Document:

Amended and Restated Canadian Security Agreement

     

    THE
      BOMBAY FURNITURE COMPANY OF CANADA INC.

     

    as
      Grantor

     

    

     

    and

     

    

     

    GE
      CANADA FINANCE HOLDING COMPANY

     

    as
      Canadian Agent

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    

     

    AMENDED
      AND RESTATED 

    CANADIAN
      SECURITY AGREEMENT

    MAY
      25, 2007

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    AMENDED
      AND RESTATED 

    CANADIAN
      SECURITY
      AGREEMENT

     

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

     

    RECITALS:

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    ARTICLE 1  

     

     

    INTERPRETATION

     

    Section 1.1  Defined
      Terms.

     

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

     

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

     

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

     

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

     

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

     

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

     

    “Collateral”
has
      the
      meaning specified in Section 2.1.

     

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

     

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

     

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

     

    “Credit
      Agreement”
has
      the
      meaning specified in the Recitals.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    “Original
      Security Agreement”
has
      the
      meaning specified the Recitals.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

    “Securities”
      means:

     

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

            

    

     

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

            

    

     

    “Security
      Interest”
has
      the
      meaning specified in Section 2.2(1).

     

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

     

    Section 1.2  Incorporated
      Terms.

     

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

     

    Section 1.3  No
      Implied Subordination.

     

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

     

    Section 1.4  Certain
      Phrases, etc.

     

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

     

    
      
        
        

      

      
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    Section 1.5  Gender
      and Number.

     

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

     

    Section 1.6  Headings,
      etc.

     

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

     

    Section 1.7  Schedules.

     

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

     

    Section 1.8  References.

     

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

     

     

    ARTICLE 2  

     

     

    SECURITY

     

    Section 2.1  Grant
      of Security.

     

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

     

    (a)  Accounts;

     

    (b)  Books;

     

    (c)  Chattel
      Paper;

     

    (d)  Contracts;

     

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

     

    (f)  Documents
      of Title;

     

    (g)  Equipment;

     

    (h)  Goods;

     

    
      
        
        

      

      
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    (i)  Instruments;

     

    (j)  Intangibles;
      

     

    (k)  Intellectual
      Property;

     

    (l)  Inventory;

     

    (m)  Investment
      Property;

     

    (n)  Leases
      and Leaseholds;

     

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

     

    (p)  Negotiable
      Collateral;

     

    (q)  Permits;

     

    (r)  Securities;

     

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

     

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

     

    Section 2.2  Secured
      Obligations.

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
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    Section 2.3  Other
      Collateral 

     

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

     

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

            

    

     

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

            

    

     

    
      	Section 2.4  	
              Collection
                of Accounts.

            

    

     

    At
      any
      time after the occurrence and during the continuation of an Event of Default,
      the Canadian Agent or the Canadian Agent’s designee may (a) notify Account
      Debtors of the Grantor that the Grantor’s Accounts have been assigned to the
      Canadian Agent or that the Canadian Agent has a security interest therein,
      or
      (b) collect the Grantor’s Accounts directly and charge the collection costs and
      expenses to the Grantor. The Grantor agrees that it will hold in trust for
      the
      Secured Parties, as the Secured Parties’ trustee, any of its 

     

    
      
        
        

      

      
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Collections
        that it receives without commingling the same with other funds of the Grantor
        and immediately will deliver such Collections to the Canadian Agent in their
        original form as received by the Grantor, together with any necessary
        endorsements or assignments.

    

     

    Section 2.5  Attachment.

     

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

     

    Section 2.6  Scope
      of Security Interest.

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    Section 2.7  Grant
      of Non-Exclusive Licence.

     

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

     

    Section 2.8  Care
      and Custody of Collateral.

     

    
      	
              (1)

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

            

    

     

    
      	
              (2)

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

            

    

     

    
      	
              (3)

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

            

    

     

    Section 2.9  Rights
      of the Grantor.

     

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

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

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

            

    

     

    Section
      2.10  Expenses.

     

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

     

     

    ARTICLE 3  

     

     

    ENFORCEMENT

     

    Section 3.1  Enforcement.

     

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

     

    Section 3.2  Remedies.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    Section 3.3  Additional
      Rights.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    Section 3.4  Exercise
      of Remedies.

