<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-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:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[bebe logo]
October 19, 1998
Dear Shareholders,
Fiscal 1998 was a very exciting year for bebe stores, inc. It was a year in
which we achieved record financial results, expanded awareness of the bebe
brand and became a public company.
Our net sales for the year reached an all-time high of more than $146
million, an increase of 54 percent over fiscal 1997. The record sales
reflected growth across all product categories and represents a solid
validation of the various management, product and operational initiatives
that we began implementing in 1996. Earnings per share also reached a record
level at $.73 per share. Gross margins rose to over 51 percent compared with
43 percent in the previous year. Over the course of the year, we opened seven
new stores, bringing our total store count to 86 as of year's end.
We are proud to report strong comparable store sales growth for the year. We
believe this was the result of several factors: a broader merchandise
offering that was well received by our customers, increased effectiveness in
our merchandise planning and management, and our expanded high-impact
advertising program and public relations campaigns.
Over the last two years, we have significantly expanded our product offering
to include a broader array of tops, separates, dresses, leather, logo and
accessory items. In fiscal 1998, this expanded collection was very well
received.
We continue to receive a strong positive response to our distinctive image
campaign. The campaign played a key role in driving our sales through enhanced
brand awareness by addressing the aspirational quality of the bebe brand.
All of us at bebe are excited about the coming year and about continuing to
support the contemporary lifestyle of our customer. We are proud to be a
public company, and look forward to sharing our vision and our progress with
you as we move ahead.
Sincerely Yours,
/s/ Manny Mashouf
Manny Mashouf
President and Chief Executive Officer
<PAGE>
[bebe logo]
380 VALLEY DRIVE
BRISBANE, CALIFORNIA 94005
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 23, 1998
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
23, 1998, at 9:30 a.m. local time, at the Company, 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 ratify the appointment of Deloitte & Touche LLP as the Company's
independent public auditors for the fiscal year ending June 30, 1999.
3. To transact such other business as may come properly before the
meeting.
Shareholders of record at the close of business on October 9, 1998, 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 19, 1998
<PAGE>
[bebe logo]
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 23, 1998, 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 19, 1998, 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, 1998, is
enclosed with this Proxy Statement.
VOTING SECURITIES
Only shareholders of record as of the close of business on October 9, 1998,
will be entitled to vote at the meeting and any adjournment thereof. As of that
date, there were 23,889,997 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.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of September 30,
1998, 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:
<TABLE>
<CAPTION>
SHARES OWNED (1)
--------------------------------
NAME AND ADDRESS OF NUMBER PERCENTAGE OF
BENEFICIAL OWNERS (#) OF SHARES CLASS (2)
- - ----------------------------------------------------------------- -------------- ---------------
<S> <C> <C>
Manny Mashouf (2) 21,014,997 88.0%
Barbara Bass (3) 212,250 *
Corrado Federico (4) 212,250 *
Neda Mashouf (5) 21,014,997 88.0
Philip Schlein (4) 212,500 *
Greg Scott (6) 141,500 *
Blair W. Lambert (6) 141,500 *
All directors and executive officers as a group (7 persons) (7) 21,934,747 88.4
</TABLE>
- - -----------------------
* Less than 1%
(1) Number of shares beneficially owned and the percentage of shares
beneficially owned are based on 23,889,997 shares outstanding as of
September 30, 1998. 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 262,780 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 212,500 shares subject to immediately exercisable options, of
which 134,425 would not be vested within 60 days of September 30, 1998, and
therefore subject to the Company's right of repurchase under certain
circumstances.
(4) Represents 212,500 shares subject to immediately exercisable options, of
which 127,350 would not be vested within 60 days of September 30, 1998, and
therefore subject to the Company's right of repurchase under certain
circumstances.
(5) Consists of shares of which Ms. Mashouf disclaims beneficial ownership,
held by Mr. Mashouf, Ms. Mashouf's husband, and 262,780 shares held by
trusts for Mr. Mashouf's children.
(6) Represents 141,500 shares subject to immediately exercisable options, of
which 101,408 would not be vested within 60 days of September 30, 1998, and
therefore subject to the Company's right of repurchase under certain
circumstances.
(7) Includes an aggregate of 919,750 shares subject to immediately exercisable
options held by the directors and officers, of which 591,942 would not be
vested within 60 days of September 30, 1998, and therefore subject to the
Company's right of repurchase under certain circumstances. Also includes
262,780 shares held by trusts for Mr. Mashouf's children, as to which
shares Mr. and Ms. Mashouf disclaim beneficial ownership.
3
<PAGE>
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 1999, 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:
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------ -------- ------------------------------------------------
<S> <C> <C>
Manny Mashouf 60 Chairman, President and Chief Executive Officer
Neda Mashouf 35 Director and Design Director
Barbara Bass* 47 Director
Corrado Federico* 57 Director
Philip Schlein* 64 Director
</TABLE>
- - ----------------------------------
* 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, and the father of Paul Mashouf, the Secretary 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 Design
Director. 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. Since 1991, Mr. Federico has served as the President of Corado,
Inc., a land development firm. From 1986 to 1991, Mr. Federico held the
position of President and Chief Executive Officer of Esprit. 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 as on the Board of
Directors of Ross Stores, Inc., ReSound Corporation, Quick Response Services and
Burnham Pacific Properties, Inc.
4
<PAGE>
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended June 30, 1998, the Board of Directors
held eleven (11) meetings. Each director serving on the Board of Directors in
fiscal year 1998 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, 1998, the Audit
Committee held one (1) meeting.
The Compensation Committee, which consists of all of the non-employee
directors, makes recommendations to the Board of Directors concerning 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, 1998, the Compensation Committee held one (1)
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
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, 1999. 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, 1999.
5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information for the fiscal years ended June
30, 1998, 1997 and 1996 concerning the compensation of the Chief Executive
Officer of the Company and the four most highly compensated executive officers
of the Company as of June 30, 1998, whose total salary and bonus for the year
ended June 30, 1998, exceeded $100,000, for services in all capacities to the
Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------------- ------------
AWARDS
------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS COMPENSATION
- - ---------------------------------------- ------- -------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Manny Mashouf 1998 $513,050 $1,650,000(2) - $2,549
President and 1997 449,921 155,754 - 1,572(3)
Chief Executive Officer 1996 330,000 - - 922
Greg Scott (4) 1998 198,066 60,000 - 2,642
Vice President of Merchandising 1997 159,288 50,210 141,500 -
1996 58,557 - - -
Blair W. Lambert (5) 1998 175,251 52,500 - -
Vice President of Finance and 1997 139,694 43,373 141,500 -
Chief Financial Officer 1996 - - - -
</TABLE>
- - -------------------------
(1) Except as disclosed in Footnote 2 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) 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."
(3) Represents a matching contribution to 401(k) contributions.
(4) Mr. Scott joined the Company in January 1996.
(5) Mr. Lambert joined the Company in June 1996.
6
<PAGE>
No grants of options to purchase Common Stock were made during the fiscal
year ended June 30, 1998, to the persons named in the Summary Compensation
Table. No options to purchase Common Stock were exercised in the fiscal year
ended June 30, 1998. The following table provides the specified information
concerning unexercised options held as of June 30, 1998, by the persons named in
the Summary Compensation Table:
AGGREGATED OPTION EXERCISES
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at June 30, 1998 Options at June 30, 1998 (1)
------------------------------- --------------------------------
Name Exercisable (2) Unexercisable Exercisable (2) Unexercisable
- - ------------------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Manny Mashouf - - - -
Greg Scott 141,500 0 $1,606,733 $0
Blair W. Lambert 141,500 0 1,606,733 0
</TABLE>
- - --------------------
(1) Calculated by determining the difference between the fair market value of
the securities underlying the option at June 30, 1998 of $13.125, the
closing price as reported by the Nasdaq National Market and the exercise
price of the Named Executive Officer's option ($1.77).
