UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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For the Fiscal Year Ended June 30, 2004
OR
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF
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Commission File Number 0-24395
bebe stores, inc.
(Exact name of registrant as specified in its charter)
California |
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94-2450490 |
(State or
Jurisdiction of
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(IRS Employer
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400 Valley Drive
Brisbane, California 94005
(Address of principal executive offices)
Telephone: (415) 715-3900
Securities registered
pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer. Yes x No o
The aggregate market value of voting stock held by non-affiliates of the registrant was approximately $132,153,173 as of December 31, 2003, the last business day of the registrants most recently completed second fiscal quarter, based upon the closing sale price per share of $17.33 of the registrants Common Stock as reported on the Nasdaq National Market on such date. Shares of Common Stock held by each executive officer and director and by each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive for other purposes.
As of August 31, 2004, 39,235,198 shares of Common Stock, $0.001 per share par value, of the registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the definitive Proxy Statement for the 2004 Annual Meeting of Shareholders, to be filed with the Commission no later than 120 days after the end of the registrants fiscal year covered by this Form 10-K.
The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. This Form 10-K includes forward-looking statements that could differ from actual future results. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words such as expects, anticipates, intends, plans, believes, estimates, thinks and similar expressions are forward-looking statements. Forward looking statements include statements about our expected results of operations and capital expenditures. Although we believe that these statements are based upon reasonable assumptions, we cannot assure you that our goals will be achieved. These forward-looking statements are made as of the date of this Form 10-K, and we assume no obligation to update or revise them or provide reasons why actual results may differ. Factors that might cause such a difference include, but are not limited to, our ability to respond to changing fashion trends, miscalculation of the demand for our products, effective management of our growth, decline in comparable store sales performance, ongoing competitive pressures in the apparel industry, changes in the level of consumer spending or preferences in apparel, our ability to attract and retain key management personnel and/or other factors discussed in Risk Factors and elsewhere in this Form 10-K.
ITEM 1. BUSINESS
General
We design, develop and produce a distinctive line of contemporary womens apparel and accessories. While we attract a broad audience, our target customers are 21 to 35-year-old women who seek current fashion trends interpreted to suit their lifestyle needs. The bebe look, appeals to a hip, sexy, sophisticated, body-conscious woman who takes pride in her appearance. The bebe customer expects value in the form of quality at a competitive price.
Our distinctive product offering includes a full range of fashion separates, dresses, active wear and accessories for all facets of the customers lifestyle: career, casual, evening and weekend wear. We design and develop the majority of our merchandise in-house. The merchandise is then manufactured to our specifications. The remainder of our merchandise is selected directly from third party manufacturers lines.
We market our products under the bebe, BEBE SPORT and bebe O brand names through our 199 retail stores, of which 159 are bebe stores, 22 are BEBE SPORT stores, and 18 are bebe outlet stores. These stores are located in 32 states, the District of Columbia and Canada. In addition, we have an on-line store at www.bebe.com and our licensees operate 12 international stores.
bebe stores. The Company was founded by Manny Mashouf, our current Chairman of the Board. We opened our first store in San Francisco, California in 1976, which was also the year we incorporated. During fiscal 2004, we opened seven bebe stores. As of June 30, 2004, the Company operated 159 stores in 32 states, the District of Columbia and Canada.
BEBE SPORT stores. The Company launched BEBE SPORT during fiscal 2003 to satisfy the casual lifestyle needs of the bebe customer. The BEBE SPORT product line is active inspired sportswear featuring cotton knits, fleece, casual active bottoms, sweaters, outerwear and accessories that are easy, sexy and modern. During fiscal 2004 we opened 13 BEBE SPORT stores. As of June 30, 2004, the Company operated 22 BEBE SPORT stores in 13 states.
bebe outlet stores. The company utilizes the outlets as a clearance vehicle for merchandise from our bebe and BEBE SPORT stores. Additionally, we round out the inventory of these stores with a strong presentation of logo merchandise and special cuts, which bear the bebe O label, produced for the outlet stores. As of June 30, 2004, the Company operated 18 bebe outlet stores in 10 states.
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On-line store. The on-line store offers the customer an extension of the bebe store experience and provides an assortment of bebe and BEBE SPORT merchandise from which the customer can choose. It is also used as a vehicle to communicate with our customers through advertising and direct mail.
Operating Strategy
Our objective is to satisfy the fashion needs of the modern, sexy and sophisticated woman. The principal elements of our operating strategy to achieve this objective are as follows:
1. Provide distinctive fashion throughout a broad product line. Fashion from throughout the world inspires our designers and merchandisers. They interpret contemporary ideas for designs, colors and fabrications into products to meet the lifestyle needs of the bebe customer. Our in-house design team allows us to quickly react to fashion trends. While certain styles and products are represented each season, our design and merchandise teams are committed to bringing newness into the merchandise mix in response to emerging trends.
2. Vertically integrate design, production, merchandising and retail functions. Our vertical integration enables us to respond quickly to changing fashion trends, reduce our risk of excess inventory, and produce distinctive quality merchandise of exceptional value.
3. Manage merchandise mix. Our approach to merchandising and a proactive inventory management program is critical to our success. By actively monitoring sell-through rates and managing the mix of categories and products in our stores, we believe that we are able to respond to emerging trends in a timely manner, minimize our dependence on any particular category, style or fabrication, and preserve a balanced, coordinated presentation of merchandise within each store.
4. Control distribution of merchandise. We control the distribution of the majority of our product through Company owned retail stores and an on-line store. This distribution strategy enables us to display the full assortment of our products, control the pricing, control the visual presentation and flow of goods, test new products and reinforce the brands identity in the eyes of our customers. The balance of our products are distributed through licensees, both domestically and internationally.
5. Enhance brand image. We attract customers through edgy, high-impact, visual advertising campaigns using print, outdoor, in-store, on-line, and direct mail communication vehicles. We also offer a line of merchandise branded with the distinctive bebe logo to increase brand awareness. We seek to create an upscale, inviting environment that further enhances the bebe brand and builds customer loyalty and demand for bebe merchandise.
Stores and Expansion Opportunities
We believe that there is a significant opportunity to expand the number of bebe and BEBE SPORT stores in new and existing markets. In selecting a specific site, we look for high traffic locations primarily in regional shopping centers and in freestanding street locations. We evaluate proposed sites based on the traffic pattern, co-tenancies, average sales per square foot achieved by neighboring stores, lease economics, demographic characteristics and other factors considered important within the specific location.
For fiscal 2005, we plan to grow our operations in a controlled manner, primarily through the opening of new stores. We have been conservative in our growth plans while we continue to evaluate the new BEBE SPORT concept. As part of our growth strategy, we may open larger stores, with two separate entrances, for both bebe and BEBE SPORT, to take advantage of the bebe brand name. In addition, we are focused on building our infrastructure in order to support a more aggressive growth plan.
Our stores typically have achieved profitability at the store operating level within the first full year of operation; however, we cannot assure you that our stores will do so in the future. Actual store growth and
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future store profitability and rates of return will depend on a number of factors that include, but are not limited to, individual store economics and suitability of available sites.
During fiscal 2004, we opened 20 stores and closed one store and in fiscal 2005 we plan to open approximately 20 stores, convert approximately two existing bebe stores into BEBE SPORT stores, and close approximately one to three stores. Depending upon the performance of the existing BEBE SPORT locations this fall and the overall retail environment, the Company may open additional locations in fiscal 2005 and 2006.
bebe stores. During fiscal 2004, we opened seven stores and closed one store. In addition to opening new stores, we expanded or relocated three existing stores to larger spaces during fiscal 2004. Our stores average approximately 3,700 square feet in size and are primarily located in regional shopping malls and freestanding street locations. Future bebe stores will be approximately 3,500 square feet. In fiscal 2005, we plan on opening approximately 11 bebe stores.
BEBE SPORT stores. During fiscal 2004, we opened 13 BEBE SPORT stores. Our stores average approximately 2,100 square feet in size and are primarily located in regional shopping malls. Future BEBE SPORT stores will be approximately 2,500 square feet. In fiscal 2005, we plan on opening approximately eight BEBE SPORT stores.
bebe outlet stores. During fiscal 2004, we did not open or close any outlet stores. Our stores average approximately 3,700 square feet in size and are primarily located in outlet malls. In fiscal 2005, we plan on opening approximately one outlet store.
Our ability to expand will depend on a number of factors, including the availability of desirable locations, the negotiation of acceptable leases and our ability to manage expansion and to source adequate inventory. We cannot assure you that we will be able to achieve our planned expansion on a timely and profitable basis. Furthermore, we cannot assure you that store openings in existing markets will not result in reduced net sales volumes and profitability of existing stores in those markets.
Store Closures. During fiscal 2004, we closed one store. We monitor the financial performance of our stores, and have closed and will continue to close stores that we do not consider to be viable. Many of the store leases contain early termination options that allow us to close the stores in certain specified years of the leases if certain minimum sales levels are not achieved.
On-line store. During fiscal 2004, we upgraded our on-line store to simplify and enhance our customers on-line shopping experience. We plan to continue to invest in such upgrades to further capitalize on the encouraging sales performance of our store.
Merchandising
Our merchandising strategy is to provide current, timely fashions in a broad selection of categories to suit the lifestyle needs of our customers. We market all of our merchandise under the bebe, BEBE SPORT and bebe O labels. In some cases, we select merchandise directly from third-party apparel manufacturers lines and market it under our bebe, BEBE SPORT or bebe O labels. We do not have long-term contracts with any third party apparel manufacturers and purchase all of the merchandise from such manufacturers by purchase order.
Product Categories. After building a strong womens suiting business in the early 1990s, we have since diversified and expanded our product line. Our distinctive product offering includes a full range of fashion separates, dresses, active wear and accessories for all facets of the customers lifestyle: career, casual, evening and weekend wear. While each categorys contribution as a percentage of total net sales varies seasonally, certain of the product classifications are represented throughout the year. We regularly evaluate existing categories for potential expansion opportunities such as the expansion of our accessory
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line to include signature handbags. We also plan to grow by introducing new product categories such as the introduction of fragrance and beauty products. These categories can be internally developed or developed in conjunction with licensees. During fiscal year 2004, our product licensee business represented less than 1% of total revenue. We currently license rights for footwear and eyewear. Our swimwear licensee terminated on June 30, 2004. Our footwear and eyewear licenses terminate on June 30, 2005 and June 30, 2006, respectively. Under the terms of these agreements, the licensees will manufacture and distribute products branded with the bebe logo to be sold at bebe stores and selected retailers.
Product Development. Our approach to the product development process allows our merchants to gain as much information as possible concerning current fashion trends before making fabric or product purchase commitments. We control the process by focusing on key color selection, fabric order, pattern development and production order deadlines. We establish the deadlines to ensure an adequate flow of inventory into the stores. While product development is seasonal, we make commitments monthly based on current sales and fashion trends. This enhances our ability to react promptly to customer demand.
A detailed merchandising plan supports the product development process. Our monthly product development cycle allows our merchants to make decisions as close as possible to the season. This merchandising plan includes sales, inventory and profitability targets for each product classification and is adjusted on an as needed basis. If we miscalculate consumer demand for our products, we may be faced with significant excess inventory and fabric for some products and missed sales opportunities for others. Weak sales and resulting markdowns could cause our profitability to be impaired.
Marketing
We reinforce our brand with an extensive image advertising campaign, which addresses the lifestyle needs and aspirations of our target customers. An outside advertising agency works with our internal marketing department to create edgy, high-impact ads to attract customers who are drawn to the playfully sensual and evocative imagery.
Image ads are produced quarterly and are featured in fashion and lifestyle magazines, transit shelters, mall kiosks, store windows and are also featured online at bebe.com.
bebes direct mail strategy reinforces the seasonal image campaigns. Additionally, catalogs featuring a wider range of bebe and BEBE SPORT product are being mailed to bebe customers.
Editorial coverage and product placement is key to bebes marketing initiatives and our public relations department communicates closely with editors, stylists, and celebrities resulting in major editorial coverage and product exposure on television, cable and videos. Additionally, bebe partners with key national magazines on cross promotions and events.
We believe that our advertising promotes brand awareness and supports numerous product line expansion opportunities. For fiscal year 2005, we plan to increase our marketing expenditures to approximately 4% of sales, from 3.4% of sales in fiscal year 2004, to promote our brand through advertising, in-store marketing, direct mail marketing and customer research.
Store Operations
Store operations are organized into four regions and 29 districts. Each region is managed by a regional manager, and each district is managed by a district manager. Each regional manager is typically responsible for four to ten districts, and each district manager is typically responsible for five to nine stores. Each store is typically staffed with three to six managers in addition to sales associates.
We seek to instill enthusiasm and dedication in our store management personnel and our sales associates through incentive programs and regular communication with the stores. Sales associates,
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excluding associates in outlet stores, receive commissions on sales with a guaranteed minimum hourly compensation. Store managers receive base compensation plus incentive compensation based on sales and inventory control. Our district managers receive base compensation plus incentive compensation based on meeting sales and profitability benchmarks. Our regional managers participate in the Companys incentive program.
Sourcing, Quality Control and Distribution
All of our merchandise is marketed under the bebe, BEBE SPORT and bebe O labels. The majority of our merchandise is designed and developed in-house and manufactured to our specifications. The balance is developed primarily in conjunction with third-party apparel manufacturers. In some cases, we select merchandise directly from these manufacturers lines. These facilities produce garments based on designs, patterns and detailed specifications produced by us.
We use computer aided design systems to develop patterns and production markers as part of our product development process. We fit test sample garments before production to make sure patterns are accurate. We maintain a formalized quality control program. Garments that do not pass inspection are returned to the manufacturer for rework or accepted at reduced prices for sale in our outlet stores.
The majority of our merchandise is received, inspected, processed, warehoused and distributed through our distribution center. Details about each receipt are supplied to merchandise allocators who determine how the product should be distributed among the stores based on current inventory levels, sales trends and specific product characteristics. Advance shipping notices are electronically communicated to the stores and any goods not shipped are stored for replenishment purposes. Merchandise typically is shipped to the stores three times per week using common carriers.
We do not have any long-term contracts with any manufacturer or supplier and place all of our orders by purchase order. If we fail to obtain sufficient quantities of manufacturing capacity or raw materials, it would have a harmful effect on our business, financial condition and results of operations. We have received in the past, and may receive in the future, shipments of products from manufacturers that fail to conform to our quality control standards. In such event, unless we are able to obtain replacement products in a timely manner, we may lose sales which could harm our operating results.
Competition
The retail and apparel industries are highly competitive and are characterized by low barriers to entry. Key competitors include, but are not limited to Arden B, BCBG, Express, Guess, and the Savvy and t.b.d. Departments within Nordstrom. We expect competition in our markets to increase. The primary competitive factors in our markets are: brand name recognition, product styling, product quality, product presentation, product pricing, store ambiance, customer service, and convenience.
We also compete with traditional department stores, specialty store retailers, on-line retailers, off-price retailers and direct marketers for, among other things, raw materials, market share, retail space, finished goods, sourcing and personnel. Because many of our competitors are larger and have substantially greater financial, distribution and marketing resources than we do, we may lack the resources to adequately compete with them. If we fail to compete in any way, it may have a harmful effect on our business, financial condition and results of operations.
Intellectual Property and Proprietary Rights
bebe, BEBE SPORT and certain other trademarks either have been registered or applications are pending with United States Patent and Trademark Office and with certain foreign registries. bebe O is a trademark of bebe stores, inc. in the United States.
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Information Systems and Technology
We are committed to utilizing technology to enhance our competitive position. Our information systems provide data for stores, production, merchandising, distribution and financial systems. The core business systems, which consist of both purchased and internally developed software, are accessed over a Company-wide network providing corporate employees with access to key business applications. Our investments in information systems have focused on our store, production, merchandise, and financial accounting systems.
Currently, our focus is on better utilizing our production, planning and point of sale system. In addition, we are evaluating a customer loyalty program to be used in conjunction with our direct marketing initiatives. We cannot assure you that we will be successful with the implementation of these new systems or plans. Failure to implement and integrate such systems or plans could have a harmful effect on our business, financial condition and results of operations.
Employees
As of June 30, 2004, we had approximately 2,600 employees, of whom approximately 350 were employed at the corporate offices and distribution center. The remaining 2,250 employees were employed in store operations. Approximately 1,000 were full-time employees and 1,600 were employed on a part-time basis. This is comparable to last fiscal year. In addition, our employees are not represented by any labor union, and the Company believes its relationship with its employees is good.
Available Information
We make available on our website, www.bebe.com , under Investor Relations, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials to the U.S. Securities and Exchange Commission (SEC).
Our Code of Business Conduct and Ethics, Corporate Governance Guidelines and Board of Directors Committee Charters are also available on our website, under Corporate Governance.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Executive Officers and Directors
The following table sets forth certain information with respect to the executive officers and directors as of September 1, 2004:
Name |
|
|
|
Age |
|
Position |
Manny Mashouf(1) |
|
66 |
|
Chairman of the Board |
||
Neda Mashouf(1) |
|
41 |
|
Vice Chairman of the Board |
||
Barbara Bass(2)(3)*(4) |
|
53 |
|
Director |
||
Cynthia Cohen(2)(3)(4)* |
|
51 |
|
Director |
||
Corrado Federico |
|
63 |
|
Director |
||
Caden Wang(2)*(3)(4) |
|
52 |
|
Director |
||
Gregory Scott(1) |
|
41 |
|
Director and Chief Executive Officer |
||
Walter Parks(1) |
|
45 |
|
Chief Financial Officer |
||
Barbara Wambach(1) |
|
44 |
|
Chief Administrative Officer |
||
Tom Curtis(1) |
|
41 |
|
General Merchandising ManagerBEBE SPORT |
||
Mary Jimenez(1) |
|
44 |
|
Vice President of DesignBEBE SPORT |
||
Hamid Mashouf(1) |
|
40 |
|
Vice President of Information Systems and Technology |
||
Paul Mashouf(1) |
|
39 |
|
Vice President of Manufacturing and SourcingBEBE SPORT |
||
Ferrell Ostrow(1) |
|
45 |
|
Vice President of Store Operations, Loss Prevention and Construction |
||
Michelle Perna(1) |
|
51 |
|
Vice President of Human Resources |
||
Susan Peterson(1) |
|
46 |
|
Vice President of Design |
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Mark Rachman(1) |
|
42 |
|
Vice President of Manufacturing and Sourcing |
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Linda Vilaikeo(1) |
|
34 |
|
Vice President of Planning and Allocation |
(1) Executive Officer.
(2) Member, Audit Committee.
(3) Member, Compensation and Management Development Committee.
(4) Member, Nominating and Corporate Governance Committee.
* Chairman of the Committee
Manny Mashouf founded bebe stores, inc. and has served as Chairman of the Board since our incorporation in 1976. Mr. Mashouf served as our Chief Executive Officer from 1976 to February 2004. Mr. Mashouf is the husband of Neda Mashouf, Vice Chairman of the Board, father of Paul Mashouf and uncle of Hamid Mashouf.
Neda Mashouf has served as a Director since June 1985 and has served as Vice Chairman of the Board since December 2003. Ms. Mashouf has served as General Merchandising Manager of Design of bebe and BEBE SPORT, as well as various other positions since joining bebe in 1984. Ms. Mashouf is the wife of Manny Mashouf, Chairman of the Board, father of Paul Mashouf and uncle of Hamid Mashouf.
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Barbara Bass has served as a Director since February 1997. Since 1993, Ms. Bass has served as the President of the Gerson Bakar Foundation. From 1989 to 1992, Ms. Bass served as President and Chief Executive Officer of the Emporium Weinstock Division of Carter Hawley Hale Stores, Inc., a department store chain. Ms. Bass also serves on the Board of Directors of Starbucks Corporation and DFS Group Limited.
Cynthia R. Cohen has served as a Director since December 2003. Ms. Cohen is founder and President of Strategic Mindshare, a strategic management consulting firm. She also serves on the Board of Directors of The Sports Authority and Hot Topic, both publicly traded companies, as well as several privately held companies. Prior to founding Strategic Mindshare in 1990, she was a Partner in Management Consulting with Deloitte & Touche. Ms. Cohen serves on the Executive Advisory Board for the Center for Retailing Education and Research at the University of Florida and is Chairman of the Strategic Mindshare Foundation, a philanthropic organization.
Corrado Federico has served as a Director since November 1996. Mr. Federico is President of Solaris Properties and has served as the President of Corado, Inc., a land development firm, since 1991. He is also an active retail consultant. From 1986 to 1991, Mr. Federico held the position of President and Chief Executive Officer of Esprit de Corp, Inc., a wholesaler and retailer of junior and childrens apparel, footwear and accessories (Esprit). Mr. Federico also serves on the Board of Directors of Hot Topic, Inc.
Caden Wang has served as a Director since October 2003. Mr. Wang is currently an affiliate of Jackson Hole Group, a consulting company. From 1999 to 2001, Mr. Wang served as Executive Vice President and Chief Financial Officer of LVMH Selective Retailing Group, which included various international retail holdings such as DFS, Sephora, and Miami Cruiseline Services. Mr. Wang previously also served as the Chief Financial Officer for DFS, Gumps, and Cost Plus. Mr. Wang is a Certified Public Accountant.
Gregory Scott has served as the Chief Executive Officer since February 2004 and as Director since August 2004. From 2000 to 2004, Mr. Scott was the President of the Arden B. division of The Wet Seal, Inc. From February 2000 to April 2000, Mr. Scott was President of Laundry, a division of Liz Claiborne. From 1996 to 2000, Mr. Scott was Vice President of Merchandising with bebe stores, inc. From 1994 to 1996, Mr. Scott was a Senior Merchandiser with Ann Taylor, Inc.
Walter Parks has served as Chief Financial Officer since January 2004. From 2001 to 2003, Mr. Parks served as Executive Vice President and Chief Administrative Officer of Wet Seal, Inc. From 1999 to 2001, Mr. Parks served as the Executive Vice President and Chief Administrative Officer of Restoration Hardware, Inc. From 1997 to 1999, Mr. Parks served as Chief Financial Officer and Treasurer for Ann Taylor Stores Corporation, and in various other positions since joining that company in 1988.
Barbara Wambach has served as Chief Administrative Officer since August 2004. From February to August 2004. Ms. Wambach served as President and Chief Operating Officer of BEBE SPORT. From 2002 to 2004, Ms. Wambach served as Executive Vice President of Gap Body, a division of Gap, Inc. From 1999 to 2002, Ms. Wambach served as the Chief Executive Officer and President of eLUXURY. From 1982 to 1999, Ms. Wambach held various executive positions with DFS and Neiman Marcus.
Tom Curtis has served as General Merchandising Manager (GMM)BEBE SPORT since June 2002. Before his promotion to GMM, Tom served as a Senior Merchandising Manager since joining the company in 1998. Prior to joining bebe stores, inc., Mr. Curtis held various positions with The Walt Disney Co., Rampage Clothing Co. and R.H. Macy & Co., Inc.
Mary Jimenez has served as Vice President of DesignBEBE SPORT since May 2004. From 1999 to 2004, Ms Jimenez was Vice President and GMM of Merchandising Content and Creative for eLUXURY. From 1990 to 1999, Ms. Jimenez held various executive positions at DFS, most recently as Vice President Senior Merchandise Manager, Ready to Wear.
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Hamid Mashouf has served as Vice President of Information Systems and Technology (IS&T) since February 2004. From January 2003 to February 2004, Mr. Mashouf served in various IS&T positions, most recently as Senior Director IS&T. From 1999 to 2002, Mr. Mashouf served in various management positions for Agilent Technologies, most recently as Strategic Scientist. From 1986 to 1999, Mr. Mashouf was with Hewlett-Packard Company in various scientific, strategic and engineering management positions in Manufacturing, Marketing and Research and Development. Mr. Mashouf is the nephew of Manny Mashouf, Chairman of the Board and Neda Mashouf, Vice Chairman of the Board.
Paul Mashouf has served as the Vice President of Manufacturing and SourcingBEBE SPORT since January 2004 and Vice President of Manufacturing and Sourcingbebe from 2003 to 2004. Mr. Mashouf was the Director of Manufacturing Systems from 2002 to 2003 and has held various other positions within the Company since joining in 1990. Before joining bebe stores, inc., Mr. Mashouf worked at other retail chains such as The Gap, Banana Republic, Oaktree and Merry Go Round. Mr. Mashouf is the son of Manny Mashouf, Chairman of the Board and Neda Mashouf, Vice Chairman of the Board.
