8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8–K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): July 7, 2005

THE WET SEAL, INC.

(Exact Name of Registrant as Specified in Charter)

Delaware	0-18632	33-0415940
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

26972 Burbank Foothill Ranch, California	92610
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (949) 583-9029

N/A

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

The Wet Seal, Inc. (the “Company”) entered into an agreement (the “Agreement”) with Michael Gold on July 7, 2005 to compensate him for his part in the sales turnaround of the Company and to provide incentives for his future assistance in achieving the Company’s return to profitability. Mr. Gold has been acting as a consultant to the Company and has been instrumental in both the design and execution of the Company’s new merchandise strategy. Mr. Gold will continue in the role until January 31, 2007.

Mr. Gold will be paid $2.8 million for the fiscal year ending January 28, 2006 and $1.2 million for the fiscal year ending February 3, 2007.

In addition, Mr. Gold will be awarded 2.0 million shares of restricted stock to vest on January 28, 2006 and two tranches of performance shares of 1,750,000 each (the “Shares”). Tranche 1 of the Shares is to vest as follows: 350,000 shares will vest if, at any time after January 1, 2006 and before January 1, 2008, the trailing 20-day weighted average price (the “20-Day Average”) equals or exceeds $3.50 per share; an additional 350,000 shares will vest (until tranche 1 is 100% vested) each time the 20-Day Average price of the Company’s Class A common stock during the vesting period equals or exceeds $4.00, $4.50, $5.00 and $5.50 per share, respectively. Tranche 2 of the Shares is to vest as follows: 350,000 shares will vest if, at any time after January 1, 2007 and before January 1, 2008, the 20-Day Average equals or exceeds $6.00 per share; an additional 350,000 shares will vest (until tranche 2 is 100% vested) each time the 20-Day Average price of the Company’s Class A common stock during the vesting period equals or exceeds $6.50, $7.00, $7.50 and $8.00 per share, respectively. In addition, the tranche 2 Shares to be otherwise earned in calendar year 2007 can vest earlier if sales per square foot of the Company’s Wet Seal division average $350 per square foot for any trailing 12 month period and an agreed merchandise margin is maintained.

The Company has not completed its determination of the full amount and timing of the charges it expects to take related to the Agreement. However, the Company believes it will take significant charges for its second quarter ending July 30, 2005 and most likely for all future quarters through January 31, 2007. Except for total cash payments of $4.0 million, all other charges will be non-cash.

The Company has agreed to file a registration statement on form S-8 covering the Shares to be issued to Mr. Gold and, if that form of registration is not available, to file one or more registration statements to enable the resale of the Shares when they are vested.

A copy of the Agreement and the Award Agreement governing the issuance of the Shares and the press release announcing the agreement with Mr. Gold are filed herewith as Exhibits 10.1, 10.2 and 99.1, respectively.

Item 9.01. Financial Statements and Exhibits

(a) Financial Statements of Business Acquired.

Not Applicable.

(b) Pro Forma Financial Information.

Not Applicable.

(c) Exhibits.

10.1	Agreement entered into between the Company and Mr. Gold.
10.2	Award Agreement entered into between the Company and Mr. Gold.
99.1	Press release, dated July 12, 2005, issued by the Company.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	THE WET SEAL, INC. (Registrant)
Date: July 12, 2005	By:	/S/ DOUGLAS FELDERMAN
	Name:	Douglas Felderman
	Title:	Chief Financial Officer

EXHIBIT INDEX

EXHIBIT NUMBER	DESCRIPTION
10.1	Agreement entered into between the Company and Mr. Gold.
10.2	Award Agreement entered into between the Company and Mr. Gold.
99.1	Press release, dated July 12, 2005, issued by the Company.

EX-10.1

Exhibit 10.1

THE WET SEAL, INC.

July 6, 2005

Mr. Michael Gold

YM inc.

50 Dufflaw Road

Toronto, Ontario M6A2W1

Dear Michael:

We are pleased to set forth the framework of your continuing relationship as a consultant to The Wet Seal, Inc. (the “Company”).

Position and Duties:

You have been consulting for us since November 1, 2004 and shall continue to serve as a consultant to the Company in the manner you are presently acting, routinely working with our merchants and buyers, consulting with the Board and the Company’s Chief Executive Officer concerning the merchandising of the stores of our Wet Seal division and the retention of appropriate executive personnel for that division. We will discuss with you any plans for the opening or closing of Wet Seal stores. You will be provided regularly (weekly/monthly and quarterly) with financial and other information you believe necessary for proper management of the division and you will be invited to attend board meetings as an observer subject to the confidentiality provisions contemplated hereby.