     

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

     

    Section 3.5  Receiver's
      Powers.

     

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

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

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

            

    

     

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

            

    

     

    Section 3.6  Appointment
      of Attorney.

     

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

     

    Section 3.7  Dealing
      with the Collateral.

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    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.

            

    

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

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

            

    

     

    Section 3.10  Registration
      Rights.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

     

    
      
        
        

      

      
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    ARTICLE 4  

     

     

    REPRESENTATIONS,
      WARRANTIES AND COVENANTS

     

    Section 4.1  General
      Representations, Warranties and Covenants.

     

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

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

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

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      	(h)  	
              Securities
                and Instruments.

            

    

     

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

            

    

     

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

            

    

     

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

            

    

     

    
      
        
        

      

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

            

    

     

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

            

    

     

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

            

    

     

     

    ARTICLE 5  

     

     

    GENERAL

     

    Section 5.1  Notices.

     

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

     

    Section 5.2  Discharge.

     

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

     

    Section 5.3  No
      Merger, Survival of Representations and Warranties.

     

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

     

    
      
        
        

      

      
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    Section 5.4  Further
      Assurances.

     

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

     

    Section 5.5  Supplemental
      Security.

     

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

     

    Section 5.6  Successors
      and Assigns.

     

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

     

    Section 5.7  Amalgamation

     

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

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    Section 5.8  Severability.

     

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

     

    Section 5.9  Amendment.

     

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

     

    Section 5.10  Waivers,
      etc.

     

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

            

    

     

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

            

    

     

    Section 5.11  Application
      of Proceeds of Security.

     

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

     

    Section 5.12  Conflict

     

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

     

    Section 5.13  Governing
      Law; Jurisdiction

     

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

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    jurisdiction
      of the courts of such Province. The parties irrevocably waive any objection
      (including any claim of inconvenient forum) that any of them may now or
      hereafter have to the venue of any legal proceeding arising out of or relating
      to this Agreement in the courts of such Province.

     

    Section 5.14  Amendment
      and Restatement

     

    This
      Agreement amends, restates and supersedes in its entirety, the Original Security
      Agreement. All references to the Original Security Agreement in any agreement,
      document or instrument that is or shall have been executed by the Grantor and
      that becomes or remains effective on or after the date hereof, shall hereafter
      be a reference to this Agreement. 

     

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

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

     

    
      	 	 	
              THE
                BOMBAY FURNITURE COMPANY OF CANADA INC.,
                

              as
                Grantor 

               

            
	
               

              By:_________________________________________

               

            	 
	 Name:
              Elaine Crowley
              Title:
                Vice President

            	
               

              
              

            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
       

       

    

    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 5W4Amendment No. 1 to Credit Agreement

    AMENDMENT
      NO. 1 TO CREDIT AGREEMENT

     

    AMENDMENT
      NO. 1, dated as of May 25, 2007 (this “Amendment”),
      to
      the Credit Agreement, dated as of October 24, 2006 (the “Credit
      Agreement”),
      by
      and among The Bombay Company, Inc., BBA Holdings, LLC, Bombay International,
      Inc., The Bombay Furniture Company of Canada Inc., as borrowers (the
“Borrowers”),
      the
      lenders signatory thereto from time to time (the “Lenders”),
      General Electric Capital Corporation, for itself, as Lender, and as
      administrative agent and collateral agent for the Lenders (in such capacity,
      the
“Agent”)
      and GE
      Canada Finance Holding Company as Canadian agent (in such capacity, the
“Canadian
      Agent”).

     

    W
      I T N E
      S S E T H :

     

    WHEREAS,
      the Borrowers have requested that the Lenders amend the Credit Agreement to
      permit the Borrowers to incur additional debt under a secured term loan from
      GB
      Merchant Partners LLC (the “Term
      Agent”)
      in the
      aggregate principal amount of $10,000,000 pursuant to the Term Loan Agreement
      (as defined below);

     

    WHEREAS,
      the Lenders have agreed to amend the provisions of the Credit Agreement but
      only
      on the terms and subject to the conditions herein provided;

     

    NOW,
      THEREFORE, in consideration of the premises and the agreements hereinafter
      contained, the parties hereto agree as follows:

     

    1.  Defined
      Terms.
      Capitalized terms used herein but not defined herein have the respective
      meanings ascribed thereto in the Credit Agreement. 

