Wet Seal to Pay Fired CEO More Than $3 Million
Wet Seal Inc. agreed to pay fired Chief Executive Kathy Bronstein more than $3 million in compensation to settle her claims against the chain-store operator, according to a company filing.
Wet Seal also said it would allow Bronstein to exercise 405,000 previously vested unexercised stock options, which at Monday’s closing price would total $4.15 million.
Bronstein, who had led the Foothill Ranch-based retailer of trendy clothes for girls and young women since 1992, was dismissed abruptly in February as the company struggled with sagging sales.
She sought damages against the company, Chairman Irving Teitelbaum and Susan O’Toole, Wet Seal’s chief merchandising officer, claiming wrongful termination, “retaliatory discharge,” gender discrimination, fraud, invasion of privacy and emotional distress, among other things, according to documents filed with the Securities and Exchange Commission last week.
Bronstein, however, didn’t file a lawsuit.
Though it denied the allegations, the company negotiated a settlement with Bronstein, partly to avoid costly litigation, the filing said.
Wet Seal agreed to pay Bronstein almost $2.2 million in compensation and to hand over a life insurance policy with a surrender value of more than $900,000. The policy had been purchased by the company to fund a supplemental executive retirement plan for Bronstein.
The parent of 622 Wet Seal, Arden B and Zutopia stores also agreed to pay Bronstein’s attorney’s fees, or up to $125,000.
In addition, Bronstein now has until June 1, 2005, to exercise the 405,000 vested stock options, the filing said. The options previously were scheduled to expire May 10, 2003.
Bronstein, who had worked for Wet Seal since 1985, also was allowed to continue using the retailer’s 60%-discount card for five years.
The agreement represents the sum of Bronstein’s severance package, said Michelle Reinglass, Bronstein’s attorney.
“This settlement resolves the claims fully between the parties,” she said. Bronstein and Wet Seal declined to comment.
Peter Whitford, the company’s new CEO, last month announced key management changes, including a new president for the flagship Wet Seal division, and said the company was on track to revive sales.
The retailer, however, has continued to struggle. It reported a second-quarter loss of $13.4 million in August, compared with a profit of $3.67 million in the year-earlier period. Sales fell 14% to $126 million.
A recent report by analyst Eric Beder of Northeast Securities Inc. called the pace of the firm’s turnaround slow but said Wet Seal was moving in the right direction and could log an improvement in same-store sales as early as the fourth quarter.
The settlement with Bronstein is another positive sign for the retailer, Beder said Monday.
“You need to settle and move forward because it slows you down,” he said.
Wet Seal’s stock closed Monday at $10.25, up 15 cents, on Nasdaq.