SEC Filing | Destination XL Group, Inc.

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

FILED BY THE REGISTRANT |X| FILED BY A PARTY OTHER THAN THE REGISTRANT | |
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DESIGNS, INC.
(Name of Registrant as Specified In Its Charter)

(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 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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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DESIGNS, INC.
66 B Street
Needham, Massachusetts 02494

__________, 1999

Dear Stockholder,

We are pleased to invite you to attend the 1999 Annual Meeting of
Stockholders of Designs, Inc., which will be held on Wednesday, September
22, 1999, at 1:00 p.m., local time, at One Post Office Square, Boston,
Massachusetts 02109. The items to be considered and voted upon at the
Annual Meeting are described in the notice of Annual Meeting of
Stockholders and Proxy Statement accompanying this letter.

Your vote is important, regardless of the size of your holdings.
Whether or not you plan to attend the Annual Meeting and vote in person,
please take a moment and complete, sign and date our enclosed BLUE proxy
card and return it in the enclosed postage-paid envelope. Instructions for
voting are contained on the BLUE proxy card. Voting in advance of the
Annual Meeting will not limit your right to vote in person should you wish
to attend the Annual Meeting.

We understand that you may receive proxy solicitation materials
from dissident stockholder Seymour Holtzman and certain entities controlled
by him, including Jewelcor Management, Inc., in connection with items Mr.
Holtzman intends to present at the Annual Meeting. These items are a slate
of director nominees chosen by Mr. Holtzman and a proposal relating to the
Company's Shareholder Rights Plan. Your Board of Directors believes that
these proposals are not in the best interests of the Company and its
stockholders and urges you to reject his solicitation and not sign any of
his white proxy cards.

YOUR VOTE IS IMPORTANT. WE ENCOURAGE YOU TO VOTE YOUR SHARES AS
SOON AS POSSIBLE. IF YOU HAVE ANY QUESTIONS OR NEED ASSISTANCE IN VOTING
YOUR SHARES, PLEASE CALL OUR PROXY SOLICITOR, INNISFREE M&A INCORPORATED,
TOLL FREE AT 1-888-750-5834.

Thank you for your support, and we look forward to seeing you at
the Annual Meeting.

Sincerely,

Joel H. Reichman
President and Chief Executive Officer

DESIGNS, INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT

_________, 1999

The Annual Meeting of Stockholders of Designs, Inc. (the "Company")
will be held at One Post Office Square, Boston, Massachusetts 02109, at
1:00 p.m., local time, on Wednesday, September 22, 1999 for the following
purposes:

1. To elect five directors to serve on the Company's Board of
Directors until the 2000 Annual Meeting of Stockholders of
the Company. The Board of Directors recommends a vote FOR
the election of each of the existing director nominees
proposed for reelection by the Company, as further described
in the accompanying Proxy Statement.

2. To vote on a stockholder proposal by dissident stockholder
Jewelcor Management, Inc., and its indirect controlling
stockholder, Mr. Seymour Holtzman, if properly presented,
relating to the Company's Shareholder Rights Plan. The Board
of Directors recommends a vote AGAINST this proposal.

3. To transact such further business as may properly come
before the Annual Meeting and at any adjournments or
postponements thereof.

The Board of Directors has fixed the close of business on August 5,
1999 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. Accordingly, only
stockholders of record at the close of business on that date will be
entitled to vote at the Annual Meeting. A list of the stockholders of
record as of the close of business on August 5, 1999 will be available for
inspection by any stockholder of record at the Annual Meeting and,
beginning on September 12, 1999, at One Post Office Square, Boston,
Massachusetts 02109. The transfer books will not be closed.

The Proxy Statement which follows contains more detailed
information as to the matters described above. This Notice of Annual
Meeting of Stockholders is first being mailed to stockholders on or about
__________, 1999.

PLEASE SIGN, DATE AND RETURN THE ENCLOSED BLUE PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. IF YOU HAVE RECEIVED A WHITE PROXY CARD
FROM A DISSIDENT GROUP OF STOCKHOLDERS, WE URGE YOU NOT TO SIGN OR RETURN
ANY WHITE PROXY CARD SENT TO YOU.

By order of the Board of Directors,

SCOTT N. SEMEL
Secretary

Needham, Massachusetts
__________, 1999

DESIGNS, INC.
66 B STREET
NEEDHAM, MASSACHUSETTS 02494
(781) 444-7222

PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS

SEPTEMBER 22, 1999

This Proxy Statement and the enclosed form of proxy are first being
mailed to stockholders of Designs, Inc. (the "Company" or "Designs") on or
about __________, 1999 in connection with the solicitation by the Board of
Directors of Designs of proxies to be used at the Annual Meeting of
Stockholders to be held on September 22, 1999, and at any and all
adjournments or postponements thereof (the "Annual Meeting"). You are urged
to sign and date the enclosed BLUE proxy card and return it in the enclosed
prepaid envelope whether or not you plan to attend the Annual Meeting. Any
stockholder may revoke such stockholder's proxy at any time before it has
been exercised by attending the Annual Meeting and voting in person or by
filing with the Secretary of the Company either an instrument in writing
revoking the proxy or another duly executed proxy bearing a later date.

At the close of business on August 5, 1999, the record date for the
Annual Meeting (the "Record Date"), the Company's outstanding voting
securities consisted of _______________ shares of common stock, par value
$.01 per share ("Common Stock"). Each share of Common Stock is entitled to
one vote on all matters properly brought before the Annual Meeting. With
respect to the election of directors, a stockholder may: (i) vote for the
election of all named director nominees, (ii) withhold authority to vote
for all named director nominees or (iii) vote for the election of all named
director nominees other than any nominee(s) with respect to whom the
stockholder withholds authority to vote by so indicating in the appropriate
space on the BLUE proxy card.

Seymour Holtzman, a dissident stockholder of the Company, his wife
Evelyn Holtzman, and certain entities controlled by them, including
Jewelcor Management, Inc. (collectively, the "Holtzman Group"), have
proposed their own slate of nominees for election to the Board of Directors
in opposition to the Company's nominees. The Holtzman Group also has stated
that it intends to present a proposal concerning a non-binding
recommendation that the Company's Board of Directors terminate the
Company's Shareholder Rights Plan (the "Holtzman Proposal"). The Board of
Directors is soliciting votes FOR the Company's slate of nominees for
election to the Board of Directors and AGAINST the Holtzman Proposal.
Unless contrary instructions are indicated on the BLUE proxy card, all
shares represented by valid proxies received pursuant to this solicitation
(and not revoked) will be voted FOR the election of all of the Company's
nominees for directors named in this Proxy Statement and AGAINST the
Holtzman Proposal. If you specify a different choice on the proxy card,
your shares will be voted as specified.

A quorum is necessary to hold a valid meeting of stockholders. If
stockholders holding at least a majority of the shares of Common Stock
outstanding as of the Record Date are present in person or by proxy, a
quorum will exist for purposes of transacting business at the Annual
Meeting, other than a vote to adjourn (for which a quorum need not be
present). Any stockholder who attends the Annual Meeting may not withhold
such stockholder's shares from the quorum count by declaring such shares
absent from the Annual Meeting. Abstentions and shares of Common Stock as
to which a nominee (such as a broker holding shares in street name for a
beneficial owner) has not received voting instructions from the beneficial
owner thereof and does not have discretionary authority with respect to a
particular matter ("broker non-votes") will be counted as present for the
purpose of establishing a quorum.

The Company's By-Laws provide that directors shall be elected by a
plurality of the votes of the shares of Common Stock properly cast. The
affirmative vote of a majority of the votes properly cast at the Annual
Meeting on the Holtzman Proposal will be required to approve the Holtzman
Proposal. Abstentions and broker-non votes with respect to any proposal
will not be counted as votes cast on such proposal. Proxies withholding
authority with respect to the election of one or more director nominees
will not be counted as votes cast for those individual nominees.

YOUR VOTE AT THIS YEAR'S ANNUAL MEETING IS ESPECIALLY IMPORTANT.
PLEASE SIGN AND DATE THE ENCLOSED BLUE PROXY CARD AND RETURN IT IN THE
ENCLOSED ENVELOPE PROMPTLY.

WE URGE YOU NOT TO SIGN OR RETURN ANY PROXY CARD THAT MAY BE SENT
TO YOU BY THE HOLTZMAN GROUP, EVEN AS A PROTEST VOTE AGAINST THE HOLTZMAN
GROUP. If you previously voted on a Holtzman Group proxy card, you have
every legal right to change your vote. You can do so simply by signing,
dating and returning the enclosed BLUE proxy card. ONLY YOUR LATEST DATED
PROXY CARD WILL COUNT.

IMPORTANT: If your shares of Common Stock are held in the name of a
brokerage firm, bank, nominee or other institution, only it can sign a BLUE
proxy card with respect to your shares and only upon specific instructions
from you. Please contact the person responsible for your account and give
instructions for a BLUE proxy card to be signed representing your shares of
Common Stock. We urge you to confirm in writing your instructions to the
person responsible for your account and to provide a copy of such
instructions to the Company's proxy solicitor, Innisfree, M&A Incorporated,
at the address indicated below so that Innisfree can attempt to ensure that
your instructions are followed.

If you have any questions about executing your proxy or require
assistance, please contact:

INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
Call Toll Free: (888) 750-5834

Banks and Brokerage Firms please call collect: (212) 750-5833

PROPOSAL 1. ELECTION OF DIRECTORS

The Board of Directors has determined, in accordance with the
By-Laws of the Company, as amended (the "By-Laws"), that the Board of
Directors to be elected at the Annual Meeting shall consist of five
members. The Board of Directors has nominated five persons, each of whom
currently serves as a member of the Board of Directors of the Company, for
election to serve on the Board until the 2000 Annual Meeting of
Stockholders or Special Meeting in lieu thereof. Although management
expects all nominees to accept nomination and to serve if elected, the
persons designated as proxies on the enclosed proxy card will have full
discretion to vote the shares represented by proxies held by them for a
substitute if a nominee is unable to serve at the time of election.

The nominees for directors are:

DIRECTOR
NAME AGE POSITION SINCE

Joel H. Reichman....... 49 President, Chief Executive 1987
Officer and Director
James G. Groninger..... 55 Director 1987
Bernard M. Manuel...... 52 Director 1990
Melvin I. Shapiro...... 84 Director 1990
Peter L. Thigpen....... 59 Director 1994

The Board of Directors recommends that you vote FOR the election of
the five individuals named above as directors of the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The following named persons were the only persons or entities
believed by the Company to be the beneficial owners of more than five
percent of the issued and outstanding shares of Common Stock as of July 16,
1999. The Company is informed that, except as indicated, all of them have
sole voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable.