Effective Date:

January 1, 2005 (Grant Date).

Term:	Through and including January 31, 2007.
Cash Payment:	$4,000,000 payable in the following manner: $2,100,000 upon the execution of this Agreement and $1,900,000 in 19 equal monthly installments of $100,000 commencing as of July 1, 2005 ($4,000,000 total).
Equity:	Restricted Stock – Time Based. A grant of 2,000,000 shares, which shall vest on January 28, 2006 in accordance with the terms of the Award Agreement attached as Exhibit A hereto.
	Performance Shares. A grant of 3,500,000 shares which shall vest in accordance with the schedule contained in the Award Agreement, attached as Exhibit A (The Company acknowledges that 300,000 of these Performance Shares, must be issued under a separate Performance Grant pursuant to a shareholder approved plan within the next 30 days.)
Conflict of Interest:	You have disclosed to the Company the extent and the nature of your retail businesses and the Company acknowledges that there are no conflicts of interest which shall affect the performance of your duties hereunder. You agree that if you or any of your affiliates find or are offered a store location in the United States or any of its territories for your business, the Company shall be given written notice of the location of the store and its intended purpose and a period of 7 days to object to your opening such store. If the Company objects, you will not open the store.
Sale of Company:	All unvested shares will vest upon a change in control as defined in Section 2.3 of the Company’s 2005 Stock Incentive Plan, as amended from time to time.

2

Restrictive Covenants:	Standard confidentiality and non-solicitation provisions shall apply.
Restrictions on Resale:	The restricted shares and the performance shares (collectively, the “Shares”) will be unregistered under the securities laws. The Company shall include the Shares under a registration statement on Form S-8 to be filed with the Securities and Exchange Commission as promptly as practicable.
	In the event the registration statement on Form S-8 covering the resale of the Shares is not available at the time you wish to sell your vested Shares, the Company will use its reasonable best efforts, at it’s expense, to file one or more registration statements covering the resale of the vested Shares at such times and in such amounts of Shares as you request, and shall maintain the effectiveness of the registration statement(s) until you have sold all of the vested Shares or until such time as they may be sold by you without the necessity of a registration statement under applicable law.
Governing Law:	California.
Dispute Resolution:	Binding Arbitration.

Very truly yours,

THE WET SEAL, INC.

By:	/s/ JOEL WALLER
	Joel Waller, President
Agreed:
/s/ MICHAEL GOLD
Michael Gold

3

EX-10.2

Exhibit 10.2

AWARD AGREEMENT

UNDER THE WET SEAL, INC.

2005 STOCK INCENTIVE PLAN

THIS AWARD AGREEMENT (this “Agreement”), dated as of July 7, 2005 and effective as of January 1, 2005 (the “Grant Date”), by and between The Wet Seal, Inc. (the “Company”) and Michael Gold (the “Participant”) who is a consultant to the Company, evidences the grant by the Company of a stock award of performance shares (the “Performance Shares”) to the Participant and restricted stock (the “Restricted Stock”) under The Wet Seal, Inc. 2005 Stock Incentive Plan, (as amended from time to time the “Plan”) and the Participant’s acceptance thereof. The Company and the Participant agree as follows:

1. Basis for Award. The award of the Performance Shares is made under the Plan pursuant to Section 10.1 and the award of the Restricted Stock is made under Section 9 of the Plan for all services rendered and to be rendered to the Company. There is no Section 162(m) compliance necessary relating to this Award.

2. Stock Awarded.

The Company hereby awards to the Participant, an award of Performance Shares and Restricted Stock in an aggregate amount of 5,500,000 shares of Class A common stock (collectively, the “Shares”) which shall be subject to the conditions and restrictions set forth in the Plan and this Agreement. For purposes of this Agreement, 3,500,000 Performance Shares shall be referred to as “Tranche 1” and “Tranche 2”, and 2,000,000 Restricted Shares shall be referred to as “Tranche 3”, respectively (collectively the “Tranches”).

The Shares shall be evidenced by book-entry registration with the Company’s transfer agent, subject to such stop-transfer orders and other terms deemed appropriate by the Committee to reflect the restrictions applicable to the Shares. Notwithstanding the foregoing, if any certificate is issued in respect of the Shares at the sole discretion of the Committee, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such award, substantially in the following form:

“THE TRANSFERABILITY OF THIS CERTIFICATE AND THE CLASS A COMMON STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) CONTAINED IN THE AWARD AGREEMENT DATED AS OF JANUARY 1, 2005, ENTERED INTO BETWEEN THE REGISTERED OWNER AND THE WET SEAL, INC.”

