EXHIBIT 10.60
WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT
This WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT (this "Waiver and
Amendment"), dated as of December 3, 2004, is entered into by and among THE
GYMBOREE CORPORATION, a Delaware corporation (the "Company"), each other
Borrower named in the signature pages hereof (together with the Company, each a
"Borrower" and, collectively, the "Borrowers") and Bank of America, N.A. (the
"Lender").
RECITALS
A. The Borrowers and the Lender are parties to a Credit Agreement,
dated as of August 11, 2003 (as amended, restated, extended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), pursuant to which
the Lender has extended certain credit facilities to the Borrowers.
B The Borrowers have requested that the Lender agree to certain
amendments to the Credit Agreement and provide certain waivers in connection
with the Credit Agreement, and the Lender has agreed to such request, subject to
the terms and conditions of this Waiver and Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to such terms in the
Credit Agreement (as amended hereby). As used herein, "Amendment Documents"
means this Waiver and Amendment, the Credit Agreement (as amended by this Waiver
and Amendment), and each certificate and other document executed and delivered
by the Borrowers pursuant to Section 5 hereof.
2. Interpretation. The rules of interpretation set forth in Sections
1.02, 1.03, 1.04, 1.05, and 1.06 of the Credit Agreement shall be applicable to
this Waiver and Amendment and are incorporated herein by this reference.
3. Defaults and Waiver.
(a) For purposes of this Amendment, the "Potential Existing
Defaults" shall mean:
(i) any Event of Default that may exist on the date hereof
under Section 8.01(b) of the Credit Agreement solely as a result of any
failure by the Borrowers to notify the Lender promptly of the occurrence
of the potential Events of Default specified in subsections (ii), (iii),
(iv) and (v) below in accordance with Section 6.03(a) of the Credit
Agreement (it being acknowledged that the Borrowers do not hereby
acknowledge that any such failure occurred or that any such Event of
Default exists);
(ii) any Event of Default that may exist on the date hereof
under Section 8.01(b) of the Credit Agreement solely as a result of any
Disposition of all or
substantially all of the assets of one or more Excluded Subsidiaries,
which Disposition may have breached Section 7.04 of the Credit Agreement
(it being acknowledged that the Borrowers do not hereby acknowledge that
any such breach occurred or that any such Event of Default exists);
(iii) any Event of Default that may exist on the date hereof
under Section 8.01(b) of the Credit Agreement solely as a result of any
breach of the covenant set forth in Section 7.05(g) of the Credit
Agreement due to the UK Dispositions (it being acknowledged that the
Borrowers do not hereby acknowledge that any such breach occurred or that
any such Event of Default exists);
(iv) any Event of Default that may exist on the date hereof
under Section 8.01(b) of the Credit Agreement, which Event of Default may
have arisen as a result of the Borrowers having made capital expenditures
during the fiscal year of the Company ending on or about January 31, 2005
in an aggregate amount which exceeds the amount permitted by the covenant
set forth in Section 7.12 of the Credit Agreement (it being acknowledged
that the Borrowers do not hereby acknowledge that any such prohibited
capital expenditures were made or that any such Event of Default exists);
and
(v) any Event of Default that may exist on the date hereof
under Section 8.01(f) of the Credit Agreement solely as a result of one or
more Excluded Subsidiaries having suspended their respective businesses
for a period of more than three Business Days during a 30-day period (it
being acknowledged that the Borrowers do not hereby acknowledge that any
such business suspension occurred or that any such Event of Default
exists).
(b) Subject to and upon the terms and conditions hereof, and to
the extent that any such Potential Existing Defaults actually exist on the date
hereof, the Lender hereby waives the Potential Existing Defaults.
(c) Subject to and upon the terms and conditions hereof, the
Lender hereby (i) consents to the liquidation and dissolution in accordance with
applicable law of each Excluded Subsidiary and (ii) waives any Events of Default
that would otherwise arise under Sections 6.05, 7.04, 7.05(g) or 8.01(f) of the
Credit Agreement after the date hereof solely as a result of the liquidation and
dissolution of any such Excluded Subsidiary.
(d) Subject to subsection (c) above, nothing contained herein
shall be deemed a waiver of (or otherwise affect the Lender's ability to
enforce) any other Default under any of the Loan Documents, including without
limitation, (i) any Default as may now or hereafter exist and arise from or
otherwise be related to any of the Potential Existing Defaults (including
without limitation any cross-default arising under the Credit Agreement by
virtue of any matters resulting from any Potential Existing Default), and (ii)
any Default arising at any time after the Effective Date and which is the same
as or similar to any of the Potential Existing Defaults.
