UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE TO
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e )(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
DESIGNS, INC.
(Name of Subject Company (Issuer))
------------------------
DESIGNS, INC. (Offeror/Issuer)
(Name of Filing Persons (Identifying Status as Offeror, Issuer or Other Person))
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
25057L10
(CUSIP Number of Class of Securities)
Dennis Hernreich
c/o Designs, Inc.
66 B Street
Needham, Massachusetts 02494
(781) 444-7222
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of filing persons)
------------------------
Copy to:
Peter G. Smith
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
(212) 715-9100
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CALCULATION OF FILING FEE
- - --------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
- - --------------------------------------------------------------------------------
$4,500,000 $900
- - --------------------------------------------------------------------------------
* For the sole purpose of calculating the filing fee in accordance with
Rule 0-11 under the Securities Exchange Act of 1934. This calculation
assumes the purchase of up to 1,500,000 shares of common stock at the
maximum tender offer price per share of $3.00.
|_| Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid:_____________ Filing Party:________________
Form or Registration No.:____________ Date Filed:_________________
|_| Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
|_| third-party tender offer subject to Rule 14d-1.
|X| issuer tender offer subject to Rule 13e-4.
|_| going-private transaction subject to Rule 13e-3.
|_| amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: |_|
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This Tender Offer Statement on Schedule TO relates to the tender offer
by Designs, Inc., a Delaware corporation, to purchase shares of its common
stock, par value $0.01 per share. Designs, Inc. is offering to purchase up to
1,500,000 shares, or such lesser number of shares as are properly tendered and
not properly withdrawn, at a price not greater than $3.00 nor less than $2.20
per share, net to the seller in cash. Designs, Inc.'s offer is being made upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
November 14, 2000 and the related Letter of Transmittal which, as amended or
supplemented from time to time, constitute the offer. This Tender Offer
Statement on Schedule TO is intended to satisfy the requirements of Rule
13e-4(c)(2) of the Securities Exchange Act of 1934, as amended.
ITEMS 1 THROUGH 11.
The information in the Offer to Purchase and the related Letter of
Transmittal, copies of which are filed herewith as Exhibits (a)(1)(A) and
(a)(1)(B) hereto, respectively, is incorporated by reference in answer to Items
1 through 11 in this Tender Offer Statement on Schedule TO.
ITEM 12. MATERIAL TO BE FILED AS EXHIBITS.
12.(a)(1)(A) Form of Offer to Purchase dated November 14, 2000.
12.(a)(1)(B) Form of Letter of Transmittal.
12.(a)(1)(C) Form of Notice of Guaranteed Delivery.
12.(a)(1)(D) Form of Letter from Designs, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
12.(a)(1)(E) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees to Clients.
12.(a)(1)(F) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
12.(a)(2)-(4) Not applicable.
12.(a)(5) Press Release issued by Designs, Inc. on November 15, 2000.
12.(b) Not applicable.
12.(d) Not applicable.
12.(e) Not applicable.
12.(g) Not applicable.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3.
Not applicable.
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: November 15, 2000
DESIGNS, INC.
By: /s/ DENNIS HERNREICH
--------------------------------
Name: Dennis Hernreich
Title: Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
EXHIBIT NUMBER
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12.(a)(1)(A) Form of Offer to Purchase dated November 14, 2000.
12.(a)(1)(B) Form of Letter of Transmittal.
12.(a)(1)(C) Form of Notice of Guaranteed Delivery.
12.(a)(1)(D) Form of Letter from Designs, Inc. to Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
12.(a)(1)(E) Form of Letter from Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees to Clients.
12.(a)(1)(F) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
12.(a)(2)-(4) Not applicable.
12.(a)(5) Press Release issued by Designs, Inc. on November 15, 2000.
12.(b) Not applicable.
12.(d) Not applicable.
12.(e) Not applicable.
12.(g) Not applicable.
OFFER TO PURCHASE FOR CASH
by
DESIGNS, INC.
of
Up to 1,500,000 Shares of Its Common Stock
At a Purchase Price Not Greater Than $3.00 Nor Less Than $2.20 Per Share
- - ------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
EASTERN TIME, ON THURSDAY, DECEMBER 14, 2000, UNLESS THE OFFER IS EXTENDED.
- - ------------------------------------------------------------------------------
Designs, Inc., a Delaware corporation, invites you to tender your shares
of its common stock, par value $0.01 per share, to Designs, Inc. at a price not
greater than $3.00 nor less than $2.20 per share in cash, as specified by
tendering stockholders, upon the terms and subject to the conditions set forth
in this Offer to Purchase and the related Letter of Transmittal (which, as
amended from time to time, together constitute the "offer").
Designs, Inc. will, upon the terms and subject to the conditions of the
offer, determine a single per share price (not greater than $3.00 nor less than
$2.20 per share), net to the seller in cash (the "Purchase Price"), that it will
pay for shares validly tendered and not withdrawn pursuant to the offer, taking
into account the number of shares so tendered and the prices specified by
tendering stockholders. Designs, Inc. will select the lowest Purchase Price that
will allow it to buy 1,500,000 shares of its common stock validly tendered and
not withdrawn pursuant to the offer (or such lesser number of shares as are
validly tendered at prices not greater than $3.00 nor less than $2.20 per
share). Designs, Inc. will pay the Purchase Price for all shares validly
tendered at prices at or below the Purchase Price and not withdrawn, upon the
terms and subject to the conditions of the offer, including the terms thereof
relating to proration and conditional tenders. Designs, Inc. reserves the right,
in its sole discretion, to purchase more than 1,500,000 shares pursuant to the
offer, up to a maximum of 1,000,000 additional shares. Under applicable
regulations of the Securities and Exchange Commission, up to an additional
315,639 shares, or 2% of the outstanding shares, may be purchased without
amending or extending the offer. Shares tendered at prices in excess of the
Purchase Price and shares not purchased because of proration or conditional
tenders will be returned.
The offer is not conditioned on any minimum number of shares being
tendered. The offer is, however, subject to certain other conditions. See
Section 7.
Designs, Inc. common stock is listed and traded on the Nasdaq National
Market tier of The Nasdaq Stock Market under the symbol "DESI." On November
2, 2000, the last full trading day on the Nasdaq National Market prior to
announcement of the offer, the closing per share sales price as reported on
the Nasdaq National Market was $2.3750. Designs, Inc. urges you to obtain
current quotations of the market price of the shares. See Section 8.
The Board of Directors of Designs, Inc. has approved the offer. However,
you must make your own decision whether to tender your shares and, if so, how
many shares to tender and the price or prices at which you are tendering your
shares. Neither Designs, Inc. nor its Board of Directors makes any
recommendation to any stockholder as to whether to tender or refrain from
tendering shares. Directors, officers and employees of Designs, Inc. who own
shares may participate in the offer on the same basis as Designs, Inc.'s other
stockholders. Designs, Inc. has been advised that neither the directors or
executive officers of Designs, Inc. nor Jewelcor Management Inc., the company's
largest stockholder, intend to tender shares pursuant to the offer.
-----------------------------
The date of this Offer to Purchase is November 14, 2000.
SUMMARY TERM SHEET
This summary highlights the most material information from this Offer to
Purchase. To understand the offer fully and for a more complete description of
the terms of the offer, you should read carefully this entire Offer to Purchase
and the related Letter of Transmittal. We have included section references to
direct you to a more complete description of the topics in this summary.
What securities is Designs, Inc. Designs, Inc. is offering to purchase
offering to purchase? 1,500,000 shares of its common stock or any
(See Section 1.) lesser number of shares that stockholders
properly tender in the offer. If more than
1,500,000 shares are tendered, all shares
tendered at or below the purchase price will
be purchased on a pro rata basis, except for
"odd lots" of less than 100 shares which will
be purchased on a priority basis.
How much will Designs, Inc. pay Designs, Inc. is conducting the offer through
me for my shares and in what a procedure commonly called a modified "Dutch
form of payment? Auction."
(See Section 5.)
o This procedure allows you to select the
price (in multiples of $.10) within a
specified price range at which you are
willing to sell your shares. The price
range for this offer is $2.20 to $3.00 per
share.
o Designs, Inc. will determine the lowest
single per share price within the price
range that will allow it to purchase
1,500,000 shares, or if fewer shares are
tendered, all shares tendered.
o All shares purchased will be purchased at
the same price, even if you have selected a
lower price, but no shares will be
purchased above the purchase price
determined by Designs, Inc. (If Designs,
Inc. determines to purchase up to 1,000,000
additional shares, those shares and the
initial 1,500,000 shares will be purchased
at the same price.)
o If you wish to maximize the chance that
your shares will be purchased, you should
check the box in the section on the Letter
of Transmittal indicating that you will
accept the purchase price determined by
Designs, Inc. under the terms of the offer.
Note that this election could result in
your shares being purchased at the minimum
price of $2.20 per share.
o Stockholders whose shares are purchased in
the offer will be paid the purchase price,
net (that is, without reduction for
brokerage commissions or solicitation fees)
in cash, without interest, as soon as
practicable after the expiration of the
offer period. Under no circumstances will
Designs, Inc. pay interest on the purchase
price, including, but not limited to, by
reason of any delay in making payment.
Does Designs, Inc. have the o Designs, Inc. intends to obtain all of
financial resources to pay me the funds required to purchase the shares
for my shares? (See Section 11.) in this offer (a maximum of $4,500,000 if
1,500,000 shares are purchased at the
potential maximum price of $3.00), plus
related expenses, from borrowings under
its bank credit facility. Designs, Inc.
has reached an agreement in principle with
its bank lender to permit such borrowings,
subject to definitive documentation. The
credit facility is also expected to be
sufficient to fund the potential purchase
of up to an additional 1,000,000 shares if
Designs, Inc. determines to do so.
When does the tender offer o The offer expires Thursday, December
expire? Can Designs, Inc. extend 14, 2000, at 5:00 p.m., Eastern time,
the offer, and if so, how will I unless it is extended by Designs, Inc.
be notified? (See Section 16.)
o Designs, Inc. may extend the offer at
any time.
o Designs, Inc. cannot assure you that
the offer will be extended or, if
extended, for how long.
o If the offer is extended, Designs, Inc.
will make a public announcement of the
extension no later than 9:00 a.m., Eastern
time, on the next business day following
the previously scheduled expiration of the
offer period.
What is the purpose of the offer? o Designs, Inc. believes that its shares
(See Section 9.) continue to be undervalued in the public
market, and that the offer is consistent
with Designs, Inc.'s long-term corporate
strategy of seeking to increase stockholder
value.
o This offer allows stockholders who wish to
sell their shares now an opportunity to
dispose of all or part of their investment
in Designs, Inc. shares on potentially more
favorable terms than would otherwise be
available. However, stockholders who choose
not to tender their shares may also benefit
from these transactions. Non-tendering
stockholders will own a greater percentage
interest in a company with a potentially
stronger earnings per share growth rate.
What are the most significant o Designs, Inc.'s obligation to purchase
conditions to the offer? (See or pay for any shares tendered depends
Section 7.) upon a number of conditions, including:
o No significant decrease in the price of
Designs, Inc. common stock or in the price
of equity securities generally, or any
adverse changes in the U.S. stock markets
or credit markets, shall have occurred
during this offer.
o No legal action shall have been threatened,
pending or taken, that might adversely
affect the offer.
o No one shall have proposed, announced or
made a tender or exchange offer (other than
this offer), merger, business combination
or other similar transaction involving
Designs, Inc.
o No material change in the business,
condition (financial or otherwise), assets,
income, operations, prospects or stock
ownership of Designs, Inc., or in the
anticipated availability of bank funding
for the offer, shall have occurred during
this offer.
How do I tender my shares? o If you decide to tender your shares,
(See Section 3.) you must either:
o For shares you hold through a broker,
dealer, commercial bank, trust company or
other nominee, you must contact the person
responsible for your account at such
broker, dealer, commercial bank, trust
company or other nominee and instruct them
to tender your shares on your behalf;
o For shares you hold in registered form,
complete the Letter of Transmittal and mail
or hand deliver it with your stock
certificate to the Depositary before 5:00
p.m., Eastern time, on December 14, 2000;
or
o If your share certificates are not
immediately available for delivery to the
Depositary, comply with the guaranteed
delivery procedure before 5:00 p.m.,
Eastern time, on December 19, 2000.
o Contact the Information Agent or your
broker for assistance.
Until what time can I withdraw o You may withdraw your tendered shares
previously tendered shares? (See at any time before 5:00 p.m., Eastern
Section 4.) time, on December 14, 2000, and, unless
already accepted for payment by Designs,
Inc., at any time after 5:00 p.m., Eastern
time, on January 12, 2001.
In what order will tendered o First, Designs, Inc. will purchase
shares be purchased? Will shares from all holders of "odd lots" of
tendered shares be prorated? less than 100 shares who properly tender
(See Section 5.) all of their shares at or below the
selected purchase price; and
o Second, after purchasing all shares
from the "odd lot" holders, Designs, Inc.
will then purchase shares from all other
stockholders who properly tender shares at
or below the selected purchase price, on a
pro rata basis, subject to the conditional
tender provisions described in Section 6.
o Consequently, all of the shares that you
tender in the offer may not be purchased
even if they are tendered at or below the
purchase price.
What do Designs, Inc. and its o Neither Designs, Inc. nor its Board of
Board of Directors think of the Directors makes any recommendation to you
offer? as to whether to tender or refrain from
(See Section 9.) tendering your shares or as to the
purchase price at which you may choose to
tender your shares.
o You must decide whether to tender your
shares and, if so, how many shares to
tender and the price or prices at which you
will tender them.
What is the recent market price o On November 2, 2000, the last full
of my shares? (See Section 8.) trading day before the announcement of the
offer, the last reported sale price of the
shares on the Nasdaq National Market was
$2.3750.
o Stockholders are urged to obtain current
market quotations for their shares.
Who do I contact if I have o For additional information or
questions about the tender offer? assistance, you may contact the
Information Agent:
o D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
212-269-5550
800-755-7520 (toll free)
Designs, Inc. has not authorized any person to make any recommendation
on behalf of Designs, Inc. as to whether stockholders should tender or
refrain from tendering shares pursuant to the offer. Designs, Inc. has not
authorized any person to give any information or to make any representation
in connection with the offer on behalf of Designs, Inc. other than those
contained in this Offer to Purchase or in the Letter of Transmittal. Do not
rely on any such recommendation or any such information or representation, if
given or made, as having been authorized by Designs, Inc.
IMPORTANT
If you desire to tender all or any portion of your shares, you must:
(1) properly complete and duly execute the Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the
Letter of Transmittal, including any required signature
guarantees, and mail or deliver the Letter of Transmittal or such
facsimile with your certificate(s) for the shares you are
tendering and any other documents required by the Letter of
Transmittal to Equiserve Trust Company (the "Depositary"),
(2) deliver such shares pursuant to the procedures for book-entry
transfer set forth in Section 3, or
(3) request your broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for you.
If you have shares registered in the name of a broker, dealer, commercial bank,
trust company or other nominee, you must contact that broker, dealer, commercial
bank, trust company or other nominee you desire to tender such shares. If you
desire to tender shares and your share certificates are not immediately
available or you cannot comply with the procedure for book-entry transfer on a
timely basis or your other required documentation cannot be delivered to the
Depositary by the expiration of the offer, you should tender such shares by
following the procedures for guaranteed delivery set forth in Section 3.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to D.F. King & Co., Inc., the Information Agent for
the offer, at its address and telephone numbers set forth on the back cover
of this Offer to Purchase.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Offer to Purchase contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward-looking statements are statements other
than historical information or statements of current condition. Some
forward-looking statements may be identified by use of terms such as "believes,"
"anticipates," "intends," or "expects." These forward-looking statements may
relate to the plans and objectives of Designs, Inc. for future operations. In
light of the risks and uncertainties inherent in all future projections, the
inclusion of forward-looking statements in this Offer to Purchase should not be
regarded as a representation by Designs, Inc. or any other person that the
objectives or plans of Designs, Inc. will be achieved. Numerous factors could
cause Designs, Inc.'s actual results to differ materially from such
forward-looking statements. We encourage you to refer to Designs, Inc.'s Current
Report on Form 8-K, previously filed with the Securities and Exchange Commission
on April 28, 2000, which identifies certain risks and uncertainties that may
have an impact on future earnings and the direction of the company. Designs,
Inc. undertakes no obligation to release publicly the results of any future
revisions it may make to forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
TABLE OF CONTENTS
Section Page
SUMMARY TERM SHEET 3
INTRODUCTION 10
THE OFFER 11
1. Number of Shares; Proration 11
2. Tenders by Owners of Fewer Than 100 Shares 13
3. Procedure for Tendering Shares 14
4. Withdrawal Rights 18
5. Purchase of Shares and Payment of Purchase Price 19
6. Conditional Tender of Shares 20
7. Certain Conditions of the Offer 21
8. Trading Market and Price Range of Shares 23
9. Background and Purpose of the Offer; Certain Effects
of the Offer 23
10. Interests of Directors and Executive Officers;
Transactions and Arrangements Concerning Shares 24
11. Source and Amount of Funds 28
12. Certain Information About Designs, Inc 29
13. Effects of the Offer on the Market for Shares;
Registration under the Securities Exchange Act 36
14. Certain Legal Matters; Regulatory Approvals 36
15. Certain U.S. Federal Income Tax Consequences 37
16. Extension of the Offer; Termination; Amendments 39
17. Fees and Expenses 40
18. Miscellaneous 41
-9-
To the Holders of Shares of Common Stock of
Designs, Inc.:
INTRODUCTION
Designs, Inc. invites you to tender your shares to Designs, Inc. at a
price not greater than $3.00 nor less than $2.20 per share in cash, as
specified by tendering stockholders, upon the terms and subject to the
conditions set forth in the offer.
Designs, Inc. will, upon the terms and subject to the conditions of the
offer, determine a single per share price (not greater than $3.00 nor less than
$2.20 per share), net to the seller in cash (the "Purchase Price"), that it will
pay for shares validly tendered and not withdrawn pursuant to the offer, taking
into account the number of shares so tendered and the prices specified by
tendering stockholders. Designs, Inc. will select the lowest Purchase Price that
will allow it to buy 1,500,000 shares of its common stock validly tendered and
not withdrawn pursuant to the offer (or such lesser number of shares as are
validly tendered at prices not greater than $3.00 nor less than $2.20 per
share). Designs, Inc. will pay the Purchase Price for all shares validly
tendered at prices at or below the Purchase Price and not withdrawn, upon the
terms and subject to the conditions of the offer, including the terms thereof
relating to proration and conditional tenders. Designs, Inc. reserves the right,
in its sole discretion, to purchase more than 1,500,000 shares pursuant to the
offer, up to a maximum of 1,000,000 additional shares. See Section 1.
The offer is not conditioned on any minimum number of shares being
tendered. The offer is, however, subject to certain other conditions. See
Section 7.
If, by the Expiration Date (as defined in Section 1), more than 1,500,000
shares are validly tendered at or below the Purchase Price and not withdrawn (or
such greater number of shares as Designs, Inc. may elect to purchase), Designs,
Inc. will, upon the terms and subject to the conditions of the offer, purchase
shares first from all Odd Lot Owners (as defined in Section 2) who validly
tender all their shares at or below the Purchase Price and then on a pro rata
basis from all other stockholders who validly tender shares at prices at or
below the Purchase Price (and do not withdraw them prior to the Expiration
Date), other than stockholders who tender conditionally, and for whom the
condition is not satisfied. Designs, Inc. will return at its own expense all
shares not purchased pursuant to the offer, including shares tendered at prices
greater than the Purchase Price and shares not purchased because of proration or
conditional tenders. The Purchase Price will be paid net to the tendering
stockholder in cash for all shares purchased. Tendering stockholders will not be
obligated to pay brokerage commissions, solicitation fees or, subject to
Instruction 7 of the Letter of Transmittal, stock transfer taxes on Designs,
Inc.'s purchase of shares pursuant to the offer. Stockholders, however, may
incur fees associated with the tendering of shares in custodial or other
beneficiary accounts. However, any tendering stockholder or other payee who
fails to complete, sign and return to the Depositary the Substitute Form W-9
that is included as part of the Letter of Transmittal or a Form W-8 obtained
from the Depositary may be subject to required U.S. federal income tax backup
withholding of 31% of the gross proceeds payable to such stockholder or other
payee pursuant to the offer. See Sections 3 and 15. In addition, Designs, Inc.
will pay all fees and expenses of the Depositary in connection with the offer.
See Section 17.
The Board of Directors has approved the offer. However, you must make your
own decision whether to tender your shares and, if so, how many shares to tender
and the price or
-10-
prices (in multiple of $.10) at which you are tendering your shares. Neither
Designs, Inc. nor its Board of Directors makes any recommendation to any
stockholder as to whether to tender or refrain from tendering shares.
Designs, Inc. is making the offer to afford to those stockholders of
Designs, Inc. desiring liquidity an opportunity to sell all or a portion of
their shares on potentially more favorable terms than would be available in
open market sales. In addition, Designs, Inc. believes that its shares
continue to be undervalued in the public market and that the offer is
consistent with its long-term corporate strategy of seeking to increase
stockholder value.
