<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
K2 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)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(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.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[LOGO]
K2 INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1999
TO THE SHAREHOLDERS OF K2 INC.:
You are cordially invited to attend our Annual Meeting to be held at the
Company's main office, 4900 South Eastern Avenue, Los Angeles, California on
Thursday, May 6, 1999 at 10:00 a.m. (local time).
The ANNUAL MEETING will be held for the following purposes:
1. To elect three directors to serve for a term of three years.
2. To approve the K2 1999 Stock Option Plan.
3. To ratify the selection of Ernst & Young LLP as independent auditors
for 1999.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 29, 1999 are
entitled to notice of the meeting and to vote at it or any adjournments thereof.
If it is convenient for you to do so, we hope you will attend the meeting.
If you cannot, and wish your stock to be voted, we urge you to fill out the
enclosed proxy card and return it to us in the envelope provided. No additional
postage is required.
[SIGNATURE]
RICHARD M. RODSTEIN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
LOS ANGELES, CALIFORNIA
APRIL 5, 1999
- --------------------------------------------------------------------------------
PLEASE DATE AND SIGN THE ACCOMPANYING PROXY CARD AND
MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
<PAGE>
[LOGO]
K2 INC.
4900 SOUTH EASTERN AVENUE
LOS ANGELES, CALIFORNIA 90040
---------------------
PROXY STATEMENT
---------------
The enclosed proxy is solicited by the Board of Directors of K2 Inc. (the
"Company"). It may be revoked at any time before it is exercised by delivering a
written notice to the Secretary of the Company stating that the proxy is
revoked, by executing a subsequent proxy and presenting it to the Secretary of
the Company or by attending the annual meeting and voting in person. Only
shareholders of record at the close of business on March 29, 1999 will be
entitled to notice of and to vote at the annual meeting. As of that date, the
Company had outstanding 16,565,806 shares of Common Stock, each share entitled
to one vote. It is anticipated that the mailing to shareholders of this Proxy
Statement and the enclosed proxy will commence on or about April 5, 1999.
Proxies will be solicited by mail, telephone, fax or telegram and may be
personally solicited by directors, officers and other employees of the Company
and by Morrow & Co., 445 Park Avenue, New York, New York, which has been engaged
for a fee of $8,000 plus expenses for this purpose. The cost of soliciting
proxies will be borne by the Company.
Both abstentions and broker non-votes are counted for purposes of
determining the presence or absence at the annual meeting of a quorum for the
transaction of business, but shares represented by broker non-votes on a matter
submitted to shareholders are not considered present and entitled to vote on
that matter. Directors will be elected by plurality vote of the shares present
and entitled to vote. The approval of the K2 1999 Stock Option Plan and the
ratification of the selection of independent auditors will each require the
affirmative vote of a majority of the shares present and entitled to vote.
Consequently, broker non-votes will have no effect, but abstentions will have
the effect of a vote against these two matters.
<PAGE>
ELECTION OF DIRECTORS
Under the Certificate of Incorporation of the Company, the Board of
Directors is divided into three classes, each having a three-year term, with the
term of office of one of the classes expiring each year. Proxies solicited
herewith will be voted for election to the Board of Directors of the nominees
named below (unless authority to vote for one or more such nominees is
withheld), to serve until the 2002 annual meeting of shareholders and until
their successors are elected and qualified. While the Board of Directors has no
reason to believe that any of those named will not be available as a candidate,
should such a situation arise the proxy may be voted for the election of other
nominees as directors in the discretion of the persons acting pursuant to the
proxy. Directors will be elected by plurality vote.
Certain information concerning the nominees and each director whose term of
office will continue after the 1999 annual meeting is set forth below:
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
FOR TERM OF OFFICE EXPIRING IN 2002
JERRY E. GOLDRESS Director since 1996
Mr. Goldress, 68, has served as Chairman of the Board and Chief Executive
Officer of Grisanti, Galef and Goldress, Inc., a corporate turnaround management
firm, since 1981. As a corporate turnaround manager, Mr. Goldress provides
assistance to businesses in financial difficulty and, as such, has frequently
been appointed a director and an executive officer of such businesses. In this
capacity, Mr. Goldress has served as president or chief executive officer of
numerous manufacturing, distribution and retail organizations. He is a member of
the board of directors of Applied Magnetics Corporation, a manufacturer of
magnetic heads for computers.
JOHN H. OFFERMANS Director since 1987
Mr. Offermans, 70, is a real estate investment consultant engaged in private
practice. From 1973 through 1993, Mr. Offermans was an active commercial real
estate broker. Prior to that, from 1970 to 1973 Mr. Offermans was president and
chief executive officer of Fabri-Tek Educational Systems, Inc., an educational
computer manufacturer, and from 1968 to 1970, he was international marketing
vice president of Electronic Associates, Inc., a manufacturer of computer
systems for the aerospace and other high technology industries.
ALFRED E. OSBORNE, JR.
Dr. Osborne, age 54, has been an Associate Professor of Business Economics
in the Anderson Graduate School of Management at the University of California at
Los Angeles since 1972, and the Director of the Harold Price Center for
Entrepreneurial Studies at UCLA since its inception two years ago. Dr. Osborne
is a member of the Board of Directors of the Times Mirror Company, Nordstrom,
Inc. and United States Filter Corporation. Dr. Osborne is also an independent
general partner of Technology Funding Venture Partners V, and he serves as a
trustee of the WM Group of Funds and the Worldwide Index Funds. Dr. Osborne was
educated at Stanford University, where he earned a B.S. in Electrical
Engineering, an MBA in Finance, an MA in Economics and a Ph.D. in Business
Economics.
2
<PAGE>
DIRECTORS CONTINUING IN OFFICE
FOR TERM OF OFFICE EXPIRING IN 2001
SUSAN E. ENGEL Director since 1996
Ms. Engel, 52, has been Chairwoman of the Board, President and Chief
Executive Officer of Department 56, Inc., a marketer of collectibles and
specialty giftware, since September 1997. Ms. Engel was its president and chief
executive officer from November 1996 to August 1997, and from September 1994 to
November 1996 she was its president and chief operating officer. From October
1991 through September 1993, Ms. Engel was president and chief executive officer
of Champion Products, Inc., a marketer and manufacturer of authentic athletic
apparel and a division of Sara Lee Corporation. Prior to Champion, Ms. Engel was
a vice president and eastern retail practice leader for Booz, Allen and
Hamilton, a general management consulting firm. Ms. Engel is a member of the
board of directors of The Penn Traffic Company, a northeast supermarket chain,
and Wells Fargo & Co., a leading financial institution.
WILFORD D. GODBOLD, JR. Director since 1998
Mr. Godbold, 60, a private investor, retired as President and Chief
Executive Officer of ZERO Corporation, which provides packaging and climate
control products to the telecommunications, instrumentation and data processing
markets, where he served from 1984 to August 1998, and for the two prior years
he served as chief operating officer of ZERO Corporation. From 1966 through 1982
he was an attorney with the law firm of Gibson, Dunn & Crutcher LLP in Los
Angeles, serving as a Partner from 1973. Mr. Godbold serves as a member of the
board of directors of Sempra Energy and its subsidiaries, Pacific Enterprises, a
holding company, Southern California Gas Company, a public utility, and San
Diego Gas & Electric Co., a public utility.