Ferrell Ostrow has served in various capacities at bebe stores, inc. since March 1999, most recently as Vice President of Store Operations, Loss Prevention and Construction. In August 2004, Mr. Ostrow announced that he will focus his energy on Store Construction and Loss Prevention. He will continue in his role as Vice President of Store Operations until a successor is retained. From 1998 to 1999, Mr. Ostrow held the position of Director of Loss Prevention at Pacific Sunwear of California Inc.
Michelle Perna has served as Vice President of Human Resources since November 2000. From 1997 to 2000, Ms. Perna was President of her own consulting company, HR1, where she implemented Human Resources functions for various companies in the Retail, Hotel/Casino, Mortgage Banking and High Technology industries. From 1997 to 1998, Ms. Perna was the Vice President of Human Resources for Merv Griffin Enterprises, New Jersey/Bahamas/Florida.
Susan Peterson has served as Vice President of Design since February 2004. From 2000 to 2004, Ms Peterson was Vice President of Design & Production for the Arden B division of The Wet Seal, Inc. From 1997 to 2000, Ms. Peterson was the Design Director of Sportswear for Rampage. From 1995 to 1996, Ms. Peterson was a Partner/Designer for Audience.
Mark Rachman has served as the Vice President of Manufacturing and Sourcing since January 2004. From July 2003 to January 2004, Mr. Rachman was Senior Director of Production. From 1992 to 2002, Mr. Rachman was the President of Ram Apparel, an apparel manufacturing company that he founded.
Linda Vilaikeo has served as Vice President of Planning and Allocation since March 2004. From 2000 to 2004, Ms. Vilaikeo held various planning positions within Gap Inc., most recently as Vice President, Company Planning and Business Development for Old Navy. From 1995 to 2000, Ms. Vilaikeo served as Director, Planning and Allocations for bebe stores inc. From 1991 to 1995, Ms. Vilaikeo held various merchandising, planning and store management positions within Macys West, a division of Federated Stores.
ITEM 2. PROPERTIES
As of June 30, 2004, our 199 stores, all of which are leased, encompassed approximately 704,000 total square feet. The typical store lease is for a 10-year term and requires us to pay a base rent and a percentage rent if certain minimum sales levels are achieved. Many of the leases provide a lease termination option in certain specified years of the lease if certain minimum sales levels are not achieved. In addition, leases for locations typically require us to pay property taxes, utilities, repairs and common area maintenance fees.
Our main corporate headquarters are currently located in a facility in Brisbane, California. The facility located at 400 Valley Drive is approximately 35,000 square feet and houses administrative offices,
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store support services, and our on-line store. The lease for 400 Valley Drive expires in April 2014. We also lease a 144,000 square foot distribution center in Benicia, California and a 22,500 square foot design studio and production facility in Los Angeles, California. The leases expire in April 2013 and February 2005, respectively. Additionally, during fiscal 2004 we acquired a 50,000 square foot design studio and production facility in Los Angeles, California and plan to move our design and production activities to this studio in the first half of fiscal 2005.
As of the date of this filing, the Company is involved in several ongoing legal proceedings as described below.
Three former employees sued bebe on November 20, 2003, in the Superior Court of the State of California, County of San Mateo (case No. CIV435794) alleging that they were misclassified as exempt employees under California law. The plaintiffs purport to bring this action on behalf of a class of former and present California bebe store managers and co-managers. Plaintiffs are seeking compensatory, statutory and injunctive relief.
A former employee sued bebe on January 20, 2004 in the Superior Court of the State of California, County of San Diego (case No. GIC824505) alleging unpaid wages and unfair business practices. The plaintiff purports to bring the action on behalf of a class of California employees who hold or have held the position of co-manager or others similarly designated. The lawsuit seeks compensatory, statutory and injunctive relief.
On February 23, 2004, The Wet Seal, Inc. filed a lawsuit in the Superior Court of the State of California, County of Orange against bebe and its current Chief Executive Officer, Greg Scott, who previously was employed as President of The Wet Seals Arden B. division until January 7, 2004. The lawsuit asserts causes of action against Scott and/or bebe for (1) specific performance of contract; (2) intentional interference with contract; (3) misappropriation of trade secrets; and (4) unfair competition. On or about May 19, 2004, the court entered The Wet Seal, Inc.s dismissal of this lawsuit. At this time, the Company is seeking to recover its court costs and attorney fees.
A former employee sued bebe on August 2, 2004 in the Superior Court of the State of California, County of Sacramento (case No. 04AS03109) alleging unlawful failure to pay wages and unfair competition. The plaintiff purports to bring the action on behalf of a class of California employees who hold or at any time within the past four years have held a salaried store management position. The lawsuit seeks compensatory, statutory and injunctive relief.
Although the Company intends to defend itself vigorously against these claims, the Company has accrued liabilities for estimated settlement costs that management believes are probable. Although the final resolution of these matters may be greater than the Companys recorded liability, management does not believe the ultimate resolution will have a material adverse effect on the Companys business, financial condition or results of operations.
In addition to the above, the Company is also involved in various other legal proceedings arising in the normal course of business. None of these matters are expected, individually or in the aggregate, to have a material adverse effect on the Companys business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of our shareholders during the fourth quarter of fiscal year 2004.
11
The common stock trades on the Nasdaq National Market under the symbol BEBE. The following table sets forth the high and low sales of our common stock for the two years ended June 30, 2004, as reported by Nasdaq:
|
|
High |
|
Low |
|
||
Fiscal 2003 |
|
|
|
|
|
||
First Quarter |
|
$ |
14.15 |
|
$ |
7.68 |
|
Second Quarter |
|
9.98 |
|
6.39 |
|
||
Third Quarter |
|
11.51 |
|
7.31 |
|
||
Fourth Quarter |
|
13.33 |
|
7.81 |
|
||
Fiscal 2004 |
|
|
|
|
|
||
First Quarter |
|
$ |
19.30 |
|
$ |
12.71 |
|
Second Quarter |
|
21.33 |
|
15.22 |
|
||
Third Quarter |
|
22.97 |
|
16.45 |
|
||
Fourth Quarter |
|
24.33 |
|
18.89 |
|
In April 2004, the Company declared a 3 for 2 stock split which became effective on May 5, 2004. All share and per share amounts included herein have been adjusted for this stock split.
As of August 31, 2004, the number of holders of record of our common stock was 72 and the number of beneficial holders of our common stock was approximately 2,560.
We have never paid any dividends on our common stock. Declaration and payment of dividends is within the sole discretion of our Board of Directors, subject to limitations imposed by California law and compliance with our credit agreements, and will depend on our earnings, capital requirements, financial condition and such other factors as the Board of Directors deems relevant.
On August 12, 2004 our Board of Directors approved an annual cash dividend of $0.20 per common share on our common stock. The first quarterly dividend of $0.05 per share is payable September 30, 2004 to stockholders of record on September 9, 2004.
Information with respect to equity plan compensation is incorporated by reference from our definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of our fiscal year.
12
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial and Operating Data
The following selected financial data is qualified by reference to, and should be read in conjunction with, the Financial Statements and Notes thereto and the other financial information appearing elsewhere in this filing. These historical results are not necessarily indicative of results to be expected in the future. In April 2004, the Company declared a 3 for 2 stock split which became effective on May 5, 2004. All share and per share amounts included herein have been adjusted for this stock split.
|
|
Fiscal Year Ended June 30, |
|
|||||||||||||||
Operating Results: |
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||
|
|
(Amounts in thousands, except per share data) |
|
|||||||||||||||
Net sales |
|
$ |
372,257 |
|
$ |
323,549 |
|
$ |
316,424 |
|
$ |
290,836 |
|
$ |
241,802 |
|
||
Cost of sales, including production and occupancy |
|
197,269 |
|
179,058 |
|
174,048 |
|
151,204 |
|
119,850 |
|
|||||||
Gross profit |
|
174,988 |
|
144,491 |
|
142,376 |
|
139,632 |
|
121,952 |
|
|||||||
Selling, general and administrative expenses |
|
122,278 |
|
115,851 |
|
101,828 |
|
97,817 |
|
76,294 |
|
|||||||
Income from operations |
|
52,710 |
|
28,640 |
|
40,548 |
|
41,815 |
|
45,658 |
|
|||||||
Interest and other income, net |
|
1,959 |
|
2,199 |
|
2,074 |
|
3,407 |
|
3,201 |
|
|||||||
Earnings before income taxes |
|
54,669 |
|
30,839 |
|
42,622 |
|
45,222 |
|
48,859 |
|
|||||||
Provision for income taxes |
|
20,899 |
|
11,560 |
|
16,138 |
|
17,415 |
|
19,454 |
|
|||||||
Net earnings |
|
$ |
33,770 |
|
$ |
19,279 |
|
$ |
26,484 |
|
$ |
27,807 |
|
$ |
29,405 |
|
||
Basic earnings per share |
|
$ |
0.87 |
|
$ |
0.50 |
|
$ |
0.70 |
|
$ |
0.75 |
|
$ |
0.80 |
|
||
Diluted earnings per share |
|
$ |
0.85 |
|
$ |
0.50 |
|
$ |
0.68 |
|
$ |
0.72 |
|
$ |
0.78 |
|
||
Basic weighted average shares outstanding |
|
38,815 |
|
38,466 |
|
38,106 |
|
37,188 |
|
36,722 |
|
|||||||
Diluted weighted average shares outstanding |
|
39,731 |
|
38,853 |
|
38,946 |
|
38,545 |
|
37,838 |
|
|||||||
|
|
Fiscal Year Ended June 30, |
|
|||||||||||||||
Statistics : |
|
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||
Number of stores: |
|
|
|
|
|
|
|
|
|
|
|
|||||||
Opened during period |
|
20 |
|
20 |
|
20 |
|
26 |
|
24 |
|
|||||||
Closed during the period |
|
1 |
|
5 |
|
1 |
|
4 |
|
1 |
|
|||||||
Open at end of period |
|
199 |
|
180 |
|
165 |
|
146 |
|
124 |
|
|||||||
Net sales per average store (in thousands)(1) |
|
$ |
1,900 |
|
$ |
1,770 |
|
$ |
1,957 |
|
$ |
2,030 |
|
$ |
2,164 |
|
||
Comparable store sales increase (decrease)(2) |
|
9.5 |
% |
(6.8 |
)% |
(5.7 |
)% |
(2.3 |
)% |
0.4 |
% |
|||||||
|
|
As of June 30, |
|
|||||||||||||||
|
|
2004 |
|
2003 |
|
2002 |
|
2001 |
|
2000 |
|
|||||||
|
|
(Dollars in thousands) |
|
|||||||||||||||
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Working capital |
|
$ |
188,164 |
|
$ |
149,840 |
|
$ |
133,738 |
|
$ |
107,323 |
|
$ |
80,711 |
|
||
Total assets |
|
296,736 |
|
241,978 |
|
213,165 |
|
174,730 |
|
137,662 |
|
|||||||
Long-term debt, including current portion |
|
|
|
|
|
2 |
|
82 |
|
173 |
|
|||||||
Shareholders equity |
|
244,420 |
|
201,345 |
|
180,541 |
|
147,296 |
|
111,800 |
|
|||||||
(1) Based on the sum of average monthly sales for the period.
(2) Comparable store sales are calculated by including the net sales of stores that have been open at least one year. Therefore, a store is included in the comparable store sales base beginning with its thirteenth month. Stores that have been expanded or remodeled by 15 percent or more or have been permanently relocated are excluded from the comparable store sales base. In addition, comparable store sales are calculated on a calendar month basis using a same day sales comparison. On-line store sales are not included in the comparable store sales calculation.
13
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Managements Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Financial Statements and Notes thereto included elsewhere in this Form 10-K. The following Managements Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under Risks That May Affect Results in this section. Fiscal year 2004 ended on June 30, 2004 and we reported this fiscal year on a calendar month basis. Effective July 1, 2004, we will report on a 4-4-5 week period end. Each period will end on a Saturday. Fiscal year 2005 started on July 1, 2004 and will end on July 2, 2005. The quarter beginning with July 1, 2004 will end October 2, 2004 and will include 3 additional days in the reporting period.
Managements Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America.
The preparation of these financial statements requires the appropriate application of certain accounting policies, many of which require us to make estimates and assumptions about future events and their impact on amounts reported in our financial statements and related notes. Since future events and their impact cannot be determined with certainty, the actual results will inevitably differ from our estimates. Such differences could be material to the financial statements. We believe our application of accounting policies, and the estimates inherently required therein, are reasonable. These accounting policies and estimates are constantly reevaluated, and adjustments are made when facts and circumstances dictate a change. Our accounting policies are more fully described in Note 1 to the financial statements.
We have identified certain critical accounting policies, which are described below.
Inventories. Our inventories are stated at the lower of weighted average cost or market. Market is determined based on the estimated net realizable value, which is generally the merchandise selling price. To ensure that our raw material is properly valued we age the fabric inventory and write down the inventory to reduce the cost in accordance with our established policy, which is based on historical experience. To ensure our finished goods inventory is properly valued we review the age and turnover of our inventory and reduce the cost if the selling price is marked down below cost. These assumptions can have an impact on current and future operating results and financial position. We estimate shortage for the period between the last physical count and balance sheet date based on historic shortage trends. If shortage trends increase it could negatively impact our profitability.
Long-lived assets. We review long-lived assets for impairment whenever events or changes in circumstances, such as store closures or poor performing stores, indicate that the carrying value of an asset may not be recoverable. If the undiscounted cash flows from the long-lived assets are less than the carrying value we record an impairment charge equal to the difference between the carrying value and the assets fair value. In addition, at the time a decision is made to close a store, we record an impairment charge, if appropriate, or accelerate depreciation over the revised useful life. Historically, our impairment charges have been immaterial. During fiscal 2004 and 2003, we recorded charges for the impairment of store assets of $120,000 and $265,000, respectively. We believe at this time that the long-lived assets carrying values and useful lives continue to be appropriate.
14
Sales Return Reserve. We record a reserve for estimated product returns based on historical return trends. For fiscal 2004, the reserve was $572,000 compared to $498,000 in fiscal 2003. If actual returns are greater than those projected, additional sales returns may be recorded in the future.
Accrued Litigation. We accrue liabilities for estimates of probable settlements of lawsuits. During fiscal 2004, two lawsuits were filed against us alleging misclassification of employment position. The lawsuits seek class action status in addition to compensatory, statutory and injunctive relief. We recorded a liability in the fourth quarter of 2004 for the estimated payment of claims. The liability recorded as of June 30, 2004 is an estimate and should a greater amount of claims occur, the recorded liability may not be sufficient.
Income Taxes. We accrue liabilities for estimates of probable settlements of domestic and foreign tax audits. At any one time, several tax years may be subject to audit by various taxing jurisdictions. The results of these audits and negotiations with taxing authorities may affect the ultimate settlement of these issues. Our effective tax rate in a given financial statement period may be materially impacted by changes in the mix and level of earnings. We also record a valuation allowance against our deferred tax assets arising from foreign tax credit carryforwards as the utilization of these credits is not assured.
Recent Accounting Pronouncements
In March 2004, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 03-1, The Meaning of Other-Than-Temporary Impairments and Its Application to Certain Investments (EITF 03-1). EITF 03-1 provides a three-step impairment model for determining whether an investment is other-than-temporarily impaired and requires the Company to recognize such impairments as an impairment loss equal to the difference between the investments cost and fair value at the reporting date. The guidance is effective for the Company during the first quarter of fiscal 2005. The Company does not believe that the adoption of EITF 03-1 will have a significant effect on its financial statements.
The following table sets forth certain financial data as a percentage of net sales for the periods indicated:
|
|
Fiscal Year Ended June 30, |
|
||||||
Statement of Operating Data: |
|
|
|
2004 |
|
2003 |
|
2002 |
|
Net sales |
|
100.0 |
% |
100.0 |
% |
100.0 |
% |
||
Cost of sales, including production and occupancy(1) |
|
53.0 |
|
55.3 |
|
55.0 |
|
||
Gross profit |
|
47.0 |
|
44.7 |
|
45.0 |
|
||
Selling, general and administrative expenses(2) |
|
32.8 |
|
35.8 |
|
32.2 |
|
||
Income from operations |
|
14.2 |
|
8.9 |
|
12.8 |
|
||
Interest and other income, net |
|
0.5 |
|
0.7 |
|
0.7 |
|
||
Earnings before income taxes |
|
14.7 |
|
9.6 |
|
13.5 |
|
||
Provision for income taxes |
|
5.6 |
|
3.6 |
|
5.1 |
|
||
Net earnings |
|
9.1 |
% |
6.0 |
% |
8.4 |
% |
||
(1) Cost of sales includes the cost of merchandise, occupancy costs and production costs.
(2) Selling, general and administrative expenses primarily consist of non-occupancy store costs, corporate overhead and advertising costs.
15
Years Ended June 30, 2004 and 2003
Net Sales. Net sales increased to $372.3 million during the year ended June 30, 2004 from $323.5 million in fiscal 2003, an increase of $48.8 million, or 15.1%. Of this increase, new, expanded or remodeled stores not included in the comparable store sales base added $20.4 million to sales, and an increase in comparable store sales of 9.5% increased sales by $28.4 million. The increase in comparable store sales performance was largely due to customer acceptance of the product offering and a more balanced assortment of merchandise that contributed to an increase in transactions per store. Based on the Companys current product offering, we expect positive comparable store sales in fiscal year 2005.
Gross Profit. Gross profit increased to $175.0 million for the year ended June 30, 2004 from $144.5 million in fiscal 2003, an increase of $30.5 million, or 21.1%. As a percentage of net sales, gross profit increased to 47.0% for fiscal 2004 from 44.7% during fiscal 2003. The increase in gross profit as a percentage of net sales resulted from improved merchandise margins of 1.5 percentage points and favorable occupancy leverage of 0.8 percentage points. These improvements are a result of customer acceptance of our merchandise and higher comparable store sales. We expect to continue to experience margin improvement as a result of favorable occupancy leverage.
Selling, General and Administrative Expenses. Selling, general and administrative expenses, which primarily consist of non-occupancy store costs, corporate overhead and advertising costs, increased to $122.3 million during fiscal 2004 from $115.9 million in fiscal 2003, an increase of $6.4 million, or 5.5%. As a percentage of net sales, these expenses decreased to 32.8% during fiscal 2004 from 35.8% in fiscal 2003. This decrease as a percentage of net sales was primarily due to lower compensation associated with higher store productivity, lower depreciation due to fully depreciated assets, offset by increased incentive compensation and costs associated with the potential settlements of outstanding lawsuits. We expect to continue to benefit from increased leverage on fixed expenses during fiscal 2005.
Interest and Other Income, Net. We generated $2.0 million of interest and other income (net of other expenses) during fiscal 2004 as compared to $2.2 million in fiscal 2003. Average cash balances continued to increase due to positive operating results, offset by lower interest rates.
Provision for Income Taxes. The effective tax rate was 38.2% for fiscal 2004 as compared to 37.5% for fiscal 2003. The higher effective tax rate for 2004 is primarily attributable to an increase in the valuation allowance against foreign tax credit carry forwards as the utilization of these carry forwards is not assured.
Years Ended June 30, 2003 and 2002
Net Sales. Net sales increased to $323.5 million during fiscal 2003 from $316.4 million in fiscal 2002, an increase of $7.1 million, or 2.2%. Of this increase, new, expanded or remodeled stores not included in the comparable store sales base added $27.3 million to sales, while a decrease in comparable store sales of 6.8% reduced sales by $20.2 million. The decrease in comparable store sales performance was attributed to the following: marketplace conditions which impacted customer traffic to our stores, missed opportunities in key product categories and production delays which resulted in missed sales opportunities and increased promotional activities.
Gross Profit. Gross profit increased to $144.5 million for fiscal 2003 from $142.4 million in fiscal 2002, an increase of $2.1 million, or 1.5%. As a percentage of net sales, gross profit decreased to 44.7% for the year from 45.0% during fiscal 2002. The decrease in gross profit as a percentage of net sales resulted from negative occupancy leverage offset by slightly higher net merchandise margins. Negative occupancy expense leverage was the result of lower sales productivity.
Selling, General and Administrative Expenses. Selling, general and administrative expenses, which primarily consist of non-occupancy store costs, corporate overhead and advertising costs, increased to $115.9 million during fiscal 2003 from $101.8 million in fiscal 2002, an increase of $14.1 million, or 13.9%.
16
As a percentage of net sales, these expenses increased to 35.8% during fiscal 2003 from 32.2% in fiscal 2002. This increase as a percentage of net sales was primarily due to higher compensation associated with the store commission structure, higher depreciation due to negative leverage and investments in the Companys infrastructure, and store closure expenses and reserves which amounted to $557,000 related to 5 store closures and an impairment reserve for 2 stores. Expenses were also impacted by charges related to abandoned information technology projects which were offset by a favorable legal settlement.
Interest and Other Expense Income, Net. We generated $2.2 million of interest and other income (net of other expenses) during fiscal 2003 as compared to $2.1 million in fiscal 2002. Average cash balances continued to increase arising from operating results offset by lower interest rates.
Provision for Income Taxes. The effective tax rate for fiscal 2003 was 37.5% as compared to 37.9% in fiscal 2002. The lower effective tax rate for fiscal 2003 was primarily attributable to a lower effective state tax rate due to the benefits of the corporate legal entity restructuring.
Seasonality of Business and Quarterly Results
Our business varies with general seasonal trends that are characteristic of the retail and apparel industries. As a result, our typical store generates a majority of our annual net sales and profitability in the second quarter of our fiscal year (which includes the fall and holiday selling seasons) compared to other quarters of our fiscal year. If for any reason our sales were below seasonal norms during the second quarter of our fiscal year, our annual operating results would be negatively impacted. Because of the seasonality of our business, results for any quarter are not necessarily indicative of results that may be achieved for a full fiscal year.
Liquidity and Capital Resources
Our working capital requirements vary widely throughout the year and generally peak in the first and second fiscal quarters. At June 30, 2004, we had approximately $194.1 million of cash and equivalents, short-term marketable securities and long-term marketable securities on hand. In addition, we had a revolving line of credit, under which we could borrow or issue letters of credit up to a combined total of $10.0 million. As of June 30, 2004, there were no borrowings under the line of credit and letters of credit outstanding totaled $5.1 million.
Net cash provided by operating activities in fiscal 2004, 2003 and 2002 was $58.0 million, $41.6 million and $49.9 million, respectively. The increase in cash provided by operating activities in fiscal 2004 compared to 2003 was primarily the result of an increase in net income, increase in accrued liabilities primarily related to incentive compensation, and other changes in working capital.
Net cash used by investing activities was $16.8 million, $33.2 million and $21.9 million in fiscal 2004, 2003 and 2002, respectively. The primary use of these funds was for capital expenditures. The decrease in cash used by investing activities in 2004 was a result of net proceeds from marketable securities, as compared to net purchases of marketable securities in 2003, offset by higher capital expenditures. Capital expenditures in 2004 relate to the purchase of our new design studio and production facility in Los Angeles for approximately $11 million, the opening of new stores for approximately $8.6 million, the expansion/relocation of stores for approximately $1.7 million, and investments in management information systems of approximately $1.0 million. We opened 20 new stores in each of fiscal 2004, 2003 and 2002 and we expect to open 20 stores in fiscal 2005. In fiscal year 2005, we expect capital expenditures of approximately $8 million for new stores, approximately $6.5 million for store expansion/relocation/conversion, approximately $3 million for investments in information systems and approximately $2.5 of other capital expenditures.
17
During fiscal 2004, the average of bebe and BEBE SPORT new store construction costs (before tenant allowances) was $358,000 per store. The average gross inventory investment per store was $55,000.
Net cash provided by financing activities was $7.1 million, $0.7 million and $4.2 million in fiscal 2004, fiscal 2003 and fiscal 2002, respectively, and was derived from proceeds from the issuance of common stock arising from stock option exercises.
On August 12, 2004 our Board of Directors approved an annual cash dividend of $0.20 per common share on our common stock. The first quarterly dividend of $0.05 per share is payable September 30, 2004 to stockholders of record on September 9, 2004.
We believe that our cash on hand, together with our cash flow from operations, will be sufficient to meet our capital and operating requirements through fiscal 2005. Our future capital requirements, however, will depend on numerous factors, including without limitation, the size and number of new and expanded stores, investment costs for management information systems, potential acquisitions and/or joint ventures, repurchase of stock and future results of operations.
