Preliminary Proxy Statement
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. 3)
Filed by the Registrant | |
Filed by a party other than the Registrant |X|
Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for Use of the
Commission Only (as permitted
|_| Definitive proxy statement by Rule 14a-6(e)(2))
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
DESIGNS, INC.
(Name of Registrant as Specified in Its Charter)
JEWELCOR MANAGEMENT, INC.
(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:
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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ANNUAL MEETING OF STOCKHOLDERS
OF DESIGNS, INC. ON OCTOBER 4, 1999
PROXY STATEMENT OF
JEWELCOR MANAGEMENT, INC.
IN OPPOSITION TO THE BOARD OF DIRECTORS OF
DESIGNS, INC.
AND IN SUPPORT OF PROPOSAL TO TERMINATE "POISON PILL"
TO ALL STOCKHOLDERS OF DESIGNS, INC.:
This Proxy Statement and the accompanying WHITE PROXY CARD are being
furnished by Jewelcor Management, Inc., a Nevada corporation ("JMI"), to the
stockholders of Designs, Inc., a Delaware corporation (the "Company"), in
connection with the solicitation of proxies to be used at the 1999 annual
meeting of the stockholders of the Company and any adjournments or postponements
thereof (the "Annual Meeting"). JMI understands that the Company plans to hold
the Annual Meeting on October 4, 1999 at 11:00 A.M. local time at One Post
Office Square, Boston, Massachusetts 02019.
JMI is soliciting your proxy (i) to elect John J. Schultz, Jeremiah P.
Murphy, Jr., Joseph Pennacchio, Robert L. Patron and Jesse H. Choper (the "JMI
Nominees") to the Board of Directors of the Company at the Annual Meeting and
(ii) to adopt JMI's proposal to terminate the Company's Shareholder Rights
Agreement, commonly known as a "Poison Pill," dated as of May 1, 1995, and all
amendments thereto (the "Poison Pill"). JMI is proposing a slate of nominees for
the Board of Directors because it believes a new Board is needed to seek to
reverse the Company's decline and pursue ways to enhance shareholder value. It
believes termination of the Company's Poison Pill is in the best interest of
shareholders, among other things because, in JMI's opinion, many institutional
investors may view a poison pill as having a negative effect on the price of
stock. Each director of the Company will be elected for a term of one (1) year
expiring at the 2000 annual meeting, each until their successors are duly
elected and qualified.
According to the definitive proxy statement filed by the Company's
management, the current Board of Directors has determined that the Board of
Directors to be elected at the Annual Meeting, which previously included six
members, shall consist of only five members, and that one of the present
directors, Stanley Berger, will not be nominated for re-election.
If they are elected to the Board, the five current JMI Nominees intend to
vote to expand the Board to six members and elect Peter R. McMullin to fill the
resulting vacancy. In addition, if they are elected to the Board, the JMI
Nominees intend to contact Mr. Berger and seek to invite him to join the Board.
Mr. Berger is the Founder, current Chairman of the Board of Directors and former
Chief Executive Officer of the Company. Although there can be no assurance that
Mr. Berger would agree to serve as a member of the Board of Directors if asked,
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JMI believes that Mr. Berger's continued involvement with the Company would
benefit the shareholders.
JMI understands that the Company has fixed August 5, 1999 as the record
date (the "Record Date") for the determination of stockholders entitled to
notice of, and to vote at, the Annual Meeting. According to the information
supplied by the Company's transfer agent, as of the Record Date there were
15,977,952 shares of Common Stock outstanding.
YOUR VOTE IS IMPORTANT - VOTE FOR EACH OF JMI'S PROPOSALS
Carefully review this Proxy Statement and the enclosed WHITE PROXY CARD. No
matter how many or how few shares of Common Stock you own, YOUR VOTE IS
IMPORTANT. Please vote FOR the election of the JMI Nominees to the Board of
Directors and FOR the proposal to terminate the Poison Pill by so indicating and
by signing, dating and promptly mailing the WHITE PROXY CARD in the enclosed
postage-paid envelope.
No Proxy Card will be furnished by JMI until such time as a definitive form
of the Proxy Statement has been filed with the Securities and Exchange
Commission. This Proxy Statement is first being sent or given to holders of the
Company's Common Stock on or about September __, 1999. This Proxy Statement has
been filed in preliminary form with the Securities and Exchange Commission on
September 1, 1999, and such preliminary form may thereafter be furnished to
stockholders of the Company.
VERY IMPORTANT
JMI REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY ANY PROXY
CARD PROVIDED TO YOU BY THE COMPANY, EVEN TO VOTE AGAINST THE INCUMBENT MEMBERS
OF THE BOARD OF DIRECTORS. RETURNING ANY PROXY CARD PROVIDED TO YOU BY THE
COMPANY COULD REVOKE THE PROXY CARD THAT YOU SIGN, DATE AND SEND TO JMI.
REMEMBER - ONLY YOUR LATEST DATED PROXY CARD WILL COUNT AT THE MEETING!
DO NOT SEND ANY PROXY CARD TO THE COMPANY!
If you own shares of Common Stock and the stock certificate is in your
name, please vote FOR the election of the JMI Nominees to the Board of Directors
and FOR the proposal to terminate the Poison Pill by marking, signing, dating
and mailing the WHITE PROXY CARD only.
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If you own shares of Common Stock, but your stock certificate is held for
you by a brokerage firm, bank or other institution, it is very likely that the
stock certificate is actually in the name of that brokerage firm, bank or other
institution. If so, only that entity can execute a Proxy Card and vote your
shares of Common Stock. The brokerage firm, bank, or other institution holding
the shares of Common Stock for you is required to forward proxy materials to you
and to solicit your instructions with respect to the granting of proxies. It
cannot vote your shares of Common Stock unless it receives your instructions. IF
A BROKERAGE FIRM, BANK, OR OTHER INSTITUTION IS HOLDING SHARES OF COMMON STOCK
FOR YOU, PLEASE INSTRUCT THAT ENTITY TO VOTE SUCH SHARES FOR THE ELECTION OF THE
JMI NOMINEES TO THE BOARD OF DIRECTORS AND FOR THE PROPOSAL TO TERMINATE THE
POISON PILL BY SIGNING, DATING AND MAILING TO JMI ON YOUR BEHALF THE WHITE PROXY
CARD PROMPTLY. JMI URGES YOU TO CONFIRM IN WRITING YOUR INSTRUCTIONS TO THE
PERSON RESPONSIBLE FOR YOUR ACCOUNT AND TO PROVIDE A COPY OF THOSE INSTRUCTIONS
TO JMI IN CARE OF D.F. KING & CO., INC. ("D.F.KING") AT THE ADDRESS SET FORTH
BELOW SO THAT JMI WILL BE AWARE OF ALL INSTRUCTIONS GIVEN AND CAN ATTEMPT TO
ENSURE THAT SUCH INSTRUCTIONS ARE FOLLOWED.
Any stockholder giving a proxy may revoke it at any time before it is voted
by attending the Annual Meeting and voting his or her shares of Common Stock in
person, by giving written notice to the Secretary of the Company at 66 B Street,
Needham, Massachusetts 02194 stating that the proxy has been revoked, or by
delivery of a proxy bearing a later date.
IF YOU HAVE ALREADY RETURNED THE PROXY CARD SUPPLIED BY THE COMPANY'S BOARD
OF DIRECTORS, YOU HAVE EVERY RIGHT TO CHANGE YOUR VOTE BY SIGNING, DATING AND
RETURNING THE WHITE PROXY CARD.
If you have any questions about executing your WHITE PROXY CARD or require
assistance, please contact:
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, NY 10005
Toll Free: (800) 290-6424
Banks and Brokers call collect: (212) 269-5550
INFORMATION ABOUT JMI
JMI is a major stockholder of the Company which, as of the date of this
Proxy Statement, is the beneficial owner of 1,570,200 shares of the Company's
Common Stock (or approximately 9.9% of the shares issued and outstanding). It
intends to vote its shares FOR the election of the JMI Nominees and FOR the
proposal to terminate the Poison Pill.
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JMI is a wholly-owned subsidiary of Jewelcor, Inc., a Pennsylvania
corporation ("JI"), which is a wholly-owned subsidiary of S.H. Holdings, Inc.
("SH"). Seymour Holtzman and Evelyn Holtzman, husband and wife, own, as tenants
by the entirety, a controlling interest of SH. The principal businesses of JMI
and its related companies are the ownership and operation of upscale retail
jewelry stores, the ownership of commercial real estate and investment and
management services. Mr. Holtzman is the Chairman of the Board and Chief
Executive Officer of each of JMI, JI and SH. The business address and the
address of the principal executive offices of JMI is 100 North Wilkes-Barre
Blvd., 4th Floor, Wilkes-Barre, Pennsylvania 18702.
Seymour Holtzman was originally among the individuals nominated by JMI for
election to the Board of Director at the Annual Meeting. In order to reduce the
potential for distraction from what JMI sees as the major problems facing the
Company, JMI took the step of withdrawing Mr. Holtzman's name as a nominee and
instead nominated Jesse H. Choper, a distinguished professor of law already
named in JMI's proxy material as a proposed addition to the Board following the
Annual Meeting. Mr. Holtzman remains a participant in the solicitation and
certain information regarding Mr. Holtzman appears under "Certain Other
Information Regarding JMI and the JMI Nominees" below.
Additional information about JMI and the JMI Nominees is set forth under
the heading "Certain Other Information Regarding JMI and The JMI Nominees" below
and in Annex A attached to this Proxy Statement. JMI has no present plan or
intention to buy any additional Common Stock. However, JMI reserves the right to
purchase additional Common Stock in the future if circumstances change.