As of the close of business on November 6, 2000, there were 15,781,972
shares of Designs, Inc. common stock outstanding. The 1,500,000 shares that
Designs, Inc. is offering to purchase represent approximately 9.5% of the
outstanding shares.
Designs, Inc. common stock is listed and traded on the Nasdaq National
Market tier of The Nasdaq Stock Market under the symbol "DESI." On November
2, 2000, the last full trading day on the Nasdaq National Market prior to the
announcement of the offer, the closing per share sales price as reported on
the Nasdaq National Market was $2.3750. Designs, Inc. urges stockholders to
obtain current quotations on the market price of the shares.
THE OFFER
1. Number of Shares; Proration.
Upon the terms and subject to the conditions of the offer, Designs, Inc.
will accept for payment (and thereby purchase) 1,500,000 shares of its common
stock or such lesser number of shares as are validly tendered before the
Expiration Date (and not withdrawn in accordance with Section 4) at a net cash
price (determined in the manner set forth below) not greater than $3.00 nor less
than $2.20 per share. The term "Expiration Date" means 5:00 p.m., Eastern time,
on Thursday, December 14, 2000, unless and until Designs, Inc. in its sole
discretion shall have extended the period of time during which the offer is
open, in which event the term "Expiration Date" shall refer to the latest time
and date at which the offer, as so extended by Designs, Inc., shall expire. See
Section 16 for a description of Designs, Inc.'s right to extend the time during
which the offer is open and to delay, terminate or amend the offer. Subject to
Section 2, if the offer is oversubscribed, shares tendered at or below the
Purchase Price before the Expiration Date will be eligible for proration,
subject to the provisions for conditional tenders described in Section 6. The
proration period also expires on the Expiration Date.
Designs, Inc. will, upon the terms and subject to the conditions of the
offer, determine a single per share Purchase Price that it will pay for shares
validly tendered and not withdrawn pursuant to the offer, taking into account
the number of shares so tendered and the prices specified by tendering
stockholders. Designs, Inc. will select the lowest Purchase Price that will
allow it to buy 1,500,000 shares of its common stock validly tendered and not
withdrawn pursuant to the offer (or such lesser number as are validly tendered
at prices not greater than $3.00 nor less than $2.20 per share). Designs, Inc.
will pay the Purchase Price for all shares validly tendered at prices at or
below the Purchase Price and not withdrawn, upon the terms and subject to the
conditions of the offer, including the terms thereof relating to proration and
conditional tenders. Shares tendered at prices in excess of the Purchase Price
and shares not purchased because of proration or conditional tender will be
returned. Designs, Inc. reserves the right, in its sole discretion, to purchase
more than 1,500,000 shares pursuant to the offer, up to a
-11-
maximum of 1,000,000 additional shares. In accordance with applicable
regulations of the Securities and Exchange Commission, Designs, Inc. may
purchase pursuant to the offer an additional amount of shares not to exceed 2%
of the outstanding shares (or an additional 315,639 shares) without amending or
extending the offer. If Designs, Inc. increases or decreases the price to be
paid for shares, Designs, Inc. increases the number of shares being sought, and
such increase in the number of shares being sought exceeds 2% of the outstanding
shares, or Designs, Inc. decreases the number of shares being sought, the offer
may need to be extended. In particular, if the offer is scheduled to expire at
any time earlier than the tenth business day from and including the date that
notice of such increase or decrease is first published, sent or given in the
manner specified in Section 16, the offer will be extended until the expiration
of ten business days. For purposes of the offer, a "business day" means any day
other than a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 a.m. through 12:00 Midnight, Eastern time.
The offer is not conditioned on any minimum number of shares being
tendered. The offer is, however, subject to certain other conditions. See
Section 7.
In accordance with Instruction 5 of the Letter of Transmittal, each
stockholder desiring to tender shares must (1) specify the price (not greater
than $3.00 nor less than $2.20 per share), in multiple of $.10, at which such
stockholder is willing to have Designs, Inc. purchase shares or (2) elect to
have such stockholder's shares purchased at a price determined by the Dutch
Auction tender process, which could result in such shares being purchased at the
minimum price of $2.20 per share. As promptly as practicable following the
Expiration Date, Designs, Inc. will, in its sole discretion, determine the
Purchase Price (not greater than $3.00 nor less than $2.20 per share) that it
will pay for shares validly tendered and not withdrawn pursuant to the offer,
taking into account the number of shares so tendered and the prices specified by
tendering stockholders. Designs, Inc. will pay the Purchase Price for all shares
validly tendered prior to the Expiration Date at prices at or below the Purchase
Price and not withdrawn, upon the terms and subject to the conditions of the
offer, including the proration and conditional tender provisions. All shares not
purchased pursuant to the offer, including shares tendered at prices greater
than the Purchase Price and shares not purchased because of proration or
conditional tenders, will be returned to the tendering stockholders at Designs,
Inc.'s expense as promptly as practicable following the Expiration Date.
If the number of shares validly tendered at or below the Purchase Price
and not withdrawn prior to the Expiration Date is less than or equal to
1,500,000 shares (or such greater number of shares as Designs, Inc. may elect to
purchase pursuant to the offer), Designs, Inc. will, upon the terms and subject
to the conditions of the offer, purchase at the Purchase Price all shares so
tendered.
Priority. Upon the terms and subject to the conditions of the offer, in
the event that prior to the Expiration Date more than 1,500,000 shares (or such
greater number of shares as Designs, Inc. may elect to purchase pursuant to the
offer) are validly tendered at or below the Purchase Price and not withdrawn,
Designs, Inc. will purchase such validly tendered shares in the following order
of priority:
(1) all shares validly tendered at or below the Purchase Price and
not withdrawn prior to the Expiration Date by any Odd Lot Owner (as
defined in Section 2) who:
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(a) tenders all shares beneficially owned by such Odd Lot
Owner at or below the Purchase Price (partial tenders will not
qualify for this preference); and
(b) completes the box captioned "Odd Lots" on the Letter of
Transmittal and, if applicable, on the Notice of Guaranteed
Delivery;
(2) after purchase of all of the foregoing shares, all shares
conditionally tendered in accordance with Section 6, for which the
condition was satisfied without regard to the procedure set forth in
clause (3) below, and all other shares tendered properly and
unconditionally, in each case, at prices at or below the Purchase Price
and not withdrawn prior to the Expiration Date, on a pro rata basis, if
necessary, as described below; and
(3) if necessary to permit Designs, Inc. to purchase 1,500,000
shares, shares conditionally tendered, for which the condition was not
initially satisfied, at or below the Purchase Price and not withdrawn
prior to the Expiration Date, selected by random lot in accordance with
Section 6.
Proration. In the event that proration of tendered shares is required,
Designs, Inc. will determine the final proration factor as promptly as
practicable after the Expiration Date. Proration for each stockholder tendering
shares (other than Odd Lot Owners satisfying clause (1) above) will be based on
the ratio of the number of shares tendered by such stockholder at or below the
Purchase Price to the total number of shares tendered by all stockholders (other
than Odd Lot Owners satisfying clause (1) above) at or below the Purchase Price,
subject to the conditional tender provisions described in Section 6. This ratio
will be applied to stockholders tendering shares (other than Odd Lot Owners
satisfying clause (1) above) to determine the number of shares (in certain
cases, rounded up to the nearest whole share) that will be purchased from each
such stockholder pursuant to the offer. Although Designs, Inc. does not expect
to be able to announce the final results of such proration until approximately
seven business days after the Expiration Date, it will announce preliminary
results of proration by press release as promptly as practicable after the
Expiration Date. Stockholders can obtain such preliminary information from
Designs, Inc. and may be able to obtain such information from their brokers.
As described in Section 15, the number of shares that Designs, Inc. will
purchase from a stockholder may affect the U.S. federal income tax consequences
to the stockholder of such purchase and therefore may be relevant to a
stockholder's decision whether to tender shares. The Letter of Transmittal
affords each tendering stockholder the opportunity to designate the order of
priority in which shares tendered are to be purchased in the event of proration.
This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of shares as of November 6, 2000, and will be furnished
to brokers, banks and similar persons whose names, or the names of whose
nominees, appear on Designs, Inc.'s stockholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of shares.
2. Tenders by Owners of Fewer Than 100 Shares.
Designs, Inc., upon the terms and subject to the conditions of the offer,
will accept for purchase, without proration, all shares validly tendered at or
below the Purchase Price and not withdrawn on or prior to the Expiration Date by
or on behalf of stockholders who beneficially own an aggregate of fewer than 100
shares ("Odd Lot Owners"). See Section 1. To avoid
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proration, however, an Odd Lot Owner must validly tender at or below the
Purchase Price all such shares that such Odd Lot Owner beneficially owns. This
preference is not available to partial tenders or to owners of 100 or more
shares in the aggregate, even if such owners have separate stock certificates
for fewer than 100 such shares. Any Odd Lot Owner wishing to tender all such
shares beneficially owned by such stockholder pursuant to this offer must
complete the box captioned "Odd Lots" in the Letter of Transmittal and, if
applicable, on the Notice of Guaranteed Delivery and must properly indicate in
the section entitled "Price (In Dollars) Per Share At Which Shares Are Being
Tendered" in the Letter of Transmittal the price at which such shares are being
tendered, or may elect to have all of such stockholder's shares purchased at the
Purchase Price determined by the Dutch Auction tender process. See Section 3.
Stockholders owning an aggregate of less than 100 shares whose shares are
purchased pursuant to the offer will avoid both the payment of brokerage
commissions and any applicable odd lot discounts payable on a sale of their
shares in transactions on a stock exchange, including the Nasdaq National
Market.
As of November 6, 2000, based upon data provided by independent
stockholder communication services and the transfer agent for Designs, Inc.
common stock, there were approximately 336 holders of record of common stock.
Approximately 8% of these holders of record held individually fewer than 100
shares and held in the aggregate no more than 2,600 shares. Because of the
number of shares held in the names of brokers and nominees, Designs, Inc. is
unable to estimate the number of beneficial owners of fewer than 100 shares or
the aggregate number of shares they own.
Designs, Inc. also reserves the right, but will not be obligated, to
purchase all shares duly tendered by any stockholder who tendered any shares
beneficially owned at or below the Purchase Price and who, as a result of
proration, would then beneficially own an aggregate of fewer than 100 shares. If
Designs, Inc. exercises this right, it will increase the number of shares that
it is offering to purchase in the offer by the number of shares purchased
through the exercise of such right.
3. Procedure for Tendering Shares.
Proper Tender of Shares. For you to validly tender your shares
pursuant to the offer, you must either:
(1) properly complete and duly execute a Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions of the Letter of
Transmittal, with any required signature guarantees and deliver it along
with your certificates for shares to be tendered and any other documents
required by the Letter of Transmittal to the Depositary prior to the
Expiration Date at one of its addresses set forth on the back cover of
this Offer to Purchase;
(2) deliver such shares pursuant to the procedures for book-entry
transfer described below (and a confirmation of such delivery received by
the Depositary, including an Agent's Message (as defined below) if you do
not deliver a Letter of Transmittal) or pursuant to ATOP (as defined
below) prior to the Expiration Date; or
(3) comply with the guaranteed delivery procedures set forth below.
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The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility (as defined below) to, and received by, the Depositary and
forming a part of a Book-Entry Confirmation (as defined below), which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the participant in the Book-Entry Transfer Facility tendering the shares
that such participant has received and agrees to be bound by the terms of the
Letter of Transmittal and that Designs, Inc. may enforce such agreement against
the participant.
As specified in Instruction 5 of the Letter of Transmittal, if you desire
to tender shares pursuant to the offer, you must either (1) check the box in the
section of the Letter of Transmittal captioned "Shares Tendered at Price
Determined by Dutch Auction" or (2) check one of the boxes in the section of the
Letter of Transmittal captioned "Shares Tendered at Price Determined by
Stockholder."
If you wish to maximize the chance that your shares will be purchased at
the relevant Purchase Price, you should check the box on the Letter of
Transmittal marked "Shares Tendered at Price Determined by Dutch Auction." Note
that this election could result in your shares being purchased at the minimum
price of $2.20 per share. If you wish to indicate a specific price (in multiples
of $.10) at which your shares are being tendered, you must check a box under the
section captioned "Shares Tendered at Price Determined by Stockholder" of the
Letter of Transmittal in the table labeled "Price (In Dollars) Per Share at
Which Shares Are Being Tendered." If you wish to tender shares at more than one
price, you must complete a separate Letter of Transmittal for each price at
which you are tendering shares. You cannot tender the same shares at more than
one price.
Your tender of shares will be proper if, and only if, on the Letter of
Transmittal you have checked either the box in the section captioned "Shares
Tendered at Price Determined by Dutch Auction" or one of the boxes in the
section captioned "Shares Tendered at Price Determined by Stockholder."
Odd Lot Owners who tender all shares must complete the section entitled
"Odd Lots" on the Letter of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery, in order to qualify for the preferential treatment
available to Odd Lot Owners as set forth in Section 2.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the Letter of Transmittal if (1) the Letter of Transmittal is signed
by the registered holder of the shares (which term, for purposes of this
Section, includes any participant in The Depository Trust Company (the
"Book-Entry Transfer Facility") whose name appears on a security position
listing as the holder of the shares) tendered therewith and payment and delivery
are to be made directly to such registered holder, or (2) shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a member of a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 under the Securities Exchange Act (an "Eligible Institution"). In this
regard, see Section 5 for information with respect to applicable stock transfer
taxes. In all other cases, all signatures on the Letter of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 of the Letter of
Transmittal. If a certificate representing shares is registered in the name of a
person other than the signer of a Letter of Transmittal, or if payment is to be
made, or shares not purchased or tendered are to be returned, to a person other
than the registered holder, the certificate must be endorsed or accompanied by
an appropriate stock power, in either case signed exactly as the name of the
registered holder appears on the certificate, with the signature on the
certificate or stock power guaranteed by an Eligible Institution. In all cases,
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payment for shares tendered and accepted for payment pursuant to the offer will
be made only after timely receipt by the Depositary of certificates for such
shares (or a timely confirmation of a book-entry transfer of such shares into
the Depositary's account at the Book-Entry Transfer Facility as described
below), a properly completed and duly executed Letter of Transmittal (or a
facsimile thereof), or an Agent's Message in connection with a book-entry
transfer, or a proper tender through the Book-Entry Transfer Facility's
Automated Tender Offer Program ("ATOP"), together with any other documents
required by the Letter of Transmittal.
The method of delivery of all documents, including share certificates, the
Letter of Transmittal and any other required documents, is at the election and
risk of the tendering stockholder. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended.
Book-Entry Delivery. The Depositary will establish an account with respect
to the shares at the Book-Entry Transfer Facility for purposes of the offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of the shares by causing the Book-Entry Transfer
Facility to transfer such shares into the Depositary's account in accordance
with the Book-Entry Transfer Facility's procedure for such transfer. Even though
delivery of shares may be effected through book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility, a properly completed
and duly executed Letter of Transmittal (or a facsimile thereof), with any
required signature guarantees, or, in the case of book-entry transfer, an
Agent's Message or, in the case of a tender through ATOP, the specific
acknowledgment, in each case together with any other required documents, must,
in any case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the guaranteed delivery procedure set forth below must be
followed. The confirmation of a book-entry transfer of shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to herein as a "Book-Entry Confirmation." Delivery of the Letter of
Transmittal and any other required documents to the Book-Entry Transfer Facility
does not constitute delivery to the Depositary.
Participants in the Book-Entry Transfer Facility may tender their shares
in accordance with ATOP, to the extent it is available to such participants for
the shares they wish to tender. A stockholder tendering through ATOP must
expressly acknowledge that the stockholder has received and agreed to be bound
by the Letter of Transmittal and that the Letter of Transmittal may be enforced
against such stockholder.
Guaranteed Delivery. If you desire to tender your shares pursuant to the
offer and you cannot deliver your share certificates to the Depositary prior to
the Expiration Date (or the procedures for book-entry transfer cannot be
completed on a timely basis) or time will not permit all required documents to
reach the Depositary before the Expiration Date, you may nevertheless tender
your shares, provided that all of the following conditions are satisfied:
(1) your tender is made by or through an Eligible Institution;
(2) the Depositary receives (by hand, mail, overnight courier or
facsimile transmission), on or prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery substantially in
the form Designs, Inc. has provided with this Offer to Purchase
(indicating the price at which the shares are being tendered),
-16-
including (where required) a signature guarantee by an Eligible
Institution in the form set forth in such Notice of Guaranteed Delivery;
and
(3) the certificates for all tendered shares in proper form for
transfer (or confirmation of book-entry transfer of such shares into the
Depositary's account at the Book-Entry Transfer Facility or a proper
tender through ATOP), together with a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) and any required signature
guarantees (or, in the case of book-entry transfer, an Agent's Message or,
in the case of a tender through ATOP, the specific acknowledgment) and any
other documents required by the Letter of Transmittal, are received by the
Depositary no later than 5:00 p.m., Eastern time, on the third Nasdaq
National Market trading day after the date the Depositary receives such
Notice of Guaranteed Delivery.
Return of Unpurchased Shares. If any tendered shares are not purchased, or
if less than all shares evidenced by a stockholder's certificates are tendered,
certificates for unpurchased shares will be returned as promptly as practicable
after the expiration or termination of the offer or, in the case of shares
tendered by book-entry transfer at the Book-Entry Transfer Facility, such shares
will be credited to the appropriate account maintained by the tendering
stockholder at the Book-Entry Transfer Facility, in each case without expense to
such stockholder.
Federal Income Tax Backup Withholding. To prevent federal income tax
backup withholding equal to 31% of the gross payments made to stockholders for
shares purchased pursuant to the offer, each stockholder who does not otherwise
establish an exemption from such withholding must provide the Depositary with
the stockholder's correct taxpayer identification number and provide certain
other information by completing the Substitute Form W-9 included as part of the
Letter of Transmittal. For a further discussion of backup withholding, see
Section 15.
Stock Option Plans. Designs, Inc. is not offering, as part of the offer,
to purchase any of the options outstanding under the stock option plans, and
tenders of such options will not be accepted. All option exercises must be
effected through Designs, Inc. A holder of options who wishes to participate in
the offer must exercise such option(s) in accordance with the terms of the stock
option plans or stock option agreements, and then tender such shares pursuant to
the offer. An exercise of an option cannot be revoked even if shares received
upon the exercise thereof and tendered in the offer are not purchased in the
offer for any reason.
Holders of options may not use the Letter of Transmittal to direct the
tender of shares issuable upon exercise of options. Questions with respect to
tendering shares issuable upon exercise of options should be directed to Dennis
Hernreich, Secretary of Designs, Inc.
In no event are any options to be delivered to the Depositary in
connection with a tender of shares hereunder.
In order for shares issuable upon exercise of options to be timely
tendered prior to the Expiration Date, holders of options must exercise such
options no later than 5:00 p.m., Eastern time, on December 12, 2000, unless
extended.
Tendering Stockholder's Representation and Warranty; Company's Acceptance
Constitutes an Agreement. It is a violation of Rule 14e-4 promulgated under the
Securities Exchange Act for a person acting alone or in concert with others,
directly or indirectly, to tender
-17-
shares for such person's own account unless at the time of tender and at the
Expiration Date such person has a "net long position" equal to or greater than
the amount tendered in (1) the shares and will deliver or cause to be delivered
such shares for the purpose of tender to Designs, Inc. within the period
specified in the offer or (2) other securities immediately convertible into,
exercisable for or exchangeable into shares ("Equivalent Securities") and, upon
the acceptance of such tender, will acquire such shares by conversion, exchange
or exercise of such Equivalent Securities to the extent required by the terms of
the offer and will deliver or cause to be delivered such shares so acquired for
the purpose of tender to Designs, Inc. within the period specified in the offer.
Rule 14e-4 also provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. A tender of shares made
pursuant to any method of delivery set forth herein will constitute the
tendering stockholder's representation and warranty to Designs, Inc. that (1)
such stockholder has a "net long position" in shares or Equivalent Securities
being tendered within the meaning of Rule 14e-4 and (2) such tender of shares
complies with Rule 14e-4. Designs, Inc.'s acceptance for payment of shares
tendered pursuant to the offer will constitute a binding agreement between the
tendering stockholder and Designs, Inc. upon the terms and subject to the
conditions of the offer.
Determinations of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of shares
to be accepted, the price to be paid therefor and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of shares will be determined by Designs, Inc., in its sole discretion, which
determination shall be final and binding on all parties. Designs, Inc. reserves
the absolute right to reject any or all tenders it determines not to be in
proper form or the acceptance of or payment for which may, in the opinion of
Designs, Inc.'s counsel, be unlawful. Designs, Inc. also reserves the absolute
right to waive any of the conditions of the offer and any defect or irregularity
in the tender of any particular shares or any particular stockholder. No tender
of shares will be deemed to be properly made until all defects or irregularities
have been cured or waived. None of Designs, Inc., the Depositary or any other
person is or will be obligated to give notice of any defects or irregularities
in tenders, and none of them will incur any liability for failure to give any
such notice.
