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Section 14A Information
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 'SS' 240.14a-11(c) or 'SS'
240.14a-12
K2 Design, Inc.
.................................................................
(Name of Registrant as Specified In Its Charter)
.................................................................
(Name of Person(s) Filing Proxy Statement if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
...........................................................
2) Aggregate number of securities to which transaction
applies:
......................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
......................................................
4) Proposed maximum aggregate value of transaction:
......................................................
5) Total fee paid:
......................................................
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
......................................................
2) Form, Schedule or Registration Statement No.:
......................................................
3) Filing Party:
......................................................
4) Date Filed:
......................................................
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K2 DESIGN, INC.
55 BROAD STREET, 7TH FLOOR
NEW YORK, NY 10004
------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, JUNE 12, 1997
------------------------------------------------------
To the Stockholders of
K2 DESIGN, INC.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of K2
Design, Inc., a Delaware corporation (the 'Company'), will be held at 9:30 a.m.
(Eastern Standard Time) on Thursday, June 12, 1997, at The New York Information
Technology Center, Fourth Floor, 55 Broad Street, New York, NY 10004, to
consider and vote upon:
1. Election of six directors for a one-year term.
2. Approval and ratification of the selection by the Board of
Directors of Arthur Andersen LLP as independent public accountants for the
Company's 1997 fiscal year.
3. Approval and ratification of the Company's 1997 Stock Incentive
Plan.
4. Any other business that may properly come before the meeting.
The Board of Directors has fixed the close of business on April 30, 1997,
as the record date for the determination of stockholders entitled to receive
notice of and to vote at said meeting. Stock transfer books will not be closed.
To assure representation of your shares, YOU ARE REQUESTED, WHETHER OR NOT
YOU PLAN TO BE PRESENT AT THE MEETING, TO COMPLETE, DATE, SIGN AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
If your shares are held of record by a broker, bank, or other nominee and
you wish to vote your shares at the meeting, you must obtain and bring to the
meeting a letter from the broker, bank, or other nominee confirming your
beneficial ownership of the shares.
By Order of the Board of Directors
BRADLEY K. SZOLLOSE
Secretary
New York, New York
April 30, 1997
<PAGE>
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K2 DESIGN, INC.
---------------------------------
PROXY STATEMENT
---------------------------------
ANNUAL MEETING OF STOCKHOLDERS
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of K2 Design, Inc. (the 'Company'). All proxies in the accompanying
form, which are properly executed and duly returned, will be voted at the Annual
Meeting of Stockholders to be held on Thursday, June 12, 1997, at 9:30 a.m. at
The New York Information Technology Center, Fourth Floor, 55 Broad Street, New
York, NY 10004, for the purposes set forth in the accompanying Notice of Annual
Meeting. The Company's mailing address is 55 Broad Street, 7th Floor, New York,
NY 10004.
This Proxy Statement and the enclosed form of proxy are being mailed to
stockholders on or about April 30, 1997.
VOTING AND SOLICITATION OF PROXIES
Only holders of record of the Company's common stock, par value $.01 per
share (the 'Common Stock'), at the close of business on April 30, 1997, will be
entitled to notice of and to vote at the Meeting. On that date there were issued
and outstanding 3,645,421 shares of Common Stock. Each outstanding share of
Common Stock is entitled to one vote on all matters to come before the Meeting.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, officers, directors and regular employees of the Company
may solicit proxies personally or by telephone, electronic mail or facsimile
transmission. The Company also intends to request that brokerage houses, banks,
custodians, nominees and fiduciaries forward soliciting material to the
beneficial owners of Common Stock held of record by such persons, and will
reimburse such persons for their reasonable expenses in forwarding such
material.
The holders of a majority of the total shares of Common Stock issued and
outstanding, whether present in person or represented by proxy, will constitute
a quorum for the transaction of business at the Meeting. The affirmative vote of
a plurality of the total shares of Common Stock represented in person or by
proxy at the Meeting is required for the election of directors. The affirmative
vote of a majority of the total shares of Common Stock represented in person or
by proxy at the Meeting is required for approval and ratification of the
appointment of independent public accountants and adoption of the 1997 Stock
Incentive Plan. Since only affirmative votes are counted as votes in favor of
these matters, abstentions and broker non-votes have the same effect as votes
against these matters. Proxies and ballots will be tabulated by the inspectors
of election.
It is important that proxies be returned promptly. Therefore, whether or
not you plan to attend in person, you are urged to execute and return your proxy
in the enclosed envelope, to which no postage need be affixed if mailed in the
United States. The proxy may be revoked at any time before it is exercised by
filing with the Secretary of the Company an instrument revoking such proxy or a
duly executed proxy bearing a later date, or by attending the Meeting and voting
in person.
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BENEFICIAL OWNERSHIP
The following table sets forth information, as of March 1, 1997, as to the
beneficial ownership of Common Stock (including shares which may be acquired
within sixty days pursuant to stock options) of each director of the Company,
the Chief Executive Officer of the Company, all directors and executive officers
as a group and persons known by the Company to beneficially own 5% of the Common
Stock. Except as set forth below, no person beneficially owns 5% or more of the
Common Stock. The address of each person included in the table is care of the
Company, 55 Broad Street, 7th Floor, New York, New York 10004.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK PERCENT OF
NAME OF OWNER BENEFICIALLY OWNED CLASS(1)
- ---------------------------------------------------------------------------- ---------------------- ----------
<S> <C> <C>
David J. Centner............................................................ 481,370(2)(3) 13.2
Matthew G. de Ganon......................................................... 481,370(2)(3) 13.2
Douglas E. Cleek............................................................ 481,370(2)(3) 13.2
Bradley K. Szollose......................................................... 481,370(2)(3) 13.2
James A. Favia.............................................................. 1,000(4) -0-
Steven N. Goldstein......................................................... -0- (4) -0-
All Directors and Executive Officers as a group (7 persons)................. 1,926,480(5) 52.4
</TABLE>
- ------------
(1) Does not give effect to 500,000 shares of Common Stock issuable upon
exercise of the Company's Redeemable Common Stock Purchase Warrants (the
'Warrants'). Two Warrants entitle the holder to purchase one share of Common
Stock for $7.50.
(2) Includes 7,500 shares underlying presently exercisable stock options,
exercisable in increments of 2,500 for $1.75, $3.50 and $6.75 per share.
Excludes 11,250 shares of Common Stock underlying stock options that are not
presently exercisable.
(3) Pursuant to a certain 10-year voting agreement entered into by Messrs.
Centner, de Ganon, Cleek and Szollose, effective July 26, 1996 (the 'Voting
Agreement'), the voting control over all of these shares is vested in Mr. de
Ganon, except that these shares must be voted in favor of the election as
directors of Messrs. de Ganon, Centner, Cleek and Szollose. In addition, the
Voting Agreement grants each party thereto a right of first refusal as to
the sale of the others' Common Stock. Messrs. Centner, de Ganon, Cleek and
Szollose each disclaim beneficial ownership of those shares with respect to
which they are not record owners.
(4) Excludes 5,000 shares of Common Stock underlying stock options that are not
presently exercisable.
(5) Includes 30,000 shares of Common Stock underlying presently exercisable
stock options and excludes 80,000 shares of Common Stock underlying stock
options that are not presently exercisable.
ELECTION OF DIRECTORS
The Company's Directors have terms expiring at the 1997 Annual Meeting, and
until their respective successors are duly elected and qualified. The officers
of the Company are appointed by the Board of Directors to hold office until
their successors are duly elected and qualified. Vacancies on the Board of
Directors are filled by the remaining directors.
