UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 2, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT
For the transition period from __________ to
______________________.
Commission file number 1-09100
Gottschalks Inc.
(Exact name of Registrant as specified in its charter)
Delaware 77-0159791
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7 River Park Place East, Fresno, California 93720
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code
(209) 434-8000
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for shorter period that the
Registrant was required to file such reports); and (2)
has been subject to such filing requirements for the
past 90 days:
Yes X No
The number of shares of the Registrant's common stock
outstanding as of November 30, 1996 was 10,472,915.
<PAGE>
INDEX
GOTTSCHALKS INC. AND SUBSIDIARIES
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed consolidated balance sheets -
November 2, 1996 and February 3, 1996 2
Consolidated statements of operations -
thirteen weeks and thirty-nine weeks ended
November 2, 1996 and October 28, 1995 3
Condensed consolidated statements of cash
flows - thirty-nine weeks ended
November 2, 1996 and October 28, 1995 4
Notes to condensed consolidated financial
statements - thirteen and thirty-nine
weeks ended November 2, 1996 and
October 28, 1995 5 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-19
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item I. GOTTSCHALKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Note 1)
(In thousands of dollars)
November 2, 1996 February 3, 1996
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 4,080 $ 5,113
Cash held by GCC Trust 245 2,280
Receivables - net (Note 2) 14,588 33,243
Merchandise inventories 125,023 87,507
Other 14,365 10,915
Total current assets 158,301 139,058
PROPERTY AND EQUIPMENT 127,299 129,549
Less accumulated depreciation and
amortization 38,727 40,299
88,572 89,250
OTHER LONG-TERM ASSETS 10,415 10,733
$257,288 $239,041
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving lines of credit (Note 4) $ 54,741 $ 45,164
Trade accounts payable 41,832 27,394
Accrued expenses and other liabilities 17,276 18,759
Short-term obligation (paid September 1996) 2,743
Current portion of long-term obligations 2,112 2,094
Total current liabilities 115,961 96,154
LONG-TERM OBLIGATIONS (less current portion):
Notes and bonds payable (Note 4) 29,736 25,654
Capitalized lease obligations (Note 5) 5,424 9,218
35,160 34,872
DEFERRED INCOME 19,723 20,265
DEFERRED LEASE PAYMENTS AND OTHER 11,776 9,833
STOCKHOLDERS' EQUITY 74,668 77,917
$257,288 $239,041
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
GOTTSCHALKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED - Note 1)
(In thousands of dollars, except share data)
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
November 2, October 28, November 2, October 28,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $ 95,675 $86,066 $276,910 $255,884
Service charges & other income 2,952 2,616 10,058 8,383
98,627 88,682 286,968 264,267
COSTS & EXPENSES:
Cost of sales 64,956 58,634 188,969 178,409
Selling, general &
administrative expenses 31,497 30,061 89,870 85,237
Depreciation & amortization 1,650 2,156 5,341 5,962
Interest expense 2,954 2,932 8,562 8,015
101,057 93,783 292,742 277,623
LOSS BEFORE INCOME TAX BENEFIT (2,430) (5,101) (5,774) (13,356)
Income tax benefit (900) (1,937) (2,137) (5,075)
NET LOSS $ (1,530) $(3,164) $ (3,637) $ (8,281)
Net loss per common share $ (.15) $ (.30) $ (.35) $ (.80)
Weighted average number of
common shares outstanding 10,473 10,416 10,457 10,416
</TABLE>
See notes to condensed consolidated financial statements.
<TABLE>
<CAPTION>
GOTTSCHALKS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED - NOTE 1)
(In thousands of dollars)
Thirty-Nine Weeks
Ended
November 2, October 28,
1996 1995
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (3,637) $ (8,281)
Adjustments:
Depreciation and amortization 4,533 4,404
Deferred income taxes 1,586 115
Deferred income and other (267) 586
Changes in operating assets and liabilities:
Receivables, excluding receivables sold
(Note 2) 12,655 10,576
Merchandise inventories (37,516) (38,923)
Trade accounts payable and accrued expenses 9,198 (1,032)
Other current and long-term assets and
liabilities (4,146) (2,570)
Net cash used in operating activities (17,594) (35,125)
INVESTING ACTIVITIES:
Purchases of property and equipment, net of
reimbursements received (5,469) (12,994)
Proceeds from sale/leaseback arrangements and
other 2,010 11,665
Net cash used in investing activities (3,459) (1,329)
FINANCING ACTIVITIES:
Proceeds from revolving lines of credit 353,328 369,006
Principal payments on revolving lines of
credit (343,750) (333,733)
Proceeds from securitization and sale of
receivables (Note 2) 6,000
Proceeds from long-term obligations 3,000 21,291
Principal payments on long-term obligations (4,349) (21,460)
Cash management liability and other 5,791 2,723
Net cash provided by financing
activities 20,020 37,827
INCREASE (DECREASE) IN CASH (1,033) 1,373
CASH AT BEGINNING OF YEAR 5,113 3,156
CASH AT END OF PERIOD $ 4,080 $ 4,529
</TABLE>
See notes to condensed consolidated financial statements.
GOTTSCHALKS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Thirteen and Thirty-Nine Weeks Ended November 2, 1996
and October 28, 1995
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance
with generally accepted accounting principles for
interim financial information and with the instructions
to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting
principles for complete financial statements. In the
opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a
fair presentation have been included. Operating
results for the thirteen and thirty-nine week periods
ended November 2, 1996 are not necessarily indicative
of the results that may be expected for the year ending
February 1, 1997, due to the seasonal nature of the
Company's business and its LIFO inventory valuation
adjustment ("LIFO adjustment"), currently recorded only
at the end of each fiscal year (Note 3). These
financial statements should be read in conjunction with
the financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the
year ended February 3, 1996 (the "1995 Annual Report on
Form 10-K").
The condensed consolidated balance sheet at February 3,
1996 has been derived from the audited consolidated
financial statements at that date.
2. RECEIVABLES SECURITIZATION PROGRAM
As described more fully in the Company's 1995 Annual
Report on Form 10-K, the Company automatically sells
all of its accounts receivable arising under its
private label customer credit cards to a wholly-owned
subsidiary, Gottschalks Credit Receivables Corporation
("GCRC"), and certain of those receivables are
subsequently conveyed to a trust, Gottschalks Credit
Card Master Trust ("GCC Trust"), to be used as
collateral for securities previously issued to
investors. The Company services and administers the
receivables in return for a monthly servicing fee. The
following certificates have been issued under the
receivables securitization program:
Fixed Base Certificates. In 1994, fractional
undivided ownership interests in certain of the
receivables were sold through the issuance of $40.0
million principal amount 7.35% Fixed Base Class A-1
Credit Card Certificates (the "1994 Fixed Base
Certificates") to third-party investors. On October
31, 1996, an additional $6.0 million principal amount
6.79% Fixed Base Class A-1 Credit Card Certificate
(the "1996 Fixed Base Certificate") was issued under
the program. Proceeds from the issuance of the 1996
Fixed Base Certificate were used to reduce outstanding
borrowings under the line of credit with Bank Hapoalim
(Note 4) and pay certain costs associated with the
transaction. Interest on the 1994 and 1996 Fixed Base
Certificates (collectively, the "Fixed Base
Certificates") is earned by the certificateholders on
a monthly basis and the outstanding principal balances
of such certificates are to be repaid in equal monthly
installments commencing September 1998 through
September 1999, through the application of credit card
receivable principal collections during that period.
The issuances of the Fixed Base Certificates were
accounted for as sales for financial reporting
purposes. Accordingly, the $46.0 million of receivables
underlying those certificates and the corresponding
obligations are excluded from the accompanying
financial statements.
Variable Base Certificate. In 1994, a Variable
Base Class A-2 Credit Card Certificate ("Variable Base
Certificate") in the principal amount of up to $15.0
million was also issued to Bank Hapoalim as collateral
for a revolving line of credit financing arrangement
with that bank (Note 4). The issuance of the Variable
Base Certificate was accounted for as a financing
transaction and, accordingly, receivables underlying
the Variable Base Certificate, totaling $1.8 million
and $17.9 million at November 2, 1996 and February 3,
1996, respectively, are included in receivables
reported in the accompanying financial statements.
Receivables reported in the accompanying financial
statements also include $9.6 million and $8.0 million
of receivables as of November 2, 1996 and February 3,
1996, respectively, representing GCRC's retained
interest in receivables sold in connection with the
issuance of the Fixed Base Certificates and
receivables, accrued finance charges and vendor claims
that did not meet certain eligibility requirements of
the program totaling $3.2 million and $7.3 million as
of November 2, 1996 and February 3, 1996, respectively.
3. MERCHANDISE INVENTORIES
Inventories, which consist of merchandise held for
resale, are valued by the retail method and are stated
at last-in, first-out (LIFO) cost, which is not in
excess of market value. The Company includes in its
valuation of inventories certain indirect merchandise
purchasing, handling and storage costs in conformity
with uniform capitalization rules. Current cost, which
approximates replacement cost, under the first-in,
first-out (FIFO) method was equal to the LIFO value of
inventories at February 3, 1996. A valuation of
inventory under the LIFO method is presently made only
at the end of each year based on actual inventory
levels and costs at that time. Since these factors are
subject to variability beyond the control of
management, interim results of operations are subject
to the final year-end LIFO inventory valuation
adjustment.
4. DEBT OBLIGATIONS
Revolving Lines of Credit. On December 5, 1996, the
Company signed a commitment letter to enter into a new
three-and-one-quarter year revolving line of credit
agreement with Congress Financial Corporation
("Congress"). The new line of credit will replace the
Company's current line of credit agreement with Fleet
Capital Corporation ("Fleet") and will provide the
Company with an $80.0 million working capital facility
through March 2000. Borrowings under the arrangement
will be limited to a restrictive borrowing base equal
to 65% of eligible merchandise inventories, increasing
to 70% of inventories during the period of September 1
through December 20 of each year to fund increased
seasonal inventory requirements. Interest under the new
facility will be charged at a rate equal to LIBOR plus
2.5%, with the potential of reducing the interest rate
by 1/4% each year, up to a maximum possible reduction
of 1/2% beginning in fiscal 1998, if specified pre-tax income levels
are attained by the Company. The agreement contains one
financial covenant, pertaining to the maintenance of a
minimum tangible net worth. Management expects the
agreement to be finalized prior to December 31, 1996,
however, given the nature of any financing arrangement,
there can be no assurance that the arrangement will be
finalized, or that its finalization will not be
delayed, subject to a variety of conditions precedent
or other factors.
The Company's current revolving line of credit
arrangement with Fleet provides for borrowings of up to
$66.0 million through September 1997. Such borrowings
are limited to a restrictive borrowing base equal to
60% of eligible merchandise inventories (50% during the
months of January 1997 through March 1997). Interest on
outstanding borrowings under the line of credit is
charged at a rate equal to LIBOR plus 3.75% (9.1% at
November 2, 1996). The maximum amount available for
borrowings under the line of credit was $61.2 million
as of November 2, 1996, of which $58.0 million was
outstanding as of that date. The agreement with Fleet
contains various restrictive covenants. The Company was
in violation of one covenant as of November 2, 1996,
pertaining to the maintenance of a minimum accounts
payable turnover ratio. The Company was, however, in
compliance with the covenant as of the subsequent
testing date. Fleet has agreed to temporarily forebear
any action against the Company with respect to the
violation.
The Company also has a revolving line of credit
arrangement with Bank Hapoalim (Note 2) which provides
for additional borrowings of up to $15.0 million.
Borrowings under the line of credit are limited to a
percentage of the outstanding principal balance of
receivables underlying the Variable Base
Certificate.and therefore, the Company's borrowing
capacity under the line of credit is subject to
seasonal variations that may affect the outstanding
principal balance of such receivables. On October 31,
1996, the maturity of the line of credit was extended
from its original expiration date of March 1997 to
March 1999, in order to coincide more closely with the
maturity of the Fixed Base Certificates (Note 2).
Interest on outstanding borrowings under the line of
credit is charged at a rate equal to LIBOR plus 1.0%
(6.4% at November 2, 1996). At November 2, 1996, $1.5
million, which was the maximum amount available for
borrowings as of that date, was outstanding under the
line of credit with Bank Hapoalim. Due to the seasonal
increase in receivables, the Company was able to
increase borrowings under the line of credit to $9.0
million by December 15, 1996.
Long-Term Borrowings. The Company has four fifteen-year mortgage loans
with Midland Commercial Funding
("Midland") with outstanding balances totaling $19.8
million at November 2, 1996. The Midland loans, due
October and November 2010, bear interest at rates
ranging from 9.23% to 9.39%. The Company also has the
following other long-term loan facilities: (i) a 10.45%
mortgage loan payable with Heller Financial, Inc.
("Heller"), due January 2002, with an outstanding loan
balance of $5.0 million at November 2, 1996; (ii) an
additional $6.0 million mortgage loan payable with
Heller, described more fully below; (iii) two five-year 10.0%
notes payable to Federated Department
Stores, Inc. ("Federated"), due March and July 2001,
with outstanding balances totaling $2.5 million at
November 2, 1996; and (iv) other long-term obligations
with outstanding balances totaling $1.2 million at
November 2, 1996.
The Company entered into an additional seven-year
financing with Heller on October 2, 1996, providing for
the mortgage of its department store in San Luis
Obispo, California. The Company received $3.0 million
of the total $6.0 million arrangement in October 1996.
The finalization of the arrangement and the funding of
the remaining $3.0 million is subject to (i) the
Company achieving a certain level of earnings before
income taxes, depreciation and amortization ("EBITDA")
for the fiscal year ending February 1, 1997; (ii) the
maintenance of a specified minimum net worth; and
(iii) the maintenance of a minimum level of operating
income for the store location in San Luis Obispo.
Management expects the agreement to be finalized on
April 1, 1997 pursuant to the agreement, however, given
the nature of any financing arrangement, there can be
no assurance that the arrangement will be finalized, or
that its finalization will not be delayed, subject to a
variety of conditions precedent or other factors.
Interest is currently being charged on the $3.0 million
received at a variable rate equal to LIBOR plus 3.0%
(8.4% at November 2, 1996), with principal payments to
commence upon funding the remaining $3.0 million of the
loan. Upon its completion, the loan is expected to bear
interest at a fixed rate of approximately 10.0%.
Short-Term Obligation. The Company repaid the
short-term loan of $2.7 million with Wells Fargo Bank,
N. A. on its maturity date of September 5, 1996.
5. LEASE ARRANGEMENTS
In March 1996, the Company finalized an agreement with
Broadway Stores, Inc. ("Broadway"), a wholly-owned
subsidiary of Federated, and the landlord, whereby the
Company vacated its present location in the Modesto,
California Vintage Faire Mall and sub-leased the
Broadway's former store in that mall for the remaining
twelve years of the Broadway lease. Under a separate
agreement with Broadway and the landlord, finalized in
the third quarter of 1996, the Company also vacated its
original location in the Fresno, California Fashion
Fair Mall and reopened a store in that mall under a new
20-year lease in the former Broadway store location.
The Company recognized a gain of $1.3 million in the
first three quarters of 1996 upon the termination of
the original leases, which were accounted for as
capital leases by the Company, representing the
difference between the capital lease obligations and
the net book value of the related assets recorded under
the capital leases. Such amounts are included in
service charges and other income.
As described more fully in the Company's 1995 Annual
Report on Form 10-K, the Company received a $4.0
million lease incentive in the first quarter of 1995 in
connection with one of its fiscal 1995 new store
openings. The $4.0 million has been deferred for
financial reporting purposes and is being amortized
over the 10-year minimum period of the lease.
6. CONTINGENCIES
As described more fully in the Company's 1995 Annual
Report on Form 10-K and the Company's Quarterly Report
on Form 10-Q for the period ended August 3, 1996, the
Company was party to a lawsuit filed in 1992 by F&N
Acquisition Corporation ("F&N") under which, among
other things, F&N originally claimed damages arising
out of the Company's alleged breach of an oral
agreement to purchase an assignment of a lease of a
former Frederick and Nelson store location in Spokane,
Washington. The Company was also party to a related
lawsuit filed by Sabey Corporation ("Sabey"), the owner
of the mall in which the Frederick and Nelson store was
located.
On July 16, 1996, the Company reached agreements with
F&N and Sabey to settle the lawsuits. The combined
total of the settlements (paid in July 1996), including
legal fees and other costs, was not materially
different from the Company's previously recorded
reserve.
GOTTSCHALKS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Following is management's discussion and analysis of
significant factors which have affected the Company's
financial position and its results of operations for
the periods presented in the accompanying condensed
consolidated financial statements.
Thirteen Weeks Ended November 2, 1996 Compared To
Thirteen Weeks Ended October 28, 1995
Results of Operations
The following table sets forth for the periods
indicated certain items from the Company's Consolidated
Statements of Operations, expressed as a percent of net
sales:
<TABLE>
<CAPTION>
Third Quarter
1996 1995
<S> <C> <C>
Net sales 100.0% 100.0%
Service charges & other income 3.1 3.0
103.1 103.0
Costs and Expenses:
Cost of sales 67.9 68.1
Selling, general & administrative expenses 32.9 34.9
Depreciation & amortization 1.7 2.5
Interest expense 3.1 3.4
105.6 108.9
LOSS BEFORE INCOME TAX BENEFIT (2.5) (5.9)
Income tax benefit (0.9) (2.2)
NET LOSS (1.6)% (3.7)%
</TABLE>
Net Sales
Net sales increased by $9.6 million to $95.7 million in
the third quarter of 1996 as compared to $86.1 million
in the third quarter of 1995, an increase of 11.1%.
This increase resulted from a 6.6% increase in
comparable store sales, combined with additional sales
volume generated by three new Gottschalks stores not
open for the entire third quarter of the prior year.
Stores operating in the third quarter of 1996 not open
for the entire period in the third quarter of 1995
include two stores in California, located in
Watsonville (August 1995) and Tracy (October 1995), and
one new store in Reno, Nevada (March 1996). The larger
replacement stores were opened in Visalia (August
1995), Modesto (March 1996) and Fresno (April 1996),
California. The Company currently has no plans for
further expansion during the remainder of fiscal 1996
or during the first half of fiscal 1997.
Service Charges and Other Income
Service charges and other income increased by $400,000
to $3.0 million in the third quarter of 1996 as
compared to $2.6 million in the third quarter of 1995,
an increase of 15.4%. As a percent of net sales,
service charges and other income increased to 3.1% in
the third quarter of 1996 as compared to 3.0% in the
third quarter of 1995.
Service charges associated with the Company's customer
credit cards remained unchanged at $2.5 million in the
third quarters of 1996 and 1995. Credit sales as a
percent of total sales decreased to 43.9% in the third
quarter of 1996 as compared to 44.9% in the third
quarter of 1995. Lower service charge income resulting
from the decrease in credit sales as a percent of total
sales was offset by additional income generated by an
increase to the interest rate charged on outstanding
customer credit card balances to 21.6% from 19.8% and
an increase to the late charge assessed on delinquent
credit card balances, both effective during the third
quarter of 1996.
Other income, which includes the amortization of
deferred income and other miscellaneous income and
expense items, increased by $400,000 to $500,000 in the
third quarter of 1996 as compared to $100,000 in the
third quarter of 1995. This increase is primarily
attributable to a gain of $200,000 recorded in the
third quarter of 1996 resulting from the termination of
a lease, (see Note 5 to the Condensed Consolidated
Financial Statements), as compared to a $175,000
reserve for a general business claim recorded in the
third quarter of 1995.
Cost of Sales
Cost of sales increased by $6.4 million to $65.0
million in the third quarter of 1996 as compared to
$58.6 million in the third quarter of 1995, an increase
of 10.9%. The Company's gross margin percent increased
to 32.1% in the third quarter of 1996 as compared to
31.9% in the third quarter of 1995. This increase in
gross margin percent is primarily due to increased
sales of higher gross margin women's, men's and
children's apparel, a higher initial inventory mark-on
percentage (through favorable vendor pricing) and a
reduction of seasonal clearance and storewide sale
event markdowns as compared to the same period of the
prior year. The Company includes in inventory the
capitalization of certain indirect purchasing,
merchandise handling and inventory storage costs to
better match sales with these related costs (uniform
capitalization). Excluding the effect of such costs,
the Company's gross margin percent increased to 35.7%
in the third quarter of 1996 as compared 35.6% in the
third quarter of 1995.
The Company's interim gross margin percent may not be
indicative of its gross margin percent for a full year,
due to the seasonal nature of the Company's business
and its LIFO inventory valuation adjustment ("LIFO
adjustment"), currently recorded only at the end of
each fiscal year. Management believes the Company's
fiscal 1996 LIFO adjustment will not materially effect
its fiscal 1996 results of operations.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased
by $1.4 million to $31.5 million in the third quarter
of 1996 as compared to $30.1 million in the third
quarter of 1995, an increase of 4.7%. As a percent of
net sales, selling, general and administrative expenses
decreased to 32.9% in the third quarter of 1996 as
compared to 34.9% in the third quarter of 1995.
Including the effect of certain costs reclassified to
cost of sales under uniform capitalization rules,
selling, general and administrative costs as a percent
of net sales decreased to 38.3% in the third quarter of
1996 as compared to 41.3% in the third quarter of 1995.
This decrease as a percent of net sales is due to the
increase in sales volume, combined with the continued
implementation of Company-wide expense control measures
to reduce operating expenses.
Depreciation and Amortization
Depreciation and amortization expense, which includes
the amortization of new store pre-opening costs,
decreased by $500,000 to $1.7 million in the third
quarter of 1996 as compared to $2.2 million in the
third quarter of 1995, a decrease of 22.7%. As a
percent of net sales, depreciation and amortization
expense decreased to 1.7% in the third quarter of 1996
as compared to 2.5% in the third quarter of 1995.
These decreases resulted from lower amortization of new
store pre-opening costs as compared to the same period
of the prior year, due to fewer new store openings,
partially offset by higher depreciation expense related
to capital expenditures for new stores.
Certain costs associated with the opening of new stores
are deferred and amortized generally on a straight-line
basis not to exceed a twelve month period. Management
expects the amortization of new store pre-opening costs
to be lower in fiscal 1996 as compared to fiscal 1995
due to fewer new store openings.
Interest Expense
Interest expense, which includes the amortization of
deferred financing costs, increased by $100,000 to $3.0
million in the third quarter of 1996 as compared to
$2.9 million in the third quarter of 1995. Due to the
increase in sales volume, interest expense as a percent
of net sales decreased to 3.1% in the third quarter of
1996 as compared to 3.4% in the third quarter of 1995.
The dollar increase in interest expense is primarily
due to additional long-term financing arrangements
entered into since the same period of the prior year,
in addition to higher interest expense associated with line of
credit borrowings during the period. The increase in
line of credit interest during the period was due to
higher average outstanding borrowings under the
Company's various lines of credit ($50.8 million in the
third quarter of 1996 as compared to $47.5 million in
the third quarter of 1995), primarily to fund increased
inventory requirements associated with new and larger
replacement stores opened since the same period of the
prior year. This increase was partially offset by a
decrease in the weighted-average interest rate
applicable to line of credit borrowings (8.7% in the
third quarter of 1996 as compared to 9.2% in the third
quarter of 1995), due to a decrease in LIBOR and a
larger percentage of borrowings outstanding under more
cost-effective financing arrangements, including the
line of credit with Bank Hapoalim and the
securitization program, during the period.
As described more fully in "Liquidity and Capital
Resources", management expects interest expense as a
percent of net sales to decrease in fiscal 1997 as
compared to fiscal 1996 as a result of the new line of
credit financing arrangement expected to be finalized
during the fourth quarter of 1996.
Income Taxes
The interim effective tax credits of (37.0%) for the
third quarter of 1996 and (38.0%) for the third quarter
of 1995 relates to net losses incurred during those
periods and represents the Company's best estimate of
the annual effective tax rate for those fiscal years.
Net Loss
The Company reduced its net loss by $1.7 million to a
net loss of $1.5 million in the third quarter of fiscal
1996 as compared to a net loss of $3.2 million in the
third quarter of fiscal 1995. On a per share basis, the
net loss was reduced by $.15 per share to a net loss of
($.15) per share in the third quarter of 1996 as
compared to a net loss of ($.30) per share in the third
quarter of 1995.
Thirty-Nine Weeks Ended November 2, 1996 Compared To
Thirty-Nine Weeks Ended October 28, 1995
Results of Operations
The following table sets forth for the periods
indicated certain items from the Company's Consolidated
Statements of Operations, expressed as a percent of net
sales:
<TABLE>
<CAPTION>
Three Quarters
1986 1985
<S> <C> <C>
Net sales 100%% 100%
Service charges & other income 3.6 3.3
103.6 103.3
Costs and Expenses:
Cost of sales 68.2 69.7
Selling, general & administrative expenses 32.5 33.3
Depreciation & amortization 1.9 2.3
Interest expense 3.1 3.2
105.7 108.5
LOSS BEFORE INCOME TAX BENEFIT (2.1) (5.2)
Income tax benefit (0.8) (2.0)
NET LOSS (1.3)% (3.2)%
</TABLE>
Net Sales
Net sales increased by $21.0 million to $276.9 million
in the first three quarters of 1996 as compared to
$255.9 million in the first three quarters of 1995, an
increase of 8.2%. This increase resulted from a 3.2%
increase in comparable store sales, combined with
additional sales volume generated by six new
Gottschalks stores open for the entire first three
quarters of the prior year.
Stores operating in the first three quarters of 1996
not open for the entire first three quarters of 1995
include four stores in California, located in Auburn
(February 1995), San Bernardino (April 1995),
Watsonville (August 1995) and Tracy (October 1995), and
two stores in Nevada, located in Carson City (March
1995) and Reno (March 1996). The larger replacement
stores were opened in Visalia (August 1995), Modesto
(March 1996) and Fresno (April 1996), California.
Service Charges and Other Income
Service charges and other income increased by $1.7
million to $10.1 million in the first three quarters
of 1996 as compared to $8.4 million in the first three
quarters of 1995, an increase of 20.2%. As a percent of
net sales, service charges and other income increased
to 3.6% in the first three quarters of 1996 as compared
to 3.3% in the first three quarters of 1995.
Service charges associated with the Company's customer
credit cards decreased by $200,000 to $7.7 million in
the first three quarters of 1996 as compared to $7.9
million in the first three quarters of 1995, a decrease
of 2.6%. This decrease is primarily due to the more
timely payment of outstanding balances by customers,
combined with a decrease in credit sales as a percent
of total sales to 44.4% in the first three quarters of
1996 as compared to 44.9% in the first three quarters
of 1995.
Other income, which includes the amortization of
deferred income and other miscellaneous income and
expense items, increased to $2.4 million in the first
three quarters of 1996 as compared to $500,000 in the
first three quarters of 1995, an increase of $1.9
million. This increase is primarily attributable to a
gain of $1.3 million resulting from the termination of
two leases and the amortization of a lease incentive
recorded in the first three quarters of fiscal 1996
(see Note 5 to the Condensed Consolidated Financial
Statements) as compared to a $175,000 reserve for a
general business claim and other miscellaneous reserves
recorded in the first three quarters of fiscal 1995.
Cost of Sales
Cost of sales increased by $10.6 million to $189.0
million in the first three quarters of 1996 as compared
to $178.4 million in the first three quarters of 1995,
an increase of 5.9%. The Company's gross margin percent
increased to 31.8% in the first three quarters of 1996
as compared to 30.3% in the first three quarters of
1995. Excluding the effect of certain costs
reclassified to cost of sales under uniform
capitalization rules, the gross margin percent
increased to 36.2% in the first three quarters of 1996
as compared to 35.1% in the first three quarters of
1995. This increase in gross margin percent is
primarily due to increased sales of higher gross
margin women's and men's and children's apparel, a
higher initial inventory mark-on percentage (through
favorable vendor pricing), and a reduction of seasonal
clearance and storewide sale event markdowns as
compared to the same period of the prior year. The
Company's gross margin percent in the first three
quarters of 1995 was negatively impacted by (i)
increased competition resulting from pricing policies
of two financially troubled retailers operating in
certain of the Company's market areas; (ii) increased
markdowns taken in an attempt to improve sales of slow-moving spring and
summer apparel and in connection with
a revision in the Company's women's apparel
merchandising strategy; and (iii) increased promotional
activity related to new store openings and storewide
sale events.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased
by $4.7 million to $89.9 million in the first three
quarters of 1996 as compared to $85.2 million in the
first three quarters of 1995, an increase of 5.5%. As a
percent of net sales, selling, general and
administrative expenses decreased to 32.5% in the first
three quarters of 1996 as compared to 33.3% in the
first three quarters of 1995. Including the effect of
certain costs reclassified to cost of sales under
uniform capitalization rules, selling, general and
administrative costs as a percent of net sales
decreased to 37.7% in the first three quarters of 1996
as compared to 39.2% in the first three quarters of
1995. This decrease as a percent of net sales is due to
the increase in sales volume, combined with the
continued implementation of Company-wide expense
control measures to reduce operating expenses.
Depreciation and Amortization
Depreciation and amortization expense decreased by
$700,000 to $5.3 million in the first three quarters of
1996 as compared to $6.0 million in the first three
quarters of 1995, a decrease of 11.7%. As a percent of
net sales, depreciation and amortization expense
decreased to 1.9% in the first three quarters of 1996
as compared to 2.3% in the first three quarters of
1995. These decreases resulted from lower amortization
of new store pre-opening costs as compared to the same
period of the prior year, due to fewer new store
openings, partially offset by higher depreciation
expense related to capital expenditures for new stores.
Interest Expense
Interest expense increased by $600,000 to $8.6 million
in the first three quarters of 1996 as compared to $8.0
million in the first three quarters of 1995, an
increase of 7.5%. Due to the increase in sales volume,
interest expense as a percent of net sales decreased to
3.1% in the first three quarters of 1996 as compared to
3.2% in the first three quarters of 1995. The dollar
increase in interest expense is primarily due to
additional long-term financing arrangements entered
into since the same period of the prior year, in
addition to higher interest expense associated with
line of credit borrowings during the period. The
increase in line of credit interest during the period
was due to higher average outstanding borrowings under
the Company's various lines of credit ($46.0 million in
the first three quarters of 1996 as compared to $42.4
million in the first three quarters of 1995), primarily
to fund increased inventory requirements associated
with the new and larger replacement stores opened since
the same period of the prior year. This increase was
partially offset by a decrease in the weighted-average
interest rate applicable to line of credit borrowings
(8.7% in the first three quarters of fiscal 1996 as
compared to 8.8% in the first three quarters of fiscal
1995), due to a decrease in LIBOR and a larger
percentage of borrowings outstanding under more cost-effective
financing arrangements, including the line of
credit with Bank Hapoalim and the securitization
program, during the period. (See "Liquidity and Capital
Resources.")
Income Taxes
The interim effective tax credit of (37.0%) for the
first three quarters of 1996 as compared to (38.0%) for
the first three quarters of 1995 relates to net losses
incurred during those periods and represents the
Company's best estimate of the annual effective tax
rate for those fiscal years.
Net Loss
The Company reduced its net loss by $4.7 million to a
net loss of $3.6 million in the first three quarters of
1996 as compared to a net loss of $8.3 million in the
first three quarters of 1995. On a per share basis, the
net loss was reduced by $.45 per share to a net loss of
($.35) per share in the first three quarters of 1996 as
compared to a net loss of ($.80) per share in the first
three quarters of 1995.
Liquidity and Capital Resources
The Company's working capital requirements are
currently met through a combination of cash, borrowings
under its revolving lines of credit and its
securitization program. Management believes the Company
has adequate cash and borrowing capacity under its
revolving lines of credit to meet its liquidity needs.
The statements in this section contain forward-looking
statements. As described more fully below, numerous
factors could cause actual results to differ materially
from the forward-looking statements described.
On December 5, 1996, the Company signed a commitment
letter to enter into a new three-and-one-quarter year
revolving line of credit financing arrangement with
Congress Financial Corporation ("Congress"). The new
line of credit will replace the Company's current line
of credit with Fleet Capital Corporation ("Fleet"), and
will provide the Company with an $80.0 million working
capital facility through March 2000, representing a
$14.0 million increase to its previous $66.0 million
facility with Fleet. Borrowings under the new line of
credit will be limited to 65% of eligible merchandise
inventories, increasing to 70% during the period of
September 1 through December 20 of each year to fund
increased seasonal inventory requirements. Interest
under the new line of credit will be charged at a rate
equal to LIBOR plus 2.5%, with the potential of
reducing the interest rate by 1/4% each year, up to a
maximum possible reduction of up to 1/2% beginning in
fiscal 1998, if specified pre-tax income levels are attained. The
agreement contains one restrictive financial covenant,
pertaining to the maintenance of a minimum tangible net
worth. Initial proceeds from the arrangement will be
used to repay all outstanding borrowings under the line
of credit with Fleet, with the remaining funds to be
available for working capital purposes. Management
expects the agreement to be finalized prior to December
31, 1996, however, given the nature of any financing
arrangement, there can be no assurance that the
arrangement will be finalized, or that its finalization
will not be delayed, subject to a variety of conditions
precedent or other factors.
The Company's current revolving line of credit
arrangement with Fleet provides for borrowings of up to
$66.0 million through September 1997. Borrowings under
the line of credit are limited to a restrictive
borrowing base equal to 60% of eligible merchandise
inventory (50% during the months of January 1997
through March 1997). Interest under the Fleet line of
credit is charged at a rate equal to LIBOR plus 3.75%
(9.1% at November 2, 1996). The maximum amount
available for borrowings under the line of credit was
$61.2 million at November 2, 1996, of which $58.0
million was outstanding as of that date. The agreement
with Fleet contains various restrictive covenants. The
Company was in violation of one covenant pertaining to
the maintenance of a minimum accounts payable turnover
ratio as of November 2, 1996. The Company was, however,
in compliance with the covenant as of the subsequent
testing date. Fleet has agreed to temporarily forebear
any action against the Company with respect to the
violation.
The Company also has a revolving line of credit with
Bank Hapoalim which provides for additional borrowings
of up to $15.0 million, limited to a restrictive
borrowing base. On October 31, 1996, the expiration
date of the line of credit was extended for two years
through March 1999, to coincide more closely with the
maturity of the Fixed Base Certificates. Interest on
outstanding borrowings under the line of credit is
charged at a rate equal to LIBOR plus 1.0%, (6.4% at
November 2, 1996). At November 2, 1996, $1.5 million,
which was the maximum amount available for borrowings
as of that date, was outstanding under the line of
credit with Bank Hapoalim. Due to the seasonal increase
in receivables, the Company was able to increase
borrowings under the line of credit to $9.0 million by
December 15, 1996. As described more fully below, the
issuance of an additional Fixed Base Certificate under
the Company's receivables securitization program has
reduced the level of receivables available to
collateralize the Variable Base Certificate, thus
reducing the Company's borrowing capacity under the
facility.
The Company entered into a seven-year financing with
Heller Financial, Inc. ("Heller") on October 2, 1996,
providing for the mortgage of its department store in
San Luis Obispo, California. The Company received $3.0
million of the total $6.0 million arrangement in
October 1996. The finalization of the arrangement and
the funding of the remaining $3.0 million is subject to
(i) the Company achieving a certain level of earnings
before income taxes, interest expense, depreciation and
amortization ("EBITDA") for the fiscal year ending
February 1, 1997; (ii) the maintenance of a specified
minimum net worth; and (iii) the maintenance of a
minimum level of operating income for the store
location in San Luis Obispo. Management expects the
agreement to be finalized on April 1, 1997 pursuant to
the agreement, however, given the nature of any
financing arrangement, there can be no assurance that
the arrangement will be finalized, or that its
finalization will not be delayed, subject to a variety
of conditions precedent or other factors. Interest is
currently being charged on the $3.0 million received at
a variable rate equal to LIBOR plus 3.0%, (8.4% at
November 2, 1996), with principal payments to commence
upon funding the remaining $3.0 million of the loan.
Upon its completion, the loan is expected to bear
interest at a fixed rate of approximately 10.0%.
The Company's other short-term and long-term borrowing
arrangements are described more fully in Note 4 to the
accompanying Condensed Consolidated Financial
Statements.
The Company's receivables securitization program is
described more fully in its 1995 Annual Report on Form
10-K and Note 2 to the Condensed Consolidated Financial
Statements. On October 31, 1996, an additional $6.0
million principal amount 6.79% Fixed Base Certificate
was issued under the program. Proceeds from the
issuance were used to reduce outstanding borrowings
under the line of credit with Bank Hapoalim. The
Company continually seeks to divert as large a
percentage of total borrowings as possible to its
securitization program, as the program provides the
most cost-effective means of borrowing funds to the
Company.
Net cash used in operating activities was $17.6 million
in the first three quarters of 1996 as compared to
$35.1 million in the first three quarters of 1995, a
decrease of $17.5 million. Cash used in operating
activities in the first three quarters of 1996
consisted primarily of seasonal increases in inventory
levels, a decrease in trade accounts payable and the
settlement of pending litigation (see Note 6 to the
Condensed Consolidated Financial Statements). Such uses
of cash were partially offset by cash provided by (i)
improved operating results; (ii) the payment of
approximately $7.6 million of operating expenses
related to fiscal 1996 during the 53rd week of fiscal
1995 as a result of the calendar shift in fiscal 1995;
(iii) the receipt of $2.8 million in the first quarter
of 1996 in connection with the filing of certain
amended income tax returns; and (iv) a decrease in
customer credit card receivables. The decrease in
credit card receivables is primarily seasonal in
nature, in that receivables are typically at their
highest level following the Christmas selling season
and decline thereafter as customers repay their account
balances. Net cash used in operating activities in the
first three quarters of 1995 reflects increased
inventory requirements associated with new stores,
higher costs associated with the opening of those new
stores during the period, a decrease in certain accrued
expenses (including sales tax), and the payment of $3.0
million to settle stockholder litigation (see the
Company's 1995 Annual Report on Form 10-K). Such uses
of cash were partially offset by the receipt of $4.0
million in connection with entering into a new lease
during the period .
Net cash used in investing activities was $3.5 million
in the first three quarters of 1996 as compared to$1.3
million in the first three quarters of 1995, an
increase of $2.2 million. Net cash used in investing
activities in the first three quarters of 1996 and 1995
consisted primarily of capital expenditures for tenant
improvements, construction costs and furniture,
fixtures and equipment associated with new and certain
existing store locations, net of amounts received as
reimbursements for certain of those expenditures and
proceeds from various sale and leaseback arrangements.
The Company received $1.9 million in connection with
the sale and leaseback of certain fixtures and
equipment in the first three quarters of 1996, and
received $11.6 million in connection with the sale and
leaseback of the Company's department store in Capitola
in the first three quarters of 1995.
Net cash provided by financing activities was $20.0
million in the first three quarters of 1996 as compared
to $37.8 million in the first three quarters of 1995, a
decrease of $17.8 million. Total advances under the
Company's various lines of credit, net of repayments,
were lower in the first three quarters of 1996 as
compared to the same period in the prior year as a
result of improved operating results, the application
of proceeds from the issuance of a $6.0 million Fixed
Base Certificate and the $3.0 million Heller mortgage
loan, the payment of approximately $7.6 million of
fiscal 1996 operating expenses during the 53rd week of
fiscal 1995, the receipt of $2.8 million from the
filing of certain amended income tax returns and from a
reduction of capital and other expenditures related to
new store openings.
The Company's 1996 expansion program included the
opening of one new 125,000 square foot department store
in Reno, Nevada in March 1996 and the relocation of two
existing stores in California into larger stores in the
Modesto Vintage Faire Mall (an increase from 89,600
square feet to 163,500 square feet - March 1996) and
the Fresno Fashion Fair Mall (an increase from 76,700
square feet to 160,000 square feet - April 1996.) The
Company currently has no further plans for expansion
during the remainder of fiscal 1996 or during the first
half of fiscal 1997.
Seasonality
The Company's business, like that of most retailers, is
subject to seasonal influences, with the major portion
of net sales, gross profit and operating results
realized during the second half of each fiscal year,
which includes the back-to-school and Christmas selling
seasons. In addition, the Company's results of
operations and cash flows may also vary from quarter to
quarter as a result of, among other things, the timing
and level of the Company's sales promotions, weather,
fashion trends and the overall health of the economy in
the Company's market areas.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed pursuant to the
requirements of Item 601 of Regulation S-K:
Exhibit No. Description
10.50 Forbearance Agreement dated
November 18, 1996, by and
between Gottschalks Inc. and
Fleet Capital Corporation.
10.51 Amended and Restated Series
1994-1 Supplement to Pooling
and Servicing Agreement, dated
October 31, 1996, by and among
Gottschalks Credit Receivables
Corporation, Gottschalks Inc.
and Bankers Trust Company.
10.52 Series 1996-1 Supplement to
Pooling and Servicing Agreement
dated as of November 1, 1996,
by and among Gottschalks Credit
Receivables Corporation,
Gottschalks Inc. and Bankers
Trust Company.
10.53 Promissory Note and Security
Agreement dated October 2, 1996
by and between Gottschalks Inc.
and Heller Financial, Inc.
10.54 Commitment Letter dated December 5, 1996 by and between
Gottschalks Inc. and Congress Financial Corporation.
27 Financial Data Schedule.
(b) The Company did not file Current Reports
on Form 8-K during the thirteen week
period ended November 2, 1996.
