SCHEDULE 14A INFORMATION
Proxy Statement Pursuant To Section 14(A) Of The Securities
Exchange Act Of 1934
FILED BY THE REGISTRANT [x]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
DESIGNS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
$
5) Total fee paid:
$
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
DESIGNS, INC.
Notice of Annual Meeting of Stockholders
to be held on August 8, 2002
Notice is hereby given that the 2002 Annual Meeting of Stockholders of Designs,
Inc. (the "Company") will be held at the Friars Club, 57 East 55th Street, New
York, New York at 9:00 A.M., local time, on August 8, 2002 for the following
purposes:
1. To elect eight directors to serve until the next Annual Meeting of
Stockholders and until their respective successors have been duly
elected and qualified.
2. To amend the Company's Restated Certificate of Incorporation to change
the Company's name from "Designs, Inc." to "Casual Male Retail Group,
Inc."
3. To amend the Company's Restated Certificate of Incorporation to increase
the authorized number of shares of the Company's common stock from
50,000,000 to 75,000,000.
4. To approve the issuance of additional common stock of the Company upon
the conversion of outstanding preferred stock and the exercise of
warrants.
5. To approve the change of the Company's state of incorporation from
Delaware to Nevada through a reincorporation merger.
6. To ratify the selection of Ernst & Young LLP as independent auditors for
the Company for the fiscal year ending February 1, 2003.
7. To transact such other business as may properly come before the meeting
or any adjournment thereof.
These proposals are more fully described in the Proxy Statement following this
Notice.
The Board of Directors recommends that you vote FOR the election of all eight
nominees to serve as directors of the Company, FOR the amendment to the
Company's Restated Certificate of Incorporation to change the Company's name,
FOR the amendment to the Company's Restated Certificate of Incorporation to
increase the authorized number of shares of common stock, FOR the approval to
issue additional common stock, FOR the change of the Company's state of
incorporation from Delaware to Nevada, and FOR the appointment of Ernst & Young
LLP as the Company's independent auditors.
Along with the attached Proxy Statement, the Company is sending you copies of
its Annual Report on Form 10-K for the fiscal year ended February 2, 2002, its
Current Report on Form 8-K filed on May 23, 2002 and its Current Report on Form
8-K/A filed on June 14, 2002. The Current Reports provide information about the
Company's recent acquisition of substantially all of the assets and the
assumption of certain operating liabilities of Casual Male Corp., which occurred
after the Company's Annual Report was filed.
The Board of Directors has fixed the close of business on June 20, 2002 as the
record date for the determination of the stockholders entitled to notice of, and
to vote at, the Annual Meeting. Accordingly, only stockholders of record at the
close of business on that date will be entitled to vote at the Annual Meeting. A
list of the stockholders of record as of the close of business on June 20, 2002
will be available for inspection by any stockholder of the Company for any
purpose germane to the Annual Meeting during normal business hours at the
Company's principal executive offices, 555 Turnpike Street, Canton,
Massachusetts 02021, beginning on July 20, 2002 and at the Annual Meeting.
Stockholders are cordially invited to attend the Annual Meeting in person.
Whether or not you plan to attend the Annual Meeting, please mark, date, sign
and return the enclosed proxy to ensure that your shares are represented at the
Annual Meeting. Stockholders who attend the Annual Meeting may vote their shares
personally, even though they have sent in proxies.
By order of the Board of Directors,
/s/ DENNIS R. HERNREICH
DENNIS R. HERNREICH
Secretary
Canton, Massachusetts
July 8, 2002
- ------------------------------------------------------------------------------
IMPORTANT: Please mark, date, sign and return the enclosed proxy as soon as
possible. The proxy is revocable and it will not be used if you give written
notice of revocation to the Secretary of the Company at 555 Turnpike Street,
Canton, Massachusetts 02021, prior to the vote to be taken at the Annual
Meeting, if you lodge a later-dated proxy or if you attend and vote at the
Annual Meeting.
- ------------------------------------------------------------------------------
DESIGNS, INC.
555 Turnpike Street
Canton, Massachusetts 02021
(781) 828-9300
Proxy Statement
Annual Meeting of Stockholders
August 8, 2002
USE OF PROXIES
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about July 8, 2002, in connection with the solicitation by
the Board of Directors of Designs, Inc. (the "Company") of proxies to be used at
the Annual Meeting of Stockholders, to be held at the Friars Club, 57 East 55th
Street, New York, New York at 9:00 A.M., local time, on Thursday, August 8,
2002, and at any and all adjournments thereof (the "Annual Meeting"). When
proxies are returned properly executed, the shares represented will be voted in
accordance with the stockholders' instructions. Stockholders are encouraged to
vote on the matters to be considered. However, if no instructions have been
specified by a stockholder, the shares covered by an executed proxy will be
voted (i) FOR the election of all eight nominees to serve as directors of the
Company, (ii) FOR the amendment to the Company's Restated Certificate of
Incorporation to change the Company's name to "Casual Male Retail Group, Inc.",
(iii) FOR the amendment to the Company's Restated Certificate of Incorporation
to increase the authorized number of shares of the Company's common stock, par
value $0.01 per share ("Common Stock"), from 50,000,000 to 75,000,000, (iv) FOR
the approval of the issuance of additional Common Stock, (v) FOR changing the
Company's state of incorporation from Delaware to Nevada through a
reincorporation merger, (subject to the discretion of the Board of Directors to
defer or abandon such reincorporation), (vi) FOR the ratification of the
appointment of Ernst & Young LLP as the Company's independent auditors, and
(vii) in the discretion of the proxies named in the proxy card with respect to
any other matters properly brought before the Annual Meeting. Any stockholder
may revoke such stockholder's proxy at any time before it has been exercised by
attending the Annual Meeting and voting in person or by filing with the
Secretary of the Company either an instrument in writing revoking the proxy or
another duly executed proxy bearing a later date.
Only holders of the Common Stock of record at the close of business on June 20,
2002, the record date for the Annual Meeting, will be entitled to notice of and
to vote at the Annual Meeting. On that date, there were 15,999,010 shares of the
Common Stock issued and outstanding, excluding shares held by the Company in
treasury. Each share is entitled to one vote at the Annual Meeting. A plurality
of the votes of shares of the Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote on the election of directors is
required to elect directors, the affirmative vote of the majority of the shares
of Common Stock outstanding and entitled to vote thereon is required to change
the Company's name, to increase the authorized number of shares of Common Stock
and to change the Company's state of incorporation and the affirmative vote of
the majority of the shares of Common Stock present in person or represented by
proxy at the Annual Meeting and entitled to vote thereon is required for all
other matters, including the issuance of additional Common Stock and the
ratification of the appointment of the Company's independent auditors. No votes
may be taken at the Annual Meeting, other than a vote to adjourn, unless a
quorum, consisting of a majority of the shares of Common Stock outstanding as of
the record date, is present in person or represented by proxy at the Annual
Meeting. Any stockholder who attends the Annual Meeting may not withhold such
stockholder's shares from the quorum count by declaring such shares absent from
the Annual Meeting. Shares voted to abstain or to withhold as to a particular
matter, or as to which a nominee (such as a broker holding shares in street name
for a beneficial owner) has no voting authority in respect of a particular
matter, shall be deemed present for quorum purposes. Such shares, however, will
not be deemed to be voting with respect to election of directors and will not
count as votes for or against such election. Votes will be tabulated by the
Company's transfer agent subject to the supervision of persons designated by the
Board of Directors as inspectors.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors, in accordance with the By-Laws of the Company, as
amended (the "By-Laws"), has set the number of members of the Company's Board of
Directors at eight. At the Annual Meeting, eight nominees, each of whom
currently serves as a member of the Board of Directors of the Company, are to be
elected to serve on the Board until the 2003 Annual Meeting of Stockholders and
until their respective successors have been duly elected and qualified. Unless a
proxy shall specify that it is not to be voted for a nominee, it is intended
that the shares represented by each duly executed and returned proxy will be
voted in favor of the election as directors of Seymour Holtzman, David A. Levin,
Jesse Choper, Alan Cohen, Stephen M. Duff, Jeremiah P. Murphy, Jr., Joseph
Pennacchio and George T. Porter, Jr. On June 10, 2002, Stanley I. Berger
resigned from the Board of Directors of the Company. The Board does not intend
to nominate a replacement for Mr. Berger at this time, although, and, in
accordance with the Company's By-Laws, a new director could be named at a later
date following the Annual Meeting. Although management expects all nominees to
accept nomination and to serve if elected, proxies will be voted for a
substitute if a nominee is unable or unwilling to accept nomination or election.
The Board of Directors unanimously recommends that you vote FOR the
election of the eight individuals named below as directors of the Company.
Set forth below is certain information regarding the Company's nominees for
directors, including information furnished by them as to their principal
occupations and business experience for the past five years, certain
directorships held by each director, their respective ages as of June 20, 2002
and the year in which each became a director of the Company:
DIRECTOR
NAME (1) AGE POSITION SINCE
-------- --- -------- -----
Seymour Holtzman............ 66 Chairman of the Board and Director 2000
David A. Levin.............. 51 President, Chief Executive Officer and Director 2000
Jesse Choper................ 66 Director (3), (4) 1999
Alan Cohen.................. 65 Director 2000
Stephen M. Duff............. 38 Director (2) 2002
Jeremiah P. Murphy, Jr...... 50 Director (3), (5) 1999
Joseph Pennacchio........... 55 Director (3), (4), (5) 1999
George T. Porter, Jr........ 55 Director 1999
(1) Robert Patron, a director of the Company since October 1999, resigned his
position effective March 11, 2002. Stanley I. Berger, a director of the
Company since its inception, except for the period between October 8, 1999
and April 11, 2000, resigned his position effective June 10, 2002.
(2) Mr. Duff was appointed a director of the Company on May 14, 2002.
(3) Current member of the Audit Committee.
(4) Current member of the Compensation Committee.
(5) Current member of the Corporate Governance Committee.
2
Directors and Executive Officers
Seymour Holtzman was appointed a director of the Company on April 7, 2000 and
Chairman of the Board on April 11, 2000. On May 25, 2001, the Board of
Directors of the Company hired Mr. Holtzman as an executive officer of the
Company. Mr. Holtzman is Chairman and Chief Executive Officer of: Jewelcor
Management, Inc.; C.D. Peacock, Inc., a prominent Chicago, Illinois retail
jewelry establishment; and S.A. Peck & Company, a retail and mail order
jewelry company. In addition, Mr. Holtzman served as President and Chief
Executive Officer of Jewelcor Incorporated (a formerly New York Stock
Exchange listed company) from 1973 to 1988. From 1986 to 1988, Mr. Holtzman
was Chairman and Chief Executive Officer of Gruen Marketing Corporation (a
formerly American Stock Exchange listed company), which distributed watches
nationwide and operated retail factory outlets. Mr. Holtzman is currently on
the Board of Directors of Little Switzerland, Inc. and Northeast Pennsylvania
Financial Corp., the holding company for First Federal Bank, and also is
Chairman of the Board of Directors of musicmaker.com, Inc.
David A. Levin was appointed President and Chief Executive Officer of the
Company on April 10, 2000 and a director of the Company on April 11, 2000.
From 1999 to 2000, he served as the Executive Vice President of eOutlet.com.
Mr. Levin was President of Camp Coleman, a division of The Coleman Company,
from 1998 to 1999. Prior to that, Mr. Levin was President of Parade of
Shoes, a division of J. Baker, Inc., from 1995 to 1997. In addition, Mr.
Levin was President of Prestige Fragrance & Cosmetics, a division of Revlon,
Inc., from 1991 to 1995. Mr. Levin has worked in the retail industry for
almost 30 years.
Jesse Choper was elected a director of the Company on October 8, 1999. Mr.
Choper is the Earl Warren Professor of Public Law at the University of
California at Berkeley School of Law, where he has taught since 1965. From
1960 to 1961 Professor Choper was a law clerk for Supreme Court Chief Justice
Earl Warren. Mr. Choper is also on the Board of Directors of musicmaker.com,
Inc.
Alan Cohen was appointed as a director of the Company on May 2, 2000. Mr.
Cohen has been Chairman of Alco Capital Group, which specializes in corporate
restructuring, reorganizations, and other turnaround situations, since 1975.
Currently he serves as the court appointed trustee of County Seat Stores,
Inc., a nation-wide chain of specialty apparel stores. Mr. Cohen is also on
the Board of Directors of Ames Department Stores, Inc.
Stephen M. Duff was appointed as a director of the Company on May 14, 2002.
Mr. Duff has been a Senior Investment Manager at The Clark Estates, Inc.
since 1995. From 1990 to 1995, Mr. Duff was a Vice President and Portfolio
Manager at the Portfolio Group, an asset management subsidiary of The
Chemical Banking Corporation. Mr. Duff is also on the Board of Directors of
Easylink Services Corporation and The Clara Welch Thanksgiving Home, a
not-for-profit elderly care facility in Cooperstown, New York.
Jeremiah P. Murphy, Jr. was elected a director of the Company on October 8,
1999. Mr. Murphy has been the President of the Harvard Cooperative Society, a
120-year-old member based retail business, since 1992. From 1987 to 1992, Mr.
Murphy was Vice-President/General Manager of Neiman Marcus' largest and most
profitable store, North Park in Dallas, Texas.
Joseph Pennacchio was elected a director of the Company on October 8, 1999. Mr.
Pennacchio has been Chief Executive Officer of Aurafin LLC, a privately held
jewelry manufacturer and wholesaler, since 1997. From May 1994 to May 1996, Mr.
Pennacchio was President of Jan Bell Marketing, a $250 million jewelry retailer,
which is listed on the American Stock Exchange. Mr. Pennacchio was also
President of Jordan Marsh Department Stores from 1992 to 1994.
George T. Porter, Jr. was appointed a director of the Company on October 28,
1999. Mr. Porter was President of Levi's USA for Levi Strauss & Co. from 1994
to 1997. Beginning in 1974, Mr. Porter held various positions at Levi
Strauss & Co., including President of Levi's Men's Jeans Division. Mr. Porter
was also Corporate Vice President, General Manager, Nike USA from 1997 to
1998.
All directors hold office until the next Annual Meeting of Stockholders and
until their respective successors have been duly elected and qualified.
3
Executive Officers
Dennis R. Hernreich, 45, has been Senior Vice President, Chief Financial Officer
and Treasurer since September 5, 2000. Prior to joining the Company, from 1996
through 1999, Mr. Hernreich held the position of Senior Vice President and Chief
Financial Officer of Loehmann's Inc., a national retailer of women's apparel.
Most recently, from 1999 to August 2000, Mr. Hernreich was Senior Vice President
and Chief Financial Officer of Pennsylvania Fashions, Inc., a 275-store retail
outlet chain operating under the name Rue 21.
Ronald N. Batts, 52, has been President of the Levi's(R) and Dockers(R) Outlet
stores since May 21, 2002 and previously was Senior Vice President of Operations
since he joined the Company on October 22, 2001. Mr. Batts previously worked as
Senior Vice President of Retail for the Haggar Clothing Company where he
established and directed Haggar Direct, Inc., a consumer direct start-up
company. Prior to Haggar, Mr. Batts was Chief Operating Officer for Mothercare
stores, a 238 store national maternity and childrenswear specialty chain. In
addition, he has served as Chief Executive Officer of CSVA, Inc., a venture
capital funded retail acquisition company, as President of Eckerd Apparel, a
division of Jack Eckerd Corporation, and as President of two divisions of
Mercantile Stores.
Executive officers serve at the discretion of the Board of Directors.
Board of Directors and Committee Meetings
The Board of Directors met five times during the Company's fiscal year ended
February 2, 2002 ("fiscal 2002"). Messrs. Holtzman, Choper, Levin, Murphy,
Pennacchio and Porter each attended at least 75 percent of the meetings of
Board. Stanley I. Berger and Robert Patron, both of whom have resigned from the
Board, also attended at least 75 percent of the meetings of the Board during the
time they served as directors. Due to Mr. Cohen's involvement as an advisor to
Casual Male Corp., with which the Company was seeking to pursue an acquisition
transaction, Mr. Cohen excused himself from all but one of the Company's Board
of Directors meetings held during fiscal 2002. Mr. Duff was appointed a director
of the Company subsequent to February 2, 2002.
The Board of Directors has three standing committees: the Audit Committee, the
Compensation Committee and the Corporate Governance Committee, which are all
made up of independent non-employee directors.
The Audit Committee assists the Board of Directors in fulfilling its oversight
responsibilities relating to the quality and integrity of the accounting,
auditing and reporting practices of the Company. The committee meets at a
minimum quarterly with management and the Company's independent auditors to
review matters relating to the Company's financial reporting, the adequacy of
internal accounting controls and the scope and results of audit work. The Audit
Committee met five times during fiscal 2002. The present members of the
committee are Messrs. Choper, Murphy and Pennacchio.
The Compensation Committee meets periodically to review executive and employee
compensation and benefits (including stock-based compensation awards under the
Company's 1992 Stock Incentive Plan), supervises benefit plans and makes
recommendations regarding them to the Board of Directors. The Compensation
Committee met once during fiscal 2002. The present members of the committee are
Messrs. Pennacchio and Choper.
The Corporate Governance Committee is responsible for performing functions
related to governance of the Company, including, but not limited to, planning
for the succession and promotion of executive officers of the Company,
nominating individuals for election to the Board of Directors and establishing,
coordinating and maintaining the Company's corporate compliance programs. The
Corporate Governance Committee did not meet during fiscal 2002. The present
members of the committee are Messrs. Pennacchio and Murphy.
All members attended at least 75 percent of the meetings of the committees on
which they served during fiscal 2002.
The Corporate Governance Committee is responsible for reviewing the nomination
of individuals for election to the Board of Directors by stockholders of the
Company. Any stockholder wishing to nominate an individual for election to the
Board of Directors must send a letter to the Secretary of the Company stating
the name and qualifications of the proposed nominee. The letter must be received
by the Company within the time limits set by, and must in all
4
other respects comply with, such Section 4.16 of the Company's By-Laws in order
for the proposed nominee to be considered for election to the Board of
Directors. Any stockholder who has complied with the timing, informational and
other requirements set forth in Section 4.16 and who seeks to make such a
nomination, or such stockholder's representative, must be present in person at
the Annual Meeting of Stockholders of the Company at which such nominee's
election is to be considered.
