-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MX2WbkMNTOcr9LsNOUcctv2Ip2tQ00L6UxMZhQ9hcCXSgKwV1fZZ8eHA8pec+J8u KI5iauEmdULDokIBpS7A6A== 0000912057-00-013782.txt : 20000328 0000912057-00-013782.hdr.sgml : 20000328 ACCESSION NUMBER: 0000912057-00-013782 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000428 FILED AS OF DATE: 20000327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: K2 INC CENTRAL INDEX KEY: 0000006720 STANDARD INDUSTRIAL CLASSIFICATION: [3949] IRS NUMBER: 952077125 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-04290 FILM NUMBER: 579923 BUSINESS ADDRESS: STREET 1: 4900 S EASTERN AVE STREET 2: SUITE 200 CITY: LOS ANGELES STATE: CA ZIP: 90040 BUSINESS PHONE: 3237242800 MAIL ADDRESS: STREET 1: 4900 S EASTERN AVE STREET 2: SUITE 200 CITY: LOS ANGELES STATE: CA ZIP: 90040 FORMER COMPANY: FORMER CONFORMED NAME: ANTHONY INDUSTRIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ANTHONY POOLS INC DATE OF NAME CHANGE: 19720317 DEF 14A 1 DEF 14A SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Section240.14a-11(c) or Section240.14a-12 K2 INC. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ No fee required. / / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. (1) Title of each class of securities to which transaction applies: ----------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ----------------------------------------------------------------------- (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: ----------------------------------------------------------------------- [LOGO] K2 INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS APRIL 28, 2000 TO THE SHAREHOLDERS OF K2 INC.: You are cordially invited to attend our Annual Meeting to be held at our main office, 4900 South Eastern Avenue, Los Angeles, California on Friday, April 28, 2000 at 9:00 a.m. (local time). The ANNUAL MEETING will be held for the following purposes: 1. To elect three directors to serve for a term of three years. 2. To ratify the selection of Ernst & Young LLP as independent auditors for 2000. 3. To transact such other business as may properly come before the meeting or any adjournments thereof. Only shareholders of record at the close of business on March 24, 2000 are entitled to notice of the meeting and to vote at it or any adjournments thereof. If it is convenient for you to do so, we hope you will attend the meeting. If you cannot, and wish your stock to be voted, we urge you to fill out the enclosed proxy card and return it to us in the envelope provided. No additional postage is required. [SIGNATURE] RICHARD M. RODSTEIN PRESIDENT AND CHIEF EXECUTIVE OFFICER LOS ANGELES, CALIFORNIA MARCH 29, 2000 - -------------------------------------------------------------------------------- PLEASE DATE AND SIGN THE ACCOMPANYING PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE. [LOGO] K2 INC. 4900 SOUTH EASTERN AVENUE LOS ANGELES, CALIFORNIA 90040 --------------------- PROXY STATEMENT --------------- The enclosed proxy is solicited by the Board of Directors of K2 Inc. ("K2"). It may be revoked at any time before it is exercised by delivering a written notice to the Secretary of K2 stating that the proxy is revoked, by executing a subsequent proxy and presenting it to the Secretary of K2 or by attending the annual meeting and voting in person. Only shareholders of record at the close of business on March 24, 2000 will be entitled to notice of and to vote at the annual meeting. As of that date, K2 had outstanding 17,949,700 shares of Common Stock, each share entitled to one vote. It is anticipated that the mailing to shareholders of this Proxy Statement and the enclosed proxy will commence on or about March 29, 2000. Proxies will be solicited by mail, telephone, fax or telegram and may be personally solicited by directors, officers and other employees of K2 and by Morrow & Co., 445 Park Avenue, New York, New York, which has been engaged for a fee of $6,500 plus expenses for this purpose. The cost of soliciting proxies will be borne by K2. Both abstentions and broker non-votes are counted for purposes of determining the presence or absence at the annual meeting of a quorum for the transaction of business, but shares represented by broker non-votes on a matter submitted to shareholders are not considered present and entitled to vote on that matter. Directors will be elected by plurality vote of the shares present and entitled to vote. The ratification of the selection of independent auditors will require the affirmative vote of a majority of the shares present and entitled to vote. Consequently, broker non-votes will have no effect, but abstentions will have the effect of a vote against such ratification. ELECTION OF DIRECTORS Under the Certificate