<PAGE>
================================================================================
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:
[_] 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 Rule 14a-11(c) or Rule 14a-12
ST. JOHN KNITS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (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:
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Notes:
<PAGE>
ST. JOHN KNITS, INC.
17422 DERIAN AVENUE
IRVINE, CALIFORNIA 92614
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 19, 1997
----------------
To the Shareholders of St. John Knits, Inc.:
Please take notice that the 1997 Annual Meeting of Shareholders of St. John
Knits, Inc. will be held at the Company's office, located at 17522 Armstrong
Avenue, Irvine, California, on Wednesday, March 19, 1997, at 2:30 p.m.
California time, for the following purposes:
1. To elect six members of the Board of Directors to hold office for a one-
year term and until their respective successors are elected and qualified.
2. To consider and act upon such other matters as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed January 31, 1997 as the record date for
determining the shareholders entitled to receive notice of and to vote at the
Annual Meeting or any adjournment or postponement thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. A majority of the outstanding shares must be represented at the
meeting in order to transact business. Consequently, if you are unable to
attend in person, please execute the enclosed Proxy and return it in the
enclosed addressed envelope. Your promptness in returning the Proxy will
assist in the expeditious and orderly processing of the proxies. If you return
your Proxy, you may nevertheless attend the meeting and vote your shares in
person, if you wish.
By Order of the Board of Directors,
ST. JOHN KNITS, INC.
[LOGO of SIGNATURE OF ROBERT E. GRAY]
Robert E. Gray
Chairman of the Board and
Chief Executive Officer
February 19, 1997
Irvine, California
<PAGE>
ST. JOHN KNITS, INC.
17422 DERIAN AVENUE
IRVINE, CALIFORNIA 92614
----------------
1997 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 19, 1997
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of St. John Knits, Inc. (the "Company"), for
use at the 1997 Annual Meeting of Shareholders to be held at the Company's
office, located at 17522 Armstrong Avenue, Irvine, California on Wednesday,
March 19, 1997 at 2:30 p.m. California time, and any and all postponements or
adjournments thereof (the "Annual Meeting"). This Proxy Statement is being
mailed to the Company's shareholders on or about February 21, 1997.
MATTERS TO BE CONSIDERED AND RECORD DATE
The 1997 Annual Meeting has been called to elect six directors to hold
office until the next annual meeting of shareholders and until their
successors are elected and qualified and to transact such other business as
may properly come before the meeting.
On January 31, 1997, the record date fixed by the Board of Directors, the
Company had outstanding 16,600,564 shares of common stock.
QUORUM AND VOTING REQUIREMENTS
The presence in person or by proxy of a majority of shares entitled to vote
at any meeting of shareholders will constitute a quorum for the transaction of
business. The shareholders are entitled to one vote per share on all matters
to be considered at the meeting. The Company's Restated Articles of
Incorporation provide that there is no cumulative voting in the election of
directors.
The director nominees who receive the greatest number of votes at the Annual
Meeting will be elected to the Board of Directors of the Company. Abstentions
and broker non-votes are counted for purposes of determining a quorum, but are
not considered as having voted for purposes of determining the outcome of a
vote.
SOLICITATION OF PROXIES
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL
MEETING, TO COMPLETE, SIGN, DATE, AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. Your executed Proxy may be revoked at any time before it is
exercised by filing with the Secretary of the Company at the Company's
principal executive offices a written notice of revocation or a duly executed
Proxy bearing a later date. The execution of the enclosed Proxy will not
affect your right to vote in person should you find it convenient to attend
the meeting and desire to vote. Your vote at the Annual Meeting will revoke
your previously executed Proxy; attendance at the Annual Meeting will not in
and of itself constitute the revocation of a Proxy.
<PAGE>
Votes cast at the Annual Meeting will be tabulated by representatives of
Harris Trust Company of California, the persons appointed by the Board of
Directors to act as inspectors of election for the Annual Meeting. The
inspectors of election will determine the number of shares outstanding, the
shares represented at the Annual Meeting, the existence of a quorum and the
authenticity, validity and effect of proxies; receive votes or ballots; hear
and determine all challenges and questions in any way arising in connection
with the right to vote; determine when the polls will close; and determine the
results of the election.
Unless otherwise directed in the accompanying Proxy, the proxy holders will
vote FOR the election of the six director nominees listed below. As to any
other matters that may properly come before the Annual Meeting, the proxy
holders will vote in accordance with their best judgment, although the Company
does not presently know of any such other matters.
Proxies for the Annual Meeting are being solicited by mail directly and
through brokerage and banking institutions. The Company will pay all expenses
in connection with the solicitation of proxies. In addition to the use of the
mail, proxies may be solicited by directors, officers and regular employees of
the Company personally, without extra compensation, by telephone, telegraph,
telefax or similar means. The Company may reimburse brokers and other persons
holding stock in their names, or in the names of nominees, for their expenses
in sending proxy materials to principals and obtaining their proxies. Beacon
Hill Partners, Inc. has been engaged to assist in solicitation for which it
will receive from the Company approximately $2,750.
PROPOSAL 1
ELECTION OF DIRECTORS
Six directors are to be elected as directors at the 1997 Annual Meeting to
serve one-year terms and until their respective successors shall be elected
and qualified. It is the intention of the person(s) named in the Proxy Card to
vote the proxies in favor of the election of directors of the six nominees
named below unless authority is withheld in accordance with the instructions
on the Proxy Card. All six nominees are presently directors of the Company. In
the event the nominees named below refuse or are unable to serve as directors
(which is not anticipated), the persons named as proxies reserve full
discretion to vote for any and all persons as may be nominated.
DIRECTOR NOMINEES
The following sets forth certain information concerning the six nominees for
election as directors of the Company:
<TABLE>
<CAPTION>
SERVED AS
NAME POSITION WITH THE COMPANY AGE DIRECTOR SINCE
---- ------------------------- --- --------------
<C> <S> <C> <C>
Robert E. Gary Chairman of the Board and Chief
Executive Officer 71 1962
Marie St. John Gray Vice-Chairman of the Board,
Chief Designer and Secretary 60 1962
Kelly A. Gray President 30 1994
Roger G. Ruppert Senior Vice President--Finance
and Chief Financial Officer 53 1994
Richard A. Gadbois, III Director 39 1993
David A. Krinsky Director 48 1993
</TABLE>
BIOGRAPHICAL INFORMATION
Robert E. Gray, a co-founder of the Company, has served as Chairman of the
Board and Chief Executive Officer of the Company since its inception in 1962.
Prior to forming the Company, Mr. Gray held various sales
2
<PAGE>
and production positions with Cannady Creations, a small sportswear company,
from 1952 to 1962, his last position being General Manager. He graduated from
the University of Southern California with a B.A. degree in political science
and psychology. Mr. Gray is the husband of Marie St. John Gray and the father
of Kelly A. Gray.
Marie St. John Gray, a co-founder of the Company, has served as Chief
Designer of the Company since its inception in 1962, Vice-Chairman of the
Board since 1988, and Secretary of the Company since March 1993. Prior to
forming the Company, Ms. Gray was a fashion model, served as hostess of the
Queen For a Day television show, and was a fit model for some of the leading
designers in the Los Angeles area. Ms. Gray was born in Yugoslavia and
educated in Austria. Ms. Gray is the wife of Robert E. Gray and the mother of
Kelly A. Gray.
Kelly A. Gray a director of the Company since October 1994, became President
of the Company in April 1996. She served as Creative Director of the Company
from June 1991 and Executive Vice President-Creative Director from December
1995 until April 1996. Ms. Gray also heads the Company's retail boutique
division and has design responsibilities for the St. John product line and the
Company's Griffith & Gray line. In addition, she has also been the Company's
Signature Model since 1982. Prior to becoming Creative Director, Ms. Gray
headed the Company's advertising department from 1988 to June 1991. Prior to
heading the advertising department of the Company, Ms. Gray held various other
administrative positions with the Company. Ms. Gray is the daughter of Robert
E. Gray and Marie St. John Gray.
Roger G. Ruppert is a certified public accountant and was appointed as a
director of the Company in October 1994. He has served as Senior Vice
President-Finance and Chief Financial Officer of the Company since October
1986. Prior to joining the Company, Mr. Ruppert was Vice President-Finance and
Chief Financial Officer of Cardis Corporation, a publicly traded auto parts
distributor, from October 1985 to October 1986. Mr. Ruppert was with Arthur
Andersen & Co. for nine years prior to joining Cardis Corporation. He
graduated with a B.S. degree in engineering from the U.S. Naval Academy and
also received an M.B.A. from the University of California, Los Angeles.
Richard A. Gadbois, III is a Senior Vice President of Corporate Executive
Services for Merrill Lynch. Previously, from 1989 to March 1994, he was a
Senior Vice President of Corporate Executive Services and a member of the
Chairman's Advisory Council of Prudential Securities Incorporated, where he
specialized in the development of a private banking service for entrepreneurs.
Prior to joining Prudential Securities, Mr. Gadbois held a similar position as
Senior Vice President, Executive Services/Corporate Finance at Shearson Lehman
Hutton where he worked from 1979 to 1989. Mr. Gadbois graduated with a B.A.
degree from the University of California, Santa Barbara in 1979, majoring in
Economics.
David A. Krinsky is a partner in the law firm of O'Melveny & Myers.
Previously, he was a partner in the law firm of Pettis, Tester, Kruse &
Krinsky from 1987 to August 1994. Prior to the formation of Pettis, Tester,
Kruse & Krinsky, Mr. Krinsky was a partner in the law firm of Gibson, Dunn &
Crutcher from 1982 to 1987. He received a B.A. and a J.D. degree from the
University of Southern California and an M.A. degree from Rutgers University.
ADDITIONAL INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors has two standing committees: (i) the Audit Committee;
and (ii) the Compensation Committee. The Audit Committee meets with the
Company's independent auditors, makes recommendations to the Board of
Directors concerning the acceptance of the reports of such auditors and the
accounting policies and procedures of the Company, and reviews financial plans
and operating results of the Company. The Audit Committee is comprised of
Messrs. Gadbois and Krinsky. During fiscal year 1996, the Audit Committee held
two meetings. The Compensation Committee meets with management and makes
recommendations to the Board of Directors concerning the annual compensation
for all executive officers and key employees of the Company. The Compensation
Committee is comprised of Messrs. Gadbois and Krinsky. During fiscal year
1996, the Compensation Committee met once. The Board of Directors does not
have a standing nominating committee.
3
<PAGE>
During the fiscal year ended November 3, 1996, the Board held ten meetings.
Each director attended at least 75% of the meetings of the Board and its
committees on which they served during their period of service.
DIRECTOR COMPENSATION
Directors holding salaried positions with the Company will not receive
compensation for their services as a director. Other directors will receive
$25,000 annually for their services as directors of the Company. During fiscal
year 1996, the Board granted each of the outside directors, Messrs. Gadbois
and Krinsky, stock options covering 10,000 shares of the Company's Common
Stock (as adjusted to reflect the Company's two-for-one stock split).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
David A. Krinsky, a director and a director-nominee of the Company, is a
partner in the law firm of O'Melveny & Myers, which has rendered legal
services to the Company in the past and is expected to provide legal services
to the Company with respect to various matters in the future.
EXECUTIVE OFFICERS
The following table sets forth information regarding the executive officers
of the Company:
<TABLE>
<CAPTION>
YEARS
WITH
NAME POSITION AGE COMPANY
---- -------- --- -------
<S> <C> <C> <C>
Robert E. Gray Chairman and Chief Executive Officer 71 34
Marie St. John Gray Vice-Chairman, Chief Designer and Secretary 60 34
Kelly A. Gray President 30 14
Roger G. Ruppert Senior Vice President-Finance and Chief Financial Officer 53 10
David C. Frankel Executive Vice President 30 1
Diane M. Griffiths Senior Vice President--Design 45 25
Karla R. Guyer Senior Vice President--Marketing 45 17
</TABLE>
BIOGRAPHICAL INFORMATION
Robert E. Gray. See information under "Election of Directors."
Marie St. John Gray. See information under "Election of Directors."
Kelly A. Gray. See information under "Election of Directors."
Roger G. Ruppert. See information under "Election of Directors."
David C. Frankel was appointed Executive Vice President of the Company
during July 1996. Prior to joining the Company, Mr. Frankel held the position
of Senior Institutional Research Analyst with The Siedler Companies, Inc., an
institutional brokerage firm based in Los Angeles. Previously, he was an
Equity Research Analyst at PaineWebber Incorporated concentrating on the
apparel industry. Over the previous five years, Mr. Frankel held various
positions in sales, merchandising, and production operations with Liz
Claiborne, Inc. Mr. Frankel received a B.A. degree in Economics from the
University of Pennsylvania, and received a Masters in Business Administration
from Columbia Business School with concentrations in marketing and finance.
Diane M. Griffiths has been Senior Vice President-Design since January 1988,
and she also is responsible, together with Ms. Kelly Gray, for the design of
the Griffith & Gray line. Ms. Griffiths has been employed by the Company in
design capacities since 1972. She graduated from the Fashion Institute of
Technology in New York.
4
<PAGE>
Karla R. Guyer has been Senior Vice President-Marketing of the Company since
1993. Previously, she was Vice President-National Sales Manager since August
1990. Ms. Guyer also served in various sales-related positions with the
Company from 1980 to 1990. Prior to joining the Company, Ms. Guyer worked for
Bullock's as a department manager of designer dresses and furs. Ms. Guyer
attended Fullerton College in California.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of January 22, 1997, regarding
the beneficial ownership of the Company's common stock ("Common Stock") by:
(i) each person who is known by the Company to be the beneficial owner of more
than 5% of the Common Stock; (ii) each of the directors and director nominees
of the Company; (iii) each executive officer listed in the Summary
Compensation Table below; and (iv) all current directors and executive
officers of the Company as a group. The information provided in the following
table reflects the Company's two-for-one stock split in fiscal 1996.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED OWNED
---- ------------ ----------
<S> <C> <C>
Putnam Investments, Inc.(/1/).................... 1,653,424 10.0%
One Post Office Square
Boston, Massachusetts 02109
Robert E. Gray(/2/).............................. 1,208,479 7.1%
Marie St. John Gray(/2/)......................... 1,208,479 7.1%
Kelly A. Gray(/3/)............................... 637,904 3.8%
Robert C. Davis(/4/)............................. 432,356 2.6%
Diane M. Griffiths(/5/).......................... 280,000 1.7%
Roger G. Ruppert(/6/)............................ 26,000 *
Richard A. Gadbois, III(/7/)..................... 13,565 *
David A. Krinsky(/7/)............................ 10,655 *
Karla R. Guyer(/8/).............................. 2,500 *
David C. Frankel................................. -- *
All current directors and executive officers as a
group (nine persons)(/9/)....................... 2,179,113 12.7%
</TABLE>
- --------
*Less than 1%.
