Exhibit 10.39

 

BROOKSTONE, INC.

BROOKSTONE COMPANY, INC.

BROOKSTONE STORES, INC.

BROOKSTONE PURCHASING, INC.

GARDENERS EDEN, INC.

 

Dated as of: April     , 2004

 

Fleet National Bank

      Individually and as Agent

40 Broad Street

Boston, Massachusetts 02109

 

Citizens Bank of Massachusetts,

      Individually and as Documentation Agent

28 State Street

Boston, Massachusetts 02109

 

BankNorth, N.A.

7 New England Executive Park

Suite 700

Burlington, Massachusetts 01803

 

National City Bank

One South Broad Street, 15th Floor

Philadelphia, Pennsylvania 19107

 

Sovereign Bank

75 State Street - sst 04-10

Boston, Massachusetts 02109

 

Re: Amendment No. 2 to Amended and Restated Credit Agreement

 

Ladies and Gentlemen:

 

We refer to the Amended and Restated Credit Agreement, dated as of February 21,
2002 (the “Agreement”), among Brookstone, Inc. (the “Parent”), Brookstone
Company, Inc. (the “Company”), Brookstone Stores, Inc. (“Stores”), Brookstone
Purchasing, Inc. (“Purchasing”), Gardeners Eden Company, Inc., who was dissolved
on February 2, 2004, (“GE”), Gardeners Eden Purchasing, Inc., who was dissolved
on February 2, 2004 (“GE Purchasing”), Gardeners Eden By Mail, Inc., whose name
has been changed to Gardeners Eden, Inc., (“GE Mail”), the lenders party thereto
(collectively, the “Lenders”), Fleet National Bank as agent for the Lenders
(“Fleet” or the “Agent”), and Citizens Bank of Massachusetts as documentation
agent (the “Documentation Agent”). Upon the terms and subject to the conditions
contained in the Agreement, you agreed to make Loans and to issue Letters of
Credit for the Borrowers.

 

Terms used in this letter agreement (this “Amendment No. 2”) which are not
defined herein, but which are defined in the Agreement, shall have the same
respective meanings herein as therein.

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We have requested that you make certain amendments to the Agreement and certain
related Lender Agreements. You have advised us that you are prepared and would
be willing to make the amendments so requested by us on the condition that we
join with you in this Amendment No. 2.

 

Accordingly, in consideration of these premises, the promises, mutual covenants
and agreements contained in this Amendment No. 2, and fully intending to be
legally bound by this Amendment No. 2, we hereby agree with you as follows:

 

ARTICLE I

 

AMENDMENTS TO AGREEMENT

 

Effective as of April     , 2004 (herein, the “Modification Date”), the
Agreement is amended as follows:

 

(a) The definition of “Brookstone Subsidiaries” contained in Section 1.1 of the
Agreement is amended: (i) by deleting the reference to “Brookstone By Mail,
Inc.”; and (ii) by inserting in its place the following: “Brookstone
International Holdings Inc. (“Brookstone International”), Advanced Audio
Concepts, Limited (“Audio”)”. It is acknowledged that Brookstone International
is a newly-formed Subsidiary which is wholly-owned by the Company and Audio is a
newly-formed Subsidiary which is wholly-owned by Brookstone International, and
as such, each is becoming a party to the Subsidiary Guaranty and certain of the
Security Documents pursuant to Section 5.10(b). It is acknowledged that
Brookstone By Mail, Inc. has been merged into Stores.

 

(b) The second paragraph of the definition of “Fixed Charge Coverage” contained
in Section 1.1. of the Agreement is amended by deleting the reference to
“$24,000,000” with respect to the aggregate Capital Expenditures and inserting
in its place the following: “$25,000,000” by deleting the reference to
$10,000,000” with respect to the new headquarters construction and inserting in
its place the following”: “$11,000,000”.

 

(c) Section 5.9 of the Agreement (“Fixed Charge Coverage”) is amended to read in
its entirety as follows:

 

“5.9 Fixed Charge Coverage. The Parent shall maintain, at the end of each fiscal
quarter for the period of four consecutive fiscal quarters then ending,
consolidated Fixed Charge Coverage of not less than 1.35 to 1.0.”

