EXHIBIT 10.25
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AMENDED AND RESTATED CREDIT AGREEMENT
Among
BROOKSTONE, INC.,
BROOKSTONE COMPANY, INC.
BROOKSTONE STORES, INC.
BROOKSTONE ACQUISITIONS SUB, INC.
THE LENDERS PARTY HERETO
and
BANKBOSTON, N.A.
as Agent for the Lenders
Dated as of May 11, 1999
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TABLE OF CONTENTS
Section Title Page
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SECTION I DEFINITIONS................................................................. 2
1.1. Definitions............................................................ 2
1.2. Accounting Terms........................................................ 13
SECTION II DESCRIPTION OF CREDIT....................................................... 13
2.1. The Loans............................................................... 13
2.2. Notice and Manner of Borrowing or Conversion of Loans................... 14
2.3. Commitment Fee.......................................................... 15
2.4. Reduction of Commitment Amount.......................................... 15
2.5. The Notes............................................................... 16
2.6. Duration of Interest Periods............................................ 16
2.7. Interest Rates and Payment of Interest.................................. 16
2.8. Changed Circumstances................................................... 17
2.9. Capital Requirements.................................................... 18
2.10. Payments and Prepayments of the Loans................................... 19
2.11. Method of Payment....................................................... 19
2.12. Default Interest........................................................ 20
2.13. Payments Not at End of Interest Period.................................. 20
2.14. Computation of Interest and Fees........................................ 20
2.15. Sharing of Payments..................................................... 21
2.16. Letter of Credit Facility............................................... 21
2.17. Swing Line Commitment................................................... 25
2.18. Procedure for Swing Line Borrowing; Interest on Swing Line Loans........ 26
2.19. Refunded Swing Line Loans; Swing Line Loan Participations............... 26
2.20. Use of Proceeds......................................................... 28
2.21. Guaranty of Parent...................................................... 28
2.22. Replacement of Lenders.................................................. 29
SECTION III CONDITIONS OF LOANS AND LETTERS OF CREDIT................................... 29
3.1. Conditions Precedent to Initial Loan.................................... 29
3.2. Conditions Precedent to All Loans and Letters of Credit................. 31
SECTION IV REPRESENTATIONS AND WARRANTIES.............................................. 32
4.1. Organization and Qualification.......................................... 32
4.2. Corporate Authority..................................................... 32
4.3. Valid Obligations....................................................... 32
4.4. Consents or Approvals................................................... 32
4.5. Title to Properties; Absence of Encumbrances............................ 33
4.6. Financial Statements.................................................... 33
(61)
Section Title Page
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4.7. Defaults................................................................ 33
4.8. Taxes................................................................... 33
4.9. Litigation.............................................................. 33
4.10. Use of Proceeds......................................................... 33
4.11. Subsidiaries............................................................ 34
4.12. Investment Company Act.................................................. 34
4.13. Compliance with ERISA................................................... 34
4.14. Environmental Matters................................................... 34
4.15. Liabilities of Stores................................................... 35
4.16. Liabilities of GE....................................................... 36
4.17. Subleased Properties.................................................... 36
4.18. Gardener's Eden Asset Purchase.......................................... 36
SECTION V AFFIRMATIVE COVENANTS........................................................ 36
5.1. Financial Statements and other Reporting Requirements................... 37
5.2. Conduct of Business..................................................... 38
5.3. Maintenance and Insurance............................................... 39
5.4. Taxes................................................................... 39
5.5. Inspection.............................................................. 39
5.6. Maintenance of Books and Records........................................ 40
5.7. Consolidated Net Worth.................................................. 40
5.8. Consolidated Total Liabilities to Consolidated Tangible Net Worth Ratio. 40
5.9. Cash Flow Coverage...................................................... 40
5.10. Further Assurances...................................................... 40
SECTION VI NEGATIVE COVENANTS.......................................................... 41
6.1. Indebtedness............................................................ 41
6.2. Contingent Liabilities.................................................. 41
6.3. Sale and Leaseback...................................................... 42
6.4. Encumbrances............................................................ 42
6.5. Merger; Acquisitions Consolidation; Sale or Lease of Assets............. 43
6.6. Additional Stock Issuance............................................... 44
6.7. Equity Distributions.................................................... 44
6.8. Investments............................................................. 44
6.9. ERISA................................................................... 44
6.10. Capital Expenditures.................................................... 45
6.11. Subsidiary Indebtedness................................................. 45
6.12. Transactions with Affiliates............................................ 45
SECTION VII DEFAULTS................................................................... 45
7.1. Events of Default....................................................... 45
7.2. Remedies................................................................ 47
7.3. Distribution of Proceeds................................................ 48
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Section Title Page
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SECTION VIII CONSENTS; AMENDMENTS; WAIVERS; REMEDIES.................................... 49
8.1. Actions by Lenders...................................................... 49
8.2. Actions by Parent or Borrowers.......................................... 49
SECTION IX SUCCESSORS AND ASSIGNS...................................................... 50
9.1. General................................................................. 50
9.2. Assignments............................................................. 50
9.3. Participations.......................................................... 51
SECTION X THE AGENT.................................................................... 52
10.1. Authorization and Action................................................ 52
10.2. Agent's Reliance, Etc................................................... 53
10.3. BankBoston, N.A. as Lender.............................................. 53
10.4. Lender Credit Decision.................................................. 54
10.5. Indemnification of Agent................................................ 54
10.6. Successor Agent......................................................... 54
10.7. Amendment of Section X.................................................. 55
SECTION XI MISCELLANEOUS................................................................ 55
11.1. Notices.................................................................. 55
11.2. Expenses................................................................. 56
11.3. Set-Off.................................................................. 56
11.4. Term of Agreement....................................................... 56
11.5. No Waivers.............................................................. 56
11.6. Governing Law........................................................... 56
11.7. Counterparts............................................................ 57
11.8. Partial Invalidity...................................................... 57
11.9. Captions................................................................ 57
11.10. WAIVER OF JURY TRIAL.................................................... 57
11.11. Entire Agreement........................................................ 57
(63)
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EXHIBITS AND SCHEDULES
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EXHIBIT A-1 Form of Promissory Note
EXHIBIT A-2 Form of Swing Line Note
EXHIBIT B Form of Notice of Borrowing or Conversion
EXHIBIT C Indebtedness; Encumbrances
EXHIBIT D Litigation
EXHIBIT E Subsidiaries
EXHIBIT F Form of Report of Chief Financial Officer
EXHIBIT G Form of Borrowing Base Report
EXHIBIT H Form of Opinion of Counsel
EXHIBIT I Form of Stores - GE Subordination Agreement
EXHIBIT J Form of Amended and Restated Unlimited Guaranty
EXHIBIT K Form of Assignment and Acceptance Agreement
EXHIBIT L Form of GE Inventory Security Agreement
EXHIBIT M Form of Amended and Restated Subordination Agreement
EXHIBIT N Form of GE - Company Subordination Agreement
SCHEDULE 1.1 Commitment Percentages
SCHEDULE 1.2 Pricing Schedule
SCHEDULE 2.16.9 Outstanding Letters of Credit
SCHEDULE 4.13 Certain ERISA Matters
SCHEDULE 4.17A List of Subleased Properties
SCHEDULE 4.17B List of Outstanding Consents
SCHEDULE 6.8 List of Investments in Subsidiaries
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AMENDED AND RESTATED CREDIT AGREEMENT
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THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of May 11, 1999, by
and among BROOKSTONE, INC., a Delaware corporation (the "Parent"), BROOKSTONE
COMPANY, INC. (the "Company"), a New Hampshire corporation, BROOKSTONE STORES,
INC., a New Hampshire corporation ("Stores"), BROOKSTONE ACQUISITIONS SUB, INC.,
a New Hampshire corporation, to be renamed GE By Mail, Inc., ("GE;" the Parent,
the Company, GE and Stores are referred to herein collectively as the
"Companies;" and the Company, GE and Stores are referred to herein individually
as a "Borrower" and collectively as the "Borrowers") each having its chief
executive office at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, the lenders from time
to time parties hereto and BANKBOSTON, N.A. ("BKB" or the "Agent"), a national
banking association having its head office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, as agent for the lenders from time to time parties hereto.
Recitals
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The Parent, the Company and Stores have established credit facilities for
working capital and other corporate needs, and the Lenders, other than The First
National Bank of Chicago, currently provide credit facilities to the Company and
Stores on the terms and conditions set forth in that certain Credit Agreement
dated as of September 22, 1997 (the "1997 Credit Agreement").
The Company desires to acquire the business and certain of the assets (the
"GE Assets") of Gardener's Eden, a division of ▇▇▇▇▇▇▇▇-Sonoma, Inc., a
California corporation. The portion of the GE Assets which are intangible
assets will be acquired by the Company and the portion of the GE Assets which
are tangible assets will be acquired by a newly-formed wholly-owned subsidiary
of the Company, GE.
The Company and Stores desire to add GE as a Borrower under the 1997 Credit
Agreement to provide financing for GE's acquisition of the tangible GE Assets
and to support GE's current and future working capital needs.
BankOne, Indiana, N.A. wishes to withdraw as a Lender and The First
National Bank of Chicago, an affiliate of BankOne, Indiana, N.A. wishes to be
added as a Lender.
NOW, THEREFORE, for good and valuable consideration, (a) the Company,
Stores, the Agent and the Lenders hereby amend and restate the 1997 Credit
Agreement in its entirety and (b) the parties hereto hereby agree, as follows:
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SECTION I
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DEFINITIONS
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1.1. Definitions.
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All capitalized terms used in this Agreement or in the Notes or in any
certificate, report or other document made or delivered pursuant to this
Agreement (unless otherwise defined therein) shall have the meanings assigned to
them below:
Adjusted Eurodollar Rate. Applicable to any Interest Period, shall mean a
rate per annum determined pursuant to the following formula:
AER = [ IOR ]
-----------
[ 1.00 - RP ]
AER = Adjusted Eurodollar Rate
IOR = Interbank Offered Rate
RP = Reserve Percentage
* The amount in brackets shall be rounded upwards, if necessary, to the next
higher 1/100 of 1%.
Where:
"Interbank Offered Rate" applicable to any Eurodollar Loan for any
Interest Period means the rate of interest determined by the Agent to
be the prevailing rate per annum at which deposits in U.S. dollars are
offered to the Agent by first-class banks in the Interbank Eurodollar
market in which it regularly participates on or about 10:00 a.m.
(Boston time) two Business Days before the first day of such Interest
Period in an amount approximately equal to the principal amount of the
Eurodollar Loan to which such Interest Period is to apply for a period
of time approximately equal to such Interest Period.
"Reserve Percentage" applicable to any Interest Period means the rate
(expressed as a decimal) applicable to the Agent during such Interest
Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum
reserve requirement (including, without limitation, any basic,
supplemental, emergency or marginal reserve requirement) of the Agent
with respect to "Eurocurrency liabilities" as that term is defined
under such regulations.
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The Adjusted Eurodollar Rate shall be adjusted automatically as of the effective
date of any change in the Reserve Percentage.
Affected Loans. See Section 2.8(a).
Affiliate. Shall mean (a) any director or officer of any Borrower or the
Parent and (b) any Person that controls, is controlled by or is under common
control with the Borrower. For purposes of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
Agent. BankBoston, N.A., in its capacity as agent for the Lenders, and its
successors in that capacity.
Agreement. This Agreement, as the same may be supplemented or amended from
time to time.
Applicable Eurodollar Margin. The applicable Eurodollar Margin described
on the Pricing Schedule.
Assignment and Acceptance. See Section 9.2(a).
Assignment and Assumption Agreement. The Assignment and Assumption
Agreement of even date herewith by and among ▇▇▇▇▇▇▇▇-Sonoma, Inc., Company and
GE pursuant to which Company or its designee assumes certain liabilities in
connection with the acquisition of the GE Assets.
Base Rate. The greater of (a) the rate of interest announced from time to
time by the Agent at its head office as its Base Rate, and (b) the Federal Funds
Effective Rate plus 1/2 of 1% per annum (rounded upwards, if necessary, to the
next l/8 of l%).
Base Rate Loan. Any Loan or Swing Line Loan bearing interest determined
with reference to the Base Rate.
Borrowers. See Preamble.
Borrowing Base. At any date during the periods described below for any
year, the applicable advance percentage of Eligible Inventory and stated amount
of outstanding documentary Letters of Credit issued in connection with the
purchase of goods which would otherwise constitute Eligible Inventory:
PERIOD ADVANCE PERCENTAGE
December 1 through May 31 50%
June 1 through July 31 65%
August 1 through November 30 75%
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provided, however, that the Advance Percentage for the period September 1, 1999
through November 30, 1999 shall be 85%.
Brookstone Subsidiaries. Brookstone By Mail, Inc., Brookstone Purchasing,
Inc., Brookstone Holdings, Inc. and Brookstone Properties, Inc.
Business Day. (a) For all purposes other than as covered by clause (b)
below, any day other than a Saturday, Sunday or legal holiday on which banks in
Boston, Massachusetts or New York, New York are open for the conduct of a
substantial part of their commercial banking business; and (b) with respect to
all notices and determinations in connection with, and payments of principal and
interest on, Eurodollar Loans, any day that is a Business Day described in
clause (a) and that is also a day for trading by and between banks in U.S.
Dollar deposits in the Interbank Eurodollar market.
Capital Expenditures. Amounts paid or Indebtedness incurred by the Parent
or any of its Subsidiaries in connection with the purchase or lease of capital
assets that would be required to be capitalized, all as shown on the
consolidated statement of cash flow of the Parent and its Subsidiaries in
accordance with generally accepted accounting principles.
Cash Flow Coverage. At any date as of which the amount thereof shall be
determined and for the period specified, the quotient obtained by dividing the
total of (a) Consolidated EBITDA plus (b) consolidated rent expense for such
period, by the total of (c) Consolidated Interest Expense and consolidated rent
expense for such period plus (d) current maturities of long-term Indebtedness
outstanding on the last day of such period.
Change of Control. Either (I) any Person or "group" (within the meaning of
Section 13(d) or 14(d) of the Exchange Act) and its affiliates shall have
acquired beneficial ownership of capital stock having 35% or more of the
ordinary voting power in the election of directors of the Parent and which
Person, group or affiliate shall have had no beneficial ownership of any such
capital stock on or before the date of this Agreement, or (ii) any Person or
group and its affiliates shall have acquired beneficial ownership of capital
stock having 40% or more of the ordinary voting power in the election of
directors of the Parent and which Person, group or affiliate had some beneficial
ownership of such stock on or before the date of this Agreement.
Code. The Internal Revenue Code of 1986 and the rules and regulations
thereunder, collectively, as the same may from time to time be supplemented or
amended and remain in effect.
Commitment Amount. $75,000,000 or any lesser amount, including zero,
resulting from a termination or reduction of such amount in accordance with
Section 2.4 or Section 7.2.
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Commitment Percentage. As to each lender, its percentage interest in the
Commitment Amount as set forth on Schedule 1.1 hereto.
Companies. See Preamble.
Company. See Preamble.
Consolidated EBITDA. At any date as of which the amount thereof shall be
determined and for the period specified, the sum of (a) Consolidated Net Income
(minus extraordinary gains and plus extraordinary losses) for such period, plus
(b) consolidated depreciation and amortization expenses for such period, plus
(c) Consolidated Interest Expense, plus (d) income tax expense for such period.
Consolidated Interest Expense. For any period for which the amount thereof
shall be determined, consolidated net interest expense (including imputed
interest on capital lease obligations) and amortized debt discount.
Consolidated Net Income. At any date as of which the amount thereof shall
be determined and for the period specified, the net income (or deficit) of the
Parent and its Subsidiaries, after taxes, determined in accordance with
generally accepted accounting principles consistently applied.
Consolidated Net Worth. At any date as of which the amount thereof shall
be determined, (a) the consolidated total assets of the Parent and its
Subsidiaries minus (b) Consolidated Total Liabilities.
Consolidated Tangible Net Worth. At any date as of which the amount
thereof shall be determined, Consolidated Net Worth minus the sum of any amounts
attributable to (a) goodwill, (b) intangible items such as unamortized debt
discount and expense, patents, trade and service marks and names, copyrights and
research and development expenses except prepaid expenses, (c) all reserves not
already deducted from assets, (d) any write-up in the book value of assets
resulting from any revaluation thereof subsequent to the date of the financial
statements referred to in Section 4.6 and (e) the value of any minority
interests in Subsidiaries.
Consolidated Total Liabilities. At any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with generally
accepted accounting principles, be classified as liabilities on the consolidated
balance sheet of the Parent and its Subsidiaries, including in any event all
Loans.
Controlled Group. All trades or businesses (whether or not incorporated)
under common control that, together with the Company, are treated as a single
employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.
Credit Participants. See Section 9.3 hereof.
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Default. An Event of Default or event or condition that, but for the
requirement that time elapse or notice be given, or both, would constitute an
Event of Default.
Defaulting Lender. A Lender which has defaulted in its obligation to make
Loans to the Borrowers hereunder for so long as it remains in default.
Eligible Inventory. The Company's inventory of goods, wherever located,
GE's inventory of goods wherever located and subject to the GE Inventory
Security Agreement, and Stores' inventory of goods located at the Company's
Mexico, Missouri distribution facility or at Subleased Properties or in transit
between any such locations and in each case subject to the Subsidiary Inventory
Security Agreement, in each case held for retail sale in the ordinary course of
business valued at the lower of cost or market and less any reserves (including
any reserves for slow-moving, obsolete and clearance items) as determined in
accordance with generally accepted accounting principles; provided that no such
inventory shall be deemed eligible if:
(a) it is under consignment to or from any Person;
(b) it is not owned by the Company, GE or Stores free and clear
of all liens other than liens created under the Stores--
Company Inventory Security Agreement or the Stores-- GE
Inventory Security Agreement.
Encumbrances. See Section 6.4.
Environmental Laws. Any and all applicable foreign, federal, state and
local environmental, health or safety statutes, laws, regulations, rules,
ordinances, policies and rules or common law (whether now existing or hereafter
enacted or promulgated), of all governmental agencies, bureaus or departments
which may now or hereafter have jurisdiction over the Parent or any of its
Subsidiaries and all applicable judicial and administrative and regulatory
decrees, judgments and orders, including common law rulings and determinations,
relating to injury to, or the protection of, real or personal property or human
health or the environment, including, without limitation, all requirements
pertaining to reporting, licensing, permitting, investigation, remediation and
removal of emissions, discharges, releases or threatened releases of Hazardous
Materials, chemical substances, pollutants or contaminants whether solid, liquid
or gaseous in nature, into the environment or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of such Hazardous Materials, chemical substances, pollutants or
contaminants.
ERISA. The Employee Retirement Income Security Act of 1974 and the rules
and regulations thereunder, collectively, as the same may from time to time be
supplemented or amended and remain in effect.
Eurodollar Loan. Any Loan bearing interest at a rate determined with
reference to the Adjusted Eurodollar Rate.
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Event of Default. Any event described in Section 7.1.
Federal Funds Effective Rate. For any day, a fluctuating interest rate per
annum equal to the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York,
or, if such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three federal funds brokers of recognized standing selected by the
Agent.
GE. See Preamble.
GE-- Company Subordination Agreement. The GE-- Company Subordination
Agreement of even date herewith among the Agent, for itself and on behalf of the
Lenders, GE and the Company, in the form of Exhibit N hereto, by which all
Indebtedness, liabilities and other obligations of GE to the Company is
subordinated to the payment and performance of the Obligations.
GE Trademark License Agreement. The License Agreement of even date
herewith between GE and the Company pursuant to which the Company has granted to
GE the right to use certain trademarks, logos, tradenames, and servicemarks
owned by the Company.
Generally accepted accounting principles. Generally accepted accounting
principles as defined by controlling pronouncements of the Financial Accounting
Standards Board, as from time to time supplemented and amended.
Guarantees. As applied to the Parent and its Subsidiaries, all guarantees,
endorsements or other contingent or surety obligations with respect to
obligations of others whether or not reflected on the consolidated balance sheet
of the Parent and its Subsidiaries, including any obligation to furnish funds,
directly or indirectly (whether by virtue of partnership arrangements, by
agreement to keep-well or otherwise), through the purchase of goods, supplies or
services, or by way of stock purchase, capital contribution, advance or loan, or
to enter into a contract for any of the foregoing, for the purpose of payment of
obligations of any other person or entity.
Hazardous Material. Any substance (a) the presence of which requires or
may hereafter require notification, investigation or remediation under any
Environmental Law; (b) which is or becomes defined as a "hazardous waste",
"hazardous material" or "hazardous substance" or "controlled industrial waste"
or "pollutant" or "contaminant" under any present or future Environmental Law or
amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. Section 9601
et seq.) and any applicable local statutes and the regulations promulgated
thereunder; (c) which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of any foreign country, the United States, any state
of the United States, or any political subdivision thereof to the extent any of
the foregoing has or
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had jurisdiction over the Company; or (d) without limitation, which contains
gasoline, diesel fuel or other petroleum products, asbestos or polychlorinated
biphenyls ("PCB's").
Indebtedness. As applied to the Parent and its Subsidiaries, (a) all
obligations for borrowed money or other extensions of credit whether or not
secured or unsecured, absolute or contingent, including, without limitation,
unmatured reimbursement obligations with respect to letters of credit or
guarantees issued for the account of or on behalf of the Parent and its
Subsidiaries and all obligations representing the deferred purchase price of
property, other than accounts payable arising in the ordinary course of
business, (b) all obligations evidenced by bonds, notes, debentures or other
similar instruments, (c) all obligations secured by any mortgage, pledge,
security interest or other lien on property owned or acquired by the Parent or
any of its Subsidiaries whether or not the obligations secured thereby shall
have been assumed, (d) that portion of all obligations arising under capital
leases that is required to be capitalized on the consolidated balance sheet of
the Parent and its Subsidiaries, (e) all Guarantees, and (f) all obligations
that are immediately due and payable out of the proceeds of or production from
property now or hereafter owned or acquired by the Parent or any of its
Subsidiaries. Indebtedness shall not include any hedge contract entered into by
Parent or any of its Subsidiaries for purposes of protecting against changes in
the cost of paper and not for speculation.
Interest Period. With respect to each Eurodollar Loan, the period
commencing on the date of the making or continuation of or conversion to such
Eurodollar Loan and ending one, two, three or six months thereafter, as the
Company may elect in the applicable Notice of Borrowing or Conversion; provided
that:
(a) any Interest Period (other than an Interest Period
determined pursuant to clause (c) below) that would
otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day unless, in the
case of Eurodollar Loans, such Business Day falls in the
next calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day;
(b) any Interest Period applicable to a Eurodollar Loan that
begins on the last Business Day of a calendar month (or on a
day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period)
shall, subject to clause (c) below, end on the last Business
Day of a calendar month;
(c) any Interest Period during the Revolving Credit Period that
would otherwise end after the Revolving Credit Termination
Date shall end on the Revolving Credit Termination Date;
and
(d) notwithstanding clause (c) above, no Interest Period
applicable to a Eurodollar Loan shall have a duration of
less than one month; and if any Interest Period applicable
to such Loans would be for a shorter period, such Interest
Period shall not be available hereunder.
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Investment. As applied to the Parent and its Subsidiaries, the purchase or
acquisition of any share of capital stock, partnership interest, evidence of
indebtedness or other equity security of any other person or entity, any loan,
advance or extension of credit to, or contribution to the capital of, any other
person or entity, any real estate held for sale or investment, any commodities
futures contracts held other than in connection with bona fide hedging
transactions, any other investment in any other person or entity, and the making
of any commitment or acquisition of any option to make an Investment.
Lender Agreements. This Agreement, the Notes, the Swing Line Note, the
Subsidiary Guaranty, the Stores Subordination Agreement, the -▇▇▇▇▇ - GE
Subordination Agreement, -he GE - Company Subordination Agreement, the GE
Inventory Security Agreement and any other present or future agreement from time
to time entered into between the Parent or any of its Subsidiaries and the Agent
or the Lenders, each as from time to time amended or supplemented, and all
statements, reports and certificates delivered by the Parent or any of its
Subsidiaries to the Agent or the Lenders in connection therewith.
