SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT - AUGUST 19, 1997
(Date of Earliest Event Reported)
The Wet Seal, Inc.
(Exact name of registrant as specified in its charter)
Commission File No. 0-18632
Delaware 33-0415940
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(State of Incorporation) (I.R.S. Employer
Identification No.)
64 Fairbanks, Irvine, California 92718
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (714) 583-9029
Continued on following page(s)
Page 1 of 76 Pages
Exhibit Index: Page 8
Page 2 of 76 Pages
Item 5. Other Events
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Adoption of Stockholder Rights Plan.
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On August 19, 1997, the Board of Directors of The Wet Seal, Inc.,
a Delaware corporation (the "Company"), declared a dividend of one Preferred
Stock Purchase Right (a "Class A Right") for each outstanding share of the
Company's Class A Common Stock, par value $0.10 per share (the "Class A Common
Stock") and one Preferred Stock Purchase Right (a "Class B Right", and together
with the Class A Rights, the "Rights"), for each outstanding share of Class B
Common Stock, par value $0.10 (the "Class B Common Stock", and together with the
Class A Common Stock, the "Common Stock"). The dividend is payable as of August
29, 1997 to stockholders of record on that date. Each Class A Right entitles the
registered holder to purchase from the Company one one-hundredth (1/100) of a
share of a new series of preferred shares of the Company, designated as Class A
Junior Preferred Stock (the "Class A Preferred Stock"), and each Class B Right
entitles the registered holder to purchase from the Company one one-hundredth
(1/100) of a share of a new series of preferred stock of the Company, designated
as Class B Junior Preferred Stock (the "Class B Preferred Stock", and together
with the Class A Preferred Stock, the "Preferred Stock"), in each case at a
price of $73.00 per one one-hundredth (1/100) of a share (the "Exercise Price"),
subject to certain adjustments. The description and terms of the Rights are set
forth in a Rights Agreement, dated as of August 19, 1997 (as the same may be
amended from time to time, the "Rights Agreement"), between the Company and
American Stock and Trust Transfer Company, as rights agent ("Rights Agent").
Initially the Rights will not be exercisable, certificates will
not be sent to stockholders, and the Rights will automatically trade with the
Common Stock.
The Rights, unless earlier redeemed by the Board of Directors,
become exercisable upon the close of business on the day (the "Distribution
Date") which is the earlier of (i) the tenth day following a public announcement
that a person or group of affiliated or associated persons, with certain
exceptions set forth below, has acquired beneficial ownership of 12% or more of
the outstanding voting stock of the Company (an "Acquiring Person") and (ii) the
tenth business day (or such later date as may be determined by the Board of
Directors prior to such time as any person or group of affiliated or associated
persons becomes an Acquiring Person) after the date of the commencement or
announcement of a person's or group's intention to commence a tender or exchange
offer the consummation of which would result in the ownership of 20% or more of
the Company's outstanding voting stock (even if no shares are actually purchased
pursuant to such offer). Prior to such date, the Rights would not be
exercisable, would not be represented by a separate certificate, and would not
be transferable apart from the Company's Common Stock, but will instead be
evidenced, with respect to any of the Common Stock certificates outstanding as
of August 29, 1997, by such Common Stock certificate. An Acquiring Person does
not include (A) the Company, (B) any subsidiary of the Company, (C) any employee
benefit plan or employee stock plan of the Company or of any subsidiary of the
Page 3 of 76 Pages
Company, or any trust or other entity organized, appointed, established or
holding Common Stock for or pursuant to the terms of any such plan, (D) any
Original Class B Stockholder (as such term is defined in the Company's restated
Certificate of Incorporation, as in effect on the date of the Rights Agreement)
or any Permitted Transferee (as such term is defined in the Company's restated
Certificate of Incorporation, as in effect on the date of the Rights Agreement)
of any such Original Class B Stockholder, or (E) any person or group whose
ownership of 12% or more of the shares of voting stock of the Company then
outstanding results solely from (i) any action or transaction or transactions
approved by the Board of Directors before such person or group became an
Acquiring Person, or (ii) a reduction in the number of issued and outstanding
shares of voting stock of the Company pursuant to a transaction or transactions
approved by the Board of Directors (provided that any person or group that does
not become an Acquiring Person by reason of clause (i) or (ii) above shall
become an Acquiring Person upon acquisition of an additional 1% or more of the
Company's voting stock unless such acquisition of additional voting stock will
not result in such person or group becoming an Acquiring Person by reason of
such clause (i) or (ii)).
