<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
DESIGNER HOLDINGS LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
<PAGE> 2
DESIGNER HOLDINGS LTD.
1385 BROADWAY
3RD FLOOR
NEW YORK, NEW YORK 10018
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1997
------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Designer
Holdings Ltd., a Delaware corporation (the "Company"), will be held at 11:00
a.m. (local time) on Monday, May 19, 1997, at The Grand Hyatt New York Hotel,
Park Avenue at Grand Central (42nd Street), New York, NY, for the following
purposes:
1. To elect two Class I Directors of the Company, to serve for a term
of three years;
2. To ratify the appointment of Coopers & Lybrand L.L.P. as the
Company's independent accountants for fiscal year 1997;
3. To ratify the adoption of the Company's 1996 Outside Director Stock
Option Plan; and
4. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Only holders of record of the Company's Common Stock at the close of
business on Monday, April 21, 1997 are entitled to notice of and to vote at the
Annual Meeting and at any and all adjournments or postponements thereof. A list
of stockholders entitled to vote at the Annual Meeting will be available for
inspection at the offices of the Company for at least ten days prior to the
meeting, and will also be available for inspection at the meeting.
By Order of the Board of Directors,
/s/ John J. Jones
John J. Jones,Vice President, General
Counsel and
Secretary
New York, New York
April 17, 1997
YOUR VOTE IS IMPORTANT
EACH STOCKHOLDER IS URGED TO COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED
PROXY TO CHASEMELLON SHAREHOLDER SERVICES, THE COMPANY'S TRANSFER AGENT, IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
RETURNING A SIGNED PROXY WILL NOT PREVENT YOU FROM ATTENDING THE MEETING AND
VOTING IN PERSON, IF YOU SO DESIRE.
<PAGE> 3
DESIGNER HOLDINGS LTD.
1385 BROADWAY
3RD FLOOR
NEW YORK, NEW YORK 10018
------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 19, 1997
------------------------
This Proxy Statement is being furnished to the holders of Common Stock, par
value $.01 per share (the "Common Stock"), of Designer Holdings Ltd., a Delaware
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the Annual Meeting of
Stockholders of the Company (the "Annual Meeting"), to be held at 11:00 a.m.
(local time) on Monday, May 19, 1997 at the Grand Hyatt New York Hotel, Park
Avenue at Grand Central (42nd Street), New York, NY, and at any and all
adjournments or postponements thereof. At the Annual Meeting, the stockholders
of the Company are being asked to consider and vote upon (i) the election of two
Class I Directors, to serve for a term of three years, (ii) a proposal to ratify
the appointment of Coopers & Lybrand L.L.P. as the Company's independent
accountants for fiscal year 1997, and (iii) a proposal to ratify the adoption of
the Company's 1996 Outside Director Stock Option Plan.
This Proxy Statement and the enclosed form of proxy are first being mailed
to stockholders of the Company on or about April 25, 1997.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Only holders of record of the Company's Common Stock at the close of
business on Monday, April 21, 1997 (the "Record Date") are entitled to notice of
and to vote at the Annual Meeting. At the close of business on the Record Date,
there were 32,159,334 shares of Common Stock outstanding. The presence, either
in person or by proxy, of the holders of a majority of the shares of Common
Stock outstanding on the Record Date is necessary to constitute a quorum at the
Annual Meeting. All abstentions and proxies for which the broker does not have
discretionary authority and has not received voting instructions from the
beneficial owners ("broker non-votes") will be included as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum at the meeting.
Each stockholder will be entitled to one vote, in person or by proxy, for
each share of Common Stock held in such stockholder's name as of the Record Date
on any matter submitted to a vote of stockholders at the Annual Meeting. The
election of the Directors will require the affirmative vote of a plurality of
the shares
of Common Stock represented and voting in person or by proxy and entitled to
vote at the Annual Meeting. Ratification of the appointment of the Company's
independent accountants for the 1997 fiscal year will require the affirmative
vote of a majority of the shares of Common Stock represented in person or by
proxy and entitled to vote at the Annual Meeting. Ratification of the adoption
of the Company's 1996 Outside Director Stock Option Plan will require the
affirmative vote of a majority of the shares of Common Stock represented in
person or by proxy and entitled to vote at the Annual Meeting. In determining
whether a proposal submitted to a vote of stockholders has received the
requisite number of affirmative votes, (i) abstentions will be counted and will
have the same effect as a vote against the proposal, except that abstentions
will not be counted as
<PAGE> 4
votes cast in connection with determining the plurality required to elect a
director and will have no effect on the outcome of that vote, and (ii) broker
non-votes will be disregarded and will have no effect on the outcome of any
proposal.
Shares of Common Stock represented by a properly executed proxy received in
time for voting at the Annual Meeting will, unless such proxy has previously
been revoked, be voted in accordance with the instructions indicated thereon. In
the absence of specific instructions to the contrary, the persons named in the
accompanying form of proxy intend to vote all properly executed proxies received
by them (i) FOR the election of the Board of Directors' nominees for Class I
Directors, (ii) FOR the ratification of the appointment of Coopers & Lybrand,
L.L.P. as the Company's independent accountants for the Company's 1997 fiscal
year, and (iii) FOR the adoption of the Company's 1996 Outside Director Stock
Option Plan. No business other than as set forth in the accompanying Notice of
Annual Meeting is expected to come before the Annual Meeting, but should any
other matter requiring a vote of stockholders be properly brought before the
Annual Meeting, it is the intention of the persons named in the enclosed form of
proxy to vote such proxy in accordance with their best judgment on such matters.