Certain information regarding the nominees for election as Directors at
this year's Annual Meeting is set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
David J. Centner................................... 31 Chairman of the Board, Chief Executive Officer and
Director
Matthew G. de Ganon................................ 34 Vice Chairman, President, Chief Operating Officer and
Director
Douglas E. Cleek................................... 34 Executive Vice President -- Chief Creative Officer and
Director
Bradley K. Szollose................................ 34 Executive Vice President -- Marketing, Treasurer,
Secretary and Director
James A. Favia..................................... 63 Director
Steven N. Goldstein................................ 57 Director
</TABLE>
2
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<PAGE>
David J. Centner joined the Company in July 1994. Mr. Centner has been the
Company's Chairman of the Board of Directors and Chief Executive Officer since
March 1995. From March 1995 to February 1997, Mr. Centner was also the Company's
Chief Financial Officer. From August 1989 to July 1994, Mr. Centner operated a
business that offered computer consulting, custom application programming and
computer personnel placement services for such clients as Merrill Lynch, Bankers
Trust, Chase Manhattan Bank, Chemical Bank and American Express. Mr. Centner has
a Bachelor of Science degree in Entrepreneurial Management from the Wharton
School of Business.
Matthew G. de Ganon has been the Company's Vice Chairman, Chief Operating
Officer and a Director since he joined the Company in July 1995 and has been
President since June 1996. For the two years prior to joining the Company, Mr.
de Ganon operated a business that created CD-ROM products and offered consulting
services regarding the use of electronic delivery to publishers of newsletters
and directories. Mr. de Ganon is co-author of the essay, 'Overcoming Future
Shock on the Superhighway: Suggestions for Providers and Technocrats,' published
and presented in the 1994 National Online Conference Proceedings. From August
1992 to July 1993, Mr. de Ganon was the Vice President of New Media of SCS, a
software developer. Mr. de Ganon's work focused on UNIX based 4GL accounting
software customization for corporate clients. From May 1991 to July 1992, Mr. de
Ganon was involved in casting administration for the Motion Picture Group of
Universal Studios, Inc. Prior thereto, Mr. de Ganon was a franchised theatrical
agent with the Stone Manners Agency in Los Angeles, California from August 1987
to May 1991.
Douglas E. Cleek, who co-founded the Company in 1993, has been the
Company's Executive Vice President -- Chief Creative Officer and a Director of
the Company since it was reorganized as a corporation in January 1995. From 1993
until then, Mr. Cleek was a general partner of the Company. For more than five
years prior thereto, Mr. Cleek was an art director for William Allen & Co. and
its successor, A.J. Bart & Sons, graphic design firms specializing in graphic
promotional materials for the hospitality industry.
Bradley K. Szollose, who co-founded the Company in 1993, has been the
Company's Executive Vice President -- Marketing, Treasurer, Secretary and a
Director of the Company since it was reorganized as a corporation in January
1995. From 1993 until then, Mr. Szollose was a general partner of the Company.
For more than five years prior thereto, Mr. Szollose was a freelance art
director for the Caribiner Group, producers of corporate theater and related
promotional/entertainment events, where he managed a team of artists and
photographers to coordinate film shooting and art preparation under the
direction of senior designers.
James A. Favia has been a Director of the Company since July 1996. Mr.
Favia is a part-time consultant to Donald & Co. Securities, Inc., the
representative of the several underwriters for the Company's initial public
offering. From November 1988 to June 1992, Mr. Favia was a principal of Shaw
Venture Partners, a venture capital fund. From 1983 to 1988, Mr. Favia was
president of Favia, Hill & Associates, a wholly owned subsidiary of Chemical
Bank responsible for money management for institutional clients. From 1974 to
1983, Mr. Favia was senior vice president, Chemical Bank, and prior thereto he
was in charge of Chemical Bank's research department from 1965 to 1974. Prior to
1965, Mr. Favia was a general partner and research director for Kuhn, Loeb &
Company, an international investment bank. Mr. Favia has a Master of Business
Administration degree in business administration from New York University and a
Bachelor of Arts degree in economics from Brooklyn College. Mr. Favia is also a
Director of Eastco Industrial Safety Corp., a public company that manufactures
industrial safety products.
Dr. Steven N. Goldstein has been a Director of the Company since 1996. Mr.
Goldstein has been Program Director, Inter-Agency and International (Networking)
Coordination Director of Network Services at the National Science Foundation
('NSF') since June 1989 and is responsible for the international networking
coordination in support of the communication needs of the United States research
and education community. Dr. Goldstein has directed NSF's International
Connections Management ('ICM') project which, in the past five years, has
assisted in connecting approximately 20 countries to the Internet. Dr. Goldstein
has also collaborated with Japanese networkers in the formation of academic
Internet service in Japan. Presently, Dr. Goldstein is also the U.S. coordinator
for the G-7 Global Information Society initiative's theme, 'Global
Interoperability of Broadband Networks,' under
3
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<PAGE>
which he coordinates closely with Japan's high performance networking projects.
Dr. Goldstein has a Bachelor of Science and Master degrees in Physics from the
Massachusetts Institute of Technology and a Doctorate degree in Engineering and
Public Policy from Carnegie Mellon University. Dr. Goldstein is also a member of
the Institute of Electrical and Electronics Engineers, the Association for
Computing Machinery and the Internet Society.
OTHER EXECUTIVE OFFICERS
Nelson C. Hunter, 48, has been Chief Financial Officer of the Company since
February 1997. From June 1996 to February 1997, he was an independent
consultant. From 1992 to June 1996, Mr. Hunter served as Senior Vice President
and Chief Financial Officer to Gross, Townsend, Frank, Hoffman, Inc., ('GTFH') a
wholly owned subsidiary of Grey Advertising ('Grey') specializing in medical and
pharmaceutical matters. He served as Vice President and Chief Financial Officer
of GTFH from 1989 to 1992. Prior thereto, Mr. Hunter was employed directly by
Grey as a Vice President and Director of Internal Audit for its worldwide
operations. He is a member of the Institute of Internal Auditors and has a
Bachelor of Science degree from Niagara University.
DIRECTORS' MEETINGS
The Board of Directors met twice during fiscal year 1996. Each Director
attended more than 75% of the combined number of meetings of both the Board of
Directors and of any committees of the Board on which the Director served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors established Audit and Compensation Committees on
July 22, 1996 and an Option Committee on October 23, 1996. The Audit Committee
consists of Messrs. Centner, Favia and Goldstein, the Compensation Committee
consists of Messrs. Centner, Favia and Goldstein and the Option Committee
consists of Messrs. Favia and Goldstein. The Audit Committee did not meet in
fiscal 1996. The Compensation Committee and Option Committee acted by unanimous
written consent in lieu of a meeting twice and once, respectively, in fiscal
1996.
The Audit Committee reviews and examines detailed reports of the Company's
independent public accountants; consults with the independent public accountants
regarding internal accounting controls, audit results and financial reporting
procedures; recommends the engagement and continuation of engagement of the
Company's independent public accountants; and meets with, and reviews and
considers recommendations of, the independent public accountants.
The Compensation Committee reviews the performance of senior management and
key employees whose compensation is the subject of review and approval by the
Committee; periodically reviews and recommends to the Board of Directors
compensation arrangements for senior management and key employees; and
periodically reviews the main elements of and administers the Company's
compensation and benefit programs, with the exception of the Company's 1996
Stock Option Plan and 1997 Stock Incentive Plan (together, the 'Plans').
The Option Committee administers the Plans and, to the extent provided
thereby, determines the persons to whom options are granted, the exercise price
thereof, the term and number of shares covered by each option grant and the type
of option to be granted. In addition, the Option Committee exercises all
discretionary power regarding the operation of the Plans.
4
<PAGE>
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the total annual compensation paid or
accrued by the Company for services in all capacities for Mr. Centner, the Chief
Executive Officer, and Mr. de Ganon, President and Chief Operating Officer. No
other Executive Officer of the Company who was serving as such at the end of
fiscal 1996 had aggregate compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION
NAME AND PRINCIPAL -------------------------- ----------------------
POSITION YEAR SALARY ($) BONUS ($) OPTION AWARDS
- ---------------------------------------------------- ---- ---------- ------------ ----------------------
<S> <C> <C> <C> <C>
David J. Centner, Chief Executive Officer........... 1996 84,000 29,000 18,750
Matthew G. de Ganon, President and Chief Operating
Officer........................................... 1996 84,000 31,000 18,750
</TABLE>
- ------------
(1) The value of perquisites and other personal benefits does not exceed 10% of
the Officer's salary.
