<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 Section 240.14a-11(c) or Section 240.14a-12
K-SWISS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF K-SWISS INC.]
31248 Oak Crest Drive
Westlake Village, California 91361
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 20, 1999
----------------
To the Stockholders of
K.Swiss Inc.:
The Annual Meeting of Stockholders of K.Swiss Inc. (the "Company") will be
held at the K.Swiss(R) Corporate Office, 31248 Oak Crest Drive, Westlake
Village, California 91361 on Thursday, May 20, 1999 at 10:00 a.m., Los Angeles
time. The purpose of the Annual Meeting is to consider and vote upon the
following matters, as more fully described in the accompanying Proxy
Statement:
(1) For holders of Class A Common Stock to elect two directors, and for
holders of Class B Common Stock to elect three directors, in each case to
serve one-year terms ending in 2000, or until their successors are elected
and qualified.
(2) To adopt, approve and ratify the Company's 1999 Stock Incentive Plan.
(3) To transact such other business as may properly come before the
meeting and any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 12, 1999 as
the record date for the determination of stockholders entitled to receive
notice of and to vote at the Annual Meeting and any adjournment or
postponement thereof. In order to constitute a quorum for the conduct of
business at the Annual Meeting, holders of a majority in voting interest of
the Company's outstanding Common Stock must be present in person or be
represented by proxy.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are requested to
mark, date, sign and return the enclosed proxy card as promptly as possible in
the envelope provided. Stockholders attending the meeting may vote in person
even if they have returned a proxy.
By Order of the Board of Directors
/s/ Steven Nichols
Steven Nichols
Chairman of the Board and
President
Westlake Village, California
April 16, 1999
<PAGE>
K.SWISS INC.
31248 Oak Crest Drive
Westlake Village, California 91361
----------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
May 20, 1999
----------------
GENERAL INFORMATION ON THE MEETING
This Proxy Statement is being mailed on or about April 16, 1999 in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of K.Swiss Inc., a Delaware corporation ("K.Swiss" or the
"Company"), for use at the Annual Meeting of Stockholders of the Company,
which is to be held on Thursday, May 20, 1999 at 10:00 a.m. at the
K.Swiss(R) Corporate Office, 31248 Oak Crest Drive, Westlake Village,
California 91361, and any adjournment or postponement thereof.
The entire cost of soliciting proxies will be borne by the Company,
including expenses in connection with preparing and mailing of proxy
solicitation materials. In addition to the use of mails, proxies may be
solicited by certain officers, directors and regular employees of the Company,
without extra compensation, by telephone, telegraph, fax or personal
interview. Although there is no formal agreement to do so, the Company will
reimburse brokerage houses and other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxies and proxy material to the
beneficial owners of the Company's stock.
RECORD DATE AND VOTING
Only stockholders of record at the close of business on April 12, 1999 are
entitled to notice of and to vote at the meeting and at any adjournment or
postponement thereof. As of April 12, 1999, 7,535,548 shares of Class A Common
Stock and 3,346,556 shares of Class B Common Stock were outstanding, all of
which shares are entitled to be voted at the meeting. The number of shares of
Class A Common Stock and Class B Common Stock reflect the effect of a two-for-
one stock split which was announced on February 8, 1999, with a record date of
March 15, 1999 and a distribution date of March 26, 1999. Stockholders are
entitled to one vote for each share of Class A Common Stock held of record,
and ten votes for each share of Class B Common Stock held of record. At the
meeting, holders of shares of Class A Common Stock will be entitled to elect
two members of the Company's Board of Directors, and holders of shares of
Class B Common Stock will be entitled to elect the remaining three members of
the Company's Board of Directors. With respect to matters other than the
election of directors or matters to which a class vote is not required by law,
the presence, either in person or by proxy, of persons entitled to vote a
majority in voting interest of the Company's outstanding Common Stock is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the inspector of election appointed for the Annual Meeting and
will determine whether or not a quorum is present. The inspector of election
will treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum but as unvoted for purposes
of determining the approval of any matter submitted to the stockholders for a
vote. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares
will not be considered as present and entitled to vote with respect to that
matter.
With respect to the election of directors or matters to which a class vote
is required by law, the presence, either in person or by proxy, of persons
entitled to vote a majority in voting interest of outstanding shares of a
class of the Company's common stock is necessary to constitute a quorum for
the election of directors to represent such class or for such other matters
requiring a class vote. A stockholder giving a proxy may revoke
1
<PAGE>
it at any time before it is voted by filing written notice of revocation with
the Secretary of the Company at 31248 Oak Crest Drive, Westlake Village,
California 91361, or by appearing at the meeting and voting in person. A prior
proxy is automatically revoked by a stockholder giving a valid proxy bearing a
later date. Shares represented by all valid proxies will be voted in
accordance with the instructions contained in the proxies. In the absence of
instructions, shares represented by valid proxies will be voted in accordance
with recommendations of the Board of Directors as shown on the proxy.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company as
of April 12, 1999 with respect to the beneficial ownership of the Company's
Common Stock by (i) each stockholder known by the Company to own beneficially
more than 5% of the outstanding shares of any class of Common Stock, (ii) each
director of the Company, and (iii) all directors and officers as a group:
<TABLE>
<CAPTION>
Class A Class B
-------------------------------- -----------------------------
Name or Identity of Group Number of Shares Percent of Number of Shares Percent of
and Address(1) Beneficially Owned(2) Class A(3) Beneficially Owned Class B(3)
- ------------------------- --------------------- ---------- ------------------ ----------
<S> <C> <C> <C> <C>
Directors:
Steven Nichols......... 324,000(4) 4.1% 2,959,412(5) 88.4%
George Powlick......... 120,594(6) 1.6 -- --
Lawrence Feldman....... 5,560 0.1 181,752(7) 5.4
Jonathan K. Layne...... 2,000 0.0 -- --
Martyn Wilford......... -- -- -- --
All Directors and Offi-
cers as a Group
(14 persons)............ 595,650 7.4 3,141,164 93.9
Other Principal Stock-
holders:
Nichols Family Trust... -- -- 2,959,412(5) 88.4
31248 Oak Crest Drive
Westlake Village, CA
91361
John Hancock Mutual
Life Insurance
Company............... 534,386(8) 7.1 -- --
P.O. Box 111
Boston, MA 02117
Royce & Associates,
Inc. ................. 489,000(9) 6.5 -- --
1414 Avenue of the
Americas
New York, NY 10019
Capital Growth Manage-
ment Limited
Partnership........... 460,000(10) 6.1 -- --
One International
Place
Boston, MA 02110
Dimensional Fund Advi- 439,200(11) 5.8 -- --
sors Inc. ............
1299 Ocean Avenue
Santa Monica, CA 90401
</TABLE>
- --------
(1) Unless otherwise indicated, all addresses are c/o K.Swiss Inc., 31248 Oak
Crest Drive, Westlake Village, California 91361.
(2) If shares of Class B Common Stock are owned by the named person or group,
excludes shares of Class B Common Stock convertible into a corresponding
number of shares of Class A Common Stock.
(3) Percentages are calculated based on the total number of shares of Class A
Common Stock outstanding (7,535,548) and on the total number of shares of
Class B Common Stock outstanding (3,346,556) as of April 12, 1999, plus,
where applicable, shares issuable upon exercise of options within sixty
days after April 12, 1999.
2
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(4) Includes of options to acquire 320,000 shares of Class A Common Stock,
which options are exercisable within sixty days after April 12, 1999.
(5) Steven Nichols, co-trustee of the Nichols Family Trust, exercises sole
power to vote and dispose of shares held by the Nichols Family Trust.
Such shares, which are owned by the Nichols Family Trust, are also shown
as beneficially owned by Mr. Nichols.
(6) Includes options to acquire 71,310 shares of Class A Common Stock, which
options are exercisable within sixty days after April 12, 1999.
(7) Such shares are held by Lawrence Feldman and his wife as trustees of
trusts for the benefit of other unrelated individuals.
(8) Based solely upon information contained in a Schedule 13G, as amended,
dated April 12, 1999 received by the Company.
(9) Based solely upon information contained in a Schedule 13G, as amended,
dated February 8, 1999, received by the Company from Royce & Associates,
Inc. as to 489,000 shares and from Mr. Charles M. Royce.
(10) Based solely upon information contained in a Schedule 13G, dated February
8, 1999 received by the Company. Capital Growth Management Limited
Partnership ("CGM") has advised the Company that it is a registered
investment advisor and that the securities shown above are held in client
accounts for which CGM serves as investment manager and that CGM thereby
disclaims beneficial ownership of all such securities.
(11) Based solely upon information contained in a Schedule 13G, as amended,
dated February 11, 1999 received by the Company. Dimensional Fund
Advisors Inc. ("Dimensional") has advised the Company that it is a
registered investment advisor and that the securities shown above are
held by several investment vehicles for which Dimensional serves as
investment manager and that Dimensional thereby disclaims beneficial
ownership of all such securities.
