PURCHASE AND SALE AGREEMENT

AMONG

GOTTSCHALKS CREDIT RECEIVABLES CORPORATION,

GOTTSCHALKS INC.

AND

HOUSEHOLD BANK (SB), N.A.

Dated as of January 30, 2003

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TABLE OF CONTENTS

ARTICLE 1 1

ARTICLE 2 PURCHASE OF ACCOUNT PORTFOLIO ASSETS 7

Section 2.1 Purchase 7

Section 2.2 Preliminary Information 8

Section 2.3 Purchase Price 8

Section 2.4 Escrow Contribution 9

ARTICLE 3 THE CLOSING AND POST-CLOSING ADJUSTMENTS 9

Section 3.1 Place and Date of Closings 9

Section 3.2 Buyer's Deliveries at Closings. 9

Section 3.3 Sellers' Deliveries at Closings 10

Section 3.4 Final Closing Statement 11

ARTICLE 4 REPRESENTATIONS AND WARRANTIES 13

Section 4.1 General Representations and Warranties of Gottschalks 13

Section 4.2 General Representations and Warranties of GCRC 14

Section 4.3 Representations and Warranties of Gottschalks Regarding the Accounts
and the Indebtedness 15

Section 4.4 Representations and Warranties of GCRC Regarding the Indebtedness 17

Section 4.5 General Representations and Warranties of Buyer 19

ARTICLE 5 CONDITIONS PRECEDENT 20

Section 5.1 Conditions to Obligations of Buyer 20

Section 5.2 Conditions to Obligations of Sellers 21

ARTICLE 6 AGREEMENTS AND COVENANTS 22

Section 6.1 [INTENTIONALLY OMITTED] 22

Section 6.2 No Sale of Assets 22

Section 6.3 Tax on Sale 22

Section 6.4 Public Announcements 22

Section 6.5 Confidentiality 23

Section 6.6 Conversion of Accounts 24

Section 6.7 Credit Bureau Reporting 25

Section 6.8 Further Assistance 25

Section 6.9 Securitization 25

Section 6.10 Cross-Reference File 25

Section 6.11 Bulk Sales Laws 25

Section 6.12 UCC Financing Statements 25

ARTICLE 7 INDEMNIFICATION 26

Section 7.1 Indemnification by Sellers 26

Section 7.2 Indemnification by Buyer 26

Section 7.3 Procedures 27

Section 7.4 Limitations on Indemnification 28

Section 7.5 Survival 28

ARTICLE 8 TERMINATION 29

Section 8.1 Grounds for Termination 29

ARTICLE 9 MISCELLANEOUS 29

Section 9.1 Waiver 29

Section 9.2 No Joint Venture 29

Section 9.3 Payment Terms 30

Section 9.4 Entire Agreement 30

Section 9.5 Notices 30

Section 9.6 Amendment; Modification 31

Section 9.7 Governing Law; Waiver of Jury Trial 31

Section 9.8 Dispute Resolution 31

Section 9.9 Severability 33

Section 9.10 Assignment 33

Section 9.11 Accounting Terms 33

Section 9.12 Singular and Plural 33

Section 9.13 Headings 33

Section 9.14 Expenses 33

Section 9.15 Counterparts 34

PURCHASE AND SALE AGREEMENT

This Purchase and Sale Agreement is made and entered into as of the 30th day of
January, 2003 by and among Gottschalks Inc., a Delaware corporation
("Gottschalks"), with its principal place of business at 7 River Park Place
East, Fresno, California 93720, Gottschalks Credit Receivables Corporation, a
Delaware corporation ("GCRC", together with Gottschalks, "Sellers"), with its
principal place of business at 7 River Park Place East, Fresno, California
93720, and Household Bank (SB), N.A., a national banking association ("Buyer" or
"Household"), with its principal place of business at 1111 Town Center Drive,
Las Vegas, NV 89144.

WITNESSETH

WHEREAS, Gottschalks currently operates department and specialty stores and
establishes credit card accounts and extends credit to individuals for the
purchase of Gottschalks' goods and services;

WHEREAS, on March 1, 1999, Gottschalks entered into an agreement with GCRC
pursuant to which it sold and continues to sell on an ongoing basis the
receivables that arise from the sale of goods and services to Gottschalks'
revolving credit card accountholders and which are associated with the portfolio
of credit card accounts;

WHEREAS, Sellers desire to sell on each Closing Date the portfolio of credit
card accounts, accounts receivable and related assets; and

WHEREAS, Buyer desires to purchase from Sellers on each Closing Date accounts,
accounts receivable and related assets with respect to the revolving credit
program established by Gottschalks on the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises, the mutual agreements set
forth herein, the benefits to be derived herefrom, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

ARTICLE 1

Definition of Terms Used in the Agreement.

The following terms shall have the following meanings when used in this
Agreement:

"Account" means (a) each private label credit card account, Indebtedness, and
any related contract right, chose in action, general intangible, chattel paper,
instrument, document, note, and proceeds thereof, wherever located, whether now
owned or hereafter acquired by any Seller, (b) all Account Documentation
evidencing the same, (c) any and all rights and remedies as to
stoppage-in-transit, reclamation, return and repossession of Merchandise and
Cross-Marketing Merchandise financed pursuant thereto, and (d) all rights as to
any Merchandise, Cross-Marketing Merchandise, goods or other property, contracts
of indemnity, guaranties or sureties, proceeds of insurance and other proceeds
at any time standing as security therefor, in each of (a) - (d) solely arising
out of Credit Card Agreements; provided, that "Account" shall not include any
Account as of the applicable Cut-Off Time, (i) that is greater than 180 days
contractually delinquent, (ii) as to which any Seller has charged off the
balance or any portion thereof, (iii) that is a Bankruptcy Account, (iv) as to
which any Seller has executed a reaffirmation agreement with an Account Debtor
who filed a petition under the Bankruptcy Code, (v) as to which the Account
Debtor is deceased, (vi) as to which any Seller has notice of actual or possible
fraud from the Account Debtor, (vii) that is a Lost or Stolen Account, (viii)
that is a gift card account, (ix) that is a debit card account, (x) that is
subject to any pending litigation, or (xi) as to which any Seller has violated
any representation or warranty set forth in Sections 4.3(e) and 4.4(e) hereof.

"Account Debtor" means any Person who is or who may become obligated pursuant to
an Account and whose Account has not been purged from Gottschalks' or Buyer's
systems.

"Account Documentation" means any and all documentation relating solely to a
Current Account or Subsequent Account, as the case may be, to the extent such
documentation is in any Seller's possession or control as of the Cut-Off Time,
including, without limitation, applications for such Accounts, Credit Card
Agreements, sales orders, billing statements, memoranda and all correspondence,
magnetic tapes, disks, or hardcopy formats, and all other written material
relating solely to such Account.

"Account Portfolio Assets" means all of the following: (i) the Current Accounts
or Subsequent Accounts, as the case may be, and (ii) the Customer Structure;
provided, however, that the Account Portfolio Assets shall not include the
Bankers Trust Company account numbered 1419647, collection account no. 11873,
and any payments contained in such collection account.

"Accrued Interest" means interest which has accrued on a Current Account but has
not yet been billed to the Account Debtor through the Initial Closing Date and
calculated in accordance with the methodology set forth in Exhibit B.

"Affiliate" means, with respect to any Person, any entity that controls, is
controlled by, or is under common control with such Person. For the purpose of
this definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract, or
otherwise.

"Agreement" means this Purchase and Sale Agreement, including all addenda,
exhibits, and schedules hereto.

"Agreement Confidential Information" has the meaning assigned to it in Section
6.5(a).

"Assumption Agreement" means the agreement to be executed by Buyer and the
Sellers and delivered on the Initial Closing Date pursuant to Sections 3.2(a)
and 3.3(a) of this Agreement in substantially the form of Exhibit C and shall be
applicable to Accounts transferred on the Initial Closing Date and each Closing
Date thereafter.

"Bankruptcy Account" means an account as to which the Account Debtor is a
Bankrupt Account Debtor provided that (A) the Bankrupt Account Debtor's
bankruptcy case was filed on or prior to the Initial Closing Date, or (B) a
Seller or Buyer determines within the period designated in Section 3.4 that such
Account Debtor became a Bankrupt Account Debtor prior to the applicable Closing
Date based upon a reliable data base.

"Bankrupt Account Debtor" means an Account Debtor who (i) has filed for
bankruptcy under the Bankruptcy Code on or prior to the Initial Closing Date and
whose bankruptcy case has not been closed or dismissed and (ii) opened the
subject Account prior to the commencement of such bankruptcy case.

"Bankruptcy Code" means the provisions of Title 11 of the United States Code, 11
U.S.C.  101 et seq.

"Bill of Sale" means the agreement to be executed by Buyer and the Sellers and
delivered on the Initial Closing Date pursuant to Sections 3.2(a) and 3.3(a) of
this Agreement in substantially the form of Exhibit D and shall be applicable to
Accounts transferred on the Initial Closing Date and each Closing Date
thereafter.

"Business Day" means any day that is not a Saturday, a Sunday, or a day on which
banks are required or permitted to be closed in the State of Nevada.

"Buyer Confidential Information" has the meaning assigned to it in Section
6.5(a).

"Buyer Indemnified Parties" has the meaning assigned to it in Section 7.1.

"Closing" means the transfer, from time to time, of the Account Portfolio Assets
from the Sellers or Gottschalks, as the case may be, to Buyer in exchange for
payment of the Purchase Price upon satisfaction or written waiver of the
conditions precedent by the appropriate Party as set forth in this Agreement.

"Closing Date" means each date on which a Closing takes place if all conditions
precedent to such Closing have been met, satisfied or waived, which initial date
shall be the Initial Closing Date and thereafter shall be the second Business
Day after which a Subsequent Account is opened.

"Closing Tape" means an electronic tape or tapes of the Accounts to be
transferred as of each Cut-Off Time, which tape or tapes shall be delivered to
Buyer on the Business Day immediately after the Initial Closing Date and on each
subsequent calendar month-end through and including the Conversion Date, and
shall include at least the following information for each Account identified on
such Closing Tape: Account number; Account Debtor's name and address;
origination date; billed interest; billed fees; credit limit; and aggregated
outstanding Indebtedness.

"Code" has the meaning assigned to it in Section 2.3(c).

"Confidential Information" has the meaning assigned to it in Section 6.5(a).

"Conversion Date" has the meaning assigned to it in the Servicing Agreement.

"Credit Card Agreement" means the credit agreement between an Account Debtor and
Gottschalks pursuant to which an Account Debtor may be permitted to purchase,
from time to time, Merchandise on credit.

"Cross-Marketing Merchandise" means those goods and services, including
accessories, extended warranties and delivery services, sold in connection
therewith, by any Person other than Gottschalks in connection with the Program.

"Cross-Reference File" means a file regarding Gottschalks' retained portfolio
account number listing provided by Gottschalks to Buyer as provided in Section
6.10.

"Current Account" means each Account issued by Gottschalks on or prior to the
Initial Closing Date and in existence on the Initial Closing Date.

"Customer Structure" means, as to the Current Accounts or Subsequent Accounts,
as the case may be, all Credit Card Agreements, and all rights and privileges
accruing under such Credit Card Agreements on and after the Cut-Off Time; all
Indebtedness posted to such Accounts after the Cut-Off Time, and fees and
revenues of such Accounts related to such Indebtedness which are earned after
the Cut-Off Time; any and all rights to process such Accounts; and all Account
Debtor records including (i) all lists and compilations in whatever form of such
Accounts, the Account Debtors, and the Credit Card Agreements, and (ii) the
Account Documentation.

