<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2)
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
K2 DESIGN, INC.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Character)
- -------------------------------------------------------------------------------
(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)(1) 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
number, or the form or schedule and the date of its filing.
1. Amount previously Paid:
- -------------------------------------------------------------------------------
2. Form, Schedule or Registration Statement no.:
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3. Filing Party:
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4. Date Filed:
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<PAGE>
K2 DESIGN, INC.
30 Broad Street, 16th Floor
New York, NY 10004
---------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on Wednesday, June 24, 1998
---------------------------------------------------
To the Stockholders of
K2 DESIGN, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders of
K2 Design, Inc., a Delaware corporation (the "Company"), will be held at 5:30
p.m. (Eastern Standard Time) on Wednesday, June 24, 1998, at the offices of
Proskauer Rose LLP, Conference Center, 26th floor, 1585 Broadway, New York, New
York 10036 to consider and vote upon:
(a) Election of six directors for a one-year term.
(b) Approval and ratification of an amendment to the
Company's 1997 Stock Incentive Plan to increase the number of shares
of Common Stock available under such plan.
(c) Approval and ratification of the selection by the Board
of Directors of Arthur Andersen LLP as independent public accountants
for the Company's 1998 fiscal year.
(d) Any other business that may properly come before the
meeting.
The Board of Directors has fixed the close of business on April 30,
1998 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
/s/ Robert W. Burke
Secretary
New York, New York
April 30, 1998
<PAGE>
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 of the Company (the "Annual Meeting") to
be held on Wednesday, June 24, 1998, at 5:30 p.m. at the offices of Proskauer
Rose LLP, Conference Center, 1585 Broadway, New York, New York 10036, for the
purposes set forth in the accompanying Notice of Annual Meeting. The Company's
mailing address is 30 Broad Street, 16th Floor, New York, New York 10004.
This Proxy Statement and the enclosed form of proxy are being mailed
to stockholders on or about May 7, 1998.
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, 1998,
will be entitled to notice of and to vote at the Annual Meeting. On that date
there were issued and outstanding 3,585,671 shares of Common Stock. Each
outstanding share of Common Stock is entitled to one vote on all matters to
come before the Annual Meeting. As of April 30, 1998, members of management of
the Company beneficially held an aggregate of 1,799,230 shares of Common Stock
(not including currently exercisable options to purchase shares of Common
Stock), or 50.2% of the total outstanding shares of Common Stock entitled to
vote at the Annual Meeting.
The cost of soliciting proxies will be borne by the Company. In
addition to the use of traditional mailings, 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 Annual Meeting. The
affirmative vote of a plurality of the total shares of Common Stock represented
in person or by proxy at the Annual 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 Annual Meeting is required for
approval of the proposal to amend the Company's 1997 Stock Incentive Plan (the
"1997 Plan") and for approval and ratification of the appointment of
independent public accountants. Stockholders who execute proxies retain the
right to revoke them at any time by notice in writing to the Secretary of the
Company, by revocation in person at the Annual Meeting or by presenting a later
dated proxy. Unless so revoked, the shares represented by proxies will be voted
at the Annual Meeting in accordance with the directions given therein.
Stockholders vote at the Annual Meeting by casting ballots (in person or by
proxy) which are tabulated by a person who is appointed by the Board of
Directors before the Annual Meeting to serve as inspector of election at the
Annual Meeting and who has executed and verified an oath of office. Abstentions
and broker "non-votes" are included in the determination of the number of
shares present at the Annual Meeting for quorum purposes. An abstention will
have the same effect as a negative vote except with respect to the election of
directors, in which case an abstention will have no effect since directors are
elected by a plurality vote.
1
<PAGE>
Broker "non-votes" are not counted in the tabulations of the votes cast on
proposals presented to stockholders because shares held by a broker are not
considered to be entitled to vote on matters as to which broker authority is
withheld. A broker "non-vote" occurs when a nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee
does not have discretionary voting power with respect to that item and has not
received instructions from the beneficial owner.
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.
BENEFICIAL OWNERSHIP
The following table sets forth information, as of April 30, 1998, 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% or more of the Common Stock. Except as set forth below, each of the
listed persons has sole voting and investment power with respect to the shares
beneficially owned by such person. The address of each person included in the
table is care of the Company, 30 Broad Street, 16th Floor, New York, New York
10004.