Certificates for shares, together with a properly completed Letter of
Transmittal and any other documents required by the Letter of Transmittal, must
be delivered to the Depositary and not to Designs, Inc. Any such documents
delivered to Designs, Inc. will not be forwarded to the Depositary and therefore
will not be deemed to be validly tendered.
4. Withdrawal Rights.
Except as otherwise provided in this Section 4, tenders of shares pursuant
to the offer are irrevocable. Shares tendered pursuant to the offer may be
withdrawn at any time before the Expiration Date and, unless accepted for
payment by Designs, Inc. as provided in this Offer to Purchase, may also be
withdrawn after 5:00 p.m., Eastern time, on January 12, 2001.
For a withdrawal to be effective, the Depositary must receive (at its
address set forth on the back cover of this Offer to Purchase) a notice of
withdrawal in written or facsimile transmission form on a timely basis. Such
notice of withdrawal must specify the name of the person who tendered the shares
to be withdrawn, the number of shares tendered, the number of shares to be
withdrawn and the name of the registered holder, if different from that of the
person who tendered such shares. If the certificates have been delivered or
otherwise identified to the Depositary, then, prior to the release of such
certificates, the tendering stockholder must also
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submit the serial numbers shown on the particular certificates evidencing the
shares and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of shares tendered by an Eligible
Institution). If shares have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and the number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn shares and otherwise comply with the
procedures of such facility.
If Designs, Inc. extends the offer, is delayed in its purchase of shares
or is unable to purchase shares pursuant to the offer for any reason, then,
without prejudice to Designs, Inc.'s rights under the offer, the Depositary may,
subject to applicable law, retain on behalf of Designs, Inc. all tendered
shares, and such shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in this Section 4,
subject to Rule 13e-4(f)(5) under the Securities Exchange Act, which provides
that the issuer making the tender offer shall either pay the consideration
offered, or return the tendered securities, promptly after the termination or
withdrawal of the tender offer.
All questions as to the form and validity, including time of receipt, of
notices of withdrawal will be determined by Designs, Inc., in its sole
discretion, which determination shall be final and binding on all parties. None
of Designs, Inc., the Depositary or any other person is or will be obligated to
give any notice of any defects or irregularities in any notice of withdrawal,
and none of them will incur any liability for failure to give any such notice.
Withdrawals may not be rescinded, and any shares properly withdrawn will
thereafter be deemed not tendered for purposes of the offer. However, withdrawn
shares may be re-tendered before the Expiration Date by again following any of
the procedures described in Section 3.
5. Purchase of Shares and Payment of Purchase Price.
In all cases, payment for shares tendered and accepted for payment
pursuant to the offer will be made promptly (subject to possible delay in the
event of proration or conditional tenders) but only after timely receipt by the
Depositary of certificates for shares (or of a timely Book-Entry Confirmation of
such shares into the Depositary's account at the Book-Entry Transfer Facility),
a properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), or, in the case of a book-entry transfer, an Agent's Message, or, in
the case of a tender through ATOP, the specific acknowledgment, in each case
together with any other required documents.
Payment for shares purchased pursuant to the offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payment
from Designs, Inc. and transmitting payment to the tendering stockholders. In
the event of proration, Designs, Inc. will determine the proration factor and
pay for those tendered shares accepted for payment as soon as practicable after
the Expiration Date. However, Designs, Inc. does not expect to be able to
announce the final results of any such proration until approximately seven
business days after the Expiration Date. Under no circumstances will Designs,
Inc. pay interest on the Purchase Price including, without limitation, by reason
of any delay in making payment. Certificates for all shares not purchased,
including all shares tendered at prices greater than the Purchase Price and
shares not purchased due to proration or conditional tenders, will be returned
(or, in the case of shares tendered by book-entry transfer, such shares will be
credited to the account maintained with the Book-Entry Transfer Facility by the
participant who so delivered such shares) as promptly as practicable following
the Expiration Date or termination of the offer without expense to the
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tendering stockholder. In addition, if certain events occur, Designs, Inc. may
not be obligated to purchase shares pursuant to the offer. See Section 7.
Designs, Inc. will pay or cause to be paid all stock transfer taxes, if
any, payable on the transfer to it of shares purchased pursuant to the offer;
provided, however, that if payment of the Purchase Price is to be made to, or
(in the circumstances permitted by the offer) if unpurchased shares are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person signing the Letter of Transmittal, the amount of all stock transfer
taxes, if any (whether imposed on the registered holder or such other person),
payable on account of the transfer to such person will be deducted from the
Purchase Price unless evidence satisfactory to Designs, Inc. of the payment of
such taxes or exemption therefrom is submitted. See Instruction 7 of the Letter
of Transmittal.
Any tendering stockholder or other payee who fails to complete fully, sign
and return to the Depositary the Substitute Form W-9 included as part of the
Letter of Transmittal or a Form W-8 or a Form W-8 BEN obtained from the
Depositary may be subject to required U.S. federal income tax backup withholding
of 31% of the gross proceeds payable to such stockholder or other payee pursuant
to the offer. See Sections 3 and 15.
6. Conditional Tender of Shares.
Under certain circumstances and subject to the exceptions set forth in
Section 1, Designs, Inc. may prorate the number of shares purchased pursuant to
the offer. As discussed in Section 15, the number of shares to be purchased from
a particular stockholder may affect the tax treatment of such purchase to such
stockholder and such stockholder's decision whether to tender. Each stockholder
is urged to consult with his or her own tax advisor. Accordingly, a stockholder
may tender shares subject to the condition that a specified minimum number of
such stockholder's shares tendered pursuant to a Letter of Transmittal or Notice
of Guaranteed Delivery must be purchased if any such shares so tendered are
purchased, and any stockholder desiring to make such a conditional tender must
so indicate in the box captioned "Conditional Tender" in such Letter of
Transmittal or, if applicable, the Notice of Guaranteed Delivery. The
conditional tender alternative is made available so that a stockholder may seek
to structure the purchase of shares from the stockholder pursuant to the offer
in such a manner that it will be treated as a sale of such shares by the
stockholder, rather than the payment of a dividend to the stockholder, for
federal income tax purposes.
Any tendering stockholder wishing to make a conditional tender must
calculate and appropriately indicate such minimum number of shares. If the
effect of accepting tenders on a pro rata basis would be to reduce the number of
shares to be purchased from any stockholder (tendered pursuant to a Letter of
Transmittal or Notice of Guaranteed Delivery) below the minimum number so
specified, such tender will automatically be regarded as withdrawn (except as
provided in the next paragraph) and all shares tendered by such stockholder
pursuant to such Letter of Transmittal or Notice of Guaranteed Delivery will be
returned as promptly as practicable thereafter.
If conditional tenders would otherwise be so regarded as withdrawn and
would cause the total number of shares to be purchased to fall below 1,500,000,
then, to the extent feasible, Designs, Inc. will select enough of such
conditional tenders that would otherwise have been so withdrawn to permit
Designs, Inc. to purchase 1,500,000 shares. In selecting among such
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conditional tenders, Designs, Inc. will select by lot and will limit its
purchase in each case to the designated minimum number of shares to be
purchased.
In the event of proration, any shares tendered pursuant to a conditional
tender for which the minimum requirements are not satisfied may not be accepted
(except as provided above) and will thereby be deemed withdrawn.
7. Certain Conditions of the Offer.
Notwithstanding any other provision of the offer, Designs, Inc. shall not
be required to accept for payment, purchase or pay for any shares tendered, and
may terminate or amend the offer or may postpone the acceptance for payment of,
or the purchase of and the payment for, shares tendered, subject to Rule
13e-4(f) promulgated under the Securities Exchange Act, if at any time on or
after November 14, 2000, and prior to the time of payment for any such shares
(whether any shares have theretofore been accepted for payment, purchased or
paid for pursuant to the offer) any of the following events shall have occurred
(or shall have been determined by Designs, Inc. to have occurred) that, in
Designs, Inc.'s judgment in any such case and regardless of the circumstances
giving rise thereto (including any action or omission to act by Designs, Inc.),
makes it inadvisable to proceed with the offer or with such acceptance for
payment or payment:
(1) there shall have been threatened or instituted or be pending
before any court, agency, authority or other tribunal any action, suit or
proceeding by any government or governmental, regulatory or administrative
agency or authority or by any other person, domestic, foreign or
supranational, or any judgment, order or injunction entered, enforced or
deemed applicable by any such court, authority, agency or tribunal, which
(a) challenges or seeks to make illegal, or to delay or otherwise directly
or indirectly to restrain, prohibit or otherwise affect the making of the
offer or the acquisition of shares pursuant to the offer or is otherwise
related in any manner to, or otherwise affects, the offer or (b) could, in
the sole judgment of Designs, Inc., materially affect the business,
condition (financial or otherwise), income, operations or prospects of
Designs, Inc. and its subsidiaries, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of Designs, Inc. and its subsidiaries, taken as a whole, or
materially impair the offer's contemplated benefits to Designs, Inc.; or
(2) there shall have been any action threatened or taken, or any
approval withheld, or any statute, rule or regulation invoked, proposed,
sought, promulgated, enacted, entered, amended, enforced or deemed to be
applicable to the offer or Designs, Inc. or any of its subsidiaries, by
any government or governmental regulatory or administrative authority or
agency or tribunal, domestic, foreign or supranational, which, in the sole
judgment of Designs, Inc., would or might directly or indirectly result in
any of the consequences referred to in clause (a) or (b) of paragraph (1)
above; or
(3) there shall have occurred (a) the declaration of any banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory); (b) any general suspension of trading
in, or limitation on prices for, securities on any U.S. national
securities exchange or in the over-the-counter market; (c) the
commencement of a war, armed hostilities or any other national or
international crisis directly or indirectly involving the United States;
(d) any limitation (whether or not mandatory) by any governmental,
regulatory or administrative agency or authority on, or
-21-
any event which, in the sole judgment of Designs, Inc. might materially
affect, the extension of credit by banks or other lending institutions in
the United States; (e) any significant decrease in the market price of the
shares or in the market prices of equity securities generally in the
United States or any change in the general political, market, economic or
financial conditions in the United States or abroad that could have in the
sole judgment of Designs, Inc. a material adverse effect on the business,
condition (financial or otherwise), income, operations or prospects of
Designs, Inc. and its subsidiaries, taken as a whole, or on the trading in
the shares; (f) in the case of any of the foregoing existing at the time
of the announcement of the offer, a material acceleration or worsening
thereof; or (g) any decline in the Dow Jones Industrial Average or the S&P
500 Composite Index or the Nasdaq Composite Index by an amount in excess
of 10% measured from the close of business on November 14, 2000; or
(4) any change shall occur or be threatened in the business, condition
(financial or otherwise), income, operations or prospects of Designs,
Inc. and its subsidiaries, taken as a whole, or in the anticipated
availability of bank funding for the offer, which in the sole judgment
of Designs, Inc. is or may be material to the consummation of the offer
or otherwise material to Designs, Inc. and its subsidiaries, taken as a
whole; or
(5) a tender or exchange offer with respect to some or all of the shares of
Designs, Inc. common stock (other than the offer), or a merger or
acquisition proposal for Designs, Inc., shall have been proposed,
announced or made by another person or shall have been publicly disclosed,
or Designs, Inc. shall have learned that (a) any person or "group" (within
the meaning of Section 13(d)(3) of the Securities Exchange Act) has
acquired or proposes to acquire beneficial ownership of more than 5% of
the outstanding shares, whether through the acquisition of stock, the
formation of a group, the grant of any option or right, or otherwise
(other than as disclosed in a Schedule 13D or 13G (or an amendment
thereto) on file with the Securities and Exchange Commission on November
14, 2000) or (b) any such person or group that on or prior to November 14,
2000, had filed such a Schedule with the Securities and Exchange
Commission thereafter shall have acquired or shall propose, to acquire
whether through the acquisition of stock, the formation of a group, the
grant of any option or right, or otherwise, beneficial ownership of
additional shares representing 2% or more of the outstanding shares; or
(6) any person or group shall have filed a Notification and Report Form under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, reflecting an
intent to acquire Designs, Inc. or any of its shares.
The foregoing conditions are for Designs, Inc.'s sole benefit and may be
asserted by Designs, Inc. regardless of the circumstances giving rise to any
such condition (including any action or inaction by Designs, Inc.) or may be
waived by Designs, Inc. in whole or in part. Designs, Inc.'s failure at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right, and each such right shall be deemed an ongoing right that may be asserted
at any time and from time to time. In certain circumstances, if Designs, Inc.
waives any of the foregoing conditions, it may be required to extend the
Expiration Date of the offer. Any determination by Designs, Inc. concerning the
events described above and any related judgment or decision by Designs, Inc.
regarding the inadvisability of proceeding with the purchase of or payment for
any shares tendered will be final and binding on all parties.
-22-
8. Trading Market and Price Range of Shares.
Designs, Inc. common stock is listed and traded on the National Market
tier of The Nasdaq Stock Market under the symbol "DESI." The high and low
closing sales prices per share on the Nasdaq National Market as compiled from
published financial sources are listed below:
High Low
1998 (fiscal year ended January 30, 1999)
First Quarter $2.7500 $1.8750
Second Quarter 2.1250 1.1250
Third Quarter 2.0312 1.3437
Fourth Quarter 2.8125 0.6250
1999 (fiscal year ended January 29, 2000)
First Quarter $2.7812 $1.8437
Second Quarter 2.5625 1.3750
Third Quarter 1.8125 1.1562
Fourth Quarter 1.7187 1.1875
2000 (fiscal year ending February 3, 2001)
First Quarter $1.5000 $1.0938
Second Quarter 2.1250 1.1875
Third Quarter 2.5625 1.9375
Fourth Quarter (through November 7, 2000) 2.4688 2.2812
On November 2, 2000, the last full trading day before the announcement of
the offer, the closing per share sales price as reported on the Nasdaq National
Market was $2.3750. Designs, Inc. urges stockholders to obtain current
quotations of the market price of the shares.
9. Background and Purpose of the Offer; Certain Effects of the Offer.
Designs, Inc. believes that its shares continue to be undervalued in
the public market, and that the offer is consistent with Design's Inc.'s
long-term corporate strategy of seeking to increase stockholder value.
Design, Inc. believes it has adequate sources of capital, including presently
anticipated borrowing capacity under its bank credit facility, to complete
the shares repurchase and pursue business opportunities.
The offer provides stockholders who are considering a sale of all or a
portion of their shares the opportunity to determine the price or prices (not
greater than $3.00 nor less than $2.20 per share) at which they are willing to
sell their shares and, if any of such shares are purchased pursuant to the
offer, to sell those shares for cash to Designs, Inc. without the usual costs
associated with a market sale. The offer gives stockholders an opportunity to
sell their shares on potentially more favorable terms than would otherwise be
available. Designs, Inc. believes that for the past two years there has been
limited liquidity in the marketplace for its stock and small purchases or sales
can cause significant fluctuations in the stock price. The offer will permit
stockholders who want to sell their stock to do so in a more liquid and stable
market. The offer would also allow Odd Lot Owners whose shares are purchased
pursuant to the offer to avoid both the payment of brokerage commissions and any
applicable odd lot discounts payable on sales of odd lots on a securities
exchange. To the extent the purchase of shares in the offer
-23-
results in a reduction in the number of stockholders of record, the costs to
Designs, Inc. for services to stockholders should be reduced.
Stockholders who do not tender their shares pursuant to the offer and
stockholders who otherwise retain an equity interest in Designs, Inc. as a
result of a partial tender of shares or a proration pursuant to Section 1 of
this Offer to Purchase will continue to be owners of Designs, Inc. with the
attendant risks and rewards associated with owning the equity securities of
Designs, Inc.
Stockholders who determine not to accept the offer will realize a
proportionate increase in their relative equity interest in Designs, Inc. and,
thus, in Designs, Inc.'s earnings and assets, subject to any risks resulting
from Designs, Inc.'s purchase of shares and its ability to issue additional
equity securities in the future. The offer may affect Designs, Inc.'s ability to
qualify for pooling-of-interests accounting treatment for any merger transaction
for approximately the next two years, which could limit alternative stockholder
enhancement vehicles during this period.
If fewer than 1,500,000 shares are purchased pursuant to the offer,
Designs, Inc. may repurchase the remainder of the shares on the open market, in
privately negotiated transactions or otherwise. In the future, Designs, Inc. may
determine to purchase additional shares on the open market, in privately
negotiated transactions, through one or more tender offers or otherwise. Any
purchases may be on the same terms as, or on terms which are more or less
favorable to stockholders than, the terms of the offer. However, Rule 13e-4
under the Securities Exchange Act prohibits Designs' Inc. and its affiliates
from purchasing any shares, other than pursuant to the offer, until at least ten
business days after the Expiration Date. Any future purchases of shares by
Designs, Inc. would depend on many factors, including the market price of the
shares, Designs, Inc.'s business and financial position, and general economic
and market conditions.
Shares Designs, Inc. acquires pursuant to the offer will be restored to
the status of authorized and unissued shares, or placed in Designs, Inc.'s
treasury, and will be available for Designs, Inc. to issue without further
stockholder action, except as required by applicable law or the rules of the
Nasdaq National Market or any other securities exchange on which the shares are
listed, for purposes including, but not limited to, the acquisition of other
businesses, the raising of additional capital for use in Designs, Inc.'s
business and the satisfaction of obligations under existing or future employee
benefit plans. Designs, Inc. has no current plans for reissuance of the shares
repurchased pursuant to the offer.
Neither Designs, Inc. nor its Board of Directors makes any
recommendation to any stockholder as to whether to tender all or any shares.
Each stockholder must make his or her own decision whether to tender shares
and, if so, how many shares to tender and at what price. Directors, officers
and employees of Designs, Inc. who own shares may participate in the offer on
the same basis as Designs, Inc.'s other stockholders. Designs, Inc. has been
advised that neither the directors or executive officers of Designs, Inc. nor
Jewelcor Management Inc., the company's largest stockholder, intend to tender
shares pursuant to the offer.
10. Interests of Directors and Executive Officers; Transactions and
Arrangements Concerning Shares.
As of November 6, 2000, Designs, Inc. had 15,781,972 shares of its common
stock issued and outstanding, and had reserved 1,003,600 shares for issuance
upon exercise of outstanding
-24-
stock options. The 1,500,000 shares that Designs, Inc. is offering to purchase
represent approximately 9.5% of the outstanding shares. As of November 6, 2000,
Designs, Inc.'s directors and executive officers as a group (twelve persons)
beneficially owned an aggregate of 4,365,355 shares, including 590,006 shares
covered by currently exercisable options granted under Designs, Inc.'s stock
option plan, representing approximately 26.7% of the outstanding shares,
assuming the exercise by such persons of their currently exercisable options.
Such shares include 2,531,997 shares beneficially owned by Mr. Seymour Holtzman,
the Chairman of the Board of Directors, and Jewelcor Management Inc., an
affiliate of Mr. Holtzman which is the company's largest stockholder. The
aggregate number and percentage of Designs, Inc. common stock beneficially owned
by each such person is set forth below. Directors, officers and employees of
Designs, Inc. who may own shares may participate in the offer on the same basis
as Designs, Inc.'s other stockholders. Designs, Inc. has been advised that
neither its directors or executive officers nor Jewelcor Management Inc. intend
to tender shares pursuant to the offer.
Security Ownership of Management, etc. As of November 6, 2000, the
following directors and executive officers of the company as a group, were the
beneficial owners of the indicated number 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 Percent
Name and Title Beneficially Owned of Class (1)
- - -------------- ------------------ ------------
Seymour Holtzman 2,531,997 (2) 15.47%
Chairman of the Board and Director
David A. Levin 200,000 1.22%
Chief Executive Officer, President and
Director
John J. Schultz 49,151 (3) *
Director
Dennis Hernreich 22,600 *
Senior Vice President, Chief Financial
Officer
and Secretary
Daniel O. Paulus 55,000 (4) *
Senior Vice President
and General Merchandising Manager
Stanley I. Berger 977,719 (5) 5.97%
Director
Jesse Choper 39,822 (6) *
Director
Alan Cohen 7,495 (5) *
Director
-25-
Number of Shares Percent
Name and Title Beneficially Owned of Class (1)
- - -------------- ------------------ ------------
Jeremiah P. Murphy, Jr. 31,747 (6) *
Director
Robert L. Patron 367,631 (7) 2.25%
Director
Joseph Pennacchio 32,869 (6) *
Director
George T. Porter, Jr. 49,324 (3) *
Director
Directors and Executive Officers 4,365,355 26.66%
as a group (12 persons)
- - ---------------------
* Less than 1%
(1) Percentage ownership is based on 15,781,972 shares of common stock
outstanding as of November 6, 2000 plus shares deemed to be outstanding
with respect to individual stockholders pursuant to Rule 13d-3(d)(1) under
the Exchange Act.
(2) Mr. Holtzman may be deemed to have shared voting and investment power over
2,528,271 shares of common stock beneficially owned by Jewelcor Management
Inc., of which Mr. Holtzman is the Chairman, President and Chief Executive
Officer. Includes 405,000 shares subject to stock options exercisable
within 60 days.
