KE 46218269 

James H.M. Sprayregen, P.C. Michael A. Condyles (VA 27807) 

Anup Sathy, P.C. (pro hac vice pending) Peter J. Barrett (VA 46179) 

Steven N. Serajeddini (pro hac vice pending) Jeremy S. Williams (VA 77469)

KIRKLAND & ELLIS LLP KUTAK ROCK LLP

KIRKLAND & ELLIS INTERNATIONAL LLP 901 East Byrd Street, Suite 1000 

300 North LaSalle Richmond, Virginia 23219-4071 

Chicago, Illinois 60654 Telephone: (804) 644-1700 

Telephone: (312) 862-2000 Facsimile: (804) 783-6192 

Facsimile: (312) 862-2200 

 

-andJoshua A. Sussberg, P.C. (pro hac vice pending) 

Matthew C. Fagen (pro hac vice pending) 

KIRKLAND & ELLIS LLP 

KIRKLAND & ELLIS INTERNATIONAL LLP 

601 Lexington Avenue

New York, New York 10022 

Telephone: (212) 446-4800 

Facsimile: (212) 446-4900 

Proposed Co-Counsel to the Debtors and Debtors in Possession 

IN THE UNITED STATES BANKRUPTCY COURT 

FOR THE EASTERN DISTRICT OF VIRGINIA 

RICHMOND DIVISION 

 ) 

In re: ) Chapter 11 

 ) 

THE GYMBOREE CORPORATION, et al.,

1

 ) Case No. 17-32986 (___) 

 ) 

 Debtors. ) (Joint Administration Requested) 

 ) 

DECLARATION OF JAMES A. MESTERHARM, CHIEF 

RESTRUCTURING OFFICER OF THE GYMBOREE CORPORATION, 

IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS 

I, James A. Mesterharm, hereby declare under penalty of perjury: 

1. I am a Managing Director at AlixPartners LLP (“AlixPartners”) and have served 

as the Chief Restructuring Officer for The Gymboree Corporation (together with the other 

above-captioned debtors and debtors in possession, the “Debtors,” and, together with their 

 

1

 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification 

number, include: The Gymboree Corporation (5258); Giraffe Intermediate B, Inc. (0659); Gym-Card, LLC 

(5720); Gym-Mark, Inc. (6459); Gymboree Manufacturing, Inc. (6464); Gymboree Retail Stores, Inc. (6461); 

Gymboree Operations, Inc. (6463); and S.C.C. Wholesale, Inc. (6588). The location of the Debtors’ service 

address is 71 Stevenson Street, Suite 2200, San Francisco, California 94105. 

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non-Debtor affiliates, “Gymboree”) since May 30, 2017.2 AlixPartners has served as financial 

and restructuring advisor to the Debtors since March 2017. 

2. I have been a full time restructuring advisor for over 23 years. I received a B.S. in 

Accounting and Management in 1990 from Purdue University and a Masters of Business 

Administration in Finance and Organizational Behavior in 1998 from Northwestern University’s 

Kellogg School of Graduate Management, where I have been a guest lecturer on restructuring 

topics. I am a Certified Public Accountant and a Fellow of the American College of Bankruptcy. 

I have been employed by AlixPartners since September 1996. AlixPartners is a global 

independent restructuring consulting firm that has a wealth of experience in providing 

restructuring advisory services, and has assisted, advised, and provided strategic advice to 

debtors, creditors, bondholders, investors, and other entities in numerous chapter 11 cases of 

similar size and complexity to these chapter 11 cases. Since its inception in 1981, AlixPartners, 

its predecessor entities, and its affiliate, AP Services, LLC, have provided restructuring or crisis 

management services in numerous large cases. Some notable, publicly-disclosed restructuring 

assignments that I have personally led include Linn Energy, Inc., Paragon Offshore PLC, Walter 

Energy, Inc., Nautilus Holdings Ltd., Eastman Kodak Company, General Growth Properties, 

Hilex-Poly, Silicon Graphics Inc., Parmalat USA, Safety-Kleen Corporation, and Zenith 

Electronics Corporation. 

3. Each of the Debtors filed voluntary petitions for relief under chapter 11 of the 

United States Bankruptcy Code, 11 U.S.C. §§ 101–1532 (the “Bankruptcy Code”) with the 

United States Bankruptcy Court for the Eastern District of Virginia (the “Court”) on June 11, 

 

2

 I also serve as the Chief Restructuring Officer of each of the other above-referenced debtors and debtors in 

possession (together with the The Gymboree Corporation, the “Debtors,” and, together with their non-Debtor 

affiliates, “Gymboree”). Debtor Gym-Card, LLC is domiciled in the state of Virginia, which serves as a proper 

basis for venue in these chapter 11 cases. 

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2017. To minimize the adverse effects on their business, the Debtors have filed motions and 

pleadings seeking various types of “first day” relief (collectively, the “First Day Motions”). 

4. I am generally familiar with the Debtors’ day-to-day operations, business and 

financial affairs, and books and records. I submit this declaration to assist the Court and parties 

in interest in understanding the circumstances compelling the commencement of these chapter 11 

cases and in support of the Debtors’ chapter 11 petitions and First Day Motions filed today. 

5. Except as otherwise indicated herein, all facts set forth in this declaration are 

based upon my personal knowledge, input by the Debtors’ management team and advisors, 

including the AlixPartners team working under my supervision, my review of relevant 

documents and information concerning the Debtors’ operations, financial affairs, and 

restructuring initiatives, or my opinions based on my experience and knowledge. I am over the 

age of 18 and authorized to submit this declaration on behalf of the Debtors. If called upon to 

testify, I could and would testify competently to the facts set forth herein. 

Preliminary Statement 

6. Amidst the challenges facing many in the retail industry, the Debtors commence 

these chapter 11 cases with a comprehensive pre-negotiated restructuring in hand, together with 

key creditor support. After more than four months of diligence and arms’ length negotiations 

with certain secured term loan lenders (the “Consenting Term Loan Lenders”), the Debtors have 

reached agreement with approximately 66%3 of lenders holding Gymboree’s $788.8 million 

secured term loan to fund and support an expedited restructuring that will ensure a viable 

enterprise and maximize stakeholder recoveries. The key terms of the prenegotiated 

restructuring contemplate a reduction of approximately $1 billion in indebtedness, an infusion of 

 

3

 Exclusive of the $20 million Li & Fung Term Loan, as described and defined below. 

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up to $115 million in new money (through both a term loan debtor-in-possession financing 

facility and a fully backstopped rights offering), and a rationalization of the Debtors’ retail 

footprint. As contemplated in the Restructuring Support Agreement, dated as of June 11, 2017 

(a copy of which is attached hereto as Exhibit A), the Debtors intend to move swiftly through 

these cases and obtain confirmation of a chapter 11 plan by September 24, 2017. 

7. Gymboree was founded in San Francisco, California in 1976 as the first program 

to promote child growth and learning through playtime with parents. Following its inception, 

Gymboree specialized in creating activities to help develop the cognitive, physical, and social 

skills of children as they play. In 1986, Gymboree launched its first retail store in California to 

provide children’s apparel to complement Gymboree’s existing development programs. Over the 

course of the next three decades, Gymboree expanded its domestic and international presence to 

approximately 1,300 specialty retail stores operating under three brands: Gymboree; Janie & 

Jack (a higher-end offering launched in 2002); and Crazy 8 (a value-oriented line launched in 

2007). Gymboree’s product and price diversification allowed it to maximize market exposure 

and create consumer loyalty in several different consumer segments. 

8. Unfortunately, the Debtors, like many other apparel and retail companies, have 

recently fallen victim to adverse macro-trends, including the general shift away from 

brick-and-mortar stores to online retail channels. More specifically, retail companies like 

Gymboree, with a substantial brick-and-mortar presence, bear higher expenses than web-based 

retailers and are heavily dependent on store traffic, which has decreased significantly as 

consumers increasingly shop online rather than in malls or shopping centers. In addition to 

competing against online retailers, the Debtors have struggled against other established 

brick-and-mortar retailers, such as Children’s Place and the Gap, who have less leveraged capital 

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structures. With less debt to service, these competitors are able to offer lower prices than the 

Debtors and still bear the high operating expenses associated with brick-and-mortar retail. 

9. These developments, compounded with an underdeveloped online presence and 

wholesale platform, have adversely impacted the Debtors’ sales and operations, with EBITDA 

declining by 24% over the last year, from approximately $94 million in 2015 to approximately 

$71 million in 2016. These declines have directly—and negatively—impacted liquidity. 

Moreover, the Debtors are facing looming debt maturities, beginning in December 2017. 

10. To protect the inherent value in its businesses and to address the existing 

macro-economic challenges, Gymboree has been proactive in developing strategies to maintain 

its market position and improve performance in the challenging retail climate. In particular, 

Gymboree is implementing real estate rationalization measures and other operational efficiency 

initiatives and developing its wholesale business and online sales presence. 

11. And unlike many retailers with challenged business models that have been unable 

to continue operations as a going concern, Gymboree has negotiated a comprehensive 

reorganization to preserve its existing and highly relevant operations, aided by a deeply-loyal 

customer base. With debtor-in-possession financing, a prenegotiated plan structure, and key 

creditor support in place, the Debtors intend to move expeditiously through these cases and 

emerge as a stronger, better-capitalized business positioned to thrive for years to come. 

12. To familiarize the Court with the Debtors, their business, the circumstances 

leading to these chapter 11 cases, and the relief the Debtors are seeking in the First Day Motions, 

I have organized this declaration into five sections. The first section provides background 

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information on the Debtors’ corporate history and operations.4 The second section offers 

detailed information on the Debtors’ prepetition capital structure. The third section describes the 

circumstances leading to the filing of these chapter 11 cases. The fourth section describes the 

Debtors’ proposed debtor-in-possession financing and Restructuring Support Agreement. The 

fifth section summarizes the relief requested in, and the legal and factual basis supporting, the 

First Day Motions. 

Discussion 

I. History. 

13. For over 30 years, Gymboree has operated stores selling high-quality clothes and 

accessories designed to provide children with maximum comfort and style, making “clothes for 

every kid and every moment of childhood.”5

 In 1986, Gymboree opened its first retail store in 

California. Gymboree’s store count had expanded to 435 by 1997 when it launched 

Gymboree.com, its first platform for inbound marketing. Gymboree continued to grow 

throughout the 2000s, including strong sales continued through the post-recession period. 

14. In October 2010, Gymboree was acquired by Bain Capital Private Equity, LP and 

certain of its affiliated investment funds or investment vehicles managed or advised by it 

(collectively, the “Sponsor”) for approximately $1.8 billion, including approximately $524 

million in equity, following a competitive bidding process. Post-acquisition, Gymboree initiated 

a global expansion of its brands into China, South Korea, Australia, and parts of Latin America 

to increase its global footprint and overtake its major competitors Carter’s, Children’s Place 

Retail Stores (“Children’s Place”) and The Gap’s Old Navy, GapKids and babyGap (collectively, 

 

4

 Many of the financial figures presented in this declaration are unaudited and potentially subject to change, but 

reflect the Debtors’ most recent review of their business. The Debtors reserve all rights to revise and 

supplement the figures presented herein. 

5

 Gymboree: http://www.gymboree.com/shop/about-gymboree. 

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“Gap”). After many years of success and growth, Gymboree expanded to approximately 1,300 

company-operated stores and outlets in the U.S. and abroad, supported by approximately 11,000 

full and part-time employees enterprise-wide. A corporate organizational chart is attached hereto 

as Exhibit A. 

15. As of late, however, the Debtors have felt the pain associated with evolving 

customer preferences and the rapid decline of brick-and-mortar retail which, combined with an 

inability to achieve anticipated domestic and international growth and a highly leveraged balance 

sheet, has led to recent losses and impairment of liquidity. 

16. In the face of these headwinds, the Debtors are implementing key initiatives to 

regain their competitive edge, including implementing real estate rationalization measures and 

other operational efficiency initiatives and developing their wholesale business and online sales 

presence. These measures, coupled with Gymboree’s anticipated deleveraging, are targeted to 

enable Gymboree to return to financial and operational success. 

A. Business Operations. 

17. The Debtors specialize in fashion-forward children’s apparel and accessories that 

are comfortable and flexible for children during active play. The Debtors maintain control over 

their proprietary brands by designing, sourcing, marketing, and selling their own merchandise 

in-house, with dedicated design and merchandising teams for each of their three brands. The 

Debtors outsource certain operational functions such as customer service, credit card processing 

and store communications to various third-party service providers, allowing the Debtors to focus 

primarily on product strategy, development, and logistics. 

18. Gymboree’s operations are seasonal in nature, with sales from retail operations 

peaking during the quarter ending in January, primarily on account of the holiday season in 

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November and December. During fiscal 2015, 2014, and 2013, the fourth quarter accounted for 

approximately 32%, 31%, and 28%, respectively, of net sales from retail operations. 

1. The Debtors’ Brick-and-Mortar Model. 

19. The Debtors operate in all fifty states, as well as in Canada and Puerto Rico. The 

Debtors also have franchise stores across several international markets, including the Middle 

East, Asia Pacific, and Latin America. As of January 2017, the Debtors operated approximately 

1,300 stores world-wide.6

 All of the Debtors’ domestic and Canadian stores are identified on the 

map below. 

20. The Debtors lease space for their domestic stores in a variety of different 

locations such as regional malls, lifestyle centers, outlet centers, strip centers, and street level 

shops. Approximately 35% of their domestic real estate space is concentrated with Simon 

Property Group, Inc. and GGP Inc. (previously General Growth Properties, Inc.), with the 

remainder of the Debtors’ leasing arrangements spread out among a variety of other landlord 

entities. 

 

6

 For the avoidance of doubt, there are no Gymboree insolvency proceedings pending outside the United States. 

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21. The Debtors use an operations model that organizes their retail stores into eight 

regions and 94 districts for purposes of management oversight. Stores are organized by brand to 

allow managers to focus more effectively on brand-specific activities, resulting in improved 

execution of sales growth and customer outreach. Initiatives are currently underway to help 

improve in-store efficiency and productivity metrics. The Debtors have recently employed new 

technologies to improve operational efficiency, including employee iPads, store email, and store 

analytics applications. 

2. The Debtors’ Product Offerings. 

22. The Debtors provide three different product lines to consumers, each with a 

distinct brand identity and targeted product offering. 

23. Launched in 1986, the Gymboree line provides customers with coordinated style 

and value designed for everyday wear for kids, ages 0 to 14, with products retailing from $15 to 

$45. The Gymboree line is available for purchase internationally across 586 stores, 174 outlets, 

and 48 franchised stores, accounting for approximately 61% of the Debtors’ revenue in 2016. 

The Gymboree line competes with other specialty retailers, including Macy’s, The Gap, 

Children’s Place, Carters, and TJMaxx. 

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24. Launched in 2002, the Janie and Jack line offers dressy to dressed-up casual 

playwear with distinct quality, design, and detail. The classically modern and timeless 

collections are sold in a boutique-like environment. Janie and Jack is the Debtors’ highest-end 

brand offering, with designs retailing from $24 to $250. Janie and Jack operates 104 stores, 45 

outlets, and two franchised stores, accounting for 17% of the Debtors’ revenue in 2016. Janie 

and Jack is comparable to other high-end retailers, such as Nordstrom, Ralph Lauren, and J. 

Crew, and has a target demographic of families with one to two kids and a median household 

income of $125,000, who value unique details in children’s clothing and are willing to spend 

more for quality and design. To complement the quality of the clothes and premium price points, 

the stores train their employees to provide suggestions regarding the apparel options that will 

best suit a particular customer’s needs, thereby providing a personalized customer service 

experience. Customers may also purchase the Janie and Jack brand offering through the Janie 

and Jack online platform. 

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25. Crazy 8, the newest addition to the Gymboree family of brands, provides apparel 

at a price point 20-30% less than the Gymboree line. Launched in 2007, the Crazy 8 brand 

provides versatile fashion for the value-oriented consumer, with apparel and accessories retailing 

from $2 to $25. With a design aesthetic featuring bright colors and bold patterns, Crazy 8 

celebrates individual style and encourages kids to “be bold and be themselves.”7

 Crazy 8 

maintains 368 stores, 14 outlets, and three franchised stores, accounting for 22% of Gymboree’s 

revenue in 2016. The target demographic is busy families with more than three kids and a 

median household income of $75,000, who take a practical approach to shopping, valuing style 

and price. Crazy 8 targets customers who shop at other comparable retailers, including the 

Children’s Place, Target, Kohl’s, and Old Navy. Like Gymboree and Janie and Jack, Crazy 8 

also maintains a dedicated online store. 

26. In 2016, the Debtors began wholesaling (i.e., selling inventory in bulk quantities) 

their Gymboree and Crazy 8 lines to larger merchants, such as T.J. Maxx and Amazon. The 

benefits of wholesaling include increased access to a broader base of customers who would not 

normally purchase Gymboree or Crazy 8 apparel, including in geographic markets where the 

wholesaler serves as a community’s one-stop-shop for all needs and services. 

3. The Debtors’ Design and Marketing Processes. 

27. The Debtors maintain control over each of their three proprietary brands by 

designing and merchandising in-house to drive sales, margin, and traffic. Merchant leaders 

collaborate to ensure compatibility of product offerings across brands, while maintaining each 

brand’s unique identity and core tenets. The design and merchandising process operates on a 

ten-month design-to-store cycle to allow management to create and source the best quality at the 

 

7

 Gymboree: http://www.gymboree.com/shop/about-gymboree. 

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lowest cost, while also providing ample time for development and execution of product strategy, 

concept, costs, product review, inventory strategy, and logistics, among others. 

28. Additionally, the Debtors operate a multi-faceted marketing and advertising 

strategy to reach the target audience for each brand. Over the past decade, the Debtors have 

expanded from in-store only marketing to direct mail, partnerships, print, digital, and social 

platforms. The Debtors’ current marketing strategy marks a shift toward an integrated, more 

advanced advertising structure, which taps into online prospecting to supplement grassroots, 

social networking and blogger outreach programs, while continuing to capitalize on the Debtors’ 

historical marketing strategies. Further, the Debtors utilize their customer database to launch 

targeted campaigns on Facebook, Instagram, and Google. The Debtors anticipate a significant 

platform upgrade in the third quarter of 2017 which will, among other things, allow for greater 

consumer insight and customer targeting. 

4. The Debtors’ Sourcing and Procurement Procedures. 

29. The Debtors utilize an international sourcing and production protocol that relies 

heavily on foreign suppliers. Substantially all of the Debtors’ retail products are manufactured 

overseas, where the Debtors work with a diverse set of suppliers comprised of over 100 vendors 

and 166 factories to manufacture apparel in accordance with their specifications. Most of the 

Company’s suppliers are located in China, Vietnam, Bangladesh, Indonesia, and India. The 

Debtors do not maintain long-term contracts with suppliers and typically transact business on an 

order-by-order basis. 

30. Approximately 93% of the Debtors’ products are sourced through LF Centennial 

Pte. Ltd. and certain of its affiliates (“Li & Fung”), Gymboree’s longstanding sourcing agent. 

Specifically, pursuant to that certain Buying Agent Agreement (the “BAA”), dated February 28, 

2015, Li & Fung helps the Debtors negotiate prices and purchase order terms with foreign 

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vendors in Asia, communicate with foreign vendors to ensure timely production, and comply 

with various foreign laws and regulations, among other things. This sourcing structure has 

reduced the average unit cost of production by 6%, while at the same time maintaining rigorous 

standards for quality, on-time delivery, and cost structure. The Debtors routinely evaluate new 

vendors within the Li & Fung network to ensure competitive pricing and have significantly 

shifted their sourcing portfolio since 2011 to vertically-integrated factories in Vietnam, 

Bangladesh, and India. 

31. The Debtors maintain an integrated supply chain aimed at ensuring the 

uninterrupted flow of merchandise to their brick-and-mortar locations. Manufacturers generally 

manufacture and ship inventory and other goods to the Debtors “freight on board” (“FOB”). 

Under an FOB arrangement, the Debtors pay freight forwarders to transport merchandise and 

other goods from Asia to the United States. Typically, the supply of retail inventory flows in 

accordance with the below graphic, with title transferring to the Debtors at the foreign port when 

merchandise and goods are loaded for shipment to the United States. 

 

32. The Debtors maintain one distribution center and warehouse located in Dixon, 

California. Inventory is shipped from the distribution center to retail stores or to customers to 

fulfill online orders.8

 

 

8

 On May 5, 2015, Gymboree sold its distribution center in Dixon, California for net proceeds of $25.9 million, 

and entered into a leaseback of the property from the purchaser for a period of 15 years. Approximately $10.9 

million of the proceeds from the sale were restricted to fund capital expenditures or reduce Gymboree’s liability 

under the Term Loan Facility (as defined below). US Port

Location of 

Inventory

Factory

Truck

Sale 

Distribution Center 

Water Dixon, CA

Foreign

Store & Web

 Port

Customer

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B. Prepetition Transactions. 

1. Take Private. 

33. On October 11, 2010, Gymboree entered into an agreement and plan of merger 

(the “Merger Agreement”) with Giraffe Holding, Inc. (“Parent”), a Delaware corporation and 

Giraffe Acquisition Corporation (“Acquisition Sub”), a Delaware corporation and indirect 

wholly-owned subsidiary of Parent controlled by investment funds sponsored by the Sponsor. 

Pursuant to the Merger Agreement, Acquisition Sub commenced a tender offer on October 25, 

2010 to acquire all outstanding shares of The Gymboree Corporation at a price of $65.40 per 

share, or $1.76 billion. The purchase price represented a 23.5% premium to Gymboree’s closing 

stock price on October 8, 2010, the last full trading day before the announcement of the Merger 

Agreement. 

34. On November 23, 2010, Acquisition Sub was merged with and into The 

Gymboree Corporation in accordance with the Merger Agreement, with The Gymboree 

Corporation continuing as the surviving entity and a wholly owned subsidiary of Parent 

(the “Acquisition”). As a result of the Acquisition, investment funds sponsored by the Sponsor 

indirectly owned a controlling interest in Parent, effectively acquiring Gymboree. 

35. Gymboree’s Board of Directors (the “Board”) appointed a special committee of 

independent directors of the Board (the “2010 Special Committee”) to review the Acquisition. 

The 2010 Special Committee was advised by Goldman, Sachs & Co. as its exclusive financial 

advisor and Skadden, Arps, Slate, Meagher & Flom LLP as its counsel. Both Goldman, Sachs & 

Co. and Peter J. Solomon Company provided fairness opinions to the 2010 Special Committee 

and agreed that the Acquisition was a fair and equitable transaction. Following the 2010 Special 

Committee’s recommendation that the tender offer and the Acquisition were advisable, fair to, 

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and in the best interests of the stockholders of the Company, the Board unanimously approved 

the Acquisition and the other transactions completed by the Merger Agreement. 

2. Sale of Gymboree Play & Music. 

36. Until July 15, 2016, Gymboree, through its then-subsidiary Gymboree Play 

Programs, Inc. (“GPPI”), offered directed parent-child developmental play programs 

(“Gymboree Play & Music”) at certain locations in the United States and other countries. 

Gymboree owned and operated six corporate Gymboree Play & Music centers and franchised 

more than 150 centers in the United States. For international sites, Gymboree contracted with 

master-franchisees in the applicable territories that operated and subfranchised the Gymboree 

Play & Music centers. In China, the largest international Gymboree Play & Music market, 

Gymboree (Tianjin) Educational Information Consultation Co. Ltd. (“Gymboree Tianjin”) was 

the master franchisee. Gymboree Tianjin and Gymboree (China) Commercial and Trading Co. 

Ltd. (“Gymboree China”), the operator of Gymboree retail stores in China, was indirectly 

controlled by investment funds sponsored by the Sponsor. Gymboree had no ownership interest 

in Gymboree Tianjin or Gymboree China. 

37. On July 15, 2016, Gymboree closed a transaction (the “Play & Music 

Transaction”) to sell all the equity of GPPI, together with assignments and licenses to certain 

intellectual property used in connection with the Gymboree Play & Music business to Zeavion, a 

Singapore-based investment group. Upon closing of the Play & Music Transaction, Zeavion 

acquired the entire Gymboree Play & Music enterprise, including its central operations and 

centers in North America. 

38. As consideration for the Play & Music Transaction, Gymboree received $128.1 

million in cash, approximately $109 million of which was restricted for purposes of paying down 

outstanding obligations under the term loan credit agreement and capital expenditures. 

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Gymboree has used the proceeds of the sale to delever its balance sheet, invest in its online 

offerings, store network, and supply chain infrastructure. As of the Petition Date, the remaining 

balance of the restricted cash attributable to the Play & Music Transaction was approximately 

$13.6 million. 

39. Concurrent with the sale of Gymboree Play & Music, non-Debtor Gymboree 

Investment Holdings L.P. sold Gymboree Tianjin and Gymboree China to Zeavion (the “Zeavion 

Transaction” and together with the Play& Music Transaction, the “Transactions”). 

40. The Board appointed a special committee of independent directors of the Board 

(the “2016 Special Committee”) to review the Transactions. The 2016 Special Committee met 

frequently throughout the sale process to review and discuss the draft sale agreements and the 

status of negotiations related to the Transactions. The 2016 Special Committee’s financial 

advisor, Houlihan Lokey, issued a fairness opinion with respect to the Transactions. Based on 

these findings, the Special Committee determined that the Transactions were fair and in the best 

interests of Gymboree, and recommended that the Board approve the Transactions. The Board 

unanimously approved the Transactions. 

C. The Debtors’ Opportunities for Growth. 

41. The Debtors are laser-focused on continuing to improve existing operations and 

have started to capitalize on certain previously underdeveloped areas of growth that will help 

facilitate long term success, including omnichannel and wholesale initiatives. The Debtors plan 

to continue developing these business strategies to diversify the means by which consumers gain 

access to sales channels. 

1. Wholesale Development. 

42. In 2016, the Debtors made an initial entry into the wholesale channel with the 

Gymboree and Crazy 8 brands, and continue to work with three online retailers and three 

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“big-box” retailers. As a result of the Debtors’ wholesale efforts, the Debtors generated $5.1 

million of sales and $1.5 million in gross margin in 2016. The wholesale channel represents an 

attractive opportunity for the Debtors, with significant potential. While still in the early stages, 

the Debtors intend to aggressively pursue wholesale opportunities, including improving current 

wholesale relationships with expanded brand offerings. 

2. Web Platform. 

43. The Debtors currently have a sizeable web business, with dedicated online stores 

for each of the Gymboree, Janie and Jack, and Crazy 8 brands. In 2016, web sales comprised 

21% of all Gymboree revenue. Despite the Debtors’ significant web business across brands, its 

web platforms are dated and unsupported, limiting omnichannel growth. The current web 

platform is in need of additional investment to improve performance of its web commerce 

infrastructure. As a result, the Debtors have undertaken significant efforts to create a seamless 

customer experience across brands and platforms, including online, brick-and-mortar stores, 

telephone, and mobile device. With a dedicated team of e-commerce and digital design 

professionals with deep and relevant experience in mobile shopping, digital marketing, and web 

design, the Debtors have been focused not only on modernizing the current web platform, but 

also on developing a coherent multichannel sales approach that provides customers with an 

integrated shopping experience across brands. 

3. Omnichannel Growth. 

44. The Debtors’ omnichannel capabilities are currently lacking relative to their peer 

retailers. The Debtors have taken steps to introduce an upgraded omnichannel platform that will: 

(a) upgrade web platforms for all three brands; (b) provide new and up-to-date customer 

relationship management (“CRM”) capabilities with expanded loyalty programs that will enable 

an enhanced and customized consumer experience; (c) upgrade point-of-sale software to improve 

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the customer checkout experience; (d) enable full cross-shop and pickup/delivery capabilities 

allowing customers to buy online and pickup in stores; and (e) ensure compliance with paymentcard industry standards. The new platform is expected to address existing challenges facing the 

Debtors’ web platform and to produce $15 million in additional annual revenue on account of 

increased consumer conversion. In addition, the upgraded omnichannel platform will result in 

enhancements for cross-channel inventory management, enhanced in-store experiences, and new 

web extensions, which collectively are anticipated to provide an additional benefit of $22.5 

million in annual revenue. 

4. Sourcing Practices. 

45. The Debtors continue to shift sourcing to lower-cost countries to ensure continued 

competitive pricing. In doing so, the Debtors have shortened production timelines and increased 

efficiency without sacrificing product quality. These practices have provided approximately 

$11 million in annual savings. The Debtors continue to advance other cost-cutting efforts, 

including reducing inventory to avoid carry-over and increasing marketing efforts to levels 

consistent with their peers. 

5. Real Estate Rationalization. 

46. The Debtors plan to capitalize on the opportunity to realign their store footprint 

by closing unprofitable and marginally profitable stores. Approximately two-thirds of the 

Debtors’ brick-and-mortar store base generates 97% of the EBITDA derived from all stores. In 

April 2017, the Debtors hired A&G Realty Partners, LLC (“A&G”) to help address this disparity 

between productive and non-productive stores and rationalize the Debtors’ store footprint. With 

the assistance of the A&G, the Debtors anticipate that they will reduce their global footprint by 

more than 375 stores, which will free up net working capital for substantial shifts to web 

commerce and allow for more efficient operations and inventory management. 

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II. The Debtors’ Prepetition Capital Structure. 

47. As of the Petition Date, the Debtors have approximately $1.1 billion in total 

funded debt obligations, consisting of approximately $81.0 million under the senior secured 

asset-based revolving credit facility (the “ABL Revolver”); $47.5 million outstanding under 

Gymboree’s asset-based term loan (the “ABL Term Loan” and, together with the ABL Revolver, 

the “ABL Facility”); $788.8 million in aggregate principal amount outstanding under the 

Debtors’ senior secured term loan (the “Term Loan Facility”); and $171.0 million in aggregate 

principal amount of 9.125% unsecured senior notes due 2018 (the “Unsecured Notes”). 

