SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AND SECURITY
AGREEMENT (the "Amendment"), dated as of
August 12, 1999, is entered into between
CONGRESS FINANCIAL CORPORATION (WESTERN), a
California corporation ("Lender"), and
GOTTSCHALKS INC., a Delaware corporation
("Borrower"), with its corporate office
located at 0 Xxxxx Xxxx Xxxxx Xxxx, Xxxxxx,
Xxxxxxxxxx 00000.
RECITAL
A. Borrower and Lender have previously
entered into that certain Loan and Security
Agreement dated December 20, 1996, as amended
by the First Amendment to Loan and Security
Agreement, dated as of August 20, 1998, the
Second Amendment to Loan and Security
Agreement, dated as of September 1, 1998, the
Third Amendment to Loan and Security
Agreement, dated as of December 18, 1998, the
Fourth Amendment to Loan and Security
Agreement, dated as of January 29, 1999, and
the Fifth Amendment to Loan and Security
Agreement, dated as of March 1, 1999 (as
amended, supplemented or modified from time to
time, the "Loan Agreement"), pursuant to which
Lender has made certain loans and financial
accommodations available to Borrower. Terms
used herein without definition shall have the
meanings ascribed to them in the Loan
Agreement.
B. Lender and Borrower wish to further
amend the Loan Agreement under the terms and
conditions set forth in this Amendment.
Lender and Borrower are entering into this
Amendment with the understanding and agreement
that, except as specifically provided herein,
none of Lender's rights or remedies as set
forth in the Loan Agreement is being waived or
modified by the terms of this Amendment.
NOW, THEREFORE, in consideration of the
foregoing and the mutual covenants herein
contained, and for other good and valuable
consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties
hereby agree as follows:
1. Section 1.34 of the Loan Agreement
is hereby amended to read in its entirety as
follows:
1.34 "Interest Rate" shall mean, (a)
as to Prime Rate Loans, a rate of one quarter
of one (.25) percentage point per annum less
than the Prime Rate and, as to Eurodollar Rate
Loans, a rate of two (2.00) percentage points
per annum in excess of the Adjusted Eurodollar
Rate (based on the Eurodollar Rate applicable
for the Interest Period selected by Borrower
as in effect three (3) Business Days after the
date of receipt by Lender of the request of
Borrower for such Eurodollar Rate Loans in
accordance with the terms hereof, whether such
rate is higher or lower than any rate
previously quoted to Borrower); and (b) with
respect to Revolving Loans outstanding during
any period in which Borrower shall have
elected to use the advance rate option
provided for in Section 2.1(a)(i)(B) and in
which the sum of the Revolving Loans and
Letter of Credit Accommodations exceeds the
lesser of seventy percent (70%) of the Value
of the Eligible Inventory or thirty-five (35%)
of the Retail Sales Price of the Eligible
Inventory, a rate of two and one-quarter
(2.25) percentage points per annum in excess
of the Adjusted Eurodollar Rate; provided,
however, that (y) in the event Borrower's
pretax income for its fiscal year ending
January 31, 2000 (excluding extraordinary
gains and non-cash losses) exceeds Six Million
Dollars ($6,000,000) and (z) Borrower has
average Excess Availability for the ninety
(90) days preceding such date of not less than
Ten Million Dollars ($10,000,000), the
applicable Interest Rate provided for in the
preceding clause (a) of this Section 1.34
shall be reduced by one-eighth of one (.125)
percentage point, such reduction in the
applicable Interest Rate to be effective as of
the first day of the month immediately
following the date of receipt by Lender of
Borrower's audited annual financial
statements, as provided by Borrower to Lender
pursuant to Section 9.6(a)(iii) hereof,
indicating the required pretax income (and
such reduction shall continue to be in effect
for so long as the Excess Availability
requirement referred to in clause (z) above
continues to be met as measured on a quarterly
basis); and provided further, however, the
Interest Rate shall mean the rate of two and
one-quarter (2.25) percentage points per annum
in excess of the Prime Rate as to Prime Rate
Loans and the rate of four and one-half (4.50)
percentage points per annum in excess of the
Adjusted Eurodollar Rate as to Eurodollar Rate
Loans, at Lender's option, without notice, (a)
for the period on and after the date of
termination or non-renewal hereof, or the date
of the occurrence of any Event of Default or
event which with notice or passage of time or
both would constitute an Event of Default, and
for so long as such Event of Default or other
event is continuing as determined by Lender
and until such time as all Obligations are
indefeasibly paid in full (notwithstanding
entry of any judgment against Borrower) and
(b) on the Revolving Loans at any time
outstanding in excess of the amounts available
to Borrower under Section 2 (whether or not
such excess(es) arise or are made with or
without Lender's knowledge or consent and
whether made before or after an Event of
Default).