Summary Disclosures about Contractual Obligations and Commercial Commitments:
The following tables summarize our significant contractual obligations and commercial commitments as of June 30, 2004 (in thousands):
|
|
Amount of commitment expiration period |
|
|||||||||||||
|
|
Total |
|
Less than
|
|
1-3 years |
|
4-5 years |
|
After 5
|
|
|||||
|
|
(Dollars in thousands) |
|
|||||||||||||
Operating leases |
|
$ |
227,394 |
|
$ |
33,805 |
|
$ |
62,969 |
|
$ |
57,243 |
|
$ |
73,377 |
|
Unconditional purchase obligations(1) |
|
52,709 |
|
52,709 |
|
|
|
|
|
|
|
|||||
Trade letters of credit |
|
4,481 |
|
4,481 |
|
|
|
|
|
|
|
|||||
Standby letters of credit |
|
578 |
|
578 |
|
|
|
|
|
|
|
|||||
Total Contractual Obligations and Commercial Commitments |
|
$ |
285,162 |
|
$ |
91,573 |
|
$ |
62,969 |
|
$ |
57,243 |
|
$ |
73,377 |
|
(1) Unconditional purchase obligations are defined as agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Included in the purchase obligations category above are commitments for inventory purchases, capital expenditures, information technology and professional services. Most arrangements are cancelable without a significant penalty and with short notice (usually 30 to 90 days). Amounts reflected on the consolidated balance sheet as accounts payable and accrued liabilities are excluded from the table above.
As of June 30, 2004, there were no borrowings outstanding under the line of credit.
We do not believe that inflation has had a material effect on the results of operations in the recent past. However, we cannot assure that our business will not be affected by inflation in the future.
18
Factors that might cause our actual results to differ materially from the forward looking statements discussed elsewhere in this report, as well as affect our ability to achieve our financial and other goals, include, but are not limited to, the following:
RISKS RELATING TO OUR BUSINESS:
1. The success of our business depends in large part on our ability to identify fashion trends as well as to react to changing customer demand in a timely manner. Consequently, we depend in part upon customer response to the creative efforts of our merchandising, design and marketing teams and their ability to anticipate trends and fashions that will appeal to our consumer base. If we miscalculate our customers product preferences or the demand for our products, we may be faced with excess inventory. Historically, this type of occurrence has resulted in excess fabric for some products and markdowns and/or write-offs, which has impaired our profitability, and may do so in the future. Similarly, any failure on our part to anticipate, identify and respond effectively to changing consumer demands and fashion trends will adversely affect our sales.
2. If we are unable to obtain raw materials, unable to find manufacturing facilities or our manufacturers perform unacceptably, our sales may be negatively affected and our financial condition may be harmed. We do not own any manufacturing facilities and therefore depend upon third parties to manufacture our products. We place all of our orders for production of merchandise and raw materials by purchase order and do not have any long-term contracts with any manufacturer or supplier. If we fail to maintain favorable relationships with our manufacturers and suppliers or are unable to obtain sufficient quantities of quality raw materials on commercially reasonable terms, it could harm our business and results of operations. We cannot assure you that third party manufacturers (1) will not supply similar products to our competitors, (2) will not stop supplying products to us completely or (3) will supply products in a timely manner. Untimely receipt of products may result in markdowns which would have a negative impact on earnings. Furthermore, we have received in the past, and may receive in the future, shipments of products from manufacturers that fail to conform to our quality control standards. In such event, unless we are able to obtain replacement products in a timely manner, we may lose sales. Certain of our third party manufacturers store our raw materials. In the event our inventory was damaged or destroyed and we were unable to obtain replacement raw materials, our earnings may be negatively impacted.
3. Our success depends on our ability to attract and retain key employees in order to support our existing business and future expansion. From time to time we actively recruit qualified candidates to fill key positions from within the company. There is substantial competition for experienced personnel, which we expect to continue. We compete for experienced personnel with companies who have greater financial resources than we do. In the past, we have experienced significant turnover of our executive management team and retail store personnel. We are also exposed to employment practice litigation due to the large number of employees and high turnover of our sales associates. If we fail to attract, motivate and retain qualified personnel, it could harm our business and limit our ability to expand.
In addition, we depend upon the expertise and execution of our key employees, particularly Manny Mashouf, the founder, Chairman of the Board and majority shareholder. We do not carry key person life insurance policies on any of our employees. If we lose the services of Mr. Mashouf or any key officers or employees, it could harm our business and results of operations.
4. If we are not able to successfully expand our bebe and BEBE SPORT stores our revenue base and earnings may be impaired. As part of our growth strategy, we may open larger bebe stores. If these stores are not successful, our financial condition may be harmed . In addition, we launched a new store concept, BEBE
19
SPORT during fiscal 2003 for which we have committed significant financial and human resources to develop and expand. The failure of the BEBE SPORT concept may result in a negative impact to earnings.
5. There can be no assurance that future store openings will be successful. We expect to open approximately 20 stores in fiscal 2005, of which approximately eight will be BEBE SPORT stores approximately eleven will be bebe stores and approximately one will be an outlet store. There can be no assurance that these stores, or any other stores that we might open in the future, will be successful or that our overall gross profit will increase as a result of opening these stores. In addition, most of our new store openings in fiscal 2005 will be in existing markets. These openings may affect the existing stores net sales volumes and profitability. Our failure to predict accurately the demographic or retail environment at any future store location could have a material adverse effect on our business, financial condition and results of operations.
6. Any serious disruption at our major facilities could have a harmful effect on our business. We currently operate our corporate office in Brisbane, California, a distribution facility in Benicia, California, and a design studio and production facility in Los Angeles, California. We have also recently purchased a design studio and production facility in Los Angeles, California. Any serious disruption at these facilities whether due to construction, relocation, fire, earthquake, terrorist acts or otherwise would harm our operations and could have a harmful effect on our business and results of operations. Furthermore, we have little experience operating essential functions away from our main corporate offices and are uncertain what effect operating such satellite facilities might have on business, personnel and results of operations. We are in process of implementing a business continuity plan that will address recovery in the event of a serious disruption at one of our major facilities.
7. We face significant competition in the retail and apparel industry, which could harm our sales and profitability. The retail and apparel industries are highly competitive and are characterized by low barriers to entry. Key competitors include, but are not limited to Arden B, BCBG, Express, Guess, and the t.b.d. and Savvy Departments within Nordstrom. We expect competition in our markets to increase. The primary competitive factors in our markets are: brand name recognition, sourcing strategies, product styling, quality, presentation and pricing, timeliness of product development and delivery, store ambiance, customer service and convenience.
We compete with traditional department stores, specialty store retailers, business to consumer websites, off-price retailers and direct marketers for, among other things, raw materials, market share, retail space, finished goods, sourcing and personnel. Because many of these competitors are larger and have substantially greater financial, distribution and marketing resources than we do, we may lack the resources to adequately compete with them. If we fail to compete in any way, it could harm our business, financial condition and results of operations.
8. Purchases of the merchandise we sell are generally discretionary and are therefore particularly susceptible to economic slowdowns. If economic conditions change, our business, financial condition and results of operations could be adversely affected. Consumers are generally more willing to make discretionary purchases, including purchases of fashion products, during periods in which favorable economic conditions prevail.
The outlook for the United States economy is uncertain and is directly affected by global political factors that are beyond our control. Any escalation of military action involving the United States could cause increased volatility in financial markets, further adversely affecting consumer confidence and spending habits.
9. If we are not able to successfully protect our intellectual property our ability to capitalize on the value of our brand name may be impaired. Even though we take actions to establish, register and protect our trademarks and other proprietary rights, we cannot assure you that we will be successful or that others
20
will not imitate our products or infringe upon our intellectual property rights. In addition, we cannot assure you that others will not resist or seek to block the sale of our products as infringements of their trademark and proprietary rights.
We are seeking to register our trademarks domestically and internationally. Obstacles exist that may prevent us from obtaining a trademark for the bebe name or related names. We may not be able to register certain trademarks, purchase the right or obtain a license to use the bebe name on commercially reasonable terms. If we fail to obtain trademark registrations, ownership or license the requisite rights, it would limit our ability to expand. In some jurisdictions, despite successful registration of our trademarks, third parties may allege infringement and bring actions against us. In addition, if our licensees fail to use our intellectual property correctly, the goodwill associated with our trademarks may be diluted.
Furthermore, if we do not demonstrate use of our trademarks, our trademark rights may lapse over time.
10. If an independent manufacturer violates labor or other laws, or is accused of violating any such laws, or if their labor practices diverge from those generally accepted as ethical, it could harm our business and brand image. While we maintain a policy to monitor the operations of our independent manufacturers by having an independent firm inspect these manufacturing sites, and all manufacturers are contractually required to comply with such labor practices, we cannot control the actions or the publics perceptions of such manufacturers, nor can we assure that these manufacturers will conduct their businesses using ethical or legal labor practices. Apparel companies can be held jointly liable for the wrongdoings of the manufacturers of their products. While we do not control their employees employment conditions or the manufacturers business practices, and the manufacturers act in their own interest, they may act in a manner that results in negative public perceptions of us and/or employee allegations or court determinations that we are jointly liable.
RISKS RELATING TO OUR COMMON STOCK:
1. Our stock price may fluctuate because of the small number of shares that can be publicly traded and the low average daily trading volumes. The vast majority of our outstanding shares of our common stock are not registered and are subject to trading restrictions. As of June 30, 2004, only 9,467,747 shares of our common stock were available to be publicly traded, and as a result, our average daily trading volumes are relatively low, and our stock price is vulnerable to market swings due to large purchases, sales and short sales of our common stock.
2. Because a principal shareholder controls the company, other shareholders may not be able to influence the direction the company takes. As of June 30, 2004, Manny Mashouf, the Chairman of the Board, beneficially owned approximately 75.8% of the outstanding shares of our common stock. As a result, he alone can control the election of directors and the outcome of all issues submitted to the shareholders. This may make it more difficult for a third party to acquire shares, may discourage acquisition bids, and could limit the price that certain investors might be willing to pay for shares of common stock. This concentration of stock ownership may have the effect of delaying, deferring or preventing a change in control of our company.
3. If we account for employee stock options using the fair value method, it could significantly reduce our net income. There has been ongoing public debate whether stock options granted to employees should be treated as compensation expense and, if so, how to properly value such charges. On March 31, 2004, the Financial Accounting Standard Board (FASB) issued an Exposure Draft, Share-Based Payment: an amendment of FASB statements No. 123 and 95, which would require a company to recognize, as an expense, the fair value of stock options and other stock-based compensation to employees beginning in 2005 and subsequent reporting periods. If we elect or are required to record an expense for our stock-based compensation plans using the fair value method as described in the Exposure Draft, we could have significant and ongoing accounting charges, which could significantly reduce our net income.
21
4. Investor confidence and share value may be adversely impacted if we are unable to favorably assess, or our independent registered public accountants are unable to provide an unqualified attestation report on our assessment of, the effectiveness of our internal control over financial reporting as of the end of our 2005 fiscal year as required by Section 404 of the Sarbanes-Oxley Act of 2002. An effective system of internal control over financial reporting is necessary for us to provide reliable financial reports. Rules adopted by the Securities and Exchange Commission pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting, and attestation of our assessment by our independent registered public accountants. This requirement will first apply to our Annual Report on Form 10-K for the fiscal year ending July 2, 2005. The rules governing the standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards under the new rules. Although we are diligently reviewing, documenting and testing our internal control over financial reporting, we may encounter problems or delays in completing the implementation of any changes necessary to make a favorable assessment of our internal control over financial reporting under the new standards. In addition, the evaluation and attestation process by our independent registered public accountants is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving a favorable review and attestation by our independent registered public accountants. If we cannot favorably assess, or our independent registered public accountants are unable to provide an unqualified attestation report on our assessment of, the effectiveness of our internal control over financial reporting, investor confidence and share value may be negatively impacted.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks, which include changes in U.S. interest rates and, to a lesser extent, foreign exchange rates. We do not engage in financial transactions for trading or speculative purposes.
Interest Rate Risk.
We currently maintain a portfolio of variable interest rate investments consisting of cash equivalents, short-term marketable securities and long-term marketable securities. Marketable securities are comprised of closed-end variable interest rate funds that invest primarily in tax-exempt municipal bonds. Due to the variable nature of these investments, their value is typically not subject to market rate changes. According to our investment policy, we may invest in taxable and tax exempt instruments. In addition, the policy establishes limits on credit quality, maturity, issuer and type of instrument. Marketable securities are classified as available for sale. We do not use derivative financial instruments in our investment portfolio.
All highly liquid investments with a maturity of three months or less at the date of purchase are considered to be cash equivalents. The remaining investments are considered short-term marketable securities if maturities range between four and twelve months or long term marketable securities if maturities are over twelve months.
The following table lists our cash equivalents, short-term marketable securities and long-term marketable securities at June 30, 2004:
|
|
2004 |
|
Fair Value |
|
||
|
|
(Dollars in thousands) |
|
||||
Cash equivalents |
|
$ |
171,753 |
|
$ |
171,753 |
|
Weighted average interest rate |
|
2.03 |
% |
|
|
||
Short-term marketable securities |
|
5,050 |
|
5,050 |
|
||
Weighted average interest rate |
|
2.20 |
% |
|
|
||
Long-term marketable securities |
|
7,875 |
|
7,875 |
|
||
Weighted average interest rate |
|
2.72 |
% |
|
|
||
Total |
|
$ |
184,678 |
|
$ |
184,678 |
|
22
The interest payable on our bank line of credit is based on variable interest rates and therefore affected by changes in market interest rates. If interest rates rose .10% from the banks reference rate as of June 30, 2004, our results from operations and cash flows would not be significantly affected since we have no outstanding borrowings.
Foreign Currency Risks.
We enter into a significant amount of purchase obligations outside of the U.S. substantially all of which are negotiated and settled in U.S. Dollars and, therefore, we have only minimal exposure to foreign currency exchange risks. We also operate a subsidiary with a functional currency other than the U.S. Dollar. This subsidiary represented less than two percent of total revenues for fiscal year 2004 and, therefore, presents only minimal exposure to foreign currency exchange risks. We do not hedge against foreign currency risks and believe that foreign currency exchange risk is immaterial.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to this item is set forth in Index to Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2004 to provide reasonable assurance that the information required to be disclosed by us in this Annual Report on Form 10-K was recorded, processed, summarized and reported within the time periods specified by the SECs rules and Form 10-K.
We also maintain a system of internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. No changes in our internal control over financial reporting occurred during the quarter ending June 30, 2004 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to this item is incorporated by reference from the Registrants definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the registrants fiscal year.
With respect to Item 406 of Regulation S-K, our Code of Business Conduct and Ethics is filed herewith as Exhibit 14.1.
23
ITEM 11. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference from the Registrants definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the registrants fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference from the Registrants definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrants fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item is incorporated by reference from the Registrants definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrants fiscal year.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to this item is incorporated by reference from the Registrants definitive Proxy Statement to be filed with the Commission not later than 120 days after the end of the Registrants fiscal year.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)
1. The financial statements listed in the Index to Consolidated Financial Statements at page F-1 are filed as a part of this report.
2. Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
3. Exhibits included or incorporated herein: See Index to Exhibits.
(b) Reports on Form 8-K.
Date of Report |
|
|
Items |
|
Description |
April 8, 2004 |
|
5, 7 |
|
The Company issued a press release announcing a 3-for-2 split of its common stock. |
|
April 8, 2004 |
|
7, 12 |
|
The Company issued a press release announcing March 2004 sales and the Companys updated financial outlook for the third quarter of fiscal 2004. |
|
April 22, 2004 |
|
7, 12 |
|
The Company issued a press release announcing third quarter earnings of fiscal 2004. |
|
May 6, 2004 |
|
7, 12 |
|
The Company issued a press release announcing April 2004 sales. |
|
June 3, 2004 |
|
7, 12 |
|
The Company issued a press release announcing May 2004 sales and the Companys updated financial outlook for the fourth quarter of fiscal 2004. |
24
(c) Exhibits
EXHIBIT
|
|
|
|
DESCRIPTION OF DOCUMENT |
3.1 |
|
Amended and Restated Articles of Incorporation of Registrant. |
||
3.2 |
|
Amended and Restated Bylaws of Registrant. |
||
4.1* |
|
Specimen certificate representing the Common Stock (in standard printer form, not provided). |
||
10.1 |
|
1997 Stock Plan. |
||
10.2* |
|
1998 Stock Purchase Plan. |
||
10.3* |
|
Form of Indemnification Agreement. |
||
10.6** |
|
Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc., (lease for additional building to house administrative departments in Brisbane, California). |
||
10.8*** |
|
Form of Retail Store License Agreement between Registrant and [company]. |
||
10.9**** |
|
Amendment No. 1 to Lease Agreement (amendment to Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc.) |
||
10.10***** |
|
Lease Agreement dated October 24, 2000, as amended, between Registrant and Lincoln PO Benicia Limited Partnership. |
||
10.11***** |
|
Lease Agreement dated November 3, 2000, as amended, between Registrant and Stanley Hirsh and Anita Hirsh as trustees, D/B/A Mercantile Center. |
||
10.12***** |
|
Form of Restricted Stock Units Agreement. |
||
10.17 |
|
Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated January 20, 2004 by and among bebe stores, inc. and 10345 Olympic LLC. |
||
14.1 |
|
Code of Business Conduct and Ethics |
||
21.1 |
|
Subsidiaries of Registrant. |
||
23.1 |
|
Consent of Independent Registered Public Accounting Firm. |
||
24.1 |
|
Power of Attorney (see signature page). |
||
31.1 |
|
Section 302 Certification of Chief Executive Officer. |
||
31.2 |
|
Section 302 Certification of Chief Financial Officer. |
||
32.1 |
|
Section 906 Certification of Chief Executive Officer. |
||
32.2 |
|
Section 906 Certification of Chief Financial Officer. |
* Incorporated by reference from exhibits of the same number in Registrants Registration Statement on Form S-1 (Reg. No. 333-50333), effective June 16, 1998.
** Incorporated by reference from exhibits of the same number in Registrants Quarterly Report on Form 10-Q filed on February 16, 1999.
*** Incorporated by reference from exhibits of the same number in Registrants Annual Report on Form 10-K filed on September 28, 1999.
**** Incorporated by reference from exhibits of the same number in Registrants Annual Report on Form 10-K filed on September 28, 2000.
***** Incorporated by reference from exhibits of the same number in Registrants Annual Report on Form 10-K filed on September 29, 2003.
25
Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Brisbane, State of California, on the 13th day of September 2004.
|
bebe stores, inc. |
|
|
By: |
/s/ Gregory Scott |
|
|
Gregory Scott |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Gregory Scott and Walter Parks, and each of them acting individually, as his true and lawful attorneys-in-fact and agents, each with full power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, with full power of each to act alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully for all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or his or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Exchange Act, this Annual Report on Form 10-K has been signed by the following persons in the capacities and on the dates indicated:
|
Name |
|
|
|
Title |
|
|
|
Date |
|
/s/ Gregory Scott |
|
Director and Chief Executive Officer (Principal |
|
September 13, 2004 |
||||||
Gregory Scott |
|
Executive Officer) |
|
|
||||||
/s/ Walter Parks |
|
Chief Financial Officer (Principal Financial Officer |
|
September 13, 2004 |
||||||
Walter Parks |
|
and Principal Accounting Officer) |
|
|
||||||
/s/ Manny Mashouf |
|
Chairman of the Board |
|
September 13, 2004 |
||||||
Manny Mashouf |
|
|
|
|
||||||
/s/ Neda Mashouf |
|
Vice Chairman of the Board |
|
September 13, 2004 |
||||||
Neda Mashouf |
|
|
|
|
||||||
/s/ Barbara Bass |
|
Director |
|
September 13, 2004 |
||||||
Barbara Bass |
|
|
|
|
||||||
/s/ Cynthia Cohen |
|
Director |
|
September 13, 2004 |
||||||
Cynthia Cohen |
|
|
|
|
||||||
/s/ Corrado Federico |
|
Director |
|
September 13, 2004 |
||||||
Corrado Federico |
|
|
|
|
||||||
/s/ Caden Wang |
|
Director |
|
September 13, 2004 |
||||||
Caden Wang |
|
|
|
|
S- 1
bebe stores, inc.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2004, 2003 AND 2002:
F- 1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
and Shareholders of
bebe stores, inc.:
We have audited the accompanying consolidated balance sheets of bebe stores, inc. and subsidiaries (the Company) as of June 30, 2004 and 2003 and the related consolidated statements of income, shareholders equity, and cash flows for each of the three fiscal years in the period ended June 30, 2004. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of bebe stores, inc. and subsidiaries as of June 30, 2004 and 2003 and the results of their operations and their cash flows for each of the three fiscal years in the period ended June 30, 2004 in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP |
|
San Francisco, California |
|
August 20, 2004 |
|
F- 2
bebe stores, inc.
(Amounts in thousands, except share data)
|
|
As of June 30, |
|
||||
|
|
2004 |
|
2003 |
|
||
Assets: |
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
||
Cash and equivalents |
|
$ |
181,205 |
|
$ |
132,889 |
|
Short-term marketable securities |
|
5,050 |
|
10,500 |
|
||
Receivables (net of allowance of $632 and $531) |
|
2,911 |
|
1,750 |
|
||
Inventories |
|
25,538 |
|
25,422 |
|
||
Deferred income taxes |
|
4,966 |
|
3,226 |
|
||
Prepaid and other |
|
2,614 |
|
3,063 |
|
||
Total current assets |
|
222,284 |
|
176,850 |
|
||
Property and equipment, net |
|
62,355 |
|
52,305 |
|
||
Long-term marketable securities |
|
7,875 |
|
7,875 |
|
||
Deferred income taxes |
|
1,640 |
|
3,202 |
|
||
Other assets |
|
2,582 |
|
1,746 |
|
||
Total assets |
|
$ |
296,736 |
|
$ |
241,978 |
|
Liabilities and Shareholders Equity: |
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
||
Accounts payable |
|
$ |
14,467 |
|
$ |
15,310 |
|
Accrued liabilities |
|
19,653 |
|
11,700 |
|
||
Total current liabilities |
|
34,120 |
|
27,010 |
|
||
Deferred rent |
|
18,196 |
|
13,623 |
|
||
Total liabilities |
|
52,316 |
|
40,633 |
|
||
Commitments and contingencies |
|
|
|
|
|
||
Shareholders equity: |
|
|
|
|
|
||
Preferred stock-authorized 1,000,000 shares at $0.001 par value per share; no shares issued and outstanding |
|
|
|
|
|
||
Common stock-authorized 60,000,000 shares at $0.001 par value per share; issued and outstanding 39,211,795 and 38,524,313 shares |
|
39 |
|
38 |
|
||
Additional paid-in capital |
|
49,144 |
|
39,906 |
|
||
Deferred compensation |
|
(36 |
) |
(75 |
) |
||
Accumulated other comprehensive income |
|
296 |
|
269 |
|
||
Retained earnings |
|
194,977 |
|
161,207 |
|
||
Total shareholders equity |
|
244,420 |
|
201,345 |
|
||
Total liabilities and shareholders equity |
|
$ |
296,736 |
|
$ |
241,978 |
|
See accompanying notes to consolidated financial statements.
F- 3
bebe stores, inc.
(Amounts in thousands, except per share data)
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2004 |
|
2003 |
|
2002 |
|
|||
Net sales |
|
$ |
372,257 |
|
$ |
323,549 |
|
$ |
316,424 |
|
Cost of sales, including production and occupancy |
|
197,269 |
|
179,058 |
|
174,048 |
|
|||
Gross profit |
|
174,988 |
|
144,491 |
|
142,376 |
|
|||
Selling, general and administrative expenses |
|
122,278 |
|
115,851 |
|
101,828 |
|
|||
Income from operations |
|
52,710 |
|
28,640 |
|
40,548 |
|
|||
Interest and other income, net |
|
1,959 |
|
2,199 |
|
2,074 |
|
|||
Earnings before income taxes |
|
54,669 |
|
30,839 |
|
42,622 |
|
|||
Provision for income taxes |
|
20,899 |
|
11,560 |
|
16,138 |
|
|||
Net earnings |
|
$ |
33,770 |
|
$ |
19,279 |
|
$ |
26,484 |
|
Basic earnings per share |
|
$ |
0.87 |
|
$ |
0.50 |
|
$ |
0.70 |
|
Diluted earnings per share |
|
$ |
0.85 |
|
$ |
0.50 |
|
$ |
0.68 |
|
Basic weighted average shares outstanding |
|
38,815 |
|
38,466 |
|
38,106 |
|
|||
Diluted weighted average shares outstanding |
|
39,731 |
|
38,853 |
|
38,946 |
|
See accompanying notes to consolidated financial statements.
F- 4
bebe stores, inc.
