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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
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DESIGNS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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previously. Identify the previous filing by registration statement number,
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September 16, 1999
Dear Fellow Stockholder:
YOUR COMPANY'S RELATIONSHIP WITH
LEVI STRAUSS & CO. IS ITS MOST CRITICAL ASSET -
LEVI STRAUSS CONFIRMS ITS POSITION
In our last letter to you I explained that Levi Strauss & Co. has
strongly stated its position on your Company's Trademark License Agreement and
Jewelcor's attempt to throw out your Board of Directors. Since then, Levi
Strauss has once again written to express its position. Nothing has changed! In
fact, based on the latest communication from Levi Strauss & Co., it appears that
Levi Strauss has reaffirmed its earlier statement that it is "UNLIKELY THAT
JEWELCOR WILL SUCCESSFULLY BE ABLE TO ESTABLISH A PRODUCTIVE WORKING
RELATIONSHIP WITH LEVI STRAUSS SHOULD JEWELCOR GAIN CONTROL OF DESIGNS."
In another letter to Holtzman dated August 27, 1999 Levi Strauss says
that it "BELIEVES THE DISPLACEMENT OF CURRENT DESIGNS DIRECTORS BY JEWELCOR
NOMINEES FALLS WITHIN SECTION 19 OF THE LICENSE AGREEMENT." Levi Strauss goes on
to say that they "MENTION THIS BECAUSE [JEWELCOR'S] REVISED PROXY MATERIALS
STATE THEN, IF AND AFTER THE JEWELCOR NOMINEES ARE ELECTED, [JEWELCOR] WILL
SEEK TO HAVE LS&CO CONFIRM THAT THEIR ELECTION DOES NOT FALL WITHIN SECTION 19.
[JEWELCOR'S] NOMINEES ALREADY HAVE (IN THE LS&CO LETTER DATED JULY 19, 1999)
LS&CO.'S VIEWS ON THAT SUBJECT, I.E. BEFORE THE ELECTION."
What does this mean? Section 19 of the License Agreement says that if
there is a transfer of control of Designs, Levi Strauss has the right to
terminate the Trademark License Agreement. Holtzman says that if he throws out
your existing Board, he will ask Levi Strauss to say that Section 19 does not
apply. Levi Strauss has once again clearly stated its position -- before the
election of directors -- that Section 19 does apply. Holtzman wants you to
ignore this clear statement by your Company's virtual sole supplier and to roll
the dice with his hand-picked nominees. Make no mistake about it; Levi Strauss
is talking about Holtzman's "nominees." The fact that Holtzman took himself off
the slate does not matter one bit. Levi Strauss has already told everyone,
including Holtzman, that Levi Strauss disagrees with Holtzman's position.
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What is Holtzman going to do if Levi Strauss seeks to terminate the
License Agreement? Sue the Company's sole supplier? Ridiculous. What do you
think will happen to your Company then? Will that improve Holtzman's chances of
"establishing a productive working relationship" with Levi Strauss? We strongly
urge you to read and reread the enclosed letters from Levi Strauss before
casting your vote. HOW CAN ANYONE VOTE FOR HOLTZMAN'S NOMINEES AFTER HEARING THE
LEVI STRAUSS POSITION?
The core issue is the Company's 25 year relationship with Levi Strauss.
The Board has not taken a position on either Levi Strauss & Co.'s or Holtzman's
interpretation of the License Agreement. The real point is: DESIGNS NEEDS A
STRONG AND SUPPORTIVE RELATIONSHIP WITH LEVI STRAUSS TO SURVIVE AND THRIVE. IT
SHOULD NOT BE JEOPARDIZED.
WHAT IS HOLTZMAN'S REAL PLAN FOR YOUR COMPANY?
Once you sift through his rhetoric, what does Holtzman offer to
stockholders? He arrived on the scene in December 1998 and has never offered a
new operating strategy. How would his slate of hand-picked directors operate
your Company if they were in charge (not to mention what in the world they would
do without the support of Levi Strauss)?
