SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 2)
Filed by the Registrant | |
Filed by a party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
|_| Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
DESIGNS, INC.
(Name of Registrant as Specified in Its Charter)
JEWELCOR MANAGEMENT, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or
schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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ANNUAL MEETING OF STOCKHOLDERS
OF DESIGNS, INC.
TO BE HELD ON SEPTEMBER 22, 1999
PROXY STATEMENT OF
JEWELCOR MANAGEMENT, INC.
IN OPPOSITION TO THE BOARD OF DIRECTORS OF
DESIGNS, INC.
AND IN SUPPORT OF PROPOSAL TO TERMINATE "POISON PILL"
TO ALL STOCKHOLDERS OF DESIGNS, INC.:
This Proxy Statement and the accompanying WHITE PROXY CARD are
being furnished by Jewelcor Management, Inc., a Nevada corporation ("JMI"), to
the stockholders of Designs, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies to be used at the 1999 annual
meeting of the stockholders of the Company and any adjournments or postponements
thereof (the "Annual Meeting"). JMI understands that the Company plans to hold
the Annual Meeting on September 22, 1999 at 1:00 P.M. local time at One Post
Office Square, Boston, Massachusetts 02019.
JMI is soliciting your proxy (i) to elect John J. Schultz,
Jeremiah P. Murphy, Jr., Joseph Pennacchio, Robert L. Patron and Jesse H.
Choper, and (the "JMI Nominees") to the Board of Directors of the Company at the
Annual Meeting and (ii) to adopt JMI's proposal to terminate the Company's
Shareholder Rights Agreement, commonly known as a "Poison Pill," dated as of May
1, 1995, and all amendments thereto (the "Poison Pill"). JMI is proposing a
slate of nominees for the Board of Directors because it believes a new Board is
needed to seek to reverse the Company's decline and pursue ways to enhance
shareholder value. It believes termination of the Company's Poison Pill is in
the best interest of shareholders, among other things because, in JMI's opinion,
many institutional investors may view a poison pill as having a negative effect
on the price of stock. Each director of the Company will be elected for a term
of one (1) year expiring at the 2000 annual meeting, each until their successors
are duly elected and qualified.
According to the preliminary proxy statement filed by the
Company's management, the current Board of Directors has determined that the
Board of Directors to be elected at the Annual Meeting, which previously
included six members, shall consist of only five members, and that one of the
present directors, Stanley Berger, will not be nominated for re-election.
If they are elected to the Board, the five current JMI
Nominees intend to vote to expand the Board to six members and elect Peter R.
McMullin to fill the resulting vacancy. In addition, if they are elected to the
Board, the JMI Nominees intend to contact Mr. Berger
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and seek to invite him to join the Board. Mr. Berger is the Founder, current
Chairman of the Board of Directors and former Chief Executive Officer of the
Company. Although there can be no assurance that Mr. Berger would agree to serve
as a member of the Board of Directors if asked, JMI believes that Mr. Berger's
continued involvement with the Company would benefit the shareholders.
JMI understands that the Company has fixed August 5, 1999 as
the record date (the "Record Date") for the determination of stockholders
entitled to notice of, and to vote at, the Annual Meeting. According to the
information supplied by the Company's transfer agent, as of the Record Date
there were 15,977,952 shares of Common Stock outstanding.
YOUR VOTE IS IMPORTANT - VOTE FOR EACH OF JMI's PROPOSALS
Carefully review this Proxy Statement and the enclosed WHITE
PROXY CARD. No matter how many or how few shares of Common Stock you own, YOUR
VOTE IS IMPORTANT. Please vote FOR the election of the JMI Nominees to the Board
of Directors and FOR the proposal to terminate the Poison Pill by so indicating
and by signing, dating and promptly mailing the WHITE PROXY CARD in the enclosed
postage-paid envelope.
No Proxy Card will be furnished by JMI until such time as a
definitive form of the Proxy Statement has been filed with the Securities and
Exchange Commission. This Proxy Statement is first being sent or given to
holders of the Company's Common Stock on or about August __, 1999. This Proxy
Statement has been filed in preliminary form with the Securities and Exchange
Commission on August __, 1999, and such preliminary form may thereafter be
furnished to stockholders of the Company.
VERY IMPORTANT
JMI REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY
ANY PROXY CARD PROVIDED TO YOU BY THE COMPANY, EVEN TO VOTE AGAINST THE
INCUMBENT MEMBERS OF THE BOARD OF DIRECTORS. RETURNING ANY PROXY CARD PROVIDED
TO YOU BY THE COMPANY COULD REVOKE THE PROXY CARD THAT YOU SIGN, DATE AND SEND
TO JMI. REMEMBER - ONLY YOUR LATEST DATED PROXY CARD WILL COUNT AT THE MEETING!
DO NOT SEND ANY PROXY CARD TO THE COMPANY!
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If you own shares of Common Stock and the stock certificate is
in your name, please vote FOR the election of the JMI Nominees to the Board of
Directors and FOR the proposal to terminate the Poison Pill by marking, signing,
dating and mailing the WHITE PROXY CARD only.
If you own shares of Common Stock, but your stock certificate
is held for you by a brokerage firm, bank or other institution, it is very
likely that the stock certificate is actually in the name of that brokerage
firm, bank or other institution. If so, only that entity can execute a Proxy
Card and vote your shares of Common Stock. The brokerage firm, bank, or other
institution holding the shares of Common Stock for you is required to forward
proxy materials to you and to solicit your instructions with respect to the
granting of proxies. It cannot vote your shares of Common Stock unless it
receives your instructions. IF A BROKERAGE FIRM, BANK, OR OTHER INSTITUTION IS
HOLDING SHARES OF COMMON STOCK FOR YOU, PLEASE INSTRUCT THAT ENTITY TO VOTE SUCH
SHARES FOR THE ELECTION OF THE JMI NOMINEES TO THE BOARD OF DIRECTORS AND FOR
THE PROPOSAL TO TERMINATE THE POISON PILL BY SIGNING, DATING AND MAILING TO JMI
ON YOUR BEHALF THE WHITE PROXY CARD PROMPTLY. JMI URGES YOU TO CONFIRM IN
WRITING YOUR INSTRUCTIONS TO THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND TO
PROVIDE A COPY OF THOSE INSTRUCTIONS TO JMI IN CARE OF D.F. KING & CO., INC.
("D.F.KING") AT THE ADDRESS SET FORTH BELOW SO THAT JMI WILL BE AWARE OF ALL
INSTRUCTIONS GIVEN AND CAN ATTEMPT TO ENSURE THAT SUCH INSTRUCTIONS ARE
FOLLOWED.
Any stockholder giving a proxy may revoke it at any time
before it is voted by attending the Annual Meeting and voting his or her shares
of Common Stock in person, by giving written notice to the Secretary of the
Company at 66 B Street, Needham, Massachusetts 02194 stating that the proxy has
been revoked, or by delivery of a proxy bearing a later date.
IF YOU HAVE ALREADY RETURNED THE PROXY CARD SUPPLIED BY THE
COMPANY'S BOARD OF DIRECTORS, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE BY
SIGNING, DATING AND RETURNING THE WHITE PROXY CARD.
If you have any questions about executing your WHITE PROXY
CARD or require assistance, please contact:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, NY 10005
Toll Free: (800) 290-6424
Banks and Brokers call collect: (212) 269-5550
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INFORMATION ABOUT JMI
JMI is a major stockholder of the Company which, as of the
date of this Proxy Statement, is the beneficial owner of 1,570,200 shares of the
Company's Common Stock (or approximately 9.9% of the shares issued and
outstanding). It intends to vote its shares FOR the election of the JMI Nominees
and FOR the proposal to terminate the Poison Pill.