A copy of a Summary of Rights will be distributed to stockholders
of record as of August 29, 1997 (the "Summary of Rights").
Until the Distribution Date (or earlier redemption or expiration
of the Rights), new Common Stock certificates issued after August 29, 1997 will
contain a legend incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Company's Common Stock certificates
outstanding as of August 29, 1997, with or without a copy of the Summary of
Rights attached, will also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate. As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights
(the "Right Certificates") will be mailed to holders of record of the Company's
Common Stock as of the close of business on the Distribution Date and such
separate certificates alone will evidence the Rights from and after the
Distribution Date.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on August 29, 2007, unless earlier
redeemed by the Company as described below.
The Preferred Stock is non-redeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, subordinate to any other series of the Company's preferred stock. The
Preferred Stock may not be issued except upon exercise of Rights. The holders of
each share of Class A Preferred Stock or Class B Preferred Stock will be
entitled to receive when, as and if declared, a quarterly dividend in an amount
equal to the greater of $1.00 per share and 100 times the cash dividends
declared on the Company's Class A Common Stock or Class B Common Stock, as
appropriate. In addition, the Class A Preferred Stock or Class B Preferred Stock
is entitled to 100 times any non-cash dividends (other than dividends payable in
Page 4 of 76 Pages
equity securities or certain rights or warrants) declared on the Common Stock,
in like kind, as appropriate. In the event of liquidation, the holders of Class
A Preferred Stock or Class B Preferred Stock will be entitled to receive for
each share of Class A Preferred Stock or Class B Preferred Stock, a liquidation
payment in an amount equal to the greater of $73.00 per one one-hundredth
(1/100) of a share or 100 times the payment made per share of Class A Common
Stock or Class B Common Stock, as appropriate. Each share of Class A Preferred
Stock will have 100 votes and each share of Class B Preferred Stock will have
1,000 votes, in each case voting together with the Common Stock. In the event of
any merger, consolidation or other transaction in which Class A Common Stock or
Class B Common Stock is exchanged, each share of Class A Preferred Stock or
Class B Preferred Stock will be entitled to receive 100 times the amount
received per share of Class A Common Stock or Class B Common Stock, as
appropriate. The rights of Preferred Stock as to dividends, liquidation and
voting are protected by anti-dilution provisions.
The number of shares of Preferred Stock issuable upon exercise of
the Rights is subject to certain adjustments from time to time in the event of a
stock dividend on, or a subdivision or combination of, the Common Stock. The
Exercise Price for the Rights is subject to adjustment in the event of
extraordinary distributions of cash or other property to holders of Common
Stock.
Unless the Rights are earlier redeemed or the transaction is
approved by the Board of Directors and the Continuing Directors (as defined in
the Rights Agreement), in the event that, after the time that the Rights become
exercisable, the Company were to be acquired in a merger or other business
combination (in which any shares of Class A Common Stock or Class B Common Stock
are changed into or exchanged for other securities or assets) or more than 50%
of the assets or earning power of the Company and its subsidiaries (taken as a
whole) were to be sold or transferred in one or a series of related
transactions, the Rights Agreement provides that proper provision will be made
so that each holder of record of a Right will from and after such date have the
right to receive, upon payment of the Exercise Price, that number of shares of
common stock of the acquiring company having a market value at the time of such
transaction equal to two times the Exercise Price. In addition, unless the
Rights are earlier redeemed, if a person or group (with certain exceptions)
becomes the beneficial owner of 12% or more of the Company's voting stock (other
than pursuant to a tender or exchange offer for all outstanding shares of Class
A Common Stock or Class B Common Stock that is approved by the Board of
Directors, after taking into account the long-term value of the Company and all
other factors they consider relevant in the circumstances (a "Qualifying Tender
Offer")), the Rights Agreement provides that proper provision will be made so
that each holder of record of a Right, other than the Acquiring Person (whose
Rights will thereupon become null and void), will thereafter have the right to
receive, upon payment of the Exercise Price, that number of shares of the Class
A Preferred Stock or Class B Preferred Stock having a market value at the time
of the transaction equal to two times the Exercise Price (such market value to
be determined with reference to the market value of Class A Common Stock or
Class B Common Stock as provided in the Rights Agreement).