(Amounts in thousands)
|
|
Common Stock |
|
Additional |
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
Number of
|
|
Amount |
|
Paid-in
|
|
Deferred
|
|
Income
|
|
Retained
|
|
Total |
|
Comprehensive
|
|
|||||||||||||||||||||
Balance as of June 30, 2001 |
|
|
37,782 |
|
|
|
$ |
38 |
|
|
|
$ |
32,004 |
|
|
|
$ |
|
|
|
|
$ |
(190 |
) |
|
|
$ |
115,444 |
|
|
$ |
147,296 |
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,484 |
|
|
26,484 |
|
|
$ |
26,484 |
|
|
||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153 |
|
|
|
|
|
|
153 |
|
|
153 |
|
|
|||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
26,637 |
|
|
||||||
Common stock issued under stock plans including tax benefit |
|
|
636 |
|
|
|
|
|
|
|
6,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,608 |
|
|
|
|
|
|||||||
Balance as of June 30, 2002 |
|
|
38,418 |
|
|
|
38 |
|
|
|
38,612 |
|
|
|
|
|
|
|
(37 |
) |
|
|
141,928 |
|
|
180,541 |
|
|
|
|
|
|||||||
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,279 |
|
|
19,279 |
|
|
$ |
19,279 |
|
|
||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306 |
|
|
|
|
|
|
306 |
|
|
306 |
|
|
|||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,585 |
|
|
||||||
Deferred compensation |
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Amortization of deferred compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
25 |
|
|
|
|
|
|||||||
Common stock issued under stock plans including tax benefit |
|
|
106 |
|
|
|
|
|
|
|
1,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,194 |
|
|
|
|
|
|||||||
Balance as of June 30, 2003 |
|
|
38,524 |
|
|
|
38 |
|
|
|
39,906 |
|
|
|
(75 |
) |
|
|
269 |
|
|
|
161,207 |
|
|
201,345 |
|
|
|
|
|
|||||||
Net earnings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,770 |
|
|
33,770 |
|
|
$ |
33,770 |
|
|
||||||
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
27 |
|
|
27 |
|
|
|||||||
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
33,797 |
|
|
||||||
Deferred compensation |
|
|
|
|
|
|
|
|
|
|
100 |
|
|
|
(100 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Amortization of deferred compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139 |
|
|
|
|
|
|
|
|
|
|
139 |
|
|
|
|
|
|||||||
Common stock issued under stock plans including tax benefit |
|
|
688 |
|
|
|
1 |
|
|
|
9,138 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,139 |
|
|
|
|
|
|||||||
Balance as of June 30, 2004 |
|
|
39,212 |
|
|
|
$ |
39 |
|
|
|
$ |
49,144 |
|
|
|
$ |
(36 |
) |
|
|
$ |
296 |
|
|
|
$ |
194,977 |
|
|
$ |
244,420 |
|
|
|
|
|
See accompanying notes to consolidated financial statements
F- 5
bebe stores, inc.
(Amount in thousands)
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2004 |
|
2003 |
|
2002 |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|||
Net earnings |
|
$ |
33,770 |
|
$ |
19,279 |
|
$ |
26,484 |
|
Adjustments to reconcile net earnings to cash provided by operating activities: |
|
|
|
|
|
|
|
|||
Non-cash compensation expense |
|
139 |
|
25 |
|
|
|
|||
Depreciation and amortization |
|
12,337 |
|
13,050 |
|
10,071 |
|
|||
Tax benefit from stock options exercised |
|
2,026 |
|
451 |
|
2,289 |
|
|||
Net loss on disposal of property |
|
95 |
|
28 |
|
713 |
|
|||
Deferred income taxes |
|
(178 |
) |
524 |
|
(1,578 |
) |
|||
Deferred rent |
|
4,573 |
|
3,534 |
|
6,130 |
|
|||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|||
Receivables |
|
(1,161 |
) |
356 |
|
33 |
|
|||
Inventories |
|
(116 |
) |
(2,034 |
) |
4,414 |
|
|||
Other assets |
|
(1,047 |
) |
94 |
|
(404 |
) |
|||
Prepaid expenses |
|
449 |
|
1,791 |
|
2,347 |
|
|||
Accounts payable |
|
(843 |
) |
3,171 |
|
1,261 |
|
|||
Accrued liabilities |
|
7,953 |
|
1,344 |
|
(1,835 |
) |
|||
Net cash provided by operating activities |
|
57,997 |
|
41,613 |
|
49,925 |
|
|||
Cash flows from investing activities: |
|
|
|
|
|
|
|
|||
Purchase of property and equipment |
|
(22,271 |
) |
(14,878 |
) |
(21,945 |
) |
|||
Proceeds from sales of equipment |
|
|
|
6 |
|
39 |
|
|||
Purchase of marketable securities |
|
(5,050 |
) |
(23,375 |
) |
|
|
|||
Proceeds from sales and maturities of marketable securities |
|
10,500 |
|
5,000 |
|
|
|
|||
Net cash used by investing activities |
|
(16,821 |
) |
(33,247 |
) |
(21,906 |
) |
|||
Cash flows from financing activities: |
|
|
|
|
|
|
|
|||
Net proceeds from issuance of common stock |
|
7,113 |
|
743 |
|
4,318 |
|
|||
Other |
|
|
|
(15 |
) |
(73 |
) |
|||
Net cash provided by financing activities |
|
7,113 |
|
728 |
|
4,245 |
|
|||
Effect of exchange rate changes on cash |
|
27 |
|
364 |
|
167 |
|
|||
Net increase in cash and equivalents |
|
48,316 |
|
9,458 |
|
32,431 |
|
|||
Cash and equivalents: |
|
|
|
|
|
|
|
|||
Beginning of year |
|
132,889 |
|
123,431 |
|
91,000 |
|
|||
End of year |
|
$ |
181,205 |
|
$ |
132,889 |
|
$ |
123,431 |
|
Supplemental information: |
|
|
|
|
|
|
|
|||
Cash paid for interest |
|
$ |
|
|
$ |
1 |
|
$ |
4 |
|
Cash paid for income taxes |
|
$ |
17,190 |
|
$ |
8,389 |
|
$ |
17,825 |
|
See accompanying notes to consolidated financial statements.
F- 6
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of the business bebe stores, inc., the Company, designs, develops and produces a distinctive line of contemporary womens apparel and accessories, which it markets under the bebe, BEBE SPORT and bebe O brand names. The Company operates 199 specialty retail stores located in 32 states, the District of Columbia, Canada, 12 licensed stores internationally and an on-line store at www.bebe.com .
The Company has one reportable segment and has three brands with product lines of a similar nature. Revenues of the Companys international retail operations represent less than two percent of total revenues for fiscal year 2004.
Basis of financial statement presentation The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (GAAP).
Stock split In April 2004, the Company declared a 3 for 2 stock split, which became effective in May 2004. All share and per share amounts included herein have been adjusted to reflect this stock split.
Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated.
Fiscal year For all periods presented herein, the Companys fiscal year ended on June 30. Beginning on July 1, 2004, the Company changed their fiscal year to a 52/53 week year, ending on the Saturday closest to June 30. The Company does not expect this change to have a significant impact on their consolidated financial statements.
Use of estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassifications Certain amounts for prior years have been reclassified to conform with current year presentation.
Foreign currency adjustments The Companys subsidiaries use the local currency as their functional currency. Translation adjustments result from the translation of foreign subsidiaries financial statements into US Dollars. The results of operations of foreign subsidiaries are translated using the average exchange rate during the period. Balance sheet amounts are translated at the exchange rate in effect at the balance sheet date. The resulting translation adjustment is included in shareholders equity.
Cash and equivalents represent cash and short-term, highly liquid investments with original maturities of less than 90 days.
Marketable securities The Companys marketable securities are classified as available for sale. Marketable securities are comprised of tax-exempt municipal bonds. Short-term marketable securities consist of investments with maturities less than or equal to one year. Long-term marketable securities consist of investments with original maturities greater than one year. As of June 30, 2004 and 2003, the carrying value of these securities approximated their fair value.
Fair value of financial instruments The carrying values of cash and equivalents, marketable securities, receivables and accounts payable approximates their estimated fair values.
F- 7
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies (Continued)
Concentration of credit risk Financial instruments, which principally subject the Company to concentration of credit risk, consist principally of cash and equivalents and marketable securities. The Company invests its cash through financial institutions. Such investments may be in excess of FDIC insurance limits. The Company has not experienced any losses on its deposits of cash and equivalents to date.
Inventories are stated at the lower of weighted average cost or market. Cost includes certain indirect purchasing, merchandise handling and storage costs.
Allowance for Doubtful Accounts
The changes in the allowance for doubtful accounts are summarized below (in thousands):
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2004 |
|
2003 |
|
2002 |
|
|||
Balance at beginning of year |
|
$ |
531 |
|
$ |
190 |
|
$ |
416 |
|
Charged to cost and expense |
|
629 |
|
384 |
|
235 |
|
|||
Deductions |
|
(528 |
) |
(43 |
) |
(461 |
) |
|||
Balance at end of year |
|
$ |
632 |
|
$ |
531 |
|
$ |
190 |
|
Property and equipment, net are stated at cost. Depreciation and amortization on property and equipment is computed using the straight-line method over the following estimated useful lives.
Description |
|
|
|
Years |
|
Buildings |
|
39.5 |
|
||
Leasehold improvements |
|
10 |
|
||
Furniture, fixtures, equipment and vehicles |
|
5 |
|
||
Computer hardware and software |
|
3 |
|
Leasing commissions associated with negotiating new store leases are capitalized in other assets and amortized over the lease term.
Impairment of long-lived assets The Company regularly reviews the carrying value of its long-lived assets . Whenever events or changes in circumstances indicate that the carrying amount of its assets might not be recoverable, the Company, using its best estimates based on reasonable and supportable assumptions and projections, has reviewed for impairment the carrying value of long-lived assets. Based on the review of certain underperforming stores, the Company recorded impairment charges of $120,000 and $265,000 in 2004 and 2003, respectively.
Deferred rent Many of the Companys operating leases contain predetermined fixed increases of the minimum rental rate during the initial lease term. For these leases, the Company recognizes the related rental expense on a straight-line basis and records the difference between the amount charged to expense and the rent paid as deferred rent.
Construction allowance The Company receives construction allowances from landlords, which are deferred and amortized on a straight-line basis over the life of the lease as a reduction of rent expense. Construction allowances are recorded under deferred rent on the balance sheet.
F- 8
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies (Continued)
Revenue recognition Net sales consist of all product sales, net of estimated returns. We record a reserve for estimated product returns based on historical return trends. At June 30, 2004 the reserve was $572,000 compared to $498,000 at June 30, 2003. If actual returns are greater that those projected, additional sales returns may be recorded in the future. Discounts offered to customers consist primarily of point of sale markdowns and coupons and are recorded at the time of the related sale as a reduction of revenue.
Gift certificates sold are carried as a liability and revenue is recognized when the gift certificate is redeemed. Similarly, customers may receive a store credit in exchange for returned goods. Store credits are carried as a liability until redeemed.
Store preopening costs associated with the opening or remodeling of stores, such as preopening rent and payroll, are expensed as incurred.
Apparel and accessory design activities are expensed as incurred.
Advertising costs are charged to expense when the advertising first takes place. Advertising costs were $12.6 million, $12.2 million and $10.7 million, respectively, during fiscal 2004, 2003 and 2002.
Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Companys financial statements or tax returns. In estimating future tax consequences, all expected future events then known to management are considered other than changes in the tax law or rates.
Stock based compensation The Company accounts for stock based awards to employees using the intrinsic value-based method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations, Statement of Financial Accounting Standards (SFAS) No. 123 Accounting for Stock-Based Compensation, and complies with the disclosure provisions of SFAS No. 148, Accounting for Stock Based Compensation Transition and Disclosure, an Amendment of FASB Statement No. 123..
F- 9
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies (Continued)
Had compensation expense been determined based on the fair value at the grant dates for awards under the Stock Plan and Stock Purchase Plan, consistent with the method of SFAS No. 123, the Companys net earnings, basic EPS and diluted EPS would have been reduced to the pro forma amounts indicated below:
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2004 |
|
2003 |
|
2002 |
|
|||
|
|
(Dollars in thousands, except
|
|
|||||||
As reported |
|
$ |
33,770 |
|
$ |
19,279 |
|
$ |
26,484 |
|
Add: Stock-based employee compensation expense included in reported net income, net of income tax |
|
86 |
|
16 |
|
|
|
|||
Deduct: Stock based employee compensation determined under the fair value method, net of income tax |
|
(3,744 |
) |
(2,191 |
) |
(2,785 |
) |
|||
Pro forma |
|
$ |
30,112 |
|
$ |
17,104 |
|
$ |
23,699 |
|
Basic EPS, as reported |
|
$ |
0.87 |
|
$ |
0.50 |
|
$ |
0.70 |
|
Basic EPS, pro forma |
|
$ |
0.78 |
|
$ |
0.44 |
|
$ |
0.62 |
|
Diluted EPS, as reported |
|
$ |
0.85 |
|
$ |
0.50 |
|
$ |
0.68 |
|
Diluted EPS, pro forma |
|
$ |
0.76 |
|
$ |
0.44 |
|
$ |
0.61 |
|
The fair value of each option grant was estimated on the date of the grant using the Black-Scholes valuation model with the following weighted-average assumptions:
|
|
Fiscal Year Ended June 30, |
|
||||||||||
|
|
2004 |
|
2003 |
|
2002 |
|
||||||
Expected dividend rate |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
|
0.00 |
% |
|
Volatility |
|
|
73 |
% |
|
|
60 |
% |
|
|
64 |
% |
|
Risk-free interest rate |
|
|
3.2 |
% |
|
|
2.2 |
% |
|
|
5.5 |
% |
|
Expected lives (years) |
|
|
5.3 |
|
|
|
5.4 |
|
|
|
5.3 |
|
|
Earnings per share Basic earnings per share (EPS) is computed as net earnings divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through the exercise of outstanding dilutive stock options.
The following is a reconciliation of the number of shares used in the basic and diluted earnings per share computations:
|
|
Fiscal Year Ended June 30, |
|
||||
|
|
2004 |
|
2003 |
|
2002 |
|
|
|
(in thousands) |
|
||||
Basic weighted average number of shares outstanding |
|
38,815 |
|
38,466 |
|
38,106 |
|
Incremental shares from assumed issuance of stock options |
|
916 |
|
387 |
|
840 |
|
Diluted weighted average number of shares outstanding |
|
39,731 |
|
38,853 |
|
38,946 |
|
F- 10
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. Summary of Significant Accounting Policies (Continued)
The number of incremental shares from the assumed issuance of stock options is calculated by applying the treasury stock method.
Excluded from the computation of the number of diluted weighted average shares outstanding were antidilutive options of 0.9 million, 1.8 million and 1.8 million for the fiscal years ended June 30, 2004, 2003 and 2002, respectively.
Comprehensive income consists of net income and other comprehensive income (income, expenses, gains and losses that bypass the income statement and are reported directly as a separate component of equity). The Companys comprehensive income equals net income plus foreign currency translation adjustments for all periods presented. Such components of comprehensive income are shown in the Consolidated Statements of Shareholders Equity.
Recent Accounting Pronouncements
In March 2004, the Emerging Issues Task Force (EITF) reached a consensus on Issue No. 03-1, The Meaning of Other-Than-Temporary Impairments and Its Application to Certain Investments (EITF 03-1). EITF 03-1 provides a three-step impairment model for determining whether an investment is other-than-temporarily impaired and requires the Company to recognize such impairments as an impairment loss equal to the difference between the investments cost and fair value at the reporting date. The guidance is effective for the Company during the first quarter of fiscal 2005. The Company does not believe that the adoption of EITF 03-1 will have a significant effect on its financial statements.
2. Inventories
The Companys inventories consist of:
|
|
As of June 30, |
|
||||
|
|
2004 |
|
2003 |
|
||
|
|
(Dollars in thousands) |
|
||||
Raw materials |
|
$ |
5,805 |
|
$ |
4,775 |
|
Merchandise available for sale |
|
19,733 |
|
20,647 |
|
||
Inventories |
|
$ |
25,538 |
|
$ |
25,422 |
|
3. Credit Facilities
The Company has an unsecured commercial line of credit agreement with a bank, which provides for borrowings and issuance of letters of credit of up to $10.0 million and expires on March 1, 2006. The outstanding balance bears interest at either the banks reference rate (which was 4.00% as of June 30, 2004 and 2003) or the LIBOR rate plus 1.75 percentage points. As of June 30, 2004 and 2003, there were no outstanding borrowings, and there was $5.1 million and $4.4 million, respectively, outstanding in letters of credit.
This credit facility requires the Company to comply with certain financial covenants, including a minimum tangible net worth and certain restrictions on making loans and investments.
F- 11
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Operating Leases
The Company leases its retail store locations, corporate headquarters, distribution center and certain office equipment and accounts for these leases as operating leases. Store leases typically provide for payment by the Company of certain operating expenses, real estate taxes and additional rent based on a percentage of net sales if a specified net sales target is exceeded. In addition, certain leases have escalation clauses and provide for terms of renewal and/or early termination based on the net sales volumes achieved.
Rent expense for the fiscal years ended June 30, 2004, 2003 and 2002 was $48.0 million, $44.5 million and $40.2 million, respectively. Rent expense includes percentage rent and other lease-required expenses for the years ended 2004, 2003 and 2002 of $15.9 million, $14.4 million, and $12.7 million, respectively.
Future minimum lease payments under operating leases at June 30, 2004 are as follows:
Fiscal year ending June 30 (in thousands), |
|
|
|
|
2005 |
|
$ |
33,805 |
|
2006 |
|
32,043 |
|
|
2007 |
|
30,926 |
|
|
2008 |
|
29,921 |
|
|
2009 |
|
27,322 |
|
|
Thereafter |
|
73,377 |
|
|
Total minimum lease payments |
|
$ |
227,394 |
|
5. Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
|
|
As of June 30, |
|
||||
|
|
2004 |
|
2003 |
|
||
Employee compensation |
|
$ |
8,161 |
|
$ |
3,137 |
|
Gift certificates and store credits |
|
4,683 |
|
4,547 |
|
||
Other |
|
4,334 |
|
2,858 |
|
||
Sales/use tax payable |
|
1,237 |
|
1,158 |
|
||
Income taxes payable |
|
1,238 |
|
|
|
||
Total |
|
$ |
19,653 |
|
$ |
11,700 |
|
F- 12
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Income Taxes
Significant components of the provision for income taxes are as follows:
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2004 |
|
2003 |
|
2002 |
|
|||
|
|
(Dollars in thousands) |
|
|||||||
Current: |
|
|
|
|
|
|
|
|||
Federal |
|
$ |
17,162 |
|
$ |
9,051 |
|
$ |
13,639 |
|
State |
|
3,457 |
|
1,848 |
|
3,869 |
|
|||
Foreign |
|
458 |
|
137 |
|
208 |
|
|||
|
|
21,077 |
|
11,036 |
|
17,716 |
|
|||
Deferred |
|
|
|
|
|
|
|
|||
Federal |
|
(28 |
) |
285 |
|
(1,278 |
) |
|||
State |
|
(156 |
) |
12 |
|
(328 |
) |
|||
Foreign |
|
6 |
|
227 |
|
28 |
|
|||
|
|
(178 |
) |
524 |
|
(1,578 |
) |
|||
Provision |
|
$ |
20,899 |
|
$ |
11,560 |
|
$ |
16,138 |
|
The components of earnings from continuing operations before income taxes are as follows:
|
|
Fiscal Year Ended June 30, |
|
|||||||
|
|
2004 |
|
2003 |
|
2002 |
|
|||
|
|
(Dollars in thousands) |
|
|||||||
United States |
|
$ |
53,427 |
|
$ |
30,360 |
|
$ |
42,471 |
|
Foreign |
|
1,242 |
|
479 |
|
151 |
|
|||
Total |
|
$ |
54,669 |
|
$ |
30,839 |
|
$ |
42,622 |
|
A reconciliation of the federal statutory tax rate with the Companys effective income tax rate is as follows:
|
|
Fiscal Year Ended June 30, |
|
||||||||||
|
|
2004 |
|
2003 |
|
2002 |
|
||||||
Federal statutory rate |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
|
35.0 |
% |
|
State rate, net of federal benefit |
|
|
3.9 |
|
|
|
3.9 |
|
|
|
5.4 |
|
|
Tax-exempt interest |
|
|
(0.9 |
) |
|
|
(2.0 |
) |
|
|
(1.5 |
) |
|
Other |
|
|
0.2 |
|
|
|
0.6 |
|
|
|
(1.0 |
) |
|
Effective tax rate |
|
|
38.2 |
% |
|
|
37.5 |
% |
|
|
37.9 |
% |
|
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes.
F- 13
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Income Taxes (Continued)
Significant components of the Companys deferred tax assets (liabilities) are as follows:
|
|
As of June 30, |
|
||||
|
|
2004 |
|
2003 |
|
||
|
|
(Dollars in thousands) |
|
||||
Current |
|
|
|
|
|
||
Gift certificates and store credits |
|
$ |
1,337 |
|
$ |
866 |
|
Inventory |
|
821 |
|
684 |
|
||
Accrued vacation |
|
700 |
|
594 |
|
||
State taxes |
|
405 |
|
(24 |
) |
||
Other accrued expenses |
|
935 |
|
68 |
|
||
Other |
|
768 |
|
1,038 |
|
||
Total Current |
|
4,966 |
|
3,226 |
|
||
Non-Current |
|
|
|
|
|
||
Basis difference in fixed assets |
|
992 |
|
1,208 |
|
||
Deferred rent |
|
1,604 |
|
1,833 |
|
||
Foreign tax credit |
|
706 |
|
350 |
|
||
Construction allowance |
|
(814 |
) |
|
|
||
Other |
|
(411 |
) |
(127 |
) |
||
Total Non-Current |
|
2,077 |
|
3,264 |
|
||
Valuation allowance |
|
(437 |
) |
(62 |
) |
||
Net deferred tax assets |
|
$ |
6,606 |
|
$ |
6,428 |
|
During the year ended June 30, 2004, the Company concluded the Internal Revenue Service examinations for the years ended June 30, 2003 and 2002 without a significant adjustment.
The Company has foreign tax credit carry forwards of approximately $706,000 which will expire at various dates from June 30, 2005 to June 30, 2009. Utilization of these credits is limited by the generation of foreign source income in future years. A valuation allowance of approximately $437,000 has been established related to these foreign tax credit carry forwards as the utilization of such amount is not assured.
F- 14
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Property and Equipment
Property and equipment consist of the following:
|
|
As of June 30, |
|
||||
|
|
2004 |
|
2003 |
|
||
|
|
(Dollars in thousands) |
|
||||
Leasehold improvements |
|
$ |
58,605 |
|
$ |
52,538 |
|
Furniture, fixtures, equipment and vehicles |
|
19,357 |
|
17,278 |
|
||
Computer hardware and software |
|
23,435 |
|
21,540 |
|
||
Assets under capital lease |
|
331 |
|
330 |
|
||
Land and buildings |
|
10,942 |
|
|
|
||
Construction in progress |
|
3,282 |
|
2,601 |
|
||
Total |
|
115,952 |
|
94,287 |
|
||
Less: accumulated depreciation and amortization |
|
(53,597 |
) |
(41,982 |
) |
||
Property and equipment, net |
|
$ |
62,355 |
|
$ |
52,305 |
|
Construction in progress consists primarily of construction costs related to facilities that will open subsequent to year end and information technology projects.
8. Employee Benefit Plan
Employees are eligible to participate in the Companys 401(k) plan if they have been employed by the Company for one year, have reached age 21, and work at least 1,000 hours annually. Generally, employees can defer up to 75% of their gross wages up to the maximum limit allowable under the Internal Revenue Code. The employer can make a discretionary matching contribution for the employee. Employer contributions to the plan for the years ended June 30, 2004, 2003 and 2002 were $137,000, $131,000, and $132,000, respectively.
9. Shareholders Equity
The Company is authorized to issue up to 1,000,000 shares of $0.001 par value preferred stock and to fix the rights, preferences, privileges and restrictions including voting rights, of these shares without any further vote or approval by the shareholders. No preferred stock has been issued to date.
The 1997 Stock Plan as amended (the Stock Plan) provides for the grant of incentive stock options, non-qualified stock options, stock purchase rights, stock awards and restricted stock units. Although the Stock Plan allows for stock options and related awards to be granted at prices below fair market value, the Company has historically granted such options at the fair market value of the stock on the date of grant. Stock options and related awards have a maximum term of ten years. Options granted vest over four years with 20% of the award vested in each of the first and second years, and 30% vested in each of the remaining two years. Restricted stock units awarded generally vest over a period of one year from the date of grant. The Company granted 5,820 and 12,798 restricted stock units to Directors under the Plan during fiscal 2004 and 2003, respectively. As of June 30, 2004, the Company has reserved 7,995,000 shares of common stock for issuance under the Stock Plan.