3
<PAGE>
ELECTION OF DIRECTORS
Under the Restated Certificate of Incorporation and the Restated Bylaws of
the Company, two (2) directors out of a total of five (5) are to be elected at
the 1999 Annual Meeting of Stockholders by the holders of Class A Common Stock
to serve one-year terms expiring at the 2000 Annual Meeting of Stockholders or
until their successors are duly elected and qualified. The remaining three (3)
directors are to be elected at the 1999 Annual Meeting of Stockholders by the
holders of Class B Common Stock to serve one-year terms expiring at the 2000
Annual Meeting of Stockholders or until their successors are duly elected and
qualified. Unless authority to vote for a certain nominee is withheld by an
indication thereon, the Class A Common Stock proxy will be voted to re-elect
Jonathan K. Layne and Martyn Wilford, and the Class B Common Stock proxy will
be voted to re-elect Steven Nichols, George Powlick, and Lawrence Feldman, in
all cases to serve until the 2000 Annual Meeting of Stockholders or until
their respective successors are elected and qualified. The Company has no
reason to believe that any of those named will not be available as a
candidate. However, if such a situation should arise, the proxy may be voted
for the election of other nominees as directors at the discretion of the
person acting pursuant to the proxy. Certain information regarding the
nominees for election by the holders of Class A Common Stock and the holders
of Class B Common Stock is set forth below:
Nominees for Election by Class A Common Stockholders at the 1999 Annual
Meeting
<TABLE>
<CAPTION>
Age at Position with Director
Name December 31, 1998 Company Since
---- ----------------- ------------- --------
<S> <C> <C> <C>
Jonathan K. Layne....... 45 Director 1990
Martyn Wilford.......... 47 Director 1990
Nominees for Election by Class B Common Stockholders at the 1999 Annual
Meeting
<CAPTION>
Age at Position with Director
Name December 31, 1998 Company Since
---- ----------------- ------------- --------
<S> <C> <C> <C>
Steven Nichols.......... 56 Chairman of the Board, President 1987
George Powlick.......... 54 Vice President--Finance, Chief Financial 1990
Officer, Secretary and Director
Lawrence Feldman........ 56 Director 1987
</TABLE>
Principal Occupations of Class A and Class B Nominees During Last Five Years
Steven Nichols has been President and Chairman of the Board of the Company
since 1987. From 1980 to 1986, Mr. Nichols was a director and Vice-President--
Merchandise of Stride Rite Corp., a footwear manufacturer and holding company.
In addition, Mr. Nichols was President of Stride-Rite Footwear from 1982 to
1986. From 1979 to 1982, Mr. Nichols served as an officer and President of
Stride Rite Retail Corp., the largest retailer of branded children's shoes in
the United States. From 1962 through 1979, he was an officer of Nichols Foot
Form Corp., which operated a chain of New York retail footwear stores.
George Powlick, Director, Vice President--Finance, Chief Financial Officer
and Secretary, joined the Company in January 1988. Mr. Powlick is a certified
public accountant and was an audit partner in the independent public
accounting firm of Grant Thornton from 1975 to 1987.
Lawrence Feldman, a Director of the Company, has been President of the Rug
Warehouse, Inc., a New York City oriental rug retailer and wholesaler, since
1977. From 1973 to 1977, he was Vice President for Design and Product
Development for Hart Schaffner & Marx, a clothing manufacturer and retailer.
Jonathan K. Layne, a Director of the Company, has been a partner in the law
firm of Gibson, Dunn & Crutcher LLP since 1987, where he specializes in
corporate and securities law matters. From 1979 to 1986 he was an associate of
the same law firm. Mr. Layne is also a member of the Board of Directors of
Amwest Insurance Group, Inc., an insurance holding company, The Finish Line,
Inc., a retailer of brand name athletic
4
<PAGE>
and leisure footwear, activewear and accessories and Maxwell Shoe Company
Inc., a manufacturer of women's casual and dress footwear.
Martyn Wilford, a Director of the Company and of K.Swiss UK Ltd. (a Company
subsidiary), has been Chairman of the Board and Chief Executive Officer of
Joseph Clark & Sons (Soho) Limited, a British leather trader, since 1986. Mr.
Wilford joined Joseph Clark & Sons in 1974. He is a chartered accountant.
CERTAIN INFORMATION CONCERNING THE BOARD
OF DIRECTORS AND CERTAIN OF ITS COMMITTEES
The Board of Directors has the following standing committees: Compensation
and Stock Option Committee and Audit Committee. The Company does not have a
nominating committee of its Board of Directors.
Meetings of the Board of Directors and Committees
The Board of Directors held four formal meetings during fiscal 1998 and took
action on numerous matters by unanimous written consent. Each Director
attended at least 75% of the meetings of the Board and Board Committees of
which he was a member.
The Compensation and Stock Option Committee is composed of Messrs. Lawrence
Feldman and Martyn Wilford. This Committee met five times during fiscal 1998.
The Audit Committee is composed of Messrs. Lawrence Feldman and Jonathan K.
Layne. This committee met two times during fiscal 1998.
Remuneration of Directors
During 1998, all directors who are not employees were paid a lump-sum of
$2,000, plus $2,000 for each committee served on and $2,000 per regular Board
meeting attended, and normal and necessary expenses for attending all such
meetings. The Company also pays non-employee directors of its subsidiaries
similar amounts.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to the compensation
paid by the Company during the years ended December 31, 1998, 1997 and 1996 to
the Chief Executive Officer and the four most highly compensated executive
officers of the Company (the Named Officers) whose salary and bonus exceeded
$100,000 in 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long Term
Compensation Compensation
----------------- ------------
Awards
------------
Options/
Name and Principal SARs All Other
Position Year Salary Bonus(1) (#) Compensation(2)
- ------------------ ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Steven Nichols.......... 1998 $721,622 $721,622 -- $40,429
President and Chief 1997 702,308 505,369 -- 42,528
Executive Officer 1996 675,308 -- 100,000 22,232
Preston Davis........... 1998 161,695 97,017 -- 17,151
Vice President Sales 1997 156,360 93,816 -- 17,888
1996 150,835 -- 6,000 4,044
Thomas Harrison......... 1998 160,146 96,088 -- 16,850
Senior Vice President 1997 155,356 93,211 25,200 18,037
1996 149,127 10,357 2,400 3,093
Deborah Mitchell........ 1998 190,088 152,070 -- 16,626(3)
Vice President--Market-
ing 1997 185,000 146,941 10,000 19,349(3)
1996 140,417 -- 40,000 2,352(3)
George Powlick.......... 1998 247,324 197,859 -- 12,023(4)
Vice President--Finance, 1997 239,934 138,122 -- 25,022(4)
Chief Financial Officer 1996 230,705 -- 15,600 9,697(4)
</TABLE>
- --------
(1) Includes cash bonuses earned and accrued during the year indicated, but
paid subsequent to the end of the year.
Effective July 1, 1996 the Company adopted an executive bonus program based
on changes in Economic Value Added ("EVA"). See "Compensation and Stock
Option Committee Report".
The terms of the program for 1996 mandated that no payouts would be made for
1996 and that any declared bonus would be carried forward to 1997 as a
beginning bank balance for the executive, except in the case of Mr. Harrison
who received a cash bonus of $10,357 for 1996. The remaining amounts accrued
and deposited in notional EVA bank accounts for 1996 for the Named Officers
are as follows: Steven Nichols--$0, Preston Davis--$28,474, Thomas
Harrison--$17,795, Deborah Mitchell--$90,570 and George Powlick--$0.
The balance accrued in notional EVA bank accounts at the end of 1997
(excluding amounts disclosed above as "Bonus" but including balances carried
forward from 1996) for the Named Officers are as follows: Steven Nichols--
$308,430, Preston Davis--$147,858, Thomas Harrison--$136,410, Deborah
Mitchell--$145,881 and George Powlick--$84,297.
The balance accrued in notional EVA bank accounts at the end of 1998
(excluding amounts disclosed above as "Bonus" but including balances carried
forward from 1997) for the Named Officers are as follows: Steven Nichols--
$1,316,536, Preston Davis--$384,642, Thomas Harrison--$417,121, Deborah
Mitchell--$352,840 and George Powlick--$360,706.
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(2) Comprised of the Company's profit sharing and 401(k) matching
contributions made in the stated year on behalf of the Named Officers,
cash payments made relating to the number of stock options held by the
Named Officers and term life insurance premiums for the benefit of the
Named Officers. The Company did not make a profit sharing contribution
during 1996.
(3) Includes $787, $2,925 and $1,352 for 1998, 1997 and 1996, respectively, of
imputed interest related to a non-interest bearing loan made by the
Company to Ms. Mitchell.