Audit Committee
On December 14, 1999, the Securities and Exchange Commission (the "Commission")
adopted new rules designed to improve disclosure relating to the functioning of
audit committees and to enhance the reliability and creditability of financial
statements of public companies. In accordance with these rules, the Audit
Committee, comprised of Mr. Jesse Choper, Chairman, Mr. Joseph Pennacchio and
Mr. Jeremiah P. Murphy, Jr. approved on May 12, 2000 a written charter for the
committee. The Company is required to attach a copy of the charter every three
years, effective for all proxy statements relating to meetings of stockholders
held after December 15, 2000. A copy of the Charter of the Audit Committee was
included as Exhibit A to the Proxy Statement for the 2001 Annual Meeting of
Stockholders. Information regarding the functions performed by the Audit
Committee, its membership, and the number of meetings held during the fiscal
year, is set forth in the "Report of the Audit Committee," included in this
Proxy Statement.
Compensation Committee Interlocks and Insider Participation
Persons serving on the Compensation Committee had no relationships with the
Company in fiscal 2002 other than their relationship to the Company as directors
entitled to the receipt of standard compensation as directors and members of
certain committees of the Board and their relationship to the Company as
beneficial owners of shares of Common Stock and options exercisable for shares
of Common Stock. No person serving on the Compensation Committee or on the Board
of Directors is an executive officer of another entity for which an executive
officer of the Company serves on such entity's board of directors or
compensation committee.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's executive officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities
(collectively, the "Reporting Persons"), to file reports of ownership and
changes in ownership with the Commission. The Reporting Persons are required to
furnish the Company with copies of all Section 16(a) reports they file. Based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to the
Company during fiscal 2002 and Forms 5 and amendments thereto furnished to the
Company with respect to fiscal 2002, the Company believes that the current
Reporting Persons complied with all applicable Section 16(a) reporting
requirements and all required reports were filed in a timely manner.
5
Executive Compensation
Summary Compensation Table. The following Summary Compensation Table sets forth
certain information regarding compensation paid or accrued by the Company with
respect to the Chief Executive Officer, the Chief Financial Officer and the
President of Levi's(R) and Dockers(R) Outlet stores of the Company as of the end
of fiscal 2002 and as of February 3, 2001 ("fiscal 2001"). The table also
includes compensation for two former executives of the Company, John J. Schultz,
former Interim President and Chief Executive Officer from October 1999 through
April 2000, and Dan O. Paulus, former Senior Vice President and General
Merchandise Manager, who resigned November 14, 2000 (collectively with Messrs.
Levin, Hernreich and Batts, the "Named Executive Officers"), for fiscal 2001 and
the fiscal year ended January 29, 2000 ("fiscal 2000").
Summary Compensation Table
Name and Annual Long-Term
Compensation Compensation
Principal Position Fiscal ------------ Awards All Other
(at February 2, 2002) Year Salary Bonus Options Compensation(1)
--------------------- ---- ------ ----- ------- ---------------
Seymour Holtzman 2002 $18,616 -0- 300,000 -0-
Chairman of the Board (2)
David A. Levin 2002 $382,374 -0- 125,000 $14,484
President and Chief Executive 2001 $311,758 -0- 300,000 $449
Officer
Dennis R. Hernreich 2002 $232,398 $15,000 100,000 $6,829
Senior Vice President and 2001 $121,610 $6,250 85,000 $85,307
Chief Financial Officer and Treasurer (3)
Ronald N. Batts 2002 $86,432 $6,000 50,000 $10,403
President of the Levi's(R)and Dockers(R)
Outlet stores (4)
John J. Schultz 2001 $63,179 -0- 60,000 -0-
Former Interim President and 2000 $58,000 -0- 30,000 -0-
Chief Executive Officer (5)
Dan O. Paulus 2001 $221,928 -0- 35,000 $5,570
Former Senior Vice President and 2000 $233,700 $70,000 -0- $3,540
General Merchandise Manager (6)
(1) The amounts disclosed in this column with respect to fiscal 2002 represent:
(i) payments by the Company of insurance premiums for term life insurance
for the benefit of the executive officers (Mr. Levin $3,131, Mr. Hernreich
$411 and Mr. Batts $124); (ii) matching contributions made by the Company
for the benefit of each of the following executive officers to the
Company's retirement plan (the "401(k) Plan") established pursuant to
Section 401(k) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code") (Mr. Levin $4,482 and Mr. Hernreich $469); (iii)
car allowances (Mr. Levin $6,872 and Mr. Hernreich $2,771); and (iv)
reimbursement for relocation costs (Mr. Hernreich $3,177 and Mr. Batts
$10,279).
(2) Mr. Holtzman was hired by the Company as an executive officer and employee
of the Company on May 25, 2001. In connection with his hiring and as
compensation for his services, the Company granted to Mr. Holtzman an
option to purchase up to 300,000 shares of Common Stock. See "Employment
Agreements" for more discussion.
(3) Mr. Hernreich's employment agreement entitles him to receive minimum
monthly payments in respect of his annual bonus at the rate of $1,250 per
month. Any annual bonus that the Compensation Committee determines shall be
paid to Mr. Hernreich would be reduced by the total of all such payments
made to
6
the executive. During fiscal 2002 and fiscal 2001, Mr. Hernreich received a
total of $15,000 and $6,250, respectively.
(4) Mr. Batts has been President of Levi's(R) and Dockers(R) Outlet stores
since May 21, 2002 and was previously Senior Vice President of Operations
since October 22, 2001. Mr. Batts' employment agreement entitles him to
receive minimum monthly payments in respect of his annual bonus at the rate
of $2,000 per month for the initial term of the agreement. Any annual bonus
that the Compensation Committee determines shall be paid to Mr. Batts would
be reduced by the total of all such payments made to the executive. During
fiscal 2002, Mr. Batts received a total of $6,000, which represents
payments for the three months from when Mr. Batts started with the Company.
(5) Mr. Schultz acted in the position of interim President and Chief Executive
Officer of the Company from October 20, 1999 until April 10, 2000.
(6) Mr. Paulus served as the Company's Senior Vice President and General
Merchandise Manager from February 4, 2000 to November 14, 2000.
Option Grants Table. The following Option Grants Table sets forth certain
information as of February 2, 2002, regarding stock options granted during
fiscal 2002 by the Company to the Named Executive Officers.
Option Grants In Last Fiscal Year
Individual Grants (1) Potential Realizable
------------------------------------------------------------- Value of Assumed
Number of Percent of Annual Rates of
Shares of Common Total Options Stock Price
Stock Granted Exercise Appreciation for
Underlying to Employees in Price Per Expiration Option Term (2)
Options Granted Fiscal Year Share Date 5% 10%
-------------- ------------- -------- -------- -------------------
Seymour Holtzman 300,000 33.8% $3.88 5/25/11 $732,033 $1,855,116
David A. Levin 125,000 14.1% $3.88 5/25/11 $305,014 $772,965
Dennis R. Hernreich 100,000 11.3% $3.88 5/25/11 $244,011 $618,372
Ronald N. Batts 50,000 5.6% $2.75 10/22/11 $86,473 $219,140
(1) These options become exercisable in three equal annual installments on each
of the first three anniversaries of the date of grant.
(2) The amounts shown in these columns represent hypothetical gains that could
be achieved for the options if exercised at the end of the option term.
These gains are based on assumed rates of stock appreciation (based on a
market value on the date of the grant) of 5% and 10% compounded annually
from the date the options were granted to their expiration date. The gains
shown are net of the option exercise price, but do not include deductions
for taxes or other expenses associated with the exercise. Actual gains, if
any, on stock option exercises will depend on the future performance of the
Common Stock and the date on which the options are exercised.
7
Aggregate Option Exercises and Fiscal Year-End Option Value Table. The following
table sets forth information for the Named Executive Officers with respect to
the exercise of stock options during fiscal 2002 and the year-end value of
unexercised options.
Aggregated Option Exercises in Fiscal 2002 and Fiscal Year-End Option Values
Number and Value of Securities
Underlying Exercisable/
Unexercisable Shares (1)
-------------------------------------------
Shares Exercisable Unexercisable
Name Acquired on Value
__________________ Exercise (#) Realized ($) # of Shares Value # of shares Value
------------- ----------- --------- --------- --------- ---------
Seymour Holtzman -0- -0- 15,000 $40,938 315,000 $77,563
David A. Levin -0- -0- 100,000 $281,250 325,000 $577,500
Dennis R. Hernreich -0- -0- 28,334 $52,293 156,666 $16,582
Ronald N. Batts -0- -0- -0- -0- 50,000 $62,500
(1) Value amounts are based on the difference between the closing price of the
Company's Common Stock on February 1, 2002 ($4.00) and the exercise price.
401(k) Plan
On January 27, 1993, the Board of Directors adopted the 401(k) Plan. All
eligible employees of the Company are entitled to participate in such plan. The
401(k) Plan permits each participant to defer up to fifteen percent of such
participant's annual salary up to a maximum annual amount ($11,000 in calendar
year 2002 and $10,500 in calendar years 2001 and 2000). The Board of Directors
of the Company may determine, from fiscal year to fiscal year, whether and to
what extent the Company will contribute to the 401(k) Plan by matching
contributions made to such plan by eligible employees. During fiscal 2002, the
matching contribution by the Company continued to be 50% of contributions by
eligible employees up to a maximum of six percent of salary.
Key Man Insurance
In fiscal 2001, the Company obtained a key man life insurance policy in the
amount of $2,000,000 on the life of Mr. Levin. In fiscal 2002, the Company
obtained a key man life insurance policy in the amount of $2,000,000 on the
life of Mr. Hernreich.
Employment Agreements
The Company entered into an employment agreement, effective as of March 31,
2000, with David A. Levin for a two-year term ending April 10, 2002. Mr. Levin's
agreement was extended on April 10, 2001 by unanimous consent of the Board of
Directors for an additional two-year term to end on April 10, 2004.
As of September 4, 2000, the Company entered into an employment agreement with
Dennis R. Hernreich for a one-year term ending September 1, 2001. Mr.
Hernreich's agreement was also extended as of April 25, 2001 by unanimous
consent of the Board of Directors for an additional one-year term to end on
September 4, 2002.
As of October 22, 2001, the Company entered into an employment agreement with
Ronald N. Batts for a one-year term ending October 22, 2002.
All three of these employment agreements with Messrs. Levin, Hernreich and Batts
(collectively, the "Employment Agreements") automatically renew for successive
one-year terms unless either party notifies the other to the contrary at least
90 days, or 60 days in the case of Mr. Batts, prior to expiration of the then
current term.
8
The Employment Agreements require each executive officer to devote substantially
all of the executive officer's time and attention to the business of the Company
as necessary to fulfill his respective duties. The Employment Agreements
originally provided that Messrs. Levin, Hernreich and Batts would be paid base
salaries at annual rates of $375,000, $225,000 and $240,000, respectively. The
Employment Agreements with Messrs. Hernreich and Batts also contained a
guaranteed discretionary prepayment of bonus in the annual amount of $15,000 and
$24,000, respectively, which prepayments were eliminated in the case of Mr.
Hernreich as of January 31, 2002. The Employment Agreements provide that the
annual rate of base salary for the renewal term may be increased by the
Compensation Committee of the Board of Directors in its sole discretion. The
Employment Agreements also provide for the payment of bonuses in such amounts as
may be determined by the Compensation Committee. While Messrs. Levin, Hernreich
and Batts are employed by the Company, the Company will provide each executive
an automobile allowance in the amount of $600 per month. Each executive is
entitled to vacation and to participate in and receive any other benefits
customarily provided by the Company to its senior executives (including any
bonus, retirement, short and long-term disability insurance, major medical
insurance and group life insurance plans in accordance with the terms of such
plans), including stock option plans, all as determined from time to time by the
Compensation Committee.
The Employment Agreements for Messrs. Hernreich and Batts also provide for
reimbursement of expenses associated with their relocation to the Boston
area. In accordance with their agreements, Messrs. Hernreich and Batts are
entitled to receive a total amount of $85,000 for relocation costs. Mr.
Hernreich received $85,000 less applicable taxes in fiscal 2001. In
addition, Messrs. Hernreich and Batts are entitled to receive reimbursement
for reasonable expenses associated with their temporary living arrangements.
Mr. Levin is entitled to receive an annual bonus of up to 50%, Mr. Hernreich is
entitled to receive an annual bonus of up to 45%, and Mr. Batts is entitled to
receive an annual bonus of up to 40% of their respective annual base salaries
depending on the performance of the Company. The Compensation Committee of the
Board of Directors shall determine, in its sole discretion, the amount of bonus
to be paid to the executive officers. Mr. Levin is entitled to receive an
additional annual bonus of 10% if the Company meets its annual projections for
its fiscal budget plan, as approved by the Board of Directors. Any bonus payable
to Mr. Batts and, prior to fiscal 2003, Mr. Hernreich, would be first subject to
reduction by the amount of the prepaid discretionary bonuses provided for in
their Employment Agreements, as discussed above. No bonuses were paid, above the
$15,000 paid to Mr. Hernreich and the $6,000 paid to Mr. Batts, in fiscal 2002.
On January 31, 2002, the Compensation Committee approved bonuses for Messrs.
Levin and Hernreich for fiscal 2002 in the amount of $70,000 and $45,000,
respectively. These bonuses were paid in fiscal 2003; however, the amount then
paid to Mr. Hernreich was $30,000, which reflected the $15,000 prepayment paid
in fiscal 2002.
As of May 14, 2002, the Company acquired substantially all of the assets and
assumed certain operating liabilities of Casual Male Corp. and certain of its
subsidiaries ("Casual Male"). In connection with that acquisition, the
Compensation Committee approved increases in the base salaries of Messrs. Levin
and Hernreich to $500,000 and $325,000, respectively. In addition, in connection
with the Company's acquisition of Casual Male, Messrs. Levin and Hernreich each
received an additional bonus of $200,000. Mr. Batts' base salary was increased
to $275,000 and includes a guaranteed discretionary prepayment of bonus of
$25,000. On May 1, 2002, each of Messrs. Levin and Hernreich was granted options
to acquire 75,000 shares of Common Stock, subject to completion of the Casual
Male acquisition, at an exercise price of $4.58 per share, equal to the closing
price of the Common Stock on that date, which options vest ratably over a three
year period.
The Employment Agreements provide that in the event the executive officer's
employment is terminated by the Company at any time for any reason other than
"justifiable cause" (as defined in the Employment Agreements), disability or
death, the Company is required to pay executive the lesser of (1) the base
salary for the remaining term of the related Employment Agreement or (2) an
amount equal to one half of the executive's annual salary. If the remaining term
of the related Employment Agreement on the date of termination is more than six
months, the executive must make a good faith effort to find new employment and
mitigate damages, costs and expenses to the Company. If he is terminated without
justifiable cause within one year after a Change of Control of the Company (as
defined in the Employment Agreements) has occurred, the executive shall receive
a lump sum payment in the amount of (1) the base salary for the remaining term
of the related Employment Agreement or (2) an amount equal to the current base
salary for one year. The Employment Agreements contain confidentiality
provisions pursuant to
9
which each executive agrees not to disclose confidential information regarding
the Company. The Employment Agreements also contain covenants pursuant to which
each executive agrees, during the term of his employment and for a one-year
period following the termination of his employment, not to have any connection
with any business which competes with the business of the Company.
For purposes of the Employment Agreements, a "Change in Control of the Company"
shall mean (i) any sale of all or substantially all of the assets of the Company
to any person or group of related persons within the meaning of Section 13(d) of
the Exchange Act ("Group"), (ii) any acquisition by any person or Group of
shares of capital stock of the Company representing more than 50% of the
aggregate voting power of the outstanding capital stock of the Company entitled
under ordinary circumstances to elect the directors of the Company ("Voting
Stock") or (iii) any replacement of a majority of the Board of Directors of the
Company over the twelve-month period following the acquisition of shares of the
capital stock of the Company representing more than 10% of the Voting Stock by
any person or Group which does not currently own more than 10% of such Voting
Stock (unless such replacement shall have been approved by the vote of the
majority of the directors then in office who either were members of the Board of
Directors at the beginning of such twelve-month period or whose elections as
directors were previously so approved).
On May 25, 2001, the Board of Directors determined to hire Seymour Holtzman, who
had served as the Company's non-employee Chairman of the Board, as an executive
officer of the Company. In connection with his hiring, the Board awarded Mr.
Holtzman an option to purchase an aggregate of 300,000 shares of the Company's
Common Stock at an exercise price of $3.88 per share, equal to the closing price
of the Common Stock on that date. The option vests at a rate of 100,000 shares
per year over three years and expires ten years from date of grant. The option
represents the principal portion of Mr. Holtzman's compensation as an employee
of the Company to date. Mr. Holtzman received $18,616 in other compensation as
an employee during fiscal 2002, and received $3,000 in directors' fees with
respect to service as a non-employee director prior to May 25, 2001. On May 14,
2002, in connection with the Company's acquisition of Casual Male, Mr. Holtzman
received a bonus of $200,000. On May 1, 2002, Mr. Holtzman was granted options
to acquire 200,000 shares of Common Stock, subject to completion of the Casual
Male acquisition, at an exercise price of $4.58 per share, equal to the closing
price of the Common Stock on that date. Mr. Holtzman is otherwise subject to an
employment agreement on terms substantially similar to those of the Employment
Agreements described above.
10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information with respect to persons known
to the Company to be the beneficial owners of more than five percent of the
issued and outstanding shares of Common Stock as of May 17, 2002. This
information has been updated from the information provided in the Company's
Annual Report on Form 10-K filed with the Commission on May 1, 2002.
