Term Loan And Security Agreement

THIRD AMENDMENT TO TERM LOAN AND SECURITY AGREEMENT

THIS THIRD AMENDMENT TO TERM LOAN AND SECURITY AGREEMENT, dated as of April 16, 2001 (this "Amendment"), is made and entered into by and among THE GYMBOREE CORPORATION, a Delaware corporation ("Guarantor One"), GYMBOREE MANUFACTURING, INC., a California corporation ("Guarantor Two") (Guarantor One and Guarantor Two each, individually a "Guarantor" and, collectively, the "Guarantors"), GYMBOREE LOGISTIC PARTNERSHIP, a California general partnership ("Borrower"), and M CREDIT, INC. formerly known as Transamerica Business Credit Corporation, a Delaware corporation ("Lender"). Capitalized terms used herein and not defined herein have the meanings assigned to them in the Loan Agreement.

WHEREAS, Guarantors, Borrower and Lender are parties to a certain Term Loan and Security Agreement, dated as of December 29, 1998, as amended by a First Amendment dated July 30, 1999 ("First Amendment") and a Second Amendment dated August 30, 2000, ("Second Amendment") (jointly the "Loan Agreement") pursuant to which, as described therein, Lender has made certain term loans to Borrower;

WHEREAS, an Event of Default has occurred and is continuing under Section 6.14 of the Loan Agreement, with respect to Guarantor Ones' Fiscal Quarter ending February 3, 2001;

WHEREAS, Guarantors and Borrower have requested that Lender waive the Existing Event of Default and, as an inducement to Lender to do so, have agreed, among other things, to pay increased rates of interest on the Term Loans in accordance with the provisions hereof;

WHEREAS, the Lender also agrees that from and after the date of execution of this Amendment, it will no longer require Guarantor One to comply with certain financial requirements of Section 6.14 of the Loan Agreement and will remove the financial default provisions of the Loan Agreement to achieve that purpose; and

WHEREAS, Guarantors, Borrower and Lender wish to enter into this Amendment in order to set forth their mutual agreements in regard to the foregoing matters;

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and conditions herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

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1. INCREASE IN INTEREST RATE.

(a) Commencing on the date hereof and continuing hereafter until the Term Loans are paid in full, the interest rate payable on each Term Loan as set forth in Section 2.3 of the Loan Agreement, as amended by the Second Amendment, will be increased to a simple interest rate equal to three fourths percent (.75%) per annum in excess of the increased interest rate established in the Second Amendment applicable to such Term Loan (the "Adjusted Fixed Rate"). The interest rate payable on Term Loan A will be increased from 8.71% per annum to 9.46% per annum and the interest rate payable on Term Loan B will be increased from 8.93% per annum to 9.68% per annum.

(b) From and after the date hereof, interest on the Term Loans shall continue to be payable ...