<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GOTTSCHALKS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
GOTTSCHALKS INC.
7 River Park Place East
Fresno, California 93720
(559) 434-4800
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 24, 1999
TO THE STOCKHOLDERS OF GOTTSCHALKS INC.:
You are cordially invited to attend the Annual Stockholders' Meeting to be
held on Thursday, June 24, 1999 at 10:00 a.m., Pacific Daylight Time, at the
Company's corporate headquarters located at 7 River Park Place East, Fresno,
California, for the purpose of considering and voting upon the following matters
described in the accompanying Proxy Statement:
1. The election of eleven directors, to hold office until the next Annual
Stockholders' Meeting and until their successors are elected and
qualified.
2. Such other matters as may properly come before the meeting or any
adjournment thereof.
The Board of Directors has fixed the close of business on April 30, 1999 as
the record date for determining the stockholders entitled to notice of, and to
vote at, the Annual Meeting or any adjournment thereof. Accordingly, only
stockholders of record at the close of business on that date will be entitled to
vote at the Annual Meeting. A list of stockholders entitled to vote at the
Annual Meeting will be available for examination by any stockholder of the
Company during normal business hours at the address above for the ten days
preceding the Annual Meeting.
We hope that you can attend the Annual Meeting in person. WHETHER OR NOT YOU
CAN ATTEND, WE URGE THAT YOU FILL IN, SIGN AND RETURN THE ENCLOSED PROXY
PROMPTLY IN THE BUSINESS REPLY ENVELOPE ENCLOSED WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
By Order of the Board of Directors,
[SIGNATURE]
Joe Levy
Chairman and Chief Executive Officer
Fresno, California
May 20, 1999
<PAGE>
GOTTSCHALKS INC.
7 River Park Place East
Fresno, California 93720
(559) 434-4800
---------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
JUNE 24, 1999
Your proxy on the enclosed Proxy Card is solicited by the Board of Directors
of Gottschalks Inc. (the "Company") for use at the Annual Stockholders' Meeting
to be held on Thursday, June 24, 1999, at the time and place set forth in the
preceding Notice of Annual Meeting, and at any adjournment of that meeting (the
"1999 Annual Meeting"). This Proxy Statement and the form of Proxy are being
first sent or given to the Company's stockholders on or about May 20, 1999.
Each properly executed proxy received prior to the 1999 Annual Meeting will
be voted as directed, but if not otherwise specified, such proxies will be voted
for the nominees of the Company's Board of Directors named in this Proxy
Statement and will be voted in the proxy holders' discretion with regard to any
other business of which the Company is not now aware that may properly come
before the 1999 Annual Meeting and be submitted to a vote of stockholders and
all matters incident to the conduct of the meeting.
Each stockholder giving a proxy pursuant to this solicitation may revoke it
at any time before it is exercised. A proxy may be revoked by filing with the
Secretary of the Company at 7 River Park Place East, Fresno, California 93720, a
written revocation or a properly executed proxy bearing a later date. A proxy
may also be revoked if the person who executed the proxy attends the 1999 Annual
Meeting in person and so requests, although attendance at the 1999 Annual
Meeting will not in itself constitute a revocation of the proxy.
Only stockholders of record of the Company's common stock, $0.01 par value
(the "Common Stock") at the close of business on April 30, 1999 are entitled to
vote at the 1999 Annual Meeting or any adjournment thereof. There were
12,575,565 shares of Common Stock outstanding on that date, each of which is
entitled to one vote on each of the matters to be presented to the stockholders
at the meeting. A majority of the Company's outstanding shares of Common Stock
as of April 30, 1999 must be represented in person or by proxy to constitute a
quorum for the 1999 Annual Meeting.
The Company will bear all costs incurred in the solicitation of proxies. In
addition to mailing copies of this material to all stockholders, the Company has
requested banks and brokers to forward copies of such material to persons for
whom they hold stock of the Company and to request authority for execution of
the proxies. The Company will reimburse such banks and brokers for their
reasonable out-of-pocket expenses incurred in connection therewith. Officers and
regular employees of the Company may, without being additionally compensated
therefore, solicit proxies by mail, telephone, telegram or personal contact.
-1-
<PAGE>
PROPOSAL 1. ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of eleven directors,
subject to future change in accordance with the Bylaws of the Company.
Accordingly, at the 1999 Annual Meeting, eleven directors are proposed to be
elected, each to hold office until the next Annual Meeting and until such
directors' successors shall be elected and qualified. The Board of Directors of
the Company has nominated, and recommends for election as directors, the eleven
persons named below. Unless authority is withheld or any nominee becomes unable
to serve, the persons named in the enclosed form of proxy will vote such proxy
for the election of all of the nominees listed below. The Board of Directors has
no reason to believe that any nominee will be unavailable, but if any such
person should become unavailable, it is expected that proxies will be voted for
such other nominee or nominees as may be recommended by the Board of Directors.
The following table sets forth certain information about the nominees
standing for election at the 1999 Annual Meeting:
NOMINEES FOR ELECTION AS DIRECTOR
<TABLE>
<CAPTION>
Present Position Director
Name Age(1) With Company Since
- ---------------------- ----------- ------------------------------------------- -----------
<S> <C> <C> <C>
Joe Levy(2) 67 Chairman and Chief Executive Officer 1986
James R. Famalette 46 President, Chief Operating Officer and 1997
Director
Bret W. Levy(2) 35 Vice President, Treasurer and Director 1986
Max Gutmann 76 Director 1992
Sharon Levy(2) 65 Director 1986
Joseph J. Penbera 52 Director 1986
Frederick R. Ruiz 55 Director 1992
O. James Woodward III 63 Director 1992
William Smith 52 Director 1998
Isidoro Alvarez 63 Director 1998
Alvarez
Jorge Pont Sanchez 61 Director 1998
</TABLE>
- ------------------------
(1) As of April 30, 1999.
(2) Joe Levy and Sharon Levy are husband and wife. Bret Levy is their son.
Mr. Joe Levy became Chairman and Chief Executive Officer of the Company's
predecessor and former subsidiary, E. Gottschalk & Co., Inc. ("E. Gottschalk")
in 1982 and of the Company in 1986. He was Executive Vice President from 1972 to
1982 and first joined E. Gottschalk in 1956. He serves on the Board of Directors
of the National Retail Federation and the Executive Committee of Frederick
-2-
<PAGE>
Atkins, Inc. He was formerly Chairman of the California Transportation
Commission and served on the Board of Directors of Community Hospitals of
Central California. He has also served on numerous other state and local
commissions and public service agencies. Mr. Joe Levy is the husband of Mrs.
Levy and the father of Mr. Bret Levy.
Mr. Famalette became the President, Chief Operating Officer and a director
of the Company on April 14, 1997. Prior to joining the Company, Mr. Famalette
was President and Chief Executive Officer of Liberty House, a department and
specialty store chain based in Honolulu, Hawaii, from 1993 through 1997, and
served in a variety of other positions with Liberty House from 1987 through
1993, including Vice President, Stores and Vice President, General Merchandise
Manager. From 1982 through 1987, he served as Vice President, General
Merchandise Manager and later President of Village Fashions/Cameo Stores in
Philadelphia, Pennsylvania, and from 1975 to 1982 served as a Divisional
Merchandise Manager for Colonies, a specialty store chain, based in Allentown,
Pennsylvania.