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)
December 17, 1996
\s\ Joseph W. Levy
(Joseph W. Levy, Chairman
and Chief Executive Officer)
December 17, 1996
\s\ Alan A. Weinstein
(Alan A. Weinstein,
Senior Vice President and
Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE IS BEING FILED IN ACCORDANCE WITH REGULATION S-T
AND INCLUDES UNAUDITED SELECTED FINANCIAL DATA FROM THE COMPANY'S QUARTERLY
REPORT ON FORM 10-Q FOR THE THIRD QUARTER ENDED NOVEMBER 2, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-END> NOV-02-1996
<CASH> 4,080
<SECURITIES> 0
<RECEIVABLES> 15,784
<ALLOWANCES> 1,196
<INVENTORY> 125,023
<CURRENT-ASSETS> 158,301
<PP&E> 127,299
<DEPRECIATION> 38,727
<TOTAL-ASSETS> 257,288
<CURRENT-LIABILITIES> 115,961
<BONDS> 35,160
0
0
<COMMON> 105
<OTHER-SE> 74,562
<TOTAL-LIABILITY-AND-EQUITY> 257,288
<SALES> 276,910
<TOTAL-REVENUES> 286,986
<CGS> 188,969
<TOTAL-COSTS> 188,969
<OTHER-EXPENSES> 5,341
<LOSS-PROVISION> 2,205
<INTEREST-EXPENSE> 8,562
<INCOME-PRETAX> (5,774)
<INCOME-TAX> (2,137)
<INCOME-CONTINUING> (3,637)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,637)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
FORBEARANCE AGREEMENT
This Forbearance Agreement (this "Forbearance
Agreement") is entered into as of the 19th day of
November, 1996, by and between Fleet Capital
Corporation, a Rhode Island corporation ("Lender"), and
Gottschalks Inc., a Delaware corporation ("Borrower"),
with reference to the following facts:
A. Lender and Borrower are parties to that
certain Loan and Security Agreement, dated as of March
30, 1994, as amended, pursuant to which Lender has
provided financial accommodations to Borrower on the
terms and conditions set forth therein. (Said Loan and
Security Agreement, as in effect from time to time,
together with all exhibits and schedules thereto, is
hereinafter referred to as the "Loan Agreement.")
B. Borrower has informed Lender that Borrower
is in violation of the financial covenant contained in
Section 8.3(I) of the Loan Agreement as of the end of
Borrower's October 1996 Fiscal Period.
C. Borrower has requested that Lender agree to
temporarily forbear from taking action against Borrower
based upon such violation of Section 8.3(I) of the Loan
Agreement, and Lender is willing to do so on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the
foregoing and the agreements contained herein, Lender
and Borrower hereby agree as follows:
1. Use of Terms Defined in Loan
Agreement. All capitalized terms that are defined in
the Loan Agreement and that are used without definition
herein shall have the meanings given to them in the
Loan Agreement.
2. Borrower's Acknowledgment of Event of
Default. Borrower acknowledges that, as of the end of
its October 1996 Fiscal Period, Borrower was in
violation of the Payables Turnover Rate covenant set
forth in Section 8.3(I) of the Loan Agreement.
Borrower acknowledges that such violation ("Applicable
Default") constitutes an Event of Default under the
Loan Agreement.
3. Lender's Agreement to Forbear Action
Based on Applicable Default. Lender agrees that until
the earlier of (i) the date upon which Borrower's
financial statements for its November 1996 Fiscal
Period are delivered to Lender, or (ii) the date by
which such financial statements are required to be
delivered to Lender pursuant to the Loan Agreement,
Lender will forbear from exercising any remedies
arising from the occurrence of the Applicable Default;
provided, however, that Lender, in its sole discretion,
may terminate such forbearance without any notice or
demand of any kind whatsoever upon the occurrence of
any other Event of Default under the Loan Agreement,
whether of the same or a different nature. Such
forbearance shall not constitute a waiver by Lender of
the existence of the Applicable Default, and Lender
shall not be under any obligation to waive the
Applicable Default or to grant any further forbearance
with respect thereto. This Forbearance Agreement shall
not constitute a waiver or agreement to forbear with
respect to any other Default or Event of Default that
might not exist or hereafter arise under the Loan
Agreement, whether of the same or a different nature.
4. Continuing Representations of
Borrower. Borrower represents and warrants to Lender
that as of the date hereof all representations and
warranties contained in the Loan Agreement are complete
and correct in all material respects, and that no
Defaults or Events of Default under the Loan Agreement,
other than the Applicable Default, have occurred and
are continuing.
5. Incorporation into Loan Agreement.
The terms and conditions of this Forbearance shall be
incorporated by reference in the Loan Agreement as
though set forth in full therein. In the event of any
inconsistency between the provisions of this
Forbearance Agreement and any other provision of the
Loan Agreement, the terms and provisions of this
Forbearance Agreement shall govern and control. Except
to the extent, if any, otherwise provided herein, all
of the provisions of the Loan Agreement shall remain in
full force and effect to the extent in effect on the
date hereof. The Loan Agreement, this Forbearance
Agreement, and the other Loan Documents constitute the
complete agreement among the parties and supersede any
prior written or oral agreements, writing,
communications, or understandings of the parties with
respect to the subject matter hereof and thereof.
6. Section Headings. The headings of
the Sections hereof are for convenience only and
without substantive meaning, and shall not be used in
interpreting any provision of this Forbearance
Agreement.
7. Counterparts. This Forbearance
Agreement may be executed in counterparts, each of
which shall be deemed to be an original but all of
which shall be one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have
executed this Forbearance Agreement as of the day and
year first written above.
("Lender")
FLEET CAPITAL CORPORATION
By: /s/ Alisa Frederick
Vice President
("Borrower")
GOTTSCHALKS INC.
By: /s/ Alan A. Weinstein
Senior Vice President and
Chief Financial Officer
[EXECUTION COPY]
GOTTSCHALKS CREDIT RECEIVABLES CORPORATION
Depositor
GOTTSCHALKS INC.
Servicer
and
BANKERS TRUST COMPANY
Trustee
___________________________________
AMENDED AND RESTATED
SERIES 1994-1 SUPPLEMENT
Dated as of October 31, 1996
to
POOLING AND SERVICING AGREEMENT
Dated as of March 30, 1994
___________________________________
GOTTSCHALKS CREDIT CARD MASTER TRUST
SERIES 1994-1
TABLE OF CONTENTS
Page
ARTICLE I
Creation of the Series 1994-1 Certificates. 1
SECTION 1.01. Designation. . . . . . . . . . . . . 1
ARTICLE II
Definitions . . . . . . . . . 2
SECTION 2.01. Definitions. . . . . . . . . . . . . . 2
ARTICLE III
Servicing Fee. . . . . . . . .23
SECTION 3.01. Servicing Compensation . . . . . . . 23
ARTICLE IV
Rights of Certificateholders and
Allocation and Application of Collections. 24
SECTION 4.01. Allocations and Distributions. . . . 24
SECTION 4.02. Interest; Unutilized Commitment Fee. 41
SECTION 4.03. Determination of Monthly Principal . 44
SECTION 4.04. Series Accounts. . . . . . . . . . . 45
SECTION 4.05. Capitalized Interest Account . . . . 47
SECTION 4.06. Retained Amount Account. . . . . . . 47
SECTION 4.07. Prepayment Account; Spread Account;
Successor Servicer Account . . . . . 51
SECTION 4.08. Deficiency Amount. . . . . . . . . . 53
SECTION 4.09. Investor Charge-Offs . . . . . . . . 54
ARTICLE V
Distributions and Reports to
Certificateholders. . . . . . . 56
SECTION 5.01. Distributions . . . . . . . . . . 56
SECTION 5.02. Reports and Statements to
Certificateholders . . . . . . . . . 56
ARTICLE VI
The Certificates . . . . . . . 57
SECTION 6.01. The Fixed Base Certificates . . . 57
SECTION 6.02. The Variable Base Certificate. . . . 58
SECTION 6.03. Transfer Restrictions . . . . . . 59
SECTION 6.04. Prepayment of the VBC Invested
Amount . . 60
SECTION 6.05. The Subordinated Certificate. . . 60
ARTICLE VII
Early Amortization Events. . . . 60
SECTION 7.01. Additional Early Amortization
Events. . . 60
SECTION 7.02. Waiver. . . . . . . . . . . . . . 63
ARTICLE VIII
Optional Repurchase . . . . . 63
SECTION 8.01. Optional Repurchase . . . . . . . 63
ARTICLE IX
Final Distributions . . . . . . 64
SECTION 9.01. Final Distributions . . . . . . . 64
ARTICLE X
Miscellaneous Provisions . . . . .. 67
SECTION 10.01. Ratification of Agreement;
Amendment and Restatement of
Existing Series Supplement . . . . . 67
SECTION 10.02. Counterparts . . . . . . . . . . . . 68
SECTION 10.03. GOVERNING LAW. . . . . . . . . . . . 68
EXHIBITS
EXHIBIT A-1 Form of Fixed Base Certificate
EXHIBIT A-2 Form of Variable Base Certificate
EXHIBIT A-3 Form of Subordinated Certificate
EXHIBIT B Form of Monthly Distribution
Statement
EXHIBIT C Form of Representation Letter
SCHEDULES
SCHEDULE I List of Accounts
AMENDED AND RESTATED SERIES 1994-1
SUPPLEMENT dated as of October 31, 1996 (the "Series
Supplement"), among GOTTSCHALKS CREDIT RECEIVABLES
CORPORATION, a Delaware corporation, as Depositor,
GOTTSCHALKS INC., a Delaware corporation, as Servicer,
and BANKERS TRUST COMPANY, a New York banking
corporation, not in its individual capacity but solely
as Trustee, amending and restating the Amended and
Restated Series 1994-1 Supplement, dated as of
September 16, 1994, as modified by that certain Waiver
Agreement, dated as of November 23, 1994, in each case,
among the Depositor, the Servicer and the Trustee (the
"Existing Series Supplement").
RECITALS
Section 6.03 of the Pooling and Servicing
Agreement, dated as of March 30, 1994, as amended by
Amendment No. 1 to Pooling and Servicing Agreement,
dated as of September 16, 1994, in each case, among the
Depositor, the Servicer and the Trustee (collectively,
the "Agreement"), provides, among other things, that
the Depositor may from time to time direct the Trustee
to authenticate and deliver, on behalf of the Trust,
one or more new Series of Investor Certificates
representing fractional undivided interests in the
Trust and in connection therewith to enter into Series
Supplements with the Servicer and the Trustee to
provide for the issuance, authentication and delivery
of a new Series of Investor Certificates and to specify
the Principal Terms thereof. Pursuant to this Series
Supplement, the Depositor and the Trustee on behalf of
the Trust shall hereby create a new Series of Investor
Certificates and specify the Principal Terms thereof.
ARTICLE I
Creation of the Series 1994-1 Certificates
SECTION 1.01. Designation. (a) There is
hereby created a Series of Investor Certificates to be
issued pursuant to the Agreement and this Series
Supplement to be known as the "Gottschalks Credit Card
Master Trust, Series 1994-1 Certificates". The Series
1994-1 Certificates will be issued in three
certificated Classes, the first of which shall be known
as the "7.35% Fixed Base Class A-1 Credit Card
Certificates, Series 1994-1"; the second of which shall
be known as the "Variable Base Class A-2 Credit Card
Certificate, Series 1994-1"; and the third of which
shall be known as the "Subordinated Certificate, Series
1994-1".
(b) In the event that any term or
provision contained herein shall conflict with or be
inconsistent with any term or provision contained in
the Agreement, the terms and provisions of this Series
Supplement shall govern.
ARTICLE II
Definitions
SECTION 2.01. Definitions. (a) Whenever
used in this Series Supplement, the following words and
phrases shall have the following meanings.
"Accelerated Amortization Election" a
written notice executed by the Holders of Certificates
representing more than 50% of the FBC Invested Amount
and delivered to the Depositor, the Servicer and the
Trustee no later than the earlier of (a) the six month
anniversary of the commencement of the Controlled
Amortization Period or (b) the commencement of the
Early Amortization Period, in either case, to the
effect that such Holders have elected to accelerate the
amortization of the FBC Invested Amount.
"Accelerated Payment" shall mean, with
respect to the Fixed Base Certificates, any FBC
Principal Collections that are paid to the Fixed Base
Certificateholders prior to the Expected Final Payment
Date due to the commencement of the Early Amortization
Period (a) on any date on or after August 31, 1997 or
(b) as a result of the occurrence of an Early
Amortization Event of the type described in Sections
7.01(a), (c), (e), (f), (g) or (j) hereof caused
directly or indirectly by (A) the imposition of a Block
Period, (B) the removal of Removed Accounts, (C) the
issuance of a new Series and/or the willful breach by
the Servicer (so long as the Servicer is Gottschalks)
of its obligations under the Agreement and this Series
Supplement.
"Additional Discount Rate" shall mean, as
of any Reset Date, the percentage (expressed as a
decimal), calculated in accordance with the following
formula:
Y = ((A - B) x 0.229091)/(C x 12)
where: Y = the Additional Discount Rate
(expressed as a decimal);
A = the VBC Interest Rate
determined as of such Reset Date (expressed as a
decimal);
B = the Initial VBC Interest Rate
(expressed as a decimal); and
C = the weighted average monthly
payment rate (i.e., the fraction, the numerator of
which for a Collection Period is the Investor Principal
Collections received during such Collection Period, and
the denominator of which is the Required Series Pool
Balance in effect during such Collection Period) for
the three consecutive Collection Periods preceding such
Reset Date (expressed as a decimal).
"Additional Interest" shall mean, as of any
date of determination, the sum of FBC Additional
Interest, if any, and VBC Additional Interest, if any,
accrued through such date.
"Additional Invested Amounts" shall have
the meaning specified in Section 6.02 hereof.
"Advance Rate" shall mean 100% minus the
Required Subordination Percentage.
"Allocation Day" shall have the meaning
specified in Section 4.01(b) hereof.
"Applicable Interest Rate" shall mean, as
of any date of determination and for any Investor
Certificate, the per annum interest rate applicable to
such Investor Certificate as of such date.
"Base Rate" shall mean, as of any date of
determination, the sum of the weighted average of the
Applicable Interest Rate applied to the Invested Amount
of each Investor Certificate of any Series then
outstanding as of such date and a zero percent interest
rate applied to the Invested Amount of each
Subordinated Certificate of any Series then outstanding
plus any Commitment Fee payable with respect to any
Investor Certificate of any Series as of such date plus
the weighted average the Senior Servicing Fee Rate
(based upon the Invested Amount of all outstanding
Certificates of all Series as of such date) per annum
plus 1% per annum.
"Calculation Agent" shall mean the Trustee
or any other Calculation Agent selected by the
Depositor which is reasonably acceptable to the
Trustee.
"Capitalized Interest Account" shall have
the meaning specified in Section 4.04(a) hereof.
"Certificates" shall mean, collectively,
the Fixed Base Certificates, the Variable Base
Certificate and the Subordinated Certificate.
"Closing Date" shall mean March 30, 1994.
"Commitment Fee" shall mean, as of any date
of determination and for (a) the Variable Base
Certificate, the VBC Unutilized Commitment Fee as of
such date and (b) any Investor Certificate of any other
Series, the per annum rate of any commitment or similar
fee payable with respect to any such Certificate as of
such date from Finance Charge Collections that are
allocable to such Certificate.
"Controlled Amortization Period" shall
mean, as the context may require, (a) the FBC
Controlled Amortization Period, (b) the VBC Controlled
Amortization Period or (c) the FBC Controlled
Amortization Period and the VBC Controlled Amortization
Period.
"Discounted Value" shall mean, with respect
to any Accelerated Payment, the amount obtained by
discounting all Remaining Scheduled Payments with
reference to such Accelerated Payment from their
respective scheduled due dates to the Distribution Date
on which such Accelerated Payment is to be paid in
accordance with accepted financial practice and at a
discount factor (applied on a monthly basis) equal to
the Reinvestment Yield with respect to such Accelerated
Payment.
"Distribution Period" shall mean, with
respect to any Distribution Date, the period from and
including the prior Distribution Date to but excluding
such Distribution Date.
"Early Amortization Event" shall mean for
the Series 1994-1 any Early Amortization Event
specified in Section 9.01 of the Agreement, together
with any additional Early Amortization Event specified
in Section 7.01 hereof.
"Exchangeable Holder's FBC Percentage"
shall mean 100% minus (a) the Floating Allocation
Percentage, when used with respect to Series Principal
FBC Collections and Series Principal SC (FBC Component)
Collections during the FBC Revolving Period, or (b) the
Fixed/Floating Allocation FBC Percentage, when used
with respect to Series Principal FBC Collections and
Series Principal SC (FBC Component) Collections during
the FBC Controlled Amortization Period and the Early
Amortization Period, provided that in any case the
Exchangeable Holder's FBC Percentage shall not be less
than zero.
"Exchangeable Holder's Percentage" shall
mean 100% minus the Floating Allocation Percentage,
provided that in any case the Exchangeable Holder's
Percentage shall not be less than zero.
"Exchangeable Holder's VBC Percentage"
shall mean 100% minus (a) the Floating Allocation
Percentage, when used with respect to Series Principal
VBC Collections and Series Principal SC (VBC Component)
Collections during the VBC Revolving Period, or (b) the
Fixed/Floating Allocation VBC Percentage, when used
with respect to Series Principal VBC Collections and
Series Principal SC (VBC Component) Collections during
the VBC Controlled Amortization Period and the Early
Amortization Period, provided that in any case the
Exchangeable Holder's VBC Percentage shall not be less
than zero.
"Expected Final Payment Date" shall mean
the September 1999 Distribution Date.
"FBC Additional Interest" shall have the
meaning specified in Section 4.02(a) hereof.
"FBC Allocation Percentage" shall mean,
with respect to any Collection Period, the percentage
equivalent of a fraction, the numerator of which is the
FBC Invested Amount and the denominator of which is the
Required Series Pool Balance, in each case, as of the
first day of such Collection Period and after giving
effect to any distributions made as of such date.
"FBC Carryover Interest" shall mean, for
any Collection Period, an amount equal to the sum of
(a) the amount of any FBC Monthly Interest previously
due but not distributed on the Fixed Base Certificates
on a prior Distribution Date, (b) to the extent
permitted under applicable law, the amount of any FBC
Additional Interest to accrue during the Related
Interest Period and (c) the amount of any FBC
Additional Interest previously due but not distributed
on the Fixed Base Certificates on a prior Distribution
Date.
"FBC Component" shall mean, as of any time
of determination, either (a) in the case of the
Retained Amount Account, the amount set forth as of
such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Retained Amount
Account pursuant to Sections 4.01(d)(i)(A)(2) and
4.01(d)(i)(B)(3) hereof less amounts withdrawn
therefrom in accordance with Section 4.06, or (b) in
the case of the Spread Account, the amount set forth as
of such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Spread Account
pursuant to Section 4.01(c)(iv) hereof less amounts
withdrawn therefrom in accordance with Section 4.07(b)
hereof.
"FBC Controlled Amortization Period" shall
mean, unless the Early Amortization Period shall have
commenced prior thereto, the period commencing on the
day immediately following the last day of the FBC
Revolving Period, and ending upon the first to occur of
(a) the commencement of the Early Amortization Period,
(b) the payment in full to the Fixed Base
Certificateholders of the FBC Invested Amount and (c)
the Series Termination Date.
"FBC Controlled Distribution Amount" shall
mean, with respect to any Distribution Date occurring
during the FBC Controlled Amortization Period, (a) if
no Accelerated Amortization Election has been made, an
amount equal to one-twelfth (1/12th) of the principal
balance of the FBC Invested Amount as of the September
1998 Distribution Date (after giving effect to any
changes in the FBC Invested Amount occurring on or
prior to such date) or (b) if an Accelerated
Amortization Election has been made, an amount equal to
one-sixth (1/6th) of the principal balance of the FBC
Invested Amount as of the Distribution Date (after
giving effect to any changes in the FBC Invested Amount
occurring on or prior to such date) immediately
preceding the date on which such Accelerated
Amortization Election was made.
"FBC Deficiency Amount" shall have the
meaning specified in Section 4.08(a) hereof.
"FBC Interest Rate" shall mean, with
respect to any Interest Period and the Fixed Base
Certificates, a fixed interest rate per annum equal to
7.35%.
"FBC Interest Shortfall" shall have the
meaning specified in Section 4.02(a) hereof.
"FBC Invested Amount" shall mean, as of any
date of determination, an amount equal to (a) the
Initial FBC Invested Amount, minus, (b) the amount of
principal payments made to the Fixed Base
Certificateholders in respect of the FBC Invested
Amount prior to such date, and minus, (c) the amount,
if any, by which the aggregate amount of FBC Investor
Charge-Offs exceed the FBC Investor Charge-Offs
reimbursed pursuant to Section 4.09(a) hereof prior to
such date.
"FBC Investor Charge-Offs" shall have the
meaning specified in Section 4.09(a) hereof.
"FBC Investor Default Amount" shall mean,
with respect to each Distribution Date, an amount equal
to the product of (a) the Investor Default Amount for
the Related Collection Period and (b) the FBC
Allocation Percentage for such Related Collection
Period.
"FBC Investor Percentage" shall mean, with
respect to any Allocation Day, the percentage
equivalent of a fraction, the numerator of which is the
FBC Invested Amount as of the preceding Business Day
and the denominator of which is the Invested Amount as
of such preceding Business Day.
"FBC Monthly Interest" shall have the
meaning specified in Section 4.02(a) hereof.
"FBC Monthly Principal" shall have the
meaning specified in Section 4.03(a) hereof.
"FBC Principal Allocation Percentage" shall
mean, with respect to any Collection Period occurring
(a) prior to the commencement of any Controlled
Amortization Period or Early Amortization Period, the
percentage equivalent of a fraction, the numerator of
which is the FBC Invested Amount and the denominator of
which is the Required Series Pool Balance, in each
case, as of the first day of such Collection Period and
after giving effect to any distributions made as of
such date, or (b) during any Controlled Amortization
Period or Early Amortization Period, the percentage
equivalent of a fraction, the numerator of which is the
FBC Invested Amount and the denominator of which is the
Required Series Pool Balance, in each case, as of the
last day of the applicable Revolving Period.
"FBC Principal Collections" shall mean, for
any Allocation Day, an amount equal to the Series
Principal FBC Collections for such day minus the amount
of Series Principal FBC Collections distributed to the
Holder of the Exchangeable Certificate on such day in
accordance with Section 4.01(b)(ii) hereof.
"FBC Revolving Period" shall mean the
period beginning at the opening of business on the
Cut-Off Date and ending on the earlier of (a) the last
day of the Related Collection Period for the
Distribution Date that is to occur in September, 1998
and (b) the close of business on the Business Day
immediately preceding the day on which the Early
Amortization Period commences.
"Fixed Base Certificates" shall have the
meaning specified in Section 6.01 hereof.
"Fixed Base Certificateholder" shall mean,
with respect to any Fixed Base Certificate on any date,
the Person in whose name such Fixed Base Certificate is
registered on such date.
"Fixed/Floating Allocation FBC Percentage"
shall mean, with respect to any Collection Period
during the FBC Controlled Amortization Period and the
Early Amortization Period, the percentage equivalent
(which percentage shall never exceed 100%) of a
fraction, the numerator of which is the Required Series
Pool Balance as of the last day of the FBC Revolving
Period and the denominator of which is the Series Pool
Balance as of the first day of the Collection Period in
respect of which the Fixed/Floating Allocation FBC
Percentage is being determined and after giving effect
to any distributions made as of such date.
"Fixed/Floating Allocation VBC Percentage"
shall mean, with respect to any Collection Period
during the VBC Controlled Amortization Period and the
Early Amortization Period, the percentage equivalent
(which percentage shall never exceed 100%) of a
fraction, the numerator of which is the Required Series
Pool Balance as of the last day of the VBC Revolving
Period and the denominator of which is the Series Pool
Balance as of the first day of the Collection Period in
respect of which the Fixed/Floating Allocation VBC
Percentage is being determined and after giving effect
to any distributions made as of such date.
"Floating Allocation Percentage" shall
mean, with respect to any Collection Period, the
percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is
the Required Series Pool Balance and the denominator of
which is the Series Pool Balance, in each case, as of
the first day of such Collection Period; provided,
however, that, with respect to the first Collection
Period, the Floating Allocation Percentage shall mean
the percentage equivalent of a fraction, the numerator
of which is the sum of the Initial FBC Invested Amount
and the Initial Subordinated Invested Amount, and the
denominator of which is the Series Pool Balance as of
the Cut-Off Date.
"Initial FBC Invested Amount" shall mean
$40,000,000.
"Initial Subordinated Invested Amount"
shall mean $7,619,048.
"Initial VBC Interest Rate" shall mean the
VBC Interest Rate applicable to the purchase of the
initial Additional Invested Amount.
"Interest Period" shall mean, (a) in the
case of the Fixed Base Certificates, each period from
and including a Distribution Date to but excluding the
following Distribution Date and (b) in the case of the
Variable Base Certificate, each period from and
including a VBC Payment and Drawdown Date to but
excluding the following VBC Payment and Drawdown Date.
"Interim Determination Date" shall mean,
with respect to any Interim Distribution Date, the day
that is two Business Days prior to such Interim
Distribution Date.
"Interim Distribution Date" shall mean the
first Business Day of each calendar month; provided
that in the case of the first Interim Distribution Date
it shall mean the first Business day of December, 1996.
"Invested Amount" shall mean, as of any
date of determination, an amount equal to the sum of
(a) the FBC Invested Amount as of such date and (b) the
VBC Invested Amount as of such date.
"Investor Default Amount" shall mean, with
respect to any Distribution Date, an amount equal to
the product of (a) the Defaulted Amount for the Related
Collection Period, (b) the Floating Allocation
Percentage for the Related Collection Period and (c)
the Series 1994-1 Allocation Percentage for the Related
Collection Period.
"Investor Finance Charge Collections" shall
mean, as of any Allocation Day, the product of (a) the
amount of Series Finance Charge Collections received
since the beginning of the preceding Business Day and
(b) the Floating Allocation Percentage for the Related
Collection Period.
"Investor Investment Proceeds" shall mean,
with respect to any Distribution Date, all interest and
other investment earnings (net of losses and investment
expenses) on funds on deposit in the Series Accounts,
together with an amount equal to the Series Allocation
Percentage of the interest and other investment
earnings on funds held in the Collection Account
credited as of such date to the Collection Account
pursuant to Section 4.02 of the Agreement.
"Investor Principal Collections" shall
mean, for any day or period, the sum of (a) the FBC
Principal Collections, (b) the VBC Principal
Collections, (c) the Subordinated Principal (FBC
Component) Collections, and (d) the Subordinated
Principal (VBC Component) Collections, in each case,
determined for such day or period, as the case may be.
"LIBOR" shall mean, with respect to any
Interest Period, the arithmetic mean (rounded upwards,
if necessary, to the nearest one-sixteenth of a
percent) of offered rates for deposits in United States
dollars having a maturity of two weeks (the "Index
Maturity") commencing on the first day of such Interest
Period which appears on the Reuters Screen LIBO Page as
of approximately 11:00 a.m., London time, on the
related Reset Date. If fewer than two such quotations
appear, LIBOR with respect to such Interest Period will
be determined at approximately 11:00 a.m., London time,
on such Reset Date on the basis of the rate at which
deposits in United States dollars having the Index
Maturity are offered to prime banks in the London
interbank market by The Chase Manhattan Bank, Citibank,
N.A. and Bank of America National Trust and Savings
Association (or any affiliate thereof) in the London
interbank market and in a principal amount equal to an
amount of not less than U.S. $500,000 and that is
representative for a single transaction in such market
at such time. The Calculation Agent will request the
principal London office of each such bank to provide a
quotation of its rate. If at least two such quotations
are provided, LIBOR will be the arithmetic mean
(rounded upwards as aforesaid) of such quotations. If
fewer than two quotations are provided, LIBOR with
respect to such Interest Period will be the arithmetic
mean (rounded upwards as aforesaid) of the rates quoted
at approximately 11:00 a.m., New York City time, on the
applicable Reset Date by three major banks in New York,
New York selected by the Calculation Agent for loans in
United States dollars to leading European banks having
the Index Maturity and in a principal amount equal to
an amount of not less than U.S. $500,000 and that is
representative for a single transaction in such market
at such time; provided, however, that if the banks
selected as aforesaid are not quoting as mentioned in
this sentence, LIBOR in effect for the applicable
period will be LIBOR in effect for the previous period.
"London Business Day" shall mean any day on
which dealings in deposits in United States dollars are
transacted in the London interbank market.
"Make Whole Premium" shall mean, with
respect to any Accelerated Payment, the excess, if any,
of the Discounted Value with respect to such
Accelerated Payment over such Accelerated Payment. The
Make Whole Premium shall never be less than zero.
"Maximum Available VBC Invested Amount"
shall mean, as of any VBC Payment and Drawdown Date
during the VBC Revolving Period, an amount equal to the
lesser of (a) the difference between (i) the product of
the Series Pool Balance on such date and the Advance
Rate on such date and (ii) the sum of the FBC Invested
Amount on such date (after giving effect to any changes
therein on such VBC Payment and Drawdown Date) and the
balance of the Retained Amount Account on such date,
and (b) $15,000,000, provided that in no event shall
the Maximum Available VBC Invested Amount be less than
zero.
"Maximum VBC Interest Rate" shall mean a
rate per annum equal to twelve percent (12%).
"Maximum VBC Subordinated Invested Amount"
shall mean, as of any date of determination, an amount
equal to (a) $2,857,143, minus, (b) the amount, if any,
by which the aggregate amount of Subordinated Investor
(VBC) Charge-Offs exceeds the Subordinated Investor
(VBC) Charge-Offs reimbursed pursuant to Sections
4.01(c)(vii)(B), 4.01(d)(iv)(A)(3) and
4.01(d)(iv)(B)(3) hereof prior to such date, minus, (c)
the amount of any reallocation of Subordinated
Principal (VBC Component) Collections made pursuant to
Sections 4.01(d)(iv)(A)(1), 4.01(d)(iv)(B)(1) and
4.01(d)(iv)(C)(1) hereof prior to such date, plus, (d)
the amount of any reallocations made pursuant to
Section 4.01(e)(iii)(B) prior to such date.
"Minimum Depositor Interest" shall mean,
with respect to the Series 1994-1, the Subordinated
Invested Amount.
"Monthly Senior Servicing Fee" shall mean,
with respect to any Distribution Date, five-sixths
(5/6ths) of the Monthly Servicing Fee for the Related
Collection Period.
"Monthly Servicing Fee" shall have the
meaning specified in Section 3.01 hereof.
"Monthly Subordinated Servicing Fee" shall
mean, with respect to any Distribution Date, one-sixth
(1/6th) of the Monthly Servicing Fee for the Related
Collection Period.
"Portfolio Yield" shall mean, with respect
to any Collection Period, the annualized percentage
equivalent of a fraction (a) the numerator of which is
the amount of Finance Charge Collections allocated to
the Certificates of all Series that are outstanding
(other than the Exchangeable Certificate) during such
Collection Period calculated on a cash basis, minus the
Default Amount allocable to the Certificates of all
Series that are outstanding (other than the
Exchangeable Certificate) with respect to such
Collection Period and (b) the denominator of which is
the Pool Balance allocable to the Certificates of all
Series that are outstanding (other than the
Exchangeable Certificate) as of the first day of such
Collection Period.
"Preceding Collection Period" shall mean,
with respect to any Collection Period, the Collection
Period ended immediately prior to such first referenced
Collection Period.
"Prepayment Account" shall have the meaning
specified in Section 4.04(a) hereof.
"Prepayment Amount" shall have the meaning
specified in Section 6.04 hereof.
"Prepayment Date" shall have the meaning
specified in Section 6.04 hereof.
"Prepayment Notice" shall have the meaning
specified in Section 6.04 hereof.
"Projected Make Whole Premium" shall mean,
for purposes of allocating Investor Finance Charge
Collections only during a Collection Period, an assumed
calculation of the Make Whole Premium calculated as of
the first day of such Collection Period and assuming
that (a) the Accelerated Payment for such calculation
is equal to the highest aggregate monthly FBC Principal
Collections during the three immediately preceding
Collection Periods and (b) that the Reinvestment Yield
is equivalent to the Reinvestment Yield calculated as
of such first day.
"Reassignment Amount" shall mean, with
respect to any Distribution Date, after giving effect
to any deposits and distributions otherwise to be made
on such Distribution Date, the sum of (a) the Invested
Amount on such Distribution Date, (b) accrued and
unpaid interest on the unpaid principal balances of the
Certificates (calculated in the manner set forth in
Section 4.02 through the day preceding such
Distribution Date), and (c) the amount of Additional
Interest, if any, due on Distribution Date and any
Additional Interest previously due but not distributed
on the Certificates.
"Reinvestment Yield" shall mean, with
respect to any Accelerated Payment, the yield to
maturity implied by (a) the yields reported, as of
10:00 a.m. New York City time on the Business Day next
preceding the Distribution Date on which such
Accelerated Payment is to be made, on the display
designated as "Page 678" on the Telerate Service (or
such other display as may replace Page 678 on the
Telerate Service) for actively traded U.S. Treasury
securities having a maturity equal or closest to the
Remaining Average Life of such Accelerated Payment as
of such Distribution Date, plus 0.5% per annum, or (b)
if such yields shall not be reported as of such time or
the yields reported as of such time shall not be
ascertainable, the Treasury Constant Maturity Series
yields reported, for the latest day for which such
yields shall have been so reported as of the Business
Day preceding the Distribution Date on which such
Accelerated Payment is to be made, in Federal Reserve
Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to
the Remaining Average Life of such Accelerated Payment
as of such Distribution Date, plus 0.5% per annum.
Such implied yield shall be determined, if necessary,
by (x) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted
financial practice and (y) interpolating linearly
between reported yields.
"Related Collection Period" shall mean,
with respect to (a) any Distribution Date, the
Collection Period ended on the second Business Day
preceding such Distribution Date and (b) any Allocation
Day, the Collection Period during which such Allocation
Day occurs.
"Related Distribution Date" shall mean,
with respect to any Collection Period or Allocation
Day, the Distribution Date following the end of such
Collection Period or Allocation Day.
"Related Interest Period" shall mean, with
respect to (a) any Collection Period, the Interest
Period which commences or Interest Periods which
commence during such Collection Period, (b) any
Distribution Date, the Interest Period ended on the
preceding day and (c) any Interim Distribution Date,
the Interest Period ended on the preceding day.
"Related Interim Distribution Date" shall
mean, with respect to any Interim Determination Date,
the first Interim Distribution Date to occur after such
Interim Determination Date.
"Remaining Average Life" shall mean, with
respect to the Fixed Base Certificates at any time of
determination after the commencement of the Early
Amortization Period, the number of years obtained by
dividing the then Remaining Dollar-Years of the Fixed
Base Certificates by the FBC Invested Amount at such
time. The term "Remaining Dollar-Years" means the
amount obtained by (a) multiplying (i) the amount of
each remaining payment with respect to the Fixed Base
Certificates, assuming that such payments are made in
the FBC Controlled Distribution Amounts (using the FBC
Invested Amount at the time the Early Amortization
Period commenced in order to calculate such FBC
Controlled Distribution Amounts) over the notional
twelve month FBC Controlled Amortization Period, by
(ii) the number of years (calculated to the nearest
one-twelfth) which will elapse between the date as of
which the calculation is made and each Distribution
Date during the notional FBC Controlled Amortization
Period and (b) totalling all the products obtained in
clause (a).
"Remaining Scheduled Payments" shall mean,
with reference to any Accelerated Payment, the sum of
(a) all payments of interest thereon at the FBC
Interest Rate that would be due on or after the
Distribution Date on which such Accelerated Payment is
to be made if no payment of such Accelerated Payment
were made prior to the Expected Final Payment Date and
(b) the amount of such Accelerated Payment.
"Required Series Pool Balance" shall mean,
as of any date of determination, the sum of (a) the
Invested Amount on such date and (b) the Subordinated
Invested Amount on such date. Notwithstanding the
foregoing, if the Depositor desires to cause a new
Series of Investor Certificates to be issued pursuant
to Section 6.03 of the Agreement at any time during the
VBC Revolving Period, for purposes of the Excess
Balance Test only, "Required Series Pool Balance" shall
mean, as of any date of determination, the sum of (a)
the FBC Invested Amount on such date, (b) the Maximum
Available VBC Invested Amount on such date and (c) the
Subordinated Invested Amount on such date.
"Required Subordination Percentage" shall
mean sixteen percent (16%).
"Reset Date" shall mean the second London
Business Day preceding the first day of each Interest
Period.
"Retained Amount Account" shall have the
meaning specified in Section 4.04(a) hereof.
"Reuters Screen LIBO Page" shall mean the
display designated as page "LIBO" on the Reuters
Monitor Money Rates Service (or such other page as may
replace the LIBO page on that service for the purpose
of displaying London interbank offered rates of major
banks).
"Senior Investor Default Holdback Amount"
shall mean, with respect to (a) any Collection Period
(other than the initial Collection Period), the product
of (i) the greater of (A) the Investor Default Amount
which the Servicer reasonably anticipates for such
Collection Period or (B) the product of (1) the highest
default rate (i.e., a fraction, the numerator of which
is the Defaulted Amount for a Collection Period, and
the denominator of which is the aggregate Principal
Receivables owned by the Trust as of the last day of
such Collection Period (or, in the case of the first
twelve Collection Periods, owned by Gottschalks)) for
any of the twelve consecutive Collection Periods
preceding such Collection Period, (2) the aggregate
amount of the Principal Receivables owned by the Trust
as of the first day of such Collection Period, (3) the
Series Allocation Percentage for the Series 1994-1 for
such Collection Period, and (4) the Floating Allocation
Percentage for such Collection Period, and (ii) a
fraction the numerator of which is the Invested Amount
and the denominator of which is the Required Series
Pool Balance, in each case, in effect for such
Collection Period and (b) the initial Collection
Period, $10,231.40.
"Senior Servicing Fee Rate" shall mean, (a)
with respect to the Certificates, two and one-half
percent (2.5%), and (b) with respect to the
Certificates of any other Series, the servicing fee
rate paid to the Servicer from the first Finance Charge
Collections received during any Collection Period that
are allocated to the Certificates of that Series.
"Series Accounts" shall have the meaning
specified in Section 4.04(a) hereof.
"Series Default Amount" shall mean, with
respect to any Distribution Date, an amount equal to
the product of (a) the Defaulted Amount for the Related
Collection Period, and (b) the Series 1994-1 Allocation
Percentage for the Related Collection Period.
"Series Finance Charge Collections" shall
mean, with respect to the aggregate amount of Finance
Charge Collections deposited in the Collection Account
on any date, that portion allocated to the Series
1994-1 in accordance with Section 4.04 of the
Agreement.
"Series Issuance Date" shall mean March 30,
1994.
"Series 1994-1" shall mean the Series of
Investor Certificates and the Subordinated Certificate
created pursuant to this Series Supplement.
"Series 1994-1 Allocation Percentage" shall
mean, for any Collection Period, the Series Allocation
Percentage for the Series 1994-1 as calculated for such
Collection Period in accordance with the Agreement.
"Series 1996-1 Fixed Base Certificates"
shall mean the Investor Certificates that have been, or
are to be, issued under the Series 1996-1 Supplement to
Pooling and Servicing Agreement, dated as of October
31, 1996, among the Depositor, the Servicer and the
Trustee.
"Series Pool Balance" shall mean, as of any
date of determination, the product of (a) the Pool
Balance as of such date and (b) the Series 1994-1
Allocation Percentage for such date.
"Series Principal Collections" shall mean,
with respect to the aggregate amount of Principal
Collections received since the beginning of the
preceding Business Day, that portion allocated to the
Series 1994-1 in accordance with Section 4.04 of the
Agreement.
"Series Principal FBC Collections" shall
mean, for each Allocation Day, an amount equal to the
product of (a) the amount of the Series Principal
Collections received since the beginning of the
preceding Business Day and (b) the FBC Principal
Allocation Percentage in effect on such Allocation Day.
"Series Principal SC Collections" shall
mean, for each Allocation Day, an amount equal to the
product of (a) the amount of the Series Principal
Collections received since the beginning of the
preceding Business Day and (b) the Subordinated
Principal Allocation Percentage in effect on such
Allocation Day.
"Series Principal SC (FBC Component)
Collections" shall mean, for any Allocation Day
occurring (a) prior to the commencement of any
Controlled Amortization Period or Early Amortization
Period, the product of (i) the Series Principal SC
Collections for such day and (ii) the FBC Investor
Percentage as of such day, or (b) during any Controlled
Amortization Period or Early Amortization Period, the
product of (i) the Series Principal SC Collections for
such day and (ii) the FBC Investor Percentage as of the
last day of the Revolving Period ended immediately
prior to such Allocation Day.
"Series Principal SC (VBC Component)
Collections" shall mean, for any Allocation Day
occurring (a) prior to the commencement of any
Controlled Amortization Period or Early Amortization
Period, the product of (i) the Series Principal SC
Collections for such day and (ii) the VBC Investor
Percentage as of such day, or (b) during any Controlled
Amortization Period or Early Amortization Period, the
product of (i) the Series Principal SC Collections for
such day and (ii) the VBC Investor Percentage as of the
last day of the Revolving Period ended immediately
prior to such Allocation Day.
"Series Principal VBC Collections" shall
mean, for each Allocation Day, an amount equal to the
product of (a) the amount of the Series Principal
Collections received since the beginning of the
preceding Business Day and (b) the VBC Principal
Allocation Percentage in effect on such Allocation Day.
"Series Termination Date" shall mean the
March 2000 Distribution Date.
"Servicing Fee Rate" shall mean, with
respect to the Certificates, three percent (3%).
"Special Prepayment Account" shall have the
meaning specified in Section 4.04(a).
"Spread Account" shall have the meaning
specified in Section 4.04(a) hereof.
"Spread Requirement" shall mean, with
respect to any Collection Period commencing with the
third full Collection Period, zero unless the Portfolio
Yield for the two preceding Collection Periods was less
than 0.5% per annum in excess of the Base Rate for such
preceding Collection Periods, in which case "Spread
Requirement" shall mean the amount, if any, by which
(a) the sum, for the Preceding Collection Period, of
the amounts, described in Sections 4.01(c)(i) and
4.01(c)(ii) hereof exceeds (b) the amount on deposit in
the Spread Account at the beginning of such Collection
Period.
"Standby Servicer" shall mean Bankers Trust
Company or such other party as may be appointed by the
Trustee to stand ready to act as a Successor Servicer
in the event that Gottschalks is removed as Servicer.
"Subordinated Allocation Percentage" shall
mean, with respect to any Collection Period, the
percentage equivalent of a fraction the numerator of
which is the Subordinated Invested Amount and the
denominator of which is the Required Series Pool
Balance, in each case, as of the first day of such
Collection Period.
"Subordinated Certificate" shall have the
meaning specified in Section 6.05 hereof with respect
to the Series 1994-1.
