EIGHTH AMENDMENT TO CREDIT AGREEMENT dated as of September 30, 1997 by and
among Mothers Work, Inc., a Delaware corporation, on its own behalf and as
successor, by merger, to Motherhood Maternity Shops, Inc., a Delaware
corporation ("MWI"), Cave Springs, Inc., a Delaware corporation ("Cave"), The
Page Boy Company, Inc., a Delaware corporation ("Page Boy"), 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, as fourth amended September 30, 1996,
as fifth amended January 31, 1997, as sixth amended April 16, 1997 and as
seventh amended July 31, 1997 (the "Credit Agreement") pursuant to which the
Bank established, in favor of the Borrowers, a credit facility in an aggregate
principal amount of $31,094,684.93, subject to the terms and conditions set
forth therein. Borrowers have requested the Bank to modify certain terms of the
Credit Agreement, including certain of the financial covenants set forth in the
Credit Agreement, which 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 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
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During the Fiscal Quarter
ending September 30, 1997 5.60:1.00
During the Fiscal Quarter
ending December 31, 1997 5.20:1.00
During the Fiscal Quarter
ending March 31, 1998 4.85:1.00
During the Fiscal Quarter
ending June 30, 1998 4.85:1.00
During the Fiscal Quarter
ending September 30, 1998 4.60:1.00
During the Fiscal Quarter
ending December 31, 1998 4.50:1.00
During the Fiscal Quarter
ending March 31, 1999,
and thereafter 4.50:1.00
provided, however, that for purposes of these calculations, any charges incurred
in any fiscal period 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 for that period.
2. 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:
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 September 30, 1997 0.80:1.00
During the Fiscal Quarter
ending December 31, 1997; 0.80:1.00
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During the Fiscal Quarter
ending March 31, 1998 0.95:1.00
During the Fiscal Quarter
ending June 30, 1998 1.00:1.00
During the Fiscal Quarter
ending September 30, 1998 1.10:1.00
During the Fiscal Quarter
ending December 31, 1998 1.20:1.00
During the Fiscal Quarter
ending March 31, 1999,
and thereafter 1.30:1.00
provided, however, that for purposes of these calculations, any charges incurred
in any fiscal period 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 for that period.
3. Section 7.09 of the Credit Agreement shall be amended by deleting
the language found therein in its entirety, and by substituting therefor the
following:
"SECTION 7.09. Current Ratio. Permit the ratio of the Current Assets to
the Current Liabilities to, at any time, be less than the respective
amounts set forth below for the periods indicated:
Period Ratio
------ -----
During the Fiscal Quarter
ending September 30, 1997 1.65:1.00
During the Fiscal Quarter
ending December 31, 1997 1.75:1.00
During the Fiscal Quarter
ending March 31, 1998 1.90:1.00
During the Fiscal Quarter
ending June 30, 1998 2.00:1.00
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During the Fiscal Quarter
ending September 30, 1998,
and thereafter 2:25:1.00
4. The Bank shall, promptly after the end of January, 1998, calculate
the average daily amount of Revolving Credit Loans outstanding to the Borrowers
during the month of January, 1998 and shall deliver such calculation to the
Borrowers. If the average daily amount of Revolving Credit Loans in January,
1998 (which excludes the aggregate undrawn amounts of all outstanding Letters of
Credit) exceeds the sum of $5,000,000, the Borrower shall pay to the Bank,
immediately upon demand, an amount equal to, one-eighth of one percent of the
amount of the Revolving Credit Commitment, which amount shall be paid in
immediately available funds.
5. As a condition to the execution and delivery of this Eighth
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 Eighth Amendment, and all of the documents and instruments
required by the Bank for the implementation of this Eighth Amendment;
b. The favorable written opinion of Pepper Hamilton Scheetz,
counsel for the Borrowers, substantially in the form of Exhibit "A" hereto,
dated the date of this Eighth Amendment, addressed to the Bank and satisfactory
to it;
c. An Amendment fee in the amount of $2,500; and
d. the inventory location report, as described in Section 6.05(k)
of the Credit Agreement.
6. 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 6(a) attached to this Eighth 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;
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(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.
7. 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 Eighth 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.
8. All other terms and conditions of the Credit Agreement and of the
Loan Documents, not inconsistent with the terms hereof, shall remain in full
force and effect and are hereby ratified and confirmed by the Borrowers.
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IN WITNESS WHEREOF, the Borrowers and the Bank have caused this Eighth
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
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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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