EMPLOYMENT AGREEMENTS FOR EXECUTIVE OFFICERS
David J. Centner, Matthew G. de Ganon, Bradley K. Szollose and Douglas E.
Cleek are each employed under employment agreements expiring December 31, 1998,
that provide for base salaries of $117,500 for 1997 and $127,500 for 1998. Each
employment agreement also provides for a bonus equal to 1.88% of the Company's
pre-tax income. Nelson C. Hunter, Chief Financial Officer, is employed pursuant
to a two-year employment agreement, effective February 18, 1997, pursuant to
which he will receive a salary of $100,000 in the first year and $125,000 in the
second year. Mr. Hunter has also been granted options to purchase 25,000 shares
of Common Stock at an exercise price of $7.00 per share and will be granted
options to acquire an additional 25,000 shares at an exercise price of $7.75 per
share. Mr. Hunter is also eligible to receive annual discretionary bonuses.
OPTION GRANTS IN FISCAL 1996
The following table sets forth information as to the options granted to
Messrs. Centner and de Ganon in fiscal 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES % OF TOTAL OPTIONS
UNDERLYING OPTIONS GRANTED TO EMPLOYEES EXERCISE PRICE EXPIRATION
NAME GRANTED (#)(1) IN FISCAL YEAR PER SHARE ($) DATE(3)
- ----------------------------------------- -------------------- -------------------- -------------- ----------
<S> <C> <C> <C> <C>
David J. Centner......................... 18,750 13.8% (2) 01/16/01
Matthew G. de Ganon...................... 18,750 13.8% (2) 01/16/01
</TABLE>
- ------------
(1) These options to purchase shares of Common Stock were granted under the 1996
Stock Option Plan and provide for vesting in 20% annual increments
commencing on January 16, 1996, the date of grant.
(2) These options are exercisable in three 2,500 share increments at per share
exercise prices of $1.75, $3.50 and $6.75.
(3) Options may terminate before their expiration dates if the optionee's status
as an employee is terminated or upon the optionee's death.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The table set forth below shows the value of unexercised options held on
December 31, 1996 by David J. Centner and Matthew G. de Ganon.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS HELD ON DECEMBER 31,
OPTIONS AT DECEMBER 31, 1996 1996 ($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
David J. Centner.... 7,500 11,250 18,750 28,125
Matthew G. de
Ganon............. 7,500 11,250 18,750 28,125
</TABLE>
- ------------
(1) Based on the closing price of the Common Stock on December 31, 1996, which
was $6.375.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on materials provided to the Company, all forms and reports with
respect to Directors and Executive Officers of the Company were timely filed
with the Securities and Exchange Commission, with the exception of initial Forms
3 of Messrs. Goldstein and Favia, which were deemed filed less than seven days
past due.
5
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<PAGE>
1997 STOCK INCENTIVE PLAN PROPOSAL
INTRODUCTION
The Company's Board of Directors has unanimously adopted, submitted for
stockholder approval, and recommended that the stockholders approve a 1997 Stock
Incentive Plan (the '1997 Plan'). If the proposed 1997 Plan is approved by the
stockholders at the Meeting, a total of 350,000 shares of Common Stock will be
issuable upon award of stock options ('Options') or restricted shares
('Restricted Shares'), or any combination thereof (collectively, the 'Awards')
under the 1997 Plan.
DESCRIPTION OF THE 1997 PLAN
The following description of the 1997 Plan is qualified in its entirety by
reference to the 1997 Plan, a copy of which is attached to this Proxy Statement
as Exhibit A and is incorporated by reference herein. Attention is particularly
directed to the description therein of the material terms and conditions of the
Options and Restricted Shares. A capitalized term used herein that is not
defined shall have the meaning ascribed to in the 1997 Plan.
All employees (including Officers and Directors) of the Company and its
Subsidiaries or independent contractors or consultants shall be eligible to
participate in the 1997 Plan. The Option Committee may grant Awards to such
persons to purchase the number of shares as the Option Committee may determine.
Options granted under the 1997 Plan may either be Incentive Stock Options
('ISOs') pursuant to which the recipient receives certain tax benefits or
non-ISOs. The price at which shares may be purchased upon exercise of an Option
shall be fixed by the Option Committee and may be more than, less than or equal
to the fair market value of the Common Stock as of the date the Option is
granted. Subject to the provisions of the 1997 Plan with respect to death,
retirement and termination of employment, the term of each Option shall be for
such period as the Option Committee shall determine as set forth in an
applicable agreement.
The method of payment of the purchase price of an Option, and the amount
required to satisfy applicable federal, state and local withholding tax
requirements, will be determined by the Option Committee and may consist of
cash, a check, a promissory note, whole shares of Common Stock already owned by
the optionee, the withholding of shares of Common Stock issuable upon such
exercise of the Option, the delivery of a properly executed exercise notice and
irrevocable instructions to a broker to deliver promptly to the Company the
amount of sale or loan proceeds required to pay the purchase price, any
combination of the foregoing methods of payment or such other consideration and
method of payment as may be permitted for the issuance of shares under the
Delaware General Corporation Law.
At the time of any Award of Restricted Shares, the Option Committee will
designate a period of time which must elapse (the 'Restriction Period') and may
impose such other restrictions, terms and conditions that must be fulfilled
before the Restricted Shares will become vested. The Option Committee may
determine that (i) Restricted Shares will be issued at the beginning of the
Restriction Period, in which case such shares will constitute issued and
outstanding shares of Common Stock for all corporate purposes, or (ii)
Restricted Shares will not be issued until the end of the Restriction Period, in
which case the holder will have none of the rights of a stockholder with respect
to the shares of Common Stock covered by such Award until such shares shall have
been issued to such holder at the end of the Restriction Period.
If a holder's employment with the Company or a Subsidiary shall be
terminated by the Company or such Subsidiary during the Restriction Period with
respect to any Restricted Shares, or prior to the exercise of any Option, for
cause, then (i) all Options held by such holder shall immediately terminate and
(ii) such holder's rights to all Restricted Shares, Retained Distributions, any
unpaid Dividend Equivalents and any cash awards shall be forfeited immediately.
All shares available under the 1997 Plan are subject to adjustments that
may be made for a merger, recapitalization, stock dividend, stock split or other
similar change affecting the number of outstanding shares of Common Stock.
Shares of Common Stock that are subject to any Award granted under the
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1997 Plan that expires, terminates or is annulled for any reason without having
been exercised and any Award of Restricted Shares that is forfeited prior to
becoming vested will return to the pool of such shares available for grant under
the 1997 Plan.
The Board of Directors may at any time amend, suspend or discontinue the
1997 Plan; provided, however, that certain amendments may not be made by the
Board of Directors without approval of the stockholders. Amendments may not
alter an outstanding Option without the consent of the optionee.
The Option Committee may require in an applicable agreement that if the
optionee acquires any shares of Common Stock through the exercise of Options or
through the vesting of Restricted Shares granted pursuant to an Award, then
prior to selling any such shares, such holder must offer to sell such shares to
the Company at their fair market value pursuant to a right of first refusal.
The obligations of the Company with respect to Awards granted under the
1997 Plan are subject to all applicable laws.
DIRECTOR FEES
Directors who are employees of the Company receive no additional
compensation for services as Directors. Directors not so employed are entitled
to be reimbursed for expenses incurred in connection with meeting attendance. In
addition, each of the Company's two non-employee Directors have been granted
options to acquire 5,000 shares of Common Stock.
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as the Company's independent public
accountants since December 31, 1995. The Board of Directors has selected Arthur
Andersen LLP to serve as the independent public accountants of the Company for
the fiscal year ending December 31, 1997. This selection will be submitted for
approval and ratification at the Annual Meeting. Representatives of Arthur
Andersen LLP are expected to attend the Annual Meeting. They will have the
opportunity to make a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
ANNUAL REPORT
The Annual Report to Stockholders (including financial statements) for the
fiscal year ended December 31, 1996 is mailed herewith to all stockholders.