JMI is a wholly-owned subsidiary of Jewelcor, Inc., a
Pennsylvania corporation ("JI"), which is a wholly-owned subsidiary of S.H.
Holdings, Inc. ("SH"). Seymour Holtzman and Evelyn Holtzman, husband and wife,
own, as tenants by the entirety, a controlling interest of SH. The principal
businesses of JMI and its related companies are the ownership and operation of
upscale retail jewelry stores, the ownership of commercial real estate and
investment and management services. Mr. Holtzman is the Chairman of the Board
and Chief Executive Officer of each of JMI, JI and SH. The business address and
the address of the principal executive offices of JMI is 100 North Wilkes-Barre
Blvd., 4th Floor, Wilkes-Barre, Pennsylvania 18702.
Seymour Holtzman was originally among the individuals
nominated by JMI for election to the Board of Director at the Annual Meeting. In
order to reduce the potential for distraction from what JMI sees as the major
problems facing the Company, JMI took the step of withdrawing Mr. Holtzman's
name as a nominee and instead nominated Jesse H. Choper, a distinguished
professor of law already named in JMI's proxy material as a proposed addition to
the Board following the Annual Meeting. Mr. Holtzman remains a participant in
the solicitation and certain information regarding Mr. Holtzman appears under
"Certain Other Information Regarding JMI and the JMI Nominees" below.
Additional information about JMI and the JMI Nominees is set
forth under the heading "Certain Other Information Regarding JMI and The JMI
Nominees" below and in Annex A attached to this Proxy Statement.
REASONS FOR THIS SOLICITATION
Since Joel Reichman took over as President and CEO of the
Company in December 1994, shareholders have watched the value of their
investment in the Company
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steadily erode. Under the leadership of Joel Reichman and the current members of
the Board of Directors, the Company has suffered approximately $77 million in
operating losses and alarming decreases in both comparable store sales and stock
price. The Company belongs to you, the stockholders, and you must decide who
should lead it. Don't let the Company's management distract you with unfulfilled
promises and personal attacks on stockholders who question management's
performance. JMI believes that the real issue is the 79% decline in the
Company's stock price since January 1995 and the Company's losses totalling
approximately $77 million over the last two and a quarter years. In JMI's
opinion Joel Reichman and the current Board of Directors should be held
responsible for the performance of the Company under their management.
Do you want to keep the current Board of Directors and
executive management with the following performance record, as publicly reported
in the Company's public filings and statements? We don't think you should.
[GRAPHIC OMITTED]
$52 MILLION DETERIORATION IN CASH POSITION SINCE JOEL
REICHMAN TOOK OVER
o When Joel Reichman replaced Stanley Berger as President, the
Company had approximately $38 million in cash and investments
and no bank debt. Now, under the reign of Joel Reichman, the
Company has no cash and over $14 million in bank debt
(including $2.3 million borrowed just three months ago to fund
a trust to provide potential future payments for Joel Reichman
and other members of senior management).
HUGE OPERATING LOSSES
o Over the last two fiscal years and the first fiscal quarter of
1999, the Company has suffered enormous operating losses
totalling approximately $77 million, or $4.82 per share. The
Company has sustained operating losses for nine straight
quarters and these losses are continuing.
[GRAPHIC OMITTED]
STOCK PRICE PLUMMETS
o Since Joel Reichman became President and CEO, the Company's
stock price has dropped from $7.75 on January 28, 1995, to
$1.56 at the close of business
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on August 11, 1999, a decline of approximately 80%. This
decline occurred during a period in which the stock market
generally has achieved unprecedented increases in value.
[GRAPHIC OMITTED]
GROSS MARGINS FALL SIGNIFICANTLY
o Since Joel Reichman became President and CEO, the Company has
experienced a substantial erosion in its gross margins. For
the fiscal year ended January 28, 1995, the Company's gross
margin was 31.6%, compared to 21% for the fiscal year ended
January 30, 1999, a decrease of 33%.
SALES DECLINE DRAMATICALLY
o Since February 3, 1996, the Company's annual sales have fallen
precipitously from $301,074,000 to $201,634,000, a 33% decline
during one of the most robust periods of economic growth in
recent history, and comparable store sales within the Company
have also decreased. The losing trend continues - the
Company's comparable store sales were:
o down 10% in April 1999,
o down 2.6% in May 1999,
o down 3% in June 1999,
o down 11.2% in July 1999, despite the fact that U.S.
retail sales generally at stores open at least one
year rose by 6.7% in July 1999 according to the
Lehman Brothers Inc. "Same Store Sales Index".
SUBSTANTIAL DECREASE IN NET WORTH
o The decrease in the Company's net worth since Joel Reichman
became CEO has been approximately $31.5 million, or more than
33%. JMI believes that Joel Reichman and the current Board of
Directors should be held responsible for the Company going
from being highly profitable to enormously unprofitable, and
from being a financially sound company to where it is today.
Rather than replacing members of senior management, the Board
of Directors continues to retain the same highly paid
individuals who, in JMI's view, have caused the Company's
financial deterioration.
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WHAT HAS THE BOARD OF DIRECTORS DONE
WHILE STOCKHOLDER VALUE HAS ERODED?
While stockholder value has plummeted under the leadership of Joel
Reichman and the current Board of Directors, the Company's management continues
to receive salaries and executive benefits at the same levels.
Moreover, the current Directors, with the exception of Stanley Berger,
own less than 1% of the outstanding Common Stock, and a substantial portion of
the Directors' small ownership was given to them by the Company as director fees
at no cost to them. After losing approximately $77 million in the past 2 1/4
years, JMI must ask how a responsible Board of Directors can fail to make a
change in senior management. JMI believes part of the answer is that these
Directors do not share your financial stake in the Company. With the exception
of Stanley Berger, who has not been nominated for re-election, the Board of
Directors and senior management have very little invested in the Company.
DIRECTORS RECENTLY ALLOCATE $3.4 MILLION TO BENEFIT
MANAGEMENT
o Directors Borrow $2.3 Million To Benefit Joel Reichman and Two
Other Executives. With the stated justification of retaining
certain members of senior management, the Board of Directors
borrowed $2.3 million in May to fund a Trust for the benefit
of Joel Reichman and two other members of senior management.
The Trust, which was created to pay for "golden parachutes"
for Joel Reichman, Scott Semel, and Carolyn Faulkner and for
other unknown items, has caused the Company to incur interest
costs which JMI estimates will amount to approximately $15,000
per month or $90,000 for the initial six month period. These
expenses do not include the additional costs of establishing
and maintaining the Trust, which are unknown at this time. As
far as JMI can determine, the Company has failed to file the
Trust with the Securities and Exchange Commission or fully
disclose the terms of the Trust to the shareholders.
o $1.1 Million For Other Executives. In April 1999, the Company
disclosed that it had recently entered into additional
agreements with "key associates" under which they could
receive as much as $1.1 million from the Company under certain
circumstances.
o Based on the current market capitalization of the Company,
under these arrangements management could receive amounts
totaling more than 13% of the total current market
capitalization.
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EXECUTIVES RETAIN SALARIES AND PERQUISITES WHILE
SHAREHOLDER VALUE DROPS
o Despite the Company's financial woes and the enormous decline
in stock price, the Company's executives still maintain the
same level of salaries, perquisites and amenities. Examples
include:
o Joel Reichman's $375,000 annual salary
o Scott Semel's $290,000 annual salary
o Carolyn Faulkner's $210,000 annual salary
o The value of the vehicles owned by the Company (not
counting the additional vehicles leased by the
Company) has increased approximately 400% from
$79,000 in 1994 to approximately $356,000 in 1998,
while overall sales have declined by $100 million
over the same period.
