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DESIGNS, INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENTJUNE 13, 1995
The Annual Meeting of Stockholders of Designs, Inc. (the "Company") will be
held at the Hyatt Regency Cambridge, 575 Memorial Drive, Cambridge,
Massachusetts at 8:30 A.M. on Tuesday, June 13, 1995 for the following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Stockholders or Special Meeting in lieu thereof.
2. To transact such further business as may properly come before the
Annual Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on April 18, 1995 as
the record date for the determination of the stockholders entitled to notice of,
and to vote at, the Annual Meeting. Accordingly, only stockholders of record at
the close of business on that date will be entitled to vote at the Annual
Meeting. The transfer books will not be closed.
By order of the Board of Directors,
SCOTT N. SEMEL
Chestnut Hill, Massachusetts
May 12, 1995
DESIGNS, INC. 1244 BOYLSTON STREETCHESTNUT HILL, MASSACHUSETTS02167
PROXY STATEMENT ANNUAL MEETING OF STOCKHOLDERSJUNE 13, 1995USE OF PROXIES
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about May 12, 1995, in connection with the solicitation by
the Board of Directors of Designs, Inc. (the "Company") of proxies to be used at
the Annual Meeting of Stockholders, to be held on Tuesday, June 13, 1995, and at
any and all adjournments thereof (the "Annual Meeting"). When proxies are
returned properly executed, the shares represented will be voted in accordance
with the stockholders' direction. Stockholders are encouraged to vote on the
matters to be considered. However, if no choice has been specified by a
stockholder, the shares will be voted as recommended by management. Any
stockholder may revoke such stockholder's proxy at any time before it has been
exercised by attending the Annual Meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Company.
A plurality of the votes of shares of the Company's Common Stock, $.01 par
value ("Common Stock"), properly cast is required to elect directors. No votes
may be taken at the Annual Meeting, other than a vote to adjourn, unless a
quorum has been constituted consisting of a majority of the outstanding shares
of Common Stock (as of the record date) present or represented at the Annual
Meeting. Any stockholder who attends the Annual Meeting may not withhold such
stockholder's shares from the quorum count by declaring such shares absent from
the Annual Meeting. Shares voted to abstain or to withhold as to a particular
matter, or as to which a nominee (such as a broker holding shares in street name
for a beneficial owner) has no voting authority in respect of a particular
matter, shall be deemed present for quorum purposes. Such shares, however, will
not be deemed to be voting with respect to election of directors and will not
count as votes for or against such election. Votes will be tabulated by the
Company's transfer agent subject to the supervision of persons designated by the
Board of Directors as inspectors.
ITEM 1ELECTION OF DIRECTORS
The Board of Directors has determined, in accordance with the By-Laws of
the Company, as amended (the "By-Laws"), that the Board of Directors to be
elected at the Annual Meeting shall consist of six members. There are six
nominees, each of whom currently serves as a member of the Board of Directors of
the Company, to be elected to serve on the Board until the 1996 Annual Meeting
of Stockholders or Special Meeting in lieu thereof. Although management expects
all nominees to accept nomination and to serve if elected, proxies may be voted
for a substitute if a nominee is unable to serve at the time of election.
The nominees for directors are:
NAME AGE POSITION SINCE
----------------------------------------- --- ------------------------------------ --------
Stanley I. Berger........................ 65 Chairman of the Board and Director 1976
Joel H. Reichman......................... 45 President, Chief Executive Officer 1987
James G. Groninger....................... 51 Director 1987
Bernard M. Manuel........................ 47 Director 1990
Melvin Shapiro........................... 80 Director 1990
Peter L. Thigpen......................... 55 Director 1994
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following named person was the only person or entity known by the
Company to be the beneficial owner of more than five percent of the issued and
outstanding shares of Common Stock as of April 7, 1995. The Company is informed
that such person has sole voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by him, subject to community
property laws where applicable.
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OF CLASS(1)
----------------------------------------------------------------- ------------ -----------
Stanley I. Berger................................................ 1,102,199(2) 6.9%
1244 Boylston Street
Chestnut Hill, Massachusetts02167<FN>
(1) A total of 15,749,187 shares of Common Stock were outstanding as of April 7,1995.
(2) Includes 134,999 shares issuable upon exercise of stock options.
As of April 7, 1995, the directors of the Company, the executive officers
of the Company and a former executive officer of the Company named in the
Summary Compensation Table set forth below, and the directors, executive
officers and such former executive officer as a group were the beneficial owners
of the indicated amount of issued and outstanding shares of Common Stock. Except
as indicated, all of them have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable.
NAME AND TITLE OWNED OF CLASS(1)
----------------------------------------------------------------- ------------ -----------
Stanley I. Berger................................................ 1,102,199(2) 6.9%
Chairman of the Board and Director
Joel H. Reichman................................................. 124,954(3) *
President, Chief Executive Officer and Director
Scott N. Semel................................................... 107,031(4) *
Senior Vice President, General Counsel and Secretary
Geoffrey M. Holczer(5)........................................... 30,000 *
Senior Vice President, Chief Financial Officer and Treasurer
Carolyn R. Faulkner.............................................. 1,200(6) *
Vice President and Controller
James G. Groninger............................................... 13,800(7) *
Melvin Shapiro................................................... 34,050(8) *
Bernard M. Manuel................................................ 22,800(9) *
Peter L. Thigpen................................................. 3,833(10) *
Directors and Executive Officers as a group (9 persons).......... 1,439,867(11) 8.9%
* Less than 1%.
(1) A total of 15,749,187 shares of Common Stock were outstanding as of April7, 1995.
(2) Includes 134,999 shares issuable upon exercise of stock options.
(3) Includes 117,497 shares issuable upon exercise of stock options, as well as
280 shares owned by Mr. Reichman's wife and 427 shares owned by Mr.
Reichman's children, as to which 707 shares Mr. Reichman disclaims
(4) Includes 102,081 shares issuable upon exercise of stock options, as well as
450 shares owned by Mr. Semel's daughter, as to which he disclaims
(5) Mr. Holczer resigned as an officer and employee of the Company in December
(6) Represents 1,200 shares issuable upon exercise of stock options.
(7) Includes 12,000 shares issuable upon exercise of stock options.
(8) Represents 33,600 shares issuable upon exercise of stock options and 450
shares owned by Mr. Shapiro's wife as to which he disclaims beneficial
(9) Represents 22,800 shares issuable upon exercise of stock options.
(10) Includes 3,333 shares issuable upon exercise of stock options.
(11) Includes 427,510 shares issuable upon exercise of stock options exercisable
within 60 days of April 7, 1995. See also Notes 2, 3, 4 and 6 through 10
above for further details concerning such options.
NOMINEES FOR DIRECTOR AND EXECUTIVE OFFICERS
Stanley I. Berger is a founder of the Company and has been its Chairman of
the Board since January 27, 1993. Mr. Berger also served as the Company's Chief
Executive Officer from January 27, 1993 until December 19, 1994. Prior to
January 27, 1993, Mr. Berger had served as the President and Chief Operating
Officer of the Company since 1977. Mr. Berger has been a director of the Company
since its inception. Mr. Berger has been in the retail clothing business for
approximately 25 years. Mr. Berger was a founder of C&S Clothing Inc. prior to
becoming a founder of Slak Shak, Inc., d/b/a You & You for Levi's ("You & You")
in 1970. In 1976, You & You was sold to The GAP Stores, Inc. ("The Gap").
Thereafter it formed The Gap's basis for retail operations in New England. Mr.
Berger also is a partial beneficial owner of Durban Trust, the Company's
landlord for its corporate headquarters.
Joel H. Reichman has been President and Chief Executive Officer of the
Company since December 19, 1994. Prior to that time, he had served as the
Company's President and Chief Operating Officer since January 27, 1993. Mr.
Reichman has been employed by the Company since 1976 and served as its Executive
Vice President from 1985 until January 1993. Prior to joining the Company, he
was employed by The Gap as Assistant to the Regional Manager and by Slak Shak,
Inc. as Assistant to the Vice President, Operations. Mr. Reichman has been
affiliated with Mr. Berger for the past 23 years in the operation of various
retail apparel businesses.
Scott N. Semel, 39, has been employed as General Counsel to the Company
since December 1986. In March 1990, Mr. Semel was elected Secretary and Vice
President of the Company. In March 1994, Mr. Semel was elected Senior Vice
President of the Company.
William D. Richins, 44, became Chief Financial Officer of the Company on
April 17, 1995. Prior to joining the Company, Mr. Richins was Executive Vice
President and Chief Financial Officer of London Fog Corporation, a manufacturer
and retailer of rainwear and outerwear, from 1993 to 1995. From 1991 to 1993, he
was Senior Vice President and Chief Financial Officer of a division of Melville
Corporation, Linens 'n Things, a domestics and home furnishings retailer. From
1989 to 1991, he was Senior Vice President, Chief Financial and Operating
Officer of Laura Ashley, Inc., an apparel and home furnishings retailer and
James G. Groninger was elected a director of the Company in 1987. Mr.
Groninger is currently the founder and president of The Bay South Company, an
investment banking firm. Prior to becoming associated with The Bay South
Company, Mr. Groninger held various positions with PaineWebber Incorporated, an
investment banking and brokerage firm, since prior to 1990, including the
position of Managing Director. Mr. Groninger presently is a member of the Board
of Directors of Cygne Designs, Inc. and NPS Pharmaceuticals, Inc.
Bernard M. Manuel was elected a director of the Company in 1990. Mr. Manuel
is the Chairman of the Board and Chief Executive Officer of Cygne Designs, Inc.,
a private label manufacturing company, and Chairman of the Board and Chief
Executive Officer of Amvent, Inc., an international financial consulting
company. Mr. Manuel has been associated with these companies since prior to
Melvin Shapiro was elected a director of the Company in 1990. Mr. Shapiro
has been a partner in the independent accounting firm of Tofias, Fleishman and
Shapiro, P.C. since prior to 1990.
Peter L. Thigpen was elected a director of the Company in March 1994. Mr.
Thigpen is currently a partner and a founder of Executive Reserves, a consulting
firm specializing in marketing strategy, quality processes and development of
strategic business plans. Prior to becoming associated with Executive Reserves,
Mr. Thigpen held various positions with Levi Strauss & Co. covering a period of
more than 23 years. Prior to leaving the employ of Levi Strauss & Co., Mr.
Thigpen held the position of Senior Vice President, U.S. Operations. Mr. Thigpen
is also a director of The Gymboree Corporation.
All directors hold office until the next Annual Meeting of Stockholders or
Special Meeting in lieu thereof. Executive officers, once elected, serve at the
discretion of the Board of Directors.
During the fiscal year ended January 28, 1995 ("fiscal year 1995"),
non-employee directors of the Company were paid $3,000 plus expenses for each
meeting of the Board of Directors in which they participated. During fiscal year
1995, non-employee directors of the Company were paid, in addition to
reimbursement of expenses, for meetings of committees of the Board in which they
participated as follows: $3,000 for each Compensation Committee meeting; $2,000
for each Management Succession Committee meeting; $1,500 for each Audit
Committee meeting; and $1,500 for each Nominating Committee meeting. During
fiscal year 1995, non-employee directors of the Company were, and during the
fiscal year ending February 3, 1996 ("fiscal year 1996"), such directors will
continue to be, eligible to participate in the Company's 1992 Stock Incentive
Plan, as amended (the "1992 Stock Incentive Plan"). Each non-employee director
of the Company who is elected by the stockholders to the Board initially will
automatically be granted, upon such election, a stock option to purchase 10,000
shares of Common Stock at the then fair market value. Each non-employee director
of the Company who is re-elected by the stockholders to the Board is granted,
upon such re-election, a stock option to purchase 3,000 shares of Common Stock
at the then fair market value. Each of such stock options becomes exercisable in
three equal installments commencing twelve months following the date of grant
and has a ten year term.