2. Section 1.39 of the Loan Agreement is
hereby amended to read in its entirety as
follows:
1.39 "Maximum Credit" shall mean, with
reference to the Revolving Loans and the
Letter of Credit Accommodations, the amount of
One Hundred Forty Million Dollars
($140,000,000).
3. Section 1.55 of the Loan Agreement is
hereby amended to read in its entirety as
follows:
1.55 "Seasonal Period" shall mean the
period from September 1 through January 31 of
each year.
4. Section 2.1(a) of the Loan Agreement is
hereby amended to read in its entirety as
follows:
2.1(a) Subject to, and upon the terms and
conditions contained herein, Lender agrees to
make Revolving Loans to Borrower from time to
time in amounts requested by Borrower up to
the amount equal to:
(i) either (A) the Lessor of: (I)
sixty-five percent (65%) (seventy percent
(70%) during the Seasonal Period) of the Value
of the Eligible Inventory, or (II) thirty-
three percent (33%) (thirty-five percent (35%)
during the Seasonal Period) of the Retail
Sales Price of the Eligible Inventory; or (B)
provided no Event of Default shall have
occurred and be continuing, then at Borrower's
option and upon one (1) day's written notice
to Lender, from November 1 through December 31
of each calendar year, the lesser of (I)
eighty percent (80%) of the Value of Eligible
Inventory, or (II) forty percent (40%) of the
Retail Sales Price of the Eligible Inventory,
which percentages shall remain in effect
through December 31 unless revoked by Borrower
upon one days' written notice to Lender;
provided, however, that advances against
Eligible Domestic In-Transit Inventory shall
not, at any one time, exceed Five Million
Dollars ($5,000,000); minus
(ii) the then undrawn amounts of
outstanding Letter of Credit Accommodations
multiplied by the applicable percentages as
provided for in Section 2.2(c) hereof; and
minus
(iii) any Availability Reserves.
5. Section 9.14 of the Loan Agreement is
hereby amended to read in its entirety as
follows:
9.14 Adjusted Net Worth. Borrower shall,
at all times, maintain Adjusted Worth of not
less than Ninety Million Dollars
($90,000,000); provided, however, Lender will
only test for Borrower's compliance with this
financial covenant on a monthly basis and then
only in the event that Borrower's Excess
Availability is less than Five Million Dollars
($5,000,000).
6. Effectiveness of this Amendment. Lender
must have received the following items, in
form and content acceptable to Lender, before
this Amendment is effective and before Lender
is required to extend any credit to Borrower
as provided for by this Amendment. The date
on which all of the following conditions have
been satisfied is the "Closing Date".
(a) Amendment. This Amendment fully
executed in a sufficient number of
counterparts for distribution to Lender and
Borrower.
(b) Authorizations. Evidence that the
execution, delivery and performance by
Borrower and each guarantor or subordinating
creditor of this Amendment and any instrument
or agreement required under this Amendment
have been duly authorized.
(c) Representations and Warranties. The
representations and warranties set forth
herein and in the Loan Agreement must be true
and correct.
(d) Effectiveness Fee. Lender shall
have received from Borrower a fee in the
amount of $112,500 for the processing and
approval of this Amendment.
(e) Other Required Documentation. All
other documents and legal matters in
connection with the transactions contemplated
by this Amendment shall have been delivered or
executed or recorded and shall be in form and
substance satisfactory to Lender.
