Exhibit 1.2
THE RIGHT START, INC.
0000 XXXXXXXX XXXXXX XXXXX
XXXXXXXX XXXXXXX, XXXXXXXXXX
July 7, 1998
To each of the parties listed
on the signature pages hereto
Re: The Right Start, Inc.
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Ladies and Gentlemen:
The Right Start, Inc. and the countersigning parties listed below hereby
agree to amend the Company's plan of Recapitalization, as set forth in that
certain Letter Agreement dated April 6, 1998, between you, the Company and the
other investors named therein (as amended on April 13, 1998, the "Letter
Agreement"), in order to amend certain terms of the Series B Preferred Stock of
the Company and the Series C Preferred Stock of the Company.
The terms of each of the Series B Preferred Stock and the Series C
Preferred Stock, as set forth in the Letter Agreement, provided that shares of
each series would be mandatorily redeemable upon the happening of a Change of
Control (as defined in the Letter Agreement). However, upon examination of the
accounting treatment for such shares by the Company's accountants, Price
Waterhouse LLP, the Company's Series B Preferred Stock and the Company's Series
C Preferred Stock can not be treated as equity for financial accounting purposes
under the current structure set forth in the Letter Agreement. Therefore, the
new terms of the Series B Preferred Stock and Series C Preferred Stock, modified
to eliminate the redemption provisions thereof, are attached hereto as Exhibit A
and Exhibit B, respectively.
If the foregoing meets with your approval, please so indicate by having an
authorized representative sign this letter agreement in the appropriate space
provided below and return this signed letter to Xxxx Xxxxxx at The Right Start,
Inc. on or prior
to July 8, 1998, whereupon this Letter Agreement and your acceptance shall
represent a binding agreement between you and the Company with respect to the
matters set forth herein.
Sincerely,
THE RIGHT START, INC.
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Chief Financial Officer
and Vice President of
Finance and
Administration
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SIGNATURE PAGES TO LETTER AGREEMENT
AGREED TO AND ACCEPTED AS OF THE DATE FIRST SET FORTH ABOVE:
ARBCO ASSOCIATES, L.P.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title:
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XXXXX XXXXXXXX NON-TRADITIONAL
INVESTMENTS, L.P.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title:
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XXXXX XXXXXXXX OFFSHORE LIMITED
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
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Title:
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OFFENSE GROUP ASSOCIATES, L.P.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title:
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OPPORTUNITY ASSOCIATES, L.P.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
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Title:
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SIGNATURE PAGES TO LETTER AGREEMENT (CONT'D)
STRATEGIC ASSOCIATES, L.P.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Partner
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Xxxxxx Xxxxxxx Strategic Partners
FUND, L.P.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: Partner
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SIGNATURE PAGES TO LETTER AGREEMENT (CONT'D)
XXXX XXXXX
/s/ Xxxx Xxxxx
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SIGNATURE PAGES TO LETTER AGREEMENT (CONT'D)
XXXXXX X. XXXX & COMPANY MONEY
PURCHASE PLAN
By: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
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Title: Trustee
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SIGNATURE PAGES TO LETTER AGREEMENT (CONT'D)
XXXXXXX XXXXXXX
/s/ Xxxxxxx Xxxxxxx
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SIGNATURE PAGES TO LETTER AGREEMENT (CONT'D)
THE TRAVELERS INDEMNITY COMPANY
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
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Title: Senior Vice President
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EXHIBIT A
THE RIGHT START, INC.
SERIES B CONVERTIBLE PREFERRED STOCK
REVISED SUMMARY OF TERMS
ISSUER: The Right Start, Inc., a California corporation (the "Company").
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SECURITY: Series B Convertible Preferred Stock, par value $0.01 per share
(the "Series B Preferred Stock").
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EXCHANGE
PRICE: $1,000 principal amount of Existing Debt per ten shares of Series
B Preferred Stock.
PRIORITY: The Series B Preferred Stock will rank senior to the Company's
common stock (the "Common Stock") and pari passu with the
----------
Company's Series A Preferred Stock and Series C Preferred Stock
with respect to liquidation, and shall be senior to or pari passu
----------
with any other preferred stock subsequently issued by the
Company; provided however, that the Series A Preferred Stock
--------
shall be senior with respect to liquidation to the Series B
Preferred Stock and Series C Preferred Stock from and after June
1, 2002.
LIQUIDATION
PREFERENCE: $100 per share of the Series B Preferred Stock (the
"Liquidation Value").
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VOTING RIGHTS: Consent of the holders of at least a majority of the Series
A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock voting together as a single class, will be
required for (a) any sale by the Company of a substantial portion
of its assets, (b) any merger of the company with another entity,
(c) each amendment of the company's articles of incorporation,
and (d) any action that (i) increases the authorized number of
shares of preferred stock of the Company of any series, (ii)
creates any new class or series of shares having preference over
or being on a parity with the Series A Preferred Stock, Series B
Preferred Stock, and Series C Preferred Stock, or (iii) creates
any contractually subordinated debt
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of the company. Such consent shall not be unreasonably withheld.
Except for such consent rights and such voting rights as may be
provided by applicable law, the Series B Preferred Stock shall
have no voting rights as a separate series except the right to
vote as a separate series within the class of Preferred Stock as
to any matters regarding any modification of the rights,
privileges or terms of the Series B Preferred Stock or otherwise
in accordance with applicable law.
