1
EXHIBIT 10.18
AMENDMENT NO. 3 TO
AMENDED AND RESTATED LINE OF CREDIT AGREEMENT AND WAIVER
This Amendment No. 3 and Waiver (the "Amendment and Waiver") dated as
of January 9, 1998, is among Bank of America National Trust and Savings
Association (the "Bank"), The Gymboree Corporation ("TGC"), Gymboree
Manufacturing, Inc. ("GMI"), Gymboree, Inc. ("GI"), Gymboree Industries Limited
("GIL"), Gymboree U.K., Ltd. ("GUKL"), and Gymboree U.K. Leasing Limited
("GUKLL"). (TGC, GMI, GI, GIL, GUKL, and GUKLL are hereinafter referred to
collectively as the "Borrowers" and individually as a "Borrower").
RECITALS
A. The Bank, TGC, and GMI entered into a certain Amended and
Restated Line of Credit Agreement dated as of October 27, 1995, as previously
amended (the "Agreement"). GI and GIL were added as Borrowers pursuant to
Amendment No. 1 to Amended and Restated Line of Credit Agreement dated as of
July 17, 1997. Pursuant to Amendment No. 2 to Amended and Restated Line of
Credit Agreement dated as of August 11, 1997 ("Amendment No. 2"), GUKL was
added as a Borrower for the limited purpose of making available to GUKL the new
foreign exchange facility added to the Agreement by Amendment No. 2.
B. In addition to GUKL, TGC has another wholly-owned English
Subsidiary GUKLL.
C. TGC, GMI, GI, GIL, and GUKL have requested the Bank (a) to add
GUKLL as a Borrower under the Agreement for the limited purpose of making
standby letters of credit available to GUKLL and (b) to begin making standby
letters available to GUKL. The Bank is willing to grant these requests subject
to certain of the additional terms and conditions set forth in this Amendment
and Waiver.
D. The Bank and the Borrowers desire to amend the Agreement in
order to memorialize the terms and conditions under which GUKLL is added as a
Borrower under the Agreement.
E. The Bank and the Borrowers also desire to amend the Agreement
in order to adjust certain within-line limitations applicable to standby
letters of credit issued under the Agreement in conjunction with making standby
letters of credit available to both GUKL and GUKLL and in order to add certain
terms and conditions to the Agreement.
F. Finally, certain events of default have occurred under the
Agreement, and, in addition, the Bank has waived on a one-time basis a
restriction applicable to commercial letters of credit in order to issue
certain letters of credit for the account of GMI. The Borrowers have requested
the Bank to waive those events of default and to confirm its one-time waiver.
The
1
2
Bank is willing to comply with that request, and in conjunction therewith, the
Bank and the Borrowers have agreed to further amend the Agreement, subject to
the terms and conditions of this Amendment and Waiver.
AGREEMENT
1. Definitions. Capitalized terms used but not defined in this
Amendment and Waiver shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
2.1 The proviso at the end of Paragraph 1.1(c) is amended to
read in its entirety as follows:
It is provided, however, that:
(i) the outstanding amounts of any commercial letters of
credit issued for the account of GI, including amounts drawn on
such letters of credit and not yet reimbursed, may not exceed
Ten Million Dollars ($10,000,000) (the "GI L/C Limit");
(ii) the outstanding amount of any commercial letters of
credit issued for the account of GIL, including amounts drawn on
such letters of credit and not yet reimbursed, may not exceed
Ten Million Dollars ($10,000,000) (the "GIL Commercial L/C
Limit");
(iii) the outstanding amount of any standby letters of
credit, including amounts drawn on such letters of credit and not
yet reimbursed, may not exceed Eleven Million Dollars
($11,000,000); provided further that the outstanding amount of
any such letters of credit, including amounts drawn on such
letters of credit and not yet reimbursed, issued (A) for the
accounts of TGC or GIL, respectively, may not exceed Five
Hundred Thousand Dollars ($500,000) for either TGC or GIL (with
respect to GIL, the "GIL Standby L/C Limit") and (B) for the
accounts of GUKL or GUKLL, respectively, may not in the
aggregate exceed Ten Million Dollars ($10,000,000) (the
"GUKL/GUKLL L/C Limit").