Mr. Bret Levy became a director of E. Gottschalk in 1982 and of the Company
in 1986. Mr. Bret Levy is a certified public accountant and obtained his MBA
from the University of Chicago. He has been an employee of the Company since
1989 and presently serves as Vice President, Treasurer. Prior to joining the
Company, Mr. Levy served as a management consultant with Price Waterhouse and a
lecturer on microeconomics at the University of Southern California. He also
serves on the Advisory Council of the National Retail Federation and serves as a
director of the Fresno Merchants Association and the California Retailers'
Association. Mr. Bret Levy is the son of Mr. Joe Levy and Mrs. Sharon Levy.
Mr. Gutmann, now retired, was Chairman and Chief Executive Officer of
Elder-Beerman Stores Corporation ("Elder-Beerman"), a regional department and
specialty store chain, during the period of 1995 to 1998 and from 1974 to 1991.
He was retired during the period of 1991 to 1995. He was also Executive Vice
President and President of Elder-Beerman from 1961 to 1973. He is a former
chairman and/or director of numerous companies and trade associations. He became
a director of the Company in 1992.
Mrs. Levy became a director of E. Gottschalk in 1979 and of the Company in
1986. She has served as an elected member of the Board of Supervisors of Fresno
County since 1975, serving as Chairman of the Board of Supervisors in 1980,
1985, 1990, 1995 and 1999. Mrs. Levy also serves on numerous other public
service agencies. Mrs. Levy is the wife of Mr. Joe Levy and the mother of Mr.
Bret Levy.
Dr. Penbera is an Eaton Fellow and Professor of Business at California State
University, Fresno, where he formerly served as Dean of The Craig School of
Business. He also serves as chairman of NetVuz, an electronic commerce firm.
Since 1992, he has been President of the Consortium for Economic Research and
also serves as Chief Economist for Regency Bank. He has served as a director of
Rug Doctor, L.P since 1986. He became a director of the Company in 1986.
Mr. Ruiz is and for at least the last five years has been the Chairman and
co-founder of Ruiz Food Products, Inc., a privately held frozen food company
based in Dinuba, California. Mr. Ruiz serves on the Board of Directors of
McClatchy Newspapers, Inc., The American Frozen Food Institute, The California
Endowment, and The Hispanic College Fund. Mr. Ruiz is also Chair of the
Institute for Family Business and a member of the Business Advisory Council of
California State University, Fresno. Mr. Ruiz has been a director of the Company
since 1992.
-3-
<PAGE>
Mr. Woodward is an attorney in the private practice of law in Fresno,
California and has been so since 1992. Since 1995, he has also been Chairman of
the Board of Directors of Mission Homes. He has served as corporate counsel for
several public corporations and was Executive Vice President of Glenfed, Inc.
from 1988 to 1991. In addition to a private law practice, he has had experience
with financial institutions and in real estate development in California. He
currently serves on the Board of Governors of the California State University,
Fresno Foundation and on the Business Advisory Counsel of California State
University, Fresno. He became a director of the Company in 1992.
Mr. William Smith is a private investor. Mr. Smith was formerly Senior Vice
President of Peter B. Cannell & Co., New York City from 1996 to 1998 and was
senior retail analyst at Neuberger & Berman, New York City from 1994 to 1995.
From 1983 to 1994, Mr. Smith was with the investment firm of Smith Barney
reaching the level of Managing Director and heading their retail trade analyst
group. Mr. Smith is the past president of the New York Retail Analysts Society
and is a Chartered Financial Analyst. He became a director of the Company in
1998.
Mr. Isidoro Alvarez Alvarez ("Mr. Isidoro Alvarez") is and for at least the
last five years has been the Chairman of El Corte Ingles, S.A., ("ECI") a
Spanish retail conglomerate operating in Spain and Portugal. From 1982 to 1998,
he was a director of The Harris Company ("Harris"), a department store chain
which formerly operated nine stores located throughout Southern California.
Harris is a wholly-owned subsidiary of ECI. He became a director of the Company
in August 1998.
Mr. Jorge Pont Sanchez ("Mr. Jorge Pont") has been the International
Division Director of ECI since 1997. With the exception of the period of 1997 to
1998, he has also been President and Chief Executive Officer of Harris since
1982. He became a director of the Company in August 1998.
ARRANGEMENTS REGARDING NOMINEES
MR. FAMALETTE. Under the terms of Mr. Famalette's employment agreement, the
Company must cause Mr. Famalette to continue to be elected as a member of the
Board of Directors during his term of employment. See "Employment and Severance
Agreements--Employment Agreement."
MR. ALVAREZ AND MR. PONT. Gottschalks, Mr. Joseph Levy, Mr. Bret Levy, ECI
and Harris are parties to a Stockholders' Agreement (described below). Pursuant
to that Stockholder's Agreement, ECI and Harris nominated Mr. Alvarez and Mr.
Pont to the Gottschalks Board.
On August 20, 1998, the Company acquired substantially all of the assets and
business of Harris pursuant to an Asset Purchase Agreement entered into with
Harris and ECI. Mr. Alvarez is a former Director of Harris and is the Chairman
of ECI. Mr. Pont is the President and Chief Executive Officer of Harris and is
the International Division Director of ECI. As consideration for such assets and
business, Gottschalks issued to Harris 2,095,900 shares of Gottschalks common
stock and an 8% Non-Negotiable, Extendable, Subordinated Note and assumed
certain liabilities. As a condition to closing the acquisition, on the same day
(1) Gottschalks, Harris, ECI, Joseph Levy and Bret Levy entered into a
Stockholders' Agreement (described below), (2) Gottschalks and Harris entered
into a Registration Rights Agreement (granting Harris certain rights to
participate in a registration statement filed by Gottschalks with the Securities
and Exchange Commission ("SEC") and (3) Gottschalks and ECI
-4-
<PAGE>
entered into a Standstill Agreement (restricting ECI's activities as an owner
(through Harris) of Gottschalks common stock).
In the Stockholders' Agreement, ECI, Harris, Joseph Levy and Bret Levy
agreed (among other things) to do the following for the term of the agreement:
- Initially, cause two ECI nominees to be added to the Gottschalks Board. As
a result, Mr. Alvarez and Mr. Pont were added to the Gottschalks Board
during fiscal 1998.
- Cause the Gottschalks Board to be structured to consist of eleven members,
of which two members will be ECI nominees and the remaining nine members
will be management nominees and independent nominees. Joseph Levy (or Bret
Levy under certain circumstances) chooses the management nominees from
management or persons affiliated with management.
- Vote all Gottschalks common stock they own or have the power to vote in
favor of the ECI nominees, the management nominees and the independent
nominees. Gottschalks also agreed to solicit proxies in favor of such
nominees.
