<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
THE WET SEAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which 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 the
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 Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
THE WET SEAL, INC.
64 FAIRBANKS
IRVINE, CALIFORNIA 92718
May 31, 1996
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 Thursday, June 20, 1996.
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,
IRVING TEITELBAUM
CHAIRMAN OF THE BOARD
<PAGE>
THE WET SEAL, INC.
64 FAIRBANKS
IRVINE, CALIFORNIA 92718
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 20, 1996
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 Thursday,
June 20, 1996 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 1996.
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 28, 1996 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,
STEPHEN GROSS
SECRETARY
Dated: May 31, 1996
<PAGE>
THE WET SEAL, INC.
64 FAIRBANKS
IRVINE, CALIFORNIA 92718
------------------------
PROXY STATEMENT
JUNE 20, 1996
------------------------
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
Thursday, June 20, 1996 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 31, 1996.
VOTING BY STOCKHOLDERS
Only holders of record of the Company's common stock, at the close of
business on May 28, 1996 are entitled to receive notice of, and to vote at, the
Annual Meeting. On that date, there were 10,349,566 shares of the Company's
Class A Common Stock, $.10 par value, and 3,157,665 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
<PAGE>
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 20, 1996. 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:
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ---------------------------------------------------------------------------------------------------------
<S> <C>
George H. Benter, Jr. Mr. George H. Benter, Jr. has been a director of the Company since
Age: 54 1990. 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.
Kathy Bronstein Ms. Kathy Bronstein was appointed the Company's Vice Chairman of the
Age: 44 Board 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 marketing and merchandising strategies.
Stephen Gross(1) Mr. Stephen Gross has been the Secretary and a director of the Company
Age: 50 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.
Age: 71 He is 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 Color Tile, Inc.,
Federal Realty Investment Trust, Gymboree Corporation and InterTan,
Inc.
Wilfred Posluns Mr. Wilfred Posluns has been a director of the Company since 1990. He
Age: 64 is 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.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Wilfred Posluns (con't.) 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 The John Forsyth
Co. Inc., Israel Discount Bank of Canada and Pacific Linen. From 1973
until March 1992, Mr. Posluns was the Chairman of the Board of
Strathearn House Group Limited, a company of which, pursuant to a
voting trust agreement, he had joint control of 48% of the voting
shares. In February 1992, a receiver was appointed for Strathearn
House Group Limited and voluntary proceedings in reorganization were
initiated under Canadian laws.
Gerald Randolph Mr. Gerald Randolph has been a director of the Company since July
Age: 77 1989. Mr. 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.
Age: 61 Siegel has been a partner in the law firm of Akin, Gump, Strauss,
Hauer & Feld, L.L.P. 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. and Ermenegildo Zegna Corporation.
Irving Teitelbaum(1) Mr. Irving Teitelbaum has been Chairman of the Board and a director of
Age: 57 the 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 400 stores in Canada and the United Kingdom. Mr. Teitelbaum
also serves as President of First Canada Management Corp., a
management consulting firm.
Edmond Thomas Mr. Edmond Thomas was appointed the Company's President in March 1994.
Age: 42 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 ("Foxmoor"). From
May 1985 to November 1988, Mr. Thomas held various positions with
Foxmoor, including Corporate Controller and Executive Vice President,
during which time his responsibilities included finance, management
information systems, distribution, real estate, store operations and
store construction.
</TABLE>
- ------------------------
(1) Mr. Teitelbaum and Mr. Gross are brothers-in-law.
3
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company who are not also directors are set
forth below:
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Barbara Bachman Ms. Barbara Bachman has been the Company's Vice President of Store
Age: 46 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
Age: 35 since 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.
Age: 36 Since 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
Age: 39 1986. In 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.
Ron Shaban Mr. Ron Shaban has been employed by the Company since September 1993
Age: 51 as Director of Management Information Systems. In June 1995, he was
appointed Vice President of Management Information Systems. From
September 1991 to September 1993, Mr. Shaban was Director of
Management Information Systems with Rag Shops, Inc. From February 1988
to September 1991, he was Director of Management Information Systems
with G & G Shops, Inc., a division of Petrie Stores.
Jean Heller Wollam Ms. Jean Heller Wollam has been the Company's Vice President of
Age: 38 Merchandising since March 1992. From March 1988 to March 1992, Ms.
Wollam held various other positions with the Company, including
Associate General Merchandising Manager responsible directly for all
private label merchandising from January 1991 to March 1992,
Divisional Merchandise Manager responsible for all sportswear from
November 1989 to December 1990, and Tops Buyer from March 1988 to
November 1989. From September 1987 to February 1988, Ms. Wollam was a
Merchandise Manager with MGA/Guess Stores and from January 1985 to
August 1987, she was a buyer with Contempo Casuals.
