Exhibit 10.1
CONSENT AND FIRST AMENDMENT TO
NON-NEGOTIABLE, SUBORDINATED NOTE
DUE MAY 30, 2010
____________________________
Fresno, California
November 20, 2008
This First Amendment to the
Non-Negotiable, Subordinated Note Due May 30, 2010, dated as
of November 20, 2008 (this " Amendment "), is entered into
by and between Gottschalks Inc. , a Delaware corporation ("
Debtor "), and The Harris Company , a California
corporation (" Creditor ").
RECITALS
WHEREAS
, Creditor is the owner and holder
of that certain Non-Negotiable, Subordinated Note with a Maturity
Date of May 30, 2009, dated as of December 7, 2004 and
executed by Debtor, in the original principal amount of Twenty Two
Million One Hundred Seventy-Nine Thousand Five Hundred Ninety-Eight
Dollars ($22,179,598.00), as modified by that certain Allonge to
the Non-Negotiable, Subordinated Note Due May 30, 2009, dated
as of July 25, 2008, which modified, among other things, the
outstanding principal amount, as of the date thereof, to Sixteen
Million One Hundred Seventy-Nine Thousand Five Hundred Ninety-Eight
Dollars ($16,719,598.00) and extended the Maturity Date to May 30,
2010 (as it may be further amended, supplemented, restated or
otherwise modified, the " Note "). Capitalized terms used
herein and not otherwise defined shall have the meanings assigned
to such terms in the Note.
WHEREAS
, Debtor entered into that certain
Investment Agreement with Everbright Development Overseas
Securities Ltd. d/b/a Everbright Development Overseas, Ltd., a
British Virgin Islands corporation (" Investor "), dated as
of November 20, 2008 (as it may be amended, supplemented, restated
or otherwise modified, the " Investment Agreement "),
whereby the Investor has agreed, among other things, to purchase
certain shares of common stock and other equity interests in the
Debtor in exchange for, among other things, the transfer of all of
the equity of Everbright Asia Limited, a British Virgin Islands
corporation (" Everbright Asia "), to Debtor and to enter
into a Capital Call Agreement (as it may be amended, supplemented,
restated or otherwise modified, the " Capital Call Agreement
") pursuant to which Investor may lend Debtor amounts from time
(such transactions collectively referred to herein as the "
Everbright Transactions ").
WHEREAS
, Debtor is entering into that
certain Amendment No. 2 to Second Amended and Restated Credit
Agreement (the " Second Amendment ") dated as of November
20, 2008 with General Electric Capital Corporation (" GECC
"), as Agent for the Lenders, The CIT Group/Business Credit, Inc.
and the other Lenders party thereto, pursuant to which, among other
things, GECC and the Lenders are consenting to the Everbright
Transactions and requiring that Creditor enter into that certain
Subordination Agreement (the " Subordination Agreement ")
dated as of November 20, 2008 with Debtor and GECC.
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WHEREAS
, in connection with the Everbright
Transactions, Debtor has requested that Creditor and Creditor
desires to (a) permit and consent to the Everbright Transactions
(b) require that Everbright Asia deliver a Subordinated Guaranty to
the Note upon consummation of the Everbright Transactions in the
form of Exhibit A annexed hereto (the " Everbright Asia
Guaranty ") and (b) amend the Note to make certain amendments
as set forth below.
NOW, THEREFORE,
in consideration of the premises and
the agreements, provisions and covenants herein contained, and for
other good and valuable consideration, the receipt and adequacy of
which are hereby conclusively acknowledged, the parties hereto
agree as follows:
Section 1.
Consent and Delivery of Everbright Asia Guaranty
.
-
Creditor hereby consents to the
Everbright Transactions and acknowledges and agrees that (i) no
Change of Control or Event of Default or Potential Event of Default
under the Note shall occur or be deemed to occur as a result of the
consummation of the Everbright Transactions, (ii) all debt incurred
pursuant to the Everbright Transactions will be permitted under the
Note and will not be required to be subordinated to the Note
pursuant to Section 9 thereof or otherwise and (iii) the Note and
Everbright Asia Guaranty shall be subject to the Subordination
Agreement.
-
Upon the closing contemplated by
Article VI of the Investment Agreement, Debtor shall cause
Everbright Asia to enter into the Everbright Asia Guaranty; it
being understood that the failure of Everbright Asia to enter into
the Everbright Asia Guaranty, as provided in this Section, shall
constitute an Event of Default under the Note.
Section 2.
