K SWISS INC, DEF 14A, 2000-04-14

K SWISS INC
DEF 14A, 2000-04-14
FOOTWEAR, (NO RUBBER)

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<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:

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(2) Aggregate number of securities to which transaction applies:

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

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

(2) Form, Schedule or Registration Statement No.:

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

(3) Filing Party:

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

(4) Date Filed:

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Notes:
<PAGE>

[LOGO OF K.SWISS(R) INC.]

31248 Oak Crest Drive
Westlake Village, California 91361

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To be held May 18, 2000

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

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 18, 2000 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 four directors, in each case to
serve one-year terms ending in 2001, or until their successors are elected
and qualified.

(2) To adopt and approve the Company's Economic Value Added Bonus Plan
and related performance goals.

(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 7, 2000 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 14, 2000
<PAGE>

K.SWISS INC.
31248 Oak Crest Drive
Westlake Village, California 91361

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

PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS

May 18, 2000

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

GENERAL INFORMATION ON THE MEETING

This Proxy Statement is being mailed on or about April 14, 2000 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 18, 2000 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, 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 7, 2000 are
entitled to notice of and to vote at the meeting and at any adjournment or
postponement thereof. As of April 7, 2000, 7,450,622 shares of Class A Common
Stock and 3,013,978 shares of Class B Common Stock were outstanding, all of
which shares are entitled to be voted at the meeting. 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 four 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 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.

1
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company as
of April 7, 2000 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 and each director nominee of the Company, (iii) each of the Named
Officers appearing in the Summary Compensation Table below, and (iv) 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 and Named
Officers:
Steven Nichols......... 76,000(4) 1.0% 2,697,412(5) 89.5%
George Powlick......... 65,884(6) 0.9 -- --
Lawrence Feldman....... 5,560 0.1 121,752(7) 4.0
Jonathan K. Layne...... 2,000 0.0 -- --
Martyn Wilford......... -- -- -- --
Preston Davis.......... 21,400(8) 0.3 -- --
Deborah Mitchell....... 12,666(9) 0.2 -- --
Peter Worley........... 17,999(10) 0.2 -- --
All Directors and Offi-
cers as a Group
(13 persons)............ 256,791 3.4 2,819,164 93.5
Director Nominee:
Stephen Fine........... 70,000(11) 0.9 -- --
Other Principal
Stockholders:
Nichols Family Trust... -- -- 2,697,412(5) 89.5
31248 Oak Crest Drive
Westlake Village, CA
91361
Systematic Financial
Management, L.P. ..... 569,443(12) 7.6 -- --
300 Frank W. Burr
Boulevard
Teaneck, NJ 07666
Dimensional Fund
Advisors Inc. ........ 379,900(13) 5.1 -- --
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 (7,450,622) and on the total number of shares of
Class B Common Stock outstanding (3,013,978) as of April 7, 2000, plus,
where applicable, shares issuable upon exercise of options within sixty
days after April 7, 2000.

(4) Consists of options to acquire 76,000 shares of Class A Common Stock,
which options are exercisable within sixty days after April 7, 2000.

(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 18,100 shares of Class A Common Stock, which
options are exercisable within sixty days after April 7, 2000.

(7) Such shares are held by Lawrence Feldman and his wife as trustees of
trusts for the benefit of other unrelated individuals.

(8) Includes options to acquire 18,800 shares of Class A Common Stock, which
options are exercisable within sixty days after April 7, 2000.

2
<PAGE>

(9) Consists of options to acquire 12,666 shares of Class A Common Stock,
which options are exercisable within sixty days after April 7, 2000.

(10) Includes options to acquire 9,999 shares of Class A Common Stock, which
options are exercisable within sixty days after April 7, 2000.

(11) Such shares are owned of record by The Biltrite Corporation, of which
Stephen Fine is a Director and President. Mr. Fine is a 50% owner of The
Biltrite Corporation.

(12) Based solely upon information contained in a Schedule 13G, dated February
10, 2000, received by the Company.

(13) Based solely upon information contained in a Schedule 13G, as amended,
dated February 4, 2000 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.

ELECTION OF DIRECTORS

Under the Restated Certificate of Incorporation and the Restated Bylaws of
the Company, two (2) directors out of a total of six (6) are to be elected at
the 2000 Annual Meeting of Stockholders by the holders of Class A Common Stock
to serve one-year terms expiring at the 2001 Annual Meeting of Stockholders or
until their successors are duly elected and qualified. The remaining four (4)
directors are to be elected at the 2000 Annual Meeting of Stockholders by the
holders of Class B Common Stock to serve one-year terms expiring at the 2001
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
Martyn Wilford and to elect Stephen Fine and the Class B Common Stock proxy
will be voted to re-elect Steven Nichols, George Powlick, Lawrence Feldman and
Jonathan K. Layne, (the last-named of whom was previously elected by holders
of Class A Common Stock), in all cases to serve until the 2001 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 2000 Annual
Meeting

