ELEVENTH AMENDMENT TO CREDIT AGREEMENT

This ELEVENTH AMENDMENT TO CREDIT AGREEMENT (this “Amendment”), dated as of July
31, 2009, 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 by (i) that certain Waiver and First Amendment to
Credit Agreement dated as of December 6, 2004, (ii) that certain Second
Amendment to Credit Agreement dated as of July 25, 2005, (iii) that certain
Third Amendment to Credit Agreement dated as of March 30, 2006, (iv) that
certain Fourth Amendment to Credit Agreement dated as of July 5, 2006, (v) that
certain Fifth Amendment to Credit Agreement dated as of February 7, 2007,
(vi) that certain Sixth Amendment to Credit Agreement dated as of April 24,
2007, (vii) that certain Seventh Amendment to Credit Agreement dated as of June
12, 2007, (viii) that certain Eighth Amendment to Credit Agreement dated as of
July 31, 2007, (ix) that certain Ninth Amendment to Credit Agreement dated as of
November 21, 2007, and (x) that certain Tenth Amendment to Credit Agreement
dated as of August 8, 2008 (collectively, and as the same may be further
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 the Lender has agreed to such request, subject to the
terms and conditions of this 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
Amendment, the Credit Agreement (as amended by this 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
Amendment and are incorporated herein by this reference.
 
3. 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:
1

--------------------------------------------------------------------------------

 
(a) Section 1.01 of the Credit Agreement shall be amended by amending and
restating the definition “Applicable Rate” to read in full as follows:
 
“Applicable Rate” means (a) prior to the Tenth Amendment Date, the following
percentages per annum, based upon the Consolidated Adjusted Leverage Ratio as
set forth in the most recent Compliance Certificate received by the Lender
pursuant to Section 6.02(a) in conjunction with financial statements provided
pursuant to Section 6.01(a) or (b):
 
Pricing Level
Consolidated Adjusted Leverage Ratio
Unused Line Fee (%)
Eurodollar Rate Loans/ Letters of Credit (%)
Base Rate Loans (%)
1
> 3.00:1.00
0.500
1.500
0.250
2
> 2.50:1.00 but < 3.00:1.00
0.400
1.250
0.000
3
> 2.00:1.00 but < 2.50:1.00
0.300
1.000
0.000
4
< 2.00:1.00
0.200
0.750
0.000

and (b) at all times from and after the Tenth Amendment Date until the Eleventh
Amendment Date, the following percentages per annum, based upon the Consolidated
Adjusted Leverage Ratio as set forth in the most recent Compliance Certificate
received by the Lender pursuant to Section 6.02(a) in conjunction with financial
statements provided pursuant to Section 6.01(a) or (b):
 
Pricing Level
Consolidated Adjusted Leverage Ratio
Unused Line Fee (%)
Eurodollar Rate Loans/ Letters of Credit (%)
Base Rate Loans (%)
1
> 3.00:1.00
0.600
1.750
0.250
2
> 2.50:1.00 but < 3.00:1.00
0.500
1.500
0.000
3
> 2.00:1.00 but < 2.50:1.00
0.400
1.250
0.000
4
< 2.00:1.00
0.300
1.000
0.000

and (c) at all times from and after the Eleventh Amendment Date, the following
percentages per annum, based upon the Consolidated Adjusted Leverage Ratio as
set forth in the most recent Compliance Certificate received by the Lender
pursuant to Section 6.02(a) in conjunction with financial statements provided
pursuant to Section 6.01(a) or (b):
 
Pricing Level
Consolidated Adjusted Leverage Ratio
Unused Line Fee (%)
Eurodollar Rate Loans/ Letters of Credit (%)
Base Rate Loans (%)
1
> 3.00:1.00
0.650
3.000
0.750
2
> 2.50:1.00 but < 3.00:1.00
0.550
2.500
0.500
3
> 2.00:1.00 but < 2.50:1.00
0.450
2.250
0.250
4
< 2.00:1.00
0.350
2.000
0.000

Any increase or decrease in the Applicable Rate resulting from a change in the
Consolidated Adjusted Leverage Ratio shall become effective as of the first
Business Day immediately following the date a Compliance Certificate is
delivered pursuant to Section 6.02(a) in conjunction with financial statements
provided pursuant to Section 6.01(a) or (b); provided, however, that if a
Compliance Certificate is not delivered when due in accordance with such
Section, then Pricing Level 1 shall apply as of the first Business Day after the
date on which such Compliance Certificate was required to have been delivered.
 