COMPANIES CONTROLLED BY DIRECTORS GRONINGER AND MANUEL
PROFIT IN TRANSACTIONS WITH COMPANY
o In 1994 and 1995, the Company paid $432,000 to a division of
Cygne Design, Inc. ("Cygne"), a troubled private label apparel
manufacturer, for merchandise to be sold by the Company
through its new, and unsuccessful, Boston Trader label. The
apparent strategy was for Cygne to become a supplier to the
Company. The Boston Trader product line resulted in over $25
million in losses for the Company. Two of the architects of
the unprofitable Boston Trader experiment, are Bernard Manuel
and James Groninger, current members of the Company's Board of
Directors and of the Special Committee created with the stated
purpose of enhancing shareholder value. Bernard Manuel is also
the principal shareholder and one of two directors of Cygne,
with James Groninger, also a Cygne shareholder, being the only
other director.
o James Groninger, a Director of the Company, is also the
President of the BaySouth Company. As far as JMI can
determine, the Company apparently retained outside legal
counsel to prepare its Poison Pill and then paid Bay South
Company $29,000 just to review this legal document.
MANAGEMENT'S RECENT STOCK TRADING
On December 8, 1998 Carolyn Faulkner, the Company's Chief Financial
Officer, or her husband purchased 12,000 shares of the Company's Common Stock,
and on December 9 1998 the Company's Controller purchased 1,000 shares of the
Company's Common Stock. Just a few days later, on December 11, 1998, the Company
issued a press release announcing that
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"its Board of Directors has formed a committee of independent outside directors
to consider the Company's strategic alternatives, including a possible sale of
the Company, with a view towards maximizing stockholder value in the near term.
The Company has retained Shields & Company, Inc. in this regard." Carolyn
Faulkner previously owned only 1,000 shares of the Company's stock and had not
purchased a single share for more than a year.
Two weeks earlier, on November 23, 1998, Joel Reichman, President and
Chief Executive Officer, and Scott Semel, Executive Vice President and General
Counsel, purchased 10,000 and 5,000 shares of the Company's Common Stock,
respectively, at prices of $0.88 to $0.94 per share. Given the timing of these
trades, as eventually reported by the Company, did these Officers have any
inside information which was not yet available to the general public?
Information regarding the Company's results of operations, financial
condition, management benefits and similar matters is taken from the Company's
public filings and press releases, including its Form 10-K's, Form 10-Q's and
Proxy Statements. Information regarding directors' interests in transactions
with the Company and trading in Company stock by the Company's officers is taken
from the same sources.
JMI'S STRATEGY TO SEEK ENHANCED SHAREHOLDER VALUE
If the JMI Nominees are elected as Directors of the Company, they
intend to immediately take steps seeking to enhance shareholder value,
including those summarized below. Of course, there can be no assurance
that any of those steps will ultimately be successful or will
necessarily enhance shareholder value.:
o Seek to Reduce Overhead - The JMI Nominees intend to cause the
Company to engage the services of the public accounting and
consulting firm of Deloitte & Touche, LLP to assist in
developing strategies to reduce overhead so that the Company
can seek a sustainable competitive advantage. Although the JMI
Nominees have not pursued this with Deloitte & Touche in this
regard, based on their preliminary review of publicly
available information about the Company and the retail sales
and other business experience of many of the JMI Nominees,
they expect that possible areas of savings could include the
following:
1. Substantially reduce the size of the Company's
corporate office space, together with a commensurate
reduction in personnel and other office overhead.
2. Eliminate warehouse expenses by shipping merchandise
directly to store locations.
3. Eliminate all company vehicles and institute a
mileage reimbursement program for business related
travel.
4. Control corporate expenses relating to travel,
lodging, and attending conferences, conventions and
trade shows.
5. Substantially reduce recurring legal, investment
banking and other professional and consulting fees
relating to the ongoing operation of the business
(recognizing that additional fees could be incurred
in connection with any potential sale of the Company
or other extraordinary transaction).
6. Reduce the number of buyers since the Company has
essentially only one
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supplier of merchandise. Based on historical
performance information, the Company had been, and in
the opinion of JMI's Nominees should again be, able
to run a low overhead operation.
7. Eliminate in-house legal staff. 8. Maintain better
inventory management.
o Eliminate Anti-Takeover Provisions - Provisions of the
Company's By-Laws and Certificate of Incorporation which in
JMI's view may discourage acquisition transactions, including
the provision prohibiting shareholders from calling special
meetings as well as the Poison Pill, will be removed and the
provision requiring advance notice of shareholder proposals
will be made less stringent. The JMI Nominees believe that
many people in the financial community view such anti-takeover
provisions with disfavor and think they may have a negative
impact on stock value.
o Implement a Stock Repurchase Program - The JMI Nominees intend
to cause the Company to initiate a stock repurchase program to
purchase five million (5,000,000) shares of Common Stock. JMI
would undertake not to sell any of its shares under the
Company's stock repurchase program, giving other shareholders
an opportunity to sell more of their shares if they choose to
do so. In the context of JMI's prior interest in acquiring the
Company, JMI obtained three preliminary financing proposals
that would provide for a stock repurchase program and adequate
working capital for the Company, and on that basis JMI
believes that similar financing would be available from the
same sources for a stock repurchase program of the type
contemplated if the JMI Nominees are elected (which would
require a lower level of borrowing). See "Credit Agreement"
below. However, there can no assurance that such a repurchase
program can be financed or successfully pursued.
o Review Potential for Sale of the Company - Beginning in
December 1998, the current Board publicly committed to sell
the Company at the highest available price in the near term.
In response JMI, among others, pursued discussions regarding a
potential acquisition of the Company, from which JMI
ultimately withdrew (See "Background of JMI's Investment in
Designs, Inc." below). The Company has said that the process
announced by the current Board did not produce any offers from
any potential acquiror other than JMI. However, the JMI
Nominees are not confident that the present Board was fully
committed to a prompt sale process, and they do not know what
other opportunities, if any, may have existed or the
circumstances that may have affected the development of other
offers. If other bidders encountered the type of difficulties
JMI believes it faced in pursuing diligence relating to its
own proposal, they may have been discouraged from pursuing a
transaction. Moreover, it may be that conditions or the
perception of potential acquirors are subject to change.
Accordingly, if
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elected the JMI Nominees would revaluate the possibility of a
sale of the Company to enhance value for all shareholders.
Among other things, the JMI Nominees intend to promptly retain
a New York investment banking firm for that purpose. Any
reasonable offer to purchase the Company will be submitted to
the shareholders for their vote. Of course, there can be no
assurance that any effort by the JMI Nominees in this regard
would be successful in identifying and completing a sale.
If the JMI Nominees find that a sincere and committed effort
does not produce a sale transaction on appropriate terms, they
intend to continue a strategy to improve the Company's
performance and enhance shareholder value going forward,
including the other steps outlined above.
In each case, the JMI Nominees cannot be certain that the steps described can be
successfully implemented or will have the intended effect, However, they believe
that a new Board of Directors will provide stockholders who are disappointed
with the performance of current management with an alternative to seek to
enhance shareholder value. JMI is seeking votes from the holders of shares of
Common Stock (i) to elect the JMI Nominees to the Board of Directors of the
Company and (ii) to adopt the proposal to terminate the Poison Pill. JMI
believes that the members of the existing Board of Directors have failed to
enhance shareholder value and RECOMMENDS THAT YOU VOTE FOR EACH OF ITS
PROPOSALS.
