UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE TO
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
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DESIGNS, INC.
(Name of Subject Company (Issuer))
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DESIGNS, INC. (Offeror/Issuer)
(Name of Filing Persons (Identifying Status as Offeror, Issuer or Other Person))
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
25057L10
(CUSIP Number of Class of Securities)
Dennis Hernreich
c/o Designs, Inc.
66 B Street
Needham, Massachusetts 02494
(781) 444-7222
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications on Behalf of Filing Persons)
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Copy to:
Peter G. Smith, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
(212) 715-9100
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|_| Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
|_| third-party tender offer subject to Rule 14d-1.
|X| issuer tender offer subject to Rule 13e-4.
|_| going-private transaction subject to Rule 13e-3.
|_| amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the results
of the tender offer: |_|
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This Amendment No. 1 to Schedule TO amends and supplements the Tender
Offer Statement on Schedule TO originally filed by Designs, Inc., a Delaware
corporation (the "Company"), with the Securities and Exchange Commission (the
"SEC") on November 15, 2000. This Amendment No. 1 to Schedule TO relates to the
tender offer by the Company to purchase up to 1,500,000 shares of its common
stock, par value $0.01 per share, or such lesser number of shares as are
properly tendered and not properly withdrawn, at a price not greater than $3.00
nor less than $2.50 per share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated November 14,
2000 and the related Letter of Transmittal, which, as amended or supplemented
from time to time, constitute the offer (the "Offer"). Except as amended and
supplemented hereby, the Schedule TO filed by the Company on November 15, 2000
remains in effect.
Item 4. Terms of the Transaction.
Item 4 of the Schedule TO is hereby amended and supplemented as follows:
o Extension. As announced by press release dated December 18,
2000, the Company has extended the offer until 5:00 p.m., Eastern time, on
Friday, December 22, 2000, which shall be the Expiration Date for the offer
unless and until extended by the Company in its sole discretion. The offer,
proration period and withdrawal rights will expire at that time, unless the
offer is further extended.
o Price Range. The price range minimum has been increased from
$2.20 to $2.50 per share. The Company will, upon the terms and subject to the
conditions of the offer, determine a single per share price (not greater than
$3.00 nor less than $2.50 per share), net to the seller in cash (the "Purchase
Price"), that it will pay for shares validly tendered and not withdrawn pursuant
to the offer, taking into account the number of shares so tendered and the
prices specified by tendering stockholders. The Company will select the lowest
Purchase Price that will allow it to buy 1,500,000 shares of its common stock
validly tendered and not withdrawn pursuant to the offer (or such lesser number
of shares as are validly tendered at prices not greater than $3.00 nor less than
$2.50 per share, or were validly tendered prior to the date hereof at prices
below $2.50 but not less than $2.20 per share).
o Proration. The Company understands that Rule 13e-4(f)(3)(ii)
under the Securities Exchange Act of 1934 would require it to accept all shares
tendered unconditionally before accepting by lot shares tendered conditionally,
and does not mean to suggest otherwise by the language of "Number of Shares;
Proration--Priority" in the Offer to Purchase.
o Forward-Looking Statements. In connection with the "Disclosure
Regarding Forward-Looking Statements" in the Offer to Purchase, the Company
notes that the so-called "safe harbor" provisions of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 do
not apply to statements in connection with tender offers.
o Conditions. All offer conditions, other than necessary
government approvals, must be satisfied or waived prior to the expiration of the
offer. The Company will not assert any conditions to the offer after expiration.
Following the definitive documentation of the agreed-upon amendment
to the Company's credit facility, the Company anticipates no potential for a
material adverse change in the availability of bank funding for the offer and
deletes that reference in condition (4) under "Certain Conditions of the Offer"
in the Offer to Purchase.