of Incorporation of K2, the Board of Directors is divided into three classes, each having a three-year term, with the term of office of one of the classes expiring each year. Proxies solicited herewith will be voted for election to the Board of Directors of the three nominees named below (unless authority to vote for one or more such nominees is withheld), to serve until the 2003 annual meeting of shareholders and until their successors are elected and qualified. While the Board of Directors has no reason to believe that any of those named will not be available as a candidate, should such a situation arise the proxy may be voted for the election of other nominees as directors in the discretion of the persons acting pursuant to the proxy. Directors will be elected by plurality vote. Bernard I. Forester, who served as Chairman of the Board of K2 and was its Chief Executive Officer from 1973 to 1995, will retire from the Board of Directors at the Annual Meeting. Robin Hernreich has been selected by the Board of Directors to fill the resulting vacancy. Information concerning Mr. Hernreich appears below. Certain information concerning the nominees and each director whose term of office will continue after the 2000 annual meeting is set forth below: NOMINEES FOR ELECTION AT THE ANNUAL MEETING FOR TERM OF OFFICE EXPIRING IN 2003 RICHARD J. HECKMANN Director since 1997 Mr. Heckmann, 56, has served as Chairman of Vivendi Water, the worldwide water products group of Vivendi S.A., a worldwide utility and communications company with headquarters in France, since September 1999. Mr. Heckmann has also been Chairman, President and Chief Executive Officer of United States Filter Corporation, a worldwide provider of water and wastewater treatment systems and services, since 1990. Vivendi acquired US Filter on April 29, 1999. Mr. Heckmann was a director and the owner of Smith Goggles until its sale in 1996. He served as the associate administrator for finance and investment of the Small Business Administration in Washington, DC and was the founder and chairman of the board of Tower Scientific Corporation. Mr. Heckmann is a member of the board of directors of United Rentals, Inc., a national equipment rental organization and Station Casinos, a gaming and entertainment enterprise. ROBIN E. HERNREICH Mr. Hernreich, 55, is an owner of the Sacramento Kings of the National Basketball Association. Mr. Hernreich has been President of Remonov Capital, Inc., since August 1992, and Vice-President of Remonov & Company, Inc., since November 1996. Both are private investment firms. From November 1989 through June 1996, Mr. Hernreich was Chairman and Chief Executive Officer of Sigma Broadcasting Company, formerly Arkansas' largest television and radio operator, and from January 1988 through September 1990, Mr. Hernreich was Chairman of the United States Repeating Arms, maker of Winchester sporting firearms. Mr. Hernreich is a member of the board of directors of the Colorado State Parks and Outdoor Recreation, where he serves as its chairman, The Eagle Valley Land Trust, the Snowboard Outreach Society and The Youth Foundation of Vail. Mr. Hernreich is also a former member of the board of directors of Ride, Inc. 2 STEWART M. KASEN Director since 1997 Mr. Kasen, 60, is a private investor. He retired as Chairman of the Board, President and Chief Executive Officer of Factory Card Outlet Corp. where he served in that position from May 1998 to October 1999, and prior to that he served as its chairman from 1997. In April 1996, he retired as Chairman, President and Chief Executive Officer of Best Products Co., Inc., a catalog showroom chain of retail stores and nationwide mail order services. He was also its president and chief executive officer from 1991 to 1996 and its president and chief operating officer from 1989 to 1991. Prior to joining Best Products, Co., Inc., Mr. Kasen served in various capacities in two divisions of Carter Hawley Hale Stores over a 24-year period, including President and Chief Executive Officer of Emporium, from 1987 to 1989, and Thalhimers, from 1984 to 1987. Mr. Kasen is a member of the board of directors of Markel Corporation, a specialty insurance underwriter, and The Elder-Beerman Stores Corp., a regional department store chain. In September 1996, Best Products Co., Inc., filed for bankruptcy under the federal bankruptcy laws. In March 1999, Factory Card Outlet Corp. filed for bankruptcy under the federal bankruptcy laws. DIRECTORS CONTINUING IN OFFICE FOR TERM OF OFFICE EXPIRING IN 2002 JERRY E. GOLDRESS Director since 1996 Mr. Goldress, 69, has served as Chairman of the Board and Chief Executive Officer of Grisanti, Galef and Goldress, Inc., a corporate turnaround management firm, since 