August 4, 2008 8K Exhibit 10.3




                                                   Exhibit 10.3



AMENDED & RESTATED 

STOCKHOLDERS' AGREEMENT

by and among

EL CORTE INGLES, S.A.,

GOTTSCHALKS INC.,

JOSEPH LEVY

and

BRET LEVY

dated as of

July 18, 2008








                 TABLE OF CONTENTS 
 

	
 	
 	
Page
	
ARTICLE 1	
Definitions	
2
	
Section 1.1	
"Additional Shares" 	
2
	
Section 1.2	
"Affiliate"  	
2
	
Section 1.3	
"Agreement" 	
2
	
Section 1.4	
"Asset Purchase Agreement"	
2
	
Section 1.5	
"Beneficially Own"	
2
	
Section 1.6	
"Board"	
2
	
Section 1.7	
"Change in Control"	
2
	
Section 1.8	
"Closing"	
4
	
Section 1.9	
"Gottschalks Common Stock"	
4
	
Section 1.10	
"Designated Board"	
4
	
Section 1.11	
"Director"	
4
	
Section 1.12	
"Early Standstill Termination Event"	
4
	
Section 1.13	
"ECI"	
4
	
Section 1.14	
"Exchange Act"	
4
	
Section 1.15	
"First Amendment"	
4
	
Section 1.16	
"fully diluted"	
4
	
Section 1.17	
"Gottschalks"	
4
	
Section 1.18	
"Harris"	
4
	
Section 1.19	
"Governmental Entity"	
4
	
Section 1.20	
"Group"	
4
	
Section 1.21	
"Independent Nominees"	
4
	
Section 1.22	
"Investor"	
5
	
Section 1.23	
"Investor Nominees"	
5
	
Section 1.24	
"Management"	
5
	
Section 1.25	
"Management Nominees"	
5
	
Section 1.26	
"Nominating Committee"	
5
	
Section 1.27	
"Original Stockholder's Agreement"	
5
	
Section 1.28	
"person"	
5
	
Section 1.29	
"Securities Act"	
5
	
Section 1.30	
"Standstill Agreement"	
5
	
Section 1.31	
"Subsidiary"	
5
	
Section 1.32	
"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	
9
	
Section 2.4	
Additional Shares for Management	
9
	
ARTICLE 3	
Voting Rights	
9
	
Section 3.1	
Gottschalks Common Stock - Voting Rights and Obligations	
9
	
Section 3.2	
Management Registration Rights	
9











                 TABLE OF CONTENTS
(Cont'd)
 


	
ARTICLE 4	
Restrictions on Transfer	
10
	
Section 4.1	
Compliance with Insider Trading Policy	
10
	
Section 4.2	
Compliance with Law	
10
	
ARTICLE 5	
Non-Competition	
10
	
ARTICLE 6	
Miscellaneous	
10
	
Section 6.1	
Term	
10
	
Section 6.2	
Counterparts	
10
	
Section 6.3	
Governing Law	
11
	
Section 6.4	
Entire Agreement	
11
	
Section 6.5	
Expenses	
11
	
Section 6.6	
Notices	
11
	
Section 6.7	
Successors and Assigns	
12
	
Section 6.8	
Headings	
12
	
Section 6.9	
Amendments and Waivers	
13
	
Section 6.10	
Interpretation; Absence of Presumption	
13
	
Section 6.11	
Severability	
13
	
Section 6.12	
Further Assurances	
13
	
Section 6.13	
Specific Performance	
13
	
Section 6.14	
Arbitration	
13
	
Section 6.15	
Attorney's Fees	
14
	
Section 6.16	
Inapplicability to Later Acquired Gottschalks Common Stock	
14




                                                    ii






THIS AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT (the "Agreement"), dated as of
July 18, 2008, 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"), entered into that certain Asset Purchase Agreement, dated as of July 21, 1998 (the "Asset Purchase Agreement"), pursuant
to which Harris sold, and Gottschalks purchased, 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 issued pursuant to the Asset Purchase Agreement were issued to Harris,
ECI's wholly-owned subsidiary; 

WHEREAS, as a condition to the transactions contemplated by the Asset Purchase Agreement, the parties entered into that certain
Stockholder's Agreement, dated as of August 20, 1998 (the "Original Stockholder's Agreement") to 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;

WHEREAS, the Original Stockholder's Agreement was amended as of December 7, 2004 (the "First Amendment"), so as to (i)
remove certain restrictions on the transfer of shares of Gottschalks Common Stock owned by Investor (hereinafter defined), and (ii)
amend the term of the Original Stockholder's Agreement; and

WHEREAS, the parties now desire to amend and restate the Original Stockholder's Agreement, as amended by the First
Amendment, so as to amend certain voting rights and obligations of Investor and Management (hereinafter defined) with respect to their
respective ownership of shares of Gottschalks Common Stock and to make certain other changes.

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"Additional Shares" shall have the meaning set forth in
Section 6.16.

Section 1.2"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 1.3"Agreement" shall have the meaning set forth in the first paragraph
hereof.

Section 1.4"Asset Purchase Agreement" shall have the meaning set forth in the second
paragraph hereof.

Section 1.5"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 1.6"Board" shall mean the board of directors of Gottschalks.

Section 1.7"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






                                                    2







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


                                                    3






Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.


Section 1.8"Closing" shall have the meaning set forth in the Asset Purchase
Agreement.

Section 1.9"Gottschalks Common Stock" shall mean the common stock, par value
$0.01 per share, of Gottschalks.

Section 1.10"Designated Board" shall have the meaning set forth in
Section 2.1(a).

Section 1.11"Director" shall mean a member of the Board.