"Cut-Off Time" means (i) for sales of Merchandise, Merchandise returns, in-store
payments and miscellaneous adjustments, the close of Gottschalks' business on
the second Business Day before each Closing Date, and (ii) for lockbox payments,
the close of Gottschalks' business on the first Business Day before each Closing
Date.

"Escrow Account" shall have the meaning assigned to it in Section 2.4.

"Escrow Agent" shall have the meaning assigned to it in Section 2.4.

"Escrow Agreement" means the escrow agreement, dated as of the date hereof,
among Gottschalks, GCRC, Buyer and the Escrow Agent.

"Estimated Initial Purchase Price" has the meaning assigned to it in Section
2.3(a)(iii).

"Estimated Subsequent Purchase Price" has the meaning assigned to it in Section
2.3(b).

"Federal Funds Interest Rate" means the average of the high and low "Federal
Funds" interest rates for the Business Day immediately preceding the Final
Settlement Date, as such rate is reported on the Final Settlement Date in the
Money Rates Column of The Wall Street Journal or as determined in such other
mutually acceptable manner as the Parties agree if The Wall Street Journal is no
longer reporting such rate.

"Final Closing Statement" means the final closing statement described in Section
3.4, satisfactory in form and substance to the Parties, which closing statement
sets forth the Purchase Price and which reflects all adjustments from the
Preliminary Closing Statement and each Subsequent Closing Statement as are
agreed to by the Parties with respect to the Current Accounts and Subsequent
Accounts for each Closing Date.

"Final Settlement Date" shall have the meaning assigned to it in Section 3.4(a).

"GLBA Privacy Law" means 16 USC 6801-6827, as amended, and the regulations of
the applicable Federal banking agency or the Federal Trade Commission
thereunder.

"Gottschalks' Revolving Credit Business" means Seller's business with respect to
the Account Portfolio Assets.

"Indebtedness" means any account receivable or any other obligation incurred by
an Account Debtor in respect of a Current Account or Subsequent Account, as the
case may be, including, without limitation, any charges for Merchandise and
Cross-Marketing Merchandise, sales tax, and all finance charges, late charges,
and other similar charges and fees added to such Account, as such charges are
billed pursuant to Sellers' accounting practices and net of any credit balances,
returns and payments.

"Indemnified Party" shall have the meaning assigned to it in Section 7.3(a).

"Indemnifying Party" shall have the meaning assigned to it in Section 7.3(a).

"Initial Closing Date" means January 31, 2003 or such other date mutually agreed
to by the parties.

"Initial Purchase Price" means the amount to be paid by Buyer to the Sellers on
the Initial Closing Date pursuant to Section 2.3(a).

"Lost or Stolen Account" means an account as to which the related credit card or
account number has been reported to Gottschalks as lost or stolen.

"Master Trust Agreement" means the Pooling and Servicing Agreement dated as of
March 1, 1999 by and among GCRC, as depositor, Gottschalks, as servicer, and
Bankers Trust Company, as trustee, as amended and supplemented to the date
hereof.

"Merchandise" means department store merchandise offered by Gottschalks,
including without limitation, apparel, cosmetics, shoes, jewelry, china, small
electrics, housewares, furniture and other related products and services sold by
Gottschalks in the ordinary course of Gottschalks' business.

"Party" means (i) when used in the singular, Buyer or any Seller, as the context
requires; and (ii) when used in the plural, Buyer and Sellers.

"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity, or government (whether federal,
state, county, city, municipal, or otherwise, including, without limitation, any
instrumentality, division, agency, body, or department thereof).

"Preliminary Closing Statement" means a draft closing statement that is prepared
by Gottschalks and presented to Buyer pursuant to Section 2.2(a).

"Prepaid Program Fee" has the meaning assigned to it in Section 2.3.

"Program" means the revolving credit program established by Gottschalks.

"Program Agreement" means the Credit Card Program Agreement, dated the date
hereof, between Buyer and Gottschalks and delivered pursuant to Sections 3.2(a)
and 3.3(a) of this Agreement.

"Purchase Price" means, subject to Section 3.4, in the aggregate, the Initial
Purchase Price and the Subsequent Purchase Price.

"Related Documents" means the Servicing Agreement, the Program Agreement and all
other documents contemplated by this Agreement by the Parties.

"Residual Amount" means the Estimated Initial Purchase Price minus the
Securitization Amount.

"Securitization Amount" means the amount to be paid by the Escrow Agent to the
trustee under the Master Trust Agreement in full satisfaction of all amounts
owed, and in cancellation of, the securities under the Securitization Trust,

"Securitization Creation Documents" means, collectively, (i) the Pooling and
Servicing Agreement, dated as of March 1, 1999, among GCRC, as depositor,
Gottschalks, as servicer, and Deutsche Bank Trust Company Americas, as trustee
(the "Trustee"), as amended (the "Pooling and Servicing Agreement"), (ii) the
Series 1999-1 Supplement to the Pooling and Servicing Agreement, dated March 1,
1999, among Gottschalks, GCRC and the Trustee (the "1999-1 Supplement"), (iii)
the Series 2000-1 Supplement to the Pooling and Servicing Agreement, dated as of
November 16, 2000, among Gottschalks, GCRC and the Trustee, as amended (the
"2000-1 Supplement"), (iv) Amendment No. 1 to the Pooling and Servicing
Agreement and the Series 1999-1 Supplement, dated as of November 16, 2000, among
GCRC, Gottschalks and the Trustee, (iv) the Amended and Restated Series 2000-1
Supplement to the Pooling and Servicing Agreement, dated as of November 15,
2001, among GCRC, Gottschalks, and the Trustee, as amended, and (v) the Amended
and Restated Receivables Purchase Agreement, dated March 1, 1999, between
Gottschalks and GCRC, as amended.

"Securitization Prepayment Documents" means, collectively, the documents listed
as items 6-27 of Schedule II to the Escrow Agreement.

"Securitization Trust" means the Gottschalks Credit Card Master Trust, formed
pursuant to the Master Trust Agreement.

"Seller" has the meaning assigned to it in the introductory paragraph.

"Seller Indemnified Parties" has the meaning assigned to it in Section 7.2.

"Servicing Agreement" means the Interim Servicing Agreement, dated the date
hereof, between Buyer and Gottschalks and delivered pursuant to Sections 3.2(a)
and 3.3(a) of this Agreement.

"Subsequent Account" means each Account issued by Gottschalks after the Initial
Closing Date and on or prior to the Conversion Date.

"Subsequent Closing Statements" means, collectively, the draft closing
statements that are prepared by Gottschalks and presented to Buyer pursuant to
Section 2.2(b).

"Subsequent Purchase Price" means the amount to be paid by Buyer to Gottschalks
on each Closing Date after the Initial Closing Date pursuant to Section 2.3(b).

"Taxes" means any federal, state, local, or foreign net income, gross income,
gross receipts, windfall profit, severance, property, production, sales, use,
license, excise, franchise, employment, payroll, withholding, alternative or
add-on minimum, ad valorem, value added, transfer, stamp, or environmental tax,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty, addition
to tax or additional amount imposed by any governmental authority.

"Trust Securities" means, collectively, the securities represented by the
certificates listed on Schedule III of the Escrow Agreement.

"UCC Statements" means, collectively, the UCC statements listed as items 21-23
of Schedule II of the Escrow Agreement.

ARTICLE 2

PURCHASE OF ACCOUNT PORTFOLIO ASSETS

Section 2.1    Purchase.

On the Initial Closing Date, effective as of the Cut-Off Time, and subject to
the terms and conditions of this Agreement, each Seller shall sell, assign, and
transfer to Buyer, and Buyer shall purchase from each Seller for the Initial
Purchase Price, each Seller's entire right, title, and interest in the Account
Portfolio Assets as of the Cut-Off Time. On each Closing Date after the Initial
Closing Date, effective as of the respective Cut-Off Time, and subject to the
terms and conditions of this Agreement, Gottschalks shall sell, assign and
transfer to Buyer, and Buyer shall purchase from Gottschalks for the applicable
Subsequent Purchase Price, Gottschalks' entire right, title and interest in the
Account Portfolio Assets owned by Gottschalks as of the Cut-Off Time. Subject to
the terms herein, commencing on the initial Cut-Off Time and continuing
thereafter, Buyer shall assume the obligations of each Seller, and each Seller
shall assign its rights to Buyer, under the terms of such Seller's Account
Documentation.

Section 2.2    Preliminary Information.

On the Initial Closing Date, Gottschalks shall deliver to Buyer a Preliminary
Closing Statement that shall calculate the Initial Purchase Price for the
Account Portfolio Assets being transferred on the Initial Closing Date, which
Preliminary Closing Statement shall be based on the best information available
to Gottschalks as of the Cut-Off Time. On the fifteenth day and last day of each
calendar month after the Initial Closing Date, Gottschalks shall deliver to
Buyer a Subsequent Closing Statement that shall calculate the Subsequent
Purchase Price for the Account Portfolio Assets being transferred on each
Closing Date after the Initial Closing Date for the prior semi-monthly period,
which Subsequent Closing Statement shall be based on the best information
available to Gottschalks as of each Cut-Off Time during such semi-monthly
period. The form of each of the Preliminary Closing Statement, the Subsequent
Closing Statements and the Final Closing Statement, showing the manner in which
the Purchase Price is to be calculated in accordance with each Seller's
established accounting practices, is attached hereto as Exhibit A.

Section 2.3    Purchase Price.

On each Closing Date, the Purchase Price to be paid by Buyer for the Account
Portfolio Assets shall be as follows:

    Initial Purchase Price
    . (i)  The Initial Purchase Price to be paid by Buyer on the Initial Closing
    Date for the Account Portfolio Assets shall, subject to Section 3.4, be an
    amount equal to (A) 100% of all Indebtedness owing in connection with all of
    the Accounts as of the Cut-Off Time, calculated in the manner set forth on
    Exhibit A;
    plus
    (B) Accrued Interest
    plus
    (C) the "Prepaid Program Fee" to be determined as set forth in subsection
    (ii) below.

    (ii) The "Prepaid Program Fee" shall be $2,500,000 if the Initial Closing
    Date occurs on or before January 31, 2003. If the Initial Closing Date
    occurs on or after February 1, 2003, the Prepaid Program Fee shall be
    increased by the amount of $16,666.67 per day after January 31, 2003 up to a
    maximum Prepaid Program Fee of $3,500,000 if the Initial Closing Date is
    April 1, 2003 or thereafter; provided, however, such additional increases to
    the Prepaid Program Fee shall not be payable by Buyer to Sellers if the
    Initial Closing Date occurs after January 31, 2003 due to factors completely
    out of Buyer's control.

    (iii) The estimated Initial Purchase Price (the "Estimated Initial Purchase
    Price") shall be (i) an estimate of the Initial Purchase Price calculated
    using the Preliminary Closing Statement, (ii) subject to post- closing
    adjustments in accordance with Section 3.4 and (iii) paid to the Escrow
    Agent by wire transfer of immediately available funds to an Escrow Account
    designated by the Escrow Agent as provided in Section 2.4. For the avoidance
    of doubt, the Prepaid Program Fee shall not be subject to the post closing
    adjustment set forth in Section 3.4.

    Subsequent Purchase Price
    . The Subsequent Purchase Price to be paid by Buyer to Gottschalks on each
    Closing Date after the Initial Closing Date shall, subject to Section 3.4,
    be an amount equal to 100% of all Indebtedness owing in connection with all
    of the Subsequent Accounts as of the applicable Cut-Off Time. Each estimated
    Subsequent Purchase Price (the "Estimated Subsequent Purchase Price") shall
    be (i) calculated in the manner set forth on Exhibit A and (ii) paid by
    Buyer to Gottschalks on each Closing Date after the Initial Closing Date by
    wire transfer of immediately available funds pursuant to the daily
    settlement procedure set forth in Section 3.02 of the Servicing Agreement.
 a. Buyer and each Seller agree that the Initial Purchase Price (less the
    Prepaid Program Fee) and each Subsequent Purchase Price shall be allocated
    among the Account Portfolio Assets (and adjusted as soon as possible
    thereafter following any post-closing adjustments) in accordance with
    Section 1060 of the Internal Revenue Code of 1986, as amended, and the
    regulations promulgated thereunder (the "Code").