F- 15
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Shareholders Equity (Continued)
The following table summarizes information about stock options outstanding at June 30, 2004:
|
|
Options Outstanding |
|
Options Vested
|
|
||||||||||||||||||||
Exercise Prices |
|
|
|
Number (In
|
|
Weighted
|
|
Weighted
|
|
Number (In
|
|
Weighted
|
|
||||||||||||
$0.00 to $9.37 |
|
|
758 |
|
|
|
5.07 |
|
|
|
$ |
4.20 |
|
|
|
565 |
|
|
|
$ |
2.75 |
|
|
||
$9.40 to $14.67 |
|
|
751 |
|
|
|
8.37 |
|
|
|
11.91 |
|
|
|
148 |
|
|
|
11.79 |
|
|
||||
$14.69 to $18.05 |
|
|
930 |
|
|
|
9.27 |
|
|
|
16.85 |
|
|
|
82 |
|
|
|
16.26 |
|
|
||||
$18.30 to $19.33 |
|
|
174 |
|
|
|
8.73 |
|
|
|
19.11 |
|
|
|
43 |
|
|
|
19.09 |
|
|
||||
$19.43 to $19.43 |
|
|
1,424 |
|
|
|
9.64 |
|
|
|
19.43 |
|
|
|
3 |
|
|
|
19.43 |
|
|
||||
$19.46 to $21.93 |
|
|
460 |
|
|
|
8.34 |
|
|
|
21.16 |
|
|
|
154 |
|
|
|
20.40 |
|
|
||||
|
|
|
4,497 |
|
|
|
8.41 |
|
|
|
$ |
15.24 |
|
|
|
995 |
|
|
|
$ |
8.69 |
|
|
||
As of June 30, 2003 and 2002 there were approximately 1,162,000 and 874,000 options exercisable at weighted average exercise prices of $8.68 and $7.28, respectively.
The following table summarizes stock option activity:
|
|
Shares
|
|
Weighted
|
|
|||||
Balance June 30, 2001 |
|
|
2,985 |
|
|
|
$ |
8.50 |
|
|
Granted |
|
|
1,168 |
|
|
|
16.77 |
|
|
|
Exercised |
|
|
(610 |
) |
|
|
6.61 |
|
|
|
Cancelled |
|
|
(1,140 |
) |
|
|
12.13 |
|
|
|
Balance June 30, 2002 |
|
|
2,403 |
|
|
|
11.35 |
|
|
|
Granted |
|
|
1,491 |
|
|
|
10.50 |
|
|
|
Exercised |
|
|
(87 |
) |
|
|
6.69 |
|
|
|
Cancelled |
|
|
(835 |
) |
|
|
13.33 |
|
|
|
Balance June 30, 2003 |
|
|
2,972 |
|
|
|
10.49 |
|
|
|
Granted |
|
|
3,030 |
|
|
|
18.53 |
|
|
|
Exercised |
|
|
(676 |
) |
|
|
10.31 |
|
|
|
Cancelled |
|
|
(829 |
) |
|
|
13.79 |
|
|
|
Balance June 30, 2004 |
|
|
4,497 |
|
|
|
$ |
15.24 |
|
|
The weighted average fair value of options and awards granted during the fiscal year ended June 30, 2004, 2003, and 2002 was $11.78, $5.65 and $7.87, respectively. As of June 30, 2004 there were 330,812 shares available for future grant.
The 1998 Employee Stock Purchase Plan (the Plan) has a total of 1,125,000 shares of common stock reserved for issuance under the Plan. The Plan allows eligible employees to purchase our common stock in
F- 16
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. Shareholders Equity (Continued)
an amount, which may not exceed 10% of the employees compensation. The Plan is implemented in sequential 24-month offerings. Each offering is generally comprised of eight, three-month purchase periods, with shares purchased on the last day of each purchase period (a Purchase Date). The price at which stock may be purchased is equal to 85% of the lower of fair market value of our common stock on the first and last day of the offering period or the Purchase Date. Under the Purchase plan in the years ended June 30, 2004, 2003 and 2002 there were 12,029, 19,488 and 25,362 shares issued, respectively.
10. Litigation
As of the date of this filing, the Company is involved in several ongoing legal proceedings as described below.
Three former employees sued bebe on November 20, 2003, in the Superior Court of the State of California, County of San Mateo (case No. CIV435794) alleging that they were misclassified as exempt employees under California law. The plaintiffs purport to bring this action on behalf of a class of former and present California bebe store managers and co-managers. Plaintiffs are seeking compensatory, statutory and injunctive relief.
A former employee sued bebe on January 20, 2004 in the Superior Court of the State of California, County of San Diego (case No. GIC824505) alleging unpaid wages and unfair business practices. The plaintiff purports to bring the action on behalf of a class of California employees who hold or have held the position of co-manager or others similarly designated. The lawsuit seeks compensatory, statutory and injunctive relief.
On February 23, 2004, The Wet Seal, Inc. filed a lawsuit in the Superior Court of the State of California, County of Orange against bebe and its current Chief Executive Officer, Greg Scott, who previously was employed as President of The Wet Seals Arden B. division until January 7, 2004. The lawsuit asserts causes of action against Scott and/or bebe for (1) specific performance of contract; (2) intentional interference with contract; (3) misappropriation of trade secrets; and (4) unfair competition. On or about May 19, 2004, the court entered The Wet Seal, Inc.s dismissal of this lawsuit. At this time, the Company is seeking to recover its court costs and attorney fees.
A former employee sued bebe on August 2, 2004 in the Superior Court of the State of California, County of Sacramento (case No. 04AS03109) alleging unlawful failure to pay wages and unfair competition. The plaintiff purports to bring the action on behalf of a class of California employees who hold or at anytime within the past four years have held a salaried store management position. The lawsuit seeks compensatory, statutory and injunctive relief.
Although the Company intends to defend itself vigorously against these claims, the Company has accrued liabilities for estimated settlement costs that management believes are reasonable. Although the final resolution of these matters may be greater than the Companys recorded liability, management does not believe the ultimate resolution will have a material adverse effect on the Companys business, financial condition or results of operations.
F- 17
bebe stores, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. Litigation (Continued)
In addition to the above, the Company is also involved in various other legal proceedings arising in the normal course of business. None of these matters are expected, individually or in the aggregate, to have a material adverse effect on the Companys business, financial condition or results of operations.
11. Quarterly Financial Information (Unaudited)
The quarterly financial information presented below reflects all adjustments which, in the opinion of the Companys management, are of a normal and recurring nature necessary to present fairly the results of operations for the periods presented.
|
|
2004 Quarter Ended |
|
||||||||||
|
|
Sept. 30 |
|
Dec. 31 |
|
March 31 |
|
June 30 |
|
||||
|
|
(in thousands) |
|
||||||||||
Net sales |
|
$ |
83,552 |
|
$ |
112,014 |
|
$ |
83,637 |
|
$ |
93,054 |
|
Gross profit |
|
38,500 |
|
54,052 |
|
38,713 |
|
43,723 |
|
||||
Selling, general and administrative expenses |
|
29,292 |
|
32,327 |
|
30,485 |
|
30,174 |
|
||||
Income from operations |
|
9,208 |
|
21,725 |
|
8,228 |
|
13,549 |
|
||||
Earnings before income taxes |
|
9,669 |
|
22,222 |
|
8,752 |
|
14,026 |
|
||||
Net earnings |
|
6,043 |
|
13,889 |
|
5,464 |
|
8,374 |
|
||||
Basic earnings per share |
|
$ |
0.16 |
|
$ |
0.36 |
|
$ |
0.14 |
|
$ |
0.21 |
|
Diluted earnings per share |
|
$ |
0.15 |
|
$ |
0.35 |
|
$ |
0.14 |
|
$ |
0.21 |
|
|
|
2003 Quarter Ended |
|
||||||||||
|
|
Sept. 30 |
|
Dec. 31 |
|
March 31 |
|
June 30 |
|
||||
|
|
(in thousands) |
|
||||||||||
Net sales |
|
$ |
73,842 |
|
$ |
100,823 |
|
$ |
68,772 |
|
$ |
80,112 |
|
Gross profit |
|
33,692 |
|
48,420 |
|
28,933 |
|
33,446 |
|
||||
Selling, general and administrative expenses |
|
26,026 |
|
31,730 |
|
29,258 |
|
28,837 |
|
||||
Income from operations |
|
7,666 |
|
16,690 |
|
(325 |
) |
4,609 |
|
||||
Earnings before income taxes |
|
8,149 |
|
17,252 |
|
227 |
|
5,211 |
|
||||
Net earnings |
|
5,095 |
|
10,791 |
|
142 |
|
3,251 |
|
||||
Basic earnings per share |
|
$ |
0.13 |
|
$ |
0.28 |
|
$ |
0.00 |
|
$ |
0.08 |
|
Diluted earnings per share |
|
$ |
0.13 |
|
$ |
0.28 |
|
$ |
0.00 |
|
$ |
0.08 |
|
12. Subsequent Event
On August 12, 2004 our Board of Directors approved an annual cash dividend of $0.20 per common share on our common stock. The first quarterly dividend of $0.05 per share is payable September 30, 2004 to stockholders of record on September 9, 2004.
F- 18
EXHIBIT
|
|
|
DESCRIPTION OF DOCUMENT |
3.1 |
|
Amended and Restated Articles of Incorporation of Registrant. |
|
3.2 |
|
Amended and Restated Bylaws of Registrant. |
|
4.1* |
|
Specimen certificate representing the Common Stock (in standard printer form, not provided). |
|
10.1 |
|
1997 Stock Plan. |
|
10.2* |
|
1998 Stock Purchase Plan. |
|
10.3* |
|
Form of Indemnification Agreement. |
|
10.6** |
|
Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc., (lease for additional building to house administrative departments in Brisbane, California). |
|
10.8*** |
|
Form of Retail Store License Agreement between Registrant and [company]. |
|
10.9**** |
|
Amendment No. 1 to Lease Agreement (amendment to Standard Industrial/Commercial-Tenant Lease-Net dated November 30, 1998 between Registrant and Far Western Land and Investment Company, Inc.) |
|
10.10***** |
|
Lease Agreement dated October 24, 2000, as amended, between Registrant and Lincoln PO Benicia Limited Partnership. |
|
10.11***** |
|
Lease Agreement dated November 3, 2000, as amended, between Registrant and Stanley Hirsh and Anita Hirsh as trustees, D/B/A Mercantile Center. |
|
10.12***** |
|
Form of Restricted Stock Units Agreement |
|
10.17 |
|
Standard Offer, Agreement and Escrow Instructions for Purchase of Real Estate dated January 20, 2004 by and among bebe stores, inc. and 10345 Olympic LLC. |
|
14.1 |
|
Code of Business Conduct and Ethics. |
|
21.1 |
|
Subsidiaries of Registrant. |
|
23.1 |
|
Report of Independent Registered Public Accounting Firm. |
|
24.1 |
|
Power of Attorney (see signature page). |
|
31.1 |
|
Section 302 Certification of Chief Executive Officer. |
|
31.2 |
|
Section 302 Certification of Chief Financial Officer. |
|
32.1 |
|
Section 906 Certification of Chief Executive Officer. |
|
32.2 |
|
Section 906 Certification of Chief Financial Officer. |
* Incorporated by reference from exhibits of the same number in Registrants Registration Statement on Form S-1 (Reg. No. 333-50333), effective June 16, 1998.
** Incorporated by reference from exhibits of the same number in Registrants Quarterly Report on Form 10-Q filed on February 16, 1999.
*** Incorporated by reference from exhibits of the same number in Registrants Annual Report on Form 10-K filed on September 28, 1999.
**** Incorporated by reference from exhibits of the same number in Registrants Annual Report on Form 10-K filed on September 28, 2000.
***** Incorporated by reference from exhibits of the same number in Registrants Annual Report on Form 10-K filed on September 29, 2003.
Exhibit 3.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BEBE STORES, INC.
Manny Mashouf and Craig Walsey certify that:
1. They are the duly elected and acting Chairman of the Board and Secretary, respectively, of bebe stores, inc., a California corporation (the Corporation ).
2. The Articles of Incorporation of this Corporation, as amended to the date of the filing of this certificate, are amended and restated to read in full as follows:
I.
The name of this Corporation is: bebe stores, inc.
II.
The purpose of this Corporation is to engage in any lawful act or activity for which a corporation may be organized under the California General Corporation Law (CGCL) other then the banking business, the trust company business, or the practice of a profession permitted to be incorporated by the California Corporation Code.
III.
This Corporation is authorized to issue two classes of shares, designated Common Stock with a par value of $0.001 per share and Preferred Stock with a par value of $0.001 per share. The total number of shares which this Corporation is authorized to issue is 61,000,000. The number of shares of Preferred Stock which this Corporation is authorized to issue is 1,000,000. The number of shares of Common Stock which this Corporation is authorized to issue is 60,000,000. Upon the filing of these Second Amended and Restated Articles of Incorporation, each outstanding share of Common Stock shall, without any further action on the part of the Corporation, be split up and converted into 1.5 fully paid and validly issued shares of Common Stock.
The Preferred Stock authorized by these Articles of Incorporation may be issued in one or more series. The Board of Directors of the Corporation is authorized to determine or alter the rights, preferences, privileges and restrictions granted or imposed upon any wholly unissued series of Preferred Stock, and within the limitations or restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series, to determine the designation and par value of any series and to fix the numbers of shares of any series.
IV.
(a) The liability of the directors of this Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law.
(b) This Corporation is authorized to provide, whether by bylaw, agreement or otherwise, for the indemnification of agents (as defined in Section 317 of the CGCL) of this Corporation in excess of that expressly permitted for those agents by Section 317 of the CGCL, for breach of duty to this Corporation and its shareholders to the extent permissible under California law (as now or hereafter in effect). In furtherance and not in limitation of the powers conferred by statute:
(i) this Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of this Corporation, or is serving at the request of this Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (each an Indemnifies
Party), against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not this Corporation would have the power to indemnify against such liability under the provisions of law; and
(ii) this Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification, to the fullest extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere.
No such agreement or other form of indemnification shall be interpreted as
limiting in any manner the rights which such agents would have to indemnification in the absence of such bylaw, agreement or other form of indemnification.
(c) Any repeal or modification of the foregoing provisions of this Article IV by the shareholders of this Corporation shall not adversely affect any right or protection of a current or former Indemnified party existing at the time of such repeal of modification
V.
Cumulative voting for the election of directors of the Corporation shall be eliminated effective upon the date when the Corporation becomes, and for as long as the Corporation is, a listed corporation within the meaning of Section 301.5 of the CGCL.
3. The foregoing Second Amended and Restated Articles of Incorporation have been duly approved by the Board of Directors of the Corporation.
4. The Corporation has only one class of shares outstanding. There are no shares of Preferred Stock outstanding.
5. In accordance with Section 902(c) of the CGCL, no vote of shareholders is required to approve the foregoing Second Amended and Restated Article of Incorporation.
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Each of the undersigned certify under penalty of perjury under the laws of the State of California that they have read the foregoing Second Amended and Restated Articles of Incorporation and knows the contents thereof, and that the statements therein are true.
Executed in Brisbane, California, on May 4, 2004.
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/s/ Manny Mashouf |
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Manny Mashouf, Chairman of the Board |
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/s/ Craig Walsey |
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Craig Walsey, Secretary |
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
bebe stores, inc.
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8.3 Indemnification of Employees and Agents of the Corporation |
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AMENDED AND RESTATED BYLAWS
OF
bebe stores, inc.
SECTION 1.1 PRINCIPAL EXECUTIVE OFFICE .
The principal executive office for the transaction of the business of bebe stores, inc. (the Corporation) is hereby fixed and located at 380 Valley Drive, Brisbane, California 94005, County of San Mateo, State of California. The Board of Directors is hereby granted full power and authority to change said principal office from one location to another.
SECTION 1.2 OTHER OFFICES .
Branch or subordinate offices may at any time be established by the Board of Directors at any place or places where the corporation is qualified to do business.
SECTION 2.1 ANNUAL MEETING.
An annual meeting of the shareholders, for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, on such date and at such time as the Board shall each year fix, which date shall be within thirteen months of the last annual meeting of shareholders.
SECTION 2.2 SPECIAL MEETING.
Special meetings of the shareholders may be called at any time by the Board of Directors, the Chairman of the Board, the President, or by the holders of shares entitled to cast not less than ten percent (10%) of the votes at the meeting. Notice of such special meeting shall be given in the same manner as for the annual meeting of shareholders.
SECTION 2.3 NOTICE OF MEETINGS .
Written notice of the place, date and time of all meetings of the shareholders shall be given, not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each shareholder entitled to vote at such meeting, and to each shareholder not
entitled to vote who is entitled by statute to notice, except as otherwise provided herein or required by law (meaning, here and hereinafter, as required from time to time by the California General Corporation Law or the Articles of Incorporation (the Articles) of the corporation). In the case of a special meeting, such notice shall include the purpose or purposes for which the meeting is called. Notice shall be given either by mail or by presenting it to the shareholder personally or by leaving it at his residence or usual place of business. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his post-office address as it appears on the records of the corporation, with postage thereon prepaid.
SECTION 2.4 LIMITATION ON BUSINESS AT SPECIAL M EETINGS.
Business transacted at any special meeting of shareholders shall be limited to the purposes stated in the notice.
SECTION 2.5 QUORUM .
At any meeting of the shareholders, the holders of a majority of all the issued and outstanding shares of the capital stock of the corporation entitled to vote at the meeting, present in person or represented by proxy, shall constitute a quorum for the transaction of business at such meeting, unless or to the extent that the presence of a larger number may be required by the Articles or by law. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting to another place, date or time.
SECTION 2.6 VOTING AND PROXIES .
A majority of the votes cast at a meeting of shareholders, duly called and at which a quorum is present, shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless more than a majority of the votes cast is required by statute, by these Bylaws or by the Articles. Unless otherwise provided by statute or in the Articles, each shareholder shall, at every meeting of the shareholders, be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such shareholder, but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.
At any meeting of the shareholders, every shareholder entitled to vote may vote in person or by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting. No shareholder may authorize more than one proxy for his shares.
SECTION 2.7 INSPECTORS OF ELECTION .
The Board or, if the Board shall not have made the appointment, the chairman presiding at any meeting of shareholders, shall have power to appoint one or more persons to act as
inspectors of election at the meeting or any adjournment thereof, but no candidate for the office of director shall be appointed as an inspector at any meeting for the election of directors.
SECTION 2.8 CONDUCT OF THE SHAREHOLDERS MEETIN G.
At every meeting of the shareholders, the Chairman, if there is such an officer, or if not, the President of the corporation, or in his absence the Vice President designated by the President, or in the absence of such designation any Vice President, or in the absence of the President or any Vice President, a chairman chosen by the majority of the voting shares represented in person or by proxy, shall act as Chairman. The Secretary of the corporation or a person designated by the Chairman shall act as Secretary of the meeting. Unless otherwise approved by the Chairman, attendance at the shareholders meeting is restricted to shareholders of record, persons authorized in accordance with Section 2.6 of these Bylaws to act by proxy and officers of the corporation.
SECTION 2.9 CONDUCT OF BUSINESS .
The Chairman shall call the meeting to order, establish the agenda and conduct the business of the meeting in accordance therewith or, at the Chairmans discretion, it may be conducted otherwise in accordance with the wishes of the shareholders in attendance. The date and time of the opening and closing of the polls for each matter upon which the shareholders will vote at the meeting shall be announced at the meeting.
The Chairman shall also conduct the meeting in an orderly manner, rule on the precedence of and procedure on, motions and other procedural matters, and exercise discretion with respect to such procedural matters with fairness and good faith toward all those entitled to take part. The Chairman may impose reasonable limits on the amount of time taken up at the meeting on discussion in general or on remarks by any one shareholder. Should any person in attendance become unruly or obstruct the meeting proceedings, the Chairman shall have the power to have such person removed from participation. Notwithstanding anything in the Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 2.9 and Section 2.10, below. The Chairman of a meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section 0 and Section 0, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
SECTION 2.10 NOTICE OF SHAREHOLDER BUSINESS .
At an annual or special meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) properly brought before the meeting by or at the direction of the Board of Directors, (c) properly brought before an annual meeting by a shareholder or (d) properly brought before a special meeting by a shareholder, but if, and only if, the notice of a special meeting provides for business to be brought before the meeting by shareholders. For business to be properly brought before a meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the Secretary of the corporation. To be timely, a shareholder proposal to be presented at an annual meeting shall be received at the corporations principal executive offices not less than 120 calendar days in advance of the date that the corporations (or the corporations predecessors) proxy statement was released to shareholders in connection with the previous years annual meeting of shareholders, except that if no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 calendar days from the date contemplated at the time of the previous years proxy statement, or in the event of a special meeting, notice by the shareholder to be timely must be received not later than the close of business on the tenth day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A shareholders notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual or special meeting (a) a brief description of the business desired to be brought before the annual or special meeting and the reasons for conducting such business at the special meeting, (b) the name and address, as they appear on the corporations books, of the shareholder proposing such business, (c) the class and number of shares of the corporation which are beneficially owned by the shareholder and (d) any material interest of the shareholder in such business.
SECTION 2.11 ACTION WITHOUT MEETING .
An action which may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the actions so taken, is signed by the holders of outstanding shares having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. All such consents shall be filed with the Secretary of the Corporation and shall be maintained in the corporate records. Prompt notice of the taking of a corporate action without a meeting by less than unanimous written consent shall be given to those shareholders who have not consented in writing.
SECTION 2.12 STOCK LIST .
A complete list of shareholders entitled to vote at any meeting of shareholders, arranged in alphabetical order for each class of stock and showing the address of each such shareholder and the number of shares registered in his name, shall be open to the examination of any such shareholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such shareholder who is present. This list shall presumptively determine the identity of the shareholders entitled to vote at the meeting and the number of shares held by each of them.
SECTION 3.1 POWERS .
Subject to the limitations stated in the Articles of Incorporation, these Bylaws, and the California General Corporation Law as to actions which shall be approved by the shareholders or by the affirmative vote of a majority of the outstanding shares entitled to vote, and subject to the duties of Directors as prescribed by the California General Corporation Law, all corporate powers shall be exercised by, or under the direction of, and the business and affairs of the corporation shall be managed by, the Board of Directors.
SECTION 3.2 NUMBER OF DIRECTORS .
The authorized number of Directors of the corporation shall not be less than five (5), nor more than nine (9), with the exact number of Directors to be fixed from time to time within such limit by a duly adopted resolution of the Board of Directors or the Shareholders. The exact number of Directors shall be six (6) until changed within the limits specified above by a duly adopted resolution of the Board of Directors or Shareholders.
SECTION 3.3 ELECTION AND TERM OF OFFICE .
The Directors shall be elected at each annual meeting of shareholders, but if any such annual meeting is not held, or the Directors are not elected thereat, the Directors may be elected at any special meeting of the shareholders held for that purpose. All Directors shall hold office until the expiration of the term for which elected and until their respective successors are elected, except in the case of the death, resignation or removal of any Director. A Director need not be a shareholder.
SECTION 3.4 RESIGNATION .
Any Director may resign effective upon giving written notice to the Chairman of the Board, the President, the Secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.
SECTION 3.5 REMOVAL .
The entire Board of Directors or any individual Director may be removed from office, prior to the expiration of their or his term of office only in the manner and within the limitations provided by the California General Corporation Law.
No reduction of the authorized number of Directors shall have the effect of removing any Director prior to the expiration of such Directors term of office.
SECTION 3.6 VACANCIES .
A vacancy in the Board of Directors shall be deemed to exist in case of the death, resignation or removal of any Director, or if the authorized number of Directors be increased, or if the shareholders fail at any annual or special meeting of shareholders at which any Director or Directors are elected to elect the full authorized number of Directors to be voted for at that meeting.
Vacancies in the Board of Directors may be filled by a majority of the Directors then in office, whether or not less than a quorum, or by a sole remaining Director. Each Director so elected shall hold office until the expiration of the term for which he was elected and until his successor is elected at an annual or a special meeting of the shareholders, or until his death, resignation or removal.
The shareholders may elect a Director or Directors at any time to fill any vacancy or vacancies not filled by the Directors. Any such election by written consent other than to fill a vacancy created by removal requires the consent of a majority of the outstanding shares entitled to vote. A Director may not be elected by written consent to fill a vacancy created by removal except by unanimous written consent of all shares entitled to vote for the election of directors.
SECTION 3.7 ORGANIZATION MEETING .