This information includes shares of Common Stock issued in a private placement
in connection with financing for the Company's May 2002 acquisition of
substantially all of the assets and the assumption of certain operating
liabilities of Casual Male (the "Casual Male Acquisition"). The information does
not include shares of the Company's Series B Convertible Preferred Stock
("Series B Preferred Stock"), which are non-voting and are currently not
convertible into shares of Common Stock, and certain warrants to acquire shares
of Common Stock, as to which the issuance of Common Stock upon exercise of such
warrants is subject to stockholder approval (the "Conditional Warrants"), all of
which were issued in private placements in connection with financing for the
Casual Male Acquisition. However, the Series B Preferred Stock will be
automatically converted into shares of Common Stock and the Conditional Warrants
will become exercisable for shares of Common Stock upon stockholders' approval
of the issuance of such Common Stock. See "Proposal 4 - Issuance of Additional
Common Stock" for more information.
The Company is informed that, except as indicated, each person has sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by such person, subject to community property laws where
applicable.
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned of Class (1)
- ------------------------------------ ------------------ ------------
Jewelcor Management, Inc. 3,212,882 (2) 19.64%
100 N. Wilkes Barre Blvd.
Wilkes Barre, Pennsylvania 18702
Putnam Investments 1,379,300 (3) 8.64%
One Post Office Square
Boston, Massachusetts 02109
Franklin Resources, Inc. 1,030,000 (4) 6.45%
One Franklin Parkway
San Mateo, California 94403
Stanley I. Berger 1,019,002 (5) 6.37%
100 Essex Road
Chestnut Hill, Massachusetts 02467
(1) As of May 17, 2002, 15,961,343 shares of Common Stock were issued and
outstanding.
(2) The Company has received Amendment No. 41 to Schedule 13D dated May 24,
2002, stating that Jewelcor Management, Inc. ("JMI") was the beneficial
owner of the number of shares of Common Stock set forth opposite its name
in the table. Includes options to acquire 400,000 shares of Common Stock.
Excludes 137,765 shares, including options to acquire 125,000 shares, owned
individually by Seymour Holtzman and 30,000 shares owned by Mr. Holtzman's
grandchildren. Includes 60,659 shares of Common Stock issued to JMI
pursuant to a consulting agreement with the Company, which agreement was
extended effective April 29, 2002. Excludes an aggregate of 549,559 shares
of Common Stock subject to Conditional Warrants issued to JMI which will
become exercisable upon stockholder approval thereof pursuant to Proposal
4, but which are not currently exercisable.
11
(3) The Company understands that Putnam Investments was the beneficial owner of
the number of shares of Common Stock set forth opposite its name in the
table. These shares were acquired in a private placement in connection with
financing for the Company's acquisition of Casual Male.
(4) The Company has received a Schedule 13G dated February 14, 2002, stating
that Franklin Resources, Inc. was the beneficial owner of the number of
shares of Common Stock set forth opposite its name in the table.
(5) Includes options to acquire 30,000 shares of Common Stock exercisable
within 60 days. Also includes options to acquire an additional 15,000
shares of Common Stock which became exercisable upon Mr. Berger's
resignation from the Board of Directors on June 10, 2002.
Security Ownership of Management
The following table sets forth certain information as of May 17, 2002, with
respect to the directors of the Company, the Named Executive Officers and the
directors and the Named Executive Officers of the Company as a group. This
information has been updated from the information provided in the Company's
Annual Report on Form 10-K filed with the Commission on May 1, 2002. The
information does not include shares of the Series B Preferred Stock or the
Conditional Warrants. The Series B Preferred Stock will be automatically
converted into shares of Common Stock and the Conditional Warrants will become
exercisable for shares of Common Stock only if the stockholders approve the
issuance of such Common Stock. See "Proposal 4 - Issuance of Additional Common
Stock" for more information. Except as indicated, each person has sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by such person, subject to community property laws where
applicable.
Number of Shares Percent
Name and Title Beneficially Owned of Class (1)
- -------------- ------------------ ------------
Seymour Holtzman 3,380,647 (2) 20.51%
Chairman of the Board and Director
David A. Levin 457,167 (3) 2.82%
Chief Executive Officer, President and Director
Dennis R. Hernreich 84,268 (4) *
Chief Financial Officer, Senior Vice President and Treasurer
Ronald N. Batts -- *
President of Levi's(R)and Dockers(R)Outlet stores
Stanley I. Berger, Director 1,019,002 (5) 6.37%
Jesse Choper, Director 73,016 (6) *
Alan Cohen, Director 47,545 (6) *
Stephen M. Duff, Director 5,000 (7) *
Jeremiah P. Murphy, Jr., Director 69,326 (8) *
Joseph Pennacchio, Director 66,212 (9) *
George T. Porter, Jr., Director 87,906 (10) *
Directors and Named Executive Officers as a group (11 persons)(12) 5,290,089 (2),(11) 31.18%
- -----------------
* Less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options held by that person that are currently exercisable, or
that become exercisable within 60 days, are deemed outstanding. Such
shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of
12
any other person. Percentage ownership is based on 15,961,343 shares of
Common Stock outstanding as of May 17, 2002, plus securities 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
3,380,647 shares of Common Stock, which includes 3,212,882 shares
(including options to acquire 400,000 shares) beneficially owned by JMI, of
which Mr. Holtzman is the Chairman, President and Chief Executive Officer
and indirectly, with his wife, the primary shareholder; 137,765 shares
owned individually, which includes 125,000 shares subject to stock options
exercisable within 60 days; and 30,000 shares owned by Mr. Holtzman's
grandchildren as to which he disclaims beneficial ownership. Includes
60,659 shares of Common Stock issued to JMI pursuant to a consulting
agreement with the Company, which agreement was extended effective April
29, 2002. Excludes an aggregate of 549,559 shares of Common Stock subject
to Conditional Warrants issued to JMI which will become exercisable upon
stockholder approval thereof pursuant to Proposal 4, but which are not
currently exercisable.
(3) Includes 241,667 shares subject to stock options exercisable within 60
days. Excludes 405 shares of Series B Preferred Stock, which will be
automatically converted into 40,500 shares of Common Stock upon stockholder
approval thereof pursuant to Proposal 4, but which are not currently
convertible.
(4) Includes 61,668 shares subject to stock options exercisable within 60 days.
Excludes 250 shares of Series B Preferred Stock, which will be
automatically converted into 25,000 shares of Common Stock upon stockholder
approval thereof pursuant to Proposal 4, but which are not currently
convertible.
(5) Includes 30,000 shares subject to stock options exercisable within 60 days.
Also includes options to acquire an additional 15,000 shares of Common
Stock which became exercisable upon Mr. Berger's resignation from the Board
of Directors on June 10, 2002.
(6) Includes 30,000 shares subject to stock options exercisable within 60 days.
(7) Includes 5,000 shares subject to stock options exercisable within 60 days.
(8) Includes 30,000 shares subject to stock options exercisable within 60 days.
Excludes 250 shares of Series B Preferred Stock, which will be
automatically converted into 25,000 shares of Common Stock upon stockholder
approval thereof pursuant to Proposal 4, but which are currently not
currently convertible.
(9) Includes 30,000 shares subject to stock options exercisable within 60 days.
Excludes 500 shares of Series B Preferred Stock, which will be
automatically converted into 50,000 shares of Common Stock upon stockholder
approval thereof pursuant to Proposal 4, but which are not currently
convertible.
(10) Includes 60,000 shares subject to stock options exercisable within 60 days.
Excludes 250 shares of Series B Preferred Stock, which will be
automatically converted into 25,000 shares of Common Stock upon stockholder
approval thereof pursuant to Proposal 4, but which are not currently
convertible.
(11) Includes 1,058,335 shares subject to stock options exercisable within 60
days. Excludes 1,655 shares of Series B Preferred Stock, which will be
automatically converted into 165,500 shares of Common Stock upon
stockholder approval thereof pursuant to Proposal 4, but which are
currently not convertible.
(12) Excludes 560,790 shares owned by Robert Patron, who ceased to be a director
of the Company during March 2002.
13
Director Compensation
During fiscal 2002, non-employee directors of the Company were paid $3,000 plus
expenses for each meeting of the Board of Directors in which they participated.
During fiscal 2002, non-employee directors of the Company were paid, in addition
to reimbursement of expenses, for meetings of committees of the Board in which
they participated as follows: $3,000 for each Compensation Committee meeting;
$1,500 for each Audit Committee meeting; and $1,500 for each Corporate
Governance Committee meeting. Directors receive $500 for telephonic meetings of
the Board of Directors and telephonic committee meetings. During fiscal 2002,
non-employee directors of the Company were also eligible to participate in the
Company's 1992 Stock Incentive Plan, as amended (the "1992 Stock Incentive
Plan"). Prior to January 20, 2000, under the provisions of the 1992 Stock
Incentive Plan, each non-employee director of the Company who was elected by the
stockholders to the Board would automatically be granted, upon such election, a
stock option to purchase 10,000 shares of Common Stock at the fair market value
of Common Stock on the date of grant. Each non-employee director of the Company
who was re-elected by the stockholders to the Board would be granted, upon such
re-election, a stock option to purchase 3,000 shares of Common Stock at the then
fair market value of Common Stock. On January 20, 2000, the Board of Directors
amended the plan to provide for the grant to each non-employee director of the
Company a stock option to purchase 15,000 shares of Common Stock upon such
director's election and a stock option to purchase 15,000 shares of Common Stock
upon such director's re-election. On June 26, 2001, the plan was further amended
by the Board of Directors to provide that each of such stock options would
become exercisable in three equal annual installments commencing with the date
of grant. All options are granted with a term of ten years.
The 1992 Stock Incentive Plan also provides that non-employee directors of the
Company may elect to receive all or a portion of their directors' fees, on a
current or deferred basis, in shares of Common Stock that are free of any
restrictions under the 1992 Stock Incentive Plan by entering into an irrevocable
agreement with the Company in advance of the beginning of a calendar year.
During fiscal 2002, all non-employee directors elected to receive their
directors' fee in Common Stock.
14
COMPENSATION COMMITTEE REPORT
Decisions concerning the compensation of the Company's executive officers
generally are made by the two-member Compensation Committee of the Board of
Directors. Each member of the Compensation Committee is a non-employee director
of the Company. This Compensation Committee Report summarizes the Company's
executive officer compensation practices and policies for fiscal year 2002. The
Compensation Committee consists of two members, Joseph Pennacchio and Jesse
Choper.
Compensation Policies
The Company's compensation policies are designed to link executive officer
compensation to the annual and long-term performance of the Company and to
provide industry-competitive compensation for such officers. The Company's
executive officer compensation consists of two key components: (1) an annual
component, consisting of annual base salary and annual incentive bonus, if any,
and (2) a long-term component consisting of the grant of stock options.
The policies with respect to each of these elements, as well as the bases for
determining the compensation of the Company's executives, are described below.
(1) Annual Component: Base Salary and Annual Incentive Bonus
The Compensation Committee reviews all base salaries for executive officers and
establishes them by reviewing the performance of each executive officer,
evaluating the responsibilities of each executive officer's position and
comparing the executive officers' salaries with salaries of executive officers
of other companies in the specialty retail apparel industry (the "Industry").
The Compensation Committee defines the Industry as public companies in the
specialty retail apparel business with similar sales and market capitalization.
Annual base salary adjustments are influenced by the Company's performance in
the previous fiscal year and the individual's contribution to that performance,
the individual's performance, promotions of the individual that may have
occurred during the fiscal year, and any increases in the individual's level of
responsibility (which is measured by various factors including, but not limited
to, the number of departments and employees for which the executive officer is
responsible). Under the Company's employment agreements with Messrs. Levin,
Hernreich and Batts, compensation for such executive officers had a base salary
element and annual cost of living increases for fiscal 2002. As discussed
previously, on May 14, 2002, the Compensation Committee increased the base
salaries of Messrs. Levin, Hernreich and Batts.
(2) Long-Term Component: Stock Options
To align executive officers' interests more closely with the interests of the
stockholders of the Company, the Company's long-term compensation program
emphasizes the grant of stock options exercisable for shares of Common Stock.
The amount of such awards is determined one or more times in each fiscal year by
the Compensation Committee. Stock options normally are granted to executive
officers in amounts based largely upon the size of stock-based awards of other
companies in the Industry for comparable positions as well as the availability
of shares of Common Stock under the 1992 Stock Incentive Plan. The Compensation
Committee may take into account other factors in determining the size of stock
option grants, including, but not limited to, the need to attract and retain
individuals the Compensation Committee perceives to be valuable to the Company.
In addition to the foregoing, executive officers receive benefits under certain
group health, long-term disability and life insurance plans, which are generally
available to the Company's eligible employees. After one year of service with
the Company, the executive officers are eligible to participate in the 401(k)
Plan. Benefits under these plans are not tied to corporate performance.
The Commission requires that this Compensation Committee Report comment upon the
Compensation Committee's policy with respect to Section 162(m) of the Internal
Revenue Code, which limits the Company's tax deduction with regard to
compensation in excess of $1 million paid to the chief executive officer and the
four most highly compensated executive officers (other than the chief executive
officer) at the end of any fiscal year unless the compensation qualifies as
"performance-based compensation." The Compensation Committee's policy with
respect
15
to Section 162(m) is to make every reasonable effort to cause compensation to be
deductible by the Company while simultaneously providing executive officers of
the Company with appropriate rewards for their performance.
THE COMPENSATION COMMITTEE
Joseph Pennacchio
Jesse Choper
16
PROPOSAL 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE NAME
OF THE COMPANY TO "CASUAL MALE RETAIL GROUP, INC."
The Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), currently provides that the Company's name is
"Designs, Inc." The Company's business has recently undergone a significant
expansion and transformation through its recent acquisition of substantially all
of the assets of Casual Male in the Casual Male Acquisition. In an effort to
more clearly identify the Company going forward, the Company's Board of
Directors is recommending to its stockholders that the Company change its name
to "Casual Male Retail Group, Inc."
As of May 14, 2002, pursuant to an Asset Purchase Agreement entered into as of
May 2, 2002, by and among the Company and Casual Male, the Company completed the
acquisition of substantially all of the assets of Casual Male for a purchase
price of approximately $170 million, plus the assumption of certain operating
liabilities. The Company was selected as the highest and best bidder for the
Casual Male assets at a bankruptcy court ordered auction commencing on May 1,
2002 and concluding on May 2, 2002 and the acquisition of Casual Male by the
Company was approved by the court on May 7, 2002.
Casual Male is a leading independent specialty retailer of fashion, casual and
dress apparel for big and tall men, with annual sales that exceed $350 million.
Casual Male sells its branded merchandise through various channels of
distribution including full price and outlet retail stores, direct mail and the
internet. Casual Male had been operating under the protection of the U.S.
Bankruptcy Court since May 2001.
In view of the significance of the Casual Male Acquisition to the growth and
future identity of the Company, the Board of Directors is recommending to its
stockholders that the Certificate of Incorporation be amended to change the
Company's name to "Casual Male Retail Group, Inc." The Company believes that
Casual Male will be a significant future contributor to the Company's overall
business and that it will be important to align the customer and investor
identification of the Company with the Casual Male store concept.
If stockholder approval is obtained for the change of the Company's name, then
the Company intends to change the symbol (currently "DESI") under which the
Common Stock trades on the Nasdaq National Market.
If stockholder approval is obtained for the change of the Company's name and for
"Proposal 5--Reincorporation of the Company to Change the Company's State of
Incorporation from Delaware to Nevada" and the Company proceeds with the
reincorporation, then the Company intends to effect the name change in
connection with the Company's reincorporation.
The Board of Directors unanimously recommends that you vote FOR the amendment
to the Company's Certificate of Incorporation to change the name of the
Company to "Casual Male Retail Group, Inc."
17
PROPOSAL 3
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Company's Board of Directors has unanimously approved an amendment to the
Certificate of Incorporation which would increase the total authorized number of
shares of Common Stock from 50,000,000 shares to 75,000,000 shares, thereby
increasing the total authorized capital stock of the Company from 51,000,000
shares to 76,000,000 shares.
The amendment to the Certificate of Incorporation will increase the authorized
Common Stock by amending and restating the first sentence of Article FOURTH of
the Certificate of Incorporation so that, as amended and restated, it will read
as follows:
"The total number of shares of capital stock which the Corporation shall
have the authority to issue shall be 75,000,000 shares of Common Stock
having a par value of $.01 per share, amounting to an aggregate par value
of $750,000, and 1,000,000 shares of Preferred Stock having a par value of
$.01 per share, amounting to an aggregate par value of $10,000."
As of June 20, 2002, the authorized capital stock of the Company consisted of
(a) 50,000,000 shares of Common Stock and (b) 1,000,000 shares of preferred
stock of the Company, of which 300,000 were previously designated as Series A
Junior Participating Cumulative Preferred Stock ("Series A Preferred Stock") and
200,000 were previously designated as Series B Preferred Stock. As of June 20,
2002:
o 15,999,010 shares of Common Stock were issued and outstanding,
o no shares of Series A Preferred Stock were issued and outstanding,
o 180,162 shares of Series B Preferred Stock were issued and
outstanding, which shares will be converted into an aggregate of
18,016,200 shares of Common Stock only if stockholder approval of the
Proposed Issuance (as defined in Proposal 4 below) pursuant to
"Proposal 4 - Issuance of Additional Common Stock" below is obtained,
o 3,039,769 shares of Common Stock and no shares of preferred stock of
the Company were held in the treasury of the Company,
o 1,556,086 shares of Common Stock were reserved for issuance upon
exercise of issued and outstanding options and 2,276,017 shares were
reserved for future issuance of options under the Company's 1992 Stock
Incentive Plan,
o 1,140,000 shares of Common Stock were reserved for future issuance
upon exercise of other outstanding options, and
o 2,603,971 shares of Common Stock were reserved for future issuance
upon exercise of the Conditional Warrants, which warrants will become
exercisable only upon stockholder approval thereof pursuant to
Proposal 4, and 787,500 shares of Common Stock were reserved for
future issuance upon exercise of the Non-conditional Warrants (as
defined in Proposal 4 below).
