St John Knits International Inc, et al. – ‘POS AM’ on 1/12/00

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Document/Exhibit                   Description                      Pages   Size 

 1: POS AM      Post-Effective Amendment                             175    825K 
 2: EX-23.1     Consent of Arthur Andersen                             1      5K 

POS AM   —   Post-Effective Amendment
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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 2000

                                                      REGISTRATION NO. 333-86583
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

POST EFFECTIVE AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933

------------------------

ST. JOHN KNITS INTERNATIONAL, INCORPORATED
(Exact name of Registrant Issuer as specified in its charter--See Inside Facing 
Page for Table of Additional Registrant Guarantors) 

                                                                [Download Table]
                                                                                  
            DELAWARE                         2253                   52-2061057    
(State or other jurisdiction of  (Primary Standard Industrial    (I.R.S. Employer 
 incorporation or organization)  Classification Code Number)   Identification No.)

------------------------

17422 DERIAN AVENUE 
IRVINE, CALIFORNIA 92614
(949) 863-1171
(Address and telephone number of Registrant's 
principal executive offices)
------------------------

ROGER G. RUPPERT
SENIOR VICE PRESIDENT--FINANCE AND
CHIEF FINANCIAL OFFICER 
ST. JOHN KNITS INTERNATIONAL, 
INCORPORATED
17422 DERIAN AVENUE 
IRVINE, CALIFORNIA 92614
(949) 863-1171
(Name, address, including zip code, and telephone 
number of agent for service)
------------------------

WITH A COPY TO: 

GARY I. HOROWITZ
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as 
practicable after this Registration Statement becomes effective.                

If the securities being registered on this Form are being offered in    
connection with the formation of a holding company and there is compliance with 
General Instruction G, check the following box. / /                             

If this form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, check the following box and   
list the Securities Act Registration number of the earlier effective            
Registration Statement for the same offering. / /                               

If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities       
Registration Statement number of the earlier effective Registration Statement   
for the same offering. / /                                                      

THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS     
SHALL FILE A FURTHER AMENDMENT WHICH SHALL SPECIFICALLY STATE THAT THIS         
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH     
SECTION 8(A) OF THE SECURITIES ACT, AS AMENDED OR UNTIL THE REGISTRATION        
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE    
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.                

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TABLE OF ADDITIONAL REGISTRANT GUARANTORS 

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                                                                        ADDRESS, INCLUDING ZIP CODE, 
                                STATE OR OTHER                              AND TELEPHONE NUMBER,    
        EXACT NAME OF          JURISDICTION OF                             INCLUDING AREA CODE, OF   
   REGISTRANT GUARANTOR AS     INCORPORATION OR     I.R.S. EMPLOYER        REGISTRANT GUARANTOR'S    
  SPECIFIED IN ITS CHARTER       ORGANIZATION    IDENTIFICATION NUMBER   PRINCIPAL EXECUTIVE OFFICES 
-----------------------------  ----------------  ---------------------  -----------------------------
                                                                                                     
St. John Knits, Inc.            California         95-2245070           17422 Derian Avenue          
                                                                        Irvine, California 92614     
                                                                        (949) 863-1171               

St. John Italy, Inc.            California         33-0690789           17422 Derian Avenue          
                                                                        Irvine, California 92614     
                                                                        (949) 863-1171               

St. John Trademarks, Inc.       California         33-0760317           17422 Derian Avenue          
                                                                        Irvine, California 92614     
                                                                        (949) 863-1171               

St. John Home, LLC              Delaware           33-0567039           17422 Derian Avenue          
                                                                        Irvine, California 92614     
                                                                        (949) 863-1171               

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PROSPECTUS                                                                      

$100,000,000                                                                    

                                                                          [LOGO]

ST. JOHN KNITS INTERNATIONAL, INCORPORATED                                      

OFFER TO EXCHANGE ALL OUTSTANDING 12 1/2% SENIOR SUBORDINATED NOTES DUE 2009 FOR
12 1/2% SENIOR SUBORDINATED NOTES DUE 2009, WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT                                                                  

UNCONDITIONALLY GUARANTEED ON A SENIOR SUBORDINATED BASIS BY ST. JOHN           
KNITS, INC., ST. JOHN ITALY, INC., ST. JOHN TRADEMARKS, INC. AND ST. JOHN HOME, 
LLC                                                                             

THE EXCHANGE OFFER                                                              

- St. John Knits International, Incorporated will exchange all outstanding notes
that are validly tendered and not validly withdrawn for an equal principal  
amount of exchange notes that are freely tradeable.                         

- You may withdraw tenders of outstanding notes at any time prior to the        
expiration of the exchange offer.                                           

- The exchange offer expires at 5:00 p.m., New York City time, on December 27,  
1999, unless extended. We do not currently intend to extend the expiration  
date.                                                                       

- We will not receive any proceeds from the exchange offer.                     

THE EXCHANGE NOTES                                                              

- The terms of the exchange notes to be issued in the exchange offer are        
substantially identical to the outstanding notes, except that the exchange  
notes will be freely tradeable.                                             

- The exchange notes will be issued under and entitled to the benefits of the   
same indenture that authorized the issuance of the outstanding notes.       

- The guarantees of the outstanding notes are, and the guarantees of the        
exchange notes will be, full, unconditional, joint and several.             

- The outstanding notes and the guarantees of the outstanding notes are, and the
exchange notes and the guarantees of the exchange notes will be, senior     
subordinated indebtedness. As of August 1, 1999, we had approximately       
$190.0 million of senior indebtedness outstanding.                          

--------------------------

If you are a broker-dealer and you receive exchange notes for your own account  
pursuant to the exchange offer, you must acknowledge that you will deliver a    
prospectus in connection with any resale of such exchange notes. The letter of  
transmittal states that by so acknowledging and by delivering a prospectus, you 
will not be deemed to admit that you are an "underwriter" within the meaning of 
the Securities Act. Broker-dealers may use this prospectus in connection with   
resales of exchange notes received in exchange for outstanding notes where such 
outstanding notes were acquired by such broker-dealer as a result of            
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the date on which the exchange offer is consummated, we
will make this prospectus available to any broker-dealer for use in connection  
with any such resale. See "Plan of Distribution."                               
--------------------------

YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 18 OF THIS     
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.                          
--------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES         
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED IF THIS   
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A     
CRIMINAL OFFENSE.                                                               
--------------------------

The date of this prospectus is November 22, 1999. 

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TABLE OF CONTENTS 

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                                          PAGE  
                                        --------
                                                
Forward-Looking Statements............      3   

Prospectus Summary....................      4   

Risk Factors..........................     18   

The Transactions......................     28   

Use of Proceeds.......................     28   

Capitalization........................     29   

Unaudited Pro Forma Condensed                   
  Consolidated Financial                        
  Information.........................     30   

Selected Historical Condensed                   
  Consolidated Financial                        
  Information.........................     35   

Management's Discussion and Analysis            
  of                                            
  Financial Condition and Results of            
  Operations..........................     37   

Business..............................     44   

Management............................     54   

Securities Ownership of Certain                 
  Beneficial Owners and Management....     59   

                                                                [Download Table]

                                          PAGE  
                                        --------
                                                

Certain Relationships and Related               
  Transactions........................     60   

Description of Senior Credit                    
  Facilities..........................     62   

The Exchange Offer....................     65   

Description of the Notes..............     76   

Description of Preferred Stock........    117   

Certain United States Federal Income            
  Tax Considerations of the Exchange            
  Offer...............................    120   

Book-Entry; Delivery and Form.........    121   

Exchange and Registration Rights......    125   

Plan of Distribution..................    128   

Legal Matters.........................    128   

Experts...............................    128   

Where You Can Find More Information...    129   

Index to Consolidated Financial                 
  Statements..........................    F-1   

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FORWARD-LOOKING STATEMENTS

 This prospectus includes forward-looking statements. All statements other
than statements of historical facts included in this prospectus, including      
statements we make under "Prospectus Summary," "Management's Discussion and     
Analysis of Financial Condition and Results of Operations" and "Business," may  
constitute forward-looking statements. We have based these forward-looking      
statements on our current expectations and projections about future events.     
Although we believe that our assumptions made in connection with the            
forward-looking statements are reasonable, we cannot assure you that our        
assumptions and expectations will prove to have been correct. Important factors 
that could cause our actual results to differ from our expectations are         
disclosed below under "Risk Factors."                                           

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PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION ABOUT ST. JOHN KNITS   
INTERNATIONAL, INCORPORATED AND ITS SUBSIDIARIES AND THIS EXCHANGE OFFER.       
BECAUSE IT IS JUST A SUMMARY, IT MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE
IMPORTANT TO YOU. YOU SHOULD READ THIS PROSPECTUS, INCLUDING THE FINANCIAL DATA 
AND RELATED NOTES, IN ITS ENTIRETY. IN THIS PROSPECTUS, REFERENCES TO "SJKI,"   
"WE," "OUR" AND "US" REFER TO ST. JOHN KNITS INTERNATIONAL, INCORPORATED AND ITS
SUBSIDIARIES, REFERENCES TO "ST. JOHN KNITS INTERNATIONAL" REFER ONLY TO ST.    
JOHN KNITS INTERNATIONAL, INCORPORATED, AND REFERENCES TO "ST. JOHN" REFER ONLY 
TO ST. JOHN KNITS, INC., ONE OF OUR SUBSIDIARIES. IN THIS PROSPECTUS, REFERENCES
TO "FISCAL 1998" REFER TO THE YEAR ENDED NOVEMBER 1, 1998 AND PRIOR FISCAL YEARS
ARE REFERRED TO IN A SIMILAR MANNER UNLESS OTHERWISE INDICATED. UNLESS OTHERWISE
SPECIFICALLY INDICATED, ALL REFERENCES TO OUR PERFORMANCE ARE FOR FISCAL 1998.  

THE COMPANY 

OVERVIEW                                                                        

We are a leading designer, manufacturer and marketer of fine women's    
clothing and accessories. The St. John name has been associated with high       
quality women's knitwear for over 35 years. Our core knitwear product line,     
which represents approximately 81% of our sales, consists of a collection of    
lifestyle clothing for women's business, evening and casual needs. We           
manufacture our products primarily to order and distribute them on a highly     
selective basis through a group of upscale retailers with whom we have long-term
relationships, as well as through our company-owned stores.                     

Our core knitwear products are considered unique and highly desirable by
customers due to their classic styling, durability, comfort, fit and quality.   
These attributes, combined with selective distribution and targeted advertising,
have created a loyal base of customers consisting of professional and higher-   
income women.                                                                   

  The strength of our brand name and customer loyalty has also enabled us to
expand our business into product lines that complement our core offerings. These
products account for approximately 19% of our sales and include:                

- women's wovens;                                                       

- activewear;                                                           

- shoes;                                                                

- coats;                                                                

- accessories;                                                          

- fragrances; and                                                       

- home furnishings.                                                     

 The success of our knitwear business, together with growth from our other
product lines, have allowed us to increase net sales from approximately         
$128.0 million in fiscal 1994 to approximately $282.0 million in fiscal 1998,   
representing a compound annual growth rate of approximately 21.8%. For the      
twelve months ended August 1, 1999, our net sales and Adjusted EBITDA (as       
defined) were approximately $297.6 million and $61.7 million, respectively.     

    We have developed a vertically integrated manufacturing process which allows
us to produce approximately 93% of our own products. We believe that this       
vertical integration differentiates us from other apparel manufacturers and has 
been critical to our success because it enables us to manufacture products to   
order, maximize manufacturing flexibility and maintain superior quality control.
We operate seven production facilities in California and one in Mexico. During  
the past five years we have invested                                            

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approximately $53.0 million in production facilities and state-of-the-art       
equipment, which we believe has further enhanced our position as the leading    
manufacturer of high-end women's knitwear.                                      

 We have had relationships with our top three retail customers, Saks Fifth
Avenue, Neiman Marcus and Nordstrom, for approximately 25, 20 and 15 years,     
respectively. We also distribute our products through 18 company-owned boutiques
and nine outlet stores. The boutiques showcase our entire line of products and  
have expanded the distribution and enhanced the brand awareness of our products.

COMPETITIVE STRENGTHS                                                           

Our competitive strengths, summarized below, include our:               

- stable core product offering;                                         

- premier brand name;                                                   

- manufacturing expertise;                                              

- long-standing customer relationships; and                             

- proven management team with substantial equity ownership.             

 STABLE CORE PRODUCT OFFERING.  We believe our knitwear is one of the most
successful product lines in women's apparel. For over 35 years, our classic,    
timeless styling and consistency in designs, fabrics and colors across seasons  
have made our products a core part of our customers' wardrobes and have created 
a high degree of customer loyalty. We believe that consistent styling encourages
our customers to augment wardrobes and match garments purchased during prior    
seasons with our current products. In addition, we believe our position as the  
leading supplier of high-end women's knitwear enhances our stability. Over the  
past 10 years, the success of our core knitwear products has driven an increase 
in net sales, from approximately $41.5 million in fiscal 1988 to approximately  
$282.0 million in fiscal 1998.                                                  

 PREMIER BRAND NAME.  We believe the St. John name is synonymous with high
quality women's apparel. We believe we have developed an exclusive image by     
selectively distributing our products through upscale retailers and through a   
long-term investment in a targeted advertising campaign. Our knitwear has       
developed a distinct reputation for its exceptional fit and low maintenance,    
qualities attributable to our proprietary high-twist yarn and knit fabric. Our  
target customers, professional and higher-income women, have proven willing to  
pay a premium price for our garments and many have become repeat purchasers of  
our products. We have been able to capitalize on this brand loyalty by          
developing products, such as accessories, shoes and coats, that complement our  
core knitwear garments.                                                         

MANUFACTURING EXPERTISE.  We believe that our vertical integration      
differentiates us from other apparel manufacturers and has been critical to our 
success because it enables us to manufacture products to order, maximize        
manufacturing flexibility and maintain superior quality control. We believe the 
ability to produce to order limits our exposure to both the inventory and market
risks associated with many apparel companies that source products               
internationally. Our in-house manufacturing capabilities also enable us to      
quickly increase production of popular styles. Our ability to control every     
aspect of the manufacturing process allows us to consistently produce garments  
to our high quality standards. Finally, we believe that our vertical integration
has enabled us to consistently achieve margins that are among the highest in the
apparel industry.                                                               

 LONG-STANDING CUSTOMER RELATIONSHIPS.  We have had relationships with our
top three retail customers, Saks Fifth Avenue, Neiman Marcus and Nordstrom, for 
approximately 25, 20 and 15 years, respectively. We believe that St. John is    
among the highest selling and most profitable product lines for each of these   
accounts. As a result, our products receive substantial senior management       
attention, high quality selling space and prominent positioning in store        
advertising. In addition, these key retail                                      

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customers have demonstrated a commitment to us by providing additional square   
footage in their stores for our new products.                                   

   PROVEN MANAGEMENT TEAM WITH SUBSTANTIAL EQUITY OWNERSHIP.  We operate under
a strong management team with significant experience in the apparel industry.   
Bob Gray and his wife, Marie Gray, co-founded the company in 1962. Bob Gray has 
been chief executive officer and Marie Gray has been chief designer since our   
inception. In addition, Kelly Gray has served in various executive positions    
since 1988 and has been our president since 1996. Mr. Gray leads a management   
team with significant experience in the design, marketing and sale of women's   
apparel. Our senior management team has a large stake in our performance. The   
Gray family beneficially owns approximately 15% of St. John Knits               
International's stock, and has the opportunity, based upon performance, to      
acquire up to an additional 5% of stock. Other members of the senior management 
team also will be given the chance to own up to approximately 5% of St. John    
Knits International through the sale of stock and the grant of incentive-based  
options.                                                                        

BUSINESS STRATEGY                                                               

We believe our knitwear is one of the most successful product lines in  
women's apparel in terms of both growth and profitability. In addition, we      
believe the line has significant remaining growth potential within its existing 
distribution base. Accordingly, we intend to pursue a strategy of controlled    
growth by focusing on the continued development of our core knitwear product    
line. We will also continue to selectively pursue expanded distribution, both   
domestically and internationally. Finally, we will augment our core product     
sales growth by continuing to extend the St. John brand into complementary      
apparel and non-apparel product lines and markets.                              

EXPAND DISTRIBUTION.  While we intend to remain selective in the        
distribution of our products, we believe that there are opportunities to        
increase sales through expanded distribution. Based on our historical           
performance and profitability as well as our strong relationships with our key  
accounts, we believe our sales will grow as these retail customers offer our    
products in newly-opened stores. In addition, we intend to selectively expand   
our company-owned boutiques by opening at least one to two stores per year in   
markets which we believe are either complementary or underserved.               

 CAPITALIZE ON INTERNATIONAL OPPORTUNITIES.  We believe that international
sales, which currently account for approximately 7.5% of our annual sales, offer
an opportunity to grow our business. We have established relationships with a   
number of high quality retail customers in Asia and Europe and we are seeking to
increase our penetration in these accounts. We are also planning to selectively 
expand our successful in-hotel boutiques business in Japan and have recently    
opened a boutique in Hong Kong.                                                 

  BROADEN COMPLEMENTARY PRODUCT LINES.  We believe we can continue to extend
the powerful St. John brand beyond our core knitwear product lines to           
complementary segments of the women's apparel market, including sportswear and  
wovens. We believe that St. John Sport and Griffith & Gray, our current entries 
in these important categories, represent substantial growth opportunities. Our  
non-apparel product lines, including Accessories, Shoes and Fragrance, accounted
for approximately 7% of wholesale sales in fiscal 1998. We believe that these   
lines can complement the knitwear business through the introduction of new      
products and expanded distribution. We view these select product extensions as  
an attractive and efficient means of growth as they generally target our core   
knitwear customer. We will continue to add devoted design resources to these    
areas and to develop additional sourcing and licensing relationships with       
suppliers capable of providing products of appropriate quality.                 

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THE TRANSACTIONS

   On February 2, 1999, we entered into a merger agreement to be acquired by a
group consisting of Vestar Capital Partners III, L.P. and Bob Gray, Marie Gray  
and Kelly Gray for approximately $536.9 million, which represents an offering   
price of $30.00 per share. Pursuant to the agreement, in July 1999 we entered   
into two mergers. As a result of the mergers, St. John became a wholly owned    
subsidiary of St. John Knits International. After the closing of the mergers,   
former public shareholders of St. John (other than the Grays) owned             
approximately 7%, the Grays beneficially owned approximately 15%, and Vestar    
beneficially owned approximately 78% of St. John Knits International's common   
stock.                                                                          

The total financing used to consummate the mergers was approximately    
$536.9 million, funded by:                                                      

- approximately $26.9 million in excess cash of St. John;               

- a $75.0 million term loan and a $115.0 million term loan provided by a
group of banks led by The Chase Manhattan Bank;                     

 - approximately $98.6 million from the offering of the outstanding notes,
net of discount;                                                    

- approximately $153.6 million of cash equity contributed by Vestar;    

    - $25.0 million of preferred stock of St. John Knits International, acquired
by an affiliate of Vestar;                                          

  - approximately $29.1 million from the rollover of a portion of the Grays'
investment in St. John; and                                         

  - approximately $13.7 million from the rollover of a portion of St. John's
then-outstanding public shares.                                     

  In this prospectus, we refer to the mergers, the elements of the financing
discussed above, and a $25.0 million revolving credit facility to be used for   
working capital as the transactions. We refer to the two term loans and the     
revolving credit facility as the senior credit facilities.                      

VESTAR CAPITAL PARTNERS 

    Vestar Capital Partners, headquartered in New York with an office in Denver,
Colorado, is a leading private equity firm which manages over $3.5 billion in   
private equity capital. Founded in 1988, Vestar Capital focuses on management   
buyouts, recapitalizations and growth equity investments and to date has        
completed 29 investments with an aggregate value of approximately $5.5 billion. 
Previous Vestar Capital investments have included Aearo Corporation, Celestial  
Seasonings, Inc., Clark-Schwebel, Inc., Consolidated Cigar Holdings, Inc.,      
Insight Communications Company, L.P., La Petite Holdings, Inc., Prestone        
Products Corporation, Pyramid Communications, Inc., Siegel & Gale               
Holdings, Inc. and Westinghouse Air Brake Company. In addition, Vestar Capital  
has considerable experience in the apparel sector. Prior equity investments in  
the apparel sector include Sun Apparel, Inc., a leading manufacturer and        
distributor of jeanswear under the "Polo Jeans Company" name (sold to Jones     
Apparel, Inc. in 1998) and Cluett American Corp., a leading designer,           
manufacturer and marketer of men's socks and dress shirts under the "Gold Toe"  
and "Arrow" brand names.                                                        

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SUMMARY OF TERMS OF THE EXCHANGE OFFER

    On July 7, 1999, we completed the private offering of the outstanding notes.
References to "notes" in this prospectus are references to both the outstanding 
notes and the exchange notes.                                                   

St. John Knits International and its subsidiaries which guarantee the   
outstanding notes entered into an exchange and registration rights agreement    
with the initial purchasers in the private offering in which St. John Knits     
International and those subsidiaries agreed to deliver to you this prospectus   
and to complete the exchange offer within 180 days after the date of original   
issuance of the outstanding notes.                                              

                                                        [Enlarge/Download Table]
                                                                                           

The Exchange Offer........................... We are offering to exchange up to $100.0     
                                              million aggregate principal amount of        
                                              exchange notes for up to $100.0 million      
                                              aggregate principal amount of outstanding    
                                              notes. Outstanding notes may be exchanged    
                                              only in integral multiples of $1,000. The    
                                              exchange notes will be substantially         
                                              identical to the outstanding notes, except   
                                              that because we have registered the exchange 
                                              notes they:                                  

                                              -  will be freely tradeable;                 

                                              -  will not bear legends restricting their   
                                                 transfer;                                 

                                              -  will not be subject to any additional     
                                                 obligations regarding registration under  
                                                 the Securities Act; and                   

                                              -  will not be subject to the special        
                                              interest payments described in "Exchange and 
                                                 Registration Rights."                     

                                              The exchange notes will be issued under and  
                                              entitled to the benefits of the same         
                                              indenture that authorized the issuance of the
                                              outstanding notes. Consequently, both series 
                                              will be treated as a single class of debt    
                                              securities under the indenture.              

Resales...................................... Based on interpretations of the staff of the 
                                              Securities and Exchange Commission set forth 
                                              in no-action letters issued to unrelated     
                                              third parties, we believe that the exchange  
                                              notes may be offered for resale, resold and  
                                              otherwise transferred by you without         
                                              compliance with the registration and         
                                              prospectus delivery provisions of the        
                                              Securities Act, if:                          

                                              -  you are acquiring the exchange notes in   
                                              the ordinary course of your business;        

                                              -  you have not engaged in, do not intend to 
                                                 engage in, and have no arrangement or     
                                                 understanding with any person to          
                                                 participate in, a distribution of the     
                                                 exchange notes; and                       

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                                                        [Enlarge/Download Table]
                                                                                           
                                              -  you are not an affiliate of St. John Knits
                                                 International within the meaning of Rule  
                                                 405 under the Securities Act.             

                                              If you do not meet these requirements, you   
                                              will need to comply with the registration and
                                              prospectus delivery requirements of the      
                                              Securities Act in connection with the resale 
                                              of exchange notes, unless an exemption to    
                                              these requirements is applicable. Each       
                                              participating broker-dealer that receives    
                                              exchange notes for its own account in        
                                              exchange for outstanding notes acquired as a 
                                              result of market-making or trading activity  
                                              must acknowledge that it will deliver a      
                                              prospectus in connection with any resale of  
                                              the exchange notes. See "Plan of             
                                              Distribution."                               

Expiration Date; Withdrawal of Tender........ The exchange offer expires at 5:00 p.m., New 
                                              York City time, on December 27, 1999 unless  
                                              we extend the expiration date. We do not     
                                              currently intend to extend the expiration    
                                              date. You may withdraw tenders of outstanding
                                              notes at any time prior to the expiration of 
                                              the exchange offer.                          

Conditions to the Exchange Offer............. The exchange offer is subject to conditions, 
                                              which we may waive if, in our reasonable     
                                              determination, one or more conditions have   
                                              not been satisfied. We currently expect that 
                                              each of the conditions will be satisfied and 
                                              that no waivers will be necessary. Please    
                                              read the section captioned "The Exchange     
                                              Offer--Conditions to the Exchange Offer" of  
                                              this prospectus for more information         
                                              regarding the conditions to the exchange     
                                              offer.                                       

Procedures for Tendering Outstanding Notes... If you wish to accept the exchange offer, you
                                              must complete, sign and date the accompanying
                                              letter of transmittal, or a facsimile of the 
                                              letter of transmittal, according to the      
                                              instructions contained in this prospectus and
                                              the letter of transmittal. You must also mail
                                              or otherwise deliver the letter of           
                                              transmittal, or a facsimile of the letter of 
                                              transmittal, together with the outstanding   
                                              notes and any other required documents to the
                                              exchange agent at the address set forth on   
                                              the cover page of the letter of transmittal. 
                                              If you hold outstanding notes through The    
                                              Depository Trust Company and wish to         
                                              participate in the exchange offer, you must  
                                              comply with the Automated Tender Offer       
                                              Program procedures of The Depository Trust   
                                              Company, by which you will agree to be bound 
                                              by the letter of transmittal.                

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Terms and Conditions of the                                                                
  Letter of Transmittal...................... By signing, or agreeing to be bound by, the  
                                              letter of transmittal, you will represent to 
                                              us that:                                     

                                              -  any exchange notes that you receive will  
                                              be acquired in the ordinary course of your   
                                                 business;                                 

                                              -  you have no arrangement or understanding  
                                                 with any person or entity to participate  
                                                 in, and do not intend to engage in, a     
                                                 distribution of the exchange notes;       

                                              -  if you are a broker-dealer that will      
                                              receive exchange notes for your own account  
                                                 in exchange for outstanding notes that you
                                                 have acquired as a result of market-making
                                                 or trading activities, that you will      
                                                 deliver a prospectus, as required by law, 
                                                 in connection with any resale of those    
                                                 exchange notes;                           

                                              -  you are not an affiliate, as defined in   
                                              Rule 405 of the Securities Act, of St. John  
                                                 Knits International or, if you are an     
                                                 affiliate, that you will comply with      
                                                 applicable registration and prospectus    
                                                 delivery requirements of the Securities   
                                                 Act; and                                  

                                              -  if you are a person in the United Kingdom,
                                                 that your ordinary activities involve you 
                                                 in acquiring, holding, managing or        
                                                 disposing of investments, as principal or 
                                                 agent, for the purposes of your business. 

Special Procedures for Beneficial Owners..... If you are a beneficial owner of outstanding 
                                              notes which are registered in the name of a  
                                              broker, dealer, commercial bank, trust       
                                              company or other nominee, and you wish to    
                                              tender those outstanding notes in the        
                                              exchange offer, you should promptly contact  
                                              the person in whose name your outstanding    
                                              notes are registered and instruct them to    
                                              tender on your behalf. If you wish to tender 
                                              on your own behalf, you must, prior to       
                                              completing and executing the letter of       
                                              transmittal and delivering your outstanding  
                                              notes, either make appropriate arrangements  
                                              to register ownership of the outstanding     
                                              notes in your name or obtain a properly      
                                              completed bond power from the person in whose
                                              name your outstanding notes are registered.  
                                              The transfer of registered ownership may take
                                              considerable time and may not be able to be  
                                              completed prior to the expiration date.      

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Guaranteed Delivery Procedures............... If you wish to tender your outstanding notes 
                                              and, prior to the expiration date, you       
                                              cannot:                                      

                                              -  deliver your outstanding notes, the letter
                                              of transmittal or any other documents        
                                                 required by the letter of transmittal; or 

                                              -  comply with the applicable procedures     
                                              under the Depository Trust Company's         
                                                 Automated Tender Offer Program,           

                                              then you must tender your outstanding notes  
                                              according to the guaranteed delivery         
                                              procedures which we explain in this          
                                              prospectus under the caption "The Exchange   
                                              Offer--Guaranteed Delivery Procedures."      

Effect on Holders of Outstanding Notes....... As a result of this exchange offer, we will  
                                              have fulfilled a covenant contained in the   
                                              exchange and registration rights agreement   
                                              among St. John Knits International and its   
                                              subsidiaries which guarantee the outstanding 
                                              notes and the initial purchasers in the      
                                              private offering through which we issued the 
                                              outstanding notes. Accordingly, there will be
                                              no increase in the interest rate on the      
                                              outstanding notes. If you do not tender your 
                                              outstanding notes in the exchange offer, you 
                                              will continue to be entitled to all the      
                                              rights and limitations that apply to the     
                                              outstanding notes under the indenture, except
                                              as noted in the preceding sentence.          

Consequence of Failure to Exchange........... If you do not exchange your outstanding notes
                                              for exchange notes in the exchange offer,    
                                              your outstanding notes will continue to be   
                                              subject to restrictions on transfer. In      
                                              general, outstanding notes may not be offered
                                              or sold unless registered under the          
                                              Securities Act, except pursuant to an        
                                              exemption from, or in a transaction not      
                                              subject to, the Securities Act and applicable
                                              state securities laws. We do not currently   
                                              anticipate that we will register the         
                                              outstanding notes under the Securities Act.  
                                              In addition, the tender of outstanding notes 
                                              in the exchange offer will reduce the        
                                              principal amount of the outstanding notes    
                                              outstanding, which may have an adverse effect
                                              upon, and increase the volatility of, the    
                                              market price of the outstanding notes due to 
                                              a reduction in liquidity. See "Risk          
                                              Factors--Failure to Exchange Outstanding     
                                              Notes."                                      

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U.S. Federal Income Tax Considerations....... The exchange of outstanding notes for        
                                              exchange notes in the exchange offer will not
                                              be a taxable event for U.S. federal income   
                                              tax purposes. See "Certain United States     
                                              Federal Income Tax Considerations of the     
                                              Exchange Offer."                             

Use of Proceeds.............................. We will not receive any cash proceeds from   
                                              the issuance of exchange notes.              

Exchange Agent............................... The Bank of New York is the exchange agent   
                                              for the exchange offer. The address and      
                                              telephone number of the exchange agent are   
                                              set forth in the section captioned "The      
                                              Exchange Offer--Exchange Agent" of this      
                                              prospectus.                                  

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SUMMARY OF TERMS OF THE EXCHANGE NOTES

                                                        [Enlarge/Download Table]
                                                                                                   
Issuer.................................... St. John Knits International, Incorporated.             

Notes Offered............................. $100,000,000 aggregate principal amount of 12 1/2%      
                                           Senior Subordinated Notes due 2009.                     

Maturity.................................. July 1, 2009.                                           

Interest.................................. Annual Rate: 12.5%.                                     

                                           Payment Frequency: Every six months on January 1 and    
                                           July 1, commencing January 1, 2000.                     

                                           Interest on the exchange notes will accrue from the last
                                           interest payment date on which interest was paid on the 
                                           outstanding notes or, if no interest was paid on the    
                                           outstanding notes, from the date the outstanding notes  
                                           were originally issued.                                 

Optional Redemption....................... Except as described below, we may not redeem the        
                                           exchange notes prior to July 1, 2004. At any time on or 
                                           after July 1, 2004, we may redeem the exchange notes at 
                                           the redemption prices, plus accrued and unpaid interest,
                                           listed in "Description of the Notes--Optional           
                                           Redemption."                                            

                                           In addition, on or before July 1, 2002 we may redeem up 
                                           to 35% of the outstanding exchange notes with the net   
                                           cash proceeds of certain equity offerings. See          
                                           "Description of the Notes--Optional Redemption."        

Change of Control......................... Upon the occurrence of a "change of control," we will be
                                           required to make an offer to repurchase each holder's   
                                           exchange notes at a price equal to 101% of the principal
                                           amount thereof, plus accrued and unpaid interest, if    
                                           any, to the date of repurchase. See "Description of the 
                                           Notes--Offer to Purchase Upon Change of Control."       

Guarantees................................ Our existing and future domestic subsidiaries will      
                                           guarantee the exchange notes with guarantees of payment 
                                           that will effectively rank below their senior debt.     

Ranking................................... The exchange notes will not be secured by any collateral
                                           and:                                                    

                                           -  will rank below all of our senior debt; and          

                                           -  will rank equal to any other senior subordinated debt
                                           we may incur.                                           

                                           Therefore, if we default, your right to payment under   
                                           the exchange notes will be junior to the rights of      
                                           holders of our senior debt to collect money we owe them 
                                           at the time. The exchange notes will effectively rank   
                                           below all liabilities (including trade payables) of our 
                                           subsidiaries which are not guarantors.                  

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                                           As of August 1, 1999, we owed approximately $190.0      
                                           million in senior debt, all of which was secured. See   
                                           "Description of the Notes--Subordination of the Notes," 
                                           "Description of Senior Credit Facilities" and           
                                           "Capitalization."                                       

Basic Covenants of Indenture.............. We issued the outstanding notes and will issue the      
                                           exchange notes under an indenture with The Bank of New  
                                           York. The indenture will limit our ability and the      
                                           ability of our restricted subsidiaries to:              

                                           -  incur more debt;                                     

                                           -  pay dividends, redeem stock or make other            
                                              distributions;                                       

                                           -  issue capital stock;                                 

                                           -  make restricted investments;                         

                                           -  sell assets;                                         

                                           -  use assets as security in other transactions;        

                                           -  enter into transactions with affiliates; and         

                                           -  merge or consolidate.                                

                                           These covenants are subject to a number of important    
                                           qualifications and limitations. See "Description of the 
                                           Notes--Certain Covenants."                              

Absence of a Public Market for the                                                                 
  Notes................................... The exchange notes will generally be freely transferable
                                           but will be new securities for which there will not     
                                           initially be a market. Accordingly, there can be no     
                                           assurance as to the development or liquidity of any     
                                           market for the exchange notes. The initial purchasers in
                                           the private placement of the outstanding notes have     
                                           advised us that they currently intend to make a market  
                                           in the exchange notes. However, they are not obligated  
                                           to do so, and any market making with respect to the     
                                           exchange notes may be discontinued at any time without  
                                           notice.                                                 

RISK FACTORS

    Prospective participants in the exchange offer should carefully consider the
risk factors set forth under the caption "Risk Factors" and the other           
information included in this prospectus prior to tendering their outstanding    
Notes. See "Risk Factors."                                                      

------------------------

   Our principal executive offices are located at 17422 Derian Avenue, Irvine,
California 92614. Our telephone number is (949) 863-1171.                       

------------------------

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONDENSED CONSOLIDATED 
FINANCIAL AND OTHER INFORMATION 

The following table sets forth summary historical condensed consolidated
financial and other information for the three fiscal years ended November 3,    
1996, November 2, 1997 and November 1, 1998 and as of and for the 39 weeks ended
August 2, 1998, August 1, 1999 and the twelve months ended August 1, 1999. The  
summary historical condensed consolidated financial and other information for   
the three fiscal years ended November 3, 1996, November 2, 1997 and November 1, 
1998 is derived from, and should be read in conjunction with, the audited       
historical consolidated financial statements of St. John and the notes thereto  
included elsewhere in this prospectus. The summary historical condensed         
consolidated financial and other information as of and for the 39 weeks ended   
August 2, 1998, August 1, 1999 and the twelve months ended August 1, 1999 have  
been derived from St. John's unaudited consolidated financial statements and, in
the opinion of our management, have been prepared on a basis consistent with the
audited historical condensed consolidated financial statements and include all  
adjustments (which consist of normal recurring accruals) that are considered by 
management to be necessary for a fair presentation of such financial            
information.                                                                    

  Also set forth below is summary unaudited pro forma condensed consolidated
financial information as of and for the twelve months ended August 1, 1999 which
was derived from, and should be read in conjunction with, the unaudited pro     
forma condensed consolidated financial information included in this prospectus. 
The unaudited pro forma condensed consolidated statement of income for the      
twelve months ended August 1, 1999 gives effect to the transactions as if they  
had been consummated on November 3, 1997. The pro forma adjustments are         
described in the notes which accompany the information under the heading        
"Unaudited Pro Forma Condensed Consolidated Financial Information" in this      
prospectus. The unaudited pro forma financial statements should not be          
considered indicative of actual results that would have been achieved had the   
transactions been consummated on the date or for the periods indicated and do   
not purport to indicate results of operations as of any future date or any      
future period.                                                                  

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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL 
AND OTHER INFORMATION 

                                                        [Enlarge/Download Table]

                                                                                                         TWELVE  
                                                 FISCAL YEAR ENDED                  39 WEEKS ENDED       MONTHS  
                                      ----------------------------------------   ---------------------    ENDED  
                                      NOVEMBER 3,    NOVEMBER 2,   NOVEMBER 1,   AUGUST 2,   AUGUST 1,  AUGUST 1,
                                          1996          1997          1998         1998        1999       1999   
                                      ------------   -----------   -----------   ---------   ---------  ---------
                                                                                      (UNAUDITED)                
                                                         (DOLLARS IN THOUSANDS, EXCEPT RATIOS)                   
                                                                                                                 
STATEMENTS OF INCOME:                                                                                            
Net sales...........................    $202,951       $242,101      $281,961    $206,293    $221,935   $297,602 
Cost of sales.......................      88,871         99,545       120,883      86,210      97,382    132,053 
                                        --------       --------      --------    --------    --------   -------- 
Gross profit........................     114,080        142,556       161,078     120,083     124,553    165,549 
Selling, general and administrative                                                                              
 expenses...........................      68,385         84,545       107,026      76,858      91,175    121,343 
Transaction fees and expenses.......                                                   --      15,212     15,212 
                                        --------       --------      --------    --------    --------   -------- 
Operating income....................      45,695         58,011        54,052      43,225      18,166     28,994 
Interest expense....................                                                   --       2,045      2,045 
Other income(1).....................       1,355            713         1,369       1,100       1,220      1,489 
                                        --------       --------      --------    --------    --------   -------- 
Income before taxes.................      47,050         58,724        55,421      44,325      17,341     28,438 
Income taxes........................      19,929         24,300        22,001      18,033       7,117     11,085 
                                        --------       --------      --------    --------    --------   -------- 
Net income..........................    $ 27,121       $ 34,424      $ 33,420    $ 26,292    $ 10,224   $ 17,353 
                                        ========       ========      ========    ========    ========   ======== 
OTHER DATA (UNAUDITED):                                                                                          
EBITDA(2)...........................    $ 52,999       $ 67,126      $ 66,294    $ 51,998    $ 47,309   $ 60,853 
Depreciation and Amortization.......       7,042          8,859        11,371       8,276      10,931     14,025 
Capital expenditures................      21,400         22,751        23,648      16,800      10,758     17,606 

PRO FORMA DATA:                                                                                                  
EBITDA(2)...........................                                                                    $ 60,353 
Adjusted EBITDA(3)..................                                                                      61,725 
Cash interest expense...............                                                                      27,142 
Ratio of total debt to Adjusted                                                                                  
 EBITDA.............................                                                                        4.71x
Ratio of Adjusted EBITDA to cash                                                                                 
 interest expense...................                                                                        2.27x
Pro forma ratio of earnings to fixed                                                                             
 charges(4).........................                                                                        0.94x

                                                        [Enlarge/Download Table]

                                                                                              AUGUST 1,  
                                                                                                1999     
                                                                                              ---------  
                                                                                                         
                                                                                              (UNAUDITED)
BALANCE SHEET DATA (AT PERIOD END):                                                                      
Cash, cash equivalents and short-term investments............................................ $ 18,057   
Working capital..............................................................................   85,132   
Total assets.................................................................................  195,748   
Total debt...................................................................................  290,520   
Mandatorily Redeemable Preferred Stock.......................................................   25,000   
Stockholders' equity (deficit)............................................................... (140,392)  

------------------------                                                        

(1) "Other income" primarily includes interest income and royalty income.       

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(2) "EBITDA" represents earnings before interest expense, other income (except  
royalty income), income taxes, depreciation and amortization expense,   
   non-cash write-off of assets and non-recurring expenses associated with the
  transactions. It is not intended to represent cash flow from operations as
  defined by generally accepted accounting principles and should not be used
as an alternative to net income as an indicator of SJKI's operating     
    performance or to cash flow as a measure of liquidity. EBITDA is included in
this prospectus as it is a basis upon which SJKI assesses its financial 
performance. SJKI believes that EBITDA, as presented, presents a useful 
   measure of assessing SJKI's ongoing operating activities without the impact
   of financing activity and non-recurring charges. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service    
requirements, it is not necessarily comparable to other similarly titled
  captions of other companies due to potential inconsistencies in the method
  of calculation. For purposes of the EBITDA calculation, non-cash write-off
    of assets was $16,000, $200,000 and $611,000 for fiscal years 1996, 1997 and
1998, respectively, $431,000 and $1,720,000 for the 39 weeks ended      
August 2, 1998 and August 1, 1999, respectively, and $1,873,000 for the 
 twelve months ended August 1, 1999. For the fiscal year ended November 1,
1998 and the twelve months ended August 1, 1999, non-cash write-off of  
    assets was primarily related to the closure of three home furnishings stores
   and the write-off of a trademark. Pro forma EBITDA reflects inclusion of an
annual advisory fee payable to Vestar under a management agreement.     

(3) "Adjusted EBITDA" represents pro forma EBITDA plus (i) expenses associated  
    with the termination of SJKI's home furnishings joint venture and settlement
 of associated litigation, which were $886,000 for the twelve months ended
August 1, 1999, and (ii) operating results relating to the four home    
    furnishings retail stores which SJKI no longer operates (three of which were
closed and one of which was transferred to the former joint venture     
partner), which represented a net loss of $486,000 for the twelve months
  ended August 1, 1999. SJKI's home furnishings joint venture was terminated
in May 1999. See "Management's Discussion and Analysis of Financial     
Condition and Results of Operations."                                   

(4) For purposes of determining the ratio of earnings to fixed charges, earnings
 are defined as earnings before income taxes and extraordinary items, plus
fixed charges. Fixed charges consist of interest expense, including     
   amortization of debt issuance costs and a portion of operating lease rental
 expense deemed to be representative of the interest factor. The pro forma
ratio of earnings to fixed charges was 1.60x for the fiscal year ended  
 November 1, 1998 and 1.70x and .80x for the 39 weeks ended August 2, 1998
and August 1, 1999, respectively.                                       

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RISK FACTORS

    Before you participate in the exchange offer, you should be aware that there
are various risks, including those described below. You should carefully        
consider these risk factors, together with the other information in this        
prospectus, before deciding to participate in the exchange offer.               

FAILURE TO EXCHANGE OUTSTANDING NOTES--IF YOU DO NOT EXCHANGE YOUR OUTSTANDING  
NOTES, THEY MAY BE MORE DIFFICULT TO SELL BECAUSE THEY WILL CONTINUE TO BE      
SUBJECT TO RESTRICTIONS ON TRANSFER AND MAY SUFFER FROM REDUCED LIQUIDITY.      

If you do not exchange your outstanding notes for exchange notes, your  
outstanding notes will continue to be subject to restrictions on transfer. In   
general, outstanding notes may not be offered or sold unless registered under   
the Securities Act, except pursuant to an exemption from, or in a transaction   
not subject to, the Securities Act and applicable state securities laws. We do  
not currently anticipate that we will register the outstanding notes under the  
Securities Act. In addition, the tender of outstanding notes in the exchange    
offer will reduce the principal amount of the outstanding notes outstanding,    
which may have an adverse effect upon, and increase the volatility of, the      
market price of the outstanding notes due to a reduction in liquidity.          

ABSENCE OF AN ACTIVE TRADING MARKET--IF AN ACTIVE TRADING MARKET DOES NOT       
DEVELOP FOR THE NOTES, IT WOULD HAVE A MATERIAL ADVERSE EFFECT ON THE MARKET    
PRICE AND LIQUIDITY OF THE NOTES.                                               

    A liquid market for the exchange notes or outstanding notes may not develop.
The outstanding notes and exchange notes constitute a new class of securities   
for which there is no established trading market. We do not intend to list the  
outstanding notes or exchange notes on any national securities exchange or to   
seek their quotation on any automated dealer quotation system. Although the     
initial purchasers of the outstanding notes have informed us that they intend to
make a market in the outstanding notes and exchange notes, they are not         
obligated to do so, and they may cease market-making activities at any time     
without notice. The liquidity of a market for the outstanding notes and exchange
notes will depend upon a number of factors, including the number of those       
holding the outstanding notes and exchange notes and the interest of securities 
dealers in making a market in the outstanding notes and exchange notes.         

   If the outstanding notes and exchange notes are traded, they may trade at a
discount from the initial offering price of the outstanding notes, depending    
upon prevailing interest rates, the market for similar securities, our          
performance and other factors. However, declines in the liquidity and market    
price of the outstanding notes or exchange notes may also occur independent of  
our financial performance or prospects.                                         

SUBSTANTIAL LEVERAGE AND DEBT SERVICE--OUR SUBSTANTIAL LEVEL OF DEBT COULD HAVE 
A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING
OUR OBLIGATIONS UNDER THE NOTES.                                                

    As a result of the transactions, we have a substantial amount of debt. As of
August 1, 1999, we had total debt of approximately $290.5 million, of which     
approximately $190.0 million was senior debt, and a stockholders' deficit of    
approximately $140.4 million, which resulted from the recapitalization of SJKI  
in connection with the transactions. In addition, we may borrow money under the 
revolving credit facility which is intended to be used primarily for working    
capital, and subject to restrictions in the senior credit facilities and in the 
indenture governing the notes, we may borrow more money for working capital,    
capital expenditures, acquisitions or other purposes.                           

   Our high level of debt could have important consequences for you, including
the following:                                                                  

   - our debt level makes us more vulnerable to economic downturns and adverse
   developments in our business, may cause us to have difficulty borrowing
money in the future for working capital,                            

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capital expenditures, acquisitions or other purposes and limits our 
     ability to pursue other business opportunities and implement our business
strategies;                                                         

   - we will need to use a large portion of the money we earn to pay principal
      and interest on the senior credit facilities, the notes and on other debt,
which will reduce the amount of money available to us to finance our
operations and other business activities;                           

   - some of our debt has a variable rate of interest, which exposes us to the
risk of increased interest rates;                                   

 - debt under the senior credit facilities will be secured and will mature
prior to the notes; and                                             

 - we may have a much higher level of debt than our competitors, which may
  put us at a competitive disadvantage and may reduce our flexibility in
responding to changing business and economic conditions, including  
increased competition.                                              

    After giving pro forma effect to the transactions, our cash interest expense
for the 12 months ended August 1, 1999 would have been approximately            
$27.1 million. As of August 1, 1999, after giving pro forma effect to the       
transactions, our ratio of earnings to fixed charges would have been 0.94 to 1. 

  We expect to obtain the money to pay our expenses and to pay the principal
and interest on the notes, the senior credit facilities and other debt from our 
operations and from additional loans under the revolving credit facility. Our   
ability to meet our expenses thus depends on our future performance, which will 
be affected by financial, business, economic and other factors. We will not be  
able to control many of these factors, such as economic conditions in the       
markets where we operate and pressure from competitors. We cannot be certain    
that the money we earn will be sufficient to allow us to pay principal and      
interest on our debt (including the notes) and meet our other obligations. If we
do not have enough money, we may be required to refinance all or part of our    
existing debt, including the notes, sell assets or borrow more money. We cannot 
guarantee that we will be able to refinance our debt, sell assets or borrow more
money on terms acceptable to us. In addition, the terms of existing or future   
debt agreements, including the senior credit facilities and the indenture, may  
restrict us from adopting any of these alternatives.                            

RESTRICTIONS IMPOSED BY OUR DEBT AGREEMENTS--COVENANT RESTRICTIONS MAY LIMIT OUR
ABILITY TO MAKE PAYMENTS ON THE NOTES OR OPERATE OUR BUSINESS.                  

The indenture contains covenants that, among other things:              

 - limit our ability to incur indebtedness and pay dividends on and redeem
capital stock; and                                                  

- create restrictions on:                                               

--  investments in unrestricted subsidiaries,                     

    --  limiting distributions from some of St. John Knits International's
subsidiaries,                                             

   --  the use of proceeds from the sale of assets and subsidiary stock,

--  entering into transactions with affiliates and                

--  creating liens.                                               

   The indenture also restricts, subject to certain exceptions, our ability to
consolidate and merge with, or to transfer all or substantially all our assets  
to, another person.                                                             

Under the senior credit facilities, we must also comply with certain    
specified financial ratios and tests that may restrict our ability to make      
distributions or other payments to our investors and creditors. If we do not    
comply with these or other covenants and restrictions contained in the senior   
credit facilities, we could default under the senior credit facilities. Such    
debt, together with accrued                                                     

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interest, could then be declared immediately due and payable. Our ability to    
comply with such provisions may be affected by events beyond our control.       

Although we believe that we will be able to maintain compliance with our
current financial tests there can be no assurance that we will be able to do so.
The restrictions imposed by such covenants may adversely affect our ability to  
take advantage of favorable business opportunities. Failure to comply with the  
terms of such covenants could result in acceleration of the indebtedness        
represented by the notes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources,"          
"Description of Senior Credit Facilities" and "Description of the Notes."       

SUBORDINATION--YOUR RIGHT TO RECEIVE PAYMENTS ON THE NOTES IS JUNIOR TO OUR BANK
AND OTHER UNSUBORDINATED INDEBTEDNESS AND POSSIBLY TO ALL OF OUR FUTURE         
BORROWINGS. THE GUARANTEES ARE JUNIOR TO ALL THE GUARANTORS' EXISTING           
INDEBTEDNESS AND POSSIBLY TO ALL OF THEIR FUTURE BORROWINGS. IN ADDITION, THE   
TERMS OF THE SENIOR CREDIT FACILITIES MAY PREVENT US FROM REPURCHASING THE NOTES
WHEN THE INDENTURE REQUIRES US TO DO SO.                                        

The notes will be contractually subordinated in right of payment to all 
senior indebtedness of St. John Knits International and the guarantees will be  
contractually subordinated in right of payment to all senior indebtedness of the
guarantors. At August 1, 1999, St. John Knits International had approximately   
$190.0 million of senior indebtedness, all of which was secured. The indenture  
will permit St. John Knits International and the guarantors to borrow certain   
additional debt, which may be senior indebtedness.                              

  If St. John Knits International or the guarantors are declared bankrupt or
insolvent, or if there is a default under and acceleration of any senior        
indebtedness, we are required to pay the lenders under the senior credit        
facilities and any other creditors who are holders of senior indebtedness in    
full before we pay you. Accordingly, we may not have enough assets remaining    
after payments to holders of such senior indebtedness to pay you. In addition,  
the indenture will provide that payments with respect to the notes will be      
blocked in the event of a payment default on certain senior indebtedness        
(including debt under the senior credit facilities) and may be blocked for up to
179 days each year in the event of certain non-payment defaults on such senior  
indebtedness. See "Description of the Notes--Subordination of the Notes."       

Further, in certain cases the senior credit facilities prohibit us from 
repurchasing any notes prior to maturity, even though the indenture requires us 
to offer to repurchase notes in certain circumstances. If we or some of our     
subsidiaries make certain asset sales or if a change of control occurs when we  
are prohibited from repurchasing notes, we could ask our lenders under the      
senior credit facilities if we may repurchase the notes or we could attempt to  
refinance the borrowings that contain such prohibitions. If we do not obtain    
such a consent or repay such borrowings, we would be unable to repurchase the   
notes. Our failure to repurchase tendered notes at a time when such repurchase  
is required by the indenture would constitute an event of default under the     
indenture which, in turn, would constitute a default under the senior credit    
facilities. In such circumstances, the subordination provisions in the indenture
would restrict payments to you. See "Description of Senior Credit Facilities"   
and "Description of the Notes--Subordination of the Notes."                     

ASSET ENCUMBRANCES TO SECURE SENIOR CREDIT FACILITIES--OUR ASSETS WILL BE       
PLEDGED AS SECURITY UNDER THE SENIOR CREDIT FACILITIES BUT OUR OBLIGATIONS UNDER
THE NOTES WILL BE UNSECURED.                                                    

  In addition to being contractually subordinated to all existing and future
senior indebtedness, our obligations under the notes will be unsecured while our
obligations under the senior credit facilities will                             

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be secured by the pledge of all the equity securities of St. John and           
substantially all of the assets of St. John Knits International and each of its 
subsidiaries, except that:                                                      

   - the pledge of the capital stock of St. John Knits International's foreign
     subsidiaries will be limited to 65% of such subsidiary's capital stock if
the pledge of any greater percentage could result in adverse tax    
consequences to St. John Knits International or such subsidiary; and

- no security interests in the assets of any of St. John Knits          
 International's foreign subsidiaries will be granted if such security
interests could result in adverse tax consequences to St. John Knits
International or such subsidiary.                                   

   If we default under the senior credit facilities, the lenders could declare
all of the funds borrowed thereunder, together with accrued interest,           
immediately due and payable. If we were unable to repay such indebtedness, the  
lenders could foreclose on the pledged assets to your exclusion, even if an     
event of default exists under the indenture at such time. If the lenders did    
foreclose on the pledged assets, they could end up controlling St. John. See    
"Description of Senior Credit Facilities."                                      

HOLDING COMPANY STRUCTURE AND STRUCTURAL SUBORDINATION--OUR ABILITY TO MAKE     
PAYMENTS ON THE NOTES DEPENDS ON OUR ABILITY TO RECEIVE DIVIDENDS FROM OUR      
SUBSIDIARIES. IN ADDITION, BECAUSE NOT ALL OF OUR SUBSIDIARIES WILL GUARANTEE   
PAYMENT ON THE NOTES, THE ASSETS OF NON-GUARANTOR SUBSIDIARIES MAY NOT BE       
AVAILABLE TO MAKE PAYMENTS ON THE NOTES.                                        

   St. John Knits International is a holding company which held no significant
assets as of August 1, 1999, other than the stock of its subsidiaries. As a     
holding company, St. John Knits International is dependent upon dividends or    
other intercompany transfers of funds from its subsidiaries to meet its debt    
service and other obligations. Generally, creditors of a subsidiary will have a 
superior claim to the assets and earnings of such subsidiary than the claims of 
creditors of its parent company, except to the extent the claims of the parent's
creditors are guaranteed by the subsidiary. St. John Knits International's      
existing and future domestic subsidiaries will guarantee payments on the notes  
on a senior subordinated basis. The notes therefore will be effectively         
subordinated to creditors of St. John Knits International's non-guarantor       
subsidiaries and the guarantees will be contractually subordinated to senior    
creditors of St. John Knits International's guarantor subsidiaries. As of       
August 1, 1999, St. John Knits International's non-guarantor subsidiaries had   
total liabilities of approximately $2.5 million, and St. John Knits             
International's guarantor subsidiaries had total liabilities of approximately   
$209.4 million (excluding liabilities under the notes and the guarantees),      
approximately $190.0 million of which was senior indebtedness.                  

Although the indenture will limit the ability of some of St. John Knits 
International's subsidiaries to incur indebtedness and issue preferred stock,   
there are certain significant qualifications and exceptions. The indenture will 
not limit such subsidiaries from incurring liabilities that are excluded from   
the definitions of indebtedness or preferred stock under the indenture. See     
"Description of the Notes--Certain Covenants--Limitation on Indebtedness."      

  In addition, the ability of St. John Knits International's subsidiaries to
pay dividends and make other payments to St. John Knits International may be    
restricted by, among other things, applicable corporate and other laws and      
regulations and agreements of the subsidiaries. Although the indenture will     
limit the ability of such subsidiaries to enter into consensual restrictions on 
their ability to pay dividends and make other payments, such limitations are    
subject to a number of significant qualifications and exceptions. See           
"Description of the Notes--Certain Covenants--Limitation on Dividend and Other  
Payment Restrictions Affecting Restricted Subsidiaries."                        

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APPAREL INDUSTRY RISKS--COMPETITION AND/OR AN ECONOMIC DOWNTURN COULD HAVE A    
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.                                        

The apparel industry is highly competitive. We compete primarily on the 
basis of price and quality. We believe that our success depends in large part on
our ability to anticipate, gauge and respond to changing consumer demands in a  
timely manner. We cannot assure that we will always be successful in this       
regard. If we misjudge these demands, our sales may suffer, which could         
adversely affect our business, financial condition and results of operations.   
For example, in fiscal 1997 we introduced a lower-priced line of apparel under  
the SJK label and attempted to broaden the appeal of our core knitwear line by  
including a number of more "fashion forward" styles. The SJK line did not       
perform as well as we anticipated and has been discontinued. The Fall 1998 core 
knitwear line did not include sufficient product options for the traditional St.
John customer and experienced below-average retail performance.                 

We compete with numerous domestic and foreign designers, brands and     
manufacturers of apparel and accessories, some of which may be significantly    
larger and more diversified and have greater financial and other resources than 
we do. Increased competition from these and future competitors could reduce our 
sales and prices, adversely affecting our results. Because of our debt level, we
may be less able to respond effectively to such competition than others.        

    The industry in which we operate is cyclical. Purchases of apparel generally
tend to decline during recessions and also may decline at other times. A        
recession in the general economy or uncertainties regarding future economic     
prospects could affect consumer spending habits and have a material adverse     
effect on our business, financial condition and results of operations.          

OWNERSHIP CHANGES IN THE RETAIL INDUSTRY AND RELIANCE ON KEY CUSTOMERS--THE LOSS
OF ONE OR MORE OF OUR PRIMARY CUSTOMERS COULD HAVE A MATERIAL ADVERSE EFFECT ON 
OUR BUSINESS.                                                                   

 We, like many of our competitors, sell to retailers. In recent years, the
retail industry has experienced consolidation and other ownership changes. In   
the future, retailers in the United States and in foreign markets may have      
financial problems or consolidate, undergo restructurings or reorganizations, or
realign their affiliations, any of which could decrease the number of stores    
that carry our products or increase the ownership concentration within the      
retail industry. We cannot assure you as to the future effect of any such       
changes.                                                                        

During fiscal 1998 and 1997, net sales to our three largest retail      
customers, Saks Fifth Avenue, Neiman Marcus and Nordstrom, totaled approximately
45% and 47% of net sales, respectively, and net sales to Saks Fifth Avenue, our 
largest retail customer, accounted for approximately 17% and 17% of net sales,  
respectively. Although we have long-established relationships with many of our  
customers, we do not have any long-term sales agreements. The loss of or        
significant decrease in business from any of our major customers could have a   
material adverse effect on our business, financial condition and results of     
operations. See "Business--Distribution."                                       

DEPENDENCE ON KEY PERSONNEL--THE LOSS OF ONE OR MORE MEMBERS OF OUR SENIOR      
MANAGEMENT TEAM COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.           

    Our success has been largely dependent on the personal efforts and abilities
of Bob Gray, Chairman and Chief Executive Officer, Marie Gray, Chief Designer,  
and Kelly Gray, President, each of whom has an employment agreement with SJKI.  
The loss of the services of any of these executives could have a material       
adverse effect on our business, financial condition and results of operations.  
See "Management."                                                               

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CONTROL BY CERTAIN STOCKHOLDERS--WE ARE CONTROLLED BY VESTAR.                   

 Vestar and the Grays, through Vestar/Gray Investors LLC, beneficially own
approximately 78% and 15%, respectively, of the outstanding common stock of St. 
John Knits International. As a result, Vestar will be able to effectively       
control the outcome of certain matters requiring a stockholder vote, including  
the election of three of the five directors of St. John Knits International (the
Grays will be contractually entitled to appoint the remaining two directors).   
Such ownership of common stock may have the effect of delaying, deferring or    
preventing a change of control.                                                 

LITIGATION--WE MAY INCUR COSTS IN CONNECTION WITH CERTAIN LEGAL PROCEEDINGS.    

On October 13, 1998, Binary Traders, Inc. filed a complaint on behalf of
purchasers of publicly traded securities of St. John during the period of       
February 25, 1998 to August 20, 1998 against SJKI, Bob Gray and Kelly Gray in   
the United States District Court, Central District of California, Southern      
Division (Binary Traders, Inc. v. St. John Knits, Inc., et al.). In this action,
Binary Traders claims that the defendants violated federal securities laws by   
allegedly making fraudulent statements to cover up management's mistakes and    
certain material adverse conditions affecting our business. In addition, the    
complaint alleges that Mr. Gray traded shares of St. John's common stock while  
in possession of allegedly material non-public information. Binary Traders seeks
class action certification and an unspecified amount of compensatory damages. On
August 6, 1999, defendants filed a motion to dismiss the action. On             
September 8, 1999, at the request of the plaintiff, the court stayed all        
proceedings in this action pending the outcome of the petition for rehearing EN 
BANC in front of the Ninth Circuit Court of Appeals in IN RE SILICON GRAPHICS,  
INC. SECURITIES LITIGATION.                                                     

  We are also a party to six lawsuits that allege claims against some of St.
John's current and former directors for breach of fiduciary duty alleged to have
arisen in connection with the mergers. All of these lawsuits were filed in the  
Superior Court of the State of California for the County of Orange. The         
principal relief sought in the six actions is certification of the putative     
class and a rescission of the mergers and damages and attorneys' fees in an     
unspecified amount. These six lawsuits were consolidated into one action on     
February 24, 1999.                                                              

On April 15, 1999, the plaintiffs in this lawsuit filed a motion for a  
preliminary injunction seeking to prevent the mergers from proceeding. The      
preliminary injunction motion was heard by the California state court on        
April 28, 1999. On April 30, 1999, the court denied the plaintiffs' motion. In  
denying the plaintiffs' request, the court ruled that the plaintiffs had not    
shown a "reasonable probability" that they could succeed in proving at trial    
that the $30.00 per share offer in the mergers is unfair. Similarly, the court  
ruled that the plaintiffs were unlikely to show that the special committee of   
St. John's board of directors that evaluated and approved the terms of the      
mergers on behalf of St. John lacked independence or failed to "shop" St. John  
adequately to other buyers. Discovery in this case is now complete and the court
has set a January 31, 2000 trial date.                                          

  On September 9, 1999, three of the plaintiffs filed another lawsuit in the
Superior Court of the State of California, County of Orange, naming SJKI, Pearl 
Acquisition Corp., Vestar/Gray Investors LLC, SJK Acquisition, Inc., Vestar     
Capital Partners III, L.P., Vestar Capital Partners and Merrill Lynch, Pierce,  
Fenner & Smith, Inc. The plaintiffs claim that each of the defendants aided and 
abetted the breach of fiduciary duties alleged in their earlier actions against 
St. John Knits, Inc., Bob Gray and Kelly Gray. Since the claims in this         
litigation are based exclusively on secondary liability and are completely      
contingent upon the success of the claims in the earlier action, on             
November 16, 1999, at the request of several defendants, the court stayed all   
proceedings in this litigation pending the outcome of the earlier action.       

