SECURITIES AND EXCHANGE COMMISSION
INFORMATION REQUIRED IN PROXY STATEMENT
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant xý Filed by a Party other than the Registrant ¨ Check the appropriate box:
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| ¨ | Preliminary Proxy Statement |
| ¨ | Confidential, for Use of the Commission Only |
(as permitted by Rule 14a-6(e)(2))
x | (as permitted by Rule 14a-6(e)(2)) |
| ý | Definitive Proxy Statement |
| ¨ | Definitive Additional Materials |
| ¨ | Soliciting Material Pursuant to §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)
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Payment of Filing Fee (Check the appropriate box):
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| ¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Foothill Ranch, California 92610
You are cordially invited to attend the Annual Meeting of Stockholders of The Wet Seal, Inc., or theAnnual Meeting, to be held at The Wet Seal, Inc.’s principal executive offices located at 26972 Burbank, Foothill Ranch, California 92610, beginning at 10:00 a.m., Pacific Time, on Wednesday,Thursday, May 16, 2012,23, 2013, or any adjournment, postponement or extension thereof. During the Annual Meeting, the matters described in the accompanying Proxy Statement will be considered. In addition to the formal items of business to be brought before the Annual Meeting, there will be an opportunity to ask appropriate questions of general interest to stockholders.
I hope you will be able to join us at the Annual Meeting. Whether or not you expect to attend, you are urged to complete, date, 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. Your vote is important regardless of the number of shares you own.
Sincerely,
SUSAN P. MCGALLA
Chief Executive Officer
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| John D. Goodman |
| Chief Executive Officer |
Foothill Ranch, California 92610
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
May 23, 2013
Notice is hereby given that the Annual Meeting of Stockholders, or theAnnual Meeting, of The Wet Seal, Inc., orourCompany, will be held at our Company’s principal executive offices, located at 26972 Burbank, Foothill Ranch, California 92610, on Wednesday,Thursday, May 16, 2012,23, 2013, or any adjournment, postponement or extension thereof. The Annual Meeting will begin at 10:00 a.m., Pacific Time. At the Annual Meeting you will be asked to consider and vote upon:
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| 1. | The election of a Board of Directors consisting of sixseven directors to serve until our Company’s 20132014 Annual Meeting of Stockholders and until their successors are duly elected and qualified. The attached Proxy Statement, which accompanies this Notice, includes the names of the nominees to be presented by our Board of Directors for election; |
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| 2. | A proposal to approve, on an advisory (non-binding) resolution regardingbasis, the compensation of our named executive officers, or theSay-on-Pay Proposal; |
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| 3. | The ratification of the appointment of Deloitte & Touche LLP, an independent registered public accounting firm, as independent auditor of our Company for fiscal 2012;2013; and |
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| 4. | Such other business, if any, as may properly come before the Annual Meeting or any adjournment, postponement or extension thereof. |
If you owned our Company’s Class A common stock at 5:00 p.m., Eastern Time, on April
2, 2012,5, 2013, you may vote at this meeting or any adjournment, postponement or extension thereof. A list of stockholders entitled to vote will be available for examination by any stockholder for any purpose germane to the Annual Meeting at the principal executive offices of our Company. The list of stockholders will be available during normal business hours 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.
If you have any questions about the proposals, including the procedures for voting your shares, please contact
Steven H. Benrubi,Alyson G. Barker, the Corporate Secretary of our Company, at (949) 699-3900.
BY ORDER OF OUR BOARD OF DIRECTORS
SUSAN P. MCGALLA
Chief Executive Officer
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| BY ORDER OF OUR BOARD OF DIRECTORS |
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| John D. Goodman |
| Chief Executive Officer |
Foothill Ranch, California
Dated: April
6, 201218, 2013
Foothill Ranch, California 92610
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PROXY STATEMENT
20122013 Annual Meeting of Stockholders
This Proxy Statement is furnished by the Board of Directors of The Wet Seal, Inc., orour Company,we orus, in connection with the solicitation of proxies for use at the Annual Meeting of Stockholders of our Company, or theAnnual Meeting. The Annual Meeting, or any adjournments, postponements or extensions thereof, will be held at our Company’s principal executive offices, located at 26972 Burbank, Foothill Ranch, California 92610, on
Wednesday,Thursday, May
16, 2012.23, 2013. The Annual Meeting will begin at 10:00 a.m., Pacific Time. This Proxy Statement and related materials are first being mailed to stockholders on or about April
17, 2012.23, 2013.
What is the purpose of the meeting?
The Annual Meeting has been called to have our stockholders consider and vote upon:
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| 1. | The election of Jonathan Duskin, SidneyDorrit M. Horn, HaroldBern, Kathy Bronstein, Lynda J. Davey, John D. Kahn, Susan P. McGalla,Goodman, Mindy C. Meads, John S. Mills, and Kenneth M. Reiss and Henry D. Winterstern to serve on our Company’s Board of Directors until our Company’s 20132014 Annual Meeting of Stockholders, or the20132014 Annual Meeting, and until their successors are duly elected and qualified (each of the nominated individuals is a current member of our Company’s Board of Directors); |
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| 2. | A proposal to approve, on an advisory (non-binding) resolution regardingbasis, the compensation of our named executive officers, or the Say-on-Pay Proposal; |
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| 3. | The ratification of the appointment of Deloitte & Touche LLP, an independent registered public accounting firm, as independent auditors of our Company for fiscal 2012;2013; and |
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| 4. | Such other business, if any, as may properly come before the Annual Meeting, or any adjournment, postponement or extension thereof. |
Who is entitled to vote at the Annual Meeting?
Only holders of record of our Company’s Class A common stock and Class B common stock are entitled to receive notice of, and to vote at, the Annual Meeting. The record date for determining such holders is 5:00 p.m., Eastern Time, on April
2, 2012.5, 2013.
How many shares are outstanding and entitled to vote at the Annual Meeting?
At 5:00 p.m., Eastern Time, on the record date, there were
90,386,19789,194,404 shares of our Company’s Class A common stock issued and outstanding. On that date, no shares of our Company’s Class B common stock were issued and outstanding.
Holders of Class A common stock are entitled to one vote per share. There are no cumulative voting rights with respect to the election of directors.
What constitutes a quorum for voting on the proposals?
The presence, in person or by proxy, of the holders of a majority of our Class A common stock shares outstanding and entitled to vote is necessary to constitute a quorum at the Annual Meeting. As of the record date for this Proxy Statement,
90,386,19789,194,404 shares of Class A common stock, representing the same number of votes, were issued and outstanding. Accordingly, the presence of the holders of Class A common stock representing at least
45,193,09944,597,202 votes will be necessary to establish a quorum.
Under Delaware law, abstentions and broker “non-votes” will be counted for purposes of establishing a quorum at the Annual Meeting, but will not be counted towards the vote total for the election of directors or the Say-on-Pay Proposal. Abstentions will also not be counted towards the vote total for Proposal 3; however, because brokers will have discretion to vote shares of the Company’s
Class A common stock in their discretion without the direction of their clients on Proposal 3, there will not be any broker non-votes with respect to Proposal 3.
What is a broker “non-vote”?
Brokers who hold shares for the accounts of their clients may vote such shares either as directed by their clients or in their own discretion if permitted by the stock exchange or other organization of which they are members.
The election of directors and the Say-on-Pay Proposal are “non-discretionary,” and brokers who have received no instructions from their clients do not have discretion to vote on those items. When a broker votes a client’s shares on some but not all of the proposals at a meeting, the missing votes are referred to as broker “non-votes.” Abstentions and broker “non-votes” will not be counted as a voteFOR orAGAINST any matter. The ratification of the appointment of our independent registered public accounting firm as our independent auditors for fiscal 20122013 (Proposal 3) is a discretionary matter on which brokers may vote without instructions from their clients.
How will my shares be voted?
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. In the absence of instructions, each proxy will be votedFOR all sixseven nominees for directors,FOR Proposal 2,andFOR Proposal 3 and will be voted in accordance with the discretion of the proxy holders upon all other matters, if any, which may properly come before the Annual Meeting. No appraisal rights exist for any action proposed to be taken at the Annual Meeting.
Any proxy received by our Company may be subsequently revoked by the stockholder at any time before it is voted at the Annual Meeting by delivering a subsequent proxy or other written notice of revocation to our Company at our principal executive offices or by attending the Annual Meeting and voting in person.
DELIVERY OF PROXY MATERIALS AND ANNUAL REPORT
Only one Proxy Statement, proxy card and Annual Report on Form 10-K for the fiscal year ended January 28, 2012,February 2, 2013, or the20112012 Annual Report, are being delivered by our Company to multiple stockholders sharing an address, unless our Company receives contrary instructions in writing. Our Company will deliver, promptly upon written or oral request, a separate copy of this Proxy Statement and accompanying materials, including a proxy card and the 20112012 Annual Report, to stockholders at a shared address to which a single copy was delivered. A stockholder who wishes to receive a separate copy of this Proxy Statement and accompanying materials now or in the future, or stockholders sharing an address who are receiving multiple copies of proxy materials and wish to receive a single copy of such materials, should submit a request via mail to our Company’s principal executive offices located at 26972 Burbank, Foothill Ranch, California 92610. Alternatively, such a request may be made by telephone at (949) 699-3900.
INTERNET AVAILABILITY OF THIS PROXY STATEMENT
Important Notice Regarding the Availability of Proxy Materials for the
ShareholderStockholders Meeting
To Be Held on
Wednesday,Thursday, May
16, 201223, 2013
Our official Notice of Annual Meeting of Stockholders, this Proxy Statement, a form of proxy and the 20112012 Annual Report are available on our website atwww.wetsealinc.com. You may request an email copy of the proxy materials, including this Proxy Statement, a form of proxy and the 20112012 Annual Report, or you may request an additional paper copy of these proxy materials, by submitting a request via mail to our principal executive offices located at 26972 Burbank, Foothill Ranch, California 92610. Alternatively, such a request may be made by telephone at (949) 699-3900. In order to facilitate timely delivery of such additional proxy materials, such a request must be made by May 2, 2012.9, 2013. We are unable to guarantee the timely delivery of additional proxy materials, via email or in hard copy, for requests made after this date.
In accordance with our Company’sCompany's Bylaws, as amended, or theBylaws, the number of directors that constitute our Board of Directors shall be determined from time to time by resolution of our Board of Directors. Upon the expiration of the term of directors, nominees are elected to serve for a term of one year and until their respective successors have been elected and qualified. Each director shall hold office until the next regular meeting of the stockholders after such director’sdirector's election and until a successor is elected and has qualified, or until the earlier death, resignation, removal or disqualification of the director. The following directors will stand for election at the Annual Meeting:
Ms. Susan P. McGallaMses. Dorrit M. Bern, Kathy Bronstein, Lynda J. Davey, and Mindy C. Meads and Messrs.
Jonathan Duskin, Sidney M. Horn, HaroldJohn D.
Kahn,Goodman, John S. Mills, and Kenneth M.
Reiss, and Henry D. Winterstern.Reiss.
Unless otherwise directed, the persons named in the proxy intend to vote all proxiesFORthe election of Ms. McGallaMses. Bern, Bronstein, Davey, and Meads and Messrs. Duskin, Horn, Kahn,Goodman, Mills, and Reiss and Winterstern to our Board of Directors. The nominees have consented to serve as directors of our Company if elected. If, prior to the Annual Meeting, any of the nominees is unable or declines to serve as a director, the discretionary authority provided in the enclosed proxy may be exercised to vote for a substitute candidate designated by our Board of Directors. Our Board of Directors has no reason to believe any of the nominees will be unable or will decline to serve as a director. Set forth below is certain information furnished to our Company by the director nominees, with ages as of April
2, 2012.5, 2013. There are no family relationships between or among any directors or executive officers of our Company.
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Jonathan Duskin
Dorrit M. Bern Age: 4462
| | Mr. Jonathan DuskinMs. Dorrit M. Bern has been a director of our Company since March 6, 2006, and he serves as a memberOctober 4, 2012. Ms. Bern is Chair of our Audit and Compensation Committees. Mr. Duskin has served as Chief Executive Officer of Macellum Capital Management LLC, a Delaware limited liability company which operates a New York-based pooled investment fund, since September 2008. From 2005 to April 2008, Mr. Duskin served as a Managing Director and Partner at Prentice Capital Management, LP, an investment management firm. From 2002 to 2005, Mr. Duskin was a Managing Director at S.A.C. Capital Associates LLC, a New York-based hedge fund. From 1998 to 2002, Mr. Duskin was a Managing Director at Lehman Brothers Inc., and served as Head of Product Management and Chairman of the Investment Policy Committee within the Research Department. Mr. Duskin previously served on each of the boards of directors of Whitehall Jewelers Inc., a former specialty retailer of jewelry, Plvtz, Inc., the holding company of Levitz Furniture Inc., and KB Toys, a former mall-based retail toy store chain. Our Board of Directors believes that Mr. Duskin’s extensive experience in the financial services industry, retail investment expertise and familiarity with our Company qualify him for his continued service on the Board of Directors. |
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Sidney M. Horn
Age: 61
| | Mr. Sidney M. Horn has been a director of our Company since January 27, 2005. Mr. Horn is the Chairman of our Nominating and Governance Committee and also serves as a member of our Audit Committee. Ms. Bern is the former Chairperson of the Board, Chief Executive Officer and President of Charming Shoppes, Inc., a retailer specializing in women's plus-size fashion, where she served from 1995-2008. Prior to that time, Ms. Bern was Group Vice-President of women's apparel and home fashions for Sears, Roebuck and Co., a department store retailer. Ms. Bern previously served on each of the Board of Directors of Southern Company, one of the largest generators of electricity in the United States where she also served as Chairperson of the Finance Committee and a member of the Audit Committee, Brunswick Corporation, a market leader in the marine, fitness and bowling and billiards industries where she also served as a member of the Audit and Compensation Committees, and OfficeMax Inc., an office supply retailer where she also served on the Audit and Executive Compensation Committees. In addition, Ms. Bern was a trustee for Pennsylvania Real Estate Investment Trust, a REIT specializing in shopping malls and power centers in the eastern United States, was a member of the advisory board for U.S. Foodservice, a division of Ahold Inc., an international supermarket operator, and a board member of the National Retail Federation. Ms. Bern was the Edward V. Fritsky Chair in Leadership at the University of Washington and currently serves on the board for Foster Business School at the University of Washington. Ms. Bern is also currently a member of The Committee of 200, America's Women Business Leaders, and a member of the advisory board of the Jay H. Baker Retailing Center at the Wharton Business School at the University of Pennsylvania, where she is an instructor in Continuing Board Education. Our Board of Directors believes that Ms. Bern' expertise as an executive in the women's apparel retail industry and her experience serving as a member of several public company boards of directors and instructing others on board operations and duties qualify her for her continued service on the Board of Directors.
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Kathy Bronstein Age: 61
| Ms. Kathy Bronstein has been a director of our Company since September 18, 2012, and she serves as a member of our Nominating and Governance and Compensation Committees. Mr. HornSince 2003, Ms. Bronstein has beenowned and operated KB Bronstein Consulting, a partner at the law firmconsulting practice that advises numerous large public and privately held retail businesses. In addition, from 1992-2003, Ms. Bronstein served as Chief Executive Officer and Vice Chairperson of Stikeman Elliot LLP since May 2000. From 1984 to May 2000, Mr. Horn was a partner at the law firmThe Wet Seal, Inc. and from 1985-1992, Ms. Bronstein served as Executive Vice President and Chief Merchandising Officer of Phillips & Vineberg LLP. Mr. HornThe Wet Seal, Inc. Ms. Bronstein currently serves on the boards of directors of Astral Media Inc.,Chapman University and Goodwill Industries of Orange County. Our Board of Directors believes that Ms. Bronstein's extensive experience managing and consulting junior apparel retailers, including her previous experience as Chief Executive Officer of our Company, qualify her for her continued service on the Board of Directors.
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Lynda J. Davey Age: 58
| Ms. Lynda J. Davey has been a Canadian specialty televisiondirector of our Company since October 4, 2012. Ms. Davey is Chair of the Board of Directors and radio broadcaster and outdoor advertising company, Genworth MI Canada Inc.,is a Canadian residential mortgage insurance company, where he serves as Chairmanmember of the Compensation CommitteeCommittee. Ms. Davey has served as Chairperson and as Lead Director,Chief Executive Officer of Avalon Group Ltd, a boutique investment bank, and Landauer Metropolitan Inc.Avalon Securities Ltd., a distributorFINRA and SEC registered broker dealer, since she co-founded the companies in 1992. Prior to her work at Avalon, Ms. Davey worked at Salomon Brothers, an investment banking firm, and was President of medical equipment. Since February 2010, Mr. Horn hasTribeca Corp, a merchant bank with large equity investments in public consumer companies and private buyouts. Ms. Davey serves on the board and chairs the audit committee of the Girl Scout Council of Greater New York, Inc. Ms. Davey is also founder and manager of Verite Capital Partners, a consulting and investment firm, and from 1998 to 2001, Ms. Davey served as Corporate Secretary to Richmont Mines Inc., a Canadian gold mining company. Mr. Hornon the Advisory Council of Wells Fargo's Capital Finance Group and its predecessor entity, the Paragon Capital Retail Group. Ms. Davey previously served on eachthe board of directors and was head of the boardsaudit committee for ICTS International, an Amsterdam based public security firm, served as a board member of Tuffy Associates Corp., a private auto service franchiser, Jane Cosmetics and Textus, a private textile company, and was a founding member of the Advisory Board of FIT's Center for Design Innovation. Our Board of Directors believes that Ms. Davey's extensive knowledge of consumer product and retail companies, and her experience as an executive and expert in investment banking and corporate transactions, qualify her for her continued service on the Board of Directors.
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John D. Goodman Age: 48
| Mr. John D. Goodman has been a director of our Company since September 18, 2012 and on January 7, 2013, Mr. Goodman was appointed the Company's Chief Executive Officer. Prior to joining our Company, Mr. Goodman was Executive Vice President, Apparel and Home at Sears Holding Corporation from November 2009 until January 2012. Mr. Goodman was also the Chief Executive Officer and a member of the board of directors of Prime Restaurants,Charlotte Russe Holding, Inc., from November 2008 to October 2009. From April 2008 to October 2008, Mr. Goodman served as President and Chief Executive Officer of Mervyn's LLC department stores, which filed for Chapter 11 bankruptcy protection in July 2008. From 2005 to 2008, Mr. Goodman served as President and General Manager of the Dockers brand at Levi Strauss & Co., and from 2003 to 2005, Mr. Goodman was the Senior Vice President and Chief Apparel Officer for Kmart Holding Corporation. Earlier in his career, Mr. Goodman held various executive positions over a restaurant franchisor, Le Chateau,10 year period while at Gap, Inc., a chain Mr. Goodman previously served on the board of specialty women’s and men’s apparel retail stores, and Algodirectors of Bleach Group, Inc., a diversified wholesaler of ladies’ apparel.lifestyle brand company. Our Board of Directors believes that Mr. Horn’s experience as a director on several company boards, hisGoodman's extensive experience in a large variety of corporate and business transactions and his experience as legal and strategic advisor to several retail and wholesale apparel companies qualify him for his continued service on the Board of Directors. |
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Harold D. Kahn
Age: 66
| | Mr. Harold D. Kahn served as a director of our Company from January 27, 2005 to October 23, 2008, when he resigned as director and became Chief Executive Officer of Steve & Barry’s, a former retail clothing chain. After his relationship with Steve & Barry’s terminated, Mr. Kahn was re-appointed as a director of our Company on November 19, 2008. Mr. Kahn was appointed Chairman of our Board of Directors on December 13, 2009. Mr. Kahn also serves as a member of our Compensation Committee and our Nominating and Governance Committee. Since February 2004, Mr. Kahn has served as President of HDK Associates, a consulting company that advises financial and investment groups. From January 1994 to February 2004, Mr. Kahn served as Chairman and Chief Executive Officer of Macy’s East, a division of Macy’s. Mr. Kahn previously served on each of the boards of directors and Audit Committees of Ronco Corporation, a company that engages in the development, marketing and distribution of kitchen and other household products in the United States, and Steven Madden, Ltd., a designer and marketer of fashion footwear and accessories for women, men and children. Our Board of Directors believes Mr. Kahn’s multi-decade experience in the retail industry, including his role as president and chief executive officer of various divisions of a leading retailerparticularly in senior management roles, and his leadership ability qualify him for his continued service on the Board of Directors.
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Mindy C. Meads Age: 61
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Susan P. McGalla
Age: 47
| | Ms. Susan P. McGalla was appointedMindy C. Meads has been a director of our Company on January 18, 2011, in conjunction with her appointmentsince October 4, 2012. Ms. Meads is Chair of the Nominating and Governance Committee and is a member of the Compensation Committee. Ms. Meads served as a Co-Chief Executive Officer of Aeropostale, Inc. from 2009 to 2010, and was President of Aeropostale, Inc. from 2007 to 2009. From 2003 to 2005, Ms. Meads served as Chief Executive Officer of our Company.Lands' End, the apparel retailer that is now a division of Sears Holding Corporation. Prior to joining our Company,that time, Ms. McGalla was the President and Chief Merchandising OfficerMeads held a variety of American Eagle Outfitters, Inc., orAEO, from 2007 to 2009, and was the President and Chief Merchandising Officer of its AE Brand from 2003 to 2007. From 1994 to 2003, Ms. McGalla held various management positions with AEO. Ms. McGalla also held variousexecutive merchandising and managementoperating positions in the department store retail sector from 1986 to 1994.at Lands' End, Sears, Gymboree, The Limited and R.H. Macy's, all nationwide retailers. Ms. McGallaMeads currently serves on the Boardboard of Directorsdirectors and is a member of HFF,the compensation committee of Mela Sciences, Inc., a commercial real estate capital intermediary,publicly held biotech company. Ms. Meads is a member of The Committee of 200, America's Women Business Leaders, and has served as a trustee and a member of the BoardAudit Committee of TrusteesThe Master School, a private high school in New York, since 2010. Ms. Meads is a former director of the Federal Reserve Board for the University of Pittsburgh and the council for the University of Pittsburgh Cancer Institute. Ms. McGalla formerly served on the Executive Committee and Board of Directors for the Allegheny Conference on Community Development.7th District (Chicago). Our Board of Directors believes that Ms. McGalla’sMeads' extensive experience in the retail industry, and particularly in senior management roles, and her leadership ability qualify her for her continued service on the Board of Directors.
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John S. Mills Age: 65
| Mr. John S. Mills has been a director of our Company since October 4, 2012. Mr. Mills is a member of our Audit and Compensation Committees. Since 2006, Mr. Mills has served as President of SDE, a consulting firm that specializes in the retail sector, store operations and growth strategies. From 2004 to 2006, Mr. Mills was Chairman of the Board of G and G Stores Inc., a specialty retailer focused on teenage women. From 2000 to 2004, Mr. Mills served as the President and Chief Operating Officer of Aeropostale Inc., and was the Executive Vice President - Director of Operations at Aeropostale, Inc. from 1998 to 2000. Mr. Mills served on the board of directors for Aeropostale, Inc. from 1998 to 2004. From 1994 to 1998, Mr. Mills held several executive positions in operations for Federated Specialty Stores, the specialty retail division of Federated Department Stores, Inc. Mr. Mills also held various executive positions within the divisions, including its specialty store division, of R.H. Macy & Co., Inc. Mr. Mills currently serves on the board of directors of VILLA, Inc., an apparel and footwear retailer. Mr. Mills has served as a private advisor to Cerberus Capital and Rosewood Capital, and on the board of directors of Marc Ecko Enterprises, a global fashion and lifestyle company. Our Board of Directors believes that Mr. Mills' expertise as an executive in the apparel retail industry, his advisory practice and his experience as a member of the board of directors for several companies qualify him for his continued service on the Board of Directors.
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Age: 6970
| | Mr. Kenneth M. Reiss has been a director of our Company since January 27, 2005. Mr. Reiss is Chairman of our Audit Committee and also serves as a member of our Nominating and Governance Committee. Prior to his retirement in June 2003, Mr. Reiss was a partner at the accounting firm of Ernst & Young L.L.P., where he served as the lead auditor for several publicly traded companies, including Toys “R” Us, Inc., Staples, Inc., Phillips-Van Heusen, Inc. and Kenneth Cole Productions, Inc. Mr. Reiss serves on the Board of Directors, is the Chairman of the Audit Committee and a member of the Governance and Nominating Committee of Harman International Industries, Inc., a manufacturer of audio and electronic products for automotive, consumer and professional useuse. Mr. Reiss also serves on the Board of Directors and serves asis the Chairman of itsthe Audit Committee and as a member of its Governance and Nominating Committee.The Children's Place Retail Stores, Inc. Additionally, Mr. Reiss previously served on the boards of directors of each of Eddie Bauer Holdings, Inc., a holding company that operates a specialty retailer of men’smen's and women’swomen's apparel, and Guitar Center, Inc., a musical instrument retail chain. Our Board of Directors believes that Mr. Reiss’Reiss' extensive audit, accounting and financial experience and expertise, and his knowledge and experience with retail and apparel companies, qualify him for his continued service on the Board of Directors. |
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Henry D. Winterstern
Age: 54
| | Mr. Henry D. Winterstern has been a director of our Company since August 18, 2004. Mr. Winterstern is the Chairman of our Compensation Committee and also serves as a member of our Audit Committee. Since April 2008, Mr. Winterstern has served as a Managing Director at Fortress Investment Group LLC, a leading, highly diversified global investment management firm, most recently serving as the Managing Director of the Hybrid Funds. From July 2005 to March 2007, Mr. Winterstern served as Co-Chairman of the Board of Directors and Chief Executive Officer of First Look Studios, Inc., an independent film studio specializing in home video releases of films and television series. Between 1999 and 2004, Mr. Winterstern served as Chief Executive Officer of CDP Capital Entertainment, an investment management and advisory services company for the entertainment industry. Between June 1998 and April 2002, Mr. Winterstern served on the Board of Directors of Algo Group, Inc., which operated in the fashion apparel industry in the United States and Canada and for which Mr. Winterstern also served as Vice Chairman from September 2000 to April 2002. He also served as director and as Vice Chairman for Consoltex Inc., a Canadian manufacturer of technical textiles, from May 1996 to October 1999 and from May 1997 to October 1999, respectively. Our Board of Directors believes that Mr. Winterstern’s experience in the retail sector and his role as a strategic advisor for acquisitions and financings in several industries qualify him for his continued service on the Board of Directors.
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Vote Required to be Elected as a Director
Election of the nominees to our Board of Directors requires the affirmative vote of the majority of the votes cast by holders of outstanding shares of the
Company’sCompany's Class A common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the election of directors. There are no cumulative voting rights with respect to the election of directors, and broker non-votes and abstentions will not be treated as votes cast with respect to the election of directors.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS
VOTE “FOR” THE ELECTION OF EACH OF THE ABOVE NOMINEES.
CORPORATE GOVERNANCE MATTERS
Corporate Governance Guidelines
Our Company has adopted The Wet Seal, Inc. Code of Business Ethics and Conduct that is applicable to all directors, officers and employees. The purpose of our Code of Business Ethics and Conduct is to foster compliance with applicable laws affecting our Company and set a standard for our expectations for business conduct. We have also adopted a Code of Ethics Policy for our Chief Executive Officer and ChiefSenior Financial OfficerOfficers to promote ethical conduct in the practice of financial management and corporate governance. In addition, we have also adopted Corporate Governance Guidelines that identify corporate governance policy standards for our directors, officers and committees of our Board of Directors. Our Code of Business Ethics and Conduct, our Code of Ethics Policy for our Chief Executive Officer and ChiefSenior Financial OfficerOfficers and our Corporate Governance Guidelines are available on our website atwww.wetsealinc.com. All members of our Board of Directors other than Ms. McGalla,Mr. Goodman, our Chief Executive Officer, have been determined to be “independent” directors in accordance with Nasdaq Global Market listing standards and applicable rules and regulations promulgated under the Securities Exchange Act of 1934, as amended, or theExchange Act. This determination by our Board of Directors is based upon an individual evaluation of each of our directors, including his or her employment or Boardlack of Directors’ affiliations, and a determination that the “independent” director has no businessan employment relationship with us or any other membersrelationship which, in the opinion of theour Board of Directors, or our Company (other than his service on ourwould interfere with the exercise of independent judgment in carrying out a director's responsibilities. Our Board of Directors) orDirectors considered Ms. Bronstein's previous employment with the Company as the Chief Executive Officer and Vice Chairperson from 1992 to 2003 and as an Executive Vice President from 1985 to 1992, ensured that she does not currently receive any involvement withpayments from the Company other than for her services as a company or firm with which we do businessdirector and concluded that she is material. an independent director.