Therefore, as of June 20, 2002, an aggregate of 45,418,553 shares of Common
Stock, out of 50,000,000 shares authorized, were issued or reserved for future
issuance.
The increase in the authorized shares of Common Stock is intended to provide the
Company's Board of Directors with authority, without further action of the
stockholders, to issue the additional shares of Common Stock from time to time
as the Board deems necessary. The Board of Directors believes it is desirable to
have the ability to issue such additional shares of Common Stock from time to
time to provide flexibility in addressing the financing needs
18
of the Company and for general corporate purposes. Potential uses of the
additional authorized shares include equity financings, stock dividends or
distributions, acquisitions of businesses, and issuance of Common Stock upon the
exercise of warrants, options and other convertible securities of the Company.
The Company does not have any current plans or proposals to issue any portion of
the additional shares of Common Stock, other than potential issuances of Common
Stock in connection with the conversion of the Series B Preferred Stock or the
exercise of the Conditional Warrants and the Non-conditional Warrants issued in
recent private placements.
The increase in the authorized number of shares of Common Stock could have
certain beneficial effects on the Company's principal stockholders depending
upon the exact nature and circumstances of any actual issuances of authorized
but unissued shares. The increase could deter takeovers, in that additional
shares could be issued (within the limits imposed by applicable law) in one or
more transactions that could make a change in control or takeover of the Company
more difficult. For example, additional shares could be issued by the Company so
as to dilute the stock ownership or voting rights of persons seeking to obtain
control of the Company. Similarly, the issuance of additional shares to certain
persons allied with the Company's management could have the effect of making it
more difficult to remove the Company's current management by diluting the stock
ownership or voting rights of persons seeking to cause such removal.
If stockholder approval is obtained for the increase of the authorized number of
shares of Common Stock and for "Proposal 5--Reincorporation of the Company to
Change the Company's State of Incorporation from Delaware to Nevada" and the
Company proceeds with the reincorporation, then the Company intends to increase
the authorized number of shares of Designs - Nevada Common Stock (as defined in
Proposal 5 below) in connection with the reincorporation to reflect the increase
of the authorized number of shares of Common Stock.
The Board of Directors unanimously recommends that you vote FOR the amendment to
the Company's Certificate of Incorporation to increase the authorized
number of shares of Common Stock.
19
PROPOSAL 4
ISSUANCE OF ADDITIONAL COMMON STOCK
The Company's Board of Directors has unanimously approved the issuance by the
Company of up to 20,620,171 shares of Common Stock, subject to adjustment
pursuant to anti-dilution provisions, upon the conversion of the Series B
Preferred Stock and the exercise of the Conditional Warrants. We refer to this
as the "Proposed Issuance".
The Series B Preferred Stock and the Conditional Warrants were issued in private
placement transactions in connection with financing for the Casual Male
Acquisition. During the same period, the Company issued shares of Common Stock
and certain warrants as to which the issuance of Common Stock upon exercise of
such warrants is not subject to stockholder approval (the "Non-conditional
Warrants").
Stockholder approval of the Proposed Issuance is not required either under
governing Delaware law or under the Certificate of Incorporation or By-Laws of
the Company. The Company is seeking stockholder approval pursuant to agreements
with the holders of the Series B Preferred Stock and the Conditional Warrants
and to take account of certain rules of the Nasdaq Stock Market. Pursuant to
these rules, an issuer whose securities are listed on Nasdaq may be required to
obtain the approval of a majority of stockholders voting on the proposal in
person or by proxy if the issuer intends to issue an aggregate number of shares
which exceeds 20% of the common stock outstanding prior to such issuance,
subject to certain exceptions. The number of shares of Common Stock and the
number of shares of Common Stock underlying the Non-conditional Warrants issued
in connection with financing for the Casual Male Acquisition did not exceed 20%
of the Common Stock outstanding as of the date such securities were issued. If
the Proposed Issuance is approved, however, then the aggregate issuance of
Common Stock and warrants to purchase Common Stock from May 1, 2002 to the time
of the Proposed Issuance will exceed 20% of the Common Stock outstanding prior
to May 1, 2002. Therefore, the Board of Directors determined to seek stockholder
approval of the Proposed Issuance.
In connection with the private placements, the Company agreed with the holders
of Series B Preferred Stock to file a Registration Statement with the Commission
with respect to the shares of Common Stock that would be issued upon conversion,
after stockholder approval is obtained for the Proposed Issuance and also
agreed, if the Proposed Issuance is approved, to register the shares of Common
Stock subject to issuance upon exercise of the Conditional Warrants and the
Non-conditional Warrants upon irrevocable notice of exercise by the holders. If
the Proposed Issuance is approved, then up to 20,620,171 additional shares of
Common Stock (subject to anti-dilution adjustment) will be registered or subject
to registration.
If stockholder approval for the Proposed Issuance is not received, then the
Series B Preferred Stock will remain outstanding. The terms of the Series B
Preferred Stock obligate the Company to pay to holders of the Series B Preferred
Stock cumulative dividends at a rate of 15% per annum, which rate will increase
to 20% per annum if the Company fails to obtain stockholder approval of the
issuance of the required number of shares of Common Stock within 150 days from
the date of issuance of the Series B Preferred Stock. For the complete terms of
the Series B Preferred Stock, please see the Certificate of Designation for the
Series B Preferred Stock attached as an exhibit to the Current Report on Form
8-K filed by the Company on May 23, 2002, which is incorporated herein by
reference.
Upon obtaining stockholder approval of the Proposed Issuance, each of the
180,162 shares of Series B Preferred Stock will be automatically converted into
100 shares of Common Stock, subject to adjustment in accordance with the terms
of the Certificate of Designation, and the Conditional Warrants will become
exercisable for a total of 2,603,971 shares of Common Stock, subject to
adjustment pursuant to anti-dilution provisions.
The terms of the Conditional Warrants do not specify the consequences if the
Proposed Issuance is not approved. Although the Board of Directors does not
intend to proceed with the Proposed Issuance if stockholder approval is not
obtained, there is no assurance that the holders of the Conditional Warrants
might not attempt to effect exercisability of the Conditional Warrants or obtain
an equivalent economic benefit through other means.
20
Although the Company is not a party to any such arrangements, the Company
understands that ten holders of approximately 7,330,280 shares of Common Stock
agreed with the purchasers of the Series B Preferred Stock, at the time of their
investment, to vote in favor of the Proposed Issuance.
If a majority of stockholders present in person or by proxy at the Annual
Meeting vote in favor of the Proposed Issuance, then an aggregate of 20,620,171
shares of Common Stock, subject to adjustment pursuant to anti-dilution
provisions, could be issued upon conversion of the Series B Preferred Stock and
upon exercise of all of the Conditional Warrants.
The Board of Directors unanimously recommends that you vote FOR the issuance of
Common Stock upon conversion of the Series B Preferred Stock and exercise
of the Conditional Warrants.
21
PROPOSAL 5
REINCORPORATION OF THE COMPANY TO CHANGE THE COMPANY'S STATE OF INCORPORATION
FROM DELAWARE TO NEVADA
The Company's Board of Directors has unanimously approved a proposal (the
"Reincorporation Proposal") to change the Company's state of incorporation from
Delaware to Nevada, by means of a merger (the "Merger") of the Company with and
into Designs, Inc., a wholly owned subsidiary of the Company to be formed in
Nevada ("Designs - Nevada"), which will be the surviving corporation in the
Merger.
The following discussion summarizes certain aspects of the Reincorporation
Proposal, including certain material differences between Delaware corporate law
and Nevada corporate law. This summary is not intended to be a complete
description of the Reincorporation Proposal or the differences between
stockholders' rights under Delaware corporate law and Nevada corporate law, and
is qualified in its entirety by reference to the following documents:
o Form of Agreement and Plan of Merger between the Company and Designs -
Nevada (the "Merger Agreement") attached hereto as Exhibit A;
o Form of Articles of Incorporation of Designs - Nevada (the "New
Charter") attached hereto as Exhibit B; and
o Form of By-laws of Designs - Nevada (the "New By-laws") attached
hereto as Exhibit C.
Approval of the Reincorporation Proposal requires the affirmative vote of a
majority of the issued and outstanding shares of Common Stock entitled to vote
thereon. The approval of the Reincorporation Proposal by the Company's
stockholders will constitute an adoption of the Merger Agreement, the New
Charter and the New By-laws and will affect certain rights of the stockholders.
Stockholders are urged to read carefully this Proxy Statement and the exhibits
attached hereto in their entirety before voting on the Reincorporation Proposal.
Principal Reasons for the Reincorporation
The Board of Directors of the Company believes that the best interests of the
Company and its stockholders will be served by changing the Company's state of
incorporation from Delaware to Nevada. The principal reason for the
reincorporation is that the franchise tax and related fees that the Company pays
as a Delaware corporation are significantly higher than the comparable fees for
a Nevada corporation.
Principal Features of the Reincorporation Proposal
At the Effective Date of the Merger (as defined in the Merger Agreement), the
separate existence of the Company will cease and Designs - Nevada, as the
surviving corporation, will succeed to all business, properties, assets and
liabilities of the Company. Upon the Effective Date of the Merger, (i) each
outstanding share of Common Stock of the Company immediately prior to the
Effective Date will be converted into one (1) share of common stock, par value
$0.01 per share, of Designs - Nevada (the "Designs - Nevada Common Stock"); and
(ii) each outstanding option, warrant or other security convertible into or
exercisable for shares of the Company's Common Stock will be automatically
assumed by Designs - Nevada and will be converted into the right to acquire an
equal number of shares of Designs - Nevada Common Stock, under the same terms
and conditions as the original options, warrants and convertible securities of
the Company. If stockholder approval is obtained for "Proposal 4--Issuance of
Additional Common Stock," then no shares of Series B Preferred Stock of the
Company will remain outstanding on the Effective Date of the Merger. No shares
of Series A Preferred Stock of the Company are outstanding.
22
No action need be taken by the Company's stockholders to exchange their stock
certificates as a result of the Merger. Certificates for shares of the Company's
Common Stock will automatically represent an equal number of shares of Designs -
Nevada Common Stock.
Approval of the Reincorporation Proposal will effect a change in the legal
domicile of the Company and certain other changes of a legal nature, as
described in this Proxy Statement. Reincorporation of the Company will not, in
and of itself, result in any change in the business, management, location of the
principal executive offices, assets, liabilities or stockholders' equity of the
Company. Reincorporation of the Company will not change the state of
incorporation of any subsidiary of the Company. The number of directors
comprising the Board of Directors of Designs - Nevada will be eight initially,
each of whom is currently a director of the Company, and each of the executive
officers of the Company will serve as executive officers of Designs - Nevada.
Upon approval of the Reincorporation Proposal by the Company's stockholders, the
proposed reincorporation will be consummated at such time as the Boards of
Directors of the Company and Designs - Nevada determine is advisable. The Merger
Agreement provides, however, that the Merger may be deferred or abandoned by the
Board of Directors of the Company prior to the Effective Date, either before or
after stockholder approval. The Board of Directors of the Company anticipates
that it may determine to defer or abandon the reincorporation in the event that
any third-party consent therefor deemed material by the Board of Directors shall
not have been obtained. After approval by the stockholders of the Company of the
Merger Agreement, no amendment shall be made which (a) alters or changes the
amount or kind of shares of Designs - Nevada to be received on conversion of
shares of the Company as provided, (b) alters or changes any term of the
Articles of Incorporation of Designs - Nevada to be effected by the Merger, or
(c) alters or changes any of the terms and conditions of the Merger Agreement if
such alteration or change would adversely affect the rights of stockholders of
the Company, without the further approval of such stockholders.
The Common Stock is currently listed on the Nasdaq National Market, and
following consummation of the Merger, the Company intends to have shares of
Designs - Nevada Common Stock continue to trade on the Nasdaq National Market
without interruption.
If stockholder approval is obtained for "Proposal 2--Amendment to the Company's
Certificate of Incorporation to Change the Name of the Company to "Casual Male
Retail Group, Inc."," and for the Reincorporation Proposal, then the Company
intends to effect the name change in connection with the reincorporation and to
change the symbol under which the Designs - Nevada Common Stock trades on the
Nasdaq National Market to a symbol reflecting the Company's new name. Otherwise,
the Designs - Nevada Common Stock will continue to trade under the same ticker
symbol "DESI".
If stockholder approval is obtained for "Proposal 3--Amendment to the Company's
Certificate of Incorporation to Increase the Authorized Number of Shares of
Common Stock," and for the Reincorporation Proposal, then the Company intends to
increase the authorized number of shares of Designs - Nevada Common Stock in
connection with the reincorporation to reflect the increase of the authorized
number of shares of Common Stock of the Company.
Rights of Stockholders to Dissent
Since the Reincorporation Proposal will be conducted through a merger of the
Company into its wholly owned subsidiary, Designs - Nevada, the Company's
stockholders will not have a right to dissent from the reincorporation and seek
to receive the fair market value of their shares in cash under the Delaware
General Corporation Law.
Comparison of Stockholders' Rights
Although the corporate statutes of Nevada and Delaware are substantially
similar, certain differences exist. This summary is not intended to be complete,
and stockholders should refer to the Delaware General Corporation Law (the
"Delaware Law") and the Nevada Revised Statutes, as amended (the "Nevada Law"),
to understand how these laws will apply to the Company and Designs - Nevada.
23
Classified Board of Directors
The Delaware Law permits any Delaware corporation to classify its board of
directors into as many as three classes with staggered terms of office. After
initial implementation of a classified board, one class will be elected at each
annual meeting of the stockholders to serve for a term of three years or until
their successors are elected to take office. The Nevada Law also permits
corporations to classify boards of directors provided that at least one-fourth
of the total number of directors is elected annually. Since neither the Company
nor Designs - Nevada has a classified board, there will be no difference in
stockholders' rights with respect to this issue.
Cumulative Voting
Cumulative voting for directors entitles stockholders to cast a number of votes
that is equal to the number of voting shares held multiplied by the number of
directors to be elected. Stockholders may cast all such votes either for one
nominee or distribute such votes among up to as many candidates as there are
positions to be filled. Cumulative voting may enable a minority stockholder or
group of stockholders to elect at least one representative to the board of
directors where such stockholders would not otherwise be able to elect any
directors. The Nevada Law permits cumulative voting in the election of directors
as long as certain procedures are followed. A Delaware corporation may provide
for cumulative voting in the corporation's certificate of incorporation. Since
neither the Company nor Designs - Nevada utilizes cumulative voting, there will
be no significant difference in stockholders' rights with respect to this issue.
Vacancies on the Board of Directors
Under the Delaware Law, vacancies on the board of directors will be filled by
the affirmative vote of a majority of the remaining directors then in office,
even if less than a quorum unless otherwise provided in the certificate of
incorporation or by-laws. Any director so appointed will hold office for the
remainder of the full term of the class of directors in which the vacancy
occurred. Similarly, the Nevada Law provides that vacancies may be filled by a
majority of the remaining directors, though less than a quorum, unless the
articles of incorporation provide otherwise. The By-Laws of the Company and
Designs - Nevada address the issue of director vacancies in the same manner.
Therefore, the change from Delaware law to Nevada law will not alter
stockholders' rights with respect to filling vacancies.
Removal of Directors
Under both the Delaware Law and the Nevada Law, any director or the entire board
of directors may be removed, with or without cause, upon the vote of the shares
entitled to vote in the election of directors. Under the Delaware Law, a
majority vote is required to remove a director. Under the Nevada Law, a director
may be removed only by the vote of stockholders casting not less than two-thirds
of the outstanding voting rights.
Indemnification of Officers and Directors and Advancement of Expenses
The Delaware Law and the Nevada Law have substantially identical provisions
regarding indemnification by a corporation of its officers, directors, employees
and agents, except that the Nevada Law provides broader indemnification in
connection with stockholder derivative lawsuits. The Delaware Law and the Nevada
Law differ in their provisions for advancement of expenses incurred by an
officer or director in defending a civil or criminal action, suit or proceeding.
The Delaware Law provides that expenses incurred by an officer or director in
defending any civil, criminal, administrative or investigative action, suit or
proceeding may be paid by the corporation in advance of the final disposition of
the action, suit or proceeding upon receipt of an undertaking by or on behalf of
the director or officer to repay the amount if it is ultimately determined that
he or she is not entitled to be indemnified by the corporation. Thus, a Delaware
corporation has the discretion to decide whether or not to advance expenses.
Under the Nevada Law, the articles of incorporation, by-laws or an agreement
made by the corporation may provide that the corporation must pay advancements
of expenses in advance of the final disposition of the action, suit or
proceedings upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined that he or she is not
entitled to be indemnified by the corporation. Thus, a corporation may have no
discretion to decide whether or not to advance expenses. There will be no
difference in
24
stockholders' rights with respect to this issue because the New By-laws and the
Company's By-Laws each provides for advancement of expenses.
Limitation on Personal Liability of Directors
A Delaware corporation is permitted to adopt provisions in its certificate of
incorporation limiting or eliminating the liability of a director to a company
and its stockholders for monetary damages for breach of fiduciary duty as a
director, unless that liability arises from breach of the duty of loyalty, acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, unlawful payment of dividends or unlawful stock
purchase or redemption, or transactions from which the director derives improper
personal benefit. The Company's Certificate of Incorporation contains a
provision limiting, to the extent permitted by the Delaware Law, the liability
of directors to the Company for breach of fiduciary duty.
The Nevada Law provides that, with certain statutory exceptions, a director or
officer is not individually liable to the corporation or its stockholders for
any damages as a result of any act or omission in his capacity as a director or
officer unless it is proven that his act of omission constituted a breach of his
fiduciary duties as a director or officer and his breach involved intentional
misconduct, fraud or a knowing violation of the law. This provision is broader
than the analogous provision in the Delaware Law, in that it is mandatory rather
than optional, covers officers as well as directors, and, unlike the Delaware
Law, does not exclude from the limitation of liability any act or omission
constituting breach of that director or officer's duty of loyalty. The New
Charter states that personal liability of the directors of Designs - Nevada is
eliminated to the fullest extent permitted or required under the Nevada Law;
officers are not included, but they are covered by the Nevada Law mandatory
limitation of liability.
