Document/Exhibit Description Pages Size
1: 8-K Current Report 4± 24K
10: EX-2.10 Plan of Acquisition, Reorganization, Arrangement, 54± 227K
Liquidation or Succession
11: EX-2.11 Plan of Acquisition, Reorganization, Arrangement, 42± 175K
Liquidation or Succession
2: EX-2.2 Plan of Acquisition, Reorganization, Arrangement, 9± 39K
Liquidation or Succession
3: EX-2.3 Plan of Acquisition, Reorganization, Arrangement, 12± 56K
Liquidation or Succession
4: EX-2.4 Plan of Acquisition, Reorganization, Arrangement, 6± 27K
Liquidation or Succession
5: EX-2.5 Plan of Acquisition, Reorganization, Arrangement, 6± 24K
Liquidation or Succession
6: EX-2.6 Plan of Acquisition, Reorganization, Arrangement, 17± 79K
Liquidation or Succession
7: EX-2.7 Plan of Acquisition, Reorganization, Arrangement, 7± 36K
Liquidation or Succession
8: EX-2.8 Plan of Acquisition, Reorganization, Arrangement, 54± 225K
Liquidation or Succession
9: EX-2.9 Plan of Acquisition, Reorganization, Arrangement, 54± 226K
Liquidation or Succession
EX-2.6 — Plan of Acquisition, Reorganization, Arrangement, Liquidation or Succession
Exhibit Table of Contents
STOCKHOLDERS' AGREEMENT
by and among
EL CORTE INGLES, S.A.,
GOTTSCHALKS INC.,
JOSEPH LEVY
and
BRET LEVY
dated as of
August 20, 1998
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions 1
Section 1.1 "Affiliate" 1
Section 1.2 "Agreement" 1
Section 1.3 "Asset Purchase Agreement" 2
Section 1.4 "Beneficially Own" 2
Section 1.5 "Board" 2
Section 1.6 "Change in Control" 2
Section 1.7 "Closing" 3
Section 1.8 "Gottschalks Common Stock" 3
Section 1.9 "Designated Board" 3
Section 1.10 "Director" 3
Section 1.11 "Early Standstill
Termination Event" 4
Section 1.12 "ECI" 4
Section 1.13 "Exchange Act" 4
Section 1.14 "fully diluted" 4
Section 1.15 "Gottschalks" 4
Section 1.16 "Harris" 4
Section 1.17 "Governmental Entity" 4
Section 1.18 "Group" 4
Section 1.19 "Independent Nominees" 4
Section 1.20 "Investor" 4
Section 1.21 "Investor Nominees" 4
Section 1.22 "Management" 4
Section 1.23 "Management Nominees" 4
Section 1.24 "Nominating Committee" 4
Section 1.25 "person" 4
Section 1.26 "Securities Act" 5
Section 1.27 "Standstill Agreement" 5
Section 1.28 "Subsidiary" 5
Section 1.29 "Transfer" 5
Section 1.30 "Transferee" 5
Section 1.31 "Voting Securities" 5
ARTICLE 2 Board of Directors 5
Section 2.1 Members of the Board 5
Section 2.2 Committee Representation. 8
Section 2.3 Vacancies 8
ARTICLE 3 Voting Rights 9
Section 3.1 Gottschalks Common Stock -
Voting Rights and
Obligations 9
Section 3.2 Management Registration
Rights 9
ARTICLE 4 Restrictions on Transfer 9
Section 4.1 Restrictions on Transfer 9
Section 4.2 Notification of
Restrictions 10
Section 4.3 Notice to Gottschalks 11
Section 4.4 Compliance with Insider
Trading Policy 11
Section 4.5 Compliance with Law 11
ARTICLE 5 Non-Competition 11
ARTICLE 6 Miscellaneous 11
Section 6.1 Term 11
Section 6.2 Counterparts 12
Section 6.3 Governing Law 12
Section 6.4 Entire Agreement 12
Section 6.5 Expenses 12
Section 6.6 Notices 12
Section 6.7 Successors and Assigns 14
Section 6.8 Headings 14
Section 6.9 Amendments and Waivers 14
Section 6.10 Interpretation; Absence
of Presumption 14
Section 6.11 Severability 14
Section 6.12 Further Assurances 14
Section 6.13 Specific Performance 14
Section 6.14 Arbitration 15
Section 6.15 Attorney's Fees 15
THIS STOCKHOLDERS' AGREEMENT (the "Agreement"), dated
as of August 20, 1998, is made by and among El Corte Ingles, S.A.,
a Spanish corporation ("ECI"), Gottschalks Inc., a Delaware
corporation ("Gottschalks"), Joseph Levy, an individual and Bret
Levy, an individual. Capitalized terms used and not defined herein
have the meanings given to them in the Asset Purchase Agreement
(hereinafter defined).