"Subordinated Component (FBC)" shall mean,
as of any time of determination, in the case of the
Retained Amount Account, the amount set forth as of
such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Retained Amount
Account pursuant to Sections 4.01(d)(iii)(A)(4) and
4.01(d)(iii)(B)(4) hereof less amounts withdrawn
therefrom in accordance with Section 4.06.
"Subordinated Component (VBC)" shall mean,
as of any time of determination, in the case of the
Retained Amount Account, the amount set forth as of
such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Retained Amount
Account pursuant to Sections 4.01(d)(iv)(A)(4) and
4.01(d)(iv)(B)(4) hereof less amounts withdrawn
therefrom in accordance with Section 4.06.
"Subordinated Invested Amount" shall mean,
as of any date of determination, the sum of the
Subordinated Invested Amount (FBC Component) and the
Subordinated Invested Amount (VBC Component), in each
case, as of such date.
"Subordinated Invested Amount (FBC
Component)" shall mean, as of any date of
determination, an amount equal to (a) the Initial
Subordinated Invested Amount, minus, (b) the amount, if
any, by which the aggregate amount of Subordinated
Investor (FBC) Charge-Offs exceeds the Subordinated
Investor (FBC) Charge-Offs reimbursed pursuant to
Sections 4.01(c)(vii)(A), 4.01(d)(iii)(A)(3) and
4.01(d)(iii)(B)(3) and 4.01(d)(iii)(C)(2)hereof prior
to such date, minus, (c) the amount of any reallocation
of Subordinated Principal (FBC Component) Collections
made pursuant to Sections 4.01(d)(iii)(A)(1),
4.01(d)(iii)(B)(1) and 4.01(d)(iii)(C)(1) hereof prior
to such date, plus, (d) the amount of any reallocations
made pursuant to Section 4.01(e)(iii)(A) prior to such
date, and minus, (e) the amount of principal payments
made to the holder of the Subordinated Certificate in
respect of the Subordinated Invested Amount (FBC
Component) pursuant to Sections 4.01(d)(iii)(C)(3),
9.01(b)(ii)(C), 9.01(c)(ii)(C) and 9.01(d)(ii)(C) prior
to such date, provided that at no time shall the
Subordinated Invested Amount (FBC Component) be less
than zero.
"Subordinated Invested Amount (VBC
Component)" shall mean, as of any date of
determination, an amount equal to (a) the product of
(i) a fraction, the numerator of which is 16, and the
denominator of which is 84 and (ii) each Additional
Invested Amount purchased by the Variable Base
Certificateholder prior to such date, minus, (b) the
product of (i) a fraction, the numerator of which is
16, and the denominator of which is 84 and (ii) the
amount of each reduction of the VBC Invested Amount
made in accordance herewith, minus, (c) the amount, if
any, by which the aggregate amount of Subordinated
Investor (VBC) Charge-Offs exceeds the Subordinated
Investor (VBC) Charge-Offs reimbursed pursuant to
Sections 4.01(c)(vii)(B), 4.01(d)(iv)(A)(3) and
4.01(d)(iv)(B)(3) and 4.01(d)(iv)(C)(2) hereof prior to
such date, minus, (d) the amount of any reallocation
of Subordinated Principal (VBC Component) Collections
made pursuant to Sections 4.01(d)(iv)(A)(1),
4.01(d)(iv)(B)(1) and 4.01(d)(iv)(C)(1) hereof prior to
such date, plus, (e) the amount of any reallocations
made pursuant to Section 4.01(e)(iii)(B) prior to such
date, and minus, (f) the amount of principal payments
made to the holder of the Subordinated Certificate in
respect of the Subordinated Invested Amount (VBC
Component) pursuant to Sections 4.01(d)(iv)(C)(3),
9.01(b)(ii)(D), 9.01(c)(ii)(D) and 9.01(d)(ii)(D) prior
to such date, provided that at no time shall the
Subordinated Invested Amount (VBC Component) be less
than zero or greater than the Maximum VBC Subordinated
Invested Amount at such time.
"Subordinated Investor Default Holdback
Amount" shall mean, with respect to (a) any Collection
Period (other than the initial Collection Period), the
product of (i) the greater of (A) the Investor Default
Amount which the Servicer reasonably anticipates for
such Collection Period or (B) the product of (1) the
highest default rate (i.e., a fraction, the numerator
of which is the Defaulted Amount for a Collection
Period, and the denominator of which is the aggregate
Principal Receivables owned by the Trust as of the last
day of such Collection Period (or, in the case of the
first twelve Collection Periods, owned by Gottschalks))
for any of the twelve consecutive Collection Periods
preceding such Collection Period, (2) the aggregate
amount of the Principal Receivables owned by the Trust
as of the first day of such Collection Period, (3) the
Series Allocation Percentage for the Series 1994-1 for
such Collection Period, and (4) the Floating Allocation
Percentage for such Collection Period, and (ii) a
fraction, the numerator of which is the Subordinated
Invested Amount and the denominator of which is the
Required Series Pool Balance, in each case, in effect
for such Collection Period and (b) the initial
Collection Period, $1,948.84.
"Subordinated Investor (FBC) Charge-Offs"
shall have the meaning specified in Section 4.09(c)
hereof.
"Subordinated Investor (VBC) Charge-Offs"
shall have the meaning specified in Section 4.09(d)
hereof.
"Subordinated Principal Allocation
Percentage" shall mean, with respect to any Collection
Period occurring (a) prior to the commencement of any
Controlled Amortization Period or Early Amortization
Period, the percentage equivalent of a fraction, the
numerator of which is the Subordinated Invested Amount
and the denominator of which is the Required Series
Pool Balance, in each case, as of the first day of such
Collection Period, or (b) during any Controlled
Amortization Period or the Early Amortization Period,
the percentage equivalent of a fraction, the numerator
of which is the Subordinated Invested Amount and the
denominator of which is the Required Series Pool
Balance, in each case, as of the last day of the
applicable Revolving Period.
"Subordinated Principal (FBC Component)
Collections" shall mean, for any Allocation Day, an
amount equal to the Series Principal SC (FBC Component)
Collections for such day minus the amount of Series
Principal SC (FBC Component) Collections distributed to
the Holder of the Exchangeable Certificate on such day
in accordance with Section 4.01(b)(iv) hereof.
"Subordinated Principal (VBC Component)
Collections" shall mean, for any Allocation Day, an
amount equal to the Series Principal SC (VBC Component)
Collections for such day minus the amount of Series
Principal SC (VBC Component) Collections distributed to
the Holder of the Exchangeable Certificate on such day
in accordance with Section 4.01(b)(v) hereof.
"Subordinated Reduction (FBC)" shall have
the meaning specified in Section 4.09(a) hereof.
"Subordinated Reduction (VBC)" shall have
the meaning specified in Section 4.09(b) hereof.
"Subordinated Servicing Fee Rate" shall
mean, with respect to the Certificates, one-half of one
percent (0.5%).
"Successor Servicer Account" shall have the
meaning specified in Section 4.04(a) hereof.
"Variable Base Certificate" shall have the
meaning specified in Section 6.02 hereof.
"Variable Base Certificateholder" shall
mean, with respect to the Variable Base Certificate on
any date, the Person in whose name the Variable Base
Certificate is registered on such date.
"VBC Additional Interest" shall have the
meaning specified in Section 4.02(b) hereof.
"VBC Additional Unutilized Commitment Fee"
shall have the meaning specified in Section 4.02(c)
hereof.
"VBC Allocation Percentage" shall mean,
with respect to any Collection Period, the percentage
equivalent of a fraction, the numerator of which is the
VBC Invested Amount and the denominator of which is the
Required Series Pool Balance, in each case, as of the
first day of such Collection Period.
"VBC Carryover Interest" shall mean, for
any VBC Payment and Drawdown Date, an amount equal to
the sum of (a) the amount of any VBC Interest
previously due but not distributed on the Variable Base
Certificate on a prior VBC Payment and Drawdown Date,
(b) to the extent permitted under applicable law, the
amount of any VBC Additional Interest to accrue during
the Related Interest Period and (c) the amount of any
VBC Additional Interest previously due but not
distributed on the Variable Base Certificate on a prior
VBC Payment and Drawdown Date.
"VBC Carryover Unutilized Commitment Fee"
shall mean, for any Collection Period, an amount equal
to the sum of (a) the amount of any VBC Unutilized
Commitment Fee previously due but not distributed to
the Holder of the Variable Base Certificate on a prior
Distribution Date, (b) to the extent permitted under
applicable law, the amount of any VBC Additional
Unutilized Commitment Fee to accrue during such
Collection Period and (c) the amount of any VBC
Additional Unutilized Commitment Fee due but not
distributed to the Holder of the Variable Base
Certificate on a prior Distribution Date.
"VBC Component" shall mean, as of any time
of determination, either (a) in the case of the
Retained Amount Account, the amount set forth as of
such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Retained Amount
Account pursuant to Sections 4.01(d)(ii)(A)(2) and
4.01(d)(ii)(B)(2) hereof less amounts withdrawn
therefrom in accordance with Section 4.06, or (b) in
the case of the Spread Account, the amount set forth as
of such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Spread Account
pursuant to Section 4.01(c)(iv) hereof less amounts
withdrawn therefrom in accordance with Section 4.07(c)
hereof.
"VBC Controlled Amortization Period" shall
mean, unless the Early Amortization Period shall have
commenced prior thereto, the period commencing on the
day immediately following the last day of the VBC
Revolving Period, and ending upon the first to occur of
(a) the commencement of the Early Amortization Period,
(b) the payment in full to the Variable Base
Certificateholder of the VBC Invested Amount and (c)
the Series Termination Date.
"VBC Controlled Distribution Amount" shall
mean, with respect to any Distribution Date occurring
during the VBC Controlled Amortization Period, an
amount equal to one-sixth (1/6th) of the principal
balance of the Variable Base Certificate as of the
September 1998 Distribution Date (after giving effect
to any changes in the VBC Invested Amount on such
date).
"VBC Deficiency Amount" shall have the
meaning specified in Section 4.08(b) hereof.
"VBC Interest Rate" shall mean, with
respect to any Interest Period and the Variable Base
Certificate, the lesser of (a) the interest rate for
such Interest Period determined in accordance with the
terms of the Variable Base Certificate and (b) the
Maximum VBC Interest Rate.
"VBC Interest Shortfall" shall have the
meaning specified in Section 4.02(b) hereof.
"VBC Invested Amount" shall mean, as of any
date of determination, an amount equal to (a) $0, plus,
(b) the aggregate principal amount of any Additional
Invested Amounts purchased by the Holder of the
Variable Base Certificate on or prior to such date,
minus, (c) the amount of principal payments made to the
Variable Base Certificateholder prior to such date, and
minus, (d) the amount, if any, by which the aggregate
amount of VBC Investor Charge-Offs exceeds the VBC
Investor Charge-Offs reimbursed pursuant to Section
4.09(b) hereof prior to such date.
"VBC Investor Charge-Offs" shall have the
meaning specified in Section 4.09(b) hereof.
"VBC Investor Default Amount" shall mean,
with respect to each Distribution Date, an amount equal
to the product of (a) the Investor Default Amount for
the Related Collection Period and (b) the VBC
Allocation Percentage for such Related Collection
Period.
"VBC Investor Percentage" shall mean, with
respect to any Allocation Day, the percentage
equivalent of a fraction, the numerator of which is the
VBC Invested Amount as of the preceding Business Day
and the denominator of which is the Invested Amount of
such preceding Business Day.
"VBC Interest" shall have the meaning
specified in Section 4.02(b) hereof.
"VBC Monthly Principal" shall have the
meaning specified in Section 4.03(b) hereof.
"VBC Payment and Drawdown Date" shall mean
each Distribution Date and Interim Distribution Date.
"VBC Principal Allocation Percentage" shall
mean, with respect to any Collection Period occurring
(a) prior to the commencement of any Controlled
Amortization Period or Early Amortization Period, the
percentage equivalent of a fraction, the numerator of
which is the VBC Invested Amount and the denominator of
which is the Required Series Pool Balance, in each
case, as of the first day of such Collection Period, or
(b) during any Controlled Amortization Period or Early
Amortization Period, the percentage equivalent of a
fraction, the numerator of which is the VBC Invested
Amount and the denominator of which is the Required
Series Pool Balance, in each case, as of the last day
of the applicable Revolving Period.
"VBC Principal Collections" shall mean, for
any Allocation Day, an amount equal to the Series
Principal VBC Collections for such day minus the amount
of Series Principal VBC Collections distributed to the
Holder of the Exchangeable Certificate on such day in
accordance with Section 4.01(b)(iii) hereof.
"VBC Revolving Period" shall mean the
period beginning at the opening of business on
September 16, 1994 and ending on the earlier of (a) the
last day of the Related Collection Period for the
Distribution Date that is to occur in September, 1998
and (b) the close of business on the Business Day
immediately preceding the day on which the Early
Amortization Period commences.
"VBC Unutilized Commitment Fee" shall mean,
with respect to any Distribution Date, either (a)
during the VBC Revolving Period, an amount equal to the
aggregate, for each day during the Distribution Period
(or, in the case of the first Distribution Date
following the date on which the Variable Base
Certificate is authenticated by the Trustee and
delivered to the Variable Base Certificateholder, the
period from and including the date of authentication
and delivery to and including the day immediately
preceding such Distribution Date), of the product of
(i) the difference between $15,000,000 and the VBC
Invested Amount on such day, (ii) the per annum rate
(based on a year of 365 days or 366 days, as the case
may be) set forth in the Variable Base Certificate and
(iii) a fraction, the numerator of which is the number
of days in such Distribution Period, and the
denominator of which is the number of days in the then
current calendar year or (b) during the VBC Controlled
Amortization Period or Early Amortization Period, zero.
"VBC Unutilized Commitment Fee Shortfall"
shall have the meaning specified in Section 4.02(c)
hereof.
(b) Notwithstanding anything to the
contrary in this Series Supplement or the Agreement,
the term "Rating Agency" shall mean, whenever used in
this Series Supplement or the Agreement with respect to
the Certificates, Duff & Phelps and Fitch.
(c) All capitalized terms used herein and
not otherwise defined herein have the meanings ascribed
to them in the Agreement. The definitions in this
Section 2.01 are applicable to the singular as well as
the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such
terms.
(d) The words "hereof", "herein" and
"hereunder" and words of similar import when used in
this Series Supplement shall refer to this Series
Supplement as a whole and not to any particular
provision of this Series Supplement; references to any
Article, Section or Exhibit are references to Articles,
Sections and Exhibits in or to this Series Supplement
unless otherwise specified; and the term "including"
means "including without limitation".
(e) References herein to "Collections
received" shall be deemed to include Collections
received and processed as to principal and finance
charges and shall not include unprocessed Collections
(i.e., Collections which have been received but for
which the Servicer in the ordinary course of its
business has not yet identified in its computer records
the principal and finance charge components).
ARTICLE III
Servicing Fee
SECTION 3.01. Servicing Compensation. The
monthly servicing fee hereunder (the "Monthly Servicing
Fee") shall be payable to the Servicer, in arrears, on
each Distribution Date occurring prior to the earlier
of the first Distribution Date following the Series
Termination Date and the first Distribution Date on
which the Invested Amount and the Subordinated Invested
Amount are both zero, in an amount equal to the sum,
for each day during the applicable Distribution Period,
of the product of (a) a fraction, the numerator of
which is the Servicing Fee Rate (expressed as a
decimal), and the denominator of which is 365 and (b)
the Required Series Pool Balance for such day;
provided, however, that with respect to the first
Distribution Date, the Monthly Servicing Fee shall be
equal to $3,968.26. In no event shall the Trust, the
Trustee, the Fixed Base Certificateholders, the
Variable Base Certificateholder or the Holder of the
Subordinated Certificate be liable for any other
servicing fee. The Monthly Servicing Fee shall be
payable to the Servicer solely to the extent amounts
are available for distribution in accordance with the
terms of this Series Supplement.
ARTICLE IV
Rights of Certificateholders and
Allocation and Application of Collections
SECTION 4.01. Allocations and
Distributions.
(a) General. Series Finance Charge
Collections, Series Principal Collections and Series
Default Amounts, as they relate to the Certificates and
the Exchangeable Certificate, shall be allocated and
distributed as set forth in this Article IV. If an
amount is to be allocated between, or paid to, the
Fixed Base Certificateholders and the Variable Base
Certificateholder, and the amount in question is not
sufficient to fully satisfy the Fixed Base
Certificateholders and the Variable Base
Certificateholder, then, unless the context otherwise
requires, such amount shall be allocated or paid to the
Fixed Base Certificateholders according to the FBC
Investor Percentage then in effect and to the Variable
Base Certificateholder according to the VBC Investor
Percentage then in effect.
(b) Distribution of Collections to the
Holder of the Exchangeable Certificate. At the
beginning of each Business Day (an "Allocation Day"),
the Servicer shall cause the Trustee to withdraw from
the Collection Account and distribute to the Holder of
the Exchangeable Certificate (i) an amount equal to the
product of (A) the Exchangeable Holder's Percentage in
effect on such day and (B) the amount of Series Finance
Charge Collections received since the beginning of the
preceding Business Day, (ii) an amount equal to the
product of (A) the Exchangeable Holder's FBC Percentage
in effect on such day and (B) the amount of Series
Principal FBC Collections received since the beginning
of the preceding Business Day, (iii) an amount equal to
the product of (A) the Exchangeable Holder's VBC
Percentage in effect on such day and (B) the amount of
Series Principal VBC Collections received since the
beginning of the preceding Business Day, (iv) an amount
equal to the product of (A) the Exchangeable Holder's
FBC Percentage in effect on such day and (B) the amount
of Series Principal SC (FBC Component) Collections
received since the beginning of the preceding Business
Day, and (v) an amount equal to the product of (A) the
Exchangeable Holder's VBC Percentage in effect on such
day and (B) the amount of Series Principal SC (VBC
Component) Collections received since the beginning of
the preceding Business Day. On each Distribution Date,
the Servicer shall allocate to the Holder of the
Exchangeable Certificate an amount equal to the product
of (x) the Exchangeable Holder's Percentage in effect
on such date and (y) the amount of Series Default
Amount for the Related Collection Period.
(c) Allocation of Investor Finance Charge
Collections. At the beginning of each Allocation Day
during a Collection Period, the Servicer shall allocate
Investor Finance Charge Collections received since the
beginning of the preceding Business Day as follows and
in the following priorities (each priority to be
satisfied daily before allocations are made to any
subsequent priority):
(i) first, unless an amount
equal to the Monthly Senior Servicing Fee due on the
Related Distribution Date, plus any previously unpaid
Monthly Senior Servicing Fee (but only with respect to
the then current Servicer) is then on deposit in the
Collection Account and allocated therefor, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(ii) second, unless an amount
equal to the sum of: (A) the FBC Monthly Interest due
on the Related Distribution Date, plus the amount of
any FBC Carryover Interest due on the Related
Distribution Date, (B) an amount equal to the VBC
Interest due on the Related Distribution Date or, if an
Interim Distribution Date is to occur prior to the
Related Distribution Date, an amount equal to the VBC
Interest due on the Related Interim Distribution Date,
plus the amount of any VBC Carryover Interest due on
the Related Distribution Date or, if an Interim
Distribution Date is to occur prior to the Related
Distribution Date, an amount equal to the VBC Carryover
Interest due on the Related Interim Distribution Date,
and (C) during the VBC Revolving Period only, an amount
equal to the VBC Unutilized Commitment Fee for the
current Distribution Period, plus the amount of any VBC
Carryover Unutilized Commitment Fee for the current
Distribution Period, is then on deposit in the
Collection Account and allocated therefor, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be retained in the
Collection Account until the respective amounts are
then on deposit;
(iii) third, unless an amount
equal to the Senior Investor Default Holdback Amount
for the current Collection Period is then on deposit in
the Collection Account and allocated therefor, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(iv) fourth, unless the amount
then on deposit in the Spread Account is equal to the
Spread Requirement on such Allocation Day, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be withdrawn from
the Collection Account in an amount equal to such
insufficiency and shall be deposited in the Spread
Account;
(v) fifth, unless an amount
equal to the sum of (A) all unreimbursed FBC Investor
Charge-Offs as of such Allocation Day have been
reallocated as FBC Principal Collections and (B) all
unreimbursed VBC Investor Charge-Offs as of such
Allocation Day have been reallocated as VBC Principal
Collections, Investor Finance Charge Collections
received since the beginning of the preceding Business
Day shall be reallocated, respectively, as FBC
Principal Collections and VBC Principal Collections
until the amounts reallocated equal all unreimbursed
FBC Investor Charge-Offs and unreimbursed VBC Investor
Charge-Offs; provided, however, that if the amount of
Investor Finance Charge Collections remaining on any
Allocation Day after making the allocations described
in paragraphs (i) through (iv) immediately above is not
sufficient to fully satisfy the reallocations required
to be made pursuant to this paragraph (v) on such
Allocation Day, such remaining Investor Finance Charge
Collections shall be reallocated as follows: (x) an
amount equal to the product of such remaining Investor
Finance Charge Collections and the FBC Investor
Percentage shall be reallocated as FBC Principal
Collections and applied to reimburse unreimbursed FBC
Investor Charge-Offs and (y) an amount equal to the
product of such remaining Investor Finance Charge
Collections and the VBC Investor Percentage shall be
reallocated as VBC Principal Collections and applied to
reimburse unreimbursed VBC Charge-Offs;
(vi) sixth, unless an amount
equal to the Subordinated Investor Default Holdback
Amount for the current Collection Period is then on
deposit in the Collection Account and allocated
therefor, Investor Finance Charge Collections deposited
in the Collection Account since the beginning of the
Preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(vii) seventh, unless an amount
equal to (A) all unreimbursed Subordinated Investor
(FBC) Charge-Offs as of such Allocation Day has been
reallocated as Subordinated Principal (FBC Component)
Collections, a portion (based on the FBC Investor
Percentage) of all Investor Finance Charge Collections
received since the beginning of the preceding Business
Day shall be reallocated as Subordinated Principal (FBC
Component) Collections; and (B) all unreimbursed
Subordinated Investor (VBC) Charge-Offs as of such
Allocation Day has been reallocated as Subordinated
Principal (VBC Component) Collections, a portion (based
on the VBC Investor Percentage) of all Investor Finance
Charge Collections received since the beginning of the
preceding Business Day shall be reallocated as
Subordinated Principal (VBC Component) Collections;
(viii) eighth, if such
Allocation Day falls within an Early Amortization
Period which commenced (1) on any date on or after
August 31, 1997 or (2) as a result of the occurrence of
an Early Amortization Event of the type described in
Sections 7.01(a), (c), (e), (f), (g) or (j) hereof
caused directly or indirectly by (A) the imposition of
a Block Period, (B) the removal of Removed Accounts,
(C) the issuance of a new Series and/or the willful
breach by the Servicer (so long as the Servicer is
Gottschalks) of its obligations under the Agreement and
this Series Supplement, then, unless an amount equal to
the Projected Make Whole Premium for the Related
Collection Period (together with any Make Whole Premium
previously due but not paid on a prior Distribution
Date) is then on deposit in the Collection Account and
allocated therefor, Investor Finance Charge Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
such amount is then on deposit and allocated therefor;
(ix) ninth, unless an amount
equal to the Monthly Subordinated Servicing Fee due on
the Related Distribution Date, plus any previously
unpaid Monthly Subordinated Servicing Fee (but only
with respect to the current Servicer) is then on
deposit in the Collection Account and allocated
therefor, Investor Finance Charge Collections received
since the beginning of the preceding Business Day shall
be retained in the Collection Account until such amount
is then on deposit; and
(x) tenth, the balance, if
any, of the Investor Finance Charge Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (i) through (ix) above) shall, subject to
Section 4.07(e) hereof, be distributed to the Depositor
for application in accordance with the Receivables
Purchase Agreement.
(d) Allocation of Principal Collections.
(i) At the beginning of each Allocation Day, the
Servicer shall allocate the FBC Principal Collections
for such day as follows and in the following priorities
(each priority to be satisfied daily before allocations
are made to any subsequent priority):
(A) if such Allocation Day occurs during
the FBC Revolving Period:
(1) first, unless the amount retained in
the Collection Account pursuant to Section
4.01(d)(iii)(A)(2) hereof (as of the preceding Business
Day), is equal to the amount of all unreimbursed FBC
Investor Charge-Offs, FBC Principal Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
the sum of such amounts equals the amount of all
unreimbursed FBC Investor Charge-Offs;
(2) second, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, FBC Principal
Collections received since the beginning of the
preceding Business Day in an amount equal to the lesser
of (x) the product of (1) the amount of such required
deposit and (2) the FBC Allocation Percentage for such
Allocation Day, and (y) the amount of FBC Principal
Collections received since the beginning of the
preceding Business Day shall be withdrawn from the
Collection Account and deposited in the Retained Amount
Account; and
(3) third, the balance, if any, of FBC
Principal Collections received since the beginning of
the preceding Business Day (after making the
allocations described in paragraphs (1) and (2) above)
shall, subject to Section 4.07(e) hereof, be
distributed to the Depositor for application in
accordance with the Receivables Purchase Agreement; or
(B) if such Allocation Day occurs during
the FBC Controlled Amortization Period:
(1) first, unless an amount equal to the
FBC Controlled Distribution Amount is then on deposit
in the Collection Account and allocated therefor, FBC
Principal Collections received since the beginning of
the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(2) second, unless the amount retained in
the Collection Account pursuant to Section
4.01(d)(iii)(B)(2) hereof (as of the preceding Business
Day), is equal to the amount of all unreimbursed FBC
Investor Charge-Offs, FBC Principal Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
the sum of such amounts equals the amount of all
unreimbursed FBC Investor Charge-Offs;
(3) third, if pursuant to Section 4.06(a)
hereof an amount is required to be deposited in the
Retained Amount Account on such day, FBC Principal
Collections received since the beginning of the
preceding Business Day in an amount equal to the lesser
of (x) the product of (1) the amount of such required
deposit and (2) the FBC Allocation Percentage for such
Allocation Day, and (y) the amount of FBC Principal
Collections received since the beginning of the
preceding Business Day shall be withdrawn from the
Collection Account and deposited in the Retained Amount
Account; and
(4) fourth, the balance, if any, of FBC
Principal Collections received since the beginning of
the preceding Business Day (after making the
allocations described in paragraphs (1), (2) and (3)
above) shall, subject to Section 4.07(e) hereof, be
distributed to the Depositor for application in
accordance with the Receivables Purchase Agreement; or
(C) if such Allocation Day occurs during
the Early Amortization Period:
(1) first, unless an amount equal to the
FBC Invested Amount is then on deposit in the
Collection Account and allocated therefor, FBC
Principal Collections received since the beginning of
the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit; and
(2) second, the balance, if any, of FBC
Principal Collections received since the beginning of
the preceding Business Day (after making the allocation
described in paragraph (1) above) shall, subject to
Section 4.07(e) hereof, be distributed to the Depositor
for application in accordance with the Receivables
Purchase Agreement.
(ii) At the beginning of each Allocation
Day, the Servicer shall allocate the VBC Principal
Collections for such day as follows and in the
following priorities (each priority to be satisfied
daily before allocations are made to any subsequent
priority):
(A) if such Allocation Day occurs during
the VBC Revolving Period:
(1) first, unless the amount retained in
the Collection Account pursuant to Section
4.01(d)(iv)(A)(2) hereof (as of the preceding Business
Day), is equal to the amount of all unreimbursed VBC
Investor Charge-Offs, VBC Principal Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
the sum of such amounts equals the amount of all
unreimbursed VBC Investor Charge-Offs;
(2) second, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, VBC Principal
Collections received since the beginning of the
preceding Business Day in an amount equal to the lesser
of (x) the product of (1) the amount of such required
deposit and (2) the VBC Allocation Percentage for such
Allocation Day, and (y) the amount of VBC Principal
Collections received since the beginning of the
preceding Business Day shall be withdrawn from the
Collection Account and deposited in the Retained Amount
Account;
(3) third, if the Servicer has received a
Prepayment Notice in accordance with Section 6.04
hereof, VBC Principal Collections received since the
beginning of the preceding Business Day shall be
retained in the Collection Account until such time as
the amount on deposit therein is equal to (1) the
Prepayment Amount, or (2) if the Prepayment Date is a
Distribution Date later than the second Distribution
Date following the date on which such Prepayment Notice
was received by the Servicer, the monthly amount set
forth in the Prepayment Notice; and
(4) fourth, the balance, if any, of VBC
Principal Collections received since the beginning of
the preceding Business Day (after making the
allocations described in paragraphs (1), (2) and (3)
above) shall, subject to Section 4.07(e) hereof, be
distributed to the Depositor for application in
accordance with the Receivables Purchase Agreement; or
(B) if such Allocation Day occurs during
the VBC Controlled Amortization Period:
(1) first, unless an amount equal to the
VBC Controlled Distribution Amount is then on deposit
in the Collection Account and allocated therefor, VBC
Principal Collections received since the beginning of
the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(2) second, unless the amount retained in
the Collection Account pursuant to Section
4.01(d)(iv)(B)(2) hereof (as of the preceding Business
Day), is equal to the amount of all unreimbursed VBC
Investor Charge-Offs, VBC Principal Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
the sum of such amounts equals the amount of all
unreimbursed VBC Investor Charge-Offs;
(3) third, if pursuant to Section 4.06(a)
hereof an amount is required to be deposited in the
Retained Amount Account on such day, VBC Principal
Collections received since the beginning of the
preceding Business Day shall be withdrawn from the
Collection Account in an amount equal to the lesser of
(x) the product of (1) the amount of such required
deposit and (2) the VBC Allocation Percentage for such
Allocation Day, and (y) the amount of VBC Principal
Collections received since the beginning of the
preceding Business Day and deposited in the Retained
Amount Account; and
(4) fourth, the balance, if any, of VBC
Principal Collections received since the beginning of
the preceding Business Day (after making the
allocations described in paragraphs (1), (2) and (3)
above) shall, subject to Section 4.07(e) hereof, be
distributed to the Depositor for application in
accordance with the Receivables Purchase Agreement; or
(C) if such Allocation Day occurs during
the Early Amortization Period:
(1) first, unless an amount equal to the
VBC Invested Amount is then on deposit in the
Collection Account and allocated therefor, VBC
Principal Collections received since the beginning of
the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit; and
(2) second, the balance, if any, of VBC
Principal Collections received since the beginning of
the preceding Business Day (after making the allocation
described in paragraph (1) above) shall, subject to
Section 4.07(e) hereof, be distributed to the Depositor
for application in accordance with the Receivables
Purchase Agreement.
(iii) At the beginning of each Allocation
Day, the Servicer shall allocate the Subordinated
Principal (FBC Component) Collections for such day as
follows and in the following priorities (each priority
to be satisfied daily before allocations are made to
any subsequent priority):
(A) if such Allocation Day occurs during
the FBC Revolving Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal (FBC
Component) Collections will be reallocated as Investor
Finance Charge Collections in the amount by which the
product of (x) the Investor Default Amount for such
Collection Period and (y) the FBC Allocation Percentage
for such Collection Period, exceeds the product of (1)
the amount allocated to the Senior Investor Default
Holdback Amount pursuant to Section 4.01(c)(iii) and
(2) the FBC Investor Percentage for such day;
(2) second, unless an amount equal to the
amount of all unreimbursed FBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal (FBC Component)
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed FBC Investor
Charge-Offs;
(3) third, unless an amount equal to the
amount of all unreimbursed Subordinated Investor (FBC)
Charge-Offs is then on deposit in the Collection
Account and allocated therefor, Subordinated Principal
(FBC Component) Collections received since the
beginning of the preceding Business Day shall be
retained in the Collection Account until the sum of
such amounts equals the amount of all unreimbursed
Subordinated Investor (FBC) Charge-Offs;
(4) fourth, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, Subordinated
Principal (FBC Component) Collections received since
the beginning of the preceding Business Day in an
amount equal to the lesser of (x) the product of (1)
the amount of such required deposit, (2) the
Subordinated Principal Allocation Percentage for such
Allocation Day and (3) the FBC Investor Percentage for
such Allocation Day, and (y) the amount of Subordinated
Principal (FBC Component) Collections received since
the beginning of the preceding Business Day shall be
withdrawn from the Collection Account and deposited in
the Retained Amount Account; and
(5) fifth, the balance, if any, of
Subordinated Principal (FBC Component) Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (1), (2), (3) and (4) above) shall, subject
to Section 4.07(e) hereof, be distributed to the
Depositor for application in accordance with the
Receivables Purchase Agreement; or
(B) if such Allocation Day occurs during
the FBC Controlled Amortization Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal (FBC
Component) Collections will be reallocated as Investor
Finance Charge Collections in the amount by which the
product of (x) the Investor Default Amount for such
Collection Period and (y) the FBC Allocation Percentage
for such Collection Period, exceeds the product of (1)
the amount allocated to the Senior Investor Default
Holdback Amount pursuant to Section 4.01(c)(iii) and
(2) the FBC Investor Percentage for such day;
(2) second, unless an amount equal to the
amount of all unreimbursed FBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal (FBC Component)
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed FBC Investor
Charge-Offs;
(3) third, unless an amount equal to the
amount of all unreimbursed Subordinated Investor (FBC)
Charge-Offs is then on deposit in the Collection
Account and allocated therefor, Subordinated Principal
(FBC Component) Collections received since the
beginning of the preceding Business Day shall be
retained in the Collection Account until the sum of
such amounts equals the amount of all unreimbursed
Subordinated Investor (FBC) Charge-Offs;
(4) fourth, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, Subordinated
Principal (FBC Component) Collections received since
the beginning of the preceding Business Day shall be
withdrawn from the Collection Account in an amount
equal to the lesser of (x) the product of (1) the
amount of such required deposit, (2) the Subordinated
Principal Allocation Percentage for such Allocation Day
and (3) the FBC Investor Percentage for such Allocation
Day, and (y) the amount of Subordinated Principal (FBC
Component) Collections received since the beginning of
the preceding Business Day, and deposited in the
Retained Amount Account; and
(5) fifth, the balance, if any, of
Subordinated Principal (FBC Component) Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (1), (2), (3) and (4) above) shall, subject
to Section 4.07(e) hereof, be distributed to the
Depositor for application in accordance with the
Receivables Purchase Agreement; or
(C) if such Allocation Day occurs during
the Early Amortization Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal (FBC
Component) Collections will be reallocated as Investor
Finance Charge Collections in the amount by which the
product of (x) the Investor Default Amount for such
Collection Period and (y) the FBC Allocation Percentage
for such Collection Period, exceeds the product of (1)
the amount allocated to the Senior Investor Default
Holdback Amount pursuant to Section 4.01(c)(iii) and
(2) the FBC Investor Percentage for such day;
(2) second, unless an amount equal to the
amount of all unreimbursed FBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal (FBC Component)
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed FBC Investor
Charge-Offs; and
(3) third, the balance, if any, of
Subordinated Principal (FBC Component) Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (1) and (2) above) (1) so long as the
Subordinated Invested Amount (FBC Component) is greater
than zero, shall, subject to Section 4.07(e) hereof, be
distributed to the Depositor for application in
accordance with the Receivables Purchase Agreement, and
(2) if the Subordinated Invested Amount (FBC Component)
is zero, shall be distributed to the Depositor.
(iv) At the beginning of each Allocation
Day, the Servicer shall allocate the Subordinated
Principal (VBC Component) Collections for such day as
follows and in the following priorities (each priority
to be satisfied daily before allocations are made to
any subsequent priority):
if such Allocation Day occurs during
the VBC Revolving Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal (VBC
Component) Collections will be reallocated as Investor
Finance Charge Collections in the amount by which the
product of (x) the Investor Default Amount for such
Collection Period and (y) the VBC Allocation Percentage
for such Collection Period, exceeds the product of (1)
the amount allocated to the Senior Investor Default
Holdback Amount pursuant to Section 4.01(c)(iii) and
(2) the VBC Investor Percentage for such day;
(2) second, unless an amount equal to the
amount of all unreimbursed VBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal (VBC Component)
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed VBC Investor
Charge-Offs;
(3) third, unless an amount equal to the
amount of all unreimbursed Subordinated Investor (VBC)
Charge-Offs is then on deposit in the Collection
Account and allocated therefor, Subordinated Principal
(VBC Component) Collections received since the
beginning of the preceding Business Day shall be
retained in the Collection Account until the sum of
such amounts equals the amount of all unreimbursed
Subordinated Investor (VBC) Charge-Offs;
(4) fourth, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, Subordinated
Principal (VBC Component) Collections received since
the beginning of the preceding Business Day in an
amount equal to the lesser of (x) the product of (1)
the amount of such required deposit, (2) the
Subordinated Principal Allocation Percentage for such
Allocation Day and (3) the VBC Investor Percentage for
such Allocation Day, and (y) the amount of Subordinated
Principal (VBC Component) Collections received since
the beginning of the preceding Business Day shall be
withdrawn from the Collection Account and deposited in
the Retained Amount Account; and
(5) fifth, the balance, if any, of
Subordinated Principal (VBC Component) Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (1), (2), (3) and (4) above) shall, subject
to Section 4.07(e) hereof, be distributed to the
Depositor for application in accordance with the
Receivables Purchase Agreement; or
(B) if such Allocation Day occurs during
the VBC Controlled Amortization Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal (VBC
Component) Collections will be reallocated as Investor
Finance Charge Collections in the amount by which the
product of (x) the Investor Default Amount for such
Collection Period and (y) the VBC Allocation Percentage
for such Collection Period, exceeds the product of (1)
the amount allocated to the Senior Investor Default
Holdback Amount pursuant to Section 4.01(c)(iii) and
(2) the VBC Investor Percentage for such day;
(2) second, unless an amount equal to the
amount of all unreimbursed VBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal (VBC Component)
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed VBC Investor
Charge-Offs;
s ~ third, unless an amount equal to the
amount of all unreimbursed Subordinated Investor (VBC)
Charge-Offs is then on deposit in the Collection
Account and allocated therefor, Subordinated Principal
(VBC Component) Collections received since the
beginning of the preceding Business Day shall be
retained in the Collection Account until the sum of
such amounts equals the amount of all unreimbursed
Subordinated Investor (VBC) Charge-Offs;
(4) fourth, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, Subordinated
Principal (VBC Component) Collections received since
the beginning of the preceding Business Day shall be
withdrawn from the Collection Account in an amount
equal to the lesser of (x) the product of (1) the
amount of such required deposit, (2) the Subordinated
Principal Allocation Percentage for such Allocation Day
and (3) the VBC Investor Percentage for such Allocation
Day, and (y) the amount of Subordinated Principal (VBC
Component) Collections received since the beginning of
the preceding Business Day, and deposited in the
Retained Amount Account; and
(5) fifth, the balance, if any, of
Subordinated Principal (VBC Component) Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (1), (2), (3) and (4) above) shall, subject
to Section 4.07(e) hereof, be distributed to the
Depositor for application in accordance with the
Receivables Purchase Agreement; or
(C) if such Allocation Day occurs during
the Early Amortization Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal (VBC
Component) Collections will be reallocated as Investor
Finance Charge Collections in the amount by which the
product of (x) the Investor Default Amount for such
Collection Period and (y) the VBC Allocation Percentage
for such Collection Period, exceeds the product of (1)
the amount allocated to the Senior Investor Default
Holdback Amount pursuant to Section 4.01(c)(iii) and
(2) the VBC Investor Percentage for such day;
(2) second, unless an amount equal to the
amount of all unreimbursed VBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal (VBC Component)
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed VBC Investor
Charge-Offs; and
(3) third, the balance, if any, of
Subordinated Principal (VBC Component) Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (1) and (2) above) (1) so long as the
Subordinated Invested Amount (VBC Component) is greater
than zero, shall, subject to Section 4.07(e) hereof, be
distributed to the Depositor for application in
accordance with the Receivables Purchase Agreement, and
(2) if the Subordinated Invested Amount (VBC Component)
is zero, shall be distributed to the Depositor.
(e) Investor Default Holdback Amounts.
On the last day of each Collection Period (other than
in the case of the first Collection Period), the
Servicer shall direct the Trustee to apply the Senior
Investor Default Holdback Amount and Subordinated
Investor Default Holdback Amount retained in the
Collection Account during such Collection Period as
follows:
(i) an amount equal to the lesser of (A)
the product of the Senior Investor Default Holdback
Amount for such Collection Period and the FBC Investor
Percentage in effect for such Collection Period and (B)
the product of the Investor Default Amount for such
Collection Period and the FBC Allocation Percentage in
effect for such Collection Period, shall be reallocated
as FBC Principal Collections;
(ii) an amount equal to the lesser of (A)
the product of the Senior Investor Default Holdback
Amount for such Collection Period and the VBC Investor
Percentage in effect for such Collection Period and (B)
the product of the Investor Default Amount for such
Collection Period and the VBC Allocation Percentage in
effect for such Collection Period, shall be reallocated
as VBC Principal Collections; and
(iii) if any of the Senior Investor Default
Holdback Amount for such Collection Period remains in
the Collection Account after making the reallocations
described in paragraphs (i) and (ii) above, (A) a
portion of such remaining amount (equal to the product
of such amount and the FBC Investor Percentage in
effect for such Collection Period) shall be reallocated
as Subordinated Principal (FBC Component) Collections
and shall result in a corresponding reinstatement of
the Subordinated Invested Amount (FBC Component) (to
the extent that any reduction has previously been made
to such amount); and (B) a portion of such remaining
amount (equal to the product of such amount and the VBC
Investor Percentage in effect for such Collection
Period) shall be reallocated as Subordinated Principal
(VBC Component) Collections and shall result in a
corresponding reinstatement of the Subordinated
Invested Amount (VBC Component) (to the extent that any
reduction has previously been made to such amount);
(iv) an amount equal to (A) the lesser of
(1) the product of (x) the Subordinated Investor
Default Holdback Amount for such Collection Period and
(y) the FBC Investor Percentage in effect for such
Collection Period, and (2) the product of (x) the
Investor Default Amount for such Collection Period, (y)
the Subordinated Allocation Percentage in effect for
such Collection Period and (z) the FBC Investor
Percentage in effect for such Collection Period shall
be reallocated as Subordinated Principal (FBC
Component) Collections, and (B) the lesser of (1) the
product of (x) the Subordinated Investor Default
Holdback Amount for such Collection Period and (y) the
VBC Investor Percentage in effect for such Collection
Period, and (2) the product of (x) the Investor Default
Amount for such Collection Period, (y) the Subordinated
Allocation Percentage in effect for such Collection
Period and (z) the VBC Investor Percentage in effect
for such Collection Period shall be reallocated as
Subordinated Principal (VBC Component) Collections; and
(v) if any of the Subordinated Investor
Default Holdback Amount for such Collection Period
remains in the Collection Account after making the
reallocations described in paragraph (iv) above, such
remaining amount shall be distributed to the Depositor
for application in accordance with the Receivables
Purchase Agreement.