COPIES OF THE COMPANY'S FORM 10-KSB AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION MAY BE OBTAINED, WITHOUT CHARGE, BY WRITTEN REQUEST TO NELSON C.
HUNTER, CHIEF FINANCIAL OFFICER.
OTHER MATTERS
Management is not aware of any matters to come before the Meeting which
will require the vote of stockholders other than those matters indicated in the
Notice of Meeting and this Proxy Statement. However, if any other matter calling
for stockholder action should properly come before the Meeting or any
adjournments thereof, those persons named as proxies in the enclosed proxy form
will vote thereon according to their best judgment.
7
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ADVANCE NOTICE FOR STOCKHOLDER PROPOSALS FOR THE
1998 ANNUAL MEETING
The Company's By-laws provide that in order for a stockholder to nominate a
candidate for election as a director at an annual meeting of stockholders or to
propose business for consideration at such meeting, notice must be delivered to
the Secretary of the Company not less than 60 days nor more than 90 days prior
to the annual meeting; provided, however, that in the event that less than 70
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be received no
later than the close of business on the 10th day following the day on which
notice of the date of the meeting was mailed or public disclosure thereof was
made, whichever occurs first. In addition, the regulations under the Securities
Exchange Act require stockholder proposals to be received by the Company prior
to December 31, 1997. Accordingly, stockholder proposals for the 1998 Annual
Meeting must be received in writing by the Company both (i) prior to December
31, 1997, and (ii) assuming a meeting date of April 30, 1998, and that not less
than 70 days' notice or prior public disclosure of the meeting date is given,
between February 28, 1998, and March 30, 1998, in order to be considered for
inclusion in the Company's proxy materials for such meeting. Any stockholder
desiring a copy of the Company's By-laws will be furnished one without charge
upon written request to the Secretary.
By Order of the Board of Directors
BRADLEY K. SZOLLOSE
Secretary
New York, New York
April, 30, 1997
8
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<PAGE>
EXHIBIT A
K2 DESIGN, INC.
1997 STOCK INCENTIVE PLAN
ARTICLE I
PURPOSE AND EFFECTIVENESS
1.1 Purpose. The purpose of the K2 Design, Inc. 1997 Stock Incentive Plan
(the 'Plan') is to promote the success of K2 Design, Inc. (the 'Company') by
providing a method whereby (i) eligible employees of the Company and its
Subsidiaries and (ii) independent contractors and consultants providing services
to the Company or its Subsidiaries may be awarded additional remuneration for
services rendered and encouraged to invest in capital stock of the Company,
thereby increasing their proprietary interest in the Company's businesses,
encouraging them to remain in the employ of the Company or its Subsidiaries, and
increasing their personal interest in the continued success and progress of the
Company or its Subsidiaries. The Plan is also intended to aid (i) in attracting
persons of exceptional ability to become officers and employees of the Company
and its Subsidiaries and (ii) inducing independent contractors to agree to
provide services to the Company.
1.2 Effective Date. The Plan shall be subject to, and become effective
upon, the approval by the affirmative vote of the holders of at least a majority
of the outstanding shares of capital stock of the Company.
ARTICLE II
DEFINITIONS
2.1 Certain Defined Terms. Capitalized terms not defined elsewhere in the
Plan shall have the following meanings (whether used in the singular or plural):
'Affiliate' of the Company means any corporation, partnership, or
other business association that, directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control
with the Company.
'Agreement' means a stock option agreement or restricted shares
agreement, or an agreement evidencing more than one type of Award,
specified in Section 10.5, as any such Agreement may be supplemented or
amended from time to time.
'Approved Transaction' means any transaction in which the Board (or,
if approval of the Board is not required as a matter of law, the
stockholders of the Company) shall approve (i) any consolidation or merger
of the Company, or binding share exchange, pursuant to which shares of
Common Stock would be changed or converted into or exchanged for cash,
securities or other property, other than any such transaction in which the
common stockholders of the Company immediately prior to such transaction
have the same proportionate ownership of the common stock of, and voting
power with respect to, the surviving corporation immediately after such
transaction, (ii) any merger, consolidation or binding share exchange to
which the Company is a party as a result of which the persons who are
common stockholders of the Company immediately prior thereto have less than
a majority of the combined voting power of the outstanding capital stock of
the Company ordinarily (and apart from the rights accruing under special
circumstances) having the right to vote in the election of directors
immediately following such merger, consolidation or binding share exchange,
(iii) the adoption of any plan or proposal for the liquidation or
dissolution of the Company, or (iv) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company.
'Award' means a grant of Options or Restricted Shares under this Plan.
'Board' means the Board of Directors of the Company.
'Code' means the Internal Revenue Code of 1986, as amended from time
to time, or any successor statute or statutes thereto. Reference to any
specific Code section shall include any successor section.
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'Committee' means the committee of the Board appointed pursuant to
Section 3.1 to administer the Plan.
'Common Stock' means the Common Stock, $.01 par value per share, of
the Company.
'Company' means K2 Design, Inc., a Delaware corporation.
'Disability' means the inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months.
'Dividend Equivalents' means, with respect to Restricted Shares to be
issued at the end of the Restriction Period, to the extent specified by the
Committee only, an amount equal to all dividends and other distributions
(or the economic equivalent thereof) which are payable to stockholders of
record during the Restriction Period on a like number of shares of Common
Stock.
'Domestic relations order' means a domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act, or
the rules thereunder.
'Effective Date' means the date on which the Plan becomes effective
pursuant to Section 1.2.
'Equity security' shall have the meaning ascribed to such term in
Section 3(a)(11) of the Exchange Act, and an equity security of an issuer
shall have the meaning ascribed thereto in Rule 16a-1 promulgated under the
Exchange Act, or any successor Rule.
'Exchange Act' means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute or statutes thereto. Reference
to any specific Exchange Act section shall include any successor section.
'Fair Market Value' of a share of the Common Stock on any day means
the last sale price (or, if no last sale price is reported, the average of
the high bid and low asked prices) for a share of Common Stock on such day
(or, if such day is not a trading day, on the next preceding trading day)
as reported on NASDAQ or, if not reported on NASDAQ, as quoted by the
National Quotation Bureau Incorporated, or if the Common Stock is listed on
an exchange, on the principal exchange on which the Common Stock is listed.
If for any day the Fair Market Value of a share of Common Stock is not
determinable by any of the foregoing means, then the Fair Market Value for
such day shall be determined in good faith by the Committee on the basis of
such quotations and other considerations as the Committee deems
appropriate.
'Holder' means an employee of the Company or a Subsidiary or an
independent contractor or consultant who has received an Award under this
Plan.
'Incentive Stock Option' means a stock option granted under Article VI
which is intended to be an incentive stock option within the meaning of
Section 422 of the Code.
'NASDAQ' means the Nasdaq Stock Market.
'Nonqualified Stock Option' means a stock option granted under Article
VI that is designated a nonqualified stock option.
'Option' means any Incentive Stock Option or Nonqualified Stock
Option.
'Plan' has the meaning ascribed thereto in Section 1.1.
'Restricted Shares' means shares of Common Stock or the right to
receive shares of Common Stock, as the case may be, awarded pursuant to
Article VIII.
'Restriction Period' means a period of time beginning on the date of
each award of Restricted Shares and ending on the Vesting Date with respect
to such Award.
'Retained Distribution' has the meaning ascribed thereto in Section
8.3.
'Rule 16b-3' means Rule 16b-3 promulgated under the Exchange Act, or
any successor Rule. References to paragraphs of Rule 16b-3 shall include
the comparable provisions of any successor Rule.
'Subsidiary' of the Company means any present or future subsidiary (as
defined in Section 424(f) of the Code) of the Company or any business
entity in which the Company owns directly or
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indirectly, 50% or more of the voting, capital or profits interests. An
entity shall be deemed a subsidiary of the Company for purposes of this
definition only for such periods as the requisite ownership or control
relationship is maintained.