(3) Includes 40,001 shares subject to stock options exercisable within 60
days.
(4) Includes 25,000 shares subject to stock options exercisable within 60
days.
(5) Includes 5,000 shares subject to stock options exercisable within 60 days.
(6) Includes 10,001 shares subject to stock options exercisable within 60
days.
(7) Includes 40,001 shares subject to stock options exercisable within 60 days
held by Business Ventures International, Inc. Mr. Patron is the sole owner
of Business Ventures International, Inc.
Assuming Designs, Inc. purchases 1,500,000 shares pursuant to the offer,
and its directors and executive officers do not tender any shares pursuant to
the offer, then after the purchase of shares pursuant to the offer, Designs,
Inc.'s directors and executive officers as a group would own beneficially
approximately 29.4% of the outstanding shares, assuming the exercise by these
persons of their currently exercisable options, including approximately 17.0%
beneficially owned by Mr. Holtzman and Jewelcor Management Inc. (If Designs,
Inc. were to increase the number of shares sought pursuant to the offer and
purchase an additional 1,000,000 shares, then, on the same basis, Designs Inc.'s
directors and executive officers would own beneficially approximately 31.5% of
the outstanding shares, including approximately 18.3% beneficially owned by Mr.
Holtzman and Jewelcor Management Inc.
-26-
During the 60 days prior to the date hereof, the following directors
and executive officers of Designs, Inc. were involved in the following
transactions relating to Designs, Inc. common stock: (a) Mr. David A. Levin,
Chief Executive Officer, President and a Director of Designs, Inc., acquired
30,000 shares on September 20, 2000 in open market transactions at $2.30 per
share; and (b) Mr. Dennis Hernreich, Designs, Inc.'s Senior Vice President,
Chief Financial Officer and Secretary of Designs, Inc., acquired 400 shares
on September 13, 2000, 6,300 shares on September 15, 2000, and 800 shares on
September 18, 2000, in each case in open market transactions at a price of
$2.28 per share.
The Board of Directors has approved the offer. However, you must make your
own decision whether to tender your shares and, if so, how many shares to tender
and the price or prices at which you are tendering your shares. Neither Designs,
Inc. nor its Board of Directors makes any recommendation to any stockholder as
to whether to tender or refrain from tendering shares.
Except for outstanding options to purchase shares granted from time to
time over recent years to certain directors and employees, including executive
officers of Designs, Inc. pursuant to its stock option plan, and except as
otherwise described herein, neither Designs, Inc. nor, to the best of its
knowledge, any of Designs, Inc.'s affiliates, is a party to any contract,
arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the offer with respect to any securities of Designs,
Inc. including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies, consents or
authorizations.
On June 28, 2000, Designs, Inc. announced that its Board of Directors
had authorized a stock repurchase program. Between June 30 and August 17,
2000, Designs, Inc. purchased an aggregate of 863,000 shares of its common
stock in open market or privately negotiated transactions at an average price
of $2.16 per share, for a total price, for all shares purchased, of
$1,860,962.50. On September 1, 2000, Designs, Inc. announced the suspension
of that repurchase program.
Except as disclosed in this Offer to Purchase, Designs, Inc. currently has
no plans or proposals that relate to or would result in:
o the acquisition by any person of additional securities of Designs,
Inc. or the disposition of securities of Designs, Inc.;
o an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving Designs, Inc. or any or all
of its subsidiaries;
o a purchase, sale or transfer of a material amount of assets of
Designs, Inc. or any of its subsidiaries;
o any change in the present Board of Directors or management of
Designs, Inc.;
-27-
o any material change in the present dividend rate or policy, or
indebtedness or capitalization of Designs, Inc.;
o any other material change in Designs, Inc.'s corporate structure or
business;
o any change in Designs, Inc.'s Certificate of Incorporation or
By-Laws or any actions which may impede the acquisition of control
of Designs, Inc. by any person;
o a class of equity security of Designs, Inc. being delisted from a
national securities exchange;
o a class of equity security of Designs, Inc. becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the
Securities Exchange Act; or
o the suspension of Designs, Inc.'s obligation to file reports
pursuant to Section 15(d) of the Securities Exchange Act.
Certain Prior Contacts, etc. On December 7, 1998, Jewelcor Management
Inc. commenced a consent solicitation seeking to replace the then-members of
the Board of Directors of Designs, Inc. and amend the By-Laws of the company,
which did not, however, result in replacement of the Board or amendment of
the By-Laws at that time. Thereafter, Jewelcor Management Inc. engaged in
certain discussions with the then-management of Designs, Inc. and made a
preliminary proposal, subject to various conditions, regarding a possible
acquisition of the company at a price of $3.65 per share. Such discussions
ended without agreement.
A slate of nominees for director proposed by Jewelcor Management Inc. was
elected to replace the incumbent Board at Designs, Inc.'s Annual Meeting of
Stockholders on October 4, 1999, following a proxy contest initiated by
Jewelcor. The new directors elected at the 1999 Annual Meeting, together with
additional individuals appointed by those new directors (including Mr. Seymour
Holtzman), were re-elected to the Board of Directors at Designs, Inc.'s 2000
Annual Meeting of Stockholders.
Additional information regarding those prior contacts between the Jewelcor
Management Inc. and Designs, Inc., the 1999 consent solicitation and proxy
contest, present relationships and transactions involving Designs, Inc. and its
directors and executive officers, and other matters is set forth in proxy
statements filed by Designs, Inc. and Jewelcor Management Inc. in connection
with Design, Inc.'s 1999 Annual Meeting of Stockholders, the proxy statement
filed by Designs, Inc. in connection with its 2000 Annual Meeting of
Stockholders, and a statement on Schedule 13D and various amendments thereto
filed by Jewelcor Management Inc. with respect to its interest in securities of
Designs, Inc., as well as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q, and Current Reports on Form 8-K filed by Designs, Inc., all of which were
filed with the Securities and Exchange Commission and are available as described
under "Where You Can Find More Information" in Section 12 of this Offer to
Purchase.
11. Source and Amount of Funds.
Assuming that Designs, Inc. purchases 1,500,000 shares of its common
stock pursuant to the offer at the potential maximum specified purchase price
of $3.00 per share, Designs, Inc. expects the amount of funds required to
purchase those shares to be $4,500,000 and the maximum aggregate cost,
including all fees and expenses applicable to the offer, to be up to
approximately $4,765,000. (Up to $3,000,000 more could be required to
purchase up to an additional 1,000,000 shares at the maximum potential price
if Designs, Inc. determined to do so.) Designs, Inc. anticipates that all of
the funds necessary to pay such amounts will be provided
-28-
from borrowings under its credit facility with Fleet Retail Finance, Inc.
Designs, Inc. has reached an agreement in principle to permit such borrowings,
subject to definitive documentation. Designs, Inc. has no alternative financing
arrangements or alternative financing plans in the event that these financing
plans are not realized. It is a condition to the offer that there be no material
change in the anticipated availability of bank funding for the offer. (See
Section 7.)
The terms of Designs, Inc.'s existing bank credit facility with Fleet
Retain Finance, Inc. are set forth in documents filed with the Securities and
Exchange Commission and available as described under "Where You Can Find More
Information" in Section 12 of this Offer to Purchase. Such facility, which is
secured by substantially all of the company's inventory and other assets,
currently bears interest at prime or LIBOR plus 225 basis points, or an
effective rate for the quarter ended October 28, 2000 of 9.0%, and is scheduled
to expire June 4, 2001. Modifications are expected in connection with the same
amendments required in connection with the offer. (See Section 12--"Recent
Developments--Anticipated Amendments to Bank Credit Facility.") The company has
no other plans to refinance borrowings under this facility.
12. Certain Information About Designs, Inc.
Summary
Designs, Inc. is an outlet retailer based in the United States selling
quality branded apparel and accessories. The company markets a broad
selection of Levi Strauss & Co. brand merchandise through outlet stores under
the name "Levi's(R)/Dockers(R)Outlet By Designs," "Levi's(R)Outlet by Designs"
and "Dockers(R)Outlet by Designs." The company uses certain Levi Strauss &
Co. trademarks pursuant to a trademark license agreement with Levi Strauss &
Co.
In fiscal year 2000, the company continued to re-align its store portfolio
and overhead structure to narrow its business to one focused solely on the
profitable outlet segment including the Levi's(R) and Dockers(R) Outlet stores.
As part of this re-alignment to an outlet-based business, the company closed its
five remaining Boston Trading Co.(TM)/ BTC(TM) mall stores and its five
Buffalo(R) Jeans Factory stores during the fourth quarter of fiscal 2000.
These strategic actions return Designs, Inc. to its core competency as a
single branded outlet operator, with all of its 107 stores devoted exclusively
to selling Levi Strauss & Co. brands of apparel and accessories.
The principal executive office of the company is located at 66 B Street,
Needham, Massachusetts 02494. Its telephone number is (781) 444-7222.
Recent Developments
Lease Option. On November 2, 2000, Designs Inc. announced that it had
entered into an option agreement with the landlord of its corporate headquarters
at 66 B Street, Needham, Massachusetts. The agreement provides the landlord with
the option, if exercised within the next fifteen months, to terminate the lease
for the company's corporate headquarters, which expires on January 31, 2006. If
such option is exercised, the company will be entitled to receive $8.9 million,
provided that certain conditions in connection with vacating the leased property
are met.
-29-
If the option is exercised, the company would have seven months thereafter to
vacate the premises. If the company failed to perform all the conditions of the
option agreement, the company would forfeit its right to the $8.9 million
payment.
In the event the option is exercised, Designs, Inc. will be required to
relocate its corporate headquarters. The company will then have to write off up
to approximately $2 million in current unamortized leasehold improvements, and
incur additional costs of approximately $1 million associated with the move to a
new location. Furthermore, the company anticipates having to incur significantly
higher rental expenses if the company were to re-locate.
Third Quarter Results. The company reported net income for the fiscal
quarter ended October 28, 2000 (the "third quarter of fiscal 2001") of $2.9
million, or $0.18 per diluted share, compared with net income of $2.7 million,
or $0.17 per diluted share, for the same period in the prior year. For the nine
months ended October 28, 2000, the company reported net income of $3.5 million,
or $0.21 per diluted share, compared with net income of $1.3 million, or $0.08
per diluted share, for the comparable period in the prior year.
Sales for the third quarter of fiscal 2001 were $56.6 million, compared
with $56.7 million for the same period in the prior year. For the nine month
year-to-date period , sales were $141.7 million, compared with $139.4 million in
the prior year. Comparable store sales decreased 2.8 percent for third quarter
of fiscal 2001. The increase in total sales through the nine months ended
October 28, 2000 is the result of sales generated from our new and remodeled
stores offset by a 1.7 percent comparable store decrease year to date.
Gross margin rate, after occupancy costs, for third quarter of fiscal 2001
was 30.7 percent of sales, compared with 32.5 percent for the same period in the
prior year. For the nine months ended October 28, 2000, gross margin rate, after
occupancy costs, was 29.3 percent of sales as compared with 28.7 percent of
sales for the same period in the prior year.
Selling, general and administrative expenses for third quarter of fiscal
2001 was $10.7 million, or 18.8 percent of sales, compared with $11.9 million,
or 20.9 percent of sales, in the same period in the prior year. Store payroll
expense, the largest component of selling, general and administrative expenses,
for third quarter of fiscal 2001 was 9.5 percent of sales, compared with 9.2
percent of sales in the same period in the prior year. For the nine months ended
October 28, 2000, selling, general and administrative expenses decreased to
$30.2 million, or 21.3% of sales, from $32.0 million, or 22.9% of sales, in the
same period in the prior year.
Through the end of the third quarter of fiscal 2001, the company has
completed remodels on six store locations and opened four new locations, one of
which is located in Puerto Rico. The company currently plans to open another two
new stores and remodel three of its existing locations during the remainder of
fiscal 2001.
Anticipated Amendments to Bank Credit Facility. Designs, Inc. has reached
an agreement in principle to amend its existing bank credit facility with Fleet
Retail Finance, Inc. in certain respects, including amendments required to
permit the company to consummate, and borrow the funds necessary to finance, the
offer. Other modifications expected to be advantageous to the company are also
anticipated. Such amendment is subject to definitive documentation, which will
be publicly filed with the Securities and Exchange Commission when completed and
executed.
-30-
Summary Historical Financial Data of Designs, Inc.
The following audited and unaudited summary historical financial data has
been derived from the consolidated statements of the company. The data should be
read in conjunction with the consolidated financial statements and notes thereto
included in the company's Annual Report on Form 10-K for the fiscal year ended
January 29, 2000 and Quarterly Report on Form 10-Q for the quarter ended July
29, 2000. Copies of these reports may be obtained as described below in Section
12 of this Offer to Purchase. The income statement data for the six months ended
July 29, 2000 and the balance sheet data as of July 29, 2000 have been derived
from the unaudited condensed consolidated financial statements of the company
which, in the opinion of management, include all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation of financial
position and results of operations for such periods. Operating results for the
six months ended July 29, 2000 are not necessarily indicative of the results
that may be expected for the entire fiscal year ending February 3, 2001.
SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA
For the year ended (unaudited)
For the six months ended
January 29, January 30, July 29, July 31,
INCOME STATEMENT DATA 2000 1999 2000 1999
----------------------------------------------------
Net sales.................. $192,192 $201,634 $85,072 $82,742
Net income (loss).......... (12,493) (18,541) 610 (1,398)
Earnings (loss) per common
share
Basic................... $ (0.78) $ (1.17) $ 0.04 $(0.09)
Diluted................. $ (0.78) $ (1.17) $ 0.04 $(0.09)
Weighted average shares
outstanding
Basic................... 16,088 15,810 16,472 15,890
Diluted................. 16,088 15,810 16,560 15,890
BALANCE SHEET DATA
Working capital............ $ 19,624 $ 24,078 $20,204 $19,451
Total assets............... 95,077 99,317 102,123 110,249
Notes payable.............. 22,202 13,825 24,976 24,168
Stockholders' equity....... 52,269 63,956 52,339 62,756
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Summary Pro-Forma Condensed Financial Data of Designs, Inc.
The following unaudited pro-forma condensed financial data gives effect to
the purchase of shares pursuant to the offer, and the payment of related taxes,
fees and expenses, based on the assumptions described in the "Notes to Summary
Pro-Forma Condensed Financial Data" below, as if such transactions had occurred
on the first day of the periods presented. The unaudited pro-forma condensed
financial data does not purport to be indicative of the results that would
actually have been obtained, or results that may be obtained in the future, or
the financial condition that would have resulted, if the purchase of the shares
pursuant to the offer had been completed at the dates indicated.
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SUMMARY UNAUDITED CONDENSED PRO-FORMA FINANCIAL INFORMATION
Fiscal Year Ending January 29, 2000 For the Six Months Ending July 29, 2000
Pro-Forma Pro-Forma
INCOME STATEMENT DATA Historical Adjustments Pro-Forma Historical Adjustments Pro-Forma
----------------------------------- ---------------------------------------
Net sales $ 192,192 $ 192,192 $ 85,072 $ 85,072
Gross margin, net of occupancy 47,440 47,440 24,073 24,073
Selling, general and administrative 43,401 67(e) 43,468 19,550 33(e) 19,583
Non-recurring charges for store closings, 6,608 6,608 - -
severance
Depreciation and amortization 6,502 6,502 2,594 - 2,594
----------------------------------- ---------------------------------------
Operating income (loss) (9,071) (67) (9,138) 1,929 (33) 1,896
Interest expense, net 1,207 405(d) 1,612 845 203(d) 1,048
----------------------------------- ---------------------------------------
Income (loss) before income taxes (10,278) (472) (10,750) 1,084 (236) 848
Income tax provision (benefit) 2,215 (195)(f) 2,020 474 (98)(f) 376
----------------------------------- ---------------------------------------
Net income (loss) $ (12,493) $ (277) $ (12,770) $ 610 $ (138) $ 472
=================================== =======================================
Earnings per share:
Basic $ (0.78) $ (0.88) $ 0.04 $ 0.03
Diluted $ (0.78) $ (0.88) $ 0.04 $ 0.03
Weighted average number of common shares
outstanding
Basic 16,088 (1,500)(g) 14,588 16,472 (1,500)(g) 14,972
Diluted 16,088 (1,500)(g) 14,588 16,560 (1,500)(g) 15,060
CONDENSED BALANCE SHEET DATA
ASSETS
Current assets $ 69,988 $ - $ 69,988
Property and equipment, net 17,106 17,106
Other assets 15,029 167 15,196
--------------------- ---------
Total assets $ 102,123 $ 167 $ 102,290
===================== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable $ 24,976 $ 4,765(c) $ 29,741
Other current liabilities 24,808 105 24,913
--------------------- ---------
Total current liabilities 49,784 4,870 54,654
--------------------- ---------
Stockholders' equity 52,339 (4,703)(a),(b) 47,636
--------------------- ---------
Total liabilities and stockholders' equity $ 102,123 $ 167 $ 102,290
===================== =========
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Notes to Summary Pro Forma Condensed Financial Data:
(a) Assumes that 1,500,000 shares of Designs, Inc. common stock are
repurchased at the potential maximum price of $3.00 per share.
(b) Costs directly related to the offer are assumed to be $65,000, and are
included in the costs of the repurchased shares.
(c) Assumes the stock purchase costs of $4,500,000 and assumed related
transaction costs of $265,000 (which include $65,000 of offer costs and
$200,000 of finance costs) will be financed with borrowings from the
company's amended credit facility.
(d) Interest expense on the additional borrowings is calculated based on
the current rate of 9.0%.
(e) Assumes deferred finance costs associated with the amendment and extension
of the company's credit facility of $200,000 will be amortized over 36
months.
(f) The assumed effective income tax rate applicable to pro-forma adjustments
was consistent with the rate for each of the respective historical
periods, or 41.4%.
(g) Pro-forma basic earnings per share are based on the weighted average
number of shares of common stock outstanding during each period, decreased
by the 1,500,000 shares assumed purchased. Pro-forma diluted earnings per
share are based on the weighted average number of shares of common stock
outstanding during the period, adjusted for the dilutive effect of shares
issuable under outstanding stock options and decreased by the 1,500,000
shares assumed purchased.
-34-
Where You Can Find More Information
Designs, Inc. is subject to the informational filing requirements of the
Securities Exchange Act and, in accordance therewith, is obligated to file
reports and other information with the Securities and Exchange Commission
relating to its business, financial condition and other matters. Information, as
of particular dates, concerning Designs, Inc.'s directors and executive
officers, their remuneration, options granted to them, the principal holders of
Designs, Inc.'s securities and any material interests of such persons in
transactions with Designs, Inc. is required to be disclosed in proxy statements
distributed to Designs, Inc.'s stockholders and filed with the Securities and
Exchange Commission. Designs, Inc. has also filed a Tender Offer Statement on
Schedule TO with the Securities and Exchange Commission, which includes
additional information with respect to the offer. Such reports, proxy statements
and other information can be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; and at its regional offices located at 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. Copies of such material may also be obtained
by mail, upon payment of the Securities and Exchange Commission's customary
charges, from the Public Reference Section of the Securities and Exchange
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Securities and Exchange Commission also maintains a web site on the World
Wide Web at http://www.sec.gov that contains reports, proxy statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission. Such reports, proxy statements and other information
concerning Designs, Inc. also can be inspected at the offices of the National
Association of Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C.
20006. Designs, Inc.'s Schedule TO may not be available at the Securities and
Exchange Commission's regional offices.
The Securities and Exchange Commission allows Designs, Inc. to
"incorporate by reference" information into this Offer to Purchase. This means
that Designs, Inc. can disclose important information to you by referring you to
another document filed separately with the Securities and Exchange Commission.
The information incorporated by reference is considered to be a part of this
Offer to Purchase, except for any information that is superseded by information
that is included directly in this document.
This Offer to Purchase incorporates by reference the documents listed
below that Designs, Inc. has previously filed with the Securities and
Exchange Commission. The documents contain important information about
Designs, Inc. and its financial condition.
Designs, Inc.'s Filings with the Commission Period
- - ------------------------------------------- ------
Annual Report on Form 10-K Fiscal year ended January 29, 2000
Quarterly Reports on Form 10-Q Fiscal quarters ended April 29,
2000 and July 29, 2000
Current Reports on Form 8-K October 3, 2000 and November 2, 2000
Designs, Inc. incorporates by reference additional documents that it may
file with the Securities and Exchange Commission between the date of this Offer
to Purchase the date the offer, proration period and withdrawal rights expire.
Those documents include periodic reports,
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such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as proxy statements.
You can obtain any of the documents incorporated by reference in this
document through Designs, Inc. or from the Securities and Exchange Commission's
web site at the address described above. Documents incorporated by reference are
available from Designs, Inc. without charge, excluding any exhibits to those
documents unless the exhibit is specifically incorporated by reference as an
exhibit in this proxy statement/prospectus. You can obtain documents
incorporated by reference in this Offer to Purchase by requesting them in
writing or by telephone from Designs, Inc. at 66 B Street, Needham,
Massachusetts 02494, telephone (781) 444-7222. Please be sure to include your
complete name and address in your request. If you request any incorporated
documents, we will mail them to you by first class mail, or another equally
prompt means, within one business day after we receive your request.