Lenders. (a) Initially, the banks described on Schedule 1.1 hereto and (b)
any other Person who becomes a Successor Lender hereunder in accordance with the
terms of Section 9.2(a) hereof.
Letters of Credit. Letters of Credit of the Agent issued for the account
of the Company in accordance with the provisions of Section 2.16.
Letter of Credit Fee Rate. For standby letters of credit, the Letter of
Credit Fee Rate shall be a per annum fee equal to the Eurodollar Rate Margin
determined in accordance with the Pricing Schedule, and for documentary letters
of credit, the Letter of Credit Fee Rate shall be a per annum fee equal to the
Documentary Letter of Credit Fee Rate determined in accordance with the Pricing
Schedule.
Loan or Revolving Credit Advance. A loan made to the Company by the
Lenders pursuant to Section II of this Agreement, and "Loans" and "Revolving
Credit Advances" means all of such loans, collectively.
Majority Lenders. At any time, the Lenders having made not less than the
Required Percentage of the outstanding principal amount of the Loans hereunder,
or, if no Loans are outstanding, the Lenders having aggregate Commitment
Percentages of not less than the Required Percentage.
Master Assignment. The Master Assignment and Assumption of Lease dated as
of August 28, 1995 from the Company to Brookstone Properties, Inc.
Master Sublease Agreement. The Master Sublease Agreement dated as of
August 28, 1995 by and between Brookstone Properties, Inc., as sublessor, and
Brookstone Stores, Inc., as sublessee.
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Maximum Letter of Credit Amount. $40,000,000.
1997 Credit Agreement. See Preamble.
Notes. Promissory notes of the Borrowers, substantially in the form of
Exhibit A-1 hereto, evidencing the obligation of the Borrowers to each Lender to
repay the Loans.
Notice of Borrowing or Conversion. See Section 2.2.
Obligations. Any and all obligations of the Company, GE, Stores and the
Parent to the Agent or the Lenders of every kind and description, direct or
indirect, absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising, regardless of how they arise or by what
agreement or instrument, if any, and including, the Loans, the Swing Line Loans,
obligations with respect to the Letters of Credit and obligations to perform
acts and refrain from taking action as well as obligations to pay money.
Parent. See Preamble.
PBGC. The Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.
Permitted Encumbrances. See Section 6.4.
Permitted Subsidiary Liabilities. Liabilities of GE, Stores and the
Brookstone Subsidiaries for (a) state franchise, income and unemployment tax
liabilities, employee withholding, accrued liabilities for employee salaries,
wages, and accrued vacation, personal property taxes, and sales and use taxes
incurred in the ordinary course of business, (b) accounts payable and accrued
liabilities (other than for inventory purchases), incurred in the ordinary
course of business, in an aggregate amount not to eIceed (i) $10,000,000 at any
time outstanding for accounts payable and accrued liabilities not related to
catalog production costs and (ii) $10,000,000 at any time outstanding for
accounts payable and accrued liabilities which relate solely to catalog
production costs incurred in the ordinary course of business, (c) indebtedness
of Stores to the Company for inventory purchased in the ordinary course of
business from the Company, which indebtedness is subordinated to the payment and
performance of all Obligations pursuant to the Stores Subordination Agreement,
(d) indebtedness of Stores to GE for inventory purchased in the ordinary course
of business from GE, which indebtedness is subordinated to the payment and
performance of all Obligations pursuant to the-Stores - GE Subordination
Agreement, (e) indebtedness of GE for normal trade debt related to the
acquisition of inventory in the ordinary course of business, (f) liabilities
under the Master Sublease Agreement, which liabilities are subordinated to the
payment and performance of all Obligations pursuant to the Subsidiary Guaranty,
(g) liabilities of GE under the GE Trademark License Agreement of even date
herewith, which liabilities are subordinated to the payment and performance of
all Obligations pursuant to-the GE - Company Subordination Agreement, (h)
liabilities of Stores under the Stores Trademark License Agreement which
liabilities are subordinated to the payment
75
and performance of all Obligations pursuant to the Stores Subordination
Agreement, and (i) liabilities of Brookstone Properties, Inc. under leases for
store locations subleased to Stores.
Person. An individual, corporation, partnership, joint venture,
association, estate, joint stock company, trust, organization, business, or a
government or agency or political subdivision thereof.
Plan. At any time, an employee pension or other benefit Plan that is
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of the
Controlled Group or (ii) if such Plan is established, maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which the Company or any member of the
Controlled Group is then making or accruing an obligation to make contributions
or has within the preceding five Plan years made contributions.
Pricing Schedule. The Pricing Schedule attached hereto as Schedule 1.2.
Qualified Investments. As applied to the Parent and its Subsidiaries,
investments in (a) notes, bonds or other obligations of the United States of
America or any agency thereof that as to principal and interest constitute
direct obligations of or are guaranteed by the United States of America, (b)
certificates of deposit or other deposit instruments or accounts of banks or
trust companies organized under the laws of the United States or any state
thereof that have capital and surplus of at least $100,000,000, (c) commercial
paper that is rated not less than prime-one or A-1 or their equivalents by
▇▇▇▇▇'▇ Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or their successors, (d) any repurchase agreement secured by any one or more of
the foregoing and (e) investments in shares of any so-called "Money Market fund"
provided that such fund is registered under the Investment Company Act of 1940,
has net assets of at least $100,000,000, has an investment portfolio with an
average maturity of 365 days or less and is not considered to be a "high-yield"
fund.
Required Percentage. 66%.
Revolving Credit Period. The period beginning on the date of this
Agreement and extending through and including the Revolving Credit Termination
Date or such earlier date on which the commitment to make Loans is terminated or
the Commitment Amount is reduced to zero in accordance with the terms hereof.
Revolving Credit Termination Date. July 31, 2002.
Stores. See Preamble.
Stores - Company Inventory Security Agreement. The Security Agreement
dated as of January 11, 1996 between Stores and the Company pursuant to which
Stores has granted to the Company a first, perfected security interest in all
inventory of Stores.
76
Stores - GE Inventory Security Agreement. The GE Inventory Security
Agreement of even date herewith between GE and Stores, in the form of Exhibit L
hereto, pursuant to which Stores has granted to GE a perfected security
interest, subject to a prior security interest granted to Company, in all
inventory of Stores.-
Stores - GE Subordination Agreement. The Stores - GE Subordination
Agreement of even date herewith among the Agent, for itself and on behalf of the
Lenders, GE and Stores, in the form of Exhibit I hereto, by which all
Indebtedness, liabilities and other obligations of Stores to GE is subordinated
to the payment and performance of the Obligations.
Stores Subordination Agreement. The Amended and Restated Subordination
Agreement of even date herewith among the Agent, for itself and on behalf of the
Lenders, Stores and the Company, in the form of Exhibit M hereto, by which all
Indebtedness, liabilities and other obligations of Stores to Company is
subordinated to the payment and performance of the Obligations.
Stores Trademark License Agreement. License Agreement dated as of August
28, 1995 between Stores and the Company pursuant to which the Company grants to
Stores the right to use certain trademarks, logos, tradenames, and servicemarks
owned by the Company.
Subleased Properties. The locations of Brookstone Stores identified on
Schedule 4.16A hereto, together with any additional locations which may be added
by notice in writing to the Agent, as to which the representations and
warranties set forth in Section 4.16 are true and correct in all respects.
Subsidiary. Any corporation, association, joint stock company, business
trust or other similar organization of which 50% or more of the ordinary voting
power for the election of a majority of the members of the board of directors or
other governing body of such entity is held or controlled by the Parent or a
Subsidiary of the Parent; or any other such organization the management of which
is directly or indirectly controlled by the Parent or a Subsidiary of the Parent
through the exercise of voting power or otherwise; or any joint venture, whether
incorporated or not, in which the Parent has a 50% or greater ownership
interest.
Subsidiary Guaranty. The Amended and Restated Unlimited Guaranty of even
date herewith from the Brookstone Subsidiaries to the Agent in the form of
Exhibit J hereto, by which the Brookstone Subsidiaries have guaranteed to the
Agent, for itself and the benefit of the Lenders, the payment and performance of
all Obligations.
Swing Line Commitment. $2,500,000.
Swing Line Lender. BankBoston, N.A.
Swing Line Loans. See Section 2.17 hereof.
77
Swing Line Note. The Swing Line Note substantially in the form of Exhibit
A-2 hereto executed by the Borrowers, jointly and severally, in favor of the
Swing Line Lender to evidence the Swing Line Loans.
Swing Line Participation Amount. See Sec(C)n 2.19(c) hereof.
1.2. Accounting Terms. All terms of an accounting character shall have
the meanings assigned thereto by generally accepted accounting principles
applied on a basis consistent with the financial statements referred to in
Section 4.6 of this Agreement, modified to the extent, but only to the extent,
that such meanings are specifically modified herein.
SECTION II
----------
DESCRIPTION OF CREDIT
---------------------
2.1. The Loans.
(a) Subject to the terms and conditions hereof, each Lender,
severally and not jointly will make Loans to the Borrowers, jointly and
severally, from time to time until the close of business on the Revolving Credit
Termination Date, in such sums as the Company may request, provided that the
aggregate principal amount of all Loans and stated amount of all Letters of
Credit at any one time outstanding hereunder shall not, (a) as to each Lender,
exceed such Lender's Commitment Percentage of the Commitment Amount, and (b) as
to all Lenders, exceed the lesser of (i) the Borrowing Base in effect at such
time and (ii) the Commitment Amount. The Borrowers may borrow, prepay pursuant
to Section 2.10 and reborrow, from the date of this Agreement until the
Revolving Credit Termination Date, the full amount available hereunder or any
lesser sum that is at least $100,000 and an integral multiple of $50,000;
provided that each Eurodollar Loan shall be in a minimum of $1,000,000 and
multiples of $500,000. Any Loan not repaid by the Revolving Credit Termination
Date shall be due and payable on the Revolving Credit Termination Date.
(b) Provided that no Default shall have occurred and be continuing,
the Borrowers may convert all or any part (in a minimum amount of $500,000 and
multiples of $100,000 for Eurodollar Loans) of any outstanding Loan into a Loan
of any other type provided for in this Agreement in the same aggregate principal
amount, on any Business Day (which, in the case of a conversion of a Eurodollar
Loan, shall be the last day of the Interest Period applicable to such Eurodollar
Loan). The Company shall give the Agent prior notice of each such conversion
(which notice shall be effective upon receipt) in accordance with Section 2.2.
(c) The Borrowers covenant that there will be a period of thirty
(30) consecutive days during each period commencing December 15 and ending the
following April 30, starting with the period commencing December 15, 1999,
during which the principal amount of the Loans outstanding shall not exceed
$10,000,000.
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2.2. Notice and Manner of Borrowing or Conversion of Loans.
-----------------------------------------------------
(a) Whenever the Borrowers desire to obtain or continue a Loan hereunder or
convert an outstanding Loan into a Loan of another type provided for in this
Agreement, the Company shall notify the Agent (which notice shall be
irrevocable) by telefax or telephone received no later than 10:00 a.m. Boston
time on the Business Day on which the requested Loan is to be made or continued
as or converted to a Base Rate Loan and received no later than 10:00 a.m. Boston
time on the date three Business Days before the day on which the requested Loan
is to be made or continued as or converted to a Eurodollar Loan. Such notice
shall specify (i) the effective date and amount of each Loan or portion thereof
to be continued or converted, subject to the limitations set forth in Section
2.1, (ii) the interest rate option to be applicable thereto, and (iii) the
duration of the applicable Interest Period, if any (subject to the provisions of
the definition of Interest Period and Section 2.6). Each such notification (a
"Notice of Borrowing or Conversion") shall be immediately followed by a written
confirmation thereof by the Company in substantially the form of Exhibit B
hereto, provided that if such written confirmation differs in any material
respect from the action taken by the Agent, the records of the Agent shall
control absent manifest error. The Agent shall give the Lenders notice of each
Notice of Borrowing or Conversion in accordance with the Agent's customary
practice.
(b) Subject to the terms and conditions of this Agreement, each Lender shall
make available on or before 2:00 p.m. Boston time on the date of each proposed
Loan, to the Agent at the Agent's address and in immediately available funds,
such Lender's Commitment Percentage of such Loan. After the Agent's receipt of
such funds and upon fulfillment of the applicable conditions set forth in
Section III, the Agent will credit such funds to the Company's demand deposit
account on the date of the proposed Loan.
(c) Unless the Agent shall have received notice from a Lender prior to the
date of any Loan that such Lender will not make available to the Agent such
Lender's Commitment Percentage of such Loan, the Agent may assume that such
Lender has made such amount available to the Agent on the date of such Loan in
accordance with and as provided in this Section 2.2 and the Agent may, in
reliance upon such assumption, make available on such date a corresponding
amount to the Borrowers. If and to the extent such Lender shall not have so made
its Commitment Percentage of such Loan available to the Agent and the Agent
shall have made available such corresponding amount to the Borrowers, such
Lender agrees to pay to the Agent forthwith on demand, and the Borrowers agree,
jointly and severally, to repay to the Agent within two Business Days after
demand (but only after demand for payment has first been made to such Lender and
such Lender has failed to make such payment), an amount equal to such
corresponding amount together with interest thereon for each day from the date
the Agent shall make such amount available to the Borrowers until the date such
amount is paid or repaid to the Agent, at an interest rate equal to (i) in the
case of such Lender the Federal Funds Effective Rate and (ii) in all other
respects at the interest rate applicable at the time to such Loans. If such
Lender shall pay to the Agent such corresponding amount, such amount so paid
shall constitute such Lender's Loan for purposes of this Agreement. If the
Borrowers make a repayment
79
required by the foregoing provisions of this Section 2.2(c) and thereafter the
applicable Lender or Lenders make the payments to the Agent required by this
Section 2.2(c), the Agent shall promptly refund the amount of such payment.
(d) The failure of any Lender to make the Loan to be made by it on any date
shall not relieve any other Lender of its obligation, if any, hereunder to make
its Loan on such date, but no Lender shall be responsible for the failure of any
other Lender to make the Loan to be made by such other Lender.
2.3. Commitment Fee. The Borrowers, jointly and severally, shall pay to
the Agent, for the accounts of the Lenders in accordance with their respective
Commitment Percentages, a commitment fee on the average daily amount of the
unborrowed portion of the Commitment Amount during each quarter or portion
thereof computed at the Commitment Fee Rate determined in accordance with the
Pricing Schedule. Commitment Fees shall be payable quarterly in arrears on the
last day of March, June, September and December of each year, beginning June 30,
1999 and on the Revolving Credit Termination Date; provided, however, that the
Borrowers shall not be liable to pay any such commitment fees for the account of
a Defaulting Lender.
2.4. Reduction of Commitment Amount. The Company may from time to time by
written notice delivered to the Agent at least seven days prior to the date of
the requested reduction, reduce by a minimum amount of $5,000,000 and by
integral multiples of $1,000,000 any unborrowed portion of the Commitment
Amount. No reduction of the Commitment Amount shall be subject to reinstatement.
2.5. The Notes.
(a) The Loans shall be evidenced by the Notes executed by the Borrowers,
jointly and severally, in favor of each Lender and having a final maturity of
the Revolving Credit Termination Date. The Notes shall be dated on or before the
date of the first Loan and shall have the blanks therein appropriately
completed.
(b) The Agent shall, and is hereby irrevocably authorized by the Borrowers
to, enter in its records appropriate notations evidencing the date and the
amount of each Loan, the interest rate applicable thereto and the date and
amount of each payment of principal made by the Borrowers with respect thereto;
and in the absence of manifest error, such notations shall constitute conclusive
evidence thereof. No failure on the part of the Agent to make any notation as
provided in this subsection (b) shall in any way affect any Loan or the rights
or obligations of the Agent, the Lenders or the Borrowers with respect thereto.
80
2.6. Duration of Interest Periods.
(a) Subject to the provisions of the definition of Interest Period, the
duration of each Interest Period applicable to a Loan shall be as specified in
the applicable Notice of Borrowing or Conversion. The Borrowers shall have the
option to elect a subsequent Interest Period to be applicable to such Loan by
the Company's giving notice of such election to the Agent received no later than
10:00 a.m. Boston time on the Business Day on which the then applicable Interest
Period ends if such Loan is to be continued as or converted to a Base Rate Loan
and three Business Days before the end of the then applicable Interest Period if
such Loan is to be continued as or converted to a Eurodollar Loan.
(b) If the Agent does not receive a notice of election of duration of an
Interest Period for a Eurodollar Loan pursuant to subsection (a) above within
the applicable time limits specified therein, or if, when such notice must be
given, a Default exists, the Borrowers shall be deemed to have elected to
convert such Loan in whole into a Base Rate Loan on the last day of the then
current Interest Period with respect thereto.
(c) Notwithstanding the foregoing, the Borrowers may not select an Interest
Period that would end, but for the provisions of the definition of Interest
Period, after the Revolving Credit Termination Date.
2.7. Interest Rates and Payment of Interest.
(a) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof at a rate per annum equal to the Base Rate. Such interest shall
be payable on the last day of each month, in arrears, commencing, May 31, 1999,
and when such Loans are due (whether at maturity, by reason of acceleration or
otherwise).
(b) Each Eurodollar Loan shall bear interest on the outstanding principal
amount thereof, for each Interest Period applicable thereto, at a rate per annum
equal to the Adjusted Eurodollar Rate plus the Applicable Eurodollar Margin.
Such interest shall be payable for such Interest Period on the last day thereof
and when such Eurodollar Loan is due (whether at maturity, by reason of
acceleration or otherwise) and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. The Borrowers
shall not have more than ten Eurodollar Loans outstanding at any time.
2.8. Changed Circumstances.
(a) In the event that:
(i) on any date on which the Adjusted Eurodollar Rate would otherwise be set,
the Agent shall have determined in good faith (which determination shall be
final and conclusive) that adequate and fair means do not exist for ascertaining
the Interbank Offered Rate, or
81
(ii) at any time the Agent shall have determined in good faith
(which determination shall be final and conclusive) that:
(A) the making or continuation of or conversion of any Loan to a
Eurodollar Loan has been made impracticable or unlawful by (1) the occurrence of
a contingency that materially and adversely affects the Interbank Eurodollar
market or (2) compliance by any Lender in good faith with any applicable law or
governmental regulation, guideline or order or interpretation or change thereof
by any governmental authority charged with the interpretation or administration
thereof or with any request or directive of any such governmental authority
(whether or not having the force of law); or
(B) the Adjusted Eurodollar Rate shall no longer represent the
effective cost to the Lenders for U.S. dollar deposits in the Interbank
Eurodollar market for deposits in which it regularly participates;
then, and in any such event, the Agent shall forthwith so notify the Company
thereof. Until the Agent notifies the Company that the circumstances giving
rise to such notice no longer apply, the obligation of the Lenders and the Agent
to allow selection by the Borrowers of a Eurodollar Loan affected by the
contingencies described in this Section 2.8(a) (herein called "Affected Loans")
shall be suspended. If at the time the Agent so notifies the Company, the
Company has previously given the Agent a Notice of Borrowing or Conversion with
respect to one or more Affected Loans but such Loans have not yet gone into
effect, such notification shall be deemed to be void and the Borrowers may
borrow Loans of a non-affected type by giving a substitute Notice of Borrowing
or Conversion Pursuant to Section 2.2 hereof.
Upon such date as shall be specified in such notice (which shall not be
earlier than the date such notice is given) the Company shall, with respect to
the outstanding Affected Loans, prepay the same, together with interest thereon
and any amounts required to be paid pursuant to Section 2.13, and may borrow a
Loan of another type in accordance with Section 2.1 hereof by giving a Notice of
Borrowing or Conversion purs to Section 2.2 hereof.
(b) In case any law, regulation, treaty or official directive or
the interpretation or application thereof by any court or by any governmental
authority charged with the administration thereof or the compliance with any
guideline or request of any central bank or other governmental authority
(whether or not having the force of law):
(i) subjects any Lender to any tax not in effect on the date hereof with
respect to payments of principal or interest or any other amounts payable
hereunder by the Company or otherwise with respect to the transactions
contemplated hereby (except for taxes on the overall net income of such Lender
imposed by the United States of America or any political subdivision thereof),
or
82
(ii) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, any Lender (other than such
requirements as are already included in the determination of the Adjusted
Eurodollar Rate), or
(iii) imposes upon any Lender any other condition with respect to
its performance under this Agreement,
and the result of any of the foregoing is to increase the cost to such Lender,
reduce the income receivable by such Lender or impose any expense upon such
Lender with respect to any outstanding Eurodollar Loans, such Lender shall
notify the Company thereof. The Borrowers, jointly and severally, agrees to pay
to such Lender the amount of such increase in cost, reduction in income or
additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by such Lender of a statement in the amount and
setting forth such Lender's calculation thereof, which statement shall be deemed
true and correct absent manifest error.
2.9. Capital Requirements. If after the date hereof any Lender
determines that (a) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements for banks or bank holding companies, or
any change in the interpretation or application thereof by any governmental
authority charged with the administration thereof, or (b) compliance by such
Lender or its parent bank holding company with any guideline, request or
directive of any such entity regarding capital adequacy (whether or not having
the force of law), has the effect of reducing the return on such Lender or such
holding company's capital as a consequence of such Lender's commitment to make
Loans hereunder to a level below that which such Lender or such holding company
could have achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such holding company's then existing policies
with respect to capital adequacy and assuming the full utilization of such
entity's capital) by any material amount, then such Lender shall notify the
Company thereof. The Borrowers, jointly and severally, agree to pay to such
Lender the amount of such reduction in the return on capital as and when such
reduction is determined, upon presentation by such Lender of a statement in the
amount and setting forth such Lender's calculation thereof, which statement
shall be deemed true and correct absent manifest error. In determining such
amount, such Lender may use any reasonable averaging and attribution methods.
83
2.10. Payments and Prepayments of the Loans.
(a) The Borrowers may make prepayments to the Agent, for the
ratable accounts of the Lenders, of outstanding Eurodollar Loans in amounts not
less than $1,000,000 and in multiples of $500,000, without premium or penalty,
on the last day of any Interest Period applicable thereto, upon three (3)
Business Days' notice to the Agent. The Borrowers may make prepayments to the
Agent, for the ratable accounts of the Lenders, of Base Rate Loans at any time
in amounts not less than $100,000 and in multiples of $50,000, without premium
or penalty, upon one Business Day's notice to the Agent. Any interest accrued
on the amounts so prepaid to the date of such payment must be paid at the time
of any such payment. No prepayment of the Revolving Loans during the Revolving
Credit Period shall affect the Commitment Amount or impair the Borrowers' right
to borrow at forth in Section 2.1.
(b) If at any time the sum of (i) the aggregate principal amount of
outstanding Loans and (ii) the stated amount of the outstanding Letters of
Credit exceeds the lesser of (A) the Borrowing Base in effect at such time or
(B) the Commitment Amount, the Borrowers, jointly and severally, shall
immediately repay to the Agent for the ratable accounts of the Lenders a
principal amount of Loans equal to such excess.
2.11. Method of Payment. All payments and prepayments of principal and
all payments of interest shall be made by the Company, on behalf of itself, GE
and Stores, or by any of the Borrowers, to the Agent at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ in immediately available funds, on or before 11:00 a.m.
(Boston time) on the due date thereof, free and clear of, and without any
deduction or withholding for, any taxes or other payments. The Agent and the
Lenders may, and the Borrowers hereby authorize the Agent and the Lenders to,
debit the amount of any payment not made by such time to the demand deposit
account of any Borrower with the Agent or such Lender. The Agent will, after
its receipt thereof, distribute like funds relating to the payment of principal,
interest or any other amounts payable hereunder ratably to the Lenders in
accordance with their respective Commitment Percentages. Any payment made by
the Borrowers to the Agent under this Agreement or under the Notes in the manner
provided in this Agreement shall be deemed to be a payment to each of the
respective Lenders, unless the provisions of this Agreement expressly provide
that any such payment shall be solely for the account of the Agent or any
specific Lender.