(4) Includes $366, $1,565 and $1,544 for 1998, 1997 and 1996, respectively, of
imputed interest related to a non-interest bearing loan made by the
Company to Mr. Powlick.
STOCK OPTION GRANTS IN 1998
There were no options to purchase the Company's Class A Common Stock granted
in 1998 to the Named Officers.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to options
exercised, unexercised options, and year end values, in each case with respect
to options to purchase the Company's Class A Common Stock granted in 1998 and
prior years under the 1990 Stock Incentive Plan and the 1988 Stock Option Plan
to the Named Officers and held by them at December 31, 1998.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money
Shares Options at Options at
Acquired December 31, 1998(#) December 31, 1998(1)
on Value ------------------------- -------------------------
Name Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven Nichols.......... 24,000 $150,500 500,000 -- $2,846,250 $ --
Preston Davis........... 7,000 78,059 52,800 13,200 366,600 68,925
Thomas Harrison......... 7,000 78,715 28,400 27,600 229,725 228,975
Deborah Mitchell........ -- -- -- 50,000 -- 404,975
George Powlick.......... -- -- 124,720 39,280 821,805 213,495
</TABLE>
- --------
(1) Represents the difference between the closing price of the Company's Class
A Common Stock on December 31, 1998 of $13.44 and the exercise price of
the options.
EMPLOYMENT AGREEMENTS
The Company and Steven Nichols, the Company's Chairman, President and Chief
Executive Officer, are parties to a five-year employment agreement commencing
January 1, 1996 and ending December 31, 2000. Under this agreement, Mr.
Nichols received an annual base salary of $721,622 during 1998 and will
receive the same amount (plus an adjustment for cost of living increases)
during each subsequent year thereafter, Mr. Nichols also receives a cash bonus
award each year in an amount ranging up to 200% of his base salary, depending
upon the financial performance of the Company as compared to the prior year.
Mr. Nichols receives no bonus for a year in which the Company's earnings
before income taxes do not exceed 110% of the prior year's earnings before
income taxes, excluding extraordinary items. Mr. Nichols will be awarded a
bonus equal to 4% of base salary for each percentage point that earnings
before income taxes for any year exceed 110%, up to and including 135%, of
earnings before income taxes in the immediately preceding year. In addition,
Mr. Nichols will be awarded a bonus equal to 5% of base salary for each
percentage point that earnings before income taxes for any year exceed 135%,
up to and including 155%, of earnings before income taxes in the immediately
preceding year. In the event earnings before income taxes for any year exceed
155% of earnings before income taxes in the immediately preceding year,
Mr. Nichols will be awarded a bonus equal to 200% of his base salary for such
year (which is the maximum bonus payable to Mr. Nichols in any one year under
the employment agreement). Mr. Nichols has voluntarily agreed to waive that
portion of the bonus he would have received under his employment agreement for
1996, 1997 and 1998 to the extent it exceeds the amount he would have received
under the Company's Economic Value Added bonus plan. See "Executive
Compensation--Compensation and Stock Option Committee Report." The employment
agreement prohibits Mr. Nichols from competing with the Company and its
subsidiaries for a period of 12 months following termination of his
employment, although this restriction is not applicable beyond December 31,
2000 if Mr. Nichols remains employed by the Company on or after that date. The
agreement is terminable upon 30 days written notice by Mr. Nichols under
certain circumstances, such as a reduction in salary or position, and is
terminable by the Company for cause.
In connection with a prior employment agreement, the Company and Mr. Nichols
entered into an amended and restated registration rights agreement which
granted Mr. Nichols the right to cause the Company to register outstanding
shares of Class A Common Stock issuable upon conversion of Class B Common
Stock, held by Mr. Nichols or any entity formed primarily for the benefit of
members of his family, in each case upon any proposal by the Company to
register shares of any class of Common Stock under the Securities Act of 1933,
as amended, in a public offering for cash.
8
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
Summary of Compensation Policies For Executive Officers
The Compensation and Stock Option Committee (the "Compensation and Stock
Option Committee" or the "Committee") administers the Company's stock option
plans, reviews the Company's compensation plans, programs and policies and
monitors the performance and compensation of executive officers and other key
employees and makes appropriate recommendations and reports to the full Board
of Directors concerning matters of executive compensation.
The Company's philosophy is to maintain compensation programs which attract,
retain and motivate senior management with economic incentives which are
directly linked to financial performance and increased stockholder value. The
key elements of the Company's executive compensation program consists of a
base salary, potential for an annual bonus directly linked to individual and
overall Company performance and the grant of stock options and other stock
incentive awards intended to encourage the achievement of superior results
over time and to directly align executive officer and stockholder economic
interests.
The Committee believes the Chief Executive Officer's compensation should be
heavily influenced by Company performance. The Chief Executive Officer and the
Company are parties to a five-year employment agreement which expires December
31, 2000. See "Executive Compensation--Employment Agreements." The Chief
Executive Officer received an annual base salary of $721,622 during 1998 and
will receive the same amount plus an adjustment for cost of living increases
during each subsequent year thereafter. He is also eligible to receive a cash
bonus award each year in an amount ranging up to 200% of his base salary,
depending entirely upon the financial performance of the Company as compared
to the prior year, provided however, for the years ending December 31, 1996,
1997 and 1998, Mr. Nichols has voluntarily agreed to waive that portion of the
bonus he would have received under his employment agreement for these years to
the extent it exceeds the amount he would have received under the Company's
Economic Value Added ("EVA") bonus plan. Mr. Nichols' 1997 and 1998 bonuses
calculated in accordance with his employment contract would have been
$1,404,616 and $1,443,244, respectively. The Company's EVA bonus plan was
designed by Stern Stewart & Co., consultants specializing in EVA plans, and
basically rewards managers for increases in EVA (i.e. after tax operating
profit, minus a charge for all capital employed). Under the applicable bonus
program, the Chief Executive Officer received bonus payments of $0, $505,369
and $721,622 for the years ending December 31, 1996, 1997 and 1998,
respectively. The Committee believes this arrangement provides the Chief
Executive Officer significant incentive and aligns what could amount to (as in
1997 and 1998) a bonus equal to a substantial percentage of his annual salary
directly to the Company's economic improvement.
In addition, the Chief Executive Officer's five-year 1990 employment
agreement provided for the grant by the Company of 400,000 shares of Class A
Common Stock which options have now been granted at exercise prices ranging
from $7.63 to $9.63 per share. In November 1994 he received a grant of 80,000
options to purchase shares of Class A Common Stock at an exercise price of
$10.63 per share and in February 1996 he received a grant of 100,000 options
to purchase shares of Class A Common Stock at an exercise price of $4.38 per
share. All exercise prices were not less than the fair market value of such
shares at the time of grant. The Committee believes these salary, bonus and
option arrangements, together with the Chief Executive Officer's substantial
equity ownership in the Company, provide him with incentive to perform at
superior levels and in a manner which is directly aligned with the economic
interests of the Company's stockholders.
The Committee has adopted similar policies with respect to overall
compensation of the Company's other executive officers. The salaries of the
Company's executive officers have been established by considering the salaries
of similar executives of comparably-sized companies both within and outside
the industry within which the Company operates. In addition, other relative
performance factors, including the individual's past performance and future
potential, are considered in establishing base salaries of executive officers.
Salaries for the Company's executive officers for 1998 generally increased 3%
over the prior year's salaries with specific salary increases depending upon
corporate performance, individual performance and inflation during the prior
fiscal year.
9
<PAGE>
Effective July 1, 1996, the Company adopted, for certain of its executive
officers plus other key management personnel, a bonus plan based on increasing
the Company's EVA. Participants can earn a target bonus, based on the
participant's role, responsibilities, and business unit, if target results are
achieved. If target results are exceeded or missed, bonuses are
proportionately increased or decreased. Target bonuses (expressed as a
percentage of salary) and related performance goals (expressed as changes in
EVA) were established at the plan adoption date, after assessing
recommendations of management and Stern Stewart & Co. EVA represents the net
after tax operating profit less a charge for capital employed and is measured
for the Company as a whole as well as individual business units within the
Company.
Each year a participating executive receives a bonus declaration equal to
their target bonus multiplied by their business unit's EVA performance factor.
The bonus declaration is accrued and placed in a notional bank account from
which annual bonus payments are made to the executive. Annual payments from
the notional bank account are equal to the bank balance (if the bank balance
is less than or equal to one target bonus) plus one third of any excess bank
balance after payment of target bonus, limited to one additional target bonus.
Remaining bank balances are carried forward and are subject to forfeiture if
the employee leaves the Company or the subsequent years change in EVA does not
achieve plan performance parameters.
During 1998, all Named Officers earned at least one target bonus because the
Company's corporate plans and goals were exceeded for their business unit. The
committee believes that EVA represents a key financial indicator of
stockholder value and is an appropriate measure of Company financial
performance.
