FIFTH AMENDMENT TO CREDIT AGREEMENT dated as of January 31, 1997 by and
among Mothers Work, Inc., a Delaware corporation ("MWI") on its own behalf and
as successor, by merger, to Motherhood Maternity Shops, Inc., a Delaware
corporation ("Motherhood"), Cave Springs, Inc., a Delaware corporation ("Cave"),
The Page Boy Company, Inc., a Delaware corporation ("Page Boy") and Mothers Work
(R.E.), Inc., a Pennsylvania corporation ("MW-RE") (each, a "Borrower", and
collectively, jointly and severally, the "Borrowers"), and CoreStates Bank,
N.A., successor to Meridian Bank ("Bank").
BACKGROUND
The Borrowers and the Bank are parties to a Credit Agreement dated as
of August 1, 1995, as first amended September 1, 1995, as second amended January
25, 1996, as third amended May 31, 1996, and as fourth amended September 30,
1996 (the "Credit Agreement") pursuant to which the Bank established, in favor
of the Borrowers, a credit facility in an aggregate principal amount of
$24,094,684.93, subject to the terms and conditions set forth therein. Borrowers
have requested the Bank to modify certain of the financial covenants set forth
in the Credit Agreement, which the Bank is willing to do, all on the terms and
conditions set forth herein. Capitalized terms used herein, and not otherwise
defined, shall have the meanings ascribed to them in the Credit Agreement.
AGREEMENTS
The parties hereto, intending to be legally bound, hereby agree:
1. Section 1.01 of the Credit Agreement shall be
modified by adding the following defined terms:
"Capital Expenditures" shall mean, with respect to any person
for any period, all amounts paid or accrued during such period
in respect of the cost of any fixed asset or improvement, or
any replacement, substitution or addition thereto, which have
a useful life of more than one year, including, without
limitation, those arising in connection with the direct or
indirect acquisition of such assets by way of increased
product or service charges or offset items, and including the
cash component of any Capitalized Lease Obligation,
Indebtedness secured by Liens permitted under Section 7.01
hereof, relocation costs incurred in moving Borrower's plant,
factory or offices, or costs incurred in store closings, but
excluding any costs directly related to the Episode
Transaction and excluding any
one-time costs associated with the Borrowers' relocation to
its new offices in fiscal year 1996.
"Current Portion of Long-Term Debt" shall mean, with respect
to any person for any period, the aggregate of regularly
scheduled principal payments on all long-term Indebtedness
(including, without limitation, Subordinated Indebtedness)
payable by such person within the ensuing twelve month period
on a Consolidated basis in accordance with GAAP.
2. Section 7.07 of the Credit Agreement shall be
amended by deleting the language found therein in its entirety,
and by substituting therefor the following:
"SECTION 7.07. Total Senior Funded Debt to Operating Cash Flow
Ratio. Permit, at any time, the ratio of (x) Total Senior
Funded Debt of MWI and its Subsidiaries on a Consolidated
basis, to (y) Operating Cash Flow of MWI and its Subsidiaries
on a Consolidated basis for the four most recent consecutive
fiscal quarters ending on or immediately preceding such date
of determination to be greater than the respective amounts set
forth below for the periods indicated:
Period Ratio
------ -----
During the Fiscal Quarter
ending Dec. 31, 1996 4.35:1.00
During the Fiscal Quarter
ending March 31, 1997 4.35:1.00
During the Fiscal Quarter
ending June 30, 1997 4.20:1.00
During the Fiscal Quarter
ending Sept. 30, 1997 4.00:1.00
During the Fiscal Quarter
ending Dec. 31, 1997,
and thereafter; 4.00:1.00
provided, however, that for purposes of these calculations, any charges incurred
in fiscal year 1996 resulting from the application of FASB 121 (Accounting for
the Impairment of Long-Lived Assets, and Long-Lived Assets to be Disposed Of)
shall not be included for purposes of determining Net Income.
