Common use of Members of the Board Clause in Contracts

Members of the Board. (a) Subject to the right of the Nominating Committee to approve nominees for Director as set forth in Section 2.2(a), from and after the Stockholder Approval Date, if any, the Company shall amend its By-laws, and the Company and Investor will take all actions necessary to cause the Board to be structured to consist of eleven members, of which four members will be designees of Investor (at least one in each class of the Board) (the "Investor Nominees"), and the Company and Investor will take all actions necessary to cause such nominees to become members of the Board as soon as practicable after the Stockholder Approval Date. If necessary to effectuate the placement of Investor Nominees on the Board, the Company shall solicit the resignations of the appropriate number of Directors to the extent necessary to permit the Investor Nominees to serve. Thereafter, at each annual or special meeting of stockholders of the Company at, or the taking of action by written consent of stockholders of the Company with respect to which any class of Directors is to be elected, Investor shall have the right (but not obligation) pursuant to this Agreement and pursuant to the By-laws of the Company to designate nominees to the Board (subject to right of the Nominating Committee to approve nominees for Director as set forth in Section 2.2(a)) such that Investor shall have on the Board of Directors a number of representatives equal to a percentage of the total number of members of the Board of Directors that is equal to the percentage of Company Common Stock Beneficially Owned by Investor, on a Fully Diluted Basis; provided, however, that (i) if the Investor would be entitled to a fractional number of representatives, the Investor shall instead be entitled to a number of representatives equal to the next higher number, (ii) in no event shall the Investor be entitled to more than four representatives and (iii) after the occurrence of a Termination Event, if any, Investor shall not be entitled to any representatives on the Board of Directors.

Members of the Board. (a) Subject Prior to the right of the Nominating Committee to approve nominees for Director as set forth in Section 2.2(a), from and after the Stockholder Approval Date, if anyClosing, the Company shall amend its By-lawsBoard 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 Company Closing, Gottschalks, Management and Investor ECI will take all actions action necessary to cause the Board two Investor Nominees (hereinafter defined) to be structured added to consist of eleven members, of which four members will be designees of Investor (at least one in each class of the Board) (the "Investor Nominees"). Thereafter, and the Company and Investor will take all actions necessary to cause such nominees to become members of the Board as soon as practicable after the Stockholder Approval Date. If necessary to effectuate the placement of Investor Nominees on the Board, the Company shall solicit the resignations of the appropriate number of Directors subject to the extent necessary to permit the Investor Nominees to serve. Thereafterterms of this Agreement, at each annual or special meeting of stockholders of the Company Gottschalks at, or the taking of action by written consent of stockholders of the Company Gottschalks with respect to to, which any class of Directors is are to be elected, Gottschalks, Management and Investor shall have the right (but not obligation) pursuant to will take all action required by this Agreement and pursuant to the By-laws of the Company to designate nominees to cause the Board to be structured to consist of eleven (subject to right 11) members, of which two (2) members will be designees of ECI (the Nominating Committee to approve nominees for Director as set forth in Section 2.2(a)"Investor Nominees") such that Investor shall have on and the Board of Directors a number of representatives equal to a percentage of the total number remaining nine (9) members will consist of members of management or persons affiliated with management that are designated by Management (the Board of Directors that is equal to "Management Nominees") and independent directors (the percentage of Company Common Stock Beneficially Owned by Investor"Independent Nominees"), on a Fully Diluted Basiscollectively, the "Designated Board"; provided, however, that the Designated Board shall be increased to twelve (i12) if the members, and Investor would shall be entitled to a fractional total of three (3) representatives on the Designated Board, if and during such time as Investor Beneficially Owns a number of representativesshares 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) Xxxxxx Xxxx (if he is alive and has the capacity) or Xxxx Xxxx (if Xxxxxx Xxxx 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 Xxxxxx Xxxx and Xxxx Xxxx 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 instead 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 representatives equal 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 higher number, whole number where the resulting fraction is .5 or above. The table below is provided by way of example: (ii) in no event shall During the Investor be entitled to more than four representatives and (iii) after the occurrence of a Termination Eventperiod under this Agreement, if any, that Investor shall not be entitled to any representatives on designate two Investor Nominees, if the total size of the Board is increased (other than as the result of Directors.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:

Members of the Board. (a) Subject Until a Termination Event, the -------------------- Company and the Stockholders shall take all action necessary to cause: (i) the right number of Directors comprising the Nominating Committee Board to approve nominees for Director be equal to fifteen (15) (subject to increase in the case of an Adverse Event, as provided below), (ii) the holders of Preferred Stock, voting separately as a single class, as set forth in Section 2.2(athe Preferred Stock Certificates of Designations, to have the exclusive right to elect a minimum of three (3) Directors (each such Director, a "Preferred Stock Director"), from and after (iii) any increases in the Stockholder Approval Date, if any, the Company shall amend its By-laws, and the Company and Investor will take all actions necessary to cause size of the Board to be structured result in an increase in the number of Preferred Stock Directors (rounded up to the next whole number) such that Preferred Stock Directors represent at least 20 percent (20%) of the votes exercisable by the Board, and (iv) at least a proportionate number (rounded up to the next whole number) of Preferred Stock Directors to serve on each committee of the Board (provided that with respect to the Executive Committee, the Executive Committee shall consist of eleven five members, of which four two members will shall be designees of Investor (Preferred Stock Directors), and at least one in Preferred Stock Director to serve on the board or other governing body of each class of the BoardCompany's subsidiaries and affiliates, other than operational home building companies. In the event (an "Adverse Event") (that on any date following the "Investor Nominees"), and the Company and Investor will take all actions necessary to cause such nominees to become members of the Board as soon as practicable Initial Issue Date that is 60 days after the Stockholder Approval Date. If necessary to effectuate the placement end of Investor Nominees on the Board, the Company shall solicit the resignations of the appropriate number of Directors to the extent necessary to permit the Investor Nominees to serve. Thereafter, at each annual or special meeting of stockholders a fiscal quarter of the Company at(a "Test Date") both (i) the Average Trading Price of the Common Stock is below $5 per share (provided that such amount shall be adjusted for reverse stock splits, or recapitalizations and other similar events) and (ii) (x) the taking of action by written consent of stockholders percentage change in the EBT per share of the Company with respect to which any class of Directors is to be elected, Investor shall have the right (but not obligation) pursuant to this Agreement and pursuant to the By-laws of the Company to designate nominees to Common Stock issued and outstanding) for the Board most recent two fiscal quarters as measured against the same two fiscal quarters from the prior fiscal year is less than (subject to right y) the percentage change in the EBT per share (of the Nominating Committee to approve nominees for Director as set forth in Section 2.2(a)Common Stock issued and outstanding) such that Investor shall have on the Board of Directors a number of representatives equal to a percentage of the total number of members of Comparable Group for the Board of Directors that is equal to the percentage of Company Common Stock Beneficially Owned by Investor, on a Fully Diluted Basis; provided, however, that (i) if the Investor would be entitled to a fractional number of representatives, the Investor shall instead be entitled to a number of representatives equal to the next higher number, (ii) in no event shall the Investor be entitled to more than four representatives and (iii) after the occurrence of a Termination Event, if any, Investor shall not be entitled to any representatives on the Board of Directors.same period as

Members of the Board. (a) Subject Until a Termination Event, the Company and the Stockholders shall take all action necessary to cause: (i) the right number of Directors comprising the Nominating Committee Board to approve nominees for Director be equal to fifteen (15) (subject to increase in the case of an Adverse Event, as provided below), (ii) the holders of Preferred Stock, voting separately as a single class, as set forth in Section 2.2(athe Preferred Stock Certificates of Designations, to have the exclusive right to elect a minimum of three (3) Directors (each such Director, a "Preferred Stock Director"), from and after (iii) any increases in the Stockholder Approval Date, if any, the Company shall amend its By-laws, and the Company and Investor will take all actions necessary to cause size of the Board to be structured result in an increase in the number of Preferred Stock Directors (rounded up to the next whole number) such that Preferred Stock Directors represent at least 20 percent (20%) of the votes exercisable by the Board, and (iv) at least a proportionate number (rounded up to the next whole number) of Preferred Stock Directors to serve on each committee of the Board (provided that with respect to the Executive Committee, the Executive Committee shall consist of eleven five members, of which four two members will shall be designees of Investor (Preferred Stock Directors), and at least one Preferred Stock Director to serve on the board or other governing body of each of the Company's subsidiaries and affiliates, other than operational home building companies. In the event (an "Adverse Event") that on any date following the Second Closing that is 60 days after the end of a fiscal quarter of the Company (a "Test Date") both (i) the Average Trading Price of the Common Stock is below $4.375 per share (provided that such amount shall be adjusted for reverse stock splits, recapitalizations and other similar events) and (ii) (x) the percentage change in each class the EBT per share of the Company (of the Common Stock issued and outstanding) for the most recent two fiscal quarters as measured against the same two fiscal quarters from the prior fiscal year is less than (y) the percentage change in the EBT per share (of the Common Stock issued and outstanding) of the Comparable Group for the same period as compared against the EBT per share (calculated on the same basis) of the Comparable Group during the same period in the prior fiscal year then the Company and the Stockholders shall take all action necessary to cause: (i) the holders of Preferred Stock voting separately as a single class, to elect Preferred Stock Directors sufficient to cause the Preferred Stock Directors to constitute a majority of the Board and all committees of the Board, including the Executive Committee ("Additional Preferred Stock Directors") and (ii) the "Investor Nominees"), and the Company and Investor will take all actions necessary to cause such nominees to become members size of the Board as soon as practicable after the Stockholder Approval Date. If necessary to effectuate the placement of Investor Nominees on the Board, the Company shall solicit the resignations of the appropriate number of Directors to the extent necessary to permit the Investor Nominees to serve. Thereafter, at each annual or special meeting of stockholders of the Company at, or the taking of action by written consent of stockholders of the Company with respect to which any class of Directors is and all committees to be elected, Investor shall have the right (but not obligation) pursuant automatically increased in order to this Agreement and pursuant to the By-laws of the Company to designate nominees to the Board (subject to effect any such additional Directors. The right of the Nominating Committee holders of Class AA Preferred Stock and Class ABI Preferred Stock to approve nominees for Director elect Additional Preferred Stock Directors shall continue until such time as set forth in Section 2.2(a)) such that Investor shall have on the Board of Directors a number of representatives equal to a percentage of the total number of members of the Board of Directors that is equal to the percentage of Company Common Stock Beneficially Owned by Investor, on a Fully Diluted Basis; provided, however, that neither (i) if the Investor would be entitled to a fractional number of representatives, the Investor shall instead be entitled to a number of representatives equal to the next higher number, nor (ii) in no event above is true for two consecutive Test Dates. The "Average Trading Price" shall mean, on any date of determination, the Investor be entitled average of the closing prices of the Common Stock over the 90 day period prior to more than four representatives and (iii) after the occurrence of a Termination Event, if any, Investor shall not be entitled to any representatives on the Board of Directorssuch date.