     

    “Amendment
      Fee Letter”
means
      the letter agreement, dated as of May 25, 2007, addressed to the Borrowers
      from
      the Agent and accepted by the Borrowers, with respect to certain fees to be
      paid
      to the Agent.

     

    “Intercreditor
      Agreement”
means
      the Intercreditor Agreement dated as of June 5, 2007 among Agent, Term Agent
      and
      the Borrowers, in form and substance acceptable to the Agent.

     

    “Security
      Agreements”
means,
      collectively (a) Amendment No. 1 dated as of June 5, 2007 to the Guaranty and
      Security Agreement dated as of October 24, 2006 and (b) the Amended and Restated
      Canadian Security Agreement dated as of June 5, 2007.

     

    “Term
      Loan Agent”
means
      GB Merchant Partners, LLC, as agent, and its successors.

     

    “Term
      Loan Agreement”
means
      the Term Loan Agreement dated as of the date hereof among the Term Agent, the
      Term Loan Lenders and the Borrowers, in form and substance acceptable to the
      Agent, as amended, restated, supplemented, replaced or otherwise modified from
      time to time in accordance with the terms of the Intercreditor
      Agreement.

     

    “Term
      Loan Documents”
means,
      collectively, the Term Loan Agreement and the Term Loan Guaranty and Security
      Agreement.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Term
      Loan Guaranty and Security Agreement”
means
      the Guaranty and Security Agreement dated as of June 5, 2007 by and among Term
      Agent and Term Loan Lenders and Grantors, in form and substance acceptable
      to
      the Agent, as amended, restated, supplemented, replaced or otherwise modified
      from time to time.

     

    “Term
      Loan Lenders”
means
      the term lenders under the Term Loan Agreement.

     

    2.  Amendments.
      

     

    (a)  Section
      1.1 (Defined Terms).
      Section
      1.1 (Defined Terms) is hereby amended as follows:

     

    (i)  The
      following definition of “Amendment No. 1 Effective Date” shall be inserted in
      its proper alphabetical order: 

     

    “Amendment
      No. 1 Effective Date”
shall
      mean June 5, 2007.

     

    (ii)  The
      definition of “Availability” shall be amended and restated in its entirety as
      follows:

     

    “Availability”
means,
      as of any date of determination, if such date is a Business Day, and determined
      at the close of business on the immediately preceding Business Day, if such
      date
      of determination is not a Business Day, the amount as determined by the
      Administrative Agent at any time, in its Permitted Discretion equal to (a)
      the
      lesser of (i) the Maximum Revolver Amount and (ii) the Aggregate Borrowing
      Base,
minus
      (b) the
      sum of the U.S. Revolving Credit Out standings and the Canadian Revolving Credit
      Outstanding (in each case, determined after giving effect to all sublimits
      and
      Reserves then applicable hereunder).

     

    (iii)  The
      definition of “Cash Dominion Event” shall be amended and restated in its
      entirety as follows:

     

    “Cash
      Dominion Event”
means
      (a) the occurrence and continuance of any Event of Default, or (b) the period
      commencing with each failure by the Borrowers to maintain Adjusted Availability
      in an amount of greater than (i) ten percent (10%) of the Aggregate Borrowing
      Base for a period of 5 consecutive Business Days or (ii) five percent (5%)
      of
      the Aggregate Borrowing Base at any time and, in each case, ending with the
      occurrence of a Cash Dominion Reversion; provided,
      however
      that (y)
      no more than 2 Cash Dominion Reversions may occur in any 12 month period and
      (z)
      if an additional Cash Dominion Event occurs during such 12 month period, no
      further Cash Dominion Reversions may occur through and including the Scheduled
      Maturity Date. 

     

    (iv)  The
      definition of “Minimum Availability Amount” shall be amended and restated in its
      entirety as follows: 

     

    “Minimum
      Availability Amount”
means,
      as of any date of determination, the greater of (a) 7.5% of the Aggregate
      Borrowing Base and (b) the Term Loan Reserve Amount.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    (v)  The
      definition of “Permitted Liens” shall be amended by deleting “and” at the end of
      clause (m) and inserting the following new clause (o) at the end thereof
      immediately before the period: 

     

    “,and
      (o)
      Liens securing the Permitted Term Debt”.