 We intend to contest these lawsuits vigorously if the plaintiffs elect to
proceed with their actions. We expect to incur legal and other defense costs as 
a result of such proceedings. These proceedings                                 

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could involve a substantial diversion of the time of some of the members of     
management, and an adverse determination in, or settlement of, such litigation  
could involve payment of significant amounts.                                   

PRICE AND AVAILABILITY OF RAW MATERIALS--AN INCREASE IN THE PRICE OR A DECREASE 
IN THE AVAILABILITY OF WOOL OR RAYON, OUR PRIMARY RAW MATERIALS, COULD HAVE A   
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.                                        

    Our principal raw materials are wool and rayon. In fiscal 1998, we purchased
approximately $10.8 million of wool and approximately $3.7 million of rayon. The
price of wool and rayon may fluctuate significantly depending on world demand.  
We cannot assure that such fluctuation in the price of wool or rayon will not   
affect our business, financial condition and results of operations.             

    We purchase wool imported primarily from Australia. We also import other raw
materials, including rayon, from Europe and Japan. In addition, our shoes, small
leather goods and certain woven products are manufactured in Europe. Our        
imported materials and products are subject to United States customs duties     
which comprise a material portion of the cost of the merchandise. A substantial 
increase in customs duties could have a material adverse effect on our business,
financial condition and results of operations. The United States and the        
countries in which materials and products are produced or sold may, from time to
time, impose new quotas, duties, tariffs or other restrictions, or adversely    
adjust prevailing quota, duty or tariff levels, any of which could have a       
material adverse effect on SJKI.                                                

INTERNATIONAL OPERATIONS--OUR INTERNATIONAL OPERATIONS EXPOSE US TO ADDITIONAL  
POLITICAL, ECONOMIC AND REGULATORY RISKS NOT FACED BY BUSINESSES THAT OPERATE   
ONLY IN THE UNITED STATES.                                                      

 We conduct international operations in Mexico, Europe and Asia. In fiscal
1998, approximately 7.5% of our sales occurred outside the United States, and   
approximately 5.7% of our products were manufactured abroad by third-party      
contractors. Any international operations will be subject to risks similar to   
those affecting our U.S. operations in addition to a number of other risks,     
including:                                                                      

- lack of complete operating control;                                   

- currency fluctuations;                                                

- trade barriers;                                                       

- exchange controls;                                                    

- governmental expropriation;                                           

- foreign taxation;                                                     

- difficulty in enforcing intellectual property rights;                 

- language and other cultural barriers; and                             

- political and economic instability.                                   

In addition, various jurisdictions outside the United States have laws  
limiting the right and ability of non-United States subsidiaries and affiliates 
to pay dividends and remit earnings to affiliated companies unless specified    
conditions exist. Our ability to expand the manufacture and sale of our products
internationally is also limited by the necessity of obtaining regulatory        
approval in new countries.                                                      

Our financial performance on a U.S. dollar denominated basis can be     
significantly affected by fluctuations in currency exchange rates. From time to 
time we enter into agreements to seek to reduce our foreign currency exposure,  
but we cannot assure that we will be successful in so doing.                    

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GOVERNMENTAL REGULATION--CHANGES IN, OR THE COSTS OF COMPLYING WITH, VARIOUS    
GOVERNMENTAL REGULATIONS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.  

    We are subject to a variety of federal, state and local laws and regulations
including those relating to zoning, land use, environmental protection and      
workplace safety. We are also subject to laws governing our relationship with   
our employees, including minimum wage requirements, overtime, working conditions
and work permit requirements. Although we believe that we are and have been in  
material compliance with all of the various regulations applicable to our       
business, we cannot assure that requirements will not change in the future or   
that we will not incur significant costs to comply with such requirements.      

TRADEMARKS--THE LOSS OR INFRINGEMENT OF OUR TRADEMARKS AND OTHER PROPRIETARY    
RIGHTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.                    

    We believe that our trademarks and other proprietary rights are important to
our success and competitive position. Accordingly, we devote substantial        
resources to the establishment and protection of our trademarks on a worldwide  
basis. We cannot assure that our actions taken to establish and protect our     
trademarks and other proprietary rights will be adequate to prevent imitation of
our products by others or to prevent others from seeking to block sales of our  
products as violative of their trademarks and proprietary rights. Moreover, we  
cannot assure that others will not assert rights in, or ownership of, trademarks
and other proprietary rights of ours or that we will be able to successfully    
resolve such conflicts. In addition, the laws of certain foreign countries may  
not protect proprietary rights to the same extent as do the laws of the United  
States. The loss of such trademarks and other proprietary rights, or the loss of
the exclusive use of our trademarks and other proprietary rights, could have a  
material adverse effect on our business, financial condition and results of     
operations. See "Business--Trademarks."                                         

YEAR 2000--TECHNOLOGY ISSUES RELATED TO THE YEAR 2000 COULD HAVE A MATERIAL     
ADVERSE EFFECT ON OUR BUSINESS.                                                 

    We use various types of technology in the operation of our business. Some of
this technology incorporates date identification functions; however, many of    
these date identification functions were developed to use only two digits to    
identify a year. These date identification functions, if not corrected, could   
cause their relating technology to fail or create erroneous results by or at the
year 2000.                                                                      

We are continuing to monitor the impact of Year 2000 issues on our      
information and non-information technology systems. As part of this process, we 
retained the services of an independent contractor with experience in analyzing 
and addressing Year 2000 issues. In addition, we developed a five-phased plan   
with respect to the Year 2000 readiness of our internal technology systems. This
plan involved:                                                                  

- creating internal awareness of Year 2000 issues;                      

- analyzing our Year 2000 state of readiness;                           

- correcting systems or acquiring new ones as needed;                   

- testing the corrected or new systems; and                             

- incorporating the corrected or new systems into our business.         

We have substantially completed all five phases of the plan. As of      
August 1, 1999, we had incurred approximately $619,000 in costs related to the  
Year 2000 issue.                                                                

 We have also developed a plan to address the impact that Year 2000 issues
may have on our vendors and customers. We are currently finalizing our          
evaluation of the materiality of our vendor and                                 

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customer relationships and have initiated communications with certain           
significant vendors and customers to identify and minimize disruptions to our   
operations and to assist in resolving Year 2000 issues. We have substantially   
completed this evaluation; however, there can be no assurance that our Year 2000
compliance efforts will be successful or that the systems and products of other 
companies on which we rely will not have an adverse effect on our business,     
financial condition and results of operations. In the event that our Year 2000  
compliance efforts are not successful or if we are not satisfied with our       
vendors' or customers' Year 2000 compliance, we will take appropriate measures. 

   We believe that additional costs related to the Year 2000 issue will not be
material to our business, financial condition and results of operations.        
However, estimates of Year 2000 related costs are based on numerous assumptions 
and there is no certainty that estimates will be achieved and actual costs could
be materially greater than anticipated. We anticipate that we will fund our     
additional Year 2000 costs with cash from operations.                           

FRAUDULENT TRANSFER CONSIDERATIONS--BANKRUPTCY AND RELATED LAWS COULD PREVENT OR
HINDER US FROM MAKING PAYMENTS ON THE NOTES.                                    

    The incurrence of indebtedness by us or any of the guarantors, respectively,
such as the notes and the guarantees, may be subject to review under U.S.       
federal bankruptcy law or relevant state fraudulent conveyance laws if a        
bankruptcy case or lawsuit is commenced by or on behalf of unpaid creditors of  
such entity. Under these laws, if in such a case or lawsuit a court were to find
that, at the time such entity incurred indebtedness (including indebtedness     
under the notes or the guarantees),                                             

   (1) it incurred such indebtedness with the intent of hindering, delaying or
defrauding current or future creditors; or                        

                                                                [Download Table]
                                                                   
(2)  (a)  it received less than reasonably equivalent value or fair
          consideration for incurring such indebtedness; and       

(b) such entity                                                   

         (i) was insolvent or was rendered insolvent by reason of any of the
transactions;                                     

        (ii) was engaged, or about to engage, in a business or transaction
         for which the assets remaining with such entity constituted
     unreasonably small capital to carry on its business; or

     (iii) intended to incur, or believed that it would incur, debts
            beyond its ability to pay as such debts matured (as all of the
              foregoing terms are defined in or interpreted under the relevant
fraudulent transfer or conveyance statutes),      

then such court could avoid or subordinate the amounts owing under the notes or 
the guarantees to presently existing and future indebtedness of such entity and 
take other actions detrimental to you.                                          

   The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any    
such proceeding. Generally, however, an entity would be considered insolvent if,
at the time it incurred the indebtedness, either                                

 - the sum of its debts (including contingent liabilities) is greater than
its assets, at fair valuation, or                                   

- the present fair saleable value of its assets is less than the amount 
  required to pay the probable liability on its total existing debts and
      liabilities (including contingent liabilities) as they become absolute and
matured.                                                            

There can be no assurance as to what standards a court would use to determine   
whether an entity was solvent at the relevant time, or whether, whatever        
standard was used, the notes or the guarantees                                  

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would not be avoided or further subordinated on another of the grounds set forth
above. In rendering its opinion in connection with the offering of exchange     
notes, our counsel will not express any opinion as to the applicability of      
federal or state fraudulent transfer and conveyance laws.                       

We believe that at the time we and the guarantors initially incurred    
indebtedness represented by the notes and the guarantees, each was:             

(1) neither insolvent nor rendered insolvent thereby,             

       (2) in possession of sufficient capital to run its businesses effectively
and                                                       

 (3) incurring debts within its ability to pay as the same mature or
become due.                                               

  In reaching the foregoing conclusions, we have relied upon our analyses of
our internal cash flow projections and estimated values of our assets and       
liabilities. There can be no assurance, however, that a court passing on such   
questions would reach the same conclusions.                                     

LIMITATION ON CHANGE OF CONTROL--WE MAY NOT BE ABLE TO AFFORD, OR BE PERMITTED, 
TO PURCHASE THE NOTES UPON A CHANGE OF CONTROL AS REQUIRED BY THE INDENTURE.    

  Upon a change of control under the indenture, we will be required to offer
to purchase all of the notes then outstanding at 101% of their principal amount,
plus accrued interest to the date of repurchase. If a change of control were to 
occur, we can provide no assurance that we would have sufficient funds to pay   
the purchase price (as defined in the indenture) for the notes, and we expect   
that we would require third party financing; however, we can provide no         
assurance that we would be able to obtain such financing on favorable terms, if 
at all. In addition, the senior credit facilities restrict our ability to       
repurchase the notes, including pursuant to an offer in connection with a change
of control. A change of control under the indenture will result in an event of  
default under the senior credit facilities and may cause the acceleration of    
other senior indebtedness, if any, in which case the subordination provisions of
the notes would require payment in full of the senior credit facilities and any 
other senior indebtedness before repurchase of the notes. See "Description of   
the Notes--Offer to Purchase upon Change of Control" and "Description of Senior 
Credit Facilities." The inability to repay senior indebtedness, if accelerated, 
and to purchase all of the tendered notes, would constitute an event of default 
under the indenture.                                                            

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THE TRANSACTIONS

THE MERGERS                                                                     

On February 2, 1999, St. John Knits International, St. John,            
SJKAcquisition, Inc. and Pearl Acquisition Corp. entered into a merger          
agreement. Under the merger agreement, St. John agreed to enter into two        
mergers, which were completed in July 1999. In the first merger--the            
reorganization merger--St. John merged with SJKAcquisition and became a wholly  
owned subsidiary of St. John Knits International. As a result of the            
reorganization merger, shareholders of St. John became stockholders of St. John 
Knits International. The reorganization merger did not result in any change in  
the business, management, fiscal year, location of the principal facilities,    
assets or liabilities of St. John.                                              

  In the second merger--the acquisition merger--St. John Knits International
merged with Pearl, a Delaware corporation which is wholly owned by Vestar/Gray  
Investors LLC, with St. John Knits International surviving the merger. Upon the 
completion of the acquisition merger, Vestar/Gray Investors was approximately   
84% owned by Vestar and approximately 16% beneficially owned by Bob Gray, Marie 
Gray and Kelly Gray. As a result of the acquisition merger, former public       
shareholders of St. John (other than the Grays) owned approximately 7% of St.   
John Knits International's common stock and Vestar and the Grays beneficially   
owned (through Vestar/Gray Investors) approximately 78% and 15% of St. John     
Knits International's common stock, respectively. Our corporate structure is now
as follows:                                                                     

[Chart] 

    In connection with the mergers, former St. John shareholders (other than the
Grays) were entitled to receive either $30.00 in cash or one share of St. John  
Knits International common stock for each share of St. John common stock owned  
before the mergers. The amount of St. John Knits International stock to be      
received by each former St. John shareholder was subject to proration so that as
a result of the mergers, St. John shareholders, other than the Grays, received a
total of 456,047 shares, or approximately 7%, of the common stock of St. John   
Knits International. The acquisition merger was accounted for as a              
recapitalization under generally accepted accounting principles. Accordingly,   
the historical basis of St. John's assets and liabilities was not impacted by   
the acquisition merger.                                                         

USE OF PROCEEDS 

We will not receive any cash proceeds from the issuance of the exchange 
notes. The net proceeds from the issuance and sale of the outstanding notes,    
which were approximately $98.6 million after deduction of underwriting          
discounts, were used to consummate the transactions.                            

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CAPITALIZATION

 The following table sets forth the unaudited capitalization of SJKI as of
August 1, 1999 after giving effect to the transactions. The information below   
should be read in conjunction with "Unaudited Pro Forma Condensed Consolidated  
Financial Information," "Management's Discussion and Analysis of Financial      
Condition and Results of Operations" and the consolidated financial statements  
of St. John and the notes thereto included elsewhere in this prospectus.        

                                                                [Download Table]

                                                                    AS OF        
                                                               AUGUST 1, 1999    
                                                            ---------------------
                                                            (DOLLARS IN MILLIONS)
                                                                                 
Cash, cash equivalents and short-term investments..........         $ 18.1       
                                                                    ======       
Debt:                                                                            
  Senior Credit Facilities(1)                                                    
    Term Loan A............................................         $ 75.0       
    Term Loan B............................................          115.0       
  Outstanding notes........................................           98.6       
  Other....................................................            1.9       
                                                                    ------       
    Total debt.............................................          290.5       
Mandatorily Redeemable Preferred Stock.....................           25.0       
Total stockholders' equity (deficit)(2)....................         (140.4)      
                                                                    ------       
    Total capitalization...................................         $175.1       
                                                                    ======       

------------------------                                                        

(1) The senior credit facilities also include a new $25.0 million revolving     
   credit facility which was undrawn and fully available as of August 1, 1999.

(2) The stockholders' deficit gives effect to the transactions in accordance    
with recapitalization accounting treatment.                             

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated financial      
information of St. John Knits International (the "Unaudited Pro Forma Financial 
Statements") has been derived by the application of pro forma adjustments to St.
John's historical consolidated financial statements included elsewhere in this  
prospectus. The unaudited pro forma condensed consolidated statements of income 
for the periods presented give effect to the transactions as if they had been   
consummated on November 3, 1997 for the fiscal year ended November 1, 1998, the 
39 weeks ended August 2, 1998 and the 39 weeks ended August 1, 1999. The        
adjustments are described in the accompanying notes. The Unaudited Pro Forma    
Financial Statements should not be considered indicative of actual results that 
would have been achieved had the transactions been consummated on the date or   
for the periods indicated and do not purport to indicate results of operations  
as of any future date or any future period. The Unaudited Pro Forma Financial   
Statements should be read in conjunction with St. John's historical consolidated
financial statements and the notes thereto included elsewhere in this           
prospectus.                                                                     

The pro forma adjustments were applied to the respective historical     
consolidated financial statements to reflect the transactions. The              
reorganization merger is reflected as a recapitalization. Accordingly, the      
historical accounting basis of St. John's assets and liabilities has not been   
impacted by the transactions.                                                   

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ST. JOHN KNITS INTERNATIONAL, INCORPORATED

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED NOVEMBER 1, 1998 

(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                      PRO FORMA        PRO   
                                                         HISTORICAL  ADJUSTMENTS      FORMA  
                                                         ----------  -----------     --------
                                                                                             
Net sales...............................................  $281,961           --      $281,961
Cost of sales...........................................   120,883           --       120,883
                                                          --------     --------      --------
  Gross profit..........................................   161,078     $     --       161,078
Selling, general and administrative expenses............   107,026          500 (a)   107,526
                                                          --------     --------      --------
  Operating income......................................    54,052         (500)       53,552
Interest expense........................................        --       32,193 (b)    32,193
Other income............................................     1,369       (1,117)(c)       252
                                                          --------     --------      --------
  Income before income taxes............................    55,421      (33,810)       21,611
Income taxes............................................    22,001      (13,423)(d)     8,578
                                                          --------     --------      --------
  Net income............................................    33,420      (20,387)       13,033
Preferred dividends.....................................        --        3,813 (e)     3,813
                                                          --------     --------      --------
  Earnings available to common shareholders.............  $ 33,420     $(24,200)     $  9,220
                                                          ========     ========      ========

EBITDA..................................................  $ 66,294                   $ 65,794
                                                          ========                   ========

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income 

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ST. JOHN KNITS INTERNATIONAL, INCORPORATED

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE 39 WEEKS ENDED AUGUST 2, 1998 

(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                        PRO FORMA        PRO   
                                                           HISTORICAL  ADJUSTMENTS      FORMA  
                                                           ----------  -----------     --------
                                                                                               
Net sales.................................................  $206,293           --      $206,293
Cost of sales.............................................    86,211           --        86,211
                                                            --------     --------      --------
  Gross profit............................................   120,082     $     --       120,082
Selling, general and administrative expenses..............    76,858          375 (a)    77,233
                                                            --------     --------      --------
  Operating income........................................    43,224         (375)       42,849
Interest expense..........................................        --       24,292 (b)    24,292
Other income..............................................     1,100         (917)(c)       183
                                                            --------     --------      --------
Income before income taxes................................    44,324      (25,584)       18,740
Income taxes..............................................    18,033      (10,157)(d)     7,876
                                                            --------     --------      --------
  Net income..............................................    26,291      (15,427)       10,864
Preferred dividends.......................................        --        1,906 (e)     1,906
                                                            --------     --------      --------
  Earnings available to common shareholders...............  $ 26,291     $(17,333)     $  8,958
                                                            ========     ========      ========

EBITDA....................................................  $ 51,998                   $ 51,623
                                                            ========                   ========

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income 

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ST. JOHN KNITS INTERNATIONAL, INCORPORATED

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME

FOR THE 39 WEEKS ENDED AUGUST 1, 1999 

(DOLLARS IN THOUSANDS)

                                                        [Enlarge/Download Table]

                                                                          PRO FORMA       PRO    
                                                             HISTORICAL  ADJUSTMENTS     FORMA   
                                                             ----------  -----------    -------- 
                                                                                                 
Net sales...................................................  $221,935     $     --     $221,935 
Cost of sales...............................................    97,382           --       97,382 
                                                              --------     --------     -------- 
  Gross profit..............................................   124,553           --      124,553 
Selling, general and administrative expenses................    91,175          341 (a)   91,516 
Transaction fees and expenses...............................    15,212           --       15,212 
                                                              --------     --------     -------- 
  Operating income..........................................    18,166         (341)      17,825 
Interest expense............................................     2,045       21,157 (b)   23,202 
Other income................................................     1,220         (962)(c)      258 
                                                              --------     --------     -------- 
  Income loss before income taxes...........................    17,341      (22,460)      (5,119)
  Income taxes..............................................     7,117       (8,917)(d)   (1,800)
                                                              --------     --------     -------- 
  Net income (loss).........................................    10,224      (13,543)      (3,319)
Preferred dividends.........................................       265        1,641 (e)    1,906 
                                                              --------     --------     -------- 
  Earnings available to common shareholders.................  $  9,959     $(15,184)    $ (5,225)
                                                              ========     ========     ======== 

EBITDA......................................................  $ 47,309                  $ 46,968 
                                                              ========                  ======== 

See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Income 

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ST. JOHN KNITS INTERNATIONAL, INCORPORATED

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED 

STATEMENT OF INCOME 

The unaudited pro forma financial information has been derived by the           
application of pro forma adjustments to St. John's historical financial         
statements of income for the periods noted. The mergers have been accounted for 
as a recapitalization, which will have no impact on the historical basis of St. 
John's assets and liabilities.                                                  

(a) Represents an annual advisory fee under the management agreement paid to    
Vestar Capital.                                                         

(b) The pro forma adjustment to interest expense for the periods presented      
reflects the following items (dollars in thousands):                    

                                                        [Enlarge/Download Table]

                                                                         39 WEEKS   39 WEEKS 
                                                            YEAR ENDED     ENDED      ENDED  
                                                            NOVEMBER 1,  AUGUST 2,  AUGUST 1,
                                                               1998        1998      1999(1) 
                                                            -----------  ---------  ---------
                                                                                             
Interest expense on the notes..............................   $12,500     $ 9,375    $ 8,485 
Interest expense on term loans.............................    16,785      12,838     10,811 
Interest expense on the revolving credit facility..........       777         473        397 
Amortization of discount...................................       138         104         94 
Amortization of deferred debt issuance                                                       
  costs....................................................     1,913       1,435      1,310 
Commitment fee of the unused portion of revolving credit                                     
  facility.................................................        80          67         60 
                                                              -------     -------    ------- 
      Total................................................   $32,193     $24,292    $21,157 
                                                              =======     =======    ======= 

------------------------                                                        

(1)  Represents pro forma interest expense through July 7, 1999, the date the   
transactions closed.                                                  

   The cash interest expense above results in a weighted average interest rate
of 10.09%, 10.18%, and 9.76% for the year ended November 1, 1998, the 39
weeks ended August 2, 1998 and the 39 weeks ended August 1, 1999,       
respectively.                                                           

  The deferred debt issuance costs reflect direct estimated costs associated
with obtaining the debt financing. These amounts are being amortized    
straight line over the estimated weighted average life of eight years.  

An increase or decrease in the interest rate of 0.125% would change the 
  annual pro forma interest expense by $360,000 and the pro forma net income
by $216,000.                                                            

(c) Eliminates interest income on cash and short-term investments which is not  
expected to be received after the mergers have been completed.          

(d) Represents the tax effect of the pro forma adjustments using an effective   
tax rate of 39.7%.                                                      

(e) Represents dividends on the Mandatorily Redeemable Preferred Stock. The     
  dividend rate is 15.25%. Dividends on the Mandatorily Redeemable Preferred
   Stock may only be paid in cash to the extent permitted by the senior credit
facilities, the indenture and other contractual arrangements of SJKI.   

(f) Upon completion of the transactions, all stock options outstanding were     
  canceled and converted to the right to receive a cash payment equal to the
    excess of $30.00 over the exercise price per share. This one-time payment of
   approximately $13.9 million will be reflected as a non-recurring expense to
  St. John in the period the mergers were effected and has not been included
in the pro forma adjustment.                                            

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SELECTED HISTORICAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth our selected historical condensed        
consolidated financial information. The selected historical condensed           
consolidated financial information for the three fiscal years ended November 3, 
1996, November 2, 1997 and November 1, 1998 are derived from the historical     
consolidated financial statements of St. John and related notes thereto (the    
"Financial Statements"), which have been audited by Arthur Andersen LLP,        
independent public accountants, as indicated in their report included elsewhere 
in this prospectus. The selected historical condensed consolidated financial    
information for the two fiscal years ended October 30, 1994 and October 29, 1995
are derived from the audited historical consolidated financial statements of St.
John, which are not included in this prospectus. The selected historical        
condensed consolidated financial and other data as of and for the 39 weeks ended
August 2, 1998, August 1, 1999 and the twelve months ended August 1, 1999 have  
been derived from St. John's unaudited consolidated financial statements and, in
the opinion of our management, have been prepared on a basis consistent with the
Financial Statements and include all adjustments (which consist of normal       
recurring accruals) that are considered by management to be necessary for a fair
presentation of such financial information.                                     

                                                        [Enlarge/Download Table]


                                          FISCAL YEAR ENDED                                
                               ---------------------------------------                     
                               OCTOBER 30,   OCTOBER 29,   NOVEMBER 3,                     
                                  1994          1995          1996                         
                               -----------   -----------   -----------                     
                                (DOLLARS IN THOUSANDS, EXCEPT RATIOS)                      
                                                                                           
STATEMENTS OF INCOME:                                                                      
  Net sales..................   $127,953      $161,795      $202,951                       
    Cost of sales............     59,179        74,252        88,871                       
                                --------      --------      --------                       
  Gross profit...............     68,774        87,543       114,080                       
    Selling, general and                                                                   
      administrative                                                                       
      expenses...............     43,288        54,550        68,385                       
                                --------      --------      --------                       
  Transaction fees and                                                                     
    expenses.................         --            --            --                       
                                --------      --------      --------                       
  Operating income...........     25,486        32,993        45,695                       
  Interest expense...........         --            --            --                       
    Other income(1)..........        340           803         1,355                       
                                --------      --------      --------                       
  Income before income                                                                     
    taxes....................     25,826        33,796        47,050                       
    Income taxes.............     10,880        14,243        19,929                       
                                --------      --------      --------                       
  Net income.................   $ 14,946      $ 19,553      $ 27,121                       
                                ========      ========      ========                       

OTHER DATA:                                                                                
  EBITDA(2)..................   $ 29,251      $ 38,539      $ 52,999                       
  Depreciation and                                                                         
    amortization.............      3,673         5,313         7,042                       
  Capital expenditures.......      7,796        17,571        21,400                       
  Net cash provided by                                                                     
    operating activities.....     12,637        18,014        16,841                       
  Net cash used in investing                                                               
    activities...............     14,292        17,714        20,114                       
  Net cash provided by (used                                                               
    in) financing                                                                          
    activities...............       (998)         (444)          748                       
Ratio of earnings to fixed                                                                 
 charges(3)..................       17.5x         18.7x         21.8x                      

BALANCE SHEET DATA (AT PERIOD                                                              
 END):                                                                                     
  Working capital............   $ 31,442      $ 38,130      $ 49,628                       
  Total assets...............     62,634        85,973       116,494                       
  Total debt.................         --            --            --                       
  Stockholders' equity.......     50,530        69,227        97,093                       


                                                                                   TWELVE  
                                   FISCAL YEAR ENDED          39 WEEKS ENDED       MONTHS  
                               -------------------------   ---------------------    ENDED  
                               NOVEMBER 2,   NOVEMBER 1,   AUGUST 2,   AUGUST 1,  AUGUST 1,
                                  1997          1998         1998        1999       1999   
                               -----------   -----------   ---------   ---------  ---------
                                           (DOLLARS IN THOUSANDS, EXCEPT RATIOS)           
                                                                                           
STATEMENTS OF INCOME:                                                                      
  Net sales..................   $242,101      $281,961     $206,293    $221,935   $297,602 
    Cost of sales............     99,545       120,883       86,210      97,382    132,053 
                                --------      --------     --------    --------   -------- 
  Gross profit...............    142,556       161,078      120,083     124,553    165,549 
    Selling, general and                                                                   
      administrative                                                                       
      expenses...............     84,545       107,026       76,858      91,175    121,343 
                                --------      --------     --------    --------   -------- 
  Transaction fees and                                                                     
    expenses.................         --            --           --      15,212     15,212 
                                --------      --------     --------    --------   -------- 
  Operating income...........     58,011        54,052       43,225      18,166     28,994 
  Interest expense...........         --            --           --       2,045      2,045 
    Other income(1)..........        713         1,369        1,100       1,220      1,489 
                                --------      --------     --------    --------   -------- 
  Income before income                                                                     
    taxes....................     58,724        55,421       44,325      17,341     28,438 
    Income taxes.............     24,300        22,001       18,033       7,117     11,085 
                                --------      --------     --------    --------   -------- 
  Net income.................   $ 34,424      $ 33,420     $ 26,292    $ 10,224   $ 17,353 
                                ========      ========     ========    ========   ======== 
OTHER DATA:                                                                                
  EBITDA(2)..................   $ 67,126      $ 66,294     $ 51,998    $ 47,309   $ 60,853 
  Depreciation and                                                                         
    amortization.............      8,859        11,371        8,276      10,931     14,025 
  Capital expenditures.......     22,751        23,648       16,800      10,758     17,606 
  Net cash provided by                                                                     
    operating activities.....     30,459        24,982       15,656      25,304     34,630 
  Net cash used in investing                                                               
    activities...............     21,542        22,377       16,881       9,324     14,820 
  Net cash provided by (used                                                               
    in) financing                                                                          
    activities...............       (817)       (2,724)         164     (12,252)   (15,140)
Ratio of earnings to fixed                                                                 
 charges(3)..................       22.6x         16.6x        18.6x        4.5x       5.7x
BALANCE SHEET DATA (AT PERIOD                                                              
 END):                                                                                     
  Working capital............   $ 69,693      $ 89,190     $ 88,592    $ 85,132   $ 85,132 
  Total assets...............    153,904       182,390      174,265     195,748    195,748 
  Total debt.................         --           408           --     290,520    290,520 
  Stockholders' equity.......    130,680       161,574      157,303    (140,392)  (140,392)

------------------------------                                                  

(1) "Other income" primarily includes interest income and royalty income.       

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(2) "EBITDA" represents earnings before interest expense, other income (except  
royalty income), income taxes, depreciation and amortization expense,   
   non-cash write-off of assets and non-recurring expenses associated with the
  transactions. It is not intended to represent cash flow from operations as
  defined by generally accepted accounting principles and should not be used
as an alternative to net income as an indicator of SJKI's operating     
    performance or to cash flow as a measure of liquidity. EBITDA is included in
this prospectus as it is a basis upon which SJKI assesses its financial 
performance. SJKI believes that EBITDA, as presented, presents a useful 
   measure of assessing SJKI's ongoing operating activities without the impact
   of financing activity and non-recurring charges. While EBITDA is frequently
used as a measure of operations and the ability to meet debt service    
requirements, it is not necessarily comparable to other similarly titled
  captions of other companies due to potential inconsistencies in the method
  of calculation. For purposes of the EBITDA calculation, non-cash write-off
 of assets was $77,000, $85,000, $16,000, $200,000 and $611,000 for fiscal
    years 1994, 1995, 1996, 1997 and 1998, respectively, $431,000 and $1,720,000
   for the 39 weeks ended August 2, 1998 and August 1, 1999, respectively, and
  $1,873,000 for the twelve months ended August 1, 1999. For the fiscal year
   ended November 1, 1998 and the twelve months ended August 1, 1999, non-cash
write-off of assets was primarily related to the closure of three home  
furnishings stores and the write-off of a trademark.                    

(3) For purposes of determining the ratio of earnings to fixed charges, earnings
 are defined as earnings before income taxes and extraordinary items, plus
fixed charges. Fixed charges consist of interest expense, including     
   amortization of debt issuance costs and a portion of operating lease rental
expense deemed to be representative of the interest factor.             

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 

Management's discussion and analysis should be read in conjunction with 
"Selected Historical Condensed Consolidated Financial Information" and the notes
thereto and St. John's consolidated financial statements and the notes thereto  
and the other more detailed financial information appearing elsewhere in this   
prospectus.                                                                     

OVERVIEW                                                                        

SJKI is a leading designer, manufacturer and marketer of high quality   
women's clothing and accessories, principally under the St. John brand name.    
SJKI's core knitwear line is sold as a collection of lifestyle clothing for     
business, evening and casual needs, and represented approximately 81% of fiscal 
1998 net sales. This core knitwear line is complemented by SJKI's other product 
categories, including women's wovens, activewear, shoes, coats, accessories,    
fragrances and home furnishings.                                                

SJKI operates seven production facilities in California and one         
recently-built facility in Mexico, manufacturing approximately 93% of its       
products in-house during fiscal 1998. SJKI believes that its vertical           
integration differentiates it from other apparel manufacturers and has been     
critical to its success because it enables SJKI to manufacture products to      
order, maximize manufacturing flexibility and maintain superior quality control.
SJKI distributes its products on a highly selective basis through a group of    
upscale retail customers with whom it has long-standing relationships, as well  
as through company-owned boutiques and outlet stores.                           

  SJKI's revenues increased from approximately $128.0 million in fiscal 1994
to approximately $282.0 million in fiscal 1998, representing a compound annual  
growth rate of 21.8%. This growth was primarily attributable to (i) increased   
penetration within SJKI's long-standing retail accounts; (ii) increased         
same-store sales at both retail accounts and company-owned stores; (iii) the    
expansion of four existing company-owned boutiques as well as the opening of    
five new company-owned boutiques and five new outlet stores; and (iv) the       
introduction of several additional product lines. In addition to SJKI's strong  
growth in sales, EBITDA increased from approximately $29.3 million in fiscal    
1994 to approximately $66.3 million in fiscal 1998, representing a compound     
annual growth rate of 22.7%. EBITDA margins improved over the same period from  
22.9% in fiscal 1994 to 23.5% in fiscal 1998.                                   

Despite this strong growth in sales and cash flow, SJKI's financial     
performance in fiscal 1998 and during the first quarter of fiscal 1999 was      
impacted by a number of issues which led to unfavorable comparisons with prior  
periods. These issues relate primarily to SJKI's efforts to maintain its high   
historical growth rates. Recognizing that the core knitwear line could no longer
support rates of growth in excess of 20%, SJKI undertook a number of growth     
initiatives which have not been successful. These initiatives included the      
introduction of a lower-priced line under the SJK label and the creation of a   
home furnishings joint venture under the Amen Wardy Home Stores name. In        
addition, SJKI attempted to broaden the appeal of its core knitwear line by     
including a number of more "fashion forward" styles in its Fall 1998 collection.
As a result, the core knitwear line did not include sufficient product options  
for the traditional St. John customer and experienced below-average retail      
performance.                                                                    

  SJKI's continued sales growth also led to capacity constraints and related
production difficulties, despite its significant historical and on-going capital
investments. These issues were exacerbated in fiscal 1998 by the increased      
complexity of garments in the Fall 1998 line, which required more time to       
produce. As a result, SJKI incurred substantial costs related to overtime and   
rework and experienced certain delays in shipping. This increase in costs was   
due in part to the reevaluation of SJKI's quality control program and the       
related procedures which were implemented during the second half of fiscal 1998.

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  Importantly, SJKI's results in fiscal 1998 and during the first quarter of
fiscal 1999 also reflect significant on-going investments which depressed       
immediate financial results, but which SJKI believes will improve future        
performance. For example, SJKI commenced operations in a new jewelry and garment
hardware manufacturing facility in Mexico and experienced inefficiencies        
commonly associated with start-up operations of this nature. In addition, SJKI  
opened one and expanded two boutiques, incurring increased fixed overhead       
without an immediate commensurate increase in revenue. SJKI also invested       
heavily in its workforce throughout the year, with the majority of this increase
relating to the hiring of additional production personnel. The immediate impact 
of this initiative was to lower gross margins, as these new employees required  
additional training and were initially less efficient than longer-term          
personnel.                                                                      

SJKI believes it has taken actions to respond to all of the issues which
impacted performance described above and has made a significant investment in   
its production capabilities. The SJK line has been discontinued. The Amen Wardy 
Home Stores joint venture was terminated in May 1999; three of the original six 
Amen Wardy stores were closed, one was transferred to the former joint venture  
partner, and two continue to be operated as a wholly owned subsidiary of SJKI   
under the St. John Home name. In addition, the knitwear line for the current    
Cruise/Spring season included a more traditional mix of styles and, as a result,
experienced performance more in line with SJKI's historical results. SJKI's     
investments during fiscal 1998 in its production capabilities included the      
addition of personnel and approximately $5.7 million invested in 56 new         
state-of-the-art electronic knitting machines. As a result of these investments,
SJKI believes it is well-positioned to meet anticipated manufacturing           
requirements.                                                                   

While SJKI believes it has taken actions to respond to all of the issues
which impacted fiscal 1998 and the first quarter of fiscal 1999, profit margins 
were affected during these periods. Specifically, gross margins declined        
primarily due to (i) capacity constraints which led to production               
inefficiencies; (ii) production difficulties and overtime associated with the   
manufacture of certain highly ornate styles in the knitwear line;               
(iii) training of new employees; and (iv) lower gross margins at company-owned  
stores. In addition, selling, general and administrative expense as a percentage
of net sales increased as a result of (i) increases in sales, marketing, design 
and administrative personnel expenses; (ii) expenses associated with the        
start-up of SJKI's home furnishings retail stores; (iii) higher markdowns on the
Fall 1998 line than on prior lines due to merchandising and design issues       
associated with targeting a more "fashion forward" customer base; (iv) expenses 
associated with the discontinuation of the SJK line; and (v) an immediate       
increase in fixed overhead at several upgraded boutiques without a corresponding
increase in revenues.                                                           

As a result of SJKI's efforts to address the issues which affected its  
results of operations in fiscal 1998 and the first quarter of fiscal 1999,      
SJKI's financial results improved during the second and third quarters of fiscal
1999 as compared to the first quarter. Specifically, SJKI's gross profit margin 
increased from 53.9% in the first quarter to 57.9% in the second quarter, even  
though second quarter gross profit margins were negatively impacted by one-time 
markdowns reported at three Amen Wardy Home stores which were closed during the 
period, and to 56.5% in the third quarter. In addition, after excluding the     
effect of certain non-recurring charges including (i) charges incurred in the   
second quarter related to the termination of the Amen Wardy Home Store joint    
venture, (ii) fees and expenses incurred in the third quarter in connection with
the transactions and (iii) the write-off during the third quarter of the costs  
associated with the acquisition of a trademark which was no longer being used,  
operating profit margin increased from 12.8% in the first quarter to 19.6% and  
15.3% in the second and third quarters, respectively.                           

  SJKI intends to pursue a strategy of controlled growth driven primarily by
the significant remaining growth potential of its core knitwear line, while     
selectively pursuing other growth opportunities. Management believes this will  
lessen the risk associated with undertaking new initiatives, relieve the        

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pressure on SJKI's production capacity, enable it to continue its highly        
selective distribution strategy and enhance margins. See "Prospectus            
Summary--The Company--Business Strategy."                                       

RESULTS OF OPERATIONS                                                           

 The following table is derived from St. John's Consolidated Statements of
Income and sets forth, for the periods indicated, the results of operations as a
percentage of net sales:                                                        

                                                        [Enlarge/Download Table]

                                                        FISCAL YEAR ENDED                  39 WEEKS ENDED     
                                             ---------------------------------------  ------------------------
                                             NOVEMBER 3,   NOVEMBER 2,   NOVEMBER 1,  AUGUST 2,      AUGUST 1,
                                                1996          1997          1998        1998           1999   
                                             -----------   -----------   -----------  ---------      ---------
                                                                                                              
Net sales...................................     100.0%       100.0%         100.0%     100.0%         100.0% 
Cost of sales...............................      43.8         41.1           42.9       41.8           43.9  
                                                ------        -----         ------      -----          -----  
Gross Profit................................      56.2         58.9           57.1       58.2           56.1  
Selling, general and administrative                                                                           
  expenses..................................      33.7         34.9           38.0       37.3           41.1  
Transaction fees and expenses...............        --           --             --         --            6.9  
                                                ------        -----         ------      -----          -----  
Operating income............................      22.5%        24.0%          19.1%      20.9%           8.1% 
                                                ======        =====         ======      =====          =====  

FIRST 39 WEEKS FISCAL 1999 COMPARED TO FIRST 39 WEEKS FISCAL 1998               

    Net sales for the first 39 weeks of fiscal 1999 increased by $15,642,000, or
7.6% over the first 39 weeks of fiscal 1998. This increase was principally      
attributable to (i) an increase in sales by company-owned retail stores of      
approximately $10,693,000, due in part to the expansion of the Las Vegas and    
South Coast Plaza boutiques which were completed in May 1998 and December 1998, 
respectively, and the addition of one retail boutique in Scottsdale, Arizona and
one outlet store since the beginning of fiscal 1998, (ii) an increase in sales  
of approximately $3,082,000 recorded by St. John Home Stores, LLC, which        
commenced operations during the fourth quarter of fiscal 1997 and (iii) an      
increase in international sales of $3,788,000, which includes the sales of St.  
John Company, Ltd., which commenced operations in Japan during the fourth       
quarter of fiscal 1997. These increases were offset by a net decrease of        
$1,921,000 in sales to existing domestic retail customers, primarily due to the 
discontinuance of the SJK line. Net sales increased primarily as a result of    
increased unit sales of various product lines.                                  

   Gross profit for the first 39 weeks of fiscal 1999 increased by $4,471,000,
or 3.7% as compared with the first 39 weeks of fiscal 1998, and decreased as a  
percentage of net sales to 56.1% from 58.2%. This decrease in the gross profit  
margin was primarily due to a decrease in the gross margin for the knitwear     
line, due to increased production costs which were not offset by a corresponding
increase in the selling price. This increase in the production costs was due in 
part to the reevaluation of SJKI's quality control program and the related      
procedures which were implemented during the second half of fiscal 1998.        

Selling, general and administrative expenses for the first 39 weeks of  
fiscal 1999 increased by $14,317,000, or 18.6% over the first 39 weeks of fiscal
1998, and increased as a percentage of net sales to 41.1% from 37.3%. This      
increase was primarily due to (i) an increase in selling expenses due to        
increased costs of promoting and marketing its products to its major customers, 
(ii) non-recurring expenses incurred in connection with resolving the litigation
involving Amen Wardy Home stores and the closure of three such stores and       
(iii) the write-off of the costs associated with the acquisition of a trademark 
which is no longer being used.                                                  

  Transaction fees and expenses represent costs directly associated with the
completion of the transactions, including $13,792,000 of costs related to       
payments made to settle St. John's outstanding stock options.                   

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Operating income for the first 39 weeks of fiscal 1999 decreased by     
$25,059,000, or 58.0% over the first 39 weeks of fiscal 1998. Operating income  
as percentage of net sales decreased to 8.1% from 20.9% during the same period. 
This decrease in the operating income as a percentage of net sales was due to   
transaction fees and expenses recorded during the third quarter of fiscal 1999, 
a decrease in the gross profit margin and an increase in selling, general and   
administrative expenses as a percentage of net sales.                           

Interest expense for the first 39 weeks of fiscal 1999 increased to     
$2,045,000. Interest expense recorded during the period was a result of the debt
acquired to finance a portion of the cash consideration paid pursuant to the    
mergers, which were completed on July 7, 1999.                                  

FISCAL 1998 COMPARED TO FISCAL 1997                                             

    Net sales for fiscal 1998 increased by approximately $39.9 million, or 16.5%
over fiscal 1997. This increase was principally attributable to (i) an increase 
in sales to existing domestic retail customers of approximately $20.9 million;  
(ii) an increase in sales by company-owned stores of approximately              
$10.2 million, due in part to the increased sales of the New York boutique, the 
expansion of the Las Vegas boutique and the addition of three outlet stores     
since the beginning of fiscal 1997; (iii) an increase in sales of approximately 
$6.0 million recorded by Amen; and (iv) an increase in international sales of   
approximately $2.8 million, which includes the sales of St. John Japan. Net     
sales increased primarily as a result of increased unit sales of various product
lines.                                                                          

 Gross profit for fiscal 1998 increased by approximately $18.5 million, or
13.0% as compared with fiscal 1997, and decreased as a percentage of net sales  
to 57.1% from 58.9%. This decrease in the gross profit margin was primarily due 
to (i) capacity constraints which led to production inefficiencies; (ii) cost   
increases related to production difficulties and overtime associated with the   
manufacture of certain highly ornate styles in the knitwear line;               
(iii) expenses relating to training of new employees; and (iv) lower gross      
margins at company-owned outlet stores. All of such additional costs were       
partially offset by an increase in the number of garments being produced and    
sold without a corresponding increase in certain production costs, due in part  
to the fixed nature of these costs.                                             

 Selling, general and administrative expenses for fiscal 1998 increased by
approximately $22.5 million, or 26.6% over fiscal 1997, and increased as a      
percentage of net sales to 38.0% from 34.9%. This increase was primarily due to 
(i) an increase of approximately $5.2 million in sales, marketing, design and   
administrative personnel expenses; (ii) expenses of approximately $4.9 million  
associated with the start-up of SJKI's home furnishings retail stores;          
(iii) increased costs of approximately $2.1 million in connection with higher   
markdowns on the Fall 1998 line and with the discontinuation of the SJK line;   
(iv) an immediate increase in fixed overhead at one upgraded boutique without a 
corresponding increase in revenues; and (v) costs related to the start-up of a  
new jewelry and garment hardware manufacturing facility in Mexico.              

    Operating income for fiscal 1998 decreased by approximately $4.0 million, or
6.8% over fiscal 1997. Operating income as a percentage of net sales decreased  
to 19.1% from 24.0% during the same period as a result of the reasons mentioned 
above.                                                                          

FISCAL 1997 COMPARED TO FISCAL 1996                                             

    Net sales for fiscal 1997 increased by approximately $39.2 million, or 19.3%
over fiscal 1996. This increase was principally attributable to (i) an increase 
in sales to existing domestic retail customers of approximately $23.0 million;  
(ii) an increase in sales by company-owned stores of approximately              
$12.8 million, due in part to the expansion of the New York boutique, which was 
completed in October 1996, and the addition of one retail boutique and two      
outlet stores since the beginning of fiscal 1996; and (iii) an increase in sales
to international retail customers of approximately $3.3 million. Net sales      
increased primarily as a result of increased unit sales of various product      
lines.                                                                          

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 Gross profit for fiscal 1997 increased by approximately $28.5 million, or
25.0% as compared with fiscal 1996, and increased as a percentage of net sales  
to 58.9% from 56.2%. This increase in the gross profit margin was primarily due 
to an increase in the number of garments being produced and sold without a      
corresponding increase in the production costs, due in part to the fixed nature 
of certain costs.                                                               

 Selling, general and administrative expenses for fiscal 1997 increased by
approximately $16.2 million, or 23.6% over fiscal 1996, and increased as a      
percentage of net sales to 34.9% from 33.7%. This increase was primarily due to 
(i) an increase of approximately $3.0 million in promotion and advertising      
expenses related to an expansion of SJKI's advertising program; (ii) an increase
of approximately $2.0 million in salaries due to SJKI's continued effort to     
build its sales and marketing team; and (iii) an increase in expenses related to
an expansion of SJKI's sales to foreign customers which include, among other    
things, import duties, sales commissions and additional freight charges.        

  Operating income for fiscal 1997 increased by approximately $12.3 million,
or 27.0% over fiscal 1996. Operating income as a percentage of net sales        
increased to 24.0% from 22.5% during the same period as a result of the reasons 
mentioned above.                                                                

LIQUIDITY AND CAPITAL RESOURCES                                                 

St. John Knits International is effectively a holding company and       
accordingly, must rely on distributions, loans and other intercompany cash flows
from its affiliates and subsidiaries to generate the funds necessary to satisfy 
the repayment of its outstanding loans.                                         

 SJKI's primary cash requirements are to fund payments required to service
its debt, to fund its working capital needs, primarily inventory and accounts   
receivable, and for the purchase of property and equipment. During the first 39 
weeks of fiscal 1999, cash provided by operating activities was $25,304,000.    
Cash provided by operating activities was primarily generated by net income and 
a decrease in accounts receivable. Cash used in investing activities was        
$9,324,000 during the first 39 weeks of fiscal 1999. The principal use of cash  
in investing activities was for the purchase of electronic knitting machines,   
the construction of leasehold improvements for a new boutique location in South 
Coast Plaza in Costa Mesa, California and the completion of leasehold           
improvements for a new St. John Home store at South Coast Plaza. Cash used in   
financing activities was $12,252,000 during the first 39 weeks of fiscal 1999.  
Cash provided by financing activities included $190,000,000 provided by senior  
secured credit facilities, $98,616,000 provided by the sale of senior           
subordinated notes, and $25,000,000 provided by the issuance of preferred stock.
Cash used in financing activities related to the mergers was $311,447,000 and   
$15,231,000 was paid as fees and expenses related to the acquisition of the     
financing.                                                                      

SJKI anticipates purchasing property and equipment of approximately     
$5,500,000 during the remainder of fiscal 1999. The estimated $5,500,000 will be
used principally for the purchase of computerized knitting machines, upgrades to
SJKI's computer systems, expansion of the company-owned boutique in Boston and  
the construction of leasehold improvements for a new boutique location in Hawaii
and a new boutique in Portland, Oregon.                                         

   As of August 1, 1999, SJKI had approximately $85,132,000 in working capital
and $18,057,000 in cash and marketable securities. SJKI's principal source of   
liquidity is internally generated funds. As part of the senior credit           
facilities, SJKI has a $25,000,000 revolving credit facility which expires on   
July 31, 2005. The revolving credit facility is secured and borrowings          
thereunder bear interest at SJKI's choice of the bank's borrowing rate plus 2.0%
(8.0% at August 1, 1999) or a Eurodollar rate plus 3.0%. The availability of    
funds under the revolving credit facility is subject to SJKI's continued        
compliance with certain covenants, including a covenant that sets the maximum   
amount SJKI can spend annually on the acquisition of fixed or capital assets,   
and certain financial covenants, including a maximum leverage ratio, a minimum  
fixed charge coverage ratio and a minimum interest expense coverage ratio. See  

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"Description of Senior Credit Facilities." As of August 1, 1999, no amounts were
outstanding under the revolving credit facility. SJKI invests its excess cash   
primarily in a money market fund and investment grade commercial paper.         

   Total debt outstanding increased $289.9 million to $290.5 million at August
1, 1999, as compared to the amount outstanding at November 1, 1998. This        
increase is due to the effect of the transactions. SJKI's outstanding debt is   
comprised of bank borrowings of $191.9 million and $98.6 million of the         
outstanding notes. Note 9 to the Consolidated Financial Statements outlines     
certain terms and conditions of SJKI's senior credit facilities and the notes.  
In addition, Note 10 outlines certain terms and conditions of SJKI's 15 1/4%    
Preferred Stock issued in connection with the transactions.                     

SJKI's primary ongoing cash requirements will be for debt service and   
capital expenditures. SJKI's debt service requirements consist primarily of     
principal and interest payments on bank borrowings and interest on the notes.   
SJKI believes it will be able to finance its debt service and capital           
expenditure requirements for the foreseeable future with internally generated   
funds and availability under the revolving credit facility. However, SJKI's     
ability to fund its capital investment requirements, interest and principal     
payment obligations and working capital requirements and to comply with all of  
the financial covenants under its debt agreements depends on its future         
operating performance and cash flow, which in turn are subject to prevailing    
economic conditions and to financial, business and other factors, some of which 
are beyond SJKI's control. See "Risk Factors--Substantial Leverage and Debt     
Service."                                                                       

The indenture governing the notes, among other things, (i) restricts St.
John Knits International's and certain of its subsidiaries' (including the      
guarantors') ability to incur additional indebtedness, issue shares of preferred
stock, incur liens, pay dividends or make certain other restricted payments and 
enter into certain transactions with affiliates, (ii) prohibits certain         
restrictions on the ability of certain subsidiaries of St. John Knits           
International (including the guarantors) to pay dividends or make certain       
payments to St. John Knits International and (iii) places restrictions on the   
ability of St. John Knits International and certain of its subsidiaries         
(including the guarantors) to merge or consolidate with any other person or     
sell, assign, transfer, lease, convey or otherwise dispose of all or            
substantially all of the assets of SJKI. The senior credit facilities also      
contain other and more restrictive covenants, prohibit St. John Knits           
International from prepaying other indebtedness (including the notes) and       
require St. John Knits International to maintain specified financial ratios,    
such as a minimum ratio of EBITDA to interest expense, a minimum fixed charge   
coverage ratio and a maximum ratio of total debt to EBITDA, and satisfy         
financial condition tests. The senior credit facilities and the indenture       
contain customary events of default. The senior credit facilities prohibit St.  
John Knits International from declaring or paying any dividends or making any   
payments with respect to the notes if it fails to perform its obligations under,
or fails to meet the conditions of, the senior credit facilities or if payment  
creates a default under the senior credit facilities.                           

  St. John declared a quarterly cash dividend of $0.025 per share on June 8,
1999 which was paid on July 22, 1999 to shareholders of record on June 24, 1999.
St. John Knits International does not anticipate the payment of any cash        
dividends on its common stock in the future. See "Description of Senior Credit  
Facilities," "Description of the Notes" and "Risk Factors--Restrictions Imposed 
by Our Debt Agreements."                                                        

SJKI's EBITDA as defined in its credit agreement for its senior secured 
credit facilities was $47,309,000 and $51,998,000 for the first 39 weeks of     
fiscal 1999 and 1998, respectively. The credit agreement is filed as            
Exhibit (a)(1) to St. John Knits International's Amendment no. 4 to the         
Rule 13e-3 Transaction Statement on Schedule 13E-3 dated July 12, 1999. EBITDA  
is not a defined term under GAAP and is not an alternative to operating income  
or cash flow from operations as determined under GAAP. SJKI believes that EBITDA
provides additional information for determining its ability to meet future debt 
service requirements; however, EBITDA does not reflect cash available to fund   
cash requirements and should not be construed as an indication of SJKI's        
operating performance or as a measure of liquidity.                             

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NEW ACCOUNTING PRONOUNCEMENTS                                                   

  In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an       
Enterprise and Related Information." SJKI will be required to adopt this        
standard for fiscal 1999. The adoption of this standard will only affect        
disclosure and will not impact SJKI's financial position or results of          
operations.                                                                     

In 1998, the American Institute of Certified Public Accountants issued  
Statement of Position 98-1, "Accounting for the Costs of Computer Software      
Developed or Obtained for Internal Use" and Statement of Position 98-5,         
"Reporting on the Costs of Start-up Activities." SJKI will be required to adopt 
these standards in fiscal 2000. The adoption of these standards will not have a 
material impact on SJKI's financial position or results of operations.          

YEAR 2000                                                                       

    SJKI uses various types of technology in the operation of its business. Some
of this technology incorporates date identification functions; however, many of 
these date identification functions were developed to use only two digits to    
identify a year. These date identification functions, if not corrected, could   
cause their relating technology to fail or create erroneous results by or at the
year 2000.                                                                      

SJKI is continuing to monitor the impact of Year 2000 issues on its     
information and non-information technology systems. As part of this process,    
SJKI retained the services of an independent contractor with experience in      
analyzing and addressing Year 2000 issues. In addition, SJKI developed a        
five-phased plan with respect to the Year 2000 readiness of its internal        
technology systems. This plan involved (i) creating internal awareness of Year  
2000 issues, (ii) analyzing SJKI's Year 2000 state of readiness,                
(iii) correcting systems or acquiring new ones as needed, (iv) testing the      
corrected or new systems and (v) incorporating the corrected or new systems into
SJKI's business. SJKI has substantially completed all five phases of the plan.  
As of August 1, 1999, SJKI had incurred approximately $619,000 in costs related 
to the Year 2000 issue.                                                         

  SJKI has also developed a plan to address the impact that Year 2000 issues
may have on its vendors and customers. SJKI is currently finalizing its         
evaluation of the materiality of its vendor and customer relationships and has  
initiated communications with certain significant vendors and customers to      
identify and minimize disruptions to its operations and to assist in resolving  
Year 2000 issues. SJKI has substantially completed this evaluation; however,    
there can be no assurance that its Year 2000 compliance efforts will be         
successful or that the systems and products of other companies on which it      
relies will not have an adverse effect on its business, financial condition and 
results of operations. In the event that SJKI's Year 2000 compliance efforts are
not successful or if it is not satisfied with its vendors' or customers' Year   
2000 compliance, SJKI will take appropriate measures.                           

   SJKI believes that additional costs related to the Year 2000 issue will not
be material to its business, financial condition and results of operations.     
However, estimates of Year 2000 related costs are based on numerous assumptions 
and there is no certainty that estimates will be achieved and actual costs could
be materially greater than anticipated. SJKI anticipates that it will fund its  
additional Year 2000 costs with cash from operations.                           

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BUSINESS

OVERVIEW                                                                        

SJKI is a leading designer, manufacturer and marketer of fine women's   
clothing and accessories. The St. John name has been associated with high       
quality women's knitwear for over 35 years. SJKI's core knitwear product line,  
which represents approximately 81% of its sales, consists of a collection of    
lifestyle clothing for women's business, evening and casual needs. SJKI         
manufactures its products primarily to order and distributes them on a highly   
selective basis through a group of upscale retailers with whom it has long-term 
relationships, as well as through company-owned stores.                         

   SJKI's core knitwear products are considered unique and highly desirable by
customers due to their classic styling, durability, comfort, fit and quality.   
These attributes, combined with selective distribution and targeted advertising,
have created a loyal base of customers consisting of professional and           
higher-income women.                                                            

  The strength of SJKI's brand name and customer loyalty has also enabled it
to expand its business into product lines that complement its core offerings.   
These products account for approximately 19% of its sales and include women's   
wovens, activewear, shoes, coats, accessories, fragrances and home furnishings. 

    The success of SJKI's knitwear business, together with growth from its other
product lines, have allowed it to increase net sales from approximately         
$128.0 million in fiscal 1994 to approximately $282.0 million in fiscal 1998,   
representing a compound annual growth rate of approximately 21.8%. For the      
twelve months ended August 1, 1999, SJKI's net sales and Adjusted EBITDA (as    
defined) were approximately $297.6 million and $61.7 million, respectively.     

SJKI has developed a vertically integrated manufacturing process which  
allows it to produce approximately 93% of its own products. SJKI believes that  
this vertical integration differentiates it from other apparel manufacturers and
has been critical to its success because it enables it to manufacture products  
to order, maximize manufacturing flexibility and maintain superior quality      
control. SJKI operates seven production facilities in California and one in     
Mexico. During the past five years SJKI has invested approximately              
$53.0 million in production facilities and state-of-the-art equipment, which it 
believes has further enhanced its position as the leading manufacturer of       
high-end women's knitwear.                                                      

  SJKI has had relationships with its top three retail customers, Saks Fifth
Avenue, Neiman Marcus and Nordstrom, for approximately 25, 20 and 15 years,     
respectively. SJKI also distributes its products through 18 Company-owned       
boutiques and nine outlet stores. The boutiques showcase SJKI's entire line of  
products and have expanded the distribution and enhanced the brand awareness of 
its products.                                                                   

PRODUCTS                                                                        

ST. JOHN                                                                        

SJKI's products are organized primarily into six separate product lines:
Knitwear, Sport, Griffith & Gray, Shoes, Accessories and Fragrance. In fiscal   
1998, sales to SJKI's retail customers accounted for approximately              
$197.0 million, and sales through company-owned stores accounted for            
approximately                                                                   

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$74.3 million. The following table details the approximate range of suggested   
retail prices by product line. The suggested retail prices are indicative of    
individual item prices.                                                         

                                                        [Enlarge/Download Table]

                                                                                               RANGE OF SUGGESTED 
PRODUCT LINE                                                 SELECTED PRODUCTS                    RETAIL PRICES   
------------                                   ----------------------------------------------  -------------------
                                                                                                                  
Knitwear                                                                                                          
  COLLECTION.................................. Dresses, Two-Piece Suits, Three-Piece Suits,    $350-$1,400        
                                                Jackets, Pants, Skirts, Coats, Sweaters,                          
                                                Separates                                                         
  DRESSY...................................... Dresses, Theater Suits, Dressy Separates        $650-$2,000        
  BASICS...................................... Skirts, Jackets, Pants                          $160-$690          
  COUTURE..................................... Dresses, Gowns, Two-Piece Suits                 $900-$3,800        
Sport......................................... Jackets, Skirts, Pants, Tops, Jeans             $ 95-$1,100        
Griffith & Gray............................... Suits, Coats, Dresses, Separates, Eveningwear   $200-$1,800        
Shoes......................................... Pumps, Sling Backs, Loafers, Boots              $210-$375          
Accessories................................... Jewelry, Scarves, Belts, Handbags               $ 60-$525          
Fragrance..................................... Perfume, Bath Products                          $ 25-$250          

KNITWEAR.  SJKI organizes its St. John Knitwear into four groups:       
Collection, Dressy, Basics and Couture. Due to the breadth of each product      
group, SJKI competes in most segments of women's designer clothing. SJKI's      
knitwear products are sold as a collection of lifestyle clothing for women's    
business, evening and casual needs. Due to its all-purpose weight, St. John     
Knitwear is a year-round product, not confined to a single season or climate.   
SJKI manufactures all of its knitwear products and designs knitwear collections 
to encourage consumers to coordinate outfits, resulting in multiple product     
purchases within a collection. In fiscal 1998, knitwear sales were approximately
$228.6 million, or 81.1% of total sales.                                        

    COLLECTION. SJKI is best known for its Collection line consisting of elegant
ready-to-wear styles. This line of daytime knit fashions includes       
sophisticated dresses and suits that focus on a tailored look. The      
 Collection line also includes jackets, pants, skirts, coats and sweaters.
All items in the line are sold as separates, including two-piece suit   
styles.                                                                 

DRESSY. The Dressy line consists of dresses, theater suits and dressy   
separates. The look of the Dressy line is one of understated elegance   
    enhanced by innovative touches, such as layers of transparent paillettes and
sequins, embroidered sleeves or glittery collars and cuffs.             

  BASICS. The Basics line is comprised of products which are sold throughout
  the year and which generally do not vary by season. These products consist
 of classic jackets, skirts and pants that are an integral part of women's
    wardrobes, all in solid black, white or navy. Simplicity of design and color
  allows these products to be combined with any number of styles from any of
SJKI's product lines and worn for daytime or dressed up for evening.    
  Retailers' inventories of Basics products tend to be maintained throughout
the year and reordered as necessary.                                    

   COUTURE. The Couture line is SJKI's most exclusive group of day and evening
apparel and is produced in limited quantities. The day group includes   
   dresses and two-piece suits which are designed with elegant embroidery. The
 evening group consists of two-piece suits and long gowns. Both groups are
designed using colored paillettes and sequins.                          

SPORT.  St. John Sport is a line of activewear which includes jackets,  
skirts, pants, tops and jeans and is targeted to our core knitwear customers.   
The line is primarily manufactured in SJKI's production facilities using woven  
fabrics purchased in Italy. In fiscal 1998, Sport sales were approximately      
$10.3 million, or 3.7% of total sales.                                          

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   GRIFFITH & GRAY.  Griffith & Gray includes suits, coats, dresses, separates
and eveningwear. The line targets a slightly younger customer than the core     
Knitwear line. Approximately half of the line is manufactured in SJKI's         
facilities, including various knit styles. The balance of the line is           
manufactured by outside contractors located in Italy using high quality European
woven fabrics. Commencing with the Fall 1999 line, Griffith & Gray will be      
carried exclusively in our company-owned stores. In fiscal 1998, Griffith & Gray
sales were approximately $6.3 million, or 2.2% of total sales.                  

