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 Section240.14a-11(c) or
Section240.14a-12
BEBE STORES, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
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(2) Aggregate number of securities to which transaction
applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which filing fee is calculated and state how it
was determined):
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/ / 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:
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[LOGO]
380 VALLEY DRIVE
BRISBANE, CALIFORNIA 94005
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 20, 2000
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of bebe
stores, inc., a California corporation (the "Company"), which will be held on
November 20, 2000, at 9:30 a.m. local time, at the Company's Main Conference
Room located at 380 Valley Drive, Brisbane, California for the following
purposes:
1. To elect five (5) directors of the Company to hold office for a one-year
term and until their respective successors are elected and qualified.
2. To consider, approve and ratify the adoption of an increase in the
maximum number of shares that may be issued under the Company's 1997 Stock Plan,
as amended, by 1,500,000 shares, from 2,830,000 shares to 4,330,000 shares.
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public auditors for the fiscal year ending June 30, 2001.
4. To transact such other business as may come properly before the meeting.
Shareholders of record at the close of business on October 2, 2000, are entitled
to notice of, and to vote at, this meeting and any adjournments thereof. For ten
days prior to the meeting, a complete list of the shareholders entitled to vote
at the meeting will be available for examination by any shareholder for any
purpose relating to the meeting during ordinary business hours at the Company.
By Order of the Board of Directors,
/s/ Manny Mashouf
Manny Mashouf
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Brisbane, California
October 18, 2000
[LOGO]
October 18, 2000
380 VALLEY DRIVE
BRISBANE, CALIFORNIA 94005
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
The accompanying proxy is solicited by the Board of Directors of bebe
stores, inc., a California corporation (the "Company"), for use at the Annual
Meeting of Shareholders to be held on November 20, 2000, or any adjournment
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Shareholders. The date of this Proxy Statement is October 18, 2000, the
approximate date on which this Proxy Statement and the accompanying form of
proxy were first sent or given to shareholders.
GENERAL INFORMATION
ANNUAL REPORT
An annual report on Form 10-K for the fiscal year ended June 30, 2000, is
enclosed with this Proxy Statement.
VOTING SECURITIES
Only shareholders of record as of the close of business on October 2, 2000
will be entitled to vote at the meeting and any adjournment thereof. As of that
date, there were 24,644,621 shares of Common Stock of the Company, par value
$0.001 per share (the "Common Stock"), issued and outstanding. Shareholders may
vote in person or by proxy. Each holder of shares of Common Stock is entitled to
one (1) vote for each share of stock held on the proposals presented in this
Proxy Statement. The Company's bylaws provide that a majority of all of the
shares of the stock entitled to vote, whether present in person or represented
by proxy, shall constitute a quorum for the transaction of business at the
meeting.
SOLICITATION OF PROXIES
The cost of soliciting proxies will be borne by the Company. The Company
will solicit shareholders by mail through its regular employees and will request
banks and brokers, and other custodians, nominees and fiduciaries, to solicit
their customers who have stock of the Company registered in the names of such
persons and will reimburse them for their reasonable, out-of-pocket costs. The
Company also may use the services of its officers, directors and others to
solicit proxies, personally or by telephone, without additional compensation.
VOTING OF PROXIES
All valid proxies received prior to the meeting will be voted. All shares
represented by a proxy will be voted, and where a shareholder specifies by means
of the proxy a choice with respect to any matter to be acted upon, the shares
will be voted in accordance with the specification so made. If no choice is
indicated on the proxy, the shares will be voted in favor of the proposals. A
shareholder giving a proxy has the power to revoke his, her or its proxy, at any
time prior to the time it is voted, by delivery to the Chief Financial Officer
of the Company of a written instrument revoking the proxy or a duly executed
proxy with a later date, or by attending the meeting and voting in person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of October 2, 2000,
with respect to the beneficial ownership of the Common Stock by (i) all persons
known by the Company to be the beneficial owners of more than 5% of the
outstanding Common Stock, (ii) each director and director-nominee of the
Company, (iii) each executive officer of the Company named in the Summary
Compensation Table below and (iv) all executive officers and directors of the
Company as a group:
SHARES OWNED (1)
--------------------------
NUMBER PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNERS OF SHARES CLASS
- ------------------------------------- ---------- -------------
Manny Mashouf (2)........................................... 20,881,607 84.92%
Barbara Bass (3)............................................ 192,250 *
Corrado Federico (4)........................................ 192,250 *
Neda Mashouf (5)............................................ 20,881,607 84.92%
Philip Schlein (6).......................................... 106,125 *
George Arvan (7)............................................ 137,860 *
Blair Lambert (8)........................................... 193,463 *
Lilliemae Stephens (9)...................................... 96,254 *
All directors and executive officers as a group (8 persons)
(10)...................................................... 21,789,809 85.16%
- ------------------------------
* Less than 1%
(1) Number of shares beneficially owned and the percentage of shares
beneficially owned are based on 24,644,621 shares outstanding as of
October 2, 2000. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission (the "SEC"). Options granted
under the Company's 1997 Stock Plan, as amended, are immediately exercisable
subject to vesting and the Company's right of repurchase under certain
circumstances. Shares of Common Stock subject to options are deemed to be
outstanding and to be beneficially owned by the person holding such options
for the purpose of computing the number of shares beneficially owned and the
percentage of ownership of such person, but are not deemed to be outstanding
and to be beneficially owned for the purpose of computing the percentage of
ownership of any other person. Except as indicated in the footnotes to the
table and subject to applicable community property laws, based on
information provided by the persons named in the table, such persons have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them.