Section 2.4    Escrow Contribution.

On the Initial Closing Date, Buyer shall deposit with Deutsche Bank Trust
Company Americas (the "Escrow Agent"), the Estimated Initial Purchase Price
described in Section 2.3(a)(iii) above into an escrow account to be established
and distributed in accordance with the terms and conditions set forth in this
Agreement and the Escrow Agreement (the "Escrow Account").

ARTICLE 3

THE CLOSING AND POST-CLOSING ADJUSTMENTS

Section 3.1    Place and Date of Closings.

 a. Initial Closing.

The initial Closing shall take place through wire transfer of the Estimated
Initial Purchase Price as described above, and facsimile delivery of executed
copies of the required closing documents, on or prior to the Initial Closing
Date to the Escrow Agent or as otherwise mutually agreed by the Parties.
Subsequent Closings. Each subsequent Closing shall take place through the wire
transfer of each Subsequent Purchase Price on each subsequent Closing Date
pursuant to the daily settlement procedure set forth in Section 3.02 of the
Servicing Agreement and facsimile exchange of the required closing documents, if
any, as mutually agreed by the Parties.

Section 3.2    Buyer's Deliveries at Closings.

 a. Initial Closing Deliverables.

On the Initial Closing Date, upon satisfaction or waiver of the conditions
precedent in Section 5.1 of this Agreement, Buyer shall deliver to each Seller
or the Escrow Agent, as applicable:
 i.    the Assumption Agreement;
 ii.   the Bill of Sale;
 iii.  the Servicing Agreement;
 iv.   the Program Agreement;
 v.    the Estimated Initial Purchase Price with respect to the Account
       Portfolio Assets being transferred;
 vi.   the Escrow Agreement;
 vii.  the financing statements described in Section 5.1(d); and
 viii. all such additional instruments, documents, or certificates as may be
       agreed to in advance by the Parties.

Subsequent Closing Deliverables. On each subsequent Closing Date, upon
satisfaction or waiver of the conditions precedent in Section 5.1 of this
Agreement, as may be applicable, Buyer shall deliver to Gottschalks:
 i.   the Assumption Agreement (previously executed and delivered on the Initial
      Closing Date);
 ii.  the Bill of Sale (previously executed and delivered on the Initial Closing
      Date); and
 iii. the Estimated Subsequent Purchase Price with respect to the Account
      Portfolio Assets being transferred.

Section 3.3    Sellers' Deliveries at Closings.

 a. Initial Closing Deliverables.

In order to transfer and assign all of the right, title, and interest of each
Seller in the Account Portfolio Assets as of the Cut-Off Time, upon satisfaction
or waiver of the conditions precedent in Section 5.2 of this Agreement and upon
receipt of the Estimated Initial Purchase Price, Sellers shall deliver the
following to Buyer or the Escrow Agent, as applicable:
 i.    the Assumption Agreement;
 ii.   the Bill of Sale;
 iii.  the Program Agreement;
 iv.   the Servicing Agreement;
 v.    the Escrow Agreement;
 vi.   the Closing Tape, together with a format of such file, and a description
       of the fields on such file;
 vii.  the UCC Statements;
 viii. the Securitization Prepayment Documents; and
 ix.   all such additional instruments, documents, or certificates as may be
       agreed to in advance by the parties.

Subsequent Closing Deliverables. In order to transfer and assign all of the
right, title and interest of Gottschalks in the Account Portfolio Assets owned
by Gottschalks as of the Cut-Off Time, upon satisfaction or waiver of the
conditions precedent in section 5.2 of this Agreement, as may be applicable, and
upon receipt of the Estimated Subsequent Purchase Price, Gottschalks shall
deliver the following to Buyer:
 i.  the Assumption Agreement (as previously executed and delivered on the
     Initial Closing Date); and
 ii. the Bill of Sale (as previously executed on the Initial Closing Date).

Section 3.4    Final Closing Statement.

Within ninety (90) days after the Conversion Date, or at such other time as is
mutually agreed to by the Parties, Buyer shall prepare according to the
directions contained in subsection (c) (with the assistance of Sellers with
respect to items under Sellers' control) and deliver to Sellers a Final Closing
Statement together with a tape or other mutually acceptable documentation
showing the changes to the Preliminary Closing Statement and each Subsequent
Closing Statement. Sellers shall review such Final Closing Statement within
thirty (30) days and shall promptly notify Buyer of any discrepancies. The
Parties shall confer until they are in agreement on the Final Closing Statement.
In the event the disputing Parties are unable to reach agreement on the Final
Closing Statement within ten (10) Business Days of the date Buyer has been
notified of any discrepancies by Sellers, with respect to the funds that are the
subject of dispute, the Parties shall jointly hire a nationally recognized
public accounting firm as the Parties mutually agree, to resolve any
discrepancies in the Final Closing Statement, and shall equally share the costs
of such resolution. The accounting firm selected shall not at the time of
selection (or at any time during its engagement hereunder) be performing
services for the Buyer, any Seller or any of their respective Affiliates. The
final resolution and decision issued by such accounting firm shall be binding
upon the Parties. The Parties shall use their commercially reasonable efforts to
cause the work of the accounting firm to be completed and report thereof to be
furnished to the Parties within thirty (30) Business Days following the
appointment of the accounting firm. The date when Sellers and Buyer reach
agreement on the Final Closing Statement or, in the absence of such agreement
the date when final resolution and decision is issued, is referred to in this
Agreement as the "Final Settlement Date." If the Final Closing Statement
establishes an increase in the Purchase Price for the Account Portfolio Assets
over that calculated based on the Preliminary Closing Statement and each
Subsequent Closing Statement, the amount of any such increase shall be delivered
to Gottschalks by Buyer within three (3) Business Days after the Final
Settlement Date. If the Final Closing Statement establishes a decrease in the
Purchase Price over that calculated based on the Preliminary Closing Statement
and each Subsequent Closing Statement, Gottschalks shall deliver to Buyer any
deficiency within three (3) Business Days after the Final Settlement Date. Any
payment made to any Party pursuant to this Section 3.4(b) shall include interest
calculated on a daily basis from the Closing Date applicable to the Account or
Accounts which are the subject matter of the reconciliation to the date such
payment is made at the Federal Funds Interest Rate. If an Account that does not
satisfy the definition of "Account" is included in the Preliminary Closing
Statement or a Subsequent Closing Statement, as the case may be, as of the
applicable Cut-Off Time, it shall be excluded from the Final Closing Statement.
Such exclusion shall be effective retroactively as of the applicable Cut-Off
Time, and Buyer shall add to the Purchase Price reflected on the Final Closing
Statement the amount of any payment Buyer received from an Account Debtor on
such Account net of any amount previously credited to such Accounts by Buyer
which after the applicable Cut-Off Time was determined to be a check for
insufficient funds, stop-payments or any amount required to be refunded by Buyer
to or on behalf of any Account Debtor. Within ten (10) Business Days after Buyer
and Gottschalks agree to the Final Closing Statement, Buyer shall deliver to
Gottschalks any assignment, acknowledgment, or other document necessary to
evidence Gottschalks' continuing right, title, and interest in such Account. If
an Account is not included in the Preliminary Closing Statement or a Subsequent
Closing Statement, as the case may be, but is included in the Final Closing
Statement because such Account satisfied the definition of "Account" as of the
applicable Cut-Off Time, such addition shall be deemed to have occurred
retroactively as of the applicable Cut-Off Time, and Gottschalks shall subtract
from the Purchase Price reflected on the Final Closing Statement the amount of
any payment Sellers received from an Account Debtor on such Account on or after
the applicable Cut-Off Time net of any amount previously credited to the Account
by Sellers which after the applicable Cut-Off Time was determined to be a check
for insufficient funds, stop-payments or any amount required to be refunded by
Sellers to or on behalf of any Account Debtor; provided, however, that no
subtraction shall be made from the Purchase Price for any payments remitted by
Sellers to Buyer. Any addition or subtraction to Purchase Price made by any
Party pursuant to this Section 3.4(c) shall include interest calculated on a
daily basis from the Closing Date applicable to the Account or Accounts which
are the subject matter of the reconciliation to the date such payment is made at
the Federal Funds Interest Rate. If Indebtedness arising from Cross-Marketing
Merchandise is included in the Preliminary Closing Statement or a Subsequent
Closing Statement, as the case may be, as of the applicable Cut-Off Time and
such Indebtedness is subject to a bona fide dispute by the Account Debtor at any
time prior to the applicable Closing Date, such Indebtedness shall be excluded
from the Final Closing Statement. Such exclusion shall be effective
retroactively as of the applicable Cut-Off Time, and Buyer shall add to the
Purchase Price reflected on the Final Closing Statement the amount of any
payment Buyer received from an Account Debtor on account of such Indebtedness,
net of any amount previously credited to such Indebtedness by Buyer which after
the applicable Cut-Off Time was determined to be a check for insufficient funds,
stop-payments or any amount required to be refunded by Buyer to or on behalf of
any Account Debtor. Within ten (10) Business Days after Buyer and Gottschalks
agree on the Final Closing Statement, Buyer shall deliver to the Gottschalks any
assignment, acknowledgment or other document necessary to evidence Gottschalks'
continuing right, title and interest in such Indebtedness. Any addition made by
Buyer pursuant to this Section 3.4(d) shall include interest calculated on a
daily basis from the Closing Date applicable to the Indebtedness which is the
subject matter of the reconciliation to the date such payment is made at the
Federal Funds Interest Rate.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

Section 4.1    General Representations and Warranties of Gottschalks.

On the date of execution of this Agreement and again as of the Initial Closing
Date, Gottschalks represents and warrants to Buyer as set forth below:

Organization.
Gottschalks is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. Gottschalks has the requisite
corporate power and authority to own and operate its properties and to carry on
its business as it is now being conducted.
Authority Relative to this Agreement.
Gottschalks has the requisite corporate power to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Gottschalks and the consummation of the
transactions contemplated hereby have been, or will be prior to the Initial
Closing Date, duly authorized by all necessary action on the part of Gottschalks
and will not violate any applicable laws, rules or regulations including,
without limitation, any such laws, rules or regulations pertaining to bulk sales
or transfers, except where such violation could not have a material adverse
effect on the Account Portfolio Assets or the consolidated operations (financial
or otherwise), business or prospects of the Sellers taken as a whole. This
Agreement has been duly executed and delivered by Gottschalks and constitutes a
legal, valid, and binding obligation of Gottschalks and is enforceable against
Gottschalks in accordance with its terms except (i) that such enforcement may be
subject to bankruptcy, conservatorship, receivership, insolvency, moratorium, or
similar laws affecting creditors' rights generally; and (ii) that the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court before
which any proceedings therefor may be brought.
No Pending Litigation
. There is no pending or, to the best knowledge of Gottschalks, threatened suit,
action, injunction, investigation, inquiry, or other proceeding against
Gottschalks or any of its Affiliates before any court or government agency in
connection with the Account Portfolio Assets, which (i) has resulted or could
result in an order staying or judgment restraining or prohibiting the
transactions contemplated hereby or subjecting any Party to material liability
on the grounds that it has breached any material law or regulation or otherwise
acted improperly in connection with the transactions contemplated hereby or
(ii) could have a material adverse effect on the Account Portfolio Assets or the
consolidated operations (financial or otherwise), business or prospects of the
Sellers taken as a whole.
No Broker
. Except as otherwise disclosed on Exhibit E, Gottschalks has not, directly or
indirectly, employed any broker, finder, financial advisor, or intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a brokerage, finders', or other fee or commission upon the execution
of this Agreement or consummation of the transactions contemplated hereby.
Privacy
. Gottschalks has complied in all material respects with the requirements of the
GLBA Privacy Law. Gottschalks has maintained a privacy policy with respect to
its handling of the nonpublic personal information of individual consumers who
are consumers or customers of Gottschalks. Gottschalks' privacy policy has been
available on its Internet website. Gottschalks has complied in all material
respects with the provisions of such privacy policy.

