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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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[ ] 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)
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(Name of Person(s) Filing Proxy Statement, if other than 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)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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[DESIGNS INC. LOGO]
August 30, 1999
Dear Fellow Stockholder:
Seymour Holtzman, through Jewelcor Management, Inc., is seeking your proxy
to elect a slate of directors in opposition to the current Board of Directors
slate. WE BELIEVE THAT ELECTING HOLTZMAN'S SLATE OF NOMINEES WOULD:
- SERIOUSLY THREATEN THE CRITICAL RELATIONSHIP BETWEEN DESIGNS AND LEVI
STRAUSS & CO. AND
- OPEN THE DOOR FOR A CREEPING ACQUISITION OF THE COMPANY BY HOLTZMAN
WITHOUT THE PAYMENT OF A PREMIUM TO ALL DESIGNS STOCKHOLDERS.
WE URGE YOU TO REJECT MR. HOLTZMAN'S REQUEST FOR YOUR PROXY BY SIGNING, DATING
AND RETURNING THE ENCLOSED BLUE CARD TODAY.
LEVI STRAUSS & CO.'S POSITION
As you know, Designs' relationship with Levi Strauss & Co. is of paramount
importance to the Company. Designs operates Levi's(R) and Dockers(R) outlet
stores under a Trademark License Agreement. The License Agreement provides that
Levi Strauss & Co. can terminate the agreement if there is a direct or indirect
transfer of control of Designs. While Designs does not currently take a position
on the matter, Holtzman has asserted that the election of his slate of directors
is not a transfer of control under the License Agreement. He has stated that, if
the Jewelcor nominees are elected, they will seek to have Levi Strauss & Co.
confirm that no transfer or breach has occurred or waive the occurrence of any
transfer or breach.
In a letter dated July 29, 1999 to Designs and Jewelcor, Levi Strauss & Co.
responded to Holtzman's assertions and challenged his views. According to Levi
Strauss & Co.:
- replacement of the current Board of Directors would fall within the
License Agreement's provisions prohibiting transfers
- BASED ON LEVI STRAUSS & CO.'S DIRECT EXPERIENCE WITH JEWELCOR AND ITS
PRINCIPALS, LEVI STRAUSS & CO. IS NOT PRESENTLY INCLINED TO WAIVE ANY OF
ITS RIGHTS UNDER THE LICENSE AGREEMENT AND INDEED INTENDS TO EXERCISE
THEM FULLY.
Far more important than any dispute over the License Agreement is the
Company's overall relationship with Levi Strauss & Co. WITHOUT A CONTINUED
STRONG AND SUPPORTIVE PARTNERSHIP WITH LEVI STRAUSS & CO., WE BELIEVE THAT
DESIGNS' VIABILITY AS A GOING CONCERN WOULD BE THREATENED.
In its letter, Levi Strauss & Co. described its prior experience with
Holtzman. In Levi Strauss & Co.'s opinion, this experience bodes poorly for a
successful working relationship between Levi Strauss & Co. and a
Jewelcor-controlled Designs. LEVI STRAUSS & CO. HAS STATED THAT IT IS UNLIKELY
THAT JEWELCOR WILL SUCCESSFULLY BE ABLE TO ESTABLISH A PRODUCTIVE WORKING
RELATIONSHIP WITH LEVI STRAUS SHOULD JEWELCOR GAIN CONTROL OF DESIGNS.
Meanwhile, Designs' relationship with Levi Strauss & Co. remains strong.
Levi Strauss & Co. has written to Designs in praise of Designs' new outlet model
and the shopping experience in its new stores, as well as the dedicated team of
personnel at the corporate office. As a primary retailer of Levi Strauss & Co.
products, Designs' ability to communicate effectively with Levi Strauss & Co. on
a near daily basis is essential to the future success of both companies.
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WE ENCLOSE THE LEVI & STRAUSS & CO. LETTER. YOU SHOULD READ IT AND DECIDE
FOR YOURSELF IF ELECTING HOLTZMAN'S SLATE WOULD SERIOUSLY JEOPARDIZE DESIGNS'
STRONG RELATIONSHIP WITH LEVI STRAUSS & CO.
WHAT DOES HOLTZMAN WANT?
In April 1999, Holtzman made a proposal to explore the acquisition of
Designs at $3.65 per share in cash to all stockholders. Two months later he
withdrew it. Could Holtzman now be trying to gain control of Designs on the
cheap without paying a premium to all stockholders?
Look at the facts.
- Holtzman wants to have his slate of directors, if elected, cause the
Company to buy 1/3 of its outstanding shares -- increasing his percentage
ownership of the Company with the Company's money.
- Holtzman wants his slate of directors to remove the Company's stockholder
rights plan, giving him the power to buy more shares and acquire a
controlling interest in Designs without paying a premium.
