<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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-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):
/ / 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 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.
26972 BURBANK
FOOTHILL RANCH, CALIFORNIA 92610
May 4, 1999
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 Wednesday, June 9, 1999.
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,
[LOGO]
Irving Teitelbaum
CHAIRMAN OF THE BOARD
<PAGE>
THE WET SEAL, INC.
26972 BURBANK
FOOTHILL RANCH, CALIFORNIA 92610
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 9, 1999
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 Wednesday,
June 9, 1999 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. Approval of an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Preferred Stock, par value
$.01 per share, from 2,000,000 shares to 5,000,000 shares and the number
of authorized shares of Class A Common Stock, par value $.10 per share,
from 20,000,000 shares to 50,000,000 shares.
3. Ratification and approval of the performance bonus award and incentive
bonus award to the Vice Chairman and Chief Executive Officer of the
Company to qualify such awards under Section 162(m) of the Internal
Revenue Code of 1986, as amended.
4. Ratification and approval of the performance bonus award and incentive
bonus award to the President and Chief Operating Officer of the Company
to qualify such awards under Section 162(m) of the Internal Revenue Code
of 1986, as amended.
5. Ratification of Deloitte & Touche LLP as the Company's independent
auditors for the fiscal year 1999.
6. To transact such other business as may properly come before the Annual
Meeting.
The Board of Directors has fixed the close of business on April 26, 1999 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,
[SIGNATURE]
Stephen Gross
SECRETARY
Dated: May 4, 1999
<PAGE>
THE WET SEAL, INC.
26972 BURBANK
FOOTHILL RANCH, CALIFORNIA 92610
------------------------
PROXY STATEMENT
JUNE 9, 1999
------------------------
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
Wednesday, June 9, 1999 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; an increase in the number of authorized shares of the Company's
Preferred Stock and Class A Common Stock; to ratify and approve the performance
bonus award and incentive bonus award to the Vice Chairman and Chief Executive
Officer of the Company and to the President and Chief Operating Officer of the
Company and to qualify such awards under Section 162(m) of the Internal Revenue
Code of 1986, as amended; 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 4, 1999.
VOTING BY STOCKHOLDERS
Only holders of record of the Company's common stock, at the close of
business on April 26, 1999, are entitled to receive notice of, and to vote at,
the Annual Meeting. On that date, there were 10,733,386 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 and outstanding. Of the 10,733,386
shares of Class A Common Stock, 1,327,000 shares are currently held as Treasury
Stock and thus not 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. However,
with respect to the vote to amend the Company's Certificate of Incorporation to
increase the number of authorized shares of Class A Common Stock, the holders of
Class A Common Stock shall vote as a separate class. 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 approval of item
2 will require the affirmative vote of the majority of the outstanding shares of
the Company entitled to vote thereon and, with respect to the increase in the
number of authorized shares of Class A Common Stock, the affirmative vote of the
majority of the outstanding shares of Class A Common Stock entitled to vote
thereon, voting together as a separate class. The ratification and approval of
items 3 through 5 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 through 5,
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 9, 1999. 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 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: 47 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: 53 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
Age: 74 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 Federal Realty Investment
Trust, Gymboree Corporation, Hudson's Bay Company, Mothers Work and The
Warnaco Group, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND BACKGROUND
- ------------------------------------- --------------------------------------------------------------------------
<S> <C>
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.
Age: 80 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. Siegel
Age: 64 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.
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: 60 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 460
stores in Canada. 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: 45 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, marketing, store
construction, the central distribution center and catalog. 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.
</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
Age: 49........................... Ms. Barbara Bachman has been the Company's Vice President of Store
Operations since December 1994. In November 1998, Ms. Bachman was
promoted to Senior Vice President of Store Operations. From 1982 to 1994,
she 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
Age: 38........................... Ms. Cecilia Gasgonia has been the Director of Merchandise Planning 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
Age: 39........................... Ms. Sharon Hughes has been employed by the Company since May 1990. 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
Age: 41........................... Ms. Ann Cadier Kim has been employed by the Company since January 1986. In
March 1994, she was appointed Vice President of Finance. In November
1998, she was appointed Senior 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.
