      the
      Administrative Agent, in a Security Cash Collateral Account, subject to
      withdrawal by the Administrative Agent as provided in Section 6.4.
      Until
      so turned over, such payment shall be held by such Grantor in trust for the
      Administrative Agent, segregated from other funds of such Grantor. Each such
      deposit of proceeds of accounts and payments in respect of general intangibles
      shall be accompanied by a report identifying in reasonable detail the nature
      and
      source of the payments included in the deposit.

     

    (b)  At
      any
      time during the continuance of an Event of Default:

     

    (i)  each
      Grantor shall, upon the Administrative Agent’s request, deliver to the
      Administrative Agent all original and other documents evidencing, and relating
      to, the Contractual Obligations and transactions that gave rise to any account
      or any payment in respect of general intangibles, including all original orders,
      invoices and shipping receipts and notify account debtors that the accounts
      or
      general intangibles have been collaterally assigned to the Administrative Agent
      and that payments in respect thereof shall be made directly to the
      Administrative Agent;

     

    
      
         

      

      
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    (ii)  the
      Administrative Agent may, without notice, at any time during the continuance
      of
      an Event of Default, limit or terminate the authority of a Grantor to collect
      its accounts or amounts due under general intangibles or any thereof and, in
      its
      own name or in the name of others, communicate with account debtors to verify
      with them to the Administrative Agent’s satisfaction the existence, amount and
      terms of any account or amounts due under any general intangible. In addition,
      the Administrative Agent may at any time enforce such Grantor’s rights against
      such account debtors and obligors of general intangibles; and

     

    (iii)  each
      Grantor shall take all actions, deliver all documents and provide all
      information necessary or reasonably requested by the Administrative Agent to
      ensure any Internet Domain Name is registered.

     

    (c)  Anything
      herein to the contrary notwithstanding, each Grantor shall remain liable under
      each account and each payment in respect of general intangibles to observe
      and
      perform all the conditions and obligations to be observed and performed by
      it
      thereunder, all in accordance with the terms of any agreement giving rise
      thereto. No Secured Party shall have any obligation or liability under any
      agreement giving rise to an account or a payment in respect of a general
      intangible by reason of or arising out of any Loan Document or the receipt
      by
      any Secured Party of any payment relating thereto, nor shall any Secured Party
      be obligated in any manner to perform any obligation of any Grantor under or
      pursuant to any agreement giving rise to an account or a payment in respect
      of a
      general intangible, to make any payment, to make any inquiry as to the nature
      or
      the sufficiency of any payment received by it or as to the sufficiency of any
      performance by any party thereunder, to present or file any claim, to take
      any
      action to enforce any performance or to collect the payment of any amounts
      that
      may have been assigned to it or to which it may be entitled at any time or
      times.

     

    Section 6.3  Pledged
      Debt
      Instrument.
      Each
      Grantor hereby expressly irrevocably authorizes and instructs, without any
      further instructions from such Grantor, each issuer of any Pledged Debt
      Instrument pledged hereunder by such Grantor to (i) comply with any instruction
      received by it from the Administrative Agent in writing that states that an
      Event of Default is continuing and is otherwise in accordance with the terms
      of
      this Agreement and each Grantor agrees that such issuer shall be fully protected
      from Liabilities to such Grantor in so complying and (ii) unless otherwise
      expressly permitted hereby, make any payment with respect to the Pledged Debt
      Instrument directly to the Administrative Agent.

     

    Section 6.4  Proceeds
      to be Turned over to and Held by Administrative Agent.
      Unless
      otherwise expressly provided in the Credit Agreement or this Security Agreement,
      upon an Event of Default all proceeds of any Collateral received by any Grantor
      hereunder in cash or Cash Equivalents shall be held by such Grantor in trust
      for
      the Administrative Agent and the other Secured Parties, segregated from other
      funds of such Grantor, and shall, promptly upon receipt by any Grantor, be
      turned over to the Administrative Agent in the exact form received (with any
      necessary endorsement). All such proceeds of Collateral and any other proceeds
      of any Collateral received by the Administrative Agent in cash or Cash
      Equivalents shall be held by the Administrative Agent in a Security Cash
      Collateral Account. All proceeds being held by the Administrative Agent in
      a
      Security Cash Collateral Account (or by such Grantor in trust for the
      Administrative Agent) shall continue to be held as collateral security for
      the
      Secured Obligations and shall not constitute payment thereof until applied
      as
      provided in the Credit Agreement.