For information with respect to advance notice requirements applicable to
stockholders who wish to propose any matter for consideration or to nominate any
person for election as a director at an annual meeting, see "Stockholder
Proposals for 1998 Annual Meeting."
Execution of the enclosed proxy will not prevent a stockholder from
attending the Annual Meeting and voting in person. Any proxy may be revoked at
any time prior to the exercise thereof by delivering in a timely manner a
written revocation or a new proxy bearing a later date to the Secretary of the
Company, 1385 Broadway, 3rd Floor, New York, New York 10018, or by attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not,
however, in and of itself constitute a revocation of a proxy.
This solicitation is being made by the Company. The cost of this
solicitation will be borne by the Company. Solicitation will be made by mail,
and may be made personally or by telephone by officers and other employees of
the Company who will not receive additional compensation for solicitation.
PROPOSAL 1
ELECTION OF CLASS I DIRECTORS
BACKGROUND
The Board of Directors currently consists of two Class I Directors, two
Class II Directors and two Class III Directors. The term of the Class I
Directors, A. Lawrence Fagan and Frederick W. Zuckerman, expires at the Annual
Meeting; the term of the Class II Directors, Peter Damon Brown and Debra Simon,
expires in 1998; and the term of the Class III Directors, Merril M. Halpern and
Arnold H. Simon, expires in 1999. Each director holds office until his or her
successor is duly elected and qualified or until his or her resignation or
removal, if earlier. The exact number of directors is determined from time to
time by a majority of directors then in office, but may not be less than five
nor more than fifteen.
At the Annual Meeting, two Directors are to be elected to serve a
three-year term ending in 2000 or until their respective successors are elected
and qualified or their earlier resignation or removal. The nominees, Mr. Fagan
and Mr. Zuckerman, presently serve as Class I Directors. Mr. Fagan and Mr.
Zuckerman have consented to serve as Directors if elected at the Annual Meeting
and, to the best knowledge of the Board of Directors, Mr. Fagan and Mr.
Zuckerman are and will be able to serve if so elected. In the event that Mr.
Fagan or Mr. Zuckerman should be unavailable to stand for election before the
Annual Meeting, the
2
<PAGE> 5
persons named in the accompanying proxy intend to vote for such other person, if
any, as may be designated by the Board of Directors, in the place of Mr. Fagan
or Mr. Zuckerman, as the case may be.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE COMPANY'S NOMINEES FOR DIRECTOR.
Set forth below is a brief biography of the Board of Directors' nominees
for election for Director and of all other members of the Board of Directors who
will continue in office.
NOMINEE FOR ELECTION FOR DIRECTOR
TERM EXPIRING IN 1997
A. LAWRENCE FAGAN, age 67. Mr. Fagan has been a director of the Company
since March 1994. He has been President of Charterhouse Group International,
Inc., a privately owned investment firm ("Charterhouse Group"), since January
1997. Prior to that time, he was Executive Vice President and Chief Operating
Officer of Charterhouse Group since 1985, and was Senior Vice President of
Charterhouse Group from 1983 to 1985. For 25 years prior to joining Charterhouse
Group, he held various corporate executive and investment banking positions. He
is a director of Microwave Power Devices, Inc. and American Disposal Services,
Inc.
FREDERICK W. ZUCKERMAN, age 62. Mr. Zuckerman has been a director of the
Company since July 1996. He has been General Partner of Zuckerman, Firstenberg &
Associates LLC since 1995. Mr. Zuckerman was Vice President and Treasurer of IBM
Corporation from 1993 to 1995. From 1991 to 1993, he served as Senior Vice
President and Treasurer of RJR Nabisco, Inc., and from 1981 to 1990, he served
as Vice President and Treasurer of Chrysler Corporation. Mr. Zuckerman is also a
member of the Boards of Directors of Meditrust, Turner Corporation, NVR
Corporation, Olympic Financial, Ltd., The Japan Equity Find, The Singapore Fund,
and Caere Corporation.
INCUMBENT CLASS II DIRECTORS
TERM EXPIRING IN 1998
PETER DAMON BROWN, age 49. Mr. Brown has been a director of the Company
since July 1996. He has been President of South Beach Co., Inc., a consulting
firm, since 1989, Vice President and Secretary of Gordon & Ferguson, an
outerwear manufacturer, since 1987 and Chief Executive Officer of Heather Hill
Sportswear, a manufacturer of moderately-priced mens and boys sportswear, since
1974.
DEBRA SIMON, age 41. Ms. Simon has been Executive Vice President and a
director of the Company since March 1994, and Vice President of Rio Sportswear
since 1985. She has over 18 years of experience in the sale and merchandising of
jeans and sportswear. Ms. Simon is married to Arnold H. Simon.
INCUMBENT CLASS III DIRECTORS
TERM EXPIRING IN 1999
MERRIL M. HALPERN, age 62. Mr. Halpern has been a director of the Company
since March 1994. Since October 1984, Mr. Halpern has served as Chairman of the
Board of Charterhouse Group. From 1973 to October 1984, Mr. Halpern served as
President and Chief Executive Officer of Charterhouse Group.
3
<PAGE> 6
Mr. Halpern is also a director of Dreyer's Grand Ice Cream, Inc., Insignia
Financial Group, Inc., Microwave Power Devices, Inc., and American Disposal
Services, Inc.
ARNOLD H. SIMON, age 51. Mr. Simon has been President of Rio Sportswear
since 1984, and Chief Executive Officer, President and a Director of the Company
since it was founded in 1994. Mr. Simon has an aggregate of 29 years of
experience in the apparel industry. Mr. Simon is married to Debra Simon.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Company's Board of Directors held 9 meetings in fiscal year 1996. Each
Director attended more than 75% of the total number of Board Meetings and
meetings of Board committees on which such Director served. The Board of
Directors currently has two standing committees: the Audit Committee and the
Compensation Committee. The membership and functions of the two standing
committees of the Board of Directors are as follows:
AUDIT COMMITTEE
The Audit Committee has the responsibility of reviewing the financial
controls of the Company. The Audit Committee's responsibilities include (i)
making recommendations to the Board of Directors of the Company with respect to
the Company's financial statements and the appointment of independent auditors,
(ii) reviewing significant audit and accounting policies and practices of the
Company, (iii) meeting with the Company's independent public accountants
concerning, among other things, the scope of audits and reports and (iv)
reviewing the performance of overall accounting and financial controls of the
Company. The Audit Committee consists of two directors who are neither officers
nor employees of the Company. The members of the Audit Committee are Messrs.
Fagan and Zuckerman. The Audit Committee met one time during the 1996 fiscal
year.
COMPENSATION COMMITTEE
The Compensation Committee has the responsibility of reviewing the
performance of certain executive officers of the Company and recommending to the
Board of Directors of the Company annual salary and bonus amounts for those
directors and officers. The Compensation Committee consists of two directors who
are "outside directors" within the meaning of Section 162(m) of the Internal
Revenue Code. The members of the Compensation Committee are Messrs. Brown and
Zuckerman. The Compensation Committee met once during the 1996 fiscal year.
COMPENSATION OF DIRECTORS
Directors of the Company who are not also employed by or otherwise
affiliated with the Company receive fees of $5,000 as annual compensation,
$5,000 for each regular and special meeting attended of the Board of Directors
and $3,000 for each committee meeting attended (held on a different day from
meetings of the full Board of Directors). In addition, directors are reimbursed
for travel costs and other out-of-pocket expenses incurred in attending each
directors' and committee meeting. Outside directors are also eligible to receive
stock options pursuant to the Company's 1996 Outside Director Stock Option Plan,
which is subject to shareholder approval at the Annual Meeting. Subject to such
approval, on July 16, 1996, Messrs. Brown and Zuckerman were each granted
options to purchase 5,000 shares of Common Stock at $16 1/2 per share, the fair
market value of the shares on that date.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information regarding
the annual and long-term compensation awarded or earned during the last two
fiscal years to those persons who were, for the fiscal years ended December 31,
1996 and 1995, respectively, the Chief Executive Officer and the four other most
highly compensated executive officers of the Company (the "Named Executive
Officers").
TABLE I
SUMMARY OF COMPENSATION TO CERTAIN EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION
------------------------------------- AWARDS
OTHER ANNUAL ---------------------
COMPEN- RESTRICTED SECURITIES ALL OTHER
SATION STOCK UNDERLYING COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS($) OPTIONS($) SATION ($)
- ----------------------------- ---- ---------- ---------- ------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Arnold H. Simon.............. 1996 $1,500,000 $ 117,190 $172,206 N/A 0 --
President and 1995 $1,000,000 $3,350,000 --
Chief Executive Officer
Maurice Dickson.............. 1996 $ 450,000 $ 257,163 -- N/A 250,000 --
Executive Vice President 1995 $ 300,000 $ 50,000 -- --
and Chief Financial Officer
Daniel J. Gladstone.......... 1996 $ 450,000 $ 550,000 -- N/A 200,000 --
Executive Vice President, 1995 $ 350,000 $1,208,862 -- --
and President, Calvin Klein
Jeanswear Company
Debra Simon.................. 1996 $ 450,000 $ 90,000 -- N/A -- --
Executive Vice President 1995 $ 400,000 $ 50,000 -- --
David Fidlon................. 1996 $ 225,000 $ 154,298 -- N/A 150,000 --
Senior Vice President, 1995 $ 150,000 -- -- --
Controller and Chief
Accounting Officer
</TABLE>
- ---------------
(1) Pursuant to his employment contract, Mr. Simon received certain perquisites,
including life and disability insurance and reimbursement for certain legal
fees. While each of the four other named individuals received perquisites or
other personal benefits in the years shown, in accordance with applicable
regulations, the value of these benefits is not indicated since they did not
exceed in the aggregate the lesser of $50,000 or 10% of the individual's
salary and bonus in any year.
(2) Mr. Dickson has been employed with the Company since September 1995. The
amounts shown in these columns for 1995 were the annual salary and bonus
that were set forth in Mr. Dickson's employment agreement with the Company.
For 1995, Mr. Dickson's total compensation was $99,230.
(3) Mr. Fidlon has been employed by the Company since June 1995. The amounts
shown in these columns for 1995 were the annual salary and bonus that the
Company agreed to pay to Mr. Fidlon. For 1995, Mr. Fidlon's total
compensation was $81,693.