48. The following table depicts the Debtors’ prepetition capital structure: 

Funded Debt Maturity Outstanding Principal 

Amount 

ABL Revolver December 2017 $81.0 million 

ABL Term Loan December 2017 $47.5 million 

Term Loan Facility February 2018 $788.8 million 

Unsecured Notes December 2018 $171.0 million 

Total Funded Debt: $1,088.3 million 

A. ABL Facility. 

49. The Gymboree Corporation, as lead borrower, the other borrowers party thereto, 

the guarantors party thereto (the “ABL Guarantors”), the revolving lenders party thereto (the 

“ABL Revolving Lenders”), the term lenders party thereto (the “ABL Term Lenders” and, 

together with the ABL Revolving Lenders, the “ABL Lenders”), Bank of America, N.A., as 

administrative agent and collateral agent (in such capacities, the “ABL Administrative Agent”), 

and Pathlight Capital LLC, as ABL term loan agent (in such capacity, the “ABL Term Agent” 

and, together with the ABL Administrative Agent, the “ABL Agents”), are parties to that certain 

Amended and Restated Credit Agreement, dated as of March 30, 2012 (as amended, restated, 

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supplemented, or otherwise modified from time to time, the “ABL Credit Agreement”).9 The 

ABL Credit Agreement provides for a senior secured revolving credit facility, with a maximum 

availability of $225 million, and a senior secured term loan of $50 million, subject to a 

borrowing base. As of the Petition Date, the aggregate borrowing base (i.e., the effective 

maximum availability) was approximately $172.2 million. Each ABL Guarantor has guaranteed 

all obligations under the ABL Facility. The obligations under the ABL Facility are secured, 

subject to certain exceptions, by a first priority lien on certain of the Debtors’ assets, including, 

without limitation, accounts receivable, inventory, cash and cash equivalents and a second 

priority lien on the Debtors’ capital stock and other personal property, including the Debtors’ 

intellectual property and investment contracts. As of the Petition Date, approximately 

$81.0 million in borrowings and approximately $49.3 million of letters of credit are outstanding 

under the ABL Revolver Facility. Approximately $47.5 million are outstanding under the ABL 

Term Loan. 

B. Term Loan.

50. On February 11, 2011, The Gymboree Corporation, as borrower, entered into that 

certain Amended and Restated Credit Agreement (as amended from time to time, the “Term 

Loan Credit Agreement”), with the other Debtor guarantors, Credit Suisse AG, Cayman Islands 

Branch, as administrative and collateral agent (the “Term Loan Agent”), and the lender parties 

thereto (the “Term Loan Lenders”). The Term Loan Facility matures in February 2018. Term 

Loan Facility obligations are secured by a first priority lien on the Debtors’ capital stock, 

intellectual property, and investment contracts and a second priority lien on all of the Debtors’ 

other personal property, including accounts receivable, inventory, cash and cash equivalents. As 

 

9

 The guarantors under the ABL Revolver Facility are Gymboree’s domestic subsidiaries and Giraffe 

Intermediate B. Inc. (collectively, the “ABL Guarantors”). 

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of the Petition Date, approximately $790 million in aggregate principal amount remained 

outstanding under the Term Loan. 

C. Unsecured Notes.

51. In connection with the Acquisition, Gymboree issued $400 million aggregate 

principal amount of 9.125% Unsecured Notes under the Indenture, dated November 23, 2010, 

with Gymboree as issuer, Deutsche Bank Trust Company Americas as indenture trustee, and 

certain of the Debtors as guarantors (the “Indenture”). As of the Petition Date, $171.0 million in 

aggregate principal amount of Unsecured Notes remains outstanding. 

52. Since 2012, Gymboree has repurchased Unsecured Notes with an aggregate total 

principal amount of approximately $229 million for approximately $113.5 million in cash 

through privately negotiated transactions, open market transactions, and a cash tender offer. As 

a result, Gymboree recorded gains of approximately $108.5 million on account of the 

extinguishment of debt, net of approximately $6.9 million in charges related to the write-off of 

deferred financing costs associated with such debt. 

53. The Unsecured Notes are due in December 2018 and require semiannual coupon 

payments on June 1 and December 1. The Debtors did not pay the coupon payment due on June 

1, 2017. 

III. Circumstances Leading Up to the Restructuring and Prepetition 

Restructuring Efforts. 

54. A confluence of factors contributed to the Debtors’ need to commence these 

chapter 11 cases. These factors include the general downturn in the retail industry and the 

marked shift away from brick-and-mortar retail to online channels, the combination of which has 

made it increasingly difficult for Debtors to maintain their cost and capital structure as sales have 

remained depressed, impairing the Debtors’ liquidity. 

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A. Challenging Operating Environment. 

55. The Debtors, like many other apparel and retail companies, have faced a 

challenging commercial environment as of late brought on by a shift away from traditional 

shopping at brick-and-mortar stores. Given the Debtors’ substantial brick-and-mortar presence 

and associated expenses, the Debtors’ businesses have been heavily dependent on store traffic 

and resulting sales conversions to meet sales and profitability targets. However, the apparel 

retail industry has made a permanent shift towards a more online-centric platform, in which 

retailers are selling more of their products via company websites or through larger retailers such 

as Amazon. This has contributed to the Debtors’ negative or declining same store sales trends 

since the second quarter of 2016, with accelerating declines throughout 2016 and into 2017. 

Gymboree-operated stores in the United States have been hit particularly hard, with same store 

sales down 12% in both the third and fourth quarter of 2016. 

56. The Debtors’ brick-and-mortar struggles have been compounded by their 

underdeveloped online presence and wholesale platform. Although online sales account for an 

increasing proportion of retail spending in general, the Debtors’ online sales remain stagnant, 

comprising less than a quarter of their total sales. In addition, the Debtors’ wholesale platform, 

which facilitates the sale of large quantities of merchandise to bulk retailers such as T.J. Maxx 

and Costco, while promising, is still in its initial stages. With more modern and customerfocused online and e-commerce models, the Debtors’ competitors, along with competing 

wholesale channels, continue to place downward pressure on the Debtors’ revenue. 

57. The Debtors’ sales have also declined due to increasing competition, both with 

other competitors and between the Debtors’ three lines. Most competitors in the children’s 

apparel space, such as Children’s Place and the Gap, are not as leveraged as the Debtors. As a 

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result, these competitors can engage in price wars with Gymboree and run promotions and sales 

for longer periods of time. 

B. Supply Chain Challenges. 

58. As a result of the global nature of their operations, the Debtors regularly transact 

business with entities located outside of the United States. For example, the Debtors purchase 

goods and materials and obtain services from merchant vendors located in China, Vietnam, 

Indonesia, Cambodia, and India. All of the merchant vendors supply goods that are crucial to the 

Debtors’ ongoing operations. Importantly, the Debtors’ business operations depend on the 

timely and uninterrupted flow of inventory through their supply chain. At any given time, the 

Debtors are engaged with such vendors to: (i) produce goods in accordance with current 

purchase orders; (ii) ship merchandise to stock the Debtors’ retail stores, distribution centers, and 

fulfill online orders; and (iii) negotiate the terms of future purchase orders. Historically, the 

Debtors have enjoyed favorable trade terms, including payment terms of as many as 75 days 

from the date of shipment, with many merchant vendors funding out-of-pocket fabric and 

production costs necessary to manufacture goods. 

59. As the Debtors’ liquidity has tightened, their supply chain vendors have 

unsurprisingly begun to put pressure on the supply chain cost structure. Since January 2017, 

when media coverage broke out regarding certain leadership changes and Gymboree’s looming 

debt overhang, numerous vendors have demanded revised trade terms, including prepayments or 

cash on delivery and have discontinued ordinary course extensions of credit to the Debtors. 

Several vendors have threatened to suspend shipping inventory until the Debtors pay upfront. 

This shift in payment terms both strained the Debtors’ liquidity and put the delivery of the 

Debtors’ winter 2017 purchase orders at material risk, jeopardizing the Debtors’ ability to fully 

capitalize on customer demand during the peak holiday selling season. 

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60. In light of these threats, Gymboree entered into a letter agreement with Li & Fung 

(the “Li & Fung Letter Agreement”) on April 21, 2017, pursuant to which Gymboree agreed to 

(a) provide a $10 million standby letter of credit for the benefit of Li & Fung (the “Li & Fung 

Letter of Credit”) and (b) issue to Li & Fung a $20 million incremental term loan under the Term 

Loan Credit Agreement (the “Li & Fung Term Loan”). As consideration, Li & Fung agreed to, 

among other things, provide extensions of credit to vendors in Bangladesh with respect to the 

Debtors’ current and future purchase orders in the ordinary course, actively promote and support 

positive messaging to vendors to maintain current trade terms, and forbear from exercising any 

remedies against the Debtors. 

61. In accordance with the Li & Fung Letter Agreement, on April 21, 2017, 

Gymboree, as borrower, the guarantors party thereto, Li & Fung, the Term Loan Agent, and the 

Term Loan Lenders party thereto, entered into the Waiver and Amendment No. 2 to Amended 

and Restated Credit Agreement (the “Term Loan Second Amendment”), pursuant to which the 

Debtors amended the Term Loan Credit Agreement to issue the Li & Fung Term Loan. 

62. On May 24, 2017, the Debtors and Li & Fung amended the BAA (the “BAA 

Amendment”). Pursuant to the BAA Amendment, the Debtors agreed to provide Li & Fung with 

up to $15 million in cash to deliver partial payments to certain vendors to assure timely delivery 

of Winter 2017 purchase orders. As a result, the Debtors were able to secure Li & Fung’s 

continued services and the commitment of various vendors to honor existing trade terms with 

respect to Winter 2017 purchase orders and ensure runway to negotiate Gymboree’s 

comprehensive restructuring.10

 

10 Without access to the restricted cash, the Debtors would have been unable to amend the BAA, and vendors 

would have tightened trade terms, likely resulting in delayed or cancelled shipments, lost vendors relationships, 

and misaligned inventory. These supply chain challenges would have placed increased pressure on the Debtors 

liquidity position, including by reducing the borrowing base under the ABL Facility. 

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63. As is typical in the apparel industry, the Debtors’ inventory represents a 

substantial portion of the ABL Facility borrowing base. Thus, the aforementioned delay in 

vendors’ shipment of new inventory to the Debtors limits the Debtors’ ability to borrow under 

the ABL Facility which, in a vicious cycle, further limits the Debtors’ ability to secure fresh 

inventory. 

64. A critical component of the Debtors’ proposed debtor-in-possession financing 

(the “Proposed DIP Financing”), described in greater detail below, is securing adequate liquidity 

for the Debtors to obtain fresh inventory and support the continuation of trade support. 

C. Prepetition Waiver/Amendment. 

65. On May 12, 2017, the ABL Agents and the ABL Lenders received notice that the 

Debtors had failed to comply with a requirement of the ABL Credit Agreement that Gymboree 

and its Restricted Subsidiaries (as defined in the ABL Credit Agreement) maintain, at all times, 

Combined Availability (as defined in the ABL Credit Agreement) in excess of the greater of (a) 

$17,500,000 and (b) ten percent of the term loan borrowing base under the ABL Credit 

Agreement, which constituted an event of default under the ABL Credit Agreement (the 

“Specified Event of Default”). Gymboree engaged in arm’s length negotiations with the 

ABL Agents and the ABL Lenders and entered into that certain Waiver to Amended and 

Restated Credit Agreement, with the ABL Guarantors, the ABL Lenders, and the ABL Agents, 

dated as of May 22, 2017, pursuant to which the ABL Agents and the ABL Lenders agreed to 

waive the Specified Event of Default, allowing the Debtors to remain in compliance with the 

ABL Credit Agreement. In exchange, the Debtors agreed to weekly status calls with the 

ABL Agents to discuss financial operations and performance, provide weekly borrowing base 

certificates, cooperate with the ABL Administrative Agent to establish cash management 

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arrangements, and authorize the retention of Berkeley Research Group, LLC as a consultant and 

financial advisor to the ABL Administrative Agent. 

66. On May 12, 2017, the Debtors, the Term Loan Agent, and the Term Loan Lenders 

again amended the Term Loan Credit Agreement (“the “Restricted Cash Amendment”) to 

provide the Debtors with access to $40 million in cash that was restricted under the Term Loan 

Credit Agreement to fund the Debtors’ working capital needs before the Petition Date. 

D. Management Changes 

67. On March 14, 2017, Mark Breitbard, who had been the Chief Executive Officer of 

Gymboree since January 8, 2013, formally announced his resignation, effective April 3, 2017. 

The Debtors appointed long-time director Mark Weikel as interim Chief Executive Officer, 

effective April 3, 2017, and continued their nationwide search to identify a permanent Chief 

Executive Officer. 

68. On May 22, 2017, the Debtors appointed Daniel J. Griesemer as Chief Executive 

Officer. On the date hereof, Andy North, who had been Chief Financial Officer of Gymboree 

since November 17, 2014, formally announced his resignation, effective immediately. The 

Debtors appointed Liyuan Woo, Director at AlixPartners, as interim Chief Financial Officer, 

effective immediately, and have initiated a nationwide search to identify a permanent Chief 

Financial Officer. 

E. Exploration of Strategic Alternatives. 

69. Recognizing the need to explore restructuring alternatives, in January 2017, the 

Debtors retained Kirkland & Ellis LLP, as legal advisor, and Lazard Freres & Co. LLC 

(“Lazard”), as investment banker. In March 2017, the Debtors retained AlixPartners, as 

restructuring and financial advisor. Together, the Debtors and their advisors analyzed the 

Debtors’ capital structure and potential sources of liquidity and runway to facilitate the 

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operational changes necessary to reduce the burdensome operational costs associated with their 

brick and mortar footprint, including various restructuring and recapitalization options. 

70. Shortly after beginning to explore restructuring alternatives, the Debtors 

commenced a detailed review of their entire real estate portfolio to identify underperforming 

stores as part of an overall strategy to reduce and optimize their existing store footprint. In April 

2017, the Debtors engaged A&G to help develop the Debtors’ go-forward real estate strategy and 

assist with restructuring and renegotiating the Debtors’ current real estate leases. As part of the 

restructuring, the Debtors plan to exit or renegotiate leases across their portfolio. Indeed, in the 

weeks preceding the Petition Date, the Debtors conducted a store-by-store performance analysis 

to, among other things, identify certain unprofitable stores to close and wind down. In 

connection with these efforts, and after an extensive review and selection process, the Debtors 

engaged Tiger Capital Group, LLC and Great American Group, LLC to liquidate the inventory in 

the closing stores and otherwise prepare the stores for turnover to the applicable landlords. 

IV. The Restructuring Support Agreement, Chapter 11 Plan, and Proposed DIP 

Financing. 

A. Restructuring Support Agreement 

71. Beginning in March 2017, the Debtors commenced comprehensive restructuring 

negotiations with the Consenting Term Loan Lenders and the Term Loan Agent’s advisors, 

Milbank, Tweed, Hadley & McCloy LLP and Rothschild & Co. (the “Term Loan Agent 

Advisors”). The Debtors were also approached by, and engaged in conversations over the last 

several months with, advisors to a group of Unsecured Noteholders. The Debtors have 

facilitated the diligence of both creditor groups’ advisors for the last several months. 

72. In May 2017, the Consenting Term Loan Lenders signed nondisclosure 

agreements with the Debtors and were given access to certain of the Debtors’ confidential 

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information to negotiate a restructuring transaction. Since the Consenting Term Loan Lenders 

became restricted, the Debtors and their advisors have engaged in a number of substantive 

meetings and telephone conferences with the Consenting Term Loan Lenders and the Term Loan 

Agent Advisors regarding comprehensive restructuring alternatives that would strengthen the 

Debtors’ balance sheet and provide necessary liquidity. After extensive negotiations, the 

Debtors and the Consenting Term Loan Lenders entered into the Restructuring Support 

Agreement on June 11, 2017. 

73. The Restructuring Support Agreement contemplates a comprehensive 

reorganization, through a chapter 11 plan, that will result in a substantial deleveraging of the 

Debtors’ balance sheet by approximately $1 billion. The key terms of the restructuring are as 

follows: 

• a $105 million debtor-in-possession term loan credit facility, including $35 

million in new money debtor-in-possession term loans and the roll-up of $70 

million of term loans under the existing term loan facility into amounts 

outstanding under the debtor-in-possession term loan credit facility (the “DIP 

Term Loan Facility”); 

• a $273.5 million debtor-in-possession revolving credit facility pursuant to which 

all amounts outstanding under the ABL Facility will be rolled-up into a 

postpetition ABL credit facility on terms similar to those under the ABL Facility 

(the “DIP ABL Facility”); and 

• up to $80 million in new equity capital by way of a rights offering (the “Rights 

Offering”) fully-backstopped, by the Consenting Term Loan Lenders, to allow 

the Company to emerge from chapter 11 with sufficient liquidity to fund the 

business. 

• All Term Loan Lenders will be afforded the opportunity to participate in the DIP 

Term Loan Facility and Rights Offering. 

The restructuring transactions contemplate pro forma equity ownership as follows:11 

 

11 The size of the Rights Offering is dependent on the Debtors’ projected post-emergence liquidity need. The pro 

forma equity ownership shown below assumes a $80 million Rights Offering. 

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• Term Loan Lenders who contribute their pro rata share of the $35 million new 

money DIP Term Loan Facility and their pro rata share of the up to $80 million 

Rights Offering will obtain the benefit of the $70 million DIP Term Loan Facility 

roll-up and ultimately share pro rata in 89.6% of the newly-issued common shares 

(the “New Gymboree Common Shares”), with an additional 2.4% of the New 

Gymboree Common Shares distributed to the Consenting Term Loan Lenders 

who have agreed to backstop the Rights Offering. 

• Non-participating Term Loan Lenders will receive their pro rata share of 8% of 

the New Gymboree Common Shares. 

• Up to 10% of New Gymboree Common Shares (on a fully diluted basis) shall be 

reserved for issuance in connection with a management incentive plan. 

74. To effectuate this comprehensive restructuring, and ensure the Debtors’ 

emergence from chapter 11, it is imperative that the Debtors meet the following key dates and 

milestones: 

• 5 days after Petition Date: File the Plan, Disclosure Statement and Solicitation 

Materials, motion for entry of an order approving the Disclosure Statement and 

Solicitation Materials, and motion for entry of an order approving entry into the 

Backstop Commitment Agreement. 

• 35 days after Petition Date: Obtain entry of a Final Order approving the 

Proposed DIP Financing. 

• 35 days after Petition Date: Obtain entry of an Order approving entry into the 

Backstop Commitment Agreement. 

• 35 days after Petition Date: Obtain one or more proposals for the Exit Term 

Loan Facility, the Exit ABL Term Loan Replacement Facility, and Exit ABL 

Revolving Facility. 

• 55 days after Petition Date: Obtain entry of Order approving the Disclosure 

Statement and Solicitation Materials (the “Disclosure Statement Order”).

• 75 days after Petition Date: Obtain written commitments for the Exit Term Loan 

Facility, the Exit ABL Term Loan Replacement Facility, and Exit ABL Revolving 

Facility. 

• 105 days after Petition Date: Obtain entry of Confirmation Order.12

 

12 Under the proposed DIP ABL Credit Facility, the Debtors must commence a parallel sale process if they do not 

obtain entry of the Confirmation Order within 95 days of the Petition Date. 

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• 110 days after Petition Date: Occurrence of the Effective Date. 

75. Preserving Gymboree’s tax attributes, including approximately $18.3 million of 

state net operating losses (“NOLs”) as of January 31, 2017, expected additional federal and state 

NOLs in the current year, and certain other attributes, is critical to any restructuring and was a 

component of the discussions with the Consenting Term Loan Lenders. In particular, there is a 

significant built in loss in the stock of The Gymboree Corp., which the Debtors plan to utilize to 

offset gains expected to be triggered by the restructuring. Critically, pursuant to the 

Restructuring Support Agreement, the Sponsor has agreed to: (i) cooperate in structuring and 

reporting the restructuring transaction in a way that allows the Debtors to use these tax attributes; 

(ii) not take any action that would jeopardize such attributes; and (iii) forego any claims for 

compensation for the use of such attributes. The Restructuring Support Agreement also includes 

mutual releases between the Sponsor and the Consenting Term Loan Lenders. As a result, the 

Debtors, the Consenting Term Loan Lenders, and the Sponsor are able to ensure that the valuable 

tax attributes are preserved and can be utilized by Gymboree. 

76. Gymboree maintains a broad “fiduciary out” under the Restructuring Support 

Agreement. Specifically, Section 17 of the Restructuring Support Agreement provides, in part, 

that nothing will require Gymboree “to take or refrain from taking any action (including, without 

limitation, terminating [the Restructuring Support Agreement] under Section 11), to the extent 

[Gymboree] determines . . . that taking, or refraining from taking, such action, as applicable, 

would be inconsistent with applicable law or its fiduciary obligations under applicable law.” 

77. On May 18, 2017, The Gymboree Corporation formed a special committee (the 

“Special Committee”) to explore strategic alternatives and/or financial alternatives and 

Transactions (as defined in the May 18, 2017 resolutions) in connection with the Board’s 

consideration of such Transactions. The Special Committee consists of independent director 

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Steven Winograd, who was also appointed to the Board on May 18, 2017. Mr. Winograd has 

experience serving on boards of directors, including as an independent director, having served 

on, among others, the board of Caesars Entertainment Operating Company since June 2014, and 

the board of Linn Acquisition Company LLC on behalf of Berry Petroleum Company LLC 

during 2016-2017. During over 33 years as an investment banker, Mr. Winograd has completed 

numerous transactions for a wide variety of public and private companies including mergers and 

acquisitions, debt and equity financings, and restructurings. Mr. Winograd received a BA from 

Wesleyan University and an MBA from the Columbia University Graduate School of Business. 

Mr. Winograd and the Special Committee, have directed Gymboree to engage the law firm of 

Munger, Tolles & Olson LLP as directed by Mr. Winograd and the Special Committee, in 

connection with the matters delegated to the Special Committee. 

B. Proposed DIP Financing 

78. To fund the administration of these chapter 11 cases, the ABL Lenders and the 

Consenting Term Loan Lenders have agreed to provide the Proposed DIP Financing in the form 

of a postpetition ABL facility (the “DIP ABL Credit Facility”) and postpetition term loan facility 

(the “DIP Term Loan Facility”). Pursuant to the terms of the DIP ABL Credit Facility, upon 

entry of the interim order approving the Proposed DIP Financing, all amounts outstanding under 

the ABL Facility, including the ABL Term Loan and ABL Revolver, will convert into 

obligations under the DIP ABL Credit Facility, to fund the Debtors’ working capital needs 

during the pendency of these chapter 11 cases. 

79. In addition, the Consenting Term Loan Lenders committed to backstop a $105 

million debtor-in-possession financing facility required to support the Debtors’ estates during 

these cases, consisting of $35 million in new money loans and, immediately upon entry of the 

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interim order, the conversion of $70 million of the outstanding prepetition owing to the DIP 

Term Loan Facility lenders into postpetition DIP Term Loans. 

80. Both revolving and term loan portions of the Proposed DIP Financing are critical 

to the Debtors’ ability to operate smoothly postpetition. I have analyzed the Debtors’ cash flow 

needs. Without the revolving and term loan portions of the Proposed DIP Financing, the Debtors 

could not continue operating for more than two weeks postpetition. The Proposed DIP 

Financing provides liquidity that is essential to fund the administrative cost of these chapter 11 

cases and, critically, to pay manufacturers and other participants in the Debtors’ supply chain to 

ensure the continuing and uninterrupted flow of inventory to the Debtors’ stores and wholesale 

customers that is the lifeblood of the Debtors’ business.13 Without access to the Proposed DIP 

Financing, the Debtors likely would need to liquidate in the near term, to the serious detriment of 

their stakeholders. 

81. Based on my knowledge and extensive discussions with the Debtors’ management 

team and advisors, including a team from AlixPartners acting under my supervision, I believe 

that the Proposed DIP Financing gives the Debtors sufficient liquidity to stabilize their 

operations and fund the administration of these chapter 11 cases as the Debtors seek to 

implement the restructuring contemplated by the Plan. Finally, based on extensive discussions 

with the Debtors’ advisors, including Lazard, I understand that the Proposed DIP Financing is on 

the most favorable terms available, presents the best—and likely only—option for the Debtors to 

reorganize their businesses as a going-concern, was negotiated in good faith and at arm’s length, 

 

13 Further, given the significance in the Debtors’ supply chain of foreign vendors who have expressed increasing 

concerns about payment by the Debtors, I expect that an interruption in payment of foreign vendors would 

cause additional vendors to modify payment terms (e.g., requiring payments up front), further exacerbating the 

Debtors’ need for cash and impairing their business. 

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and will allow the Debtors to maximize the value of their estates for the benefit of all parties in 

interest. 

V. Evidentiary Support for First Day Motions.14

82. In April 2017, the Debtors retained AlixPartners to assist in the process of 

preparing for a potential chapter 11 filing. Since AlixPartners’ retention, I have overseen the 

team of AlixPartners professionals that has been helping the Debtors: (a) finalize the terms of the 

Restructuring Support Agreement, the Plan, and the Proposed DIP Financing; (b) compile the 

diligence necessary to draft the First Day Motions; (c) manage liquidity; (d) and otherwise 

prepare for these chapter 11 cases. 

83. Contemporaneously herewith, the Debtors have filed a number of First Day 

Motions seeking orders granting various forms of relief intended to stabilize the Debtors’ 

business operations, facilitate the efficient administration of these chapter 11 cases, and expedite 

a swift and smooth restructuring of the Debtors’ balance sheet. 

84. I am familiar with the contents of each First Day Motion and believe that the 

relief sought in each First Day Motion: (i) is necessary to enable the Debtors to operate in 

chapter 11 with minimal disruption or loss of productivity and value; (ii) constitutes a critical 

element in achieving a successful reorganization of the Debtors; and (iii) best serves the Debtors’ 

estates and creditors’ interests. The facts set forth in each First Day Motion are incorporated 

herein by reference.

 

14 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the 

respective First Day Motions. 

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A. Debtors’ Motion for Entry of an Order (I) Directing Joint Administration of 

Chapter 11 Cases and (II) Granting Related Relief (the “Joint Administration 

Motion”). 

85. Pursuant to the Joint Administration Motion, the Debtors request entry of an order 

directing procedural consolidation and joint administration of these chapter 11 cases. Given the 

integrated nature of the Debtors’ operations, joint administration of these chapter 11 cases will 

provide significant administrative convenience and cost savings to Gymboree without harming 

the substantive rights of any party in interest. 

86. Many of the motions, hearings, and orders in these chapter 11 cases will affect 

each and every Debtor entity. For example, virtually all of the relief sought by the Debtors in the 

First Day Motions is sought on behalf of all of the Debtors. The entry of an order directing joint 

administration of these chapter 11 cases will reduce fees and costs by avoiding duplicative filings 

and objections. Joint administration of these chapter 11 cases, for procedural purposes only, 

under a single docket, will also ease the administrative burdens on the Court by allowing the 

Debtors’ cases to be administered as a single joint proceeding instead of eight independent 

chapter 11 cases. Accordingly, on behalf of the Debtors, I respectfully submit that the Joint 

Administration Motion should be approved. 

B. Debtors’ Motion For Entry of an Order (I) Establishing Certain Notice, Case 

Management, and Administrative Procedures and (II) Granting Related Relief

(the “Case Management Procedures Motion”).

87. Pursuant to the Case Management Procedures Motion, the Debtors request entry 

of an order establishing certain noticing, case management, and administrative procedures 

including, among other things: (a) directing that matters requiring notice under Bankruptcy Rule 

2002(a)(2)–(6) will be served only to individuals and entities identified on a shortened mailing 

list and those creditors who, in accordance with Local Bankruptcy Rules 2002-1 and 9013-1(M), 

file with the Court a request that they receive such notice pursuant to Bankruptcy Rule 2002; (b) 

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allowing electronic service of all documents (except complaints and summonses) for the 2002 

List (as defined in the Case Management Procedures); and (c) directing that all matters be heard 

at periodic omnibus hearings to be scheduled in advance by the Court. 

88. Given the thousands of potential creditors who may file requests for service of 

filings and considering the numerous motions and applications to be filed in these chapter 11 

cases, approval of the Case Management Procedures will provide significant administrative 

convenience and cost savings by reducing the need for emergency hearings and requests for 

expedited relief, and will foster consensual resolution of important matters. Furthermore, the 

Debtors’ use of electronic service to the 2002 List will undoubtedly reduce the administrative 

and financial burden of providing notice to the Debtors’ creditors and other parties in interest. 

89. The establishment of the Case Management Procedures will also promote the 

efficient and orderly administration of these chapter 11 cases. Authorizing the Debtors to serve 

their documents on a limited mailing matrix will ease the administrative and economic burdens 

on the Court and the Debtors’ estates. Authorizing electronic service in these chapter 11 cases 

for the 2002 List will also allow for efficient and effective service at a significantly reduced cost 

to the Debtors’ estates and other serving parties. Early notice of Omnibus Hearings to all parties 

in interest will enable these parties to plan efficiently for the use of hearing time, will avoid the 

need for numerous hearings within each month, and will lessen the burden on the Court and on 

the Debtors’ estates. Additionally, parties in interest will still have the opportunity to bring true 

emergency matters before the Court on an expedited basis pursuant to the Local Bankruptcy 

Rules and the Case Management Procedures. 

C. Debtors’ Motion for Entry of an Order (I) Extending Time to File Schedules 

and Statements of Financial Affairs, (II) Authorizing the Debtors to File a 

Consolidated List of Creditors in Lieu of Submitting a Mailing Matrix for Each 

Debtor, (III) Authorizing the Debtors to File a Consolidated List of the Debtors’ 

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50 Largest Unsecured Creditors, and (IV) Granting Related Relief 

(the “Creditor Matrix, SOFAs, and Schedules Motion”).

90. Pursuant to the Creditor Matrix, SOFAs, and Schedules Motion, the Debtors seek 

entry of an order: (a) extending the deadline by which the Debtors must file their schedules of 

assets and liabilities, schedules of current income and expenditures, schedules of executory 

contracts and unexpired leases, and statements of financial affairs (collectively, the “Schedules 

and Statements”) by thirty (30) days, for a total of forty-four (44) days from the Petition Date 

without prejudice to the Debtors’ ability to request additional extensions for cause shown; 

(b) authorizing the Debtors to file a consolidated list of creditors in lieu of submitting a separate 

mailing matrix for each Debtor; and (c) authorizing the Debtors to file a consolidated list of the 

Debtors’ 50 largest unsecured creditors. 

1. Schedules and Statements Extension. 

91. To prepare the Schedules and Statements, the Debtors must compile information 

from books, records, and documents relating to creditor claims, as well as the Debtors’ many 

contracts. This information is voluminous and located in numerous places throughout the 

Debtors’ organization. Collecting the necessary information requires an enormous expenditure 

of time and effort on the part of the Debtors, their employees, and their professional advisors in 

the near term, when these resources would be best used to improve the Debtors’ business 

operations. 

92. Although the Debtors, with the assistance of their professional advisors, are 

mobilizing their employees to work diligently and expeditiously on preparing the Schedules and 

Statements, resources are strained and limited. Given the amount of work entailed in completing 

the Schedules and Statements and the competing demands on the Debtors’ employees and 

professionals to assist in efforts to stabilize business operations during the initial postpetition 

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period, the Debtors likely will not be able to properly and accurately complete the Schedules and 

Statements within the required time period. 