RECITALS
WHEREAS, Gottschalks, ECI and The Harris Company, a California
corporation and a wholly-owned subsidiary of ECI ("Harris"), have
entered into an Asset Purchase Agreement, dated as of July 21, 1998
(the "Asset Purchase Agreement"), pursuant to which Harris has
agreed to sell, and Gottschalks has agreed to purchase,
substantially all of the assets and certain of the liabilities of
Harris for certain consideration, including, but not limited to,
certain shares of Gottschalks Common Stock (hereinafter defined),
upon the terms and subject to the conditions set forth therein; and
WHEREAS, the shares of Gottschalks Common Stock to be issued
pursuant to the Asset Purchase Agreement will be issued to Harris,
ECI's wholly-owned subsidiary; and
WHEREAS, it is a condition to the transactions contemplated by the
Asset Purchase Agreement and the parties believe it to be in their
best interests that they enter into this Agreement and provide for
certain rights and restrictions with respect to the investment by
ECI (through Harris) in Gottschalks, certain rights and
restrictions of Joseph Levy and Bret Levy with respect to their
ownership of Gottschalks Common Stock and the corporate governance
of Gottschalks.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants
and agreements contained herein and for good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE 1
Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "Affiliate" shall have the meaning ascribed thereto in
Rule 12b-2 promulgated under the Exchange Act, and as in effect on
the date hereof.
Section 1.2 "Agreement" shall have the meaning set forth in the
first paragraph hereof.
Section 1.3 "Asset Purchase Agreement" shall have the meaning set
forth in the second paragraph hereof.
Section 1.4 "Beneficially Own" shall mean, with respect to any
security, having direct or indirect (including through any
Subsidiary or Affiliate) "beneficial ownership" of such security,
as determined pursuant to Rule 13d-3 under the Exchange Act,
including pursuant to any agreement, arrangement or understanding,
whether or not in writing.
Section 1.5 "Board" shall mean the board of directors of
Gottschalks.
Section 1.6 "Change in Control" shall mean the occurrence of any of
the following events:
(a) An acquisition (other than directly from Gottschalks) of any
Voting Securities by any person immediately after which such person
has Beneficial Ownership of fifty percent (50%) or more of the
combined voting power of Gottschalks' then outstanding Voting
Securities; provided, however, in determining whether a Change in
Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (1) an
employee benefit plan (or a trust forming a part thereof)
maintained by (i) Gottschalks or (ii) a Subsidiary of Gottschalks,
(2) Gottschalks or any Subsidiary of Gottschalks, (3) any person or
Group who, immediately prior to the date hereof had Beneficial
Ownership of fifteen percent (15%) or more of the Gottschalks
Common Stock or (4) any person in connection with a "Non-Control
Transaction" (as hereinafter defined).
(b) A merger, consolidation or reorganization involving
Gottschalks, unless:
(i) the stockholders of Gottschalks immediately before such
merger, consolidation or reorganization, own, directly or
indirectly immediately following such merger, consolidation or
reorganization, at least fifty percent (50%) of the combined voting
power of the outstanding voting securities of the corporation
resulting from such merger or consolidation or reorganization (the
"Surviving Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately before such
merger, consolidation or reorganization; and
(ii) the individuals who were members of the Designated
Board immediately prior to the execution of the agreement providing
for such merger, consolidation or reorganization constitute at
least two-thirds of the members of the Board of the Surviving
Corporation; and
(iii) no person (other than Gottschalks or any Subsidiary of
Gottschalks, any employee benefit plan (or any trust forming a
part thereof) maintained by Gottschalks, the Surviving Corporation
or any Subsidiary of Gottschalks, or any person who, immediately
prior to such merger, consolidation or reorganization had
Beneficial Ownership of twenty-five percent (25%) or more of the
then outstanding Voting Securities) has Beneficial Ownership of
twenty-five percent (25%) or more of the combined voting power of
the Surviving Corporation's then outstanding voting securities; and
(iv) a transaction described in clauses (i) through (iii) of
this paragraph (b) shall herein be referred to as a "Non-Control
Transaction."
(c) A complete liquidation or dissolution of Gottschalks.
(d) An agreement for the sale or other disposition of all or
substantially all of the assets of Gottschalks to any person (other
than a transfer to a Subsidiary).
(e) The acquisition of any Voting Securities by Joseph Levy,
Sharon Levy or their lineal descendents immediately after which
Joseph Levy, Sharon Levy and their lineal descendents together have
a pecuniary interest in more than fifty percent (50%) of
Gottschalks' then outstanding equity securities.
(f) The acquisition of any Voting Securities by Gerald Blum, his
spouse or his lineal descendents immediately after which Gerald
Blum, his spouse and his lineal descendents together have a
pecuniary interest in more than fifty percent (50%) of Gottschalks'
then outstanding equity securities.