RICHARD M. RODSTEIN Director since 1995
Mr. Rodstein, 44, has been President and Chief Executive Officer of the
Company since 1996. Mr. Rodstein was president and chief operating officer of
the Company from 1990 to 1995 and has held various executive positions with the
Company since joining it in 1983. Prior to 1983, Mr. Rodstein was a certified
public accountant with Ernst & Young LLP, an international auditing and
consulting firm.
DIRECTORS CONTINUING IN OFFICE
FOR TERM OF OFFICE EXPIRING IN 2000
BERNARD I. FORESTER Director since 1966
Mr. Forester, 71, is Chairman of the Board of the Company. From January 1,
1973 through December 31, 1995, Mr. Forester served as chief executive officer
of the Company. Mr. Forester additionally served as its president from 1967
through 1975 and 1979 through 1989. Prior to 1966, Mr. Forester was chief
financial officer and a director of Republic Corporation and prior to that was a
certified public accountant with PricewaterhouseCoopers LLP, an international
auditing and consulting firm.
3
<PAGE>
RICHARD J. HECKMANN Director since 1997
Mr. Heckmann, 55, has served as Chairman of the Board, President and Chief
Executive Officer of United States Filter Corporation, a worldwide provider of
water and wastewater treatment systems and services, since 1990. Mr. Heckmann
was a director and the owner of Smith Goggles until its sale in 1996. He served
as the associate administrator for finance and investment of the Small Business
Administration in Washington, D.C. and was the founder and chairman of the board
of Tower Scientific Corporation. Mr. Heckmann is a member of the board of
directors of Waste Management, Inc., a solid waste management company, and
United Rentals, Inc., a national equipment rental organization.
STEWART M. KASEN Director since 1997
Mr. Kasen, 59, has served as Chairman of the Board, President and Chief
Executive Officer of Factory Card Outlet Corp. since May 1998 and prior to that
he served as its chairman from 1997. In April 1996, he retired as chairman,
president and chief executive officer of Best Products., Inc., a catalog
showroom chain of retail stores and nationwide mail order services. He was also
its president and chief executive officer from 1991 to 1996 and its president
and chief operating officer from 1989 to 1991. Prior to joining Best Products,
Co., Inc., Mr. Kasen served in various capacities in two divisions of Carter
Hawley Hale Stores over a 24-year period, including president and chief
executive officer of Emporium, from 1987 to 1989, and Thalhimers, from 1984 to
1987. Mr. Kasen is a member of the board of directors of Markel Corporation, a
specialty insurance underwriter, O'Sullivan Industries Holdings, Inc., a
manufacturer of ready-to-assemble furniture, and The Elder-Beerman Stores Corp.,
a regional department store chain. In September 1996, Best Products Co., Inc.,
filed for bankruptcy under the federal bankruptcy laws. In March 1999, Factory
Card Outlet Corp. filed for bankruptcy under the federal bankruptcy laws.
Under the By-Laws of the Company, nominations for the election of directors
may be made by the Board or by any stockholder entitled to vote in the election
of directors, provided that no stockholder may nominate a person for election as
a director unless written notice of such nomination is presented to the Company
at least 90 days prior to the date of the applicable meeting. No such notice has
been given with respect to the election of directors. As a result, no other
nominees for election as director will be considered at the annual meeting
except nominations made by the Board in the event one of the nominees named
herein should unexpectedly be unavailable.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held six meetings in 1998. Each director attended at
least 75% of the total number of meetings of the Board of Directors and
Committees on which he or she served, except Mr. Heckmann who attended 71.4%.
The Board of Directors currently has four standing committees: Audit
Committee, Compensation Committee, Executive Committee and Nominating Committee.
The Audit Committee of the Board of Directors, consisting of Ms. Engel
(Chairwoman), Mr. Godbold and Mr. Offermans, held two meetings in 1998. The
functions of the Committee include recommending to the Board the engagement or
discharge of the independent auditors, directing investigations into matters
relating to audit functions, reviewing the plan and results of audit with the
auditors, reviewing the Company's internal accounting controls and approving
services to be performed by the auditors and related fees.
4
<PAGE>
The Compensation Committee of the Board of Directors, consisting of Mr.
Goldress, Mr. Kasen and Mr. Simon (Chairman), held two meetings in 1998. The
Committee considers and authorizes remuneration arrangements for senior
management, including the granting of options under the Company's stock option
plan.
The Executive Committee of the Board of Directors, consisting of Mr.
Forester, Mr. Offermans and Mr. Rodstein (Chairman), held one meeting in 1998,
but took actions from time to time by written consent. The Committee is
authorized to act on behalf of the Board on all corporate actions for which
applicable law does not require participation of the full Board.
The Nominating Committee of the Board of Directors, consisting of Mr.
Forester (Chairman), Mr. Goldress and Mr. Heckmann, held two meetings in 1998,
in addition to informal meetings of Committee members with potential nominees
for director from time to time. The Committee recruits and interviews qualified
candidates to serve as directors and reports on its findings to the full Board.
APPROVAL OF K2 1999 STOCK OPTION PLAN
In February 1999 the Board of Directors adopted the K2 1999 Stock Option
Plan (1999 Plan), subject to shareholder approval at the 1999 Annual Meeting.
Under the 1999 Plan, options to purchase a maximum of 1,400,000 shares of Common
Stock, currently equal to 8.5% of the Company's outstanding shares, may be
granted to employees of the Company and to nonemployee directors. The purpose of
the 1999 Plan is to provide a means whereby the Company may attract and retain
persons of ability as key employees and nonemployee directors and motivate such
persons to exert their best efforts on behalf of the Company and its
subsidiaries. The Board of Directors or the committee referred to below, will
have the authority to determine those employees who are eligible to receive
options. Based upon past experience, the Company expects that this will include
approximately 100 persons.
The Company presently may grant stock options to employees and nonemployee
directors pursuant to the Company's 1994 Incentive Stock Option Plan. At March
29, 1999, there were only 19,375 shares with respect to which options may be
granted.
The following is a summary of the 1999 Plan. The operation of the 1999 Plan
is governed in all respects by the plan document which is annexed as Exhibit A.
The 1999 Plan will be administered by the Board of Directors or a committee
of not less than two directors, each of whom qualifies as an "outside director",
within the meaning of Section 162(m) of the Internal Revenue Code, and "a
non-employee director" within the meaning of Rule 16b-3 under the Securities
Exchange Act.
Subject to the provisions of the 1999 Plan, the Board or the committee shall
have the power to:
- determine the recipients of options and the number of shares subject to
each option
- determine the number of options and basis of granting options to
non-employee directors
- authorize the granting of options which qualify as "incentive stock
options" under the Internal Revenue Code, or which do not so qualify
- determine the term of each option, the time or times at which the option
may be exercised, and the manner of exercise
- interpret the 1999 Plan
5
<PAGE>
All options granted under the 1999 Plan shall have such terms and provisions
as the Board or the committee may determine, subject to the following:
- all options shall expire after no more than 10 years from the date of
grant
- no option shall be granted with an exercise price less than the fair
market value of the Company's common stock on the date of grant
- no option shall be transferable other than by will or the laws of descent
and distribution
- no option granted under the 1999 Plan shall be amended to reduce the
exercise price, or surrendered in exchange for a replacement option having
a lower exercise price, except for antidilution and similar adjustments to
reflect changes in the common stock of the Company, such as a stock
dividend, recapitalization, reorganization or merger
- the aggregate fair market value of common stock (determined at the time an
option is granted) subject to incentive stock options granted to any one
employee shall not exceed $100,000
The maximum number of shares of Common Stock that may be granted under the
1999 Plan in any calendar year to any nonemployee director or key employee shall
be limited to 20,000 and 150,000, respectively.
Upon the exercise of an option, the holder must make payment either (i) in
cash (including the proceeds of a "cashless exercise" with the assistance of a
broker); or (ii) by delivering Common Stock of the Company already owned by the
optionee and having a total fair market value on the date of such delivery equal
to the purchase price; or (iii) by delivering a combination of cash and Common
Stock of the company having a total fair market value on the date of such
delivery equal to the purchase price; or (iv) by a reduction of such number of
shares otherwise issuable pursuant to such option as has a total fair market
value on the date of exercise equal to the purchase price. The Board or the
committee may authorize a loan to any optionee to enable the exercise of options
and the payment of withholding taxes arising from such exercise.
The recipient of an option which is not an incentive stock option, as
defined in the Internal Revenue Code, will not realize income upon grant of the
option, but will realize ordinary income in the amount of the difference between
the fair market value of the stock on the date the option is exercised and the
exercise price. The amount of ordinary income will be deductible in computing
the taxable income of the Company. The option holder will have a basis for the
stock acquired equal to the fair market value of the stock on the date of
exercise. Any gain or loss realized upon the subsequent sale of stock acquired
on the exercise of the option will be a short-term or long-term capital gain or
loss depending on the optionee's holding period.
The recipient of an incentive stock option generally will not realize any
income upon its grant, or upon its exercise if no disposition of the shares
received upon exercise is made within two years from the date of grant or within
one year after the acquisition of the shares. The excess of the fair market
value over the exercise price of the shares received upon the exercise of an
incentive stock option, however, is a tax preference item in the year of
exercise which may subject the recipient to an alternative minimum tax. If the
foregoing holding periods are met, the recipient will realize a long-term
capital gain upon the difference between the sale price and the exercise price,
and the Company will receive no deduction from taxable income. If these holding
periods are not met, the recipient generally will realize ordinary income to the
extent of the difference between the exercise price and the fair market value of
the shares on the date
6
<PAGE>
the option is exercised. However, if the disposition is by a sale or exchange at
a price less than the fair market value on the date of exercise, then, in
general, the amount of ordinary income is limited to the gain realized on such
sale or exchange. If the sale price exceeds the fair market value on the date of
exercise, such excess will be a capital gain, long-term or short-term depending
on the employee's holding period for such stock. The Company will have a
deduction in an amount equal to the ordinary income realized by the optionee.
The 1999 Plan will terminate on the tenth anniversary of its approval by the
shareholders unless earlier terminated by the Board of Directors. The Board may
also amend the Plan; provided, however, that, no action of the Board of
Directors may increase the number of shares with respect to which options may be
granted under the Plan, permit the granting of any option at an option price
less than either the fair market value on date of grant or par value or permit
the extension or granting of options which expire beyond the maximum ten-year
term permitted under the Plan. Without the permission of an optionee, no
amendment or discontinuance of the Plan shall alter or impair any option
previously granted to him or her under the Plan. No termination of the 1999 Plan
will affect options outstanding at the time of termination, and options granted
prior to termination may extend beyond termination.
No options have been granted to nonemployee directors or key employees under
the 1999 Plan, and no determinations have been made regarding the employees to
whom grants may be made in the future or the number of shares which will be
subject to future options, other than the grant limitations as to nonemployee
directors and employees.
See "Executive Compensation--Option Grants in 1998" and "Aggregated Option
Exercises in 1998 and Year-End Option Values" for information concerning options
granted under the Company's 1994 Plan.
The affirmative vote of a majority of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote for the 1999
Plan is required for approval of the 1999 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE K2
1999 STOCK OPTION PLAN.
7
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares cumulative total return to shareholders, assuming
quarterly reinvestment of dividends, of the Company, the Russell 2000 Index and
a weighted index of a peer group of companies with market capitalizations
similar to that of the Company. The peer group is comprised of Cannondale
Corporation, First Team Sports, Inc., Johnson Worldwide Associates, Inc., Morrow
Snowboards, Inc., Rawlings Sporting Goods Company, Inc. and The North Face, Inc.
The graph assumes investment of $100 on December 31, 1993 in the Company's
Common Stock, the Russell 2000 Index and common stock of the peer group (except
for Cannondale, which became a public company in 1994; Morrow, which became a
public company in 1995; Rawlings, which became a public company in 1994; and The
North Face, which became a public company in 1996). In 1998 Brunswick
Corporation was replaced by Johnson Worldwide Associates, Inc. in the peer group
index due to the size of Brunswick's market capitalization in relation to the
index.
COMPARATIVE 5-YEAR TOTAL RETURNS
K2 INC., RUSSELL 2000, PEER GROUP
PERFORMANCE RESULTS THROUGH DECEMBER 31, 1998
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
KTO Russell 2000 Peer Group
<S> <C> <C> <C>
1993 $100.0 $100.0 $100.0
1994 107.2 98.2 92.0
1995 157.7 126.2 88.0
1996 191.6 147.0 84.0
1997 163.0 179.7 67.9
1998 75.2 175.2 52.3
</TABLE>
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual, long-term and
other compensation of the Company's President and Chief Executive Officer and
the four most highly compensated executive officers of the Company:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS OF
NAME AND ---------------------- STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- ------------------------------------------------ --------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Richard M. Rodstein ............................ 1998 325,000 -- 50,000 11,400(a)
President and Chief Executive Officer 1997 280,000 233,300 35,000 12,500(a)
1996 260,000 420,000 35,000 12,600(a)
John J. Rangel ................................. 1998 210,000 -- 35,000 8,500(a)
Senior Vice President--Finance 1997 195,000 132,900 20,000 9,500(a)
1996 175,000 250,000 20,000 8,400(a)
David H. Herzberg .............................. 1998 160,000 95,000 12,000 9,000(a)
Vice President & President of Shakespeare 1997 160,000 160,000 8,000 10,100(a)
Monofilament 1996 150,000 150,000 8,000 10,300(a)
J. Wayne Merck ................................. 1998 155,000 75,000 12,000 2,000(a)
Vice President & President of Shakespeare 1997 155,000 125,000 8,000 3,300(a)
Composites & Electronics 1996 (c) (c) (c) (c)
David G. Cook .................................. 1998 $ 155,000 $ 75,000 12,000 5,100(b)
Vice President & President of Stearns 1997 155,000 100,000 8,000 5,100(b)
1996 145,000 145,000 8,000 6,800(b)
</TABLE>
- ------------------------
(a) Dollar value of allocations to the accounts of the named individuals in the
Company's Employee Stock Ownership Plan: Mr. Rodstein ($6,400 in 1998,
$7,700 in 1997 and $8,400 in 1996), Mr. Rangel ($3,500 in 1998, $4,800 in
1997 and $5,600 in 1996), Mr. Herzberg ($2,500 in 1998, $8,000 in 1997 and
$9,000 in 1996), and Mr. Merck ($900 in 1998 and $2,300 in 1997); and
Company's matching contribution to the accounts of the named individuals in
the Company's 401(k) Retirement Savings Plan, which was adopted in 1996: Mr.
Rodstein ($5,000 in 1998, $4,800 in 1997 and $4,200 in 1996), Mr. Rangel
($5,000 in 1998, $4,700 in 1997 and $2,800 in 1996), Mr. Herzberg ($2,500 in
1998, $2,100 in 1997 and $1,300 in 1996) and Mr. Merck ($1,000 in 1998 and
$1,000 in 1997).
(b) Dollar value of allocation to Mr. Cook's account in the Company's Employee
Stock Ownership Plan ($1,800 in 1998, $3,400 in 1997 and $3,700 in 1996) and
the Company's matching contribution to the Stearns 401(k) Payroll Savings
and Profit Sharing Plan ($3,300 in 1998, $1,700 in 1997 and $3,000 in 1996).
(c) Mr. Merck became a Vice President of the Company on January 1, 1997.
9
<PAGE>
The following table summarizes the number of shares and the terms and
conditions of stock options granted to the named executive officers in 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
OPTIONS PRICE APPRECIATION FOR
GRANTED EXERCISE OPTION TERM (D)
OPTIONS EMPLOYEES PRICE PER EXPIRATION ----------------------
NAME GRANTED (A) DURING 1998 SHARE (B) DATE (C) 5% 10%
- ---------------------------------------- ----------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. M. Rodstein.......................... 50,000 14.08% $ 11.25 12/16/08 $ 354,400 $ 894,400
J. J. Rangel............................ 35,000 9.86% $ 11.25 12/16/08 $ 248,100 $ 626,100
D. H. Herzberg.......................... 12,000 3.38% $ 11.25 12/16/08 $ 85,100 $ 214,700
J.W. Merck.............................. 12,000 3.38% $ 11.25 12/16/08 $ 85,100 $ 214,700
D. G. Cook.............................. 12,000 3.38% $ 11.25 12/16/08 $ 85,100 $ 214,700
</TABLE>
- ------------------------
(a) All options granted to the named individuals in 1998 are exercisable as to
20% after one year from date of grant, an additional 30% after two years and
an additional 50% after three years. The option agreements in connection
with the options granted to the named individuals contain a provision under
which the optionee may borrow money from the Company in connection with the
exercise of the options. Each currently outstanding loan bears interest,
payable quarterly, at a fixed rate equal to the Applicable Federal Rate, as
published by the Internal Revenue Service, for the period during which the
loan was made.
(b) The exercise price is the closing price of the Company's common stock on
December 16, 1998, the date of grant.
(c) All options granted to the named individuals in 1998 expire on the tenth
anniversary of the date of grant, subject to earlier expiration in the event
of the officer's termination of employment with the Company.
(d) In order for the named individuals to realize these potential values, the
closing price of the Company's common stock on December 16, 2008 would have
to be $18.34 and $29.14 per share, respectively.
10
<PAGE>
The following table summarizes exercises of stock options in 1998 which were
previously granted to the President and Chief Executive Officer and the other
named executive officers, as well as the number of all unexercised options held
by them at the end of 1998, and their value at that date if they were
in-the-money.
AGGREGATED STOCK OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT
12/31/98
---------------------------------------------
NUMBER OF UNEXERCISED
SHARES OPTIONS AT 12/31/98 EXERCISABLE UNEXERCISABLE
ACQUIRED ON VALUE -------------------------- --------------------- ----------------------
NAME EXERCISE (A) REALIZED EXERCISABLE UNEXERCISABLE SHARES TOTAL $ SHARES TOTAL $
- -------------------- ------------- --------- ----------- ------------- --------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. M. Rodstein...... -- -- 122,920 95,500 -- -- -- --
J. J. Rangel........ -- -- 65,575 61,000 -- -- -- --
D. H. Herzberg...... -- -- 28,108 22,400 -- -- -- --
J. W. Merck......... -- -- 4,100 20,900 -- -- -- --
D. G. Cook.......... -- -- 27,454 22,400 -- -- -- --
</TABLE>
- ------------------------
(a) Optionees, in the discretion of the Compensation Committee, may be granted
the right to borrow money from the Company in connection with the exercise
of options under both the 1994 Incentive Stock Option Plan and the 1988
Incentive Stock Option Plan. At December 31, 1998, the aggregate loans
outstanding to executive officers in connection with the exercise of stock
options, including the exercises shown above, and the weighted average
Applicable Federal Rate at which they bear interest were: Mr. Doyle
($128,400, 5.57%), Mr. Herzberg ($46,100, 5.89%) and Mr. Merck ($43,800,
5.97%).
PENSION PLANS
The Company maintains several defined benefit pension plans for the benefit
of eligible K2 Inc. employees and employees of its Shakespeare and Stearns
business units. The plans are tax-qualified, Company-funded plans subject to the
provisions of ERISA. Contributions to the plans, which are made solely by the
Company, are actuarially determined. Benefits under the plans are based on years
of service and remuneration.
The table below illustrates approximate annual benefits under the Pension
Plan of K2 Inc. (the "K2 Plan"), based on the indicated assumptions. For 1998,
the Internal Revenue Code (the "Code") limits the K2 Plan's covered compensation
to $160,000.
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65
(A) YEARS OF SERVICE
-----------------------------------------------------
COVERED COMPENSATION 15 20 25 30 35
- --------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000............................... $ 18,750 $ 25,000 $ 31,250 $ 37,500 $ 43,750
$150,000............................... 22,500 30,000 27,500 45,000 52,500
$175,000............................... 24,000 32,000 40,000 48,000 56,000
</TABLE>
- ------------------------
(a) An individual retiring at age 65 earns his maximum pension (as a percentage
of covered compensation) at 35 years of service.
11
<PAGE>
The K2 Plan defines remuneration on which annual benefits are based as the
average of the participant's highest five consecutive years' earnings. Earnings
include salary, wages, overtime pay, commissions, bonuses, and similar forms of
incentive compensation actually paid during the year not exceeding certain
amounts for sales personnel and subject to the $160,000 Code Limit in 1998 for
all personnel.
Compensation for 1998 that would be included in the calculation of covered
compensation and credited years of service at December 31, 1998 is shown below
for the individuals named in the Summary Compensation Table who are participants
in the plan.
<TABLE>
<CAPTION>
COVERED YEARS OF
NAME COMPENSATION SERVICE
- --------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
Richard M. Rodstein.................................................. $ 160,000 15
John J. Rangel....................................................... 160,000 14
</TABLE>
The Salaried Employees' Pension Plan of Shakespeare Company (the
"Shakespeare Plan") defines remuneration upon which annual benefits are based as
the average of the employee's highest five consecutive years' earnings. Earnings
include the employee's regular basic monthly earnings excluding commissions,
bonuses, maintenance, overtime and other extra compensation, not exceeding
certain amounts for field sales personnel and subject to the $160,000 Code Limit
in 1998 for all personnel.