Our Chief Executive Officer,
Ms. McGalla,Mr. Goodman, is not a member of any committees of our Board of Directors. The independent directors meet regularly during every quarterly Board of Directors meeting in separate executive session without any member of
our Company management present. The
ChairmanChair of the Board of Directors, who is an independent director, presides over these meetings.
Relationships Between Directors
Before the Board of Directors made the independence determination described in the preceding paragraph, Mr. Reiss advised the Board of Directors that he holds a 2% equity interest in Macellum Capital Management, LLC and a small investment (valued at less than 2% of total funds invested) in the fund managed by Macellum Capital Management, LLC. In addition, Mr. Reiss informed the Board of Directors that he also has provided approximately two hours per week of advisory services to Macellum Capital Management, LLC. Mr.
Jonathan Duskin,
a member of the Company's Board of Directors from March 6, 2006 until October 4, 2012, is the General Partner of Macellum Capital Management, LLC. The organizational documents of the Macellum Fund preclude the fund from taking any position in companies in which any of its advisors are members of the Board of Directors or serve as management. Our Board of Directors has considered this relationship in determining the independence of Mr.
Duskin and Mr. Reiss and concluded that, due to such
directors’directors' representations and the fact that the investment amount is not significant with respect to the investment fund or to the personal financial position of Mr. Reiss, such relationship does not affect
the “independence” of any of such directors.Mr. Reiss' independence. In addition, it was determined that Mr.
Reiss’Reiss' advisory responsibilities and related compensation do not affect
the independence of Mr. Duskin or Mr. Reiss.his independence.
Review, Approval or Ratification of Related Party Transactions
The Company has not entered into or proposed entering into any transaction valued in excess of $120,000 in which any related party had or will have a direct or indirect material interest. Nevertheless, the Board of Directors of the Company has adopted the Company’sCompany's Code of Business Ethics and Conduct, or theCode, a copy of which is posted on the Company’sCompany's website atwww.wetsealinc.com. The Code, which is administered by the Company’sCompany's Corporate Ethics/Compliance Officer, applies to any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which the Company or one of its subsidiaries participates and a related person had, has or will have a direct or indirect interest. Each director or executive officer of the Company must notify the Company’sCompany's Corporate Ethics/Compliance Officer of any interest thatsuch individual or an immediate family member of such individual had, has or may have, in a related person transaction, and the Company’sCompany's Corporate Ethics/Compliance Officer must, in turn, determine whether or not the transaction is in the best interest of the Company. For purposes of the Code, a “related person” includes any director or executive officer of the Company or a relative of such director or executive officer, which, in turn, includes his or her spouse, children, parents, siblings, in-laws and any other relatives who reside or share a home with such director or executive officer of the Company.
Committees of Our Board of Directors
Our Board of Directors has established three committees consisting of the Audit Committee, Compensation Committee and Nominating and Governance Committee. Our Board of Directors has adopted charters for each of its committees, which are posted on our Company’sCompany's website atwww.wetsealinc.com. The current members of the committees are identified in the table below:
|
| | | | | |
Director | Audit Committee | | Audit
Compensation Committee
| | CompensationNominating and Governance Committee
|
Dorrit M. Bern
Committee
| X | | Nominating and
Governance Committee
(Chair) | | — |
Jonathan Duskin
Kathy Bronstein
| — | | X | | X |
Lynda J. Davey
| — | | X | | — |
Mindy C. Meads
| — | | X | | (Chair) |
John S. Mills
| X | | X | | — |
Sidney M. Horn
| | X | | X | | (Chairman) |
Harold D. Kahn
| | — | | X | | X |
Kenneth M. Reiss
| | (Chairman)(Chair) | | — | | X |
Henry D. Winterstern
| | X | | (Chairman) | | — |
Meetings and Attendance of Directors
Our Board of Directors and its committees held the following number of meetings during the fiscal year ended
January 28, 2012:February 2, 2013: | | |
| |
Group | | Meetings | |
Board of Directors | | | 12 | 27 |
Audit Committee | 6 |
| Compensation Committee | 7 | |
Compensation Committee
| | | 2 | |
Nominating and Governance Committee | | | 3 | |
All of the directors,
then in office, attended 75% or more of the total number of meetings of our Board of Directors and of committee(s) of the Board of Directors on which they served
and that were held during the fiscal year ended
January 28, 2012.Although ourFebruary 2, 2013.
Our Company
does not have a formal policy requiring members of the Board of Directors to attend annual meetings of the stockholders, our Company informally requires that all of our incumbent directors and director nominees attend the annual meeting of stockholders unless a director gives prior notice to the Chairman of the Board of Directors of his or her inability to attend. All members of our Board of Directors, then in office, participated in the
20112012 annual meeting of stockholders.
Our Audit Committee is composed entirely of non-management directors, each of whom our Board of Directors has determined is “independent” in accordance with Nasdaq Global Market listing standards and applicable rules and regulations promulgated under the Exchange Act.
From March 22, 2006Mr. Reiss has served on our Audit Committee from 2005 through the date of this Proxy
Statement, theStatement. During fiscal 2012, Messrs. Jonathan Duskin, Sidney M. Horn and Henry D. Winterstern served as members of our Audit Committee
up until their resignations from our Board of Directors on October 4, 2012. Ms. Bern and Mr. Mills have
consistedserved as members of
Messrs. Reiss, Duskin, Horn and Winterstern.our Audit Committee from October 9, 2012 through the date of this Proxy Statement. Mr. Goodman served as a member of our Audit Committee from October 9, 2012 through January 7, 2013, when he became our Company's Chief Executive Officer.
Our Audit Committee is responsible for reviewing and, as it shall deem appropriate, making recommendations to our Board of Directors with respect to, internal accounting and financefinancial controls for ourCompany and accounting principles and auditing practices and procedures to be employed in the preparation and review of our Company’sCompany's financial statements and press releases relating to our Company’sCompany's financial statements and results of operations. Our Audit Committee is also responsible for recommending to our Board of Directors independent registered public accountants to audit the annual financial statements of our Company, as well as for reviewing the scope of the audit as determined by the accountants. The charter of our Audit Committee is available on our Company’sCompany's website atwww.wetsealinc.com.
Mr. Reiss, the Chairman of our Audit Committee, has 38 years of experience in auditing public companies during his tenure at Ernst & Young L.L.P. and Ms. Bern, has served in the capacity of Chief Executive Officer and President of Charming Shoppes, Inc. and has served on the Finance and Audit Committees of various companies throughout her career, have been determined by our Board of Directors to be an “audit committee financial expert”experts” under the regulations of the Securities and Exchange Commission, or theSEC, and to be “financially sophisticated” under applicable Nasdaq Global Market listing standards by virtue of histheir experience described above in the section captioned“ELECTION OF DIRECTORS.”
Each of the directors comprising our Compensation Committee is not a member of management and has been determined by our Board of Directors to be “independent” in accordance with Nasdaq Global Market listing standards.
During fiscal 2012, Mr. Winterstern served as our Compensation Committee Chair and Messrs. Duskin, Horn, and Harold D. Kahn served as members of our Compensation Committee up until their resignations from our Board of Directors on October 4, 2012. Ms. Bern was appointed as the Chair of our Compensation Committee on October 9, 2012 and continues to serve in this role through the date of this Proxy Statement. Mses. Bronstein, Davey and Meads and Mr. Mills have served as members of our Compensation Committee since October 9, 2012 through the date of this Proxy Statement. Our Compensation Committee reviews and proposes to the Board of Directors for approval the compensation of our Chief Executive Officer and the compensation of our other executive officers, administers our equity-based compensation plans and reviews the disclosures in the Compensation Discussion and Analysis and the annual Compensation Committee report for inclusion in our
Company’sCompany's annual Proxy Statement.
Under The Wet Seal, Inc. Amended and Restated 2005 Stock Incentive Plan, or the Amended and Restated Plan, our Compensation Committee approves the grant of Awards (as defined in the Amended and Restated Plan) including options, restricted stock, performance shares, restricted share units, performance share units, share purchases, share awards or any other awards based on the value of our common shares to our directors, named executive officers and other Company personnel and consultants to our Company. In addition, our Compensation Committee recommends for approval by the Board of Directors bonus guidelines and equity-based awards to be granted to our named executive officers and directors as well as grants our Chief Executive Officer certain levels of authority to grant equity-based awards to other Company employees. Our Compensation Committee also reviews and recommends for approval by the Board of Directors contractual employment and compensation arrangements with our named executive officers and other members of senior management and oversees the administration of our employee benefits and benefit plans. The charter of our Compensation Committee is available on our Company’sCompany's website atwww.wetsealinc.com.
Nominating and Governance Committee
Our Nominating and Governance Committee is composed entirely of non-management directors, each of whom our Board of Directors has determined is “independent” in accordance with Nasdaq Global Market listing standards. During fiscal 2012, Mr. Horn served as our Nominating and Governance Chair and Mr. Kahn served as a member of our Nominating and Governance Committee up until their resignations from our Board of Directors on October 4, 2012. Ms. Meads was appointed as the Chair of our Nominating and Governance Committee on October 9, 2012 and continues to serve in this role through the date of this Proxy Statement. Ms. Bronstein has served as a member of our Nominating and Governance Committee from October 9, 2012 through the date of this Proxy Statement. Mr. Reiss has served as a member of our Nominating and Governance Committee from December 2009 through the date of this Proxy Statement. Mr. Goodman served as a member of our Nominating and Governance Committee from October 9, 2012 through January 7, 2013, when he became our Company's Chief Executive Officer.
Our Nominating and Governance Committee proposes to our Board of Directors and to stockholders a slate of director nominees in connection with the election of directors. It also advises our Board of Directors with respect to board procedures and committees, oversees the evaluation of our Board of Directors and develops, recommends and reviews our corporate governance guidelines. The charter of our Nominating and Governance Committee is available on our Company’sCompany's website atwww.wetsealinc.com. In discharging its responsibilities to nominate candidates for election to our Board of Directors, our Nominating and Governance Committee has not specified any minimum qualifications for serving on our Board of Directors. However, our Nominating and Governance Committee’sCommittee's criteria for selecting new directors includes possession of such knowledge, experience, skills, expertise and diversity in business, background and experience as may enhance our Board of Directors’Directors' ability to manage and direct the affairs and business of our Company. Our Nominating and Governance Committee utilizes a variety of methods for identifying andevaluating nominees for director. Candidates may come to the attention of our Nominating and Governance Committee through current directors, professional search firms, stockholders or other persons. Candidates may be considered at any point during the year. For additional information on stockholder recommendations for nominees to our Board of Directors, please see the section below under the caption “STOCKHOLDER NOMINEES.”
Executive Sessions; Meetings with Management
The non-management members of our Board of Directors, which include each member of our Board of Directors other than
Ms. McGalla,Mr. Goodman, meet in executive session on a quarterly basis. From time to time, executives from our third party internal audit provider and our Internal Audit Manager meet with our Audit Committee to review the internal audit function and compliance with the internal controls requirements under the Sarbanes-Oxley Act. Our Audit Committee also meets in executive session with the independent registered accountants regularly. All other committees are given the opportunity to meet without management as they deem necessary.
Senior members of our
Company’sCompany's management are routinely invited to make presentations to our Board of Directors or committees to provide management insight into items being discussed by our Board of Directors. In addition, members of our Board of Directors have free access to all other members of management and employees of our Company.
Board Leadership Structure and Risk Management
The roles of Chief Executive Officer and
ChairmanChair of the Board of Directors are separate in recognition of the differences between the two roles. The Chief Executive Officer is responsible for setting the strategic direction for our Company and the day-to-day leadership and performance of the Company, while the
ChairmanChair of the Board of Directors provides guidance to the Chief Executive Officer, sets the agenda for Board of Directors meetings and presides over meetings of the full Board of Directors. We believe this structure provides strong leadership for our Board of Directors, while also positioning our Chief Executive Officer as the leader of our Company in the eyes of our customers, vendors and stockholders.
Our Company is exposed to a number of risks, including economic, regulatory,
legal and others risks, such as the impact of competition and general economic conditions. Management is responsible for the day-to-day management of risks our Company faces, while the Board of Directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are reasonably adequate and functioning as designed.
The Board of Directors believes that establishing an appropriate “tone at the top” and that full and open communication between management and the Board of Directors are essential for effective risk management and oversight. Our
ChairmanChair of the Board of Directors meets regularly with our Chief Executive Officer and other senior officers to discuss strategy and the risks facing our Company. In addition, senior management attends the quarterly Board meetings and is available to address any questions or concerns raised by the Board of Directors on risk management and any other matters. Each quarter, the Board of Directors is provided an update by senior management on strategic matters involving our operations.
While the Board of Directors is ultimately responsible for risk oversight at our Company, our three Board committees assist the Board of Directors in fulfilling its oversight responsibilities in specific areas of risk. The Audit Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls and compliance with legal and regulatory requirements. Our
Company’sCompany's Compensation Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to management of risks arising from our compensation policies and programs. The Nominating and Governance Committee assists the Board of Directors in fulfilling its oversight responsibilities with respect to the management of risks associated with board organization, membership and structure and succession planning for our directors and corporate governance.
The following is a list, as of April
2, 2012,5, 2013, of the names, ages and certain biographical information for the executive officers of our Company who are not also directors.
| | |
Name and Age
| | Principal Occupation and Background
|
Kenneth D. Seipel
Age: 51
| | Mr. Kenneth D. Seipel was appointed our President and Chief Operating Officer in March 2011. Prior to joining our Company, Mr. Seipel served as the President and Chief Merchandise/Marketing Officer of Pamida Discount Stores LLC, a regional discount chain of department stores with more than 175 locations in the United States, since 2009. Previous to this, Mr. Seipel served as Executive Vice President of Stores, Operations and Store Design for the Old Navy division of Gap, Inc., an American clothing brand and chain of more than 1,000 stores in the United States and Canada, from 2003 through 2008. Mr. Seipel also held various merchandising and operations management roles earlier in his career with Target Corporation, a public retailing company and the second largest discount retailer in the United States, Shopko Stores, Inc., a privately-held chain of retail stores, and J. C. Penney Company, Inc., a public corporation which operates a chain of mid-range department stores and catalog sales merchant offices throughout the United States. |
| |
Name and Age | Principal Occupation and Background |
Age: 4546 | | Mr. Steven H. Benrubi was appointed our Executive Vice President, Chief Financial Officer and Corporate Secretary in September 2007. Since June 2005, Mr. Benrubi had previously served as our Vice President and Corporate Controller. Immediately prior to that, from August 2003, he served as Vice President and Corporate Controller of CKE Restaurants, Inc., a public corporation and the parent company of several fast foodfast-food restaurant chains, including Carl’sCarl's Jr. and Hardee’s.Hardee's. Prior to his employment with CKE Restaurants, Inc., Mr. Benrubi served as treasurer of Champion Enterprises, Inc., a public corporation and manufacturer and retailer of manufactured homes.
|
| |
Harriet Bailiss-Sustarsic
Age: 54
| | Ms. Harriet Bailiss-Sustarsic was appointed Executive Vice President and Chief Merchandise Officer, Wet Seal Division, in November 2011. Prior to joining our Company, Ms. Sustarsic most recently served as the Senior Vice President and General Merchandise Manager for the North American Guess Retail Division, orGuess, from 2006 to 2010. Ms. Sustarsic served as the Vice President and General Merchandise Manager for Guess from 2004 to 2006. Prior to joining Guess, Ms. Sustarsic held various management positions at Charlotte Russe Holdings, Inc., orCharlotte Russe, from 1996 to 2003. In 2001, Ms. Sustarsic was named President and Chief Merchandising Officer of Charlotte Russe. Ms. Sustarsic also held various merchandising and management positions in the specialty and department store retail sectors from 1980 to 1996. |
| |
Age: 5253 | | Ms. Sharon Hughes was appointed our President and Chief MerchandiseMerchandising Officer, Arden B Division, in November 2009.2009 and continued in such role until her resignation on April 11,2013. Ms. Hughes had previously served as a consultant to the Arden B merchant team from February 2008 to November 2009. Prior to that,Before then, from 2002 to 2008, Ms. Hughes provided merchandising and operational consulting services to various companies. From 1990 to 2002, Ms. Hughes was an employee of our Company during which time she was involved in the formation of the Arden B concept,and eventually servingserved as our Senior Vice President of Merchandising for our Wet Seal Division. From 1984 to 1990, Ms. Hughes served as a general merchandise manager at Saturday’sSaturday's World, a women’swomen's specialty retailer based in Seattle, Washington. Prior toBefore her employment with Saturday’sat Saturday's World, Ms. Hughes served as a buyer for our Wet Seal Division, beginning in 1979.
|
| | |
Barbara Cook
Age: 53
| | Ms. Barbara Cook was appointed Senior Vice President of Store Operations of the Wet Seal, Inc. in November 2011. Prior to joining our Company, Ms. Cook served as the Senior Vice President of Gap Stores and Operations, North America, from 2007 to 2011. Ms. Cook also served as the Managing Director of Europe Gap, Outlet & Banana Republic for Gap Inc., orGap, from 2005 to 2007. Prior to joining Gap, Ms. Cook served as the Managing Director for the Retail Division of T-Mobile, a mobile communications retailer and wireless carrier, from 2002 to 2005. Ms. Cook also served as the Regional General Manager of UK for Starbucks Coffee Company, an international coffee company and coffeehouse chain with over 17,000 stores worldwide. Ms. Cook held various management positions in the apparel and grocer retail sectors from 1976 to 1999. |
Director Compensation
The directors do not receive any additional compensation in connection with their attendance at Board of Directors and committee meetings other than the cash and equity compensation described below in “Director Compensation Table.” All directors are reimbursed for expenses incurred in connection with attendance at the meetings of our Board of Directors and committees.
Fiscal 2011 Compensation Analysis
During fiscal
2011,2012, all non-employee directors were entitled to receive the annual cash retainers set forth below,
andas approved by the Board of Directors.
| | | | | | | | |
Position
| | Annual Cash Retainer | | | Payment | |
Director
| | | $65,000 | | | | Quarterly | |
Audit Committee Chairman
| | An additional $ | 20,000 | | | | Quarterly | |
Other Committee Chairman
| | An additional $ | 10,000 | | | | Quarterly | |
Chairman of our Board
| | An additional $ | 75,000 | | | | Quarterly | |
|
| | | | | | |
| Position | Annual Cash Retainer | | Payment |
| Director | | $ | 65,000 |
| | Quarterly |
| Audit Committee Chair | An additional | $ | 20,000 |
| | Quarterly |
| Other Committee Chair | An additional | $ | 10,000 |
| | Quarterly |
| Chair of our Board | An additional | $ | 75,000 |
| | Quarterly |
In addition to the foregoing cash compensation program, each non-employee director received a restricted stock grant having a cash value of $125,000, onpro-rated for those board members appointed to our Board of Directors subsequent to February 1, 2011,2012 based upon the datenumber of issuance.days of service in fiscal 2012. Based upon the closing stock price of our Class A common stock on February 1, 2012, September 18, 2012 or November 13, 2012, Messrs. Duskin, Horn, Kahn, Reiss and Winterstern, received 34,916 shares of our restricted stock, Ms. Bronstein and Mr. Goodman received 15,245 shares of our restricted stock and Mses. Bern, Davey, and Meads and Mr. Mills received 14,122 shares of our restricted stock, respectively. On October 4, 2012, Messrs. Duskin, Horn, Kahn and Winterstern each vested in 23,532 shares and forfeited 11,384 shares of their restricted stock in connection with their resignations from our board of directors. Mses. Bern, Bronstein, Davey, and Meads and Messrs. Goodman, Mills and Reiss each vested in their restricted stock shares granted in fiscal 2012 on February 1, 2013.
Fiscal 2013 Compensation Policy
During fiscal 2012, the Board of Directors modified and approved its non-employee director compensation policy for fiscal 2013. The modifications made to the board compensation structure for fiscal 2013 represent reductions to both the annual cash retainers and the cash value of the annual stock grant compared to fiscal 2012, and is as set forth below.
|
| | | | | | |
| Position | Annual Cash Retainer | | Payment |
| Director | | $ | 55,000 |
| | Quarterly |
| Audit Committee Chair | An additional | $ | 20,000 |
| | Quarterly |
| Other Committee Chair | An additional | $ | 10,000 |
| | Quarterly |
| Chair of our Board | An additional | $ | 20,000 |
| | Quarterly |
The cash value of the annual restricted stock grant for fiscal 2013 was reduced to $110,000.
Accordingly, Mses. Bern, Bronstein, Davey, and Meads and Messrs. Mills and Reiss, all non-employee directors, received a restricted stock grant having a cash value of $110,000 on February 1, 2013, the date of issuance, as compensation for their services to be provided in fiscal 2013. Based upon the closing stock price of our Class A common stock on that date, each non-employee director received 36,12739,711 shares of our restricted stock. These shares vestedwill vest on the one-year anniversary of the date of grant, February 1, 2012.2014. See "Fiscal 2013 Compensation," for further information on fiscal 2013 board compensation. The awarding of stock options, restricted stock and/or performance shares by our Company to directors, in their capacity as such, is at the discretion of the Compensation Committee.
All directors are reimbursed for expenses incurred in connection with attendance at the meetings of our Board of Directors and committees.
Director Compensation Table
The following Director Compensation Table summarizes the compensation paid to our directors in fiscal
2011. | | | | | | | | | | | | |
Name (1) | | Fees
Earned or
Paid in
Cash
($) (2) | | | Share
Awards
($) (3) | | | Total
($) | |
Jonathan Duskin | | $ | 65,000 | | | $ | 125,000 | | | $ | 190,000 | |
Sidney M. Horn | | $ | 75,000 | | | $ | 125,000 | | | $ | 200,000 | |
Harold D. Kahn | | $ | 140,000 | | | $ | 125,000 | | | $ | 265,000 | |
Kenneth M. Reiss | | $ | 85,000 | | | $ | 125,000 | | | $ | 210,000 | |
Henry D. Winterstern | | $ | 75,000 | | | $ | 125,000 | | | $ | 200,000 | |
|
| | | | | |
| Name (1) | Fees Earned or Paid in Cash ($) | | Share Awards ($) (2) | | Total ($) |
| Dorrit M. Bern (3) | $23,695 | | $151,096 | | $174,791 |
| Kathy Bronstein (4) | $23,393 | | $157,260 | | $180,653 |
| Lynda J. Davey (3) | $44,231 | | $151,096 | | $195,327 |
| Jonathan Duskin (5) | $48,750 | | $125,000 | | $173,750 |
| Sidney M. Horn (5) | $56,250 | | $125,000 | | $181,250 |
| Harold D. Kahn (5) | $361,250 | | $125,000 | | $486,250 |
| Mindy C. Meads (3) | $23,695 | | $151,096 | | $174,791 |
| John S. Mills (3) | $20,536 | | $151,096 | | $171,632 |
| Kenneth M. Reiss (6) | $85,000 | | $235,000 | | $320,000 |
| Henry D. Winterstern (5) | $56,250 | | $125,000 | | $181,250 |
_____________________
| |
| (1) | Susan P. McGalla,John D. Goodman was appointed to our Board of Directors on September 18, 2012 and served as a non-employee director until his appointment as our Chief Executive Officer is not included in this table since she received no compensation for her services as a director.on January 7, 2013. The compensation received by Ms. McGallaMr. Goodman prior to January 7, 2013, as an employeea non-employee director of our Company, is shownincluded in the “Summary Compensation Table.”
|
(2) | Members of our Board of Directors, other than Ms. McGalla, received director’s fees at the rate of $65,000 per year, payable in quarterly installments. The Audit Committee Chairman received an additional retainer
|
| of $20,000 per year and other committee Chairmen received an additional retainer of $10,000 per year, all payable in quarterly installments. The Chairman of our Board of Directors received an additional retainer of $75,000 per year, payable in quarterly installments. All members of our Board of Directors are reimbursed for actual expenses incurred in connection with attendance at meetings of our Board of Directors and of committees of our Board of Directors. |
(3)(2) | The amounts in this column reflect the grant date fair value of the restricted stock awards, determined in accordance with applicable accounting standards using the closing trading price of a share of our Class A common stock of $3.46$3.58, $3.10, $2.91 and $2.77 as of February 1, 2011. As2012, September 18, 2012, November 13, 2012, and February 1, 2013, respectively. The February 1, 2013 grant of January 28, 2012,39,711 restricted shares, representing $110,000 of value, to each director had 36,127 unvested shares of Mses. Bern, Bronstein, Davey, and Meads and Messrs. Mills and Reiss represented the annual restricted stock. These shares vestedstock grant related to their services to be provided in fiscal 2013, will vest on February 1, 2014 and represented all of the unvested restricted shares held by each member as of February 2, 2013. Messrs. Duskin, Horn, Kahn and Winterstern forfeited a pro-rata portion of their |
restricted shares, representing 11,384 restricted shares and $40,755 of the grant date fair value, upon their resignations from our Board of Directors on October 4, 2012.
| |
| (3) | Mses. Bern, Davey, and Meads and Mr. Mills were appointed to our Board of Directors on October 4, 2012. |
| |
| (4) | Ms. Bronstein was appointed to our Board of Directors on September 18, 2012. |
| |
| (5) | Messrs. Duskin, Horn, Kahn and Winterstern resigned from our Board of Directors on October 4, 2012. |
| |
| (6) | Mr. Reiss was appointed to our Board of Directors on January 27, 2005. |
Indemnification Agreements with our Directors
We have entered into indemnification agreements with each of our non-employee directors. These agreements require us, among other things, to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to our Company, and to advance expenses incurred as a result of any proceeding against them as to which they can be indemnified. We also expect to enter into indemnification agreements with our future non-management directors.
Our Nominating and Governance Committee considers properly submitted stockholder nominations for candidates for membership on our Board of Directors. There is no difference in the manner in which the Nominating and Governance Committee evaluates director candidates based on whether such candidate is recommended by the Nominating and Governance Committee or a stockholder. Any stockholder who desires to recommend a nominee for our Board of Directors must submit a letter addressed to our Corporate Secretary at our Company’s principal executive offices, located at 26972 Burbank, Foothill Ranch, California 92610, and which is clearly identified as a “Director Nominee
Recommendation”.Recommendation.” All recommendation letters must identify the author as a stockholder and provide a brief summary of the candidate’s qualifications, as well as contact information for both the candidate and the stockholder. Following verification of the stockholder status of persons proposing candidates, recommendations are aggregated and considered by our Nominating and Governance Committee. If any materials are provided by a stockholder in connection with the nomination of a director candidate, such materials are forwarded to our Nominating and Governance Committee.
Any stockholder recommendations for the 20132014 Annual Meeting must be submitted no earlier than the opening of business on January 14, 2013,23, 2014, and no later than the close of business on February 13, 2013,22, 2014, to assure time for meaningful consideration and evaluation of the nominees by our Nominating and Governance Committee. In the event that the 20132014 Annual Meeting is not within forty-five days before or after May 15, 2013,23, 2014, any stockholder recommendation for Board of Director nominees will be considered timely if it is received no earlier than the opening of business on the 120thday before the meeting and no later than the later of (i) the close of business on the 90thday before the meeting or (ii) the close of business on the 10thday following the day on which our Company first makes the public announcement of the date of the 20132014 Annual Meeting. Any stockholder recommendations for a special meeting of stockholders called for the purpose of electing directors must be submitted no later than the close of business on the 10thday following the day on which our Company first makes the public announcement of the date of the special meeting.
STOCKHOLDER COMMUNICATIONS
Our Company has adopted a formal process by which stockholders may communicate directly to directors. Under this process, any communication sent to a director or directors in care of our Corporate Secretary at our Company’s principal executive offices, located at 26972 Burbank, Foothill Ranch, California 92610, is forwarded to the specified director or directors. There is no screening process, other than to confirm that the sender is a stockholder, and all stockholder communications that are received by our Corporate Secretary to the attention of a director or directors are forwarded to the director or directors, with a copy to the Chairman of our Audit Committee.
ADVISORY VOTE ON EXECUTIVE COMPENSATION
Federal legislation (Section
Pursuant to Section 14A of the
Securities Exchange
Act) requires that we include in this Proxy Statement theAct, stockholders have an opportunity
for our stockholders to vote on an advisory (non-binding) resolution to approve,
on a non-binding, advisory basis, the compensation of our named executive officers (sometimes referred to as “Say-on-Pay”). Accordingly, the following resolution will be submitted for stockholder approval at the Annual Meeting:
“
RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables, and narrative discussion, is hereby approved.”
While this vote is non-binding, the Board of Directors and the Compensation Committee, which is comprised of independent directors, expect to take into account the outcome of this vote in considering future executive compensation arrangements.