(2) Mr. Mashouf's address is c/o bebe stores, inc., 380 Valley Drive, Brisbane,
California 94005. Includes 131,390 shares held by trusts for Mr. Mashouf's
children, as to which shares Mr. Mashouf disclaims beneficial ownership.
Mr. Mashouf is the Chairman, President and Chief Executive Officer of the
Company.
(3) Represents 192,250 shares subject to immediately exercisable options, of
which 10,613 would not be vested within 60 days of October 2, 2000, and
therefore subject to the Company's right of repurchase under certain
circumstances.
(4) Represents 192,250 shares subject to immediately exercisable options.
(5) Consists of shares of which Ms. Mashouf disclaims beneficial ownership, held
by Mr. Mashouf, Ms. Mashouf's husband, and 131,390 shares held by trusts for
Mr. Mashouf's children.
(6) Represents 106,125 shares subject to immediately exercisable options.
(7) Includes 136,900 shares subject to immediately exercisable options, of which
91,928 would not be vested within 60 days of October 2, 2000, and therefore
subject to the Company's right of repurchase under certain circumstances.
(8) Includes 191,500 shares subject to immediately exercisable options, of which
118,097 would not be vested within 60 days of October 2, 2000, and therefore
subject to the Company's right of repurchase under certain circumstances.
(9) Includes 95,000 shares subject to immediately exercisable options, of which
78,919 would not be vested within 60 days of October 2, 2000, and therefore
subject to the Company's right of repurchase under certain circumstances.
(10) Includes an aggregate of 914,025 shares subject to immediately exercisable
options held by the directors and officers, of which 299,557 would not be
vested within 60 days of October 2, 2000, and therefore subject to the
Company's right of repurchase under certain circumstances. Also includes
131,390 shares held by trusts for Mr. Mashouf's children, as to which shares
Mr. and Ms. Mashouf disclaim beneficial ownership.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of five directors.
Management's nominees for election at the Annual Meeting of Shareholders to the
Board of Directors are listed below. If elected, the nominees will serve as
directors until the Company's Annual Meeting of Shareholders in 2001, and until
their successors are elected and qualified. If a nominee declines to serve or
becomes unavailable for any reason, or if a vacancy occurs before the election
(although Management knows of no reason to anticipate that this will occur), the
proxies may be voted for such substitute nominee as Management may designate.
DIRECTOR-NOMINEES
The table below sets forth for the Company's director-nominees to be elected
at this meeting, and information concerning their age and background:
NAME AGE POSITION
- ------------------------------------- -------- ------------------------------------------------------
Manny Mashouf 62 Chairman, President and Chief Executive Officer
Neda Mashouf 37 Director and Merchandising Advisor
Barbara Bass* 49 Director
Corrado Federico* 59 Director
Philip Schlein* 66 Director
- ------------------------
* Member, Audit Committee and Compensation Committee
MANNY MASHOUF founded the Company and has served as Chairman, President and
Chief Executive Officer of the Company since the Company's incorporation in
1976. Mr. Mashouf is the husband of Neda Mashouf, a Director of the Company.
NEDA MASHOUF has served as a Director of the Company since September 1984
and has been employed by the Company since 1984, most recently as Merchandising
Advisor. Ms. Mashouf is the wife of Manny Mashouf, the Chairman, President and
Chief Executive Officer of the Company.
BARBARA BASS has served as a Director of the Company since February 1997.
Since 1993, Ms. Bass has served as the President of the Gerson Bakar Foundation.
From 1989 to 1992, Ms. Bass served as President and Chief Executive Officer of
the Emporium Weinstock Division of Carter Hawley Hale Stores, Inc., a department
store chain. Ms. Bass also serves on the Board of Directors of Starbucks
Corporation, DFS Group Limited and The Bombay Company, Inc.
CORRADO FEDERICO has served as a Director of the Company since
November 1996. Mr. Federico is President of Solaris Properties and has served as
the President of Corado, Inc., a land development firm since 1991. From 1986 to
1991, Mr. Federico held the position of President and Chief Executive Officer of
Esprit de Corp. Mr. Federico also serves on the Board of Directors of Hot
Topic, Inc.
PHILIP SCHLEIN has served as a Director of the Company since December 1996.