13. Effects of the Offer on the Market for Shares; Registration under the
Securities Exchange Act.
Designs, Inc.'s purchase of shares pursuant to the offer will reduce the
number of shares that might otherwise trade publicly and is likely to reduce the
number of stockholders. Nonetheless, Designs, Inc. believes that there will
still be a sufficient number of shares outstanding and publicly traded following
the offer to ensure a continued trading market in the shares. Based on the
published guidelines of the Nasdaq National Market, Designs, Inc. does not
believe that its purchase of shares pursuant to the offer will cause its
remaining shares to be delisted from any such market quotation system.
The shares are registered under the Securities Exchange Act, which
requires, among other things, that Designs, Inc. furnish certain information to
its stockholders and to the Securities and Exchange Commission and comply with
the Securities and Exchange Commission's proxy rules in connection with meetings
of Designs, Inc.'s stockholders. Designs, Inc. believes that its purchase of
shares pursuant to the offer will not result in the shares becoming eligible for
deregistration under the Securities Exchange Act.
14. Certain Legal Matters; Regulatory Approvals.
Designs, Inc. is not aware of any license or regulatory permit material to
its business that might be adversely affected by its acquisition of shares as
contemplated in the offer, or of any approval or other action by any government
or governmental, administrative or regulatory authority or agency, domestic,
foreign or supranational, that would be required for Designs, Inc.'s acquisition
or ownership of shares as contemplated by the offer. Should any such approval or
other action be required, Designs, Inc. currently contemplates that it will seek
such approval or other action. Designs, Inc. cannot predict whether it may
determine that it is required to delay the acceptance for payment of, or payment
for, shares tendered pursuant to the offer pending the outcome of any such
matter. There can be no assurance that any such approval or other action, if
needed, would be obtained or would be obtained without substantial conditions,
or that the failure to obtain any such approval or other action might not result
in adverse consequences to Designs, Inc.'s business. Designs, Inc.'s obligations
under the offer to accept for payment and pay for shares are subject to certain
conditions. See Section 7.
-36-
15. Certain U.S. Federal Income Tax Consequences.
The following discussion summarizes certain U.S. federal income tax
consequences to holders of shares relevant to the offer. The discussion
contained in this summary is based upon the Internal Revenue Code of 1986, as
amended (the "Code"), temporary and final Treasury Regulations promulgated
thereunder, proposed Treasury Regulations, published rulings, notices and other
administrative pronouncements of the Internal Revenue Service ("IRS"), and
judicial decisions now in effect, all of which are subject to change at any time
by legislative, judicial, or administrative action. Any such changes may be
applied retroactively in a manner that could materially affect the tax
consequences described herein.
This summary assumes that the shares are held as capital assets, within
the meaning of Section 1221 of the Code. This summary does not address all of
the tax consequences that may be relevant to particular stockholders in light of
their personal circumstances, or to certain types of stockholders (such as
certain financial institutions, dealers in securities or commodities, securities
traders that elect to mark to market, foreign persons, insurance companies,
tax-exempt organizations or persons who hold shares as a position in a
"straddle" or as a part of a "hedging" or "conversion" transaction for U.S.
federal income tax purposes). In particular, the discussion of the consequences
of an exchange of shares for cash pursuant to the offer applies only to a United
States Holder. For purposes of this summary, a "United States Holder" is a
holder of shares that is (a) a citizen or resident of the United States, (b) a
corporation, partnership or other entity created or organized in or under the
laws of the United States, any state or any political subdivision thereof, (c)
an estate the income of which is subject to U.S. federal income taxation
regardless of its source or (d) a trust whose administration is subject to the
primary supervision of a U.S. court and which has one or more U.S. persons who
have the authority to control all substantial decisions of the trust. Additional
or alternative tax consequences may apply with respect to shares acquired as
compensation (including shares acquired upon the exercise of options or which
were or are subject to forfeiture restrictions).
This summary does not address the state, local, or foreign tax
consequences of participating in the offer. Each stockholder should consult its
own tax advisor concerning the decision to participate in the offer as well as
the specific tax consequences (foreign, federal, state, and local) applicable to
it.
United States Holders Who Receive Cash Pursuant to the Offer. An exchange
of shares for cash pursuant to the offer by a United States Holder will be a
taxable transaction for U.S. federal income tax purposes. As a consequence of
the exchange, a United States Holder will, depending on such holder's particular
circumstances, be treated either as having sold such holder's shares or as
having received a dividend distribution from Designs, Inc., with the tax
consequences described below.
Under Section 302 of the Code, a United States Holder whose shares are
exchanged for cash pursuant to the offer will be treated as having sold such
holder's shares, rather than as having received a dividend, if the exchange (a)
results in a "complete termination" of such holder's equity interest in Designs,
Inc., (b) is "substantially disproportionate" with respect to such holder or (c)
is "not essentially equivalent to a dividend" with respect to the holder, each
as discussed below. In applying constructive ownership rules, in addition to
shares actually owned by a United States Holder, such holder will be deemed to
constructively own shares actually or constructively owned by certain related
entities and individuals. For purposes of these
-37-
constructive ownership rules, a holder of options to acquire shares is generally
deemed to constructively own those shares even if the option is not exercised.
If a United States Holder sells shares to persons other than Designs, Inc.
at or about the time such holder also sells shares to Designs, Inc. pursuant to
the offer, and the various sales effected by the holder are part of an overall
plan to reduce or terminate such holder's proportionate interest in Designs,
Inc., then the sales to persons other than Designs, Inc. may, for U.S. federal
income tax purposes, be integrated with the holder's sale of shares pursuant to
the offer and, if integrated, should be taken into account in determining
whether the holder satisfies any of the three tests described below.
A United States Holder will satisfy the "complete termination" test if all
shares actually or constructively owned by such holder are exchanged for cash
pursuant to the offer.
A United States Holder will satisfy the "substantially disproportionate"
test if immediately after the exchange such holder owns less than 50% of the
total voting power in Designs, Inc. and such holder's percentage interest in
Designs, Inc. (i.e., the number of shares actually and constructively owned by
such holder divided by the number of shares outstanding) is less than 80% of
such holder's percentage interest in Designs, Inc. prior to the exchange.
A United States Holder will satisfy the "not essentially equivalent to a
dividend" test if the reduction in such holder's percentage interest in Designs,
Inc., as described above, constitutes a "meaningful reduction of the
stockholder's proportionate interest" given such holder's particular facts and
circumstances. The IRS has indicated in published rulings that any reduction in
the percentage interest of a stockholder whose relative stock interest in a
publicly held corporation is minimal (an interest of less than 1% should satisfy
this requirement) and who exercises no control over corporate affairs should
constitute such a "meaningful reduction."
Designs, Inc. cannot predict whether or to what extent the offer will be
oversubscribed. If the offer is oversubscribed, proration of tenders pursuant to
the offer will cause Designs, Inc. to accept fewer shares than are tendered.
Therefore, a holder can be given no assurance that a sufficient number of such
holder's shares will be exchanged pursuant to the offer to ensure that such
exchange will be treated as a sale, rather than as a dividend, for U.S. federal
income tax purposes pursuant to the rules discussed above. A holder may wish to
condition the tender on a minimum number of shares being redeemed as described
in Section 6 above, so that none of such holder's shares are redeemed unless
Designs, Inc. accepts a sufficient number of his or her shares so that he or she
satisfies one or more of the tests described above. While such a conditional
tender may ensure that a redemption of a holder's shares would be treated as an
exchange for U.S. federal income tax purposes, a conditional tender may result
in no shares being accepted by Designs, Inc. In determining the minimum number
of shares to be accepted for purchase in a conditional tender, a holder should
take into account shares constructively owned by the holder pursuant to the
rules discussed above. Stockholders considering a conditional tender are urged
to consult with their tax advisors regarding the relative advantages and
disadvantages of such a tender.
If a United States Holder is treated as having sold such holder's shares
under the tests described above, such holder will recognize gain or loss equal
to the difference between the amount of cash received and such holder's tax
basis in the shares exchanged. Any capital gain or loss so recognized generally
will be long-term capital gain or loss if the holding period for the holder's
shares surrendered exceeds one year. In the case of a United States Holder that
is an
-38-
individual, estate, or trust, such long term capital gain or loss will be taxed
at a maximum rate of 20%. The U.S. federal income tax rates applicable to
capital gains for taxpayers other than individuals, estates, and trusts are
currently the same as those applicable to ordinary income. A United States
Holder's ability to deduct capital losses from ordinary income is limited.
Capital losses generally may be used by a corporate taxpayer only to offset
capital gains, and by an individual taxpayer only to the extent of capital gains
plus $3,000 of ordinary income per year.
If a United States Holder who exchanges shares pursuant to the offer is
not treated under Section 302 of the Code as having sold such holder's shares
for cash, the entire amount of cash received by such holder will be treated as a
dividend to the extent of Designs, Inc.'s current and accumulated earnings and
profits, which Designs, Inc. anticipates will be sufficient to cover the amount
of any such dividend and will be includible in the holder's gross income as
ordinary income in its entirety, without reduction for the tax basis of the
shares exchanged. No loss will be recognized. As to an exchange which is treated
as a dividend, a United States Holder's tax basis in the shares exchanged
generally will be added to such holder's tax basis in such holder's remaining
shares. To the extent that cash received in exchange for shares is treated as a
dividend to a corporate United States Holder, such holder will be (i) eligible
for a dividends-received deduction (subject to applicable limitations) and (ii)
subject to the "extraordinary dividend" provisions of the Code. To the extent,
if any, that the cash received by a United States Holder exceeds Designs, Inc.'s
current and accumulated earnings and profits, it will be treated first as a
tax-free return of such holder's tax basis in the shares and thereafter as
capital gain.
Stockholders Who Do Not Receive Cash Pursuant to the Offer. Stockholders
whose shares are not purchased pursuant to the offer will not incur any tax
liability as a result of the consummation of the offer.
Federal Income Tax Backup Withholding. Under the U.S. federal income tax
backup withholding rules, 31% of the gross proceeds payable to a stockholder or
other payee pursuant to the offer must be withheld by the Depositary and
remitted to the U.S. Treasury unless such holder (i) is a corporation, foreign
person, or other exempt recipient, and when required, establishes this exemption
or (ii) provides its taxpayer identification number, certifies that it is not
currently subject to backup withholding, and otherwise complies with applicable
requirements of the backup withholding rules. A United States Holder may
generally avoid backup withholding by furnishing a completed Substitute Form W-9
included as part of the Letter of Transmittal. In order for a foreign individual
to qualify as an exempt recipient, such an individual must submit a completed
Form W-8 which is available from the Depositary upon request. See Instructions
13 and 14 of the Letter of Transmittal. Backup withholding is not an additional
tax; any amount withheld under these rules will be creditable against the U.S.
federal income tax liability of the beneficial holder subject to the
withholding, and may entitle such holder to a refund provided that the required
information is furnished to the IRS.
The tax discussion set forth above is included for general information
only. Each stockholder should consult its own tax advisor concerning the
decision to participate in the offer as well as the specific tax consequences
(foreign, federal, state, and local) applicable to it.
16. Extension of the Offer; Termination; Amendments.
Designs, Inc. expressly reserves the right, in its sole discretion, at any
time and from time to time, and regardless of whether or not any of the events
set forth in Section 7 shall have occurred or shall be deemed by Designs, Inc.
to have occurred, to extend the period of time
-39-
during which the offer is open and thereby delay acceptance for payment of, and
payment for, any shares by giving oral or written notice of such extension to
the Depositary and making a public announcement thereof. Designs, Inc. also
expressly reserves the right, in its sole discretion, to terminate the offer and
not accept for payment or pay for any shares not theretofore accepted for
payment or paid for or, subject to applicable law, to postpone payment for
shares upon the occurrence of any of the conditions specified in Section 7
hereof by giving oral or written notice of such termination or postponement to
the Depositary and making a public announcement thereof. Additionally, in
certain circumstances, if Designs, Inc. waives any of the conditions of the
offer set forth in Section 7, it may be required to extend the Expiration Date
of the offer. Designs, Inc.'s reservation of the right to delay payment for
shares that it has accepted for payment is limited by Rule 13e-4(f)(5)
promulgated under the Securities Exchange Act, which requires that Designs, Inc.
must pay the consideration offered or return the shares tendered promptly after
termination or withdrawal of a tender offer. Subject to compliance with
applicable law, Designs, Inc. further reserves the right, in its sole
discretion, and regardless of whether any of the events set forth in Section 7
shall have occurred or shall be deemed by Designs, Inc. to have occurred, to
amend the offer in any respect (including, without limitation, by decreasing or
increasing the consideration offered in the offer to holders of shares or by
decreasing or increasing the number of shares being sought in the offer).
Amendments to the offer may be made at any time and from time to time by public
announcement thereof, such announcement, in the case of an extension, to be
issued no later than 9:00 a.m., Eastern time, on the next business day after the
last previously scheduled or announced Expiration Date. Any public announcement
made pursuant to the offer will be disseminated promptly to stockholders in a
manner reasonably designed to inform stockholders of such change. Without
limiting the manner in which Designs, Inc. may choose to make any public
announcement, except as provided by applicable law (including Rule 13e-4(e)(2)
promulgated under the Securities Exchange Act), Designs, Inc. shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If Designs, Inc. makes a material change in the terms of the offer or the
information concerning the offer, or if it waives a material condition of the
offer, Designs, Inc. will extend the offer to the extent required by Rules
13e-4(d)(2) and 13e-4(e)(2) promulgated under the Securities Exchange Act, which
require that the minimum period during which an offer must remain open following
material changes in the terms of the offer or information concerning the offer
(other than a change in price or a change in percentage of securities sought)
will depend upon the facts and circumstances, including the relative materiality
of such terms or information. If (1) Designs, Inc. increases or decreases the
price to be paid for shares, Designs, Inc. increases the number of shares being
sought and such increase in the number of shares being sought exceeds 2% of the
outstanding shares or Designs, Inc. decreases the number of shares being sought,
and (2) the offer is scheduled to expire at any time earlier than the tenth
business day from, and including, the date that notice of such increase or
decrease is first published, sent or given, the offer will be extended until the
expiration of such ten business days.
17. Fees and Expenses.
Designs, Inc. has retained Equiserve Trust Company as Depositary and
D.F. King & Co., Inc. as Information Agent in connection with the offer. The
Depositary and the Information Agent will receive reasonable and customary
compensation for their services. Designs, Inc. will also reimburse the
Depositary for out-of-pocket expenses, including reasonable attorneys' fees,
and has agreed to indemnify the Depositary against certain liabilities in
connection with the
-40-
offer, including certain liabilities under the federal securities laws. The
Depositary has not been retained to make solicitations or recommendations in
connection with the offer.
Designs, Inc. will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person for soliciting any shares
pursuant to the offer. Designs, Inc. will, however, on request, reimburse
such persons for customary handling and mailing expenses incurred in
forwarding materials in respect of the offer to the beneficial owners for
which they act as nominees. No such broker, dealer, commercial bank or trust
company has been authorized to act as Designs, Inc.'s agent for purposes of
the offer. Designs, Inc. will pay (or cause to be paid) any stock transfer
taxes on its purchase of shares, except as otherwise provided in Instruction
7 of the Letter of Transmittal.
18. Miscellaneous.
Designs, Inc. is not aware of any jurisdiction where the making of the
offer is not in compliance with applicable law. If Designs, Inc. becomes aware
of any jurisdiction where the making of the offer is not in compliance with any
valid applicable law, Designs, Inc. will make a good faith effort to comply with
such law. If, after such good faith effort, Designs, Inc. cannot comply with
such law, the offer will not be made to (nor will tenders be accepted from or on
behalf of) the holders of shares residing in such jurisdiction. In any
jurisdiction the securities or blue sky laws of which require the offer to be
made by a licensed broker or dealer, the offer is being made on Designs, Inc.'s
behalf by one or more registered brokers or dealers licensed under the laws of
such jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of Designs, Inc. in connection with the offer other
than those contained in this Offer to Purchase or in the related Letter of
Transmittal. If given or made, such information or representation must not be
relied upon as having been authorized by Designs, Inc.
DESIGNS, INC.
November 14, 2000
-41-
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal and certificates for the shares and any
other required documents should be sent or delivered by each stockholder or such
stockholder's broker, dealer, commercial bank, trust company or other nominee to
the Depositary at its address set forth below:
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Registered or
By Hand Delivery: By Overnight Delivery: Certified Mail:
Securities Transfer and Equiserve Trust Company Equiserve Trust Company
Reporting Services, Inc. Corporate Actions Corporate Actions
c/o Equiserve Trust Company 40 Campanelli Drive P.O. Box 9573
100 Williams Street/Galleria Braintree, MA 02184 Boston, MA 02205-9573
New York, NY 10038
By Facsimile Transmission Confirm Receipt of
(For Eligible Institutions Only): Facsimile by Telephone:
(781) 575-4826 (781) 575-4816
For Information Telephone:
(781) 575-3400
Any questions or requests for assistance or for additional copies of this
Offer to Purchase, the Letter of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent at the address and telephone
numbers below. Stockholders may also contact their brokers, dealers, commercial
banks or trust companies for assistance concerning the offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 755-7520
EXAMPLE OF "DUTCH AUCTION" PROCESS
The following illustrates a possible outcome of the "Dutch
Auction" tender offer process:
Number of Shares
Price Shares Tendered at That Price Cumulative Total of
Tendered at: by All Stockholders: Shares
Tendered:
$2.20 400,000 400,000
$2.30 300,000 700,000
$2.40 200,000 900,000
$2.50 200,000 1,100,000
$2.60 200,000 1,300,000
$2.70 200,000 1,500,000
All shares below would not be purchased.
$2.80 300,000 1,800,000
$2.90 200,000 2,000,000
$3.00 200,000 2,200,000
Since Designs, Inc. intends to purchase a minimum of 1,500,000 shares, in this
example all shares tendered at prices of $2.20, $2.30, $2.40, $2.50, $2.60 and
$2.70 would ALL receive the same amount of $2.70 per share. Stockholders will
not pay any fees or brokerage commission.
Using this example, any shares tendered at $2.80, $2.90 and $3.00 would NOT be
purchased, because 1,500,000 shares would have been tendered at lower prices.
Note: This is only an example of the potential operation of the "Dutch Auction"
process under certain hypothetical circumstances. The actual results of the
offer will depend on the number of shares tendered and the prices specified by
tendering stockholders. The "Dutch Auction" process is described in detail in
Designs, Inc.'s Offer to Purchase dated November 14, 2000, of which this example
is a part. Stockholders should carefully read the entire Offer to Purchase,
which contains this and other important information, before deciding whether to
tender shares.
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
DESIGNS, INC.
Pursuant to the Offer to Purchase
Dated November 14, 2000
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THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
EASTERN TIME, ON THURSDAY, DECEMBER 14, 2000, UNLESS THE OFFER IS EXTENDED.
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The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Registered or
By Hand Delivery: By Overnight Delivery: Certified Mail:
Securities Transfer and Equiserve Trust Company Equiserve Trust Company
Reporting Services, Inc. Corporate Actions Corporate Actions
c/o Equiserve Trust Company 40 Campanelli Drive P.O. Box 9573
100 Williams Street/Galleria Braintree, MA 02184 Boston, MA 02205-9573
New York, NY 10038
By Facsimile Transmission Confirm Receipt of
(For Eligible Institutions Only): Facsimile by Telephone:
(781) 575-4826 (781) 575-4816
You should read this Letter of Transmittal, including the
accompanying instructions, carefully before completing it.
Delivery of this Letter of Transmittal to an address other than as set
forth above will not constitute a valid delivery. Deliveries to Designs, Inc.
will not be forwarded to the Depositary and therefore will not constitute valid
delivery. Deliveries to the Book-Entry Transfer Facility will not constitute
valid delivery to the Depositary.
This Letter of Transmittal is to be completed only if (a) certificates
representing shares are to be forwarded herewith, or (b) unless an Agent's
Message (as defined in the Offer to Purchase) is used or the acknowledgement
required by the Book-Entry Transfer Facility's ATOP (as defined in the Offer to
purchase) is provided, a tender of shares is to be made concurrently by
book-entry transfer to the account maintained by the Depositary at the
Book-Entry Transfer Facility as described in Section 3 of the Offer to Purchase.
Stockholders who desire to tender shares pursuant to the offer, but whose share
certificates are not immediately available or who cannot deliver the
certificates and all other documents required by this Letter of Transmittal to
the Depositary on or before the Expiration Date (as defined in the Offer to
Purchase), or who cannot comply with the procedure for book-entry transfer on a
timely basis, may nevertheless tender their shares pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. See
Instruction 2.
|_| CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
----------------------------------------
Account Number:
--------------------------------------------------------
Transaction Code Number:
-----------------------------------------------
If the tendered shares are being tendered on behalf of customers, please
state the number of customer accounts for whose benefit the tender is
made:
|_| CHECK HERE IF CERTIFICATE(S) FOR TENDERED SHARES ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s):
---------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------
Name of Institution which Guaranteed Delivery:
-------------------------
Account Number (if delivered by book-entry transfer):
o CHECK HERE IF YOU ARE TENDERING LOST, STOLEN, DESTROYED OR MUTILATED
CERTIFICATE[S]. SEE INSTRUCTION 15.
