THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT,
LIMITED WAIVER AND CONSENT
This Third Amendment to Loan and Security Agreement, Limited Waiver and
Consent("Amendment") is dated September 3, 1997 and entered into by and between
XXXXXX FINANCIAL, INC. ("Lender"), and THE RIGHT START, INC. ("Borrower").
WHEREAS, Lender and Borrower have entered into a Loan and Security
Agreement dated November 14, 1996 (as amended, the "Loan Agreement"); and
WHEREAS, an Event of Default is in existence under subsection 8.1(C) of the
Agreement as a result of Borrower's breach of the Minimum EBITDA covenant
contained in subsection 6.3 for the two (2) fiscal quarters ending July 31, 1997
(the "Existing Event of Default"); and
WHEREAS, Borrower has requested that Lender (i) waive the Existing Event of
Default, (ii) amend the EBITDA covenant, (iii) increase Lender's Letter of
Credit Liability, and (iv) consent to Borrower's sale of 1,500,000 shares of its
common stock; and
WHEREAS, Lender has agreed to Borrower's requests, subject to the terms and
conditions set forth herein.
NOW THEREFORE, in consideration of the mutual conditions and agreements set
forth in the Agreements and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, intending to be legally bound, hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, to the
extent not otherwise defined herein, shall have the same meanings as in the
Loan Agreement, as amended hereby.
2. Amendments. The Agreement is hereby amended as follows:
(a) Subsection 2.1(G)(1) is deleted in its entirety and replaced with
the following:
(1) Maximum Amount. The aggregate amount of Letter
of Credit Liability with respect to all Lender Letters of
Credit outstanding at any time shall not exceed $3,000,000.
(b) Subsection 6.3 is deleted in its entirety and replaced with the
following:
6.3 Minimum EBITDA. Borrower shall have a minimum EBITDA for the
two (2) fiscal quarters ending July 31, 1997 of no more negative than
($1,850,000) and for the three (3) fiscal quarters ending October 31,
1997 of no more negative than ($3,000,000).
3. Limited Waiver. Lender hereby waives the Existing Event of Default.
This is a limited waiver and shall not be deemed to constitute a waiver of
any other existing Events of Default or any future breach of the Agreement
or any of the other Loan Documents (including, without limitation, a breach
of the covenant causing the Existing Event of Default for any period other
than that specified herein).
4. Limited Consent. Notwithstanding the provisions of subsection 7.8
of the Agreement, entitled "Transactions with Affiliates", Lender hereby
consents to Borrower's sale of 1,500,000 shares of common stock pursuant to
that certain Securities Purchase Agreement dated as of September 4, 1997
among Borrower and the Purchasers (as defined therein) listed on the
signature pages thereto (a copy of which is attached hereto as Exhibit A,
the "Securities Purchase Agreement"), the net proceeds of which shall be
equal to at least $3,500,000 and be wire transferred directly to the
Blocked Account. This is a limited consent which shall be effective only
with respect to the specific facts set forth above. This limited consent
shall not be deemed to constitute a consent or waiver of any other term,
provision or condition of the Agreement or to prejudice any right or remedy
that Lender may now have or may have in the future under or in connection
with any of the Loan Documents.
5. Conditions. The effectiveness of this Amendment is subject to the
satisfaction of the following conditions precedent (unless specifically
waived in writing by Lender):
(a) there shall have occurred no material adverse change in the business,
operations, financial conditions, profits or prospects, or in the
Collateral of Borrower;
(b) Borrower shall have executed and delivered such other documents
and instruments as Lender may require;
(c) all corporate proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to Lender and its
legal counsel;
(d) Borrower shall have received net proceeds in an amount of at least
$3,500,000 from the sale of 1,500,000 shares of its common stock pursuant
to the Securities Purchase Agreement and wire transferred said proceeds to
the Blocked Account; and
(e) Borrower shall have paid Lender a documentation fee in the amount
of $500.00
Section 5.02 Ratification. The terms and provisions set forth in this
Amendment shall modify 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 ratified and confirmed
and shall continue in full force and effect.
Section 5.03 Corporate Action The execution, delivery and performance of
this Amendment have been authorized by all requisite corporate action on the
part of Borrower and will not violate the Articles of Incorporation or Bylaws of
Borrower.
Section 5.04 Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 5.05 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of Lender and Borrower and their respective
successors and assigns.
Section 5.06 Counterparts. This Amendment may be executed in one or more
counterparts, each of which when so executed shall be deemed to be an original,
but all of which when taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first above written.
XXXXXX FINANCIAL, INC.,
as Lender
By:
Title:
THE RIGHT START, INC.,
as Borrower
By:
Title:
