SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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
THE WET SEAL, INC.
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(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):
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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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 the
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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
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previously. Identify the previous filing by registration statement number,
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THE WET SEAL, INC.
26972 BURBANK
FOOTHILL RANCH, CALIFORNIA 92610
May 8, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
The Wet Seal, Inc. to be held at the Westin South Coast Plaza, 686 Anton Blvd.,
Costa Mesa, California 92626, at 10:00 a.m., on Tuesday, June 9, 1998.
During the Annual Meeting the matters described in the accompanying Proxy
Statement will be considered. In addition, there will be a report regarding the
progress of the Company and there will be an opportunity to ask questions of
general interest to you as a stockholder.
I hope you will be able to join us at the Annual Meeting. Whether or not you
expect to attend, you are urged to sign and return the enclosed proxy card in
the envelope provided in order to make certain that your shares will be
represented at the Annual Meeting.
Sincerely,
/s/ Irving Teitelbaum
--------------------------------------
IRVING TEITELBAUM
CHAIRMAN OF THE BOARD
THE WET SEAL, INC.
26972 BURBANK
FOOTHILL RANCH, CALIFORNIA 92610
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 9, 1998
10:00 A.M.
------------------------
Notice is hereby given that the Annual Meeting (the "Annual Meeting") of
Stockholders of The Wet Seal, Inc. (the "Company") will be held at the Westin
South Coast Plaza, 686 Anton Blvd., Costa Mesa, California 92626, on Tuesday,
June 9, 1998 at 10:00 a.m. to consider and vote upon:
1. Election of a Board of Directors consisting of nine directors. The
attached Proxy Statement, which is part of the Notice, includes the names
of the nominees to be presented by the Board of Directors for election.
2. Ratification of Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year 1998.
3. To transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has fixed the close of business on May 1, 1998 as the
record date for determination of stockholders entitled to notice of, and to
vote, at the Annual Meeting. A list of such stockholders will be available for
examination by any stockholder for any purpose germane to the Annual Meeting,
during normal business hours, at the office of the Company for a period of ten
days prior to the Annual Meeting.
To assure that your shares will be represented at the Annual Meeting, please
sign and promptly return the accompanying proxy card in the enclosed envelope.
You may revoke your proxy at any time before it is voted.
By Order of the Board of Directors
/s/ Irving Teitelbaum
--------------------------------------
Stephen Gross
SECRETARY
Dated: May 8, 1998
THE WET SEAL, INC.
26972 BURBANK
FOOTHILL RANCH, CALIFORNIA 92610
------------------------
PROXY STATEMENT
JUNE 9, 1998
------------------------
This Proxy Statement is furnished by the Board of Directors of The Wet Seal,
Inc., a Delaware Corporation (the "Company"), in connection with the
solicitation of proxies for use at the Annual Meeting of Stockholders to be held
at the Westin South Coast Plaza, 686 Anton Blvd., Costa Mesa, California on
Tuesday, June 9, 1998 beginning at 10:00 a.m. and at any adjournments thereof.
The Annual Meeting has been called to consider and vote upon the election of
nine directors; to ratify the Board of Directors' nomination of Deloitte &
Touche LLP as the Company's independent auditors; and to consider any other
business as may properly come before the Annual Meeting. This Proxy Statement
and the accompanying proxy are being sent to stockholders of record on or about
May 8, 1998.
VOTING BY STOCKHOLDERS
Only holders of record of the Company's common stock, at the close of
business on May 1, 1998, are entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 10,669,578 shares of the Company's
Class A Common Stock, $.10 par value, and 2,912,665 shares of the Company's
Class B Common Stock, $.10 par value, issued, outstanding and entitled to vote.
Class A Common Stock is entitled to one vote per share and, while both the Class
A and Class B vote together as a single Class, the Class B Common Stock is
entitled to two votes per share. According to the Company's Restated Certificate
of Incorporation, stockholders may not cumulate their voting rights. Thus, the
holders of a plurality of the shares voting at the Annual Meeting will be able
to elect all of the directors. The ratification of independent auditors will
require the affirmative vote of holders of a majority of the Common Stock
entitled to vote thereon present in person or by proxy at the Annual Meeting.
The shares represented by each properly executed unrevoked proxy received in
time for the Annual Meeting will be voted in accordance with the instructions
specified therein, or, in the absence of instructions, FOR items 1 and 2, and
will be voted in accordance with the discretion of the proxies upon all other
matters which may properly come before the Annual Meeting. Any proxy received by
the Company may be subsequently revoked by the stockholder any time before it is
voted at the meeting either by delivering a subsequent proxy or other written
notice of revocation to the Company at its above address or by attending the
meeting and voting in person. Pursuant to Delaware law, abstentions are treated
as present and entitled to vote and thus have the effect of a vote against the
matter. A broker non-vote on a matter is considered not entitled to vote on that
matter and thus is not counted in determining whether a matter requiring
approval of a majority of the shares present and entitled to vote has been
approved or whether a majority of the vote of the shares present and entitled to
vote has been cast.
1
ELECTION OF DIRECTORS
DIRECTORS
The Company's Bylaws give the Board the power to set the number of directors
at no less than three nor more than fifteen. The size of the Company's Board is
currently set at nine. The directors so elected will serve until the next Annual
Meeting of Stockholders. Nine directors are to be elected at the Annual Meeting
to be held on June 9, 1998. All of the nominees are currently directors of the
Company. The Board knows of no reason why any nominee for director would be
unable to serve as a director. In the event that any of them should become
unavailable prior to the Annual Meeting, the proxy will be voted for a
substitute nominee or nominees designated by the Board of Directors, or the
number of directors may be reduced accordingly.
The following table sets forth information regarding the nominees for
director:
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ------------------------------------ ---------------------------------------------------------------------------
George H. Benter, Jr. .............. Mr. George H. Benter, Jr. has been a director of the Company since 1990.