<TABLE>
<CAPTION>
Age at Position with Director
Name December 31, 1999 Company Since
---- ----------------- ------------- --------
<S> <C> <C> <C>
Stephen Fine............ 51 None -- (1)
Martyn Wilford.......... 48 Director 1990

Nominees for Election by Class B Common Stockholders at the 2000 Annual
Meeting

<CAPTION>
Age at Position with Director
Name December 31, 1999 Company Since
---- ----------------- ------------- --------
<S> <C> <C> <C>
Steven Nichols.......... 57 Chairman of the Board, President 1987
George Powlick.......... 55 Vice President--Finance, Chief Financial 1990
Officer, Secretary and Director
Lawrence Feldman........ 57 Director 1987
Jonathan K. Layne....... 46 Director 1990
</TABLE>
- --------
(1) Mr. Fine previously served as a director of the Company from 1987 to
August 1998.

3
<PAGE>

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.

Stephen Fine, a nominee for Director of the Company, has been a Director,
President and Chief Operating Officer of The Biltrite Corporation since 1985,
and from 1982 to 1985 he served as Executive Vice-President of Biltrite, a
supplier of rubber and plastics products used in footwear, flooring and
industrial applications. From 1970 to 1982, he held various executive
positions with American Biltrite Inc. Mr. Fine is a Director of Maxwell Shoe
Company Inc., a manufacturer of women's casual and dress footwear. Mr. Fine
previously served as a Director of the Company from 1987 until his resignation
in August 1998.

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 The
Finish Line, Inc., a retailer of brand name athletic and leisure footwear,
activewear and accessories.

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 1999 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 nine times during fiscal 1999.

The Audit Committee is composed of Messrs. Lawrence Feldman and Martyn
Wilford. Mr. Jonathan Layne served for a portion of the year on the committee.
This committee met two times during fiscal 1999.

4
<PAGE>

Remuneration of Directors

During 1999, 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.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to the compensation
paid by the Company during the years ended December 31, 1999, 1998 and 1997 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 1999.

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.......... 1999 $746,834 $746,834 -- $80,943(3)
President and Chief 1998 721,622 721,622 -- 59,479(3)
Executive Officer 1997 702,308 505,369 -- 42,528

Preston Davis........... 1999 166,546 99,928 -- 15,502
Vice President Sales 1998 161,695 97,017 -- 17,151
1997 156,360 93,816 -- 17,888

Deborah Mitchell........ 1999 236,383 189,106 27,000 16,562
Vice President-- 1998 190,088 152,070 -- 16,626(4)
Marketing 1997 185,000 146,941 10,000 19,349(4)

George Powlick.......... 1999 254,744 203,795 62,000 50,635(5)
Vice President--Finance, 1998 247,324 197,859 -- 19,643(5)(6)
Chief Financial Officer 1997 239,934 138,122 -- 25,022(6)

Peter Worley............ 1999 183,591 91,796 7,000 16,476
Vice President--Product 1998 166,310 83,155 2,000 16,222
Development 1997 144,900 60,271 30,000 13,626
</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. 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, Deborah Mitchell--
$90,570, George Powlick--$0, and Peter Worley--$9,356.

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, Deborah Mitchell--$145,881, George
Powlick--$84,297 and Peter Worley--$48,093.

5
<PAGE>

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, Deborah Mitchell--$352,840,
George Powlick--$360,706 and Peter Worley--$161,263.

The balance accrued in notional EVA bank accounts at the end of 1999
(excluding amounts disclosed above as "Bonus" but including balances
carried forward from 1998) for the Named Officers are as follows: Steven
Nichols--$2,874,432, Preston Davis--$572,724, Deborah Mitchell--$713,479,
George Powlick--$785,823 and Peter Worley--$336,323. Based on the Company's
future performance, the Named Officers may or may not be paid these
balances. See "Compensation and Stock Option Committee Report".

(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.

(3) Includes $51,050 and $19,050 for 1999 and 1998, respectively, of above-
market interest earned on deferred compensation.

(4) Includes $787 and $2,925 for 1998 and 1997, respectively, of imputed
interest related to a non-interest bearing loan made by the Company to Ms.
Mitchell.

(5) Includes $29,835 and $7,620 for 1999 and 1998, respectively, of above-
market interest earned on deferred compensation.

(6) Includes $366 and $1,565 for 1998 and 1997, respectively, of imputed
interest related to a non-interest bearing loan made by the Company to Mr.
Powlick.