3. Section 7.08 of the Credit Agreement shall be
amended by deleting the language found therein in its entirety,
and by substituting therefor the following:
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SECTION 7.08. Ratio of Operating Cash Flow to Interest
Expense, Current Portion of Long-Term Debt and Capital
Expenditures. Permit, at any time, the ratio of Operating Cash
Flow of MWI and its Subsidiaries on a Consolidated basis for
the four most recent consecutive fiscal quarters ending on or
immediately preceding such date of determination to the
aggregate of (x) the Interest Expense plus (y) the Capital
Expenditures incurred during the same four most recent fiscal
quarters, plus (z) the Current Portion of Long-Term Debt,
calculated as of the date of such determination, to be less
than the respective amounts set forth below for the periods
indicated:
Period Ratio
------ -----
During the Fiscal Quarter
ending Dec. 31, 1996 1.00:1.00
During the Fiscal Quarter
ending March 31, 1997 1.05:1.00
During the Fiscal Quarter
ending June 30, 1997 1.15:1.00
During the Fiscal Quarter
ending Sept. 30, 1997 1.40:1.00
During the Fiscal Quarter
ending Dec. 31, 1997,
and thereafter; 1.50:1.00
provided, however, that for purposes of these calculations, any charges incurred
in fiscal year 1996 resulting from the application of FASB 121 (Accounting for
the Impairment of Long-Lived Assets, and Long-Lived Assets to be Disposed Of)
shall not be included for purposes of determining Net Income.
4. As a condition to the execution and delivery of this Fifth
Amendment to Credit Agreement, the Borrowers shall deliver to the Bank, in form
and content satisfactory to the Bank and its counsel, the following documents,
instruments or payments:
(a) A certified copy of resolutions adopted by
the Board of Directors of each of the Borrowers authorizing the execution,
delivery and performance of this Fifth Amendment, and all of the documents and
instruments required by the Bank for the implementation of this Agreement;
(b) The favorable written opinion of Pepper,
Hamilton & Scheetz, counsel to the Borrowers, substantially in
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the form of Exhibit "A" hereto, dated the date of this Fifth Amendment,
addressed to the Bank and satisfactory to it; and
(c) An amendment fee in the amount of $2,500.
5. The Borrowers hereby:
(a) acknowledge and agree that all of their
representations, warranties and covenants contained in the Credit Agreement
and/or in the Loan Documents, as amended hereby, are true, accurate and correct
on and as of the date hereof as if made on and as of the date hereof, except as
set forth on Schedule 5(a) attached to this Fifth Amendment; provided, however,
that with respect to the dates set forth in certain representations, such dates
shall be updated as follows:
(i) in Section 4.05, the referenced date shall be
September 30, 1996;
(ii) in Section 4.07(a), the referenced date for
consolidated balance sheet shall be September 30, 1996;
(iii) in Section 4.07(b), the referenced date shall be
1997; and
(iv) in Section 4.07(c), the referenced 1995 Fiscal
Year and 1996 Fiscal Year shall be changed to 1996 Fiscal Year and 1997 Fiscal
Year, respectively.
(b) acknowledge and agree that they have no
defense, set-off, counterclaim or challenge against the payment of any sums
owing under the Credit Agreement or the Loan Documents or the Obligations, or
the enforcement of any of the terms of the Credit Agreement or the Loan
Documents, as amended hereby; and
(c) represent and warrant that no Event of Default, as
defined in the Credit Agreement, exists or will exist upon the
delivery of notice, passage of time or both.
6. The Borrowers will pay all of Bank's out-of-pocket
costs and expenses incurred in connection with the review, preparation,
negotiation, documentation and closing of this Fifth Amendment and the
consummation of the transactions contemplated herein, including, without
limitation, fees, expenses and disbursements of counsel retained by Bank and all
fees related to filings, recording of documents and searches, appraisal costs,
whether or not the transactions contemplated hereunder are consummated.
7. All other terms and conditions of the Credit Agreement and
of the Loan Documents, not inconsistent with the
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terms hereof, shall remain in full force and effect and are hereby ratified and
confirmed by the Borrowers.
IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Fifth
Amendment to Credit Agreement to be executed by their respective authorized
officers as of the day and year first above written.
MOTHERS WORK, INC.
By: /s/ Thomas Frank
-----------------------
Name: Thomas Frank
Title: Vice President
CAVE SPRINGS, INC.
By: /s/ Thomas Frank
-----------------------
Name: Thomas Frank
Title: Vice President
THE PAGE BOY COMPANY, INC.
By: /s/ Thomas Frank
-----------------------
Name: Thomas Frank
Title: Vice President
MOTHERS WORK (R.E.), INC.
By: /s/ Thomas Frank
-----------------------
Name: Thomas Frank
Title: Vice President
CORESTATES BANK, N.A.
By: /s/ Randal D. Southern
-----------------------
Name: Randal D. Southern
Title: Vice President
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QUALIFICATIONS, EXCEPTIONS
TO REPRESENTATIONS
NONE
SCHEDULE 6(a)
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