7. Representations and Warranties. The
Borrower represents and warrants as follows:
(a) Authority. The Borrower and each
other Loan Party has the requisite corporate
power and authority to execute and deliver
this Amendment, as applicable, and to perform
its obligations hereunder and under the Loan
Documents (as amended or modified hereby) to
which it is a party. The execution, delivery
and performance by the Borrower of this
Amendment and by each other Loan Party of each
Loan Document (as amended or modified hereby)
to which it is a party have been duly approved
by all necessary corporate action of such Loan
Party and no other corporate proceedings on
the part of such Loan Party are necessary to
consummate such transactions.
(b) Enforceability. This Amendment has
been duly executed and delivered by Borrower.
This Amendment and each Loan Document (as
amended or modified hereby) is the legal,
valid and binding obligation of each Loan
Party hereto or thereto, enforceable against
such Loan Party in accordance with its terms,
and is in full force and effect.
(c) Representations and Warranties. The
representations and warranties contained in
each Loan Document (other than any such
representations or warranties that, by their
terms, are specifically made as of a date
other than the date hereof) are correct on and
as of the date hereof as though made on and as
of the date hereof.
(d) No Default. No event has occurred
and is continuing that constitutes an Event of
Default.
8. Choice of Law. The validity of this
Amendment, its construction, interpretation
and enforcement, the rights of the parties
hereunder, shall be determined under, governed
by, and construed in accordance with the
internal laws of the State of California
governing contracts only to be performed in
that State.
9. Counterparts. This Amendment may be
executed in any number of counterparts and by
different parties and separate counterparts,
each of which when so executed and delivered,
shall be deemed an original, and all of which,
when taken together, shall constitute one and
the same instrument. Delivery of an executed
counterpart of a signature page to this
Amendment by telefacsimile shall be effective
as delivery of a manually executed counterpart
of this Amendment.
10. Due Execution. The execution, delivery
and performance of this Amendment are within
the power of Borrower, have been duly
authorized by all necessary corporate action,
have received all necessary governmental
approval, if any, and do not contravene any
law or any contractual restrictions binding on
Borrower.
11. Reference to and Effect on the Loan
Documents.
(a) Upon and after the effectiveness of
this Amendment, each reference in the Loan
Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to
the Loan Agreement, and each reference in the
other Loan Documents to "the Loan Agreement",
"thereof" or words of like import referring to
the Loan Agreement, shall mean and be a
reference to the Loan Agreement as modified
and amended hereby.
(b) Except as specifically amended
above, the Loan Agreement and all other Loan
Documents, are and shall continue to be in
full force and effect and are hereby in all
respects ratified and confirmed and shall
constitute the legal, valid, binding and
enforceable obligations of Borrower to Lender.
(c) The execution, delivery and
effectiveness of this Amendment shall not,
except as expressly provided herein, operate
as a waiver of any right, power or remedy of
Lender under any of the Loan Documents, nor
constitute a waiver of any provision of any of
the Loan Documents.
(d) To the extent that any terms and
conditions in any of the Loan Documents shall
contradict or be in conflict with any terms or
conditions of the Loan Agreement, after giving
effect to this Amendment, such terms and
conditions are hereby deemed modified or
amended accordingly to reflect the terms and
conditions of the Loan Agreement as modified
or amended hereby.
12. Ratification. Borrower hereby restates,
ratifies and reaffirms each and every term and
condition set forth in the Loan Agreement, as
amended hereby, and the Loan Documents
effective as of the date hereof.
13. Estoppel. To induce Lender to enter into
this Amendment and to continue to make
advances to Borrower under the Loan Agreement,
Borrower hereby acknowledges and agrees that,
after giving effect to this Amendment, as of
the date hereof, there exists no Event of
Default and no right of offset, defense,
counterclaim or objection in favor of Borrower
as against Lender with respect to the
Obligations.
IN WITNESS WHEREOF, the parties have
entered into this Amendment as of the date
first above written.
BORROWER
Gottschalks INC.,
a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxx
Title: SVP/CFO
LENDER
CONGRESS FINANCIAL CORPORATION
(WESTERN), a California corporation
By: /s/ Xxxxxxxx Xxxxxxxxxx
Title: Vice President