(iv) the outstanding amounts of any letters of credit
issued for the accounts of TGC or GMI, including amounts drawn
on such letters of credit and not yet reimbursed, may not at any
time exceed the Commitment minus the sum of the GI L/C Limit
plus the GIL Commercial L/C Limit plus the
2
3
GIL Standby L/C Limit plus the GUKL/GUKLL L/C
Limit.
(In calculating the amounts described above, the Bank will use
Equivalent Amounts for letters of credit denominated in Canadian
Dollars, Irish Punts, or English Pounds Sterling. "Equivalent
Amount" means the equivalent in U.S. Dollars of another currency
calculated at the spot rate for the purchase of such other
currency with U.S. Dollars quoted by the Bank's Foreign Exchange
Trading Center in San Francisco, California, at approximately
8:00 a.m. San Francisco time two (2) banking days (as determined
by Bank with respect to such currency) prior to the relevant
date.)
2.2 The first seven sentences of Paragraph 1.3 are amended to
read in their entirety as follows:
1.3 Letters of Credit. This line of credit may be used for
financing:
(i) commercial letters of credit with a maximum maturity
of 180 days but not to extend more than 180 days beyond the
Expiration Date. Each commercial letter of credit will require
drafts payable at sight or up to the earlier of 180 days after
sight or 180 days after the Expiration Date.
(ii) standby letters of credit with a maximum maturity not
to extend more than 5 years beyond the Expiration Date in the
case of letters of credit issued for the account of either GUKL
or GUKLL and not to extend beyond the Expiration Date in all
other cases.
Each commercial letter of credit issued for the account of GI may be
denominated in U.S. Dollars or Canadian Dollars. Each commercial
letter of credit issued for the account of GIL may be denominated in
U.S. Dollars or Irish Punts. Each standby letter of credit issued for
the account of either GUKL or GUKLL may be denominated in U.S.
Dollars or English Pounds Sterling. All other letters of credit
issued pursuant to this Agreement will be denominated in U.S. Dollars.
2.3 A new Paragraph 1.5 is added to the Agreement, and it reads
in its entirety as follows:
1.5 Termination of Line Credit. if this line of credit
terminates as a result of the Borrowers' request to cancel it, the
Bank's decision to cancel it because on or more Borrowers are in
3
4
GIL Standby L/C Limit plus the GUKL/GUKLL L/C Limit.
(In calculating the amounts described above, the Bank will use
Equivalent Amounts for letters of credit denominated in Canadian
Dollars, Irish Punts, or English Pounds Sterling. "Equivalent Amount"
means the equivalent in U.S. Dollars of another currency calculated at
the spot rate for the purchase of such other currency with U.S.
Dollars quoted by the Bank's Foreign Exchange Trading Center in San
Francisco, California, at approximately 8:00 a.m. San Francisco time
two (2) banking days (as determined by Bank with respect to such
currency) prior to the relevant date.)
2.2 The first seven sentences of Paragraph 1.3 are amended to read in
their entirety as follows:
1.3 Letters of Credit. This line of credit may be used for
financing;
(i) commercial letters of credit with a maximum maturity of 180
days but not to extend more than 180 days beyond the Expiration Date.
Each commercial letter of credit will require drafts payable at sight
or up to the earlier of 180 days after sight or 180 days after the
Expiration Date.
(ii) standby letters of credit with a maximum maturity not to
extend more than 5 years beyond the Expiration Date in the case of
letters of credit issued for the account of either GUKL or GUKLL and
not to extend beyond the Expiration Date in all other cases.