JMI'S PROPOSALS
Termination of Poison Pill
On May 1, 1995, the current Board of Directors of the Company adopted a
Poison Pill. According to the Poison Pill, if a person either (i) acquires the
beneficial ownership of 15% or more of the Company's Common Stock (an "Acquiring
Person") or (ii) acquires the beneficial ownership of 10% or more of the
outstanding shares of Common Stock and is declared to be an "Adverse Person" by
the Board of Directors (an "Adverse Person"), all shareholders, with the
exception of the Acquiring Person or Adverse Person, can exercise certain rights
under the Poison Pill that will substantially diminish the voting and ownership
rights of the Acquiring Person or Adverse Person.
JMI believes that the Poison Pill is an impediment to the sale of the
Company and serves to perpetuate the incumbency of the Board of Directors and
management. The limited changes to the Poison Pill recently implemented by the
Company's Board in the context of JMI's possible acquisition of the Company do
not appear to JMI to eliminate this concern. Certain of those changes are
specific just to JMI and its prior proposal. The other changes appear to create
a very limited Poison Pill exception which expires in less than three months (on
November 7, 1999). Even during that brief period the exception would apply only
to limited types of offers on particular terms (i.e., all cash tender offers for
any and all shares at a price of not less than
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$3.65 per share and irrevocably committing to effect a second-step merger on
stated terms). In JMI's opinion, the Poison Pill may have the effect of
discouraging efforts to acquire the Company that might be beneficial to, and
supported by, a majority of shareholders. The following proposal would recommend
that the Board of Directors of the Company terminate the Poison Pill. The text
of the resolution is as follows:
"RESOLVED, it is recommended that the Board of Directors of
the Company take the necessary steps to terminate the Company's
Shareholder Rights Agreement dated as of May 1, 1995, together with any
amendments thereto."
Election of Directors
The Board of Directors of the Company currently consists of
six members, each of which shall hold office until the Annual Meeting and until
his successor is elected and qualified. According to the preliminary proxy
statement filed by the Company's management, the current Board of Directors has
determined that the Board of Directors to be elected at the Annual Meeting shall
consist of only five members. The Directors elected at the Annual Meeting will
serve until the 2000 Annual Meeting of Stockholders and until their respective
successors are elected and qualified. JMI is soliciting your proxy at the Annual
Meeting for the election of Jesse H. Choper, Joseph Pennacchio, John J. Schultz,
Robert L. Patron and Jeremiah P. Murphy, Jr. to the Board of Directors of the
Company. If they are elected to the Board, the five current JMI nominees intend
to vote to expand the Board to six members and elect Peter R. McMullin to fill
the resulting vacancy. Mr. McMullin has agreed to serve if so elected.
Accordingly, information concerning Mr. McMullin is included below, and unless
otherwise noted all general statements concerning the JMI Nominees also apply to
Mr. McMullin. (As noted above, if elected to the Board of Directors, the JMI
Nominees also expect to seek to invite Stanley Berger, the Founder, current
Chairman of the Board of Directors and former Chief Executive Officer of the
Company to rejoin the Board. There can be no assurance that Mr. Berger would
agree to serve as a member of the Board if asked.)
CERTAIN OTHER INFORMATION REGARDING JMI AND THE JMI NOMINEES
Set forth below are the name, age, business address, present
principal occupation and employment history of each of the JMI Nominees and Mr.
McMullin for at least the past five years. This information has been furnished
to JMI by the respective Nominees. Each of the Nominees is at least 18 years of
age. None of the entities referenced below is a parent or subsidiary of the
Company.
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JMI NOMINEES
Name, Age and
Business Address Principal Occupation and Five Year History
- ---------------- ------------------------------------------
John J. Schultz, 62 Mr. Schultz, who has more than thirty-five
142 Wilton Road West years of retail experience, has served as
Ridgefield, CT 06877 an active consultant to the retail
industry since 1993, dealing with
virtually all major segments of the retail
industry. From 1991 to 1993, Mr. Schultz
served as President of the National Retail
Federation, a leading retail industry
trade association. Previously, Mr. Schultz
served as Executive Vice President and
General Merchandise Manager for
Bloomingdale's Department Stores and
Sanger Harris Department Stores and as
President and Chief Executive Officer of
B. Altman & Co. Mr. Schultz currently
serves as a member of the Board of
Directors of The Great Train Store, Inc.,
and Big Smith Brands, Inc. Mr. Schultz is
a graduate of Fairleigh Dickenson
University, Dartmouth Institute and the
Federated Senior Management Institute.
Jeremiah P. Murphy, Jr., 47 Mr. Murphy is the President of the Harvard
1400 Massachusetts Ave. Cooperative Society (the "Coop"), a 117
Cambridge, MA 02138 year old member based retail business.
Since becoming President in November of
1991, Mr. Murphy has directed the
restructuring and right-sizing of the
Cooperative's retail operations and has
returned the Cooperative to profitability.
Mr. Murphy is presently overseeing the
expansion of the Cooperative's catalog
operations and web based membership system
with E-Commerce capabilities. From July
1987 to November 1991, Mr. Murphy was
Vice-President/General Manager for Neiman
Marcus' largest and most profitable retail
store, located in Northpark Mall, Dallas,
Texas. Mr. Murphy previously served in
various other managerial capacities with
Neiman Marcus from July 1977 to July 1987.
Mr. Murphy received a B.A. from Harvard
College in 1973 and his M.B.A. from
Harvard Business School in 1977.
- 15 -
Joseph Pennacchio, 52 Mr. Pennacchio has been the President of
14001 N.W. 4th Street Aurafin LLC, a privately held jewelry
Sunrise, FL manufacturer and wholesaler since December
1997. From June 1996 to December 1997 he
was a retail consultant. From May 1994 to
May 1996 Mr. Pennacchio was the President
of Jan Bell Marketing, Inc., a $250
million jewelry retailer, which is traded
on the American Stock Exchange. He has
previously served as the President of
Jordan Marsh Department Stores; the Senior
Vice President for all Merchandising at
Abraham & Strauss Department Stores; the
Group Vice President of Merchandising -
Textiles at R.H. Macy.
Robert L. Patron, 53 Mr. Patron is a lawyer and investor. Mr.
641 Seneca Road Patron had been a real estate developer
Great Falls, VA 22066 who, since 1968, was engaged in the
construction and commercial leasing of
shopping centers. From his years of
leasing to national retail department
stores and other tenants, Mr. Patron has
acquired extensive experience in
addressing and negotiating the various
real estate issues that confront retail
operations. Through the years, Mr. Patron
has developed or acquired a financial
interest in over 65 commercial and
residential properties located in 13
states. In 1994 Mr. Patron temporarily
curtailed his activities to attend the
George Washington University School of Law
where he attained his law degree at the
age of 53.
Jesse H. Choper, 63 Mr. Choper is the Earl Warren Professor of
University of California at Public Law at the University of California
Berkley Berkeley School of Law at School of Law where he has taught since
Boalt Hall 1965. Professor Choper was the Dean of the
Berkeley, CA 94720 Law School from 1982 to 1992. In 1996, he
was a visiting professor at Harvard Law
School, University of Milan in Italy Law
School and Universitad Autonoma in
Barcelona, Spain. From 1960 to 1961,
Professor Choper was a law clerk for
Supreme Court Chief Justice Earl Warren.
If elected, the JMI Nominees intend to vote to expand the Board to six members
- 16 -
and add the following individual.