     

    
      
         

      

      
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    Section 6.5  [Reserved]

     

    Section 6.6  Deficiency.
      Each
      Grantor shall remain liable for any deficiency if the proceeds of any sale
      or
      other disposition of any Collateral are insufficient to pay the Secured
      Obligations and the fees and disbursements of any attorney employed by the
      Administrative Agent or any other Secured Party to collect such
      deficiency.

     

    ARTICLE VII  

     

    

     

    THE
      ADMINISTRATIVE AGENT

     

    Section 7.1  Administrative
      Agent’s Appointment as Attorney-in-Fact.
      (a)
      Each
      Grantor hereby irrevocably constitutes and appoints the Administrative Agent
      and
      any Related Person thereof, with full power of substitution, as its true and
      lawful attorney-in-fact with full irrevocable power and authority in the place
      and stead of such Grantor and in the name of such Grantor or in its own name,
      for the purpose of carrying out the terms of the Loan Documents, to, during
      the
      continuance of an Event of Default, take any appropriate action and to execute
      any document or instrument that may be necessary or desirable to accomplish
      the
      purposes of the Loan Documents, and, without limiting the generality of the
      foregoing, each Grantor hereby gives the Administrative Agent and its Related
      Persons the power and right, on behalf of such Grantor, without notice to or
      assent by such Grantor, to do any of the following when an Event of Default
      shall be continuing:

     

    (i)  in
      the
      name of such Grantor, in its own name or otherwise, take possession of and
      indorse and collect any check, draft, note, acceptance or other instrument
      for
      the payment of moneys due under any account or general intangible or with
      respect to any other Collateral and file any claim or take any other action
      or
      proceeding in any court of law or equity or otherwise deemed appropriate by
      the
      Administrative Agent for the purpose of collecting any such moneys due under
      any
      account or general intangible or with respect to any other Collateral whenever
      payable;

     

    (ii)  in
      the
      case of any Intellectual Property owned by or licensed to the Grantors, execute,
      deliver and have recorded any document that the Administrative Agent may request
      to evidence, effect, publicize or record the Administrative Agent’s license or
      security interest in such Intellectual Property and the goodwill and general
      intangibles of such Grantor relating thereto or represented
      thereby;

     

    (iii)  pay
      or
      discharge taxes and Liens levied or placed on or threatened against any
      Collateral, effect any repair or pay any insurance called for by the terms
      of
      the Credit Agreement (including all or any part of the premiums therefor and
      the
      costs thereof);

     

    (iv)  execute,
      in connection with any sale provided for in Section 6.1
      or
Section 6.5,
      any
      document to effect or otherwise necessary or appropriate in relation to evidence
      the Sale of any Collateral; or

     

    
      
         

      

      
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    (v)  (A)
      direct any party liable for any payment under any Collateral to make payment
      of
      any moneys due or to become due thereunder directly to the Administrative Agent
      or as the Administrative Agent shall direct, (B) ask or demand for, and collect
      and receive payment of and receipt for, any moneys, claims and other amounts
      due
      or to become due at any time in respect of or arising out of any Collateral,
      (C)
      sign and indorse any invoice, freight or express bill, bill of lading, storage
      or warehouse receipt, draft against debtors, assignment, verification, notice
      and other document in connection with any Collateral, (D) commence and prosecute
      any suit, action or proceeding at law or in equity in any court of competent
      jurisdiction to collect any Collateral and to enforce any other right in respect
      of any Collateral, (E) defend any actions, suits, proceedings, audits, claims,
      demands, orders or disputes brought against such Grantor with respect to any
      Collateral, (F) settle, compromise or adjust any such actions, suits,
      proceedings, audits, claims, demands, orders or disputes and, in connection
      therewith, give such discharges or releases as the Administrative Agent may
      deem
      appropriate, (G) sub-license any Intellectual Property owned by the Grantors
      or
      any IP Licenses of the Grantors throughout the world on such terms and
      conditions set forth in Section
      6.21
      of the
      Credit Agreement and in such manner as the Administrative Agent shall in its
      sole discretion determine, including the execution and filing of any document
      necessary to effectuate or record such license and (H) generally, Sell,
      grant a Lien on, make any Contractual Obligation with respect to and otherwise
      deal with, any Collateral as fully and completely as though the Administrative
      Agent were the absolute owner thereof for all purposes and do, at the
      Administrative Agent’s option, at any time or from time to time, all acts and
      things that the Administrative Agent deems necessary to protect, preserve or
      realize upon any Collateral and the Secured Parties’ security interests therein
      and to effect the intent of the Loan Documents, all as fully and effectively
      as
      such Grantor might do.