(g) Buyer is no longer a reporting company under the Exchange
Act.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any person (the "Subject Person")
acquired Beneficial Ownership or pecuniary interest of more than
the permitted amount of the outstanding Voting Securities or equity
securities as a result of the acquisition of Voting Securities or
equity securities by Gottschalks which, by reducing the number of
Voting Securities or equity securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject
Person or in which the subject person has a pecuniary interest,
provided that if a Change in Control would occur (but for the
operation of this sentence) as a result of the acquisition of
Voting Securities by Gottschalks, and after such share acquisition
by Gottschalks, the Subject Person becomes the Beneficial Owner of
the additional Voting Securities which increases the percentage of
the then outstanding Voting Securities Beneficially Owned by the
Subject Person, then a Change in Control shall occur.
Section 1.7 "Closing" shall have the meaning set forth in the Stock
Purchase Agreement.
Section 1.8 "Gottschalks Common Stock" shall mean the common stock,
par value $0.01 per share, of Gottschalks.
Section 1.9 "Designated Board" shall have the meaning set forth in
Section 2.1(a).
Section 1.10 "Director" shall mean a member of the Board.
Section 1.11 "Early Standstill Termination Event" shall have
the meaning set forth in the Standstill Agreement.
Section 1.12 "ECI" shall have the meaning set forth in the
first paragraph hereof.
Section 1.13 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
Section 1.14 "fully diluted" shall mean, with respect to the
Gottschalks Common Stock, the total number of outstanding shares of
Gottschalks Common Stock (for such purposes, treating as
outstanding Gottschalks Common Stock all options or warrants to
purchase and securities convertible into (or exchangeable or
redeemable for) the Gottschalks Common Stock as of the relevant
measurement date).
Section 1.15 "Gottschalks" shall have the meaning set forth in
the first paragraph hereof.
Section 1.16 "Harris" shall have the meaning set forth in the
second paragraph hereof.
Section 1.17 "Governmental Entity" means any government or any
agency, bureau, board, commission, court, department, official,
political subdivision, tribunal or other instrumentality of any
government, whether federal, state or local, domestic or foreign.
Section 1.18 "Group" shall mean a "group" as such term is used
in Section 13(d)(3) of the Exchange Act.
Section 1.19 "Independent Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.20 "Investor" shall mean ECI (through Harris),
together with and any Transferee, and so long as Harris and any
Transferee own shares of Gottschalks Common Stock, such persons
shall be treated as one entity for the purposes of this Agreement.
Section 1.21 "Investor Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.22 "Management" shall mean Joseph Levy and Bret
Levy.
Section 1.23 "Management Nominees" shall have the meaning set
forth in Section 2.1(a).
Section 1.24 "Nominating Committee" shall mean the nominating
committee of the Board as it is constituted from time to time.
Section 1.25 "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust,
unincorporated organization, other form of business or legal entity
or Governmental Entity.
Section 1.26 "Securities Act" shall mean the Securities Act of
1933, as amended.
Section 1.27 "Standstill Agreement" shall mean that certain
Standstill Agreement by and between ECI and Gottschalks dated the
date hereof.
Section 1.28 "Subsidiary" shall mean any corporation,
partnership limited liability company, joint venture, business
trust or other entity of which the specified person, directly or
indirectly, owns or controls 50% or more of the securities or other
interests entitled to vote in the election of directors (or others
performing similar functions) with respect to such corporation or
other organization, or otherwise has the ability to control such
corporation, partnership, limited liability company, joint venture,
business trust or other entity.
Section 1.29 "Transfer" shall have the meaning set forth in
Section 4.1.
Section 1.30 "Transferee" shall mean any Affiliate of Harris
to whom Harris has transferred shares of Gottschalks Common Stock
pursuant to Section 4.1(a)(iii) of this Agreement.
Section 1.31 "Voting Securities" shall mean at any time shares
of any class of capital stock of Gottschalks which are then
entitled to vote generally in the election of Directors.
ARTICLE 2
Board of Directors
Section 2.1 Members of the Board.
(a) Prior to the Closing, the Board is comprised of three members
of management of Gottschalks, one person related to certain members
of management of Gottschalks and five independent directors.
Immediately following the Closing, Gottschalks, Management and ECI
will take all action necessary to cause two Investor Nominees
(hereinafter defined) to be added to the Board. Thereafter,
subject to the terms of this Agreement, at each annual or special
meeting of stockholders of Gottschalks at, or the taking of action
by written consent of stockholders of Gottschalks with respect to,
which any Directors are to be elected, Gottschalks, Management and
Investor will take all action required by this Agreement to cause
the Board to be structured to consist of eleven (11) members, of
which two (2) members will be designees of ECI (the "Investor
Nominees") and the remaining nine (9) members will consist of
members of management or persons affiliated with management that
are designated by Management (the "Management Nominees") and
independent directors (the "Independent Nominees"), collectively,
the "Designated Board"; provided, however, that the Designated
Board shall be increased to twelve (12) members, and Investor shall
be entitled to a total of three (3) representatives on the
Designated Board, if and during such time as Investor Beneficially
Owns a number of shares of Gottschalks Common Stock equal to at
least 30% of the outstanding Gottschalks Common Stock, on a fully
diluted basis.