2.12. Default Interest. Upon the concurrence and during the continuance
of any Default, the Borrowers, jointly and severally, on demand, shall pay to
the Agent for the account of the Lenders interest on the unpaid principal
balance of the Loans and the Swing Line Loans, and, to the extent permitted by
applicable law, on any overdue interest and fees or any other amounts payable
hereunder or under the Notes and the Swing Line Notes, at a rate per annum equal
to two percent (2%) above the rate then applicable to Base Rate Loans, which
interest shall be compounded monthly and payable on demand.
2.13. Payments Not at End of Interest Period. If the Borrowers for any
reason make any payment of principal with respect to any Eurodollar Loan on any
day other than the last day of an Interest Period applicable to such Eurodollar
Loan, or fail to borrow or continue or convert
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to a Eurodollar Loan after giving a Notice of Borrowing or Conversion Pursuant
to Section 2.2, or if any Eurodollar Loan is accelerated pursuant to Section
7.2(b), the Borrowers, jointly and severally, shall pay to the Agent, for the
ratable accounts of the Lenders, an amount computed pursuant to the-following
formula.
L = (R - T) x P x D
----------------
360
L = amount payable to the Agent for the ratable accounts of the Lenders
R = interest rate on such Loan
T = effective interest rate per annum at which any readily marketable bond or other obligation of the
United States, selected at the Agent's sole discretion, maturing on or near the last day of the
then applicable Interest Period of such Loan and in approximately the same amount as such Loan can
be purchased by the Agent on the day of such payment of principal or failure to borrow or continue
or convert
P = the amount of principal prepaid or the amount of the requested Loan
D = the number of days remaining in the Interest Period as of the date of such payment or the number of
days of the requested Interest Period
The Borrowers, jointly and severally, shall pay such amount upon presentation by
the Agent of a statement setting forth the amount and the Agent's calculation
thereof pursuant hereto.
2.14. Computation of Interest and Fees. Interest and all fees payable
hereunder shall be computed daily on the basis of a year of 360 days and paid
for the actual number of days for which due, except for interest on Base Rate
Loans which shall be computed daily on a basis of a year of 365 days and paid
for the actual number of days for which due. If the due date for any payment of
principal is extended by operation of law, interest shall be payable for such
extended time. If any payment required by this Agreement becomes due on a day
that is not a Business Day such payment may be made on the next succeeding
Business Day (subject to clause (a) of the definition of Interest Period), and
such extension shall be included in computing interest in connection with such
payment.
2.15. Sharing of Payments. If any Lender shall obtain any payment
(whether voluntary, involuntary, through the exercise of any right of set-off,
or otherwise) on account of the Loans made by it in excess of its ratable share
(according to the then outstanding principal amount of the Loans) of payments on
account of the Loans obtained by all the Lenders, such Lender shall purchase
from the other Lenders such participations in the Loans held by such other
Lenders as shall cause such purchasing Lender to share such payment ratably
according to the then outstanding principal amount of the Loans with each of
such other Lenders; provided, however, that if all or any portion of such
payment is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and the purchase price restored to the extent of such recovery,
with interest at an interest rate per annum equal to the Base Rate. The
Borrowers, jointly and severally, agree that any Lender so purchasing a
participation in the Loans from another Lender pursuant to this Section 2.15
may, to the fullest extent permitted by law, exercise all its rights of
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payment with respect to such participation as fully as if such Lender were the
direct creditor of each Borrower in the amount of such participation.
2.16. Letter of Credit Facility.
2.16.1. The Letters of Credit. Subject to the terms and conditions hereof,
including satisfaction of the conditions set forth in Section 3.2 hereof, and
provided no Default has occurred and that the Agent is generally issuing letters
of credit for the account of customers in its ordinary banking business, the
Agent agrees upon the request of the Company pursuant to Section 2.16.2 hereof,
to issue Letters of Credit, provided that: (a) the outstanding stated amount of
the Letters of Credit shall not exceed the Maximum Letter of Credit Amount; (b)
the sum of (i) the outstanding stated amount of all Letters of Credit and (ii)
the aggregate principal amount of an outstanding Loans shall not exceed the
lesser of (A) the Borrowing Base and (B) the Commitment Amount; and (c) each
Letter of Credit shall expire on or before the earlier of ten (10) days prior to
the Revolving Credit Termination Date or 360 days issuance thereof.
2.16.2. Issuing a Letter of Credit. The Company may request that the Agent
issue a Letter of Credit by written notice (the "L/C Notice") given to the Agent
not less than two (2) Business Days prior to the proposed date of issuance of
such Letter of Credit. The L/C Notice shall specify the proposed date of
issuance and the beneficiary and amount of such Letter of Credit, and shall be
accompanied by a letter of credit application completed to the satisfaction of,
and with such amendments and modifications as may be deemed necessary by, the
Agent.
2.16.3. Letter Credit Participations.
(a) The Agent shall notify the Lenders on a monthly basis,
reporting the issuance or any amendment or extension of any Letter of Credit.
Immediately upon the issuance by the Agent of any Letter of Credit, the Agent
shall be deemed to have sold to each Lender (each such Lender, in its capacity
under this Section 2.16.3, an "L/C Participant"), and each such L/C Participant
shall be deemed irrevocably and unconditionally to have purchased and received
from the Agent, without recourse or warranty, an undivided interest and
participation (each an "L/C Participation") to the extent of such L/C
Participant's Commitment Percentage, in such Letter of Credit, any substitute
Letter of Credit, each draw made thereunder and the obligations of the Borrowers
under the Lender Agreements with respect thereto, and any security therefor or
anty pertaining thereto.
(b) In determining whether to pay under any Letter of Credit, the
Agent shall have no obligation relative to the L/C Participants other than to
confirm that any documents required to be delivered under such Letter of Credit
have been delivered and that they appear to comply on their face with the
requirements of such Letter of Credit. Any action taken or omitted to be taken
by the Agent under or in connection with any Letter of Credit, if taken or
omitted to be taken in the absence of gross negligence or willful misconduct,
shall not create for the Agent any resulting liability.
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2.16.4. Reimbursement and Other Payments.
--------------------------------
(a) The Borrowers, jointly and severally, hereby agree to pay to
the Agent, for the ratable accounts of the Lenders, on the date on which the
Agent shall be required to pay any draft presented under any Letter of Credit, a
sum (the "Reimbursement Amount") equal to: (i) the amount so paid under such
Letter of Credit, plus (ii) interest on any amount remaining unpaid by the
Borrowers to the Lenders under clause (i) from and including the date on which
such amount becomes payable pursuant to clause (i) until payment in full,
payable on demand, at a per annum rate of interest equal to the rate applicable
to Loans under Section 2.7 (a) plus any additional interest under Section 2.12.
If the Borrowers shall fail to pay to the Agent the Reimbursement Amount on the
date on which the Agent shall be required to pay any draft presented under any
Letter of Credit, the Agent shall, to the extent the Borrowers have availability
to request a Loan, consider such failure to be a request for a Loan in the
amount of the Reimbursement Amount. In the event any such Loan is made pursuant
to this Section 2.16.4(a), the Agent shall notify each Lender of such Lender's
Commitment Percentage of such Loan, and such Lender shall make available
promptly to the Agent the corresponding amount of such Loan, all in accordance
with Section 2.2 hereof. The Borrowers, jointly and severally, agree that the
Agent may make any such Loan, and each Lender agrees to deliver such Lender's
Commitment Percentage of such Loan, even if the making of such Loan causes the
outstanding balance of all Loans to exceed the limits set forth in Section 2.1
hereof, and the Borrowers further agree that the making of such Loan by the
Agent in excess of the limits set forth in Section 2.1 hereof shall constitute
an automatic Default under Section VII, entitling the Agent and the Lenders to
exercise all rights and remedies available to them under the Lender ements and
applicable law.
(b) The Borrowers shall, jointly and severally, quarterly in
arrears on the last day of each calendar quarter for the calendar quarter ending
on such date, pay a fee (in each case, a "Letter of Credit Fee") to the Agent in
respect of each Letter of Credit issued, extended or renewed at the request of
Borrowers equal to the face amount of each Letter of Credit multiplied by the
Letter of Credit Fee Rate per annum. The Agent shall, in turn, remit to each
Lender its pro rata portion of such Letter of Credit Fee. In addition, the
--------
Borrowers shall, jointly and severally, pay to the Agent, for its own account,
(a) on standby Letters of Credit, a fronting fee equal to % per annum of the
stated amount, payable quarterly in arrears, and (b) on the date of issuance, or
any extension or renewal of any Letter of Credit and at such other time or times
as such charges are customarily made by the Agent, the Agent's standard
issuance, processing, negotiation, amendment and administrative fees, determined
in accordance with customary fees and (C)rges for similar facilities.
(c) If prior to the time a Loan would have otherwise been made pursuant to
Section 2.16.4(a) one of the events described in Section 7.1(g) or (h) shall
have occurred and be continuing, each Lender shall, on the date such Loan was to
have been made pursuant to the provisions of paragraph (a) above (the
"Reimbursement Date"), purchase an undivided participating interest in an amount
equal to (i) its Commitment Percentage times (ii) the aggregate principal amount
of the Reimbursement Amount then outstanding which was to have
87
been repaid with such Loan (the "Letter of Credit Participation Amount"). On
the Reimbursement Date, each Lender shall transfer to the Agent, in immediately
available funds, such Lender's Letter of Credit Participation Amount and upon
receipt thereof the Agent shall deliver to such Lender a Letter of Credit Loan
Participation Certificate dated the date of the Lender's receipt of such funds
and in such Lettdit Participation Amount.
2.16.5. Obligations Absolute. The obligations of the Borrowers with
--------------------
respect to the Letters of Credit shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(a) any lack of validity or enforceability of the Letters of Credit or
this Agreement;
(b) any amendment or waiver of or any consent to or actual departure from
this Agreement;
(c) the existence of any claim, set-off, defense or other right which the
Borrowers may have at any time against any beneficiary or any transferee of a
Letter of Credit (or any persons or entities for which any such beneficiary or
any such transferee may be acting), the Agent, the Lenders or any other person
or entity, whether in connection with this Agreement, the transactions
contemplated herein or in any other agents or any unrelated transaction;
(d) any statement or any other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein beingrue or inaccurate in any respect;
(e) payment by the Agent under a Letter of Credit against presentation by the
beneficiary thereof of a draft or certificate which does not comply with terms
of such Letter of Credit; or
(f) any other circumstance or happening whatsoever, whether or not similar to
any of the foregoing.
The obligations of the Borrower under this Section 2.16.5 shall not
limit any rights or claims of the Borrowers tion 2.16.6 or 2.16.8 hereof.
2.16.6. The Uniform Customs and Practice. The Uniform Customs and Practice
--------------------------------
for Documentary Credits (ICC Publication No. 500) shall be binding on the
Borrowers and the Agent. The Borrowers assume all risks of the acts or omissions
of the beneficiary of each Letter of Credit with respect to such Letter of
Credit. In furtherance of, and not in limitation of the Agent's rights and
powers under the Uniform Customs and Practice, but subject to all other
provisions of this Section 2.16.6, it is understood and agreed that the Agent
shall not have any liability for, and that the Borrowers assume all
responsibility for: (a) the genuineness of any
88
signature; (b) the form, correctness, validity, sufficiency, genuineness,
falsification and legal effect of any draft, certification or other document
required by a Letter of Credit or the authority of the person signing the same;
(c) the failure of any instrument to bear any reference or adequate reference to
a Letter of Credit or the failure of any persons to note the amount of any
instrument on the reverse of a Letter of Credit or to surrender a Letter of
Credit or otherwise to comply with the terms and conditions of a Letter of
Credit; (d) the good faith or acts of any person other than the Agent and its
agents and employees; (e) the existence, form, sufficiency or breach of or
default under any agreement or instrument of any nature whatsoever; (f) any
delay in giving or failure to give any notice, demand or protest; and (g) any
error, omission, delay in or nondelivery of any notice or other communication,
however sent. The determination as to whether the required documents are
presented prior to the expiration of a Letter of Credit and whether such other
documents are in proper and sufficient form for compliance with a Letter of
Credit shall be made by the Agent in its sole discretion, which determination
shall be conclusive and binding upon the Borrowers. It is agreed that the Agent
may honor, as complying with the terms of the Letters of Credit and this
Agreement, any documents otherwise in order and signed or issued by the
beneficiary thereof. Any action, inaction or omission on the part of the Agent
under or in connection with the Letters of Credit or any related instruments or
documents, if in good faith and in conformity with such laws, regulations or
commercial or banking customs as the Agent may reasonably deem to be applicable,
shall be binding upon the Borrowers, shall not place the Agent or the Lenders
under any liability to the Borrowers, and shall not affect, impair or prevent
the vesting of any of the Agent's or the Lenders' rights or powers hereunder or
the Borrowers' obligation to make full reimbursement.
2.16.7. Modification, Consent, etc. If the Borrowers, either in writing or
--------------------------
orally, request or consent to any modification or extension of a Letter of
Credit or waives failure of any draft, certificate or other documents to comply
with the terms of a Letter of Credit, the Agent shall be entitled to rely and
shall be deemed to have relied on such request, consent or waiver with respect
to any action taken or omitted by the Agent pursuant to any such request,
consent or waiver, and such extension, modification or waivee binding upon the
Borrowers.
2.16.8. Liability of the Agent and the Lenders. Neither the Agent, the
--------------------------------------
Lenders nor any of their officers or directors shall be liable or responsible
for: (a) the use which may be made of the Letters of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by the Agent against
presentation of documents which do not comply with the terms of a Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to a Letter of Credit; or (d) any other circumstances whatsoever in
making or failure to make payment under a Letter of Credit, except that
notwithstanding anything in this Section 2.16.8 to the contrary, the Borrowers
shall have a claim against the Agent, and the Agent shall be liable to the
Borrowers, to the extent but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Borrowers which were caused by the
Agent's failure to conform to the standards of the Uniform Customs and Practice.
In furtherance and not in limitation of the foregoing, the Agent may accept
documents
89
that appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary. Nothing
contained in this Section 2.16.8 shall affect the Agent's responsibilities under
Section 2.16.6.
2.16.9. Outstanding Letters of Credit. As of the date of this Agreement,
-----------------------------
certain letters of credit are outstanding from BKB for the account of the
Company under the 1997 Credit Agreement, which letters of credit are described
on Schedule 2.16.9. hereto. The parties hereto acknowledge and agree that upon
execution of this Agreement, all letters of credit described on Schedule 2.16.9.
hereto shall automatically be deemed to be Letters of Credit hereunder without
the necessity of any further action on the part of the
Company, the Lenders or the Agent.
2.17 Swing Line Commitment. Subject to the terms and conditions hereof,
---------------------
BankBoston, N.A. (in such capacity, the "Swing Line Lender") agrees to make
available to the Borrowers a portion of the credit otherwise available to the
Borrowers hereunder from time to time prior to the Revolving Credit Termination
Date by making swing line loans ("Swing Line Loans") to the Borrowers, jointly
and severally, in an aggregate principal amount not to exceed at any one time
outstanding the Swing Line Commitment; provided that (a) the aggregate principal
amount of Swing Line Loans outstanding at any time shall not exceed the Swing
Line Commitment then in effect (notwithstanding that the Swing Line Loans
outstanding at any time, when aggregated with the Swing Line Lender's other
outstanding Loans hereunder, may exceed the Swing Line Commitment then in
effect) and (b) the Borrowers shall not request, and the Swing Line Lender shall
not be obligated to make, any Swing Line Loan if, after giving effect to the
making of such Swing Line Loan, the aggregate amount of the Loans, the Swing
Line Loans and the stated amount of all Letters of Credit exceed the lesser of
the Borrowing Base in effect at such time and the Commitment Amount. Prior to
the Revolving Credit Termination Date, the Borrowers may use the Swing Line
Commitment by borrowing, repaying and reborrowing, all in accordance with the
terms and conditions hereof. Swing Line Loans shall be Base Rate Loans only.
The Borrowers may use the proceeds of Revolving Credit Advances from time to
time to repay any outstanding Swing Line Loans. The Borrowers, jointly and
severally, shall repay all outstanding Swing Line Loans on the Revolving Credit
Termination Date. On the Closing Date, the Borrowers shall deliver to the Swing
Line Lender a Swing Line Note to evidence the Swing Line Loans from time to time
made by the Swing Line Lender to the Borrowers hereunder.
2.18 Procedure for Swing Line Borrowing; Interest on Swing Line Loans.
----------------------------------------------------------------
Whenever the Borrowers desire that the Swing Line Lender make Swing Line Loans
under Section 2.18, the Company shall give the Swing Line Lender irrevocable
telephonic notice confirmed promptly in writing (which telephonic notice must be
received by the Swing Line Lender not later than 1:00 P.M., Boston time, on the
proposed borrowing date), specifying (a) the amount to be borrowed and, (b) the
requested borrowing date (which shall be a Business Day prior to the Revolving
Credit Termination Date); and not later than 3:00 P.M., Boston time, on the
borrowing date specified in the notice in respect of Swing Line Loans, the Swing
Line Lender shall make the proceeds of such Swing Line Loan available to the
Company, as agent for the Borrowers on such borrowing date in accordance with
the instructions of the Company. The Borrowers, jointly and severally, shall
pay interest on the unpaid balance of the Swing Line Loans from time to time
outstanding at a per annum rate equal to the Base Rate. Interest on the Swing
Line Loans shall
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be payable monthly in arrears on the last day of each month, commencing May 31,
1999 and continuing until all of the Indebtedness of the Borrowers to the Swing
Line Lender hereunder shall have been paid in full.
2.19 Refunded Swing Line Loans; Swing Line Loan Participations. (a) The
---------------------------------------------------------
Swing Line Lender, at any time and from time to time in its sole and absolute
discretion, but in any event at least once every fourteen days, may, on behalf
of the Borrowers (which hereby irrevocably direct the Swing Line Lender to act
on their behalf) on one Business Day's notice given by the Swing Line Lender no
later than 12:00 noon, Boston time, request each Lender to make, and each Lender
hereby agrees to make, a Revolving Credit Advance in an amount equal to such
Lender's Commitment Percentage of the aggregate amount of the Swing Line Loans
(the "Refunded Swing Line Loans") outstanding on the date of such notice, to
repay the Swing Line Lender. Unless any of the events described in Section
7.1(g) or (h) shall have occurred and be continuing (in which case the
procedures of Section 2.19(c) shall apply), each Lender shall make the amount of
such Revolving Credit Advance available to the Agent at its office in
immediately available funds, not later than 10:00 A.M., Boston time, one
Business Day after the date of such notice. The proceeds of such Revolving
Credit Advances shall be immediately applied by the Swing Line Lender to repay
the Refunded Swing Line Loans. Effective on the day such Revolving Credit
Advances are made, the portion of the Swing Line Loans so paid shall no longer
be outstanding as Swing Line Loans and shall be outstanding as Revolving Credit
Advances and owed to the Lenders in accordance with their respective Commitment
Percentages. The Borrowers irrevocably authorize the Swing Line Lender to
charge the Borrowers' accounts with the Agent (up to the amount available in
each such account) to immediately pay the amount of such Refunded Swing Line
Loans to the extent amounts received from the Lenders are not sufficient to
repay ill such Refunded Swing Line Loans.
(b) The making of any Swing Line Loan hereunder shall be subject to
the satisfaction of the applicable conditions precedent thereto set forth in
Section 3.2. The Swing Line Lender shall notify the Company of its election not
to make Swing Line Loans hereunder as a result of the failure to satisfy such
conditions precedent, unless an Event of Default of the type specified in
Section 7.1(g) or (h) shall have occurred and be continuing.
(c) If prior to the time a Revolving Credit Advance would have
otherwise been made pursuant to Section 2.2(a) one of the events described in
Section 7.1(g) or (h) shall have occurred and be continuing, each Lender shall,
on the date such Revolving Credit Advance was to have been made pursuant to the
notice referred to in Section 2.19(a) (the "Refunding Date"), purchase an
undivided participating interest in an amount equal to (i) its Commitment
Percentage times (ii) the aggregate principal amount of Swing Line Loans then
outstanding which were to have been repaid with such Revolving Credit Advances
(the "Swing Line Participation Amount"). On the Refunding Date, each Lender
shall transfer to the Swing Line Lender, in immediately available funds, such
Lender's Swing Line Participation Amount and upon receipt thereof the Swing Line
Lender shall deliver to such Lender a Swing Line Loan Participation Certificate
dated the date of the Swing Line Lender's receipt of such funds an such Swing
Line Participation Amount.
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(d) Whenever, at any time after the Swing Line Lender has received
from any Lender such Lender's Swing Line Participation Amount, the Swing Line
Lender receives any payment on account of the Swing Line Loans, the Swing Line
Lender will distribute to such Lender its Swing Line Participation Amount
(appropriately adjusted, in the case of interest payments, to reflect the period
of time during which such Lender's participating interest was outstanding and
funded and, in the case of principal and interest payments, to reflect such
Lender's pro rata portion of such payment if such payment is not sufficient to
pay the principal of and interest on all Swing Line Loans then due); provided
however, that in the event that such payment received by the Swing Line Lender
is required to be returned, such Lender will return to the Swing Line Lender any
portion thereof previously distributed to it by the Swing Line Lender.
(e) Each Lender's obligation to make the Loans referred to in
Section 2.19(a) and to purchase participating interest pursuant to Section
2.19(c) shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, (i) any setoff, counterclaim,
recoupment, defense or other right which such Lender or the Borrowers may have
against the Swing Line Lender, the Borrowers or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of a Default or an Event of
Default or the failure to satisfy any of the other conditions specified in
Section 3.2; (iii) any adverse change in the condition (financial or otherwise)
of the Borrowers; (iv) any breach of this Agreement or any other Lender
Agreement by the Borrowers or any other Lender; or (v) any other circumstances,
happening or event whatsoever, whether or not similar to any of the foregoing.
2.20. Use of Proceeds. The proceeds of all Loans and Swing Line Loans
---------------
shall be used by the Borrowers as follows: (a) the initial Revolving Credit
Loans shall be used to repay in full all amounts outstanding for Loans and
Revolving Credit Advances under the 1997 Credit Agreement, (b) up to $12,400,000
of Revolving Credit Loans may be used on or prior to May 13, 1999 for the
purchase by the Company and GE of the intangible and tangible GE Assets,
respectively, and (c) all future Revolving Credit Advances and all Swing Line
Loans shall be used for general working capital and other general corporate
purposes, including repurchases of stock of the Parent permitted hereunder.