NUMBER OF SHARES ERCENTAGE(1) OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON STOCK
-------------------- ------------

Grace & White, Inc.
515 Madison Avenue
New York, New York 10022 ................. 2,057,100(2) 12.9%
Franklin Resources, Inc.
777 Mariners Island Boulevard
San Mateo, California 94403 .............. 1,900,000(3) 11.9
Jewelcor Management, Inc.
100 North Wilkes-Barre Boulevard
Wilkes-Barre, PA 18702.................... 1,570,200(4) 9.9
Stanley I. Berger
100 Essex Road
Chestnut Hill, Massachusetts 02467........ 1,205,437(5) 7.4
Dimensional Fund Advisors Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401............ 838,400(6) 5.3

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(1) Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission (the "SEC") and generally
includes voting or investment power with respect to securities.
Except as indicated, each person possesses sole
voting and investment power with respect to all of the shares of
Common Stock owned by such person, subject to community property
laws where applicable. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options held by that
person that are currently exercisable, or become exercisable by
September 14, 1999 (60 days after July 16, 1999), are deemed
outstanding. Such shares, however, are not deemed outstanding for
the purpose of computing the percentage ownership of any other
person. Percentage ownership is based on 15,963,948 shares of
Common Stock outstanding on July 16, 1999, plus securities deemed
to be outstanding with respect to individual stockholders pursuant
to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The information as to each person has
been furnished by such person.
(2) The Company received an Amendment No. 1 to Schedule 13G dated
February 8, 1999, stating that Grace & White, Inc. ("Grace &
White") was the beneficial owner of the number of shares of Common
Stock set forth opposite its name in the table above. The report
indicates that at December 31, 1998 Grace & White had sole voting
power with respect to 194,000 shares and that Grace & White may be
deemed to beneficially own, within the meaning of Rule 13d-3 of the
Exchange Act, 2,057,100 shares over which it had sole dispositive
power. The report indicates that the shares were acquired in the
ordinary course of Grace & White's investment advisory business and
not with the purpose of changing or influencing the control of the
Company.
(3) The Company received a report on Schedule 13G/A dated May 8, 1999
and filed jointly by Franklin Resources, Inc. ("FRI"), Franklin
Advisory Services, Inc. ("FASI"), Charles B. Johnson and Rupert H.
Johnson, Jr. FASI is an investment adviser;
FRI is the parent holding company of FASI; and Charles B. Johnson
and Rupert H. Johnson, Jr. each own in excess of 10% of the
outstanding stock, and are the principal stockholders, of FRI. The
report states that FASI had sole voting power and sole dispositive
power over 1,900,000 shares as of that date. The report further
states that the shares were beneficially owned by one or more open
or closed-end investment companies or other managed accounts which
are advised by direct and indirect investment adviser subsidiaries
of FRI. The report indicates that the shares were acquired in the
ordinary course of business and not with the purpose of changing or
influencing the control of the Company. The report describes the
relationship among Franklin, FASI, Charles B. Johnson and Rupert H.
Johnson, Jr., but it does not affirm the existence of a "group" as
that term is used in Section 13(d)(3) of the Exchange Act;
nevertheless, the Company believes that FRI, FASI, Charles B.
Johnson and Rupert H. Johnson, Jr. may be deemed to constitute a
group under Section 13(d)(3) of the Exchange Act and that such
group may be deemed to be the beneficial owner of the shares
described in this footnote.
(4) The Company has received reports on Schedule 13D, initially dated
as of November 27, 1998 and amended through July 19, 1999 and filed
jointly on behalf of Jewelcor Management, Inc. ("JMI"), Jewelcor,
Inc., S.H. Holdings, Inc., Seymour Holtzman and Evelyn Holtzman.
JMI is a wholly-owned subsidiary of Jewelcor, Inc. Jewelcor, Inc.
is a wholly-owned subsidiary of S.H. Holdings, Inc. Seymour
Holtzman and Evelyn Holtzman own, as tenants by the entirety, a
controlling interest of S.H. Holdings, Inc. The last report filed
before the date of this table, filed as of July 19, 1999, states
that JMI had sole voting power and sole dispositive power over
1,570,200 shares as of that date. The report describes the
relationship among JMI, Jewelcor, Inc., S.H. Holdings, Inc.,
Seymour Holtzman and Evelyn Holtzman, but it does not affirm the
existence of a "group" as that term is used in Section 13(d)(3) of
the Exchange Act; nevertheless, the Company believes that JMI,
Jewelcor, Inc., S.H. Holdings, Inc., Seymour Holtzman and Evelyn
Holtzman may be deemed to constitute a group under Section 13(d)(3)
of the Exchange Act and that such group may be deemed to be the
beneficial owner of the shares described in this footnote.
(5) Includes 241,500 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999. Mr. Berger
filed a Schedule 13D with the SEC, dated as of December 29, 1998,
stating that he had consented or would consent in his capacity as a
stockholder to the proposals described in the Consent Solicitation
Statement of JMI dated December 21, 1998. See "THE HOLTZMAN GROUP
SOLICITATION -- Background" below. JMI's consent solicitation
expired without any of its proposals being approved by the
Company's stockholders.
(6) The Company received a report on Schedule 13G dated February 12,
1999 stating that Dimensional Fund Advisors Inc. ("DFAI") was
reporting the beneficial ownership of an aggregate of 838,400
shares by four investment companies to which DFAI furnishes
investment advice and certain other investment vehicles to which
DFAI serves as an investment adviser. These investment companies
and other investment vehicles are referred to as the "Portfolios"
in the Schedule 13G filed by DFAI. The Schedule 13G states that all
securities reported in the Schedule 13G are owned by advisory
clients of DFAI, none of which, to DFAI's knowledge, owns more than
five percent of the outstanding shares of Common Stock of the
Company. The report on Schedule 13G indicates that at December 31,
1998 DFAI had sole voting power and with respect to all 838,400
shares reported and that DFAI may be deemed to beneficially own
such shares within the meaning of Rule 13d-3 of the Exchange Act in
that it had sole dispositive power over them. The report indicates
that the shares were acquired in the ordinary course of business
and not with the purpose of changing or influencing the control of
the Company. The report describes the relationship among DFAI and
its advisory clients but does not affirm the existence of a "group"
as that term is used in Section 13(d)(3) of the Exchange Act. DFAI
disclaims beneficial ownership of the shares; nevertheless, the
Company believes that DFAI and its advisory clients may be deemed
to constitute a group under Section 13(d)(3) of the Exchange Act
and that such group may be deemed to be the beneficial owner of the
shares described in this footnote.

SECURITY OWNERSHIP OF MANAGEMENT

As of July 16, 1999, the following directors of the Company, the
Named Executive Officers (as defined below) and the directors and Named
Executive Officers as a group were the beneficial owners of the indicated
amount of issued and outstanding shares of Common Stock. Except as
indicated, all of them have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially owned by them, subject
to community property laws where applicable.

NUMBER OF
SHARES OF PERCENTAGE OF
NAME AND TITLE OF BENEFICIAL OWNER COMMON STOCK COMMON STOCK
BENEFICIALLY OUTSTANDING
OWNED (1)
-------------------- -----------------

Stanley I. Berger
Chairman of the Board and Director............... 1,205,437(2) 7.4%
Joel H. Reichman
President, Chief Executive Officer and 416,455(3) 2.6
Director...........................................
Scott N. Semel
Executive Vice President, General 310,537(4) 1.9
Counsel and Secretary..............................
Carolyn R. Faulkner
Vice President, Chief Financial Officer 80,000(5) *
and Treasurer......................................
James G. Groninger
Director......................................... 80,765(6) *
Melvin I. Shapiro
Director......................................... 65,187(7) *
Bernard M. Manuel
Director......................................... 90,885(8) *
Peter L. Thigpen
Director......................................... 61,551(9) *
All directors and executive officers as a
group (8 persons)................................. 2,310,817(10) 13.5%
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* Less than 1.0%.
(1) Beneficial ownership is determined in accordance with the rules of
the SEC and generally includes voting or investment power with
respect to securities. Except as indicated, each person possesses
sole voting and investment power with respect to all of the shares
of Common Stock owned by such person, subject to community property
laws where applicable. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options held by that
person that are currently exercisable, or become exercisable by
September 14, 1999 (60 days after July 16, 1999), are deemed
outstanding. Such shares, however, are not deemed outstanding for
the purpose of computing the percentage ownership of any other
person. Percentage ownership is based on 15,963,948 shares of
Common Stock outstanding as of July 16, 1999, plus securities
deemed to be outstanding with respect to individual stockholders
pursuant to Rule 13d-3(d)(1) under the Exchange Act. The
information as to each person has been furnished by such person.
(2) Includes 241,500 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999. Mr. Berger
filed a Schedule 13D with the SEC, dated as of December 29, 1998,
stating that he had consented or would consent in his capacity as a
stockholder to the proposals described in the Consent Solicitation
Statement of JMI dated December 21, 1998. See "THE HOLTZMAN GROUP
SOLICITATION -- Background" below. JMI's consent solicitation
expired without any of its proposals being approved by the
Company's stockholders.
(3) Includes 370,500 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999, as well as 280
shares owned by Mr. Reichman's wife and 427 shares owned by Mr.
Reichman's children, as to which 707 shares Mr. Reichman disclaims
beneficial ownership.
(4) Includes 272,500 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999, as well as 450
shares owned by Mr. Semel's daughter, as to which he disclaims
beneficial ownership.
(5) Includes 67,000 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999, as well as
12,000 shares beneficially owned by Mrs. Faulkner's husband, as to
which she disclaims beneficial ownership.
(6) Includes 43,500 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999.
(7) Includes 43,500 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999 and 450 shares
owned by Mr. Shapiro's wife as to which he disclaims beneficial
ownership.
(8) Includes 43,500 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999.
(9) Includes 22,000 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999.
(10) Includes 1,104,000 shares issuable pursuant to outstanding stock
options exercisable within 60 days of July 16, 1999. See also Notes
2 through 9 above for further details concerning such options.

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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's officers
and directors, and persons who own more than 10% of a registered class of
the Company's equity securities, to file reports of ownership and changes
in ownership with the Commission. Officers, directors and greater-than-10%
stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely upon a review of
Forms 3 and 4 and amendments thereto furnished to the Company during fiscal
year 1998 and Forms 5 and amendments thereto furnished to the Company with
respect to fiscal year 1998, the Company believes that all Section 16(a)
filing requirements applicable to its officers, directors and
greater-than-10% stockholders were fulfilled in a timely manner, except for
the late filing of a Form 5 by Mrs. Faulkner.

NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS

DIRECTORS

Joel H. Reichman has been President and Chief Executive Officer of
the Company since December 1994. Prior to that time, he served as the
Company's President and Chief Operating Officer since January 1993. Mr.
Reichman has been employed by the Company since 1976 and served as its
Executive Vice President from 1985 until January 1993. Mr. Reichman has
been a director of the Company since 1987. Mr. Reichman has worked in the
retail clothing business for more than 25 years.

James G. Groninger was elected a director of the Company in 1987.
Mr. Groninger is the founder and president of The BaySouth Company, a
financial advisory firm. Prior to becoming associated with The BaySouth
Company, from 1988 through 1994, Mr. Groninger held various positions with
PaineWebber Incorporated, an investment banking and brokerage firm,
including the position of Managing Director. Mr. Groninger is a member of
the Board of Directors of Cygne Designs, Inc., a private label designer and
manufacturer of clothing for women, and NPS Pharmaceuticals, Inc., a
research and development pharmaceutical company.

Bernard M. Manuel was elected a director of the Company in 1990.
Mr. Manuel is the Chairman of the Board and Chief Executive Officer of
Cygne Designs, Inc., and Chairman of the Board and Chief Executive Officer
of Amvent, Inc., an international financial consulting company. Mr. Manuel
has been associated with these companies since prior to 1990.

Melvin I. Shapiro was elected a director of the Company in 1990.
Mr. Shapiro retired from the independent accounting firm of Tofias,
Fleishman, Shapiro & Co., P.C. in April 1998. Until his retirement, Mr.
Shapiro had been a partner in that firm for more than 25 years.

Peter L. Thigpen was elected a director of the Company in March
1994. Mr. Thigpen is a partner and a founder of Executive Reserves, a
consulting firm specializing in marketing strategy, quality processes and
the development of strategic business plans. Prior to becoming associated
with Executive Reserves, Mr. Thigpen held various positions with Levi
Strauss & Co. ("Levi Strauss") covering a period of more than 23 years,
including the position of Senior Vice President, U.S. Operations. Mr.
Thigpen has been a lecturer at the Haas School of Business at the
University of California, Berkeley since 1992. Mr. Thigpen is presently a
member of the Board of Directors of Radica Games Limited, a developer,
manufacturer and distributor of electronic handheld and table top games.

All directors hold office until the next Annual Meeting of
Stockholders or Special Meeting in lieu thereof. Executive officers, once
elected, serve at the discretion of the Board of Directors.

EXECUTIVE OFFICERS

Scott N. Semel, 43, has been employed as General Counsel to the
Company since 1986. Mr. Semel was elected Secretary and Vice President of
the Company in March 1990, and Senior Vice President of the Company in
March 1994. Mr. Semel was elected Executive Vice President of the Company
in April 1996.

Carolyn R. Faulkner, 37, joined the Company as its Controller in
June 1993. In March 1994, Mrs. Faulkner was elected as a Vice President of
the Company. In July 1996, Mrs. Faulkner was elected Chief Financial
Officer. On January 20, 1998, Mrs. Faulkner was elected Treasurer of the
Company. Prior to joining the Company, from 1985 through May 1993, Mrs.
Faulkner held various positions with Coopers & Lybrand L.L.P., an
independent accounting firm, including the position of Business Assurance
Manager.

DIRECTOR COMPENSATION

During the Company's fiscal year ended January 30, 1999 ("fiscal
year 1998"), non-employee directors of the Company were, and during the
fiscal year ending January 29, 2000 ("fiscal year 1999") such directors
will continue to be, eligible to participate in the Company's 1992 Stock
Incentive Plan, as amended (the "1992 Stock Incentive Plan"). The 1992
Stock Incentive Plan provides that each non-employee director of the
Company who is elected by the stockholders to the Board initially will
automatically be granted, upon such election, a stock option to purchase up
to 10,000 shares of Common Stock at the then fair market value of Common
Stock. Each non-employee director of the Company who is re-elected by the
stockholders 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 Common Stock. The 1992 Stock Incentive Plan further provides that
each of such stock options becomes exercisable in three equal annual
installments commencing twelve months following the date of grant and has a
ten year term.

During fiscal year 1998, non-employee directors of the Company were
entitled to receive, in addition to reimbursement of expenses, fees for
each meeting of the Board of Directors or committees of the Board in which
they participated, as follows: $3,000 for each meeting of the Board of
Directors; $3,000 for each Compensation Committee meeting; $1,500 for each
Audit Committee meeting; $1,500 for each Corporate Governance Committee
meeting; and $3,000 for each meeting of the Special Committee. The 1992
Stock Incentive Plan also provides that non-employee directors of the
Company may elect to receive all or a portion of their directors' fees, on
a current or deferred basis, in shares of Common Stock that are free of any
restrictions under the 1992 Stock Incentive Plan ("Unrestricted Stock").
Non-employee directors who are members of the Audit Committee received cash
payments as their full compensation for two Audit Committee meetings in
fiscal year 1998 that occurred before April 13, 1998. On April 13, 1998 the
Board of Directors amended the 1992 Stock Incentive Plan expressly to
provide the Compensation Committee of the Board of Directors (the
"Compensation Committee") with the authority to waive the requirement that
such an irrevocable agreement be delivered prior to the beginning of the
calendar year in which a non-employee director wishes to receive shares of
Unrestricted Stock in lieu of directors' fees otherwise due. On April 13,
1998 the Compensation Committee waived, with respect to calendar year 1998,
compliance with the requirement that such irrevocable agreements be
delivered prior to the beginning of the calendar year. This waiver was
applicable to meetings of the Board of Directors and its committees held on
April 13, 1998 and thereafter through the end of calendar year 1998. All
non-employee directors elected to receive one-half of their directors' fees
(excluding reimbursement of expenses) in shares of Unrestricted Stock for
meetings of the Board of Directors and its committees in which they
participated in fiscal year 1998, beginning with the meetings held on April
13, 1998.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table sets forth certain
information regarding compensation paid or accrued by the Company with
respect to the Chief Executive Officer of the Company during fiscal year
1998 and the other two executive officers of the Company as of January 30,
1999 (collectively, the "Named Executive Officers"), for fiscal year 1998
and the fiscal years ended January 31, 1998 ("fiscal year 1997") and
February 1, 1997 ("fiscal year 1996").

LONG-TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS
------------------ ------------
SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) SATION($)(2)
------------------ ------ --------- -------- ------------ -------------

Joel H. Reichman..... 1998 $375,000 $0 0 $3,671
President and Chief 1997 375,000 0 270,000 3,621
Executive Officer 1996 375,000 0 40,000 2,451

Scott N. Semel......... 1998 $290,000 $0 0 $3,610
Executive Vice 1997 290,000 0 150,000 3,566
President, 1996 290,000 0 40,000 3,472
General Counsel and
Secretary(3)

Carolyn R. Faulkner.... 1998 $210,000 $0 0 $3,497
Vice President, 1997 210,000 0 80,000 3,453
Chief Financial 1996 158,808 0 20,000 2,412
Officer and
Treasurer(4)

- ----------------------
(1) Other than as described in this table or the footnotes to this
table, the Company did not pay any Named Executive Officer any
compensation, including incidental personal benefits, in excess of
10% of such Named Executive Officer's base salary.
(2) The amounts disclosed in this column covering fiscal year 1998
represent: (i) payments by the Company of insurance premiums for
term life insurance for the benefit of the executive officers (Mr.
Reichman, $471; Mr. Semel, $410; and Mrs. Faulkner, $297); and (ii)
matching contributions equal to $3,200 that were made by the
Company for the benefit of each of the Named Executive Officers to
the Company's retirement plan (the "401(k) Plan") established
pursuant to Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code").
(3) Mr. Semel was elected Executive Vice President of the Company on
April 17, 1996.
(4) Mrs. Faulkner was elected Chief Financial Officer of the Company on
July 16, 1996 and was elected Treasurer of the Company on January
20, 1998.

OPTIONS/SAR GRANTS

The Company did not grant any stock options during fiscal year 1998
to any of the Named Executive Officers.

OPTION EXERCISES AND FISCAL YEAR-END VALUES

The following Fiscal Year-End Option Table sets forth certain
information regarding stock options held as of January 30, 1999 by the
Named Executive Officers. None of the Named Executive Officers exercised
any stock options during fiscal year 1998:

COMMON STOCK
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS HELD
FISCAL YEAR-END(1) AT FISCAL YEAR-END($) (2)
----------------------- --------------------------

NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------

Joel H. Reichman 303,166 229,334 $0 $0
Scott N. Semel 229,166 133,334 0 0
Carolyn R. Faulkner 42,333 73,667 0 0

- --------------
(1) Includes 270,000, 150,000 and 80,000 options for Mr. Reichman, Mr.
Semel and Mrs. Faulkner, respectively, which are subject to
forfeiture if the per share price of Common Stock does not close at
or above $12.00 for at least five trading days ending on or prior
to April 28, 2002.
(2) "Value" means the difference between the option exercise price and
the market value, as of the fiscal year-end, of the shares of
Common Stock acquired upon exercise. Based on the last sale price
of Common Stock ($2.81 per share) on Friday, January 29, 1999, as
reported by The Nasdaq Stock Market, less the applicable option
exercise price, no option held by a Named Executive Officer was "in
the money" as of the end of fiscal year 1998.

EMPLOYMENT AGREEMENTS

The Company entered into employment agreements, effective as of
October 16, 1995, with each of Joel H. Reichman and Scott N. Semel for
three-year terms ending October 15, 1998, and an employment agreement,
effective as of May 9, 1997, with Carolyn R. Faulkner for a three-year term
ending May 8, 2000. Each of these employment agreements (collectively, the
"Employment Agreements") provides for automatic renewal for successive
one-year terms unless either party notifies the other to the contrary at
least 90 days prior to expiration of the then current term. Each of Mr.
Reichman's and Mr. Semel's employment agreements renewed pursuant to this
automatic renewal provision as of October 15, 1998 and will renew again
pursuant to such provision on October 15, 1999.

The Employment Agreements require each executive officer to devote
substantially all of the executive officer's time and attention to the
business of the Company as necessary to fulfill his or her duties. Pursuant
to the Employment Agreements, Messrs. Reichman and Semel and Mrs. Faulkner
were initially entitled to be paid base salary at an annual rate of
$375,000, $255,000 and $210,000, respectively. The Employment Agreements
provide that the executive officers' annual rate of base salary for the
remaining years of employment may be increased by the Compensation
Committee in its sole discretion. The Employment Agreements further provide
that, effective as of the first day of each fiscal year of the Company,
each executive officer's annual rate of base salary will be increased by at
least the percentage increase in the cost of living in Boston,
Massachusetts. Each of Messrs. Reichman and Semel and Mrs. Faulkner waived
their right to receive this increase for fiscal 1998. The Employment
Agreements also provide for the payment of bonuses in such amounts as may
be determined by the Compensation Committee. While an executive officer is
employed by the Company, the Company provides the executive officer with a
full-size automobile for the executive officer's personal use and for use
in performance of his or her employment duties and obligations, including
maintenance of and fuel for such automobile. Each executive officer is
entitled to vacations and to participate in and receive any other benefits
customarily provided by the Company to its senior executives (including any
bonus, retirement, short and long-term disability insurance, major medical
insurance and group life insurance plans in accordance with the terms of
such plans), including stock option plans, all as determined from time to
time by the Compensation Committee.

The Employment Agreements provide that in the event the executive
officer's employment is terminated by the Company at any time for any
reason other than "justifiable cause" (as defined in the Employment
Agreements), disability or death, or in the event that the Company shall
fail to renew the Employment Agreement at any time within two years
following the date of a "Change in Control of the Company," the Company is
required, upon such termination or failure to renew, immediately to pay to
the executive officer, in a lump sum, a severance payment equal to the
greater of (i) one-twelfth of the executive officer's then annual base
salary multiplied by the number of months remaining in the term of the
Employment Agreement or (ii) a sum equal to his or her annual base salary
then in effect multiplied by two. In addition, in the event the executive
officer's employment is terminated under such circumstances, the executive
officer is also entitled to continue to participate, at the Company's
expense, in the Company's health insurance and disability insurance
programs to the extent permitted by such programs for a period of two
years. The Employment Agreements also provide that in the event the Company
elects not to renew the Employment Agreement (other than within two years
following a Change of Control of the Company), the Company will pay the
executive officer a sum equal to the greater of (i) one year's annual base
salary or (ii) two months' base salary plus one-sixth of the executive
officer's bonus, if any, relating to the most recently completed fiscal
year, for each year the executive officer has been employed by the Company.
If an executive officer dies while he or she is on Company business, then
the Company is required to pay such executive officer's estate one-half of
his or her then annual base salary.