(f) Distributions. (i) On or before
each Determination Date, the Servicer shall provide
written directions to the Trustee directing the Trustee
to distribute to the Fixed Base Certificateholders on
the following Distribution Date from amounts on deposit
in the Collection Account:
(A) if such Determination Date occurs
during the FBC Revolving Period: (1) an amount equal to
the sum of the amounts, if any, retained in the
Collection Account during the Related Collection Period
in respect of the Fixed Base Certificates pursuant to
Section 4.01(c)(ii) and (2) an amount equal to the
lesser of the Projected Make Whole Premium for the
Related Collection Period and the Make Whole Premium
calculated as of such Determination Date; or
(B) if such Determination Date occurs
during the FBC Controlled Amortization Period, an
amount equal to the sum of the amounts, if any,
retained in the Collection Account during the Related
Collection Period in respect of the Fixed Rate
Certificates pursuant to Sections 4.01(c)(ii) and
4.01(d)(i)(B)(1); or
(C) if such Determination Date occurs
during the Early Amortization Period, an amount equal
to the sum of the amounts, if any, retained in the
Collection Account during the Related Collection Period
in respect of the Fixed Rate Certificates pursuant to
Sections 4.01(c)(ii) and 4.01(d)(i)(C)(1);
(ii) On each Interim Determination Date, the
Servicer shall provide written directions to the
Trustee directing the Trustee to distribute to the
Variable Base Certificateholder on the Related Interim
Distribution Date from amounts on deposit in the
Collection Account on such Interim Determination Date,
an amount equal to the lesser of (x) the amount, if
any, retained in the Collection Account for the Related
Interest Period in respect of the Variable Base
Certificate pursuant to Section 4.01(c)(ii) and (y) the
VBC Interest due on such Related Interim Distribution
Date; and
On or before each Determination Date, the
Servicer shall provide written directions to the
Trustee directing the Trustee to distribute to the
Variable Base Certificateholder on the following
Distribution Date from amounts on deposit in the
Collection Account:
(A) if such Determination Date occurs
during the VBC Revolving Period, the amount, if any,
retained in the Collection Account for the Related
Interest Period in respect of the Variable Base
Certificate pursuant to Section 4.01(c)(ii); or
(B) if such Determination Date occurs
during the VBC Controlled Amortization Period, an
amount equal to the sum of (I) the amount, if any,
retained in the Collection Account for the Related
Interest Period in respect of the Variable Base
Certificate pursuant to Section 4.01(c)(ii) and (II)
the amount, if any, retained in the Collection Account
during the Related Collection Period in respect of the
Variable Base Certificate pursuant to Section
4.01(d)(ii)(B)(1); or
(C) if such Determination Date occurs
during the Early Amortization Period, an amount equal
to the sum of (I) the amount, if any, retained in the
Collection Account for the Related Interest Period in
respect of the Variable Base Certificate pursuant to
Section 4.01(c)(ii) and (II) the amount, if any,
retained in the Collection Account during the Related
Collection Period in respect of the Variable Base
Certificate pursuant to Section 4.01(d)(ii)(C)(1);
(iii) On or before each Determination Date,
the Servicer shall provide written directions to the
Trustee directing the Trustee to distribute to the
Servicer on the following Distribution Date from
amounts on deposit in the Collection Account, an amount
equal to the sum of the amounts, if any, retained in
the Collection Account during the Related Collection
Period pursuant to Sections 4.01(c)(i) and 4.01(c)(ix);
provided, however, so long as Gottschalks is the
Servicer, the Trustee shall first deduct from any
amount payable to the Servicer pursuant to this
paragraph (iii) an amount equal to $8,000 (plus any
prior payments of such amount which remain unpaid) as
payment for the fees of the Standby Servicer; and
(iv) On each Distribution Date, the Servicer
shall provide written instructions to the Trustee
directing the Trustee to distribute all amounts
retained in the Collection Account pursuant to Section
4.01(c) and Section 4.01(d) and not required for any
other purpose to the Depositor for application in
accordance with the Receivables Purchase Agreement.
(g) Other Amounts. The withdrawals to be
made from the Collection Account pursuant to this
Section 4.01 do not apply to deposits into the
Collection Account that do not represent Collections,
including payment of the purchase price for the
Certificates pursuant to Section 2.03 of the Agreement,
payment of the purchase price for Additional Invested
Amounts pursuant to Section 6.02 hereof and proceeds
from the sale, disposition or liquidation of
Receivables pursuant to Section 9.02 or Section 12.02
of the Agreement.
(h) Series 1996-1 Proceeds. The Trustee
shall transfer from the Collection Account to the
Special Prepayment Account proceeds received by the
Trustee in connection with the sale and issuance of the
Series 1996-1 Fixed Base Certificate.
SECTION 4.02. Interest; Unutilized
Commitment Fee. (a) FBC Monthly Interest. The amount
of monthly interest ("FBC Monthly Interest")
distributable from the Collection Account (or, in the
case of the first Distribution Date, from the
Capitalized Interest Account) with respect to the Fixed
Base Certificates on any Distribution Date shall be an
amount equal to one-twelfth (1/12th) of the product of
(i) the FBC Invested Amount as of the close of business
on the first day of the Related Collection Period, and
(ii) the FBC Interest Rate; provided that in the case
of the initial Interest Period the FBC Monthly Interest
shall be $122,500. On the Determination Date preceding
each Distribution Date, the Servicer shall determine
the excess, if any, of (x) the sum of FBC Monthly
Interest for the Related Interest Period plus the
amount, if any, of the FBC Interest Shortfall which was
due but not paid on the prior Distribution Date over
(y) the amount which will be available to be
distributed to the Holders of the Fixed Base
Certificates on such Distribution Date in respect
thereof pursuant to this Series Supplement (such
excess, the "FBC Interest Shortfall"). If, on any
Distribution Date, the FBC Interest Shortfall is
greater than zero, then an additional amount ("FBC
Additional Interest") shall be payable as provided
herein with respect to Fixed Base Certificates on each
Distribution Date following such Distribution Date, to
but excluding the Distribution Date on which the FBC
Interest Shortfall is paid to the Holders of the Fixed
Base Certificates, in an amount equal to one-twelfth of
the product of (i) such FBC Interest Shortfall (or the
portion thereof which has not previously been paid to
Fixed Base Certificateholders) and (ii) the FBC
Interest Rate. Notwithstanding anything to the
contrary herein, FBC Additional Interest shall be paid
or distributed on Fixed Base Certificates only to the
extent permitted by applicable law.
(b) VBC Interest. The amount of interest
("VBC Interest") distributable from the Collection
Account with respect to the Variable Base Certificate
on any VBC Payment and Drawdown Date shall be an amount
equal to the product of (i) the VBC Invested Amount as
of the close of business on the previous VBC Payment
and Drawdown Date (after giving effect to all
distributions, if any, made on such date), (ii) the VBC
Interest Rate in effect for the Related Interest Period
and (iii) a fraction, the numerator of which is the
actual number of days elapsed in the Related Interest
Period, and the denominator of which is 360. On the
Determination Date or Interim Determination Date, as
the case may be, preceding each VBC Payment and
Drawdown Date, the Servicer shall determine the excess,
if any, of (x) the sum of the VBC Interest for the
Related Interest Period plus the amount, if any, of the
VBC Interest Shortfall which was due but not paid on
the prior VBC Payment and Drawdown Date over (y) the
amount which will be available to be distributed to the
Holder of the Variable Base Certificate on such VBC
Payment and Drawdown Date in respect thereof pursuant
to this Series Supplement (such excess, the "VBC
Interest Shortfall"). If, on any VBC Payment and
Drawdown Date, the VBC Interest Shortfall is greater
than zero, then an additional amount ("VBC Additional
Interest") shall be payable as provided herein with
respect to the Variable Base Certificate on each VBC
Payment and Drawdown Date following such VBC Payment
and Drawdown Date, to but excluding the VBC Payment and
Drawdown Date on which the VBC Interest Shortfall is
paid to the Holder of the Variable Base Certificate, in
an amount equal to the product of (i) such VBC Interest
Shortfall (or the portion thereof which has not
previously been paid to the Variable Base
Certificateholder), (ii) the VBC Interest Rate in
effect for the Related Interest Period, and (iii) a
fraction, the numerator of which is the actual number
of days elapsed in the Related Interest Period, and the
denominator of which is 360. Notwithstanding anything
to the contrary herein, VBC Additional Interest shall
be paid or distributed on the Variable Base Certificate
only to the extent permitted by applicable law.
(c) VBC Unutilized Commitment Fee. On
the Determination Date preceding each Distribution
Date, the Servicer shall determine the excess, if any,
of (i) the sum of the VBC Unutilized Commitment Fee for
the applicable Distribution Period plus the amount, if
any, of the VBC Unutilized Commitment Fee Shortfall
which was due but not paid on the prior Distribution
Date over (ii) the amount which will be available to be
distributed to the Holder of the Variable Base
Certificate on such Distribution Date in respect
thereof pursuant to this Series Supplement (such
excess, the "VBC Unutilized Commitment Fee Shortfall").
If, on any Distribution Date, the VBC Unutilized
Commitment Fee Shortfall is greater than zero, then an
additional amount ("VBC Additional Unutilized
Commitment Fee") shall be payable as provided herein
for the VBC Unutilized Commitment Fee on each
Distribution Date following such Distribution Date, to
but excluding the Distribution Date on which the VBC
Unutilized Commitment Fee Shortfall is paid to the
Holder of the Variable Base Certificate, in an amount
equal to the product of (i) such VBC Unutilized
Commitment Fee Shortfall (or the portion thereof which
has not previously been paid to the Variable Base
Certificateholder), (ii) the unutilized commitment fee
rate (based on a year of 365 days or 366 days, as the
case may be) set forth in the Variable Base
Certificate, and (iii) a fraction, the numerator of
which is the number of days in the applicable
Distribution Period, and the denominator of which is
the number of days in the then current calendar year.
Notwithstanding anything to the contrary herein, VBC
Additional Unutilized Commitment Fee shall be paid or
distributed on the Variable Base Certificate only to
the extent permitted by applicable law.
(d) Adjustment of Discount Rate. (i) On
each Reset Date, the Servicer shall calculate the
Additional Discount Rate and, if such rate is positive,
cause the Depositor to increase the Discount Rate by
the amount of the Additional Discount Rate calculated
on such Reset Date; provided, however, that any such
increase shall be made in accordance with, and subject
to the limitations of, Section 2.07 of the Agreement.
If the Additional Discount Rate so calculated is
negative, the Servicer shall cause the Depositor to
reduce the Discount Rate by such rate; provided,
however, that any such reduction shall be made in
accordance with, and subject to the limitations of,
Section 2.07 of the Agreement; and provided further,
however, that such reduction shall not cause the
Discount Rate to be less than the Discount Rate at the
time the Initial VBC Interest Rate was established.
(ii) If the average of the Portfolio Yield
for any three consecutive Collection Periods is reduced
to a rate which is less than one-half of one percent
(0.5%) in excess of the Base Rate, the Depositor shall,
subject to compliance with Section 2.07 of the
Agreement, increase the Discount Rate in accordance
with the Agreement by an amount estimated to cause the
Portfolio Yield to increase on an annualized basis in
future Collection Periods by at least one percent (1%).
SECTION 4.03. Determination of Monthly
Principal. (a) (i)FBC Monthly Principal. The amount
of monthly principal ("FBC Monthly Principal")
distributable from the Collection Account with respect
to the Fixed Base Certificates on each Distribution
Date during the FBC Revolving Period shall be zero.
(ii) The amount of FBC
Monthly Principal distributable from the Collection
Account with respect to the Fixed Base Certificates on
each Distribution Date during the FBC Controlled
Amortization Period or the Early Amortization Period
shall be equal to the FBC Principal Collections
(including Investor Finance Charge Collections
reallocated as FBC Principal Collections) on deposit in
the Collection Account on such Distribution Date;
provided, however, that the amount of FBC Monthly
Principal distributable to the Holders of the Fixed
Base Certificates on any Distribution Date during the
FBC Controlled Amortization Period or Early
Amortization Period, as the case may, shall in no event
exceed the FBC Invested Amount in effect on the
Business Day preceding such Distribution Date.
(b)(i) VBC Monthly Principal. The amount
of monthly principal ("VBC Monthly Principal")
distributable from the Collection Account with respect
to the Variable Base Certificate on each Distribution
Date during the VBC Revolving Period shall, except as
provided in Section 4.07 hereof, be zero.
(ii) The amount of VBC
Monthly Principal distributable from the Collection
Account with respect to the Variable Base Certificate
on each Distribution Date during the VBC Controlled
Amortization Period or the Early Amortization Period
shall be equal to the VBC Principal Collections
(including Investor Finance Charge Collections
reallocated as VBC Principal Collections) on deposit in
the Collection Account on such Distribution Date;
provided, however, that the amount of VBC Monthly
Principal distributable to the Holder of the Variable
Base Certificate on any Distribution Date during the
VBC Controlled Amortization Period or Early
Amortization Period, as the case may, shall in no event
exceed the VBC Invested Amount in effect on the
Business Day preceding such Distribution Date.
SECTION 4.04. Series Accounts. (a) The
Servicer, for the benefit of the Certificateholders,
shall establish and maintain in the name of the
Trustee, on behalf of the Trust, (i) an Eligible
Deposit Account (the "Capitalized Interest Account"),
which shall be identified as the "Capitalized Account
for Gottschalks Credit Card Master Trust, Series
1994-1", (ii) an Eligible Deposit Account (the
"Retained Amount Account"), which shall be identified
as the "Retained Amount Account for Gottschalks Credit
Card Master Trust, Series 1994-1", (iii) an Eligible
Deposit Account (the "Prepayment Account"), which shall
be identified as the "Prepayment Account for
Gottschalks Credit Card Master Trust, Series 1994-1",
(iv) an Eligible Deposit Account (the "Special
Prepayment Account"), which shall be identified as the
"Special Prepayment Account for Gottschalks Credit Card
Master Trust, Series 1994-1", (v) an Eligible Deposit
Account (the "Spread Account"), which shall be
identified as the "Spread Account for Gottschalks
Credit Card Master Trust, Series 1994-1", and (vi) an
Eligible Deposit Account (the "Successor Servicer
Account"), which shall be identified as the "Successor
Servicer Account for Gottschalks Credit Card Master
Trust, Series 1994-1". Each of the Capitalized
Interest Account, the Retained Amount Account, the
Prepayment Account and the Spread Account shall bear a
designation clearly indicating that the funds deposited
therein are held for the benefit of the
Certificateholders. The Successor Servicer Account
shall be held for the exclusive benefit of potential
Successor Servicers. The Capitalized Interest Account,
the Retained Amount Account, the Prepayment Account,
the Special Prepayment Account, the Spread Account and
the Successor Servicer Account are referred to herein
individually as a "Series Account" and collectively as
"Series Accounts."
(b) At the written direction of the
Servicer, funds on deposit in any Series Account shall
be invested by the Trustee in Eligible Investments
selected by the Servicer that will mature no later than
the date on which such funds are expected to be
withdrawn from such Series Account. All such Eligible
Investments shall be held by the Trustee for the
benefit of the Certificateholders. All interest and
other investment earnings (net of losses and investment
expenses) of funds on deposit in the Series Accounts
shall be deposited in the Collection Account as Finance
Charge Collections.
(c) The Capitalized Interest Account
shall be maintained until all amounts on deposit
therein have been applied in accordance with Section
4.05 hereof. The Retained Amount Account shall be
maintained until all amounts on deposit therein have
been applied in accordance with Section 4.06(g) or (h)
hereof. The Prepayment Account shall be maintained
until all amounts on deposit therein have been applied
in accordance with Section 4.07(a) hereof. The Spread
Account shall be maintained until all amounts on
deposit therein have been applied in accordance with
Section 4.07(d) hereof. The Successor Servicer Account
shall be maintained until all amounts on deposit
therein have been applied in accordance with Section
4.07(e) hereof.
(d) The Trustee shall possess all right,
title and interest in and to all funds on deposit from
time to time in, and all Eligible Investments credited
to, the Series Accounts and in all proceeds thereof.
Each Series Account shall be under the sole dominion
and control of the Trustee for the benefit of the
Certificateholders. If, at any time, any Series
Account ceases to be an Eligible Deposit Account the
Servicer shall within ten (10) Business Days (or such
longer period, not to exceed thirty (30) calendar days,
as to which each Rating Agency may consent) instruct
the Trustee to establish a new Series Account meeting
the conditions specified in subsection (a) above as an
Eligible Deposit Account and shall transfer any cash
and/or any investments to such new Series Account.
Neither the Depositor, the Servicer nor any person or
entity claiming by, through or under the Depositor, the
Servicer or any such person or entity shall have any
right, title or interest in, or any right to withdraw
any amount from, any Series Account, except as
expressly provided herein. Schedule 1 hereto, which is
hereby incorporated into and made part of this Series
Supplement, identifies the Series Accounts by setting
forth for each such account the account number of such
account, the account designation of such account and
the name of the institution with which such account has
been established. If a substitute Series Account is
established pursuant to this Section 4.04, the Servicer
shall provide to the Trustee an amended Schedule 1,
setting forth the relevant information for such
substitute Series Account.
(e) The Servicer shall maintain a ledger
for the Retained Amount Account and shall record in
such ledger the FBC Component, the VBC Component, the
Subordinated Component (FBC) and the Subordinated
Component (VBC) of each deposit made by the Trustee to,
and each withdrawal by the Trustee from, the Retained
Amount Account. The Servicer shall also maintain a
ledger for the Spread Account and shall record in such
ledger the FBC Component and the VBC Component for each
deposit made by the Trustee to, and withdrawal by the
Trustee from, the Spread Account.
(f) Pursuant to the authority granted to
the Servicer in Section 3.01(a) of the Agreement, the
Servicer shall have the power, revocable by the
Trustee, to instruct the Trustee to make withdrawals
and payments from the Series Accounts for the purposes
of carrying out the Servicer's or the Trustee's duties
hereunder.
SECTION 4.05. Capitalized Interest
Account. On the Closing Date, the Trustee shall
deposit in the Capitalized Interest Account from the
proceeds of the sale of the Fixed Base Certificates an
amount equal to the FBC Monthly Interest that will have
accrued and be due and payable to the Holders of the
Fixed Base Certificates on the first Distribution Date.
On the first Distribution Date, the Servicer shall
cause the Trustee to withdraw from the Capitalized
Interest Account for distribution to the Holders of the
Fixed Base Certificates an amount equal to the FBC
Monthly Interest that is due and payable on such
Distribution Date.
SECTION 4.0|<PAGE>
Retained Amount Account. The Servicer shall cause
the Trustee to deposit amounts in, and withdraw amounts
from, the Retained Amount Account as follows:
(a) If, at the close of business of the
Servicer on any Business Day prior to the commencement
of the Early Amortization Period, the Required Series
Pool Balance at such time exceeds the sum of (i) the
Series Pool Balance at such time, (ii) the balance of
the Retained Amount Account at such time, (iii) the
balance of the Prepayment Account at such time and (iv)
the balance of the Special Prepayment Account at such
time, the Servicer shall cause the Trustee to withdraw
from the Collection Account in accordance with Section
4.01(d) and deposit in the Retained Amount Account on
such day an amount equal to the lesser of (x) such
excess and (y) if such day falls within both (1) the
FBC Revolving Period and the VBC Revolving Period, an
amount equal to the sum of the maximum amounts
available on such day pursuant to Sections
4.01(d)(i)(A)(2), 4.01(d)(ii)(A)(2), 4.01(d)(iii)(A)(4)
and 4.01(d)(iv)(A)(4) hereof; (2) the FBC Revolving
Period and the VBC Controlled Amortization Period, an
amount equal to the sum of the maximum amounts
available on such day pursuant to Sections
4.01(d)(i)(A)(2), 4.01(d)(ii)(B)(3), 4.01(d)(iii)(A)(4)
and 4.01(d)(iv)(A)(4) hereof; or (3) the FBC Controlled
Amortization Period and the VBC Controlled Amortization
Period, an amount equal to the sum of the maximum
amounts available on such day pursuant to Sections
4.01(d)(i)(B)(3), 4.01(d)(ii)(B)(3), 4.01(d)(iii)(B)(4)
and 4.01(d)(iv)(B)(4) hereof.
(b) If, at the close of business of the
Servicer on any Business Day prior to the commencement
of the Early Amortization Period, the balance of the
Retained Amount Account is greater than zero, and the
sum of (i) the Series Pool Balance at such time, (ii)
the balance of the Retained Amount Account at such
time, (iii) the balance of the Prepayment Account at
such time and (iv) the balance of the Special
Prepayment Account at such time, exceeds the Required
Series Pool Balance, the Servicer shall cause the
Trustee to withdraw from the Retained Amount Account
for distribution to the Depositor on such day an amount
equal to the lesser of (x) the amount of such
difference and (y) the balance of the Retained Amount
Account. Any such withdrawal shall, to the greatest
extent possible, reduce (1) the FBC Component and the
VBC Component of the Retained Amount Account by the
product of the FBC Allocation Percentage or the VBC
Allocation Percentage, as the case may be, and the
amount of such withdrawal, (2) the Subordinated
Component (FBC) of the Retained Amount Account by the
product of the Subordinated Allocation Percentage, the
FBC Investor Percentage and the amount of such
withdrawal, and (3) the Subordinated Component (VBC) of
the Retained Amount Account by the product of the
Subordinated Allocation Percentage, the VBC Investor
Percentage and the amount of such withdrawal.
(c) If, at the close of business of the
Servicer on the last day of any Collection Period
occurring during the FBC Controlled Amortization
Period, (i) the balance of the Retained Amount Account
is greater than zero (after first giving effect to any
deposit to, or withdrawal from, the Retained Amount
Account described in subsections (a) and (b) of this
Section 4.06) and (ii) the Servicer has determined on
such last day that the difference between the FBC
Controlled Amortization Amount and the amount of FBC
Principal Collections on deposit in the Collection
Account on such last day is greater than zero, the
Servicer shall cause the Trustee to withdraw from the
FBC Component of the Retained Amount Account for
deposit in the Collection Account as FBC Principal
Collections an amount equal to the lesser of (x) the
amount of such difference and (y) the balance of the
FBC Component of the Retained Amount Account.
(d) If, at the close of business of the
Servicer on the last day of any Collection Period
occurring during the VBC Controlled Amortization
Period, (i) the balance of the Retained Amount Account
is greater than zero (after first giving effect to any
deposit to, or withdrawal from, the Retained Amount
Account described in subsections (a) and (b) of this
Section 4.06) and (ii) the Servicer has determined on
such last day that the difference between the VBC
Controlled Distribution Amount and the amount of VBC
Principal Collections on deposit in the Collection
Account on such last day is greater than zero, the
Servicer shall cause the Trustee to withdraw from the
VBC Component of the Retained Amount Account for
deposit in the Collection Account as VBC Principal
Collections an amount equal to the lesser of (x) the
amount of such difference and (y) the balance of the
VBC Component of the Retained Amount Account.
(e) If, at the close of business of the
Servicer on the last day of any Collection Period
occurring prior to the commencement of the Early
Amortization Period, (i) the balance of the Retained
Amount Account is greater than zero (after first giving
effect to any deposit to, or withdrawals from, the
Retained Amount Account described in subsections (a),
(b) and (c) of this Section 4.06) and (ii) the Servicer
has determined on such last day that (A) a FBC Investor
Charge-Off will be required to be made on the Related
Distribution Date, and/or (B) one or more FBC Investor
Charge-Offs made on one or more prior Distribution
Dates has not been reimbursed, the Servicer shall cause
the Trustee to withdraw from such account for deposit
in the Collection Account as FBC Principal Collections
the following amounts (the first priority to be
satisfied before progressing to the second priority):
(x) first, an amount equal to the
lesser of (1) the sum of the amount of such FBC
Investor Charge-Off to be made and/or unreimbursed FBC
Investor Charge-Offs and (2) an amount equal to the
balance of the Subordinated Component (FBC) of the
Retained Amount Account; and
(y) second, an amount equal to the
lesser of (1) the amount, if greater than zero, by
which the sum of the amount of such FBC Investor
Charge-Off to be made and/or unreimbursed FBC Investor
Charge-Offs exceeds the amount of the withdrawal, if
any, provided for in paragraph (x) immediately above,
and (2) an amount equal to the balance of the FBC
Component of the Retained Amount Account.
(f) If, at the close of business of the
Servicer on the last day of any Collection Period
occurring prior to the commencement of the Early
Amortization Period, (i) the balance of the Retained
Amount Account is greater than zero (after first giving
effect to any deposit to, or withdrawal from, the
Retained Amount Account described in subsections (a),
(b) and (d) of this Section 4.06) and (ii) the Servicer
has determined on such last day that (A) a VBC Investor
Charge-Off will be required to be made on the Related
Distribution Date, and/or (B) one or more VBC Investor
Charge-Offs made on one or more prior Distribution
Dates has not been reimbursed, the Servicer shall cause
the Trustee to withdraw from such account for deposit
in the Collection Account as VBC Principal Collections
the following amounts (the first priority to be
satisfied before progressing to the second priority):
(x) first, an amount equal to the
lesser of (1) the sum of the amount of such VBC
Investor Charge-Off to be made and/or unreimbursed VBC
Investor Charge-Offs and (2) an amount equal to the
balance of the Subordinated Component (VBC) of the
Retained Amount Account; and
(y) second, an amount equal to the
lesser of (1) the amount, if greater than zero, by
which the sum of the amount of such VBC Investor
Charge-Off to be made and/or unreimbursed VBC Investor
Charge-Offs exceeds the amount of the withdrawal, if
any, provided for in paragraph (x) immediately above,
and (2) an amount equal to the balance of the VBC
Component of the Retained Amount Account.
(g) If, at the close of business of the
Servicer on the last day of the first Collection Period
occurring during the Early Amortization Period, the
balance of the Retained Amount Account is greater than
zero, the Servicer shall cause the Trustee to withdraw
from the Retained Amount Account for deposit in the
Collection Account (i) as FBC Principal Collections,
the balance of the FBC Component of the Retained Amount
Account; and (ii) as VBC Principal Collections, the
balance of the VBC Component of the Retained Amount
Account. The balance, if any, of the Subordinated
Component (FBC) of the Retained Amount Account at the
commencement of the Early Amortization Period will be
retained in the Retained Amount Account and shall be
applied to the extent necessary, to avoid FBC Investor
Charge-Offs or to reimburse unreimbursed FBC Investor
Charge-Offs. The balance, if any, of the Subordinated
Component (VBC) of the Retained Amount Account at the
commencement of the Early Amortization Period will be
retained in the Retained Amount Account and shall be
applied to the extent necessary, to avoid VBC Investor
Charge-Offs or to reimburse unreimbursed VBC Investor
Charge-Offs.
(h) At the close of business of the
Servicer on the earlier of (i) the Series Termination
Date and (ii) the date on which the Invested Amount has
been reduced to zero, the balance, if any, remaining in
the Retained Amount Account shall be withdrawn and
transferred to the Depositor for application in
accordance with the Receivables Purchase Agreement.
SECTION 4.07. Prepayment Account; Spread
Account; Successor Servicer Account. (a) Amounts
deposited in the Prepayment Account in accordance with
Section 4.01(d)(ii)(A)(3) pursuant to a Prepayment
Notice hereof shall be withdrawn on the Prepayment Date
set forth in such Prepayment Notice and distributed to
the Holder of the Variable Base Certificate as a
prepayment of the VBC Invested Amount. Amounts
deposited in the Special Prepayment Account in
accordance with Section 4.01(h) shall be withdrawn and
applied at the written direction of the Depositor to
prepay the VBC Invested Amount or, if not so used, for
transfer to the Collection Account and allocation as
Investor Principal Collections.
(b) If on any Determination Date the
Servicer determines that a FBC Deficiency Amount
exists, the Servicer shall cause the Trustee to
withdraw from the FBC Component of the Spread Account
and deposit in the Collection Account an amount equal
to the lesser of (i) the amount of such FBC Deficiency
Amount and (ii) the balance of the FBC Component of the
Spread Account. Amounts so deposited in the Collection
Account shall be set aside therein to cure (in whole or
part) the amount of any such FBC Deficiency Amount. In
the event that a withdrawal is made from the FBC
Component of the Spread Account on any Determination
Date and the amount of such withdrawal is less than the
FBC Deficiency Amount calculated on such Determination
Date, then the amount withdrawn shall be applied in the
following priority, first, against the amounts
described in Section 4.08(a)(i)(A), second, against the
amounts described in Section 4.08(a)(i)(B), third,
against the amounts described in Section 4.08(a)(i)(C),
and fourth, against the amounts described in Section
4.08(a)(i)(D).
(c) If on any Determination Date the
Servicer determines that a VBC Deficiency Amount
exists, the Servicer shall cause the Trustee to
withdraw from the VBC Component of the Spread Account
and deposit in the Collection Account an amount equal
to the lesser of (i) the amount of such VBC Deficiency
Amount and (ii) the balance of the VBC Component of the
Spread Account. Amounts so deposited in the Collection
Account shall be set aside therein to cure (in whole or
part) the amount of any such VBC Deficiency Amount. In
the event that a withdrawal is made from the VBC
Component of the Spread Account on any Determination
Date and the amount of such withdrawal is less than the
VBC Deficiency Amount calculated on such Determination
Date, then the amount withdrawn shall be applied in the
following priority, first, against the amounts
described in Section 4.08(b)(i)(A), second, against the
amounts described in Section 4.08(b)(i)(B), third,
against the amounts described in Section 4.08(b)(i)(C),
fourth, against the amounts described in Section
4.08(b)(i)(D), fifth, against the amounts described in
Section 4.08(b)(i)(E), and sixth, against the amounts
described in Section 4.08(b)(i)(F).
(d) At the close of business of the
Servicer on the earlier of (i) the Series Termination
Date and (ii) the date on which the Invested Amount has
been reduced to zero, the balance, if any, remaining in
the Spread Account shall be withdrawn and transferred
to the Depositor.
(e) Prior to the distribution in any
Collection Period of any Investor Finance Charge
Collections or Investor Principal Collections from the
Collection Account to the Depositor pursuant to
Sections 4.01(c)(ix), 4.01(d)(i)(A)(3),
4.01(d)(ii)(A)(4), 4.01(d)(iii)(A)(5),
4.01(d)(iv)(A)(5), 4.01(d)(i)(B)(4), 4.01(d)(ii)(B)(4),
4.01(d)(iii)(B)(5), 4.01(d)(iv)(B)(5),
4.01(d)(i)(C)(2), 4.01(d)(ii)(C)(2),
4.01(d)(iii)(C)(3), 4.01(d)(iv)(C)(3), the Trustee
shall withdraw from the Collection Account and deposit
in the Successor Servicer Account an amount of $35,000
for such Collection Period until such time as $200,000
is on deposit in the Successor Servicer Account and,
thereafter, the obligation to fund the Successor
Servicer Account shall cease. Amounts on deposit in
the Successor Servicer Account may be withdrawn only to
pay costs associated with the replacement of
Gottschalks as Servicer. If a Successor Servicer is
appointed to replace Gottschalks as Servicer, the
Trustee shall, upon receipt of written requisitions
from such Successor Servicer, withdraw from the
Successor Servicer Account within the three (3) month
period following such appointment amounts as and when
needed to reimburse such Successor Servicer for
documented costs incurred in connection with the
appointment of such Successor Servicer and the
performance of its duties under the Agreement. Any
amount on deposit in the Successor Servicer Account on
the three month anniversary of such appointment shall
be distributed to the Depositor. If Gottschalks is not
replaced as Servicer, on the earlier of (i) the date on
which the Invested Amount is zero, or (ii) the Series
Termination Date, all amounts on deposit in the
Successor Servicer Account shall be distributed to the
Depositor. Notwithstanding the foregoing provisions of
this Section 4.07(e), no such withdrawals and deposits
shall be made if the Depositor provides the Trustee by
April 11, 1994 with, or causes the Trustee to be
provided by April 11, 1994 with, and at all times
thereafter shall maintain, an irrevocable direct pay
letter of credit with a face amount equal to the
difference between $200,000 and the amount on deposit
in the Successor Servicer Account, which letter of
credit shall be in a form reasonably acceptable to the
Trustee, issued by an Eligible Institution, and which
permits the Trustee to draw thereunder upon the
replacement of Gottschalks as Servicer under the
Agreement.
SECTION 4.08. Deficiency Amount. (a) FBC
Deficiency Amount. On each Determination Date, the
Servicer shall determine the amount (the "FBC
Deficiency Amount"), if any, by which (i) the sum of
(A) a pro rata portion (based on the FBC Investor
Percentage) of the Monthly Senior Servicing Fee for the
Related Distribution Date, (B) the FBC Monthly Interest
for the Related Interest Period, (C) all FBC Carryover
Interest for the Related Interest Period, and (D) the
FBC Investor Default Amount, if any, for the Related
Collection Period, exceeds (ii) the sum of (A) the
Investor Finance Charge Collections allocated to the
Fixed Base Certificates during the Related Collection
Period pursuant to Section 4.01(c)(ii), (B) a pro rata
portion (based on the FBC Allocation Percentage) of the
Investor Finance Charge Collections retained in the
Collection Account pursuant to Section 4.01(c)(i)
during the Related Collection Period, (C) a pro rata
portion (based on the FBC Allocation Percentage) of the
Investor Investment Proceeds on deposit in the
Collection Account on such Determination Date, (D) a
pro rata portion (based on the FBC Investor Percentage)
of the balance of the Spread Account as of such
Determination Date, (E) the FBC Component of the
balance of the Retained Amount Account as of such
Determination Date, and (F) a pro rata portion (based
on the FBC Investor Percentage) of the Collections
allocated to the Senior Investor Default Holdback
Amount for the Related Collection Period. In the event
the FBC Deficiency Amount for such Distribution Date is
greater than zero, the Servicer shall give the Trustee
written notice thereof on the date of computation.
(b) VBC Deficiency Amount. On each
Determination Date, the Servicer shall determine the
amount (the "VBC Deficiency Amount"), if any, by which
(i) the sum of (A) a pro rata portion (based on the VBC
Investor Percentage) of the Monthly Senior Servicing
Fee due on the Related Distribution Date, (B) the
aggregate VBC Interest for each Interest Period
included within the related Distribution Period, (C)
all Carryover VBC Interest for the related Distribution
Period, (D) the VBC Unutilized Commitment Fee for the
related Distribution Period, (E) the VBC Carryover
Unutilized Commitment Fee for the related Distribution
Period, (F) the VBC Investor Default Amount, if any,
for such Distribution Date, exceeds (ii) the sum of (A)
the Investor Finance Charge Collections allocated to
the Variable Base Certificate during the Related
Collection Period pursuant to Section 4.01(c)(ii), (B)
a pro rata portion (based on the VBC Allocation
Percentage) of the Investor Finance Charge Collections
retained in the Collection Account pursuant to Section
4.01(c)(i) during the Related Collection Period, (C) a
pro rata portion (based on the VBC Allocation
Percentage) of the Investor Investment Proceeds on
deposit in the Collection Account on such Determination
Date, (D) a pro rata portion (based on the VBC Investor
Percentage) of the balance of the Spread Account as of
such Determination Date, (E) the VBC Component of the
balance of the Retained Amount Account as of such
Determination Date, and (F) a pro rata portion (based
on the VBC Investor Percentage) of the Collections
allocated to the Senior Investor Default Holdback
Amount for the Related Collection Period. In the event
the VBC Deficiency Amount for such Distribution Date is
greater than zero, the Servicer shall give the Trustee
written notice thereof on the date of computation.
SECTION 4.09. Investor Charge-Offs. (a)
FBC Investor Charge-Offs. If on a Distribution Date
(i) the FBC Deficiency Amount (after giving effect to
any deposits to the Collection Account made in
accordance with Sections 4.06(e) and 4.07(b) hereof)
for such Distribution Date exceeds the amount, if any,
by which (A) the FBC Investor Default Amount for the
Related Collection Period exceeds (B) the product of
(x) the Senior Investor Default Holdback Amount for the
Related Collection Period and (y) the FBC Investor
Percentage for the Related Collection Period, then, the
Subordinated Invested Amount (FBC Component) shall be
reduced by the amount of such excess (a "Subordinated
Reduction (FBC)"), but by no more than the FBC Investor
Default Amount for such Distribution Date. In the
event that a Subordinated Reduction (FBC) would cause
the Subordinated Invested Amount (FBC Component) to be
a negative number, the Subordinated Invested Amount
(FBC Component) shall instead be reduced to zero, and
the FBC Invested Amount shall be reduced by the amount
which the Subordinated Invested Amount (FBC Component)
would have been reduced below zero, but by not more
than the FBC Investor Default Amount for such
Distribution Date (such reduction to the FBC Invested
Amount, a "FBC Investor Charge-Off"). FBC Investor
Charge-Offs shall be reimbursed and the FBC Invested
Amount shall thereafter be increased (but not by an
amount in excess of the aggregate FBC Investor
Charge-Offs) on any Distribution Date by the amount of
Investor Finance Charge Collections reallocated as FBC
Principal Collections for that purpose pursuant to
Section 4.01(c)(v), as well as from withdrawals from
the Retained Amount Account and from Subordinated
Principal (FBC Component) Collections retained in the
Collection Account pursuant to Section
4.01(d)(iii)(A)(2) and 4.01(d)(iii)(B)(2) hereof.
(b) VBC Investor Charge-Offs. If on a
Distribution Date (i) the VBC Deficiency Amount (after
giving effect to any deposits to the Collection Account
made in accordance with Sections 4.06(f) and 4.07(c)
hereof) for such Distribution Date exceeds the amount,
if any, by which (A) the VBC Investor Default Amount
for the Related Collection Period exceeds (B) the
product of (x) the Senior Investor Default Holdback
Amount for the Related Collection Period and (y) the
VBC Investor Percentage for the Related Collection
Period, then, the Subordinated Invested Amount (VBC
Component) shall be reduced by the amount of such
excess (a "Subordinated Reduction (VBC)"), but by no
more than the VBC Investor Default Amount for such
Distribution Date. In the event that a Subordinated
Reduction (VBC) would cause the Subordinated Invested
Amount (VBC Component) to be a negative number, the
Subordinated Invested Amount (VBC Component) shall
instead be reduced to zero, and the VBC Invested Amount
shall be reduced by the amount which the Subordinated
Invested Amount (VBC Component) would have been reduced
below zero, but by not more than the VBC Investor
Default Amount for such Distribution Date (such
reduction to the VBC Invested Amount, a "VBC Investor
Charge-Off"). VBC Investor Charge-Offs shall be
reimbursed and the VBC Invested Amount shall thereafter
be increased (but not by an amount in excess of the
aggregate VBC Investor Charge-Offs) on any Distribution
Date by the amount of Investor Finance Charge
Collections reallocated as VBC Principal Collections
for that purpose pursuant to Section 4.01(c)(v), as
well as from withdrawals from the Retained Amount
Account and from Subordinated Principal Collections
(VBC Component) retained in the Collection Account
pursuant to Section 4.01(d)(iv)(A)(2) and
4.01(d)(iv)(B)(2) hereof.
(c) Subordinated Investor (FBC)
Charge-Offs. Subordinated Reductions (FBC) and amounts
withdrawn from Subordinated Principal (FBC Component)
Collections pursuant to Section 4.01(d)(iii)(A)(2) and
4.01(d)(iii)(B)(2) are collectively referred to herein
as "Subordinated Investor (FBC) Charge-Offs."
Subordinated Investor (FBC) Charge-Offs will result in
a reduction in the Subordinated Invested Amount (FBC
Component). Subordinated Investor (FBC) Charge-Offs
shall be reimbursed and the Subordinated Invested
Amount (FBC Component) increased (but not by an amount
in excess of the aggregate amount of Subordinated
Investor (FBC) Charge-Offs) to the extent that Investor
Finance Charge Collections are reallocated as
Subordinated Principal (FBC Component) Collections
pursuant to Section 4.01(c)(vii)(A) and 4.01(e)(iv)(A)
hereof.
(d) Subordinated Investor (VBC)
Charge-Offs. Subordinated Reductions (VBC) and amounts
withdrawn from Subordinated Principal (VBC Component)
Collections pursuant to Section 4.01(d)(iv)(A)(2) and
4.01(d)(iv)(B)(2) are collectively referred to herein
as "Subordinated Investor (VBC) Charge-Offs."
Subordinated Investor (VBC) Charge-Offs will result in
a reduction in the Subordinated Invested Amount (VBC
Component). Subordinated Investor (VBC) Charge-Offs
shall be reimbursed and the Subordinated Invested
Amount (VBC Component) increased (but not by an amount
in excess of the aggregate amount of Subordinated
Investor (VBC) Charge-Offs) to the extent that Investor
Finance Charge Collections are reallocated as
Subordinated Principal (VBC Component) Collections
pursuant to Section 4.01(c)(vii)(B) and 4.01(e)(iv)(B)
hereof.
ARTICLE V
Distributions and Reports to
Certificateholders
SECTION 5.01. Distributions. (a) On
each Distribution Date, the Trustee shall distribute to
the Certificateholders of record on the preceding
Record Date (other than as provided in Section 12.02 of
the Agreement respecting a final distribution) such
Certificateholder's pro rata share of the amounts
required to be distributed pursuant to Article IV
hereof and in accordance with the written direction of
the Servicer. Except as provided in Section 12.02 of
the Agreement with respect to a final distribution,
distributions to Certificateholders hereunder shall be
made by wire transfer in immediately available funds.