 

(d) The definition of “Lender Agreements” contained in Section 1.1 of the
Agreement shall, wherever used in the Agreement or any of the other Lender
Agreements, be deemed to also mean and include this Amendment No. 2 and each of
the other Amendment Documents delivered in connection herewith.

 

(e) Section 5.2(c) of the Agreement (“Conduct of Business”) is amended by
deleting the parenthetical in the last three lines thereof, it being
acknowledged that Brookstone Realty, Inc. was previously merged into Stores, and
Brookstone Fork Distribution was previously dissolved.

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(f) Clause (d) of Section 6.1 of the Agreement is amended to read in its
entirety as follows:

 

“(d) Indebtedness of Stores to the City of Mexico, Missouri evidenced by a
capitalized lease of Stores’ facility in the City of Mexico, Missouri in an
aggregate amount not to exceed $2,500,000, (including, without duplication,
payments under the City of Mexico bond held by Commerce Bank, National
Association, which represents the base rental obligation under such capitalized
lease), Indebtedness (including a capital lease or mortgage financing) incurred
in connection with the expansion of the Company’s existing distribution facility
in an aggregate amount not exceeding $14,000,000, and Indebtedness (including a
capital lease or mortgage financing) incurred in connection with the
construction of a new headquarters in an aggregate amount not exceeding
$11,000,000.”

 

It is acknowledged that Company has assigned the lease of the facility in the
City of Mexico, Missouri to Stores.

 

(g) Clause (f) contained in Section 6.2 of the Agreement (“Contingent
Liabilities”) is amended by inserting at the end thereof (before the period) the
following:

 

“and Guarantees by the Parent or the Company of the Indebtedness of Stores
permitted under Section 6.1(d) in connection with the City of Mexico, Missouri
capital lease.”

 

(h) The first paragraph of Section 6.10 of the Agreement (“Capital
Expenditures”) is amended to read in its entirety as follows:

 

“6.10. Capital Expenditures. The Parent and its Subsidiaries shall not make
Capital Expenditures in an aggregate amount in any fiscal year exceeding the sum
of (a) $19,000,000 for the fiscal year ending January 31, 2004, (b) $21,500,000
for the fiscal year ending January 29, 2005, and (c) $23,000,000 for the fiscal
year ending January 28, 2006. Up to $4,000,000 of the amount (if any) of Capital
Expenditures not used in any fiscal year may be used in the next succeeding
fiscal year, provided that the amount (if any) of Capital Expenditures unused in
the fiscal year ending February 1, 2003 shall not be permitted to be used in any
other fiscal year.”

 

(i) Section 11.13 of the Agreement (“Collateral Release Conditions”) is hereby
deleted in its entirety, and shall have no further force or effect.

 

(j) Clause (k) of Section 6.4 of the Agreement and the second paragraph of
Section 6.10 of the Agreement are each amended by deleting the reference to
“$10,000,000” with respect to the new headquarters construction, and inserting
in its place the following: “$11,000,000.” In addition, the second paragraph of
said Section 6.10 is further amended by deleting the reference to “$5,500,000”
with respect to the new headquarters construction, and inserting in its place
the following: “$6,500,000.”

 

(k) Exhibit E to the Agreement is amended to read in its entirety as set forth
in Annex A to this Amendment No. 2.

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(l) The Table set forth in the first paragraph of Schedule 1.2 to the Agreement
(the “Pricing Schedule”) is amended to read in its entirety as follows:

 

“ Status

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   Level I

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   Level II

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   Level III

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Applicable LIBOR Margin

   1.75    1.50    1.25  

Applicable Base Rate Margin

   0.25    0.00    0.00  

Documentary Letter of Credit Fee

   0.875    0.75    0.625  

Commitment Fee

   0.50    0.375    0.300 ”

 

(m) The definitions of “Level I Status”, “Level II Status”, “Level III Status”
and “Level IV Status” contained in the second paragraph of Schedule 1.2 to the
Agreement (the “Pricing Schedule”) are respectively amended to read in their
entirety as follows:

 

“Level I Status” exists at any date if, at such date, the Fixed Charge Coverage
ratio for the four consecutive quarters then ending is greater than or equal to
1.35 to 1.0 and less than 1.45-to-1.0 and no Default exists.