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The offer is subject to reasonable satisfaction of the stated
conditions, and the Company is limited to reasonable discretion in determining
whether any condition has been satisfied. Conditions (1) and (3) under "Certain
Conditions of the Offer" in the Offer to Purchase are clarified to refer, in
each case, to "the reasonable judgment of Designs, Inc." rather than "the sole
judgment of Designs, Inc." Condition (4) is clarified to provide as follows:
"(4) any change shall occur or be threatened in the
business, condition (financial or otherwise), income,
operations or prospects of Designs, Inc. and its
subsidiaries, taken as a whole, other than voluntary
action by Designs, Inc., which in the reasonable
judgment of Designs, Inc. is or may be material to
the consummation of the offer or otherwise material
to Designs, Inc. and its subsidiaries, taken as a
whole; or"
For purposes of Condition (3), the Company would consider a decrease
of more than 20% in the market price of the Company's shares to be a
"significant decrease".
o Certain U.S. Federal Income Tax Consequences. The Company
withdraws its statement in the last paragraph under "Certain U.S. Federal Income
Tax Consequences" in the Offer to Purchase that the tax discussion set forth
therein is "for general information only."
Item 5. Past Contacts, Transactions, Negotiations and Agreements.
Item 5 of the Schedule TO is hereby amended and supplemented as follows:
o Certain Past Contracts. As discussed in the Offer to Purchase,
Jewelcor Management Inc., the Company's largest stockholder, engaged in certain
discussions with the then-management of the Company regarding a possible
acquisition. After those discussions in the spring of 1999 ended without
agreement, Jewelcor stated that in its opinion the Company had failed to comply
with Jewelcor's conditions and requests and to provide all of the information
Jewelcor sought in connection with its due diligence. The then-management of the
Company disagreed and later stated that it believed that Jewelcor had not
demonstrated sufficient progress in obtaining financing and other matters.
Jewelcor took issue with that description. For the positions expressed, see
Amendment No. 3 to Jewelcor's Schedule 14A with respect to Designs, Inc. filed
with the SEC on September 3, 1999, especially pages 18-20, and Designs, Inc.'s
Schedule 14A filed with the SEC on August 30, 1999, especially pages 20-22,
which are incorporated by reference herein for their descriptions of contacts
between Jewelcor and the Company regarding a possible acquisition. Reference is
made to the entire text of such documents for information concerning contacts
between Jewelcor and the Company regarding the election of directors. At the
October 4, 1999 Annual Meeting of Stockholders of the Company, stockholders
voted to replace the entire incumbent Board of the Company with a slate of
nominees proposed by Jewelcor. Jewelcor did not reinitiate any acquisition
proposal thereafter. Additional information regarding contacts concerning the
Company's directors is found in the Company's Proxy Statement on Schedule 14A
for its 2000 Annual Meeting of Stockholders, filed with the SEC on June 1, 2000,
which is also incorporated by reference herein.
Item 6. Purposes of the Transaction and Plans or Proposals.
Item 6 of the Schedule TO is hereby amended and supplemented as follows:
o Background and Purpose of the Offer. The Company's beliefs,
stated in the Offer to Purchase, that its shares are undervalued in the public
market, that the offer is consistent with the long-
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term corporate strategy of seeking to increase stock value, that there has been
limited liquidity in the marketplace for the Company's stock and that small
purchases or sales can cause significant fluctuations in the stock price,
represent only the beliefs and opinions of the Company's management and should
be taken as such. Those beliefs are based upon, among other things, the
Company's review of the recent trading prices of the Company's stock, the
volatility of such prices and their response to trading activity, higher stock
prices prevailing at other times in the Company's history, and management's
opinions of the future potential for the Company's performance. Stockholders
should rely on their own consideration of these and other matters in determining
whether, and at what price, to tender shares.
o Certain Effects of the Offer. If a total of 1,500,000 shares
are purchased pursuant to the offer, constituting approximately 9.5% of the
total shares outstanding, each stockholder's remaining equity interest in the
Company will proportionately increase by approximately 10.5%. That will
proportionately increase both earnings per share and losses per share. Further,
stockholders who do not tender shares in the offer will hold shares of a company
whose bank indebtedness has increased by up to approximately $4,765,000
(assuming that the maximum aggregate purchase price and all fees and expenses
are financed by borrowings under the Company's credit facility). Finally,
liquidity problems may increase as a result of the offer.