Section 4.2    General Representations and Warranties of GCRC.

On the date of execution of this Agreement and again as of the Initial Closing
Date, GCRC represents and warrants to Buyer as set forth below:

Organization.
GCRC is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware. GCRC has the requisite corporate power
and authority to own and operate its properties and to carry on its business as
it is now being conducted.
Authority Relative to this Agreement.
GCRC has the requisite corporate power to execute and deliver this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by GCRC and the consummation of the transactions contemplated
hereby have been, or will be prior to the Initial Closing Date, duly authorized
by all necessary action on the part of GCRC and will not violate any applicable
laws, rules or regulations including, without limitation, any such laws, rules
or regulations pertaining to bulk sales or transfers, except where such
violation could not have a material adverse effect on the Account Portfolio
Assets or the consolidated operations (financial or otherwise), business or
prospects of the Sellers taken as a whole. This Agreement has been duly executed
and delivered by GCRC and constitutes a legal, valid, and binding obligation of
GCRC and is enforceable against GCRC in accordance with its terms except (i)
that such enforcement may be subject to bankruptcy, conservatorship,
receivership, insolvency, moratorium, or similar laws affecting creditors'
rights generally; and (ii) that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
No Pending Litigation
. There is no pending or, to the best knowledge of GCRC, threatened suit,
action, injunction, investigation, inquiry, or other proceeding against GCRC or
any of its Affiliates before any court or government agency in connection with
the Account Portfolio Assets, which (i) has resulted or could result in an order
staying or judgment restraining or prohibiting the transactions contemplated
hereby or subjecting any Party to material liability on the grounds that it has
breached any material law or regulation or otherwise acted improperly in
connection with the transactions contemplated hereby or (ii) could have a
material adverse effect on the Account Portfolio Assets or the consolidated
operations (financial or otherwise), business or prospects of the Sellers taken
as a whole.
No Broker
. Except as otherwise disclosed on Exhibit E, GCRC has not, directly or
indirectly, employed any broker, finder, financial advisor, or intermediary in
connection with the transactions contemplated by this Agreement who might be
entitled to a brokerage, finders', or other fee or commission upon the execution
of this Agreement or consummation of the transactions contemplated hereby.
Privacy
. GCRC has complied, to the extent applicable, in all material respects, with
all privacy consumer protection and other laws and regulations, including
without limitation the GLBA Privacy Law.

Section 4.3    Representations and Warranties of Gottschalks Regarding the
Accounts and the Indebtedness.

Gottschalks represents and warrants to Buyer as set forth below:

Title to Accounts.
 i.  As of the Initial Closing Date, there are no liens or other encumbrances
     with respect to any Current Account (other than Indebtedness in respect of
     such Current Account), except for the liens or encumbrances related to the
     Securitization Trust, and Gottschalks owns or has good and marketable title
     to each Current Account (other than Indebtedness in respect of such Current
     Account), free and clear of any liens or other encumbrances, except for the
     liens or encumbrances related to the Securitization Trust. Except for the
     ongoing transfer by Gottschalks of Indebtedness into the Securitization
     Trust, Gottschalks has not taken any action to transfer ownership of any
     Current Account (other than Indebtedness in respect of such Current
     Account) to anyone other than Buyer. Gottschalks has full right and
     authority to sell and assign each such Current Account (other than
     Indebtedness in respect to such Current Account) to Buyer pursuant to this
     Agreement.
 ii. As of each subsequent Closing Date, there are no liens or other
     encumbrances with respect to any Subsequent Account and Gottschalks owns
     and has good marketable title to each Subsequent Account free and clear of
     any liens or encumbrances. Gottschalks has not taken any action to transfer
     ownership of the Subsequent Accounts to anyone other than Buyer.
     Gottschalks has full right and authority to sell and assign each such
     Subsequent Account to Buyer pursuant to this Agreement.

Securitization.
 i.   As of the Initial Closing Date, the only outstanding securitization trust
      is the Securitization Trust and the Master Trust Agreement is the only
      outstanding pooling and servicing agreement with respect to the
      Securitization Trust. Further, the Series 1999-1 and Series 2000-1 are the
      only series of certificates or notes outstanding under the Securitization
      Trust.
 ii.  As of the Initial Closing Date, assuming the (A) prepayment of the Trust
      Securities as contemplated by the Securitization Prepayment Documents and
      (B) consummation of the transactions contemplated by this Agreement and
      each Related Document, after the Initial Closing Date there shall be no
      (i) liens or encumbrances on any Current Account related to the
      Securitization Trust and (ii) securities or notes outstanding under the
      Securitization Trust.
 iii. As of the Initial Closing Date, no default, or event which, with the
      passage of time or delivery of notice, would constitute a default, exists
      under the Securitization Creation Documents and the transactions
      contemplated by the Securitization Prepayment Documents will not
      constitute a default under the Securitization Creation Documents.

Accuracy of Closing Tape.
As of each Closing Date, each Account is as described in the Closing Tape, and
when transmitted by Gottschalks to Buyer, the information contained in the
Closing Tape shall be correct in all material respects.
Change in Terms/Underwriting.
As of each Closing Date, except as may have been required by law, or as set
forth in this Agreement or as mutually agreed to by the Parties, there have been
no changes made as a result of the contemplated sale of Accounts to Buyer, to
the manner in which Gottschalks has accepted or evaluated credit card
applications, opened Accounts, collected Accounts, or administered Accounts
during the period from November 20, 2002 to each Closing Date such that the
value of the Accounts was adversely affected.
Compliance with Laws.
As of each Closing Date, (i) Gottschalks' Revolving Credit Business has been
conducted in material compliance with all applicable laws, rules, regulations,
and orders; (ii) each of the Accounts and the interest rates, fees, and charges
in connection therewith have, at all times during Gottschalks' ownership of such
Accounts, complied in all material respects with all applicable laws; (iii) each
Account and the related Indebtedness is the legal, valid and binding obligation
of the Account Debtor and any guarantor named therein; and (iv) Gottschalks has
all permits, licenses, certificates of authority, orders, and approvals of, and
has made all filings, applications and registrations with, federal, state, and
local governmental or regulatory bodies that are required in order to permit
Gottschalks to carry on Gottschalks' Revolving Credit Business as it is
presently conducted and all such permits, licenses, certificates of authority,
orders, and approvals are in full force and effect, except where the failure to
comply with such applicable laws or to have any such permits, licenses,
certificates of authority, orders, applications or registrations could not have
a material adverse effect on the Account Portfolio Assets or the consolidated
operations (financial or otherwise), business or prospects of Sellers taken as a
whole.
Credit Card Agreement
. As of each Closing Date, Gottschalks has heretofore delivered to Buyer a true
and complete copy of each form of Credit Card Agreement and any changes in terms
or amendments thereto used in connection with the Program, which would be in
effect as of the Cut-Off Time with respect to any Account.
Effectiveness of Transfer.
As of each Closing Date, the execution and delivery of the Assumption Agreement
and the Bill of Sale in accordance with this Agreement and the filing of the
UCC-1 financing statement referred to in Section 5.1(d) are sufficient to
transfer Gottschalks' title to the Current Accounts (other than the Indebtedness
in respect of such Current Accounts) and the Subsequent Accounts to Buyer on the
Initial Closing Date and each subsequent Closing Date, respectively. Upon each
such transfer, Buyer will be vested with all of Gottschalks' right, title, and
interest in and to the Account Portfolio Assets that relate to such Accounts
free and clear of any lien, pledge, claim, security interest, encumbrance,
charge, or restriction of any kind existing on the Account Portfolio Assets.
Processing.
As of each Closing Date, during the period of Gottschalks' ownership of the
Current Accounts (other than the Indebtedness in respect of such Current
Account) and the Subsequent Accounts, each such Account has been processed and
serviced in material conformance with all of the requirements of the respective
Account Documentation and other applicable servicing agreements and policies and
applicable law and in accordance with Gottschalks' written policies with respect
to such Account. All such Accounts presently are, and during the period of
Gottschalks' ownership of such Accounts always have been, processed by
Gottschalks or an Affiliate of Gottschalks or third party contractor of
Gottschalks.
Default.
As of each Closing Date, no default or potential default exists on the part of
Gottschalks with respect to the Accounts or Indebtedness, other than those
defaults or potential defaults which could have a material adverse effect on the
Account Portfolio Assets or the consolidated operations (financial or
otherwise), business or prospects of the Sellers taken as a whole.

Section 4.4    Representations and Warranties of GCRC Regarding the
Indebtedness.

On the date of execution of this Agreement and again as of the Initial Closing
Date, GCRC represents and warrants to Buyer as follows:

Title to Accounts.
As of the Initial Closing Date, there are no liens or other encumbrances with
respect to any Indebtedness in respect of any Current Account, except for the
liens or encumbrances related to the Securitization Trust, and GCRC owns or has
good and marketable title to the Indebtedness in respect of each Current
Account, free and clear of any liens or other encumbrances, except for the liens
or encumbrances related to the Securitization Trust. Except for the ongoing
transfer by GCRC of Indebtedness into the Securitization Trust, GCRC has not
taken any action to transfer ownership of the Indebtedness in respect of any
Current Account to anyone other than Buyer. GCRC has full right and authority to
sell and assign such Indebtedness in respect of each Current Account to Buyer
pursuant to this Agreement.
Securitization.
 i.   As of the Initial Closing Date, the only outstanding securitization trust
      is the Securitization Trust and the Master Trust Agreement is the only
      outstanding pooling and servicing agreement with respect to the
      Securitization Trust. Further, the Series 1999-1 and Series 2000-1 series
      are the only series of certificates or notes outstanding under the
      Securitization Trust.
 ii.  As of the Initial Closing Date, assuming the (A) prepayment of the Trust
      Securities as contemplated by the Securitization Prepayment Documents and
      (B) consummation of the transactions contemplated by this Agreement and
      each Related Document, after the Initial Closing Date there shall be no
      (i) liens or encumbrances on any Indebtedness in respect of a Current
      Account related to the Securitization Trust and (ii) securities or notes
      outstanding under the Securitization Trust.
 iii. As of the Initial Closing Date, no default, or event which, with the
      passage of time or delivery of notice, would constitute a default, exists
      under the Securitization Creation Documents and the transactions
      contemplated by the Securitization Prepayment Documents will not
      constitute a default under the Securitization Creation Documents.