If a certificate is issued with respect to the Shares, the Committee may require that the certificate evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that the Participant shall have delivered a stock power, endorsed in blank, relating to the shares covered by such Award. At the expiration of the restrictions, the Company shall instruct the transfer agent to release the shares from the restrictions applicable to such Shares, subject to the terms of the Plan and applicable law or, in the event that a certificate has been issued, redeliver to the Participant (or his or her legal representative, beneficiary or heir) share certificates for the shares deposited with it without any legend, except as otherwise provided by the Plan, this Agreement or applicable law. During the period that the Participant holds the Shares, the Participant shall have the right to receive dividends on and to vote the

2

Shares while it is subject to restriction, except as otherwise provided by the Plan. If the Shares are forfeited, in whole or in part, the Participant will assign, transfer and deliver any evidence of the Shares to the Company and cooperate with the Company to reflect such forfeiture. By accepting these Shares, the Participant acknowledges that the Company does not have an adequate remedy in damages for the breach by the Participant of the conditions and covenants set forth in this Agreement and agrees that the Company is entitled to and may obtain an order or a decree of specific performance against the Participant issued by any court having jurisdiction.

Except as provided in the Plan or this Agreement, the restrictions on the Shares are that prior to vesting as provided in Section 3 of this Agreement, the Shares will be forfeited by the Participant and all of the Participant’s rights to such stock shall immediately terminate without any payment or consideration by the Company, in the event of any sale, assignment, transfer, hypothecation, pledge or other alienation of such Shares made or attempted, whether voluntary or involuntary, and if involuntary whether by process of law in any civil or criminal suit, action or proceeding, whether in the nature of an insolvency or bankruptcy proceeding or otherwise. Notwithstanding the foregoing, Participant may transfer the Shares to his Immediate Family Members (or to trusts or partnerships or limited liability companies established for such family members); provided, that, such transfer is for no consideration and effected through such procedures as the Committee may establish from time to time.

3. Vesting.

The restrictions described in Section 2 of this Agreement will lapse with respect to 350,000 of the Performance Shares in Tranche 1 if, at any time following the first anniversary of the Grant Date and before the third anniversary of the Grant Date (the “Tranche 1 Vesting

3

Period”), the weighted average closing price of the Company’s Class A Common Stock (the “Stock”) for any trailing 20 trading days (the “20-Day Average”) during the Tranche 1 Vesting Period equals or exceeds $3.50 per share and the restrictions described in Section 2 of this Agreement will lapse with respect to an additional 350,000 of the Performance Shares in Tranche 1 (until the entire Tranche 1 is 100% vested) each time the 20-Day Average per share price of the Stock during the Tranche 1 Vesting Period equals or exceeds $4.00; $4.50; $5.00 and $5.50. For the avoidance of doubt, if the 20-Day Average equals or exceeds $5.50 per share at any time during the Tranche 1 Vesting Period, the restrictions on 100% of Tranche 1 shall lapse.

The restrictions described in Section 2 of this Agreement will lapse with respect to 350,000 of the Performance Shares in Tranche 2 if, at any time following the second anniversary of the Grant Date and before the third anniversary of the Grant Date (the “Tranche 2 Vesting Period”), the 20-Day Average during the Tranche 2 Vesting Period equals or exceeds $6.00 per share and the restrictions described in Section 2 of this Agreement will lapse with respect to an additional 350,000 of the Performance Shares in Tranche 2 (until the entire Tranche 2 is 100% vested) each time the 20-Day Average per share price of the Stock during the Tranche 2 Vesting Period equals or exceeds $6.50; $7.00; $7.50 and $8.00. For the avoidance of doubt, if the 20-Day Average equals or exceeds $8.00 per share at any time during the Tranche 2 Vesting Period, the restrictions on 100% of Tranche 2 shall lapse, and further, provided, that the restrictions described in Section 2 of this Agreement will in any event lapse with respect to all the Performance Shares in Tranche 2 which are priced at $6.00 and over at such time before the third anniversary of the Grant Date as the reported sales per square foot of all Wet Seal Stores open for at least 12 months equal or exceed $350 per square feet for that trailing twelve month period and the weighted average merchandise margin (internal gross margin) on those sales is at least 59%.

4

The restrictions described in Section 2 of this Agreement shall lapse on January 28, 2006 with respect to 100% of the Restricted Shares in Tranche 3, whether or not you are still employed by the Company.