Since April 1985, Mr. Schlein has been a general partner of U.S. Venture
Partners, a venture capital firm specializing in retail and consumer products
companies. From January 1974 to January 1985, Mr. Schlein served as President
and Chief Executive Officer of Macy's California, a division of R. H. Macy &
Co, Inc., a department store chain. Mr. Schlein also serves on the Board of
Directors of Ross Stores, Inc., NBC Internet, Inc., QRS Corporation and Burnham
Pacific Properties, Inc.
3
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 2000, the Board of Directors held
eleven (11) meetings. Each director serving on the Board of Directors in fiscal
year 2000 attended at least 75% of such meetings of the Board of Directors and
the Committees on which he or she serves.
The Audit Committee, which consists of all of the non-employee directors,
oversees actions taken by the Company's independent auditors, recommends the
engagement of auditors and reviews the results and scope of the audit and other
services provided by the Company's independent auditors, reviews and evaluates
the Company's control functions and reviews the Company's investment policy.
During the fiscal year ended June 30, 2000, the Audit Committee held three
(3) meeting.
The Compensation Committee, which consists of all of the non-employee
directors, makes recommendations to the Board of Directors concerning certain
salaries and incentive compensation for employees and consultants of the
Company. The Compensation Committee also administers the Company's 1997 Stock
Plan. During the fiscal year ended June 30, 2000, the Compensation Committee
held two (2) meeting. For additional information concerning the Compensation
Committee, see "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION."
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
If a quorum representing a majority of all outstanding shares of Common
Stock is present and voting, either in person or by proxy, the five nominees for
director receiving the highest number of votes will be elected. Abstentions and
broker non-votes will each be counted as present for purposes of determining the
presence of a quorum. Abstentions and broker non-votes, on the other hand, will
have no effect on the outcome of the vote. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED ABOVE.
PROPOSAL NO. 2
AMENDMENT TO THE BEBE STORES, INC. 1997 STOCK PLAN, AS AMENDED
In June 1997, the Board of Directors adopted and the Company's then sole
shareholder approved the 1997 Stock Plan (the "Stock Plan"). As of June 30,
2000, a total of 2,830,000 shares of Common Stock were authorized for issuance
under the Stock Plan, of which 628,189 shares have been issued and exercised and
1,678,612 shares remain issued and outstanding following the exercise of
corresponding stock options. Accordingly as of June 30, 2000, only 523,199
shares remain available for future grants under the Stock Plan.
The Stock Plan was created in order to assist the Company in the
recruitment, retention and motivation of key employees who are experienced,
highly qualified and in a position to make material contributions to bebe's
success. The retail industry is increasingly competitive. Also, the Company
competes with non-retail companies for employees because of its geographical
location. As more companies enter the market the very limited number of skilled
and experienced employees are in demand by a growing number of competitors. The
Company believes that stock options are critical in attracting and retaining
these key contributors. The Stock Plan is intended to offer a significant
incentive by enabling key employees to acquire options to purchase Common Stock
at a price equal to its fair market value on the date the option is granted. The
options will become valuable to the recipients only if the price of the
Company's Common Stock appreciates following the grant and when such options
have vested. By providing key employees with the opportunity to acquire an
equity interest in the Company over time and because benefit is only received
through improved stock performance, the Company believes that stock options
serve to align the interests of key employees closely with other shareholders.
4
The Company believes that an adequate reserve of shares for issuance under
the Stock Plan is necessary to enable it to successfully compete with other
companies and is essential to the Company's ability to retain experienced
employees and to recruit additional qualified individuals. During fiscal 2000,
the Company granted options under the Stock Plan in line with its corporate and
field growth. The Company anticipates that growth in hiring will continue
through fiscal 2001, and therefore believes that the remaining share reserve
under the Stock Plan may not be adequate for the number of option grants to
employees required during the coming year.
Accordingly, the Board of Directors believes that approval of this proposal
is in the best interest of the Company and its shareholders. At a meeting held
in August 2000, subject to shareholder approval being received at the annual
meeting, the Board of Directors unanimously adopted an amendment to the Stock
Plan to increase the number of shares of Common Stock reserved for issuance upon
the exercise of options granted under the Stock Plan by 1,500,000 shares to a
total of 4,330,000 shares.
SUMMARY OF THE PROVISIONS OF THE STOCK PLAN
The following summary of the Stock Plan, including the proposed amendment
requiring shareholder approval, is qualified in its entirety by the specific
language of the Stock Plan, a copy of which is available to any shareholder upon
request.
The Stock Plan is administered by the Board of Directors and a duly
appointed committee of the Board of Directors. Options granted under the Stock
Plan may be either incentive stock options, that is, options which are intended
to satisfy the requirements of Section 422 of the Internal Revenue Code of 1986
(the "Code"), or nonqualified stock options. The Board of Directors, or the
committee of the Board of Directors, determines the criteria upon which options
are granted. The criteria typically include job classification for grants to new
employees, and job classification, performance and length of employment for
grants to existing employees.