     

    (b)  If
      any
      Grantor fails to perform or comply with any Contractual Obligation contained
      herein, the Administrative Agent, at its option, but without any obligation
      so
      to do, may perform or comply, or otherwise cause performance or compliance,
      with
      such Contractual Obligation.

     

    (c)  The
      expenses of the Administrative Agent incurred in connection with actions
      undertaken as provided in this Section 7.1,
      together with interest thereon at a rate set forth in Section
      2.9
      of the
      Credit Agreement, from the date of payment by the Administrative Agent to the
      date reimbursed by the relevant Grantor, shall be payable by such Grantor to
      the
      Administrative Agent on demand.

     

    (d)  Each
      Grantor hereby ratifies all that said attorneys shall lawfully do or cause
      to be
      done by virtue of this Section 7.1.
      All
      powers, authorizations and agencies contained in this Agreement are coupled
      with
      an interest and are irrevocable until this Agreement is terminated and the
      security interests created hereby are released.

     

    Section 7.2  Authorization
      to File Financing Statements.
      Each
      Grantor authorizes the Administrative Agent and its Related Persons, at any
      time
      and from time to time, to file or record financing statements, amendments
      thereto, and other filing or recording documents or instruments with respect
      to
      any Collateral in such form and in such offices as the Administrative Agent
      reasonably determines appropriate to perfect the security interests of the
      Administrative Agent under this Agreement. A photographic or other reproduction
      of this Agreement shall be sufficient as a financing statement or other filing
      or recording document or instrument for filing or recording in any jurisdiction.
      Such Grantor also hereby ratifies its authorization for the Administrative
      Agent
      to have filed any initial financing statement or amendment thereto under the
      UCC
      (or other similar laws) in effect in any jurisdiction if filed prior to the
      date
      hereof.

     

    
      
         

      

      
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    Section 7.3  Authority
      of Administrative Agent.
      Each
      Grantor acknowledges that the rights and responsibilities of the Administrative
      Agent under this Agreement with respect to any action taken by the
      Administrative Agent or the exercise or non-exercise by the Administrative
      Agent
      of any option, voting right, request, judgment or other right or remedy provided
      for herein or resulting or arising out of this Agreement shall, as between
      the
      Administrative Agent and the other Secured Parties, be governed by the Credit
      Agreement and by such other agreements with respect thereto as may exist from
      time to time among them, but, as between the Administrative Agent and the
      Grantors, the Administrative Agent shall be conclusively presumed to be acting
      as agent for the Secured Parties with full and valid authority so to act or
      refrain from acting, and no Grantor shall be under any obligation or entitlement
      to make any inquiry respecting such authority.

     

    Section 7.4  Duty;
      Obligations and Liabilities.
      (a) Duty
      of Administrative Agent.
      The
      Administrative Agent’s sole duty with respect to the custody, safekeeping and
      physical preservation of the Collateral in its possession shall be to deal
      with
      it in the same manner as the Administrative Agent deals with similar property
      for its own account. The powers conferred on the Administrative Agent hereunder
      are solely to protect the Administrative Agent’s interest in the Collateral and
      shall not impose any duty upon the Administrative Agent to exercise any such
      powers. The Administrative Agent shall be accountable only for amounts that
      it
      receives as a result of the exercise of such powers, and neither it nor any
      of
      its Related Persons shall be responsible to any Grantor for any act or failure
      to act hereunder, except for their own gross negligence or willful misconduct
      as
      finally determined by a court of competent jurisdiction. In addition, the
      Administrative Agent shall not be liable or responsible for any loss or damage
      to any Collateral, or for any diminution in the value thereof, by reason of
      the
      act or omission of any warehousemen, carrier, forwarding agency, consignee
      or
      other bailee if such Person has been selected by the Administrative Agent in
      good faith.

     

    (b)  Obligations
      and Liabilities with respect to Collateral.
      No
      Secured Party and no Related Person thereof shall be liable for failure to
      demand, collect or realize upon any Collateral or for any delay in doing so
      or
      shall be under any obligation to sell or otherwise dispose of any Collateral
      upon the request of any Grantor or any other Person or to take any other action
      whatsoever with regard to any Collateral. The powers conferred on the
      Administrative Agent hereunder shall not impose any duty upon any other Secured
      Party to exercise any such powers. The other Secured Parties shall be
      accountable only for amounts that they actually receive as a result of the
      exercise of such powers, and neither they nor any of their respective officers,
      directors, employees or agents shall be responsible to any Grantor for any
      act
      or failure to act hereunder, except for their own gross negligence or willful
      misconduct as finally determined by a court of competent
      jurisdiction.