If any of the Performance Shares are still outstanding as of the third anniversary of the Grant Date and have not otherwise vested after giving effect to the vesting provisions of clauses (a) and (b) above, the unvested shares of Stock shall automatically be forfeited without the payment of any consideration to the Participant.

Except as provided herein, if the Participant ceases to be a Consultant to the Company at any time and for any reason prior to the vesting of the Performance Shares, all shares that are still outstanding upon such termination of employment shall automatically be forfeited without the payment of any consideration to the Participant upon such cessation of service. Notwithstanding the foregoing, if Participant’s service is terminated by death or disability, at any time during the Tranche 1 or Tranche 2 Vesting Period, Participant shall continue to vest into the Performance Shares that he would have vested into, as though he were still employed, for the one-year period following his termination of continuous service (but not beyond the Tranche 2 Vesting Period) but the Restricted Shares shall vest on the date the restrictions thereon would otherwise lapse, whatever the reason for termination. If Participant’s service is terminated without cause all Restricted and Performance Shares shall immediately vest. The Company acknowledges the Performance Shares will not be forfeited after January 31, 2007, if Participant has performed his services hereunder up until that date.

5

On a change of control, as defined in §2.3 of the Company’s 2005 Stock Incentive Plan, as amended from time to time, the Restricted and Performance Shares will be immediately vested.

4. Company; Participant.

The term “Company” as used in this Agreement with reference to service shall include the Company and its Affiliates, as appropriate.

Whenever the word “Participant” is used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to the beneficiaries, the executors, the administrators, or the person or persons to whom the Performance Shares may be transferred by will or by the laws of descent and distribution, and as provided in the last sentence of Section 2(c) hereof the word “Participant” shall be deemed to include such person or persons.

5. Adjustments. The Award may be adjusted as provided for in Section 12 of the Plan and the Committee shall not exercise any discretion under Section 10.4 of the Plan to reduce Participant’s award hereunder.

6. Compliance with Law. Notwithstanding any of the provisions hereof, the Company will not be obligated to issue or transfer any Stock to the Participant hereunder, if the exercise thereof or the issuance or transfer of such Stock shall constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority. Any determination in this connection by the Committee shall be final, binding and conclusive. The Company will take all appropriate steps, including, to the extent necessary, the

6

filing of an appropriate registration statement at its sole expense, such that Participant may sell Shares upon the lapse of the restrictions set forth herein (with respect to each group of 350,000 vested Shares), subject to the Company’s insider trading policies.

7. No Right to Continued Service. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue in the service of the Company or shall interfere with or restrict in any way the rights of the Company, which are hereby expressly reserved, to terminate the services of or discharge the Participant at any time for any reason whatsoever, with or without cause. Except as provided herein, Participant acknowledges and agrees that the continued vesting of the Performance Shares granted hereunder is premised upon his provision of future services with the Company and such Performance Shares shall not accelerate upon his termination of continuous service for any reason.

8. Representations and Warranties of Participant. The Participant represents and warrants to the Company that:

Agrees to Terms of the Plan. The Participant has received a copy of the Plan and has read and understands the terms of the Plan and this Agreement, and agrees to be bound by their terms and conditions. In the event of a conflict or inconsistency between the terms and provisions of the Plan and the provisions of this Agreement, this Agreement shall govern and control. All capitalized terms not defined herein shall have the meaning ascribed to them as set forth in the Plan. The Participant acknowledges that there may be adverse tax consequences upon the vesting of Performance Shares or disposition of the shares of Stock once vested, and that the Participant should consult a tax adviser prior to such time.

7

Cooperation. The Participant agrees to sign such additional documentation as may reasonably be required from time to time by the Company.

9. Taxes.

The Participant agrees that, subject to clause 9(b) below, no later than the date as of which the restrictions shall lapse with respect to all or any of the Shares covered by this Agreement, the Participant shall pay to the Company (in cash or to the extent permitted by the Board, Stock held by the Participant for at least six (6) months whose Fair Market Value on the date the Shares vest is equal to the amount of the Participant’s tax withholding liability) any federal, state or local taxes of any kind required by law to be withheld, if any, with respect to the Shares for which the restrictions shall lapse. The Company or its affiliates shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the Shares.

If the Participant properly elects to include in gross income for federal income tax purposes an amount equal to the Fair Market Value of the Shares granted hereunder pursuant to Section 83(b) of the Code, the Participant shall pay to the Company, or make other arrangements satisfactory to the Board to pay to the Company in the year of such grant, any federal, state or local taxes required to be withheld with respect to such Stock. If the Participant fails to make such payments, the Company or its affiliates shall, to the extent permitted by law, have the right to deduct from any payment of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to such Stock.