Age: 56 Since May 1992, Mr. Benter has been President, Chief Operating Officer and
a director of City National Bank. From 1965 until April 1992, Mr. Benter
worked in various capacities with Security Pacific Corporation,
culminating in the position of Vice Chairman. Prior to that time he held
various positions with Security Pacific National Bank. He is also a
director of Whittaker Corporation and The Seeley Company, a privately held
commercial real estate brokerage service company.
Kathy Bronstein .................... Ms. Kathy Bronstein was appointed the Company's Vice Chairman of the Board
Age: 46 in March 1994. Since March 1992, she has also served as the Company's
Chief Executive Officer. From March 1992 to March 1994, she was the
Company's President. From January 1985 through March 1992, Ms. Bronstein
was Executive Vice President and General Merchandise Manager and a
director of the Company. Ms. Bronstein's primary responsibilities include
formulating and directing the Company's expansion and overall
merchandising and marketing strategies.
Stephen Gross (1) .................. Mr. Stephen Gross has been the Secretary and a director of the Company
Age: 52 since June 1984. Mr. Gross co-founded Suzy Shier Limited. Since 1967, he
has been a director and an officer of Suzy Shier Limited, having served as
President, Assistant Secretary and Treasurer since 1976. He has also been
the General Merchandise Manager of Suzy Shier Limited since 1974. Mr.
Gross also serves as President of Irwel Management Services Inc., a
management consulting firm established in 1975.
Walter F. Loeb ..................... Mr. Walter F. Loeb has been a director of the Company since May 1993. He is
Age: 73 President of Loeb Associates Inc., a New York-based retail consultancy
company that has served a variety of domestic and international companies
since its founding in February 1990. Mr. Loeb is also the publisher of
"Loeb Retail Letter," a monthly analysis of the retail industry. He
currently is a director of Federal Realty Investment Trust, Gymboree
Corporation, Hudson's Bay Company, Mothers Work and The Warnaco Group,
Inc.
2
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ------------------------------------ ---------------------------------------------------------------------------
Wilfred Posluns .................... Mr. Wilfred Posluns has been a director of the Company since 1990. He is
Age: 66 Managing Director of Cedarpoint Investments, Inc., a Toronto-based venture
capital company. Mr. Posluns was the Chairman of the Board of Directors
and Chief Executive Officer of Dylex Limited from July 1988 to August 1995
and President from 1976 through 1990. He was a member of the Board of
Directors of Dylex Limited from 1966 to August 1995. On January 11, 1995,
Dylex Limited filed for court protection under the Companies' Creditors
Arrangement Act and emerged from protection under such Act in 1995. Mr.
Posluns is a director of Radiology Corporation of America.
Gerald Randolph .................... Mr. Gerald Randolph has been a director of the Company since July 1989. Mr.
Age: 79 Randolph is a chartered accountant in Canada. He has been engaged in an
outside professional capacity by Suzy Shier Limited from its inception in
1967, having served as its independent auditor, until July 1989 when he
was appointed Chief Financial Officer and a director of Suzy Shier
Limited.
Alan Siegel ........................ Mr. Alan Siegel has been a director of the Company since 1990. Mr. Siegel
Age: 63 has been a partner in the law firm of Akin, Gump, Strauss, Hauer & Feld,
L.L.P., which provides legal services to the Company, since August 1995.
From 1987 to July 1995 he was a partner in the law firm of Baker &
McKenzie. He is also a director of Thor Industries, Inc., Ermenegildo
Zegna Corporation and Ascent Asset Management Advisory Services, Inc.
Irving Teitelbaum (1) .............. Mr. Irving Teitelbaum has been Chairman of the Board and a director of the
Age: 59 Company since June 1984. Mr. Teitelbaum is the co-founding President (in
1967) and current Chairman and Chief Executive Officer of Suzy Shier
Limited, a Canadian public company listed on the Toronto and Montreal
Stock Exchanges, retailing women's apparel and lingerie in over 430 stores
in Canada and the United Kingdom. Mr. Teitelbaum is also Chairman of La
Senza PLC, a U.K. public company listed on the AIM market of the London
Stock Exchange, retailing lingerie in over 50 stores and concessions in
the United Kingdom. Mr. Teitelbaum also serves as President of First
Canada Management Corp., a management consulting firm.
3
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ------------------------------------ ---------------------------------------------------------------------------
Edmond Thomas ...................... Mr. Edmond Thomas was appointed the Company's President in March 1994.
Age: 44 Since June 1992, he has also served as the Company's Chief Operating
Officer. His responsibilities include overseeing store operations, real
estate, finance, management information systems, store construction and
the central distribution center. Mr. Thomas became a director of the
Company in August 1992. Prior to joining the Company, from May 1991
through June 1992, Mr. Thomas was President and Chief Operating Officer
and a director of Domain, Inc., a Boston-based upscale home furnishings
retailer. From November 1988 to May 1991, Mr. Thomas was President and
Chief Financial Officer of Foxmoor Specialty Stores Corporation, a retail
women's apparel chain.
- ------------------------
(1) Mr. Teitelbaum and Mr. Gross are brothers-in-law.
4
EXECUTIVE OFFICERS
The executive officers of the Company who are not also directors are set
forth below:
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ------------------------------------ ---------------------------------------------------------------------------
Barbara Bachman .................... Ms. Barbara Bachman has been the Company's Vice President of Store
Age: 48 Operations since December 1994. From 1982 to 1994, Ms. Bachman served as
Vice President of Stores Operations with Contempo Casuals. She previously
held various other positions with Contempo Casuals, including Regional
Director of Stores from 1979 to 1982, District Manager from 1977 to 1979,
and Store Manager from 1976 to 1977.
Cecilia Gasgonia ................... Ms. Cecilia Gasgonia has been the Director of Merchandise Planning since
Age: 37 joining the Company in February 1994. She was appointed Vice President of
Merchandise Planning and Distribution in June 1995. From 1987 to January
1994, Ms. Gasgonia was Director of Merchandise Planning with Clothestime,
a junior retail chain.
Sharon Hughes ...................... Ms. Sharon Hughes has been employed by the Company since May 1990. Since
Age: 38 March 1994, she has served as the Vice President of Merchandising. From
May 1990 to March 1994 she served as a Merchandise Manager. From 1983 to
April 1990, Ms. Hughes was employed by Saturday's, a chain of clothing
stores, in various capacities, the most recent of which was General
Merchandise Manager.
Ann Cadier Kim ..................... Ms. Ann Cadier Kim has been employed by the Company since January 1986. In
Age: 40 March 1994, she was appointed Vice President of Finance. Since December
1993 she has served as the Company's Chief Financial Officer. From January
1986 to November 1993, Ms. Cadier Kim was the Company's Controller. From
September 1982 to August 1985, she was employed by Touche Ross & Co., as
an audit senior. Ms. Cadier Kim is a certified public accountant.
The Board of Directors met or took action by written consent four times in
the fiscal year ended January 31, 1998. Each of the directors attended at least
75% of the Board of Directors meetings and their respective committee meetings.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Executive Committee consisting of Irving Teitelbaum,
Kathy Bronstein and Edmond Thomas. The Executive Committee was formed in April
1990. Its primary responsibility is to oversee the execution of lease
commitments made by the Company between meetings of the Board of Directors.
The Company has an Audit Committee consisting of Gerald Randolph (Chairman),
George H. Benter, Jr. and Wilfred Posluns. The Audit Committee is responsible
for reviewing, as it shall deem appropriate, and recommending to the Board of
Directors internal accounting and finance controls for the Company and
accounting principles and auditing practices and procedures to be employed in
the preparation and review of the Company's financial statements. The Audit
Committee is also responsible
5
for recommending to the Board of Directors independent public accountants to
audit the annual financial statements of the Company and scope of the audit to
be undertaken by the accountants.
The Company has no nominating committee. Nominations are proposed by the
Executive Committee of the Board.
The Company has a Compensation Committee consisting of Irving Teitelbaum,
Wilfred Posluns and Stephen Gross. The Compensation Committee is responsible for
establishing general compensation policies and specific compensation levels for
the Company's executive officers. See "Report of the Compensation Committee on
Executive Compensation."
The Company has an Option Committee consisting of Walter F. Loeb and George
H. Benter, Jr. The Option Committee is responsible for granting stock options to
executive officers and other key employees whose contributions are considered
important to the long-term success of the Company pursuant to the Company's
long-term incentive plans.
During the fiscal year ended January 31, 1998, the Executive Committee met
or took action by written consent eight times, the Compensation Committee met or
took action by written consent one time, the Audit Committee met or took action
by written consent three times and the Option Committee met or took action by
written consent two times.
6
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth the compensation (cash and non cash) for the
Chief Executive Officer and the four other most highly compensated executive
officers ("named executive officers") who earned in excess of $100,000 per annum
during any of the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS
--------------------------------------
ANNUAL COMPENSATION SECURITIES
----------------------------------------------------- RESTRICTED UNDERLYING
NAME AND FISCAL OTHER ANNUAL STOCK STOCK LTIP
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($)(2) OPTIONS(#) PAYOUTS($)
- -------------------- ------ --------- --------- ------------------ ------------ ---------- ----------
Kathy Bronstein..... 1997 682,418 1,271,375(3) -- 59,982 120,000 --
Vice Chairman and 1996 633,171 917,560(4) -- 42,303 -- --
Chief Executive 1995 433,135 348,180(5) -- 20,680 -- --
Officer
Edmond Thomas....... 1997 563,627 726,500(3) -- 49,806 120,000 --
President and 1996 566,853 524,320(4) -- 37,010 -- --
Chief
Operating Officer 1995 362,272 198,960(5) -- 18,800 -- --
Sharon Hughes....... 1997 181,730 90,813(3) -- 17,614 10,000 --
Vice President of 1996 138,768 20,000(4) -- 9,700 -- --
Merchandising 1995 127,610 -- -- 5,170 -- --
Barbara Bachman..... 1997 176,423 40,000(3) -- 16,381 10,000 --
Vice President 1996 166,211 20,000(4) -- 12,276 -- --
1995 152,654 5,000 -- 6,204 -- --
of Store Operations
Ann Cadier Kim...... 1997 150,000 30,000(3) -- 13,210 10,000 --
Vice President of 1996 140,951 20,000(4) -- 9,881 -- --
Finance 1995 109,389 10,000 -- 5,266 10,000 --
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION($)
- -------------------- ---------------
Kathy Bronstein..... 222,555(6)
Vice Chairman and --
Chief Executive --
Officer
Edmond Thomas....... 49,062(6)
President and --
Chief
Operating Officer --
Sharon Hughes....... --
Vice President of --
Merchandising --
Barbara Bachman..... --
Vice President --
--
of Store Operations
Ann Cadier Kim...... --
Vice President of --
Finance --
- ------------------------------
(1) While the named executive officers enjoy certain perquisites, for fiscal
years 1995, 1996 and 1997 these did not exceed the lesser of $50,000 or 10%
of each officer's salary and bonus.
(2) The Company has a stock bonus plan whereby certain employees of the Company
receive Class A Common Stock in proportion to their salary. The amount of
the award is also dependent on the Company's earnings before tax and the
stock price on the date of grant. The bonus shares vest at a rate of 33.33%
per year on each anniversary of the grant date, and a participant's right to
non issued shares is subject to forfeiture if the participant's employment
is terminated. Dividends are not paid on stock grant awards until such time
as the stock is vested and issued to the executive. Shares granted under the
plan held by executives at January 31, 1998 are as follows: Ms.
Bronstein--6,865; Mr. Thomas--7,429; Ms. Hughes--3,566; Ms. Bachman--1,986;
and Ms. Cadier Kim--3,030. The aggregate market value at January 31, 1998 of
these shares is as follows: Ms. Bronstein--$210,241; Mr. Thomas--$227,513;
Ms. Hughes--$109,209; Ms. Bachman-- $60,821; and Ms. Cadier Kim--$92,794.
(3) Bonus amounts earned in fiscal 1997 were paid to the executives in fiscal
1998.
(4) Bonus amounts earned in fiscal 1996 were paid to the executives in fiscal
1997.
(5) Bonus amounts earned in fiscal 1995 were paid to the executives in fiscal
1996.
(6) Amount represents pay in lieu of vacation for fiscal 1997 and prior fiscal
years back to original date of hire for Ms. Bronstein, fiscal 1985, and for
Mr. Thomas, fiscal 1992.
7
OPTION GRANTS
The following table sets forth information regarding options granted in 1997
to each of the named executive officers pursuant to the Company's 1996 Long-Term
Incentive Plan.
OPTION GRANTS IN THE LAST FISCAL YEAR
POTENTIAL REALIZABLE
NUMBER OF PERCENTAGE OF VALUE AT ASSUMED ANNUAL
SECURITIES TOTAL OPTIONS RATES OF STOCK PRICE
UNDERLYING GRANTED TO APPRECIATION FOR OPTION
OPTIONS EMPLOYEES IN EXERCISE OR TERM(2)
GRANTED FISCAL YEAR BASE PRICE ($ EXPIRATION ------------------------
NAME (SHARES)(1) 1997 PER SHARE) DATE 5%($) 10%($)
- ----------------------------------- ----------- --------------- ------------- ----------- ------------ ----------
Kathy Bronstein.................... 120,000 20% 20.0 8/20/07 1,509,348 3,824,976
Edmond Thomas...................... 120,000 20% 20.0 8/20/07 1,509,348 3,824,976
Sharon Hughes...................... 10,000 2% 20.0 8/20/07 125,779 318,748
Barbara Bachman.................... 10,000 2% 20.0 8/20/07 125,779 318,748
Ann Cadier Kim..................... 10,000 2% 20.0 8/20/07 125,779 318,748
- ------------------------
(1) The options granted to Ms. Bronstein and Mr. Thomas vest at the rate of
33 1/3% per year beginning in August 1999. The options granted to Ms.
Hughes, Ms. Bachman and Ms. Cadier Kim vest at the rate of 20% per year for
the next five years.
(2) Potential realizable value is based on the assumption that the stock price
of the Common Stock appreciates at the annual rate shown (compounded
annually) from the date of grant until the end of the ten year option term.
These numbers are calculated based on the requirements promulgated by the
Securities and Exchange Commission and do not reflect the Company's estimate
of future stock price performance.
8
OPTION EXERCISE AND FISCAL YEAR-END VALUES
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND OPTION VALUES AT JANUARY 31, 1998
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT "IN-THE-MONEY" OPTIONS AT
SHARES JANUARY 31, 1998(#) JANUARY 31, 1998($)(1)
ACQUIRED ON VALUE -------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ------------- ----------- ----------- ------------- ---------- -------------
Kathy Bronstein................. -- -- 40,000 200,000 1,060,000 3,395,000
Edmond Thomas................... -- -- 40,000 200,000 1,060,000 3,395,000
Sharon Hughes................... 2,000 51,750 500 14,000 13,250 212,250
Barbara Bachman................. -- -- 6,000 14,000 155,250 209,750
Ann Cadier Kim.................. 3,000 71,500 2,000 20,000 45,250 348,000
- ------------------------
(1) Represents the market value of shares underlying "in-the-money" options on
January 31, 1998 less the option exercise price. Options are "in-the-money"
at the fiscal year end if the fair market value of the underlying securities
on such date exceeds the exercise or base price of the option.
RETIREMENT PLAN
Irving Teitelbaum, Kathy Bronstein and Edmond Thomas are participants in The
Wet Seal, Inc. Supplemental Executive Retirement Plan ("SERP"), an unfunded,
nonqualified retirement plan. According to the terms of the SERP, a
participant's "Annual Accrued Benefit" shall be $250,000 which may be increased
upward, if applicable, based on the "Pre-Tax Profit Percentage" (as defined in
the SERP) for the three full fiscal years of the Company preceding the date the
participant's service with the Company is terminated, as follows:
ANNUAL ACCRUED
3-YEAR AVERAGE PRE-TAX PROFIT PERCENTAGE BENEFIT
- ----------------------------------------------------------------------- ---------------------
if 4.25% or greater but less than 4.75%................................ $ 300,000
if 4.75% or greater but less than 5.25%................................ $ 350,000
if 5.25% or greater but less than 5.75%................................ $ 400,000
if 5.75% or greater but less than 7.00%................................ $ 450,000
if 7.00% or greater.................................................... $ 500,000
A participant is entitled to receive benefits under the SERP upon his or her
Normal Retirement Date (the first day of the month following the date the
participant's service with the Company as an officer or executive has
terminated, and which occurs at or after the date the participant has attained
22.5 years of service with the Company). A participant may receive an early
retirement benefit equal to his or her Annual Accrued Benefit reduced by 1/2 of
1% per month for the number of months his or her retirement precedes his or her
Normal Retirement Date. The normal form of benefit is a straight life annuity,
ending in the month in which the participant dies. The Annual Accrued Benefit is
payable in 12 equal monthly installments a year. The participant may choose to
receive the benefit in the form of a 50% joint and survivor annuity. Benefits
under the SERP are forfeitable upon a termination of employment for Cause (as
defined in the SERP). Benefits under the SERP are provided by the Company on a
noncontributory basis.