Dividends
The Delaware Law is more restrictive than the Nevada Law with respect to when
dividends may be paid. Under the Delaware Law, subject to any restrictions
provided in the certificate of incorporation, a corporation may declare
dividends out of surplus, or if no surplus exists, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year
(provided that the amount of capital of the corporation following the
declaration and payment of the dividend is not less than the aggregate amount of
the capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets).
The Nevada Law provides that except as otherwise provided in its articles of
incorporation, no distribution (including dividends on, or redemption or
repurchases of, shares of capital stock) may be made if, after giving effect to
such distribution, the corporation would not be able to pay its debts as they
become due in the usual course of business, or the corporation's total assets
would be less than the sum of its total liabilities plus the amount that would
be needed at the time of a liquidation to satisfy the preferential rights of
preferred stockholders.
Restrictions on Business Combinations
Both the Delaware Law and the Nevada Law contain provisions restricting the
ability of a corporation to engage in business combinations with an interested
stockholder. Under the Delaware Law, a corporation is not permitted to engage in
a business combination with any interested stockholder for a three-year period
following the date such stockholder became an interested stockholder, unless (i)
the transaction resulting in a person becoming an interested stockholder, or the
business combination, is approved by the board of directors of the corporation
before the person becomes an interested stockholder; (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the outstanding
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares owned by persons who are both officers and directors
of the corporation, and shares held by certain employee stock ownership plans);
or (iii) at or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and by
the holders of at least two thirds of the corporation's outstanding voting stock
at an annual or special meeting and not by written consent, excluding shares
owned by the interested stockholder. The Delaware Law defines "interested
stockholder" generally as a person who owns 15% or more of the outstanding
shares of a corporation's voting stock. The Delaware Law allows corporations to
opt-out of the statute with provisions expressly electing not to be governed by
such statutory provisions.
25
The Nevada Law regulates business combinations more stringently. First, an
interested stockholder is defined as a beneficial owner of ten percent (10%) or
more of the voting power. Second, the three-year moratorium can be lifted only
by advance approval by a corporation's board of directors, as opposed to the
Delaware Law's provision that allows interested stockholder combinations with
board or stockholder approval. Finally, after the three-year period,
combinations remain prohibited unless they are approved by the board of
directors or a majority of the outstanding voting power not beneficially owned
by the interested party, or the interested stockholders satisfy certain
fair-value requirements. As in Delaware, a Nevada corporation may opt out of the
statute with appropriate provisions in its articles of incorporation. Neither
the Company's Certificate of Incorporation nor the New Charter contains
provisions electing not to be governed by such statutory provisions.
Amendment to Certificate/Articles of Incorporation
Both the Delaware Law and the Nevada Law provide that approval of proposed
amendments to a corporation's certificate (in Delaware) or articles (in Nevada)
of incorporation require the affirmative vote of holders of a majority of all
outstanding shares entitled to vote, with each stockholder being entitled to one
vote for each share so held. Both states provide that the board of directors may
without stockholder approval fix the voting powers, designations, preferences,
limitations, restrictions and rights of a class of stock, on condition that the
corporation's organizational documents grant that power to its board of
directors. Holders of the outstanding shares of a particular class are entitled
to vote as a class on a proposed amendment if the amendment would alter or
change the power, preferences or special rights of one or more series of any
class so as to affect them adversely. Under the Nevada Law, but not under the
Delaware Law, the number of authorized shares of any such class of stock may be
increased or decreased and the number of shares outstanding may be
correspondingly increased or decreased by a resolution adopted by the board of
directors without stockholders approval.
Actions by Written Consent of Stockholders
Each of the Nevada Law and the Delaware Law provides that, unless the
certificate (in Delaware) or articles (in Nevada) of incorporation provide
otherwise, any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting if the holders of outstanding stock
having at least the minimum number of votes that would be necessary to authorize
or take such action at a meeting consents to the action in writing. In addition,
the Delaware Law requires the corporation to give prompt notice of the taking of
corporate action without a meeting by less than unanimous written consent to
those stockholders who did not consent in writing.
Stockholder Vote for Mergers and Other Corporate Reorganizations
In general, both jurisdictions provide that merger of a corporation or sale of
substantially all of its assets requires the approval of a majority of
outstanding shares entitled to vote, as well as approval by the board of
directors. Neither the Nevada Law nor the Delaware Law requires stockholder
approval by the stockholders of a surviving corporation in a merger or
consolidation as long as the surviving corporation issues no more than 20% of
its voting stock in the transaction.
Dissenters' Rights
In both jurisdictions, dissenting stockholders of a corporation engaged in
certain major corporate transactions are entitled to appraisal rights. Appraisal
rights permit a stockholder to receive cash equal to the fair market value of
the stockholder's shares (as determined by agreement of the parties or by a
court) in lieu of the consideration such stockholder would otherwise receive in
any such transaction.
Under the Delaware Law, appraisal rights are generally available for the shares
of any class or series of stock of a Delaware corporation in a merger or
consolidation, provided that no appraisal rights are available for the shares of
any class or series of stock which, at the record date for the meeting held to
approve such transaction, were either (1) listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
("NASD") or (2) held of record by more than 2,000 stockholders. Even if the
shares of any class or series of stock meet the requirements of clause (1) or
(2)
26
above, appraisal rights are available for such class or series if the holders
thereof receive in the merger or consolidation anything except:
o shares of stock of the corporation surviving or resulting from such
merger or consolidation;
o shares of stock of any other corporation which at the effective date
of the merger or consolidation is either listed on a national
securities exchange, or designated as a national market system
security on an interdealer quotation system by the NASD or held of
record by more than 2,000 stockholders;
o cash in lieu of fractional shares; or
o any combination of the foregoing.
No appraisal rights are available to stockholders of the surviving corporation
if the merger did not require their approval.
Under the Nevada Law, a stockholder is entitled to dissent from, and obtain
payment for the fair value of his or her shares in the event of (i) consummation
of a plan of merger, if approval by the stockholders is required and the
stockholder is entitled to vote on the merger or if the domestic corporation is
a subsidiary and is merged with its parent, (ii) a plan of exchange in which the
corporation is a party, or (iii) any corporate action taken pursuant to a vote
of the stockholders, if the articles of incorporation, by-laws or a resolution
of the board of directors provides that voting or nonvoting stockholders are
entitled to dissent and obtain payment for their shares.
As with the Delaware Law, the Nevada Law provides an exception to dissenters'
rights. Holders of securities listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the NASD or held by at least 2,000 stockholders of record are
generally not entitled to dissenters' rights. This exception is not, however,
available if the articles of incorporation of the corporation issuing the shares
state that it is not available, or if the holders of the class or series are
required under the plan of merger or exchange to accept for the shares anything
except specified kinds of consideration (which are essentially identical to
those specified in the analogous provision of the Delaware Law).
Stockholder Inspection Rights
The Delaware Law grants any stockholder of record the right to inspect and to
copy for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other records. A proper purpose is one reasonably related
to such person's interest as a stockholder. Directors also have the right to
examine the corporation's stock ledger, a list of its stockholders and its other
records for a purpose reasonably related to their positions as directors.
Under the Nevada Law, only a stockholder of record who owns at least 15% of the
corporation's outstanding shares, or has been authorized in writing by holders
of at least 15% of the outstanding shares, is entitled to inspect and make
copies of the corporation's financial records. Only a person who has been a
stockholder of record for at least six months, or who owns at least 5% of the
corporation's outstanding shares or has been authorized in writing by holders of
at least 5% of the outstanding shares, is entitled to inspect and make copies of
the corporation's stock ledger, articles of incorporation and by-laws.
Derivative Suits
Under both the Delaware Law and the Nevada Law, a stockholder may bring a
derivative action on behalf of the corporation only if the stockholder was a
stockholder of the corporation at the time of the transaction in question or the
stockholder acquired the stock thereafter by operation of law.
Special Meetings of Stockholders
The Delaware Law permits special meetings of stockholders to be called by the
board of directors or by any other one or more persons authorized in the
certificate of incorporation or by-laws to call a special stockholder meeting.
The Nevada Law permits the entire board of directors, any two directors, or the
president to call special meetings of
27
stockholders, unless the articles of incorporation or by-laws provide otherwise.
There will be no difference in stockholders' rights with respect to this issue
because the New By-laws and the Company's By-Laws each provide that a special
meeting of stockholders may only be called by the Board of Directors pursuant to
a resolution approved by the affirmative vote of a majority of the directors
then in office.
Certain Material Federal Income Tax Consequences of the Merger
The following is a summary of certain material anticipated federal income tax
consequences of the Merger. This summary is based on the federal income tax laws
now in effect and as currently interpreted; it does not take into account
possible changes in such laws or interpretations, including amendments to
applicable statutes, regulations and proposed regulations or changes in judicial
or administrative rulings, some of which may have retroactive effect. In
addition, the summary discussion is intended to address only those federal
income tax consequences that are generally applicable to a stockholder who holds
shares of Common Stock as a capital asset. This summary is provided for general
information only and does not purport to address all aspects of the possible
federal income tax consequences of the Merger and IS NOT INTENDED AS TAX ADVICE
TO ANY PERSON. In particular, and without limiting the foregoing, this summary
does not consider the federal income tax consequences to stockholders of the
Company in light of their individual investment circumstances or to holders
subject to special treatment under the federal income tax laws (for example,
life insurance companies, regulated investment companies, foreign taxpayers,
persons who received their shares of Common Stock as compensation in connection
with the performance of services or on exercise of options received as
compensation in connection with the performance of services). This summary does
not address any consequence of the Merger under any state, local or foreign tax
laws.
No ruling from the Internal Revenue Service or opinion of counsel will be
obtained regarding the federal income tax consequences to the stockholders of
the Company as a result of the Merger. ACCORDINGLY, EACH STOCKHOLDER IS
ENCOURAGED TO CONSULT HIS OR HER TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF
THE PROPOSED TRANSACTION TO SUCH STOCKHOLDER, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS.
The Company believes that the Merger will be a tax-free reorganization of the
Company. If the Merger qualifies as a reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), a stockholder of the
Company who exchanges his or her shares of Common Stock solely for shares of
Designs - Nevada Common Stock would recognize no gain or loss for federal income
tax purposes. In addition, a stockholder's aggregate tax basis in his or her
shares of Designs - Nevada Common Stock received as a result of the Merger
should be the same as his or her aggregate tax basis in the shares of the Common
Stock exchanged therefor, and the stockholder's holding period for the shares of
Designs - Nevada Common Stock should include the period during which such
stockholder held the shares of Common Stock surrendered in the Merger.
THE TAX CONSEQUENCES OF THE MERGER TO ANY PARTICULAR STOCKHOLDER MAY DIFFER
DEPENDING UPON THAT STOCKHOLDER'S OWN CIRCUMSTANCES AND TAX POSITION.
FURTHERMORE, THIS SUMMARY DOES NOT DISCUSS ANY ASPECTS OF STATE, LOCAL, FOREIGN
OR OTHER TAX LAWS. EACH STOCKHOLDER IS URGED TO CONSULT WITH SUCH STOCKHOLDER'S
OWN TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO SUCH STOCKHOLDER OF THE
MERGER.
Required Vote
The Board of Directors believes that the approval of the Reincorporation
Proposal, including the Merger, the New Charter and the New By-laws, is in the
best interests of the stockholders of the Company. The approval of the
Reincorporation Proposal requires the affirmative vote of a majority of the
issued and outstanding shares of Common Stock entitled to vote thereon.
The Board of Directors unanimously recommends that you vote FOR the
reincorporation of the Company to change the Company's state of incorporation
from Delaware to Nevada.
28
PROPOSAL 6
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders of the Company, the Board of
Directors has selected Ernst & Young LLP as independent auditors for the Company
for the fiscal year ending February 1, 2003. Ernst & Young LLP were engaged as
the Company's auditors in October 2000. If stockholders fail to ratify the
selection of such auditors, the Board of Directors will reconsider the
selection.
Audit Fees
Ernst & Young LLP billed the Company an aggregate of $158,350 in fees for
professional services rendered in connection with the audit of the Company's
financial statements for the fiscal year ended February 2, 2002 included in the
Company's Annual Report on Form 10-K and the reviews of the financial statements
included in each of the company's Quarterly Reports on Form 10-Q during fiscal
2002.
Financial Information Systems Designs and Implementation Fees
For the fiscal year ended February 2, 2002, Ernst & Young LLP did not provide
the Company and its affiliates with any professional services in connection with
the designs and implementation of financial information systems.
All Other Fees
For the fiscal year ended February 2, 2002, Ernst & Young LLP billed the Company
an aggregate of $147,060 in fees for other services rendered to the Company and
its affiliates, including audit-related service fees of $35,000, tax service
fees of $108,160 and other non-audit fees of $3,900. Audit-related service fees
include fees for benefit plan and statutory audits. Ernst & Young LLP did not
provide any internal audit services to the Company.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting and will have the opportunity to make a statement if they desire to do
so and to respond to appropriate questions.
The Audit Committee and the Board of Directors unanimously recommend that you
vote FOR the ratification of the selection of Ernst & Young LLP as
independent auditors of the Company.
29
PERFORMANCE GRAPH
The following Performance Graph compares the Company's cumulative stockholder
return with that of a broad market index (Standard & Poor's Industrials Index)
and one published industry index (Standard & Poor's 500 - Composite Retail
Index) for each of the most recent five years ended January 31. The cumulative
stockholder return for shares of the Company's Common Stock and each of the
indices is calculated assuming that $100 was invested on January 31, 1997. The
Company paid no cash dividends during the periods shown. The performance of the
indices is shown on a total return (dividends reinvested) basis. The graph lines
merely connect January 31 of each year and do not reflect fluctuations between
those dates. In addition there is a chart of the annual percentage return of the
Company's Common Stock, the S & P Industrial and Composite Retail 500.
[GRAPHIC OMITTED]
Annual Return Percentage
Years Ending
Company/Index Jan 98 Jan 99 Jan00 Jan 01 Jan 02
- -----------------------------------------------------------------------
DESIGNS, INC. (63.54) 28.58 (46.67) 50.00 77.78
S&P INDUSTRIALS 23.80 32.14 16.12 (8.48) (18.56)
COMPOSITE RETAIL- 500 46.73 62.73 (1.65) 3.46 4.13
Indexed Returns
Base Period
Company/Index Jan 97 Jan 98 Jan 99 Jan 00 Jan01 Jan02
- -----------------------------------------------------------------------
DESIGNS, INC. 100 36.46 46.88 25.00 37.50 66.67
S&P INDUSTRIALS 100 123.80 163.59 189.96 173.86 141.59
COMPOSITE RETAIL - 500100 146.73 238.78 234.85 242.97 253.01
30
To supplement the five year historical performance shown above, below is a
Performance Graph which compares the Company's cumulative stockholder return as
of May 17, 2002, since the change in control which occurred in October 1999. At
the Company's Annual Meeting of Stockholders held in October 1999, the
stockholders voted to elect a new slate of directors supported by Jewelcor
Management, Inc.
[GRAPHIC OMITTED]
Limitation of Liability; Indemnification
The Company's Certificate of Incorporation provides that no director of the
Company shall be personally liable to the Company or to any of its stockholders
for monetary damages arising out of such director's breach of fiduciary duty,
except to the extent that the elimination or limitation of liability is not
permitted by the Delaware General Corporation Law. The Delaware General
Corporation Law, as currently in effect, permits a corporation to eliminate the
liability of directors for breach of fiduciary duty, except that directors
remain liable for (i) any breach of the directors' duty of loyalty to a company
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) any payment of a
dividend or approval of a stock repurchase that is illegal under Section 174 of
the Delaware General Corporation Law, or (iv) any transaction from which the
directors derived an improper personal benefit. The effect of this provision of
the Certificate of Incorporation is that directors cannot be held liable for
monetary damages arising from breaches of their duty of care, unless the breach
involves one of the four exceptions described in the preceding sentence. The
provision does not prevent stockholders from obtaining injunctive or other
equitable relief against directors, nor does it shield directors from liability
under federal or state securities laws.
The Certificate of Incorporation and the Company's By-Laws further provide for
indemnification of the Company's directors and officers to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, including
circumstances in which indemnification is otherwise discretionary.
31
Certain Relationships and Related Transactions
Jewelcor Management, Inc.
On October 28, 1999, the Company entered into a consulting agreement with
Jewelcor Management, Inc. ("JMI") to assist in developing and implementing a
strategic plan for the Company and for other related consulting services as may
be agreed upon between JMI and the Company. Seymour Holtzman, who became the
Company's Chairman of the Board of Directors on April 11, 2000, is a beneficial
holder of approximately 20% of the outstanding Common Stock of the Company
(principally held by JMI). He is also the President and Chief Executive Officer,
and indirectly, with his wife, the primary shareholder, of JMI. In fiscal 2000,
JMI received compensation under this agreement totaling $347,560 which consisted
of (i) a stock option to purchase 400,000 shares of Common Stock, which was
valued by an independent third party, using a growth model, at $63,560, and (ii)
the issuance of 203,489 shares of Common Stock, which had an aggregate market
value of $240,000.
In June 2000, JMI received 182,857 non-forfeitable and fully vested shares of
Common Stock in connection with the Company extending its consulting arrangement
with JMI for an additional one-year period commencing on April 29, 2000 and
ending on April 29, 2001. The fair value of those shares on June 26, 2000, the
date of issuance, was $240,000 or $1.3125 per share. This consulting agreement
was extended through April 29, 2002 and as compensation JMI received 61,856
non-forfeitable and fully vested shares of Common Stock with a fair value of
$240,000 on May 25, 2001. The consulting agreement was again extended through
April 29, 2003 and as compensation JMI received 60,659 non-forfeitable and fully
vested shares of Common Stock with a fair value of $276,000 on April 29, 2002.