Summary Compensation Table. The following Summary Compensation Table sets
forth certain information regarding compensation paid or accrued by the Company
with respect to Stanley I. Berger and Joel H. Reichman, each of whom served as
Chief Executive Officer of the Company during a portion of fiscal year 1995, the
other two executive officers of the Company as of January 28, 1995 and Geoffrey
M. Holczer, a former executive officer of the Company who resigned in December
1994, for the fiscal years ended January 28, 1995, January 29, 1994 and January30, 1993.
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM
NAME AND COMPENSATION COMPENSATION
PRINCIPAL POSITION FISCAL ------------------- AWARDS: ALL OTHER
(AT JANUARY 28, 1995) YEAR SALARY BONUS OPTIONS COMPENSATION(1)
----------------------------------- ------ -------- -------- ------------ ---------------
Stanley I. Berger.................. 1995(2) $462,564 $152,000(3) 35,000 $ 20,989
Chairman of the Board 1994 $460,000 $184,000 25,000 $ 2,106
1993(4) $420,000 $210,000 172,500 $ 216
Joel H. Reichman................... 1995(5) $300,000 $ 91,000(6) 35,000 $ 3,334
President and 1994 $270,000 $108,000 25,000 $ 3,934
Chief Executive Officer 1993(7) $215,000 $107,500 112,500 $ 216
Scott N. Semel..................... 1995 $225,000 $ 68,500(8) 25,000 $ 2,544
Senior Vice President, General 1994 $170,000 $ 68,000 15,000 $ 3,749
Counsel and Secretary 1993 $142,000 $ 71,000 82,500 $ 216
Geoffrey M. Holczer................ 1995(9) $201,164 $ 61,139(10) 25,000 $ 138,589
Senior Vice President, Chief 1994 $200,000 $ 80,000 15,000 $ 3,880
Financial Officer and 1993 $187,500 $ 93,750 82,500 $ 216
Carolyn R. Faulkner................ 1995(11) $ 97,091 $ 16,154(12) 5,000 $ 2,200
Vice President and Controller
(1) The amounts disclosed in this column covering fiscal year 1995 represent
(i) payments to Mr. Berger under his Consulting Agreement in fiscal year
1995 of $20,833; (ii) salary continuation (paid and accrued) and the value
of an automobile transferred to Mr. Holczer under his Employee Separation
Agreement with the Company in the aggregate amount of $136,308; (iii)
payments for insurance premiums for term life insurance for the benefit of
the executive officer (Mr. Berger $156, Mr. Reichman $156, Mr. Semel $156,
Mr. Holczer $156, and Mrs. Faulkner $123); and (iv) matching contributions
made by the Company to the Company's retirement plan (the "401(k) Plan")
established pursuant to Section 401(k) of the Internal Revenue Code of
1986, as amended, for the benefit of the executive officer (Mr. Reichman
$3,178, Mr. Semel $2,388, Mr. Holzcer $2,125, and Mrs. Faulkner $2,077).
(2) Mr. Berger resigned as Chief Executive Officer and an employee of the
Company on December 19, 1994.
(3) Mr. Berger earned a bonus for fiscal year 1995 under the Company's
Executive Incentive Plan ("EIP") in the total amount of $152,000, of which
amount $42,000 was paid by the Company in fiscal year 1996.
(4) Mr. Berger became Chairman of the Board and Chief Executive Officer of the
Company on January 27, 1993.
(5) Mr. Reichman became Chief Executive Officer of the Company on December 19,1994.
(6) Mr. Reichman earned a bonus for fiscal year 1995 under the EIP in the total
amount of $91,000, of which amount $25,000 was paid by the Company in
fiscal year 1996.
(7) Mr. Reichman became President and Chief Operating Officer of the Company on
January 27, 1993.
(8) Mr. Semel earned a bonus for fiscal year 1995 under the EIP in the total
amount of $68,500, of which amount $19,000 was paid by the Company in
fiscal year 1996.
(9) Mr. Holczer resigned as an officer and employee of the Company in December
1994. 122,500 of Mr. Holczer's options that remained unexercised thirty
days following his resignation as an officer and employee of the Company
terminated thirty days following such resignation.
(10) Mr. Holczer earned a bonus for fiscal year 1995 in the amount of $61,139,
all of which will be paid by the Company in fiscal year 1996.
(11) Mrs. Faulkner became a Vice President of the Company in March 1994.
(12) Mrs. Faulkner earned a bonus for fiscal year 1995 in the amount of $16,154,
all of which was paid by the Company in fiscal year 1996.