(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 shall accelerate
and become fully vested, and the Company's right to repurchase shall lapse.
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.
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.
7
<PAGE>
CERTAIN TRANSACTIONS
From time to time during the last three fiscal years, Mr. Mashouf has
loaned to or borrowed from the Company various amounts of cash ranging from
loans to the Company of up to $500,000 and advances on bonuses from the Company
of up to $200,000. Loans to the Company by Mr. Mashouf bore interest at an
annual rate of 10%. The Company did not accrue interest on advances on bonuses
to Mr. Mashouf. As of September 30, 1998, there were no borrowings due to Mr.
Mashouf from the Company or advances owed to the Company by Mr. Mashouf.
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, 1998. 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, 1998
[GRAPH]
<TABLE>
<CAPTION>
06/17/98 06/30/98
<S> <C> <C>
S&P Textile Index $100.00 100.63
S&P500 $100.00 102.36
bebe stores, inc. $100.00 119.32
</TABLE>
- - --------------------
(1) No dividends have been declared on the Company's Common Stock.
8
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors for fiscal 1998
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.
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.
In April 1997, the Chief Executive Officer evaluated the performance of the
Company and Mr. Lambert from the time he joined the Company in June 1996, and
increased Mr. Lambert's annual salary by 25%.(1) In December 1997, based on the
Chief Executive Officer's evaluation of the performance of the Company and Mr.
Scott in calendar year 1997, the Compensation Committee increased Mr. Scott's
annual salary by approximately 28%. The Compensation Committee believes that
such increases in salary were advisable to encourage these executive officers to
remain with the Company and to reward these executive officers for the Company's
performance during said periods.
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 1998, the Company exceeded the specified profitability targets,
and, accordingly, Messrs. Scott and Lambert received incentive compensation of
approximately 30% of their respective annual salaries at the end of fiscal 1998
as provided in the Profit Sharing Plan.
- - --------------------------
(1) The Compensation Committee was not established until December 1997.
9
<PAGE>
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.
On June 26, 1997, the Compensation Committee recommended to the Board of
Directors, and the Board of Directors approved, stock option grants to
certain of the executive officers, based on the achievement of individualized
objectives and the financial performance of the Company for fiscal 1997. In
each case the size of each grant was based upon the relative seniority and
responsibilities of each executive officer and the historical and expected
contributions of each executive officer to the Company. Such grants were
immediately exercisable, subject to the Company's right of repurchase that
lapses over a four-year period. At the end of fiscal 1998, the Compensation
Committee reviewed the options recently granted to the executive officers in
fiscal 1997 and determined that such options were sufficient incentive and
reward for the executive officers for such period. No additional options
were granted to executive officers in fiscal 1998.
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 1997, 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. In recognition of the Company's significant
improvement in financial performance from fiscal 1996 through fiscal 1998, the
Compensation Committee granted Mr. Mashouf a discretionary bonus of $1,500,000
in December 1997. The Compensation Committee currently does not plan to award
bonuses of this size annually.
Because the Company exceeded the profitability targets specified in the
Profit Sharing Plan, Mr. Mashouf also received incentive compensation of
approximately 30% of his annual base salary at the end of fiscal 1998 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
10
<PAGE>
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 21,
1999 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 19, 1998
11
<PAGE>
bebe stores, inc.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 23, 1998
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, 380 Valley Drive, Brisbane,
California, on November 23, 1998 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 19, 1998 (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 AND 2.
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
<PAGE>
/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:
<TABLE>
<CAPTION>
FOR all nominees listed WITHHOLD AUTHORITY
below (except as marked to vote for all nominees
to the contrary below.) listed below.
<S> <C> <C>
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:
(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
<S> <C> <C> <C>
FOR ABSTAIN AGAINST
2. To ratify the appointment of Deloitte & / / / / / /
Touche LLP as the Company's
independent public auditors for the
fiscal year ending June 30, 1999.
</TABLE>
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 stockholder 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:
----------------- ---------------------------------------------