REASONS FOR THIS SOLICITATION
Since Joel Reichman took over as President and CEO of the Company in
December 1994, shareholders have watched the value of their investment in the
Company steadily erode. Under the leadership of Joel Reichman and the current
members of the Board of Directors, the Company has suffered approximately $78.3
million in operating losses and alarming decreases in both comparable store
sales and stock price. The Company belongs to you, the stockholders, and you
must decide who should lead it. Don't let the Company's management distract you
with unfulfilled promises and personal attacks on stockholders who question
management's performance. JMI believes that the real issue is the 83% decline in
the Company's stock price since January 1995 and the Company's losses totalling
approximately $78.3 million over the last two and a half years. In JMI's opinion
Joel Reichman and the current Board of Directors should be held responsible for
the performance of the Company under their management.
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Do you want to keep the current Board of Directors and executive management
with the following performance record, as publicly reported in the Company's
public filings and statements? We don't think you should.
[GRAPHIC OMITTED]
$58 MILLION DETERIORATION IN CASH POSITION SINCE JOEL REICHMAN TOOK
OVER
o When Joel Reichman replaced Stanley Berger as President, the Company
had approximately $38 million in cash and investments and no bank
debt. Now, under the reign of Joel Reichman, the Company has over $23
million in bank debt (including $2.3 million borrowed just three
months ago to fund a trust to provide potential future payments for
Joel Reichman and other members of senior management) and only
approximately $4.2 million in cash.
HUGE OPERATING LOSSES
o Over the last two fiscal years and the first two fiscal quarters of
1999, the Company has suffered enormous operating losses totalling
approximately $78.3 million, or $4.90 per share. The Company has
sustained operating losses for ten straight quarters and these losses
are continuing.
[GRAPHIC OMITTED]
STOCK PRICE PLUMMETS
o Since Joel Reichman became President and CEO, the Company's stock
price has dropped from $7.75 on January 28, 1995, to $1.313 at the
close of business on August 30, 1999, a decline of approximately 83%.
This decline occurred during a period in which the stock market
generally has achieved unprecedented increases in value.
[GRAPHIC OMITTED]
GROSS MARGINS FALL SIGNIFICANTLY
o Since Joel Reichman became President and CEO, the Company has
experienced a substantial erosion in its gross margins. For the fiscal
year ended January 28,
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1995, the Company's gross margin was 31.6%, compared to 21% for the
fiscal year ended January 30, 1999, a decrease of 33%.
SALES DECLINE DRAMATICALLY
o Since February 3, 1996, the Company's annual sales have fallen
precipitously from $301,074,000 to $201,634,000, a 33% decline during
one of the most robust periods of economic growth in recent history,
and comparable store sales within the Company have also decreased. The
losing trend continues - the Company's comparable store sales were:
o down 10% in April 1999,
o down 2.6% in May 1999,
o down 3% in June 1999,
o down 11.2% in July 1999, despite the fact that U.S. retail sales
generally at stores open at least one year rose by 6.7% in July
1999 according to the Lehman Brothers Inc. "Same Store Sales
Index".
SUBSTANTIAL DECREASE IN NET WORTH
o The decrease in the Company's net worth since Joel Reichman became CEO
has been approximately $31.5 million, or more than 33%. JMI believes
that Joel Reichman and the current Board of Directors should be held
responsible for the Company going from being highly profitable to
enormously unprofitable, and from being a financially sound company to
where it is today. Rather than replacing members of senior management,
the Board of Directors continues to retain the same highly paid
individuals who, in JMI's view, have caused the Company's financial
deterioration.
WHAT HAS THE BOARD OF DIRECTORS DONE
WHILE STOCKHOLDER VALUE HAS ERODED?
While stockholder value has plummeted under the leadership of Joel Reichman
and the current Board of Directors, the Company's management continues to
receive salaries and executive benefits at the same levels.
Moreover, the current Directors, with the exception of Stanley Berger, own
less than 1% of the outstanding Common Stock, and a substantial portion of the
Directors' small ownership
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was given to them by the Company as director fees at no cost to them. After
losing approximately $78.3 million in the past 2 1/2 years, JMI must ask how a
responsible Board of Directors can fail to make a change in senior management.
JMI believes part of the answer is that these Directors do not share your
financial stake in the Company. With the exception of Stanley Berger, who has
not been nominated for re-election, the Board of Directors and senior management
have very little invested in the Company.
DIRECTORS RECENTLY ALLOCATE $3.4 MILLION TO BENEFIT MANAGEMENT
o Directors Borrow $2.3 Million To Benefit Joel Reichman and Two Other
Executives. With the stated justification of retaining certain members
of senior management, the Board of Directors borrowed $2.3 million in
May to fund a Trust for the benefit of Joel Reichman and two other
members of senior management. The Trust, which was created to pay for
"golden parachutes" for Joel Reichman, Scott Semel, and Carolyn
Faulkner and for other unknown items, has caused the Company to incur
interest costs which JMI estimates will amount to approximately
$15,000 per month or $90,000 for the initial six month period. These
expenses do not include the additional costs of establishing and
maintaining the Trust, which are unknown at this time. As far as JMI
can determine, the Company has failed to file the Trust with the
Securities and Exchange Commission or fully disclose the terms of the
Trust to the shareholders.
o $1.1 Million For Other Executives. In April 1999, the Company
disclosed that it had recently entered into additional agreements with
"key associates" under which they could receive as much as $1.1
million from the Company under certain circumstances.
o Based on the current market capitalization of the Company, under these
arrangements management could receive amounts totaling more than 13%
of the total current market capitalization.
EXECUTIVES RETAIN SALARIES AND PERQUISITES WHILE SHAREHOLDER VALUE
DROPS
o Despite the Company's financial woes and the enormous decline in stock
price, the Company's executives still maintain the same level of
salaries, perquisites and amenities. Examples include:
o Joel Reichman's $375,000 annual salary
o Scott Semel's $290,000 annual salary
o Carolyn Faulkner's $210,000 annual salary
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o The value of the vehicles owned by the Company (not counting the
additional vehicles leased by the Company) has increased
approximately 400% from $79,000 in 1994 to approximately $356,000
in 1998, while overall sales have declined by $100 million over
the same period.
COMPANIES CONTROLLED BY DIRECTORS GRONINGER AND MANUEL PROFIT IN
TRANSACTIONS WITH COMPANY
o In 1994 and 1995, the Company paid $432,000 to a division of Cygne
Design, Inc. ("Cygne"), a troubled private label apparel manufacturer,
for merchandise to be sold by the Company through its new, and
unsuccessful, Boston Trader label. The Boston Trader product line
resulted in over $25 million in losses for the Company. Cygne's only
directors are Bernard Manuel and James Groninger, both members of the
Company's Board of Directors and of the Special Committee created with
the stated purpose of enhancing shareholder value. Bernard Manuel is
the principal shareholder and chief executive officer of Cygne, and
James Groninger is also a Cygne shareholder.
o James Groninger, a Director of the Company, is also the President of
The BaySouth Company. The Company has reported that it paid BaySouth
Company $29,000 in connection with the adoption of its Poison Pill, in
addition to whatever legal or other work was done to prepare this
legal document.
MANAGEMENT'S RECENT STOCK TRADING
On December 8, 1998 Carolyn Faulkner, the Company's Chief Financial
Officer, or her husband purchased 12,000 shares of the Company's Common Stock,
and on December 9, 1998 the Company's Controller purchased 1,000 shares of the
Company's Common Stock. Two weeks earlier, on November 23, 1998, Joel Reichman,
President and Chief Executive Officer, and Scott Semel, Executive Vice President
and General Counsel, purchased 10,000 and 5,000 shares of the Company's Common
Stock, respectively, at prices of $0.88 to $0.94 per share.
On December 11, 1998, the Company issued a press release announcing that
"its Board of Directors has formed a committee of independent outside directors
to consider the Company's strategic alternatives, including a possible sale of
the Company, with a view towards maximizing stockholder value in the near term.
The Company has retained Shields & Company, Inc. in this regard."
Information regarding the Company's results of operations, financial
condition, management benefits and similar matters is taken from the Company's
public filings and press releases, including its Form 10-K's, Form 10-Q's and
Proxy Statements. Information regarding
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directors' interests in transactions with the Company and trading in Company
stock by the Company's officers is taken from the same sources.
JMI'S STRATEGY TO SEEK ENHANCED SHAREHOLDER VALUE
If the JMI Nominees are elected as Directors of the Company, they intend to
immediately take steps seeking to enhance shareholder value, including
those summarized below. Of course, there can be no assurance that any of
those steps will ultimately be successful or will necessarily enhance
shareholder value.
o Seek to Reduce Overhead - The JMI Nominees intend to cause the Company
to engage the services of the public accounting and consulting firm of
Deloitte & Touche, LLP to assist in developing strategies to reduce
overhead so that the Company can seek a sustainable competitive
advantage. Although the JMI Nominees have not pursued this with
Deloitte & Touche in this regard, based on their preliminary review of
publicly available information about the Company and the retail sales
and other business experience of many of the JMI Nominees, they expect
that possible areas of savings could include the following:
1. Substantially reduce the size of the Company's corporate office
space, together with a commensurate reduction in personnel and
other office overhead.
2. Eliminate warehouse expenses by shipping merchandise directly to
store locations.
3. Eliminate all company vehicles and institute a mileage
reimbursement program for business related travel.