1981. As a corporate turnaround manager, Mr. Goldress provides assistance to businesses in financial difficulty and, as such, has frequently been appointed a director and an executive officer of such businesses. In this capacity, Mr. Goldress has served as president or chief executive officer of numerous manufacturing, distribution and retail organizations. He is a member of the board of directors of Applied Magnetics Corporation, a manufacturer of magnetic heads for computers, and Chairman of the Board of Frontier Insurance, a specialty property casualty insurance carrier. JOHN H. OFFERMANS Director since 1987 Mr. Offermans, 71, is a real estate investment consultant engaged in private practice. From 1973 through 1993, Mr. Offermans was an active commercial real estate broker. Prior to that, from 1970 to 1973 Mr. Offermans was president and chief executive officer of Fabri-Tek Educational Systems, Inc., an educational computer manufacturer, and from 1968 to 1970, he was international marketing vice president of Electronic Associates, Inc., a manufacturer of computer systems for the aerospace and other high technology industries. ALFRED E. OSBORNE, JR. Director since 1999 Dr. Osborne, 55, has been an Associate Professor of Business Economics in the Anderson Graduate School of Management at the University of California at Los Angeles since 1972, and the Director of the Harold Price Center for Entrepreneurial Studies at UCLA since its inception twelve years ago. Dr. Osborne is a member of the Board of Directors of the Times Mirror Company, a newspaper and media company, and Nordstrom, Inc., a specialty fashion retailer. He also is a trustee of the WM Group of Funds, an independent general partner of Technology Funding Venture Partners V, and a director of First Pacific Advisors' Capital and New Income Funds, all 1940 Investment Company Act Companies. 3 DIRECTORS CONTINUING IN OFFICE FOR TERM OF OFFICE EXPIRING IN 2001 SUSAN E. ENGEL Director since 1996 Ms. Engel, 53, has been Chairwoman of the Board, President and Chief Executive Officer of Department 56, Inc., a marketer of collectibles and specialty giftware, since September 1997. Ms. Engel was its president and chief executive officer from November 1996 to August 1997, and from September 1994 to November 1996 she was its president and chief operating officer. From October 1991 through September 1993, Ms. Engel was president and chief executive officer of Champion Products, Inc., a marketer and manufacturer of authentic athletic apparel and a division of Sara Lee Corporation. Prior to Champion, Ms. Engel was a vice president and eastern retail practice leader for Booz, Allen and Hamilton, a general management consulting firm. Ms. Engel is a member of the board of directors of Supervalu, a grocery wholesaler and supermarket chain located in the Midwest, and Wells Fargo & Co., a leading financial institution. WILFORD D. GODBOLD, JR. Director since 1998 Mr. Godbold, 61, is a private investor. He retired as President and Chief Executive Officer of ZERO Corporation, which provides packaging and climate control products to the telecommunications, instrumentation and data processing markets, where he served in that position from 1984 to August 1998. For the two prior years he served as chief operating officer of ZERO Corporation. From 1966 through 1982 he practiced law as an attorney with the law firm of Gibson, Dunn & Crutcher LLP in Los Angeles, serving as a Partner from 1973, where his focus was acquisitions, mergers and public financings. Mr. Godbold serves as a member of the board of directors of Sempra Energy and its subsidiaries, including Southern California Gas Company, a public utility, and San Diego Gas & Electric Co., a public utility. RICHARD M. RODSTEIN Director since 1995 Mr. Rodstein, 45, has been President and Chief Executive Officer of K2 since 1996. Mr. Rodstein was president and chief operating officer of K2 from 1990 to 1995 and has held various executive positions with K2 since joining it in 1983. Prior to 1983, Mr. Rodstein was a certified public accountant with Ernst & Young LLP, an international auditing and consulting firm. Under the By-Laws of K2, nominations for the election of directors may be made by the Board or by any stockholder entitled to vote in the election of directors, provided that no stockholder may nominate a person for election as a director unless written notice of such nomination is presented to K2 at least 90 days prior to the date of the applicable meeting. No such notice has been given with respect to the election of directors. As a result, no other nominees for election as director will be considered at the annual meeting except nominations made by the Board in the event one of the nominees named herein should unexpectedly be unavailable. 