     

    ARTICLE VIII  

     

     

    MISCELLANEOUS

     

    Section 8.1  Reinstatement.
      Each
      Grantor agrees that, if any payment made by any Loan Party or other Person
      and
      applied to the Secured Obligations is at any time annulled, avoided, set aside,
      rescinded, invalidated, declared to be fraudulent or preferential or otherwise
      required to be refunded or repaid, or the proceeds of any Collateral are
      required to be returned by any Secured Party to such Loan Party, its estate,
      trustee, receiver or any other party, including any Grantor, under any
      bankruptcy law, state or federal law, common law or equitable cause, then,
      to
      the extent of such payment or repayment, any Lien or other Collateral securing
      such liability shall be and remain in full force and effect, as fully as if
      such
      payment had never been made. If, prior to any of the foregoing, (a) any Lien
      or
      other Collateral securing such Grantor’s liability hereunder shall have been
      released or terminated by virtue of the foregoing or (b) any provision of the
      Guaranty hereunder shall have been terminated, cancelled or surrendered, such
      Lien, other Collateral or provision shall be reinstated in full force and effect
      and such prior release, termination, cancellation or surrender shall not
      diminish, release, discharge, impair or otherwise affect the obligations of
      any
      such Grantor in respect of any Lien or other Collateral securing such obligation
      or the amount of such payment.

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

    Section 8.2  Release
      of Collateral.
      (a)
      At the
      time provided in clause (b)(iii)
      of
Section 9.10
      of the
      Credit Agreement, the Collateral shall be released from the Lien created hereby
      and this Agreement and all obligations (other than those expressly stated to
      survive such termination) of the Administrative Agent and each Grantor hereunder
      shall terminate, all without delivery of any instrument or performance of any
      act by any party, and all rights to the Collateral shall revert to the Grantors.
      Each Grantor is hereby authorized to file UCC amendments at such time evidencing
      the termination of the Liens so released. At the request of any Grantor
      following any such termination, the Administrative Agent shall deliver to such
      Grantor any Collateral of such Grantor held by the Administrative Agent
      hereunder and execute and deliver to such Grantor such documents as such Grantor
      shall reasonably request to evidence such termination.

     

    (b)  If
      the
      Administrative Agent shall be directed or permitted pursuant to clause
      (i)
      or
(ii) of
      Section 9.10(b)
      of the
      Credit Agreement to release any Lien or any Collateral, such Collateral shall
      be
      released from the Lien created hereby to the extent provided under, and subject
      to the terms and conditions set forth in, such clauses
      (i)
      and
(ii).
      In
      connection therewith, the Administrative Agent, at the request of any Grantor,
      shall execute and deliver to such Grantor such documents as such Grantor shall
      reasonably request to evidence such release.

     

    (c)  At
      the
      time provided in Section
      9.10(a)
      of the
      Credit Agreement and at the request of the Borrower, a Grantor shall be released
      from its obligations hereunder in the event that all the Securities of such
      Grantor shall be Sold to any Person that is not an Affiliate of any Borrower
      and
      the Subsidiaries of any Borrower in a transaction permitted by the Loan
      Documents.

     

    Section 8.3  Independent
      Obligations.
      The
      obligations of each Grantor hereunder are independent of and separate from
      the
      Secured Obligations and the Guaranteed Obligations. If any Secured Obligation
      or
      Guaranteed Obligation is not paid when due, or upon any Event of Default, the
      Administrative Agent may, at its sole election, proceed directly and at once,
      without notice, against any Grantor and any Collateral to collect and recover
      the full amount of any Secured Obligation or Guaranteed Obligation then due,
      without first proceeding against any other Grantor, any other Loan Party or
      any
      other Collateral and without first joining any other Grantor or any other Loan
      Party in any proceeding.

     

    Section 8.4  No
      Waiver by Course of Conduct.
      No
      Secured Party shall by any act (except by a written instrument pursuant to
      Section 8.6),
      delay,
      indulgence, omission or otherwise be deemed to have waived any right or remedy
      hereunder or to have acquiesced in any Default or Event of Default. No failure
      to exercise, nor any delay in exercising, on the part of any Secured Party,
      any
      right, power or privilege hereunder shall operate as a waiver thereof. No single
      or partial exercise of any right, power or privilege hereunder shall preclude
      any other or further exercise thereof or the exercise of any other right, power
      or privilege. A waiver by any Secured Party of any right or remedy hereunder
      on
      any one occasion shall not be construed as a bar to any right or remedy that
      such Secured Party would otherwise have on any future occasion.