4. Control corporate expenses relating to travel, lodging, and
attending conferences, conventions and trade shows.
5. Substantially reduce recurring legal, investment banking and
other professional and consulting fees relating to the ongoing
operation of the business (recognizing that additional fees could
be incurred in connection with any potential sale of the Company
or other extraordinary transaction).
6. Reduce the number of buyers since the Company has essentially
only one supplier of merchandise. Based on historical performance
information, the Company had been, and in the opinion of JMI's
Nominees should again be, able to run a low overhead operation.
7. Eliminate in-house legal staff.
8. Maintain better inventory management.
o Eliminate or Revise Anti-Takeover Provisions - The Poison Pill would
be terminated, as discussed elsewhere in this Proxy Statement, and the
provision of
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the Company's current By-Laws prohibiting shareholders from calling
special meetings, will be eliminated. In addition, the current By-Law
provision requiring advance notice of shareholder proposals will be
made less stringent by shortening the required time for such notice
from 75 days to 45 days. To the extent that the JMI Nominees may later
identify any other provisions of the Company's By-Laws or Certificate
of Incorporation which in their view may discourage acquisition
transactions, they would expect to eliminate or limit those as well.
The JMI Nominees believe that many people in the financial community
view such anti-takeover provisions with disfavor and think they may
have a negative impact on stock value. The intended By-Law changes may
make it easier for a shareholder to influence management of the
Company by permitting a shareholder to seek to call a special meeting
whether or not management agrees, and leaving such a shareholder more
time and flexibility to nominate directors or propose other matters
for consideration at annual meetings.
o Implement a Stock Repurchase Program - The JMI Nominees intend to
cause the Company to initiate a stock repurchase program to purchase
five million (5,000,000) shares of Common Stock. JMI would undertake
not to sell any of its shares under the Company's stock repurchase
program, giving other shareholders an opportunity to sell more of
their shares if they choose to do so. (JMI would not intend to
purchase any Common Stock itself in connection with such a stock
repurchase program by the Company, and has no present plan or
intention to buy any additional Common Stock. However, JMI reserves
the right to purchase shares of Common Stock in the future if
circumstances change.) In the context of JMI's prior interest in
acquiring the Company, JMI obtained three expressions of interest from
prospective lenders (one of which assumed a non-hostile tender offer
for not less than 90% of the Common Stock) that contemplated providing
for a stock repurchase program and adequate working capital for the
Company. On that basis JMI believes that similar financing would be
available from the same sources for a stock repurchase program of the
type contemplated if the JMI Nominees are elected (which would require
a lower level of borrowing). See "Credit Agreement" below. However,
there can no assurance that such a repurchase program can be financed
or successfully pursued.
o Review Potential for Sale of the Company - Beginning in December 1998,
the current Board publicly committed to sell the Company at the
highest available price in the near term. In response JMI, among
others, pursued discussions regarding a potential acquisition of the
Company, from which JMI ultimately withdrew (See "Background of JMI's
Investment in Designs, Inc." below). The Company has said that the
process announced by the current Board did not produce any offers from
any potential acquiror other than JMI. However, the JMI Nominees are
not confident that the present Board was fully committed to a prompt
sale process, and they do not know what other opportunities, if any,
may
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have existed or the circumstances that may have affected the
development of other offers. If other bidders encountered the type of
difficulties JMI believes it faced in pursuing diligence relating to
its own proposal, they may have been discouraged from pursuing a
transaction. Moreover, it may be that conditions or the perception of
potential acquirors are subject to change. Accordingly, if elected the
JMI Nominees would revaluate the possibility of a sale of the Company
to enhance value for all shareholders. Among other things, the JMI
Nominees intend to promptly retain a New York investment banking firm
for that purpose. Any reasonable offer to purchase the Company will be
submitted to the shareholders for their vote. Of course, there can be
no assurance that any effort by the JMI Nominees in this regard would
be successful in identifying and completing a sale.
If the JMI Nominees find that a sincere and committed effort does not
produce a sale transaction on appropriate terms, they intend to
continue a strategy to improve the Company's performance and enhance
shareholder value going forward, including the other steps outlined
above.
In each case, the JMI Nominees cannot be certain that the steps described can be
successfully implemented or will have the intended effect, However, they believe
that a new Board of Directors will provide stockholders who are disappointed
with the performance of current management with an alternative to seek to
enhance shareholder value. JMI is seeking votes from the holders of shares of
Common Stock (i) to elect the JMI Nominees to the Board of Directors of the
Company and (ii) to adopt the proposal to terminate the Poison Pill. JMI
believes that the members of the existing Board of Directors have failed to
enhance shareholder value and RECOMMENDS THAT YOU VOTE FOR EACH OF ITS
PROPOSALS.
JMI'S PROPOSALS
Termination of Poison Pill
On May 1, 1995, the current Board of Directors of the Company adopted a
Poison Pill. According to the Poison Pill, if a person either (i) acquires the
beneficial ownership of 15% or more of the Company's Common Stock (an "Acquiring
Person") or (ii) acquires the beneficial ownership of 10% or more of the
outstanding shares of Common Stock and is declared to be an "Adverse Person" by
the Board of Directors (an "Adverse Person"), all shareholders, with the
exception of the Acquiring Person or Adverse Person, can exercise certain rights
under the Poison Pill that will substantially diminish the voting and ownership
rights of the Acquiring Person or Adverse Person.
JMI believes that the Poison Pill is an impediment to the sale of the
Company and serves to perpetuate the incumbency of the Board of Directors and
management. The limited changes to the Poison Pill recently implemented by the
Company's Board in the context of JMI's possible acquisition of the Company do
not appear to JMI to eliminate this concern. Certain of those
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changes are specific just to JMI and its prior proposal. The other changes
appear to create a very limited Poison Pill exception which expires in less than
three months (on November 7, 1999). Even during that brief period the exception
would apply only to limited types of offers on particular terms (i.e., all cash
tender offers for any and all shares at a price of not less than $3.65 per share
and irrevocably committing to effect a second-step merger on stated terms). In
JMI's opinion, the Poison Pill may have the effect of discouraging efforts to
acquire the Company that might be beneficial to, and supported by, a majority of
shareholders. The following proposal would recommend that the Board of Directors
of the Company terminate the Poison Pill. The text of the resolution is as
follows:
"RESOLVED, it is recommended that the Board of Directors of the
Company take the necessary steps to terminate the Company's Shareholder
Rights Agreement dated as of May 1, 1995, together with any amendments
thereto."
Election of Directors
The Board of Directors of the Company currently consists of six members,
each of which shall hold office until the Annual Meeting and until his successor
is elected and qualified. According to the definitive proxy statement filed by
the Company's management, the current Board of Directors has determined that the
Board of Directors to be elected at the Annual Meeting shall consist of only
five members. The Directors elected at the Annual Meeting will serve until the
2000 Annual Meeting of Stockholders and until their respective successors are
elected and qualified. JMI is soliciting your proxy at the Annual Meeting for
the election of Jesse H. Choper, Joseph Pennacchio, John J. Schultz, Robert L.
Patron and Jeremiah P. Murphy, Jr. to the Board of Directors of the Company. If
they are elected to the Board, the five current JMI nominees intend to vote to
expand the Board to six members and elect Peter R. McMullin to fill the
resulting vacancy. Mr. McMullin has agreed to serve if so elected. Accordingly,
information concerning Mr. McMullin is included below, and unless otherwise
noted all general statements concerning the JMI Nominees also apply to Mr.
McMullin. (As noted above, if elected to the Board of Directors, the JMI
Nominees also expect to seek to invite Stanley Berger, the Founder, current
Chairman of the Board of Directors and former Chief Executive Officer of the
Company to rejoin the Board. There can be no assurance that Mr. Berger would
agree to serve as a member of the Board if asked.)
CERTAIN OTHER INFORMATION REGARDING JMI AND THE JMI NOMINEES
Set forth below are the name, age, business address, present principal
occupation and employment history of each of the JMI Nominees and Mr. McMullin
for at least the past five years. This information has been furnished to JMI by
the respective Nominees. Each of the Nominees is at least 18 years of age. None
of the entities referenced below is a parent or subsidiary of the Company.
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JMI NOMINEES
Name, Age and
Business Address Principal Occupation and Five Year History
- ---------------- ------------------------------------------
John J. Schultz, 62 Mr. Schultz, who has more than thirty-five
142 Wilton Road West years of retail experience, has served as
Ridgefield, CT 06877 an active consultant to the retail
industry since 1993, dealing with
virtually all major segments of the retail
industry. From 1991 to 1993, Mr. Schultz
served as President of the National Retail
Federation, a leading retail industry
trade association. Previously, Mr. Schultz
served as Executive Vice President and
General Merchandise Manager for
Bloomingdale's Department Stores and
Sanger Harris Department Stores and as
President and Chief Executive Officer of
B. Altman & Co. Mr. Schultz currently
serves as a member of the Board of
Directors of The Great Train Store, Inc.,
and Big Smith Brands, Inc. Mr. Schultz is
a graduate of Fairleigh Dickenson
University, Dartmouth Institute and the
Federated Senior Management Institute.
Jeremiah P. Murphy, Jr., 47 Mr. Murphy is the President of the Harvard
1400 Massachusetts Ave. Cooperative Society (the "Coop"), a 117
Cambridge, MA 02138 year old member based retail business.
Since becoming President in November of
1991, Mr. Murphy has directed the
restructuring and right-sizing of the
Cooperative's retail operations and has
returned the Cooperative to profitability.
