GAP INC: Entering into a Material Definitive Agreement, Creating a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant, Financial Statements and Supporting Documentation (Form 8-K)


Section 1.01 Entering into a Material Definitive Agreement.

On July 13, 2022, The Gap, Inc. (the “Company”), as parent borrower, certain
WE and the Company’s Canadian subsidiaries, as borrowers and guarantors (collectively, the “Creditor Parties”), the lenders named therein (each, a “Lender” and collectively, the “Lenders”), Bank of America, North America., as administrative agent and guarantee agent, the issuing banks designated therein, BofA Securities, Inc., JPMorgan Chase Bank, North America., Citibank, North America., MUFG Union Bank, North America and HSBC Bank USA, National Associationas lead co-arrangers, National Association of American Banksas documentation officer, Wells Fargo Bank, National Association and
Sumitomo Mitsui Banking Corporationas Syndication Agents and BofA Securities, Inc.
and Sumitomo Mitsui Banking Corporationas co-coordinators of sustainability, have entered into a fourth amended and restated revolving credit agreement (the “ABL Credit Agreement”) providing for an asset-based facility in an initial aggregate principal amount of $2.2 billion (the “ABL Credit Facility”), under which the availability of borrowings is primarily based on the value of certain assets of the Company, which ABL Credit Agreement replaced this Third Amended and Restated Revolving Credit Agreement, dated May 7, 2020by and between the Company, certain of its subsidiaries, the lenders named therein, the issuing banks named therein and Bank of America, as administrative agent and collateral agent (the “Existing Credit Agreement”).

Availability, interest and maturity. The initial maximum availability under the ABL Credit Facility is $2.2 billion available to the Company for revolving loans in WE dollars or Alternative Currencies (as defined in the ABL Credit Agreement), including (i) a $300 million sub-limit for issuing letters of credit, (ii) a $200 million sub-limit for swingline loans and (iii) a $200 million sub-limit for borrowings by Canadian borrowers (as defined in the ABL Credit Agreement). Subject to the availability of the borrowing base, the Company may incur and repay borrowings from time to time until the maturity of the ABL Credit Facility. The Company may at any time make voluntary early repayments of loans and must make mandatory early repayments upon the occurrence of specific events. Borrowings under the ABL Credit Facility will mature, and loan commitments thereunder will terminate, on July 13, 2027 (unless terminated early by the Company). Loans denominated in WE Dollars under the ABL Credit Facility will bear interest at an annual rate based on SOFR (subject to a floor of zero) plus a margin of 125 to 150 basis points, depending on the availability of the base. borrowing and subject to sustainability-related pricing adjustments (the “ESG Adjustments”) based on two separate key performance indicators (the “Applicable KPIs”). Alternatively, the Company has the option of selecting an annual base rate equal to the greater of (a) the federal funds rate plus 0.50%, (b) the Bank of America prime rate (or the prime rate announced by Bank of America in
Toronto, Ontario as its “base rate”, in respect of loans to a Canadian borrower), (c) a one-month term SOFR (subject to a floor of zero) plus 1.00%, and ( d) 1.00%, in each case plus a margin of 25 to 50 basis points, depending on the availability of the borrowing base and subject to ESG adjustments based on the applicable KPIs. Loans denominated in alternative currencies will bear interest at the rates described in the ABL Credit Agreement. The undrawn availability rate is 25 basis points per year.

Proceeds from the ABL Credit Facility will be used to repay amounts due under the existing credit agreement and for working capital, capital expenditures and other general corporate purposes for the Company and its subsidiaries. .

The ABL Credit Agreement also allows the Company to increase availability under the ABL Credit Facility or add term loans on a “last out” basis up to a maximum additional amount equal at $500 million.

Guarantees and security. The Company’s obligations under the ABL Credit Agreement will be guaranteed by certain of its WE and Canadian subsidiaries. The obligations of the credit parties are secured by WE and Canadian assets, including a first lien on inventory, certain receivables and related assets.

Pacts. The ABL Credit Agreement contains customary covenants restricting the activities of the company, as well as those of its subsidiaries, including limitations on the ability to sell assets, engage in mergers or other fundamental changes, enter into capital leases or certain leases that are not in the ordinary course of business, enter into transactions involving related parties or derivatives, incur or prepay debts, grant privileges or negative pledges over its assets, making loans or other investments, paying dividends or repurchasing shares or other securities, securing obligations of third parties, engaging in sale-leaseback sales and making changes to its structure of business. There are exceptions to these commitments, and some commitments only apply when unused availability falls below specified thresholds. In addition, the ABL credit agreement includes, as a financial covenant, a spring-loaded fixed charge coverage ratio that occurs when availability falls below a specified threshold.

Event of default. The ABL Credit Agreement contains customary events of default, including defaults in payment, breach of representations and warranties, breach of covenants, breach of other obligations under the credit or related documents, defaults on other material debts, bankruptcy, insolvency and inability to pay debts when due, material judgments, terminations of pension plans or specified underfunding, change of control and failure of certain provisions of any collateral or security document supporting the Company’s credit facility to be fully effective. The cross-default provisions of the ABL Credit Agreement apply if a default occurs on another indebtedness of the company or guarantors in excess of a specified amount and the applicable grace period in respect of the indebtedness has expired, so that the lenders or trustee for indebtedness in default have the right to accelerate. If a fault event

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occurs under the ABL Credit Facility, subject to any applicable grace period, the lenders may terminate their covenants, declare all borrowings under the ABL Credit Facility immediately payable and seize the collateral.

The above summary of the material terms of the ABL Credit Facility does not purport to be complete and is qualified in its entirety by reference to the ABL Credit Agreement, a copy of which is filed as Schedule 10.1 hereto and incorporated by reference herein.

Item 2.03 Creation of a Direct Financial Obligation or Obligation Under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth above in Section 1.01 is incorporated by reference in this Section 2.03.

Item 9.01 Financial statements and supporting documents.

(d) Exhibits.

  Exhibit No.          Exhibit Description
     10.1  *           Fourth Amended and Restated Revolving Credit Agreement dated as of July 13,

      104              Cover Page Interactive Data File (embedded within the Inline XBRL document)

* Certain appendices and exhibits have been omitted in accordance with SK Rule 601(a)(5). The company undertakes to provide a copy of any appendix or document omitted from the US Securities and Exchange Commission on demand.

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