</TABLE>
The Board of Directors met or took action by written consent eight times in
the fiscal year ended January 30, 1999. 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
4
<PAGE>
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 George H. Benter, Jr. The Compensation Committee is
responsible for establishing general compensation policies and specific
compensation levels for the Company's executive officers. Effective April 1999,
the Compensation Committee has created an Incentive Compensation Subcommittee
consisting of Wilfred Posluns and George H. Benter, Jr. to address all issues
before the Compensation Committee that require decisions by directors who
qualify as outside directors under Section 162(m) of the Internal Revenue Code
of 1986, as amended, and as non-employee directors under Section 16(b) of the
Securities Exchange Act of 1934, as amended. 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 30, 1999, 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 four 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 ("named executive officers") who earned in excess of $100,000 per annum
during any of the Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
-----------------------------
ANNUAL COMPENSATION SECURITIES
--------------------------------------------------------------- RESTRICTED UNDERLYING
NAME AND OTHER ANNUAL STOCK STOCK
PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) COMPENSATION($)(1) AWARDS($)(2) OPTIONS(#)
- -------------------------- ----------- ----------- ---------- ------------------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Kathy Bronstein........... 1998 742,159 1,477,097(3) -- 63,612 --
Vice Chairman and 1997 682,418 1,271,375(4) -- 59,982 120,000
Chief Executive 1996 633,171 917,560(5) -- 42,303 --
Officer
Edmond Thomas............. 1998 592,878 844,055(3) -- 51,369 --
President and Chief 1997 563,627 726,500(4) -- 49,806 120,000
Operating Officer 1996 566,853 524,320(5) -- 37,010 --
Barbara Bachman........... 1998 187,731 40,000(3) -- 17,042 10,000
Senior Vice President 1997 176,423 40,000(4) -- 16,381 10,000
of Store Operations 1996 166,211 20,000(5) -- 12,276 --
Sharon Hughes............. 1998 179,808 25,000(3) -- 14,346 --
Vice President of 1997 181,730 90,813(4) -- 17,614 10,000
Merchandising 1996 138,768 20,000(5) -- 9,700 --
Ann Cadier Kim............ 1998 165,000 40,000(3) -- 14,346 10,000
Senior Vice President 1997 150,000 30,000(4) -- 13,210 10,000
of Finance 1996 140,951 20,000(5) -- 9,881 --
<CAPTION>
NAME AND LTIP ALL OTHER
PRINCIPAL POSITION PAYOUTS($) COMPENSATION($)
- -------------------------- --------------- -----------------
<S> <C> <C>
Kathy Bronstein........... -- 53,465(6)
Vice Chairman and -- 222,555(7)
Chief Executive -- --
Officer
Edmond Thomas............. -- 33,517(6)
President and Chief -- 49,062(7)
Operating Officer -- --
Barbara Bachman........... -- --
Senior Vice President -- --
of Store Operations -- --
Sharon Hughes............. -- --
Vice President of -- --
Merchandising -- --
Ann Cadier Kim............ -- --
Senior Vice President -- --
of Finance -- --
</TABLE>
- ------------------------------
(1) While the named executive officers enjoy certain perquisites, for fiscal
years 1998, 1997 and 1996 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. Aggregate shares granted
under the plan to the named executive officers as of January 30, 1999 are as
follows: Ms. Bronstein-- 8,555; Mr. Thomas--8,795; Ms. Bachman--2,439; Ms.
Hughes--3,947; and Ms. Cadier Kim--3,412. The aggregate market value at
January 30, 1999 of these shares is as follows: Ms. Bronstein--$321,882; Mr.
Thomas--$330,912; Ms. Bachman--$91,676; Ms. Hughes--$148,506; and Ms. Cadier
Kim--$128,377.
(3) Bonus amounts earned in fiscal 1998 were paid to the executives in fiscal
1999.
(4) Bonus amounts earned in fiscal 1997 were paid to the executives in fiscal
1998.
(5) Bonus amounts earned in fiscal 1996 were paid to the executives in fiscal
1997.
(6) Amount represents pay in lieu of vacation for fiscal 1998.
(7) Amount represents pay in lieu of vacation for fiscal 1997 and prior fiscal
years back to original date of hire for Ms. Bronstein, fiscal 1985, and for
Mr. Thomas, fiscal 1992.
6
<PAGE>
OPTION GRANTS
The following table sets forth information regarding options granted in 1998
to each of the named executive officers pursuant to the Company's 1996 Long-Term
Incentive Plan.
OPTION GRANTS IN THE LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES PERCENTAGE OF STOCK PRICE
UNDERLYING TOTAL OPTIONS APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(2)
GRANTED EMPLOYEES IN BASE PRICE ($ EXPIRATION --------------------
NAME (SHARES)(1) FISCAL YEAR 1998 PER SHARE) DATE 5%($) 10%($)
- ------------------------------------------ ----------- ----------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Kathy Bronstein........................... -- -- -- -- -- --
Edmond Thomas............................. -- -- -- -- -- --
Barbara Bachman........................... 10,000 8% 19.31 11/18/08 121,440 307,752
Sharon Hughes............................. -- -- -- -- -- --
Ann Cadier Kim............................ 10,000 8% 19.31 11/18/08 121,440 307,752
</TABLE>
- ------------------------
(1) The options granted to 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.