5
<PAGE> 8
STOCK OPTION GRANTS
The following table shows the number of shares of Common Stock underlying
the stock options granted in fiscal year 1996 to each of the Named Executive
Officers, the percentage of total options granted which each executive's stock
option grant represents, the exercise price of each option granted and the
expiration date of each option granted.
TABLE II
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF APPRECIATION FOR
SECURITIES PERCENT OF TOTAL OPTION TERM
UNDERLYING OPTIONS GRANTED EXERCISE EXPIRATION ----------------
NAME OPTIONS IN FISCAL YEAR PRICE DATE 5%(1) 10%(2)
- ------------------------------------ ---------- ---------------- -------- ---------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
Maurice Dickson..................... 250,000 15.9 $ 18 05/09/06 $ 0 $320,000
Daniel J. Gladstone................. 200,000 12.7 $ 18 05/09/06 $ 0 $256,000
David Fidlon........................ 150,000 9.5 $ 18 05/09/06 $ 0 $192,000
</TABLE>
- ---------------
(1) Represents the potential appreciation of the options, determined by assuming
an annual compounded rate of appreciation of 5% per year over the ten year
term of the grants, as prescribed by the rules. The amount set forth above
is not intended to forecast future appreciation, if any, of the stock price.
There can be no assurance that the appreciation reflected in this table will
be achieved.
(2) Represents the potential appreciation of the options, determined by assuming
an annual compounded rate of appreciation of 10% per year over the ten year
term of the grants, as prescribed by the rules. The amount set forth above
is not intended to forecast future appreciation, if any, of the stock price.
There can be no assurance that the appreciation reflected in this table will
be achieved.
6
<PAGE> 9
STOCK OPTION EXERCISES
The following table shows the number and value of stock options exercised
by each of the Named Executive Officers during fiscal year 1996, the number of
all vested (exercisable) and unvested (not yet exercisable) stock options held
by each such officer at the end of fiscal year 1996, and the value of all such
options that were "in the money" (i.e., where the market price of Designer
Holdings Ltd. Common Stock was greater than the exercise price of the options)
at the end of fiscal year 1996.
TABLE III
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 (1)
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS(2)
OPTIONS AT END OF AT THE END OF
FISCAL YEAR 1996 FISCAL YEAR 1996
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------------------------- ------------------------- -------------------------
<S> <C> <C>
Maurice Dickson.................. 0/250,000 $0/0
Daniel J. Gladstone.............. 66,667/133,333 $0/0
David Fidlon..................... 0/150,000 $0/0
</TABLE>
- ---------------
(1) There were no options exercised during 1996.
(2) The fair market value (average of the high and low) of the underlying Common
Stock at December 31, 1996 was below the exercise price of all options.
EMPLOYMENT AGREEMENTS
Arnold Simon. The Company has an employment agreement with Mr. Simon (the
"Simon Employment Agreement"). The Simon Employment Agreement, which expires on
December 31, 1998, provides for Mr. Simon to be the President and Chief
Executive Officer of the Company at an annual base salary of not less than $1.5
million. The Simon Employment Agreement also provides for his receipt of an
annual cash bonus with respect to 1996 equal to the difference between (i) 2% of
all Adjusted EBITDA (as defined) if such 1996 Adjusted EBITDA is between $50
million and $60 million or 3% of all Adjusted EBITDA if it exceeds $60 million
and (ii) $2 million. With respect to 1997 and 1998, the Simon Employment
Agreement provides that he will receive an annual cash bonus based on specific
increases in Adjusted EBITDA ranging from 2 1/2% to 4% of all Adjusted EBITDA in
the applicable year. Mr. Simon's agreement also provides that he is entitled to
certain other benefits, including life and disability insurance, an automobile,
financial consulting and an apartment. In addition, Mr. Simon is entitled to
participate in the plans and programs maintained by the Company for its senior
executives.
The Simon Employment Agreement may be terminated at any time by Mr. Simon
for "Good Reason" which shall be deemed to exist if, without his consent, (i) a
majority of Additional Board Members (as defined) shall consist of persons whose
election or appointment was not approved in writing by Mr. Simon (other than
those persons who are members as of the date of the agreement); (ii) there shall
occur (A) any liquidation of the Company or Calvin Klein Jeanswear Company, a
wholly owned subsidiary of the Company ("CKJC"), or the sale of substantially
all the assets of the Company and CKJC taken as a whole or (B) any merger,
consolidation or other business combination of the Company or CKJC (each, a
"Transaction") or any
7
<PAGE> 10
combination of such Transactions, other than a Transaction immediately after
which the stockholders of the Company who are stockholders immediately prior to
the Transaction continue to own beneficially, directly or indirectly, more than
80% of the then outstanding voting securities of the Company; or (iii) any
person or group (as such term is defined under the Exchange Act), or group of
related persons (other than Charterhouse Equity Partners II, L.P.
("Charterhouse")) which is not an affiliate of the Company currently shall
beneficially own, directly or indirectly, more than 50% of the then outstanding
voting stock of the Company.
Upon termination by Mr. Simon for Good Reason or termination by the Company
without Cause (as defined), Mr. Simon will be entitled, in addition to any
accrued base salary and annual bonus earned but not yet paid, a lump sum payment
in an amount equal to the sum of (i) Mr. Simon's highest annual base salary
during the term multiplied by 2.99 (299%) and (ii) Mr. Simon's average annual
bonus paid or payable with respect to the then immediately preceding three
fiscal years multiplied by 2.99 (299%); provided that the maximum amount payable
shall not exceed $9 million in the aggregate. Mr. Simon has the obligation to
notify the Company in writing of the reason for his proposed termination for
Good Reason, and the Company will have the right to correct certain acts or
failure described in such notice.