(b) Investor's representation on the Designated Board will be
reduced to one representative and the size of the Designated Board
will be reduced by the number of Investor Nominees so resigning if
either: (i) Investor disposes of more than 700,000 shares of
Gottschalks Common Stock; or (ii) Investor and its Affiliates
Beneficially Own a number of shares of Gottschalks Common Stock
equal to less than 10% of the outstanding Gottschalks Common Stock,
on a fully diluted basis.
(c) Investor's representation on the Board will be terminated on
the earlier of: (i) the date Investor disposes of more than
1,350,000 shares of Gottschalks Common Stock; or (ii) Investor and
its Affiliates Beneficially Own a number of shares of Gottschalks
Common Stock equal to less than 5% of the outstanding Gottschalks
Common Stock, on a fully diluted basis.
(d) Subject to the terms of this Agreement: (i) Investor has the
right to designate the Investor Nominees; (ii) Joseph Levy (if he
is alive and has the capacity) or Bret Levy (if Joseph Levy is not
alive or no longer has the capacity) has the right to designate the
Management Nominees; and (iii) the Nominating Committee, or the
Board if there is no Nominating Committee, has the right to
designate the Independent Nominees. In the event both Joseph Levy
and Bret Levy are deceased or incapacitated, the Management
Nominees shall be chosen by the Chief Executive Officer of
Gottschalks.
(e) Investor and Management each agrees not to name any person as
a nominee to the Board if (i) such person is not reasonably
experienced in business or financial matters, (ii) such person has
been convicted of, or has pled nolo contendere to, a felony, (iii)
the election of such person would violate any law, or (iv) any
event required to be disclosed pursuant to Item 401(f) of
Regulation S-K of the Exchange Act has occurred with respect to
such person. Investor and Management, respectively, shall each use
reasonable efforts to afford the Independent Nominees of
Gottschalks a reasonable opportunity to meet any individual that it
is considering naming as a nominee to the Board.
(f) Subject to Section 6.1 of this Agreement, Gottschalks will
support the nomination of and the election of each Investor
Nominee, each Management Nominee and each Independent Nominee to
the Board, and Gottschalks will exercise all authority under
applicable law to cause each Investor Nominee, each Management
Nominee and each Independent Nominee to be elected to the Board as
provided herein. Without limiting the generality of the foregoing,
with respect to each meeting of stockholders of Gottschalks at
which Directors are to be elected, Gottschalks shall use its
reasonable efforts to solicit from the stockholders of Gottschalks
eligible to vote in the election of Directors proxies in favor of
each Investor Nominee, each Management Nominee and each Independent
Nominee.
(g) Subject to Section 6.1 of this Agreement:
(i) During the period under this Agreement, if any, that
Investor shall be entitled pursuant to the proviso of Section
2.1(a) to designate three Investor Nominees, if the total size of
the Board is later increased (other than as the result of an
acquisition transaction approved by the Board) Investor shall be
entitled to a proportionate increase in the number of Investor
Nominees. The new number of Investor Nominees shall be calculated
by multiplying 3/12 by the size of the new Board (excluding any
Directors who have been added as a result of any acquisition
transaction approved by the Board) and rounding the result up to
the next whole number where the resulting fraction is .5 or above.
The table below is provided by way of example:
Number of Directors Number of Investor Nominees
13 3
14 4
15 4
16 4
17 4
(ii) During the period under this Agreement, if any, that
Investor shall be entitled to designate two Investor Nominees, if
the total size of the Board is increased (other than as the result
of an acquisition transaction approved by the Board), Investor
shall be entitled to a proportionate increase in the number of
Investor Nominees. The new number of Investor Nominees shall be
calculated by multiplying 2/11 by the size of the new Board
(excluding any Directors who have been added as a result of any
acquisition transaction approved by the Board) and rounding the
result up to the next whole number where the resulting fraction is
.5 or above. The table below is provided by way of example:
Number of Directors Number of Investor Nominees
12 2
13 2
14 3
15 3
16 3
17 3
(iii) During the period under this Agreement, if any, that
Investor shall be entitled to designate one Investor Nominee, if
the total size of the Board is increased (other than as the result
of an acquisition transaction approved by the Board), Investor
shall be entitled to a proportionate increase in the number of
Investor Nominees. The new number of Investor Nominees shall be
calculated by multiplying 1/11 by the size of the new Board
(excluding any Directors who have been added as a result of any
acquisition transaction approved by the Board) and rounding the
result up to the next whole number where the resulting fraction is
.5 or above. The table below is provided by way of example:
Number of Directors Number of Investor Nominees
12 1
13 1
14 1
15 1
16 1
17 2
(h) If the Board is increased as provided in paragraph (g) of
this Section 2.1, other than those new Directors which must be
Investor Nominees pursuant to such paragraph (g), new Directors to
be added to the Board shall be either Management Nominees or
Independent Nominees. Such Board, as then constituted, will be the
"Designated Board" for all purposes hereunder.