Immediately after each annual meeting of shareholders, the Board of Directors shall hold a regular meeting for the purpose of organization, the election of officers and the transaction of other business. No notice of such meeting need be given.
SECTION 3.8 OTHER REGULAR MEETINGS .
The Board of Directors may provide by resolution the time and place for the holding of regular meetings of the Board; provided, however, that if the date so designated falls upon a legal holiday, then the meeting shall be held at the same time and place on the next succeeding day which is not a legal holiday. No notice of such regular meetings of the Board need be given.
SECTION 3.9 CALLING MEETINGS .
Meetings of the Board of Directors for any purpose or purposes shall be held whenever called by the Chairman of the Board, the President or the Secretary or any two Directors of the corporation.
SECTION 3.10 PLACE OF MEETINGS .
Meetings of the Board of Directors shall be held at any place within or without the State of California which may be designated in the notice of the meeting, or, if not stated in the notice or there is no notice, designated by resolution of the Board. In the absence of such designation, meetings of the Board of Directors shall be held at the principal executive office of the corporation.
SECTION 3.11 TELEPHONIC MEETINGS .
Members of the Board may participate in a regular or special meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Participation in a meeting pursuant to this Section 3.11 constitutes presence in person at such meeting.
SECTION 3.12 NOTICE OF SPECIAL MEETINGS .
Written notice of the time and place of special meetings of the Board of Directors shall be delivered personally to each Director, or sent to each Director by mail, telephone or telegraph. In case such notice is sent by mail, it shall be deposited in the United States mail at least four (4) days prior to the time of the holding of the meeting. In case such notice is delivered personally, or by telephone or telegraph, it shall be so delivered at least forty-eight (48) hours prior to the time of the holding of the meeting. Such notice may be given by the Secretary of the corporation or by the persons who called said meeting. Such notice need not specify the purpose of the meeting, and notice shall not be necessary if appropriate waivers, consents and/or approvals are filed in accordance with Section 3.13 of these Bylaws.
SECTION 3.13 WAIVER OF NOTICE .
Notice of a meeting need not be given to any Director who signs a waiver of notice, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Director.
The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
SECTION 3.14 ACTION WITHOUT MEETING .
Any action required or permitted to be taken by the Board of Directors may be taken without a meeting, if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such Directors.
SECTION 3.15 QUORUM .
A majority of the authorized number of Directors shall constitute a quorum for the transaction of business. Every act or decision done or made by a majority of the Directors present at a meeting duly held at which a quorum is present shall be the act of the Board of Directors, unless the Articles of Incorporation, or the California General Corporation Law, specifically requires a greater number. In the absence of a quorum at any meeting of the Board of Directors, a majority
of the Directors present may adjourn the meeting as provided in Section 3.16 of these Bylaws. A meeting at which a quorum is initially present may continue to transact business, notwithstanding the withdrawal of enough Directors to leave less than a quorum, if any action taken is approved by at least a majority of the required quorum for such meeting.
SECTION 3.16 ADJOURNMENT .
Any meeting of the Board of Directors, whether or not a quorum is present, may be adjourned to another time and place by the vote of a majority of the Directors present. Notice of the time and place of the adjourned meeting need not be given to absent Directors if said time and place are fixed at the meeting adjourned.
SECTION 3.17 INSPECTION RIGHTS .
Every Director shall have the absolute right at any time to inspect, copy and make extra copies of, in person or by agent or attorney, all books, records and documents of every kind and to inspect the physical properties of the corporation.
SECTION 3.18 FEES AND COMPENSATION .
Directors shall not receive any stated salary for their services as directors, but, by resolution of the Board, a fixed fee, with or without expenses of attendance, may be allowed for attendance at each meeting. Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, employee or otherwise, and receiving compensation therefor.
SECTION 3.19 LOANS TO OFFICERS .
The corporation may not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any member of the Board of Directors or any executive officer (or equivalent thereof) of the corporation.
EXECUTIVE COMMITTEE AND OTHER COMMITTEES
SECTION 4.1 EXECUTIVE COMMITTEE .
The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, appoint an executive committee, consisting of two or more Directors. The Board may designate one or more Directors as an alternate member of such committee, who may replace any absent member of any meeting of the committee. The executive committee, subject to any limitations imposed by the California General Corporation Law, or by resolution adopted by the affirmative vote of a majority of the authorized number of Directors, or imposed by the Articles
of Incorporation or by these Bylaws, shall have and may exercise all of the powers of the Board of Directors.
SECTION 4.2 OTHER COMMITTEES .
The Board of Directors may, by resolution adopted by a majority of the authorized number of Directors, designate such other committees, each consisting of 2 or more Directors, as it may from time to time deem advisable to perform such general or special duties as may from time to time be delegated to any such committee by the Board of Directors, subject to the limitations contained in the California General Corporation Law, or imposed by the Articles of Incorporation or by these Bylaws. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent member at any meeting of the committee.
SECTION 4.3 MINUTES AND REPORTS .
Each committee shall keep regular minutes of its proceedings, which shall be filed with the Secretary. All action by any committee shall be reported to the Board of Directors at the next meeting thereof, and, insofar as rights of third parties shall not be affected thereby, shall be subject to revision and alteration by the Board of Directors.
SECTION 4.4 MEETINGS .
Except as otherwise provided in these Bylaws or by resolution of the Board of Directors, each committee shall adopt its own rules governing the time and place of holding and the method of calling its meetings and the conduct of its proceedings and shall meet as provided by such rules, and it shall also meet at the call of any member of the committee. Unless otherwise provided by such rules or by resolution of the Board of Directors, committee meetings shall be governed by Sections 3.11, 3.12 and 3.13 of these Bylaws.
SECTION 4.5 TERM OF OFFICE OF COMMITTEE MEMBERS .
The term of office of any committee member shall be as provided in the resolution of the Board of Directors designating him but shall not exceed his term as a Director. Any member of a committee may be removed at any time by resolution adopted by Directors holding a majority of the directorships, either present at a meeting of the Board or by written approval thereof.
SECTION 5.1 OFFICERS .
The officers of the corporation shall be a President, a Vice President, a Secretary and a Treasurer, who shall be the Chief Financial Officer of the corporation. The corporation may also have, at the discretion of the Board of Directors, a Chairman of the Board, a Vice Chairman of
the Board, one or more additional Vice Presidents, one or more Assistant Treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3. One person may hold two or more offices.
SECTION 5.2 ELECTION .
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 and 5.5, shall be chosen annually by the Board of Directors and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified.
SECTION 5.3 SUBORDINATE OFFICERS, ETC.
The Board of Directors may appoint such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in these Bylaws or as the Board of Directors may from time to time determine.
SECTION 5.4 REMOVAL AND RESIGNATION .
Any officer may be removed, either with or without cause, by a majority of the Directors at the time in office, at any regular or special meeting of the Board, or, except in case of an officer chosen by the Board of Directors, by an officer upon whom such power of removal may be conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 5.5 VACANCIES .
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office.
SECTION 5.6 CHAIRMAN OF THE BOARD .
The Chairman of the Board, if there shall be such an officer, shall, if present, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws.
SECTION 5.7 VICE CHAIRMAN OF THE BOARD .
The Vice Chairman of the Board, if there shall be such an officer, shall, in the absence of the Chairman of the Board, preside at all meetings of the Board of Directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors or prescribed by these Bylaws.
SECTION 5.8 PRESIDENT .
Subject to such supervisory powers, if any, as may be given by the Board of Directors to the Chairman of the Board, if there be such an officer, the President shall be the general manager and chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders. He shall be ex officio a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or by these Bylaws.
SECTION 5.9 VICE PRESIDENT .
In the absence or disability of the President, the Vice Presidents in order of their rank as fixed by the Board of Directors, or if not ranked, the Vice President designated by the Board of Directors, shall perform the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors or these Bylaws.
SECTION 5.10 SECRETARY .
The Secretary shall keep, or cause to be kept, a book of minutes in written form of the proceedings of the Board of Directors, committees of the Board, and shareholders. Such minutes shall include all waivers of notice, consents to the holding of meetings, or approvals of the minutes of meetings executed pursuant to these Bylaws or the California General Corporation Law. The Secretary shall keep, or cause to be kept at the principal executive office or at the office of the corporations transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each.
The Secretary shall give or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by these Bylaws or by law to be given, and shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these Bylaws.
SECTION 5.11 TREASURER AND CHIEF FINANCIAL OFFI CER.
The Treasurer and Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of account in written form or any other form capable of being converted into written form.
The Treasurer and Chief Financial Officer shall deposit all monies and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the Board of Directors. He shall disburse all funds of the corporation as may be ordered by the Board of Directors, shall render to the President and Directors, whenever they request it, an account of all of his transactions as Treasurer and Chief Financial Officer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.
SECTION 5.12 ASSISTANT SECRETARY .
The Assistant Secretary shall have all the powers, and perform all the duties of, the Secretary in the absence or inability of the Secretary to act.
SECTION 5.13 COMPENSATION .
The compensation of the officers shall be fixed from time to time by the Board of Directors, and no officer shall be prevented from receiving such compensation by reason of the fact that he is also a Director of the corporation.
SECTION 6.1 RECORD DATE .
The Board of Directors may fix, in advance, a time in the future as the record date for the determination of shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action. Shareholders on the record date are entitled to notice and to vote or receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares in the books of the corporation after the record date, except as otherwise provided by law. Said record date shall not be more than sixty (60) or less than ten (10) days prior to the date of such meeting, nor more than sixty (60) days prior to any other action. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the Board fixes a new record date for the adjourned meeting, but the Board shall fix a new record date if the meeting is adjourned for more than forty-five (45) days from the date set for the original meeting.
If no record date is fixed by the Board of Directors, the record date shall be fixed pursuant to the California General Corporation Law.
SECTION 6.2 INSPECTION OF CORPORATE RECORDS .
The accounting books and records, and minutes of proceedings of the shareholders and the Board of Directors and committees of the Board shall be open to inspection upon written demand made upon the corporation by any shareholder or the holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to his interest as a shareholder, or as the holder of such voting trust certificate. The record of shareholders shall also be open to inspection by any shareholder or holder of a voting trust certificate at any time during usual business hours upon written demand on the corporation, for a purpose reasonably related to such holders interest as a shareholder or holder of a voting trust certificate. Such inspection may be made in person or by an agent or attorney, and shall include the right to copy and to make extracts.
SECTION 6.3 EXECUTION OF CORPORATE INSTRUMENTS .
The Board of Directors may, in its discretion, determine the method and designate the statutory officer or officers, or other person or persons, to execute any corporate instrument or document, or to sign the corporate name without limitation, except where otherwise provided by law, and such execution or signature shall be binding upon the corporation. Unless otherwise specifically determined by the Board of Directors, formal contracts of the corporation, promissory notes, mortgages, evidences of indebtedness, conveyances or other instruments in writing, and any assignment or endorsement thereof, executed or entered into between the corporation and any person, may be signed by the Chairman of the Board, the President, any Vice President, the Secretary or the Treasurer of the corporation.
SECTION 6.4 RATIFICATION BY SHAREHOLDERS .
The Board of Directors may, subject to applicable notice requirements, in its discretion, submit any contract or act for approval or ratification of the shareholders at any annual meeting of shareholders, or at any special meeting of shareholders called for that purpose; and any contract or act which shall be approved or ratified by the affirmative vote of a majority of the shares entitled to vote represented at a duly held meeting at which a quorum is present, or by the written consent of shareholders, shall be as valid and binding upon the corporation and upon the shareholders thereof as though approved or ratified by each and every shareholder of the corporation, unless a greater vote is required by law for such purpose.
SECTION 6.5 REPRESENTATION OF SHARES OF OTHER C ORPORATIONS.
The President and Vice President of this corporation are authorized to vote, represent and exercise on behalf of the corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation and any other corporation or corporations may be exercised either by such officers in person or by any person authorized so to do by proxy or power of attorney and duly executed by said officers.
SECTION 6.6 INSPECTION OF BYLAWS .
The corporation shall keep in its principal executive office in this State the original or a copy of the Bylaws as amended or otherwise altered to date, which shall be open to inspection by the shareholders at all reasonable times during office hours.
SECTION 6.7 FACSIMILE SIGNATURES .
In addition to the provisions for use of facsimile signatures elsewhere specifically authorized in these Bylaws, facsimile signatures of any officer or officers of the Corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.
SECTION 7.1 FORM OF CERTIFICATES .
Certificates for shares of stock of the corporation shall be in such form and design as the Board of Directors shall determine and shall be signed in the name of the corporation by the Chairman of the Board, or the President or Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or any Assistant Secretary. Each certificate shall state the certificate number, the date of issuance, the number, class or series and the name of the record holder of the shares represented thereby, the name of the corporation, and, if the shares of the corporation are classified or if any class of shares has two or more series, there shall appear the statement required by the California General Corporation Law.
SECTION 7.2 TRANSFER OF SHARES .
Transfers of stock shall be made only upon the transfer books of the Corporation kept at an office of the Corporation or by transfer agents designated to transfer shares of the stock of the Corporation. Except where a certificate is issued in accordance with Section 7.3 of these Bylaws, an outstanding certificate for the number of shares involved shall be surrendered for cancellation before a new certificate is issued therefor.
SECTION 7.3 LOST CERTIFICATES .
The Board of Directors may order a new certificate for shares of stock to be issued in the place of any certificate alleged to have been lost, stolen or destroyed, but in every such case, the owner or the legal representative of the owner of the lost, stolen or destroyed certificates may be required to give the corporation a bond (or other adequate security) in such form and amount as the Board may deem sufficient to indemnify it against any claim that may be made against the corporation (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or issuance of such new certificate.
SECTION 8.1 INDEMNIFICATION BY CORPORATION .
Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (Proceeding), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, or was a director, officer, employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, whether the basis of such Proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the California General Corporation Law, against all expenses, liability and loss (including attorneys fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; PROVIDED, HOWEVER, that, except as provided in Section 8.2 of this Article VIII, the corporation shall indemnify any such person seeking indemnity in connection with a Proceeding (or part thereof) initiated by such person only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation. The right to indemnification conferred by this Section shall include the right to be paid by the corporation expenses incurred in defending any such Proceeding in advance of its final disposition to the fullest extent authorized by the California General Corporation Law; PROVIDED, HOWEVER, that, if required by the California General Corporation Law, the payment of such expenses incurred by such person in advance of the final disposition of such Proceeding shall be made only upon delivery to the corporation of an undertaking, by or on behalf of such person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under this Section or otherwise.
SECTION 8.2 RIGHT OF CLAIMANT TO BRING SUIT .
If a claim under Section 8.1 of this Article VIII is not paid in full by the corporation within ninety (90) days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the California General Corporation Law for the corporation to indemnify the claimant for the amount claimed. Neither the failure of the corporation (including its board of directors, independent legal counsel, or it shareholders) to have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the California General Corporation Law, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.
SECTION 8.3 INDEMNIFICATION OF EMPLOYEES AND AG ENTS OF THE CORPORATION.
The corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and to the advancement of expenses to any employee or agent of the corporation to the fullest extent of the provisions of this Article with respect to the indemnification of and advancement of expenses to directors and officers of the corporation.
SECTION 8.4 RIGHTS NOT EXCLUSIVE .
The rights conferred on any person by this Article VIII above shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaw, agreement, vote of shareholders or disinterested directors or otherwise.
SECTION 8.5 INDEMNITY AGREEMENTS .
The Board of Directors is authorized to enter into a contract with any Director, officer, employee or agent of the corporation, or any person who is or was serving at the request of the corporation as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including employee benefit plans, or any person who was a director, officer, employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation, providing for indemnification rights equivalent to or, if the Board of Directors so determines, greater than, those provided for in this Article VIII.
SECTION 8.6 INSURANCE .
The corporation may purchase and maintain insurance, at its expense, to protect itself and any Director, officer, employee or agent of the corporation or another corporation (including a predecessor corporation), partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the corporation would have the power to indemnify such person against such expense, liability or loss under the California General Corporation Law.
SECTION 8.7 AMENDMENT, REPEAL OR MODIFICATION .
Any amendment, repeal or modification of any provision of this Article VIII by the shareholders or the Directors of the corporation shall not adversely affect any right or protection
of a Director or officer of the corporation existing at the time of such amendment, repeal or modification.
SECTION 9.1 POWER OF SHAREHOLDERS .
New Bylaws may be adopted or these Bylaws may be amended or repealed by the affirmative vote of a two-thirds majority of the outstanding shares entitled to vote or by the written consent thereof, except as otherwise provided by law or by the Articles of Incorporation.
SECTION 9.2 POWER OF DIRECTORS .
Subject to the right of shareholders as provided in Section 9.1 of these Bylaws, Bylaws other than a Bylaw or amendment thereof specifying or changing the authorized number of Directors, or the minimum or maximum number of a variable Board of Directors, or changing from a fixed to a variable Board of Directors or vice versa, may be adopted, amended or repealed by a unanimous vote of the Board of Directors.
CERTIFICATE OF SECRETARY
I hereby certify that I am the duly elected and acting Secretary of bebe stores, inc., a California corporation and that the foregoing Amended and Restated Bylaws, comprising eighteen (18) pages, constitute the Bylaws of said corporation as duly adopted by the Board of Directors.
IN WITNESS WHEREOF, I have hereunder subscribed my name this 29 day of September, 2003.
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/s/ John E. Kyees |
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John E. Kyees, Secretary |
Exhibit 10.1
bebe stores, inc.
1997 STOCK PLAN
(As amended and restated through October 20, 2003)
TABLE OF CONTENTS
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Accelerated Vesting and Settlement of Restricted Stock Unit Awards. |
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(d) |
Promissory Note. |
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ii
bebe stores, inc.
1997 STOCK PLAN
The purpose of the Plan is to offer selected individuals an opportunity to acquire a proprietary interest in the success of the Company, or to increase such interest, by purchasing Shares of the Companys Stock. The Plan provides for the direct award or sale of Shares, the grant of Options to purchase Shares and the grant of Restricted Stock Units. Options granted under the Plan may include Nonstatutory Options (NSOs) as well as Incentive Stock Options (ISOs) intended to qualify under Section 422 of the Code.
Capitalized terms are defined in Section 13.
1
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The Optionee may exercise all or part of the Optionees Options at any time before the expiration of such Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionees Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionees Service terminated (or vested as a result of the termination). The balance of such Options shall lapse when the Optionees Service terminates. In the event that the Optionee dies after the termination of the Optionees Service but before the expiration of the Optionees Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionees estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionees Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before the Optionees Service terminated (or vested as a result of the termination).
5
or
All or part of the Optionees Options may be exercised at any time before the expiration of such Options under the preceding sentence by the executors or administrators of the Optionees estate or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionees death or became exercisable as a result of the death. The balance of such Options shall lapse when the Optionee dies.
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Nothing in the Plan or in any right, Option or Restricted Stock Unit granted under the Plan shall confer upon the Purchaser, Optionee, or Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Purchaser, Optionee or Participant) or of the Purchaser, Optionee or Participant which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.
10
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Companys incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Companys securities immediately before such transaction.
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The undersigned hereby certifies that the foregoing is the bebe stores, inc. 1997 Stock Plan as amended.
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bebe stores, inc. |
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By: |
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Title: |
President |
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14
PLAN HISTORY
June 26, 1997 |
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Plan adopted by the Companys Board of Directors with a share reserve of 1,000,000 shares |
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July 15, 1997 |
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Plan approved by the Companys shareholders |
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April 6, 1998 |
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Plan amended and restated by the Companys Board of Directors (effective upon the effective date of the initial registration by the Company of its stock under Section 12 of the Securities Exchange Act of 1934, as amended (the Companys IPO) |
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April 9, 1998 |
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Company effected a 2.83:1 stock split resulting in a share reserve of 2,830,000 shares |
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May 18, 1998 |
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Amended and Restated Plan approved by the Companys shareholders (effective upon the Companys IPO) |
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June 16, 1998 |
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Effective date of the Companys IPO |
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August 2000 |
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Increase of the maximum number of shares that may be issued to 4,330,000 approved by Board |
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November 2000 |
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Increase of the maximum number of shares that may be issued to 4,330,000 approved by Shareholders |
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March 25, 2003 |
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Plan amended by the Companys Board of Directors to provide for the grant of Restricted Stock Units. |
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June 13, 2003 |
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Plan amended to include a conviction for a violation of any securities law as a part of the definition of Termination for Cause. |
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August 27, 2003 |
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Increase of the maximum number of shares that may be issued to 5,330,000 approved by Board. . |
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October 20, 2003 |
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Board approves amendment of plan to add Section 162(m) provision to preserve Companys ability to deduct in full certain plan-related compensation with a grant limit of |
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400,000 shares per fiscal year. |
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December 8, 2003 |
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Increase of the maximum number of shares that may be issued under the Plan to 5,330,000 and Section 162(m) grant limit of 400,000 shares approved by Shareholders. |
16
Exhibit 10.17
STANDARD
OFFER, AGREEMENT AND ESCROW
INSTRUCTIONS FOR PURCHASE OF REAL ESTATE
(Non-Residential)
American Industrial Real Estate Association
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January 20, 2004 |
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(Date for Reference Purposes) |
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Initials |
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Initials |
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(a) |
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Cash down payment, including the Deposit as defined in paragraph 4.3 (or if an all cash transaction, the Purchase Price): |
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10,950,000.00 |
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Total Purchase Price: |
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$ |
10,950,000.00 |
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(b) Within 5 business days after the contingencies discussed in paragraph 9.1 (a) through (k) are approved or waived, Buyer shall deposit with Escrow Holder the additional sum of $5,000,000.00 to be applied to the Purchase Price at the Closing.
ý eOffice Suites, Inc. attn.: Howard Sher represents Seller exclusively ( Sellers Broker );
ý Commercial Resource Real Estate Services: J. Beimforde represents Buyer exclusively ( Buyers Broker ); or
The Parties acknowledge that Brokers are the procuring cause of this Agreement. See paragraph 24 for disclosures regarding the nature of a real estate agency relationship. Buyer shall use the services of Buyers Broker exclusively in connection with any and all negotiations and offers with respect to the Property for a period of 1 year from the Date of Agreement.
notified in writing, Escrow Holder shall assume that no Material Change has occurred prior to the Closing.
IMPORTANT: IN A PURCHASE OR EXCHANGE OF REAL PROPERTY, IT MAY BE ADVISABLE TO OBTAIN TITLE INSURANCE IN CONNECTION WITH THE CLOSE OF ESCROW SINCE THERE MAY BE PRIOR RECORDED LIENS AND ENCUMBRANCES WHICH AFFECT YOUR INTEREST IN THE PROPERTY BEING ACQUIRED. A NEW POLICY OF TITLE INSURANCE SHOULD BE OBTAINED IN ORDER TO ENSURE YOUR INTEREST IN THE PROPERTY THAT YOU ARE ACQUIRING.
Possession of the Property shall be given to Buyer at the Closing subject to the rights of tenants under Existing Leases.
At any time during the Escrow period, Buyer, and its agents and representatives, shall have the right at reasonable times and subject to rights of tenants, to enter upon the Property for the purpose of making inspections and tests specified in this Agreement. No destructive testing shall be conducted, however, without Sellers prior approval which shall not be unreasonably withheld. Following any such entry or work, unless otherwise directed in writing by Seller, Buyer shall return the Property to the condition it was in prior to such entry or work, including the recompaction or removal of any disrupted soil or material as Seller may reasonably direct. All such inspections and tests and any other work conducted or materials furnished with respect to the Property by or for Buyer shall be paid for by Buyer as and when due and Buyer shall indemnify, defend, protect and hold harmless Seller and the Property of and from any and all claims, liabilities, losses, expenses (including reasonable attorneys fees), damages, including those for injury to person or property, arising out of or relating to any such work or materials or the acts or omissions of Buyer, its agents or employees in connection therewith.
The Parties shall each, diligently and in good faith, undertake all actions and procedures reasonably required to place the Escrow in condition for Closing as and when required by this Agreement. The Parties agree to provide all further information, and to execute and deliver all further documents, reasonably required by Escrow Holder or the Title Company.
If any Party or Broker brings an action or proceeding (including arbitration) involving the Property whether founded in tort, contract or equity, or to declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term Prevailing Party shall include, without limitation, a Party or Broker who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys fees award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys fees reasonably incurred.