As described in detail under “Compensation Discussion and Analysis,” the Board of Directors believes that our long-term success depends in large measure on our ability to attract and retain qualified personnel. Our compensation system plays a significant role in our ability to attract, retain and motivate the highest quality workforce. The Board believes that its current compensation program directly links executive compensation to performance, aligning the interests of our executive officers with those of our stockholders, and encourages you to review carefully the Compensation Discussion and Analysis beginning on page 15 of this Proxy Statement and the tabular and other disclosures on executive compensation beginning on page
2524 of this Proxy Statement.
Proposal and Required Vote
At the Annual Meeting, stockholders will be asked to approve the advisory resolution set forth above approving the compensation of our named executive officers. Such approval will require the affirmative vote of a majority of the votes cast by holders of outstanding shares of our
Class A common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the Proposal. Abstentions and broker non-votes will not be counted as votes cast with respect to this Say-on-Pay Proposal.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THIS SAY-ON-PAY PROPOSAL
At the
20112012 annual meeting of stockholders, we provided our stockholders with the opportunity to cast an advisory vote on the compensation of our named executive officers as disclosed in the proxy statement for the
20112012 annual meeting of stockholders, and our stockholders approved the proposal, with
93%96% of the votes cast in favor. At the 2011 annual meeting of stockholders, we also asked our stockholders to indicate if we should hold an advisory vote on the compensation of our named executive officers every one, two or three years, with our board of directors recommending an annual advisory vote. Because our board of directors views it as a good corporate governance practice, and because at our 2011 annual meeting of stockholders approximately 90% of the votes cast were in favor of an annual advisory vote, we again are asking our stockholders to approve the compensation of our named executive officers as disclosed in this Proxy Statement.
Unless the Board modifies its determination on the frequency of future say-on-pay advisory votes, the next say-on-pay advisory vote will be held at the 2014 annual meeting of stockholders.
COMPENSATION DISCUSSION AND ANALYSIS
Executive Summary
Our Compensation Discussion and Analysis (“CD&A”) describes our compensation philosophy, and compensation decisions for our named executive officers that are described in the Summary Compensation Table. Our named executive officers for fiscal 2012 consisted of the following individuals:
John D. Goodman, our Chief Executive Officer;
Steven H. Benrubi, our Executive Vice President, Chief Financial Officer and former Corporate Secretary;
Barbara Cook, our former Senior Vice President of Store Operations;
Sharon Hughes, our former President and Chief Merchandise Officer, Arden B Division;
Susan P. McGalla, our former Chief Executive Officer;
Kenneth D. Seipel, our former President and Chief Operating Officer; and
Harriet Bailiss-Sustarsic, our former Executive Vice President and Chief Merchandise Officer, Wet Seal Division.
Fiscal 2012 was a challenging year for our Company, marked by changes in leadership, strategic direction and brand positioning, which had a significant impact on our financial performance. More specifically, during fiscal 2012 and in early fiscal 2013, we experienced the following changes in senior management: on July 23, 2012, Ms. Susan P. McGalla, our former Chief Executive Officer, was terminated by our Board of Directors; on October 19, 2012, Ms. Harriet Bailiss- Sustarsic, our former Executive Vice President and Chief Merchandise Officer, Wet Seal Division, resigned from her position; on February 1, 2013, Mr. Kenneth D. Seipel, our former President and Chief Operating Officer, resigned from his position; on February 20, 2013, Ms. Barbara Cook, our former Senior Vice President of Store Operations, resigned from her position; and on April 11, 2013, Ms. Sharon Hughes, our former President and Chief Merchandise Officer, Arden B Division, resigned from her position.
On January 7, 2013, our Board of Directors appointed Mr. John D. Goodman as our Chief Executive Officer and believes he and other key members of management have the requisite experience and knowledge in the fast fashion retail apparel sector to help position our Company for success. Since Mr. Goodman's appointment, he and the management team have moved quickly to begin stabilizing the business, transition the Company back to a fast fashion strategy, and prepare it for growth.
During these challenging times for the business, we believe the Company has utilized responsible compensation practices that balance the need to invest in leadership talent to create business success, while also appropriately reflecting the actual performance delivered. Key examples include:
•Targeting a market median pay strategy overall, including for our new Chief Executive Officer;
•Using an annual incentive program that is based on achievement of specific financial performance;
•Not providing a bonus payout in fiscal 2012 as financial performance goals were not achieved;
•Providing limited fiscal 2012 long-term incentive awards to manage expenses and shareholder dilution; and
Using market- and shareholder-aligned employment agreement terms. For example, Wet Seal does not have gross-ups for any of its executives in the event of a termination subsequent to a change of control.
The remainder of this compensation discussion and analysis provides more details on the compensation programs in place at our Company and specific actions taken in fiscal 2012.
Our Compensation Committee has developed a compensation policy for our named executive officers with the following guidelines:
Provide base salaries that are competitive in the retail apparel industry and that willin order to attract and retain our named executive officers;
Provide annual cash bonuses that are tied to our consolidated financial performance or divisional financial performance, as the case may be, in order to align the interests of our named executive officers with those of our stockholders; and
Provide long-term incentive benefits that will reward our named executive officers’ long-term commitment and motivate the named executive officers to achieve our strategic objective of increased stockholder value.
We seek to compensate our named executive officers pursuant to this compensation philosophy which is reflected in the terms of their respective employment agreements.philosophy. Our Compensation Committee reviews all recommendations made with respect to discretionary compensation and approves all discretionarykey compensation decisions for our named executive officers (subject to ratification byin the Boardcontext of Directors). Members of senior management (including certain of our named executive officers)market practices and individual circumstances and applies the appropriate judgment for the situation. We use governance practices that provide information to ourthe Compensation Committee with respectappropriate information to individual and divisional performance to assist our Compensation Committee in its analysis and evaluation of ourmake decisions, with no named executive officers and its recommendationsofficer able to the Boardmake decisions about his/
her own compensation. Our Chief Executive Officer
makes compensation recommendations to the Compensation Committee for all named executive officers outside of himself and additional information is
involved inprovided by senior management as appropriate. The Compensation Committee gathers performance information from management and additional information, as needed, from its outside consultant for the Chief Executive Officer compensation decisions and for purposes of establishing performance goals and metrics
except for the
President and Chief Operating Officer’s, the Executive Vice President and Chief Financial Officer’s and her own performance goals and metrics, through the review and approval of the annual operating plan and the individual management performance objectives from which the operating and performance targets for incentive compensation are derived.Our named executive officers for fiscal 2011 consisted of the following individuals:
Susan P. McGalla, our Chief Executive Officer;
Kenneth D. Seipel, our Presidentofficers' annual bonus and Chief Operating Officer;
performance-based equity incentive awards, where applicable.Steven H. Benrubi, our Executive Vice President, Chief Financial Officer and Corporate Secretary;
Harriet Bailiss-Sustarsic, our Executive Vice President and Chief Merchandise Officer, Wet Seal Division;
Sharon Hughes, our President and Chief Merchandise Officer, Arden B Division; and
Jon C. Kubo, our former Senior Vice President of E-Commerce and Chief Information Officer.
In July 2011, Mr. Kubo, our former Senior Vice President of E-Commerce and Chief Information Officer, resigned from his position as a Company executive and entered into a Transition and Separation Agreement with our Company pursuant to which Mr. Kubo served in the non-executive position of Senior Vice President of Information Technology through September 30, 2011.
Compensation Mix and Other Compensation
We allocate compensation between
short and long-term
and currently paid compensation
in a manner that is designed to ensure adequate base compensation to attract and retain qualified personnel,
provide a focus on achieving short-term business goals, while
also providing incentives designed to maximize long-term value for
us and our stockholders.
Overall, we seek to apply a compensation strategy of being aligned with the median of our competitive market, as discussed below. We provide cash compensation in the form of base salary to meet
basic competitive
salary requirements andpay requirements. We reward performance on an annual basis in the form of bonus compensation,
which is based upon achieving or surpassing specific short-term financial goalsgoals. The intent of the annual incentive program is to support a performance-based organizational culture that is aligned with achieving the Company’s objectives and strategic initiatives. We also provide non-cash compensation in the form of equity grants to provide a long-term incentive opportunity for our named executive officers, reward superior performance against specific objectives and long-term strategic goals and align the long-term interests of our named executive officers with those of our stockholders.
Use of Compensation Consultant
To assist the Compensation Committee in its review and determination of executive compensation, the Compensation Committee retained and sought advice from Mercer US, Inc., or Mercer, an outside consultant, during fiscal 2012 and to date in fiscal 2013. Mercer worked directly with the Compensation Committee in the roles and undertaking the responsibilities described above. During fiscal 2012, the Compensation Committee, as in past years, had responsibility for engaging Mercer and directed the nature of the communication and interchange of data between Mercer and management.
Peer Group Company Market Information
The Compensation Committee believes that given the specialized nature of our industry, we require executive talent with general fashion retail experience as well as specific and deep expertise in fast fashion. These specific skills and experience limit the pool of talent from which we recruit and also cause our employees to be highly valued and sought after in our industry. This results in a relatively narrowly defined peer group of companies from which we primarily look to for new executives. Further, this also results in these companies being our most direct competitors for the attraction and retention of executive talent with the skills and experience needed to create a successful business at our Company. The Compensation Committee compares our pay levels and programs to those of this peer group and uses this comparative data as a reference point in its review and determination of compensation upon appointment of our named executive officers.
Based on recommendations from Mercer, the Compensation Committee uses the following objective criteria in selecting its peer group from the range of other specialty retail companies:
•industry;
•companies that generally compare in market capitalization and/or revenue;
•our competitors for executive talent, and where possible;
•companies that compete directly with our products.
|
| |
Fiscal 2012 Peer Group or Peer Group (1) |
| Aeropostale, Inc. | JoS. A. Bank Clothiers, Inc. |
| bebe Stores, Inc. | New York & Company, Inc. |
| The Buckle, Inc. | Pacific Sunwear of California, Inc. |
| Cache, Inc. | rue 21, Inc. |
| Christopher & Banks Corporation | Zumiez, Inc. |
| Coldwater Creek Inc. | |
| Destination Maternity Corp. | |
| Hot Topic, Inc. | |
| Guess, Inc. | |
(1) Christopher & Banks Corporation, Coldwater Creek Inc., Destination Maternity Corp., and JoS. A. Bank Clothiers, Inc. were added in fiscal 2012 compensation decisions.
The market capitalization of our peer group ranged between $75 million and $2.8 billion determined as of January 31, 2012. The 2011 revenue of our Peer Group companies ranged between $224 million and $2.6 billion and derived from information included in filings with the SEC. For those Peer Group companies that do not have years ending in January, the 2011 revenue represents the revenues for the 2011 calendar year using information included in filings with the SEC. Our Company's market capitalization and revenue, as of the end of, and for, our fiscal 2011, was $328 million and $621 million, respectively. The median 2011 market capitalization and revenue of our Peer Group was $451 million and $761 million, respectively.
In addition to conducting comparisons of peer group data, our Compensation Committee considers other factors when setting executive base salary and determining future salary increases, as noted under "Determination of Base Salary and Future Salary Increases."
Stockholder Advisory Vote on Executive Compensation
At our 2012 Annual Meeting of Stockholders, our stockholders voted, in non-binding advisory votes, to approve the compensation of our named executive officers, and at our 2011 Annual Meeting of Stockholders, our stockholders voted, in non-binding advisory votes, (i) to approve the compensation of our named executive officers and (ii) in favor of having a non-binding stockholder vote on executive compensation once every year. Our Compensation Committee reviewed the result of the stockholders’ advisory vote on executive compensation. In light of the approval by a substantial majority of our stockholders of the compensation programs described in our 20112012 proxy statement (representing 93%96% of the shares represented in person or by proxy at the meeting and entitled to vote), our Compensation Committee did not implement changes to our executive compensation programs as a result of the stockholders’ advisory vote. The compensation for each of the Company’s named executive officers for Fiscal 20112012 reflects the continued improvements in each individual’s performance andperformance.
The next advisory vote on the
changes regarding the Company’s financial and operating performance.compensation of our named executive officers will be held at our 2014 Annual Meeting of Stockholders.
Determination of Base Salary and Future Salary Increases
When establishing the base salaries of our named executive officers, our Compensation Committee considers a number of factors, including:
individual responsibilities and performance expectations;
specialty retail and related trade salary rates provided by a compensation consultant and/or compensation surveys;
surveys, as noted previously;cost of living factors in the Southern California real estate market where our principal executive offices are located;
the named executive officer’s applicable experience; and
Base salaries of our named executive officers are
established at hiring and reviewed annually by our Compensation Committee, which assesses individual performance, contribution to our Company and level of responsibility and the Company’s financial position when determining whether the base salary adequately reflects the executive’s qualifications, experience, role and responsibilities in comparison to our market position.
In determining the level of cash compensation to be provided to Mr. Goodman upon his appointment as our Chief Executive Officer, our Compensation Committee reviewed the survey provided by Mercer with the base salaries received by chief executive officers of our Peer Group, as well as our Company's history of chief executive officers' base salaries, and considered Mr. Goodman's previous experience and compensation. Our Compensation Committee determined that the cash compensation program was fair in light of our Company’s market position and the growth conditions presented to Mr. Goodman and in comparison to the base salaries provided to chief executive officers by our Peer Group. In fiscal 2011, Ms. McGalla and2012, Mr. SeipelGoodman did not receive increasesan increase in theirhis base salaries as theysalary since he had only recently been appointed to their positionshis position in January 2011 and March 2011, respectively. Mr. Benrubi received a 4.5% merit2013.
In fiscal 2012, Ms. McGalla did not receive an increase to
hisher base salary
based upon the Board's assessment of her performance. Based upon Ms. McGalla's and
Mr. Kubo received a 2%the Compensation Committee's assessment of the other named executive officers' performance, they were provided with the following merit
increase to his base salaryincreases in April
20112012 in connection with merit increases granted to most corporate office employees.
Mr. Seipel received a 3.5% merit increase to his base salary and Mr. Benrubi received a 5.1% merit increase to his base salary. Ms. Sustarsic
was hired late in fiscal 2011 and was not eligible for anreceived a 1.0% merit increase
into her base salary
during fiscal 2011.and Ms. Cook received a 1.0% merit increase to her base salary, which both reflected a pro-rated amount based upon the amount of time they had been employed with our Company. Ms. Hughes did not receive
an increase to her base salary in fiscal 2011.a merit increase.
We use annual cash bonuses to reward and incentivize the superior short-term performance of our named executive officers, resulting in a performance-based organizational culture. Annual cash bonuses are determined based upon achieving certain levels of our overall Company financial performance metrics, divisional financial
performance metrics, or a combination of both, as well as achieving individual pre-determined performance/strategic objectives pertaining to completion of projects and/or goals specific to the functional area of the named executive officer. During the first quarter of each fiscal year, our Compensation Committee and our Chief Executive Officer establish financial performance goals and other metrics against which our named executive officers will be evaluated. Our Chief Executive Officer does not participate in any formal discussion with the Compensation Committee regarding decisions on herhis own performance goals and other metrics. We do not evaluate any of the individual performance/strategic objectives using any specific formula, and we do not assign any particular weight to any particular element within the individual performance/strategic objective.
Ms. McGalla and
Mr. Seipel were eachGoodman was not eligible for the annual cash bonus in Fiscal 2012 since he was not employed by our Company as of July 29, 2012, the first day of the fiscal 2012 third quarter, as outlined in the annual bonus plan. However, Mr. Goodman is eligible to receive a cash bonus in fiscal 2013 based upon achievingachievement of certain levels of total Company EBITDA, which is defined as earnings before interest, income taxes, depreciation and amortization and asset impairment charges,charges.
Ms. McGalla, Mr. Seipel and Mr. Benrubi were each eligible to receive a cash bonus based upon achieving certain levels of total Company EBITDA; comparable store sales increases, which represents the increase in sales from stores that were open all twelve months of the current and prior fiscal years or that passed the one-year anniversary of opening or re-opening during the fiscal year; and merchandise margins; as well as based upon development of a three-year strategic plan for the Company.Company for Ms. McGalla and Mr. Seipel and achieving a certain level of inventory shrink for Mr. Benrubi. However, a minimum total Company EBITDA target must be met before any annual cash bonuses described above can be attained. Ms. McGalla’s, Mr. Seipel’s and Mr. Seipel’sBenrubi's performance goals are measured solely using corporate performance since our CEO, COO and COOCFO have overall responsibility for our company.Company. For more detail on the performance goals, see theFiscal 20112012 Bonus table. Mr. Benrubi wasMses. Sustarsic and Hughes were eligible to receive a cash bonus based upon achieving certain levels of total Company EBITDA, comparable store sales increases, merchandise margins and inventory shrink. However, a minimum total Company EBITDA target must be met before any annual cash bonuses described above can be attained. Mr. Benrubi’s performance goals are measured solely using corporate performance since our CFO has overall responsibility for our company. For more detail on the performance goals, see theFiscal 2011 Bonus table.Ms. Sustarsic was not eligible for the annual cash bonus in fiscal 2011 since she was not employed by our Company prior to the bonus eligible cutoff date of July 31, 2011, the first day of the fiscal 2011 third quarter. However, Ms. Sustarsic is eligible to receive a cash bonus in fiscal 2012 based upon achievement of a combination of overall Company financial performance and the Wet Seal or Arden B divisional financial performance. Overall Company financial performance is based upon the achievement of certain levels of total Company EBITDA, while the Wet Seal or Arden B divisional financial performance is based upon the achievement of certain levels of divisional gross margin dollars for comparable stores (represents gross margin dollars from stores that were open all twelve months of the fiscal year and from the internet business), divisional comparable store sales increase, and pre-determined individual performance objectives. For fiscal 2012, Ms. Sustarsic’s and Hughes' individual performance objectives included achieving positive comparable store sales growth, improved merchandise margin, overseeing and managing the "Brand DNA" rollout, team development and support of corporate mission and values within each of their respective divisions. A minimum qualifying divisional EBITDA must also be met before any divisional bonus payout may occur. For more detail on the performance goals, see theFiscal 20112012 Bonus table.
Ms. HughesCook was eligible to receive a cash bonus based upon achieving a combination of overall Company financial performance and the Arden B divisional financial performance. Overall Company financial performance is based upon the achievement ofattaining certain levels of total Company EBITDA, while the Arden B divisional financial performance is based upon the achievement of certain levels of divisional gross margin dollars for comparable stores, divisional comparable store sales increase, and pre-determined individual performance objectives. For fiscal 2011, the individual performance objectives for Ms. Hughes were to achieve positive comparable store sales trends, provide significant contributions to the brand “DNA” project, and lead a cross functional team to develop merchandise strategy plans for the Arden B division. A minimum qualifying divisional EBITDA must also be met before any divisional bonus payout may occur. For more detail on the performance goals, see theFiscal 2011 Bonus table.Mr. Kubo was eligible to receive a cash bonus if certain targets of total Company EBITDA and comparable store sales increases, are achieved. In addition, Mr. Kubo was eligible to receive additional bonus amounts ifand pre-determined individual performance objectives were achieved.objectives. However, a minimum total Company EBITDA
target must be met before any annual cash bonuses described above can be attained. For fiscal 2011, Mr. Kubo’s2012, Ms. Cook's individual performance objectives included growthdevelopment of a three-year store operations strategy, process improvements, training and development of the E-Commerce business, supporting alignment of E-Commercefield and store strategies, optimizationteam on leadership, business management and selling, and support of E-Commerce toolscorporate mission and applications recently implemented, successful implementation of various information systems, identification of continued cost savings for our Company, and maintaining strong information systems security compliance.values. For more detail on the performance goals, see theFiscal 20112012 Bonus table.
Our Compensation Committee believes that tying annual cash bonuses to both Company and divisional financial performance aligns the interests of management with stockholders and encourages intensive efforts to attain and increase profitability throughout our Company. Our Compensation Committee also believes that tying a portion of annual cash bonuses to pre-determined individual performance/strategic objectives encourages executives to focus on the key operational goals of the functional areas they manage. Set forth in the following chart is a description of the cash bonus guidelines for each of our named executive officers.
| | | | | | | | | | |
Named Executive Officers | | Fiscal 2011
Bonus Calculation | | Target
Percentage
of Base
Salary | | | Maximum
Percentage
of Base
Salary | |
Susan P. McGalla | | Based upon achieving certain total Company EBITDA, comparable store sales increase targets, merchandise margin targets, and preparation of a Company strategic plan (2) | | | 100 | % | | | 200 | % |
| | | |
Kenneth D. Seipel | | Based upon achieving certain total Company EBITDA, comparable store sales increase targets, merchandise margin targets, and preparation of a Company strategic plan (2) | | | 75 | % | | | 150 | % |
| | | |
Steven H. Benrubi | | Based upon achieving certain total Company EBITDA, comparable store sales increase targets, merchandise margin targets, and inventory shrink targets (2) | | | 50 | % | | | 100 | % |
| | | |
Harriet Bailiss-Sustarsic (1) | | 80% based upon achieving a minimum qualifying Wet Seal Division EBITDA as well as certain Wet Seal division merchandise margin dollars for comparable stores and comparable store sales increase, and individual pre-determined performance objectives; 20% based upon achieving certain total Company EBITDA targets (2) | | | 50 | % | | | 100 | % |
| | | |
Sharon Hughes | | 80% based upon achieving a minimum qualifying Arden B Division EBITDA as well as certain Arden B division merchandise margin dollars for comparable stores and comparable store sales increase, and individual pre-determined performance objectives; 20% based upon achieving certain total Company EBITDA targets (2) | | | 50 | % | | | 100 | % |
| | | |
Jon C. Kubo | | Based upon achieving certain total Company EBITDA and comparable store sales increase targets, and individual pre-determined performance objectives (2) | | | 40 | % | | | 80 | % |
|
| | | | | |
| Named Executive Officers | Fiscal 2012
Bonus Calculation | | Target Percentage of Base Salary | | Maximum Percentage of Base Salary |
| John D. Goodman (1) | N/A | | N/A | | N/A |
| Susan P. McGalla | Based upon achieving total Company EBITDA (50%), comparable store sales increase (30%) and merchandise margin targets (10%), and preparation of a Company three-year strategic plan (10%) (2) | | 100% | | 200% |
| Kenneth D. Seipel | Based upon achieving total Company EBITDA (50%), comparable store sales increase (30%), merchandise margin targets (10%), and preparation of a Company three-year strategic plan (10%) (2) | | 75% | | 150% |
| Steven H. Benrubi | Based upon achieving total Company EBITDA (50%), comparable store sales increase (30%), merchandise margin targets (10%), and inventory shrink targets (10%) (2) | | 50% | | 100% |
| Harriet Bailiss-Sustarsic | 80% based upon achieving a minimum qualifying Wet Seal Division EBITDA as well as Wet Seal division merchandise margin dollars for comparable stores and comparable store sales increase targets, and individual pre-determined performance objectives; 20% based upon achieving certain total Company EBITDA targets (2) | | 50% | | 100% |
| Sharon Hughes | 80% based upon achieving a minimum qualifying Arden B Division EBITDA as well as Arden B division merchandise margin dollars for comparable stores and comparable store sales increase targets, and individual pre-determined performance objectives; 20% based upon achieving certain total Company EBITDA targets (2) | | 50% | | 100% |
| Barbara Cook | Based upon achieving total Company EBITDA (50%) and comparable store sales increase targets (30%), and individual pre-determined performance objectives (20%) (2) | | 40% | | 80% |
_______________________
| |
| (1) | Ms. SustarsicMr. Goodman was not eligible for the annual cash bonus since shehe was not employed by our Company as of July 31, 2011,29, 2012, the first day of the fiscal 20112012 third quarter, as outlined in the annual bonus plan. See “Summary of Employment Agreements” for a further description of the bonus arrangement for Ms. Sustarsic.Mr. Goodman.
|
| |
| (2) | A minimum total Company EBITDA target must be met before any annual cash bonus related to other targets or objectives can be attained. |
Our Compensation Committee, with the assistance of management, reviews our Company’s consolidated and divisional financial performance and calculates bonuses based upon the attainment of performance objectives that are set during the first quarter of each fiscal year and that are approved by the Board of Directors. Our annual bonus plan requires minimum total Company and/or divisional EBITDA to be met before any annual cash bonuses can be attained. In fiscal 2011, there2012, none of the respective goals were met, so no awarded annualperformance-based bonuses were awarded. Our actual results were as follows: consolidated EBITDA was ($18,740), Wet Seal Division EBITDA was ($9,796), Arden B Division EBITDA was ($8,944), consolidated comparable store sales percentage was (10.1%), Wet Seal Division comparable store sales percentage was (10.1%), and Arden B Division comparable store sales percentage was (9.9%).
In light of leadership changes and business challenges in fiscal 2012, the Company implemented an Employee Retention Plan (the "Retention Plan"), approved by our Board of Directors effective August 19, 2012, for our senior leadership and certain other key team members to
retain the talent critical to executing upon our
strategy and enhancing shareholder value. The Retention Plan was designed to help provide stability and continuity for the Company during an important transition period. The Retention Plan provides for a cash payment to each of the eligible employees, payable August 19, 2013, provided the employee is still employed by us, subject to acceleration upon certain terminations following a change in control. Mses. Sustarsic and Cook were each provided a $75,000 cash award, payable August 19, 2013, under the Retention Plan. As Mses. Sustarsic and Cook both resigned from their positions prior to the August 19, 2013 achievement date, they each forfeited their $75,000 cash awards. No other named executive
officers.During fiscal 2011, Mr. Benrubi was paid $50,000 ofofficers were provided awards under the $75,000 retention bonus provided in fiscal 2010, per his employment agreement. Mr. Benrubi would be required to reimburse a pro-rata amount of his retention bonus if he would leave the Company prior the end of his three year employment term, per his employment agreement. During fiscal 2011, Mr. Kubo forfeited $25,000, which constitutes the unpaid portion of his $50,000 promotion bonus awarded in fiscal 2010, upon his termination of employment with the Company on July 18, 2011 and in accordance with his Transition and Separation Agreement. Upon Mr. Kubo’s termination, and in accordance with his Transition and Separation Agreement, reimbursement of a pro-rata portion of the $25,000 promotion bonus paid to him in fiscal 2010 was waived.
Retention Plan.
