ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This ELEVENTH AMENDMENT TO LOAN AND SECURITY AGREEMENT (this
"Amendment") is dated as of October 23, 2000, and entered into by and between
THE RIGHT START, INC., a California corporation ("Borrower"), and HELLER
FINANCIAL, INC. ("Lender").
RECITALS
WHEREAS, Borrower and Lender have entered into that certain
Loan and Security Agreement dated as of November 14, 1996, as amended by that
certain First Amendment to Loan and Security Agreement and Limited Waiver and
Consent dated as of April 30, 1997, as further amended by that certain Second
Amendment to Loan and Security Agreement and Limited Waiver dated July 10, 1997,
as further amended by that certain Third Amendment to Loan and Security
Agreement, Limited Waiver and Consent dated September 3, 1997, as further
amended by that certain Fourth Amendment to Loan and Security Agreement and
Limited Consent effective as of January 30, 1998, as further amended by that
certain Waiver and Fifth Amendment to Loan and Security Agreement dated as of
December 9, 1998, as modified by those certain consent letters dated April 28,
1999 and July 8, 1999 as further amended by that certain Sixth Amendment to the
Loan and Security Agreement and First Amendment to Secured CAPEX Note dated as
of November 8, 1999, as further amended by that certain Seventh Amendment to
Loan and Security Agreement and Second Amendment to Secured CAPEX Note dated as
of January 18, 2000, as further amended by that certain Eighth Amendment to Loan
and Security Agreement and Waiver dated as of April 28, 2000 (the "Eighth
Amendment), as further amended by that certain Ninth Amendment to Loan and
Security Agreement dated as of June 9, 2000 (the "Ninth Amendment"), as further
amended by that certain Tenth Amendment to Loan and Security Agreement and
Limited Waiver dated as of June 30, 2000 (the "Tenth Amendment" and the Loan
Agreement, as so amended by all the foregoing, the "Loan Agreement");
WHEREAS, Borrower has requested certain amendments to the Loan
Documents (as defined in the Loan Agreement), and waivers of certain events of
default as set forth herein;
WHEREAS, Lender is willing to grant such limited waivers and
to make such amendments, all on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of these premises, the
agreements, provisions and covenants contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
AGREEMENT
1. Defined Terms. Capitalized terms used but not otherwise defined herein
shall have the meanings given in the Loan Agreement.
2. Amendment to Subsection 2.4 of the Loan Agreement. Subsection 2.4 of
the Loan Agreement is amended to add the following subsection (b)(3):
"(3) Proceeds of Issuance of Preferred Stock.
Promptly following receipt by Borrower of the proceeds of the
issuance of its Series D Convertible Pay-in-Kind Preferred
Stock, Borrower shall prepay the CAPEX Loan in an amount of
not less than $1,000,000, such prepayment to be applied to the
installments due under the CAPEX Note in the inverse order of
maturity."
3. Amendment to Subsection 5.17 of the Loan Agreement. Subsection 5.17 of
the Loan Agreement is hereby deleted in its entirety and the following
substituted therefor:
"5.17 Minimum Availability. Borrower shall
maintain Minimum Availability of at least $400,000 at all times."
4. Amendment to Subsection 6.1 of the Loan Agreement. Subsection 6.1 of
the Loan Agreement is hereby deleted in its entirety and the following
substituted therefor:
"6.1 Net Worth. Borrower shall maintain Net Worth of
at least (a) $5,900,000 as of July 31, 2000, (b) $5,300,000 as
of August 31, 2000, (c) $6,600,000 as of September 30, 2000,
and (d) $8,000,000 as of October 31, 2000 and as of the end of
each month thereafter."
5. Amendment to Subsection 6.3 of the Loan Agreement. Subsection 6.3 of
the Loan Agreement is hereby deleted in its entirety and the following
substituted therefor:
"6.3 Minimum EBITDA. Borrower shall have a
minimum EBITDA for the periods set forth below in the amounts set forth below:
<TABLE>
Period Amount
<S> <C>
Three months ended April 30, 1998 ($1,200,000)
Six months ended July 31, 1998 ($1,200,000)
Nine months ended October 31, 1998 ($ 900,000)
Twelve months ended January 31, 1999 ($ 900,000)
Twelve months ended April 30, 1999 ($ 500,000)
Twelve months ended July 31, 1999 $ 0
Twelve months ended October 31, 1999 $ 400,000
Twelve months ended January 31, 2000 $ 500,000
Twelve months ended April 30, 2000 $ 250,000
Twelve months ended July 31, 2000 $ 0
Twelve months ended October 31, 2000 $ 0
Twelve months ended February 3, 2001 $ 400,000"
</TABLE>
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6. Amendment to Subsection 6.4 of the Loan Agreement. Subsection 6.4 of the
Loan Agreement is hereby amended to delete the amount of $1,750,000 as the
permitted Capital Expenditures for the Fiscal Year ending January 29, 2001 and
to replace it with $3,000,000.