Peter R. McMullin, 56 Mr. McMullin, is an investment analyst and
2101 Corporate Boulevard the co-founder of Southeast Research
Suite 402 Partners, Inc. ("Southeast"). Mr.
Boca Raton, FL 33431 McMullin had been an Executive Vice
President and a Managing Director of
Southeast from its inception in June 1990
until July 1999, when it merged with Ryan,
Beck & Co. Since 1997, Mr. McMullin has
been the Executive Vice President, Chief
Investment Officer and a director of
Research Partners International, a company
that provides institutional research,
investment banking, securities brokerage
and trading services through its principal
subsidiaries. Mr. McMullin has 29 years
experience as an analyst in the retail and
consumer products areas in both the U.S.
and Canada.
Each of the JMI Nominees has consented to serve as a director
of the Company and, if elected, intends to discharge his duties as a director in
compliance with all applicable legal requirements, including the general
fiduciary obligations imposed upon corporate directors.
Except as set forth in this Proxy Statement or in Annex A
hereto, to the best knowledge of JMI, none of the Nominees is employed by JMI or
Seymour Holtzman. All of the Nominees are citizens of the United States. Mr.
McMullin is also a citizen of Canada.
Except as set forth in this Proxy Statement or in Annex A
hereto, to the best knowledge of JMI, none of JMI, any of the persons
participating in this solicitation on behalf of JMI, the JMI Nominees and, with
respect to items (i), (vii) and (viii) of this paragraph, any associate (within
the meaning of Rule 14a-1 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of the foregoing persons (i) owns beneficially, directly
or indirectly any securities of the Company, (ii) owns beneficially, directly or
indirectly, any securities of any parent or subsidiary of the Company, (iii)
owns any securities of the Company of record but not beneficially, (iv) has
purchased or sold any securities of the Company within the past two years, (v)
has incurred indebtedness for the purpose of acquiring or holding securities of
the Company, (vi) is or has within the past year been a party to any contract,
arrangement or understanding with respect to any securities of the Company,
(vii) since the beginning of the Company's last fiscal year has been indebted to
the Company or any of its subsidiaries in excess of $60,000 or (viii) has any
arrangement or understanding with respect to future employment by the Company or
with respect to any future transactions to which the Company or any of its
affiliates will or may be a party. In addition, except as set forth in this
Proxy Statement or in Annex A hereto, to the best knowledge of JMI, none of JMI,
any of the persons participating in this solicitation
- 17 -
on behalf of JMI, the JMI Nominees and any associates of the foregoing persons,
has had or is to have a direct or indirect material interest in any transaction
or proposed transaction with the Company in which the amount involved exceeds
$60,000, since the beginning of the Company's last fiscal year.
Except as set forth in this Proxy Statement or in Annex A
hereto, to the best knowledge of JMI, none of the Nominees, since the beginning
of the Company's last fiscal year, has been affiliated with (i) any entity that
made or received, or during the Company's current fiscal year proposes to make
or receive, payments to or from the Company or its subsidiaries for property or
services in excess of five percent of either the Company's or such entity's
consolidated gross revenues for its last full fiscal year, or (ii) any entity to
which the Company or its subsidiaries was indebted at the end of the Company's
last full fiscal year in an aggregate amount exceeding five percent of the
Company's total consolidated assets at the end of such year. None of the JMI
Nominees is or during the Company's last fiscal year has been affiliated with
any law or investment banking firm that has performed or proposes to perform
services for the Company.
To the best knowledge of JMI, none of the corporations or
organizations in which the JMI Nominees have conducted their principal
occupation or employment was a parent, subsidiary or other affiliate of the
Company, and the JMI Nominees do not hold any position or office with the
Company or have any family relationship with any executive officer or director
of the Company or have been involved in any proceedings, legal or otherwise, of
the type required to be disclosed by the rules governing this solicitation.
JMI has agreed to indemnify each of the Nominees against
certain liabilities, including liabilities under the federal securities laws, in
connection with this proxy solicitation and such person's involvement in the
operation of the Company and to reimburse such Nominee for his out-of-pocket
expenses.
As noted above, if elected to the Board of Directors the JMI
Nominees also expect to seek to invite Stanley Berger to re-join the Board.
Seymour Holtzman and JMI have engaged in other proxy contests
in recent years. In October 1995, Seymour Holtzman sought proxies from the
stockholders of First Financial Corporation of Western Maryland ("FFWM") in
connection with FFWM's 1995 annual meeting of stockholders (1) to elect a slate
of directors nominated by Mr. Holtzman to FFWM's Board of Directors and (2) to
vote against the adoption of FFWM's stock option plan, which was proposed by
FFWM's Board of Directors. Mr. Holtzman was successful in defeating the adoption
of the stock option plan, but narrowly lost the proposal for the election of his
director nominees. In connection with FFWM's 1996 annual meeting of
stockholders, Seymour Holtzman also sought proxies from the stockholders of FFWM
to elect four individuals nominated by Mr. Holtzman to FFWM's Board of
Directors. Mr. Holtzman agreed to withdraw his proposal for election of
directors after FFWM hired an
- 18 -
investment banking firm to pursue a sale or merger of the bank. FFWM ultimately
merged with Keystone Financial Inc.
JMI filed a preliminary proxy statement in connection with the
1999 annual meeting of stockholders of Little Switzerland, Inc. ("LSVI"), which
meeting was scheduled to be held on February 25, 1999. JMI's preliminary proxy
statement related to its intent to solicit proxies to elect certain individuals
nominated by JMI to the Board of Directors of LSVI. In February, 1999, JMI and
LSVI settled the potential proxy contest. As part of the settlement, LSVI's
Board of Directors agreed to nominate certain of JMI's director nominees to the
LSVI Board of Directors. In addition, JMI engaged in a consent solicitation with
respect to the Company. See "Background of JMI's Investment in Designs, Inc."
below.
BACKGROUND OF JMI'S INVESTMENT IN DESIGNS, INC.
Beginning in October 1998, JMI began to acquire shares of
Common Stock because JMI believed that the then current trading prices of the
Common Stock did not adequately reflect the value of the underlying business and
assets of the Company.
On November 27, 1998, JMI, JI, SH and Seymour and Evelyn
Holtzman (the "Reporting Persons") filed with the Securities and Exchange
Commission a Statement on Schedule 13D (the "Schedule 13D") reporting that JMI
had acquired in excess of 5% of the outstanding shares of the Common Stock. On
December 1, 1998 the Reporting Persons filed an amendment to the Schedule 13D
reporting that JMI had acquired an additional 528,500 shares of Common Stock,
bringing JMI's ownership to approximately 9.9% of the Common Stock last reported
by the Company as outstanding. The total amount of funds required to purchase
the shares of Common Stock acquired by JMI since October 26, 1998 was
$976,978.50, all of which was obtained through credit made available to JMI
under standard margin agreements with a registered broker dealer entered into in
the ordinary course of business.
Seymour Holtzman was originally among the individuals
nominated by JMI for election to the Board of Directors at the Annual Meeting
and remains a participant in this solicitation. He is the Chairman of the Board
and Chief Executive Officer of JMI and with his wife owns, as tenants by the
entirety, a controlling interest in JMI's ultimate parent company, S.H.