Each Employment Agreement contains confidentiality provisions
pursuant to which each executive officer agrees not to disclose
confidential information regarding the Company. Each Employment Agreement
also contains covenants pursuant to which each executive officer agrees
during the term of his or her employment and for a one-year period
following the termination of his or her employment, not to have any
connection with any business which competes with the business of the
Company. Each Employment Agreement provides that in the event of
termination of employment (unless such termination is because the Company
fails to renew the Employment Agreement or the Company terminates the
executive officer's employment within two years following a Change in
Control of the Company), the executive officer will be available on a
part-time basis to advise and consult with the Company, with respect to the
affairs of the Company, for up to one year following termination of
employment. In the event the Company elects not to renew an executive
officer's Employment Agreement, or terminates the executive officer's
employment within two years following a Change in Control of the Company,
or fails to make the required severance payments described above, then the
non-competition covenants contained in such executive officer's Employment
Agreement will automatically terminate.

Under the Employment Agreements, the executive officer may
terminate his or her employment at any time upon 30 days' prior notice.
Upon the executive officer's termination of employment or election not to
renew his or her Employment Agreement, the non-competition covenants
contained in such executive officer's Employment Agreement will terminate
unless the Company pays the executive officer the severance payments
described above. In such event, the executive officer will be entitled to
receive such portion of his or her annual base salary and bonus, if any, as
had been accrued to date.

For purposes of the Employment Agreements, a "Change in Control of
the Company" is deemed to occur if: (i) there is consummated (a) any
consolidation or merger of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the
Company's Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of the
Company's Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, or (b) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company; or (ii) the
stockholders of the Company approve any plan or proposal for liquidation or
dissolution of the Company; or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act) becomes the beneficial
owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 40% or more of the Company's outstanding Common Stock other than
pursuant to a plan or arrangement entered into by such person and the
Company; or (iv) during any period of two consecutive years, individuals
who at the beginning of such period constitute the entire Board of
Directors of the Company cease for any reason to constitute a majority
thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were directors
at the beginning of the period.

The Employment Agreements also provide that if, in connection with
a change of ownership or control of the Company or a change in ownership of
a substantial portion of the assets of the Company (all within the meaning
of Section 280G(b)(2) of the Internal Revenue Code), an excise tax is
payable by the executive officer under Section 4999 of the Internal Revenue
Code, then the Company will pay to the executive officer additional
compensation which will be sufficient to enable the executive officer to
pay such excise tax as well as the income tax and excise tax on such
additional compensation, such that, after the payment of income and excise
taxes, the executive officer is in the same economic position in which he
would have been if the provisions of Section 4999 of the Internal Revenue
Code had not been applicable.

In May 1999, the Company established a trust (the "Trust") for the
purpose of securing already existing obligations of the Company to Messrs.
Reichman and Semel and Mrs. Faulkner (the "Trust Executives") under the
Employment Agreements, the "Indemnification Agreements" (as defined below
under "Additional Information Concerning Executive Compensation-Limitation
of Liability; Indemnification") and the Company's By-Laws. The Company
deposited $2.3 million in the Trust for these obligations. The funds will
be held in the Trust to pay the amounts due under the Employment Agreements
to the Trust Executives in the event of a Change in Control of the Company
and also to pay any amounts due to the Trust Executives pursuant to the
Indemnification Agreements or the Company's By-Laws.

The Trust may be revoked by the Company, and the funds withdrawn,
after (i) November 11, 1999, if no Change in Control of the Company has
occurred or (ii) a period of twenty-eight months following a Change in
Control of the Company. On July 7, 1999, the Board of Directors of the
Company adopted resolutions providing that the Trust will automatically be
revoked, and the funds withdrawn, on November 12, 1999 if no Change in
Control of the Company has occurred before such date. In addition, the
\Trust may terminate on the date on which the Trust Executives and their
beneficiaries are no longer entitled to benefits under the terms of the
Employment Agreements, the Indemnification Agreements or the Company's
By-Laws, unless sooner revoked by the Company as described above. The Trust
may not be amended by the Company in any manner adverse to the Trust
Executives and their beneficiaries following a Change in Control of the
Company.

The Trust Executives have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under
the Employment Agreements, the Indemnification Agreements or the Company's
By-Laws and the Trust are unsecured contractual rights of the Trust
Executives against the Company. Any assets of the Trust are subject to the
claims of the Company's creditors in the event the Company becomes
insolvent or in certain circumstances if the Lenders (as defined herein)
accelerate time for payment under the Amended and Restated Loan and
Security Agreement dated as of June 4, 1998, by and among the Company and
BankBoston Retail Finance Inc. and Norwest Business Credit Inc. now known
as Wells Fargo Business Credit Inc. (collectively, the "Lenders").

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

James G. Groninger, Bernard M. Manuel and Peter L. Thigpen served
on the Compensation Committee during all of fiscal year 1998. Persons
serving on the Compensation Committee had no relationships with the Company
in fiscal year 1998 other than their relationship to the Company as
directors entitled to the receipt of standard compensation as directors and
members of certain committees of the Board and their relationship to the
Company as beneficial owners of shares of Common Stock and options
exercisable for shares of Common Stock. No person serving on the
Compensation Committee or on the Board of Directors is an executive officer
of another entity for which an executive officer of the Company serves on
the board of directors or on that entity's compensation committee.

ADDITIONAL INFORMATION CONCERNING EXECUTIVE COMPENSATION

401(K) PLAN

On January 27, 1993, the Board of Directors adopted the 401(k)
Plan. All eligible employees of the Company are entitled to participate in
the 401(k) Plan. The 401(k) Plan permits each participant to defer up to
fifteen percent of such participant's annual salary up to a maximum annual
amount ($9,500 in calendar year 1997 and $10,000 in calendar year 1998).
The Board of Directors of the Company may determine, from fiscal year to
fiscal year, whether and to what extent the Company will contribute to the
401(k) Plan by matching contributions made to the Plan by eligible
employees. During fiscal year 1998, the matching contribution by the
Company continued to be 50% of contributions by eligible employees up to a
maximum of six percent of salary.

SENIOR EXECUTIVE INCENTIVE PLAN

The Company's Senior Executive Incentive Plan (the "SEIP") was
initially adopted by the Board of Directors of the Company during fiscal
year 1996. The SEIP is an incentive compensation plan under which executive
officers of the Company may be eligible to receive annual cash bonus
payments. The Compensation Committee determined that none of the Named
Executive Officers were eligible to participate, and did not designate any
Named Executive Officers as participants in the SEIP for fiscal 1998.

KEY MAN INSURANCE

The Company has obtained a key man life insurance policy in the
amount of $2,000,000 on the life of Mr. Reichman. The Company pays the
premium for such policy and is the sole beneficiary thereof.

LIMITATION OF LIABILITY; INDEMNIFICATION

The Company's Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), provides that no director of the
Company shall be personally liable to the Company or to any of its
stockholders for monetary damages arising out of such director's breach of
fiduciary duty, except to the extent that the elimination or limitation of
liability is not permitted by the Delaware General Corporation Law. The
Delaware General Corporation Law, as currently in effect, permits charter
provisions eliminating the liability of directors for breach of fiduciary
duty, except that directors remain liable for (i) any breach of the
directors' duty of loyalty to a company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) any payment of a dividend or approval of a
stock repurchase that is illegal under Section 174 of the Delaware General
Corporation Law, or (iv) any transaction from which the directors derived
an improper personal benefit. The effect of this provision of the
Certificate of Incorporation is that directors cannot be held liable for
monetary damages arising from breaches of their duty of care, unless the
breach involves one of the four exceptions described in the preceding
sentence. The provision does not prevent stockholders from obtaining
injunctive or other equitable relief against directors, nor does it shield
directors from liability under federal or state securities laws.

The Certificate of Incorporation and the By-Laws further provide
for indemnification of the Company's directors and officers to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise
discretionary.

On December 10, 1998, the Company's Board of Directors authorized
the Company to enter into indemnification arrangements (the
"Indemnification Agreements") with each of the Company's directors and
executive officers (collectively, the "Indemnitees"). The Indemnification
Agreements provide for the indemnification of, and advancing of expenses
incurred by, each Indemnitee, by reason of any event or occurrence (an
"Indemnificable Event") related to the fact that such Indemnitee is or was
a director or officer of the Company. Such expenses include attorneys' fees
and all other costs or obligations paid or incurred in connection with
investigating, defending or being a witness in or preparing to defend, be a
witness in or participate in, any claim relating to an Indemnificable
Event.

COMPENSATION COMMITTEE REPORT

Decisions concerning the compensation of the Company's executive
officers generally are made by the three-member Compensation Committee.
Each member of the Compensation Committee is a non-employee director of the
Company. This Report summarizes the Company's executive officer
compensation practices and policies for fiscal year 1998.

COMPENSATION POLICIES

The Company's compensation policies are designed to link executive
officer compensation to the annual and long-term performance of the Company
and to provide industry-competitive compensation for such officers. The
compensation mix reflects a balance of annual cash payments, consisting of
annual base salary payments and annual incentive bonus payments, and
long-term stock-based incentives in the form of stock options. Annual
incentive cash bonuses may be earned by eligible executive officers under
the SEIP adopted in fiscal year 1996 based upon the achievement of
measurable corporate performance goals established prior to or in the first
quarter of each fiscal year. However, emphasis in incentive compensation is
placed on the more strategic stock-based plans which more closely align the
interests of the executive officers with those of the stockholders of the
Company and which provide incentives to attract individuals and to motivate
and retain executive officers over the long-term.

The Company's executive officer compensation consists of two key
components: (1) an annual component, consisting of base salary and bonus,
if any, and (2) a long-term component consisting of the grant of stock
options. The policies with respect to each of these elements, as well as
the bases for determining the compensation of the Company's Chief Executive
Officer, Joel H. Reichman, are described below.

(1) ANNUAL COMPONENT: BASE SALARY AND ANNUAL BONUS

Base Salary: The Employment Agreements described above specify
initial base salaries and annual cost of living increases for the three
executive officers who had such agreements in fiscal year 1998 and permit
increases in such base salaries by the Compensation Committee. The
Compensation Committee reviews all base salaries for executive officers and
establishes them by reviewing the performance of each executive officer,
evaluating the responsibilities of each executive officer's position and
comparing the executive officers' salaries with salaries of executive
officers of other companies in the retail apparel industry (the
"Industry"). The Compensation Committee defines the Industry as public
companies in the retail apparel business with similar sales and market
capitalization. Annual base salary adjustments are influenced by the
Company's performance in the previous fiscal year and the individual's
contribution to that performance, the individual's performance, promotions
of the individual that may have occurred during the fiscal year, and any
increases in the individual's level of responsibility (which is measured by
various factors including, but not limited to, the number of departments
and employees for which the executive officer is responsible). Each of the
three executive officers have declined to accept cost of living increases
set forth in their Employment Agreements: Mr. Reichman has declined for the
past three fiscal years, Mr. Semel has declined for the past two fiscal
years and Mrs. Faulkner declined for fiscal year 1998.