The Company's Board of Directors determined to commence the offer
last month because, among other things, the Company had just announced a
significant agreement with the landlord of its executive offices, as well as
results for the third quarter. The Board did not consider any alternatives to
the offer, after the Company had earlier pursued a publicly announced market
stock repurchase program.
Item 7. Source and Amount of Funds or Other Consideration.
Item 7 of the Schedule TO is hereby amended and supplemented as follows:
o Amendment and Restatement of Credit Facility. As the Company
announced on December 12, 2000, it has entered into a definitive Second Amended
and Restated Loan and Security Agreement with Fleet Retail Finance Inc., dated
as of December 7, 2000, which, among other things, completes the anticipated
definitive documentation of the agreement in principle between the Company and
Fleet referred to under "Source and Amount of Funds" and elsewhere in the Offer
to Purchase. The amendment, among other things, confirmed the Company's ability
to use funds for the purchase of its stock, including pursuant to the offer. The
amendment also provided for an extension of the credit facility to November 30,
2003, reduced the borrowing costs and tied future interest costs to excess
borrowing availability, eliminated all existing financial performance covenants
and adopted a minimum availability covenant, increased the amount that can
potentially be borrowed by increasing the advance rate formula to 68% of the
Company's eligible inventory, and reduced the total commitment from $50 million
to $45 million. Borrowings under this credit facility bear interest at variable
rates based on FleetBoston, N.A.'s prime rate or the London Interbank Offering
Rate ("LIBOR"). These interest rates at October 28, 2000 were 9.50% for prime
and 8.90% for LIBOR. Based upon sensitivity analysis as of October 28, 2000, a
10% increase in interest rates would result in a potential loss to future
earnings of approximately $168,000 on an annualized basis.
o Certain Additional Information Regarding Bank Financing and
Financial Statements. For additional information regarding the Company's bank
financing, reference is made to the Company's Quarterly Report on Form 10-Q for
the fiscal quarter ended October 28, 2000, filed with the SEC on December 12,
2000, and to the text of the Second Amended and Restated Loan and Security
Agreement filed as Exhibit 10.12 to that Form 10-Q, both of which are
incorporated by reference herein. That Form
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10-Q, as well as the Company's Annual Report on Form 10-K for the fiscal year
ended January 29, 2000 (which is also incorporated by reference herein) include,
at pages 2-4 and 6 of the Form 10-Q and at pages 11-27 through 30 of the Form
10-K, certain audited and unaudited financial information regarding the Company,
which the Company also specifically incorporates by reference in response to
Item 10 of this Schedule TO.
Item 10. Financial Statements.
See Item 7 of this Schedule TO.
ITEM 12. MATERIAL TO BE FILED AS EXHIBITS.
Item 12 is hereby amended by adding the following exhibits:
12(a)(1)(G) Supplement to Offer to Purchase dated December 18, 2000
12(b)(1) Amended and Restated Loan and Security Agreement, dated as of
December 7, 2000, between Designs, Inc. and Fleet Retail
Finance Inc., as agent for the Lenders identified therein
(included as Exhibit 10.12 to Designs, Inc.'s Form 10-Q dated
December 12, 2000 and incorporated herein by reference)
99.1 Press Release of Designs, Inc. dated December 15, 2000
99.2 Press Release of Designs, Inc. dated December 18, 2000
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After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: December 18, 2000
DESIGNS, INC.
By: /s/ DENNIS HERNREICH
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Name: Dennis Hernreich
Title: Senior Vice President and
Chief Financial Officer