When you cut through it, we believe Holtzman's sole idea for operating
the Company is to "seek to reduce overhead" (after spending corporate dollars to
hire consultants to tell him how to do it). His proxy materials have a laundry
list of ideas with no support for them. He says that based on "other business
experience" of his nominees, they expect that "possible" areas of savings
include the laundry list. Consultants, "possible" and "other business
experience." Nice words, but where's the substance?
We want the stockholders to hear the facts, not some empty promises.
Here is what we have actually done to reduce overhead and improve profits.
Holtzman continues to give you a history lesson. It's important that
you know what is happening today. Since 1997 (long before we ever heard of
Holtzman) overhead has been reduced 27% from $65.6 million to $48.0 million.
This was accomplished as the Company closed unprofitable stores through a series
of headcount reductions, expense reductions and improvements in staffing
efficiencies in the stores. These reductions were accomplished and continued
throughout 1998
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and into 1999 (with selling, general and administrative expense in the first six
months of fiscal 1999 declining by about $3.6 million or 21% of our fiscal 1998
levels), despite the fact that your Company expended resources and time dealing
with Holtzman's proxy contests and his purported attempt to acquire your Company
earlier this year.
HOLTZMAN'S STRATEGY DOES NOT INCLUDE ANY CHANGE WHATSOEVER TO THE
STRATEGIC DIRECTION OF YOUR COMPANY. Our current strategy has been and is to
refocus all your Company's resources on operating and growing a chain of
Levi's(R) and Dockers(R) Outlets. The success of that strategy and your
Company's future is directly dependent upon maintaining its relationship with
Levi Strauss.
Holtzman's other ideas are equally unimpressive and risky to other
stockholders. He wants to remove the stockholder rights plan, which would give
him the power to buy more shares and acquire a controlling interest in the
Company without paying a premium to other stockholders. He wants the Company to
buy 1/3 of its outstanding shares, which would increase his percentage ownership
of your Company, using your Company's money.
We think it is important that stockholders understand how this could
work. His hand-picked board votes to have the Company borrow money to buy back
1/3 of the Company's shares. This increases Holtzman's percentage ownership from
9.9% to almost 15% without his paying one penny. Then his board removes the
stock holder rights plan (the only thing keeping him from buying stock at
today's price). He can then run in to the market to buy more shares, and you the
stockholder would receive no premium. Who wins then? Holtzman -- at your
expense. Could this be why he never went through with his $3.65 per share offer.
THE SPECIAL COMMITTEE TODAY STANDS READY TO SIGN AN AGREEMENT WITH HOLTZMAN FOR
HIS $3.65 PER SHARE OFFER, IF HE STILL WANTS TO PAY IT TO ALL THE STOCKHOLDERS.
WHY DOES HOLTZMAN WANT TO DO THIS? IN OUR VIEW, HE KNOWS THAT THE
COMPANY IS DOING WELL AND HOPES THAT THE OTHER STOCKHOLDERS DON'T REALIZE IT.
YOUR COMPANY IS ON THE RIGHT TRACK
Holtzman knows -- or should know -- that the Company's strategic
efforts of the last three years are finally paying off. That could be why he
tells you not to believe the Company's numbers. Here is where your Company
stands today:
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- Through August 1999, the Company has realized a profit of $.03
per share compared to a loss of $(.36) per share for the prior
year's period.
- Through August 1999, gross margins are running $4 million or
16% ahead of last year.
- Through August 1999, we have opened six new Levi's(R) and
Dockers(R) Outlets with annualized sales and profits of $15
million and $2.1 million, respectively.
- Levi Strauss has given us tentative approval to open two
Levi's(R) and Dockers(R) Outlet stores in Puerto Rico in
fiscal 2000. We are very excited about the opportunities in
this new market.
- Through August 1999, we have remodeled five of our older
Levi's(R) Outlets that are performing 31% ahead of last year's
levels.
- Through August 1999, overhead is down 16%, or $4.4 million
from last year's levels.