'Vesting Date' with respect to any Restricted Shares awarded hereunder
means the date on which such Restricted Shares cease to be subject to a
risk of forfeiture, as designated in or determined in accordance with the
Agreement with respect to such award of Restricted Shares pursuant to
Article VIII. If more than one Vesting Date is designated for an award of
Restricted Shares, references in the Plan to a Vesting Date in respect of
such Award shall be deemed to refer to each party of such Award and the
Vesting Date of such part.
ARTICLE III
ADMINISTRATION
3.1 Committee. The Plan shall be administered by the Option Committee of
the Board unless a different committee is appointed by the Board. The Committee
shall be comprised of not less than two persons. The Committee shall select one
of its members as its chairman and shall hold its meetings at such times and
places as it shall deem advisable. A majority of its members shall constitute a
quorum and all determinations shall be made by a majority of such quorum. Any
determination reduced to writing and signed by all of the members shall be fully
as effective as if it had been made by a majority vote at a meeting duly called
and held.
3.2 Powers. The Committee shall have full power and authority to grant to
eligible persons Options under Article VI of the Plan and/or Restricted Shares
under Article VIII of the Plan, to determine the terms and conditions (which
need not be identical) of all Awards so granted, to interpret the provisions of
the Plan and any Agreements relating to Awards granted under the Plan and to
supervise the administration of the Plan. The Committee in making an Award may
provide for the granting or issuance of additional, replacement or alternative
Awards upon the occurrence of specified events, including the exercise of the
original Award. The Committee shall have sole authority in the selection of
persons to whom Awards may be granted under the Plan and in the determination of
the timing, pricing and amount of any such Award, subject only to the express
provisions of the Plan. In making determinations hereunder, the Committee may
take into account the nature of the services rendered by the respective
employees, independent contractors and consultants, their present and potential
contributions to the success of the Company and its Subsidiaries and such other
factors as the Committee in its discretion deems relevant.
3.3 Interpretation. The Committee is authorized, subject to the provisions
of the Plan, to establish, amend and rescind such rules and regulations as it
deems necessary or advisable for the proper administration of the Plan and to
take such other action in connection with or in relation to the Plan as it deems
necessary or advisable. Each action and determination made or taken pursuant to
the Plan by the Committee, including any interpretation or construction of the
Plan, shall be final and conclusive for all purposes and upon all persons. No
member of the Committee shall be liable for any action or determination made or
taken by him or the Committee in good faith with respect to the Plan.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to the provisions of this Article IV, the
maximum number of shares of Common Stock with respect to which Awards may be
granted during the term of the Plan shall be 350,000 shares. Shares of Common
Stock will be made available from the authorized but unissued shares of the
Company. The shares of Common Stock subject to (i) any Award granted under the
Plan that shall expire, terminate or be annulled for any reason without having
been exercised (or considered to have been exercised as provided in Section 7)
and (ii) any award of Restricted Shares that shall be forfeited prior to
becoming vested (provided that the Holder received no benefits of ownership of
such Restricted Shares other than voting rights and the accumulation of Retained
Distributions and unpaid Dividend Equivalents that are likewise forfeited),
shall again be available for purposes of the Plan.
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4.2 Adjustments. If the Company subdivides its outstanding shares of Common
Stock into a greater number of shares of Common Stock (by stock dividend, stock
split, reclassification or otherwise) or combines its outstanding shares of
Common Stock into a similar number of shares of Common Stock (by reverse stock
split, reclassification or otherwise), or if the Committee determines that any
stock dividend, extraordinary cash dividend, reclassification, recapitalization,
reorganization, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock or other similar corporate event
(including mergers or consolidations other than those which constitute Approved
Transactions) affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under this Plan, then the Committee shall, in its sole discretion and
in such manner as the Committee may deem equitable and appropriate, make such
adjustments to any or all of (i) the number and kind of shares which thereafter
may be awarded, optioned or otherwise made subject to the benefits contemplated
by the Plan; (ii) the number and kind of shares subject to outstanding Awards;
and (iii) the purchase or exercise price with respect to any of the foregoing,
provided, however, that the number of shares subject to any Award shall always
be a whole number. The Committee may, if deemed appropriate, provide for a cash
payment to any Holder of an Award in connection with any adjustment made
pursuant to this Section 4.2.
ARTICLE V
ELIGIBILITY
5.1 General. The persons who shall be eligible to participate in the Plan
and to receive Awards under the Plan shall be such employees (including officers
and directors) of the Company and its Subsidiaries or independent contractors or
consultants as the Committee shall select. Awards may be made to employees,
independent contractors or consultants who hold or have held Awards under this
Plan or any similar or other awards under any other plan of the Company or any
of its Affiliates.
ARTICLE VI
STOCK OPTIONS
6.1 Grant of Options. Subject to the limitations of the Plan, the Committee
shall designate from time to time those eligible persons to be granted Options,
the time when each Option shall be granted to such eligible persons, the number
of shares subject to such Option, whether such Option is an Incentive Stock
Option or a Nonqualified Stock Option and, subject to Section 6.2, the purchase
price of the shares of Common Stock subject to such Option. Subject to the other
provisions of the Plan, the same person may receive Incentive Stock Options and
Nonqualified Stock Options at the same time and pursuant to the same Agreement,
provided that Incentive Stock Options and Nonqualified Stock Options are clearly
designated as such.
6.2 Option Price. The price at which shares may be purchased upon exercise
of an Option shall be fixed by the Committee and may be more than, less than or
equal to the Fair Market Value of the Common Stock as of the date the Option is
granted.
6.3 Term of Options. Subject to the provisions of the Plan with respect to
death, retirement and termination of employment, the term of each Option shall
be for such period as the Committee shall determine as set forth in the
applicable Agreement.
6.4 Exercise of Options. An Option granted under the Plan shall become (and
remain) exercisable during the term of the Option to the extent provided in the
applicable Agreement and this Plan and, unless the Agreement otherwise provides,
may be exercised to the extent exercisable, in whole or in part, at any time and
from time to time during such term; provided, however, that subsequent to the
grant of an Option, the Committee, at any time before complete termination of
such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part (without reducing the term of such Option).
6.5 Manner of Exercise.
(a) Form of Payment. An Option shall be exercised by written notice to
the Company upon such terms and conditions as the Agreement may provide and
in accordance with such other
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procedures for the exercise of Options as the Committee may establish from
time to time. The method or methods of payment of the purchase price for
the shares to be purchased upon exercise of an Option and of any amounts
required by Section 10.10 shall be determined by the Committee and may
consist of (i) cash, (ii) check, (iii) promissory note, (iv) whole shares
of Common Stock already owned by the Holder, (v) the withholding of shares
of Common Stock issuable upon such exercise of the Option, (vi) the
delivery, together with a properly executed exercise notice, of irrevocable
instructions to a broker to deliver promptly to the Company the amount of
sale or loan proceeds required to pay the purchase price, (vii) any
combination of the foregoing methods of payment, or such other
consideration and method of payment as may be permitted for the issuance of
shares under the Delaware General Corporation Law. The permitted method or
methods of payment of the amounts payable upon exercise of an Option, if
other than in cash, shall be set forth in the applicable Agreement and may
be subject to such conditions as the Committee deems appropriate. Without
limiting the generality of the foregoing, if a Holder is permitted to elect
to have shares of Common Stock issuable upon exercise of an Option withheld
to pay all or any part of the amounts payable in connection with such
exercise, then the Committee shall have the sole discretion to approve or
disapprove such election, which approval or disapproval shall be given
after such election is made.
(b) Value of Shares. Shares of Common Stock delivered in payment of
all or any part of the amounts payable in connection with the exercise of
an Option, and shares of Common Stock withheld for such payment, shall be
valued for such purpose at their Fair Market Value as of the exercise date.