7. Limited Waivers. As of the Effective Date of this Amendment (as
defined in Paragraph 9 below), Lender hereby waives (a) the Events of Default
which have occurred as a result of Borrower's failure to meet the minimum Net
Worth covenant contained in Subsection 6.1 of the Loan Agreement as of August
31, 2000 and Borrower's exceeding the maximum Capital Expenditure limitations
contained in Subsection 6.4 of the Loan Agreement and (b) the Event of Default
that results from Borrower's failure to own and control at least 51% of the
voting capital stock of The Right Start.com, as long as Borrower owns and
controls at least 48% of such voting capital stock. The waivers contained herein
are limited to the Events of Default specified herein and shall not extend to
any future or other existing Defaults or Events of Default, and Lender's
granting of such waivers shall not obligate it to grant any similar or other
future waiver of any Default or Event of Default.
8. Representations and Warranties. Borrower represents and warrants to
Lender as follows: a. Borrower has been duly organized and is validly existing
and in good standing under the laws of the jurisdiction of its incorporation, as
well as in each jurisdiction in which Borrower is required to be qualified to
transact business.
b. Borrower has full power and authority and legal right to execute and
deliver this Amendment and to perform its obligations under the Loan Agreement
and the other Loan Documents, each as amended hereby, and has taken all
necessary action to authorize such execution, delivery and performance.
c. This Amendment has been duly executed and delivered by Borrower and such
Amendment, and each of the Loan Agreement and the other Loan Documents as
amended hereby, each constitutes the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and subject to the availability of equitable remedies.
9. Conditions to the Effectiveness of this Amendment. Each of the following
shall be conditions precedent to the effectiveness of this Amendment (the date
on which such conditions are met being the "Effective Date"):
a. Borrower shall have duly executed and delivered a counterpart of this
Amendment to Lender or its counsel.
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<PAGE>
b. After giving effect to this Amendment, (a) no Default or Event of
Default has occurred and is continuing, (b) all of the representations and
warranties contained in the Loan Documents shall be true and correct in all
material respects (except for any representation or warranty limited by its
terms to a specific date), (c) Borrower shall have performed in all material
respects all agreements and satisfied all conditions which any Loan Document
(including as amended hereby) provides shall be performed by it on or prior to
such date, and (d) Borrower shall have delivered to Lender a certificate to such
effect in the form attached hereto as Exhibit A.
c. Borrower shall have delivered to Lender or its counsel a certificate of
its Secretary or an Assistant Secretary, certifying as to (i) the resolutions of
its Board of Directors authorizing this Amendment, (ii) the incumbency of the
officers executing this Amendment and any other documents in connection
herewith, (iii) the articles of incorporation of Borrower and (iv) the bylaws of
Borrower, each as in effect on the Effective Date, together with a good standing
certificate from the Secretary of State of the State of California with respect
to the Borrower.
10. Effect of Amendment; Ratification. From and after the Effective Date,
all references in the Loan Documents to the Loan Agreement shall mean the Loan
Agreement as amended hereby. The terms and provisions set forth in this
Amendment shall amend and supersede all inconsistent terms and provisions set
forth in the Agreement and, except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement are hereby ratified and
confirmed and are and shall continue in full force and effect.
11. No Waiver. Except as, and only to the extent, set forth in Section 5 of
this Amendment, nothing contained herein or in any other instrument or
document executed in connection herewith, nor any action taken by Lender in
connection with this Amendment or any other action contemplated hereby shall in
any event be construed or deemed to constitute a waiver of any past, present or
future Default or Event of Default or a waiver or an estoppel of any cause of
action Lender may have against Borrower for any reason whatsoever, and Lender
hereby reserves all rights and remedies under the Agreement or the other Loan
Documents.
12. Fees and Expenses. Borrower acknowledges that all fees and expenses
(including reasonable attorneys'fees) incurred by Lender in connection with this
Amendment are for the account of Borrower pursuant to the Loan Agreement.
13. Counterparts. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. Delivery via facsimile of an executed counterpart of a
signature page of this Amendment shall be effective as delivery of a
manually-executed counterpart of this Amendment.
14. Severability. The illegality or unenforceability of any provision of
this Amendment, the Loan Agreement (including as amended hereby) or any other
document or any other instrument or agreement required hereunder or thereunder
shall not in any way affect or impair the legality or enforceability of the
remaining provisions of this Amendment, the Loan Agreement (including as amended
hereby) or such other document or any other instrument or agreement required
hereunder or thereunder.
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15. Successors and Assigns. This Amendment shall be binding upon and shall
inure to the benefit of Lender and Borrower and their respective successors and
assigns.
16. Governing Law. This Amendment shall be governed by, and shall be
construed and enforced in accordance with, the internal laws of the State of
Illinois, without regard to conflicts of laws principles.
[SIGNATURE PAGE FOLLOWS]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed by a duly authorized officer as of the date first
above written.
THE RIGHT START, INC.
By: /s/ Jerry R. Welch
Name: Jerry R. Welch
Its: President and Chief Executive Officer
HELLER FINANCIAL, INC.
By: /s/ Janice Faulkner
Name: Janice Faulkner
Its: Assistant Vice President
