THE WET SEAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Effective as of February 3, 1997
THE WET SEAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ESTABLISHMENT AND PURPOSES
The Wet Seal, Inc. hereby establishes effective as of February 3,
1997, an unfunded, nonqualified deferred compensation plan for a select group of
key directors and officers of the Company. The purpose of the plan is to
provide such key directors and officers with an enhanced retirement benefit in
order to ensure that such directors and officers receive an appropriate level of
replacement income at retirement while at the same time incentivizing such
directors and officers to continue their efforts to increase the overall
profitability of the Company. All benefits under the plan shall be paid out of
the general assets of the Company. The Company may establish and fund a grantor
trust to provide benefits under the plan.
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THE WET SEAL, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
ARTICLE 1. DEFINITIONS
1.1. "ANNUAL ACCRUED BENEFIT" shall have the meaning set forth in
Section 3.1.
1.2. "BENEFICIARY" means any person, persons, or entity designated
by a Participant to receive any benefits payable in the event of the
Participant's death. If no valid Beneficiary designation is in effect at the
Participant's death, or if no person, persons or entity so designated survives
the Participant, or if each surviving validly designated Beneficiary is legally
impaired or prohibited from taking, the Participant's Beneficiary shall be his
surviving spouse, if any, or if the Participant has no surviving spouse, then
his estate. If the Committee is in doubt as to the right of any person to
receive such amount, it may retain such amount, without liability for any
interest thereon, until the rights thereto are determined, or the Committee may
pay such amount into any court of appropriate jurisdiction and such payment
shall be a complete discharge of the liability of the Plan.
1.3. "BOARD" means the Board of Directors of the Company.
1.4. "CAUSE" means the Participant's (i) gross negligence,
recklessness or malfeasance in the performance of his duties, or (ii) conviction
of any criminal act, act of fraud or other misconduct resulting or intended to
result directly or indirectly in gain or personal enrichment at the expense of
the Company; provided however, that if any Participant is employed by the
Company pursuant to the terms of an employment agreement with the Company, the
definition of "Cause" contained in such agreement, if any, shall be incorporated
herein by reference and shall control in lieu of the preceding definition.
1.5. "CHANGE OF CONTROL" shall have the meaning set forth in
Article 5.
1.6. "COMMITTEE" means the Irving Teitelbaum, Kathy Bronstein and
Alan Siegel, provided, however, that if Irving Teitelbaum at any time cannot
serve as a member of the Committee, Stephen Gross shall be designated as his
replacement.
1.7. "COMPANY" means The Wet Seal, Inc., a Delaware corporation, or
any successor thereto.
1.8. "EARLY RETIREMENT DATE" means the first day of the month
following the date a Participant's Service with the Company is terminated prior
to his or her Normal Retirement Date.
1.9. "EFFECTIVE DATE" means February 3, 1997.
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1.10. "NORMAL RETIREMENT AGE" means the date the Participant attains
(or would attain) 22.5 Years of Service.
1.11. "NORMAL RETIREMENT DATE" means the first day of the month
following the date a Participant's Service with the Company is terminated and
which occurs at or after the date a Participant attains Normal Retirement Age.
1.12. "PARTICIPANT" means any person included in the membership of
the Plan who has been designated as a Participant by the Board of Directors or
its delegate.
1.13. "PLAN" means The Wet Seal, Inc. Supplemental Executive
Retirement Plan.
1.14. "PRE-TAX PERCENTAGE" means the ratio, expressed as a
percentage, that Pre-Tax Profits bears to the Company's gross revenues
(excluding interest income) in any fiscal year of the Company.
1.15. "PRE-TAX PROFIT" shall mean the Company's earnings (other than
investment income before taxes on or with respect to income. The Pre-Tax Profit
shall be determined by the Company's annual income statement prepared by the
accountants for the Company in accordance with generally accepted accounting
principles consistently applied.
1.16. "RETIREE" means a Participant who has retired from the Company
and is eligible to receive a benefit under the Plan.