The Committee also generally grants stock options to the executive officers
based primarily upon a subjective evaluation of the executive's past
performance and future ability to influence the Company's long-term growth and
profitability and secondarily upon the Company's recent economic performance.
See "Stock Option Plans." Options are generally (but not always) granted at
current market values and generally (but not always) contain vesting periods
over a three-year period commencing on the third anniversary of the date of
option grant. In some cases, the Committee has granted options with exercise
prices of $0.50 per share to certain employees in amounts less than it would
have granted to such persons at the then current market values. The Committee
believes that this practice, although not widely utilized, can be a
significant factor in motivating certain individuals, particularly those
persons the Company is seeking initially to hire. In making new option grants,
the Committee does consider the number of options already held by an executive
officer. Since the value of a stock option bears a direct relationship to the
Company's stock price, the Committee believes they are effective incentives
for management to create value for stockholders. Consequently, the Committee
believes stock options are a critical component of its long-term, performance-
based compensation philosophy.
Under 1993 federal law and applicable regulations, income tax deductions for
compensation paid by publicly-traded companies may be limited to the extent
total compensation (including base salary, annual bonus, restricted stock
awards, stock option exercises, and non-qualified benefits) for certain
executive officers exceeds $1 million in any one year. Under the law, the
deduction limit does not apply to payments which qualify as "performance-
based". To qualify as "performance-based", compensation payments must be made
from a plan that is administered by a committee of outside directors. In
addition, the material terms of the plan must be disclosed to and approved by
stockholders, and the committee must certify that the performance goals were
achieved before payments can be awarded.
10
<PAGE>
The Committee intends to design the Company's compensation programs to
conform with the legislation and related regulations so that total
compensation paid to any employee will not exceed $1 million in any one year,
except for compensation payments in excess of $1 million which qualify as
"performance-based". However, the Company may pay compensation which is not
deductible in limited circumstances when sound management of the Company so
requires.
Compensation and Stock Option
Committee
Lawrence Feldman
Martyn Wilford
Dated: April 9, 1999
The above report of the Compensation and Stock Option Committee will not be
deemed to be incorporated by reference into any filing by the Company under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to
the extent that the Company specifically incorporates same by reference.
Compensation Committee Interlocks and Insider Participation
Directors Feldman and Wilford comprise the Compensation and Stock Option
Committee.
In June 1988, the Company issued to the Rug Warehouse Inc. Pension Plan &
Trust ("RWI") (of which Mr. Feldman, a Director of the Company, was trustee)
10% junior subordinated debentures in the principal amount of $400,000 to
refinance certain junior subordinated debentures that were then repaid. The
debentures are due on December 31, 2001 with interest payable quarterly.
Beginning June 30, 1996 and on each December 31 and June 30 thereafter until
the debentures are fully retired, the holder of such debentures may require
the Company to redeem $50,000 (or such lesser principal amount outstanding) of
such debentures on such dates. The Company has been informed that RWI has
transferred its debentures to Mrs. Susan Feldman, the wife of Mr. Feldman.
11
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN
AMONG K.SWISS INC. CLASS A COMMON STOCK,
BROAD MARKET INDEX AND INDUSTRY INDEX(1)
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Measurement Period Industry Broad
(Fiscal Year Covered) K-Swiss Inc. Index Market
- ------------------- ------------ --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/31/93 $100.00 $100.00 $100.00
FYE 12/30/94 $ 86.18 $111.12 $104.99
FYE 12/29/95 $ 47.76 $128.67 $202.18
FYE 12/31/96 $ 43.72 $202.18 $169.18
FYE 12/31/97 $ 72.34 $150.38 $207.00
FYE 12/31/98 $120.09 $136.48 $291.96
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1994
ASSUMES DIVIDENDS REINVESTED
FISCAL YEARS ENDING DECEMBER 31
- --------
(1) Industry Index chosen was Media General Industry Group 321--Textile--
Apparel Footwear & Accessories
12
<PAGE>
STOCK OPTION PLANS
On January 9, 1990, the Board of Directors adopted the K.Swiss Inc. 1990
Stock Incentive Plan (the "1990 Plan") which authorized the issuance of up to
1,050,000 shares of Class A Common Stock, subject to adjustments under certain
circumstances. As amended, the aggregate number of shares issuable upon
options and other awards under this plan is currently 1,650,000 shares of
Class A Common Stock. The purpose of such plan is to enable the Company to
attract, retain and motivate its key employees by providing for or increasing
their proprietary interest in the Company. Any person who is employed by the
Company on a salaried basis is eligible to participate in the 1990 Plan.
Awards may not be granted under the 1990 Plan after January 9, 2000. Although
any award that was duly granted on or prior to such date may thereafter be
exercised or settled in accordance with its terms, no shares of Class A Common
Stock may be issued pursuant to any award after January 9, 2010. The 1990 Plan
is administered by a committee of the Board of Directors of the Company, which
has full power to construe the 1990 Plan. The 1990 Plan authorizes the
Compensation and Stock Option Committee to enter into any type of arrangement
with an eligible employee that, by its terms, involves or might involve the
issuance of (1) Class A Common Stock, (2) an option, warrant, convertible
security, stock appreciation right or similar right with an exercise or
conversion privilege at a price related to the Class A Common Stock, or (3)
any other security or benefit with a value derived from the value of the Class
A Common Stock. As of April 12, 1999, 178 persons were eligible to so
participate.
During the year ended December 31, 1998 two current executive officers (out
of 11 persons) were granted options to acquire an aggregate of 3,000 shares of
Class A Common Stock at an average per share exercise price of $0.50. During
the year ended December 31, 1998, other employees were granted options to
acquire 43,450 shares of Class A Common Stock at an average exercise price of
$3.58 per share. As of April 12, 1999, there were 2,143,786 options granted,
443,022 options exercised, 673,496 options cancelled, 1,027,268 options
outstanding and 179,710 options available for future grant under the 1990
Plan. Such options are exercisable at prices ranging from $0.50 to $11.56 per
share.
ADOPTION, APPROVAL AND RATIFICATION OF THE COMPANY'S
1999 STOCK INCENTIVE PLAN
At the Annual Meeting of Stockholders, the stockholders of the Company will
be asked to adopt, approve and ratify the K.Swiss Inc. 1999 Stock Incentive
Plan (the "1999 Plan").
On April 12, 1999, the Board of Directors unanimously adopted and approved
the 1999 Plan, and is submitting the 1999 Plan to stockholders for their
adoption, approval and ratification at the Annual Meeting. The Board of
Directors believes it is in the best interests of the Company to attract,
retain and motivate its employees and consultants in the Company, and to
attract, retain and motivate its non-employee directors and further align
their interest with those of the stockholders of the Company by providing for
or increasing the proprietary interest of such persons in the Company. Because
no Awards may be granted under the terms of the 1990 Plan after January 9,
2000, the Board of Directors has adopted and approved the 1999 Plan to further
this goal.
All statements set forth in this Proxy Statement relating to the 1999 Plan
are qualified in their entirety by reference to the complete statement of the
1999 Plan, which is set forth in Appendix A to this Proxy Statement. Any
capitalized terms not defined in this section shall have the meanings given to
them in the 1999 Plan. The 1999 Plan is intended to qualify under Rule 16b-3
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If
any of the terms or provisions of the 1999 Plan conflict with the requirements
of Rule 16b-3, then such terms and provisions shall be deemed inoperative to
the extent they so conflict with such requirements.
Administration
The 1999 Plan shall be administered by the Board of Directors or a committee
(the "Committee") consisting of two or more directors, each of whom is (i) a
"Non-Employee Director" (as such term is defined in Rule 16b-3 promulgated
under the Exchange Act, as such Rule may be amended from time to time), and
(ii) with respect to any Award intended to qualify as "performance-based
compensation" within the meaning of
13
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
is an "outside director" within the meaning of Section 162(m) of the Code. The
Board of Directors shall have the discretion to appoint, add, remove or
replace members of the Committee, and shall have the sole authority to fill
vacancies on the Committee.
Participants
Awards may be granted pursuant to the 1999 Plan to: (1) any employee of the
Company or any of its subsidiaries or affiliates, including any director who
is also such an employee, (2) any consultant of the Company or any of its
subsidiaries or affiliates or (3) any director of the Company who is not an
employee of the Company (a "Non-Employee Director").
Operation of the 1999 Plan
The Committee, on behalf of the Company, is authorized under the 1999 Plan
to enter into any type of arrangement with an Eligible Person that is not
inconsistent with the provisions of the 1999 Plan and that, by its terms,
involves or might involve the issuance of (1) shares of Class A Common Stock
or of any other class of security of the Company that is convertible into
shares of Common Stock ("Shares") or (2) a right or interest with an exercise
or conversion privilege at a price related to the Shares or with a value
derived from the value of the Shares, which right or interest may, but need
not, constitute a Derivative Security (as such term is defined in Rule 16a-1
promulgated under the Exchange Act, as such rule may be amended from time to
time). The entering into of any such arrangement is referred to herein as the
"grant" of an "Award."
