Exhibit 10.46

Second AMENDMENT TO CREDIT AGREEMENT

SECOND AMENDMENT, dated as of March 22, 2002 (this "Amendment"), to theCredit Agreement referred to below, is entered into by and among GOTTSCHALKS INC., a Delawarecorporation ("Borrower"); GENERAL ELECTRIC CAPITAL CORPORATION, a Delawarecorporation (in its individual capacity, "GE Capital"), for itself, as aLender, and as Agent for Lenders; The CIT GROUP/BUSINESS CREDIT, INC., as a Lender; LASALLE RETAILFINANCE, a division of LASALLE BUSINESS CREDIT, Inc, as agent for STANDARD FEDERAL BANK NATIONALASSOCIATION, as a Lender; and FOOTHILL CAPITAL CORPORATION, as a Lender.

W I T N E S S E T H

WHEREAS, Borrower, Agent and Lenders are parties to that certain Credit Agreement dated as ofJanuary 31, 2002 (as amended, supplemented or otherwise modified from time to time, the"Credit Agreement"); 

WHEREAS, Borrower, Kimco Capital Corporation ("Kimco"), a Delaware corporation,for itself, as a Lender, and as Agent for Lenders, and the other Lenders signatory thereto from timeto time, are entering into that certain Credit Agreement dated as of March 22, 2002 (the"Kimco Credit Agreement"); 

WHEREAS, concurrently herewith, Agent, each Lender and Kimco are entering into that certainIntercreditor Agreement dated as of March 22, 2002; and

WHEREAS, Borrower, Agent and Lenders have agreed to amend the Credit Agreement in the manner, andon the terms and conditions, provided for herein;

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration,the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto herebyagree as follows:

Definitions
.  Capitalized terms not otherwise defined herein shall have the meaningsascribed to them in the Credit Agreement.
Amendment to Section 5.18 of the Credit Agreement
.  Section 5.18(c) of the CreditAgreement is hereby amended as of the Amendment Effective Date by replacing the reference to"sixty (60) days" (appearing in Section 5.18(c)) with "ninety (90) days".
Amendment to Section 6.3 of the Credit Agreement
.  Section 6.3 of the Credit Agreement ishereby amended as of the Amendment Effective Date by adding the following as clause (c)thereof:

"(c)   In connection with and to effect the refinancing of the Heller Notes pursuant toSection 6.3(a)(v)(1) and provided that Borrower shall at all times cause any KimcoIndebtedness or Liens relating thereto to be subject to an intercreditor agreement in form andsubstance reasonably acceptable to Agent, Borrower may incur and permit to exist the KimcoIndebtedness, and, in connection with such Kimco Indebtedness (and pursuant to Section6.7(c)) , Borrower may (i) grant a senior security interest in the Kimco Mortgaged Properties tothe Kimco Lenders as security for the Kimco Indebtedness, provided, that Borrowerconcurrently grants (pursuant to execution and delivery of Mortgages in form and substancesatisfactory to Agent) a junior security interest in the Kimco Mortgaged Properties to Agent, foritself and for the benefit of Lenders, to secure the Obligations under the Loan Documents and,within five (5) Business Days thereafter causes the delivery and/or occurrence of the additionalrequirements relating thereto set forth in Section 5.9(b) (or, with respect to titleinsurance policies, obtains within such five (5) Business Day period a signed commitment from theapplicable title insurance company for the issuance of such title insurance, in form and substancereasonably acceptable to Agent), and (ii) grant a junior security interest to the Kimco Lenders inother of the Borrower's assets as security for the Kimco Indebtedness, provided, that, priorto granting any such junior security interest to the Kimco Lenders, Borrower shall have deliveredwritten notice thereof (or, with respect to the initial grant of security interests to the KimcoLenders in connection with the execution and delivery of the Kimco Credit Agreement, copies of therelevant documents granting the same) to Agent and shall have granted a security interest in allsuch other assets to the Agent, for itself and for the benefit of Lenders, to secure theObligations, in accordance with Section 5.9 hereof and otherwise in form and substance satisfactoryto the Agent, that shall at all times be senior in all respects to any such security interestgranted to the Kimco Lenders."
Amendment to Section 6.19 of the Credit Agreement
.  Section 6.19 of the Credit Agreementis hereby amended as of the Amendment Effective Date by deleting subparagraph (a) and replacing itwith the following:

"(a)	No Credit Party shall change or amend the terms of the Kimco Indebtedness or anySubordinated Debt, or any indenture, mortgage or agreement in connection with any such Indebtedness(including, with respect to the Kimco Indebtedness, the Kimco Credit Agreement and the "LoanDocuments" as defined therein) if the effect of such amendment is to:  (i) increase theinterest rate on such Indebtedness; (ii) change the dates upon which payments of principal orinterest are due on such Indebtedness other than to extend such dates; (iii) change any defaultor event of default other than to delete or make less restrictive any default provision therein, oradd any covenant with respect to such Indebtedness; (iv) change the redemption or prepaymentprovisions of such Indebtedness other than to extend the dates therefor or to reduce the premiumspayable in connection therewith; (v) grant any security or collateral to secure payment of suchIndebtedness except, with respect to Kimco Indebtedness, as permitted under Section 6.3(c)and 6.7(c) hereof; or (vi) change or amend any other term if such change or amendmentwould materially increase the obligations of the Credit Party thereunder or confer additionalmaterial rights on the holder of such Indebtedness in a manner adverse to any Credit Party, Agent orany Lender." 
Amendment to Annex A to the Credit Agreement
.  Annex A to the Credit Agreement is herebyamended as of the Amendment Effective Date by:
- Deleting the definition of Mortgaged Properties and replacing it with the following:
""Mortgaged Properties" has the meaning assigned to it in Section5.9(b) hereto and shall include, in addition (for all uses of such term other than in Section5.9(b)), any other Real Estate of any Credit Party which may from time to time become subject toa mortgage in the favor of the Agent securing the Obligations."
- Adding in alphabetical order the following definitions for the terms "Kimco","Kimco Credit Agreement", "Kimco Indebtedness", "Kimco Lenders" and"Kimco Mortgaged Properties" that shall read in full as follows:

""Kimco" means Kimco Capital Corporation, a Delaware corporation."

 ""Kimco Credit Agreement" means that certain Credit Agreement, dated March22, 2002, among Borrower, Kimco, for itself as a Kimco Lender, and as agent for the Kimco Lenders,and the other Kimco Lenders signatory thereto from time to time, as it may be amended or otherwisemodified from time to time subject to Section 6.19 hereof." 

 ""Kimco Indebtedness" means Indebtedness of Borrower to the Kimco Lenderspursuant to the Kimco Credit Agreement and documents relating thereto, in an aggregate principalamount not to exceed $16,000,000."

""Kimco Lenders" means "Lenders" as defined in the Kimco CreditAgreement."

""Kimco Mortgaged Properties" means the parcels of real property owned orleased by Borrower and located at the following addresses: (i) 313 Madonna Road, San Luis Obispo,California, 93405; (ii) 1673 West Lacey Blvd., Hanford, California 93230; and (iii) 10317 SilverdaleWay North, Silverdale, Washington 98383, together with all buildings, improvements, appurtenances,fixtures, easements and other rights incidental to the ownership of such parcels of real property orany of the foregoing, including, without limitation, the benefits under all reciprocal easementagreements or similar documents related to each of the foregoing properties."
Amendment to Annex E of the Credit Agreement
.  Annex E of the Credit Agreement is herebyamended as of the Amendment Effective Date to delete paragraph (h) in its entirety and replace itwith the following new paragraph (h) that shall read in full as follows:

"(h)	Debt and Equity Notices.  To Agent, as soon as practicable, copies of allmaterial written notices given or received by any Credit Party with respect to any such Person's (i)Indebtedness permitted under Sections 6.3(a)(v)(1), (vii) or (ix) hereof (including the KimcoIndebtedness), (ii) Stock, or (iii) Subordinated Debt, and, within 2 Business Days after any Creditparty obtains knowledge of any matured or unmatured event of default with respect to any suchIndebtedness permitted under Sections 6.3(a)(v)(1), (vii) or (ix) hereof or SubordinatedDebt, notice of such event of event of default."
Representations and Warranties
.  To induce Agent and Lenders to enter into thisAmendment, Borrower hereby represents and warrants that:
- The execution, delivery and performance by Borrower of this Amendment are within Borrower'scorporate power and have been duly authorized by all necessary corporate and shareholderaction.
- This Amendment has been duly executed and delivered by or on behalf of Borrower.
- This Amendment constitutes a legal, valid and binding obligation of Borrower enforceable againstBorrower in accordance with its terms, except as enforceability may be limited by applicablebankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rightsgenerally and by general equitable principles (whether enforcement is sought by proceedings inequity or at law).
- No Default has occurred and is continuing after giving effect to this Amendment.
- No action, claim or proceeding is now pending or, to the knowledge of Borrower, threatenedagainst Borrower, at law, in equity or otherwise, before any court, board, commission, agency orinstrumentality of any federal, state, or local government or of any agency or subdivision thereof,or before any arbitrator or panel of arbitrators, (i) which challenges Borrower's right, power, orcompetence to enter into this Amendment or, to the extent applicable, perform any of its obligationsunder this Amendment, the Credit Agreement as amended hereby or any other Loan Document, or thevalidity or enforceability of this Amendment, the Credit Agreement as amended hereby or any otherLoan Document or any action taken under this Amendment, the Credit Agreement as amended hereby orany other Loan Document or (ii) which if determined adversely, is reasonably likely to have orresult in a Material Adverse Effect after giving effect to this Amendment.  To the knowledge ofBorrower, there does not exist a state of facts which is reasonably likely to give rise to suchproceedings.
No Other Amendments
.  Except as expressly amended herein, the Credit Agreement shall beunmodified and shall continue to be in full force and effect in accordance with its terms.
Expenses
.  Borrower hereby reconfirms its obligations pursuant to Section 11.3 of theCredit Agreement to pay and reimburse Agent for all reasonable costs and expenses (including,without limitation, reasonable fees of counsel) incurred in connection with the negotiation,preparation, execution and delivery of this Amendment and all other documents and instrumentsdelivered in connection herewith. 
Effectiveness
.  This Amendment shall become effective as of March 22, 2002 (the"
Amendment Effective Date
") only upon satisfaction in full in the judgment of theLender of each of the following conditions on or prior to March 22, 2002:
Documents
.  Agent shall have received this Amendment duly executed and delivered byAgent, all Lenders and Borrower and consented and agreed to by GCRC.
Payment of Expenses
.  Borrower shall have paid to Agent and Lenders all costs, fees andexpenses owing in connection with this Amendment and the other Loan Documents and due to Agent orLenders (including, without limitation, reasonable legal fees and expenses), in each case to theextent billed to Borrower or otherwise scheduled to be paid on or before the Amendment EffectiveDate.
Representations and Warranties
.  All representations and warranties of or on behalf ofthe Credit Parties or GCRC in this Amendment and all the other Loan Documents shall be true andcorrect in all material respects with the same effect as though such representations and warrantieshad been made on and as of the date hereof and on and as of the date that the other conditionsprecedent in this Section 10
have been satisfied.

In the event that each of the foregoing conditions precedent has not been satisfied on or priorto March 22, 2002, this Amendment shall become, upon written notice by Agent to Borrower, null andvoid and of no force or effect.
GOVERNING LAW
.  THIS AMENDMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH,THE LAW OF THE STATE OF NEW YORK.
Counterparts
.  This Amendment may be executed by the parties hereto on any number ofseparate counterparts and all of said counterparts taken together shall be deemed to constitute oneand the same instrument.

 

 

 
**[Signature Page to Follow]**
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed anddelivered as of the day and year first above written.
**GOTTSCHALKS INC.

By:  /s/ Michael S. Geele**