9
DIRECTOR COMPENSATION
All directors who are not directly affiliated with the Company as well as
one director who is affiliated receive a fee of $5,000 for each board meeting
attended, with a minimum yearly fee of $20,000. All directors are reimbursed for
expenses connected with attendance at the meetings of the Board of Directors. An
additional fee of $1,000 is paid to non-employee directors for each Audit
committee meeting attended.
All directors who are not directly affiliated with the Company as well as
one director who is affiliated were granted stock options of 5,000 shares each
in fiscal 1997 pursuant to the Company's 1996 Long-Term Incentive Plan. The
options vest at the rate of 20% per year for the next five years.
All directors, except one, who are not directly affiliated with the Company
as well as one director who is affiliated were granted stock options of 10,000
shares each in fiscal 1994 pursuant to the Company's 1994 Long-Term Incentive
Plan. One independent director was granted 15,000 options in fiscal 1996. The
options vest at the rate of 20% per year for the next five years.
EMPLOYMENT AGREEMENTS
KATHY BRONSTEIN
Kathy Bronstein has served as the Chief Executive Officer of the Company
since March 1992. On December 30, 1988, in her former position of Executive Vice
President and General Merchandise Manager, Ms. Bronstein entered into an
employment agreement with the Company. Under this agreement, as amended, Ms.
Bronstein is entitled to a base salary of $550,000 per annum, adjusted annually
by 0.5% ( 1/2 of 1%) of the pre-tax profits of the Company for the preceding
fiscal year to the extent this amount exceeds the aggregate cash dividends Ms.
Bronstein is eligible to receive on her holdings of the Company's capital stock
referable to the same fiscal year. This adjustment is not cumulative and is in
lieu of any salary review or cost of living adjustments. Ms. Bronstein also
receives an incentive bonus of 3.5% of the pre-tax profits of the Company (as
defined in the agreement) for each fiscal year.
In January 1995, Ms. Bronstein's employment agreement was amended to provide
automatic extensions to the term of her employment agreement as well as
termination benefits upon the occurrence of certain trigger events. In the event
of a trigger event, the employment agreement is terminated and Ms. Bronstein is
entitled to receive an immediate payment approximately equal to three years of
Ms. Bronstein's current base salary and bonus during the last three fiscal
years. Trigger events include a "change in control" AND either (i) Ms.
Bronstein's election to resign within 90 days of a material change in Ms.
Bronstein's rights and duties or (ii) Ms. Bronstein's termination by the Company
without cause. A "change in control" means (i) the disposition or conversion by
a Class B stockholder (other than Ms. Bronstein) of a majority of that
stockholder's Class B shares or (ii) the acquisition of more than 50% of the
voting power in a Class B stockholder or the ability to control the disposition
or voting of a Class B stockholder's shares AND a majority of the Board of
Directors of the Company ceases to be those in office two years prior to the
change in control ("Continuing Directors") or those elected by a majority of
other Continuing Directors. In addition, upon a change in control (regardless of
the termination of the employment agreement), Ms. Bronstein's stock options
become immediately exercisable. In the event that the total payments made to Ms.
Bronstein upon the occurrence of a trigger event result in "excess parachute
payments" under the Internal Revenue Code of 1986, as amended, the Company would
be obligated to pay the excise tax due on such amount and any income tax
obligations arising from reimbursement of any such excise taxes.
Ms. Bronstein's agreement expires on January 30, 2003. The agreement
automatically extends for an additional year on the first day of each fiscal
year for up to five years. These automatic extensions may be terminated by
either party at any time upon prior written notice. She has agreed not to
compete with the
10
Company during the term of her employment and for a period of two (2) years
thereafter. She is provided with a car by the Company.
The Company has obtained "key man" life insurance in the amount of $5.0
million payable to the Company in the event of Ms. Bronstein's death while
employed by the Company.
EDMOND THOMAS
Edmond Thomas has served as the Company's President and Chief Operating
Officer since March 17, 1994. On June 22, 1992, in his former position of
Executive Vice President and Chief Operating Officer, he entered into an
employment agreement with the Company. Under this agreement, as amended, Mr.
Thomas is entitled to a base salary of $500,000 per annum plus an annual
adjustment of .25% ( 1/4 of 1%) of the pre-tax profits of the Company for the
preceding fiscal year to the extent this amount exceeds the aggregate cash
dividends Mr. Thomas is eligible to receive on his holdings of the Company's
capital stock referable to the same fiscal year. This adjustment is non
cumulative and is in lieu of any salary review or cost of living adjustments.
Mr. Thomas also receives an incentive bonus of 2% of the pre-tax profits of the
Company (as defined in the agreement) for each fiscal year.
In January 1995, Mr. Thomas' employment agreement was amended to provide
automatic extensions to the term of his employment agreement as well as
termination benefits upon the occurrence of certain trigger events. In the event
of a trigger event, the employment agreement is terminated and Mr. Thomas is
entitled to receive an immediate payment approximately equal to three years of
Mr. Thomas' current base salary and bonus during the last three fiscal years.
Trigger events include a "change in control" AND either (i) Mr. Thomas' election
to resign within 90 days of a material change in Mr. Thomas' rights and duties
or (ii) Mr. Thomas' termination by the Company without cause. A "change in
control" means (i) the disposition or conversion by a Class B stockholder (other
than Ms. Bronstein) of a majority of that stockholder's Class B shares or (ii)
the acquisition of more than 50% of the voting power in a Class B stockholder or
the ability to control the disposition or voting of a Class B stockholder's
shares ANDa majority of the Board of Directors of the Company ceases to be those
in office two years prior to the change in control ("Continuing Directors") or
those elected by a majority of other Continuing Directors. In addition, upon a
change in control (regardless of the termination of the employment agreement),
Mr. Thomas' stock options become immediately exercisable. In the event that the
total payments made to Mr. Thomas upon the occurrence of a trigger event result
in "excess parachute payments" under the Internal Revenue Code of 1986, as
amended, the Company would be obligated to pay the excise tax due on such amount
and any income tax obligations arising from reimbursement of any such excise
taxes.