(i) If Investor's right to nominate directors to the Board is
reduced or terminated as set forth in this Agreement, Investor
shall cause the applicable number of its Investor Nominees to
immediately resign (regardless of the remaining term, if any) and,
in the event that the number of Investor Nominees is reduced rather
than terminated, the Designated Board shall be reduced in size by
the number of Investor Nominees so resigning.
(j) Except as otherwise set forth in this Section 2.1,
Gottschalks shall not reduce the number of Investor Nominees or
Independent Nominees without Investor's consent.
Section 2.2 Committee Representation. During such time, if any, as
Investor is entitled to have at least one Investor Nominee on the
Board, unless Investor chooses not to exercise its rights under
this Section 2.2, Gottschalks shall cause at least one Director who
is an Investor Nominee to be appointed to each standing committee
of the Board. Notwithstanding the foregoing, if none of the
Directors who are Investor Nominees would be considered
"independent" of Gottschalks, "disinterested," "nonemployee
directors" and "outside directors" (i) for purposes of any
applicable rule of the New York Stock Exchange or any other
securities exchange or other self-regulating organization requiring
that members of the audit committee of the Board be independent of
Gottschalks or (ii) for purposes of any law or regulation that
requires, in order to obtain or maintain favorable tax, securities,
corporate law or other material legal benefits with respect to any
plan or arrangement for employee compensation or benefits, that the
members of the committee of the Board charged with responsibility
for such plan or arrangement be "independent" of Gottschalks,
"disinterested," "nonemployed directors" or "outside directors,"
then a Director who is an Investor Nominee shall not be required to
be appointed to any such standing committee. In no event shall any
Investor Nominee serve on any committee of the Board evaluating any
transaction or potential transaction involving Gottschalks and any
of Investor, its Affiliates or any Group of which Investor is a
member or such other transaction or potential transaction which
would involve an actual or potential conflict of interest on the
part of the Directors who are Investor Nominees. Any members of
any committee who are Investor Nominees shall, in the event of any
vacancy in such membership, be replaced by a Director who is an
Investor Nominee elected by the Directors who are Investor
Nominees.
Section 2.3 Vacancies. In the event that any Investor Nominee
shall cease to serve as a Director for any reason other than the
fact that Investor no longer has a right to nominate such Director,
the vacancy resulting thereby shall be filled by an Investor
Nominee designated by Investor; provided, however, that any
Investor Nominee so designated shall satisfy the qualification
requirements set forth in Section 2.1(e). In the event that any
Management Nominee or Independent Nominee shall cease to serve as a
Director, the vacancy resulting thereby shall be filled in
accordance with the terms of this Agreement with either a
Management Nominee or an Independent Nominee provided, however,
that any nominee so designated shall satisfy the qualification
requirements set forth in Section 2.1(e).
ARTICLE 3
Voting Rights
Section 3.1 Gottschalks Common Stock - Voting Rights and
Obligations.
(a) Subject to the provisions of this Section 3.1(a), Investor
and its Affiliates may vote the shares of Gottschalks Common Stock
which they own in their sole and absolute discretion. Investor
shall and shall cause its Affiliates to: (i) be present, in person
or represented by proxy, at all stockholder meetings of Gottschalks
so that all Gottschalks Common Stock beneficially owned by Investor
and its Affiliates may be counted for the purpose of determining
the presence of a quorum at such meetings; and (ii) vote or
consent, or cause to be voted or a consent to be given, with
respect to all Gottschalks Common Stock owned beneficially or of
record by Investor or its Affiliates or of which Investor or its
Affiliates otherwise has the power to vote: (A) in favor of the
election of the Investor Nominees, the Management Nominees and the
Independent Nominees; and (B) with regard to any transaction which
would result in a Change in Control that has been approved by the
Board and submitted to a vote of Gottschalks' stockholders, as
recommended by the Board.
(b) Subject to the provisions of this Section 3.1(b), each member
of Management may vote the shares of Gottschalks Common Stock owned
by such member in his sole and absolute discretion. Management
shall: (i) be present, in person or represented by proxy, at all
stockholder meetings of Gottschalks so that all Gottschalks Common
Stock beneficially owned by Management may be counted for the
purpose of determining the presence of a quorum at such meetings;
and (ii) vote or consent, or cause to be voted or a consent to be
given, with respect to all Gottschalks Common Stock owned
beneficially or of record by Management or of which Management
otherwise has the power to vote in favor of the election of the
Investor Nominees, the Independent Nominees and the Management
Nominees.
Section 3.2 Management Registration Rights. With respect to any
request by members of management of Gottschalks or members of the
Joseph Levy family to the Board to participate in any registration
of shares of Gottschalks stock owned by such persons, Investor
shall cause the Investor Nominees to vote proportionately with the
group of Directors composed of the Management Nominees and the
Independent Nominees voting on such request, taken as a whole.