The Stockholders' Agreement provides for the ECI nominees to be increased or
decreased as a result of changes in the amount of Gottschalks common stock that
ECI owns (through Harris) as follows:
<TABLE>
<CAPTION>
Impact of Changes in Ownership
of Gottschalks' Outstanding
Common Stock
or Disposal of Common Stock Change to Number of Change to Size
(in Either Case Fully Diluted) ECI Nominees of Board
- ---------------------------------------------------- -------------------- ---------------
<S> <C> <C>
ECI, directly or indirectly, beneficially owns at Increased to 3 Increased to 12
least 30% of common stock
ECI disposes of more than 700,000 shares of common Decreased to 1 Decreased by
stock OR ECI and its affiliates beneficially own number of ECI
less than 10% of common stock nominees that
must resign
ECI disposes of more than 1,350,000 shares of common Decreased to 0 Decreased by
stock OR ECI and its affiliates beneficially own number of ECI
less than 5% of common stock nominees that
must resign
</TABLE>
The Stockholders' Agreement also (1) provides for proportional adjustments
to the number of ECI nominees in the event of an increase in the Board size
(other than as the result of an acquisition transaction approved by the Board),
(2) contains restrictions on the transfer by Harris of the Gottschalks common
stock, (3) contains other agreements between the parties regarding voting on
change in control transactions and participation by Mr. Levy's family in a
Gottschalks registration statement and (4) includes a non-compete agreement from
Harris and ECI.
-5-
<PAGE>
The Stockholders' Agreement term (other than the provisions relating to
restrictions on transfer by Harris of its shares that have a different
termination date) lasts until the earlier of (1) the date ECI is no longer
entitled to nominees on the Gottschalks Board and (2) the expiration of the
Standstill Agreement other than as the result of an Early Standstill Termination
Event (as such term is defined in the Standstill Agreement). Gottschalks has
previously filed the Stockholders' Agreement, the 8% Non-Negotiable Subordinated
Note, the Registration Rights Agreement and the Standstill Agreement with the
SEC.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE NOMINEES LISTED ABOVE
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE NOMINEES LISTED ABOVE. PROXIES RECEIVED BY THE BOARD OF DIRECTORS WILL BE SO
VOTED UNLESS STOCKHOLDERS SPECIFY IN THEIR PROXY A CONTRARY CHOICE.
MEETINGS OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
During the fiscal year ended January 30, 1999, the Board of Directors held
five meetings. The Board of Directors has established audit, compensation and
nominating committees to devote attention to specific matters and to assist in
the discharge of its responsibilities. With the exception of Mr. Isidoro
Alvarez, each director attended at least 75% of the Board meetings and meetings
of Board committees that he or she was eligible to attend. The functions of the
committees, their current members and the number of meetings held during the
year are described below:
AUDIT COMMITTEE. Dr. Penbera and Messrs. Ruiz, Woodward, Gutmann and Smith
sit on the Audit Committee. The Audit Committee's functions are to (1) receive
from, and review with, the independent auditors such auditors' report on the
Company's annual audited financial statements, (2) review with the independent
auditors the scope of the succeeding annual audit and quarterly review
procedures, (3) nominate the independent auditors to be selected each year by
the Board, (4) review consulting services rendered by the Company's independent
accountants and evaluate the possible effect on the auditors' independence of
performing such services, (5) ascertain the existence of adequate internal
accounting and control systems, (6) review with management and the Company's
independent auditors current and emerging accounting and financial reporting
requirements and practices affecting the Company and (7) evaluate the
qualifications and performance of the Company's internal audit staff and oversee
and support the audit staff's functions. The Audit Committee met four times
during fiscal 1998.
COMPENSATION COMMITTEE. Dr. Penbera and Messrs. Ruiz, Woodward, Gutmann and
Smith sit on the Compensation Committee. The Compensation Committee determines
or reviews and passes upon management's recommendations with respect to (1)
executive compensation, (2) bonuses, (3) contractual obligations relating to
employment of officers and (4) incentive stock awards and stock option grants.
The Compensation Committee met five times during fiscal 1998.
NOMINATING COMMITTEE. Dr. Penbera and Messrs. Ruiz, Woodward and Gutmann
sit on the Nominating Committee. The Nominating Committee's functions are to
review the qualifications of, and nominate independent candidates for the
Company's Board of Directors. The Nominating Committee will not consider
nominees recommended by stockholders. The Nominating Committee met one time
during fiscal 1998.
-6-
<PAGE>
COMPENSATION OF DIRECTORS. The following table sets forth amounts paid to
each of the non-employee directors during fiscal 1998.
DIRECTOR COMPENSATION FOR FISCAL YEAR 1998
<TABLE>
<CAPTION>
Security Grants
Cash Compensation ----------------------------------
------------------------------------- Securities
Annual Consulting Underlying
Retainer Meeting Fees/Other Number of Options
Name Fees($)(1) Fees($)(2) Fees($) Shares(#)(3) (SAR)(#)(3)
- ---------------------------- ----------- ----------- ----------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Sharon Levy $ -- $ 5,000 $ -- 0 0
Joseph Penbera 12,000 7,500 -- 7,000 0
Frederick R. Ruiz 12,000 8,000 -- 7,000 0
O. James Woodward III 12,000 8,000 -- 7,000 0
Max Gutmann 12,000 7,500 9,986(4) 7,000 0
William Smith 7,000 4,500 5,833(4) 7,000 0
Isidoro Alvarez Alvarez -- -- -- 0 0
Jorge Pont Sanchez -- 2,000 3,827(4) 0 0
Gerald H. Blum -- -- 218,137(5) 0 0
</TABLE>
- ------------------------
(1) The five outside directors who are neither officers nor an affiliate of the
Company receive an annual stipend of $12,000, payable monthly. Stipend
payments to Mr. William Smith were for a partial year.
(2) The non-employee directors receive $1,000 for each meeting of the Board
attended and $500 for each Committee meeting attended and held on a separate
date. As a consultant of the Company, Mr. Blum was not eligible to receive
payments for such meetings.
(3) The five outside directors who are neither officers nor an affiliate of the
Company received grants of options in fiscal 1998 under The Gottschalks Inc.
1998 Stock Option Plan (the"1998 Stock Option Plan"). There were no
individual grants of options in tandem with stock appreciation rights
("SARS") or freestanding SARS made during fiscal 1998.
(4) The Company reimburses directors who reside outside the Fresno area for
costs incurred in attending meetings of the Board and in performing Board
duties. Such expense reimbursements typically include meals and
transportation costs and, when required, overnight hotel expenses. Amounts
indicated for Mr. Jorge Pont are paid directly to ECI.
(5) Mr. Gerald Blum served as Vice Chairman of the Board from February 1, 1998
through June 25, 1998. He did not stand for re-election as director at the
1998 Annual Meeting. This amount represents amounts paid to Mr. Gerald Blum
pursuant to his Consulting Agreement which provides for Mr. Blum to perform
certain consulting services for the Company during the period of June 1,
1994 through May 31, 2001 in return for an annual fee of $200,000, payable
monthly. The Consulting Agreement, entered into on May 27, 1994, also
provides for the payment of an annual office allowance and continuation of
certain insurance and retirement benefits. The Company paid
-7-
<PAGE>
Mr. Blum a total of $218,137 under the Consulting Agreement in fiscal 1998,
consisting of $200,000 of fees paid to him between February 1, 1998 and
January 30, 1999, $12,000 for office space rental and $6,137 for
contributions made by the Company on behalf of Mr. Blum to the Gottschalks
Inc. Retirement Savings Plan and amounts paid for the continuation of
health, life and disability insurance benefits under the Company's existing
benefits program.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and executive officers of the Company, as well as persons owning
more than 10% of the Company's outstanding shares of stock (collectively, the
"Reporting Persons") are required by Section 16(a) of the Securities and
Exchange Act of 1934 to file reports showing their initial ownership of the
Company's Common Stock and any subsequent changes in such ownership, with the
SEC, the New York Stock Exchange, the Pacific Stock Exchange and the Company.