Accuracy of Closing Tape.
Each Current Account and the associated Indebtedness is as described in the
Closing Tape, and when transmitted by GCRC to Buyer, the information contained
in the Closing Tape shall be correct in all material respects.
Change in Terms/Underwriting.
Except as may have been required by law, or as set forth in this Agreement or as
mutually agreed to by the Parties, GCRC did not change as a result of the
contemplated sale of the Current Accounts to Buyer, the manner in which it
accepted or evaluated Indebtedness in respect of any Current Account, collected
the Indebtedness in respect of any Current Account, or administered the
Indebtedness in respect of any Current Account during the period from November
20, 2002 to the Initial Closing Date such that the value of the Indebtedness in
respect of any Current Account was adversely affected.
Compliance with Laws.
(i) GCRC's purchase and handling of the Indebtedness in respect of any Current
Account has been conducted in material compliance with all applicable laws,
rules, regulations, and orders; (ii) the Indebtedness in respect of each Current
Account is the legal, valid and binding obligation of the Account Debtor and any
guarantor named therein; and (iii) GCRC has all permits, licenses, certificates
of authority, orders, and approvals of, and has made all filings, applications
and registrations with, federal, state, and local governmental or regulatory
bodies that are required in order to permit GCRC to carry on GCRC's business as
it is presently conducted and all such permits, licenses, certificates of
authority, orders, and approvals are in full force and effect, except where the
failure to comply with such applicable laws or to have any such permits,
licenses, certificates of authority, orders, applications or registrations could
not have a material adverse effect on the Account Portfolio Assets or the
consolidated operations (financial or otherwise), business or prospects of the
Sellers taken as a whole.
Effectiveness of Transfer.
The execution and delivery of the Assumption Agreement and the Bill of Sale in
accordance with this Agreement and the filing of the UCC-1 financing statement
referred to in Section 5.1(d) are sufficient to transfer GCRC's title to the
Indebtedness in respect of any Current Account to Buyer. Upon such transfer,
Buyer will be vested with all of GCRC's right, title, and interest in and to the
Indebtedness in respect of each Current Account, free and clear of any lien,
pledge, claim, security interest, encumbrance, charge, or restriction of any
kind existing on the Account Portfolio Assets.
Processing.
During the period of GCRC's ownership of the Indebtedness in respect of each
Current Account, such Indebtedness has been processed and serviced in
conformance with all of the requirements of the respective Account Documentation
and other applicable servicing agreements and policies and applicable law and in
accordance with GCRC's written policies. All such Indebtedness presently is, and
during the period of GCRC's ownership of such Indebtedness always has been,
processed by GCRC or an Affiliate of GCRC or third party contractor of GCRC.
Default.
No default or potential default exists on the part of GCRC with respect to the
Indebtedness in respect of any Current Account, other than those defaults or
potential defaults which could not be reasonably expected to have a material
adverse effect on the Account Portfolio Assets or the consolidated operations
(financial or otherwise), business or prospects of the Sellers taken as a whole.

Section 4.5    General Representations and Warranties of Buyer.

On the date of execution of this Agreement and again as of each Closing Date,
Buyer represents and warrants to Sellers as set forth below:

Organization.
Buyer is a national banking association, duly organized and validly existing,
and in good standing under the laws of the United States. Buyer has the
requisite corporate power and authority to own and operate its properties and to
carry on its business as it is now being conducted.
Authority Relative to this Agreement.
Buyer has the requisite corporate power to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Buyer and the consummation of the transactions
contemplated hereby have been, or will be prior to the Initial Closing Date,
duly authorized by all necessary action on the part of Buyer and will not
violate any applicable laws, rules or regulations including, without limitation,
any such laws, rules or regulations pertaining to bulk sales or transfers,
except where such violation could not have a material adverse effect on the
Account Portfolio Assets or the consolidated operations (financial or
otherwise), business or prospects of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes a legal, valid, and binding
obligation of Buyer and is enforceable against Buyer in accordance with its
terms except that (i) such enforcement may be subject to bankruptcy,
conservatorship, receivership, insolvency, moratorium, or similar laws affecting
creditors' rights generally; and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings
therefore may be brought.
Permits, Licenses and Approvals.
Buyer has all permits, licenses, certificates of authority, orders, and
approvals of, and has, or will prior to the Initial Closing Date have made all
filings, applications and registrations with, federal, state, and local
governmental or regulatory bodies that are required in order to permit Buyer to
acquire, and conduct business with respect to, the Account Portfolio Assets and
all such permits, licenses, certificates of authority, orders, and approvals are
in full force and effect, except where the failure to comply with such
applicable laws or to have any such permits, licenses, certificates of
authority, orders, applications or registrations could not have a material
adverse effect on Buyer's ability to acquire, and conduct business with respect
to, the Account Portfolio Assets or the consolidated operations (financial or
otherwise), business or prospects of Buyer.
No Pending Litigation.
There is no pending or, to the best knowledge of Buyer, threatened suit, action,
injunction, investigation, inquiry, or other proceeding against Buyer before any
court or government agency, which has resulted or could result in an order
staying or judgment restraining or prohibiting the transactions contemplated
hereby or subjecting any Party to material liability on the grounds that it has
breached any law or regulation or otherwise acted improperly in connection with
the transactions contemplated hereby.
No Broker.
Buyer has not, directly or indirectly, employed any broker, finder, financial
advisor, or intermediary in connection with the transactions contemplated by
this Agreement who might be entitled to a brokerage, finders', or other fee or
commission upon the execution of this Agreement or consummation of the
transactions contemplated hereby.

ARTICLE 5

CONDITIONS PRECEDENT

Section 5.1    Conditions to Obligations of Buyer.

The obligation upon Buyer to consummate the transactions contemplated herein
shall be subject to the fulfillment on or prior to the Initial Closing Date or
each Closing Date, as the case may be, of the following conditions (any of which
may be waived by Buyer), which conditions Sellers agree to use their reasonable
best efforts to fulfill (Buyer agrees to use reasonable efforts to cooperate
with Sellers as Sellers may reasonably request in order to facilitate the
satisfaction of these conditions):

Closing Documents.
Sellers shall have executed and delivered this Agreement and the documents set
forth in Section 3.3 of this Agreement to which it is a party, and each such
document shall be in full force and effect.
Compliance with Covenants.
Sellers shall have performed, and be in compliance with, in all material
respects all of its agreements and covenants under this Agreement.
Accuracy of Representations and Warranties
. The representations and warranty of Sellers contained in this Agreement shall
be true in all material respects on and as of each Closing Date as if made on
such date, except for those representations and warranties which address matters
only as of a particular date (which shall be true in all material respects as of
such date).
Financing Statements.
At or before the Initial Closing Date, each Seller shall assist Buyer, as
reasonably requested, in the preparation of financing statements for filing,
which are reasonably necessary to give notice of Buyer's interest in the Account
Portfolio Assets transferred by Sellers.
Prepayment of Securitization and Releases.
As of the Initial Closing Date, Buyer shall have received (i) evidence of the
prepayment of the Trust Securities by its receipt of executed copies of the
Securitization Prepayment Documents, and (ii) the UCC Statements.
Hart-Scott Rodino.
On or prior to the Initial Closing Date, the Parties shall have received
evidence of the expiration or early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended.
No Proceedings.
There shall not have commenced and be pending against the Buyer or any Seller
any proceeding (a) involving any material challenge to, or seeking material
damages or other material relief in connection with, the transactions
contemplated hereby or (b) that is reasonably likely to have the effect of
preventing, delaying, making illegal or otherwise interfering with the
transactions contemplated by this Agreement.

Section 5.2    Conditions to Obligations of Sellers.

The obligation upon Sellers to consummate the transactions contemplated herein
shall be subject to the fulfillment on or prior to the Initial Closing Date or
each Closing Date, as the case may be, of the following conditions (any of which
may be waived by Sellers), which conditions Buyer agrees to use its reasonable
best efforts to fulfill (Sellers agree to use reasonable efforts to cooperate
with Buyer as Buyer may reasonably request in order to facilitate the
satisfaction of these conditions):

Closing Documents.
Buyer shall have executed and delivered this Agreement and the documents set
forth in Section 3.2 of this Agreement, and each such document shall be in full
force and effect.
Purchase Price.
On or prior to the Initial Closing Date, (i) the Initial Purchase Price shall
have been delivered to the Escrow Agent pursuant to the Escrow Agent's written
instructions set forth in the Escrow Agreement and (ii) the Residual Amount
shall have been delivered to Gottschalks pursuant to Gottschalks' wire
instructions. On or prior to each subsequent Closing Date, each Subsequent
Purchase Price shall have been delivered to Gottschalks pursuant to Gottschalks'
written instructions.
Compliance With Covenants.
Buyer shall have performed, and be in compliance with, all of its respective
agreements and covenants under this Agreement.
Accuracy of Representations and Warranties.
The representations and warranties of Buyer contained in this Agreement shall be
true in all material respects on and as of each Closing Date as if made on such
date.
Prepayment of Securitization and Releases.
As of the Initial Closing Date, Sellers shall have received (i) evidence of the
prepayment of the Trust Securities by its receipt of executed copies of the
Securitization Prepayment Documents, (ii) the UCC Statements and (iii) releases
from all holders of securities under the Securitization Trust acknowledging that
neither Buyer nor its Affiliates shall have any liability to such holders for
anything done or not done by Sellers and/or their Affiliates or any other third
party.
Hart-Scott Rodino.
On or prior to the Initial Closing Date, the Parties shall have received
evidence of the expiration or early termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 as amended.
No Proceedings.
There shall not have commenced and be pending against the Buyer or any Seller
any proceeding (a) involving any material challenge to, or seeking material
damages or other material relief in connection with, the transactions
contemplated hereby or (b) that is reasonably likely to have the effect of
preventing, delaying, making illegal or otherwise interfering with the
transactions contemplated by this Agreement.

ARTICLE 6

AGREEMENTS AND COVENANTS

Section 6.1    [INTENTIONALLY OMITTED].

Section 6.2    No Sale of Assets.

Until the Conversion Date, without the prior written consent of Buyer, Sellers
shall not sell, lease, assign, transfer, encumber, or otherwise dispose of any
of the Account Portfolio Assets, except pursuant to this Agreement and in the
ordinary course of Sellers' business pursuant to the Program. Nothing in this
Paragraph shall refer or apply to any transactions related to Sellers'
securitization of the Accounts.

Section 6.3    Tax on Sale.

 a. Responsibility for Taxes - Sellers

. Each Seller shall be liable for and pay (i) any Taxes relating to the Account
Portfolio Assets that accrue or otherwise relate to any taxable year or period
(or portion thereof) ending on or prior to the Cut-Off Time applicable to such
Account Portfolio Assets, and (ii) any Taxes imposed on the Sellers as a result
of the sale of the Account Portfolio Assets to the Buyer. For purposes of this
Agreement, Taxes attributable to a portion of a taxable year or period shall be
determined on a "closing of the books" basis as of each Cut-Off Time, except
that Taxes imposed on a periodic basis (such as property Taxes) shall be
allocated on a daily basis. Sellers shall be liable for and pay (i) any Taxes
relating to the Account Portfolio Assets that accrue or otherwise relate to any
taxable year or period (or portion thereof) ending on or prior to the Cut-Off
Time applicable to such Account Portfolio Assets (except that Taxes attributable
to transactions or events occurring during the period after the Cut-Off Time and
ending on the Closing Date shall be apportioned to the Sellers only if such
transactions or events are properly includible in the Sellers' consolidated tax
return and shall otherwise be apportioned to the Buyer, other than any Taxes in
connection with the dissolution of the Securitization Trust which shall be
solely Sellers' liability), and (ii) any Taxes imposed on the Sellers as a
result of the sale of the Account Portfolio Assets to the Buyer. Responsibility
for Taxes - Buyer. Buyer shall be liable for and pay any Taxes relating to the
Account Portfolio Assets that accrue or otherwise relate to any taxable year or
period (or portion thereof, as determined in accordance with Section 6.3(a))
beginning after the Cut-Off Time; except for (i) Taxes imposed upon the Sellers
as a result of the sale of the Account Portfolio Assets to the Buyer, (ii) any
Taxes in connection with the dissolution of the Securitization Trust, and (iii)
any other Taxes for which the Sellers are responsible as set forth in Section
6.3(a)(i). Information Reporting. Unless otherwise provided herein, Sellers
shall be responsible for any applicable 2003 IRS or state information reporting
for events (including cancellation of indebtedness) or payments related to the
Account Portfolio Assets which occur during the period beginning January 1, 2003
and ending on the Cut-Off Time. Buyer shall be responsible for any applicable
2003 IRS or state information reporting for events (including cancellation of
indebtedness) or payments related to the Account Portfolio Assets which occur
subsequent to the Cut-Off Time.