All employees, directors, consultants and advisors of the Company are
eligible to participate in the Stock Plan. The exercise price of any option
granted under the Stock Plan may not be less than 85% of the fair market value
of the Common Stock of the Company on the date of grant; provided, however, that
any incentive stock option granted to a person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Company shall have an exercise price not less than 110% of the fair market value
of the Common Stock of the Company on the date of grant. To date all options
granted under the Stock Plan have been granted at 100% of the fair market value
of the Common Stock of the Company on the date of grant.
Shares subject to an option granted under the Stock Plan may be purchased
for cash or in cash equivalents, by tender of shares of Common Stock owned by
the optionee having a fair market value not less than the option price, by any
other means as may be determined by the Board of Directors to be consistent with
the purpose of the Stock Plan and with applicable laws and regulations, or by
any combination of these methods. Under the Stock Plan, options are immediately
exercisable, but are subject to repurchase at the original exercise price in the
event that the optionee's employment ceases for any reason. The Company's right
of repurchase generally lapses over a four-year period as follows: 20% in each
of the first two years after the grant date and 30% in the third and fourth
years after the grant date, with full lapse of the repurchase option occurring
on the fourth anniversary date. The Stock Plan does not permit the grant of an
incentive stock option which has a term of greater than 10 years from the date
such option is granted. If an optionee ceases to be an employee of the Company
for any reason, except death or disability, the optionee may generally exercise
his or her option (to the extent unexercised and vested on the date of
termination) within three months after the date of termination, but in any event
not later than the expiration of the option term. If an optionee ceases to be an
employee of the Company due to disability, the right to exercise generally
terminates within six months after the date of termination, but in any event not
later than the expiration of the option term. If an
5
optionee ceases to be an employee of the Company due to death, the optionee (or
his or her legal representative) may exercise the option (to the extent
unexercised and vested on the date of optionee's death) within 12 months after
the date of optionee's death, but in any event not later than the expiration of
the option term. For outside directors, consultants and advisors who are granted
an option, termination of status as a director, consultant or advisor
constitutes termination of service. In the event of a Change of Control (as
defined in the 1997 Stock Plan), options granted to the outside directors and
Mr. Lambert shall accelerate and become fully vested and the Company's right of
repurchase shall lapse. The Board of Directors may terminate or amend the 1997
Stock Plan at any time. However, without shareholder approval, the Board of
Directors may not amend the Stock Plan to increase the total number of shares of
Common Stock covered by the Stock Plan or change the class of persons eligible
to receive options.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK PLAN
The following summary is intended only as a general guide as to the United
States federal income tax consequences under current law with respect to
participation in the Stock Plan and does not attempt to describe all possible
federal or other tax consequences of such participation. Furthermore, the tax
consequences of options are complex and subject to change, and a taxpayer's
particular situation may be such that some variation of the described rules is
applicable. Optionees are advised to consult their own tax advisors before the
exercise of any option and before the disposition of any shares of Common Stock
acquired upon the exercise of an option.
INCENTIVE STOCK OPTIONS
Options designated as incentive stock options are intended to fall within
the provisions of Section 422 of the Code. An optionee recognizes no taxable
income as the result of the grant or exercise of such an option. For optionees
who do not dispose of their shares for two years following the date the option
was granted nor within one year following the transfer of the shares upon
exercise of the option, the gain on sale of the shares (which is defined to be
the difference between the sale price and the purchase price of the shares) will
be taxed as long-term capital gain or loss equal to the difference, if any,
between the sale price and the purchase price of the shares. If an optionee is
entitled to long-term capital gain treatment upon a sale of the stock, the
Company will not be entitled to any deduction for federal income tax purposes.
If an optionee disposes of shares within two years after the date of grant or
within one year from the date of exercise (a "disqualifying disposition"), the
difference between the option price and the fair market value of the shares on
the determination date, which is generally the date of exercise (not to exceed
the gain realized on the sale if the disposition is a transaction with respect
to which a loss, if sustained, would be recognized), will be taxed at ordinary
income rates at the time of disposition. Any gain in excess of that amount will
be a capital gain. If a loss is recognized, there will be no ordinary income,
and such loss will be a capital loss. A capital gain or loss will be long-term
if the optionee's holding period is more than 12 months. Any ordinary income
recognized by the optionee upon the disposition of the stock can be deductible
by the Company for federal income tax purposes.