If the Holtzman nominees are elected and their plans implemented, there
would be no protection against a "creeping acquisition." STOCKHOLDERS WHO SELL
THEIR SHARES WOULD NOT BE ASSURED OF A PREMIUM. STOCKHOLDERS WHO RETAIN THEIR
SHARES WOULD BE SUBJECT TO THE SIGNIFICANT RISK OF LOSS OF THE LEVI STRAUSS &
CO. RELATIONSHIP.
WE URGE YOU TO SIGN, DATE AND RETURN TODAY THE ENCLOSED BLUE PROXY
CARD. WE RESPECTFULLY REQUEST THAT YOU NOT RETURN ANY PROXY FORMS SENT
TO YOU BY JEWELCOR. REGARDLESS OF HOW MANY SHARES YOU OWN, YOUR VOTE
IS VERY IMPORTANT.
PLEASE READ THE LEVI STRAUSS & CO. LETTER TO HOLTZMAN AND THE COMPANY
CAREFULLY BEFORE YOU CAST YOUR VOTE. On behalf of the Board's Special Committee,
I thank you for your continued trust and support.
Sincerely,
/S/ James G. Groninger
James G. Groninger
Chairman of the Special Committee
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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VIA FACSIMILE and FEDERAL EXPRESS
July 29, 1999
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Joel Reichman Seymour Holtzman
President and CEO Chairman and CEO
Designs, Inc. Jewelcor Management, Inc.
66 B Street 100 North Wilkes-Barre Blvd.
Needham, MA 02494 4th Floor
Wilkes-Barre, PA 18702
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Re: The Designs, Inc./Levi Strauss & Co. License Agreement
Dear Messrs. Reichman and Holtzman:
We note with interest the recent filing of proxy statements by Designs,
Inc. and Jewelcor Management, Inc., respectively, in connection with the 1999
Annual Meeting of Shareholders of Designs currently scheduled for September 22,
1999.
Designs is very important to Levi Strauss & Co., both as a large customer
and as its licensee under a trademark license agreement to operate Levi's(R) and
Dockers(R) outlet stores in more than 25 states. Due to this relationship, as
well as the significance of the License Agreement to Designs(1), we thought that
some comment from LS&CO. regarding certain of the statements in the proxy
filings might help to inform the coming months for you and Designs'
shareholders.
First, LS&CO. does not agree with the Jewelcor proxy's assertion that the
proposed election of JMI Nominees "is not a transfer of control and will not
cause a concern under the License Agreement with Levi Strauss." To the contrary,
and as Jewelcor's proxy materials go on to contemplate, LS&CO.'s view is that
displacement of Designs' current Board by the JMI Nominees would fall within the
License Agreement's provisions prohibiting transfers. That is, Designs would
need LS&CO.'s consent for the License Agreement to continue in effect if and
after the JMI Nominees displace the current Designs directors.
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(1) Designs' proxy filing states: "The Company also believes that its
relationship with Levi Strauss is the most significant asset of the
Company . . ."
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DESIGNS, INC./JEWELCOR MANAGEMENT, INC.
JULY 29, 1999
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Second, the Jewelcor proxy further indicates that in the event LS&CO. takes
this view, Jewelcor will "seek to have Levi Strauss confirm that no 'transfer'
or breach has occurred or waive the occurrence of any 'transfer' or breach."
Jewelcor is, of course, free to approach LS&CO., as it deems appropriate. Based
on its direct experience to date with Jewelcor and its principals (described in
more detail below), however, LS&CO. is not presently inclined to waive any of
its rights under the License Agreement and indeed, intends to exercise them
fully.
Third, the Jewelcor proxy indicates that if the JMI Nominees are elected,
Jewelcor would take the immediate step, among other things, of selling Designs,
through the retention of a New York investment banking firm.(2) Whether or not
the JMI Nominees' displacement of the current Board (should it occur) is
ultimately found to constitute a prohibited transfer under the License
Agreement, there is no doubt that Jewelcor's proposed sale of Designs to a third
party without LS&CO.'s consent would fall within the prohibited transfer
provisions.
On the face of Jewelcor's proxy, then, there are at least two events which
implicate the License Agreement's prohibited transfer provisions -- the
potential election of the JMI Nominees, and, should the election occur and a
buyer be located, the proposed sale of Designs to a third party. Should these
eventualities ever arise, LS&CO. would of course consider in good faith the
facts then before it in determining whether to consent to any transfer of
Designs, and whether the event in question resulted in a material breach of the
License Agreement.
Given the importance of the continuation of the LS&CO. relationship to
Designs' successful operation(3), however, let me identify for you some of
LS&CO.'s substantial concerns which have developed as we have observed the
battle for control of Designs unfold over recent months. These considerations
would factor substantially into LS&CO.'s evaluation of any transfer:
- Our trademarks, notably the Levi's(R) and Dockers(R) brand names which
are the subject of the License Agreement, are LS&CO.'s crown jewels.