7
<PAGE>
OPTION EXERCISE AND FISCAL YEAR-END VALUES
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR
AND OPTION VALUES AT JANUARY 30, 1999
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT "IN-THE-MONEY" OPTIONS AT
SHARES JANUARY 30, 1999(#) JANUARY 30, 1999($)(1)
ACQUIRED ON VALUE -------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------- ------------- ----------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kathy Bronstein.................. -- -- 80,000 160,000 2,680,000 3,455,000
Edmond Thomas.................... -- -- 80,000 160,000 2,680,000 3,455,000
Barbara Bachman.................. 4,000 123,000 6,000 20,000 173,750 417,900
Sharon Hughes.................... -- -- 2,500 10,000 59,000 236,000
Ann Cadier Kim................... 2,000 47,750 6,000 24,000 160,750 537,650
</TABLE>
- ------------------------
(1) Represents the market value of shares underlying "in-the-money" options on
January 30, 1999 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:
<TABLE>
<CAPTION>
ANNUAL ACCRUED
3-YEAR AVERAGE PRE-TAX PROFIT PERCENTAGE BENEFIT
- ----------------------------------------------------------------------- ---------------------
<S> <C>
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
</TABLE>
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.
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
8
<PAGE>
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. Two
directors who are affiliated with the Company were granted stock options of
100,000 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 a performance bonus of 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, 2004. The agreement
automatically extends for an additional year on the first day of each subsequent
fiscal year. 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.
9
<PAGE>
In April 1999, Ms. Bronstein's employment agreement was further amended to
provide that, commencing with fiscal year 1999, if stockholder approval is not
obtained with respect to the Bonus Awards granted to Ms. Bronstein under her
employment agreement then the performance bonus adjustment and the incentive
bonus (or portion thereof) will not be paid to Ms. Bronstein to the extent that
the aggregate remuneration (including but not limited to the base salary,
performance bonus adjustment and incentive bonus) otherwise payable under the
employment agreement exceeds $1,000,000. (See Proposal #3.)
The Company has obtained "key man" life insurance in the amount of $3.0
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 $550,000 per annum plus an annual
performance bonus adjustment of .50% ( 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 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, 2004. The agreement
automatically extends for an additional year on the first day of each subsequent
fiscal year. 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.
In April 1999, Mr. Thomas' employment agreement was further amended to
provide that, commencing with fiscal year 1999, if stockholder approval is not
obtained with respect to the Bonus Awards granted to Mr. Thomas under his
employment agreement then the performance bonus adjustment and the incentive
bonus (or portion thereof) will not be paid to Mr. Thomas to the extent that the
aggregate remuneration (including but not limited to the base salary,
performance bonus adjustment and incentive bonus) otherwise payable under the
employment agreement exceeds $1,000,000. (See Proposal #4.)
10
<PAGE>
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 fiscal year ended January 30, 1999, a fee of $375,000, and in each of the
fiscal years ended January 31, 1998 and February 1, 1997, 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 George H. Benter, Jr. serve as
members of the Compensation Committee. Mr. Teitelbaum also serves as Chairman of
the Board 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.
11
<PAGE>
The Chief Executive Officer (the "CEO") and the President and Chief
Operating Officer are eligible pursuant to their employment agreements (provided
the approval of the stockholders is obtained as described below--see Proposals
#3 and #4) 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
Company earned cash bonuses in fiscal 1998 in the amounts of $1,477,097 and
$844,055, respectively, which were paid in fiscal 1999.
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 (provided the approval of the stockholders is obtained as
described below--see Proposal #3). Ms. Bronstein received such an adjustment in
fiscal 1998. 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 (provided the approval of the stockholders is
obtained as described below--see Proposal #3). Under this formula, Ms. Bronstein
earned a cash bonus in fiscal 1998 in the amount of $1,477,097, which was paid
in fiscal 1999.
LIMITATIONS ON DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, enacted as
part of the Revenue Reconciliation Act of 1993, limits the deductibility of
compensation paid to certain executive officers of the Company beginning with
the Company's taxable year 1994. To qualify for deductibility under Section
162(m), compensation in excess of $1 million per year paid to the Chief
Executive Officer and the four other most highly compensated executive officers
at the end of such fiscal year generally must be either (1) paid pursuant to a
written binding contract in effect on February 17, 1993 or (2)
"performance-based" compensation as determined under Section 162(m). In order to
be considered "performance-based" for this purpose, compensation must be paid
solely on account of the attainment of one or more
12
<PAGE>
pre-established performance goals established by a committee of two or more
"outside directors," pursuant to an arrangement that has been disclosed to and
approved by stockholders. Also, in order for an arrangement to give rise to
fully deductible "performance-based" compensation, the terms of the arrangement
must preclude the exercise of any discretion in the administration of the plan
that would have the effect of increasing compensation paid thereunder.