The base rate of such compensation was agreed to be increased to $276,000 per
annum in connection with the Casual Male Acquisition. The JMI consulting
agreement includes a significant disincentive for non-performance, which would
require JMI to pay to the Company a penalty equal to 150% of any unearned
consulting services.
In fiscal 2000, the Company also reimbursed JMI in the amount of $400,000, which
was paid in shares of Common Stock, for expenses incurred by JMI in connection
with the October 1999 proxy solicitation. Based on the closing price of the
stock on October 29, 1999, JMI received 346,021 shares of Common Stock.
JMI invested an aggregate of $5,750,000 in the recent private placement of the
Company's senior subordinated notes, on terms no less favorable to the Company
than the terms negotiated by the Company with unrelated third party investors.
As a result, JMI acquired: (i) a 12% Senior Subordinated Note due 2007 in the
principal amount of $4,500,000 with interest payable quarterly and Conditional
Warrants to acquire 315,000 shares of Common Stock at an exercise price of $0.01
per share and (ii) a 12% Senior Subordinated Note due 2007 in the principal
amount of $1,250,000 with interest payable quarterly, Conditional Warrants to
acquire 87,500 shares of Common Stock at an exercise price of $0.01 per share,
and Conditional Warrants to acquire 147,059 shares of Common Stock at an
exercise price of $8.50 per share. The exercisability of such Conditional
Warrants is subject to stockholder approval thereof pursuant to Proposal 4.
Officers and Directors Participating in Private Placement
Certain officers and directors of the Company participated in the Company's
recent private placement of the Series B Preferred Stock. Of the 180,162 shares
of Series B Preferred Stock issued, such officers and directors of the Company
acquired an aggregate of 1,655 shares. See "Security Ownership of Management"
for more information regarding each individual's participation.
On May 14, 2002, Stephen M. Duff, a Senior Investment Manager at The Clark
Estates, Inc., was appointed as a director of the Company. Clark Partners I,
L.P., one of several investment funds of The Clark Estates, Inc., has invested
an aggregate of $11,250,000 in the recent private placement of the Company's
senior subordinated notes and acquired Non-conditional Warrants to purchase
787,500 shares of Common Stock at an exercise price of $0.01 per share and
Conditional Warrants to purchase, subject to stockholder approval, 147,059
shares of Common Stock at an exercise price of $8.50 per share. In addition,
Clark Partners I, L.P. also purchased 14,118 shares of Series B Preferred Stock.
32
Certain Arrangements with Other Directors
On February 8, 2000, the Company retained Mr. Porter as a consultant to advise
the Company with regard to merchandising strategies and operations. As
compensation for these services, Mr. Porter is paid a rate of $2,000 per day,
payable at his election in cash or in shares of Common Stock, plus reimbursement
of reasonable out-of-pocket expenses. Mr. Porter was paid $4,000 and $13,661 as
compensation and reimbursement of related expenses for fiscal 2002 and 2001,
respectively. As part of his compensation, Mr. Porter was also granted stock
options exercisable for up to 30,000 shares of Common Stock. The per share
exercise price of these options was the closing price of the Common Stock on the
date of grant.
In June 2000, the Company extended a loan to David A. Levin, its President and
Chief Executive Officer, in the amount of $196,875 in order for Mr. Levin to
acquire from the Company 150,000 newly issued shares of Common Stock at the
closing price of the Common Stock on that day. The Company and Mr. Levin entered
into a secured promissory note, whereby Mr. Levin agrees to pay to the Company
the principal sum of $196,875 plus interest due and payable on June 26, 2003.
The promissory note bears interest at a rate of 6.53% per annum and is secured
by the 150,000 acquired shares of Common Stock.
Relationship with Independent Public Accountants
On October 3, 2000, Deloitte & Touche LLP ("Deloitte & Touche") resigned as the
Company's independent accountants. On October 11, 2000, the Company engaged
Ernst & Young LLP as its new principal independent accountants. The appointment
of Ernst & Young LLP as the Company's independent auditors was unanimously
approved by the Audit Committee of the Company's Board of Directors.
Deloitte & Touche served as the Company's principal independent accountants from
December 21, 1999 to October 3, 2000. During fiscal 2000 and thereafter through
October 3, 2000, there were no disagreements between the Company and Deloitte &
Touche on matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure which, if not resolved to the
satisfaction of Deloitte & Touche, would have caused Deloitte & Touche to make
reference to the subject matters thereof in its reports. During the fiscal 2000
and thereafter through October 3, 2000, there was no occurrence of the kinds of
events described in Item 304(a)(1)(v) of Regulations S-K promulgated by the
Commission. In addition, none of the reports issued by Deloitte & Touche
concerning the Company's financial statements for the fiscal year end January
29, 2000 and thereafter through October 3, 2000 contained any adverse opinion or
disclaimer of opinion. Such reports were not qualified or modified as to
uncertainty, audit scope, or accounting principles.
33
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on behalf
of the Board of Directors. Management has the primary responsibility for the
financial statements and the reporting process, including the systems of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed the audited financial statements in the Annual Report with
management, including a discussion of the quality, not just the acceptability,
of the accounting principles, the reasonableness of significant judgments, and
the clarity of disclosures in the financial statements.
The Audit Committee reviewed with the independent auditors, who are responsible
for expressing an opinion on the conformity of those audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Audit Committee
under generally accepted auditing standards. In addition, the Audit Committee
has discussed with the independent auditors the auditors' independence from
management and the Company including the matters in the written disclosures
required by the Independence Standards board and considered the compatibility of
non-audit services with the auditors' independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Audit Committee meets with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting. The
Audit Committee held five meetings during the fiscal year ended February 2,
2002.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the fiscal year ended February 2, 2002 for filing with the Commission.
The Audit Committee and the Board have also recommended, subject to ratification
by the Company's stockholders, the selection of Ernst & Young LLP as the
Company's independent auditors.
THE AUDIT COMMITTEE
Jesse Choper
Joseph Pennacchio
Jeremiah P. Murphy, Jr.
34
WHERE YOU CAN FIND MORE INFORMATION
The Company files annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. You may read and copy these reports
and other information filed by the Company at the Public Reference Section of
the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet world wide web site that contains reports,
proxy statements and other information about issuers, like the Company and
Casual Male, who file electronically with the SEC through the Electronic Data
Gathering, Analysis and Retrieval (EDGAR) system. The address of this site is
http://www.sec.gov.
Access to this information as well as other information on the Company is also
available on the Company's website at http://www.designsinc.com.
The documents set forth below that the Company has previously filed with the SEC
contain important information about the Company and its financial condition.
Copies of these documents (except the Current Report on Form 8-K/A filed on May
23, 2002) without attachments are being mailed with this Proxy Statement.
Designs, Inc. SEC Filings (Commission File No. 0-15898):
- -------------------------------------------------------
Annual Report on Form 10-K Fiscal Year ended February 2, 2002
Current Report on Form 8-K Filed on May 23, 2002
Current Report on Form 8-K/A Filed on May 23, 2002
Current Report on Form 8-K/A Filed on June 14, 2002
SOLICITATION
The Company will bear the cost of solicitation of proxies. In addition to the
use of the mails, proxies may be solicited by certain officers, directors and
employees of the Company without extra compensation, by telephone, facsimile
or personal interview. D.F. King & Company, Inc. has been retained by the
Company for a fee not to exceed $5,000 to aid in solicitation of proxies.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESS
Only one copy of the Proxy Statement is being delivered to multiple stockholders
sharing an address unless the Company has received contrary instructions from
one or more of the stockholders in question. If you are one of a number of
stockholders sharing a single address and would like to receive a separate copy
of the Proxy Statement or if you would like to request that the Company send you
a separate copy of annual reports or proxy statements, as applicable, in the
future, please contact the Company at the following address. The Company will
send you a copy of the Proxy Statement promptly after it receives your written
or oral request.
STOCKHOLDER PROPOSALS
Under the rules of the Commission, in order for any shareholder proposal to be
included in the Company's proxy statement and proxy card for presentation at the
2003 Annual Meeting of Stockholders, the proposal must be received by the
Secretary of the Company at the Company's principal executive offices by
February 8, 2003 (120 days before the anniversary date of the date this Proxy
Statement is being mailed to the Company's stockholders).
The Company's By-Laws provide that for business to be properly brought before an
Annual Meeting of Stockholders (or any Special Meeting in lieu of Annual Meeting
of Stockholders), a stockholder must: (i) give timely written notice to the
Secretary of the Company describing any proposal to be brought before such
meeting; and (ii) be present at such Annual Meeting, either in person or by a
representative. Such procedural requirements are fully set forth in Section 3.14
of the By-Laws. A stockholder's notice will be timely if delivered to, or mailed
to and received by, the Company not less than seventy-five days nor more than
one hundred twenty days prior to the
35
anniversary date of the immediately preceding Annual Meeting (the "Anniversary
Date"). To bring an item of business before the 2003 Annual Meeting, a
stockholder must deliver the requisite notice of such item to the Secretary of
the Company not before April 10, 2003 nor later than May 25, 2003. In the event
the Annual Meeting is scheduled to be held on a date more than thirty days
before the Anniversary Date or more than sixty days after the Anniversary Date,
however, a stockholder's notice will be timely delivered to, or mailed to, and
received by, the Company not later than the close of business on the later of
(a) the seventy-fifth day prior to the scheduled date of such Annual Meeting or
(b) the fifteenth day following the day on which public announcement of the date
of such Annual Meeting is first made by the Company.
OTHER MATTERS
As of this date, management knows of no business which may properly come before
the Annual Meeting other than that stated in the Notice of Annual Meeting of
Stockholders. Should any other business arise, proxies given in the accompanying
form will be voted in accordance with the discretion of the person or persons
voting them.
36
DESIGNS, INC.
Notice of 2002 Annual Meeting
of
Stockholders and Proxy
Statement
Thursday, August 8, 2002
9:00 A.M.
Friars Club
57 East 55th Street
New York, New York 10022
Please sign your proxy and
return it in the enclosed
postage-paid envelope so that
you may be represented at the
Annual Meeting.
37
EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF MERGER
This merger agreement is dated ________, 2002, and is between DESIGNS,
INC., a Nevada corporation ("Designs Nevada"), and DESIGNS, INC., a Delaware
corporation ("Designs Delaware").
Designs Nevada is a corporation incorporated in the State of Nevada and
is governed by the provisions of Chapter 78 of the Nevada Revised Statutes (the
"NRS").
Designs Delaware is a corporation incorporated in the State of Delaware
and is governed by the provisions of the Delaware General Corporation Law (the
"DGCL").
Designs Delaware desires to change its corporate domicile from Delaware
to Nevada by means of a statutory merger whereby Designs Delaware will be merged
into Designs Nevada and the separate corporate existence of Designs Delaware
will cease.
The parties intend, by executing this agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and to cause the merger described in this
agreement to qualify as a tax-free reorganization under the provisions of
Section 368 of the Code.
The parties hereby agree as follows:
ARTICLE 1
PRINCIPAL TERMS OF THE MERGER
1.1 Merger. At the Effective Time, Designs Delaware will merge into
Designs Nevada in accordance with the DGCL and the NRS (that merger, the
"Merger"). The separate existence of Designs Delaware will thereupon cease and
Designs Nevada will be the surviving corporation (in that capacity, the
"Surviving Corporation") and will continue its corporate existence under the
laws of the State of Nevada.
1.2 Effective Time. The Merger will become effective on the date a
certificate of ownership and merger is filed by the Surviving Corporation with
the Secretary of State of the State of Delaware in accordance with Section 253
of the DGCL or the date articles of merger are filed by the Surviving
Corporation with the Secretary of State of the State of Nevada in accordance
with Chapter 92A of the NRS, whichever filing occurs later (that date, the
"Effective Time").
1.3 Effects of the Merger. At the Effective Time, the Merger will have
the effects specified in the DGCL, the NRS, and this agreement.
1.4 Articles of Incorporation. At the Effective Time, the articles of
incorporation of Designs Nevada as in effect immediately prior to the Effective
Time will become the articles of incorporation of the Surviving Corporation
until duly amended in accordance with its terms and the NRS.
1.5 Bylaws. At the Effective Time, the bylaws of Designs Nevada as in
effect immediately prior to the Effective Time will become the bylaws of the
Surviving Corporation until duly amended in accordance with their terms and as
provided by the NRS.
1.6 Directors and Officers. At the Effective Time, the directors and
officers of Designs Delaware in office at the Effective Time will retain their
positions as the directors and officers, respectively, of the Surviving
Corporation, each of those directors and officers to hold office, subject to the
applicable provisions of the articles of incorporation and bylaws of the
Surviving Corporation and the NRS, until his or her successor is duly elected or
appointed or until his or her earlier death, incompetence, or removal.
A-1
ARTICLE 2
CONVERSION AND CANCELLATION OF STOCK
2.1 Conversion. (a) By virtue of the Merger, at the Effective Time the
following will occur:
(1) each share of Designs Delaware common stock, par value
$0.01 per share, outstanding immediately prior to the
Effective Time will be converted into one share of
Designs Nevada common stock, par value $0.01 per share;
(2) each share of Series A preferred stock, par value $0.01
per share, of Designs Delaware outstanding immediately
prior to the Effective Time will be converted into one
share of Series A preferred stock, par value $0.01 per
share, of Designs Nevada; and
(3) each outstanding option, warrant, or other security
exercisable for or convertible into shares of Designs
Delaware common stock will be assumed by Designs Nevada
and will be converted into the right to acquire an
equal number of shares of Designs Nevada common stock,
under the same terms and conditions as the original
options, warrants, and other securities.
(b) As of the Effective Time, outstanding stock certificates
representing shares of Designs Nevada common stock and Series A preferred stock
will represent the same number of shares of Designs Nevada common stock and
Series A preferred stock, and the holder thereof will be entitled to precisely
the same rights as a holder of certificates issued by Designs Nevada.
2.2 Cancellation. At the Effective Time, each share of Designs Nevada
common stock issued and outstanding immediately prior to the Effective Time and
held by Designs Delaware will be canceled without any consideration being issued
or paid therefor.
ARTICLE 3
CONDITIONS
3.1 Conditions. Consummation of the Merger is subject to the
satisfaction at or prior to the Effective Time of the condition that this
agreement and the Merger are adopted and approved by Designs Delaware in the
manner provided in Section 253 of the DGCL and by Designs Nevada in the manner
provided in Chapter 92A.120 of the NRS.
ARTICLE 4
MISCELLANEOUS
4.1 Waiver and Amendment. Any provision of this agreement may be waived
at any time by the party that is, or whose stockholders are, entitled to the
benefits of that provision. This agreement may at any time prior to the
Effective Time be amended by agreement of the boards of directors of the Designs
Nevada and Designs Delaware. After approval of this agreement by the
stockholders of Designs Delaware, this agreement may not without their further
approval be amended in a way that alters (1) the amount or kind of shares of
Designs Nevada to be received on conversion of shares of Designs Delaware, (2)
any term of the articles of incorporation of the Surviving Corporation, or (3)
any of the terms of this agreement in a way that adversely affects the rights of
stockholders of Designs Delaware.
4.2 Termination. This agreement may be terminated or the consummation
of the Merger may be deferred at any time prior to the Effective Time by the
board of directors of Designs Delaware, without any action of the stockholders
of Designs Delaware or Designs Nevada, notwithstanding the approval of this
agreement by the stockholders or board of directors of either Designs Delaware
or Designs Nevada.
A-2
4.3 Counterparts. This agreement may be executed in any number of
counterparts, each of which is an original and all of which together constitute
one and the same instrument.
4.4 Governing Law. This agreement is governed by the laws of the State
of Nevada, except that consummation of the merger by Designs Delaware is
governed by Delaware law.
The parties are executing this agreement on the date stated in the
introductory clause.
DESIGNS, INC. [Nevada corporation]
By:
-----------------------------------
Name:
Title:
DESIGNS, INC. [Delaware corporation]
By:
-----------------------------------
Name:
Title:
EXHIBIT B
FORM OF
ARTICLES OF INCORPORATION
OF
DESIGNS, INC.
I, the undersigned, being the original incorporator herein named, for
the purpose of forming a corporation under Title 7, Chapter 78 of the Nevada
Revised Statutes (the "NRS"), do hereby adopt and make the following Articles of
Incorporation.
FIRST: The name of the Corporation is Designs, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Nevada is 6100 Neil Road, Suite 500, Reno, Nevada 89511, and the name
of its registered agent at such address is The Corporation Trust Company of
Nevada.
THIRD: The nature of the business or purposes to be conducted or
promoted is as follows:
To engage in retail or wholesale distribution, marketing and sale of
clothing, apparel and related goods and products; to purchase or lease and
maintain real property for the purpose of operating retail stores or outlets,
warehouses, corporate headquarters or other related facilities; to develop,
market and distribute financial, merchandising and data processing systems
(including, without limitation, computer software programs) for inventory and
cost control, sales reporting, financial accounting and other financial and
managerial control purposes; and to engage in any businesses related to or
arising from the foregoing.
To conduct or engage in any lawful act or activity for which
corporations may be organized under the NRS.
FOURTH: The total number of shares of capital stock which the
Corporation shall have the authority to issue shall be 50,000,000 shares of
Common Stock having a par value of $.01 per share, amounting to an aggregate par
value of $500,000, and 1,000,000 shares of Preferred Stock having a par value of
$.01 per share, amounting to an aggregate par value of $10,000.
The voting power, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions of the
above classes of stock are as follows:
PREFERRED STOCK
The Board of Directors is authorized, subject to limitations prescribed
by law, to provide for the issuance of the shares of Preferred Stock in series,
and by filing a certificate pursuant to the applicable law of the State of
Nevada, to establish from time to time the number of shares to be included in
each such series, and to fix the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
B-1
(d) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative powers, rights, preferences and limitations of
that series.