Awards are not restricted to any specified form or structure and may
include, without limitation, grants, sales or bonuses of stock, restricted
stock, stock options, reload stock options, stock purchase warrants, other
rights to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, limited stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance shares, and an Award
may consist of one such security or benefit or two or more of them in tandem
or in the alternative. Awards may be issued, and Shares may be issued pursuant
to an Award, for any lawful consideration as determined by the Committee,
including, without limitation, services rendered by the recipient of such
Award.
The 1999 Plan provides that the aggregate number of Shares that may be
issued pursuant to all Awards shall not exceed 600,000 and that the aggregate
number of shares that may be granted to any one Eligible Person during any
calendar year shall not exceed 300,000, subject to adjustment as provided
below. The 1999 Plan will be used in addition to the 1990 Plan, which provided
for an aggregate of 1,650,000 shares to be issued pursuant to options of which
179,710 remained available for awards as of April 12, 1999. If the outstanding
securities of the class then subject to the 1999 Plan are increased, decreased
or exchanged for or converted into cash, property or a different number or
kind of securities, or if cash, property or securities are distributed in
respect of such outstanding securities, in either case as a result of a
reorganization, merger, consolidation, recapitalization, restructuring,
reclassification, dividend (other than a regular, quarterly cash dividend) or
other distribution, stock split, reverse stock split or the like, or if
substantially all of the property and assets of the Company are sold, then,
unless the terms of such transaction shall provide otherwise, the Committee
shall make appropriate and proportionate adjustments in (1) the number and
type of shares or other securities or cash or other property that may be
acquired pursuant to Incentive Stock Options ("ISO's") and other Awards
theretofore granted under the 1999 Plan, (2) the maximum number and type of
shares or other securities that may be issued pursuant to ISOs and other
Awards thereafter granted under the 1999 Plan, and (3) the maximum number of
Shares for which options may be granted to any participant during any one
calendar year; provided, however, that no adjustment shall be made to the
number of Shares that may be acquired pursuant to outstanding ISOs or the
maximum number of Shares with respect to which ISOs may be granted under the
1999 Plan to the extent such adjustment would result in such options being
treated as other than ISOs; provided further that no such adjustment shall be
made to the extent the Committee determines that such adjustment would result
in the disallowance of a federal income tax deduction for compensation
attributable to Awards hereunder by causing such compensation to be other than
Performance-Based Compensation.
14
<PAGE>
Under certain circumstances, the Committee, in its sole discretion, may
provide for the acceleration of any Awards in the event of a Change of Control
of the Company.
For federal income tax purposes, the maximum compensation payable to
employees pursuant to the 1999 Plan, during the term of the 1999 Plan and
awards granted thereunder, is equal to the number of shares of Class A Common
Stock with respect to which awards may be issued thereunder, multiplied by the
value of such shares on the date such compensation is measured (which, in the
case of Nonqualified Options (defined below), will generally be the date of
exercise of the options).
Manner of Exercise
The recipient of an Award, including any recipient who is a director or
officer of the Company, may pay the purchase price of the Shares or other
property issuable pursuant to such Award, and/or such recipient's tax
withholding obligation with respect to such issuance, in whole or in part, by
any one or more of the following:
(1) the delivery of cash;
(2) the delivery of the other property deemed acceptable by the Committee;
(3) the delivery of previously owned shares of capital stock of the Company
(including "pyramiding") or other property; or
(4) a reduction in the amount of Shares or other property otherwise issuable
pursuant to such Award.
Amendment and Termination
The Board of Directors may amend, alter or discontinue the 1999 Plan or any
agreement evidencing an Award made under the 1999 Plan, but no amendment or
alteration shall be made which would impair the rights of any Award holder,
without such holder's consent, under any Award theretofore granted, provided
that no such consent shall be required if the Board of Directors or the
Committee determines in its sole discretion and prior to the date of any
change of control (as defined, if applicable, in the agreement evidencing such
Award) that such amendment or alteration is not reasonably likely to
significantly diminish the benefits provided under such Award, or that any
such diminution has been adequately compensated.
No Right to Company Employment
Nothing in the 1999 Plan or as a result of any Award granted pursuant to the
1999 Plan shall confer on an individual any right to continue in the employ of
the Company or any of its subsidiaries or affiliates or interfere in any way
with the right of the Company (or its subsidiaries or affiliates, as
applicable) to terminate an individual's employment at any time. The agreement
evidencing an Award may contain such provisions as the Committee may approve
with respect to the effect of approved leaves of absence.
Compliance with Law
The 1999 Plan, the grant and exercise of Awards thereunder, and the
obligation of the Company to sell and deliver Shares under such Awards, shall
be subject to all applicable federal and state laws, rules and regulations and
to such approvals by any governmental or regulatory agency as may be required.
The Company shall not be required to issue or deliver any certificates for
shares of Class A Common Stock prior to the completion of any registration or
qualification of such shares under any federal or state law or issuance of any
ruling or regulation of any government body which the Company shall, in its
sole discretion, determine to be necessary or advisable.
Effective Date
The Effective Date of the 1999 Plan shall be the date upon which it was
approved by the Board of Directors, subject however to approval of the 1999
Plan by the affirmative votes of the holders of a majority of the securities
of the Company present, or represented, and entitled to vote at the Annual
Meeting.
15
<PAGE>
Federal Income Tax Treatment
The following is a brief description of the federal income tax treatment
that will generally apply to Awards issued under the 1999 Plan, based on
federal income tax laws in effect on the date hereof. The exact federal income
tax treatment of Awards will depend on the specific nature of the Award. Such
an Award may, depending on the conditions applicable to the Award, be taxable
as an option, as restricted or unrestricted stock, as a cash payment, or
otherwise. Recipients of options or other Awards should not rely on this
discussion for individual tax advice, as each recipient's situation and the
tax consequences of any particular Award will vary depending upon the specific
facts and circumstances involved. Each recipient is advised to consult with
his or her own tax advisor for particular federal, as well as state and local,
income and any other tax advice.
Incentive Options. Pursuant to the 1999 Plan, employees may be granted
options that are intended to qualify as ISOs under the provisions of Section
422 of the Code. Generally, the employee is not taxed on the grant or the
exercise of an ISO. However, the employee's "alternative minimum taxable
income" for the year of exercise will be increased by the excess of the fair
market value of the shares acquired upon the exercise of an ISO ("ISO Shares")
over the exercise price, and thus exercise of an ISO may subject the employee
to the "alternative minimum tax" in the year of exercise.
If the employee sells the ISO Shares at any time within (1) one year after
the date of transfer of ISO Shares to the employee pursuant to the exercise of
the ISO or (2) two years after the date of grant of the ISO (a "Disqualifying
Disposition"), then, at the time of such Disqualifying Disposition (a) the
employee will recognize capital gain equal to the excess, if any, of the sales
price over the fair market value of the ISO Shares on the date of exercise,
(b) the employee will recognize ordinary income equal to the excess, if any,
of the lesser of the sales price or the fair market value of the ISO Shares on
the date of exercise, over the exercise price of such ISO, and (c) the
employee will recognize capital loss equal to the excess, if any, of the
exercise price of such ISO over the sales price of the ISO Shares. If the
employee sells the ISO Shares at any time after the one-year and two-year
periods described above, then the employee will recognize long-term capital
gain or loss equal to the difference between the sales price and the exercise
price of such ISO, and the Company will not be entitled to any deduction.
Long-term capital gain for individual taxpayers currently is taxed at a
maximum rate for federal income tax purposes of 20%.
Nonqualified Options. The grant of an option or other similar right to
acquire stock that does not qualify for treatment as an ISO (a "Nonqualified
Option") is generally not a taxable event for the optionee. Upon exercise of
the option, the optionee will generally recognize ordinary income equal to the
excess of the fair market value of the stock acquired upon exercise
(determined as of the date of the exercise) over the exercise price of such
option. See "Special Rules for Awards Granted to Insiders," below.
Special Rules for Awards Granted to Insiders. If an optionee is a director,
officer or stockholder subject to Section 16 of the Exchange Act (an
"Insider"), the timing of the recognition of any ordinary income and the date
used to determine the fair market value of the underlying stock may be
deferred. Insiders should consult their tax advisors to determine the tax
consequences to them of exercising options granted to them pursuant to the
1999 Plan.
Miscellaneous Tax Issues. Awards may be granted under the 1999 Plan that do
not fall clearly into the categories described above. The federal income tax
treatment of these Awards will depend upon the specific terms of such Awards.
Generally, the Company will be required to make arrangements for withholding
applicable taxes with respect to any ordinary income recognized by a
participant in connection with Awards made under the 1999 Plan.