2

--------------------------------------------------------------------------------

 
(b) Section 1.01 shall be further amended by adding the following definition, in
appropriate alphabetical order:
 
“Applicable SLC Rate” means one-half the Applicable Rate for Letters of Credit.
 
(c) Section 1.01 of the Credit Agreement shall be amended by amending and
restating “Consolidated Adjusted Leverage Ratio” to read in full as follows:
 
“Consolidated Adjusted Leverage Ratio” means, (a) as determined as of any date
prior to August 1, 2009, the ratio of (i) Consolidated Funded Indebtedness as of
such date plus six (6) times the amount of Lease Expenses for the Subject Period
to (ii) Consolidated Adjusted EBITDAR for the Subject Period and (b) as
determined as of August 1, 2009 or thereafter, the ratio of (i) Consolidated
Funded Indebtedness as of such date plus eight (8) times the amount of Lease
Expenses for the Subject Period to (ii) Consolidated Adjusted EBITDAR for the
Subject Period.
 
(d) Section 1.01 of the Credit Agreement shall be further amended by adding the
definition “Eleventh Amendment Date”, in appropriate alphabetical order, to read
as follows:
 
“Eleventh Amendment Date” means the “Effective Date” as defined in that Eleventh
Amendment to Credit Agreement dated as of July 31, 2009 among the Borrowers and
the Lender.
 
(e) Section 1.01 of the Credit Agreement shall be further amended by amending
and restating “Scheduled Maturity Date” to read in full as follows:
 
“Scheduled Maturity Date” means September 1, 2010.
 
(f) Section 1.01 of the Credit Agreement shall be further amended by placing the
following definitions in appropriate alphabetical order: “Consolidated EBITDA”,
“Guarantee”,  “Standby L/C Obligations” and “Subject Period”.
 
(g) Section 2.03(a)(ii)(B) and (E) of the Credit Agreement shall each be amended
by replacing the words “90 days” with “180 days”.
 
(h) Section 2.03(h)(i) of the Credit Agreement shall be amended and restated  to
read in full as follows:
 
(i) Standby Letters of Credit.  The applicable Borrower shall pay to the Lender
a letter of credit fee for each Standby Letter of Credit equal to the Applicable
SLC Rate times the daily maximum amount available to be drawn under such Letter
of Credit (whether or not such maximum amount is then in effect under such
Letter of Credit).  Such letter of credit fees shall be computed on a quarterly
basis in arrears, and shall be due and payable on the first Business Day after
the end of each March, June, September and December, commencing with the first
such date to occur after the issuance of such Letter of Credit, on the Maturity
Date and thereafter on demand.  If there is any change in the Applicable SLC
Rate during any quarter, the daily maximum amount of each Letter of Credit shall
be computed and multiplied by the Applicable SLC Rate separately for each period
during such quarter that such Applicable SLC Rate was in effect.  Such fees
shall be fully earned when paid and are non-refundable.
 
3

--------------------------------------------------------------------------------

 
(i) Section 2.12 of the Credit Agreement shall be amended and restated to read
in full as follows:
 
2.12 Option to Increase Commitment.  From and after the Tenth Amendment Date,
the Company may, upon written notice to the Lender, on not more than two
occasions, request an increase in the Commitment by up to $20,000,000 in the
aggregate.  Upon approval of such request by the Lender, in its sole discretion,
the Commitment shall be increased by the amount specified in such notice, not to
exceed $20,000,000 in the aggregate for all such requests together, effective as
of the date specified in such request (not to be earlier than three Business
Days after the date such request is approved by Lender) (the “Increase Effective
Date”).  As conditions precedent to any such increase, the Company shall deliver
to the Lender (i) a certificate of the Company signed by a Responsible Officer
of the Company in the form of Exhibit F hereto and attaching the resolutions
adopted by each Loan Party approving or consenting to such increase or
authorizing a Responsible Officer of the Company to approve such increase and
(ii) an upfront expansion fee equal to 0.125% times the amount of the requested
increase in Commitment.
 
(j) Section 7.06(e) of the Credit Agreement shall be amended and restated to
read in full as follows:
 
(e) the Company may purchase, redeem or otherwise acquire shares of its capital
stock for cash, in an aggregate amount not to exceed, (i) for all such
purchases, redemptions and other acquisitions together occurring from and after
the Second Amendment Date until the Fifth Amendment Date, the amount of
$110,000,000, (ii) for all such purchases, redemptions and other acquisitions
together occurring from and after the Fifth Amendment Date until the Eleventh
Amendment Date, the amount of $175,000,000, and (iii) for all such purchases,
redemptions and other acquisitions together occurring from and after the
Eleventh Amendment Date, the amount of $75,000,000; provided, in each case that
after giving effect to such proposed action, no Default would exist.
 