93. The Debtors therefore request that the Court extend the 14-day period for an 

additional 30 days, without prejudice to the Debtors’ right to request further extensions, for cause 

shown. This will allow time for the Debtors to receive a greater number of invoices related to 

the prepetition period, which will improve the accuracy of the Schedules and Statements and 

reduce the time spent on claims administration in these chapter 11 cases. 

2. Consolidated Creditor Matrix. 

94. Although a list of creditors usually is filed on a debtor-by-debtor basis, in a 

complex chapter 11 bankruptcy case involving more than one debtor, the debtors may file a 

consolidated creditor matrix. Here, compiling separate top creditor lists for each individual 

Debtor would consume an excessive amount of the Debtors’ time and resources, and filing a 

consolidated list would more appropriately reflect the liabilities against the Debtors’ operations 

on an enterprise level. 

3. Consolidated List of 50 Largest Creditors. 

95. The Debtors request authority to file a single, consolidated list of their 50 largest 

general unsecured creditors. This will help alleviate administrative burdens, costs, and the 

possibility of duplicative service, and will prevent the Debtors’ estates from incurring 

unnecessary costs associated with serving multiple notices to the parties listed on the Debtors’ 

voluminous creditor matrix. 

96. Accordingly, on behalf of the Debtors, I respectfully submit that the Court should 

approve the Creditor Matrix, SOFAs, and Schedules Motion. 

D. Debtors’ Application for Entry of an Order (I) Authorizing the Debtors to 

Employ and Retain Prime Clerk LLC as Claims and Noticing Agent, Effective 

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Nunc Pro Tunc To The Petition Date and (II) Granting Related Relief (the 

“Claims and Noticing Agent Application”). 

97. Pursuant to the Claims and Noticing Agent Application, the Debtors seek entry of 

an order appointing Prime Clerk LLC as Claims and Noticing Agent in the Debtors’ chapter 11 

cases effective nunc pro tunc to the Petition Date to, among other tasks, assume full 

responsibility for the distribution of notices and the maintenance, processing and docketing of 

proofs of claim filed in the Debtors’ chapter 11 cases pursuant to the provisions of the 

Engagement Agreement. 

98. Based on my discussions with Gymboree’s advisors, I believe that the Debtors’ 

selection of Prime Clerk LLC to act as the Claims and Noticing Agent is appropriate under the 

circumstances and in the best interest of the estates. Moreover, it is my understanding that based 

on all engagement proposals obtained and reviewed that Prime Clerk LLC’s rates are 

competitive and reasonable given the quality of services and expertise. 

99. The Debtors anticipate that there will be thousands of persons and entities to be 

noticed in these chapter 11 cases. In light of the number of parties in interest and the complexity 

of the Debtors’ business, the Debtors submit that the appointment of a claims and noticing agent 

will provide the most effective and efficient means of, and relieve the Debtors and/or the Clerk’s 

office of the administrative burden of noticing, and processing proofs of claim and is in the best 

interests of both the Debtors’ estates and their creditors. Accordingly, on behalf of the Debtors, I 

respectfully submit that the Court should approve the Claims and Noticing Agent Application. 

E. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to Obtain Postpetition Financing, (II) Authorizing the Debtors to Use 

Cash Collateral, (III) Granting Liens and Providing Superpriority 

Administrative Expense Status to the Postpetition Lenders, (IV) Granting 

Adequate Protection to the Prepetition Lenders, (V) Modifying the Automatic 

Stay, (VI) Scheduling a Final Hearing, and (VII) Granting Related Relief (the 

“DIP Motion”).

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100. The Debtors seek entry of interim and final orders authorizing the Debtors to 

obtain senior secured postpetition financing on a superpriority basis consisting of a senior 

secured superpriority credit facility and a new money multiple draw term loan facility. The 

Debtors are entering chapter 11 with limited cash on hand, and the Debtors require immediate 

access to the liquidity provided by the DIP Facilities to operate their businesses postpetition. 

101. After a series of significant, arms’-length and good faith negotiations, a subset of 

the Prepetition Term Loan Lenders agreed to fund $105 million in postpetition financing 

required to support the Debtors’ estates during these cases, including a commitment for $35 

million in new money and the conversion of $70 million of outstanding Prepetition Term Loans 

owing to the DIP Term Loan Lenders into DIP Term Loans upon entry of the Interim Order. 

The Debtors also seek to convert the Prepetition ABL Obligations into DIP ABL Obligations 

upon entry of the Interim Order, and to draw on the DIP ABL Credit Facility to fund their 

working capital needs during the pendency of these chapter 11 cases. 

102. In light of the Debtors’ liquidity constraints, and contemporaneously with 

negotiating the DIP Facilities with the Debtors’ existing debtholders, the Debtors, with the 

assistance of their advisors, actively solicited proposals for alternative debtor-in-possession 

financing. Ultimately, no third-party offered a viable alternative financing proposal that would 

allow the Debtors to continue to operate their businesses as a going concern. 

103. Without the funding provided by the DIP Facilities, including the new money 

term loans, during the interim period, the Debtors’ access to the cash needed to operate the 

business would evaporate and trade creditors would likely cease extending credit, creating a 

vicious cycle. Accordingly, absent immediate access to the DIP Facilities, the Debtors may have 

to liquidate in short order, which would be value-destructive. 

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104. I believe the requested relief is necessary to avoid the immediate and irreparable 

harm that would otherwise result if the Debtors are denied the liquidity that would be provided 

through their proposed interim borrowings, on the terms and conditions set forth in the DIP 

Documents and the Interim and Final Orders. 

F. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to (A) Continue to Operate Their Cash Management System, (B) 

Honor Certain Prepetition Obligations Related Thereto, (C) Maintain Existing 

Business Forms, and (D) Perform Intercompany Transactions, and (II) 

Granting Related Relief (“Cash Management Motion”). 

105. Pursuant to the Cash Management Motion, the Debtors seek entry of interim and 

final orders authorizing the Debtors to: (a) continue to operate their Cash Management System; 

(b) honor any prepetition obligations related thereto; (c) maintain existing Business Forms in the 

ordinary course of business; and (d) continue to perform the Intercompany Transactions 

consistent with historical practice. 

106. In the ordinary course of business, the Debtors maintain an integrated, centralized 

cash management system (the “Cash Management System”). The Cash Management System is 

typical of multi-store retail operations and comparable to the centralized cash management 

systems used by other similarly sized retail companies to manage the cash flow of operating 

units in a cost-effective, efficient manner. The Debtors use their Cash Management System in 

the ordinary course to transfer and distribute funds and to facilitate cash monitoring, forecasting, 

and reporting. The Debtors’ treasury department maintains daily oversight over the Cash 

Management System and implements cash management controls for entering, processing, and 

releasing funds, including in connection with Intercompany Transactions (as defined below). 

The Debtors’ corporate accounting, cash forecasting, and internal audit departments regularly 

reconcile the Debtors’ books and records to ensure that all transfers are accounted for properly. 

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107. The Cash Management System is comprised of approximately 85 Bank Accounts, 

which are held at 23 Cash Management Banks, operated by the Debtors. The Cash Management 

System consists of:15

• 24 primary Bank Accounts (collectively, the “Primary Accounts”), maintained by 

Bank of America, N.A. (“Bank of America”); and 

• 61 Bank Accounts located at various other institutions throughout the United 

States.16

108. Historically, the Debtors estimate that they pay approximately $150,000 in Bank 

Fees each month, depending on transaction volume. The Debtors estimate that approximately 

$180,000 in prepetition Bank Fees remains outstanding as of the Petition Date. The Debtors 

estimate that cash collections average approximately $85 million per month, including store cash 

receipts, credit card receipts, partner shop payments, and e-commerce sales. In addition, the 

Debtors estimate that total disbursements will range between $85 million and $120 million per 

month during these chapter 11 cases. 

109. Of the 23 Cash Management Banks, 10 are designated as authorized depositories 

under the U.S. Trustee Guidelines. In addition, the Primary Accounts reside at Bank of America, 

which is an authorized depository. 13 Bank Accounts are held at Cash Management Banks that 

are not Authorized Depositories under the U.S. Trustee Guidelines. All of the Bank Accounts 

held by these Cash Management Banks are Store Level Accounts, which, as noted above, receive 

deposits from stores throughout the week and are regularly deposited daily into one of the 

 

15 The Cash Management System also includes 10 foreign Bank Accounts, maintained by Toronto Dominion 

Bank (“TD Bank”) and Westpac Banking Corporation (“Westpac”) for the non-Debtor Canadian and Australian 

accounts, respectively. The Debtors are not funding Puerto Rican or Canadian operations. 

16 There are currently 53 inactive Store Level Accounts as a result of recent consolidation. 

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Primary Accounts. The Primary Accounts can only receive deposits: their ability to disburse is 

disabled. Indeed, the banks at which the Store Level Accounts are maintained are typically the 

only bank located nearby these stores, and if the Debtors are not permitted to maintain these 

Store Level Accounts, the 270 stores that make daily deposits into such accounts will likely have 

to submit their required daily deposits by other means, creating additional operational and 

administrative burdens and expenses to the detriment of the Debtors’ business and their estate. 

110. As part of the Cash Management System, the Debtors utilize a number of 

preprinted Business Forms. The U.S. Trustee Guidelines require that the Cash Management 

Banks print “Debtor in Possession” and the bankruptcy case number on checks issued after the 

Petition Date. To minimize the burden on their estates and avoid confusion on the part of 

employees, customers, vendors, and suppliers during the pendency of these chapter 11 cases, the 

Debtors request that the Court authorize their continued use of all Business Forms in existence 

immediately before the Petition Date, without reference to the Debtors’ status as debtors in 

possession. If the Debtors exhaust their existing supply of checks during these chapter 11 cases, 

the Debtors will print or order checks with the designation “Debtor in Possession” and the 

corresponding bankruptcy case number. 

111. In the ordinary course of business, the Debtors engage in routine business 

relationships with each other resulting in intercompany receivables and payables. Accordingly, 

at any given time there may be Intercompany Claims owing by one Debtor to non-Debtor 

affiliates. Payments from the subsidiaries are generally paid into the Collection Account. The 

Intercompany Claims are reflected as journal entry receivables and payables, as applicable, in the 

respective Debtors’ accounting systems. 

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112. The Debtors track all fund transfers in their respective accounting system and can 

ascertain, trace, and account for all Intercompany Transactions. The Debtors will continue to 

track postpetition intercompany transfers. Discontinuing the Intercompany Transactions would 

unnecessarily disrupt the Cash Management System and the Debtors’ operations to the detriment 

of the Debtors and their creditors and other stakeholders. The Debtors seek the authority to 

continue the Intercompany Transactions in the ordinary course of business, in a manner 

consistent with prepetition practice. 

113. I believe that the relief requested in the Cash Management Motion is essential to 

the continued operation of the Debtors’ business and denial of such relief would severely disrupt, 

if not cripple, the Debtors’ businesses. Therefore, I believe that the relief requested in the Cash 

Management Motion is in the best interests of the Debtors’ estates, their creditors, and all other 

parties in interest. Accordingly, on behalf of the Debtors, I respectfully submit that the Court 

should approve the Cash Management Motion. 

G. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to (A) Pay Prepetition Wages, Salaries, Other Compensation, and 

Reimbursable Expenses and (B) Continue Employee Benefits Programs, and 

(II) Granting Related Relief (the “Wages Motion”). 

114. Pursuant to the Wages Motion, the Debtors seek entry of interim and final 

orders authorizing the Debtors to (a) pay all prepetition and postpetition wages, salaries, other 

compensation, and reimbursable expenses on account of the Employee Compensation and 

Benefits Programs in the ordinary course of business and (b) continue to administer the 

Employee Compensation and Benefits Programs. 

115. The Debtors employ over 11,000 individuals on a full- and part-time basis 

(the “Employees”). Approximately 10,500 Employees are paid on an hourly basis, and 

approximately 500 Employees earn a salary. The Employees are not represented by a collective 

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bargaining unit. In addition to the Employees, the Debtors also periodically retain specialized 

individuals as independent contractors, as well as temporary workers, to complete discrete 

projects (the “Temporary Staff”) sourced periodically from various staffing agencies (the 

“Staffing Agencies”) to fulfill certain duties on a short-term basis. At this time, the Debtors 

retain approximately 250 Temporary Staff. The Temporary Staff are an important supplement to 

the efforts of the Debtors’ Employees. 

116. The Debtors’ Employees and Temporary Workers perform a wide variety of 

functions critical to the Debtors’ operations at the Debtors’ home office, Dixon distribution 

center, and regional stores. Certain of these individuals are highly trained and have an essential 

working knowledge of the Debtors’ business that cannot be easily replaced. The remainder of 

these individuals provide work necessary to continue the Debtors’ store-level operations. 

Without the continued, uninterrupted services of their Employees and Temporary Workers, the 

Debtors’ reorganization efforts will be threatened. 

117. The vast majority of Employees rely exclusively on the Employee Compensation 

and Benefits Programs to pay their daily living expenses and support their families. 

Thus, Employees will be exposed to significant financial consequences if the Debtors are not 

permitted to continue the Employee Compensation and Benefits Programs in the ordinary course 

of business. Consequently, I believe that the relief requested is necessary and appropriate. 

118. The Debtors seek to minimize the personal hardship the Employees would suffer 

if employee obligations are not paid when due or as expected. The Debtors are seeking authority 

to pay and honor certain prepetition claims relating to the Employee Compensation and Benefits, 

including, among other things, wages, salaries, and other compensation; expense reimbursement, 

including, Commuter Programs and tuition reimbursement; payroll services, federal and state 

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withholding taxes and other amounts withheld (including garnishments, Employees’ share of 

insurance premiums, taxes, and 401(k) contributions); health insurance, including, medical, 

dental, vision, and disability; retirement benefits; workers’ compensation benefits; paid time off, 

other paid leave, unpaid leave; life and accidental death and dismemberment insurance; shortand long-term disability coverage; employee assistance; severance; and other benefits that the 

Debtors have historically directly or indirectly provided to the Employees in the ordinary course 

of business and as further described in the Wages Motion. 

119. Pursuant to the Wages Motion, the Debtors also seek authority to continue their 

ordinary course incentive programs and to honor their obligations to non-insider Employees 

under the pre-existing bonus programs, described more fully in the Wages Motion. The Debtors 

believe the Non-Insiders Employee Incentive Programs drive Employees’ performance, align 

Employees’ interests with those of the Debtors generally, and promote the overall efficiency and 

safety of the Debtors’ operations. I understand that “insiders” (as the term is defined in section 

101(31) of the Bankruptcy Code) of the Debtors are excluded from the relief requested in the 

Wages Motion. I understand that no Employees are owed Employee Compensation in excess of 

$12,850. 

120. I believe that the Employees provide the Debtors with services necessary to 

conduct the Debtors’ business, and the Debtors believe that absent the payment of the Employee 

Compensation and Benefits owed to the Employees, the Debtors may experience significant 

employee turnover and instability at this critical time in these chapter 11 cases. Additionally, 

believe that without these payments, the Employees may become demoralized and unproductive 

because of the potential significant financial strain and other hardships the Employees may face. 

Such Employees may then elect to seek alternative employment opportunities. 

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121. I understand that a significant portion of the value of the Debtors’ business is tied 

to their workforce, which cannot be replaced without significant cost and efforts. I therefore 

believe that payment of certain prepetition obligations with respect to the Employee 

Compensation and Benefits is a necessary and critical element of the Debtors’ efforts to preserve 

value and will give the Debtors the greatest likelihood of retention of the Employees as the 

Debtors seek to operate their business in these chapter 11 cases. Therefore, I believe that the 

relief requested in the Wages Motion inures to the benefit of all parties in interest. Accordingly, 

on behalf of the Debtors, I respectfully submit that the Court should approve the Wages Motion. 

H. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to (A) Continue and Renew Their Liability, Property, Casualty, and 

Other Insurance Policies and Honor All Obligations In Respect Thereof; (B) 

Continue and Renew Their Prepetition Insurance Premium Financing 

Agreements; and (C) Continue the Surety Bond Programs and (II) Granting 

Related Relief (the “Insurance Motion”). 

122. Pursuant to the Insurance Motion, the Debtors seek entry of an order authorizing 

the Debtors to: (a) continue insurance coverage entered into prepetition and satisfy payment of 

prepetition obligations related thereto in the ordinary course of business and renew, supplement, 

or purchase insurance coverage in the Debtors’ discretion on a postpetition basis, (b) continue 

performance under prepetition insurance premium financing agreements and renew, supplement, 

or enter into insurance premium financing agreements in the Debtors’ discretion on a 

postpetition basis, and (c) continue and renew their surety bond program on an uninterrupted 

basis. 

123. In the ordinary course of business, the Debtors maintain approximately 

20 Insurance Policies that are administered by various third-party insurance carriers. These 

Insurance Policies provide coverage for, among other things, the Debtors’ property, general 

liability, automobile liability, workers’ compensation, umbrella coverage, excess liability, 

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pollution liability, executive protection, commercial crime, special risk, cyber liability, cargo and 

marine cargo liability, foreign voluntary compensation, employers’ liability, and directors’ and 

officers’ liability. The aggregate annual premium on account of the Insurance Policies is 

approximately $3.5 million. In addition, the Debtors’ contract with Gallagher Basset, a thirdparty claims administrator, for assistance in managing the portfolio of general liability claims 

asserted against the Debtors. The Debtors estimate that, as of the petition date, approximately 

$65,000 is outstanding on account of prepetition obligations to Gallagher Basset, all of which 

will become payable within the first 21 days of these chapter 11 cases. 

124. The Debtors obtain the majority of their Insurance Policies through their 

insurance broker, Marsh USA, Inc (“Marsh”). Marsh is the broker of record with respect to the 

Debtors’ fiduciary, commercial and special crime, and directors’ and officers’ insurance policies. 

As of the Petition Date, the Debtors do not believe that they owe any amounts to Marsh on 

account of fees or any other prepetition obligations. 

125. The vast majority of the Insurance Policies are financed through the Premium 

Financing Agreements. As of the Petition Date, the Debtors estimate that approximately $33,000 

is outstanding on account of the Premium Financing Agreements, all of which will come due 

during the first 21 days of these chapter 11 cases. The Debtors seek authority, on an interim 

basis, subject to entry of the Final Order, to pay such amounts as they come due. 

126. The Debtors also maintain a Surety Bond Program in the ordinary course of 

business to fulfill obligations to certain third parties, often governmental units or other public 

agencies, to secure the Debtors’ payment or performance of certain obligations. These 

obligations include United States Customs and Excise Taxes and Use Taxes in the 

Commonwealth of Puerto Rico. The Debtors contract with Avalon Risk Management 

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(“Avalon”) and Lexon Insurance Company (“Lexon”) to provide the requisite surety bonds, 

which total approximately $11.7 million. As of the Petition Date, the Debtors do not believe 

that they owe any amounts on account of annual premiums, which total approximately $65,000, 

or any other prepetition obligations. Out of an abundance of caution, however, the Debtors seek 

authority to honor any amounts owed to Avalon and Lexon to ensure the Surety Bond Program 

remains uninterrupted. 

127. Continuation and renewal of the Insurance Policies and Surety Bond Program is 

essential to preserving the value of the Debtors’ business, properties, and assets. Moreover, in 

many cases, coverage provided by the Insurance Policies is required by the regulations, laws, and 

contracts that govern the Debtors’ commercial activities, including the requirements of the U.S. 

Trustee. I believe that the relief requested in the Insurance Motion is in the best interests of the 

Debtors’ estates, their creditors, and all other parties in interest, and will enable the Debtors to 

continue to operate their business in chapter 11 without disruption. Accordingly, on behalf of 

the Debtors, I respectfully submit that the Court should approve the Insurance Motion. 

I. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Payment of Certain Prepetition and Postpetition Taxes and Fees and (II) 

Granting Related Relief (the “Taxes Motion”). 

128. Pursuant to the Taxes Motion, the Debtors seek the authority for the Debtors to 

make payment and remittance of taxes and fees that accrued prior to the Petition Date and that 

will become payable during the pendency of these chapter 11 cases. The Debtors also request 

that the Court authorize and direct applicable financial institutions, when the Debtors in their 

sole discretion so request, to receive, process, honor, and pay any and all checks or wire transfer 

requests in respect of the taxes and fees. 

129. In the ordinary course of business, the Debtors collect, withhold, and incur sales 

and use taxes, income taxes, franchise taxes, property taxes, and miscellaneous taxes and fees as 

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more fully described in the Taxes Motion, and occasionally are the subject of audit investigations 

on account of prior year tax returns. The Debtors estimate that approximately $13.2 million in 

taxes and fees relating to the prepetition period are due and payable or will become due and 

payable after the Petition Date. Payment of the taxes and fees is critical to the Debtors’ 

continued and uninterrupted operations. The Debtors’ failure to pay prepetition taxes and fees 

may cause the authorities to take precipitous action, including, but not limited to, conducting 

audits, filing liens, preventing the Debtors from doing business in certain jurisdictions, seeking to 

lift the automatic stay, or pursuing payment of the taxes and fees from the Debtors’ officers and 

directors, all of which would greatly disrupt the Debtors’ operations and ability to focus on their 

reorganization efforts. 

130. I believe that the relief requested in the Taxes Motion is in the best interests of the 

Debtors’ estates, their creditors, and all other parties in interest, and will enable the Debtors to 

continue to operate their business in chapter 11 without disruption. Accordingly, on behalf of 

the Debtors, I respectfully submit that the Court should approve the Taxes Motion. 

J. Debtors’ Motion for Entry of Interim and Final Orders (I) Approving the 

Debtors’ Proposed Adequate Assurance of Payment for Future Utility Services, 

(II) Prohibiting Utility Companies from Altering, Refusing, or Discontinuing 

Services, (III) Approving the Debtors’ Proposed Procedures for Resolving 

Additional Assurance Requests, and (IV) Granting Related Relief (the “Utilities 

Motion”). 

131. Pursuant to the Utilities Motion, the Debtors seek entry of interim and final 

orders: (a) approving the Debtors’ Proposed Adequate Assurance of payment for future utility 

services; (b) prohibiting Utility Companies from altering, refusing, or discontinuing services; and 

(c) approving the Debtors’ proposed procedures for resolving Additional Assurance Requests. 

132. In connection with the operation of their business and management of their 

properties, the Debtors obtain electricity, natural gas, propane, telecommunications, water, waste 

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management (including sewer and trash), internet, cable, and other similar services from a 

number of third-party utility companies or brokers. On average, the Debtors pay approximately 

$1.8 million each month for third-party Utility Services, calculated as a historical average 

payment for the twelve-month period ended April 30, 2017. Accordingly, the Debtors estimate 

that their cost for Utility Services during the next 30 days (not including any deposits to be paid) 

will be approximately $1.8 million. The Debtors have provided certain of the Utility Companies 

with cash deposits, escrow agreements, or letters of credit, and estimate that the amount currently 

held as deposits or prepayments with respect to the Utility Companies is approximately 

$314,680. To provide additional assurance of payment, the Debtors propose to deposit $830,324 

into a segregated account, which is an amount sufficient to cover one half of the Debtors’ 

average monthly cost of Utility Services, calculated as a historical average payment for the 

twelve-month period ended April 30, 2017, less the amount of Prepetition Deposits held by the 

Utility Companies. The Adequate Assurance Deposit will be held by the Debtors, and the 

Debtors’ creditors will have no lien on any Adequate Assurance Deposit to the extent not 

returned to the Debtors pursuant to the terms set forth in the Order or the Adequate Assurance 

Account. 

133. The Debtors also request approval of their proposed Adequate Assurance 

Procedures. These procedures allow Utility Companies to request additional adequate assurance 

where they believe it is required, and ensure that all key stakeholder groups obtain notice of such 

request before it is honored. 

134. In addition, the Debtors seek authority to continue honoring in the ordinary course 

of business certain non-technical utility-related obligations that are paid directly to their 

Landlords. 

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135. Preserving Utility Services on an uninterrupted basis is essential to the Debtors’ 

ongoing operations and, therefore, to the success of their reorganization. Indeed, because the 

Debtors operate a customer-facing retail enterprise and the Debtors’ business depends upon 

having an ability to maintain open and active stores, any interruption in Utility Services, even for 

a brief period of time, would disrupt the Debtors’ ability to continue its operations. I believe this 

disruption would adversely impact customer relationships and result in a significant decline in 

the Debtors’ revenues and profits. Such a result could seriously jeopardize the Debtors’ 

reorganization efforts and, ultimately, value and creditor recoveries. It is critical, therefore, that 

Utility Services continue uninterrupted during these chapter 11 cases. Accordingly, on behalf of 

the Debtors, I respectfully submit that the Court should approve the Utilities Motion. 

K. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to Pay Prepetition Claims of Lien Claimants, Import and Export 

Claimants, and 503(b)(9) Claimants, (II) Confirming Administrative Expense 

Priority of Outstanding Orders, and (III) Granting Related Relief (the “Lien 

Claimants Motion”).

136. Pursuant to the Lien Claimants Motion, the Debtors seek entry of interim and 

final orders (a) authorizing, but not directing, the Debtors to pay in the ordinary course all 

prepetition and postpetition amounts owing on account of (i) certain shippers, warehousemen, 

and other non-merchant lienholders, (ii) certain import and export claimants, and (iii) certain 

Bankruptcy Code section 503(b)(9) claimants; and (b) confirming the administrative expense 

priority status of Outstanding Orders. 

1. Lien Claimants 

137. The Debtors’ business depends on the uninterrupted flow of inventory and other 

goods through its supply chain and distribution network, including the purchase, importation, 

storage, and shipment of the Debtors’ Merchandise. Generally, the Debtors design the 

Merchandise in-house and contract with various Foreign Vendors, to produce and manufacture 

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the Merchandise in accordance with the Debtors’ design specifications. Depending on the nature 

of the Debtors’ arrangement with a given manufacturer, either the manufacturers or the Debtors, 

through freight forwarders, ship the Merchandise to the Debtors’ warehouse and distribution 

center located in Dixon, California, which is leased from the Warehousemen. Additionally, the 

flow of Merchandise from the Debtors’ manufacturers to the Warehousemen, and ultimately to 

(a) stock the Debtors’ domestic brick and mortar stores, (b) fulfill online orders, or (c) fulfill 

orders of the Debtors’ wholesalers (both domestic and foreign) and foreign franchisees, depends 

on the services provided by the Shippers. 

138. Additionally, the Debtors employ various general contractors and vendors to 

assist with remodels and on-site construction and repairs at the corporate headquarters and the 

retail stores (the “Non-Merchant Lienholders” and, together with the Shippers and 

Warehousemen, the “Lien Claimants”). In particular, the Non-Merchant Lienholders provide 

renovation and repair services for the Debtors’ new corporate headquarters as well as ongoing 

store remodels or deliver various furniture and fixtures for installation in the Debtors’ new 

corporate headquarters as well as individual retail stores. The Non-Merchant Lienholders are not 

under contract, but rather perform work and related services on an order by order basis. 

139. Under certain non-bankruptcy laws, the Lien Claimants may be able to assert 

liens on the goods in their possession to secure payment of the charges or expenses incurred in 

connection with the Lien Charges.17 Accordingly, in the event the Lien Charges remain unpaid, 

the Lien Claimants are likely to attempt to assert such possessory liens, and may refuse to deliver 

or release goods in their possession until their claims are satisfied and their liens redeemed. The 

 

17 For example, section 7-307 of the Uniform Commercial Code provides, in pertinent part, that “[a] carrier has a 

lien on the goods covered by a bill of lading or on the proceeds thereof in its possession for charges after the 

date of the carrier’s receipt of the goods for storage or transportation, including demurrage and terminal 

charges, and for expenses necessary for preservation of the goods incident to their transportation or reasonably 

incurred in their sale pursuant to law.” See U.C.C. § 7-307(a) (2003). 

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Lien Claimants’ retention of the Debtors’ goods and supplies would disrupt the Debtors’ 

operations and affect the Debtors’ ability to efficiently administer these chapter 11 cases. The 

cost of such disruption to the Debtors’ estates would likely be greater than the applicable Lien 

Charges. Further, pursuant to section 363(e) of the Bankruptcy Code, the Lien Claimants may be 

entitled to adequate protection of any valid possessory lien, which would drain estate assets. 

140. Collectively, the Debtors estimate approximately $5.5 million of third-party 

shipping, storage, and other charges (collectively, the “Lien Charges”) are due and owing as of 

the Petition Date, of which approximately $4.6 million may become due and owing during the 

interim period. 

2. The Import Claimants 

141. In the ordinary course of their businesses, the Debtors import inventory and 

related materials (collectively, the “Imported Goods”) from the Foreign Vendors. In the ordinary 

course, the Debtors also export inventory (collectively, the “Exported Goods”) to foreign 

countries, including inventory to be sold in the Debtors’ stores located in Canada and Puerto 

Rico. Timely receipt or transmittal, as applicable, of the Imported Goods and Exported Goods is 

critical to both the Debtors’ domestic and foreign business operations. 

142. The Debtors seek authority to pay any and all necessary and appropriate 

Import/Export Charges incurred on account of prepetition transactions. Absent such payment, 

parties to whom the Debtors owe Import/Export Charges may interfere with the transportation of 

the Imported Goods or Exported Goods. The Debtors pay approximately $65.3 million annually 

on account of Import/Export Charges. The Debtors estimate that approximately $6.9 million in 

Import/Export Charges for goods currently in transit is outstanding as of the Petition Date, of 

which the entirety may become due and owing during the interim period. For the foregoing 

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reasons, I believe that payment of the Import/Export Charges is necessary to preserve and 

enhance the value of the Debtors’ business for the benefit of all parties in interest. 

3. The 503(b)(9) Claimants 

143. The Debtors may have received certain inventory, goods, or materials from 

various foreign and domestic vendors (collectively, the “503(b)(9) Claimants”) within the 20-day 

period immediately preceding the Petition Date. Many of the Debtors’ relationships with 

the 503(b)(9) Claimants are not governed by long-term contracts, but are instead maintained on 

an order-by-order basis. As a result, a 503(b)(9) Claimant may refuse to supply new orders 

without payment of its prepetition claims. Such refusal could negatively affect the Debtors’ 

estates as the Debtors’ business is dependent on the steady flow of inventory to stock their stores. 

144. The Debtors believe that as of the Petition Date, they owe approximately $21.7 

million on account of goods delivered within the 20 days immediately preceding the Petition 

Date, of which approximately $6.3 million may become due and owing during the interim 

period, and the value of which may be entitled to administrative priority under section 503(b)(9) 

of the Bankruptcy Code. 

L. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to Pay Certain Prepetition Claims of Critical Vendors and (II) 

Granting Related Relief (the “Critical Vendors Motion”). 

145. Pursuant to the Critical Vendors Motion, the Debtors seek entry of interim and 

final orders: (a) authorizing, but not directing, the Debtors to pay, in the ordinary course of 

business, all undisputed, liquidated, prepetition amounts owing on account of claims held by 

Critical Vendors; and (b) granting related relief. 

146. In the ordinary course of business, the Debtors obtain materials and services from 

a limited number of highly specialized Service Vendors, Operating and Retail Providers, and 

Marketing Support Vendors, and other businesses that would likely be impossible to replace or 

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the loss of which would result in substantially higher costs for the Debtors at this early, critical 

juncture in these chapter 11 cases. The Debtors rely on timely and frequent delivery of these 

critical goods and services and any interruption in this supply—however brief—would disrupt 

the Debtors’ operations and could potentially cause irreparable harm to their businesses, 

employees, customer base, and market share. Further, the Debtors currently enjoy favorable 

trade terms with many of their Critical Vendors. Loss of trade terms (whether on account of 

demands for cash in advance, cash on delivery, or otherwise) would materially impair the value 

of the Debtors’ estates. 

147. With the assistance of their advisors, the Debtors have spent time reviewing and 

analyzing their books and records, consulting with management and the Debtors’ personnel 

responsible for operations and purchasing, reviewing contracts and supply agreements, and 

analyzing applicable laws, regulations, and historical practice to identify certain critical business 

relationships and/or suppliers of goods and services—the loss of which would materially impair 

the going-concern viability of the Debtors’ business. At this time, the Debtors estimate that the 

Critical Vendors may hold claims in excess of $2.9 million that are not entitled to administrative 

or other priority status under section 503(b)(9) of the Bankruptcy Code, of which approximately 

$1.3 million will become due and owing during the interim period. 

148. I believe that the relief requested in the Critical Vendors Motion will allow the 

Debtors to preserve stakeholder value by paying the prepetition claims of certain counterparties 

that are critical to the Debtors’ business enterprise while also providing the Debtors with 

flexibility to engage in settlement discussions with such parties regarding the validity, amount, 

and extent of their claims. I believe that the harm attendant to severing ties with the Critical 

Vendors would likely far outweigh the cost of payment of the Critical Vendor Claims. 

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Therefore, I believe that the relief requested in the Critical Vendors Motion inures to the benefit 

of all parties in interest. Accordingly, on behalf of the Debtors, I respectfully submit that the 

Court should approve the Critical Vendors Motion. 

M. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to Pay Certain Prepetition Claims of Foreign Vendors and (II) 

Granting Related Relief (the “Foreign Vendors Motion”). 

149. Pursuant to the Foreign Vendors Motion, the Debtors seek entry of interim and 

final orders authorizing, but not directing, the Debtors to pay, in the ordinary course of business, 

all Foreign Vendor Claims held by Foreign Vendors located outside the United States, that are 

essential to the Debtors’ ongoing business operations. 

150. As a result of the global nature of their operations, the Debtors regularly transact 

business with entities located outside of the United States. Many of these Foreign Vendors 

supply goods, materials, or services to the Debtors that are crucial to the Debtors’ ongoing 

operations. I believe that if the Debtors are unable to honor the payment terms for goods that 

shipped prior to the Petition Date, but will not become due and owing until after the Petition 

Date, the Foreign Vendors are unlikely to complete production on open purchase orders or 

accept new purchase orders in the future. Without timely deliveries from their foreign suppliers, 

the provision of services, and the cooperation of all the Foreign Vendors, the Debtors’ operations 

could suffer from a lack of inventory or other products and services to the detriment of the 

Debtors and their stakeholders, as nearly all of the Debtors’ products are manufactured according 

to detailed specifications that are typically ordered six months in advance of the time when the 

Debtors ultimately receive the products. 

151. More fundamentally, the Foreign Vendors could simply refuse to do business with 

the Debtors. Because all of the Foreign Vendors have no (or de minimis) assets or operations in 

the United States that would be subject to the jurisdiction of this Court, the Debtors have no 

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workable enforcement mechanism against these parties. I believe that the cumulative impact of 

the Foreign Vendors’ breach of their contracts with the Debtors could have an adverse effect on 

the Debtors’ operations and their ability to reorganize. 

152. Lastly, if the Foreign Vendor Claims are not paid, the Foreign Vendors may take 

precipitous action against the Debtors based upon an erroneous belief that they are not subject to 

the automatic stay provisions of section 362(a) of the Bankruptcy Code. Although the automatic 

stay applies to protect the Debtors’ assets wherever they are located in the world, attempting to 

enforce the Bankruptcy Code in foreign countries is often challenging and will consume 

meaningful estate personnel and resources. 

153. In light of these consequences, the Debtors have concluded that payment of the 

Foreign Vendor Claims is essential to avoid disruptions to the Debtors’ operations. The Debtors 

estimate that as of the Petition Date, approximately $75.2 million is accrued and outstanding on 

account of Foreign Vendor Claims, of which approximately $38.7 million may come due on an 

interim basis. 

N. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing the 

Debtors to Maintain and Administer Their Existing Customer Programs and 

Honor Certain Prepetition Obligations Related Thereto and (II) Granting 

Related Relief (the “Customer Programs Motion”). 

154. Pursuant to the Customer Programs Motion, the Debtors seek entry of interim and 

final orders authorizing the Debtors to maintain and administer their Customer Programs and 

honor certain prepetition obligations related thereto. 

155. The Debtors have historically provided certain incentives, discounts, and 

accommodations to their customers to attract and maintain positive customer relationships. 

The Customer Programs promote customer satisfaction and inure to the goodwill of the Debtors’ 

business and the value of their “brand.” These programs include refund and exchange programs, 

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loyalty programs, referral programs, gift card and certificate programs, and other sale 

promotions. Accordingly, maintaining the goodwill of their customers is important to the 

Debtors’ ongoing operations in these chapter 11 cases, and is necessary to maximize value for 

the benefit of all of the Debtors’ stakeholders. 

156. The Debtors estimate that, of their prepetition obligations under the 

Customer Programs, approximately $26.3 million constitutes accrued credits, adjustments, 

discounts, or other similar obligations owing to their customers, the vast majority of which 

do not entail the expenditure of cash. 

157. I believe that continuing to administer the Customer Programs without 

interruption during the pendency of the chapter 11 cases will help preserve the Debtors’ valuable 

customer relationships and goodwill, which will inure to the benefit of all of the Debtors’ 

creditors and benefit their estates. In contrast, if the Debtors are unable to continue the Customer 

Programs postpetition or pay amounts due and owing to customers, the Debtors risk alienating 

certain customer constituencies (who might then initiate business relationships with the Debtors’ 

competitors) and might suffer corresponding losses in customer loyalty and goodwill that will 

harm their prospects for reorganization and/or maximizing the value of their estate. 

158. I believe that the relief requested herein will pay dividends with respect to the 

long-term reorganization of their businesses, both in terms of profitability and the engendering of 

goodwill, especially at this critical time following the filing of the chapter 11 cases. 

O. Debtors’ Motion for Entry of Interim and Final Orders (I) Authorizing The 

Debtors To Assume The Consulting Agreement, (II) Approving Procedures for 

Store Closing Sales, and (III) Granting Related Relief (the “Store Closing 

Motion”). 

159. Pursuant to the Store Closing Motion, the Debtors seek entry of interim and final 

orders (i) authorizing the Debtors to (a) assume the Consulting Agreement, and (b) close stores 

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in accordance with the terms of the Sale Guidelines with such sales to be free and clear of all 

liens, claims and encumbrances, and (ii) approving procedures to wind-up any Additional 

Closing Stores pursuant to the Sale. 

160. Recognizing the need to right-size their store footprint to align with industry 

conditions, the Debtors’ management team and advisors, including Lazard Frères & Co. LLC 

and A&G Realty Partners, LLC, undertook an extensive analysis of the Debtors’ existing store 

footprint, and whether and how many stores the Debtors should close in connection with their 

broader financial and operational restructuring initiatives. The Debtors’ management team and 

advisors ultimately determined that it is appropriate to close and wind down (the “Store 

Closings”) up to 450 unprofitable brick-and-mortar store locations (contingent on lease 

negotiations with the Debtors’ landlords) based off factors such as historical store profitability, 

recent sales trends, the geographic market in which the store is located, the potential to realize 

negotiated rent reductions with applicable landlords, and specific circumstances related to a 

store’s performance. 

161. I believe that the Store Closings and the Sales provide the best and most efficient 

means of selling the Store Closure Assets to maximize the value to their estates. Delay in 

consummating the Store Closings would diminish the recovery tied to monetization of the Store 

Closure Assets for a number of reasons. The Stores fail to generate positive cash flow and 

therefore are a drain on liquidity. Thus, the Debtors will realize an immediate benefit in terms of 

financial liquidity upon the sales of the Store Closure Assets and the termination of operations at 

the Stores. Further, the swift and orderly commencement of the Sale will allow the Debtors to 

timely reject the applicable Store leases, and therefore avoid the accrual of unnecessary 

administrative expenses for rent payment. Delaying the Store Closings may cause the Debtors to 

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pay postpetition rent at many of these stores, at a possible cost to the estate of approximately 

$3.0 to $3.8 million per month. 

162. Furthermore, I believe that assumption of the Consulting Agreement will allow 

the Debtors to utilize the experience and resources of the Consultant in performing large-scale 

liquidations in a format that allows the Debtors to retain control over the sale process and which 

will provide the maximum benefit to the estates. Indeed, the Debtors estimate that the proceeds 

from the Sales will be approximately $65 million to $85 million.

[Remainder of Page Left Intentionally Blank] 

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KE 46218269 

Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing 

statements are true and correct to the best of my knowledge, information, and belief. 

Dated: June 12, 2017 /s/ James A. Mesterharm 

 James A. Mesterharm 

 Chief Restructuring Officer 

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Exhibit A 

Restructuring Support Agreement

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EXECUTION COPY

THIS RESTRUCTURING SUPPORT AGREEMENT IS NOT AN OFFER WITH RESPECT TO 

ANY SECURITIES OR A SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN 

WITHIN THE MEANING OF SECTION 1125 OF THE BANKRUPTCY CODE. ANY SUCH 

OFFER OR SOLICITATION WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS 

AND/OR PROVISIONS OF THE BANKRUPTCY CODE. NOTHING CONTAINED IN THIS 

RESTRUCTURING SUPPORT AGREEMENT SHALL BE AN ADMISSION OF FACT OR 

LIABILITY OR, UNTIL THE OCCURRENCE OF THE AGREEMENT EFFECTIVE DATE ON 

THE TERMS DESCRIBED HEREIN, DEEMED BINDING ON ANY OF THE PARTIES 

HERETO.

RESTRUCTURING SUPPORT AGREEMENT

This Restructuring Support Agreement (including all exhibits and schedules attached 

hereto, as each may be amended, restated, supplemented, or otherwise modified from time to time 

in accordance with the terms hereof, this “Agreement”)1 is made and entered into as of June 11, 

2017, by and among the following parties (each of the foregoing described in sub-clauses (i), (ii), 

and (iii), a “Party” and, collectively, the “Parties”):

i. The Gymboree Corporation (“Gymboree”) and its undersigned direct and indirect 

subsidiaries and Giraffe Intermediate B, Inc. (collectively, the “Debtors”);

ii. Bain Capital Private Equity, LP on behalf of itself and each of its affiliated investment 

funds or investment vehicles managed or advised by it, and its Affiliates that directly 

or indirectly hold interests in the Debtors (collectively, the “Sponsor”); and

iii. the lenders party to that certain Amended and Restated Credit Agreement, dated as of 

February 11, 2011 (as amended, restated, modified, or supplemented from time to time, 

the “Term Loan Credit Agreement”), by and among Gymboree, as borrower, certain 

of Gymboree’s subsidiaries and Giraffe Intermediate B, Inc., as guarantors, Credit 

Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent (solely 

in such capacities, the “Term Loan Agent”)that are or may become in accordance with 

Section 6 of this Agreement (collectively, the “Consenting Creditors”).

RECITALS

WHEREAS, the Parties have engaged in good faith, arm’s-length negotiations regarding 

the restructuring and recapitalization of the Debtors, including with respect to the Debtors’

respective obligations under the Term Loan Agreement;

WHEREAS, the Parties desire to effectuate a restructuring and recapitalization of the 

Debtors as set forth in the Restructuring Term Sheet through the confirmation and consummation 

of a prenegotiated chapter 11 plan of reorganization (as may be amended or supplemented from 

time to time in accordance with the terms of this Agreement, the “Plan”) and certain related 

1 Capitalized terms used but not otherwise defined herein have the meaning ascribed to such terms in the term sheet 

attached hereto as Exhibit A (the “Restructuring Term Sheet”), subject to Section 2 hereof. 

 

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transactions, all of which shall be on the terms and conditions described in this Agreement 

(such transactions, the “Restructuring Transactions”); 

WHEREAS, to facilitate the consummation of the Restructuring Transactions, the Debtors 

intend to commence voluntary reorganization cases (the “Chapter 11 Cases”) under chapter 11 

of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”), in the 

United States Bankruptcy Court for the Eastern District of Virginia, Richmond Division 

(the “Bankruptcy Court”) and promptly file the Plan and a related disclosure statement (as may 

be amended or supplemented from time to time in accordance with the terms of this Agreement, 

the “Disclosure Statement”) prior to soliciting votes on the Plan in accordance with section 1125 

of the Bankruptcy Code;

WHEREAS, certain Consenting Creditors have agreed to provide the Debtors with a $105 

million debtor-in-possession financing facility (“DIP Term Loan Financing”) consisting of 

(a) up to $35 million in new money delayed draw term loans”) to fund the Chapter 11 Cases and 

(b) $70 million of term loans to refinance amounts due and owing under the Term Loan Credit 

Agreement, substantially on the terms set forth in the Debtor-in-Possession Credit Agreement, 

dated as of June 11, 2017 and entered into concurrently herewith (the “DIP Term Loan 

Agreement”), and subject to entry of the DIP Orders (as defined below);

WHEREAS, certain Consenting Creditors have agreed to fund up to $80 million in two 

new money rights offerings (the “Rights Offerings”) in connection with the Restructuring 

Transactions pursuant to that certain Backstop Commitment Agreement, dated as of June 11, 2017 

and entered into concurrently herewith (the “Backstop Commitment Agreement”) and in 

accordance with the rights offering procedures attached to the Backstop Commitment Agreement 

(the “Rights Offering Procedures”); and

WHEREAS, the following sets forth the agreement among the Parties concerning their 

respective rights and obligations in respect of the Restructuring Transactions.

NOW, THEREFORE, in consideration of the covenants and agreements contained 

herein, and for other valuable consideration, the receipt and sufficiency of which are hereby 

acknowledged, each Party, intending to be legally bound hereby, agrees as follows:

AGREEMENT

Section 1. Agreement Effective Date. This Agreement shall become effective and binding 

upon each of the Parties at 12:00 a.m. (prevailing Eastern Time), on the date on which: (a)(i) the 

Debtors shall have executed and delivered counterpart signature pages of this Agreement to 

counsel to the Term Loan Agent; and (ii) holders of at least 66% of the aggregate principal amount 

of all claims outstanding under the Term Loan Credit Agreement (any such claims, the “Term 

Loan Claims”) (determined without regard to any claims held by a person or entity that is an 

“insider” as that term is defined in section 101(31) of the Bankruptcy Code and excluding the 2017 

Incremental Term Loan (as defined in the Term Loan Credit Agreement)) shall have executed and 

delivered to the Debtors counterpart signature pages of this Agreement; (b) the Sponsor shall have 

executed and delivered counterpart signatures of this Agreement to the Debtors; and (c) the 

Debtors have given notice to counsel to the Term Loan Agent and the Sponsor in accordance with 

2

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Section 18.09 hereof that each of the foregoing conditions set forth in this Section 1, in each case, 

has been satisfied and this Agreement is effective (such date, the “Agreement Effective Date”).

Section 2. Exhibits and Schedules Incorporated by Reference. Each of the exhibits hereto 

(including the Restructuring Term Sheet) and any schedules to such exhibits (collectively, the 

“Exhibits and Schedules”)) is expressly incorporated herein and made a part of this Agreement, 

and as used in this Agreement, all references to this Agreement shall include the Exhibits and 

Schedules. In the event of any inconsistency between this Agreement (without reference to the 

Exhibits and Schedules) and the Exhibits and Schedules, this Agreement (without reference to the 

Exhibits and Schedules) shall govern.

Section 3. Definitive Documentation. 

(a) The definitive documents and agreements governing the Restructuring 

Transactions (collectively, the “Restructuring Documents”) shall consist of this Agreement and 

each of the following documents: 

(i) the Plan (and all exhibits thereto); 

(ii) the Confirmation Order and pleadings in support of entry of the 

Confirmation Order; 

(iii) the Disclosure Statement, the other solicitation materials in respect of the 

Plan (such materials, collectively, the “Solicitation Materials”), the motion to approve the 

Disclosure Statement, and the order entered by the Bankruptcy Court approving the Disclosure 

Statement and Solicitation Materials as containing, among other things, “adequate information” as 

required by section 1125 of the Bankruptcy Code (the “Disclosure Statement Order”); 

(iv) all other documents that are contained in any supplements filed in 

connection with the Plan (collectively, the “Plan Supplement”); 

(v) (A) the interim order or orders authorizing the use of cash collateral and 

debtor-in-possession financing (each, an “Interim DIP Order”) and (B) the final order or orders 

authorizing the use of cash collateral and debtor-in-possession financing (each, a “Final DIP 

Order” and together with the Interim DIP Order, collectively, the “DIP Orders”); 

(vi) the DIP Term Loan Credit Agreement, including any amendments, 

modifications, supplements thereto, and together with any related notes, certificates, agreements, 

security agreements, documents, and instruments (including any amendments, restatements, 

supplements, or modifications of any of the foregoing) related to or executed in connection 

therewith (collectively, the “DIP Term Documents”);

(vii) the post-petition debtor-in-possession credit agreement (together with the 

DIP Term Loan Credit Agreement, the “DIP Credit Agreements”) for the $273.5 revolving 

debtor-in-possession financing facility (the “DIP ABL Facility” and the financing associated 

therewith, the “DIP ABL Financing”) to be entered into in accordance with the DIP Orders by 

the Debtors, Bank of America, N.A., as Administrative Agent, and the lenders party thereto, 

including any amendments, modifications, supplements thereto, and together with any related 

3

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notes, certificates, agreements, security agreements, documents, and instruments (including any 

amendments, restatements, supplements, or modifications of any of the foregoing) related to or 

executed in connection therewith (collectively, the “DIP ABL Documents”);

(viii) the credit agreements for the Exit Credit Facilities, including any 

amendments, modifications, supplements thereto, and together with any related notes, certificates, 

agreements, intercreditor agreements, security agreements, documents, and instruments (including 

any amendments, restatements, supplements, or modifications of any of the foregoing) related to 

or executed in connection therewith; 

(ix) any documents relating to corporate governance matters; and

(x) an order or orders of the Bankruptcy Court approving the Debtors’ 

assumption of, and performance under, the Backstop Commitment Agreement (the “BCA 

Approval Order”);

(b) Certain of the Restructuring Documents remain subject to negotiation and completion 

and shall, upon completion, contain terms, conditions, representations, warranties, and covenants 

consistent with the terms of this Agreement, and shall otherwise be in form and substance 

acceptable to each of the Debtors and the Required Consenting Creditors. As used herein and the 

Restructuring Term Sheet: (i) the term “Required Consenting Creditors” means, at any relevant 

time, (a) if the Initial Consenting Creditors (as defined below) then collectively hold at least 40.0% 

of the principal amount of all outstanding Term Loan Claims at such time, the Majority Initial 

Consenting Creditors (as defined below) and (b) if the Initial Consenting Creditors then 

collectively hold less than 40.0% of the principal amount of all outstanding Term Loan Claims at 

such time, Consenting Creditors then collectively holding greater than 50.0% by principal amount 

outstanding of the Term Loan Claims held by all Consenting Creditors at such time; (ii) the term 

“Initial Consenting Creditor” means any Consenting Creditor that became a Party to this 

Agreement on June 11, 2017; and (iii) the term “Majority Initial Consenting Creditors” means, 

at any relevant time, Initial Consenting Creditors then collectively holding at least 50.0% by 

principal amount outstanding of Term Loan Claims held by all Initial Consenting Creditors at such 

time. 

Section 4. Milestones. As provided in and subject to Section 5.03, the Debtors shall 

implement the Restructuring Transactions in accordance with the milestones set forth in the 

Restructuring Term Sheet (the “Milestones”). Each Milestone may only be extended with the 

express prior written consent of the Required Consenting Creditors, not to be unreasonably 

withheld.

Section 5. Commitments Regarding the Restructuring Transactions.

5.01. Commitment of the Consenting Creditors.

(a) From the Agreement Effective Date until the occurrence of a Termination Date (as 

defined in Section 11.06) applicable to the Consenting Creditors, each of the Consenting Creditors 

agrees (on a several but not joint basis) to:

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(i) to the extent permitted to vote to accept or reject the Plan (and subject to 

the actual receipt by such Consenting Creditor of the Disclosure Statement and the Solicitation 

Materials, in each case, approved by the Bankruptcy Court as containing “adequate information” 

as such term is defined in section 1125 of the Bankruptcy Code), vote each of its claims against 

the Debtors (including each of its Term Loan Claims and any other claims against the Debtors 

(such claims, together with any claims the Sponsor may have against the Debtors, the “Debtor 

Claims”)) and any interests in the Debtors (such interests, together with any interests the Sponsor 

may have in the Debtors, the “Debtor Interests” and collectively with the Debtor Claims, the 

“Debtor Claims/Interests”) to accept the Plan by delivering its duly executed and completed 

ballot(s) accepting the Plan on a timely basis;

(ii) negotiate in good faith the Restructuring Documents and use reasonable 

best efforts to take any and all necessary and appropriate actions in furtherance of the Plan and this 

Agreement; 

(iii) use reasonable best efforts to support and take all actions necessary or 

appropriate to facilitate the solicitation, confirmation and consummation of the Plan and the 

Restructuring Transactions;

(iv) consent to and use reasonable best efforts to support the release, discharge, 

exculpation, and injunction provisions contained in the Plan (and not “opt out” of such provisions 

in the Plan);

(v) not object to or join in any objection to, and use reasonable best efforts to 

support approval of, the BCA Approval Order, the Solicitation Materials, the Disclosure Statement 

Order, the DIP Orders, and the Confirmation Order;

(vi) not change or withdraw (or cause to be changed or withdrawn) any vote(s) 

to accept the Plan; provided, however, that if a Termination Date occurs before consummation of 

the Restructuring Transactions, all votes tendered by such Consenting Creditors to accept the Plan 

shall be immediately revoked and deemed void ab initio in accordance with Section 11; 

(vii) fully subscribe to its ratable portion of the Rights Offerings on account of 

its Term Loan Claims; and

(viii) not directly or indirectly (A) object to, delay, impede, or take any other 

action to interfere with the acceptance, implementation, or consummation of the Restructuring 

Transactions, or otherwise take any action which would, or which would reasonably be expected 

to, breach or be inconsistent with this Agreement, (B) propose, file, support, or vote for any 

dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors, 

merger, transaction, consolidation, business combination, joint venture, partnership sale of assets, 

financing (debt or equity), restructuring of the Debtors, other than the Restructuring Transactions 

(each, an “Alternative Transaction”), or (C) support, encourage or direct any other person or 

entity to take any action contemplated in (A) and (B) of this Section 5.01(a)(viii). 

(b) Notwithstanding the foregoing, nothing in this Agreement and neither a vote to 

accept the Plan by any Consenting Creditor nor the acceptance of the Plan by any Consenting 

Creditor shall: (i) be construed to prohibit any Consenting Creditor from contesting whether any 

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matter, fact, or thing is a breach of, or is inconsistent with, this Agreement or the other 

Restructuring Documents, or exercising any rights (including any consent and approval rights 

contemplated under this Agreement or the other Restructuring Documents) or remedies 

specifically reserved herein or therein; (ii) be construed to prohibit or limit any Consenting 

Creditor from appearing as a party-in-interest in any matter to be adjudicated in the Chapter 11 

Cases, so long as, during the Effective Period, such appearance and the positions advocated in 

connection therewith are not inconsistent with this Agreement and are not for the purpose of 

hindering, delaying, or preventing the consummation of the Restructuring Transactions; provided, 

that any delay or other impact on consummation of the Restructuring Transactions contemplated 

by the Plan caused by a Consenting Creditor’s opposition to (x) any relief that is inconsistent with 

such Restructuring Transactions, (y) a motion by the Debtors to enter into a material executory 

contract, lease, or other arrangement outside of the ordinary course of its business without 

obtaining the prior written consent of the Required Consenting Creditors, not to be unreasonably 

withheld, or (z) any relief that is adverse to the interests of the Consenting Creditors sought by the 

Debtors (or any other party), shall not constitute a violation of this Agreement; or (iii) impair or 

waive the rights of any Consenting Creditor to assert or raise any objection permitted under this 

Agreement in connection with any hearing on confirmation of the Plan or in the Bankruptcy Court.

5.02. Commitment of the Sponsor. 

(a) From the Agreement Effective Date until the occurrence of a Termination Date (as 

defined in Section 11.06) applicable to the Sponsor, the Sponsor agrees to:

(i) to the extent permitted to vote to accept or reject the Plan (and subject to 

the actual receipt by the Sponsor of the Disclosure Statement and the Solicitation Materials, in 

each case, approved by the Bankruptcy Court as containing “adequate information” as such term 

is defined in section 1125 of the Bankruptcy Code), vote each of its Debtor Claims/Interests to 

accept the Plan by delivering its duly executed and completed ballot(s) accepting the Plan on a 

timely basis; 

(ii) use reasonable best efforts to support and take all actions necessary or 

appropriate to facilitate the solicitation, confirmation and consummation of the Plan and the 

Restructuring Transactions;

(iii) consent to and use reasonable best efforts to support the release, discharge, 

exculpation, and injunction provisions contained in the Plan (and not “opt out” of such provisions 

in the Plan);

(iv) not object to or join in any objection to, and use reasonable best efforts to 

support approval of, the BCA Approval Order, the Solicitation Materials, the Disclosure Statement 

Order, the DIP Orders, and the Confirmation Order; 

(v) not change or withdraw (or cause to be changed or withdrawn) any vote(s) 

to accept the Plan; 

(vi) not directly or indirectly (A) object to, delay, impede, or take any other 

action to interfere with the acceptance, implementation, or consummation of the Restructuring 

Transaction, or otherwise take any action which would, or which would reasonably be expected 

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to, breach or be inconsistent with this Agreement, (B) propose, file, support, or vote for any 

Alternative Transaction, or (C) support, encourage or direct any other person or entity to take any 

action contemplated in (A) and (B) of this Section 5.02(a)(vi);

(vii) not pledge, encumber, assign, sell or otherwise transfer, including by the 

utilization of a worthless stock deduction, offer or contract to pledge, encumber, assign, sell, or 

otherwise transfer, in whole or in part, any portion of its right, title, or interests in any of its shares, 

stock, or other interests in the Debtors to the extent it will impair any Debtor’s tax attributes;

(viii) not assert any claims of any kind or priority against the Debtors in the 

Chapter 11 Cases (provided, that the Sponsor and each Sponsor Released Party (as defined herein) 

shall have the right to file a proof of claim in the Chapter 11 Cases in compliance with the bar date 

to preserve its right to assert its claims if this Agreement terminates in accordance with its terms);

(ix) not take any action, or cause any Non-Debtor or Debtor to take any action, 

that would generate taxable income for the Debtors or any Non-Debtor outside the ordinary course 

of business of the Debtors, or cause any Non-Debtor or Debtor to cease to be a member of an 

existing Gymboree Consolidated Group; and

(x) cooperate (and cause any Non-Debtors over which it has control to 

cooperate) with the Debtors and the Reorganized Debtors in connection with any Gymboree 

Consolidated Group tax return filings, audits and proceedings with respect to taxable years ending 

on or prior to, or including, the Plan Effective Date (including jointly managing such filings and 

proceedings, and not compromising any audit or proceeding without the Reorganized Debtors’ 

consent, such consent not to be unreasonably withheld); provided, that reasonable expenses 

incurred by the Non-Debtors at the request of the Reorganized Debtors in connection with this 

sentence shall be borne by the Reorganized Debtors.

(b) Notwithstanding the foregoing, nothing in this Agreement and neither a vote to 

accept the Plan by the Sponsor nor the acceptance of the Plan by the Sponsor shall: (i) be construed 

to prohibit the Sponsor from contesting whether any matter, fact, or thing is a breach of, or is 

inconsistent with, this Agreement or the other Restructuring Documents, or exercising any rights 

(including any consent and approval rights contemplated under this Agreement or the other 

Restructuring Documents) or remedies specifically reserved herein or therein; (ii) be construed to 

prohibit or limit the Sponsor from appearing as a party-in-interest in any matter to be adjudicated 

in the Chapter 11 Cases, so long as, during the Effective Period, such appearance and the positions 

advocated in connection therewith are not inconsistent with this Agreement and are not for the 

purpose of hindering, delaying, or preventing the consummation of the Restructuring Transactions; 

provided, that any delay or other impact on consummation of the Restructuring Transactions 

contemplated by the Plan caused by the Sponsor’s opposition to (x) any relief that is inconsistent 

with such Restructuring Transactions or (y) any relief that is adverse to the interests of the Sponsor 

sought by the Debtors (or any other party), shall not constitute a violation of this Agreement; or 

(iii) impair or waive the rights of the Sponsor to assert or raise any objection permitted under this 

Agreement in connection with any hearing on confirmation of the Plan or in the Bankruptcy Court.

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5.03. Commitment of the Debtors. 