The Simon Employment Agreement also provides that the Company may terminate
Mr. Simon for Cause, at which time he will be entitled, among other things, to
his then existing base salary through the date of termination and any annual
bonus for the prior fiscal year not yet paid together with the pro rata portion
of the annual bonus for the calendar year in which termination occurs through
the date of termination. Mr. Simon has also agreed that if he voluntarily
terminates his employment other than for Good Reason, he will not compete with
the Company for the lesser of the remaining term of the agreement or 24 months
following the date of termination.
Maurice Dickson. The Company has an employment agreement with Mr. Dickson
(the "Dickson Employment Agreement"). The Dickson Employment Agreement, which
expires on August 15, 1998, provides for Mr. Dickson to be employed as Chief
Financial Officer of the Company, and, commencing as of January 1, 1997, to
receive an annual base salary of $490,000, an annual bonus based upon the
Company's performance, and certain other benefits. The Dickson Employment
Agreement will automatically renew for additional one year periods unless the
Company gives written notice of non-renewal at least five months prior to the
renewal date.
Daniel J. Gladstone. The Company has an employment agreement with Mr.
Gladstone (the "Gladstone Employment Agreement") which expires on December 31,
1997, unless renewed. The Gladstone Employment Agreement provides for Mr.
Gladstone to be employed as President of CKJC and Executive Vice President of
the Company and, commencing as of January 1, 1996 to receive an annual base
salary of $450,000, an annual bonus based upon the Company's performance, and
certain other benefits.
Debra Simon. The Company has an employment agreement with Ms. Simon, which
expires on December 31, 1997, and provides for Ms. Simon to be employed as
Executive Vice President of the Company at an annual salary of $450,000 and a
bonus at the discretion of the Company. Ms. Simon's agreement will automatically
renew for additional one year periods unless the Company gives written notice of
non-renewal by the August 31 prior to the renewal year.
David Fidlon. The Company has an employment agreement with Mr. Fidlon (the
"Fidlon Employment Agreement") which expires on June 12, 1998. The Fidlon
Employment Agreement provides for Mr. Fidlon to be employed as Senior Vice
President and Controller of the Company and to receive an annual base salary,
commencing as of January 1, 1997, of $325,000, an annual bonus based upon the
Company's performance,
8
<PAGE> 11
and certain other benefits. The Fidlon Employment Agreement will automatically
renew for additional one year period unless the Company gives written notice of
non-renewal at least five months prior to the renewal date.
PERFORMANCE GRAPH
The Performance Graph shown below compares the cumulative total shareholder
return on Common Stock, based on the market price of the Common Stock, with the
total return of the S&P 500 Composite Stock Index and the S&P Textiles index.
The comparison of total return assumes that a fixed investment of $100 was
invested on May 9, 1996 (the effective date of the Company's initial public
offering) in Common Stock, and in each of the foregoing indices and further
assumes the reinvestment of dividends. The stock price performance shown on the
graph is not necessarily indicative of future performance.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and officers to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the
Company's Common Stock. Copies of all such Section 16(a) reports are required to
be
9
<PAGE> 12
furnished to the Company. These filing requirements also apply to beneficial
owners of more than ten percent of the Company's Common Stock. To the Company's
knowledge, based solely on review of the copies of Section 16(a) reports
furnished to the Company during the fiscal year ended September 30, 1996, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, all transactions were reported on a timely basis,
except that Messrs. Zuckerman and Brown, who became directors of the Company on
July 16, did not file an initial Form 3 until November 14 and 19, respectively.
Mr. Brown did not own or trade in any securities of the Company until he
purchased 5,000 shares of Common Stock on April 17, 1997. Mr. Zuckerman did not
own or trade in any securities of the Company until he purchased 5,000 shares of
Common Stock on November 5, 1996.
REPORT ON EXECUTIVE COMPENSATION BY
THE COMPANY'S COMPENSATION COMMITTEE
COMPENSATION PHILOSOPHY
The Company's executive compensation program is designed to attract and
retain top quality executives and to provide them with both an incentive and a
reward for superior performance. The program includes three principal
components -- base salary, cash bonus opportunities and stock options. Members
of the Compensation Committee are outside directors who are not employees of the
Company. The Compensation Committee believes that during 1996 no executive
officer of the Company received compensation in excess of competitive rates for
similarly situated executive officers The Company's program is based on the
belief that the interests of the employees should be closely aligned with those
of the Company's stockholders. To support this philosophy, the following
principles provide a framework for the compensation program:
-- Offer compensation opportunities that attract the best talent to the
Company; motivate individuals to perform at their highest levels; reward
outstanding achievement; and retain the leadership and skills necessary for
building long-term stockholder value;
-- Maintain a portion of total compensation at risk, tied to both meeting
strategic objectives of the Company, as well as to meeting individual
performance objectives; and
-- Encourage individuals to manage from the perspective of owners of the
Company.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The Compensation Committee recommends the total cash compensation of Mr.
Simon, which must be approved by the full Board of Directors. During 1996, Mr.
Simon's compensation was determined based upon the salary and bonus set forth in
his employment contract, which includes a targeted level of EBITDA. The
Compensation Committee believes that Mr. Simon's contributions to the Company
during 1996 amply justified his compensation.