The difference between the option price and the fair market value of the
shares on the determination date of an incentive stock option (which is
generally the date of exercise--see discussion below regarding definition of
determination date and Section 83(b) election) is an adjustment in computing the
optionee's alternative minimum taxable income and may be subject to an
alternative minimum tax which is paid if such tax exceeds the regular tax for
the year. Special rules may apply with respect to certain subsequent sales of
the shares in a disqualifying disposition, certain basis adjustments for
purposes of computing the alternative minimum taxable income on a subsequent
sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
6
NONQUALIFIED STOCK OPTIONS
Options not designated or qualifying as incentive stock options will be
nonqualified stock options. Nonqualified stock options have no special tax
status. An optionee generally recognizes no taxable income as the result of the
grant of such an option. Upon exercise of an option, the optionee normally
recognizes ordinary income in the amount of the difference between the option
price and the fair market value of the shares on the determination date (which
is generally the date of exercise). If the optionee is an employee, such
ordinary income generally is subject to withholding of income and employment
taxes. The "determination date" is the date on which the option is exercised
unless the shares are not vested and/or the sale of the shares at a profit would
subject the optionee to suit under Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), in which case the determination date
is the later of (i) the date on which the shares vest, or (ii) the date on which
the sale of the shares at a profit would no longer subject the optionee to suit
under Section 16(b) of the Exchange Act. (Section 16(b) of the Exchange Act
generally is applicable only to officers, directors and beneficial owners of
more than 10% of the Common Stock of the Company.) If the determination date is
after the exercise date, the optionee may elect, pursuant to Section 83(b) of
the Code, to have the exercise date be the determination date by filing an
election with the Internal Revenue Service not later than thirty days after the
date the option is exercised. Upon the sale of stock acquired by the exercise of
a nonqualified stock option, any gain or loss, based on the difference between
the sale price and the fair market value on the date of recognition of income,
will be taxed as capital gain or loss. A capital gain or loss will be long-term
if the optionee's holding period is more than 12 months from the date of
recognition of income. No tax deduction is available to the Company with respect
to the grant of the option or the sale of the stock acquired pursuant to such
grant. The Company should be entitled to a deduction equal to the amount of
ordinary income recognized by the optionee as a result of the exercise of the
option.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast on the proposal, at the
annual meeting at which a quorum representing a majority of all outstanding
shares of Common Stock of the Company is present, either in person or by proxy,
is required for approval of this proposal. Votes for and against, abstentions
and broker non-votes will each be counted as present for purposes of determining
the presence of a quorum. Neither abstentions nor broker non-votes will have any
effect on the outcome of this vote. The Board of Directors believes that the
proposed amendment of the Stock Plan is in the best interests of the Company and
its shareholders for the reasons stated above. THEREFORE, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS PROPOSAL TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY RESERVED FOR ISSUANCE UNDER THE
STOCK PLAN FROM 2,830,000 SHARES TO 4,330,000 SHARES.
7
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC AUDITORS
The Board of Directors of the Company has selected Deloitte & Touche LLP as
independent auditors to audit the financial statements of the Company for the
fiscal year ending June 30, 2001. A representative of Deloitte & Touche LLP is
expected to be present at the Annual Meeting of Shareholders with the
opportunity to make a statement if the representative desires to do so, and is
expected to be available to respond to appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes cast at the Annual Meeting
of Shareholders, at which a quorum representing a majority of all outstanding
shares of Common Stock is present and voting, either in person or by proxy, is
required for approval of this proposal. Abstentions and broker non-votes will
each be counted as present for purposes of determining the presence of a quorum.
Abstentions and broker non-votes, on the other hand, will have no effect on the
outcome of the vote. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE FISCAL YEAR ENDING JUNE 30, 2001.
8
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information for the fiscal years ended
June 30, 2000, 1999 and 1998 concerning the compensation of the Chief Executive
Officer of the Company and the three other executive officers of the Company as
of June 30, 2000 whose total salary and bonus for the year ended June 30, 2000
exceeded $100,000 for services in all capacities to the Company and its
subsidiaries (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1)
- --------------------------- -------- -------- ----------
Manny Mashouf 2000 $534,691 $ 0
President and 1999 514,533 150,000
Chief Executive Officer 1998 513,050 1,650,000(5)
George Arvan 2000 $194,281 $ 50,000
Vice President of Production 1999 157,623 47,223
1998 104,103(7) 32,884
Blair Lambert 2000 $206,306 $ 50,000
Chief Financial Officer 1999 180,000 53,826
1998 175,251 52,500
Lilliemae Stephens 2000 $141,375 $ 20,000
Vice President, General Counsel 1999 37,692(8) 8,530
and Corporate Secretary 1998 -- --
LONG TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION OPTIONS COMPENSATION
- --------------------------- ------------ ------------
Manny Mashouf -- $56,424(2)
President and -- 60,872(3)
Chief Executive Officer -- 43,393(4)
George Arvan 20,000 $ 1,454(6)
Vice President of Production -- --
84,900 --
Blair Lambert -- $ 2,473(6)
Chief Financial Officer -- 1,955(6)
-- --
Lilliemae Stephens 50,000 --
Vice President, General Counsel 45,000 --
and Corporate Secretary -- --
- ------------------------
(1) Except for bonuses paid in fiscal 2000 and as disclosed in Footnote 5 below,
bonuses are based on the Company's Profit Sharing Plan (the "Profit Sharing
Plan"). See "REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION."
(2) Represents a $2,000 matching contribution to 401(k) contributions and
$54,424 in life insurance premiums.
(3) Represents a $2,000 matching contribution to 401(k) contributions, $141 of
imputed interest on loans by the Company to Mr. Mashouf and $58,731 in life
insurance premiums.
(4) Represents a $2,549 matching contribution to 401(k) contributions, $25 of
imputed interest on loans by the Company to Mr. Mashouf and $40,819 in life
insurance premiums.