Shares of Common Stock Percent of
Name of Owner Beneficially Owned Class(1)
------------- ---------------------- ----------
Matthew G. de Ganon 1,777,980(2)(3) 49.0
David J. Centner 492,620(2)(3) 13.7
Douglas E. Cleek 492,620(2)(3) 13.7
Robert W. Burke 320,834(4) 8.8
Bradley K. Szollose 300,120(2)(3) 8.3
James A. Favia 3,500(5) *
Steven N. Goldstein 2,500(5) *
All Directors and 2,084,100(6) 56.6
Executive Officers
as a group (7 persons)
- --------------------------
* Less than one percent.
(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 11,250 shares underlying presently exercisable stock options,
exercisable in increments of 3,750 shares for $1.75, $3.50 and $6.75
per share. Excludes 7,500 shares of Common Stock underlying stock
options that are not presently exercisable .
2
<PAGE>
(3) Includes 68,750 shares of Common Stock which are subject to an option
(the "Option Shares") held by Robert Burke. Pursuant to a 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, and the Option Shares, are vested in
Mr. de Ganon. Such shares subject to the Voting Agreement 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) Includes the Option Shares (an aggregate of 275,000 shares of Common
Stock) at an exercise price of $1.75 per share, and vested options to
purchase up to an additional 45,834 shares of Common Stock (14,286
shares of which are exercisable at $1.625 per share and 31,548 shares
of which are exercisable at $1.75 per share). Upon exercise, the
Option Shares are subject to a proxy granted in favor of Mr. de Ganon
so long as the Voting Agreement remains in place. Excludes an
aggregate of 79,166 shares subject to options which are not currently
exercisable or within the next 60 days.
(5) Excludes 2,500 shares of Common Stock underlying stock options that
are not presently exercisable.
(6) Includes 95,834 shares of Common Stock underlying presently
exercisable stock options and excludes 114,166 shares of Common Stock
underlying stock options that are not presently exercisable.
3
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Directors have terms expiring at the 1998 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:
Name Age Position
---- --- --------
David J. Centner 32 Chairman of the Board,
Chief Executive
Officer and Director
Matthew G. de Ganon 35 Vice Chairman, President
and Director
Douglas E. Cleek 35 Executive Vice President--
Chief Creative
Officer and Director
Bradley K. Szollose 35 Director
James A. Favia 64 Director
Steven N. Goldstein 58 Director
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 and a
Director since he joined the Company in July 1995 and has been President since
June 1996. He was also the Chief Operating Officer of the Company from July
1995 to November 1997. 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.
4
<PAGE>
Bradley K. Szollose, who co-founded the Company in 1993, has been a
Director since January 1995 and was the Company's Executive Vice
President--Marketing, Treasurer and Secretary of the Company from January 1995
until November 1997. 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 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
Robert W. Burke, 34, joined the Company in October 1997 as Executive
Vice President--Business Affairs. Since November 1997, he has been the
Company's Chief Operating Officer. For more than five years prior to joining
the Company, Mr. Burke was a corporate attorney at a large New Jersey law firm,
most recently as a member of such firm.
DIRECTORS' MEETINGS
The Board of Directors met five (5) times during fiscal 1997. 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 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.
5
<PAGE>
The Audit Committee did not meet formally in fiscal 1997. The Option Committee
acted by unanimous written consent in lieu of a meeting thirteen times in
fiscal 1997.
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.
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. Commencing in 1998, the
non-employee directors will each receive a fee of $100 per meeting.
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 those executive officers (the "Named Executives")
who served in executive capacities at the end of fiscal 1997 and had aggregate
compensation in excess of $100,000.
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation(1) Compensation
Name and Principal Position Year Salary($) Bonus($) Option Awards
- --------------------------- ---- --------- -------- -------------
David J. Centner,
Chairman and Chief 1997 113,982 -- --
Executive Officer 1996 84,000 29,000 18,750
Matthew G. de Ganon,
Vice Chairman 1997 115,623 -- --
and President 1996 84,000 31,000 18,750
Douglas Cleek,
Executive Vice 1997 115,623 -- --
President--Chief
Creative Officer 1996 83,473 -- 18,750
- --------------------------
(1) The value of perquisites and other personal benefits does not exceed
10% of the Officer's salary.