(1) Information is as of April 8, 1996 and is based on a Schedule 13G filed
with the Securities and Exchange Commission by Putnam Investments, Inc.
("Putnam"), a wholly-owned subsidiary of Marsh & McLennan Companies, Inc.
Putnam reported that it has shared voting power with respect to 342,412
shares and has shared dispositive power with respect to 1,653,424 shares.
Putnam also reported that it wholly owns two registered investment
advisers: (i) Putnam Investment Management, Inc., which has shared
dispositive power with respect to 1,213,212 shares and beneficially owns
approximately 7.3% of the Company's shares; and (ii) The Putnam Advisory
Company, Inc., which has shared voting power with respect to 342,412
shares and has shared dispositive power with respect to 440,212 shares and
beneficially owns approximately 2.7% of the Company's shares.
(2) Includes 753,839 shares which are owned by the Gray Family Trust, of which
Robert E. Gray and Marie St. John Gray serve as co-Trustees. In addition,
includes 54,640 shares which are owned by the Kelly Ann Gray Trust, of
which Robert E. Gray and Marie St. John Gray serve as co-Trustees, and
also includes 400,000 shares ("Option Shares") issuable upon exercise of
options exercisable at or within 60 days of January 22, 1997. Robert E.
Gray and Marie St. John Gray hold 320,000 Option Shares and 80,000 Option
Shares, respectively.
5
<PAGE>
(3) Includes 60,000 shares issuable upon exercise of options exercisable at or
within 60 days of January 22, 1997.
(4) Mr. Davis resigned from his employment by the Company on April 19, 1996,
and the information is provided as of July 31, 1996. Includes 432,356
shares which are owned by the Robert and Alison Davis Family Trust, of
which Robert C. Davis serves as co-Trustee.
(5) Includes 200,000 shares which are owned by the Griffiths Family Trust, of
which Diane M. Griffiths serves as co-Trustee, and also includes 80,000
shares issuable upon exercise of options exercisable at or within 60 days
of January 22, 1997.
(6) Includes 25,000 shares issuable upon exercise of options exercisable at or
within 60 days of January 22, 1997.
(7) Includes 6,665 shares issuable upon exercise of options exercisable at or
within 60 days of January 22, 1997.
(8) Includes 2,000 shares issuable upon exercise of options exercisable at or
within 60 days of January 22, 1997.
(9) Includes 580,330 shares issuable upon exercise of options exercisable at
or within 60 days of January 22, 1997.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for services in all
capacities to the Company of the following persons (the "Named Executive
Officers"): (i) the chief executive officer during fiscal year 1996; (ii) the
other four most highly compensated executive officers of the Company who were
serving as of November 3, 1996; and (iii) one individual for whom disclosures
would have been made under clause (ii) but for the fact he was not serving on
November 3, 1996:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(/5/)
-------------------------------
ALL OTHER
YEAR SALARY($)(/1/) BONUS($)(/1/) COMPENSATION($)
---- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Robert E. Gray 1996 $1,564,331(/2/) -- $1,423
Chairman and Chief 1995 1,263,325(/2/) -- 1,872
Executive Officer 1994 1,025,298 -- 2,870
Marie St. John Gray 1996 396,298 -- 408
Vice-Chairman, Chief 1995 389,643 $50,000 570
Designer and Secretary 1994 392,083 -- 1,066
Kelly A. Gray 1996 558,685(/3/) -- 1,831
President 1995 482,366(/3/) -- 2,442
1994 460,317(/3/) 25,000 3,936
Diane M. Griffiths 1996 252,885 -- 1,831
Senior Vice President-- 1995 254,960 10,000 2,442
Design 1994 253,707 -- 3,936
Robert C. Davis 1996 234,615 -- --
Former President and 1995 417,460 -- 2,442
Chief Operating 1994 368,055 -- 3,936
Officer(/4/)
Karla R. Guyer 1996 211,941 -- 1,831
Senior Vice President-- 1995 184,858 -- 2,442
Marketing 1994 179,861 -- 3,137
</TABLE>
- --------
(1) The amounts shown in this column include amounts and awards accrued during
each of fiscal years 1996, 1995 and 1994 that were earned but not paid in
such fiscal year.