STOCK OPTION GRANTS IN 1999

The following table sets forth information with respect to options to
purchase the Company's Class A Common Stock granted in 1999 to the Named
Officers.
<TABLE>
<CAPTION>
Potential
Individual Grants Reliazable Value at
----------------------------------------------- Assumed Annual
% of Total Rates of Stock
Options Price Appreciation
Options Granted to Exercise for Option Term(1)
Granted Employees Price Expiration -------------------
Name (#)(2) in 1999 (per share)(3) Date 5% 10%
- ---- ------- ---------- -------------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Steven Nichols.......... -- -- % $ -- -- $ -- $ --

Preston Davis........... -- -- -- -- -- --

Deborah Mitchell........ 25,000(4) 17 17.38 04/04/09 660,039 1,308,296
1,000(5) 1 1.00 10/05/09 27,200 43,904
1,000(6) 1 17.06 10/06/09 10,731 27,193

George Powlick.......... 60,000(7) 42 32.13 04/19/09 1,212,194 3,071,939
1,000(5) 1 1.00 10/05/09 27,200 43,904
1,000(6) 1 17.06 10/06/09 10,731 27,193

Peter Worley............ 5,000(8) 3 29.63 04/13/09 93,155 236,073
1,000(5) 1 1.00 10/05/09 27,200 43,904
1,000(6) 1 17.06 10/06/09 10,731 27,193
</TABLE>
- --------
(1) Potential realizable value is based on the assumption that the fair market
value of the common stock price will appreciate at the annual rate shown
(compound annually) from the grant date until the end of the ten year
option term. This value is calculated based on requirements of the
Securities and Exchange Commission and does not reflect the Company's
estimate of future stock price growth.

(2) The Company's 1990 Stock Incentive Plan is administered by the
Compensation and Stock Option Committee of the Board of Directors which
determines the eligibility of persons under the Plan, the number of awards
to be granted and the terms of such grants.

6
<PAGE>

(3) Options were granted at or below market value at the date of grant (the
closing price of the Company's Class A Common Stock on the Nasdaq National
Market). The exercise price and tax withholding obligations related to
exercise may be paid by delivery of already owned shares or by offset of
the underlying shares, subject to certain conditions.

(4) Options granted commenced vesting on April 5, 1999 and vest 33% three
years, four years and five years, respectively, after the date upon which
such options commenced vesting.

(5) Options granted commenced vesting on October 6, 1999 and vest 33% three
years, four years and five years, respectively, after the date upon which
such options commenced vesting.

(6) Options granted commenced vesting on October 7, 1999 and vest 33% three
years, four years and five years, respectively, after the date upon which
such options commenced vesting.

(7) Options granted commenced vesting on April 20, 1999 and vest 33% two
years, with the remaining balance vesting 33% three years, four years and
five years, respectively, after the date upon which such options commenced
vesting.

(8) Options granted commenced vesting on April 14, 1999 and vest 33% four
years, five years and six years, respectively, after the date upon which
such options commenced vesting.

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 1999 and
prior years under the 1990 Stock Incentive Plan to the Named Officers and held
by them at December 31, 1999.
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money
Acquired Options at Options at
on December 31, 1999 (#) December 31, 1999(1)
Exercise Value ------------------------- -------------------------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Steven Nichols.......... 424,000 $12,040,688 76,000 -- $1,079,428 $ --
Preston Davis........... 44,000 1,366,575 14,400 7,600 116,823 89,343
Deborah Mitchell........ 4,000 170,500 4,333 68,667 61,542 592,840
George Powlick.......... 135,500 3,819,594 2,660 87,840 37,780 301,859
Peter Worley............ -- -- 3,333 55,667 43,589 629,936
</TABLE>
- --------
(1) Represents the difference between the closing price of the Company's Class
A Common Stock on December 31, 1999 of $18.58 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 $746,834 during 1999 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

7
<PAGE>

employment agreement). Mr. Nichols has voluntarily agreed to waive that
portion of the bonus he would have received under his employment agreement for
1996 through 1999 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.

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 $746,834 during 1999 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
through 1999, 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, 1998 and 1999
bonuses calculated in accordance with his employment contract would have been
$1,404,616, $1,443,244, and $1,493,668 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 $505,369, $721,622 and $746,834 for the years ending December 31, 1997,
1998 and 1999, respectively. The Committee believes this arrangement provides
the Chief Executive Officer significant incentive and aligns what could amount
to (as in 1997, 1998 and 1999) a bonus equal to a substantial percentage of
his annual salary directly to the Company's economic improvement.

8
<PAGE>

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 1999 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.

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 1999, 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 $1.00 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.

9
<PAGE>

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.

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 4, 2000

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.

10
<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 K-SWISS INC INDUSTRY
(Fiscal Year Covered) CL A INDEX NASDAQ
- --------------------- ---------- --------- ----------
<S> <C> <C> <C>
Measurement Pt- 12/30/1994 $100.00 $100.00 $100.00
FYE 12/29/1995 $ 55.42 $115.79 $129.71
FYE 12/31/1996 $ 50.74 $181.94 $161.18
FYE 12/31/1997 $ 83.95 $135.33 $197.16
FYE 12/31/1998 $139.35 $122.82 $278.08
FYE 12/31/1999 $193.09 $167.50 $490.46
</TABLE>

ASSUMES $100 INVESTED ON JANUARY 1, 1995
ASSUMES DIVIDENDS REINVESTED
FISCAL YEARS ENDING DECEMBER 31

- --------
(1) Industry Index chosen was Media General Industry Group 321--Textile--
Apparel Footwear & Accessories

11
<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 was 1,650,000 shares of Class A
Common Stock. The purpose of such plan was 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 was employed by the
Company on a salaried basis was eligible to participate in the 1990 Plan.
Awards may no longer be granted under the 1990 Plan. 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 will
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 authorized the
Compensation and Stock Option Committee to enter into any type of arrangement
with an eligible employee that, by its terms, involved 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.