(5) Includes a bonus of $1.5 million in recognition of the Company's significant
improvement in performance. The Company currently does not plan to award
bonuses of this size annually. See "REPORT OF THE COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION--CHIEF EXECUTIVE OFFICER
COMPENSATION."
(6) Represents a matching contribution to 401(k) contributions.
(7) Mr. Arvan joined the Company in September 1997.
(8) Ms. Stephens joined the Company in January 1999.
9
The following table provides the specified information concerning grants of
options to purchase the Company's Common Stock made during the fiscal year ended
June 30, 2000, to the Named Executive Officers. These options are immediately
exercisable but, except as otherwise noted, vest over a four-year period from
the date of grant.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED
VALUE AT ASSUMED
INDIVIDUAL GRANTS IN FISCAL 2000 ANNUAL
----------------------------------------------- RATES OF STOCK
NUMBER OF PERCENT OF PRICE APPRECIATION
SECURITIES TOTAL OPTIONS FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE OR (3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED (#)(1) FISCAL YEAR (2) ($/SH) DATE 5%($) 10%($)
- ---- -------------- --------------- ------------ ---------- -------- --------
Manny Mashouf..................... 0 -- -- -- -- --
George Arvan...................... 20,000 2.37% $11.25 04/07/2010 $ 0 $ 0
Blair Lambert..................... 0 -- -- -- -- --
Lilliemae Stephens................ 10,000 1.18% $28.94 08/02/2009 $ 0 $ 0
15,000 1.77 13.75 02/16/2010 0 0
50,000 5.92 7.50 06/15/2010 71,264 113,476
- ------------------------
(1) These options were granted under the Stock Plan. The options granted are
immediately exercisable, but are subject to repurchase in the event that the
optionee's employment with the Company ceases for any reason. The Company's
right of repurchase generally lapses over a four-year period, as to 1/5th of
the shares one year from the grant date, 1/60th of the shares in each of the
successive twelve months and 1/40th of the shares in each of the successive
24 months with full lapse of the repurchase option occurring on the fourth
anniversary date. The options have a 10-year term, subject to earlier
termination in certain situations related to termination of employment.
(2) Based on a total of 845,275 options granted to all employees, consultants
and directors during fiscal 2000.
(3) Potential gains are net of exercise price, but before taxes associated with
exercise. These amounts represent certain assumed rates of appreciation
only, based on the Securities and Exchange Commission rules. Actual gains,
if any, on stock option exercises are dependent on the future performance of
the Common Stock, overall market conditions and the option holders'
continued employment through the vesting period. The amounts reflected in
this table may not necessarily be achieved.
10
No options to purchase Common Stock were exercised in the fiscal year ended
June 30, 2000 by the Named Executive Officers. The following table provides the
specified information concerning unexercised options held as of June 30, 2000,
by the Named Executive Officers:
AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND FISCAL YEAR-END VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT JUNE 30, 2000 (#) OPTIONS AT JUNE 30, 2000 (1)
------------------------------- -------------------------------
NAME EXERCISABLE (2) UNEXERCISABLE EXERCISABLE (2) UNEXERCISABLE
- ---- --------------- ------------- --------------- -------------
Manny Mashouf............................. -- -- -- --
George Arvan.............................. 86,900 0 $182,303 $ 0
Blair Lambert............................. 71,500 0 472,258 $ 0
Lilliemae Stephens........................ 95,000 0 43,750 $ 0
- ------------------------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the option at June 30, 2000 of $8.375, the closing
price as reported by the Nasdaq National Market, and the exercise price of
the Named Executive Officer's option.
(2) Under the 1997 Stock Plan, options granted are immediately exercisable
subject to vesting and the Company's right of repurchase under certain
circumstances. The Company's right of repurchase generally lapses over a
four year period, as to 20% of the shares one year from the grant date,
1/60th of the shares in each of the successive twelve months and 1/40th of
the shares in each of the successive twenty-four months with full lapse of
the repurchase option occurring on the fourth anniversary date. See also
"CHANGE IN CONTROL ARRANGEMENTS."
CHANGE IN CONTROL ARRANGEMENTS
In the event of a Change of Control (as defined in the 1997 Stock Plan),
options granted to the nonemployee directors and Mr. Lambert, certain options of
Ms. Stephens, shall accelerate and become fully vested, and the Company's right
to repurchase shall lapse. As for all other options granted under the 1997 Stock
Plan, in the event of a Change of Control, such options shall become exercisable
in full if (i) the Company is subject to a Change in Control, (ii) such options
do not remain outstanding, (iii) such options are not assumed by the surviving
corporation or its parent and (iv) the surviving corporation or its parent does
not substitute options with substantially the same terms for such options.
DIRECTOR COMPENSATION
The Company's non-employee directors are paid a fee of $500 for each meeting
of the Board of Directors that they attend. The Company also reimburses all
directors for their expenses incurred in attending such meetings. In addition,
certain directors have been granted options to purchase Common Stock in the
past, and options may be granted to directors of the Company in the future.