  SHOES.  The St. John Shoe line consists of pumps, sling backs, loafers and
boots, manufactured in Italy using high quality Italian leather. Shoes are      
designed to match the styles and colors of the Knitwear line. During fiscal     
1997, SJKI began distribution of the Shoe line to most of its major customers in
the United States. In fiscal 1998, Shoe sales were approximately $9.2 million,  
or 3.3% of total sales.                                                         

 ACCESSORIES.  The Accessories line is comprised of fine jewelry, scarves,
belts and handbags. All Accessories are color coordinated with the various      
fashion collections. Four collections of upscale jewelry are produced each year.
In fiscal 1998, Accessories sales were approximately $8.3 million, or 2.9% of   
total sales.                                                                    

FRAGRANCE.  The Fragrance line includes perfume, eau de parfum, perfumed
body mist, body cream, lotion, body powder and bath products. The signature     
fragrance, St. John, is marketed as an accessory to the St. John apparel line   
through most of SJKI's major customers and SJKI's own retail stores. During     
fiscal 1997, SJKI signed a distribution agreement to allow another company the  
right to distribute fragrance in the United States. During fiscal 1998, SJKI    
launched a second scent, White Camellia, which is currently marketed along with 
SJKI's signature scent. In fiscal 1998, Fragrance sales were approximately      
$2.6 million, or 0.9% of total sales.                                           

LICENSED                                                                        

SJKI has license agreements to manufacture and sell eyewear, watches and
coats under the St. John name. The eyewear line was launched during fiscal 1998 
and the watch line was launched during the first quarter of fiscal 1999.        

In February 1999, SJKI also signed a licensing agreement to create a new
line of women's coats. The new St. John Coat Collection will offer the usual    
classic styles, elegance and superior quality which St. John customers have come
to expect. The new line was launched in August 1999. Prior to the license       
agreement, SJKI's Coat Collection, consisting primarily of faux fur coats in    
various styles and colors, was manufactured in SJKI's factories using fabric    
imported from Europe and sold for between $750 and $1,100 per item. In fiscal   
1998, Coat Collection sales were approximately $1.4 million, or 0.5% of total   
sales.                                                                          

ST. JOHN HOME                                                                   

 SJKI operates two home furnishings stores, located in Scottsdale, Arizona
and Costa Mesa, California, under the name St. John Home. In addition, SJKI     
operates one St. John Home outlet store in Nevada that opened in June 1999. St. 
John Home stores sell upscale home furnishings and gift items. SJKI previously  
operated six home furnishings stores through a joint venture which was          
terminated in May 1999. Three of those stores were closed, and one was          
transferred to the joint venture partner. For the 39 weeks ended August 1, 1999,
the Scottsdale and Costa Mesa stores, together with the Nevada outlet, generated
net sales of approximately $3.3 million.                                        

MANUFACTURING                                                                   

 SJKI has developed a vertically integrated manufacturing process which it
believes is unique and critical to its success. During fiscal 1998,             
approximately 93% of SJKI's products were manufactured at                       

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SJKI's own facilities, while the remaining 7% was manufactured by outside       
contractors, primarily in Europe. SJKI twists, dyes and knits its yarn, as well 
as constructs, presses and finishes its knitwear products, in its seven         
facilities located in Southern California and one in Mexico. SJKI manufactures  
its knitwear using its highly automated electronic knitting machines coupled    
with a skilled labor force. SJKI also manufactures its own jewelry and hardware 
for its products. Products not manufactured by SJKI principally consist of the  
Griffith & Gray and Shoe product lines as well as home furnishings, handbags,   
scarves, belts and fragrances.                                                  

SJKI believes that its vertical integration differentiates it from other
apparel manufacturers and has been critical to its success because it enables   
SJKI to manufacture products to order, maximize manufacturing flexibility and   
maintain superior quality control. SJKI believes that the ability to produce to 
order limits its exposure to both the inventory and market risks associated with
many apparel companies that source products internationally. SJKI's in-house    
manufacturing capabilities also enable it to quickly increase production of     
popular styles. SJKI's ability to control every aspect of the manufacturing     
process allows it to consistently produce garments to its high quality          
standards. Finally, SJKI believes that its vertical integration has enabled it  
to consistently achieve margins that are among the highest in the apparel       
industry.                                                                       

The manufacturing process begins with the twisting together of wool and 
rayon on SJKI's precision twisting machines in a proprietary process that       
produces SJKI's "Santana" yarn. The twisted yarn is transferred to SJKI's dye   
house for dyeing based on garment orders received. The dyed yarn is knit on     
SJKI's computerized electronic knitting machines and then cut, assembled and    
finished in SJKI's linking, seaming and hand finishing facilities. SJKI's       
jewelry and hardware manufacturing plants produce the buttons and buckles for   
garments, as well as bracelets, earrings, necklaces, chokers, pins and other    
accessories. SJKI also manufactures many of its woven products, as well as      
blouses, jeans and certain scarves.                                             

  SJKI has made recent investments in its production capabilities, including
the addition of personnel hired during fiscal 1998 and approximately            
$5.7 million invested in 56 new state-of-the-art electronic knitting machines.  
Also, during fiscal 1998, SJKI completed a new jewelry and garment hardware     
manufacturing facility in Mexico. The new facility gives SJKI additional        
manufacturing capacity as well as the ability to lower the cost of certain      
labor-intensive jewelry and hardware components through reduced labor costs. In 
addition, workers at the Mexico facility apply paillettes and sequins to some of
SJKI's apparel products.                                                        

DESIGN                                                                          

    St. John designs its garments to be consistent with SJKI's classic, timeless
style. To accomplish this goal, design teams reference the prior season's       
designs and patterns to establish a basis for the current season's lines. The   
design teams also work closely with the sales force to incorporate current      
consumer preferences into the season's line. Dye lots are kept consistent with  
prior years to enable consumers to augment their wardrobes over several seasons.
Once design parameters for a particular item are established, the design teams  
work with the manufacturing group to plan construction details and hardware     
attachments, such as buttons, to ensure efficient manufacturing. The design     
staff has an average of nine years of experience with SJKI. See "Management's   
Discussion and Analysis of Financial Condition and Results of Operations."      

DISTRIBUTION                                                                    

  SJKI's products are distributed primarily through a select group of retail
customers and SJKI's 18 boutiques, nine outlet stores, two home furnishing      
stores and one home furnishing outlet.                                          

    RETAIL CUSTOMERS.  SJKI selectively distributes its products through some of
the nation's leading upscale retailers, including Saks Fifth Avenue, Neiman     
Marcus and Nordstrom, each of which                                             

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accounted for more than 10.0% of SJKI's net sales in fiscal 1998 (approximately 
45% collectively) and have been customers of SJKI for approximately 25, 20 and  
15 years, respectively. Since the mid-1980s, SJKI has worked with these and     
certain other retail customers to create in-store boutiques, which are          
designated areas devoted exclusively to SJKI's products. Other significant      
customers of SJKI include Jacobson's, Macy's West, Lord & Taylor and select     
Marshall Field's and Dayton Hudson stores.                                      

 COMPANY-OWNED STORES.  In order to diversify its product distribution and
enhance name recognition, SJKI began opening its own retail boutiques in 1989   
and currently operates 18 such boutiques. The boutiques showcase SJKI's entire  
line of products and have expanded the distribution and enhanced the brand      
awareness of its products. SJKI also operates nine outlet stores. Unlike many of
its competitors, SJKI does not expressly manufacture product for its outlets,   
instead utilizing the outlets to sell seconds, design samples and slow-moving   
inventory from SJKI's full-price boutiques. In addition, SJKI operates two home 
furnishing stores and one home furnishing outlet.                               

    INTERNATIONAL.  SJKI sells its products to retail customers in Asia, Europe,
Canada and Mexico. In Asia, SJKI has established relationships with a number of 
highly qualified retailers, including Lane Crawford in Hong Kong and China and  
ShinSegae in South Korea, and is now seeking to increase its penetration in     
these accounts. In addition, SJKI is planning to expand its successful in-hotel 
boutiques business in Japan and opened a boutique in Hong Kong in May 1999.     
SJKI's European efforts involve expanding and upgrading its relationships with  
high quality independent retail customers, principally in the United Kingdom,   
Germany, Belgium, Switzerland and the Netherlands. During fiscal 1998,          
international sales to retail customers and through St. John Japan accounted for
approximately 7.5% of SJKI's net sales.                                         

MARKETING                                                                       

  SJKI markets its Collection, Dressy and Couture lines along with its Sport
and Griffith & Gray lines twice a year, during the Fall and Cruise/Spring       
seasons. These lines are shown in January for delivery between May and October  
and in August for delivery between November and April. The majority of orders   
for each of these six-month delivery periods normally are received within five  
weeks of showings, and the goods are then made to order. The Shoe line is       
marketed four times per year. SJKI markets its Basics, Accessories and Fragrance
lines throughout the year.                                                      

SJKI shows its product lines to retail customer buyers in its New York, 
Irvine and Dallas showrooms. Members of SJKI's senior management team work      
closely with major retail customers to develop sales plans and to determine the 
appropriate mix of merchandise. These detailed sales plans are based on past    
purchases, expected sales growth and profitability. SJKI also shows its products
in its Dusseldorf and Japan showrooms as well as in other foreign countries at  
various times during the year using its outside sales representatives.          

SJKI's strategy is to sell its products to its retail accounts and to   
facilitate the sale of its products through to the ultimate consumer. SJKI      
employs a sales team, showroom personnel and customer service representatives.  
The sales team is currently comprised of 24 U.S. and seven international field  
representatives. The sales team establishes and maintains in-store boutique     
presentations, develops close working relationships with store management and   
trains key sales people to be St. John specialists. The St. John specialists at 
certain key retail accounts are eligible for SJKI's incentive rewards. In       
addition, SJKI's customer service representatives monitor computerized          
information on each store's sales and styles sold in an effort to track and     
increase sales.                                                                 

In order to promote its exclusive upscale image, SJKI consistently      
advertises in both national and international fashion magazines, including      
Vanity Fair, Vogue, Elle and Harper's. In fiscal 1998, SJKI spent approximately 
$11.0 million on advertising. Management believes that this advertising approach
enhances SJKI's image. SJKI's advertising features Kelly Gray as its Signature  
Model. SJKI also designs and produces seasonal exclusive St. John catalogs,     
which are distributed at the discretion of individual                           

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retailers. Distribution is usually limited to target repeat purchasers or those 
who meet SJKI's consumer profile.                                               

RAW MATERIALS AND SUPPLIERS                                                     

   SJKI's primary raw materials in the production of its knitwear are wool and
rayon. In fiscal 1998, SJKI purchased approximately $10.8 million of wool and   
approximately $3.7 million of rayon. SJKI uses the highest quality wool,        
primarily from Australia. Generally, a wool commitment is taken with SJKI's     
primary U.S. spinner for a set quantity of wool based on SJKI's forecasted wool 
requirements for approximately one year. Multiple spinners are available, both  
domestically and internationally, with comparable pricing for spun Australian   
wool yarn. SJKI also maintains yarn suppliers in Europe and Asia. SJKI generally
holds an inventory of twisted yarn sufficient for approximately six weeks of    
production to protect it from potential supply interruptions. Rayon is available
in raw or dyed form from various European and Japanese suppliers.               

   In addition to wool and rayon, SJKI purchases fabric from various suppliers
and has little difficulty in satisfying its fabric requirements from Europe and 
Asia. Crystals, glass beadings, pearls and raw materials used in the manufacture
of paillettes are purchased from certain suppliers in Europe. SJKI believes that
there are alternative sources for certain of these specialized items.           

COMPETITION                                                                     

 Due to its long history of strong sales and market leadership in designer
knitwear, SJKI believes that it faces limited direct competition for its core   
product offerings. In addition, SJKI believes that the risk of strong new       
competitors is further limited given its substantial investment in knitwear     
production technology and its strong relationships with its retail accounts. In 
a broader context, SJKI does compete with such successful designers as Armani,  
Calvin Klein, Chanel, Donna Karan and Escada for higher-income female customers.

EMPLOYEES                                                                       

At August 1, 1999, SJKI had approximately 4,360 full-time employees,    
including seven in executive positions, approximately 275 in design and sample  
production, 2,895 in production, 180 in quality control, 275 in retail, 110 in  
sales and advertising and the balance in clerical and office positions. In      
addition, SJKI had approximately 260 full-time employees working at SJKI's      
facility in Mexico, 40 working at St. John Home and 40 at St. John Japan. SJKI  
is not party to any labor agreements, and none of its employees is represented  
by a union. SJKI believes a significant number of its employees are highly      
skilled and that turnover among these employees has been minimal. SJKI considers
its relationship with its employees to be good and has not experienced any      
interruption of its operations due to labor disputes.                           

BACKLOG                                                                         

  Net sales for the first 39 weeks of fiscal 1999 increased by approximately
$15.6 million, or 7.6% over the first 39 weeks of fiscal 1998. As of August 1,  
1999, SJKI had unfilled customer orders of approximately $56.4 million for the  
1999 Fall season compared with approximately $63.5 million as of August 2, 1998.
Backlog decreased primarily as a result of timing issues, with earlier shipments
of fall products in 1999 compared with the corresponding 1998 period, as well as
the discontinuation of the SJK and Coat product lines.                          

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PROPERTIES                                                                      

HEADQUARTERS, ADMINISTRATIVE AND MANUFACTURING FACILITIES.  The general 
location, use and approximate size of SJKI's headquarters, administrative and   
manufacturing facilities, as well as whether they are leased or owned, are set  
forth below:                                                                    

                                                        [Enlarge/Download Table]

                                                                   APPROXIMATE AREA IN  LEASED OR
LOCATION                                       USE                     SQUARE FEET        OWNED  
--------                         --------------------------------  -------------------  ---------
                                                                                                 
Irvine, California.............. Design Facility, Showroom,              110,500        Owned    
                                 Sewing, Warehousing, Shipping                                   
Tijuana, Mexico................. Jewelry and Hardware                     63,100        Owned    
                                   Manufacturing                                                 
Van Nuys, California............ Assembling, Sewing                       27,900        Owned    
San Ysidro, California.......... Assembling                               27,300        Owned    
Irvine, California.............. Warehousing, Administrative              24,300        Owned    
                                   Offices                                                       
Irvine, California.............. Knitting                                 20,500        Owned    
Irvine, California(1)........... Knitting, Sewing, Finishing,            175,000        Leased   
                                   Shipping, Administrative                                      
                                   Offices                                                       
Irvine, California.............. Warehousing                             120,300        Leased   
Irvine, California(2)........... Corporate Headquarters,                  85,000        Leased   
                                   Showroom, Twisting, Dyeing                                    
Alhambra, California(3)......... Assembling, Sewing                       41,000        Leased   
Santa Ana, California........... Jewelry and Hardware                     23,000        Leased   
                                   Manufacturing                                                 
Irvine, California.............. Administrative Offices                   20,200        Leased   

------------------------------                                                  

(1) SJKI leases this property from a general partnership in which SJKI holds a  
50% interest.                                                           

(2) SJKI leases this property from a partnership in which the Gray Family Trust,
 a revocable living trust of which Bob and Marie Gray serve as co-trustees
and are the sole beneficiaries, has a 50% general partnership interest. 

(3) SJKI leases this property from a limited partnership in which the Gray      
Family Trust has a 65% general partnership interest.                    

SJKI believes that there are facilities available for lease in the event
that either the productive capacities of SJKI's manufacturing facilities need to
be expanded or a current lease of a manufacturing facility expires.             

   SJKI leases certain of its facilities from affiliates of SJKI. See "Certain
Relationships and Related Transactions." SJKI believes that its existing        
facilities are well maintained and in good operating condition.                 

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    RETAIL PROPERTIES.  The general location, use and approximate size of SJKI's
retail properties, all of which are leased, are set forth below:                

                                                        [Enlarge/Download Table]

                                                                           APPROXIMATE AREA IN
LOCATION                                             USE                       SQUARE FEET    
--------                             ------------------------------------  -------------------
                                                                                              
Costa Mesa, California(1)...........      Boutique, Home Furnishings              15,400      
New York, New York(2)...............               Boutique                       13,700      
Beverly Hills, California...........               Boutique                        7,000      
Chicago, Illinois...................               Boutique                        6,000      
Las Vegas, Nevada...................               Boutique                        5,600      
Palm Beach, Florida.................               Boutique                        5,200      
Munich, Germany.....................               Boutique                        4,400      
Dallas, Texas.......................               Boutique                        4,300      
Atlanta, Georgia....................               Boutique                        3,500      
Scottsdale, Arizona.................               Boutique                        3,200      
Honolulu, Hawaii....................               Boutique                        2,900      
Charlotte, North Carolina...........               Boutique                        2,800      
Boston, Massachusetts...............               Boutique                        3,900      
Palm Desert, California.............               Boutique                        2,400      
Manhasset, New York.................               Boutique                        2,400      
Denver, Colorado....................               Boutique                        2,300      
Bal Harbour, Florida................               Boutique                        2,200      
Hong Kong...........................               Boutique                          600      
Primm, Nevada.......................                Outlet                         3,200      
Queenstown, Maryland................                Outlet                         2,700      
Central Valley, New York............                Outlet                         2,600      
Milpitas, California................                Outlet                         2,200      
Sunrise, Florida....................                Outlet                         2,200      
San Antonio, Texas..................                Outlet                         2,100      
Camarillo, California...............                Outlet                         2,000      
Cabazon, California.................                Outlet                         2,000      
Philadelphia, Pennsylvania..........                Outlet                         1,400      
Scottsdale, Arizona.................           Home Furnishings                    5,400      
Primm, Nevada.......................       Home Furnishings Outlet                 4,000      
New York, New York..................               Showroom                       12,300      
Dusseldorf, Germany.................               Showroom                        2,900      
Dallas, Texas.......................               Showroom                        2,600      

------------------------------                                                  

(1) The lease includes both the St. John boutique and St. John Home store which 
were opened subsequent to the end of fiscal 1998.                       

(2) The boutique located on 5(th) Avenue in New York City is covered by two     
leases.                                                                 

As of November 1, 1998, annual base rents for SJKI's leased properties  
listed in the table above ranged from approximately $102,000 to $1.2 million. In
general, the terms of these leases provide for rent escalations dependent upon  
either increases in the lessor's operating expenses or fluctuations in the      
consumer price index in the relevant geographical area.                         

TRADEMARKS                                                                      

SJKI owns and utilizes several trademarks, principal among which are St.
John-Registered Trademark-, St. John by Marie Gray-Registered Trademark-, St.   
John Boutiques-Registered Trademark- and Griffith & Gray-Registered Trademark-. 
The St. John-Registered Trademark- trademark is registered with the United      
States Patent and Trademark Office and in several other major jurisdictions in  
the world.                                                                      

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SJKI regards its trademarks and other proprietary rights as valuable assets and 
believes that they have significant value in the marketing of its products. SJKI
vigorously protects its trademarks against infringement.                        

REGULATION                                                                      

SJKI is subject to a variety of federal, state and local laws and       
regulations including those relating to zoning, land use, environmental         
protection and workplace safety. SJKI is also subject to laws governing its     
relationship with its employees, including minimum wage requirements, overtime, 
working conditions and work permit requirements. Although SJKI believes that it 
is and has been in material compliance with all of the various regulations      
applicable to its business, SJKI cannot assure that requirements will not change
in the future or that it will not incur significant costs to comply with such   
requirements.                                                                   

LEGAL PROCEEDINGS                                                               

Securities Fraud Class Action                                                   

On October 13, 1998, Binary Traders, Inc. filed a complaint on behalf of
purchasers of publicly traded securities of St. John during the period of       
February 25, 1998 to August 20, 1998 against SJKI, Bob Gray and Kelly Gray in   
the United States District Court, Central District of California, Southern      
Division (Binary Traders, Inc. v. St. John Knits, Inc., et al.). In this action,
Binary Traders claims that the defendants violated federal securities laws by   
allegedly making fraudulent statements to cover up management's mistakes and    
certain material adverse conditions affecting SJKI's business. In addition, the 
complaint alleges that Mr. Gray traded shares of St. John's common stock while  
in possession of allegedly material non-public information. Binary Traders seeks
class action certification and an unspecified amount of compensatory damages. On
August 6, 1999, defendants filed a motion to dismiss the action. On             
September 8, 1999, at the request of the plaintiff, the court stayed all        
proceedings in this action pending the outcome of the petition for rehearing EN 
BANC in front of the Ninth Circuit Court of Appeals in IN RE SILICON GRAPHICS,  
INC. SECURITIES LITIGATION.                                                     

Litigation Regarding the Transactions                                           

   SJKI is also a party to six lawsuits that allege claims against some of St.
John's current and former directors for breach of fiduciary duty alleged to have
arisen in connection with the mergers that were part of the transactions. All of
these lawsuits were filed in the Superior Court of the State of California for  
the County of Orange. The principal relief sought in the six actions is         
certification of the putative class and a rescission of the mergers and damages 
and attorneys' fees in an unspecified amount. These six lawsuits were           
consolidated into one action on February 24, 1999.                              

On April 15, 1999, the plaintiffs in this lawsuit filed a motion for a  
preliminary injunction seeking to prevent the mergers from proceeding. The      
preliminary injunction motion was heard by the California state court on        
April 28, 1999. On April 30, 1999, the court denied the plaintiffs' motion. In  
denying the plaintiffs' request, the court ruled that the plaintiffs had not    
shown a "reasonable probability" that they could succeed in proving at trial    
that the $30.00 per share offer in the mergers is unfair. Similarly, the court  
ruled that the plaintiffs were unlikely to show that the special committee of   
St. John's board of directors that evaluated and approved the terms of the      
mergers on behalf of St. John lacked independence or failed to "shop" St. John  
adequately to other buyers.                                                     

While declining to grant the preliminary injunction, the court imposed a
constructive trust which prevents the Grays from receiving in the mergers any   
amount for their St. John shares in excess of $30.00 per share until a full     
trial on the merits is held. Prior to the determination of the final terms of   
the stock options to be granted to the Grays after the mergers, the plaintiffs  
had argued that these options represent additional consideration for the Grays' 
St. John shares. It is SJKI's belief that these                                 

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employee stock options represent incentive compensation for the Grays' services 
as officers of St. John Knits International after the mergers and are not       
additional consideration for their St. John shares.                             

The court also imposed a constructive trust preventing two of St. John's
former directors from exercising options that were repriced by the board of     
directors in September 1998 until a full trial on the merits is held. It is     
SJKI's belief that the September 1998 option repricing was not improper. The    
repricing was consistent with the repricing of options held by key employees of 
St. John, excluding the Grays.                                                  

    In imposing the constructive trusts, the court indicated that the plaintiffs
had shown "reasonable probability" that they could succeed at trial in proving  
that the former St. John directors breached their fiduciary duties with respect 
to the repricing of the director options and the alleged preferential treatment 
of the Grays to the extent that the Grays receive a higher price for their      
shares than the public shareholders in the mergers. Discovery in this case is   
now complete and the court has set a January 31, 2000 trial date.               

  On September 9, 1999, three of the plaintiffs filed another lawsuit in the
Superior Court of the State of California, County of Orange, naming SJKI, Pearl 
Acquisition Corp., Vestar/Gray Investors LLC, SJK Acquisition, Inc., Vestar     
Capital Partners III, L.P., Vestar Capital Partners and Merrill Lynch, Pierce,  
Fenner & Smith, Inc. The plaintiffs claim that each of the defendants aided and 
abetted the breach of fiduciary duties alleged in their earlier actions against 
St. John Knits, Inc., Bob Gray and Kelly Gray. Since the claims in this         
litigation are based exclusively on secondary liability and are completely      
contingent upon the success of the claims in the earlier action, on             
November 16, 1999, at the request of several defendants, the court stayed all   
proceedings in this litigation pending the outcome of the earlier action.       

    SJKI intends to contest these lawsuits vigorously if the plaintiffs elect to
proceed with their actions. SJKI expects to incur legal and other defense costs 
as a result of such proceedings. These proceedings could involve a substantial  
diversion of the time of some of the members of management, and an adverse      
determination in, or settlement of, such litigation could involve payment of    
significant amounts. SJKI believes it has sufficient insurance to cover any     
amounts for which it may be held liable pursuant to either the litigation       
regarding the transactions or the securities fraud class action. Therefore, SJKI
believes that these proceedings will not have a material adverse effect on      
SJKI's business, financial condition and results of operations.                 

Amen Wardy Home Stores Litigation                                               

   In May 1999, SJKI settled litigation relating to the Amen Wardy Home Stores
joint venture. In connection with this settlement, SJKI transferred ownership of
the Las Vegas home furnishings store and the Amen Wardy name to its former      
partner in the joint venture. SJKI also transferred certain property and agreed 
to pay certain expenses in connection with the settlement.                      

   SJKI is not a party to any other litigation which is individually or in the
aggregate material to its business.                                             

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS OF ST. JOHN KNITS INTERNATIONAL                

 The following sets forth certain information concerning the directors and
executive officers of St. John Knits International:                             

                                                        [Enlarge/Download Table]

          NAME                      POSITION WITH ST. JOHN KNITS INTERNATIONAL         AGE   
          ----                      ------------------------------------------       --------
                                                                                             
Bob Gray................ Chairman of the Board and Chief Executive Officer              73   
Kelly Gray.............. Director and President                                         33   
Marie Gray.............. Chief Designer and Secretary                                   62   
Bruce Fetter............ Executive Vice President and Chief Operating Officer           44   
Roger Ruppert........... Senior Vice President--Finance and Chief Financial Officer     56   
Karla Guyer............. Senior Vice President--Marketing                               47   
Linda Koontz............ Vice President--Sales                                          42   
Daniel O'Connell........ Director                                                       45   
James Kelley............ Director                                                       44   
Sander Levy............. Director                                                       37   

BIOGRAPHICAL INFORMATION                                                        

   Bob Gray, a co-founder of St. John, has served as Chairman of the Board and
Chief Executive Officer of the company since its inception in 1962. Prior to    
forming St. John, Mr. Gray held various sales 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 Gray and the father of Kelly Gray.                         

Kelly Gray 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 Griffith & Gray line. In addition, she has    
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 Bob Gray and Marie Gray.                                            

    Marie Gray, a co-founder of the company, has served as Chief Designer of the
company since its inception in 1962 and as 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 is the wife of Bob   
Gray and the mother of Kelly Gray.                                              

Bruce Fetter was appointed Executive Vice President and Chief Operating 
Officer in June 1999. He served as Senior Vice President and Chief Operating    
Officer of the company since November 1997. He joined the company in            
January 1997 as Vice President--Distribution and in April was appointed Senior  
Vice President--Operations. From August 1994 to December 1996 he held the       
position of Vice President--Logistics for Bob's Stores, a division of the       
Melville Corporation. Mr. Fetter graduated with a B.S. degree from the          
University of Southern California in 1976, majoring in business.                

Roger Ruppert 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. He graduated with a B.S. degree in engineering from the U.S.   
Naval                                                                           

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Academy and also received an M.B.A. from the University of California, Los      
Angeles. Mr. Ruppert is a certified public accountant.                          

  Karla Guyer has been Senior Vice President--Marketing of the company since
1993. Between August 1990 and 1993, she was Vice President/National Sales       
Manager. Ms. Guyer attended Fullerton College in California.                    

Linda Koontz was appointed Vice President--Sales of the company in      
January 1996. Previously, she served as National Sales Manager for ready-to-wear
from 1993 to 1996 and National Sales Manager for the accessory division from    
1991 to 1993. Ms. Koontz graduated with a B.A. degree in political science from 
California State University--San Bernardino and also received a J.D. from       
Western State University.                                                       

Daniel O'Connell is the Chief Executive Officer and founder of Vestar   
Capital. Mr. O'Connell is a director of Advanced Organics, Inc., Aearo          
Corporation, Cluett American Corp., Insight Communications Company, L.P.,       
Remington Products Company L.L.C., Russell-Stanley Holdings, Inc., Siegel & Gale
Holdings, Inc. and Sheridan Healthcare, Inc. Mr. O'Connell received an A.B.     
degree from Brown University and an M.B.A. degree from Yale University.         

James Kelley is a Managing Director of Vestar Capital and was a founding
partner of Vestar Capital at its inception in 1988. Mr. Kelley is a director of 
Consolidated Container Holdings, LLC, Celestial Seasonings, Inc. and            
Westinghouse Air Brake Company. Mr. Kelley received a B.S. degree from the      
University of Northern Colorado, a J.D. degree from the University of Notre Dame
and an M.B.A. degree from Yale University.                                      

Sander Levy is a Managing Director of Vestar Capital and was a founding 
partner of Vestar Capital at its inception in 1988. Mr. Levy is a director of   
Cluett American Corp. Mr. Levy received a B.S. degree from The Wharton School of
the University of Pennsylvania and an M.B.A. degree from Columbia University.   

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS                                

Directors of St. John Knits International do not receive compensation,  
except as officers or employees of the company.                                 

Summary Compensation Table                                                      

   The following table sets forth the compensation in fiscal 1998 for services
in all capacities to St. John Knits International and its subsidiaries of the   
following persons: (i) the chief executive officer of St. John during fiscal    
year 1998 and (ii) the other four most highly compensated executive officers of 
St. John:                                                                       

                                                        [Enlarge/Download Table]

                                                            ANNUAL COMPENSATION(5)          
                                                  ------------------------------------------
                                                                                 ALL OTHER  
                                                  SALARY(1)         BONUS(1)    COMPENSATION
                                                  ----------       ----------   ------------
                                                                                            
Bob Gray......................................... $1,617,132(2)    $      --       $1,383   
  Chairman and Chief Executive Officer                                                      
Marie Gray.......................................    525,985              --        1,383   
  Chief Designer                                                                            
Kelly Gray.......................................    663,432(3)           --        1,383   
  President                                                                                 
David Frankel(4).................................    258,912              --        1,383   
  Executive Vice President                                                                  
Bruce Fetter.....................................    258,130              --        1,383   
  Chief Operating Officer                                                                   

------------------------------                                                  

(1) The amounts shown in this column include amounts and awards accrued during  
fiscal 1998 that were earned but not paid in such fiscal year.          

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(2) This amount includes $500,000 of annual salary that was earned but deferred 
in fiscal 1998 pursuant to the Employment Agreement, as amended, dated  
June 1, 1995 by and between St. John and Mr. Gray.                      

(3) This amount includes modeling fees of $250,000 which were paid to Ms. Gray  
during fiscal 1998.                                                     

(4) David Frankel resigned from his employment by SJKI on February 10, 1999.    

(5) SJKI has concluded that the aggregate amount of perquisites and other       
personal benefits, securities or property paid to each of the listed    
   officers for fiscal 1998 did not exceed the lesser of 10% of such officer's
   total annual salary and bonus for such year or $50,000. Therefore, any such
amounts are not included in the table.                                  

EMPLOYMENT AGREEMENTS                                                           

   During fiscal 1995, SJKI entered into an Employment Agreement with Bob Gray
commencing, June 1, 1995 for three years. During fiscal 1998, this agreement was
amended to extend the term to May 31, 2000. SJKI also entered into new          
Employment Agreements with Marie Gray, Kelly Gray and Bruce Fetter, effective   
July 14, 1998. The new employment agreements extended through December 31, 1998 
and renew automatically at the end of each year unless terminated on thirty days
notice by either party. The agreements require each employee to devote          
substantially his or her full business time and attention and best efforts to   
the affairs of SJKI during the term of the agreements. The agreements currently 
provide for the payment of a base salary at the rate of $1,475,000 for Bob Gray,
$500,000 for Marie Gray, $420,000 for Kelly Gray and $350,000 for Bruce Fetter. 
Under Kelly Gray's employment agreement, SJKI also compensates Ms. Gray $250,000
each year for her position as the Signature Model of SJKI.                      

Prior to being amended in October 1999, Bob Gray's employment agreement 
provided for additional annual compensation of $500,000 to be deferred each year
into a grantor trust. However, in connection with the closing of the            
transactions, Bob Gray received a lump sum payment of approximately             
$2.1 million, which represented all deferred compensation owed to him under his 
employment agreement (the "Deferred Payment"). Under the terms of his employment
agreement, the deferred compensation would not otherwise be distributed to      
Mr. Gray until the earlier of (i) the termination of his employment with SJKI   
and (ii) June 1, 2000, on an installment basis, subject to the $1.0 million     
compensation limit under Section 162(m) of the Internal Revenue Code of 1986, as
amended. In connection with the payment of the Deferred Payment, Mr. Gray's     
employment agreement was amended to provide that as of August 6, 1999, no       
portion of his annual compensation from SJKI will be deferred and all provisions
of his employment agreement regarding compensation deferrals were terminated.   
Under the amended employment agreement, Mr. Gray's base compensation under his  
employment agreement was increased by $500,000 per year to approximately        
$1,475,000.                                                                     

 The employment agreements for each of Bob, Marie and Kelly Gray and Bruce
Fetter also provide for the payment of severance benefits upon the termination  
of the employee's employment. Each employment agreement provides that SJKI pay  
severance benefits in the form of compensation continuation for a period equal  
to 18 months if the employee's employment is terminated by reason of a          
disability. In cases where the employee's employment is terminated by reason of 
the employee's death, SJKI generally will provide certain health insurance      
benefits to the employee's immediate family for a period of six months.         

    Under the agreements, in cases where the employee's employment is terminated
by SJKI without cause or by the employee with good reason, such severance       
benefits would include payment to the employee (excluding Mr. Gray) 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 would
include payment to him of all base salary through May 31, 2000. For purposes of 
the employment agreements, (i) termination by SJKI "with cause" includes        
termination for dishonesty, willful misconduct, a breach of a fiduciary duty    
which involves personal profit or benefit to the employee, a willful violation  
of any law and conviction thereunder and a material breach of the employment    
agreement and (ii) termination by the employee "for good reason" includes       
termination as a result of the assignment to the employee of duties inconsistent
with the employee's position and status, a                                      

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substantial alteration in the nature, status or prestige of the employee's      
responsibilities, the relocation of SJKI's executive offices to a point more    
than 50 miles from the location of such offices as of the date of the applicable
employment agreement and a reduction in the employee's base salary.             

  Under the employment agreements, termination of employment for good reason
also means voluntary termination by the employee as a result of (i) the failure 
by SJKI to obtain from any successor, before the succession takes place, an     
agreement to assume and perform the employment agreements or (ii) an occurrence 
of a "change of control event." A "change of control event" takes place when a  
person or group of persons acquire ownership of 25% or more of the outstanding  
common stock of St. John without first obtaining the approval of St. John's then
outstanding directors. These employment agreements provide for additional       
severance benefits to the employees upon these events of voluntary termination, 
including a lump sum payment equal to two times the employee's then base salary.

Kelly Gray has been SJKI's Signature Model since 1982. Ms. Gray's       
responsibilities as Signature Model include still photography modeling for      
SJKI's Cruise/Spring and Fall clothing lines, fragrance and accessories. SJKI   
uses photographs of Ms. Gray in SJKI's print advertising for these products.    
SJKI believes the modeling arrangement with Ms. Gray contains terms no less     
favorable to SJKI than those obtainable from unaffiliated third parties.        

RETIREMENT PLAN                                                                 

SJKI 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 board of      
directors. The Retirement Plan was funded in each of fiscal years 1998, 1997 and
1996 with contributions of $500,000.                                            

STOCK OPTION PLAN                                                               

In connection with the transactions, in order to provide financial      
incentives for certain of its employees, St. John Knits International adopted a 
stock option plan which provides for the grant of options to purchase shares of 
St. John Knits International common stock.                                      

    St. John Knits International granted Bob Gray, Marie Gray and Kelly Gray, as
incentive compensation, employee stock options to acquire St. John Knits        
International common stock representing 5% of the total shares of St. John Knits
International common stock outstanding on a fully diluted basis. The exercise   
price of the options will be $30.00 per share. The options will vest and become 
exercisable in specified circumstances, including upon the continued employment 
of the Grays for a specified period of time and the achievement of specified    
performance criteria, and will have up to a 10-year term. Any unvested options  
will expire following specified terminations of the applicable individual's     
employment with SJKI. In addition, if the applicable performance criteria are   
not met, the options will not become exercisable and will terminate without     
payment therefor.                                                               

In addition, some members of senior management other than the Grays have
been and will be offered the opportunity to purchase shares of St. John Knits   
International. These members of senior management will also receive, as         
incentive compensation, employee stock options to acquire shares of St. John    
Knits International common stock. The exercise price of any options granted on  
the date of the closing of the transactions will be $30.00 per share. The       
exercise price of any options granted subsequent to the date of the closing of  
the transactions will reflect the fair market value of the underlying shares, as
determined by the board of directors of St. John Knits International in its best
judgment. The options will vest and become exercisable upon the continued       
employment of the applicable individual with SJKI for a specified period of time
and will have up to a 10-year term. Any unvested options will expire following  
specified terminations of the applicable individual's employment with SJKI. In  
addition, upon the occurrence of a change in control transaction, these options 
may                                                                             

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become fully exercisable. The board of directors of St. John Knits International
determines which members of senior management are offered the opportunity to    
purchase these shares and receive these options.                                

  The shares of St. John Knits International common stock that these members
of senior management have been and will be offered the opportunity to purchase  
and the shares of St. John Knits International common stock underlying the      
options that these members of senior management will receive as incentive       
compensation will, in the aggregate, represent approximately 5% of the          
outstanding common stock of St. John Knits International on a fully diluted     
basis.                                                                          

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SECURITIES OWNERSHIP OF CERTAIN 
BENEFICIAL OWNERS AND MANAGEMENT

    The following table sets forth information as of November 16, 1999 regarding
the beneficial ownership of St. John Knits International's common stock by:     
(i) each person who is known by SJKI to be the beneficial owner of more than 5% 
of the common stock; (ii) each of the directors of St. John Knits International;
(iii) each executive officer listed in the Summary Compensation Table above; and
(iv) all current directors and executive officers of St. John Knits             
International as a group.                                                       

                                                        [Enlarge/Download Table]

                                                               APPROXIMATE                     
                                                             NUMBER OF SHARES                  
                                                               BENEFICIALLY                    
NAME                                                              OWNED        PERCENTAGE OWNED
----                                                         ----------------  ----------------
                                                                                               
Vestar/Gray Investors LLC(1)................................    6,090,205           93.03%     
  1225 17th Street, Suite 1660                                                                 
  Denver, Colorado 80202                                                                       
Bob Gray(2).................................................      611,412            9.34%     
Marie Gray(2)...............................................      611,412            9.34%     
Kelly Gray..................................................      357,571            5.46%     
Bruce Fetter................................................        1,750            0.03%     
Daniel O'Connell(3).........................................    5,121,222           78.23%     
James Kelley(3).............................................    5,121,222           78.23%     
Sander Levy(3)..............................................    5,121,222           78.23%     
All current directors and executive officers as a group                                        
  (seven persons)...........................................    6,091,955           93.08%     

------------------------------                                                  

(1) Vestar Capital Partners III, L.P., 245 Park Avenue, New York, New York      
  10167, beneficially owns 5,121,222 shares, or approximately 78.23%, of St.
   John Knits International's common stock through its controlling interest in
Vestar/SJK Investors LLC, which owns approximately 84% of Vestar/Gray   
Investors.                                                              

(2) Includes 556,772 shares which are beneficially owned (through Vestar/Gray   
    Investors) by the Gray Family Trust, of which Robert and Marie Gray serve as
co-trustees and are the sole beneficiaries. In addition, includes 54,640
  shares which are beneficially owned (through Vestar/Gray Investors) by the
 Kelly Ann Gray Trust, of which Robert and Marie Gray serve as co-trustees
and of which Kelly Gray is the sole beneficiary.                        

(3) Includes shares beneficially owned by Vestar. Each of Mr. O'Connell,        
Mr. Kelley and Mr. Levy disclaims the existence of a group and disclaims
beneficial ownership of the common stock not held by him.               

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SJKI leases its corporate office and manufacturing facility in Irvine,  
California from GM Properties, a partnership in which the Gray Family Trust, of 
which Bob and Marie Gray serve as co-trustees and are the sole beneficiaries,   
has a 50% general partnership interest. The lease is for a five-year term       
expiring on May 30, 2001, with SJKI having the option to extend the lease for   
another five-year term at a lease amount to be agreed upon. The current base    
monthly lease payment under this lease is approximately $60,000, with annual    
increases of 4%. During fiscal years 1998, 1997 and 1996, SJKI paid GM          
Properties approximately $701,000, $621,000 and $645,000, respectively, under   
this lease.                                                                     

 SJKI leases its Alhambra, California manufacturing facility from Alhambra
Partners, a limited partnership in which the Gray Family Trust has a 65% general
partnership interest. The lease is for a five-year term expiring on August 31,  
2001, with SJKI 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 $24,000, with annual increases of 4%. During fiscal 
years 1998, 1997 and 1996, SJKI paid Alhambra Partners approximately $274,000,  
$263,000 and $321,000, respectively, under this lease.                          

SJKI periodically rents certain personal property from Ocean Air        
Charters, Inc. ("Ocean"), in which Bob Gray and Marie Gray are the sole         
shareholders. During fiscal years 1998, 1997 and 1996, SJKI paid approximately  
$21,000, $30,000 and $37,000, respectively, with respect to such property. In   
addition, St. John and Ocean each hold a 50% ownership interest in a partnership
("Partnership") which owns an airplane. As of November 1, 1998, each partner had
a net capital investment in the Partnership of approximately $854,000. During   
fiscal years 1998, 1997 and 1996, the Partnership leased the airplane to SJKI   
and received lease payments totaling approximately $868,000, $840,000 and       
$572,000, respectively. As of April 1, 1999, St. John and the Partnership       
entered into a lease agreement for the airplane expiring March 31, 2001, at a   
lease rate of $93,000 per month.                                                

 Each of the arrangements between SJKI and entities controlled by the Gray
family is, in the opinion of management, on terms no less favorable to SJKI than
those that were available from persons not affiliated with SJKI.                

CERTAIN AGREEMENTS RELATING TO THE TRANSACTIONS                                 

   Vestar Capital, St. John Knits International and St. John have entered into
a management agreement. Pursuant to the management agreement, St. John Knits    
International and St. John paid to Vestar Capital a transaction fee of          
$4.0 million at closing and reimbursed Vestar Capital for all out-of-pocket     
expenses incurred in connection with the mergers. In addition, under the        
agreement Vestar Capital will provide management services, including advisory   
and consulting services, in relation to the selection, supervision and retention
of independent auditors, outside legal counsel, investment bankers or other     
financial advisors or consultants. For these services, the management agreement 
provides that St. John Knits International and St. John will pay Vestar Capital 
an annual fee of $500,000 and will reimburse Vestar Capital for all             
out-of-pocket expenses. The management agreement will terminate if Vestar       
Capital and its partners and their respective affiliates, through Vestar/Gray   
Investors or otherwise, hold, in the aggregate, less than 50% of the St. John   
Knits International stock beneficially owned by Vestar immediately following the
closing of the transactions and cease to control a majority of St. John Knits   
International's board of directors.                                             

St. John Knits International is approximately 93% owned by Vestar/Gray  
Investors. Vestar beneficially owns approximately 84%, and the Grays            
beneficially own approximately 16%, of Vestar/ Gray Investors. The Vestar/Gray  
Investors limited liability company agreement provides, among other things, that
Vestar may appoint three of St. John Knits International's five directors and   
the Grays may appoint the remaining two directors. The right of Vestar and the  
Grays to appoint directors will be                                              

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subject to reduction to the extent the amount of St. John Knits International   
stock allocated to either is reduced.                                           

    St. John Knits International has entered into a stockholders' agreement with
stockholders of St. John Knits International, including Vestar/Gray Investors,  
Vestar and the Grays, which states, among other things, that (i) prior to a     
public offering of St. John Knits International common stock, if Bob Gray ceases
to serve as Chairman or Chief Executive Officer of St. John or St. John Knits   
International or if the employment with SJKI of Marie Gray or Kelly Gray ceases 
for any reason, then he or she will have the right to require St. John Knits    
International, or, under some circumstances, St. John, to purchase the shares of
St. John Knits International common stock beneficially owned by such employee,  
up to a maximum of $5.0 million worth of such common stock for all Gray         
employees during any 12-month period; and (ii) prior to a public offering of St.
John Knits International common stock, if any of the Grays is terminated without
"cause" or resigns for "good reason," as these terms are defined in their       
current respective employment agreements with St. John, then he or she will have
the right to require St. John Knits International, or, under some circumstances,
St. John, to purchase shares of St. John Knits International common stock       
beneficially owned by such employee, up to a maximum of 25% of the common stock 
beneficially owned by all such terminated or resigning Gray employees during any
12-month period.                                                                

    The stockholders' agreement also provides that each of the Grays, so long as
he or she is employed by SJKI and for a period of five years after he or she    
ceases to be so employed, will not, directly or indirectly, engage in the       
design, manufacturing, production, marketing, sale or distribution of women's   
clothing or accessories anywhere in the world in which SJKI is doing business,  
other than through his or her employment with SJKI. The agreement also provides 
that if Kelly Gray is terminated without "cause" or resigns for "good reason,"  
as defined under her current employment agreement, the term of the non-compete  
period will be reduced to three years, and, subject to restrictions, she will be
permitted to engage in certain otherwise competitive activities.                

   The Preferred Stock is currently held by Vestar/SJK Investors LLC, Kelly A.
Gray and The Gray Family Trust. The holders of the Preferred Stock will be      
entitled to up to five demand registration rights at the expense of SJKI.       

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DESCRIPTION OF SENIOR CREDIT FACILITIES 

 In connection with the transactions, St. John Knits International entered
into a credit agreement (the "Credit Agreement") with The Chase Manhattan Bank, 
as administrative agent (the "Agent"), and the Lenders named therein (the       
"Lenders") that provided term loans of $190.0 million and a revolving credit    
facility of up to $25.0 million. Chase Securities Inc. acted as advisor and     
arranger (the "Arranger") in connection with the senior credit facilities. The  
following is a summary description of the principal terms of the senior credit  
facilities and is subject to and qualified in its entirety by reference to the  
Credit Agreement.                                                               

STRUCTURE                                                                       

   Loans under the Credit Agreement consist of (i) the $75.0 million Term Loan
A; (ii) the $115.0 million Term Loan B; and (iii) the $25.0 million revolving   
credit facility (a portion of which will be available for letters of credit and 
in the form of swingline loans). St. John Knits International used the proceeds 
from the Term Loans to provide a portion of the funding necessary to consummate 
the acquisition merger. St. John Knits International will use the revolving     
credit facility for working capital requirements.                               

SECURITY; GUARANTY                                                              

The obligations of St. John Knits International under the senior credit 
facilities are unconditionally and irrevocably guaranteed, jointly and          
severally, by each existing and subsequently acquired or organized domestic, and
to the extent no adverse tax consequences to St. John Knits International or    
such subsidiary would result from such guarantees, each foreign subsidiary of   
St. John Knits International. In addition, the senior credit facilities and the 
guarantees thereunder are secured by substantially all of the assets of St. John
Knits International and its subsidiaries (collectively, the "Collateral"),      
including but not limited to (i) a first priority pledge of all the capital     
stock of each existing and subsequently acquired or organized subsidiary of St. 
John Knits International (which pledge, in the case of any foreign subsidiary,  
will be limited to 65% of the capital stock of such foreign subsidiary to the   
extent the pledge of any greater percentage could result in adverse tax         
consequences to St. John Knits International or such subsidiary); and (ii) a    
perfected first priority security interest in, and mortgage on, substantially   
all tangible and intangible assets of St. John Knits International and each     
existing and subsequently acquired domestic, and to the extent no adverse tax   
consequence to St. John Knits International or such subsidiary could result     
therefrom, each foreign, subsidiary of St. John Knits International (including  
but not limited to accounts receivable, documents, inventory, equipment,        
intellectual property, investment property, general intangibles, real property, 
cash and cash accounts and proceeds of the foregoing), in each case subject to  
certain limited exceptions. The Credit Agreement provides for the release of    
guarantees under certain limited circumstances.                                 

AVAILABILITY                                                                    

Amounts repaid or prepaid under the Term Loans may not be reborrowed.   
Amounts under the revolving credit facility will be available on a revolving    
basis.                                                                          

AMORTIZATION; INTEREST                                                          

Term Loan A will be repayable in quarterly principal payments over six  
years. The scheduled annual payments, in equal quarterly installments, are      
$3.0 million during the first year, $5.0 million during the second year,        
$7.0 million during the third year, $11.0 million during the fourth year,       
$22.0 million during the fifth year and $27.0 million during the sixth year.    
Term Loan A will bear interest at a rate per annum equal (at St. John Knits     
International's option) to: (i) an adjusted London interbank offered rate       
("Adjusted LIBOR") plus 3.00% or (ii) a rate equal to the highest of the Agent's

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prime rate, a certificate of deposit rate plus 1% and the Federal Funds         
effective rate plus 1/2 of 1% (the "Alternate Base Rate") plus 2.00%, in each   
case subject to certain reductions based on SJKI's financial performance. Term  
Loan B will be repayable in quarterly principal payments over eight years, with 
no payment scheduled during the first year, payments totaling $1.0 million per  
year for the second through fifth years and payments totaling $11.0 million     
during the sixth year, $40.0 million during the seventh year and $60.0 million  
during the eighth year, and will bear interest at a rate per annum equal (at    
St. John Knits International's option) to: (i) Adjusted LIBOR plus 3.50% or     
(ii) the Alternate Base Rate plus 2.50%, in each case subject to certain        
reductions based on SJKI's financial performance. The revolving credit facility 
will be a six year facility and outstanding balances thereunder will bear       
interest at a rate per annum equal (at St. John Knits International's option)   
to: (i) Adjusted LIBOR plus 3.00% or (ii) the Alternate Base Rate plus 2.00%, in
each case subject to certain reductions based on SJKI's financial performance.  
Amounts under the senior credit facilities not paid when due bear interest at a 
default rate equal to 2.00% above the otherwise applicable rate.                

PREPAYMENTS                                                                     

  The senior credit facilities permit St. John Knits International to prepay
loans and to permanently reduce revolving credit commitments, in whole or in    
part, at any time. In addition, St. John Knits International is required to make
mandatory prepayments of Term Loans, subject to certain exceptions, in amounts  
equal to (i) 75% of Excess Cash Flow (as defined in the Credit Agreement); and  
(ii) 100% of the net cash proceeds of certain dispositions of assets or         
issuances of debt or equity of St. John Knits International or any of its       
subsidiaries (in each case, subject to certain exceptions and subject to a      
reduction to zero based upon SJKI's financial performance). Mandatory and       
optional prepayments of the Term Loans will be allocated pro rata between Term  
Loan A and Term Loan B and applied ratably based on the number of remaining     
installments under each, except that, so long as Term Loan A is outstanding, the
Lenders participating in Term Loan B will have the right to refuse mandatory    
prepayments, in which case such prepayments will be applied to Term Loan A. Any 
prepayment of Adjusted LIBOR loans other than at the end of an interest period  
will be subject to reimbursement of breakage costs.                             

FEES                                                                            

   St. John Knits International is required to pay the Lenders, on a quarterly
basis, a commitment fee equal to 1/2 of 1% per annum on the undrawn portion of  
the unused commitments, subject to reductions based upon SJKI's financial       
performance. St. John Knits International is also required to pay (i) a         
commission on the face amount of all outstanding letters of credit equal to     
(A) with respect to trade letters of credit, 1.25% per annum and (B) with       
respect to all other letters of credit, the applicable margin then in effect for
Adjusted LIBOR loans under the revolving credit facility, less amounts paid     
under clause (ii) below, (ii) a fronting fee in the amount of 0.25% per annum on
each letter of credit, to the issuing bank on a quarterly basis, (iii) annual   
administration fees and (iv) agent, arrangement and other similar fees.         

COVENANTS                                                                       

The senior credit facilities contain covenants that, among other things,
restrict the ability of St. John Knits International and its subsidiaries to    
dispose of assets, incur additional indebtedness, incur guarantee obligations,  
prepay other indebtedness or amend other debt instruments, pay dividends, create
liens on assets, enter into sale and leaseback transactions, make investments,  
loans or advances, make acquisitions, engage in mergers or consolidations,      
change the business conducted by SJKI, make capital expenditures, or engage in  
certain transactions with affiliates and otherwise restrict certain corporate   
activities. In addition, under the senior credit facilities, St. John Knits     
International is                                                                

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required to comply with specified financial ratios, including minimum interest  
coverage ratios, maximum leverage ratios and minimum fixed charge coverage      
ratios.                                                                         

The senior credit facilities also contain provisions that prohibit any  
modification of the indenture in any manner adverse to the Lenders and that     
limit St. John Knits International's ability to refinance or otherwise prepay   
the notes without the consent of such Lenders.                                  

EVENTS OF DEFAULT                                                               

   The senior credit facilities contain customary events of default, including
payment defaults, breach of representations and warranties, covenant defaults,  
cross-defaults to certain other indebtedness, certain events of bankruptcy and  
insolvency, ERISA events, judgment defaults, actual or asserted invalidity of   
any security interest and change of control.                                    

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THE EXCHANGE OFFER

GENERAL                                                                         

  We are offering, upon the terms and subject to the conditions set forth in
this prospectus and in the accompanying letter of transmittal, which together   
constitute the exchange offer, to exchange up to $100.0 million aggregate       
principal amount of exchange notes for a like aggregate principal amount of     
outstanding notes properly tendered on or prior to the expiration date and not  
withdrawn as permitted by the procedures described below. We are making the     
exchange offer with respect to all of the outstanding notes.                    

    The exchange notes will be substantially identical to the outstanding notes,
except that because we have registered the exchange notes they:                 

- will be freely tradeable;                                             

- will not bear legends restricting their transfer;                     

  - will not be subject to any additional obligations regarding registration
under the Securities Act; and                                       

- will not be subject to the special interest payments described in     
"Exchange and Registration Rights."                                 

PURPOSE AND EFFECT OF THE EXCHANGE OFFER                                        

 The outstanding notes were issued on July 7, 1999 in a transaction exempt
from the registration requirements of the Securities Act. Accordingly, the      
outstanding notes may not be reoffered, resold, or otherwise transferred unless 
registered under the Securities Act or an applicable exemption from the         
registration and prospectus delivery requirements of the Securities Act is      
available.                                                                      

In connection with the issuance and sale of the outstanding notes, we   
entered into an exchange and registration rights agreement with the initial     
purchasers of the outstanding notes, in which we and our subsidiaries           
guaranteeing the outstanding notes agreed:                                      

- to use our reasonable best efforts to file with the Securities and    
Exchange Commission, within 90 days of July 7, 1999, a registration 
statement under the Securities Act relating to this exchange offer; 

   - to use our reasonable best efforts to cause the registration statement to
     become effective as soon as practicable, but no later than 150 days after
July 7, 1999; and                                                   

- to commence the exchange offer promptly after the exchange offer      
   registration statement has become effective, hold the offer open for at
   least 30 days and exchange the exchange notes for all outstanding notes
  validly tendered and not withdrawn before the expiration of the offer.

  We are making this exchange offer in order to satisfy our obligations with
respect to the exchange and registration rights agreement. A copy of the        
exchange and registration rights agreement has been filed as an exhibit to the  
registration statement of which this prospectus is a part.                      

 Other than pursuant to the exchange and registration rights agreement, we
are not required to file any registration statement to register any outstanding 
notes which remain outstanding. If you hold outstanding notes and do not tender 
your outstanding notes or your outstanding notes are tendered but not accepted, 
you will have to rely on exemptions to registration requirements under the      
securities laws, including the Securities Act, if you wish to sell your         
outstanding notes.                                                              

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    If we fail to comply with the obligations described above under the exchange
and registration rights agreement, we will be required to pay you additional    
interest. Please read the section captioned "Exchange and Registration Rights"  
for more details regarding the exchange and registration rights agreement.      

If you wish to exchange your outstanding notes for transferable exchange
notes in the exchange offer, you will be required to represent to us that, among
other things:                                                                   

- any exchange notes that you receive will be acquired in the ordinary  
course of your business;                                            

- you have no arrangement or understanding with any person or entity to 
 participate in, and do not intend to engage in, a distribution of the
exchange notes;                                                     

  - if you are a broker-dealer that will receive exchange notes for your own
 account in exchange for outstanding notes that you have acquired as a
  result of market-making or trading activities, that you will deliver a
  prospectus, as required by law, in connection with any resale of those
exchange notes;                                                     

    - you are not an affiliate, as defined in Rule 405 of the Securities Act, of
   St. John Knits International or, if you are an affiliate, that you will
    comply with applicable registration and prospectus delivery requirements
of the Securities Act; and                                          

  - if you are a person in the United Kingdom, that your ordinary activities
    involve you in acquiring, holding, managing or disposing of investments,
as principal or agent, for the purposes of your business.           

RESALE OF EXCHANGE NOTES                                                        

Based on interpretations of the staff of the Securities and Exchange    
Commission set forth in no-action letters issued to unrelated third parties, we 
believe that the exchange notes may be offered for resale, resold and otherwise 
transferred by you without compliance with the registration and prospectus      
delivery provisions of the Securities Act, if:                                  

- you are acquiring the exchange notes in the ordinary course of your   
business;                                                           

- you have not engaged in, do not intend to engage in, and have no      
arrangement or understanding with any person to participate in, a   
distribution of the exchange notes; and                             

- you are not an affiliate of St. John Knits International within the   
meaning of Rule 405 under the Securities Act.                       

See "K-III Communications Corporation," SEC No-Action Letter, available 
May 14, 1993; "Mary Kay Cosmetics, Inc.," SEC No-Action Letter, available       
June 5, 1991; "Morgan Stanley & Co., Incorporated," SEC No-Action Letter,       
available June 5, 1991; and "Exxon Capital Holdings Corporation," SEC No-Action 
Letter, available May 13, 1988.                                                 

If you do not meet these requirements:                                  

- you cannot rely on the position of the staff of the Securities and    
     Exchange Commission enunciated in "Exxon Capital Holdings Corporation" or
similar interpretive letters; and                                   

    - you must comply with the registration and prospectus delivery requirements
    of the Securities Act in connection with a secondary resale transaction,
unless an exemption to these requirements is applicable.            

This prospectus may be used for an offer to resell, resale or other     
retransfer of exchange notes only as specifically set forth in this prospectus. 
With regard to broker-dealers, only broker-dealers that acquired outstanding    
notes as a result of market-making or trading activity may participate in the   

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exchange offer. Each broker-dealer that receives exchange notes for its own     
account in exchange for outstanding notes acquired as a result of market-making 
or trading activity must acknowledge that it will deliver a prospectus in       
connection with any resale of the exchange notes. Please read the section       
captioned "Plan of Distribution" for more details regarding the transfer of     
exchange notes.                                                                 

TERMS OF THE EXCHANGE OFFER                                                     

 Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept for exchange any outstanding   
notes properly tendered and not withdrawn prior to the expiration date. We will 
issue $1,000 principal amount of exchange notes in exchange for each $1,000     
principal amount of outstanding notes surrendered under the exchange offer.     
Outstanding notes may be tendered only in integral multiples of $1,000.         

   The exchange notes will be issued under and entitled to the benefits of the
same indenture that authorized the issuance of the outstanding notes.           
Consequently, both series will be treated as a single class of debt securities  
under the indenture.                                                            

  The exchange offer is not conditioned upon any minimum aggregate principal
amount of outstanding notes being tendered for exchange.                        

    As of the date of this prospectus, $100.0 million aggregate principal amount
of the outstanding notes is outstanding. This prospectus and the letter of      
transmittal are being sent to all registered holders of outstanding notes. There
will be no fixed record date for determining those who are registered holders of
outstanding notes entitled to participate in the exchange offer.                

    We intend to conduct the exchange offer in accordance with the provisions of
the exchange and registration rights agreement, the applicable requirements of  
the Securities Act and the Exchange Act and the rules and regulations of the    
Securities and Exchange Commission. Outstanding notes that are not tendered for 
exchange will remain outstanding and continue to accrue interest and will be    
entitled to the rights and benefits relating to the outstanding notes under the 
indenture and the exchange and registration rights agreement.                   

We will be deemed to have accepted for exchange properly tendered       
outstanding notes when we have given oral or written notice of the acceptance to
the exchange agent. The exchange agent will act as your agent for the purposes  
of receiving the exchange notes from us and delivering exchange notes to you.   
Subject to the terms of the exchange and registration rights agreement, we      
expressly reserve the right to amend or terminate the exchange offer, and not to
accept for exchange any outstanding notes not previously accepted for exchange, 
upon the occurrence of any of the conditions specified below under the caption  
"--Conditions to the Exchange Offer."                                           

If you tender outstanding notes in the exchange offer, you will not be  
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of       
outstanding notes. We will pay all charges and expenses, other than specific    
applicable taxes described below, in connection with the exchange offer. It is  
important that you read the section labeled "--Fees and Expenses" below for more
details regarding fees and expenses incurred in the exchange offer.             

EXPIRATION DATE; EXTENSIONS; AMENDMENTS                                         

The exchange offer will expire at 5:00 p.m., New York City time on      
December 27, 1999, unless in our sole discretion, we extend it.                 

In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify registered holders of     
outstanding notes of the extension no later than 9:00 a.m., New York City time, 
on the business day after the previously scheduled expiration date.             

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We reserve the right, in our sole discretion:                           

- to delay accepting for exchange any outstanding notes;                

- to extend the exchange offer or to terminate the exchange offer and to
    refuse to accept outstanding notes not previously accepted if any of the
      conditions set forth below under "--Conditions to the Exchange Offer" have
not been satisfied, by giving oral or written notice of the delay,  
extension or termination to the exchange agent; or                  

    - subject to the terms of the exchange and registration rights agreement, to
amend the terms of the exchange offer in any manner.                