Section 6.4    Public Announcements.

The Parties shall consult with each other before they or any of their respective
Affiliates or agents issue any press releases or otherwise make, any public
statements with respect to this Agreement and the transactions contemplated
hereby, and none of them nor any Affiliate of any of them shall issue any such
press release or make any public statement prior to receiving express written
approval of the other Party, which approval shall not be unreasonably withheld,
except, in each case, as may be required by applicable law or regulation, in
which case such Party or Affiliate thereof shall consult with the other Party
prior to such release or statement to the extent practicable.

Section 6.5    Confidentiality.

This Agreement, the Related Documents, the performance of the Parties hereunder
and thereunder and the transactions contemplated hereby and thereby, shall be
confidential ("Agreement Confidential Information") and no Party or its
officers, directors, shareholders, employees, attorneys, accountants, advisors,
lenders, agents, successors, assigns or personal representatives shall disclose
the Agreement Confidential Information to any other Person except as otherwise
required by law or regulation or to enforce their rights with respect to
Agreement Confidential Information, or as otherwise permitted by this Agreement.
Buyer shall not disclose any information, in any form, supplied to the Buyer
and/or its Affiliates by, or at the direction of Sellers and/or their Affiliates
whenever furnished, including any copies, excerpts, summaries, analyses or notes
thereof (the "Seller Confidential Information") to any Person who is not a
partner, officer, employee, counsel, or agent of Buyer, except with the consent
of Gottschalks or pursuant to a subpoena or order issued by a court of competent
jurisdiction or by a judicial or administrative or legislative body or committee
with jurisdiction over Buyer. Sellers shall not disclose any information, in any
form, supplied to the Sellers and/or their Affiliates by, or at the direction of
Buyer and/or its Affiliates whenever furnished, including any copies, excerpts,
summaries, analyses or notes thereof (the "Buyer Confidential Information") to
any Person who is not a partner, officer, employee, counsel, or agent of any
Seller, except with the consent of Buyer or pursuant to a subpoena or order
issued by a court of competent jurisdiction or by a judicial or administrative,
or legislative body or committee with jurisdiction over Seller. The Agreement
Confidential Information, the Seller Confidential Information, and the Buyer
Confidential Information are hereinafter collectively referred to as the
"Confidential Information." In the event that a Party receives a request to
disclose any Confidential Information of the other Party under such subpoena or
order, such Party shall (i) notify the other Party within five (5) Business Days
after receipt of such request; (ii) consult with that Party on the advisability
of taking steps to resist or narrow such request; and (iii) if disclosure is
required or deemed advisable, cooperate with that Party in any attempt that such
Party may make to obtain an order or other reliable assurance that confidential
treatment will be accorded to designated portions of the Confidential
Information. Information will not be deemed Confidential Information if (i) the
information is already lawfully known to a Party; (ii) the information
thereafter becomes lawfully obtainable from other than as a result of a
disclosure by the disclosing Party or such Party's officers, employees, counsel,
or agents; (iii) the information is required to be disclosed to a regulatory
authority having authority over the disclosing Party; (iv) the information is
disclosed to a Party's Affiliate, provided, however, that such Affiliates agree
to be bound by the provisions of this Section 6.4; (v) the information is
disclosed to a Party's auditors or counsel (each of whom the disclosing Party
shall cause to keep such information confidential and to use the same only in
connection with this Agreement and the Related Documents, including in the case
of auditors, any general or more limited audit or review of such disclosing
Party, and in the case of counsel, any disputes relating to this Agreement, the
Related Documents or legal matters which involve such disclosing Party with
respect to which Confidential Information which is subject to this Section 6.4
is germane) or is required to be disclosed strictly on a need to know basis to
its investors or rating agencies; (vi) the information is required to be
disclosed in the financial statements of such other Party or its Affiliates to
the extent required by GAAP, or in any filing with the U.S. Securities and
Exchange Commission; (vii) the information is required to be disclosed to a
Party's source(s) of funding, provided such source(s) agree to be bound by
confidentiality provisions substantially similar to those contained in this
Section 6.4; (viii) the information is required by law, regulation or court
order to be disclosed by the disclosing Party; provided, however, that prior
notice of such disclosure (other than to the disclosing Party's Affiliates,
auditors, counsel, rating agencies or lenders) has been given to the non-
disclosing Party, when legally permissible, and that the Party which is required
to make the disclosure follows the procedures set forth in Section 6.4(b) to
permit the disclosing Party to take legal action to prevent the disclosure as
otherwise required by law or to enforce their rights with respect to the
Confidential Information; (ix) the information is contained in or derived from
any Account Documentation delivered by Buyer or is otherwise information Buyer
or Buyer's counsel or underwriters determine is reasonably required to be
disclosed in each case in connection with the securitization and sale of
interests in the Accounts or Indebtedness, as permitted in Section 12.3 of the
Program Agreement; provided that the parties to which Buyer discloses such
information agree to be bound by the terms of this provision, or (x) the
information is disclosed by Gottschalks to third parties in connection with
Gottschalks' potential sale of the Account Portfolio Assets under Section 11.5
of the Program Agreement; provided that the parties to which Gottschalks
discloses such information agree to be bound by the terms of these (or similar)
provisions. The Parties hereto agree that this Section 6.5 shall supersede in
its entirety the Confidentiality Agreement dated August 21, 2002, between the
Buyer and Gottschalks (the "Confidentiality Agreement"), and that such
Confidentiality Agreement shall thereby be terminated and of no further force
and effect. Notwithstanding any other provisions contained herein, each Party
authorizes the other to disclose all information and materials regarding the
structure and tax aspects of the transaction to the extent required by Section
6011 of the Code in order to avoid the transaction described herein being
treated as a "Confidential Transaction" as defined thereby.

Section 6.6    Conversion of Accounts.

With respect to all Account Portfolio Assets, Buyer shall be responsible for
handling on and after the Conversion Date all Account Debtor service issues, any
and all losses resulting from service issues, and for refunding credit balances
at its expense to the extent such credit balances were taken into account in
computing the Purchase Price as a reduction thereof or arose as a result of
credit transactions thereafter. In addition, with respect to all Account
Portfolio Assets, Buyer assumes and agrees to pay, perform in accordance with
the terms of, and be bound by Seller's obligations that are to be performed
after each Closing Date with respect to, the Accounts and under the Account
Documentation, including without limitation, any Cross-Marketing Merchandise,
whether or not arising after such Closing Date. Buyer agrees that it will
conduct the conversion of Account Portfolio Assets onto its systems.

Section 6.7    Credit Bureau Reporting.

Upon each Closing Date, Sellers will notify the three major credit reporting
bureaus (Equifax, Experian and TransUnion), and any collection agencies or
consumer credit counseling agencies to which Accounts have been referred that
the designation on all Accounts shall reflect that the Accounts and Indebtedness
were transferred.

Section 6.8    Further Assistance.

The Parties will use all reasonable efforts to obtain the satisfaction of the
conditions set forth in Article 5 hereof and to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable to carry out all of their respective obligations under this Agreement
and to consummate and make effective the transactions contemplated by this
Agreement, including, but not limited to, (i) assisting Buyer in the orderly
transition of the Account Portfolio Assets being acquired by Buyer, (ii) giving
prompt notice to the other Party regarding any customer service or Federal Fair
Credit Billing Act complaints filed by an Account Debtor which affects such
other Parties and (iii) delivering Account Documentation and such other
information as Buyer may reasonably request in connection with the servicing of
the Accounts to the extent and in the same form and condition that Seller
maintains such information.

Section 6.9    Securitization.

On or prior to March 1, 2003, Sellers shall dissolve, or cause to be dissolved,
and pay out the Securitization Trust and terminate the Master Trust Agreement.

Section 6.10    Cross-Reference File.

Sellers agree to provide Buyer with the Cross-Reference File no later than
twenty-one (21) days after the Initial Closing Date, and thereafter shall
provide monthly updates thereto. The account numbers set forth in the Cross-
Reference File shall be used solely for the purpose of researching payments on
accounts which Buyer believes it does not own. Buyer shall destroy the Cross-
Reference File within one (1) year after the Conversion Date. Sellers'
obligations under this Section 6.10 shall terminate on the Conversion Date.

Section 6.11    Bulk Sales Laws.

Buyer and each Seller hereby waive compliance with the provisions of any
applicable "bulk sales" and "bulk transfer" or similar laws of any state.

Section 6.12    UCC Financing Statements.

Sellers shall file, or cause to be filed, all of the UCC Statements on the
Initial Closing Date.

ARTICLE 7

INDEMNIFICATION

Section 7.1    Indemnification by Sellers.

Sellers agree to jointly and severally indemnify and hold harmless Buyer and its
officers, directors, employees, partners and Affiliates (the "Buyer Indemnified
Parties"), from any out-of-pocket liability, loss, cost, expense, including
reasonable attorneys' fees and expenses (collectively "Losses"), which shall
result from and be caused by (i) the breach of any of Sellers' representations
or warranties contained in this Agreement, (ii) the breach by any Seller of any
of its covenants or agreements contained in this Agreement, (iii) any false or
misleading advertising or other misrepresentation with respect to the Account
Portfolio Assets by Sellers or any of their Affiliates or any of their
respective agents, directors, officers or employees prior to each Closing Date,
(iv) Sellers' ownership of the Account Portfolio Assets prior to each Closing
Date and the operation and ownership of the Securitization Trust or Sellers'
Affiliates, or third parties' operation and ownership of the Securitization
Trust, (v) any action suit, proceeding or claim or other litigation, or any
investigation by any governmental authority affecting the Account Portfolio
Assets arising out of any action or inaction with respect to the Account
Portfolio Assets prior to each Closing Date, or (vi) any action, suit,
proceeding, claim or other litigation arising out of any action or inaction of
the Sellers or any Seller with respect to the Securitization Trust, the Escrow
Agreement or the Securitization Organizational Documents, including the failure
of any Seller to satisfy its respective obligations as described in the
Securitization Prepayment Documents; provided, that in no event shall Sellers be
obligated under this Article 7 to indemnify the Buyer Indemnified Parties
against any Losses and any interest thereon which shall result solely from the
willful misconduct or negligent acts or omissions of the Buyer Indemnified
Parties, but provided nevertheless that if Buyer and any Seller are jointly sued
by a third party and, except with respect to claims or liability arising from
the Securitization Trust, Buyer and any Seller are held to be liable as joint
tortfeasors by a court of competent jurisdiction, then the allocation of loss
between Buyer and such Seller shall be as determined by such court.

Section 7.2    Indemnification by Buyer.

Buyer agrees to indemnify and hold harmless each Seller and each of such
Sellers' officers, directors, employees, partners and Affiliates (the "Seller
Indemnified Parties"), from any Losses, which shall result from and be caused by
(i) the breach of any of Buyer's representations or warranties contained in this
Agreement, (ii) the breach by Buyer of any of its covenants or agreements
contained in this Agreement, (iii) Buyer's acts or omissions or failure to
satisfy any of its obligations or liabilities to third parties on or after the
Cut-Off Time, and (iv) Buyer's failure to obtain or maintain any permit,
license, authority, order, approval or other authorization required to own or
operate, or conduct the business with respect to, the Account Portfolio Assets;
provided, that in no event shall Buyer be obligated under this Article 7 to
indemnify the Seller Indemnified Parties against any Losses and any interest
thereon which shall result solely from the willful misconduct or gross negligent
acts or omissions of the Seller Indemnified Parties; but provided nevertheless
that if Buyer and Seller are jointly sued by a third party and Buyer and Seller
are held to be liable as joint tortfeasors by a court of competent jurisdiction,
then the allocation of loss between Buyer and Seller shall be as determined by
such court.

