8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 6, 2002

Gottschalks Inc.
(Exact name of registrant as specified in its charter)

Delaware (State of Other Jurisdiction of Incorporation)

 

1-09100	77-0159791
(Commission File Number)	(I.R.S. Employer Identification Number)

7 River Park Place East
Fresno, California    93720
(Address of principal executive offices including zip code)

(559) 434-4800
(Registrant's telephone number, including area code)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

Item 5. Other Events

The Company's senior secured revolving credit facility (for which General Electric Capital Corporation ("GE Capital") serves as agent), originally required the Company to obtain an additional $10.0 million of external financing by April 30, 2002, with a minimum of $5.0 million of that amount required by March 31, 2002 (the "Initial Liquidity Event"). As described in the Company's Annual Report on Form 10-K for the year ended February 2, 2002, the Company received net proceeds totaling approximately $6.0 million from three transactions completed prior to March 31, 2002, which fully satisfied the requirements of the Initial Liquidity Event. However, the Company was not able to fund the remaining $4.0 million required by April 30, 2002. As a result, beginning April 30, 2002 and continuing until the remaining $4.0 million was received, the Company was required to maintain a two-week trailing average minimum borrowing availability of at least $13.0 million, with a minimum of $10.0 million of borrowing availability at all times.

On May 6, 2002, the GE facility was amended to reduce the total dollar amount of external financing required from the original $10.0 million to $9.5 million, and to extend the date by which the funds are required to be obtained by June 15, 2002. The amendment, which was dated and was effective as of April 30, 2002, also permanently eliminated the previously described minimum liquidity requirements. The Company has received a commitment letter from a financial institution to finance the Company's partnership interest in its corporate headquarters, subject to certain conditions. Net proceeds from that transaction are expected to be approximately $3.5 million, and the receipt of those proceeds, which are expected on or before June 15, 2002, will result in a total of $9.5 million received from external financings. In the event the Company fails to fund the remaining $3.5 million by June 15, 2002, the Company will be required to pay a fee of $238,500 to the lenders, and the Company will not be eligible to receive an interest rate reduction under the GE facility until those proceeds have been received. However, the failure to complete the transaction by June 15, 2002 will not result in an event of default or additional covenants under the GE facility.

INDEX TO EXHIBITS

Exhibit No.	Description
10.1	Third Amendment to Credit Agreement dated April 30, 2002, by and among Gottschalks Inc., General Electric Capital Corporation, The CIT Group/Business Credit, LaSalle Retail Finance and Foothill Capital Corporation.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Gottschalks Inc. (Registrant)
May 10, 2002	By: /s/ James R. Famalette James R. Famalette President and Chief Executive Officer
May 10, 2002	By: /s/ Michael S. Geele Michael S. Geele Senior Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit No.	Description
10.1	Third Amendment to Credit Agreement dated April 30, 2002, by and among Gottschalks Inc., General Electric Capital Corporation, The CIT Group/Business Credit, LaSalle Retail Finance and Foothill Capital Corporation.

EX-10

Exhibit 10.1

THIRD AMENDMENT TO CREDIT AGREEMENT

THIRD AMENDMENT, dated as of April 30, 2002 (this "Amendment"), to the Credit Agreement referred to below, is entered into by and among GOTTSCHALKS INC., a Delaware corporation ("Borrower"); GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, "GE Capital"), for itself, as a Lender, and as Agent for Lenders; The CIT GROUP/BUSINESS CREDIT, INC., as a Lender; LASALLE RETAIL FINANCE, a division of LASALLE BUSINESS CREDIT, Inc, as agent for STANDARD FEDERAL BANK NATIONAL ASSOCIATION, as a Lender; and FOOTHILL CAPITAL CORPORATION, as a Lender.

W I T N E S S E T H

WHEREAS, Borrower, Agent and Lenders are parties to that certain Credit Agreement dated as of January 31, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"; capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement);

WHEREAS, as a result of the closing by Borrower of the Kimco Credit Agreement and certain other events generating Liquidity Event Proceeds, the Initial Liquidity Hurdle Date occurred prior to March 31, 2002;

WHEREAS, Borrower has requested this amendment to the Credit Agreement in connection with the Subsequent Liquidity Hurdle Date;

NOW THEREFORE, in consideration of the premises, the Amendment Fee (as hereinafter defined), and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Amendment to Section 1.5(a). Section 1.5(a) to the Credit Agreement is hereby amended as of the Amendment Effective Date by amending subsection (ii) of the second paragraph thereof (such paragraph commencing with "The Applicable Revolver LIBOR Margin") to read as follows:

"(ii) by an additional 0.25% effective prospectively from the date (the "Subsequent Liquidity Hurdle Date") on which Borrower shall have obtained Liquidity Event Proceeds from and after January 1, 2002 (including amounts calculated in reaching the Initial Liquidity Hurdle Date) in an aggregate cumulative amount equal to Nine Million Five Hundred Thousand Dollars ($9,500,000); provided, however, that the Initial Liquidity Hurdle Date and the Subsequent Liquidity Hurdle Date, as applicable, shall not be deemed to have occurred for any purpose under this Agreement until and unless (1) Borrower shall have delivered evidence reasonably satisfactory to Agent of receipt of the relevant Liquidity Event Proceeds, and (2) Borrower shall have applied the full amount of such Liquidity Event Proceeds as a payment or prepayment on the Obligations (without a reduction in the Tranche A Revolving Loan Commitments)."