 

“Level II Status” exists at any date if, at such date, the Fixed Charge Coverage
ratio for the four consecutive quarters then ending is greater than or equal to
1.45-to-1.0 and less than 1.60-to-1.0 and no Default exists.

 

“Level III Status” exists at any date if, at such date, the Fixed Charge
Coverage ratio for the four consecutive quarters then ending is greater than or
equal to 1.60-to-1.0 and no Default exists.”

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES

 

The Borrowers hereby jointly and severally represent and warrant to you as
follows:

 

(a) Representations in Agreement. Each of the representations and warranties
made by the Borrowers to you in the Agreement was true, correct and complete
when made and, after giving effect to all of the acknowledgements, arrangements
and transactions contemplated by this Amendment No. 2, is true, correct and
complete with respect to the Borrowers on and as of the date hereof with the
same full force and effect as if each of such representations and warranties had
been made by the Borrowers on the date hereof and in this Amendment No. 2.

 

(b) No Defaults or Events of Default. No Default or Event of Default exists on
the date of this Amendment No. 2 (after giving effect to all of the
acknowledgements, arrangements and transactions contemplated by this Amendment
No.2).

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(c) Binding Effect of Documents. This Amendment No. 2 has been duly executed and
delivered to you by the Borrowers and is in full force and effect as of the date
hereof, and the agreements and obligations of the Borrowers contained herein
constitute legal, valid and binding obligations of the Borrowers enforceable
against the Borrowers in accordance with their respective terms.

 

ARTICLE III

 

PROVISIONS OF GENERAL APPLICATION

 

(a) No Other Changes. Except to the extent specifically amended and supplemented
hereby, all of the terms, conditions and the provisions of the Agreement and the
other Lender Agreements shall remain unmodified, and the Agreement and the other
Lender Agreements, as amended and supplemented by this Amendment No. 2, are
confirmed as being in full force and effect.

 

(b) Governing Law. This Amendment No. 2 is intended to take effect as a sealed
instrument and shall be deemed to be a contract under the laws of the
Commonwealth of Massachusetts. This Amendment No. 2 and the rights and
obligations of each of the parties hereto shall be governed by and interpreted
and determined in accordance with the laws of the Commonwealth of Massachusetts.

 

(c) Binding Effect; Assignment. This Amendment No. 2 shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors in title and assigns.

 

(d) Counterparts. This Amendment No. 2 may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed an
original, but all of which together shall constitute one instrument. In making
proof of this Amendment No. 2, it shall not be necessary to produce or account
for more than one counterpart thereof signed by each of the parties hereto.

 

(e) Conflict with Other Agreements. If any of the terms of this Amendment No. 2
shall conflict in any respect with any of the terms of any of the Agreement or
any other Lender Agreements, the terms of this Amendment No. 2 shall be
controlling.

 

(f) Conditions Precedent. This Amendment No. 2 shall become and be effective as
of the Modification Date, but only if (i) the Borrowers shall have delivered to
the Agent, fully executed and duly authorized, this Amendment No. 2 (together
with a revised Exhibit E in the form of Annex A hereto), (ii) the form of
acceptance at the end of this Amendment No. 2 shall be signed by the Agent and
the Lenders, (iii) the form of guarantor consent at the end of this Amendment
No. 2 shall be signed by the Brookstone Subsidiaries, (iv) Brookstone
International and Audio shall have become parties to the Subsidiary Guaranty
and, as required by the Agent, the Security Documents, appropriate financing
statements shall have been executed and filed naming Brookstone International as
Debtor, and all security interests created thereunder shall have been perfected
in favor of the Agent and constitute first-priority liens, (v) 100% of the
capital stock of Brookstone International and 65% of the capital stock of Audio
shall have become subject to a perfected, first-priority pledge in favor of the
Agent, and original stock certificates along with stock powers executed in blank
shall have been delivered to the Agent,