Fiscal 20112012 Bonus | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Consolidated
Target
EBITDA (1) | | | Consolidated
Achieved
EBITDA (1) | | | Consolidated
Target
Comparable
Store Sales
Percentage | | | Consolidated
Achieved
Comparable
Store Sales
Percentage | | | Consolidated
Target Shrink % | | | Consolidated
Achieved
Shrink % | | | Personal
Performance
Objectives | | | Bonus
Payment
Target | | | Bonus
Payment | | | % of
Target
Payment
Bonus | |
| | | (thousands) | | | (thousands) | | | | | | | | | | | | | | | | | | (thousands) | | | (thousands) | | | | |
Susan P. McGalla (2) | | $ | 54,242 | | | $ | 49,186 | | | | 5.0 | % | | | 1.2 | % | | | — | | | | — | | | | — | | | $ | 800 | | | | — | | | | — | |
Kenneth D. Seipel (2) | | $ | 54,242 | | | $ | 49,186 | | | | 5.0 | % | | | 1.2 | % | | | — | | | | — | | | | — | | | $ | 431 | | | | — | | | | — | |
Steven H. Benrubi (2) | | $ | 54,242 | | | $ | 49,186 | | | | 5.0 | % | | | 1.2 | % | | | 3.0 | % | | | 3.2 | % | | | — | | | $ | 196 | | | | — | | | | — | |
Harriet Bailiss-Sustarsic (3) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Sharon Hughes | | $ | 54,242 | | | $ | 49,186 | | | | 5.0 | % | | | 1.2 | % | | | — | | | | — | | | | 25 | % | | $ | 48 | | | | — | | | | — | |
Jon C. Kubo | | $ | 54,242 | | | $ | 49,186 | | | | 5.0 | % | | | 1.2 | % | | | — | | | | — | | | | — | | | $ | 139 | | | | — | | | | — | |
|
| | | | | | | | | | | | | | |
| Name | | Consolidated Minimum EBITDA (1) | | Consolidated Target EBITDA (1) | | Consolidated Maximum EBITDA (1) | | Consolidated Minimum Comparable Store Sales Percentage Increase (2) | | Consolidated Target Comparable Store Sales Percentage Increase (2) | | Consolidated Maximum Comparable Store Sales Percentage Increase (2) | | Bonus Payment Target |
| | | (thousands) | | (thousands) | | (thousands) | | | | | | | | (thousands) |
| John D. Goodman (3) | | — | | — | | — | | — | | — | | — | | — |
| Susan P. McGalla | | $57,507 | | $60,319 | | $70,123 | | 4.2% | | 5.4% | | 10.0% | | $800 |
| Kenneth D. Seipel | | $57,507 | | $60,319 | | $70,123 | | 4.2% | | 5.4% | | 10.0% | | $446 |
| Steven H. Benrubi | | $57,507 | | $60,319 | | $70,123 | | 4.2% | | 5.4% | | 10.0% | | $206 |
| Harriet Bailiss-Sustarsic | | $57,507 | | $60,319 | | $70,123 | | 4.2% | | 5.4% | | 10.0% | | $40 |
| Sharon Hughes | | $57,507 | | $60,319 | | $70,123 | | 4.2% | | 5.4% | | 10.0% | | $48 |
| Barbara Cook | | $57,507 | | $60,319 | | $70,123 | | 4.2% | | 5.4% | | 10.0% | | $141 |
|
| | | | | | | | | |
| Name | Wet Seal Division Minimum Qualifying EBITDA (1) | | Wet Seal Division Minimum Comparable Store Sales Percentage Increase (2) | | Wet Seal Division Target Comparable Store Sales Percentage Increase (2) | | Wet Seal Division Maximum Comparable Store Sales Percentage Increase (2) | | Bonus Payment Target |
| | (thousands) | | | | | | | | (thousands) |
| Harriet Bailiss-Sustarsic | $55,425 | | 4.0% | | 5.3% | | 9.9% | | $161 |
|
| | | | | | | | | | | | |
| Name | Arden B Division Minimum Qualifying EBITDA (1) | | Arden B Division Minimum Comparable Store Sales Percentage Increase (2) | | Arden B Division Target Comparable Store Sales Percentage Increase (2) | | Arden B Division Maximum Comparable Store Sales Percentage Increase (2) | | Bonus Payment Target |
| | (thousands) | | | | | | | | (thousands) |
| Sharon Hughes | $ | 2,061 |
| | 5.3 | % | | 6.3% | | 10.5% | | $194 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name
| | Wet Seal
Division
Minimum
Qualifying
EBITDA
(1)
| | | Wet Seal
Division
Achieved
EBITDA
(1)
| | | Wet Seal
Division
Target
Comparable
Store Sales
Percentage
| | | Wet Seal
Division
Achieved
Comparable
Store Sales
Percentage
| | | Wet Seal
Division
Target
Merchandise
Margin
Dollars for
Comparable
Stores
| | | Wet Seal
Division
Achieved
Merchandise
Margin
Dollars for
Comparable
Stores
| | | Bonus
Payment
Target
| | | Bonus
Payment
| | | % of
Target
Payment
Bonus
| |
| | (thousands) | | | (thousands) | | | | | | | | | (thousands) | | | (thousands) | | | (thousands) | | | (thousands) | | | | |
Harriet Bailiss-Sustarsic (3)
| | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Arden B
Division
Minimum
Qualifying
EBITDA
(1) | | | Arden B
Division
Achieved
EBITDA
(1) | | | Arden B
Division
Target
Comparable
Store Sales
Percentage | | | Arden B
Division
Achieved
Comparable
Store Sales
Percentage | | | Arden B
Division
Target
Merchandise
Margin
Dollars for
Comparable
Stores | | | Arden B
Division
Achieved
Merchandise
Margin
Dollars for
Comparable
Stores | | | Bonus
Payment
Target | | | Bonus
Payment | | | % of
Target
Payment
Bonus | |
| | | (thousands) | | | (thousands) | | | | | | | | | (thousands) | | | (thousands) | | | (thousands) | | | (thousands) | | | | |
Sharon Hughes | | $ | 7,163 | | | $ | 761 | | | | 4.3 | % | | | -3.4 | % | | $ | 61,355 | | | $ | 53,757 | | | $ | 194 | | | | — | | | | — | |
| (1) | EBITDA is defined as earnings before interest, income taxes, depreciation and amortization and asset impairment charges. |
(2) | During fiscal 2011, Ms. Consolidated EBITDA performance objectives represent 50% of potential bonus payouts, if achieved, for Mses. McGalla Mr.and Cook and Messrs. Seipel and Mr. BenrubiBenrubi. Consolidated EBITDA performance objectives represent 20% of potential bonus payout, if achieved, their merchandise margin targets. However, as thefor Mses. Sustarsic and Hughes. The divisional minimum total Companyqualifying EBITDA targetmetrics for Mses. Sustarsic and Hughes represents an incentive qualifier that must be achieved before any annual cashpotential bonus related to other targets or objectivespayout can be attained Ms. McGalla, Mr. Seipel, and Mr. Benrubi did not achieve a cash bonus in fiscal 2011.related to their other performance objectives. |
| |
| (2) | The consolidated comparable store sales percentage increase performance objectives for Mses. McGalla and Cook and Messrs. Seipel and Benrubi represent 30% of their potential bonus payouts, if achieved. The divisional comparable store sales percentage increase performance objectives for Mses. Sustarsic and Hughes represent 24% of their potential bonus payouts, if achieved. |
| |
| (3) | Ms. SustarsicMr. Goodman was not eligible for the annual cash bonus since shehe was not employed by our Company as of July 31, 2011,29, 2012, the first day of the fiscal 20112012 third quarter, as outlined in the annual bonus plan. See“Summary of Employment Agreements” for a further description of the bonus arrangement for Ms. Sustarsic.Mr. Goodman.
|
In addition to the above performance objectives, Mses. McGalla, Sustarsic and Hughes and Messrs. Seipel and Benrubi were also provided minimum, target and maximum consolidated or divisional merchandise margin metrics in fiscal 2012, representing 10% of Ms. McGalla's and Messrs. Seipel's and Benrubi's potential bonus payouts and 40% of Mses. Sustarsic's and Hughes' potential bonus payouts, if achieved. The merchandise margin metrics were set by our Compensation Committee and approved by the Board of Directors at levels they believed would have provided significant improvement to our business, if attained, and would require significant effort on the part of the executive to attain. We believe our consolidated and divisional merchandise margins are sensitive information that we do not disclose publicly and would present a competitive disadvantage if we were to do so. During fiscal 2012, the consolidated merchandise margin and divisional merchandise margin metrics were not attained. In addition, as the minimum consolidated EBITDA was not attained, measurement of this goal was not applicable.
Ms. McGalla's and Mr. Seipel's fiscal 2012 performance objectives also contained the completion of a three-year strategic plan for our Company to support the improvement and future growth of the business, representing 10% of their potential bonus payouts if completed. Our Board of Directors determined that this performance objective was not achieved. In addition, as the minimum consolidated EBITDA was not attained, measurement of this goal was not applicable.
Mr. Benrubi's fiscal 2012 performance objectives also contained a consolidated inventory shrink target, representing 10% of his potential bonus payout if achieved. This goal was set by our Compensation Committee and approved by our Board of Directors at a level they believed would demonstrate continued improvement in our Company's efforts to reduce the level of inventory shrink experienced and would require significant effort to be attained. During fiscal 2012, the consolidated inventory shrink target was not achieved. In addition, as the minimum consolidated EBITDA was not attained, measurement of this goal was not applicable.
Mses. Sustarsic's, Hughes' and Cook's fiscal 2012 performance objectives also contained pre-determined individual performance objectives, representing 16% of Mses. Sustarsic's and Hughes' and 20% of Ms. Cook's potential bonus payouts if achieved, and as previously outlined above. As the minimum consolidated or divisional EBITDA performance objectives were not attained, measurement of these goals was not applicable.
Typically, upon commencement of our named executive officers’ employment, we
have granted these individualsgrant our named executive officers equity awards under our 2005 Stock Incentive Plan (the “Plan”)
, 2000 Stock Incentive Plan, or 1996 Long-Term Incentive Plan, (collectively, the “Incentive Plans”) in the form of stock options, restricted stock and/
or performance shares. We previously granted awards under our 1996 Long-Term Incentive Plan and 2000 Stock Incentive Plan that remain unvested and/or unexercised as of January 28, 2012; however, the 1996 Plan expired during fiscal 2006 and the 2000 plan expired during 2009, and no further share awards may be granted under the 1996 or 2000 Plans. These equity awards vest ratably over specified periods and/or vest upon the attainment of certain market conditions, as the case may be. Our Compensation Committee believes that stock options, restricted stock and performance shares provide a motivating form of incentive compensation while serving to align the interest of our stockholders and management.
In granting
stock options, restricted stock,
and performance shares,
and stock options, our Compensation Committee takes into consideration the anticipated long-term contributions of an individual to our potential growth and success, as well as the number of
stock options, restricted stock and/or performance shares granted to similarly situated executives at similar companies.
Compensation Packages For Our Named Executive OfficersCEO Compensation
Prior to Ms. McGalla’s appointment as Chief Executive Officer on January 18, 2011, or theMcGalla Appointment Date, our Compensation Committee evaluated the equity incentive to be provided to Mr. Goodman in relation to the overall compensation package to be provided to him and sought advice and a survey of equity compensation arrangements from our compensation consultants at Mercer LLP, orMercer, when evaluating the compensation packagethat included equity incentive provided to provide Ms. McGalla.chief executive officers at companies within our Peer Group. Our Compensation Committee desired to have a compensation arrangement that offered significantprovided appropriate equity incentives for demonstrating personal commitment to improving our financial performance and increasing our stock price. Based upon suchprice and was reasonable with regard to the advice and surveyequity incentives provided by Mercer, Ms. McGalla received a grant of 1,000,000 performancecompanies within our Peer Group. Accordingly, upon Mr. Goodman's appointment as the Chief Executive Officer on January 7, 2013 (his "Appointment Date"), he was granted 174,355 restricted shares subject to time-based vesting. In addition, Mr. Goodman received our commitment to grant him a target number of performance shares valued at $720,000, subject to time-based vesting and performance targets to be set by the Board of Directors no later than April 30, 2013. Mr. Goodman was also provided with our commitment to grant him one share of restricted stock, with time-based vesting terms, on the McGalla Appointment Date. In addition, on the McGalla Appointment Date, Ms. McGalla was granted 500,000 restricted shares and an option to acquire up to 1,200,000 sharesfor each share of our Class A common stock, both subjectCommon Stock purchased by him, within the first ninety days of his employment, up to time-based vesting terms. For a more detailed discussionmaximum aggregate purchase price of the terms of her equity awards, see “Summary of Employment Agreements and Potential Payments Upon Termination or a Change of Control.” In addition to Ms. McGalla’s equity incentive arrangement, our Compensation Committee reviewed the survey provided by Mercer, with consideration of Ms. McGalla’s previous experience and compensation, to evaluate the level of cash compensation to be provided to Ms. McGalla in relation to the chief executive officers of Aeropostale, Inc., bebe Stores, Inc., The Buckle, Inc., Cache, Inc., Guess, Inc., Hot Topic, Inc., New York & Company, Inc., Pacific Sunwear of California, Inc., rue 21, Inc. and Zumiez, Inc.$650,000. Our Compensation Committeecommittee determined that the cash and equity compensation, programalong with the cash compensation, was fair in light of our Company’sCompany's market position and the growth conditions presented to Ms. McGalla.
PresidentMr. Goodman and COO Compensation
Upon Mr. Seipel’s appointment as President and Chief Operating Officer on March 28, 2011, or theSeipel Appointment Date, our Compensation Committee utilized the compensation package providedin comparison to Ms. McGalla, as well as compensation packages for chief operating officers in similar companies, as a basis for determining the equity compensation arrangement for Mr. Seipel.Our Compensation Committee desired to have a compensation arrangement that offered significant equity incentives for improvingprovided by companies in our financial performance and increasing our stock price. Accordingly, Mr. Seipel received a grant of 400,000 performance shares, subject to performance and time-based vesting terms on April 4, 2011. Also on April 4, 2011, Mr. Seipel was granted 250,000 restricted shares. In addition, on the Seipel Appointment Date, Mr. Seipel was granted an option to acquire up to 400,000 shares of our Class A common stock, both subject to time-based vesting terms.Peer Group. For a more detailed discussion of the terms of his equity awards, see “Summary of Employment Agreements Agreements" and Potential "Potential Payments Upon Termination or a Change of Control.” Our
On August 19, 2012, our Compensation Committee
considered Mr. Seipel’s previous experiencegranted Mses. Sustarsic and
compensation to evaluate the level of cash compensation to be provided to Mr. Seipel. Our Compensation Committee determined that the cash and equity compensation program was fair in light of our Company’s market position and the growth conditions presented to Mr. Seipel.CFO Compensation
Mr. Benrubi’s employment contract was renewed in August 2010. Prior to such renewal, the Compensation Committee sought advice from Mercer as to CFO compensation packages for comparable companies and considered Mr. Benrubi’s performance over his initial contract term. Based on this, the Compensation Committee entered into a new employment agreement with Mr. Benrubi pursuant to which Mr. Benrubi’s annual cash compensation was increased to $375,000, effective August 3, 2010, the effective date of his new employment agreement, or theBenrubi Effective Date. Also per his new employment agreement, on August 3, 2010, Mr. Benrubi was granted 90,000Cook each 10,000 restricted shares, and an option to acquire up to 90,000 shares of our Class A common stock, both subject to time-based vesting terms. For a more detailed discussionvesting. These grants were made in conjunction with the annual equity award grant to stock eligible employees typically made at that time of the terms of his equity awards, see “Summary of Employment Agreements and Potential Payments Upon Termination or a Change of Control.” In light of the announcement of Mr. Edmond Thomas’ departure as President and Chief Executive Officer in late 2010, and the important role Mr. Benrubi was to have during the Company’s leadership transition period, theyear. The Compensation Committee also believed it was necessarygranted restricted shares to Mses. Sustarsic and Cook to provide a $75,000 retention bonus to Mr. Benrubi payable as follows: $25,000incentives that would provide continued focus on the Benrubi Effective Date and $50,000 twelve months from the Benrubi Effective Date provided Mr. Benrubi was still employed with the Company on such date. Mr. Benrubi would be required to reimburse a pro-rata amount of his retention bonus if he would leave the Company prior the end of his three year employment term, per his employment agreement. Mr. Benrubi received a merit increase to his base salary to $391,875 in April 2011 in connection with merit increases granted to most corporate office employees. Our Compensation Committee determined that his overall compensation package, including the fiscal 2011 base salary increase, was fair in light of our Company’s market position and Mr. Benrubi’s responsibility for the Company and years of service.
Wet Seal CMO Compensation
In evaluating the compensation package to be offered to Ms. Sustarsic, our Compensation Committee considered Ms. Sustarsic’s vast amount of specialty retail experience, leadership roles held throughout her career, and compensation packages for divisional chief merchandise officers in similar companies. Our Compensation Committee also considered the compensation packages granted to previous divisional chief merchants within our Company. Our Compensation Committee also desired to provide Ms. Sustarsic a compensation arrangement that offered significant equity incentives for improving the financial performance of our Company and an improvedthe performance of our Company’sCompany's stock price. Accordingly, upon Ms. Sustarsic’s appointment as the Chief Merchandise Officer of our Wet Seal Division in November 2011, she received a grant of an optionprice, and to acquire up to 125,000 shares of our Class A common stock, which is subject to time-based vesting terms. For a more detailed discussion of the terms of her equity awards, see “Summary of Employment Agreements and Potential Payments Upon Termination or a Change of Control.” Ms. Sustarsic was also provided a base salary of $400,000.Our Compensation Committee determined that the cash and equity compensation program was fair in light of our Company’s market position and the scope of responsibilities of Ms. Sustarsic’s role.
Arden B President and CMO Compensation
In evaluating the compensation package to be offered to Ms. Hughes, our Compensation Committee considered Ms. Hughes’ extensive apparel industry experience, her performance in 2008 and 2009serve as a consultant serving the Arden B division, her past leadership roles withretention tool during a pivotal time for our Company as well as compensation packages for divisional presidentswhen leadership stability and chief merchandise officers in similar companies. Our Compensation Committee also considered the compensation packages grantedcontinuity were critical to previous divisional chief merchants withinexecuting upon our Company and the scope of responsibilities of Ms. Hughes’ role as President, in additionreturn to Chief Merchandise Officer, of our Arden B Division. Our Compensation Committee also desired to provide Ms. Hughes a compensation arrangement that offered significant equity incentives for improving the financial performance of our Company and an improved performance of our Company’s stock price. Accordingly, upon Ms. Hughes’ appointment as the President and Chief Merchandise Officer of our Arden B Division in November 2009, she received a grant of 54,000 performance shares, which are subject to performance and time-based vesting terms. In addition, on the
date of her appointment, Ms. Hughes was granted an option to acquire up to 85,000 shares of our Class A common stock, which is subject to time-based vesting terms. For a more detailed discussion of the terms of her equity awards, see “Summary of Employment Agreements and Potential Payments Upon Termination or a Change of Control.” On November 19, 2010, Ms. Hughes’ base salary increased to $485,000, in accordance with the terms of her employment agreement. Ms. Hughes’ was not provided any salary increases during fiscal 2011.Our Compensation Committee determined that the cash and equity compensation program was fair in light of our Company’s market position and the scope of responsibilities of Ms. Hughes’ role.
CIO Compensation
At the time of the appointment of Mr. Kubo as our Vice President and Chief Information Officer in March 2005, our Company was actively engaged in a turnaround strategy to improve our financial performance and results of operations. A fundamental component of our operational and financial strategies focused upon identifying and retaining talented senior management personnel. Compensation granted to Mr. Kubo reflected how difficult it was to attract and retain talent during such a challenging period for our Company.
In evaluating modifications to the compensation package for Mr. Kubo, based on consultation with our Chief Executive Officer, our Compensation Committee considered the efficiency and effectiveness with which Mr. Kubo lead our information technology organization, as well as Mr. Kubo’s degree of success in accomplishing the personal performance objectives established for him on an annual basis, which included execution of information systems development plans on time and within budget in support of the technology elements of various operations initiatives throughout the year, and growing our E-Commerce business. As a result of the increased focus on the Company’s E-Commerce growth strategy and Mr. Kubo’s role in achieving such strategy, the Compensation Committee determined it was appropriate to enter into an employment agreement with Mr. Kubo on August 26, 2010, or theKubo Effective Date, and promote him to Senior Vice President of E-Commerce and CIO. Under Mr. Kubo’s employment agreement, he was provided an increase in his annual cash compensation to $340,000 and a promotion bonus of $50,000 payable as follows: $25,000 on the Kubo Effective Date, and $25,000 twelve months from the Kubo Effective Date, provided that Mr. Kubo was still employed by the Company on such date. Mr. Kubo would be required to reimburse a pro-rata amount of his promotion bonus if he would leave the Company prior to the end of this three year employment term, per his employment agreement. During fiscal 2011, Mr. Kubo’s employment was terminated. In accordance with his Transition and Separation Agreement, Mr. Kubo was not provided the remaining $25,000 of his promotion bonus and was not required to reimburse a pro-rata amount of the $25,000 related to his promotion bonus paid in fiscal 2010.
In addition, Mr. Kubo was granted an option to acquire up to 75,000 shares of our Class A common stock, on the Kubo Effective Date, which was subject to time-based vesting terms. For a more detailed discussion of the terms of his equity awards, see “Summary of Employment Agreements andPotential Payments Upon a Termination or Change of Control.” Also, in April 2011, Mr. Kubo received a 2% merit increase in his annual base salary related to his performance over the previous year.
fast fashion strategy.
Perquisites and Personal Benefits
Our named executive officers also participate in life insurance, health, disability and major medical insurance plans, and such other employee benefit plans and programs and perquisites as we may from time to time maintain for the benefit of our employees. Under the 401(k) Plan, we provide matching contributions to employees based on such employee’s annual eligible compensation.
We determine perquisites on a case-by-case basis and will provide a perquisite to a named executive officer when we believe it is necessary to attract or retain the executive officer. We believe that providing these benefits is a relatively inexpensive way to enhance the competitiveness of the executive’s compensation package. In fiscal 2011, Ms. McGalla was provided with Company paid car allowance and relocation allowance in connection withher commencement of employment with the Company.2012, Mr. SeipelGoodman was provided with a Company paid car allowance (pro-rated for the number of months employed in fiscal 2011) and temporary housing and relocationtravel allowance in connection with his commencement of employment with the Company. Ms. McGalla, Mr. Seipel, and Ms. Sustarsic were provided with Company paid car allowances. Ms. Hughes was provided with a Company paid car lease and car expense. Ms. Cook was provided with a Company paid car allowance, (pro-rated for the months employed in fiscal 2011), relocation allowance (a portion of which is subject to pro-rata reimbursement by Ms. SustarsicCook if she would leave the Company within the first year of her employment), and temporary housing in connection with her commencement of employment with the Company. Ms. Hughes was provided with a Company paid car lease and car allowances. For a more detailed discussion of the perquisites and personal benefits provided to our named executive officers, see the “Summary Compensation Table Table" and "Summary of Employment Agreements.” While we currently intend to maintain our current benefits and perquisites for our named executive officers, our Compensation Committee may revise, amend or add to these benefit programs at its discretion.
Limitations on Deductibility of Executive Compensation
Under Section 162(m) of the Internal Revenue Code, we may not be able to deduct certain forms of compensation in excess of $1,000,000 paid to certain executive officers. Our Compensation Committee believes that it is generally in our best interests to satisfy the requirements for deductibility under Section 162(m). Accordingly, our Compensation Committee has taken appropriate actions, to the extent it believes feasible, to preserve the deductibility of annual incentive and long-term performance awards. However, notwithstanding this general policy, our Compensation Committee also believes there may be circumstances in which our interests are best served by maintaining flexibility in the way compensation is provided, whether or not compensation is fully deductible under Section 162(m).
Employment Agreements; Severance and Change of Control
We have entered into written employment agreements with Ms. McGalla, Mr. Seipel, Mr. Benrubi, Ms. Hughes, Ms. SustarsicGoodman and Mr. Kubo.Benrubi. The employment agreements provide for the payment of additional and future compensation to such executive officers in the event of certain types of terminations and, in the case of Ms. McGalla’s and Mr. Seipel’sGoodman's employment agreements,agreement, in the event of a change of control of our Company. In addition, all these individuals are parties to incentive compensation award agreements that also provide, in some cases, for acceleration of equity in connection with termination events and/or a change of control of our Company. We believe that severance protections play a valuable role in attracting and retaining key talent. Accordingly, we provide such protections for our named executive officers. We also believe that the occurrence, or potential occurrence, of a change of control transaction can create uncertainty and distraction for our named executive officers, and in particular our Chief Executive Officer and Chief Operating Officer. To encourage Ms. McGalla and Mr. SeipelGoodman to remain employed with us during such an important time, theirhis employment agreements provideagreement provides for enhanced severance in the event of certain terminations following a change of control. In addition, certain of our named executive officers would be entitled to accelerated vesting of their outstanding equity awards upon a change of control. For a detailed description of these agreements and the potential amounts that we may be obligated to pay and/or the terms upon which unvested incentive equity is accelerated, see “Summary of Employment Agreements.”Agreements" and "Potential Payments Upon Termination or a Change of Control."
We previously entered into anemployment agreements with Ms. McGalla, Mr. Seipel, Ms. Sustarsic, Ms. Hughes and Ms. Cook, which were terminated as a result of the termination and/or resignation of their employment with our Company, aside for Ms. Hughes, whose employment agreement with Mr. Kubo. Upon Mr. Kubo’s resignation on July 18, 2011, we entered into a Transition and Separation Agreement whereby Mr. Kubo’s employmentexpired during our 2012 fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except as disclosed below, during the fiscal year ended February 2, 2013, no member of our Compensation Committee (i) was to continue withan officer or employee of the Company until September 30, 2011 (“Termination Date”), or as earlier terminated byany of our subsidiaries; (ii) was formerly an officer of the Company inor any of our subsidiaries, or (iii) had any relationship requiring disclosure under the capacitySEC’s rules governing disclosure of related person transactions (Item 404 of Regulation S-K). Additionally, no executive officer of the Company served as a non-executive Seniormember of the board of directors or compensation committee of any other entity that had one or more executive officers serving as members of our Board of Directors or Compensation Committee during the fiscal year ended February 2, 2013.
From 1992 to 2003, Ms. Kathy Bronstein served as the Chief Executive Officer and Vice Chairperson of the Company and from 1985 to 1992, Ms. Bronstein served as an Executive Vice President of Information Technology. Mr. Kubo servedthe Company. Ms. Bronstein does not currently receive any payments from the Company other than for her services as a director.
COMPENSATION COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this
role until his Termination Date.Proxy Statement and, through incorporation by reference from this Proxy Statement, the 2012 Annual Report.
The Compensation Committee
For fiscal 2012:
Dorrit M. Bern (Chair)
Kathy Bronstein
Lynda J. Davey
Mindy C. Meads
John S. Mills
The foregoing Report of our Compensation Committee does not constitute soliciting materials and shall not be deemed filed or incorporated by reference into any other filing by our Company with the SEC, except to the extent specifically incorporated by reference.
RISK ASSESSMENT AND COMPENSATION PRACTICES
Our management assessed and discussed with our Compensation Committee and Board of Directors the Company’s compensation policies and practices for our employees as they relate to our risk management. Based upon this assessment, we believe that any risks arising from such policies and practices are not reasonably likely to have a material adverse effect on the Company in the future.
Our employees’ base salaries are fixed in amount and thus we do not believe that they encourage excessive risk-taking. While performance-based cash bonuses focus on achievement of short-term or annual goals, which may encourage the taking of short-term risks at the expense of long-term results, we believe that our internal controls help mitigate this risk. Also, our performance-based cash bonuses are limited, representing a small portion of the total compensation opportunities available to most employees. We also believe that our performance-based cash bonuses appropriately balance risk and the desire to focus our employees on specific short-term goals important to our success, and do not encourage unnecessary or excessive risk-taking.
A significant
proportionportion of the compensation provided to our employees is in the form of long-term equity-based incentives that are important to help further align our employees’ interests with those of our stockholders. We do not believe that these equity-based incentives encourage unnecessary or excessive risk taking because their ultimate value is tied to our stock price. In addition, we generally stagger grants of equity-based awards and subject them to long-term vesting schedules to help ensure that employees have significant value tied to the long-term performance of our common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended January 28, 2012, no member of our Compensation Committee (i) was an officer or employee of the Company or any of our subsidiaries; (ii) was formerly an officer of the Company or any of our subsidiaries, or (iii) had any relationship requiring disclosure under the SEC’s rules governing disclosure of related person transactions (Item 404 of Regulation S-K). Additionally, no executive officer of the Company served as a member of the board of directors or compensation committee of any other entity that had one or more executive officers serving as members of our Board of Directors or Compensation Committee during the fiscal year ended January 28, 2012.
COMPENSATION COMMITTEE REPORT
Our Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussion, our Compensation Committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and, through incorporation by reference from this Proxy Statement, the 2011 Annual Report.
The Compensation Committee
For fiscal 2011:
Henry D. Winterstern (Chairman)
Jonathan Duskin
Sidney M. Horn
Harold D. Kahn
The foregoing Report of our Compensation Committee does not constitute soliciting materials and shall not be deemed filed or incorporated by reference into any other filing by our Company with the SEC, except to the extent specifically incorporated by reference.