(a) From the Agreement Effective Date until the occurrence of a Termination Date (as 

defined in Section 11.06) applicable to the Debtors, the Debtors agree, and agree to cause each of 

their direct and indirect subsidiaries to:

(i) negotiate in good faith all Restructuring Documents and take any and all 

necessary and appropriate actions in furtherance of the Plan and this Agreement; 

(ii) obtain orders of the Bankruptcy Court in respect of the Restructuring 

Transactions, including approval of the BCA Approval Order, the Solicitation Materials, the 

Disclosure Statement Order, the DIP Orders, and the Confirmation Order;

(iii) support and consummate the Restructuring Transactions in accordance with 

this Agreement within the time-frames contemplated under this Agreement and in compliance with 

each Milestone; 

(iv) execute and deliver any other required agreements to effectuate and 

consummate the Restructuring Transactions; 

(v) use reasonable best efforts to obtain any and all required regulatory and/or 

third-party approvals for the Restructuring Transactions; 

(vi) pay the reasonable and documented fees and expenses of the Consenting 

Creditors as set forth in Section 13 of this Agreement;

(vii) timely file a formal objection, in form and substance reasonably acceptable 

to the Required Consenting Creditors, to any motion filed with the Bankruptcy Court by a party 

seeking the entry of an order (1) directing the appointment of a trustee or examiner (with expanded 

powers beyond those set forth in section 1106(a)(3) and (4) of the Bankruptcy Code), 

(2) converting any of the Chapter 11 Cases to a case under chapter 7 of the Bankruptcy Code, 

(3) dismissing any of the Chapter 11 Cases, or (4) modifying or terminating the Debtors’ exclusive 

right to file and/or solicit acceptances of a plan of reorganization, as applicable; 

(viii) support and use commercially reasonable efforts to consummate the (x) DIP 

Term Financing pursuant to the DIP Orders and the DIP Term Documents (including the exchange 

and conversion of prepetition term loans into Roll-Up DIP Loans) and (y) the DIP ABL Financing 

pursuant to the DIP Orders and the DIP ABL Documents;

(ix) promptly notify the Required Consenting Creditors in writing of any 

governmental or third party complaints, litigations, investigations, or hearings (or communications 

indicating that the same may be contemplated or threatened);

(x) timely file a formal objection, in form and substance reasonably acceptable 

to the Required Consenting Creditors, to any motion, application, or adversary proceeding 

(A) challenging the validity, enforceability, perfection, or priority of, or seeking avoidance or 

subordination of, any portion of the Term Loan Claims, or (B) asserting any other cause of action 

against and/or with respect or relating to such claims or the prepetition liens securing such claims;

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(xi) to the extent that any legal or structural impediment arises that would 

prevent, hinder, or delay the consummation of the transactions contemplated in this Agreement or 

the Plan, negotiate in good faith appropriate additional or alternative provisions to address any 

such impediment, in consultation with the Required Consenting Creditors; provided, however, that 

the economic outcome for the Required Consenting Creditors, the anticipated timing of 

confirmation and the Plan Effective Date, and other materials terms as contemplated herein must 

be substantially preserved, as determined by the Required Consenting Creditors;

(xii) if the Debtors know of a breach by any Debtor in respect of any of the 

obligations, representations, warranties, or covenants of the Debtors set forth in this Agreement, 

furnish prompt written notice (and in any event within three (3) days of such actual knowledge) to 

the Required Consenting Creditors and the Sponsor and promptly take all remedial action 

necessary to cure such breach by an such Debtor;

(xiii) timely file a formal response to any motion or other pleading filed with the 

Bankruptcy Court by any party objecting to approval of the Solicitation Materials, the Disclosure 

Statement Order, the DIP Orders, the Confirmation Order, or any other Restructuring Documents 

contemplated under this Agreement;

(xiv) operate their business in the ordinary course, taking into account the 

Restructuring Transactions; 

(xv) not modify the Plan or any other Restructuring Documents, in whole or in 

part, in a manner that is inconsistent with this Agreement, subject to Section 16 hereof; and

(xvi) not directly or indirectly (A) delay, impede, or take any other action to 

interfere with the acceptance, implementation, or consummation of the Restructuring Transaction, 

or otherwise take any action which would, or which would reasonably be expected to, breach or 

be inconsistent with this Agreement, (B) propose, file, seek, solicit, or support any Alternative 

Transaction, or (C) support, encourage or direct any other person or entity to take any action 

contemplated in (A) and (B) of this Section 5.03(a)(xvi).

(b) Notwithstanding the foregoing Section 5.03(a), without limiting the rights and 

obligations of the Parties under Section 11 (including, without limitation, the Debtors’ termination 

rights under Section 11.03), (i) if any of the Debtors receive a proposal or expression of interest 

regarding any Alternative Transaction during the period from the Agreement Effective Date until 

the occurrence of a Termination Date (as defined in Section 11.06) applicable to the Debtors, the 

Debtors shall promptly notify counsel to the Term Loan Agent and the Sponsor of any such 

proposal or expression of interest, with such notice to include the material terms thereof, including 

(unless prohibited by a separate agreement) the identity of the person or group of persons involved, 

(ii) the Debtors shall promptly furnish to counsel to the Term Loan Agent and the Sponsor copies 

of any written offer, oral offer, or any other information (unless prohibited by separate agreement) 

that they receive relating to the foregoing and shall promptly inform counsel to the Term Loan 

Agent and the Sponsor of any material changes to such proposals, and (iii) the Debtors shall not 

enter into any confidentiality agreement with a party interested in an Alternative Transaction 

unless such party consents to identifying and providing to counsel to the Term Loan Agent and the 

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Sponsor (under a reasonably acceptable confidentiality agreement) the information contemplated 

under this Section 5.03(b).

Section 6. Transfer of Debtor Claims/Interests.

(a) During the Effective Period, no Consenting Creditor or Sponsor shall sell, assign, 

transfer, permit the participation in, or otherwise dispose of (each, a “Transfer”) any ownership 

(including any beneficial ownership2) in the Debtor Claims/Interests to any party (other than an 

entity that is controlled by or is under common control with such Consenting Creditor (a “Related 

Party”)) or Sponsor, respectively, unless the following requirements have been satisfied 

(a transferee that satisfies such requirements, a “Permitted Transferee,” and such Transfer, a 

“Permitted Transfer”):

(i) the intended transferee executes and delivers to counsel to the Debtors, 

counsel to the Term Loan Agent, and counsel to the Sponsor, on the terms set forth below an 

executed form of the transfer agreement in the form attached hereto as Exhibit B (a “Transfer 

Agreement”);

(ii) with respect to the Transfer of (a) Term Loan Claims, (b) Loans and 

Commitments under (and in each case, as defined in) the DIP Term Loan Credit Agreement, and 

(c) Backstop Commitments (as defined in the Backstop Commitment Agreement)(each of (a),(b) 

and (c), a “Restructuring Claim” and together the “Restructuring Claims”), the Transfer 

complies in all respects with the following requirement (the “Stapling Requirement”): 

(A) simultaneously with a Consenting Creditor’s Transfer of all or any 

portion of a Restructuring Claim, such Consenting Creditor and its 

Contracted Related Parties shall be obligated to make a 

proportionate Transfer of each of the Restructuring Claims held by 

the Consenting Creditor and its Contracted Related Parties to the 

same Permitted Transferee (and/or its Related Parties) (for the 

avoidance of doubt, the amount shall be determined by dividing the 

amount of the individual type of Restructuring Claim proposed to 

be sold by the total amount of the same type of Restructuring Claim 

held by the Consenting Creditor and its Contracted Related Parties 

and then applying that percentage to the aggregate amount of each 

type of Restructuring Claim held by the Consenting Creditor and its 

Contracted Related Parties ); provided, that Transfers by a 

Consenting Creditor of Restructuring Claims made to such 

Consenting Creditor’s Related Parties are not subject to the Stapling 

Requirement. 

2 As used herein, the term “beneficial ownership” means the direct or indirect economic ownership of, and/or the 

power, whether by contract or otherwise, to direct the exercise of the voting rights and the disposition of, the 

Debtor Claims/Interests or the right to acquire such claims or interests.

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(B) As used herein, “Contracted Related Parties” means any Related 

Party that is a party to this Agreement, the Backstop Commitment 

Agreement or the DIP Term Loan Agreement. 

(iii) with respect to the Transfer of any Debtor Interests only, such Transfer shall 

not (A) violate the terms of any order entered by the Bankruptcy Court with respect to preservation 

of net operating losses or (B) in the reasonable business judgment of the Debtors and their legal 

and tax advisors, adversely (1) affect the Debtors’ ability to maintain the value of and utilize their

net operating loss carryforwards or other tax attributes or (2) the Debtors’ ability to obtain the 

regulatory consents or approval necessary to effectuate the Restructuring Transaction.

(b) The Debtors shall have five (5) business days from receiving notice of the Transfer 

Agreement with respect to the Transfer of any Debtor Interests in accordance with this Section 

6(a)(i) to object to such Transfer Agreement for the reasons described in Section 6(a)(iii).

(c) Notwithstanding Section 6(a), a Qualified Marketmaker3 that acquires any Debtor 

Claims/Interests subject to this Agreement with the purpose and intent of acting as a Qualified 

Marketmaker for such Debtors Claims/Interests shall not be required to execute and deliver to 

counsel a Transfer Agreement in respect of such Debtor Claims/Interests if (i) such Qualified 

Marketmaker transfers such Debtor Claims/Interests (by purchase, sale, assignment, participation, 

or otherwise) consistent with the Stapling Requirements within three (3) business days of its 

acquisition to a transferee that is an entity that is not an Affiliate, affiliated fund, or affiliated entity 

with a common investment advisor; (ii) the transferee otherwise is a Permitted Transferee 

(including, for the avoidance of doubt, the requirement that such transferee execute a Transfer 

Agreement); and (iii) the transfer otherwise is a Permitted Transfer.

(d) This Agreement shall in no way be construed to preclude the Consenting Creditors 

or Sponsor from acquiring additional Debtor Claims/Interests or effecting a Transfer of all or a 

portion of its Debtor Claims/Interests to an entity controlled by or under common control with 

such Consenting Creditors or Sponsor, as applicable, as of the date of such Transfer); provided, 

that (i) any such Consenting Creditor or Sponsor or entity that acquires Debtor Claims/Interests, 

as applicable, after the Agreement Effective Date shall promptly notify counsel to the Debtors of 

such acquisition including the amount of such acquisition, who shall then promptly notify counsel 

to the Term Loan Agent and Sponsor and (ii) such Debtor Claims/Interests shall automatically and 

immediately upon acquisition by such Consenting Creditor, Sponsor, or entity, as applicable, be 

deemed subject to the terms of this Agreement (regardless of when or whether notice of such 

acquisition is given to the Debtors or counsel to the Term Loan Agent or Sponsor) and subsequent 

Transfers shall be subject to this Section 6.

(e) Upon the completion of any Transfer of Debtor Claims in accordance with this 

Section 6, the transferee shall be deemed a Consenting Creditor hereunder with respect to such 

3 As used herein, the term “Qualified Marketmaker” means an entity that (a) holds itself out to the public or the 

applicable private markets as standing ready in the ordinary course of business to purchase from customers and 

sell to customers claims of the Debtors (or enter with customers into long and short positions in claims against 

the Debtors), in its capacity as a dealer or market maker in claims against the Debtors and (b) is, in fact, regularly 

in the business of making a market in claims against issuers or borrowers (including debt securities or other debt).

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transferred rights, obligations and claims and the Transferor shall be deemed to relinquish its rights 

and claims (and be released from its obligations under this Agreement) with respect to such 

transferred Debtor Claims.

(f) Any Transfer of any Debtor Claims/Interests made in violation of this Section 6

shall be void ab initio and of no force and effect and shall not create any obligation or liability of 

any Consenting Creditor or the Debtors to the purported transferee.

Section 7. Representations and Warranties of Consenting Creditors and Sponsor. Each 

Consenting Creditor and Sponsor, severally, and not jointly, represents and warrants for itself and 

not any other Person or Entity that the following statements are true, correct, and complete, to the 

best of its actual knowledge, as of the date hereof:

(a) it is the beneficial owner of the face amount of the Debtor Claims/Interests, or is 

the nominee, investment manager, or advisor for beneficial holders of the Debtor Claims/Interests, 

as reflected on such Consenting Creditor’s or Sponsor’s signature page to this Agreement (such 

Debtor Claims/Interests, the “Owned Debtor Claims/Interests”);

(b) it has the full power and authority to act on behalf of, vote, and consent to matters 

concerning the Owned Debtor Claims/Interests; 

(c) it is either (i) a qualified institutional buyer as defined in Rule 144A of the 

Securities Act, (ii) an institutional accredited investor (as defined in Rule 501(a)(1), (2), (3), or (7) 

under the Securities Act of 1933, as amended (the “Securities Act’), (iii) a Regulation S non-U.S. 

person, or (iv) the foreign equivalent of (i) or (ii) above;

Section 8. Mutual Representations and Warranties. Each (i) Consenting Creditor and 

Sponsor, severally, and not jointly, and (ii) Debtor, on a joint and several basis, hereby represents 

and warrants for itself and not any other Person or Entity that the following statements are true, 

correct, and complete, to the best of its actual knowledge, as of the date hereof:

8.01. Enforceability. It is validly existing and in good standing under the laws of the 

state of its organization, and this Agreement is a legal, valid, and binding obligation of such Party, 

enforceable against it in accordance with its terms, except as enforcement may be limited by 

applicable laws relating to or limiting creditors’ rights generally or by equitable principles relating 

to enforceability.

8.02. No Consent or Approval. Except as expressly provided in this Agreement, the Plan, 

the Term Sheet, or the Bankruptcy Code, no consent or approval is required by any other Person 

or Entity in order for it to effectuate the Restructuring Transactions contemplated by, and perform 

the respective obligations under, this Agreement.

8.03. Power and Authority. Except as expressly provided in this Agreement and subject 

to applicable law, it has all requisite corporate or other power and authority to enter into, execute, 

and deliver this Agreement and, to effectuate the Restructuring Transactions contemplated by, and 

perform its respective obligations under, this Agreement.

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8.04. Governmental Consents. Except as expressly set forth herein and with respect to 

the Debtors’ execution and performance of this Agreement (and subject to necessary Bankruptcy 

Court approval and/or regulatory approvals associated with the Restructuring Transactions), the 

execution, delivery, and performance by it of this Agreement does not, and shall not, require any 

registration or filing with consent or approval of, or notice to, or other action to, with or by, any 

federal, state, or other governmental authority or regulatory body.

8.05. No Conflicts. The execution, delivery, and performance of this Agreement does 

not and shall not: (a) violate any provision of law, rules, or regulations applicable to it or any of 

its subsidiaries in any material respect; (b) violate its certificate of incorporation, bylaws, or other 

organizational documents or those of any of its subsidiaries; or (c) conflict with, result in a breach 

of, or constitute (with due notice or lapse of time or both) a default under any contractual obligation 

to which it is a party, which conflict, breach, or default, would have a material adverse effect on 

the Restructuring Transactions. 

8.06. Fiduciary Duties. It has no actual knowledge of any event that, due to any fiduciary 

or similar duty to any other Person or Entity, would prevent it from taking any action required of 

it under this Agreement.

8.07. Other Representations. It has sufficient knowledge and experience to evaluate 

properly the terms and conditions of the Plan and this Agreement, and has been afforded the 

opportunity to consult with its legal and financial advisors with respect to its decision to execute 

this Agreement, and it has made its own analysis and decision to enter into this Agreement and 

otherwise investigated this matter to its full satisfaction.

Section 9. Acknowledgement. Notwithstanding any other provision herein, this Agreement is 

not and shall not be deemed to be an offer with respect to any securities or solicitation of votes for 

the acceptance of a plan of reorganization for purposes of sections 1125 and 1126 of the 

Bankruptcy Code or otherwise. Any such offer or solicitation will be made only in compliance 

with all applicable securities laws and provisions of the Bankruptcy Code. The Debtors will not 

solicit acceptances of any Plan from Consenting Creditors in any manner inconsistent with the 

Bankruptcy Code or applicable bankruptcy law. 

Section 10. Cooperation and Support.

(a) The Required Consenting Creditors and the Sponsor shall have a reasonable 

opportunity to review and comment on first-day pleadings (the “First Day Pleadings”). The 

Debtors shall use commercially reasonable efforts to incorporate the comments of the Required 

Consenting Creditors and the Sponsor as to the First Day Pleadings. 

(b) Additionally, during the Effective Period, the Debtors will use reasonable best 

efforts to provide draft copies of all material motions, pleadings, and documents other than the 

First Day Pleadings that the Debtors intend to file with the Bankruptcy Court to counsel to the 

Term Loan Agent and the Sponsor at least three (3) days before the date on which Debtors intend 

to file such motions. To the extent such documents do not constitute Restructuring Documents 

(which shall be subject to the consent and approval rights of the Debtors, the Required Consenting 

Creditors, and the Sponsor as set forth in Section 3 of this Agreement), the Debtors shall consult 

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in good faith with counsel to the Term Loan Agent and the Sponsor regarding the form and 

substance of such documents.

(c) The Debtors shall (i) provide to the Consenting Creditors’ and the Sponsor’s 

advisors timely and reasonable responses to all reasonable diligence requests, in each case for 

purposes of evaluating the Debtors’ assets, liabilities, operations, businesses, finances, strategies, 

prospects, and affairs; and (ii) promptly notify counsel to the Term Loan Agent and the Sponsor 

of any newly commenced material governmental or third party litigations, investigations, or 

hearing against any of the Debtors. 

Section 11. Termination Events. 

11.01. Consenting Creditor Termination Events. This Agreement may be terminated as 

between the Consenting Creditors and the other Parties, in each case, upon five (5) business days 

written notice delivered in accordance with Section 18.09 hereof by the Required Consenting 

Creditors pursuant to this Section 11.01 upon the occurrence and continuation of any of the 

following events (provided that the foregoing Required Consenting Creditors have not failed to 

perform or comply in all material respects with the terms and conditions of this Agreement):

(a) the failure to meet any of the Milestones unless (i) such failure is the result of any 

act, omission, or delay on the part of the Required Consenting Creditors in violation of their 

obligations under this Agreement or (ii) such Milestone is waived in accordance with Section 4;

(b) the effective date of the Plan (the “Plan Effective Date”) shall not have occurred 

on or before December 15, 2017 (the “Outside Date”);

(c) the occurrence of a material breach by any Party other than the Required 

Consenting Creditors of this Agreement; provided, that (i) such Required Consenting Creditors 

shall transmit a notice to the Debtors, the Sponsor, and the other Consenting Creditors pursuant to 

Section 18.09 hereof, detailing any such breach and (ii) any other Consenting Creditor may 

transmit a notice to any Party detailing a breach (while providing copies of such notice pursuant 

to Section 18.09 hereof) and, in either case, if such breach is capable of being cured, the breaching 

Party shall have five (5) business days after receiving such notice to cure any breach; 

(d) the issuance by any governmental authority, including any regulatory authority, the 

Bankruptcy Court, or another court of competent jurisdiction, of any injunction, judgment, decree, 

charge, ruling, or order that, in each case, would have the effect of preventing substantial 

consummation of the Restructuring Transactions; provided, that the Debtors shall have five (5)

business days after issuance of such injunction, judgment, decree, charge, ruling, or order to obtain 

relief that would allow consummation of the Restructuring Transactions in a manner that (i) does 

not prevent or diminish in a material way compliance with the terms of this Agreement, or (ii) is 

acceptable to the Required Consenting Creditors;

(e) the (i) conversion of one or more of the Chapter 11 Cases of the Debtors to a case 

under chapter 7 of the Bankruptcy Code, (ii) dismissal of one or more of the Chapter 11 Cases of 

the Debtors, unless such conversion or dismissal, as applicable, is made with the prior written 

consent of the Required Consenting Creditors, or (iii) appointment of a trustee, receiver, or 

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examiner with expanded powers beyond those set forth in section 1106(a)(3) or (4) of the 

Bankruptcy Code in one or more of the Chapter 11 Cases; 

(f) any Debtor, without the prior consent of the Required Consenting Creditors, 

(i) amends, or modifies, or files a pleading seeking authority to amend or modify, the Restructuring 

Documents in a manner that is materially inconsistent with this Agreement, (ii) suspends or 

revokes the Restructuring Transactions, or (iii) publicly announces its intention to take any such 

action listed in Sub-Clauses (i) and (ii) of this subsection;

(g) any of the Restructuring Documents do not comply with Section 3 of this 

Agreement or any other document or agreement necessary to consummate the Restructuring 

Transactions is not reasonably satisfactory to the Required Consenting Creditors;

(h) any Debtor makes any filing in support of, enters into an agreement with respect to, 

or announces its support for any Alternative Transaction or that it will file any plan of 

reorganization other than the Plan, or files any motion or application seeking authority to sell any 

material assets (other than as provided for in the Plan), without the prior written consent of the 

Required Consenting Creditors;

(i) the Bankruptcy Court enters any order authorizing the use of cash collateral or postpetition financing that is not substantially consistent with this Agreement or otherwise consented 

to by the Required Consenting Creditors;

(j) the Debtors’ failure to consummate the DIP ABL Financing;

(k) the occurrence of any Event of Default under the DIP Term Documents, the DIP 

ABL Documents, or the DIP Orders, as applicable, that has not been cured (if susceptible to cure) 

or waived in accordance with the terms thereof;

(l) a breach by any Debtor or any other Party of any representation, warranty, or 

covenant of such Debtor or other Party set forth in Section 8 of this Agreement that could 

reasonably be expected to have a material adverse impact on the consummation of the 

Restructuring Transactions that (to the extent curable) remains uncured for a period of five (5) 

business days after the receipt by the Debtors of written notice and description of such breach from 

any other Party;

(m) any Debtor or Sponsor files a motion, application, or adversary proceeding (or any 

Debtor or other Party supports any such motion, application, or adversary proceeding filed or 

commence by any third party) (i) challenging the validity, enforceability, perfection, or priority of, 

or seeking avoidance or subordination of, the Term Loan Claims, or (ii) asserting any other cause 

of action against and/or with respect or relating to such claims or the prepetition liens securing 

such claims;

(n) a determination is made with respect to any Debtor pursuant to Section 11.03(b) 

that its continued support of the Restructuring Transactions would be inconsistent with its fiduciary 

obligations under applicable law;

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(o) any Debtor terminates its obligations under and in accordance with Section 11.03 

of this Agreement;

(p) the Bankruptcy Court enters an order in the Chapter 11 Cases terminating any of 

the Debtors’ exclusive right to file a plan or plans of reorganization or to solicit acceptances thereof 

pursuant to section 1121 of the Bankruptcy Code;

(q) the DIP Orders or any of the orders confirming the Plan or approving the Disclosure 

Statement are reversed, stayed, dismissed, vacated, reconsidered, modified, or amended without 

the consent of the Required Consenting Creditors or a motion for reconsideration, reargument, or 

rehearing with respect to such orders has been filed and the Debtors have failed to timely object to 

such motion; or

(r) the occurrence of a Maturity Date (as defined in each of the DIP Credit 

Agreements).

The Interim DIP Order will provide that the Consenting Creditors are authorized to take any steps 

necessary (including, without limitation, sending any notice contemplated hereunder) to effectuate 

the termination of this Agreement notwithstanding section 362 of the Bankruptcy Code or any 

other applicable law and no cure period contained in this Agreement shall be extended pursuant to 

sections 108 or 365 of the Bankruptcy Code or any other applicable law without the prior written 

consent of the Required Consenting Creditors; provided, that following the commencement of the 

Chapter 11 Cases and until such time as the Interim DIP Order (which includes the foregoing 

provision) is entered, the occurrence of any Termination Event in this Section 11.01 shall result in 

the automatic termination of this Agreement five days following such occurrence unless waived 

in writing by the Required Consenting Creditors.

11.02. Sponsor’s Termination Events. This Agreement may be terminated as between the 

Sponsor and the other Parties upon five (5) business days written notice delivered in accordance 

with Section 18.09 hereof by the Sponsor pursuant to this Section 11.02 upon the occurrence and 

continuation of any of the following events (provided that the Sponsor has not failed to perform 

or comply in all material respects with the terms and conditions of this Agreement):

(a) the occurrence of a material breach by any Party other than the Sponsor of this 

Agreement; provided,that (i) the Sponsor shall transmit a notice to the Debtors and the Consenting 

Creditors pursuant to Section 18.09 hereof detailing any such breach and, if such breach is capable 

of being cured, the breaching Party shall have five (5) business days after receiving such notice to 

cure any breach; 

(b) the entry of an order by the Bankruptcy Court denying confirmation of the Plan; and 

(c) a Release Revocation Event (as defined herein).

11.03. Debtors’ Termination Events. Any Debtor may terminate this Agreement as to all 

Parties upon five (5) business days’ prior written notice, delivered in accordance with 

Section 18.09 hereof, upon the occurrence of any of the following events: 

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(a) the breach by any of the Consenting Creditors of any material provision set forth in 

this Agreement that remains uncured for a period of five (5) business days after the receipt by the 

Consenting Creditors of notice of such breach; 

(b) the board of directors, board of managers, or a similar governing body of any 

Debtor determines based on advice of counsel that proceeding with any of the Restructuring 

Transactions would be inconsistent with applicable law or its fiduciary obligations under 

applicable law, including having received a proposal or offer for an Alternative Transaction, that 

such Alternative Transaction is likely to be more favorable to such Debtor’s estate than the 

Restructuring Transactions and that continued support of the Restructuring Transactions pursuant 

to this Agreement would be inconsistent with its fiduciary obligations; or 

(c) the issuance by any governmental authority, including any regulatory authority, the 

Bankruptcy Court, or another court of competent jurisdiction, of any ruling or order enjoining the 

consummation of a material portion of the Restructuring Transactions; provided, that the Debtors 

have made reasonable best efforts to cure, vacate, reverse, or have overruled such ruling or order 

prior to terminating this Agreement.

11.04. Mutual Termination. This Agreement, and the obligations of all Parties hereunder, 

may be terminated by mutual agreement among each of the Debtors, the Sponsor, and the Required 

Consenting Creditors.

11.05. Termination Upon Completion of the Restructuring Transaction. This Agreement 

shall terminate automatically without any further required action or notice on the Plan Effective 

Date, subject to Section 12 of this Agreement.

11.06. Effect of Termination. The earliest date on which termination of this Agreement 

as to a Party is effective in accordance with Sections 11.01, 11.02, 11.03, 11.04, and 11.05 shall 

be referred to as a “Termination Date.” Upon the occurrence of a Termination Date as to a Party, 

this Agreement shall be of no further force and effect and each Party subject to such termination 

shall be released from its commitments, undertakings, and agreements under or related to this 

Agreement and shall have the rights and remedies that it would have had, had it not entered into 

this Agreement, and shall be entitled to take all actions, whether with respect to the Restructuring 

Transactions or otherwise, that it would have been entitled to take had it not entered into this 

Agreement. Upon the occurrence of a Termination Date with respect to the Consenting Creditors 

or the Sponsor, any and all consents or ballots tendered by such Consenting Creditors or the 

Sponsor, as applicable, shall be deemed, for all purposes, to be null and void ab initio and shall 

not be used in any manner in connection with the Restructuring Transactions or otherwise. 

Notwithstanding anything to the contrary in this Agreement, the foregoing shall not be construed 

to prohibit the Debtors, the Sponsor, or any of the Consenting Creditors from contesting whether 

any such termination is in accordance with its terms or to seek enforcement of any rights under 

this Agreement that arose or existed before a Termination Date. Except as expressly provided in 

this Agreement, nothing herein is intended to, or does, in any manner waive, limit, impair, or 

restrict (a) any right of any Debtor or the ability of any Debtor to protect and preserve its rights 

(including rights under this Agreement), remedies, and interests, including its claims against any 

Consenting Creditor, (b) any right of any Consenting Creditor, or the ability of any Consenting 

Creditor, to protect and preserve its rights (including rights under this Agreement), remedies, and 

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interests, including its claims against any Debtor, Sponsor, or Consenting Creditor, and (c) any 

right of the Sponsor, or the ability of the Sponsor to protect and preserve its rights (including any 

rights under this Agreement), remedies, and interests, including its claims against any Debtor or 

Consenting Creditor. Nothing in this Section 11.06 shall restrict any Debtor’s right to terminate 

this Agreement in accordance with Section 11.03(b).

Section 12. Survival. Notwithstanding the termination of this Agreement pursuant to 

Section 11, the agreements and obligations of the Parties in Sections 14 and 15 hereof (and any 

defined terms needed for the interpretation of any such Sections) shall survive such termination 

and shall continue in full force and effect in accordance with the terms hereof.

Section 13. Fees and Expenses. The Debtors shall pay and reimburse all reasonable and 

documented fees and expenses when due (including travel costs and expenses) of the attorneys, 

accountants, other professionals, advisors and consultants of the Term Loan Agent and the 

Consenting Creditors (whether incurred directly by the Consenting Creditors or on their behalf 

through the Term Loan Agent and regardless of whether such fees and expenses are incurred before 

or after the Petition Date), including the fees and expenses of (a) Milbank, Tweed, Hadley & 

McCloy LLP (“Milbank”) as legal counsel, (b) McGuireWoods LLP as local counsel, 

(c) Rothschild Inc. (“Rothschild”) as financial advisor and investment banker, and (d) Carriage 

House Capital Advisors, LLC (“Carriage House”) as consultant, and any such other advisors or 

consultants as may be reasonably retained on behalf of the Consenting Creditors in consultation 

with the Debtors, in each case, including all amounts payable or reimbursable under applicable fee 

or engagement letters with the Debtors (which agreements shall not be terminated by the Debtors 

before the termination of this Agreement), the DIP Order, or the Term Loan Credit Agreement.

Section 14. Release.

14.01. On the Agreement Effective Date, (x) each Consenting Creditor, and subject in all 

respects to Section 15, on behalf of itself and its predecessors, successors and assigns, subsidiaries, 

Affiliates, managed accounts or funds, current and former officers, directors, principals, 

shareholders, members, partners, employees, agents, advisory board members, financial advisors, 

attorneys, accountants, investment bankers, consultants, representatives, management companies, 

fund advisors and other professionals (in each case in their capacity as such) (collectively, the 

“Consenting Creditor Releasing Parties”), expressly and generally releases, acquits and 

discharges (i) the Sponsor; (ii) the Sponsor’s respective predecessors, successors and assigns, 

subsidiaries, Affiliates (in each case of the foregoing, except the Debtors), managed accounts or 

funds or investment vehicles, and each of such entities’ respective current and former officers, 

directors, principals, shareholders, members, partners, employees, agents, advisory board 

members, financial advisors, attorneys, accountants, investment bankers, consultants, 

representatives, management companies, fund advisors and other professionals of the Sponsor; 

and (iii) the current and former Sponsor-appointed directors of the Debtors and its subsidiaries (in 

each case in their capacity as such) ((i) through (iii), collectively, the “Sponsor Released Parties”) 

from, any and all claims, obligations, rights, suits, damages, causes of action, remedies and 

liabilities whatsoever, including any derivative claims asserted or assertable on behalf of the 

Debtors, any claims asserted or assertable on behalf of any holder of any claim against or interest 

in the Debtors and any claims asserted or assertable on behalf of any other entity, whether known 

or unknown, foreseen or unforeseen, matured or unmatured, in law, equity, contract, tort or 

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otherwise, by statute or otherwise, that such Consenting Creditor Releasing Parties (whether 

individually or collectively), ever had, now has or may have, based on or relating to, or in any 

manner arising from, in whole or in part, the Debtors (including, without limitation, the purchase, 

sale, rescission, or any other transaction relating to any security of the Debtors, or any other 

transaction) or the negotiation, formulation or preparation of the Restructuring Transactions, in 

each case, arising on or before the execution of this Agreement. For the avoidance of doubt, the 

foregoing shall not operate as a release of any Debtor.