(2) These amounts include $500,000 and $208,333 of annual salary for fiscal
years 1996 and 1995, respectively, that was earned but deferred pursuant
to the Employment Agreement dated June 1, 1995 by and between the Company
and Mr. Gray.
<PAGE>
(3) These amounts include modeling fees of $250,000 which were paid to Ms.
Gray during each of fiscal years 1996, 1995 and 1994.
(4) Mr. Davis resigned from his employment by the Company on April 19, 1996.
(5) The Company has concluded that the aggregate amount of perquisites and
other personal benefits, securities or property paid to each of the listed
officers for each of the fiscal years 1996, 1995 and 1994 did not exceed
the lesser of 10% of such officer's total annual salary and bonus for each
such year or $50,000. Therefore, any such amounts are not included in the
table.
EMPLOYMENT AGREEMENTS
During fiscal 1995, the Company entered into an Employment Agreement with
Robert E. Gray commencing June 1, 1995 for three years. The Company also
entered into new Employment Agreements with Marie St. John Gray, Kelly A.
Gray, Diane M. Griffiths, Roger G. Ruppert and Karla R. Guyer, effective
January 1, 1997 for one year. The agreements require each employee to devote
substantially his or her full business time and attention and best efforts to
the affairs of the Company during the term of the agreements. The agreements
currently provide for the payment of a base salary at the rate of $975,000 for
Robert E. Gray, $400,000 for Marie St. John Gray, $350,000 for Kelly A. Gray,
$250,000 for Diane M. Griffiths, $210,000 for Roger G. Ruppert and $205,000
for Karla R. Guyer. Mr. Gray's employment agreement also provides for
additional annual compensation of $500,000 to be deferred. Under Kelly A.
Gray's employment agreement, the Company also compensates Ms. Gray $250,000
each year for her position as the Signature Model of the Company. The
agreements provide for the payment of severance benefits upon the termination
of the employee's employment. Under the agreements (excluding Mr. Gray's),
such severance benefits in certain circumstances would include payment to the
employee of the employee's base salary for the longer of the remaining term of
the agreement or six months. Under Mr. Gray's employment agreement, such
severance benefits in certain circumstances would include payment to him of
all base salary and all deferred compensation payments through May 31, 1998.
As of July 22, 1996, the Company entered into a letter agreement with David
Frankel regarding his employment as an Executive Vice President of the
Company. The letter agreement generally provides for an annual base salary of
$250,000, a discretionary bonus and stock options covering up to 50,000 shares
of the Company's Common Stock. Generally, if Mr. Frankel is terminated at any
time during his first year of employment with the Company, he would receive
six months severance pay.
RETIREMENT PLAN
The Company maintains the Employees' Profit Sharing Plan, as amended (the
"Retirement Plan"), a qualified profit-sharing plan for the benefit of all
eligible employees. The Retirement Plan contemplates the sharing of profits
and is funded annually by cash contributions at the discretion of the
Company's Board of Directors. The Retirement Plan was funded in each of fiscal
years 1996, 1995 and 1994 with contributions of $500,000.
STOCK OPTION PLAN
The Company's 1993 Stock Option Plan (the "Plan") was adopted by the
Company's shareholders and Board of Directors during January 1993 and provides
for the granting of "incentive stock options," within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended, and nonstatutory stock
options. Under the Plan, options covering an aggregate of 1,600,000 shares of
the Common Stock may be granted to directors, officers and employees of the
Company, except that incentive stock options may not be granted to non-
employee directors. The Plan is administered by the Board of Directors which
has sole discretion and authority, consistent with the provisions of the Plan,
to determine which eligible participants will receive options, the time when
options will be granted, the terms of options granted and the number of shares
which will be subject to options granted under the Plan. The Board may also
appoint a committee to administer the Plan and, subject to applicable law, to
exercise all of the powers of the Board under the Plan.
7
<PAGE>
The exercise price of incentive stock options must be not less than the fair
market value of a share of Common Stock on the date the option is granted
(110% with respect to optionees who own at least 10% of the outstanding Common
Stock). Nonstatutory stock options shall have such exercise prices as
determined by the Board. The Board of Directors has the authority to determine
the time or times at which options granted under the Plan become exercisable,
provided that options expire no later than ten years from the date of grant
(five years with respect to optionees who own at least 10% of the outstanding
Common Stock). Options are nontransferable, other than upon death by will and
the laws of descent and distribution, and generally may be exercised only by
an employee while employed by the Company or within three months after
termination of employment (12 months for termination resulting from death or
disability). As of January 7, 1997, the Plan was amended to provide that upon
the occurrence of a merger, liquidation, the sale of substantially all of the
assets of the Company or certain other major corporate transactions regarding
the Company, all unvested installments of then outstanding options shall
automatically accelerate and become fully vested, and all optionees shall have
the right to exercise all of their options to the extent not previously
exercised.