     

    
      
         

      

      
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    Section 8.5  Amendments
      in Writing.
      None of
      the terms or provisions of this Agreement may be waived, amended, supplemented
      or otherwise modified except in accordance with Section 10.1
      of the
      Credit Agreement; provided,
      however,
      that
      the annex to this Agreement may be supplemented (but no existing provisions
      may
      be modified and no Collateral may be released) through Joinder Agreements,
      in
      substantially the form of Annex 1,
      duly
      executed by the Administrative Agent and each Grantor directly affected
      thereby.

     

    Section 8.6  Additional
      Grantors;
      Joinder Agreements.
      If, at
      the option of any Borrower or as required pursuant to Section 6.11
      of the
      Credit Agreement, such Borrower shall cause a Subsidiary that is not a Grantor
      to become a Grantor hereunder, such Subsidiary shall execute and deliver to
      the
      Administrative Agent a Joinder Agreement substantially in the form of
Annex 1
      and
      shall thereafter for all purposes be a party hereto and have the same rights,
      benefits and obligations as a Grantor party hereto on the Closing
      Date.

     

    Section 8.7  Notices.
      All
      notices, requests and demands to or upon the Administrative Agent or any Grantor
      hereunder shall be effected in the manner provided for in Section 10.11
      of the
      Credit Agreement; provided,
      however,
      that
      any such notice, request or demand to or upon any Grantor shall be addressed
      to
      the Borrower’s notice address set forth in such Section
      10.11.

     

    Section 8.8  Successors
      and Assigns.
      This
      Agreement shall be binding upon the successors and assigns of each Grantor
      and
      shall inure to the benefit of each Secured Party and their successors and
      assigns; provided,
      however,
      that no
      Grantor may assign, transfer or delegate any of its rights or obligations under
      this Agreement without the prior written consent of the Administrative
      Agent.

     

    Section 8.9  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 by Electronic Transmission shall
      be
      as effective as delivery of a manually executed counterpart hereof.

     

    Section 8.10  Severability.
      Any
      provision of this Agreement 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 this Agreement or any part
      of
      such provision in any other jurisdiction.

     

    Section 8.11  Governing
      Law.
      This
      Agreement and the rights and obligations of the parties hereto shall be governed
      by, and construed and interpreted in accordance with, the law of the State
      of
      New York.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    Section 8.12  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 this
      agreement by the mutual waivers and certifications in this Section 8.12.

     

    [SIGNATURE
      PAGES FOLLOW]

    

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF,
      each of
      the undersigned has caused this Guaranty and Security Agreement to be duly
      executed and delivered as of the date first above written.

     

    THE
      BOMBAY COMPANY, INC.

     

    as
      Grantor

     

    
      	 	
              By:

            	
              /s/
                Elaine D. Crowley

            	 

    

     

    Name:
      Elaine D. Crowley

     

    Title:
      Senior Vice President, Chief Financial Officer and Treasurer

     

    BBA
      HOLDINGS, INC.

     

    as
      Grantor

     

    
      	 	
              By:

            	
              /s/
                Jeffrey J. Walker

            	 

    

     

    Name:
      Jeffrey J. Walker

     

    Title:
      President

     

    BOMBAY
      INTERNATIONAL, INC.

     

    as
      Grantor

     

    
      	 	
              By:

            	
              /s/
                Elaine D. Crowley

            	 

    

     

    Name:
      Elaine D. Crowley

     

    Title:
      Vice President

     

    

     

    ACCEPTED
      AND AGREED

     

    as
      of the
      date first above written:

     

    GENERAL
      ELECTRIC CAPITAL CORPORATION

     

    as
      Administrative Agent and Collateral Agent

     

    By:/s/
      Kristina M. Miller

     

    Name:
      Kristina M. Miller

     

    Title:
      Duly Authorized Signatory

     

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FORM
      OF
      JOINDER AGREEMENT

     

    This
      JOINDER
      AGREEMENT,
      dated
      as of ______________ __, 20__, is delivered pursuant to Section 8.6
      of the
      Guaranty and Security Agreement, dated as of October 24, 2006, by The Bombay
      Company, Inc. (the “Parent”)
      and
      the Affiliates of the Parent from time to time party thereto as Grantors in
      favor of the General Electric Capital Corporation, as administrative agent
      and
      collateral agent for the Secured Parties referred to therein (the “Guaranty
      and Security Agreement”).
      Capitalized terms used herein without definition are used as defined in the
      Guaranty and Security Agreement.