Should our marks ever become associated in consumers' minds with shoddy
or even average business practices, this devalues LS&CO. We will not
enter into, or remain in business with, any business partner who does not
afford our marks appropriate respect and treatment.
- Designs is one of LS&CO.'s largest accounts as measured by sales volume
and number of store locations. Designs currently operates more than 100
Levi's(R) and Dockers(R) outlet stores in 27 states,
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(2) Designs' proxy filing, as well as previous correspondence filed with the
Securities and Exchange Commission, indicates that during early 1999 the
Special Committee of the Board of Designs, "acting through Shields &
Company, contacted 72 third parties which [they] believed might be
interested in purchasing the Company. Of these 72 third parties, 17
expressed interest and thereafter received a detailed memorandum describing
the Company and its business." This process of courting potential buyers led
to discussions with Jewelcor regarding its potential acquisition of Designs,
but to LS&CO.'s knowledge no other potential buyers made a bid. The Jewelcor
proxy does not elaborate on what additional steps it would take to
successfully locate a potential buyer, or why it would succeed when Shields
& Company failed.
(3) Even Jewelcor's proxy indicates that "if... Levi Strauss were to ultimately
terminate the License Agreement, the Company's business could be materially
adversely effected [sic]."
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DESIGNS, INC./JEWELCOR MANAGEMENT, INC.
JULY 29, 1999
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representing a substantial product flow in an increasingly important
retail channel. The potential disruption of Designs' retail presence and
approach which could result from Jewelcor's proposed changes in Designs'
Board membership, management and ownership give rise to substantial
business risk to LS&CO.
- In recent years the LS&CO. and Designs' relationship has variously
included vendor/manufacturer, licensor/licensee and joint venturers'
dynamics. Through these experiences doing business together, the crucial
importance of open, timely communications and a successful, indeed
intimate, day to day working relationship between LS&CO. and Designs has
become increasingly apparent. Indeed, representatives of our companies
communicate virtually daily about a broad range of operational issues
associated with running the outlet stores. LS&CO. continues to believe
that a strong working relationship based on communication, trust and
confidence is critical to its and Designs' business success.
- LS&CO.'s entire direct experience with Jewelcor and its principals
occurred in Spring 1999, during the course of Jewelcor's discussions with
Designs regarding a prospective acquisition of Designs. In anticipation
of being asked to consent to an assignment of the License Agreement to
Jewelcor, and seeking information relevant to the anticipated consent
request (e.g., information about Jewelcor's and its principals' retail
and apparel experience, business plan for Designs, financial strength,
etc.), LS&CO. provided Jewelcor's principals with a written information
request and confidentiality agreement under which the requested
information could be provided. Jewelcor acknowledged receipt of LS&CO.'s
request; however, no responsive information whatsoever was ever provided.
LS&CO. had no further communications from Jewelcor until, after LS&CO.
sent a letter to Jewelcor withdrawing its information request in light of
public reports that Jewelcor's bid for Designs had been withdrawn,
Jewelcor sent LS&CO. a letter indicating that it had withdrawn its bid.
In our opinion, even if Jewelcor furnished the information now and LS&CO.
concluded that the information met LS&CO's criteria, this bodes poorly
for the future of a successful working relationship between LS&CO. and a
Jewelcor-controlled Designs.
- Jewelcor's lack of communication with LS&CO., which by any measure is an
important participant in Designs' business, persists even as this proxy
fight gets underway.
- Finally, since early 1999 (within several weeks of Jewelcor's acquisition
of an approximately 9.9% share of Designs at record low share prices),
this series of initiatives seeking to gain control of Designs has created
a substantial distraction and cloud of uncertainty for the Designs'
business and incumbent management. In LS&CO.'s view, Designs' resources
would be more productively dispatched to concentrate on managing and
building the Designs business without disruptions such as this proxy
fight, which promises continuing turmoil through at least September 22,
1999. Recognizing Jewelcor's understandable interest in maximizing
shareholder value, we submit that these continuing control plays
themselves impair Designs' ability to improve all participants' return on
their investments.
Let me summarize LS&CO.'s key positions regarding Designs and the Jewelcor
proxy's proposals. LS&CO. views both the proposed displacement of the Designs
Board in its entirety, and the stated plan to sell Designs to a third party, as
triggering events under its License Agreement's prohibition against transfers
without its consent. LS&CO. will not waive its rights under the License
Agreement and presently intends to exercise them fully. Finally, LS&CO.'s direct
experience with Jewelcor's and its principals' communication approach
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DESIGNS, INC./JEWELCOR MANAGEMENT, INC.
JULY 29, 1999
PAGE 4 OF 4
and lack of responsiveness leads LS&CO. to believe that it is unlikely that
Jewelcor will successfully establish a productive working relationship with
LS&CO., should Jewelcor gain control of Designs.
Very truly yours,
/s/ Lauren Miller
Lauren Miller
Vice President, Finance, Business
Development