2. Amendment to Section 1.9(e). Section 1.9(e) to the Credit Agreement is hereby amended as of the Amendment Effective Date by amending the second sentence thereof (commencing with "In addition to the foregoing") to read as follows:

"In addition to the foregoing, in the event that the Subsequent Liquidity Hurdle Date shall not have occurred on or before June 15, 2002, Borrower shall pay to Agent, for the ratable benefit of the Tranche A Revolving Lenders, on June 15, 2002, an additional liquidity risk fee in an amount equal to 0.15% multiplied by the amount of the Tranche A Revolving Loan Commitment."

3. Amendment to Annex A to the Credit Agreement. Annex A to the Credit Agreement is hereby amended as of the Amendment Effective Date by deleting the definition of "Liquidity Event Measurement Date" and replacing it with the following:

""Liquidity Event Measurement Date" means each day from and including March 31, 2002 to and including the Initial Liquidity Hurdle Date (but only if such date is after March 31, 2002)."

4. Representations and Warranties. To induce Agent and Lenders to enter into this Amendment, Borrower hereby represents and warrants that:
1. The execution, delivery and performance by Borrower of this Amendment are within Borrower's corporate power and have been duly authorized by all necessary corporate and shareholder action.
2. This Amendment has been duly executed and delivered by or on behalf of Borrower.
3. This Amendment constitutes a legal, valid and binding obligation of Borrower enforceable against Borrower in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).
4. No Default has occurred and is continuing after giving effect to this Amendment.
5. No action, claim or proceeding is now pending or, to the knowledge of Borrower, threatened against Borrower, at law, in equity or otherwise, before any court, board, commission, agency or instrumentality of any federal, state, or local government or of any agency or subdivision thereof, or before any arbitrator or panel of arbitrators, (i) which challenges Borrower's right, power, or competence to enter into this Amendment or, to the extent applicable, perform any of its obligations under this Amendment, the Credit Agreement as amended hereby or any other Loan Document, or the validity or enforceability of this Amendment, the Credit Agreement as amended hereby or any other Loan Document or any action taken under this Amendment, the Credit Agreement as amended hereby or any other Loan Document or (ii) which if determined adversely, is reasonably likely to have or result in a Material Adverse Effect after giving effect to this Amendment. To the knowledge of Borrower, there does not exist a state of facts which is reasonably likely to give rise to such proceedings.
5. No Other Amendments. Except as expressly amended herein, the Credit Agreement shall be unmodified and shall continue to be in full force and effect in accordance with its terms.
6. Amendment Fee. Borrower shall pay to the Agent, for the benefit of the Lenders, in connection with certain recent accommodations provided by Lenders and Lenders' willingness to enter into this Amendment, a non-refundable fee equal to $400,000 (the "Amendment Fee"), payable on the date hereof.
7. Expenses. Borrower hereby reconfirms its obligations pursuant to Section 11.3 of the Credit Agreement to pay and reimburse Agent for all reasonable costs and expenses (including, without limitation, reasonable fees of counsel) incurred in connection with the negotiation, preparation, execution and delivery of this Amendment and all other documents and instruments delivered in connection herewith.
8. Effectiveness. This Amendment shall become effective as of April 30, 2002 (the "Amendment Effective Date") only upon satisfaction in full in the judgment of the Agent of each of the following conditions:
1. Documents. Agent shall have received this Amendment duly executed and delivered by Agent, all Lenders and Borrower and consented and agreed to by GCRC.
2. Payment of Amendment Fee. Borrower shall have paid to Agent, for the benefit of the Lenders, the Amendment Fee.
3. Payment of Expenses. Borrower shall have paid to Agent and Lenders all costs, fees and expenses owing in connection with this Amendment and the other Loan Documents and due to Agent or Lenders (including, without limitation, reasonable legal fees and expenses), in each case to the extent billed to Borrower or otherwise scheduled to be paid on or before the Amendment Effective Date.
4. Representations and Warranties. All representations and warranties of or on behalf of the Credit Parties or GCRC in this Amendment and all the other Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date hereof and on and as of the date that the other conditions precedent in this Section 8 have been satisfied.


9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10. Counterparts. This Amendment may be executed by the parties hereto on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

[Signature Page to Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

GOTTSCHALKS INC.

By: /s/ Michael S. Geele

Title: Senior Vice President/Chief Financial Officer

GENERAL ELECTRIC CAPITAL

CORPORATION,

as Agent and Lender

By: /s/ Todd Gronski

Title: Its Duly Authorized Signatory

THE CIT GROUP/BUSINESS CREDIT INC.,

as Lender

By: /s/ Adrian Avalos

Title: Vice President

FOOTHILL CAPITAL CORPORATION,

as Lender

By: /s/ Juan Barrera

Title: Assistant Vice President

LASALLE RETAIL FINANCE, a division of LASALLE BUSINESS CREDIT, INC., as agent for STANDARD FEDERAL BANK NATIONAL ASSOCIATION N.A.,

as Lender

By: /s David Molinario

Title: Vice President

Acknowledgment, Consent and Agreement to Third Amendment to Credit Agreement:

The undersigned hereby (i) acknowledges and consents to each of the amendments to the Credit Agreement effected by this Amendment and (ii) confirms and agrees that its obligations under the GCRC Letter shall continue without any diminution thereof and shall remain in full force and effect on and after the effectiveness of this Amendment.

Acknowledged, consented and agreed to as of April 30, 2002.

NOW THEREFORE, in consideration of the premises and for other good and

GOTTSCHALKS CREDIT RECEIVABLES CORPORATION, a Delaware corporation

hereby acknowledged, the parties hereto hereby agree as follows:

By: /s/ Michael Geele

Title: President

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