     

    (vi)  The
      following definition of “Permitted Term Debt” shall be inserted in its proper
      alphabetical order: 

     

    “Permitted
      Term Debt”
means
      all “Obligations”, as defined in the Term Loan Agreement.

     

    (vii)  The
      following definition of “Term Loan Agent” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Agent”
means
      GB Merchant Partners LLC, as agent, and its successors.

     

    (viii)  The
      following definition of “Term Loan Agreement” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Agreement”
means
      the Term Loan Agreement dated as of May 25, 2007 among the Term Loan Agent,
      the
      lenders party thereto and the Borrowers, as in effect on the Amendment No.
      1
      Effective Date, as amended, restated, supplemented, replaced or otherwise
      modified from time to time in accordance with the terms of the Intercreditor
      Agreement.

     

    (ix)  The
      following definition of “Term Loan Documents” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Documents”
means
      the Term Loan Agreement , together with all other documents and agreements
      contemplated thereunder and executed in connection therewith.

     

    (x)  The
      following definition of “Term Loan Lenders” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Lenders”
means
      the term lenders under the Term Loan Agreement.

     

    (xi)  The
      following definition of “Term Loan Reserve” shall be inserted in its proper
      alphabetical order: 

     

    “Term
      Loan Reserve Amount”
means
      the lesser of (i) $10,000,000, provided,
      that as
      of December 31st
      of each
      Fiscal Year, this amount shall equal the greater of the then Term Loan Reserve
      Amount or $15,000,000 until such time as the Borrower provides Projections
      acceptable to the Agent and Term Loan Agent and (ii) 10% of the Aggregate
      Borrowing Base.

     

    (b)  Section
      2.5 of the Credit Agreement.
      Section
      2.5 of the Credit Agreement is hereby amended by inserting the following clause
      (c) at the end thereof: 

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    “(c) Prepayment
      Fee.
      In the
      event that the Commitments are terminated and reduced to 0 under this
Section
      2.5
      on or
      before the second anniversary of the Amendment No. 1 Effective Date, the
      Borrowers shall pay to the Administrative Agent and the Canadian Agent, as
      the
      case may be, a premium (to be paid to the Lenders, as liquidated damages and
      compensation for the costs of being prepared to make funds available hereunder)
      in an amount equal to $200,000; provided,
      however,
      that no
      such prepayment fee shall be payable under this Section
      2.5(c)
      if the
      Commitments are terminated in connection with a refinancing whereby the Agent
      is
      the administrative agent under the new facility.”

     

    (c)  Section
      5.3(d) of the Credit Agreement.
      Section
      5.3(d) of the Credit Agreement is hereby amended by inserting the following
      into
      clause (iv), immediately preceding “generally”:

     

    “or
      by
      the Borrowers to the Term Loan Agent ”

     

    (d)  Section
      5.4(b) of the Credit Agreement.
      Section
      5.4(b) of the Credit Agreement is hereby amended as follows:

     

    (i)  The
      last
      sentence of clause (i) shall be deleted and replaced with the
      following:

     

    “Prior
      to
      the occurrence of an Event of Default, the Administrative Agent, in its
      Permitted Discretion, may (and shall at the Required Lender’s direction), cause
      one (1) additional inventory per Fiscal Year to be taken at the expense of
      the
      Borrowers. Following the occurrence and during the continuance of an Event
      of
      Default, the Administrative Agent, in its Permitted Discretion, may (and shall
      at the Required Lender’s direction), cause additional inventories to be taken at
      the expense of the Borrowers.”

     

    (ii)  Clause
      (ii) shall be amended and restated as follows:

     