Section 1.12"Early Standstill Termination Event" shall have the meaning set forth in the
Standstill Agreement.

Section 1.13"ECI" shall have the meaning set forth in the first paragraph hereof.

Section 1.14"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

Section 1.15"First Amendment" shall have the meaning set forth in the fifth paragraph
hereof.

Section 1.16"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 1.17"Gottschalks" shall have the meaning set forth in the first paragraph
hereof.

Section 1.18"Harris" shall have the meaning set forth in the second paragraph
hereof.

Section 1.19"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 1.20"Group" shall mean a "group" as such term is used in Section 13(d)(3) of the
Exchange Act.

Section 1.21"Independent Nominees" shall have the meaning set forth in Section
2.1(a).


                                                    4






Section 1.22"Investor" shall mean ECI (through Harris), and so long as Harris own shares
of Gottschalks Common Stock, such persons shall be treated as one entity for the purposes of this Agreement.

Section 1.23"Investor Nominees" shall have the meaning set forth in
Section 2.1(a).

Section 1.24"Management" shall mean Joseph Levy and Bret Levy.

Section 1.25"Management Nominees" shall have the meaning set forth in
Section 2.1(a).

Section 1.26"Nominating Committee" shall mean the nominating committee of the Board
as it is constituted from time to time.

Section 1.27"Original Stockholder's Agreement" shall have the meaning set forth in the
fourth paragraph hereof.

Section 1.28"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 1.29"Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.30"Standstill Agreement" shall mean that certain Standstill Agreement by and
between ECI and Gottschalks dated August 20, 1998.

Section 1.31"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 1.32"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 2.1Members 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


                                                    5






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


                                                    6






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





                                                    7







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 2.2Committee 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


                                                    8






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 2.3Vacancies. 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).

Section 2.4Additional Shares for Management. By executing a joinder
agreement, the shares held by any family member of Joe Levy may commit to vote the shares Beneficially Owned by such member as
required under this Article 2 and Section 3.1 for shares of Gottschalks Common Stock Beneficially Owned by Management. Such
joinder agreement shall not restrict the sale, gift, disposition or other transfer of the shares Beneficially Owned by such family
person.

ARTICLE 3



Voting Rights

Section 3.1Gottschalks 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, in favor of the election of the Investor
Nominees, the Management Nominees and the Independent Nominees, except as otherwise provided in Section 6.16 hereof.


(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


                                                    9






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 3.2Management 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 4.1Compliance 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 4.2Compliance 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.


                                                    10







ARTICLE 6



Miscellaneous

Section 6.1Term. The provisions of this Agreement shall continue in force and effect until the date that
Investor is no longer entitled pursuant to Section 2.1 of this Agreement to a representative on the Board.

Section 6.2Counterparts. 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 6.3Governing 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 6.4Entire Agreement. This Agreement, together with the Asset
Purchase Agreement and the other agreements of the parties hereto and Harris of even date therewith, 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 6.5Expenses. 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.


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Section 6.6Notices. 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: James Famalette, Chairman & Chief Executive Officer

   Telecopier: (559) 434-4666


with a copy to:


O'Melveny & Myers LLP

   400 South Hope Street

   Los Angeles, CA 90071

   Attention: C. James Levin, 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: (559) 434-4666


Bret Levy

   Gottschalks Inc.

   7 River Park Place

   Fresno, CA 93720

   Telecopier: (559) 434-4666





(c)If to ECI:



El Corte Ingles, S.A.

   Hermosilla, 112

   28009 Madrid SPAIN

   Attention: Mr Jorge Pont

   Telecopier: 011-34-91-402-1567





                                                    12






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 6.7Successors 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.

Section 6.8Headings. The headings in this Agreement are for convenience only
and shall not limit or otherwise affect the meaning hereof.

Section 6.9Amendments 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 6.10Interpretation; 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 6.11Severability. 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 6.12Further Assurances. Gottschalks and Investor agree that, from time
to time, each of them will, and will cause their respective Affiliates to, and Management


                                                    13






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 6.13Specific 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 6.14Arbitration.

(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 6.15Attorney'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


                                                    14






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.


Section 6.16Inapplicability to Later Acquired Gottschalks Common Stock . The
obligations of Investor and its affiliates under this Agreement shall not be applicable to any Gottschalks Common Stock acquired by
Investor and its Affiliate from and after July 18, 2008 to the extent such acquisition causes Investor and such Affiliates to hold (at the
time of measurement for any vote, consent or other right or obligation otherwise required hereunder) of record and beneficially more
than 2,950,900 shares (as such number is appropriately adjusted for stock dividends, stock splits and similar recapitalizations occurring
thereafter) of Gottschalks Common Stock (the "Additional Shares"). The terms of this Agreement shall continue to apply to any shares
acquired prior to such date or acquired thereafter but which do not cause the holdings of Investor and its affiliates to exceed 2,950,900
shares (as such number is appropriately adjusted for such dividends, stock splits or similar recapitalizations) at the time of
measurement for any vote, consent or other obligation. In addition, the Additional Shares shall not be counted towards determining
Investor's rights to designate three (3) directors under the proviso of Section 2.1(a).

 

[Signature Page Follows]


                                                    15








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.

 

   By: /s/ Jorge Pont

   Name: Jorge Pont

   Title:International Division Director


GOTTSCHALKS INC.

 

By: /s/ James R. Famalette

   Name: James R. Famalette

   Title:Chairman & CEO

 

/s/ Joseph Levy

 JOSEPH LEVY

 

/s/ Bret Levy

    BRET LEVY
















                                                    S-1







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: July 18, 2008


 

 

 

/s/ Sharon Levy

   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: July 18, 2008


 

 

 

/s/ Audrey Levy

   AUDREY LEVY