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DESCRIPTION OF SHARES TENDERED
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Name(s) and Address(es) of Certificate(s) Tendered
Registered Holder(s) (Attach additional signed list if
(Please fill in exactly as name(s) necessary)
appear(s) on the certificate(s))
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Total Number Number of
of Shares Shares
Represented Tendered**
Certificate by
Number(s)* Certificate(s)*
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Total Shares:
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2
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Indicate in this box the order (by certificate number) in which shares are to
be purchased in the event of proration.***
Attach additional signed list if necessary. See Instruction 9.
1st: __________ 2nd: __________ 3rd: __________ 4th: __________ 5th: _______
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* DOES NOT need to be completed by stockholders tendering shares by
book-entry transfer.
** Unless otherwise indicated, it will be assumed that all shares evidenced
by each certificate delivered to the Depositary are being tendered hereby.
See Instruction 4.
*** If you do not designate an order, shares will be selected for purchase by
the Depositary in the event less than all shares tendered are purchased
due to proration.
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PRICE AT WHICH SHARES ARE TENDERED
Shares Tendered at Price Determined by Stockholder
(See Instruction 5)
By checking one of the following boxes below instead of the box under
"Shares Tendered at Price Determined by Dutch Auction," the undersigned hereby
tenders shares at the price checked. This action could result in none of the
shares being purchased if the Purchase Price (as defined in the Offer to
Purchase) determined by Designs, Inc. for the shares is less than the price
checked below. A stockholder who desires to tender shares at more than one price
must complete a separate Letter of Transmittal for each price at which shares
are tendered. The same shares cannot be tendered at more than one price. CHECK
ONLY ONE BOX.
Price (In Dollars) Per Share at Which Shares Are Being Tendered:
-------------------------------------------------------------
|_| $2.20 |_| $2.50 |_| $2.80
-------------------------------------------------------------
-------------------------------------------------------------
|_| $2.30 |_| $2.60 |_| $2.90
-------------------------------------------------------------
-------------------------------------------------------------
|_| $2.40 |_| $2.70 |_| $3.00
-------------------------------------------------------------
OR
Shares Tendered at Price Determined by Dutch Auction
(See Instruction 5)
|_| The undersigned wants to maximize the chance that Designs, Inc. will
purchase all of the shares the undersigned is tendering (subject to the
possibility of proration). Accordingly, by checking this one box instead
of one of the price boxes above, the undersigned hereby tenders shares and
is willing to accept the Purchase Price determined by Designs, Inc. in
accordance with the terms of the offer. This action could result in
receiving a price per share of as low as $2.20.
3
ODD LOTS
(See Instruction 8)
To be completed only if shares are being tendered by or on behalf of a
person owning, beneficially or of record, an aggregate of fewer than 100 shares.
The undersigned either (check one box):
|_| is the beneficial or record owner of an aggregate of fewer than 100
shares, all of which are being tendered; or
|_| is a broker, dealer, commercial bank, trust company, or other nominee that
(a) is tendering for the beneficial owner(s), shares with respect to which
it is the registered holder, and (b) believes, based upon representations
made to it by the beneficial owner(s), that each such person is the
beneficial owner of an aggregate of fewer than 100 shares and is tendering
all of the shares.
In addition, the undersigned is tendering shares either (check one box):
|_| at the Purchase Price, as the same will be determined by Designs, Inc.
in accordance with the terms of the offer (persons checking this box
need not indicate the price per share above); or
|_| at the price per share indicated above in the section captioned "Shares
Tendered at Price Determined by Stockholder."
CONDITIONAL TENDER
(See Instruction 16)
You may condition your tender of shares upon the purchase by Designs, Inc.
of a specified minimum number of the shares tendered, all as described in
Section 6 of the Offer to Purchase. Unless Designs, Inc. purchases at least that
minimum number of shares you indicate below pursuant to the terms of the offer,
none of the shares tendered will be purchased. It is your responsibility to
calculate the minimum number of shares that must be purchased if any are
purchased, and you are urged to consult your own tax advisor. Unless this box
has been checked and a minimum specified, the tender will be deemed
unconditional.
|_| The minimum number of shares that must be purchased, if any are
purchased, is: ___________ shares.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, Designs, Inc. may terminate or amend the offer or may
postpone the acceptance for payment of, or the payment for, shares tendered or
may accept for payment fewer than all of the shares tendered. In any event, the
undersigned understands that certificate(s) for any shares not tendered or not
purchased will be returned to the undersigned at the address indicated above,
unless otherwise indicated under the box entitled "Special Payment Instructions"
or the box entitled "Special Delivery Instructions" below.
4
The undersigned understands that acceptance of shares by Designs, Inc.
for payment will constitute a binding agreement between the undersigned and
Designs, Inc. upon the terms and subject to the conditions of the offer.
The check for the aggregate net Purchase Price for the shares tendered and
purchased will be issued to the order of the undersigned and mailed to the
address indicated above, unless otherwise indicated under the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" below. The undersigned acknowledges that Designs, Inc. has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
shares from the name of their registered holder(s), or to order the registration
or transfer of any shares tendered by book-entry transfer, if Designs, Inc. does
not purchase any of the shares.
- - ---------------------------------------- ---------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 10) (SEE INSTRUCTIONS 1, 6, 7 AND 10)
To be completed only if certificate(s) To be completed only if
for shares not tendered or not certificate(s) for shares not
purchased and/or any check for the tendered or not purchased and/or any
Purchase Price are to be issued in the check for the Purchase Price is to be
name of someone other than the mailed or sent to someone other than
undersigned, or if shares tendered the undersigned, or to the
hereby and delivered by book-entry undersigned at an address other than
transfer which are not purchased are that designated above.
to be returned by credit to an account
at the Book-Entry Transfer Facility
other than that designated above.
Issue check and/or share Mail check and/or share
certificate(s) to: certificate(s) to:
Name: Name:
------------------------------- ------------------------------
(Please Print) (Please Print)
Address: Address:
------------------------------- ------------------------------
------------------------------- ------------------------------
(Include Zip Code) (Include Zip Code)
Tax Identification or Social Security Tax Identification or Social Security
Number: Number:
- - ------------------------------------ -------------------------------------
Credit shares delivered by book-entry
transfer and not purchased to the account
set forth below:
Account Number:
- - ----------------------------------------
5
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
To Equiserve Trust Company:
The undersigned hereby tenders to Designs, Inc., a Delaware corporation,
the above-described shares of Designs, Inc. common stock, par value $0.01 per
share, at the price per share indicated in this Letter of Transmittal, net to
the seller in cash, without interest, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated November 14, 2000, receipt
of which is hereby acknowledged, and in this Letter of Transmittal which, as
amended or supplemented from time to time, together constitute the offer.
Subject to, and effective upon, acceptance for payment of the shares
tendered in accordance with the terms and subject to the conditions of the
offer, including, if the offer is extended or amended, the terms and conditions
of the extension or amendment, the undersigned agrees to sell, assign and
transfer to, or upon the order of, Designs, Inc. all right, title and interest
in and to all shares tendered and orders the registration of all shares if
tendered by book-entry transfer and irrevocably constitutes and appoints the
Depositary as the true and lawful agent and attorney-in-fact of the undersigned
with respect to the shares with full knowledge that the Depositary also acts as
the agent of Designs, Inc., with full power of substitution (the power of
attorney being deemed to be an irrevocable power coupled with an interest), to:
o deliver certificate(s) representing the shares or transfer ownership
of the shares on the account books maintained by the Book-Entry
Transfer Facility, together, in either case, with all accompanying
evidences of transfer and authenticity, to or upon the order of
Designs, Inc. upon receipt by the Depositary, as the undersigned's
agent, of the Purchase Price with respect to the shares;
o present certificates for the shares for cancellation and transfer on
Designs, Inc.'s books; and
o receive all benefits and otherwise exercise all rights of beneficial
ownership of the shares, subject to the next paragraph, all in
accordance with the terms and subject to the conditions of the
offer.
The undersigned covenants, represents and warrants to Designs, Inc.
that:
o the undersigned has full power and authority to tender, sell, assign
and transfer the shares tendered hereby and when and to the extent
accepted for payment, Designs, Inc. will acquire good, marketable
and unencumbered title to the tendered shares, free and clear of all
security interests, liens, restrictions, charges, encumbrances,
conditional sales agreements or other obligations relating to the
sale or transfer of the shares, and not subject to any adverse
claims;
o the undersigned understands that tenders of shares pursuant to any
one of the procedures described in Section 3 of the Offer to
Purchase and in the instructions will constitute the undersigned's
acceptance of the terms and conditions of the offer, including the
undersigned's representation and warranty that (i) the undersigned
has a "net long position," within the meaning of Rule 14e-4 under
the Securities Exchange
6
Act of 1934, in the shares or equivalent securities at least equal
to the shares being tendered, and (ii) the tender of shares complies
with Rule 14e-4;
o the undersigned will, upon request, execute and deliver any
additional documents deemed by the Depositary or Designs, Inc. to be
necessary or desirable to complete the sale, assignment and transfer
of the shares tendered; and
o the undersigned has read, understands and agrees to all of the terms
of the offer.
The undersigned understands that tenders of shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions will constitute a binding agreement between the undersigned and
Designs, Inc. upon the terms and subject to the conditions of the offer. The
undersigned acknowledges that under no circumstances will Designs, Inc. pay
interest on the Purchase Price, including without limitation, by reason of any
delay in making payment.
All authority conferred or agreed to be conferred will survive the death
or incapacity of the undersigned, and any obligation of the undersigned will be
binding on the heirs, personal representatives, executors, administrators,
successors, assigns, trustees in bankruptcy and legal representatives of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that Designs, Inc. will determine a single per
share price, not greater than $3.00 nor less than $2.20, net to the seller in
cash, that it will pay for shares properly tendered, taking into account the
number of shares tendered and the prices specified by tendering stockholders.
Designs, Inc. will select the lowest Purchase Price that will allow it to buy
1,500,000 shares or, if a lesser number of shares are properly tendered, all
shares that are properly tendered and not withdrawn. All shares acquired in the
offer will be acquired at the same Purchase Price. All shares properly tendered
at prices at or below the Purchase Price and not properly withdrawn will be
purchased, subject to the conditions of the offer and the "odd lot" priority,
proration and conditional tender provisions described in the Offer to Purchase.
Shares tendered at prices in excess of the Purchase Price that is determined by
Designs, Inc. and shares not purchased because of proration or conditional
tenders will be returned.
7
IMPORTANT
STOCKHOLDERS SIGN HERE
(Please Complete and Return the Attached Substitute Form W-9)
(Must be signed by the registered holder(s) exactly as holder(s) name(s)
appear(s) on certificate(s) for the shares or on a security position listing or
by person(s) authorized to become the registered holder(s) thereof by
certificates and documents transmitted with this Letter of Transmittal. If
signature is by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or another person acting in a fiduciary or
representative capacity, please set forth full title and see Instruction 6.)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Signature(s) of Owner(s))
Dated: , 2000
-----------------------
Name(s):
------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Please Print)
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
(Include Zip Code)
Daytime Area Code(s) and Telephone Number(s):
-----------------------------------
Tax Identification or Social Security Number:
-----------------------------------
Guarantee of Signature(s), If Required
(See Instructions 1 and 6)
Authorized Signature:
-----------------------------------------------------------
Name(s):
------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Please Print)
Title:
--------------------------------------------------------------------------
Name of Firm:
-------------------------------------------------------------------
Address:
-----------------------------------------------------------------------
(Include Zip Code)
Area Code(s) and Telephone Number(s):
-------------------------------------------
Dated: , 2000
-----------------------
IMPORTANT: COMPLETE AND SIGN THE ATTACHED SUBSTITUTE FORM W-9. NON-UNITED
STATES HOLDERS, HOWEVER, SHOULD OBTAIN AND COMPLETE A FORM W-8.
8
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer.
1. Guarantee of Signatures. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered holder of the shares
(which term, for these purposes, includes any Book-Entry Transfer Facility
participant whose name appears on a security position listing as the owner of
the shares) tendered exactly as the name of the registered holder appears on the
certificate(s) for the shares tendered with this Letter of Transmittal and
payment and delivery are to be made directly to the owner unless the owner has
completed either the box entitled "Special Payment Instructions" or "Special
Delivery Instructions" above; or (b) the shares are tendered for the account of
a firm that is a member in good standing of the Securities Transfer Agent's
Medallion Program or a firm that is an "eligible guarantor institution," as that
term is defined in Rule 17Ad-15 under the Securities Exchange Act (each of the
foregoing constituting an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all
signatures on this Letter of Transmittal. See Instruction 6.
2. Delivery of Letter of Transmittal and Share Certificates; Guaranteed
Delivery Procedures. This Letter of Transmittal is to be completed only if share
certificates are delivered with it to the Depositary (or the certificates will
be delivered pursuant to a Notice of Guaranteed Delivery previously sent to the
Depositary) or, unless an Agent's Message is utilized, if a tender for shares is
being made concurrently pursuant to the procedure for tender by book-entry
transfer set forth in Section 3 of the Offer to Purchase. Certificates for all
physically tendered shares, or confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile of the Letter of Transmittal), including any required
signature guarantees, an Agent's Message in the case of a book-entry transferor,
the specific acknowledgement in the case of a tender through the Book-Entry
Transfer Facility's ATOP, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at the one of its addresses set
forth in this document on or before the Expiration Date. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
Participants in the Book-Entry Transfer Facility may tender their shares
in accordance with the Book-Entry Transfer Facility's automated tender offer
program to the extent it is available to such participants for the shares they
wish to tender. A stockholder tendering through the automated tender offer
program must specifically acknowledge that the stockholder has received and
agreed to be bound by the Letter of Transmittal and that the Letter of
Transmittal may be enforced against such stockholder.
Stockholders whose certificates are not immediately available or who
cannot deliver certificates for their shares and all other required documents to
the Depositary before the Expiration Date, or whose shares cannot be delivered
on a timely basis pursuant to the procedures for book-entry transfer, must
tender their shares by or through an Eligible Institution by properly completing
and duly executing and delivering a Notice of Guaranteed Delivery (or facsimile
of the Notice of Guaranteed Delivery) and by otherwise complying with the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
Pursuant to that procedure, certificates for all physically tendered shares or
book-entry confirmations, as
9
the case may be, as well as this properly completed and duly executed Letter of
Transmittal (or manually signed facsimile of this Letter of Transmittal), an
Agent's Message in the case of a book-entry transfer or the specific
acknowledgement in the case of a tender through the Book-Entry Transfer
Facility's ATOP, and all other documents required by this Letter of Transmittal,
must be received by the Depositary within 3 business days after receipt by the
Depositary of the Notice of Guaranteed Delivery, all as provided in Section 3 of
the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth therein. For shares
to be tendered validly pursuant to the guaranteed delivery procedure, the
Depositary must receive the Notice of Guaranteed Delivery on or before the
Expiration Date.
The method of delivery of all documents, including certificates for
shares, the Letter of Transmittal and any other required documents, is at the
election and risk of the tendering stockholder. If delivery is by mail, Designs,
Inc. recommends that you use registered mail with return receipt requested,
properly insured. In all cases, sufficient time should be allowed to ensure
timely delivery.
Designs, Inc. will not accept any alternative, conditional or contingent
tenders, except as expressly provided in Section 6 of the Offer to Purchase. All
tendering stockholders, by execution of this Letter of Transmittal (or a
facsimile of this Letter of Transmittal), waive any right to receive any notice
of the acceptance of their tender.
3. Inadequate Space. If the space provided in the box entitled
"Description of Shares Tendered" above is inadequate, the certificate numbers
and/or the number of shares should be listed on a separate signed schedule
and attached to this Letter of Transmittal.
4. Partial Tenders and Unpurchased Shares (not applicable to stockholders
who tender by book-entry transfer). If fewer than all of the shares evidenced by
any certificate are to be tendered, fill in the number of shares that are to be
tendered in the column entitled "Number of Shares Tendered" in the box entitled
"Description of Shares Tendered" above. In that case, if any tendered shares are
purchased, a new certificate for the remainder of the shares (including any
shares not purchased) evidenced by the old certificate(s) will be issued and
sent to the registered holder(s), unless otherwise specified in either the box
entitled "Special Payment Instructions" or the box entitled "Special Delivery
Instructions" in this Letter of Transmittal, as soon as practicable after the
Expiration Date. Unless otherwise indicated, all shares represented by the
certificate(s) set forth above and delivered to the Depositary will be deemed to
have been tendered.
5. Indication of Price at Which Shares are Being Tendered. For shares to
be properly tendered, the stockholder must either (1) check the box next to the
section captioned "Shares Tendered at Price Determined by Dutch Auction" in this
Letter of Transmittal or (2) check one of the boxes in the section captioned
"Shares Tendered at Price Determined by Stockholder" in this Letter of
Transmittal indicating the price at which the stockholder is tendering shares.
Only one box may be checked. If more than one box is checked or if no box is
checked, the shares will not be properly tendered. A stockholder wishing to
tender portions of the holder's shares at different prices must complete a
separate Letter of Transmittal for each price at which the holder wishes to
tender each portion of the holder's shares. The same shares
10
cannot be tendered (unless previously and properly withdrawn as provided in
Section 4 of the Offer to Purchase) at more than one price.
6. Signatures on Letter of Transmittal; Stock Powers and
Endorsements.
o If this Letter of Transmittal is signed by the registered holder(s)
of the shares tendered, the signature(s) must correspond exactly
with the name(s) as written on the face of the certificate(s)
without any change whatsoever.
o If the shares tendered are registered in the names of two or more
joint holders, each holder must sign this Letter of Transmittal.
o If any tendered shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles) as there are
different registrations of certificates.
o When this Letter of Transmittal is signed by the registered
holder(s) of the shares tendered, no endorsement(s) of
certificate(s) representing the shares or separate stock power(s)
are required unless payment is to be made or the certificate(s) for
shares not tendered or not purchased are to be issued to a person
other than the registered holder(s). Signature(s) on the
certificate(s) must be guaranteed by an Eligible Institution. If
this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, or if payment is
to be made or certificate(s) for shares not tendered or not
purchased are to be issued to a person other than the registered
holder(s), the certificate(s) must be endorsed or accompanied by
appropriate stock power(s), in either case signed exactly as the
name(s) of the registered holder(s) appears on the certificate(s),
and the signature(s) on the certificate(s) or stock power(s) must be
guaranteed by an Eligible Institution. See Instruction 1.
o If this Letter of Transmittal or any certificate(s) or stock
power(s) is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or any other person
acting in a fiduciary or representative capacity, that person should
so indicate when signing this Letter of Transmittal and must submit
proper evidence satisfactory to Designs, Inc. of his or her
authority so to act.
7. Stock Transfer Taxes. Except as provided in this Instruction 7, no
stock transfer tax stamps or funds to cover tax stamps need accompany this
Letter of Transmittal. Designs, Inc. will pay any stock transfer taxes payable
on the transfer to it of shares purchased pursuant to the offer. If, however,
(a) payment of the Purchase Price for shares tendered and accepted for purchase
is to be made to any person other than the registered holder(s); (b) shares not
tendered or rejected for purchase are to be registered in the name(s) of any
person(s) other than the registered holder(s); or (c) certificate(s)
representing tendered shares are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal, then the Depositary
will deduct from the Purchase Price the amount of any stock transfer taxes
(whether imposed on the registered holder(s), other person(s) or otherwise)
payable on account of the transfer to that person, unless satisfactory evidence
of the payment of the taxes or any exemption therefrom is submitted.
11
8. Odd Lots. As described in Section 1 of the Offer to Purchase, if
Designs, Inc. is to purchase fewer than all shares tendered before the
Expiration Date and not properly withdrawn, the shares purchased first will
consist of all shares properly tendered by any stockholder who owned,
beneficially or of record, an aggregate of fewer than 100 shares and who validly
tendered such shares at or below the Purchase Price (an "odd lot holder"). This
preference will not be available unless the section captioned "Odd Lots" is
completed.
9. Order of Purchase in Event of Proration. As described in Section 1 of
the Offer to Purchase, stockholders may designate the order in which their
shares are to be purchased in the event of proration. The order of purchase may
have an effect on the federal income tax treatment of the Purchase Price for the
shares purchased. See Sections 1 and 15 of the Offer to Purchase.
10. Special Payment and Delivery Instructions. If certificate(s) for
shares not tendered or not purchased and/or check(s) are to be issued in the
name of a person other than the signer of this Letter of Transmittal or if the
certificate(s) and/or check(s) are to be sent to someone other than the person
signing this Letter of Transmittal or to the signer at a different address, the
box entitled "Special Payment Instructions" and/or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal should be completed as
applicable and signatures must be guaranteed as described in Instruction 1.