Annual Bonus: The concept underlying the SEIP is to link
compensation to the performance of the Company based on measurable
corporate performance criteria. Generally, an executive officer's
eligibility is determined based upon an assessment of such officer's
performance during the previous fiscal year as well as other factors which
members of the Compensation Committee may take into account. The
Compensation Committee determined that none of the Named Executive Officers
would be eligible to participate in the SEIP for fiscal year 1998.

(2) LONG-TERM COMPONENT: STOCK OPTIONS

To align executive officers' interests more closely with the
interests of the stockholders of the Company, the Company's long-term
compensation program emphasizes the grant of stock options exercisable for
shares of Common Stock. The amount of such awards is determined one or more
times in each fiscal year by the Compensation Committee. Stock options
normally are granted to executive officers in amounts based largely upon
the size of stock-based awards of other companies in the Industry for
comparable positions as well as the availability of shares of Common Stock
under the 1992 Stock Incentive Plan. The Compensation Committee may take
into account other factors in determining the size of stock option grants,
including, but not limited to, the need to attract and retain individuals
the Compensation Committee perceives to be valuable to the Company.

In light of the Company's performance in fiscal year 1998, the
Compensation Committee did not award stock options to the Company's
executive officers in fiscal year 1998.

In addition to the foregoing, the Company's executive officers
receive benefits under certain group health, long-term disability and life
insurance plans which are generally available to the Company's eligible
employees. After one year of service with the Company, the executive
officers are eligible to participate in the 401(k) Plan. Benefits under
these plans are not tied to corporate performance.

The Commission requires that this Report comment upon the
Compensation Committee's policy with respect to Section 162(m) of the
Internal Revenue Code, which limits the Company's tax deduction with regard
to compensation in excess of $1 million paid to the chief executive officer
and the four most highly compensated executive officers (other than the
chief executive officer) at the end of any fiscal year unless the
compensation qualifies as "performance-based compensation." The
Compensation Committee's policy with respect to Section 162(m) is to make
every reasonable effort to cause compensation to be deductible by the
Company while simultaneously providing executive officers of the Company
with appropriate rewards for their performance.

CHIEF EXECUTIVE OFFICER COMPENSATION

Mr. Reichman served as the Company's President and Chief Executive
Officer during all of fiscal year 1998. The following discussion sets forth
the bases for Mr. Reichman's compensation during fiscal year 1998 and the
relationship between his compensation and the performance of the Company.

Annual Base Salary: Mr. Reichman's base salary was initially fixed
in October 1995 by his employment agreement at $375,000 per year. Mr.
Reichman earned the same base salary for fiscal year 1998. Mr. Reichman's
salary is subject to increase by the Compensation Committee. The
Compensation Committee authorized a $25,000 salary increase for fiscal year
1996. Mr. Reichman declined to accept the salary increase. Pursuant to the
terms of his employment agreement, as of the first day of each fiscal year
Mr. Reichman's salary is to be increased by at least the percentage
increase in the cost of living in Boston, Massachusetts. The Compensation
Committee reviewed the Company's performance during fiscal year 1998 and
the contributions of Mr. Reichman to that performance, as well as Mr.
Reichman's anticipated responsibilities in fiscal year 1999. Given the
Company's continued losses, the Compensation Committee did not authorize an
increase in Mr. Reichman's base salary for fiscal year 1998. Mr. Reichman
has declined to accept a cost of living increase set forth in his
Employment Agreement for the last three fiscal years.

Annual Bonus: As stated above, the Compensation Committee
determined that none of the Named Executive Officers would be eligible to
participate in the SEIP for fiscal year 1998.

Stock Options: Mr. Reichman was not awarded any stock options
during fiscal year 1998.

In fiscal year 1998, Mr. Reichman continued to lead the Company's
return to its core competency as a single-branded outlet operator by
increasing the number of stores devoted exclusively to selling Levi Strauss
brand apparel and accessories to 95 by the end of the year. In furtherance
of the Company's focus on its outlet business, the Company purchased 25
Levi's(R) and Dockers(R) outlets from a subsidiary of Levi Strauss in
September 1998. The Company also dissolved and wound up its joint venture
with a subsidiary of Levi Strauss in fiscal 1998, and assumed full
ownership of the joint venture's eleven Levi's(R) Outlets stores in October
1998. In connection with these transactions, the Company renegotiated its
key trademark license with Levi Strauss, among other things, to permit the
Company to substitute new stores for underperforming outlet stores, to
extend the term of the license generally and to extend it for additional
periods as to outlet stores that the Company remodels. During fiscal year
1998, the Company also closed additional unprofitable mall-based specialty
stores and planned and implemented significant overhead reductions. The
Committee believes that Mr. Reichman's successful completion of these
important steps in the Company's strategic transition will contribute
significantly to the Company's efforts to regain profitability.

Throughout fiscal year 1998, the Company continued to face the
challenges imposed by the difficult market for Levi Strauss brand apparel.
The Company's operating performance, like that of other apparel retailers
that are heavily dependent on sales of Levi's(R) brand merchandise,
continued to be affected by reduced consumer demand in the United States
for Levi's(R) brand products. Mr. Reichman directed the Company's response
to these market conditions, with primary responsibility for store
operations, store construction and design and real estate, as well as
merchandising and marketing. The Company's operating performance and the
performance of its Common Stock during the fiscal year were disappointing.
The Committee believes that, although the Company did not become profitable
in fiscal year 1998, performance improved in that the Company's losses
decreased from those incurred in fiscal year 1997.

The Compensation Committee is satisfied that Mr. Reichman's
contributions to the Company in fiscal year 1998, particularly the steps he
has taken to return the Company to profitability in fiscal year 1999,
warrant his compensation for fiscal year 1998.

THE COMPENSATION COMMITTEE
James G. Groninger
Bernard M. Manuel
Peter L. Thigpen

PERFORMANCE GRAPH

The following Performance Graph compares the Company's cumulative
stockholder return with that of a broad market index (Standard & Poor's
Industrials Index), one published industry index (Standard & Poor's Retail
(Specialty-Apparel) Index) and a selected peer group for each of the most
recent five years ended January 31. The peer group consists of Big Dog
Holdings, Inc.; Philip Van Heusen Corporation; the Cato Corporation;
Charming Shoppes, Inc.; Filene's Basement Corp.; and Catherine's Stores
Corporation. The cumulative stockholder return for shares of Common Stock
and for each of the indices and the peer group is calculated assuming that
$100 was invested on January 31, 1994. The Company paid no cash dividends
during the periods shown. The performance of the indices is shown on a
total return (dividends reinvested) basis. The graph lines merely connect
January 31 of each year and do not reflect fluctuations between those
dates.

COMPARISON OF FIVE-YEAR CUMULATIVE RETURN

[GRAPH]

S&P RETAIL
S&P (SPECIALTY-
MEASUREMENT PERIOD INDUSTRIALS APPAREL)
(FISCAL YEAR COVERED) DESIGNS, INC. INDEX INDEX PEER GROUP

1994 100.00 100.00 100.00 100.00
1995 58.0 102.00 80.00 50.00
1996 45.0 140.00 95.00 30.00
1997 47.0 176.00 121.00 40.00
1998 17.0 223.00 219.00 42.00
1999 22.00 306.00 372.00 32.00

The graph and other data used above were prepared by Standard &
Poor's Compustat Services, a division of The McGraw-Hill Companies.

THE HOLTZMAN GROUP SOLICITATION

The Holtzman Group has nominated five individuals for election to
the Board of Directors in opposition to the Company's nominees and has also
stated that it intends to present the Holtzman Proposal. On July 19, 1999,
the Holtzman Group filed a preliminary proxy statement with the SEC for the
purpose of soliciting proxies in favor of its nominees for the Board of
Directors and the Holtzman Proposal.

THE COMPANY BELIEVES THAT THE ELECTION OF THE HOLTZMAN GROUP'S
SLATE OF NOMINEES AND THE APPROVAL OF THE HOLTZMAN PROPOSAL WOULD BE
HARMFUL TO THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS THAT
STOCKHOLDERS VOTE ON THE ENCLOSED BLUE PROXY CARD IN FAVOR OF THE SLATE OF
DIRECTORS NOMINATED BY THE BOARD (SEE PAGE 2) AND AGAINST THE HOLTZMAN
PROPOSAL. THE COMPANY ALSO URGES STOCKHOLDERS NOT TO VOTE ON ANY PROXY CARD
THAT MAY BE FURNISHED BY THE HOLTZMAN GROUP.

BACKGROUND. On December 7, 1998, the Holtzman Group filed a
preliminary Consent Solicitation Statement with the Securities and Exchange
Commission for the purpose of seeking stockholder consents to remove,
without cause, five of the six members of the Company's Board of Directors
and replace them with its own nominees and to approve certain other
proposals with respect to the Company's By-Laws. The Holtzman Group's
consent solicitation expired on February 11, 1999 without any of its
proposals being approved by the Company's stockholders.

In December 1998, the Board of Directors of Designs determined to
maximize stockholder value in the short term through a sale of the Company.
At that time, the Board established a Special Committee consisting solely
of independent outside Directors to direct the sale process. To assist in
this process, the Board authorized the engagement of Shields & Company,
Inc. as financial advisor.

In early 1999 the Special Committee, acting through Shields &
Company, contacted 72 third parties which Shields & Company and the Special
Committee believed might be interested in purchasing the Company. Of these
72 third parties, 17 expressed interest and thereafter received a detailed
memorandum describing the Company and its business. Potential buyers who
indicated that they wished to proceed further, including Mr. Holtzman,
received additional financial information concerning the Company. In
addition, the Company established a data room that was available to
potential buyers, including Mr. Holtzman. A draft definitive acquisition
agreement was distributed on April 1, 1999 to interested parties, who were
requested to submit a mark-up of the agreement along with their bids on or
before April 15, 1999.

On April 28, 1999, Mr. Holtzman submitted a conditional proposal to
explore the purchase of Designs for $3.65 per share. The proposal indicated
that the purchase would be funded with approximately $20 million of equity
and $40 million of debt. In his proposal letter, Mr. Holtzman indicated
that he was "highly confident that the debt financing required for the
transaction is available." Mr. Holtzman's proposal was subject to several
conditions:

(1) "completion of a satisfactory inventory appraisal";
(2) "satisfactory resolution of the $5 million tax assessment by
the Internal Revenue Service for the year ending 1992";
(3) the prior written consent of Levi Strauss to the assignment,
sublicense or transfer of Designs' rights and obligations
under the Amended and Restated Trademark License Agreement
dated as of October 31, 1998, with Levi Strauss (the
"License Agreement") to JMI or its affiliates;
(4) obtaining debt and equity financing; and
(5) an amendment to Designs' Shareholder Rights Agreement to
provide that "it is not applicable to the proposed
transaction."