4. Amendments to Credit Agreement. Subject to the terms and conditions
hereof, and with effect from and after the Effective Date, the Credit Agreement
shall be amended as follows:
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(a) Section 1.01 of the Credit Agreement shall be amended at the
definition of "Consolidated Net Income" by amending and restating such
definition in its entirety as follows:
"Consolidated Net Income" means, for any period, for the
Company and its Subsidiaries on a consolidated basis, the net income
of the Company and its Subsidiaries (excluding extraordinary gains
and extraordinary losses and losses resulting solely from the UK
Dispositions) for such period.
(b) Section 1.01 of the Credit Agreement shall be further amended
by adding the following definition in the appropriate alphabetical order:
"Excluded Subsidiaries" means Gymboree Industries Limited, an
Irish corporation, Gymboree of Ireland, Limited, an Irish
corporation, and Gymboree U.K. Leasing Limited, a company
incorporated under the laws of England and Wales.
(c) Section 1.01 of the Credit Agreement shall be further amended
at the definition of "Inoperative Subsidiary" by amending and restating such
definition in its entirety as follows:
"Inoperative Subsidiary" means each of (a) Gymboree Japan
K.K., a Japanese corporation, (b) Gymboree Industries Holdings
Limited, an Irish corporation, (c) GOF196 Limited, an Irish
corporation, (d) Gymboree U.K. Limited, a company incorporated under
the laws of England and Wales, and (e) the Excluded Subsidiaries.
(d) Section 1.01 of the Credit Agreement shall be further amended
by adding the following definition in the appropriate alphabetical order:
"UK Dispositions" has the meaning specified in Section
7.05(g).
(e) Section 7.05(g) of the Credit Agreement shall be amended by
amending and restating such subsection to read in its entirety as follows:
(g) Dispositions by any Borrower and its Subsidiaries not
otherwise permitted under this Section 7.05; provided that (i) at the time of
any such Disposition, no Default shall exist or would result from such
Disposition and (ii) the aggregate book value of all property Disposed of in
reliance on this clause (g) in any fiscal year (other than Dispositions of stock
or assets directly related to the Borrowers' United Kingdom and Ireland
operations made by the Borrowers and their Subsidiaries during the fiscal
quarter of the Company ended October 30, 2004; the "UK Dispositions") shall not
exceed $5,000,000.
(f) Section 7.12 of the Credit Agreement shall be amended by
amending and restating such Section to read in its entirety as follows:
7.12 CAPITAL EXPENDITURES. Make or become legally obligated to make
any expenditure in respect of the purchase or other acquisition of
any fixed or capital
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asset (excluding normal replacements and maintenance which are
properly charged to current operations), except for capital
expenditures in the ordinary course of business not exceeding, in
the aggregate for the Company and its Subsidiaries during each
fiscal year set forth below, the amount set forth opposite such
fiscal year:
FISCAL YEAR ENDING NEAREST AMOUNT ($)
- ----------------------------------------------------
January 31, 2004 $40,000,000
January 31, 2005 $75,000,000
January 31, 2006 $60,000,000
(g) Section 7.13 of the Credit Agreement shall be amended by
amending and restating such Section to read in its entirety as follows:
7.13 INOPERATIVE SUBSIDIARIES. From and after the Closing Date, (a)
transfer any assets or properties to any Inoperative Subsidiary, (b)
suffer or permit any Inoperative Subsidiary to otherwise have or
acquire assets or properties exceeding the Specified Level in value
or amount, or (c) suffer or permit any Inoperative Subsidiary to
carry on any business or other operation of any kind; provided that
from and after October 30, 2004, provided there exists no Default,
the Company may contribute cash to any Excluded Subsidiary so long
as (x) any such cash contribution shall be made solely for the
purpose of satisfying the claims of creditors directly in connection
with the dissolution of any such Excluded Subsidiary, and (y) the
aggregate amount of all such cash contributions made in respect of
all such Excluded Subsidiaries shall not exceed $15,000,000.
(h) Schedule 2 to the form of Compliance Certificate set forth as
Exhibit C to the Credit Agreement shall be amended and restated in the form
attached hereto as Exhibit A.
5. Representations and Warranties. Each Borrower hereby represents and
warrants to the Lender as follows:
(a) No Default, other than the possible occurrence of the
Potential Existing Defaults, has occurred and is continuing (or would result
from the amendment to the Credit Agreement contemplated hereby).
(b) The execution, delivery and performance by the Borrowers of
this Waiver and Amendment have been duly authorized by all necessary corporate
and other action and do not and will not require any registration with, consent
or approval of, or notice to or action by, any Person (including any
Governmental Authority) in order to be effective and enforceable.
(c) The Amendment Documents constitute the legal, valid and
binding obligations of the Borrowers party thereto, enforceable against each
such Borrower in accordance with their respective terms, without defense,
counterclaim or offset.