COMPENSATION AND AWARD TABLES
The information contained in the following tables describes compensation provided to our named executive officers for fiscal years
2012, 2011,
2010, and
2009.2010.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name and Principal Position | | Year | | | Salary
($) | | | Bonus
($) | | | Share
Awards
($) (1) | | | Option
Awards
($) (2) | | | Non-Equity
Incentive Plan
Compensation
($) (3) | | | All Other
Compensation
($) (4) | | | Total
($) | |
Susan P. McGalla, | | | 2011 | | | $ | 796,923 | | | | — | | | | — | | | | — | | | | — | | | $ | 144,395 | | | $ | 941,318 | |
Chief Executive Officer | | | 2010 | | | $ | 27,692 | (5) | | | — | | | $ | 4,420,000 | | | $ | 1,864,849 | | | | — | | | $ | 723 | | | $ | 6,313,264 | |
| | | | | | | | |
Kenneth D. Seipel, | | | 2011 | | | $ | 464,423 | | | | — | | | $ | 2,270,666 | | | $ | 624,500 | | | | — | | | $ | 100,092 | | | $ | 3,459,681 | |
Chief Operating Officer | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Steven H. Benrubi, | | | 2011 | | | $ | 388,630 | | | $ | 50,000 | (6) | | | — | | | | — | | | | — | | | $ | 17,428 | | | $ | 456,058 | |
Executive Vice President | | | 2010 | | | $ | 347,540 | | | $ | 25,000 | (6) | | $ | 299,700 | | | $ | 121,664 | | | | — | | | $ | 17,989 | | | $ | 811,893 | |
and Chief Financial Officer | | | 2009 | | | $ | 319,385 | | | | — | | | | — | | | | — | | | | — | | | $ | 24,426 | | | $ | 343,811 | |
| | | | | | | | |
Harriet Bailiss-Sustarsic, | | | 2011 | | | $ | 53,846 | (7) | | | — | | | | — | | | $ | 153,923 | | | | — | | | $ | 58,107 | | | $ | 265,876 | |
Executive Vice President and Chief Merchandise Officer, Wet Seal Division | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | |
Sharon Hughes, | | | 2011 | | | $ | 485,000 | | | | — | | | | — | | | | — | | | | — | | | $ | 24,813 | | | $ | 509,813 | |
President and Chief | | | 2010 | | | $ | 455,250 | | | | — | | | $ | 21,528 | | | $ | 11,163 | | | | — | | | $ | 20,129 | | | $ | 508,070 | |
Merchandise Officer,
Arden B Division | | | 2009 | | | $ | 506,538 | | | $ | 100,000 | | | $ | 96,390 | | | $ | 116,994 | | | | — | | | $ | 234 | | | $ | 820,156 | |
| | | | | | | | |
Jon C. Kubo, | | | 2011 | | | $ | 265,800 | | | | — | | | | — | | | | — | | | | — | | | $ | 204,397 | | | $ | 470,197 | |
Former Senior Vice | | | 2010 | | | $ | 300,601 | | | $ | 25,000 | (6) | | | — | | | $ | 87,994 | | | | — | | | $ | 11,501 | | | $ | 425,096 | |
President and Chief Information Officer | | | 2009 | | | $ | 270,400 | | | | — | | | | — | | | $ | 13,200 | | | | — | | | $ | 11,261 | | | $ | 294,861 | |
|
| | | | | | | | | | | | | | | | |
Name and Principal Position | | Year (1) | | Salary ($) | | Bonus ($) | | Share Awards ($) (2) | | Option Awards ($) (3) | | Non-Equity Incentive Plan Compensation ($) (4) | | All Other Compensation ($) (5) | | Total ($) |
| John D. Goodman, | | 2012 | | $61,538 | (6) | — | | $527,260 | (7) | — | | — | | $33,393 | | $622,191 |
| Chief Executive Officer | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Susan P. McGalla, | | 2012 | | $435,308 | | — | | — | | — | | — | | $1,758,531 | | $2,193,839 |
| Former Chief Executive | | 2011 | | $796,923 | | — | | — | | — | | — | | $144,395 | | $941,318 |
| Officer | | 2010 | | $27,692 | | — | | $4,420,000 | | $1,864,849 | | — | | $723 | | $6,313,264 |
| | | | | | | | | | | | | | | | | |
| Kenneth D. Seipel, | | 2012 | | $603,365 | | — | | — | | — | | — | | $1,212,538 | | $1,815,903 |
| Former President and | | 2011 | | $464,423 | | — | | $2,270,666 | | $624,500 | | — | | $100,092 | | $3,459,681 |
| Chief Operating Officer | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Steven H. Benrubi, | | 2012 | | $416,719 | | — | | — | | — | | — | | $19,145 | | $435,864 |
| Executive Vice President | | 2011 | | $388,630 | | $50,000 | | — | | — | | — | | $17,428 | | $456,058 |
| and Chief Financial Officer | | 2010 | | $347,540 | | $25,000 | | $299,700 | | $121,664 | | — | | $17,989 | | $811,893 |
| | | | | | | | | | | | | | | | | |
| Harriet Bailiss-Sustarsic, | | 2012 | | $313,300 | | — | | $31,000 | | — | | — | | $26,576 | | $370,876 |
| Former Executive Vice President and Chief | | 2011 | | $53,846 | | — | | — | | $153,923 | | — | | $58,107 | | $265,876 |
| Merchandise Officer, Wet Seal Division | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Sharon Hughes, | | 2012 | | $494,327 | | — | | — | | — | | — | | $22,498 | | $516,825 |
| Former President and Chief | | 2011 | | $485,000 | | — | | — | | — | | — | | $24,813 | | $509,813 |
Merchandise Officer, Arden B Division | | 2010 | | $455,250 | | — | | $21,528 | | $11,163 | | — | | $20,129 | | $508,070 |
| | | | | | | | | | | | | | | | | |
| Barbara Cook, | | 2012 | | $359,336 | | — | | $31,000 | | — | | — | | $74,149 | | $464,485 |
| Former Senior Vice | | 2011 | | $57,885 | | — | | — | | $107,736 | | — | | $1,662 | | $167,283 |
| President of Store Operations | | | | | | | | | | | | | | | | |
_________________________
| |
| (1) | Fiscal 2012 included 53 weeks versus 52 weeks in each of fiscal 2011 and 2010. |
| |
| (2) | Amounts reflect the grant date fair value of the awards granted in fiscal 2011, 2010, and 2009 determined in accordance with applicable accounting standards for restricted stock and performance share awards. Assumptions used in the calculation of these amounts are included in Note 2 of the Notes to Consolidated Financial Statements in our Company’s Annual Reports on Form 10-K filed with the SEC on March 28, 2013, March 26, 2012, and March 30, 2011, and March 31, 2010.2011. |
(2) | |
| (3) | Amounts reflect the grant date fair value of the awards granted in fiscal 2011, 2010, and 2009 determined in accordance with applicable accounting standards for stock option awards. Assumptions used in the calculation of these amounts are included in Note 2 of the Notes to Consolidated Financial Statements in our Company’s Annual Reports on Form 10-K filed with the SEC on March 26, 2012 and March 30, 2011, and March 31, 2010.2011. |
(3) | |
| (4) | Represents bonus amounts earned through achievement of pre-determined financial performance and individual performance objectives under our Company’s fiscal 2011, 2010 and 2009 annual incentive plansplan approved by our Compensation Committee. No such amounts were earned by the named executive officers during fiscal 2011. |
(4) | |
| (5) | For fiscal 2011,2012, this column includes the following for each of the named executive officers: for Mr. Goodman this column includes $23,393 for fees paid to Mr. Goodman as a non-employee director, and travel/temporary housing allowances of $10,000 (representing one month of up to seven months provided under Mr. Goodman's employment agreement); for Ms. McGalla, this column includes Company paid car allowances of $19,200, relocation allowances of $112,599,$9,305, our Company’s matching contribution to her 401(k) Retirement Plan of $11,846, and$11,731, the value of supplemental health care benefits provided by our Company of $750;$235 and severance of $1,737,260 pursuant to her employment agreement and general release, of which $100,000 was paid in November 2012, and the remainder is to be paid in seven monthly installments beginning February 1, 2013, as outlined in the general release; for Mr. Seipel, this column includes a Company paid car allowance of $11,700 (pro-rated for the number of months employed in fiscal 2011), temporary housing and relocation allowances of $78,036,$10,800, our Company’s matching contribution to his 401(k) Retirement Plan of $9,731,$11,738, and the valueseverance of supplemental health care benefits provided by our Company of $625;$1,190,000 to be payable in twelve monthly installments beginning in March 2013; for Mr. Benrubi, this column includes our Company’s matching contribution to his 401(k) Retirement Plan of $13,736$13,739 and the value of supplemental health care benefits provided by our Company of $3,692;$5,406; for Ms. Sustarsic, this column includes Company paid car allowances of $1,246 (pro-rated for the months employed in fiscal 2011), relocation allowances$7,477, our Company’s matching contribution to her 401(k) Retirement Plan of $56,736, of which $50,000 is |
| subject to pro-rata reimbursement by Ms. Sustarsic if she would leave the Company within the first year of her employment,$9,973 and the value of supplemental health care benefits provided by our Company of $125;$9,126; for Ms. Hughes, this column includes a Company paid car lease and car allowancesexpenses of $24,063$22,498; and the value of supplemental health care benefits provided by our Company of $750; for Mr. Kubo,Ms. Cook, this column includes our Company’s matching contribution to his 401(k) Retirement Plana Company paid car allowance of $10,632, severance$10,800 and relocation allowances of $173,400 pursuant to the terms of his Transition and Separation Agreement, to be paid over six monthly installments beginning in October 2011, and the value of supplemental health care benefits provided by our Company of $20,365.$63,349. |
(5) | Ms. McGalla |
| (6) | Mr. Goodman was hired on January 18, 2011. This7, 2013 as our Chief Executive Officer; this amount represents Ms. McGalla’sMr. Goodman's base salary for the portion of fiscal 20102012 during which shehe was employed by us. |
(6) | During fiscal 2010, |
| (7) | Includes $47,260 for an award of restricted shares granted to Mr. Benrubi was providedGoodman for his services as a $75,000 retention bonus payable as follows: $25,000 in August 2010 and $50,000 in August 2011, per his employment agreement. Mr. Benrubi would be required to reimburse a pro-rata amount of his retention bonus if he would leave the Company prior the end of his three year employment term, per his employment agreement. During fiscal 2010, Mr. Kubo was provided a $50,000 promotion bonus payable as follows: $25,000 in August 2010 and $25,000 in August 2011, per his employment agreement. Mr. Kubo would be required to reimburse a pro-rata amount of his promotion bonus if he would leave the Companynon-employee director prior to the end of this three year employment term, per his employment agreement. However, under Mr. Kubo’s Transition and Separation Agreement, he was not paid the remaining $25,000 of his promotion bonus and reimbursement of a pro-rata amount of the $25,000 payment made in fiscal 2010 was waived.appointment as our Chief Executive Officer. |
(7) | Ms. Sustarsic was hired on November 28, 2011. This amount represents Ms. Sustarsic’s base salary for the portion of fiscal 2011 during which she was employed by us. |
Grants of Plan Based Awards for Fiscal
20112012
The following table summarizes the grants made to each of our named executive officers during fiscal
20112012 under our Incentive Plans, annual bonus plan or additional equity arrangements.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Grant
Date | | | Estimated Future Payouts
Under Non Equity Incentive
Plan Awards (1) | | | Estimated Future Payouts
Under Equity Incentive
Plan Awards | | | All
Other
Share
Awards:
Number
of
Shares
or Units
(#)(3) | | | All
Other
Option
Awards:
Number of
Shares
Underlying
Options
(#) (4) | | | Exercise
or Base
Price of
Option
Awards
($/Sh) (5) | | | Grant
Date
Fair
Value of
Share
and
Option
Awards (6) | |
| | | Threshold
($) | | | Target
($) | | | Maximum
($) | | | Threshold
(#) | | | Target
(#)(2) | | | Maximum
(#) | | | | | |
Susan P. McGalla | | | — | | | $ | 400,000 | | | $ | 800,000 | | | $ | 1,600,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Kenneth D. Seipel | | | — | | | $ | 215,625 | | | $ | 431,250 | | | $ | 862,500 | | | | — | | | | — | | | | �� | | | | — | | | | — | | | | — | | | | — | |
| | | 3/28/11 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 400,000 | | | $ | 4.00 | | | $ | 624,500 | |
| | | 4/4/11 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 250,000 | | | | — | | | | — | | | $ | 1,040,000 | |
| | | 4/4/11 | | | | — | | | | — | | | | — | | | | — | | | | 133,333 | | | | — | | | | — | | | | — | | | | — | | | $ | 495,999 | |
| | | 4/4/11 | | | | — | | | | — | | | | — | | | | — | | | | 133,333 | | | | — | | | | — | | | | — | | | | — | | | $ | 407,999 | |
| | | 4/4/11 | | | | — | | | | — | | | | — | | | | — | | | | 133,334 | | | | — | | | | — | | | | — | | | | — | | | $ | 326,668 | |
Steven H. Benrubi | | | — | | | $ | 97,969 | | | $ | 195,938 | | | $ | 391,875 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Harriet Bailiss-Sustarsic(7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 11/28/11 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 125,000 | | | $ | 3.23 | | | $ | 153,923 | |
Sharon Hughes | | | — | | | $ | 121,250 | | | $ | 242,500 | | | $ | 485,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
Jon C. Kubo | | | — | | | $ | 69,360 | | | $ | 138,720 | | | $ | 277,440 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
|
| | | | | | | | | | | |
| Name | Grant Date | | Estimated Future Payouts Under Non Equity Incentive Plan Awards (1) | | All Other Share Awards: Number of Shares or Units (#)(2) | | Grant Date Fair Value of Share and Option Awards (3) |
Threshold ($) | | Target ($) | | Maximum ($) | |
| John D. Goodman (4) | 1/8/2013 | | — | | — | | — | | 174,355 | | $480,000 |
| | 9/18/2012 | | — | | — | | — | | 15,245 | | $47,260 |
| Susan P. McGalla | — | | $400,000 | | $800,000 | | $1,600,000 | | — | | — |
| Kenneth D. Seipel | — | | $223,125 | | $446,250 | | $892,500 | | — | | — |
| Steven H. Benrubi | — | | $102,969 | | $205,938 | | $411,875 | | — | | — |
| Harriet Bailiss-Sustarsic | — | | $100,750 | | $201,500 | | $403,000 | | — | | — |
| | 8/19/2012 | | — | | — | | — | | 10,000 | | $31,000 |
| Sharon Hughes | — | | $121,250 | | $242,500 | | $485,000 | | — | | — |
| Barbara Cook | — | | $70,602 | | $141,204 | | $282,408 | | — | | — |
| | 8/19/2012 | | — | | — | | — | | 10,000 | | $31,000 |
| |
| (1) | Threshold represents a bonus payout achievement level of 50%, Target represents a bonus payout achievement level of 100%, and Maximum represents a bonus payout achievement level of 200% of estimated non-equity incentive plan compensation pursuant to the annual cash bonuses described above. |
(2) | Reflects the number of performance shares granted in fiscal 2011 under the Plan. These performance shares vest on the relevant yearly anniversary of March 28, 2011 based upon achievement of share appreciation targets which will be deemed to have been met upon the attainment, at any time within the respective measurement periods, of a trailing 30-day volume weighted average share price at or above the respective share appreciation targets. See“Summary of Employment Agreement”for more detail. |
(3)(2) | Reflects the number of restricted stock awards granted in fiscal 20112012 under the Plan. Mr. Seipel’sThe restricted shares vest as follows: 50,000 shares on each of the first two anniversaries of March 28, 2011 and 150,000 shares on the third anniversary of March 28, 2011. |
(4) | Reflects the number of stock options granted in fiscal 2011. These options vest and become exercisable in three equal annual installments, commencing one year after the date of grant, aside for 15,245 of Mr. Seipel’s stock options, which become exercisableGoodman's restricted shares that vested on February 1, 2013 and were granted in connection with his services as follows: 100,000 sharesa non-employee director of our Company until his appointment as our Chief Executive Officer on each of the first two anniversaries of the grant date and 200,000 shares on third anniversary of the grant date.January 7, 2013. |
(5) | Represents the exercise price of stock options reported in the previous column, which is equal to the closing price of our shares on the grant date. |
(6)(3) | Represents the fair value of share awards and option awards as of the grant date pursuant to applicable accounting standards. Assumptions used in the calculation of these amounts are included in Note 2 of the Notes to Consolidated Financial Statements in our Company’s Annual Report on Form 10-K filed with the SEC on March 26, 2012.28, 2013. |
(7) | |
| (4) | Ms. SustarsicMr. Goodman was not eligible for the annual cash bonus since shehe was not employed by our Company as of July 31, 2011,29, 2012, the first day of the third quarter of fiscal 2011,2012, as outlined in the annual bonus plan. See“Summary of Employment Agreements” for a further description of the fiscal 2013 bonus arrangement for Ms. Sustarsic.Mr. Goodman.
|
Outstanding Equity Awards at
20112012 Fiscal Year-End
The following table includes certain information with respect to the value of all outstanding equity awards held by each named executive officer as of the end of fiscal
20112012 under our
Incentive Plans. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Option Awards | | | Share Awards | |
| | Option
Grant
Date | | | Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#) (1) | | | Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#) (1) | | | Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#) | | | Option
Exercise
Price
($) | | | Option
Expiration
Date | | | Shares
or
Units
Grant
Date | | | Number
of
Shares
or
Units
That
Have
not
Vested
(#) (2) | | | Market
Value of
Shares
or Units
That
Have
Not
Vested
($) (3) | | | Equity
Incentive
Awards
Grant
Date | | | Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
other
Rights
That
Have Not
Vested
(#) (4) | | | Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested
($) (3) | |
Susan P. McGalla | | | 1/18/11 | | | | 360,000 | | | | 840,000 | | | | — | | | $ | 3.72 | | | | 1/18/2018 | | | | 1/18/11 | | | | 433,334 | | | $ | 1,573,002 | | | | 1/18/11 | | | | 666,667 | | | $ | 2,420,001 | |
| | | | | | | | | | | | |
Kenneth D. Seipel | | | 3/28/11 | | | | — | | | | 400,000 | | | | — | | | $ | 4.00 | | | | 3/28/2016 | | | | 4/4/11 | | | | 250,000 | | | $ | 907,500 | | | | 4/4/11 | | | | 400,000 | | | $ | 1,452,000 | |
| | | | | | | | | | | | |
Steven H. Benrubi | | | 3/27/07 | | | | 18,870 | | | | — | | | | — | | | $ | 6.50 | | | | 3/27/2012 | | | | — | | | | — | | | | — | | | | 3/28/07 | | | | 18,870 | | | $ | 68,498 | |
| | | 9/21/07 | | | | 60,000 | | | | — | | | | — | | | $ | 4.26 | | | | 9/21/2017 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 8/3/10 | | | | — | | | | 60,000 | | | | — | | | $ | 3.44 | | | | 8/3/2020 | | | | 8/3/10 | | | | 60,000 | | | $ | 217,800 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Harriet Bailiss-Sustarsic | | | 11/28/11 | | | | — | | | | 125,000 | | | | — | | | $ | 3.23 | | | | 11/28/2016 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Sharon Hughes | | | 11/23/09 | | | | 56,667 | | | | 28,333 | | | | — | | | $ | 3.43 | | | | 11/23/2014 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | 8/19/10 | | | | 3,000 | | | | 6,000 | | | | — | | | $ | 2.99 | | | | 8/19/2015 | | | | 8/19/10 | | | | 4,800 | | | $ | 17,424 | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | |
Jon C. Kubo(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
|
| | | | | | | | | | | | | | | |
| Name | Option Awards | | Share Awards |
Option Grant Date | | Number of Securities Underlying Unexercised Options Exercisable (#) (1) | | Number of Securities Underlying Unexercised Options Unexercisable (#) (1) | | Option Exercise Price ($) | | Option Expiration Date | | Shares or Units Grant Date | | Number of Shares or Units That Have not Vested (#) (2) | | Market Value of Shares or Units That Have Not Vested ($) (3) |
| John D. Goodman | — | | — | | — | | — | | — | | 1/8/2013 | | 174,355 | | $482,963 |
| Susan P. McGalla (4) | — | | — | | — | | — | | — | | — | | — | | — |
| Kenneth D. Seipel (5) | 3/28/2011 | | 200,000 | | — | | $4.00 | | 8/1/2013 | | 4/4/2011 | | 125,000 | | $346,250 |
| Steven H. Benrubi | 9/21/2007 | | 60,000 | | — | | $4.26 | | 9/21/2017 | | — | | — | | — |
| | 8/3/2010 | | 30,000 | | 30,000 | | $3.44 | | 8/3/2020 | | 8/3/2010 | | 30,000 | | $83,100 |
| Harriet Bailiss-Sustarsic (6) | — | | — | | — | | — | | — | | — | | — | | — |
| Sharon Hughes (7) | 11/23/2009 | | 85,000 | | — | | $3.43 | | 7/11/2013 | | — | | — | | — |
| | 8/19/2010 | | 6,000 | | 3,000 | | $2.99 | | 7/11/2013 | | 8/19/2010 | | 2,400 | | $6,648 |
| Barbara Cook (8) | 11/16/2011 | | 30,000 | | 60,000 | | $3.14 | | 05/20/2013 | | 8/19/2012 | | 10,000 | | $27,700 |
_______________________
| |
| (1) | Options vest and become exercisable ratably in three equal annual installments upon the first, second and third anniversaries of the date of grant, aside for Ms. McGalla’s stock options, which becomebecame exercisable as follows: 360,000 shares on each of the first three anniversariesanniversary of the grant date and 120,000 shares360,000 on August 8, 2014November 13, 2012, as a result of her termination by our Board of Directors and in accordance with her employment agreement, and Mr. Seipel’s stock options, which becomebecame exercisable as follows: 100,000 shares on each of the first two anniversariesanniversary of the grant date and 200,000100,000 shares on third anniversaryMarch 8, 2013, as a result of the grant date.his resignation from our Company and in accordance with his employment agreement. |
| |
| (2) | Comprised of restricted stock that vests in three equal annual installments upon the first, second and third anniversaries of the date of grant, aside for Ms. McGalla’sMr. Goodman's restricted stock awards, which vest in three equal installments on each of January 7, 2014, January 7, 2015 and January 7, 2016; Ms. McGalla's restricted stock awards which vested as follows: 66,666 shares on each of the first three anniversariesanniversary of the grant date and 300,002 shares250,000 on August 8, 2014November 13, 2012, as a result of her termination by our Board of Directors and in accordance with her employment agreement, and Mr. Seipel’s restricted stock awards, which vestvested as follows: 50,000 shares on eachthe first anniversary of the first two anniversaries of March 28, 2011grant date and 150,000125,000 shares on the third anniversaryMarch 8, 2013, as a result of March 28, 2011 .his resignation from our Company and in accordance with his employment agreement. |
| |
| (3) | Calculated as the number of shares of unvested restricted stock awards or performance shares, as applicable, multiplied by the closing price of our Company’s Class A common stock as of January 27, 2012,February 1, 2013, the last trading day of fiscal 2011,2012, or $3.63.$2.77. |
(4) | Comprised of performance shares that vest upon the achievement of certain specified years of service and certain 20-day or 30-day Average Trading Price thresholds for our Class A common stock, as such term is defined in the respective performance share award agreements. |
(5)(4) | Upon Mr. Kubo’sMs. McGalla's termination of employment on September 30, 2011,July 23, 2012, or the KuboMcGalla Termination Date, heshe was provided threesix months to exercise any vested equity awards.awards pursuant to her stock option agreement. As of January 28, 2012, Mr. KuboFebruary 2, 2013, Ms. McGalla had either exercised or forfeited all of hisher vested equity awardsoptions and there were no remaining outstanding option awards. |
| |
| (5) | Upon Mr. Seipel's termination of employment on February 1, 2013, or the Seipel Termination Date, he was provided six months, or until August 1, 2013, to exercise any vested stock option awards pursuant to his stock option agreement. As of February 2, 2013, Mr. Seipel has not yet exercised any of his outstanding vested equity awards. |
| |
| (6) | As of February 2, 2013, Ms. Sustarsic had forfeited all of her vested options and there were no remaining outstanding option awards. |
| |
| (7) | Upon Ms. Hughes' termination of employment on April 11, 2013, she was provided three months, or until July 11, 2013, to exercise any vested stock option awards pursuant to her stock option agreement and all of her remaining unvested stock option and restricted stock awards were forfeited. |
| |
| (8) | Upon Ms. Cook's termination of employment on February 20, 2013, she was provided three months, or until May 20, 2013, to exercise any vested stock option awards pursuant to her stock option agreement and all of her remaining unvested stock option and restricted stock awards were forfeited. |
Option Exercises and Shares Vested in Fiscal
20112012
The following table includes certain information with respect to option exercises and restricted stock awards that vested for our named executive officers in fiscal
2011. | | | | | | | | | | | | | | | | |
Name | | Option Awards | | | Share Awards | |
| | Number of Shares
Acquired on
Exercise (#) | | | Value Realized on
Exercise ($) | | | Number of
Shares Acquired
on Vesting (#) | | | Value Realized on
Vesting ($) (1) | |
Susan P. McGalla | | | — | | | | — | | | | 399,999 | | | $ | 1,383,997 | |
Steven H. Benrubi | | | 70,000 | | | $ | 69,933 | (2) | | | 30,000 | | | $ | 144,900 | |
Sharon Hughes | | | — | | | | — | | | | 2,400 | | | $ | 10,560 | |
Jon C. Kubo | | | 41,667 | | | $ | 66,467 | (3) | | | — | | | | — | |
|
| | | |
| Name | Share Awards |
Number of Shares Acquired on Vesting (#) | | Value Realized on Vesting ($) (1) |
| Susan P. McGalla | 250,000 | | $727,500 |
| Kenneth D. Seipel | 183,333 | | $605,000 |
| Steven H. Benrubi | 30,000 | | $82,200 |
| Sharon Hughes | 2,400 | | $7,440 |
_____________________________
| |
| (1) | Calculated by multiplying the number of shares that vested by the closing price of our Class A common stock on the vesting date. |
(2) | Calculated as (a) $336,733 in proceeds from 70,000 options exercised on the September 8, 2011 exercise date less (b) $266,800 total exercise cost of the 70,000 options exercised on the September 8, 2011 exercise date. |
(3) | Calculated as (a) $207,918 in proceeds from the 41,667 options exercised on the September 20, 2011 exercise date less (b) $141,451 total exercise cost of the 41,667 options exercised on the September 20, 2011 exercise date. |
Non-Qualified Deferred Compensation and Pension Arrangement
We do not maintain non-qualified deferred compensation arrangements or pension arrangements for our named executive officers.
SUMMARY OF EMPLOYMENT AGREEMENTS
A. Named Executive Officers Employed with the Company as of the Date of this Proxy Statement
Susan P. McGalla,
John D. Goodman, our Chief Executive Officer
On January 18, 2011, 7, 2013, or the Goodman Effective Date, we entered into an Employment Agreement with Susan P. McGalla,John D. Goodman, or theMcGalla Goodman Agreement, setting forth the terms of herhis employment with us as our Chief Executive Officer. The McGalla Agreement became effective on January 18, 2011, or theMcGalla Effective Date. The McGallaGoodman Agreement will terminate on August 8, 2014.January 30, 2016. In addition to the below benefits, the McGallaGoodman Agreement provides Ms. McGallaMr. Goodman with potential severance/change of control benefits in the event of certain terminations of herhis employment, as discussed in more detail in“Potential Payments Upon Termination or a Change inof Control.”
Cash Compensation/Benefits
Under the
McGallaGoodman Agreement,
Ms. McGallaMr. Goodman is entitled to:
a base salary of $800,000 (which is subject to annual review by our Compensation Committee);
an annual performance bonus (paid in accordance with our bonus plan, which is administered under the Plan), with a target cash award of 100% of Ms. McGalla’sMr. Goodman's base salary and a maximum cash award of 200% of herhis base salary;
participate in such employee benefit plans and insurance programs offered to our employees and executive officers;
andmonthlytravel and temporary housing allowance of $1,600$10,000 per month for automobile expenses;
relocation allowance of $85,000;
reimbursement for travel and lodging for identifying housing, schooling and other activities; and
reimbursement for temporary housing of up to $12,500 per month.
seven (7) months.
Equity Incentive Arrangement
On
the McGalla Effective Date, Ms. McGallaJanuary 8, 2013, Mr. Goodman received a grant of
1,000,000 performance shares of our Class A common stock, issued under the terms of the Plan, and 500,000174,355 restricted shares of our Company’s Class A common stock, issued under the terms of the
Plan. The performance shares willPlan, and which vest in three
equal tranches
in the manner set forth in the chart below. | | | | | | |
Number of
Performance
Shares within
each Tranche
| | Time Based Vesting Date
| | Stock Price
Measurement Period
| | Share Appreciation Target to
be Equaled or Exceeded
|
| | | |
Tranche 1:
333,333
| | 1stanniversary of the
McGalla Effective Date
| | From the McGalla Effective Date through the 3rdanniversary thereof | | $4.60 per share |
Tranche 2:
333,333
| | 2ndanniversary of the
McGalla Effective Date
| | From the 1stanniversary of the McGalla Effective Date through the 3rdanniversary thereof | | $5.80 per share |
Tranche 3:
333,334
| | 3rdanniversary of the
McGalla Effective Date
| | From the 2ndanniversary of the McGalla Effective Date through the 3rdanniversary thereof | | $7.00 per share |
The baseline share price used to determine the share appreciation targets was $3.50. This was the Company’s Class A common stock closing price as of January 10, 2011, which was the day before the Company and Ms. McGalla entered into her employment agreement. The initial share appreciation target of $4.60 represents an approximate 30% increase in the Company’s share price over the baseline. Each subsequent share appreciation target represents an additional $1.20 increase in the Company’s share price over the initial share appreciation target. Our Compensation Committee determined the increase over the baseline share price to achieve the initial share appreciation target and the $1.20 increments thereafter reflect substantial increases in the Company’s market value that would merit vesting of the respective performance share tranches.