Mr. Thomas' agreement expires on January 30, 2003. The agreement
automatically extends for an additional year on the first day of each fiscal
year for up to five years. These automatic extensions may be terminated by
either party at any time upon prior written notice. He has agreed not to compete
with the Company during the term of his employment and for a period of two (2)
years thereafter. He is provided with a car by the Company.
The Company has obtained "key man" life insurance in the amount of $5.0
million payable to the Company in the event of Mr. Thomas' death while employed
by the Company.
BUSINESS RELATIONSHIPS
MANAGEMENT SERVICES
In each of the fiscal years ended January 31, 1998, February 1, 1997, and
February 3, 1996, a fee of $250,000 was paid to First Canada Management, Inc., a
company controlled by Irving Teitelbaum, for the services of Irving Teitelbaum,
Chairman of the Board of the Company, and Stephen Gross, Corporate Secretary of
the Company, respectively.
11
First Canada Management, Inc. was granted stock options of 200,000 shares in
fiscal 1997 pursuant to the Company's 1996 Long-Term Incentive Plan. The options
vest at the rate of 20% per year for the next five years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Irving Teitelbaum, Wilfred Posluns and Stephen Gross serve as members of the
Compensation Committee. Mr. Teitelbaum also serves as Chairman of the Board of
the Company and Mr. Gross also serves as the Secretary of the Company.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The primary duties of the Compensation Committee include: (i) reviewing the
compensation levels of the Company's primary executive officers and certain
other members of senior management, (ii) consulting with and making
recommendations to the Company's Option Committee regarding the Company's
overall policy of granting options and awards under the Company's long-term
incentive plans, (iii) monitoring the performance of senior management, and (iv)
related matters. A decision to employ any person with an annual compensation of
$150,000 or more (or any increase in annual compensation to $150,000 or more)
must be approved by the Compensation Committee. The Compensation Committee is
comprised entirely of non-employee Directors.
COMPENSATION PHILOSOPHY
The Company's executive compensation programs are based upon the recognition
that The Wet Seal, Inc. competes in a creative industry in which it is critical
to stay current with rapidly changing trends and styles. Competition is intense
for talented executives who can successfully guide a company in this type of
competitive environment. Therefore, the Company's compensation programs are
designed to provide total compensation packages that will both attract talented
individuals to the Company as well as provide rewards based upon the Company's
long-term success.
With these principles in mind, the Compensation Committee has set forth the
following guidelines:
1. Provide base salaries which are competitive in the retail clothing
industry to attract and retain talented individuals;
2. Provide annual bonuses that are tied to the Company's short-term
performance to align the interests of the Company's executives with those of
its stockholders; and
3. Provide long-term incentive benefits which will reward long-term
commitment to the Company.
COMPENSATION OF EXECUTIVE OFFICERS
Base salaries for executive officers are established with a view to the
responsibilities of the position and the experience of the individual. Salary
levels are also fixed with reference to comparable companies in retail and
related trades. The salaries of key executive officers and the incentive plans
in which they participate are reviewed annually by the Compensation Committee in
light of the Committee's assessment of individual performance, contribution to
the Company and level of responsibility.
The Chief Executive Officer (the "CEO") and the President and Chief
Operating Officer are eligible pursuant to their employment agreements to
receive annual cash bonuses of 3.5% and 2%, respectively, of the Company's
pre-tax profit. The Compensation Committee believes that tying annual cash
bonuses to the Company's profitability aligns the interests of management with
stockholders and encourages intensive efforts to attain and increase
profitability. The CEO and the President and Chief Operating Officer of the
12
Company earned cash bonuses in fiscal 1997 in the amounts of $1,271,375 and
$726,500, respectively, which were paid in fiscal 1998.
The Company also maintains an employee stock bonus plan in which the top
executives of the Company are eligible to participate. Awards under this plan to
executives are calculated by multiplying the Company's fiscal year-end pre-tax
profit as a percentage of sales by the executive's base salary and dividing such
amount by the price of the Company's Class A Common Stock as of the end of the
fiscal year. Grants under the stock bonus plan vest over a period of three
years.
Stock options are granted to executive officers and other key employees
whose contributions are considered important to the long-term success of the
Company pursuant to the Company's long-term incentive plans. Stock options have
historically been granted by the Option Committee on a case-by-case basis based
upon the Board's evaluation of an individual's past contributions and potential
future contributions to the Company. In granting stock options, the Option
Committee takes into consideration the anticipated long-term contributions of an
individual to the potential growth and success of the Company, as well as the
number of options previously granted to the individual.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Since March 1992, Kathy Bronstein has served as CEO of the Company. Ms.
Bronstein received a base salary of $375,000 in fiscal 1995. In December 1995,
Ms. Bronstein's employment agreement was amended to increase her base salary to
$550,000. The Compensation Committee deemed this increase appropriate in light
of the Company's recent performance and the successful acquisition of the
Contempo Casuals chain, which substantially increased the size of the Company.
As the Company continues to adapt to a changed environment in the women's retail
apparel industry, the Compensation Committee believes that Ms. Bronstein's
experience and capabilities will be critical in enabling the Company to remain
competitive and profitable. Ms. Bronstein is eligible to receive a
non-cumulative annual adjustment (in lieu of a cost of living adjustment) to her
base salary of 0.5% of the pre-tax profits of the Company for the preceding
fiscal year to the extent this amount exceeds the aggregate cash dividends Ms.
Bronstein is eligible to receive on her holdings of Company common stock for the
same fiscal year. Ms. Bronstein received such an adjustment in fiscal 1997. See
"Executive Compensation and Other Information-- Employment Agreements." Ms.
Bronstein is also eligible to receive an annual cash bonus pursuant to her
employment agreement of 3.5% of the pre-tax profits of the Company for each
fiscal year. Under this formula, Ms. Bronstein earned a cash bonus in fiscal
1997 in the amount of $1,271,375, which was paid in fiscal 1998.