Mr. Murphy is presently overseeing the
expansion of the Cooperative's catalog
operations and web based membership system
with E-Commerce capabilities. From July
1987 to November 1991, Mr. Murphy was
Vice-President/General Manager for Neiman
Marcus' largest and most profitable retail
store, located in Northpark Mall, Dallas,
Texas. Mr. Murphy previously served in
various other managerial capacities with
Neiman Marcus from July 1977 to July 1987.
Mr. Murphy received a B.A. from Harvard
College in 1973 and his M.B.A. from
Harvard Business School in 1977.
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Joseph Pennacchio, 52 Mr. Pennacchio has been the President of
14001 N.W. 4th Street Aurafin LLC, a privately held jewelry
Sunrise, FL manufacturer and wholesaler since December
1997. From June 1996 to December 1997 he
was a retail consultant. From May 1994 to
May 1996 Mr. Pennacchio was the President
of Jan Bell Marketing, Inc., a $250
million jewelry retailer, which is traded
on the American Stock Exchange. He has
previously served as the President of
Jordan Marsh Department Stores; the Senior
Vice President for all Merchandising at
Abraham & Strauss Department Stores; the
Group Vice President of Merchandising -
Textiles at R.H. Macy.
Robert L. Patron, 53 Mr. Patron is a lawyer and investor. Mr.
641 Seneca Road Patron had been a real estate developer
Great Falls, VA 22066 who, since 1968, Great was engaged in the
construction and commercial leasing of
shopping centers. From his years of
leasing to national retail department
stores and other tenants, Mr. Patron has
acquired extensive experience in
addressing and negotiating the various
real estate issues that confront retail
operations. Through the years, Mr. Patron
has developed or acquired a financial
interest in over 65 commercial and
residential properties located in 13
states. In 1994 Mr. Patron temporarily
curtailed his activities to attend the
George Washington University School of Law
where he attained his law degree at the
age of 53.
Jesse H. Choper, 63 Mr. Choper is the Earl Warren Professor of
University of California at Public Law at the University of California
Berkeley School of Law at Berkeley School of Law where he has
Boalt Hall taught since 1965. Professor Choper was
Berkeley, CA 94720 the Dean of the Law School from 1982 to
1992. In 1996, he was a visiting professor
at Harvard Law School, University of Milan
in Italy Law School and Universitad
Autonoma in Barcelona, Spain. From 1960 to
1961, Professor Choper was a law clerk for
Supreme Court Chief Justice Earl Warren.
If elected, the JMI Nominees intend to vote to expand the
Board to six members and add the following individual.
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<PAGE>
Peter R. McMullin, 56 Mr. McMullin, is an investment analyst and
2101 Corporate Boulevard the co-founder of Southeast Research
Suite 402 Partners, Inc. ("Southeast"). Mr. McMullin
Boca Raton, FL 33431 had been an Executive Vice President and a
Managing Director of Southeast from its
inception in June 1990 until July 1999,
when it merged with Ryan, Beck & Co. Since
1997, Mr. McMullin has been the Executive
Vice President, Chief Investment Officer
and a director of Research Partners
International, a company that provides
institutional research, investment
banking, securities brokerage and trading
services through its principal
subsidiaries. Mr. McMullin has 29 years
experience as an analyst in the retail and
consumer products areas in both the U.S.
and Canada.
Each of the JMI Nominees has consented to serve as a director of the
Company and, if elected, intends to discharge his duties as a director in
compliance with all applicable legal requirements, including the general
fiduciary obligations imposed upon corporate directors.
Except as set forth in this Proxy Statement or in Annex A hereto, to the
best knowledge of JMI, none of the Nominees is employed by JMI or Seymour
Holtzman. All of the Nominees are citizens of the United States. Mr. McMullin is
also a citizen of Canada.
Except as set forth in this Proxy Statement or in Annex A hereto, to the
best knowledge of JMI, none of JMI, any of the persons participating in this
solicitation on behalf of JMI, the JMI Nominees and, with respect to items (i),
(vii) and (viii) of this paragraph, any associate (within the meaning of Rule
14a-1 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
of the foregoing persons (i) owns beneficially, directly or indirectly any
securities of the Company, (ii) owns beneficially, directly or indirectly, any
securities of any parent or subsidiary of the Company, (iii) owns any securities
of the Company of record but not beneficially, (iv) has purchased or sold any
securities of the Company within the past two years, (v) has incurred
indebtedness for the purpose of acquiring or holding securities of the Company,
(vi) is or has within the past year been a party to any contract, arrangement or
understanding with respect to any securities of the Company, (vii) since the
beginning of the Company's last fiscal year has been indebted to the Company or
any of its subsidiaries in excess of $60,000 or (viii) has any arrangement or
understanding with respect to future employment by the Company or with respect
to any future transactions to which the Company or any of its affiliates will or
may be a party. In addition, except as set forth in this Proxy Statement or in
Annex A hereto, to the best knowledge of JMI, none of JMI, any of the persons
participating in this solicitation on behalf of JMI, the JMI Nominees and any
associates of the foregoing persons, has had or is to have a direct or indirect
material interest in any transaction or proposed transaction with the
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<PAGE>
Company in which the amount involved exceeds $60,000, since the beginning of the
Company's last fiscal year.
Except as set forth in this Proxy Statement or in Annex A hereto, to the
best knowledge of JMI, none of the Nominees, since the beginning of the
Company's last fiscal year, has been affiliated with (i) any entity that made or
received, or during the Company's current fiscal year proposes to make or
receive, payments to or from the Company or its subsidiaries for property or
services in excess of five percent of either the Company's or such entity's
consolidated gross revenues for its last full fiscal year, or (ii) any entity to
which the Company or its subsidiaries was indebted at the end of the Company's
last full fiscal year in an aggregate amount exceeding five percent of the
Company's total consolidated assets at the end of such year. None of the JMI
Nominees is or during the Company's last fiscal year has been affiliated with
any law or investment banking firm that has performed or proposes to perform
services for the Company.
To the best knowledge of JMI, none of the corporations or organizations in
which the JMI Nominees have conducted their principal occupation or employment
was a parent, subsidiary or other affiliate of the Company, and the JMI Nominees
do not hold any position or office with the Company or have any family
relationship with any executive officer or director of the Company or have been
involved in any proceedings, legal or otherwise, of the type required to be
disclosed by the rules governing this solicitation.
JMI has agreed to indemnify each of the Nominees against certain
liabilities, including liabilities under the federal securities laws, in
connection with this proxy solicitation and such person's involvement in the
operation of the Company and to reimburse such Nominee for his out-of-pocket
expenses.
As noted above, if elected to the Board of Directors the JMI Nominees also
expect to seek to invite Stanley Berger to re-join the Board.
Seymour Holtzman and JMI have engaged in other proxy contests in recent
years. In October 1995, Seymour Holtzman sought proxies from the stockholders of
First Financial Corporation of Western Maryland ("FFWM") in connection with
FFWM's 1995 annual meeting of stockholders (1) to elect a slate of directors
nominated by Mr. Holtzman to FFWM's Board of Directors and (2) to vote against
the adoption of FFWM's stock option plan, which was proposed by FFWM's Board of
Directors. Mr. Holtzman was successful in defeating the adoption of the stock
option plan, but narrowly lost the proposal for the election of his director
nominees. In connection with FFWM's 1996 annual meeting of stockholders, Seymour
Holtzman also sought proxies from the stockholders of FFWM to elect four
individuals nominated by Mr. Holtzman to FFWM's Board of Directors. Mr. Holtzman
agreed to withdraw his proposal for election of directors after FFWM hired an
investment banking firm to pursue a sale or merger of the bank. FFWM ultimately
merged with Keystone Financial Inc.
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<PAGE>
JMI filed a preliminary proxy statement in connection with the 1999 annual
meeting of stockholders of Little Switzerland, Inc. ("LSVI"). JMI's preliminary
proxy statement related to its intent to solicit proxies to elect certain
individuals nominated by JMI to the Board of Directors of LSVI. In February
1999, JMI and LSVI settled the potential proxy contest. As part of the
settlement, LSVI's Board of Directors agreed to nominate certain of JMI's
director nominees to the LSVI Board of Directors. In addition, JMI engaged in a
consent solicitation with respect to the Company. See "Background of JMI's
Investment in Designs, Inc." below.
BACKGROUND OF JMI'S INVESTMENT IN DESIGNS, INC.
Beginning in October 1998, JMI began to acquire shares of Common Stock
because JMI believed that the then current trading prices of the Common Stock
did not adequately reflect the value of the underlying business and assets of
the Company.
On November 27, 1998, JMI, JI, SH and Seymour and Evelyn Holtzman (the
"Reporting Persons") filed with the Securities and Exchange Commission a
Statement on Schedule 13D (the "Schedule 13D") reporting that JMI had acquired
in excess of 5% of the outstanding shares of the Common Stock. On December 1,
1998 the Reporting Persons filed an amendment to the Schedule 13D reporting that
JMI had acquired an additional 528,500 shares of Common Stock, bringing JMI's
ownership to approximately 9.9% of the Common Stock last reported by the Company
as outstanding. The total amount of funds required to purchase the shares of
Common Stock acquired by JMI since October 26, 1998 was $976,978.50, all of
which was obtained through credit made available to JMI under standard margin
agreements with a registered broker dealer entered into in the ordinary course
of business.
Seymour Holtzman was originally among the individuals nominated by JMI for
election to the Board of Directors at the Annual Meeting and remains a
participant in this solicitation. He is the Chairman of the Board and Chief
Executive Officer of JMI and with his wife owns, as tenants by the entirety, a
controlling interest in JMI's ultimate parent company, S.H. Holdings, Inc. Mr.