The table below illustrates approximate annual benefits under the
Shakespeare pension plan based on the indicated assumptions.
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL PENSION UPON
RETIREMENT AT AGE 65 (A)
------------------------------------------
YEARS OF SERVICE
------------------------------------------
COVERED COMPENSATION 15 20 25 45
- -------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$125,000.......................................... $ 26,300 $ 43,800 $ 61,300 $ 75,000
$150,000.......................................... 31,500 52,500 73,500 90,000
$175,000.......................................... 33,600 56,500 78,400 96,000
</TABLE>
- ------------------------
(a) An individual retiring at age 65 earns his maximum pension (as a percentage
of covered compensation) after approximately 43 years of service.
Compensation for 1998 that would be included in the calculation of covered
compensation and credited years of service at December 31, 1998 is shown below
for the individuals named in the Summary Compensation Table who are participants
in the Shakespeare Plan.
<TABLE>
<CAPTION>
COVERED YEARS OF
NAME COMPENSATION SERVICE
- --------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
David H. Herzberg.................................................... $ 160,000 19
J. Wayne Merck....................................................... $ 160,000 8
</TABLE>
The Stearns Manufacturing Company Salaried, Administrative and Clerical
Employees' Pension Plan (the "Stearns Plan") defines remuneration on which
annual benefits are based as the average of the participant's highest 60 months'
compensation. Compensation includes salary, wages, overtime pay, bonuses, and
commissions, subject to the $160,000 Code limit for 1998. The 1998 covered
compensation of
12
<PAGE>
Mr. Cook, the only individual named in the Summary Compensation Table who
participates in the Stearns Plan, was $160,000, and he had 19 years of service
as of December 31, 1998.
The table below illustrates approximate annual benefits under the Stearns
Plan based on the indicated assumptions.
<TABLE>
<CAPTION>
APPROXIMATE ANNUAL PENSION UPON
RETIREMENT AT AGE 65 (A)
------------------------------------------
YEARS OF SERVICE
------------------------------------------
COVERED COMPENSATION 15 20 25 30
- -------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
$125,000.......................................... $ 26,100 $ 34,800 $ 43,500 $ 52,250
$150,000.......................................... 33,000 44,000 55,000 66,000
$175,000.......................................... 35,800 47,700 59,600 71,500
</TABLE>
- ------------------------
(a) An individual retiring at age 65 earns his maximum pension (as a percentage
of covered compensation) at 30 years of service.
DIRECTORS' COMPENSATION
In 1998 directors who were not salaried officers of the Company were paid
$1,500 per calendar quarter for their services as directors, $1,000 per calendar
quarter for each committee position held by them and $1,000 per meeting day for
each meeting of the Board of Directors and of any committee which they attended.
They were also reimbursed for out-of-pocket expenses. Directors may elect to
defer the receipt of fees. Interest on deferred fees is accrued quarterly based
on the average interest rate earned by the Company in the preceding quarter on
its short-term commercial paper. Under the Company's Directors' Medical Expense
Reimbursement Plan, non-employee directors are reimbursed at the rate of 185%
for up to $10,000 of medical and dental expenses not covered under other health
insurance plans. For 1998 an aggregate of $102,700 was paid under such plan.
Under the 1994 Incentive Stock Option Plan, nonemployee directors receive an
initial grant of 1,000 stock options on the first grant date after their
election and annual grants thereafter of 500 stock options. All grants to
nonemployee directors are at fair market value on date of grant and are
exercisable as to 20% after one year from date of grant, an additional 30% after
two years and an additional 50% after three years, all exercisable amounts being
cumulative. In 1998 initial grants of 1,000 stock options each were made to
Richard J. Heckmann and Stewart M. Kasen and grants of 500 stock options each
were made to Susan E. Engel, Bernard I. Forester, Jerry E. Goldress, John H.
Offermans and John B. Simon. Each stock option granted had an exercise price of
$21.50 per share, the closing price on the January 2, 1998 grant date, and each
was for a ten-year term.
The Company maintains a Non-Employee Directors' Benefit Plan, payable out of
the general funds of the Company, under which a non-employee director who is
vested (at least ten years of service as a director) is entitled to receive, in
general, an annual retirement benefit during the period commencing upon the
later of age 55 and the date the director retires from the Board of Directors
and ending upon the earlier of the director's death or the number of years equal
to the director's years of service as a non-employee director. Under the Plan,
the annual retirement benefit is the product of (i) the director's average
annual fees (based on the three-year period immediately preceding retirement
from the Board of Directors) and (ii) the sum of .55 plus an additional .05 for
each full year of service in excess of 11 years of service and up to 20 years. A
director may make an irrevocable election so that, in lieu of the retirement
13
<PAGE>
benefit described above, the director's beneficiary would instead receive, on
the director's postretirement death, the discounted value of such benefit. In
the event of a change in control, as defined in the Plan, a vested director
would receive on retirement an actuarially reduced lump sum payment in lieu of
instalment payments. Under the terms of a retirement agreement between Mr.
Forester and the Company, Mr. Forester has waived any right to a retirement
benefit under this Plan.
Mr. Forester receives benefits under a retirement agreement with the Company
which provided that he would act as a consultant to the Company through December
31, 1998. For his consulting services, Mr. Forester received cash compensation
in the amount of $200,000 in 1998, as well as certain other noncash benefits
provided under the agreement. In addition, Mr. Forester receives supplemental
retirement benefits of approximately $319,300 each year during his lifetime, and
his survivor will receive a monthly death benefit equal to the retirement
benefit for a period of five years after his death. The supplemental retirement
benefit and death benefit are funded through a trust that has Wells Fargo Bank
as its trustee. The retirement agreement also provides for the continuation of a
pre-existing, split-dollar life insurance policy on Mr. Forester's life. For
1998, the dollar value to Mr. Forester of the premiums paid by the Company on
this policy was $20,700.
COMPENSATION COMMITTEE REPORT
COMPENSATION OBJECTIVES AND PRACTICES
K2's executive compensation program is designed to help the Company attract,
motivate and appropriately reward management who are responsible for K2's
short-term and long-term profitability, growth and return to shareholders.
The key elements of the program consist of base salary, annual
performance-based cash awards and long-term incentive awards. Base salaries are
initially established by evaluating the responsibilities of the position, the
experience of the individual and salaries for comparable positions in the
marketplace. Depending on the overall financial performance of the Company,
salaries are adjusted from time to time to reflect increased responsibilities,
to keep pace with competitive practices and to reflect the performance of
individual executives. The amount of the annual performance-based cash awards
available for allocation are based on the excess earnings after the Company
first achieves a specified return on average shareholders' equity. The available
awards are then allocated utilizing performance criteria designed to create
value for the Company and its shareholders. The individuals' performances are
subjectively evaluated against their criteria. The program has been designed to
place a significant amount of compensation at risk by first setting annual base
salaries at levels generally near the 50th percentile of the marketplace for
similar positions based on the survey data obtained. The annual incentive award
is then utilized to bring total annual cash compensation (base salary plus
annual incentive award) above the average for comparable positions at
similar-sized companies when superior performance levels are achieved. Stock
incentives are provided to reward management for taking actions that will
contribute to the Company's long-term growth and success, and to link their
interests to those of K2's shareholders.