2.21. Guaranty of Parent. The Parent hereby unconditionally guaranties
------------------
to the Agent and the Lenders the prompt payment and performance of (a) all
liabilities and obligations and Indebtedness, direct or indirect, matured or
unmatured, primary or secondary, certain or contingent, of the Borrowers and the
Brookstone Subsidiaries (including without limitation, costs and expenses
incurred by the Agent and the Lenders in attempting to collect or enforce any of
the foregoing), accrued in each case to the date of payment, and (b) the
performance of all other agreements, covenants and conditions of the Borrowers
and the Brookstone Subsidiaries with respect thereto set forth in this Agreement
and all other Lender Agreements. The responsibilities and obligations of the
Borrowers and the Brookstone Subsidiaries to the Agent and the Lenders described
in the preceding sentence are hereinafter referred to collectively as the
"Guaranteed Obligations." The guaranty pursuant to this Section 2.21 is an
absolute, unconditional and continuing guaranty of the full and punctual payment
and performance by the Borrowers and the Brookstone Subsidiaries of the
Guaranteed Obligations and not of collectability of the
92
Guaranteed Obligations, and is in no way conditioned upon any requirement that
the Agent or the Lenders first attempt to collect any of the Guaranteed
Obligations from the Borrowers and the Brookstone Subsidiaries or resort to any
security or other means of obtaining payment of any of the Guaranteed
Obligations which the Agent or the Lenders now has or may acquire after the date
hereof, or upon any other contingency whatsoever. Upon any default by the
Borrowers or the Brookstone Subsidiaries in the full and punctual payment and
performance of the Guaranteed Obligations, the liabilities and obligations of
the Parent hereunder shall, at the option of the Agent, become forthwith due and
payable to the Agent and the Lenders without demand or notice of any nature, all
of which are expressly waived by the Parent. Payments by the Parent under this
Section 2.21 may be required by the Agent or the Lenders on any number of
occasions. The Parent waives presentment, demand, protest, notice of acceptance,
notice of Guaranteed Obligations incurred and all other notices of any kind, all
defenses which may be available by virtue of any valuation, stay, moratorium law
or other similar law now or hereafter in effect, any right to require the
marshalling of assets of the Borrowers and the Brookstone Subsidiaries, and all
suretyship defenses generally. Without limiting the generality of the foregoing,
the Parent agrees to the provisions of any instrument evidencing, securing or
otherwise executed in connection with any Guaranteed Obligations and agrees that
the obligations of the Parent hereunder shall not be released or discharged, in
whole or in part, or otherwise affected by any rescissions, waivers, amendments
or modifications of any of the terms or provisions of any agreement evidencing
securing or otherwise executed in connection with any Guaranteed Obligation.
Until the payment and performance in full of all Guaranteed Obligations and any
and all obligations of the Borrowers and the Brookstone Subsidiaries to any
affiliate of the Agent or the Lenders, the Parent shall not exercise any rights
against the Borrowers and the Brookstone Subsidiaries arising as a result of
payment by the Parent hereunder, by way of subrogation or otherwise. The payment
of any amounts due with respect to any indebtedness of the Borrowers and the
Brookstone Subsidiaries now or hereafter held by the Parent is hereby
subordinated to the prior payment in full of the Guaranteed Obligations.
2.22 Replacement of Lenders. If any Lender (an "Affected Lender")
----------------------
defaults in its obligation to make Loans, in accordance with the terms of this
Agreement, the Borrowers may, within ninety (90) days of receipt of notice of
such default, by notice (a "Replacement Notice") in writing to the Agent and
such Affected Lender (a) request the Affected Lender to cooperate with such
Borrowers in obtaining a replacement bank satisfactory to the Agent and such
Borrowers (the "Replacement Lender"); (b) request the non-Affected Lenders to
acquire and assume all of the Affected Lender's Loans and Commitment Percentage,
as provided herein, but none of such Lenders shall be under an obligation to do
so; or (c) designate a Replacement Lender reasonably satisfactory to the Agent
(which shall be deemed to be satisfactory if a Successor Lender). If any
satisfactory Replacement Lender shall be obtained, and/or if any one or more of
the non-Affected Lenders shall agree to acquire and assume all of the Affected
Lender's Loans and Commitment Percentage, then such Affected Lender shall
assign, in accordance with Section 9.2, all of its Commitment Percentage, Loans,
Notes and other rights and obligations under this Agreement and all other Loan
Agreements to such Replacement Lender or non-Affected Lenders, as the case may
be, in exchange for payment of the principal amount so assigned and all interest
and fees accrued on the amount so assigned, plus all other
93
Obligations then due and payable to the Affected Lender; provided, however, that
prior to any such assignment, such Borrower shall have paid to such Affected
Lender all amounts properly demanded and unreimbursed under this Agreement. Upon
the effective date of such assignment, such Borrower shall issue replacement
Notes to such Replacement Lender and/or non-Affected Lenders, as the case may
be, and such institution shall become a "Lender" for all purposes under this
Agreement and the other Loan Agreements.
SECTION III
-----------
CONDITIONS OF LOANS AND LETTERS OF CREDIT
-----------------------------------------
3.1. Conditions Precedent to Initial Loan. The obligation of the Lenders
------------------------------------
to make the initial Loan is subject to the condition precedent that the Agent
shall have received, in form and substance satisfactory te Agent and its
counsel, the following:
(a) this Agreement and Notes, duly executed by the Borrowers;
(b) the Subsidiary Guaranty duly executed by the Brookstone Subsidiaries:
(c) the Stores - GE Subordination Agreement;
(d) the GE Inventory Security Agree;
(e) the Stores Subordination Agreement;
(f) the GE - Company Subordination Agreement;
(g) the Asset Purchase Agreement duly executed by GE, the Company
and ▇▇▇▇▇▇▇▇-Sonoma, Inc., and evidence that all conditions precedent to
consummation of the Asset Purc, except for funding, have been satisfied;
(h) certificates of the Secretary or an Assistant Secretary of the
Parent, each Borrower, and each of the Brookstone Subsidiaries with respect to
resolutions of the Board of Directors authorizing the execution and delivery of
this Agreement, the Notes, the Subsidiary Guaranty,-the Stores Subordination
Agreement, the Stores - GE Subordination Agreement, the GE - Company
Subordination Agreement and the GE Inventory Security Agreement and identifying
the officer(s) authorized to execute, deliver and take all other actions
required under this Agreement, and pding specimen signatures of such officers;
(i) certificates of incorporation of each of the Parent, each
Borrower and each of the Brookstone Subsidiaries and all amendments and
supplements thereto, filed in the office of the Secretaries of State of Delaware
and New Hampshire, respectively, and each certified by said Secretaries of State
as being a true and correct copy thereof;
94
(j) the Bylaws of each of the Parent, each Borrower and each of the
Brookstone Subsidiaries and all amendments and supplements thereto, certified by
the Secretary or an Assistant Secretary of the Parent, each Borrower, and each
of the Brookstone Subsidiaries, respectively as being a true and correct copy
thereof;
(k) certificates of the Secretaries of State of those jurisdictions
where GE owns or leases real property, as to legal exise and good standing of
GE, in such states;
(l) an opinion addressed to it from ▇▇▇▇▇ & ▇▇▇▇▇▇▇ counsel to the
Parent, each Borrower, and each of the Brookstone Subsidiaries, substantially in
the form of Exhibit H hereto;
---------
(m) certificates of the Secretary or an Assistant Secretary of the
Company, Stores and Brookstone Properties, Inc. certifying that information
contained in the certified copies of the Master Assignment, the Master Sublease
Agreement and the Subsidiary Inventory Security Agreement, and the evidence of
perfection of the first security interest created thereunder in favor of the
Company in all locations in which any inventory of Stores is located, delivered
on September 22, 1997 to the Agent in connection with the 1997 Credit Agreement,
is true and correct on and as of the date hereof with the same force and effect
as if made on the date hereof and that (i) there have been no amendments to such
Master Assignment, Master Sublease Agreement and Subsidiary Inventory Security
Agreement since September 22, 1997 and (ii) first security interest remains
perfected;
(n) payment to BankBoston, N.A. of all accrued commitment fees under
the 1997 Credit Agreement; and
(o) such other documents, and completion of such other matters, as
counsel for the Agent may reasonably deem necessary or appropriate.
3.2. Conditions Precedent to All Loans and Letters of Credit. The Lenders'
-------------------------------------------------------
obligation to make each Loan, including the initial Loan, or continue or convert
Loans to Loans of another type, or issue or extend any Letter of Credit, are
further subject to the following conditions:
(a) timely receipt by the Agent of the Notice of Borrowing or
Conversion as provided in Section 2.2 or an L/C Notice as provided in Section
2.16.2;
(b) (i) the representations and warranties contained in Section IV
shall be true and accurate in all material respects on and as of the date of
such Notice of Borrowing or Conversion or L/C Notice and on the effective date
of the making, continuation or conversion of each Loan or issuance or extension
of each Letter of Credit as though made at and as of each such date (except to
the extent that such representations and warranties expressly relate to an
earlier date), (ii) the sum of (A) the aggregate principal amount of outstanding
Loans and (B) the stated amount of the outstanding Letters of Credit, after the
making, continuation or conversion of such Loan or issuance or extension of such
Letter of Credit, will not exceed the lesser of (x) the Borrowing Base in effect
as of the end of the Borrowers' previous fiscal month or (y) the
95
Commitment Amount, and (iii) no Default shall have occurred and be continuing,
or would result from such Loan or Letter of Credit;
(c) the resolutions referred to in Section (d) shall remain in full
force and effect; and
(d) no change shall have occurred in any law or regulation or
interpretation thereof that, in the opinion of counsel for any Lender, would
make it illegal or against the policy of any governmental agency or authority
for any Lender to make Loans or issue Letters of Credit hereunder.
The making of each Loan and issuance or extension of each Letter of Credit
shall be deemed to be a representation and warranty by the Company on the date
of the making, continuation or conversion of such Loan or issuance or extension
of such Letter of Credit as to the accuracy of the facts referred to in
subsection (b) of this Section 3.2.
SECTION IV
----------
REPRESENTATIONS AND WARRANTIES
------------------------------
In order to induce the Agent and the Lenders to enter into this Agreement
and to induce the Lenders to make Loans hereunder, the Parent and the Borrowers
represent and warrant to the Agent and the Lenders that:
4.1. Organization and Qualification. Each of the Parent and its
------------------------------
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, (b) has all
requisite corporate power to own its property and conduct its business as now
conducted and as presently contemplated, and (c) is duly qualified and in good
standing as a foreign corporation and is duly authorized to do business in each
jurisdiction where the nature of its properties or business requires such
qualification, except to the extent any such failure to be duly qualified or in
good standing does not have a material adverse effect on the business or
financial condition of the Parent and its Subsidiaries considered as a whole.
4.2. Corporate Authority. The execution, delivery and performance of
-------------------
this Agreement and the Notes and the transactions contemplated hereby are within
the corporate power and authority of the Parent and the Borrowers and have been
authorized by all necessary corporate proceedings, and do not and will not (a)
require any consent or approval of the stockholders of the Parent and the
Borrowers, (b) contravene any provision of the charter documents or by-laws of
the Parent and the Borrowers or any law, rule or regulation applicable to the
Parent and the Borrowers, (c) contravene any provision of, or constitute an
event of default or event that, but for the requirement that time elapse or
notice be given, or both, would constitute an event of default under, any other
agreement, instrument, order or undertaking binding on the Parent and the
Borrowers, or (d) result in or require the imposition of any Encumbrance on any
of the properties, assets or rights of the Parent and the Borrowers.
96
4.3. Valid Obligations. This Agreement and the Notes and all of their
-----------------
respective terms and provisions are the legal, valid and binding obligations of
the Parent and the Borrowers, with respect to this Agreement, and the Borrowers,
with respect to the Notes, enforceable in accordance with their respective terms
except as limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting the enforcement of creditors rights generally, and except as the
remedy of specific performance or of injunctive relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
4.4. Consents or Approvals. The execution, delivery and performance of
---------------------
this Agreement and the Notes and the transactions contemplated herein do not
require any approval or consent of, or filing or registration with, any
governmental or other agency or authority, or any other party.
4.5. Title to Properties; Absence of Encumbrances. Each of the Parent
--------------------------------------------
and its Subsidiaries has good and marketable title to all of the properties,
assets and rights of every name and nature now used in the conduct of its
business, including, without limitation, such properties, assets and rights as
are reflected in the financial statements referred to in Section 4.6 (except
such properties, assets or rights as have been disposed of in the ordinary
course of business since the date thereof), free from all Encumbrances except
Permitted Encumbrances or those Encumbrances disclosed in Exhibit C hereto, and,
except as so disclosed, free from all defects of title that might materially
adversely affect such properties, assets or rights, token as a whole.
4.6. Financial Statements. The Parent has furnished to the Lenders its
--------------------
consolidated balance sheet as of January 31, 1999 and its consolidated
statements of income, changes in stockholders' equity and cash flow for the
fiscal year then ended, and related footnotes, audited and certified by Price
Waterhouse. The Company has furnished to the Lenders balance sheets and
statements of income on a consolidated and stand alone basis related to the
operations of Gardener's Eden which represent the most recent balance sheets and
statements of income available. All such financial statements were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods specified and present fairly the financial position
of the Parent and its Subsidiaries as of such dates and the results of the
operations of the Parent and its Subsidiaries for such periods. There are no
liabilities, contingent or otherwise, not disclosed in such financial statements
or in Exhibit C hereto that involve a material amount. There has been no
material adverse change in the properties, assets or condition, financial or
otherwise, of the Parent and its Subsidiaries since January 31, 1999.
4.7. Defaults. No Default exists.
--------
4.8. Taxes. The Parent and each Subsidiary have filed all federal,
-----
state and other tax returns or appropriate extensions required to be filed, and
all taxes, assessments and other governmental charges due from the Parent and
each Subsidiary have been fully paid, except for immaterial amounts which are
being contested by appropriate proceedings. The Parent and each
97
Subsidiary have established on their books reserves adequate for the payment of
all federal, state and other tax liabilities.
4.9. Litigation. Except as set forth on Exhibit D hereto, there is no
----------
litigation, arbitration, proceeding or investigation pending, or, to the
knowledge of the Parent's or any Subsidiary's officers, threatened, against the
Parent or any Subsidiary that, if adversely determined, could result in a
material judgment not fully covered by insurance, could result in a forfeiture
of all or any substantial part of the property of the Parent or its
Subsidiaries, or could otherwise have a material adverse effect on the assets,
business or prospects of the Parent or any Subsidiary.
4.10. Use of Proceeds. Following the application of the proceeds of
---------------
each Loan, the value of all "margin stock" as such term is used in Regulations U
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R. 221 and
224, as amended, of the Parent will not exceed 25% of the value of the total
assets of the Parent that are subject to the restrictions set forth in Section
6.5 and 6.6.
4.11. Subsidiaries. All the Subsidiaries of the Parent are listed on
------------
Exhibit E hereto. The Parent or a Subsidiary of the Parent is the owner, free
and clear of all liens and encumbrances, of all of the issued and outstanding
stock of each Subsidiary, except with respect to Properties which has issued
stock to other shareholders as described on Exhibit E hereto. All shares of
such stock have been validly issued and are fully paid and nonassessable, and no
rights to subscribe to any additional shares have been granted, and no options,
warrants or similar rights are outstanding. Brookstone Realty, Inc. conducts no
business and owns no property, assets or rights of any name or nature.
4.12. Investment Company Act. Neither the Parent nor any of its
----------------------
Subsidiaries is subject to regulation under the Investment Company Act of 1940,
as amended.
4.13. Compliance with ERISA. Except as disclosed on Schedule 4.13, the
---------------------
Parent and each member of the Controlled Group have fulfilled their obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and are in compliance in all material respects with the applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA; and no "prohibited transaction" or
"reportable event" (as such terms are defined in ERISA) has occurred with
respect to any Plan.
4.14. Environmental Matters.
---------------------
(a) The Parent and each of its Subsidiaries have obtained all permits,
licenses and other authorizations which are required under all Environmental
Laws, except to the extent failure to have any such permit, license or
authorization would not have a material adverse effect on the business,
financial condition or operations of the Parent and its Subsidiaries. The Parent
and each of its Subsidiaries are in compliance with the terms and conditions of
all such permits, licenses and authorizations, and are also in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained
98
in any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply would
not have a material adverse effect on the business, financial condition or
operations of the Parent and its Subsidiaries.
(b) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or, to the
knowledge of the Parent or any Subsidiary, threatened by any governmental or
other entity with respect to any alleged failure by the Parent or any of its
Subsidiaries to have any permit, license or authorization required in connection
with the conduct of its business or with respect to any Environmental Laws,
including, without limitation, Environmental Laws relating to the generation,
treatment, storage, recycling, transportation, disposal or release of any
Hazardous Materials, except to the extent that such notice, complaint, penalty
or investigation did not or could not result in the remediation of any property
owned or used by the Parent or any of its Subsidiaries costing in excess of
$100,00 per occurrence or $500,000 in the aggregate.
(c) To the best of the knowledge of the Parent or any Subsidiary,
no material oral or written notification of a release of a Hazardous Material
has been filed by or on behalf of the Parent or any of its Subsidiaries and no
property now or previously owned, leased or used by the Parent or any of its
Subsidiaries is listed or proposed for listing on The National Priorities List
under the Comprehensive Environmental Response, Compensation and Liability Act
of 1980, as amended, or on any similar state list of sites requiring
investigation or clean-up.
(d) There are no liens or encumbrances arising under or pursuant to
any Environmental Laws on any of the real property or properties owned, or to
the best knowledge of the Parent and their Subsidiaries, any real property
leased or used, by the Parent or any of its Subsidiaries and no governmental
actions have been taken or are in process which could subject any of such
properties to such liens or encumbrances or, as a result of which the Parent or
any of its Subsidiaries would be required to place any notice or restriction
relating to the presence of Hazardous Materials at any property owned by it in
any deed to such property.
(e) Neither Parent nor any of its Subsidiaries nor, to the best knowledge of
the Parent or any Subsidiary but without conducting any special investigation,
any previous owner, tenant, occupant or user of any property owned, leased or
Issued by the Parent or any of its Subsidiaries has (i) engaged in or permitted
any operations or activities upon or any use or occupancy of such property, or
any portion thereof, for the purpose of or in any way involving the handling,
manufacture, treatment, storage, use, generation, release, discharge, refining,
dumping or disposal (whether legal or illegal, accidental or intentional) of any
Hazardous Materials on, under, in or about such property, except to the extent
commonly used in day-to-day operations of such property and in such case only in
compliance with all Environmental Laws, or (ii) transported any Hazardous
Materials to, from or across such property except to the extent commonly used in
day-to-day operations of such property and, in such case, in compliance with,
all Environmental Laws; nor to the best knowledge of the Parent, but without
conducting any
99
special investigation, have any Hazardous Materials migrated from other
properties upon, about or beneath such property, nor, to the best knowledge of
the Parent or any Subsidiary, are any Hazardous Materials presently constructed,
deposited, stored or otherwise located on, under, in or about such property
except to the extent commonly used in day-to-day operations of such property
and, in such case, in compliance with, all Environmental Laws.
4.15. Liabilities of Stores. Stores has no indebtedness, liabilities or
---------------------
other obligations of any kind, direct or contingent, whether required to be
reflected on a balance sheet or not, other than Permitted Subsidiary
Liabilities. Stores is not a party to any contract, agreement or other
undertaking with any party other than the Company, except for the Master
Sublease Agreement, the Master Assignment and the Lender Agreements.
4.16. Liabilities of GE. GE has no indebtedness, liabilities or other
-----------------
obligations of any kind, direct or contingent, whether required to be reflected
on a balance sheet or not, other than Permitted Subsidiary Liabilities. GE is
not a party to any contract, agreement or other undertaking with any party other
than the Company, except for the Assignment and Assumption Agreement, purchase
orders, catalog production contracts and the Lender Agreements.
4.17. Subleased Properties. A list of the Subleased Properties is
--------------------
attached hereto as Schedule 4.17A. The lease for each of such Subleased
Properties was entered into by Brookstone Properties, Inc., or the Company; if
entered into by the Company, the Company has assigned its rights, but not its
obligations, under each such lease to Brookstone Properties, Inc. pursuant to
the Master Assignment; the landlord of each such Subleased Property has
consented, if consent is required, to the Master Assignment and Master Sublease;
the execution and delivery of the Master Sublease and the Subordination
Agreements do not constitute a default, or require consent from a landlord
(except for consents which have been received and any other consents described
on Schedule 4.17B) under any lease for any Subleased Property.
4.18 Gardener's Eden Asset Purchase. Upon the funding of the initial
------------------------------
Revolving Credit Advance, the Gardener's Eden asset purchase (the "Asset
Purchase") will be consummated pursuant to the terms of the Asset Purchase
Agreement. True, complete and correct copies of the Asset Purchase documents
have been delivered to the Agent and none of them has been modified, amended or
supplemented. The Borrowers hereby certify to the Lenders that all conditions
precedent to the obligations of the Buyer (as defined in the Asset Purchase
Agreement) set forth in Section 6.1 of the Asset Purchase Agreement, and all
conditions precedent to the obligations of the Gardener's Eden Seller set forth
in Section 6.2 of the Asset Purchase Agreement have been satisfied in full,
without modification, amendment or waiver. Company hereby confirms and restate
as if set forth herein in full the representations and warranties of the Buyer
set forth in Section 4 of the Asset Purchase Agreement and the representations
and warranties of the Seller set forth in Section 3 of the Asset Purchase
Agreement.
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SECTION V
---------
AFFIRMATIVE COVENANTS
---------------------
So long as the Lenders have any commitment to make Loans or issue Letters
of Credit hereunder or any Loan or other Obligation remains outstanding, the
Parent and the Borrowers covenant, jointly and severally, as follows:
5.1. Financial Statements and other Reporting Requirements. The
-----------------------------------------------------
Parents shall furnish to the Agent and to each Lender:
(a) as soon as available to the Parent, but in any event within 90
days after the end of each of its fiscal years, a consolidated and consolidating
balance sheet as of the end of, and a related consolidated and consolidating
statement of income, changes in stockholders' equity and cash flow for, such
year, audited and certified by Price Waterhouse LLP (or other independent
certified public accountants acceptable to the Agent and the Lenders) in the
case of such consolidated statements, and certified by the chief financial
officer in the case of such consolidating statements; and, concurrently with
such financial statements, a copy of said certified public accountants'
management report and a written statement by such accountants that, in the
making of the audit necessary for their report and opinion upon such financial
statements they have obtained no knowledge of any Default set out in Sections
5.7, 5.8, 5.9, 6.1 and 6.10 or, if in the opinion of such accountants any such
Default exists, they shall disclose in such written statement the nature and
status thereof;
(b) as soon as available to the Parent, but in any event within 45
days after the end of each of its fiscal quarters, a consolidated balance sheet
as of the end of, and a related consolidated statement of income and cash flow
for, the period then ended, certified by the principal financial officer of the
Parent but subject, however, to normal, recurring year-end adjustments
that shall not in the aggregate be material in amount;
(c) concurrently with the delivery of each financial statement
pursuant to subsections (a) and (b) of this Section 5.1, a report in
substantially the form of Exhibit F hereto signed on behalf of the Parent by its
chief financial officer;
(d) within 10 business days after the end of each fiscal month, a
report in substantially the form of Exhibit G hereto signed on behalf of the
Borrowers by their chief financial officers;
(e) promptly after the receipt thereof by the Parent, copies of any
reports submitted to the Parent by independent public accountants in connection
with any interim review of accounts of the Parent made by such accountants;
(f) promptly after the same are available, copies of all proxy
statements, financial statements and reports as the Parent shall send to its
stockholders or as the Parent may file with
101
the Securities and Exchange Commission or any governmental authority (excluding
tax returns, except on request) at any time having jurisdiction over the Parent
or its Subsidiaries;
(g) if and when the Parent, or any Borrower gives or is required to
give notice to the PBGC of any "Reportable Event" (as defined in Section 4043 of
ERISA) with respect to any Plan that might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that any member of the Controlled
Group or the Plan administrator of any Plan has given or is required to give
notice of any such Reportable Event, a copy of the notice of such Report Event
given or required to be given to the PBGC;
(h) immediately upon becoming aware of the existence of any
condition or event that constitutes a Default, written notice thereof specifying
the nature and duration thereof and the action being or proposed to be taken
with respect thereto;
(i) promptly upon becoming aware of any litigation or of any
investigative proceedings by a governmental agency or authority commenced or
threatened against the Parent or any of its Subsidiaries of which it has notice,
the outcome of which would or might have a materially adverse effect on the
assets, business or prospects of the Parent and its Subsidiaries on a
consolidated basis, written notice thereof and the action being or proposed to
be taken with respect thereto;
(j) promptly upon becoming aware of any investigative proceedings
by a governmental agency or authority commenced or threatened against the Parent
or any of its Subsidiaries regarding any potential violation of Environmental
Laws or any spill, release, discharge or disposal of any Hazardous Material,
written notice thereof and the action being or proposed to be taken with respect
thereto;
(k) within 45 days after the beginning of each fiscal year, budgets
for the Parent and its Subsidiaries for such fiscal year, on a quarter-by-
quarter basis and in such detail as the Agent may reasonably request; and
(l) the Company and GE will provide the Agent copies of all written
notices or other material written communications given or received by the
Company and/or GE pursuant to or in connection with the Asset Purchase
Agreement, including without limitation claims for indemnification under Section
9 of the Asset Purchase Agreement, provided, however, that any notices relating
to claims for losses that result from (i) customer returns and (ii) duties,
tariffs, excise taxes or penalties, which claims represent losses from Quarterly
Claims (as defined in the Asset Purchase Agreement) may be provided to the Agent
on a quarterly basis in the form of a statement of such Quarterly Claims as
provided in Section 9.3 of the Asset Purchase Agreement. Neither Company nor GE
will enter into any amendment or modification of or waive any of the provisions
of the Asset Purchase Agreement, including without limitation claims for
indemnification under Section 9 of the Asset Purchase Agreement.