A holder's tax basis in Class A Common Stock acquired pursuant to the 1999
Plan generally will equal the amount paid for the Class A Common Stock
(including the exercise price of an option) plus any amount recognized as
ordinary income with respect to that stock. Other than ordinary income
recognized with respect to the Class A Common Stock and included in basis, any
subsequent gain or loss upon the disposition of such stock generally will be
capital gain or loss (long-term or short-term, depending on the holder's
holding period).
16
<PAGE>
Special rules will apply in cases where a participant pays the exercise or
purchase price of the Award or applicable withholding tax obligations under
the 1999 Plan by delivering previously owned shares of Class A Common Stock or
by reducing the amount of shares otherwise issuable pursuant to the Award. The
surrender or withholding of such shares will in certain circumstances result
in the recognition of income with respect to such shares or a carryover basis
in the shares acquired, and may constitute a Disqualifying Disposition with
respect to ISO Shares.
The terms of the agreements pursuant to which specific awards are made to
participants under the 1999 Plan may provide for accelerated vesting or
payment of an award in connection with a change in ownership or control of the
Company. In that event and depending upon the individual circumstances of the
recipient, certain amounts with respect to such awards may constitute "excess
parachute payments" under the "golden parachute" provisions of the Code.
Pursuant to these provisions, a participant will be subject to a 20% excise
tax on any "excess parachute payments" and the Company will be denied any
deduction with respect to such payments. Participants in the 1999 Plan should
consult their tax advisors as to whether accelerated vesting of an award in
connection with a change of ownership or control of the Company would give
rise to an excess parachute payment.
With certain exceptions, an individual may not deduct investment interest to
the extent such interest exceeds the individual's net investment income for
the year. Investment interest generally includes interest paid on indebtedness
incurred to purchase shares of Class A Common Stock. Interest disallowed under
this rule may be carried forward to and deducted in later years, subject to
the same limitations.
The Company generally obtains a deduction equal to the ordinary income
recognized by the participant. However, the Company's deduction for such
amounts (including amounts attributable to the ordinary income recognized with
respect to options) may be limited to $1,000,000 (per person) annually.
Board Recommendation
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to adopt, approve and ratify the 1999 Plan, in
the form attached hereto as Appendix A, in order to attract, retain and
motivate qualified employees. The affirmative votes of the holders of a
majority of the voting power of the Company present, or represented, and
entitled to vote at the Annual Meeting is necessary for the approval of this
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
ADOPTION, APPROVAL AND RATIFICATION OF THE COMPANY'S 1999 STOCK INCENTIVE
PLAN.
CERTAIN TRANSACTIONS
In June 1988, the Company issued to George Powlick (Director, Vice
President--Finance and Chief Financial Officer of the Company) 10% junior
subordinated debentures in the principal amount of $100,000 to refinance
certain junior subordinated debentures that were then repaid. The debentures
are due on December 31, 2001 with interest payable quarterly. Beginning June
30, 1996 and on each December 31 and June 30 thereafter until the debentures
are fully retired, the holder of such debentures may require the Company to
redeem $50,000 (or such lesser principal amount outstanding) of such
debentures on such dates.
Jonathan Layne is a member of the Board of Directors of the Company and a
nominee to continue as a Class A Director. See "Election of Directors". Mr.
Layne is a partner of the law firm Gibson, Dunn & Crutcher LLP which has
provided legal services to the Company. The Company expects that such law firm
will continue to render legal services to the Company.
17
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Grant Thornton was the Company's certified public accountant for fiscal
1998. During fiscal 1998, the Company also engaged Grant Thornton to render
certain non-audit professional services involving general consultations.
The appointment of auditors is approved annually by the Board of Directors
which is based in part on the recommendation of the Audit Committee. In making
its recommendation, the Audit Committee reviewed both the audit scope and
estimated audit fees for the coming year. Grant Thornton has been selected by
the Audit Committee and the Board of Directors for the current year.
Stockholder approval is not sought in connection with this selection. Each
professional service performed by Grant Thornton during fiscal 1998 was
reviewed, and the possible effect of such service on the independence of the
firm was considered, by the Audit Committee. Representatives of Grant Thornton
will be present at the Annual Meeting of Stockholders and will be given an
opportunity to make a statement if they desire to do so and will respond to
questions from stockholders.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Stockholders who wish to present proposals for action at the 2000 Annual
Meeting of Stockholders should submit their proposals in writing to the
Secretary of the Company at the address set forth on the first page of this
Proxy Statement. Proposals must be received by the Secretary no later than
December 10, 1999, for inclusion in next year's proxy statement and proxy
card.
MISCELLANEOUS
The Company knows of no matters other than the foregoing to be brought
before the Annual Meeting, but if any other such matter properly comes before
the meeting, or any adjournment or postponement thereof, it is the intention
of the persons named in the accompanying form of Proxy to vote the proxies in
accordance with their best judgment.
The Annual Report of the Company for the fiscal year ended December 31,
1998, including financial statements, is being mailed under the same cover to
each person who was a stockholder of record on April 12, 1999.
The Company will furnish without charge a copy of its Annual Report on Form
10-K for the fiscal year ended December 31, 1998, as filed with the Securities
and Exchange Commission, to any stockholder desiring a copy. Stockholders may
write to K.Swiss Inc., 31248 Oak Crest Drive, Westlake Village, California
91361, Attention: George Powlick, Vice President--Finance.
EACH STOCKHOLDER WHO DOES NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON
IS URGED TO EXECUTE THE PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Steven Nichols
Steven Nichols
Chairman of the Board and
President
Westlake Village, California
April 16, 1999
18
<PAGE>
Appendix A
K.Swiss Inc.
1999 STOCK INCENTIVE PLAN
Section 1. PURPOSE OF PLAN
This 1999 Stock Incentive Plan (this "Plan") of K-Swiss Inc., a Delaware
corporation (the "Company"), is intended to serve as an incentive to, and to
encourage stock ownership by, certain employees and non-employee directors, so
that they may acquire or increase their proprietary interests in the success
of the Company and to encourage them to remain in the Company's service.
Section 2. PERSONS ELIGIBLE UNDER PLAN
Any employee or director of the Company or any of its subsidiaries or
affiliates (an "Eligible Person") shall be eligible to be considered for the
grant of Awards (as hereinafter defined) hereunder. Any director of the
Company who is not an employee (a "Non-Employee Director") shall be eligible
to be considered for the grant of Non-Employee Director Options (as
hereinafter defined) pursuant to Section 10 hereof, but shall not otherwise
participate in this Plan. For purposes of this Plan, the Chairman of the
Board's status as a Non-Employee Director shall be determined by the Board of
Directors of the Company (the "Board").
Section 3. AWARDS
(A) The Board or the Committee (as hereinafter defined) is authorized under
this Plan to approve any type of arrangement with an Eligible Person that is
not inconsistent with the provisions of this Plan and that, by its terms,
involves or might involve the issuance of (1) shares of Class A Common Stock,
par value $0.01 per share, of the Company or of any other class of security of
the Company which is convertible into shares of the Company's Class A Common
Stock (the "Shares") or (2) a right or interest with an exercise or conversion
privilege at a price related to the Shares or with a value derived from the
value of the Shares, which right or interest may, but need not, constitute a
"Derivative Security," as such term is defined in Rule 16a-1 promulgated under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as such
Rule may be amended from time to time. The entering into of any such
arrangement is referred to herein as the "grant" of an "Award."
(B) Awards are not restricted to any specified form or structure and may
include, without limitation, grants, sales or bonuses of stock, restricted
stock, stock options, reload stock options, stock purchase warrants, other
rights to acquire stock, securities convertible into or redeemable for stock,
stock appreciation rights, limited stock appreciation rights, phantom stock,
dividend equivalents, performance units or performance shares, and an Award
may consist of one such security or benefit, or two or more of them in tandem
or in the alternative. The terms upon which an Award is granted shall be
evidenced by a written agreement executed by the Company and the Eligible
Person to whom such Award is granted.
(C) Subject to paragraph (D)(2) below, Awards may be granted, and Shares may
be issued pursuant to an Award, for any lawful consideration as determined by
the Board or the Committee, including, without limitation, services rendered
by the Eligible Person.