</TABLE>
4
<PAGE>
The Board of Directors met or took action by written consent five times in
the fiscal year ended February 3, 1996. 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 Commmittee 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 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 February 3, 1996 the Executive Committee met or
took action by written consent twelve times, the Compensation Committee met or
took action by written consent one time, the Audit Committee met or took action
by written consent two times and the Option Committee met or took action by
written consent two times.
5
<PAGE>
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 who earned in excess of $100,000 per annum during any of the Company's
last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
----------------------------------------- STOCK UNDERLYING
NAME AND FISCAL OTHER ANNUAL AWARDS STOCK OPTIONS LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($)(1) ($)(2) (#) PAYOUTS($) COMPENSATION($)
- -------------------- ------ --------- --------- ------------------ ---------- ------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kathy Bronstein 1995 433,135 348,180(3) -- -- -- -- --
Vice Chairman and 1994 284,607 -- -- -- 200,000 -- --
Chief Executive 1993 313,122 -- -- -- -- -- --
Officer
Edmond Thomas 1995 362,272 198,960(3) -- 18,800 -- -- --
President and 1994 250,000 -- -- -- 200,000 -- --
Chief
Operating Officer 1993 250,000 -- -- -- -- -- --
Jean Heller Wollam 1995 161,076 24,870(3) -- 6,204 -- -- --
Vice President of 1994 150,000 -- -- -- 10,000 -- --
Merchandising 1993 150,000 -- -- -- -- -- --
Barbara Bachman 1995 152,654 5,000 -- 6,204 -- -- --
Vice President of 1994(4) 24,231 10,000 -- -- 10,000 -- --
Store Operations 1993 -- -- -- -- -- -- --
Sharon Hughes 1995 127,610 -- -- 5,170 -- -- --
Vice President of 1994 110,000 -- -- -- 10,000 -- --
Merchandising 1993 101,900 -- -- -- -- -- --
</TABLE>
- ------------------------
(1) While the named executive officers enjoy certain perquisites, for fiscal
years 1993, 1994 and 1995 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 February 3, 1996 are as follows: Mr.
Thomas--3,964; Ms. Wollam--3,298; Ms. Bachman--841; and Ms. Hughes--2,509.
The aggregate market value at February 3, 1996 of these shares is as
follows: Mr. Thomas--$29,235; Ms. Wollam--$24,323; Ms. Bachman--$6,202; and
Ms. Hughes--$18,504.
(3) Bonus amounts earned in fiscal 1995 were paid to the executives in fiscal
1996.
(4) Ms. Bachman was appointed Vice President of Store Operations in December
1994.
OPTION GRANTS
There were no options granted in fiscal 1995.
6
<PAGE>
OPTION EXERCISE AND FISCAL YEAR-END VALUES
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND OPTION VALUES AT FEBRUARY 3, 1996
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS "IN-THE-MONEY" OPTIONS AT
SHARES AT FEBRUARY 3, 1996(#) FEBRUARY 3, 1996($)(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kathy Bronstein................. -- -- 80,000 160,000 130,000 520,000
Edmond Thomas................... -- -- 80,000 160,000 130,000 520,000
Jean Heller Wollam.............. -- -- 2,000 8,000 6,500 26,000
Barbara Bachman................. -- -- 2,000 8,000 5,250 21,000
Sharon Hughes................... -- -- 2,000 8,000 6,500 26,000
</TABLE>
- ------------------------
(1) Represents the market value of shares underlying "in-the-money" options on
February 3, 1996 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.
DIRECTOR COMPENSATION
All directors who are not directly affiliated with the Company as well as
one director who is affiliated receive a fee of $4,000 for each board meeting
attended, with a minimum yearly fee of $16,000. All directors are reimbursed for
expenses connected with attendance at the meetings of the Board of Directors. No
additional fees are paid to directors for serving on committees.
All directors 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. 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
7
<PAGE>
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, 2001. 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 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 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), 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, 2001. 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.
8
<PAGE>
BUSINESS RELATIONSHIPS
MANAGEMENT SERVICES
In each of the fiscal years ended February 3, 1996, January 28, 1995 and
January 29, 1994, 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.
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
9
<PAGE>
efforts to attain and increase profitability. The CEO and the President and
Chief Operating Officer of the Company earned cash bonuses in fiscal 1995 in the
amounts of $348,180 and $198,960, respectively, which were paid in fiscal 1996.
The Company also maintains an employee stock bonus plan in which the top 25
to 30 executives of the Company (with the exception of the CEO) 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 1995. 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
1995 in the amount of $348,180, which was paid in fiscal 1996.