The Compensation Committee
Irving Teitelbaum
Wilfred Posluns
Stephen Gross
13
STOCK PRICE PERFORMANCE GRAPH
The Performance Graph compares the cumulative stockholder return on the
Company's common stock with the return on the Total Return Index for the Nasdaq
Stock Market (US) and the Nasdaq Retail Trade Stocks. The Performance Graph
assumes $100 invested on January 29, 1993 in the stock of The Wet Seal, Inc.,
the Nasdaq Stock Market (US) and the Nasdaq Retail Trade Stocks. It also assumes
that all dividends are reinvested.
PERFORMANCE GRAPH
FOR THE WET SEAL COMMON STOCK
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
THE WET SEAL, INC. NASDAQ STOCK MARKET (US) NASDAQ RETAIL TRADE STOCKS
1/29/93* $100 $100 $100
1/28/94* 46 114 106
1/27/95* 57 110 95
2/2/96* 105 157 107
1/31/97* 288 203 131
1/30/98* 438 240 154
JANUARY 29, JANUARY 28, JANUARY 27, FEBRUARY 2, JANUARY 31,
1993* 1994* 1995* 1996* 1997*
--------------- --------------- --------------- --------------- ---------------
The Wet Seal, Inc.................. 100 46 57 105 288
Nasdaq Stock Market (US)........... 100 114 110 157 203
Nasdaq Retail Trade Stocks......... 100 106 95 107 131
JANUARY 30,
1998*
---------------
The Wet Seal, Inc.................. 438
Nasdaq Stock Market (US)........... 240
Nasdaq Retail Trade Stocks......... 154
- ------------------------
* Date closest to the Company's fiscal year end.
The historical stock performance shown on the graph is not necessarily
indicative of future price performance.
14
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 24, 1998, for (i) each
person known to the Company to have beneficial ownership of more than 5% of each
class of the Company's capital stock; (ii) each of the Company's directors;
(iii) each of the Company's executive officers designated in the Summary
Compensation Table; and (iv) all directors and officers of the Company as a
group.
% %
BENEFICIAL BENEFICIAL % BENEFICIAL PERCENT OF
NUMBER OF OWNERSHIP NUMBER OF OWNERSHIP OWNERSHIP OF VOTE OF ALL
SHARES OF OF SHARES SHARES OF OF SHARES ALL CLASSES OF CLASSES OF
NAME CLASS A OF CLASS A CLASS B OF CLASS B STOCK STOCK
- -------------------------------------- ----------- ----------- ----------- ----------- --------------- -----------
Los Angeles Express Fashions, Inc.
(Suzy Shier Equities, Inc.
Subsidiary) (1)..................... -- -- 1,300,000 44.6% 9.6% 15.8%
1604 St. Regis Blvd. Dorval, Quebec,
Canada H9P1H6
3254127 Canada, Inc. (GTHI Subsidiary)
(1)................................. -- -- 815,573 28.0% 6.0% 9.9%
1604 St. Regis Blvd. Dorval, Quebec,
Canada H9P1H6
Suzy Shier Equities, Inc. (Suzy Shier
Ltd. Subsidiary) (1)................ -- -- 175,000 6.0% 1.3% 2.1%
1604 St. Regis Blvd. Dorval, Quebec,
Canada H9P1H6
La Senza, Inc. (Suzy Shier Ltd.
Subsidiary) (1)..................... -- -- 155,000 5.3% 1.1% 1.9%
1604 St. Regis Blvd. Dorval, Quebec,
Canada H9P1H6
Kathy Bronstein (2)................... 81,636 * 467,092 16.0% 4.0% 6.2%
Ed Thomas (3)......................... 84,143 * -- -- * *
Sharon Hughes (4)..................... 4,937 * -- -- * *
Barbara Bachman (4)................... 2,000 * -- -- * *
Ann Cadier Kim (4).................... 4,769 * -- -- * *
George Benter (4)..................... 7,500 * -- -- * *
Walter F. Loeb (4).................... 7,400 * -- -- * *
Wilfred Posluns (4)................... 3,000 * -- -- * *
Gerald Randolph (4)................... -- * -- -- * *
Alan Siegel (4)....................... 1,000 * -- -- * *
Craig Drill Capital, L.P. (5)......... 1,563,800 14.7% -- -- 11.5% 9.5%
Park Avenue Plaza New York, New York
10055
Scudder Kemper Investments, Inc. (6).. 691,900 6.5% -- -- 5.1% 4.2%
345 Park Avenue New York, New York
10154
Delaware Management Holdings, Inc.
(7)................................. 663,400 6.2% -- -- 4.9% 4.0%
2005 Market St. Philadelphia,
Pennsylvania 19103..................
All directors and officers as a group
(13 individuals).................... 201,385 1.9% 2,912,665 100.0% 22.9% 36.5%
- ------------------------------
* Less than 1%
(1) Los Angeles Express Fashions, Inc., 3254127 Canada, Inc., Suzy Shier
Equities, Inc. and La Senza, Inc. are directly or indirectly controlled by
Irving Teitelbaum, Chairman of the Board, and Stephen Gross, Secretary and a
director of the Company. These stockholders beneficially own shares which in
the aggregate represent approximately 29.7% of the total voting power with
respect to the Company.
15
(2) Ms. Bronstein has sole voting and dispositive power with respect to all of
the stated holdings of Class A and Class B Common Stock. Shares held include
options representing the immediate right to purchase 80,000 shares of Class
A Common Stock. Ms. Bronstein also holds options to purchase an additional
160,000 shares of Class A Common Stock which become exercisable over the
next four years.
(3) Mr. Thomas has sole voting and dispositive power with respect to all of the
stated holdings of Class A Common Stock. Shares held include options
representing the immediate right to purchase 80,000 shares of Class A Common
Stock. Mr. Thomas also holds options to purchase an additional 160,000
shares of Class A Common Stock which become exercisable over the next four
years.