11. Irregularities. All questions as to the number of shares to be
accepted, the price to be paid for the shares and the validity, form,
eligibility (including time of receipt) and acceptance for payment of any tender
of shares will be determined by Designs, Inc. in its sole discretion. Designs,
Inc.'s determination will be final and binding on all parties. Designs, Inc.
reserves the absolute right to reject any or all tenders of shares it determines
not to be in proper form or the acceptance of which or payment for which may, in
the opinion of Designs, Inc.'s counsel, be unlawful. Designs, Inc. also reserves
the absolute right to waive any of the conditions of the offer or any defect or
irregularity in any tender with respect to any particular shares or any
particular stockholder. Designs, Inc.'s interpretation of the terms of the offer
(including these Instructions) will be final and binding on all parties. No
tender of shares will be deemed to be properly made until all defects and
irregularities have been cured by the tendering stockholder or waived by
Designs, Inc. Unless waived, any defects or irregularities in connection with
tenders must be cured within a time period that Designs, Inc. will determine.
None of Designs, Inc., the Depositary, the Information Agent (as defined in the
Offer to Purchase) or any other person is or will be obligated to give notice of
any defects or irregularities in tenders and none of them will incur any
liability for failure to give any notice of defect or irregularity.
12. Questions and Requests for Assistance and Additional Copies. You may
request additional copies of the Offer to Purchase, the Letter of Transmittal or
the Notice of Guaranteed Delivery from the Information Agent at its address and
telephone numbers set forth on the back cover of the Offer to Purchase.
13. Tax Identification Number and Backup Withholding. Federal income tax
law generally requires that a stockholder whose tendered shares are accepted for
purchase, or the stockholder's assignee (in either case, the "payee"), provide
the Depositary with the payee's correct Taxpayer Identification Number ("TIN"),
which, in the case of a payee who is an individual, is the payee's social
security number. If the Depositary is not provided with the correct TIN or an
adequate basis for an exemption, the payee may be subject to penalties
12
imposed by the Internal Revenue Service and backup withholding in an amount
equal to 31% of the gross proceeds received pursuant to the offer. If
withholding results in an overpayment of taxes, a refund may be obtained.
To prevent backup withholding, each payee must provide the payee's correct
TIN by completing the Substitute Form W-9 set forth in this document, certifying
that the TIN provided is correct (or that the payee is awaiting a TIN) and that
(i) the payee is exempt from backup withholding, (ii) the payee has not been
notified by the Internal Revenue Service that the payee is subject to backup
withholding as a result of a failure to report all interest or dividends, or
(iii) the Internal Revenue Service has notified the payee that the payee is no
longer subject to backup withholding.
If the payee lacks a TIN, the payee should (i) consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for instructions on applying for a TIN, (ii) check the box "Awaiting
TIN" in Part I of the Substitute Form W-9, and (iii) sign and date the
Substitute Form W-9 and the Certificate of Awaiting Taxpayer Identification
Number set forth in this document. If the payee does not provide the payee's TIN
to the Depositary within 60 days, backup withholding will begin and continue
until the payee furnishes the payee's TIN to the Depositary. Note that checking
the box "Awaiting TIN" on the Substitute Form W-9 means that the payee has
already applied for a TIN or that the payee intends to apply for one in the near
future.
If shares are held in more than one name or are not in the name of the
actual owner, consult the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for information on which TIN to
report.
Exempt payees (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding and reporting
requirements. To prevent possible erroneous backup withholding, an exempt payee
should write "Exempt" in Part II of the Substitute Form W-9. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on the Substitute
Form W-9 for additional instructions. In order for a nonresident alien or
foreign entity to qualify as exempt, that person must submit a completed IRS
Form W-8 Certificate of Foreign Status or a Substitute Form W-8, signed under
penalty of perjury attesting to the exempt status. This form may be obtained
from the Depositary.
14. Withholding for Non-United States Holders. Even if a non-United States
holder (as defined in Section 15 of the Offer to Purchase) has provided the
required certification to avoid backup withholding, the Depositary will withhold
United States federal income taxes equal to 31% of the gross payments payable to
a non-United States holder or his or her agent unless the Depositary determines
that a reduced rate of withholding is available under a tax treaty or that an
exemption from withholding is applicable because the gross proceeds are
effectively connected with the conduct of a trade or business within the United
States. To obtain a reduced rate of withholding under a tax treaty, a non-United
States holder must deliver to the Depositary before the payment a properly
completed and executed IRS Form 1001. To obtain an exemption from withholding on
the grounds that the gross proceeds paid pursuant to the offer are effectively
connected with the conduct of a trade or business within the United States, a
non-United States holder must deliver to the Depositary a properly completed and
executed IRS Form 4224. A non-United States holder that qualifies for an
exemption from withholding by delivering IRS Form 4224 will generally be
required to file a United States federal income tax return and will be subject
to United States federal income tax on income derived from the sale of
13
shares pursuant to the offer in the manner and to the extent described in
Section 15 of the Offer to Purchase as if it were a United States holder. The
Depositary will determine a stockholder's status as a non-United States holder
and eligibility for a reduced rate of, or exemption from, withholding by
reference to any outstanding certificates or statements concerning eligibility
for a reduced rate of, or exemption from, withholding (e.g., IRS Form 1001 or
IRS Form 4224) unless facts and circumstances indicate that reliance is not
warranted. A non-United States holder may be eligible to obtain a refund of all
or a portion of any tax withheld if the non-United States holder meets those
tests described in Section 15 of the Offer to Purchase that would characterize
the exchange as a sale (as opposed to a dividend) or is otherwise able to
establish that no tax or a reduced amount of tax is due.
Non-United States holders are urged to consult their tax advisors
regarding the application of United States federal income tax withholding,
including eligibility for a withholding tax reduction or exemption, and the
refund procedure.
15. Lost, Stolen, Destroyed or Mutilated Certificates. Stockholders whose
certificates for all or part of their shares have been lost, stolen, destroyed
or mutilated must notify Equiserve Trust Company. Equiserve Trust Company will
instruct stockholders as to the procedures to be followed in order to replace
the certificate.
16. Conditional Tenders. As described in Section 6 of the Offer to
Purchase, stockholders may condition their tenders on all or a minimum number of
their tendered shares being purchased. If Designs, Inc. will purchase less than
all of the shares tendered before the Expiration Date and not withdrawn, the
Depositary will perform a preliminary proration, and any shares tendered at or
below the Purchase Price pursuant to a conditional tender for which the
condition was not satisfied by the preliminary proration will be deemed
withdrawn, subject to reinstatement if such conditionally tendered shares are
subsequently selected by random lot for purchase subject to Section 6 of the
Offer to Purchase. Conditional tenders will be selected by lot only from
stockholders who tender all of their shares. All tendered shares will be deemed
unconditionally tendered unless the "Conditional Tender" box is completed. The
conditional tender alternative is made available so that a stockholder may
assure that the purchase of shares from the stockholder pursuant to the offer
will be treated as a sale of the shares by the stockholder, rather than the
payment of a dividend to the stockholder, for federal income tax purposes. Odd
lot shares, which will not be subject to proration, cannot be conditionally
tendered. It is the tendering stockholder's responsibility to calculate the
minimum number of shares that must be purchased from the stockholder in order
for the stockholder to qualify for sale (rather than dividend) treatment, and
each stockholder is urged to consult his or her own tax advisor.
In the event of proration, any shares tendered pursuant to a conditional
tender for which the minimum requirements are not satisfied may not be accepted
and thereby will be deemed withdrawn.
This Letter of Transmittal, properly completed and duly executed (or a
manually signed facsimile of this Letter of Transmittal), together with
certificates representing shares being tendered (or confirmation of book-entry
transfer by the Depositary) and all other required documents, or a Notice of
Guaranteed Delivery, must be received before 5:00 p.m., Eastern time, on the
Expiration Date. Stockholders are encouraged to return a completed Substitute
Form W-9 with this Letter of Transmittal.
14
PLEASE PROVIDE YOUR SOCIAL SECURITY OR OTHER TAXPAYER IDENTIFICATION NUMBER ON
THIS SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT YOU ARE NOT SUBJECT TO BACKUP
WITHHOLDING. FAILURE TO DO SO MAY SUBJECT YOU TO 31% U.S. FEDERAL INCOME TAX
BACKUP WITHHOLDING.
- - ---------------------------------------------------------------------------------------------
SUBSTITUTE
Form W-9 PART I-- PLEASE PROVIDE YOUR TIN ___________________________________
Department of the IN THE BOX AT RIGHT AND CERTIFY BY Social Security Number(s) or
Treasury Internal SIGNING AND DATING BELOW Employer Identification Number
Revenue Service
- - ---------------------------------------------------------------------------------------------
PAYER'S REQUEST FOR
TAXPAYER PART 2 -- Certification -- Under penalties of perjury, I certify that:
IDENTIFICATION (1) The number shown on this form is my correct Taxpayer NUMBER
(TIN) Identification Number ("TIN") (or I am waiting for a number to be
issued to me) and (2) I am not subject to back-up
withholding because I have not been notified by the
Internal Revenue Service ("IRS") that I am subject to
back-up withholding as a result of a failure to report all
interest or dividends, or the IRS has notified me that I
am no longer subject to back-up withholding.
- - ---------------------------------------------------------------------------------------------
PART 3 -- Awaiting TIN -- You must check the box below if
you are awaiting a TIN to be assigned to you. See also the
Certificate of Awaiting Taxpayer Identification Number
below.
[ ] Awaiting TIN
- - ---------------------------------------------------------------------------------------------
Certification Instructions -- You must cross out item (2)
above if you have been notified by the IRS that you are
subject to back-up withholding because of under reporting
interest or dividends on your tax return. However, if
after being notified by the IRS that you were subject to
back-up withholding you received another notification from
the IRS that you are no longer subject to back-up
withholding, do not cross out item (2)
SIGNATURE: __________________________ DATE: _________________
- - ---------------------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
*(TO BE COMPLETED ONLY IF THE BOX IN PART 3 ABOVE IS CHECKED)
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31 percent
of all reportable payments made to me thereafter will be withheld until I
provide such a number.
SIGNATURE: ______________________________ DATE: ___________________________
- - ---------------------------------------------------------------------------------------------
15
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269- 5550
All Others Call Toll Free: (800) 755-7520
16
NOTICE OF GUARANTEED DELIVERY
For Tender of Shares of Common Stock
of
DESIGNS, INC.
This Notice of Guaranteed Delivery, or one substantially in the form
hereof, must be used to accept the offer if certificates evidencing shares of
common stock, par value $0.01 per share, of Designs, Inc., a Delaware
corporation, are not immediately available, or if the procedure for book-entry
transfer described in the Offer to Purchase dated November 14, 2000 and the
related Letter of Transmittal, which, as amended or supplemented from time to
time, together constitute the offer, cannot be completed on a timely basis or
time will not permit all required documents, including a properly completed and
duly executed Letter of Transmittal (or a manually signed facsimile of the
Letter of Transmittal), an Agent's Message in the case of a book-entry transfer
(as defined in the Offer to Purchase) or the specific acknowledgement in the
case of a tender through the ATOP of the Book-Entry Transfer Facility (as
defined in the Offer to Purchase), and any other required documents, to reach
the Depositary prior to the Expiration Date (as defined in the Offer to
Purchase).
This Notice of Guaranteed Delivery, properly completed and duly executed,
may be delivered by hand, mail or facsimile transmission to the Depositary. See
Section 3 of the Offer to Purchase.
The Depositary for the Offer is:
EQUISERVE TRUST COMPANY
By Hand Delivery: By Overnight Delivery: By Registered or
Certified Mail:
Securities Transfer and Equiserve Trust Company
Reporting Services, Inc. Corporate Actions Equiserve Trust Company
c/o Equiserve Trust Company 40 Campanelli Drive Corporate Actions
100 Williams Street/Galleria Braintree, MA 02184 P.O. Box 9573
New York, NY 10038 Boston, MA 02205-9573
By Facsimile Transmission Confirm Receipt of
(For Eligible Institutions Only): Facsimile by Telephone:
(781) 575-4826 (781) 575-4816
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via facsimile transmission other
than as set forth above will not constitute a valid delivery. Deliveries to
Designs, Inc. will not be forwarded to the Depositary and therefore will not
constitute valid delivery. Deliveries to the Book-Entry Transfer Facility will
not constitute valid delivery to the Depositary.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on the Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Offer to Purchase)
under the instructions to the Letter of Transmittal, the signature guarantee
must appear in the applicable space provided in the signature box on the Letter
of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
THE GUARANTEE ON THE LAST PAGE OF THIS NOTICE MUST BE COMPLETED.
Notice of Guaranteed Delivery:
The undersigned tenders to Designs, Inc. at the price per share indicated
in this Notice of Guaranteed Delivery, upon the terms and subject to the
conditions described in the Offer to Purchase and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the number of shares
specified below pursuant to the guaranteed delivery procedure described in
Section 3 of the Offer to Purchase.
Number of shares to be tendered: ___________ shares.
Shares Tendered at Price Determined by Stockholder
(See Instruction 5 to the Letter of Transmittal)
By checking one of the following boxes below instead of the box under
"Shares Tendered at Price Determined by Dutch Auction," the undersigned hereby
tenders shares at the price checked. This action could result in none of the
shares being purchased if the Purchase Price determined by Designs, Inc. for the
shares is less than the price checked below. A stockholder who desires to tender
shares at more than one price must complete a separate Letter of Transmittal for
each price at which shares are tendered. The same shares cannot be tendered at
more than one price.
Price (In Dollars) Per Share at Which Shares Are Being Tendered:
-------------------------------------------------------------
|_| $2.20 |_| $2.50 |_| $2.80
-------------------------------------------------------------
|_| $2.30 |_| $2.60 |_| $2.90
-------------------------------------------------------------
|_| $2.40 |_| $2.70 |_| $3.00
-------------------------------------------------------------
OR
Shares Tendered at Price Determined by Dutch Auction
(See Instruction 5 to the Letter of Transmittal)
|_| The undersigned wants to maximize the chance of having Designs, Inc.
purchase all of the shares the undersigned is tendering (subject to the
possibility of proration). Accordingly, by checking this one box instead of one
of the price boxes above, the undersigned hereby tenders shares and is willing
to accept the Purchase Price determined by Designs, Inc. in accordance with the
terms of the offer. This action could result in the undersigned receiving a
price per share as low as $2.20.
Signature(s):
----------------------------------------------------------------
Daytime Area Code(s) and Telephone Number(s):
---------------------------------
Name(s) of Registered Holder(s)
----------------------------------------------
(Please Print)
Date: , 2000
-------------------
If shares will be delivered by book-entry transfer, provide the following
information:
Certificate No.(s): Account No.:
----------------------- ------------------
Address:
----------------------------------------------------------------------
(Include Zip Code)
2
ODD LOTS
To be completed ONLY if shares are being tendered by or on behalf of a
person owning beneficially or of record an aggregate of fewer than 100 shares.
The undersigned either (check one box):
|_| is the beneficial or record owner of an aggregate of fewer than 100
shares, all of which are being tendered; or
|_| is a broker, dealer, commercial bank, trust company, or other nominee that
(a) is tendering for the beneficial owner(s) of shares with respect to
which it is the registered holder, and (b) believes, based upon
representations made to it by the beneficial owner(s), that each person
was the beneficial or record owner of an aggregate of fewer than 100
shares and is tendering all of those shares.
In addition, the undersigned is tendering shares either (check one box):
|_| at the Purchase Price determined by Designs, Inc. in accordance with
the terms of the offer (persons checking this box need not indicate the
price per share below); or
|_| at the price per share indicated below in the section captioned "Shares
Tendered at Price Determined by Stockholder."
CONDITIONAL TENDER
You may condition your tender of shares upon Designs, Inc. purchasing a
specified minimum number of the shares tendered, all as described in the Offer
to Purchase, particularly in Section 6. Unless at least the minimum number of
shares you indicate below is purchased by Designs, Inc. pursuant to the terms of
the offer, none of the shares tendered by you will be purchased. It is your
responsibility to calculate the minimum number of shares that must be purchased
if any are purchased, and you are urged to consult your own tax advisor. Unless
this box has been completed and a minimum specified, the tender will be deemed
unconditional.
|_| The minimum number of shares that must be purchased, if any are
purchased is: ___________ shares.
3
GUARANTEE
(Not to be used for a signature guarantee)
The undersigned, a firm that is a member in good standing of the
Securities Transfer Agents Medallion Program or a firm that is an "eligible
guarantor institution," as that term is defined in Rule 17Ad-15 promulgated
under the Securities Exchange Act of 1934, as amended (each of the foregoing
constituting an "Eligible Institution"), guarantees the delivery to the
Depositary of the shares tendered, in proper form for transfer, or a
confirmation that the shares tendered have been delivered pursuant to the
procedure for book-entry transfer described in the Offer to Purchase into the
Depositary's account at the Book-Entry Transfer Facility, in each case together
with a properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile of the Letter of Transmittal), an Agent's Message in the case
of a book-entry transfer or the specific acknowledgement in the case of a tender
through ATOP (as defined in the Offer to Purchase), and any other required
documents, all within 3 business days after the date of receipt by the
Depositary of this Notice of Guaranteed Delivery.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates representing shares to the Depositary within the time period set
forth in the Offer to Purchase. Failure to do so could result in a financial
loss to the Eligible Institution.
Name of Firm:
--------------------------------------------------------------
Address:
-------------------------------------------------------------------
- - ---------------------------------------------------------------------------
Zip Code:
------------------------------------------------------------------
Area Code and Telephone Number:
--------------------------------------------
Authorized Signature:
------------------------------------------------------
Name:
------------------------------------------------------
(Please Print)
Title:
---------------------------------------------------------------------
Dated: , 2000
-----------------------
Note: Do not send share certificates with this form. Certificates for shares
should be sent with the Letter of Transmittal.
4
OFFER TO PURCHASE FOR CASH
by
DESIGNS, INC.
Up to 1,500,000 Shares of its Common Stock at a Purchase Price
not Greater than $3.00 nor Less Than $2.20 Per Share
- - ------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
EASTERN TIME, ON THURSDAY, DECEMBER 14, 2000, UNLESS THE OFFER IS EXTENDED.
- - ------------------------------------------------------------------------------
November 14, 2000
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Designs, Inc., a Delaware corporation, has appointed us to act as the
information agent in connection with its offer to purchase shares of its common
stock, par value $0.01 per share. The offer is for the purchase of up to
1,500,000 shares at a price not greater than $3.00 nor less than $2.20 per
share, net to the seller in cash, without interest, as specified by stockholders
tendering their shares.
Designs, Inc. will determine the lowest Purchase Price that will allow it
to buy 1,500,000 shares or, if a lesser number of shares are properly tendered,
all shares that are properly tendered and not withdrawn. All shares acquired in
the offer will be acquired at the same Purchase Price.
Designs, Inc.'s offer is being made upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal, which, as amended or supplemented from time to time, together
constitute the offer.
Only shares properly tendered at prices at or below the Purchase Price and
not properly withdrawn will be purchased. However, because of the "odd lot"
priority, proration and conditional tender provisions described in the Offer to
Purchase, all of the shares tendered at or below the Purchase Price will not be
purchased if more than the number of shares Designs, Inc. seeks are properly
tendered. Shares tendered at prices in excess of the Purchase Price that is
determined by Designs, Inc. and shares not purchased because of proration or
conditional tenders will be returned as promptly as practicable following the
Expiration Date.
Designs, Inc. reserves the right, in its sole discretion, to purchase more
than 1,500,000 shares pursuant to the offer, up to a maximum of 1,000,000
additional shares.
The offer is not conditioned on any minimum number of shares being
tendered. The offer is, however, subject to other conditions.
If at the expiration of the offer more than 1,500,000 shares, or any
greater number of shares as Designs, Inc. may elect to purchase, are properly
tendered at or below the Purchase Price and not properly withdrawn, Designs,
Inc. will buy shares first from any person (an "odd lot holder") who owned
beneficially or of record an aggregate of fewer than 100 shares and so certified
in the appropriate place on the Letter of Transmittal and, if applicable, on a
Notice of Guaranteed Delivery, who properly tender all their shares at or below
the Purchase Price, and then on a pro rata basis from all other stockholders who
properly tender shares at prices at or below the Purchase Price, subject to the
conditional tender provisions.
For your information and for forwarding to those of your clients for whom
you hold shares registered in your name or in the name of your nominee, we are
enclosing the following documents:
1. The Offer to Purchase dated November 14, 2000.
2. The Letter of Transmittal for your use and for the information of your
clients, together with the accompanying Substitute Form W-9. Facsimile copies of
the Letter of Transmittal, with manual signatures, may be used to tender shares.
3. The Notice of Guaranteed Delivery to be used to accept the offer and
tender shares pursuant to the offer if none of the procedures for tendering
shares described in the Offer to Purchase can be completed on a timely basis.