Holtzman, age 63, maintains a business address at 100 North Wilkes-Barre Blvd.,
Wilkes-Barre PA 18702. Mr. Holtzman has been involved in the retail business for
over 30 years. For many years he has been the President and Chief Executive
Officer of Jewelcor, Inc., formerly a New York Stock Exchange company that
operated a nationwide chain of retail stores. In addition, from 1986 to 1988.
Mr. Holtzman was the Chairman of the Board and Chief Executive Officer of Gruen
Marketing Corporation, an American Stock Exchange company involved in the
nationwide distribution of watches and the operation of retail factory outlet
stores. Mr. Holtzman is the 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
based in Chicago, Illinois, which has operated a retail internet division for
over 5 years; as well as other affiliated entities. Mr. Holtzman is also a
member of the Board of Directors of Ambanc Holding Co., Inc., the parent company
for a $730 million bank. Unless otherwise noted all general statements
concerning the JMI Nominees also apply to Mr. Holtzman.
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<PAGE>
On December 7, 1998, JMI commenced a consent solicitation requesting that
the shareholders of the Company vote for its proposals to (i) remove all current
members of the Company's Board of Directors other than Stanley I. Berger; (ii)
elect Seymour Holtzman, Peter R. McMullin, Steve R. Tomasi, Jesse H. Choper and
Deborah M. Rhem-Jackson as directors of the Company; (iii) amend certain
sections of the By-Laws of the Company; and (iv) repeal any By-Laws adopted by
the Board of Directors subsequent to December 11, 1995 other than the By-Laws
adopted as contemplated by the consent solicitation.
Based on information obtained from JMI's proxy solicitation firm,
shareholders representing approximately 42.8% of the total outstanding shares of
Common Stock of the Company voted in favor of JMI's proposals in response to the
December 1998 solicitation.
In response to the consent solicitation the Company indicated a commitment
to sell the Company at the highest available price in the near term. Thereafter,
JMI pursued preliminary discussions with the Company with respect to a potential
acquisition.
JMI indicated, based on the status of discussions and outstanding questions
and issues regarding the Company, including, among other things, significant tax
and other diligence items, that it was not yet prepared to make an unconditional
proposal to acquire the Company. Nevertheless, the Company's investment bankers
requested that JMI submit an immediate proposal subject to any appropriate
conditions. Accordingly, on April 28, 1999, JMI submitted to the Company a
proposal, subject to certain express terms and conditions, under which JMI
stated it would explore the purchase of all of the issued and outstanding
capital stock of the Company. A copy of JMI's April 28, 1998 letter is annexed
hereto as Annex B.
On May 5, 1999, the Special Committee of the Board of Directors of the
Company responded to JMI's April 28, 1999 proposal. Briefly, the Special
Committee notified JMI that it intended to pursue JMI's proposal and said it had
directed management and its legal and financial advisors to cooperate with JMI
in completing its due diligence review of the Company and communicating with
representatives of Levi Strauss & Co. The Special Committee also said that it
would be prepared to recommend that the Company enter into a definitive
agreement with JMI following resolution of contingencies in JMI's proposal
relating to due diligence and Levi Strauss, provided JMI's $3.65 per share price
represented the highest offer received at such time. The Committee indicated
that it reserved the right to entertain proposals from other parties to acquire
the Company.
Thereafter, JMI sought to pursue its due diligence review and make progress
in satisfying the conditions JMI had placed on its proposal. In JMI's opinion,
as communicated to the Company and its representatives, JMI's conditions and
requests in that connection, including requests JMI believed relevant to
pursuing productive discussions with Levi Strauss when that became appropriate,
were not satisfied. The Company has disagreed.
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<PAGE>
On June 24, 1999, JMI withdrew its April 28, 1999 proposal because in JMI's
opinion the Company had failed to comply with JMI's conditions and requests and
to provide JMI with all of the information that it sought in connection with its
due diligence. Copies of Seymour Holtzman's correspondence to James G.
Groninger, Chairman of the Special Committee of the Board of Directors of the
Company, setting forth the basis of JMI's withdrawal of its proposal from JMI's
point of view, are annexed hereto as Annex C and Annex D. The issues of concern
to JMI are described in that correspondence. JMI requested a variety of
information as a condition to proceeding with its consideration of a
transaction. In JMI's view, the responses to those requests were unsatisfactory,
with material being denied or delayed. In fact, the Company did not respond to
certain requests until JMI had withdrawn its acquisition proposal entirely.
POTENTIAL EFFECTS OF THE PROPOSALS
Set forth below is a description of certain provisions of certain
agreements to which the Company is a party which may be affected as a result of
the election of the JMI Nominees and which appear to JMI to have the potential
to materially impact the Company. This description is qualified in its entirety
by reference to such agreements which have been filed by the Company with the
Commission. The election of the JMI Nominees may trigger "change of control"
provisions in certain agreements to which the Company is a party. Other
documents or arrangements applicable to the Company not available to or not
reviewed by JMI may affect the matters described below or may be affected by the
matters contemplated by this Proxy Statement.
Credit Agreement
On June 4, 1998 the Company amended its asset based lending agreement (the
"Lending Agreement") with BankBoston Retail Finance, Inc. ("BankBoston"). The
Lending Agreement allows the Company to borrow an amount equal to up to 65% of
its inventory. As of July 31, 1999 the aggregate amount currently available to
be borrowed was approximately $37 million and the Company currently has an
outstanding balance under the Lending Agreement of approximately $23 million.
The Lending Agreement provides that the change of a majority of the Board of
Directors would constitute a change of control which would constitute an "event
of default." Upon the occurrence of an "event of default" any and all
"Liabilities" shall either (i) become due and payable without any further act on
the part of BankBoston or any other lender or (ii) become immediately due and
payable, at the option of BankBoston without notice or demand. Liabilities
include, among other things, the obligation to pay any loan or advance and any
interest thereon. JMI expects to cause the Company to seek to have BankBoston
confirm that no "change of control" has occurred or waive the effects of any
such "change of control." If BankBoston declares a default, JMI will assist the
Company in making other financing arrangements to replace the Lending Agreement.
In this regard, JMI has already received three comparable proposals from
financial institutions. There can be no assurance that either of the
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<PAGE>
foregoing can be implemented or agreed, or if implemented or agreed, the terms
on which such implementation or agreement may be reached.
Employment Agreements
The Company has entered into employment agreements (each an "Employment
Agreement" and collectively, the "Employment Agreements") with each of Joel H.
Reichman, the President and Chief Executive Officer, Scott N. Semel, Senior Vice
President, General Counsel and Secretary, and Carolyn Faulkner, Vice President
and Chief Financial Officer (each an "Executive" and collectively, the
"Executives") which contain "golden parachute provisions". The Employment
Agreements provide that removal and replacement of a majority of the Board of
Directors would constitute a "change of control."
If, among other things, the Company shall fail to renew such Executive's
Employment Agreement within two years of a "change of control," or if any of the
Executives is terminated without justifiable cause, the Company shall upon such
termination, immediately pay such Executive, the greater of (i) two times the
then annual salary of such Executive or (ii) 1/12 of such Executive's then
annual salary multiplied by the number of months remaining in the term (the
"Severance Period"). In addition, the Company shall continue to allow such
Executive to participate, at the Company's expense, in the Company's health
insurance and disability insurance programs, to the extent permitted under such
programs, during the Severance Period and shall pay such Executive additional
compensation to enable such Executive to pay any tax that may be imposed by
Section 280G of the Internal Revenue Code of 1986, as amended. Based on publicly
available filings, the current annual salaries of each of Mr. Reichman, Mr.
Semel and Ms. Faulkner are $375,000, $290,000 and $210,000, respectively.
Stock Options
Pursuant to the Company's 1992 Stock Incentive Plan, as amended (the "1992
Stock Incentive Plan"), incentive and non-incentive stock options, unrestricted
and restricted stock awards and performance share awards may be granted to full
or part time officers and other selected employees of the Company and its
subsidiaries. In addition, the 1992 Stock Incentive Plan provides that each
non-employee director of the Company that is elected by the stockholders
initially will be granted, upon such election, a stock option to purchase up to
10,000 shares of the Company's Common Stock at the then fair market value of the
Common Stock. The 1992 Stock Incentive Plan also provides that each non-employee
director of the Company that is re-elected to the Board is granted, upon such
re-election, a stock option to purchase up to 3,000 shares of Common Stock at
the then fair market value of the Common Stock.
Each stock option granted under the 1992 Stock Incentive Plan will
automatically become fully exercisable upon a "change of control." For purposes
of the 1992 Stock Incentive Plan, the Election of the JMI Nominees would
constitute a "change of control." In addition,
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<PAGE>
upon a "change of control" all restrictions on restricted stock are
automatically deemed waived and the recipients of such restricted stock awards
shall become entitled to receipt of the stock subject to such awards.
Based on the Company's proxy statements for the annual meetings of
stockholders for each of 1996, 1997, and 1998 the senior officers hold options
to acquire a total of 700,000 shares at prices ranging from $6.125 to $12.00 per
share.
Trademark and License Agreement
The Company is a party to an Amended and Restated Trademark License
Agreement (the "License Agreement") with Levi Strauss & Co. ("Levi Strauss")
pursuant to which, among other things, Levi Strauss has granted certain rights
to use certain Levi Strauss trademarks in connection with the Company's
business. The License Agreement purports to restrict assignments, sublicenses or
other transfers (a "transfer") by the Company of its rights or obligations under
the License Agreement without the prior written approval of Levi Strauss, and to
further provide that a "transfer" shall include any direct or indirect transfer
of control of the Company. This is a typical provision in a license agreement.