Based solely on a review of the copies of such reports received by the Company
and written representations of directors and executive officers of the Company,
the Company believes that all such filing requirements were satisfied by the
Reporting Persons during the year.
-8-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 30, 1999, the Common Stock
beneficially owned by each director, nominee and named executive officer,
individually, and all directors and executive officers, as a group, as well as
the name and address of each person known to the Company to beneficially own
more than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership(1)
---------------------------------------
Total
Currently as
Shares of Exercisable Percent
Present Position Common Stock of
Name With the Company Stock(#)(2) Options(#)(3) Class(4)
- ----------------------------------- ------------------------------ ------------ -------------- -------
<S> <C> <C> <C> <C>
The Harris Company 2,095,900(5) 0 16.7%
P.O. Box 20
Redlands, CA 92373
Gerald H. Blum Consultant 1,530,529(6) 0 12.2%
9 River Park Place East
Fresno, CA 93720
Joe Levy Chairman and Chief Executive 1,305,395(7)(8) 25,000 10.6%
P.O. Box 28920 Officer
Fresno, CA 93729-8920
David L. Babson 873,000(9) 0 6.9%
and Company Incorporated
One Memorial Drive
Cambridge, MA
02142-1300
Peter B. Cannell & Co., Inc. 822,150(10) 0 6.5%
645 Madison Avenue
New York, NY 10022
Dimensional Fund Advisors Inc. 730,100(11) 0 5.8%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
James R. Famalette President, Chief Operating 1,358 5,000 *
Officer and Director
Bret W. Levy Vice President, Treasurer and 355,382(12) 10,000 2.9%
Director
Max Gutmann Director 21,000 5,000 *
Sharon Levy Director 0(8) 0 *
Joseph J. Penbera Director 5,000 5,000 *
Frederick R. Ruiz Director 9,550 5,000 *
O. James Woodward III Director 3,000 5,000 *
William Smith Director 5,500 5,000 *
Isidoro Alvarez Alvarez Director 0 0 *
Jorge Pont Sanchez Director 0 0 *
Gary L. Gladding Executive Vice President, 3,349 20,000 *
General Merchandise Manager
Michael J. Schmidt Senior Vice President, 9,661 20,000 *
Director of Stores
Alan A. Weinstein Former Senior Vice President 1,178 0 *
and Chief Financial
Officer(13)
Directors and Executive Officers as 1,719,483 105,000 14.4%
a Group (14 Persons)
</TABLE>
- ------------------------
* Holdings represent less than 1% of all common shares outstanding.
(1) Unless as otherwise indicated, (i) beneficial ownership is direct and (ii)
the person indicated has sole voting and investment power over the shares of
Common Stock indicated.
-9-
<PAGE>
(2) Includes shares of common stock held in the Gottschalks Inc. Retirement
Savings Plan, as follows: Joe Levy (14,233 shares); James R. Famalette (358
shares); Bret W. Levy (1,082 shares); Gary L. Gladding (3,459 shares) and
Michael J. Schmidt (4,661 shares).
(3) Shares that may be acquired pursuant to options exercisable within 60 days
of April 30, 1999.
(4) Assumes that only those options of the particular person or group listed
that are exercisable within 60 days of April 30, 1999 have been exercised
and no others.
(5) The information with respect to The Harris Company was reported on a
Schedule 13D filed by Mr. Joe Levy, Mr. Bret Levy, ECI and Harris with the
SEC on August 28, 1998, a copy of which was relied upon by the Company in
making this disclosure. The Harris Company exercised, as of August 28, 1998,
sole voting power and sole dispositive power with respect to 2,095,900
shares.
(6) Includes an aggregate of 975,000 shares beneficially owned as trustee of the
trust established by the Will of Gertrude H. Klein. Does not include other
shares owned by Mr. Blum's adult children, over which shares Mr. Blum
disclaims beneficial ownership.
(7) Does not include the aggregate of 1,088,500 shares held by Joseph Levy's
adult children, Jody Levy-Schlesinger, Felicia Levy-Weston and Bret Levy and
their spouses and children, over which shares Joseph Levy disclaims
beneficial ownership; and does not include 580,000 shares in which Joe Levy
has a pecuniary interest as a beneficiary of the trust established by the
Will of Gertrude H. Klein.
(8) Sharon Levy shares beneficial ownership of the shares attributed to Joe
Levy, her husband, as community property.
(9) The information with respect to David L. Babson and Company Incorporated was
reported on a Schedule 13G filed by David L. Babson and Company Incorporated
with the SEC on January 19, 1999, a copy of which was relied upon by the
Company in making this disclosure. David L. Babson and Company Incorporated
exercised, as of January 19, 1999, sole voting power and sole dispositive
power with respect to 873,000 shares.
(10) The information with respect to Peter B. Cannell & Co., Inc., was reported
on a Schedule 13G filed by Peter B. Cannell & Co., Inc., on February 5,
1999, a copy of which was relied upon in making this disclosure. Peter B.
Cannell & Co., Inc. exercised, as of February 5, 1999, sole voting power and
sole dispositive power with respect to 822,150 shares.
(11) The information with respect to Dimensional Fund Advisors Inc. was reported
on a Schedule 13G filed by Dimensional Fund Advisors Inc., with the SEC on
February 11, 1999, a copy of which was received by the Company and relied
upon in making this disclosure. Dimensional Fund Advisors Inc., exercised,
as of February 11, 1999, sole voting power and sole dispositive power with
respect to 730,100 shares.
(12) Includes 70,400 shares owned by Mr. Bret Levy's children, for which Mr.
Levy serves as custodian. Does not include 16,200 shares owned by Bret
Levy's spouse.
(13) Mr. Weinstein's employment with the Company was terminated on September 27,
1998.
As of April 30, 1999, other than as indicated above, there was no person or
group known by the Company to own beneficially more than 5% of the outstanding
Common Stock of the Company.
-10-
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following table lists the executive officers of the Company:
<TABLE>
<CAPTION>
Name Age(1) Position
- ------------------------- ------- ---------------------------------------------
<S> <C> <C>
Joe Levy(2) 67 Chairman and Chief Executive Officer
James R. Famalette(2) 46 President, Chief Operating Officer and
Director
Gary L. Gladding 59 Executive Vice President/General Merchandise
Manager
Michael S. Geele 49 Senior Vice President and Chief Financial
Officer
Michael J. Schmidt 57 Senior Vice President/Director of Stores
</TABLE>
- ------------------------
(1) As of April 30, 1999.