(D) Subject to the provisions of this Plan, the Board or the Committee shall
determine all of the terms and conditions of each Award granted under this
Plan, which terms and conditions may (but need not) include, among other
things:
(1) provisions permitting any holder of an Award to pay the purchase
price of the Shares or other property issuable pursuant to such Award,
and/or such holder's tax withholding obligation with respect to such
issuance, in whole or in part, by any one or more of the following means:
(a) the delivery of cash;
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(b) the delivery of other property;
(c) the delivery of previously owned shares of capital stock of the
Company (including "pyramiding");
(d) a reduction in the amount of Shares or other property otherwise
issuable pursuant to such Award; or
(e) the delivery of a promissory note of the holder or of a third
party;
(2) provisions specifying the exercise or settlement price for any Award,
or specifying the method by which such price is determined, provided that
the exercise or settlement price of any Award that is an option to acquire
a Share or a right to appreciation with respect to a Share or a similar
Award, and that is intended to qualify as "performance-based compensation"
for purposes of Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), shall be not less than the fair market value of a
Share on the date such Award is granted;
(3) provisions relating to the exercisability and/or vesting of Awards,
lapse and non-lapse restrictions upon the Shares obtained or obtainable
under Awards or under this Plan and the termination, expiration and/or
forfeiture of Awards;
(4) provisions conditioning or accelerating the grant of an Award or the
receipt of benefits pursuant to such Award upon the occurrence of specified
events, including, without limitation, the achievement of performance
goals, the exercise or settlement of a previous Award, the satisfaction of
an event or condition within the control of the recipient of the Award or
within the control of others, a change of control of the Company, an
acquisition of a specified percentage of the voting power of the Company,
the dissolution or liquidation of the Company, a sale of substantially all
of the property and assets of the Company or an event of the type described
in Section 7 hereof;
(5) provisions required in order for such Award to qualify (a) as an
incentive stock option under Section 422 of the Code (an "Incentive Stock
Option"), (b) as "performance based compensation" under Section 162(m) of
the Code, and/or (c) for an exemption from Section 16 of the Exchange Act;
and/or
(6) provisions restricting the transferability of Awards or Shares issued
under Awards.
Section 4. STOCK SUBJECT TO PLAN
(A) The aggregate number of Shares that may be issued pursuant to all
Incentive Stock Options granted under this Plan shall not exceed 600,000,
subject to adjustment as provided in Section 7 hereof.
(B) At any time, the aggregate number of Shares issued and issuable pursuant
to all Awards (including all Incentive Stock Options and Awards that
constitute a right or interest with an exercise or conversion privilege at a
price related to the Shares or with a value derived from the value of Shares)
granted under this Plan shall not exceed 600,000, subject to adjustment as
provided in Section 7 hereof.
(C) The aggregate number of Shares subject to Awards granted during any
calendar year to any one Eligible Person (including the number of shares
involved in Awards having a value derived from the value of Shares) shall not
exceed 300,000, subject to adjustment as provided in Section 7 hereof.
(D) For purposes of Section 4(B) hereof, the aggregate number of Shares
issued and issuable pursuant to Awards granted under this Plan shall at any
time be deemed to be equal to the sum of the following:
(i) the number of Shares that were issued prior to such time pursuant
to Awards granted under this Plan, other than Shares that were
subsequently reacquired by the Company pursuant to the terms and
conditions of such Awards and with respect to which the holder thereof
received no benefits of ownership such as dividends; plus
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(ii) the number of Shares that were otherwise issuable prior to such
time pursuant to Awards granted under this Plan, but that were withheld
by the Company as payment of the purchase price of the Shares issued
pursuant to such Awards or as payment of the recipient's tax
withholding obligation with respect to such issuance; plus
(iii) the maximum number of Shares that are or may be issuable at or
after such time pursuant to Awards granted under this Plan prior to
such time.
Section 5. NATURE AND DURATION OF PLAN
(A) This Plan is intended to constitute an unfunded arrangement for a select
group of management or other key employees.
(B) Any Awards granted under this Plan shall be granted within ten years
from the Effective Date of this Plan (as provided in Section 9) (the
"Expiration Date"). Although Shares may be issued after the Expiration Date
pursuant to Awards made prior to such date, no Shares shall be issued under
this Plan after the tenth anniversary of the Expiration Date.
Section 6. ADMINISTRATION OF PLAN
(A) This Plan shall be administered by the Board or a committee of the Board
(the "Committee") consisting of two or more directors, each of whom is (i) a
"Non-Employee Director" (as such term is defined in Rule 16b-3 promulgated
under the Exchange Act), and (ii) with respect to any Award intended to
qualify for the "performance-based compensation" exception of Section 162(m)
of the Code, is an "outside director" within the meaning of Section 162(m) of
the Code. The Board shall have the discretion to appoint, add, remove or
replace members of the Committee, and shall have the sole authority to fill
vacancies on the Committee.
(B) Subject to the provisions of this Plan, the Board or the Committee shall
be authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan with respect to the Awards
over which the Board or such Committee has authority, including, without
limitation, the following:
(1) adopt, amend and rescind rules and regulations relating to this Plan;
(2) determine which persons are Eligible Persons and to which of such
Eligible Persons, if any, and when Awards shall be granted hereunder;
(3) grant Awards to Eligible Persons and determine the terms and
conditions thereof, including the number of Shares subject thereto and the
circumstances under which Awards become exercisable or vested or are
forfeited or expire, which terms may but need not be conditioned upon the
passage of time, continued employment, the satisfaction of performance
criteria, the occurrence of certain events (including events which the
Board or the Committee determine constitute a change of control), or other
factors;
(4) determine whether, and the extent to which adjustments are required
pursuant to Section 7 hereof;
(5) interpret and construe any terms and conditions of, and define any
terms used in, this Plan, any rules and regulations under this Plan and/or
any Award granted under this Plan; and
(6) determine the terms and conditions of the Non-Employee Director
Options that are granted hereunder, other than the terms and conditions
specified in Section 10 hereof.
(C) All decisions, determinations, and interpretations of the Committee
shall be final and conclusive upon any Eligible Person to whom an Award has
been granted and to any other person holding an Award.
(D) The Committee may, in the terms of an Award or otherwise, temporarily
suspend the exercisability of an Award and/or the issuance of Shares under an
Award if the Committee determines that securities law or other considerations
so warrant.
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Section 7. ADJUSTMENTS
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or
shares or securities are distributed in respect of such outstanding
securities, in either case as a result of a reorganization, merger,
consolidation, recapitalization, restructuring, reclassification, dividend
(other than a regular, quarterly cash dividend) or other distribution, stock
split, reverse stock split, spin-off or the like, or if substantially all of
the property and assets of the Company are sold, then, unless the terms of
such transaction shall provide otherwise, the Board or the Committee may make
appropriate and proportionate adjustments in (A) the number and type of shares
or other securities or cash or other property that may be acquired pursuant to
Awards theretofore granted under this Plan and the exercise or settlement
price of such Awards, (B) the aggregate number and type of shares or other
securities that may be issued pursuant to all Awards thereafter granted under
this Plan, (C) the aggregate number of Shares that may be issued pursuant to
Incentive Stock Options that may be granted under this Plan, and (D) the
aggregate number of Shares that may be subject to Awards granted during any
calendar year to any one Eligible Person; provided, however, that
notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 7 to the extent that it would (and the adjustment shall be modified
appropriately so that it does not) (1) cause an Award intended to qualify for
the "performance based compensation" exception under Section 162(m) of the
Code to not so qualify, or (2) without the consent of the Company and the
holder of the Incentive Stock Option, cause an Award intended to qualify as an
Incentive Stock Option to not so qualify.
Section 8. AMENDMENT AND TERMINATION OF PLAN
The Board may amend, alter or discontinue this Plan or any agreement
evidencing an Award made under this Plan, but no amendment or alteration shall
be made which would impair the rights of any Award holder, without such
holder's consent, under any Award theretofore granted, provided that no such
consent shall be required if the Board or the Committee determines in its sole
discretion and prior to the date of any change of control (as defined, if
applicable, in the agreement evidencing such Award) that such amendment or
alteration is not reasonably likely to significantly diminish the benefits
provided under such Award, or that any such diminution has been adequately
compensated.
Section 9. EFFECTIVE DATE OF PLAN
The Effective Date of this Plan shall be the date upon which it was approved
by the Board, subject however to approval of this Plan by the affirmative
votes of the holders of a majority of the voting power of the Company present,
or represented, and entitled to vote at the Company's annual meeting of
stockholders.
Section 10. NON-EMPLOYEE DIRECTOR OPTIONS
(A) The Board or the Committee is authorized under this Plan to grant each
Non-Employee Director an option (a "Non-Employee Director Option") to purchase
up to 2,000 Shares during a calendar year, subject to adjustment as provided
in Section 7 hereof.
(B) Each Non-Employee Director Option granted under this Plan shall expire
upon the first to occur of the following:
(1) Twenty-four (24) months after the date upon which the optionee shall
cease to be a director of the Company; or
(2) The tenth anniversary of the Date of Grant of such Non-Employee
Director Option.
(C) Each Non-Employee Director Option shall have an exercise price equal to
the greater of (1) the aggregate fair market value on the Date of Grant of
such option of the Shares subject thereto or (2) the aggregate par value of
such Shares on such date.