COMMON STOCK
The holders of the Common Stock shall be entitled to one vote for each
share of Common Stock registered in the name of such holder. The holders of the
Common Stock shall be entitled to such dividends as may from time to time be
declared by the Board of Directors, but only when and as declared by the Board
of Directors, out of any funds legally available for declaration of dividends,
and subject to any provisions of these Articles of Incorporation, as amended
from time to time, or of resolutions of the Board of Directors adopted pursuant
to authority herein contained, requiring that dividends be declared, paid or set
aside upon the outstanding shares of Preferred Stock of any series or upon the
outstanding shares of any other class of capital stock ranking senior to the
Common Stock as to dividends or that the Corporation fulfill any obligations it
may have with respect to the redemption of any outstanding Preferred Stock as a
condition to the declaration and/or payment of any dividend on the Common Stock;
but no such provisions shall restrict the declaration or payment of any dividend
or distribution on the Common Stock payable solely in shares of Common Stock. In
the event of the liquidation, dissolution or winding up of the affairs of the
Corporation, the holders of the Common Stock shall be entitled to share pro rata
in the net assets available for distribution to holders of Common Stock after
satisfaction of the prior claims of the holders of shares of Preferred Stock of
any series and shares of any other class of capital stock ranking senior to the
Common Stock as to assets, in accordance with the provisions of these Articles
of Incorporation, as amended from time to time, or of resolutions of the Board
of Directors adopted pursuant to authority herein contained.
FIFTH: In furtherance of and not in limitation of powers conferred by
statute, it is further provided that:
(a) Subject to the limitations and exceptions, if any, contained in the
by-laws of the Corporation, the by-laws may be adopted, amended or repealed by
the Board of Directors of the Corporation.
(b) Elections of directors need not be by written ballot.
(c) Subject to any applicable requirements of law, the books of the
Corporation may be kept outside the State of Nevada at such location as may be
designated by the Board of Directors or in the by-laws of the Corporation.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The Corporation shall indemnify each person who at any time
is, or shall have been, a director or officer of the Corporation, and is
threatened to be or is made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is, or was, a director or officer
of the Corporation, or served at the request of the Corporation as a director,
officer, employee, trustee, or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement incurred in connection
with any such action, suit or proceeding to the maximum extent permitted by the
NRS as the same exists of hereafter
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may be amended. The foregoing right of indemnification shall in no way be
exclusive of any other rights of indemnification to which any such director or
officer may be entitled, under any by-law, agreement, vote of directors or
stockholders or otherwise.
EIGHTH: The personal liability of the directors of the Corporation is
hereby eliminated to the fullest extent permitted or required under the NRS, as
amended or supplemented. No amendment or repeal of this Article EIGHTH shall
deprive a director of the benefits hereof with respect to any act or omission
occurring prior to such amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation, in the manner
now or hereafter prescribed by statute, and this Certificate of incorporation
and all rights conferred upon stockholders herein are granted subject to this
reservation.
TENTH: The business and affairs of the Corporation shall be managed by
or under the direction of a Board of Directors, which initially shall consist of
two (2) directors. The number of directors of the Corporation may be increased
or decreased in the manner provided in the by-laws of the Corporation, except
that at no time shall there be less than one director. The name and the post
office box or street address, either residence or business, of each of the
initial members of the Board of Directors are follows:
Name Address
ELEVENTH: The name and post office box or street address, either
residence or business, of the incorporator signing these Articles of
Incorporation are as follows:
Name Address
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of
________, 2002, declaring and certifying that the facts stated hereinabove are
true.
----------------------------
[Name], Incorporator
STATE OF _________________ )
) ss.
COUNTY OF _______________ )
This instrument was acknowledged before me on _______________, 2002, by
[name], as Incorporator of Designs, Inc., a Nevada corporation.
----------------------------
Notary Public
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EXHIBIT C
FORM OF
BY-LAWS
OF
DESIGNS, INC.
(A Nevada Corporation)
Section 1. ARTICLES OF INCORPORATION AND BY-LAWS
1.1 These By-Laws are subject to the Articles of Incorporation of the
Corporation. In these By-Laws, references to the Articles of Incorporation and
By-Laws mean the provisions of the Articles of Incorporation and the By-Laws as
are from time to time in effect.
Section 2. OFFICES
2.1 REGISTERED OFFICE. The registered office shall be in the City of
Reno, County of Washoe, State of Nevada.
2.2 OTHER OFFICES. The Corporation may also have offices at such other
places both within and without the State of Nevada as the Board of Directors may
from time to time determine or the business of the Corporation may require.
Section 3. STOCKHOLDERS
3.1 LOCATION OF MEETINGS. All meetings of the stockholders shall be
held at such place either within or without the State of Nevada as shall be
designated from time to time by the Board of Directors. Any adjourned session of
any meeting shall be held at the place designated in the vote of adjournment.
3.2 ANNUAL MEETING. The annual meeting of stockholders shall be held
for the election of directors on the second Tuesday in June in each year, unless
that day be a legal holiday at the place where the meeting is to be held, in
which case the meeting shall be held at the same hour on the next succeeding day
not a legal holiday, or at such other date and time as shall be designated from
time to time by the Board of Directors. Any other business as may be required or
permitted by law or these By-Laws may properly come before the annual meeting.
3.3 SPECIAL MEETING IN PLACE OF ANNUAL MEETING. If the election for
directors shall not be held on the day designated by these By-Laws, the
directors shall cause the election to be held as soon thereafter as convenient,
and to that end, if the annual meeting is omitted on the day herein provided
therefor or if the election of directors shall not be held thereat, a special
meeting of the stockholders may be held in place of such omitted meeting or
election, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting, and
in such case all references in these By-Laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called and
the purposes thereof shall be specified in the call, as provided in Section 3.4.
3.4 NOTICE OF ANNUAL MEETING. Written notice of the annual meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, and signed by the President or a Vice-President, or
the Secretary, or an Assistant Secretary, or by such other natural person or
persons as the directors may designate shall be given to each stockholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting. No action shall be taken at such meeting unless
such notice is given, or unless waiver of such notice is given by the holders of
outstanding stock having not less than the minimum number of votes necessary to
take such action at a meeting at which all shares entitled to vote thereon were
voted. Prompt notice of all action taken in connection with such waiver of
notice shall be given to all stockholders not present or represented at such
meeting.
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3.5 SPECIAL MEETINGS. Except as otherwise required by law and subject
to the rights, if any, of the holders of any series of preferred stock, special
meetings of the stockholders of the Corporation may be called only by the Board
of Directors pursuant to a resolution approved by the affirmative vote of a
majority of the directors then in office.
3.6 NOTICE OF SPECIAL MEETING. Written notice of a special meeting of
stockholders stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called, and signed by the President or a
Vice-President, or the Secretary, or an Assistant Secretary, or by such other
natural person or persons as the directors may designate shall be given not less
than ten nor more than sixty days before the date of the meeting to each
stockholder entitled to vote at such meeting. No action shall be taken at such
meeting unless such notice is given, or unless waiver of such notice is given by
the holders of outstanding stock having not less than the minimum number of
votes necessary to take such action at a meeting at which all shares entitled to
vote thereon were voted. Prompt notice of all action taken in connection with
such waiver of notice shall be given to all stockholders not present or
represented at such meeting.
3.7 STOCKHOLDER LIST. The Secretary shall prepare and make, at least
ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
3.8 QUORUM OF STOCKHOLDERS. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise required by
law, or by the Articles of Incorporation or by these By-Laws. Except as
otherwise provided by law, no stockholder present at a meeting may withhold his
shares from the quorum count by declaring his shares absent from the meeting.
3.9 ADJOURNMENT. Any meeting of stockholders may be adjourned from time
to time to any other time and to any other place at which a meeting of
stockholders may be held under these By-Laws, which time and place shall be
announced at the meeting, by a majority of votes cast upon the question, whether
or not a quorum is present. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
3.10 PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after six months from
its date unless such proxy provides for a longer period, which may not exceed
any maximum period provided by law. Except as otherwise provided by law, a
stockholder may revoke any proxy which is not irrevocable by attending the
meeting for which the proxy was given and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and, if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
Corporation generally. The authorization of a proxy may but need not be limited
to specified action, provided, however, that if a proxy limits its authorization
to a meeting or meetings of stockholders, unless otherwise specifically provided
such proxy shall entitle the holder thereof to vote at any adjourned session but
shall not be valid after the final adjournment thereof.
3.11 INSPECTORS. The directors or the person presiding at the meeting
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment
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thereof. Each inspector, before entering upon the discharge of his duties, shall
take and sign an oath faithfully to execute the duties of inspector at such
meeting with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum and the validity and effect of proxies, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspectors shall make a report in
writing of any challenge, question or matter determined by them and execute a
certificate of any fact found by them.
3.12 ACTION BY VOTE. When a quorum is present at any meeting, whether
the same be an original or an adjourned session, a plurality of the votes
properly cast for election to any office shall elect to such office and a
majority of the votes properly cast upon any question other than an election to
an office shall decide the question, except when a larger vote is required by
law, by the Articles of Incorporation or by these By-Laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.13 ACTION WITHOUT MEETINGS. Unless otherwise provided in the Articles
of Incorporation, any action required to be taken at any annual or special
meeting of stockholders of the Corporation, or any action which may be taken at
any annual or special meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
3.14 MATTERS TO BE CONSIDERED AT ANNUAL MEETINGS. At any annual meeting
of stockholders or any special meeting in lieu of annual meeting of stockholders
(for purposes of this Section 3.14 and Section 4.16 hereof, hereinafter referred
to as an "Annual Meeting"), only such business shall be conducted, and only such
proposals shall be acted upon, as shall have been properly brought before such
Annual Meeting. To be considered as properly brought before an Annual Meeting,
business must be: (a) specified in the notice of the Annual Meeting, (b)
otherwise properly brought before the annual meeting by, or at the direction of,
the Board of Directors, or (c) otherwise properly brought before the Annual
Meeting by any holder of record (both as of the time notice of such proposal is
given by the stockholder as set forth below and as of the record date for the
Annual Meeting in question) of any shares of capital stock of the Corporation
entitled to vote at such Annual Meeting who complies with the requirements set
forth in this Section 3.14.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (i) give timely notice as required by this Section 3.14 to
the Secretary of the Corporation and (ii) be present at such Annual Meeting,
either in person or by a representative. A stockholder's notice shall be timely
if delivered to, or mailed to and received by, the Corporation at its principal
executive office not less than seventy-five days nor more than one hundred
twenty days prior to the anniversary date of the immediately preceding Annual
Meeting (for purposes of this Section 3.14 and Section 4.16 hereof, hereinafter
referred to as the "Anniversary Date"); provided, however, that in the event the
Annual Meeting is scheduled to be held on a date more than thirty days before
the Anniversary Date or more than sixty days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed to and received
by, the Corporation at its principal executive office not later than the close
of business on the later of (A) the seventy-fifth day prior to the scheduled
date of such Annual Meeting or (B) the fifteenth day following the day on which
public announcement of the date of such Annual Meeting is first made by the
Corporation.
For purposes of these By-Laws, "public announcement" shall mean: (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (ii) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (iii) a letter or report sent to all stockholders of
record of the Corporation at the time of the mailing of such letter or report.
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A stockholder's notice to the Secretary shall set forth as to each
matter proposed to be brought before an Annual Meeting: (i) a brief description
of the business the stockholder desires to bring before such Annual Meeting and
the reasons for conducting such business at such Annual Meeting, (ii) the name
and address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation' s capital stock beneficially owned by the stockholder proposing
such business, (iv) the names and addresses of the beneficial owners, if any, of
any capital stock of the Corporation registered in such stockholder's name on
such books, and the class and number of shares of the Corporation's capital
stock beneficially owned by such beneficial owners, (v) the names and addresses
of other stockholders known by the stockholder proposing such business to
support such proposal, and the class and number of shares of the Corporation's
capital stock beneficially owned by such other stockholders, and (vi) any
material interest of the stockholder proposing to bring such business before
such meeting (or any other stockholders known to be supporting such proposal) in
such proposal.
If the Board of Directors or a designated committee thereof determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 3.14 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 3.14 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If neither the Board of Directors nor
such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the Annual
Meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 3.14. If the presiding officer determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 3.14 or that the information provided in a
stockholders notice does not satisfy the information requirements of this
Section 3.14 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 3.14, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the Annual Meeting with respect to such
proposal.
Notwithstanding the foregoing provisions of this Section 3.14, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations thereunder with respect to the matters set forth in this Section
3.14, and nothing in this Section 3.14 shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation' s proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
3.15 INSPECTION OF STOCKHOLDER CONSENTS. In the event of the delivery
to the Corporation of the requisite written stockholder consents to take
corporate action and/or any related revocation or revocations, the Corporation
shall engage nationally recognized independent inspectors of elections for the
purpose of promptly performing a ministerial review of the validity of such
consents and revocations. For the purpose of permitting the inspectors to
perform such review, no action by written consent without a meeting shall be
effective until such date as the independent inspectors certify to the
Corporation that the consents delivered to the Corporation constitute at least
the minimum number of votes that would be necessary to take the corporate
action. Nothing contained in this paragraph shall in any way be construed to
suggest or imply that the Board of Directors or any stockholder shall not be
entitled to contest the validity of any consent or revocation thereof, whether
before or after such certification by the independent inspectors, or to take any
other action (including, without limitation, the commencement, prosecution or
defense of any litigation with respect thereto, and the seeking of injunctive
relief in such litigation).
Section 4. DIRECTORS
4.1 NUMBER; QUALIFICATIONS. The Board of Directors shall consist of one
or more members, the number thereof to be determined from time to time by
resolution of the Board of Directors. Directors need not be stockholders.
4.2 ELECTION; VACANCIES. The Board of Directors shall initially consist
of persons elected as such by the incorporator. At the first annual meeting of
stockholders and at each annual meeting thereafter, the stockholders shall elect
directors to replace those directors whose terms then expire. Vacancies and any
newly created directorships resulting from any increase in the number of
directors may be filled by vote of the
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stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the Board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the Articles of Incorporation or of
these By-Laws as to the number of directors required for a quorum or for any
vote or other actions.
4.3 TENURE. Except as otherwise provided by law, by the Articles of
Incorporation or by these By-Laws, each director shall hold office until the
next annual meeting and until his successor is elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified.
4.4 POWERS. The business of the Corporation shall be managed by or
under the direction of the Board of Directors which shall have and may exercise
all the powers of the Corporation and do all such lawful acts and things as are
not by law, the Articles of Incorporation or these By-Laws directed or required
to be exercised or done by the stockholders.
4.5 COMMITTEES. The Board of Directors may, by vote of a majority of
the whole Board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation,
including the power to authorize the seal of the Corporation to be affixed to
all papers which require it and the power and authority to declare dividends or
to authorize the issuance of stock; excepting, however, such powers which by
law, by the Articles of Incorporation or by these By-Laws they are prohibited
from so delegating. In the absence or disqualification of any member of such
committee and his alternate, if any, the member or members thereof present at
any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member. Except as
the Board of Directors may otherwise determine, any committee may make rules for
the conduct of its business, but unless otherwise provided by the Board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these By-Laws for the conduct of business by the Board of
Directors. Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors upon request.
4.6 REGULAR MEETING. Regular meetings of the Board of Directors may be
held without call or notice at such place within or without the State of Nevada
and at such times as the Board may from time to time determine, provided that
notice of the first regular meeting following any such determination shall be
given to absent directors. A regular meeting of the directors may be held
without call or notice immediately after and at the same place as the annual
meeting of the stockholders.
4.7 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held at any time and at any place within or without the State of Nevada
designated in the notice of the meeting, and may be called only by the Secretary
upon the request of persons constituting a majority of the Special Committee of
the Board of Directors formed by resolution adopted by the Board of Directors on
__________, 2002, reasonable notice thereof being given to each director by the
Secretary or any member of such Special Committee.
4.8 NOTICE. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting, addressed to him at his usual or last
known business or residence address or to give notice to him in person or by
telephone at least twelve hours before the meeting. Notice of a meeting need not
be given to any director if a written waiver of notice, executed by him before
or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
4.9 QUORUM. Except as may be otherwise provided by law, by the Articles
of Incorporation or by these By-Laws, at any meeting of the directors a majority
of the directors then in office shall
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constitute a quorum; a quorum shall not in any case be less than one-third of
the total number of directors constituting the whole Board. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice.
4.10 ACTION BY VOTE. Except as may be otherwise provided by law, by the
Articles of Incorporation or by these By-Laws, when a quorum is present at any
meeting the vote of a majority of the directors present shall be the act of the
Board of Directors.
4.11 ACTION WITHOUT A MEETING. Unless otherwise restricted by the
Articles of Incorporation or these By-Laws, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all the members of the Board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the Board or of such
committee. Such consent shall be treated for all purposes as the act of the
Board or of such committee, as the case may be.
4.12 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Unless
otherwise restricted by the Articles of Incorporation or these By-Laws, members
of the Board of Directors or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.13 COMPENSATION. Unless otherwise restricted by the Articles of
Incorporation or these By-Laws, the Board of Directors shall have the authority
to fix from time to time the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and the performance of their responsibilities as directors and may be
paid a fixed sum for attendance at each meeting of the Board of Directors and/or
a stated salary as director. No such payment shall preclude any director from
serving the Corporation or its parent or subsidiary corporations in any other
capacity and receiving compensation therefor. The Board of Directors may also
allow compensation for members of special or standing committees for service on
such committees.
4.14 INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the Corporation and one or
more of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of the Corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) The material facts as to his relationship or interest and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the Corporation as
of the time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
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4.15 RESIGNATION OR REMOVAL OF DIRECTORS. Unless otherwise restricted
by the Articles of Incorporation or by law, any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a majority of
the stock issued and outstanding and entitled to vote at an election of
directors. Any director may resign at any time by delivering his resignation in
writing to the President or the Secretary or to a meeting of the Board of
Directors. Such resignation shall be effective upon receipt unless specified to
be effective at some other time; and without in either case the necessity of its
being accepted unless the resignation shall so state. No director resigning and
(except where a right to receive compensation shall be expressly provided in a
duly authorized written agreement with the Corporation) no director removed
shall have any right to receive compensation as such director for any period
following his resignation or removal, or any right to damages on account of such
removal, whether his compensation be by the month or by the year or otherwise;
unless in the case of a resignation, the directors, or in the case of removal,
the body acting on the removal, shall in their or its discretion provide for
compensation.