During the year ended December 31, 1999 five current executive officers (out
of 11 persons) were granted options to acquire an aggregate of 98,000 shares
of Class A Common Stock at an average per share exercise price of $26.27.
During the year ended December 31, 1999, other employees were granted options
to acquire 49,000 shares of Class A Common Stock at an average exercise price
of $7.12 per share. As of April 7, 2000, there were 2,285,286 options granted,
895,518 options exercised, 689,498 options cancelled and 700,270 options
outstanding under the 1990 Plan. Such options are exercisable at prices
ranging from $0.50 to $47.38 per share. There are no options available for
future grant under the 1990 Plan.

On April 12, 1999 the Board of Directors, and on May 20, 1999 the
stockholders of the Company, each adopted and approved the K.Swiss Inc. 1999
Stock Incentive Plan (the "1999 Plan"). The 1999 Plan provides that the
aggregate number of shares that may be issued pursuant to all Awards shall not
exceed 600,000. The purpose of such plan is to enable 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 their proprietary interest of such persons in the Company.
Awards may not be granted under the 1999 Plan after April 12, 2009. 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 April 12, 2019. The 1999 Plan
is administered by a committee of the Board of Directors of the Company, which
has full power to construe the 1999 Plan. The 1999 Plan authorizes the
Compensation and Stock Option Committee to enter into any type of arrangement
with an eligible person that, by its terms, involves or might involve the
issuance of (1) 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. As of
April 7, 2000, 309 persons were eligible to so participate.

During the year ended December 31, 1999, no awards were granted under the
1999 Plan. As of April 7, 2000, there were 181,450 options granted and
outstanding and 418,550 options available for future grant under the 1999
Plan. Such options are exercisable at a price of $1.00 to $10.13 per share.

12
<PAGE>

ADOPTION AND APPROVAL OF THE COMPANY'S ECONOMIC VALUE
ADDED BONUS PLAN AND RELATED PERFORMANCE GOALS

Proposal

At the Annual Meeting of Stockholders, the stockholders of the Company will
be asked to adopt and approve the Company's Economic Value Added Bonus Plan
(the "EVA Bonus Plan") and the related performance goals established for
participants under the EVA Bonus Plan.

The Company adopted the EVA Bonus Plan effective July 1, 1996. The EVA Bonus
Plan currently covers fifteen (15) executive officers and other key management
personnel, but the Compensation and Stock Option Committee may add or remove
participants from the EVA Bonus Plan in the future. All executive officers and
management personnel of the Company are eligible to participate in the EVA
Bonus Plan although participation is conditioned upon approval by the
Compensation and Stock Option Committee. Participants are selected based on
their roles and responsibilities in the performance of a business unit or the
Company as a whole. Bonuses are awarded under the EVA Bonus Plan based on the
performance of each participant's business unit or the Company as a whole, as
the case may be. Performance is measured as the change in EVA, which is after
tax operating profit, less a charge for all capital employed. Target bonuses
are a set percentage of salary for each participant and represent the amount
of bonus declared for each EVA performance target achieved.

At the end of each year, each participant 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
for each participant. The annual bonus payment to each participant is equal to
the participant's bank balance, if the notional bank balance is less than or
equal to the participant's target bonus. If the notional bank balance is
greater than the target bonus, the bonus payment will equal the target bonus
plus one third of any excess bank balance after payment of the target bonus,
limited to one additional target bonus. Therefore, the maximum bonus payment
in any given year to any participant is limited to two times his or her target
bonus amount. Any remaining bank balances are carried forward to the following
year and are subject to forfeiture if the employee leaves the Company or
subject to recapture depending upon the subsequent year's change in EVA.

The maximum payment which may be made to any participant in any given year
is 100% of his or her base salary. Each of the Named Officer's 1999 base
salaries is set forth on the Summary Compensation Table at page 5. The base
salary for each Named Officer will be equal to their respective 1999 base
salaries, plus an adjustment for cost of living increases for 2000 and for
each subsequent year thereafter. Under extraordinary circumstances, annual
increases in base salary for the Named Officers may exceed an adjustment for
cost of living increases. In addition, Steven Nichols may not be paid more
than $2,000,000 under the EVA Bonus Plan in any given year, and no other
participant may be paid more than $500,000 under the EVA Bonus Plan in any
given year.