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(D) All outstanding Non-Employee Director Options theretofore granted under
this Plan shall become fully exercisable upon the first to occur of the
following:
(1) the date of stockholder approval of a reorganization, merger or
consolidation of the Company as a result of which the outstanding
securities of the class then subject to this Plan are exchanged for or
converted into cash, property and/or securities not issued by the Company
or by a company whose common equity holders immediately after such
transaction consist only of persons who are holders of the common equity of
the Company immediately before such transaction;
(2) the first date upon which the directors of the Company who were
nominated by the Board for election as directors shall cease to constitute
a majority of the authorized number of directors of the Company;
(3) the dissolution or liquidation of the Company; or
(4) the sale of all or substantially all of the property and assets of
the Company.
Section 11. EXTRAORDINARY CORPORATE TRANSACTIONS.
(A) The Committee may provide, either at the time an Award is granted or
thereafter, that a Change in Control shall have such effect as specified by
the Committee, or no effect, as the Committee in its sole discretion may
provide. Without limiting the foregoing, the Committee may but need not
provide, either at the time an Award is granted or thereafter, that if a
Change in Control occurs, then effective as of a date selected by the
Committee, the Committee (which for purposes of the Change in Controls
described in (iii) and (v) of Section 11(B) shall be the Committee as
constituted prior to the occurrence of such Change in Control) acting in its
sole discretion without the consent or approval of any Eligible Person, will
effect one or more of the following alternatives or combination of
alternatives with respect to any or all outstanding Awards (which alternatives
may be conditional on the occurrence of such of the Change in Control
specified in clause (i) through (v) of Section 11(B) which gives rise to the
Change in Control and which may vary among individual Eligible Persons):
(1) in the case of a Change in Control specified in clauses (i), (ii) or
(iv) of Section 11(B), accelerate the time at which Awards then outstanding
may be exercised in full for a limited period of time on or before a
specified date (which will permit the Eligible Person to participate with
the Class A Common Stock received upon exercise of such Award in the event
of a Change in Control specified in clauses (i), (ii) or (iv), as the case
may be) fixed by the Committee, after which specified date all unexercised
options and all rights of Eligible Persons thereunder shall terminate;
(2) accelerate the time at which Awards then outstanding may be exercised
so that such Awards shall be exercisable in full for their then remaining
term and shall be subject to assumption and/or adjustment pursuant to
Section 7; or
(3) require the mandatory surrender to the Company of outstanding Awards
held by such Eligible Person (irrespective of whether such Awards are then
exercisable under the provisions of this Plan) as of a date, before or not
later than sixty days after such Change in Control, specified by the
Committee, and in such event the Committee shall thereupon cancel such
Awards and the Company shall pay to each Eligible Person an amount of cash
equal to the excess of the fair market value of the aggregate shares
subject to such Award over the aggregate Award price of such shares.
Notwithstanding the foregoing, with the consent of the Eligible Person, the
Committee may in lieu of the foregoing make such provision with respect of any
Change in Control as it deems appropriate.
(B) For purposes of this Plan and Awards granted under this Plan, the term
"Change in Control" shall mean (i) any merger or consolidation in which the
Company shall not be the surviving entity (or survives only as a subsidiary of
another entity whose shareholders did not own all or substantially all of the
Company's Common Stock immediately prior to such transaction), (ii) the sale
of all or substantially all of the Company's assets to any other person or
entity (other than a wholly-owned subsidiary), (iii) the acquisition of
beneficial
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ownership or control of (including, without limitation, power to vote) more
than 50% of the outstanding shares of Common Stock by any person or entity
(including a "group" as defined by or under Section 13(d)(3) of the Exchange
Act), (iv) the dissolution or liquidation of the Company, (v) a contested
election of directors, as a result of which or in connection with which the
persons who were directors of the Company before such election or their
nominees cease to constitute a majority of the Board, or (vi) any other event
specified by the Committee, regardless of whether at the time an Award is
granted or thereafter.
Section 12. COMPLIANCE WITH OTHER LAWS AND REGULATIONS
This Plan, the grant and exercise of Awards thereunder, and the obligation
of the Company to sell and deliver shares under such Awards, shall be subject
to all applicable federal and state laws, rules and regulations and to such
approvals by any governmental or regulatory agency as may be required. The
Company shall not be required to issue or deliver any certificates for shares
of Class A Common Stock prior to the completion of any registration or
qualification of the Shares under any federal or state law or issuance of any
ruling or regulation of any government body which the Company shall, in its
sole discretion, determine to be necessary or advisable.
Section 13. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to this
Plan shall confer on any individual any right to continue in the employ of the
Company or interfere in any way with the right of the Company to terminate an
individual's employment at any time. The agreement evidencing an Award may
contain such provisions as the Committee may approve with respect to the
effect of approved leaves of absence.
Section 14. LIABILITY OF COMPANY
The Company and any affiliate which is in existence or hereafter comes into
existence shall not be liable to an Eligible Person or other persons as to:
(A) The non-issuance or sale of Shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority
deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder; and
(B) Any tax consequence expected, but not realized, by any Eligible Person
or other person due to the issuance, exercise, settlement, cancellation or
other transaction involving any Award granted hereunder.
Section 15. GOVERNING LAW
This Plan and any Awards and agreements hereunder shall be interpreted and
construed in accordance with the laws of the State of Delaware and applicable
federal law.
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<PAGE>
PROXY K-SWISS INC. PROXY
Class A Common Stock
Proxy for Annual Meeting of Stockholders, May 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS for the Annual
Meeting of Stockholders to be held on May 20, 1999 at 10:00 a.m. at the K-Swiss
Corporate Office, 31248 Oak Crest Drive, Westlake Village, California 91361.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the accompanying Proxy Statement for the 1999 Annual
Meeting and, revoking all prior Proxies, appoints Steven Nichols and George
Powlick, and each of them, with full power of substitution in each, the Proxies
of the undersigned to represent the undersigned and vote all shares of Class A
Common Stock of the undersigned in K-Swiss Inc., at the Annual Meeting of
Stockholders to be held on May 20, 1999, and any adjournments or postponements
thereof upon the following matters and in the manner designated on the reverse
side hereof.
This Proxy will be voted FOR Items 1 and 2 unless otherwise specified.
(Continued and to be signed on reverse side.)
K-SWISS INC.
P.O. BOX 11251
NEW YORK, N.Y. 10203-0251
<PAGE>
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] EXCEPTIONS* [_]
listed below for all nominees listed below
</TABLE>
Nominees: Jonathan K. Layne, Martyn Wilford
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name on the space provided
below.)
*Exceptions___________________________________________________________________
2. To adopt, approve and ratify
the Company's 1999 Stock
Incentive Plan FOR [_] AGAINST [_] ABSTAIN [_]
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof and as to which the undersigned
hereby confers discretionary authority.
Change of Address and/ [_]
or Comments Mark Here
Please sign as name(s) appears. Executors,
administrators, guardians, officers of corporations,
and others signing in a fiduciary capacity should
state their full title as such.
Dated:_____________________________________, 1999
_________________________________________________
_________________________________________________
Votes must be Indicated
(x) In Black or Blue Ink. [X]
PLEASE MARK, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
PROXY K-SWISS INC. PROXY
Class B Common Stock
Proxy for Annual Meeting of Stockholders, May 20, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS for the Annual
Meeting of Stockholders to be held on May 20, 1999 at 10:00 a.m. at the K-Swiss
Corporate Office, 31248 Oak Crest Drive, Westlake Village, California 91361.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the accompanying Proxy Statement for the 1999 Annual Meeting
and, revoking all prior Proxies, appoints Steven Nichols and George Powlick, and
each of them, with full power of substitution in each, the Proxies of the
undersigned to represent the undersigned and vote all shares of Class B Common
Stock of the undersigned in K-Swiss Inc., at the Annual Meeting of Stockholders
to be held on May 20, 1999, and any adjournments or postponements thereof upon
the following matters and in the manner designated on the reverse side hereof.
This Proxy will be voted FOR Items 1 and 2 unless otherwise specified.
(Continued and to be signed on reverse side.)
K-SWISS INC.
P.O. BOX 11052
NEW YORK, N.Y. 10203-0052
<PAGE>
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees [_] WITHHOLD AUTHORITY to vote [_] EXCEPTIONS* [_]
listed below for all nominees listed below
</TABLE>
Nominees: Steven Nichols, George Powlick, Lawrence Feldman
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominees's name on the space
provided below.)
*Exceptions___________________________________________________________________
<TABLE>
<S> <C> <C> <C>
2. To adopt, approve and ratify FOR [_] AGAINST [_] ABSTAIN [_]
the Company's 1999 Stock
Incentive Plan.
</TABLE>
3. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof and as to which the undersigned
hereby confers discretionary authority.
Change of Address and/ [_]
or Comments Mark Here
Please sign as name(s) appears. Executors,
administrators, guardians, officers of corporations,
and other signing in a fiduciary capacity should
state their full title as such.
Dated:_____________________________________, 1999
_________________________________________________
_________________________________________________
Votes must be indicated
(x) In Black or Blue Ink [X]
PLEASE MARK, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