The License Agreement does not specifically define "transfer of control".
While neither JMI nor, to its knowledge, the Company has obtained a legal
opinion on this point, JMI believes that the mere election of new Directors at
the scheduled expiration of their predecessors' stated terms, by vote of
shareholders at their regular annual meeting, should not properly be viewed a
transfer of control. (Among other things, in the other material third-party
agreement where a similar issue may arise, the Company's Lending Agreement,
different language is used, referring to "change" rather than "transfer," and it
is explicitly stated that change of a majority of the Board will be treated as
such a change for purposes of that Lending Agreement.) The License Agreement
further provides that any attempt to "transfer" without the prior written
consent of Levi Strauss shall be void and deemed a material breach of the
license Agreement, which would purport to permit Levi Strauss, among other
remedies available under law, to terminate the License Agreement 120 days after
written notice is given to the Company, unless the breach is cured.
While JMI does not believe that a change in the Board of Directors pursuant
to a validly authorized shareholder action at the annual meeting constitutes a
"transfer" under the License Agreement, following the filing of its preliminary
proxy material, JMI received a letter from a representative of Levi Strauss
taking the position that election of the JMI Nominees would constitute such a
"transfer". That letter also expressed a belief that it was unlikely that JMI
would establish a productive working relationship with Levi Strauss. JMI has
endeavored to correct what it believes to be a misimpression on the part of Levi
Strauss which it believes to have formed the basis of this communication which
appears to reflect the mischaracterization by the Company's present management
of the process of JMI's discussions concerning a possible acquisition of the
Company last spring, JMI will continue to address this subject with Levi
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Strauss as appropriate with a view to maintaining a good relationship between
the Company and Levi Strauss. JMI recognizes the possibility that issues raised
(inaccurately, in JMI's view) about the discussions earlier this year regarding
a potential acquisition of the Company and communications relating to that
process may concern and distract shareholders. Accordingly, in addition to
seeking to address any matter of concern to Levi Strauss, JMI has taken the step
of withdrawing Seymour Holtzman's name as a nominee for election to the
Company's Board. If elected, the JMI Nominees would seek to have Levi Strauss
confirm that no "transfer" or breach has occurred or, given the position already
stated, waive the occurrence of any "transfer" or breach. Especially given the
letter received by JMI, however, there can be no assurance that Levi Strauss
would so agree and, if (i) it were ultimately determined that a "transfer" and
breach had occurred, (ii) such breach were not cured within the requisite time
period and (iii) Levi Strauss were to ultimately terminate the License
Agreement, the Company's business could be materially adversely effected. Of
course, any sale of the Company that might emerge in the future (like any sale
the Company might have proceeded with last spring) would likely involve a
transfer of control under the Levi Strauss agreement, and any such transfer
without the approval of Levi Strauss could have the same sort of material
negative impact on the Company. The JMI Nominees would not expect that a
potential acquiror would wish to complete an acquisition of the Company without
the approval of Levi Strauss.
VOTING AND PROXY PROCEDURES
The presence in person or by proxy of a majority of the outstanding shares
of the Common Stock will constitute a quorum at the Annual Meeting. Each
outstanding share of Common Stock is entitled to one vote on each matter
properly presented at that meeting and a majority of the votes properly cast
that meeting will be required to approve any proposal presented at the Annual
Meeting, with the exception of the election of directors.
Directors of the Company are elected by a plurality of the votes cast by
the stockholders entitled to vote at a meeting at which a quorum is present. A
plurality means that the nominees with the largest number of votes are elected
as directors, up to the maximum number of directors to be chosen at the meeting.
Consequently, election of the JMI Nominees requires the affirmative vote of a
plurality of the votes cast in the election at the Annual Meeting, assuming a
quorum is present or otherwise represented at the Annual Meeting.
Shares of Common Stock that reflect abstentions or "broker non-votes"
(i.e., shares represented at the meeting held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and with respect to which the broker or nominee
does not have discretionary voting power to vote such shares) will be counted
for purposes of determining whether a quorum is present for the transaction of
business at the Annual Meeting. In addition, abstentions will be treated as
votes cast against a particular proposal while broker non-votes will have no
impact on the outcome of the vote on a particular proposal. With respect to the
election of the JMI Nominees as directors, votes may
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<PAGE>
only be cast in favor of or withheld from the JMI Nominees; there is no ability
to abstain. In addition, broker non-votes will have no effect on the outcome of
the election of JMI Nominees as directors.
If no directions are given and the signed WHITE PROXY CARD is returned, the
attorneys-in-fact appointed in the proxy will vote the shares of Common Stock
represented by that WHITE PROXY CARD FOR the election of the JMI Nominees and
FOR the proposal to terminate the Poison Pill.
Stockholders of record as of the close of business on the Record Date will
be entitled to vote at the Annual Meeting.
At the Annual Meeting, five Directors are to be elected for a term expiring
at the 2000 annual meeting and until their successors have been duly elected and
qualified. JMI is soliciting your proxy in support of the election of the JMI
Nominees. If you wish to vote for the JMI Nominees by proxy, you must submit the
WHITE PROXY CARD furnished to you by JMI and must NOT submit the Board of
Directors' Proxy Card. A stockholder may not submit a proxy card to vote for
both the JMI Nominees and the Company's nominees. If a stockholder submits both
a WHITE PROXY CARD and the Company's Proxy Card, only the latest dated proxy
will be counted.
IMPORTANT
JMI REQUESTS THAT YOU DO NOT VOTE ON OR RETURN TO THE COMPANY ANY PROXY
CARD PROVIDED TO YOU BY THE COMPANY, EVEN TO VOTE AGAINST THE INCUMBENT BOARD'S
SLATE OF NOMINEES. RETURNING ANY PROXY CARD PROVIDED TO YOU BY THE COMPANY COULD
REVOKE THE WHITE PROXY CARD THAT YOU SIGN, DATE AND SEND TO JMI.
Any stockholder giving a proxy may revoke it at any time before it is voted
by attending the Annual Meeting and voting his or her shares of the Company's
Common Stock in person, by giving written notice to the Secretary of the Company
at 66 B Street, Needham, Massachusetts 02494 stating that the proxy has been
revoked, or by delivery of a proxy bearing a later date.
An executed proxy card may be revoked at any time by marking, dating,
signing and delivering a written revocation before the time that the action
authorized by the executed proxy becomes effective. A revocation may be in any
written form validly signed by the record holder as long as it clearly states
the intention to revoke. Delivery of a later proxy card which is properly
completed will also constitute a revocation of an earlier proxy. Although a
revocation is effective if delivered to the Company, JMI requests that either
the original or photostatic copies of all revocations of proxies be mailed or
delivered to D.F. King & Co., Inc., at the
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address set forth below, so that it will be aware of all revocations and can
more accurately determine which proxies that have been received are valid.
D.F. King & Co., Inc.
77 Water Street, 20th Floor
New York, NY 10005
Toll Free: 800-290-6424
Banks and Brokers call collect: 212-269-5550
STOCKHOLDERS OF RECORD ON THE RECORD DATE ARE ELIGIBLE TO VOTE ON THE
MATTERS DISCUSSED ABOVE. ANYONE OWNING SHARES OF THE COMPANY'S COMMON STOCK
BENEFICIALLY (BUT NOT OF RECORD), SUCH AS A PERSON WHOSE OWNERSHIP OF SHARES IS
THROUGH A BROKER, BANK OR OTHER FINANCIAL INSTITUTION, SHOULD CONTACT THAT
BROKER, BANK OR FINANCIAL INSTITUTION WITH INSTRUCTIONS TO EXECUTE THE WHITE
PROXY CARD ON HIS OR HER BEHALF OR TO HAVE THE BROKER, BANK OR FINANCIAL
INSTITUTION'S NOMINEE EXECUTE THE WHITE PROXY CARD.
SOLICITATION OF PROXIES AND EXPENSES
Proxies may be solicited by JMI and by its agents by mail, telephone,
telegraph and personal solicitation. Banks, brokerage houses and other
custodians, nominees and fiduciaries will be requested to forward proxy
solicitation material to the beneficial owners of Common Stock that such
institutions hold of record. The JMI Nominees, as well as Mr. McMullin, together
with employees and advisers of JMI and its affiliates, may participate in the
solicitation of proxies.
JMI has retained D.F. King & Co., Inc. to assist it in the solicitation of
proxies and for related services. Approximately 20 employees of D.F. King & Co.,
Inc. will engage in the solicitation. JMI has agreed to pay D.F. King & Co.,
Inc. an estimated fee of up to $30,000 and has agreed to reimburse it for its
reasonable out-of-pocket expenses. D.F. King & Co., Inc. will solicit proxies
for the Annual Meeting from individuals, brokers, banks, nominees and other
institutional holders. JMI estimates that its total expenditures relating to
this proxy solicitation, including fees of D.F. King & Co., will be
approximately $________. Total expenditures to date relating to this proxy
solicitation have been approximately $50,000.
The entire expense of preparing and mailing this Proxy Statement and the
total expenditures relating to the solicitation of proxies (including, without
limitation, costs, if any, related to advertising, printing, fees of attorneys,
financial advisors, solicitors, consultants, accountants, public relations,
transportation and litigation) will be borne by JMI.
- 26 -
<PAGE>
JMI expects to seek reimbursement from the Company for its expenses in
connection with this proxy solicitation if the JMI Nominees are elected to the
Board of Directors. This request will not be submitted to a stockholder vote.