SECTION 5.02. Reports and Statements to
Certificateholders. (a)On each Determination Date, the
Servicer will provide the Trustee with a completed
Distribution Date Statement, substantially in the form
of Exhibit B hereto, and on each Distribution Date, the
Trustee shall forward to each Certificateholders such
statement.
(b) The Trustee shall maintain at its
Corporate Trust Office a copy of each statement
received by it pursuant to subsection (a) of this
Section 5.02. The Trustee shall make such statements
available for inspection by Certificateholders upon
reasonable notice at its Corporate Trust Office.
(c) On or before January 31 of each
calendar year, beginning with calendar year 1995, the
Trustee shall furnish or cause to be furnished to each
Person who at any time during the preceding calendar
year was a Certificateholder, a statement prepared by
the Servicer containing the information required to be
contained in the monthly statements to
Certificateholders described in subsection (a) of this
Section 5.02, as the case may be, aggregated for such
calendar year or the applicable portion thereof during
which such Person was a Certificateholder, together
with such other information as is required to be
provided by an issuer of indebtedness under the
Internal Revenue Code and such other customary
information as the Trustee or the Servicer deems
necessary to enable the Certificateholders to prepare
their tax returns. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent
that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of
the Internal Revenue Code as from time to time in
effect.
(d) Notwithstanding any other provision of
the Agreement or this Series Supplement to the
contrary, the Trustee and the Servicer shall promptly
deliver to the initial Holders of the Fixed Base
Certificates a copy of each notice, statement or other
document received or generated by it in connection with
this Series Supplement and/or the Agreement; provided,
however, that the Trustee shall not be required to
deliver to the initial Holders copies of notices,
statements or other documents received from the
Servicer and for which the Servicer is required to
deliver such notices, statements or other documents
directly to the Holders and vice versa.
ARTICLE VI
The Certificates
SECTION 6.01. The Fixed Base
Certificates. The Fixed Base Certificates will be
issued in registered form, substantially in the form of
Exhibit A-1, and shall upon issue, be executed and
delivered by the Depositor to the Trustee for
authentication (the "Fixed Base Certificates"). The
Trustee shall, upon the written request of the
Depositor, authenticate and deliver the Fixed Rate
Certificates to the Person or Persons designated in
such notice against receipt of the purchase price
therefor as provided in the Agreement. The
requirements of Section 6.04(e)(ii) of the Agreement
shall not apply, and shall be deemed waived, in
connection with the initial purchase of the Fixed Base
Certificates.
SECTION 6.02. The Variable Base
Certificate. (a) The Variable Base Certificate will
be issued in registered form, substantially in the form
of Exhibit A-2, and shall upon issue, be executed by
the Depositor and delivered to the Trustee for
authentication (the "Variable Base Certificate"). The
Trustee shall, upon the written request of the
Depositor, authenticate and deliver the Variable Base
Certificate to the Person designated in such notice
against receipt of the purchase price therefor as
provided in the Agreement.
(b) The Variable Base Certificateholder
shall agree, by its acceptance of the Variable Base
Certificate, that the Depositor may, upon at least
three London Business Days' prior written notice to the
Variable Base Certificateholder and the Trustee,
request the Variable Base Certificateholder to acquire,
and the Variable Base Certificateholder shall acquire,
on any VBC Payment and Drawdown Date during the VBC
Revolving Period, undivided interests in the Trust
(such interests, the "Additional Invested Amounts");
provided, however, that the Variable Base
Certificateholder shall not be required to acquire any
Additional Invested Amount (i) that is in a minimum
amount of less than $500,000 or any $100,000 integral
multiple in excess thereof); (ii) if the acquisition
thereof would cause the VBC Invested Amount on such VBC
Payment and Drawdown Date to exceed the Maximum
Available VBC Invested Amount on such date and (iii) if
on the acquisition date any amount is on deposit in the
Prepayment Account.
(c) If the Variable Base
Certificateholder acquires any Additional Invested
Amount, then in consideration of the receipt by the
Trustee of such Certificateholder's payment for such
Additional Invested Amount, the Servicer shall
appropriately note in its succeeding daily and monthly
servicing reports such Additional Invested Amount (and
the corresponding increase in the VBC Invested Amount
as a result of such acquisition) and shall direct the
Trustee to pay to the Depositor the purchase price
received by the Trustee for such Additional Invested
Amount (which shall be equal to the amount of such
Additional Invested Amount).
(d) The Variable Base Certificateholder
shall, and is hereby authorized to, record on the grid
attached to its Variable Base Certificate (or at such
Certificateholder's option, in its internal books and
records) the date and amount of any Additional Invested
Amount purchased by it, and each repayment thereof;
provided that failure to make any such recordation on
such grid or any error in such grid shall not adversely
affect such Certificateholder's rights with respect to
the VBC Invested Amount and its right to receive
principal and interest payments in respect of the VBC
Invested Amount.
(e) Notwithstanding anything to the
contrary contained in this Series Supplement, no VBC
Unutilized Commitment Fee shall commence accruing until
such time as the Trustee has authenticated and
delivered the Variable Base Certificate to the order of
the Depositor.
SECTION 6.03. Transfer Restrictions.
The Trustee shall not authenticate and deliver to any
Person any Variable Base Certificate unless it contains
a legend in substantially the following form:
"THIS CERTIFICATE (OR ITS PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAW.
THE HOLDER OF THIS CERTIFICATE AGREES FOR THE
BENEFIT OF GOTTSCHALKS CREDIT RECEIVABLES CORPORATION
THAT NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE
MAY BE MADE WITHOUT THE PRIOR WRITTEN CONSENT OF
GOTTSCHALKS CREDIT RECEIVABLES CORPORATION. IN
ADDITION TO THE FOREGOING RESTRICTION, NO RESALE OR
OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE EXCEPT
(1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (2) IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS,
OR (3) TO GOTTSCHALKS CREDIT RECEIVABLES CORPORATION."
In addition to transfer restrictions contained in the
Agreement, the Trustee shall not be required to give
effect to any transfer of the Fixed Base Certificates
or the Variable Base Certificate until such time as the
proposed transferee thereof delivers to the Trustee an
investment representation letter substantially in the
form of Exhibit C attached hereto.
SECTION 6.04. Prepayment of the VBC
Invested Amount.The Depositor may elect to prepay the
VBC Invested Amount in whole, or in part in a minimum
amount of not less than $500,000 or any $100,000
integral multiple in excess thereof, on any
Distribution Date during the VBC Revolving Period. If
the Depositor makes such an election, it shall give the
Holder of the Variable Base Certificate, the Servicer
and the Trustee written notice thereof. Such notice (a
"Prepayment Notice") shall (a) be given to the Holder
of the Variable Base Certificate, the Servicer and the
Trustee no later than three London Business Days prior
to a VBC Payment and Drawdown Date, (b) specify the
amount to be prepaid (the "Prepayment Amount"), (c)
specify the Distribution Date on which such prepayment
is expected to occur (a "Prepayment Date"), which
Prepayment Date shall occur no sooner than fourteen
days after the Prepayment Notice is delivered to the
Holder of the Variable Base Certificate, the Servicer
and the Trustee, and (d) specify the amount expected to
be transferred from the Collection Account to the
Prepayment Account in the event that the Prepayment
Date is a Distribution Date later than the second
Distribution Date following the date on which such
Prepayment Notice is received by the Holder of the
Variable Base Certificate, the Servicer and the
Trustee. In addition to the foregoing, the Depositor
may elect to prepay the VBC Invested Amount in whole,
or in part on November 1, 1996 in a minimum amount of
not less than $500,000 or any $100,000 integral
multiple in excess thereof from amounts on deposit in
the Special Prepayment Account, provided that (i)
notice of such prepayment is given to the Holder of the
Variable Base Certificate by the Depositor on October
31, 1996 and (ii) such prepayment is accompanied by
compensation for any actual funding loss or losses
which the Holder of the Variable Base Certificate may
incur as a result of such prepayment (including losses
arising from the redeployment of funds).
SECTION 6.05. The Subordinated
Certificate. The Subordinated Certificate will be
issued in registered form, substantially in the form of
Exhibit A-3, and shall upon issue, be executed and
delivered by the Depositor to the Trustee for
authentication (the "Subordinated Certificate"). The
Trustee shall authenticate and deliver the Subordinated
Certificate to the Depositor simultaneously with its
delivery of the Fixed Base Certificates. The
Subordinated Certificate shall not be transferable.
ARTICLE VII
Early Amortization Events
SECTION 7.01. Additional Early
Amortization Events. If any one or more of the
following events shall occur:
(a) failure on the part of the Depositor
(i) to make any payment or deposit required to be made
by the Depositor by the terms of (A) the Agreement or
(B) this Series Supplement, on or before the date
occurring two Business Days after the date such payment
or deposit is required to be made herein or (ii) duly
to observe or perform in any material respect any
covenants or agreements of the Depositor set forth in
the Agreement or this Series Supplement, which failure
to observe or perform has a material adverse effect on
the Certificateholders and which continues unremedied
for a period of 30 days after the earlier of (A) the
date the Depositor has knowledge thereof and (B) the
date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the
Depositor by the Trustee, or to the Depositor and the
Trustee by the Holders of Certificates representing
more than 50% of the Invested Amount, and continues to
affect materially and adversely the interests of the
Certificateholders for such period; or
(b) any representation or warranty made
by the Depositor in the Agreement or this Series
Supplement, or any information contained in a computer
file or microfiche list required to be delivered by the
Depositor pursuant to Section 2.01, 2.06 or 2.08 of the
Agreement, (i) shall prove to have been incorrect in
any material respect when made or when delivered, which
continues to be incorrect in any material respect for a
period of 30 days after the earlier of (A) the date the
Depositor has knowledge thereof and (B) the date on
which written notice of such failure, requiring the
same to be remedied, shall have been given to the
Depositor by the Trustee, or to the Depositor and the
Trustee by the Holders of Certificates representing
more than 50% of the Invested Amount, and (ii) as a
result of which the interests of the Certificateholders
are materially and adversely affected and continue to
be materially and adversely affected for such period;
provided, however, that an Early Amortization Event
pursuant to this subsection 7.01(b) shall not be deemed
to have occurred hereunder if the Depositor has
accepted reassignment of or repurchased the related
Receivable, or all of such Receivables, if applicable,
during such period in accordance with the provisions of
the Agreement; or
(c) a Servicer Default occurs; or
(d) Gottschalks Inc. is replaced as the
Servicer; or
(e) for three consecutive Collection
Periods one and one-half percent (1.5%) or more of the
aggregate balance of all Eligible Receivables are more
than 90 days past due; or
(f) the average of the Portfolio Yield
for any three consecutive Collection Periods is reduced
to a rate which is less than the Base Rate; or
(g) for 60 consecutive days, the balance
in the Retained Amount Account shall exceed $2,500,000;
or
(h) the failure to pay the Invested
Amount by the Expected Final Payment Date; or the
failure to pay the FBC Controlled Distribution Amount
on any Distribution Date during the FBC Controlled
Amortization Period; or the failure to pay the VBC
Controlled Distribution Amount on any Distribution Date
during the VBC Controlled Amortization Period; or
(i) the Subordinated Invested Amount (FBC
Component) shall be reduced to zero on a date on which
the FBC Invested Amount is greater than zero; or the
Subordinated Invested Amount (VBC Component) shall be
reduced to zero on a date on which the VBC Invested
Amount is greater than zero; or
(j) the Defaulted Amount (net of
Recoveries) as a percentage of the average Receivables
outstanding, on an annualized basis, exceeds seven
percent (7%), for a period of three consecutive
Collection Periods; or
(k) an Early Amortization Period for any
other Series shall commence; or
(l) the average of the monthly payment
rate (i.e., for any Collection Period, a fraction, the
numerator of which is the Investor Principal
Collections received during such Collection Period, and
the denominator of which is the Required Series Pool
Balance in effect for such Collection Period) for any
three consecutive Collection Periods shall be less than
10%; or
(m) the failure by Gottschalks Inc. at
any time to have available one or more working capital
credit facilities with an aggregate commitment of at
least $20,000,000 provided by one or more commercial
banks or other lending institutions; or
(n) Gottschalks Inc. shall have defaulted
in the payment of indebtedness for borrowed money in
excess of $500,000 beyond the period of grace provided
for in the agreement or instrument under which such
indebtedness was created or incurred, such indebtedness
shall have been declared due and payable, such
declaration shall not have been rescinded, revoked or
stayed and such declaration shall have remained in
effect for at least 30 days; or Gottschalks Inc. shall
have defaulted on one or more store leases, and the net
liquidated damages or other net actual losses thereon
shall have exceeded $2,000,000 in the aggregate for any
12 month period;
then, in the case of any event described in subsections
(a) or (b) of this Section 7.01, after the applicable
grace period, if any, set forth in such subsections,
either the Trustee or the Holders of Certificates
representing more than 50% of the Invested Amount by
notice then given in writing to the Depositor and the
Servicer (and to the Trustee if given by
Certificateholders) may declare that an early
amortization event (an "Early Amortization Event") has
occurred as of the date of such notice, and, in the
case of any event described in subsections (c), (d),
(e), (f), (g), (h), (i), (j), (k), (l), (m) or (n) of
this Section 7.01, subject to applicable law, an Early
Amortization Event shall occur without any notice or
other action on the part of the Trustee or the
Certificateholders (except as otherwise provided in any
such subsection), immediately upon the occurrence of
such event. Notwithstanding the foregoing, the Early
Amortization Events described in Section 7.01(e), (f),
(j) and (l) shall not become operative until the July
1994 Collection Period.
SECTION 7.02. Waiver. Notwithstanding
the declaration or occurrence of an Early Amortization
Period, the Holders of Certificates representing 50% or
more of the Invested Amount may, by written notice to
the Trustee, waive such Early Amortization Event. Such
waiver shall be binding upon all Fixed Base
Certificateholders, the Variable Base Certificateholder
and the other parties to this Series Supplement. In
the case of such a waiver, all parties hereto and all
such Certificateholders shall be restored to their
former positions and rights hereunder and any such
Early Amortization Period shall be deemed not to be
continuing; provided, however, this Section 7.02 shall
not apply in the case of an Early Amortization Event of
the type described in Section 7.01(d).
ARTICLE VIII
Optional Repurchase
SECTION 8.01. Optional Repurchase. (a)
On any Distribution Date occurring after the date on
which the Invested Amount is reduced to 10% or less of
the Initial FBC Invested Amount, the Depositor shall
have the option to purchase the entire amount of, but
not less than the entire amount of, the Certificates,
at a purchase price equal to the Reassignment Amount
for such Distribution Date.
(b) The Depositor shall give the Servicer
and the Trustee at least ten (10) days' prior written
notice of the Distribution Date on which the Depositor
intends to exercise such purchase option. Not later
than 12:00 noon, New York City time, on such
Distribution Date the Depositor shall deposit the
Reassignment Amount into the Collection Account in
immediately available funds. Such purchase option is
subject to payment in full of the Reassignment Amount.
The Reassignment Amount shall be distributed as set
forth in Section 9.01(b) hereof.
ARTICLE IX
Final Distributions
SECTION 9.01. Final Distributions. (a)
The amount to be paid by the Depositor to the
Collection Account with respect to the Certificates in
connection with a purchase of the Certificates pursuant
to Section 2.03 of the Agreement shall equal the
Reassignment Amount for the first Distribution Date
following the Collection Period in which the
reassignment obligation arises under the Agreement.
(b) Reassignment Amounts deposited into
the Collection Account pursuant to Section 8.01 of this
Series Supplement or Section 2.03 of the Agreement and
allocated to the Series 1994-1 Certificates, shall be
applied by the Trustee at the direction of the
Servicer, not later than 12:00 noon, New York City
time, on the Distribution Date on which such amounts
are deposited (or, if such date is not a Distribution
Date, on the immediately following Distribution Date)
as follows:
(i) in the case of Reassignment Amounts
which constitute Investor Finance Charge Collections:
(A) an amount equal to the product of such Investor
Finance Charge Collections and the FBC Investor
Percentage for such Distribution Date shall be applied
to pay an amount up to the sum of (1) all accrued and
unpaid interest on the unpaid balance of the FBC
Invested Amount and (2) the FBC Carryover Interest due
on such Distribution Date; (B) an amount equal to the
product of such Investor Finance Charge Collections and
the VBC Investor Percentage for such Distribution Date
shall be applied to pay an amount up to the sum of (1)
all accrued and unpaid interest on the unpaid balance
of the VBC Invested Amount and (2) the VBC Carryover
Interest due on such Distribution Date; and (C) any
amount remaining after the foregoing applications shall
be reallocated as Investor Principal Collections and
applied as provided in paragraph (ii) immediately
below; and
(ii) in the case of Reassignment Amounts
which constitute Investor Principal Collections: (A) an
amount equal to the product of such Investor Principal
Collections and the FBC Allocation Percentage for such
Distribution Date shall be applied to pay an amount up
to the FBC Invested Amount; (B) an amount equal to the
product of such Investor Principal Collections and the
VBC Allocation Percentage for such Distribution Date
shall be applied to pay an amount up to the VBC
Invested Amount; (C) an amount equal to the product of
(x) such Investor Principal Collections, (y) the
Subordinated Allocation Percentage for such
Distribution Date and (z) the FBC Investor Percentage
for such Distribution Date, shall be applied to pay an
amount up to the Subordinated Invested Amount (FBC
Component); (D) an amount equal to the product of (x)
such Investor Principal Collections, (y) the
Subordinated Allocation Percentage for such
Distribution Date and (z) the VBC Investor Percentage
for such Distribution Date, shall be applied to pay an
amount up to the Subordinated Invested Amount (VBC
Component); and (E) any amount remaining after the
foregoing applications shall be distributed to the
Holder of the Exchangeable Certificate.
(c) Termination Proceeds deposited into
the Collection Account pursuant to Section 12.02(c) of
the Agreement and allocated to the Series 1994-1 and
the Certificates, shall be applied by the Trustee at
the direction of the Servicer, not later than 12:00
noon, New York City time, on the Distribution Date on
which such amounts are deposited (or, if such date is
not a Distribution Date, on the immediately following
Distribution Date) as follows:
(i) in the case of Termination Proceeds
which constitute Investor Finance Charge Collections:
(A) an amount equal to the product of such Investor
Finance Charge Collections and the FBC Investor
Percentage for such Distribution Date shall be applied
to pay an amount up to the sum of (1) all accrued and
unpaid interest on the unpaid balance of the FBC
Invested Amount and (2) the FBC Carryover Interest due
on such Distribution Date; (B) an amount equal to the
product of such Investor Finance Charge Collections and
the VBC Investor Percentage for such Distribution Date
shall be applied to pay an amount up to the sum of (1)
all accrued and unpaid interest on the unpaid balance
of the VBC Invested Amount and (2) the VBC Carryover
Interest due on such Distribution Date; and (C) any
amount remaining after the foregoing applications shall
be reallocated as Investor Principal Collections and
applied as provided in paragraph (ii) immediately
below; and
(ii) in the case of Termination Proceeds
which constitute Investor Principal Collections: (A) an
amount equal to the product of such Investor Principal
Collections and the FBC Allocation Percentage for such
Distribution Date shall be applied to pay an amount up
to the FBC Invested Amount; (B) an amount equal to the
product of such Investor Principal Collections and the
VBC Allocation Percentage for such Distribution Date
shall be applied to pay an amount up to the VBC
Invested Amount; (C) an amount equal to the product of
(x) such Investor Principal Collections, (y) the
Subordinated Allocation Percentage for such
Distribution Date and (z) the FBC Investor Percentage
for such Distribution Date, shall be applied to pay an
amount up to the Subordinated Invested Amount (FBC
Component); (D) an amount equal to the product of (x)
such Investor Principal Collections, (y) the
Subordinated Allocation Percentage for such
Distribution Date and (z) the VBC Investor Percentage
for such Distribution Date, shall be applied to pay an
amount up to the Subordinated Invested Amount (VBC
Component); and (E) any amount remaining after the
foregoing applications shall be distributed to the
Holder of the Exchangeable Certificate.
(d) Liquidation Proceeds deposited into
the Collection Account pursuant to Section 9.02(b) of
the Agreement and allocated to the Series 1994-1
Certificates, shall be applied by the Trustee at the
direction of the Servicer, not later than 12:00 noon,
New York City time, on the Distribution Date on which
such amounts are deposited (or, if such date is not a
Distribution Date, on the immediately following
Distribution Date) as follows:
(i) in the case of Liquidation Proceeds
which constitute Investor Finance Charge Collections:
(A) an amount equal to the product of such Investor
Finance Charge Collections and the FBC Investor
Percentage for such Distribution Date shall be applied
to pay an amount up to the sum of (1) all accrued and
unpaid interest on the unpaid balance of the FBC
Invested Amount and (2) the FBC Carryover Interest due
on such Distribution Date; (B) an amount equal to the
product of such Investor Finance Charge Collections and
the VBC Investor Percentage for such Distribution Date
shall be applied to pay an amount up to the sum of (1)
all accrued and unpaid interest on the unpaid balance
of the VBC Invested Amount and (2) the VBC Carryover
Interest due on such Distribution Date; and (C) any
amount remaining after the foregoing applications shall
be reallocated as Investor Principal Collections and
applied as provided in paragraph (ii) immediately
below; and
(ii) in the case of Liquidation Proceeds
which constitute Investor Principal Collections: (A) an
amount equal to the product of such Investor Principal
Collections and the FBC Allocation Percentage for such
Distribution Date shall be applied to pay an amount up
to the FBC Invested Amount; (B) an amount equal to the
product of such Investor Principal Collections and the
VBC Allocation Percentage for such Distribution Date
shall be applied to pay an amount up to the VBC
Invested Amount; (C) an amount equal to the product of
(x) such Investor Principal Collections, (y) the
Subordinated Allocation Percentage for such
Distribution Date and (z) the FBC Investor Percentage
for such Distribution Date, shall be applied to pay an
amount up to the Subordinated Invested Amount (FBC
Component); (D) an amount equal to the product of (x)
such Investor Principal Collections, (y) the
Subordinated Allocation Percentage for such
Distribution Date and (z) the VBC Investor Percentage
for such Distribution Date, shall be applied to pay an
amount up to the Subordinated Invested Amount (VBC
Component); and (E) any amount remaining after the
foregoing applications shall be distributed to the
Holder of the Exchangeable Certificate.
(e) Notwithstanding anything to the
contrary contained in this Series Supplement or the
Agreement, any distribution made pursuant to this
Section 9.01 shall be deemed to be a final distribution
pursuant to Section 12.02 of the Agreement with respect
to the Certificates.
(f) Notwithstanding Section 12.02 of the
Agreement, no Certificateholder shall be required to
surrender its Investor Certificate(s) in order to
receive its final distribution under the Agreement and
this Series Supplement.
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Ratification of
Agreement; Amendment and Restatement of Existing Series
Supplement. As supplemented by this Series Supplement,
the Agreement is in all respects ratified and confirmed
and the Agreement as so supplemented by this Series
Supplement, shall be read, taken and construed as one
and the same instrument. From and after the date first
above referenced, this Series Supplement shall amend
and restate the Existing Series Supplement in its
entirety.
SECTION 10.02. Counterparts. This Series
Supplement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an
original, but all of which shall together constitute
but one and the same instrument.
SECTION 10.03. GOVERNING LAW. THIS SERIES
SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICTS OF LAW PROVISIONS, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 10.04. Rating Agency Notice. No
amendment or waiver with respect to any Early
Amortization Event shall be effective until such time
as the Rating Agencies have been notified.
IN WITNESS WHEREOF, the Depositor, the
Servicer and the Trustee have caused this Series
Supplement to be duly executed by their respective
officers as of the day and year first above written.
GOTTSCHALKS CREDIT
RECEIVABLES CORPORATION, as
Depositor
By: /s/ STEVE FURST
Chief Financial Officer
of G.C.R.C.
By: /s/ JOSEPH LEVY
Chairman
GOTTSCHALKS INC., as
Servicer
By: /s/ ALAN A. WEINSTEIN
Senior Vice President/
Chief Financial Officer
BANKERS TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By: /s/ MELISSA J. KAYE
Senior Vice President
SCHEDULE I
List of Series Accounts
Bankers Trust Company
ABA # 021001033
ACCT: 01419647
REF: Gottschalks 1994-1
Attn: Ms. Joanne Manieri
Gottschalks Credit Card Master Trust Series 1994-1
Capitalized Interest Account: 11871
Gottschalks Credit Card Master Trust Series 1994-1
Retained Amount Account: 11869
Gottschalks Credit Card Master Trust Series 1994-1
Prepayment Account: 11870
Gottschalks Credit Card Master Trust Series
1994-1 Special Prepayment Account: _______
Gottschalks Credit Card Master Trust Series 1994-1
Spread Account: 11872
Gottschalks Credit Card Master Trust Series 1994-1
Successor Servicer Account: 11868
[EXECUTION COPY]
GOTTSCHALKS CREDIT RECEIVABLES CORPORATION
Depositor
GOTTSCHALKS INC.
Servicer
and
BANKERS TRUST COMPANY
Trustee
___________________________________
SERIES 1996-1 SUPPLEMENT
Dated as of November 1, 1996
to
POOLING AND SERVICING AGREEMENT
Dated as of March 30, 1994
___________________________________
GOTTSCHALKS CREDIT CARD MASTER TRUST
TABLE OF CONTENTS
Page
ARTICLE I
Creation of the Series 1996-1 Certificates. 1
SECTION 1.01. Designation. . . . . . . . . . . . . . 1
ARTICLE II
Definitions . . . . . . . .. 2
SECTION 2.01. Definitions. . . . . . . . . . . . . 2
ARTICLE III
Servicing Fee. . . . . . . . 14
SECTION 3.01. Servicing Compensation . . . . . . . 14
ARTICLE IV
Rights of Certificateholders and
Allocation and Application of Collections. .15
SECTION 4.01. Allocations and Distributions. . . . 15
SECTION 4.02. FBC Monthly Interest . . . . . . . . 24
SECTION 4.03. Determination of FBC Monthly Principal25
SECTION 4.04. Series Accounts. . . . . . . . . . . 25
SECTION 4.05. Capitalized Interest Account . . . . 27
SECTION 4.06. Retained Amount Account. . . . . . . 27
SECTION 4.07. Spread Account . . . . . . . . . . . 29
SECTION 4.08. FBC Deficiency Amount. . . . . . . . 30
SECTION 4.09. Investor Charge-Offs . . . . . . . . .30
ARTICLE V
Distributions and Reports to
Certificateholders. . . . . . . .31
SECTION 5.01. Distributions . . . . . . . . . . 31
SECTION 5.02. Reports and Statements to
Certificateholders . . . . . . . . . .32
ARTICLE VI
The Certificates . . . . . . . 33
SECTION 6.01. The Fixed Base Certificates . . . 33
SECTION 6.02. Transfer Restrictions . . . . . . 33
SECTION 6.03. The Subordinated Certificate. . . 34
ARTICLE VII
Early Amortization Events. . . . . .34
SECTION 7.01. Additional Early Amortization
Events. . . 34
SECTION 7.02. Waiver. . . . . . . . . . . . . . 36
ARTICLE VIII
Optional Repurchase . . . . . . 37
SECTION 8.01. Optional Repurchase . . . . . . . 37
ARTICLE IX
Final Distributions . . . . . . .37
SECTION 9.01. Final Distributions . . . . . . . 37
ARTICLE X
Miscellaneous Provisions . . . . . 40
SECTION 10.01. Ratification of Agreement. . . . . 40
SECTION 10.02. Counterparts . . . . . . . . . . . . 40
SECTION 10.03. GOVERNING LAW. . . . . . . . . . . . 40
EXHIBITS
EXHIBIT A-1 Form of Fixed Base Certificate
EXHIBIT A-2 Form of Subordinated Certificate
EXHIBIT B Form of Monthly Distribution
Statement
EXHIBIT C Form of Representation Letter
SCHEDULES
SCHEDULE I List of Accounts
<PAGE>
SERIES 1996-1 SUPPLEMENT dated as of
October 31, 1996 (the "Series Supplement"), among
GOTTSCHALKS CREDIT RECEIVABLES CORPORATION, a Delaware
corporation, as Depositor, GOTTSCHALKS INC., a Delaware
corporation, as Servicer, and BANKERS TRUST COMPANY, a
New York banking corporation, not in its individual
capacity but solely as Trustee.
RECITALS
Section 6.03 of the Pooling and Servicing
Agreement, dated as of March 30, 1994, as amended by
Amendment No. 1 to Pooling and Servicing Agreement,
dated as of September 16, 1994, and Amendment No. 2 to
Pooling and Servicing Agreement, of even date herewith,
in each case, among the Depositor, the Servicer and the
Trustee (collectively, the "Agreement"), provides,
among other things, that the Depositor may from time to
time direct the Trustee to authenticate and deliver, on
behalf of the Trust, one or more new Series of Investor
Certificates representing fractional undivided
interests in the Trust and in connection therewith to
enter into Series Supplements with the Servicer and the
Trustee to provide for the issuance, authentication and
delivery of a new Series of Investor Certificates and
to specify the Principal Terms thereof. Pursuant to
this Series Supplement, the Depositor and the Trustee
on behalf of the Trust shall hereby create a new Series
of Investor Certificates and specify the Principal
Terms thereof.
ARTICLE I
Creation of the Series 1996-1 Certificates
SECTION 1.01. Designation. (a) There is
hereby created a Series of Investor Certificates to be
issued pursuant to the Agreement and this Series
Supplement to be known as the "Gottschalks Credit Card
Master Trust, Series 1996-1 Certificates". The Series
1996-1 Certificates will be issued in two certificated
Classes, the first of which shall be known as the
"6.79% Fixed Base Certificates, Series 1996-1"; and the
second of which shall be known as the "Subordinated
Certificate, Series 1996-1".
(b) In the event that any term or
provision contained herein shall conflict with or be
inconsistent with any term or provision contained in
the Agreement, the terms and provisions of this Series
Supplement shall govern.
ARTICLE II
Definitions
SECTION 2.01. Definitions. (a) Whenever
used in this Series Supplement, the following words and
phrases shall have the following meanings.
"Accelerated Amortization Election" a
written notice executed by the Holders of Certificates
representing more than 50% of the FBC Invested Amount
and delivered to the Depositor, the Servicer and the
Trustee no later than the earlier of (a) the six month
anniversary of the commencement of the Controlled
Amortization Period or (b) the commencement of the
Early Amortization Period, in either case, to the
effect that such Holders have elected to accelerate the
amortization of the FBC Invested Amount.
"Accelerated Payment" shall mean any FBC
Principal Collections that are paid to the Fixed Base
Certificateholders prior to the Expected Final Payment
Date due to the commencement of the Early Amortization
Period (a) on any date on or after August 31, 1997 or
(b) as a result of the occurrence of an Early
Amortization Event of the type described in Sections
7.01(a), (c), (e), (f), (g) or (j) hereof caused
directly or indirectly by (A) the imposition of a Block
Period, (B) the removal of Removed Accounts, (C) the
issuance of a new Series and/or the willful breach by
the Servicer (so long as the Servicer is Gottschalks)
of its obligations under the Agreement and this Series
Supplement.
"Advance Rate" shall mean 100% minus the
Required Subordination Percentage.
"Allocation Day" shall have the meaning
specified in Section 4.01(b) hereof.
"Applicable Interest Rate" shall mean, as
of any date of determination and for any Investor
Certificate, the per annum interest rate applicable to
such Investor Certificate as of such date.
"Base Rate" shall mean, as of any date of
determination, the sum of the weighted average of the
Applicable Interest Rate applied to the Invested Amount
of each Investor Certificate of any Series then
outstanding as of such date and a zero percent interest
rate applied to the Invested Amount of each
Subordinated Certificate of any Series then outstanding
as of such date plus the weighted average Senior
Servicing Fee Rate per annum plus 1% per annum.
"Calculation Agent" shall mean the Trustee
or any other Calculation Agent selected by the
Depositor which is reasonably acceptable to the
Trustee.
"Capitalized Interest Account" shall have
the meaning specified in Section 4.04(a) hereof.
"Certificates" shall mean, collectively,
the Fixed Base Certificates and the Subordinated
Certificate.
"Closing Date" shall mean October 31, 1996.
"Commitment Fee" shall mean as of any date
of determination and for any Investor Certificate of
any Series, the per annum rate of any commitment or
similar fee payable with respect to any such
Certificate as of such date from Finance Charge
Collections that are allocable to such Certificate.
"Controlled Amortization Period" shall
mean, unless the Early Amortization Period shall have
commenced prior thereto, the period commencing on the
day immediately following the last day of the FBC
Revolving Period, and ending upon the first to occur of
(a) the commencement of the Early Amortization Period,
(b) the payment in full to the Fixed Base
Certificateholders of the FBC Invested Amount and (c)
the Series Termination Date.
"Discounted Value" shall mean, with respect
to any Accelerated Payment, the amount obtained by
discounting all Remaining Scheduled Payments with
reference to such Accelerated Payment from their
respective scheduled due dates to the Distribution Date
on which such Accelerated Payment is to be paid in
accordance with accepted financial practice and at a
discount factor (applied on a monthly basis) equal to
the Reinvestment Yield with respect to such Accelerated
Payment.
"Early Amortization Event" shall mean for
the Series 1996-1 any Early Amortization Event
specified in Section 9.01 of the Agreement, together
with any additional Early Amortization Event specified
in Section 7.01 hereof.
"Exchangeable Holder's Percentage" shall
mean, (a) in the case of Series Finance Charge
Collections, 100% minus the Floating Allocation
Percentage, and (b) in the case of Series Principal
Collections, 100% minus (i) the Floating Allocation
Percentage, when used with respect to Series Principal
Collections during the FBC Revolving Period, or (ii)
the Fixed/Floating Allocation Percentage, when used
with respect to Series Principal Collections during the
Controlled Amortization Period and the Early
Amortization Period, provided that in any case the
Exchangeable Holder's Percentage shall not be less than
zero.
"Expected Final Payment Date" shall mean
the September 1999 Distribution Date.
"FBC Additional Interest" shall have the
meaning specified in Section 4.02 hereof.
"FBC Allocation Percentage" shall mean,
with respect to any Collection Period, the percentage
equivalent of a fraction, the numerator of which is the
FBC Invested Amount and the denominator of which is the
Required Series Pool Balance, in each case, as of the
first day of such Collection Period and after giving
effect to any distributions made as of such date.
"FBC Carryover Interest" shall mean, for
any Collection Period, an amount equal to the sum of
(a) the amount of any FBC Monthly Interest previously
due but not distributed on the Fixed Base Certificates
on a prior Distribution Date, (b) to the extent
permitted under applicable law, the amount of any FBC
Additional Interest to accrue during the Related
Interest Period and (c) the amount of any FBC
Additional Interest previously due but not distributed
on the Fixed Base Certificates on a prior Distribution
Date.
"FBC Component" shall mean, as of any time
of determination, either (a) in the case of the
Retained Amount Account, the amount set forth as of
such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Retained Amount
Account pursuant to Sections 4.01(d)(i)(A)(2) and
4.01(d)(i)(B)(3) hereof less amounts withdrawn
therefrom in accordance with Section 4.06, or (b) in
the case of the Spread Account, the amount set forth as
of such time on the ledger maintained by the Trustee in
accordance with Section 4.04(e) hereof as representing
the net balance of deposits made to the Spread Account
pursuant to Section 4.01(c)(iv) hereof less amounts
withdrawn therefrom in accordance with Section 4.07
hereof.
"FBC Controlled Distribution Amount" shall
mean, with respect to any Distribution Date occurring
during the Controlled Amortization Period, (a) if no
Accelerated Amortization Election has been made, an
amount equal to one-twelfth (1/12th) of the principal
balance of the FBC Invested Amount as of the September
1998 Distribution Date (after giving effect to any
changes in the FBC Invested Amount occurring on or
prior to such date) or (b) if an Accelerated
Amortization Election has been made, an amount equal to
one-sixth (1/6th) of the principal balance of the FBC
Invested Amount as of the Distribution Date (after
giving effect to any changes in the FBC Invested Amount
occurring on or prior to such date) immediately
preceding the date on which such Accelerated
Amortization Election was made.
"FBC Deficiency Amount" shall have the
meaning specified in Section 4.08 hereof.
"FBC Interest Rate" shall mean, with
respect to any Interest Period and the Fixed Base
Certificates, a fixed interest rate per annum equal to
6.79%.
"FBC Interest Shortfall" shall have the
meaning specified in Section 4.02 hereof.
"FBC Invested Amount" shall mean, as of any
date of determination, an amount equal to (a) the
Initial FBC Invested Amount, minus, (b) the amount of
principal payments made to the Fixed Base
Certificateholders in respect of the FBC Invested
Amount prior to such date, and minus, (c) the amount,
if any, by which the aggregate amount of FBC Investor
Charge-Offs exceed the FBC Investor Charge-Offs
reimbursed pursuant to Section 4.09 hereof prior to
such date.
"FBC Investor Charge-Offs" shall have the
meaning specified in Section 4.09 hereof.
"FBC Monthly Interest" shall have the
meaning specified in Section 4.02 hereof.
"FBC Monthly Principal" shall have the
meaning specified in Section 4.03 hereof.
"FBC Principal Allocation Percentage" shall
mean, with respect to any Collection Period occurring
(a) prior to the commencement of the Controlled
Amortization Period or the Early Amortization Period,
the percentage equivalent of a fraction, the numerator
of which is the FBC Invested Amount and the denominator
of which is the Required Series Pool Balance, in each
case, as of the first day of such Collection Period and
after giving effect to any distributions made as of
such date, or (b) during the Controlled Amortization
Period or the Early Amortization Period, the percentage
equivalent of a fraction, the numerator of which is the
FBC Invested Amount as of the last day of the FBC
Revolving Period and the denominator of which is the
Required Series Pool Balance as of such last day.
"FBC Principal Collections" shall mean, for
any Allocation Day, an amount equal to the Series
Principal FBC Collections for such day minus the
product of (a) the amount of Series Principal
Collections distributed to the Holder of the
Exchangeable Certificate on such day in accordance with
Section 4.01(b)(ii) hereof and (b) the FBC Principal
Allocation Percentage in effect on such Allocation Day.
"FBC Revolving Period" shall mean the
period beginning at the opening of business on the
Closing Date and ending on the earlier of (a) the last
day of the Related Collection Period for the
Distribution Date that is to occur in September, 1998
and (b) the close of business on the Business Day
immediately preceding the day on which the Early
Amortization Period commences.
"Fixed Base Certificates" shall have the
meaning specified in Section 6.01 hereof.
"Fixed Base Certificateholder" shall mean,
with respect to any Fixed Base Certificate on any date,
the Person in whose name such Fixed Base Certificate is
registered on such date.
"Fixed/Floating Allocation Percentage"
shall mean, with respect to any Collection Period
during the Controlled Amortization Period and the Early
Amortization Period, the percentage equivalent (which
percentage shall never exceed 100%) of a fraction, the
numerator of which is the Required Series Pool Balance
as of the last day of the FBC Revolving Period and the
denominator of which is the Series Pool Balance as of
the first day of the Collection Period in respect of
which the Fixed/Floating Allocation Percentage is being
determined and after giving effect to any distributions
made as of such date.
"Floating Allocation Percentage" shall
mean, with respect to any Collection Period, the
percentage equivalent (which percentage shall never
exceed 100%) of a fraction, the numerator of which is
the Required Series Pool Balance and the denominator of
which is the Series Pool Balance, in each case, as of
the first day of such Collection Period; provided,
however, that, with respect to the first Collection
Period, the Floating Allocation Percentage shall mean
the percentage equivalent of a fraction, the numerator
of which is the sum of the Initial FBC Invested Amount
and the Initial Subordinated Invested Amount, and the
denominator of which is the Series Pool Balance as of
the Closing Date.
"Initial FBC Invested Amount" shall mean
$6,000,000.
"Initial Subordinated Invested Amount"
shall mean $1,142,858.
"Interest Period" shall mean, with respect
to any Distribution Date, the period from and including
the Distribution Date immediately preceding such
Distribution Date (or, in the case of the first
Distribution Date, from and including the Closing Date)
to but excluding such Distribution Date.
"Investor Default Amount" shall mean, with
respect to any Distribution Date, an amount equal to
the product of (a) the Defaulted Amount for the Related
Collection Period, (b) the Floating Allocation
Percentage for the Related Collection Period and (c)
the Series 1996-1 Allocation Percentage for the Related
Collection Period.
"Investor Finance Charge Collections" shall
mean, as of any Allocation Day, the product of (a) the
amount of Series Finance Charge Collections received
since the beginning of the preceding Business Day and
(b) the Floating Allocation Percentage for the then
current Collection Period.
"Investor Investment Proceeds" shall mean,
with respect to any Distribution Date, all interest and
other investment earnings (net of losses and investment
expenses) on funds on deposit in the Series Accounts,
together with an amount equal to the Series Allocation
Percentage of the interest and other investment
earnings on funds held in the Collection Account
credited as of such date to the Collection Account
pursuant to Section 4.02 of the Agreement.
"Investor Principal Collections" shall
mean, for any day or period, the sum of (a) the FBC
Principal Collections and (b) the Subordinated
Principal Collections, in each case, determined for
such day or period, as the case may be.
"Make Whole Premium" shall mean, with
respect to any Accelerated Payment, the excess, if any,
of the Discounted Value with respect to such
Accelerated Payment over such Accelerated Payment. The
Make Whole Premium shall never be less than zero.
"Minimum Depositor Interest" shall mean,
with respect to the Series 1996-1, the Subordinated
Invested Amount.
"Monthly Senior Servicing Fee" shall mean,
with respect to any Distribution Date, five-sixths
(5/6ths) of the Monthly Servicing Fee for the Related
Collection Period.
"Monthly Servicing Fee" shall have the
meaning specified in Section 3.01 hereof.
"Monthly Subordinated Servicing Fee" shall
mean, with respect to any Distribution Date, one-sixth
(1/6th) of the Monthly Servicing Fee for the Related
Collection Period.