Notwithstanding the foregoing, if a Holder who is permitted to do so
pursuant to the applicable Agreement elects to have shares of Common Stock
issuable upon exercise of an Option withheld in payment of all or any part
of the amounts payable in connection with the exercise of such Option and
if, in order to meet the exemptive requirements of Rule 16b-3, such
election is made during a window period determined in accordance with
paragraph (e)(3) of such Rule (or is made prior thereto to become effective
during such window period), then for purposes of determining the Fair
Market Value of the shares of Common Stock withheld, such Option (other
than an Incentive Stock Option) shall be deemed to have been exercised on
the day during such window period on which the highest reported last sale
price of a share of Common Stock as reported on NASDAQ occurred and the
Fair Market Value of such shares shall be deemed to be such highest
reported last sale price.
(c) Issuance of Shares. The Company shall effect the transfer of the
shares of Common Stock purchased under the Option as soon as practicable
after the exercise thereof and payment in full of the purchase price
therefor and of any amounts required by Section 10.10, and within a
reasonable time thereafter such transfer shall be evidenced on the books of
the Company. No Holder or other person exercising an Option shall have any
of the rights of a stockholder of the Company with respect to shares of
Common Stock subject to an Option granted under the Plan until due exercise
and full payment has been made. No adjustment shall be made for cash
dividends or other rights for which the record date is prior to the date of
such due exercise and full payment.
6.6 Nontransferability. Unless otherwise determined by the Committee and
provided in the applicable Agreement, Options shall not be transferable other
than by will or the laws of descent and distribution or pursuant to a domestic
relations order and, except as otherwise required pursuant to a domestic
relations order, Options may be exercised during the lifetime of the Holder
thereof only by such Holder (or his or her court appointed legal
representative).
ARTICLE VII
INTENTIONALLY OMITTED
ARTICLE VIII
RESTRICTED SHARES
8.1 Grant. Subject to the limitations of the Plan, the Committee shall
designate those eligible persons to be granted awards of Restricted Shares,
shall determine the time when each such Award shall be granted, whether shares
of Common Stock covered by awards of Restricted Shares will be
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issued at the beginning or the end of the Restriction Period and whether
Dividend Equivalents will be paid during the Restriction Period in the event
shares of the Common Stock are to be issued at the end of the Restriction
Period, and shall designate (or set forth the basis for determining) the Vesting
Date or Vesting Dates for each award of Restricted Shares and may prescribe
other restrictions, terms and conditions applicable to the vesting of such
Restricted Shares in addition to those provided in the Plan. The Committee shall
determine the price, if any, to be paid by the Holder for the Restricted Shares;
provided, however, that the issuance of Restricted Shares shall be made for at
least the minimum consideration necessary to permit such Restricted Shares to be
deemed fully paid and nonassessable. All determinations made by the Committee
pursuant to this Section 8.1 shall be specified in the Agreement.
8.2 Issuance of Restricted Shares at Beginning of the Restriction Period.
If shares of Common Stock are issued at the beginning of the Restriction Period,
the stock certificate or certificates representing such Restricted Shares shall
be registered in the name of the Holder to whom such Restricted Shares shall
have been awarded. During the Restriction Period, certificates representing the
Restricted Shares and any securities constituting Retained Distributions shall
bear a restrictive legend to the effect that ownership of the Restricted Shares
(and such Retained Distributions), and the enjoyment of all rights appurtenant
thereto, are subject to the restrictions, terms and conditions provided in the
Plan and the applicable Agreement. Such certificates shall remain in the custody
of the Company and the Holder shall deposit with the Company stock powers or
other instruments of assignment, each endorsed in blank, so as to permit
retransfer to the Company of all or any portion of the Restricted Shares and any
securities constituting Retained Distributions that shall be forfeited or
otherwise not become vested in accordance with the Plan and the applicable
Agreement.
8.3 Restrictions. Restricted Shares issued at the beginning of the
Restriction Period shall constitute issued and outstanding shares of Common
Stock for all corporate purposes. The Holder will have the right to vote such
Restricted Shares, to receive and retain such dividends and distributions, as
the Committee may in its sole discretion designate, paid or distributed on such
Restricted Shares and to exercise all other rights, powers and privileges of a
Holder of Common Stock with respect to such Restricted Shares; except, that (a)
the Holder will not be entitled to delivery of the stock certificate or
certificates representing such Restricted Shares until the Restriction Period
shall have expired and unless all other vesting requirements with respect
thereto shall have been fulfilled or waived; (b) the Company will retain custody
of the stock certificate or certificates representing the Restricted Shares
during the Restriction Period as provided in Section 8.2; (c) other than such
dividends and distributions as the Committee may in its sole discretion
designate, the Company will retain custody of all distributions ('Retained
Distributions') made or declared with respect to the Restricted Shares (and such
Retained Distributions will be subject to the same restrictions, terms and
vesting and other conditions as are applicable to the Restricted Shares) until
such time, if ever, as the Restricted Shares with respect to which such Retained
Distributions shall have been made, paid or declared shall have become vested,
and such Retained Distributions shall not bear interest or be segregated in a
separate account; (d) the Holder may not sell, assign, transfer, pledge,
exchange, encumber or dispose of the Restricted Shares or any Retained
Distributions or his interest in any of them during the Restriction Period; and
(e) a breach of any restrictions, terms or conditions provided in the Plan or
established by the Committee with respect to any Restricted Shares or Retained
Distributions will cause a forfeiture of such Restricted Shares and any Retained
Distributions with respect thereto.
8.4 Issuance of Stock at End of the Restriction Period. Restricted Shares
issued at the end of the Restriction Period shall not constitute issued and
outstanding shares of Common Stock and the Holder shall not have any of the
rights of a stockholder with respect to the shares of Common Stock covered by
such an award of Restricted Shares, in each case until such shares shall have
been transferred to the Holder at the end of the Restriction Period. If and to
the extent that shares of Common Stock are to be issued at the end of the
Restriction Period, the Holder shall be entitled to receive Dividend Equivalents
with respect to the shares of Common Stock covered thereby either (i) during the
Restriction Period, or (ii) in accordance with the rules applicable to Retained
Distributions, as the Committee may specify in the Agreement.
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8.5 Cash Awards. In connection with any award of Restricted Shares, an
Agreement may provide for the payment of a cash amount to the Holder of such
Restricted Shares at any time after such Restricted Shares shall have become
vested. Such cash awards shall be payable in accordance with such additional
restrictions, terms and conditions as shall be prescribed by the Committee in
the Agreement and shall be in addition to any other salary, incentive, bonus or
other compensation payments which such Holder shall be otherwise entitled or
eligible to receive from the Company.
8.6 Completion of Restriction Period. On the Vesting Date with respect to
each award of Restricted Shares, and the satisfaction of any other applicable
restrictions, terms and conditions (a) all or the applicable portion of such
Restricted Shares shall become vested, (b) any Retained Distributions and any
unpaid Dividend Equivalents with respect to such Restricted Shares shall become
vested to the extent that the Restricted Shares related thereto shall have
become vested and (c) any cash award to be received by the Holder with respect
to such Restricted Shares shall become payable, all in accordance with the terms
of the applicable Agreement. Any such Restricted Shares, Retained Distributions
and any unpaid Dividend Equivalents that shall not become vested shall be
forfeited to the Company and the Holder shall not thereafter have any rights
(including dividend and voting rights) with respect to such Restricted Shares,
Retained Distributions and any unpaid Dividend Equivalents that shall have been
so forfeited. The Committee may, in its discretion, provide that the delivery of
any Restricted Shares, Retained Distributions and unpaid Dividend Equivalents
that shall have become vested, and payment of any cash awards that shall have
become payable, shall be deferred until such date or dates as the recipient may
elect. Any election of a recipient pursuant to the preceding sentence shall be
filed in writing with the Committee in accordance with such rules and
regulations, including any deadline for the making of such an election, as the
Committee may provide.