During fiscal 1996 and 1995, the Company granted 28,000 and 19,500 stock
options, respectively, under the Plan (each stock option referenced herein
covers one share of the Common Stock). At November 3, 1996, 681,472 stock
options were outstanding under the Plan with exercise prices ranging from
$8.50 to $23.25, and 625,458 of such outstanding options were exercisable. At
November 3, 1996, the Plan had 711,668 stock options available for future
grant.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant any stock options to any of the Named Executive
Officers during the fiscal year ended November 3, 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during the fiscal year
ended November 3, 1996 and unexercised options held by each such officer as of
November 3, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END(#)(/1/) FISCAL YEAR-END($)(/2/)
------------------------- -------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Gray.......... -- -- 320,000 -- 12,160,000 --
Marie St. John Gray..... -- -- 80,000 -- 3,040,000 --
Robert C. Davis(/3/).... 80,000 1,530,199 -- -- -- --
Kelly A. Gray........... -- -- 60,000 -- 2,280,000 --
Diane M. Griffiths...... -- -- 80,000 -- 3,040,000 --
Karla R. Guyer.......... 18,000 626,375 2,000 -- 76,000 --
</TABLE>
- --------
(1) Each of these options have exercise prices of $8.50 per share.
(2) The per share dollar value of the options is equal to the difference
between the fair market value of one share of Common Stock and the per
share exercise price of the options. The closing price per share of the
Common Stock at November 3, 1996 was $46.50, as reported by the New York
Stock Exchange. Thus, the options had a per share dollar value at November
3, 1996 equal to $38.00.
(3) Mr. Davis resigned from his employment by the Company on April 19, 1996.
8
<PAGE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the
Securities Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report of
the Compensation Committee and the Performance Graph shall not be deemed to be
incorporated by reference into any such filings.
COMPENSATION REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of two independent outside directors. No member of the Committee is
a former or current officer or employee of the Company or any of its
subsidiaries. The Committee is responsible for setting and administering the
policies that govern compensation for executive officers and key employees.
The Committee evaluates the performance of management and determines
compensation policies and levels.
EXECUTIVE COMPENSATION PHILOSOPHY
The Company believes that compensation should reflect the value created for
its shareholders, while supporting the business strategies and long-range
plans of the Company. Accordingly, the Company's executive compensation
program is based on guiding principles designed to align compensation with the
Company's business strategy and performance. These principles are:
(i) to attract and retain key executives critical to the long-term
success of the Company who are of the highest caliber;
(ii) to motivate executives to enhance long-term shareholder value by
building appropriate ownership in the Company; and
(iii) to provide salary increases to key executives whose efforts can be
reflected in the Company's annual and long-term plans and goals.
EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation is based on three principal components,
each of which is intended to serve the Company's overall compensation
philosophy.
Base Salary. Base salary for each executive is intended to be determined
principally by the following factors:
(i) the executive's contribution to the Company's business;
(ii) the executive's length of service with the Company; and
(iii) the executive's unique talents and abilities with respect to the
Company's operations.
Salaries for executive officers are provided in employment agreements
between the Company and the executive officers. Such salaries are reviewed by
the Committee on an annual basis.
Annual Bonuses. The Company does not award bonuses to its executive
officers, except in extraordinary situations. The Company believes that an
executive officer is always expected to perform his or her duties to the best
of his or her ability. Consequently, the Company believes that an annual base
salary itself should provide for that performance, and a bonus generally
should not be paid.
Stock Options. Executive officers are eligible to receive grants of
incentive stock options and nonstatutory stock options under the Company's
1993 Stock Option Plan (the "Plan"). The Plan is an integral part of the
Company's compensation system. The Plan is designed to encourage and create
ownership of the Common Stock by key employees. Through the Plan, long-range
interests of key employees are aligned with shareholders' interests as these
employees build meaningful stakes in the Company. Awards to executive officers
must be granted with exercise prices at least equal to the fair market value
of the underlying Common Stock at the date of grant. Stock options generally
vest in installments over multiple years.
9
<PAGE>
CEO COMPENSATION
The Company entered into a three-year employment agreement with Mr. Gray
effective June 1, 1995. The agreement requires Mr. Gray to devote
substantially his full business time and attention and best efforts to the
affairs of the Company during the term of the agreement. The agreement
provides for the payment of a base salary at the rate of $975,000 per year.
The agreement also provides for additional compensation totaling $500,000 per
year to be deferred. The agreement provides for the payment of severance
benefits upon termination of Mr. Gray's employment. Under certain
circumstances, such severance benefits would include a lump sum payment to Mr.