1.17. "SERVICE" means service with the Company as an officer and/or
director whether before or after the Effective Date.
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ARTICLE 2. PARTICIPATION
2.1. BOARD DETERMINATION. The Board shall, in its sole discretion,
determine from among the directors and officers of the Company those individuals
who shall be Participants in the Plan. Such individuals shall become
Participants under the Plan effective on the date designated by the Board. The
determination of the Board with respect to participation under the Plan shall be
final.
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ARTICLE 3. ACCRUED BENEFITS
3.1. DETERMINATION OF ANNUAL ACCRUED BENEFIT. A Participant's
Annual Accrued Benefit shall be $250,000. The Annual Accrued Benefit shall be
adjusted, if applicable based on the Pre-Tax Profit Percentage for the three
full fiscal years of the Company preceding the date the Participant's service
with the Company is terminated, in accordance with the following schedule:
3-Year Average Pre-Tax Percentage Annual Accrued Benefit
--------------------------------- ----------------------
if less than 4.25% $250,000
if 4.25% or greater but less $300,000
less than 4.75%
if 4.75% or greater but less $350,000
less than 5.25%
if 5.25% or greater but less $400,000
less than 5.75%
if 5.75% or greater but less $450,000
less than 7.00%
if 7.00% or greater $500,000
3.2. NORMAL RETIREMENT. A Participant shall be entitled to receive
a benefit equal to his Annual Accrued Benefit as determined under Section 3.1
commencing on his Normal Retirement Date and ending with the payment due for the
month in which the Participant dies.
3.3. EARLY RETIREMENT. A Participant shall be entitled to receive,
commencing on his Early Retirement Date and ending with the payment due for the
month in which the Participant dies, a benefit equal to his Annual Accrued
Benefit determined under Section 3.1 as of his Early Retirement Date, reduced by
1/2 of 1% per month for the number of months his Early Retirement Date preceeds
his Normal Retirement Date.
3.4. FORM OF BENEFIT. In the absence of a valid election under
Section 3.5 of the Plan, the Participant's Annual Accrued Benefit shall be a
straight life annuity for the period commencing on the Normal Retirement Date or
Early Retirement Date, as the case may be, and ending in the month in which the
Participant dies. The Annual Accrued Benefit shall be payable in 12 equal
monthly installments per annum.
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3.5. OPTIONAL FORMS OF BENEFIT PAYMENT
(a) A Participant may elect to receive his Annual Accrued
Benefit in the form of a "50% Joint and Survivor Annuity" (as defined below),
provided that the Participant makes and submits to the Committee an irrevocable
election of such optional form not later than 90 days prior to becoming a
Retiree. For purposes of this Section 3.5, a "50% Joint and Survivor Annuity"
shall mean an immediate annuity for the life of the Participant with a survivor
annuity for the life of the Beneficiary which is 50% of the amount of the
annuity which is payable during the joint lives of the Participant and the
Beneficiary and which is the actuarial equivalent of the straight life annuity
form of benefit.
(b) If a Participant elects to receive his Annual Accrued
Benefit in the form of a 50% Joint and Survivor Annuity, and his joint annuitant
dies before the Participant's benefit payments have commenced, then the
Participant's election under this Section 3.5 shall be null and void and a
Participant may elect, in accordance with procedures established by the
Committee, to receive his Annual Accrued Benefit in the form of a straight life
annuity or designate a different Beneficiary.
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ARTICLE 4. EFFECT OF TERMINATION OF SERVICE
4.1. DEATH. If a Participant's Service terminates by reason of the
death of the Participant, the Participant's Beneficiary shall be entitled to
receive a death benefit in an amount equal to the present value of the benefits
the Participant would have received if he had retired on his date of death.
4.2. DISABILITY. A Participant who is disabled and receiving
payments under the Company's long term disability plan, if any, shall continue
to accrue Service under the Plan until the earlier of (i) the date his long-term
disability benefit terminates or (ii) his Normal Retirement Age. No benefit
under this Plan shall be payable to a Participant while he is receiving such
long-term disability benefit payments.