POLICY WITH RESPECT TO QUALIFYING COMPENSATION DEDUCTIBILITY
The Company's policy with respect to the deductibility limit of Section
162(m) of the Code generally is to preserve the federal income tax deductibility
of compensation paid when it is appropriate and is in the best interest of the
Company and its stockholders. However, the Company reserves the right to
authorize the payment of non-deductible compensation if it deems that it is
appropriate.
The Compensation Committee
Irving Teitelbaum
Wilfred Posluns
George H. Benter, Jr.
13
<PAGE>
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 28, 1994 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>
NASDAQ STOCK NASDAQ RETAIL
<S> <C> <C> <C>
DOLLARS The Wet Seal, Inc. Market (US) Trade Stocks
1/28/94* 100 100 100
1/27/95* 123 96 90
2/2/96* 227 137 101
1/31/97* 619 178 124
1/30/98* 942 210 144
1/29/99* 1158 328 176
</TABLE>
<TABLE>
<CAPTION>
JANUARY 28, JANUARY 27, FEBRUARY 2, JANUARY 31, JANUARY 30,
1994* 1995* 1996* 1997* 1998*
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
The Wet Seal, Inc.................. 100 123 227 619 942
Nasdaq Stock Market (US)........... 100 96 137 178 210
Nasdaq Retail Trade Stocks......... 100 90 101 124 144
<CAPTION>
JANUARY 29,
1999*
-------------
<S> <C>
The Wet Seal, Inc.................. 1,158
Nasdaq Stock Market (US)........... 328
Nasdaq Retail Trade Stocks......... 176
</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.
14
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of April 5, 1999, 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>
% % %
NUMBER BENEFICIAL BENEFICIAL BENEFICIAL
OF SHARES OWNERSHIP NUMBER OWNERSHIP OWNERSHIP
OF OF SHARES OF SHARES OF SHARES OF ALL CLASSES
NAME CLASS A OF CLASS A OF CLASS B OF CLASS B OF STOCK
- ---------------------------------------------- ----------- ------------- ----------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Los Angeles Express Fashions, Inc. (Suzy Shier
Equities, Inc. Subsidiary) (1).............. -- -- 1,300,000 44.6% 10.6%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
3254127 Canada, Inc. (GTHI Subsidiary) (1).... -- -- 815,573 28.0% 6.6%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
Suzy Shier Equities, Inc. (Suzy Shier Ltd.
Subsidiary) (1)............................. 104,000 1.1% 175,000 6.0% 2.3%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
La Senza, Inc. (Suzy Shier Ltd. Subsidiary)
(1)......................................... 244,500 2.6% 155,000 5.3% 3.2%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
Kathy Bronstein (2)........................... 123,923 1.3% 467,092 16.0% 4.8%
Ed Thomas (3)................................. 128,147 1.4% -- -- 1.0%
Barbara Bachman (4)........................... 4,000 * -- -- *
Sharon Hughes (4)............................. 7,522 * -- -- *
Ann Cadier Kim (4)............................ 8,447 * -- -- *
George Benter (4)............................. 10,500 * -- -- *
Stephen Gross (4)............................. 20,000 * -- -- *
Walter F. Loeb (4)............................ 10,400 * -- -- *
Wilfred Posluns (4)........................... 6,000 * -- -- *
Gerald Randolph (4)........................... 2,000 * -- -- *
Alan Siegel (4)............................... 4,000 * -- -- *
Irving Teitelbaum (4)......................... 20,000 * -- -- *
FMR Corp. (5)................................. 1,280,700 13.6% -- -- 10.4%
82 Devonshire Street Boston, Massachusetts
02109
Lazard Freres & Co. LLC (6)................... 1,064,585 11.3% -- -- 8.6%
30 Rockefeller Plaza New York, New York
10020
Amvescap PLC (7).............................. 609,900 6.5% -- -- 5.0%
11 Devonshire Square London, England EC2M
4YR
Freiss Associates, Inc. (8)................... 600,000 6.4% -- -- 4.9%
115 E. Snow King Jackson, Wyoming 83001
All directors and officers as a group (13
individuals)................................ 700,865 7.5% 2,912,665 100.0% 29.3%
<CAPTION>
PERCENT
OF VOTE OF
ALL CLASSES
NAME OF STOCK
- ---------------------------------------------- -------------
<S> <C>
Los Angeles Express Fashions, Inc. (Suzy Shier
Equities, Inc. Subsidiary) (1).............. 17.1%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
3254127 Canada, Inc. (GTHI Subsidiary) (1).... 10.7%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
Suzy Shier Equities, Inc. (Suzy Shier Ltd.