(m) from time to time, such other financial data and information
about the Parent or its Subsidiaries as the Agent or the Lenders may reasonably
request.
102
5.2. Conduct of Business. Each of the Parent and its Subsidiaries
-------------------
shall:
(a) duly observe and comply in all material respects with all
applicable laws and valid requirements of any governmental authorities relative
to its corporate existence, rights and franchises, to the conduct of its
business and to its property and assets (including without limitation all
Environmental Laws and ERISA), and shall maintain and keep in full force and
effect all licenses and permits necessary in any material respect to the proper
conduct of its business;
(b) maintain its corporate existence; and
(c) remain engaged substantially in its existing business -- the Parent will
continue to be a holding company, conducting no business, incurring no
Indebtedness (other than as permitted under Section 6.1(d) and 6.2(f)) and
holding no assets other than 100% of the stock of the Company; the Company, GE
and Stores will conduct business as specialty and mail order retailers; and the
other Subsidiaries will continue their current operations as in effect at
closing (including, in the case of Brookstone Realty, Inc., conducting no
business and owning no assets).
5.3. Maintenance and Insurance. Each of the Parent and its Subsidiaries
-------------------------
shall maintain its properties in good repair, working order and condition as
required for the normal conduct of its business. Each of the Parent and its
Subsidiaries shall at all times maintain liability and casualty insurance with
financially sound and reputable insurers in such amounts as the officers of the
Parent in the exercise of their reasonable judgment deem to be adequate. On
request of the Agent from time to time, the Parent shall furnish to the Agent
and the Lenders certificates or other evidence satisfactory to the Agent and the
Lenders of compliance with the foregoing insurance provisions.
5.4. Taxes. The Parent shall pay or cause to be paid all taxes,
-----
assessments or governmental charges on or against it or any of its Subsidiaries
or its or their properties on or prior to the time when they become due;
provided that this covenant shall not apply to any tax, assessment or charge
that is being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been established and are being
maintained in accordance with generally accepted accounting principles if no
proceedings shall have been commenced to foreclose any lien securing such tax,
assessment or charge.
5.5. Inspection. The Parent shall permit the Agent and the Lenders or
----------
their designees, at any reasonable time, and upon reasonable notice (or if a
Default shall have occurred and is continuing, at any time and without prior
notice), to (a) visit and inspect the properties of the Parent and its
Subsidiaries, (b) examine and make copies of and take abstracts from the books
and records of the Parent and its Subsidiaries, and (c) discuss the affairs,
finances and accounts of the Parent and its Subsidiaries with their appropriate
officers, employees and accountants. In handling such information the Agent and
the Lenders shall exercise the same degree of care that they exercise with
respect to their own proprietary information of the same types to maintain the
103
confidentiality of any non-public information thereby received or received
pursuant to subsections 5.l(a), (b), or (c) except that disclosure of such
information may be made (i) to the subsidiaries, affiliates, employees,
officers, directors, or advisors of the Agent and the Lenders in connection with
their present or prospective business relations with the Parent, (ii) to
prospective transferees or purchasers of an interest in the Loans (so long as
any such transferee is regularly engaged in the business of making loans similar
to the Loans and agrees to be subject to the confidentiality requirements set
forth herein), (iii) as required by law, regulation, rule or order, subpoena,
judicial order or similar order and (iv) as may be required in connection with
the examination, audit or similar investigation of the Agent and the Lenders.
5.6. Maintenance of Books and Records. Each of the Parent and its
---------------------------------
Subsidiaries shall keep adequate books and records of account, in which true and
complete entries will be made reflecting all of its business and financial
transactions, and such entries will be made in accordance with generally
accepted accounting principles consistently applied and applicable law.
5.7. Consolidated Net Worth. The Parent shall maintain Consolidated Net
----------------------
Worth as of the end of each fiscal quarter, commencing with the quarter ending
April 30, 1999, of not less than the sum of (a) $40,000,000 plus (b) 75% of
Consolidated Net Income for the period from February 1, 1998 through the end of
the most recent fiscal year (but without deduction for losses during any fiscal
year during such period), less (c) repurchases by the Parent of its capital
stock from September 30, 1998 through the end of the most recent fiscal quarter
up to a maximum amount of $10,000,000.
5.8. Consolidated Total liabilities to Consolidated Tangible Net Worth
-----------------------------------------------------------------
Ratio. The Parent shall maintain a ratio of Consolidated Total Liabilities to
-----
Consolidated Tangible Net Worth of not greater than (a) 2.00-to-1 as of the end
of the Parent's third fiscal quarter of 1999 and each year thereafter, and (b)
1.0-to-1 at the end of each fiscal year and at the end of each other fiscal
quarter.
5.9. Cash Flow Coverage. The Parent shall, for each period of four
------------------
consecutive fiscal quarters, commencing with the four quarters ending April 30,
1999, maintain consolidated Cash Flow Coverage of not less than (a) 1.40-to-1
through the second quarter of fiscal year 2000 and (b) 1.45-to-1 as of the end
of each fiscal quarter thereafter.
5.10. Further Assurances. At any time and from time to time the Parent
------------------
shall, and shall cause each of its Subsidiaries to, execute and deliver such
further instruments and take such further action as may reasonably be requested
by the Agent and the Lenders to effect the purposes of this Agreement and the
Notes, including but not limited to, evidence of the perfection of the security
interest created under the GE Inventory Security Agreement and the Stores -
Company Inventory Security Agreement.
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SECTION VI
----------
NEGATIVE COVENANTS
------------------
So long as the Lenders have any commitment to lend or issue Letters of
Credit hereunder or any Loan or other Obligation remains outstanding, the Parent
and the Borrowers covenant as follows:
6.1. Indebtedness. Neither the Parent nor any of its Subsidiaries shall
------------
create, incur, assume, guarantee or be or remain liable with respect to any
Indebtedness, including inter-company Indebtedness, other than the following:
(a) Indebtedness of the Parent or any of its Subsidiaries to the Lenders
created under this Agreement and the Notes;
(b) Indebtedness of the Subsidiaries existing as of the date of this Agreement
and disclosed on Exhibit C hereto (C)in the financial statements referred to in
---------
Section 4.6;
(c) Indebtss of the Subsidiaries secured by Permitted Encumbrances;
(d) Indebtedness from the Company to the Parent not to exceed $500,000 at any
time and Indebtedness from the Parent to Company not to exceed $500,000 at any
time;
(e) Indebtedness of the Company to the City of Mexico, Missouri evidenced by a
capitalized lease of the Company's facility in the City of Mexico, Missouri in
an aggregate amount not to exceed $3,500,000;
(f) other unsecured Indebtedness of the Company in an aggregate outstanding
principal amount not exceeding $500,00
(g) the Guarantees permitted pursuant to Section 6.2; and
(h) Permitted Subsidiary Liabilities.
6.2. Contingent Liabilities. Neither the Parent nor any of its Subsidiaries
----------------------
shall create, incur, assume, guarantee or remain liable with respect to any
Guarantees other than the following:
(a) Guarantees in favor of the Lenders;
(b) Guarantees by the Subsidiaries existing on the date of this Agreement and
disclosed on Exhibit C hereto and in the financial statements referred to in
---------
Section 4.6;
105
(c) Guarantees resulting from the endorsement of negotiable instruments for
collection in the ordinary course of business;
(d) Guarantees by the Subsidiaries with respect to surety, appeal, performance
and return-of-money and other similar obligations incurred in the ordinary
course of business (exclusive of obligations for the payment of borrowed money)
not exceeding in the aggregate at any time $200,000;
(e) Guarantees by the Subsidiaries of normal trade debt relating to the
acquisition of goods and supplies;
(f) Guarantees by the Parent and the Company of obligations of Properties for
lease obligations with respect to retail stores used by the Company and Stores;
and
(g) Guaranty by the Company of obligations of GE pursuant to that certain
[Asset Purchase agreement] of even date herewith.
6.3. Sale and Leaseback. Neither the Parent nor any of its Subsidiaries
-------------------
shall enter into any arrangements, directly or indirectly, whereby it shall sell
or transfer any property owned by it in order to lease such property or lease
other property that the Parent or any such Subsidiary intends to use for
substantially the same purpose as the property being sold or transferred, if the
aggregate principal amount of all such outstanding leases under all such
arrangements would exceed $500,000.
6.4. Encumbrances. Neither the Parent nor any of its Subsidiaries shall
------------
create, incur, assume or suffer to exist any mortgage, pledge, security
interest, lien or other charge or encumbrance, including the lien or retained
security title of a conditional vendor upon or with respect to any of its
property or assets ("Encumbrances"), or assign or otherwise convey any right to
receive income, including the sale or discount of accounts receivable with or
wit recourse, except the following ("Permitted Encumbrances"):
----------------------
(a) Encumbrances in favor of the Lenders;
(b) Encumbrances against assets of the Subsidiaries existing as the date of
this Agreement and disclosed in Exhibit C hereto;
---------
(c) liens for taxes, fees, assessments and other governmental charges to the
extent that payment of the same may be postponed or is not required in
accordance with the provisions of Section 5.4;
(d) landlords' and lessors' liens in respect of rent not in default
or in default and being contested in good faith or liens in respect of pledges
or deposits under workmen's compensation, unemployment insurance, social
security laws, or similar legislation (other than ERISA) or in connection with
appeal and similar bonds incidental to litigation; mechanics', laborers' and
materialmen's and similar liens, if the obligations secured by such liens are
not
106
then delinquent; liens securing the performance of bids, tenders, contracts
(other than for the payment of money); and statutory obligations incidental to
the conduct of its business and that do not in the aggregate materially detract
from the value of its property or materially impair the use thereof in the
operation of its business;
(e) judgment liens that shall not have been in existence for a period longer
than 30 days after the creation thereof or, if a stay of execution shall have
been obtained, a period longer than 30 days after the expiration of such stay;
(f) rights of lessors under capital leases with Subsidiaries in an aggregate
principal amount not to exceed $4,000,000;
(g) security interests created by any Subsidiary in respect of any purchase
money obligations of any Subsidiary for tangible property used in its business
that at any time shall not exceed (i) $200,000 in the aggregate for all
Subsidiaries, other than GE, and (ii) $3,000,000 in the aggregate for GE,
provided that any such security interests shall not extend to property and
assets of auch Subsidiary not financed by such a purchase money obligation;
(h) easements, rights of way, restrictions and other similar charges or
Encumbrances relating to real property and not interfering in a material way
with the ordinary conduct of its business;
(i) Encumbrances on its property or assets created in connection with the
refinancing of Indebtedness secured by Permitted Encumbrances on such property,
provided that the amount of Indebtedness secured by any such Encumbrance shall
not be increased as a result of such refinancing and no such Encumbrance shall
extend to property and assets of any such Subsidiary not encumbered prior to any
such refinancing;
(j) Encumbrances in the nature of a security interest in checks created or to
be created in connection with a certain Welcome Check Warranty Agreement dated
September 1, 1994 between the Company and Equifax Check Services, Inc. (the
"Equifax Agreement") or similar agreements relating to the discounting of
customer checks;
(k) the grant by Stores of security interests in inventory to any pursuant to
the Subsidiary Inventory Security Agreement; and
(l) the grant by Stores of security interests in inventory to GE pursuant to
the GE Subsidiary Inventory Security Agreement.
6.5. Merger; Acquisitions Consolidation; Sale or Lease of Assets.
-----------------------------------------------------------
Neither the Parent nor any of its Subsidiaries shall sell, lease or otherwise
dispose of assets or properties (valued at the lower of cost or market) in any
fiscal year, other than (a) sales of inventory by the Subsidiaries in the
ordinary course of business and (b) sales, leases or other dispositions of
assets
107
by the Subsidiaries to third parties for fair market value in the
aggregate not in excess of 5% of Consolidated Tangible Net Worth as of the end
of its most recently completed fiscal year; or acquire all or substantially all
of the assets of any Person, except that the Borrowers may acquire all or
substantially all of the assets of any Person so long as (a) the aggregate
consideration for such acquisition or series of related acquisitions and
Investments, does not exceed $2,000,000, (b) no Default shall have occurred and
be continuing and (c) the acquired Person is a specialty retailer or direct
marketing company; or liquidate, merge or consolidate into or with any other
Person, provided that (a) any Subsidiary of the Parent other than the Company
may merge or consolidate into or with (i) the Company if no Default has occurred
and is continuing or would result from such merger and if the Company is the
surviving entity, or (ii) any other wholly-owned Subsidiary of the Parent if no
Default has occurred and is continuing or would result from such merger (b) the
Company may sell property as provided in Section 6.3 and (c) the Company may
assign all of its rights, title and interest in certain checks pursuant to the
provisions of the Equifax Agreement.
6.6. Additional Stock Issuance. The Parent shall not permit any of its
-------------------------
Subsidiaries to issue any additional shares of its capital stock or other equity
securities, any options therefor or any securities convertible thereto other
than to the Parent, except for issuance by Properties of non-voting preferred
shares to employees of the Company in New Hampshire. Neither the Parent nor any
of its Subsidiaries shall sell, transfer or otherwise dispose of any of the
capital stock or other equity securities of a Subsidiary, except to the Parent
or any of its wholly-owned Subsidiaries.
6.7. Equity Distributions. Neither the Parent nor the Company shall pay
--------------------
any dividends on any class of its capital stock or make any other distribution
or payment on account of or in redemption, retirement or purchase of such
capital stock; provided that this Section shall not apply to (a) the issuance,
delivery or distribution by the Parent of shares of its common stock pro rata to
its existing shareholders, (b) the purchase or redemption by the Parent of its
capital stock with the proceeds of the issuance of additional shares of capital
stock and (c) repurchases by the Parent of up to $10,000,000 of its capital
stock after the date hereof, and dividends from the Company to the Parent in an
amount equal to and used by the Parent for such repurchases.
6.8. Investments. Neither the Parent nor any of its Subsidiaries shall
-----------
make or maintain any Investments other than (a) Investments in the Borrowers and
the Brookstone Subsidiaries described on Schedule 6.8, which schedule shall be
delivered to Agent on or before August 3, 1999 (b) advances by the Company to
the Parent to enable the Parent to pay Delaware franchise taxes and other
routine operating expenses, and (c) Qualified Investments.
6.9. ERISA. Neither the Parent nor any member of the Controlled Group
-----
shall permit any Plan maintained by it to (a) engage in any "prohibited
transaction" (as defined in Section 4975 of the Code, (b) incur any "accumulated
funding deficiency" (as defined in Section 302 of ERISA) whether or not waived,
or (c) terminate any Plan in a manner that could result in the imposition of a
lien or encumbrance on the assets of the Parent or any of its Subsidiaries
pursuant to Section 4068 of ERISA.
108
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) $15,000,000; plus (b) 60% of the positive difference, if any,
between Consolidated EBITDA for the prior fiscal year and $17,039,000.
6.11. Subsidiary Indebtedness. Stores, GE, and the Brookstone
------------------------
Subsidiaries will not (a) create, incur or suffer to exist any indebtedness,
liabilities or other obligations of any kind, direct or contingent, whether
required to be reflected on a balance sheet or not, other than Permitted
Subsidiary Liabilities, or (b) enter into any contract, agreement or undertaking
with any Party other than the Company, except for the Master Sublease Agreement,
the Master Assignment, the Lender Agreements, contracts, agreements or
undertakings with respect to Permitted Subsidiary Liabilities, the Transitionary
Shared Services Agreement between ▇▇▇▇▇▇▇▇-Sonoma, Inc. and the Company, and, as
to Brookstone Properties, Inc., leases for store locations subleased to Stores.
6.12. Transactions with Affiliates. The Parent and the Borrowers will
----------------------------
not enter into any transaction, including without limitation, the purchase, sale
or exchange of property or the rendering of any service, with each other or with
any other Affiliate, except that (a) the Parent and the Borrowers may pay
salaries, fees and bonuses to their directors, officers and employees as are
usual and customary in their business, (b) the Parent and the Borrowers may
enter into transactions among themselves as provided under the Master
Assignment, the Master Sublease Agreement and the Subsidiary Inventory Security
Agreement and (c) the Parent and the Borrowers may enter into transactions with
the Brookstone Subsidiaries so long as all payments for such transactions (other
than payments to Brookstone Properties, Inc. under the Master Sublease) are made
solely by offsetting intercompany accounts receivables and payables.
SECTION VII
-----------
DEFAULTS
--------
7.1. Events of Default. There shall be an event of Default hereunder if any
------------------
of the following events occurs:
(a) the Borrowers shall fail to pay (a) any amount of principal of
any Loans, including Swingline Loans, or any Reimbursement Obligation when due,
or (b) any amount of interest thereon or any fees or expenses payable hereunder
or under the Notes within five days of the due date therefor; or
(b) The Parent, or the Borrowers shall fail to perform any term,
covenant or agreement contained in Sections 5.1(h), 5.2(b), 5.2(c) 5.5, 5.7
through 5.9 or 6.1 through 6.12, provided however, that if a failure to perform
-------- -------
the covenants contained in Sections 5.7, 5.9, 6.1, 6.5 and 6.10 are solely a
result of a change in one or more accounting principles used in the preparation
of financial statements, because of a change mandated by the Financial
Accounting
109
Standards Board, then an Event of Default relating to such Sections
shall not be an Event of Default if the covenants contained in such Sections
would have been complied with had the Parent, or the Borrowers continued to
employ those generally accepted accounting principles employed in the
prepation of their audited financial statements dated January 31, 1999.
(c) the Parent or the Borrowers shall fail to perform any covenant
contained in Sections 5), 5.1(i) or 5.2(a), and such failure shall continue for
15 days; or
(d) the Parent or the Borrowers shall fail to perform any term,
covenant or agreement (other than in respect of subsections 7.1(a) through (c)
hereof) contained in this Agreement and such default shall continue for 30 days
after notice thereof has been sent to the Parent by the Agent; or
(e) any representation or warranty of the Borrowers or the Parent
made in this Agreement or in the Notes or any other documents or agreements
executed in connection with the transactions contemplated by this Agreement or
in any certificate delivered hereunder shall prove to have been false in any
material respect upon the date when made or deemed to have been made; or
(f) the Parent or any of its Subsidiaries shall fail to pay at
maturity, or within any applicable period of grace, any obligations in excess of
$500,000 in the aggregate for Indebtedness, or for the use of real or personal
property, or fail to observe or perform any term, covenant or agreement
evidencing or securing such obligations for Indebtedness, or relating to such
use of real or personal property, the result of which failure is to permit the
holder or holders of such Indebtedness to cause such Indebtedness to become due
prior to its stated maturity upon delivery of required notice, if any; or
(g) the Parent or any of its Subsidiaries shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar official of itself or of all or a
substantial part of its property, (ii) be generally not paying its debts as such
debts become due, (iii) make a general assignment for the benefit of its
creditors, (iv) commence a voluntary case under the Federal Bankruptcy Code (as
now or hereafter in effect), (v) take any action or commence any case or
proceeding under any law relating to bankruptcy, insolvency, reorganization,
winding-up or composition or adjustment of debts, or any other law providing for
the relief of debtors, (vi) fail to contest in a timely or appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
under the Federal Bankruptcy Code or other law, (vii) take any action under the
laws of its jurisdiction of incorporation or organization similar to any of the
foregoing, or (viii) take any corporate action for the purpose of effecting any
of the foregoing; or
(h) a proceeding or case shall be commenced, without the application or
consent of the Parent or any of its Subsidiaries in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization, dissolution, winding
up, or composition or readjustment of its debts, (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of it or of all or any
substantial part of its assets, or (iii) similar relief in respect of it, under
any law relating to
110
bankruptcy, insolvency, reorganization, winding-up or composition or adjustment
of debts or any other law providing for the relief of debtors, and such
proceeding or case shall continue undismissed, or unstayed and in effect, for a
period of 90 days; or an order for relief shall be entered in an involuntary
case under the Federal Bankruptcy Code, against the Parent or such Subsidiary;
or action under the laws of the jurisdiction of incorporation or organization of
the Parent or any of its Subsidiaries similar to any of the foregoing shall be
taken with respect to the Parent or such Subsidiary and shall continue unstayed
and in effect for any period of 90 days; or
(i) a judgment or order for the payment of money shall be entered against the
Parent or any of its Subsidiaries by any court, or a warrant of attachment or
execution or similar process shall be issued or levied against property of the
Parent or such Subsidiary, that in the aggregate exceeds $1,500,000 and such
judgment, order, warrant or process shall continue undischarged or unstayed for
30 days; or
(j) the Parent or any member of the Controlled Group shall fail to
pay when due an amount or amounts aggregating in excess of $500,000 that it
shall have become liable to pay to the PBGC or to a Plan under Title IV of
ERISA; or notice of intent to terminate a Plan or Plans shall be filed under
Title IV of ERISA by the Parent, any member of the Controlled Group, any Plan
administrator or any combination of the foregoing, or the PBGC shall institute
proceedings under Title IV of ERISA to terminate or to cause a trustee to be
appointed to administer any such Plan or Plans or a proceeding shall be
instituted by a fiduciary of any such Plan or Plans against the Parent and such
proceedings shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any such Plan or Plans must be terminated; or
(k) the occurrence of a Change of Control.
7.2. Remedies. Upon the occurrence of an Event of Default described in
--------
subsections 7.1(g) and (h), immediately and automatically, and upon the
occurrence of any other Event of Default, at any time thereafter while such
Event of Default is continuing, at the Majority Lenders' option and declaration:
(a) the Lender's commitment to make any further Loans hereunder shall
terminate;
(b) the unpaid principal amount of the Loans together with accrued
interest and all other Obligations shall become immediately due and payable
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived;
(c) the Borrowers, jointly and severally, shall immediately provide
the Agent, for the ratable accounts of the Lenders, with cash in an amount of
105% of the stated amount of outstanding Letters of Credit to be held by the
Agent, for the ratable accounts of the Lenders, as collateral for the
Obligations; and
111
(d) the Agent may, and upon the request of the Majority Lenders,
shall exercise any and all rights the Agent and the Lenders have under this
Agreement, the Notes or any other documents or agreements executed in connection
herewith, or at law or in equity, and proceed to protect and enforce the Agent's
and the Lenders' rights by any action at law, in equity or other appropriate
proceeding.
7.3. Distribution of Proceeds. Notwithstanding anything to the contrary
------------------------
contained herein, in the event that following the occurrence or during the
continuance of any Event of Default, the Agent or any Lender receives any monies
on account of the Obligations from the Borrower otherwise, such monies shall be
distributed for application as follows:
(a) First, to the payment of or the reimbursement of the Agent for
or in respect of all costs, expenses, disbursements and losses which shall have
been incurred or sustained by the Agent in connection with the collection of
such monies by the Agent, or in connection with the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of Agent or the Lenders under this Agreement or any other Lender
Agreement;
(b) Second, to the payment of all interest, including interest on
overdue amounts and late charges, then due and payable with respect to the
Loans, allocate among the Lenders in proportion to their respective Commitment
Percentages;
(c) Third, to the payment of the outstanding principal balance of the Loans,
alloc among the Lenders in proportion to their respective Commitment
Percentages;
(d) Fourth, to any other outstanding Lender Obligations, allocated among the
Lenders in proportion to their respective Commitment Percentages; and
(e) Fifth, the excess, if any, shall be returned to the Borrowers or to such
other persons as are entitled thereto.