The performance goals contained in the EVA Bonus Plan have been established
in conjunction with a management consulting firm and approved by the
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee may amend, alter or discontinue the EVA Bonus Plan in full or with
respect to any individual participant. It is intended that the Compensation
and Stock Option Committee will certify in writing that the performance goals
contained in the EVA Bonus Plan have been satisfied before payment of any
amounts due under the EVA Bonus Plan, if any. Future amounts payable under the
EVA Bonus Plan are not determinable because payments are based on the future
performance of the Company and its business units. However, the following
chart shows the bonus payments in the last completed fiscal year for the
individuals and groups listed:

13
<PAGE>

NEW PLAN BENEFITS

Economic Value Added Bonus Plan

<TABLE>
<CAPTION>
Name and Position Dollar Value ($)
----------------- ----------------
<S> <C>
Steven Nichols................................................ $ 746,834
President and Chief Executive Officer

Preston Davis................................................. 99,928
Vice President Sales

Deborah Mitchell.............................................. 189,106
Vice President--Marketing

George Powlick................................................ 203,795
Vice President--Finance, Chief Financial Officer

Peter Worley.................................................. 91,796
Vice President--Product Development

Executive Group............................................... 1,712,668
Non-Executive Officer Employee Group.......................... 173,760
</TABLE>

Current tax laws restrict the deductibility of executive compensation paid
by public companies. Under these restrictions, the Company will not be able to
deduct compensation paid to its Named Officers in excess of $1,000,000 unless
the excess compensation satisfies the requirements applicable to "performance-
based compensation" set forth in the tax laws and regulations and unless
certain other requirements are met. Non-deductibility would result in
additional tax costs to the Company. The stockholder approval requested by
this proposal will assist in enabling the compensation payable by the Company
pursuant to the EVA Bonus Plan to qualify as "performance-based compensation,"
thereby enabling the Company to achieve maximum tax deductibility of such
compensation costs. If the stockholders of the Company do not approve this
proposal, the Company will not make any further payments pursuant to the EVA
Bonus Plan.

The EVA Bonus Plan is set forth in full at Exhibit A attached hereto. Any
description of such provisions contained herein is qualified in its entirety
by reference to the provisions themselves contained in Exhibit A.

Recommendation

The Board of Directors believes it is in the best interests of the Company
and its stockholders to approve the Company's Economic Value Added Bonus Plan
and the related performance goals in the form attached as Exhibit A in order
to enable the Company to achieve maximum tax deductibility of the compensation
costs associated with the Economic Value Added Bonus Plan and in order to
attract, retain and motivate key employees. The affirmative vote 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 AND APPROVAL OF THE COMPANY'S ECONOMIC VALUE ADDED BONUS PLAN.

14
<PAGE>

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 as a Class B 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.

RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Grant Thornton was the Company's certified public accountant for fiscal
1999. During fiscal 1999, 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 1999 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 2001 ANNUAL MEETING

Stockholders who wish to present proposals for action at the 2001 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 11, 2000, 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,
1999, including financial statements, is being mailed under the same cover to
each person who was a stockholder of record on April 7, 2000.

The Company will furnish without charge a copy of its Annual Report on Form
10-K for the fiscal year ended December 31, 1999, 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.

15
<PAGE>

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 14, 2000

16
<PAGE>

APPENDIX A

K.SWISS INC.

EVA IMPROVEMENT PROGRAM

MEASURING OUR PERFORMANCE

Our mission has one simple goal--to create greater value for our share
owners, employees and other stakeholders. That is the main purpose of K.Swiss
Inc. and that goal is built upon a simple economic premise--that value is
created by consistently increasing the Company's economic profit year after
year.

While our mission is easy enough to understand, how we accomplish it is
somewhat more complex.

In 1996 we adopted a simple easy-to-use tool to measure our financial
performance. Known as Economic Value Added or EVA, this measurement tool helps
us to determine how well we are doing in our primary mission. EVA tells us how
much value we have added from one year to the next by calculating the growth
in our economic profit.

Because it is a key factor in the financial health of the Company, EVA also
plays a significant role in our future. So, it is important that we all learn
what we can do to positively affect the Company's EVA--for the benefit of our
share owners, the Company and ourselves.

WHAT IS EVA?

EVA is a financial performance measurement tool that is easily calculated.
Put simply, EVA measures the increase in economic profit generated from one
year to the next.

Let's start by defining economic profit. Economic profit is the Company's
net operating profit after taxes (NOPAT) minus a charge for operating capital.
This charge reflects the cost of acquiring that capital from our share owners
and our lenders. Calculating our economic profit shows if we are obtaining a
return greater than the cost of that capital.

To measure whether we are improving our economic profit each year, we use
the formula for Economic Value Added. EVA is calculated by subtracting last
year's economic profit from this year's. The result is the economic value
added to the Company--how much additional value we have created for share
owners in that particular year.

WHY USE EVA?

Not only is it an ideal financial measurement tool, EVA is also the most
accurate method for making business decisions that truly create additional
economic value for our Company.

Used by themselves, other financial measurements, such as operating income
growth, can be misleading. Unless a business consistently earns more than the
cost of its capital, it will lose value for its share owners .... even if it is
growing operating income.