     

    By
      executing and delivering this Joinder Agreement, the undersigned, as provided
      in
Section 8.6
      of the
      Guaranty and Security Agreement, hereby becomes a party to the Guaranty and
      Security Agreement as a Grantor thereunder with the same force and effect as
      if
      originally named as a Grantor therein and, without limiting the generality
      of
      the foregoing, as collateral security for the prompt and complete payment and
      performance when due (whether at stated maturity, by acceleration or otherwise)
      of the Secured Obligations of the undersigned, hereby mortgages, pledges and
      hypothecates to the Administrative Agent for the benefit of the Secured Parties,
      and grants to the Administrative Agent for the benefit of the Secured Parties
      a
      lien on and security interest in, all of its right, title and interest in,
      to
      and under the Collateral of the undersigned and expressly assumes all
      obligations and liabilities of a Grantor thereunder. The undersigned hereby
      agrees to be bound as a Grantor for the purposes of the Guaranty and Security
      Agreement.

     

    The
      information set forth in Annex 1-A
      is
      hereby added to the information set forth in the Perfection Certificate. By
      acknowledging and agreeing to this Joinder Agreement, the undersigned hereby
      agrees that this Joinder Agreement may be attached to the Guaranty and Security
      Agreement and represents that the information set forth in Annex
      1-A
      is true,
      correct and complete.

     

    The
      undersigned hereby represents and warrants that each of the representations
      and
      warranties contained in Article IV
      of the
      Guaranty and Security Agreement applicable to it is true and correct in all
      material respects on and as the date hereof as if made on and as of such
      date.

     

    IN
      WITNESS WHEREOF,
      the
      undersigned has caused this Joinder Agreement to be duly executed and delivered
      as of the date first above written.

     

    [ADDITIONAL
      GRANTOR]

     

    
      	 	
              By:
                

            	 	 

    

     

    Name:

     

    Title:

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ACKNOWLEDGED
      AND AGREED

     

    as
      of the
      date first above written:

     

    [EACH
      GRANTOR PLEDGING 

     

    ADDITIONAL
      COLLATERAL]

     

    By:  

     

    Name:

     

    Title:

     

    GENERAL
      ELECTRIC CAPITAL CORPORATION

     

    as
      Administrative Agent and Collateral Agent

     

    By:  

     

    Name:

     

    Title:

     

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX
      1-A

     

    PERFECTION
      CERTIFICATE UPDATE

     

    [Perfection
      Certificate for each additional Grantor]Canada Security Agreement

     

    THE
      BOMBAY FURNITURE COMPANY OF CANADA INC.

     

    as
      Grantor

     

    

     

    and

     

    

     

    GE
      CANADA FINANCE HOLDING COMPANY

     

    as
      Canadian Agent

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    CANADIAN
      SECURITY AGREEMENT

    OCTOBER
      24, 2006

    

     

    

     

    

     

    

     

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CANADIAN
      SECURITY
      AGREEMENT

     

    Security
      agreement dated as of October 24, 2006 made by The
      Bombay Furniture Company of Canada Inc., a corporation continued and existing
      under the laws of the Province of Ontario (together with its successors and
      permitted assigns, the “Grantor”)
      to and
      in favour of GE Canada Finance Holding Company, individually
      and as agent (together with its successors and assigns, the “Canadian
      Agent”)
      for
      itself and the Canadian Lenders under the Credit Agreement.

     

    RECITALS:

     

    
      	(a)  	
              The
                Canadian Agent and the Canadian Lenders have
                agreed to make certain credit facilities available to the Grantor
                on the
                terms and conditions contained in the Credit Agreement; and
                

            

    

     

    
      	(b)  	
              It
                is a condition precedent to the extension of credit to the Grantor
                under
                the Credit Agreement that the Grantor execute and deliver this Agreement
                in favour of the Canadian Agent as security for the payment and
                performance of the Grantor’s obligations under the Credit Agreement and
                the other Loan Documents to which it is a
                party.

            

    

     

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

     

     

        
      ARTICLE 1  

    INTERPRETATION

     

    Section 1.1  Defined
      Terms.

     

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

     

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

     

    “Administrative
      Agent”
means
      General Electric Capital Corporation, acting as administrative agent and
      collateral agent for the Lenders under the Credit Agreement and any successor
      agent appointed under the Credit Agreement, and its successors and permitted
      assigns.