(d) After giving effect to the waiver of the Potential Existing
Defaults set forth in Section 3, all representations and warranties of the
Borrowers contained in Article V of
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the Credit Agreement are true and correct on and as of the Effective Date,
except to the extent that any such representation and warranty specifically
relates to an earlier date, in which case they are true and correct as of such
earlier date.
(e) Each Borrower is entering into this Waiver and Amendment on
the basis of its own investigation and for its own reasons, without reliance
upon the Lender or any other Person.
(f) There has occurred since January 31, 2004 no event or
circumstance that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(g) The Obligations of each Borrower under the Credit Agreement
and each other Loan Document are not subject to any defense, counterclaim,
set-off, right of recoupment, abatement or other claim.
6. Effective Date. (a) This Waiver and Amendment will become effective
when each of the conditions precedent set forth in this Section 6 has been
satisfied (the "Effective Date"):
(i) The Lender shall have received from each Borrower a duly
executed original (or, if elected by the Lender, an executed facsimile
copy) counterpart to this Waiver and Amendment.
(ii) The Lender shall have received from the Company a
certificate signed by the assistant secretary of each Borrower, dated the
Effective Date, in form and substance satisfactory to the Lender, and
certifying evidence of the authorization of the execution, delivery and
performance by each Borrower of the Amendment Documents to which it is
party.
(iii) The Borrowers shall have paid all Attorney Costs of the
Lender to the extent invoiced prior to the Effective Date (including any
previously invoiced and outstanding Attorney Costs that relate to services
previously provided), plus such additional amounts of Attorney Costs as
shall constitute the Lender's reasonable estimate of Attorney Costs
incurred or to be incurred by it through the closing proceedings related
to this Waiver and Amendment (provided that such estimate shall not
thereafter preclude a final settling of accounts between the Borrowers and
the Lender).
(iv) The Lender shall have received, in form and substance
satisfactory to it, such additional approvals, consents, opinions,
documents and other information as the Lender shall request.
(b) From and after the Effective Date, the Credit Agreement is
amended as set forth herein. Except as expressly amended pursuant hereto, the
Credit Agreement shall remain unchanged and in full force and effect and is
hereby ratified and confirmed in all respects.
7. Reservation of Rights. Each Borrower acknowledges and agrees that
neither the execution nor the delivery by the Lender of this Waiver and
Amendment shall (a) be deemed to create a course of dealing or otherwise
obligate the Lender to execute similar amendments under
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the same or similar circumstances in the future or (b) be deemed to create any
implied waiver of any right or remedy of the Lender with respect to any term or
provision of any Loan Document (including any term or provision relating to the
occurrence of a Material Adverse Effect).
8. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants and
provisions of the Credit Agreement are and shall remain in full force and effect
and all references therein to such Credit Agreement shall henceforth refer to
the Credit Agreement as amended by this Waiver and Amendment. This Waiver and
Amendment shall be deemed incorporated into, and a part of, the Credit
Agreement.
(b) This Waiver and Amendment shall be binding upon and inure to
the benefit of the parties hereto and thereto and their respective successors
and assigns. No third party beneficiaries are intended in connection with this
Waiver and Amendment.
(c) THIS WAIVER AND AMENDMENT IS SUBJECT TO THE PROVISIONS OF
SECTIONS 9.19 AND 9.20 OF THE CREDIT AGREEMENT RELATING TO GOVERNING LAW, VENUE
AND WAIVER OF RIGHT TO TRIAL BY JURY, THE PROVISIONS OF WHICH ARE BY THIS
REFERENCE INCORPORATED HEREIN IN FULL.
(d) This Waiver and Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party hereto or thereto either
in the form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and the
receipt by the Lender of a facsimile transmitted document purportedly bearing
the signature of a Borrower shall bind such Borrower with the same force and
effect as the delivery of a hard copy original. Any failure by the Lender to
receive the hard copy executed original of such document shall not diminish the
binding effect of receipt of the facsimile transmitted executed original of such
document of the party whose hard copy page was not received by the Lender.
(e) This Waiver and Amendment, together with the Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein and therein. This Waiver and Amendment
supersedes all prior drafts and communications with respect thereto. This Waiver
and Amendment may not be amended except in accordance with the provisions of
Section 9.01 of the Credit Agreement.
(f) If any term or provision of this Waiver and Amendment shall be
deemed prohibited by or invalid under any applicable law, such provision shall
be invalidated without affecting the remaining provisions of this Waiver and
Amendment or the Credit Agreement, respectively.
(g) Each Borrower covenants to pay to or reimburse the Lender,
upon demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in
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connection with the development, preparation, negotiation, execution and
delivery of this Waiver and Amendment.