Gray equal to his then base salary for the remaining term of the agreement and
all remaining deferred compensation payments called for through the end of
such term. As discussed above, Mr. Gray generally shall not be entitled to an
annual bonus. In fiscal 1996, Mr. Gray did not receive any stock option
grants.
The executive compensation practices of the Company are constantly re-
evaluated to ensure their support of the strategic goals of the Company and
their contribution to the creation of shareholder value.
The foregoing report has been furnished by the Committee:
Richard A. Gadbois, III
David A. Krinsky
February 10, 1997
10
<PAGE>
COMPANY STOCK PRICE PERFORMANCE
The following graph assumes that $100 was invested on March 10, 1993 in each
of St. John Knits, Inc., the S&P 500 Index and the S&P Textile-Apparel
Manufacturers Index ("Textile Index"). It also assumes reinvestment of
dividends, where applicable.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG ST. JOHN KNITS, INC., THE S&P 500 INDEX
AND THE S&P TEXTILE-APPAREL MANUFACTURERS INDEX
FOR THE PERIOD FROM MARCH 10, 1993 TO NOVEMBER 3, 1996
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
3/11/93 10/31/93 10/31/94 10/29/95 11/03/96
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
St. John Knits, Inc. $100 $ 96 $175 $275 $539
S&P 500 Index $100 $107 $112 $141 $175
Textile Index $100 $ 74 $ 89 $ 83 $103
</TABLE>
* The historical stock performance shown on the graph is not intended to and
may not be indicative of future stock performance.
11
<PAGE>
CERTAIN TRANSACTIONS
The Company leases its corporate office and manufacturing facility in
Irvine, California from GM Properties, a partnership in which the Gray Family
Trust has a 50% general partnership interest. The lease is for a five-year
term expiring on May 30, 2001 and provides for a current base monthly lease
payment of approximately $46,000, with annual increases of 4%. During fiscal
years 1996, 1995 and 1994, the Company paid GM Properties $645,000, $600,000
and $572,000, respectively, under this lease. Under the lease, the Company has
the option to extend the lease for another five-year term at a lease amount to
be agreed upon.
The Company leases its Alhambra, California manufacturing facility from
Alhambra Partners, a limited partnership in which the Gray Family Trust has a
65% general partnership interest and Robert C. Davis has a 18% limited
partnership interest. The lease is for a five-year term expiring on August 31,
2001, with the Company having the option to extend the lease for a five-year
term at a lease amount to be agreed upon. The current base monthly lease
payment under this lease is approximately $22,000, with annual increases of
4%. During fiscal years 1996, 1995 and 1994, the Company paid Alhambra
Partners $321,000, $302,000 and $297,000, respectively, under this lease.
The Company periodically rents certain personal property from Ocean Air
Charters, Inc. ("Ocean"), in which Robert E. Gray and Marie St. John Gray are
the sole shareholders. During fiscal years 1996, 1995 and 1994, the Company
paid $37,000, $3,000 and $62,000, respectively, with respect to such property.
In addition, the Company and Ocean each hold a 50% ownership interest in a
partnership ("Partnership") which owns an airplane. As of November 3, 1996,
each partner had a net capital investment in the Partnership of approximately
$2,246,000. During fiscal years 1996, 1995 and 1994, the Partnership leased
the airplane to the Company and received lease payments totaling $572,000,
$240,000 and $240,000, respectively. As of March 7, 1996, the Company and the
Partnership entered into a lease agreement for the airplane expiring March 31,
1997, at a lease rate of $70,000 per month.
Each of the arrangements between the Company and entities controlled by the
Gray family is, in the opinion of management, on terms no less favorable to
the Company than those that were available from persons not affiliated with
the Company.
In addition, see "Compensation Committee Interlocks and Insider
Participation."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Executive officers, directors and greater-than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file.
Except as follows, to the Company's knowledge, based solely on its review of
the copies of such reports furnished to the Company and written
representations that no other reports were required, during the fiscal year
ended November 3, 1996, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater-than ten percent beneficial
owners were satisfied. Messrs. Gadbois and Krinsky inadvertently did not
report a grant of stock options on Form 4 when required. Each reported such
grant on Form 5. Mr. Gadbois inadvertently did not report a sale of the
Company's Common Stock he made in September 1996 and did not include such sale
on Form 5 for fiscal 1996. The sale was reported on Form 4 once the oversight
was discovered.
AUDITORS
The Board of Directors has selected Arthur Andersen LLP as its independent
public accountants for the fiscal year ending November 2, 1997. Arthur
Andersen LLP also served as the Company's independent public accountants for
the fiscal year ended November 3, 1996. A representative of this firm will be
in attendance at the Annual Meeting to answer any questions from shareholders
relating to the financial statements of the Company and to make a statement,
if he or she desires to do so.