(4) Shares held include options representing the immediate right to purchase the
following shares of Class A Common Stock: Ms. Hughes--2,500; Ms.
Bachman--2,000; Ms. Cadier Kim--4,000; Messrs. Benter and Loeb--6,000 each;
Mr. Posluns--3,000; and Mr. Siegel--1,000.
(5) As reported in a Schedule 13D dated February 12, 1996, Craig Drill Capital,
L.P. has sole voting and dispositive power with respect to 1,563,800 shares
of the Class A Common Stock of the Company. Mr. Craig A. Drill is sole
general partner of Craig Drill Capital, L.P.
(6) As reported in a Schedule 13G dated February 12, 1998, Scudder Kemper
Investments, Inc. ("Scudder") beneficially owns 691,900 shares of the Class
A Common Stock of the Company. Scudder has sole voting power with respect to
354,400 shares and sole dispositive power with respect to 512,400 shares.
Scudder has shared voting power with respect to 228,700 shares and shared
dispositive power with respect to 179,500 shares.
(7) As reported in a Schedule 13G dated February 3, 1997, Delaware Management
Holdings, Inc. ("DMHI") is the parent holding company of Delaware Management
Company, Inc. ("DMCI"). DMHI has sole voting power with respect to 17,850
shares and sole dispositive power with respect to 663,400 shares.
16
ELECTION OF AUDITORS
The Board of Directors, after consideration of the recommendation of the
Audit Committee, has nominated the independent public accounting firm of
Deloitte & Touche LLP as the Company's independent auditors for the fiscal year
1998. Stockholders will be asked to ratify the nomination of the Board of
Directors. Deloitte & Touche LLP has served as the Company's auditors since
fiscal 1989. Representatives of Deloitte & Touche LLP are expected to be present
at the Annual Meeting and will be available to make a statement if they desire
and are expected to respond to appropriate inquiries from the stockholders.
Although ratification of the auditors by stockholders is not legally required,
the Company's Board of Directors believes such ratification to be in the best
interest of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The federal securities laws require the filing of certain reports by
officers, directors and beneficial owners of more than 10% of the Company's
securities with the Securities and Exchange Commission and Nasdaq. Specific due
dates have been established and the Company is required to disclose in this
Proxy Statement any failure to file by these dates. Based solely on a review of
copies of the filings furnished to the Company, the Company believes that during
fiscal 1997, all filing requirements were satisfied by the Company's officers,
directors and ten percent (10%) stockholders, except as set forth below.
Each of the nominees for director listed under "Election of Directors" and
each of the officers listed under "Executive Officers" did not file the required
Form 5 on a timely basis in connection with a grant of options during fiscal
1997.
OTHER MATTERS
The Board of Directors knows of no other business to come before the Annual
Meeting. However, if any other matters are properly brought before the Annual
Meeting, the persons named in the accompanying form of Proxy or their
substitutes will vote in their discretion on such matters.
The cost of this solicitation or proxies will be borne by the Company.
Arrangements may be made with brokerage houses, custodians, nominees and
fiduciaries to send proxies and materials to their principals and, upon request,
the Company will reimburse them for their expenses in so doing.
STOCKHOLDER PROPOSALS FOR PRESENTATION
AT 1999 ANNUAL MEETING
If a Stockholder of the Company wishes to present a proposal for
consideration at the next Annual Meeting of Stockholders, the proposal must be
received at the executive offices of the Company no later than January 8, 1999,
to be considered for inclusion in the Company's Proxy Statement and form of
Proxy for that Annual Meeting.
17
Please Detach and Mail in the Envelope Provided
PROXY THE WET SEAL, INC. PROXY 1998 ANNUAL MEETING PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING JUNE 9, 1998
The undersigned, a stockholder of The Wet Seal, Inc., a Delaware
corporation, appoints Kathy Bronstein and Edmond Thomas, or either of them,
his true and lawful agents and proxies, each with full power of substitution,
to vote all shares of stock that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of The Wet Seal,
Inc. to be held at the Westin South Coast Plaza, 686 Anton Blvd., Costa Mesa,
California 92626 on June 9, 1998, at 10:00 a.m., and any adjournment thereof,
with respect to the following matters which are more fully explained in the
Proxy Statement of the Company dated May 8, 1998, receipt of which is
acknowledged by the undersigned:
NEW ADDRESS:
Check here for / / -----------------------
address change -----------------------
-----------------------
-----------------------
(Continued and to be signed
and dated on reverse side)
do not print in this area
Please Detach and Mail in the Envelope Provided
/X/ Please mark your
votes as in this
example.
For all Withhold NOMINEES:
1. Election of nominees authority George H. Benter, Jr.,
Directors / / / / Kathy Bronstein,
Stephen Gross, Walter
F. Loeb, Wilfred
Posluns, Gerald
Randolph, Alan Siegel,
Irving Teitelbaum,
Edmond Thomas
Instruction: To withhold
authority to vote for any
individual nominee, write that
nominees name on the space
provided below.
- ------------------------------------
2. Ratification of the selection by the Board of FOR AGAINST ABSTAIN
Directors of Deloitte & Touche LLP as Independent / / / / / /
Auditors for the Company for the year ending
January 30, 1999.
3. Such other matters as may properly come before / / / / / /
the Annual Meeting. The Board of Directors at
present knows of no other matters to be brought
before the Annual Meeting.
shareholder name & address
do not print in this area
Signature(S) Date
---------------------------------- ----------------
Note: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
This proxy will be voted in accordance with the instructions given. If no
direction is made, the shares represented by this proxy will be voted FOR
proposals 1 and 2 and will be voted in accordance with the discretion of the
proxies upon all other matters which may come before the Annual Meeting.
important: please vote, date, sign and return the proxy card promptly using
the enclosed postage-paid envelope.