(2) Information with respect to Joe Levy and James R. Famalette is included in
the "Election of Directors" portion of this Proxy Statement.
Gary L. Gladding has been Executive Vice President of the Company since
1987, and joined E. Gottschalk as Vice President/General Merchandise Manager in
1983. From 1980 to 1983, he was Vice President and General Merchandise Manager
for Lazarus Department Stores, a division of Federated Department Stores, Inc.,
and he previously held merchandising manager positions with the May Department
Stores Co.
Michael S. Geele became Senior Vice President and Chief Financial Officer of
the Company on January 21, 1999. Prior to joining the Company, Mr. Geele was
Chief Financial Officer of Southwest Supermarkets in Phoenix, Arizona from 1995
to 1998. From 1991 to 1995, Mr. Geele served as Vice President of Finance for
Smitty's Super Valu in Phoenix, Arizona, and from 1981 to 1991 served in various
financial positions with Smitty's, including Senior Director and Corporate
Controller. Mr. Geele is a certified public accountant.
Michael J. Schmidt became Senior Vice President/Director of Stores of E.
Gottschalk in 1985. Prior to joining the Company in 1983, he held management
positions with Liberty House, Allied Corporation and R.H. Macy & Co., Inc.
-11-
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION. The materials set forth below contain information on
certain cash and non-cash compensation provided to the Company's Chief Executive
Officer and the four other current and former executive officers of the Company
who were the most highly compensated executive officers for fiscal year 1998,
collectively referred to herein as the "Named Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards(1)
Annual Compensation --------------
------------------------------------------------ Securities All Other
Name and Fiscal Base Other Annual Underlying Compensation
Principal Position Year Salary($)(2) Bonus($)(3) Compensation($)(4) Options(#)(5) ($)(6)
- ------------------------- ------- ------------- ------------ ----------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joe Levy 1998 $327,600 $28,125 $ -- 40,000 $3,453
Chairman & 1997 327,600 0 -- 0 6,669
Chief Executive Officer 1996 327,600 0 -- 0 2,635
James R. Famalette 1998 $345,192 $127,902 $ -- 40,000 $3,267
President, Chief 1997 262,500(7) -- 68,803(8) 20,000 168
Operating Officer & 1996 -- -- -- -- --
Director
Gary L. Gladding 1998 $284,354 $24,056 $ -- 4,000 $1,754
Executive Vice 1997 276,508 0 -- 0 5,057
President & General 1996 268,200 0 -- 0 2,084
Merchandise Manager
Michael J. Schmidt 1998 $201,081 $16,429 $ -- 4,000 $2,677
Senior Vice President & 1997 187,672 10,000(9) -- 0 4,155
Director of Stores 1996 179,364 10,000(9) -- 0 1,836
Alan A. Weinstein 1998 $199,227(10) $16,054 $ -- 0 $2,083
Former Senior Vice 1997 183,307 0 -- 0 3,793
President & Chief 1996 175,000 0 -- 0 1,797
Financial Officer
</TABLE>
- ------------------------
(1) The Company did not make any payments or awards that would be classified
under the "Restricted Stock Award" and "LTIP Payout" columns otherwise
required to be included in the Table by the applicable SEC disclosure rules.
(2) Includes compensation earned but deferred pursuant to the Gottschalks Inc.
Retirement Savings Plan and a cafeteria plan established pursuant to
Internal Revenue Code Section 125.
(3) Bonus amounts paid in fiscal 1998 were paid under the 1998 Bonus Plan (the
"Bonus Plan"). The bonus paid to Mr. Famalette also includes $100,000
payable under his employment agreement.
-12-
<PAGE>
Except as indicated at footnote (10) below, no bonus compensation was earned
by the Named Officers in fiscal years 1996 or 1997.
(4) Except as indicated at footnote (8) below, the amounts included in this
column for each of the Named Officers do not include the value of certain
perquisites in which the aggregate did not exceed the lesser of $50,000 or
10% of the Named Officer's aggregate salary and bonus compensation for
fiscal 1996, 1997 or 1998, as applicable.
(5) Represents shares of stock underlying options granted under the Company's
various stock option plans. There were no individual grants of options in
tandem with SARS or freestanding SARS made during fiscal years 1996, 1997 or
1998 to the Named Officers.
(6) Represents contributions made by the Company on behalf of the Named Officers
to the Gottschalks Inc. Retirement Savings Plan in the form of Common Stock
of the Company and amounts paid for term life insurance premiums.
(7) Mr. Famalette was employed by the Company on April 14, 1997. This represents
base salary paid for a partial year in fiscal 1997. See the "Employment and
Severance Agreements" portion of this Proxy Statement for a description of
amounts to be paid to Mr. Famalette pursuant to his employment agreement.
(8) Represents amounts paid as reimbursement for actual relocation expenses
incurred.
(9) Mr. Schmidt received a discretionary bonus payment in fiscal 1997. Fiscal
1996 amounts represent a bonus earned in the previous fiscal year and paid
to Mr. Schmidt in the fiscal year indicated pursuant to his employment
agreement, which was terminated effective June 1, 1995 (fiscal 1995).
(10) Mr. Weinstein's employment with the Company was terminated on September 27,
1998. See the "Employment and Severance Agreements" portion of this Proxy
Statement for a description of future amounts to be paid to Mr. Weinstein
pursuant to his severance agreement.
-13-
<PAGE>
OPTION GRANTS. Shown below is information with respect to grants of stock
options to the Named Officers during the last fiscal year under the 1998 Stock
Option Plan. In addition to options granted to the Named Officers below, in
fiscal 1998 a total of 213,000 options were also granted to 171 officers and key
employees of the Company under the 1998 Stock Option Plan.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
---------------------------------------------------------------- Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Price Appreciation for
Underlying Options Granted Exercise Option Term
Options to Employees in Price Expiration ----------------------
Name Granted#(1) Fiscal Year ($/Share)(2) Date 5% 10%
- ------------------- ------------- --------------- ------------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Joe Levy 40,000 13.3% $ 8.25 11/23/08 $ 208,000 $ 526,000
James R. Famalette 40,000 13.3 7.50 11/23/08 189,000 478,000
Gary L. Gladding 4,000 1.3 7.50 11/23/08 19,000 49,000
Michael J. Schmidt 4,000 1.3 7.50 11/23/08 19,000 49,000
Alan A. Weinstein 0 -- -- -- -- --
</TABLE>
- ------------------------
(1) These options were granted at a price of $7.50 per share ($8.25 in the case
of Mr. Joe Levy) and first become exercisable on the first anniversary of
the grant date, with 25% of the underlying shares becoming exercisable at
that time, an additional 25% of the option shares becoming exercisable on
each successive anniversary date and full vesting on the fourth anniversary
date.
(2) Represents the fair market value of the Company's Common Stock (110% of fair
market value for options granted to Mr. Joe Levy) based on its closing price
on the New York Stock Exchange as of the date of the grant of the options.