Holdings, Inc. Mr. Holtzman, age 63, maintains a business address at 100 North
Wilkes-Barre Blvd., Wilkes-Barre PA 18702. Mr. Holtzman has been involved in the
retail business for over 30 years. For many years he has been the President and
Chief Executive Officer of Jewelcor, Inc., formerly a New York Stock Exchange
company that operated a nationwide chain of retail stores. In addition, from
1986 to 1988 Mr. Holtzman was the Chairman of the Board and Chief Executive
Officer of Gruen Marketing Corporation, an American Stock Exchange company
involved in the nationwide distribution of watches and the operation of retail
factory outlet stores. Mr. Holtzman is the Chief Executive Officer of Jewelcor
Management, Inc.; C.D. Peacock, Inc., a prominent Chicago, Illinois retail
- 19 -
jewelry establishment; and S.A. Peck & Company, a retail and mail order jewelry
company based in Chicago, Illinois, which has operated a retail internet
division for over 5 years; as well as other affiliated entities. Mr. Holtzman is
also a member of the Board of Directors of Ambanc Holding Co., Inc., the parent
company for a $730 million bank. Unless otherwise noted all general statements
concerning the JMI Nominees also apply to Mr. Holtzman.
On December 7, 1998, JMI commenced a consent solicitation
requesting that the shareholders of the Company vote for its proposals to (i)
remove all current members of the Company's Board of Directors other than
Stanley I. Berger; (ii) elect Seymour Holtzman, Peter R. McMullin, Steve R.
Tomasi, Jesse H. Choper and Deborah M. Rhem-Jackson as directors of the Company;
(iii) amend certain sections of the By-Laws of the Company; and (iv) repeal any
By-Laws adopted by the Board of Directors subsequent to December 11, 1995 other
than the By-Laws adopted as contemplated by the consent solicitation.
Based on information obtained from JMI's proxy solicitation
firm, shareholders representing approximately 42.8% of the total outstanding
shares of Common Stock of the Company voted in favor of JMI's proposals in
response to the December 1998 solicitation.
In response to the consent solicitation the Company indicated
a commitment to sell the Company at the highest available price in the near
term. Thereafter, JMI pursued preliminary discussions with the Company with
respect to a potential acquisition.
JMI indicated, based on the status of discussions and
outstanding questions and issues regarding the Company, including, among other
things, significant tax and other diligence items, that it was not yet prepared
to make an unconditional proposal to acquire the Company. Nevertheless, the
Company's investment bankers requested that JMI submit an immediate proposal
subject to any appropriate conditions. Accordingly, on April 28, 1999, JMI
submitted to the Company a proposal, subject to certain express terms and
conditions, under which JMI stated it would explore the purchase of all of the
issued and outstanding capital stock of the Company. A copy of JMI's April 28,
1998 letter is annexed hereto as Annex B.
On May 5, 1999, the Special Committee of the Board of
Directors of the Company responded to JMI's April 28, 1999 proposal.
On June 24, 1999, JMI withdrew its April 28, 1999 proposal
based on Designs' failure to comply with JMI's conditions and requests and to
provide JMI with all of the information that it sought in connection with its
due diligence. Copies of Seymour Holtzman's correspondence to James G.
Groninger, Chairman of the Special Committee of the Board of Directors of the
Company, which set forth the basis of JMI's withdrawal of its proposal, are
annexed hereto as Annex C and Annex D. The issues of concern to JMI are
described in that correspondence. JMI requested a variety of information as a
condition to proceeding with its consideration of a transaction. In JMI's view,
the responses to those requests were unsatisfactory, with material being denied
or delayed. In fact, the Company did not respond to
- 20 -
certain requests until JMI had withdrawn its acquisition proposal entirely.
POTENTIAL EFFECTS OF THE PROPOSALS
Set forth below is a description of certain provisions of
certain agreements to which the Company is a party which may be affected as a
result of the election of the JMI Nominees and which appear to JMI to have the
potential to materially impact the Company. This description is qualified in its
entirety by reference to such agreements which have been filed by the Company
with the Commission. The election of the JMI Nominees may trigger "change of
control" provisions in certain agreements to which the Company is a party. Other
documents or arrangements applicable to the Company not available to or not
reviewed by JMI may affect the matters described below or may be affected by the
matters contemplated by this Proxy Statement.
Credit Agreement
On June 4, 1998 the Company amended its asset based lending
agreement (the "Lending Agreement") with BankBoston Retail Finance, Inc.
("BankBoston"). The Lending Agreement allows the Company to borrow an amount
equal to up to 65% of its inventory. As of ___, 1999 the aggregate amount
currently available to be borrowed was approximately $37 million and the Company
currently has an outstanding balance under the Lending Agreement of
approximately $14 million. The Lending Agreement provides that the change of a
majority of the Board of Directors would constitute a change of control which
would constitute an "event of default." Upon the occurrence of an "event of
default" any and all "Liabilities" shall either (i) become due and payable
without any further act on the part of BankBoston or any other lender or (ii)
become immediately due and payable, at the option of BankBoston without notice
or demand. Liabilities include, among other things, the obligation to pay any
loan or advance and any interest thereon. JMI expects to cause the Company to
seek to have BankBoston confirm that no "change of control" has occurred or
waive the effects of any such "change of control." If BankBoston declares a
default, JMI will assist the Company in making other financing arrangements to
replace the Lending Agreement. In this regard, JMI has already received three
comparable proposals from financial institutions. There can be no assurance that
either of the foregoing can be implemented or agreed, or if implemented or
agreed, the terms on which such implementation or agreement may be reached.
Employment Agreements
The Company has entered into employment agreements (each an
"Employment Agreement" and collectively, the "Employment Agreements") with each
of Joel H. Reichman, the President and Chief Executive Officer, Scott N. Semel,
Senior Vice President, General Counsel and Secretary, and Carolyn Faulkner, Vice
President and Chief Financial Officer (each an "Executive" and collectively, the
"Executives") which contain "golden parachute
- 21 -
provisions". The Employment Agreements provide that removal and replacement of a
majority of the Board of Directors would constitute a "change of control."
If, among other things, the Company shall fail to renew such
Executive's Employment Agreement within two years of a "change of control," or
if any of the Executives is terminated without justifiable cause, the Company
shall upon such termination, immediately pay such Executive, the greater of (i)
two times the then annual salary of such Executive or (ii) 1/12 of such
Executive's then annual salary multiplied by the number of months remaining in
the term (the "Severance Period"). In addition, the Company shall continue to
allow such Executive to participate, at the Company's expense, in the Company's
health insurance and disability insurance programs, to the extent permitted
under such programs, during the Severance Period and shall pay such Executive
additional compensation to enable such Executive to pay any tax that may be
imposed by Section 280G of the Internal Revenue Code of 1986, as amended. Based
on publicly available filings, the current annual salaries of each of Mr.
Reichman, Mr. Semel and Ms. Faulkner are $375,000, $290,000 and $210,000,
respectively.
Stock Options
Pursuant to the Company's 1992 Stock Incentive Plan, as
amended (the "1992 Stock Incentive Plan"), incentive and non-incentive stock
options, unrestricted and restricted stock awards and performance share awards
may be granted to full or part time officers and other selected employees of the
Company and its subsidiaries. In addition, the 1992 Stock Incentive Plan
provides that each non-employee director of the Company that is elected by the
stockholders initially will be granted, upon such election, a stock option to
purchase up to 10,000 shares of the Company's Common Stock at the then fair
market value of the Common Stock. The 1992 Stock Incentive Plan also provides
that each non-employee director of the Company that is re-elected to the Board
is granted, upon such re-election, a stock option to purchase up to 3,000 shares
of Common Stock at the then fair market value of the Common Stock.
Each stock option granted under the 1992 Stock Incentive Plan
will automatically become fully exercisable upon a "change of control." For
purposes of the 1992 Stock Incentive Plan, the Election of the JMI Nominees
would constitute a "change of control." In addition, upon a "change of control"
all restrictions on restricted stock are automatically deemed waived and the
recipients of such restricted stock awards shall become entitled to receipt of
the stock subject to such awards.