(k) Section 7.11(c) of the Credit Agreement shall be amended and restated to
read in full as follows:
 
(c) Consolidated Adjusted Leverage Ratio.  Permit the Consolidated Adjusted
Leverage Ratio, (i) at any time prior to the Second Amendment Date, to be
greater than 3.00:1.00, (ii) at any time from and after the Second Amendment
Date and prior to August 1, 2009, to be greater than 4.00:1.00, and
(iii) thereafter, to be greater than 3.50:1.00.
 
4

--------------------------------------------------------------------------------

 
(l) Schedule 2 to Exhibit C to the Credit Agreement shall be amended and
restated in the form attached hereto as Annex I.
 
(m) Schedule 5.14 to the Credit Agreement shall be amended and restated in the
form attached hereto as Annex II.
 
4. Representations and Warranties.  Each Borrower hereby represents and warrants
to the Lender as follows:
 
(a) No Default has occurred and is continuing.
 
(b) The execution, delivery and performance by the Borrowers of this 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) All representations and warranties of the Borrowers contained in Article V
of 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 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, 2009 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.
 
5. Effective Date.
 
(a) This Amendment will become effective as of the date shown first above (the
“Effective Date”), provided each of the conditions precedent set forth in this
Section 5 has been satisfied:
 
(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
Amendment.
 
5

--------------------------------------------------------------------------------

 
(ii) The Lender shall have received from the Company a certificate signed by the
assistant secretary of each Borrower 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 Lender shall have received such documents and certifications as the
Lender may reasonably require to evidence that each Borrower is duly organized
or formed, validly existing, in good standing and qualified to engage in
business in each jurisdiction where its ownership, lease or operation of
properties or the conduct of its business requires such qualification, except to
the extent that failure to do so could not reasonably be expected to have a
Material Adverse Effect.
 
(iv) The Borrowers shall have paid (A) to the Lender an upfront fee of 0.125%
times the Commitment, and (B) to the Lender’s counsel, all reasonable attorneys’
fees and expenses incurred by the Lender in connection with the development,
preparation, negotiation and delivery of this Amendment and the other Amendment
Documents.
 
(v) 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.
 
6. Reservation of Rights.  Each Borrower acknowledges and agrees that neither
the execution nor the delivery by the Lender of this Amendment shall (a) be
deemed to create a course of dealing or otherwise obligate the Lender to execute
similar amendments under 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).
 
7. 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 Amendment.  This Amendment shall be deemed
incorporated into, and a part of, the Credit Agreement.
 
(b) This 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 Amendment.
 
(c) THIS AMENDMENT IS SUBJECT TO THE PROVISIONS OF SECTIONS 9.19, 9.20 and 9.23
OF THE CREDIT AGREEMENT RELATING TO GOVERNING LAW, VENUE, WAIVER OF RIGHT TO
TRIAL BY JURY AND JUDICIAL REFERENCE, THE PROVISIONS OF WHICH ARE BY THIS
REFERENCE INCORPORATED HEREIN IN FULL.
 
6

--------------------------------------------------------------------------------

 
(d) This 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 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 Amendment supersedes all prior drafts and
communications with respect thereto.  This 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 Amendment shall be deemed prohibited by or
invalid under any applicable law, such provision shall be invalidated without
affecting the remaining provisions of this Amendment or the Credit Agreement,
respectively.
 
(g) Each Borrower covenants to pay to or reimburse the Lender, upon demand, for
all reasonable fees and expenses incurred in connection with the development,
preparation, negotiation, execution and delivery of this Amendment and the other
Amendment Documents.
 
(h) This Amendment shall constitute a “Loan Document” under and as defined in
the Credit Agreement.
 
[Remainder of page intentionally left blank]
 
7

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
 

 
THE GYMBOREE CORPORATION,
as a Borrower
     
By:
/s/ Blair W. Lambert
 
Name:
Blair W. Lambert
 
Title:
C.O.O. - C.F.O.
             
GYMBOREE MANUFACTURING, INC.,
as a Borrower
     
By:
/s/ Blair W. Lambert
 
Name:
Blair W. Lambert
 
Title:
C.O.O. - C.F.O.
             
GYM-MARK, INC.,
as a Borrower
     
By:
/s/ Blair W. Lambert
 
Name:
Blair W. Lambert
 
Title:
  C.O.O. - C.F.O.
             