Each commercial letter of credit issued for the account of GI may be
denominated in U.S. Dollars or Canadian Dollars. Each commercial letter of
credit issued for the account of GIL may be denominated in U.S. Dollars or
Irish Punts. Each standby letter of credit issued for the account of either
GUKL or GUKLL may be denominated in U.S. Dollars or English Pounds
Sterling. All other letters of credit issued pursuant to this Agreement
will be denominated in U.S. Dollars.
2.3 A new Paragraph 1.5 is added to the Agreement, and it reads in
its entirety as follows:
1.5 Termination of Line of Credit. If this line of credit
terminates as a result of the Borrowers' request to cancel it, the Bank's
decision to cancel it because one or more Borrowers are in
3
5
default, the Bank's decision not to renew it, or the Borrowers'
decision not to accept the Bank's offer to renew it upon such terms
and conditions as the Bank may offer, or for any other reason, the
Borrowers must by no later than 15 days before the effective date of
such termination:
(a) deposit with the Bank, as cash security for the
Borrowers' reimbursement obligations with respect to all
outstanding letters of credit issued pursuant to this Agreement,
an amount equal to the total outstanding amount of all such
letters of credit, including amounts drawn on any such letters of
credit and not yet reimbursed, and sign such documents as the
Bank requires to obtain and perfect its security interest in such
cash security; and
(b) with respect to each letter of credit, if any, for
which the Borrowers have not provided cash security in accordance
with subparagraph (a) above, obtain a standby letter of credit
issued in favor of the Bank, as beneficiary, by an issuer
acceptable to the Bank and in form, amount, and substance
acceptable to the Bank for the purpose of supporting the
Borrowers' reimbursement obligations with respect to the
corresponding letter of credit outstanding under this Agreement.
If any letters of credit are requested by an Borrower and issued by
the Bank during the 15 days before the effective date of such
termination, the Borrowers must, with respect to any such letter of
credit issued during such period, take the actions described in either
subparagraph (a) or subparagraph (b) above prior to the issuance of
such letter of credit.
2.4 The final sentence of the definition of "Subsidiary" in
Paragraph 5.1 is amended to read in its entirety as follows:
The term "Subsidiary" shall include GMI, GI, GIL, GUKL, or GUKLL
in the event that GMI, GI, GIL, GUKL, or GUKLL is no longer a
"Borrower" under this Agreement.
2.5 A new Paragraph 5.15 is added to the Agreement, and it reads
in its entirety as follows:
5.15 Year 2000 Compliance. Each Borrower and each
Subsidiary has conducted a review and assessment of its computer
applications and made inquiry of its key suppliers, vendors, and
customers with respect to the "year 2000 problem" (that is, the
4
6
risk that computer applications may not be able to properly perform
date-sensitive functions after December 31, 1999) and, based on that
review and inquiry, no Borrower and no Subsidiary believes the year
2000 problem will result in a material adverse change in its business
condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
2.6 Paragraph 6.1 is amended to read in its entirety as
follows:
6.1 Use of Line of Credit. To request commercial or
standby letters of credit only for the use in the usual course of
business and to request standby letters of credit only for the
accounts of TGC, GIL, GUKL, or GUKLL.
2.7 In the lead-in of Paragraph 6.2, the second
parenthetical phrase is amended to read in its entirety as follows:
(other than guarantees by TGC of the obligations of GUKL under store
or distributor center leases, guarantees by TGC of the obligations
of any one or more of the other Subsidiaries under store or
distributor center leases, and the guaranty of Gymboree Industries
Holdings Limited required under this Agreement)
2.8 Paragraph 6.5 is deleted.
2.9 Paragraph 9.2 is amended to read in its entirety as
follows:
9.2 Governing Law, Jurisdiction, and Service of Process.
(a) This Agreement is governed by and construed
according to the laws of the State of California, United
States of America.