Page 5 of 76 Pages
Fractions of shares of Preferred Stock (other than fractions that
are integral multiples of one one-hundredth (1/100) of a share) may, at the
election of the Company, be evidenced by depositary receipts. The Company may
also issue cash in lieu of fractional shares which are not integral multiples of
one one-hundredth (1/100) of a share.
At any time on or prior to the close of business on the earlier
of tenth day after the time that a person has become an Acquiring Person (or
such later date as a majority of the Board of Directors and a majority of the
Continuing Directors may determine) or August 29, 2007, the Company may redeem
the Rights in whole, but not in part, at a price of $0.01 per Right, subject to
adjustment (the "Redemption Price"). The Rights may be redeemed after the time
that any Person has become an Acquiring Person only if approved by a majority of
the Continuing Directors. Immediately upon the effective time of the action of
the Board of Directors of the Company authorizing redemption of the Rights, the
right to exercise the Rights will terminate and the only right of the holders of
the Rights will be to receive the Redemption Price.
For as long as the Rights are then redeemable, the Company may,
except with respect to the Redemption Price or date of expiration of the Rights,
amend the Rights in any manner, including an amendment to extend the time period
in which the Rights may be redeemed. At any time when the Rights are not then
redeemable, the Company may amend the Rights in any manner that does not
materially adversely affect the interests of holders of the Rights as such.
Amendments to the Rights Agreement from and after the time that any Person
becomes an Acquiring Person requires the approval of a majority of the
Continuing Directors (as provided in the Rights Agreement).
Until a Right is exercised, the holder, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
As of August 19, 1997, there were 10,644,874 shares of Class A
Common Stock (and 114,500 shares of Class A Common Stock reserved for issuance
under the Company's existing stock option plans) and 2,912,665 shares of Class B
Common Stock issued and outstanding. A total of 800,000 shares of Class A
Preferred Stock and 200,000 shares of Class B Preferred Stock have been reserved
for issuance upon exercise of the Rights.
The Rights have certain anti-takeover effects. The Rights will
cause substantial dilution to a person or group who attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The Rights
should not interfere with any merger or other business combination approved by
the Board since they may be redeemed by the Company at $0.01 per Right at any
time until the close of business on the tenth day (or such later date as
described above) after a person or group has obtained beneficial ownership of
10% or more of the voting stock.
Page 6 of 76 Pages
The form of Rights Agreement between the Company and American
Stock Transfer & Trust Company, as rights agent, specifying the terms of the
Rights, which includes as Exhibit A the form of Summary of Rights to Purchase
Class A Preferred Stock and Class B Preferred Stock, as Exhibit B the form of
Right Certificate and as Exhibit C the form of Certificate of Designations of
the Company setting forth the terms of the Class A Preferred Stock and Class B
Preferred Stock are attached hereto as exhibits and incorporated herein by
reference. The foregoing description of the Rights is qualified by reference to
such exhibits.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits.
1. Rights Agreement, dated as of August 19, 1997, between The
Wet Seal, Inc. and American Stock Transfer & Trust Company,
as Rights Agent. This Rights Agreement includes as Exhibit A
the Summary of Rights, as Exhibit B the form of Right
Certificate and Exhibit C in the form of Certificate of
Designations.
2. Press Release, dated August 25, 1997.
3. Letter to The Wet Seal, Inc. Common Shareholders, dated
August 25, 1997.
Page 7 of 76 Pages
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.
By: /S/ KATHY BRONSTEIN
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Name: KATHY BRONSTEIN
Title: VICE CHAIRMAN AND
CHIEF EXECUTIVE
OFFICER
Dated: August 25, 1997
Page 8 of 76 Pages
EXHIBIT INDEX
Exhibit No. Description
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1 Rights Agreement, dated as of August 19, 1997, between The Wet
Seal, Inc. and American Stock Transfer & Trust Company, as Rights
Agent. This Rights Agreement includes as Exhibit A the Summary of
Rights, as Exhibit B the form of Right Certificate and Exhibit C
in the form of Certificate of Designations.
2 Press Release, dated August 25, 1997.
3 Letter to The Wet Seal, Inc. Common Stockholders, dated August
25, 1997.