Option Grants Table. The following Option Grants Table sets forth certain
information as of January 28, 1995 regarding stock options granted during the
fiscal year ended January 28, 1995 by the Company to the current executive
officers and a former executive officer named in the Summary Compensation Table:
OPTION GRANTS IN LAST FISCAL YEAR
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
PERCENT OF PRICE APPRECIATION
TOTAL OPTIONS EXERCISE FOR
NUMBER OF OPTIONS GRANTED TO PRICE PER OPTION TERM(4)
GRANTED TO PURCHASE EMPLOYEES IN SHARE EXPIRATION -------------------
NAME COMMON STOCK(1) FISCAL YEAR(2) ($/SH) DATE(3) 5% 10%
---- ------------------- -------------- --------- ---------- -------- --------
Stanley I. Berger....... 35,000 11.1% $15.25 04/04/04 $335,673 $850,661
Joel H. Reichman........ 35,000 11.1% $15.25 04/04/04 $335,673 $850,661
Scott N. Semel.......... 25,000 7.9% $15.25 04/04/04 $239,767 $607,615
Geoffrey M. Holczer..... 25,000 7.9% $15.25 04/04/04 $239,767 $607,615
Carolyn R. Faulkner..... 5,000 1.6% $ 9.00 07/01/04 $ 28,001 $ 71,719
(1) Options were granted to Messrs. Berger, Reichman, Semel and Holczer under
the 1992 Stock Incentive Plan and become exercisable in three equal annual
installments commencing twelve months following the date of grant. Options
were granted to Mrs. Faulkner under the 1992 Stock Incentive Plan and become
exercisable in five equal installments commencing twelve months following
the date of grant.
(2) Options covering 316,500 shares of Common Stock were granted to employees of
the Company during fiscal year 1995.
(3) All options described above expire ten years following the date of grant.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based upon assumed rates of share price appreciation set by the
Securities and Exchange Commission (the "Commission") of five percent and
ten percent compounded annually from the date the respective options were
granted. Actual gains, if any, are dependent on the performance of shares of
Common Stock. There can be no assurance that the amounts shown will be
Fiscal Year-End Option Table. The following Fiscal Year-End Option Table
sets forth certain information regarding stock options exercised during the
fiscal year ended January 28, 1995 and stock options held as of January 28, 1995
by the current executive officers and a former executive officer named in the
Summary Compensation Table:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED
OPTIONS TO PURCHASE VALUE OF UNEXERCISED
COMMON STOCK AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR END FISCAL YEAR-END(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Stanley I. Berger............ -- -- 123,333 109,167 $ -0- $ -0-
Joel H. Reichman............. -- -- 105,831 89,167 $127,114 $ -0-
Scott N. Semel............... -- -- 93,748 62,500 $193,375 $ -0-
Geoffrey M. Holczer.......... 48,750 $260,943 -- -- $ -- $ --
Carolyn R. Faulkner.......... -- -- 1,200 9,800 $ -0- $ -0-
(1) Value Realized means the difference between the option exercise price and
the market value, as of the date of exercise, of the shares of Common Stock
acquired upon exercise.
(2) Value is based on the last sale price of Common Stock ($7.75 per share) on
Friday, January 27, 1995, as reported by the NASDAQ National Market System,
less the applicable option exercise price.
COMPENSATION COMMITTEE REPORT
Decisions concerning the compensation of the Company's executive officers
generally are made by the two-member Compensation Committee of the Company's
Board of Directors. Each member of the Compensation Committee is a non-employee
director of the Company. The Compensation Committee must make all decisions
concerning stock-based compensation awards in order to qualify the stock-based
plans for exemption under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The following Report summarizes
the Company's executive officer compensation practices and policies for fiscal
COMPENSATION POLICIESThe Company's compensation policies are designed to link executive officer
compensation to the annual and long term performance of the Company and to
provide industry-competitive compensation for such officers. The compensation
mix reflects a balance of annual cash payments, consisting of annual base salary
payments and annual incentive bonus payments, and long term stock-based
incentives in the form of stock options. Annual incentive cash bonuses are
earned by eligible executive officers under the Company's EIP based upon the
achievement of measurable corporate performance goals established prior to or in
the first fiscal quarter of each fiscal year. However, emphasis in incentive
compensation is placed on the more strategic stock-based plans which more
closely align the interests of the executive officers with those of the
stockholders of the Company and which provide incentives to attract individuals
and to motivate and retain executive officers over the long term.
The Company's executive officer compensation consists of two key elements:
(1) an annual component, consisting of base salary and bonus, if any, and (2) a
long term component consisting of the grant of stock
options. The policies with respect to each of these elements, as well as the
basis for determining the compensation of each of the Company's employees who
served as Chief Executive Officer during fiscal year 1995, Stanley I. Berger and
Joel H. Reichman, are described below:
(1) Annual Component: Base Salary and Annual Bonus
Base Salary: Base salaries for executive officers are reviewed and
established annually by reviewing the individual performance of the executive
officers, evaluating the responsibilities of the position and comparing the
executive officers' salaries with those of other comparable executive officers
of other companies in the specialty retail apparel chain store industry (the
"Industry"). The Compensation Committee defines the Industry as public companies
in the specialty retail apparel chain store business with similar sales and
market capitalizations. In connection with base salary amounts set for fiscal
year 1995, members of the Compensation Committee reviewed two
professionally-prepared industry surveys and a survey prepared at the direction
of the Compensation Committee to determine the competitive amounts of base
salary for the Industry. The Compensation Committee also reviews the individual
performance of the executive officers of the Company. Annual base salary
adjustments are influenced by the Company's performance in the previous fiscal
year, the individual's contribution to that performance and the individual's
level of responsibility (which is measured by various factors including, but not
limited to, the number of departments and employees for which the executive
officer is responsible). Base salary rates for fiscal year 1995 for the
individuals who held the position of Chief Executive Officer and the other three
most highly compensated executive officers who held such positions in the prior
year increased on average by approximately 13.5%, compared to a 14.0% increase
for the fiscal year ended January 29, 1994 ("fiscal year 1994").