THE PARTIES AGREE THAT IT WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX, PRIOR TO SIGNING THIS AGREEMENT, THE ACTUAL DAMAGES WHICH WOULD BE SUFFERED BY SELLER IF BUYER FAILS TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT. THEREFORE, IF, AFTER THE SATISFACTION OR WAIVER OF ALL CONTINGENCIES PROVIDED FOR THE BUYERS BENEFIT, BUYER BREACHES THIS AGREEMENT, SELLER SHALL BE ENTITLED TO LIQUIDATED DAMAGES IN THE AMOUNT OF $250,000.00. UPON PAYMENT OF SAID SUM TO SELLER, BUYER SHALL BE RELEASED FROM ANY FURTHER LIABILITY TO SELLER, AND ANY ESCROW CANCELLATION FEES AND TITLE COMPANY CHARGES SHALL BE PAID BY SELLER.
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Buyer Initials |
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Seller Initials |
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WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION TO NEUTRAL ARBITRATION.
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Buyer Initials |
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Seller Initials |
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Additional provisions of this offer, if any, are as follows or are attached hereto by an addendum consisting of paragraphs 28 through 37. (If there are no additional provisions write NONE.)
see addendum, attached |
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ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS AGREEMENT OR THE TRANSACTION TO WHICH IT RELATES, THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS AGREEMENT.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PROPERTY. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PROPERTY, THE INTEGRITY AND CONDITION OF ANY STRUCTURES AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PROPERTY FOR BUYERS INTENDED USE.
WARNING: IF THE PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS OF THIS AGREEMENT MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.
NOTE:
1. THIS FORM IS NOT FOR USE IN CONNECTION WITH THE SALE OF RESIDENTIAL PROPERTY.
2. IF THE BUYER IS A CORPORATION, IT IS RECOMMENDED THAT THIS AGREEMENT BE SIGNED BY TWO CORPORATE OFFICERS.
The undersigned Buyer offers and agrees to buy the Property on the terms and conditions stated and acknowledges receipt of a copy hereof.
NOTE: A PROPRIETARY INFORMATION SHEET IS REQUIRED TO BE DELIVERED TO BUYER BY SELLER UNDER THIS AGREEMENT.
BROKER: |
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SELLER: |
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eOffice Suites, Inc. |
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10345 Olympic LLC |
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Attn: Howard Sher |
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By: |
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Title: |
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Date: |
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Address: |
13101 Washington Blvd. |
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Name Printed: |
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Los Angeles, CA |
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Title: |
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Telephone: |
(310) 566 7004 |
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Facsimile: |
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Federal ID No. |
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By: |
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Federal ID No. |
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ADDENDUM
TO THE STANDARD OFFER, AGREEMENT AND ESCROW
INSTRUCTIONS FOR THE PURCHASE OF REAL ESTATE DATED
JANUARY 20, 2004, BY AND BETWEEN bebe stores, inc. AND/OR ASSIGNEE,
AS BUYER AND 10345 OLYMPIC LLC, AS SELLER, FOR THE PROPERTY AT
10345 WEST OLYMPIC BOULEVARD, LOS ANGELES, CALIFORNIA 90064
22
Regarding Costs of Escrow: Seller shall pay One-half (½) of the escrow fees; that portion of the premium for the Title Policy equivalent to the premium to CLTA Owners Standard Coverage Policy of Title Insurance; the cost of documentary transfer tax in connection with the recordation of the Grant Deed (Buyer to cooperate with Seller to minimize the Documentary Transfer Tax paid by Seller, at no cost to Buyer, and subject to Buyers counsel review and approval of minimization process); the cost of any obligations of Seller hereunder; and any other closing costs or charges not expressly provided for herein and customarily paid by a Seller of real property in Los Angeles County, California. Buyer shall pay: One-half (½) of the escrow fees; the cost of recording the Grand Deed; the premium for the Title Policy in excess of the premium for a CLTA Owners Standard Coverage title policy; the cost of any other obligations of Buyer hereunder; any other closing costs or charges not expressly provided for herein and customarily paid by a Buyer of real property in Los Angeles County, California. In the event that this escrow shall fail to close by reason of default of either party hereunder, the defaulting party shall be liable for all escrow and title cancellation charges. In the event that the escrow shall fail to close for any other reason, each party shall pay one-half (½) of all escrow and title cancellation charges.
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To Buyer: |
bebe stores, inc. |
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860 South Los Angeles Street |
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Los Angeles, California 90014 |
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Attention: Mr. Manny Mashouf, Chief Executive Officer |
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With a Copy To: |
Commercial REsource Real Estate Services |
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520 S. Grand Avenue |
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Suite 690 |
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Los Angeles, California 90071 |
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Attention: Justin Beimforde |
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To Seller: |
10345 Olympic LLC |
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c/o eOffice Suites |
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13101 West Washington Boulevard |
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Los Angeles, CA 90066 |
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To Escrow Holder: |
Wilshire Escrow Company |
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4720 Wilshire Boulevard |
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Los Angeles, California 90010 |
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Attention: Ms. Pamela J. Wood |
Delivery of any notice or other communication hereunder shall be deemed made on the date of actual delivery thereof to the address of the addressee, if personally delivered, and on the date indicated in the return receipt or couriers records as the date of delivery or as the date of first attempted delivery, if sent by mail or courier service. Any party may change its address for purposes of this Paragraph by giving notice to the other party and to Escrow Holder as herein provided.
24
WILSHIRE ESCROW
COMPANY
a corporation
4270 Wilshire Boulevard
Los Angeles, California 90010
(323) 935-3530 Fax (323) 938-8927
www.wilshire-escrow.com
Opening Escrow Instructions: SALE |
Escrow Number: 116254 |
Escrow Officer: Pamela J. Wood (Ext. 317) |
Date: January 22, 2004 |
THIS OPENING ESCROW INSTRUCTIONS IS AN AMENDMENT TO THAT CERTAIN STANDARD OFFER, AGREEMENT AND ESCROW INSTRUCTIONS FOR PURCHASE OF REAL ESTATE, DATED JANUARY 20, 2004
CASH THROUGH ESCROW |
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$ |
10,950,000.00 |
|
|
|
|
|
|
TOTAL CONSIDERATION |
|
$ |
10,950,000.00 |
|
RE: 10345 West Olympic Boulevard, Los Angeles, California 90064-2548
*** ESCROW NO. 116254 PLEASE SIGN ON PAGE FIVE ***
1
2
3
4
GENERAL INSTRUCTIONS
1-C) You are hereby authorized to destroy without liability and without further notice to us, all documents, papers, instructions and any other material in connection with this escrow five years after termination of same.
2-C) We, jointly and severally, agree to save and hold you harmless, by reason of any misrepresentation or omission by any of the parties to this escrow as to compliance with rules and/or regulations of any governmental agency, State, Federal, Municipal, or otherwise, as concerns rent control, priorities, price ceilings, and matters of a like nature.
3-C) In the event that the conditions of this escrow have not been complied with at the expiration of the time provided for herein, you are instructed to complete the same at the earliest possible date thereafter, unless we or either of us have made written demand upon you for return of the money and/or instruments deposited by either of us, in which case you may return all instruments and/or funds to the respective parties hereto and this escrow will without further notice be considered terminated, or you may withhold and stop all further proceedings in this escrow without liability for interest on funds held or for damages or otherwise until receipt of mutual cancellation instructions by all parties shall have been deposited in this escrow, whereupon you are then instructed to disburse the escrow funds and instruments accordingly, less your proper charges. You are further authorized and instructed to remit all the funds by your check to the party(ies) depositing same in this escrow if this escrow is not consummated, unless specifically instructed to the contrary.
4-C) If conflicting demands are made or notice served upon you or legal action is taken in connection with this escrow, you shall not be required to determine the same or take any action in the premises, but may withhold and stop all further proceedings without liability therefor, or you may file suit in interpleader or for declaratory relief. If you are required to respond to any legal summons or proceedings or if any action of interpleader or declaratory relief is brought by you, we jointly and severally agree to pay all costs, expenses and reasonable attorneys fees expended or incurred by you, and a lien is hereby created in your companys favor to cover said items. We agree to save you harmless as escrow holder hereunder from all loss and expenses, including reasonable attorneys fees and court costs sustained by reason of any action, legal or otherwise, which may in any way arise out of this escrow, before or after closing, notwithstanding anything in these instructions to the contrary.
5-C) We jointly and severally, agree that in the event of cancellation we shall pay you a sum sufficient to pay you for any expenses which you have incurred pursuant to these instructions and a reasonable cancellation fee for services rendered by you, said expenses and fees to be put in escrow before cancellation is effective. We further agree that said charges may be apportioned to us in a manner which you consider equitable and that your decision in that regard will be binding and conclusive upon us. Any funds which have been deposited by a licensed real estate broker for either or both of us shall be returned to such broker.
6-C) Any action brought against the escrow holder, based on these instructions or the transaction arising therefrom, shall be filed within one (1) year from the closing of said escrow, or shall be forever barred.
7-C) Recordation of any instruments delivered through this escrow, if necessary or proper in the issuance of the policy of title insurance called for, is authorized, and in connection therewith, funds and/or instruments received in this escrow may be delivered to, or deposited with any Bank, Title Company, Savings and Loan Association, or Licensed Escrow Agent, subject to your order, prior to the close of escrow, for the purpose of complying with the terms and conditions of these escrow instructions.
Wilshire Escrow Company is licensed by the DEPARTMENT OF CORPORATIONS of the State of California under License #963 0326 issued in 1944.
5
Receipt of a copy of these instructions is hereby acknowledged; my signature on all instruments and instructions pertaining to this escrow indicates my unconditional acceptance and approval of same.
BUYER SIGNATURE(S):
bebe stores, Inc.
By: |
|
|
|
Manny Mashouf, Chief Executive Officer |
MAILING: 860 South Los Angeles Street, Los Angeles, CA 90066
FORWARDING:
The foregoing terms, provisions, conditions and instructions are hereby approved and accepted in their entirety and concurred in by me. I will hand you necessary documents called for on my part to cause title to be shown as above, which you are authorized to deliver when you hold or have caused to be applied funds set forth above within the time as above provided. Pay your escrow charges, my recording fees, charges for evidence of title as called for whether or not this escrow is consummated, except those the buyer agreed to pay. You are hereby authorized to pay bonds, assessments, taxes, and any liens of record, including prepayment penalties, if any, to show title as called for. Affix documentary transfer stamps on deed as required. Receipt of a copy of these instructions is hereby acknowledged.
SELLER SIGNATURE(S):
10345 Olympic LLC
By: |
|
|
|
Harvey J. Lind, Managing Member |
MAILING: 13101 West Washington Blvd., #100, Los Angeles, CA 90066
MAILING:
* * * ESCROW NO. 116254 PLEASE SIGN ABOVE * * *
6
ESCROW NO. 116254-010
LEGAL DESCRIPTION
PARCEL 1:
LOTS 12, 13, 14, 16 AND 17 IN BLOCK 19, OF TRACT NO. 7260, IN THE CITY OF LOS ANGELES, COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 79, PAGE(S) 98 AND 99 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPT THEREFROM THAT PORTION OF SAID LOT 14, LYING SOUTHEASTERLY OF THE FOLLOWING DESCRIBED LINE:
BEGINNING AT A POINT IN THE NORTHERLY LINE OF SAID LOT 14, DISTANT THEREIN 13.22 FEET WESTERLY FROM THE NORTHEASTERLY CORNER OF SAID LOT 14; THENCE SOUTHWESTERLY IN A DIRECT LINE 76.29 FEET TO THE SOUTHWESTERLY LINE OF SAID LOT 14, DISTANT THEREON 65.50 FEET NORTHWESTERLY FROM THE MOST SOUTHERLY CORNER OF SAID LOT 14.
ALSO EXCEPT THE INTEREST OF THE CITY OF LOS ANGELES IN THAT PORTION OF LOT 13 DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST SOUTHERLY CORNER OF SAID LOT 13; THENCE NORTHWESTERLY, ALONG THE SOUTHWESTERLY LINE OF SAID LOT 13, (66) FEET; THENCE NORTHEASTERLY, IN A DIRECT LINE TO A POINT IN THE NORTHEASTERLY LINE OF SAID LOT 13, DISTANT THEREON (65.50) FEET NORTHWESTERLY FROM THE MOST EASTERLY CORNER OF SAID LOT 13; THENCE SOUTHEASTERLY, ALONG SAID NORTHEASTERLY LINE, (65.50) FEET TO SAID MOST EASTERLY CORNER; THENCE SOUTHWESTERLY, ALONG THE SOUTHEASTERLY LINE OF SAID LOT 13, (91.45) FEET TO THE POINT OF BEGINNING, AS CONDEMNED BY FINAL DECREE OF CONDEMNATION, A CERTIFIED COPY OF WHICH WAS RECORDED DECEMBER 18, 1939 IN BOOK 17134 PAGE 181, OFFICIAL RECORDS.
PARCEL 2:
THAT PORTION OF LOT 15, BLOCK 19 OF TRACT 7260, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED IN BOOK 79 PAGES 98 AND 99 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, LYING NORTHWESTERLY OF THE FOLLOWING DESCRIBED LINE:
BEGINNING AT A POINT IN THE EASTERLY LINE OF SAID LOT 15, DISTANT THEREON 13.47 FEET NORTHERLY FROM THE SOUTHEASTERLY CORNER OF SAID LOT; THENCE SOUTHWESTERLY IN A DIRECT LINE TO A POINT IN THE SOUTHWESTERLY LINE OF SAID LOT, DISTANT THEREON 13.22 FEET WESTERLY FROM THE SOUTHEASTERLY CORNER OF SAID LOT.
PARCEL 3:
LOT 11 BLOCK 19 OF TRACT 7260, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED IN BOOK 79 PAGES 98 AND 99 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
THE PROPERTY IS MORE COMMONLY KNOWN AS
10345 West Olympic Boulevard
Los Angeles, California 90064-2548
APN: 4319-006-052
EXHIBIT A
7
WILSHIRE ESCROW COMPANY
a corporation
4270 Wilshire Boulevard
Los Angeles, California 90010
(323) 935-3530 Fax (323) 938-8927
www.wilshire-escrow.com
AMENDMENT/SUPPLEMENT TO ESCROW INSTRUCTIONS
TO: |
|
WILSHIRE ESCROW COMPANY |
|
ESCROW NO: 116254 |
|
|
Pamela J. Wood (Ext. 317) |
|
DATE: February 6, 2004 |
|
|
Escrow Officer |
|
PAGE 1 OF 1 |
RE: 10345 West Olympic Boulevard, Los Angeles, California 90064-2548
THESE ESCROW INSTRUCTIONS ARE HEREBY AMENDED/SUPPLEMENTED TO READ AS FOLLOWS:
Harvey Jeffrey Lind, as Trustee of the 1992 Harvey and Lauen Lind Family Trust, dated 10-26-92, as amended 03-08-99, AND Howard A. Sher, as Trustee of the Sher Family Trust Dated 01-15-99; Managing Members of 10345 Olympic LLC, herein acknowledge they have reviewed original escrow instructions and supplements and/or amendments thereto to date, including commission agreement, as previously executed by Harvey Lind, managing member of 10345 Olympic LLC and approves of same in their entirety.
SELLER DISCLOSURE: Undersigned Buyer herein understands and acknowledges that Howard A. Sher, signing as Trustee of a managing member trust for 10345 Olympic, LLC is a California Real Estate Licensee and is affiliated with eOffices Suites, a Broker to this transaction.
10345 Olympic, LLC |
|
bebe stores, Inc. |
||
|
|
|
||
By: |
|
|
By: |
|
|
Harvey Jeffrey
Lind, Trustee of the 1992
|
|
|
Manny Mashouf, Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
Howard A. Sher, Trustee of the Sher Family Trust Dated 01-15-99, Managing Member |
|
|
8
WILSHIRE ESCROW COMPANY
a corporation
4270 Wilshire Boulevard
Los Angeles, California 90010
(323) 935-3530 Fax (323) 938-8927
www.wilshire-escrow.com
AMENDMENT TO ESCROW INSTRUCTIONS
TO: |
|
WILSHIRE ESCROW COMPANY |
|
ESCROW NO: 116254 |
|
|
Pamela J. Wood (Ext. 317) |
|
DATE: February 18, 2004 |
|
|
Escrow Officer |
|
PAGE 1 OF 1 |
RE: 10345 West Olympic Boulevard, Los Angeles, California 90064-2548
TOTAL PURCHASE PRICE AND/OR TERMS TO PURCHASE PRICE ARE HEREIN AMENDED AS FOLLOWS:
CASH THROUGH ESCROW |
|
$ |
4,557,000.00 |
|
EXISTING DEED OF TRUST WITH APPROXIMATE BALANCE OF |
|
$ |
6,393,000.00 |
|
TOTAL CONSIDERATION |
|
$ |
10,950,000.00 |
|
Buyer agrees to take title SUBJECT TO existing Deed of Trust of record, in favor of Bank of the West, securing a Note with an approximate unpaid principal balance of $6,393,000.00.
Buyer requests escrow holder to procure a Demand for Payoff and intends to pay said existing loan in full within 2 business days after the successful close of escrow herein. If the unpaid balance proves to be more or less than stated above you are to adjust the cash down accordingly.
Buyer will be delivering the funds to payoff said loan in full to Investors Title Company prior to the close of this escrow and herein authorizes and instructs escrow holder to request title company to pay said loan in full as soon as possible after the successful close of this escrow.
Escrow holder is to hold all sellers proceeds until said loan has been confirmed paid by title company. All moneys needed to pay said loan in full, above the unpaid principal, shall be credited to buyers in the form of a refund check through escrow herein.
Any additional expenses of title company to be able to issue a title policy, after close of escrow, showing property free and clear of any encumbrances, shall be charged to Seller through escrow herein.
10345 Olympic, LLC |
|
bebe stores, Inc. |
||
|
|
|
||
By: |
|
|
By: |
|
|
Harvey Jeffrey
Lind, Trustee of the 1992
|
|
|
Manny
Mashouf, Chief Executive Officer,
|
|
|
|
|
|
|
|
|
|
|
By: |
|
|
|
|
|
Howard A.
Sher, Trustee of the Sher Family Trust
|
|
|
9
WILSHIRE ESCROW COMPANY
a corporation
4270 Wilshire Boulevard
Los Angeles, California 90010
(323) 935-3530 Fax (323) 938-8927
www.wilshire-escrow.com
AMENDMENT/SUPPLEMENT TO ESCROW INSTRUCTIONS
TO: |
|
WILSHIRE ESCROW COMPANY |
|
ESCROW NO: 116254 |
|
|
Pamela J. Wood (Ext. 317) |
|
DATE: February 24, 2004 |
|
|
Escrow Officer |
|
PAGE 1 OF 1 |
RE: 10345 West Olympic Boulevard, Los Angeles, California 90064-2548
THESE ESCROW INSTRUCTIONS ARE HEREBY AMENDED/SUPPLEMENTED TO READ AS FOLLOWS:
As a matter of agreement between the undersigned, with which escrow holder is not to be concerned: Each party agrees not to disclose any of the terms of this Agreement without the prior written consent of the other party other than as required by law.
10345 Olympic, LLC |
|
bebe studio realty, LLC |
|||
|
|
|
|||
By: |
|
|
By: bebe studio, Inc., sole member |
||
|
Harvey Jeffrey Lind, Trustee of the 1992 |
|
|
||
|
Harvey and Lauen Lind Family Trust dated |
|
|
By: |
|
|
10-26-92, as amended 03-08-99, Managing Member |
|
|
Manny Mashouf, Chairman |
|
|
|
|
|
||
By: |
|
|
|
||
|
Howard A.
Sher, Trustee of the Sher Family Trust
|
|
|
10
WILSHIRE ESCROW COMPANY
a corporation
4270 Wilshire Boulevard
Los Angeles, California 90010
(323) 935-3530 Fax (323) 938-8927
www.wilshire-escrow.com
AMENDMENT/SUPPLEMENT TO ESCROW INSTRUCTIONS
TO: |
|
WILSHIRE ESCROW COMPANY |
|
ESCROW NO: 116254 |
|
|
Pamela J. Wood (Ext. 317) |
|
DATE: February 24, 2004 |
|
|
Escrow Officer |
|
PAGE 1 OF 1 |
RE: 10345 West Olympic Boulevard, Los Angeles, California 90064-2548
THESE ESCROW INSTRUCTIONS ARE HEREBY AMENDED/SUPPLEMENTED TO READ AS FOLLOWS:
Title to subject property shall vest as follows:
bebe studio realty, LLC, a California limited liability company
The Grantee, as named above, herein acknowledges that it has reviewed original escrow instructions and supplements and/or amendments thereto to date as previously executed by bebe stores, Inc. and approves of same in their entirety.
Deposit(s) in escrow to be credited to the account of the above named Grantees without consideration for the account of bebe stores, Inc. who no longer has any interest in and to said subject property.
Undersigned Seller herein authorizes and instructs escrow holder to correct the Grant Deed, already executed by Seller, to reflect buyers vesting as shown above.
10345 Olympic, LLC |
|
bebe studio realty, LLC |
|||
|
|
|
|||
By: |
|
|
By: bebe studio, Inc., sole member |
||
|
Harvey Jeffrey Lind, Trustee of the 1992 |
|
|
||
|
Harvey and Lauen Lind Family Trust dated |
|
|
By: |
|
|
10-26-92, as amended 03-08-99, Managing Member |
|
|
Manny Mashouf, Chairman |
|
|
|
|
|
||
By: |
|
|
|
||
|
Howard A.
Sher, Trustee of the Sher Family Trust
|
|
|
11
WILSHIRE ESCROW COMPANY
a corporation
WILSHIRE ESCROW COMPANY |
ESCROW NO: 116254 |
4270 Wilshire Boulevard |
DATE: February 24, 2004 |
Los Angeles, California 90010 |
Pamela J. Wood (Ext. 317) |
(323) 935-3530 |
Escrow Officer |
AMENDED ESCROW INSTRUCTIONS PERTAINING TO COMMISSION
RE: 10345 West Olympic Boulevard, Los Angeles, California 90064-2548
At the close of escrow pay to the following licensed real estate broker(s) as a commission for services rendered, the sum of $273,750.00 which you are authorized and instructed to deduct from funds due me under the above numbered escrow:
These instructions are conditional upon Selling Agent crediting Buyer with $50,000.00 from commission due them at the successful close of escrow.
Said amount is to be disbursed as follows:
LISTING AGENT: |
$0.00 |
To: |
eOffice Suites, Inc.
|
|
|
|
|
SELLING AGENT: |
$273,750,00 |
To: |
Rinaldo Elliott Hunt
|
|
|
|
Routing No. 122000247 |
|
|
|
for credit to the account of Rinaldo E. Hunt Real Estate Trust Account |
|
|
|
Account No. 8606667668 |
|
10345 Olympic, LLC |
|
|
|
|
|
By: |
|
|
|
Harvey Jeffrey
Lind, Trustee of the 1992 Harvey
|
|
|
|
|
By: |
|
|
|
Howard A.
Sher, Trustee of the Sher Family
|
Undersigned Broker herein authorizes and instructs escrow holder to credit the sum of $50,000.00 to Buyer at the successful close of escrow.
|
|
|
Rinaldo Elliott Hunt |
Undersigned herein acknowledged:
bebe studio realty, LLC |
||
|
||
By: bebe studio, Inc., sole member |
||
|
||
By: |
|
|
Manny Mashouf, Chairman |
12
SUPPLEMENTAL ESCROW INSTRUCTIONS
TO: |
|
WILSHIRE ESCROW COMPANY |
|
ESCROW NO: 116254 |
|
|
|
|
DATE: February 24, 2004 |
|
|
|
|
PAGE 1 OF 2 |
|
|
|
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|
As a matter of record, with which this escrow is not concerned, undersigned herein understand and acknowledge that the officers and shareholders of Windsor Exchange Corp. are the same officers and shareholders of Wilshire Escrow Company, a California corporation.
13
ALL OTHER TERMS AND CONDITIONS OF THIS ESCROW SHALL REMAIN UNCHANGED.
ACCOMODATOR/SELLER: |
|
BUYER: |
||
Windsor Exchange Corp. |
|
bebe studio realty, LLC |
||
|
|
|
||
By: |
|
|
By: bebe studio, Inc., sole member |
|
|
|
|
|
|
By: |
|
|
By: |
|
|
|
|
Manny Mashouf, Chairman |
|
|
|
|
EXCHANGOR: |
|
|
|
|
|
10345 Olympic LLC |
|
|
|
|
|
By: |
|
|
|
Harvey Jeffrey
Lind, Trustee of the 1992 Harvey
|
|
|
|
|
By: |
|
|
|
Howard A.
Sher, Trustee of the Sher Family Trust
|
|
14
Exhibit 14.1
bebe
100 EQUAL EMPLOYMENT & CORPORATE GOVERNANCE |
|
CODE OF BUSINESS CONDUCT & ETHICS |
POLICY# 104 |
SCOPE: All current bebe employees.