In a May 5, 1999 letter responding to Mr. Holtzman, the Special
Committee advised Mr. Holtzman of its decision to pursue his proposal and
its willingness to negotiate a definitive acquisition agreement, but
indicated that the first three conditions to Mr. Holtzman's proposal
described above should be resolved prior to entering into a definitive
agreement. The Special Committee indicated that it had directed management
and its legal and financial advisors to cooperate with JMI in satisfying
these conditions expeditiously. The Special Committee also said it would
recommend to the Designs Board of Directors that the Designs Shareholder
Rights Agreement be amended so as to be inapplicable to the proposed
transaction.

In its response, the Special Committee also urged Mr. Holtzman to
submit a mark-up of the draft definitive agreement that had been previously
sent to him. In addition, it stated that before entering into a definitive
agreement with Mr. Holtzman, the Special Committee would need access to his
proposed funding sources "to assess the viability of the proposed financing
arrangement."

On June 24, 1999, Mr. Holtzman withdrew his proposal, alleging that
the Special Committee was not committed to the sale of the Company and was
impeding the due diligence process. The Special Committee has categorically
denied those allegations, and believes that Holtzman's assertions are
nothing more than an attempt to distract attention from the fact that he
was unable or unwilling to satisfy major contingencies to his proposal. Mr.
Holtzman failed to obtain the required consent from Levi Strauss & Co.
under its license agreement with the Company. In fact, in the Special
Committee's view, Mr. Holtzman did not even make a good faith attempt to
seek the Levi Strauss & Co. consent. In connection with its consideration
of whether or not to consent to the proposed change in ownership of
Designs, Levi Strauss & Co. requested certain information from Mr. Holtzman
and Mr. Holtzman never supplied Levi Strauss & Co. with the requested
information. Mr. Holtzman never responded to the Special Committee's
request, made on May 5, 1999 and repeated several times thereafter, that
Mr. Holtzman provide comments on the draft acquisition agreement that the
Special Committee delivered to Mr. Holtzman on April 1st. Further, despite
Holtzman's assertion that he was "highly confident" that debt financing for
his proposal would be available, he failed to provide any evidence to the
Special Committee that he was able to secure commitments for such
financing.

Following the withdrawal by Holtzman of his acquisition proposal,
the Special Committee recommended to the Designs Board of Directors that
its Shareholder Rights Agreement be amended to permit Mr. Holtzman to speak
with the five largest shareholders of Designs for the purpose of
ascertaining their interest in participating with Mr. Holtzman in the
acquisition of Designs. The Special Committee also recommended that the
amendment become effective upon Mr. Holtzman's satisfaction of the
following three conditions: (1) that he formally request the consent of
Levi Strauss & Co. for his proposed acquisition of control of Designs and
provide Levi Strauss & Co. with all the information that Levi Strauss & Co.
had requested; (2) that he set forth in writing any material information
concerning Designs that he believes he has not already received; and (3)
that he provide a mark-up of the draft acquisition agreement, which the
Special Committee had been requesting since April. The Special Committee
also recommended to the Designs Board of Directors that the Designs
Shareholder Rights Agreement be amended to exempt from the Agreement any
acquisition of Common Stock made on or before November 7, 1999 pursuant to
an all-cash tender offer for any and all outstanding shares at a price of
not less than $3.65 per share where the purchaser has irrevocably committed
to effect a second-step cash-out merger for the same per share cash
consideration paid in the tender offer (any such offer, a "qualifying
offer")

On July 6, 1999, the Special Committee sent a letter to Designs
stockholders describing the foregoing events and stating in the letter that
if within a reasonable period of time Mr. Holtzman could obtain the consent
of Levi Strauss & Co. and firm up his financing, the Special Committee
would recommend to the Board of Directors that Designs enter into a
definitive acquisition agreement with Mr. Holtzman at $3.65 per share in
cash. On July 7, 1999, the Board of Directors approved all of the
amendments to the Shareholder Rights Agreement proposed by the Special
Committee.

DESPITE THE EFFORTS OF THE SPECIAL COMMITTEE TO FACILITATE A SALE
OF DESIGNS TO MR. HOLTZMAN, HE EITHER COULD NOT OR WOULD NOT DELIVER ON HIS
PROPOSAL TO ACQUIRE DESIGNS AT $3.65 PER SHARE.

ELECTION OF DIRECTORS. For the reasons discussed below, the Company
believes that it is not in the best interests of Designs stockholders to
elect the Holtzman Group nominees to the Board.

According to the Holtzman Group's own proxy materials, one of
Holtzman's plans if the Holtzman Group nominees are elected is to cause
Designs to implement a share repurchase program. The Company believes that,
if the Holtzman Group nominees are elected, Holtzman would acquire
effective control of Designs at an average cost materially below the $3.65
per share previously offered by him. Mr. Holtzman would enhance his
ownership position through a reduction in the number of outstanding shares
caused by the repurchase program, coupled with any additional purchases by
JMI. The Company considers this to be a classic "creeping acquisition"
strategy that we strongly believe is not in the best interests of the
stockholders of Designs.

Holtzman states that if his nominees are elected, they will seek to
enhance shareholder value through a sale of Designs. In the Board's view,
this is an empty promise. Designs, through its financial advisor, contacted
72 potential buyers. Moreover, the fact that Designs was for sale was
publicly disclosed. Nonetheless, no credible offer to acquire Designs
emerged despite an intensive effort to seek a buyer. The Company believes
that Holtzman's purported plan is utterly without credibility and that his
real agenda is to acquire effective control of Designs "on the cheap"
through a creeping acquisition.

The Company also believes that its relationship with Levi Strauss &
Co. is the most significant asset of the Company. The License Agreement
prohibits any assignment or transfer by the Company of any of its rights or
obligations under the License Agreement, including in connection with "a
direct or indirect transfer of control" of the Company, without the prior
approval of Levi Strauss & Co. Accordingly, in connection with any
transaction involving such a transfer of control, the Company would be
required to obtain the prior consent of Levi Strauss & Co. in order to
avoid a breach of the terms of the License Agreement. The Holtzman Group
asserts that the proposed election of JMI Nominees is not a "transfer of
control" under the License Agreement with Levi Strauss & Co. In a letter to
the Company and Jewelcor Management, Inc. dated July 29, 1999, Levi Strauss
& Co. takes the position that the proposed displacement of the Designs
board in its entirety, and a sale of Designs to a third party, are
triggering events under the prohibition against transfers without the
consent of Levi Strauss & Co. Additionally, the letter states that Levi
Strauss & Co. will not waive its rights under the License Agreement and
presently intends to exercise them fully. The Company currently takes no
position on this interpretation of the License Agreement. In light of the
letter and Holtzman's previous conduct in connection with the matter of
obtaining consent from Levi Strauss & Co., and in particular his failure to
provide information that was specifically requested by Levi Strauss & Co.,
Designs believes there is a material risk that Levi Strauss & Co. would not
give its consent to any transaction constituting "a direct or indirect
transfer of control" to Holtzman. In the Company's view, the key point is
not rights under a contract. Given the importance of Levi Strauss & Co. to
Designs, the Company believes that any erosion of the relationship with
Levi Strauss & Co. also erodes the value of the Company and is not in the
stockholder's best interests.

THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES THAT ELECTION OF THE
HOLTZMAN NOMINEES IS NOT IN THE BEST INTERESTS OF THE COMPANY'S
STOCKHOLDERS AND URGES STOCKHOLDERS TO REJECT HIS SOLICITATION. YOUR BOARD
OF DIRECTORS THEREFORE REQUESTS THAT YOU SIGN, DATE AND RETURN THE ENCLOSED
BLUE PROXY CARD, WHETHER OR NOT YOU HAVE PREVIOUSLY SIGNED AND RETURNED THE
WHITE PROXY CARD SOLICITED BY THE HOLTZMAN GROUP.

PROPOSAL 2. HOLTZMAN PROPOSAL RELATING TO RIGHTS PLAN

The Holtzman Group is also proposing that the Company's
stockholders approve a resolution recommending that the Board of Directors
of the Company terminate the Company's Shareholder Rights Agreement dated
as of May 1, 1995, together with any amendments thereto (the "Rights
Plan").

The Board of Directors adopted the Rights Plan in 1995 in response
to its concerns that a person or group could acquire control of the
Company, in the open market or otherwise, without paying an appropriate
premium for control and without offering a fair and adequate price to all
stockholders. The Rights Plan is designed to deter coercive takeover
tactics and to otherwise encourage third parties interested in acquiring
the Company to negotiate with the Board of Directors. In particular, the
Rights Plan is intended to (i) reduce the risk of coercive two-tiered,
front-end loaded or partial offers which may not offer fair value to all
stockholders; (ii) mitigate against market accumulators who through open
market and/or private purchases may achieve a position of substantial
influence or control without paying to selling or remaining stockholders a
fair control premium; (iii) deter market accumulators who are simply
interested in putting the Company into "play"; (iv) restrict self-dealing
by a substantial stockholder; and (v) preserve the Board of Directors'
bargaining power and flexibility to deal with third-party acquirors and to
otherwise seek to maximize values for all stockholders.

As recent events demonstrate, the Rights Plan is not intended to
prevent or deter a proxy contest or an offer to acquire the Company at a
price and on terms that would be in the best interests of all stockholders.
If the Board of Directors determines that an unsolicited offer is fair and
on terms that are otherwise in the best interests of stockholders, the
Board of Directors can redeem the rights issued under the Rights Plan or
amend the Rights Plan in order to permit the offer to proceed. Furthermore,
as discussed above, the Company amended the Rights Plan so that it would
not apply to any offer that meets the criteria of a "qualifying offer."

In light of Mr. Holtzman's previous conditional "offers" to acquire
the outstanding Common Stock of the Company and his intent, as disclosed in
his proxy statement, to cause the Company to repurchase up to five million
shares of Common Stock held by stockholders other than himself concurrently
with his own accumulation of additional shares of Common Stock in the open
market, stockholders should consider whether Mr. Holtzman is attempting to
gain control of the Company without paying any control premium to all the
stockholders. If so, this is the very scenario that the Rights Plan was
intended to prevent.

THE BOARD OF DIRECTORS CONSIDERS THE CONTINUATION OF THE RIGHTS
PLAN, AS AMENDED, TO BE IN THE BEST INTERESTS OF ITS STOCKHOLDERS AND
THEREFORE RECOMMENDS A VOTE AGAINST THE HOLTZMAN PROPOSAL (PROPOSAL 2).

ADDITIONAL INFORMATION

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company entered into a consulting agreement with Mr. Berger
dated as of December 21, 1994 (the "Consulting Agreement") in which he
agreed to provide an average of four days per week of consulting services
to the Company until December 20, 1997. As compensation for such services,
among other things, the Company agreed to pay Mr. Berger at the rate of
$250,000 per annum and to provide him and his spouse health benefits during
and after the term of the Consulting Agreement. The Consulting Agreement
contains covenants pursuant to which Mr. Berger agreed during the term of
the Consulting Agreement and for a two year period following expiration of
the agreement, not to have any connection with any business that competes
with the business of the Company in the eastern United States. Under the
Consulting Agreement, the Company also agreed, during the term of the
agreement, to make available to Mr. Berger an automobile for use in
connection with his work for the Company and to reimburse him for the
expenses of operation of the automobile. The Company further agreed to
transfer title to such automobile to Mr. Berger, without charge to him,
promptly after expiration of the term of the agreement, and such
automobile, having a value of approximately $19,800 at the time of
transfer, was transferred to Mr. Berger in January 1998. From January 1,
1998 through December 31, 1998, Mr. Berger was paid to provide consulting
services to the Company on a month-to-month basis at the rate of $50,000
per annum. During this period and thereafter, the Company has provided, and
will continue to provide, health benefits to Mr. Berger and his spouse
pursuant to the Consulting Agreement. The Company paid Mr. Berger $45,833
in consulting fees pursuant to this arrangement for his services in fiscal
year 1998.