- Through August 1999 we have received lavish praise from Levi
Strauss for the Company's current strategy and operations.
They like what we are doing and have written to us to tell us
about it. Please take a look at the enclosed letter to the
Company from Levi Strauss expressing their opinion of our
current strategy and operations.
- We still have some of our strongest months of this year ahead
of us.
CLEARLY YOUR COMPANY'S TURN-AROUND STRATEGY IS WORKING.
WE URGE YOU NOT TO JEOPARDIZE THE FUTURE FOR YOUR COMPANY. Please
return the BLUE proxy card marked in favor of the directors supported by manage-
ment and against the proposal to terminate the stockholder rights plan. STOP
SEYMOUR HOLTZMAN BEFORE IT'S TOO LATE.
Sincerely,
James G. Groninger
Chairman of the Special Committee
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IF YOU HAVE ANY QUESTIONS ABOUT
VOTING YOUR PROXY OR REQUIRE ANY
ASSISTANCE, PLEASE CALL:
INNISFREE M&A INCORPORATED
TOLL-FREE (888) 750-5834
BANKS AND BROKERS CALL
COLLECT: (212) 750-5833
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July 21, 1999
Jim Laps
Vice President
Customer Business Development
Levi Strauss & Co.
1155 Battery Street
San Francisco, CA 94111
Mr. Joel H. Reichman
President, CEO
Designs Inc.
66 B Street
Needham, MA 02194
Dear Joel:
It was great visiting with you and your team last week. Spending the entire day
created an opportunity to become acquainted with your operation and strategic
direction. I must say, I was impressed. Your outlet model would make any retail
store look good. The display of our branded products was inviting, coordinated
and clear. The shopping experience was as good as any specialty store I have
visited. Your sales associates know the product and, just as importantly, seemed
very excited to be doing their jobs. This combination is not readily evident in
today's shopping environment.
When I got back to your corporate office, I found an inspired and dedicated
team. Frankly, there was a "buzz" and pace that any leader would love to be a
part of. When I speak to our personnel here at the Plaza, they underscore the
professionalism that your Designs team demonstrate. Under the leadership of Dan
Paulus you have a buying team that negotiates with force and decides with
determination. Your team truly demonstrates an attitude of creating opportunity
and an energy level that is contagious.
Thank you for the day we spent together. It was gratifying to see the dedicated
and organized direction of your strategy and team.
Regards
Jim
cc: John Ermaninger
Dan Paulus
<PAGE> 8
LEVIS
LOGO
VIA FACSIMILE and FEDERAL EXPRESS
August 27, 1999
Seymour Holtzman
Chairman and CEO
Jewelcor Management, Inc.
100 North Wilkes-Barre Blvd., 4th Floor
Wilkes-Barre, PA 18702
Re: The Designs, Inc./Levi Strauss & Co. License Agreement
Dear Mr. Holtzman:
Thank you for your letter of August 16, 1999. You had told me, when you
called me on July 29, 1999, that you and perhaps others from your group desired
to meet with representatives of Levi Strauss & Co. We assumed you wanted to
furnish us with the information we had requested last May, and also try to
persuade us to waive our rights under our License Agreement with Designs. I
expressed to you LS&CO.'s willingness to participate in such a meeting.
We advise you, again, that LS&CO. believes the displacement of current
Design directors by Jewelcor nominees falls within Section 19 of the License
Agreement. I mention this because your revised proxy materials state then, if
and after the Jewelcor nominees are elected, they will seek to have LS&CO.
confirm that their election does not fall within Section 19. The nominees
already have LS&CO.'s views on that subject, i.e., before the election.
Finally, though I am reluctant to entertain this sort of diversion, let
me say that I am genuinely perplexed by your letter's assertions about "ad
hominem comments" and "shoddy business practices." There is nothing expressed or
implied, in my letter that remotely fits that description.
Very truly yours,
Lauren Miller
Vice President, Finance, Business Development
cc: Joel Reichman