CONTACT: General Counsel, VP of Human Resources, CFO (Corporate directory) or Hotline indicated below.
A Message About the Code of Business Conduct and Ethics from the Chairman and CEO:
To All Officers, Directors and Employees:
One of our Companys most valuable assets is its integrity. Protecting this asset is the job of everyone in the Company. To that end, we have established a Code of Business Conduct and Ethics. The Code applies to every officer, director and employee. We also expect that those with whom we do business (including our agents, consultants, suppliers and customers) will also adhere to the Code. Our Code is designed to help you comply with the law and maintain the highest standards of ethical conduct. The Code does not cover every issue that may arise, but it sets out basic principles and a methodology to help guide you in the attainment of this common goal.
All of the Companys officers, directors and employees must carry out their duties in accordance with the policies set forth in this Code and with applicable laws and regulations. To the extent that other Company polices and procedures conflict with this Code, you should follow this Code. Any violation of applicable law or any deviation from the standards embodied in this Code will result in disciplinary action up to and including termination. Disciplinary action also may apply to an employees supervisor who directs or approves the employees improper actions, or is aware of those actions but does not act appropriately to correct them. In addition to imposing its own discipline, the Company may also bring suspected violations of law to the attention of the appropriate law enforcement personnel. If you are in a situation which you believe may violate or lead to a violation of this Code, follow the procedures described in Sections 10 and 11 of the Code.
Manny Mashouf
Founder and Chairman
DISCLAIMER: The Employment-At-Will disclaimer contained in the front of this Manual applies to all bebe policies and procedures.
Date: 4/4/04
POLICY
The Nasdaq rules require that the Company provide a code of conduct for all of its directors, officers and employees. This Company is committed to being a good corporate citizen. The Companys policy is to conduct its business affairs honestly and in an ethical manner. That goal cannot be achieved unless you individually accept your responsibility to promote integrity and demonstrate the highest level of ethical conduct in all of your activities. Activities that may call into question the Companys reputation or integrity should be avoided. The Company understands that not every situation is black and white. The key to compliance with the Code is exercising good judgment. This means following the spirit of this Code and the law, doing the right thing and acting ethically even when the law is not specific. When you are faced with a business situation where you must determine the right thing to do, you should ask the following questions:
Am I following the spirit, as well as the letter, of any law or Company policy?
Would I want my actions reported on 60 Minutes ?
What would my family, friends or neighbors think of my actions?
Will there be any direct or indirect negative consequences for the Company?
Managers set an example for other employees and are often responsible for directing the actions of others. Every manager and supervisor is expected to take necessary actions to ensure compliance with this Code, to provide guidance and assist employees in resolving questions concerning the Code and to permit employees to express any concerns regarding compliance with this Code. No one has the authority to order another employee to act contrary to this Code.
The Company seeks to comply with both the letter and spirit of the laws and regulations in all countries in which it operates.
The Company is committed to full compliance with the laws and regulations of the cities, states and countries in which it operates. You must comply with all applicable laws, rules and regulations in performing your duties for the Company. Numerous federal, state and local laws and regulations define and establish obligations with which the Company, its employees and agents must comply. Under certain circumstances, local
country law may establish requirements that differ from this Code. You are expected to comply with all local country laws in conducting the Companys business. If you violate these laws or regulations in performing your duties for the Company, you not only risk individual indictment, prosecution and penalties, and civil actions and penalties, you also subject the Company to the same risks and penalties. If you violate these laws in performing your duties for the Company, you may be subject to immediate disciplinary action, including possible termination of your employment or affiliation with the Company.
An explanation of certain of the key laws with which you should be familiar can be found in bebes Policies and Procedures Manual. As explained below, you should always consult your manager or the Compliance Team with any questions about the legality of you or your colleagues conduct.
It is of paramount importance to the Company that all disclosure in reports and documents that the Company files with, or submits to, the SEC, and in other public communications made by the Company is full, fair, accurate, timely and understandable. You must take all steps available to assist the Company in these responsibilities consistent with your role within the Company. In particular, you are required to provide prompt and accurate answers to all inquiries made to you in connection with the Companys preparation of its public reports and disclosure.
The Companys Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for designing, establishing, maintaining, reviewing and evaluating on a quarterly basis the effectiveness of the Companys disclosure controls and procedures (as such term is defined by applicable SEC rules). The Companys CEO, CFO, principal accounting officer or controller and persons performing similar functions, persons who meet the requirements of Item 406 of Regulation S-K and such other Company officers are designated from time to time by the Audit Committee of the Board of Directors (including, but not limited to, all Director level and more senior employees) shall be deemed the Senior Officers of the Company. Senior Officers shall take all steps necessary or advisable to ensure that all disclosure in reports and documents filed with or submitted to the SEC, and all disclosure in other public communication made by the Company is full, fair, accurate, timely and understandable.
Senior Officers are also responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Senior Officers will take all necessary steps to ensure compliance with established accounting procedures, the Companys system of internal controls and generally accepted accounting principles.
Senior Officers will ensure that the Company makes and keeps books, records, and accounts, which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company. Senior Officers will also ensure that the Company devises and maintains a system of internal accounting controls sufficient to provide reasonable assurances that:
transactions are executed in accordance with managements general or specific authorization;
transactions are recorded as necessary (a) to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and (b) to maintain accountability for assets;
access to assets is permitted, and receipts and expenditures are made, only in accordance with managements general or specific authorization; and
the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences, all to permit prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the Companys financial statements.
Any attempt to enter inaccurate or fraudulent information into the Companys accounting system will not be tolerated and will result in disciplinary action, up to and including termination of employment.
Senior Officers each bear a special responsibility for promoting integrity throughout the Company. Furthermore, the Senior Officers have a responsibility to foster a culture throughout the Company as a whole that ensures the fair and timely reporting of the Companys results of operation and financial condition and other financial information.
Because of this special role, the Senior Officers are bound by the following Financial Officer Code of Ethics, and by accepting the Code of Business Conduct and Ethics each agrees that he or she will:
Perform his or her duties in an honest and ethical manner.
Handle all actual or apparent conflicts of interest between his or her personal and professional relationships in an ethical manner.
Take all necessary actions to ensure full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, government agencies and in other public communications.
Comply with all applicable laws, rules and regulations of federal, state and local governments.
Proactively promote and be an example of ethical behavior in the work environment.
You should never trade securities on the basis of confidential information acquired through your employment or fiduciary relationship with the Company.
You are prohibited under both federal law and Company policy from purchasing or selling Company stock, directly or indirectly, on the basis of material non-public information concerning the Company. Any person possessing material non-public information about the Company must not engage in transactions involving Company securities until this information has been released to the public. Generally, material information is that which would be expected to affect the investment decisions of a reasonable investor or the market price of the stock. You must also refrain from trading in the stock of other publicly held companies, such as existing or potential customers or suppliers, on the basis of material confidential information obtained in the course of your employment or service as a director. It is also illegal to recommend a stock to (i.e., tip) someone else on the basis of such information. If you have a question concerning appropriateness or legality of a particular securities transaction, consult with the Companys Director of Risk Management. Officers, directors and certain other employees of the Company are subject to additional responsibilities under the Companys insider trading compliance policy, a copy of which has been provided to each such officer, director and employee, and which can be obtained from the Companys Director of Risk Management.
You must avoid any situation in which your personal interests conflict or even appear to conflict with the Companys interests. You owe a duty to the Company not to compromise the Companys legitimate interests and to advance such interests when the opportunity to do so arises in the course of your employment.
You shall perform your duties to the Company in an honest and ethical manner. You shall handle all actual or apparent conflicts of interest between your personal and professional relationships in an ethical manner.
You should avoid situations in which your personal, family or financial interests conflict or even appear to conflict with those of the Company. You may not engage in activities that compete with the Company or compromise its interests. You should not take for your own benefit opportunities discovered in the course of employment that you have reason to know would benefit the Company. The following are examples of actual or potential conflicts:
you, or a member of your family, receive improper personal benefits (including but not limited to the receipt of gifts) as a result of your position in the Company;
you use Companys property for your personal benefit;
you engage in activities that interfere with your loyalty to the Company or your ability to perform Company duties or responsibilities effectively;
you work simultaneously (whether as an employee or a consultant) for a competitor, customer or supplier;
you, or a member of your family, have a financial interest in a customer, supplier, or competitor which is significant enough to cause divided loyalty with the Company or the appearance of divided loyalty (the significance of a financial interest depends on many factors, such as size of investment in relation to your income, net worth and/or financial needs, your potential to influence decisions that could impact your interests, and the nature of the business or level of competition between the Company and the supplier, customer or competitor);
you, or a member of your family, acquire an interest in property (such as real estate, patent or other intellectual property rights or securities) in which you have reason to know the Company has, or might have, a legitimate interest;
you, or a member of your family, receive a loan or a guarantee of a loan from a customer, supplier or competitor (other than a loan from a financial institution made in the ordinary course of business and on an arms-length basis);
you divulge or use the Companys confidential information such as financial data, customer information, or computer programs for your own personal or business purposes;
you make gifts or payments, or provide special favors, to customers, suppliers or competitors (or their immediate family members) with a value significant enough to cause the customer, supplier or competitor to make a purchase, or take or forego
other action, which is beneficial to the Company and which the customer, supplier or competitor would not otherwise have taken; or
you are given the right to buy stock in other companies or you receive cash or other payments in return for promoting the services of an advisor, such as an investment banker, to the Company.
Neither your, nor members of your immediate family, are permitted to solicit or accept valuable gifts, payments, special favors or other consideration from customers, suppliers or competitors.
Conflicts are not always clear-cut. If you become aware of a conflict described above or any other conflict, potential conflict, or have a question as to a potential conflict, you should consult with higher levels of management or the Companys Compliance Team and/or follow the procedures described in Sections 10 and 11 of the Code. If you become involved in a situation that gives rise to an actual conflict, you must inform higher levels of management or the Companys Compliance Team of the conflict.
All confidential information concerning the Company obtained by you is the property of the Company and must be protected.
Confidential information includes all non-public information that might be of use to competitors, or harmful to the Company or its customers, if disclosed. You must maintain the confidentiality of such information entrusted to you by the Company, its customers and its suppliers, except when disclosure is authorized by the Company or required by law.
Examples of confidential information include, but are not limited to: the Companys trade secrets; business trends and projections; information about financial performance; new product or marketing plans; research and development ideas or information; manufacturing processes; information about potential acquisitions, divestitures and investments; stock splits, public or private securities offerings or changes in dividend policies or amounts; significant personnel changes; and existing or potential major contracts, orders, suppliers, customers or finance sources or the loss thereof.
Your obligation with respect to confidential information extends beyond the workplace. In that respect, it applies to communications with your family members and continues to apply even after your employment or director relationship with the Company terminates.
Our goal is to conduct our business with integrity.
You should endeavor to deal honestly with the Companys customers, suppliers, competitors, and employees. Under federal and state laws, the Company is prohibited from engaging in unfair methods of competition, and unfair or deceptive acts and practices. You should not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any other unfair dealing.
Examples of prohibited conduct include, but are not limited to:
bribery or payoffs to induce business or breaches of contracts by others;
acquiring a competitors trade secrets through bribery or theft;
making false, deceptive or disparaging claims or comparisons about competitors or their products or services; or
mislabeling products or services.
You should endeavor to protect the Companys assets and ensure their proper use.
Company assets, both tangible and intangible, are to be used only for legitimate business purposes of the Company and only by authorized employees or consultants. Intangible assets include intellectual property such as trade secrets, patents, trademarks and copyrights, business, marketing and service plans, engineering and manufacturing ideas, designs, databases, Company records, salary information, and any unpublished financial data and reports. Unauthorized alteration, destruction, use, disclosure or distribution of Company assets violates Company policy and this Code. Theft or waste of, or carelessness in using, these assets have a direct adverse impact on the Companys operations and profitability and will not be tolerated.
The Company provides computers, voice mail, electronic mail (e-mail), and Internet access to certain employees for the purpose of achieving the Companys business objectives. As a result, the Company has the right to access, reprint, publish, or retain any information created, sent or contained in any of the Companys computers or e-mail systems of any Company machine. You may not use e-mail, the Internet or voice mail for any illegal purpose or in any manner that is contrary to the Companys policies or the standards embodied in this Code.
You should not make copies of, or resell or transfer (externally or internally), copyrighted publications, including software, manuals, articles, books, and databases being used in the Company, that were created by another entity and licensed to the Company, unless you are authorized to do so under the applicable license agreement.
In no event should you load or use, on any Company computer, any software, third party content or database without receiving the prior written permission of the Information Systems Department to do so. You must refrain from transferring any data or information to any Company computer other than for Company use. You may use a handheld computing device or mobile phone in connection with your work for the Company, but must not use such device or phone to access, load or transfer content, software or data in violation of any applicable law or regulation or without the permission of the owner of such content, software or data. If you should have any question as to what is permitted in this regard, please consult with the Companys Information Systems Director.
You should report any violation or suspected violation of this Code to the appropriate Company personnel or via the Companys anonymous and confidential reporting procedures.
The Companys efforts to ensure observance of, and adherence to, the goals and policies outlined in this Code mandate that you promptly bring to the attention of the Compliance Team, any material transaction, relationship, act, failure to act, occurrence or practice that you believe, in good faith, is inconsistent with, in violation, or reasonably could be expected to give rise to a violation, of this Code. You should report any suspected violations of the Companys financial reporting obligations or any complaints or concerns about questionable accounting or auditing practices in accordance with the procedures set forth below.
Here are some approaches to handling your reporting obligations:
In the event you believe a violation of the Code, or a violation of applicable laws and/or governmental regulations has occurred or you have observed or become aware of conduct which appears to be contrary to the Code, immediately report the situation to your supervisor, the Compliance Team or call the Companys Confidential Compliance Hotline, 866-232-3201. Supervisor or managers who receive any report of a suspected violation must report the matter to the Compliance Team.
If you have or receive notice of a complaint or concern regarding the Companys financial disclosure, accounting practices, internal accounting controls, auditing, or questionable accounting or auditing matters, you must immediately advise your supervisor, or the Compliance Team.
If you wish to report any such matters anonymously or confidentially, then you may do so as follows: Mail a description of the suspected violation or other complaint or concern to:
Compliance Team
400 Valley Drive
Brisbane, CA 94005
c/o General Counsel
Calling our toll free Compliance Hotline, 866-232-3201.
Use common sense and good judgment; Act in good faith. You are expected to become familiar with and to understand the requirements of the Code. If you become aware of a suspected violation, dont disclosure to the appropriate parties try to investigate it or resolve it on your own. Prompt is vital to ensuring a thorough and timely investigation and resolution. The circumstances should be reviewed by appropriate personnel as promptly as possible, and delay may affect the results of any investigation. A violation of the Code, or of applicable laws and/or governmental regulations is a serious matter and could have legal implications. Allegations of such behavior are not taken lightly and should not be made to embarrass someone or put him or her in a false light. Reports of suspected violations should always be made in good faith.
Internal investigation. When an alleged violation of the Code, applicable laws and/or governmental regulations is reported, the Company will take appropriate action in accordance with the compliance procedures outlined in Section 11 of the Code. You are expected to cooperate in internal investigations of alleged misconduct or violations of the Code or of applicable laws or regulations.
No fear of retaliation. It is Company policy that there be no intentional retaliation against any person who provides truthful information to a Company or law enforcement official concerning a possible violation of any law, regulation or Company policy, including this Code. Persons who retaliate may be subject to civil, criminal and administrative penalties, as well as disciplinary action, up to and including termination of employment. In cases in which you report a suspected violation in good faith and are not engaged in the questionable conduct, the Company will attempt to keep its discussions with you confidential to the extent reasonably possible. In the course of its investigation, the Company may find it necessary to share information with others on a need to know basis. No retaliation shall be taken against you for reporting alleged violations while acting in good faith.
The Company has established this Code as part of its overall policies and procedures. To the extent that other Company policies and procedures conflict with this Code, you should follow this Code. The Code applies to all Company directors and Company employees, including all officers, in all locations.
The Code is based on the Companys core values, good business practices and applicable law. The existence of a Code, however, does not ensure that directors, officers and employees will comply with it or act in a legal and ethical manner. To achieve optimal legal and ethical behavior, the individuals subject to the Code must know and understand the Code as it applies to them and as it applies to others. You must champion the Code and assist others in knowing and understanding it.
Compliance. You are expected to become familiar with and understand the requirements of the Code. Most importantly, you must comply with it.
CEO Responsibility. The Companys CEO shall be responsible for ensuring that the Code is established and effectively communicated to all employees, officers and directors. Although the day-to-day compliance issues will be the responsibility of the Companys managers, the CEO has ultimate accountability with respect to the overall implementation of and successful compliance with the Code.
Corporate Compliance Management. The CEO shall choose a team of employees who will report to the CEO and be responsible for ensuring that the Code becomes an integral part of the Companys culture (the Compliance Team). The Corporate Compliance Team is currently the CFO, the Vice President of Human Resources and the General Counsel. The Compliance Teams charter is to ensure communication, training, monitoring, and overall compliance with the Code. The Compliance Team will, with the assistance and cooperation of the Companys officers, directors and managers, foster an atmosphere where employees are comfortable in communicating and/or reporting concerns and possible Code violations. The Company shall maintain a Confidential Compliance Hotline (866-232-3201) which will be monitored by the Compliance Team. The Company shall maintain a record of all calls received. The Compliance Team shall provide the Audit Committee on a quarterly basis a log of all calls to the Hotline, and a summary of all other communications expressing complaints or concerns received by the Compliance Team relating to the Companys financial disclosures, accounting, internal controls and auditing matters.
Internal Reporting of Violations. The Companys efforts to ensure observance of, and adherence to, the goals and policies outlined in this Code mandate that all
employees, officers and directors of the Company report suspected violations in accordance with Section 9 of this Code.
Screening Of Employees. The Company shall exercise due diligence when hiring and promoting employees and, in particular, when conducting an employment search for a position involving the exercise of substantial discretionary authority, such as a member of the executive team, a senior management position or an employee with financial management responsibilities. The Company shall make reasonable inquiries into the background of each individual who is a candidate for such a position. All such inquiries shall be made in accordance with applicable law and good business practice.
Access to the Code. The Company shall ensure that employees, officers and directors may access the Code on the Companys website. In addition, each current employee will be provided with a copy of the Code. New employees will receive a copy of the Code as part of their new hire information. From time to time, the Company will sponsor employee training programs in which the Code and other Company policies and procedures will be discussed.
Monitoring. The officers of the Company shall be responsible to review the Code with all of the Companys managers. In turn, the Companys managers with supervisory responsibilities should review the Code with his/her direct reports. Managers are the go to persons for employee questions and concerns relating to the Code, especially in the event of a potential violation. Managers or supervisors will immediately report any violations or allegations of violations to the Compliance Team. Managers will work with the Compliance Team in assessing areas of concern, potential violations, any needs for enhancement of the Code or remedial actions to effect the Codes policies and overall compliance with the Code and other related policies.
Auditing. Resources selected by the Nominating and Corporate Governance Committee will be responsible for auditing the Companys compliance with the Code.
Internal Investigation. When an alleged violation of the Code is reported, the Company shall take prompt and appropriate action in accordance with the law and regulations and otherwise consistent with good business practice. If the suspected violation appears to involve either a possible violation of law or an issue of significant corporate interest, or if the report involves a complaint or concern of any person, whether employee, a shareholder or other interested person regarding the Companys financial disclosure, internal accounting controls, questionable auditing or accounting matters or practices or other issues relating to the Companys
accounting or auditing, then the manager or investigator should immediately notify the Compliance Team and/or his or her Vice President or other corporate officer. If a suspected violation involves any director or executive officer or if the suspected violation concerns any fraud, whether or not material, involving management or other employees who have a significant role in the Companys internal controls, the manager, the Compliance Team or any person who received such report should immediately report the alleged violation to the Compliance Team, if appropriate, the Chief Executive Officer and/or Chief Financial Officer, and, in every such case, the Chairman of the Audit Committee. The Compliance Team or the Chairman of the Audit Committee, as applicable, shall assess the situation and determine the appropriate course of action. At a point in the process consistent with the need not to compromise the investigation, a person who is suspected of a violation shall be apprised of the alleged violation and shall have an opportunity to provide a response to the investigator.
Disciplinary Actions. Subject to the following sentence, the Compliance Team, after consultation with the Vice President of Human Resources and the General Counsel, shall be responsible for implementing the appropriate disciplinary action in accordance with the Companys policies and procedures for any employee who is found to have violated the Code. If a violation has been reported to the Audit Committee or another committee of the Board, that Committee shall be responsible for determining appropriate disciplinary action. Any violation of applicable law or any deviation from the standards embodied in this Code will result in disciplinary action, up to and including termination of employment. Any employee engaged in the exercise of substantial discretionary authority, including any Senior Officer, who is found to have engaged in a violation of law or unethical conduct in connection with the performance of his or her duties for the Company, shall be removed from his or her position and not assigned to any other position involving the exercise of substantial discretionary authority. In addition to imposing discipline upon employees involved in non-compliant conduct, the Company also will impose discipline, as appropriate, upon an employees supervisor, if any, who directs or approves such employees improper actions, or is aware of those actions but does not act appropriately to correct them, and upon other individuals who fail to report known non-compliant conduct. In addition to imposing its own discipline, the Company will bring any violations of law to the attention of appropriate law enforcement personnel.
Retention of Reports and Complaints. All reports and complaints made to or received by the Compliance Team or the Chair of the Audit Committee shall be logged into a record maintained for this purpose by the Compliance Team and this record of such report shall be retained for five (5) years.
Required Government Reporting. Whenever conduct occurs that requires a report to the government, the Compliance Team shall be responsible for complying with such reporting requirements.
Corrective Actions. Subject to the following sentence, in the event of a violation of the Code, the manager and members of the Compliance Team should assess the situation to determine whether the violation demonstrates a problem that requires remedial action as to Company policies and procedures. If a violation has been reported to the Audit Committee or another committee of the Board, that committee shall be responsible for determining appropriate remedial or corrective actions. Such corrective action may include providing revised public disclosure, retraining Company employees, modifying Company policies and procedures, improving monitoring of compliance under existing procedures and other action necessary to detect similar non-compliant conduct and prevent it from occurring in the future. Such corrective action shall be documented, as appropriate.
The most current version of this Code will be posted and maintained on the Companys website and filed as an exhibit to the Companys Annual Report on Form 10-K. The Companys Annual Report on Form 10-K shall disclose that the Code is maintained on the website and shall disclose that substantive amendments and waivers will also be posted on the companys website.
Any substantive amendment or waiver of this Code (i.e., a material departure from the requirements of any provision) particularly applicable to or directed at executive officers or directors may be made only after approval by the Board of Directors and will be disclosed within five (5) business days of such action (a) on the Companys website for a period of not less than twelve (12) months and (b) in a Form 8-K filed with the Securities and Exchange Commission. Such disclosure shall include the reasons for any waiver. The Company shall retain the disclosure relating to any such amendment or waiver for less than five (5) years.
EXHIBIT 23.1
Board of Directors
bebe stores, inc.
We consent to the incorporation by reference in Registration Statement Nos. 333-65201 and 333-62096 of bebe stores, inc. on Form S-8 of our report dated August 20, 2004, appearing in this Annual Report on Form 10-K of bebe stores, inc. for the fiscal year ended June 30, 2004.
/s/ Deloitte & Touche LLP |
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San Francisco, California |
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September 13, 2004 |
EXHIBIT 31.1
I, Gregory Scott, certify that:
1. I have reviewed this annual report on Form 10-K of bebe stores, inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: September 13, 2004 |
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/s/ Gregory Scott |
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Gregory Scott |
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Chief Executive Officer |
EXHIBIT 31.2
I, Walter Parks, certify that:
1. I have reviewed this annual report on Form 10-K of bebe stores, inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(c) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors:
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: September 13, 2004 |
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/s/ Walter Parks |
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Walter Parks |
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Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of bebe stores, inc. (the Company) on Form 10-K for the fiscal year ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Gregory Scott, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 906), that:
(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Gregory Scott |
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Gregory Scott |
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Chief Executive Officer |
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September 13, 2004 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to bebe stores, inc. and will be retained by bebe stores, inc. and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of bebe stores, inc. (the Company) on Form 10-K for the fiscal year ended June 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Walter Parks, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 906), that:
(1) The Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Walter Parks |
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Walter Parks |
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Chief Financial Officer |
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September 13, 2004 |
A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to bebe stores, inc. and will be retained by bebe stores, inc. and furnished to the Securities and Exchange Commission or its staff upon request.