Amendments
-
The Note shall be amended by adding
the following legend thereto:
"This
instrument and the rights and obligations evidenced hereby are
subordinate in the manner and to the extent set forth in that
certain Subordination Agreement (the " Subordination
Agreement ") dated as of November 20, 2008 among The Harris
Company (" Creditor "), Gottschalks Inc. (" Debtor
"), and General Electric Capital Corporation (" Agent "), to
the indebtedness (including interest) owed by the Debtor pursuant
to that certain Second Amended and Restated Credit Agreement dated
as of September 26, 2007 among the Debtor, Agent and the lenders
from time to time party thereto, as such agreement has been and
hereafter may be further amended, supplemented or otherwise
modified from time to time and to indebtedness refinancing the
indebtedness under that agreement as contemplated by the
Subordination Agreement; and each holder of this instrument, by its
acceptance hereof, irrevocably agrees to be bound by the provisions
of the Subordination Agreement."
-
Section 5 of the Note shall be
amended by amending and restating said section in its entirety as
follows:
" 5.
Prepayment of Principal Amount . Debtor shall have the
right, at any time, to prepay the Principal Amount in whole or in
part, without penalty or
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premium, subject to the restrictions under the
Credit Agreement and the Subordination Agreement."
Section 3.
Condition to Effectiveness . Section 1 and 2 of this Amendment shall only
become effective upon (a) the execution of this Amendment by each
of the Debtor and Creditor, (b) the execution and delivery of the
Second Amendment and (c) the execution and delivery of the
Subordination Agreement.
Section 4.
Effect on the Note . Except as specifically amended by this
Amendment, the Note shall remain in full force and effect and is
hereby ratified and confirmed in all respects. Nothing herein is
intended to nor shall constitute a novation of the Note or the
obligations evidenced thereby, which (as amended, supplemented,
restated or modified) on the date hereof shall remain in full force
and effect, but shall be governed under the terms and conditions of
the Note as modified by this Amendment.
Section 5.
Counterparties .
This Amendment may be executed in any number of counterparts. All
counterparts shall collectively constitute a single
agreement.
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blank. ]
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IN WITNESS WHEREOF, the parties
have caused this Amendment to be executed and delivered by its duly
authorized officers, as of the day and year and the place first
written above.
GOTTSCHALKS INC.
By:
/s/ James R. Famalette
James R. Famalette
President and CEO
THE
HARRIS COMPANY
By:
/s/ Jorge Pont
Jorge Pont
President and CEO
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Exhibit A
EXHIBIT A
EVERBRIGHT ASIA SUBORDINATED GUARANTY OF ECI
NOTE
In order to induce The Harris
Company, a California corporation (" Creditor ") to maintain
credit to Gottschalks Inc., a Delaware corporation (" Debtor
") pursuant to the Non-Negotiable Subordinated Note Due May 30,
2009 issued by Debtor in favor of Creditor (as amended,
supplemented, restated or otherwise modified from time to time, the
" ECI Note "; terms defined therein and not otherwise
defined herein being used herein as therein defined) and in
consideration of, among other things, Creditor's waiver of its
right to accelerate the maturity of the ECI Note as a result of
certain transactions entered into among Debtor and affiliates of
Guarantor, the undersigned (" Guarantor ") hereby
irrevocably and unconditionally guaranties, as primary obligor and
not merely as surety, the due and punctual payment in full of all
Obligations (as hereinafter defined) when the same shall become
due, whether at stated maturity, by acceleration, demand or
otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. § 362(a)). The term "
Obligations " is used herein in its most comprehensive sense
and includes any and all obligations of Debtor now or hereafter
made, incurred or created, whether absolute or contingent,
liquidated or unliquidated, whether due or not due, and however
arising under or in connection with the ECI Note.
Guarantor acknowledges that the
Obligations have been incurred for and will inure to the benefit of
Guarantor.
In the event that all or any
portion of the Obligations is paid by Debtor, the obligations of
Guarantor hereunder shall continue and remain in full force and
effect or be reinstated, as the case may be, in the event that all
or any part of such payment(s) is rescinded or recovered directly
or indirectly from Creditor as a preference, fraudulent transfer or
otherwise, and any such payments that are so rescinded or recovered
shall constitute Obligations.
Upon the failure of Debtor to pay
any of the Obligations when and as the same shall become due,
Guarantor will upon demand pay, or cause to be paid, in cash, to
Creditor an amount equal to the aggregate of the unpaid
Obligations.
Guarantor agrees that its
obligations hereunder are irrevocable, absolute, independent and
unconditional and shall not be affected by any circumstance which
constitutes a legal or equitable discharge of a guarantor or surety
other than payment in full of the Obligations. In furtherance of
the foregoing and without limiting the generality thereof,
Guarantor agrees as follows: (a) this Guaranty is a guaranty
of payment when due and not of collectibility; (b) Creditor
may enforce this Guaranty upon the occurrence of an Event of
Default under the ECI Note notwithstanding the existence of any
dispute between Debtor and Creditor with respect to the existence
of such event; (c) the obligations of Guarantor hereunder are
independent of the obligati