Specifically, each of Ms. Bass, Mr. Federico and Mr. Schlein have received
options to purchase 212,250 shares of Common Stock, at an exercise price of
$1.77 per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, executive compensation was administered by the
Compensation Committee comprised of three outside directors of the Board of
Directors, Ms. Bass, Mr. Federico and Mr. Schlein.
11
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers, directors and persons who beneficially own
more than 10% of the Common Stock to file initial reports of ownership and
reports of changes in ownership with the SEC. Such persons are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms filed
by such persons. Based solely on the Company's review of such forms furnished to
the Company and written representations from certain reporting persons, the
Company believes that all filing requirements applicable to the Company's
executive officers, directors and more than 10% shareholders were complied with
and filed in a timely matter, except for Form 3's filed for Mr. Arvan and
Ms. Stephens.
CERTAIN TRANSACTIONS
Since July 1, 1997, there has not been, nor is there currently proposed, any
transaction or series of similar transactions to which we were or are a party in
which the amount involved exceeds $60,000 and in which any director, executive
officer or holder of more than 5% of the Common Stock had or will have a direct
or indirect interest other than compensation arrangements, which are described
where required under "Executive Compensation."
12
COMPARISON OF SHAREHOLDER RETURN
The following graph compares the percentage change in the Company's
cumulative total shareholder return on Common Stock with (i) Standard & Poor's
500 Stock Index ("S&P 500") and (ii) the Standard & Poor's Textile/Apparel Index
("S&P Textile Index") from June 17, 1998 to June 30, 2000. The graph assumes an
initial investment of $100 and reinvestment of dividends.(1) The graph is not
necessarily indicative of future price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN OF JUNE 17, 1998 TO JUNE 30, 2000
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
6/17/98 6/30/98 6/30/99 6/30/00
S&P Textile Index $100 $101 $68 $47
S&P 500 $100 $102 $124 $131
bebe stores, inc. $100 $120 $309 $76
- ------------------------
(1) No dividends have been declared on the Company's Common Stock.
13
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors for fiscal 2000
consisted of the three nonemployee directors of the Company, Ms. Bass,
Mr. Federico and Mr. Schlein.
The Compensation Committee is responsible for setting and administering the
policies governing compensation of the executive officers of the Company,
including cash compensation and stock ownership programs. The goals of the
Company's compensation policy are to attract and retain executive officers who
contribute to the overall success of the Company, by offering compensation which
is competitive in the retail apparel industry for companies of the Company's
size, to motivate executives to achieve the Company's business objectives and to
reward them for their achievements. The Company generally uses salary, incentive
compensation and stock options to meet these goals.
As of June 30, 2000, Messrs. Mashouf, Arvan and Lambert and Ms. Stephens
were the executive officers of the Company.
SALARY
Salaries are set by the Compensation Committee for each executive officer,
including the Chief Executive Officer, within the range of salary for similar
positions in other companies of similar size in retail apparel industry, based
on a number of available published surveys, which do not specifically identify
companies, as adjusted for the Company's projected revenue levels and regional
salary differences. Salaries generally are targeted at the median of salaries
among comparable companies, although the salaries also are adjusted based on
each officer's experience, tenure and prior performance. In preparing the
performance graph set forth in the section entitled "COMPARISON OF SHAREHOLDER
RETURN," the Company has selected Standard and Poor's Textile/Apparel Index as
its published industry index; however, the companies included in the Company's
salary survey are not necessarily those included in this index, because
companies in the index may not compete with the Company for executive talent,
and companies which do compete for executive talent may not be publicly traded.
The Chief Executive Officer annually evaluates the performance of the other
executive officers, and recommends salary adjustments to the Compensation
Committee. The Compensation Committee evaluates the individual performance of
the executive officer and the financial performance of the Company for that
fiscal year. Additionally, the Compensation Committee places weight on the
competitive employment situation in the Company's industry and geographic area
in considering salary adjustments.
INCENTIVE COMPENSATION
The Company maintains a Profit Sharing Plan to reward certain employees of
the Company for their participation in the Company's success and to provide
incentive for such employees to continue to maximize the Company's
profitability. Pursuant to the Profit Sharing Plan, each employee receives an
annual, non-discretionary bonus equal to a certain percentage of his or her base
salary if the Company meets or exceeds specific profitability targets for the
fiscal year, subject to certain participation requirements.
In fiscal 2000, the Company did not exceed the specified profitability
targets, and, accordingly, employees, including the executive officers, did not
receive incentive compensation as provided in the Profit Sharing Plan. However,
the Board of Directors of the Company chose to grant to all employees who would
have been eligible under the Profit Sharing Plan a special incentive reward in
an amount determined by each employee's supervisor as encouragement to remain
with the Company and reward
14
for their performance during the year. As part of the special incentive reward
program, the Committee granted a special incentive reward to the executive
officers.