-14-
<PAGE>
OPTION EXERCISES. Shown below is information with respect to the exercise
of stock options during the last fiscal year by the Named Officers and the value
of unexercised options held by each of them as of the end of the last fiscal
year.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 1998 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of
Securities Unexercised In-
Underlying the-Money
Unexercised Options at
Options at Fiscal Year-
Fiscal Year-End End(1)
---------------- ----------------
Shares Value Exercisable/ Exercisable/
Name Acquired(#) Realized($) Unexercisable(#) Unexercisable($)
- ------------------ ----------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Joe Levy 0 $ 0 25,000/40,000 $ 0/0
James R. Famalette 0 0 5,000/55,000 12,475/52,425
Gary L. Gladding 0 0 20,000/4,000 0/1,500
Michael J. Schmidt 0 0 20,000/4,000 0/1,500
Alan A. Weinstein 0 0 0/0 0/0
</TABLE>
- ------------------------
(1) The exercise price of the options range from $5.38 to $10.87 per share. The
closing price of the Company's Common Stock on the New York Stock Exchange
as of January 30, 1999 was $7.875 per share.
EMPLOYMENT AND SEVERANCE AGREEMENTS
EMPLOYMENT AGREEMENT. The Company has an employment agreement with James R.
Famalette as President and Chief Operating Officer. Under the agreement, Mr.
Famalette's employment began on April 14, 1997 and was initially to continue for
two years, with automatic annual renewals to the agreement thereafter (unless
terminated with one year's notice). The agreement is still in effect, as no
notice of termination has been provided. The agreement provides that Mr.
Famalette shall be a member of the Board of Directors during his term of
employment. In his capacity as President, Chief Operating Officer and Director,
the agreement provides for the payment of an annual base salary of $325,000 in
his first year of employment (April 14, 1997 through April 13, 1998) and
$350,000 in his second year of employment (April 14, 1998 through April 13,
1999), and each subsequent year the agreement is in effect. The agreement also
provided for the payment of a bonus of $100,000 in May 1998, the grant of 20,000
options under the Company's 1994 Stock Option Plan (with 25% of such options
vesting on each anniversary of the option grant at an exercise price equal to
the fair market value of the Company's Common Stock on the date of the grant), a
car allowance, the payment of certain relocation and other expenses and other
benefits typically offered to all employees of the Company. The compensation
payable pursuant to the agreement shall be terminated if Mr. Famalette
terminates his employment with the Company through retirement, disability or
death, Mr. Famalette is terminated for cause (as defined) or the Company sells
all or part of its business and Mr. Famalette is able to continue his employment
with the buyer at or above his then base salary. With the exception of the
employment agreement with
-15-
<PAGE>
Mr. Famalette, the Company has no employment agreements with any of the other
Named Officers, including the Chief Executive Officer.
SEVERANCE AGREEMENTS. The Company has Severance Agreements with each of the
Named Officers, including the Chief Executive Officer. Such agreements provide
for the continuing payment of the officer's base salary for a period of twelve
months, except for Messrs. Levy and Famalette, whose severance benefits will be
payable for a period of twenty-four months, and in the case of Mr. Famalette,
less the period remaining under his employment agreement. The agreements also
provide for continuing coverage in the Company's group medical plan at the
Company's expense for one year in the event the officer is terminated by written
notice by the Company for other than cause (as defined). The agreements require
the officer to continue to report to work and perform the duties of his or her
employment until the date set forth as the officer's date of termination in
order to receive such continuing payments. The officer is not entitled to
receive a severance benefit under certain conditions including: (i) the
termination of employment occurs by other than written notice of termination by
the Company; (ii) if the Company sells all or part of its business and the
officer has the opportunity to continue his or her employment with the buyer at
or above the officer's base rate of pay; and (iii) the termination of employment
for cause (as defined). In the event of a change in control, the severance
benefits are extended to a period of twenty-four months in the case of Mr. Joe
Levy and Mr. Famalette, and to a period of eighteen months in the case of
Messrs. Gladding, Geele and Schmidt.
Pursuant to his written termination notice, Mr. Alan Weinstein, the
Company's former Senior Vice President and Chief Financial Officer, will receive
the continuing payment of his base salary, totaling $187,000, over the twelve
month period following his termination on September 27, 1998, and the right to
continuing coverage in the Company's group medical plan at the Company's expense
for one year. Upon his termination, Mr. Weinstein also received payment for all
accrued vacation and holiday pay.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gottschalks is indebted to Harris, a stockholder owning more than 5% of the
Gottschalks common stock. As described under the heading "Agreements Regarding
Nominees," on August 20, 1998 the Company acquired substantially all of the
assets and business of Harris. As consideration for the purchase, Gottschalks
issued to Harris, 2,095,900 shares of Gottschalks common stock and an 8%
Non-Negotiable, Extendable, Subordinated Note and assumed certain other
liabilities. The Subordinated Note is due August 20, 2003 in the principal
amount of $22,179,598. Interest on the Subordinated Note is payable
semi-annually beginning in February 1999, with the principal portion due and
payable upon its maturity date, unless such payment would result in the default
on any of the Company's other credit facilities, whereby the maturity date of
the Subordinated Note would be extended by three years to August 2006. Mr.
Alvarez and Mr. Pont are directors of Gottschalks and are also directors and/or
executive officers of Harris and its parent, ECI. Mr. Alvarez is a former
Director of Harris and is the Chairman of ECI. Mr. Pont is the President and
Chief Executive Officer of Harris and is the International Division Director of
ECI.
Mr. Blum's Consulting Agreement provides for Mr. Blum to perform certain
consulting services for the Company during the period of June 1, 1994 through
May 31, 2001 in return for annual fees of $200,000 payable monthly. The
Consulting Agreement, entered into on May 27, 1994, also provides for the
payment of an annual office allowance and continuation of certain insurance and
retirement benefits. The Company paid Mr. Blum a total of $218,137 under the
Consulting Agreement in fiscal 1998.
-16-
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS HAS FURNISHED THE
FOLLOWING REPORT ON EMPLOYEE COMPENSATION. SUCH REPORT WILL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING THIS PROXY
STATEMENT INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES ACT OF 1933 OR
UNDER THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT THE COMPANY
SPECIFICALLY INCORPORATES THIS INFORMATION BY REFERENCE AND SHALL NOT OTHERWISE
BE DEEMED SOLICITING MATERIAL OR BE DEEMED FILED UNDER SUCH ACTS.
The policy of the Compensation Committee of the Board of Directors is that
the compensation of the executives of the Company should be closely aligned with
the interests of the stockholders of the Company and linked with the Company's
overall financial performance and the executive's individual performance. The
Compensation Committee generally believes compensation should be limited to
amounts that are deductible under present income tax law. However, under certain
circumstances, the Compensation Committee may authorize the payment of
compensation that is not deductible. Such policies have been incorporated into a
performance-based compensation program developed and implemented by the
Compensation Committee for the senior executive officers of the Company.
COMPENSATION PROGRAM
The Company's executive compensation program consists primarily of three
components: (1) a base salary that is designed to attract and retain qualified
employees for the Company; (2) annual incentives which are tied to the
performance of the Company; and (3) stock options.