The share appreciation targets will be deemed to have been met upon the attainment, at any time within the respective measurement periods, of a trailing 30-day volume weighted average share price at or above the respective share appreciation targets. In the event the target share price is met and the time based vesting has been met, the respective shares would be vested. On January 18, 2012, the Tranche 1 performance shares vested and were issued as the $4.60 share appreciation target was met.
All of the restricted shares were granted on January 18, 2011. The restricted shares vest with respect to 66,666 shares on each of the first, second and third anniversaries of the McGallaGoodman Effective Date, and 300,002 shares on August 8, 2014, which is the expiration of the term of the McGalla Agreement, provided that Ms. McGallaMr. Goodman is employed by us on the respective vesting dates. On January 18, 2012, the first tranche of 66,666Mr. Goodman was also provided a commitment to be granted additional restricted shares vested.
In addition tofor each share of our Class A common stock that Mr. Goodman purchases, and within 90 days following the restricted stock and performance shares, on the McGallaGoodman Effective Date, our Board of Directors granted Ms. McGalla an option to acquiredate, up to 1,200,000an aggregate maximum purchase price of $650,000. On February 15, 2013, Mr. Goodman had purchased an aggregate of 218,192 shares of our Class A common stock, at an exerciserepresenting the aggregate maximum purchase price of $3.72, our Company’s closing Class A common stock price$650,000, and the Company granted him 218,192 additional restricted shares in accordance with the Goodman Agreement. The 218,192 restricted shares, granted on the grant date, January 18, 2011. The stock optionsFebruary 15, 2013, vest with respect to 360,000 shares onin three equal tranches upon the first, second and third anniversaries of the McGalla Effective Date and 120,000 shares on August 8, 2014, which is the expiration of the term of the McGalla Agreement,grant date, provided that Ms. McGallaMr. Goodman is employed by us on the respective vesting dates.
On January 18, 2012,the Goodman Effective Date, Mr. Goodman also received a commitment to be granted 261,533 performance shares of our Class A common stock under the Plan, representing the target value of $720,000, upon the establishment of a performance
goal by the Board of Directors, to occur no later than April 30, 2013. On April 8, 2013, the Compensation Committee of the Board of Directors established the performance goals, in terms of minimum and target levels of fiscal 2013 total Company EBITDA, or Minimum EBITDA and Target EBITDA, and granted 261,533 performance shares of our Class A common stock to Mr. Goodman. The performance shares will be deemed to be earned as follows, 130,767 shares (50%) if Minimum EBITDA is achieved and all 261,533 shares (100%) if Target EBITDA is achieved. If the Company's fiscal 2013 total Company EBITDA is between the Minimum EBITDA and Target EBITDA amounts, the number of performance shares earned by Mr. Goodman will be determined by linear interpolation. The performance shares earned pursuant to the award will be subject to time-based vesting in three equal installments, one on the date the Compensation Committee determines the number of earned performance shares, and the other two on the second and third anniversaries of Mr. Goodman's commencement date, in each case subject to Mr. Goodman's continuing employment with the Company.
On April 8, 2013, the Compensation Committee of the Board of Directors also granted a target award to Mr. Goodman of 119,008 performance share units. Each performance share unit represents a contingent right to receive one share of the Company's Class A common stock. The number of units earned by Mr. Goodman will be determined after the end of the Company's 2013 fiscal year, based upon the Company's actual fiscal 2013 total Company EBITDA. If actual fiscal 2013 total Company EBITDA reaches a Stretch level, or Stretch EBITDA, Mr. Goodman will earn all of the units covered by the award. If actual fiscal 2013 total Company EBITDA is below Target EBITDA, he will earn no units covered by the award. If actual fiscal 2013 total Company EBITDA is between the Target EBITDA and Stretch EBITDA the number of units earned by Mr. Goodman will be determined by linear interpolation based on the extent that actual fiscal 2013 total Company EBITDA exceeds Target EBITDA (limited to 100%). The performance share units earned by Mr. Goodman will be subject to time-based vesting in three equal annual installments beginning on the first trancheanniversary of 360,000 stock options vested.the performance share units grant date, in each case subject to Mr. Goodman's continuing employment with the Company.
The optionsMinimum, Target and Stretch EBITDA performance goals for both performance-based awards were set considering the significant under performance of the Company in fiscal 2012 and the importance of returning the Company to the strong levels of EBITDA performance in past years.
The restricted
stockand performance shares and the performance share units granted to
Ms. McGallaMr. Goodman are subject to the terms and conditions of the Plan and the related award agreements.
Kenneth D. Seipel, our President and Chief Operating Officer
On March 21, 2011, we entered into an Employment Agreement with Kenneth D. Seipel, or theSeipel Agreement, setting forth the terms of his employment with us as our President and Chief Operating Officer. The Seipel Agreement became effective on March 28, 2011, or theSeipel Effective Date. The Seipel Agreement will terminate on March 28, 2014. In addition to the below benefits, the Seipel Agreement provides Mr. Seipel with potential severance/change of control benefits in the event of certain terminations of his employment, as discussed in more detail in“Potential Payments Upon Termination or a Change in Control.”
Cash Compensation/Benefits
Under the Seipel Agreement, Mr. Seipel is entitled to:
a base salary of $575,000 (which is subject to annual review by our Compensation Committee);
an annual performance bonus (paid in accordance with our bonus plan, which is administered under the Plan), with a target cash award of 75% of Mr. Seipel’s base salary and a maximum cash award of 150% of his base salary;
participate in such employee benefit plans and insurance programs offered to our employees and executive officers;
monthly allowance of $900 for automobile expenses;
relocation allowance of up to $50,000;
reimbursement for travel and lodging for identifying housing and other activities; and
reimbursement for temporary housing of up to $8,000 per month for up to 120 days following the Seipel Effective Date.
Equity Incentive Arrangement
On April 4, 2011, Mr. Seipel received a grant of 400,000 performance shares of our Class A common stock, issued under the terms of the Plan, and 250,000 restricted shares of our Company’s Class A common stock, issued under the terms of the Plan. The performance shares will vest in three tranches in the manner set forth in the chart below.
| | | | | | |
Number of
Performance
Shares within
each Tranche
| | Time Based Vesting Date
| | Stock Price
Measurement Period
| | Share Appreciation Target to
be Equaled or Exceeded
|
Tranche 1:
133,333
| | 1stanniversary of the
Seipel Effective Date
| | From the Seipel Effective Date through the 3rdanniversary thereof | | $4.60 per share |
| | | |
Tranche 2:
133,333
| | 2ndanniversary of the
Seipel Effective Date
| | From the 1stanniversary of the Seipel Effective Date through the 3rdanniversary thereof | | $5.80 per share |
| | | |
Tranche 3:
133,334
| | 3rdanniversary of the
Seipel Effective Date
| | From the 2ndanniversary of the Seipel Effective Date through the 3rdanniversary thereof | | $7.00 per share |
The share appreciation targets were set at the same level as Ms. McGalla’s share appreciation targets as the Compensation Committee deemed them to continue to be relevant targets to measure performance as they had recently been determined in January 2011 upon the Company entering into the McGalla Agreement. For further details on the calculations and the Compensation Committees’ basis for the share appreciation targets, see the summary of the McGalla Agreement herein.
The share appreciation targets will be deemed to have been met upon the attainment, at any time within the respective measurement periods, of a trailing 30-day volume weighted average share price at or above the respective share appreciation targets. In the event the target share price is met and the time based vesting has been met, the respective shares would be vested. During the period ended January 28, 2012, the Tranche 1 share appreciation target of $4.60 was met and 133,333 shares vested on March 28, 2012.
The restricted shares vest with respect to 50,000 shares on each of the first two anniversaries of the Seipel Effective Date and 150,000 shares on the third anniversary of the Seipel Effective Date, provided that Mr. Seipel is employed by us on the respective vesting dates. On March 28, 2012, the first tranche of 50,000 shares vested.
In addition to the restricted stock and performance shares, on the Seipel Effective Date, our Board of Directors granted Mr. Seipel an option to acquire up to 400,000 shares of our Class A common stock at an exercise price of $4.00, our Company’s closing Class A common stock price on the grant date, March 28, 2011. The stock options vest with respect to 100,000 shares on the first two anniversaries of the Seipel Effective Date and 200,000 shares on the third anniversary of the Seipel Effective Date, provided that Mr. Seipel is employed by us on the respective vesting dates. On March 28, 2012, the first tranche of 100,000 stock options vested.
The options and restricted stock granted to Mr. Seipel are subject to the terms and conditions of the Plan and the related award agreements.
Steven H. Benrubi, our Executive Vice President and Chief Financial Officer and Corporate Secretary
On August 3, 2010, or theBenrubi Effective Date, we renewed Mr. Benrubi’sBenrubi's previous employment agreement, which had been amended and restated as of February 11, 2008, or theBenrubi Agreement, setting forth the terms of Mr. Benrubi’sBenrubi's employment with us as our Executive Vice President and Chief Financial Officer and Corporate Secretary. TheOfficer. Effective April 8, 2013, the Company entered into an Employment Agreement Termination Agreement with Mr. Benrubi, which terminated the Benrubi Agreement, will terminate on August 3,and Mr. Benrubi began participating in the Company's Severance and Change in Control Plan, as described in the 8-K filed April 11, 2013. Mr. Benrubi continues to be employed as the Company's Executive Vice President and Chief Financial Officer.
In addition to the below benefits
under the
former Benrubi Agreement,
provides Mr. Benrubi
would have been provided with potential severance benefits in the event of certain terminations of his employment, as discussed in more detail in “Potential Payments Upon Termination or a Change
inof Control.”
Cash Compensation/Benefits
Under the
former Benrubi Agreement, as renewed, Mr. Benrubi
iswas entitled
to:to and continues to be provided:a base salary of $375,000 (which is subject to annual review by our Compensation Committee; during fiscal 20112012 Mr. Benrubi was provided a 4.5%5.1% merit increase)increase, which increased his base salary to $411,875);
an annual performance bonus (paid in accordance with our bonus plan, which is administered under the Plan), with a target cash award of 50% of Mr. Benrubi’s base salary and a maximum cash award of 100% of his base salary. Mr. Benrubi was also provided a retention bonus attainable as follows: $25,000 upon the Benrubi Effective Date and $50,000 on the first anniversary date of the Benrubi Effective date,Date, provided that Mr. Benrubi was still employed by the Company upon such date. Both payments had been paid as of January 28, 2012. If Mr. Benrubi is terminated by our Company for cause or by him without good reason prior to the third anniversary of the Benrubi Effective Date, Mr. Benrubi will have to repay a pro-rata portion of the bonus;February 2, 2013; and
participate in such employee benefit plans and insurance programs offered to our employees and executive officers.
Equity Incentive Arrangement
At the time of Mr. Benrubi’s retention as our Executive Vice President and Chief Financial Officer, Mr. Benrubi was granted an option to acquire up to 60,000 shares of our Class A common stock. The options were priced at the greater of (x) the closing price of our Class A common stock on September 21, 2007 and (y) the volume weighted average 30 day share price
Upon renewal of the
Class A common stock ending on and includingSeptember 21, 2007. The exercise price per share is $4.26. The options vested in three equal tranches upon the first, second and third anniversaries of September 21, 2007. In addition, on September 21, 2007, Mr.former Benrubi was granted 90,000 restricted shares of our Company’s Class A common stock. The restricted shares vested in three equal tranches beginning upon the first, second and third anniversaries of September 21, 2007.
On August 20, 2008, Mr. Benrubi was granted an option to acquire up to 40,000 shares of our Class A common stock at an exercise price per share of $4.09, our Company’s closing Class A common stock price on the grant date. The options vested in three equal tranches upon the first, second and third anniversaries of August 20, 2008.
On the Benrubi Effective Date,Agreement, Mr. Benrubi was granted an option to acquire up to 90,000 shares of our Class A common stock.stock on the Benrubi Effective Date. The options were priced at the greater of (x) the closing price of our Class A common stock on the Benrubi Effective Date and (y) the volume weighted average 30 day share price of the Class A common
stock ending on and including the Benrubi Effective Date. The exercise price per share is $3.44. The options vest in three equal tranches upon the first, second and third anniversaries of the Benrubi Effective Date. On August 3, 2011
and August 3, 2012, the first
trancheand second tranches of options
vested.vested, respectively. In addition, on the Benrubi Effective Date, Mr. Benrubi was granted 90,000 restricted shares of our Company’s Class A common stock. The restricted shares vest in three equal tranches upon the first, second and third anniversaries of the Benrubi Effective Date. On August 3, 2011
and August 3, 2012, the first
trancheand second tranches of restricted shares
vested.vested, respectively.
The options and restricted stock granted to Mr. Benrubi are subject to the terms and conditions of the Plan and the related award agreements.
B. Named Executive Officers No Longer Employed by Our Company as of the Date of this Proxy Statement
Susan P. McGalla, our former Chief Executive Officer
On January 18, 2011, we entered into an Employment Agreement with Susan P. McGalla, or the McGalla Agreement, setting forth the terms of her employment with us as our Chief Executive Officer. The McGalla Agreement became effective on January 18, 2011. The McGalla Agreement was terminated on July 23, 2012, upon the termination of Ms. McGalla's employment with our Company by our Board of Directors. The McGalla Agreement provided Ms. McGalla with severance benefits paid in connection with her termination of employment, as discussed in more detail in “Potential Payments Upon Termination or a Change of Control.”
Kenneth D. Seipel, our former President and Chief Operating Officer
On March 21, 2011, we entered into an Employment Agreement with Kenneth D. Seipel, or the Seipel Agreement, setting forth the terms of his employment with us as our President and Chief Operating Officer. The Seipel Agreement became effective on March 28, 2011. Upon Mr. Seipel's resignation on February 1, 2013, the Seipel Agreement was terminated. The Seipel Agreement provided Mr. Seipel with severance benefits paid in connection with his termination of employment, as discussed in more detail in “Potential Payments Upon Termination or a Change of Control.”
Harriet Bailiss-Sustarsic, our
former Executive Vice President and Chief Merchandise Officer, Wet Seal Division
On November 1, 2011, we entered into an Employment Agreement with Harriet Bailiss-Sustarsic, or theSustarsic Agreement, setting forth the terms of her employment with us as our Executive Vice President and Chief Merchandise Officer.Officer of our Wet Seal Division. The Sustarsic Agreement became effective on November 28, 2011 or theSustarsic Effective Date. The Sustarsic Agreement does not have a termination date as Ms. Sustarsic’s employment with the Company is on an “at will” basis (as defined in the Sustarsic Agreement). In addition to the below benefits, the Sustarsic Agreement provides Ms. Sustarsic with potential severance benefits in the event of certain terminations ofand terminated October 19, 2012 upon her employment, as discussed in more detail in“Potential Payments Upon Termination or a Change in Control.”resignation.Cash Compensation/Benefits
Under the Sustarsic Agreement, Ms. Sustarsic is entitled to:
a base salary of $400,000;
an annual performance bonus (paid in accordance with our bonus plan, which is administered under the Plan), with a target cash award of 50% of Ms. Sustarsic’s base salary and a maximum cash award of 100% of her base salary;
participate in such employee benefit plans and insurance programs offered to our employees and executive officers;
monthly allowance of $900 for automobile expenses;
relocation allowance of $50,000. If Ms. Sustarsic voluntarily resigns from the Company within the first 12 months of the Sustarsic Effective Date, Ms. Sustarsic will have to repay a pro-rata portion of the relocation allowance; and
reimbursement for three months of temporary housing of up to $3,000 per month.
Equity Incentive Arrangement
At the time of Ms. Sustarsic’s retention as our Executive Vice President and Chief Merchandise Officer, Ms. Sustarsic was granted an option to acquire up to 125,000 shares of our Class A common stock at an exercise price of $3.23, our Company’s closing Class A common stock price on the Sustarsic Effective Date. The options vested in three equal tranches upon the first, second and third anniversaries of the Sustarsic Effective Date.
The options granted to Ms. Sustarsic are subject to the terms and conditions of the Plan and the related award agreements.
Sharon Hughes, our former President and Chief Merchandise Officer, Arden B Division
On November 19, 2009, we entered into an Employment Agreement with Sharon Hughes, or theHughes Agreement, setting forth the terms of her employment with us as our President and Chief Merchandise Officer, Arden B Division. The Hughes Agreement became effective on November 23, 2009, or theHughes Effective Date.2009. The Hughes Agreement will terminateterminated on November 23, 2012. In addition to the below benefits, the Hughes Agreement provides Ms. Hughes continued employment with potential severance benefitsour Company, without an employment agreement, in the eventcapacity of certain terminationsour President and Chief Merchandising Officer of our Arden B Division until her employment, as discussed in more detail in“Potential Payments Upon Termination or a Change in Control.”Cash Compensation/Benefits
Under the Hughes Agreement, Ms. Hughes is entitled to:
a base salary of $450,000 through the first anniversary of the Hughes Effective Date and $485,000 as of the first anniversary of the Hughes Effective Date through the end of the term of the Hughes Agreement;
an annual performance bonus (paid in accordance with our bonus plan, which is administered under the Plan), with a target cash award of 50% of Ms. Hughes’ base salary and a maximum cash award of 100% of her base salary. Ms. Hughes also earned a retention bonus of $100,000 with respect to fiscal 2009, which was paid in a lump sumresignation on April 16, 2010. If Ms. Hughes had been terminated by11, 2013.
Barbara Cook, our Company for cause or by her without good reason prior to the first anniversary of the Hughes Effective Date, Ms. Hughes would have been required to repay a pro-rata portion of the retention bonus; and
participate in such employee benefit plans and insurance programs offered to our employees and executive officers.
Equity Incentive Arrangement
As of the Hughes Effective Date, Ms. Hughes was granted an option to acquire up to 85,000 shares of our Class A common stock. The options were priced at the greater of (x) the closing price of our Company’s Class A common stock on the Hughes Effective Date and (y) the volume weighted average 30 day share price of the Class A common stock ending on and including the Hughes Effective Date. The exercise price per share is $3.43. The options vest in three equal tranches upon the first, second and third anniversaries of the Hughes Effective Date. On November 23, 2010, the first tranche of options vested. On November 23, 2011, the second tranche of options vested.
In addition, on the Hughes Effective Date, Ms. Hughes received a grant of 54,000 performance shares of our Company’s Class A common stock, which were issued under the terms of the Plan. The award agreement governing her performance shares provides that the performance shares vest in two equal tranches beginning on the first and second anniversaries of the Hughes Effective Date, provided certain conditions are satisfied. The two tranches of the performance shares vest in the manner set forth in the following chart:
| | | | | | |
Number of
Performance
Shares within
each Tranche
| | Time Based Vesting Date
| | Stock Price
Measurement Period
| | Share Appreciation Target to
be Equaled or Exceeded/Share
Allocation to Vest
|
Tranche 1:
27,000
| | 1stanniversary of the
Hughes Effective Date
| | From the Hughes Effective Date through the 2ndanniversary thereof | | $4.19 per share/13,500
$5.03 per share/13,500
|
Tranche 2: 27,000
| | 2ndanniversary of the
Hughes Effective Date
| | From the 1stanniversary of the Hughes Effective Date through the 2ndanniversary thereof | | $6.03 per share/13,500
$7.24 per share/13,500
|
The baseline share price used to determine the share appreciation targets was $3.49. This was based on the trailing 20-day volume weighted average share price of the Company’s Class A common stock as of November 18, 2009, which was the day before the Company and Ms. Hughes entered into the Hughes Agreement. The initial share appreciation target represents a 20% increase in the Company’s share price over the baseline, with each subsequent share appreciation target representing an additional 20% increase in the Company’s share price.
The share appreciation targets will be deemed to have been met upon the attainment, at any time within the respective measurement periods, of a trailing 20-day volume weighted average share price at or above the respective share appreciation targets. In the event the target share price is met and the time based vesting has been met, the respective shares would be vested.
On November 23, 2010, 13,500 of Tranche 1 performance shares vested and were issued as the $4.19 share appreciation target was met. On November 23, 2011, the remaining 13,500 of Tranche 1 performance shares and all 27,000 Tranche 2 performance shares were forfeited as the share appreciation targets were not met.
B. Named Executive Officers No Longer Employed by Our Company as of the Date of this Proxy Statement
Jon C. Kubo, ourformer Senior Vice President of E-Commerce and Chief Information Officer
Store Operations
On March 21, 2005, we hired Jon C. Kubo as an employee of our Company. On August 26, 2010, upon the appointment of Mr. Kubo as our Senior Vice President of E-Commerce and CIO,November 7, 2011, we entered into an Employment Agreement with him,Barbara Cook, or theKubo Cook Agreement, setting forth the terms of hisher employment with us in that role.as our Senior Vice President of Store Operations. The KuboCook Agreement became effective on August 26, 2010, or theKubo Effective Date. The Kubo Agreement was set to terminate on August 26,November 16, 2011 and terminated February 20, 2013 or theKubo Termination Date. Upon Mr. Kubo’s resignation on July 18, 2011, the Kubo Agreement was terminated and replaced by a Transition and Separation Agreement that terminated on the Kubo Termination Date. In addition to the below benefits, the Kubo Agreement provided Mr. Kubo with potential severance benefits in the eventupon her resignation.
a base salary of $340,000 (and which was subject to annual review by our Compensation Committee);
an annual performance bonus (paid in accordance with our bonus plan, which is administered under the Plan), with a target cash award of 40% of Mr. Kubo’s base salary and a maximum cash award of 80% of his base salary. Mr. Kubo was also provided a promotion bonus of $50,000 attainable as follows: $25,000 upon the Kubo Effective Date and $25,000 on the first anniversary of the Kubo Effective Date provided Mr. Kubo was still employed by the Company on such date. If Mr. Kubo was terminated by our Company for cause or by him without good reason prior to the third anniversary of the Kubo Effective Date, Mr. Kubo would have to repay a pro-rata portion of the bonus (under Mr. Kubo’s Transition and Separation Agreement, repayment of the $25,000 promotion bonus paid in fiscal 2010 was waived and Mr. Kubo was not entitled to the remaining $25,000 promotion bonus payment); and
participate in such employee benefit plans and insurance programs offered to our employees and executive officers.
Equity Incentive Arrangement
As of the Kubo Effective Date, Mr. Kubo was granted an option to acquire up to 75,000 shares of our Class A common stock. The options were priced at the greater of (x) the closing price of our Company’s Class A common stock on the Kubo Effective Date and (y) the volume weighted average 30 day share price of our Class A common stock ending on and including the Kubo Effective Date. The exercise price per share was $3.15. The options were to vest in three equal tranches beginning upon the first, second and third anniversaries of the Kubo Effective Date. On August 26, 2011, the first tranche of options vested. Upon the Kubo Termination Date, the second and third tranches of stock options were forfeited and Mr. Kubo had 90 days to exercise the first tranche of options that had vested as well as any other vested outstanding equity awards.
TERMINATION OR A CHANGE OF CONTROL
The following section discusses potential termination and change of control payment amounts assuming a hypothetical triggering event had occurred as of
January 28, 2012.February 2, 2013.
A. Named Executive Officers as of the Date of this Proxy Statement
SUSAN P. MCGALLA
JOHN D. GOODMAN
Termination Payments/Rights
Upon Mr. Goodman's appointment as our Chief Executive Officer, our Company entered into a change of control and severance agreement with Mr. Goodman, or the Ms. McGalla’sGoodman Severance Agreement, setting forth the benefits that Mr. Goodman would receive upon a change of control or certain termination events. Mr. Goodman’s employment may be terminated by us or by Ms. McGallaMr. Goodman at any time, subject to the terms and conditions of the McGallaGoodman Severance Agreement. The respective rights and obligations of Ms. McGallaMr. Goodman and us depend upon the party that initiates the termination and the reasons for the termination.
In the event of termination of her employment without “cause” or her resignation for “good reason” (as such terms are defined in the McGalla Agreement), Ms. McGalla will be entitled to receive (contingent on Ms. McGalla signing a Release (as defined in the McGalla Agreement) and not revoking the Release within thirty (35) days of the termination):
(a) the greater of (i) Ms. McGalla’s aggregate base salary for the remainder of the term of the McGalla Agreement and (ii) Ms. McGalla’s then current base salary, multiplied by two (2), which payment will be made in twelve (12) equal monthly installments over a one (1) year period, subject to compliance with Section 409A of the Internal Revenue Code, as amended, or Section 409A;
(b) payment by our Company of the cost of Ms. McGalla’s coverage under COBRA for one (1) year, subject to mitigation and to the extent that Ms. McGalla elects such coverage;
(c) vesting of the unvested restricted shares and option shares that are scheduled to vest at the next annual vesting milestone following the termination date and 50% vesting of all other remaining unvested restricted shares; and
(d) vesting of the unvested performance shares that would have vested on the service-based vesting date immediately following the termination date provided that the share appreciation target for such measurement period is achieved prior to the termination date and 50% vesting of all other remaining unvested performance shares provided that the respective share appreciation target for such measurement period is achieved prior to the termination date.
In the event that Ms. McGalla’s employment is terminated as a result of her “disability” (as such term is defined in the McGalla Agreement) or her death, Ms. McGalla will receive:
(a) accrued but unpaid salary, payment for unreimbursed expenses and accrued but unpaid employee benefits through the employment termination date;
(b) Ms. McGalla’s target bonus for the fiscal year in which the date of termination occurs, or the termination fiscal year, which shall be pro rated for the number of full calendar quarters Ms. McGalla was employed by our Company in the termination fiscal year;
(c) payment by our Company of the cost of Ms. McGalla’s coverage under COBRA for one (1) year, subject to mitigation and to the extent that Ms. McGalla elects such coverage;
(d) vesting of the unvested restricted shares and option shares that are scheduled to vest at the next annual vesting milestone and 50% vesting of all other remaining unvested restricted shares; and
(e) vesting of the unvested performance shares that would have vested on the service-based vesting date immediately following the termination date provided that the share appreciation target for such measurement period is achieved prior to the termination date and 50% vesting of all other remaining unvested performance shares provided that the respective share appreciation target for such measurement period is achieved prior to the termination date.
In the event of a termination of Ms. McGalla’s employment for “cause” or her resignation without “good reason”, Ms. McGalla will receive (a) accrued but unpaid base salary, (b) payment for unreimbursed expenses and (c) accrued but unpaid employee benefits through the employment termination date. Nevertheless, if our Board of Directors has the reasonable belief that Ms. McGalla has committed any of the acts that constitute the basis for a “cause” termination, Ms. McGalla may be suspended without pay until an investigation is concluded.
Change of Control Payments
If we experience a “change of control” (as such term is defined in the McGalla Agreement) during the term of Ms. McGalla’s employment with us, and the consideration per share payable to the our stockholders at the closing of the change of control transaction equals or exceeds 120% of the share appreciation targets of any tranche or tranches of Ms. McGalla’s unvested performance shares, Ms. McGalla shall be entitled to vesting in full of such unvested tranche or tranches of performance shares simultaneously with the closing of the change of control transaction.
If we experience a “change of control” (as such term is defined in the McGalla Agreement) during the term of Ms. McGalla’s employment with us, and, within one hundred eighty (180) days of the change of control, Ms. McGalla’s employment with us is terminated by our Company without cause or by Ms. McGalla for good reason, Ms. McGalla will be entitled to receive (contingent on Ms. McGalla signing a Release and not revoking the Release within thirty (35) days of the termination):
(a) a payment equal to the sum of (i) Ms. McGalla’s then current base salary multiplied by two (2) and (ii) Ms. McGalla’s target bonus for the fiscal year in which the termination occurs (pro rated for the number of full calendar quarters that Ms. McGalla was employed during such fiscal year) multiplied by two (2). This payment will be made in twelve (12) equal monthly installments over one (1) year, subject to compliance with Section 409A;
(b) payment by our Company of the cost of Ms. McGalla’s coverage under COBRA for one (1) year, subject to mitigation and to the extent that Ms. McGalla elects such coverage;
(c) vesting of the unvested restricted shares that are scheduled to vest at the next annual vesting milestone and 50% vesting of all other remaining unvested restricted shares provided, however, that if the consideration per share payable to our stockholders at the closing of the change of control transaction equals or exceeds $5.50, vesting of all other remaining unvested restricted shares will occur; and
(d) the greater of (i) vesting of the unvested option shares that are scheduled to vest at the next annual vesting milestone and (ii)(1) if the consideration per share payable to our stockholders at the closing of the change of control transaction equals or exceeds $5.52, vesting of 33.3% of all remaining unvested option shares; (2) if the consideration per share payable to our stockholders at the closing of the change of control transaction equals or exceeds $6.96, vesting of 66.66% of all remaining unvested option shares, or; (3) if the consideration per share payable to our stockholders at the closing of the change of control transaction equals or exceeds $8.40, vesting of all remaining unvested option shares.