Based on the Company's proxy statements for the annual
meetings of stockholders for each of 1996, 1997, and 1998 the senior officers
hold options to acquire a total of 700,000 shares at prices ranging from $6.125
to $12.00 per share.
Trademark and License Agreement
The Company is a party to an Amended and Restated Trademark
License
- 22 -
Agreement (the "License Agreement") with Levi Strauss & Co. ("Levi Strauss")
pursuant to which, among other things, Levi Strauss has granted certain rights
to use certain Levi Strauss trademarks in connection with the Company's
business. The License Agreement purports to restrict assignments, sublicenses or
other transfers (a "transfer") by the Company of its rights or obligations under
the License Agreement without the prior written approval of Levi Strauss, and to
further provide that a "transfer" shall include any direct or indirect transfer
of control of the Company. This is a typical provision in a license agreement.
The License Agreement does not specifically define "transfer
of control". While neither JMI nor, to its knowledge, the Company has obtained a
legal opinion on this point, JMI believes that the mere election of new
Directors at the scheduled expiration of their predecessors' stated terms, by
vote of shareholders at their regular annual meeting, should not properly be
viewed a transfer of control. (Among other things, in the other material
third-party agreement where a similar issue may arise, the Company's Lending
Agreement, different language is used, referring to "change" rather than
"transfer," and it is explicitly stated that change of a majority of the Board
will be treated as such a change for purposes of that Lending Agreement.) The
License Agreement further provides that any attempt to "transfer" without the
prior written consent of Levi Strauss shall be void and deemed a material breach
of the license Agreement, which would purport to permit Levi Strauss, among
other remedies available under law, to terminate the License Agreement 120 days
after written notice is given to the Company, unless the breach is cured.
While JMI does not believe that a change in the Board of
Directors pursuant to a validly authorized shareholder action at the annual
meeting constitutes a "transfer" under the License Agreement, following the
filing of its preliminary proxy material, JMI received a letter from a
representative of Levi Strauss taking the position that election of the JMI
Nominees would constitute such a "transfer". That letter also expressed a belief
that it was unlikely that JMI would establish a productive working relationship
with Levi Strauss. JMI has endeavored to correct what it believes to be a
misimpression on the part of Levi Strauss which it believes to have formed the
basis of this communication which appears to reflect the mischaracterization by
the Company's present management of the process of JMI's discussions concerning
a possible acquisition of the Company last spring, JMI will continue to address
this subject with Levi Strauss as appropriate with a view to maintaining a good
relationship between the Company and Levi Strauss. JMI recognizes the
possibility that issues raised (inaccurately, in JMI's view) about the
discussions earlier this year regarding a potential acquisition of the Company
and communications relating to that process may concern and distract
shareholders. Accordingly, in addition to seeking to address any matter of
concern to Levi Strauss, JMI has taken the step of withdrawing Seymour
Holtzman's name as a nominee for election to the Company's Board. If elected,
the JMI Nominees would seek to have Levi Strauss confirm that no "transfer" or
breach has occurred or, given the position already stated, waive the occurrence
of any "transfer" or breach. Especially given the letter received by JMI,
however, there can be no assurance that Levi Strauss would so agree and, if (i)
it were ultimately determined that a "transfer" and breach had occurred, (ii)
such breach were not cured within the requisite time period and (iii) Levi
- 23 -
Strauss were to ultimately terminate the License Agreement, the Company's
business could be materially adversely effected. Of course, any sale of the
Company that might emerge in the future (like any sale the Company might have
proceeded with last spring) would likely involve a transfer of control under the
Levi Strauss agreement, and any such transfer without the approval of Levi
Strauss could have the same sort of material negative impact on the Company. The
JMI Nominees would not expect that a potential acquiror would wish to complete
an acquisition of the Company without the approval of Levi Strauss.
VOTING AND PROXY PROCEDURES
The presence in person or by proxy of a majority of the
outstanding shares of the Common Stock will constitute a quorum at the Annual
Meeting. Each outstanding share of Common Stock is entitled to one vote on each
matter properly presented at that meeting and a majority of the votes properly
cast that meeting will be required to approve any proposal presented at the
Annual Meeting, with the exception of the election of directors.
Directors of the Company are elected by a plurality of the
votes cast by the stockholders entitled to vote at a meeting at which a quorum
is present. A plurality means that the nominees with the largest number of votes
are elected as directors, up to the maximum number of directors to be chosen at
the meeting. Consequently, election of the JMI Nominees requires the affirmative
vote of a plurality of the votes cast in the election at the Annual Meeting,
assuming a quorum is present or otherwise represented at the Annual Meeting.
Shares of Common Stock that reflect abstentions or "broker
non-votes" (i.e., shares represented at the meeting held by brokers or nominees
as to which instructions have not been received from the beneficial owners or
persons entitled to vote such shares and with respect to which the broker or
nominee does not have discretionary voting power to vote such shares) will be
counted for purposes of determining whether a quorum is present for the
transaction of business at the Annual Meeting. In addition, abstentions will be
treated as votes cast against a particular proposal while broker non-votes will
have no impact on the outcome of the vote on a particular proposal. With respect
to the election of the JMI Nominees as directors, votes may only be cast in
favor of or withheld from the JMI Nominees; there is no ability to abstain. In
addition, broker non-votes will have no effect on the outcome of the election of
JMI Nominees as directors.
If no directions are given and the signed WHITE PROXY CARD is
returned, the attorneys-in-fact appointed in the proxy will vote the shares of
Common Stock represented by that WHITE PROXY CARD FOR the election of the JMI
Nominees and FOR the proposal to terminate the Poison Pill.
Stockholders of record as of the close of business on the
Record Date will be entitled to vote at the Annual Meeting.
- 24 -
At the Annual Meeting, five Directors are to be elected for a
term expiring at the 2000 annual meeting and until their successors have been
duly elected and qualified. JMI is soliciting your proxy in support of the
election of the JMI Nominees. If you wish to vote for the JMI Nominees by proxy,
you must submit the WHITE PROXY CARD furnished to you by JMI and must NOT submit
the Board of Directors' Proxy Card. A stockholder may not submit a proxy card to
vote for both the JMI Nominees and the Company's nominees. If a stockholder
submits both a WHITE PROXY CARD and the Company's Proxy Card, only the latest
dated proxy will be counted.
IMPORTANT
JMI REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY
ANY PROXY CARD PROVIDED TO YOU BY THE COMPANY, EVEN TO VOTE AGAINST THE
INCUMBENT BOARD'S SLATE OF NOMINEES. RETURNING ANY PROXY CARD PROVIDED TO YOU BY
THE COMPANY COULD REVOKE THE WHITE PROXY CARD THAT YOU SIGN, DATE AND SEND TO
JMI.
Any stockholder giving a proxy may revoke it at any time
before it is voted by attending the Annual Meeting and voting his or her shares
of the Company's Common Stock in person, by giving written notice to the
Secretary of the Company at 66 B Street, Needham, Massachusetts 02494 stating
that the proxy has been revoked, or by delivery of a proxy bearing a later date.
An executed proxy card may be revoked at any time by marking,
dating, signing and delivering a written revocation before the time that the
action authorized by the executed proxy becomes effective. A revocation may be
in any written form validly signed by the record holder as long as it clearly
states the intention to revoke. Delivery of a later proxy card which is properly
completed will also constitute a revocation of an earlier proxy. Although a
revocation is effective if delivered to the Company, JMI requests that either
the original or photostatic copies of all revocations of proxies be mailed or
delivered to D.F. King & Co., Inc., at the address set forth below, so that it
will be aware of all revocations and can more accurately determine which proxies
that have been received are valid.