BASE SALARY. The base salary of the Chief Executive Officer was originally
determined by the Compensation Committee based on factors such as scope of
responsibility, current performance and the overall financial performance of the
Company for the most recent fiscal year. In such determination, the Compensation
Committee also considered salary ranges of chief executive officers of certain
competitors of the Company. The annual base salary for the Chief Executive
Officer for fiscal 1998 of $327,600 did not change from the previous year. The
Chief Executive Officer, in turn, recommends an original annual base salary for
the senior executive officers of the Company based on factors such as the scope
of responsibility and base salary ranges of similarly positioned executives of
the Company. Annual adjustments to such base salaries are determined based on
factors including, but not limited to, the executive's individual performance,
the performance of areas within the executive's scope of responsibility and the
overall performance of the Company. The Compensation Committee reviews and
passes on the Chief Executive Officer's recommendations for such officers'
annual base salary levels.
ANNUAL INCENTIVES. The Company's bonus plan in effect for fiscal 1998 (the
"Bonus Plan") provides for a bonus pool to be divided on a pro rata basis (based
on base salary) among the key executives of the Company, including the Chief
Executive Officer. The total amount of the bonus pool is determined based on the
Company's performance. The Board of Directors sets pre-tax profit plan goals for
the Company each fiscal year. If the Company meets its plan goals, the amount
allocated to the bonus pool is the amount equal to 5% of the pre-tax plan. If
the Company exceeds the pre-tax plan goal by 10%, the amount allocated to the
bonus pool increases by 10% of the incremental increase in the pre-tax profit.
If the Company exceeds the pre-tax plan goal by 20%, the bonus pool increases by
20% of the incremental increase in the pre-tax profit. If the Company exceeds
its plan goal by 30% or more, the bonus pool increases by 30% of the incremental
increase in the pre-tax profit. No bonuses are to be paid
-17-
<PAGE>
if the Company does not achieve its plan goal for the fiscal year. The bonus
pool is then divided among the key executives of the Company pro rata based on
their salary level (such amount for each individual being that individual's
"potential payout"). The actual payment for each individual is then determined
by analyzing the Company's performance and the individual's performance. Fifty
percent (50%) of the potential payout is based solely on the Company's
performance, thirty percent (30%) of the potential payout is based on a
subjective evaluation of the key executive's performance and twenty percent
(20%) of the potential payout is based on the key executive's performance
measured against the key executive's goals. The maximum bonus to be paid to any
key executive is 50% of a key executive's base salary. Based on the Company's
and his individual performance for fiscal 1998, the Company's CEO earned the
maximum bonus allowable under the discretionary provisions of the plan.
The Company's employment agreement with Mr. Famalette provided for the
payment of a bonus of $100,000 in May 1998. (See "Employment and Severance
Agreements").
STOCK OPTIONS. Stock options are granted to the senior executive officers
and other key employees of the Company at the discretion of the Compensation
Committee. The Compensation Committee believes the grant of stock options
reinforces the importance of improving stockholder value over the long term, and
encourages and facilitates executive and key employee stock ownership of the
Company. The determination to grant options is also based on factors such as the
current number of unexercised options held by the senior executive officers and
employees, the expiration dates of those options and the current financial
performance of the Company. Option grants for the Chief Executive Officer are
determined by the Compensation Committee. Option grants for the senior
executives and key employees of the Company are recommended by the Chief
Executive Officer and reviewed and passed upon by the Compensation Committee. In
fiscal 1998, 88,000 options were granted to the Named Officers under the 1998
Stock Option Plan at exercise prices ranging from $7.50 to $8.25 per share. In
fiscal 1998, a total of 213,000 options were also granted to 171 officers and
key employees of the Company under the 1998 Stock Option Plan at exercise prices
ranging from $7.50 to $9.00 per share. All options granted under the 1998 Stock
Option Plan are granted at the fair market value of the Company's common stock
on the dates of the grants, with the exception of options granted to Mr. Joe
Levy, which are granted at an exercise price of 110% of fair market value on the
date of the grant. Such options vest at a rate of 25% per year beginning on the
first anniversary after the date of the grant and expire in ten years.
OTHER. Compensation for other officers and managers of the Company was paid
during fiscal 1998 based upon an evaluation of such individuals' performance,
responsibilities and the level of compensation of similarly positioned managers
at the Company and its competitors. Excluding amounts paid to the Named
Officers, bonuses in the aggregate amount of $543,000 were paid to eighty-nine
store managers, merchandising and operations personnel of the Company during
1998 based primarily upon the performance of the particular individual's unit,
department, division or store.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. No member of
the current Compensation Committee is a former or current officer or employee of
the Company or any of its subsidiaries, or is employed by a company whose board
of directors includes a member of management of the Company.
O. James Woodward III, Chairman Max Gutmann Joseph J. Penbera
Frederick R. Ruiz William Smith
-18-
<PAGE>
STOCK PRICE PERFORMANCE
The graph below compares the cumulative total return of the Company's Common
Stock with the cumulative total return of (i) the S&P 600 SmallCap Index and
(ii) three companies described in the footnote to the graph. Except as
described, the comparison covers the five-year period from close of market on
the last trading day prior to the beginning of the 1994 fiscal year to the last
day of the Company's 1998 fiscal year and assumes that $100 was invested at the
beginning of the period in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
The past stock price performance shown for the Company's Common Stock is not
necessarily indicative of future price performance. The Performance Graph will
not be deemed to be incorporated by reference by any general statement
incorporating this Proxy Statement into any filing by the Company under the
Securities Act of 1933 or under the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed soliciting material or be deemed
filed under such Acts.
GOTTSCHALKS INC. STOCK PRICE PERFORMANCE
FIVE YEAR CUMULATIVE TOTAL STOCKHOLDERS' RETURN (1)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
DOLLARS
<S> <C> <C> <C> <C> <C>
GOTTSCHALKS INC. NEW PEER GROUP OLD PEER GROUP S & P 500 S & P 600 SMALLCAP
1/94 100 100 100 100 100
1/95 87 104 104 101 92
1/96 69 70 73 139 121
1/97 63 82 86 176 149
1/98 87 176 151 224 181
1/99 94 48 82 296 187
</TABLE>
- ------------------------
(1) Assumes $100 is invested on January 30, 1994 in the Company's Common Stock,
the S&P 600 SmallCap Index and a composite index, weighted by market
capitalization, of the following three companies: Bon-Ton Stores, Inc.,
Jacobson Stores, Inc., and Stage Stores, Inc. ("Stage"). The dollar amounts
shown at each year-end are as of the last trading day prior to the end of
the Company's fiscal year. The composite index includes data for Stage
beginning in the fiscal year ended January 31, 1997, during which time Stage
became traded on the NYSE. This year the
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<PAGE>
Company has changed both its broad equity market index and its peer index.
Accordingly, the stock price performance graph also includes the indexes
used in last year's performance graph. The Company's fiscal 1997 stock
performance chart included the S&P 500 Index. However, management believes
the S&P 600 SmallCap Index provides a better indicator of the Company's
performance. The Company's composite index for fiscal 1997 also included the
following three peer companies: Bon-Ton Stores, Inc., Crowley Milner & Co.