(b) Any legal action or proceeding with respect to
this Agreement may be brought in the state or federal
courts located in the State of California, and by execution
and delivery of this Agreement, the Borrowers consent, for
themselves and in respect of their property, to the
jurisdiction of those courts. The Borrowers irrevocably
waive any objection, including any objection to the laying
of venue or based on the grounds of forum non conveniens,
which they may now or hereafter have to the bringing of any
action or proceeding in such jurisdiction in respect of this
Agreement or any document related
5
7
hereto. The Borrowers waive personal service of any summons,
complaint, or other process, which may be made by any other means
permitted by California law.
(c) Final judgment (a certified or exemplified copy of
which shall be conclusive evidence of the fact and of the amount of
any indebtedness of the Borrowers in any action or proceeding with
respect to this Agreement) shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment. Nothing herein shall
affect the rights of the Bank to commence any action or proceeding in
the courts of Canada (or any province thereof), Great Britain,
Ireland or the courts of any other state or country where the
Borrowers or any of their property may be found.
(d) The Borrowers acknowledge and agree that the locals
for any arbitration pursuant to Paragraph 9.4 of this Agreement shall
be within the State of California.
(e) GI, GIL, GUKL, and GUKLL irrevocably appoint TGC and
GMI as their process agents to receive, for them and on their behalf,
service of process in any legal action or proceeding with respect to
this Agreement. If TGC's or GMI's chief executive office is no longer
located in the State of California, GI, GIL, GUKL, and GUKLL also
appoint the Secretary of State of the State of California as their
process agent to receive, for them and on their behalf, service of
process in any legal action or proceeding with respect to this
Agreement. If for any reason GI's, GIL's, GUKL's, and GUKLL's process
agents are unable to act as such, GI, GIL, GUKL, and GUKLL shall
promptly notify the Bank and within thirty (30) days appoint a
substitute process agent or agents acceptable to the Bank. Nothing in
this Agreement will affect the right of the Bank to serve process in
any manner permitted by law.
3. Defaults and Waiver.
3.1 For purposes of this Amendment and Waiver, the "Existing
Defaults" shall mean:
(a) the default existing under Paragraph 1.4(1) of the
Agreement from September 24, 1997, until December 1, 1997, as a
result of the Borrowers' failure to enter into the FEMA until
December 1, 1997, instead of by September 23, 1997, as required by
Paragraph 1.4(1); and
6
8
(b) the default existing under Paragraph 6.5 of the
Agreement as of November 21, 1997, and thereafter as a result of the
Borrowers' and the Subsidiaries' expenditures for the repurchase of
shares exceeding, without the Bank's prior consent, the maximum
aggregate amount permitted by Paragraph 6.5
3.2 Subject to and upon the terms and conditions hereof, the Bank
hereby waives the Existing Defaults.
3.3 Subject to the terms and conditions hereof, the Bank confirms
that on December 1, 1997, it waived Paragraph 1.3(i) of the Agreement for
the sole and express purpose of complying with the Borrowers' request to
issue 3 commercial letters of credit for the account of GMI, each such
letter of credit with a maximum maturity of 209 days instead of the maximum
maturity of 180 days required by Paragraph 1.3(i).
3.4 Nothing contained herein shall be deemed a waiver of (or
otherwise affect the Bank's ability to enforce) any other event of default
or any other term, condition, or covenant of the Agreement, including
without limitation (i) any event of default as may now or hereafter exist
and arise from or otherwise be related to the Existing Defaults (including
without limitation any cross-default arising under the Agreement by virtue
of any matters resulting from the Existing Defaults) or to the requirements
set forth in Paragraph 1.3(i) of the Agreement, and (ii) any event of
default arising at any time after the date of this Amendment and Waiver and
which is the same as any of the Existing Defaults or is a breach of any of
the requirements set forth in Paragraph 1.3(i) of the Agreement.