6
<PAGE>
Employment Agreements for Executive Officers
David J. Centner, Matthew G. de Ganon, 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. Robert W. Burke, Chief Operating Officer, is employed pursuant to a
three-year employment agreement, effective December 16, 1997, pursuant to which
he will receive a salary of $200,000 in the first year, $220,000 in the second
year and $242,000 in the third year. Mr. Burke has also been granted options to
purchase (i) 42,857 shares of Common Stock at an exercise price of $1.625 per
share and 57,143 shares of Common Stock at an exercise price of $1.75 per
share, which options vest ratably on the date of commencement of employment and
each of the next two anniversaries thereof and (ii) an additional 25,000 shares
at an exercise price of $1.75 per share, which options vest 50% on July 1, 1998
and 50% on January 1, 1999. Mr. Burke is also eligible to receive annual
discretionary bonuses. All executive officers of the Company voluntarily
reduced their salaries in fiscal 1997 and fiscal 1998 on a temporary basis as
part of the Company's cost reduction program.
Option Grants in Fiscal 1997
No options were granted to Mr. Centner and the Named Executives in
fiscal 1997.
Option Exercises and Year-End Value Table
The table set forth below shows the value of unexercised options held
on December 31, 1997 by Mr. Centner and each of the Named Executives.
Value of Unexercised
In-the-Money
Number of Unexercised Options held on
Options at December 31, 1997 December 31, 1997 ($)(1)
---------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
David J. Centner 11,250 7,500 $468.75 $312.50
Matthew G. de Ganon 11,250 7,500 $468.75 $312.50
Douglas Cleek 11,250 7,500 $468.75 $312.50
- ---------------------
(1) Based on the closing price of the Common Stock on December 31, 1997,
which was $1.875.
Filing Requirements
The Company believes that all filing requirements under Section 16(a)
of the Securities Act of 1934, as amended, applicable to its officers,
directors and greater than 10% beneficial owners were complied with during the
fiscal year ended December 31, 1997, except for Forms 4 in respect of the grant
of options to purchase Common Stock held by Messrs. de Ganon, Centner, Cleek
and Szollose to Mr. Burke, which are fully disclosed in other public filings
made by each of such persons. In addition, Mr. Szollose is less than 60 days
delinquent in the filing of a Form 4 in respect of the private sale of 187,500
shares of Common Stock for an aggregate purchase price of $150,000 in March
1998. Appropriate Forms 4 will be filed promptly hereafter.
7
<PAGE>
Certain Relationships and Related Transactions
In March 1998, the Company purchased 95,000 shares of Common Stock
from Bradley Szollose, a director of the Company, for an aggregate purchase
price of $76,000 (or $.80 per share). The Company believes that the terms of
this transaction were negotiated at arms length and were on terms no less
favorable to the Company than could have been obtained from an unaffiliated
party.
PROPOSAL 2
1997 STOCK INCENTIVE PLAN PROPOSAL
The Board of Directors approved the amendment to the 1997 Plan in
April 1998, subject to the approval of the stockholders, to provide (i) that
the aggregate number of shares of Common stock subject to options or awards
under the 1997 Plan be increased from 350,000 to 500,000 and accordingly, (ii)
that the number of shares reserved for the future issuance of shares of Common
stock upon the exercise of options under the 1997 Plan be increased from
350,000 shares to 500,000 shares. The affirmative vote of the holders of at
least a majority of the outstanding shares of Common Stock present and entitled
to vote at the Annual Meeting is required to approve the amendment to the 1997
Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE THEIR SHARES FOR
THE PROPOSAL TO APPROVE THE AMENDMENT TO THE 1997 PLAN.
Summary of the 1997 Plan
The following summary of the 1997 Plan is qualified in its entirety by
reference to the 1997 Plan, a copy of which is attached to the Company's public
reports or available upon request in writing directed to the President of the
Company. Attention is particularly directed to the description therein of the
material terms and conditions of the award of stock options ("Options") or
restricted shares ("Restricted Shares"), or any combination thereof
(collectively, the "Awards").