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(vi) satisfactory lien search results shall have been delivered to the Agent
with respect to the assets of Brookstone International, (vii) satisfactory
evidence of insurance with respect to Brookstone International shall have been
delivered to the Agent, and the interest of the Agent as loss payee and
additional insured and the provision of 30 days advance notice of cancellation
shall have been endorsed on all instruments of insurance issued in respect of
property and liability, (viii) the Agent shall have received confirmation of the
filing of UCC amendments reflecting the name change of Gardeners Eden By Mail,
Inc. to Gardeners Eden, Inc., (ix) the Agent shall have received from Brookstone
International, Audio and each Borrower a copy, certified by a duly authorized
officer of such Person to be true and complete on the Modification Date, of
records of all corporate action taken by such Person to authorize (A) its
execution and delivery of this Amendment No. 2 and any other document to which
it is a party delivered in connection with this Amendment No. 2 (together with
Amendment No. 2, the “Amendment Documents”), (B) its performance of all of its
agreements and obligations under each of such documents, and (C) any
transactions contemplated by the Amendment Documents to which it is a party, and
(x) the Borrowers shall have paid all legal fees incurred in connection with
this Amendment No. 2.

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If you are in agreement with the foregoing, please sign the form of acceptance
on the enclosed counterpart of this Amendment No. 2 and return such counterpart
to the undersigned along with the closing items referenced in clause (f) above,
whereupon this Amendment No. 2, as so accepted by you, shall become a binding
agreement among you and the undersigned.

 

Very truly yours, BROOKSTONE, INC. By:  

/s/

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Title:     BROOKSTONE COMPANY, INC. By:  

/s/

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Title:     BROOKSTONE STORES, INC. By:  

/s/

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Title:     BROOKSTONE PURCHASING, INC. By:  

/s/

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      Title:     GARDENERS EDEN, INC. (f/k/a Gardeners Eden By Mail, Inc.) By:  

/s/

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Title:    

 

(Signatures continued on next page)

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The foregoing Amendment No. 2 is hereby accepted by the undersigned as of April
    , 2004.

 

FLEET NATIONAL BANK,

 

    Individually and as Agent By:  

/s/

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Title:     CITIZENS BANK OF MASSACHUSETTS,     Individually and as Documentation
    Agent By:  

/s/

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Title:     BANKNORTH, N.A. By:  

/s/

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Title:     NATIONAL CITY BANK By:  

/s/

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Title:     SOVEREIGN BANK By:  

/s/

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Title:    

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ANNEX A

 

Exhibit E

Subsidiaries

 

Brookstone Company, Inc.

Brookstone Stores, Inc.

Brookstone Purchasing, Inc.

Brookstone Properties, Inc.

Brookstone Holdings, Inc.

Brookstone International Holdings, Inc.

Brookstone O’Hare, LLC

Brookstone Retail Puerto Rico, Inc.

Gardeners Eden, Inc.

Advance Audio Concepts, Limited

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CONSENT OF GUARANTORS

 

Each of Brookstone Properties, Inc., Brookstone Holdings, Inc., Brookstone
Retail Puerto-Rico, Inc. and Brookstone By Mail, Inc., who was merged into
Brookstone Stores, Inc. on February 2, 2004 (collectively referred to herein as
the “Guarantors”) has jointly and severally guaranteed the Obligations of the
Borrowers under the Agreement by executing an Amended and Restated Unlimited
Guaranty dated as of February 21, 2002 (the “Unlimited Guaranty”). By executing
this letter, each of the Guarantors who are signatories to this Consent hereby
absolutely and unconditionally reaffirms the Unlimited Guaranty, and
acknowledges and agrees to the terms and conditions of this letter and the
Agreement as amended hereby.

 

BROOKSTONE PROPERTIES, INC.

BROOKSTONE HOLDINGS, INC.

BROOKSTONE RETAIL PUERTO-RICO, INC.

By:

 

/s/ Philip Roizin

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    Philip Roizin, Treasurer