14.02. On the Agreement Effective Date, the Sponsor, subject in all respects to Section 

15, on behalf of itself and its predecessors, successors and assigns, subsidiaries, Affiliates (in each 

case of the foregoing, except the Debtors), managed accounts or funds or investment vehicles, and 

each of such entities’ respective current and former officers, directors, principals, shareholders, 

members, partners, employees, agents, advisory board members, financial advisors, attorneys, 

accountants, investment bankers, consultants, representatives, management companies, fund 

advisors and other professionals of the Sponsor (in each case in their capacity as such) 

(collectively, the “Sponsor Releasing Parties” and, together with Consenting Creditor Releasing 

Parties, the “Releasing Parties”), expressly and generally releases, acquits and discharges (i) the 

Sponsor, (ii) the other applicable Sponsor Released Parties, (iii) each Consenting Creditor, and 

(iv) each Consenting Creditor’s respective predecessors, successors and assigns, subsidiaries, 

Affiliates, managed accounts or funds, and each of such entities’ respective current and former 

officers, directors, principals, shareholders, members, partners, employees, agents, advisory board 

members, financial advisors, attorneys, accountants, investment bankers, consultants, 

representatives, management companies, fund advisors and other professionals of each Consenting 

Creditor (in each case in their capacity as such) ((iii) through (iv), collectively, the “Consenting 

Creditor Released Parties”) from, any and all claims, obligations, rights, suits, damages, causes 

of action, remedies and liabilities whatsoever, including any derivative claims asserted or 

assertable on behalf of the Debtors, any claims asserted or assertable on behalf of any holder of 

any claim against or interest in the Debtors and any claims asserted or assertable on behalf of any 

other entity, whether known or unknown, foreseen or unforeseen, matured or unmatured, in law, 

equity, contract, tort or otherwise, by statute or otherwise, that such Sponsor Releasing Parties 

(whether individually or collectively), ever had, now has or may have, based on or relating to, or 

in any manner arising from, in whole or in part, the Debtors (including, without limitation, the 

purchase, sale, rescission, or any other transaction relating to any security of the Debtors) or the 

negotiation, formulation or preparation of the Restructuring Transactions, in each case, arising on 

or before the execution of this Agreement; provided, that nothing in the foregoing shall result in 

any of the Debtors’ officers and directors waiving any indemnification claims against the Debtors 

or any of its insurance carriers or any rights as beneficiaries of any insurance policies (including 

any indemnification obligations and insurance policies that may be assumed by the Reorganized 

Debtors consistent with this Agreement).

14.03. Subject to Section 15, each of the Releasing Parties knowingly grants the releases 

under this Section 14 (collectively, the “Release”) notwithstanding that each Releasing Party may 

hereafter discover facts in addition to, or different from, those which either such Releasing Party 

now knows or believes to be true, and without regard to the subsequent discovery or existence of 

such different or additional facts, and each Releasing Party expressly waives any and all rights that 

such Releasing Party may have under any statute or common law principle which would limit the 

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effect of the Release to those claims actually known or suspected to exist as of before the 

Agreement Effective Date.

14.04. In the event that any third party, trustee, debtor in possession, creditor, estate, 

creditors’ committee, or similar entity is successful in pursuing any claim, cause of action, or 

litigation against any Sponsor Released Party with respect to any claims released pursuant to the 

Release, each Releasing Party agrees that it shall not recover any funds received, awarded, or 

arising from settlement, judgment, or other resolution of such actual or threatened claim, cause of 

action or litigation, and shall assign any such recoveries to, and hold them in trust for, such Sponsor 

Released Party.

14.05. Subject to Section 15, in connection with their agreement to the foregoing Release, 

the Releasing Parties knowingly and voluntarily waive and relinquish any and all provisions, rights 

and benefits conferred by any law of the United States or any state or territory of the United States, 

or principle of common law, which governs or limits a person’s release of unknown claims, 

comparable or equivalent to California Civil Code § 1542, which provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES 

NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING 

THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY 

AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

14.06. Each of the Releasing Parties hereby represents and warrants that it has access to 

adequate information regarding the terms of this Agreement, the scope and effect of the Release, 

and all other matters encompassed by this Agreement to make an informed and knowledgeable 

decision with regard to entering into this Agreement. Each of the Releasing Parties further 

represents and warrants that it has not relied upon any other Party in deciding to enter into this 

Agreement and has instead made its own independent analysis and decision to enter into this 

Agreement.

Section 15. Revocation of Release.

15.01. Subject to Section 15.03, a Release provided in Section 14 shall be deemed revoked 

if any Party receives a notice from any other Party (each, a “Release Revocation Notice”) of the 

occurrence of a Release Revocation Event (as defined herein) and the recipient(s) of the Release 

Revocation Notice fails to cure such Release Revocation Event within five (5) business days of 

receipt of such Release Revocation Notice (the “Revocation Cure Period”) or such Release 

Revocation Notice is not otherwise rescinded; provided, that in the event the recipient(s) of a 

Release Revocation Notice disputes either the occurrence of a Release Revocation Event or the 

failure of the recipient(s) to cure the Release Revocation Event within the Revocation Cure Period, 

such recipient(s) shall have ten (10) business days from the expiration of the Revocation Cure 

Period to seek a determination by the Bankruptcy Court as to whether a Release Revocation Event 

occurred and was not cured within the Revocation Cure Period.

15.02. Release Revocation Event. For the purposes of this Agreement, a “Release 

Revocation Event” means any of the following: 

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(a) a breach by any Party (other than the Releasing Party seeking to revoke the Release) of 

any material representation, warranty, covenant, or other provision of this Agreement that gives 

rise to a termination right under this Agreement; and

(b) this Agreement is terminated with respect to any Debtor, including, without limitation, 

as a result of a Debtor’s determination pursuant to Section 11.03(b).

Notwithstanding subsections (a) and (b) of this Section 15.02, if the economic outcome for the 

Required Consenting Creditors, the timing of confirmation and the Plan Effective Date, and all 

other material terms as contemplated herein are substantially preserved, in each case as determined 

by the Required Consenting Creditors, the foregoing subsections (a) and (b) shall not constitute a 

Release Revocation Event (other than with respect to a breach of this Agreement by the Sponsor).

15.03. Effect of Revocation of Release. 

(a) Revocation of a Release as a result of a Release Revocation Event as contemplated in 

subsections (b) and (c) hereof shall result in a full and complete restoration of any and all claims, 

liabilities, and causes of action subject to such Release, and such Release shall be void ab initio, 

in each case, to the extent contemplated in subsections (b) and (c) of this Section 15.03. 

(b) In the case of a Release Revocation Event under Section 15.02(a), (i) if the breaching 

Party is a Sponsor, the Release in Section 14.01 shall be revoked with respect to all of the Sponsor 

Released Parties (and such Sponsor Released Parties shall no longer have the benefit of such 

Release), and (ii) if the breaching Party is a Consenting Creditor, the Releases in section 14.02 

shall be revoked solely with respect to such breaching Consenting Creditor and its respective 

Consenting Creditor Released Parties (and such Consenting Creditor Released Parties shall no 

longer have the benefit of such Release). Other than as set forth in this Section 15.02(b), the 

revocation of any Release under section 15.02(a) shall not operate as a revocation of, nor otherwise 

impair or affect, any other Release.

(c) In the case of a Release Revocation Event under Sections 15.02(b), the Releases in 

Sections 14.01 and 14.02 shall be revoked in their entireties.

Section 16. Amendments. This Agreement (including the Exhibits and Schedules), may not be 

modified, amended, or supplemented in any manner except in writing signed by each of the 

Debtors and the Required Consenting Creditors; provided that any such modification, amendment, 

or supplement that is reasonably anticipated to have an adverse impact on any Sponsor Released 

Party may only be effected by a writing signed by each of the Debtors, the Required Consenting 

Creditors, and the Sponsor. Any proposed modification, amendment, or supplement that is not 

approved by the requisite Parties as set forth above shall be ineffective and void ab initio.

Section 17. Fiduciary Duties. Nothing in this Agreement shall require the Debtors, nor the 

Debtors’ directors, managers, and officers, to take or refrain from taking any action (including, 

without limitation, terminating this Agreement under Section 11), to the extent such person or 

persons determines, based on the advice of counsel, that taking, or refraining from taking, such 

action, as applicable, would be inconsistent with applicable law or its fiduciary obligations under 

applicable law; provided, that this Section 17 shall not impede any Party’s right to terminate this 

Agreement pursuant to Section 11. 

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Section 18. Miscellaneous.

18.01. Further Assurances. Subject to the other terms of this Agreement, the Parties agree 

to execute and deliver such other instruments and perform such acts, in addition to the matters 

herein specified, as may be reasonably appropriate or necessary, or as may be required by order of 

the Bankruptcy Court, from time to time, to effectuate the Restructuring Transactions, as 

applicable.

18.02. Complete Agreement. This Agreement (including the Exhibits and Schedules) 

constitutes the entire agreement among the Parties with respect to the subject matter hereof and 

supersedes all prior negotiations, agreements, and understandings, whether oral or written, among 

the Parties with respect thereto.

18.03. Headings. The headings of all sections of this Agreement are inserted solely for 

the convenience of reference and are not a part of and are not intended to govern, limit, or aid in 

the construction or interpretation of any term or provision hereof.

18.04. GOVERNING LAW; SUBMISSION TO JURISDICTION; SELECTION OF 

FORUM; WAIVER OF TRIAL BY JURY. THIS AGREEMENT IS TO BE GOVERNED BY 

AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK 

APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN SUCH STATE, 

WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. Each 

Party hereto agrees that it shall bring any action or proceeding in respect of any claim arising out 

of or related to this Agreement in either the United States District Court for the Southern District 

of New York or any New York state court (the “Chosen Courts”), and solely in connection with 

claims arising under this Agreement: (a) irrevocably submits to the exclusive jurisdiction of the 

Chosen Courts; (b) waives any objection to laying venue in any such action or proceeding in the 

Chosen Courts; and (c) waives any objection that the Chosen Courts are an inconvenient forum or 

do not have jurisdiction over any Party hereto or constitutional authority to finally adjudicate the 

matter; provided, that if the Debtors commence the Chapter 11 Cases, then the Bankruptcy Court 

(or court of proper appellate jurisdiction) shall be the exclusive Chosen Court. 

18.05. Trial by Jury Waiver. EACH PARTY HERETO IRREVOCABLY WAIVES ANY 

AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF 

OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED 

HEREBY.

18.06. Execution of Agreement. This Agreement may be executed and delivered in any 

number of counterparts and by way of electronic signature and delivery, each such counterpart, 

when executed and delivered, shall be deemed an original, and all of which together shall constitute 

the same agreement. Except as expressly provided in this Agreement, each individual executing 

this Agreement on behalf of a Party has been duly authorized and empowered to execute and 

deliver this Agreement on behalf of said Party. 

18.07. Interpretation and Rules of Construction. This Agreement is the product of good 

faith negotiations among the Debtors, the Sponsor, and the Consenting Creditors, and in the 

enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any presumption 

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with regard to interpretation for or against any Party by reason of that Party having drafted or 

caused to be drafted this Agreement, or any portion hereof, shall not be effective in regard to the 

interpretation hereof. The Debtors and the Consenting Creditors were each represented by counsel 

during the negotiations and drafting of this Agreement and continue to be represented by counsel. 

In addition, this Agreement shall be interpreted in accordance with section 102 of the Bankruptcy 

Code. 

18.08. Successors and Assigns. This Agreement is intended to bind and inure to the 

benefit of the Parties and their respective successors and permitted assigns, as applicable. There 

are no third party beneficiaries under this Agreement, and the rights or obligations of any Party 

under this Agreement may not be assigned, delegated, or transferred to any other person or entity.

18.09. Notices. All notices hereunder shall be deemed given if in writing and delivered 

by electronic mail, courier, or registered or certified mail (return receipt requested) to the following 

addresses (or at such other addresses as shall be specified by like notice):

(a) if to a Debtor, to:

The Gymboree Corporation

71 Stevenson Street, Suite 2200

San Francisco, CA 94105

Attention: Kimberly MacMillan

 kimberly_macmillan@gymboree.com

with copies (which shall not constitute notice) to:

Kirkland & Ellis LLP

300 North LaSalle Street

Chicago, IL 60654

Attention: Anup Sathy, P.C.

 anup.sathy@kirkland.com

 Steven N. Serajeddini

 steven.serajeddini@kirkland.com

-andKirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

Attention: Joshua A. Sussberg, P.C.

 joshua.sussberg@kirkland.com

 Matthew C. Fagen

 matthew.fagen@kirkland.com

(b) if to the Consenting Creditors, to:

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The address set forth on each such Consenting Creditors’ signature page (or as 

directed by any transferee thereof), as the case may be.

With a copy to counsel to the Term Loan Agent (which shall not constitute 

notice):

Milbank, Tweed, Hadley & McCloy LLP

28 Liberty Street

New York, NY 10005

Attention: Dennis F. Dunne

 ddunne@milbank.com

 Evan R. Fleck

 efleck@milbank.com

-andMcGuireWoods LLP

800 East Canal Street

Richmond, VA 23219

Attention: Dion W. Hayes

 dhayes@mcguirewoods.com 

(c) if to the Sponsor, to:

Bain Capital Partners, LLC

200 Clarendon Street

Boston, MA 02116

Attention: David Hutchins

 dhutchins@baincapital.com

with copies (which shall not constitute notice) to:

Weil Gotshal & Manges LLP

767 5th Avenue

New York, NY 10153

Attention: Matt Barr

 matt.barr@weil.com

 Robert Lemons

 Robert.lemons@weil.com

or such other address as may have been furnished by a Party to each of the other Parties by notice 

given in accordance with the requirements set forth above. Any notice given by delivery, mail 

(electronic or otherwise), or courier shall be effective when received. For purposes of this 

Agreement, any consents or approvals of the Required Consenting Creditors may be provided by 

counsel to the Term Loan Agent.

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18.10. Independent Due Diligence and Decision Making. Each Consenting Party hereby 

confirms that its decision to execute this Agreement has been based upon its independent 

investigation of the operations, businesses, financial and other conditions, and prospects of the 

Debtors. 

18.11. Waiver. If the Restructuring Transactions are not consummated, or if this 

Agreement is terminated for any reason, the Parties fully reserve any and all of their rights. 

Pursuant to Federal Rule of Evidence 408 and any other applicable rules of evidence, this 

Agreement and all negotiations relating hereto shall not be admissible into evidence in any 

proceeding other than a proceeding to enforce its terms, pursue the consummation of the 

Restructuring Transactions, or the payment of damages to which a Party may be entitled under this 

Agreement.

18.12. Specific Performance. It is understood and agreed by the Parties that money 

damages would be an insufficient remedy for any breach of this Agreement by any Party and each 

non-breaching Party shall be entitled to specific performance and injunctive or other equitable 

relief (without the posting of any bond and without proof of actual damages) as a remedy of any 

such breach, including an order of the Bankruptcy Court or other court of competent jurisdiction 

requiring any Party to comply promptly with any of its obligations hereunder.

18.13. Relationship Among Parties. Notwithstanding anything herein to the contrary, the 

agreements, representations, warranties, and obligations of the Consenting Creditors under this 

Agreement are, in all respects, several and not joint. No Party shall have any responsibility by 

virtue of this Agreement for any trading by any other Entity. No prior history, pattern, or practice 

of sharing confidences among or between the Parties shall in any way affect or negate this 

Agreement. The Parties hereto acknowledge that this Agreement does not constitute an agreement, 

arrangement, or understanding with respect to acting together for the purpose of acquiring, 

holding, voting, or disposing of any equity securities of the Debtors and the Consenting Creditors 

do not constitute a “group” within the meaning of Rule 13d-5 under the Securities Exchange Act 

of 1934, as amended. No action taken by any Consenting Creditor pursuant to this Agreement 

shall be deemed to constitute or to create a presumption by any of the Parties that the Consenting 

Creditors are in any way acting in concert or as such a “group.”

18.14. Reservation of Rights.

(a) Except as expressly provided in this Agreement or the Term Sheet, including Section 

5.01 of this Agreement, nothing herein is intended to, or does, in any manner waive, limit, impair, 

or restrict the ability of any Party to protect and preserve its rights, remedies, and interests, 

including without limitation, its claims against any of the other Parties.

(b) Without limiting Section 11.06 and Sub-Clause (a) of this Section 18.14 in any way, if 

the Plan is not consummated in the manner set forth, and on the timeline set forth, in this 

Agreement, or if this Agreement is terminated for any reason, nothing shall be construed herein as 

a waiver by any Party of any or all of such Party’s rights, remedies, claims, and defenses and the 

Parties expressly reserve any and all of their respective rights, remedies, claims, and defenses, 

subject to Section 18.11 of this Agreement. This Agreement, the Plan, and any related document 

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shall in no event be construed as or be deemed to be evidence of an admission or concession on 

the part of any Party of any claim or fault or liability or damages whatsoever. Each of the Parties 

any and all wrongdoing or liability of any kind and does not concede any infirmity in the claims 

or defenses which it has asserted or could assert. 

18.15. Severability and Construction. If any provision of this Agreement shall be held by 

a court of competent jurisdiction to be illegal, invalid, or unenforceable, the remaining provisions 

shall remain in full force and effect if essential terms and conditions of this Agreement for each 

Party remain valid, binding, and enforceable.

18.16. Remedies Cumulative. All rights, powers, and remedies provided under this 

Agreement or otherwise available in respect hereof at law or in equity shall be cumulative and not 

alternative, and the exercise of any right, power, or remedy thereof by any Party shall not preclude 

the simultaneous or later exercise of any other such right, power, or remedy by such Party.

18.17. Additional Parties. Without in any way limiting the requirements of Section 6 of 

this Agreement, additional Term Loan Lenders may elect to become Parties to this Agreement 

upon execution and delivery to the other Parties of a Joinder Agreement in the form attached hereto 

as Exhibit C. Each such additional Party shall become a Consenting Creditor under this 

Agreement in accordance with the terms of this Agreement and shall be bound by the terms and 

conditions of this Agreement, deemed to make all representations and warranties contained herein 

as of the date of the execution and delivery of such Joinder Agreement, and shall be both a 

Releasing Party and Released Party as if it was an original signatory of this Agreement as of the 

date hereof.

18.18. Other Support Agreements. Until a Termination Date with respect to the Debtors, 

no Debtor shall enter into any other restructuring support agreement related to a partial or total 

restructuring of the Debtors’ balance sheet unless such support agreement is consistent in all 

respects with the Restructuring Term Sheet and is reasonably acceptable to the Required 

Consenting Creditors.

18.19. Confidentiality. The terms of any existing confidentiality agreements executed by 

and among any of the Parties as of the date hereof shall remain in full force in accordance with 

their terms. Except as required by applicable law, rule, or regulation or as ordered by the 

Bankruptcy Court or other court of competent jurisdiction, no Party or its advisors shall disclose 

to any person or entity (including, for the avoidance of doubt, any other Party) the holdings 

information of any Consenting Creditor without such Consenting Creditor’s prior written consent; 

provided, that the Debtors may publicly disclose the aggregate holdings of all Consenting 

Creditors.

18.20. Consent Rights Preserved. Notwithstanding any provision in any order approving 

any First Day Pleading that grants the Debtors discretion to take any action that is subject to 

consent or approval rights of the Consenting Creditors hereunder, the entry of such order shall not 

be deemed a waiver of such consent or approval rights hereunder.

[Remainder of page intentionally left blank.]

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EXHIBIT A to 

the Restructuring Support Agreement

Restructuring Term Sheet

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EXECUTION VERSION

THIS TERM SHEET IS NOT AN OFFER WITH RESPECT TO ANY SECURITIES OR A 

SOLICITATION OF ACCEPTANCES OF A CHAPTER 11 PLAN WITHIN THE MEANING 

OF SECTION 1125 OF THE BANKRUPTCY CODE. ANY SUCH OFFER OR 

SOLICITATION WILL COMPLY WITH ALL APPLICABLE SECURITIES LAWS AND/OR 

PROVISIONS OF THE BANKRUPTCY CODE. NOTHING CONTAINED IN THIS TERM 

SHEET SHALL BE AN ADMISSION OF FACT OR LIABILITY OR DEEMED BINDING ON 

ANY OF THE PARTIES HERETO. 

RESTRUCTURING TERM SHEET

This term sheet (this “Restructuring Term Sheet”) describes the principal terms of a restructuring of the 

Gymboree Corporation (“Gymboree”) and certain of its directly and indirectly-owned subsidiaries listed 

on Annex I, and Giraffe Intermediate B, Inc. (collectively, the “Debtors” and, such restructuring, the 

“Restructuring”) through cases (the “Chapter 11 Cases”) that will be filed under chapter 11 of the 

Bankruptcy Code in the United States Bankruptcy Court for the Eastern District of Virginia, Richmond 

Division (the “Bankruptcy Court”).

The governing documents with respect to the Restructuring will contain terms and conditions that are 

dependent on each other, including those described in this Restructuring Term Sheet and the 

Restructuring Support Agreement, dated as of June 11, 2017, to which this Restructuring Term Sheet is 

attached (as may be amended in accordance with its terms, the “Restructuring Support Agreement”). 

This Restructuring Term Sheet does not include a description of all of the terms, conditions, and other 

provisions that are to be contained in the definitive documentation governing the Restructuring, which 

shall be subject to the applicable consent and approval rights of the Parties as set forth in the 

Restructuring Support Agreement and the other Restructuring Documents. Capitalized terms used but not 

otherwise defined later in this Restructuring Term Sheet or in the Restructuring Support Agreement have 

the meanings ascribed to such terms as set forth on Annex II.

This Restructuring Term Sheet is a draft, is intended for discussions purposes, and is subject to Federal 

Rule of Evidence 408.

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OVERVIEW OF THE RESTRUCTURING

Implementation The Debtors will effectuate the Restructuring through the filing of the 

Chapter 11 Cases and confirmation of a plan of reorganization under 

chapter 11 of the Bankruptcy Code (as it may be amended or 

supplemented from time to time, including all exhibits, schedules, 

supplements, appendices, annexes and attachments thereto, the “Plan”), 

which shall be consistent with this Restructuring Term Sheet, subject to 

the terms and conditions set forth in the Restructuring Support 

Agreement. As further described herein, the Restructuring is proposed 

to be funded through (i) the consensual use of cash collateral under the 

DIP Orders; (ii) $35 million in New Money DIP Loans under the DIP 

Term Loan Facility and $70 million in Roll-up DIP Loans; (iii) a DIP 

ABL Facility; (iv) up to $80 million of Rights Offerings under the Plan; 

and (v) the Exit Credit Facilities.

DIP ABL Facility The Debtors have obtained a commitment from certain ABL Revolver 

Lenders and ABL Term Loan Lenders to provide an approximately 

$273.5 million debtor-in-possession financing facility on terms 

reasonably acceptable to the Required Consenting Creditors (the “DIP 

ABL Facility”), pursuant to which the commitments and loans of the 

ABL Lenders under the ABL Facility will convert into the DIP ABL 

Facility during the Chapter 11 Cases pursuant to the DIP Orders.

DIP Term Loan Facility Certain Term Loan Lenders (in their capacities as such, the “Initial DIP 

Term Lenders”) have committed to provide the Debtors with a $105 

million debtor-in-possession financing facility (the “DIP Term Loan 

Facility”) consisting of (a) $35 million in new money delayed draw term 

loans (the “New Money DIP Loans”) to fund the Chapter 11 Cases and 

(b) $70 million of term loans (the “Roll-up DIP Loans”) rolling up 

amounts due and owing to the DIP Term Lenders, on terms and 

conditions acceptable to the Required Consenting Creditors. Additional 

Prepetition Term Lenders (in their capacities as such, the “Electing DIP 

Term Lenders” and together with the Initial DIP Term Lenders, the 

“DIP Term Lenders”) will have the right to commit to their ratable 

share of the DIP Term Loan Facility before the Election Date (which 

shall be the date that is 14 days after the entry of the Interim DIP Order) 

by executing the Restructuring Support Agreement and taking such other 

actions as specified in the election procedures that are reasonably 

acceptable to the Debtors and the Term Loan Agent (the “Election 

Procedures”), which will require each Electing DIP Term Lender, to 

agree, among other things, to support the Restructuring and fully 

subscribe to its ratable portion of the Rights Offerings.

Backstop Commitment 

Agreement and Rights 

Offerings

The Plan will provide for new money rights offerings consisting of (i) a 

rights offering in reliance upon the exemption from registration under 

the Securities Act provided in section 1145 of the Bankruptcy Code (the 

“1145 Rights Offering”) and (ii) a rights offering in reliance upon the 

exemption from registration provided in section 4(a)(2) of the Securities 

Act (the “4(a)(2) Rights Offering” and together with the 1145 Rights 

Offering, the “Rights Offerings”) to Term Loan Lenders to purchase the 

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Rights Offering Shares of up to $80 million in the aggregate (the 

“Maximum Rights Offering Amount”), subject to reduction to such 

amount as is reasonably determined in accordance with the Backstop 

Commitment Agreement (on or about, but no later than, the 14th day 

before the Plan confirmation hearing) as necessary for the Reorganized 

Debtors to maintain approximately (but no less than) $50 million of 

projected liquidity for the 12 months following the Plan Effective Date 

(and assuming for purposes of such calculation that the New Money DIP 

Loans are fully drawn) (the “Adjusted Rights Offering Amount”).

The Maximum Rights Offering Amount will be fully backstopped by 

certain Term Loan Lenders (in their capacities as such, the “Backstop 

Parties”) and the Rights Offerings will be conducted, subject in all 

respects to the terms and conditions set forth in the Backstop 

Commitment Agreement. In consideration for their agreement to 

backstop the Rights Offerings, each Backstop Party will receive its pro 

rata share of a premium equal to 5% of the Maximum Rights Offering 

Amount (the “Backstop Premium”), which shall be satisfied by the 

Backstop Premium Shares and will be treated as an administrative 

expense of the Debtors (and otherwise payable in cash if the 

Restructuring is not consummated for any reason other than as specified 

in the Backstop Commitment Agreement).

Exit ABL Revolving 

Facility

The Debtors will enter into either (a) a replacement asset-based 

revolving loan facility from the ABL Revolving Lenders pursuant to 

which the ABL Revolving Lenders will convert all revolving 

commitments under the DIP ABL Facility into commitments under such 

replacement facility on the Plan Effective Date or (b) a new asset-based 

revolving loan facility in an amount sufficient to repay the DIP ABL 

Facility in full and to provide incremental liquidity, in either case, on 

terms and conditions (and in an amount) reasonably acceptable to the 

Required Consenting Creditors (the “Exit ABL Revolving Facility”).

Exit ABL Term Loan 

Replacement Facility

The Debtors will use commercially reasonable efforts to obtain either 

(a) a replacement term loan facility from the ABL Term Loan Lenders 

pursuant to which the ABL Term Loan Lenders will convert all ABL 

Term Loan Facility Claims into commitments under such replacement 

facility on the Plan Effective Date, or (b) a third-party term loan facility 

sufficient to pay the ABL Term Loan Facility Claims in full on the Plan 

Effective Date, on terms and conditions (and in an amount) reasonably 

acceptable to the Required Consenting Creditors (the “Exit ABL Term 

Loan Replacement Facility”) and obtain proposals and a written 

commitment for such Exit ABL Term Loan Replacement facility by the 

applicable Milestones on the best available terms.

Exit Term Loan Facility The New Money DIP Loans will be replaced or refinanced on the Plan 

Effective Date by an exit term loan facility (the “Exit Term Loan 

Facility” and together with the ABL Revolving Facility, and the Exit 

ABL Term Loan Replacement Facility, the “Exit Credit Facilities”) 

provided by the DIP Term Lenders, substantially as set forth on the term 

sheet attached as Annex IV (the “Exit Term Loan Facility Term 

Sheet”) and otherwise reasonably acceptable to the Required Consenting 

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Creditors, subject to the Debtors’ ability to obtain an alternative term 

loan facility sufficient to pay the New Money DIP Loan Claims in full 

on the Plan Effective Date, on terms and conditions (and in an amount) 

reasonably acceptable to the Required Consenting Creditors. The 

Debtors will use commercially reasonable efforts to obtain proposals and 

written commitments for an Exit Term Loan Facility sufficient to 

refinance the New Money DIP Loan Claims and the ABL Term Loan 

Facility Claims on the best available terms. 

Milestones The Debtors will implement the Restructuring in accordance with the 

following milestones (the “Milestones”):

1. No later than June 11, 2017, the Petition Date shall have 

occurred.

2. No later than 3 days following the Petition Date (June 14, 2017), 

the Debtors shall have obtained entry of the Interim DIP Order.

3. No later than 5 days after the Petition Date (June 16, 2017), the 

Debtors shall have filed a motion seeking entry of an order 

approving the Debtors’ entry into the Backstop Commitment 

Agreement (the “BCA Approval Order”).

4. No later than 5 days after the Petition Date (June 16, 2017), the 

Debtors shall have filed the Plan, the Disclosure Statement, and a 

motion seeking approval of the Disclosure Statement and 

Solicitation Materials.

5. No later than 10 days after the Petition Date (June 21, 2017), the 

Debtors shall have filed a motion seeking entry of an order 

approving going out-of-business sales and related relief (the 

“GOB Order”).

6. No later than 10 days following the Petition Date (June 21, 

2017), the Debtors shall have filed a motion seeking to extend the 

date by which to assume or reject unexpired leases of nonresidential real property.

7. No later than 35 days following the Petition Date (July 16, 2017), 

the Debtors shall have obtained entry of the Final DIP Orders.

8. No later than 35 days following the Petition Date (July 16, 2017), 

the Debtors shall have obtained entry of the BCA Approval 

Order.

9. No later than 35 days following the Petition Date (July 16, 2017), 

the Debtors shall have obtained entry of the GOB Order.