ARTICLE IX
INTENTIONALLY OMITTED
ARTICLE X
GENERAL PROVISIONS
10.1 Acceleration of Options and Restricted Shares.
(a) Death or Disability. If a Holder's employment shall terminate by
reason of death or Disability, notwithstanding any contrary waiting period,
installment period, vesting schedule or Restriction Period in any Agreement
or in the Plan, unless the applicable Agreement provides otherwise: (i) in
the case of an Option, each outstanding Option granted under the Plan shall
immediately become exercisable in full in respect of the aggregate number
of shares covered thereby; and (ii) in the case of Restricted Shares, the
Restriction Period applicable to each such Award of Restricted Shares shall
be deemed to have expired and all such Restricted Shares, any related
Retained Distributions and any unpaid Dividend Equivalents shall become
vested and any cash amounts payable pursuant to the applicable Agreement
shall be adjusted in such manner as may be provided in the Agreement.
(b) Approved Transactions. In the event of any Approved Transaction,
notwithstanding any contrary waiting period, installment period, vesting
schedule or Restriction Period in any Agreement or in the Plan, unless the
applicable Agreement provides otherwise: (i) in the case of an Option each
such outstanding Option granted under the Plan shall become exercisable in
full in respect of the aggregate number of shares covered thereby; and (ii)
in the case of Restricted Shares, the Restriction Period applicable to each
such award of Restricted Shares shall be deemed to have expired and all
such Restricted Shares, any related Retained Distributions and any unpaid
Dividend Equivalents shall become vested and any cash amounts payable
pursuant to the applicable Agreement shall be adjusted in such manner as
may be provided in the Agreement, provided, however, that any Options not
theretofore exercised shall terminate upon consummation of the Approved
Transaction. Notwithstanding the foregoing, unless otherwise provided in
the applicable Agreement, the Committee may, in its discretion, determine
that any or all outstanding Awards of any or all types granted pursuant to
the Plan will not vest or become exercisable on an accelerated basis in
connection with an Approved Transaction and/or will not terminate if not
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exercised prior to consummation of the Approved Transaction, if the Board
or the surviving or acquiring corporation, as the case may be, shall have
taken, or made effective provision for the taking of, such action as in the
opinion of the Committee is equitable and appropriate to substitute a new
Award for such Award or to assume such Award and in order to make such new
or assumed Award, as nearly as may be practicable, equivalent to the old
Award (before giving effect to any acceleration of the vesting or
exercisability thereof), taking into account, to the extent applicable, the
kind and amount of securities, cash or other assets into or for which the
Common Stock may be changed, converted or exchanged in connection with the
Approved Transaction.
10.2 Termination of Employment.
(a) General. If a Holder's employment shall terminate prior to the
complete exercise of an Option (or deemed exercise thereof, as provided in
Section 7.2) or during the Restriction Period with respect to any
Restricted Shares, then such Option shall thereafter be exercisable, and
the Holder's rights to any unvested Restricted Shares, Retained
Distributions, unpaid Dividend Equivalents and cash amounts shall
thereafter vest solely to the extent provided in the applicable Agreement;
provided, however, that (i) no Option may be exercised after the scheduled
expiration date thereof; (ii) if the Holder's employment terminates by
reason of death or Disability, the Option shall remain exercisable for a
period of at least one year following such termination (but not later than
the scheduled expiration of such Option); and (iii) any termination by the
Company for cause will be treated in accordance with the provisions of
Section 10.2(b).
(b) Termination by Company for Cause. If a Holder's employment with
the Company or a Subsidiary shall be terminated by the Company or such
Subsidiary during the Restriction Period with respect to any Restricted
Shares, or prior to the exercise of any Option, for cause (for these
purposes, cause shall have the meaning ascribed thereto in any employment
agreement to which such Holder is a party or, in the absence thereof, shall
include but not be limited to, insubordination, dishonesty, incompetence,
moral turpitude, other misconduct of any kind or the refusal to perform his
duties and responsibilities for any reason other than illness or
incapacity; provided, however, that if such termination occurs within 12
months after an Approved Transaction, termination for cause shall mean only
a felony conviction for fraud, misappropriation or embezzlement), then (i)
all Options held by such Holder shall immediately terminate and (ii) such
Holder's rights to all Restricted Shares, Retained Distributions, any
unpaid Dividend Equivalents and any cash awards shall be forfeited
immediately.
(c) Miscellaneous. The Committee may determine whether any given leave
of absence constitutes a termination of employment; provided, however, that
for purposes of the Plan (i) a leave of absence, duly authorized in writing
by the Company for military service or sickness, or for any other purpose
approved by the Company if the period of such leave does not exceed 90
days, and (ii) a leave of absence in excess of 90 days, duly authorized in
writing by the Company, provided the employee's right to reemployment is
guaranteed either by statute or contract, shall not be deemed a termination
of employment. Awards made under the Plan shall not be affected by any
change of employment so long as the Holder continues to be an employee of
the Company or any Subsidiary.
10.3 Right of Company to Terminate Employment. Nothing contained in the
Plan or in any Award, and no action of the Company or the Committee with respect
thereto, shall confer or be construed to confer on any Holder any right to
continue in the employ of the Company or any of its Subsidiaries or interfere in
any way with the right of the Company or a Subsidiary to terminate the
employment of the Holder at any time, with or without cause; subject, however,
to the provisions of any employment agreement between the Holder and the Company
or any Subsidiary.
10.4 Nonalienation of Benefits. No right or benefit under the Plan shall be
subject to alienation, sale, assignment, hypothecation, pledge, exchange,
transfer, encumbrance or charge, and any attempt to alienate, sell, assign,
hypothecate, pledge, exchange, transfer, encumber or charge the same shall be
void. No right or benefit hereunder shall in any manner be liable for or subject
to the debts, contracts, liabilities or torts of the person entitled to such
benefits.
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10.5 Written Agreement. Each grant of an Option under the Plan shall be
evidenced by a stock option agreement which shall designate the Options granted
thereunder as Incentive Stock Options or Nonqualified Stock Options; and each
award of Restricted Shares shall be evidenced by a restricted shares agreement,
each in such form and containing such terms and provisions not inconsistent with
the provisions of the Plan as the Committee from time to time shall approve;
provided, however, that if more than one type of Award is made to the same
Holder, such Awards may be evidenced by a single agreement with such Holder.
Each grantee of an Option or Restricted Shares shall be notified promptly of
such grant and a written agreement shall be promptly executed and delivered by
the Company and the grantee, provided that, in the discretion of the Committee,
such grant of Options or Restricted Shares shall terminate if such written
agreement is not signed by such grantee (or his attorney) and delivered to the
Company within 60 days after the date the Committee approved such grant. Any
such written agreement may contain (but shall not be required to contain) such
provisions as the Committee deems appropriate (i) to ensure that the penalty
provisions of Section 4999 of the Code will not apply to any stock or cash
received by the Holder from the Company, or (ii) to provide cash payments to the
Holder to mitigate the impact of such penalty provisions upon the Holder. Any
such agreement may be supplemented or amended from time to time as approved by
the Committee as contemplated by Section 10.8(b).
10.6 Designation of Beneficiaries. Each person who shall be granted an
Award under the Plan may designate a beneficiary or beneficiaries and may change
such designation from time to time by filing a written designation of
beneficiary or beneficiaries with the Committee on a form to be prescribed by
it, provided that no such designation shall be effective unless so filed prior
to the death of such person.
10.7 Right of First Refusal. The Agreements may contain such provisions as
the Committee shall determine to the effect that if a Holder elects to sell all
or any shares of Common Stock that such Holder acquired upon the exercise of an
Option or upon the vesting of Restricted Shares awarded under the Plan, then
such Holder shall not sell such shares unless such Holder shall have first
offered in writing to sell such shares to the Company at Fair Market Value on a
date specified in such offer (which date shall be at least three business days
and not more than ten business days following the date of such offer). In any
such event, certificates representing shares issued upon exercise of Options or
and the vesting of Restricted Shares shall bear a restrictive legend to the
effect that transferability of such shares are subject to the restrictions
contained in the Plan and the applicable Agreement and the Company may cause the
transfer agent for the Common Stock to place a stop transfer order with respect
to such shares.