Subsidiary) (1)............................. 3.0%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
La Senza, Inc. (Suzy Shier Ltd. Subsidiary)
(1)......................................... 3.6%
1604 St. Regis Blvd. Dorval, Quebec, Canada
H9P1H6
Kathy Bronstein (2)........................... 6.9%
Ed Thomas (3)................................. *
Barbara Bachman (4)........................... *
Sharon Hughes (4)............................. *
Ann Cadier Kim (4)............................ *
George Benter (4)............................. *
Stephen Gross (4)............................. *
Walter F. Loeb (4)............................ *
Wilfred Posluns (4)........................... *
Gerald Randolph (4)........................... *
Alan Siegel (4)............................... *
Irving Teitelbaum (4)......................... *
FMR Corp. (5)................................. 8.4%
82 Devonshire Street Boston, Massachusetts
02109
Lazard Freres & Co. LLC (6)................... 7.0%
30 Rockefeller Plaza New York, New York
10020
Amvescap PLC (7).............................. 4.0%
11 Devonshire Square London, England EC2M
4YR
Freiss Associates, Inc. (8)................... 3.9%
115 E. Snow King Jackson, Wyoming 83001
All directors and officers as a group (13
individuals)................................ 42.9%
</TABLE>
- ------------------------------
* 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 34.7% of the total voting power with
respect to the Company.
(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 120,000 shares of Class
A 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. Shares held include options
representing the immediate right to purchase 120,000 shares of Class A
Common Stock. Mr. Thomas also
15
<PAGE>
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. Hughes--4,500; Ms. Cadier
Kim--7,000; Messrs. Benter and Loeb--9,000 each; Mr. Gross--20,000; Mr.
Posluns--6,000; Mr. Randolph--1,000; Mr. Siegel--4,000 and Mr.
Teitelbaum--20,000.
(5) As reported in a Schedule 13G dated March 10, 1999, FMR Corp. beneficially
owns 1,280,700 shares of the Class A Common Stock of the Company. FMR Corp.
has sole voting power with respect to 219,800 shares and sole dispositive
power with respect to 1,280,700 shares.
(6) As reported in a Schedule 13G dated February 10, 1999, Lazard Freres & Co.
LLC ("Lazard") beneficially owns 1,064,585 shares of the Class A Common
Stock of the Company. Lazard has sole voting power with respect to 838,065
shares and sole dispositive power with respect to 1,064,585 shares.
(7) As reported in a Schedule 13G dated March 10, 1999, AMVESCAP PLC ("AMV") is
the parent holding company of AVZ, Inc. ("AVZ"), AIM Management Group, Inc.
("AIM"), AMVESCAP Group Services, Inc. ("AGS"), INVESCO, Inc. ("II") and
INVESCO North American Holdings, Inc. ("IAH"). AMV beneficially owns 609,900
shares of the Class A Common Stock of the Company. AMV, AVZ, AIM, AGS, II,
and IAH have shared voting and dispositive power with respect to 609,900
shares.
(8) As reported in a Schedule 13G dated January 25, 1999, Friess Associates,
Inc. ("Friess") beneficially owns 600,000 shares of the Class A Common Stock
of the Company. Friess has sole voting power and sole dispositive power with
respect to 600,000 shares.
16
<PAGE>
PROPOSALS
PROPOSAL #2
AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF THE COMPANY'S PREFERRED STOCK AND CLASS A COMMON STOCK
The Company is proposing to amend its Certificate of Incorporation to
increase the number of authorized shares of its Preferred Stock, par value $.01
per share, from 2,000,000 shares to 5,000,000 shares. No shares of the Company's
Preferred Stock are issued and outstanding. The Preferred Stock may be issued in
series and denominations and with terms and conditions as established by the
Company's Board of Directors.
In addition, the Company is proposing to amend its Certificate of
Incorporation to increase the number of authorized shares of its Class A Common
Stock, par value $.10 per share, from 20,000,000 shares to 50,000,000 shares.
The newly authorized shares of Class A Common Stock will be identical in all
respects to the issued and outstanding shares of Class A Common Stock. Of the
20,000,000 shares of Class A Common Stock the Company is presently authorized to
issue, 10,733,386 shares are issued and outstanding. Of the 10,733,386 shares,
1,327,000 shares are currently held as Treasury Stock and thus not entitled to
vote.