"Portfolio Yield" shall mean, with respect
to any Collection Period, the annualized percentage
equivalent of a fraction (a) the numerator of which is
the amount of Finance Charge Collections allocated to
the Certificates of all Series that are outstanding
(other than the Exchageable Certificate) during such
Collection Period calculated on a cash basis, minus the
Default Amount allocable to the Certificates of all
Series that are outstanding (other than the Exchageable
Certificate) with respect to such Collection Period and
(b) the denominator of which is the Pool Balance
allocable to the Certificates of all Series that are
outstanding (other than the Exchageable Certificate) as
of the first day of such Collection Period.
"Preceding Collection Period" shall mean,
with respect to any Collection Period, the Collection
Period ended immediately prior to such first referenced
Collection Period.
"Projected Make Whole Premium" shall mean,
for purposes of allocating Investor Finance Charge
Collections only during a Collection Period, an assumed
calculation of the Make Whole Premium calculated as of
the first day of such Collection Period and assuming
that (a) the Accelerated Payment for such calculation
is equal to the highest aggregate monthly FBC Principal
Collections during the three immediately preceding
Collection Periods and (b) that the Reinvestment Yield
is equivalent to the Reinvestment Yield calculated as
of such first day.
"Reassignment Amount" shall mean, with
respect to any Distribution Date, after giving effect
to any deposits and distributions otherwise to be made
on such Distribution Date, the sum of (a) the FBC
Invested Amount on such Distribution Date, (b) accrued
and unpaid interest on the unpaid principal balance of
the Fixed Base Certificates (calculated on the basis of
the outstanding principal balance of the Fixed Base
Certificates at the FBC Interest Rate through the day
preceding such Distribution Date), and (c) the amount
of FBC Additional Interest, if any, for such
Distribution Date and any FBC Additional Interest
previously due but not distributed on the Fixed Base
Certificates on a prior Distribution Date.
"Reinvestment Yield" shall mean, with
respect to any Accelerated Payment, the yield to
maturity implied by (a) the yields reported, as of
10:00 a.m. New York City time on the Business Day next
preceding the Distribution Date on which such
Accelerated Payment is to be made, on the display
designated as "Page 678" on the Telerate Service (or
such other display as may replace Page 678 on the
Telerate Service) for actively traded U.S. Treasury
securities having a maturity equal or closest to the
Remaining Average Life of such Accelerated Payment as
of such Distribution Date, plus 0.5% per annum, or (b)
if such yields shall not be reported as of such time or
the yields reported as of such time shall not be
ascertainable, the Treasury Constant Maturity Series
yields reported, for the latest day for which such
yields shall have been so reported as of the Business
Day preceding the Distribution Date on which such
Accelerated Payment is to be made, in Federal Reserve
Statistical Release H.15 (519) (or any comparable
successor publication) for actively traded U.S.
Treasury securities having a constant maturity equal to
the Remaining Average Life of such Accelerated Payment
as of such Distribution Date, plus 0.5% per annum.
Such implied yield shall be determined, if necessary,
by (x) converting U.S. Treasury bill quotations to
bond-equivalent yields in accordance with accepted
financial practice and (y) interpolating linearly
between reported yields.
"Related Collection Period" shall mean,
with respect to (a) any Distribution Date, the
Collection Period ended on the second Business Day
preceding such Distribution Date and (b) any Allocation
Day, the Collection Period during which such Allocation
Day occurs.
"Related Distribution Date" shall mean,
with respect to any Collection Period or Allocation
Day, the Distribution Date following the end of such
Collection Period or Allocation Day.
"Related Interest Period" shall mean, with
respect to (a) any Distribution Date, the Interest
Period ended on the preceding day and (b) any
Collection Period, the Interest Period which commences
during such Collection Period.
"Remaining Average Life" shall mean, at any
time of determination after the commencement of the
Early Amortization Period, the number of years obtained
by dividing the then Remaining Dollar-Years of the
Fixed Base Certificates by the FBC Invested Amount at
such time. The term "Remaining Dollar-Years" means the
amount obtained by (a) multiplying (i) the amount of
each remaining payment with respect to the Fixed Base
Certificates, assuming that such payments are made in
the FBC Controlled Distribution Amounts (using the FBC
Invested Amount at the time the Early Amortization
Period commenced in order to calculate such FBC
Controlled Distribution Amounts) over the number of
months comprising the FBC Controlled Amortization
Period, by (ii) the number of years (calculated to the
nearest one-twelfth) which will elapse between the date
as of which the calculation is made and each
Distribution Date during the notional FBC Controlled
Amortization Period and (b) totalling all the products
obtained in clause (a).
"Remaining Scheduled Payments" shall mean,
with reference to any Accelerated Payment, the sum of
(a) all payments of interest thereon at the FBC
Interest Rate that would be due on or after the
Distribution Date on which such Accelerated Payment is
to be made if no payment of such Accelerated Payment
were made prior to the Expected Final Payment Date and
(b) the amount of such Accelerated Payment.
"Required Series Pool Balance" shall mean,
as of any date of determination, the sum of (a) the FBC
Invested Amount on such date and (b) the Subordinated
Invested Amount on such date.
"Required Subordination Percentage" shall
mean sixteen percent (16%).
"Retained Amount Account" shall have the
meaning specified in Section 4.04(a) hereof.
"Senior Investor Default Holdback Amount"
shall mean, with respect to (a) any Collection Period
(other than the initial Collection Period), the product
of (i) the greater of (A) the Investor Default Amount
which the Servicer reasonably anticipates for such
Collection Period or (B) the product of (1) the highest
default rate (i.e., a fraction, the numerator of which
is the Defaulted Amount for a Collection Period, and
the denominator of which is the aggregate Principal
Receivables owned by the Trust as of the last day of
such Collection Period) for any of the twelve
consecutive Collection Periods preceding such
Collection Period, (2) the aggregate amount of the
Principal Receivables owned by the Trust as of the
first day of such Collection Period, (3) the Series
Allocation Percentage for the Series 1996-1 for such
Collection Period, and (4) the Floating Allocation
Percentage for such Collection Period, and (ii) a
fraction the numerator of which is the FBC Invested
Amount and the denominator of which is the Required
Series Pool Balance, in each case, in effect for such
Collection Period and (b) the initial Collection
Period, $16,500.
"Senior Servicing Fee Rate" shall mean, (a)
with respect to the Certificates, two and one-half
percent (2.5%), and (b) with respect to the
Certficiates of any other Series, the servicing fee
rate paid to the Servicer from the first Finance Charge
Collections received during any Collection Period that
are allocated to the Certificates of that Series.
"Series Accounts" shall have the meaning
specified in Section 4.04(a) hereof.
"Series Default Amount" shall mean, with
respect to any Distribution Date, an amount equal to
the product of (a) the Defaulted Amount for the Related
Collection Period, and (b) the Series 1996-1 Allocation
Percentage for the Related Collection Period.
"Series Finance Charge Collections" shall
mean, with respect to the aggregate amount of Finance
Charge Collections deposited in the Collection Account
on any date, that portion allocated to the Series
1996-1 in accordance with Section 4.04 of the
Agreement.
"Series Issuance Date" shall mean October
31, 1996.
"Series 1996-1" shall mean the Series of
Investor Certificates and the Subordinated Certificate
created pursuant to this Series Supplement.
"Series 1996-1 Allocation Percentage" shall
mean, for any Collection Period, the Series Allocation
Percentage for the Series 1996-1 as calculated for such
Collection Period in accordance with the Agreement.
"Series Pool Balance" shall mean, as of any
date of determination, the product of (a) the Pool
Balance as of such date and (b) the Series 1996-1
Allocation Percentage for such date.
"Series Principal Collections" shall mean,
with respect to the aggregate amount of Principal
Collections received since the beginning of the
preceding Business Day, that portion allocated to the
Series 1996-1 in accordance with Section 4.04 of the
Agreement.
"Series Principal FBC Collections" shall
mean, for each Allocation Day, an amount equal to the
product of (a) the amount of the Series Principal
Collections received since the beginning of the
preceding Business Day and (b) the FBC Principal
Allocation Percentage in effect on such Allocation Day.
"Series Principal SC Collections" shall
mean, for each Allocation Day, an amount equal to the
product of (a) the amount of the Series Principal
Collections received since the beginning of the
preceding Business Day and (b) the Subordinated
Principal Allocation Percentage in effect on such
Allocation Day.
"Series Termination Date" shall mean the
March 2000 Distribution Date.
"Servicing Fee Rate" shall mean, with
respect to the Certificates, three percent (3%).
"Spread Account" shall have the meaning
specified in Section 4.04(a) hereof.
"Spread Requirement" shall mean, with
respect to any Collection Period, zero unless the
Portfolio Yield for the two preceding Collection
Periods was less than 0.5% per annum in excess of the
Base Rate for such preceding Collection Periods, in
which case "Spread Requirement" shall mean the amount,
if any, by which (a) the sum, for the Preceding
Collection Period, of the amounts, described in
Sections 4.01(c)(i) and 4.01(c)(ii) hereof exceeds (b)
the amount on deposit in the Spread Account at the
beginning of such Collection Period.
"Standby Servicer" shall mean Bankers Trust
Company or such other party as may be appointed by the
Trustee to stand ready to act as a Successor Servicer
in the event that Gottschalks is removed as Servicer.
"Subordinated Allocation Percentage" shall
mean, with respect to any Collection Period, the
percentage equivalent of a fraction the numerator of
which is the Subordinated Invested Amount and the
denominator of which is the Required Series Pool
Balance, in each case, as of the first day of such
Collection Period.
"Subordinated Certificate" shall have the
meaning specified in Section 6.03 hereof with respect
to the Series 1996-1.
"Subordinated Component" shall mean, as of
any time of determination, in the case of the Retained
Amount Account, the amount set forth as of such time on
the ledger maintained by the Trustee in accordance with
Section 4.04(e) hereof as representing the net balance
of deposits made to the Retained Amount Account
pursuant to Sections 4.01(d)(ii)(A)(4) and
4.01(d)(ii)(B)(4) hereof less amounts withdrawn
therefrom in accordance with Section 4.06.
"Subordinated Invested Amount" shall mean,
as of any date of determination, an amount equal to (a)
the Initial Subordinated Invested Amount, minus, (b)
the amount, if any, by which the aggregate amount of
Subordinated Investor Charge-Offs exceeds the
Subordinated Investor Charge-Offs reimbursed pursuant
to Sections 4.01(c)(vii), 4.01(d)(ii)(A)(3),
4.01(d)(ii)(B)(3) and 4.01(d)(ii)(C)(2) hereof prior to
such date, minus, (c) the amount of any reallocation of
Subordinated Principal Collections made pursuant to
Sections 4.01(d)(ii)(A)(1), 4.01(d)(ii)(B)(1) and
4.01(d)(ii)(C)(1) hereof prior to such date, plus, (d)
the amount of any reallocations made pursuant to
Section 4.01(e)(ii) prior to such date, and minus, (e)
the amount of principal payments made to the holder of
the Subordinated Certificate in respect of the
Subordinated Invested Amount pursuant to Sections
4.01(d)(ii)(C)(3), 9.01(b)(ii)(B), 9.01(c)(ii)(B) and
9.01(d)(ii)(B) prior to such date, provided that at no
time shall the Subordinated Invested Amount be less
than zero.
"Subordinated Investor Default Holdback
Amount" shall mean, with respect to (a) any Collection
Period (other than the initial Collection Period), the
product of (i) the greater of (A) the Investor Default
Amount which the Servicer reasonably anticipates for
such Collection Period or (B) the product of (1) the
highest default rate (i.e., a fraction, the numerator
of which is the Defaulted Amount for a Collection
Period, and the denominator of which is the aggregate
Principal Receivables owned by the Trust as of the last
day of such Collection Period) for any of the twelve
consecutive Collection Periods preceding such
Collection Period, (2) the aggregate amount of the
Principal Receivables owned by the Trust as of the
first day of such Collection Period, (3) the Series
Allocation Percentage for the Series 1996-1 for such
Collection Period, and (4) the Floating Allocation
Percentage for such Collection Period, and (ii) a
fraction, the numerator of which is the Subordinated
Invested Amount and the denominator of which is the
Required Series Pool Balance, in each case, in effect
for such Collection Period and (b) the initial
Collection Period, $3,000.
"Subordinated Investor Charge-Offs" shall
have the meaning specified in Section 4.09(b) hereof.
"Subordinated Principal Allocation
Percentage" shall mean, with respect to any Collection
Period occurring (a) prior to the commencement of the
Controlled Amortization Period or Early Amortization
Period, the percentage equivalent of a fraction, the
numerator of which is the Subordinated Invested Amount
and the denominator of which is the Required Series
Pool Balance, in each case, as of the first day of such
Collection Period, or (b) during the Controlled
Amortization Period or the Early Amortization Period,
the percentage equivalent of a fraction, the numerator
of which is the Subordinated Invested Amount as of the
last day of the FBC Revolving Period and the
denominator of which is the Required Series Pool
Balance as of such last day.
"Subordinated Principal Collections" shall
mean, for any Allocation Day, an amount equal to the
Series Principal SC Collections for such day minus the
product of (a) the amount of Series Principal
Collections distributed to the Holder of the
Exchangeable Certificate on such day in accordance with
Section 4.01(b)(ii) hereof and (b) the Subordinated
Principal Allocation Percentage in effect on such
Allocation Day.
"Subordinated Reduction" shall have the
meaning specified in Section 4.09(a) hereof.
"Subordinated Servicing Fee Rate" shall
mean, with respect to the Certificates, one-half of one
percent (0.5%).
(b) Notwithstanding anything to the
contrary in this Series Supplement or the Agreement,
the term "Rating Agency" shall mean, whenever used in
this Series Supplement or the Agreement with respect to
the Certificates, Duff & Phelps and Fitch.
(c) All capitalized terms used herein and
not otherwise defined herein have the meanings ascribed
to them in the Agreement. The definitions in this
Section 2.01 are applicable to the singular as well as
the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such
terms.
(d) The words "hereof", "herein" and
"hereunder" and words of similar import when used in
this Series Supplement shall refer to this Series
Supplement as a whole and not to any particular
provision of this Series Supplement; references to any
Article, Section or Exhibit are references to Articles,
Sections and Exhibits in or to this Series Supplement
unless otherwise specified; and the term "including"
means "including without limitation".
(e) References herein to "Collections
received" shall be deemed to include Collections
received and processed as to principal and finance
charges and shall not include unprocessed Collections
(i.e., Collections which have been received but for
which the Servicer in the ordinary course of its
business has not yet identified in its computer records
the principal and finance charge components).
ARTICLE III
Servicing Fee
SECTION 3.01. Servicing Compensation. The
monthly servicing fee hereunder (the "Monthly Servicing
Fee") shall be payable to the Servicer, in arrears, on
each Distribution Date occurring prior to the earlier
of the first Distribution Date following the Series
Termination Date and the first Distribution Date on
which the FBC Invested Amount and the Subordinated
Invested Amount are both zero, in an amount equal to
the sum, for each day during the Related Interest
Period, of the product of (a) a fraction, the numerator
of which is the Servicing Fee Rate (expressed as a
decimal), and the denominator of which is 365 and (b)
the Required Series Pool Balance for such day;
provided, however, that with respect to the first
Distribution Date, the Monthly Servicing Fee shall be
equal to $8,900. In no event shall the Trust, the
Trustee, the Fixed Base Certificateholders or the
Holder of the Subordinated Certificate be liable for
any other servicing fee. The Monthly Servicing Fee
shall be payable to the Servicer solely to the extent
amounts are available for distribution in accordance
with the terms of this Series Supplement.
ARTICLE IV
Rights of Certificateholders and
Allocation and Application of Collections
SECTION 4.01. Allocations and
Distributions.
(a) General. Series Finance Charge
Collections, Series Principal Collections and Series
Default Amounts, as they relate to the Certificates and
the Exchangeable Certificate, shall be allocated and
distributed as set forth in this Article IV.
(b) Distribution of Collections to the
Holder of the Exchangeable Certificate. At the
beginning of each Business Day (an "Allocation Day"),
the Servicer shall cause the Trustee to withdraw from
the Collection Account and distribute to the Holder of
the Exchangeable Certificate (i) an amount equal to the
product of (A) the Exchangeable Holder's Percentage in
effect on such day and (B) the amount of Series Finance
Charge Collections received since the beginning of the
preceding Business Day, and (ii) an amount equal to the
product of (A) the Exchangeable Holder's Percentage in
effect on such day and (B) the amount of Series
Principal Collections received since the beginning of
the preceding Business Day. On each Distribution Date,
the Servicer shall allocate to the Holder of the
Exchangeable Certificate an amount equal to the product
of (x) the Exchangeable Holder's Percentage in effect
on such date and (y) the amount of Series Default
Amount for the Related Collection Period.
(c) Allocation of Investor Finance Charge
Collections. At the beginning of each Allocation Day,
the Servicer shall allocate Investor Finance Charge
Collections received since the beginning of the
preceding Business Day as follows and in the following
priorities (each priority to be satisfied daily before
allocations are made to any subsequent priority):
(i) first, unless an amount
equal to the Monthly Senior Servicing Fee for the
current Interest Period, plus any previously unpaid
Monthly Senior Servicing Fee (but only with respect to
the then current Servicer) is then on deposit in the
Collection Account and allocated therefor, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(ii) second, unless an amount
equal to the sum of the FBC Monthly Interest to accrue
during the Related Interest Period, plus the amount of
any FBC Carryover Interest for the Related Collection
Period is then on deposit in the Collection Account and
allocated therefor, Investor Finance Charge Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
such amounts are then on deposit;
(iii) third, unless an amount
equal to the Senior Investor Default Holdback Amount
for the current Collection Period is then on deposit in
the Collection Account and allocated therefor, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(iv) fourth, unless the amount
then on deposit in the Spread Account is equal to the
Spread Requirement on such Allocation Day, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be withdrawn from
the Collection Account in an amount equal to such
insufficiency and shall be deposited in the Spread
Account;
(v) fifth, unless all
unreimbursed FBC Investor Charge-Offs as of such
Allocation Day have been reallocated as FBC Principal
Collections, Investor Finance Charge Collections
received since the beginning of the preceding Business
Day shall be reallocated as FBC Principal Collections
until the amounts reallocated equal all unreimbursed
FBC Investor Charge-Offs;
(vi) sixth, unless an amount
equal to the Subordinated Investor Default Holdback
Amount for the current Collection Period is then on
deposit in the Collection Account and allocated
therefor, Investor Finance Charge Collections deposited
in the Collection Account since the beginning of the
Preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(vii) seventh, unless all
unreimbursed Subordinated Investor Charge-Offs as of
such Allocation Day have been reallocated as
Subordinated Principal Collections, Investor Finance
Charge Collections received since the beginning of the
preceding Business Day shall be reallocated as
Subordinated Principal Collections until the amounts
reallocated equal all unreimbursed Subordinated
Investor Charge-Offs;
(viii) eighth, if such
Allocation Day falls within an Early Amortization
Period which commenced (1) on any date on or after
August 31, 1997 or (2) as a result of the occurrence of
an Early Amortization Event of the type described in
Sections 7.01(a), (c), (e), (f), (g) or (j) hereof
caused directly or indirectly by (A) the imposition of
a Block Period, (B) the removal of Removed Accounts,
(C) the issuance of a new Series and/or the willful
breach by the Servicer (so long as the Servicer is
Gottschalks) of its obligations under the Agreement and
this Series Supplement, then, unless an amount equal to
the Projected Make Whole Premium for the Related
Collection Period (together with any Make Whole Premium
previously due but not paid on a prior Distribution
Date) is then on deposit in the Collection Account and
allocated therefor, Investor Finance Charge Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
such amount is then on deposit and allocated therefor;
(ix) ninth, unless an amount
equal to the Monthly Subordinated Servicing Fee for the
current Interest Period, plus any previously unpaid
Monthly Subordinated Servicing Fee (but only with
respect to the current Servicer) is then on deposit in
the Collection Account and allocated therefor, Investor
Finance Charge Collections received since the beginning
of the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit; and
(x) tenth, the balance, if
any, of the Investor Finance Charge Collections
received since the beginning of the preceding Business
Day (after making the allocations described in
paragraphs (i) through (ix) above) shall be distributed
to the Depositor for application in accordance with the
Receivables Purchase Agreement.
(d) Allocation of Principal Collections.
(i) At the beginning of each Allocation Day, the
Servicer shall allocate the FBC Principal Collections
for such day as follows and in the following priorities
(each priority to be satisfied daily before allocations
are made to any subsequent priority):
(A) if such Allocation Day occurs during
the FBC Revolving Period:
(1) first, unless the amount retained in
the Collection Account pursuant to Section
4.01(d)(ii)(A)(2) hereof (as of the preceding Business
Day), is equal to the amount of all unreimbursed FBC
Investor Charge-Offs, FBC Principal Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
the sum of such amounts equals the amount of all
unreimbursed FBC Investor Charge-Offs;
(2) second, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, FBC Principal
Collections received since the beginning of the
preceding Business Day in an amount equal to the lesser
of (x) the product of (1) the amount of such required
deposit and (2) the FBC Allocation Percentage for such
Allocation Day, and (y) the amount of FBC Principal
Collections received since the beginning of the
preceding Business Day shall be withdrawn from the
Collection Account and deposited in the Retained Amount
Account; and
(3) third, the balance, if any, of FBC
Principal Collections received since the beginning of
the preceding Business Day (after making the
allocations described in paragraphs (1) and (2) above)
shall be distributed to the Depositor for application
in accordance with the Receivables Purchase Agreement;
or
(B) if such Allocation Day occurs during
the Controlled Amortization Period:
(1) first, unless an amount equal to the
FBC Controlled Distribution Amount is then on deposit
in the Collection Account and allocated therefor, FBC
Principal Collections received since the beginning of
the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit;
(2) second, unless the amount retained in
the Collection Account pursuant to Section
4.01(d)(ii)(B)(2) hereof (as of the preceding Business
Day), is equal to the amount of all unreimbursed FBC
Investor Charge-Offs, FBC Principal Collections
received since the beginning of the preceding Business
Day shall be retained in the Collection Account until
the sum of such amounts equals the amount of all
unreimbursed FBC Investor Charge-Offs;
(3) third, if pursuant to Section 4.06(a)
hereof an amount is required to be deposited in the
Retained Amount Account on such day, FBC Principal
Collections received since the beginning of the
preceding Business Day in an amount equal to the lesser
of (x) the product of (1) the amount of such required
deposit and (2) the FBC Allocation Percentage for such
Allocation Day, and (y) the amount of FBC Principal
Collections received since the beginning of the
preceding Business Day shall be withdrawn from the
Collection Account and deposited in the Retained Amount
Account; and
(4) fourth, the balance, if any, of FBC
Principal Collections received since the beginning of
the preceding Business Day (after making the
allocations described in paragraphs (1), (2) and (3)
above) shall be distributed to the Depositor for
application in accordance with the Receivables Purchase
Agreement; or
(C) if such Allocation Day occurs during
the Early Amortization Period:
(1) first, unless an amount equal to the
FBC Invested Amount is then on deposit in the
Collection Account and allocated therefor, FBC
Principal Collections received since the beginning of
the preceding Business Day shall be retained in the
Collection Account until such amount is then on
deposit; and
(2) second, the balance, if any, of FBC
Principal Collections received since the beginning of
the preceding Business Day (after making the allocation
described in paragraph (1) above) shall be distributed
to the Depositor for application in accordance with the
Receivables Purchase Agreement.
(ii) At the beginning of each Allocation
Day, the Servicer shall allocate the Subordinated
Principal Collections for such day as follows and in
the following priorities (each priority to be satisfied
daily before allocations are made to any subsequent
priority):
(A) if such Allocation Day occurs during
the FBC Revolving Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal Collections
will be reallocated as Investor Finance Charge
Collections in the amount by which the product of (x)
the Investor Default Amount for such Collection Period
and (y) the FBC Allocation Percentage for such
Collection Period, exceeds the amount allocated to the
Senior Investor Default Holdback Amount pursuant to
Section 4.01(c)(iii);
(2) second, unless an amount equal to the
amount of all unreimbursed FBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal Collections received
since the beginning of the preceding Business Day shall
be retained in the Collection Account until the sum of
such amounts equals the amount of all unreimbursed FBC
Investor Charge-Offs;
(3) third, unless an amount equal to the
amount of all unreimbursed Subordinated Investor
Charge-Offs is then on deposit in the Collection
Account and allocated therefor, Subordinated Principal
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed Subordinated Investor
Charge-Offs;
(4) fourth, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, Subordinated
Principal Collections received since the beginning of
the preceding Business Day in an amount equal to the
lesser of (x) the product of (1) the amount of such
required deposit and (2) the Subordinated Principal
Allocation Percentage for such Allocation Day, and (y)
the amount of Subordinated Principal Collections
received since the beginning of the preceding Business
Day shall be withdrawn from the Collection Account and
deposited in the Retained Amount Account; and
(5) fifth, the balance, if any, of
Subordinated Principal Collections received since the
beginning of the preceding Business Day (after making
the allocations described in paragraphs (1), (2), (3)
and (4) above) shall be distributed to the Depositor
for application in accordance with the Receivables
Purchase Agreement; or
(B) if such Allocation Day occurs during
the Controlled Amortization Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal Collections
will be reallocated as Investor Finance Charge
Collections in the amount by which the product of (x)
the Investor Default Amount for such Collection Period
and (y) the FBC Allocation Percentage for such
Collection Period, exceeds the amount allocated to the
Senior Investor Default Holdback Amount pursuant to
Section 4.01(c)(iii);
(2) second, unless an amount equal to the
amount of all unreimbursed FBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal Collections received
since the beginning of the preceding Business Day shall
be retained in the Collection Account until the sum of
such amounts equals the amount of all unreimbursed FBC
Investor Charge-Offs;
(3) third, unless an amount equal to the
amount of all unreimbursed Subordinated Investor
Charge-Offs is then on deposit in the Collection
Account and allocated therefor, Subordinated Principal
Collections received since the beginning of the
preceding Business Day shall be retained in the
Collection Account until the sum of such amounts equals
the amount of all unreimbursed Subordinated Investor
Charge-Offs;
(4) fourth, if pursuant to Section
4.06(a) hereof an amount is required to be deposited in
the Retained Amount Account on such day, Subordinated
Principal Collections received since the beginning of
the preceding Business Day shall be withdrawn from the
Collection Account in an amount equal to the lesser of
(x) the product of (1) the amount of such required
deposit and (2) the Subordinated Principal Allocation
Percentage for such Allocation Day, and (y) the amount
of Subordinated Principal Collections received since
the beginning of the preceding Business Day, and
deposited in the Retained Amount Account; and
(5) fifth, the balance, if any, of
Subordinated Principal Collections received since the
beginning of the preceding Business Day (after making
the allocations described in paragraphs (1), (2), (3)
and (4) above) shall be distributed to the Depositor
for application in accordance with the Receivables
Purchase Agreement; or
(C) if such Allocation Day occurs during
the Early Amortization Period:
(1) first, on the last day of each
Collection Period, Subordinated Principal Collections
will be reallocated as Investor Finance Charge
Collections in the amount by which the product of (x)
the Investor Default Amount for such Collection Period
and (y) the FBC Allocation Percentage for such
Collection Period, exceeds the amount allocated to the
Senior Investor Default Holdback Amount pursuant to
Section 4.01(c)(iii);
(2) second, unless an amount equal to the
amount of all unreimbursed FBC Investor Charge-Offs is
then on deposit in the Collection Account and allocated
therefor, Subordinated Principal Collections received
since the beginning of the preceding Business Day shall
be retained in the Collection Account until the sum of
such amounts equals the amount of all unreimbursed FBC
Investor Charge-Offs; and
(3) third, the balance, if any, of
Subordinated Principal Collections received since the
beginning of the preceding Business Day (after making
the allocations described in paragraphs (1) and (2)
above) (1) so long as the Subordinated Invested Amount
is greater than zero, shall be distributed to the
Depositor for application in accordance with the
Receivables Purchase Agreement, and (2) if the
Subordinated Invested Amount is zero, shall be
distributed to the Depositor.
(e) Investor Default Holdback Amounts.
On the last day of each Collection Period (other than
in the case of the first Collection Period), the
Servicer shall direct the Trustee to apply the Senior
Investor Default Holdback Amount and the Subordinated
Investor Default Holdback Amount retained in the
Collection Account during such Collection Period as
follows:
(i) an amount equal to the lesser of (A)
the Senior Investor Default Holdback Amount for such
Collection Period and (B) the product of the Investor
Default Amount for such Collection Period and the FBC
Allocation Percentage in effect for such Collection
Period, shall be reallocated as FBC Principal
Collections;
(ii) if any of the Senior Investor Default
Holdback Amount for such Collection Period remains in
the Collection Account after making the reallocation
described in paragraph (i) above, such remaining amount
shall be reallocated as Subordinated Principal
Collections and shall result in a corresponding
reinstatement of the Subordinated Invested Amount (to
the extent that any reduction has previously been made
to such amount);
(iii) an amount equal to the lesser of (A)
the Subordinated Investor Default Holdback Amount for
such Collection Period and (B) the product of the
Investor Default Amount for such Collection Period and
the Subordinated Allocation Percentage in effect for
such Collection Period shall be reallocated as
Subordinated Principal Collections; and
(iv) if any of the Subordinated Investor
Default Holdback Amount for such Collection Period
remains in the Collection Account after making the
reallocation described in paragraph (iii) above, such
remaining amount shall be distributed to the Depositor
for application in accordance with the Receivables
Purchase Agreement.
(f) Distributions. (i) On or before
each Determination Date, the Servicer shall provide
written directions to the Trustee directing the Trustee
to distribute to the Fixed Base Certificateholders on
the following Distribution Date from amounts on deposit
in the Collection Account:
(A) if such Determination Date occurs
during the FBC Revolving Period: (1) an amount equal to
the sum of the amounts, if any, retained in the
Collection Account during the Related Collection Period
in respect of the Fixed Base Certificates pursuant to
Section 4.01(c)(ii) and (2) an amount equal to the
lesser of the Projected Make Whole Premium for the
Related Collection Period and the Make Whole Premium
calculated as of such Determination Date; or
(B) if such Determination Date occurs
during the Controlled Amortization Period, an amount
equal to the sum of the amounts, if any, retained in
the Collection Account during the Related Collection
Period in respect of the Fixed Rate Certificates
pursuant to Sections 4.01(c)(ii) and 4.01(d)(i)(B)(1);
or
(C) if such Determination Date occurs
during the Early Amortization Period, an amount equal
to the sum of the amounts, if any, retained in the
Collection Account during the Related Collection Period
in respect of the Fixed Rate Certificates pursuant to
Sections 4.01(c)(ii) and 4.01(d)(i)(C)(1);
(ii) On or before each Determination Date,
the Servicer shall provide written directions to the
Trustee directing the Trustee to distribute to the
Servicer on the following Distribution Date from
amounts on deposit in the Collection Account, an amount
equal to the sum of the amounts, if any, retained in
the Collection Account during the Related Collection
Period pursuant to Sections 4.01(c)(i) and 4.01(c)(ix);
provided, however, so long as Gottschalks is the
Servicer, the Trustee shall first deduct from any
amount payable to the Servicer pursuant to this
paragraph (ii) an amount equal to $1,250 (plus any
prior payments of such amount which remain unpaid) as
payment for the fees of the Standby Servicer; and
(iii) On each Distribution Date, the
Servicer shall provide written instructions to the
Trustee directing the Trustee to distribute all amounts
retained in the Collection Account pursuant to Section
4.01(c) and Section 4.01(d) and not required for any
other purpose to the Depositor for application in
accordance with the Receivables Purchase Agreement.
(g) Other Amounts. The withdrawals to be
made from the Collection Account pursuant to this
Section 4.01 do not apply to deposits into the
Collection Account that do not represent Collections,
including payment of the purchase price for the
Certificates pursuant to Section 2.03 of the Agreement
and proceeds from the sale, disposition or liquidation
of Receivables pursuant to Section 9.02 or Section
12.02 of the Agreement.
SECTION 4.02. FBC Monthly Interest. The
amount of monthly interest ("FBC Monthly Interest")
distributable from the Collection Account (or, in the
case of the first Distribution Date, from the
Capitalized Interest Account) with respect to the Fixed
Base Certificates on any Distribution Date shall be an
amount equal to one-twelfth (1/12th) of the product of
(i) the FBC Invested Amount as of the close of business
on the first day of the Related Collection Period, and
(ii) the FBC Interest Rate; provided that in the case
of the initial Interest Period the FBC Monthly Interest
shall be $33,950. On the Determination Date preceding
each Distribution Date, the Servicer shall determine
the excess, if any, of (x) the sum of FBC Monthly
Interest for the Related Interest Period plus the
amount, if any, of the FBC Interest Shortfall which was
due but not paid on the prior Distribution Date over
(y) the amount which will be available to be
distributed to the Holders of the Fixed Base
Certificates on such Distribution Date in respect
thereof pursuant to this Series Supplement (such
excess, the "FBC Interest Shortfall"). If, on any
Distribution Date, the FBC Interest Shortfall is
greater than zero, then an additional amount ("FBC
Additional Interest") shall be payable as provided
herein with respect to Fixed Base Certificates on each
Distribution Date following such Distribution Date, to
but excluding the Distribution Date on which the FBC
Interest Shortfall is paid to the Holders of the Fixed
Base Certificates, in an amount equal to one-twelfth of
the product of (i) such FBC Interest Shortfall (or the
portion thereof which has not previously been paid to
Fixed Base Certificateholders) and (ii) the FBC
Interest Rate. Notwithstanding anything to the
contrary herein, FBC Additional Interest shall be paid
or distributed on Fixed Base Certificates only to the
extent permitted by applicable law.
SECTION Determination of FBC Monthly
Principal. The amount of monthly principal ("FBC
Monthly Principal") distributable from the Collection
Account with respect to the Fixed Base Certificates on
each Distribution Date during the FBC Revolving Period
shall be zero. The amount of FBC Monthly Principal
distributable from the Collection Account with respect
to the Fixed Base Certificates on each Distribution
Date during the Controlled Amortization Period or the
Early Amortization Period shall be equal to the FBC
Principal Collections (including Investor Finance
Charge Collections reallocated as FBC Principal
Collections) on deposit in the Collection Account on
such Distribution Date; provided, however, that the
amount of FBC Monthly Principal distributable to the
Holders of the Fixed Base Certificates on any
Distribution Date during the Controlled Amortization
Period or Early Amortization Period, as the case may,
shall in no event exceed the FBC Invested Amount in
effect on the Business Day preceding such Distribution
Date.
SECTION 4.04. Series Accounts. (a) The
Servicer, for the benefit of the Certificateholders,
shall establish and maintain in the name of the
Trustee, on behalf of the Trust, (i) an Eligible
Deposit Account (the "Capitalized Interest Account"),
which shall be identified as the "Capitalized Account
for Gottschalks Credit Card Master Trust, Series
1996-1", (ii) an Eligible Deposit Account (the
"Retained Amount Account"), which shall be identified
as the "Retained Amount Account for Gottschalks Credit
Card Master Trust, Series 1996-1", and (iii) an
Eligible Deposit Account (the "Spread Account"), which
shall be identified as the "Spread Account for
Gottschalks Credit Card Master Trust, Series 1996-1".
Each of the Capitalized Interest Account, the Retained
Amount Account and the Spread Account shall bear a
designation clearly indicating that the funds deposited
therein are held for the benefit of the
Certificateholders. The Capitalized Interest Account,
the Retained Amount Account and the Spread Account are
referred to herein individually as a "Series Account"
and collectively as "Series Accounts."
(b) At the written direction of the
Servicer, funds on deposit in any Series Account shall
be invested by the Trustee in Eligible Investments
selected by the Servicer that will mature no later than
the date on which such funds are expected to be
withdrawn from such Series Account. All such Eligible
Investments shall be held by the Trustee for the
benefit of the Certificateholders. All interest and
other investment earnings (net of losses and investment
expenses) of funds on deposit in the Series Accounts
shall be deposited in the Collection Account as Finance
Charge Collections.
(c) The Capitalized Interest Account
shall be maintained until all amounts on deposit
therein have been applied in accordance with Section
4.05 hereof. The Retained Amount Account shall be
maintained until all amounts on deposit therein have
been applied in accordance with Section 4.06(e) or (f)
hereof. The Spread Account shall be maintained until
all amounts on deposit therein have been applied in
accordance with Section 4.07(b) hereof.
(d) The Trustee shall possess all right,
title and interest in and to all funds on deposit from
time to time in, and all Eligible Investments credited
to, the Series Accounts and in all proceeds thereof.
Each Series Account shall be under the sole dominion
and control of the Trustee for the benefit of the
Certificateholders. If, at any time, any Series
Account ceases to be an Eligible Deposit Account the
Servicer shall within ten (10) Business Days (or such
longer period, not to exceed thirty (30) calendar days,
as to which each Rating Agency may consent) instruct
the Trustee to establish a new Series Account meeting
the conditions specified in subsection (a) above as an
Eligible Deposit Account and shall transfer any cash
and/or any investments to such new Series Account.
Neither the Depositor, the Servicer nor any person or
entity claiming by, through or under the Depositor, the
Servicer or any such person or entity shall have any
right, title or interest in, or any right to withdraw
any amount from, any Series Account, except as
expressly provided herein. Schedule 1 hereto, which is
hereby incorporated into and made part of this Series
Supplement, identifies the Series Accounts by setting
forth for each such account the account number of such
account, the account designation of such account and
the name of the institution with which such account has
been established. If a substitute Series Account is
established pursuant to this Section 4.04, the Servicer
shall provide to the Trustee an amended Schedule 1,
setting forth the relevant information for such
substitute Series Account.
(e) The Servicer shall maintain a ledger
for the Retained Amount Account and shall record in
such ledger the FBC Component and the Subordinated
Component of each deposit made by the Trustee to, and
each withdrawal by the Trustee from, the Retained
Amount Account. The Servicer shall also maintain a
ledger for the Spread Account and shall record in such
ledger each deposit made by the Trustee to, and
withdrawal by the Trustee from, the Spread Account.
(f) Pursuant to the authority granted to
the Servicer in Section 3.01(a) of the Agreement, the
Servicer shall have the power, revocable by the
Trustee, to instruct the Trustee to make withdrawals
and payments from the Series Accounts for the purposes
of carrying out the Servicer's or the Trustee's duties
hereunder.
SECTION 4.05. Capitalized Interest
Account. On the Closing Date, the Trustee shall
deposit in the Capitalized Interest Account from the
proceeds of the sale of the Fixed Base Certificates an
amount equal to the FBC Monthly Interest that will have
accrued and be due and payable to the Holders of the
Fixed Base Certificates on the first Distribution Date.
On the first Distribution Date, the Servicer shall
cause the Trustee to withdraw from the Capitalized
Interest Account for distribution to the Holders of the
Fixed Base Certificates an amount equal to the FBC
Monthly Interest that is due and payable on such
Distribution Date.
SECTION 4.06. Retained Amount Account.
The Servicer shall cause the Trustee to deposit amounts
in, and withdraw amounts from, the Retained Amount
Account as follows:
(a) If, at the close of business of the
Servicer on any Business Day prior to the commencement
of the Early Amortization Period, the Required Series
Pool Balance at such time exceeds the sum of (i) the
Series Pool Balance at such time and (ii) the balance
of the Retained Amount Account at such time, the
Servicer shall cause the Trustee to withdraw from the
Collection Account in accordance with Section 4.01(d)
and deposit in the Retained Amount Account on such day
an amount equal to the lesser of (x) such excess and
(y) if such day falls within (1) the FBC Revolving
Period, an amount equal to the sum of the maximum
amounts available on such day pursuant to Sections
4.01(d)(i)(A)(2) and 4.01(d)(ii)(A)(4) hereof; or (2)
the Controlled Amortization Period, an amount equal to
the sum of the maximum amounts available on such day
pursuant to Sections 4.01(d)(i)(B)(3) and
4.01(d)(ii)(B)(4) hereof.
(b) If, at the close of business of the
Servicer on any Business Day prior to the commencement
of the Early Amortization Period, the balance of the
Retained Amount Account is greater than zero, and the
sum of (i) the Series Pool Balance at such time and
(ii) the balance of the Retained Amount Account at such
time exceeds the Required Series Pool Balance, the
Servicer shall cause the Trustee to withdraw from the
Retained Amount Account for distribution to the
Depositor on such day an amount equal to the lesser of
(x) the amount of such difference and (y) the balance
of the Retained Amount Account. Any such withdrawal
shall, to the greatest extent possible, reduce (1) the
FBC Component of the Retained Amount Account by the
product of the FBC Allocation Percentage and the amount
of such withdrawal and (2) the Subordinated Component
of the Retained Amount Account by the product of the
Subordinated Allocation Percentage and the amount of
such withdrawal.
(c) If, at the close of business of the
Servicer on the last day of any Collection Period
occurring during the Controlled Amortization Period,
(i) the balance of the Retained Amount Account is
greater than zero (after first giving effect to any
deposit to, or withdrawal from, the Retained Amount
Account described in subsections (a) and (b) of this
Section 4.06) and (ii) the Servicer has determined on
such last day that the difference between the FBC
Controlled Amortization Amount and the amount of FBC
Principal Collections on deposit in the Collection
Account on such last day is greater than zero, the
Servicer shall cause the Trustee to withdraw from the
FBC Component of the Retained Amount Account for
deposit in the Collection Account as FBC Principal
Collections an amount equal to the lesser of (x) the
amount of such difference and (y) the balance of the
FBC Component of the Retained Amount Account.
(d) If, at the close of business of the
Servicer on the last day of any Collection Period
occurring prior to the commencement of the Early
Amortization Period, (i) the balance of the Retained
Amount Account is greater than zero (after first giving
effect to any deposit to, or withdrawals from, the
Retained Amount Account described in subsections (a),
(b) and (c) of this Section 4.06) and (ii) the Servicer
has determined on such last day that (A) a FBC Investor
Charge-Off will be required to be made on the Related
Distribution Date, and/or (B) one or more FBC Investor
Charge-Offs made on one or more prior Distribution
Dates has not been reimbursed, the Servicer shall cause
the Trustee to withdraw from such account for deposit
in the Collection Account as FBC Principal Collections
the following amounts (the first priority to be
satisfied before progressing to the second priority):
(x) first, an amount equal to the
lesser of (1) the sum of the amount of such FBC
Investor Charge-Off to be made and/or unreimbursed FBC
Investor Charge-Offs and (2) an amount equal to the
balance of the Subordinated Component of the Retained
Amount Account; and
(y) second, an amount equal to the
lesser of (1) the amount, if greater than zero, by
which the sum of the amount of such FBC Investor
Charge-Off to be made and/or unreimbursed FBC Investor
Charge-Offs exceeds the amount of the withdrawal, if
any, provided for in paragraph (x) immediately above,
and (2) an amount equal to the balance of the FBC
Component of the Retained Amount Account.