Any delay in acceptance, extension, termination or amendment will be    
followed as promptly as practicable by oral or written notice of the delay to   
registered holders of the outstanding notes. If we amend the exchange offer in a
manner that we determine to constitute a material change, we will promptly      
disclose the amendment in a manner reasonably calculated to inform you of the   
amendment.                                                                      

Without limiting the manner in which we may choose to make public       
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we have no obligation to publish, advertise, or otherwise   
communicate those public announcements, other than by making a timely release to
a financial news service.                                                       

CONDITIONS TO THE EXCHANGE OFFER                                                

Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any exchange notes for, any outstanding notes, 
and we may terminate the exchange offer as provided in this prospectus before   
accepting any outstanding notes for exchange if in our reasonable judgment:     

    - any action or proceeding is instituted or threatened in any court or by or
      before any governmental agency or regulatory authority, or any injunction,
      order or decree is issued with respect to the exchange offer which, in our
  sole judgment, might materially impair our ability to proceed with the
exchange offer or have a material adverse effect on the contemplated
benefits of the exchange offer to us; or                            

 - any change or any development involving a prospective change shall have
occurred or been threatened in our business, properties, assets,    
  liabilities, financial condition, operations, results of operations or
    prospects that is or may be adverse to us, or we shall have become aware
   of facts that have or may have adverse significance with respect to the
value of the outstanding notes or the exchange notes or that may    
    materially impair the contemplated benefits of the exchange offer to us;
or                                                                  

   - any law, rule or regulation or applicable interpretations of the staff of
     the Securities and Exchange Commission is issued or promulgated which, in
 our good faith determination, do not permit us to effect the exchange
offer; or                                                           

    - any governmental approval has not been obtained, which approval we, in our
sole discretion, deem necessary for the consummation of the exchange
offer; or                                                           

   - there shall have been proposed, adopted or enacted any law, statute, rule
or regulation or an amendment to any existing law, statute, rule or 
regulation which, in our sole judgment, might materially impair our 
 ability to proceed with the exchange offer or have a material adverse
effect on the contemplated benefits of the exchange offer to us; or 

  - there shall occur a change in the current interpretation by the staff of
      the Securities and Exchange Commission which permits the outstanding notes
     to be offered for resale, resold and otherwise transferred by holders who
are not affiliates of ours within the meaning of Rule 405           

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 under the Securities Act without compliance with the registration and
  prospectus delivery provisions of the Securities Act provided that the
      notes are acquired in the ordinary course of the holders' business and the
holder have no arrangement with any person to participate in the    
distribution of the outstanding notes.                              

In addition, we will not be obligated to accept for exchange your       
outstanding notes if you have not made to us:                                   

   - the representations described under "--Purpose and Effect of the Exchange
Offer," "--Procedures for Tendering" and "Plan of Distribution;" and

- those other representations as may be reasonably necessary under      
applicable Securities and Exchange Commission rules, regulations or 
interpretations to make available to us an appropriate form for     
registration of the exchange notes under the Securities Act.        

  We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any outstanding notes by giving oral or written notice of an
extension. During an extension, all outstanding notes previously tendered will  
remain subject to the exchange offer, and we may accept them for exchange. We   
will return any outstanding notes that we do not accept for exchange for any    
reason without expense as promptly as practicable after the expiration or       
termination of the exchange offer.                                              

    We expressly reserve the right to amend or terminate the exchange offer, and
to reject for exchange any outstanding notes not previously accepted for        
exchange, upon the occurrence of any of the conditions of the exchange offer    
specified above. We will give oral or written notice of any amendment or        
termination as promptly as practicable.                                         

    These conditions are for our sole benefit, and we may assert them regardless
of the circumstances that may give rise to them or waive them in whole or in    
part at any or at various times in our sole discretion if we reasonably         
determine that one or more conditions have not been satisfied. If we fail at any
time to exercise any of the rights above, this failure will not constitute a    
waiver of those rights. Each of those rights will be deemed an ongoing right    
that we may assert at any time or at various times.                             

    In addition, we will not accept for exchange any outstanding notes tendered,
and will not issue exchange notes in exchange for any outstanding notes, if any 
stop order is threatened or in effect with respect to the registration statement
of which this prospectus constitutes a part or the qualification of the         
indenture under the Trust Indenture Act of 1939.                                

PROCEDURES FOR TENDERING                                                        

  Only a registered holder of outstanding notes may tender outstanding notes
in the exchange offer. If you are a registered holder of outstanding notes, to  
tender in the exchange offer, you must:                                         

  - complete, sign and date the letter of transmittal, or a facsimile of the
  letter of transmittal; have the signature on the letter of transmittal
    guaranteed if the letter of transmittal so requires; and mail or deliver
     the letter of transmittal or facsimile to the exchange agent prior to the
expiration date; or                                                 

   - comply with The Depository Trust Company's Automated Tender Offer Program
procedures described below.                                         

In addition, with respect to delivery of the outstanding notes, either: 

- the exchange agent must receive the outstanding notes along with the  
letter of transmittal; or                                           

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    - the exchange agent must receive confirmation of book-entry transfer of the
 outstanding notes into the exchange agent's account at The Depository
      Trust Company according to the procedure for book-entry transfer described
below or a properly transmitted agent's message; or                 

  - you must comply with the guaranteed delivery procedures described below.

If you physically deliver the letter of transmittal and other required  
documents, the exchange agent must receive them at the address set forth below  
under "--Exchange Agent" prior to the expiration date.                          

  If you tender your outstanding notes and do not withdraw your tender prior
to the expiration date, your tender will constitute an agreement between you and
us in accordance with the terms and subject to the conditions set forth in this 
prospectus and in the letter of transmittal.                                    

  The method of delivery of outstanding notes, the letter of transmittal and
all other required documents to the exchange agent is at your election and risk.
Rather than mail these items, we recommend that you use an overnight or hand    
delivery service. In all cases, you should allow sufficient time to assure      
delivery to the exchange agent before the expiration date. You should not send  
the letter of transmittal or outstanding notes to us. You may request your      
broker, dealer, commercial bank, trust company or other nominee to effect the   
above transactions for you.                                                     

 If your outstanding notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender, you     
should contact that party promptly and instruct it to tender on your behalf. If 
your outstanding notes are registered in the name of a nominee and you wish to  
tender on your own behalf, you must, prior to completing and executing the      
letter of transmittal and delivering outstanding notes, either:                 

- make appropriate arrangements to register ownership of the outstanding
notes in your name; or                                              

 - obtain a properly completed bond power from the nominee. The bond power
must be signed by the nominee as its name appears on the outstanding
  notes, and an eligible institution must guarantee the signature on the
bond power.                                                         

   The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.                                      

Your signature on a letter of transmittal or a notice of withdrawal     
described below must be guaranteed by a member firm of a registered national    
securities exchange or of the National Association of Securities Dealers, Inc., 
a commercial bank or trust company having an office or correspondent in the     
United States or another eligible institution within the meaning of             
Rule 17Ad-15 under the Exchange Act, unless you:                                

- are the registered owner of the outstanding notes, and you have not   
completed the sections entitled "Special Issuance Instructions" or  
"Special Delivery Instructions" on the letter of transmittal; or    

- are an eligible institution.                                          

If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,    
officers of corporations or others acting in a fiduciary or representative      
capacity, those persons should so indicate when signing. They must also submit  
evidence satisfactory to us of their authority to deliver the letter of         
transmittal.                                                                    

   The exchange agent and The Depository Trust Company have confirmed that any
financial institution that is a participant in The Depository Trust Company's   
system may use The Depository Trust Company's Automated Tender Offer Program to 
tender. If you are a participant in the program, you may, instead of physically 
completing and signing the letter of transmittal and delivering it to the       

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exchange agent, transmit your acceptance of the exchange offer electronically.  
You may do so by causing The Depository Trust Company to transfer the           
outstanding notes to the exchange agent in accordance with its procedures for   
transfer. The Depository Trust Company will then send an agent's message to the 
exchange agent. An agent's message is a message transmitted by The Depository   
Trust Company, received by the exchange agent and forming part of the book-entry
confirmation, to the effect that:                                               

    - The Depository Trust Company has received an express acknowledgment from a
participant in its Automated Tender Offer Program that is tendering 
  outstanding notes that are the subject of the book-entry confirmation;

 - the participant has received and agrees to be bound by the terms of the
   letter of transmittal; alternatively, in the case of an agent's message
  relating to guaranteed delivery, that the participant has received and
   agrees to be bound by the applicable notice of guaranteed delivery; and

- the agreement may be enforced against the participant.                

  We will determine in our sole discretion all questions as to the validity,
form, eligibility, time of receipt, acceptance of tendered outstanding notes and
withdrawal of tendered outstanding notes. Our determination will be final and   
binding. We reserve the absolute right to reject any outstanding notes not      
properly tendered or any outstanding notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right to waive any     
defects, irregularities or conditions of tender as to particular outstanding    
notes. Our interpretation of the terms and conditions of the exchange offer,    
including the instructions in the letter of transmittal, will be final and      
binding on all parties. Unless waived, any defects or irregularities in         
connection with tenders of outstanding notes must be cured within the time that 
we shall determine. Although we intend to notify you of defects or              
irregularities with respect to tenders of outstanding notes, neither we, the    
exchange agent nor any other person will incur any liability for failure to give
that notification. Tenders of outstanding notes will not be deemed made until   
the defects or irregularities have been cured or waived. Any outstanding notes  
received by the exchange agent that are not properly tendered and as to which   
the defects or irregularities have not been cured or waived will be returned by 
the exchange agent without cost to the person that tendered, unless otherwise   
provided in the letter of transmittal, as soon as practicable following the     
expiration date.                                                                

In all cases, we will issue exchange notes for outstanding notes that we
have accepted for exchange under the exchange offer only after the exchange     
agent timely receives:                                                          

  - outstanding notes or a timely book-entry confirmation of the outstanding
    notes into the exchange agent's account at The Depository Trust Company;
and                                                                 

    - a properly completed and duly executed letter of transmittal and all other
required documents or a properly transmitted agent's message.       

TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL                               

   The letter of transmittal contains, among other things, the following terms
and conditions, which are part of the exchange offer.                           

 The party tendering outstanding notes for exchange exchanges, assigns and
transfers the outstanding notes to us and irrevocably constitutes and appoints  
the exchange agent as the transferor's agent and attorney-in-fact to cause the  
outstanding notes to be assigned, transferred and exchanged. The transferor     
represents and warrants that it has full power and authority to tender,         
exchange, assign and transfer the outstanding notes and to acquire exchange     
notes issuable upon the exchange of the tendered outstanding notes, and that,   
when the outstanding notes are accepted for exchange, we will                   

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acquire good and unencumbered title to the tendered outstanding notes, free and 
clear of all liens, restrictions, charges and encumbrances and not subject to   
any adverse claim. The transferor also warrants that it will, upon request,     
execute and deliver any additional documents deemed by the exchange agent or us 
to be necessary or desirable to complete the exchange, assignment and transfer  
of tendered outstanding notes or transfer ownership of the outstanding notes on 
the account books maintained by a book-entry transfer facility. The transferor  
further agrees that acceptance of any tendered outstanding notes by us and the  
issuance of exchange notes in exchange for outstanding notes will constitute    
performance in full by us and our subsidiaries guaranteeing the outstanding     
notes of our obligations under the exchange and registration rights agreement   
described above under "--Purpose and Effect of the Exchange Offer." All         
authority conferred by the transferor will survive the death or incapacity of   
the transferor and every obligation of the transferor shall be binding upon the 
heirs, legal representatives, successors, assigns, executors and administrators 
of the transferor.                                                              

   By agreeing to be bound by the letter of transmittal, you will represent to
us that:                                                                        

- any exchange notes that you receive will be acquired in the ordinary  
course of your business;                                            

- you have no arrangement or understanding with any person or entity to 
 participate in, and do not intend to engage in, a distribution of the
exchange notes;                                                     

  - if you are a broker-dealer that will receive exchange notes for your own
 account in exchange for outstanding notes that you have acquired as a
  result of market-making or trading activities, that you will deliver a
  prospectus, as required by law, in connection with any resale of those
exchange notes;                                                     

    - you are not an affiliate, as defined in Rule 405 of the Securities Act, of
   St. John Knits International or, if you are an affiliate, that you will
    comply with applicable registration and prospectus delivery requirements
of the Securities Act; and                                          

  - if you are a person in the United Kingdom, that your ordinary activities
    involve you in acquiring, holding, managing or disposing of investments,
as principal or agent, for the purposes of your business.           

BOOK-ENTRY TRANSFER                                                             

   The exchange agent will make a request to establish an account with respect
to the outstanding notes at The Depository Trust Company for purposes of the    
exchange offer promptly after the date of this prospectus. If you are a         
financial institution participating in The Depository Trust Company's system,   
you may make book-entry delivery of outstanding notes by causing The Depository 
Trust Company to transfer the outstanding notes into the exchange agent's       
account at The Depository Trust Company in accordance with The Depository Trust 
Company's procedures for transfer. If you are unable to deliver confirmation of 
the book-entry tender of your outstanding notes into the exchange agent's       
account at The Depository Trust Company or other documents required by the      
letter of transmittal to the exchange agent on or prior to the expiration date, 
you must tender your outstanding notes according to the guaranteed delivery     
procedures described below.                                                     

GUARANTEED DELIVERY PROCEDURES                                                  

  If you wish to tender outstanding notes but your outstanding notes are not
immediately available or you cannot deliver your outstanding notes, the letter  
of transmittal or any other required documents to the exchange agent or comply  
with the applicable procedures under The Depository Trust Company's Automated   
Tender Offer Program prior to the expiration date you may still tender your     
outstanding notes in the exchange offer if:                                     

- you make the tender through an eligible institution;                  

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- prior to the expiration date, the exchange agent receives from the    
     eligible institution either a properly completed and duly executed notice
      of guaranteed delivery by facsimile transmission, mail or hand delivery or
    a properly transmitted agent's message and notice of guaranteed delivery
setting forth your name and address, the registered number(s) of the
     outstanding notes, if applicable, and the principal amount of outstanding
     notes tendered, stating that the tender of the outstanding notes is being
    made and guaranteeing that, within three New York Stock Exchange trading
     days after the expiration date, the letter of transmittal or facsimile of
the letter of transmittal together with the outstanding notes or a  
      book-entry confirmation, and any other documents required by the letter of
transmittal, will be deposited by the eligible institution with the 
exchange agent; and                                                 

 - the exchange agent receives a properly completed and executed letter of
 transmittal or facsimile of the letter of transmittal, as well as all
  tendered outstanding notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the letter of     
    transmittal, within three New York Stock Exchange trading days after the
expiration date.                                                    

   Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to you.                                                                    

WITHDRAWAL OF TENDERS                                                           

Except as otherwise provided in this prospectus, you may withdraw your  
tender at any time prior to the expiration date.                                

For a withdrawal to be effective:                                       

- the exchange agent must receive a written notice, including telegram, 
telex, facsimile transmission or letter of withdrawal at one of the 
addresses set forth below under "--Exchange Agent", or              

 - you must comply with the appropriate procedures of The Depository Trust
Company's Automated Tender Offer Program system.                    

A notice of withdrawal must:                                            

 - specify the name of the person who tendered the outstanding notes to be
withdrawn;                                                          

 - identify the outstanding notes to be withdrawn, including the principal
amount of the outstanding notes; and                                

 - where certificates for outstanding notes have been transmitted, specify
the name in which the outstanding notes were registered.            

If certificates for outstanding notes have been delivered or otherwise  
identified to the exchange agent, then, prior to the release of those           
certificates, you must also submit:                                             

- the serial numbers of the particular certificates to be withdrawn; and

 - a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless you are an eligible institution.                 

If you have tendered outstanding notes pursuant to the procedure for    
book-entry transfer described above, any notice of withdrawal must specify the  
name and number of the account at The Depository Trust Company to be credited   
with the withdrawn outstanding notes and otherwise comply with the procedures of
the facility. We will determine all questions as to the validity, form and      
eligibility, including time of receipt of the notices of withdrawal, and our    
determination shall be final and binding on all parties. We will deem any       
outstanding notes properly withdrawn not to have been validity tendered for     
exchange for purposes of the exchange offer. We will return any outstanding     
notes that you have tendered for exchange but that are not exchanged for any    
reason to you without cost as                                                   

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soon as practicable after withdrawal, rejection of tender or termination of the 
exchange offer. In the case of outstanding notes being tendered by book-entry   
transfer into the exchange agent's account at The Depository Trust Company      
according to the procedures described above, these outstanding notes will be    
credited to an account maintained with The Depository Trust Company for         
outstanding notes as soon as practicable after withdrawal, rejection of tender  
or termination of the exchange offer. Properly withdrawn outstanding notes may  
be re-tendered at any time on or prior to the expiration date.                  

EXCHANGE AGENT                                                                  

  The Bank of New York has been appointed as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for    
additional copies of this prospectus or of the letter of transmittal and        
requests for the notice of guaranteed delivery to the exchange agent addressed  
as follows:                                                                     

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FOR DELIVERY BY REGISTERED OR CERTIFIED MAIL:  FOR OVERNIGHT DELIVERY ONLY OR BY HAND:

            The Bank of New York                        The Bank of New York          
             101 Barclay Street                          101 Barclay Street           
          New York, New York 10286                    New York, New York 10286        
          Attn: Reorganization Unit                   Attn: Reorganization Unit       

BY FACSIMILE TRANSMISSION (FOR ELIGIBLE INSTITUTIONS ONLY): 
The Bank of New York
(212) 815-6339
Attn: Reorganization Unit 

FEES AND EXPENSES                                                               

   We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitation by          
telegraph, telephone or in person by our officers and regular employees and     
those of our affiliates.                                                        

We have not retained any dealer-manager in connection with the exchange 
offer and will not make any payments to broker-dealers or others soliciting     
acceptances of the exchange offer. We will, however, pay the exchange agent     
reasonable and customary fees for its services and reimburse it for its related 
reasonable out-of-pocket expenses.                                              

    We will pay the cash expenses to be incurred in connection with the exchange
offer. The expenses are estimated in the aggregate to be approximately $330,000.
They include:                                                                   

- registration fees of the Securities and Exchange Commission;          

- fees and expenses of the exchange agent and trustee;                  

- accounting and legal fees and printing costs; and                     

- related fees and expenses.                                            

We will pay all transfer taxes, if any, applicable to the exchange of   
outstanding notes under the exchange offer. If you tender outstanding notes,    
however, you will be required to pay any transfer taxes whether imposed on the  
registered holder of the outstanding notes, or any other person if:             

- certificates representing outstanding notes for principal amounts not 
  tendered or accepted for exchange are to be delivered to, or are to be
 issued in the name of, any person other than the registered holder of
outstanding notes tendered;                                         

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   - tendered outstanding notes are registered in the name of any person other
than the person signing the letter of transmittal; or               

- a transfer tax is imposed for any reason other than the exchange of   
   outstanding notes under the exchange offer. If satisfactory evidence of
     payment of the taxes is not submitted with the letter of transmittal, the
amount of the transfer taxes will be billed to the person tendering.

CONSEQUENCES OF FAILURE TO EXCHANGE                                             

    If you do not exchange outstanding notes, they may be more difficult to sell
because they will continue to be subject to transfer restrictions and may suffer
from reduced liquidity.                                                         

If you do not exchange your outstanding notes for exchange notes, your  
outstanding notes will continue to be subject to restrictions on transfer. In   
general, outstanding notes may not be offered or sold unless registered under   
the Securities Act, except pursuant to an exemption from, or in a transaction   
not subject to, the Securities Act and applicable state securities laws. We do  
not currently anticipate that we will register the outstanding notes under the  
Securities Act. In addition, the tender of outstanding notes in the exchange    
offer will reduce the principal amount of the outstanding notes outstanding,    
which may have an adverse effect upon, and increase the volatility of, the      
market price of the outstanding notes due to a reduction in liquidity.          

ACCOUNTING TREATMENT                                                            

We will record the exchange notes in our accounting records at the same 
carrying value as the outstanding notes as reflected in our accounting records  
on the date of exchange. Accordingly, we will not recognize any gain or loss for
accounting purposes in connection with the exchange offer. We will capitalize   
the expenses of the exchange offer and amortize them over the life of the       
related debt.                                                                   

OTHER                                                                           

  Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax     
advisors in making your own decision on what action to take.                    

 We may in the future seek to acquire untendered outstanding notes in open
market or privately negotiated transactions, through subsequent exchange offers 
or otherwise. We have no present plans to acquire any outstanding notes that are
not tendered in the exchange offer or to file a registration statement to permit
resales of any untendered outstanding notes.                                    

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DESCRIPTION OF THE NOTES

The outstanding notes were issued and the exchange notes will be issued 
under an indenture dated as of July 7, 1999 among St. John Knits International, 
the guarantors and The Bank of New York, as trustee (the "Trustee"), a copy of  
which has been filed as an exhibit to the registration statement of which this  
prospectus is a part. Upon the issuance of the exchange notes, the indenture    
will be subject to and governed by the Trust Indenture Act of 1939. The         
following summary of certain provisions of the indenture and the notes does not 
purport to be complete and is subject to, and is qualified in its entirety by   
reference to, the Trust Indenture Act, and to all of the provisions of the      
indenture, including the definitions of certain terms therein and those terms   
made a part of the indenture by reference to the Trust Indenture Act, as in     
effect on the date of the indenture. The definitions of certain capitalized     
terms used in the following summary are set forth below under "--Certain        
Definitions." References in this "Description of the Notes" section to "St. John
Knits International" mean only St. John Knits International and not any of its  
Subsidiaries, and references to the notes refer to both the exchange notes and  
the outstanding notes.                                                          

GENERAL                                                                         

The outstanding notes were and the exchange notes will be issued only in
registered form, without coupons, in denominations of $1,000 and integral       
multiples of $1,000. St. John Knits International will appoint the Trustee to   
serve as registrar and paying agent under the indenture. No service charge will 
be made for any registration of transfer or exchange of the notes, except for   
any tax or other governmental charge that may be imposed in connection          
therewith.                                                                      

RANKING                                                                         

   The outstanding notes are and the exchange notes will be unsecured and will
rank junior to, and be subordinated in right of payment to, all existing and    
future Senior Indebtedness of St. John Knits International, PARI PASSU in right 
of payment with all Senior Subordinated Indebtedness of St. John Knits          
International and senior in right of payment to all Subordinated Indebtedness of
St. John Knits International. At August 1, 1999, St. John Knits International   
had approximately $190.0 million of Senior Indebtedness outstanding (exclusive  
of undrawn commitments of $25.0 million). All debt incurred under the Credit    
Facility will be Senior Indebtedness of St. John Knits International, is        
guaranteed by each of the Guarantors on a senior basis and will be secured by   
substantially all of the assets of St. John Knits International and such        
Guarantors.                                                                     

MATURITY, INTEREST AND PRINCIPAL OF THE NOTES                                   

  The notes will be limited to $100.0 million aggregate principal amount and
will mature on July 1, 2009. Cash interest on the notes will accrue at a rate of
12 1/2% per annum and will be payable semi-annually in arrears on each          
January 1 and July 1 commencing January 1, 2000, to the holders of record of    
notes at the close of business on December 15 and June 15, respectively,        
immediately preceding such interest payment date. Cash interest will accrue from
the most recent interest payment date to which interest has been paid or, if no 
interest has been paid, from July 7, 1999. Interest will be computed on the     
basis of a 360-day year of twelve 30-day months.                                

OPTIONAL REDEMPTION                                                             

   The notes will be redeemable at the option of St. John Knits International,
in whole or in part, at any time on or after July 1, 2004, at the redemption    
prices (expressed as a percentage of principal amount) set forth below, plus    
accrued and unpaid interest thereon, if any, to the redemption date (subject to 
the right of Holders of record on the relevant record date to receive interest  
due on the                                                                      

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relevant interest payment date), if redeemed during the 12-month period         
beginning on July 1 of the years indicated below:                               

                                                                [Download Table]

                                                              REDEMPTION
YEAR                                                            PRICE   
----                                                          ----------
                                                                        
2004........................................................    106.250%
2005........................................................    104.688%
2006........................................................    103.125%
2007........................................................    101.563%
2008 and thereafter.........................................    100.000%

   In addition, at any time and from time to time on or prior to July 1, 2002,
St. John Knits International may redeem in the aggregate up to 35% of the       
originally issued aggregate principal amount of the notes with the net cash     
proceeds of one or more Public Equity Offerings by St. John Knits International 
at a redemption price in cash equal to 112.5% of the principal amount thereof,  
plus accrued and unpaid interest thereon, if any, to the date of redemption     
(subject to the right of Holders of record on the relevant record date to       
receive interest due on the relevant interest payment date); PROVIDED, HOWEVER, 
that at least 65% of the originally issued aggregate principal amount of the    
notes must remain outstanding immediately after giving effect to each such      
redemption (excluding any notes held by St. John Knits International or any of  
its Affiliates). Notice of any such redemption must be given within 60 days     
after the date of the closing of the relevant Public Equity Offering of St. John
Knits International.                                                            

SELECTION AND NOTICE OF REDEMPTION                                              

   In the event that less than all of the notes are to be redeemed at any time
pursuant to an optional redemption, selection of such notes for redemption will 
be made by the Trustee in compliance with the requirements of the principal     
national securities exchange, if any, on which the notes are listed or, if the  
notes are not then listed on a national securities exchange, on a PRO RATA      
basis, by lot or by such method as the Trustee shall deem fair and appropriate  
(and in such manner as complies with applicable legal requirements); PROVIDED,  
HOWEVER, that no notes of a principal amount of $1,000 or less shall be redeemed
in part; PROVIDED, FURTHER, HOWEVER, that if a partial redemption is made with  
the net cash proceeds of a Public Equity Offering by St. John Knits             
International, selection of the notes or portions thereof for redemption shall  
be made by the Trustee only on a PRO RATA basis or on as nearly a PRO RATA basis
as is practicable (subject to the procedures of The Depository Trust Company),  
unless such method is otherwise prohibited. Notice of redemption shall be mailed
by first-class mail at least 30 but not more than 60 days before the redemption 
date to each Holder of notes to be redeemed at its registered address. If any   
note is to be redeemed in part only, the notice of redemption that relates to   
such note shall state the portion of the principal amount thereof to be         
redeemed. A new note in a principal amount equal to the unredeemed portion      
thereof will be issued in the name of the Holder thereof upon cancellation of   
the original note. On and after the redemption date, interest will cease to     
accrue on notes or portions thereof called for redemption as long as St. John   
Knits International has deposited with the paying agent for the notes funds in  
satisfaction of the applicable redemption price pursuant to the indenture.      

SUBORDINATION OF THE NOTES                                                      

   The payment of the principal of, premium, if any, and interest on the notes
is subordinated in right of payment, to the extent and in the manner provided in
the indenture, to the prior payment in full in cash of all Senior Indebtedness. 

  Upon any payment or distribution of assets or securities of St. John Knits
International of any kind or character, whether in cash, property or securities 
(excluding any payment or distribution of                                       

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Permitted Junior Securities and excluding any payment from the trust described  
under "--Satisfaction and Discharge of Indenture; Defeasance" (a "Defeasance    
Trust Payment")), upon any dissolution or winding-up or liquidation or          
reorganization of St. John Knits International or assignment for the benefit of 
creditors of St. John Knits International or similar proceeding, whether        
voluntary or involuntary or in bankruptcy, insolvency, receivership or other    
proceedings, all Senior Indebtedness shall first be paid in full in cash before 
the Holders of the notes or the Trustee on behalf of such Holders shall be      
entitled to receive any payment by or on behalf of St. John Knits International 
of the principal of, premium, if any, or interest on the notes, or any payment  
by or on behalf of St. John Knits International to acquire any of the notes for 
cash, property or securities, or any distribution by St. John Knits             
International with respect to the notes of any cash, property or securities     
(excluding any payment or distribution of Permitted Junior Securities and       
excluding any Defeasance Trust Payment). Before any such payment or distribution
may be made by, or on behalf of, St. John Knits International in respect of the 
principal of, premium, if any, or interest on the notes upon any such           
dissolution or winding-up or liquidation or reorganization of St. John Knits    
International or assignment for the benefit of creditors of St. John Knits      
International or similar proceeding, whether voluntary or involuntary or in     
bankruptcy, insolvency, receivership or other proceedings, any payment or       
distribution of assets or securities of St. John Knits International of any kind
or character, whether in cash, property or securities (excluding any payment or 
distribution of Permitted Junior Securities and excluding any Defeasance Trust  
Payment), to which the Holders of the notes or the Trustee on their behalf would
be entitled, but for the subordination provisions of the indenture, shall be    
made by St. John Knits International or by any receiver, trustee in bankruptcy, 
liquidation trustee, agent or other Person making such payment or distribution, 
directly to the holders of the Senior Indebtedness (PRO RATA to such holders on 
the basis of the respective amounts of Senior Indebtedness held by such holders)
or their representatives or to the trustee or trustees or agent or agents under 
any agreement or indenture pursuant to which any of such Senior Indebtedness may
have been issued, as their respective interests may appear, to the extent       
necessary to pay all such Senior Indebtedness in full in cash after giving      
effect to any prior or concurrent payment, distribution or provision therefor to
or for the holders of such Senior Indebtedness.                                 

No direct or indirect payment of any kind or character (excluding any   
payment or distribution of Permitted Junior Securities and excluding any        
Defeasance Trust Payment) by or on behalf of St. John Knits International in    
respect of principal of, premium, if any, or interest on the notes or to acquire
any of the notes, whether pursuant to the terms of the notes, upon acceleration,
pursuant to an Offer to Purchase or otherwise, will be made if, at the time of  
such payment, there exists a default in the payment of all or any portion of the
obligations in respect of any Designated Senior Indebtedness, whether at        
maturity, on account of mandatory redemption or prepayment, acceleration or     
otherwise, and such default shall not have been cured or waived or the benefits 
of this sentence waived by or on behalf of the requisite number of holders of   
such Designated Senior Indebtedness. In addition, if any non-payment event of   
default occurs with respect to any Designated Senior Indebtedness pursuant to   
which the maturity thereof may be immediately accelerated, then upon and after  
receipt by the Trustee of written notice (a "Payment Blockage Notice") from the 
holder or holders of such Designated Senior Indebtedness or the trustee or agent
acting on behalf of the holders of such Designated Senior Indebtedness, unless  
and until all such events of default have been cured or waived or have ceased to
exist or such Designated Senior Indebtedness has been discharged or repaid in   
full in cash or the benefits of these provisions have been waived by the        
requisite number of holders of such Designated Senior Indebtedness, no direct or
indirect payment of any kind or character (excluding any payment or distribution
of Permitted Junior Securities and excluding any Defeasance Trust Payment) will 
be made by or on behalf of St. John Knits International in respect of principal 
of, premium, if any, or interest on the notes or to acquire any of the notes,   
upon acceleration, pursuant to an Offer to Purchase or otherwise to such        
Holders, during a period (a "Payment Blockage Period") commencing on the date of
receipt of such Payment Blockage Notice by the Trustee and ending 179 days      
thereafter.                                                                     

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Notwithstanding anything in the subordination provisions of the indenture or the
notes to the contrary, (x) in no event will a Payment Blockage Period extend    
beyond 179 days from the date the Payment Blockage Notice in respect thereof was
given, (y) there shall be a period of at least 181 consecutive days in each     
360-day period when no Payment Blockage Period is in effect and (z) not more    
than one Payment Blockage Period may be commenced with respect to the notes     
during any period of 360 consecutive days. No event of default that existed or  
was continuing on the date of commencement of any Payment Blockage Period with  
respect to the Designated Senior Indebtedness initiating such Payment Blockage  
Period (to the extent the holder of Designated Senior Indebtedness, or trustee  
or agent, giving notice commencing such Payment Blockage Period had knowledge of
such existing or continuing event of default) may be, or be made, the basis for 
the commencement of any other Payment Blockage Period by the holder or holders  
of such Designated Senior Indebtedness or the trustee or agent acting on behalf 
of such Designated Senior Indebtedness, whether or not within a period of 360   
consecutive days, unless such event of default has been cured or waived for a   
period of not less than 90 consecutive days (it being understood that a         
subsequent act or event that constitutes a breach of a covenant or other        
provision, including breach of a financial covenant with respect to a subsequent
period, shall be considered a separate event of default from a previous act or  
event that constitutes a breach of the same covenant or other provision for this
purpose).                                                                       

   If any payment or distribution is made to the Trustee or any of the Holders
that should not have been made in accordance with the foregoing subordination   
provisions, such payment or distribution shall be held in trust for, and paid or
delivered to, the holders of Senior Indebtedness or their representatives or to 
the trustee or trustees or agent or agents therefor, as their respective        
interests may appear.                                                           

The failure to make any payment or distribution for or on account of the
notes by reason of the provisions of the indenture described under this         
"--Subordination of the Notes" heading will not be construed as preventing the  
occurrence of any Event of Default in respect of the notes. See "--Events of    
Default" below.                                                                 

  By reason of the subordination provisions described above, in the event of
insolvency of St. John Knits International, funds which would otherwise be      
payable to Holders of the notes will be paid to the holders of Senior           
Indebtedness to the extent necessary to pay the Senior Indebtedness in full in  
cash, and St. John Knits International may be unable to meet fully its          
obligations with respect to the notes.                                          

 At the time of the issuance of the exchange notes, the Credit Facility is
expected to be the only outstanding Senior Indebtedness. Subject to the         
restrictions set forth in the indenture, in the future St. John Knits           
International may issue additional Senior Indebtedness.                         

GUARANTEES OF THE NOTES                                                         

The indenture provides that each of the Guarantors will unconditionally 
guarantee on a joint and several basis (the "Guarantees") all of St. John Knits 
International's obligations under the notes, including its obligations to pay   
principal, premium, if any, and interest with respect to the notes. The         
Guarantees will be general unsecured obligations of the Guarantors. The         
obligations of each Guarantor under its Guarantee will be subordinated and      
junior in right of payment to the prior payment in full of all existing and     
future Guarantor Senior Indebtedness of such Guarantor to substantially the same
extent as the notes are subordinated to all existing and future Senior          
Indebtedness of St. John Knits International. Payments and distributions under  
or in respect of the Guarantees will not be permitted when payment and          
distributions by St. John Knits International under the notes are not permitted 
by reason of the subordination provisions described above. The Guarantors will  
also be guaranteeing all obligations of St. John Knits International under the  
Credit Facility, and each Guarantor will be granting a security interest in all 
or substantially all of its assets to secure the obligations under the Credit   
Facility. The obligations of each Guarantor are limited to the maximum amount   
which, after                                                                    

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giving effect to all other contingent and fixed liabilities of such Guarantor   
(including any Guarantor Senior Indebtedness Incurred after the Issue Date) and 
after giving effect to any collections from or payments made by or on behalf of 
any other Guarantor in respect of the obligations of such other Guarantor under 
its Guarantee or pursuant to its contribution obligations under the indenture,  
will result in the obligations of such Guarantor under its Guarantee not        
constituting a fraudulent conveyance or fraudulent transfer under Federal or    
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a PRO RATA     
amount, based on the net assets of each Guarantor determined in accordance with 
GAAP.                                                                           

At August 1, 1999, outstanding Guarantor Senior Indebtedness was        
approximately $190.0 million, all of which was outstanding under the Credit     
Facility; and the Guarantors had no Guarantor Senior Subordinated Indebtedness  
other than the Guarantees.                                                      

    St. John Knits International shall cause each Domestic Restricted Subsidiary
issuing a Guarantee after the Issue Date to execute and deliver to the Trustee a
supplemental indenture in form reasonably satisfactory to the Trustee pursuant  
to which such Domestic Restricted Subsidiary shall become a party to the        
indenture and thereby unconditionally guarantee all of St. John Knits           
International's Obligations under the notes and the indenture on the terms set  
forth therein. Thereafter, such Domestic Restricted Subsidiary shall (unless    
released in accordance with the terms of this indenture) be a Guarantor for all 
purposes of the indenture.                                                      

The indenture provides that if the notes thereunder are defeased in     
accordance with the terms of the indenture, or if all or substantially all of   
the assets of any Guarantor or all of the Equity Interests of any Guarantor are 
sold (including by consolidation, merger, issuance or otherwise) by St. John    
Knits International (or pursuant to an exercise of remedies, or transfer in lieu
thereof, on behalf of any holder or holders of a Lien securing Senior           
Indebtedness), and if (x) the Net Cash Proceeds from such Asset Sale are used in
accordance with the covenant described under "--Certain Covenants--Disposition  
of Proceeds of Asset Sales" or (y) St. John Knits International delivers to the 
Trustee an officers' certificate to the effect that the Net Cash Proceeds from  
such Asset Sale shall be used in accordance with the covenant described under   
"--Certain Covenants--Disposition of Proceeds of Asset Sales" and within the    
time limits specified by such covenant, then such Guarantor (in the event of a  
sale or other disposition of all of the Equity Interests of such Guarantor) or  
the corporation acquiring such assets (in the event of a sale or other          
disposition of all or substantially all of the assets of such Guarantor) shall  
be released and discharged of its Guarantee obligations in respect of the       
indenture and the notes PROVIDED, HOWEVER, that a sale of a Guarantor (other    
than by way of a sale or disposition pursuant to an exercise of remedies, or    
transfer in lieu thereof, on behalf of any holder or holders of a Lien securing 
Senior Indebtedness) will still be subject to St. John Knits International's    
obligations under the first paragraph under "--Certain Covenants--Merger, Sale  
of Assets, etc.".                                                               

   Any Guarantor that is designated an Unrestricted Subsidiary pursuant to and
in accordance with "--Certain Covenants--Designation of Unrestricted            
Subsidiaries" below shall upon such Designation be released and discharged of   
its Guarantee obligations in respect of the indenture and the notes and any     
Unrestricted Subsidiary whose Designation is revoked pursuant to "--Certain     
Covenants--Designation of Unrestricted Subsidiaries" below will be required to  
become a Guarantor in accordance with the procedure described in the third      
preceding paragraph.                                                            

OFFER TO PURCHASE UPON CHANGE OF CONTROL                                        

    Following the occurrence of a Change of Control (the date of such occurrence
being the "Change of Control Date"), St. John Knits International shall notify  
the Holders of the notes of such occurrence in the manner prescribed by the     
indenture and shall, within 45 days after the Change of Control Date, make an   
Offer to Purchase all notes then outstanding at a purchase price in cash equal  
to 101% of the aggregate principal amount thereof, plus accrued and unpaid      
interest thereon, if any, to the Purchase                                       

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Date (subject to the right of Holders of record on the relevant record date to  
receive interest due on the relevant interest payment date).                    

St. John Knits International will not be required to make an Offer to   
Purchase upon a Change of Control if a third party makes the Offer to Purchase  
in the manner, at the times and otherwise in compliance with the requirements   
set forth in the indenture applicable to an Offer to Purchase made by St. John  
Knits International and purchases all notes validly tendered and not withdrawn  
under such Offer to Purchase.                                                   

 St. John Knits International's ability to repurchase notes pursuant to an
Offer to Purchase may be limited by a number of factors. The occurrence of      
certain of the events that constitute a Change of Control could constitute a    
default under the Credit Facility. In addition, certain events that may         
constitute a change of control under the Credit Facility and cause a default may
not constitute a Change of Control under the indenture. Future Indebtedness of  
St. John Knits International and its Subsidiaries may also contain prohibitions 
of certain events that would constitute a Change of Control or require such     
Indebtedness to be repurchased upon a Change of Control. Moreover, the exercise 
by the Holders of their right to require St. John Knits International to        
repurchase the notes could cause a default under such Indebtedness, even if the 
Change of Control itself does not, due to the financial effect of such          
repurchase on St. John Knits International. Finally, St. John Knits             
International's ability to pay cash to the Holders upon a repurchase may be     
limited by St. John Knits International's then existing financial resources.    
There can be no assurance that sufficient funds will be available when necessary
to make any required repurchases.                                               

  Even if sufficient funds were otherwise available, the terms of the Credit
Facility will (and other Indebtedness may) prohibit St. John Knits              
International's repurchase of notes. Consequently, if St. John Knits            
International is not able to prepay the Credit Facility and any such other      
Indebtedness containing similar restrictions or obtain requisite consents, St.  
John Knits International will be unable to fulfill its repurchase obligations if
Holders of notes exercise their repurchase rights following a Change of Control,
thereby resulting in a default under the indenture. A default under the         
indenture may result in a cross-default under the Credit Facility. In the event 
of a default under the Credit Facility, the subordination provisions of the     
indenture would likely restrict payments to the Holders of the notes.           

If a Change of Control occurs which also constitutes an event of default
under the Credit Facility, the lenders under the Credit Facility would be       
entitled to exercise the remedies available to a secured lender under applicable
law and pursuant to the terms of the Credit Facility. Accordingly, any claims of
such lenders with respect to the assets of St. John Knits International will be 
prior to any claim of the Holders of the notes to the extent of the value of    
such assets.                                                                    

   The Change of Control provisions described above may deter certain mergers,
tender offers and other takeover attempts involving St. John Knits International
by increasing the capital required to effectuate such transactions. The         
definition of "Change of Control" includes a disposition of all or substantially
all of the property and assets of St. John Knits International and its          
Subsidiaries taken as a whole to any Person other than St. John Knits           
International or any Wholly Owned Restricted Subsidiary. Although there is a    
limited body of case law interpreting the phrase "substantially all," there is  
no precise established definition of the phrase under applicable law.           
Accordingly, in certain circumstances there may be a degree of uncertainty as to
whether a particular transaction would involve a disposition of "all or         
substantially all" of the property or assets of a Person. As a result, it may be
unclear as to whether a Change of Control has occurred and whether a Holder of  
notes may require St. John Knits International to make an offer to repurchase   
the notes as described above.                                                   

  If St. John Knits International makes an Offer to Purchase, St. John Knits
International shall comply with all applicable securities laws and regulations, 
and any violation of the provisions of the indenture relating to such Offer to  
Purchase occurring as a result of such compliance shall not be                  

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deemed an Event of Default or an event that, with the passing of time or giving 
of notice, or both, would constitute an Event of Default.                       

    Except as described above with respect to a Change of Control, the indenture
does not contain provisions that permit the Holders of the notes to require that
St. John Knits International repurchase or redeem the notes in the event of a   
takeover, recapitalization or similar transaction.                              

CERTAIN COVENANTS                                                               

LIMITATION ON INDEBTEDNESS.  St. John Knits International shall not, and
shall not cause or permit any Restricted Subsidiary to, directly or indirectly, 
Incur any Indebtedness (including Acquired Indebtedness), except for Permitted  
Indebtedness; PROVIDED, HOWEVER, that St. John Knits International and any      
Restricted Subsidiary may Incur Indebtedness if, at the time of and immediately 
after giving pro forma effect to such Incurrence of Indebtedness and the        
application of the proceeds therefrom, the Consolidated Coverage Ratio would be 
at least 2.0 to 1.0 prior to the second anniversary of the Issue Date; 2.25 to  
1.0 on or after the second anniversary of the Issue Date but prior to the fourth
anniversary of the Issue Date; and 2.5 to 1.0 on or after the fourth anniversary
of the Issue Date.                                                              

    The foregoing limitations will not apply to the Incurrence by St. John Knits
International or any Restricted Subsidiary of any of the following              
(collectively, "Permitted Indebtedness"), each of which shall be given          
independent effect:                                                             

      (a) Indebtedness under the notes and other Indebtedness outstanding on
the Issue Date;                                                         

  (b) Indebtedness of St. John Knits International and any Guarantor
  Incurred pursuant to the Credit Facility if at the time of and immediately
after giving effect thereto, the aggregate consolidated Indebtedness    
 Incurred under the Credit Facility would not exceed $215.0 million at any
  one time outstanding; PROVIDED, HOWEVER, that such $215.0 million shall be
reduced by the sum of (i) the amount of any repayments or prepayments of
  Indebtedness (that are accompanied by a corresponding permanent commitment
reduction) under the Credit Facility and (ii) the outstanding principal 
amount of Indebtedness and preferred stock of a Receivables Entity      
 (excluding the net proceeds of such Indebtedness and preferred stock that
are applied to the repayment or prepayment of Indebtedness described in 
clause (i));                                                            

    (c) Indebtedness of any Guarantor owed to and held by St. John Knits
International or any Guarantor and other Indebtedness of St. John Knits 
International owed to and held by any Guarantor which is unsecured and  
   subordinated in right of payment to the payment and performance of St. John
Knits International's obligations under any Senior Indebtedness, the    
   indenture and the notes and Indebtedness of a Foreign Restricted Subsidiary
that is not a Guarantor owed to and held by any other Foreign Restricted
    Subsidiary that is not a Guarantor; PROVIDED, HOWEVER, that an Incurrence of
Indebtedness that is not permitted by this clause (c) shall be deemed to
   have occurred upon (i) any sale or other disposition of any Indebtedness of
St. John Knits International or any Restricted Subsidiary referred to in
 this clause (c) to a Person (other than St. John Knits International or a
 Guarantor), (ii) any sale or other disposition of Equity Interests of any
Guarantor which holds Indebtedness of St. John Knits International or   
another Restricted Subsidiary such that such Guarantor ceases to be a   
Guarantor and (iii) the designation of a Restricted Subsidiary that is a
 Guarantor and which holds Indebtedness of St. John Knits International or
any other Restricted Subsidiary as an Unrestricted Subsidiary;          

     (d) the Guarantees and guarantees by any Guarantor of Indebtedness of
  St. John Knits International; PROVIDED, HOWEVER, that if such guarantee is
   of Subordinated Indebtedness, then the Guarantee of such Guarantor shall be
senior to such Guarantor's guarantee of Subordinated Indebtedness;      

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(e) Hedging Obligations of St. John Knits International or any  
 Restricted Subsidiary entered into in the ordinary course of business and
not for speculative purposes;                                           

(f) Purchase Money Indebtedness (and refinancings thereof) and  
    Capitalized Lease Obligations (and refinancings thereof) which do not exceed
$7.0 million in the aggregate at any one time outstanding;              

   (g) Indebtedness to the extent representing a replacement, renewal,
refinancing or extension (collectively, a "refinancing") of outstanding 
   Indebtedness Incurred in compliance with the Consolidated Coverage Ratio of
    the first paragraph of this covenant or clause (a) of this paragraph of this
   covenant; PROVIDED, HOWEVER, that (i) any such refinancing shall not exceed
the sum of the principal amount (or accreted amount (determined in      
  accordance with GAAP), if less) of the Indebtedness being refinanced, plus
 the amount of accrued interest thereon, plus the amount of any reasonably
  determined prepayment premium necessary to accomplish such refinancing and
such reasonable fees and expenses incurred in connection therewith,     
(ii) Indebtedness representing a refinancing of Indebtedness other than 
   Senior Indebtedness shall have a Weighted Average Life to Maturity equal to
 or greater than the Weighted Average Life to Maturity of the Indebtedness
  being refinanced, (iii) Indebtedness that is PARI PASSU with the notes may
only be refinanced with Indebtedness that is made PARI PASSU with or    
  subordinate in right of payment to the notes and Subordinated Indebtedness
 may only be refinanced with Subordinated Indebtedness, (iv) no Restricted
Subsidiary that is not a Guarantor may Incur Indebtedness to refinance  
Indebtedness of St. John Knits International or any Guarantor and       
  (v) Indebtedness of St. John Knits International may only be refinanced by
Indebtedness of St. John Knits International and Indebtedness of a      
Restricted Subsidiary may only be refinanced by Indebtedness of such    
Restricted Subsidiary or by St. John Knits International;               

     (h) Indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and   
completion guarantees provided by St. John Knits International or a     
Restricted Subsidiary in the ordinary course of business;               

        (i) Indebtedness arising from agreements of St. John Knits International
or a Restricted Subsidiary providing for indemnification, adjustment of 
   purchase price or similar obligations, in each case, incurred or assumed in
   connection with the disposition of any business, assets or Equity Interests
    of a Restricted Subsidiary, PROVIDED that the maximum aggregate liability in
   respect of all such Indebtedness shall at no time exceed the gross proceeds
actually received by St. John Knits International and its Restricted    
Subsidiaries in connection with such disposition;                       

       (j) Indebtedness arising from the honoring by a bank or other financial
  institution of a check, draft or similar instrument (except in the case of
    daylight overdrafts) drawn against insufficient funds in the ordinary course
of business, PROVIDED, HOWEVER, that such Indebtedness is extinguished  
within five business days of Incurrence;                                

       (k) Indebtedness representing deferred compensation to employees of St.
   John Knits International and its Subsidiaries in an aggregate amount not to
exceed $1.0 million at any one time outstanding;                        

 (l) Indebtedness of Foreign Restricted Subsidiaries which are not
    Guarantors in an aggregate amount not to exceed $7.5 million at any one time
outstanding;                                                            

 (m) Indebtedness of Foreign Restricted Subsidiaries which are not
    Guarantors owed to and held by St. John Knits International or any Guarantor
in an aggregate amount not to exceed $12.5 million at any one time      
outstanding;                                                            

    (n) Indebtedness of a Receivables Entity that is non-recourse to St.
John Knits International or any other Restricted Subsidiary of St. John 
Knits International Incurred in connection with a                       

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Qualified Receivables Transaction, PROVIDED that the proceeds of such   
   Indebtedness are used to reduce Indebtedness under the Credit Facility; and

(o) in addition to the items referred to in clauses (a) through 
(n) above, Indebtedness of St. John Knits International (including any  
   Indebtedness under the Credit Facility that utilizes this subparagraph (o))
   having an aggregate principal amount not to exceed $10.0 million at any one
time outstanding.                                                       

  For purposes of determining compliance with, and the outstanding principal
amount of any particular Indebtedness incurred pursuant to and in compliance    
with, this covenant:                                                            

      (1) in the event that Indebtedness meets the criteria of more than one
    of the types of Indebtedness described in the first and second paragraphs of
 this covenant, St. John Knits International, in its sole discretion, will
classify such item of Indebtedness on the date of Incurrence and only be
   required to include the amount and type of such Indebtedness in one of such
clauses; and                                                            

      (2) the amount of Indebtedness issued at a price that is less than the
principal amount thereof will be equal to the amount of the liability in
respect thereof determined in accordance with GAAP.                     

   Accrual of interest, accrual of dividends, the accretion of accreted value,
the payment of interest in the form of additional Indebtedness and the payment  
of dividends in the form of additional shares of preferred stock will not be    
deemed to be an Incurrence of Indebtedness for purposes of this covenant        
PROVIDED, in each such case, that the amount thereof is included in the         
Consolidated Fixed Charges of such Person.                                      

LIMITATION ON SENIOR SUBORDINATED INDEBTEDNESS.  St. John Knits         
International shall not, directly or indirectly, Incur any Indebtedness that by 
its terms would expressly rank senior in right of payment to the notes and      
subordinate in right of payment to any other Indebtedness of St. John Knits     
International.                                                                  

St. John Knits International shall not permit any Guarantor to, and no  
Guarantor shall, directly or indirectly, Incur any Indebtedness that by its     
terms would expressly rank senior in right of payment to the Guarantee of such  
Guarantor and subordinate in right of payment to any other Indebtedness of such 
Guarantor.                                                                      

   LIMITATION ON RESTRICTED PAYMENTS.  St. John Knits International shall not,
and shall not cause or permit any Restricted Subsidiary to, directly or         
indirectly,                                                                     

       (i) declare or pay any dividend or any other distribution on any Equity
 Interests of St. John Knits International or any Restricted Subsidiary or
    make any payment or distribution to the direct or indirect holders (in their
  capacities as such) of Equity Interests of St. John Knits International or
any Restricted Subsidiary (other than any dividends, distributions and  
  payments made to St. John Knits International or any Restricted Subsidiary
and dividends or distributions payable to any Person solely in Qualified
Equity Interests of St. John Knits International or any Restricted      
Subsidiary or in options, warrants or other rights to purchase Qualified
Equity Interests of St. John Knits International or any Restricted      
Subsidiary);                                                            

  (ii) purchase, redeem or otherwise acquire or retire for value any
Equity Interests of St. John Knits International or any Restricted      
Subsidiary (other than any such Equity Interests owned by St. John Knits
International or any Restricted Subsidiary);                            

(iii) purchase, redeem, defease or retire for value, or make any
  principal payment on, prior to any scheduled maturity, scheduled repayment
or scheduled sinking fund payment, any                                  

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   Subordinated Indebtedness (other than any Subordinated Indebtedness held by
St. John Knits International); or                                       

(iv) make any Investment in any Person (other than Permitted    
Investments)                                                            

(any such payment or any other action (other than any exception thereto)        
described in (i), (ii), (iii) or (iv) each, a "Restricted Payment"), unless     

        (a) no Default or Event of Default shall have occurred and be continuing
  at the time or immediately after giving effect to such Restricted Payment;

        (b) immediately after giving effect to such Restricted Payment, St. John
   Knits International would be able to Incur $1.00 of additional Indebtedness
    (other than Permitted Indebtedness) under the Consolidated Coverage Ratio of
the first paragraph of "--Limitation on Indebtedness" above; and        

   (c) immediately after giving effect to such Restricted Payment, the
    aggregate amount of all Restricted Payments declared or made on or after the
Issue Date does not exceed an amount equal to the sum of (1) 50% of     
  cumulative Consolidated Net Income determined for the period (taken as one
 period) from the Issue Date and ending on the last day of the most recent
    fiscal quarter immediately preceding the date of such Restricted Payment for
   which consolidated financial information of St. John Knits International is
 available (or if such cumulative Consolidated Net Income shall be a loss,
   minus 100% of such loss), PLUS (2) the aggregate net cash proceeds received
  by St. John Knits International either (x) as capital contributions to St.
    John Knits International after the Issue Date or (y) from the issue and sale
 (other than to a Restricted Subsidiary) of its Qualified Equity Interests
   after the Issue Date (excluding the net proceeds from any issuance and sale
   of Qualified Equity Interests financed, directly or indirectly, using funds
borrowed from St. John Knits International or any Restricted Subsidiary 
 until and to the extent such borrowing is repaid), PLUS (3) the principal
    amount (or accreted amount (determined in accordance with GAAP), if less) of
any Indebtedness of St. John Knits International or any Restricted      
 Subsidiary Incurred after the Issue Date which has been converted into or
 exchanged for Qualified Equity Interests of St. John Knits International,
   PLUS(4) without duplication of any amounts included in clause (1) above, in
the case of the disposition or repayment of, or the receipt by St. John 
Knits International or any Restricted Subsidiary of any dividends or    
 distributions from, any Investment constituting a Restricted Payment made
    after the Issue Date (including by way of a Revocation), an amount equal, in
 the aggregate, to the lesser of the amount of such Investment, other than
 pursuant to a Revocation, in which case such amount will be the lesser of
   the Fair Market Value of such Investment at the date of Revocation, and the
    amount received by St. John Knits International or any Restricted Subsidiary
 upon such disposition, repayment, dividend or distribution or Revocation.

The foregoing provisions will not prevent:                              

     (i) the payment of any dividend or distribution on, or redemption of,
Equity Interests within 60 days after the date of declaration of such   
   dividend or distribution or the giving of formal notice of such redemption,
if at the date of such declaration or giving of such formal notice such 
payment or redemption would comply with the provisions of the indenture 
   PROVIDED, HOWEVER, that the payment of the $0.025 per share dividend on St.
John common stock declared on June 8, 1999 and payable on July 22, 1999 
shall not constitute a Restricted Payment;                              

     (ii) the purchase, redemption, retirement or other acquisition of any
   Equity Interests of St. John Knits International in exchange for, or out of
   the net cash proceeds of the substantially concurrent issue and sale (other
   than to a Restricted Subsidiary) of, Qualified Equity Interests of St. John
   Knits International; PROVIDED, HOWEVER, that any such net cash proceeds and
the value of any Qualified Equity Interests issued in exchange for such 
retired Equity Interests are excluded                                   

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    from clause (c)(2) of the preceding paragraph (and were not included therein
 at any time) and are not used to redeem the notes pursuant to "--Optional
Redemption" above;                                                      

(iii) the purchase, redemption, retirement, defeasance or other 
    acquisition of Subordinated Indebtedness, or any other payment thereon, made
in exchange for, or out of the net cash proceeds of a substantially     
concurrent issue and sale (other than to a Restricted Subsidiary) of,   
 (x) Qualified Equity Interests of St. John Knits International; PROVIDED,
HOWEVER, that any such net cash proceeds and the value of any Qualified 
Equity Interests issued in exchange for Subordinated Indebtedness are   
    excluded from clauses (c)(2) and (c)(3) of the preceding paragraph (and were
not included therein at any time) and are not used to redeem the notes  
  pursuant to "--Optional Redemption" above or (y) Subordinated Indebtedness
permitted to be Incurred pursuant to clause (g) of the second paragraph 
under "--Limitation on Indebtedness";                                   

(iv) the making of loans or advances to officers, employees and 
directors of St. John Knits International or any Restricted Subsidiary  
    entered into in the ordinary course of business or to fund purchases by such
   employees from St. John Knits International of Equity Interests of St. John
    Knits International, in an amount not to exceed $5.0 million at any one time
outstanding;                                                            

      (v) the repurchase, redemption, defeasance, retirement, refinancing or
  acquisition for value or payment of principal of Subordinated Indebtedness
 at a purchase price not greater than 101% of the principal amount of such
   Subordinated Indebtedness in the event of a Change of Control pursuant to a
provision similar to the "--Offer to Purchase upon Change of Control"   
   provisions above; PROVIDED, HOWEVER, that prior to any such repurchase, St.
John Knits International has made an Offer to Purchase as provided in   
    "--Offer to Purchase upon Change of Control" above with respect to the notes
and has repurchased all notes validly tendered for payment in connection
with such Offer to Purchase;                                            

   (vi) the purchase, redemption or other acquisition, cancellation or
   retirement for value of Equity Interests of St. John Knits International or
  any Restricted Subsidiary of St. John Knits International or any parent of
St. John Knits International held by any existing or former employees or
  management of St. John Knits International or any Restricted Subsidiary of
  St. John Knits International (other than Robert Gray, Marie Gray and Kelly
 Gray) or their assigns, estates or heirs, in each case in connection with
the repurchase provisions under employee stock option or stock purchase 
   agreements or other agreements to compensate management employees; PROVIDED
    that such redemptions or repurchases pursuant to this clause will not exceed
   $500,000 in the aggregate during any calendar year; provided, further, that
any amounts not used for redemptions or repurchases pursuant to this    
clause (vi) may be used in any subsequent calendar year;                

       (vii) repurchases of Equity Interests deemed to occur upon the exercise
of stock options if such Equity Interests represent a portion of the    
exercise price thereof;                                                 

   (viii) the defeasance, redemption or repurchase of any Disqualified
    Equity Interest of St. John Knits International or any Restricted Subsidiary
in exchange for, or out of the net cash proceeds of, a substantially    
  concurrent issue and sale (other than to St. John Knits International or a
    Subsidiary of St. John Knits International) of Disqualified Equity Interests
    of St. John Knits International or such Restricted Subsidiary, respectively;
    PROVIDED that: (A) the aggregate liquidation preference of such Disqualified
   Equity Interest does not exceed the aggregate liquidation preference of the
Disqualified Equity Interest so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (B) such Disqualified Equity Interest has a final
maturity date later than the final maturity date of, and has a Weighted 
   Average Life to Maturity equal to or greater than the Weighted Average Life
to Maturity of the notes; and (C) such Disqualified Equity Interest is  
incurred either by St. John Knits International or by the Restricted    
Subsidiary who is the obligor                                           

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on the Disqualified Equity Interest being extended, refinanced, renewed,
replaced, defeased or refunded;                                         

     (ix) the defeasance, redemption or repurchase of any Preferred Equity
Interest or Disqualified Equity Interest issued in connection with the  
   acquisition of assets or a Permitted Business, PROVIDED, that the aggregate
amount of such defeasance, redemption or repurchase payments shall not  
exceed at any time $5.0 million;                                        

 (x) the payment of any dividend by a Restricted Subsidiary to the
holders of its common Equity Interests on a pro rata basis;             

      (xi) the purchase by St. John Knits International of Gray Common Stock
pursuant to the terms of the Stockholders' Agreement in an amount not to
exceed $5.0 million, PROVIDED HOWEVER, that such amounts do not exceed  
$2.5 million for the first twelve month period following the Issue Date;

  (xii) cash payments to Robert Gray, Marie Gray or Kelly A. Gray on
Preferred Equity Interests of St. John Knits International that are     
Qualified Equity Interests in an amount not to exceed $250,000 for each 
fiscal year;                                                            

    (xiii) Restricted Payments in an amount not to exceed $10.0 million;

       (xiv) Restricted Payments made on the Issue Date in connection with the
transactions; and                                                       

   (xv) the redemption of up to $5.0 million of Preferred Stock (which
$5.0 million amount may include the amount of any accrued but unpaid    
dividends) after the first anniversary of the Issue Date;               

PROVIDED the Consolidated Coverage Ratio, pro forma for such transaction, for   
the two most recently completed fiscal quarters of St. John Knits International,
is at least 2.25 to 1.0; and PROVIDED, FURTHER, that St. John Knits             
International and its Restricted Subsidiaries may only redeem Preferred Stock   
pursuant to this clause (xv) once; PROVIDED, HOWEVER, that in the case of each  
of clauses (v), (vi), (ix), (x) and (xv) no Default or Event of Default shall   
have occurred and be continuing or would arise therefrom.                       

In determining the amount of Restricted Payments permissible under this 
covenant, amounts expended pursuant to clauses (iv), (vi), (ix), (xi), (xii),   
(xiii) and (xv) of the immediately preceding paragraph shall be included as     
Restricted Payments. Amounts paid pursuant to clause (i) of the immediately     
preceeding paragraph shall be included, when paid, as Restricted Payments only  
to the extent not already included as Restricted Payments upon declaration.     
Amounts expended pursuant to all other clauses of the immediately preceding     
paragraph shall not be included as Restricted Payments. The amount of any       
non-cash Restricted Payment shall be deemed to be equal to the Fair Market Value
thereof at the date of the making of such Restricted Payment.                   

  LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES.  St. John Knits International shall not, and shall not cause or   
permit any Restricted Subsidiary to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on  
the ability of any Restricted Subsidiary to (a) pay dividends or make any other 
distributions to St. John Knits International or any other Restricted Subsidiary
on its Equity Interests or with respect to any other interest or participation  
in, or measured by, its profits, or pay any Indebtedness owed to St. John Knits 
International or any other Restricted Subsidiary, (b) make loans or advances to,
or guarantee any Indebtedness or other obligations of, or make any Investment   
in, St. John Knits International or any other Restricted Subsidiary or          
(c) transfer any of its properties or                                           

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assets to St. John Knits International or any other Restricted Subsidiary,      
except for such encumbrances or restrictions existing under or by reason of:    

 (i) the Credit Facility, or any other agreement of St. John Knits
   International or the Restricted Subsidiaries outstanding on the Issue Date,
in each case as in effect on the Issue Date, and any amendments,        
restatements, renewals, replacements or refinancings thereof; PROVIDED, 
HOWEVER, that any such amendment, restatement, renewal, replacement or  
refinancing is no more restrictive in the aggregate with respect to such
encumbrances or restrictions than those contained in the agreement being
amended, restated, reviewed, replaced or refinanced;                    

(ii) applicable law;                                            

     (iii) any instrument governing Indebtedness or Equity Interests of an
  Acquired Person acquired by St. John Knits International or any Restricted
Subsidiary as in effect at the time of such acquisition (except to the  
   extent such Indebtedness was Incurred by such Acquired Person in connection
with, as a result of or in contemplation of such acquisition); PROVIDED,
  HOWEVER, that such encumbrances and restrictions are not applicable to St.
   John Knits International or any Restricted Subsidiary, or the properties or
  assets of St. John Knits International or any Restricted Subsidiary, other
than the Acquired Person;                                               

      (iv) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;         

     (v) Purchase Money Indebtedness for property acquired in the ordinary
 course of business that only imposes encumbrances and restrictions on the
property so acquired;                                                   

      (vi) any agreement for the sale or disposition of the Equity Interests
or assets of any Restricted Subsidiary; PROVIDED, HOWEVER, that such    
encumbrances and restrictions described in this clause (vi) are only    
  applicable to such Restricted Subsidiary or assets, as applicable, and any
such sale or disposition is made in compliance with "--Disposition of   
Proceeds of Asset Sales" below to the extent applicable thereto;        

       (vii) refinancing Indebtedness permitted under clause (g) of the second
  paragraph of "--Limitation on Indebtedness" above; PROVIDED, HOWEVER, that
such encumbrances and restrictions contained in the agreements governing
such Indebtedness are no more restrictive in the aggregate than those   
contained in the agreements governing the Indebtedness being refinanced 
immediately prior to such refinancing;                                  

(viii) the indenture;                                           

        (ix) mortgages, pledges or other security agreements permitted under the
indenture securing Indebtedness of St. John Knits International or a    
Restricted Subsidiary to the extent such encumbrances or restrictions   
   restrict the transfer of the property subject to such mortgages, pledges or
other security agreements;                                              

  (x) Liens securing Indebtedness otherwise permitted to be Incurred
    pursuant to the provisions of the covenant described below under the caption
    "--Limitation on Liens" that limit the right of St. John Knits International
    or any Restricted Subsidiary to dispose of the assets subject to such Liens;

  (xi) provisions with respect to the disposition or distribution of
   assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;                        

      (xii) any other security agreement, instrument or document relating to
   Senior Indebtedness hereafter in effect, PROVIDED that such encumbrances or
 restrictions are customary in connection with such documents and that the
terms and conditions of such encumbrances or restrictions are           

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no more restrictive than those encumbrances or restrictions imposed in  
connection with the Credit Facility as in effect on the Issue Date;     

    (xiii) any agreement relating to a sale and leaseback transaction or
    capital lease, but only on the property subject to such transaction or lease
   and only to the extent that such restrictions or encumbrances are customary
with respect to a sale and leaseback transaction or capital lease;      

  (xiv) Indebtedness Incurred by Foreign Restricted Subsidiaries; or

    (xv) customary restrictions imposed on the payment of dividends by a
  Receivables Entity in connection with a Qualified Receivables Transaction.

   DESIGNATION OF UNRESTRICTED SUBSIDIARIES.  St. John Knits International may
designate after the Issue Date any Subsidiary of St. John Knits International as
an "Unrestricted Subsidiary" under the indenture (a "Designation") only if:     

        (i) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such Designation;              

    (ii) at the time of and after giving effect to such Designation, St.
    John Knits International could Incur $1.00 of additional Indebtedness (other
 than Permitted Indebtedness) under the Consolidated Coverage Ratio of the
first paragraph of "--Limitation on Indebtedness" above; and            

(iii) St. John Knits International would be permitted to make an
 Investment (other than a Permitted Investment) at the time of Designation
(assuming the effectiveness of such Designation) pursuant to the first  
  paragraph of "--Limitation on Restricted Payments" above in an amount (the
 "Designation Amount") equal to the Fair Market Value of the net assets of
such Subsidiary on such date.                                           

   In the event of any such Designation, St. John Knits International shall be
deemed to have made an Investment constituting a Restricted Payment pursuant to 
"--Limitation on Restricted Payments" for all purposes of the indenture in the  
Designation Amount.                                                             

   Neither St. John Knits International nor any Restricted Subsidiary shall at
any time (x) provide credit support for, subject any of its property or assets  
(other than the Equity Interests of any Unrestricted Subsidiary) to the         
satisfaction of, or guarantee, any Indebtedness of any Unrestricted Subsidiary  
(including any undertaking, agreement or instrument evidencing such             
Indebtedness), (y) be directly or indirectly liable for any Indebtedness of any 
Unrestricted Subsidiary or (z) be directly or indirectly liable for any         
Indebtedness which provides that the holder thereof may (upon notice, lapse of  
time or both) declare a default thereon or cause the payment thereof to be      
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of any Unrestricted Subsidiary,   
except for any non-recourse guarantee given solely to support the pledge by St. 
John Knits International or any Restricted Subsidiary of the capital stock of   
any Unrestricted Subsidiary. For purposes of the foregoing, the Designation of a
Subsidiary of St. John Knits International as an Unrestricted Subsidiary shall  
be deemed to include the Designation of all of the Subsidiaries of such         
Subsidiary.                                                                     

  St. John Knits International may revoke any Designation of a Subsidiary as
an Unrestricted Subsidiary (a "Revocation") only if:                            

        (i) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such Revocation; and          

(ii) all Liens and Indebtedness of such Unrestricted Subsidiary 
    outstanding immediately following such Revocation would, if Incurred at such
   time, have been permitted to be Incurred for all purposes of the indenture.

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All Designations and Revocations must be evidenced by resolutions of the
board of directors of St. John Knits International, delivered to the Trustee    
certifying compliance with the foregoing provisions.                            

   LIMITATION ON LIENS.  St. John Knits International shall not, and shall not
cause or permit any Restricted Subsidiary to, directly or indirectly, Incur any 
Liens of any kind against or upon any of their respective properties or assets  
now owned or hereafter acquired, or any proceeds therefrom or any income or     
profits therefrom, to secure any Indebtedness unless contemporaneously therewith
effective provision is made, (x) in the case of St. John Knits International, to
secure the notes and all other amounts due under the indenture and any other    
class of Senior Subordinated Indebtedness, and (y) in the case of a Restricted  
Subsidiary which is a Guarantor, to secure such Restricted Subsidiary's         
Guarantee of the notes and all other amounts due under the indenture, in each   
case, equally and ratably with such Indebtedness (or, in the event that such    
Indebtedness is subordinated in right of payment to the notes or such Restricted
Subsidiary's Guarantee, prior to such Indebtedness) with a Lien on the same     
properties and assets securing such Indebtedness for so long as such            
Indebtedness is secured by such Lien, except for (i) Liens securing Senior      
Indebtedness (including, without limitation, Indebtedness incurred under the    
Credit Facility) and (ii) Permitted Liens.                                      

   DISPOSITION OF PROCEEDS OF ASSET SALES.  St. John Knits International shall
not, and shall not cause or permit any Restricted Subsidiary to, directly or    
indirectly, make any Asset Sale, unless (i) St. John Knits International or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets sold or   
otherwise disposed of and (ii) at least 75% of such consideration consists of   
(A) cash or Cash Equivalents, or (B) properties and capital assets that will be 
used in the business of St. John Knits International and its Restricted         
Subsidiaries as existing at such time or in businesses reasonably related       
thereto (as determined in good faith by St. John Knits International's board of 
directors) ("Replacement Assets") or the Equity Interests of any Person engaged 
in a Permitted Business if, in connection with the receipt by St. John Knits    
International or any Restricted Subsidiary of such Equity Interests, (1) such   
Person becomes a Restricted Subsidiary and a Guarantor or (2) such Person is    
merged, consolidated or amalgamated with or into, or transfers or conveys       
substantially all of its assets to, or is liquidated into, St. John Knits       
International or any Restricted Subsidiary that is a Guarantor. The amount of   
any Indebtedness (other than any Subordinated Indebtedness) of St. John Knits   
International or any Restricted Subsidiary that is actually assumed by the      
transferee in such Asset Sale and from which St. John Knits International and   
the Restricted Subsidiaries are fully and unconditionally released shall be     
deemed to be cash for purposes of determining the percentage of cash            
consideration received by St. John Knits International or the Restricted        
Subsidiaries within such period.                                                

   St. John Knits International or such Restricted Subsidiary, as the case may
be, may (i) apply the Net Cash Proceeds of any Asset Sale within 360 days of    
receipt thereof to repay Senior Indebtedness and permanently reduce any related 
commitment, or (ii) make an Investment in Replacement Assets within such period.

    To the extent all or part of the Net Cash Proceeds of any Asset Sale are not
applied within 360 days of such Asset Sale as described in clause (i) or        
(ii) of the immediately preceding paragraph (such Net Cash Proceeds, the        
"Unutilized Net Cash Proceeds"), St. John Knits International shall, within     
45 days after such 360th day, make an Offer to Purchase all outstanding notes   
and other Senior Subordinated Indebtedness, PRO RATA, up to a maximum principal 
amount (expressed as a multiple of $1,000) of notes and other Senior            
Subordinated Indebtedness equal to such Unutilized Net Cash Proceeds, at a      
purchase price in cash equal to 100% of the principal amount thereof (or the    
accreted value of such other Senior Subordinated Indebtedness, if such other    
Senior Subordinated Indebtedness is issued at a discount), plus accrued and     
unpaid interest thereon, if any, to the Purchase Date; PROVIDED, HOWEVER, that  
the Offer to Purchase may be deferred until there are aggregate Unutilized Net  
Cash Proceeds equal to or in excess of $10.0 million, at which time the entire  
amount of such                                                                  

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Unutilized Net Cash Proceeds, and not just the amount in excess of              
$10.0 million, shall be applied as required pursuant to this paragraph.         

 With respect to any Offer to Purchase effected pursuant to this covenant,
among the notes, to the extent the aggregate principal amount of notes and other
Senior Subordinated Indebtedness tendered pursuant to such Offer to Purchase    
exceeds the Unutilized Net Cash Proceeds to be applied to the repurchase        
thereof, such notes and other Senior Subordinated Indebtedness shall be         
purchased PRO RATA based on the aggregate principal amount of such notes and    
other Senior Subordinated Indebtedness tendered (or the accreted value of such  
other Senior Subordinated Indebtedness, if such other Senior Subordinated       
Indebtedness is issued at a discount) by each holder of notes and such other    
Senior Subordinated Indebtedness. To the extent the Unutilized Net Cash Proceeds
exceed the aggregate amount of notes and other Senior Subordinated Indebtedness 
tendered pursuant to such Offer to Purchase, St. John Knits International may   
retain and utilize any portion of the Unutilized Net Cash Proceeds not applied  
to repurchase the notes and other Senior Subordinated Indebtedness for any      
purpose consistent with the other terms of the indenture. Upon completion of the
Offer to Purchase, Unutilized Net Cash Proceeds will be reset at zero.          

 In the event that St. John Knits International makes an Offer to Purchase
the notes and other Senior Subordinated Indebtedness, St. John Knits            
International shall comply with any applicable securities laws and regulations, 
and any violation of the provisions of the indenture relating to such Offer to  
Purchase occurring as a result of such compliance shall not be deemed an Event  
of Default or an event that, with the passing of time or giving of notice, or   
both, would constitute an Event of Default.                                     

Each Holder shall be entitled to tender all or any portion of the notes 
owned by such Holder pursuant to the Offer to Purchase, subject to the          
requirement that any portion of a note tendered must be tendered in an integral 
multiple of $1,000 principal amount and subject to any proration among tendering
Holders and holders of other Senior Subordinated Indebtedness as described      
above.                                                                          

MERGER, SALE OF ASSETS, ETC.  St. John Knits International shall not    
consolidate with or merge with or into (whether or not St. John Knits           
International is the Surviving Person) any other entity and St. John Knits      
International shall not, and shall not cause or permit any Restricted Subsidiary
to, sell, convey, assign, transfer, lease or otherwise dispose of all or        
substantially all of St. John Knits International's and the Restricted          
Subsidiaries' properties and assets (determined on a consolidated basis for St. 
John Knits International and the Restricted Subsidiaries) to any entity in a    
single transaction or series of related transactions (including by way of       
consolidation or merger), unless: (i) either (x) St. John Knits International   
shall be the Surviving Person or (y) the Surviving Person (if other than St.    
John Knits International) shall be a corporation organized and validly existing 
under the laws of the United States of America or any State thereof or the      
District of Columbia or, if any such transaction involves a Disposition by a    
Foreign Restricted Subsidiary, under the laws of the United States of America or
any state thereof or the District of Columbia or the jurisdiction under which   
such Foreign Restricted Subsidiary was organized, and shall, in any such case,  
expressly assume by a supplemental indenture, the due and punctual payment of   
the principal of, premium, if any, and interest on all the notes and the        
performance and observance of every covenant of the indenture and the           
Registration Rights Agreement to be performed or observed on the part of St.    
John Knits International; (ii) immediately thereafter, no Default or Event of   
Default shall have occurred and be continuing; and (iii) immediately after      
giving effect to any such transaction involving the Incurrence by St. John Knits
International or any Restricted Subsidiary, directly or indirectly, of          
additional Indebtedness (and treating any Indebtedness not previously an        
obligation of St. John Knits International or any Restricted Subsidiary in      
connection with or as a result of such transaction as having been Incurred at   
the time of such transaction), the Surviving Person could Incur, on a pro forma 
basis after giving effect to such transaction as if it had occurred at the      
beginning of the four quarter period immediately preceding such transaction for 
which consolidated financial statements of St. John Knits International are     
available, at                                                                   

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least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under
the Consolidated Coverage Ratio of the first paragraph of "--Limitation on      
Indebtedness" above.                                                            

Notwithstanding the foregoing clause (iii) of the immediately preceding 
paragraph, (x) any Restricted Subsidiary may consolidate with, merge into or    
transfer all or part of its properties and assets to St. John Knits             
International or any Restricted Subsidiary that is a Guarantor and (y) St. John 
Knits International may merge with an Affiliate incorporated solely for the     
purpose of reincorporating St. John Knits International in another domestic     
United States jurisdiction to realize tax or other benefits.                    

  For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or         
substantially all the properties and assets of one or more Restricted           
Subsidiaries the Equity Interest of which constitutes all or substantially all  
the properties and assets of St. John Knits International shall be deemed to be 
the transfer of all or substantially all the properties and assets of St. John  
Knits International.                                                            

 No Guarantor (other than a Guarantor whose Guarantee is to be released in
accordance with the terms of its Guarantee and the indenture as provided in the 
fourth paragraph under "Guarantees of the Notes" above) shall consolidate with  
or merge with or into another Person, whether or not such Person is affiliated  
with such Guarantor and whether or not such Guarantor is the Surviving Person,  
unless (i) the Surviving Person (if other than such Guarantor) is a corporation 
organized and validly existing under the laws of the United States, any State   
thereof or the District of Columbia; (ii) the Surviving Person (if other than   
such Guarantor) expressly assumes by a supplemental indenture all the           
obligations of such Guarantor under its Guarantee of the notes and the          
performance and observance of every covenant of the indenture and the           
Registration Rights Agreement to be performed or observed by such Guarantor,    
(iii) at the time of and immediately after such Disposition, no Default or Event
of Default shall have occurred and be continuing; and (iv) immediately after    
giving effect to any such transaction involving the Incurrence by such          
Guarantor, directly or indirectly, of additional Indebtedness (and treating any 
Indebtedness not previously an obligation of such Guarantor in connection with  
or as a result of such transaction as having been Incurred at the time of such  
transaction), St. John Knits International could Incur, on a pro forma basis    
after giving effect to such transaction as if it had occurred at the beginning  
of the latest fiscal quarter for which consolidated financial statements of St. 
John Knits International are available, at least $1.00 of additional            
Indebtedness (other than Permitted Indebtedness) under the Consolidated Coverage
Ratio of the first paragraph of "Limitation on Indebtedness" above; PROVIDED,   
HOWEVER, that this paragraph shall not be a condition to a merger or            
consolidation of a Guarantor if such merger or consolidation only involves St.  
John Knits International and/or one or more other Guarantors. Notwithstanding   
the foregoing, nothing in this covenant shall prohibit the consolidation or     
merger with or into or the sale of all or substantially all of the assets or    
properties of a Guarantor to any other Restricted Subsidiary that is a          
Guarantor.                                                                      

In the event of any transaction (other than a lease) described in and   
complying with the conditions listed in the immediately preceding paragraphs in 
which St. John Knits International or a Guarantor, as the case may be, is not   
the Surviving Person and the Surviving Person is to assume all the Obligations  
of St. John Knits International under the notes, the indenture and the          
Registration Rights Agreement or of such Guarantor under its Guarantee, the     
indenture and the Registration Rights Agreement, as the case may be, pursuant to
a supplemental indenture, such Surviving Person shall succeed to, and be        
substituted for, and may exercise every right and power of, St. John Knits      
International or such Guarantor, as the case may be, and St. John Knits         
International, as the case may be, shall be discharged from its Obligations     
under the indenture and the notes or such Guarantor shall be discharged from its
Obligations under the indenture and its Guarantee.                              

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  TRANSACTIONS WITH AFFILIATES.  St. John Knits International shall not, and
shall not cause or permit any Restricted Subsidiary to, directly or indirectly, 
conduct any business or enter into any transaction (or series of related        
transactions) with or for the benefit of any of their respective Affiliates or  
any officer, director or employee of St. John Knits International or any        
Restricted Subsidiary (each an "Affiliate Transaction"), unless (i) such        
Affiliate Transaction is on terms which are no less favorable to St. John Knits 
International or such Restricted Subsidiary, as the case may be, than would be  
available in a comparable transaction with an unaffiliated third party and      
(ii) (A) if such Affiliate Transaction (or series of related Affiliate          
Transactions) involves aggregate payments or the transfer of other consideration
between St. John Knits International and an Affiliate of St. John Knits         
International having a Fair Market Value in excess of $5.0 million, such        
Affiliate Transaction is in writing and St. John Knits International delivers an
officer's certificate to the Trustee certifying that such Affiliate Transaction 
(or series of Affiliate Transactions) complies with the foregoing provisions or 
(B) if such Affiliate Transaction (or series of related Affiliate Transactions) 
involves aggregate payments or the transfer of other consideration between St.  
John Knits International and an Affiliate of St. John Knits International having
a Fair Market Value in excess of $10.0 million, such Affiliate Transaction is in
writing and St. John Knits International delivers a written opinion from an     
Independent Financial Advisor (filed with the Trustee) stating that the terms of
such Affiliate Transaction are fair, from a financial point of view, to St. John
Knits International or the Restricted Subsidiary involved in such Affiliate     
Transaction, as the case may be.                                                

  Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to:                                                             

   (i) transactions with or among St. John Knits International and any
Restricted Subsidiary or between or among Restricted Subsidiaries;      

       (ii) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
  arrangements, stock options and stock ownership plans and other reasonable
    fees and compensation paid to and indemnity provided on behalf of, officers,
   directors, employees, consultants or agents of St. John Knits International
  or any Restricted Subsidiary of St. John Knits International as determined
in good faith by St. John Knits International's Board of Directors;     

(iii) the payment of fees and expenses to Vestar or any of its  
Affiliates (A) pursuant to the Management Agreement, as in effect on the
Issue Date, or (B) pursuant to any amended, supplemented or replacement 
management agreement in an aggregate amount not to exceed 1.25% of      
  Consolidated EBITDA for the last four full fiscal quarters completed prior
to the date of such payment;                                            

     (iv) any Restricted Payments made in compliance with "--Limitation on
Restricted Payments" above;                                             

       (v) loans and advances to officers, directors and employees of St. John
    Knits International or any Restricted Subsidiary made in the ordinary course
of business;                                                            

     (vi) the entering into by St. John Knits International and any of its
Restricted Subsidiaries of a tax sharing or similar arrangement;        

(vii) any employment agreement entered into by St. John Knits   
International or any Restricted Subsidiary in the ordinary course of    
business;                                                               

   (viii) payment of reasonable Directors' fees to Persons who are not
otherwise Affiliates of St. John Knits International;                   

(ix) any sale or other issuance of Equity Interests (other than 
Disqualified Equity Interests) of                                       
St. John Knits International;                                           

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(x) payments by St. John Knits International or any Restricted  
Subsidiary to Vestar and its Affiliates made for any financial advisory,
financing, underwriting or placement services in connection with        
acquisitions or other corporate transactions, in amounts which are      
  (a) usual and customary for transactions of such type, in an amount not to
    exceed 1% of the value of any such transaction or (b) approved by a majority
of the disinterested members of the board of directors of St. John Knits
International as comparable to that which would be charged by an        
unaffiliated third party for such services;                             

(xi) transactions permitted by the Vestar/Gray LLC Agreement;   

     (xii) sales or other transfers or dispositions of accounts receivable
   and other related assets customarily transferred in an asset securitization
transaction involving accounts receivable to a Receivables Entity in a  
    Qualified Receivables Transaction, and acquisitions of Permitted Investments
in connection with a Qualified Receivables Transaction;                 

        (xiii) leases in effect on the Issue Date and any renewals thereof which
include substantially similar terms;                                    

       (xiv) the transactions and the payment of all fees and expenses related
thereto;                                                                

     (xv) any agreement as in effect on the Issue Date (including, without
limitation, each of the agreements entered into in connection with the  
transactions) or any transaction contemplated thereby; and              

        (xvi) the sale of Preferred Stock to Vestar or any of its affiliates and
any transaction contemplated by the terms of the Preferred Stock.       

LIMITATION ON THE SALE OR ISSUANCE OF EQUITY INTERESTS OF RESTRICTED    
SUBSIDIARIES.  St. John Knits International shall not sell any Equity Interest  
of a Restricted Subsidiary, and shall not cause or permit any Restricted        
Subsidiary, directly or indirectly, to issue or sell any Equity Interests,      
except: (i) to                                                                  
St. John Knits International or a Wholly Owned Restricted Subsidiary; or        
(ii) if, immediately after giving effect to such issuance or sale, such         
Restricted Subsidiary would no longer constitute a Restricted Subsidiary.       
Notwithstanding the foregoing, St. John Knits International is permitted to sell
all the Equity Interest of a Restricted Subsidiary as long as St. John Knits    
International is in compliance with the terms of the covenant described under   
"--Disposition of Proceeds of Asset Sales" and, if applicable, "--Merger, Sale  
of Assets, etc." above.                                                         

LIMITATION ON GUARANTEES BY RESTRICTED SUBSIDIARIES.  The indenture will
provide that in the event St. John Knits International (i) organizes or acquires
any Domestic Restricted Subsidiary (other than a Receivables Entity) after the  
Issue Date that is not a Guarantor or (ii) causes or permits any Foreign        
Restricted Subsidiary that is not a Guarantor to, directly or indirectly,       
guarantee the payment of any Indebtedness of St. John Knits International or any
Domestic Restricted Subsidiary ("Other Indebtedness"), then in each case St.    
John Knits International shall cause such Restricted Subsidiary to              
simultaneously execute and deliver a supplemental indenture to the indenture    
pursuant to which it will become a Guarantor under the indenture; PROVIDED,     
HOWEVER, that in the event a Domestic Restricted Subsidiary is acquired in a    
transaction in which a merger agreement is entered into, such Domestic          
Restricted Subsidiary shall not be required to execute and deliver such         
supplemental indenture until the consummation of the merger contemplated by any 
such merger agreement; PROVIDED, FURTHER, that if such Other Indebtedness is    
(i) Indebtedness that is ranked PARI PASSU in right of payment with the notes or
the Guarantee of such Domestic Restricted Subsidiary, as the case may be, the   
Guarantee of such Foreign Restricted Subsidiary shall be PARI PASSU in right of 
payment with the guarantee of the Other Indebtedness; or (ii) Subordinated      
Indebtedness, the Guarantee of such Foreign Restricted Subsidiary shall be      
senior in right of payment to the guarantee of the Other Indebtedness (which    
guarantee of such Subordinated Indebtedness shall provide that such guarantee is
subordinated to the Guarantees of such Subsidiary to the same extent and in     
substantially the same manner as the Other Indebtedness is                      

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subordinated to the notes or the Guarantee of such Domestic Restricted          
Subsidiary, as the case may be).                                                

 BUSINESS ACTIVITIES.  St. John Knits International will not, and will not
permit any Restricted Subsidiary to, engage in any business other than the      
Permitted Business.                                                             

PROVISION OF FINANCIAL INFORMATION.  Whether or not St. John Knits      
International is subject to Section 13(a) or 15(d) of the Exchange Act, or any  
successor provision thereto, St. John Knits International shall file with the   
SEC (if permitted by SEC practice and applicable law and regulations) the annual
reports, quarterly reports and other documents which St. John Knits             
International would have been required to file with the SEC pursuant to such    
Section 13(a) or 15(d) or any successor provision thereto if St. John Knits     
International were so subject, such documents to be filed with the SEC on or    
prior to the respective dates (the "Required Filing Dates") by which St. John   
Knits International would have been required so to file such documents if St.   
John Knits International were so subject. St. John Knits International shall    
also in any event (a) within 15 days of each Required Filing Date (whether or   
not permitted or required to be filed with the SEC) (i) transmit (or cause to be
transmitted) by mail to all Holders, as their names and addresses appear in the 
note register, without cost to such Holders upon their request, and (ii) file   
with the Trustee, copies of the annual reports, quarterly reports and proxy     
statements which St. John Knits International is required to file with the SEC  
pursuant to the preceding sentence, or, if such filing is not so permitted,     
information and data of a similar nature, and (b) if, notwithstanding the       
preceding sentence, filing such documents by St. John Knits International with  
the SEC is not permitted by SEC practice or applicable law or regulations,      
promptly upon written request supply copies of such documents to any Holder. In 
addition, for so long as any notes remain outstanding and prior to the later of 
the consummation of the Exchange Offer and the filing of the Initial Shelf      
Registration Statement, if required, St. John Knits International will furnish  
to the Holders upon their request, the information required to be delivered     
pursuant to Rule 144A(d)(4) under the Securities Act.                           

EVENTS OF DEFAULT                                                               

The occurrence of any of the following will be defined as an "Event of  
Default" under the indenture:                                                   

      (a) failure to pay principal of (or premium, if any, on) any note when
   due (whether or not prohibited by the provisions of the indenture described
under "--Subordination of the Notes" above);                            

   (b) failure to pay any interest on any note when due, continued for
30 days or more (whether or not prohibited by the provisions of the     
indenture described under "--Subordination of the Notes" above);        

  (c) default in the payment of principal of or interest on any note
  required to be purchased pursuant to any Offer to Purchase required by the
 indenture when due and payable or failure to pay on the Purchase Date the
Purchase Price for any note validly tendered pursuant to any Offer to   
Purchase required by the indenture (whether or not prohibited by the    
  provisions of the indenture described under "--Subordination of the Notes"
above);                                                                 

     (d) failure to perform or comply with any of the provisions described
under "--Certain Covenants--Merger, Sale of Assets, etc." above;        

       (e) failure to perform any other covenant, warranty or agreement of St.
John Knits International under the indenture or in the notes or of the  
    Guarantors under the indenture or in the Guarantees continued for 30 days or
   more after written notice to St. John Knits International by the Trustee or
Holders of at least 25% in aggregate principal amount of the outstanding
notes;                                                                  

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  (f) default or defaults under the terms of one or more instruments
  evidencing or securing Indebtedness of St. John Knits International or any
of its Restricted Subsidiaries having an outstanding principal amount of
   $10.0 million or more individually or in the aggregate that has resulted in
   the acceleration of the payment of such Indebtedness or failure by St. John
  Knits International or any of its Restricted Subsidiaries to pay principal
of at least $10.0 million when due at the stated maturity of any such   
Indebtedness and such default or defaults shall have continued after any
applicable grace period and shall not have been cured or waived within  
10 days after the occurrence thereof;                                   

  (g) the rendering of a final judgment or judgments (not subject to
appeal) against St. John Knits International or any of its Restricted   
Subsidiaries in an amount of $10.0 million or more (net of any amounts  
covered by reputable and creditworthy insurance companies) which remains
    undischarged or unstayed for a period of 60 days after the date on which the
right to appeal has expired;                                            

        (h) certain events of bankruptcy, insolvency or reorganization affecting
St. John Knits International or any of its Significant Restricted       
Subsidiaries; or                                                        

 (i) other than as provided in or pursuant to any Guarantee or the
indenture, the Guarantee of any Guarantor ceases to be in full force and
    effect or is declared null and void and unenforceable or found to be invalid
or any Guarantor denies its liability under its Guarantee (other than by
   reason of a release of such Guarantor from its Guarantee in accordance with
the terms of the indenture and such Guarantee).                         

Subject to the provisions of the indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee 
will be under no obligation to exercise any of its rights or powers under the   
indenture at the request or direction of any of the Holders of notes, unless    
such Holders shall have offered to the Trustee reasonable indemnity. Subject to 
such provisions for the indemnification of the Trustee, the Holders of a        
majority in aggregate principal amount of the outstanding notes will have the   
right to direct the time, method and place of conducting any proceeding for any 
remedy available to the Trustee, or exercising any trust or power conferred on  
such Trustee subject to applicable law.                                         

If an Event of Default with respect to the notes (other than an Event of
Default with respect to St. John Knits International described in clause (h) of 
the second preceding paragraph) occurs and is continuing, the Trustee or the    
Holders of at least 25% in aggregate principal amount of the outstanding notes, 
by notice in writing to St. John Knits International, may declare the unpaid    
principal of (and premium, if any) and accrued interest to the date of          
acceleration on all the outstanding notes to be due and payable immediately and,
upon any such declaration, such principal amount (and premium, if any) and      
accrued interest, notwithstanding anything contained in the indenture or the    
notes to the contrary, will become immediately due and payable; PROVIDED,       
HOWEVER, that so long as the Credit Facility shall be in full force and effect, 
if an Event of Default shall have occurred and be continuing (other than an     
Event of Default with respect to St. John Knits International described in      
clause (h) of the second preceding paragraph), the notes shall not become due   
and payable until the earlier to occur of (x) five business days following      
delivery of written notice of such acceleration of the notes to the agent under 
the Credit Facility and (y) the acceleration (ipso facto or otherwise) of any   
Indebtedness under the Credit Facility. If an Event of Default specified in     
clause (h) of the preceding paragraph with respect to St. John Knits            
International occurs under the indenture, the notes will ipso facto become      
immediately due and payable without any declaration or other act on the part of 
the Trustee or any Holder of the notes.                                         

Any such declaration with respect to the notes may be annulled by the   
Holders of a majority in aggregate principal amount of the outstanding notes    
upon the conditions provided in the indenture. For information as to waiver of  
defaults, see "--Modification and Waiver" below.                                

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The indenture provides that the Trustee shall, within 90 days after the 
occurrence of any Default or Event of Default with respect to the notes         
outstanding, give the Holders of the notes thereof notice of all uncured        
Defaults or Events of Default thereunder known to it; PROVIDED, HOWEVER, that,  
except in the case of a Default or an Event of Default in payment with respect  
to the notes or a Default or Event of Default in complying with "--Certain      
Covenants--Merger, Sale of Assets, etc." above, the Trustee shall be protected  
in withholding such notice if and so long as a committee of its trust officers  
in good faith determines that the withholding of such notice is in the interest 
of the Holders of the notes.                                                    

  No Holder of any note will have any right to institute any proceeding with
respect to the indenture or for any remedy thereunder, unless such Holder shall 
have previously given to the Trustee written notice of a continuing Event of    
Default thereunder and unless the Holders of at least 25% of the aggregate      
principal amount of the outstanding notes shall have made written request, and  
offered reasonable indemnity, to the Trustee to institute such proceeding as the
Trustee, and the Trustee shall have not have received from the Holders of a     
majority in aggregate principal amount of such outstanding notes a direction    
inconsistent with such request and shall have failed to institute such          
proceeding within 60 days. However, such limitations do not apply to a suit     
instituted by a Holder of such a note for enforcement of payment of the         
principal of and premium, if any, or interest on such note on or after the      
respective due dates expressed in such note.                                    

St. John Knits International will be required to furnish to the Trustee 
annually a statement as to the performance by it of certain of its obligations  
under the indenture and as to any default in such performance.                  

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, INCORPORATOR,          
STOCKHOLDERS, PARTNERS AND MEMBERS                                          

   No director, officer, employee, incorporator, stockholder, partner (general
or limited) or member of St. John Knits International or any of its Affiliates, 
as such, shall have any liability for any obligations of St. John Knits         
International or any of its Affiliates under the notes, the indenture or the    
Guarantees or for any claim based on, in respect of, or by reason of, such      
obligations or their creation. Each Holder of notes by accepting a note waives  
and releases all such liability. The waiver and release are part of the         
consideration for issuance of the notes.                                        

SATISFACTION AND DISCHARGE OF INDENTURE; DEFEASANCE                             

St. John Knits International may terminate its and the Guarantors'      
substantive obligations in respect of the notes by delivering all outstanding   
notes to the Trustee for cancellation and paying all sums payable by it on      
account of principal of, premium, if any, and interest on all notes or          
otherwise. In addition to the foregoing, St. John Knits International may,      
provided that no Default or Event of Default has occurred and is continuing or  
would arise therefrom (or, with respect to a Default or Event of Default        
specified in clause (h) of "--Events of Default" above, occurs at any time on or
prior to the 91st calendar day after the date of such deposit (it being         
understood that this condition shall not be deemed satisfied until after such   
91st day)) under the indenture and provided that no default under any Senior    
Indebtedness would result therefrom, terminate its and the Guarantors'          
substantive obligations in respect of the notes (except for its obligations to  
pay the principal of (and premium, if any, on) and the interest on the notes and
the Guarantors' Guarantee thereof) by (i) depositing with the Trustee, under the
terms of an irrevocable trust agreement, money or United States Government      
Obligations sufficient (without reinvestment) to pay all remaining Indebtedness 
on such notes; (ii) delivering to the Trustee either an Opinion of Counsel or a 
ruling directed to the Trustee from the Internal Revenue Service to the effect  
that the Holders of the notes will not recognize income, gain or loss for       
Federal income tax purposes as a result of such deposit and termination of      
obligations; (iii) delivering to the Trustee an Opinion of Counsel to the effect
that St. John Knits International's exercise of its option                      

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under this paragraph will not result in any of St. John Knits International, the
Trustee or the trust created by St. John Knits International's deposit of funds 
pursuant to this provision becoming or being deemed to be an "investment        
company" subject to regulation under the Investment Company Act of 1940, as     
amended (the "Investment Act"); and (iv) complying with certain other           
requirements set forth in the indenture. In addition, St. John Knits            
International may, provided that no Default or Event of Default has occurred and
is continuing or would arise therefrom (or, with respect to a Default or Event  
of Default specified in clause (h) of "--Events of Default" above, occurs at any
time on or prior to the 91st calendar day after the date of such deposit (it    
being understood that this condition shall not be deemed satisfied until after  
such 91st day)) under the indenture and provided that no default under any      
Senior Indebtedness would result therefrom, terminate all of its and the        
Guarantors' substantive obligations in respect of the notes (including its      
obligations to pay the principal of (and premium, if any, on) and interest on   
the notes and the Guarantors' Guarantee thereof) by (i) depositing with the     
Trustee, under the terms of an irrevocable trust agreement, money or United     
States Government Obligations sufficient (without reinvestment) to pay all      
remaining Indebtedness on the notes; (ii) delivering to the Trustee either a    
ruling directed to the Trustee from the Internal Revenue Service to the effect  
that the Holders of the notes will not recognize income, gain or loss for       
federal income tax purposes as a result of such deposit and termination of      
obligations or an Opinion of Counsel addressed to the Trustee based upon such a 
ruling or based on a change in the applicable federal tax law since the date of 
the indenture, to such effect; (iii) delivering to the Trustee an Opinion of    
Counsel to the effect that St. John Knits International's exercise of its option
under this paragraph will not result in any of St. John Knits International, the
Trustee or the trust created by St. John Knits International's deposit of funds 
pursuant to this provision becoming or being deemed to be an "investment        
company" subject to regulation under the Investment Act; and (iv) complying with
certain other requirements set forth in the indenture.                          

St. John Knits International may make an irrevocable deposit pursuant to
this provision only if at such time it is not prohibited from doing so under the
subordination provisions of the indenture or certain covenants in the Senior    
Indebtedness and St. John Knits International has delivered to the Trustee and  
any Paying Agent an officers' certificate and Opinion of Counsel to that effect.

GOVERNING LAW                                                                   

The indenture, the notes and the Guarantees will be governed by, and    
construed in accordance with, the laws of the State of New York without giving  
effect to applicable principles of conflicts of law to the extent that the      
application of the law of another jurisdiction would be required thereby.       

MODIFICATION AND WAIVER                                                         

   Modifications and amendments of the indenture may be made by St. John Knits
International, the Guarantors, and the Trustee with the consent of the Holders  
of a majority in aggregate principal amount of the outstanding notes (including 
consents obtained in connection with a tender offer or exchange offer for the   
notes); PROVIDED, HOWEVER, that no such modification or amendment to the        
indenture may, without the consent of the Holder of each note affected thereby, 

 (a) change the maturity of the principal of or any installment of
    interest on any such note or alter the optional redemption provisions of any
   such note or the indenture in a manner adverse to the Holders of the notes;

     (b) reduce the principal amount of (or the premium) of any such note;

        (c) reduce the rate of or extend the time for payment of interest on any
such note;                                                              

        (d) change the place or currency of payment of principal of (or premium)
or interest on any such note;                                           

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    (e) modify any provisions of the indenture relating to the waiver of
past defaults (other than to add sections of the indenture or the notes 
   subject thereto) or the right of the Holders of notes to institute suit for
 the enforcement of any payment on or with respect to any such note or any
    Guarantee in respect thereof or the modification and amendment provisions of
   the indenture and the notes (other than to add sections of the indenture or
the notes which may not be amended, supplemented or waived without the  
consent of each Holder therein affected);                               

      (f) reduce the percentage of the principal amount of outstanding notes
    necessary for amendment to or waiver of compliance with any provision of the
indenture or the notes or for waiver of any Default in respect thereof; 

   (g) waive a default in the payment of principal of, interest on, or
redemption payment with respect to, the notes (except a rescission of   
acceleration of the notes by the Holders thereof as provided in the     
indenture and a waiver of the payment default that resulted from such   
acceleration);                                                          

  (h) modify the ranking or priority of any note or the Guarantee in
respect thereof of any Guarantor or modify the definition of Senior     
Indebtedness or Guarantor Senior Indebtedness or amend or modify the    
subordination provisions of the indenture in any manner adverse to the  
Holders of the notes;                                                   

     (i) amend, change or modify in any material respect the obligation of
   St. John Knits International to make and consummate an Offer to Purchase in
    the event of a Change of Control or make and consummate an Offer to Purchase
 with respect to any Asset Sale that has been consummated or modify in any
   material respect any of the provisions or definitions with respect thereto;
or                                                                      

     (j) release any Significant Restricted Subsidiary that is a Guarantor
  from any of its obligations under its Guarantee or the indenture otherwise
than in accordance with the indenture.                                  

  The Holders of a majority in aggregate principal amount of the outstanding
notes, on behalf of all Holders of notes, may waive compliance by St. John Knits
International and the Guarantors with certain restrictive provisions of the     
indenture. Subject to certain rights of the Trustee, as provided in the         
indenture, the Holders of a majority in aggregate principal amount of the notes,
on behalf of all Holders, may waive any past default under the indenture        
(including any such waiver obtained in connection with a tender offer or        
exchange offer for the notes), except a default in the payment of principal,    
premium or interest or a default arising from failure to purchase any notes     
tendered pursuant to an Offer to Purchase, or a default in respect of a         
provision that under the indenture cannot be modified or amended without the    
consent of the Holder of each note that is affected.                            

Without the consent of any Holder, St. John Knits International and the 
Trustee may amend the indenture to:                                             

(i) cure any ambiguity, omission, defect or inconsistency;      

        (ii) provide for the assumption by a successor corporation, partnership,
trust or limited liability company of the obligations of St. John Knits 
International under the indenture;                                      

    (iii) provide for uncertificated notes in addition to or in place of
certificated notes (PROVIDED that the uncertificated notes are issued in
    registered form for purposes of Section 163(f) of the Internal Revenue Code,
or in a manner such that the uncertificated notes are described in      
Section 163(f)(2)(B) of the Internal Revenue Code);                     

(iv) add Guarantees with respect to the notes;                  

(v) secure the notes;                                           

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 (vi) add to the covenants of St. John Knits International for the
 benefit of the Holders or surrender any right or power conferred upon St.
John Knits International;                                               

      (vii) make any change that does not adversely affect the rights of any
Holder; or                                                              

    (viii) comply with any requirement of the SEC in connection with the
qualification of the indenture under the Trust Indenture Act.           

However, no amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of Senior Indebtedness
or Guarantor Senior Indebtedness, as the case may be, then outstanding unless   
the holders of such Senior Indebtedness or Guarantor Senior Indebtedness, as the
case may be (or any group or representative thereof authorized to give a        
consent), consent to such change.                                               

THE TRUSTEE                                                                     

 Except during the continuance of a Default, the Trustee will perform only
such duties as are specifically set forth in the indenture. During the existence
of a Default, the Trustee will exercise such rights and powers vested in it     
under the indenture and use the same degree of care and skill in its exercise as
a prudent person would exercise under the circumstances in the conduct of such  
person's own affairs.                                                           

The indenture and provisions of the Trust Indenture Act incorporated by 
reference therein contain limitations on the rights of the Trustee, should it   
become a creditor of St. John Knits International, any Guarantor or any other   
obligor upon the notes, to obtain payment of claims in certain cases or to      
realize on certain property received by it in respect of any such claim as      
security or otherwise. The Trustee is permitted to engage in other transactions 
with St. John Knits International or an Affiliate of St. John Knits             
International; PROVIDED, HOWEVER, that if it acquires any conflicting interest  
(as defined in the indenture or in the Trust Indenture Act), it must eliminate  
such conflict or resign.                                                        

CERTAIN DEFINITIONS                                                             

  Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full definition of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.        

"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person (a) assumed in   
connection with an Acquisition from such Person or (b) existing at the time such
Person becomes a Restricted Subsidiary or is merged or consolidated with or into
St. John Knits International or any Restricted Subsidiary.                      

"ACQUIRED PERSON" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified      
Person.                                                                         

  "ACQUISITION" means (i) any capital contribution (by means of transfers of
cash or other property to others or payments for property or services for the   
account or use of others, or otherwise) by St. John Knits International or any  
Restricted Subsidiary to any other Person, or any acquisition or purchase of    
Equity Interests of any other Person by St. John Knits International or any     
Restricted Subsidiary, in either case pursuant to which such Person shall become
a Restricted Subsidiary or shall be consolidated with or merged into St. John   
Knits International or any Restricted Subsidiary or (ii) any acquisition by St. 
John Knits International or any Restricted Subsidiary of the assets of any      
Person which constitute substantially all of an operating unit or line of       
business of such Person or which is otherwise outside of the ordinary course of 
business.                                                                       

"AFFILIATE" of any specified Person means any other Person directly or  
indirectly controlling or controlled by or under direct or indirect common      
control with such specified Person and shall also mean any beneficial owner of  
shares representing 5% or more of the total voting power of the Voting          

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Equity Interests (on a fully diluted basis) of St. John Knits International or  
of rights or warrants to purchase such Voting Equity Interests (whether or not  
currently exercisable) and any Person who would be an Affiliate of any such     
beneficial owner pursuant to this definition; PROVIDED, HOWEVER, that for       
purposes of the "--Transactions with Affiliates" covenant, the term "Affiliate" 
shall not include the Initial Purchasers or their affiliates. For purposes of   
this definition, "control" (including, with correlative meanings, the terms     
"controlling," "controlled by" and "under common control with"), as used with   
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such    
Person, whether through the ownership of voting securities, by agreement or     
otherwise.                                                                      

   "ASSET SALE" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition) or other disposition (including, without 
limitation, any merger, consolidation or sale-leaseback transaction) to any     
Person other than St. John Knits International or a Restricted Subsidiary, in   
one transaction or a series of related transactions, of (i) any Equity Interest 
of any Restricted Subsidiary (other than directors' qualifying shares, to the   
extent mandated by applicable law); (ii) any assets of St. John Knits           
International or any Restricted Subsidiary which constitute substantially all of
an operating unit or line of business of St. John Knits International or any    
Restricted Subsidiary; or (iii) any other property or asset of St. John Knits   
International or any Restricted Subsidiary outside of the ordinary course of    
business (including the receipt of proceeds paid on account of the loss of or   
damage to any property or asset and awards of compensation for any asset taken  
by condemnation, eminent domain or similar proceedings). For the purposes of    
this definition, the term "Asset Sale" shall not include (a) the creation of any
Lien not prohibited by "--Certain Covenants--Limitation on Liens" above;        
(b) sales of property or equipment that has become worn out, obsolete or damaged
or otherwise unsuitable for use in connection with the business of St. John     
Knits International or any Restricted Subsidiary, as the case may be; (c) any   
transaction consummated in compliance with "--Certain Covenants--Limitation on  
Restricted Payments" above; (d) any transfers of properties and assets between  
Restricted Subsidiaries or St. John Knits International and a Restricted        
Subsidiary; (e) the sale of Cash Equivalents in the ordinary course of business;
(f) a disposition of inventory in the ordinary course of business;              
(g) transactions permitted under "--Certain Covenants--Merger, Sale of Assets,  
etc."; (h) the sale or other disposition of assets owned by Amen Wardy Home     
Stores, LLC; and (i) the sale of accounts receivable, or participation therein, 
in connection with any Qualified Receivables Transactions. In addition, solely  
for purposes of "--Certain Covenants--Disposition of Proceeds of Asset Sales"   
above, any sale, conveyance, transfer, lease or other disposition of any        
property or asset, whether in one transaction or a series of related            
transactions, involving assets with a Fair Market Value not in excess of        
$2.5 million in any fiscal year shall be deemed not to be an Asset Sale.        

"ATTRIBUTABLE INDEBTEDNESS" in respect of a sale/leaseback transaction  
means, as at the time of determination, the present value (discounted at the    
interest rate borne by the notes, compounded semi-annually) of the total        
obligations of the lessee for rental payments during the remaining term of the  
lease included in such sale/leaseback transaction (including any period for     
which such lease has been extended).                                            

"BOARD RESOLUTION" means, with respect to any Person, a duly adopted    
resolution of the Board of Directors of such Person.                            

  "CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be properly capitalized on the balance sheet in accordance with    
GAAP.                                                                           

"CASH EQUIVALENTS" means: (a) U.S. dollars; (b) securities issued or    
directly and fully guaranteed or insured by the U.S. government or any agency or
instrumentality thereof having maturities of not more than one year from the    
date of acquisition; (c) certificates of deposit and eurodollar time deposits   
with                                                                            

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maturities of six months or less from the date of acquisition, bankers'         
acceptances with maturities not exceeding six months and overnight bank         
deposits, in each case with any domestic commercial bank having capital and     
surplus in excess of $500 million; (d) repurchase obligations with a term of not
more than seven days for underlying securities of the types described in clauses
(b) and (c) above entered into with any financial institution meeting the       
qualifications specified in clause (c) above; (e) commercial paper rated P-1,   
A-1 or the equivalent thereof by Moody's Investors Service, Inc. or Standard &  
Poor's Corporation, respectively, and in each case maturing within six months   
after the date of acquisition; and (f) money market funds at least 95% of the   
assets of which constitute Cash Equivalents of the kinds described in clauses   
(a) through (e) of this definition.                                             

"CHANGE OF CONTROL" means the occurrence of any of the following events 
(whether or not approved by the Board of Directors of St. John Knits            
International): (i) any Person (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act, including any group acting for the purpose of acquiring,   
holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under 
the Exchange Act), other than one or more Permitted Holders, is or becomes the  
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, 
except that a Person shall be deemed to have "beneficial ownership" of all      
shares that any such Person has the right to acquire, whether such right is     
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of greater than 35% of the total
voting power of the then outstanding Voting Equity Interests of St. John Knits  
International and such Person beneficially owns a greater percentage of the     
total voting power of the then outstanding Voting Equity Interests of St. John  
Knits International than the Permitted Holders; (ii) St. John Knits             
International or any of its Subsidiaries sells, assigns, conveys, transfers,    
leases or otherwise disposes (other than by way of merger or consolidation) of  
all or substantially all of the assets of St. John Knits International and its  
Subsidiaries (determined on a consolidated basis) to any Person (other than St. 
John Knits International or any Wholly Owned Restricted Subsidiary);            
(iii) during any period of two consecutive years, individuals who at the        
beginning of such period constituted the Board of Directors of St. John Knits   
International (together with any new directors whose election by such Board of  
Directors or whose nomination for election by the shareholders of St. John Knits
International was approved by a vote of a majority of the directors of St. John 
Knits International then still in office who were either directors at the       
beginning of such period or whose election or nomination for election was       
previously so approved) cease for any reason to constitute a majority of the    
Board of Directors of St. John Knits International then in office; or (iv) St.  
John Knits International is liquidated or dissolved or adopts a plan of         
liquidation or dissolution.                                                     

"CHANGE OF CONTROL DATE" has the meaning set forth under "--Offer to    
Purchase upon Change of Control" above.                                         

"CONSOLIDATED COVERAGE RATIO" as of any date of determination means the 
ratio of (i) the aggregate amount of Consolidated EBITDA for the four quarter   
period of the most recent four consecutive fiscal quarters for which financial  
statements are available ending prior to the date of such determination (the    
"Four Quarter Period") to (ii) Consolidated Fixed Charges for such Four Quarter 
Period; PROVIDED, HOWEVER, that (1) if St. John Knits International or any      
Restricted Subsidiary has incurred any Indebtedness since the beginning of such 
Four Quarter Period that remains outstanding on such date of determination or if
the transaction giving rise to the need to calculate the Consolidated Coverage  
Ratio is an Incurrence of Indebtedness, Consolidated EBITDA and Consolidated    
Fixed Charges for such Four Quarter Period shall be calculated after giving     
effect on a pro forma basis to such Indebtedness as if such Indebtedness had    
been Incurred on the first day of such Four Quarter Period and the discharge of 
any other Indebtedness repaid, repurchased or otherwise discharged with the     
proceeds of such new Indebtedness as if such discharge had occurred on the first
day of such Four Quarter Period, (2) if since the beginning of such Four Quarter
Period St. John Knits International or any Restricted Subsidiary shall have made
any Asset Sale, the Consolidated EBITDA for such Four Quarter Period            

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shall be reduced by an amount equal to the Consolidated EBITDA (if positive)    
directly attributable to the assets that are the subject of such Asset Sale for 
such Four Quarter Period or increased by an amount equal to the Consolidated    
EBITDA (if negative) directly attributable thereto for such Four Quarter Period 
and Consolidated Fixed Charges for such Four Quarter Period shall be reduced by 
an amount equal to the Consolidated Fixed Charges directly attributable to any  
Indebtedness of St. John Knits International or any Restricted Subsidiary       
repaid, repurchased or otherwise discharged with respect to St. John Knits      
International and its continuing Restricted Subsidiaries in connection with such
Asset Sale for such Four Quarter Period (or, if the Equity Interests of any     
Restricted Subsidiary are sold, the Consolidated Fixed Charges for such Four    
Quarter Period directly attributable to the Indebtedness of such Restricted     
Subsidiary to the extent St. John Knits International and its continuing        
Restricted Subsidiaries are no longer liable for such Indebtedness after such   
sale), (3) if since the beginning of such Four Quarter Period St. John Knits    
International or any Restricted Subsidiary (by merger or otherwise) shall have  
made an Investment in any Restricted Subsidiary (or any Person that becomes a   
Restricted Subsidiary) or an acquisition of assets, including any acquisition of
assets occurring in connection with a transaction causing a calculation to be   
made hereunder, which constitutes all or substantially all of an operating unit 
or a line of a business or which constitutes Replacement Assets, Consolidated   
EBITDA and Consolidated Fixed Charges for such Four Quarter Period shall be     
calculated after giving pro forma effect to (x) such Investment or acquisition  
of assets (including the Incurrence of any Indebtedness) as if such Investment  
or acquisition occurred on the first day of such Four Quarter Period and        
(y) net expense and cost reductions attributable to the assets acquired         
calculated on a basis consistent with the standards set forth in Regulation S-X 
under the Securities Act as in effect on the Issue Date and (4) if since the    
beginning of such Four Quarter Period any Person (that subsequently became a    
Restricted Subsidiary or was merged with or into St. John Knits International or
any Restricted Subsidiary since the beginning of such Four Quarter Period) shall
have made any Asset Sale or any Investment or acquisition of assets that would  
have required an adjustment pursuant to clause (2) or (3) above if made by St.  
John Knits International or a Restricted Subsidiary during such Four Quarter    
Period, Consolidated EBITDA and Consolidated Fixed Charges for such Four Quarter
Period shall be calculated after giving pro forma effect thereto as if such     
Asset Sale, Investment or acquisition of assets occurred on, with respect to any
Investment or acquisition, the first day of such Four Quarter Period and, with  
respect to any Asset Sale, the day prior to the first day of such Four Quarter  
Period. For purposes of this definition, whenever pro forma effect is to be     
given to an acquisition of assets, the amount of income or earnings relating    
thereto and the amount of Consolidated Fixed Charges associated with any        
Indebtedness Incurred in connection therewith, the pro forma calculations shall 
be determined in accordance with GAAP. If any Indebtedness bears a floating rate
of interest and is being given pro forma effect, the interest expense on such   
Indebtedness shall be calculated as if the rate in effect on the date of        
determination had been the applicable rate for the entire period (taking into   
account any agreement under which Hedging Obligations are outstanding applicable
to such Indebtedness if such agreement under which such Hedging Obligations are 
outstanding has a remaining term as at the date of determination in excess of   
12 months); PROVIDED, HOWEVER, that the Consolidated Fixed Charges of St. John  
Knits International attributable to interest on any Indebtedness Incurred under 
a revolving credit facility computed on a pro forma basis shall be computed     
based upon the average daily balance of such Indebtedness during the Four       
Quarter Period.                                                                 

    "CONSOLIDATED EBITDA" means, for any period, the Consolidated Net Income for
such period, plus, without duplication, the following to the extent deducted in 
calculating such Consolidated Net Income: (i) Consolidated Income Tax Expense   
for such period; (ii) Consolidated Interest Expense for such period;            
(iii) Consolidated Non-cash Charges for such period; (iv) step-ups in inventory 
valuation as a result of purchase accounting in connection with the acquisition 
of assets or Equity Interests; (v) costs not reimbursable by St. John Knits     
International's or any Subsidiary's insurance incurred in connection with any   
litigation and other legal proceedings to which St. John Knits International or 
such Subsidiary is currently a party (other than in connection with the         
settlement of the litigation concerning Amen                                    

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Wardy Home Stores, LLC), PROVIDED that such costs included in this clause (v)   
shall not exceed $1.0 million for all periods; (vi) cash charges not to exceed  
$1.0 million in connection with the settlement of the litigation concerning Amen
Wardy Home Stores, LLC, the acquisition of the remaining 49% interest in Amen   
Wardy Home Stores, LLC and the closure of certain Amen Wardy stores and related 
costs; and (vii) expenses related to the transactions; LESS (A) all non-cash    
items increasing Consolidated Net Income for such period and (B) all cash       
payments during such period relating to non-cash charges that were added back in
determining Consolidated EBITDA in any prior period.                            

"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any  
period, the sum, without duplication, of (i) Consolidated Interest Expense and  
(ii) the product of (x) the amount of all dividend payments on any series of    
Preferred Equity Interest of St. John Knits International and its Restricted    
Subsidiaries (other than dividends paid solely in Qualified Equity Interests and
other than unpaid dividends on the Preferred Stock) paid, accrued or scheduled  
to be paid or accrued during such period times (y) a fraction, the numerator of 
which is one and the denominator of which is one minus the then current         
effective consolidated federal, state and local tax rate of such Person,        
expressed as a decimal.                                                         

"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to St. John Knits 
International for any period, the provision for Federal, state, local and       
foreign income taxes payable by St. John Knits International and the Restricted 
Subsidiaries for such period as determined on a consolidated basis in accordance
with GAAP.                                                                      

"CONSOLIDATED INTEREST EXPENSE" means, with respect to St. John Knits   
International for any period, without duplication, the sum of (i) the interest  
expense of St. John Knits International and the Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, including,
without limitation, (a) any amortization of debt discount, (b) the net cost     
under Hedging Obligations, (c) the interest portion of any deferred payment     
obligation, (d) all commissions, discounts and other fees and charges owed with 
respect to letters of credit and bankers' acceptance financing, (e) all         
capitalized interest and all accrued interest and (f) the cash contributions to 
any employee stock ownership plan or similar trust to the extent such           
contributions are used by such plan or trust to pay interest or fees to any     
Person (other than St. John Knits International) in connection with Indebtedness
Incurred by such plan or trust; PROVIDED, HOWEVER, that there will be excluded  
therefrom any such interest expense of any Unrestricted Subsidiary to the extent
the related Indebtedness is not guaranteed or paid by St. John Knits            
International or any Restricted Subsidiary and (ii) interest expense            
attributable to Capitalized Lease Obligations and the interest portion of rent  
expense associated with Attributable Indebtedness in respect of the relevant    
lease giving rise thereto, determined as if such lease were a capitalized lease 
in accordance with GAAP, as determined for St. John Knits International and the 
Restricted Subsidiaries on a consolidated basis in accordance with GAAP.        

    "CONSOLIDATED NET INCOME" means, for any period, the consolidated net income
(loss) of St. John Knits International and the Restricted Subsidiaries          
determined in accordance with GAAP and before any reduction in respect of       
dividends paid solely in Qualified Equity Interests and before any reduction in 
respect of unpaid dividends on the Preferred Stock; PROVIDED, HOWEVER, that     
there shall not be included in such Consolidated Net Income: (i) any net income 
(loss) of any Person if such Person is not a Restricted Subsidiary, except      
(A) to the extent of cash actually distributed by such Person during such period
to St. John Knits International or a Restricted Subsidiary as a dividend or     
other distribution, (B) with respect to foreign joint ventures, to the extent   
that cash is available for distribution (without restriction and not committed  
for other purposes) during such period to St. John Knits International or a     
Restricted Subsidiary as a dividend or other distribution, but is not           
distributed due to adverse tax or other business reasons, such cash shall be    
included and (C) St. John Knits International's equity in a net loss of any such
Person (other than an Unrestricted Subsidiary) for such                         

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period shall be included in determining such Consolidated Net Income; (ii) any  
net income (loss) of any person acquired by St. John Knits International or a   
Restricted Subsidiary in a pooling of interests transaction for any period prior
to the date of such acquisition; (iii) any net income (but not loss) of any     
Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, 
directly or indirectly, on the payment of dividends or the making of            
distributions by such Restricted Subsidiary, directly or indirectly, to St. John
Knits International to the extent of such restrictions; (iv) any gain or loss,  
together with any related provision for taxes on such gain or loss, realized    
upon the sale or other disposition of any asset of St. John Knits International 
or the Restricted Subsidiaries (including pursuant to any sale/leaseback        
transaction) outside of the ordinary course of business; (v) any extraordinary  
gain or loss, together with any related provision for taxes on such             
extraordinary gain or loss; (vi) the cumulative effect of a change in accounting
principles; (vii) any restoration to income of any contingency reserve of an    
extraordinary, non-recurring or unusual nature, except to the extent that       
provision for such reserve was made out of Consolidated Net Income accrued at   
any time following the Issue Date; (viii) gains and losses resulting from       
foreign currency transaction adjustments; (ix) gains and losses on assets that  
are marked to market; (x) any costs and expenses related to the transactions    
incurred on or immediately after the Issue Date, including the settlement of all
outstanding options; and (xi) non-cash expenses resulting from the grant of     
Equity Interests and other compensation to management personnel of St. John     
Knits International and its Subsidiaries pursuant to a written plan or agreement
or the treatment of options under variable plan accounting.                     

   "CONSOLIDATED NET WORTH" of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with    
GAAP, less (without duplication) amounts attributable to Disqualified Equity    
Interests of such Person.                                                       

  "CONSOLIDATED NON-CASH CHARGES" means, with respect to any Person, for any
period the sum of (i) depreciation, (ii) amortization and (iii) all non-cash    
extraordinary charges and other non-cash expenses of such Person and its        
Restricted Subsidiaries reducing Consolidated Net Income of such Person and its 
Restricted Subsidiaries for such period, determined on a consolidated basis in  
accordance with GAAP (excluding, for purposes of clause (iii) only, such charges
which require an accrual of or a reserve for cash charges for any future period)
including, without limitation, non-cash charges in connection with the          
settlement of the litigation concerning Amen Wardy Home Stores, LLC, the        
acquisition of the remaining 49% interest in Amen Wardy Home Stores, LLC and the
closure of certain Amen Wardy stores and related costs.                         

 "CREDIT FACILITY" means the Credit Agreement, dated as of the Issue Date,
among St. John Knits International, the lenders named therein, and The Chase    
Manhattan Bank, as Administrative Agent, and any and all guarantee agreements,  
security agreements and other agreements and instruments relating thereto, in   
each case as the same may be amended, modified, supplemented or replaced from   
time to time, and including any deferrals, renewals, extensions, replacements,  
refinancings or refundings thereof, or amendments, modifications or supplements 
thereto and any agreement providing therefor (including any restatements thereof
and any increases in the amount of the commitments or Indebtedness thereunder), 
whether by or with the same or any other lender, creditor, group of lenders or  
group of creditors, and including related notes, guarantee and note agreements  
and other instruments and agreements executed in connection therewith.          

   "DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.                                 

"DESIGNATED SENIOR INDEBTEDNESS" means (a) any Indebtedness outstanding 
under the Credit Facility and (b) after the Credit Facility has been terminated 
and all Indebtedness thereunder has been repaid in full, any other Senior       
Indebtedness which, at the time of determination, has an aggregate principal    
amount outstanding, together with any commitments to lend additional amounts, of
at least $10.0 million, if the instrument governing such Senior Indebtedness    
expressly states that such                                                      

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Indebtedness is "Designated Senior Indebtedness" for purposes of the indenture  
and a Board Resolution setting forth such designation by St. John Knits         
International has been filed with the Trustee.                                  

"DESIGNATION" has the meaning set forth under "--Certain                
Covenants--Designation of Unrestricted Subsidiaries" above.                     

"DESIGNATION AMOUNT" has the meaning set forth under "--Certain         
Covenants--Designation of Unrestricted Subsidiaries" above.                     

  "DISPOSITION" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person 
is the Surviving Person) or the sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of such Person's assets.          

    "DISQUALIFIED EQUITY INTEREST" means any Equity Interest which, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable at the option of the holder thereof), or upon the happening of any 
event, matures or is mandatorily redeemable, pursuant to a sinking fund         
obligation or otherwise, or redeemable, at the option of the holder thereof     
(except, in each case, upon the occurrence of a Change of Control or Asset      
Sale), in whole or in part, or exchangeable into Indebtedness on or prior to the
earlier of the maturity date of the notes or the date on which no notes remain  
outstanding.                                                                    

  "DOMESTIC RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of St. John
Knits International organized under the laws of the United States or any        
political subdivision thereof or the operations of which are located            
substantially inside the United States.                                         

   "EQUITY INTEREST" in any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or       
interests in (however designated) corporate stock or other equity               
participations, including partnership interests, whether general or limited, in 
such Person, including any Preferred Equity Interests.                          