4. A printed form of letter, which you may send to your clients for whose
accounts you hold shares registered in your name or in the name of your nominee,
with an instruction form provided for obtaining the clients' instructions with
regard to the offer.
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
6. A return envelope addressed to Equiserve Trust Company, as
Depositary for the offer.
Your prompt action is requested. We urge you to contact your clients as
promptly as possible. Please note that the offer, proration period and
withdrawal rights will expire on 5:00 p.m., Eastern time, on December 14, 2000,
unless the offer is extended.
Holders of shares whose certificate(s) for the shares are not immediately
available or who cannot deliver the certificate(s) and all other required
documents to the Depositary, or complete the procedures for book-entry transfer,
before the Expiration Date must tender their shares according to the procedure
for guaranteed delivery described in Section 3 of the Offer to Purchase.
Neither Designs, Inc. nor any officer, director, stockholder, agent or
other representative of Designs, Inc. will pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of shares pursuant to
the offer. Designs, Inc. will, however, upon request, reimburse you for
customary mailing and handling expenses incurred by you in forwarding any of
the enclosed materials to your clients whose shares are held by you as a
nominee or in a fiduciary capacity. Designs, Inc. will pay or cause to be
paid any stock transfer taxes applicable to its purchase of shares, except as
otherwise provided in the Letter of Transmittal.
Requests for additional copies of the enclosed materials and any
inquiries you may have with respect to the offer should be addressed to D.F.
King & Co., Inc., as Information Agent, at (212) 269-5550 (collect) or (800)
755-7520 (toll free).
Very truly yours,
D.F. KING & CO.
NOTHING CONTAINED IN THIS DOCUMENT OR IN THE ENCLOSED DOCUMENTS WILL MAKE
YOU OR ANY OTHER PERSON AN AGENT OF DESIGNS, INC., THE INFORMATION AGENT OR THE
DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE
STATEMENTS CONTAINED IN THOSE DOCUMENTS.
OFFER TO PURCHASE FOR CASH
by
DESIGNS, INC.
Up to 1,500,000 Shares of its Common Stock at a Purchase Price
not Greater than $3.00 nor Less Than $2.20 Per Share
- - ------------------------------------------------------------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M.,
EASTERN TIME, ON THURSDAY, DECEMBER 14, 2000, UNLESS THE OFFER IS EXTENDED.
- - ------------------------------------------------------------------------------
November 14, 2000
To Our Clients:
Enclosed for your consideration are the Offer to Purchase dated November
14, 2000 and the related Letter of Transmittal in connection with the offer by
Designs, Inc., a Delaware corporation, to purchase shares of its common stock,
par value $0.01 per share. Designs, Inc. is offering to purchase up to 1,500,000
shares for cash at a price not greater than $3.00 nor less than $2.20 per share,
net to the seller in cash, without interest, as specified by stockholders
tendering their shares.
Designs, Inc. will select the lowest Purchase Price that will allow it to
buy 1,500,000 shares or, if a lesser number of shares are properly tendered, all
shares that are properly tendered and not withdrawn. All shares acquired in the
offer will be acquired at the same Purchase Price.
Designs, Inc.'s offer is being made upon the terms and subject to the
conditions set forth in the Offer to Purchase and in the related Letter of
Transmittal, which, as amended or supplemented from time to time, together
constitute the offer.
Only shares properly tendered at prices at or below the Purchase Price and
not properly withdrawn will be purchased. However, because of the "odd lot"
priority, proration and conditional tender provisions described in the Offer to
Purchase, all of the shares tendered at or below the Purchase Price will not be
purchased if more than the number of shares Designs, Inc. seeks are properly
tendered. Shares tendered at prices in excess of the Purchase Price that is
determined by Designs, Inc. and shares not purchased because of proration or
conditional tenders will be returned as promptly as practicable following the
Expiration Date.
Designs, Inc. reserves the right, in its sole discretion, to purchase
more than 1,500,000 shares pursuant to the offer, up to a maximum of
1,000,000 additional shares.
If at the expiration of the offer more than 1,500,000 shares, or any
greater number of shares as Designs, Inc. may elect to purchase, are properly
tendered at or below the Purchase Price and not properly withdrawn before the
Expiration Date, Designs, Inc. will purchase shares first from any person (an
"odd lot holder") who owned beneficially or of record an aggregate of fewer than
100 shares and so certified in the appropriate place on the Letter of
Transmittal and, if applicable, on a Notice of Guaranteed Delivery, and properly
tendered all those shares at or
below the Purchase Price and then, subject to the conditional tender provisions,
on a pro rata basis from all other stockholders who properly tender shares at
prices at or below the Purchase Price.
A tender of your shares can be made only by us as the holder of record and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to tender your shares held by us
for your account.
Accordingly, we request instructions as to whether you wish to tender any
or all of the shares held by us for your account, upon the terms and subject to
the conditions of the offer.
Please note the following:
1. Shares may be tendered at prices not greater than $3.00 nor less than
$2.20 per share, as indicated in the attached Instruction Form.
2. You may designate the priority in which certificates will be
purchased in the event of proration.
3. The offer is not conditioned on any minimum number of shares being
tendered. The offer is, however, subject to other conditions described in the
Offer to Purchase.
4. The offer, proration period and withdrawal rights will expire at 5:00
p.m., Eastern time, on December 14, 2000, unless the offer is extended.
5. The offer is for 1,500,000 shares, constituting approximately
9.5% of the shares outstanding as of November 6, 2000.
6. Designs, Inc.'s Board of Directors has approved the making of the
offer. However, neither Designs, Inc., Designs, Inc.'s Board of Directors, nor
the Information Agent is making any recommendation whether you should tender or
refrain from tendering your shares or at what Purchase Price you should choose
to tender your shares. You must make the decision whether to tender your shares
and, if so, how many shares to tender and the price or prices at which you will
tender them.
7. Tendering stockholders who hold shares registered in their own name and
who tender their shares directly to the Depositary will not be obligated to pay
brokerage commissions, solicitation fees or, subject to Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the purchase of shares by
Designs, Inc. in the offer.
Designs, Inc. will, upon the terms and subject to the conditions of the
offer, accept all your shares for purchase if:
o you owned beneficially or of record an aggregate of fewer than 100
shares;
o you instruct us to tender on your behalf all your shares at or below
the Purchase Price before the Expiration Date; and
o you complete the section entitled "Odd Lots" in the attached
Instruction Form.
2
If you wish to tender portions of your shares at different prices, you
must complete a separate Instruction Form for each price at which you wish to
tender each portion of your shares. We must submit separate Letters of
Transmittal on your behalf for each price you will accept for each portion
tendered.
If you wish to have us tender any or all of your shares, please instruct
us by completing, executing, detaching and returning the attached Instruction
Form. An envelope to return your Instruction Form to us is enclosed. If you
authorize us to tender your shares, all your shares will be tendered unless
otherwise indicated on the attached Instruction Form.
Please forward your Instruction Form to us as soon as possible to allow us
ample time to tender your shares on your behalf prior to the expiration of the
offer.
As described in the Offer to Purchase, if more than 1,500,000 shares, or
any greater number of shares as Designs, Inc. may elect to purchase, have been
properly tendered at or below the Purchase Price and not properly withdrawn
before the Expiration Date, Designs, Inc. will purchase tendered shares on the
basis described below:
o First, all shares tendered and not withdrawn before the Expiration
Date by any odd lot holder who:
o tenders all shares owned beneficially or of record by the odd
lot holder at a price at or below the Purchase Price (tenders
of less than all shares owned by the odd lot holder will not
qualify for this preference); and
o completes the section captioned "Odd Lots" on the Letter of Transmittal
and, if applicable, on the Notice of Guaranteed Delivery;
and
o Second, after purchase of all of the foregoing shares, subject to
the conditional tender provisions described in Section 6 of the
Offer to Purchase, all other shares properly tendered at prices at
or below the Purchase Price and not properly withdrawn before the
Expiration Date, on a pro rata basis (with appropriate adjustments
to avoid purchases of fractional shares) as described in the Offer
to Purchase.
The offer is being made solely pursuant to the Offer to Purchase and the
related Letter of Transmittal and is being made to all registered holders of
shares of common stock of Designs, Inc. The offer is not being made to, nor will
tenders be accepted from or on behalf of, holders of shares of common stock of
Designs, Inc. residing in any jurisdiction in which the making of the offer or
acceptance thereof would not be in compliance with the securities laws of that
jurisdiction.
3
INSTRUCTION FORM
INSTRUCTIONS FOR TENDER OF SHARES OF DESIGNS, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase dated November 14, 2000 and the related Letter of Transmittal
in connection with the offer by Designs, Inc., to purchase shares of its common
stock, par value $0.01 per share. Designs, Inc. is offering to purchase up to
1,500,000 shares at a price not greater than $3.00 nor less than $2.20 per
share, net to the seller in cash, without interest, as specified by stockholders
tendering their shares. Designs, Inc.'s offer is being made upon the terms and
subject to the conditions set forth in the Offer to Purchase and in the related
Letter of Transmittal, which, as amended or supplemented from time to time,
together constitute the offer.
This will instruct you to tender to Designs, Inc., on (our) (my) behalf,
the number of shares indicated below (or if no number is indicated below, all
shares) which are beneficially owned by (us) (me) and registered in your name,
upon the terms and subject to the conditions of offer.
Number of shares to be tendered: ___________ shares.*
* Unless otherwise indicated, it will be assumed that all shares held by
us for your account are to be tendered.
PRICE AT WHICH SHARES TENDERED
Shares Tendered at Price Determined by Stockholder
(See Instruction 5 to the Letter of Transmittal)
By checking one of the following boxes below instead of the box under
"Shares Tendered at Price Determined by Dutch Auction," the undersigned hereby
tenders shares at the price checked below. This action could result in none of
the shares being purchased if the Purchase Price determined by Designs, Inc. for
the shares is less than the price checked below. A stockholder who desires to
tender shares at more than one price must complete a separate Instruction Form
for each price at which shares are tendered. The same shares cannot be tendered
at more than one price.
Price (In Dollars) Per Share at Which Shares Are Being Tendered:
-------------------------------------------------------------
|_| $2.20 |_| $2.50 |_| $2.80
-------------------------------------------------------------
|_| $2.30 |_| $2.60 |_| $2.90
-------------------------------------------------------------
|_| $2.40 |_| $2.70 |_| $3.00
-------------------------------------------------------------
OR
Shares Tendered at Price Determined by Dutch Auction
(See Instruction 5 to the Letter of Transmittal)
|_| The undersigned wants to maximize the chance of having Designs, Inc.
purchase all of the shares the undersigned is tendering (subject to the
possibility of proration).
4
Accordingly, by checking this one box instead of one of the price boxes
above, the undersigned hereby tenders shares and is willing to accept the
Purchase Price determined by Designs, Inc. in accordance with the terms of
the offer. This action could result in receiving a price per share of as
low as $2.20.
ODD LOTS
o By checking this box, the undersigned represents that the undersigned
owns, beneficially or of record, an aggregate of fewer than 100 shares and
is tendering all of those shares. (In addition, the undersigned is
tendering shares either (check one box):
o at the Purchase Price, as it will be determined by Designs, Inc. in
accordance with the terms of the offer (persons checking this box need
not indicate the price per share below); or
o at the price per share indicated below under "Price (In Dollars) Per Share
at Which Shares Are Being Tendered."
CONDITIONAL TENDER
A tendering stockholder may condition his or her tender of shares upon
Designs, Inc. purchasing a specified minimum number of the shares tendered, all
as described in Section 6 of the Offer to Purchase. Unless at least the minimum
number of shares you indicate below is purchased by Designs, Inc. pursuant to
the terms of the offer, none of the shares tendered by you will be purchased. It
is the tendering stockholder's responsibility to calculate the minimum number of
shares that must be purchased if any are purchased, and each stockholder is
urged to consult his or her own tax advisor. Unless this box has been completed
and a minimum specified, the tender will be deemed unconditional.
o The minimum number of shares that must be purchased, if any are
purchased is: ___________ shares.
THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE OPTION AND RISK OF
THE TENDERING STOCKHOLDER. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY.
- - --------------------------------------------------------------------------------
Sign Here:
- - --------------------------------------------------------------------------------
(Signature(s))
- - --------------------------------------------------------------------------------
Name(s):
- - --------------------------------------------------------------------------------
(Please Print)
- - --------------------------------------------------------------------------------
Address(es):
- - --------------------------------------------------------------------------------
(Include Zip Code)
Dated: , 2000
-----------------------
5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer. - Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the Payer.
- - -------------------------------------- ----------------------- ----------------------------------- ---------------------------
Give the SOCIAL Give the EMPLOYER
For this type of account: SECURITY number of -- For this type of account: IDENTIFICATION
number of --
- - -------------------------------------- ----------------------- ----------------------------------- ---------------------------
1. An individual's account The individual 9. Sole proprietorship account The owner (4)
2. Two or more individuals (joint The actual owner of 10. A valid trust, estate or Legal entity (Do not
account) the account or, if pension trust furnish the identifying
combined funds, the number of the personal
first individual on representative or trustee
the account (1) unless the legal entity
itself is not designated
in the account title.) (5)
3. Husband and wife (joint The actual owner of 11. Corporate account The corporation
account) the account or, if
joint funds, the
first individual on
the account (1)
4. Custodian account of a minor The minor (2) 12. Religious, charitable or The organization
(Uniform Gift to Minors Act) educational organization
account
5. Adult and minor (joint account) The adult or, if the 13. Partnership account held in The partnership
minor is the only the name of the business
contributor, the
minor (1)
6. Account in the name of The ward, minor or 14. Association, club or other The organization
guardian or committee for a incompetent person (3) tax-exempt organization
designated ward, minor or
incompetent person
7. a.A revocable savings trust The grantor-trustee 15. A broker or registered The broker or nominee
account (in which grantor is (1) nominee
also trustee)
b.Any "trust" account that is
not a legal or valid trust The actual owner (1)
under State law
8. Sole proprietorship account The owner (4) 16. Account with the Department The public entity
of Agriculture in the name
of a public entity (such as
a State or local government,
school district or prison)
that receives agricultural
program payments
- - -----------------------------------------------------------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner and you may also enter the business or "doing
business as" name. Use either the owner's social security number or the
employer identification number of the business (if it has one).
(5) List first and circle the name of the legal trust, estate or pension
trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number, or Form
SS-4, Application for an Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply for
a number. United States resident aliens who cannot obtain a social security
number must apply for an ITIN (Individual Taxpayer Identification Number) on
Form W-7.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Even if the payee does not provide a TIN in the manner required, you are not
required to backup withhold on any payments you make if the payee is:
1. An organization exempt from tax under section 501(a), any IRA, or a
custodial account under section 403(b)(7) if the account satisfies the
requirements of section 401(f)(2).
2. The United States or any of its agencies or instrumentalities.
3. A state, the District of Columbia, a possession of the United States, or
any of their political subdivisions or instrumentalities.
4. A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
5. An international organization or any of its agencies or instrumentalities.
Other payees that may be exempt from backup withholding include:
6. A corporation.
7. A foreign central bank of issue.
8. A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
9. A futures commission merchant registered with the Commodity Futures
Trading Commission.
10. A real estate investment trust.
11. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
12. A common trust fund operated by a bank under section 584(a).
13. A financial institution.
14. A middleman known in the investment community as a nominee or who is
listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
15. A trust exempt from tax under section 664 or described in section 4947.
Interest and dividend payments. All listed payees are exempt except the payee in
item 9.
Broker transactions. All payees listed in items 1 through 13 are exempt. A
person registered under the Investment Advisors Act of 1940 who regularly acts
as a broker is also exempt.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING Payments that are not subject to
information reporting also are not subject to backup withholding.
Dividends and patronage dividends that generally are exempt from backup
withholding include:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
o Payments of patronage dividends not paid in money.
o Payments made by certain foreign organizations.
o Section 404(k) distributions made by an ESOP
Interest payments that generally are exempt from backup withholding include:
o Payments of interest on obligations issued by individuals. However, if you
pay $600 or more of interest in the course of your trade or business to a
payee, you must report the payment. Backup withholding applies to the
reportable payment if the payee has not provided a TIN or has provided an
incorrect TIN.
o Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding.
FILE THE FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE
"EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS
ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
PENALTIES
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you fail
to furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding. If you make
a false statement with no reasonable basis which results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information. Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) Misuse of Taxpayer Identification Number. If the requester discloses or uses
taxpayer identification numbers in violation of Federal law, the requester may
be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
2
FOR IMMEDIATE RELEASE
For Information, Contact:
Seymour Holtzman, Chairman of the Board
Jeff Unger, Investor Relations
Designs, Inc.
(781) 444-7222
RJ Falkner & Company, Inc.
Investor Relations Counsel
(800) 377-9893
info@rjfalkner.com
DESIGNS, INC. ANNOUNCES COMMENCEMENT OF DUTCH AUCTION TENDER OFFER
(Needham, MA, November 15, 2000) -- Designs, Inc. (NASDAQ/NMS: DESI), operator
of Levi's(R) and Dockers(R) Outlet By Designs stores, today announced that it
has commenced a "Dutch Auction" tender offer for up to 1.5 million shares of the
Company's Common Stock, reserving the option to purchase up to an additional 1
million shares. The Company currently has approximately 15.8 million shares
outstanding.
Under the terms of the offer, the Company has invited the shareholders
to tender their shares to the Company at prices specified by the tendering
shareholders not in excess of $3.00 nor less than $2.20 per share, in ten-cent
($0.10) increments. There is no certainty that the Company will purchase all
shares tendered in the offer, and in the event of an over-subscription within
the specified range, the Company would accept shares on a pro rata basis. The
tender offer commenced today, November 15, 2000, and will expire at 5:00 pm EST,
on December 14, 2000, unless extended by the Company. Any shareholders who
require tender offer materials may contact the Information Agent for the offer
at the address and telephone number indicated below.
Designs, Inc. will select the lowest single per-share purchase price
that will allow it to buy 1,500,000 million shares, or up to an additional
1,000,000 shares at the Company's option. If a lesser number of shares is
properly tendered, the Company will purchase all shares properly tendered and
not withdrawn at the lowest single per-share price.
If the tender offer is over-subscribed, Designs, Inc. will purchase
first from shareholders owning fewer than 100 shares and tendering all such
shares at or below the purchase price determined by the Company and then from
all other shareholders tendering at or below such purchase price on a pro rata
basis. The tender offer will not be conditioned on any minimum number of shares
being tendered.
Neither the Company nor its Board of Directors is making any
recommendation to shareholders as to whether to tender or refrain from tendering
their shares or as to the purchase price on any tender. The Company has been
advised that neither the Company's directors or executive officers nor Jewelcor
Management, Inc., the Company's largest shareholder, intend to tender any shares
pursuant to the offer. D.F. King and Co., Inc. will act as Information Agent.
THIS PRESS RELEASE IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT AN OFFER TO BUY
OR THE SOLICITATION OF AN OFFER TO SELL ANY SHARES OF DESIGNS, INC.'S COMMON
STOCK. THE SOLICITATION OF OFFERS TO BUY DESIGNS, INC. COMMON STOCK WILL ONLY BE
MADE PURSUANT TO AN OFFER TO PURCHASE AND RELATED MATERIALS DISTRIBUTED TO
SHAREHOLDERS BY DESIGNS, INC. SHAREHOLDERS SHOULD CAREFULLY READ THOSE MATERIALS
BECAUSE THEY CONTAIN IMPORTANT INFORMATION, INCLUDING THE VARIOUS TERMS AND
CONDITIONS OF THE OFFER. SHAREHOLDERS CAN OBTAIN COPIES OF THE OFFER TO
PURCHASE, RELATED MATERIALS AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION THROUGH THE COMMISSION'S WEB SITE AT http://www.sec.gov
WITHOUT CHARGE. SHAREHOLDERS CAN ALSO OBTAIN COPIES OF THE OFFER TO PURCHASE AND
RELATED ------------------ MATERIALS, WITHOUT CHARGE, FROM DESIGNS, INC. BY ORAL
OR WRITTEN REQUEST TO: DESIGNS, INC. ATTENTION: DENNIS HERNREICH, SENIOR VICE
PRESIDENT AND CHIEF FINANCIAL OFFICER, 66 B STREET, NEEDHAM, MASSACHUSETTS,
02494, OR FROM THE COMPANY'S INFORMATION AGENT, D.F. KING AND CO., INC., AT 77
WATER STREET, NEW YORK, N.Y. 10005, TELEPHONE 800-758-5880.
The discussion of forward-looking information requires management of the Company
to make certain estimates and assumptions regarding the Company's strategic
direction and the effect of such plans on the Company's financial results. The
Company's actual results and the implementation of its plans and operations may
differ materially from forward-looking statements made by the Company. The
Company encourages readers of forward-looking information concerning the Company
to refer to its prior filings with the Securities and Exchange Commission that
set forth certain risks and uncertainties that may have an impact on future
results and direction of the Company.
Designs, Inc. operates 106 Levi's(R)Outlet by Designs and Dockers(R)Outlet by
Designs stores. These stores are located in outlet parks and malls throughout
the eastern United States and Puerto Rico.