    “(ii) At
      the
      Borrowers’ expense, upon the request of the Administrative Agent from time to
      time, the Borrowers will obtain and deliver to the Administrative Agent, or,
      if
      the Administrative Agent so elects, will cooperate with the Administrative
      Agent
      in the Administrative Agent’s obtaining, a report of an independent collateral
      auditor satisfactory to the Administrative Agent (which may be affiliated with
      one of Lenders) with respect to the Books and Accounts and inventory components
      included in the Aggregate Borrowing Base, which report shall indicate whether
      or
      not the information set forth in the Borrowing Base Certificate most recently
      delivered is accurate and complete in all material respects based upon a review
      by such auditors of the Accounts (including verification with respect to the
      amount, aging, identity and credit of the respective account debtors and the
      billing practices of the Borrowers) and inventory (including verification as
      to
      the value, location and respective types); provided,
      however,
      that
      the Borrowers shall not be obligated to pay for more than 4 commercial finance
      exams in any 12 month period; provided,
      further,
      that
      the Borrower shall be obligated to pay for any additional commercial finance
      exams conducted in connection with the Borrowers request to add Eligible
      Accounts of Wholesale, Accounts with respect to private label credit cards,
      or
      Accounts with respect to Permitted Acquisitions to the U.S. Borrowing
      Base.”

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (iii)  The
      following shall be added to the end of clause (iii), immediately preceding
      the
      period:

     

    “;
      provided,
      further,
      that
      following the occurrence and during the continuance of an Event of Default,
      the
      Borrowers shall be obligated to pay for such additional appraisals as the
      Administrative Agent may, in its Permitted Discretion, require”

     

    (iv)  Clause
      (iv) shall be amended by deleting “1 real property appraisal in any 12 month
      period”, in the fourth line and replacing it with the following:

     

    “real
      property appraisals or “desktop” review of the most recent real estate appraisal
      as the Administrative Agent may, in its Permitted Discretion,
      require”

     

    (e)  Section
      6.14(a) of the Credit Agreement.
      Section
      6.14(a) of the Credit Agreement is hereby amended as follows:

     

    (i)  The
      following shall be added to the end of clause (iv), immediately preceding the
      semicolon

     

    “,
      including, without limitation, the delivery of any notice to the Term Loan
      Agent
      (or any Term Loan Lender) of any “defaults” or “events of default” under the
      Term Loan Agreement or the other Term Loan Documents”

     

    (ii)  Clauses
      (v) and (vi) shall be renumbered as clauses (vii) and (viii)
      respectively.

     

    (iii)  The
      following clauses (v) and (vi) shall be inserted immediately preceding clause
      (vii) (previously clause (v)):

     

    “(v) The
      occurrence of any Property Loss Event involving Collateral having a fair market
      value in excess of $500,000;

     

    (vi) Any
      prepayment of Permitted Term Debt;”

     

    (f)  Section
      7.1 of the Credit Agreement.
      Section
      7.1 of the Credit Agreement is hereby amended by deleting “and” at the end of
      clause (i) and inserting the following new clause (k) at the end thereof
      immediately before the period:

     

    “;
      and

     

    (k) Permitted
      Term Debt”

     

    (g)  Section
      7.3 of the Credit Agreement.
      Section
      7.3 of the Credit Agreement is hereby amended as follows:

     

    (i)  By
      deleting all of the language between the parentheses in clause (a) and replacing
      it with the following:

     

    “excluding
      this Agreement, the other Loan Documents and the Term Loan
      Documents”.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (ii)  By
      deleting all of the language between the parentheses in clause (b) and replacing
      it with the following:

     

    “excluding
      this Agreement, the other Loan Documents and the Term Loan
      Documents”.

     

    (h)  Section
      7.21 of the Credit Agreement.
      Section
      7.21 shall be inserted immediately following Section 7.20 of the Credit
      Agreement and shall read as follows:

     

    “Section
      7.21  Amendments
      to Term Loan Agreement.
      The
      Borrowers will not agree to any amendment, modification, waiver or supplement
      to
      the Term Loan Agreement or any other agreement executed in connection therewith
      which contravenes the provisions of the Intercreditor Agreement.”

     

    (i)  Section
      7.22 of the Credit Agreement.
      Section
      7.2 shall be inserted immediately following Section 7.21 of the Credit Agreement
      and shall read as follows:

     

    “Section
      7.22  Maximum
      Indebtedness.
      The
      Borrowers shall not permit or suffer to exist the aggregate of (i) all payment
      Obligations hereunder, plus (ii) all Permitted Term Debt, to be greater than
      60%
      of the sum of the Eligible Inventory (valued at Cost) owned by the U.S.
      Borrowers and Eligible Inventory (valued at Cost) owned by Bombay Canada, tested
      as of December 31, 2007.”