(e) If, at the close of business of the
Servicer on the last day of the first Collection Period
occurring during the Early Amortization Period, the
balance of the Retained Amount Account is greater than
zero, the Servicer shall cause the Trustee to withdraw
from the Retained Amount Account for deposit in the
Collection Account as FBC Principal Collections, the
balance of the FBC Component of the Retained Amount
Account. The balance, if any, of the Subordinated
Component of the Retained Amount Account at the
commencement of the Early Amortization Period will be
retained in the Retained Amount Account and shall be
applied to the extent necessary, to avoid FBC Investor
Charge-Offs or to reimburse unreimbursed FBC Investor
Charge-Offs.
(f) At the close of business of the
Servicer on the earlier of (i) the Series Termination
Date and (ii) the date on which the FBC Invested Amount
has been reduced to zero, the balance, if any,
remaining in the Retained Amount Account shall be
withdrawn and transferred to the Depositor for
application in accordance with the Receivables Purchase
Agreement.
SECTION 4.07. Spread Account. (a) If on
any Determination Date the Servicer determines that a
FBC Deficiency Amount exists, the Servicer shall cause
the Trustee to withdraw from the Spread Account and
deposit in the Collection Account an amount equal to
the lesser of (i) the amount of such FBC Deficiency
Amount and (ii) the balance of the Spread Account.
Amounts so deposited in the Collection Account shall be
set aside therein to cure (in whole or part) the amount
of any such FBC Deficiency Amount. In the event that a
withdrawal is made from the Spread Account on any
Determination Date and the amount of such withdrawal is
less than the FBC Deficiency Amount calculated on such
Determination Date, then the amount withdrawn shall be
applied in the following priority, first, against the
amounts described in Section 4.08(i)(A), second,
against the amounts described in Section 4.08(i)(B),
third, against the amounts described in Section
4.08(i)(C), and fourth, against the amounts described
in Section 4.08(i)(D).
(b) At the close of business of the
Servicer on the earlier of (i) the Series Termination
Date and (ii) the date on which the FBC Invested Amount
has been reduced to zero, the balance, if any,
remaining in the Spread Account shall be withdrawn and
transferred to the Depositor.
SECTION 4.08. FBC Deficiency Amount. On
each Determination Date, the Servicer shall determine
the amount (the "FBC Deficiency Amount"), if any, by
which (i) the sum of (A) the Monthly Senior Servicing
Fee for the Related Distribution Date, (B) the FBC
Monthly Interest for the Related Interest Period, (C)
all FBC Carryover Interest for the Related Interest
Period, and (D) the FBC Investor Default Amount, if
any, for the Related Collection Period, exceeds (ii)
the sum of (A) the Investor Finance Charge Collections
allocated to the Fixed Base Certificates during the
Related Collection Period pursuant to Section
4.01(c)(ii), (B) a pro rata portion (based on the FBC
Allocation Percentage) of the Investor Finance Charge
Collections retained in the Collection Account pursuant
to Section 4.01(c)(i) during the Related Collection
Period, (C) a pro rata portion (based on the FBC
Allocation Percentage) of the Investor Investment
Proceeds on deposit in the Collection Account on such
Determination Date, (D) the balance of the Spread
Account as of such Determination Date, (E) the FBC
Component of the balance of the Retained Amount Account
as of such Determination Date, and (F) the Collections
allocated to the Senior Investor Default Holdback
Amount for the Related Collection Period. In the event
the FBC Deficiency Amount for such Distribution Date is
greater than zero, the Servicer shall give the Trustee
written notice thereof on the date of computation.
SECTION 4.09. Investor Charge-Offs. (a)
FBC Investor Charge-Offs. If on a Distribution Date
(i) the FBC Deficiency Amount (after giving effect to
any deposits to the Collection Account made in
accordance with Sections 4.06(d) and 4.07(a) hereof)
for such Distribution Date exceeds the amount, if any,
by which (A) the FBC Investor Default Amount for the
Related Collection Period exceeds (B) the Senior
Investor Default Holdback Amount for the Related
Collection Period, then, the Subordinated Invested
Amount shall be reduced by the amount of such excess (a
"Subordinated Reduction"), but by no more than the FBC
Investor Default Amount for such Distribution Date. In
the event that a Subordinated Reduction would cause the
Subordinated Invested Amount to be a negative number,
the Subordinated Invested Amount shall instead be
reduced to zero, and the FBC Invested Amount shall be
reduced by the amount which the Subordinated Invested
Amount would have been reduced below zero, but by not
more than the FBC Investor Default Amount for such
Distribution Date (such reduction to the FBC Invested
Amount, a "FBC Investor Charge-Off"). FBC Investor
Charge-Offs shall be reimbursed and the FBC Invested
Amount shall thereafter be increased (but not by an
amount in excess of the aggregate FBC Investor
Charge-Offs) on any Distribution Date by the amount of
Investor Finance Charge Collections reallocated as FBC
Principal Collections for that purpose pursuant to
Section 4.01(c)(v), as well as from withdrawals from
the Retained Amount Account and from Subordinated
Principal Collections retained in the Collection
Account pursuant to Section 4.01(d)(ii)(A)(2) and
4.01(d)(ii)(B)(2) hereof.
(b) Subordinated Investor Charge-Offs.
Subordinated Reductions and amounts withdrawn from
Subordinated Principal Collections pursuant to Section
4.01(d)(ii)(A)(2) and 4.01(d)(ii)(B)(2) are
collectively referred to herein as "Subordinated
Investor Charge-Offs." Subordinated Investor
Charge-Offs will result in a reduction in the
Subordinated Invested Amount. Subordinated Investor
Charge-Offs shall be reimbursed and the Subordinated
Invested Amount increased (but not by an amount in
excess of the aggregate amount of Subordinated Investor
Charge-Offs) to the extent that Investor Finance Charge
Collections are reallocated as Subordinated Principal
Collections pursuant to Section 4.01(c)(vii) and
4.01(e)(iii) hereof.
ARTICLE V
Distributions and Reports to
Certificateholders
SECTION 5.01. Distributions. (a) On
each Distribution Date, the Trustee shall distribute to
the Certificateholders of record on the preceding
Record Date (other than as provided in Section 12.02 of
the Agreement respecting a final distribution) such
Certificateholder's pro rata share of the amounts
required to be distributed pursuant to Article IV
hereof and in accordance with the written direction of
the Servicer. Except as provided in Section 12.02 of
the Agreement with respect to a final distribution,
distributions to Certificateholders hereunder shall be
made by wire transfer in immediately available funds.
SECTION 5.02. Reports and Statements to
Certificateholders. (a)On each Determination Date, the
Servicer will provide the Trustee with a completed
Distribution Date Statement, substantially in the form
of Exhibit B hereto, and on each Distribution Date, the
Trustee shall forward to each Certificateholders such
statement.
(b) The Trustee shall maintain at its
Corporate Trust Office a copy of each statement
received by it pursuant to subsection (a) of this
Section 5.02. The Trustee shall make such statements
available for inspection by Certificateholders upon
reasonable notice at its Corporate Trust Office.
(c) On or before January 31 of each
calendar year, beginning with calendar year 1997, the
Trustee shall furnish or cause to be furnished to each
Person who at any time during the preceding calendar
year was a Certificateholder, a statement prepared by
the Servicer containing the information required to be
contained in the monthly statements to
Certificateholders described in subsection (a) of this
Section 5.02, as the case may be, aggregated for such
calendar year or the applicable portion thereof during
which such Person was a Certificateholder, together
with such other information as is required to be
provided by an issuer of indebtedness under the
Internal Revenue Code and such other customary
information as the Trustee or the Servicer deems
necessary to enable the Certificateholders to prepare
their tax returns. Such obligation of the Trustee
shall be deemed to have been satisfied to the extent
that substantially comparable information shall be
provided by the Trustee pursuant to any requirements of
the Internal Revenue Code as from time to time in
effect.
(d) Notwithstanding any other provision of
the Agreement or this Series Supplement to the
contrary, the Trustee and the Servicer shall promptly
deliver to the initial Holders of the Fixed Base
Certificates a copy of each notice, statement or other
document received or generated by it in connection with
this Series Supplement and/or the Agreement; provided,
however, that the Trustee shall not be required to
deliver to the initial Holders copies of notices,
statements or other documents received from the
Servicer and for which the Servicer is required to
deliver such notices, statements or other documents
directly to the Holders and vice versa.
ARTICLE VI
The Certificates
SECTION 6.01. The Fixed Base
Certificates. The Fixed Base Certificates will be
issued in registered form, substantially in the form of
Exhibit A-1, and shall upon issue, be executed and
delivered by the Depositor to the Trustee for
authentication (the "Fixed Base Certificates"). The
Trustee shall, upon the written request of the
Depositor, authenticate and deliver the Fixed Rate
Certificates to the Person or Persons designated in
such notice against receipt of the purchase price
therefor as provided in the Agreement.
SECTION 6.02. Transfer Restrictions.
The Trustee shall not authenticate and deliver to any
Person any Fixed Base Certificate unless it contains a
legend in substantially the following form:
"THIS CERTIFICATE (OR ITS PREDECESSOR) WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"). THIS CERTIFICATE HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY
APPLICABLE STATE SECURITIES LAW OF ANY STATE AND MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
UNLESS REGISTERED PURSUANT TO OR EXEMPT FROM
REGISTRATION UNDER THE SECURITIES ACT AND ANY OTHER
APPLICABLE SECURITIES LAW.
THE HOLDER OF THIS CERTIFICATE AGREES FOR THE
BENEFIT OF GOTTSCHALKS CREDIT RECEIVABLES CORPORATION
THAT NO RESALE OR OTHER TRANSFER OF THIS CERTIFICATE
MAY BE MADE WITHOUT THE PRIOR WRITTEN CONSENT OF
GOTTSCHALKS CREDIT RECEIVABLES CORPORATION. IN
ADDITION TO THE FOREGOING RESTRICTION, NO RESALE OR
OTHER TRANSFER OF THIS CERTIFICATE MAY BE MADE EXCEPT
(1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (2) IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS,
OR (3) TO GOTTSCHALKS CREDIT RECEIVABLES CORPORATION."
In addition to transfer restrictions contained in the
Agreement, the Trustee shall not be required to give
effect to any transfer of the Fixed Base Certificates
until such time as the proposed transferee thereof
delivers to the Trustee an investment representation
letter substantially in the form of Exhibit C attached
hereto.
SECTION 6.03. The Subordinated
Certificate. The Subordinated Certificate will be
issued in registered form, substantially in the form of
Exhibit A-2, and shall upon issue, be executed and
delivered by the Depositor to the Trustee for
authentication (the "Subordinated Certificate"). The
Trustee shall authenticate and deliver the Subordinated
Certificate to the Depositor simultaneously with its
delivery of the Fixed Base Certificates. The
Subordinated Certificate shall not be transferable.
ARTICLE VII
Early Amortization Events
SECTION 7.01. Additional Early
Amortization Events. If any one or more of the
following events shall occur:
(a) failure on the part of the Depositor
(i) to make any payment or deposit required to be made
by the Depositor by the terms of (A) the Agreement or
(B) this Series Supplement, on or before the date
occurring two Business Days after the date such payment
or deposit is required to be made herein or (ii) duly
to observe or perform in any material respect any
covenants or agreements of the Depositor set forth in
the Agreement or this Series Supplement, which failure
to observe or perform has a material adverse effect on
the Certificateholders and which continues unremedied
for a period of 30 days after the earlier of (A) the
date the Depositor has knowledge thereof and (B) the
date on which written notice of such failure, requiring
the same to be remedied, shall have been given to the
Depositor by the Trustee, or to the Depositor and the
Trustee by the Holders of Certificates representing
more than 50% of the FBC Invested Amount, and continues
to affect materially and adversely the interests of the
Certificateholders for such period; or
(b) any representation or warranty made
by the Depositor in the Agreement or this Series
Supplement, or any information contained in a computer
file or microfiche list required to be delivered by the
Depositor pursuant to Section 2.01, 2.06 or 2.08 of the
Agreement, (i) shall prove to have been incorrect in
any material respect when made or when delivered, which
continues to be incorrect in any material respect for a
period of 30 days after the earlier of (A) the date the
Depositor has knowledge thereof and (B) the date on
which written notice of such failure, requiring the
same to be remedied, shall have been given to the
Depositor by the Trustee, or to the Depositor and the
Trustee by the Holders of Certificates representing
more than 50% of the FBC Invested Amount, and (ii) as a
result of which the interests of the Certificateholders
are materially and adversely affected and continue to
be materially and adversely affected for such period;
provided, however, that an Early Amortization Event
pursuant to this subsection 7.01(b) shall not be deemed
to have occurred hereunder if the Depositor has
accepted reassignment of or repurchased the related
Receivable, or all of such Receivables, if applicable,
during such period in accordance with the provisions of
the Agreement; or
(c) a Servicer Default occurs; or
(d) Gottschalks Inc. is replaced as the
Servicer; or
(e) for three consecutive Collection
Periods one and one-half percent (1.5%) or more of the
aggregate balance of all Eligible Receivables are more
than 90 days past due; or
(f) the average of the Portfolio Yield
for any three consecutive Collection Periods is reduced
to a rate which is less than the Base Rate; or
(g) for 60 consecutive days, the balance
in the Retained Amount Account shall exceed $375,000;
or
(h) the failure to pay the FBC Invested
Amount by the Expected Final Payment Date; or the
failure to pay the FBC Controlled Distribution Amount
on any Distribution Date during the Controlled
Amortization Period; or
(i) the Subordinated Invested Amount
shall be reduced to zero on a date on which the FBC
Invested Amount is greater than zero; or
(j) the Defaulted Amount (net of
Recoveries) as a percentage of the average Receivables
outstanding, on an annualized basis, exceeds seven
percent (7%), for a period of three consecutive
Collection Periods; or
(k) an Early Amortization Period for any
other Series shall commence; or
(l) the average of the monthly payment
rate (i.e., for any Collection Period, a fraction, the
numerator of which is the Investor Principal
Collections received during such Collection Period, and
the denominator of which is the Required Series Pool
Balance in effect for such Collection Period) for any
three consecutive Collection Periods shall be less than
10%; or
(m) the failure by Gottschalks Inc. at
any time to have available one or more working capital
credit facilities with an aggregate commitment of at
least $20,000,000 provided by one or more commercial
banks or other lending institutions; or
(n) Gottschalks Inc. shall have defaulted
in the payment of indebtedness for borrowed money in
excess of $500,000 beyond the period of grace provided
for in the agreement or instrument under which such
indebtedness was created or incurred, such indebtedness
shall have been declared due and payable, such
declaration shall not have been rescinded, revoked or
stayed and such declaration shall have remained in
effect for at least 30 days; or Gottschalks Inc. shall
have defaulted on one or more store leases, and the net
liquidated damages or other net actual losses thereon
shall have exceeded $2,000,000 in the aggregate for any
12 month period;
then, in the case of any event described in subsections
(a) or (b) of this Section 7.01, after the applicable
grace period, if any, set forth in such subsections,
either the Trustee or the Holders of Certificates
representing more than 50% of the FBC Invested Amount
by notice then given in writing to the Depositor and
the Servicer (and to the Trustee if given by
Certificateholders) may declare that an early
amortization event (an "Early Amortization Event") has
occurred as of the date of such notice, and, in the
case of any event described in subsections (c), (d),
(e), (f), (g), (h), (i), (j), (k), (l), (m) or (n) of
this Section 7.01, subject to applicable law, an Early
Amortization Event shall occur without any notice or
other action on the part of the Trustee or the
Certificateholders (except as otherwise provided in any
such subsection), immediately upon the occurrence of
such event.
SECTION 7.02. Waiver. Notwithstanding
the declaration or occurrence of an Early Amortization
Period, the Holders of Certificates representing 50% or
more of the FBC Invested Amount may, by written notice
to the Trustee, waive such Early Amortization Event.
Such waiver shall be binding upon all Fixed Base
Certificateholders and the other parties to this Series
Supplement. In the case of such a waiver, all parties
hereto and all such Certificateholders shall be
restored to their former positions and rights hereunder
and any such Early Amortization Period shall be deemed
not to be continuing; provided, however, this Section
7.02 shall not apply in the case of an Early
Amortization Event of the type described in Section
7.01(d).
ARTICLE VIII
Optional Repurchase
SECTION 8.01. Optional Repurchase. (a)
On any Distribution Date occurring after the date on
which the FBC Invested Amount is reduced to 10% or less
of the Initial FBC Invested Amount, the Depositor shall
have the option to purchase the entire amount of, but
not less than the entire amount of, the Certificates,
at a purchase price equal to the Reassignment Amount
for such Distribution Date.
(b) The Depositor shall give the Servicer
and the Trustee at least ten (10) days' prior written
notice of the Distribution Date on which the Depositor
intends to exercise such purchase option. Not later
than 12:00 noon, New York City time, on such
Distribution Date the Depositor shall deposit the
Reassignment Amount into the Collection Account in
immediately available funds. Such purchase option is
subject to payment in full of the Reassignment Amount.
The Reassignment Amount shall be distributed as set
forth in Section 9.01(b) hereof.
ARTICLE IX
Final Distributions
SECTION 9.01. Final Distributions. (a)
The amount to be paid by the Depositor to the
Collection Account with respect to the Certificates in
connection with a purchase of the Certificates pursuant
to Section 2.03 of the Agreement shall equal the
Reassignment Amount for the first Distribution Date
following the Collection Period in which the
reassignment obligation arises under the Agreement.
(b) Reassignment Amounts deposited into
the Collection Account pursuant to Section 8.01 of this
Series Supplement or Section 2.03 of the Agreement and
allocated to the Series 1996-1 Certificates, shall be
applied by the Trustee at the direction of the
Servicer, not later than 12:00 noon, New York City
time, on the Distribution Date on which such amounts
are deposited (or, if such date is not a Distribution
Date, on the immediately following Distribution Date)
as follows:
(i) Reassignment Amounts which constitute
Investor Finance Charge Collections shall be applied to
pay an amount up to the sum of (A) all accrued and
unpaid interest on the unpaid balance of the FBC
Invested Amount and (B) the FBC Carryover Interest due
on such Distribution Date and, if any amount remains
after the foregoing applications, such amount shall be
reallocated as Investor Principal Collections and
applied as provided in paragraph (ii) immediately
below; and
(ii) in the case of Reassignment Amounts
which constitute Investor Principal Collections: (A)
an amount equal to the product of such Investor
Principal Collections and the FBC Allocation Percentage
for such Distribution Date shall be applied to pay an
amount up to the FBC Invested Amount; (B) an amount
equal to the product of (x) such Investor Principal
Collections and (y) the Subordinated Allocation
Percentage for such Distribution Date shall be applied
to pay an amount up to the Subordinated Invested
Amount; and (C) any amount remaining after the
foregoing applications shall be distributed to the
Holder of the Exchangeable Certificate.
(c) Termination Proceeds deposited into
the Collection Account pursuant to Section 12.02(c) of
the Agreement and allocated to the Series 1996-1 and
the Certificates, shall be applied by the Trustee at
the direction of the Servicer, not later than 12:00
noon, New York City time, on the Distribution Date on
which such amounts are deposited (or, if such date is
not a Distribution Date, on the immediately following
Distribution Date) as follows:
(i) Termination Proceeds which constitute
Investor Finance Charge Collections shall be applied to
pay an amount up to the sum of (A) all accrued and
unpaid interest on the unpaid balance of the FBC
Invested Amount and (B) the FBC Carryover Interest due
on such Distribution Date and, if any amount remains
after the foregoing applications, such amount shall be
reallocated as Investor Principal Collections and
applied as provided in paragraph (ii) immediately
below; and
(ii) in the case of Termination Proceeds
which constitute Investor Principal Collections: (A)
an amount equal to the product of such Investor
Principal Collections and the FBC Allocation Percentage
for such Distribution Date shall be applied to pay an
amount up to the FBC Invested Amount; (B) an amount
equal to the product of (x) such Investor Principal
Collections and (y) the Subordinated Allocation
Percentage for such Distribution Date shall be applied
to pay an amount up to the Subordinated Invested
Amount; and (C) any amount remaining after the
foregoing applications shall be distributed to the
Holder of the Exchangeable Certificate.
(d) Liquidation Proceeds deposited into
the Collection Account pursuant to Section 9.02(b) of
the Agreement and allocated to the Series 1996-1
Certificates, shall be applied by the Trustee at the
direction of the Servicer, not later than 12:00 noon,
New York City time, on the Distribution Date on which
such amounts are deposited (or, if such date is not a
Distribution Date, on the immediately following
Distribution Date) as follows:
(i) Liquidation Proceeds which constitute
Investor Finance Charge Collections shall be applied to
pay an amount up to the sum of (A) all accrued and
unpaid interest on the unpaid balance of the FBC
Invested Amount and (B) the FBC Carryover Interest due
on such Distribution Date and, if any amount remains
after the foregoing applications, such amount shall be
reallocated as Investor Principal Collections and
applied as provided in paragraph (ii) immediately
below; and
(ii) in the case of Liquidation Proceeds
which constitute Investor Principal Collections: (A)
an amount equal to the product of such Investor
Principal Collections and the FBC Allocation Percentage
for such Distribution Date shall be applied to pay an
amount up to the FBC Invested Amount; (B) an amount
equal to the product of (x) such Investor Principal
Collections and (y) the Subordinated Allocation
Percentage for such Distribution Date shall be applied
to pay an amount up to the Subordinated Invested
Amount; and (C) any amount remaining after the
foregoing applications shall be distributed to the
Holder of the Exchangeable Certificate.
(e) Notwithstanding anything to the
contrary contained in this Series Supplement or the
Agreement, any distribution made pursuant to this
Section 9.01 shall be deemed to be a final distribution
pursuant to Section 12.02 of the Agreement with respect
to the Certificates.
(f) Notwithstanding Section 12.02 of the
Agreement, no Certificateholder shall be required to
surrender its Investor Certificate(s) in order to
receive its final distribution under the Agreement and
this Series Supplement.
ARTICLE X
Miscellaneous Provisions
SECTION 10.01. Ratification of
Agreement. As supplemented by this Series Supplement,
the Agreement is in all respects ratified and confirmed
and the Agreement as so supplemented by this Series
Supplement, shall be read, taken and construed as one
and the same instrument.
SECTION 10.02. Counterparts. This Series
Supplement may be executed in two or more counterparts,
each of which when so executed shall be deemed to be an
original, but all of which shall together constitute
but one and the same instrument.
SECTION 10.03. GOVERNING LAW. THIS SERIES
SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICTS OF LAW PROVISIONS, AND THE OBLIGATIONS,
RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 10.04. Rating Agency Notice. No
amendment or waiver with respect to any Early
Amortization Event shall be effective until such time
as the Rating Agencies have been notified.
<PAGE>
IN WITNESS WHEREOF, the Depositor, the
Servicer and the Trustee have caused this Series
Supplement to be duly executed by their respective
officers as of the day and year first above written.
GOTTSCHALKS CREDIT RECEIVABLES
CORPORATION, as Depositor
By: /s/ STEVE FURST
Chief Financial Officer
of G.C.R.C.
By: /s/ JOSEPH LEVY
Chairman
GOTTSCHALKS INC., as
Servicer
By: /s/ ALAN A. WEINSTEIN
Senior Vice President/
Chief Financial Officer
BANKERS TRUST COMPANY, not in its
individual capacity but solely as Trustee
By: /s/ MELISSA J. KAYE
Senior Vice President
SCHEDULE I
List of Series Accounts
Bankers Trust Company
ABA # 021001033
ACCT: 01419647
REF: Gottschalks 1996-1
Attn: Ms. Joanne Manieri
Gottschalks Credit Card Master Trust Series 1996-1
Capitalized Interest Account: 21627
Gottschalks Credit Card Master Trust Series 1996-1
Retained Amount Account: 21626
Gottschalks Credit Card Master Trust Series 1996-1
Spread Account: 21625
Loan No.: 1910059-0003
PROMISSORY NOTE
$6,000,000.00 October 2, 1996
FOR VALUE RECEIVED, Gottschalks, Inc., a Delaware
corporation ("Maker"), promises to pay to the order of
Heller Financial, Inc., a Delaware corporation
(together with any holder of this Note, "Payee"), at
its office located at 500 West Monroe Street, Chicago,
Illinois 60661, or at such other place as Payee may
from time to time designate, the principal sum of Six
Million and 00/100 Dollars ($6,000,000.00), together
with interest thereon as set forth herein. All
payments shall be applied first to interest and then to
principal. Interest shall be computed on the basis of
a 360 day year comprised of 30-day months.
Except as set forth below, from the date hereof
through March 31, 1997, the outstanding principal
balance hereunder shall bear interest at a floating
rate per annum equal to the One Month LIBOR Rate
(defined below), plus three percent (3.00%), and from
and after April 1, 1997, the outstanding principal
balance hereunder shall bear interest at a fixed rate
per annum equal to the Treasury Rate (defined below),
plus three and 10/100 percent (3.10%). Interest
hereunder shall be payable on the first day of each
consecutive calendar month commencing November 1, 1996,
and continuing for as long as any amount of principal
is outstanding hereunder.
Principal shall be payable in eighty-four (84)
consecutive monthly installments commencing May 1,
1997, and continuing on the same day of each
consecutive calendar month thereafter until this Note
is fully paid, the first eighty-three (83) installments
each in the amount of Seventy-One Thousand Four Hundred
Twenty-Eight and 57/100 Dollars ($71,428.57), and the
final installment in the amount of Seventy-One Thousand
Four Hundred Twenty-Eight and 69/100 Dollars
($71,428.69); provided, however, that if Payee applies
to the amounts due under this Note the security deposit
Secured Party holds under the Security Agreement
(defined below) in accordance with Section 13(a)
thereof, the first eighty-three (83) installments shall
each be in the amount of Thirty-Five Thousand Seven
Hundred Fourteen and 28/100 Dollars ($35,714.28) and
the final installment shall be in the amount of
Thirty-Five Thousand Seven Hundred Fourteen and 76/100
Dollars ($35,714.76).
As used herein, the term "One Month LIBOR Rate"
shall mean, for each calendar month (or, in the case of
the initial funding month, partial calendar month), a
rate of interest equal to:
(A) the rate of interest determined by
Payee at which deposits in U.S. Dollars are offered for
the one (1) month interest period based on information
presented on the Reuters Screen LIBO Page as of 11:00
A.M. (London time) on the day which is two (2) business
days (not counting Saturdays) prior to the first day of
each calendar month (or, in the case of the initial
funding month, on the date hereof); provided that if at
least two (2) such offered rates appear on the Reuters
Screen LIBO Page in respect of such interest period,
the arithmetic mean of all such rates (as determined by
Payee) will be the rate used; provided further that if
there are fewer than two (2) offered rates or Reuters
ceases to provide LIBOR quotations, such rate shall be
the average rate of interest determined by Payee at
which deposits in U.S. Dollars are offered for the one
(1) month interest period by Bankers Trust Company, The
Chase Manhattan Bank, National Association and Chemical
Bank (or their respective successors) to banks with
combined capital and surplus in excess of $500,000,000
in the London interbank market as of 11:00 A.M. (London
time) on the applicable interest rate determination
date, divided by
(B) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates
(expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2)
business days prior to the beginning of each calendar
month (including, without limitation, basic,
supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having
jurisdiction with respect thereto, as now and from time
to time in effect) for Eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation
D of such Board) which are required to be maintained by
a member bank of the Federal Reserve System;
(such rate to be adjusted to the nearest one
sixteenth of one percent (1/16 of 1%) or, if there is
no nearest one sixteenth of one percent (1/16 of 1%),
to the next higher one sixteenth of one percent (1/16
of 1%)).
As used herein, the term "Treasury Rate" shall
mean the yield per annum as of April 1, 1997, on
"7-year" securities issued by the United States
Treasury, as appears on Telerate page 7051 under the
heading "Daily Treasury Constant Maturities from the
Economic Bulletin Board" (or, if Telerate ceases to
provide daily quotations for constant maturities of
United States Treasury securities, as appears on
Federal Reserve Statistical Release H.15 (519) as
published by the Board of Governors of the Federal
Reserve System).
Notwithstanding the foregoing, if at any time
implementation of any provision hereof shall cause the
interest contracted for or charged herein or
collectable hereunder to exceed the applicable lawful
maximum rate, then the interest shall be limited to
such applicable lawful maximum.
This Note is secured by the collateral described
in the Security Agreement dated September ___________,
1996, between Maker and Payee (the "Security
Agreement;" and together with all related documents and
instruments, the "Loan Documents") to which reference
is made for a statement of the nature and extent of
protection and security afforded, certain rights of
Payee and certain rights and obligations of Maker,
including Maker's rights, if any, to prepay the
principal balance hereof; provided, however, that in
addition to any other sum payable hereunder, under the
Security Agreement or any of the other Loan Documents,
in the event of a prepayment of the principal balance
hereunder on or after April 1, 1997, whether voluntary,
following acceleration or otherwise, Maker shall pay to
Payee together with such prepayment a Breakage Fee
(defined below), which Breakage Fee, together with the
amounts payable under Section 3(ii) of the Security
Agreement, if any, represents liquidated damages to
Payee for the loss of its bargain and not a penalty.
As used herein, the term "Breakage Fee" shall mean the
amount, if any, by which (A) the present value, in the
aggregate, of the then remaining installments of
principal and interest due hereunder, absent the
prepayment, using a discount rate equal to the yield to
maturity as of the date two (2) days prior to the date
of the prepayment on United States Treasury Notes with
a final maturity approximately equal to the remaining
term hereof, absent the prepayment, as published in The
Wall Street Journal, plus three and 10/100 percent
(3.10%), exceeds (B) the then outstanding principal
balance hereunder, absent the prepayment.
Time is of the essence hereof. If payment of any
installment or any other sum due under this Note or the
Loan Documents is not paid when due, Maker agrees to
pay a late charge equal to the lesser of (i) five cents
(5) per dollar on, and in addition to, the amount of
each such payment, or (ii) the maximum amount Payee is
permitted to charge by law. In the event of the
occurrence of an Event of Default (as defined in the
Security Agreement), then the entire unpaid principal
balance hereof with accrued and unpaid interest
thereon, together with all other sums payable under
this Note or the Loan Documents, shall, at the option
of Payee and without notice or demand, become
immediately due and payable, such accelerated balance
bearing interest until paid at the rate of three
percent (3%) per annum above the fixed rate set forth
in the first paragraph of this Note.
Maker and all endorsers, guarantors or any others
who may at any time become liable for the payment
hereof hereby consent to any and all extensions of
time, renewals, waivers and modifications of, and
substitutions or release of security or of any party
primarily or secondarily liable on, or with respect to,
this Note or any of the Loan Documents or any of the
terms and provisions thereof that may be made, granted
or consented to by Payee, and agree that suit may be
brought and maintained against any one or more of them,
at the election of Payee, without joinder of the others
as parties thereto, and that Payee shall not be
required to first foreclose, proceed against, or
exhaust any security herefor, in order to enforce
payment of this Note by any one or more of them. Maker
and all endorsers, guarantors or any others who may at
any time become liable for the payment hereof hereby
severally waive presentment, demand for payment, notice
of nonpayment, protest, notice of protest, notice of
dishonor, and all other notices in connection with this
Note, filing of suit and diligence in collecting this
Note or enforcing any of the security herefor, and,
without limiting any provision of any of the Loan
Documents, agree to pay, if permitted by law, all
expenses incurred in collection, including reasonable
attorneys' fees, and hereby waive all benefits of
valuation, appraisement and exemption laws.
If there be more than one Maker, all the
obligations, promises, agreements and covenants of
Maker under this Note are joint and several.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. AT PAYEE'S ELECTION AND WITHOUT
LIMITING PAYEE'S RIGHT TO COMMENCE AN ACTION IN ANY
OTHER JURISDICTION, MAKER HEREBY SUBMITS TO THE
EXCLUSIVE JURISDICTION AND VENUE OF ANY COURT (FEDERAL,
STATE OR LOCAL) HAVING SITUS WITHIN THE STATE OF
ILLINOIS, EXPRESSLY WAIVES PERSONAL SERVICE OF PROCESS
AND CONSENTS TO SERVICE BY CERTIFIED MAIL, POSTAGE
PREPAID, DIRECTED TO THE LAST KNOWN ADDRESS OF MAKER,
WHICH SERVICE SHALL BE DEEMED COMPLETED WITHIN TEN (10)
DAYS AFTER THE DATE OF MAILING THEREOF.
MAKER HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS NOTE. THIS WAIVER IS INFORMED AND FREELY MADE.
MAKER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
IT HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO
THIS NOTE, AND THAT IT WILL CONTINUE TO RELY ON THE
WAIVER IN ITS RELATED FUTURE DEALINGS. MAKER FURTHER
WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.
Witness/Attest: GOTTSCHALKS, INC.,
a Delaware corporation
By: /s/ STEVE FURST
President
Master
cefd/notefxd.doc 2/96
o:\winword\sas\gotschlk\sched2\notefxd.doc 9/20/96 12:17 PM
Loan No.: 1910059-0003
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made this 2nd
day of October, 1996, by and between Gottschalks, Inc.,
a Delaware corporation ("Debtor"), whose business
address is 7 River Park Place East, Fresno, California
93720, and Heller Financial, Inc., a Delaware
corporation ("Secured Party"), whose address is
Commercial Equipment Finance Division, 500 West Monroe
Street, Chicago, Illinois 60661.
WITNESSETH:
1. Secure Payment. To secure payment of
indebtedness in the principal sum of up to Six Million
and 00/100 Dollars ($6,000,000.00), as evidenced by a
note or notes dated October 2, 1996, executed
and delivered by Debtor to Secured Party (the "Notes")
and any obligations arising under this Agreement, and
also to secure any other indebtedness or liability of
Debtor to Secured Party, direct or indirect, absolute
or contingent, due or to become due, now existing or
hereafter arising and no matter how acquired by Secured
Party, including all future advances or loans which may
be made at the option of Secured Party (all the
foregoing hereinafter called the "Indebtedness"),
Debtor hereby grants and conveys to Secured Party a
first priority continuing lien and security interest in
the property described on the Schedule(s) attached
hereto (the "Schedules"), all products and proceeds
(including insurance proceeds) thereof, if any, and all
substitutions, replacements, attachments, additions,
and accessions thereto, all or any of the foregoing
hereinafter called the "Collateral." The Schedules may
be supplemented from time to time to evidence the
Collateral subject to this Agreement.
2. Warranties, Representations and Covenants.
Debtor warrants, represents, covenants and agrees as
follows:
(a) Perform Obligations. Debtor shall pay as
and when due all of the Indebtedness secured by this
Agreement and perform all of the obligations contained
in this Agreement according to its terms. Debtor shall
use the loan proceeds primarily for business uses and
not for personal, family, household, or agricultural
uses.
(b) Perfection. This Agreement creates a valid
and first priority continuing lien and security
interest in the Collateral, securing the payment and
performance of the Indebtedness and all actions
necessary to perfect and protect such security interest
have been duly taken.
(c) Collateral Free and Clear. Except as may
be set forth on the Schedules, Debtor shall keep the
Collateral free and clear of all liens, claims,
charges, encumbrances and other security interests of
any kind (other than the security interest granted
hereby). Debtor shall defend the title to the
Collateral against all persons and against all claims
and demands whatsoever. At the request of Secured
Party, Debtor shall furnish further assurance of title,
execute any written agreement and do any other acts
necessary to effectuate the purposes and provisions of
this Agreement, including in order to perfect,
continue, or terminate the security interest of Secured
Party in the Collateral, and pay all costs in
connection therewith.
(d) Possession and Operating Order of the
Collateral. Subject to Secured Party's rights and
remedies upon the occurrence of an Event of Default
(defined below), Debtor shall retain possession of the
Collateral at all times and shall not sell, exchange,
assign, loan, deliver, lease, mortgage, or otherwise
dispose of the Collateral or any part thereof without
the prior written consent of Secured Party. Debtor
shall at all times keep the Collateral at the
location[s] specified on the Schedules (except for
removals thereof in the usual course of business for
temporary periods). At Debtor's sole cost and expense,
Debtor shall also keep the Collateral in good repair
and condition and shall not misuse, abuse, waste or
otherwise allow it to deteriorate, except for normal
wear and tear. Secured Party may verify any Collateral
in any reasonable manner which Secured Party may
consider appropriate, and Debtor shall furnish all
reasonable assistance and information and perform any
acts which Secured Party may reasonably request in
connection therewith.
(e) Insurance. Debtor shall insure the
Collateral against loss by fire (including extended
coverage), theft and other hazards, for its full
insurable value including replacement costs, with a
deductible not to exceed Fifty Thousand and 00/100
Dollars ($50,000.00) per occurrence and without
co-insurance. In addition, Debtor shall obtain
liability insurance covering liability for bodily
injury, including death and property damage, in an
amount of at least Five Million and 00/100 Dollars
($5,000,000.00) per occurrence or such greater amount
as may comply with general industry standards, or in
such other amounts as Secured Party may otherwise
require. All policies of insurance required hereunder
shall be in such form, amounts, and with such companies
as Secured Party may approve; shall provide for at
least thirty (30) days prior written notice to Secured
Party prior to any modification or cancellation
thereof; shall name Secured Party as loss payee or
additional insured, as applicable, and shall be payable
to Debtor and Secured Party as their interests may
appear; shall waive any claim for premium against
Secured Party; and shall provide that no breach of
warranty or representation or act or omission of Debtor
shall terminate, limit or affect the insurers'
liability to Secured Party. Certificates of insurance
or policies evidencing the insurance required hereunder
along with satisfactory proof of the payment of the
premiums therefor shall be delivered to Secured Party
who is authorized, but under no duty, to obtain such
insurance upon failure of Debtor to do so. Debtor
shall give immediate written notice to Secured Party
and to insurers of loss or damage to the Collateral and
shall promptly file proofs of loss with insurers.
Debtor hereby irrevocably appoints Secured Party as
Debtor's attorney-in-fact, coupled with an interest,
for the purpose of obtaining, adjusting and canceling
any such insurance and endorsing settlement drafts.
Debtor hereby assigns to Secured Party, as additional
security for the Indebtedness, all sums which may
become payable under such insurance.
(f) If Collateral Attaches to Real Estate. If
the Collateral or any part thereof has been attached to
or is to be attached to real estate, an accurate
description of the real estate and the name and address
of the record owner is set forth on the Schedules.
Debtor shall, on demand of Secured Party, furnish
Secured Party with a disclaimer or waiver of any
interest in any such Collateral satisfactory to Secured
Party and signed by all persons having an interest in
the real estate. Notwithstanding the foregoing, the
Collateral shall remain personal property and shall not
be affixed to realty without the prior written consent
of Secured Party.
(g) Financial Statements. Debtor shall furnish
to Secured Party, as soon as practicable, and in any
event within sixty (60) days after the end of each
fiscal quarter of Debtor and each guarantor of all or
any part of the Indebtedness (each, a "Guarantor"),
respectively, Debtor's and each Guarantor's unaudited
financial statements including in each instance,
balance sheets, income statements, and statements of
cash flow, on a consolidated and consolidating basis,
as appropriate, and separate profit and loss statements
as of and for the quarterly period then ended and for
the respective person's fiscal year to date, prepared
in accordance with generally accepted accounting
principles, consistently applied ("GAAP"). Debtor
shall also furnish to Secured Party, as soon as
practicable, and in any event within ninety (90) days
after the end of each fiscal year of Debtor and each
Guarantor, respectively, Debtor's and each Guarantor's
annual audited financial statements, including balance
sheets, income statements and statements of cash flow
for the fiscal year then ended, on a consolidated and
consolidating basis, as appropriate, which have been
prepared by its independent accountants in accordance
with GAAP. Such audited financial statements shall be
accompanied by the independent accountant's opinion,
which opinion shall be in form generally recognized as
"unqualified".
(h) Authorization. Debtor is now, and will at
all times remain, duly licensed, qualified to do
business and in good standing in every jurisdiction
where failure to be so licensed or qualified and in
good standing would have a material adverse effect on
its business, properties or assets. Debtor has the
power to authorize, execute and deliver this Agreement,
the Notes and any other documents and instruments
relating thereto (the Agreement, Notes and other
documents and instruments, all as amended from time to
time, are hereafter collectively referred to as the
"Loan Documents"), to incur and perform obligations
hereunder and thereunder, and to grant the security
interests created hereby. As of the time of delivery
thereof to Secured Party, the Loan Documents will have
been duly authorized, executed, and delivered by or on
behalf of Debtor, and will constitute the legal, valid,
and binding obligations of Debtor, enforceable against
Debtor in accordance with their respective terms.
Debtor shall preserve and maintain its existence and
shall not wind up its affairs or otherwise dissolve.
Debtor shall not, without thirty (30) days prior
written notice to Secured Party, (1) change its name or
so change its structure such that any financing
statement or other record notice becomes misleading or
(2) change its principal place of business or chief
executive or accounting offices from the address stated
herein.
(i) Litigation. There are no actions, suits,
proceedings, or investigations ("Litigation") pending
or, to the knowledge of Debtor, threatened against
Debtor or otherwise affecting the Collateral. Debtor
shall promptly notify Secured Party in writing of
Litigation against it if: (1) the outcome of such
Litigation may materially or adversely affect the
finances or operations of Debtor (for purposes of this
provision, Five Hundred Thousand and 00/100 Dollars
($500,000.00) shall be deemed material) or (2) such
Litigation questions the validity of any Loan Document
or any action taken or to be taken pursuant thereto.
Debtor shall furnish to Secured Party such information
regarding any such Litigation as Secured Party shall
reasonably request.