Annual Bonus: The concept underlying the EIP is to link compensation
to the performance of the Company based on a number of criteria. The
Compensation Committee annually determines which executive officers are eligible
to participate in the EIP for the following fiscal year. Generally, an executive
officer's eligibility is determined based upon an assessment of such officer's
individual performance during the previous fiscal year as well as other factors
which members of the Compensation Committee may take into account. In fiscal
year 1995, the EIP used a base profitability threshold and five quantifiable
measurements of corporate performance, each of which is determined without
regard to the effect of any non-recurring item of income or expense: growth of
revenue, increase in profitability of the Company's comparable stores (i.e.,
stores open for at least one full fiscal year), achievement of profitability
goals for new stores, control of non-store general and administrative expenses,
and return on equity. Prior to or in the first fiscal quarter of each fiscal
year the Compensation Committee reviews and thereafter establishes the goals for
each measure of performance and the weight of each such measure. Under the EIP,
if all of the goals are met or exceeded during the fiscal year and the base
profitability threshold is met, then the Company's executive officers are
entitled to receive the maximum bonus that may be paid, which, for fiscal year
1995, was 50% of the executive officer's base salary for that portion of the
fiscal year in which the individual served as an executive officer of the
Company. In the event only a portion of the goals are met or exceeded and the
EIP's base profitability threshold is met or exceeded, the executive officers
are entitled to receive a portion of the maximum bonus. If the base
profitability threshold is not met during the fiscal year, the Company's
executive officers are not entitled to payment of any bonus under the EIP. Prior
to the beginning of fiscal year 1994, the Compensation Committee increased the
goals required to be met with respect to certain of the five measurements of
corporate performance. During fiscal year 1995, the corporate performance goals
of profitability of newer stores, control of expenses and return on equity and
the base profitability threshold were exceeded and each of the executive
officers participating in the EIP was paid a bonus equal to approximately 30% of
the executive officer's base salary pro-rated for that portion of the fiscal
year that the individual served as an executive officer of the Company. Mrs.
Faulkner's annual bonus was determined under the Company's incentive plan for
Presidents under which corporate performance goals for control of expenses and
profitability were achieved and Mrs. Faulkner was paid a bonus equal to
approximately 17% of her base salary for fiscal year 1995.
(2) Long Term Component: Stock Options
To align executive officers' interests more closely with the interests of
the stockholders of the Company, the Company's long term compensation program
emphasizes the grant of stock options exercisable for shares of Common Stock.
The amount of such awards is determined one or more times each year by the
Compensation Committee. Stock options are granted to executive officers in
amounts based largely upon the size of stock-based awards of other companies in
the Industry for comparable positions. The Compensation Committee may take into
account other factors in determining the size of stock option grants including,
but not limited to, the need to attract and retain individuals the Compensation
Committee perceives to be valuable to the Company. In connection with stock
option grants in fiscal year 1995, the members of the Compensation Committee
reviewed a survey prepared at the direction of the Compensation Committee in
order to determine the competitive amounts of stock option grants for the
executive officers. All stock options granted to executive officers in fiscal
year 1995 had an exercise price equal to the fair market value of shares of
Common Stock on the day of grant. All stock options granted to executive
officers of the Company in fiscal year 1995 become exercisable in three equal
annual installments commencing twelve months after the date of grant. Stock
options generally are exercisable between one and ten years from the date of
grant. Such stock options provide incentive for creation of stockholder value
over the long term since the full benefit of the compensation package cannot be
realized unless an appreciation in the price of Common Stock occurs over a
specified number of years.
In addition to the foregoing, executive officers receive benefits under
certain group health and life insurance plans which are generally available to
the Company's eligible employees. The executive officers, after one year of
service with the Company, are eligible to participate in the 401(k) Plan.
Benefits under these plans are not tied directly to corporate performance.
The Commission requires that this Report comment upon the Compensation
Committee's policy with respect to Section 162(m) of the Internal Revenue Code
of 1986, as amended, which limits the Company's tax deduction with regard to
compensation in excess of $1 million paid to any executive officers of the
Company named in the Summary Compensation Table unless the compensation
qualifies as "performance-based compensation." The Compensation Committee's
policy with respect to Section 162(m) is to make every reasonable effort to
cause compensation to be deductible by the Company while simultaneously
providing executive officers of the Company with appropriate rewards for their
(3) Chief Executive Officer Compensation
(a) Mr. Berger's Compensation
Stanley I. Berger became Chief Executive Officer and Chairman of the Board
of the Company on January 27, 1993 pursuant to the Company's management
succession program. Mr. Berger served as the Company's Chairman of the Board and
Chief Executive Officer during all of fiscal year 1994 and until December 19,1994. The following discussion sets forth the bases for Mr. Berger's
compensation during fiscal year 1995 and the relationship between his
compensation and the performance of the Company. Mr. Berger was responsible for
the day to day operations of the Company with particular attention paid to its
merchandising policies and practices.
Annual Base Salary
Mr. Berger's rate of base salary for fiscal year 1995 was set during the
first fiscal quarter of the fiscal year. At that time the Company was reporting
record sales and, but for a non-recurring $15 million pre-tax restructuring
charge related to the closing of a group of the Company's Designs stores, would
have reported record earnings for fiscal year 1994. During fiscal year 1994, the
Company reported an 18% increase in sales and a 10% increase in earnings per
share compared to the prior fiscal year. In light of the Company's performance
during fiscal year 1994 and in order to align Mr. Berger's base salary with the
base salaries of other chief executive officers in the Industry, the
Compensation Committee increased Mr. Berger's annual rate of base salary by
For fiscal year 1995, the Company reported record sales of $265.9 million,
which was approximately $25 million (or 10%) more revenue than the Company
earned in fiscal year 1994. Gross profit increased $8.9 million and net income
was at a record level (after taking into account $3.2 million of income related
to the Company's restructuring program). These results were achieved despite a
decrease in comparable store sales principally due to the impact of a difficult
retail environment, a decrease in available goods for the Company's Outlet
stores, a trucking strike in the first quarter of fiscal year 1995, reduced
Canadian tourism resulting from an unfavorable exchange rate and competitive
pressure on the Company's mall-based Designs stores from other retailers. Mr.