SECTION VIII
------------
CONSENTS; AMENDMENTS; WAIVERS; REMEDIES
---------------------------------------
8.1. Actions by Lenders. Except as otherwise expressly set forth in any
particular provision of this Agreement, any consent or approval required or
permitted by this Agreement to be given by the Lenders, including without
limitation under Section 8.2, may be given, and any term of this Agreement or of
any other instrument related hereto or mentioned herein, including the Master
Assignment, the Master Sublease, and the Subsidiary Inventory Security
Agreement, may be amended, and the performance or observance by the Parent or
the Borrowers of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) with, but
only with, the written consent of the Parent, the Borrowers and the Majority
Lenders provided, however, that without the written consent of all Lenders:
112
(a) no reduction in the interest rates on or any fees relating to the Loans
shall be made;
(b) no extension or postponement shall be made of the stated time of payment
of the principal amount of, interest on, or fees payable to the Lenders relating
to the Loans;
(c) no increase in the Commitment Amount, or extension of the Revolving Credit
Termination Date shall be made;
(d) no release of any guarantor of the Obligations shall be made;
(e) no change in the definition of the term "Majority Lenders" shall be made;
(f) no change in the provisions of this Section 8.1 shall be made; and
(g) no increase in the Commitment Percentage shall be made.
8.2. Actions by Parent or Borrowers. No delay or omission on the Agent's or
------------------------------
the Lenders' part in exercising their rights and remedies against the Parent,
the Borrowers or any other interested party shall constitute a waiver. A breach
by the Parent or the Borrowers of their respective obligations under this
Agreement may be waived only by a written waiver executed by the Agent and the
Lenders in accordance with Section 8.1. The Agent's and the Lenders' waiver of
the Parent's or the Borrowers' breach in one or more instances shall not
constitute or otherwise be an implicit waiver of subsequent breaches. To the
extent permitted by applicable law, the Parent and the Borrowers each hereby
agrees to waive, and does hereby absolutely and irrevocably waive (a) all
presentments, demands for performance, notices of protest and notices of
dishonor in connection with any of the Indebtedness evidenced by the Notes, (b)
any requirement of diligence or promptness on the Agent's or the Lenders' part
in the enforcement of its rights under the provisions of this Agreement or any
Lender Agreement, and (c) any and all notices of every kind and description
which may be required to be given by any statute or rule of law with respect to
its liability (i) under this Agreement or in respect of the Indebtedness
evidenced by the Notes or any other Obligation or (ii) under any other Lender
Agreement. No course of dealing between the Parent, the Borrowers and the Agent
or the Lenders shall operate as a waiver of any of the Agent's or the Lenders'
rights under this Agreement or any Lender Agreement or with respect to any of
the Obligations. This Agreement shall be amended only by a written instrument
executed by the Agent and the Lenders in accordance with Section 8.1 making
explicit reference to this Agreement. The Agent's and the Lenders' rights and
remedies under this Agreement and under all subsequent agreements between the
Agent, the Lenders, the Parent and the Borrowers shall be cumulative and any
rights and remedies expressly set forth herein shall be in addition to, and not
in limitation of, any other rights and remedies which may be applicable to the
Agent and the Lenders in law or at equity.
113
SECTION IX
----------
SUCCESSORS AND ASSIGNS
----------------------
9.1. General. This Agreement shall be binding upon and shall inure to
-------
the benefit of the parties hereto and their respective successors (which shall
include in the case of the Agent or any Lender any entity resulting from a
merger or consolidation) and assigns, except that (a) none of the Parent, or the
Borrowers may assign its rights or obligations under this Agreement, and (b)
each Lender may assign its rights in this Agreement only as set forth below in
this Section IX.
9.2. Assignments.
-----------
(a) Assignments. In compliance with applicable laws with respect
-----------
to such assignment and with the consent of the Company (provided that if there
shall exist an Event of Default, the Company's consent shall not be required for
any such assignment) and the Agent (which consents in all cases shall not be
unreasonably withheld), a Lender may assign to one or more financial
institutions, including commercial finance institutions, organized or existing
under the laws of the United States of America, any state thereof or Canada and
having capital and surplus, net worth or the equivalent of not less than
$100,000,000 (each a "Successor Lender") a proportionate part of its rights and
obligations in connection with this Agreement, its Notes and the related Lender
Agreements and each such Successor Lender shall assume such rights and
obligations pursuant to an Assignment and Acceptance Agreement ("Assignment and
Acceptance Agreement") duly executed by such Successor Lender and such assigning
Lender and acknowledged and consented to by the Company and the Agent,
substantially in the form of Exhibit K attached hereto. Any assignment under
this Section 9.2(a) shall be in a minimum amount of $5,000,000. In connection
with any assignment under this Section 9.2(a) there shall be paid to the Agent
by the assigning Lender the Successor Lender an administrative processing fee in
the amount of $3,500.
(b) Assignment Procedures. In the event of an assignment in accordance with
---------------------
Section 9.2(a), upon execution and delivery of such an assignment at least five
(5) Business Days prior to the proposed assignment date, and payment by such
Successor Lender to the assigning Lender an amount equal to the purchase price
agreed between such assigning Lender and such Successor Lender, such Successor
Lender shall become party to this Agreement as a signatory hereto and shall have
all the rights and obligations of a Lender under this Agreement and the other
Lender Agreements with an interest therein as set forth in such assignment, and
such assignor making such assignment shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by any
party shall be required. Upon the consummation of any such assignment, the
assigning Lender, the Successor Lender, the Parent and the Borrowers shall make
appropriate arrangements so that, if required, new Notes are issued to the
Successor Lender and replacement Notes are issued to the assigning Lender in
principal amounts reflecting their respective revised interests.
114
(c) Register. The Agent shall maintain a register (the "Register")
for the recordation of (i) the names and addresses of all Successor Lenders that
enter into Assignment and Acceptance Agreements, (ii) the interests of each
Lender, and (iii) the amounts of the Loans owing to each Lender from time to
time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Parent, the Borrowers, the Agent and the Lenders may
treat each person whose name is registered therein for all purposes as a party
to this Agreement. The Register shall be available for inspection by the
Parent, the Borrowers oy Lender at any reasonable time and from time to time
upon reasonable prior notice.
(d) Further Assurances. The Parent and the Borrowers shall sign
such documents and take such other actions from time to time reasonably
requested by the Agent or a Lender to enable any Successor Lender to share in
the benefits and rights created by the Lender Agreements.
(e) Assignments to Federal Reserve Bank. Any Lender at any time
may assign all or any portion of its rights under this Agreement and its Notes
to a Federal Reserve Bank. No such assignment shall release the transferor
Lender from its obligations hereunder.
9.3. Participations. Any Lender may, without the consent of the Parent,
the Borrowers or the Agent, at any time grant or offer to grant to one or more
financial institutions ("Credit Participants") participating interests in such
Lender's rights and obligations in this Agreement, its Notes and the related
Lender Agreements, and each such Credit Participant shall acquire such
participation subject to the terms set forth below.
(a) Amount. Each such participation shall be in a minimum amount
of at least $5,000,000; provided that a Lender grant a participation to an
affiliate without any limitation on the amount thereof.
(b) Procedure. Each Lender granting such participation shall
comply with all applicable laws with respect to such transfer and shall remain
responsible for the performance of its obligations hereunder and under the other
Lender Agreements and shall retain the sole right and responsibility to exercise
its rights and to enforce the obligations of the Parent, and the Borrowers
hereunder and under the other Lender Agreements, including the right to consent
to any amendment, modification or waiver of any provision of any Lender
Agreement, except for those matters referred to in Section 8.1 which require the
consent of all Lenders and which may also require the consent of each Credit
Participant.
(c) Dealing with Lenders. The Parent and the Borrowers shall
continue to deal solely and directly with the Lenders in connection with their
rights and obligations under this Agreement and the other Lender Agreements.
(d) Rights of Credit Participants. The Parent and the Borrowers
each agree that each Credit Participant shall, to the extent provided in its
participation instrument, be entitled to the benefits of Sections 2.8, 2.9,
2.13, 7.3 and 11.3 with respect to its participating interest; provided,
however, that no Credit Participant shall be entitled to receive any greater
payment under such
115
Sections than the Lender granting such participation would have been entitled to
receive with respect to the interests transferred.
(e) Notice. At the time of granting any participation, the Lender
granting such participation shall notify the Agent, the Borrowers and the
Parent.
SECTION X
---------
THE AGENT
---------
10.1. Authorization and Action. Each Lender hereby appoints and
authorizes the Agent to take such action on its behalf and to exercise such
powers under this Agreement and the other Lender Agreements as are delegated to
the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement and the other Lender Agreements (including, without limitation,
enforcement or collection of the Notes), the Agent shall not be required to
exercise any discretion or take any action, but shall be required to act or to
refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of the Lenders, and such instructions shall
be binding upon all Lenders; provided, however, that the Agent shall not be
required to take any action which exposes the Agent to liability or which is
contrary to this Agreement or the other Lender Agreements or applicable law.
Subject to the foregoing provisions and to the other provisions of this Section
X, the Agent shall, on behalf of the Lenders: (a) execute any documents on
behalf of the Lenders providing collateral for or guarantees of the Obligations;
(b) hold and apply any collateral for the Obligations, and the proceeds thereof,
at any time received by it, in accordance with the provisions of this Agreement
and the other Lender Agreements; (c) exercise any and all rights, powers and
remedies of the Lenders under this Agreement or any of the other Lender
Agreements, including the giving of any consent or waiver or the entering into
of any amendment, subject to the provisions of Section 8.1; (d) at the direction
of the Lenders, execute, deliver and file UCC financing statements, mortgages,
deeds of trust, lease assignments and such other agreements in respect of any
collateral for the Obligations, and possess instruments included in the
collateral on behalf of the Lenders; and (e) in the event of acceleration of the
Indebtedness of the Borrowers hereunder, act at the direction of the Lenders to
exercise the rights of the Lenders hereunder and under the other Lender
Agreements.
10.2. Agent's Reliance, Etc. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the Lenders for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement or the other Lender Agreements, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Agent: (a) may treat the payee of any Note as the holder thereof
until the Agent receives written notice of the assignment or transfer thereof
signed by such payee and in form required under Section IX hereof; (b) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representations to any Lender
and shall not be responsible to
116
any Lender for any statements, warranties or representations made in or in
connection with this Agreement or the other Lender Agreements; (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement or the other Lender
Agreements on the part of the Parent, the Borrowers or any other entity or to
inspect the property (including the books and records) of the Parent, the
Borrowers or any other entity; (e) shall not be responsible to any Lender for
the due execution, legality, validity, enforceability, genuineness, sufficiency
or value of this Agreement or the other Lender Agreements or any other
instrument or document furnished pursuant hereto or thereto; and (f) shall incur
no liability under or in respect of this Agreement or the other Lender
Agreements by acting upon any notice, consent, certificate or other instrument
or writing (which may be by telecopy or telegram) believed by the Agent to be
genuine and signed or sent by the proper party or parties.
10.3. BankBoston, N.A. as Lender. With respect to its Commitment
Percentage of the Loans hereunder, BankBoston, N.A. shall have the same rights
and powers under this Agreement and the other Lender Agreements as any other
Lender and may exercise the same as though it were not the Agent; and the term
"Lender" or "Lender(s)" shall, unless otherwise expressly indicated, include
BankBoston, N.A. in its individual capacity. BankBoston, N.A. and its
affiliates may lend money to, and generally engage in any kind of business with,
the Parent, the Borrowers, any of the Parent's or the Borrowers' Affiliates and
any entity that may do business with or own securities of the Parent, the
Borrowers or any of their Affiliates, all as if BankBoston, N.A. were not the
Agent and"without any duty to account therefor to the Lenders.
10.4. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and based
on the financial statements referred to in Section 5.1 and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Agent or any other Lender and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
10.5. Indemnification of Agent. Each Lender agrees to indemnify the
Agent (to the extent that the Agent is not reimbursed by the Borrowers), ratably
according to each Lender's Commitment Percentage, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
imposed on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Lender Agreement or any action taken
or omitted by the Agent in such capacity under this Agreement; provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Agent's gross negligence or wilful misconduct. Without
limitation of the foregoing, each Lender agrees to reimburse the Agent promptly
upon demand for its ratable share of any out-of-pocket expenses (including
counsel fees) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal
117
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement and each other Lender Agreement, to the
extent that the Agent is not reimbursed for such expenses by the Borrowers.
10.6. Successor Agent. Except as provided below, the Agent may resign
at any time that it ceases to hold at least 34% of the aggregate Commitment
Percentages by giving not less than 15 days' written notice thereof to the
Lenders, the Parent and the Company. Upon any such resignation, the Lenders
shall have the right to appoint a successor Agent which shall be reasonably
acceptable to the Parent and the Company. If no successor Agent shall have been
so appointed by the Lenders (other than the resigning Agent), and shall have
accepted such appointment, within thirty (30) days after the retiring Agent's
giving notice of resignation, then the retiring Agent may, on behalf of the
Lenders, appoint a successor Agent, which shall be a commercial bank or
financial institution organized under the laws of the United States of America
or of any state thereof and having a combined capital and surplus of at least
$50,000,000 and which shall be reasonably acceptable to the Parent and the
Company. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Agreement and the other Lender Agreements. After any retiring Agent's
resignation hereunder as Agent, the provisions of this Section X shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Lender Agreements.
10.7. Amendment of Section X. The Parent and the Borrowers each hereby
agree that the foregoing provisions of this Section X constitute an agreement
among the Agent and the Lenders (and the Agent and the Lenders acknowledge that
except for the provisions of Section 10.6, the Parent and the Borrowers are not
parties to or bound by such foregoing provisions) and that any and all of the
provisions of this Section X may be amended at any time by the Lenders without
the consent or approval of, or notice to, the Parent or the Borrowers (other
than the requirement of notice to the Parent and the Company of the resignation
of the Agent and the appointment of a successor Agent).
SECTION XI
----------
MISCELLANEOUS
-------------
11.1. Notices. Unless otherwise specified herein, all notices
hereunder to any party hereto shall be in writing and shall be deemed to have
been given when delivered by hand, when properly deposited in the mails postage
prepaid, when sent by telex, answerback received, or electronic facsimile
transmission, or when delivered to the telegraph company or overnight courier,
addressed to such party at its address indicated below:
118
(a) If to the Parent or the Borrowers, at
Brookstone, Inc.
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Executive Vice President and
Chief Financial Officer
(b) If to the Agent, at
BankBoston, N.A., as Agent
Retail/Apparel/Consumer Division
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇-▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Director
(c) If to any Lender, at the address(es) and to the attention of
the person(s) specified below such Lender's name on the execution page of this
Agreement (or in the case of a Successor Lender, at the address(es) and to the
attention of the person(s) specified in the Assignment and Acceptance Agreement
executed by such Successor Lender); or
(d) at any other address specified by such party in writing.
11.2. Expenses. The Parent and the Borrowers, jointly and severally,
will pay on demand all expenses of the Agent and the Lenders in connection with
the preparation, waiver or amendment of this Agreement, the Notes or other
documents executed in connection therewith, or the administration, default or
collection of the Loans or other Obligations or administration, default,
collection in connection with the Agent's and the Lenders' exercise,
preservation or enforcement of any of their rights, remedies or options
thereunder, including, without limitation, reasonable fees of outside legal
counsel or the allocated costs of in-house legal counsel, reasonable accounting,
consulting, brokerage or other similar professional fees or expenses, and any
fees or expenses associated with any travel or other costs relating to any
appraisals or examinations conducted in connection with the Obligations or any
collateral therefore and the amount of all such expenses shall, until paid, bear
interest at the rate applicable to principal hereunder (including any default
rate). Prior to any Default, the Agent shall notify the Company prior to
incurring any expenses for its or any Lender's in-house legal counsel or for any
accountants.
11.3. Set-Off. Regardless of the adequacy of any collateral or other
means of obtaining repayment of the Obligations, any deposits, balances or other
sums credited by or due from the head office of the Lenders or any of their
branch offices to the Parent or any of the Borrowers may, at any time and from
time to time after the occurrence of an Event of Default hereunder, without
notice to the Parent or the Borrowers or compliance with any other condition
precedent
119
now or hereafter imposed by statute, rule of law, or otherwise (all of which are
hereby expressly waived) be set off, appropriated, and applied by the Lenders
against any and all obligations of the Parent and the Borrowers to the Lenders
or any of their affiliates in such manner as the head office of the Lenders or
any of their branch offices in their sole discretion may determine, and the
Parent and each of the Borrowers hereby grant the Lenders a continuing security
interest in such deposits, balances or other sums for the payment and
performance of all such obligations.
11.4. Term of Agreement. This Agreement shall continue in force and
effect so long as the Lenders have any commitment to make Loans or issue Letters
of Credit hereunder or any Loan, any Letter of Credit or any other Obligation
shall be outstanding.
11.5. No Waivers. No failure or delay by the Agent or the Lenders in
exercising any right, power or privilege hereunder or under the Notes or under
any other documents or agreements executed in connection herewith shall operate
as a waiver thereof; nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein and in the Notes provided are
cumulative and not exclusive of any rights or remedies otherwise provided by
agreement or law.
11.6. Governing Law. This Agreement and the Notes shall be deemed to be
contracts made under seal and shall be construed in accordance with and governed
by the laws of The Commonwealth of Massachusetts (without giving effect to any
conflicts of laws provisions contained therein).
11.7. Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures hereto and thereto were
upon the same instrument.
11.8. Partial Invalidity. The invalidity or unenforceability of any one
or more phrases, clauses or sections of this Agreement shall not affect the
validity or enforceability of the remaining portions of it.
11.9. Captions. The captions and headings of the various sections and
subsections of this Agreement are provided for convenience only and shall not be
construed to modify the meaning of such sections or subsections.
11.10. WAIVER OF JURY TRIAL. THE AGENT, THE LENDERS, THE PARENT AND THE
BORROWERS AGREE THAT NONE OF THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED
UPON, OR ARISING OUT OF, THIS AGREEMENT, THE NOTES, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR
(B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE
BEEN FULLY DISCUSSED BY THE AGENT, THE LENDERS, THE PARENT AND THE BORROWERS,
AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS. NONE OF THE AGENT, THE
LENDERS, THE PARENT OR THE BORROWERS HAS AGREED WITH OR REPRESENTED TO ANY
120
OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
11.11. Entire Agreement. This Agreement, the Notes, the Lender
Agreements and the documents and agreements executed in connection herewith
constitute the final agreement of the parties hereto and supersede any prior
agreement or understanding, written or oral, with respect to the matters
contained herein and therein.
121
IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Agreement to be executed by their duly authorized officers as of the day and
year first above written.
BROOKSTONE, INC.
By:__________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer
BROOKSTONE COMPANY, INC.
By:__________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer
BROOKSTONE STORES, INC.
By:__________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer
BROOKSTONE ACQUISITIONS SUB, INC.
By:__________________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
122
BANKBOSTON, N.A.,
as Agent for the Lenders
By:__________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
BANKBOSTON, N.A.
By:__________________________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
THE FIRST NATIONAL BANK OF CHICAGO
By:_______________________________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
USTRUST
By:_______________________________________________
Name: P. ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By:_______________________________________________
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
Exibit A-1
----------
123
BROOKSTONE COMPANY, INC.
BROOKSTONE STORES, INC.
BROOKSTONE ACQUISITIONS SUB, INC.
FORM OF PROMISSORY NOTE
May __, 1999
_____________$ Boston, Massachusetts
For value received, the undersigned, jointly and severally, hereby promise
to pay to ________________(the "Lender"), or order, at the head office of
BankBoston, N.A., as Agent, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, the
principal amount of__________ Dollars ($_____________) or such lesser amount as
shall equal the principal amount outstanding hereunder on July 31, 2002 (the
"Revolving Credit Termination Date"), in lawful money of the United States of
America and in immediately available funds, and to pay interest on the unpaid
principal balance hereof from time to time outstanding, at said office and in
like money and funds, for the period commencing on the date hereof until paid in
full, at the rates per annum and on the dates provided in the Amended and
Restated Credit Agreement referred to below. All principal remaining unpaid and
any accrued but unpaid interest shall be due and payable on July 31, 2002.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Amended and Restated Credit Agreement
dated as of May __, 1999 by and among Brookstone, Inc., the undersigned, the
Lender, the other lenders party thereto and BankBoston, N.A., as Agent (herein,
as the same may from time to time be amended or extended, referred to as the
"Credit Agreement"), but neither this reference to the Credit Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned makers of this Note to pay the principal of and
interest on this Note as herein provided.
In case an Event of Default (as defined in the Credit Agreement) shall
occur, the aggregate unpaid principal of and accrued interest on this Note shall
become or may be declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.
The undersigned may at their option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Credit Agreement.
124
Each undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained therein).
BROOKSTONE COMPANY, INC.
By:___________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
BROOKSTONE STORES, INC.
By: ___________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President and
Chief Financial Officer
BROOKSTONE ACQUISITIONS SUB, INC.
By: ___________________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
Witness (as to all): ______________________
125
SCHEDULE I TO PROMISSORY NOTE
-----------------------------
AMOUNT TYPE OF LOAN
OF (EURODOLLAR OR INTEREST INTEREST AMOUNT NOTATION
DATE LOAN BASE RATE) RATE* PERIOD** PAID MADE BY
----- ------ ------------- -------- --------- ------ --------
___________________________
* For Base Rate Loans, insert "Base Rate".
** For Eurodollar Loans.
126
EXHIBIT A-2
-----------
BROOKSTONE COMPANY, INC.
BROOKSTONE STORES, INC.
PROMISSORY NOTE
September __, 1997
_______________$ Boston, Massachusetts
For value received, the undersigned, jointly and severally, hereby promise
to pay to _____________________ (the "Lender"), or order, at the head office of
BankBoston, N.A., as Agent, at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, the
principal amount of ______________ Dollars ($_______________) or such lesser
amount as shall equal the principal amount outstanding hereunder on July 31,
2002 (the "Revolving Credit Termination Date"), in lawful money of the United
States of America and in immediately available funds, and to pay interest on the
unpaid principal balance hereof from time to time outstanding, at said office
and in like money and funds, for the period commencing on the date hereof until
paid in full, at the rates per annum and on the dates provided in the Credit
Agreement referred to below. All principal remaining unpaid and any accrued but
unpaid interest shall be due and payable on July 31, 2002.
This Note is issued pursuant to, and entitled to the benefits of, and is
subject to, the provisions of a certain Credit Agreement dated as of September
__, 1997 by and among Brookstone, Inc., the undersigned, the Lender, the other
lenders party thereto and BankBoston, N.A., as Agent (herein, as the same may
from time to time be amended or extended, referred to as the "Credit
Agreement"), but neither this reference to the Credit Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned makers of this Note to pay the principal of and
interest on this Note as herein provided.
In case an Event of Default (as defined in the Credit Agreement) shall
occur, the aggregate unpaid principal of and accrued interest on this Note shall
become or may be declared to be due and payable in the manner and with the
effect provided in the Credit Agreement.
The undersigned may at their option prepay all or any part of the principal
of this Note before maturity upon the terms provided in the Credit Agreement.
127
EXHIBIT B
---------
BROOKSTONE COMPANY, INC.
BROOKSTONE STORES, INC.
NOTICE OF BORROWING OR CONVERSION
BankBoston, N.A.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Credit Agreement Dated as of May , 1999 (the "Agreement")
-----------------------------------------------------------
Ladies and Gentlemen:
Pursuant to Section 2.2 of the Agreement the undersigned hereby confirms
its request made on _____________, 19___ for a [Base Rate] [Eurodollar] Loan in
the amount of $____________* on ____________, 199. After the making of such
Loan, the aggregate amount of Loans and Letters of Credit outstanding will not
exceed the Borrowing Base in effect as of the end of the Company's last fiscal
month end.