(j) No Conflicts. Debtor is not in violation
of any material term or provision of its by-laws, or of
any material agreement or instrument, or of any
judgment, decree, order, or any statute, rule, or
governmental regulation applicable to it. The
execution, delivery, and performance of the Loan
Documents do not and will not violate, constitute a
default under, or otherwise conflict with any such term
or provision or result in the creation of any security
interest, lien, charge, or encumbrance upon any of the
properties or assets of Debtor, except for the security
interest herein created.
(k) Compliance with Laws. Debtor shall use and
maintain the Collateral in a lawful manner in
accordance with all applicable laws, regulations,
ordinances, and codes and shall otherwise comply in all
material respects with all applicable laws, rules, and
regulations and duly observe all valid requirements of
all governmental authorities, and all statutes, rules
and regulations relating to its business, including (i)
the Internal Revenue Code of 1986, as amended from time
to time, (ii) all federal, state, and local laws,
rules, regulations, orders, and decrees relating to
health, safety, hazardous substances, and environmental
matters, including the Resource Recovery and
Reclamation Act of 1976, the Comprehensive
Environmental Response, Compensation, and Liability Act
of 1980, the Toxic Substances Control Act, the Clean
Water Act of 1977, and the Clean Air Act, all as
amended from time to time (collectively, "Environmental
Laws"), (iii) the Employees Retirement Income Security
Act of 1974, as amended from time to time, and (iv) the
Fair Labor Standards Act, as amended from time to time.
(l) Taxes. Debtor has timely filed all tax
returns (federal, state, local, and foreign) required
to be filed by it and has paid or established reserves
for all taxes, assessments, fees, and other
governmental charges in respect of its properties,
assets, income and franchises. Debtor shall promptly
pay and discharge all taxes, assessments, license fees
(related to the Collateral) and other governmental
charges prior to the date on which penalties are
attached thereto, establish adequate reserves for the
payments of such taxes, assessments, and other
governmental charges and make all required withholding
and other tax deposits, and, upon request, provide
Secured Party with receipts or other proof that any or
all of such taxes, assessments, license fees or
governmental charges have been paid in a timely
fashion; provided, however, that nothing contained
herein shall require the payment of any tax,
assessment, or other governmental charge so long as its
validity is being diligently contested in good faith
and by appropriate proceedings diligently conducted and
Debtor has established cash reserves therefor in
accordance with GAAP. Should any stamp, excise, or
other tax, including mortgage, conveyance, deed,
intangible, or recording taxes become payable in
connection with or respect of any of the Loan
Documents, Debtor shall pay the same (including
interest and penalties, if any) and shall hold Secured
Party harmless with respect thereto.
(m) Environmental Laws. Except as disclosed by
Debtor (or Debtor's representative or agent) in writing
to Secured Party's counsel (including internal counsel)
on or prior to the date hereof, Debtor has (1) not
received any summons, complaint, order, or other notice
that it is not in compliance with, or that any public
authority is investigating its compliance with, any
Environmental Laws and (2) no knowledge of any material
violation of any Environmental Laws on or about its
assets or property. Debtor shall provide Secured
Party, promptly following receipt, copies of any
correspondence, notice, complaint, order, or other
document that it receives asserting or alleging a
circumstance or condition which requires or may require
a cleanup, removal, remedial action or other response
by or on the part of Debtor under any Environmental
Laws, or which seeks damages or civil, criminal or
punitive penalties from Debtor for an alleged violation
of any Environmental Laws.
(n) Regulations. No proceeds of the loans or
any other financial accommodation hereunder will be
used, directly or indirectly, for the purpose of
purchasing or carrying any margin security, as that
term is defined in Regulations G, T, U, X of the Board
of Governors of the Federal Reserve System.
(o) Books and Records. Debtor shall maintain,
at all times, true and complete books and records in
accordance with GAAP and consistent with those applied
in the preparation of Debtor's financial statements.
At all reasonable times, upon reasonable notice, and
during normal business hours, Debtor shall permit
Secured Party or its agents to audit, examine and make
extracts from or copies of any of its books, ledgers,
reports, correspondence, and other records relating to
the Collateral.
(p) Setoff. Without limiting any other right
of Secured Party, whenever Secured Party has the right
to declare any Indebtedness to be immediately due and
payable (whether or not it has so declared), Secured
Party is hereby authorized at any time and from time to
time to the fullest extent permitted by law, to set off
and apply against any and all of the Indebtedness, any
and all monies then or thereafter owed to Debtor by
Secured Party in any capacity, whether or not the
obligation to pay such monies owed by Secured Party is
then due. Secured Party shall be deemed to have
exercised such right of setoff immediately at the time
of such election even though any charge therefor is
made or entered on Secured Party's records subsequent
thereto.
(q) Standard of Care; Notice of Claims. Debtor
acknowledges and agrees that Secured Party shall not be
liable for any acts or omissions nor for any error of
judgment or mistake of fact or law other than as a sole
and direct result of Secured Party's gross negligence
or willful misconduct. Debtor shall give Secured Party
written notice of any action or inaction by Secured
Party or any agent or attorney of Secured Party that
may give rise to a claim against Secured Party or any
agent or attorney of Secured Party or that may be a
defense to payment or performance of and of the
Indebtedness for any reason, including commission of a
tort (subject, in any event, to the first sentence of
this paragraph) or violation of any contractual duty or
duty implied by law. Debtor agrees that unless such
notice is fully given as promptly as possible (and in
any event within thirty (30) days) after Debtor has
knowledge, or with the exercise of reasonable diligence
should have had knowledge, of any such action or
inaction, Debtor shall not assert, and Debtor shall be
deemed to have waived, any claim or defense arising
therefrom.
(r) Indemnity. Debtor shall indemnify, defend
and hold Secured Party, its parent, affiliates,
officers, directors, agents, employees, and attorneys
harmless from and against any loss, expense (including
reasonable attorneys' fees and costs), damage or
liability arising directly or indirectly out of (i) any
breach of any representation, warranty or covenant
contained in any Loan Document, (ii) any claim or cause
of action that would deny Secured Party the full
benefit or protection of any provision in any Loan
Document, or (iii) the ownership, possession, lease,
operation, use, condition, sale, return, or other
disposition of the Collateral, except to the extent the
loss, expense, damage or liability arises solely and
directly from Secured Party's gross negligence or
willful misconduct. If after receipt of any payment of
all or any part of the Indebtedness, Secured Party is
for any reason compelled to surrender such payment to
any person or entity, because such payment is
determined to be void or voidable as a preference,
impermissible set-off, or a diversion of trust funds,
or for any other reason, the Loan Documents shall
continue in full force and effect and Debtor shall be
liable to Secured Party for the amount of such payment
surrendered. The provisions of the preceding sentence
shall be and remain effective notwithstanding any
contrary action which may have been taken by Secured
Party in reliance upon such payment, and any such
contrary action so taken shall be without prejudice to
Secured Party's rights under this Agreement and shall
be deemed to have been conditioned upon such payment
having become final and irrevocable. Additionally,
Debtor shall be liable for all charges, costs, expenses
and attorneys' fees incurred by Secured Party
(including a reasonable allocation of the compensation,
costs and expenses of internal counsel, based upon time
spent): (i) in perfecting, defending or protecting its
security interest in the Collateral, or any part
thereof; (ii) in the negotiation, execution, delivery,
administration, amendment or enforcement of the Loan
Documents or the collection of any amounts due under
any Note or other Loan Document; (iii) in any lawsuit
or other legal proceeding in any way connected with any
of the Loan Documents, including any contract or tort
or other actions, any arbitration or other alternative
dispute resolution proceeding, all appeals and judgment
enforcement actions and any bankruptcy proceeding
(including any relief from stay and/or adequate
protection motions, cash collateral disputes,
assumption/rejection motions and disputes or objections
to any proposed disclosure statement or reorganization
plan). Debtor acknowledges and agrees that the
preceding sentence shall survive and not be merged with
any judgment in connection with any exercise of any
right or remedy by Secured Party provided under this
Agreement. The provisions of this paragraph shall
survive the termination of this Agreement and the other
Loan Documents.
(s) Complete Information. No representation or
warranty made by Debtor in any Loan Document and no
other document or statement furnished to Secured Party
by or on behalf of Debtor contains any material
misstatement of a material fact or omits to state any
material fact necessary in order to make the statements
contained therein not misleading. Except as expressly
set forth in the Schedules, there is no fact known to
Debtor that will or could have a materially adverse
affect on the business, operation, condition (financial
or otherwise), performance, properties or prospects of
Debtor or Debtor's ability to timely pay all of the
Indebtedness and perform all of its other obligations
contained in or secured by this Agreement. Each
representation and warranty made by Debtor in this
Agreement shall be deemed to have been made as of the
date of this Agreement and as of the date of each
advance of funds under a Note.
(t) Collateral Documentation. Debtor shall
deliver to Secured Party prior to any advance or loan,
satisfactory documentation regarding the Collateral to
be financed, including such invoices, canceled checks
evidencing payments, or other documentation as may be
reasonably requested by Secured Party. Additionally,
Debtor shall satisfy Secured Party that Debtor's
business and financial information is as has been
represented and there has been no material change in
Debtor's business, financial condition, or operations.
3. Prepayment. Subject to Section 13(c), upon
forty-five (45) days prior written notice to Secured
Party, Debtor may prepay in whole, but not in part, the
then entire unpaid principal balance of any Note,
together with all accrued and unpaid interest thereon
to the date of such prepayment, provided that along
with and in addition to such prepayment, Debtor shall
pay (i) any and all other sums then due under any of
the Loan Documents, and (ii) a prepayment fee as
liquidated damages and not as a penalty, in a sum equal
to the following percentages of the amount prepaid: 5%
for any prepayment in Loan Year 1; 4% for any
prepayment made in Loan Year 2; 3% for any prepayment
made in Loan Year 3; 2% for any prepayment made in Loan
Year 4; 1% for any prepayment made in Loan Year 5; 0%
for any prepayment made in Loan Years 6 and 7. The
phrase "Loan Year" as used herein shall mean each
twelve (12) consecutive months commencing April 1,
1997. The prepayment fee described in clause (ii)
above shall also be due upon the acceleration of the
maturity date of any Note following the occurrence of
any Event of Default.
4. Events of Default. If any one of the following
events (each of which is herein called an "Event of
Default") shall occur: (a) Debtor fails to pay any part
of the Indebtedness within ten (10) calendar days of
its due date, or (b) any warranty or representation of
Debtor in any Loan Document is materially untrue,
misleading or inaccurate, or (c) Debtor or any
Guarantor breaches or defaults in the performance of
any other agreement or covenant under any Loan
Document, or (d) Debtor or any Guarantor breaches or
defaults in the payment or performance of any debt or
other obligation owed by it to Secured Party or any
affiliate of Secured Party, or (e) Debtor breaches or
defaults in the payment or performance of any debt or
other obligation, whether now or hereafter existing,
with an outstanding principal balance in excess of One
Million and 00/100 Dollars ($1,000,000.00), and the
same is subsequently accelerated, or (f) there shall be
a change in the beneficial ownership and control,
directly or indirectly, of the majority of the
outstanding voting securities or other interests
entitled (without regard to the occurrence of any
contingency) to elect or appoint members of the board
of directors or other managing body of Debtor or any
Guarantor (a "change of control"), or there is any
merger, consolidation, dissolution, liquidation,
winding up or sale or other transfer of all or
substantially all of the assets of Debtor or any
Guarantor pursuant to which there is a change of
control or cessation of Debtor or the Guarantor or the
business of either, or (g) Debtor or any Guarantor
shall file a voluntary petition in bankruptcy, shall
apply for or permit the appointment by consent or
acquiescence of a receiver, conservator, administrator,
custodian or trustee for itself or all or a substantial
part of its property, shall make an assignment for the
benefit of creditors or shall be unable, fail or admit
in writing its inability to pay its debts generally as
such debts become due, or (h) there shall have been
filed against Debtor or any Guarantor an involuntary
petition in bankruptcy or Debtor or any Guarantor shall
suffer or permit the involuntary appointment of a
receiver, conservator, administrator, custodian or
trustee for all or a substantial part of its property
or the issuance of a warrant of attachment, diligence,
execution or similar process against all or any
substantial part of its property; unless, in each case,
such petition, appointment or process is fully bonded
against, vacated or dismissed within forty-five (45)
days from its effective date, but not later than ten
(10) days prior to any proposed disposition of any
assets pursuant to any such proceeding, or (i) if there
is a material adverse change in the business or
financial condition or prospects of Debtor, then, and
in any such event, Secured Party shall have the right
to exercise any one or more of the remedies hereinafter
provided.
Each of the following events shall also constitute an
Event of Default hereunder and upon the occurrence of
any one or more of them, Secured Party shall have the
right to exercise any one or more of the remedies
hereinafter provided:
(aa) If at the end of the first fiscal
quarter of Debtor ending after the date of this
Agreement (the "Initial Quarter"), Debtor's net income
before interest expense, income taxes, depreciation,
amortization (which shall include amortization of new
store pre-opening costs) and extraordinary gains, all
as determined in accordance with GAAP ("EBITDA"), for
the Initial Quarter and the preceding three (3) fiscal
quarters, in the aggregate, is less than one (1.0) time
as much as all of Debtor's interest expense incurred
during the same four (4) fiscal year quarters, all as
determined in accordance with GAAP (i.e., the ratio of
EBITDA to interest expense in the four (4) fiscal
quarters may not be less than 1:1); or
(bb) If at the end of any fiscal quarter
of Debtor after the Initial Quarter, Debtor's EBITDA
for the preceding four (4) fiscal quarters (including
the quarter just ended) is less than one and one-half
(1.5) times as much as all of Debtor's interest expense
incurred during the same four (4) fiscal year quarters
("Interest Expense"), all as determined in accordance
with GAAP (i.e., the ratio of EBITDA to Interest
Expense in any four (4) fiscal year quarters may not be
less than 1.5:1); or
(cc) If Debtor at any time has a net worth
as determined in accordance with GAAP of less than
Sixty-Five Million and 00/100 Dollars ($65,000,000); or
(dd) If at the end of any fiscal year of Debtor,
Debtor's "operating income" for its store located at
313 Madonna Road, San Luis Obispo, California, is less
than Two Million Dollars ($2,000,000), as shown on any
Store Income Statement.
5. Remedies. If an Event of Default shall occur, in
addition to all rights and remedies of a secured party
under the Uniform Commercial Code, Secured Party may,
at its option, at any time (a) declare the entire
unpaid Indebtedness to be immediately due and payable;
(b) without demand or legal process, enter into the
premises where the Collateral may be found and take
possession of and remove the Collateral, all without
charge to or liability on the part of Secured Party; or
(c) require Debtor to assemble the Collateral, render
it unusable, and crate, pack, ship, and deliver the
Collateral to Secured Party in such manner and at such
place as Secured Party may require, all at Debtor's
sole cost and expense. DEBTOR HEREBY EXPRESSLY WAIVES
ITS RIGHTS, IF ANY, TO (1) PRIOR NOTICE OF REPOSSESSION
AND (2) A JUDICIAL OR ADMINISTRATIVE HEARING PRIOR TO
SUCH REPOSSESSION. Secured Party may, at its option,
ship, store and repair the Collateral so removed and
sell any or all of it at a public or private sale or
sales. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type
customarily sold on a recognized market, Secured Party
will give Debtor reasonable notice of the time and
place of any public sale thereof or of the time after
which any private sale or any other intended
disposition thereof is to be made, it being understood
and agreed that Secured Party may be a buyer at any
such sale and Debtor may not, either directly or
indirectly, be a buyer at any such sale. The
requirements, if any, for reasonable notice will be met
if such notice is mailed postage prepaid to Debtor at
its address shown above, at least five (5) days before
the time of sale or disposition. In accordance with
Section 2(r), Debtor shall also be liable for and shall
upon demand pay to Secured Party all expenses incurred
by Secured Party in connection with the undertaking or
enforcement by Secured Party of any of its rights or
remedies hereunder or at law, all of which costs and
expenses shall be additional Indebtedness hereby
secured. After any such sale or disposition, Debtor
shall be liable for any deficiency of the Indebtedness
remaining unpaid, with interest thereon at the rate set
forth in the related Notes.
6. Cumulative Remedies. All remedies of Secured
Party hereunder are cumulative, are in addition to any
other remedies provided for by law or in equity and
may, to the extent permitted by law, be exercised
concurrently or separately, and the exercise of any one
remedy shall not be deemed an election of such remedy
or to preclude the exercise of any other remedy. No
failure on the part of Secured Party to exercise, and
no delay in exercising any right or remedy, shall
operate as a waiver thereof or in any way modify or be
deemed to modify the terms of this Agreement or any
other Loan Document or the Indebtedness, nor shall any
single or partial exercise by Secured Party of any
right or remedy preclude any other or further exercise
of the same or any other right or remedy.
7. Assignment. Secured Party may transfer or assign
all or any part of the Indebtedness and the Loan
Documents without releasing Debtor or the Collateral,
and upon such transfer or assignment the assignee or
holder shall be entitled to all the rights, powers,
privileges and remedies of Secured Party to the extent
assigned or transferred. The obligations of Debtor
shall not be subject, as against any such assignee or
transferee, to any defense, set-off, or counter-claim
available to Debtor against Secured Party and any such
defense, set-off, or counter-claim may be asserted only
against Secured Party.
8. Time is of the Essence. Time and manner of
performance by Debtor of its duties and obligations
under the Loan Documents is of the essence. If Debtor
shall fail to comply with any provision of any of the
Loan Documents, Secured Party shall have the right, but
shall not be obligated, to take action to address such
non-compliance, in whole or in part, and all moneys
spent and expenses and obligations incurred or assumed
by Secured Party shall be paid by Debtor upon demand
and shall be added to the Indebtedness. Any such
action by Secured Party shall not constitute a waiver
of Debtor's default.
9. Enforcement. This Agreement shall be governed by
and construed in accordance with the internal laws and
decisions of the State of Illinois, without regard to
principles of conflicts of law. At Secured Party's
election and without limiting Secured Party's right to
commence an action in any other jurisdiction, Debtor
hereby submits to the exclusive jurisdiction and venue
of any court (federal, state or local) having situs
within the State of Illinois, expressly waives personal
service of process and consents to service by certified
mail, postage prepaid, directed to the last known
address of Debtor, which service shall be deemed
completed within ten (10) days after the date of
mailing thereof.
10. Further Assurance; Notice. Debtor shall, at its
expense, do, execute and deliver such further acts and
documents as Secured Party may from time to time
reasonably require to assure and confirm the rights
created or intended to be created hereunder, to carry
out the intention or facilitate the performance of the
terms of the Loan Documents or to assure the validity,
perfection, priority or enforceability of any security
interest created hereunder. Debtor agrees to execute
any instrument or instruments necessary or expedient
for filing, recording, perfecting, notifying,
foreclosing, and/or liquidating of Secured Party's
interest in the Collateral upon request of, and as
determined by, Secured Party, and Debtor hereby
specifically authorizes Secured Party to prepare and
file Uniform Commercial Code financing statements and
other documents and to execute same for and on behalf
of Debtor as Debtor's attorney-in-fact, irrevocably and
coupled with an interest, for such purposes. All
notices required or otherwise given by either party
shall be in writing and shall be delivered by hand, by
registered or certified first class United States mail,
return receipt requested, or by overnight courier to
the other party at its address stated herein or at such
other address as the other party may from time to time
designate by written notice. All notices shall be
deemed given when received, when delivery is refused or
when the returned for failure to be called for.
11. Waiver of Jury Trial. Debtor and Secured Party
hereby waive their respective rights to a jury trial of
any claim or cause of action based upon or arising in
connection with any of the Loan Documents. This waiver
is informed and freely made. Debtor and Secured Party
acknowledge that this waiver is a material inducement
to enter into a business relationship, that each has
already relied on the waiver in entering into the Loan
Documents, and that each will continue to rely on the
waiver in their related future dealings. Debtor and
Secured Party further warrant and represent that each
has reviewed this waiver with its legal counsel and
that each knowingly and voluntarily waives its jury
trial rights following consultation with legal counsel.
12. Complete Agreement. The Loan Documents are
intended by Debtor and Secured Party to be the final,
complete, and exclusive expression of the agreement
between them. The Loan Documents may not be altered,
modified or terminated in any manner except by a
writing duly signed by the parties thereto. Debtor and
Secured Party intend the Loan Documents to be valid and
binding and no provisions hereof and thereof which may
be deemed unenforceable shall in any way invalidate any
other provisions of the Loan Documents, all of which
shall remain in full force and effect. The Loan
Documents shall be binding upon the respective
successors, legal representatives, and assigns of the
parties. The singular shall include the plural, the
plural shall include the singular, and the use of any
gender shall be applicable to all genders. The use in
any of the Loan Documents of the word "including," or
words of similar import, when following any general
term, statement or matter shall not be construed to
limit such term, statement or matter to any specific
item or matters, whether or not language of
nonlimitation, such as "without limitation" or "but not
limited to," or words of similar import, are used with
reference thereto, but rather shall be deemed to refer
to all other items or matters that could reasonably
fall within the broadest possible scope of such term,
statement or matter. If there be more than one Debtor,
the warranties, representations and agreements
contained herein and in the other Loan Documents shall
be joint and several. The Schedules on the following
page[s] are incorporated herein by this reference and
made a part hereof. Sections and subsections headings
are included for convenience of reference only and
shall not be given any substantive effect.
13. Loan Terms; Fee and Security Deposit.
(a) Principal Payments. The outstanding
principal balance under each Note shall be due and
payable in eighty-four (84) consecutive monthly
installments commencing May 1, 1997, and continuing on
the same day of each month thereafter until the Note is
fully paid. Subject to any prepayment expressly
permitted hereunder, the first eighty-three (83)
principal installment payments under the Notes shall be
in the principal amount of Seventy-One Thousand Four
Hundred Twenty-Eight and 57/100 Dollars ($71,428.57),
and the final principal installment payment shall be in
the principal amount of Seventy-One Thousand Four
Hundred Twenty-Eight and 69/100 Dollars ($71,428.69);
provided, however, that in the event Debtor's EBITDA
for its fiscal year ending January 31, 1997, is not at
least Twenty Million and 00/100 Dollars
($20,000,000.00), Secured Party shall have the right,
in its sole and arbitrary discretion, to apply the
Security Deposit (defined below) to the outstanding
principal balance under the Notes, in which event the
first eighty-three (83) principal installment payments
under the Notes shall be in the amount of Thirty-Five
Thousand Seven Hundred Fourteen and 28/100 Dollars
($35,714.28), and the final principal installment
payment shall be in the amount of Thirty-Five Thousand
Seven Hundred Fourteen and 76/100 Dollars ($35,714.76).
Reference is made to the Notes for a full statement of
the payment terms thereof.
(b) Interest Rate and Payments. Provided no
Event of Default shall have occurred, from the date
thereof through March 31, 1997, the outstanding
principal balance under the Notes shall bear interest
at a rate per annum equal to the One Month LIBOR Rate
(defined below), plus three percent (3.00%), and from
and after April 1, 1997, the outstanding principal
balance under the Notes shall bear interest at a rate
per annum equal to the Treasury Rate (defined below),
plus three and 10/100 percent (3.10%). Accrued
interest under the Notes shall be payable on the first
day of each consecutive calendar month following the
date thereof and continuing for as long as any amount
of principal is outstanding thereunder. Reference is
made to the Notes for a full statement of the interest
rates thereunder and the payment terms thereof.
(c) Permitted Prepayment. Provided no Event of
Default has occurred, if Debtor's EBITDA for its fiscal
year ending January 31, 1997, is not at least Twenty
Million and 00/100 Dollars ($20,000,000.00), then
Debtor shall have the right, but not the obligation, to
prepay on or before April 30, 1997, in whole, but not
in part, the then entire unpaid principal balance of
the Notes, in which case Debtor shall at the same time
pay to Secured Party all accrued and unpaid interest
thereunder as of the date of prepayment and any and all
other sums due under any of the Loan Documents.
Notwithstanding anything to the contrary in Section 3,
no prepayment fee shall be payable in respect of any
such prepayment.
(d) Security Deposit. On or before the date of
this Agreement, Debtor shall cause to be deposited with
Secured Party in immediately available funds the amount
of Three Million and 00/100 Dollars ($3,000,000.00)
(the "Security Deposit"), which shall be held by
Secured Party as additional collateral for the due and
punctual payment and performance of the Indebtedness.
Debtor hereby assigns, grants and sets over to Secured
Party all of Debtor's right, title, and interest in and
to the Security Deposit for such purpose. For so long
as the Security Deposit is held by Secured Party, the
Security Deposit shall bear interest at a rate per
annum equal to the One Month LIBOR Rate, plus one and
50/100 percent (1.5%), which such interest shall be
paid by Secured Party to Debtor on the first day of
each consecutive calendar month following the date of
this Agreement; provided, however, that no interest
shall accrue on the Security Deposit or be payable to
Debtor at any time following the occurrence of an Event
of Default. If Debtor provides to Secured Party its
annual audited financial statements evidencing to
Secured Party's satisfaction that Debtor's EBITDA for
its fiscal year ending January 31, 1997, was more than
Twenty Million and 00/100 Dollars ($20,000,000.00),
then, upon Debtor's written request therefor, Secured
Party shall return the Security Deposit to Debtor.
(e) Origination Fee. Subject to the proviso in
the next sentence, Debtor shall pay to Secured Party a
loan documentation and origination fee in the amount of
One Hundred Twenty Thousand and 00/100 Dollars
($120,000.00) (the "Origination Fee"). The Origination
Fee shall be paid in two (2) installments, each of
which shall be in the amount of Sixty Thousand and
00/100 Dollars ($60,000.00), the first of which shall
be due and payable to Secured Party on or before the
date of this Agreement and the second of which shall be
due and payable on or before May 1, 1997; provided,
however that if Debtor prepays the entire principal
balance under the Notes and all other amounts described
in Section 13(c) in accordance with the terms thereof,
the second installment of the Origination Fee shall not
become payable. Secured Party acknowledges that Debtor
has previously deposited with it the sum of Sixty-Three
Thousand and 00/100 Dollars ($63,000.00) (the "Loan
Payment Deposit"), and Debtor and Secured Party agree
that Secured Party shall apply the Loan Payment Deposit
first to Secured Party's costs and expenses in
connection with the transactions contemplated
hereunder, including Secured Party's attorneys' fees,
title insurance premiums, recording fees, lien searches
and other related items, all of which shall be for
Debtor's account, and second to the first installment
of the Origination Fee, in full or partial payment
thereof, as the case may be.
(f) Definitions.
(i) As used herein, the term "One Month LIBOR
Rate" shall mean, for each calendar month, a rate of
interest equal to:
(A) the rate of interest determined by
Secured Party at which deposits in U.S. Dollars are
offered for the one (1) month interest period based on
information presented on the Reuters Screen LIBO Page
as of 11:00 A.M. (London time) on the day which is two
(2) business days (not counting Saturdays) prior to the
first day of each calendar month (or, in the case of
the initial funding month of the Note, on the date of
the Note); provided that if at least two (2) such
offered rates appear on the Reuters Screen LIBO Page in
respect of such interest period, the arithmetic mean of
all such rates (as determined by Secured Party) will be
the rate used; provided further that if there are fewer
than two (2) offered rates or Reuters ceases to provide
LIBOR quotations, such rate shall be the average rate
of interest determined by Secured Party at which
deposits in U.S. Dollars are offered for the one (1)
month interest period by Bankers Trust Company, The
Chase Manhattan Bank, National Association and Chemical
Bank (or their respective successors) to banks with
combined capital and surplus in excess of $500,000,000
in the London interbank market as of 11:00 A.M. (London
time) on the applicable interest rate determination
date, divided by
(B) a number equal to 1.0 minus the
aggregate (but without duplication) of the rates
(expressed as a decimal fraction) of reserve
requirements in effect on the day which is two (2)
business days prior to the beginning of each calendar
month (including, without limitation, basic,
supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal
Reserve System or other governmental authority having
jurisdiction with respect thereto, as now and from time
to time in effect) for Eurocurrency funding (currently
referred to as "Eurocurrency liabilities" in Regulation
D of such Board) which are required to be maintained by
a member bank of the Federal Reserve System;
(such rate to be adjusted to the nearest one
sixteenth of one percent (1/16 of 1%) or, if there is
no nearest one sixteenth of one percent (1/16 of 1%),
to the next higher one sixteenth of one percent (1/16
of 1%)).
(ii) As used herein, the term "Treasury Rate"
shall mean the yield per annum as of April 1, 1997, on
"7-year" securities issued by the United States
Treasury, as appears on Telerate page 7051 under the
heading "Daily Treasury Constant Maturities from the
Economic Bulletin Board" (or, if Telerate ceases to
provide daily quotations for constant maturities of
United States Treasury securities, as appears on
Federal Reserve Statistical Release H.15 (519) as
published by the Board of Governors of the Federal
Reserve System).
IN WITNESS WHEREOF, Secured Party and Debtor have each
signed this Agreement as of the day and year first
above written.
HELLER FINANCIAL, INC., GOTTSCHALKS, INC.,
a Delaware corporation a Delaware corporation
By: /s/ TERRY MCMULLEN By:/s/ STEVE FURST
Vice President President
SCHEDULE
Description of Collateral
Description of Collateral (Full description including
make, model and serial number):
See Schedule A attached hereto
Place where Collateral is to be kept:
See Schedule A attached hereto.
Other liens, encumbrances or security interests to
which Collateral is or may be subject, if any:
N/A
Other Collateral
N/A
If Collateral is attached or to be attached to real
estate, set forth:
Address of Real Estate (Including County, block
number, lot number, etc.):
See Exhibit B attached hereto
Record Owner of Real Estate (Name and Address):
Gottschalks, Inc., 7 River Park Place East,
Fresno, California 93720
If the real estate at which the Collateral is to be
kept is leased:
Name and Address of Lessor of Real Estate:
N/A ____________
Initials
15
master\secagmt.doc 2/96
o:\winword\sas\gotschlk\sched2\secagmt.doc 9/25/96
3:58 PM
December 4, 1996
Mr. Joe W. Levy
Mr. Stephen J. Furst
Mr. Alan A. Weinstein
Gottschalks Inc.
7 River Park Place East
Fresno, CA. 93729
Gentlemen:
You have provided us with certain information and have
discussed with us the current and future needs for the
financing of Gottschalks Inc., a Delaware corporation
(the "Company").
In connection therewith, we are pleased to inform you
that Congress Financial Corporation (Western), a
California corporation ("Congress"), has approved and
hereby commits to provide a secured line of credit of
Eighty Million Dollars ($80,000,000) (the "Credit
Line") to the Company to be used to refinance its
indebtedness to Fleet Capital Corporation and for
ongoing working capital purposes. All advances under
the committed facility shall be secured by valid first
and only liens on all personal property assets of the
Company, including, but not limited to, inventories,
proceeds thereof (excluding accounts receivable sold by
the Company to its special purpose subsidiary,
Gottschalks Credit Receivables Corporation ("GCRC"),
related intangibles of the Company and negative pledge
of the said capital stock of GCRC to be held in an
escrow for the benefit of Congress in a manner
acceptable to Congress.
The Credit Line will include the following general
structure and lending formulas:
1. REVOLVING LINE OF CREDIT
A. Amount: Revolving loans of up to
Eighty Million Dollars ($80,000,000) based upon the
lending formula, and subject to the sublimits and other
terms described herein.
B. Inventory Lending Formula: Loans of
sixty-five percent (65%) of the value of eligible
inventory of the Company, valued at the lower of cost
or market, with cost determined under the retail
method, net of markdowns. An additional five percent
(5%) seasonal advance will be available from September
1 through December 20 of each calendar year during the
term of the Credit Line. An inventory sublimit will be
established to limit advances against eligible domestic
in-transit inventory to Five Million Dollars
($5,000,000). Appraisals satisfactory to us in all
respects shall be conducted on a "going out of business
sale" basis, at your expense, by appraisers acceptable
to us, and shall be net of all markdowns and estimated
liquidation expenses. Eligible inventory will be
determined pursuant to general criteria which will be
set forth in the loan documentation. Generally,
eligible inventory will exclude obsolete, damaged or
defective inventory, inventory held for return to
vendors, UNICAP, all foreign and such domestic in-transit
inventory upon which Congress cannot perfect a
first priority security interest, and those other items
which do not constitute collateral acceptable for
lending purposes pursuant to reasonable and customary
criteria established by us.
2. LETTER OF CREDIT FACILITY
A. Amount: Letters of Credit ("LC's")
arranged through us of up to an aggregate amount at any
time outstanding of Twenty Million Dollars
($20,000,000), included within the overall Credit Line.
B. LC Reserves Against Availability: A
reserve will be required when opening LC's for the
purpose of purchasing eligible inventory. The reserve
will be against revolving loan availability and shall
be equal to the inverse of the applicable inventory
advance rate, multiplied by the cost of the applicable
inventory, plus duty, freight and cost of transport
within the U.S. LCS which are opened for other
purposes approved by us, which approval shall not be
unreasonably withheld will require reserves of one
hundred percent (100%) of the amount of such LCS.
C. Letter of Credit Fee: We shall
receive an LC fee at a rate equal to one percent (1%)
per annum on the daily outstanding balance of the LCS
payable monthly in arrears. All normal, reasonable and
customary applicable bank and opening charges will be
in addition to our fee and charged to your loan
account.
3. FINANCIAL COVENANT
The loan agreement shall contain one financial
covenant--minimum net worth. The dollar amount of the
covenant will be set prior to closing at a mutually
acceptable level and will remain at that level, with no
step-up, for the term of the agreement.
4. INTEREST RATE
The interest rate on loans shall be on-quarter of
one percent (0.25%) per annum above the rate announced
from time to time by CoreStates Bank, N.A. as its
"Prime Rate", or at the Company's option, a rate of two
and one-half percent (2.5%) per annum above the
adjusted Eurodollar rate used by us. The adjusted
Eurodollar rate will be calculated based on the average
of rates of interest per annum at which CoreStates
Bank, N.A. is offered deposits of U.S. dollars in the
London interbank market adjusted by the reserve
percentages prescribed by governmental authorities as
determined by us. Collections shall be credited to the
loan account of the Company on a daily basis, after our
receipt of a wire transfer of federal funds into our
payment account designated for such purpose. If
collections are received after 10:00 a.m. Pacific Time,
collections shall be credited the next day.
Notwithstanding the foregoing, the interest rates
described above will be reduced by one-quarter of one
percent (0.25%) following a fiscal year ending January
31, 1998 or thereafter in which the Company's pretax
income (excluding extraordinary gains and non-cash
losses) exceeds Two Million Dollars ($2,000,000); and
further reduced by an additional one-quarter of one
percent (0.25%) following a consecutive fiscal-year-end
in which the Company's pretax income (excluding
extraordinary gains and non-cash losses) exceeds Two
Million Dollars ($2,000,000).
5. FEES
All fees listed below are in addition to interest
and other fees and charges provided for herein and may,
at our option, be charged directly to any loan account
for the Company maintained with us.
A. Closing Fee: We shall receive a
closing fee of Five Hundred and Ninety Thousand Dollars
($590,000) for providing the credit facility outlined
herein, earned and payable in full at closing. Upon
issuance of this commitment letter, One Hundred Fifty
Thousand Dollars ($150,000) is payable as a non-refundable
commitment fee. This commitment fee shall
be applied to the closing fee when the transaction
closes. We shall pay the early termination fee charged
by Fleet Business Credit, Inc. at funding providing
such early termination fee does not exceed One Hundred
and Ninety Thousand Dollars ($190,000).
B. Loan Servicing and Audit Fee: We
shall receive a loan servicing and audit fee of $4,000
for each month or part thereof during the term of the
arrangements, payable monthly in advance.
C. Early Termination Fee: If the Credit
Line is terminated for any reason prior to March 31,
2000, we shall receive an early termination fee as
follows:
(i) Two percent (2%) of the Credit
Line if terminated on or prior to the first anniversary
of the date of closing;
(ii) One percent (1%) of the Credit
Line if terminated after the first anniversary and on
or prior to the second anniversary of the date of
closing; and
(iii) One-half of one percent (0.5%)
of the Credit Line if terminated after the second
anniversary and prior to the third anniversary of the
date of closing or during any renewal term.
The Early Termination Fee will be reduced
by fifty percent (50%) in the event the Credit Line is
terminated in conjunction with a secondary equity
offering or a sale of a majority of the Company's
common stock or assets to a third party. Additionally,
in the event that all obligations of the Company to us
are refinanced, on or after the first anniversary of
the date of closing, through CoreStates Bank, N.A., we
shall waive the Early Termination Fee.
6. TERM
The Credit Line shall expire on March 31, 2000,
with annual renewals thereafter at mutual option.
7. EXPENSES
A. You agree to pay all reasonable legal
and closing expenses, including attorney's fees (as
previously quoted) and disbursements, filing and search
fees, appraisal fees and field examination expenses and
per diem field examination charges, whether or not this
transaction closes. We charge $600 per person per day
for our field examiners in the filed and in the office,
including travel and hotel expenses (not to exceed
$15,000). All such expenses shall be paid to us upon
demand, together with such advance funds on account of
such expenses anc charges as we may from time to time
request. This paragraph shall survive the expiration
or termination of this letter.
B. If this transaction closes, you
further agree to pay all of our customary and
reasonable out-of-pocket third party expenses incurred
from time to time during the course of our financing
arrangements.
8. DEPOSITS
We acknowledge that you have previously deposited
with us $50,000 against our expenses.
9. OTHER INFORMATION AND CONDITIONS
Our commitment is expressly subject to review of
certain other information and a satisfactory completion
of our field examinations. Our commitment is also
contingent upon a closing taking place within forty-five (45)
days after the date hereof, after which time
this commitment shall terminate. This commitment is
not assignable or transferable and is to be relied upon
only by the Company.
In addition, subject to such conditions as may be
established by us, we would anticipate that the closing
of the Credit Line will be subject to the satisfaction,
in a manner acceptable to us, of the following:
A. The Company continuing to furnish us
with all financial information, projections, budgets,
business plans, cash flows and such other information
as we reasonably request from time to time. We shall
have received current perpetual inventory records
and/or roll forwards of inventory through the date of
closing, together with supporting documentation, and
other documents and information that will enable us to
accurately identify and verify the eligible collateral
at or before closing in a manner satisfactory to us.
B. Satisfactory legal review of the
proposed transactions including but not limited to the
structure for the sale of accounts from the Company to
its special purpose subsidiary, and loan structure by
our counsel and execution of loan documents, all in
form and substance satisfactory to us, including, but
not limited to, a loan agreement, security agreements,
a negative pledge of GCRC's capital stock to be held in
escrow for the benefit of Congress, collateral
assignments, landlord waivers, blocked account
agreements, agreements with credit card companies and
UCC financing statements. Such loan documents will
contain such provisions, representations, warranties,
conditions, covenants and events of default as are
satisfactory to us and our counsel.
C. The excess availability under the
lending formulas provided for above, subject to
reserves, shall be not less than $10,000,000 at the
closing, after the payment of fees and expenses of the
transaction and the application of the proceeds of the
initial loans, and provided the accounts payable of the
Company are then at a level and in a condition
reasonably acceptable to us.
D. As or prior to closing, you shall
deliver to us evidence of insurance coverage with
respect to our collateral, satisfactory to us as to
amount, form, substance and carrier, including, without
limitation, lender's loss payee endorsements in our
favor as to casualty and business interruption
insurance, and containing any endorsements, assurances
or affirmative coverage requests by us for protection
of our interests, all which shall be, in form and
substance, acceptable to us.
E. No material adverse change in the
business, operations, profits or prospects of the
Company or in the condition of the assets of the
Company shall have occurred since the date of our
latest field examinations.
F. On an ongoing basis, the Company
shall provide us, at its sole cost and expense, with
inventory appraisals, from Gordon Brothers Partners,
Inc. or from another appraisal firm acceptable to us,
at least annually, or more frequently, at our request,
after the occurrence and during the continuance of an
Event of Default under the Loan Agreement.
Unless accepted by you and so accepted, received by us
by the close of business in Los Angeles on December 5,
1996, this commitment shall not be effective.
This letter is directed solely to the Company and shall
not be assigned to any other party. The Company may
disclose this letter to its agents, employees,
advisors, attorneys, accountants, the courts, and other
parties (except financial institutions) who may be
participating in the transactions described in this
letter. No party, other than Company, shall have any
rights or benefits under this letter. The Company
shall indemnify, defend and hold Congress harmless for
any breach of any warranty, covenant or undertaking by
the Company, as well as for claims of any third
parties, and expenses related thereto, relating to this
letter and the transactions described herein.
By signing and approving this letter, you acknowledge
that Congress has made no agreement or commitment to
the Company to lend money or to extend credit except as
expressly set forth in this letter and has made no
agreement or commitment with the Company to modify or
consider any modification of the terms of this letter.
This letter shall replace and supersede any and all
discussions and written communications by Congress
concerning the Credit Line. No modification of this
letter shall be binding upon or enforceable against
Congress without the prior written approval thereto by
Congress.
THIS LETTER SHALL BE GOVERNED BY AND INTERPRETED BY THE
LAWS OF THE STATE OF CALIFORNIA GOVERNING CONTRACTS TO
BE WHOLLY PERFORMED IN SUCH STATE. THE COMPANY AND
CONGRESS EACH HEREBY EXPRESSLY WAIVE ANY RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY DISPUTE OR CONTROVERSY
CONCERNING THIS LETTER OR THE TRANSACTIONS DESCRIBED
HEREIN. IN ANY DISPUTE BETWEEN THE PARTIES TO THIS
LETTER OR THE TRANSACTIONS DESCRIBED HEREIN, THE
PREVAILING PARTY SHALL BE ENTITLED TO ALL COSTS AND
ATTORNEY'S FEES INCURRED IN CONNECTION WITH SUCH
DISPUTE.
We look forward to continuing to work with you and your
associates on this transaction.
Very truly yours,
CONGRESS FINANCIAL CORPORATION (WESTERN)
By: /s/ Donald A. McLeod
Senior Vice President
AGREED AND ACCEPTED ON THIS 5th DAY OF DECEMBER, 1996:
GOTTSCHALKS INC.
By: /s/ Alan Weinstein
Senior Vice President/Chief Financial Officer