Berger, like the other executive officers of the Company eligible to participate
in the EIP, received a bonus equal to approximately 30% of his base salary.
In light of the Company's performance in fiscal year 1994 and Mr. Berger's
contribution to that performance and in furtherance of the Compensation
Committee's policy of more closely aligning the executive officers' interests
with those of the stockholders, in the first quarter of fiscal year 1995, the
Compensation Committee granted Mr. Berger stock options covering 35,000 shares
of Common Stock. Based on the surveys reviewed by the Compensation Committee,
the Committee believes this option grant is consistent with practices in
comparable companies in the Industry for their chief executive officers.
(b) Mr. Reichman's Compensation
Mr. Reichman became Chief Executive Officer of the Company on December 19,1994 pursuant to the Company's management succession program. Mr. Reichman's
base salary for fiscal year 1995 was established, and he was granted stock
options for fiscal year 1995, while he was President and Chief Operating Officer
of the Company. During fiscal year 1995, until he became Chief Executive
Officer, Mr. Reichman was directly responsible for store operations, store
construction and real estate, marketing, and technology and information systems.
Mr. Reichman, after being elected Chief Executive Officer, became directly
responsible for merchandising planning and visual merchandising.
Mr. Reichman's compensation for fiscal 1995 reflects his contribution to
the Company's continued expansion, its record revenues, its gross profit and net
income results and the survey information received by the Committee concerning
compensation of other comparable executives in the Industry. In establishing Mr.
Reichman's compensation, the Committee also considered its expectation that Mr.
Reichman would succeed to the office of Chief Executive Officer prior to the
beginning of fiscal year 1996 under the Company's management succession program.
Accordingly, Mr. Reichman's annual base salary for fiscal year 1995 was
increased 11%. To provide him additional long term incentive to create
stockholder value and after review of his position in the Company and its equity
incentive plans, the Compensation Committee granted Mr. Reichman options
covering 35,000 shares of Common Stock. Mr. Reichman's annual bonus was earned
under the EIP and reflects satisfaction of three of the corporate performance
goals established by the Committee under the EIP as described above.
Despite a difficult retail environment, the Company reported record sales
and earnings in fiscal year 1995. The Company successfully opened four new
Original Levi's(R) Stores, fifteen new Levi's(R) Outlet by Designs stores, and
one new Designs store, remodeled seventeen other stores, successfully completed
the Company's store closing program and entered into a joint venture between
subsidiaries of the Company and Levi's Only Stores, Inc., a subsidiary of Levi
Strauss & Co. Although the performance of the Company's Common Stock during
fiscal year 1995 was disappointing, the Compensation Committee is satisfied that
the contribution of Messrs. Berger and Reichman to the Company's operating
performance in fiscal year 1995 warranted their compensation for that year.
THE COMPENSATION COMMITTEE
James G. Groninger
Bernard M. Manuel
Peter L. Thigpen was elected to the Compensation Committee on May 1, 1995
and did not participate in the Committee's compensation deliberations described
in the foregoing Report or in the preparation of the Report.
The following Performance Graph compares the performance of the Company's
cumulative stockholder return with that of a broad market index (Standard &
Poor's 400 Industrial Index) and a published industry index (the Standard &
Poor's Retail Specialty Index) for each of the most recent five years ended
January 31. The cumulative stockholder return for shares of Common Stock and
each of the indices is calculated assuming that $100 was invested on January 31,
1990. The Company paid no cash dividends during the periods shown. The
performance of the indices is shown on a total return (dividends reinvested)
basis. The graph lines merely connect January 31 of each year and do not reflect
fluctuations between those dates.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
MEASUREMENT PERIOD S&P INDUS- (SPECIALTY)
(FISCAL YEAR COVERED) DESIGNS, INC. TRIALS INDEX INDEX
1990 100 100 100
1991 207.40 110.81 114.90
1992 492.60 136.02 155.20
1993 1266.67 146.20 204.05
1994 850.00 164.40 199.47
1995 491.67 167.26 198.26
The model and other data used above were prepared by Standard & Poor's
Compustat Services, a division of McGraw-Hill, Inc.
ADDITIONAL INFORMATION401(K) PLAN
On January 27, 1993, the Board of Directors adopted the 401(k) Plan. All
eligible employees of the Company are entitled to participate in such Plan. The
401(k) Plan permits each participant to defer up to fifteen percent of such
participant's annual salary up to a maximum annual amount ($9,240 in each of
calendar year 1994 and calendar year 1995). The Board of Directors of the
Company may determine, from fiscal year to fiscal year, whether and to what
extent the Company will contribute to the 401(k) Plan by matching contributions
made to such Plan by eligible employees. During fiscal year 1995, the matching
contribution by the Company was set at 50% of contributions by eligible
employees up to a maximum of six percent of salary.
EXECUTIVE INCENTIVE PLAN
The EIP, which was initially adopted by the Board of Directors of the
Company during the fiscal year ended January 26, 1991, was updated and
re-adopted by the Compensation Committee on April 4, 1994. The EIP is an
incentive compensation plan under which executive officers of the Company may be
eligible to receive annual cash bonus payments. For a more complete description
of the EIP, please refer to the "Compensation Policies" portion of the
Compensation Committee Report set forth above.
KEY MAN INSURANCE The Company has obtained key man life insurance policies in the amounts of
$2,000,000 on the lives of each of Messrs. Berger and Reichman. The Company pays
the premium for such policies and is the sole beneficiary thereof.