The Compensation Committee
Irving Teitelbaum
Wilfred Posluns
Stephen Gross
CHANGE OF CONTROL
In a series of transactions which took place in 1995, Dylex Limited, which
previously had indirect beneficial ownership of 3,978,227 shares of Class B
Common Stock, representing 39% of the voting power of the Company, disposed of
its entire interest in the Company by selling: 1,500,000 shares of Class B
Common Stock to Suzy Shier Inc., for a price of $4.00 per share; 387,227 shares
of Class B Common Stock to Gross-Teitelbaum Holdings Inc., for a price of $4.00
per share; and 2,100,000 shares of Class B Common Stock which was converted to
Class A Common Stock upon its sale pursuant to a registration statement.
Following such transactions, Suzy Shier, Inc., Gross-Teitelbaum Holdings
Inc., 2927977 Canada Inc. and Los Angeles Express Fashions Inc. (collectively,
the "Trust Stockholders"), each of which is controlled directly or indirectly by
Irving Teitelbaum, Chairman of the Board, and Stephen Gross, Secretary and a
director of the Company, in the aggregate owned 5,340,573 shares of Class B
Common Stock, representing 58.2% of the voting power of the Company.
10
<PAGE>
In August 1995, the Trust Stockholders entered into a Voting Trust Agreement
pursuant to which the Trust Stockholders conveyed to the trustee the right to
exercise the voting rights attached to all 5,340,573 shares of Class B Common
Stock owned by them. Upon the completion of the public offering of the Company's
Class A Common Stock on May 24, 1996, the Voting Trust Agreement terminated. As
of May 28, 1996, entities controlled directly or indirectly by Messrs.
Teitelbaum and Gross controlled approximately 32.3% of the voting power with
respect to the Company. See "Principal Stockholders."
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 July 2, 1990 (the date closest to the Company's initial
public offering) 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
<TABLE>
<CAPTION>
WET SEAL NASDAQ INDEX RETAIL INDEX
<S> <C> <C> <C>
July 2,1990* 100 100 100
February 1, 1991* 70 93 99
January 31, 1992* 82 141 174
January 29, 1993* 49 160 155
January 28, 1994* 23 181 166
January 27, 1995* 28 174 147
February 2, 1996* 52 253 165
</TABLE>
<TABLE>
<CAPTION>
JULY 2, FEBRUARY 1, JANUARY 31, JANUARY 29, JANUARY 28, JANUARY 27, FEBRUARY 2,
1990 1991* 1992* 1993* 1994* 1995* 1996*
------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
The Wet Seal, Inc............................ 100 70 82 49 23 28 52
Nasdaq Stock Market (US)..................... 100 93 141 160 181 174 253
Nasdaq Retail Trade Stocks................... 100 99 174 155 166 147 165
</TABLE>
- ------------------------
* 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.
11
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of May 30, 1996, 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.
<TABLE>
<CAPTION>
% % % PERCENT
NUMBER BENEFICIAL BENEFICIAL BENEFICIAL OF VOTE OF
OF SHARES OWNERSHIP NUMBER OWNERSHIP OWNERSHIP ALL
OF OF SHARES OF SHARES OF SHARES OF ALL CLASSES CLASSES
NAME CLASS A OF CLASS A OF CLASS B OF CLASS B OF STOCK OF STOCK
- ---------------------------------------- ---------- ----------- ------------ ----------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles Express Fashions, Inc. (1).. -- -- 1,500,000 47.5% 11.1% 18.0%
1604 St. Regis Blvd.
Dorval, Quebec, Canada H9P 1H6
2927977 Canada, Inc. (GTHI
Subsidiary) (1)......................... -- -- 1,015,573 32.2% 7.5% 12.2%
1604 St. Regis Blvd.
Dorval, Quebec, Canada H9P 1H6
Suzy Shier Inc. (1)..................... -- -- 175,000 5.5% 1.3% 2.1%
1604 St. Regis Blvd.
Dorval, Quebec, Canada H9P 1H6
Kathy Bronstein (2)..................... 10,000 * 467,092 14.8% 3.5% 5.7%
Ed Thomas (3)........................... 1,830 * -- -- * *
Jean Heller Wollam (4).................. 7,562 * -- -- * *
Sharon Hughes (4)....................... 2,308 * -- -- * *
Barbara Bachman (4)..................... 2,000 * -- -- * *
George Benter (4)....................... 5,500 * -- -- * *
Walter F. Loeb (4)...................... 5,400 * -- -- * *
Gerald Randolph (4)..................... 4,000 * -- -- * *
Alan Siegel (4)......................... 4,000 * -- -- * *
Craig Drill Capital, L.P. (5)........... 1,563,800 15.1% -- -- 11.6% 9.4%
Park Avenue Plaza
New York, New York 10055
Merrill Lynch & Co., Inc. (6)........... 562,400 5.4% -- -- 4.2% 3.4%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
Charles M. Royce (7).................... 427,870 4.1% -- -- 3.2% 2.6%
1414 Avenue of the Americas
New York, New York 10019
Pioneering Management Corporation (8)... 399,700 3.9% -- -- 3.0% 2.4%
60 State Street
Boston, Massachusetts 02109
All directors and officers as a group
(14 individuals)........................ 51,126 * 3,157,665 100.0% 23.8% 38.2%
</TABLE>
- ------------------------
* Less than 1%
(1) GTHI Subsidiary, Suzy Shier Inc., and Los Angeles Express Fashions, 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 32.5% of the total voting power with respect to the Company.