4. GUKLL's Acknowledgement. GUKLL hereby acknowledges that by
executing this Amendment and Waiver and thereby becoming a Borrower under the
Agreement for the limited purpose of the obtaining standby letters of credit
issued for its account by the Bank, GUKLL promises and agrees to perform or to
be subject to, as applicable, each and every covenant, agreement, term, and
obligation of the Agreement including, without limitation, those which pertain
to the joint and several liability of each Borrower to the Bank for the
payment of all obligations under the Agreement and under any instrument or
agreement required under the Agreement.
5. Representations and Warranties. When the Borrowers sign this
Amendment and Waiver, the Borrowers represent and warrant to the Bank that: (a)
there is no event which is, or with notice or lapse of time or both would be,
a default under the Agreement, except those events, if any, that have been
disclosed in writing to the Bank or waived in writing by the Bank, (b) the
representations and warranties in the
7
9
Agreement are true as of the date of this Agreement and Waiver as if made on
the date of this Amendment and Waiver, (c) this Amendment and Waiver is within
each Borrower's powers, has been duly authorized, and does not conflict with
any Borrower's organizational papers, (d) this Amendment and Waiver does not
conflict with any law, agreement, or obligation by which any Borrower is bound,
and (e) the Borrower are entering into this Amendment and Waiver on the basis
of their own investigation and for their own reasons, without reliance upon the
Bank or any other entity or individual.
6. Conditions Precedent. This Amendment and Waiver will be
effective when the Bank receives, in form and content acceptable to the Bank,
evidence that the execution, delivery, and performance by GUKL and GUKLL of
this Amendment and Waiver and any instrument or agreement required under the
Agreement, as amended by this Amendment and Waiver, have been duly authorized.
7. Conditions Subsequent. This Amendment and Waiver will remain
effective only if the Bank receives, in form and content acceptable to the
Bank, by no later than February 28, 1998:
(a) Guaranty signed by Gymboree Industries Holdings Limited ("GIHL")
(b) Evidence that the execution, delivery and performance by GIHL of
the above-required Guaranty have been duly authorized, together with a
written opinion from GIHL's legal counsel covering such matters as the
Bank may require. The legal counsel and the forms of the opinion must be
acceptable to the Bank.
8. Reservation of Rights. The Borrowers acknowledge and agree that
neither the Bank's forbearance in exercising its rights and remedies in
connection with the Existing Defaults, nor the execution and delivery by the
Bank of this Amendment and Waiver, shall be deemed (a) to create a course of
dealing or otherwise obligate the Bank to forbear or execute similar waivers
under the same or similar circumstances in the future, or (b) to waive,
relinquish or impair any right of the Bank to receive any indemnity or similar
payment from any person or entity as a result of any matter arising from or
relating to the Existing Defaults.
9. Effect of Amendment and Waiver. Except as provided in this
Amendment and Waiver, all of the terms and conditions of the Agreement shall
remain in full force and effect. Further, nothing in this Amendment and Waiver
shall release TGC, GMI, GI, GIL, or GUKL from any of its obligations under the
Agreement.
8
10
This Amendment and Waiver is executed as of the date stated at the
beginning of this Amendment.
Bank of America National Trust
and Savings Association
By
---------------------------------
Title
------------------------------
By
---------------------------------
Title
------------------------------
The Gymboree Corporation
By /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title President and CEO
------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title Vice President, Treasurer
------------------------------
Gymboree Manufacturing, Inc.
By /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title President and CEO
------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title Vice President, Treasurer
------------------------------
9
11
Gymboree, Inc.
By /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title President and CEO
------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree Industries Limited
By /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title President and CEO
------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree U.K., Ltd.
By /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title President and CEO
------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title Vice President, Treasurer
------------------------------
Gymboree U.K. Leasing Limited
By /s/ ▇▇▇▇ ▇▇▇▇▇
---------------------------------
Title President and CEO
------------------------------
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title Vice President, Treasurer
------------------------------
10