     

    “Agreement”
means
      this 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).

     

    
      
         

      

      
        1

        
          

        

      

      
         

      

    

    “Canadian
      Lender”
means
      each Lender organized and operating under the laws of Canada or a province
      thereof, which has a Canadian Revolving Credit Commitment, holds Canadian
      Revolving Loans or participates in any Canadian Swing Loan.

     

    “Collateral”
has
      the
      meaning specified in Section 2.1.

     

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

     

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

     

    “Credit
      Agreement”
means
      the credit agreement dated as of October 24, 2006, by and among the Borrowers,
      the Lenders, the L/C Issuers from time to time party thereto, the Administrative
      Agent and the Canadian Agent, as the same may be amended, modified, extended,
      renewed, replaced, restated, supplemented or refinanced from time to time and
      includes any agreement extending the maturity of, or refinancing or
      restructuring all or any portion of, the indebtedness under such agreement
      or
      any successor agreements, whether or not with the same Agents or
      Lenders.

     

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

     

    “Documents”
means
      a
      document of title or a receipt in the nature of a warehouse receipt (even though
      issued by a person who is the owner of such goods and is not a warehouse-man)
      issued for goods including distilled spirits and agricultural commodities which
      are stored under a statute requiring a bond against withdrawal or a
      license.

     

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

     

    “Intellectual
      Property”
means
      domestic and foreign: (i) patents, applications for patents and reissues,
      divisions, continuations, renewals, extensions and continuations-in-part of
      patents or patent applications; (ii) proprietary and non-public business
      information, including inventions (whether patentable or not), invention
      disclosures, improvements, discoveries, trade secrets, confidential information,
      know-how, methods, processes, designs, technology, technical data, schematics,
      formulae and customer lists, and documentation relating to any of the foregoing;
      (iii) copyrights, copyright registrations and applications for copyright
      registration; (iv) mask works, mask work registrations and applications for
      mask
      work registrations; (v) designs, design registrations, design registration
      applications and integrated circuit topographies; (vi) trade names, business
      names, corporate names, domain names, website names and world wide web
      addresses, common law trade-marks, trade-mark registrations, trade mark
      applications, trade dress and logos, and the goodwill associated with any of
      the
      foregoing; (vii) computer software and programs (both source code and object
      code form), all proprietary rights in the computer software and programs and
      all
      documentation and other materials related to the computer software and programs;
      and (viii) any other intellectual property and industrial property.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

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

     

    “Investment
      Property” means
      a
      security, whether certificated or uncertificated, security entitlement,
      securities account, commodity contract, or commodity account, and any and all
      supporting obligations in respect thereof.

     

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

     

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

     

    “Negotiable
      Collateral” means
      collectively, letters of credit, letter of credit rights, instruments,
      promissory notes, drafts, documents of title, documents, and chattel paper
      (including electronic chattel paper and tangible chattel paper), and any and
      all
      supporting obligations in respect thereof arising from the sale of Inventory
      or
      Accounts.

     

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

     

    “PPSA”
means
      the Personal
      Property Security Act
      (Ontario), as in effect from time to time, including any amendments thereto
      and
      any statute substituted therefor and amendments thereto.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

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

     

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

     

    “Secured
      Parties”
means,
      collectively, the Canadian Agent and the Canadian Lenders.

     

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

     

    “Securities”
      means:

     

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

            

    

     

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

            

    

     

    “Specified
      Collateral”
means
      Accounts and Inventory and any proceeds of the foregoing.

     

    “U.S.
      Advances”
means,
      at any time, in each case to the extent outstanding at such time, U.S. Revolving
      Loans and Swing Loans made by the U.S. Lenders to the U.S. Borrowers and the
      L/C
      Obligations for all Letters of Credit issued by GE Capital at the request of
      the
      Parent.

     

    Section 1.2  Incorporated
      Terms.

     

    Whenever
      the terms “Accessions”,
      “Account”,
      “Chattel
      Paper”,
      “Document
      of Title”,
      “Goods”,
      “Intangible”,
      “Inventory”,
      “Money”,
      “Proceeds”
and
      “Security
      Interest”
are
      used herein, they shall be interpreted in accordance with their respective
      meanings in the PPSA. Capitalized terms used in this Agreement but not defined
      have the meanings given to them in the Credit Agreement.

     

    Section 1.3  No
      Implied Subordination.