As the Company may require that additional shares of its capital stock be
available for acquisitions and other corporate purposes, such as stock splits or
other recapitalizations, the Board of Directors has resolved to seek approval of
additional shares of capital stock by amendment of the Company's Certificate of
Incorporation. While there are no acquisitions pending which would involve the
issuance of such additional shares, the Company does from time to time consider
potential acquisitions, some or all of which may involve the issuance of shares
by the Company.
The affirmative vote of the majority of the outstanding shares of the
Company entitled to vote thereon and, with respect to the increase in the number
of authorized shares of Class A Common Stock, the affirmative vote of the
majority of the outstanding shares of Class A Common Stock entitled to vote
thereon, voting together as a separate class, is required to adopt the
resolution to amend the Company's Certificate of Incorporation to increase the
authorized capital stock in the manner described above. The Board of Directors
unanimously recommends a vote "FOR" approval of the resolution.
PROPOSAL #3
APPROVAL OF THE PERFORMANCE BONUS AWARD AND INCENTIVE BONUS AWARD FOR THE VICE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
On April 16, 1999, the Board of Directors and the Incentive Compensation
Subcommittee approved the terms of the performance bonus award and incentive
bonus award ("Bonus Awards") for the Vice Chairman and Chief Executive Officer
of the Company, subject to approval by the Company's stockholders in accordance
with the provisions of Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Bonus Awards were awarded in connection with the Company's
employment agreement with Ms. Bronstein. Section 162(m) generally authorizes the
deduction of compensation in excess of $1 million per taxable year payable to
the Chief Executive Officer and the four other most highly compensated executive
officers only where such compensation is based on performance and satisfy
certain other requirements and is approved by stockholders.
The affirmative vote of the holders of at least a majority of the
outstanding shares of the Company present in person or by proxy and entitled to
vote at the Annual Meeting is required to adopt the resolution to approve the
Bonus Awards granted to Ms. Bronstein. If the Bonus Awards are approved by the
stockholders and certain other requirements set forth in Section 162(m) of the
Code are satisfied, the performance bonus and incentive bonus payments to Ms.
Bronstein as described below will qualify for deduction under Section 162(m) of
the Code.
17
<PAGE>
Given Ms. Bronstein's substantial contribution to the Company and high level
of responsibility, and the view of the Board that Ms. Bronstein continue to be
highly motivated to enhance the financial performance of the Company, the Board
unanimously recommends a vote "FOR" approval of the resolution.
PROPOSAL #4
APPROVAL OF THE PERFORMANCE BONUS AWARD AND INCENTIVE BONUS AWARD FOR THE
PRESIDENT AND CHIEF OPERATING OFFICER
On April 16, 1999, the Board of Directors and the Incentive Compensation
Subcommittee approved the terms of the performance bonus award and incentive
bonus award ("Bonus Awards") for the President and Chief Operating Officer of
the Company, subject to approval by the Company's stockholders in accordance
with the provisions of Section 162(m) of the Internal Revenue Code of 1986, as
amended. The Bonus Awards were awarded in connection with the Company's
employment agreement with Mr. Thomas. Section 162(m) generally authorizes the
deduction of compensation in excess of $1 million per taxable year payable to
the Chief Executive Officer and the four other most highly compensated executive
officers only where such compensation is based on performance and satisfy
certain other requirements and is approved by stockholders.
The affirmative vote of the holders of at least a majority of the
outstanding shares of the Company present in person or by proxy and entitled to
vote at the Annual Meeting is required to adopt the resolution to approve the
Bonus Awards granted to Mr. Thomas. If the Bonus Awards are approved by the
stockholders and certain other requirements set forth in Section 162(m) of the
Code are satisfied, the performance bonus and incentive bonus payments to Mr.
Thomas as described below will qualify for deduction under Section 162(m) of the
Code.
Given Mr. Thomas' substantial contribution to the Company and high level of
responsibility, and the view of the Board that Mr. Thomas continue to be highly
motivated to enhance the financial performance of the Company, the Board
unanimously recommends a vote "FOR" approval of the resolution.
SUMMARY OF THE PERFORMANCE BONUS AND INCENTIVE BONUS AWARDS
The following description of the Bonus Awards is intended only as a summary
and is qualified in its entirety by reference to the text of Ms. Bronstein's
employment agreement dated December 30, 1988, a copy of which was filed with the
Securities and Exchange Commission with the Company's Registration Statement
File No. 33-34895, and the amendment to such employment agreement filed herewith
and Mr. Thomas' employment agreement dated June 22, 1992, a copy of which was
filed with the Securities and Exchange Commission with the Company's Annual
Report on Form 10-K for the year ended January 29, 1994, and the amendments to
such employment agreement filed herewith. Copies of the employment agreements
and amendments also may be obtained from the Company, without charge, upon
written or oral request to Investor Relations, c/o The Wet Seal, Inc., 26972
Burbank, Foothill Ranch, CA 92610.