GYMBOREE RETAIL STORES, INC.,
as a Borrower
       
By:
/s/ Blair W. Lambert
 
Name:
Blair W. Lambert
 
Title:
C.O.O. - C.F.O.
             
GYMBOREE PLAY PROGRAMS, INC.,
as a Borrower
       
By:
/s/ Blair W. Lambert
 
Name:
Blair W. Lambert
 
Title:
C.O.O. - C.F.O.
           

 
Signature Page One to Eleventh Amendment to Credit Agreement

--------------------------------------------------------------------------------

 

 
GYMBOREE OPERATIONS, INC.,
as a Borrower
       
By:
/s/ Blair W. Lambert
 
Name:
Blair W. Lambert
 
Title:
C.O.O. - C.F.O.
             
GYMBOREE, INC. (CANADA),
as a Borrower
       
By:
/s/ Blair W. Lambert
 
Name:
Blair W. Lambert
 
Title:
C.O.O. - C.F.O.

 
Signature Page Two to Eleventh Amendment to Credit Agreement

--------------------------------------------------------------------------------

 

 
LENDER
 
BANK OF AMERICA, N.A., as the Lender
       
By:
/s/ David Leimsieder
 
Name:
David Leimsieder
 
Title:
Senior Vice President

 
Signature Page Three to Eleventh Amendment to Credit Agreement

--------------------------------------------------------------------------------

 
ANNEX I
 
For the Quarter/Year ended ___________ (“Statement Date”)
 
SCHEDULE 2
to the Compliance Certificate
($ in 000’s)
 
I.
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 (I.A.1 + 2 + 3 + 4):
  $               
B.    Current Liabilities as of Statement Date
  $               
C.    Outstanding Amounts as of Statement Date (without duplication to I.B):
  $                         
D.    Consolidated Asset Coverage Ratio (I.A.5 ÷ (I.B + I.C)):
   
______to 1.00 
           
Minimum Required: 1.00:1.00
       

 

--------------------------------------------------------------------------------

 
 
II.
Section 7.11(c)/Applicable Rate — Consolidated Adjusted Leverage Ratio.

 
A.   Consolidated Adjusted 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. Non-cash expenses recognized by the Company during the Subject Period in
connection with the issuance of stock options and other equity interests in the
Company in consideration of employee services:
  $               
7. Losses during the Subject Period resulting solely from the UK Dispositions
and included in the  calculation of Consolidated Net Income in  Line II.A.1:
  $               
8. Consolidated Adjusted EBITDA for Subject Period (II.A.1 + 2 + 3 + 4 + 5 + 6 +
7):
  $               
B.    1. Lease Expenses for Subject Period:
  $               
2. Consolidated Adjusted EBITDAR for Subject Period (II.A.8 + II.B.1):
  $               
C.    Consolidated Funded Indebtedness at Statement Date:
  $               
D.    Lease Expenses for Subject Period:
  $               
E.    8 × II.D (or, for any Statement Date prior to  August 1, 2009, 6 × II.D):
  $               
F.    Consolidated Leverage Ratio ((II.C+II.E) ÷ II.B.2): Maximum permitted:
   
_____ to 1.00 
           
(1) At any time prior to the Second Amendment Date:
   
3.00:1.00 
           
(2) At any time from and after the Second Amendment Date  and prior to August 1,
2009:
   
4.00:1.00 
           
(3) Thereafter:
   
3.50:1.00 
 

 
III.
Section 7.12 -- Capital Expenditures.

 
A.   Capital expenditures made during fiscal year to date:
  $               
B.    Maximum permitted capital expenditures for fiscal year:
  $               
C.    Excess (deficiency) for covenant compliance (Line III.B less III.A):
  $       

 

--------------------------------------------------------------------------------

 
ANNEX II
 
SCHEDULE 5.14
 
SUBSIDIARIES
AND OTHER EQUITY INVESTMENTS
 
Part(i).
Subsidiaries.

 
1.
Gymboree Manufacturing, Inc.

 
2.
Gym-Mark, Inc.

 
3.
Gymboree Retail Stores, Inc.

 
4.
Gymboree Island, LLC

 
5.
Gym-Card, LLC

 
6.
Gymboree Play Programs, Inc.

 
7.
Gymboree Operations, Inc.

 
8.
Gymboree, Inc. (Canada)

 
9.
Gymboree Industries Limited

 
Part(ii).
Other Equity Investments.

 
None.
 

--------------------------------------------------------------------------------