COMPONENTS OF EXECUTIVE COMPENSATION
The Components of executive compensation are as follows:
Salary. The annual base salaries of the executive officers of the Company,
other than those officers whose salaries are set forth in employment contracts,
are determined by Mr. Simon. Salary increases are granted from time to time
based on both individual performance and on the Company's ability to pay such
increases.
10
<PAGE> 13
Cash Bonus. The annual cash bonus for certain executive officers is based
on annual performance goals. For 1996, the performance goals for Mr. Simon, Mr.
Dickson and Mr. Fidlon were target levels of EBITDA. The performance goal for
Mr. Gladstone was a target level of sales. The annual cash bonus for other
executive officers is determined by annual review by Mr. Simon and the
Compensation Committee and is based upon the financial performance of the
Company, the individual performance of such officers and the reasonableness of
the compensation relative to the industry. The determination of the bonuses of
such senior executives is based upon the recommendation of Mr. Simon, with final
approval by the Compensation Committee.
Stock Options. The Compensation Committee believes that stock options are
an appropriate vehicle to link employees' interest in the Company with those of
the Company's stockholders. Stock option awards are designed primarily to
provide strong incentives for superior longer-term performance and continued
employment with the Company. Because it is believed that corporate performance
is one of the principal factors influencing the market value of the Company's
Common Stock, the granting of stock options to executive officers encourages
them to work to achieve consistent improvements in corporate performance.
Options generally have a life of ten years, vest over three years, and have an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Also, the exercisability of stock options is conditioned upon the
employee's continued employment with the Company; thus, unexercised stock
options are forfeited within a designated period of time following the executive
officer's leaving the Company. The stock option awards granted to employees in
1996 were set taking into account an individual's level of responsibility and
achievement. The determination of stock option awards is based upon the
recommendation of Mr. Simon, with final approval by the Compensation Committee.
Section 162(m) of the Internal Revenue Code. Section 162(m) of the
Internal Revenue Code generally disallows a tax deduction to public companies
for compensation in excess of $1,000,000 paid to a Company's chief executive
officer and any one of the four other most highly paid executive officers during
its taxable year.
Qualifying performance-based compensation is not subject to the deduction
limit if certain requirements are met. The Section 162(m) limitation is not
applicable to Mr. Simon under the terms of his employment contract. It does not
appear that the Section 162(m) limitation will have a significant impact on the
Company in the near term. However, the Compensation Committee plans to review
this matter periodically and take such actions as are necessary to comply with
the new statute to avoid non-deductible compensation payments.
COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS OF
DESIGNER HOLDINGS LTD.
Peter Damon Brown
Frederick W. Zuckerman
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN INDEBTEDNESS OF MANAGEMENT
The Company has advanced amounts to Mr. Simon totalling approximately
$1,722,000 as of March 31, 1997, in connection with personal expenses. Mr. Simon
has issued a promissory note to the Company in connection with such advances.
The note is due and payable in full on December 31, 1998, and bears interest at
8.25%. Accrued interest on the note through March 31, 1997 amounted to
approximately $57,000.
11
<PAGE> 14
CERTAIN TRANSACTIONS WITH MANAGEMENT
The Company contracts for the services of temporary employees with Karlyn
Associates, a temporary recruiting agency located in New Jersey. The owner of
Karlyn is the wife of Mr. Dickson. During 1996 the Company paid approximately
$298,000 to Karlyn for the services of temporary employees. The agency charges
the Company rates which are no greater than could be obtained in an arms length
transaction.
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of April 15, 1997, the total number of
shares of Common Stock of the Company beneficially owned, and the percentage so
owned, by (i) each director of the Company, (ii) each person who has an
ownership interest in New Rio, L.L.C. (the "Principal Stockholder"), (iii) each
person known to the Company to be the beneficial owner of more than five percent
of the outstanding Common Stock of the Company, (iv) each of the executive
officers listed in the Summary Compensation Table and (v) all directors and
officers as a group. The number of shares owned are those "beneficially owned"
as determined under the rules of the Securities and Exchange Commission, and
such information is not necessarily indicative of beneficial ownership for any
other purpose. The Principal Stockholder is a limited liability company and is
the record owner of the shares of Common Stock beneficially owned by the persons
listed under its heading below. Its operative agreement allows the holders of
ownership interests therein generally to cause the Principal Stockholder to
exercise disposition rights as directed by each such holder independently with
respect to such holder's allocable percentage of the shares of Common Stock of
the Company. Therefore, such persons may be deemed to be the beneficial owners
of shares of Common Stock of the Company.