"EXCHANGE ACT" means the Exchange Act, as amended, and the rules and    
regulations promulgated by the SEC thereunder.                                  

  "EXPIRATION DATE" has the meaning set forth in the definition of "Offer to
Purchase" below.                                                                

"FAIR MARKET VALUE" means, with respect to any asset, the price (after  
taking into account any liabilities relating to such assets) which could be     
negotiated in an arm's-length free market transaction, for cash, between a      
willing seller and a willing and able buyer, neither of which is under any      
compulsion to complete the transaction; PROVIDED, HOWEVER, that the Fair Market 
Value of any such asset or assets shall be determined conclusively by the Board 
of Directors of St. John Knits International acting in good faith, and shall be 
evidenced by resolutions of the Board of Directors of St. John Knits            
International delivered to the Trustee.                                         

 "FOREIGN RESTRICTED SUBSIDIARY" means a Restricted Subsidiary of St. John
Knits International not organized under the laws of the United States or any    
political subdivision thereof and the operations of which are located and       
conducted substantially outside of the United States.                           

"FOUR QUARTER PERIOD" has the meaning set forth in the definition of    
"Consolidated Coverage Ratio" above.                                            

"GAAP" means generally accepted accounting principles in effect in the  
United States on the date hereof and which are consistently applied for all     
applicable periods.                                                             

    "GRAY COMMON STOCK" means common stock of St. John Knits International owned
by Robert E. Gray, Marie Gray or Kelly A. Gray.                                 

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    "GUARANTEE" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course  
of business), direct or indirect, in any manner, of any part or all of such     
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,  
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of   
such obligation, including, without limiting the foregoing, the payment of      
amounts drawn down by letters of credit.                                        

"GUARANTEE" means the guarantee of the notes by each Guarantor under the
indenture.                                                                      

"GUARANTOR" means (i) each Domestic Restricted Subsidiary (other than a 
Receivables Entity) in existence on the Issue Date and (ii) each other          
Restricted Subsidiary formed, created or acquired before or after the Issue Date
required to become a Guarantor after the Issue Date pursuant to "--Limitation on
Guarantees by Restricted Subsidiaries" above.                                   

    "GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any Guarantor, at any
date, (a) all Obligations of such Guarantor under or in respect of the Credit   
Facility; (b) all Hedging Obligations of such Guarantor; (c) all Obligations of 
such Guarantor under stand-by letters of credit; and (d) all other Indebtedness 
of such Guarantor for borrowed money, including principal, premium, if any, and 
interest (including Post-Petition Interest) on such Indebtedness unless the     
instrument under which such Indebtedness of such Guarantor for money borrowed is
Incurred expressly provides that such Indebtedness for money borrowed is not    
senior or superior in right of payment to such Guarantor's Guarantee of the     
notes, and all renewals, extensions, modifications, amendments or refinancings  
thereof. Notwithstanding the foregoing, Guarantor Senior Indebtedness shall not 
include (a) to the extent that it may constitute Indebtedness, any Obligation   
for federal, state, local or other taxes; (b) any Indebtedness among or between 
such Guarantor and any Subsidiary of such Guarantor or any Affiliate of such    
Guarantor or any of such Affiliate's Subsidiaries; unless, and for so long as   
such Indebtedness has been pledged to secure obligations under or in respect of 
Guarantor Senior Indebtedness; (c) to the extent that it may constitute         
Indebtedness, any Obligation in respect of any trade payable Incurred for the   
purchase of goods or materials, or for services obtained, in the ordinary course
of business; (d) that portion of any Indebtedness that is Incurred in violation 
of the indenture; (e) Indebtedness evidenced by such Guarantor's Guarantee of   
the notes; (f) Indebtedness of such Guarantor that is expressly subordinate or  
junior in right of payment to any other Indebtedness of such Guarantor; (g) to  
the extent that it may constitute Indebtedness, any obligation owing under      
leases (other than Capitalized Lease Obligations) or management agreements;     
(h) any obligation that by operation of law is subordinate to any general       
unsecured obligations of such Guarantor; and (i) Indebtedness of a Guarantor to 
the extent such Indebtedness is owed to and held by any Federal, state, local or
other governmental authority.                                                   

 "GUARANTOR SENIOR SUBORDINATED INDEBTEDNESS" means the Guarantees and any
other Indebtedness of a Guarantor that specifically provides that such          
Indebtedness is to rank PARI PASSU in right of payment with the Guarantees and  
is not subordinated by its terms in right of payment to any Indebtedness or     
other obligation of the Guarantor other than Guarantor Senior Indebtedness.     

"HEDGING AGREEMENT" means, with respect to any Person, all interest rate
swap or similar agreements or foreign currency or commodity hedge, exchange or  
similar agreements of such Person.                                              

   "HEDGING OBLIGATIONS" means, with respect to any Person, the Obligations of
such Person under Hedging Agreements.                                           

"HOLDERS" means the registered holders of the notes.                    

  "INCUR" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (including by conversion, exchange or           
otherwise), assume, guarantee or otherwise become liable in respect of such     
Indebtedness or other obligation or the recording, as required pursuant to GAAP 
or otherwise, of any such Indebtedness or other obligation on the balance sheet 
of such Person (and                                                             

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"Incurrence," "Incurred" and "Incurring" shall have meanings correlative to the 
foregoing). Indebtedness of any Acquired Person or any of its Subsidiaries      
existing at the time such Acquired Person becomes a Restricted Subsidiary (or is
merged into or consolidated with St. John Knits International or any Restricted 
Subsidiary), whether or not such Indebtedness was Incurred in connection with,  
as a result of, or in contemplation of, such Acquired Person becoming a         
Restricted Subsidiary (or being merged into or consolidated with St. John Knits 
International or any Restricted Subsidiary), shall be deemed Incurred at the    
time any such Acquired Person becomes a Restricted Subsidiary or merges into or 
consolidates with St. John Knits International or any Restricted Subsidiary.    

"INDEBTEDNESS" means (without duplication), with respect to any Person, 
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed;      
(b) every obligation of such Person evidenced by bonds, debentures, notes or    
other similar instruments, including obligations incurred in connection with the
acquisition of property, assets or businesses; (c) every reimbursement          
obligation of such Person with respect to letters of credit, bankers'           
acceptances or similar facilities issued for the account of such Person;        
(d) every obligation of such Person issued or assumed as the deferred purchase  
price of property or services (but excluding trade accounts payable incurred in 
the ordinary course of business and payable in accordance with industry         
practices, or other accrued liabilities arising in the ordinary course of       
business which are not overdue or which are being contested in good faith);     
(e) every Capital Lease Obligation of such Person; (f) every net obligation     
under Hedging Agreements of such Person; (g) every obligation of the type       
referred to in clauses (a) through (f) of another Person and all dividends of   
another Person the payment of which, in either case, such Person has guaranteed 
or is responsible or liable for, directly or indirectly, as obligor, guarantor  
or otherwise; and (h) any and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any liability of the kind   
described in any of the preceding clauses (a) through (g) above. Indebtedness   
(a) shall never be calculated taking into account any cash and cash equivalents 
held by such Person; (b) shall not include obligations of any Person            
(x) arising from the honoring by a bank or other financial institution of a     
check, draft or similar instrument inadvertently drawn against insufficient     
funds in the ordinary course of business, provided that such obligations are    
extinguished within two business days of their incurrence, (y) resulting from   
the endorsement of negotiable instruments for collection in the ordinary course 
of business and consistent with past business practices and (z) under stand-by  
letters of credit to the extent collateralized by cash or Cash Equivalents;     
(c) which provides that an amount less than the principal amount thereof shall  
be due upon any declaration of acceleration thereof shall be deemed to be       
incurred or outstanding in an amount equal to the accreted value thereof at the 
date of determination; and (d) shall include the liquidation preference and any 
mandatory redemption payment obligations in respect of any Disqualified Equity  
Interests of St. John Knits International or any Restricted Subsidiary.         

  "INDEPENDENT FINANCIAL ADVISOR" means a nationally recognized, accounting,
appraisal, investment banking firm or consultant which, in the judgment of the  
Board of Directors of St. John Knits International, is independent and qualified
to perform the task for which it is to be engaged.                              

 "INSOLVENCY OR LIQUIDATION PROCEEDING" means, with respect to any Person,
any liquidation, dissolution or winding up of such Person, or any bankruptcy,   
reorganization, insolvency, receivership or similar proceeding with respect to  
such Person, whether voluntary or involuntary.                                  

 "INTEREST" means, with respect to the notes, the sum of any cash interest
and any Liquidated Damages (as defined under "Exchange and Registration Rights" 
below) on the notes.                                                            

    "INVESTMENT" means, with respect to any Person, any direct or indirect loan,
advance, guarantee or other extension of credit or capital contribution to (by  
means of transfers of cash or other property or assets to others or payments for
property or services for the account or use of others, or otherwise), or        
purchase or acquisition of capital stock, bonds, notes, debentures or other     
securities or evidences of Indebtedness issued by, any other Person; PROVIDED   
that (i) endorsements of negotiable instruments and                             

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documents in the ordinary course of business and (ii) an acquisition of assets, 
Equity Interests or other securities by St. John Knits International for        
consideration consisting exclusively of Equity Interests (other than            
Disqualified Equity Interests) of St. John Knits International shall in each    
case not be deemed to be an Investment. For purposes of the "Limitation on      
Restricted Payments" covenant above, (i) "Investment" shall include the         
applicable Designation Amount at the time of the Designation of any Restricted  
Subsidiary as an Unrestricted Subsidiary and (ii) the amount of any Investment  
shall be the original cost of such Investment, plus the cost of all additions   
thereto, but without any other adjustments for increases or decreases in value, 
or write-ups, write-downs or write-offs with respect to such Investment; reduced
by the payment of dividends or distributions in connection with such Investment 
or any other amounts received in respect of such Investment; PROVIDED, HOWEVER, 
that no such payment of dividends or distributions or receipt of any such other 
amounts shall reduce the amount of any Investment if such payment of dividends  
or distributions or receipt of any such amounts would be included in            
Consolidated Net Income. If St. John Knits International or any Restricted      
Subsidiary sells or otherwise disposes of any Voting Equity Interests of any    
direct or indirect Restricted Subsidiary such that, after giving effect to any  
such sale or disposition, St. John Knits International no longer owns, directly 
or indirectly, greater than 50% of the outstanding Voting Equity Interests of   
such Restricted Subsidiary, St. John Knits International shall be deemed to have
made an Investment on the date of any such sale or disposition.                 

   "ISSUE DATE" means July 7, 1999, the original issue date of the outstanding
notes.                                                                          

  "LIEN" means any lien, mortgage, charge, security interest, hypothecation,
assignment for security or encumbrance of any kind (including any conditional   
sale or capital lease or other title retention agreement, any lease in the      
nature thereof, and any agreement to give any security interest).               

   "MANAGEMENT AGREEMENT" means the management agreement dated as of the Issue
Date between St. John Knits International and Vestar.                           

    "MATURITY DATE" means the date, which is set forth on the face of the notes,
on which the notes will mature.                                                 

    "NET CASH PROCEEDS" means the aggregate proceeds in the form of cash or Cash
Equivalents received by St. John Knits International or any Restricted          
Subsidiary in respect of any Asset Sale, including all cash or Cash Equivalents 
received upon any sale, liquidation or other exchange of proceeds of Asset Sales
received in a form other than cash or Cash Equivalents, net of (a) the direct   
costs relating to such Asset Sale (including, without limitation, legal,        
accounting and investment banking fees, and sales commissions) and any          
relocation expenses incurred as a result thereof; (b) taxes paid or payable as a
result thereof (after taking into account any available tax credits or          
deductions and any tax sharing arrangements); (c) amounts required to be applied
to the repayment of Indebtedness secured by a Lien on the asset or assets that  
were the subject of such Asset Sale; (d) amounts deemed, in good faith,         
appropriate by the Board of Directors of St. John Knits International to be     
provided as a reserve, in accordance with GAAP, against any liabilities         
associated with such assets which are the subject of such Asset Sale; including,
without limitation, pension and other post-employment benefit liabilities,      
liabilities related to environmental matters and liabilities under any          
indemnification obligations associated with such Asset Sale, all as reflected in
an officers' certificate delivered to the Trustee (provided that the amount of  
any such reserves shall be deemed to constitute Net Cash Proceeds at the time   
such reserves shall have been reversed or are not otherwise required to be      
retained as a reserve); and (e) with respect to Asset Sales by Restricted       
Subsidiaries, the portion of such cash payments attributable to Persons holding 
a minority interest in such Restricted Subsidiary.                              

   "OBLIGATIONS" means any principal, interest (including, without limitation,
Post-Petition Interest), penalties, fees, indemnification obligations,          
reimbursement obligations, obligations to provide cash collateral, damages and  
other liabilities payable under the documentation governing any Indebtedness.   

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  "OFFER" has the meaning set forth in the definition of "Offer to Purchase"
below.                                                                          

    "OFFER TO PURCHASE" means a written offer (the "Offer") sent by or on behalf
of St. John Knits International by first-class mail, postage prepaid, to each   
Holder at his address appearing in the register for the notes on the date of the
Offer offering to purchase up to the principal amount of notes specified in such
Offer at the purchase price specified in such Offer (as determined pursuant to  
the indenture if so required). Unless otherwise required by applicable law, the 
Offer shall specify an expiration date (the "Expiration Date") of the Offer to  
Purchase, which shall be not less than 20 business days nor more than 60 days   
after the date of such Offer, and a settlement date (the "Purchase Date") for   
purchase of notes to occur no later than five business days after the Expiration
Date. St. John Knits International shall notify the Trustee at least 15 business
days (or such shorter period as is acceptable to the Trustee) prior to the      
mailing of the Offer of St. John Knits International's obligation to make an    
Offer to Purchase, and the Offer shall be mailed by St. John Knits International
or, at St. John Knits International's request, by the Trustee in the name and at
the expense of St. John Knits International. The Offer shall contain all the    
information required by applicable law to be included therein. The Offer shall  
contain all instructions and materials necessary to enable such Holders to      
tender notes pursuant to the Offer to Purchase. The Offer shall also state:     
(1) the section of the indenture pursuant to which the Offer to Purchase is     
being made; (2) the Expiration Date and the Purchase Date; (3) the aggregate    
principal amount of the outstanding notes offered to be purchased by St. John   
Knits International pursuant to the Offer to Purchase (including, if less than  
100%, the manner by which such amount has been determined pursuant to the       
section of the indenture requiring the Offer to Purchase) (the "Purchase        
Amount"); (4) the purchase price to be paid by St. John Knits International for 
each $1,000 aggregate principal amount of notes accepted for payment (as        
specified pursuant to the indenture) (the "Purchase Price"); (5) that the Holder
may tender all or any portion of the notes registered in the name of such Holder
and that any portion of a note tendered must be tendered in an integral multiple
of $1,000 principal amount; (6) the place or places where notes are to be       
surrendered for tender pursuant to the Offer to Purchase; (7) that interest on  
any note not tendered or tendered but not purchased by St. John Knits           
International pursuant to the Offer to Purchase will continue to accrue;        
(8) that on the Purchase Date the Purchase Price will become due and payable    
upon each note being accepted for payment pursuant to the Offer to Purchase and 
that interest thereon shall cease to accrue on and after the Purchase Date;     
(9) that each Holder electing to tender all or any portion of a note pursuant to
the Offer to Purchase will be required to surrender such note at the place or   
places specified in the Offer prior to the close of business on the Expiration  
Date (such note being, if St. John Knits International or the Trustee so        
requires, duly endorsed by, or accompanied by a written instrument of transfer  
in form satisfactory to St. John Knits International and the Trustee duly       
executed by, the Holder thereof or his attorney duly authorized in writing);    
(10) that (a) if notes in an aggregate principal amount less than or equal to   
the Purchase Amount are duly tendered and not withdrawn pursuant to the Offer to
Purchase, St. John Knits International shall purchase all such notes and (b) if 
notes in an aggregate principal amount in excess of the Purchase Amount are     
tendered and not withdrawn pursuant to the Offer to Purchase, St. John Knits    
International shall purchase notes having an aggregate principal amount equal to
the Purchase Amount on a PRO RATA basis (with such adjustments as may be deemed 
appropriate so that only notes in denominations of $1,000 principal amount or   
integral multiples thereof shall be purchased); and (11) that in the case of any
Holder whose note is purchased only in part, St. John Knits International shall 
execute and the Trustee shall authenticate and deliver to the Holder of such    
note without service charge, a new note or notes, of any authorized denomination
as requested by such Holder, in an aggregate principal amount equal to and in   
exchange for the unpurchased portion of the note so tendered.                   

 An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.                                   

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"OPINION OF COUNSEL" means a written opinion from legal counsel who is  
reasonably acceptable to the Trustee. The counsel may be an employee of or      
counsel to St. John Knits International, Vestar or the Trustee.                 

   "PERMITTED BUSINESS" means the business of St. John Knits International and
its Restricted Subsidiaries conducted on the Issue Date and businesses ancillary
or reasonably related thereto, including businesses whose principal strategy is 
to capitalize on the image of St. John Knits International and its products.    

"PERMITTED HOLDER" means Vestar and its Affiliates.                     

  "PERMITTED INDEBTEDNESS" has the meaning set forth in the second paragraph
of "--Certain Covenants--Limitation on Indebtedness" above.                     

"PERMITTED INVESTMENTS" means (a) Cash and Cash Equivalents;            
(b) Investments in prepaid expenses, negotiable instruments held for collection 
and lease, utility and workers' compensation, performance and other similar     
deposits; (c) Hedging Obligations; (d) bonds, notes, debentures, stock or other 
securities received as a result of Asset Sales permitted under "--Certain       
Covenants--Disposition of Proceeds of Asset Sales" above; (e) Investments in St.
John Knits International and Investments in a Guarantor or a Person that, as a  
result of or in connection with such Investment, becomes a Guarantor or is      
merged with or into or consolidated with St. John Knits International or another
Guarantor or that transfers or conveys all or substantially all its assets to   
St. John Knits International or a Guarantor; (f) Investments existing as of the 
Issue Date; (g) any Investment consisting of a guarantee by a Restricted        
Subsidiary of Senior Indebtedness or any guarantee of Indebtedness otherwise    
permitted by the indenture; (h) receivables owing to St. John Knits             
International or any Restricted Subsidiary created or acquired in the ordinary  
course of business and payable or dischargeable in accordance with customary    
trade terms; PROVIDED, HOWEVER, that such trade terms may include such          
concessionary trade terms as St. John Knits International or any such Restricted
Subsidiary deems reasonable under the circumstances; (i) payroll, travel and    
similar advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses for accounting purposes and that are made  
in the ordinary course of business; (j) Investments in joint ventures in an     
aggregate amount not to exceed $5.0 million; (k) stock, obligations or          
securities received in settlement of debts created in the ordinary course of    
business and owing to St. John Knits International or any Restricted Subsidiary 
or in satisfaction of judgments or pursuant to any plan of reorganization or    
similar arrangement upon the bankruptcy or insolvency of a debtor;              
(l) Investments by St. John Knits International or a Restricted Subsidiary in a 
Receivables Entity or any Investment by a Receivables Entity in any other       
Person, in each case, in connection with a Qualified Receivables Transaction;   
(m) Indebtedness permitted pursuant to clause (m) of "--Certain                 
Covenants--Limitation on Indebtedness"; (n) Investments by St. John Knits       
International or a Restricted Subsidiary in St. John Japan for the purpose of   
purchasing minority interests therein in an aggregate amount not to exceed      
$1.5 million and (o) Investments in Foreign Restricted Subsidiaries which are   
not Guarantors in an aggregate amount not to exceed $10.0 million.              

"PERMITTED JUNIOR SECURITIES" means any securities of St. John Knits    
International or any other Person that are (i) equity securities without special
covenants or (ii) debt securities expressly subordinated in right of payment to 
all Senior Indebtedness that may at the time be outstanding, to substantially   
the same extent as, or to a greater extent than, the notes are subordinated as  
provided in the indenture, in any event pursuant to a court order so providing  
and as to which (a) the rate of interest on such securities shall not exceed the
effective rate of interest on the notes on the date of the indenture, (b) such  
securities shall not be entitled to the benefits of covenants or defaults       
materially more beneficial to the holders of such securities than those in      
effect with respect to the notes on the date of the indenture and (c) such      
securities shall not provide for amortization (including sinking fund and       
mandatory prepayment provisions) commencing prior to the date six months        
following the final                                                             

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scheduled maturity date of the Senior Indebtedness (as modified by the plan of  
reorganization pursuant to which such securities are issued).                   

 "PERMITTED LIENS" means (a) Liens on property of a Person existing at the
time such Person is merged into or consolidated with St. John Knits             
International or any Restricted Subsidiary; PROVIDED, HOWEVER,that such Liens   
were in existence prior to the contemplation of such merger or consolidation and
do not secure any property or assets of St. John Knits International or any     
Restricted Subsidiary other than the property or assets subject to the Liens    
prior to such merger or consolidation; (b) Liens imposed by law such as         
carriers', warehousemen's and mechanics' Liens and other similar Liens arising  
in the ordinary course of business which secure payment of obligations not more 
than 60 days past due or which are being contested in good faith and by         
appropriate proceedings; (c) Liens existing on the Issue Date; (d) Liens        
securing only the notes or the Guarantees; (e) Liens in favor of St. John Knits 
International or any Restricted Subsidiary (including any such Liens securing   
Indebtedness, to the extent and for so long as such Indebtedness is pledged to  
secure Senior Indebtedness); (f) Liens for taxes, assessments or governmental   
charges or claims that are not yet delinquent or that are being contested in    
good faith by appropriate proceedings promptly instituted and diligently        
conducted; PROVIDED, HOWEVER, that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made therefor;        
(g) easements, reservation of rights of way, restrictions and other similar     
easements, licenses, restrictions on the use of properties, or minor            
imperfections of title that in the aggregate do not in any case materially      
detract from the properties subject thereto or interfere with the ordinary      
conduct of the business of St. John Knits International and the Restricted      
Subsidiaries; (h) Liens resulting from the deposit of cash or notes in          
connection with contracts, tenders or expropriation proceedings, or to secure   
workers' compensation, surety or appeal bonds, costs of litigation when required
by law and public and statutory obligations or obligations under franchise      
arrangements entered into in the ordinary course of business; (i) Liens securing
Indebtedness consisting of Capital Lease Obligations, Purchase Money            
Indebtedness, mortgage financings, industrial revenue bonds or other monetary   
obligations, in each case incurred solely for the purpose of financing all or   
any part of the purchase price or cost of construction or installation of assets
used in the business of St. John Knits International or the Restricted          
Subsidiaries, or repairs, additions or improvements to such assets, PROVIDED,   
HOWEVER, that (I) such Liens secure Indebtedness in an amount not in excess of  
the original purchase price or the original cost of any such assets or repair,  
addition or improvement thereto (plus an amount equal to the reasonable fees and
expenses in connection with the incurrence of such Indebtedness), (II) such     
Liens do not extend to any other assets of St. John Knits International or the  
Restricted Subsidiaries (and, in the case of repair, addition or improvements to
any such assets, such Lien extends only to the assets (and improvements thereto 
or thereon) repaired, added to or improved), (III) the Incurrence of such       
Indebtedness is permitted by "--Certain Covenants--Limitation on Indebtedness"  
above and (IV) such Liens attach within 90 days of such purchase, construction, 
installation, repair, addition or improvement; (j) Liens in favor of issuers of 
surety or performance bonds or letters of credit or bankers' acceptances issued 
pursuant to the request of and for the account of such Person in the ordinary   
course of its business; PROVIDED, HOWEVER, that such letters of credit do not   
constitute Indebtedness; (k) Liens securing Hedging Obligations so long as the  
related Indebtedness is, and is permitted to be under the indenture, secured by 
a Lien on the same property securing such Hedging Obligation; (l) leases and    
subleases of real property which do not materially interfere with the ordinary  
conduct of the business of St. John Knits International or any of its Restricted
Subsidiaries; (m) judgment Liens not giving rise to an Event of Default so long 
as such Lien is adequately bonded and any appropriate legal proceedings which   
may have been duly initiated for the review of such judgment have not been      
finally terminated or the period within which such proceedings may be initiated 
has not expired, (n) Liens arising solely by virtue of any statutory or common  
law provisions relating to banker's Liens, rights of set-off or similar rights  
and remedies as to deposit accounts or other funds maintained with a depositary 
institution; PROVIDED that (1) such deposit account is not a dedicated cash     
collateral account and is not subject to restrictions against access by St. John
Knits International in excess of those set forth by regulations promulgated by  
the Federal Reserve                                                             

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Board, and (2) such deposit account is not intended by St. John Knits           
International or any Restricted Subsidiary to provide collateral to the         
depositary institution; (o) Liens arising from Uniform Commercial Code financing
statement filings regarding operating leases entered into by St. John Knits     
International and its Restricted Subsidiaries in the ordinary course of         
business; (p) Liens on property at the time St. John Knits International or a   
Restricted Subsidiary acquired the property, including any acquisition by means 
of a merger or consolidation with or into St. John Knits International or any   
Restricted Subsidiary; PROVIDED, HOWEVER, that such Liens are not created,      
incurred or assumed in connection with or in contemplation of, such acquisition;
PROVIDED, FURTHER, HOWEVER, that such Liens may not extend to any other property
owned by St. John Knits International or any Restricted Subsidiary; (q) Liens   
securing Indebtedness or other obligations of a Restricted Subsidiary owing to  
St. John Knits International or a Restricted Subsidiary; (r) Liens on assets    
transferred to a Receivables Entity or on assets of a Receivables Entity, in    
either case incurred in connection with a Qualified Receivables Transaction;    
(s) Liens arising out of consignment or similar arrangements for the sale of    
goods entered into by St. John Knits International or any Restricted Subsidiary 
in the ordinary course of business; (t) Liens incurred in the ordinary course of
business of St. John Knits International or any Restricted Subsidiary with      
respect to obligations that do not exceed $5.0 million at any one time          
outstanding and that (1) are not incurred in connection with the borrowing of   
money or the obtaining of advances or credit (other than trade credit in the    
ordinary course of business) and (2) do not in the aggregate materially detract 
from the value of the property or materially impair the use thereof in the      
operation of business by St. John Knits International or such Restricted        
Subsidiary; and (u) Liens to secure any refinancings, renewals, extensions,     
modifications or replacements (collectively, "refinancing") (or successive      
refinancings), in whole or in part, of any Indebtedness secured by Liens        
referred to in the clauses above so long as such Lien does not extend to any    
other property (other than improvements thereto).                               

"PERSON" means any individual, corporation, partnership, joint venture, 
association, joint-stock company, limited liability company, limited liability  
limited partnership, trust, unincorporated organization or government or any    
agency or political subdivision thereof.                                        

"POST-PETITION INTEREST" means, with respect to any Indebtedness of any 
Person, all interest accrued or accruing on such Indebtedness after the         
commencement of any Insolvency or Liquidation Proceeding with respect to such   
Person in accordance with and at the contract rate (including, without          
limitation, any rate applicable upon default) specified in the agreement or     
instrument creating, evidencing or governing such Indebtedness, whether or not, 
pursuant to applicable law or otherwise, the claim for such interest is allowed 
or allowable as a claim in such Insolvency or Liquidation Proceeding.           

   "PREFERRED EQUITY INTEREST", in any Person, means an Equity Interest of any
class or classes (however designated) which is preferred as to the payment of   
dividends or distributions, or as to the distribution of assets upon any        
voluntary or involuntary liquidation or dissolution of such Person, over Equity 
Interests of any other class in such Person.                                    

"PREFERRED STOCK" means the 15 1/4% Preferred Stock of St. John Knits   
International issued on the Issue Date and any Qualified Equity Interest of St. 
John Knits International issued in exchange for or the net proceeds of which are
used to redeem the Preferred Stock.                                             

"PRINCIPAL" of a debt security means the principal of the security plus,
when appropriate, the premium, if any, on the security.                         

"PUBLIC EQUITY OFFERING" means, with respect to St. John Knits          
International, an underwritten public offering of Qualified Equity Interests of 
St. John Knits International pursuant to an effective registration statement    
filed under the Securities Act (excluding registration statements filed on      
Form S-8).                                                                      

  "PURCHASE AMOUNT" has the meaning set forth in the definition of "Offer to
Purchase" above.                                                                

"PURCHASE DATE" has the meaning set forth in the definition of "Offer to
Purchase" above.                                                                

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"PURCHASE MONEY INDEBTEDNESS" means Indebtedness of St. John Knits      
International or any Restricted Subsidiary Incurred for the purpose of financing
all or any part of the purchase price, or the cost of construction or           
improvement of any property; PROVIDED, HOWEVER, that the aggregate principal    
amount of such Indebtedness does not exceed the lesser of the Fair Market Value 
of such property or such purchase price or cost, including any refinancing of   
such Indebtedness that does not increase the aggregate principal amount (or     
accreted amount, if less) thereof as of the date of refinancing.                

"PURCHASE MONEY NOTE" means a promissory note of a Receivables Entity   
evidencing a line of credit, which may be irrevocable, from St. John Knits      
International or any Restricted Subsidiary of St. John Knits International in   
connection with a Qualified Receivables Transaction to a Receivables Entity,    
which note is repayable from cash available to the Receivables Entity, other    
than amounts required to be established as reserves pursuant to agreements,     
amounts paid to investors in respect of interest, principal and other amounts   
owing to such investors and amounts owing to such investors and amounts paid in 
connection with the purchase of newly generated accounts receivable.            

 "PURCHASE PRICE" has the meaning set forth in the definition of "Offer to
Purchase" above.                                                                

   "QUALIFIED EQUITY INTEREST" in any Person means any Equity Interest in such
Person other than any Disqualified Equity Interest.                             

"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of  
transactions that may be entered into by St. John Knits International or any of 
its Restricted Subsidiaries pursuant to which St. John Knits International or   
any of its Restricted Subsidiaries may sell, convey or otherwise transfer to    
(1) a Receivables Entity (in the case of a transfer by St. John Knits           
International or any of its Restricted Subsidiaries) and (2) any other Person   
(in the case of a transfer by a Receivables Entity), or may grant a security    
interest in, any accounts receivable (whether now existing or arising in the    
future) of St. John Knits International or any of its Restricted Subsidiaries,  
and any assets related thereto including, without limitation, all collateral    
securing such accounts receivable, all contracts and all guarantees or other    
obligations in respect of such accounts receivable, the proceeds of such        
receivables and other assets which are customarily transferred, or in respect of
which security interests are customarily granted in connection with asset       
securitization involving accounts receivable.                                   

   "RECEIVABLES ENTITY" means a Wholly Owned Restricted Subsidiary of St. John
Knits International (other than a Guarantor) which engages in no activities     
other than in connection with the financing of accounts receivable and which is 
designated by the board of directors of St. John Knits International (as        
provided below) as a Receivables Entity:                                        

       (1) no portion of the Indebtedness or any other obligations (contingent
or otherwise) of which:                                                 

         (a) is guaranteed by St. John Knits International or any Restricted
 Subsidiary of St. John Knits International (excluding guarantees of
      Obligations (other than the principal of, and interest on, Indebtedness)
pursuant to Standard Securitization Undertakings);                

         (b) is recourse to or obligates St. John Knits International or any
    Restricted Subsidiary of St. John Knits International in any way other
than pursuant to Standard Securitization Undertakings; or         

           (c) subjects any property or asset of St. John Knits International or
    any Restricted Subsidiary of St. John Knits International, directly or
       indirectly, contingently or otherwise, to the satisfaction thereof, other
than pursuant to Standard Securitization Undertakings;            

      (2) with which neither St. John Knits International nor any Restricted
Subsidiary of St. John Knits International has any material contract,   
agreement, arrangement or understanding (except in connection with a    
Purchase Money Note or Qualified Receivables Transaction) other than on 
  terms no less favorable to St. John Knits International or such Restricted
  Subsidiary than those that might be obtained at the time from Persons that
are not Affiliates of St. John Knits                                    

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    International, other than fees payable in the ordinary course of business in
connection with servicing accounts receivable; and                      

    (3) to which neither St. John Knits International nor any Restricted
    Subsidiary of St. John Knits International has any obligation to maintain or
  preserve such entity's financial condition or cause such entity to achieve
certain levels of operating results.                                    

Any such designation by the board of directors of St. John Knits        
International shall be evidenced to the Trustee by filing with the Trustee a    
certified copy of the resolution of the board of directors of St. John Knits    
International giving effect to such designation and an officers' certificate    
certifying that such designation complied with the foregoing conditions.        

"REDEMPTION DATE" has the meaning set forth in the third paragraph of   
"--Optional Redemption" above.                                                  

   "REPLACEMENT ASSETS" has the meaning set forth in the first paragraph under
"--Certain Covenants--Disposition of Proceeds of Asset Sales" above.            

    "RESTRICTED SUBSIDIARY" means any Subsidiary of St. John Knits International
that has not been designated by the Board of Directors of St. John Knits        
International, by a resolution of the Board of Directors of St. John Knits      
International delivered to the Trustee, as an Unrestricted Subsidiary pursuant  
to "--Certain Covenants--Designation of Unrestricted Subsidiaries" above. Any   
such designation may be revoked by a resolution of the Board of Directors of St.
John Knits International delivered to the Trustee, subject to the provisions of 
such covenant.                                                                  

"SEC" means the Securities and Exchange Commission.                     

 "SENIOR INDEBTEDNESS" means, at any date, (a) all Obligations of St. John
Knits International under or in respect of the Credit Facility; (b) all Hedging 
Obligations of St. John Knits International; (c) all Obligations of St. John    
Knits International under stand-by letters of credit; and (d) all other         
Indebtedness of St. John Knits International for borrowed money, including      
principal, premium, if any, and interest (including Post-Petition Interest) on  
such Indebtedness, unless the instrument under which such Indebtedness of St.   
John Knits International for money borrowed is Incurred expressly provides that 
such Indebtedness for money borrowed is not senior or superior in right of      
payment to the notes, and all renewals, extensions, modifications, amendments or
refinancings thereof. Notwithstanding the foregoing, Senior Indebtedness shall  
not include (a) to the extent that it may constitute Indebtedness, any          
Obligation for Federal, state, local or other taxes; (b) any Indebtedness among 
or between St. John Knits International and any Subsidiary of St. John Knits    
International or any Affiliate of St. John Knits International or any of such   
Affiliate's Subsidiaries, unless and for so long as such Indebtedness has been  
pledged to secure obligations under or in respect of Senior Indebtedness;       
(c) to the extent that it may constitute Indebtedness, any Obligation in respect
of any trade payable Incurred for the purchase of goods or materials, or for    
services obtained, in the ordinary course of business; (d) that portion of any  
Indebtedness that is Incurred in violation of the indenture; (e) Indebtedness   
evidenced by the notes; (f) Indebtedness of St. John Knits International that is
expressly subordinate or junior in right of payment to any other Indebtedness of
St. John Knits International; (g) to the extent that it may constitute          
Indebtedness, any obligation owing under leases (other than Capitalized Lease   
Obligations) or management agreements; (h) any obligation that by operation of  
law is subordinate to any general unsecured obligations of St. John Knits       
International; and (i) Indebtedness of St. John Knits International to the      
extent such Indebtedness is owed to and held by any Federal, state, local or    
other governmental authority.                                                   

"SENIOR SUBORDINATED INDEBTEDNESS" means the notes and any other        
Indebtedness of St. John Knits International that specifically provides that    
such Indebtedness is to rank PARI PASSU in right of payment with the notes and  
is not subordinated by its terms in right of payment to any Indebtedness or     
other obligation of St. John Knits International which is not Senior            
Indebtedness.                                                                   

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"SIGNIFICANT RESTRICTED SUBSIDIARY" means any Restricted Subsidiary that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of       
Regulation S-X promulgated pursuant to the Securities Act, as such regulation is
in effect on the date hereof.                                                   

 "STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties,
covenants and indemnities entered into by St. John Knits International or any   
Restricted Subsidiary of St. John Knits International which are reasonably      
customary in securitization of accounts receivable transactions.                

"STATED MATURITY" means, when used with respect to any note or any      
installment of interest thereon, the date specified in such note as the fixed   
date on which the principal of such note or such installment of interest is due 
and payable.                                                                    

  "STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement among St. John
Knits, Inc., St. John Knits International, Vestar/Gray Investors LLC, Vestar/SJK
Investors LLC and the members of Vestor/ Gray Investors LLC party thereto dated 
as of, and as in effect on, the Issue Date.                                     

"SUBORDINATED INDEBTEDNESS" means, with respect to St. John Knits       
International or any Guarantor, any Indebtedness of St. John Knits International
or such Guarantor, as the case may be, which is expressly subordinated in right 
of payment to the notes or such Guarantor's Guarantee, as the case may be.      

    "SUBSIDIARY" means, with respect to any Person, (a) any corporation of which
the outstanding Voting Equity Interests having at least a majority of the votes 
entitled to be cast in the election of directors shall at the time be owned,    
directly or indirectly, through one or more Persons by such Person, or (b) any  
other Person of which at least a majority of Voting Equity Interests are at the 
time, directly or indirectly, owned by such first named Person.                 

"SURVIVING PERSON" means, with respect to any Person involved in or that
makes any Disposition, the Person formed by or surviving such Disposition or the
Person to which such Disposition is made.                                       

    "UNITED STATES GOVERNMENT OBLIGATIONS" means direct non-callable obligations
of the United States of America for the payment of which the full faith and     
credit of the United States is pledged.                                         

"UNRESTRICTED SUBSIDIARY" means any Subsidiary of St. John Knits        
International designated as such pursuant to "--Certain Covenants--Designation  
of Unrestricted Subsidiaries" above. Any such designation may be revoked by a   
resolution of the Board of Directors of St. John Knits International delivered  
to the Trustee, subject to the provisions of such covenant.                     

"UNUTILIZED NET CASH PROCEEDS" has the meaning set forth in the third   
paragraph under "--Certain Covenants--Disposition of Proceeds of Asset Sales"   
above.                                                                          

"VESTAR" means Vestar Capital Partners III, L.P.                        

    "VESTAR/GRAY LLC AGREEMENT" means the Amended and Restated Limited Liability
Company Agreement of Vestar/Gray Investors LLC, by and among Vestar/SJK         
Investors LLC, Robert Gray, Marie Gray, Kelly A. Gray, the Kelly Ann Gray Trust 
and the Gray Family Trust dated as of, and as in effect on, the Issue Date.     

  "VOTING EQUITY INTERESTS" means Equity Interests in a corporation or other
Person with voting power under ordinary circumstances entitling the holders     
thereof to elect the Board of Directors or other governing body of such         
corporation or Person.                                                          

   "WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (a) the sum of the        
products obtained by multiplying (i) the amount of each then remaining          
installment, sinking fund, serial maturity or other required scheduled payment  
of principal, including payment of final maturity, in respect thereof, by       
(ii) the number of years (calculated to the nearest one-twelfth) that will      
elapse between such date and the making of such payment, by (b) the then        
outstanding aggregate principal amount of such Indebtedness.                    

   "WHOLLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary all of
the outstanding Voting Equity Interests (other than directors' qualifying       
shares) of which are owned, directly or indirectly, by St. John Knits           
International and/or one or more Wholly Owned Restricted Subsidiaries.          

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DESCRIPTION OF PREFERRED STOCK

 The summary contained herein of certain provisions of the Preferred Stock
issued by St. John Knits International (the "Issuer") in connection with the    
transactions does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Certificate of Designations relating thereto,
a copy of which has been filed as an exhibit to the registration statement of   
which this prospectus is a part.                                                

GENERAL                                                                         

Pursuant to the Certificate of Designations, 250,000 shares of Preferred
Stock with a liquidation preference of $100 per share were authorized for       
issuance in connection with the transactions. The Preferred Stock will rank     
junior in right of payment to all liabilities and obligations (whether or not   
for borrowed money) of the Issuer (other than common stock of the Issuer and any
preferred stock of the Issuer which by its terms is on parity with or junior to 
the Preferred Stock).                                                           

RANK                                                                            

   The Preferred Stock will, with respect to the dividend rights and rights on
liquidation, winding-up and dissolution, rank (i) senior to all classes of      
common stock and each other class of capital stock or series of preferred stock 
issued by the Issuer established after the Issue Date by the board of directors 
of the Issuer which does not expressly provide that it ranks senior to or on a  
parity with the Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution (collectively referred to with the common stock of   
the Issuer as "Junior Securities"); (ii) on a parity with each other class of   
capital stock or series of preferred stock issued by the Issuer established     
after the Issue Date by the board of directors of the Issuer, which expressly   
provides that such series will rank on a parity with the Preferred Stock as to  
dividend rights and rights on liquidation, winding-up and dissolution           
(collectively referred to as "Parity Securities"); and (iii) junior to each     
other class of capital stock or series of preferred stock issued by the Issuer  
established after the Issue Date by the board of directors of the Issuer the    
terms of which specifically provide that such series will rank senior to the    
Preferred Stock as to dividend rights and rights on liquidation, winding-up and 
dissolution (collectively referred to as "Senior Securities"). The Preferred    
Stock will be subject to the issuance of series of Junior Securities, Parity    
Securities and Senior Securities.                                               

DIVIDENDS                                                                       

Holders of Preferred Stock will be entitled to receive, when, as and if 
declared by the board of directors of the Issuer, out of funds legally available
therefor, dividends on the Preferred Stock, at an annual rate equal to 15 1/4%, 
PROVIDED that if dividends are not paid on a dividend payment date, dividends   
shall continue to accrue on unpaid dividends. Dividends on the Preferred Stock  
may only be paid in cash if permitted under the terms of the senior credit      
facilities, the indenture and other contractual arrangements of St. John Knits  
International. Dividends will accrue from the date of issuance and will be      
payable semi-annually in arrears on January 1 and July 1 of each year,          
commencing on January 1, 2000. The indenture would permit the payment of cash   
dividends on the Preferred Stock only if the Issuer has availability under      
clause (c) of the test set forth under "Description of the Notes-Certain        
Covenants-Limitation on Restricted Payments." The senior credit facilities      
prohibit the payment of cash dividends on the Preferred Stock for five years    
after the Issue Date.                                                           

OPTIONAL REDEMPTION                                                             

    The Preferred Stock may be redeemed at any time on or after July 1, 2004, in
whole or in part, at the option of the Issuer, at the redemption prices         
(expressed in percentages of liquidation value) set                             

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forth below together with all accumulated dividends to the date of redemption,  
if redeemed during the 12-month period beginning on July 1 of the years         
indicated.                                                                      

                                                                [Download Table]

YEAR                                                           PERCENTAGE
----                                                           ----------
                                                                         
2004........................................................    107.625% 
2005........................................................    105.719% 
2006........................................................    103.813% 
2007........................................................    101.906% 
2008 and thereafter.........................................    100.000% 

The Preferred Stock will also be redeemable in whole or in part, at the 
option of SJKI at any time before July 1, 2004, at a redemption price equal to  
the greater of (i) 100% of the liquidation value of the Preferred Stock and     
(ii) the present values of the liquidation value at the mandatory redemption    
date, discounted on a semi-annual basis at the Treasury Yield plus 15 basis     
points. The "Treasury Yield" means, with respect to any redemption date, the    
rate per annum equal to the semi-annual equivalent yield to maturity for a      
comparable treasury issue.                                                      

   In addition, at any time and from time to time on or prior to July 1, 2002,
the Issuer may redeem in the aggregate up to 35% of the originally issued       
liquidation value of the Preferred Stock with the net cash proceeds of one or   
more Public Equity Offerings (as defined in the indenture) by St. John Knits    
International at a redemption price in cash equal to 115.25% of the liquidation 
value thereof, plus accumulated dividends thereon, if any, to the date of       
redemption; PROVIDED, HOWEVER, that at least 65% of the originally issued       
aggregate liquidation value of the Preferred Stock must remain outstanding      
immediately after giving effect to each such redemption (excluding any Preferred
Stock held by the Issuer or any of its affiliates). Notice of any such          
redemption must be given within 60 days after the date of the closing of the    
relevant Public Equity Offering of St. John Knits International.                

    The Preferred Stock may only be redeemed if permitted under the terms of the
senior credit facilities, the indenture and other contractual arrangements of   
St. John Knits International.                                                   

MANDATORY REDEMPTION                                                            

On July 1, 2010, the Issuer will be required to redeem (subject to      
contractual and other restrictions with respect thereto and to the legal        
availability of funds therefor) all outstanding shares of Preferred Stock at a  
price equal to the liquidation value thereof plus all accumulated dividends to  
the date of redemption.                                                         

RIGHT OF APPOINTMENT                                                            

    Upon the failure of the Issuer to redeem all outstanding shares of Preferred
Stock as described above under the caption "Mandatory Redemption", or upon the  
failure by the Issuer or any of its Restricted Subsidiaries (as defined in the  
Certificate of Designations) to comply with any of the covenants or agreements  
set forth in the Certificate of Designations, and the continuance of any such   
failure for 60 consecutive days or more, the number of members of the board of  
directors of the Issuer will be increased by one and the holders of a majority  
of the outstanding aggregate liquidation preference of the Preferred Stock,     
acting as a separate class, will be entitled to appoint one member to the board 
of directors of the Issuer.                                                     

EXCHANGE                                                                        

The Issuer may, at its option, exchange all but not less than all of the
shares of then outstanding Preferred Stock for debentures of the Issuer in a    
principal amount equal to the liquidation value of the Preferred Stock plus     
accumulated dividends. The exchange debentures will bear interest at 15 1/4% per
annum, have a final stated maturity of July 1, 2010, have optional redemption   
provisions comparable to                                                        

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the Preferred Stock and will have customary covenants and events of default. The
Issuer may not cause the exchange of Preferred Stock for debentures unless      
permitted under the terms of the senior credit facilities, the indenture and    
other contractual arrangements of SJKI.                                         

CHANGE OF CONTROL                                                               

Upon a change of control of St. John Knits International, the holders of
Preferred Stock will have the right to require St. John Knits International to  
repurchase the Preferred Stock at 101% of liquidation value, plus accumulated   
dividends to the date of repurchase, to the extent permitted under the terms of 
the senior credit facilities, the indenture and other contractual arrangements  
of St. John Knits International.                                                

VOTING RIGHTS                                                                   

Holders of the Preferred Stock will have no voting rights, except as    
provided under Delaware law.                                                    

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS 
OF THE EXCHANGE OFFER 

EXCHANGE OF NOTES                                                               

 The following summary describes the material United States federal income
tax considerations of the exchange offer. The exchange of outstanding notes for 
exchange notes in the exchange offer will not constitute a taxable event to you.
Consequently, no gain or loss will be recognized by you upon receipt of an      
exchange note, the holding period of the exchange notes will include the holding
period of the outstanding note and the basis of the exchange notes will be the  
same as the basis of the outstanding note immediately before the exchange.      

IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OUTSTANDING NOTES FOR 
EXCHANGE NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED      
STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS  
AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING          
JURISDICTION.                                                                   

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BOOK-ENTRY; DELIVERY AND FORM 

 The exchange notes will initially be represented by one or more permanent
global notes in definitive, fully registered book-entry form, without interest  
coupons, that will be deposited with, or on behalf of, The Depository Trust     
Company and registered in the name of The Depository Trust Company or its       
nominee, on behalf of the acquirors of exchange notes represented thereby for   
credit to the respective accounts of the acquirors, or to such other accounts as
they may direct, at The Depository Trust Company, or Morgan Guaranty Trust      
Company of New York, Brussels Office, as operator of the Euroclear System, or   
Cedel Bank, societe anonyme. See "The Exchange Offer--Book-entry Transfer."     

    Except as set forth below, the global notes may be transferred, in whole and
not in part, solely to another nominee of The Depository Trust Company or to a  
successor of The Depository Trust Company or its nominee. Beneficial interests  
in the global notes may not be exchanged for notes in physical, certificated    
form except in the limited circumstances described below.                       

    All interests in the global notes, including those held through Euroclear or
Cedel, may be subject to the procedures and requirements of The Depository Trust
Company. Those interests held through Euroclear or Cedel may also be subject to 
the procedures and requirements of such systems.                                

CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES                              

 The descriptions of the operations and procedures of The Depository Trust
Company, Euroclear and Cedel set forth below are provided solely as a matter of 
convenience. These operations and procedures are solely within the control of   
the respective settlement systems and are subject to change by them from time to
time. We take no responsibility for these operations or procedures, and         
investors are urged to contact the relevant system or its participants directly 
to discuss these matters.                                                       

The Depository Trust Company has advised SJKI that it is:               

    (i) a limited purpose trust company organized under the laws of the State of
New York,                                                         

(ii) a "banking organization" within the meaning of the New York Banking
Law,                                                              

(iii) a member of the Federal Reserve System,                           

  (iv) a "clearing corporation" within the meaning of the Uniform Commercial
Code, as amended, and                                             

  (v) a "clearing agency" registered pursuant to Section 17A of the Exchange
Act, as amended (the "Exchange Act").                             

The Depository Trust Company was created to hold securities for its     
participants (collectively, the "Participants") and facilitates the clearance   
and settlement of securities transactions between Participants through          
electronic book-entry changes to the accounts of its Participants, thereby      
eliminating the need for physical transfer and delivery of certificates. The    
Depository Trust Company's Participants include securities brokers and dealers  
(including the Initial Purchasers), banks and trust companies, clearing         
corporations and certain other organizations. Indirect access to The Depository 
Trust Company's system is also available to other entities such as banks,       
brokers, dealers and trust companies (collectively, the "Indirect Participants")
that clear through or maintain a custodial relationship with a Participant,     
either directly or indirectly. Investors who are not Participants may           
beneficially own securities held by or on behalf of The Depository Trust Company
only through Participants or Indirect Participants.                             

    SJKI expects that pursuant to procedures established by The Depository Trust
Company ownership of the notes will be shown on, and the transfer of ownership  
thereof will be effected only through, records maintained by The Depository     
Trust Company (with respect to the interests of Participants)                   

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and the records of Participants and the Indirect Participants (with respect to  
the interests of persons other than Participants).                              

The laws of some jurisdictions may require that certain purchasers of   
securities take physical delivery of such securities in definitive form.        
Accordingly, the ability to transfer interests in the notes represented by a    
global note to such persons may be limited. In addition, because The Depository 
Trust Company can act only on behalf of its Participants, who in turn act on    
behalf of persons who hold interests through such Participants, the ability of a
person having an interest in notes represented by a global note to pledge or    
transfer such interest to persons or entities that do not participate in The    
Depository Trust Company's system, or to otherwise take actions in respect of   
such interest, may be affected by the lack of a physical definitive security in 
respect of such interest.                                                       

So long as The Depository Trust Company or its nominee is the registered
owner of a global note, The Depository Trust Company or such nominee, as the    
case may be, will be considered the sole owner or holder of the notes           
represented by the global note for all purposes under the indenture. Except as  
provided below, owners of beneficial interests in a global note will not be     
entitled to have notes represented by such global note registered in their      
names, will not receive or be entitled to receive physical delivery of          
Certificated Notes, and will not be considered the owners or holders thereof    
under the indenture for any purpose, including with respect to the giving of any
direction, instruction or approval to the Trustee thereunder. Accordingly, each 
holder owning a beneficial interest in a global note must rely on the procedures
of The Depository Trust Company and, if such holder is not a Participant or an  
Indirect Participant, on the procedures of the Participant through which such   
holder owns its interest, to exercise any rights of a holder of notes under the 
indenture or such global note. SJKI understands that under existing industry    
practice, in the event that SJKI requests any action of holders of notes, or a  
holder that is an owner of a beneficial interest in a global note desires to    
take any action that The Depository Trust Company, as the holder of such global 
note, is entitled to take, The Depository Trust Company would authorize the     
Participants to take such action and the Participants would authorize holders   
owning through such Participants to take such action or would otherwise act upon
the instruction of such holders. Neither SJKI nor the Trustee will have any     
responsibility or liability for any aspect of the records relating to or        
payments made on account of notes by The Depository Trust Company, or for       
maintaining, supervising or reviewing any records of The Depository Trust       
Company relating to such notes.                                                 

  Payments with respect to the principal of, and premium, if any, liquidated
damages, if any, and interest on, any notes represented by a global note        
registered in the name of The Depository Trust Company or its nominee on the    
applicable record date will be payable by the Trustee to or at the direction of 
The Depository Trust Company or its nominee in its capacity as the registered   
holder of the global note representing such notes under the indenture. Under the
terms of the indenture, SJKI and the Trustee may treat the persons in whose     
names the notes, including the global notes, are registered as the owners       
thereof for the purpose of receiving payment thereon and for any and all other  
purposes whatsoever. Accordingly, neither SJKI nor the Trustee has or will have 
any responsibility or liability for the payment of such amounts to owners of    
beneficial interests in a global note (including principal, premium, if any,    
liquidated damages, if any, and interest). Payments by the Participants and the 
Indirect Participants to the owners of beneficial interests in a global note    
will be governed by standing instructions and customary industry practice and   
will be the responsibility of the Participants or the Indirect Participants and 
The Depository Trust Company.                                                   

Transfers between Participants in The Depository Trust Company will be  
effected in accordance with The Depository Trust Company's procedures, and will 
be settled in same-day funds. Transfers between participants in Euroclear or    
Cedel will be effected in the ordinary way in accordance with their respective  
rules and operating procedures.                                                 

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Subject to compliance with the transfer restrictions applicable to the  
notes, cross-market transfers between the Participants in The Depository Trust  
Company, on the one hand, and Euroclear or Cedel participants, on the other     
hand, will be effected through The Depository Trust Company in accordance with  
The Depository Trust Company's rules on behalf of Euroclear or Cedel, as the    
case may be, by its respective depositary; however, such cross-market           
transactions will require delivery of instructions to Euroclear or Cedel, as the
case may be, by the counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time) of such system. 
Euroclear or Cedel, as the case may be, will, if the transaction meets its      
settlement requirements, deliver instructions to its respective depositary to   
take action to effect final settlement on its behalf by delivering or receiving 
interests in the relevant global notes in The Depository Trust Company, and     
making or receiving payment in accordance with normal procedures for same-day   
funds settlement applicable to The Depository Trust Company. Euroclear          
participants and Cedel participants may not deliver instructions directly to the
depositories for Euroclear or Cedel.                                            

  Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a global note from a Participant in 
The Depository Trust Company will be credited, and any such crediting will be   
reported to the relevant Euroclear or Cedel participant, during the securities  
settlement processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of The Depository Trust Company. Cash 
received in Euroclear or Cedel as a result of sales of interest in a global note
by or through a Euroclear or Cedel participant to a Participant in The          
Depository Trust Company will be received with value on the settlement date of  
The Depository Trust Company but will be available in the relevant Euroclear or 
Cedel cash account only as of the business day for Euroclear or Cedel following 
The Depository Trust Company's settlement date.                                 

 Although The Depository Trust Company, Euroclear and Cedel have agreed to
the foregoing procedures to facilitate transfers of interests in the global     
notes among participants in The Depository Trust Company, Euroclear and Cedel,  
they are under no obligation to perform or to continue to perform such          
procedures, and such procedures may be discontinued at any time. Neither SJKI   
nor the Trustee will have any responsibility for the performance by The         
Depository Trust Company, Euroclear or Cedel or their respective participants or
indirect participants of their respective obligations under the rules and       
procedures governing their operations.                                          

CERTIFICATED NOTES                                                              

If:                                                                     

  (i) SJKI notifies the Trustee in writing that The Depository Trust Company
   is no longer willing or able to act as a depositary or The Depository
  Trust Company ceases to be registered as a clearing agency under the
     Exchange Act and a successor depositary is not appointed within 90 days
of such notice or cessation,                                      

   (ii) SJKI, at its option, notifies the Trustee in writing that it elects to
   cause the issuance of notes in definitive form under the indenture or

(iii) upon the occurrence of certain other events as provided in the    
indenture,                                                        

then, upon surrender by The Depository Trust Company of the global notes,       
certificated notes will be issued to each person that The Depository Trust      
Company identifies as the beneficial owner of the notes represented by the      
global notes. Upon any such issuance, the Trustee is required to register such  
certificated notes in the name of such person or persons (or the nominee of any 
thereof) and cause the same to be delivered thereto.                            

    Neither SJKI nor the Trustee shall be liable for any delay by The Depository
Trust Company or any Participant or Indirect Participant in identifying the     
beneficial owners of the related notes and each                                 

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such person may conclusively rely on, and shall be protected in relying on,     
instructions from The Depository Trust Company for all purposes (including with 
respect to the registration and delivery, and the respective principal amounts, 
of the notes to be issued).                                                     

YEAR 2000                                                                       

The Depository Trust Company's management is aware that some computer   
applications, systems, and the like for processing data ("Systems") that are    
dependent upon calendar dates, including dates before, on, and after January 1, 
2000, may encounter "Year 2000 problems." The Depository Trust Company has      
informed its Participants and other members of the financial community (the     
"Industry") that it has developed and is implementing a program so that its     
Systems, as the same relate to the timely payment of distributions (including   
principal and income payments) to securityholders, book-entry deliveries and    
settlement of trades within The Depository Trust Company ("DTC Services"),      
continue to function appropriately. This program includes a technical assessment
and a remediation plan, each of which is complete. Additionally, The Depository 
Trust Company's plan includes a testing phase, which is expected to be completed
within appropriate time frames.                                                 

However, The Depository Trust Company's ability to perform properly its 
services is also dependent upon other parties, including but not limited to     
issuers and their agents, as well as third party vendors from whom The          
Depository Trust Company licenses software and hardware, and third party vendors
on whom The Depository Trust Company relies for information or the provision of 
services, including telecommunication and electrical utility service providers, 
among others. The Depository Trust Company has informed the Industry that it is 
contacting (and will continue to contact) third party vendors from whom The     
Depository Trust Company acquires services to: (i) impress upon them the        
importance of such services being Year 2000 compliant; and (ii) determine the   
extent of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, The Depository Trust Company is in the process  
of developing such contingency plans as it deems appropriate.                   

 According to The Depository Trust Company, the foregoing information with
respect to The Depository Trust Company has been provided to the industry for   
informational purposes only and is not intended to serve as a representation,   
warranty, or contract modification of any kind.                                 

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EXCHANGE AND REGISTRATION RIGHTS

  St. John Knits International, the guarantors and the initial purchasers of
the outstanding notes entered into the exchange and registration rights         
agreement concurrently with the issuance of the outstanding notes. Pursuant to  
the exchange and registration rights agreement, St. John Knits International and
the guarantors agreed to:                                                       

     (i) file with the Commission on or prior to 90 days after the date of
 issuance of the outstanding notes a registration statement on Form S-1 or
Form S-4, if the use of such form is then available (the "exchange offer
registration statement") relating to a registered exchange offer for the
outstanding notes and the guarantees under the Securities Act and       

  (ii) use their reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities Act
within 150 days after the Issue Date. As soon as practicable after the  
  effectiveness of the exchange offer registration statement, St. John Knits
International and the guarantors will offer to the holders of Transfer  
  Restricted Securities (as defined below) who are not prohibited by any law
or policy of the Commission from participating in the exchange offer the
    opportunity to exchange their Transfer Restricted Securities for an issue of
exchange notes, guaranteed by the guarantors, that are identical in all 
  material respects to the outstanding notes (except that the exchange notes
    will not contain terms with respect to transfer restrictions) and that would
    be registered under the Securities Act. St. John Knits International and the
  guarantors will keep the exchange offer open for not less than 30 days (or
    longer, if required by applicable law) after the date on which notice of the
exchange offer is mailed to the holders of the outstanding notes.       

If:                                                                     

      (i) because of any change in law or applicable interpretations thereof
by the staff of the Commission, St. John Knits International and the    
 guarantors are not permitted to effect the exchange offer as contemplated
hereby,                                                                 

    (ii) any outstanding notes validly tendered pursuant to the exchange
    offer are not exchanged for exchange notes within 180 days after the date of
issuance of the outstanding notes,                                      

     (iii) the initial purchasers of the outstanding notes so request with
    respect to outstanding notes not eligible to be exchanged for exchange notes
in the exchange offer,                                                  

      (iv) any applicable law or interpretations do not permit any holder of
outstanding notes to participate in the exchange offer,                 

     (v) any holder of outstanding notes that participates in the exchange
 offer does not receive freely transferable exchange notes in exchange for
tendered outstanding notes or                                           

(vi) St. John Knits International and the guarantors so elect,  

then St. John Knits International and the guarantors will file with the         
Commission a shelf registration statement to cover resales of Transfer          
Restricted Securities by such holders who satisfy certain conditions relating to
the provision of information in connection with the shelf registration          
statement. For purposes of the foregoing, "Transfer Restricted Securities" means
each outstanding note until:                                                    

    (i) the date on which such outstanding note has been exchanged for a
freely transferable exchange note in the exchange offer;                

 (ii) the date on which such outstanding note has been effectively
  registered under the Securities Act and disposed of in accordance with the
shelf registration statement or                                         

   (iii) the date on which such outstanding note is distributed to the
   public pursuant to Rule 144 under the Securities Act or is salable pursuant
to Rule 144(k) under the Securities Act.                                