[The Interest Period applicable to said Loan will [be (one) (two) (three)
(six) months].**
[Said Loan represents a conversion of the [Base Rate] [Eurodollar] Loan in
the same amount made on ______________.]***
The representations and warranties contained or referred to in Section IV
of the Agreement are true and accurate on and as of the effective date of the
Loan as though made at and as of such date (except to the extent that such
representations and warranties expressly relate to an earlier date); and no
Default has occurred and is continuing or will result from the Loan.
BROOKSTONE COMPANY, INC.
By:
Name:
Title:
128
BROOKSTONE STORES, INC.
Date
By:
Name:
Title:
________________
* Eurodollar Loans must be in a minimum amount of $1,000,000 and in
integral multiplies of $500,000.
** To be inserted in any request for a Eurodollar Loan.
*** To be inserted in any request for a conversion.
129
Each undersigned maker hereby waives presentment, demand, notice of
dishonor, protest and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note.
This instrument shall have the effect of an instrument executed under seal
and shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (without giving effect to any conflicts of laws
provisions contained herein).
BROOKSTONE COMPANY, INC.
By: ________________________________
Name:
Title:
BROOKSTONE STORES, INC.
By: ________________________________
Name:
Title:
Witness (as to both): _______________________
130
EXHIBIT C
---------
INDEBTEDNESS; ENCUMBRANCES
--------------------------
[to be provided by the Parent]
131
EXHIBIT D
---------
LITIGATION
----------
[to be provided by the Parent]
132
EXHIBIT E
---------
SUBSIDIARIES
------------
[to be provided by the Parent]
133
EXHIBIT F
---------
BROOKSTONE, INC.
REPORT OF CHIEF FINANCIAL OFFICER
BROOKSTONE, Inc. (the "Parent") HEREBY CERTIFIES that:
This Report is furnished pursuant to Section 5.1(c) of the Credit Agreement
dated as of May __, 1999 by and among the Parent, Brookstone Company, Inc.,
Brookstone Stores, Inc., the lenders party thereto and BankBoston, N.A., as
Agent (the "Agreement"). Unless otherwise defined herein, the terms used in
this Report have the meanings given to them in the Agreement.
As required by Section 5.1(a) of the Agreement, consolidated financial
statements of the Parent and its Subsidiaries for the [year/quarter] ended
____________, 199___ (the "Financial Statements") prepared in accordance with
generally accepted accounting principles consistently applied accompany this
Report. The Financial Statements present fairly the consolidated financial
position of the Parent and its Subsidiaries as at the date thereof and the
consolidated results of operations of the Parent and its Subsidiaries for the
period covered thereby (subject only to normal recurring year-end adjustments).
The figures set forth in Schedule A for determining compliance by the
Parent with the financial and certain other covenants contained in the Agreement
present fairly the information set forth therein as of the date or for the
period to which this certificate relates.
The activities of the Parent and its Subsidiaries during the period covered
by the Financial Statements have been reviewed by the Chief Financial Officer or
by employees or agents under his immediate supervision. Based on such review,
to the best knowledge and belief of the Chief Financial Officer, and as of the
date of this Report, no Default has occurred.*
WITNESS my hand this __________ day of _____________, 19___.
BROOKSTONE, INC.
By:
Name:
Title:
-------------
* If a Default has occurred, this paragraph is to be modified with an
appropriate statement as to the nature thereof, the period of existence
thereof and what action the Parent has taken, is taking, or proposes to
take with respect thereto.
134
SCHEDULE A
to
EXHIBIT F
----------
COVENANT COMPLIANCE WORKSHEET
------------------------------
Consolidated Net Worth (Section 5.7)
------------------------------------
REQUIRED:
(i) Base Net Worth $_________
(ii) 75% of Consolidated Net Income from
February 1, 1998h the
most recent year end
(without deduction for any annual losses) $_________
(iii) Repurchases of capital stock by
the Parent since September 30, 1998 $_________
(iv) (i) plus (ii) less (iii) $_________
---- ----
ACTUAL:
$_________
Ratio of Consolidated Total Liabilities to
Consolidated Tangible Net Worth (Section 5.8)
---------------------------------------------
REQUIRED: Not greater than /1/: 1.00
=============================== ====
ACTUAL:
(i) Consolidated Total Liabilities $____
(ii) Consolidated Total Assets $____
(iii) The sum of goodwill ($_______), intangible
assets ($________), reserves ($________),
write-up in book value of
asset_______), minority interests
($__________), and Consolidated Total Liabilities $____
135
(iv) Consolidated Tangible Net Worth
line (ii) less line (iii)) $____
(v) Line (i) divided by line (iv) : 1.00
===== ====
-----------------------
/1/ 2.00 as of the end of the third fiscal quarter of 1999 and each year
thereafter; 1.0 at fiscal year end and at other fiscal quarter ends.
136
Ratio of Cash Flow to Debt Service (Section 5.9)
------------------------------------------------
REQUIRED: Not less than 1.40:1 through the second quarter of fiscal year 2000
and 1.45:1 thereafter
ACTUAL: Cash Flow Convenant
(Section 5.9)
Q1 Q2 Q3 Q4 12 MONTHS
___________________________________________________ ROLLING
Consolidated Net Income
(After taxes)
Less: Extraordinary Gains
Plus: Extraordinary Losses
Plus: Depreciation/
Amortization
Plus: Rent
Plus: Interest Expense
Plus: T
(A) Subtotal
Rent
Plus: Interest Expense
Plus: Current Maturities of
Indebtedness
(B) Subtotal
Cash Flow Coverage:
Line (A) divided by line (B)
137
Indebtedness (Section 6.1)
--------------------------------------------
(i) Indebtedness of the Company to
the Parent (not to exceed
$500,000) $___________________
(ii) Indebtedness of the Parent to
the Company (not to exceed
$500,000) $___________________
(iii) Indebtedness of the Company to
the Town of Mexico, Missouri
(not to exceed $3,500,000) $___________________
(iv) Indebtedness of Stores to the Company
(v) other unsecured Indebtedness of
the Parent and the Company
(not to exceed $500,000 in
the aggregate) $___________________
Encumbrances (Section 6.4(g))
-----------------------------
Encumbrances in respect of purchase
money obligations for tangible property
(not to exceed $200,000) $___________________
Sale or Lease of Assets (Section 6.5)
-------------------------------------
Sales, leases and other dispositions
of assets or properties (valued at the
lower of cost or market), other than
as permitted under Section 6.5.,
since the beginning of the
current fiscal year to exceed 5% of
Consolidated Tangible Net Worth) $___________________
138
Capital Expenditures (Section 6.10)
-----------------------------------
(i) Capital Expenditures since the beginning of the current fiscal
year (not to exceed $15,000,000 plus $________, 60% of the positive
difference between Consolidated EBITDA for the prior fiscal year
($_______) and $17,039,000 $_____________
WITNESS by hand this ______ day of __________, 19___.
BROOKSTONE, INC.
By:_____________________________
Name:
Title:
139
EXHIBIT G
---------
BROOKSTONE COMPANY, INC.
BROOKSTONE STORES, INC.
BORROWING BASE REPORT
------------------------
BROOKSTONE COMPANY, INC. (the "Company") and BROOKSTONE STORES, INC.
("Stores") hereby jointly and severally certify that:
This Report is furnished pursuant to Section 5.1(d) of the Amended and
Restated Revolving Credit Agreement dated as of May __, 1999 by and among
Brookstone, Inc., the Company, Stores, the lenders party thereto and BankBoston,
N.A., as Agent (the "Agreement"). Unless otherwise defined herein, the terms
used in this Report have the meanings given to them in the Agreement.
As of ______________, 199___, the end of the last fiscal month of the
Company and Stores, the Company and Stores jointly and severally certify as
follows:
A. Eligible Inventory was $_______, determined as follows:
1. Gross Inventory
2. Less reserves and other exclusions $__________
3. Eligible Inventory (Line 1 less Line 2) $__________
B. The Borrowing Base was $_________, determined as follows:
1. 50% of Eligible Inventory* $__________
2. 50% Outstanding Documentary
Letters of Credit* $__________
3. Borrowing Base (Line 1 plus line 2) $__________
C. The amount available for Loans and Letters of Credit
under the Agreement was $______, determined as follows:
1. The Lesser of $750,000 or the Borrowing Base $________
2. Outstanding Loans $________
3. Outstanding Letters of Credit $________
4. Availability for Loans and Letters
of Credit (Line 1 less the sum
of line 2 and line 3 $________
140
WITNESS my hand this ________ day of ______, 199__.
BROOKSTONE COMPANY, INC.
BROOKSTONE-STORES, INC.
By:___________________________
Name:
Title: Chief Financial Officer
141
GE - COMPANY SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT dated as of May ___, 1999, by and among
BROOKSTONE ACQUISITIONS SUB, INC., a New Hampshire corporation (to be renamed GE
By Mail, Inc.)("GE"), BROOKSTONE COMPANY, INC. (the "Company"), a New Hampshire
corporation (the "Company") and BANKBOSTON, N.A., as Agent (the "Agent") under
the Amended and Restated Credit Agreement referred to below.
Recitals
--------
GE is and from time to time may be obligated to the Company for certain
payments pursuant a License Agreement of even date herewith and for other
obligations from time to time. The Company and GE have requested that the
Lenders under and as defined in a certain Amended and Restated Credit Agreement
of even date herewith (herein, as the same may from time to time be amended or
extended, referred to as the "Amended and Restated Credit Agreement") by and
among the Lenders, BankBoston, N.A., as Agent, Brookstone Stores, Inc., Company,
GE, and Brookstone, Inc., a Delaware corporation grant financial accommodations
to the Company and GE, and the Lenders have indicated that they are unwilling to
do so unless the Company and GE shall join in this Agreement and the Company
shall subordinate, to the extent and in the manner hereinafter set forth, the
indebtedness hereinbefore referred to and also all other indebtedness and
obligations of GE to the Company, direct or indirect, absolute or contingent,
due or to become due, now existing or hereafter arising (herein called the
"Subordinated Debt") to all indebtedness of GE to the Lenders, direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising (herein called the "Lender Debt"). Capitalized terms used
herein and not otherwise defined shall have the meanings set forth in the
Amended and Restated Credit Agreement (provided, however, that the term
"Lenders" as used herein shall mean the Lenders and the Swing Line Lender under
the Amended and Restated Credit Agreement).
NOW, THEREFORE, in consideration of the premises and as an inducement to
the Lenders to grant financial accommodations to the Company and GE, whether by
loan or advance or extension of time for the payment of Lender Debt or
otherwise, and in consideration of the granting thereof, the Company and GE
warrant to and covenant with the Agent and the Lenders as follows:
1. (a) The Subordinated Debt and any and all documents evidencing such
Subordinated Debt shall be and hereby are subordinated and until all Lender Debt
shall have been paid in full, GE shall not, directly or indirectly, make any
payment of principal or interest on account of or transfer any collateral for
any part of the Subordinated Debt, the Company shall not demand or accept from
GE or any other person any such payment or collateral nor cancel, set off or
otherwise discharge any part of the Subordinated Debt and neither GE nor the
Company shall otherwise take or permit any action prejudicial to or inconsistent
with tIe Bank's priority position over the Company created by this Agreement;
provided, however that (i) GE may grant to the Company a security interest in
all of its assets to secure the payment and performance of the Subordinated Debt
and (ii) until written notice from the Agent of the occurrence of a Default
142
under the documents pursuant to which the Lender Debt has been issued and a
written direction to cease such payments, GE may make payments of amounts due
the Company in respect of royalty payments due to the Company.
(b) The Company will not take or omit to take any action or
assert any claim with respect to the Subordinated Debt or otherwise which is
inconsistent with the provisions of this Agreement. Without limiting the
foregoing, the Company will not assert, collect or enforce the Subordinated Debt
or any part thereof or take any action to foreclose or realize upon the
SubordiIated Debt or any part thereof or enforce any documents evidencing the
Subordinated Debt except (i) in each such case as necessary, so long as no
Default or Event of Default has occurred and is then continuing under the
Amended and Restated Credit Agreement or would occur after giving effect
thereto, to collect any sums expressly permitted to be paid by GE pursuant to
Section 1(a), or (ii) to the extent (but only to such extent) that the
commencement a legal action may be required to toll the running of any
applicable statute of limitation.
(c) If the Company, in contravention of the terms of this Agreement, shall
commence, prosecute or participate in any suit, action or proceeding against GE,
then GE may interpose as a defense or plea the making of this Agreement, and the
Agent may intervene and interpose such defense or plea in its name or in the
name of GE. If the Company, in contravention of the terms of this Agreement,
shall attempt to collect any of the Subordinated Debt or enforce any documents
evidencing such debt, then the Agent or GE may, by virtue of this Agreement,
restrain the enforcement thereof in the name of the Agent or in the name of GE.
2. As security for the Lender Debt, the Company hereby assigns, transfers
and sets over to the Agent the Subordinated Debt, whether evidenced by
negotiable or non negotiable instruments, securities or other writings, book
entries or otherwise. In the event any endorsement or assignment of any
instrument evidencing the Subordinated Debt is omitted, the Agent is hereby
irrevocably authorized to make the same. GE and the Company shall make
appropriate notations in their books to show the subordinate character of all
Subordinated Debt which may now or hereafter be carried on open account.
3. The Company will not commence or join with any other creditor or
creditors of GE in commencing any bankruptcy, reorganization or insolvency
proceedings against GE. At any meeting of creditors of GE or in the event of
any proceeding, voluntary or involuntary, for the distribution, division or
application of all or part of the assets of GE or the proceeds thereof, whether
such proceeding be for the liquidation, dissolution or winding up of GE or its
business, a receivership, insolvency or bankruptcy proceeding, an assignment for
the benefit of creditors or a proceeding by or against GE for relief under any
bankruptcy, reorganization or insolvency law or any law relating to the relief
of debtors, readjustment of indebtedness, reorganization, arrangement,
composition or extension or otherwise, if all Lender Debt has not been paid in
full at the time, the Agent is hereby irrevocably authorized at any such meeting
or in any such proceeding:
143
(a) To enforce claims comprising Subordinated Debt either in its own
name or the name of the Company, by proof of debt, proof of claim, suit or
otherwise;
(b) To collect any assets of GE distributed, divided or applied by way
of dividend or payment, or any such securities issued, on account of
Subordinated Debt and apply the same, or the proceeds of any realization upon
the same that the Agent in its discretion elects to effect, to Lender Debt until
all Lender Debts shall have been paid in full, rendering any surplus to the
Company;
(c) To vote claims comprising Subordinated Debt to accept or reject
any plan of partial or complete liquidation, reorganization, arrangement,
composition or extension; and
(d) To take generally any action in connection with any such meeting
or proceeding which the Company might otherwise take.
4. Except as permitted under Section 1, should any payment on account of
or any collateral for any part of the Subordinated Debt be received by the
Company, such payment or collateral shall be delivered forthwith to the Agent by
the Company for application to Lender Debt, in the form received except for the
addition of any endorsement or assignment necessary to effect transfer of all
rights therein to the Agent. The Agent is irrevocably authorized to supply any
required endorsement or assignment which may have been omitted. Until so
delivered any such payment or collateral shall be held by the recipient in trust
for the Agent and shall not be commingled with other funds or property of the
recipient.
5. The Company is the lawful owner of the Subordinated Debt and no part
thereof has been assigned to or subordinated or subjected to any other security
interest in favor of anyone other than the Agent. Until all Lender Debt has
been paid in full, GE shall not issue any instrument, security or other writing
evidencing any part of the Subordinated Debt except at the request of and in the
manner requested by the Agent; and the Company shall not assign or subordinate
any part of the Subordinated Debt except to or in favor of the Agent.
6. The Agent is hereby authorized to demand specific performance of this
Agreement, whether or not GE shall have complied with the provisions hereof
applicable to it, at any time when the Company shall have failed to comply with
any provision hereof applicable to it. The Company hereby irrevocably waives
any defense based on the adequacy of a remedy at law which might be asserted as
a bar to the remedy of specific performance hereof in any action brought
therefor by the Agent. The Company further waives presentment, notice and
protest in connection with all negotiable instruments evidencing Lender Debt or
Subordinated Debt to which it may be a party, notice of the acceptance of this
Agreement by the Agent and the Lenders, notice of any loan made, extension
granted or other action taken in reliance hereon and all demands and notices of
every kind in connection with this Agreement, Lender Debt or Subordinated Debt;
assent to any renewal, extension or postponement of the time of payment of
Lender Debt or any other indulgence with respect thereto, to any substitution,
exchange or release of collateral therefor and
144
to the addition or release of any person primarily or secondarily liable
thereon; and agree to the provisions of any instrument, security or other
writing evidencing Lender Debt.
7. (a) GE and the Company shall execute and deliver to the Agent and the
Lenders such further instruments and shall take such further action as the
Agent or the Lenders may at any time or times reasonably request in order to
carry out the provisions and intent of this Agreement.
(b) The Company will not, at any time while this Agreement is in
effect, modify any of the terms of any of the Subordinated Debt or any of the
documents evidencing the Subordinated Debt.
8. If all indebtedness of GE to the Agent and the Lenders is at any time
or times hereafter paid in full and thereafter GE again becomes indebted to the
Agent and the Lenders, the provisions of this Agreement shall apply to such new
indebtedness unless before the same is incurred the Company notifies the Agent
and the Lenders in writing to the contrary. If, in reliance upon this
Agreement, the Agent and the Lenders grant loans and extensions or takes other
action, after the termination of this Agreement by the Company, but prior to the
receipt by the Agent and the Lenders of written notice of such termination, the
rights of the Agent and the Lenders shall be the same as they would have been
had such termination not occurred, and GE and the Company, jointly and
severally, shall indemnify the Agent and the Lenders and save them harmless from
and against any loss, cost, liability or expense which it may have incurred or
suffered by reason of any action so taken by it.
9. If any warranty herein contained shall prove to have been materially
false when made or in the event of a breach by GE or the Company in the
performance of any of the terms hereof, the Agent may, at its option, declare
all Lender Debt to be forthwith due and payable, without presentment, demand,
protest, or notice of any kind, notwithstanding any time or credit otherwise
allowed.
10. The rights granted to the Agent and the Lenders hereunder are solely
for their protection and nothing herein contained shall impose on the Agent and
the Lenders any duties with respect to any property of GE or the Company
received hereunder beyond reasonable care in its custody and preservation while
in possession of the Agent or the Lenders. The Agent shall have no duty to
preserve rights against prior parties in any instrument or chattel paper
received hereunder.
11. This Agreement is intended to take effect as a sealed instrument,
shall be binding upon GE, the Company, and their respective successors and
assigns, shall inure to the benefit of the Agent and the Lenders and their
successors and assigns and shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
145
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of May __, 1999.
BROOKSTONE ACQUISITIONS SUB, INC.
By:_________________________
BROOKSTONE COMPANY, INC.
By:___________________________
Accepted
BANKBOSTON, N.A.
By:_____________________________
146
AMENDED AND RESTATED SUBORDINATION AGREEMENT
AMENDED AND RESTATED SUBORDINATION AGREEMENT dated as of May ___,
1999, by and among BROOKSTONE STORES, INC., a New Hampshire corporation
("Stores"), BROOKSTONE COMPANY, INC. (the "Company"), a New Hampshire
corporation (the "Company") and BANKBOSTON, N.A., as Agent (the "Agent") under
the Amended and Restated Credit Agreement referred to below.
Recitals
--------
Stores is and from time to time may be indebted to the Company for
inventory purchased from the Company and for other advances or obligations from
time to time. The Company and Stores have requested that the Lenders under and
as defined in a certain Amended and Restated Credit Agreement of even date
herewith (herein, as the same may from time to time be amended or extended,
referred to as the "Amended and Restated Credit Agreement") by and among the
Lenders, BankBoston, N.A., as Agent, Stores, Company, Brookstone Acquisitions
Sub, Inc., a New Hampshire corporation (to be renamed GE By Mail, Inc.), and
Brookstone, Inc., a Delaware corporation grant financial accommodations to the
Company and Stores, and the Lenders have indicated that they are unwilling to do
so unless the Company and Stores shall amend and restate that certain
Subordination Agreement dated as of September 22, 1997 among Company, Stores and
Agent (the "Subordination Agreement"), and the Company shall subordinate, to the
extent and in the manner hereinafter set forth, the indebtedness hereinbefore
referred to and also all other indebtedness and obligations of Stores to the
Company, direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising (herein called the "Subordinated Debt") to all
indebtedness of Stores to the Lenders, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising (herein
called the "Lender Debt"). Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Amended and Restated Credit
Agreement (provided, however, that the term "Lenders" as used herein shall mean
the Lenders and the Swing Line Lender under the Amended and Restated Credit
Agreement).
NOW, THEREFORE, in consideration of the premises and as an inducement to
the Lenders to grant financial accommodations to the Company and Stores, whether
by loan or advance or extension of time for the payment of Lender Debt or
otherwise, and in consideration of the granting thereof, the Company and Stores
hereby amend and restate the Subordination Agreement and warrant to and covenant
with the Agent and the Lenders as follows:
1. (a) The Subordinated Debt and any and all documents evidencing such
Subordinated Debt shall be and hereby are subordinated and until all Lender Debt
shall have been paid in full, Stores shall not, directly or indirectly, make any
payment of principal or interest on account of or transfer any collateral for
any part of the Subordinated Debt, the Company shall not demand or accept from
Stores or any other person any such payment or collateral nor cancel, set
147
off or otherwise discharge any part of the Subordinated Debt and neither Stores
nor the Company shall otherwise take or permit any action prejudicial to or
inconsistent with the Bank's priority position over the Company created by this
Agreement; provided, however that (i) Stores may grant to the Company a security
interest in all of its assets to secure the payment and performance of the
Subordinated Debt and (ii) until written notice from the Agent of the occurrence
of a Default under the documents pursuant to which the Lender Debt has been
issued and a written direction to cease such payments, Stores may make payments
of amounts due the Company in respect of inventory purchased from, and royalty
payments or other obligations payable to, the Company.
(b) The Company will not take or omit to take any action or assert any
claim with respect to the Subordinated Debt or otherwise which is inconsistent
with the provisions of this Agreement. Without limiting the foregoing, the
Company will not assert, collect or enforce the Subordinated Debt or any part
thereof or take any action to foreclose or realize upon the Subordinated Debt or
any part thereof or enforce any documents evidencing the Subordinated Debt
except (i) in each such case as necessary, so long as no Default or Event of
Default has occurred and is then continuing under the Amended and Restated
Credit Agreement or would occur after giving effect thereto, to collect any sums
expressly permitted to be paid by Stores pursuant to Section 1(a), or (ii) to
the extent (butly to such extent) that the commencement of a legal action may be
required to toll the running of any applicable statute of limitation.
(c) If the Company, in contravention of the terms of this Agreement, shall
commence, prosecute or participate in any suit, action or proceeding against
Stores, then Stores may interpose as a defense or plea the making of this
Agreement, and the Agent may intervene and interpose such defense or plea in its
name or in the name of Stores. If the Company, in contravention of the terms of
this Agreement, shall attempt to collect any of the Subordinated Debt or enforce
any documents evidencing such debt, then the Agent or Stores may, by virtue of
this Agreement, restrain the enforcement thereof in the name of the Agent or in
the name of Stores.
2. As security for the Lender Debt, the Company hereby assigns, transfers
and sets over to the Agent the Subordinated Debt, whether evidenced by
negotiable or non negotiable instruments, securities or other writings, book
entries or otherwise. In the event any endorsement or assignment of any
instrument evidencing the Subordinated Debt is omitted, the Agent is hereby
irrevocably authorized to make the same. Stores and the Company shall make
appropriate notations in their books to show the subordinate character of all
Subordinated Debt which may now or hereafter be carried on open account.