8

10. Notice. Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered to the party for whom it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided; provided, that, unless and until some other address be so designated, all notices or communications by the Participant to the Company shall be mailed or delivered to the Company at its principal executive offices, and all notices or communications by the Company to the Participant may be given to the Participant personally or may be mailed to him at his address as recorded in the records of the Company. Notwithstanding the foregoing, at such time as the Company institutes a policy for delivery of notice by e-mail, notice may be given in accordance with such policy.

11. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of California without regard to its conflict of law principles.

9

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

THE WET SEAL, INC.
By:	/s/ Joel Waller
Name:	Joel Waller
Title:	CEO
PARTICIPANT
/s/ Michael Gold
Michael Gold

10

EX-99.1

Exhibit 99.1

Contact:

Investor Relations

(949) 699-4804

THE WET SEAL, INC. ENTERS INTO

AGREEMENT WITH MICHAEL GOLD

FOOTHILL RANCH, CA, July 12, 2005 — Specialty retailer The Wet Seal, Inc. (Nasdaq: WTSLA) today announced that it had entered into an agreement on July 7, 2005 with Michael Gold to compensate him for his part in the sales turnaround of the Company and provide incentives for his future assistance in achieving the Company’s return to profitability. Mr. Gold has been acting as a consultant to the Company and has been instrumental in both the design and execution of the Company’s new merchandise strategy. Mr. Gold will continue in the role until January 31, 2007.

Mr. Gold will be paid $2.8 million for the fiscal year ending January 28, 2006 (the current fiscal year of the Company) and $1.2 million for the fiscal year ending February 3, 2007.

In addition, Mr. Gold will be awarded 2.0 million shares of restricted stock to vest on January 28, 2006, the last day of this fiscal year, and two tranches of performance shares of 1,750,000 each (the “Shares”). Tranche 1 of the Shares is to vest as follows: 350,000 shares will vest if, at any time after January 1, 2006 and before January 1, 2008, the trailing 20-day weighted average closing price (the “20-Day Average”) equals or exceeds $3.50 per share; an additional 350,000 shares will vest (until tranche 1 is 100% vested) each time the 20-Day Average price of the Company’s stock during the vesting period equals or exceeds $4.00, $4.50, $5.00 and $5.50 per share, respectively. Tranche 2 of the Shares is to vest as follows: 350,000 shares will vest if, at any time after January 1, 2007 and before January 1, 2008, the 20-Day Average equals or exceeds $6.00 per share; an additional 350,000 shares will vest (until tranche 2 is 100% vested) each time the 20-Day Average price of the Company’s stock during the vesting period equals or exceeds $6.50, $7.00, $7.50 and $8.00 per share, respectively. In addition, the tranche 2 Shares to be otherwise earned in calendar year 2007 can vest earlier if sales per square foot of our Wet Seal division average $350 per square foot for any trailing 12 month period and an agreed merchandise margin is maintained.

The Company has not completed its determination of the full amount and timing of the charges it expects to take related to this agreement. However, the Company believes it will take significant charges for its second quarter ending July 30, 2005 and most likely for all future quarters through January 31, 2007. Except for total cash payments of $4.0 million, all other charges will be non-cash.

The Company has agreed to file a registration statement on form S-8 covering the Shares to be issued to Mr. Gold and, if that form of registration is not available, to file one or more registration statements to enable the resale of the Shares when they are vested.

Headquartered in Foothill Ranch, California, The Wet Seal, Inc. is a leading specialty retailer of fashionable and contemporary apparel and accessory items. The Company currently operates a total of 398 stores in 46 states, the District of Columbia and Puerto Rico, including 307 Wet Seal stores and 91 Arden B. stores. The company’s products can also be purchased online at www.wetseal.com or www.ardenb.com. For more company information, visit www.wetsealinc.com.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This news release contains forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements that relate to the Company’s opening and closing of stores, profitability and growth, demand for its products or any other statements that relate to the intent, belief, plans or expectations of the Company or its management. All forward-looking statements made by the Company involve material risks and uncertainties and are subject to change based on factors beyond the Company’s control. Accordingly, the Company’s future performance and financial results may differ materially from those expressed or implied in any such forward-looking statements. Such factors include, but are not limited to, those described in the Company’s filings with the Securities and Exchange Commission. This news release contains results reflecting partial year data and non-fiscal data that may not be indicative of results for similar future periods or for the full year. The Company will not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

SOURCE: The Wet Seal, Inc.