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 St. John Knits International and the guarantors will use their reasonable
best efforts to have the exchange offer registration statement or, if           
applicable, the shelf registration statement (each, a "Registration Statement") 
declared effective by the Commission as promptly as practicable after the filing
thereof. Unless the exchange offer would not be permitted by a policy of the    
Commission, St. John Knits International and the guarantors will commence the   
exchange offer and will use their reasonable best efforts to consummate the     
exchange offer as promptly as practicable, but in any event prior to 180 days   
after the date of issuance of the outstanding notes. If applicable, St. John    
Knits International and the guarantors will use their reasonable best efforts to
keep the shelf registration statement effective for a period of two years after 
the Issue Date or such shorter period when all outstanding notes covered by the 
shelf registration statement have been sold in the manner set forth above and as
contemplated in the shelf registration statement or when the outstanding notes  
become eligible for resale pursuant to Rule 144 under the Securities Act without
volume restrictions, if any.                                                    

If:                                                                     

(i) the applicable Registration Statement is not filed with the 
Commission on or prior to 90 days after the date of issuance of the     
outstanding notes (or, in the case of a shelf registration statement    
required to be filed in response to a change in law or applicable       
interpretations of the Staff of the Commission, if later, within 45 days
  after publication of such change in law or interpretation, but in no event
before 90 days after the date of issuance of the outstanding notes);    

        (ii) the exchange offer registration statement or the shelf registration
statement, as the case may be, is not declared effective within 150 days
 after the date of issuance of the outstanding notes (or, in the case of a
    shelf registration statement required to be filed in response to a change in
   law or applicable interpretations of the Staff of the Commission, if later,
 within 60 days after publication of such change in law or interpretation,
but in no event before 150 days after the date of issuance of the       
outstanding notes);                                                     

   (iii) the exchange offer is not consummated on or prior to 180 days
    after the date of issuance of the outstanding notes (other than in the event
St. John Knits International files a shelf registration statement); or  

     (iv) the shelf registration statement is filed and declared effective
   within the time periods specified in clause (ii) above but shall thereafter
    cease to be effective (at any time that St. John Knits International and the
guarantors are obligated to maintain the effectiveness thereof) without 
    being succeeded within 45 days by an additional Registration Statement filed
  and declared effective (each such event referred to in clauses (i) through
(iv), a "Registration Default"),                                        

St. John Knits International and the guarantors will be obligated to pay        
liquidated damages ("Liquidated Damages") to each holder of Transfer Restricted 
Securities, during the period of one or more such Registration Defaults, in an  
amount equal to $0.192 per week per $1,000 principal amount of the outstanding  
notes constituting Transfer Restricted Securities held by such holder until the 
applicable Registration Statement is filed, the exchange offer registration     
statement is declared effective and the exchange offer is consummated or the    
shelf registration statement is declared effective or again becomes effective,  
as the case may be. All accrued Liquidated Damages shall be paid to holders in  
the same manner as interest payments on the outstanding notes on semi-annual    
payment dates which correspond to interest payment dates for the outstanding    
notes. Following the cure of all Registration Defaults, the accrual of          
Liquidated Damages will cease.                                                  

  The exchange and registration rights agreement also provides that St. John
Knits International and the guarantors (i) shall make available for a period of 
180 days after the consummation of the exchange offer a prospectus meeting the  
requirements of the Securities Act to any broker-dealer for use in connection   
with any resale of any such exchange notes and (ii) shall pay all expenses      
incident to the exchange offer (including the expense of one counsel to the     
holders of the outstanding notes) and                                           

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will indemnify certain holders of the outstanding notes (including any broker-  
dealer) against certain liabilities, including liabilities under the Securities 
Act. A broker-dealer which delivers such a prospectus to purchasers in          
connection with such resales will be subject to certain of the civil liability  
provisions under the Securities Act and will be bound by the provisions of the  
exchange and registration rights agreement (including certain indemnification   
rights and obligations).                                                        

Each holder of outstanding notes who wishes to exchange such outstanding
notes for exchange notes in the exchange offer will be required to make certain 
representations, including representations that:                                

   (i) any exchange notes to be received by it will be acquired in the
ordinary course of its business;                                        

(ii) it has no arrangement or understanding with any person to  
participate in the distribution of the exchange notes; and              

(iii) it is not an "affiliate" (as defined in Rule 405 under the
  Securities Act) of St. John Knits International, or if it is an affiliate,
that it will comply with the registration and prospectus delivery       
requirements of the Securities Act to the extent applicable.            

   If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of the 
exchange notes. If the holder is a broker-dealer that will receive exchange     
notes for its own account in exchange for outstanding notes that were acquired  
as a result of market-making activities or other trading activities (an         
"Exchanging Dealer"), it will be required to acknowledge that it will deliver a 
prospectus in connection with any resale of such exchange notes.                

Holders of the outstanding notes will be required to make certain       
representations to St. John Knits International and the guarantors (as described
above) in order to participate in the exchange offer and will be required to    
deliver information to be used in connection with the shelf registration        
statement in order to have their outstanding notes included in the shelf        
registration statement and benefit from the provisions regarding liquidated     
damages set forth in the preceding paragraphs. A holder who sells outstanding   
notes pursuant to the shelf registration statement generally will be required to
be named as a selling securityholder in the related prospectus and to deliver a 
prospectus to purchasers, will be subject to certain of the civil liability     
provisions under the Securities Act in connection with such sales and will be   
bound by the provisions of the exchange and registration rights agreement which 
are applicable to such a holder (including certain indemnification obligations).

    For so long as the notes are outstanding, St. John Knits International, upon
request, will continue to provide to holders of the notes and to prospective    
purchasers of the notes the information required by Rule 144A(d)(4) under the   
Securities Act.                                                                 

   The foregoing description of the exchange and registration rights agreement
is a summary only, does not purport to be complete and is qualified in its      
entirety by reference to all provisions of the exchange and registration rights 
agreement. A copy of the exchange and registration rights agreement has been    
filed as an exhibit to the registration statement of which this prospectus forms
a part.                                                                         

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PLAN OF DISTRIBUTION

    Each broker-dealer that receives exchange notes for its own account pursuant
to the exchange offer must acknowledge that it will deliver a prospectus in     
connection with any resale of the exchange notes. This prospectus, as it may be 
amended or supplemented from time to time, may be used by a broker-dealer in    
connection with resales of exchange notes received in exchange for outstanding  
notes that the broker-dealer had acquired as a result of market-making          
activities or other trading activities. We have agreed that for a period of     
180 days from the date on which the exchange offer is consummated, we will make 
this prospectus, as amended or supplemented, available to any broker-dealer for 
use in connection with resale, and will promptly send additional copies of this 
prospectus and any amendment or supplement to this prospectus to any            
broker-dealer that requests the documents in the letter of transmittal. In      
addition, until February 21, 2000, all dealers effecting transactions in the    
exchange notes may be required to deliver a prospectus.                         

We will not receive any proceeds from any sale of exchange notes by     
broker-dealers. Exchange notes received by broker-dealers for their own account 
pursuant to the exchange offer may be sold from time to time in one or more     
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the exchange notes or a combination of these methods  
of resale, at prevailing market prices at the time of resale, at prices related 
to these prevailing market prices or at negotiated prices. Any such resale may  
be made directly to purchasers or to or through brokers or dealers who may      
receive compensation in the form of commissions or concessions from any such    
broker-dealer or the purchasers of any exchange notes. Any broker-dealer that   
resells exchange notes that were received by it for its own account pursuant to 
the exchange offer and any broker or dealer that participates in a distribution 
of exchange notes may be deemed to be an "underwriter" within the meaning of the
Securities Act, and any profit on any such resale of exchange notes and any     
commissions or concessions received by any these persons may be deemed to be    
underwriting compensation under the Securities Act. The letter of transmittal   
states that, by acknowledging that it will deliver and by delivering a          
prospectus, a broker-dealer will not be deemed to admit that it is an           
"underwriter" within the meaning of the Securities Act.                         

For a period of 180 days from the date on which the exchange offer is   
consummated, we will promptly send additional copies of this prospectus and any 
amendment or supplement to this prospectus to any broker-dealer that requests   
such documents in the letter of transmittal. We have agreed to pay all expenses 
incident to the exchange offer (including the expenses of one counsel for the   
holders of the outstanding notes) other than commissions or concessions of any  
broker-dealers and will indemnify the holders of the outstanding notes          
(including any broker-dealers) against certain liabilities, including           
liabilities under the Securities Act.                                           

LEGAL MATTERS 

  The validity of the exchange notes will be passed upon for SJKI by Simpson
Thacher & Bartlett, New York, New York.                                         

EXPERTS 

The consolidated financial statements of St. John included in this      
prospectus for the fiscal years ended November 3, 1996, November 2, 1997 and    
November 1, 1998 have been audited by Arthur Andersen LLP, independent public   
accountants, as indicated in their report with respect thereto, and are included
in reliance upon the authority of said firm as experts in accounting and        
auditing in giving said reports.                                                

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WHERE YOU CAN FIND MORE INFORMATION 

We have filed with the Securities and Exchange Commission a registration
statement on Form S-4 under the Securities Act with respect to the exchange     
notes being offered by this prospectus. This prospectus, which forms a part of  
the registration statement, does not contain all of the information set forth   
in, or filed as an exhibit to, the registration statement. For further          
information with respect to St. John Knits International and the exchange notes,
we refer you to the registration statement. While we believe that we have       
provided all material information regarding the contracts and other documents   
described in this prospectus, the information we have provided is not           
necessarily complete. Where these contracts and other documents are filed as    
exhibits to the registration statement, our descriptions are qualified by the   
exhibits.                                                                       

  We are not currently subject to the reporting requirements of the Exchange
Act. Upon completion of the exchange offer, we will be subject to the           
informational requirements of the Exchange Act and, as a result, will file      
periodic reports and other information with the Securities and Exchange         
Commission. The registration statement and periodic reports and other           
information can be inspected and copied at the Public Reference Section of the  
Securities and Exchange Commission located at Room 1024, Judiciary Plaza, 450   
Fifth Street, N.W., Washington D.C., 20549 and at regional public reference     
facilities maintained by the Securities and Exchange Commission located at      
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661   
and Seven World Trade Center, Suite 1300, New York, New York 10048. You can     
obtain copies of this material, including copies of all or any portion of the   
registration statement, from the Public Reference Section of the Securities and 
Exchange Commission at prescribed rates. You may also access this material      
electronically by means of the Securities and Exchange Commission's home page on
the Internet (http://www.sec.gov).                                              

In addition, whether or not required by the Securities and Exchange     
Commission, so long as any outstanding notes are outstanding, beginning with the
quarter ended August 1, 1999 we will furnish to those holding any outstanding   
notes, within the time periods specified in the Securities and Exchange         
Commission's rules and regulations:                                             

  - all quarterly and annual financial information that would be required to
   be contained in a filing with the Securities and Exchange Commission on
    Forms 10-Q and 10-K if we were required to file these Forms, including a
    "Management's Discussion and Analysis of Financial Condition and Results
     of Operations" and, with respect to the annual information only, a report
on the annual financial statements by our independent auditors; and 

   - all current reports that we would be required to file with the Securities
 and Exchange Commission on Form 8-K if we were required to file these
reports.                                                            

In addition, whether or not required by the Securities and Exchange     
Commission, we will file a copy of all of the information and reports referred  
to above with the Securities and Exchange Commission for public availability    
within the time periods specified in the Securities and Exchange Commission's   
rules and regulations, unless the Securities and Exchange Commission will not   
accept the filing, and we will make the information available to securities     
analysts and prospective investors upon request.                                

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                [Download Table]

                                                                PAGE  
                                                              --------
                                                                      
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS....................     F-2  
CONSOLIDATED FINANCIAL STATEMENTS                                     
  Consolidated Balance Sheets at November 2, 1997, November           
    1, 1998 and August 1, 1999 (unaudited)..................     F-3  
  Consolidated Statements of Income and Comprehensive Income          
    for each of the three years in the period ended                   
    November 1, 1998, and the 39 week periods ended                   
    August 2, 1998 and August 1, 1999 (unaudited)...........     F-4  
  Consolidated Statements of Shareholders' Equity for each            
    of the three years in the period ended November 1,                
    1998....................................................     F-5  
  Consolidated Statements of Cash Flows for each of the               
    three years in the period ended November 1, 1998, and             
    the 39 week periods ended August 2, 1998 and August 1,            
    1999 (unaudited)........................................     F-6  
  Notes to Consolidated Financial Statements................     F-7  
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE                             
  Schedule II--Valuation and Qualifying Account.............    F-21  

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO ST. JOHN KNITS, INC.:                                                        

We have audited the accompanying consolidated balance sheets of ST. JOHN
KNITS, INC. (a California corporation) and subsidiaries as of November 2, 1997  
and November 1, 1998, and the related consolidated statements of income,        
shareholders' equity and cash flows for each of the three years in the period   
ended November 1, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these      
financial statements based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

In our opinion, the consolidated financial statements referred to above 
present fairly, in all material respects, the consolidated financial position of
St. John Knits, Inc. and subsidiaries as of November 2, 1997 and November 1,    
1998, and the results of their operations and their cash flows for each of the  
three years in the period ended November 1, 1998 in conformity with generally   
accepted accounting principles.                                                 

Our audits were made for the purpose of forming an opinion on the basic 
financial statements taken as a whole. The schedule listed in the index to      
consolidated financial statements is presented for purposes of complying with   
the Securities and Exchange Commission's rules and is not part of the basic     
financial statements. This schedule has been subjected to the auditing          
procedures applied in the audit of the basic financial statements and, in our   
opinion, fairly states in all material respects the financial data required to  
be set forth therein in relation to the basic financial statements taken as a   
whole.                                                                          

                       Arthur Andersen LLP

Orange County, California                                                       
December 18, 1998 (except for the matters                                       
discussed in Note 12 and 13 as to which the date is                             
September 3, 1999)                                                              

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ST. JOHN KNITS, INC.

CONSOLIDATED BALANCE SHEETS 

                                                        [Enlarge/Download Table]

                                                             NOVEMBER 2,    NOVEMBER 1,     AUGUST 1,   
                                                                 1997           1998           1999     
                                                             ------------   ------------   ------------ 
                                                                                           (UNAUDITED)  
                                                                                                        
                           ASSETS                                                                       
Current assets:                                                                                         
  Cash and cash equivalents................................. $ 14,266,564   $ 14,336,872   $ 18,033,835 
  Investments...............................................    2,351,765      1,175,427         23,173 
  Accounts receivable, net..................................   36,572,423     35,562,189     31,340,472 
  Inventories...............................................   30,736,980     47,748,286     46,805,050 
  Prepaid income tax........................................           --             --      1,858,530 
  Deferred income tax benefit...............................    5,793,961      7,743,961      7,743,961 
  Other.....................................................    2,591,742      2,377,352      2,521,905 
                                                             ------------   ------------   ------------ 
    Total current assets....................................   92,313,435    108,944,087    108,326,926 
                                                             ------------   ------------   ------------ 
Property and equipment:                                                                                 
  Machinery and equipment...................................   35,903,659     47,023,808     50,443,800 
  Leasehold improvements....................................   25,351,868     30,691,098     33,316,891 
  Buildings.................................................   11,572,917     17,883,700     17,880,244 
  Furniture and fixtures....................................    5,434,754      6,462,833      6,804,004 
  Land......................................................    3,536,606      5,786,857      5,786,857 
  Construction in progress..................................    4,225,573        666,481      2,297,034 
                                                             ------------   ------------   ------------ 
                                                               86,025,377    108,514,777    116,528,830 
  Less--Accumulated depreciation and amortization...........   28,222,633     38,627,543     46,985,297 
                                                             ------------   ------------   ------------ 
                                                               57,802,744     69,887,234     69,543,533 
                                                             ------------   ------------   ------------ 
Deferred financing costs....................................           --             --     15,105,916 
Other assets................................................    3,787,396      3,558,347      2,771,448 
                                                             ------------   ------------   ------------ 
                                                             $153,903,575   $182,389,668   $195,747,823 
                                                             ============   ============   ============ 

            LIABILITIES AND SHAREHOLDERS' EQUITY                                                        

Current liabilities:                                                                                    
  Accounts payable.......................................... $ 10,034,396   $  8,303,874   $  6,953,378 
  Accrued expenses..........................................   10,504,934     11,329,773     13,012,126 
  Income taxes payable......................................    2,081,242        120,657             -- 
  Current portion of long-term debt.........................                     227,979      3,229,572 
                                                             ------------   ------------   ------------ 
    Total current liabilities...............................   22,620,572     19,754,304     23,195,076 
                                                             ------------   ------------   ------------ 
Long-term debt, net of current portion......................           --        407,599    188,664,889 
Subordinated notes, net of discount.........................                          --     98,625,611 
                                                             ------------   ------------   ------------ 
    Total liabilities.......................................                                310,485,576 
                                                             ------------   ------------   ------------ 
Minority interest...........................................      602,910        653,435        654,092 
                                                             ------------   ------------   ------------ 
Mandatorily Redeemable Preferred Stock, $100 stated value:                                              
 Authorized--3,000,000 shares, issued and                                                               
 outstanding--250,000 and none, respectively................           --             --      25,000,00 
Commitments and contingencies (Notes 7, 10, 11 and 12)                                                  
Stockholders' equity (deficit):                                                                         
  Common Stock, par value $0.01 per share:                                                              
    Authorized--30,000,000 shares, Issued and                                                           
    outstanding--6,546,174 and 16,579,484 shares,                                                       
    respectively............................................      502,799        502,799         65,462 
Unrealized loss on securities...............................           --        (27,504)       (30,318)
Cumulative translation adjustment...........................      (19,351)       197,249        169,199 
Additional paid-in capital..................................   18,929,541     17,882,672    147,087,032 
Retained earnings...........................................  111,267,104    143,019,114   (287,683,220)
                                                             ------------   ------------   ------------ 
                                                              130,680,093    161,574,330   (140,391,845)
                                                             ------------   ------------   ------------ 
                                                             $153,903,575   $182,389,668   $195,747,823 
                                                             ============   ============   ============ 

See accompanying notes. 

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ST. JOHN KNITS, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

                                                        [Enlarge/Download Table]

                                                       FISCAL YEAR ENDED                       39 WEEKS ENDED        
                                         ----------------------------------------------  --------------------------- 
                                         NOVEMBER 3,      NOVEMBER 2,      NOVEMBER 1,    AUGUST 2,      AUGUST 1,   
                                             1996             1997             1998          1998           1999     
                                         ------------   ----------------   ------------  ------------   ------------ 
                                                                                                 (UNAUDITED)         
                                                                                                                     
Net sales............................... $202,951,000     $242,100,843     $281,960,763  $206,293,273   $221,935,006 
Cost of sales...........................   88,870,838       99,545,173      120,882,597    86,210,644     97,381,765 
                                         ------------     ------------     ------------  ------------   ------------ 
Gross profit............................  114,080,162      142,555,670      161,078,166   120,082,629    124,553,241 
Selling, general and administrative                                                                                  
  expenses..............................   68,385,089       84,544,884      107,025,666    76,857,692     91,175,121 
Transaction fees and expenses...........                                                           --     15,211,711 
                                         ------------     ------------     ------------  ------------   ------------ 
Operating income........................   45,695,073       58,010,786       54,052,500    43,224,937     18,166,409 
Interest expense........................                                                           --      2,045,341 
Other income............................    1,355,234          712,694        1,369,022     1,100,080      1,220,441 
                                         ------------     ------------     ------------  ------------   ------------ 
Income (loss) before income taxes.......   47,050,307       58,723,480       55,421,522    44,325,017     17,341,509 
Income taxes............................   19,928,645       24,299,829       22,000,904    18,033,451      7,117,259 
                                         ------------     ------------     ------------  ------------   ------------ 
Net income..............................   27,121,662       34,423,651       33,420,618    26,291,566     10,224,250 
Comprehensive income, net of tax:                                                                                    
  Foreign currency translation                                                                                       
    adjustment..........................      --              --                --           (147,292)       (16,550)
  Unrealized loss on securities.........      --              --                --                 --         (1,660)
                                         ------------     ------------     ------------  ------------   ------------ 
Comprehensive income.................... $ 27,121,662     $ 34,423,651     $ 33,420,618  $ 26,144,274   $ 10,206,040 
                                         ============     ============     ============  ============   ============ 
Net income per common share:                                                                                         
  Basic................................. $       1.64     $       2.07     $       2.00  $       1.57   $       0.64 
                                         ============     ============     ============  ============   ============ 
  Diluted............................... $       1.59     $       2.01     $       1.94  $       1.53   $       0.63 
                                         ============     ============     ============  ============   ============ 
Dividends per share..................... $       0.10     $       0.10     $       0.10  $      0.075   $      0.075 
                                         ============     ============     ============  ============   ============ 
Shares used in the calculation of net                                                                                
  income per share:                                                                                                  
  Basic.................................   16,518,077       16,614,975       16,693,955    16,707,206     15,670,913 
                                         ============     ============     ============  ============   ============ 
  Diluted...............................   17,015,991       17,133,631       17,234,630    17,133,421     16,042,501 
                                         ============     ============     ============  ============   ============ 

See accompanying notes. 

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ST. JOHN KNITS, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY 

                                                        [Enlarge/Download Table]

                                COMMON STOCK                                                                          
                            ---------------------  ADDITIONAL    CUMULATIVE   UNREALIZED                              
                              NUMBER                 PAID-IN     TRANSLATION   LOSS ON      RETAINED                  
                            OF SHARES     AMOUNT     CAPITAL     ADJUSTMENT   SECURITIES    EARNINGS        TOTAL     
                            ----------   --------  -----------   -----------  ----------  ------------   ------------ 
                                                                                                                      
Balance, October 29,                                                                                                  
  1995....................  16,468,734   $502,799  $15,687,393    $     --     $     --   $ 53,037,048   $ 69,227,240 
  Dividends declared ($.10                                                                                            
    per share)............          --         --           --          --           --     (1,653,348)    (1,653,348)
  Shares issued upon                                                                                                  
    exercise of options                                                                                               
    including tax                                                                                                     
    benefit...............     130,330         --    2,397,758          --           --             --      2,397,758 
Net income................          --         --           --          --           --     27,121,662     27,121,662 
                            ----------   --------  -----------    --------     --------   ------------   ------------ 
Balance, November 3,                                                                                                  
  1996....................  16,599,064    502,799   18,085,151          --           --     78,505,362     97,093,312 
  Dividends declared ($.10                                                                                            
    per share)............          --         --           --          --           --     (1,661,909)    (1,661,909)
  Shares issued upon                                                                                                  
    exercise of options                                                                                               
    including tax                                                                                                     
    benefit...............      35,484         --      844,390          --           --             --        844,390 
  Foreign currency                                                                                                    
    translation                                                                                                       
    adjustment............          --         --           --     (19,351)          --             --        (19,351)
  Net income..............          --         --           --          --           --     34,423,651     34,423,651 
                            ----------   --------  -----------    --------     --------   ------------   ------------ 
Balance November 2, 1997..  16,634,548    502,799   18,929,541     (19,351)          --    111,267,104    130,680,093 
  Dividends declared ($.10                                                                                            
    per share)............          --         --           --          --           --     (1,668,608)    (1,668,608)
  Shares issued upon                                                                                                  
    exercise of options                                                                                               
    including tax                                                                                                     
    benefit...............     109,336         --    1,832,969          --           --             --      1,832,969 
  Shares repurchased......    (164,400)        --   (2,879,838)         --           --             --     (2,879,838)
  Unrealized loss on                                                                                                  
    securities............          --         --           --          --      (27,504)            --        (27,504)
  Foreign currency                                                                                                    
    translation                                                                                                       
    adjustment............          --         --           --     216,600           --             --        216,600 
  Net income..............          --         --           --          --           --     33,420,618     33,420,618 
                            ----------   --------  -----------    --------     --------   ------------   ------------ 
Balance November 1, 1998..  16,579,484   $502,799  $17,882,672    $197,249     $(27,504)  $143,019,114   $161,574,330 
                            ==========   ========  ===========    ========     ========   ============   ============ 

See accompanying notes. 

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ST. JOHN KNITS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS 

                                                        [Enlarge/Download Table]

                                                                 FISCAL YEAR ENDED                      39 WEEKS ENDED        
                                                     ------------------------------------------  ---------------------------- 
                                                     NOVEMBER 3,    NOVEMBER 2,    NOVEMBER 1,    AUGUST 2,       AUGUST 1,   
                                                         1996           1997           1998          1998           1999      
                                                     ------------   ------------   ------------  ------------   ------------- 
                                                                                                         (UNAUDITED)          
                                                                                                                              
Cash flows from operating activities:                                                                                         
  Net income........................................ $27,121,662    $34,423,651    $33,420,618   $ 26,291,566   $  10,224,250 
  Adjustments to reconcile net income to net cash                                                                             
    provided by operating activities:                                                                                         
    Depreciation and amortization...................   7,042,376      8,858,703     11,370,680      8,275,770      10,930,588 
    Net increase in deferred income tax benefit.....  (1,925,194)      (300,000)    (1,950,000)      (500,000)             -- 
    Loss on disposal of property and equipment......      42,792        215,810        483,920        478,275         963,949 
    Partnership losses..............................     224,368        351,165        331,405        252,113         184,594 
    Minority interest in income of consolidated                                                                               
      subsidiaries..................................          --        602,910         50,525         48,190             657 
    (Increase) decrease in accounts receivable......  (6,969,300)    (8,478,817)     1,010,234      4,117,122       4,221,717 
    (Increase) decrease in inventories..............  (8,710,012)    (7,117,926)   (17,011,306)   (16,509,327)        943,236 
    Increase in prepaid income taxes................                                               (1,092,178)     (1,858,530)
    (Increase) decrease in other current assets.....  (1,022,146)    (1,322,360)       214,390        236,568        (144,553)
    (Increase) decrease in other assets.............  (1,501,100)         6,700       (488,410)       (48,414)       (347,741)
    Increase (decrease) in accounts payable.........     923,607      4,629,995     (1,730,522)    (2,582,433)     (1,350,496)
    Increase (decrease) in accrued expenses.........   2,343,116     (1,004,422)     1,240,704     (1,230,303)      1,656,779 
    Increase (decrease) in income taxes payable.....    (729,125)      (262,758)    (1,960,585)    (2,081,242)       (120,657)
    Decrease in deferred income tax liability.......          --       (143,941)            --             --              -- 
                                                     ------------   ------------   ------------  ------------   ------------- 
      Net cash provided by operating activities.....  16,841,044     30,458,710     24,981,653     15,655,707      25,303,793 
                                                     ------------   ------------   ------------  ------------   ------------- 
Cash flows from investing activities:                                                                                         
  Proceeds from sale of property and equipment......      60,294         84,641         10,499         10,499         175,500 
  Purchase of property and equipment................ (21,400,369)   (22,751,076)   (23,648,032)   (16,799,772)    (10,757,801)
  Purchase of trademarks............................          --       (747,928)            --             --              -- 
  Purchase of short-term investments................    (347,006)      (204,959)            --       (150,271)             -- 
  Sale of short-term investments....................   2,524,182      2,075,710      1,176,338             --       1,152,254 
  Capital contributions to partnership..............    (995,869)       (67,108)            --             --              -- 
  Capital distributions from partnership............      44,500         68,500         84,496         58,996         106,500 
                                                     ------------   ------------   ------------  ------------   ------------- 
      Net cash used in investing activities......... (20,114,268)   (21,542,220)   (22,376,699)   (16,880,548)     (9,323,547)
                                                     ------------   ------------   ------------  ------------   ------------- 
Cash flows from financing activities:                                                                                         
  Dividends paid....................................  (1,650,090)    (1,661,022)    (2,084,472)    (1,668,735)     (1,244,545)
  Issuance of common stock..........................   2,397,758        844,390      1,832,969      1,832,968         796,510 
  Addition to long-term debt........................          --             --        407,599             --       1,427,000 
  Payment for the repurchase of common stock........          --             --     (2,879,838)            --              -- 
  Principal payments on long-term debt..............          --             --             --             --        (169,710)
  Proceeds from credit agreement....................          --             --             --             --     190,000,000 
  Proceeds from issuance of subordinated notes......          --             --             --             --      98,616,000 
  Recapitalization..................................          --             --             --             --    (311,446,769)
  Issuance of preferred stock.......................          --             --             --             --      25,000,000 
  Financing fees and expenses.......................          --             --             --             --     (15,230,905)
                                                     ------------   ------------   ------------  ------------   ------------- 
      Net cash provided by (used in) financing                                                                                
        activities..................................     747,668       (816,632)    (2,723,742)       164,233     (12,252,419)
                                                     ------------   ------------   ------------  ------------   ------------- 
Effect of exchange rate changes.....................          --        (19,351)       216,600       (248,384)        (28,050)
                                                     ------------   ------------   ------------  ------------   ------------- 
Unrealized loss on securities.......................          --             --        (27,504)            --          (2,814)
                                                     ------------   ------------   ------------  ------------   ------------- 
Net increase (decrease) in cash and cash                                                                                      
  equivalents.......................................  (2,525,556)     8,080,507         70,308     (1,308,992)      3,696,963 
Beginning balance, cash and cash equivalents........   8,711,613      6,186,057     14,266,564     14,266,564      14,336,872 
                                                     ------------   ------------   ------------  ------------   ------------- 
Ending balance, cash and cash equivalents........... $ 6,186,057    $14,266,564    $14,336,872   $ 12,957,572   $  18,033,835 
                                                     ============   ============   ============  ============   ============= 
Supplemental disclosures of cash flow information:                                                                            
  Cash received during the period for interest                                                                                
    income.......................................... $   717,099    $   988,272    $ 1,154,834   $  1,115,220   $     984,558 
                                                     ============   ============   ============  ============   ============= 
  Cash paid during the period for:                                                                                            
    Interest expense................................ $        --    $    46,954    $        --   $        338   $       7,179 
                                                     ============   ============   ============  ============   ============= 
    Income taxes.................................... $20,565,267    $24,526,911    $25,286,040   $ 20,910,962   $  10,455,685 
                                                     ============   ============   ============  ============   ============= 

See accompanying notes. 

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

1. COMPANY BACKGROUND AND BASIS OF PRESENTATION                                 

The consolidated financial statements include the accounts of St. John  
Knits, Inc. ("St. John"), a California corporation, and its subsidiaries. St.   
John and its subsidiaries are collectively referred to herein as "the Company." 
All interdivisional and intercompany transactions and accounts have been        
eliminated in consolidation. The Company is a leading designer, manufacturer and
marketer of women's clothing and accessories. The Company's products are        
distributed primarily through specialty retailers and the Company's own retail  
boutiques and outlets.                                                          

 During fiscal 1997, the Company formed St. John Company, Ltd. in Japan to
operate as a 51 percent owned subsidiary to distribute the Company's products in
Japan. During fiscal 1998 the Company increased its ownership percentage to     
68 percent. During fiscal 1997 the Company also formed Amen Wardy Home Stores,  
LLC, a 51 percent owned subsidiary which operates five home furnishing boutiques
under the name Amen Wardy Home. The operations of both entities are included in 
the accompanying consolidated financial statements.                             

2. SUMMARY OF ACCOUNTING POLICIES                                               

a.  DEFINITION OF FISCAL YEAR.  The Company utilizes a 52-53 week fiscal
year whereby the fiscal year ends on the Sunday nearest to October 31.          
Accordingly, fiscal years 1996, 1997 and 1998 ended on November 3, November 2   
and November 1, respectively. Fiscal year 1996 was comprised of 53 weeks, and   
fiscal years 1998 and 1997 were comprised of 52 weeks.                          

b.  USE OF ESTIMATES.  The preparation of the financial statements in   
conformity with generally accepted accounting principles requires management to 
make certain estimates and assumptions that affect the reported amounts of      
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results may
differ from those estimates.                                                    

c.  REVENUE RECOGNITION.  Revenue on sales to specialty retailers is    
recognized when the goods are shipped. The Company establishes liabilities for  
estimated returns and allowances at the time of shipment. The Company also      
provides for estimated discounts when recording sales. Retail sales are         
recognized at the point of sale. The Company establishes liabilities for        
estimated returns at the retail stores. Accounts receivable are shown net of    
allowances for discounts and uncollectible amounts of $2,543,000 and $905,000 in
fiscal year 1997, and $2,488,000 and $951,000 in fiscal year 1998, respectively.

d.  INVENTORIES.  Inventories are valued at the lower of cost or market.
During fiscal 1997 the Company elected to change its method of accounting for   
its inventory from the last-in, first-out (LIFO) method to the first-in,        
first-out (FIFO) method. This change did not have a material effect on the      
financial statements for any year presented. Therefore, the cumulative effect   
($363,000) was reflected in the fiscal year 1997 financial statements as a      
reduction of cost of goods sold.                                                

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)                                   

Inventories are comprised of the following:                             

                                                                [Download Table]

                                                               1997         1998    
                                                            -----------  -----------
                                                                                    
Raw materials.............................................. $10,362,158  $14,529,822
Work in process............................................   6,451,053    8,896,248
Finished products..........................................  13,923,769   24,322,216
                                                            -----------  -----------
                                                            $30,736,980  $47,748,286
                                                            ===========  ===========

   e.  PROPERTY AND EQUIPMENT.  Property and equipment are stated at cost. The
Company provides for depreciation using the straight-line method to provide for 
the retirement of property and equipment at the end of their estimated useful   
lives, which range from three to thirty-nine years.                             

f.  CASH AND CASH EQUIVALENTS.  For purposes of the statements of cash  
flows, cash and cash equivalents include all liquid debt instruments purchased  
with a maturity of three months or less.                                        

 g.  FOREIGN EXCHANGE TRANSACTIONS AND CONTRACTS.  The Company enters into
foreign exchange contracts as a hedge against exchange rate risk on the         
collection of certain accounts receivable denominated in a foreign currency.    
Market value gains and losses are recognized as the contracts mature, and       
exchange adjustments resulting from foreign currency transactions are offset by 
exchange gains or losses recognized from such contracts.                        

  h.  INCOME TAXES.  The Company utilizes the liability method of accounting
for income taxes required by Statement of Financial Accounting Standards        
("SFAS") No. 109 "Accounting for Income Taxes."                                 

i.  EARNINGS PER SHARE.  The Company adopted SFAS No. 128 "Earnings Per 
Share" during fiscal 1998. Under the new requirement, primary earnings per share
was replaced with basic earnings per share. Basic earnings per share excludes   
the dilutive effect of common stock equivalents, including stock options.       
Diluted earnings per share, which replaced fully diluted earnings per share,    
includes all dilutive items. Dilution is calculated based upon the treasury     
stock method, which assumes that all dilutive securities were exercised and that
the proceeds received were applied to repurchase outstanding shares at the      
average market price during the period.                                         

   As a result of the adoption of SFAS No. 128, primary earnings per share for
fiscal 1996 and 1997 were restated from $1.59 to $1.64 and from $2.01 to $2.07, 
respectively, to reflect the change to basic earnings per share. The difference 
between basic and diluted earnings per share, as shown on the Company's         
Consolidated Statements of Income, is due to the dilutive effect of stock       
options outstanding.                                                            

j.  TWO-FOR-ONE STOCK SPLIT.  On March 12, 1996, the Board of Directors 
declared a two-for-one common stock split which was distributed on May 6, 1996  
to shareholders of record at the close of business on April 8, 1996. All share  
and per share data included in the consolidated financial statements and        
accompanying notes have been adjusted to reflect the stock split.               

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

2. SUMMARY OF ACCOUNTING POLICIES (CONTINUED)                                   

k.  FOREIGN CURRENCY TRANSLATION.  The Company translates the financial 
statements of its foreign subsidiaries from the local (functional) currencies to
U.S. dollars in accordance with SFAS No. 52 "Foreign Currency Translation".     
Substantially all assets and liabilities of the Company's foreign subsidiaries  
are translated at year-end exchange rates, while revenue and expenses are       
translated at average exchange rates prevailing during the year. Adjustments for
foreign currency translation fluctuations are excluded from net income and are  
included as a separate component of consolidated shareholders' equity.          

 l.  ADVERTISING AND PROMOTION.  All costs associated with advertising and
promotion of the Company's products are expensed as incurred.                   

m.  INVESTMENTS.  The Company's investments are categorized as          
available-for-sale securities, as defined by SFAS No. 115 "Accounting for       
Certain Investments in Debt and Equity Securities." Unrealized holding gains and
losses are reflected as a net amount in a separate component of stockholders'   
equity until realized. For the purpose of computing realized gains and losses,  
cost is identified on a specific identification basis.                          

  n.  NEW ACCOUNTING PRONOUNCEMENTS.  In June 1997, the Financial Accounting
Standards Board issued SFAS Nos. 130 and 131 "Reporting Comprehensive Income"   
and "Disclosures about Segments of an Enterprise and Related Information." The  
Company will be required to adopt these standards in fiscal 1999. The adoption  
of these standards is not expected to have a material impact on the Company's   
financial position or results of operations.                                    

    In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-up Activities". The 
Company will be required to adopt this standard in fiscal 2000. The adoption of 
this standard is not expected to have a material impact on the Company's        
financial position or results of operations.                                    

   o.  UNAUDITED INTERIM FINANCIAL INFORMATION.  The accompanying consolidated
balance sheet as of August 1, 1999 and the consolidated statements of income and
comprehensive income for the 39 weeks ended August 2, 1998 and August 1, 1999   
are unaudited but include all adjustments (consisting of normal recurring       
accruals) which, in the opinion of management, are necessary for a fair         
statement of the financial position and the operating results and cash flows for
the interim date and periods presented. Results for the interim periods are not 
necessarily indicative of results to be achieved for an entire year or future   
periods.                                                                        

  p.  COMPREHENSIVE INCOME.  The Company has adopted SFAS No. 130 "Reporting
Comprehensive Income" during the first quarter of fiscal 1999. This statement   
requires that all items that meet the definition of components of comprehensive 
income be reported in a financial statement for the period in which they are    
recognized. Components of comprehensive income include revenue, expenses, gains 
and losses that under generally accepted accounting principles are included in  
comprehensive income but excluded from net income.                              

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

3. FAIR VALUE OF FINANCIAL INSTRUMENTS                                          

 The carrying amounts of cash and cash equivalents approximate fair value.
Investments consist primarily of municipal bonds with maturity dates of less    
than six months and common stock, which are classified as available-for-sale.   

   Investments available-for-sale at November 2, 1997 and November 1, 1998 are
as follows:                                                                     

NOVEMBER 2, 1997                                                                

                                                        [Enlarge/Download Table]

                                                                      MARKET    UNREALIZED
                                                           COST       VALUE        LOSS   
                                                        ----------  ----------  ----------
                                                                                          
Municipal Securities................................... $1,500,000  $1,500,000    $    -- 
Money Market Fund......................................    833,511     833,511         -- 
Common Stock...........................................     18,254      18,254         -- 
                                                        ----------  ----------    ------- 
                                                        $2,351,765  $2,351,765    $    -- 
                                                        ==========  ==========    ======= 

------------------------                                                        

NOVEMBER 1, 1998                                                                

                                                        [Enlarge/Download Table]
                                                                                        
Municipal Securities.................................... $1,000,000  $1,000,000  $    --
Common Stock............................................    202,931     175,427   27,504
                                                         ----------  ----------  -------
                                                         $1,202,931  $1,175,427  $27,504
                                                         ==========  ==========  =======

  The Company holds various foreign exchange contracts. At November 2, 1997,
the Company had contracts maturing through November 10, 1998 to sell            
10.9 million deutsche marks and 670,000 British pounds at rates ranging from    
1.55 to 1.71 deutsche marks to the U.S. dollar and 1.62 to 1.66 U.S. dollars to 
the British pound. At November 1, 1998, the Company had contracts maturing      
through May 28, 1999 to sell 5.4 million deutsche marks and 365,000 British     
pounds at rates ranging from 1.71 to 1.77 deutsche marks to the U.S. dollar and 
1.63 to 1.64 U.S. dollars to the British pound. At November 2, 1997 and         
November 1, 1998 the fair value of these foreign exchange contracts were less   
than the face value by $96,000 and $197,000, respectively.                      

  During the fourth quarter of fiscal 1998, the Company adopted SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." The adoption of 
SFAS No. 133 did not have a material effect on the Company's financial position 
or results of operations. It is the Company's policy to reduce the effects of   
fluctuations in foreign currency exchange rates associated with its sale of     
goods denominated in foreign currency by entering into forward contracts. The   
Company enters into contracts to sell foreign currencies in the future only to  
protect the U.S. dollar value of certain investments and future foreign currency
transactions. The Company does not engage in speculation. The gains and losses  
on these contracts are included in income upon maturity and offset the foreign  
exchange gains and losses reported on the underlying transactions. The total net
gain recorded during fiscal 1998 was                                            

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

3. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)                              

approximately $321,000 and is included as an offset to selling, general and     
administrative expenses on the accompanying Consolidated Statements of Income.  

4. ACCRUED EXPENSES                                                             

Accrued expenses for fiscal years 1997 and 1998 are comprised of the    
following:                                                                      

                                                        [Enlarge/Download Table]

                                                                1997         1998    
                                                             -----------  -----------
                                                                                     
Wages and benefits.......................................... $ 4,013,350  $ 5,135,454
Workers' compensation.......................................     796,382      646,100
Profit-sharing plan contribution............................     500,000      500,000
Promotional and advertising allowance.......................   1,741,896    1,896,955
Other.......................................................   3,453,306    3,151,264
                                                             -----------  -----------
                                                             $10,504,934  $11,329,773
                                                             ===========  ===========

5. INCOME TAXES                                                                 

The provision for income taxes for fiscal years 1996, 1997 and 1998,    
consists of the following:                                                      

                                                        [Enlarge/Download Table]

                                                          1996          1997         1998    
                                                       -----------   -----------  -----------
                                                                                             
    Current:                                                                                 
      Federal......................................... $16,434,369   $18,878,088  $17,568,636
      State...........................................   4,277,275     5,335,096    4,220,969
                                                       -----------   -----------  -----------
                                                        20,711,644    24,213,184   21,789,605
Deferred provision (benefit)..........................    (782,999)       86,645      211,299
                                                       -----------   -----------  -----------
                                                       $19,928,645   $24,299,829  $22,000,904
                                                       ===========   ===========  ===========

The components of the deferred income tax provision (benefit) for fiscal
years 1996, 1997 and 1998 are as follows:                                       

                                                        [Enlarge/Download Table]

                                                           1996         1997        1998   
                                                        -----------   ---------   -------- 
                                                                                           
Allowance for uncollectible accounts................... $        --   $  57,083   $ 16,718 
Inventory adjustments to market........................  (1,286,168)    609,067   (431,311)
Accrued expenses.......................................     374,841    (429,750)   663,042 
Depreciation...........................................     128,328    (149,755)   (37,150)
                                                        -----------   ---------   -------- 
                                                        $  (782,999)  $  86,645   $211,299 
                                                        ===========   =========   ======== 

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

5. INCOME TAXES (CONTINUED)                                                     

The components of the Company's deferred income tax benefit as of       
November 2, 1997 and November 1, 1998 are as follows:                           

                                                                [Download Table]

                                                                1997        1998   
                                                             ----------  ----------
                                                                                   
Deferred income tax benefit:                                                       
  Tax basis adjustments to inventory........................ $1,952,210  $2,126,806
  Allowance for uncollectible accounts......................    364,583     879,725
  Inventory adjustments to market...........................  2,952,273   2,283,321
  Accrued expenses..........................................    524,895   2,454,109
                                                             ----------  ----------
                                                             $5,793,961  $7,743,961
                                                             ==========  ==========

   The reported provision for income taxes differs from the amount computed by
applying the statutory federal income tax rate to the income before provision   
for income taxes for fiscal years 1996, 1997 and 1998 as follows:               

                                                        [Enlarge/Download Table]

                                                      1996         1997         1998     
                                                   -----------  -----------  ----------- 
                                                                                         
Income tax provision computed at statutory rate... $16,467,607  $20,553,218  $19,397,537 
State taxes, net of federal benefit...............   2,844,192    3,549,834    3,350,232 
Tax credits and other.............................     616,846      196,777     (746,865)
                                                   -----------  -----------  ----------- 
Tax provision..................................... $19,928,645  $24,299,829  $22,000,904 
                                                   ===========  ===========  =========== 

6. BENEFIT AND STOCK OPTION PLANS                                               

   The Company is self-insured for a portion of its medical benefits programs.
Amounts charged to expense for health benefits were $3,137,000, $3,110,000 and  
$3,594,000 for fiscal years 1996, 1997 and 1998, respectively, and were based on
actual claims and an estimate of claims incurred but not reported. The current  
liability for health benefits is included in accrued expenses on the            
accompanying consolidated balance sheets. The Company maintains excess insurance
coverage on an individual and an aggregate basis.                               

    The Company maintains a qualified profit-sharing plan for the benefit of all
eligible employees. This plan contemplates the sharing of profits annually at   
the discretion of the Board of Directors and is funded by cash contributions.   
The contribution to this plan was $500,000, in each of the fiscal years 1996,   
1997 and 1998.                                                                  

  The Company has one stock option plan, the 1993 St. John Knits, Inc. Stock
Option Plan (the "Plan"). Options granted under the Plan may be either incentive
or nonstatutory stock options. The Company accounts for the Plan under          
Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to      
Employees", under which no compensation cost has been recognized for fiscal     
years 1996, 1997 and 1998.                                                      

 SFAS No. 123 "Accounting for Stock-Based Compensation" was issued in 1995
and, if fully adopted, changes the methods for recognition of cost on plans     
similar to that of the Company.                                                 

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

6. BENEFIT AND STOCK OPTION PLANS (CONTINUED)                                   

Adoption of SFAS No. 123 is optional for employee stock option grants, however  
pro forma disclosure as if the Company had adopted the cost recognition method  
is required. Had compensation cost for stock options awarded under the Plan been
determined consistent with SFAS No. 123, the Company's net income and earnings  
per share would have reflected the following pro forma amounts:                 

                                                                [Download Table]

                                                       1997         1998    
                                                    -----------  -----------
                                                                            
Net income:                     As reported........ $34,423,651  $33,420,618
                                Pro forma.......... $33,605,519  $31,818,853
Net income per share--diluted:  As reported........ $      2.01  $      1.94
                                Pro forma.......... $      1.96  $      1.85

 The Company may grant up to 2,350,000 options under the Plan. The Company
has granted 1,625,334 options through November 1, 1998. The options are         
primarily issued at fair market value with exercise prices equal to the         
Company's stock price at the date of grant. Options generally vest over three   
years; are exercisable in whole or in installments; and expire ten years from   
date of grant.                                                                  

The following is a summary of the activity in the Plan for fiscal years 
1996, 1997 and 1998:                                                            

                                                        [Enlarge/Download Table]

                                                  1996                 1997                 1998        
                                           -------------------  -------------------  -------------------
                                                      WEIGHTED             WEIGHTED             WEIGHTED
                                                      AVERAGE              AVERAGE              AVERAGE 
                                                      EXERCISE             EXERCISE             EXERCISE
                                            SHARES     PRICE     SHARES     PRICE     SHARES     PRICE  
                                           --------   --------  --------   --------  --------   --------
                                                                                                        
Outstanding, beginning of year............  784,470    $ 8.81   681,472     $ 9.45    842,988    $17.16 
Granted...................................   28,000     23.04   197,000      42.27    527,334     27.12 
Exercised................................. (130,330)     8.50   (35,484)      8.50   (109,336)     9.79 
Forfeited.................................     (668)     8.50        --         --   (339,334)    39.44 
                                           --------    ------   -------     ------   --------    ------ 
Outstanding, end of year..................  681,472    $ 9.45   842,988     $17.16    921,652    $15.42 
                                           ========    ======   =======     ======   ========    ====== 
Exercisable, end of year..................  625,458    $ 8.68   668,644     $11.28    677,960    $14.37 
Weighted average fair value of options                                                                  
  granted.................................             $ 8.80               $17.93               $11.34 

During fiscal 1998, a total of 324,334 options were repriced.           

 The following is a detail of the stock options outstanding at November 1,
1998, including weighted average contractual life and exercise price            
information:                                                                    

                                                                [Download Table]

                                                         WEIGHTED AVERAGE      
                                                    ---------------------------
      RANGE OF            OPTIONS       OPTIONS        REMAINING       EXERCISE
   EXERCISE PRICES      OUTSTANDING   EXERCISABLE   CONTRACTUAL LIFE    PRICE  
---------------------   -----------   -----------   ----------------   --------
                                                                               
      $8.50               492,818       492,818           4.36          $ 8.50 
 $15.06 to $23.00         328,834        85,142           9.48           18.58 
 $39.06 to $39.13         100,000       100,000           9.10           39.09 
                          -------       -------           ----          ------ 
 $8.50 to $39.13          921,652       677,960           6.70          $15.42 
                          =======       =======           ====          ====== 

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

6. BENEFIT AND STOCK OPTION PLANS (CONTINUED)                                   

For purposes of the pro forma presentation above, the fair value of each
option grant is estimated on the date of grant using the Black-Scholes pricing  
model with the following assumptions used for the grants in fiscal years 1997   
and 1998: weighted average risk-free interest rate of 6.32 and 5.55 percent;    
weighted average volatility of 31.0 and 27.5 percent; expected life of 6 years; 
and weighted average dividend yield of 0.237 and 0.263 percent.                 

7. COMMITMENTS                                                                  

The Company has entered into various leases for manufacturing, showroom,
warehouse, retail and office locations, including leases with related parties   
(Note 9). The leases expire at various dates through the year 2014 and certain  
leases contain renewal options. Rental expense under these leases was           
approximately $8,094,000, $9,474,000 and $12,052,000 in fiscal years 1996, 1997 
and 1998, respectively.                                                         

    The following is a schedule of future minimum rental payments required under
noncancellable operating leases as of November 1, 1998:                         

                                                                [Download Table]
                                                                          
1999........................................................  $ 12,802,000
2000........................................................    12,247,000
2001........................................................    11,305,000
2002........................................................    10,831,000
2003........................................................    10,222,000
Thereafter..................................................    69,584,000
                                                              ------------
                                                              $126,991,000
                                                              ============

The Company has various employment contracts with certain key employees,
which expire at various times through June 1, 2000. These agreements provide for
total annual compensation aggregating $3,634,000 and the payment of severance   
benefits upon the termination of employment.                                    

 As of November 2, 1997 and November 1, 1998, the Company's commitments to
purchase wool yarn were approximately $11,847,000 and $12,779,000 respectively. 
The Company's commitment to purchase computerized knitting machines totaled     
approximately $2,326,000 and $569,000 at November 2, 1997 and November 1, 1998, 
respectively.                                                                   

On November 4, 1998, the Board of Directors of the Company adopted a    
shareholder rights plan whereby shareholders will receive one right for each    
share of common stock. The rights were issued as a dividend to shareholders of  
record on November 18, 1998. Generally, the plan provides that if a person or   
group acquires more than 15 percent of the Company's stock, holders of the      
rights will be entitled to purchase the Company's stock at half of market value.
The plan also provides that if the Company is acquired in a merger or other     
business combination after a person or group acquires more than 15 percent of   
the Company's stock, holders of the rights will be entitled to purchase the     
acquiring company's stock at half of market value. Subject to certain           
restrictions, the Company will be entitled to redeem the rights for $0.01 per   
right at any time until the first date of public announcement that a 15 percent 
position in the Company has been acquired.                                      

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

8. LINE OF CREDIT AND LONG-TERM DEBT                                            

The Company has a line of credit agreement with a bank. The agreement   
provides for a $25,000,000 line of credit that matures March 1, 2000. Borrowings
under the line bear interest at the bank's reference rate (8.0 percent at       
November 1, 1998) or an offshore rate plus 1.5 percent. The agreement contains  
covenants, which, among other matters, restrict capital expenditures, dividends,
investments, loans and advances and require the maintenance of certain financial
ratios. No amounts were due under this line of credit at either November 2, 1997
or November 1, 1998. Letters of credit outstanding under the line of credit     
totaled approximately $331,000 and $111,000 at November 2, 1997 and November 1, 
1998, respectively.                                                             

The long-term debt included on the consolidated balance sheet at        
November 1, 1998 represents the long-term portion of a term loan incurred by the
Company's Japanese subsidiary, St. John Company, Ltd. The loan requires 36 equal
monthly installments including principal and interest through August 2001. The  
effective interest rate for the loan was 2.1 percent at November 1, 1998. The   
current portion of this loan is included in accrued liabilities on the          
accompanying consolidated balance sheets.                                       

9. RELATED-PARTY TRANSACTIONS                                                   

    The Company leases its corporate headquarters/manufacturing facility and one
other manufacturing facility from partnerships in which a shareholder of the    
Company is a significant partner. The annual payments on these leases were      
approximately $966,000, $884,000 and $975,000 in fiscal years 1996, 1997 and    
1998, respectively. The leases expire at various dates during fiscal year 2001  
and are included in the future minimum rental payments disclosure (Note 7).     

   The Company periodically rents personal property provided by a company that
is owned by a shareholder. Rental payments for the use of such equipment were   
approximately $37,000, $30,000 and $21,000 in fiscal years 1996, 1997 and 1998, 
respectively.                                                                   

At November 2, 1997 and November 1, 1998, the Company held a 50 percent 
ownership interest in a partnership which leases transportation equipment to the
Company. The holder of the other 50 percent ownership interest is a corporation 
which is wholly-owned by one of the Company's shareholders. During fiscal 1996, 
the Company made net capital contributions to the partnership of approximately  
$951,000. At November 2, 1997 and November 1, 1998, the Company's investment in 
this partnership, net of partnership losses, was approximately $1,270,000 and   
$854,000, respectively, and is included in other assets on the accompanying     
consolidated balance sheets. During fiscal years 1996, 1997 and 1998, the       
Company made lease payments to the partnership of $572,000, $840,000 and        
$868,000, respectively. During the same years, the Company reported net losses  
from the activities of the partnership of $224,000, $351,000 and $331,000,      
respectively.                                                                   

10. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS                         

A substantial portion of the Company's sales are made to three major    
customers. These three customers accounted for 18, 15 and 15 percent of net     
sales during fiscal 1996, 17, 15 and 15 percent of net sales during fiscal 1997 
and 17, 14 and 14 percent during fiscal 1998. The loss of any one of these      
customers could have a materially adverse affect on the Company's business.     

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

10. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS (CONTINUED)             

  The Company sells primarily to specialty apparel retailers; thus, the risk
of collection losses is concentrated in this industry. Management believes that 
the Company's credit and collection policies are adequate to prevent significant
collection losses and that the allowance for uncollectible accounts is adequate 
at November 2, 1997 and November 1, 1998.                                       

11. LITIGATION                                                                  

AMEN WARDY HOME STORES                                                  

On October 5, 1998, Amen Wardy, Jr. ("Wardy Jr.") filed a complaint (the
"Wardy Jr. Complaint") against the Company, Amen Wardy Home Stores, LLC, a      
51 percent owned subsidiary of the Company ("Amen"), Robert E. Gray, Marie St.  
John Gray, Kelly A. Gray, Black and Co., Inc. and Jennifer Black in the Superior
Court of the State of California, County of Orange (WARDY, JR. V. ST. JOHN      
KNITS, INC., ET AL.). The complaint, which was amended on December 4, 1998,     
involves claims of wrongful termination, breach of contract, breach of the      
implied covenant of good faith and fair dealing, breach of fiduciary duty,      
slander, libel, intentional and negligent infliction of emotional distress, an  
accounting fraud, negligent misrepresentation, conspiring to commit fraud and   
aiding and abetting fraud. The complaint alleges that Amen wrongfully terminated
Wardy Jr. because he refused to participate in improper accounting practices.   
The complaint also alleges that the Company used Amen for its benefit and to the
detriment of Amen. Wardy Jr. seeks an unspecified amount of compensatory and    
punitive damages as well as costs of suit, including attorneys' fees.           

  On November 16, 1998, the Company and Amen filed a cross-complaint against
Wardy Jr., and a third party complaint against Amen Wardy, Sr., Bob Hightower   
and Amen Wardy Home, Inc. ("AWHI") in the Superior Court of the State of        
California, County of Orange. Together, these complaints involve claims of      
breach of contract, breach of fiduciary duty and fraud. These complaints allege 
that AWHI used Amen for its benefit and to the detriment of Amen and the        
Company. The Company and Amen seek an unspecified amount of compensatory and    
punitive damages, as well as costs of suit, including attorneys' fees.          

On November 17, 1998, AWH Direct, Inc. ("AWH Direct") filed a derivative
complaint against Amen, the Company, Robert E. Gray, Marie St. John Gray, Kelly 
A. Gray, David A. Krinsky and David C. Frankel in the Superior Court of the     
State of California, County of Orange (AWH DIRECT, LLC V. AMEN WARDY HOME       
STORES, LLC, ET AL.). In this action AWH Direct is represented by the same      
counsel as Wardy Jr. in WARDY JR. V. ST. JOHN KNITS, INC., ET AL., described    
above. AWH Direct claims that the defendants are liable for breach of fiduciary 
duty, breach of contract, breach of the implied covenant of good faith and fair 
dealing, wrongful refusal to allow inspection of books and records and an       
accounting. The complaint makes allegations similar to the ones made in the     
Wardy Jr. Complaint. AWH Direct seeks an unspecified amount of compensatory and 
punitive damages, a mandatory injunction requiring defendants to allow plaintiff
immediate access to the books and records of Amen and costs of suit, including  
attorneys' fees.                                                                

SECURITIES FRAUD CLASS ACTION                                           

On October 13, 1998, Binary Traders, Inc. filed a complaint on behalf of
purchasers of publicly traded securities of the Company during the period of    
February 25, 1998 to August 25, 1998 against the                                

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

11. LITIGATION (CONTINUED)                                                      

Company, Robert E. Gray and Kelly A. Gray in the United States District Court,  
Central District of California, Southern Division (BINARY TRADERS, INC. V. ST.  
JOHN KNITS, INC., ET AL.). In this action, Binary Traders claims that the       
defendants violated federal securities laws by allegedly making fraudulent      
statements to cover up management's mistakes and certain material adverse       
conditions affecting the Company's business. In addition, the complaint alleges 
that Mr. Gray traded shares of the Company's common stock while in possession of
allegedly material non-public information. Binary Traders seeks class action    
certification and an unspecified amount of compensatory damages.                

PROPOSED BUY-OUT LITIGATION                                             

  Effective December 8, 1998, the Company received a proposal from Robert E.
Gray, Chairman and Chief Executive Officer, and Vestar Capital Partners III,    
L.P. to purchase substantially all of the outstanding common stock of the       
Company through a buy-out transaction. The Company has appointed an independent 
committee of directors to evaluate the proposed transaction.                    

  The Company is party to lawsuits that allege claims against certain of the
Company's directors for breach of fiduciary duty alleged to have arisen from the
proposed buy-out transaction. The lawsuits were filed in the Superior Court of  
the State of California for the County of Orange.                               

   The dates the lawsuits were instituted, as well as the principal parties to
the lawsuits, are as follows: (i) TEHRANI V. ST. JOHN KNITS, INC., ET AL., filed
on December 9, 1998, by Mishel S. Tehrani, as representative for a putative     
class of unidentified members, against the Company, Robert E. Gray, Marie St.   
John Gray, Kelly A. Gray, Roger G. Ruppert, Richard A. Gadbois III, David A.    
Krinsky and Rick Rozar and (ii) HILL V. ST. JOHN KNITS, INC., ET AL., filed on  
December 9, 1998, by Kenneth O. Hill, as representative for a putative class of 
unidentified members, against the Company, Robert E. Gray, Marie St. John Gray, 
Kelly A. Gray, Roger G. Ruppert, Richard A. Gadbois III and David A. Krinsky.   

The principal relief sought in the these actions is certification of the
putative class, an injunction of the proposed buy-out transaction from          
proceeding or, to the extent the transaction is concluded, a rescission of the  
buy-out transaction and damages and attorneys' fees in an unspecified amount.   

The Company is unable to estimate the outcome of these matters or any   
potential liabilities it may incur. The Company expects to incur legal and other
defense costs as a result of such proceedings in an amount which it can not     
currently estimate. These proceedings could involve a substantial diversion of  
the time of some of the members of management, and an adverse determination in, 
or settlement of, such litigation could involve payment of significant amounts, 
which could have an adverse impact on the Company's business, financial         
condition, results of operations and cash flows.                                

12. SUBSEQUENT EVENTS                                                           

PROPOSED BUY-OUT LITIGATION                                             

Additional lawsuits were instituted in regards to the proposed buy-out  
transaction. The lawsuits were filed in the Superior Court of the State of      
California for the County of Orange. The dates the lawsuits were instituted, as 
well as the principal parties to the lawsuits, are as follows: (i) SILVERMAN V. 
ST. JOHN KNITS, INC., ET AL., filed on December 23, 1998, by Shirley Silverman, 
as representative for a putative class of unidentified members, against the     
Company, Robert E. Gray, Marie St. John Gray, Kelly A. Gray, Roger G. Ruppert,  
Richard A. Gadbois III and David A. Krinsky and (ii) VINIKOW V. ST.             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

12. SUBSEQUENT EVENTS (CONTINUED)                                               

JOHN KNITS, INC., ET AL., filed on January 8, 1999, by Larry Vinikow as         
representative for a putative class of unidentified members, against the        
Company, Robert E. Gray, Marie St. John Gray, Kelly A. Gray, Roger G. Ruppert,  
Richard A. Gadbois III and David A. Krinsky. All of these lawsuits, including   
those described in Note 11, were consolidated into one lawsuit on February 24,  
1999.                                                                           

The principal relief sought in the these actions is certification of the
putative class, an injunction of the proposed buy-out transaction from          
proceeding or, to the extent the transaction is concluded, a rescission of the  
buy-out transaction, and damages and attorneys' fees in an unspecified amount.  

   On March 9, 1999, plaintiffs filed a Consolidated Amended Complaint, adding
Robert Davis, Daniel Reiner and Mark Goldston, members of the Company's Board of
Directors, as defendants and also adding an additional cause of action for      
unjust enrichment.                                                              

On April 15, 1999, the plaintiffs in the lawsuit filed a motion for     
preliminary injunction seeking to prevent the mergers from proceeding. The      
preliminary injunction motion was heard by the California state court on        
April 28, 1999. On April 30, 1999, the court denied the plaintiffs' preliminary 
injunction motion. In denying the plaintiffs' request, the court ruled that the 
plaintiffs had not shown a "reasonable probability" that they could succeed in  
proving at trial that the $30 per share offer in the mergers is unfair.         
Similarly, the court ruled that the plaintiffs were unlikely to show that the   
special committee of the Company's Board of Directors lacked true independence  
or failed to "shop" the Company adequately to other buyers.                     

While declining to grant the preliminary injunction, the court imposed a
constructive trust which prevents Robert E. Gray, Marie Gray and Kelly A. Gray  
from receiving in the mergers any amount for their Company shares in excess of  
$30 per share until a full trial on the merits is held. Prior to the            
determination of the final, definitive terms of the stock options to be granted 
to the Grays after the mergers, the plaintiffs had argued that these options    
represent additional consideration for the Grays' Company shares. It is the     
Company's belief that these employee stock options represent compensation for   
the Grays' services as officers of the reorganized company after the mergers and
are not additional consideration for their Company shares.                      

  The court also imposed a constructive trust preventing Messrs. Gadbois and
Krinsky, directors of the Company, from exercising options that were repriced by
the board in September 1998 until a full trial on the merits is held. It is the 
Company's belief that the September 1998 option repricing was not improper. The 
repricing was consistent with the repricing of options held by key employees of 
the Company, excluding the Grays, and occurred on September 15, 1998, which was 
nearly two months in advance of Vestar's first meeting with the Grays.          