4.3. WITHOUT CAUSE. If a Participant's Service is terminated by
the Company without Cause, the Participant shall be eligible for the following
benefits under the Plan:
(a) If the Participant has attained his Normal Retirement
Age on the date of termination, he shall be eligible to receive a benefit as
described in Section 3.2, in the form of a single life annuity, as soon as
practicable following the Participant's date of termination.
(b) If the Participant has not attained his Normal
Retirement Age on the date of termination, he shall be eligible to receive a
reduced benefit as described in Section 3.3, in the form of a single life
annuity, as soon as practicable following the Participant's date of termination.
4.4. FOR CAUSE. In the event that a Participant's Service is
terminated by the Company for Cause, the Participant shall forfeit all benefits
under the Plan regardless of his eligibility to receive such benefits under the
Plan.
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ARTICLE 5. EFFECT OF CHANGE OF CONTROL
5.1. CHANGE OF CONTROL.
(a) In the event of a "Change of Control" (as defined
below), then whether or not a Participant is otherwise eligible to receive a
retirement benefit under the Plan on the date of such Change of Control, the
Company shall pay each Participant, within 60 days of the date of the Change of
Control, a lump-sum retirement benefit in an amount equal to the present value
of the Annual Accrued Benefit provided under Section 3.1, calculated as if the
Participant had retired on his Early Retirement Date without any reduction as
provided in Section 3.3. For purposes of this Section 5.1, a "Change of
Control" shall be deemed to have occurred if both of the following conditions
occur: (a) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or "group" (as such term is used in
Rule 13d-5(b)(1) under said Act) of such persons, (other than (i) any such
person or group who, as of January 1, 1997 is the "beneficial owner" (as defined
in Rule 13d-3 under said Act), directly or indirectly, of securities of the
Company representing 20% or more of the total voting power represented by the
Company's outstanding voting securities as of January 1, 1997, (ii) a trustee or
other fiduciary holding securities under an employee benefits plan of the
Company or (iii) a corporation owned directly or indirectly by the shareholders
of the Company in substantially the same proportions as their beneficial
ownership of stock of the Company), after January 1, 1997 becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities representing 20% or more of the total voting power
represented by the Company's then outstanding voting securities, and (b) at any
time after the event described in (a) above, either Irving Teitelbaum or Stephen
Gross do not continue as directors on the Board as a result of the vote of the
beneficial owner with respect to which the event in (a) occurred.
(b) To the extent that any payments accruing to any
Participant become subject to Section 4999 of the Internal Revenue Code of 1986,
as amended (the "Code"), to any successor section, or to any other federal,
state or local excise tax (exclusive of regular employment withholding taxes
under Subtitle C of the Code or similar state or local taxes), the amounts
payable to the Participants shall be increased by the amounts necessary to
result in the Participant receiving the same amounts or rights which would be
payable if such taxes were not in effect.
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ARTICLE 6. GENERAL PROVISIONS
6.1. ADMINISTRATION. The Committee shall have full power and
authority to administer and interpret the Plan. The Committee may from time to
time establish rules for the administration of the Plan that are not
inconsistent with the provisions of the Plan. The Committee, with the advice of
an actuary, shall also prescribe all actuarial factors for converting any
benefits payable under the Plan to a lump sum or effectuating any election by a
participant to receive an optional form of benefit.
6.2. CLAIMS PROCEDURE. All claims for benefits under the Plan
shall be administered in the same manner as provided under the Company's
qualified retirement plan and the Committee shall have the same powers and
authority with respect to the disposition of claims under this Plan as the
applicable fiduciary of Company's qualified retirement plan. The determination
of the Committee as to any disputed questions arising under this Plan, including
but not limited to claims for benefits and questions of construction and
interpretation, shall be final, binding and conclusive upon all persons.