ADDITIONAL INFORMATION
Reference is made to the Proxy Statement that JMI expects will be filed by
the Board of Directors of the Company for information concerning the Common
Stock (including the number of issued and outstanding shares as of the Record
Date), beneficial ownership of Common Stock by, and other information
concerning, the Company's management and directors, the Company's independent
public accountants, the principal holders of Common Stock and procedures for
submitting proposals for consideration at the 1999 Annual Meeting.
Stockholders are referred to the Company's Proxy Statement with respect to
the compensation and remuneration paid and payable and other information related
to the Company's officers and directors, beneficial ownership of the Company's
securities and the procedures for submitting proposals for consideration at the
2000 annual meeting of the stockholders of the Company.
Stockholders of the Company are not entitled to appraisal rights in
connection with the matters set forth in this Proxy Statement.
Except as otherwise noted herein, the information concerning the Company
has been taken from or is based upon documents, and records on file with the
Securities and Exchange Commission and other publicly available information. JMI
does not take responsibility for the accuracy or completeness of the information
contained in such documents and records, or for any failure by the Company to
disclose events that may affect the significance or accuracy of any such
information.
Time is critically short. Please sign, date and mail the enclosed WHITE
PROXY CARD today in the envelope provided. Only your latest dated Proxy Card
will count.
If you have any questions about giving your proxy or require assistance in
voting your shares of Common Stock, please call:
Seymour Holtzman Richard Huffsmith
Jewelcor Companies Jewelcor Companies
100 North Wilkes-Barre Boulevard or 100 North Wilkes-Barre Boulevard
Wilkes-Barre, PA 18702 Wilkes-Barre, PA 18702
Phone: (800) 880-6972 Phone: (800) 880-6972
- 27 -
<PAGE>
JEWELCOR MANAGEMENT, INC.
September _____, 1999
- 28 -
<PAGE>
ANNEX A
TRANSACTIONS IN DESIGNS, INC. COMMON STOCK
BY JMI AND JMI NOMINEES
The following table sets forth information with respect to all purchases of
Common Stock of the Company by JMI during the past two years. Except as set
forth below, to the knowledge of JMI, no participant in this solicitation or JMI
Nominee has purchased or sold securities of the Company within the past two
years.
JEWELCOR MANAGEMENT, INC.
Trade Date Number of Shares Purchased Total Cost
10/26/98 50,000 $36,765.00
11/9/98 225,000 $164,265.00
11/10/98 166,700 $105,036.00
11/17/98 600,000 $330,015.00
11/30/98 528,500 $340,897.50
Please see the section titled "Information about JMI" in this Proxy Statement
for information regarding the relationship between JMI, Mr. Seymour Holtzman and
certain other persons.
- 29 -
<PAGE>
ANNEX B
VIA FEDERAL EXPRESS
April 28, 1999
The Board of Directors
Designs, Inc.
66 B Street
Needham, MA 02194
Attn: Mr. Joel Reichman,
President and Chief Executive Officer
Gentlemen:
Subject to the terms and conditions hereof, Jewelcor Management, Inc.
("JMI") is pleased to submit the following proposal pursuant to which JMI and
Designs, Inc. ("Designs") will explore the purchase by JMI of all of the issued
and outstanding capital stock of Designs.
1. Consideration: JMI is prepared to pay $3.65 for each share of
Designs' common stock. The per share consideration represents a significant
premium over the recent trading range for Designs' common stock and delivers
significant current value to Designs' shareholders.
2. Structure: JMI (or its affiliates) will acquire Designs in a cash
tender offer for all of the outstanding common stock of Designs at $3.65 per
share (the "Tender Offer"), subject to the condition that not less than 51% of
the outstanding common stock is tendered. We will commit to a merger (the
"Merger") between Designs and a newly formed affiliate of JMI as promptly as
practical following completion of the Tender Offer, in which any shares of
Designs common stock not tendered will be exchanged for $3.65 in cash. This
proposal does not constitute a binding commitment and does not reflect all
matters upon which agreement must be reached in order to complete this
transaction. The Tender Offer and the Merger would be accomplished through an
appropriate merger
<PAGE>
The Board of Directors
Designs, Inc.
April 28, 1999
Page Two (2)
agreement containing customary representations and warranties, conditions and
other terms, including a customary termination fee.
3. Conditions: The proposed acquisition would be funded, in part, by new
financing of approximately $20 million of equity and $40 million of debt. The
equity portion would be funded by JMI or its affiliates and other investors
(including any existing shareholders of Designs that may join with JMI in
consummating the proposed acquisition). In regard to the debt financing, we have
had significant discussions with several lenders and are currently reviewing
several financing proposals. We are highly confident that the debt financing
required for this transaction is available and that we can speedily and
efficiently complete a transaction to the satisfaction of the Designs' Board of
Directors and shareholders. Our proposal is subject to i) the completion of a
satisfactory inventory appraisal by JMI's independent appraisal expert, which
could impact the financing required by JMI for this transaction, ii) the
satisfactory resolution of the $5 million tax assessment by the Internal Revenue
Service for the year ending 1992 referred to in the Designs' 1997 Annual Report,
iii) Levi Strauss & Co.'s prior written consent to the assignment, sublicense,
or transfer of Designs' rights and obligations under the Amended and Restated
Trademark License Agreement ("Agreement") made as of October 31, 1998 by and
between Levi Strauss & Co and Designs, Inc, to JMI or its affiliates as set
forth in paragraph 19 of the Agreement, and iv) an amendment by the Board of
Directors of Designs to the Shareholder Rights Agreement ("Rights Agreement")
dated May 1, 1995 providing that the Rights Agreement is not applicable to this
proposed transaction (including any transaction where existing shareholders of
Designs join with JMI in submitting a bid for the purchase of all of the
outstanding shares of Designs' common stock). The consummation of the
transaction would also be subject to the expiration of the waiting period under
the Hart-Scott-Radino Antitrust Improvements Act.
4. Timing: We believe an acquisition agreement could be fully negotiated
and executed within 10 to 14 days from the date your Board authorizes you to
proceed with this proposal.
5. Exclusivity: During the period commencing from your acceptance of
this proposal and ending 14 days thereafter or such earlier date as JMI and
Designs mutually
<PAGE>
The Board of Directors
Designs, Inc.
April 28, 1999
Page Three (3)
agree to discontinue discussions, Designs hereby agrees that it will not,
directly or indirectly, through any officer, director, employee, affiliate or
agent or otherwise, take any action to solicit, initiate, entertain, encourage
or support any inquiry, proposal or offer from, furnish any information to, or
participate in any negotiations with, any third party regarding any acquisition
of Designs, any merger or consolidation with or involving Designs or any
acquisition of any material portion of the stock or assets of Designs. Designs
agrees that any such negotiations in progress immediately prior to its
acceptance of this proposal will be suspended during such period and that
Designs will not accept or enter into any agreement, arrangement or
understanding regarding any such third party acquisition transaction during such
period.
Our proposal will be void and shall be considered withdrawn if it is not
accepted by 5:00 p.m. E.D.T. on May 7, 1999.
We look forward to working with you and to the successful completion of
this transaction. If you have any questions regarding this proposal, please do
not hesitate to call Jeff Unger at (561) 447-4713.
Sincerely,
Seymour Holtzman
Chairman and Chief Executive Officer
AGREED AND ACCEPTED AS OF MAY ______, 1999
- ------------------------------------------------
DESIGNS, INC.
<PAGE>
ANNEX C
June 24, 1999
Mr. James G. Groninger
Chairman
Special Committee of the
Board of Directors
Designs, Inc.
66 B Street
Needham, MA 02494
Dear Mr. Groninger:
Your letter of June 11, 1999 is full of inaccuracies, material
misrepresentations, and mischaracterizations as to what really occurred over the
past few months. The statement that the company has "promptly and diligently"
provided us with the information necessary to satisfy the conditions in our
April 28, 1999 proposal is preposterous. In my opinion, the intention of your
letter is to mislead the shareholders to give them the impression that you have
provided us with everything we required, and have done so on a timely basis.
That is clearly not the case.
The company has not met the conditions contained in my April 28, 1999
proposal in which we requested permission to speak with the existing
shareholders of the company, including Stanley Berger, to discuss their possible
interest in this proposed transaction. Designs denied this request, with the
limited exception of allowing Stanley Berger to speak to Levi Strauss on our
behalf. The only thing that you have essentially granted us is to use Mr. Berger
as a reference, which is not what we requested. It makes no sense to us to go
forward (and incur even more fees and expenses) unless we have a clear
<PAGE>
Page Two (2)
Mr. James G. Groninger
June 24, 1999
indication from Designs' other large shareholders of whether the terms of our
proposal would be well received, and whether we can work with these
shareholders.
The following are additional instances where the company has denied or
delayed providing us the information necessary to fully conduct our due
diligence:
$5 Million Tax Assessment: Despite numerous requests, it took us almost
three months to get the information regarding the IRS $5 million tax
assessment and we still have not been allowed to speak with Coopers &
Lybrand, the accountants that prepared the tax return.
$2.3 Million Trust Agreement: The company reported that it established
a $2.3 million trust for the purpose of funding "golden parachutes" for
Messrs. Reichman and Semel and Ms. Faulkner. I presume the company had
to borrow the money to fund this trust, and consequently, the
shareholders are burdened by this significant interest expense. How can
the company justify this needless substantial expense when the company
lost approximately $76 million over the past 2 years. We have made
numerous requests to the company for a copy of this document, but it
has not been produced. Why?