    In imposing the constructive trusts, the court indicated that the plaintiffs
had shown a "reasonable probability" that they could succeed at trial in proving
that the Company directors breached their fiduciary duties with respect to the  
repricing of the director options and the alleged preferential treatment of the 
Grays to the extent that the Grays receive a higher price for their shares than 
the public shareholders in the mergers. The Company intends to continue to      
contest vigorously the plaintiffs' allegations in this lawsuit, including any   
request by the plaintiffs for the imposition of a constructive trust after a    
full trial on the merits is held.                                               

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

12. SUBSEQUENT EVENTS (CONTINUED)                                               

  On June 30, 1999, plaintiffs filed a Second Consolidated Amended Complaint
adding a new cause of action for negligence and new allegations asserting       
self-dealing and irremediable conflicts of interest in the Board approval of the
proposed buy-out transaction.                                                   

On June 28, 1999, the proposed buy-out transaction was submitted to and 
approved by the shareholders of the Company.                                    

The Company is unable to estimate the outcome of these matters or any   
potential liabilities it may incur. The Company expects to incur legal and other
defense costs as a result of such proceedings in an amount which it can not     
currently estimate. These proceedings could involve a substantial diversion of  
the time of some of the members of management, and an adverse determination in, 
or settlement of, such litigation could involve payment of significant amounts, 
which could have an adverse impact on the Company's business, financial         
condition, results of operations and cash flows.                                

AMEN WARDY HOME STORES LITIGATION                                       

 The Wardy Jr. Action and the AWH Direct Action were settled pursuant to a
Memorandum of Understanding between the parties dated April 1, 1999 and a       
subsequent Settlement Agreement and Mutual General Release dated April 30, 1999.
As part of the settlement, the Company paid certain legal fees of the plaintiffs
and transferred the AWHS boutique in Las Vegas to an affiliate of Amen Wardy,   
Jr. In addition, as part of the settlement, AWHS became a wholly owned          
subsidiary of the Company and the name of the entity was changed to "St. John   
Home, LLC". Pursuant to the settlement, the Wardy Jr. Action was dismissed with 
prejudice on May 11, 1999 and the AWH Direct Action was dismissed with prejudice
on May 5, 1999.                                                                 

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION                   

 The Company's payment obligations under the Senior Subordinated Notes are
guaranteed by certain of the Company's wholly owned subsidiaries (the Guarantor 
Subsidiaries). Such guarantees are full, unconditional and joint and several.   
Separate financial statements of the Guarantor Subsidiaries are not presented   
because the Company's management has determined that they would not be material 
to investors. The following supplemental financial information sets forth, on an
unconsolidated basis, balance sheets, statement of operations, and statement of 
cash flows information for the Parent Company (consisting of St. John Knits     
International, Incorporated and St. John Knits, Inc.), for the Guarantor        
Subsidiaries and for the Company's other subsidiaries (the Non-Guarantor        
Subsidiaries). The supplemental financial information reflects the investments  
of the Parent Company in the Guarantor and Non-Guarantor Subsidiaries using the 
equity method of accounting. The supplemental financial information is presented
for the periods as of November 1, 1998 and August 1, 1999, and for the year     
ended November 1, 1998 and the nine months ended August 1, 1999 and August 2,   
1998. Supplemental financial information has not been presented as of           
November 2, 1997 as the Non-Guarantor Subsidiaries are inconsequential and,     
accordingly, the historical consolidated financial statements for this period   
represents, in substance, the combined financial information for the Guarantor  
Subsidiaries.                                                                   

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
NOVEMBER 1, 1998

                                                        [Enlarge/Download Table]

                                          PARENT    GUARANTOR     NON-GUARANTOR                             
                                         COMPANY   SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                         --------  ------------   -------------   ------------  ------------
                                                               (AMOUNTS IN THOUSANDS)                       
                                                                                                            
ASSETS                                                                                                      
Current assets:                                                                                             
Cash, cash equivalents and                                                                                  
  investments........................... $ 15,273     $  154         $   86         $     --      $ 15,513  
Accounts receivable, net................   33,926        201          1,435               --        35,562  
Inventories (1).........................   42,922      4,090            736               --        47,748  
Deferred income tax benefit.............    7,744         --             --               --         7,744  
Other...................................    2,091        287             --               --         2,378  
Intercompany accounts receivable........       72         --             --              (72)           --  
                                         --------     ------         ------         --------      --------  
Total current assets....................  102,028      4,732          2,257              (72)      108,945  
Property and equipment, net.............   64,227      1,859          3,801               --        69,887  
Investment in subsidiaries..............      855         --             --             (855)           --  
Receivable from consolidated                                                                                
  subsidiaries..........................   12,526         --             --          (12,526)           --  
Other assets............................    2,308          2          1,248               --         3,558  
                                         --------     ------         ------         --------      --------  
    Total assets........................ $181,944     $6,593         $7,306         $(13,453)     $182,390  
                                         ========     ======         ======         ========      ========  
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                        
Current liabilities:                                                                                        
Accounts payable........................ $  7,832     $  373         $   99         $     --      $  8,304  
Accrued expenses........................   10,991         24             87               --        11,102  
Curent portion of long-term debt........       --         --            228               --           228  
Intercompany accounts payable...........       --         --             72              (72)           --  
Income taxes payable....................    1,181     (1,144)            84               --           121  
                                         --------     ------         ------         --------      --------  
Total current liabilities...............   20,004       (747)           570              (72)       19,755  
Intercompany payable....................       --      8,468          4,058          (12,526)           --  
Long-term debt, net of current                                                                              
  portion...............................       --         --            408               --           408  
                                         --------     ------         ------         --------      --------  
Total liabilities.......................   20,004      7,721          5,036          (12,598)       20,163  
Minority interest.......................       --         --            653               --           653  
Total stockholders' equity (deficit)....  161,940     (1,128)         1,617             (855)      161,574  
                                         --------     ------         ------         --------      --------  
Total liabilities and stockholders'                                                                         
  equity................................ $181,944     $6,593         $7,306         $(13,453)     $182,390  
                                         ========     ======         ======         ========      ========  

------------------------                                                        

(1) Inventories are shown at cost for all entities.                             

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
AUGUST 1, 1999
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                          PARENT      GUARANTOR     NON-GUARANTOR                             
                                          COMPANY    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                         ---------   ------------   -------------   ------------  ------------
                                                                 (AMOUNTS IN THOUSANDS)                       
                                                                                                              
ASSETS                                                                                                        
Current assets:                                                                                               
Cash, cash equivalents and                                                                                    
  investments..........................  $  17,676     $   122          $  259        $     --      $  18,057 
Accounts receivable, net...............     29,600         407           1,333              --         31,340 
Inventories (1)........................     44,044       1,862             899              --         46,805 
Deferred income tax benefit............      7,744          --              --              --          7,744 
Prepaid income tax.....................         --          --              --           1,859          1,859 
Other..................................      2,256         265               1              --          2,522 
Intercompany accounts receivable.......        884          --              --            (884)            -- 
                                         ---------     -------          ------        --------      --------- 
Total current assets...................    102,204       2,656           2,492             975        108,327 
Property and equipment, net............     63,506       2,084           3,954              --         69,544 
Investment in subsidiaries.............       (916)         --              --             916             -- 
Receivable from consolidated                                                                                  
  subsidiaries.........................     14,353          --              --         (14,353)            -- 
Deferred financing costs...............     15,106          --              --              --         15,106 
Other assets...........................      1,614          25           1,132              --          2,771 
                                         ---------     -------          ------        --------      --------- 
    Total assets.......................  $ 195,867     $ 4,765          $7,578        $(12,462)     $ 195,748 
                                         =========     =======          ======        ========      ========= 
LIABILITIES AND STOCKHOLDERS' EQUITY                                                                          
Current liabilities:                                                                                          
Accounts payable.......................  $   6,440     $   417          $   96        $     --      $   6,953 
Accrued expenses.......................     12,632         231             149              --         13,012 
Curent portion of long-term debt.......      3,001          --             229              --          3,230 
Intercompany accounts payable..........         --          --             884            (884)            -- 
Income taxes payable...................        988      (2,850)              3           1,859             -- 
                                         ---------     -------          ------        --------      --------- 
Total current liabilities..............     23,061      (2,202)          1,361             975         23,195 
Intercompany payable...................         --      10,545           3,808         (14,353)            -- 
Long-term debt, net of current                                                                                
  portion..............................    287,053          --             238              --        287,291 
                                         ---------     -------          ------        --------      --------- 
Total liabilities......................    310,114       8,343           5,407         (13,378)       310,486 
Minority interest......................         --          --             654              --            654 
Preferred stock........................     25,000          --              --              --         25,000 
Total stockholders' equity (deficit)...   (139,247)     (3,578)          1,517             916       (140,392)
                                         ---------     -------          ------        --------      --------- 
    Total liabilities and stockholders'                                                                       
      equity...........................  $ 195,867     $ 4,765          $7,578        $(12,462)     $ 195,748 
                                         =========     =======          ======        ========      ========= 

------------------------                                                        

(1) Inventories are shown at cost for all entities                              

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
FISCAL YEAR ENDED NOVEMBER 1, 1998

                                                        [Enlarge/Download Table]

                                    PARENT     GUARANTOR     NON-GUARANTOR                             
                                   COMPANY    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                   --------   ------------   -------------   ------------  ------------
                                                          (AMOUNTS IN THOUSANDS)                       
                                                                                                       
Net Sales......................... $271,286     $ 6,260         $4,415           $ --        $281,961  
Cost of Sales.....................  115,875       3,100          1,908                        120,883  
                                   --------     -------         ------           ----        --------  
Gross profit......................  155,411       3,160          2,507             --         161,078  
Selling, general and                                                                                   
  administrative expenses.........   99,061       5,283          2,682             --         107,026  
                                   --------     -------         ------           ----        --------  
Operating income (loss)...........   56,350      (2,123)          (175)            --          54,052  
Other income (expense)............    1,797        (423)            45            (50)          1,369  
                                   --------     -------         ------           ----        --------  
Income (loss) before income                                                                            
  taxes...........................   58,147      (2,546)          (130)           (50)         55,421  
Income taxes......................   23,116      (1,051)           (64)            --          22,001  
                                   --------     -------         ------           ----        --------  
Income (loss) before equity in                                                                         
  loss of consolidated                                                                                 
  subsidiaries....................   35,031      (1,495)           (66)           (50)         33,420  
Equity in loss of consolidated                                                                         
  subsidiaries....................     (656)         --             --            656              --  
                                   --------     -------         ------           ----        --------  
Net income (loss)................. $ 34,375     $(1,495)        $  (66)          $606        $ 33,420  
                                   ========     =======         ======           ====        ========  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED AUGUST 2, 1998
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                    PARENT     GUARANTOR     NON-GUARANTOR                             
                                   COMPANY    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                   --------   ------------   -------------   ------------  ------------
                                                          (AMOUNTS IN THOUSANDS)                       
                                                                                                       
Net sales......................... $198,820     $ 4,421         $3,052           $ --        $206,293  
Cost of sales.....................   82,498       2,400          1,312             --          86,210  
                                   --------     -------         ------           ----        --------  
Gross profit......................  116,322       2,021          1,740             --         120,083  
Selling, general and                                                                                   
  administrative expenses.........   71,648       3,436          1,774             --          76,858  
                                   --------     -------         ------           ----        --------  
Operating income (loss)...........   44,674      (1,415)           (34)            --          43,225  
Other income (expense)............    1,410        (275)            13            (48)          1,100  
                                   --------     -------         ------           ----        --------  
Income (loss) before income                                                                            
  taxes...........................   46,084      (1,690)           (21)           (48)         44,325  
Income taxes......................   18,742        (699)           (10)            --          18,033  
                                   --------     -------         ------           ----        --------  
Income (loss) before equity in                                                                         
  loss of consolidated                                                                                 
  subsidiaries....................   27,342        (991)           (11)           (48)         26,292  
Equity in loss of consolidated                                                                         
  subsidiaries....................     (448)         --             --            448              --  
                                   --------     -------         ------           ----        --------  
Net income (loss)................. $ 26,894     $  (991)        $  (11)          $400        $ 26,292  
                                   ========     =======         ======           ====        ========  

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED AUGUST 1, 1999
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                    PARENT     GUARANTOR     NON-GUARANTOR                             
                                   COMPANY    SUBSIDIARIES   SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                   --------   ------------   -------------   ------------  ------------
                                                          (AMOUNTS IN THOUSANDS)                       
                                                                                                       
Net sales......................... $209,956     $ 7,503         $4,476          $   --       $221,935  
Cost of sales.....................   90,852       4,515          2,015              --         97,382  
                                   --------     -------         ------          ------       --------  
Gross profit......................  119,104       2,988          2,461              --        124,553  
Selling, general and                                                                                   
  administrative expenses.........   81,760       6,551          2,864              --         91,175  
Transaction fees and expenses.....   15,212          --             --              --         15,212  
                                   --------     -------         ------          ------       --------  
Operating income (loss)...........   22,132      (3,563)          (403)             --         18,166  
Interest expense..................    2,045          --             --                          2,045  
Other income (expense)............    1,739        (593)            75              (1)         1,220  
                                   --------     -------         ------          ------       --------  
Income (loss) before income                                                                            
  taxes...........................   21,826      (4,156)          (328)             (1)        17,341  
Income taxes......................    8,989      (1,706)          (166)             --          7,117  
                                   --------     -------         ------          ------       --------  
Income (loss) before equity in                                                                         
  loss of consolidated                                                                                 
  subsidiaries....................   12,837      (2,450)          (162)             (1)        10,224  
Equity in loss of consolidated                                                                         
  subsidiaries....................   (1,771)         --             --           1,771             --  
                                   --------     -------         ------          ------       --------  
Net income (loss)................. $ 11,066     $(2,450)        $ (162)         $1,770       $ 10,224  
                                   ========     =======         ======          ======       ========  

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
FISCAL YEAR ENDED NOVEMBER 1, 1998

                                                        [Enlarge/Download Table]

                                                PARENT     GUARANTOR     NON-GUARANTOR                              
                                                COMPANY   SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                               ---------  ------------   --------------   ------------  ------------
                                                                      (AMOUNTS IN THOUSANDS)                        
                                                                                                                    
OPERATING ACTIVITIES:                                                                                               
Net income...................................  $ 34,375     $(1,495)        $   (66)         $ 606        $ 33,420  
Adjustments to reconcile net income to net                                                                          
  cash provided by (used in) operating                                                                              
  activities:                                                                                                       
  Depreciation and amortization..............    11,039         232             100             --          11,371  
  Increase in deferred income tax benefit....    (1,950)         --              --             --          (1,950) 
  Loss on disposal of property and                                                                                  
    equipment................................       484          --              --             --             484  
  Partnership losses.........................       331          --              --             --             331  
  Minority interest in income of consolidated                                                                       
    subsidiaries.............................        --          --              --             50              50  
  Equity in income (loss) of consolidated                                                                           
    subsidiaries.............................       656          --              --           (656)             --  
Cash provided by (used in) changes in                                                                               
  operating assets and liabilities:                                                                                 
  Accounts receivable........................     1,092        (201)            119             --           1,010  
  Intercompany receivables (net).............   (11,074)      6,714           4,360             --              --  
  Inventories................................   (13,078)     (3,107)           (826)            --         (17,011) 
  Other current assets.......................      (194)        395              13             --             214  
  Other assets...............................       (51)         --            (437)            --            (488) 
  Accounts payable and other accrued                                                                                
    expenses.................................      (742)        139             114             --            (489) 
  Income taxes payable.......................      (582)     (1,051)           (328)            --          (1,961) 
                                               --------     -------         -------          -----        --------  
      Net cash provided by operation                                                                                
        activities...........................    20,306       1,626           3,049             --          24,981  
                                               --------     -------         -------          -----        --------  
INVESTING ACTIVITIES                                                                                                
  Purchases of property and equipment........   (17,640)     (1,580)         (4,428)            --         (23,648) 
  Short-term investments.....................     1,176          --              --             --           1,176  
  Other......................................        95          --              --             --              95  
                                               --------     -------         -------          -----        --------  
      Net cash used in investing                                                                                    
        activities...........................   (16,369)     (1,580)         (4,428)            --         (22,377) 
                                               --------     -------         -------          -----        --------  
FINANCING ACTIVITIES                                                                                                
  Issuance of common stock...................     1,233          --             600             --           1,833  
  Payments for the repurchase of common                                                                             
    stock....................................    (2,880)         --              --             --          (2,880) 
  Addition to long-term debt.................        --          --             407             --             407  
  Dividends paid.............................    (2,084)         --              --             --          (2,084) 
                                               --------     -------         -------          -----        --------  
      Net cash provided by (used in)                                                                                
        financing activities.................    (3,731)         --           1,007             --          (2,724) 
                                               --------     -------         -------          -----        --------  
Effect of exchange rate changes..............        69          --             148             --             217  
Unrealized loss on securities................       (27)         --              --             --             (27) 
                                               --------     -------         -------          -----        --------  
Net increase (decrease) in cash and cash                                                                            
  equivalents................................       248          46            (224)            --              70  
Beginning balance, cash and cash                                                                                    
  equivalents................................    13,849         108             310             --          14,267  
                                               --------     -------         -------          -----        --------  
Ending balance, cash and cash equivalents....  $ 14,097     $   154         $    86          $  --        $ 14,337  
                                               ========     =======         =======          =====        ========  
Supplemental disclosures of cash flow                                                                               
  information:                                                                                                      
  Cash received during the year for interest                                                                        
    income...................................  $  1,155                                                   $  1,155  
                                               ========                                                   ========  
  Cash paid during the year for:                                                                                    
    Interest expense.........................  $     --                                                   $     --  
                                               ========                                                   ========  
    Income taxes.............................  $ 25,286                                                   $ 25,286  
                                               ========                                                   ========  

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
9 MONTHS ENDED AUGUST 2, 1998 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                PARENT     GUARANTOR     NON-GUARANTOR                              
                                                COMPANY   SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                               ---------  ------------   --------------   ------------  ------------
                                                                      (AMOUNTS IN THOUSANDS)                        
                                                                                                                    
OPERATING ACTIVITIES:                                                                                               
Net income...................................   $26,894     $  (991)        $   (11)         $ 400        $ 26,292  
Adjustments to reconcile net income to net                                                                          
  cash provided by (used in) operating                                                                              
  activities:                                                                                                       
  Depreciation and amortization..............     8,017         203              56             --           8,276  
  Increase in deferred income tax benefit....      (500)         --              --             --            (500) 
  Loss on disposal of property and                                                                                  
    equipment................................       478          --              --             --             478  
  Partnership losses.........................       252          --              --             --             252  
  Minority interest in income of consolidated                                                                       
    subsidiaries.............................        --          --              --             48              48  
  Equity in income (loss) of consolidated                                                                           
    subsidiaries.............................       448          --              --           (448)             --  
Cash provided by (used in) changes in                                                                               
  operating assets and liabilities:                                                                                 
  Accounts receivable........................     3,384          --             733             --           4,117  
  Intercompany receivables (net).............    (8,234)      4,566           3,668             --                  
  Inventories................................   (14,078)     (1,798)           (633)            --         (16,509) 
  Other current assets.......................      (994)        137               2             --            (855) 
  Other assets...............................       (36)         --             (13)            --             (49) 
  Accounts payable and other accrued                                                                                
    expenses.................................    (3,712)         90            (191)            --          (3,813) 
  Income taxes payable.......................    (1,008)       (699)           (374)            --          (2,081) 
                                                -------     -------         -------          -----        --------  
      Net cash provided by operation                                                                                
        activities...........................    10,911       1,508           3,237             --          15,656  
                                                -------     -------         -------          -----        --------  
INVESTING ACTIVITIES                                                                                                
  Purchases of property and equipment........   (11,839)     (1,140)         (3,821)            --         (16,800) 
  Short-term investments.....................      (150)         --              --             --            (150) 
  Other......................................        69          --              --             --              69  
                                                -------     -------         -------          -----        --------  
      Net cash used in investing                                                                                    
        activities...........................   (11,920)     (1,140)         (3,821)            --         (16,881) 
                                                -------     -------         -------          -----        --------  
FINANCING ACTIVITIES                                                                                                
  Issuance of common stock...................     1,233          --             600             --           1,833  
  Dividends paid.............................    (1,669)         --              --             --          (1,669) 
                                                -------     -------         -------          -----        --------  
      Net cash provided by (used in)                                                                                
        financing activities.................      (436)         --             600             --             164  
                                                -------     -------         -------          -----        --------  
Effect of exchange rate changes..............       (12)         --            (236)            --            (248) 
Unrealized loss on securities................        --          --              --             --              --  
                                                -------     -------         -------          -----        --------  
Net increase (decrease) in cash and cash                                                                            
  equivalents................................    (1,457)        368            (220)            --          (1,309) 
Beginning balance, cash and cash                                                                                    
  equivalents................................    13,488         109             670             --          14,267  
                                                -------     -------         -------          -----        --------  
Ending balance, cash and cash equivalents....   $12,031     $   477         $   450          $  --        $ 12,958  
                                                =======     =======         =======          =====        ========  
Supplemental disclosures of cash flow                                                                               
  information:                                                                                                      
  Cash received during the thirty-nine weeks                                                                        
    for interest income......................   $ 1,115                                                   $  1,115  
                                                =======                                                   ========  
  Cash paid during the thirty-nine weeks for:                                                                       
    Interest expense.........................   $    --                                                   $     --  
                                                =======                                                   ========  
    Income taxes.............................   $20,911                                                   $ 20,911  
                                                =======                                                   ========  

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

13. SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION (CONTINUED)       

ST. JOHN KNITS, INC.
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
9 MONTHS ENDED AUGUST 1, 1999 
(UNAUDITED) 

                                                        [Enlarge/Download Table]

                                                         PARENT      GUARANTOR     NON-GUARANTOR                              
                                                         COMPANY    SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS  CONSOLIDATED
                                                        ---------   ------------   --------------   ------------  ------------
                                                                                (AMOUNTS IN THOUSANDS)                        
                                                                                                                              
OPERATING ACTIVITIES:                                                                                                         
Net income............................................. $  11,066     $(2,450)         $(162)         $  1,770     $  10,224  
Adjustments to reconcile net income to net cash                                                                               
  provided by (used in) operating activities:                                                                                 
  Depreciation and amortization........................    10,613         200            118                --        10,931  
  Loss on disposal of property and equipment...........         7         957             --                --           964  
  Partnership losses...................................       185          --             --                --           185  
  Minority interest in income of consolidated                                                                                 
    subsidiaries.......................................        --          --             --                 1             1  
  Equity in income (loss) of consolidated                                                                                     
    subsidiaries.......................................     1,771          --             --            (1,771)           --  
Cash provided by (used in) changes in operating assets                                                                        
  and liabilities:                                                                                                            
  Accounts receivable..................................     4,330        (206)            98                --         4,222  
  Intercompany receivables (net).......................    (3,214)      2,328            886                --                
  Inventories..........................................      (959)      2,228           (326)               --           943  
  Other current assets.................................    (2,025)         22             (1)               --        (2,004) 
  Other assets.........................................      (441)        (23)           116                --          (348) 
  Accounts payable and other accrued expenses..........       328          --            (21)               --           307  
  Income taxes payable.................................     1,659      (1,706)           (74)               --          (121) 
                                                        ---------     -------          -----          --------     ---------  
      Net cash provided by operation activities........    23,320       1,350            634                --        25,304  
                                                        ---------     -------          -----          --------     ---------  
INVESTING ACTIVITIES                                                                                                          
  Purchases of property and equipment..................    (9,092)     (1,382)          (284)               --       (10,758) 
  Short-term investments...............................     1,152          --             --                --         1,152  
  Other................................................       282          --             --                --           282  
                                                        ---------     -------          -----          --------     ---------  
      Net cash used in investing activities............    (7,658)     (1,382)          (284)               --        (9,324) 
                                                        ---------     -------          -----          --------     ---------  
FINANCING ACTIVITIES                                                                                                          
  Proceeds from credit agreement.......................   190,000          --             --                --       190,000  
  Proceeds from issuance of subordinated notes.........    98,616          --             --                --        98,616  
  Addition to long-term debt...........................     1,427          --             --                --         1,427  
  Principle payments on long-term debt.................        --          --           (170)               --          (170) 
  Recapitalization.....................................  (311,447)         --             --                --      (311,447) 
  Issuance of common stock.............................       797          --             --                --           797  
  Issuance of preferred stock..........................    25,000          --             --                --        25,000  
  Financing fees and expenses..........................   (15,231)         --             --                --       (15,231) 
  Dividends paid.......................................    (1,244)         --             --                --        (1,244) 
                                                        ---------     -------          -----          --------     ---------  
      Net cash used in financing activities............   (12,082)         --           (170)               --       (12,252) 
                                                        ---------     -------          -----          --------     ---------  
Effect of exchange rate changes........................       (21)         --             (7)               --           (28) 
Unrealized loss on securities..........................        (3)         --             --                --            (3) 
                                                        ---------     -------          -----          --------     ---------  
Net increase (decrease) in cash and cash equivalents...     3,556         (32)           173                --         3,697  
Beginning balance, cash and cash equivalents...........    14,097         154             86                --        14,337  
                                                        ---------     -------          -----          --------     ---------  
Ending balance, cash and cash equivalents.............. $  17,653     $   122          $ 259          $     --     $  18,034  
                                                        =========     =======          =====          ========     =========  
Supplemental disclosures of cash flow information:                                                                            
  Cash received during the thirty-nine weeks for                                                                              
    interest income.................................... $     985                                                  $     985  
                                                        =========                                                  =========  
  Cash paid during the thirty-nine weeks for:                                                                                 
    Interest expense................................... $       7                                                  $       7  
                                                        =========                                                  =========  
    Income taxes....................................... $  10,456                                                  $  10,456  
                                                        =========                                                  =========  

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

14. RECAPITALIZATION TRANSACTION (UNAUDITED)                                    

On February 2, 1999, the Company entered into a merger agreement to be  
acquired by a group consisting of Vestar Capital Partners III, L.P. (Vestar) and
Bob Gray, Marie Gray and Kelly Gray for approximately $533.9 million, which     
represents an offering price of $30.00 per share. Pursuant to the agreement, on 
July 7, 1999 the Company entered into two mergers. As a result of the mergers,  
St. John became a wholly owned subsidiary of SJKI. The total financing used to  
consummate the mergers was approximately $536.9 million, funded by approximately
$26.9 million in excess cash of St. John; Senior Credit Facilities consisting of
a $75.0 million Term Loan A and a $115.0 million Term Loan B; approximately     
$98.6 million from the offering of Senior Subordinated Notes, net of discount;  
approximately $153.6 million of cash equity contributed by Vestar; $25.0 million
of preferred stock of SJKI, acquired by an affiliate of Vestar; approximately   
$29.1 million from the rollover of a portion of the Grays' investment in St.    
John; and approximately $13.7 million from the rollover of a portion of St.     
John's then-outstanding public shares.                                          

SENIOR CREDIT FACILITIES                                                

Under the Senior Credit Facilities, Term Loan A will be repayable in    
quarterly principal payments over six years with payments totaling $3.0 million 
during the first year, $5.0 million during the second year, $7.0 million during 
the third year, $11.0 million during the fourth year, $22.0 million during the  
fifth year and $27.0 million during the sixth year. Term Loan A will bear       
interest at a rate per annum equal (at SJKI's option) to: (i) an adjusted London
interbank offered rate ("Adjusted LIBOR") plus 3.00% or (ii) a rate equal to the
highest of the Agent's prime rate, a certificate of deposit rate plus 1% and the
Federal Funds effective rate plus 1/2 of 1% (the "Alternate Base Rate") plus    
2.00%, in each case subject to certain reductions based on SJKI's financial     
performance.                                                                    

Term Loan B will be repayable in quarterly principal payments over eight
years, with no payment scheduled during the first year, payments totaling $1.0  
million per year for the second through fifth years and payments totaling $11.0 
million during the sixth year, $40.0 million during the seventh year and $60.0  
million during the eighth year, and will bear interest at a rate per annum equal
(at SJKI's option) to: (i) Adjusted LIBOR plus 3.50% or (ii) the Alternate Base 
Rate plus 2.50%, in each case subject to certain reductions based on SJKI's     
financial performance.                                                          

The $25,000,000 revolving credit facility included in the Senior Credit 
Facilities will be a six year facility and outstanding balances thereunder will 
bear interest at a rate per annum equal (at SJKI's option) to: (i) Adjusted     
LIBOR plus 3.00% or (ii) the Alternate Base Rate plus 2.00%, in each case       
subject to certain reductions based on SJKI's financial performance. Amounts    
under the senior credit facilities not paid when due bear interest at a default 
rate equal to 2.00% above the otherwise applicable rate.                        

SENIOR SUBORDINATED NOTES                                               

    The $100,000,000 of Senior Subordinated Notes issued in connection with this
transaction will mature on July 1, 2009. Interest on the Notes will accrue at a 
rate of 12.5% per annum and will be payable semi-annually in arrears on each    
January 1 and July 1 commencing January 1, 2000.                                

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

14. RECAPITALIZATION TRANSACTION (UNAUDITED) (CONTINUED)                        

   The notes will be redeemable at the option of SJKI, in whole or in part, at
any time on or after July 1, 2004, at the redemption prices (expressed as a     
percentage of principal amount) set forth below, plus accrued and unpaid        
interest thereon, if any, to the redemption date (subject to the right of       
holders of record on the relevant record date to receive interest due on the    
relevant interest payment date), if redeemed during the 12-month period         
beginning on July 1 of the years indicated below:                               

                                                                [Download Table]

REDEMPTION                                                            
YEAR                                                                  
----------                                                            
                                                                      
2004........................................................  106.250%
2005........................................................  104.688%
2006........................................................  103.125%
2007........................................................  101.563%
2008 and thereafter.........................................  100.000%

   In addition, at any time and from time to time on or prior to July 1, 2002,
SJKI may redeem in the aggregate up to 35% of the originally issued aggregate   
principal amount of the notes with the net cash proceeds of one or more public  
equity offerings by SJKI at a redemption price in cash equal to 112.5% of the   
principal amount thereof, plus accrued and unpaid interest thereon, if any, to  
the date of redemption (subject to the right of holders of record on the        
relevant record date to receive interest due on the relevant interest payment   
date); provided, however, that at least 65% of the originally issued aggregate  
principal amount of the notes must remain outstanding immediately after giving  
effect to each such redemption (excluding any notes held by SJKI or any of its  
affiliates). Notice of any such redemption must be given within 60 days after   
the date of the closing of the relevant public equity offering of SJKI.         

MANDATORILY REDEEMABLE PREFERRED STOCK                                  

  The $25,000,000 Mandatorily Redeemable Preferred Stock consists of 250,000
shares of Preferred Stock with a liquidation preference of $100 per share and   
ranks junior in right of payment to all liabilities and obligations (whether or 
not for borrowed money) of SJKI (other than common stock of SJKI and any        
preferred stock of SJKI which by its terms is on parity with or junior to the   
Preferred Stock).                                                               

Holders of Preferred Stock will be entitled to receive, when, as and if 
declared by the board of directors of SJKI, out of funds legally available      
therefor, dividends on the Preferred Stock, at an annual rate equal to 15.25%,  
provided that if dividends are not paid on a dividend payment date, dividends   
shall continue to accrue on unpaid dividends.                                   

    The Preferred Stock may be redeemed at any time on or after July 1, 2004, in
whole or in part, at the option of SJKI, at the redemption prices (expressed in 
percentages of liquidation value) set forth                                     

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

14. RECAPITALIZATION TRANSACTION (UNAUDITED) (CONTINUED)                        

below together with all accumulated dividends to the date of redemption, if     
redeemed during the 12-month period beginning on July 1 of the years indicated. 

                                                                [Download Table]

REDEMPTION                                                            
YEAR                                                                  
----------                                                            
                                                                      
2004........................................................  107.625%
2005........................................................  105.719%
2006........................................................  103.813%
2007........................................................  101.906%
2008 and thereafter.........................................  100.000%

The Preferred Stock will also be redeemable in whole or in part, at the 
option of SJKI at any time before July 1, 2004, at a redemption price equal to  
the greater of (i) 100% of the liquidation value of the Preferred Stock and (ii)
the present values of the liquidation value at the mandatory redemption date,   
discounted on a semi-annual basis at the Treasury Yield plus 15 basis points.   
The "Treasury Yield" means, with respect to any redemption date, the rate per   
annum equal to the semi-annual equivalent yield to maturity for a comparable    
treasury issue.                                                                 

   In addition, at any time and from time to time on or prior to July 1, 2002,
SJKI may redeem in the aggregate up to 35% of the originally issued liquidation 
value of the Preferred Stock with the net cash proceeds of one or more Public   
Equity Offerings (as defined in the indenture) by SJKI at a redemption price in 
cash equal to 115.25% of the liquidation value thereof, plus accumulated        
dividends thereon, if any, to the date of redemption; provided, however, that at
least 65% of the originally issued aggregate liquidation value of the Preferred 
Stock must remain outstanding immediately after giving effect to each such      
redemption (excluding any Preferred Stock held by SJKI or any of its            
affiliates). Notice of any such redemption must be given within 60 days after   
the date of the closing of the relevant public equity offering of SJKI. The     
Preferred Stock may only be redeemed if permitted under the terms of the senior 
credit facilities, the indenture and other contractual arrangements of SJKI.    

    On July 1, 2010, SJKI will be required to redeem (subject to contractual and
other restrictions with respect thereto and to the legal availability of funds  
therefor) all outstanding shares of Preferred Stock at a price equal to the     
liquidation value thereof plus all accumulated dividends to the date of         
redemption. Accordingly, the carrying value of such stock has been classified   
outside of shareholders' equity.                                                

    SJKI may, at its option, exchange all but not less than all of the shares of
then outstanding Preferred Stock for debentures of SJKI in a principal amount   
equal to the liquidation value of the Preferred Stock plus accumulated          
dividends. The exchange debentures will bear interest at 15 1/4% per annum, have
a final stated maturity of July 1, 2010, have optional redemption provisions    
comparable to the Preferred Stock and will have customary covenants and events  
of default. SJKI may not cause the exchange of Preferred Stock for debentures   
unless permitted under the terms of the senior credit facilities, the indenture 
and other contractual arrangements of SJKI.                                     

The impact of this recapitalization transaction has been included on the
accompanying unaudited consolidated balance sheet as of August 1, 1999.         

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ST. JOHN KNITS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(INFORMATION AS OF AUGUST 1, 1999 AND FOR THE 39 WEEK PERIODS ENDED AUGUST 2, 
1998

AND AUGUST 1, 1999 IS UNAUDITED)

15. RESULTS BY QUARTER (UNAUDITED)                                              

 The unaudited results by quarter for fiscal years 1997 and 1998 are shown
below:                                                                          

                                                        [Enlarge/Download Table]

                                                          FIRST      SECOND     THIRD      FOURTH 
                                                         QUARTER    QUARTER    QUARTER    QUARTER 
                                                         --------   --------   --------   --------
                                                                                                  
                                                         (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 
November 2, 1997                                                                                  
  Net sales............................................. $56,175    $59,563    $54,811    $71,552 
  Gross profit..........................................  31,756     35,871     32,163     42,767 
  Net income............................................   7,383      8,874      7,201     10,965 
  Net income per common share--diluted..................    0.43       0.52       0.42       0.64 

November 1, 1998                                                                                  
  Net sales............................................. $68,761    $69,806    $67,727    $75,667 
  Gross profit..........................................  39,778     40,876     39,428     40,996 
  Net income............................................   9,220      9,746      7,325      7,129 
  Net income per common share--diluted..................    0.54       0.57       0.43       0.42 

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                                                                     SCHEDULE II

ST. JOHN KNITS, INC.

VALUATION AND QUALIFYING ACCOUNT

FOR THE FISCAL YEARS ENDED NOVEMBER 3, 1996,
NOVEMBER 2, 1997 AND NOVEMBER 1, 1998 

                                                        [Enlarge/Download Table]

                                                    BALANCE AT   CHARGED TO              BALANCE AT 
                                                   BEGINNING OF  COSTS AND                 END OF   
                                                   FISCAL YEAR    EXPENSES   DEDUCTIONS  FISCAL YEAR
                                                   ------------  ----------  ----------  -----------
                                                                                                    
Allowance for Uncollectible Accounts:                                                               
  Fiscal year ended November 3, 1996..............   $750,000     $ 88,547    $ 88,547    $750,000  
  Fiscal year ended November 2, 1997..............   $750,000     $369,987    $214,987    $905,000  
  Fiscal year ended November 1, 1998..............   $905,000     $283,826    $238,099    $950,727  

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                                                                [Download Table]
                    
$100,000,000  [LOGO]

ST. JOHN KNITS INTERNATIONAL, INCORPORATED                                      

OFFER TO EXCHANGE ALL OUTSTANDING 12 1/2% SENIOR SUBORDINATED NOTES             
DUE 2009 FOR 12 1/2% SENIOR SUBORDINATED                                        
NOTES DUE 2009, WHICH HAVE BEEN REGISTERED                                      
UNDER THE SECURITIES ACT                                                        

UNCONDITIONALLY GUARANTEED ON A SENIOR                                          
SUBORDINATED BASIS BY ST. JOHN KNITS, INC.,                                     
ST. JOHN ITALY, INC., ST. JOHN TRADEMARKS, INC.                                 
AND ST. JOHN HOME, LLC                                                          

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PART II 
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS                              

 Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other        
employees and individuals against expenses (including attorneys' fees),         
judgments, fines, and amounts paid in settlement in connection with specified   
actions, suits or proceedings, whether civil, criminal, administrative, or      
investigative (other than action by or in the right of the corporation a        
"derivative action"), if they acted in good faith and in a manner they          
reasonably believed to be in or not opposed to the best interests of the        
corporation and, with respect to any criminal action or proceedings, had no     
reasonable cause to believe their conduct was unlawful. A similar standard is   
applicable in the case of derivative actions, except that indemnification only  
extends to expenses (including attorneys' fees) incurred in connection with the 
defense or settlement of derivative actions, and the statute requires court     
approval before there can be any indemnification where the person seeking       
indemnification has been found liable to the corporation. The statute provides  
that it is not exclusive of other indemnification that may be granted by a      
corporation's charter, by-laws, disinterested director vote, stockholder vote,  
agreement or otherwise. The Registrant's by-laws provide that the Registrant    
will indemnify any person to the fullest extent permitted by Delaware law who is
or was made, or threatened to be made, a party to any threatened, pending or    
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, including, without limitation, an action by or in the right of   
the Registrant to procure a judgment in its favor, by reason of the fact that   
the person, or a person of whom the person is the legal representative, is or   
was a director or officer of the Registrant, or is or was serving in any        
capacity at the request of the Registrant for any other corporation,            
partnership, joint venture, trust, employee benefit plan or other enterprise,   
against judgments, fines, penalties, excise taxes, amounts paid in settlement   
and costs, charges and expenses (including attorneys' fees and disbursements).  
Persons who are not directors or officers of the Registrant may be similarly    
indemnified in respect of service to the Registrant or to any of the above other
entities at the request of the Registrant to the extent the board of directors  
at any time specifies that those persons are entitled to the benefits of the    
indemnification. Pursuant to the by-laws, the Registrant also has the power to  
purchase officers' and directors' liability insurance which insures against     
liabilities that officers and directors of the Registrant, in those capacities, 
may incur.                                                                      

Section 102(b)(7) of the DGCL permits a corporation to provide in its   
certificate of incorporation that a director of the corporation shall not be    
personally liable to the corporation or its stockholders for monetary damages   
for breach of fiduciary duties as a director, except for liability (i) for any  
transaction from which the director derives an improper personal benefit,       
(ii) for acts or omissions not in good faith or that involve intentional        
misconduct or a knowing violation of law, (iii) for improper payment of         
dividends or redemptions of shares, or (iv) for any breach of a director's duty 
of loyalty to the company or its stockholders. Article Sixth of the Registrant's
certificate of incorporation includes this provision.                           

   Under the Delaware Limited Liability Company Act (the "LLC Act"), a limited
liability company may, unless otherwise provided in its limited liability       
company agreement, indemnify any member or manager of the limited liability     
company or any other person from and against any and all claims and demands     
whatsoever. The amended and restated limited liability company agreement of St. 
John Home, LLC does not contain any provisions limiting the terms of the LLC    
Act.                                                                            

    Under California law, a corporation generally has the power to indemnify any
agent who is a party to any action, other than an action by or in the right of  
the corporation to procure a judgement in its favor, against expenses,          
judgments, fines and settlements if that person acted in good faith and in a    
manner that person reasonably believed to be in the best interests of the       
corporation and, in the case of a criminal proceeding, had no reasonable cause  
to believe his or her conduct was unlawful. In                                  

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addition, a corporation generally has the power to indemnify any agent who is a 
party to any action by or in the right of the corporation, against expenses     
actually and reasonably incurred by that person in connection with the defense  
or settlement of the action if that person acted in good faith and in a manner  
that person believed to be in the best interests of the corporation and its     
shareholders. An agent of a corporation for purposes of the California General  
Corporation Law (the "CGCL") includes directors, officers and employees of such 
corporation. The bylaws of St. John Trademarks, Inc. provide for indemnification
of directors, officers, employees and agents of St. John Trademarks, Inc. to the
fullest extent permitted by law.                                                

The indemnification authorized by the CGCL is not exclusive and a       
corporation may grant its directors some additional rights to indemnification.  
The restated Articles of Incorporation and restated bylaws of St. John Knits,   
Inc. and the Articles of Incorporation and the bylaws of St. John Italy, Inc.   
permit St. John Knits, Inc. and St. John Italy, Inc., respectively, to indemnify
each of their agents in excess of the indemnification otherwise permitted by the
CGCL with respect to actions for breach of duty to St. John Knits, Inc. and St. 
John Italy, Inc., respectively, subject, in each case, to limitations imposed by
the CGCL.                                                                       

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES                             

 The following exhibits were filed pursuant to Item 601 of Regulation S-K.

                                                                [Download Table]

EXHIBIT NO.                        DESCRIPTION OF EXHIBIT                   
-----------                        ----------------------                   
                                                                            
          *2.1  Agreement and Plan of Merger, dated as of February 2, 1999, 
                among St. John Knits, Inc., SJK Acquisition, Inc., St. John 
                Knits International, Incorporated and Acquisition Corp.     

          *3.1  Restated Certificate of Incorporation of St. John Knits     
                International, Incorporated.                                

          *3.2  By-Laws of St. John Knits International, Incorporated       

          *3.3  Amended and Restated Articles of Incorporation of St. John  
                Knits, Inc.                                                 

          *3.4  By-Laws of St. John Knits, Inc.                             

          *3.5  Certificate of Determination of Preferences of Series A     
                Junior Participating Preferred Stock of St. John Knits, Inc.

          *3.6  Articles of Incorporation of St. John Italy, Inc.           

          *3.7  By-Laws of St. John Italy, Inc.                             

          *3.8  Articles of Incorporation of St. John Trademarks, Inc.      

          *3.9  Amended and Restated By-Laws of St. John Trademarks, Inc.   

         *3.10  Certificate of Formation of St. John Home, LLC              

         *3.11  Amended and Restated Limited Liability Company Agreement of 
                St. John Home, LLC                                          

         *3.12  Certificate of Designations for 15 1/4% Exchangeable        
                Preferred Stock due 2010 of St. John Knits International    

          *4.1  Indenture, dated as of July 7, 1999, by and among St. John  
                Knits International, Incorporated, the guarantors named     
                therein and The Bank of New York, as the Trustee            

          *4.2  Form of 12 1/2% Senior Subordinated Notes due 2009          

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EXHIBIT NO.                        DESCRIPTION OF EXHIBIT                   
-----------                        ----------------------                   
                                                                            
          *4.3  Exchange and Registration Rights Agreement, dated as of     
                July 7, 1999, by and among St. John Knits International, St.
                John Knits, Inc., St. John Italy, Inc., St. John            
                Trademarks, Inc., St. John Home, LLC, Chase                 
                Securities Inc., Bear, Stearns & Co. Inc. and PaineWebber   
                Incorporated.                                               

          *4.4  Certificate of Designations for 15 1/4% Exchangeable        
                Preferred Stock due 2010 of St. John Knits International    

          *4.5  Subscription Agreement, dated as of July 7, 1999, between   
                St. John Knits International and Vestar/SJK Investors LLC,  
                relating to the 15 1/4% Exchangeable Preferred Stock due    
                2010 of St. John Knits International.                       

            *5  Opinion of Simpson Thacher & Bartlett                       

         *10.1  Credit Agreement, dated July 7, 1999, by and among the      
                Company, the Lenders from time to time party thereto and The
                Chase Manhattan Bank, as administrative agent               

         *10.2  Voting agreement, dated as of February 2, 1999, among Vestar
                Capital Partners III, L.P., Vestar/Gray LLC and the parties 
                listed on Schedule A thereto                                

         *10.3  Stockholders' Agreement, dated July 7, 1999, by and among   
                the Company, SJK, Vestar/ Gray Investors LLC, Vestar/SJK    
                Investors LLC and the members of Vestar/Gray Investors LLC  
                Signatory Thereto                                           

         *10.4  Amended and Restated Limited Liability Company Agreement of 
                Vestar/SJK Investors LLC, dated as of July 7, 1999          

         *10.5  Management Agreement among St. John Knits, Inc., St. John   
                Knits International and Vestar Capital Partners             

         *10.6  Letter Agreement dated April 27, 1999, between Vestar       
                Capital Partners and Robert E. Gray, attaching (i) a summary
                of terms for the Grays' stock options, (ii) a form of St.   
                John Knits International, Incorporated 1999 Stock Option    
                Plan and (iii) a form of Stock option agreement             

         *10.7  Superior Court of the State of California County of Orange, 
                Central Justice Center Minute Order, dated April 30, 1999   

         *10.8  Lease Amendment Agreement dated April 1, 1997 between St.   
                John Knits, Inc. and G.M. Properties (increasing the space  
                of the corporate headquarters, warehousing and Manufacturing
                facility)                                                   

         *10.9  Agreement of Lease dated as of December 31, 1995 by and     
                between St. John Knits, Inc. and Rolex Realty Company, Inc. 
                (New York Boutique)                                         

        *10.10  Lease dated June 1, 1986 between G.M. Properties and St.    
                John Knits, Inc. (Corporate Headquarters)                   

        *10.11  Industrial Real Estate Lease dated November 13, 1985 between
                Alhambra Partners, a California Limited Partnership, and St.
                John Knits, Inc., together with Amendment No. 1 to          
                Industrial Real Estate Lease dated November 13, 1985 and    
                Option to Extend Term dated November 13, 1985 (Assembling,  
                Sewing)                                                     

        *10.12  Agreement of Lease dated January 11, 1991 by and between    
                Rolex Realty Company, Inc. and St. John Knits, Inc. together
                with Lease Modification Agreement dated January 11, 1991 and
                Second Lease Modification Agreement dated April 12, 1991    
                (New York Boutique)                                         

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EXHIBIT NO.                        DESCRIPTION OF EXHIBIT                   
-----------                        ----------------------                   
                                                                            
        *10.13  Amended and Restated Agreement of Limited Partnership of SJA
                1&2, Ltd. dated October 31, 1993 by and between St. John    
                Knits, Inc. and Ocean Air Charters, Inc.                    

        *10.14  Amended and Restated Employment Agreement between St. John  
                Knits, Inc. and Robert E. Gray.                             

        *10.15  Employment Agreement dated as of July 14, 1998 between St.  
                John Knits, Inc. and Marie St. John Gray                    

        *10.16  Employment Agreement dated as of July 14, 1998 between St.  
                John Knits, Inc. and Kelly A. Gray                          

        *10.17  Employment Agreement dated as of July 14, 1998 between St.  
                John Knits, Inc. and Roger G. Ruppert                       

        *10.18  Employment Agreement dated as of July 14, 1998 between St.  
                John Knits, Inc. and Karla R. Guyer                         

        *10.19  St. John Knits, Inc. Employees' Profit Sharing Plan dated as
                of August 21, 1995                                          

        *10.20  Aircraft Lease dated April 1, 1998 by and between St. John  
                Knits, Inc. and Ocean Air Charters, Inc. as Trustee of the  
                SJA 1&2, Ltd. Trust (Lease for Company airplane)            

        *10.21  Form of Indemnity Agreement by and between St. John Knits,  
                Inc., St. John Knits International and each of their        
                directors and officers                                      

        *10.22  Distribution Agreement dated June 11, 1997 by and between   
                St. John Knits, Inc. and Gary Farn, Ltd.                    

        *10.23  General Partnership Agreement of St. John-Varian Development
                Company dated April 3, 1995 by and between St. John Knits,  
                Inc. and Varian Associates, a California General Partnership

        *10.24  Lease Agreement dated April 3, 1995 by and between St. John 
                Knits, Inc. and St. John-Varian Development Company         
                (Knitting, Sewing, Finishing, Shipping, Administrative      
                Offices)                                                    

        *10.25  Joint Venture Agreement dated July 17, 1997 between St. John
                Knits, Inc. and Commercial Development Co., Ltd.            

        *10.26  Lease Extension Agreement dated February 6, 1996 between St.
                John Knits, Inc. and G.M. Properties (extending the lease   
                for St. John Knits, Inc.'s current Corporate Headquarters)  

        *10.27  Lease Extension Agreement dated as of September 1, 1996     
                between St. John Knits, Inc. and Alhambra Partners          
                (extending the lease for one of the Company's Assembling and
                Sewing facilities)                                          

        *10.28  License and Distribution Agreement dated as of August 1,    
                1997 between St. John Knits, Inc. and St. John Co., Ltd.    

        *10.29  Asset Purchase Agreement dated as of August 29, 1996 among  
                St. John Knits, Inc., Jakob Schlaepfer & Co. AG and Jakob   
                Schlaepfer, Inc.                                            

        *10.30  Manufacturing and Supply Agreement dated as of November 9,  
                1996 by and between St. John Knits, Inc. and Calzaturificio 
                M.A.B. S.p.A.                                               

        *10.31  Sales Representative Agreement dated November 13, 1996 by   
                and between St. John Knits, Inc. and Hilda Chang            

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EXHIBIT NO.                        DESCRIPTION OF EXHIBIT                   
-----------                        ----------------------                   
                                                                            
        *10.32  Unit Price Construction Agreement between St. John de       
                Mexico, S.A. de C.V. and Administration Tijuana Industrial, 
                S.A. de C.V.                                                

        *10.33  1999 St. John Knits International, Incorporated Stock Option
                Plan                                                        

        *10.34  Stock Option Agreement, dated as of July 7, 1999, between   
                St. John Knits International and Bob Gray                   

        *10.35  Stock Option Agreement, dated as of July 7, 1999, between   
                St. John Knits International and Marie St. John Gray        

        *10.36  Stock Option Agreement, dated as of July 7, 1999, between   
                St. John Knits International and Kelly A. Gray              

           *21  Subsidiaries of St. John Knits International, Incorporated. 

        **23.1  Consent of Arthur Andersen LLP, Independent Auditors        

         *23.2  Consent of Simpson Thacher & Bartlett (contained in opinion 
                filed as Exhibit 5)                                         

           *24  Power of Attorney                                           

           *25  Form T-1 Statement of Eligibility under the Trust Indenture 
                Act of 1939 of The Bank of New York, as trustee             

           *27  Financial Data Schedules for the year ended November 1, 1998
                and the 39 weeks ended August 1, 1999                       

         *99.1  Form of Letter of Transmittal                               

         *99.2  Form of Notice of Guaranteed Delivery                       

------------------------                                                        

*   Previously filed                                                            

**  Filed herewith                                                              

ITEM 22. UNDERTAKINGS                                                           

   (a) Insofar as indemnification for liabilities arising under Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the  
registrant pursuant to the foregoing provisions, or otherwise, the registrant   
has been advised that in the opinion of the Securities and Exchange Commission  
this indemnification is against public policy as expressed in the Act and is,   
therefore, unenforceable. In the event that a claim for indemnification against 
these liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the   
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being           
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate     
jurisdiction the question whether the indemnification by it is against public   
policy as expressed in the Act and will be governed by the final adjudication of
the issue.                                                                      

(b) The undersigned registrant hereby undertakes:                       

       (1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:              

       (i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;                           

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         (ii) to reflect in the prospectus any facts or events arising after
           the effective date of the registration statement (or the most
             recent post-effective amendment thereof) which, individually or
     in the aggregate, represent a fundamental change in the
  information set forth in the registration statement.
               Notwithstanding the foregoing, any increase or decrease in volume
            of securities offered (if the total dollar value of securities
         offered would not exceed that which was registered) and any
         deviation from the low or high end of the estimated maximum
             offering range may be reflected in the form of prospectus filed
               with the Commission pursuant to Rule 424(b) if, in the aggregate,
      the changes in volume and price represent no more that a
           20 percent change in the maximum aggregate offering price set
         forth in the "Calculation of Registration Fee" table in the
effective registration statement; and             

           (iii) to include any material information with respect to the plan of
       distribution not previously disclosed in the registration
         statement or any material change to this information in the
registration statement;                           

(2) That, for the purpose of determining any liability under the
  Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered   
    therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof; and                          

      (3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the       
termination of the offering.                                            

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SIGNATURES

   Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the            
undersigned, thereunto duly authorized, in the City of Irvine, in the State of  
California, on January 12, 2000.                                                

                                                                [Download Table]
                                              
ST. JOHN KNITS INTERNATIONAL,                 
INCORPORATED                                  

By:             /s/ ROGER G. RUPPERT          
     -----------------------------------------
                  Roger G. Ruppert            
      CHIEF FINANCIAL OFFICER AND SENIOR VICE 
                 PRESIDENT, FINANCE           

    Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the          
capacities indicated below on the 12th day of January, 2000.                    

                                                        [Enlarge/Download Table]

                 SIGNATURE                                       TITLE                     
                 ---------                   ----------------------------------------------
                                                                                           
                     *                                                                     
-------------------------------------------  Chairman of the Board and Chief Executive     
                 Bob Gray                      Officer (Principal Executive Officer)       
                     *                                                                     
-------------------------------------------  Director and President                        
               Kelly A. Gray                                                               
           /s/ ROGER G. RUPPERT              Chief Financial Officer and Senior Vice       
-------------------------------------------    President, Finance (Principal Financial     
             Roger G. Ruppert                  Officer and Principal Accounting Officer)   
                     *                                                                     
-------------------------------------------  Director                                      
             Daniel O'Connell                                                              
                     *                                                                     
-------------------------------------------  Director                                      
               James Kelley                                                                
                     *                                                                     
-------------------------------------------  Director                                      
                Sander Levy                                                                

                                                                [Download Table]
                                              
*By:           /s/ ROGER G. RUPPERT           
      --------------------------------------  
                 Roger G. Ruppert,            
                 ATTORNEY-IN-FACT             

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SIGNATURES

   Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the            
undersigned, thereunto duly authorized, in the City of Irvine, in the State of  
California, on January 12, 2000.                                                

                                                                [Download Table]
                                              
ST. JOHN KNITS, INC.                          

By:             /s/ ROGER G. RUPPERT          
     -----------------------------------------
                  Roger G. Ruppert            
      CHIEF FINANCIAL OFFICER AND SENIOR VICE 
                 PRESIDENT, FINANCE           

    Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the          
capacities indicated below on the 12th day of January, 2000.                    

                                                        [Enlarge/Download Table]

                 SIGNATURE                                       TITLE                     
                 ---------                   ----------------------------------------------
                                                                                           
                     *                                                                     
-------------------------------------------  Chairman of the Board and Chief Executive     
                 Bob Gray                      Officer (Principal Executive Officer)       
                     *                                                                     
-------------------------------------------  Director and President                        
               Kelly A. Gray                                                               
           /s/ ROGER G. RUPPERT              Chief Financial Officer and Senior Vice       
-------------------------------------------    President, Finance (Principal Financial     
             Roger G. Ruppert                  Officer and Principal Accounting Officer)   
                     *                                                                     
-------------------------------------------  Director                                      
             Daniel O'Connell                                                              
                     *                                                                     
-------------------------------------------  Director                                      
               James Kelley                                                                
                     *                                                                     
-------------------------------------------  Director                                      
                Sander Levy                                                                

                                                                [Download Table]
                                              
*By:           /s/ ROGER G. RUPPERT           
      --------------------------------------  
                 Roger G. Ruppert,            
                 ATTORNEY-IN-FACT             

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SIGNATURES

   Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the            
undersigned, thereunto duly authorized, in the City of Irvine, in the State of  
California, on January 12, 2000.                                                

                                                                [Download Table]
                                              
ST. JOHN ITALY, INC.                          

By:             /s/ ROGER G. RUPPERT          
     -----------------------------------------
                  Roger G. Ruppert            
      VICE PRESIDENT, CHIEF FINANCIAL OFFICER 
                   AND SECRETARY              

    Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the          
capacities indicated below on the 12th day of January, 2000.                    

                                                        [Enlarge/Download Table]

                  SIGNATURE                                       TITLE                  
                  ---------                                       -----                  
                                                                                         

                      *                       President, Chief Executive Officer and     
--------------------------------------------  Director (Principal Executive Officer)     
                Kelly A. Gray                                                            

            /s/ ROGER G. RUPPERT              Vice President, Chief Financial Officer,   
--------------------------------------------  Secretary and Director (Principal Financial
              Roger G. Ruppert                Officer and Principal Accounting Officer)  

                      *                       Director                                   
--------------------------------------------                                             
                  Bob Gray                                                               

                                                                [Download Table]
                                              
*By:           /s/ ROGER G. RUPPERT           
      --------------------------------------  
                 Roger G. Ruppert,            
                 ATTORNEY-IN-FACT             

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SIGNATURES

   Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the            
undersigned, thereunto duly authorized, in the City of Irvine, in the State of  
California, on January 12, 2000.                                                

                                                                [Download Table]
                                              
ST. JOHN TRADEMARKS, INC.                     

By:             /s/ ROGER G. RUPPERT          
     -----------------------------------------
                  Roger G. Ruppert            
              CHIEF FINANCIAL OFFICER,        
            VICE PRESIDENT AND SECRETARY      

    Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the          
capacities indicated below on the 12th day of January, 2000.                    

                                                        [Enlarge/Download Table]

                 SIGNATURE                                       TITLE                   
                 ---------                                       -----                   
                                                                                         
                     *                                                                   
-------------------------------------------  President, Chief Executive Officer and      
                 Bob Gray                      Director (Principal Executive Officer)    

           /s/ ROGER G. RUPPERT              Chief Financial Officer, Vice President and 
-------------------------------------------    Secretary (Principal Financial Officer and
             Roger G. Ruppert                  Principal Accounting Officer)             

                     *                                                                   
-------------------------------------------  Director                                    
                Marie Gray                                                               

                                                                [Download Table]
                                              
*By:           /s/ ROGER G. RUPPERT           
      --------------------------------------  
                 Roger G. Ruppert,            
                 ATTORNEY-IN-FACT             

II-10 

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SIGNATURES

   Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the            
undersigned, thereunto duly authorized, in the City of Irvine, in the State of  
California, on January 12, 2000.                                                

                                                                [Download Table]
                                              
ST. JOHN HOME, LLC                            

By:             ST JOHN KNITS, INC.           
                  ITS SOLE MEMBER             

By:             /s/ ROGER G. RUPPERT          
     -----------------------------------------
                  Roger G. Ruppert            
      CHIEF FINANCIAL OFFICER AND SENIOR VICE 
                 PRESIDENT, FINANCE           

    Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the          
capacities indicated below on the 12th day of January, 2000.                    

                                                        [Enlarge/Download Table]

                 SIGNATURE                                       TITLE                     
                 ---------                   ----------------------------------------------
                                                                                           
                     *                                                                     
-------------------------------------------  Chairman of the Board and Chief Executive     
                 Bob Gray                      Officer (Principal Executive Officer)       
                     *                                                                     
-------------------------------------------  Director and President                        
               Kelly A. Gray                                                               
           /s/ ROGER G. RUPPERT              Chief Financial Officer and Senior Vice       
-------------------------------------------    President, Finance (Principal Financial     
             Roger G. Ruppert                  Officer and Principal Accounting Officer)   
                     *                                                                     
-------------------------------------------  Director                                      
             Daniel O'Connell                                                              
                     *                                                                     
-------------------------------------------  Director                                      
               James Kelley                                                                
                     *                                                                     
-------------------------------------------  Director                                      
                Sander Levy                                                                

                                                                [Download Table]
                                              
*By:           /s/ ROGER G. RUPPERT           
      --------------------------------------  
                 Roger G. Ruppert,            
                 ATTORNEY-IN-FACT             

II-11 

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘POS AM’ Filing		Date		First		Last			Other Filings
		7/1/10		120		161
		7/1/09		15		159
		7/31/05		43
		7/1/04		15		161
		7/1/02		15		161
		8/31/01		62
		5/30/01		62
		3/31/01		62
		6/1/00		58		145
		5/31/00		58
		3/1/00		146
		2/21/00		130
		1/31/00		25		55
Filed on:		1/12/00		1		175
		1/1/00		15		159
		12/27/99		3		69
		11/22/99		3					S-4/A
		11/16/99		25		61
		9/9/99		25		55
		9/8/99		25		54
		9/3/99		133					S-4
		8/6/99		25		58
		8/1/99		3		169			10-Q
		7/22/99		44		87
		7/12/99		44					SC 13E3/A
		7/7/99		10		169			8-K
		6/30/99		150					8-K
		6/28/99		150					8-K
		6/24/99		44
		6/8/99		44		87
		5/28/99		141
		5/11/99		150
		5/5/99		150
		4/30/99		25		167
		4/28/99		25		149			S-4/A,  SC 13E3/A
		4/27/99		167
		4/15/99		25		149
		4/1/99		62		150
		3/9/99		149
		2/24/99		25		149
		2/10/99		58					8-K,  SC 13D/A
		2/2/99		9		167			8-K
		1/8/99		149
		12/31/98		58					SC 13D/A
		12/23/98		148
		12/18/98		133
		12/9/98		148
		12/8/98		148					8-K
		12/4/98		147
		11/18/98		145
		11/17/98		147
		11/16/98		147
		11/10/98		141
		11/4/98		145					8-K
		11/1/98		6		169			10-K405,  10-K405/A
		10/13/98		25		147			SC 13G/A
		10/5/98		147
		9/15/98		149
		8/25/98		147
		8/20/98		25		54
		8/2/98		17		162			10-Q
		7/14/98		58		168
		4/1/98		168
		2/25/98		25		147
		11/3/97		17		32
		11/2/97		17		163			10-K405,  10-K405/A
		8/1/97		168
		7/17/97		168
		6/11/97		168					10-Q
		4/1/97		167
		11/13/96		168
		11/9/96		168
		11/3/96		17		163			10-K
		9/1/96		168
		8/29/96		168
		5/6/96		139
		4/8/96		139					SC 13G/A
		3/12/96		139
		2/6/96		168
		12/31/95		167
		10/29/95		37		136
		8/21/95		168
		6/1/95		58
		4/3/95		168
		10/30/94		37
		10/31/93		168
		5/14/93		68
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