     

    (j)  Section
      8.1 of the Credit Agreement.
      Section
      8.1 of the Credit Agreement is hereby amended by deleting “or” at the end of
      clause (m) and inserting the following new clause (o) at the end thereof
      immediately before the period:

     

    “;
      or

     

    (o) any
      “Event of Default” under and as defined in the Term Loan Agreement shall have
      occurred and be continuing”

     

    (k)  Section
      10.19 of the Credit Agreement.
      Section
      10.19 of the Credit Agreement is hereby amended by inserting the following
      at
      the end thereof:

     

    “
The
      Borrowers hereby consent to the publication (including, without limitation,
      by
      way of press release or other public announcement), from time to time, by the
      Administrative Agent or any Lender of advertising material relating to the
      financing transactions contemplated by this Agreement and the other Loan
      Documents using any Borrower’s name, product photographs, logo or trademark,
      provided such publication shall not occur prior to the earlier of (i) the
      Amendment No. 1 Effective Date and (ii) any Borrower’s public announcement of
      such financing transactions.”

     

    (l)  Section
      10.23 of the Credit Agreement.
      Section
      10.23 shall be inserted immediately following Section 10.22 of the Credit
      Agreement and shall read as follows:

     

    “Section
      10.23  Intercreditor
      Agreement.
      In the
      event of any conflict between any provision in this Agreement and any provision
      in the Intercreditor Agreement, such 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    provision
      in the Intercreditor Agreement shall control and such provision of this
      Agreement shall be deemed to have been complied with or satisfied to the extent
      of such conflict.”

     

    3.  Conditions
      to Effectiveness of this Amendment.
      This
      Amendment shall become effective as of the date first written above upon the
      satisfaction of the following conditions precedent:

     

    (a)  The
      Agent
      shall have received a duly executed counterpart of this Amendment, executed
      by
      each of the Borrowers and the Lenders;

     

    (b)  The
      Agent
      shall have received a duly executed counterpart of each of the Security
      Agreements, executed by each Borrower and Guarantor party thereto, together
      with
      copies of amendments to UCC and PPSA filings, executed by each of the Borrowers
      and the Lenders if necessary;

     

    (c)  The
      Agent
      shall have received a duly executed counterpart of the Intercreditor Agreement,
      executed by each party thereto;

     

    (d)  The
      Agent
      shall have received a duly executed counterpart of each Term Loan Document,
      executed by each of the Borrowers, Term Agent and the Term Loan
      Lenders.

     

    (e)  The
      Agent
      shall have received favorable opinions of counsel to the Borrowers from (a)
      Thompson & Knight LLP, special U.S. counsel to the Borrowers and (b) Fraser
      Milner Casgrain LLP, special Canadian counsel to the Borrowers, each addressed
      to the Agent and the Canadian Agent, the L/C Issuers and the Lenders and
      addressing such matters as the Agent may reasonably request;

     

    (f)  The
      Agent
      shall have received a certificate of the secretary or other Responsible Officer
      of each Borrower in charge of maintaining Books and records of such Borrower
      certifying as to (A) the names and signatures of each officer of such Borrower
      authorized to execute and deliver any of this Agreement, the Security
      Agreements, the Intercreditor Agreement and the Term Loan Documents, to which
      such Borrower is a party, (B) the Governing Documents of such Borrower attached
      to such certificate are complete and correct copies of such Governing Documents
      as in effect on the date of such certification (or, for any such Governing
      Document delivered to the Agent on the Closing Date, that there have been no
      changes from such Governing Document so delivered) and (C) the resolutions
      of
      such Borrower’s board of directors or other appropriate governing body approving
      and authorizing the execution, delivery and performance of each of this
      Agreement, the Security Agreements, the Intercreditor Agreement and the Term
      Loan Documents or any other agreement, to which such Borrower is a
      party;

     

    (g)  The
      Agent
      and the Lenders shall have received (i) payment of the arrangement fee set
      forth in the Amendment Fee Letter and (ii) all other fees and costs
      (including reasonable attorneys fees) incurred in connection with the
      negotiation, preparation and execution of this Amendment; and

     

    (h)  The
      Agent
      shall have received from the Borrowers such other documents and information
      as
      it may reasonably request.

