SF\Gottschalks Inc.\Note\071800
6
Loan No.: 1910059-0004
PROMISSORY NOTE
$10,000,000.00 July 24, 2000
FOR VALUE RECEIVED, GOTTSCHALKS INC., a
Delaware corporation ( "Maker"), promises to
pay to the order of HELLER FINANCIAL LEASING,
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
$10,000,000.00, together with interest thereon
at a rate per annum equal to the Base Rate
(hereafter defined), plus three percent (3%),
payable in thirty-six (36) consecutive monthly
installments of principal plus interest
commencing September 1, 2000, and continuing
on the same day of each consecutive calendar
month thereafter until this Note is fully
paid. The first thirty-five (35) such monthly
installments shall each be in the principal
amount of $277,777.78, plus accrued interest,
and the final monthly installment shall be in
the amount of the entire then outstanding
principal balance hereunder, plus all accrued
and unpaid interest, charges and other amounts
owing hereunder or under the Security
Agreement (defined below). All payments shall
be applied first to interest and then to
principal. Interest shall be computed on the
basis of a 360-day year and charged for the
actual number of days elapsed. Maker shall
make an interest only initial payment on
August 1, 2000, of all accrued interest from
the date of this Note through July 31, 2000.
"Base Rate" means, for each 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 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 business days
(not counting Saturdays) prior to the first
day of each calendar month; provided that if
at least two 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 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 month interest
period by Bankers Trust Company and Chase
Bank, N. A. (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 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 or, if there is
no nearest one sixteenth of one percent, to
the next higher one sixteenth of one percent
).
For the initial funding month (or any
fraction thereof) under this Note, the
interest rate hereunder shall be the Base Rate
in effect on the day of funding, plus three
percent (3%).
It is the intent of the parties to comply
strictly with applicable usury laws.
Notwithstanding anything herein to the
contrary, in no event shall interest
contracted for, taken, charged, reserved or
received hereunder ever exceed the highest non-
usurious interest permitted under applicable
law and if any such excess interest is taken,
received or collected, then such excess shall
be deemed the result of a mathematical error
and shall be applied as a reduction of
principal and any remainder refunded to the
Maker.
This Note is secured by the collateral
described in the Security Agreement dated July
24, 2000, between Maker and Payee (the
"Security Agreement"), the collateral
described in the Security Agreement dated
December 16, 1994, between Maker and Payee
(the "Hanford Security Agreement"), the
collateral described in the Security Agreement
dated September 30, 1996, between Maker and
Payee (the "SLO Security Agreement"), the
collateral described in the Deed of Trust,
Security Agreement, Assignment of Leases and
Rents and Fixture Filing recorded on December
16, 1994 in the Official Records of Kings
County, California, as Instrument No. 9424303
(the "Hanford Deed of Trust") and the
collateral described in Deed of Trust,
Security Agreement, Assignment of Leases and
Rents and Fixture Filing recorded on October
1, 1996, in the Official Records of San Luis
Obispo County, California, as Instrument No.
1996-049244 and amended by that certain
Amendment to Deed of Trust recorded July 30,
1999 in the Official Records of San Luis
Obispo County, California, as Instrument No.
1999-055875 (the "SLO Deed of Trust;" and
together with the Security Agreement, the
Hanford Security Agreement, the SLO Security
Agreement, the Hanford Deed of Trust and 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.
Maker may not prepay all or any part of
principal outstanding under this Note prior to
its stated maturity except strictly in
accordance with the terms of Section 3 of the
Security Agreement.
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
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 then
otherwise applicable interest rate hereunder.
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.
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 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 PAYEE HAS ALREADY RELIED ON
THE WAIVER IN MAKING THE LOAN EVIDENCED BY
THIS NOTE, AND THAT PAYEE 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/ Michael Geele
/s/ Warren Williams, Secretary
Name: Michael Geele
Title: Senior Vice President/Chief
Financial Officer