OPTIONAL
CONVERSION: Series B Preferred Stock shall be convertible in whole or in part
at any time, and from time to time, at the option of the holders
into shares of the Company's Common Stock at a rate equal to
$1.50 per share, the ("Conversion Price").
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ANTI-DILUTION
PROVISIONS: The Series B Preferred Stock will be subject to anti-dilution
provisions providing for adjustments to the Conversion Price
upon:
(a) Dividend or distribution of shares of Common Stock to holders
of Common Stock;
(b) Subdivision or combination of the outstanding shares of
Common Stock.
INFORMATION
RIGHTS: The Company will timely furnish the holders of the Series B
Preferred Stock with annual, quarterly and monthly financial
statements. Representatives of such holders will have the right,
upon reasonable notice, to inspect the books and records of the
Company.
PREEMPTIVE
RIGHTS: If the Company proposes to offer additional securities (other
than employee incentive stock or stock options, securities issued
in a public offering or the acquisition of another company, or
shares issued upon conversion or exercise of outstanding
securities), the Company will first offer all such securities to
the holders of the Series B Preferred Stock and the Series C
Preferred Stock (or Common Stock issued upon conversion of the
Series B Preferred Stock or Series C Preferred Stock) on a pro
rata basis. Such preemptive rights will not be transferable
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and will terminate with respect to any shares of Series B
Preferred Stock or Series C Preferred Stock (or common stock
issued upon conversion of the Series B Preferred Stock or Series
C Preferred Stock), as the case may be, upon the earlier of (a)
the transfer of such shares or (b) the fifth anniversary of the
Preferred Stock Exchange.
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EXHIBIT B
THE RIGHT START, INC.
SERIES C CONVERTIBLE PREFERRED STOCK
SUMMARY OF TERMS
ISSUER: The Right Start, Inc., a California corporation (the "Company").
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SECURITY: Series C Convertible Preferred Stock, par value $0.01 per share
(the "Series C Preferred Stock").
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EXCHANGE
PRICE: $1000 principal amount of debt, represented by the new Senior
Subordinated Notes due 2000, per ten shares of Series C Preferred
Stock.
PRIORITY: The Series C Preferred Stock will rank senior to the Company's
common stock (the "Common Stock") and pari passu with the
----------
Company's Series A Preferred Stock and Series B Preferred Stock
with respect to liquidation, and shall be senior to or pari passu
----------
with any other preferred stock subsequently issued by the
Company; provided however, that the Series A Preferred Stock
----------------
shall be senior with respect to liquidation to the Series B
Preferred Stock and the Series C Preferred Stock from and after
June 1, 2002.
LIQUIDATION
PREFERENCE: $100 per share of Series C Preferred Stock (the "Liquidation
-----------
Value").
-----
VOTING RIGHTS: Consent of the holders of at least a majority of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock voting together as a single class, will be required for (a)
any sale by the Company of a substantial portion of its assets,
(b) any merger of the company with another entity, (c) each
amendment of the company's articles of incorporation, and (d) any
action that (i) increases the authorized number of shares of
preferred stock of the Company of any series, (ii) creates any
new class or series of shares having preference over or being on
a parity with the Series A Preferred Stock, Series B Preferred
Stock, and Series C Preferred Stock, or (iii) creates any
contractually subordinated debt
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of the company. Such consent shall not be unreasonably withheld.
Except for such consent rights and such voting rights as may be
provided by applicable law, the Series C Preferred Stock shall
have no voting rights as a separate series except the right to
vote as a separate series within the class of Preferred Stock as
to any matters regarding any modification of the rights,
privileges or terms of the Series C Preferred Stock or otherwise
in accordance with applicable law.
OPTIONAL
CONVERSION: The Series C Preferred Stock shall be convertible in whole or in
part at any time, and from time to time, at the option of the
holders into shares of the Company's Common Stock at a rate equal
to $1.00 per share, (the "Conversion Price").
----------------
ANTI-DILUTION
PROVISIONS: The Series C Preferred Stock will be subject to anti-dilution
provisions providing for adjustments to the Conversion Price
upon:
(a) Dividend or distribution of shares of Common Stock to holders
of Common Stock;
(b) Subdivision or combination of the outstanding shares of
Common Stock.
INFORMATION
RIGHTS: The Company will timely furnish the holders of the Series C
Preferred Stock with annual, quarterly and monthly financial
statements. Representatives of such holders will have the right,
upon reasonable notice, to inspect the books and records of the
Company.
PREEMPTIVE
RIGHTS: If the Company proposes to offer additional securities (other
than employee incentive stock or stock options, securities issued
in a public offering or the acquisition of another company, or
shares issued upon conversion or exercise of outstanding
securities), the Company will first offer all such securities to
the holders of the Series B Preferred Stock and the Series C
Preferred Stock (or Common Stock issued upon conversion of the
Series B Preferred Stock or Series C Preferred Stock) on a pro
rata basis. Such preemptive rights will not be transferable
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and will terminate with respect to any shares of Series B
Preferred Stock or Series C Preferred Stock (or common stock
issued upon conversion of the Series B Preferred Stock or Series
C Preferred Stock), as the case may be, upon the earlier of (a)
the transfer of such shares or (b) the fifth anniversary of the
Preferred Stock Exchange.
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