BOARD OF DIRECTORS AND COMMITTEE MEETINGS

The Board of Directors met seven times during fiscal year 1998.
Messrs. Reichman, Groninger and Manuel attended all meetings of the Board,
Messrs. Thigpen and Berger attended six meetings and Mr. Shapiro attended
four meetings.

The Board of Directors has an Audit Committee consisting of Messrs.
Berger, Groninger, Shapiro, and Thigpen, a Compensation Committee
consisting of Messrs. Groninger, Manuel and Thigpen, and a Corporate
Governance Committee consisting of Messrs. Berger, Groninger, Manuel,
Shapiro and Thigpen.

The Audit Committee meets periodically with management and the
Company's independent accountants to review matters relating to the
Company's financial reporting, the adequacy of internal accounting controls
and the scope and results of audit work. The Audit Committee met four times
during fiscal year 1998. Mr. Thigpen attended all meetings of the Audit
Committee, Messrs. Groninger and Berger attended three meetings and Mr.
Shapiro attended two meetings.

The Compensation Committee meets periodically to review executive
and employee compensation and benefits (including stock-based compensation
awards under the 1992 Stock Incentive Plan), supervise benefit plans and
make recommendations regarding them to the Board of Directors. The
Compensation Committee met twice in fiscal year 1998 and all members
attended each meeting.

The Corporate Governance Committee is responsible for performing
functions related to governance of the Company, including, but not limited
to, planning for the succession and promotion of executive officers of the
Company, nominating individuals for election to the Board of Directors and
establishing, coordinating and maintaining the Company's corporate
compliance programs. The Corporate Governance Committee met once during
fiscal year 1998 and all members attended the meeting.

The Corporate Governance Committee is responsible for reviewing the
nomination of individuals for election to the Board of Directors by
stockholders of the Company. Stockholders wishing to nominate an individual
for election to the Board of Directors must send a letter to the Secretary
of the Company stating the name and qualifications of the proposed nominee.
The letter must be received by the Company within the time limits set by,
and must in all other respects comply with, Section 4.16 of the By-Laws in
order for the proposed nominee to be considered for election to the Board
of Directors. Any stockholder who has complied with the timing,
informational and other requirements set forth in Section 4.16 and who
seeks to make such a nomination, or such stockholder's representative, must
be present in person at the Annual Meeting of Stockholders of the Company
at which such nominee's election is to be considered.

On December 11, 1998, the Board of Directors formed a Special
Committee in accordance with Section 4.5 of the By-Laws for the purpose of
managing the process of seeking a buyer for the Company. The Special
Committee consists of Messrs. Groninger, Manuel and Thigpen. The Special
Committee met five times during fiscal year 1998 and all members attended
each of such meetings.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

On June 19, 1998, the Company dismissed its principal independent
accountants, Coopers & Lybrand L.L.P. ("Coopers & Lybrand"). On June 24,
1998, the Company engaged Arthur Andersen LLP ("Arthur Andersen") as its
new principal independent accountants. The Company's Board of Directors and
its Audit Committee unanimously approved the change of principal
independent accountants.

Since January 28, 1995 to date Arthur Andersen has served and
continues to serve as the principal independent accountant of The
Designs/OLS Partnership (the "OLS Partnership"), the joint venture
partnership between a subsidiary of the Company and a subsidiary of Levi's
Only Stores, Inc., a subsidiary of Levi Strauss. For financial reporting
purposes, the OLS Partnership's assets, liabilities and results of
operations are consolidated with those of the Company.

During fiscal year 1996 and fiscal year 1997 and thereafter until
its engagement of Arthur Andersen, the Company did not consult Arthur
Andersen regarding the type of audit opinions that might be rendered on the
Company's financial statements relating to such periods. Throughout those
same periods, there were no matters that occurred that constituted either a
disagreement or the kind of event described in Item 304(a)(1)(v) of
Regulation S-K promulgated by the SEC.

During fiscal year 1996 and fiscal year 1997 and thereafter through
June 19, 1998, there were no disagreements between the Company and Coopers
& Lybrand on matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which, if not resolved
to the satisfaction of Coopers & Lybrand, would have caused Coopers &
Lybrand to make reference to the subject matter thereof in its reports.
During the fiscal year 1996 and fiscal year 1997 and thereafter through
June 19, 1998, there was no occurrence of the kinds of events described in
Item 304(a)(1)(v) of Regulation S-K promulgated by the SEC. In addition,
none of the reports issued by Coopers & Lybrand concerning the Company's
financial statements for the Company's fiscal years ended February 1, 1997
and January 31, 1998 and thereafter through June 19, 1998 contain any
adverse opinion or disclaimer of opinion. Such reports were not qualified
or modified as to uncertainty, audit scope, or accounting principles.

SOLICITATION OF PROXIES

Proxies may be solicited, without additional compensation, by
directors, officers or employees of the Company by mail, telephone,
facsimile, telegram, in person or otherwise. The Company will bear the cost
of the solicitation of proxies, including the preparation, printing and
mailing of the proxy materials. In addition, the Company will request
banks, brokers and other custodians, nominees and fiduciaries to forward
proxy material to the beneficial owners of the Common Stock and obtain
their voting instructions. The Company will reimburse those firms for their
expenses in accordance with the rules of the SEC and The New York Stock
Exchange. In addition, the Company has retained Innisfree M&A Incorporated
("Innisfree") to assist in the solicitation of proxies for a fee of [ ]
plus out-of-pocket expenses. Innisfree will employ approximately 25 people
to solicit the Company's stockholders.

Expenses related to the solicitation of stockholders, in excess of
those normally spent for an annual meeting, are expected to aggregate
approximately [_______,] of which approximately [_______] has been spent to
date.

PARTICIPANTS IN THE SOLICITATION

Under applicable regulations of the SEC, each member of the Board
of Directors, certain executive officers of the Company and certain other
corporate officers of the Company may be deemed to be a "participant" in
the Company's solicitation of proxies. The principal occupation and
business address of each person who may be deemed a participant are set
forth in Appendix A hereto. Information about the present ownership by the
directors and named executive officers of the Company of the Company's
securities is provided in this Proxy Statement and the present ownership of
the Company's securities by other participants is listed in Appendix A.

STOCKHOLDER PROPOSALS

Pursuant to the Company's By-Laws, the Company generally holds its
annual meeting of stockholders in June. The date of the 1999 Annual Meeting
was delayed due to the Company's efforts to negotiate a sale transaction
with JMI. The Company intends to hold its 2000 annual meeting of
stockholders in June. If the Company does so, the deadline for submitting
stockholder proposals for inclusion in the Company's proxy materials will
be a reasonable time before the Company begins to print and mail its proxy
materials. If the Company does not hold the 2000 annual meeting of
stockholders on a date that is more than 30 days from the date of the
Annual Meeting, then stockholder proposals for inclusion in the proxy
materials related to the 2000 Annual Meeting of Stockholders must be
received by the Company at its executive offices no later than _______,
2000.

In addition, the By-Laws provide that for business to be properly
brought before an Annual Meeting of Stockholders (or any Special Meeting in
lieu of an Annual Meeting of Stockholders), a stockholder must: (i) give
timely written notice to the Secretary of the Company describing any
proposal to be brought before such meeting; and (ii) be present at such
Annual Meeting, either in person or by a representative. Such procedural
requirements are fully set forth in Section 3.14 of the By-Laws. A
stockholder's notice will be timely if delivered to, or mailed to and
received by, the Company not less than seventy-five days nor more than one
hundred twenty days prior to the anniversary date of the immediately
preceding Annual Meeting (the "Anniversary Date"). To bring an item of
business before the 2000 Annual Meeting, a stockholder must deliver the
requisite notice of such item to the Secretary of the Company not before
May 25, 2000 nor later than July 9, 2000. In the event the Annual Meeting
is scheduled to be held on a date more than thirty days before the
Anniversary Date or more than sixty days after the Anniversary Date,
however, a stockholder's notice will be timely if delivered to, or mailed
to and received by, the Company not later than the close of business on the
later of (a) the seventy-fifth day prior to the scheduled date of such
Annual Meeting or (b) the fifteenth day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Company.

OTHER MATTERS

As of this date, management knows of no business which may properly
come before the Annual Meeting other than that stated in the Notice of
Annual Meeting. Should any other business arise, proxies given in the
accompanying form will be voted in accordance with the discretion of the
person or persons voting them. The Annual Report for fiscal year 1998 is
being delivered to stockholders with this Proxy Statement, but is not
incorporated herein and is not to be deemed a part hereof.

IMPORTANT

1. If your shares are registered in your own names, please sign,
date and mail the enclosed BLUE Proxy Card to Innisfree in the postage-paid
envelope provided.

2. If your shares are held in the name of a brokerage firm, bank
nominee or other institution, only it can sign a BLUE Proxy Card with
respect to your shares and only after receiving your specific instructions.
To ensure that your shares are voted, you should also contact the person
responsible for your account and give instructions for a BLUE Proxy Card to
be issued representing your shares.

If you have any questions about giving your proxy or require
assistance, please call:

INNISFREE M&A INCORPORATED
501 MADISON AVENUE, 20th FLOOR
NEW YORK, NEW YORK 10022
CALL TOLL FREE: (888) 750-5834
BANKS & BROKERS CALL COLLECT: (212) 750-5833

APPENDIX A

INFORMATION CONCERNING THE DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
AND EMPLOYEES OF DESIGNS AND OTHER PARTICIPANTS WHO MAY
ALSO SOLICIT PROXIES ON BEHALF OF DESIGNS

The following table sets forth the name, principal business address
and the present office or other principal occupation or employment, and the
name, principal business and the address of any corporation or other
organization in which such employment is carried on, of the directors and
certain executive officers of Designs and certain employees and other
representatives of Designs who may also solicit proxies from stockholders
of Designs (collectively, the "Participants"). Unless otherwise indicated,
the principal occupation refers to such person's position with Designs and
the business address is 66 B Street, Needham, MA 02494.

DIRECTORS

The principal occupations of the Company's directors are set forth
on pages 6 and 7 of this Proxy Statement. The principal business address of
Mr. Reichman is that of the Company. The name, business and address of the
other director-participants' organization of employment are as follows:

Name Address

Stanley I. Berger 100 Essex Road
Chestnut Hill, MA 02467

James G. Groninger The Bay South Company
101 Shockoe Slip, Suite M
Richmond, VA 23219

Bernard M. Manuel Cygne Designs, Inc.
1372 Broadway
New York, NY 10018

Melvin I. Shapiro 2044 Beacon Street
Waban, MA 02168

Peter L. Thigpen Executive Reserves
700 Larkspur Landing Circle, Suite 273
Larkspur, CA 94939

EXECUTIVE OFFICERS AND MANAGEMENT

The principal occupation of the Company's executive officers and
certain other members of management and employees who are deemed
participants in the solicitation of proxies are set forth below. Except as
otherwise specified below, the principal business address of each of such
persons is that of the Company.

