STOCKHOLDERS' AGREEMENT
by and among
EL CORTE INGLES, S.A.,
GOTTSCHALKS INC.,
XXXXXX XXXX
and
XXXX XXXX
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 "Xxxxxx" 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 Xxxxxxx
Xxxxxxx 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"), Xxxxxx Xxxx, an individual
and Xxxx Xxxx, 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 Xxxxxx Company, a
California corporation and a wholly-owned subsidiary of
ECI ("Xxxxxx"), have entered into an Asset Purchase
Agreement, dated as of July 21, 1998 (the "Asset
Purchase Agreement"), pursuant to which Xxxxxx has
agreed to sell, and Gottschalks has agreed to purchase,
substantially all of the assets and certain of the
liabilities of Xxxxxx 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 Xxxxxx, 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 Xxxxxx) in Gottschalks, certain rights
and restrictions of Xxxxxx Xxxx and Xxxx Xxxx 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
Xxxxxx Xxxx, Xxxxxx Xxxx or their lineal descendents
immediately after which Xxxxxx Xxxx, Xxxxxx Xxxx 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
Xxxxxx Xxxx, his spouse or his lineal descendents
immediately after which Xxxxxx Xxxx, 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 "Xxxxxx" 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
Xxxxxx), together with and any Transferee, and so long
as Xxxxxx 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 Xxxxxx Xxxx
and Xxxx Xxxx.
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 Xxxxxx to whom Xxxxxx 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) 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 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 Xxxxxx Xxxx 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 ___, 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 Xxxxxx 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, XXXXXX XXXX AND XXXX XXXX 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
Xxxxxx 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,
XXXXXX XXXX AND XXXX XXXX."
(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 Xxxxxxx Xxxxxxx 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 xxxxxxx xxxxxxx 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 Xxxxxx 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 Xxxxxx 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.
0 Xxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Attention: General Counsel
Telecopier: (000) 000-0000
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: D. Xxxxxxx Xxxxxx, Esq.
Telecopier: (000) 000-0000
(b) If to Management, to each of the following:
Xxxxxx Xxxx
Gottschalks Inc.
0 Xxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Telecopier: (000) 000-0000
Xxxx Xxxx
Gottschalks Inc.
0 Xxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Telecopier: (000) 000-0000
(c) If to ECI:
El Corte Ingles, X.X.
Xxxxxxxxxx, 000
00000 Xxxxxx XXXXX
Attention: Xx Xxxxx Xxxx
Telecopier: 011-34-91-402-1567
With a copy to:
McPeters, McAlearney, Shimoff & Xxxx
0 X. Xxxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxx, Esq.
Telecopier: (000) 000-0000
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/ XXXXX XXXX
GOTTSCHALKS INC.
/S/ XXXXX XXXXXXXXX
/S/ XXXXXX XXXX
/S/ XXXX XXXX
ACKNOWLEDGEMENT AND AGREEMENT OF SPOUSE
The undersigned spouse of Xxxxxx Xxxx acknowledges that
she has read the attached Stockholders' Agreement of
even date herewith and agrees to be bound thereby.
Dated: August 20, 1998
/S/ XXXXXX XXXX
ACKNOWLEDGEMENT AND AGREEMENT OF SPOUSE
The undersigned spouse of Xxxx Xxxx acknowledges that
she has read the attached Stockholders' Agreement of
even date herewith and agrees to be bound thereby.
Dated: August 20, 1998