The following table quantifies the severance and accelerated vesting Ms. McGalla would receive if a triggering event occurred on January 28, 2012.
| | | | | | | | | | | | |
Event | | Total Cash
Severance (1) | | | Value of
Accelerated
Equity (2) | | | Total | |
Termination Without Cause or with Good Reason | | $ | 2,031,411 | | | $ | 907,500 | | | $ | 2,938,911 | |
Death or Disability | | $ | 816,596 | | | $ | 907,500 | | | $ | 1,524,096 | |
With Cause or Without Good Reason | | | — | | | | — | | | | — | |
Termination Without Cause or with Good Reason Following a Change of Control | | $ | 2,816,596 | | | $ | 907,500 | | | $ | 3,724,096 | |
Change of Control | | | — | | | | — | | | | — | |
(1) | Pursuant to the terms of the McGalla Agreement, as of January 28, 2012, upon her termination without “cause,” or with “good reason,” Ms. McGalla would be entitled to payments totaling $2,031,411, less applicable withholding taxes, which represents the aggregate current base salary for the remainder of her employment term and payment of her coverage under COBRA for one year, approximately $16,596, if Ms. McGalla elects such coverage. Upon death or “disability,” Ms. McGalla would be entitled to payments totaling $816,596, less applicable withholding taxes, which represent her target bonus and, in the event of disability, payment of her coverage under COBRA for one year, approximately $16,596, if Ms. McGalla elects such coverage. Upon a termination without “cause,” or with “good reason,” within one-hundred and eighty (180) days following a “change of control,” Ms. McGalla would be entitled to payments totaling $2,816,596, less applicable withholding taxes, which represents two (2) times her 2011 base salary and two (2) times her target bonus pro-rated to reflect the three full calendar quarters served in her position during the year, and payment of her coverage under COBRA for one year, approximately $16,596, if Ms. McGalla elects such coverage. |
(2) | For purposes of a termination without “cause” or with “good reason”, due to death or “disability”, and without “cause” or with “good reason” within one-hundred and eighty (180) days following a “change of control,” the value of accelerated equity with respect to the restricted shares is calculated as the product of (a) the sum of 66,666 unvested restricted shares scheduled to vest at the next vesting milestone and 50% of the remaining unvested restricted shares, or 183,334 shares, Ms. McGalla would vest into and (b) $3.63, which was our Company’s closing common stock price on January 27, 2012, the last trading day of fiscal 2011. The value of accelerated equity with respect to her previously granted stock options and performance shares is $0 as the stock options were not “in the money” due to their exercise price per share being in excess of our $3.63 closing common stock price on January 27, 2012, the last trading day of fiscal 2011, and as none of the share appreciation targets were met as of January 28, 2012 for the remaining unvested performance shares. Upon a “change of control,” the value of accelerated equity with respect to her previously granted stock options, restricted shares and performance shares is $0 as our Company’s closing common stock price on January 27, 2012, the last trading day of fiscal 2011, did not equal or exceed the required per share amounts or share appreciation targets, as defined in the McGalla Agreement. |
KENNETH D. SEIPEL
Termination Payments/Rights
Mr. Seipel’s employment may be terminated by us or by Mr. Seipel at any time, subject to the terms and conditions of the Seipel Agreement. The respective rights and obligations of Mr. Seipel and us depend upon the party that initiates the termination and the reasons for the termination.
In the event of termination of his employment without “cause” or his resignation for “good reason” (as such terms are defined in the
SeipelGoodman Severance Agreement), Mr.
SeipelGoodman will be entitled to receive (contingent on Mr.
SeipelGoodman timely signing a Release (as defined in the
SeipelGoodman Severance Agreement) and not revoking the
Release within thirty (35) days of the termination)Release):
(a)
the greater of (i) Mr.
Seipel’s aggregate base salary for the remainder of the term of the Seipel Agreement and (ii) Mr. Seipel’sGoodman's then current base salary, multiplied by two (2), which payment will be made in
twelve (12) equal monthly installments over a
one (1) year period,single cash lump sum payment, net of applicable withholding taxes, subject to compliance with Section 409A of the Internal Revenue Code, as amended, or Section 409A;
(b) payment by our Company of the cost of Mr.
Seipel’sGoodman's coverage under COBRA for
one (1) year,up two (2) years, subject to mitigation and to the extent that Mr.
SeipelGoodman elects such coverage;
(c) vesting of the unvested restricted shares and option shares that are scheduled to vest
at the next annual vesting milestone followingwithin one-year of the termination
date and 50% vesting of all other remaining unvested restricted shares; anddate;
(d) vesting of the unvested performance shares that would have vested onwhereby the service-based vesting date immediately following the termination date provided that the share appreciation target for such measurement period isperformance goals were achieved prior to the termination date and 50%pro-rata vesting of all other remaining unvested performance shares provided thatfor which at least 50% of the applicable performance measurement period has lapsed and the respective share appreciation targetperformance goals, adjusted to reflect pro-rata goals through the fiscal quarter end nearest to the termination date, for such measurement period iswere achieved prior to the termination date; and
(e) pro-rata vesting of Mr. Goodman's target bonus if at least 50% of the applicable performance measurement period has lapsed and the respective performance goals, adjusted to reflect pro-rata goals through the fiscal quarter end nearest to the termination date, for such measurement period were achieved prior to the termination date.
In the event that Mr.
Seipel’sGoodman's employment is terminated as a result of his “disability” (as such term is defined in the
SeipelGoodman Agreement) or his death, Mr.
SeipelGoodman will receive:
(a) accrued but unpaid salary, payment for unreimbursed expenses and accrued but unpaid employee benefits through the employment termination date;
and
(b) Mr.
Seipel’sGoodman's target bonus,
based upon achievement of the applicable performance goals, for the fiscal year in which the date of termination occurs,
or the termination fiscal year, which shall be
pro ratedpro-rated for the number of
full calendar quartersdays Mr.
SeipelGoodman was employed by our Company in the termination fiscal
year;(b) payment by our Company of the cost of Mr. Seipel’s coverage under COBRA for one (1) year, subject to mitigation and to the extent that Mr. Seipel elects such coverage;
(c) vesting of the unvested restricted shares and option shares that are scheduled to vest at the next annual vesting milestone and 50% vesting of all other remaining unvested restricted shares; and
(d) vesting of the unvested performance shares that would have vested on the service-based vesting date immediately following the termination date provided that the share appreciation target for such measurement period is achieved prior to the termination date and 50% vesting of all other remaining unvested performance shares provided that the respective share appreciation target for such measurement period is achieved prior to the termination date.
year.
In the event of a termination of Mr.
Seipel’sGoodman’s employment for “cause” or his resignation without “good reason”, Mr.
SeipelGoodman will receive (a) accrued but unpaid base salary, (b) payment for unreimbursed expenses, and (c) accrued but unpaid employee benefits through the employment termination date. Nevertheless, if our Board of Directors has the reasonable belief that Mr.
SeipelGoodman has committed any of the acts that constitute the basis for a “cause” termination, Mr.
SeipelGoodman may be suspended without pay until an investigation is concluded.
In the event Mr. Goodman terminates his employment at the end of his employment term, as specified in the Goodman Agreement, following the Company's provision to Mr. Goodman of Notice of Non-Renewal, then Mr. Goodman is entitled to receive:
(a) vesting of the unvested restricted shares and option shares that are scheduled to vest within one-year of the termination date; and
(b) vesting of the unvested performance shares whereby the performance goals were achieved prior to the termination date and pro-rata vesting of all other remaining unvested performance shares for which at least 50% of the applicable performance measurement period has lapsed and the respective performance goals, adjusted to reflect pro-rata goals through the fiscal quarter end nearest to the termination date, for such measurement period were achieved prior to the termination date.
Change of Control Payments
If we experience a “change of control” (as such term is defined in the
SeipelGoodman Agreement) during the term of Mr.
Seipel’sGoodman’s employment with us, and
the consideration per share payable to the our stockholders at the closing of the change of control transaction equals or exceeds 120% of the share appreciation targets of any tranche or tranches of Mr.
Seipel’s unvested performance shares, Mr. Siepel shall be entitled to vesting in full of such unvested tranche or tranches of performance shares simultaneously with the closing of the change of control transaction.If we experience a “change of control” (as such term is defined in the Seipel Agreement) during the term of Mr. Seipel’s employment with us, and, within one hundred eighty (180) days of the change of control, Mr. Seipel’sGoodman's employment with us is terminated by our Company without cause or by Mr. SeipelGoodman for good reason, either in contemplation of the change of control or within the 12 month period following the change of control, Mr. SeipelGoodman will be entitled to receive (contingent on Mr. SeipelGoodman timely signing a Release and not revoking the Release within thirty (35) days of the termination)Release):
(a) a payment equal to the sum of (i) Mr.
Seipel’sGoodman's then current base salary multiplied by two (2) and (ii) Mr.
Seipel’sGoodman's target bonus for the fiscal year in which the termination occurs
(pro rated for the number of full calendar quarters that Mr. Seipel was employed during such fiscal year) multiplied by two (2). This payment will be made in
twelve (12) equal monthly installments over one (1) year,a single cash lump sum, less applicable withholding taxes, subject to compliance with Section 409A;
(b) payment by our Company of the cost of Mr.
Seipel’sGoodman's coverage under COBRA for
one (1) year,up to two (2) years, subject to mitigation and to the extent that Mr.
SeipelGoodman elects such coverage;
(c) vesting of theall outstanding and unvested restricted shares, that are scheduled to vest at the next annual vesting milestonestock options, performance shares and 50%performance share units held by Mr. Goodman on his termination date; and
(d) pro-rata vesting of all other remaining unvested restricted shares, provided, however, thatMr. Goodman's target bonus if at least 50% of the consideration per share payableapplicable performance measurement period has lapsed and the respective performance goals, adjusted to reflect pro-rata goals through the fiscal quarter end nearest to the our stockholders attermination dates, for such measurement period were achieved prior to the closingtermination date.
In the event Mr. Goodman's employment is terminated as a result of
thea contemplation of a change of control
transaction equals or exceeds $5.50, vesting of all other remaining unvested restricted shares will occur; and(d) the greater of (a) vesting of the unvested option shares that are scheduled to vest at the next annual vesting milestone and (b)(i) if the consideration per share payable to our stockholders at the closing of thea change of control transaction equalsdoes not occur, Mr. Goodman would be entitled to receive the same benefits as those provided for termination of his employment without “cause” or exceeds $5.52, vesting of 33 1/3% of all remaining unvested option shares (ii) if the consideration per share payable to our stockholders at the closing of the change of control transaction equals or exceeds $6.96, vesting of 66 2/3% of all remaining unvested option shares (iii) if the consideration per share payable to our stockholders at the closing of the change of control transaction equals or exceeds $8.40, vesting of all remaining unvested option shares.
his resignation for “good reason,” outlined above.
The following table quantifies the severance and accelerated vesting Mr.
SeipelGoodman would receive if a triggering event occurred on
January 28, 2012. | | | | | | | | | | | | |
Event | | Total Cash
Severance (1) | | | Value of
Accelerated
Equity (2) | | | Total | |
Termination Without Cause or with Good Reason | | $ | 1,268,453 | | | $ | 1,028,499 | | | $ | 2,296,952 | |
Death or Disability | | $ | 335,410 | | | $ | 1,028,499 | | | $ | 1,363,909 | |
With Cause or Without Good Reason | | | — | | | | — | | | | — | |
Termination Without Cause or with Good Reason Following a Change of Control | | $ | 1,808,847 | | | $ | 544,500 | | | $ | 2,353,347 | |
Change of Control | | | — | | | | — | | �� | | — | |
|
| | | | | |
| Event | Total Cash Severance (1) | | Value of Accelerated Equity (2) | | Total |
| Termination Without Cause or with Good Reason | $1,630,504 | | $160,987 | | $1,791,491 |
| Death or Disability | — | | — | | — |
| With Cause or Without Good Reason | — | | — | | — |
| Termination Without Cause or with Good Reason Following a Change of Control | $1,630,504 | | $482,963 | | $2,113,467 |
| Termination in Contemplation of a Change of Control without a Change of Control Occurring | $1,630,504 | | $160,987 | | 1,791,491 |
________________________
| |
| (1) | Pursuant to the terms of the Seipel Agreement, as of January 28, 2012, upon his termination without “cause,” or with “good reason,” Mr. Seipel would be entitled to payments totaling $1,268,453, less applicable withholding taxes, which represents the aggregate current base salary for the remainder of his employment term and payment of his coverage under COBRA for one year, approximately $11,972, if Mr. Seipel elects such coverage. Upon death or “disability,” Mr. Seipel would be entitled to payments equal to $335,410 which represent his target bonus pro-rated to reflect the three full calendar quarters served in his position during the year and, in the event of disability, payment of his coverage under COBRA for one year, approximately $11,972, if Mr. Seipel elects such coverage. Upon a termination without “cause,” or with “good reason,” within one-hundred and eighty (180) days following a “change of control,” Mr. Seipel would be entitled to payments totaling $1,808,847, less applicable withholding taxes, which representsConstitutes two (2) times his 20112012 base salary of $800,000, $30,504 (two years' COBRA coverage at fiscal 2012 rates), and two (2) times hisno bonus amount since Mr. Goodman was not eligible for a target bonus pro-rated to reflect the three full calendar quarters served in his position during the year, and payment of his coverage under COBRA for one year, approximately $11,972, if Mr. Seipel elects such coverage.fiscal 2012. |
| |
| (2) | For purposes of a termination without “cause” or with “good reason” and in contemplation of a change of control that does not occur, the value of accelerated equity with respect to the restricted shares is calculated as the product of (a) the sum of 58,118 unvested restricted shares scheduled to vest within one year of the termination date and (b) $2.77, which was our Company’s closing Class A common stock price on February 1, 2013, the last trading day of fiscal 2012. For purposes of a termination without “cause” or with “good reason” within one-hundred and eighty (180) days12 months following a “change of control,” the value of accelerated equity with respect to the restricted shares is $544,500, calculated as the product of (a) the sum of 50,000174,355 unvested restricted shares scheduled to vest at the next vesting milestone and 50% of the remaining unvested restricted shares, or 100,000 shares, Mr. Seipel would vest into and (b) $3.63,��$2.77, which was our Company’s closing Class A common stock price on January 27, 2012,February 1, 2013, the last trading day of fiscal 2011. The value2012. As Mr. Goodman had not yet been granted his performance shares and performance share units as of February 2, 2013, there would be no accelerated equity value with respect to his previously granted stock options is $0 as the stock options were not “in the money” due to their exercise price per share being in excess of our $3.63 closing common stock price on January 27, 2012, the last trading day of fiscal 2011. For purposes of a termination without “cause” or with “good reason” and due to death or “disability”, the total value of accelerated equity is $1,028,499 and represents the sum of (1) the value of accelerated equity with respect to the restricted shares of $544,500 and is calculated as the product of (a) the sum of 50,000 unvested restricted |
| shares scheduled to vest at the next vesting milestone and 50% of the remaining unvested restricted shares, or 100,000 shares, Mr. Seipel would vest into and (b) $3.63, which was our Company’s closing common stock price on January 27, 2012, the last trading day of fiscal 2011, and (2) the value of accelerated equity with respect to his previously granted performance shares of $483,999, calculated as the product of (a) 133,333 unvested performance shares scheduled to vest at the next vesting milestone andin any termination events that attained their share appreciation target of $4.60 prior to the termination date and (b) $3.63, which was our Company’s closing common stock price on January 27, 2012, the last trading day of fiscal 2011. Upon a “change of control,” the value ofprovide for accelerated equity with respect to his previously granted stock options, restricted shares and performance shares is $0 as our Company’s closing common stock price on January 27, 2012, the last trading day of fiscal 2011, did not equal or exceed the required per share amounts or share appreciation targets, as defined in the Seipel Agreement.vesting. |
Termination Payments/Rights
Effective April 8, 2013, the Company entered into an Employment Agreement Termination Agreement with Mr. Benrubi, which terminated the Benrubi Agreement, and Mr. Benrubi began participating in the Company's Severance and Change in Control Plan, as described in the 8-K filed April 11, 2013. Mr. Benrubi continues to be employed as the Company's Executive Vice President and Chief Financial Officer. Mr. Benrubi’s employment may be terminated by us or by Mr. Benrubi at any
time, subject to the terms and conditions of the Benrubi Agreement.time. The respective rights and obligations of Mr. Benrubi and us
dependunder the former Benrubi Agreement depended upon the party that
initiatesinitiated the termination and the reasons for the termination.
In the event of a termination of Mr. Benrubi’s employment by us without “cause,” or if Mr. Benrubi
terminatesterminated his employment for “good reason” (as such terms are defined in the
former Benrubi Agreement) on or before August 3, 2013, Mr. Benrubi
shall bewould have been entitled to receive (contingent on Mr. Benrubi signing a Release (as defined in the
former Benrubi Agreement) and not revoking the Release within thirty (30) days of the termination) severance pay in an amount equal to one year’s base salary, payable in equal bi-monthly installments over a period of one (1) year, subject to compliance with Section 409A and the terms of the
former Benrubi Agreement.
Under the former Benrubi Agreement, Mr. Benrubi
shallwas not
be entitled to any additional payments in connection with his
termination. Inpotential termination and, in the event of a termination without “cause” after August 3, 2013, Mr. Benrubi
willwould not
behave been entitled to severance.
In
Under the former Benrubi Agreement, in the event of a termination of Mr. Benrubi’s employment for “cause” or his resignation without “good reason” (as such terms are defined in the
former Benrubi Agreement) or his employment
iswas terminated as a result of his “disability” (as such term is defined in the
former Benrubi Agreement) or his death, Mr. Benrubi
will receivewould have received (a) accrued but unpaid salary, (b) payment for unreimbursed expenses and (c) accrued but unpaid employee benefits through the employment termination date.
Change of Control Payments
Under the terms of the
former Benrubi Agreement, Mr. Benrubi
iswas not entitled to receive any payments in connection with a change of control. However, pursuant to the terms of his stock option
award agreements and
his restricted stock
and performance share award agreements, upon a “change of control” (as such term is defined in the Plan) during his employment with us, Mr. Benrubi’s unvested stock options and restricted stock will
vest and any performance restrictions will lapse, allowing for vesting of performance shares.vest.
The following table quantifies the severance and accelerated vesting Mr. Benrubi would receive if a triggering event occurred on
January 28, 2012. | | | | | | | | | | | | |
Event | | Total Cash
Severance (1) | | | Value of
Accelerated
Equity (2)(3) | | | Total | |
Termination Without Cause or with Good Reason | | $ | 391,875 | | | | — | | | $ | 391,875 | |
Death or Disability | | | — | | | | — | | | | — | |
With Cause or Without Good Reason | | | — | | | | — | | | | — | |
Change of Control | | | — | | | $ | 297,698 | | | $ | 297,698 | |
|
| | | | | |
| Event | Total Cash Severance (1) | | Value of Accelerated Equity (2) | | Total |
| Termination Without Cause or with Good Reason | $411,875 | | — | | $411,875 |
| Death or Disability | — | | — | | — |
| With Cause or Without Good Reason | — | | — | | — |
| Change of Control | — | | $83,100 | (3) | $83,100 |
______________________
| |
| (1) | Pursuant to the former Benrubi Agreement, as of January 28, 2012,February 2, 2013, upon his termination without “cause” or with “good reason,” Mr. Benrubi would behave been entitled to receive severance payments totaling his base salary under the former Benrubi Agreement, less applicable withholding taxes, totaling $391,875.$411,875. |
| |
| (2) | The value of accelerated equity with respect to previously granted stock options is $0 as the stock options were not “in the money” due to their exercise price per share being in excess of our $2.77 closing Class A common stock price on February 1, 2013, the last trading day of fiscal 2012. |
| |
| (3) | The value of accelerated equity with respect to restricted stock and performance shares is calculated as the sum of the product of (a) 60,00030,000 shares of restricted stock and 18,870 performance shares that Mr. Benrubi would vest into and (b) $3.63,$2.77, which was our Company’s closing Class A common stock price on January 27, 2012,February 1, 2013, the last trading day of fiscal 2011.2012. |
(3) | The value of accelerated equity with respect to the options is calculated as the product of (a) 60,000 option shares, representing the unvested options that are “in the money” at January 28, 2012, and that Mr. Benrubi would vest into and (b) $0.19, the difference between $3.63, which
B. Named Executive Officers No Longer Employed by Our Company
SUSAN P. MCGALLA On July 23, 2012, Ms. McGalla’s employment with our Company was our Company’s closing common stock price on January 27, 2012, the last trading day of fiscal 2011, and $3.44, the option share exercise price. |
HARRIET BAILISS-SUSTARSIC
Termination Payments/Rights
Ms. Sustarsic’s employment may be terminated by us or by Ms. Sustarsic at any time, subjectour Board of Directors. Pursuant to the terms and conditions of the Sustarsic Agreement. The respective rights and obligations of Ms. Sustarsic and us depend upon the party that initiates the termination and the reasons for the termination.
In the event of a termination of Ms. Sustarsic’s employment by us without “cause” (as such term is defined in the Sustarsic Agreement) on or before November 28, 2012, Ms. Sustarsic shall be entitled to receive (contingent on Ms. Sustarsic signing a Release (as defined in the Sustarsic Agreement) and not revoking the Release within thirty (35) days of the termination) total severance equal to six months, or 50%, of her annual base salary at the time of her terminations, payable in six equal monthly installments, subject to compliance with Section 409A and the terms of the Sustarsic Agreement.McGalla Agreement and the general release signed by Ms. Sustarsic shall not beMcGalla, or the McGalla Release, Ms. McGalla was entitled to an aggregate of $3,070,375 in payments and benefits as follows:
(a) a $1,737,260 severance payment, of which $100,000 was paid on November 13, 2012 and the remainder is payable in seven (7) monthly installments, as defined in the McGalla Release, beginning February 1, 2013;
(b) payment of (i) any additional payments in connectionaccrued but unpaid base compensation earned through July 23, 2012, (ii) the cash value of any accrued but unused vacation through July 23, 2012, which amount equaled $47,615, (iii) reimbursement for any unreimbursed business expenses incurred prior to July 23, 2012 to which she would otherwise have been entitled, and (iv) any amounts due under any Company benefit plan or arrangement for the period prior to July 23, 2012; and
(c) accelerated vesting of the 66,666 unvested restricted shares, valued at approximately $194,000, and 360,000 stock options, valued at approximately $558,000, that were scheduled to vest at the next annual vesting milestone following the termination date and 50% of the remaining unvested restricted shares, or 183,334 shares, valued at approximately $533,500. Ms. McGalla was provided with her termination. In the eventcontinued opportunity to exercise any outstanding vested stock options for six (6) months after July 23, 2012, at the exercise price of a termination without “cause” after November 28, 2012,$3.72. On January 23, 2013, all of Ms. Sustarsic will not be entitledMcGalla's vested stock options were forfeited.
KENNETH D. SEIPEL
On February 1, 2013, Mr. Seipel resigned from our Company and his employment was terminated. Pursuant to
severance.Change of Control Payments
Under the terms of the SustarsicSeipel Agreement, Mr. Seipel was entitled to an aggregate of $1,789,269 in payments and benefits as follows:
(a) a $1,190,000 severance payment, payable in twelve (12) monthly installments, as defined in the Seipel Agreement, beginning thirty-five (35) days after signing a release;
(b) payment of (i) any accrued but unpaid base compensation earned through February 1, 2013, (ii) the cash value of any accrued but unused vacation through February 1, 2013, which amount equaled $84,959, (iii) reimbursement for any unreimbursed business expenses incurred prior to February 1, 2013 to which he would otherwise have been entitled, and (iv) any amounts due under any Company benefit plan or arrangement for the period prior to February 1, 2013;
(c) payment by our Company of $12,060, which represents the cost of Mr. Seipel’s coverage under COBRA for one (1) year, subject to mitigation and to the extent that Mr. Seipel elects such coverage; and
(d) accelerated vesting of the 50,000 unvested restricted shares, valued at approximately $138,500, and 100,000 stock options, valued at approximately $156,000, that were scheduled to vest at the next annual vesting milestone following the termination date and 50% of the remaining unvested restricted shares, or 75,000 shares, valued at approximately $207,750. Mr. Seipel was provided with the continued opportunity to exercise any outstanding vested stock options for six (6) months after February 1, 2013, at the exercise price of $4.00.
HARRIET BAILISS-SUSTARSIC
On October19, 2012, Ms. Sustarsic isresigned from our Company and her employment was terminated. Ms. Sustarsic was not entitled to any benefits and only received accrued but unpaid base compensation earned through October 19, 2012, (ii) the cash value of any accrued but unused vacation, through October 19, 2012, which amount equaled $16,818, (iii) reimbursement for any unreimbursed business expenses incurred prior to October 19, 2012 to which she would otherwise have been entitled, and (iv) any amounts due under any Company benefit plan or arrangement for the period prior to October 19, 2012. In addition, as Ms. Sustarsic voluntarily resigned from the Company within the first 12 months of the Sustarsic Effective Date, Ms. Sustarsic repaid $8,333, representing a pro-rata portion of the $50,000 relocation allowance provided to her upon her appointment as our Executive Vice President and Chief Merchandise Officer of our Wet Seal Division.
SHARON HUGHES
On April 11, 2013, Ms. Hughes resigned from our Company. Ms. Hughes was not entitled to any benefits, however, the Company offered Ms. Hughes a severance payment equal to twelve (12) weeks of her base salary (contingent on Ms. Hughes' signing and not revoking a Release). Ms. Hughes received, (i) accrued but unpaid base compensation earned through April 11, 2013, (ii) the cash value of any accrued but unused vacation, through April 11, 2013, which amount equaled $6,244, (iii)
reimbursement for any unreimbursed business expenses incurred prior to April 11, 2013 to which she would otherwise have been entitled, and (iv) any amounts due under any Company benefit plan or arrangement for the period prior to April 11, 2013.
Ms. Hughes was also not entitled to receive any payments in connection with
a change of control. However, pursuant to the terms of her
stock option award agreement, upon a “change of control” (as such term is defined in the Plan) during her employment with us, Ms. Sustarsic’s unvested stock options will vest.The following table quantifies the severance and accelerated vesting Ms. Sustarsic would receive if a triggering event occurred on January 28, 2012.
| | | | | | | | | | | | |
Event | | Total Cash
Severance (1) | | | Value of
Accelerated
Equity (2)(3) | | | Total | |
Termination Without Cause or with Good Reason | | $ | 200,000 | | | | — | | | $ | 200,000 | |
Death or Disability | | | — | | | | — | | | | — | |
With Cause or Without Good Reason | | | — | | | | — | | | | — | |
Change of Control | | | — | | | $ | 50,000 | | | $ | 50,000 | |
(1) | Pursuant to the Sustarsic Agreement, as of January 28, 2012, upon her termination without “cause,” Ms. Sustarsic would be entitled to receive severance payments totaling 50% of her base salary under the Sustarsic Agreement, less applicable withholding taxes, totaling $200,000. |
(2) | The value of accelerated equity with respect to the options is calculated as the product of (a) 125,000 option shares, representing the unvested options that are “in the money” at January 27, 2012, the last trading day of fiscal 2011, and that Ms. Sustarsic would vest into and (b) $0.40, the difference between $3.63, which was our closing common stock price on January 27, 2012, the last trading day of fiscal 2011, and $3.23, the option share exercise price. |
SHARON HUGHES
Termination Payments/Rights
Ms. Hughes’ employment may be terminated by us or by Ms. Hughes at any time, subject to the terms and conditions of the Hughes Agreement. The respective rights and obligations of Ms. Hughes and us depend upon the party that initiates the termination and the reasons for the termination.
In the event of a termination of Ms. Hughes’ employment without “cause” or by her resignation for “good reason” (as such terms are defined in the Hughes Agreement), Ms. Hughes will be entitled to receive (contingent on Ms. Hughes signing a Separation Agreement and Release within twenty-one (21) daysoccurrence of termination (as defined in the Hughes Agreement) and not revoking the Separation Agreement or Release) severance pay in an
amount equal to one times Ms. Hughes’ base salary. This payment will be made in twelve (12) equal monthly installments over one (1) year, subject to compliance with Section 409A.
In the event of a termination of Ms. Hughes’ employment for “cause” or her resignation without “good reason,” or her employment terminates as a result of her “disability” (as such terms are defined in the Hughes Agreement) or her death, Ms. Hughes will receive (a) accrued but unpaid base salary, (b) payment for unreimbursed expenses and (c) accrued and unpaid employee benefits through the employment termination date. Nevertheless, if our Board of Directors has reason to believe that Ms. Hughes has committed any of the acts that constitute the basis for a “cause” termination, Ms. Hughes may be suspended without pay until an investigation is concluded.