("Crowley"), and Jacobson Stores, Inc. In February 1999, Crowley reported on
a Form 8-K that it filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code. Crowley reported that it is continuing to
operate as a debtor-in-possession and, subject to court approval, will
commence and/or continue clearance sales at its stores pending an orderly
wind-down of operations under the protection of the court. Accordingly,
Crowley has been replaced with Stage.
-20-
<PAGE>
OTHER MATTERS
INDEPENDENT AUDITORS
The Audit Committee selected Deloitte & Touche LLP as the Company's
independent auditors for fiscal 1999. Representatives of Deloitte & Touche LLP
are expected to be present at the 1999 Annual Meeting and will be available to
answer appropriate questions and to make any statement they may desire. While it
is presently anticipated that Deloitte & Touche LLP will continue to serve as
the Company's independent auditors during fiscal 1999, and in that capacity will
report on the Company's 1999 annual financial statements, the Audit Committee
reserves the right to select different independent auditors at any time.
VOTING PROCEDURES AND REQUIRED VOTE
A majority of the Company's outstanding shares of Common Stock as of April
30, 1999 must be represented in person or by proxy to constitute a quorum for
the 1999 Annual Meeting. All shares represented in person or by proxy,
regardless of the nature of the vote, the indication of abstention or the
absence of a vote indication, including broker non-votes (i.e. shares held by
brokers or nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote that the broker or nominee does
not have discretionary power to vote on a particular matter), will be counted as
shares that are present and entitled to vote for purposes of determining the
presence of a quorum. The election of directors shall be determined by a
plurality of votes cast and, therefore, only votes for or against a candidate,
and not abstentions or broker non-votes, are relevant to the outcome. However,
brokers and nominees may be precluded from exercising their voting discretion
with respect to certain matters to be acted upon. Accordingly, for purposes of
determining the outcome of any matter as to which the broker has physically
indicated on the proxy for such shares that it does not have discretionary
authority to vote on a particular subject, those shares will be treated as not
present and not entitled to vote with respect to that matter (even through those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters).
Any unmarked proxies, including those submitted by brokers or nominees, will
be voted as indicated in the accompanying proxy card and as summarized elsewhere
in this Proxy Statement.
STOCKHOLDER PROPOSALS
In order for stockholder proposals for the Annual Stockholders' Meeting to
be held on or about June 22, 2000 to be eligible for inclusion in the Company's
Proxy Statement for that meeting, they must be received by the Company at its
principal office located at 7 River Park Place East, Fresno, California 93720,
prior to January 21, 2000 and must comply with all legal requirements for
inclusion of such proposals.
Stockholder proposals submitted outside the processes of Rule 14a-8 under
the Securities Exchange Act of 1934 (i.e., a proposal to be presented at the
next annual meeting of stockholders but NOT submitted for inclusion in the
Company's Proxy Statement for that meeting) must be timely submitted. Until
further notice, to be timely with respect to the Company's 2000 Annual
Stockholders' Meeting (which is presently expected to be held in June 2000), a
stockholder's notice of director nominations or of business to be brought before
such Annual Meeting must be received in writing by the Secretary of the Company
at the principal executive office of the Company not less than thirty (30) days
nor more than
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<PAGE>
ninety (90) days prior to the Annual Meeting. Such notice must also contain
certain additional information required by the Bylaws and otherwise comply with
applicable legal requirements. Stockholders may obtain a complete copy of the
Company's Bylaws, as amended, by submitting a request to the Secretary of the
Company at the address set forth below under "Annual Report to Stockholders and
Form 10-K."
ANNUAL REPORT TO STOCKHOLDERS AND FORM 10-K
The Company's financial statements are not made part of this Proxy
Statement. However, financial statements reported upon by Deloitte & Touche LLP
are included in the Annual Report to Stockholders for fiscal year 1998 which is
enclosed with this Proxy Statement or was previously mailed to stockholders. The
Annual Report to Stockholders is not to be regarded as proxy soliciting material
or as a communication by means of which any solicitation is made.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 1998, AS FILED WITH
THE SEC, WILL BE PROVIDED WITHOUT CHARGE TO ANY STOCKHOLDER WHO REQUESTS IT IN
WRITING FROM MICHAEL S. GEELE, THE COMPANY'S SENIOR VICE PRESIDENT/CHIEF
FINANCIAL OFFICER, 7 RIVER PARK PLACE EAST, FRESNO, CALIFORNIA 93720. THE
EXHIBITS TO THAT REPORT WILL ALSO BE PROVIDED UPON REQUEST AND PAYMENT OF COSTS
OF REPRODUCTION.
OTHER BUSINESS
The Board of Directors of the Company knows of no other business to be
presented at the 1999 Annual Meeting. However, if any other matters properly
come before the meeting, it is the intention of the persons named in the
accompanying proxy to vote pursuant to the proxies in accordance with their
judgement on such matters.
------------------------
It is important that all proxies be forwarded promptly in order that a
quorum may be present at the meeting.
We respectfully request you to sign, date and return the accompanying proxy
at your earliest convenience.
By Order of the Board of Directors,
[SIGNATURE]
Joe Levy
Chairman and Chief Executive Officer
May 20, 1999
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<PAGE>
P
R GOTTSCHALKS INC.
O
X ANNUAL MEETING OF STOCKHOLDERS, JUNE 24, 1999
Y
The undersigned hereby appoints Joe Levy and O. James Woodward III and
each of them, each with full power of substitution, as proxy of the
undersigned to attend the Annual Stockholders' Meeting of Gottschalks Inc.,
to be held on June 24, 1999 at 10:00 a.m., and any adjournment thereof, and
to vote the number of shares the undersigned would be entitled to vote if
personally present as follows with respect to the following matters which are
more fully described in the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated May 20, 1999, receipt of which is hereby
acknowledged by the undersigned.
COMMENTS/ADDRESS CHANGE: Please Mark Comment/Address Box on Reverse Side
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
- FOLD AND DETACH HERE -
<PAGE>
Please mark
your votes as
indicated in
this example / X /
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE NOMINEES ON PROPOSAL 1.
WITHHELD
FOR FOR ALL
1. ELECTION OF DIRECTORS. / / / /
Joe Levy, James R. Famalette, Bret W. Levy,
Max Gutmann, Sharon Levy,
Joseph J. Penbera, Frederick R. Ruiz,
O. James Woodward III, William Smith,
Isidoro Alvarez Alvarez and Jorge Pont Sanchez
WITHHELD FOR: (Write that nominee's name in the space provided below.)
- ---------------------------------------------------------------------
2. Such other matters as may properly come before the meeting or any
adjournment thereof. As to such other matters the undersigned hereby confers
discretionary authority.
I PLAN TO ATTEND MEETING / /
COMMENTS/ADDRESS CHANGE
Please mark this box if you have written comments/address change
on the reverse side. / /
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR EACH OF THE NOMINEES FOR DIRECTOR. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS OF GOTTSCHALKS INC.
Signature(s) Dated , 1999
------------------------------------ ---------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME IS PRINTED. EACH JOINT TENANT SHOULD
SIGN. EXECUTIVES, ADMINISTRATORS, TRUSTEES OR GUARDIANS SHOULD GIVE FULL
TITLES WHEN SIGNING. PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
- FOLD AND DETACH HERE -