The performance bonus award provides that, with respect to the 1999 fiscal
year, and each succeeding fiscal year during the term of the employment
agreement, each of Ms. Bronstein's and Mr. Thomas' (each, an "Executive") base
salary would be adjusted by a performance bonus equal to 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 such Executive is eligible to
receive on her or his holdings of the Company's capital stock referable to the
same fiscal year. This bonus is not cumulative and is in lieu of any salary
review or cost of living adjustments.
The performance bonus, if any, for any fiscal year will be paid in cash
after the close of each fiscal year if such bonus is less than $25,000; if such
bonus is more than $25,000 it will be paid in equal monthly installments over
the balance of the succeeding fiscal year, but only if the pre-tax profits
criteria for such fiscal year have been achieved, as calculated in accordance
with the Company's audited books and records and certified in writing by the
Incentive Compensation Subcommittee. In determining pre-tax profits,
18
<PAGE>
calculations will be based on generally accepted accounting principles, applied
on a consistent basis with prior years.
The incentive bonus award provides that, with respect to the 1999 fiscal
year, and each succeeding fiscal year during the term of the employment
agreement, the Executive will be entitled to receive an incentive bonus equal to
a percentage of the Company's pre-tax profits. The percentage applicable to Ms.
Bronstein is 3.5% and the percentage applicable to Mr. Thomas is 2%.
The incentive bonus, if any, for any fiscal year will be paid in cash not
later than the last day of the third month following the close of such fiscal
year, but only if the pre-tax profits criteria for such fiscal year have been
achieved, as calculated in accordance with the Company's audited books and
records and certified in writing by the Incentive Compensation Subcommittee. In
determining pre-tax profits, calculations will be based on generally accepted
accounting principles, applied on a consistent basis with prior years. (See
Executive Compensation and Other Information--Employment Agreements.)
PROPOSAL #5
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
1999. 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 1998, all filing requirements were satisfied by the Company's officers,
directors and ten percent (10%) stockholders, except as set forth below.
One director, Mr. Gerald Randolph, did not file the required Form 4 on a
timely basis in connection with an exercise of options during fiscal 1998.
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 2000 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 7, 2000,
to be considered for inclusion in the Company's Proxy Statement and form of
Proxy for that Annual Meeting.
19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION PAGE
- --------- ---------------------------------------------------------------------------------------------- -----------
<S> <C> <C>
A PROPOSED AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE WET SEAL, INC...................
B SEVENTH AMENDMENT TO THE SERVICES AGREEMENT BETWEEN THE COMPANY AND KATHY BRONSTEIN (TO BE
FILED WITH DEFINITIVE PROXY)..................................................................
C FOURTH AMENDMENT TO THE SERVICES AGREEMENT BETWEEN THE COMPANY AND EDMOND THOMAS (TO BE FILED
WITH DEFINITIVE PROXY)........................................................................
D FIFTH AMENDMENT TO THE SERVICES AGREEMENT BETWEEN THE COMPANY AND EDMOND THOMAS (TO BE FILED
WITH DEFINITIVE PROXY)........................................................................
E SIXTH AMENDMENT TO THE SERVICES AGREEMENT BETWEEN THE COMPANY AND EDMOND THOMAS (TO BE FILED
WITH DEFINITIVE PROXY)........................................................................
</TABLE>
<PAGE>
EXHIBIT A
TEXT OF PROPOSED AMENDMENT TO THE CERTIFICATE
OF INCORPORATION OF THE WET SEAL, INC.
Set forth below is the proposed amendment to the Certificate of
Incorporation of the Company which is to be submitted for the approval of the
stockholders of the Company at the Annual Meeting to be held on June 9, 1999. If
such proposed amendment is approved by the stockholders of the Company, the
Board of Directors will cause an Amendment of the Certificate of Incorporation
containing the proposed amendment to be filed with the Secretary of State of the
State of Delaware and will adopt a conforming amendment to the Company's
By-laws.