COMPENSATION FOR THE NAMED EXECUTIVE OFFICERS
BASE SALARY. The compensation committee increased the salaries of the named
executive officers for 1998 by varying amounts based on the results of a survey
conducted by a compensation consultant. Increases for the group averaged 7.4%.
After these adjustments, the total base salaries of the named executive officers
as a group remained near the 50th percentile, according to survey data. For
1998,
14
<PAGE>
Mr. Rodstein's base salary was increased 16% to $325,000, which was 36% below
the 50th percentile, according to survey data.
ANNUAL CASH INCENTIVE. The executive officers of the Company are eligible
for participation under the Executive Officers' Incentive Compensation Plan. For
1998, the executive officers who participated in the plan included the Chief
Executive Officer and the Senior Vice President--Finance. Pursuant to the plan,
the formula provides for an incentive compensation bonus pool based on a
percentage of incentive compensation income in excess of a required return on
average shareholders' equity. Performance criteria were also adopted for the
plan participants to assist the compensation committee in determining the
allocation of any bonus pool generated.
During 1998, due to the decline in earnings, incentive compensation income
was less than the required return on average shareholders' equity. Consequently,
no incentive compensation award was made to the Chief Executive Officer for
1998. The Senior Vice President--Finance, by virtue of his participation in the
plan, was also granted no award. The remaining named executive officers were
evaluated against performance criteria and key objectives previously established
under divisional plans, and awards totaling $245,000 were granted to them. The
1998 awards represented a decline of 36% from the prior year for those named
executives who received awards in both years.
LONG-TERM STOCK INCENTIVE. For 1998, the compensation committee awarded
long-term incentives to key executives in the form of stock options having an
exercise price equal to the market price of the Company's stock on the date of
grant and vesting over three years. By utilizing such pricing and vesting, the
compensation committee intended that the full benefit would be realized only if
stock price appreciation occurs and if the key employee does not leave the
Company during that period.
In determining the number of options awarded to executive officers, the
compensation committee considered information provided by the Company's
independent compensation consultants, which included, among other things, market
studies of annual stock option grants as a percentage of shares outstanding. The
compensation committee's awards this year once again addressed management's
concern regarding the need to remain competitive in retaining and attracting
executive talent by granting stock options to a broader group of employees. The
compensation committee believes that equity interests held by management more
closely align the interests of shareholders and management. Against that
background, in 1998 Mr. Rodstein was granted options for 50,000 shares, and the
other named executive officers were granted options ranging from 35,000 to
12,000 shares.
John B. Simon, Chairman
Jerry E. Goldress
Stewart M. Kasen
15
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Goldress, Kasen, and Simon served on the compensation committee of
the Company during the year 1998. No member of the compensation committee was,
during the year 1998, either an officer or employee or a former officer or
employee of the Company or any of its subsidiaries, nor did any member have any
relationship with the Company which would be required to be disclosed.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is the name, address and number of shares of Common Stock
beneficially owned as of March 29, 1999 by each person known to the Company to
own 5% or more of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
SHARES OF PERCENT OF
SHAREHOLDER COMMON STOCK CLASS
- ---------------------------------------------------------------------------------------- -------------- -----------
<S> <C> <C>
Trust under Company's Employee Stock Ownership Plan .................................... 1,782,393(a) 10.8
4900 South Eastern Avenue
Los Angeles, CA 90040
Joseph L. Harrosh ...................................................................... 1,404,400(b) 8.5
40900 Grimmer Boulevard
Fremont, CA 94538
The Anthony Family Trust ............................................................... 1,001,249(c) 6.0
65 Park Lane
Concord, MA 01742
ICM Asset Management, Inc. ............................................................. 842,383(d) 5.1
601 West Main Avenue, Suite 600
Spokane, WA 99201
</TABLE>
- ------------------------
(a) Includes shares allocated to the accounts of participants in the ESOP, the
voting of which is directed by such participants. Until shares are allocated
to the accounts of participants in the ESOP, the terms of the Trust require
the Trustee to vote those shares in the same proportion as the allocated
shares are voted.
(b) Based on the most recently filed Form 13G of Joseph L. Harrosh dated
February 2, 1999.
(c) Based on the most recently filed Form 13D of The Anthony Family Trust dated
May 22, 1996.
(d) Based on the most recently filed Form 13G of ICM Asset Management, Inc.
dated February 10, 1999.
16
<PAGE>
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED ON
NAME MARCH 29, 1999 (A) PERCENT OF CLASS (B)
- --------------------------------------------------------------------- ----------------------- -----------------------
<S> <C> <C>
Directors and Nominees for Director
Susan E. Engel..................................................... 1,100 *
Bernard I. Forester................................................ 393,405(d) 2.4
Wilford D. Godbold, Jr............................................. 1,000 *
Jerry E. Goldress.................................................. 2,100 *
Richard J. Heckmann................................................ 5,200 *
Stewart M. Kasen................................................... 1,700 *
John H. Offermans.................................................. 2,607 *
Alfred E. Osborne, Jr.............................................. -- *
Richard M. Rodstein................................................ 266,207 1.6
John B. Simon...................................................... 13,929 *
Executive Officers (c)
John J. Rangel..................................................... 116,868 .7
David H. Herzberg.................................................. 69,615 .4
J. Wayne Merck..................................................... 12,422 .1
David G. Cook...................................................... 70,137 .4
All Directors and Executive Officers as a group (18)................. 1,128,787 6.7
</TABLE>
- ------------------------
(a) Includes the following shares subject to options exercisable within 60 days
of the date of this Proxy Statement: Susan E. Engel-600 shares; Bernard I.
Forester-1,350 shares; Jerry E. Goldress-600 shares; Richard J. Heckmann-200
shares; Stewart M. Kasen-200 shares; John H. Offermans-2,400 shares; Richard
M. Rodstein-122,920 shares; John B. Simon-2,400 shares; John J.
Rangel-65,575 shares; David H. Herzberg-28,108 shares; J. Wayne Merck-4,100
shares; David G. Cook-27,454 shares; and all directors and officers as a
group-323,015 shares. With the exception of the shares referred to in the
preceding sentence and the shares allocated to the accounts of Mr. Rodstein
(14,118 shares), Mr. Rangel (7,378 shares), Mr. Herzberg (14,409 shares),
Mr. Merck (1,322 shares), Mr. Cook (3,039 shares), and all directors and
officers as a group (75,321 shares), under the Company's ESOP, each of the
named persons has sole voting and investment power with respect to the
shares beneficially owned by him.
(b) The shares subject to options described in note (a) for each individual were
deemed to be outstanding for purposes of calculating the percentage owned by
such individual.
(c) Executive officers named in the Summary Compensation Table (other than Mr.
Rodstein, whose securities holdings are listed above).
(d) Includes 1,469 shares held by the Bernard & Venessa Forester Foundation,
over which Mr. Forester exercises voting and investment power as an officer
of the Foundation.
* Less than .1%.
17
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers to file initial reports of ownership and
reports of changes of ownership of the Company's Common Stock with the
Securities and Exchange Commission. Executive officers and directors are
required to furnish the Company with copies of all Section 16(a) forms that they
file. Based upon a review of these filings and written representations from
certain of the Company's directors and executive officers that no other reports
were required, all such Forms were filed on a timely basis by reporting persons.