LIMITATION OF LIABILITY; INDEMNIFICATION The Company's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), provides that no director of the Company shall
be personally liable to the Company or to any of its stockholders for monetary
damages arising out of such director's breach of fiduciary duty, except to the
extent that the elimination or limitation of liability is not permitted by the
Delaware General Corporation Law. The Delaware General Corporation Law, as
currently in effect, permits charter provisions eliminating the liability of
directors for breach of fiduciary duty, except that directors remain liable for
(i) any breach of the directors' duty of loyalty to a company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) any payment of a
dividend or approval of a stock repurchase that is illegal under Section 174 of
the Delaware General Corporation Law, or (iv) any transaction from which the
directors derived an improper personal benefit. The effect of this provision of
the Certificate of Incorporation is that directors cannot be held liable for
monetary damages arising from breaches of their duty of care, unless the breach
involves one of the four exceptions described in the preceding sentence. The
provision does not prevent stockholders from obtaining injunctive or other
equitable relief against directors, nor does it shield directors from liability
under federal or state securities laws.
The Certificate of Incorporation and the By-Laws further provide for
indemnification of the Company's directors and officers to the fullest extent
permitted by Section 145 of the Delaware General Corporation Law, including
circumstances in which indemnification is otherwise discretionary.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company leases its headquarters in Chestnut Hill, Massachusetts from
Durban Trust, a nominee trust of which the sole beneficiary is a partnership
affiliated with Stanley I. Berger, the Chairman of the Board and a director of
the Company, and the estate of Calvin Margolis, a former executive officer and
director of the Company. The general partner of the beneficiary is a corporation
controlled by Mr. Berger and the estate of Mr. Margolis and the only limited
partners of the beneficiary are Mr. Berger and the estate of Mr. Margolis. Total
rent paid to Durban Trust in fiscal year 1995 was approximately $491,000. The
Company believes that the lease arrangements between the Company and Durban
Trust are on terms at least as favorable to the Company as it would have
expected to receive from a landlord unrelated to the Company, Mr. Berger or the
estate of Mr. Margolis for office facilities of equal quality. The lease expires
in April 1996.
The Company has entered into a Consulting Agreement with Mr. Berger dated
as of December 21, 1994 in which he has agreed for a period of three years to
provide an average of four days per week of consulting services to the Company.
As compensation for such services, among other things, the Company has agreed to
pay Mr. Berger at the rate of $250,000 per annum and to provide him and his
spouse health benefits during and after the term of the Agreement. In the event
of the death of Mr. Berger during the term of the Agreement, the Company will
continue to make such payments to his spouse for the balance of the term. Under
the Agreement, the Company also agreed that during the term of the Agreement it
would make available to Mr. Berger an automobile for use in connection with his
work for the Company and would reimburse him for the expenses of operation of
the automobile and that it would transfer title to the automobile to Mr. Berger,
without charge to him, promptly after expiration of the term of the Agreement.
In connection with Mr. Holczer's resignation in December 1994, he entered
into an Employee Separation Agreement with the Company. In the Agreement, the
Company agreed, among other things, to continue his base salary for six months,
to pay him his bonus for fiscal year 1995 calculated in accordance with the EIP,
to continue his health care benefits for the salary continuation period plus
three months and to transfer title to an automobile to Mr. Holczer, without
charge to him, which he used in connection with his work for the Company.
James G. Groninger, a director of the Company, was a Managing Director of
PaineWebber Incorporated until December 31, 1994. During fiscal year 1995, the
Company paid brokerage commissions to PaineWebber Incorporated in connection
with the Company's stock repurchase program. Mr. Groninger is currently founder,
president and principal stockholder of The Bay South Company, an investment
banking firm. The Company has engaged the Bay South Company to advise the
Company in connection with the development of its Shareholder Rights Plan and
has agreed to pay The Bay South Company a fee of $25,000 for such services.
Bernard M. Manuel, a director of the Company, is the Chairman of the Board,
Chief Executive Officer and a stockholder of Cygne Designs, Inc. In connection
with the Company's testing of its private label concept in certain of its
stores, a subsidiary of Cygne Designs, Inc. sold the Company private label
products for which it paid $121,000 in fiscal year 1995.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors met five times during fiscal year 1995. Messrs.
Berger, Reichman, Groninger, Manuel and Shapiro attended all meetings of the
Board. Mr. Thigpen attended four of the meetings of the Board. Mr. Thigpen was
first elected to the Board of Directors during fiscal year 1995 on March 21,1994.
The Board of Directors has an Audit Committee consisting of Messrs.
Groninger and Shapiro and a Compensation Committee consisting of Messrs.
Groninger, Manuel and Thigpen. The Board of Directors also
has a Management Succession Committee and a Nominating Committee, both of which
consist of Messrs. Groninger, Manuel, Shapiro and Thigpen.
The Audit Committee meets periodically with management and the Company's
independent public accountants to review matters relating to the Company's
financial reporting, the adequacy of internal accounting controls and the scope
and results of audit work. The Audit Committee met two times during fiscal year
1995 and both members attended each meeting.
The Compensation Committee meets periodically to review executive and
employee compensation and benefits (including stock-based compensation awards
under the 1992 Stock Incentive Plan), supervise benefit plans and make
recommendations regarding them to the Board of Directors. The Compensation
Committee met one time in fiscal year 1995, and Messrs. Groninger and Manuel
attended the meeting. Mr. Thigpen was elected to the Committee on May 1, 1995.
The Management Succession Committee is responsible for planning for the
succession and promotion of executive officers of the Company. The Management
Succession Committee met two times during fiscal year 1995, and all of the
members attended each meeting.