4.16 DIRECTOR NOMINATIONS. Nominations of candidates for election as
directors of the Corporation at any Annual Meeting may be made only (a) by, or
at the direction of, a majority of the directors then in office or (b) by any
holder of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing, informational and
other requirements set forth in this Section 4.16. Any stockholder who has
complied with the timing, informational and other requirements set forth in this
Section 4.16 and who seeks to make such a nomination, or such stockholder's
representative, must be present in person at the Annual Meeting. Only persons
nominated in accordance with the procedures set forth in this Section 4.16 shall
be eligible for election as directors at an Annual Meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 4.16. A stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not less than seventy-five days
nor more than one hundred twenty days prior to the Anniversary Date; provided,
however, that in the event the Annual Meeting is scheduled to be held on a date
more than thirty days before the Anniversary Date or more than sixty days after
the Anniversary Date, a stockholder's notice shall be timely if delivered to, or
mailed and received by, the Corporation at its principal executive office not
later than the close of business on the later of (i) the seventy-fifth day prior
to the scheduled date of such Annual Meeting or (ii) the fifteenth day following
the day on which public announcement of the date of such Annual Meeting is first
made by the Corporation.
A stockholder's notice to the Secretary shall set forth as to each
person whom the stockholder proposes to nominate for election or re-election as
a director: (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation's capital stock which are
beneficially owned by such person on the date of such stockholder notice, and
(iv) the consent of each nominee to serve as a director if elected. A
stockholder' s notice to the Secretary shall further set forth as to the
stockholder giving such notice: (i) the name and address, as the appear on the
Corporation's stock transfer books, of such stockholder and of the beneficial
owners (if any) of the Corporation's capital stock registered in such
stockholder's name and the name and address of other stockholders known by such
stockholder to be supporting such nominee(s), (ii) the class and number of
shares of the Corporation's capital stock which are held of record, beneficially
owned or represented by proxy by such stockholder and by any other stockholders
known by such stockholder to be supporting such nominee(s) on the record date
for the Annual Meeting in question (if such date shall then have been made
publicly available) and on the date of such stockholder's notice, and (iii) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
stockholder.
If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not made in accordance with the terms of
this Section 4.16 or that the information provided in a stockholder's notice
does not satisfy the informational requirements of this Section 4.l6 in any
material respect, then such nomination shall not be considered at the Annual
Meeting in question. If neither the Board of Directors nor such committee makes
a determination as to whether a nomination was made in accordance with the
provisions of this Section 4.16, the presiding officer of the Annual Meeting
shall determine whether a nomination was made in
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accordance with such provisions. If the presiding officer determines that any
stockholder nomination was not made in accordance with the terms of this Section
4.16 or that the information provided in a stockholder's notice does not satisfy
the informational requirements of this Section 4.16 in any material respect,
then such nomination shall not be considered at the Annual Meeting in question.
If the Board of Directors, a designated committee thereof or the presiding
officer determines that a nomination was made in accordance with the terms of
this Section 4.16, the presiding officer shall so declare at the Annual Meeting
and ballots shall be provided for use at the Annual Meeting with respect to such
nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 4.16, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased Board of Directors at least
seventy-five days prior to the Anniversary Date, a stockholder's notice required
by this Section 4.16 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if such notice shall be
delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the fifteenth day
following the day on which such public announcement is first made by the
Corporation.
No person shall be elected by the stockholders as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 4.16. Election of directors at an Annual Meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such Annual Meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as directors at an
Annual Meeting in accordance with the procedures set forth in this Section 4.16
shall be provided for use at such Annual Meeting.
Section 5. NOTICES
5.1 FORM OF NOTICE. Whenever, under the provisions of law, or of the
Articles of Incorporation or of these By-Laws, notice is required to be given to
any director or stockholder, such notice may be given by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Unless written notice by mail is required by law, written notice may also be
given by telegram, cable, telecopy, commercial delivery service, telex or
similar means, addressed to such director or stockholder at his address as it
appears on the records of the Corporation, in which case such notice shall be
deemed to be given when delivered into the control of the persons charged with
effecting such transmission, the transmission charge to be paid by the
Corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
5.2 WAIVER OF NOTICE. Whenever notice is required to be given under the
provisions of law, the Articles of Incorporation or these By-Laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the directors need be specified in any written waiver of notice.
Section 6. OFFICERS AND AGENTS
6.1 ENUMERATION; QUALIFICATION. The officers of the Corporation shall
be a Chairman of the Board of Directors, a President, a Treasurer, a Secretary
and such other officers, if any, as the Board of Directors from time to time may
in its discretion elect or appoint including without limitation one or more Vice
Presidents. Each of any such officers must be natural persons. Any officer may
be, but none need be, a director or stockholder. Any two or more offices may be
held by the same person. Any officer may be required by the Board of Directors
to secure the faithful performance of his duties to the Corporation by giving
bond in such amount and with sureties or otherwise as the Board of Directors may
determine.
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6.2 POWERS AND DUTIES OF THE OFFICERS.
(A) CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
all meetings of the Board of Directors and stockholders of the Corporation,
shall generally supervise the affairs of the Corporation and see that all orders
and resolutions of the Board of Directors are carried into effect, and, together
with the President, shall have general supervision and direction of the other
officers, employees and agents of the Corporation, subject to the control of the
Board of Directors. The Chairman shall be ex officio a member of all committees
of the Board of Directors except the Audit Committee, and shall have particular
responsibility for supervision of the Corporation's investor relations,
financial and legal affairs, and shall have such other powers and perform such
other duties and functions as may from time to time be assigned by the Board of
Directors.
(B) PRESIDENT. The President shall be the Chief Executive Officer of
the Corporation, responsible for the general day-to-day management of the
business of the Corporation. The President shall preside at all meetings of the
Board of Directors and stockholders of the Corporation in the absence of the
Chairman of the Board, and, together with the Chairman of the Board, shall have
general supervision and direction of the other officers, employees and agents of
the Corporation, subject to the control of the Board of Directors. The President
shall from time to time make such reports of the affairs and operations of the
Corporation as the Board of Directors may direct and shall have such other
powers and perform such other duties and functions as may from time to time be
assigned by the Board of Directors.
(C) SENIOR VICE PRESIDENTS. Each Senior Vice President shall have such
powers and perform such duties and functions as may from time to time be
assigned by the Board of Directors. One Senior Vice President shall be
designated by the Board of Directors to, in the event of the President's absence
or disability, perform all the duties and exercise the powers of the President.
(D) VICE PRESIDENTS. Each Vice President shall have such powers and
perform such duties and functions as may from time to time be assigned by the
Board of Directors.
(E) SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and of the stockholders of the Corporation and shall keep the minutes
thereof in appropriate books. The Secretary shall give or cause to be given
notice of all meetings of stockholders, and special meetings of the Board of
Directors to the extent otherwise provided in the By-Laws, and shall perform
such other duties as may be incidental to the office of Secretary or as may from
time to time be assigned by the Board of Directors. The Secretary shall keep in
safe custody the seal of the Corporation and affix it to any instrument when
authorized by the Board of Directors. The Secretary shall have custody of the
books and records of the Corporation, except such books and records as may be in
the custody of the Treasurer or another person authorized by the Board of
Directors to have such custody.
(F) TREASURER. The Treasurer shall have the custody of the corporate
funds and securities of the Corporation and shall be responsible for the keeping
of full and accurate accounts of receipts and disbursements in books belonging
to the Corporation, for the deposit of all moneys and other valuable effects in
the name and to the credit of the corporation, and for the disbursement of the
funds of the Corporation subject to the order of the Board of Directors. The
Treasurer shall render to the Chairman of the Board, the President and the Board
of Directors whenever they may so require an account of all his or her
transactions as Treasurer and of the financial condition of the Corporation. The
Treasurer shall, if required by the Board of Directors, give the Corporation a
bond in such sum or sums and with such surety or sureties as shall be
satisfactory to the Board of Directors, conditioned upon the faithful
performance of his or her duties.
(G) ASSISTANT SECRETARIES. The Board of Directors may appoint one or
more Assistant Secretaries who shall perform the duties and exercise the powers
of the Secretary in the Secretary's absence or disability and have such other
powers and perform such other duties and functions of the Secretary as may from
time to time be assigned by the Board of Directors.
(H) ASSISTANT TREASURERS. The Board of Directors may appoint one or
more Assistant Treasurers who shall perform the duties and exercise the powers
of the Treasurer in the Treasurer's absence or disability and have such other
powers and perform such other duties and functions of the Treasurer as may from
time to time be assigned by the Board of Directors.
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(I) SUBORDINATE OFFICERS. The Corporation may have such subordinate
officers as the Board of Directors may from time to time deem desirable. Each
such officer shall hold office for such period and perform such duties as the
Board of Directors, the Chairman of the Board or an officer designated pursuant
to this Section 6 may prescribe.
(J) DELEGATION OF DUTIES. In case of the absence of any officer of the
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Chairman of the Board, the President or the Board of Directors
may confer for the time-being the powers or duties, or any of them, of such
officer upon any other officer. In the absence of an officer, that officer's
duties shall be performed and his or her authority may be exercised by the next
most senior officer, with seniority expressed by the order of appearance in this
Section 6.2, and, within a category, by seniority in a particular position, with
the right reserved to the Board of Directors to make such designation or
supersede any designation so made.
6.3 ELECTION. The Board of Directors at its first meeting after each
annual meeting of stockholders, or special meeting in place of an annual
meeting, shall choose a Chairman, a President, a Secretary and a Treasurer.
Other officers may be appointed by the Board of Directors at such meeting, at
any other meeting or by written consent. At any time or from time to time, the
directors may delegate to any officer their power to elect or appoint any other
officer or any agents.
6.4 TENURE. Each officer shall hold office until the first meeting of
the Board of Directors following the next annual meeting of the stockholders and
until his successor is elected and qualified unless a shorter period shall have
been specified in terms of his election or appointment, or in each case until he
sooner dies, resigns, is removed or becomes disqualified. Each agent of the
Corporation shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
6.5 RESIGNATION AND REMOVAL. Any officer may resign at any time by
delivering his resignation in writing to the President or the Secretary or to a
meeting of the Board of Directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in any
case the necessity of its being accepted unless the resignation shall so state.
The Board of Directors may at any time remove any officer either with or without
cause. The Board of Directors may at any time terminate or modify the authority
of any agent. No officer resigning and (except where a right to receive
compensation shall be expressly provided in a duly authorized written agreement
with the Corporation) no officer removed shall have any right to any
compensation as such officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise; unless in the case of
a resignation, the directors, or in the case of removal, the body acting on the
removal, shall in their or its discretion provide for compensation.
6.6 VACANCIES. If the office of the Chairman, the President, the
Treasurer or the Secretary becomes vacant, the directors may elect a successor
by vote of a majority of the directors then in office. If the office of any
other officer becomes vacant, any person or body empowered to elect or appoint
that office may choose a successor. Each such successor shall hold office for
the unexpired term of his predecessor, and in the case of the Chairman, the
President, the Treasurer and the Secretary until his successor is chosen and
qualified, or in each case until he sooner dies, resigns, is removed or becomes
disqualified.
Section 7. CAPITAL STOCK
7.1 STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the Articles of Incorporation and the By-Laws, be prescribed from time to time
by the Board of Directors. Such certificate shall be signed by the President or
a Vice-President and (i) the Treasurer or an Assistant Treasurer or (ii) the
Secretary or an Assistant Secretary. Any of or all the signatures on the
certificate may be a facsimile. In case an officer, transfer agent, or registrar
who has signed or whose facsimile signature has been placed on such certificate
shall have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the time of its
issue.
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7.2 LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8. TRANSFER OF SHARES OF STOCK
8.1 TRANSFER ON BOOKS. Subject to any restrictions with respect to the
transfer of shares of stock, shares of stock may be transferred on the books of
the Corporation by the surrender to the Corporation or its transfer agent of the
certificate therefor properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the Board of Directors
or the transfer agent of the Corporation may reasonably require. Except as may
be otherwise required by law, by the Articles of Incorporation or by these
By-Laws, the Corporation shall be entitled to treat the record holder of stock
as shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to receive notice and to vote or to give any
consent with respect thereto and to be held liable for such calls and
assessments, if any, as may lawfully be made thereon, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
properly transferred on the books of the Corporation.
It shall be the duty of each stockholder to notify the Corporation of
his post office address.
Section 9. GENERAL PROVISIONS
9.1 RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting. If no record date is fixed,
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held;
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed; and
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
9.2 DIVIDENDS. Dividends upon the capital stock of the Corporation may
be declared by the Board of Directors at any regular or special meeting or by
written consent, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the Articles of
Incorporation.
9.3 PAYMENT OF DIVIDENDS. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or
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for repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interest of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
9.4 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
9.5 FISCAL YEAR. The fiscal year of the Corporation shall end the
Saturday closest to the 31st of January unless otherwise determined by the Board
of Directors.
9.6 SEAL. The Board of Directors may, by resolution, adopt a corporate seal. The
corporate seal shall have inscribed thereon the name of the Corporation, the
year of its organization and the word ["Nevada."] The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
The seal may be altered from time to time by the Board of Directors.
Section 10. INDEMNIFICATION
10.1 It being the intent of the Corporation to provide maximum
protection available under the law to its officers and directors, the
Corporation shall indemnify its officers and directors to the full extent the
Corporation is permitted or required to do so by the Nevada Revised Statutes as
the same exists or hereafter may be amended. Such indemnification shall include
payment by the Corporation, in advance of the final disposition of a civil or
criminal action, suit or proceedings, of expenses incurred by a director or
officer in defending any such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director or officer to repay such payment if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation. The Corporation may accept any such undertaking without
reference to the financial ability of the person to make such repayment. As used
in this paragraph, the terms "director" and "officer" include their respective
heirs, executors, and administrators.
Section 11. AMENDMENTS
11.1 These By-Laws may be altered, amended or repealed or new By-Laws
may be adopted by the stockholders or by the Board of Directors when such power
is conferred upon the Board of Directors by the Articles of Incorporation, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors. If the power
to adopt, amend or repeal By-Laws is conferred upon the Board of Directors by
the Articles of Incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal By-Laws.
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DETACH HERE
PROXY
DESIGNS, INC.
555 Turnpike Street, Canton, Massachusetts 02021
This Proxy Is Solicited On Behalf Of The Board Of Directors
For The Annual Meeting Of Stockholders To Be Held On August 8, 2002
The undersigned stockholder of Designs, Inc., hereby appoints David A.
Levin and Dennis R. Hernreich, and each of them, proxies, with full power of
substitution to each and to each substitute appointed pursuant to such power, to
vote all shares of Common Stock of the Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders of
the Company to be held on August 8, 2002, at 9:00 A.M. local time, at the Friars
Club, 57 East 55th Street, New York, New York, and at any adjournment thereof,
with all powers the undersigned would possess if personally present, as set
forth on the reverse hereof, upon the matters set forth thereon and more fully
described in the Notice and Proxy Statement for such Annual Meeting, and, in
their discretion, upon all such other matters as may properly come before the
Annual Meeting. The undersigned hereby revokes all proxies, if any, hitherto
given by the undersigned for such Annual Meeting.
SEE REVERSE (CONTINUED AND TO BE SIGNED ON REVERSE SIDE) SEE REVERSE
SIDE SIDE
DETACH HERE
|X| PLEASE MARK VOTES AS IN THIS EXAMPLE.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED IT WILL BE VOTED AS
SPECIFIED HEREIN. IF NO SPECIFIC DIRECTION IS GIVEN, IT WILL BE VOTED "FOR" EACH
OF THE PROPOSALS. RECEIPT IS HEREBY ACKNOWLEDGED OF THE NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT OF DESIGNS, INC. DATED JULY 8, 2002.
1. Election of Directors: THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ALL NOMINEES NAMED BELOW.
Nominees: (1) Seymour Holtzman, (2) David A. Levin, (3) Alan Cohen, (4)
Jesse Choper, (5) Stephen M. Duff, (6) Jeremiah P. Murphy, Jr., (7) Joseph
Pennacchio and (8) George T. Porter, Jr.
|_| FOR ALL NOMINEES |_| WITHHELD FROM ALL NOMINEES
|_| FOR, except vote withheld from the nominee(s) as noted above.
2. Amendment to the Company's Certificate of Incorporation to change the
name of the Company to "Casual Male Retail Group, Inc.": THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
FOR |_| AGAINST |_| ABSTAIN |_|
3. Amendment to the Company's Certificate of Incorporation to increase the
authorized number of shares of common stock: THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" PROPOSAL 3.
FOR |_| AGAINST |_| ABSTAIN |_|
4. Approval of issuance of additional common stock: THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" PROPOSAL 4.
FOR |_| AGAINST |_| ABSTAIN |_|
5. Approval of reincorporation of the Company to change the Company's state
of incorporation from Delaware to Nevada: THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" PROPOSAL 5.
FOR |_| AGAINST |_| ABSTAIN |_|
6. Ratification of selection of Ernst & Young LLP as independent auditors
for the Company: THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 6.
FOR |_| AGAINST |_| ABSTAIN |_|
MARK HERE IF YOU PLAN TO ATTEND THE MEETING |_|
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
IMPORTANT: Please sign your name or names
exactly as printed on this proxy and fill in
the date next to your signature. If more than
one person is named, each must sign. When
signing as attorney, executor, administrator,
trustee or guardian, give title as such. If the
stockholder is a corporation, this proxy should
be signed by an authorized officer and such
officer should state his/her title.
Signature: ___________ Date: _______ Signature: ____________Date: ______