Section 7.3    Procedures.

In the event any claim is made, or any suit or action is commenced, against a
Party with respect to which such Party may seek indemnification under this
Article 7 or under the indemnification provisions in the Servicing Agreement or
Program Agreement from another Party, then such Party shall give notice thereof
to the Party from whom indemnification is sought hereunder. The Party against
which such claim is made, or any suit or action is commenced, will hereinafter
be referred to as the "Indemnified Party"; the Party to which such notice is
given will hereinafter be referred to as the "Indemnifying Party." Such notice
must be given within ten (10) days of the Indemnified Party's notice of any such
claim, suit or action. The Indemnifying Party shall be entitled to participate
in the defense thereof and, to the extent the Indemnifying Party notifies the
Indemnified Party in writing, to assume, at the Indemnifying Party's expense,
the defense thereof, with counsel reasonably satisfactory to such Indemnified
Party. After notice from the Indemnifying Party to such Indemnified Party of its
election so to assume the defense thereof, the Indemnifying Party will not be
liable, except as provided in Section 7.3(b), to such Indemnified Party under
this Section 7.3 for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof. The Indemnified Party
shall have the right to employ its own counsel if the Indemnified Party elects,
with the consent of the Indemnifying Party, to assume such defense, but the fees
and expenses of such counsel shall be at the Indemnified Party's expense, unless
(i) the employment of such counsel, at the Indemnifying Party's expense, shall
have been authorized in writing by the Indemnifying Party, (ii) the Indemnifying
Party shall not have employed counsel to take charge of the defense within
thirty (30) days after the Indemnifying Party shall have elected to assume the
defense of such action after electing to assume such defense thereof, or (iii)
the Indemnified Party has been advised by legal counsel that the Indemnified
Party's interests may differ from those of the Indemnifying Party (in which case
the Indemnifying Party shall not have the right to direct the defense of such
action on behalf of the Indemnified Party), in any of which events such
reasonable fees and expenses shall be borne by the Indemnifying Party. The
Indemnified Party shall have the right to reject any settlement approved by the
Indemnifying Party if the Indemnified Party waives its right to indemnification
hereunder or if the settlement requires any obligation of the Indemnified Party
other than the payment of money. The Indemnified Party shall have the right to
settle any third party claim over the objection of the Indemnifying Party;
provided, that if the Indemnifying Party is contesting such claim in good faith
and has assumed the defense of such claim, the Indemnified Party waives any
right to indemnity therefor. Any such settlement or compromise of, or any final
judgment or decree entered on or in, any claim, suit or action which the
Indemnified Party defended or participated in the defense of in accordance
herewith, shall be deemed to have been consented to by, and shall be binding
upon, the Indemnified Party as fully as if the Indemnifying Party had assumed
the defense thereof and a final judgment or decree had been entered in such suit
or action, or with regard to such claim, by a court of competent jurisdiction
for the amount of such settlement, compromise, judgment or decree. In the event
that the Indemnifying Party reimburses the Indemnified Party for any third party
claim, the Indemnified Party shall remit to the Indemnifying Party any
reimbursement that the Indemnified Party subsequently receives for such third
party claim.

Section 7.4    Limitations on Indemnification.

If the Indemnified Party fails to give notice of any claim being made or any
suit or action being commenced in respect of which indemnification under this
Article 7 may be sought within ten (10) days of the Indemnified Party's receipt
of notice thereof, such failure shall not limit the liability of the
Indemnifying Party; provided, that this provision shall not be deemed to limit
the Indemnifying Party's rights to recover for any loss, cost, or expense that
it can establish resulted from such failure to give prompt notice. The language
set forth in this Article 7 exclusively governs the obligations of the Parties
with respect to the subject matter thereof. Notwithstanding anything to the
contrary set forth in this Article 7, none of Sellers nor Buyer shall have any
obligation to indemnify an Indemnified Party in respect of any breach of a
representation or warranty under Section 7.1(i) (other than Sections 4.3(b) and
4.4(b)) and Section 7.2(i) unless and until $100,000 in Losses have been
incurred in the aggregate by the Indemnified Party in respect of breaches of
representations and warranties under Section 7.1(i) (other than Sections 4.3(b)
and 4.4(b)) or Section 7.2(i), as applicable. After the Indemnified Party incurs
$100,000 in aggregate Losses, in respect of breaches of representations and
warranties under Section 7.1(i) (other than Sections 4.3(b) and 4.4(b)) or
Section 7.2(i), as applicable, Buyer or Sellers, whichever the case may be,
shall indemnify the Indemnified Party in accordance with this Article 7 to the
extent of the full amount of such Losses in excess of such $100,000. The amount
of any Losses under Sections 7.1 and 7.2, as applicable, to be paid by an
Indemnifying Party shall be net of any amounts recovered by the Indemnified
Party under applicable insurance policies. The Indemnifying Party shall not be
liable for any Losses relating to any matter to the extent the Indemnified Party
had been fully compensated for such matter pursuant to the Purchase Price
adjustment under Section 3.4.

Section 7.5    Survival.

The representations and warranties of the respective Parties set forth in
Article IV of this Agreement shall survive the Conversion Date until the date
which is twelve months after the Conversion Date and shall then expire.
Notwithstanding the foregoing, the representations and warranties in Sections
4.1(e), 4.2(e), 4.3(b), 4.3(e), 4.4(b), 4.4(e) and 4.5(c) shall survive the
Initial Closing Date and remain in effect until the expiration of the statute of
limitations applicable to the matters covered thereby. Claims for breach of any
such representations or warranties may be asserted after expiration of the
period specified above, and such claims shall not be subject to any defense
based on nonsurvival of such representation and/or warranty if, but only if,
written notice shall have been given with respect thereto on or before
expiration of the period specified above in accordance with the terms of Section
7.3 hereof. The obligations of the Parties pursuant to Sections 6.4 and 6.5 with
respect to public announcements and Confidential Information shall survive
delivery and transfer of the Account Portfolio Assets to Buyer, and shall inure
to the benefit of Buyer, Sellers and any assignee thereof. Without limiting the
foregoing, all obligations of an Indemnifying Party to indemnify an Indemnified
Party under this Article 7 shall survive the Initial Closing Date until
expiration of the statute of limitations applicable to the matters covered
thereby.

ARTICLE 8

TERMINATION

Section 8.1    Grounds for Termination.

 a. This Agreement may be terminated at any time prior to the Initial Closing
    Date:
     i.  by mutual written agreement of Buyer and Sellers; and
     ii. by any Party if the initial Closing shall not have occurred on or
         before February 28, 2003.

    The Party desiring to terminate this Agreement pursuant to Section 8.1(b)
    shall provide written notice of termination to the other Parties.

 b. Effect of Termination. If this Agreement is terminated as permitted by
    Section 8.1(a) such termination shall be without liability to any Party (or
    any Affiliate of such Party) to the other Parties to this Agreement;
    provided, that if such termination shall result from the willful failure of
    a Party to fulfill (unless such willful failure is due to the inability of
    such Party to obtain commercially reasonable terms) any closing condition
    under Article 5, where fulfillment is solely within such Party's control,
    such Party shall be fully liable for any and all Losses incurred or suffered
    by the other Parties as a result of such failure. The provisions of Sections
    6.4, 6.5 and 9.14 shall survive any termination hereof pursuant to Section
    8.1(a).

ARTICLE 9

MISCELLANEOUS

Section 9.1    Waiver.

Failure or delay on the part of any Party to exercise any right provided for
herein, shall not act as a waiver thereof, nor shall any single or partial
exercise of any right by a Party preclude the exercise of any other right or the
further exercise of such right thereof. In no event shall a term or provision of
this Agreement be deemed to have been waived, modified, or amended, unless said
waiver, modification or amendment is in writing and signed by all of the Parties
hereto.

Section 9.2    No Joint Venture.

Nothing in this Agreement shall be deemed to create a partnership or joint
venture between any of the Parties. Except as expressly set forth herein, no
Party shall have any authority to bind or commit the other Parties.

Section 9.3    Payment Terms.

All payments to be made by any Party pursuant to the terms of this Agreement
shall be made by wire transfer in lawful money of the United States, immediately
available funds, to a bank account in a member bank of the Federal Reserve
System designated by the Party to which such payment is to be made.

Section 9.4    Entire Agreement.

Each Party acknowledges that no representations, agreements, or promises were
made to it by the other Party or any of the other Party's employees other than
those representations, agreements, or promises specifically contained in this
Agreement. This Agreement (a) sets forth the entire understanding among the
Parties hereto, (b) supersedes all negotiations, prior discussions and
agreements, including without limitation, the Non-Binding Letter of Intent,
dated December 20, 2002, between Gottschalks and Buyer and the Confidentiality
Agreement, and (c) shall be binding on and shall inure to the benefit of each
Party and their respective successors and assigns, except as otherwise provided
herein. The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of the Parties with respect to the
transactions contemplated hereby and no Person shall be a third party
beneficiary of any of the terms and provisions of this Agreement.

Section 9.5    Notices.

All notices, requests, demands and other communications which are required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given upon the delivery or the fifth (5th) day after
the mailing thereof, as the case may be, sent by registered or certified mail,
return receipt requested, postage prepaid, by fax if immediately followed by
registered or certified mail, or by a nationally recognized overnight delivery
service to:

 a. Gottschalks Credit Receivables Corporation
    c/o Gottschalks, Inc.
    7 River Park Place East
    Fresno, California 93720
    Attention: President
    Facsimile: (559) 434-4666
    
    
    
    with copies to:
    
    Gottschalks Inc.
    7 River Park Place East
    Fresno, California 93720
    Attention: General Counsel
    Facsimile: (559) 434-4666
    
    And
    
    O'Melveny & Myers, LLP
    400 South Hope Street, 15th Floor
    Los Angeles, California 90071
    Attention: Daniel F. Passage, Esq.
    Facsimile: (213) 430-6407

 b. Household Bank (SB), N.A.
    2700 Sanders Road
    Prospect Heights, IL 60070
    Attention: General Counsel
    Facsimile: 847-564-6001
    
    
    
    with a copy to:
    
    Household Retail Services
    2700 Sanders Road
    Prospect Heights, IL 60070
    Attention: President
    Facsimile: 847-564-6280

Section 9.6    Amendment; Modification.

This Agreement may not be amended or modified except by a writing signed by each
Party.

Section 9.7    Governing Law; Waiver of Jury Trial.

This Agreement shall be governed by and be construed in accordance with the laws
of the State of New York without regard to internal principles of conflict of
laws. The Parties hereto waive all right to trial by jury in any action or
proceeding to enforce or defend any rights pursuant hereto.

Section 9.8    Dispute Resolution.