The Nominating Committee is responsible for nominating individuals to serve
as directors of the Company. The Nominating Committee met one time during fiscal
year 1995, and all of the members attended the meeting. The Nominating Committee
will consider the nomination of individuals suggested by stockholders of the
Company. Stockholders wishing to nominate an individual for election to the
Board of Directors must send a letter to the Secretary of the Company stating
the name and qualifications of the proposed nominee. The letter must be received
prior to December 1 of the year immediately preceding the year in which the
annual meeting is to be held at which the proposed nominee would be considered.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Coopers & Lybrand L.L.P., which has served as the
Company's principal independent public accountants continuously since 1981, was
selected by the Board of Directors to continue in that capacity for the fiscal
year ending February 3, 1996. Representatives of that firm are expected to be
present at the Annual Meeting and will have the opportunity to make a statement
if they desire to do so and to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Commission. Officers, directors and greater-than-10%
shareholders are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during fiscal year 1995 and Forms 5 and amendments
thereto furnished to the Company with respect to fiscal year 1995, or written
representations that Form 5 was not required, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and
greater-than-10% shareholders were fulfilled in a timely manner, except that due
to an oversight, Mr. Thigpen did not timely report on Form 3 the amount of his
beneficial ownership of the Company's Common Stock within 10 days of the date of
his election to the Company's Board of Directors. Upon the resignation of
Geoffrey M. Holczer as an employee and officer of the Company, Carolyn R.
Faulkner assumed the duties of principal financial and accounting officer.
Through an oversight, an initial statement of beneficial ownership on Form 3 was
not filed for Mrs. Faulkner on or before the tenth day of the month following
the month in which Mrs. Faulkner assumed her duties as principal
financial and accounting officer, nor was a report on Form 5 with respect to
information required in such Form 3. After investigating these matters, the
Company has concluded that the omissions were inadvertent, and that the failures
to file did not give rise to liability under Section 16(b) of the Exchange Act
for recapture of short-swing profits.
SHARES ENTITLED TO VOTE
At the close of business on April 18, 1995, the record date for the Annual
Meeting, the Company's outstanding voting securities consisted of 15,751,085
shares of Common Stock. Each share is entitled to one vote at the Annual
SOLICITATION The Company will bear the cost of solicitation of proxies. In addition to
the use of the mails, proxies may be solicited by certain officers, directors
and regular employees of the Company without extra compensation, by telephone,
telegraph or personal interview. Georgeson & Company Inc. has been retained by
the Company for a fee not to exceed $10,000 to aid in solicitation of proxies.
Stockholder proposals for inclusion in the proxy materials related to the
1996 Annual Meeting of Stockholders or special meeting in lieu thereof must be
received by the Company at its Executive Offices no later than January 12, 1996.
As of this date, management knows of no business which may properly come
before the Annual Meeting other than that stated in the Notice of Annual
Meeting. Should any other business arise, proxies given in the accompanying form
will be voted in accordance with the discretion of the person or persons voting
them. The Annual Report for fiscal year 1995 is being delivered to stockholders
with this Proxy Statement, but is not incorporated herein and is not to be
deemed a part hereof.
DESIGNS, INC. NOTICE OF 1995 ANNUAL MEETING OF STOCKHOLDERS AND PROXY STATEMENT TUESDAY, JUNE 13, 1995 8:30 A.M.[LOGO] HYATT REGENCY CAMBRIDGE 575 MEMORIAL DRIVECAMBRIDGE, MASSACHUSETTS02139 PLEASE SIGN YOUR PROXY AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT YOU MAY BE REPRESENTED AT THE ANNUAL MEETING.
PROXY DESIGNS, INC. PROXY 1244 BOYLSTON STREET, CHESTNUT HILL, MASSACHUSETTS02167THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 13, 1995.
The undersigned stockholder of Designs, Inc., hereby appoints Stanley
I. Berger and Joel H. Reichman, and each of them, proxies, with full power of
substitution to each and to each substitute appointed pursuant to such power,
to vote all shares of Common Stock of the Company which the undersigned would
be entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held on Tuesday, June 13, 1995, at the Hyatt Regency
Cambridge, 575 Memorial Drive, Cambridge, Massachusetts, and at any adjournment
thereof, with all powers the undersigned would possess if personally present,
as set forth on the reverse hereof, upon the matters set forth thereon and more
fully described in the Notice and Proxy Statement for such Annual Meeting, and,
in their discretion, upon all such other matters as may properly come before
the Annual Meeting. The undersigned hereby revokes all proxies, if any,
hitherto given by the undersigned to others for such Annual Meeting.
(CONTINUED AND TO BE DATED AND SIGNED ON REVERSE SIDE) / SEE REVERSE SIDE /
/ X / PLEASE MARK VOTES AS IN THIS EXAMPLE THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1.
1. Election of Directors:
Nominees: Stanley I. Berger, Joel H. Reichman, James G. Groninger,
Bernard M. Manuel, Melvin Shapiro and Peter L. Thigpen.
/ / FOR / / WITHHELD ALL FROM ALL NOMINEES NOMINEES
/ / _________________________________________________________
FOR, except vote withheld from the following nominees(s).
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED IT WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFIC DIRECTION IS GIVEN, IT WILL BE VOTED "FOR" THE ELECTION OF THE DIRECTOR NOMINEES. RECEIPT IS HEREBY ACKNOWLEDGED OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT OF DESIGNS, INC. DATED MAY 12, 1995. MARK HERE / / MARK HERE / / FOR ADDRESS IF YOU PLAN CHANGE AND TO ATTEND NOTE AT LEFT THE MEETING
IMPORTANT: Please signn your name or names exactly as printed on this proxy.
If more than one person is named, all must sign. When signing as attorney,
executor, administrator, trustee or guardian, give title as such.
Signature _________________________________________ Date __________________
Signature _________________________________________ Date __________________