Shields & Company, Inc. Engagement Letter: We have made numerous
requests for the engagement letter between Designs, Inc. and Shields &
Company, but the company has not given us a copy. The amount of the fee
payable to Shields & Company could be a substantial expense in this
transaction. Why?
Audit Work Papers: We have repeatedly asked the company for permission
to review the current auditor's (Arthur Andersen) work papers, but they
have not been provided to us. Why?
<PAGE>
Page Three (3)
Mr. James G. Groninger
June 24, 1999
Inventory Appraisal: The proposals we received for financing require an
inventory appraisal. The professional inventory evaluator that we hired
at great expense was delayed access to the stores and other relevant
information by the company, which caused additional delays of
approximately four weeks.
Other Requests Which Were Denied or Delayed:
Corporate Minutes
Store Sales Data
Corporate Contracts and Agreements
Explanation of Certain Items on the Company's Balance Sheet
Executive Benefits
Your refusal to allow us to speak with existing shareholders, and your
failure to provide the above information on a timely basis has prevented me from
concluding financing arrangements. Although we have several proposals for
financing, the fees for obtaining a financing commitment in this proposed
transaction would amount to in excess of $300,000, and the company would like me
to incur that additional expense without knowing whether we have a deal.
We have already spent approximately $500,000 in time and money in an
attempt to move this process forward for the benefit of all shareholders, and
the inference that we are less than sincere is appalling. It is clear to me that
the company's agenda is to maintain the status quo, and not to sell the company
as previously promised. The company's dilatory tactics have frustrated us and
caused us to needlessly waste time and money, and any suggestion that you have
been cooperative is ludicrous.
We believe that your correspondence and the recent 10-Q filing are
false and misleading and may have violated securities laws, and we demand that
you issue a curative statement. I had hoped that the management and Board of
Directors of the company would have acted more responsibly in carrying out their
fiduciary duty to the shareholders.
<PAGE>
Page Four (4)
Mr. James Groninger
June 24, 1999
Our efforts have been continually thwarted by the fact that Designs
failed to respond to our requests on a timely basis, failed to provide all of
the information we requested, provided us with inaccurate and incomplete
information, and made material misrepresentations concerning the Company and its
business. And most importantly, you refused to satisfy all of the conditions of
our proposal.
In view of these circumstances, we are withdrawing our proposal. We
believe that it is in everyone's best interest to let the shareholders decide
the future of the company at the Annual Meeting.
Sincerely,
Seymour Holtzman
Chairman and Chief Executive Officer
<PAGE>
ANNEX D
VIA TELEFAX (781) 449-8666
June 30, 1999
Mr. James G. Groninger
Mr. Bernard M. Manuel
Mr. Peter L. Thigpen
Special Committee of the
Board of Directors
Designs, Inc.
66 B Street
Needham, MA 02494
Gentlemen:
We were appalled by the inaccurate and misleading statements made by
the Special Committee in Designs, Inc.'s June 25, 1999 Press Release. Designs'
continued attempts to mislead the company's shareholders and impugn my integrity
are unconscionable. Given the company's continued refusal to cooperate with our
legitimate requests for information and management's apparent lack of commitment
to a sale of the company for the benefit of all shareholders, your attempts to
blame me for this failed transaction are outrageous.
Since the Special Committee was purportedly created for the purpose of
selling the company, each of you should be aware of our numerous requests for
material information necessary to conduct our due diligence, and the fact that
Designs failed to provide this information.
As I stated in my June 24, 1999 letter to Mr. Groninger, Designs,
despite our repeated requests:
1. FAILED to provide us with a copy of the $2.3 million trust agreement
that was created last month to fund "golden parachute" benefits for
Designs' executives Joel Reichman, Scott Semel and Carolyn Faulkner.
<PAGE>
Page Two (2)
Designs, Inc.
June 30, 1999
2. FAILED to make arrangements for us to speak with Coopers & Lybrand,
the accounting firm that prepared the company's tax returns,
concerning the $5 million tax assessment. (It also took us
approximately 2 1/2 months to get other information concerning this
$5 million tax assessment.)
3. FAILED to provide us with a copy of the engagement letter between
Designs, Inc. and Shields & Company, Inc., which could reveal a
substantial expense in the proposed transaction.
4. FAILED to provide permission for our auditors to review all of the
company's auditor's work papers, which are routinely provided to a
potential buyer in a transaction of this nature.
5. FAILED to permit us to speak with other shareholders of the company
to determine if they were interested in joining us in this proposed
transaction, which was a condition contained in our initial
proposal.
Due to our initial fear that the company might not be committed to the
sales process and might not timely provide the information that we requested, we
have kept detailed notes as to what information we requested, when we requested
the information, and the company's responses to our requests.
Clearly, the information that we requested was material to the proposed
transaction. Had all of the information been provided to us, and provided
promptly, we would have had more than enough time to properly evaluate the
company and pursue the transaction contemplated by our proposal.
As you know, we have had substantive communications with various
financial institutions regarding the financing of our proposal. We were unable
to conclude our financing arrangements as a result of your conduct.
Based on these facts, I am shocked and dismayed by the statement in
Designs' press release that "the Special Committee believed that all information
requests by Mr. Holtzman and his representatives concerning these due diligence
matters were complied with promptly." This statement belies the facts. Moreover,
your statement that "we are disappointed that Mr. Holtzman has withdrawn his
proposal" is ludicrous. Management's reluctance to pursue a legitimate proposal
shows that they are not fully committed to a sale of the company.
<PAGE>
Page Three (3)
Designs, Inc.
June 30, 1999
While conducting our due diligence on the proposed transaction, there
were numerous times that we gave serious consideration to withdrawing our
proposal due to Designs' conduct, but we continued this process out of deference
to the other shareholders. However, when it became clear to us that we were not
going to receive the information we requested, we could not justify the expenses
that we were incurring in continuing the matter.
In regard to Levi Strauss, as contemplated by our original proposal, we
specifically asked the company for permission to speak with Stanley Berger, the
Chairman of the Board, the Founder, and the largest individual shareholder of
the company, and an individual with a longstanding relationship with Levi
Strauss, to determine if he was interested in participating in this proposed
transaction. If the company would have permitted us to seek to involve Mr.
Berger in this transaction, which it refused to do, we believe that it would
have provided the most productive line of communication with Levi Strauss.
Although we have withdrawn our proposal to purchase the company as a
result of Designs' tactics, we still believe that the recently established $2.3
million trust is material and that the trust agreement should be filed with the
Securities and Exchange Commission. The $2.3 million used to fund this trust
represents approximately $.15 per share, which is approximately 10% of the
current market capitalization of the company. Shareholders of Designs should
have the right to know the exact terms of this trust, how it was funded and how
much it cost them to "feather the nests" of the top executives. I also believe
that the details of the $5 million tax assessment are material and should be
disclosed.
Due to the numerous false and misleading statements contained in Mr.
Groninger's June 11, 1999 letter (which was filed with Designs' Form 10-Q dated
June 15, 1999) and the June 25, 1999 press release, we insist that the company
issue a curative statement to inform the shareholders and investing public of
the true facts.
Sincerely,
Seymour Holtzman
Chairman and Chief Executive Officer
<PAGE>
FORM OF PROXY
DESIGNS INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF JEWELCOR MANAGEMENT, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON SEPTEMBER 22, 1999
The undersigned stockholder of Designs, Inc. hereby appoints
____________________ and _________________, and each of them with full power of
substitution and to each substitute appointed pursuant to such power, as proxy
or proxies, to cast all votes, as designated hereon, which the undersigned
stockholder is entitled to cast at the Annual Meeting of the Stockholders of
Designs, Inc. to be held at 1:00 p.m. local time on September 22, 1999, at One
Post Office Square, Boston, Massachusetts 02109, and, at any and all
adjournments and postponements thereof, with all powers which the undersigned
would possess if personally present (i) as designated below with respect to the
matters set forth below and described in the accompanying Notice and Proxy
Statement, and (ii) in their discretion with respect to any other business that
may properly come before the Annual Meeting. The undersigned stockholder hereby
revokes any proxy or proxies heretofore given by the undersigned to others for
such Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED AND RETURNED WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED (1) FOR THE ELECTION OF ALL NOMINEES LISTED IN PROPOSAL 1 AND (2)
FOR PROPOSAL 2.
PLEASE ACT PROMPTLY.
PLEASE SIGN AND DATE THE REVERSE SIDE OF THIS PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE TODAY
1. ELECTION OF DIRECTORS: To elect the nominees for director below for a term
of one year;
FOR all nominees listed below |_| WITHHOLD AUTHORITY |_|
(except as marked to the to vote for all nominees
contrary below) listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.)
John J. Schultz Robert L. Patron
Jeremiah P. Murphy, Jr. Jesse H. Choper
Joseph Pennacchio
2. Jewelcor Management, Inc.'s proposal to terminate the Shareholder Rights
Agreement, dated as of May 1, 1995.
FOR |_| AGAINST |_| ABSTAIN |_|
<PAGE>
This proxy may be revoked prior to the time it is voted by delivering to
the Secretary of the Company either a written revocation or a proxy bearing a
later date or by appearing at the Annual Meeting and voting in person.
Dated: ___________________________________
Signature: _______________________________
Signature: _______________________________
Title: ___________________________________
Please date and sign here exactly as name
appears hereon. When signing as attorney,
administrator, trustee or guardian, give
full title as such; and when stock has
been issued in the name of two or more
persons, all must sign.