12
<PAGE> 15
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
--------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENTAGE
----------------------------------------------------- ---------- -----------
<S> <C> <C>
NEW RIO, L.L.C.:
Charterhouse Equity Partners II, L.P. ............. 8,033,800 25.0%
535 Madison Avenue
New York, NY 10022
Arnold H. Simon(1)................................. 7,805,813 24.3%
1385 Broadway
New York, NY 10018
Martin L. Berman................................... 141,146 *
Steven E. Berman................................... 53,272 *
Phyllis West Berman................................ 51,084 *
Trust for the benefit of Mark K Berman and Allison
A. Berman....................................... 157,445 *
Michael A. Covino.................................. 225,374 *
Chef Nominees Limited.............................. 15,934 *
---------- -----------
NEW RIO, L.L.C. TOTAL................................ 16,483,868 51.3%
Calvin Klein, Inc. ................................ 1,275,466 4.0%
205 West 39th Street
New York, NY 10018
Merril M. Halpern(2)............................... -- --
Debra Simon(3)..................................... -- --
A. Lawrence Fagan(2)............................... -- --
Maurice Dickson.................................... 5,000 *
Daniel J. Gladstone(4)............................. 71,667 *
David Fidlon....................................... 3,000 *
James Bloise....................................... 2,000 *
Peter Brown........................................ 5,000 *
Frederick W. Zuckerman............................. 5,000 *
All current executive officers and directors as a
group (11 persons)(2)(4)........................ 7,904,202 24.6%
</TABLE>
- ---------------
* Less than one percent.
(1) Includes 302,924 shares owned by AS Enterprises LLC, a company owned by Mr.
and Mrs. Simon.
(2) Messrs. Halpern and Fagan are executive officers of Charterhouse Group,
which indirectly controls Charterhouse. Messrs. Halpern and Fagan may be
deemed to beneficially own the shares of Common Stock beneficially owned by
Charterhouse. Messrs. Halpern and Fagan disclaim all such beneficial
ownership.
(3) Ms. Simon is Mr. Simon's wife. See Mr. Simon's beneficial ownership above.
(4) Includes 66,667 shares issuable upon the exercise of options.
13
<PAGE> 16
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to stockholder ratification, the Board of Directors has reappointed
the firm of Coopers & Lybrand, L.L.P., Certified Public Accountants, as
independent auditors to make an examination of the accounts of the Company for
the fiscal year ending December 31, 1997. Coopers & Lybrand, L.L.P. has served
as the independent auditors of the Company since the fiscal year ended December
31, 1994.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" SUCH
RATIFICATION. Unless contrary instructions are given, the proxies solicited by
management will be voted "FOR" such ratification. Ratification will require the
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or by proxy and entitled to vote at the meeting.
One or more representatives of Coopers & Lybrand, L.L.P. are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they desire to do so and will be available to respond to questions.
PROPOSAL 3
RATIFICATION OF ADOPTION OF 1996 OUTSIDE DIRECTOR STOCK OPTION PLAN
The Company has adopted, subject to stockholder approval, the 1996 Outside
Director Stock Option Plan (the "Director Plan"), which provides for the
granting of nonqualified options to purchase shares of Common Stock to any
director of the Company who (i) first becomes a member of the Board of Directors
on or after July 16, 1996, (ii) is not an active employee or officer of the
Company or a subsidiary thereof, and (iii) is not appointed or designated to
serve as a member of the Board of Directors by New Rio, L.L.C., Charterhouse
Group, Mr. Simon or any of their respective affiliates (each, an "Eligible
Director"). The Director Plan is designed to provide a means of giving Eligible
Directors an increased opportunity to acquire an investment in the Company,
thereby maintaining and strengthening their desire to remain with or join the
Company's Board of Directors and stimulating their efforts on the Company's
behalf. The Director Plan authorizes the issuance of up to 100,000 shares of
Common Stock, subject to adjustments in certain circumstances. No options may be
granted 10 years from the effective date of the Director Plan.
Eligible Directors are eligible to receive options under the Director Plan
in accordance with the terms thereof. Each Eligible Director, on the initial
grant date (as defined in the Director Plan), will be granted nonqualified stock
options ("NQSOs") to purchase 5,000 shares of Common Stock. Each year, other
than with respect to the year in which an Eligible Director receives an initial
grant of options, as of the first business day following the annual meeting of
stockholders, each Eligible Director will receive a NQSO to purchase 3,000
shares of Common Stock. Upon the exercise of an option, the purchase price paid
by an Eligible Director will be 100% of the fair market value of such share at
the time of the grant of the option, or the par value of the share, whichever is
greater. The options to purchase shares of Common Stock described above will be
exercisable on or after the first anniversary of the date of grant. In addition,
options granted and not previously exercisable will become vested and fully
exercisable immediately upon an Eligible Director's death or disability or upon
a Change in Control (as defined in the Director Plan).
Each option will expire upon the tenth anniversary of the date of grant.
Subject to the number of shares authorized for issuance under the Director Plan
and the term of the Director Plan, the Director Plan shall continue in effect
without limit unless and until the Board of Directors otherwise determines.
14
<PAGE> 17
If an Eligible Director terminates his or her service on the Board of
Directors for any reason, including disability, death, resignation or failure to
stand for reelection, any exercisable option which has not expired may be
exercised, to the extent exercisable at the time of such termination of service,
by the Eligible Director (or, in the event of his death) until the first
anniversary of the date that the Eligible Director ceases to be a member of the
Board of Directors. The Director Plan is administered by a duly appointed
committee of the Board of Directors which has the full and final authority to
interpret the Director Plan and to adopt and amend such rules and regulations
for the administration of the Director Plan. In addition, the Board of Directors
has the right to amend or terminate the Director Plan in certain circumstances.
The following table shows the number of shares of Common Stock underlying
the stock options granted, subject to shareholder approval, in fiscal year 1996
to each of the outside directors, the number of shares of Common Stock
underlying each option, the exercise price of such options, and the expiration
date of each option granted.