EMPLOYMENT OF INDEPENDENT AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors has
chosen the firm of Ernst & Young LLP as independent auditors to examine the
consolidated financial statements of the Company for the year 1999. A
representative of Ernst & Young LLP is expected to be present at the annual
meeting with the opportunity to make a statement, if he so desires, and to be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the Company's 2000
annual meeting of shareholders must be received by the Company no later than
December 6, 1999 for inclusion in the proxy statement and form of proxy for that
meeting.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
meeting. If other matters do properly come before the meeting, the persons
acting pursuant to the proxy will vote on them in their discretion. A copy of
the 1998 Annual Report to shareholders is being mailed with this Proxy
Statement.
UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER OF RECORD AS OF MARCH 29, 1999,
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1998 (EXCLUDING EXHIBITS) AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION WILL BE SUPPLIED WITHOUT CHARGE. REQUESTS SHOULD BE DIRECTED TO THE
SECRETARY OF K2 INC., 4900 SOUTH EASTERN AVENUE, LOS ANGELES, CALIFORNIA 90040.
[SIGNATURE]
RICHARD M. RODSTEIN
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
LOS ANGELES, CALIFORNIA
APRIL 5, 1999
18
<PAGE>
EXHIBIT A
K2 1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to provide a means whereby K2 Inc.
(the "Company") may, through the grant of options to purchase Common Stock of
the Company, attract and retain persons of ability as key employees (including
officers and directors who are also employees) and as nonemployee directors and
motivate such persons to exert their best efforts on behalf of the Company and
any Subsidiary. When used in the Plan with reference to employment, the term
"Company" shall include Subsidiaries of the Company. As used herein the term
"Subsidiary" shall mean any legal entity, 50% or more of the voting equity of
which is owned or controlled directly or indirectly by the Company.
2. SHARES SUBJECT TO THE PLAN. Options may be granted by the Company from
time to time to key employees and nonemployee directors of the Company to
purchase shares of Common Stock ($1.00 par value) of the Company ("Common
Stock"), and may be either authorized and unissued or held by the Company in its
treasury. The maximum number of shares of Common Stock with respect to which
options may be granted under the Plan shall be 1,400,000 shares, subject to
adjustment as provided in Section 4(i). If any option granted under the Plan
shall terminate, expire or, with the consent of the optionee, be canceled, new
options may thereafter be granted covering such shares. Anything contained
herein to the contrary notwithstanding, the aggregate number of shares of Common
Stock with respect to which options may be granted during any calendar year to
any employee or nonemployee director shall be limited to 150,000 and 20,000,
respectively.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the Board
of Directors or a committee of the Board (the "Committee") consisting of not
less than two members appointed by the Board of Directors of the Company. Each
member of the Committee shall be a member of the Board who qualifies both as an
"outside director" within the meaning of Section 162(m) of the Internal Revenue
Code of 1986, as amended from time to time (the "Code"), and as a "non-employee
director" within the meaning of Rule 16b-3 under the Securities Exchange Act of
1934. Any vacancy occurring in the membership of the Committee shall be filled
by appointment of the Board.
Subject to the provisions of the Plan, the Board or the Committee shall have
the power to:
(a) determine and designate from time to time those employees of the Company
to whom options are to be granted and the number of shares to be optioned
to each such employee;
(b) determine from time to time the number of options and basis of granting
options to nonemployee directors;
(c) authorize the granting of options which qualify as incentive stock
options within the meaning of Section 422 of the Code ("Incentive Stock
Options"), and options which do not qualify as Incentive Stock Options,
both of which are referred to herein as options;
(d) determine the number of shares subject to each option;
(e) determine the time or times and the manner when each option shall be
exercisable and the duration of the exercise period, which period shall
in no event exceed ten years from the date the option is granted;
(f) extend the term of an option (including extension by reason of an
optionee's death, permanent disability or retirement) but not beyond ten
years from the date of the grant.
A-1
<PAGE>
The Board or the Committee may interpret the Plan, prescribe, amend and
rescind any rules and regulations necessary or appropriate for the
administration of the Plan, and make such other determinations and take such
other action as it deems necessary or advisable, subject to the terms and
provisions of the Plan. Without limiting the generality of the foregoing
sentence, the Board or the Committee may, in its discretion, treat all or any
portion of any period during which an optionee is on military leave or on an
approved leave of absence from the Company as a period of employment of such
optionee by the Company for purposes of accrual of his or her rights under his
or her option; provided, however, that no option may be granted to an employee
while he or she is on a leave of absence. Any interpretation, determination or
other action made or taken by the Board or the Committee shall be final, binding
and conclusive.
4. TERMS AND CONDITIONS OF OPTIONS. Each option granted under the Plan
shall be evidenced by an agreement, in form approved by the Board or the
Committee, which shall be subject to the following express terms and conditions
and to such other terms and conditions as the Board or the Committee may deem
appropriate:
(a) OPTION PERIOD. Each option agreement shall specify the period for which
the option thereunder is granted (which in no event shall exceed ten
years from the date of grant) and shall provide that the option shall
expire at the end of such period.
(b) OPTION PRICE. The option price per share shall be determined by the
Board or the Committee at the time any option is granted, and shall be
not less than the fair market value (but in no event less than the par
value) of the Common Stock of the Company on the date the option is
granted.
(c) EXERCISE OF OPTION. No part of any option may be exercised until the
optionee shall have remained in the employ of the Company for such period
after the date on which the option is granted as the Board or the
Committee may specify in the option agreement, subject to any provision
in the option agreement for the acceleration of exercisability in the
event of a change-in-control of the Company.
(d) PAYMENT OF PURCHASE PRICE UPON EXERCISE. The purchase price of the
shares as to which an option shall be exercised shall be paid to the
Company at the time of exercise either (i) in cash (including the
proceeds of a "cashless exercise" with the assistance of a broker), or
(ii) by delivering Common Stock of the Company already owned by the
optionee and having a total fair market value on the date of such
delivery equal to the purchase price, (iii) by delivering a combination
of cash and Common Stock of the Company having a total fair market value
on the date of such delivery equal to the purchase price; or (iv) by a
reduction of such number of shares otherwise issuable pursuant to such
option as has a total fair market value on the date of exercise equal to
the purchase price. The Board or the Committee may authorize a loan to
any optionee to enable the exercise of options and the payment of
withholding taxes arising from such exercise.
(e) EXERCISE IN THE EVENT OF DEATH OR TERMINATION OF EMPLOYMENT. (1) If an
optionee's employment by the Company shall terminate because of his or
her death, retirement or permanent disability, his or her option may be
exercised, to the extent provided in the option agreement, by him or her
or by the person or persons to whom the optionee's rights under the
option pass by designation pursuant to Section 5, or, absent a
designation, by will or applicable law, or if no such person has such
right, by the executor or administrator of his or her estate, at any
time, or from time to time, but not later than the earlier of (i) the
expiration date specified pursuant to paragraph (a) of this Section 4 or
(ii) the expiration of the period, if any, prescribed in the agreement
for such an
A-2
<PAGE>
exercise. (2) If an optionee's employment shall terminate for any reason
other than death, retirement or permanent disability, all right to
exercise his or her option shall terminate at the date of such
termination of employment or after the expiration of any period specified
in the option agreement..