A-1
<PAGE>

HOW DOES EVA ACTUALLY WORK?

Using EVA is simple. Just follow these four steps:

First, calculate your NOPAT.

Second, calculate your capital charge. To do that, multiply your average
operating capital times the Company's cost of capital. Operating capital is
your working capital (cash, inventories and receivables minus payables) plus
your fixed assets (property, plant and equipment).

Next, subtract your capital charge from your NOPAT. This is your economic
profit.

Finally, subtract last year's economic profit from this year's economic
profit . . . and the result is the economic value you have added.

WHO IS ACCOUNTABLE FOR EVA?

Each Company operation is accountable for its economic profit and EVA.
Specifically, it is responsible for the two key drivers of EVA--net income and
operating capital.

Previously, operating managers were judged on several net income measures
over which they had varying degrees of control. In the future, financial
performance will be based on measures which can be influenced. Treasury-
related items--interest income and expense--will be charged to Corporate
Treasury.

In addition, the Company's effective tax rate will be charged to all
operations.

In addition, more focus will be given to the second driver of EVA--operating
capital. The capital invested in an operation directly affects its economic
profit through the capital charge. If each operation and each business segment
earn returns in excess of the cost of capital, the Company will consistently
grow its economic profit and EVA.

A-2
<PAGE>

K.SWISS INC.

YOUR EVA AWARD CALCULATION

1996

Overview

The EVA award is a formula-driven plan which is based upon two factors: (1)
a bonus target and (2) a financial performance factor.

Incentive Award = Bonus Target X Performance Factor

The Bonus Target is a percentage of base salary that is defined by the plan.
The Performance Factor is a multiplier derived by comparing actual financial
performance to expected financial performance. For example, if you have an
established Bonus Target of $10,000 and your business unit's actual
performance equaled 110% of expected performance last year, your incentive
award equals $11,000 ($10,000 X 110%).

Incentive Award = Bonus Target X Performance Factor
= $10,000 X 110%
= $11,000

This booklet will explain our plan and how to calculate your EVA award.

THE EVA AWARD

Your Bonus Target

K.Swiss' EVA incentive program has set competitive targets for individual
participants. Each participant has a Bonus Target that is determined by
multiplying a Target Percentage by the incumbent's base salary. The Target
Percentage for each participant has been established by the compensation
committee based on job requirements, scope and duties of each position. For
example, if your Target Percentage is equal to 10 and your salary is $90,000,
your Bonus Target would be 10% X $90,000 = $9,000.

Bonus Target = Target Percentage X Participant's Base Salary
= 10% X $90,000
= $9,000

EVA Performance Factor

EVA is an exciting new development in incentive compensation design. It
makes managers into stakeholders in two powerful ways:

1. Your EVA Award will be based solely on the EVA Performance of your
business unit.

2. Your EVA Bonus Declaration (the amount credited to the Bonus Bank at year
end) is unlimited because, far from being an expense, it is a share of the
value you are adding to K.Swiss.

One of the core values in our incentive pay program is that each participant
should receive a portion of the value that they help create. K.Swiss uses EVA
to measure the Company's performance. The EVA Award is designed so that you
receive an award based on your business unit's contribution to K.Swiss' EVA.
An explanation of key concepts follows.

Our shareholders expected return on their investment can be measured in
terms of EVA growth on an annual basis. This is called Expected EVA
Improvement (EI). This improvement is not based upon your business plan, but
rather on the expectations of our shareholders.

A-3
<PAGE>

The EVA Interval represents the amount of deviation from Expected EVA
Improvement (EI) that eliminates (negative deviation) or doubles (positive
deviation) the bonus declaration. The EVA Interval and the expected EVA
Improvement have been established by outside consultants who use their
knowledge to take economic and financial data for K.Swiss and our industry
into account to develop the EVA Interval and expected EVA Improvement. From
the graph, you can see that the EVA Interval establishes the leverage (risk)
of the plan; that is, the smaller the interval, the more quickly the bonus
declaration doubles or goes to zero. The slope of the line, which is
determined by the EVA Interval, establishes the extent to which you will be
rewarded (or penalized) for actual EVA performance greater (or less) than EI.

It is important for K.Swiss' incentive pay program to provide you with part
of the value you help create. To do this, the bonus calculation has to
increase EVA Bonus Declarations as EVA Improvement increases. EVA Bonus
Declarations will equal the EVA Target when Actual EVA Improvement equals the
Expected EVA Improvement (EI) for your business unit.

In the next few pages you will be walked through calculating the EVA Bonus
Declaration and EVA Award. As you will see, an EVA Bonus Declaration can be
positive or negative depending upon your business unit's actual performance.
The purpose of these calculations is to take the process shown in the chart
and apply it to your situation.

EVA Award Calculations Summarized:

1. The Actual EVA Improvement (AI) is measured by subtracting the Prior Year
EVA from the Current Year EVA of your business unit.

2. Excess EVA Improvement is calculated by subtracting the Expected EVA
Improvement (EI) from the Actual EVA Improvement (AI).