     

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

     

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

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

     

    (a)  Accounts;

     

    (b)  Books
      relating to the Specified Collateral;

     

    (c)  intangibles
      relating to Specified Collateral including all security interests, goodwill,
      choses in action, contracts, contract rights, licenses and other contractual
      benefits and all Deposit Accounts relating to the Specified 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
      Specified Collateral); 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    (d)  Documents,
      documents of title and chattel paper relating to Specified
      Collateral;

     

    (e)  Inventory
      including goods held for sale, lease or resale, goods furnished or to be
      furnished to third parties under contracts of lease, consignment or service,
      goods which are raw materials or work in process, goods used in or procured
      for
      packing and materials used or consumed in the business of the
      Grantor;

     

    (f)  Instruments,
      Securities, Investment Property and Negotiable Collateral, in each case,
      relating to Specified Collateral;

     

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

     

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

     

    (i)  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(h) 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.

     

    Section 2.2  Secured
      Obligations.

     

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

            

    

     

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

            

    

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Section 2.3  Other
      Collateral 

     

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

     

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

            

    

     

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

            

    

     

    
      	Section 2.4  	
              Collection
                of Accounts, General Intangibles, and Negotiable
                Collateral

            

    

     

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

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    Section 2.5  Attachment.

     

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

     

    Section 2.6  Scope
      of Security Interest.

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      	(3)  	
              The
                Security Interest does not extend to consumer
                goods.

            

    

     

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

            

    

     

    Section 2.7  Grant
      of Non-Exclusive Licence.

     

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

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    Section 2.8  Care
      and Custody of Collateral.

     

    
      	
              (1)

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

            

    

     

    
      	
              (2)

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

            

    

     

    
      	
              (3)

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

            

    

     

    Section 2.9  Rights
      of the Grantor.

     

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

            

    

     

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

            

    

     

    Section
      2.10  Expenses.

     

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

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

         
      ARTICLE 3  

    ENFORCEMENT

     

    Section 3.1  Enforcement.

     

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

     

    Section 3.2  Remedies.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
         

      

      
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      	(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;
                and

            

    

     

    
      	(o)  	
              any
                other remedy or proceeding authorized or permitted under the PPSA
                or
                otherwise by law or equity.

            

    

     

    Section 3.3  Additional
      Rights.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

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

            

    

     

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

            

    

     

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

            

    

     

    Section 3.4  Exercise
      of Remedies.

     

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

     

    Section 3.5  Receiver's
      Powers.

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
         

      

      
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    Section 3.6  Appointment
      of Attorney.

     

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

     

    Section 3.7  Dealing
      with the Collateral.

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
         

      

      
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    Section 3.8  Standards
      of Sale.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    Section 3.9  Dealings
      by Third Parties.

     

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

            

    

     

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

            

    

     

    
      
         

      

      
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    Section 3.10  Registration
      Rights.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

     

    
      
         

      

      
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    ARTICLE 4  

    REPRESENTATIONS,
      WARRANTIES AND COVENANTS

     

    Section 4.1  General
      Representations, Warranties and Covenants.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

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

            

    

     

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

            

    

     

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

            

    

     

    
      	(h)  	
              Securities
                and Instruments.

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
         

      

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

            

    

     

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

            

    

     

     

          
      ARTICLE 5  

    GENERAL

     

    Section 5.1  Notices.

     

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

     

    Section 5.2  Discharge.

     

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

     

    Section 5.3  No
      Merger, Survival of Representations and Warranties.

     

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

     

    Section 5.4  Further
      Assurances.

     

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

     

    
      
         

      

      
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    Section 5.5  Supplemental
      Security.

     

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

     

    Section 5.6  Successors
      and Assigns.

     

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

     

    Section 5.7  Amalgamation

     

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

     

    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.

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    Section 5.9  Amendment.

     

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

     

    Section 5.10  Waivers,
      etc.

     

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

            

    

     

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

            

    

     

    Section 5.11  Application
      of Proceeds of Security.

     

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

     

    Section 5.12  Conflict

     

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

     

    Section 5.13  Governing
      Law;
      Jurisdiction

     

    This
      Agreement will be governed by, interpreted and enforced in accordance with
      the
      laws of the Province of Ontario and the federal laws of Canada applicable
      therein. Without prejudice to the ability of the Canadian Agent to enforce
      this
      Agreement in any other proper jurisdiction, the Grantor irrevocably submits
      and
      attorns to the non-exclusive 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. 

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
         

      

      
        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:
                /s/ Elaine D. Crowley

              Name: 
                Elaine D. Crowley

              Title: 
                Vice President

            	
               

            
	 	
            

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    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

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