1. ARTICLE IV, SECTION 4.1
Set forth below is the text of Article IV, Section 4.1 of the Company's
Certificate of Incorporation, as proposed to be amended if Proposal # 2 is
approved by the Company's stockholders:
"Section 4.1. NUMBER OF SHARES. The total number of shares which the
Corporation shall have authority to issue is SIXTY-FIVE MILLION
(65,000,000), consisting of "Common Stock" and "Preferred Stock" as follows:
(a) PREFERRED STOCK. The total number of shares of Preferred Stock
shall be FIVE MILLION (5,000,000), having a par value of one cent ($0.01)
per share, which may be issued from time to time in one or more series.
The board of directors is hereby authorized to fix, by resolution or
resolutions providing for the issue of any such series, the voting
powers, if any, and the designation, preferences and rights of the shares
in such series, and the qualifications, limitations or restrictions
thereof, including, but not limited to, the following:
(1) the number of shares constituting that series and the distinctive
designation thereof;
(2) the dividend rate on the shares of that series, whether dividends
shall be cumulative and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends on
shares of that series;
(3) the voting rights, if any, of shares of that series in addition
to the voting rights provided by law, and the terms of such
voting rights;
(4) the terms and conditions of the conversion privileges, if any, of
shares of that series, including provision for adjustment of the
conversion rate in such events as the board of directors shall
determine;
(5) the terms and conditions of redemption, if shares of that series
shall be redeemable, including the date or dates upon or after
which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(6) the terms and amount of any sinking fund for the redemption or
purchase of shares of that series, if any;
(7) the rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights or priority, if any, of
payment of shares of that series; and
(8) any other relative rights, preferences and limitations of that
series.
Dividends on outstanding Preferred Stock shall be declared and paid, or
set apart for payment, before any dividend shall be declared and paid, or
set apart for payment, on the Common Stock with respect to the same dividend
period.
A-1
<PAGE>
(b) COMMON STOCK. The total number of shares of Common Stock shall be
SIXTY MILLION (60,000,000), divided into two classes designated as Class A
Common Stock and Class B Common Stock, as follows: the total number of
authorized shares of Class A Common Stock shall be FIFTY MILLION
(50,000,000), and each share of Class A Common Stock shall have a par value
of ten cents ($0.10); and the total number of authorized shares of Class B
Common Stock shall be TEN MILLION (10,000,000), and each share of Class B
Common Stock shall have a par value of ten cents ($0.10)."
A-2
<PAGE>
- Please Detach and Mail in the Envelope Provided -
- --------------------------------------------------------------------------------
PROXY THE WET SEAL, INC. PROXY--1999 ANNUAL MEETING PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING JUNE 9, 1999
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, 1999, 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 4, 1999, 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)
<PAGE>
<TABLE>
<S><C>
- Please Detach and Mail in the Envelope Provided -
- --------------------------------------------------------------------------------
/ X / PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR WITHHOLD
ALL NOMINEES AUTHORITY FOR AGAINST ABSTAIN
1. Election of / / / / NOMINEES: 2. Approval of an amendment to the / / / / / /
Directors George H. Benter, Jr., Company's Certificate of
Kathy Bronstein, Stephen Incorporation to increase the number
Gross, Walter F. Loeb, of authorized shares of Preferred
Wilfred Posluns, Stock, par value $.01 per share, from
Gerald Randolph, Alan 2,000,000 shares to 5,000,000 shares
Siegel, Irving and the number of authorized shares
Teitelbaum, Edmond of Class A Common Stock, par value
Thomas $.10 per share, from 20,000,000
shares to 50,000,000 shares.
Instruction: To withhold authority to 3. Ratification and approval of the / / / / / /
vote for any individual nominee, write performance bonus award and incentive
that nominee's name on the space bonus award to the Vice Chairman and
provided below. Chief Executive Officer of the
Company to qualify such awards under
- --------------------------------------- Section 162(m) of the Internal
Revenue Code, of 1986, as amended.
4. Ratification and approval of the / / / / / /
performance bonus award and incentive
bonus award to the President and
Chief Operating Officer of the
Company to qualify such awards under
Section 162(m) of the Internal
Revenue Code, of 1986 as amended.
5. Ratification of the selection by / / / / / /
the Board of Directors of Deloitte &
Touche LLP as Independent Auditors
for the Company for the year ending
January 29, 2000.
6. 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.
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
through 5 and will be voted in accordance with the
SIGNATURE(S) DATE discretion of the proxies upon all other matters which
----------------------- ---------------- may come before the Annual Meeting.
Note: Please sign exactly as name appears hereon. Joint IMPORTANT: PLEASE VOTE, DATE, SIGN AND RETURN THE PROXY
owners should each sign. When signing as attorney, CARD PROMPTLY USING THE ENCLOSED POSTAGE-PAID ENVELOPE.
executor, administrator, trustee or guardian, please
give full title as such.
</TABLE>