10.8 Termination and Amendment.
(a) General. Unless the Plan shall theretofore have been terminated as
hereinafter provided, no Awards may be made under the Plan on or after the
tenth anniversary of the Effective Date. The Board or the Committee may at
any time prior to the tenth anniversary of the Effective Date terminate the
Plan, and may, from time to time, suspend or discontinue the Plan or modify
or amend the Plan in such respects as it shall deem advisable; except that
no such modification or amendment shall be effective prior to approval by
the Company's stockholders to the extent such approval is then required
pursuant to Rule 16b-3 in order to preserve the applicability of any
exemption provided by such Rule to any Award then outstanding (unless the
holder of such Award consents) or to the extent stockholder approval is
otherwise required by applicable legal requirements.
(b) Modification. No termination, modification or amendment of the
Plan may, without the consent of the person to whom any Award shall
theretofore have been granted, adversely affect the rights of such person
with respect to such Award. No modification, extension, renewal or other
change in any Award granted under the Plan shall be made after the grant of
such Award, unless the same is consistent with the provisions of the Plan.
With the consent of the Holder and subject to the terms and conditions of
the Plan (including Section 10.8(a)), the Committee may amend outstanding
Agreements with any Holder, including, without limitation, any amendment
which would (i) accelerate the time or times at which the Award may be
exercised, and/or (ii) extend the scheduled expiration date of the Award.
Without limiting the generality of the foregoing, the Committee may, but
solely with the Holder's consent unless otherwise provided in the
Agreement,
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agree to cancel any Award under the Plan and issue a new Award in
substitution therefor, provided that the Award so substituted shall satisfy
all of the requirements of the Plan as of the date such new Award is made.
Nothing contained in the foregoing provisions of this Section 10.8(b) shall
be construed to prevent the Committee from providing in any Agreement that
the rights of the Holder with respect to the Award evidenced thereby shall
be subject to such rules and regulations as the Committee may, subject to
the express provisions of the Plan, adopt from time to time, or impair the
enforceability of any such provision.
10.9 Government and Other Regulations. The obligation of the Company with
respect to Awards shall be subject to all applicable laws, rules and regulations
and such approvals by any governmental agencies as may be required, including,
without limitation, the effectiveness of any registration statement required
under the Securities Act of 1933, and the rules and regulations of any
securities exchange or association on which the Common Stock may be listed or
quoted.
10.10 Withholding. The Company's obligation to deliver shares of Common
Stock or pay cash in respect of any Award under the Plan shall be subject to
applicable federal, state and local tax withholding requirements. Federal, state
and local withholding tax due at the time of an Award, upon the exercise of any
Option or upon the vesting of, or expiration of restrictions with respect to,
Restricted Shares, as appropriate, may, in the discretion of the Committee, be
paid in shares of Common Stock already owned by the Holder or through the
withholding of shares otherwise issuable to such Holder, upon such terms and
conditions (including, without limitation, the conditions referenced in Section
6.5) as the Committee shall determine. If the Holder shall fail to pay, or make
arrangements satisfactory to the Committee for the payment, to the Company of
all such federal, state and local taxes required to be withheld by the Company,
then the Company shall, to the extent permitted by law, have the right to deduct
from any payment of any kind otherwise due to such Holder an amount equal to any
federal, state or local taxes of any kind required to be withheld by the Company
with respect to such Award.
10.11 Separability. It is the intent of the Company that this Plan comply
with Rule 16b-3 with respect to persons subject to Section 16 of the Exchange
Act unless otherwise provided herein or in an Award Agreement, that any
ambiguities or inconsistencies in the construction of this Plan be interpreted
to give effect to such intention, and that if any provision of this Plan is
found not to be in compliance with Rule 16b-3, such provision shall be null and
void to the extent required to permit this Plan to comply with Rule 16b-3.
10.12 Non-Exclusivity of the Plan. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options and the awarding of
stock and cash otherwise then under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
10.13 Exclusion from Pension and Profit-Sharing Computation. By acceptance
of an Award, unless otherwise provided in the applicable Agreement, each Holder
shall be deemed to have agreed that such Award is special incentive compensation
that will not be taken into account, in any manner, as salary, compensation or
bonus in determining the amount of any payment under any pension, retirement or
other employee benefit plan, program or policy of the Company or any Subsidiary.
In addition, each beneficiary of a deceased Holder shall be deemed to have
agreed that such Award will not affect the amount of any life insurance
coverage, if any, provided by the Company on the life of the Holder which is
payable to such beneficiary under any life insurance plan covering employees of
the Company or any Subsidiary.
10.14 Unfunded Plan. Neither the Company nor any Subsidiary shall be
required to segregate any cash or any shares of Common Stock which may at any
time be represented by Awards and the Plan shall constitute an 'unfunded' plan
of the Company. Except as provided in Article VIII with respect to awards of
Restricted Shares and except as expressly set forth in writing, no employee
shall have voting or other rights with respect to shares of Common Stock prior
to the delivery of such shares. Neither the Company nor any Subsidiary shall, by
any provisions of the Plan, be deemed to be a trustee of any Common Stock or any
other property, and the liabilities of the Company and any Subsidiary to any
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employee pursuant to the Plan shall be those of a debtor pursuant to such
contract obligations as are created by or pursuant to the Plan, and the rights
of any employee, former employee or beneficiary under the Plan shall be limited
to those of a general creditor of the Company or the applicable Subsidiary, as
the case may be. In its sole discretion, the Board may authorize the creation of
trusts or other arrangements to meet the obligations of the Company under the
Plan, provided, however, that the existence of such trusts or other arrangements
is consistent with the unfunded status of the Plan.
10.15 Governing Law. The Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
10.16 Accounts. The delivery of any shares of Common Stock and the payment
of any amount in respect of an Award shall be for the account of the Company or
the applicable Subsidiary, as the case maybe, and any such delivery or payment
shall not be made until the recipient shall have paid or made satisfactory
arrangements for the payment of any applicable withholding taxes as provided in
Section 10.10.
10.17 Legends. In addition to any legend contemplated by Section 10.7, each
certificate evidencing Common Stock subject to an Award shall bear such legends
as the Committee deems necessary or appropriate to reflect or refer to any
terms, conditions or restrictions of the Award applicable to such shares,
including, without limitation, any to the effect that the shares represented
thereby may not be disposed of unless the Company has received an opinion of
counsel, acceptable to the Company, that such disposition will not violate any
federal or state securities laws.
10.18 Company's Rights. The grant of Awards pursuant to the Plan shall not
affect in any way the right or power of the Company to make reclassifications,
reorganizations or other changes of or to its capital or business structure or
to merge, consolidate, liquidate, sell or otherwise dispose of all or any part
of its business or assets.
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APPENDIX 1
K2 DESIGN, INC.
55 BROAD STREET, 7TH FLOOR
NEW YORK, NY 10004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Matthew G. de Ganon and David J. Centner as
Proxies, each with power to appoint his substitute, and hereby authorizes either
of them to represent and to vote, as designated below, all the shares of the
Common Stock of K2 Design, Inc. held of record by the undersigned on April 30,
1997, at the Annual Meeting of K2 Design, Inc., Stockholders to be held on June
12, 1997, or any adjournment thereof.
(1) Election of Directors.
Nominees: David J. Centner, Matthew G. de Ganon, Douglas E. Cleek, Bradley K.
Szollose, James A. Favia and Steven N. Goldstein
[ ] VOTE FOR all nominees listed above, except vote withheld as to the
following nominees (if any):
----------------------------------------------------------------------
[ ] VOTE WITHHELD from all nominees
(2) Selection of auditors
To approve and ratify the appointment of Arthur Andersen LLP as the
independent auditors for the Company for the fiscal year ending December 31,
1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) Adoption of the Company's 1997 Stock Incentive Plan
To approve and ratify the adoption of the Company's 1997 Stock Incentive
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
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This proxy when properly executed will be voted in the manner directed herein by
the undersigned stockholder. If no direction is made, this proxy will be voted
FOR Proposals 1, 2 and 3.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership or limited liability company, please sign in partnership or limited
liability company name by authorized person.
Dated: ..................... , 1997
...................................
SIGNATURE
...................................
SIGNATURE IF HELD JOINTLY
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