10. No later than 35 days following the Petition Date (July 16, 2017), 

the Debtors shall have obtained one or more proposals containing 

a description of the material terms and conditions for the Exit 

ABL Term Loan Replacement Facility or demonstrated to the 

reasonable satisfaction of the Required Consenting Creditors that 

such proposals were not available.

11. No later than 35 days following the Petition Date (July 16, 2017), 

the Debtors shall have obtained one or more proposals containing 

a description of the material terms and conditions for (a) an Exit 

Term Loan Facility sufficient to refinance the New Money DIP 

Loan Claims and (b) an Exit Term Loan Facility sufficient to 

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refinance both the Exit Term Loan Facility and the ABL Term 

Loan Facility Claims, or shall have demonstrated to the 

reasonable satisfaction of the Required Consenting Creditors that 

such proposals were not available. 

12. No later than 35 days following the Petition Date (July 16, 2017), 

the Debtors shall have obtained one or more proposals containing 

a description of the material terms and conditions for the 

refinancing of the DIP ABL Facility (which need not be a 

traditional asset-backed financing arrangement), or shall have 

demonstrated to the reasonable satisfaction of the Required 

Consenting Creditors that such proposals were not available.

13. No later than 50 days after the filing of the Plan, Disclosure 

Statement, and a motion seeking approval of the Disclosure 

Statement and Solicitation Materials, the Debtors shall have 

obtained entry of the Disclosure Statement Order approving the 

Disclosure Statement and Solicitation Materials.

14. No later than 75 days following the Petition Date (August 25, 

2017), the Debtors shall have obtained a written commitment for 

the Exit ABL Term Loan Replacement Facility that is in form 

and substance reasonably satisfactory to the Required Consenting 

Creditors or demonstrated to the reasonable satisfaction of the 

Required Consenting Creditors that such commitment was not 

available.

15. No later than 75 days following the Petition Date (August 25, 

2017), the Debtors shall have obtained written commitments for 

(a) an Exit Term Loan Facility sufficient to refinance the New 

Money DIP Loan Claims and (b) an Exit Term Loan Facility 

sufficient to refinance both the Exit Term Loan Facility and the 

ABL Term Loan Facility Claims, or shall have demonstrated to 

the reasonable satisfaction of the Required Consenting Creditors 

that such commitments were not available.

16. No later than 75 days following the Petition Date (August 25, 

2017), either (i) the ABL Lenders shall have agreed to provide 

the Exit ABL Revolving Facility and to convert all commitments 

under the DIP ABL Facility into such Exit Revolving Facility on 

the Plan Effective Date, or (ii) the Debtors shall have obtained a 

written commitment from another financing source to provide the 

Exit ABL Revolving Facility (which need not be a traditional 

asset-backed financing arrangement) on the Plan Effective Date, 

in either case, in form and substance reasonably satisfactory to 

the Required Consenting Creditors.

17. No later than 105 days following the Petition Date (September 

24, 2017), the Debtors shall have obtained entry of the 

Confirmation Order.

18. No later than the earliest of (a) 120 days following the Petition 

Date (October 9, 2017) and (b) 15 days following the entry of the 

Confirmation Order, the Plan Effective Date shall have occurred.

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TREATMENT OF CLAIMS AND INTERESTS UNDER THE PLAN

Type of Claim Treatment Impairment / 

Voting

DIP ABL Facility 

Claims

In full satisfaction of each allowed DIP ABL Facility Claim, 

each Holder thereof will either be, subject to the consent of 

the Required Consenting Creditors: (a) repaid in full in cash 

or (b) with the consent of such Holder, receive its pro rata

share of the Exit ABL Revolving Facility or the Exit ABL 

Term Loan Replacement Facility, as applicable.

N/A

New Money DIP 

Loan Claims

In full satisfaction of the allowed New Money DIP Loan 

Claims, each Holder of an allowed New Money DIP Loan 

Claim will either: be repaid in full in cash1 or receive its pro

rata share of the Exit Term Loan Facility (the “Base 

Treatment”); provided, that if (a) on the first business day 

after entry of the Confirmation Order the most recently 

delivered Budget (as defined in the DIP Orders) projects that 

any amount in the DIP Funding Account (as defined in the 

DIP Term Loan Credit Agreement) will remain undrawn 

immediately prior to the occurrence of the then-projected 

Plan Effective Date (the “DIP Surplus Amount”), (b) the 

Required Consenting Creditors elect to receive DIP Surplus 

Conversion Shares (such election to be made no later than 5 

business days after entry of the Confirmation Order) (a “DIP 

Surplus Conversion”), then (c) on the Plan Effective Date, 

each Holder of an allowed New Money DIP Loan Claim will 

receive its pro rata share of the DIP Surplus Conversion 

Shares, and (d) the amount of New Money DIP Loan Claims 

entitled to the Base Treatment will be reduced ratably among 

the Holders by the DIP Surplus Amount. 2

Notwithstanding the foregoing, to the extent there is a DIP 

Surplus Amount and the Required Consenting Creditors do 

not elect to receive DIP Surplus Conversion Shares, then on 

the date that is one business day prior to the election 

described in footnote two of the preceding paragraph, the 

Debtors shall be permitted to draw an amount of New Money 

DIP Loans equal to the portion of the DIP Surplus Amount 

N/A

1 In lieu of receiving a cash repayment in satisfaction of any New Money DIP Loan Claims subject to the 

Base Treatment, each Holder thereof may instead elect not to receive such cash repayment and apply such 

amount towards any funding obligations under the Backstop Commitment Agreement or in connection with 

the Rights Offerings, in each case, in the manner set forth in the DIP Term Loan Credit Agreement and 

upon notice to the Debtors and the DIP Term Loan Agent, and prior to the Subscription Escrow Funding 

Date (as defined in the Backstop Commitment Agreement) 

2 To the extent that after an election as described in clause (b) of this paragraph, a subsequent Budget 

indicates that the DIP Surplus Amount on the then-projected Plan Effective Date is different than that 

indicated in the most recent Budget prior to the election, then the amount of DIP Surplus Conversion shares 

may be adjusted accordingly as determined by the Debtors and the Required Consenting Creditors.

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not subject to the election, to the extent necessary to permit 

the Debtors to meet the Projected Liquidity Requirement (as 

defined in the Backstop Commitment Agreement) on the Plan 

Effective Date (after taking into account availability under 

the Exit Credit Facilities upon the occurrence of the Plan 

Effective Date).

Roll-Up DIP 

Claims

In full satisfaction of the allowed Roll-up DIP Claims, each 

Holder of an allowed Roll-up DIP Claim will receive its pro 

rata share of the Roll-Up DIP Conversion Shares.

Administrative 

Claims

Except to the extent that a Holder of an allowed 

Administrative Claim and the Debtor against which such 

allowed Administrative Claim is asserted agree to less 

favorable treatment for such Holder, each Holder of an 

allowed Administrative Claim shall receive, in full 

satisfaction of its Claim, payment in full in cash.

N/A

Priority Tax 

Claims

In full satisfaction of the allowed Priority Tax Claims, each 

Holder of an allowed Priority Tax Claim will be paid in full 

in cash or otherwise receive treatment consistent with the 

provisions of section 1129(a)(9) of the Bankruptcy Code.

N/A

Other Secured 

Claims

In full satisfaction of each allowed Other Secured Claim, 

each Holder thereof will receive: (a) payment in full in cash; 

(b) delivery of the collateral securing any such Claim and 

payment of any interest required under section 506(b) of the 

Bankruptcy Code; (c) Reinstatement of such Claim; or 

(d) other treatment rendering such claim Unimpaired.

Unimpaired; 

deemed to 

accept. 

Other Priority 

Claims

Except to the extent that a Holder of an allowed Other 

Priority Claim and the Debtor against which such allowed 

Other Priority Claim is asserted agree to less favorable 

treatment for such Holder, in full satisfaction of each allowed 

Other Priority Claim against the Debtors, each Holder thereof 

shall receive payment in full in cash or other treatment 

rendering such Claim Unimpaired.

Unimpaired; 

deemed to 

accept.

Term Loan 

Secured Claims

In full satisfaction of each allowed Term Loan Secured 

Claim, each Holder thereof will receive its pro rata share of: 

(a) the Term Loan Common Shares; and (b) the Rights; 

provided, that the Li & Fung Term Loan Claim shall not be 

entitled to any recovery under the Plan so long as the Li & 

Fung Agreement has been assumed in connection with the 

Plan.

Impaired; 

entitled to vote.

Critical Trade 

Claims

In full satisfaction of each allowed Critical Trade Claim, each 

Holder thereof will receive cash in an amount equal to such 

allowed Critical Trade Claim (only to the extent not already 

satisfied by payments made pursuant to an order of the 

Bankruptcy Court) on the later of: (a) the Plan Effective 

Date; or (b) the date due in the ordinary course of business in 

accordance with the terms and conditions of the particular 

transaction or agreement giving rise to such allowed Critical 

Unimpaired; 

deemed to 

accept.

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Trade Claim.

General Unsecured

Claims 

General Unsecured Claims shall not be entitled to any 

recovery or distribution under the Plan.

Impaired; 

deemed to reject.

Intercompany

Claims 

Unless otherwise provided for under the Plan, each Debtor 

Intercompany Claim will either be Reinstated or canceled and 

released at the option of the Debtors in consultation with the 

Required Consenting Creditors; provided, that no 

distributions shall be made on account of any such Debtor 

Intercompany Claims on the Plan Effective Date.

Unimpaired; 

deemed to 

accept or

Impaired; 

deemed to reject.

Intercompany

Interests

Intercompany Interests shall receive no recovery or 

distribution and be Reinstated solely to maintain the Debtors’ 

corporate structure.

Unimpaired; 

deemed to 

accept.

Existing Common

Stock

All Interests (other than Intercompany Interests) will be 

cancelled, released, and extinguished, and will be of no 

further force or effect and no Holder of Existing Common 

Stock shall be entitled to any recovery or distribution under 

the Plan on account of such Interests.

Impaired; 

deemed to reject.

OTHER TERMS OF THE RESTRUCTURING

Executory Contracts and 

Unexpired Leases

Except as otherwise provided in this Restructuring Term Sheet or the 

Restructuring Support Agreement, the Debtors shall assume or reject, as 

the case may be, executory contracts and unexpired leases in the Plan 

Supplement, which shall be in form and substance reasonably acceptable 

to the Required Consenting Creditors; provided, that the Debtors shall 

assume the Li & Fung Agreement.

Cash Collateral and 

Adequate Protection

The DIP Orders shall provide for the Debtors’ consensual use of the cash 

collateral of the Term Loan Lenders on the terms and conditions set forth 

in the DIP Term Loan Facility Term Sheet and as otherwise may be 

reasonably acceptable to the Required Consenting Creditors.

Li & Fung Pursuant to the Critical Vendor Motion (as defined below), the Debtors 

shall seek entry of interim and final orders to make payments to the Li & 

Fung vendors, through Li & Fung, as they come due in the ordinary 

course of business during the pendency of the chapter 11 cases under the 

Li & Fung Agreement. Li & Fung shall be included in the Critical 

Vendor Motion and, in consideration of being treated as a Critical 

Vendor, agrees to continue to perform under the Li & Fung Agreement on 

terms and conditions consistent with past practice (i.e., 75 day terms) and 

on the Plan Effective Date release the $10 million letter of credit provided 

in connection with the Li & Fung Agreement.

Critical Vendor Orders The Debtors shall file one or more motions (the “Critical Vendors 

Motions”) seeking entry of interim and final orders (in each case, in form 

and substance reasonably acceptable to the Required Consenting 

Creditors) to make payments to certain critical and critical foreign 

vendors (“Critical Vendors”) on account of prepetition and postpetition 

claims as they come due in the ordinary course of business during the 

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pendency of the chapter 11 cases. As a condition to receiving such 

payments, each such Critical Vendor shall agree to continue to provide 

goods and services to the Debtors on terms and conditions reasonably 

acceptable to the Debtors and the Required Consenting Creditors. Li & 

Fung (and vendors who sell through Li & Fung) shall be included under 

the Critical Vendor Motion and, in consideration for being treated as a 

Critical Vendor, Li & Fung (and vendors who sell through Li & Fung) 

will continue to perform in accordance with the Li & Fung Agreement 

consistent with past practice (i.e., 75 day terms). 

Charter; Bylaws; 

Corporate Governance

Corporate governance for the Reorganized Debtors, including charters, 

bylaws, operating agreements, or other organization or formation 

documents, as applicable, shall be consistent with section 1123(a)(6) of 

the Bankruptcy Code, as applicable, and in form and substance 

reasonably acceptable to the Debtors and the Required Consenting

Creditors. The New Gymboree Common Shares shall be subject to a 

stockholders’ agreement, substantially in the form included in the Plan 

Supplement, containing terms and conditions that are reasonably 

acceptable to the Required Consenting Creditors and each holder of the 

New Gymboree Common Shares will be bound thereby without the need 

for execution by any party thereto other than Reorganized Gymboree.

The Reorganized Gymboree Board will be comprised of seven members 

as of the Plan Effective Date as follows: 

(i) Gymboree’s chief executive officer immediately prior to the 

occurrence of the Plan Effective Date, who shall be chief 

executive officer of Reorganized Gymboree; 

(ii) Ron Beegle of Carriage House Capital Advisors, LLC

(iii) one member selected by Brigade Capital Management

(iv) one member selected by OppenheimerFunds, Inc.

(v) one member selected by Searchlight Capital Partners; and 

(vi) two members selected by the Required Consenting Creditors;

provided, that if at any time prior to the Plan Effective Date any entity 

specified in (iii), (iv) or (v) does not have aggregate holdings (together 

with its Affiliates that own, manage, direct or have investment authority 

with respect to Gymboree’s indebtedness) that would entitle such entity 

to an allocation of at least 9.5% of the New Gymboree Common Shares 

(prior to dilution by the MIP) outstanding on a pro forma basis on the 

Plan Effective Date, then such entity shall not be entitled to select a 

director and such director will instead be selected by the Required 

Consenting Creditors. Provisions regarding the removal, appointment, 

and replacement of members of the subsequent Reorganized Gymboree 

Board to be determined by the Required Consenting Creditors.

Initial Officers All initial officers of the Reorganized Debtors shall be disclosed in the 

Plan Supplement and shall be reasonably acceptable to the Required 

Consenting Creditors.

9

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Tax Issues The Restructuring will be effectuated and structured in a tax-efficient 

manner determined by the Debtors and the Required Consenting 

Creditors; provided that: (i) if the Restructuring gives rise to any cash 

income taxes payable by any non-debtor member of any consolidated, 

combined or unitary tax group of which Gymboree or any of its 

subsidiaries is a member (such group, a “Gymboree Consolidated 

Group” and such non-debtor member, a “Non-Debtor”), the Plan shall 

provide that any such taxes shall be paid by the Reorganized Debtors; and 

(ii) any tax losses generated by a Non-Debtor or Debtor arising in 

connection with the cancellation or worthlessness of any stock of any 

Non-Debtor, or otherwise in connection with the Restructuring, shall be 

available to shelter any income or gain arising in connection with the 

Restructuring without any requirement for the Debtors to compensate the 

Sponsor or any Non-Debtor for the use of such losses; provided, however, 

for the avoidance of doubt, that nothing in the Restructuring Support 

Agreement shall limit the Sponsor’s ability to recognize any loss it may 

have with respect to its stock in Giraffe Holdings, Inc. following the 

occurrence of the Plan Effective Date in accordance with the terms of the 

Restructuring Support Agreement. 

Exemption from SEC 

Registration

The issuance of all securities in connection with the Plan, including the 

New Equity Interests, will be exempt from SEC registration to the fullest 

extent permitted by law.

Company Status and 

Reporting Upon 

Emergence

Reorganized Gymboree will be a private company on the Plan Effective 

Date; provided, that from and after the Plan Effective Date, Reorganized 

Gymboree shall be required to provide (via separate agreement or in its 

organizational documents) to its shareholders such audited annual and 

unaudited quarterly financial statements for such periods, with such 

statements being prepared in accordance with U.S. GAAP on a private 

company basis (for the avoidance of doubt, no SAS 100 review or 

compliance with any other requirement of Regulation S-X under the 

Securities Act is required in connection with the delivery of the required 

financial statements).

Company Status Upon 

Chapter 11 Filing

The Company shall cease filing SEC reports on the Petition Date.

Registration Rights Registration rights shall be determined in connection with the Plan 

Supplement in a form reasonably acceptable to the Debtors and the 

Required Consenting Creditors.

Employment Obligations On the Plan Effective Date, the Debtors shall be deemed to have assumed 

each of the written contracts, agreements, policies, programs and plans 

for compensation, bonuses, reimbursement, health care benefits, disability 

benefits, deferred compensation benefits, travel benefits, vacation and 

sick leave benefits, savings, severance benefits, retirement benefits, 

welfare benefits, relocation programs, life insurance and accidental death 

and dismemberment insurance, including written contracts, agreements, 

policies, programs and plans for bonuses and other incentives or 

compensation for the Debtors’ current and former employees, directors, 

officers, and managers, including executive compensation programs and 

existing compensation arrangements for the employees of the Debtors 

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(but excluding any severance agreements with any of Debtors’ former 

employees); provided, that any of the foregoing included in the schedule 

of assumed contracts contained in the Plan Supplement that was not 

previously disclosed to the advisors for the Consenting Creditors on or 

before the date of entry into the Restructuring Support Agreement shall 

be assumed subject to the consent of the Required Consenting Creditors 

on or before the Confirmation Date, which consent shall not be 

unreasonably withheld; provided, further, that the Debtors’ Management 

Severance Plan and employment agreements will be assumed as modified 

so as to clarify that the Restructuring (and any related changes in duties 

that result from Gymboree no longer being a publicly-traded company as 

of the Plan Effective Date) will not constitute a Good Reason event for 

the purposes of the Management Severance Plan or any employment 

agreement. Following the Plan Effective Date, the Reorganized Debtors 

shall not amend the management severance plan without the consent of 

the participating employees for a period of one year after the Plan 

Effective Date.

Indemnification of 

Prepetition Directors, 

Officers, Managers, et al.

All indemnification obligations in place as of the Plan Effective Date 

(whether in the by-laws, certificates of incorporation or formation, limited 

liability company agreements, other organizational or formation 

documents, board resolutions, indemnification agreements, employment 

contracts, or otherwise) for the current and former directors, officers, 

managers, employees, attorneys, accountants, investment bankers, and 

other professionals of the Debtors, as applicable, shall be assumed and 

remain in full force and effect after the Plan Effective Date, and shall not 

be modified, reduced, discharged, impaired, or otherwise affected in any 

way, and shall survive Unimpaired and unaffected, irrespective of when 

such obligation arose; provided, that any of the foregoing included in the 

schedule of assumed contracts contained in the Plan Supplement that was 

not previously disclosed to the advisors for the Consenting Creditors on 

or before the date of entry into the Restructuring Support Agreement shall 

be assumed subject to the consent of the Required Consenting Creditors 

on or before the Confirmation Date, which consent shall not be 

unreasonably withheld.

Director, Officer, 

Manager, and Employee 

Tail Coverage

On the Plan Effective Date, the Debtors shall be deemed to have assumed 

all unexpired directors’, managers’, and officers’ liability insurance 

policies (including any “tail policy”) and of any of the Debtors with 

respect to directors, managers, officers, and employees of the Debtors. 

Any extensions, renewals and new liability insurance policies purchased 

by the Debtors shall be reasonably acceptable to the Required Consenting 

Creditors.

Cancellation of Notes, 

Instruments, Certificates, 

and Other Documents 

On the Plan Effective Date, except to the extent otherwise provided in the 

Plan, all notes, instruments, certificates, and other documents evidencing 

Claims or Interests, including credit agreements and indentures, shall be 

canceled and the obligations of the Debtors thereunder or in any way 

related thereto shall be deemed satisfied in full and discharged.

Issuance of New 

Securities; Execution of 

the Plan Restructuring 

On the Plan Effective Date, the Debtors or Reorganized Debtors, as 

applicable, shall issue all securities, notes, instruments, certificates, and 

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Documents other documents required to be issued pursuant to the Restructuring.

Retention of Jurisdiction The Plan will provide for the retention of jurisdiction by the Bankruptcy 

Court for usual and customary matters.

Discharge, Release, 

Injunction, and 

Exculpation

In addition to the releases under the Restructuring Support Agreement, 

the Plan will provide for customary release, discharge, injunction and 

exculpation provisions, substantially as set forth in Annex III.

Conditions Precedent to 

the Effective Date

The Plan shall contain customary conditions precedent to occurrence of 

the Plan Effective Date, including the following:

(i) the Backstop Commitment Agreement shall remain in full force 

and effect and shall not have been terminated by the Debtors or 

the Backstop Parties;

(ii) the Restructuring Support Agreement shall remain in full force 

and effect and shall not have been terminated by the Debtors or 

the Consenting Creditors;

(iii) the Debtors shall not be in default under the DIP Credit 

Agreements or the DIP Orders (or, to the extent that the 

Debtors have been or are in default on the proposed Effective 

Date, such default shall have been waived by the lenders 

thereunder or cured in a manner consistent with the DIP Credit 

Agreements and the DIP Orders, as applicable);

(iv) all conditions precedent to the effectiveness of the Exit Credit 

Facilities shall have been satisfied or duly waived;

(v) the Confirmation Order shall have been duly entered and in full 

force and effect;

(vi) the Debtors shall have obtained all authorizations, consents, 

regulatory approvals, rulings, or documents that are necessary 

to implement and effectuate the Plan and each of the other 

transactions contemplated by the Restructuring;

(vii) the final version of the Plan Supplement and all of the 

schedules, documents, and exhibits contained therein, and all 

other schedules, documents, supplements and exhibits to the 

Plan, shall be consistent with the Restructuring Support 

Agreement in all material respects and otherwise approved by 

the parties thereto consistent with their respective consent and 

approval rights as set forth in Section 3 of the Restructuring 

Support Agreement, and shall have been filed in a manner 

consistent with the Restructuring Support Agreement;

(viii) all fees, expenses, and other amounts payable pursuant to the 

Restructuring Support Agreement, the Backstop Commitment 

Agreement, and the DIP Orders (including, without limitation, 

the fees and expenses of Milbank, McGuireWoods, Rothschild, 

and Carriage House payable thereby) shall have been paid in 

full;

(ix) all allowed Professional Fee Claims approved by the 

Bankruptcy Court shall have been paid in full or amounts 

12

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sufficient to pay such allowed Professional Fee Claims after the 

Effective Date shall have been placed in the Professional Fee 

Escrow Account pending approval of the Professional Fee 

Claims by the Bankruptcy Court; and

(x) the Debtors shall have implemented the Restructuring in a 

manner consistent in all material respects with the Plan and the 

Restructuring Support Agreement.

13

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EXECUTION VERSION

ANNEX I

SUBSIDIARIES PARTY TO RESTRUCTURING

Gym-Card, LLC

Gym-Mark, Inc.

Gymboree Manufacturing, Inc.

Gymboree Operations, Inc.

Gymboree Retail Stores, Inc.

S.C.C. Wholesale, Inc.

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ANNEX II

DEFINITIONS

Term Definition

ABL Claims Collectively, ABL Term Loan Claims and ABL Revolver Claims.

ABL Lenders Collectively, the ABL Revolver Lenders and the ABL Term Lenders. 

ABL Revolver Claims Any claim held by the ABL Revolver Lenders, in their capacity as such, 

arising under, derived from, or based on the ABL Credit Agreement

ABL Revolver Lenders Any Revolving Credit Lender, as defined in the ABL Credit Agreement.

ABL Term Lenders As defined in the ABL Credit Agreement.

ABL Term Loan Claims Any claim held by the ABL Term Lenders, in their capacity as such, 

arising under, derived from, or based on the ABL Credit Agreement.

ABL Credit Agreement The Second Amendment to Amended and Restated Credit Agreement, 

dated as of April 22, 2016 (as amended from time to time), by and among 

Gymboree, as the borrower; certain of Gymboree’s subsidiaries and 

Giraffe Intermediate B, Inc., as guarantors, Bank of America, N.A., in its 

capacity as administrative agent for the ABL Revolver Lenders, Pathlight 

Capital LLC, in its capacity as agent for the ABL Term Lenders, the ABL 

Revolver Lenders, and the ABL Term Lenders.

Administrative Claim A Claim incurred by the Debtors on or after the Petition Date and before 

the Effective Date for a cost or expense of administration of the Chapter 

11 Cases entitled to priority under sections 503(b), 507(a)(2), or 507(b) of 

the Bankruptcy Code.

Affiliate With respect to any Person, all Persons that would fall within the 

definition assigned to such term in section 101(2) of the Bankruptcy 

Code, if such Person was a debtor in a case under the Bankruptcy Code.

Backstop Premium Shares New Gymboree Common Shares issued as payment of the Backstop 

Premium in accordance with the Backstop Commitment Agreement equal 

to 2.3% of the New Gymboree Common Shares on the Plan Effective 

Date, subject to dilution by the MIP.

Cause of Action Any claims, Claims, Interests, damages, remedies, causes of action, 

demands, rights, actions, suits, obligations, liabilities, accounts, defenses, 

offsets, powers, privileges, licenses, and franchises of any kind or 

character whatsoever, whether known or unknown, foreseen or 

unforeseen, existing or hereinafter arising, contingent or non-contingent, 

matured or unmatured, suspected or unsuspected, in tort, law, equity, or 

otherwise. Causes of Action also include: (a) all rights of setoff, 

counterclaim, or recoupment and claims on contracts or for breaches of 

duties imposed by law; (b) the right to object to or otherwise contest 

Claims or Interests; (c) claims pursuant to sections 362, 510, 542, 543, 

544 through 550, or 553 of the Bankruptcy Code; and (d) such claims and 

defenses as fraud, mistake, duress, and usury and any other defenses set 

forth in section 558 of the Bankruptcy Code.

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Term Definition

Claim As defined in section 101(5) of the Bankruptcy Code against a Debtor.

Class A category of Holders of Claims or Interests pursuant to section 1122(a) 

of the Bankruptcy Code.

Confirmation Entry of the Confirmation Order on the docket of the Chapter 11 Cases, 

subject to the conditions set forth in the Plan, which shall be consistent 

with this Restructuring Term Sheet and the Restructuring Support 

Agreement.

Consummation The occurrence of the Plan Effective Date.

Critical Trade Claims Any Claim held by a creditor that provides goods necessary to the 

continued operation of the Reorganized Debtors; provided, that the holder 

of such Claim has agreed to continue to provide goods and services to the 

Reorganized Debtors on terms and conditions reasonably acceptable to 

the Debtors and the Required Consenting Creditors.

DIP ABL Facility Claims Any Claim derived from or based upon the DIP ABL Facility.

DIP Facility Claims The DIP ABL Facility Claims and the DIP Term Loan Claims.

DIP Surplus Conversion 

Shares

The New Gymboree Common Shares issued on account of the DIP 

Surplus Amount (pursuant to the exemption from registration available 

under Section 4(a)(2) of the Securities Act) and purchased at the Share 

Ratio, subject to dilution from the MIP.

DIP Term Loan Agent Credit Suisse AG, Cayman Islands Branch, in its capacity as 

administrative agent, and any successor thereto.

DIP Term Loan Facility 

Claims

The DIP New Money Loan Claims and the DIP Roll-up Claims.

Plan Effective Date The first date upon which all of the conditions precedent to the 

effectiveness of the Plan have been satisfied or waived in accordance with 

the terms of the Plan. The date upon which the Plan Effective Date is 

proposed to occur by the Debtors shall be reasonably acceptable to the 

Required Consenting Creditors.

Entity As defined in section 101(15) of the Bankruptcy Code.

Estate As to each Debtor, the estate created for the Debtor in its Chapter 11 Case 

pursuant to section 541 of the Bankruptcy Code.

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Term Definition

Exculpated Parties Collectively, and in each case in its capacity as such: (a) the Debtors and 

Reorganized Debtors; (b) the Consenting Creditors; (c) the Backstop 

Parties; (d) the Term Loan Agent; (e) the DIP Term Lenders; (f) the DIP 

Term Loan Agent; (g) the Sponsor; (h) with respect to each of the 

foregoing entities in clauses (a) through (g), each such Entity’s current 

and former predecessors, successors, Affiliates (regardless of whether 

such interests are held directly or indirectly), subsidiaries, direct and 

indirect equityholders, funds, portfolio companies, management 

companies; and (i) with respect to each of the foregoing Entities in 

clauses (a) through (h), each of their respective current and former 

directors, officers, members, employees, partners, managers, independent 

contractors, agents, representatives, principals, professionals, consultants, 

financial advisors, attorneys, accountants, investment bankers, and other 

professional advisors (with respect to clause (h), each solely in their 

capacity as such).

Existing Common Stock Shares of common stock in Gymboree.

General Unsecured Claim Any Claim, including the Term Loan Deficiency Claim and the 

Unsecured Note Claim, other than an Administrative Claim, a 

Professional Fee Claim, a Secured Tax Claim, an Other Secured Claim, a 

Priority Tax Claim, an Other Priority Claim, an ABL Claim, a Term Loan 

Secured Claim, a Li & Fung Term Loan Claim, a Critical Vendor Claim, 

or a DIP Facility Claim.

Holder An Entity holding a Claim or Interest, as applicable.

Impaired With respect to any Class of Claims or Interests, a Class of Claims or 

Interests that is impaired within the meaning of section 1124 of the 

Bankruptcy Code.

Intercompany Claim A Claim held by a Debtor or an Affiliate against a Debtor or an Affiliate.

Intercompany Interest An Interest in any Debtor other than Gymboree. 

Interest Any equity security (as defined in section 101(16) of the Bankruptcy 

Code) in any Debtor.

Li & Fung LF Centennial Pte Ltd. and its Affiliates.

Li & Fung Agreement That certain agreement by and between Gymboree Manufacturing, Inc. 

and LF Centennial Pte Ltd, dated as of February 28, 2015, as amended 

from time to time, in each case, in a manner reasonably acceptable to the 

Debtors and the Required Consenting Creditors.

Li & Fung Term Loan 

Claim

Any Claim arising in connection with the 2017 Incremental Term Loan 

(as defined in the Term Loan Credit Agreement).

MIP The management equity incentive plan implemented by the Reorganized 

Gymboree Board that provides for the issuance of options and/or equity 

based compensation to members of the management of Reorganized 

Gymboree. New Gymboree Common Shares representing up to 10% of 

the New Gymboree Common Shares outstanding on the Plan Effective 

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Term Definition

Date, on a fully-diluted basis, shall be reserved for issuances in 

connection with the MIP. The participants in the MIP, the allocation of 

MIP compensation to participants (including the amounts allocated, the 

timing of grants, and the form of options and/or equity compensation 

allocated) and the terms and conditions of such options and/or equity 

compensation (including performance, time based vesting, exercise price, 

base values, hurdles, forfeiture, repurchase rights and transferability) shall 

be determined by the Reorganized Gymboree Board in its sole discretion.