Name Principal Occupation

Scott N. Semel Executive Vice President, General
Counsel and Secretary

Carolyn R. Faulkner Vice President, Chief Financial Officer
and Treasurer

Anthony E. Hubbard Vice President and Deputy General Counsel

Shelly E. Mokas Controller

SHIELDS & COMPANY, INC.

In December 1998, Designs retained Shields & Company, Inc.
("Shields") to act as its financial advisor in connection with the proposed
sale of the Company, for which Shields may receive substantial fees, as
well as reimbursement of reasonable out-of-pocket expenses. In addition,
Designs has agreed to indemnify Shields and certain persons related to it
against certain liabilities arising out of their engagement. Shields is an
investment banking and advisory firm that provides a range of financial
services for institutional and individual clients. Shields does not admit
that it or any of its directors, officers or employees is a "participant"
(as defined in Schedule 14A promulgated under the Exchange Act) in the
solicitation of proxies by the Company, or that Schedule 14A requires the
disclosure of certain information concerning Shields. In connection with
its role as financial advisor to Designs, certain investment banking
employees of Shields may communicate in person, by telephone or otherwise
with a limited number of institutions, brokers or other persons who are
stockholders of Designs. Shields, through an affiliate, may trade
securities of Designs for its own account and the account of its customers
and, accordingly, may at any time hold a long or short position in such
securities. As of July 16, 1999, Shields did not hold a position in shares
of Common Stock for its own account. Additionally, in the normal course of
its business, Shields may finance securities positions by bank and other
borrowings and repurchase and securities borrowing transactions.

Information with respect to the employees of Shields who may be
deemed "Participants" is set forth below. None of the individuals named
below owns any shares of Common Stock or has engaged in any transaction
involving Designs Common Stock during the past two years. The principal
business address of each of the persons listed below is 150 Federal Street,
Boston, MA 02110.

Name Principal Occupation

Thomas J. Shields Investment Banking and Advisory Services

Jeffrey C. Bloomberg Investment Banking and Advisory Services

INFORMATION REGARDING OWNERSHIP OF THE COMPANY'S SECURITIES BY PARTICIPANTS

None of the Participants owns any of the Company's securities of
record but not beneficially. The number of shares of Common Stock held by
directors and the Named Executive Officers is set forth on pages 5 and 6 of
this Proxy Statement. The number of shares of Common Stock held by the
other Participants is set forth below:

Share
Name Ownership

Thomas J. Shields None

Jeffrey C. Bloomberg None

Anthony E. Hubbard 12,000 shares of Common Stock

Shelly E. Mokas 6,400 shares of
Common Stock

MISCELLANEOUS INFORMATION CONCERNING PARTICIPANTS

Except as described in the Proxy Statement or in this Appendix A,
to the knowledge of the Company none of the Participants nor any of their
respective affiliates or associates (together, the "Participant
Affiliates"), (i) directly or indirectly beneficially owns any shares of
Common Stock of the Company or any securities of any subsidiary of the
Company or (ii) has had any relationship with the Company in any capacity
other than as a stockholder, employee, officer and director. Furthermore,
except as described in the Proxy Statement or in this Appendix A, no
Participant or Participant Affiliate is either a party to any transaction
or series of transactions since the beginning of fiscal 1998, or has
knowledge of any currently proposed transaction or series of transactions,
(i) to which the Company or any of its subsidiaries was or is to be a
party, (ii) in which the amount involved exceeds $60,000, and (iii) in
which any Participant Affiliate had, or will have, a direct or indirect
material interest.

Except for the employment and consulting agreements described in
the Proxy Statement, to the knowledge of the Company no Participant or
Participant Affiliate has entered into any agreement or understanding with
any person respecting any future employment by the Company or its
affiliates or any future transactions to which the Company or any of its
affiliates will or may be a party. Except as described in this Appendix A
or in the Proxy Statement, to the knowledge of the Company there are no
contracts, arrangements or understandings by any Participant Affiliate
within the past year with any person with respect to the Company's
securities.

INFORMATION CONCERNING CERTAIN TRANSACTIONS IN COMMON STOCK BY PARTICIPANTS
WITHIN THE PAST TWO YEARS

The following table sets forth all purchases and sales of Common
Stock by the Participants during the last two years:

NUMBER OF SHARES DATE OF
NAME PURCHASED (OR SOLD) PURCHASE OR SALE FOOTNOTE

Stanley I. Berger (4,000) 10/1/97 (3)
(5,780) 12/5/97 (3)
1,090 4/13/98 (4)
1,000 6/1/98 (4)
1,440 6/9/98 (4)
3,000 6/9/98 (1)
1,200 8/13/98 (4)
1,846 9/28/98 (4)
1,297 12/10/98 (4)
600 2/8/99 (4)
387 3/19/99 (4)
639 4/8/99 (4)
615 5/12/99 (4)
750 5/19/99 (4)
1,043 7/7/99 (4)

Joel H. Reichman 14,998 11/7/97 (7)
5,000 6/9/98 (2)
10,000 11/23/98 (2)

Scott N. Semel 18,750 11/14/97 (7)
(4,837) 11/14/97 (8)
(1,161) 12/30/97 (3)
5,000 11/23/98 (2)

Carolyn R. Faulkner 200 7/15/97 (2)
800 10/15/97 (2)
12,000 12/08/98 (2)*

James G. Groninger 1,818 4/13/98 (4)
1,000 6/1/98 (4)
1,440 6/9/98 (4)
3,000 6/9/98 (1)
1,200 8/13/98 (4)
1,846 9/28/98 (4)
1,297 12/10/98 (4)
750 12/28/98 (4)
705 1/4/99 (4)
727 1/11/99 (4)
631 1/19/99 (4)
1,930 1/25/99 (4)
539 2/1/99 (4)
1,200 2/8/99 (4)
695 2/15/99 (4)
644 2/22/99 (4)
750 3/1/99 (4)
685 3/8/99 (4)
761 3/15/99 (4)
387 3/19/99 (4)
750 3/22/99 (4)
1,573 3/29/99 (4)
666 4/5/99 (4)
639 4/8/99 (4)
695 4/12/99 (4)
666 4/19/99 (4)
727 4/26/99 (4)
615 4/30/99 (4)
1,200 5/5/99 (4)
1,230 5/12/99 (4)
1,500 5/19/99 (4)
738 5/26/99 (4)
786 6/2/99 (4)
774 6/9/99 (4)
923 6/16/99 (4)
888 6/24/99 (4)
1,090 6/28/99 (4)
1,000 7/1/99 (4)
2,086 7/7/99 (4)

Melvin I. Shapiro 27,000 10/8/97 (7)
(10,000) 10/14/97 (5)
(5,000) 10/15/97 (5)
1,090 4/13/98 (4)
1,440 6/9/98 (4)
3,000 6/9/98 (1)
1,846 9/28/98 (4)
827 1/25/99 (4)
600 2/8/99 (4)
387 3/19/99 (4)
639 4/8/99 (4)
615 5/12/99 (4)
750 5/19/99 (4)
1,043 7/7/99 (4)

Bernard M. Manuel 16,200 10/6/97 (7)
1,818 4/13/98 (4)
1,000 6/1/98 (4)
960 6/9/98 (4)
3,000 6/9/98 (1)
1,200 8/13/98 (4)
1,846 9/28/98 (4)
1,297 12/10/98 (4)
750 12/28/98 (4)
705 1/4/99 (4)
727 1/11/99 (4)
631 1/19/99 (4)
1,655 1/25/99 (4)
539 2/1/99 (4)
1,200 2/8/99 (4)
695 2/15/99 (4)
644 2/22/99 (4)
750 3/1/99 (4)
685 3/8/99 (4)
1,573 3/29/99 (4)
639 4/8/99 (4)
695 4/12/99 (4)
666 4/19/99 (4)
727 4/26/99 (4)
615 4/30/99 (4)
1,200 5/5/99 (4)
1,500 5/19/99 (4)
738 5/26/99 (4)
786 6/2/99 (4)
923 6/16/99 (4)
888 6/24/99 (4)
1,090 6/28/99 (4)
1,000 7/1/99 (4)
1,043 7/7/99 (4)

Peter L. Thigpen 500 8/20/97 (2)
1,000 1/20/98 (2)
1,818 4/13/98 (4)
1,440 6/9/98 (4)
3,000 6/9/98 (1)
1,200 8/13/98 (4)
1,846 9/28/98 (4)
1,297 12/10/98 (4)
750 12/28/98 (4)
705 1/4/99 (4)
727 1/11/99 (4)
631 1/19/99 (4)
1,930 1/25/99 (4)
539 2/1/99 (4)
1,200 2/8/99 (4)
695 2/15/99 (4)
644 2/22/99 (4)
750 3/1/99 (4)
685 3/8/99 (4)
761 3/15/99 (4)
387 3/19/99 (4)
750 3/22/99 (4)
1,573 3/29/99 (4)
666 4/5/99 (4)
639 4/8/99 (4)
695 4/12/99 (4)
666 4/19/99 (4)
727 4/26/99 (4)
615 4/30/99 (4)
1,200 5/5/99 (4)
1,230 5/12/99 (4)
1,500 5/19/99 (4)
738 5/26/99 (4)
786 6/2/99 (4)
774 6/9/99 (4)
923 6/16/99 (4)
888 6/24/99 (4)
1,090 6/28/99 (4)
1,000 7/1/99 (4)
2,086 7/7/99 (4)

Anthony E. Hubbard 2,500 10/6/97 (1)
2,500 6/9/98 (1)
3,000 6/9/98 (6)

Shelly E. Mokas 1,000 10/6/97 (1)
1,000 6/9/98 (1)
3,000 6/9/98 (6)
500 9/28/98 (1)
1,000 12/9/98 (2)
Footnotes:

(1) Stock option award.
(2) Open market or private purchase.
(3) Disposition pursuant to a bona fide gift.
(4) Acquisition of shares via Director compensation.
(5) Open market or private sale.
(6) Issued pursuant to conditioned stock award.
(7) Acquisition of shares via exercise of a stock option.
(8) Tender of shares toward purchase of a stock option exercise.
* Purchased by spouse's IRA

PROXY

DESIGNS, INC.

ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 22, 1999

The undersigned stockholder of Designs, Inc. hereby appoints
______________, 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) AGAINST PROPOSAL 2.

PLEASE ACT PROMPTLY
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE TODAY

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES LISTED IN PROPOSAL 1 BELOW AND AGAINST PROPOSAL 2.

1. Election of the nominees named below to the Board of Directors
of the Company.

For Withhold For All Except
[ ] [ ] [ ]

Nominees: Joel H. Reichman,
James G. Groninger,
Bernard M. Manuel,
Melvin I. Shapiro, and
Peter L. Thigpen.

INSTRUCTION: To withhold authority to vote
for any individual nominee, mark "For All
Except" and write that nominee's name in the
space provided below.

-------------------------------------------

2. Holtzman proposal to terminate the Shareholder Rights
Agreement.

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: _______________

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.