ARTICLE 4
Restrictions on Transfer
Section 4.1 Restrictions on Transfer.
(a) Until the earlier of (x) August 20, 2003, or (y) approval by
the stockholders of Gottschalks of a transaction which would result
in a Change in Control, Investor will not directly or indirectly
sell, transfer, pledge or otherwise dispose of (collectively,
"Transfer") any shares of Gottschalks Common Stock issued to Harris
except for: (i) Transfers made in compliance with the requirements
of Rule 144 of the Securities Act, (ii) Transfers pursuant to
negotiated transactions with third parties, provided that: (A) the
transferee acknowledges that it is subject to the Standstill
Agreement and the provisions of Articles 3 and 4 of this Agreement;
and (B) Gottschalks approves any such Transfer that would result in
a person beneficially owning more than 9.8% of the Gottschalks
Common Stock, (iii) Transfers to one or more Affiliates of Investor
who agree to be bound by the terms and conditions of the Standstill
Agreement and the obligations of the transferor under this
Agreement, (iv) pledges to a bona fide financial institution for
the purpose of securing bona fide indebtedness of Investor;
provided, that: (A) such indebtedness is full recourse
indebtedness; and (B) no such pledge, if enforced, would result in
the bona fide financial institution or any person acquiring the
pledged shares having Beneficial Ownership of more than 9.8% of the
Gottschalks Common Stock and (v) Transfers pursuant to or in
accordance with the Registration Rights Agreement in a bona fide
public offering.
(b) Any Transferee hereunder shall succeed to the obligations,
but not the rights, of ECI under this Agreement. Notwithstanding
the foregoing, ECI agrees that it shall remain fully liable for
ensuring that the Transferee complies with all obligations assumed
by Transferee pursuant to this Agreement.
(c) Any Transfer contrary to the provisions of this Section 4.1
shall be null and void and the transferee shall not be recognized
by Gottschalks as the holder or owner of such shares for any
purposes (including voting and dividend rights) unless and until
such provisions are satisfied.
(d) This Agreement places no restrictions on the Transfer by
Management of any shares of Gottschalks Common Stock owned by
Management.
Section 4.2 Notification of Restrictions.
(a) Any certificates representing the shares of Gottschalks
Common Stock issued by Gottschalks to Investor will bear the
following legend, which legend will remain until such time as the
securities represented by the certificates are transferred without
such shares continuing to be subject to this Agreement:
"THESE SECURITIES ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT
AMONG EL CORTE INGLES, S.A. [OR TRANSFEREE], THE ISSUER, JOSEPH
LEVY AND BRET LEVY AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN
ACCORDANCE THEREWITH."
(b) The following legend: (i) will be placed on any certificates
representing the shares of Gottschalks Common Stock owned or
acquired by Investor or its Affiliates that were not issued by
Gottschalks to Harris and will remain on such certificates until
the termination of this Agreement; and (ii) will be placed on any
certificates representing the shares of Gottschalks Common Stock
owned by Management and will remain on such certificates until the
earlier of the termination of this Agreement and the date on which
the shares represented by such certificate or certificates are
transferred by Management:
"THESE SECURITIES ARE SUBJECT TO THE PROVISIONS OF AN AGREEMENT
AMONG EL CORTE INGLES, S.A., THE ISSUER, JOSEPH LEVY AND BRET
LEVY."
(c) None of Investor, any Affiliate of Investor or Management
shall deposit any shares of Gottschalks Common Stock owned by them
into a voting trust or subject any such shares to any arrangement
or agreement with respect to the voting of such shares inconsistent
with the terms of this Agreement.
Section 4.3 Notice to Gottschalks. During the period specified in
Section 4.1, if Investor wishes to sell pursuant to Section 4.1 any
shares of Gottschalks Common Stock, Investor shall give Gottschalks
15 days' prior written notice of such proposed sale, setting forth
the number of shares of Gottschalks Common Stock that Investor
proposes to sell, the expected timing of the proposed sale, and the
details of such sale, in order to enable Gottschalks and Management
to confirm that such sale complies with this Agreement.
Section 4.4 Compliance with Insider Trading Policy. For as long as
Investor Beneficially Owns any shares of Gottschalks Common Stock,
it will, and will use its best efforts to cause its directors,
officers, employees, agents, and representatives to, comply with
the written policy of Gottschalks designed to prevent violations of
insider trading and similar laws.
Section 4.5 Compliance with Law. During the term of this
Agreement, Investor shall comply with, and make timely filings in
accordance with, Sections 13 and 16 of the Exchange Act.