12
<PAGE>
NOMINATIONS AND SHAREHOLDER PROPOSALS
The Company's Bylaws require that all nominations for persons to be elected
directors, other than those made by the Board of Directors, be made pursuant
to written notice to the Secretary of the Company. The notice must be received
not less than 60 nor more than 90 days prior to the meeting at which the
election will take place (or not later than 10 days after notice or public
disclosure of such meeting date if such disclosure occurs less than 70 days
prior to the date of such meeting). The notice must set forth all information
relating to each nominee that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required pursuant to the
Securities Exchange Act of 1934, as amended. The notice must also include the
shareholder's name and address as they appear on the Company's books and the
class and number of shares of stock beneficially owned by such shareholder.
In addition, the Bylaws require that for business to be properly brought
before an annual meeting by a shareholder, the Secretary of the Company must
have received written notice thereof not less than 60 nor more than 90 days
prior to the meeting (or not later than 10 days after notice or public
disclosure of such meeting date if such disclosure occurs less than 70 days
prior to the date of the meeting). The notice must set forth (i) a brief
description of the business desired to be brought before the meeting and the
reasons therefor; (ii) the shareholder's name and address as they appear on
the Company's books; (iii) the class and number of shares of stock
beneficially owned by the shareholder; and (iv) any material interest of the
shareholder in such business.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposal of a shareholder intended to be presented at the Company's 1998
annual meeting and included in the proxy statement and form of proxy for that
meeting must be received by the Company no later than October 24, 1997.
OTHER MATTERS
The Board of Directors knows of no other matters other than those described
herein that will be presented for consideration at the Annual Meeting. If,
however, any other business shall properly come before the Annual Meeting, the
proxy holders will, as to such items, vote the shares represented by proxies
in accordance with their best judgment.
ANNUAL REPORT
A copy of the Summary 1996 Annual Report to Shareholders, together with a
copy of the Company's annual report on Form 10-K, as filed with the Securities
and Exchange Commission, without exhibits, is being mailed to each shareholder
of record, together with the proxy materials. Copies of exhibits to the annual
report on Form 10-K are available, but a reasonable fee per page will be
charged to the requesting shareholder. Shareholders may make requests in
writing to Roger G. Ruppert, Chief Financial Officer, St. John Knits, Inc.,
2722 Michelson Drive, Irvine, California 92612.
By Order of the Board of Directors
[LOGO of SIGNATURE OF ROBERT E. GRAY]
Robert E. Gray
February 19, 1997
Irvine, California
13
<PAGE>
ST. JOHN KNITS, INC.
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS--MARCH 19, 1997
The undersigned hereby appoints Robert E. Gray and Roger G. Ruppert, and each
of them, with full power of substitution, as proxies to represent the
undersigned and vote all shares of stock which the undersigned is entitled to
vote at the Annual Meeting of Shareholders of St. John Knits, Inc. to be held
on March 19, 1997, and at any postponements or adjournments thereof, as
specified below, and to vote in accordance with their best judgment on such
other business as may properly come before the Meeting and at any
postponements or adjournments thereof.
UNLESS OTHERWISE SPECIFIED BY THE UNDERSIGNED, THIS PROXY WILL BE VOTED FOR
PROPOSAL 1 AND WILL BE VOTED BY THE PROXYHOLDERS IN ACCORDANCE WITH THEIR BEST
JUDGMENT AS TO ANY OTHER MATTERS PROPERLY TRANSACTED AT THE MEETING AND AT ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF. TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS JUST SIGN ON THE REVERSE SIDE, NO BOXES NEED TO BE
CHECKED.
Check here if you plan to attend the
0 meeting.
New Address: ______________________________
___________________________________________
___________________________________________
0 Check here for address change.
(Continued and to be signed on reverse side)
<PAGE>
(continued from reverse side)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. 0
[______________________________________________________________________________]
1. ELECTION OF DIRECTORS: Nominees: Robert E. Gray, Marie St. John Gray, Kelly
A. Gray, Roger G. Ruppert, David A. Krinsky and Richard A. Gadbois, III
FOR all
nominees
0
WITHHELD
from all
nominees
0
FOR all nominees, except vote withheld from the following nominee(s):
0
____________________________________________________________________________
Dated: ___________________________________________________________________,1997
_______________________________________________________________________________
Signature of Shareholder
_______________________________________________________________________________
Printed Name of Shareholder
_______________________________________________________________________________
Title (if appropriate)
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS. IF ACTING AS ATTORNEY, EXECUTOR,
TRUSTEE, OR IN REPRESENTATIVE CAPACITY, SIGN NAME AND INDICATE TITLE. IF
SHARES ARE IN THE NAMES OF MORE THAN ONE PERSON, EACH SHOULD SIGN.