6.3. ARBITRATION. If a Participant has exhausted his remedies with
respect to a claim for benefits under Section 6.2, such Participant may seek
review of the Committee's determinations with respect thereto through binding
arbitration in New York City, New York in accordance with the rules and
constitution of the American Arbitration Association. Notwithstanding the
foregoing, any final determination of the Committee pursuant to Section 6.2
shall be binding unless the Arbitrator determines that such determination was
arbitrary and capricious. Judgment upon any such arbitration award may be
entered in a court of competent jurisdiction in New York City, New York and the
Participant submits to the jurisdiction of such court.
6.4. FUNDING
(a) All amounts payable in accordance with the Plan shall
constitute a general unsecured obligation of the Company. Such amounts, as well
as any administrative costs relating to the Plan, shall be paid out of the
general assets of the Company, unless the provisions of paragraph (b) below are
applicable.
(b) The Board of Directors may establish a grantor trust to
fund benefits payable under the Plan and/or administrative costs relating to the
Plan. The assets of said trust will be held separate and apart from other
Company funds and shall be used exclusively for the purposes set forth in the
Plan and the applicable trust agreement, subject to the following conditions:
(i) the creation of said trust shall not cause the
Plan to be other than "unfunded" for purposes of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA");
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(ii) the Company shall be treated as the "grantor"
of said trust for purposes of Sections 671 and 677 of the Code; and
(iii) said trust agreement shall provide that the
trust fund assets may be used to satisfy claims of the Company's general
creditors, provided that the rights of such general creditors are enforceable
under federal law.
6.5. CONDITIONS OF EMPLOYMENT NOT AFFECTED BY THE PLAN. Nothing
contained in this Plan shall be construed as a contract of employment; nor shall
the Plan or its establishment confer any legal rights upon any director or
employee or other person for a continuation of employment with the Company, nor
interfere with the rights of the Company to discharge any director or employee
and to treat him without regard to the effect which that treatment might have
upon him as a Participant or potential Participant of the Plan. The terms of
the Plan shall govern all benefits payable under the Plan and shall supersede
any contractual obligations the Company may have with respect to the payment of
benefits under this Plan.
6.6. FACILITY OF PAYMENT. If the Committee shall find that any
person to whom any amount is payable under the Plan is found by a court of
competent jurisdiction unable to care for his affairs because of illness or
accident, or is a minor, or has died, then any payment due him or his estate
(unless a prior claim therefor has been made by a duly appointed legal
representative) may, if the Committee so elects, be paid to his spouse, a child,
a relative, an institution maintaining or having custody of such person, or any
other person deemed by the Committee to be a proper recipient on behalf of such
person otherwise entitled to payment. Any such payment shall be a complete
discharge of the liability of the Plan therefor.
6.7. WITHHOLDING TAXES. The Company shall have the right to deduct
from each payment to be made under the Plan any required withholding taxes.
6.8. NONALIENATION. Subject to applicable law, no benefit under
the Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any attempt to do so
shall be void, nor shall any such benefit be in any manner liable for or subject
to garnishment, attachment, execution or levy, or liable for or subject to the
debts, contracts, liabilities, engagements or torts of the Participants.
6.9. CONSTRUCTION
(a) The Plan is intended to be an unfunded deferred
compensation arrangement for a select group of "management or highly compensated
employees" and therefore exempt from the requirements or Sections 201, 301 and
401 of ERISA.
(b) All rights hereunder shall be governed by and construed
in accordance with the laws of the State of California.
(c) The masculine pronoun shall mean the feminine wherever
appropriate.
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6.10. AMENDMENT OR TERMINATION. The Board (or the Committee if
empowered by the Board) may amend, modify or terminate the Plan at any time.
Notice of such amendment or termination shall be given in writing to each
Participant and beneficiary of a deceased Participant having an interest in the
Plan. No such amendment shall diminish the rights of any Participant with
respect to benefits due him under the terms of the Plan at the time of its
modification amendment or termination. Notwithstanding the foregoing, upon the
occurrence of a Change of Control (as defined in Article 5) no amendment of the
Plan or action of the Board or Committee or its delegate which affects an
Participant is valid and enforceable without the prior written consent of such
Participant.
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