Change of Control Payments
Under the terms of the Hughes Agreement, Ms. Hughes is not entitled to receive any payments in connection with a change of control. However, pursuant to the terms of her stock option and restricted stock and performance share award agreements, upon a “change"change of control”control" (as such term is defined in the Plan) during her employment with us, Ms. Hughes’Hughes' unvested stock options and restricted stock will vest, and any performance restrictions will lapse, allowing for vesting of performance shares.
awards would have vested.
The following table quantifies the
severance and accelerated vesting Ms. Hughes would
receivehave received if a triggering event
had occurred on
January 28, 2012. | | | | | | | | | | | | |
Event | | Total Cash
Severance (1) | | | Value of
Accelerated
Equity (2)(3) | | | Total | |
Termination Without Cause or with Good Reason | | $ | 485,000 | | | | — | | | $ | 485,000 | |
Death or Disability | | | — | | | | — | | | | — | |
With Cause or Without Good Reason | | | — | | | | — | | | | — | |
Change of Control | | | — | | | $ | 173,946 | | | $ | 173,946 | |
|
| | | | | |
| Event | Total Cash Severance | | Value of Accelerated Equity (1)(2) | | Total |
| Change of Control | — | | $6,648 | | $6,648 |
_____________________
| |
| (1) | PursuantThe value of accelerated equity with respect to previously granted stock options is $0 as the termsstock options were not “in the money” due to their exercise price per share being in excess of our $2.77 closing Class A common stock price on February 1, 2013, the Hughes Agreement, aslast trading day of January 28, 2012, upon her termination without “cause,” or with “good reason,” Ms. Hughes would be entitled to receive severance payments equal to her then current base salary, less applicable withholding taxes, totaling $485,000.fiscal 2012. |
| |
| (2) | The value of accelerated equity with respect to restricted stock and performance shares is calculated as the sum of the product of (a) the sum of 4,8002,400 shares of restricted stock and 40,500 of performance shares that Ms. Hughes would vesthave vested into and (b) $3.63,$2.77, which was our Company’s closing Class A common stock price on January 27, 2012,February 1, 2013, the last trading day of fiscal 2011.2012. |
BARBARA COOK
On February 20, 2013, Ms. Cook resigned from our Company and her employment was terminated. Ms. Cook was not entitled to any benefits and only received accrued, but unpaid base compensation earned through February 20, 2013, (ii) the cash value of any accrued but unused vacation, through February 20, 2013, which amount equaled $13,056, (iii) reimbursement for any unreimbursed business expenses incurred prior to February 20, 2013 to which she would otherwise have been entitled, and (iv) any amounts due under any Company benefit plan or arrangement for the period prior to February 20, 2013.
Ms. Cook was also not entitled to receive any payments in connection with her termination of employment or the occurrence of a change of control. However, pursuant to the terms of her stock option and restricted stock award agreements, upon a "change of control" (as such term is defined in the Plan) during her employment with us, Ms. Cook's unvested stock options and restricted awards would have vested.
The following table quantifies the accelerated vesting Ms. Cook would have received if a triggering event had occurred on February 2, 2013.
|
| | | | | |
| Event | Total Cash Severance | | Value of Accelerated Equity (1)(2) | | Total |
| Change of Control | — | | $27,700 | | $27,700 |
_____________________
(3) | |
| (1) | The value of accelerated equity with respect to previously granted stock options is $0 as the stock options were not “in the money” due to their exercise price per share being in excess of our $2.77 closing Class A common stock price on February 1, 2013, the last trading day of fiscal 2012. |
| |
| (2) | The value of accelerated equity with respect to restricted stock shares is calculated as the sum of (i) the product of (a) 28,333 option10,000 shares representing the unvested options that are “in the money” at January 28, 2012, andof restricted stock that Ms. HughesCook would vesthave vested into and (b) $0.20, the difference between $3.63,$2.77, which was our Company’s closing Class A common stock price on January 27, 2012,February 1, 2013, the last trading day of fiscal 2011, and $3.43, the exercise price of the option shares; and (ii) the product of (a) 6,000 option shares, representing the unvested options that are “in the money” at January 28, 2012, and that Ms. Hughes would vest into and (b) $0.64, the difference between $3.63, which was our closing common stock price on January 27, 2012, the last trading day of fiscal 2011, and $2.99, the exercise price of the option shares.2012. |
B. Named Executive Officers No Longer Employed by Our Company
JON C. KUBO
Termination Payments/Rights
Upon Mr. Kubo’s resignation on July 18, 2011, our Company and Mr. Kubo entered into the Transition and Separation Agreement in connection with Mr. Kubo’s continued employment with the Company. The Transition and Separation Agreement expired on September 30, 2011, or theTransition Period Expiration Date. Under the terms
severance pay in an amount equal to 50% of one year’s base salary, payable in equal bi-monthly installments over a period of six (6) months, beginning no later than twenty-one (21) days following the Transition Period Expiration Date.
In addition, subject to Mr. Kubo’s satisfaction of certain transition duties specified in the Agreement to the reasonable satisfaction of the Company, the Company waived repayment of the first installment of the Promotion Bonus (within the meaning of the Kubo Agreement) in the amount of $25,000. Mr. Kubo also acknowledged and agreed that he was not entitled to receive the second installment of the Promotion Bonus in the amount of $25,000 irrespective of his continued employment in accordance with the Transition and Separation Agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our Company’s Class A common stock for (i) each person known to our Company to have beneficial ownership of more than 5% of our Company’s Class A common stock and (ii) each of our Company’s directors and executive officers named in the Summary Compensation Table. Except as otherwise indicated below, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of Class A common stock shown below as beneficially owned by them. Unless otherwise indicated, the address of each person listed below is c/o The Wet Seal, Inc., 26972 Burbank, Foothill Ranch, California 92610.
As of April
2, 2012,5, 2013, there were
90,386,19789,194,404 shares of Class A common stock issued and outstanding and no shares of Class B common stock issued and outstanding. Except for information based upon Schedule 13G and Schedule 13D filings filed with the SEC, as indicated in the footnotes, beneficial ownership is stated as of April
2, 2012. | | | | | | | | |
Name and Address of Stockholder | | Beneficial Ownership
of Shares of Class A
Common Stock | | | Percent of Beneficial
Ownership of
Shares of Class A
Common Stock | |
Paradigm Capital Management, Inc. (1) | | | 7,974,694 | | | | 8.80 | % |
9 Elk Street Albany, New York 12207 | | | | | | | | |
| | |
BlackRock Inc. (2) | | | 5,275,350 | | | | 5.82 | % |
40 East 52 nd Street New York, New York 10022 | | | | | | | | |
| | |
The Vanguard Group, Inc. (3) | | | 4,731,837 | | | | 5.22 | % |
100 Vanguard Boulevard Malvern, Pennsylvania 19355 | | | | | | | | |
| | |
Named Executive Officers and Directors | | | | | | |
Harriet Bailiss-Sustarsic | | | — | | | | * | |
Steven H. Benrubi (4) | | | 186,996 | | | | * | |
Jonathan Duskin (5) | | | 110,409 | | | | * | |
Sidney M. Horn (6) | | | 187,853 | | | | * | |
Sharon Hughes (7) | | | 79,487 | | | | * | |
Harold D. Kahn (8) | | | 257,029 | | | | * | |
Jon C. Kubo | | | — | | | | * | |
Susan P. McGalla (9) | | | 1,668,399 | | | | 1.8 | % |
Kenneth M. Reiss (10) | | | 285,402 | | | | * | |
Kenneth D. Seipel (11) | | | 682,753 | | | | * | |
Henry D. Winterstern (12) | | | 166,802 | | | | * | |
All Named Executive Officers and Directors as a group (11 individuals) | | | 3,625,130 | | | | 4.0 | % |
|
| | | |
| Name and Address of Stockholder | Beneficial Ownership of Shares of Class A Common Stock | | Percent of Beneficial Ownership of Shares of Class A Common Stock |
Paradigm Capital Management, Inc. (1) 9 Elk Street
Albany, New York 12207 | 8,694,510 | | 9.70% |
The Clinton Group, Inc. (2)
9 West 57th Street
26th Floor -------New York, New York 10019 | 6,963,235 | | 7.77% |
BlackRock Inc. (3) 40 East 52nd Street
New York, New York 10022 | 6,042,504 | | 6.74% |
The Vanguard Group, Inc. (4) 100 Vanguard Boulevard
Malvern, Pennsylvania 19355 | 4,893,706 | | 5.46% |
| Named Executive Officers and Directors | | | |
| Harriet Bailiss-Sustarsic | — | | * |
| Steven H. Benrubi (5) | 222,559 | | * |
| Dorrit M. Bern (6) | 71,833 | | * |
| Kathy Bronstein (6) | 54,956 | | * |
| Barbara Cook (7) | 30,000 | | * |
| Lynda J. Davey (6) | 53,833 | | * |
| John D. Goodman (8) | 626,048 | | * |
| Sharon Hughes (9) | 109,940 | | * |
| Susan P. McGalla (10) | 341,698 | | * |
| Mindy C. Meads (6) | 53,833 | | * |
| John S. Mills (6) | 53,833 | | * |
| Kenneth M. Reiss (6) | 325,113 | | * |
| Kenneth D. Seipel (11) | 394,214 | | * |
| All Named Executive Officers and Directors as a group (13 individuals) | 2,337,860 | | 2.62% |
______________________
* Less than 1%
| (1) | As reported in Amendment No. 45 to Schedule 13G dated December 31, 20112012 that was filed on February 13, 2012.11, 2013. |
| |
| (2) | As reported in Amendment No. 211 to Schedule 13D dated and filed on February 13, 2013, the Clinton Group, Inc. beneficially owned an aggregate of 6,963,235 shares of Class A common stock, constituting approximately 7.77% of the shares of Class A common stock outstanding, as follows: (i) Clinton Spotlight Fund, L.P. ("Spotlight Fund") may be deemed the beneficial owner of 850 shares of Class A common stock, or approximately 0.00% of the outstanding shares of Class A common stock; (ii) Clinton Spotlight Master Fund, L.P. ("SPOT") may be deemed the beneficial owner of 2,869,622 shares of Class A common stock, or approximately 3.20% of the outstanding shares of Class A common stock; (iii) Clinton Magnolia Master Fund, Ltd. ("Magnolia") may be deemed the beneficial owner of 1,058,433 shares of Class A common stock, or approximately 1.18% of the outstanding shares of Class A common stock; (iv) Clinton Retail Opportunity Partnership, L.P. ("CROP") may be deemed the beneficial owner of 2,006,858 shares of Class A common stock, or approximately 2.24% of the outstanding shares of Class A common stock; (v) Clinton Special Opportunities |
Master Fund, Ltd. ("CSO") may be deemed the beneficial owner of 557,132 shares of Class A common stock, or approximately 0.62% of the outstanding shares of Class A common stock (vi) Clinton Relational Opportunity Master Fund, L.P. ("CREL") may be deemed the beneficial owner of 470,340 shares of Class A common stock, or approximately 0.52% of the outstanding shares of Class A common stock; (vii) Clinton Group, Inc. ("CGI") may be deemed the beneficial owner of the 6,963,235 shares of Class A common stock owned by SPOT, Magnolia, CROP, CSO, and CREL, or approximately 7.77% of the outstanding shares of Class A common stock; and (v) George E. Hall may be deemed the beneficial owner of the 6,963,235 shares of Class A common stock owned by Spotlight Fund, SPOT, Magnolia, CROP, CSO, CREL and CGI, or approximately 7.77% of the outstanding shares of Class A common stock.
| |
| (3) | As reported in Amendment No. 3 to Schedule 13G dated December 30, 201131, 2012 that was filed on January 8, 2012.February 4, 2013. |
(3) | |
| (4) | As reported in Amendment No. 1 to Schedule 13G dated December 31, 20112012 that was filed on February 10, 2012.7, 2013. |
(4) | |
| (5) | Includes (i) 60,00046,567 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights, and (ii) 60,00090,000 shares of our Company’s Class A common stock issuable upon the exercise of options that have vested or will vest within 60 days of April 2, 2012.5, 2013. |
(5) | Includes 34,916 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights. |
| (6) | Includes 34,91639,711 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights. |
| |
| (7) | Includes 30,000 shares of our Company’s Class A common stock issuable upon the exercise of options that have vested as of April 5, 2013. |
| |
| (8) | Includes 392,547 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights. |
| |
| (9) | Includes (i) 4,8002,400 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights, and (ii) 59,66791,000 shares of our Company’s Class A common stock issuable upon the exercise of options that have vested or will vest within 60 days of April 2, 2012.5, 2013. |
(8) | Includes 34,916 |
| (10) | Represents all vested performance and restricted shares of our Company’sCompany's Class A common stock which are subjectheld as of November 13, 2012, the date the vesting of certain of such shares was accelerated as a result of Ms. McGalla's termination from our Company and pursuant to vesting restrictions and have voting rights.the McGalla Agreement. |
(9) | Includes (i) 666,667 |
| (11) | Represents all vested performance and restricted shares that vest upon achievement of certain 30-day Average Trading Price thresholds for our Company’sCompany's Class A common stock held as of March 8, 2013, the date the vesting of certain of such shares was accelerated as a result of Mr. Seipel's termination from our Company and have voting rights, (ii) 433,334 restricted shares of our Company’s Class A common stock which are subjectpursuant to vesting restrictions and have voting rights and (iii) 360,000the Seipel Agreement. Includes 200,000 shares of our Company’s Class A common stock issuable upon the exercise of options that have vested or will vest within 60 daysas of April 2, 2012.5, 2013. |
(10) | Includes 34,916 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights. |
(11) | Includes (i) 266,667 performance shares that vest upon achievement of certain 30-day Average Trading Price thresholds for our Company’s Class A common stock and have voting rights, (ii) 200,000 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights and (iii) 100,000 shares of our Company’s Class A common stock issuable upon the exercise of options that have vested or will vest within 60 days of April 2, 2012. |
(12) | Includes (i) 34,916 restricted shares of our Company’s Class A common stock which are subject to vesting restrictions and have voting rights and (ii) 15,000 shares of our Company’s Class A common stock issuable upon the exercise of options that have vested or will vest within 60 days of April 2, 2012. |
POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE
NON-AUDIT SERVICES OF INDEPENDENT AUDITORS
Consistent with the policies of the SEC regarding auditor independence, our Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the independent auditors. In recognition of this responsibility, our Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by the independent auditors.
Audit services are services rendered by the independent auditors for the audit of financial statements and review of financial statements included in our Company’s Quarterly Report on Form 10-Q or services that are normally provided by the independent auditors in connection with statutory and regulatory filings or engagements. In addition, the independent auditors engage in a review of the effectiveness of our Company’s internal control over financial reporting.
Audit-related services are for assurance and related services performed by the independent auditors that are reasonably related to the performance of the audit or review of the financial statements.
Tax services include all services performed by the independent auditors for tax compliance, tax planning and tax advice, including professional services rendered for preparation and review of the federal and state corporate income tax returns, preparation of the Company’s Puerto Rico corporate income tax return and miscellaneous tax advice and tax planning related to federal and state income and other tax issues.
Prior to engagement of the independent auditors for the following year’s audit, management will submit an aggregate of services expected to be rendered during that year for each of the four categories of services to our Audit Committee for approval. Our Audit Committee then pre-approves these services by category of service. The fees are budgeted and our Audit Committee requires the independent auditors and management to report actual fees versus the budget periodically throughout the year by category of service. During the year, circumstances may arise when it may become necessary to engage the independent auditors for additional services not contemplated in the original pre-approval. In those instances, our Audit Committee generally requires specific pre-approval before engaging the independent auditors.
In the future, theThe Audit Committee may delegate the authority to pre-approve the services of the independent auditors to one or more designated members of the Audit Committee with any such
preapprovalpre-approval reported to the Audit Committee at its next regularly scheduled meeting.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The fees incurred by our Company for Deloitte & Touche LLP’s services for fiscal
20102011 are set forth in our Company’s Proxy Statement dated April
15, 2011,6, 2012, which have been updated in this Proxy Statement to reflect final amounts of fees incurred. Such fees for fiscal
20112012 are subject to subsequent adjustment if final amounts billed differ from the current estimates. During fiscal
20102011 and
2011,2012, fees for services provided by Deloitte & Touche LLP were as follows:
The aggregate fees incurred by our Company for Deloitte & Touche LLP’s audit of our Company’s annual financial statements, the issuance of consents, the reviews of the financial statements included in our Company’s Quarterly Reports on Form 10-Q and audit of our Company’s internal control over financial reporting totaled
$655,000$703,000 and
$690,000$771,000 in fiscal
20102011 and
2011,2012, respectively.
The aggregate fees billed to our Company by Deloitte & Touche LLP for audit-related services totaled $2,200 and
$2,200$11,300 in fiscal
20102011 and
2011,2012, respectively.
The aggregate fees billed to our Company by Deloitte & Touche LLP for tax compliance, tax advice and tax planning services totaled
$89,000$36,600 and
$39,500$34,800 in fiscal
20102011 and
2011,2012, respectively.
Other than
the services described above, there were no other fees billed by Deloitte & Touche LLP for services rendered to our Company in fiscal
20102011 and
2011.2012.
All of the services for which audit fees, audit-related fees and tax fees were billed to our Company were approved by the Audit Committee.
REPORT OF THE AUDIT COMMITTEE
Our Audit Committee serves as the representative of our Board of Directors for general oversight of our Company’s financial accounting and reporting, systems of internal control and audit process, and monitoring compliance with laws and regulations and standards of business conduct. Our Audit Committee operates under a written charter, a copy of which is available on our Company’s website atwww.wetsealinc.com. Management of our Company has the primary responsibility for preparing the financial statements of our Company, including our Company’s internal controls, as well as our Company’s financial reporting process. Deloitte & Touche LLP, an independent registered public accounting firm acting as our Company’s independent auditor, is responsible for performing an independent audit of our Company’s consolidated financial statements in accordance with the standards of the United States Public Company Accounting Oversight Board and issuing a report thereon and as to its assessment of the effectiveness of
our Company's internal control over financial reporting.
In this context, our Audit Committee hereby reports as follows:
Our Audit Committee has reviewed and discussed the audited financial statements for fiscal 20112012 with our Company’s management and Deloitte & Touche LLP, an independent registered public accounting firm, acting as our Company’s independent auditor. Additionally, our Audit Committee has reviewed and discussed, with management and with Deloitte & Touche LLP, Deloitte & Touche LLP’s attestation on internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.
Our Audit Committee has discussed with Deloitte & Touche LLP the matters required to be discussed by Statement on Auditing Standards No. 114, The Auditor’s Communication with those Charged with Governance, as amended, by the Auditing Standards Boardrules of the American Institute of Certified Public Accountants.Company Accounting Oversight Board (“PCAOB”), including U.S. Auditing Standard Section 380. This included (a) the auditor’s judgments about the quality, not just the acceptability, of the accounting principles as applied in The Wet Seal, Inc.’s financial reporting, (b) the methods used to account for significant unusual transactions, (c) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus, (d) the process used by management in formulating particularly sensitive accounting estimates and the basis for the auditor’s conclusions regarding the reasonableness of those estimates and (e) disagreements with management over the application of accounting principles, the basis for management’s accounting estimates and disclosures in the financial statements.
Our Audit Committee has received the written disclosures and the letter from Deloitte & Touche LLP, as required by Independence Standards Board Standard No. 1, Independence Discussionsapplicable requirements of the PCAOB, regarding the independent accountant's communications with the Audit Committees, as amended,Committee concerning independence, and has discussed with Deloitte & Touche LLP the matter of that firm’s independence.
Based on the review and discussion referred to in the three bullet points above, our Audit Committee recommended to our Board of Directors and our Board of Directors has approved that the audited financial statements of our Company for fiscal 20112012 be included in the 20112012 Annual Report, for filing with the SEC.
Kenneth M. Reiss (Chairman)
Jonathan Duskin
Sidney
Dorrit M.
HornHenry D. Winterstern
Bern
John S. Mills
The foregoing Report of our Audit Committee does not constitute soliciting materials and shall not be deemed filed or incorporated by reference in any previous or future documents filed by our Company with the SEC under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that our Company specifically incorporates the report by reference in any such document.
RATIFICATION OF APPOINTMENT OF THE INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Upon recommendation of our Audit Committee, our Board of Directors proposes that the stockholders ratify the appointment of Deloitte & Touche LLP, an independent registered public accounting firm, to serve as the independent auditor of our Company for fiscal
2012.2013. Deloitte & Touche LLP served as the independent auditor of our Company for fiscal
2011.2012.
Neither our Company’s Restated Certificate of Incorporation, as amended, nor its Bylaws, as amended, require that the stockholders ratify the selection of our Company’s independent auditor. Our Company is doing so because our Company believes it is a matter of good corporate practice. If the stockholders do not ratify the selection, our Board of Directors and our Audit Committee will reconsider whether to retain Deloitte & Touche LLP, but may retain such independent auditor. Even if the appointment is ratified, our Board of Directors and our Audit Committee, in their discretion, may change the appointment at any time during the year if they determine that such change would be in the best interest of our Company and its stockholders.
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 stockholders.
Ratification of the appointment of Deloitte & Touche LLP as our Company’s independent auditor requires the affirmative vote of a majority of the votes cast by holders of the outstanding shares of the Company’s
Class A common stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the Proposal. Abstentions will not be counted as votes cast with respect to this Proposal. Because brokers will have discretion to vote shares of the Company’s common stock in their discretion without the direction of their clients on this Proposal 3, there will not be any broker non-votes with respect to this Proposal 3.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP, AN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM, AS OUR COMPANY’S INDEPENDENT AUDITOR FOR FISCAL
2012.2013.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and the rules issued thereunder require that our directors, certain of our executive officers and beneficial owners of more than ten percent of a registered class of our equity securities file reports of ownership and changes in ownership with the SEC. Our Company believes that during the fiscal year ended
January 28, 2012,February 2, 2013, all such filing requirements were satisfied by our Company’s officers, directors and ten percent
stockholders, except for Ms. Sharon Hughes, our President and Chief Merchandise Officer, Arden B Division, who had two late Form 4 filings related to the forfeiture of 40,500 performance shares and the tender to our Company of 880 restricted shares to cover tax liabilities.stockholders.
OTHER MATTERS TO COME BEFORE THE
20122013 ANNUAL MEETING
Our 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 of proxies will be borne by our Company. Arrangements may be made with brokerage houses, custodians, nominees and fiduciaries to send proxies and materials to their principals and, upon request, our Company will reimburse them for their expenses in so doing.
STOCKHOLDER PROPOSALS FOR PRESENTATION AT THE
20132014 ANNUAL MEETING
Pursuant to Rule 14a-8 of the Exchange Act, if a stockholder of our Company wishes to submit a proposal for consideration at the 20132014 Annual Meeting to be included in the Proxy Statement relating to that meeting, the proposal must be received at the principal executive offices of our Company no later than the close of business on the 120thday before the first anniversary of the date on which this Proxy Statement is released to stockholders. If our 20132014 Annual Meeting is held within 30 days of May 15, 2013,23, 2014, any stockholder proposals for the 20132014 Annual Meeting which are received by December 14, 201218, 2013 would be considered timely for inclusion in the Proxy Statement relating to the 20132014 Annual Meeting. However, if our 20132014 Annual Meeting is held more than 30 days before or after May 15, 2013,23, 2014, then the deadline for submitting stockholder proposals for inclusion in the Proxy Statement relating to the 20132014 Annual Meeting is a reasonable time before we begin to print and distribute the proxy materials for the 20132014 Annual Meeting. Stockholders who intend to nominate persons for election as directors at the 20132014 Annual Meeting must comply with the advance notice procedures and other provisions set forth in this Proxy Statement and the Bylaws in order for such nomination to be properly brought before the 20132014 Annual Meeting. Any stockholder proposal for the
20132014 Annual Meeting which is submitted outside the processes of Rule 14a-8 shall be considered untimely unless written notice of such proposal is received by the Secretary of our Company no later than the close of business on February
13, 201322, 2014 or no earlier than the opening of business on January
14, 2013.23, 2014. However, if the
20132014 Annual Meeting is not within 45 days before or after May
15, 2013,23, 2014, notice by the stockholder shall be considered untimely unless it is received no later than the later of (i) the close of business on
February 13, 2013 andthe 90th day before the meeting or (ii) the close of business on the tenth day following the day on which public announcement of the date of the
20132014 Annual Meeting is first made, nor earlier than the opening of business on
January 14, 2013.the 120th day before the meeting.
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| PROXY | | THE WET SEAL, INC. | | PROXY |
| ANNUAL MEETING | | ANNUAL MEETING |
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| | Solicited on behalf of our Board of Directors | | |
| | for the Annual Meeting of Stockholders to be held on May 16, 201223, 2013 | | |
The undersigned, a stockholder in The Wet Seal, Inc., a Delaware corporation, appoints
Susan P. McGallaJohn D. Goodman and Steven H. Benrubi, or either of them, as the undersigned’s 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 our Company’s principal executive offices, located at 26972 Burbank, Foothill Ranch, California 92610, on
Wednesday,Thursday, May
16, 2012,23, 2013, at 10:00 a.m., Pacific time, or any adjournment, postponement or extension thereof with respect to the following matters which are more fully explained in our Proxy Statement dated April
6, 2012,18, 2013, receipt of which is acknowledged by the undersigned.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
SIXSEVEN NOMINEES FOR DIRECTORS, FOR PROPOSAL 2, AND FOR PROPOSAL 3 AS MORE SPECIFICALLY SET FORTH IN OUR PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
(Continued and to be Signed on Reverse Side)
ANNUAL MEETING OF STOCKHOLDERS OF
THE WET SEAL, INC.
MAY 16, 2012
May 23, 2013
Important Notice Regarding Internet Availability of Proxy Materials
for the
20122013 Annual Meeting of Stockholders to be held on May
16, 2012.23, 2013.
This communication presents only an overview of the more complete proxy materials that are
available to you on the Internet. We encourage you to access and review all of the
important information contained in the proxy materials before voting.
The following materials are accompanying this notice and are available for view at our website
atwww.wetsealinc.comunder the “Investor Relations” tab: —
20122013 Notice and Proxy Statement
—Annual Report for Fiscal Year ended
January 28, 2012February 2, 2013
Please sign, date and mail
envelope provided as soon
â ¯Please detach along perforated line and mail in the envelope provided.
¯â |
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20830000000000000000 4 | | 052207 |
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL
SIXSEVEN NOMINEES, “FOR” PROPOSAL 2, AND “FOR” PROPOSAL 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS
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| | | | | | | FOR | | AGAINST | | ABSTAIN |
1. Election of Directors - Our Board recommends a vote FOR each of the following nominees: | | 2. Approval, on an advisory basis, of the compensation of The Wet Seal, Inc.’s named executive officers | | ¨ | | ¨ | | ¨ |
¨ | FOR | FOR ALL NOMINEESAGAINST | ABSTAIN | | | O | | | Jonathan Duskin | | | | | | | | | | |
| Dorrit M. Bern | ¨ | ¨ | | O | | | Sidney M. Horn | | | | | ¨ | FOR | | AGAINST | | ABSTAIN |
| Kathy Bronstein | ¨ | ¨ | WITHHOLD AUTHORITY¨ | | | O | | | Harold D. Kahn | | 3. The Ratificationratification of the Appointmentappointment of Deloitte & Touche LLP as Independent Registered Public Accounting Firm of The Wet Seal, Inc. for fiscal 2012 2013 | ¨ | ¨ | ¨ |
| Lynda J. Davey | ¨ | ¨ | ¨ | | ¨ | |
| John D. Goodman | ¨ |
| ¨ | FOR ALL NOMINEES¨ | | | O |
| Mindy C. Meads | ¨ | ¨ | ¨ | | | Susan P. McGalla |
| John S. Mills | ¨ | ¨ | ¨ | | | | | | | | | |
| Kenneth M. Reiss | ¨ | ¨ | ¨ | | | O | | | Kenneth M. Reiss | | | | | | | | | |
¨ | | FOR ALL EXCEPT | | | O | | | Henry D. Winterstern | | | | | | | | | |
| (See instruction below) | | | | | | | | | | | | | | | |
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INSTRUCTION: | | To withhold authority to vote for any individual nominee(s),
mark“FOR ALL EXCEPT” and fill in the circle next to
each nominee you wish to withhold, as shown here:l
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. | | ¨ | | |
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| Signature of Stockholder | | | | Date: | | | | Signature of Stockholder | | | | Date: | | |
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| Note: | | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. |