(f) EXERCISE IN THE EVENT A NONEMPLOYEE DIRECTOR CEASES TO BE A DIRECTOR. If
a nonemployee director shall cease to be a director because of his or her
death, retirement pursuant to any age limitation for the service of
directors, or permanent disability, his or her option may be exercised,
to the extent provided in the option agreement, by him or her or by the
person or persons to whom the optionee's rights under the option pass by
designation pursuant to Section 5, or, absent a designation, by will or
applicable law, or if no such person has such right, by the executor or
administrator of his or her estate, at any time, or from time to time,
but not later than the earlier of (i) the expiration date specified
pursuant to paragraph (a) of this Section 4 or (ii) the expiration of the
period, if any, prescribed in the agreement for such an exercise. If a
nonemployee director shall cease to be a director for any reason other
than death, retirement pursuant to any age limitation for the service of
directors or permanent disability, all right to exercise his or her
option shall terminate 90 days following the date such person ceases to
be a director.
(g) TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall be
transferable other than by will or by the laws of descent and
distribution. During the lifetime of the optionee an option shall be
exercisable only by him or her.
(h) INVESTMENT REPRESENTATION. Upon demand by the Board or the Committee,
the optionee shall deliver to the Committee at the time of any exercise
of an option a written representation that the shares to be acquired upon
such exercise are to be acquired for investment and not for resale or
with a view to the distribution thereof. Upon such demand, delivery of
such representation prior to the delivery of any shares issued upon
exercise of an option and prior to the expiration of the option period
shall be a condition precedent to the right of the optionee or such other
person to purchase any shares (and each option agreement shall contain an
undertaking to deliver such a representation).
(i) ADJUSTMENTS IN EVENT OF CHANGE IN COMMON STOCK. In the event of any
change in the Common Stock of the Company by reason of any stock
dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of shares, or rights offering to
purchase Common Stock at a price substantially below fair market value,
or of any similar change affecting the Common Stock, the number and kind
of shares which thereafter may be optioned and sold under the Plan and
the number and kind of shares subject to option in outstanding option
agreements and the purchase price per share thereunder shall be
appropriately adjusted consistent with such change in such manner as the
Board or the Committee may deem equitable to prevent substantial dilution
or enlargement of the rights granted to, or available for, participants
in the Plan.
(j) OPTIONEES TO HAVE NO RIGHT AS A STOCKHOLDER. No optionee shall have any
rights as a stockholder with respect to any shares subject to his or her
option prior to the date of issuance to him or her of a certificate or
certificates for such shares.
(k) PLAN AND OPTION NOT TO CONFER RIGHTS WITH RESPECT TO CONTINUANCE of
EMPLOYMENT. The Plan and any option granted under the Plan shall not
confer upon any optionee any right with respect to continuance of
employment by the Company, nor shall they interfere in any way with the
right of the Company to terminate his or her employment at any time.
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(l) TAX WITHHOLDING. The Board or the Committee may authorize options that
permit tax withholding obligations arising upon exercise to be paid by
having the Company withhold shares having a total fair market value on
the date of such delivery equal to the amount required.
(m) LIMITATION ON VALUE OF INCENTIVE STOCK OPTIONS. The aggregate fair
market value (determined as of the time the option is granted) of the
stock for which Incentive Stock Options granted to any one employee under
this Plan and under all stock option plans of the Company and its
Subsidiaries may by their terms first become exercisable during any
calendar year shall not exceed $100,000.
(n) PROHIBITION ON REPRICING. No option granted hereunder shall be amended
to reduce the exercise price thereof, or surrendered in exchange for a
replacement option having a lower price; provided that this provision
shall not restrict or prohibit any antidilution adjustment or other
action in accordance with paragraph (i) above.
5. DESIGNATION OF BENEFICIARIES. An optionee may file with the Company a
written designation of a beneficiary or beneficiaries under the Plan and may
from time to time revoke or change any such designation of beneficiary. Any
designation of beneficiary under the Plan shall be controlling over any other
disposition, testamentary or otherwise; provided, however, that if the Board or
the Committee shall be in doubt as to the entitlement of any such beneficiary to
any option, it may determine to recognize only the legal representative of such
optionee, in which case the Company, the Board, the Committee and the members
thereof shall not be under any further liability to anyone.
6. COMPLIANCE WITH GOVERNMENT LAW AND REGULATIONS. The Plan, the grant and
exercise of options thereunder, and the obligation of the Company to sell and
deliver shares under such options, shall be subject to all applicable laws,
rules and regulations and to such approvals by any government or regulatory
agency as may be required. The Company shall not be required to issue or deliver
any certificates for shares of Common Stock prior to (i) the listing of such
shares on any stock exchange on which the Common Stock may then be listed and
(ii) the completion of any registration or qualification of such shares under
any state or federal law, or any ruling or regulation of any governmental body
which the Company shall, in its sole discretion, determine to be necessary or
advisable.
7. AMENDMENT OR DISCONTINUANCE OF THE PLAN. The Board of Directors of the
Company may at any time amend or discontinue the Plan; provided, however, that,
subject to the provisions of Section 4(i) no action of the Board of Directors or
of the Committee may (i) increase the number of shares with respect to which
options may be granted under the Plan, (ii) permit the granting of any option at
an option price less than that determined in accordance with Section 4(b), (iii)
modify Section 4(n) to permit the reprising of options, or (iv) permit the
extension or granting of options which expire beyond the ten-year period
provided for in Sections 3(e) and 4(a). Without the written consent of an
optionee, no amendment or discontinuance of the Plan shall alter or impair any
option previously granted to him or her under the Plan.
8. EFFECTIVE DATE OF THE PLAN. The effective date of the Plan shall be the
date of approval of the Plan by stockholders of the Company holding not less
than a majority of the votes of the shares present and voting at a meeting at
which the Plan is proposed for approval.
9. NAME. The Plan shall be known as the "K2 1999 Stock Option Plan."
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PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY
RICHARD M. RODSTEIN, BERNARD I. FORESTER and SUSAN E. McCONNELL, and each of
them, with full power of substitution, are hereby authorized to represent and to
vote the stock of the undersigned in K2 INC. at the Annual Meeting of
Shareholders to be held on May 6, 1999 and at any adjournment thereof as set
forth below:
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
FOR all nominees listed at right / / JERRY E. GOLDRESS
(EXCEPT AS MARKED TO THE JOHN H. OFFERMANS
CONTRARY BELOW) ALFRED E. OSBORNE, JR.
</TABLE>
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.)
- --------------------------------------------------------------------------------
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE / /
CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
2. PROPOSAL TO APPROVE THE K2 1999 STOCK OPTION PLAN
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP as independent
auditors for 1999.
/ / FOR / / AGAINST / / ABSTAIN
4. Upon or in connection with the transaction of such other business as may
properly come before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED AND, UNLESS OTHERWISE SPECIFIED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSALS 2 AND 3.
Date _______________________, 1999
__________________________________
Signature
__________________________________
Signature if held jointly
Please sign exactly as name
appears at left. 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, please
sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
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