3. The Company will not commence or join with any other creditor or
creditors of Stores in commencing any bankruptcy, reorganization or insolvency
proceedings against Stores. At any meeting of creditors of Stores or in the
event of any proceeding, voluntary or involuntary, for the distribution,
division or application of all or part of the assets of Stores or the proceeds
thereof, whether such proceeding be for the liquidation, dissolution or winding
up of Stores or its business, a receivership, insolvency or bankruptcy
proceeding, an assignment for the benefit of creditors or a proceeding by or
against Stores for relief under any bankruptcy, reorganization or
148
insolvency law or any law relating to the relief of debtors, readjustment of
indebtedness, reorganization, arrangement, composition or extension or
otherwise, if all Lender Debt has not been paid in full at the time, the Agent
is hereby irrevocably authorized at any such meeting or in any such proceeding:
(a) To enforce claims comprising Subordinated Debt either in its own
name or the name of the Company, by proof of debt, proof of claim, suit or
otherwise;
(b) To collect any assets of Stores distributed, divided or applied by
way of dividend or payment, or any such securities issued, on account of
Subordinated Debt and apply the same, or the proceeds of any realization upon
the same that the Agent in its discretion elects to effect, to Lender Debt until
all Lender Debt shall have been paid in full, rendering any surplus to the
Company;
(c) To vote claims comprising Subordinated Debt to accept or reject
any plan of partial or complete liquidation, reorganization, arrangement,
composition or extension; and
(d) To take generally any action in connection with any such meeting
or proceeding which the Company might otherwise take.
4. Except as permitted under Section 1, should any payment on account of
or any collateral for any part of the Subordinated Debt be received by the
Company, such payment or collateral shall be delivered forthwith to the Agent by
the Company for application to Lender Debt, in the form received except for the
addition of any endorsement or assignment necessary to effect transfer of all
rights therein to the Agent. The Agent is irrevocably authorized to supply any
required endorsement or assignment which may have been omitted. Until so
delivered any such payment or collateral shall be held by the recipient in trust
for the Agent and shall not be commingled with other funds or property of the
recipient.
5. The Company is the lawful owner of the Subordinated Debt and no part
thereof has been assigned to or subordinated or subjected to any other security
interest in favor of anyone other than the Agent. Until all Lender Debt has
been paid in full, Stores shall not issue any instrument, security or other
writing evidencing any part of the Subordinated Debt except at the request of
and in the manner requested by the Agent; and the Company shall not assign or
subordinate any part of the Subordinated Debt except to or in favor of the
Agent.
6. The Agent is hereby authorized to demand specific performance of this
Agreement, whether or not Stores shall have complied with the provisions hereof
applicable to it, at any time when the Company shall have failed to comply with
any provision hereof applicable to it. The Company hereby irrevocably waives
any defense based on the adequacy of a remedy at law which might be asserted as
a bar to the remedy of specific performance hereof in any action brought
therefor by the Agent. The Company further waives presentment, notice and
protest in connection
149
with all negotiable instruments evidencing Lender Debt or Subordinated Debt to
which it may be a party, notice of the acceptance of this Agreement by the Agent
and the Lenders, notice of any loan made, extension granted or other action
taken in reliance hereon and all demands and notices of every kind in connection
with this Agreement, Lender Debt or Subordinated Debt; assent to any renewal,
extension or postponement of the time of payment of Lender Debt or any other
indulgence with respect thereto, to any substitution, exchange or release of
collateral therefor and to the addition or release of any person primarily or
secondarily liable thereon; and agree to the provisions of any instrument,
security or other writing evidencing Lender Debt.
7. (a) Stores and the Company shall execute and deliver to the Agent and
the Lenders such further instruments and shall take such further action as the
Agent or the Lenders may at any time or times reasonably request in order to
carry out the provisions and intent of this Agreement.
(b) The Company will not, at any time while this Agreement is in
effect, modify any of the terms of any of the Subordinated Debt or any of the
documents evidencing the Subordinated Debt.
8. If all indebtedness of Stores to the Agent and the Lenders is at any
time or times hereafter paid in full and thereafter Stores again becomes
indebted to the Agent and the Lenders, the provisions of this Agreement shall
apply to such new indebtedness unless before the same is incurred the Company
notifies the Agent and the Lenders in writing to the contrary. If, in reliance
upon this Agreement, the Agent and the Lenders grant loans and extensions or
takes other action, after the termination of this Agreement by the Company, but
prior to the receipt by the Agent and the Lenders of written notice of such
termination, the rights of the Agent and the Lenders shall be the same as they
would have been had such termination not occurred, and Stores and the Company,
jointly and severally, shall indemnify the Agent and the Lenders and save them
harmless from and against any loss, cost, liability or expense which it may have
incurred or suffered by reason of any action so taken by it.
9. If any warranty herein contained shall prove to have been materially
false when made or in the event of a breach by Stores or the Company in the
performance of any of the terms hereof, the Agent may, at its option, declare
all Lender Debt to be forthwith due and payable, without presentment, demand,
protest, or notice of any kind, notwithstanding any time or credit otherwise
allowed.
10. The rights granted to the Agent and the Lenders hereunder are solely
for their protection and nothing herein contained shall impose on the Agent and
the Lenders any duties with respect to any property of Stores or the Company
received hereunder beyond reasonable care in its custody and preservation while
in possession of the Agent or the Lenders. The Agent shall have no duty to
preserve rights against prior parties in any instrument or chattel paper
received hereunder.
150
11. This Agreement is intended to take effect as a sealed instrument,
shall be binding upon Stores, the Company, and their respective successors and
assigns, shall inure to the benefit of the Agent and the Lenders and their
successors and assigns and shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
151
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of May __, 1999.
BROOKSTONE STORES, INC.
By:________________________
BROOKSTONE COMPANY, INC.
By:________________________
Accepted
BANKBOSTON, N.A.
By:________________________
152
AMENDED AND RESTATED UNLIMITED GUARANTY
AMENDED AND RESTATED UNLIMITED GUARANTY dated as of May ___, 1999, by
BROOKSTONE PROPERTIES, INC., BROOKSTONE HOLDINGS, INC., BROOKSTONE PURCHASING,
INC. and BROOKSTONE BY MAIL, INC. (each a "Guarantor" and collectively the
"Guarantors"), in favor of BANKBOSTON, N.A, a national banking association with
its head office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, as Agent (the
"Agent") for the Lenders parties to the Amended and Restated Credit Agreement
referred to below.
Recitals
--------
In consideration of the Lenders' giving time, credit or banking facilities
or accommodations to Brookstone Company, Inc., Brookstone Stores, Inc.,
Brookstone Acquisitions Sub, Inc. (to be renamed GE By Mail, Inc.) and their
successors (the "Borrowers") under an Amended and Restated Credit Agreement of
even date herewith (the "Amended and Restated Credit Agreement") by and among
the Agent, the Borrowers, Brookstone, Inc. and the Lenders parties thereto, the
Notes and Swing Line Note issued thereunder and otherwise, the Guarantors hereby
amend and restate that certain Unlimited Guaranty dated as of September 22, 1997
by the Guarantors and agree, jointly and severally, as follows. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Amended and Restated Credit Agreement (provided, however, that the term
"Lenders" as used herein shall mean all the Lenders and the Swing Line Lender
under the Amended and Restated Credit Agreement).
1. GUARANTY OF PAYMENT AND PERFORMANCE. The Guarantors hereby guarantee
to the Agent and the Lenders, jointly and severally, the full and punctual
payment when due (whether at maturity, by acceleration or otherwise), and the
performance, of all liabilities, agreements and other obligations of the
Borrowers to the Agent and the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, secured or unsecured, now existing or
hereafter arising or acquired (whether by way of discount, letter of credit,
lease, loan, overdraft or otherwise) (the "Obligations"). This Guaranty is an
absolute, unconditional and continuing guaranty of the full and punctual payment
and performance of the Obligations and not of their collectibility only and is
in no way conditioned upon any requirement that the Agent and the Lenders first
attempt to collect any of the Obligations from the Borrowers or resort to any
security or other means of obtaining their payment. Should the Borrowers
default in the payment or performance of any of the Obligations, the obligations
of the Guarantors hereunder shall become immediately due and payable to the
Agent and the Lenders, without demand or notice of any nature, all of which are
expressly waived by the Guarantors. Payments by the Guarantors hereunder may be
required by the Agent on any number of occasions.
2. GUARANTORS' AGREEMENT TO PAY. The Guarantors further agree, jointly
and severally, as principal obligors and not as guarantors only, to pay to the
Agent and the Lenders, on demand, all costs and expenses (including court costs
and legal expenses) incurred or expended by the Agent and the Lenders in
connection with the Obligations, this Guaranty and
153
the enforcement thereof, together with interest on amounts recoverable under
this Guaranty from the time such amounts become due until payment, at the rate
per annum equal to the rate of interest announced by the Agent from time to time
at its head office as its Base Rate, plus 2%; provided that if such interest
exceeds the maximum amount permitted to be paid under applicable law, then such
interest shall be reduced to such maximum permitted amount.
3. UNLIMITED GUARANTY. The liability of the Guarantors hereunder shall be
unlimited.
4. WAIVERS BY GUARANTORS; AGENT'S FREEDOM TO ACT. The Guarantors agree
that the Obligations will be paid and performed strictly in accordance with
their respective terms regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent and the Lenders with respect thereto. The Guarantors waive
presentment, demand, protest, notice of acceptance, notice of Obligations
incurred and all other notices of any kind, all defenses which may be available
by virtue of any valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of the
Borrowers, and all suretyship defenses generally. Without limiting the
generality of the foregoing, the Guarantors agree to the provisions of any
instrument evidencing, securing or otherwise executed in connection with any
Obligation and agree that the obligations of the Guarantors hereunder shall not
be released or discharged, in whole or in part, or otherwise affected by (i) the
failure of the Agent and the Lenders to assert any claim or demand or to enforce
any right or remedy against the Borrowers; (ii) any extensions or renewals of
any Obligation; (iii) any rescissions, waivers, amendments or modifications of
any of the terms or provisions of any agreement evidencing securing or otherwise
executed in connection with any Obligation; (iv) the substitution or release of
any entity primarily or secondarily liable for any Obligation; (v) the adequacy
of any rights the Agent and the Lenders may have against any collateral or other
means of obtaining repayment of the Obligations; (vi) the impairment of any
collateral securing the Obligations, including without limitation the failure to
perfect or preserve any rights the Agent and the Lenders might have in such
collateral or the substitution, exchange, surrender, release, loss or
destruction of any such collateral; or (vii) any other act or omission which
might in any manner or to any extent vary the risk of the Guarantors or
otherwise operate as a release or discharge of the Guarantors, all of which may
be done without notice to the Guarantors.
5. UNENFORCEABILITY OF OBLIGATIONS AGAINST BORROWERS. If for any reason
the Borrowers have no legal existence or are under no legal obligation to
discharge any of the Obligations, or if any of the Obligations have become
irrecoverable from the Borrowers by operation of law or for any other reason,
this Guaranty shall nevertheless be binding on the Guarantors to the same extent
as if the Guarantors at all times had been the principal obligor on all such
Obligations. In the event that acceleration of the time for payment of the
Obligations is stayed upon the insolvency, bankruptcy or reorganization of a
Borrower, or for any other reason, all such amounts otherwise subject to
acceleration under the terms of any agreement evidencing, securing or otherwise
executed in connection with any Obligation shall be immediately due and payable
by the Guarantors.
154
6. SUBROGATION; SUBORDINATION. Until the payment and performance in full
of all Obligations and any and all obligations of the Borrowers to any affiliate
of the Agent and the Lenders, the Guarantors shall not exercise any rights
against the Borrowers arising as a result of payment by the Guarantors
hereunder, by way of subrogation or otherwise, and will not prove any claim in
competition with the Agent and the Lenders or their affiliates in respect of any
payment hereunder in bankruptcy or insolvency proceedings of any nature; the
Guarantors will not claim any set-off or counterclaim against the Borrowers in
respect of any liability of the Guarantors to the Borrowers; and the Guarantors
waive any benefit of and any right to participate in any collateral which may be
held by the Agent or any such affiliate. The payment of any amounts due with
respect to any indebtedness of the Borrowers now or hereafter held by the
Guarantors is hereby subordinated to the prior payment in full of the
Obligations. The Guarantors agree that after the occurrence of any default in
the payment or performance of the Obligations, the Guarantors will not demand,
▇▇▇ for or otherwise attempt to collect any such indebtedness of the Borrowers
to the Guarantors until the Obligations shall have been paid in full. If,
notwithstanding the foregoing sentence, the Guarantors shall collect, enforce or
receive any amounts in respect of such indebtedness, such amounts shall be
collected, enforced and received by the Guarantors as trustee for the Agent and
the Lenders and be paid over to the Agent on account of the Obligations without
affecting in any manner the liability of the Guarantors under the other
provisions of this Guaranty.
7. SECURITY; SET-OFF. The Guarantors grant to the Agent and the Lenders,
as security for the full and punctual payment and performance of the Guarantors'
obligations hereunder, a continuing lien on and security interest in all
securities or other property belonging to the Guarantors now or hereafter held
by the Agent or the Lenders and in all deposits (general or special, time or
demand, provisional or final) and other sums credited by or due from the Agent
or the Lenders to the Guarantors or subject to withdrawal by the Guarantors; and
regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, the Agent or the Lenders are hereby authorized at
any time and from time to time, without notice to the Guarantors (any such
notice being expressly waived by the Guarantors) and to the fullest extent
permitted by law, to set off and apply such deposits and other sums against the
obligations of the Guarantors under this Guaranty, whether or not the Agent or
the Lenders shall have made any demand under this Guaranty and although such
obligations may be contingent or unmatured.
8. TERMINATION; REINSTATEMENT. This Guaranty shall remain in full force
and effect until the Agent is given written notice of the Guarantors' intention
to discontinue this Guaranty, notwithstanding any intermediate or temporary
payment or settlement of the whole or any part of the Obligations. No such
notice shall be effective unless received and acknowledged by an officer of the
Agent at its head office. No such notice shall affect any rights of the Agent
or the Lenders or of any affiliate hereunder including, without limitation, the
rights set forth in Sections 4 and 6, with respect to Obligations incurred prior
to the receipt of such notice or Obligations incurred pursuant to any contract
or commitment in existence prior to such receipt, and all checks drafts, notes,
instruments (negotiable or otherwise) and writings made by or for the account of
the Borrowers and drawn on the Agent or any Lender or any of their agents
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purporting to be dated on or before the date of receipt of such notice, although
presented to and paid or accepted by the Agent or any Lender after that date,
shall form part of the Obligations. This Guaranty shall continue to be
effective or be reinstated, notwithstanding any such notice, if at any time any
payment made or value received with respect to an Obligation is rescinded or
must otherwise be returned by the Agent or any Lender upon the insolvency,
bankruptcy or reorganization of the Borrowers, or otherwise, all as though such
payment had not been made or value received.
9. SUCCESSORS AND ASSIGNS. This Guaranty shall be binding upon the
Guarantors, jointly and severally, their successors and assigns, and shall inure
to the benefit of and be enforceable by the Agent, the Lenders and their
successors, transferees and assigns. Without limiting the generality of the
foregoing sentence, the Agent and the Lenders may assign or otherwise transfer
any agreement or any note held by it evidencing, securing or otherwise executed
in connection with the Obligations, or sell participations in any interest
therein, to any other person or entity, in accordance with the provisions of the
Amended and Restated Credit Agreement, and such other person or entity shall
thereupon become vested, to the extent set forth in the agreement evidencing
such assignment, transfer or participation, with all the rights in respect
thereof granted to the Agent and the Lenders herein.
10. AMENDMENTS AND WAIVERS. No amendment or waiver of any provision of
this Guaranty nor consent to any departure by the Guarantors therefrom shall be
effective unless the same shall be in writing and signed by the Agent. No
failure on the part of the Agent and the Lenders to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
11. NOTICES. All notices and other communications called for hereunder
shall be made in writing and, unless otherwise specifically provided herein,
shall be deemed to have been duly made or given when delivered by hand or mailed
first class mail postage prepaid or, in the case of telegraphic or telexed
notice, when transmitted, answer back received, addressed as follows: if to the
Guarantors, at the address set forth beneath its signature hereto, and if to the
Agent and the Lenders, c/o BankBoston, N.A., as Agent, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇-▇▇-
▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Telex: 4996527 BOSTONBK BSN, Attention: ▇▇.
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Director, or at such other address as either party may
designate in writing.
12. GOVERNING LAW; CONSENT TO JURISDICTION. This Guaranty is intended to
take effect as a sealed instrument and shall be governed by, and construed in
accordance with, the laws of The Commonwealth of Massachusetts. The Guarantors
agree that any suit for the enforcement of this Guaranty may be brought in the
courts of The Commonwealth of Massachusetts or any Federal Court sitting therein
and consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Guarantors by mail at the address
specified in Section 11 hereof. The Guarantors hereby waive any objection that
they may now or hereafter have to the venue of any such suit or any such court
or that such suit was brought in an inconvenient court.
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13. WAIVER OF JURY TRIAL. THE AGENT AND THE GUARANTORS AGREE THAT NONE OF
THEM NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY LAWSUIT,
PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED UPON, OR ARISING OUT OF, THIS
GUARANTY, ANY RELATED INSTRUMENTS, ANY COLLATERAL OR THE DEALINGS OR THE
RELATIONSHIP BETWEEN OR AMONG ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH
ACTION WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY DISCUSSED BY THE AGENT
AND THE GUARANTORS, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
NEITHER THE AGENT NOR THE GUARANTORS HAVE AGREED WITH OR REPRESENTED TO THE
OTHER THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
14. MISCELLANEOUS. This Guaranty constitutes the entire agreement of the
Guarantors with respect to the matters set forth herein. The rights and
remedies herein provided are cumulative and not exclusive of any remedies
provided by law or any other agreement, and this Guaranty shall be in addition
to any other guaranty of the Obligations. The invalidity or unenforceability of
any one or more sections of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are for the ease of
reference only and shall not affect the meaning of the relevant provisions. The
meanings of all defined terms used in this Guaranty shall be equally applicable
to the singular and plural forms of the terms defined.
157
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed
and delivered by its duly authorized officer as of the date appearing on page
one.
BROOKSTONE PROPERTIES, INC.,
BROOKSTONE HOLDINGS, INC.,
BROOKSTONE PURCHASING, INC.
BROOKSTONE BY MAIL, INC.
By:_______________________________________
▇▇▇▇▇▇ ▇▇▇▇▇▇, Executive Vice President
and Chief Financial Officer
Address:
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telex:__________________________________
158
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, made this _____ day of May, 1999, by and between
Brookstone Acquisitions Sub, Inc., a New Hampshire corporation (to be renamed GE
By Mail, Inc.), with a principal place of business at ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Secured Party"), and Brookstone Stores, Inc.,
a New Hampshire corporation, with a principal place of business at ▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Debtor").
Recitals:
---------
The Secured Party has and shall hereafter extend credit to the Debtor for,
among other reasons, the purchase of inventory from Secured Party by Debtor. As
used in this agreement, the term "Obligations" shall refer to all payment and
performance obligations and liabilities of the Debtor to the Secured Party of
every kind and nature (including, without limitation, those under accounts
payable due from Debtor to Secured Party for the purchase of inventory), whether
now existing or hereafter arising and however existing or arising.
NOW, THEREFORE, in consideration of the foregoing receipt and the covenants
set forth in this agreement, the receipt and sufficiency of which consideration
is hereby acknowledged, the Secured Party and the Debtor hereby agree as
follows:
1. Grant of Security Interest. To secure the full and timely payment and
--------------------------
performance of all of the Obligations, the Debtor hereby assigns and pledges to
the Secured Party all if its right, title and interest in, and grants to the
Secured Party a continuing security interest in and to any and all inventory (as
defined in Section 9-109(4) of the Uniform Commercial Code as adopted by the
State of New Hampshire, NHRSA 382-A:9-109(4), as the same may be amended from
time to time) of the Debtor, wherever located, whether such inventory is now
owned or existing or hereafter arising or hereafter acquired, and specifically
including all accessions, additions, substitutions, an replacements thereto or
therefor, and all products and proceeds (whether cash or non-cash) thereof (all
of the foregoing hereinafter collectively referred to as the "Collateral").
2. Representations and Warranties. The Debtor represents and warrants to
------------------------------
the Secured Party, as follows:
(a) the Debtor has good and marketable title to the Collateral free
from all liens, encumbrances, and security interests (other than the security
interest created hereby); and
(b) the Debtor has full power and authority to execute, deliver, and
perform this agreement for the purposes herein contained.
159
3. Affirmative Covenants. The Debtor shall:
---------------------
(a) keep the Collateral free and clear of all liens, security interests, and
encumbrances and shall immediately remove any such lien, security interest, or
encumbrance, whether or not the same is subordinate to or superior to the
security interest granted to the Secured Party hereunder;
(b) keep the Collateral insured against such risks and in such amounts as may
from time to time be reasonably required by the Secured Party with such policies
naming the Secured Party as an additional named insured and loss payee (as the
Secured Party's interests may appear) and being non-cancelable without at least
thirty (30) days' prior written notice to the Secured Party;
(c) execute such other documents as the Secured Party may from time to
time reasonably require in order to evidence, preserve, protect, or perfect the
security interest granted hereby and pay for any and all recording fees incident
thereto;
(d) pay, perform, and satisfy all Obligations as and when due;
(e) comply with all laws, ordinances, rules, regulations, decrees, orders,
writs, injunctions, or other governmental requirements applicable to the Debtor
and its business and properties;
(f) keep and maintain complete and accurate books and records pertaining to
the Debtor and its business, properties, and financial condition, and, upon
request by the Secured Party, permit the Secured Party and its representatives
to inspect such books and records; and
(g) upon request by the Secured Party, (i) provide the Secured Party with
such additional information concerning the Collateral as the Secured Party may
reasonably request from time to time, and (ii) permit the Secured Party and its
representatives to inspect the Collateral from time to time.
4. Default.
-------
(a) For purposes of this agreement, there shall be deemed to have occurred an
"Event of Default" in the event of the failure of Debtor to pay any of the
Obligations when due and within ten (10) days after a request by Secured Party
for payment thereof has been made by Secured Party.
(b) Upon the occurrence of an Event of Default, the Secured Party shall, in
addition to any other right the Secured Party may have under other agreements
with the Debtor or by law, have the following rights:
(i) the right to take immediate possession of any or all of the Collateral
wherever located;
160
(ii) all rights of a secured party under the Uniform commercial Code as
enacted by the State of New Hampshire and embodied in Revised Statutes
Annotated, Chapter 382-A, as from time to time amended;
(iii) the right to require the Debtor to assemble any or all of the
Collateral and make the same available to the Secured Party at a place to
be designated by the Secured Party;
(iv) the right to collect from the Debtor all reasonable attorneys' fees
and legal expenses incurred by the Secured Party in enforcing the Secured
Party's rights under this agreement.
5. Foreclosure; Deficiencies.
-------------------------
(a) Written notice with postage prepaid deposited in first-class mail
addressed to the Debtor at the Debtor's address shown on this agreement ten (10)
days prior to the date of a public or private sale shall in respects be
reasonable notification to the Debtor of the sale of any of the Collateral.
(b) The Debtor shall remain liable for any deficiency arising from the sale
of the Collateral.
6. Miscellaneous. This agreement may not be modified, altered, or amended
-------------
unless it is in writing and signed by both parties hereto. No waiver of any
default by the Secured Party shall operate as a waiver of any future default.
This agreement shall be binding on the heirs, personal and legal
representatives, successors, and assigns of the parties hereto, but the Debtor's
obligations hereunder may not be assigned or delegated without the prior written
consent of the Secured Party. This agreement shall be interpreted and construed
in all respects under the laws of the State of New Hampshire.
161
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement all as of the date first above written.
SECURED PARTY:
BROOKSTONE ACQUISITIONS SUB, INC.
___________________________ By:
Witness
DEBTOR:
BROOKSTONE STORES, IN
___________________________ By:
Witness
162