ARTICLE 5
Non-Competition
Investor acknowledges that in light of Investor's representation on
the Board, it would be unfair for Investor to compete with
Gottschalks. For these and other reasons, and as an inducement to
Gottschalks to enter into this Agreement, Investor agrees that
during the term of this Agreement, Investor will not and will not
allow Harris to, directly or indirectly, for its own benefit or as
agent for another, carry on or participate in the ownership,
management or control of, or the financing of, or be employed by,
or consult for or otherwise render services to, or allow its name
or reputation to be used in or by any other present or future
business enterprise that competes with Gottschalks in the States of
Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,
Oklahoma, Oregon, Texas, Utah, Washington or Wyoming; provided,
however, that nothing contained herein shall limit the right of
Investor as an investor to hold and make investments in securities
of any corporation or limited partnership that is registered on a
national securities exchange or admitted to trading privileges
thereon or actively traded in a generally recognized
over-the-counter market, provided Investor's equity interest
therein does not exceed 5% of the outstanding shares or interests
in such corporation or partnership.
ARTICLE 6
Miscellaneous
Section 6.1 Term. The provisions of Article 4 of this Agreement
shall expire, upon the earlier of (i) August 20, 2003, or (ii)
approval by the stockholders of Gottschalks of a transaction which
would result in a Change of Control. All other provisions of this
Agreement shall expire, and Investor shall, in accordance with the
provisions of paragraph (i) of Section 2.1 require its Investor
Nominees to immediately resign, upon the earlier of: (i) the date
on which Investor no longer is entitled pursuant to Section 2.1 of
this Agreement to a representative on the Board; and (ii) the
expiration of the Standstill Agreement (other than as the result of
an Early Standstill Termination Event).
Section 6.2 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate
counterparts, all of which shall constitute one and the same
agreement, and shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other
parties.
Section 6.3 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE
WITHOUT REFERENCE TO THE CHOICE OF LAW PRINCIPLES THEREOF.
Each party hereby irrevocably submits to and accepts for itself and
its properties, generally and unconditionally, the exclusive
jurisdiction of and service of process pursuant to the laws of the
State of California and the rules of its courts, waives any defense
of forum non conveniens and agrees to be bound by any judgment
rendered thereby arising under or out of in respect of or in
connection with this Agreement or any related document or
obligation. Each party further irrevocably designates and appoints
the individual identified in or pursuant to Section 6.6 hereof to
receive notices on its behalf, as its agent to receive on its
behalf service of all process in any such action before any body,
such service being hereby acknowledged to be effective and binding
service in every respect. A copy of any such process so served
shall be mailed by registered mail to each party at its address
provided in Section 6.6; provided that, unless otherwise provided
by applicable law, any failure to mail such copy shall not affect
the validity of the service of such process. If any agent so
appointed refuses to accept service, the designating party hereby
agrees that service of process sufficient for personal jurisdiction
in any action against it in the applicable jurisdiction may be made
by registered or certified mail, return receipt requested, to its
address provided in Section 6.6. Each party hereby acknowledges
that such service shall be effective and binding in every respect.
Nothing herein shall affect the right to serve process in any other
manner permitted by law.
Section 6.4 Entire Agreement. This Agreement, together with the
Asset Purchase Agreement and the other agreements of the parties
hereto and Harris of even date herewith, contain the entire
agreement among the parties with respect to the subject matter
hereof. This Agreement is not intended to confer upon any person
not a party hereto (and their successors and assigns) any rights or
remedies hereunder.
Section 6.5 Expenses. Except as set forth in the Asset Purchase
Agreement, all legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and
expenses.
Section 6.6 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be deeded to
have been made (i) when delivered personally or by telecopier, (ii)
if to a party in the same country as the mailing party, when mailed
first class registered or certified mail, postage prepaid, or (iii)
if to a party in a different country from the sending party, on the
second day following deposit with a reputable commercial air
courier, charges prepaid, to each respective party as shown below:
(a) If to Gottschalks:
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Attention: General Counsel
Telecopier: (209) 434-4666
with a copy to:
O'Melveny & Myers LLP
400 South Hope Street
Los Angeles, CA 90071
Attention: D. Stephen Antion, Esq.
Telecopier: (213) 430-6407
(b) If to Management, to each of the following:
Joseph Levy
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Telecopier: (209) 434-4804
Bret Levy
Gottschalks Inc.
7 River Park Place
Fresno, CA 93720
Telecopier: (209) 434-4804
(c) If to ECI:
El Corte Ingles, S.A.
Hermosilla, 112
28009 Madrid SPAIN
Attention: Mr Jorge Pont
Telecopier: 011-34-91-402-1567
With a copy to:
McPeters, McAlearney, Shimoff & Hatt
4 W. Redlands Boulevard, 2nd Floor
Redlands, California 92373
Attention: Thomas H. McPeters, Esq.
Telecopier: (909) 792-6234
Section 6.7 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. Neither this
Agreement nor any rights or obligations under it are assignable by
any party hereto, except that ECI and any subsequent Transferee
shall be permitted to assign its rights hereunder as provided in
Section 4.1 hereof.
Section 6.8 Headings. The headings in this Agreement are for
convenience only and shall not limit or otherwise affect the
meaning hereof.