All Disputes shall be resolved in accordance with this Section 9.8. "Dispute"
means any dispute, controversy or claim arising out of or relating to this
Agreement, whether based on contract, tort, statute or other legal or equitable
theory (including without limitation, any claim of fraud, misrepresentation or
fraudulent inducement or any question of validity or effect of this Agreement
including this clause) or the breach or termination thereof. The Parties agree
to communicate with each other to achieve informal resolution of all Disputes
that may arise under this Agreement. However, if such communication does not
resolve such Dispute, the matter in dispute will be subject to the dispute
resolution provisions set forth in this Section 9.8. The Party that desires to
initiate the dispute resolution shall notify the other party in writing of the
nature and details of the Dispute (the "Dispute Notice"). Within thirty (30)
days from the date of delivery of the Dispute Notice, a face to face meeting of
one or more principal officers of each party shall be held at a mutually
convenient time and location to negotiate a resolution of the Dispute. If
negotiation does not resolve the matter, the parties agree to submit the matter
to mediation within forty (40) days from the date of delivery of the Dispute
Notice. The mediation shall be administered in accordance with American
Arbitration Association's Commercial Mediation Rules. The mediator will not have
power to decide the Dispute, but will use mediation techniques to assist the
Parties in reaching a resolution. The costs of such mediation shall be shared
equally 50% by the Buyer and 50% by the Sellers. If the Dispute is not resolved
by negotiation or mediation within fifty (50) days of delivery of the Dispute
Notice, the Parties agree to submit the matter in dispute to binding arbitration
which shall be conducted before JAMS/Endispute, Inc. ("JAMS") in accordance with
the rules and regulations promulgated by JAMS as in effect at the time of the
commencement of the arbitration. The arbitration shall be held before a single
arbitrator acceptable to the Parties . If the Parties cannot agree on a single
arbitrator, then (i) the Buyer shall choose one arbitrator and the Sellers shall
choose one arbitrator and (ii) a third arbitrator shall be chosen by the other
two arbitrators; provided, that each Arbitrator chosen under (i) and (ii) above
shall not be an Affiliate of any party to such arbitration (the
"Arbitrator(s)"). The Arbitrator(s) shall be bound by the terms of this
Agreement. Any award made by the Arbitrator(s) shall be binding on the parties.
Notwithstanding the foregoing provisions, any Party at any time may require that
a matter in dispute be submitted directly to arbitration, irrespective of
whether negotiation or mediation has been attempted or completed. Such
arbitration shall be held in New York, New York. The Arbitrator shall have the
authority, taking into account the Parties' desire that any arbitration
proceeding hereunder be reasonably expedited and efficient, to permit the
Parties to conduct discovery. Any such discovery shall be (i) guided generally
by and be no broader than permitted under the United States Federal Rules of
Civil Procedure and (ii) subject to the Arbitrator and the Parties entering into
a mutually acceptable confidentiality agreement. The Arbitrator's or
Arbitrators' decision and award in any such arbitration shall be made and
delivered within 120 days of the date on which such arbitration proceedings
commenced. The Arbitrator's or Arbitrators' decision shall be in writing and
shall be as brief as possible and will include the basis for the Arbitrator's
decision. A record of the arbitration proceeding shall be kept. Judgment on the
award rendered by the Arbitrator may be entered into any court having
jurisdiction thereof. The Arbitrator shall have the power but not the obligation
to award to the Party it deems to have prevailed, all or a portion of the costs
of the arbitration (including, transcripts, room rental fees and fees and
expenses of the arbitrator and JAMS, and the reasonable legal fees, costs and
disbursements of the prevailing Party thereto); provided, that if court
proceedings to stay litigation or compel arbitration are necessary, the
non-prevailing Party in such proceedings shall pay all reasonable costs,
expenses, and attorney's fees incurred in connection with such court
proceedings. The Parties hereto acknowledge and agree that this Section 9.8
shall not limit the right of any Party to seek from a court of competent
jurisdiction any equitable relief with respect to the Dispute to which such
Party may otherwise be entitled, including, without limitation, specific
performance or injunctive or other relief. The Parties agree to participate in
any arbitration in good faith.

Section 9.9    Severability.

Any term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity of unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement in such jurisdiction or in
any other jurisdiction. If any provision of this Agreement is deemed to be so
broad as to be unenforceable, such provision shall be interpreted to be only so
broad as is enforceable.

Section 9.10    Assignment.

Neither this Agreement nor any of the rights or obligations hereunder shall be
assignable by any Party without the written consent of the other Parties.

Section 9.11    Accounting Terms.

Accounting terms used herein and not otherwise defined herein shall be construed
in accordance with United States Generally Accepted Accounting Principles (GAAP)
and definitions consistently applied.

Section 9.12    Singular and Plural.

Words used herein in the singular, where the context so permits, shall be deemed
to include the plural and vice versa. The definitions of words in the singular
herein shall apply to such words when used in the plural where the context so
permits and vice versa.

Section 9.13    Headings.

The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.

Section 9.14    Expenses.

Except as otherwise specifically provided herein, all costs and expenses in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the Parties, as the case may be, depending upon which Party incurred
such costs and expenses; provided, however, that the Buyer agrees to pay all
filing fees associated with any filings made under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.

Section 9.15    Counterparts.

This Agreement may be executed in one or more counterparts, each of which
counterparts shall be deemed to be an original, and all such counterparts shall
constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties have caused their respective duly authorized
representatives to execute this Agreement as of the date first written above.

GOTTSCHALKS INC.:

By: /s/ James Famalette

Title: President & CEO

HOUSEHOLD BANK (SB), N.A.:

By: /s/ Richard C. Klesse

Title: Vice President

GOTTSCHALKS CREDIT RECEIVABLES CORPORATION:

By: /s/ Michael Geele

Title: President

 

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EXHIBIT A

ESTIMATED AND FINAL CLOSING STATEMENTS

Indebtedness (as calculated below) $_______________

Plus: Accrued Interest $_______________

Total Receivables Purchased $_______________

Plus: Prepaid Program Fee $_______________

Total Purchase Price $_______________

Indebtedness shall be calculated as follows:

Total accounts receivable (including Accounts and accounts

that do not satisfy the definition of an Account) $_______________

Less: Charged Off accounts $_______________

Less: Bankruptcy accounts $_______________

Less: Reaffirmation accounts $_______________

Less: Deceased accounts $_______________

Less: Fraud accounts $_______________

Less: Lost or Stolen accounts $_______________

Less: Pending Litigation accounts $_______________

Indebtedness (Total) $_______________

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EXHIBIT B

CALCULATION OF ACCRUED INTEREST

Estimated Accrued Interest Report

Cycle #

Cycle Date

Cycle Period

Billed Interest

# Days in Cycle

Average Interest Per Day

# Days to 1/31

Estimated
Accrued
Interest

1

01/01/2003

12/2/02-1/1/03

-

31

-

30

-

2

01/05/2003

12/6/02-1/5/03

-

31

-

26

-

3

01/08/2003

12/9/02-1/8/03

-

31

-

23

-

4

01/11/2003

12/12/02-1/11/03

-

31

-

20

-

5

01/14/2003

12/15/02-1/14/03

-

31

-

17

-

6

01/15/2003

12/16/02-1/15/03

-

31

-

16

-

7

01/19/2003

12/20/02-1/19/03

-

31

-

12

-

8

01/23/2003

12/24/02-1/23/03

-

31

-

8

-

9

01/26/2003

12/27/02-1/26/03

-

31

-

5

 

10

01/28/2003

12/29/02-1/28/03

-
_________

31

-

3

___________

Total

   

-
________

     

-
_________

               

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EXHIBIT C

ASSUMPTION AGREEMENT

THIS ASSUMPTION AGREEMENT (this "Agreement") is made and entered into as of the
___ day of January, 2003 by and among Gottschalks Credit Receivables Corporation
("GCRC"), Gottschalks Inc. ("Gottschalks" together with GCRC the "Sellers"), and
Household Bank (SB), N.A. ("Buyer"), pursuant to that certain Purchase and Sale
Agreement dated as of January ___, 2003 (the "Purchase Agreement") among Sellers
and Buyer. Capitalized terms not otherwise defined herein have the meanings
given such terms in the Purchase Agreement.

WHEREAS, each Seller desires to sell and assign to Buyer and Buyer wishes to
purchase and accept from each Seller, for the consideration and upon the terms
and conditions set forth in the Purchase Agreement, all of such Seller's right,
title and interest in, to and under the Accounts and Customer Structure
(collectively, the "Account Portfolio Assets"), on and after the Cut-Off Time
applicable to such Account Portfolio Assets;

NOW, THEREFORE, pursuant to the Purchase Agreement, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed that:

Acceptance and Assumption.
Buyer hereby assumes and agrees to pay, perform in accordance with the terms of
and be bound by each Seller's obligations that are to be performed after each
Closing Date with respect to, and under, the Account Portfolio Assets of such
Seller sold, granted, conveyed, delivered, transferred or assigned to Buyer on
each such Closing Date.
Benefit: Governing Law.
This Agreement shall inure to the benefit of, and be binding upon, the
respective successors and assigns of the parties hereto and shall be governed by
and construed and interpreted in accordance with the Purchase Agreement, the
internal laws of the State of New York, without regard to principles of
conflicts of laws, and applicable federal law.
Effect on Purchase Agreement.
Nothing contained in this Agreement shall be deemed to supersede any of the
obligations, agreements, covenants, representations or warranties of Sellers or
Buyer contained in the Purchase Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives the day and year first above written.

 

GOTTSCHALKS CREDIT RECEIVABLES CORPORATION

By: /s/ Michael Geele

Title: President

 

GOTTSCHALKS INC.

By: /s/ James Famalette

Title: President & CEO

HOUSEHOLD BANK (SB), N.A.:

By: /s/ Richard C. Klesse

Title: Vice President

 

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EXHIBIT D

BILL OF SALE

THIS BILL OF SALE (this "Bill of Sale") is made and entered into as of the ___
day of January, 2003 by and among Gottschalks Credit Receivables Corporation
("GCRC"), Gottschalks Inc. ("Gottschalks" together with GCRC the "Sellers"), and
Household Bank (SB), N.A. ("Buyer"), pursuant to that certain Purchase and Sale
Agreement dated as of January ___, 2003 (the "Purchase Agreement") among Sellers
and Buyer. Capitalized terms not otherwise defined herein have the meanings
given such terms in the Purchase Agreement.

WHEREAS, each Seller desires to sell and assign to Buyer and Buyer wishes to
purchase and accept from each Seller, for the consideration and upon the terms
and conditions set forth in the Purchase Agreement, all of such Seller's right,
title and interest in, to and under the Accounts and Customer Structure,
(collectively, the "Account Portfolio Assets") on and after the Cut-Off Time
applicable to such Account Portfolio Assets;

NOW, THEREFORE, pursuant to the Purchase Agreement, and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed that:

Sale and Transfer.
Each Seller hereby sells, grants, conveys, delivers, transfers, and assigns to
Buyer and its successors and assigns all of such Seller's right, title and
interest in the Account Portfolio Assets on the Closing Date applicable to such
Account Portfolio Assets, to have and to hold the Account Portfolio Assets for
its or their own use and benefit forever.
Representations and Warranties.
The transfer of the Account Portfolio Assets pursuant to Section (a) hereof is
subject to the representations and warranties contained in the Purchase
Agreement that survive the Closing.
Benefit: Governing Law.
This Bill of Sale shall inure to the benefit of, and be binding upon, the
respective successors and assigns of the parties hereto and shall be governed by
and construed and interpreted in accordance with the Purchase Agreement, the
internal laws of the State of New York, without regard to principles of
conflicts of laws, and applicable federal law.
Effect on Purchase Agreement.
Nothing contained in this Bill of Sale shall be deemed to supersede any of the
obligations, agreements, covenants, representations or warranties of Sellers or
Buyer contained in the Purchase Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Bill of Sale to be
executed by their duly authorized representatives the day and year first above
written.

GOTTSCHALKS CREDIT RECEIVABLES CORPORATION

By: /s/ Michael Geele

Title: President

 

GOTTSCHALKS INC.

By: /s/ James Famalette

Title: President & CEO

HOUSEHOLD BANK (SB), N.A.:

By: /s/ Richard C. Klesse

Title: Vice President

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EXHIBIT E

BROKERS

Financo Inc.

 

 

 

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