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Chinese Everbright to invest $30 mn in Gottschalks

27
Nov '08
Gottschalks Inc announced that it has signed a definitive agreement for up to a $30 million investment in the Company by Everbright Development Overseas Ltd. ("Everbright"), a British Virgin Islands corporation, as well as a strategic business partnership to establish direct sourcing and consignment product sales at Gottschalks and launch a new wholesale business.

Under the terms of the definitive agreement, in addition to Everbright's investment in the Company, Gottschalks will receive all of the issued and outstanding capital stock, trademarks, patents and licenses of Everbright Asia Limited ("Everbright Asia"), a British Virgin Islands corporation, and will establish a new wholesale business from which Gottschalks will receive all profits.

Under the terms of the definitive agreement, Everbright's investment will consist of a $15 million acquisition of newly-issued shares of Gottschalks common stock, a capital call of up to $15 million in the form of a capital contribution or loan that will be used for additional support to fund the Company's credit facility, the potential to acquire additional shares of Gottschalks common stock based upon a pre-tax income threshold, and warrants to acquire additional shares of Gottschalks common stock.

Jim Famalette, Chairman and Chief Executive Officer of Gottschalks, stated, "We are very pleased to have reached this definitive agreement with Everbright. At the closing of the transaction, the new investment will serve to strengthen our financial position. This strategic business partnership will enable us to leverage Everbright's international sourcing network to enhance our operations and also provide our customers with new quality products at very attractive price points.”

“In addition, we would be able to launch and test an expanded merchandise assortment with very limited risk as select manufacturers utilize our stores to provide consignment products. Further, we expect this agreement will allow us to diversify our traditional business model with more direct business to business, and direct to consumer product sales from the network through our relationship with Everbright. Taken together, we anticipate our partnership with Everbright will support our long- term growth initiatives, allow the Company to diversify its business model, and have a positive impact on our results over time."

Mai Wong, Chairman of Everbright, stated, "We are pleased we have signed this definitive agreement to invest in, and partner with, Gottschalks to help them achieve their future growth plans."

"Over the years, the Company has established itself as a leader in offering the best brands and quality merchandise to customers in their markets and we look forward to utilizing their presence to provide many of our international manufacturers with an attractive entrance into the U.S. We are especially pleased to be able to leverage Gottschalks' business to expand our exclusive consumer membership program, which was developed by Everbright in China over the last eight years, and is a driving aspect behind Everbright's investment in Gottschalks."

"As Everbright and Gottschalks work to implement our many partnership initiatives, we hope to create opportunities to expand this program to consumers across the U.S. over time. We strongly believe this relationship will allow Gottschalks and Everbright to build on the complementary aspects of our businesses."

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Gottschalks


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