Section 6.9 Amendments and Waivers. This Agreement may be amended
only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the
party to be bound and then only to the specific purpose, extent and
instance so provided.
Section 6.10 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender
shall be held to include the other gender as the context requires,
(ii) the terms "hereof", "herein", and "herewith" and words of
similar import shall, unless otherwise stated, be construed to
refer to this Agreement as a whole and not to any particular
provision of this Agreement, and Article, Section and paragraph
references are to the Articles, Sections and paragraphs, of this
Agreement unless otherwise specified, (iii) the word "including"
and words of similar import when used in this Agreement shall mean
"including, without limitation," unless the context otherwise
requires or unless otherwise specified, (iv) the word "or" shall
not be exclusive, and (v) provisions shall apply, when appropriate,
to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation
against the party drafting or causing any instrument to be drafted.
Section 6.11 Severability. In the event that any one or more
of the provisions contained herein, or the application thereof in
any circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
Section 6.12 Further Assurances. Gottschalks and Investor
agree that, from time to time, each of them will, and will cause
their respective Affiliates to, and Management agrees that it will
execute and deliver such further instruments and take such other
action as may be necessary to carry out the purposes and intents
hereof.
Section 6.13 Specific Performance. Each of the parties hereto
acknowledges that, in view of the uniqueness of the arrangements
contemplated by this Agreement, each party would not have an
adequate remedy at law for money damages in the event that this
Agreement has not been performed in accordance with its terms, and
therefore agree that the other parties hereto shall be entitled to
specific enforcement of the terms hereof in addition to any other
remedy to which the parties hereto may be entitled, at law or in
equity.
Section 6.14 Arbitration.
(a) Any controversy, dispute or claim under, arising out of, in
connection with or in relation to this Agreement, including but not
limited to the negotiation, execution, interpretation,
construction, coverage, scope, performance, non-performance,
breach, termination, validity or enforceability of this Agreement
or this Section 6.14 shall be determined by arbitration conducted
in accordance with the Commercial Arbitration Rules or then
existing rules for commercial arbitration of the American
Arbitration Association. The arbitration shall additionally be
governed by the California Arbitration Act. The arbitration shall
be before a single arbitrator who shall be selected by mutual
agreement of the parties from among a list of seven potential
arbitrators provided by the American Arbitration Association. If
the parties cannot agree on an arbitrator from this first list, the
parties hereto shall select an arbitrator for such arbitration from
a second list of seven potential arbitrators provided by the
American Arbitration Association with each party, alternately
striking names, with the last name remaining to be the arbitrator
so selected. In the event that either party seeks a temporary
restraining order, preliminary injunction or other provisional
relief, the provisions of Section 1281.8 of the Cal. Civ. Proc.
Code shall apply. The arbitration of such issues, including
without limitation any party's rights to specific performance
pursuant to Article 5 or Section 6.13 hereof or to any award of
damages suffered by any party hereto by reason of the acts or
omissions of any party, shall be final and binding upon the parties
to the maximum extent permitted by law. The parties intend that
this Article shall be valid, binding, enforceable and irrevocable
and shall survive the termination of this Agreement.
(b) Proceedings under and the provisions of this Section 6.14
shall be subject to Section 6.3 of this Agreement.
(c) Any arbitration proceedings hereunder shall be held in Los
Angeles, California.
(d) Judgment upon any award rendered by the arbitrator(s) may be
entered by any court having jurisdiction thereof.
Section 6.15 Attorney's Fees. In the event of any action,
complaint, petition, or other proceeding ("Action") by any party
arising under or out of, in connection with or in respect of, this
Agreement, the prevailing party shall be entitled to reasonable
attorney's fees, costs and expenses incurred in such Action.
Attorney's fees incurred in enforcing any judgment in respect of
this Agreement are recoverable as a separate item. The parties
intend that the preceding sentences be severable from the other
provisions of this Agreement, survive any judgment and, to the
maximum extent permitted by law, not be deemed merged into such
judgment.
IN WITNESS WHEREOF, this Agreement has been signed by or on behalf
of each of the parties hereto as of the day first above written.
EL CORTE INGLES, S.A.
/S/ JORGE PONT
GOTTSCHALKS INC.
/S/ JAMES FAMALETTE
/S/ JOSEPH LEVY
/S/ BRET LEVY
ACKNOWLEDGEMENT AND AGREEMENT OF SPOUSE
The undersigned spouse of Joseph Levy acknowledges that she has
read the attached Stockholders' Agreement of even date herewith and
agrees to be bound thereby.
Dated: August 20, 1998
/S/ SHARON LEVY
ACKNOWLEDGEMENT AND AGREEMENT OF SPOUSE
The undersigned spouse of Bret Levy acknowledges that she has read
the attached Stockholders' Agreement of even date herewith and
agrees to be bound thereby.
Dated: August 20, 1998
Dates Referenced Herein and Documents Incorporated by Reference
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