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, NY 10005
Toll Free: 800-290-6424
Banks and Brokers call collect: 212-269-5550
STOCKHOLDERS OF RECORD ON THE RECORD DATE ARE ELIGIBLE TO VOTE
ON THE MATTERS DISCUSSED ABOVE. ANYONE OWNING SHARES OF THE COMPANY'S COMMON
STOCK BENEFICIALLY (BUT NOT OF RECORD), SUCH
- 25 -
AS A PERSON WHOSE OWNERSHIP OF SHARES IS THROUGH A BROKER, BANK OR OTHER
FINANCIAL INSTITUTION, SHOULD CONTACT THAT BROKER, BANK OR FINANCIAL INSTITUTION
WITH INSTRUCTIONS TO EXECUTE THE WHITE PROXY CARD ON HIS OR HER BEHALF OR TO
HAVE THE BROKER, BANK OR FINANCIAL INSTITUTION'S NOMINEE EXECUTE THE WHITE PROXY
CARD.
SOLICITATION OF PROXIES AND EXPENSES
Proxies may be solicited by JMI and by its agents by mail,
telephone, telegraph and personal solicitation. Banks, brokerage houses and
other custodians, nominees and fiduciaries will be requested to forward proxy
solicitation material to the beneficial owners of Common Stock that such
institutions hold of record. The JMI Nominees, as well as Mr. McMullin, together
with employees and advisers of JMI and its affiliates, may participate in the
solicitation of proxies.
JMI has retained D.F. King & Co., Inc. to assist it in the
solicitation of proxies and for related services. Approximately 20 employees of
D.F. King & Co., Inc. will engage in the solicitation. JMI has agreed to pay
D.F. King & Co., Inc. an estimated fee of up to $30,000 and has agreed to
reimburse it for its reasonable out-of-pocket expenses. D.F. King & Co., Inc.
will solicit proxies for the Annual Meeting from individuals, brokers, banks,
nominees and other institutional holders. JMI estimates that its total
expenditures relating to this proxy solicitation, including fees of D.F. King &
Co., will be approximately $________. Total expenditures to date relating to
this proxy solicitation have been approximately $2,000.
The entire expense of preparing and mailing this Proxy
Statement and the total expenditures relating to the solicitation of proxies
(including, without limitation, costs, if any, related to advertising, printing,
fees of attorneys, financial advisors, solicitors, consultants, accountants,
public relations, transportation and litigation) will be borne by JMI.
JMI expects to seek reimbursement from the Company for its
expenses in connection with this proxy solicitation if the JMI Nominees are
elected to the Board of Directors. This request will not be submitted to a
stockholder vote.
ADDITIONAL INFORMATION
Reference is made to the Proxy Statement that JMI expects will
be filed by the Board of Directors of the Company for information concerning the
Common Stock (including the number of issued and outstanding shares as of the
Record Date), beneficial ownership of Common Stock by, and other information
concerning, the Company's management and directors, the Company's independent
public accountants, the principal holders of Common Stock and procedures for
submitting proposals for consideration at the 1999 Annual Meeting.
- 26 -
Stockholders are referred to the Company's Proxy Statement
with respect to the compensation and remuneration paid and payable and other
information related to the Company's officers and directors, beneficial
ownership of the Company's securities and the procedures for submitting
proposals for consideration at the 2000 annual meeting of the stockholders of
the Company.
Stockholders of the Company are not entitled to appraisal
rights in connection with the matters set forth in this Proxy Statement.
Except as otherwise noted herein, the information concerning
the Company has been taken from or is based upon documents, and records on file
with the Securities and Exchange Commission and other publicly available
information. JMI does not take responsibility for the accuracy or completeness
of the information contained in such documents and records, or for any failure
by the Company to disclose events that may affect the significance or accuracy
of any such information.
Time is critically short. Please sign, date and mail the
enclosed WHITE PROXY CARD today in the envelope provided. Only your latest dated
Proxy Card will count.
If you have any questions about giving your proxy or require
assistance in voting your shares of Common Stock, please call:
Seymour Holtzman Richard Huffsmith
Jewelcor Companies Jewelcor Companies
100 North Wilkes-Barre Boulevard or 100 North Wilkes-Barre Boulevard
Wilkes-Barre, PA 18702 Wilkes-Barre, PA 18702
Phone: (800) 880-6972 Phone: (800) 880-6972
JEWELCOR MANAGEMENT, INC.
August _______, 1999
- 27 -
ANNEX A
TRANSACTIONS IN DESIGNS, INC. COMMON STOCK
BY JMI AND JMI NOMINEES
The following table sets forth information with respect to all purchases of
Common Stock of the Company by JMI during the past two years. Except as set
forth below, to the knowledge of JMI, no participant in this solicitation or JMI
Nominee has purchased or sold securities of the Company within the past two
years.
JEWELCOR MANAGEMENT, INC.
Trade Date Number of Shares Purchased Total Cost
- ---------- -------------------------- ----------
10/26/98 50,000 $36,765.00
11/9/98 225,000 $164,265.00
11/10/98 166,700 $105,036.00
11/17/98 600,000 $330,015.00
11/30/98 528,500 $340,897.50
Please see the section titled "Information about JMI" in this Proxy Statement
for information regarding the relationship between JMI, Mr. Seymour Holtzman and
certain other persons.
- 28 -
FORM OF PROXY
DESIGNS INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF JEWELCOR MANAGEMENT, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 22, 1999
The undersigned stockholder of Designs, Inc. hereby appoints
____________________ and _________________, and each of them with full power of
substitution and to each substitute appointed pursuant to such power, as proxy
or proxies, to cast all votes, as designated hereon, which the undersigned
stockholder is entitled to cast at the Annual Meeting of the Stockholders of
Designs, Inc. to be held at 1:00 p.m. local time on September 22, 1999, at One
Post Office Square, Boston, Massachusetts 02109, and, at any and all
adjournments and postponements thereof, with all powers which the undersigned
would possess if personally present (i) as designated below with respect to the
matters set forth below and described in the accompanying Notice and Proxy
Statement, and (ii) in their discretion with respect to any other business that
may properly come before the Annual Meeting. The undersigned stockholder hereby
revokes any proxy or proxies heretofore given by the undersigned to others for
such Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED WILL BE VOTED IN THE
MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED (1) FOR THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1
AND (2) FOR PROPOSAL 2.
PLEASE ACT PROMPTLY.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE TODAY
1. ELECTION OF DIRECTORS: To elect the nominees for director below for a
term of one year;
FOR all nominees listed below |_| WITHHOLD AUTHORITY |_|
(except as marked to the contrary below) to vote for all nominees
listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
John J. Schultz Robert L. Patron
Jeremiah P. Murphy, Jr. Jesse H. Choper
Joseph Pennacchio
2. Jewelcor Management, Inc.'s proposal to terminate the Shareholder
Rights Agreement, dated as of May 1, 1995.
FOR |_| AGAINST |_| ABSTAIN |_|
This proxy may be revoked prior to the time it is voted by delivering
to the Secretary of the Company either a written revocation or a proxy bearing a
later date or by appearing at the Annual Meeting and voting in person.
Dated:_________________________________
Signature:_____________________________
Signature:_____________________________
Title:_________________________________
Please date and sign here exactly as name
appears hereon. When signing as attorney,
administrator, trustee or guardian, give
full title as such; and when stock has
been issued in the name of two or more
persons, all must sign.