3. The Performance Multiple is calculated by dividing your Excess EVA
Improvement by your EVA Interval.

4. Your Bonus Multiple is calculated by adding the Performance Multiple and
the Target Multiple (always 1).

5. Your EVA Bonus Declaration is calculated by multiplying the Bonus
Multiple in Step 4 by your Bonus Target.

6. Your EVA Bonus Declaration is credited to the Bonus Bank.

7. The Bonus Bank pays out your EVA Award based on certain rules.

Measuring EVA Performance

Performance is measured based on Actual EVA Improvement in your business
unit compared to the Expected EVA Improvement. Your business unit's
performance is measured after the Current Year EVA is known. Remember that
this measurement is not based on budget or business plan performance.

<TABLE>
<C> <S>
Step 1 First, the Prior Year EVA is subtracted from the Current Year EVA.
The difference--called Actual EVA Improvement--is the amount of
growth in EVA from one year to the next.

Step 2 Calculate the Excess EVA Improvement by subtracting the Expected
EVA Improvement (EI) from the Actual EVA Improvement (AI).
</TABLE>

Actual EVA Improvement (AI) = Current Year EVA - Prior Year EVA
Excess EVA Improvement = Actual EVA Improvement (AI) - Expected EVA
Improvement

A-4
<PAGE>

Calculating the EVA Bonus Declaration

Once the amount of Excess EVA Improvement is known, the Bonus Declaration,
the amount credited to the Bonus Bank, can be calculated.

<TABLE>
<C> <S>
Step 3 Calculate the Performance Multiple by dividing the Excess EVA
Improvement by the EVA Interval.

Step 4 Calculate the Bonus Multiple by adding the Performance Multiple and
the Target Multiple (always 1).

Step 5 Multiply the Bonus Multiple by the Bonus Target and you will get
the current year Bonus Declaration.
</TABLE>

Performance Multiple = Excess EVA/EVA Interval
Bonus Multiple = Performance Multiple + Target Multiple (always 1)
Bonus Declaration = Bonus Multiple X Bonus Target

The bottom line is, if the Actual EVA Improvement (AI) is greater than
Expected EVA Improvement (EI), the EVA Bonus Declaration will be greater than
the EVA Target.

The Bonus Bank

Once the EVA Bonus Declaration is calculated, it is deposited in the Bonus
Bank. Payments you receive are drawn from the Bonus Bank balance. The Bonus
Bank:

. Links cumulative pay to cumulative performance by reserving a portion of
negative and exceptionally positive bonus declarations against future
EVA Improvement.

. Constantly extends an individual's time horizon forward when making
business decisions.

. Smoothes the bumps and grinds of the business cycle.

Here's how the bank works:

<TABLE>
<C> <S>
Step 6 The EVA Bonus Declaration is deposited into the Bonus Bank (in
1997 the beginning balance comes from 1996, if any).

Step 7a The amount of the Bonus Bank balance, up to your full Bonus
Target, will be paid to you from the Bonus Bank balance.

Step 7b If there is a remaining positive balance, you will receive an
additional payment of one-third of the Bonus Bank balance. The
amount of this additional payment cannot exceed your Bonus
Target. That is, the maximum amount paid from the Bonus Bank in
any year is 2 times your Bonus Target. Of course, if you reach
this limit, any remaining amounts will remain in the Bonus Bank
and are available for future payout.
</TABLE>

In extreme situations, it would be possible that negative Bonus Declaration
could result in a negative Bonus Bank. If you end the year with a negative
Bonus Bank balance, that negative balance will be carried forward to the next
year and must be offset by future positive Bonus Declarations.

Please remember that when we adopted EVA Award System for 1996 we stated we
would declare only 50% of a normal bonus declaration due to adopting the plan
effective July 1, 1996. In addition, for 1996 only, any EVA Bonus Declaration
for 1996 would be deposited into the Bonus Bank as a beginning balance for
1997 and no cash bonus award would be made for 1996.

A-5
<PAGE>

Your Bonus Worksheet

The following worksheet is provided for you to complete with your own
information.

<TABLE>
<C> <C> <S> <C>
1. Annual Base Salary......................... $
2. X Target Percentage........................ %
----
3. Bonus Target............................... $

STEP 1 4. Current Year EVA...................... $
STEP 1 5. - Prior Year EVA...................... $
STEP 1 6. = Actual EVA Improvement (AI)........... $
STEP 2 7. - Expected EVA Improvement (EI)..........$
STEP 2 8. = Excess EVA Improvement.............. $
STEP 3 9. / EVA Interval........................ $
STEP 3 10. = Performance Multiple................ $
STEP 4 11. + Target Multiple (always 1)............ $
STEP 4 12. = Bonus Multiple...................... $
STEP 5 13. X Bonus Target........................ $
STEP 5 14. = EVA Bonus Declaration............... $
STEP 6 15. Beginning Bonus Bank Balance.......... $
STEP 6 16. + EVA Bonus Declaration (line 14)..... $
STEP 6 17. = Available Bonus Bank Balance........ $
STEP 7a 18. - Payout up to EVA Target............. $
STEP 7a 19. = Excess Bonus Bank Balance........... $
STEP 7b 20. + Payout of excess Bonus Bank
Balance*.............................. $
STEP 7b 21. Total EVA Award (line 18. + line 20.). $
</TABLE>
- --------
* Not to exceed EVA Target.