(h) This Waiver and Amendment shall constitute a "Loan Document"
under and as defined in the Credit Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Waiver and
Amendment to be duly executed as of the date first above written.
THE GYMBOREE CORPORATION, as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE MANUFACTURING, INC., as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYM-MARK, INC., as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE RETAIL STORES, INC., as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
Signature Page 1 to Waiver and First Amendment to Credit Agreement
THE GYMBOREE STORES, INC., as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE LOGISTICS PARTNERSHIP, as a Borrower
By: GYMBOREE RETAIL STORES, INC. as General
Partner
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE PLAY PROGRAMS, INC., as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE OPERATIONS, INC., as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
Signature Page 2 to Waiver and First Amendment to Credit Agreement
GYMBOREE, INC. (CANADA), as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE INDUSTRIES LIMITED, as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE U.K. LEASING LIMITED, as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
GYMBOREE OF IRELAND, LIMITED, as a Borrower
By: /s/ Myles McCormick
----------------------------------
Name: Myles McCormick
Title: Chief Financial Officer
Signature Page 3 to Waiver and First Amendment to Credit Agreement
BANK OF AMERICA, N.A., as the Lender
By: /s/ Ronald Drobny
----------------------------------
Name: Ronald Drobny
Title: Senior Vice President
Signature Page 4 to Waiver and First Amendment to Credit Agreement
EXHIBIT A
(Please see attached amended and restated Schedule 2 to form of Compliance
Certificate)
Exhibit A to Waiver and First Amendment Agreement
For the Quarter/Year ended ___________ ("Statement Date")
SCHEDULE 2
to the Compliance Certificate
($ in 000's)
I. SECTION 7.11(a) -- CONSOLIDATED TANGIBLE NET WORTH.
A. 85% Consolidated Tangible Net Worth at Benchmark Date: $____________
B. 75% of Consolidated Net Income for each full fiscal quarter ending
after Benchmark Date (no reduction for losses): $____________
C. 100% of increases in Shareholders' Equity after Benchmark Date from
issuance and sale of capital stock or other equity interests
(including from conversion of debt securities): $____________
D. Minimum required Consolidated Tangible Net Worth (Lines I.A + I.B +
I.C): $____________
E. Actual Consolidated Tangible Net Worth at Statement Date:
1. Shareholders' Equity: $____________
2. Intangible Assets: $____________
3. Consolidated Tangible Net Worth (I.E.1 less I.E.2): $____________
F. Excess (deficient) for covenant compliance (Line I.E.3 less I.D): $____________
II. SECTION 7.11 (b) -- CONSOLIDATED ASSET COVERAGE RATIO
A. Current Assets determined as of Statement Date:
1. Cash: $____________
2. Marketable Securities: $____________
3. Trade Accounts Receivable: $____________
4. Inventory: $____________
5. Current Assets (II.A.1 + 2 + 3 + 4): $____________
B. Current Liabilities as of Statement Date $____________
C. Outstanding Amounts as of Statement Date (without duplication to
II.B): $____________
D. Consolidated Asset Coverage Ratio (II.A.5 / (II.B + II.C): ______to 1.00
Minimum Required: 1.00:1.00
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III. SECTION 7.11(c)/APPLICABLE RATE -- CONSOLIDATED ADJUSTED LEVERAGE RATIO.
A. Consolidated EBITDA for four consecutive fiscal quarters ending on
above date ("Subject Period"):
1. Consolidated Net Income for Subject Period: $____________
2. Consolidated Interest Charges for Subject Period: $____________
3. Provision for income taxes payable during Subject Period: $____________
4. Depreciation expense for Subject Period: $____________
5. Amortization expense for Subject Period: $____________
6. Losses during the Subject Period resulting solely from the UK
Dispositions and included in the calculation of Consolidated
Net Income in Line III.A.1: $____________
7. Consolidated EBITDA (III.A.1 + 2 + 3 + 4 + 5 + 6): $____________
B. 1. Lease Expenses for Subject Period: $____________
2. Consolidated Adjusted EBITDAR (III.A.7 + III.B.1): $____________
C. Consolidated Funded Indebtedness at Statement Date: $____________
D. Lease Expenses for Subject Period: $____________
E. 6 x III.D: $____________
F. Consolidated Leverage Ratio ((III.C+III.E) / III.B.2): _____ to 1.00
Maximum permitted. 3.00:1.00
IV. SECTION 7.12 -- CAPITAL EXPENDITURES.
A. Capital expenditures made during fiscal year to date: $____________
B. Maximum permitted capital expenditures for fiscal year: $____________
C. Excess (deficient) for covenant compliance (Line IV.B less IV.A): $____________
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