STOCK OPTIONS
The Company believes that employee equity ownership provides executive
officers with significant additional motivation to maximize value for the
Company's shareholders. Because the stock options are granted at the prevailing
market price, the stock options will only have value if the Company's stock
price increases over the exercise price. Therefore, the Committee believes that
stock options will serve to align the interests of executive officers closely
with other shareholders because of the direct benefit executive officers receive
through improved stock performance.
The Compensation Committee recommends to the Board of Directors stock option
grants to the executive officers based on the achievement of individualized
objectives and the financial performance of the Company. The size of grants is
based upon relative seniority and responsibilities and the historical and
expected contributions to the Company. Such grants are immediately exercisable,
subject to the Company's right of repurchase that lapses over a four-year
period.
CHIEF EXECUTIVE OFFICER COMPENSATION
SALARY. The Compensation Committee generally evaluates the performance and
sets the salary of the Company's Chief Executive Officer on an annual basis. In
assessing the annual salary of the Chief Executive Officer, the Compensation
Committee evaluates his performance and the financial performance of the Company
for that fiscal year. Additionally, the Compensation Committee reviews the
competitive employment situation in the Company's industry and geographic area
in considering salary adjustments. Pursuant to this evaluation process, the
Compensation Committee increased Mr. Mashouf's annual salary from $360,000 to
$500,000 in January 1997. The Compensation Committee believes that such increase
in salary was advisable to reward the Chief Executive Officer for the Company's
performance in calendar 1996. At the end of fiscal 2000, the Compensation
Committee reviewed the salary of the Chief Executive Officer and determined that
the recent increase to his salary was sufficient at that time.
INCENTIVE COMPENSATION. Because the Company did not meet its profitability
targets specified in the Profit Sharing Plan, Mr. Mashouf did not received
incentive compensation at the end of fiscal 2000 as provided in the Profit
Sharing Plan.
STOCK OPTIONS. Because Mr. Mashouf beneficially owns a substantial amount
of the Company's outstanding shares of Common Stock, the Compensation Committee
did not grant Mr. Mashouf any options to purchase additional shares of Common
Stock.
COMPENSATION COMMITTEE
Barabara Bass
Corrado Federico
Philip Schlein
15
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented at the next Annual
Meeting of Shareholders of the Company must be received by the Company at its
offices at 380 Valley Drive, Brisbane, California 94005 not later than June 20,
2001 and satisfy the conditions established by the SEC for shareholder proposals
to be included in the Company's proxy statement for that meeting.
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which the Board of
Directors intends to present or knows that others will present at the meeting is
as set forth above. If any other matter or matters are properly brought before
the meeting, or any adjournment thereof, it is the intention of the persons
named in the accompanying form of proxy to vote the proxy on such matters in
accordance with their best judgment.
By Order of the Board of Directors,
/s/ Manny Mashouf
Manny Mashouf
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BRISBANE, CALIFORNIA
OCTOBER 18, 2000
16
BEBE STORES, INC.
Proxy for the Annual Meeting of Shareholders
To be held on November 20, 2000
Solicited by the Board of Directors
The undersigned hereby appoints Manny Mashouf with full power of
substitution to represent the undersigned and to vote all of the shares of
stock in bebe stores, inc., a California corporation (the "Company"), which
the undersigned is entitled to vote at the Annual Meeting of Shareholders of
the Company to be held at the Company's principal offices located at 380
Valley Drive, Brisbane, California, on November 20, 2000 at 9:30 a.m. local
time, and at any adjournment or postponement thereof (1) as hereinafter
specified upon the proposals listed on the reverse side and as more
particularly described in the Proxy Statement of the Company dated October
18, 2000 (the "Proxy Statement"), receipt of which is hereby acknowledged,
and (2) in his discretion upon such other matters as may properly come before
the meeting.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1, 2 AND 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
/X/ Please mark your votes as in this example using
dark ink only.
A vote FOR the following proposals is recommended by the Board
of Directors:
1. To elect the following five (5) persons as directors to hold office for a
one-year term and until their respective successors are elected and qualified:
FOR all nominees listed below (except as marked to the contrary below).
/ /
WITHHOLD AUTHORITY to vote for all nominees listed below.
/ /
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list
below.)
Manny Mashouf Neda Mashouf Barbara Bass Corrado Federico Philip Schlein
2. To approve and ratify the adoption of an increase in the maximum number
of shares that may be issued under the Company's 1997 Stock Plan, as amended,
by 1,500,000 shares, from 2,830,000 shares to 4,330,000 shares.
FOR AGAINST ABSTAIN
/ / / / / /
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public auditors for the fiscal year ending June 30, 2001.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record
by a corporation, the Proxy should be executed by the President or Vice
President and the Secretary or Assistant Secretary, and the corporate seal
should be affixed thereto. Executors or administrators or other fiduciaries
who execute the above Proxy for a deceased shareholder should give their full
title. Please date the Proxy.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
SIGN AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK
MAY BE REPRESENTED AT THE MEETING.
Date: ______________________________ Signature:________________________
Date: ______________________________ Signature:________________________