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.
8
<PAGE>
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
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.
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP, independent
auditors, to serve as auditors of the Company for the fiscal year ending
December 31, 1998. Although stockholder ratification of the Board of Directors'
action in this respect is not required, the Board considers it desirable for
stockholders to pass upon the selection of auditors and, if the stockholders
disapprove of the selection, intends to consider the selection of other
auditors for the current fiscal year.
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting, will have an opportunity to make a statement if they so
desire, and will be available to respond to appropriate questions from
stockholders.
The affirmative vote of the holders of a majority of the shares of
Common Stock present in person and by proxy at the Annual Meeting and entitled
to vote thereon is necessary for the ratification of the appointment of the
auditors. Proxies received in response to this solicitation will be voted FOR
the ratification of the appointment of the auditors, unless otherwise specified
in the proxy.
9
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP.
ANNUAL REPORT
The Annual Report to Stockholders (including financial statements) for
the fiscal year ended December 31, 1997 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 Matthew G. de
Ganon, President.
OTHER MATTERS
Management is not aware of any matters to come before the Annual
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
Annual Meeting or any adjournments thereof, those persons named as proxies in
the enclosed proxy form will vote thereon according to their best judgment.
ADVANCE NOTICE FOR STOCKHOLDER PROPOSALS
FOR THE 1999 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 at least 120 days prior to the mailing of the proxy
statement relating to the next annual meeting of stockholders. Accordingly,
stockholder proposals for the 1999 Annual Meeting must be received in writing
by the Company no later than December 31, 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 President.
By Order of the Board of Directors
/s/ Robert W. Burke
Secretary
New York, New York
April 30, 1998
10
<PAGE>
K2 DESIGN, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
June 24, 1998
This Proxy is Solicited by the Board of Directors.
The undersigned stockholder of K2 Design, Inc. (the "Company") hereby
appoints each of Matthew G. de Ganon and Robert W. Burke, attorneys and
proxies, each with full power of substitution, to represent the undersigned and
vote all shares of the Common Stock of the Company which the undersigned is
entitled to vote, with all powers the undersigned would possess if personally
present, at the Annual Meeting of Stockholders (the "Meeting") of the Company
to be held at the offices of Proskauer Rose LLP, Conference Center, 1585
Broadway, New York, New York 10036 at 5:30 P.M., on June 24, 1998, and at any
adjournments thereof, with respect to the proposals hereinafter set forth and
upon such other matters as may properly come before the Meeting and any
adjournments thereof.
This proxy when properly executed, will be voted in the manner
directed herein by the undersigned stockholder.
Unless otherwise specified, this proxy will be voted "FOR" the
election of all nominees as directors of the Company, "FOR" the ratification of
the amendment to the 1997 Stock Incentive Plan, "FOR" the ratification of
Arthur Andersen LLP as auditors of the Company and in the discretion of the
proxies with respect to all other matters which may properly come before the
Meeting and any adjournments thereof. The undersigned acknowledges receipt of
the accompanying Notice of Annual Meeting and Proxy Statement.
Please mark boxes |X| in blue or black ink.
1. Election of Directors
/ / FOR all nominees listed / / WITHHOLD AUTHORITY to
below (except as marked vote for all nominees
to the contrary below) listed below
Nominees: David J. Centner, Matthew G. de Ganon, Douglas E.
Cleek, Bradley K. Szollose, James A. Favia and Steven
N. Goldstein
Instruction: To withhold authority to vote for any individual
nominee, write that nominee's name in the space provided below.
2. Ratification of the amendments to the 1997 Stock Incentive Plan.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
3. Ratification of the selection of Arthur Andersen LLP as auditors
of the Company for the year ending December 31, 1998.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, on any other matters that may properly come
before the Meeting and any adjournments thereof.
Dated: ________________, 1998
---------------------------------------------------------
Signature of Stockholder(s)
---------------------------------------------------------
Name of Stockholder(s)
NOTE: When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator,
trustee, custodian, guardian or corporate officer, please
give your full title as such. If a corporation, please sign
full corporate name by authorized officer. If a partnership,
please sign in partnership name by authorized person.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