12
<PAGE>
(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. Ms. Bronstein also
holds options to purchase an additional 120,000 shares of Class A Common
Stock which become exercisable over the next three years.
(3) Mr. Thomas has sole voting and dispositive power with respect to all of the
stated holdings of Class A Common Stock. Mr. Thomas also holds options to
purchase an additional 120,000 shares of Class A Common Stock which become
exercisable over the next three years.
(4) Shares held include options representing the immediate right to purchase the
following shares of Class A Common Stock: Ms. Wollam--4,000; Ms.
Hughes--500; Ms. Bachman--2,000; and Messrs. Benter, Loeb, Randolph and
Siegel--4,000 each.
(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 May 10, 1996, Merrill Lynch & Co., Inc.
("ML&Co.") may be deemed to be the beneficial owner of an aggregate position
of 562,400 shares of the Class A common stock of Wet Seal, Inc. through its
indirect wholly-owned subsidiaries, Merrill Lynch Asset Management, L.P.
("MLAM") and Fund Asset Management, L.P. ("FAM") and certain proprietary
accounts of its wholly-owned subsidiary, Merrill Lynch, Pierce, Fenner &
Smith, Incorporated ("MLPF&S"). MLAM and FAM are investment advisers for
certain registered investment companies which hold an aggregate position of
561,700 shares. ML&Co., MLAM and FAM disclaim beneficial ownership of any
securities of the company, other than in the case of ML&Co., 700 shares held
by its wholly-owned subsidiary, MLPF&S, in proprietary trading accounts.
(7) As reported in a Schedule 13G dated February 13, 1996, all of the securities
are beneficially owned by Charles M. Royce. Mr. Royce may be deemed to be a
controlling person of Quest Advisory Corp. ("Quest") and Quest Management
Company ("QMC"), and as such may be deemed to own beneficially the shares of
Class A Common Stock beneficially owned by Quest and QMC. Quest has sole
voting and dispositive authority with respect to 358,670 shares. QMC has
sole voting and dispositive authority with respect to 69,200 shares. Mr.
Royce does not own any shares of Class A Common Stock outside of Quest and
QMC, and expressly disclaims that he is, in fact, the beneficial owner of
the shares held by Quest and QMC.
(8) As reported in a Schedule 13G dated January 26, 1996, Pioneering Management
Corp. has sole voting power with respect to 399,700 shares of the Class A
Common Stock of the Company and has shared dispositive power with respect to
399,700 shares of the Class A Common Stock.
13
<PAGE>
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
1996. 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 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.
REPORTING OBLIGATIONS OF OFFICERS, DIRECTORS AND 10% SHAREHOLDERS
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, or written representations that
no Form 5's were required, the Company believes that during fiscal 1995, all
filing requirements were satisfied by the Company's officers, directors and ten
percent (10%) stockholders.
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 1997 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 31, 1997,
to be considered for inclusion in the Company's Proxy Statement and form of
Proxy for that Annual Meeting.
14
<PAGE>
THE WET SEAL, INC. PROXY--1996 ANNUAL MEETING
PROXY PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING JUNE 20, 1996
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 20, 1996, 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 31, 1996, receipt of which is acknowledged by the
undersigned:
Check here for NEW ADDRESS:______________________
address change / / __________________________________
__________________________________
__________________________________
(Continued and to be signed and dated on reverse side)
<PAGE>
/ X / PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of FOR WITHHOLD
Directors ALL NOMINEES AUTHORITY
/ / / /
NOMINEES: George H. Benter, Jr., 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 nominee's name on the space provided below.
- -------------------------------------------------
2. Ratification of the selection by the Board of Directors of Deloitte &
Touche LLP as Independent Auditors for the Company for the year ending
February 1, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
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.
FOR AGAINST ABSTAIN
/ / / / / /
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.
SIGNATURE(S)____________________________________________ DATE ________________
NOTE: Please sign exactly as name appears on the proxy. Trustees, Guardians,
Personal and other Representatives, please indicate full titles.