TABLE IV
OUTSIDE DIRECTOR OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
# OF SECURITIES
NAME AND POSITION UNDERLYING OPTIONS EXERCISE PRICE EXPIRATION DATE OF OPTIONS
----------------------------------- ------------------ -------------- --------------------------
<S> <C> <C> <C>
Peter Damon Brown.................. 5,000 $16.25 07/16/06
Frederick W. Zuckerman............. 5,000 $16.25 07/16/06
</TABLE>
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In accordance with Rule 14a-8 under the Securities Exchange Act of 1934,
any stockholder proposals intended to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Company no later than December 17, 1997 in
order to be considered for inclusion in the Proxy Statement and form of proxy
relating to that meeting.
Section 6 of Article III of the Company's By-Laws provides that, in order
for a stockholder to nominate a person for election to the Board of Directors at
an annual meeting of the Company, such stockholder must be a stockholder of
record on the date the notice described below is given and on the record date
for the annual meeting, and must have given timely prior written notice to the
Secretary of the Company of such stockholder's intention to make such nomination
before the meeting. To be timely, notice must be received by the Company not
less than sixty days nor more than ninety days prior to the date of the annual
meeting; provided, however, that in the event that the annual meeting is called
for a date that is not within thirty days before or after the anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the tenth day following the day on which notice of
the date of the annual meeting was mailed or public disclosure of the date of
the annual meeting was made, whichever first occurs. Such notice must contain
certain information about the person whom the stockholder proposes to nominate,
including the name, age, residence and business address, occupation, and class
and number of shares of capital stock owned beneficially or of record by the
proposed nominee. The notice must also contain the following information
regarding the stockholder giving notice: the name and record address of such
stockholder and the class and number of shares of capital stock of the Company
beneficially owned by such stockholder. In addition, such notice must contain
any other information related to the proposed nominee or such stockholder that
would be required to be disclosed in a proxy statement.
15
<PAGE> 18
In addition, Section 5 of Article II of the Company's By-Laws provides
that, in order for a stockholder to propose any matter for consideration at an
annual meeting of the Company, such stockholder must be a stockholder of record
on the date the notice described below is given and on the record date for the
annual meeting, and must have given timely prior written notice to the Secretary
of the Company of such stockholder's intention to bring such business before the
meeting. To be timely, notice must be received by the Company not less than
sixty days nor more than ninety days prior to the anniversary date of the
immediately preceding annual meeting; provided, however,that in the event that
the annual meeting is called for a date that is not within twenty days before or
after such anniversary date, notice by the stockholder in order to be timely
must be so received not later than the close of business on the twentieth day
following the day on which notice of the date of the annual meeting was mailed
or public disclosure of the annual meeting was made, whichever first occurs.
Such notice must contain certain information about such business and the
stockholder who proposes to bring the business before the meeting, including the
name and record address of such stockholder, a brief description of the business
the stockholder proposes to bring before the meeting, the reasons for conducting
such business at the annual meeting, the class and number of shares of capital
stock beneficially or of record owned by such stockholder, any material interest
of such stockholder in the business so proposed, and any other information that
would be required to be disclosed in a proxy statement.
ADDITIONAL INFORMATION
Copies of the Company's 1996 Annual Report to Stockholders, which includes
audited financial statements, are being mailed to stockholders of the Company on
or about the same date as the mailing of this proxy statement. Additional copies
are available without charge upon request. Requests should be addressed to the
General Counsel and Secretary, Designer Holdings Ltd., 1385 Broadway, 3rd Floor,
New York, NY 10018.
By order of the Board of Directors,
/s/ John J. Jones
JOHN J. JONES
Vice President, General Counsel
and Secretary
New York, New York
April 17, 1997
16
<PAGE> 19
DESIGNER HOLDINGS LTD.
COMMON STOCK PROXY
FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 19, 1997
The undersigned hereby appoints Arnold H. Simon and Maurice Dickson, or
either of them, each with power of substitution, as proxies to represent the
undersigned at the Annual Meeting of Stockholders of Designer Holdings Ltd. to
be held at the Grand Hyatt New York Hotel, Park Avenue at Grand Central (East
42nd Street), New York, N.Y., at 11:00 a.m., and any adjournment thereof, and to
vote the number of shares of the common stock of Designer Holdings Ltd. that the
undersigned would be entitled to vote if personally present.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DESIGNER
HOLDINGS LTD. THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION,
THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2 AND 3. IN THEIR DISCRETION, THE
PROXY HOLDERS ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 20
1. ELECTION OF DIRECTORS.
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
[ ] [ ]
Nominees: A. Lawrence Fagan, Frederick W. Zuckerman
Instructions: To withhold authority to vote for any individual nominee, write
name of nominee(s) below:
- -----------------------------------------------------------------------------
2. Appointment of Coopers & Lybrand, L.L.P.
as independent accountants.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Ratification of Adoption of the Company's 1996
Outside Director Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Other Matters. In their discretion, the proxies
are authorized to vote upon other matters that
may come before the meeting and upon matters
incident to the conduct of the meeting.
Dated , 1997
------------------ --
-------
| ----------------------------------
| Signature
|
-----------------------------------
(Signature if held jointly)
Proxy instructions:
1. Please sign exactly as the name
or names appear on your stock
certificate.
2. A proxy executed by a corporation
must be signed in its name by an
authorized executive officer.
3. If the shares are issued in the
name of two or more persons, all of
them must sign the proxy.
4. Executors, administrators, trustees
and partners should indicate their
capacity when signing.
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