     

    4.  Representations
      and Warranties.
      Each
      Borrower represents and warrants to the Agent and the Lenders as
      follows:

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    (a) The
      execution, delivery and performance by such Borrower of this Amendment is within
      such Borrower’s corporate powers or limited liability company powers, as
      applicable, and has been duly authorized by all necessary corporate or limited
      liability company, and, if required, stockholder or member action, as
      applicable. This Amendment has been duly executed and delivered by such Borrower
      and constitutes a legal, valid and binding obligation of such Borrower,
      enforceable in accordance with its terms, subject to applicable bankruptcy,
      insolvency, reorganization, moratorium or other laws affecting creditors’ rights
      generally and subject to general principles of equity regardless of whether
      considered in a proceeding in equity or at law. 

     

    (b) No
      consent or approval of any Governmental Authority or any other Person is
      required for any of the Borrowers to execute, deliver and perform this
      Amendment. 

     

    (c) After
      giving effect to this Amendment, the Agent has continuing, perfected liens
      in
      the Collateral.

     

    5.  Miscellaneous.

     

    (a)As
      of the
      date hereof, each reference in the Credit Agreement to “this Agreement,”
“hereunder,” “hereof,” “herein,” or words of like import, and each reference in
      the other Loan Documents to the Credit Agreement (including, without limitation,
      by means of words like “thereunder”, “thereof” and words of like import), shall
      mean and be a reference to the Credit Agreement as modified hereby, and this
      Amendment and the Credit Agreement shall be read together and construed as
      a
      single agreement.

     

    (b)The
      execution, delivery and effectiveness of this Amendment shall not, except as
      expressly provided herein, operate as a waiver of any right, power or remedy
      of
      the Lenders or the Agent under any of the Loan Documents, nor constitute a
      waiver or amendment of any other provision of any of the Loan Documents or
      for
      any purpose except as expressly set forth herein.

     

    (c)This
      Amendment shall be deemed a Loan Document.

     

    (d) The
      Section titles contained in this Amendment are and shall be without substantive
      meaning or content of any kind whatsoever and are not a part of the agreement
      between the parties hereto.

     

    (e) Except
      as
      expressly provided herein, the Credit Agreement and the other Loan Documents
      shall continue in full force and effect, and the terms and conditions of the
      Credit Agreement are expressly incorporated herein and ratified and confirmed
      in
      all respects.

     

    (f) The
      fact
      that any term or provision of this Amendment is held invalid, illegal or
      unenforceable as to any person in any situation in any jurisdiction shall not
      affect the validity, enforceability or legality of the remaining terms or
      provisions hereof or the validity, enforceability or legality of such offending
      term or provision in any other situation or jurisdiction or as applied to any
      person.

     

    (g) This
      Amendment may be executed in any number of counterparts, all of which, taken
      together, shall constitute one and the same agreement and any party may enter
      into this Amendment by executing a counterpart. Transmission by facsimile of
      an
      executed counterpart of this Amendment shall be deemed to constitute due and
      sufficient 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        
delivery
        of such counterpart.

    

     

    (h) Each
      of
      the parties hereto irrevocably waives trial by jury in any action or proceeding
      with respect to this Amendment or any other Loan Document.

     

    (i) This
      Amendment shall be governed by, and construed in accordance with, the laws
      of
      the State of New York.

     

    (j) The
      terms
      of this Amendment shall be binding upon and shall inure to the benefit of the
      parties and their respective successors and assigns.

     

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
      date
      first written above.

     

    

     

    THE
      BOMBAY COMPANY, INC.

    

    

    By:___________________________     

    Name:

    Title:

    

    BBA
      HOLDINGS, LLC

    

    

    By:___________________________     

    Name:

    Title:

    

    BOMBAY
      INTERNATIONAL, INC.

    

    

    By:___________________________     

    Name:

    Title:

    

    THE
      BOMBAY FURNITURE COMPANY OF CANADA INC.

    

    

    By:___________________________     

    Name:

    Title:

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    GENERAL
      ELECTRIC CAPITAL CORPORATION, as Lender and Administrative Agent

    

    

    By:___________________________________     

    Name:

    Title:
      Duly Authorized Signatory

    

    GE
      CANADA
      FINANCE HOLDING COMPANY, as Canadian Agent and as Canadian Lender

    

    

    By:___________________________________     

    Name:

    Title:
      Duly Authorized Signatory

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