Other Rules

Transfers

If you are transferred from one EVA business unit to another EVA business
unit during a given year, you will receive a bonus declaration and payment
according to the following rules:

. The award declared for the year of the transfer will be determined
according to the full year EVA results of both EVA business units in which
you worked during the plan year, and prorated based on the number of months
of service in each EVA business unit.

. Any positive Bonus Bank balance you have at the time of transfer will be
paid out over three years beginning at the end of the year of the transfer.
A new Bonus Bank (with a beginning balance of zero) will be established for
you based on awards earned in the new EVA business unit.

. Any negative Bonus Bank balance you have at the time of transfer will be
carried over and amortized against awards earned at your new EVA business
unit.

Terminations

Awards

If employment with K.Swiss terminates during the year, you will not be
eligible for an EVA incentive award for that year.

A-6
<PAGE>

Bonus Bank

Bonus Bank balances will be forfeited upon termination except in the
following cases:

. Termination due to death, disability or retirement (at or after age 62).

. In cases of terminations due to death or disability, the Bonus Bank
balance will be paid in one lump sum within thirty (30) days of the
termination date. In cases of termination due to retirement at or after
age 62, any Bonus Bank balance you have will be paid over three years,
beginning at the end of the year in which you retire.

A Program That Rewards Your Performance

By providing you a share of all the value you help create, K.Swiss' EVA
Award program gives you an incentive to make decisions in the best interest of
K.Swiss, our shareholders, customers and employees. By encouraging good
business decisions, cost improvements and productivity, it also reinforces the
goals of K.Swiss' Strategic Plan.

The incentive compensation plans established by K.Swiss Inc. should not be
construed to be a guarantee or contract of employment nor are employees vested
in these benefits. As is customary with such plans, the Board of Directors of
K.Swiss Inc. reserves the right to change or discontinue any plan at any time
and for any reason, with or without notice.

Glossary

Actual EVA Improvement (AI)-Current Year EVA minus Prior Year EVA.

Bonus Bank-Links cumulative pay to cumulative performance by reserving a
portion of negative and exceptionally positive bonus declarations against
future EVA improvement.

Bonus Multiple-A number that is the sum of your Performance Multiple and
Target Multiple (always 1).

Bonus Target-The amount calculated by multiplying the Target Percentage and
the participant's base salary.

Current Year EVA-The EVA for a participant's business unit at the end of the
current year being measured.

EVA Award-The amount of EVA bonus paid in any plan year. This amount cannot
exceed 2 times the participant's EVA Target Bonus.

EVA Bonus Declaration-The dollar amount deposited in the Bonus Bank at year-
end, before any payments are made.

EVA Interval-The amount based on KSwiss' financial information and other
economic data that determines the leverage of the EVA Plan Component. It is
the amount of deviation from Expected EVA Improvement that eliminates or
doubles the EVA Target bonuses.

Excess EVA Improvement-The amount by which Actual EVA Improvement is greater
than (+) or less than (-) Expected EVA Improvement, that is (AI)-(EI).

Expected EVA Improvement (EI)-The expected EVA Improvement in a
participant's business unit in a given year. Provides the performance measure
and standard for target awards that is consistent with shareholder
expectations.

A-7
<PAGE>

Performance Multiple-Excess EVA Improvement divided by the EVA Interval.
This percentage represents your share of the excess EVA improvement in your
business unit.

Prior Year EVA-The EVA for a participant's business unit at the end of the
year prior to the year being measured.

Target Percentage-The percentage of your base salary that is used to
calculate the Bonus Target. This percentage is determined by the compensation
committee.

A-8
<PAGE>

PROXY K-SWISS INC. PROXY
Class A Common Stock
Proxy for Annual Meeting of Stockholders, May 18, 2000

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS for the Annual
Meeting of Stockholders to be held on May 18, 2000 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 2000 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 18, 2000, 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: Stephen Fine, 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 and approve the Company's
Value Added Bonus Plan and related
performance goals 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:_____________________________________, 2000

_________________________________________________

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 18, 2000

The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the accompanying Proxy Statement for the 2000 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 18, 2000, 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: Steven Nichols, George Powlick, Lawrence Feldman, Jonathan K. Layne
(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 and approve the Company's FOR [_] AGAINST [_] ABSTAIN [_]
Economic Value Added Bonus Plan
and related performance goals
</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:_____________________________________, 2000

_________________________________________________

Votes must be indicated
(x) In Black or Blue Ink [X]

PLEASE MARK, DATE AND MAIL THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.