New Gymboree Common 

Shares

Reorganized Gymboree will have one class of common equity interests.

New Money DIP Loan 

Claim

Any Claim derived from or based upon the New Money DIP Loans.

Other Priority Claim Any Claim, other than an Administrative Claim or a Priority Tax Claim, 

entitled to priority in right of payment under section 507(a) of the 

Bankruptcy Code.

Other Secured Claim Any Secured Claim against any of the Debtors, other than an ABL Claim, 

a Term Loan Secured Claim, or a Li & Fung Term Loan Claim.

Person An individual, corporation, partnership, limited liability company, joint 

venture, trust, estate, unincorporated association, unincorporated 

association, governmental entity, or political subdivision thereof, or any 

other entity.

Petition Date The date on which the Debtors commence the Chapter 11 Cases.

Priority Tax Claims Claims of governmental units of the type described in section 507(a)(8) of 

the Bankruptcy Code.

Professional An entity employed pursuant to a Bankruptcy Court order in accordance 

with sections 327 or 1103 of the Bankruptcy Code and to be compensated 

for services rendered before or on the confirmation date, pursuant to 

sections 327, 328, 329, 330, or 331 of the Bankruptcy Code.

Professional Fee Claims All Administrative Claims for the compensation of Professionals and the 

reimbursement of expenses incurred by such Professionals through and 

including the Plan Effective Date to the extent such fees and expenses 

have not been previously paid.

Professional Fee Escrow 

Account

An interest-bearing account in an amount equal to the total estimated 

amount of Professional Fee Claims and funded by the Debtors on the Plan 

Effective Date.

Purchase Price The per share purchase price of the Rights Offering Shares at the Share 

Ratio, as specified herein.

Reinstated With respect to Claims and Interests, that the Claim or Interest shall be 

rendered Unimpaired in accordance with section 1124 of the Bankruptcy 

Code.

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Term Definition

Released Parties Collectively, and in each case in its capacity as such: (a) the Consenting 

Creditors; (b) the Sponsor; (c) the Backstop Parties; (d) the Term Loan 

Agent; (e) the DIP Term Lenders; (f) the DIP Term Loan Agent; (g) with 

respect to each of the Debtors, the Reorganized Debtors, and each of the 

foregoing entities in clauses (a) through (f), each such Entity’s current 

and former predecessors, successors, Affiliates (regardless of whether 

such interests are held directly or indirectly), subsidiaries, direct and 

indirect equityholders, funds, portfolio companies, management 

companies; and (h) with respect to each of the foregoing Entities in 

clauses (a) through (g), each of their respective current and former 

directors, officers, members, employees, partners, managers, independent 

contractors, agents, representatives, principals, professionals, consultants, 

financial advisors, attorneys, accountants, investment bankers, and other 

professional advisors (with respect to clause (g), each solely in their 

capacity as such); provided, that any Holder of a Claim or Interest that

objects to or votes to reject the Plan (and thereby opts out of the releases) 

shall not be a “Released Party.”

Releasing Parties Collectively, and in each case in its capacity as such: (a) the Consenting 

Creditors; (b) the Sponsor; (c) the Backstop Parties; (d) the Term Loan 

Agent; (e) the DIP Term Lenders; (f) the DIP Term Loan Agent; (g) with 

respect to each of the Debtors, the Reorganized Debtors, and each of the 

foregoing entities in clauses (a) through (f), each such Entity’s current 

and former predecessors, successors, Affiliates (regardless of whether 

such interests are held directly or indirectly), subsidiaries, direct and 

indirect equityholders, funds, portfolio companies, management 

companies; (h) with respect to each of the foregoing Entities in clauses 

(a) through (g), each of their respective current and former directors, 

officers, members, employees, partners, managers, independent 

contractors, agents, representatives, principals, professionals, consultants, 

financial advisors, attorneys, accountants, investment bankers, and other 

professional advisors (with respect to clause (g), each solely in their 

capacity as such); (i) all Holders of Claims and Interests that are deemed 

to accept the Plan; (j) all Holders of Claims and Interests who vote to 

accept the Plan; and (k) all Holders in voting Classes who abstain from 

voting on the Plan and who do not object to the Plan.

Reorganized Debtors The Debtors, as reorganized pursuant to and under the Plan or any 

successor thereto.

Reorganized Gymboree Gymboree, as reorganized pursuant to and under the Plan or any 

successor thereto.

Reorganized Gymboree 

Board

The initial board of directors of Reorganized Gymboree 

Rights The rights to participate in the Rights Offerings on the terms set forth in 

the Rights Offering Procedures.

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Term Definition

Rights Offering Shares New Gymboree Common Shares to be purchased at the Share Ratio 

pursuant to the Rights Offerings such that at the Maximum Rights 

Offering Amount the Rights Offering Shares will be equal to 46.9% of 

the New Gymboree Common Shares outstanding on the Plan Effective 

Date (subject to a downward ratable adjustment to account for the 

difference (if any) between the Maximum Rights Offering Amount and 

the Adjusted Rights Offering Amount), subject to dilution by the MIP and 

the DIP Surplus Conversion Shares after giving effect to the increase in 

stipulated equity value as a result of the DIP Surplus Conversion.

Roll-Up DIP Conversion 

Shares

New Gymboree Common Shares purchased at the Share Ratio equal to 

41.0% of the New Gymboree Common Shares, subject to dilution by the 

MIP and the DIP Surplus Conversion Shares after giving effect to the 

increase in stipulated equity value as a result of the DIP Surplus 

Conversion.

Roll-up DIP Claim Any Claim derived from or based upon the Roll-up DIP Loans.

SEC The Securities and Exchange Commission.

Secured When referring to a Claim: (a) secured by a lien on property in which any 

of Debtors has an interest, which lien is valid, perfected, and enforceable 

pursuant to applicable law or by reason of a Bankruptcy Court order, or 

that is subject to setoff pursuant to section 553 of the Bankruptcy Code, 

to the extent of the value of the creditor’s interest in the Debtors’ interest 

in such property or to the extent of the amount subject to setoff, as 

applicable, as determined pursuant to section 506(a) of the Bankruptcy 

Code; or (b) allowed pursuant to the Plan, or separate order of the 

Bankruptcy Court, as a secured claim.

Share Ratio A per share purchase price for New Gymboree Common Shares based on 

a 35% discount to a stipulated equity value of $262.5 million based on a 

total enterprise value of $430 million (each of which stipulated equity 

value and enterprise value shall remain fixed regardless of whether the 

Adjusted Rights Offering Amount is equal to or less than the Maximum 

Rights Offering Amount). In the event of a DIP Surplus Conversion, the 

Share Ratio shall be adjusted to use the stipulated equity value above, 

increased by the amount of the DIP Surplus Amount.

Term Loan Credit 

Agreement

The Amended and Restated Credit Agreement, dated as of February 11, 

2011 (as amended from time to time), by and among Gymboree, as the 

borrower; certain of Gymboree’s subsidiaries and Giraffe Intermediate B, 

Inc., as guarantors, the Term Loan Agent, and the Term Loan Lenders.

Term Loan Agent Credit Suisse AG, Cayman Islands Branch, in its capacity as 

administrative agent under the Term Loan Credit Agreement, and any 

successor thereto.

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Term Definition

Term Loan Common 

Shares

100% of the New Gymboree Common Shares outstanding on the Plan 

Effective Date reduced by each of the following: 

(a) the Rights Offering Shares, 

(b) the Roll-Up Conversion Shares,

(c) the Backstop Premium Shares, and

(d) any DIP Surplus Conversion Shares.

Assuming the Maximum Rights Offering Amount, the Term Loan 

Common Shares will be equal to 9.8% of the New Gymboree Common 

Shares outstanding on the Plan Effective Date (prior to a ratable upward 

adjustment to account for the difference (if any) between the Maximum 

Rights Offering Amount and the Adjusted Rights Offering Amount) 

before any dilution by the DIP Surplus Conversion Shares. The Term 

Loan Common Shares shall be subject to further dilution by the MIP. 

Term Loan Claims Any Claim derived from or based upon the Term Loan Credit Agreement 

(other than the Li & Fung Term Loan Claims). The Term Loan Claims 

shall be allowed pursuant to the Plan, and shall include all principal, 

unpaid prepetition interest at the contractual rate, all unpaid postpetition 

interest at the contractual rate, and all other amounts due and owing under 

the Term Loan Credit Agreement. Any unpaid fees and expenses owing 

thereunder shall be paid in cash on the Plan Effective Date.

Term Loan Deficiency 

Claims

Any Term Loan Claim that is not a Secured Claim.

Term Loan Lenders The lending institutions party from time to time to the Term Loan Credit 

Agreement.

Term Loan Secured Claim Any Secured Claim that is a Term Loan Claim.

Unimpaired With respect to a Class of Claims or Interests, a Class of Claims or 

Interests that is not Impaired.

Unsecured Notes The 9.125% unsecured senior notes due December 1, 2018, issued 

pursuant to that certain Indenture dated November 23, 2010, by and 

among Gymboree, as issuer; certain of Gymboree’s subsidiaries, as 

guarantors; and the Indenture Trustee.

Unsecured Note Claims Any Claim derived from or based upon the Unsecured Notes.

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ANNEX III

DISCHARGE, RELEASE, INJUNCTION, AND EXCULPATION PROVISIONS

Discharge of Claims and 

Termination of Interests

Pursuant to section 1141(d) of the Bankruptcy Code, and except as 

otherwise specifically provided in the Plan or in any contract, 

instrument, or other agreement or document created pursuant to the 

Plan, the distributions, rights, and treatment that are provided in the 

Plan shall be in complete satisfaction, discharge, and release, effective 

as of the Effective Date, of Claims (including any Debtor 

Intercompany Claims resolved or compromised after the Effective 

Date by the Reorganized Debtors), Interests, and Causes of Action of 

any nature whatsoever, including any interest accrued on Claims or 

Interests from and after the Petition Date, whether known or 

unknown, against, liabilities of, Liens on, obligations of, rights 

against, and Interests in, the Debtors or any of their assets or 

properties, regardless of whether any property shall have been 

distributed or retained pursuant to the Plan on account of such 

Claims and Interests, including demands, liabilities, and Causes of 

Action that arose before the Effective Date, any liability (including 

withdrawal liability) to the extent such Claims or Interests relate to 

services performed by employees of the Debtors before the Effective 

Date and that arise from a termination of employment, any 

contingent or non-contingent liability on account of representations 

or warranties issued on or before the Effective Date, and all debts of 

the kind specified in sections 502(g), 502(h), or 502(i) of the 

Bankruptcy Code, in each case whether or not: (1) a Proof of Claim 

based upon such debt or right is filed or deemed filed pursuant to 

section 501 of the Bankruptcy Code; (2) a Claim or Interest based 

upon such debt, right, or Interest is allowed pursuant to section 502 

of the Bankruptcy Code; or (3) the Holder of such a Claim or Interest 

has accepted the Plan. Any default or “event of default” by the 

Debtors or Affiliates with respect to any Claim or Interest that 

existed immediately before or on account of the filing of the 

Chapter 11 Cases shall be deemed cured (and no longer continuing) 

as of the Effective Date. The Confirmation Order shall be a judicial 

determination of the discharge of all Claims and Interests subject to 

the Effective Date occurring.

Releases by the Debtors Pursuant to section 1123(b) of the Bankruptcy Code, for good and 

valuable consideration, on and after the Effective Date, each Released 

Party is deemed released and discharged by the Debtors, the 

Reorganized Debtors, and their Estates from any and all Causes of 

Action, including any derivative claims asserted on behalf of the 

Debtors, that the Debtors, the Reorganized Debtors, or their Estates 

would have been legally entitled to assert in their own right (whether 

individually or collectively) or on behalf of the Holder of any Claim 

or Interest, or that any Holder of any Claim or Interest could have 

asserted on behalf of the Debtors, based on or relating to, or in any 

manner arising from, in whole or in part:

1. the Debtors, the Debtors’ in- or out-of-court restructuring 

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efforts, intercompany transactions, the formulation, 

preparation, dissemination, negotiation, or filing of the 

Restructuring Support Agreement or the other Restructuring 

Documents;

2. any Restructuring Document, contract, instrument, release, 

or other agreement or document (including providing any 

legal opinion requested by any Entity regarding any 

transaction, contract, instrument, document, or other 

agreement contemplated by the Plan or the reliance by any 

Released Party on the Plan or the Confirmation Order in lieu 

of such legal opinion) created or entered into in connection 

with the Restructuring Support Agreement, the Disclosure 

Statement, or the Plan; 

3. the Chapter 11 Cases, the Disclosure Statement, the Plan, the 

filing of the Chapter 11 Cases, the pursuit of Confirmation, 

the pursuit of Consummation, the administration and 

implementation of the Plan, including the issuance or 

distribution of Securities pursuant to the Plan, or the 

distribution of property under the Plan or any other related 

agreement; or 

4. any other act or omission, transaction, agreement, event, or 

other occurrence taking place on or before the Effective Date

relating to any of the foregoing.

Notwithstanding anything to the contrary in the foregoing, the 

releases set forth above do not release any post-Effective Date 

obligations of any party or Entity under the Plan, any Restructuring 

Document, or any document, instrument, or agreement (including 

those set forth in the Plan Supplement) executed to implement the 

Plan.

Releases by Holders of 

Claims and Interests of the 

Debtors

As of the Effective Date, each Releasing Party is deemed to have 

released and discharged each Debtor, Reorganized Debtor, and other 

Released Party from any and all Causes of Action, including any 

derivative claims asserted on behalf of the Debtors, that such Entity 

would have been legally entitled to assert (whether individually or 

collectively), based on or relating to, or in any manner arising from, 

in whole or in part: 

1. the Debtors, the Debtors’ in- or out-of-court restructuring 

efforts, intercompany transactions, the formulation, 

preparation, dissemination, negotiation, or filing of the 

Restructuring Support Agreement or the other Restructuring 

Documents;

2. any Restructuring Document, contract, instrument, release, 

or other agreement or document (including providing any 

legal opinion requested by any Entity regarding any 

transaction, contract, instrument, document, or other 

agreement contemplated by the Plan or the reliance by any 

Released Party on the Plan or the Confirmation Order in lieu 

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of such legal opinion) created or entered into in connection 

with the Restructuring Support Agreement, the Disclosure 

Statement, or the Plan; 

3. the Chapter 11 Cases, the Disclosure Statement, the Plan, the 

filing of the Chapter 11 Cases, the pursuit of Confirmation, 

the pursuit of Consummation, the administration and 

implementation of the Plan, including the issuance or 

distribution of Securities pursuant to the Plan, or the 

distribution of property under the Plan or any other related 

agreement; or 

4. any other act or omission, transaction, agreement, event, or 

other occurrence taking place on or before the Effective Date 

relating to any of the foregoing.

Notwithstanding anything to the contrary in the foregoing, the 

releases set forth above do not release any post-Effective Date 

obligations of any party or Entity under the Plan, any Restructuring 

Document, or any document, instrument, or agreement (including 

those set forth in the Plan Supplement) executed to implement the 

Plan. 

Exculpation Except as otherwise specifically provided in the Plan, no Exculpated 

Party shall have or incur, and each Exculpated Party is hereby 

released and exculpated from any Cause of Action for any claim 

related to any act or omission in connection with, relating to, or 

arising out of, the Chapter 11 Cases, the formulation, preparation, 

dissemination, negotiation, filing, or termination of the Restructuring 

Support Agreement and related prepetition transactions, the 

Disclosure Statement, the Plan, or any Restructuring Document, 

contract, instrument, release or other agreement or document 

(including providing any legal opinion requested by any Entity 

regarding any transaction, contract, instrument, document, or other 

agreement contemplated by the Plan or the reliance by any 

Exculpated Party on the Plan or the Confirmation Order in lieu of 

such legal opinion) created or entered into in connection with the 

Disclosure Statement or the Plan, the filing of the Chapter 11 Cases, 

the pursuit of Confirmation, the pursuit of Consummation, the 

administration and implementation of the Plan, including the 

issuance of Securities pursuant to the Plan, or the distribution of 

property under the Plan or any other related agreement, except for 

claims related to any act or omission that is determined in a final 

order to have constituted actual fraud, willful misconduct, or gross 

negligence, but in all respects such Entities shall be entitled to 

reasonably rely upon the advice of counsel with respect to their duties 

and responsibilities pursuant to the Plan. The Exculpated Parties 

have, and upon closing of the Chapter 11 Cases or the Effective Date

shall be deemed to have, participated in good faith and in compliance 

with the applicable laws with regard to the solicitation of, and 

distribution of, consideration pursuant to the Plan and, therefore, are 

not, and on account of such distributions shall not be, liable at any 

time for the violation of any applicable law, rule, or regulation 

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governing the solicitation of acceptances or rejections of the Plan or 

such distributions made pursuant to the Plan.

Injunctions Except as otherwise expressly provided in the Plan or for obligations 

issued or required to be paid pursuant to the Plan or the 

Confirmation Order, all Entities that have held, hold, or may hold 

claims or interests that have been released pursuant to the Plan, shall 

be discharged pursuant to the Plan, or are subject to exculpation 

pursuant to the Plan, are permanently enjoined, from and after the 

Effective Date, from taking any of the following actions against, as 

applicable, the Debtors, the Reorganized Debtors, or the Released 

Parties: (i) commencing or continuing in any manner any action or 

other proceeding of any kind on account of or in connection with or 

with respect to any such claims or interests; (ii) enforcing, attaching, 

collecting, or recovering by any manner or means any judgment, 

award, decree, or order against such Entities on account of or in 

connection with or with respect to any such claims or interests; 

(iii) creating, perfecting, or enforcing any lien or encumbrance of any 

kind against such Entities or the property or the estates of such 

Entities on account of or in connection with or with respect to any 

such claims or interests; (iv) asserting any right of setoff, 

subrogation, or recoupment of any kind against any obligation due 

from such Entities or against the property of such Entities on account 

of or in connection with or with respect to any such claims or 

interests unless such Entity has timely asserted such setoff right in a 

document filed with the Bankruptcy Court explicitly preserving such 

setoff, and notwithstanding an indication of a claim or interest or 

otherwise that such Entity asserts, has, or intends to preserve any 

right of setoff pursuant to applicable law or otherwise; and 

(v) commencing or continuing in any manner any action or other 

proceeding of any kind on account of or in connection with or with 

respect to any such claims or interests released or settled pursuant to 

the Plan. 

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ANNEX IV

TERM LOAN EXIT FACILITY TERM SHEET

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EXECUTION VERSION

ANNEX IV

THE GYMBOREE CORPORATION

Exit Term Loan Facility

Summary of Principal Terms and Conditions

Borrower Reorganized Gymboree Corporation, a Delaware corporation (the 

“Company” or the “Borrower”), formerly a debtor and debtor-inpossession in the cases filed under Chapter 11 (the “Chapter 11 Cases”). 

Guarantors Each wholly-owned domestic subsidiary that executes a guaranty 

(collectively, the “Guarantors” and together with the Borrower, the 

“Credit Parties”).

Exit Term Loan 

Facility 

Secured term loan facility (the “Exit Term Loan Facility” or the “Exit 

Financing”), the holders thereof referred to as the “Lenders”, comprised of 

term loans (“Exit Term Loans”) converted on a dollar-for-dollar basis from 

the loans under the Borrowers’ debtor-in-possession credit agreement (the 

“DIP Facility”) on the Closing Date (as defined below). 

The “Plan” means the Chapter 11 Plan of Reorganization and the related 

disclosure statement of the Credit Parties (collectively, the “Debtors”) to be 

filed with the United States Bankruptcy Court for the Eastern District of 

Virginia (the “Bankruptcy Court”), in form and substance reasonably 

satisfactory to the Required Lenders; provided that the Approved Plan of 

Reorganization (as defined in the DIP Facility) shall be the Plan and be 

deemed to be reasonably satisfactory to the Required Lenders. The 

reorganization contemplated by the Plan is referred to herein as the 

“Reorganization.”

Use of Proceeds Subject to Section 2.11 of the DIP Facility, the Exit Term Loan Facility will 

be used to refinance in full all outstanding “New Money DIP Loans” under 

the DIP Facility on the Closing Date.

Closing Date The date on which the Exit Term Loans are issued under the Exit TermLoan 

Facility and the Reorganization is consummated in all material respects 

pursuant to the Plan (the “Closing Date”).

Maturity The date that is 5 years after the Closing Date.

Collateral The Exit Term Loan Facility will be secured by a perfected security interest 

in, with the priority described below under “Priority,” and lien on 

substantially all of the Credit Parties’ tangible and intangible assets 

(collectively, the “Collateral”), with materiality thresholds and exceptions 

to be agreed. For purposes hereof “ABL Priority Collateral” and “Term 

Priority Collateral” shall be substantially consistent with the definitions in 

that certain Intercreditor Agreement dated as of November 23, 2010, by and 

among Bank of America, N.A., as ABL agent, Credit Suisse AG, Cayman 

Islands Branch, as term agent (as amended, supplemented or otherwise 

modified prior to the date hereof, the “Prepetition Intercreditor 

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Agreement”).

Priority A first priority lien on all Term Priority Collateral and a second priority lien 

on all ABL Priority Collateral, other than certain customary baskets to be 

agreed (“Permitted Liens”).

Conditions to 

Closing

Usual and customary for facilities of this type, including, without limitation, 

the following:

A. The negotiation, execution and delivery of customary definitive 

documentation in respect of the Exit Financing consistent with the terms 

set forth in this Term Sheet and otherwise satisfactory to the Required 

Lenders and the Administrative Agent (the “Exit Financing 

Documentation”).

B. The reasonable satisfaction of the Required Lenders with:

• The Plan;

• the terms of any new asset-based revolving facility and asset-based 

term loan facility (collectively, the “Exit ABL Facility”), replacing 

the debtor-in-possession asset-based revolving credit facility and 

debtor-in-possession asset-based term loan facility in form and 

substance reasonably satisfactory to the Required Lenders and 

priority of collateral (i.e. first lien on all ABL Priority Collateral, 

second lien on Term Priority Collateral), and the definitive 

documentation in respect thereof; and

• the terms, entry and effectiveness of a confirmation order with 

respect to the Plan.

C. The Reorganization shall have been consummated in accordance in all 

material respects with the Plan (all conditions set forth therein having 

been satisfied or waived (with any such waiver having been approved 

by the Required Lenders)), and substantial consummation (as defined 

in Section 1101 of the Bankruptcy Code) of the Plan in accordance in 

all material respects with its terms shall have occurred substantially 

contemporaneously with the closing of the Exit Term Loans and such 

closing shall have occurred not later than [October 15, 2017].

D. The Required Lenders shall be satisfied that, on the Closing Date, 

immediately after giving effect to the consummation of the Plan, the 

issuance of the Exit Term Loans to occur on the Closing Date and any 

other transactions to occur on the Closing Date, the Credit Parties and 

their subsidiaries shall have outstanding no indebtedness for borrowed 

money other than indebtedness outstanding under the Exit Financing, 

the Exit ABL Facility and any additional indebtedness (including but 

not limited to capital leases) on terms and conditions (including as to 

amount) satisfactory to the Required Lenders and, if secured, subject to 

intercreditor arrangements satisfactory to the Required Lenders.

E. Delivery of evidence that all required insurance has been maintained 

and that the Administrative Agent has been named as loss payee and 

additional insured, provided that to the extent the Borrower is not able 

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to deliver the insurance certificates and endorsements pursuant to this 

clause (E) by the Closing Date after having used commercially 

reasonable efforts, such insurance certificates and endorsements shall 

be delivered within 30 days after the Closing Date (or such longer time 

as the Administrative Agent may agree).

F. Accuracy of representations and warranties contained in the Exit 

Financing Documentation in all material respects (or, in the case of 

representations and warranties that are qualified by materiality, in all 

respects) on the Closing Date (except to the extent such representations 

and warranties expressly relate to an earlier date, in which case they 

shall be true and correct in all material respects as of such earlier date) 

and absence of default and Event of Default under the Exit Financing 

Documentation.

G. Compliance with customary documentation conditions, including the 

delivery of customary legal opinions and closing certificates (including 

a customary solvency certificate), good standing certificates and 

certified organizational documents, in each case, in form and substance 

reasonably satisfactory to the Required Lenders and the Administrative 

Agent.

H. The Administrative Agent shall have a perfected lien on substantially 

all of the assets of the Credit Parties, other than Permitted Liens, subject 

in priority only to the liens granted to the Exit ABL Facility which shall 

be subject to ranking and intercreditor arrangements satisfactory to the 

Required Lenders and subject to any agree post-closing perfection 

requirements.

I. Receipt by the Administrative Agent of reasonably satisfactory results 

of customary lien searches.

J. All requisite governmental and material third party approvals shall have 

been obtained, and there shall be no litigation, governmental, 

administrative or judicial action against the Credit Parties, in each case, 

the obtaining or existence of which would reasonably be expected to 

restrain, prevent or impose materially burdensome restrictions on the 

Reorganization or the Exit Term Loans.

K. Delivery of all documentation and other information required by bank 

regulatory authorities under applicable “know-your-customer”, antimoney laundering rules and regulations, and the Patriot Act. 

L. Payment by the Borrowers on the Closing Date of (i) the reasonable and 

documented out-of-pocket administrative and collateral agency fee and 

expenses (including the fees and expenses of one outside counsel to the 

Administrative Agent) due on such date and (ii) the fees of Carriage 

House Capital Advisors, LLC, Milbank, Tweed, Hadley & McCloy 

LLP, Rothschild Inc., and McGuire Woods, in connection with the 

transactions hereunder, in each case to the extent invoiced two (2) 

business days prior to the Closing Date.

M. No default or event of default under the DIP Facility.

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Interest Rate Adjusted LIBOR Rate plus 11.50% per annum (subject to a 1.00% LIBOR 

floor) payable quarterly in cash. 

During the continuance of an Event of Default, past due amounts under the 

Exit Term Loan Facility will bear interest at an additional 2.00% per annum

above the interest rate otherwise applicable.

Scheduled 

Amortization 

Commencing following the first year anniversary of the Closing Date, the 

Exit Term Loans shall be repaid in equal quarterly installments of 5% per 

annum of the original principal amount of the Exit Term Loans on each 

December 31, March 31, June 30 and September 30.

Call Protection Callable at 105%, 103% and 102% in years 1, 2 and 3 and thereafter at par.

Mandatory 

Prepayments

The Exit Term Loans shall be prepaid with:

(i) 100% of the net cash proceeds of non-ordinary course asset sales or 

casualty or condemnation events (subject to reinvestment rights and 

baskets and exclusions to be agreed); and

(ii) 100% of the proceeds of debt incurrences (other than debt permitted 

under the Exit Financing Documentation). 

Financial Covenants None.

Required Lenders Lenders holding a majority of the Exit Term Loans (the “Required 

Lenders”).

Exit Facility 

Documentation

The definitive financing documentation for the Exit Term Loan (the “Exit

Facility Documentation”) shall contain representations and warranties, 

covenants and events of default expressly set forth in this Term Sheet and, 

to the extent any other terms are not expressly set forth in this Term Sheet, 

will (i) be negotiated in good faith within a reasonable time period to be 

determined based on the expected Closing Date, (ii) contain such other 

terms as the Company and the Lenders shall reasonably agree (given due 

regard to the operations, size, industry (and risks and trends associated 

therewith), geographic locations and businesses of the Credit Parties); it 

being understood and agreed that the Prepetition Term Loan Agreement will 

be used as a starting point for the Exit Facility Documentation.

Governing Law State of New York.

Administrative 

Agent

Credit Suisse AG, Cayman Islands Branch

4820-4170-3753, v. 6

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EXHIBIT B to 

the Restructuring Support Agreement

Form of Transfer Agreement and Joinder

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Transfer Agreement and Joinder

The undersigned (“Transferee”) hereby acknowledges that it has read and understands the 

Restructuring Support and Lock-Up Agreement, dated as of __________ (the “Agreement”),1 by 

and among The Gymboree Corporation and its Affiliates and subsidiaries bound thereto, the 

Consenting Creditors, and certain other parties, including the transferor to the Transferee of any 

Term Loan Claims or Debtor Claims (each such transferor, a “Transferor”), and agrees to be 

bound by the terms and conditions thereof to the extent the Transferor was thereby bound, and 

shall be deemed a “Consenting Creditor” and a “Party” under the terms of the Agreement.

The Transferee specifically agrees to be bound by the terms and conditions of the 

Agreement and makes all representations and warranties contained therein as of the date of the 

Transfer, including the agreement to be bound by the vote of the Transferor if such vote was cast 

before the effectiveness of the Transfer discussed herein.

Date Executed: 

______________________________________

Name:

Title:

Address:

E-mail address(es):

Telephone:

Facsimile:

1 Capitalized terms not used but not otherwise defined herein shall have the meanings ascribed to such terms 

in the Agreement.

Aggregate Amounts Beneficially Owned or Managed on Account of:

ABL Revolver Claims (if any) $[__]

ABL Term Loan Claims (if any) $[__]

Term Loan Claims (if any) $[__]

Unsecured Note Claims (if any) $[__]

Existing Common Stock (if any) [__] shares

 

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EXHIBIT C to 

the Restructuring Support Agreement

Form of Joinder Agreement

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Joinder Agreement

The undersigned (“Joining Party”) hereby acknowledges that it has read and understands 

the Restructuring Support, dated as of __________ (the “Agreement”),1 by and among The 

Gymboree Corporation and its Affiliates and subsidiaries bound thereto, the Consenting Creditors, 

and certain other parties, and agrees to be bound by the terms and conditions thereof, and shall be 

deemed a “Consenting Creditor” and a “Party” under the terms of the Agreement.

The Joining Party specifically agrees to be bound by the terms and conditions of the 

Agreement and makes all representations and warranties contained therein as of the date hereof.

Date Executed: 

______________________________________

Name:

Title:

Address:

E-mail address(es):

Telephone:

Facsimile:

1 Capitalized terms not used but not otherwise defined herein shall have the meanings ascribed to such terms 

in the Agreement.

Aggregate Amounts Beneficially Owned or Managed on Account of:

ABL Revolver Claims (if any) $[__]

ABL Term Loan Claims (if any) $[__]

Term Loan Claims (if any) $[__]

Unsecured Note Claims (if any) $[__]

Existing Common Stock (if any) [__] shares

 

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Exhibit B 

Corporate Organizational Structure 

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