EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
AND WAIVER
This EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT AND
WAIVER (this "Amendment") is dated as of April 28, 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 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 so amended, the "Loan Agreement");
WHEREAS, Events of Default exist under (i) subsection 6.1 of
the Loan Agreement as a result of Borrower's breach of the minimum Net Worth
covenant contained in subsection 6.1 for the months of February and March 2000,
(ii) subsection 6.4 of the Loan Agreement as a result of Borrower's exceeding
the limitations on Capital Expenditures and (iii) subsection 5.1(Q) as a result
of Borrower's failing to provide the Projections required thereunder (the
"Existing Events of Default"), and Borrower has requested that Lender waive such
Existing Events of Default and Lender has agreed to do so, all upon the terms
and conditions set forth herein;
WHEREAS, Borrower has requested certain amendments to the Loan
Documents (as defined in the Loan Agreement), as set forth herein;
WHEREAS, Lender is willing to grant such amendments, all upon
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:
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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 2.1(C) of the Loan Agreement. Subsection 2.1(C)
is hereby amended by inserting the following before the final sentence thereof:
"Commencing on May 1, 2000, and continuing on the first day of
each month thereafter until the CAPEX Loan is paid in full,
Borrower shall pay to Lender (in addition to any other amounts
due hereunder), $100,000, which payments shall be credited to
the outstanding principal balance of all CAPEX Advances
outstanding as of each such payment date."
3. Amendment to Subsection 5.1(N) of the Loan Agreement. Subsection 5.1
(N) of the Loan Agreement is amended to add the following at the end of
such subsection:
"and within 2 Business Days of opening a new store location, a
revised list of locations including the address of the new
location and copies of the lease for such location either as
executed or a draft in substantially final form (and in such
case, send the final lease when executed)
4. Amendment to Subsection 6.1 of the Loan Agreement. Subsection 6.1 of
the Loan Agreement is hereby deleted in its entirety an the following
substituted therefor:
"6.1 Net Worth. Borrower shall maintain Net Worth of at
least (a) $7,196,000 as of April 30, 2000, (b) $6,950,000
as of May 31, 2000, (c) $6,995,000 as of June 30, 2000, (d)
$6,773,000 as of July 31, 2000 and (e) $8,000,000 as of
August 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:
Period Amount
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)
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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 $ 500,000
Twelve months ended October 31, 2000 $ 500,000
Twelve months ended February 3, 2001 $ 500,000"
6. Additional Covenants of Borrower. On or before May 15, 2000, Borrower
shall deliver to Lender consolidated and consolidating Projections for Borrower
and its Subsidiaries for each month of the Fiscal Year ending on February 3,
2001, in form and substance, and containing such detail, as are satisfactory to
Lender. Failure to comply with this covenant shall constitute an Event of
Default under the Loan Agreement.
7. Limited Waiver. As of the Effective Date of this Amendment (as
defined in Paragraph 7 below), Lender hereby waives the Existing Events of
Default. The waiver contained herein is limited to the Existing Events of
Default and shall not extend to any future or other existing Defaults or Events
of Default, and Lender's granting of such waiver 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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b. Before and after giving effect to this Amendment, (a) no Default or
Event of Default has occurred and is continuing other than the Existing
Events of Default, (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 provides shall be performed by it on or prior to such
date (except for the Existing Events of Default), 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
incumbency of the officers executing this Amendment and any other
documents in connection herewith, (ii) the articles of incorporation of
Borrower and (iii) 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.
d. Borrower shall have paid to Lender a closing fee in the amount of
$30,000.00.
10. Post-Closing Condition. Within five (5) Business Days of the date hereof,
Borrower shall deliver to Lender evidence of Borrower's Board of Directors'
authorization and ratification of Borrower's execution, delivery and performance
of its obligations under this Amendment and under the Loan Documents as amended
hereby, and of the transactions contemplated hereby and thereby, such evidence
to be in form and substance satisfactory to Lender. Borrower hereby acknowledges
and agrees that failure to deliver such evidence within the time period set
forth above shall constitute an Event of Default under the Loan Agreement.
11. 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.
12. No Waiver. Except as and only to the extent set forth in Section 7 hereof,
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.
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13. 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.
14. Counterparts. This Agreement 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.
15. 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.
16. 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.
17. 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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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 CEO
HELLER FINANCIAL, INC.
By: /s/ David A. Coleman
Name: David A. Coleman
Its: Assistant Vice President
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Exhibit A
BORROWER'S CLOSING CERTIFICATE
This certificate is delivered pursuant to that certain Eighth
Amendment to Loan and Security Agreement and Limited Waiver dated as of April
28, 2000 (the "Amendment") between The Right Start, Inc., a California
corporation ("Borrower"), and Heller Financial, Inc. ("Lender"). Except as
provided herein, all capitalized terms used herein which are defined in the Loan
Agreement shall have the meanings given therein. The undersigned hereby
certifies to Lender that he or she, as applicable, is the duly elected,
qualified and acting Chief Executive Officer or Chief Financial Officer of
Borrower, as applicable, and on behalf of Borrower (and not individually),
further certifies to Lender that:
1. Each representation and warranty made in Section 4 of the
Loan Agreement and in the other Loan Documents is true, correct and complete in
all material respects as of the Effective Date (as defined in the Amendment) to
the same extent as though made on and as of that date, except for any
representation and warranty limited by its terms to a specific date.
2. No event has occurred and is continuing or would result
from the consummation of the transactions contemplated under the Amendment on
the Effective Date which event would constitute a Default or Event of Default,
except for the Existing Events of Default (as defined in the Amendment).
3. Borrower has performed in all material respects all
agreements and satisfied all conditions which any Loan Document provides shall
be performed by it on or before the Effective Date, other than the Existing
Events of Default.
4. No order, judgment or decree of any court, arbitrator or
governmental authority purports to enjoin or restrain Lender from making any
Loans or issuing any Lender Letters of Credit to Borrower, or to extend the
maturity date of any Loans or Letters of Credit outstanding on the date hereof.
5. There is not pending, or to my knowledge threatened, any
action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration against or affecting Borrower or any of its
property that has not been disclosed by Borrower in writing, and there has
occurred no development in any such action, charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration so disclosed
that could reasonably be expected to have a Material Adverse Effect.
6. No event or condition has occurred since the fiscal quarter
ending on January 31, 2000, which constitutes or could reasonably be expected to
constitute a Material Adverse Effect or which has not been previously and fully
disclosed to Lender in writing.
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7. On the date hereof after giving effect to the transactions
contemplated by the Amendment on the date hereof and the payment by Borrower of
all costs, fees and expenses related thereto, Borrower (a) owns assets the fair
salable value of which are (i) greater than the total amount of its liabilities
(including contingent liabilities) and (ii) greater than the amount that will be
required to pay the probable liabilities of Borrower as they mature; (b) has
capital that is not unreasonably small in relation to its business as presently
conducted or any contemplated or undertaken transaction; and (c) does not intend
to incur and does not believe that it will incur debts beyond its ability to pay
such debts as they become due.
8. The conditions precedent set forth in Section 9 of the
Amendment have been satisfied.
IN WITNESS WHEREOF, the undersigned has duly executed this
Borrower's Closing Certificate on behalf of Borrower this 28th day of April,
2000.
THE RIGHT START, INC.
By: /s/ Jerry R. Welch
Name: Jerry R. Welch
Title: Chief Executive Officer
By: /s/ Gina M. Engelhard
Name: Gina M. Engelhard
Title: Chief Financial Officer
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