4 BOARD OF DIRECTORS AND COMMITTEES The Board of Directors held six meetings in 1999. Each director attended at least 75% of the total number of meetings of the Board of Directors and Committees on which he or she served. The Board of Directors currently has four standing committees: Audit Committee, Compensation Committee, Executive Committee and Nominating Committee. The Audit Committee of the Board of Directors, consisting of Ms. Engel (Chairwoman), Mr. Godbold and Mr. Offermans, held three meetings in 1999. The functions of the Committee include recommending to the Board the engagement or discharge of the independent auditors, directing investigations into matters relating to audit functions, reviewing the plan and results of audit with the auditors, reviewing K2's internal accounting controls and approving services to be performed by the auditors and related fees. The Compensation Committee of the Board of Directors, consisting of Mr. Goldress (Chairman), Mr. Heckmann and Mr. Kasen, held two meetings in 1999. The Committee considers and authorizes remuneration arrangements for senior management, including the granting of options under K2's stock option plan. The Executive Committee of the Board of Directors, consisting of Mr. Forester, Mr. Godbold and Mr. Rodstein (Chairman), held no meetings in 1999, but took actions from time to time by written consent. The Committee is authorized to act on behalf of the Board on all corporate actions for which applicable law does not require participation of the full Board. The Nominating Committee of the Board of Directors, consisting of Mr. Goldress, Mr. Heckmann (Chairman) and Dr. Osborne, held two meetings in 1999, in addition to informal meetings of Committee members with potential nominees for director from time to time. The Committee recruits and interviews qualified candidates to serve as directors and reports on its findings to the full Board. 5 STOCK PRICE PERFORMANCE GRAPH The graph below compares cumulative total return to shareholders, assuming quarterly reinvestment of dividends, of K2, the Russell 2000 Index and a weighted index of a peer group of companies with market capitalizations similar to that of K2. The peer group is comprised of Cannondale Corporation, First Team Sports, Inc., Johnson Outdoor Inc., Oakley Inc., Rawlings Sporting Goods Company, Inc., Rockshox Inc., The North Face, Inc. and Vans Inc. The graph assumes investment of $100 on December 31, 1994 in K2's Common Stock, the Russell 2000 Index and common stock of the peer group (except for Oakley, which became a public company in 1995; Rockshox, which became a public company in 1996; and The North Face, which became a public company in 1996). In 1999, Morrow Snowboards, Inc. ("Morrow"), was replaced by Oakley, Rockshox and Vans due to the acquisition of certain assets of Morrow by K2. COMPARATIVE 5-YEAR TOTAL RETURNS K2 INC., RUSSELL 2000, PEER GROUP PERFORMANCE RESULTS THROUGH DECEMBER 31, 1999 EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
KTO Russell 2000 Peer Group 1994 $100.0 $100.0 $100.0 1995 147.3 126.2 98.8 1996 179.1 144.8 78.8 1997 152.2 174.6 78.2 1998 70.2 168.5 45.2 1999 52.5 201.6 32.7
6 EXECUTIVE COMPENSATION The following table sets forth information concerning annual, long-term and other compensation of K2's President and Chief Executive Officer and the four most highly compensated executive officers of K2: SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ANNUAL COMPENSATION AWARDS OF NAME AND ---------------------- STOCK ALL OTHER PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($) ------------------ -------- ---------- --------- ------------ ---------------- Richard M. Rodstein .................. 1999 325,000 202,000 150,000 6,180(a) President and Chief Executive 1998 325,000 -- 50,000 11,400(a) Officer 1997 280,000 233,300 35,000 12,500(a) John J. Rangel ....................... 1999 210,000 101,000 75,000 6,028(a) Senior Vice President--Finance 1998 210,000 -- 35,000 8,500(a) 1997 195,000 132,900 20,000 9,500(a) David H. Herzberg .................... 1999 160,000 70,000 -- 3,480(a) Vice President & President of 1998 160,000 95,000 12,000 9,000(a) Shakespeare Monofilament 1997 160,000 160,000 8,000 10,100(a) J. Wayne Merck ....................... 1999 155,000 75,000 -- 1,892(a) Vice President & President of 1998 155,000 75,000 12,000 2,000(a) Shakespeare Composites & Electronics 1997 155,000 125,000 8,000 3,300(a) David G. Cook ........................ 1999 155,000 70,000 -- 4,130(a) Vice President & President of 1998 155,000 75,000 12,000 5,100(b) Stearns 1997 155,000 100,000 8,000 5,100(b)
- ------------------------ (a) Dollar value of allocations to the accounts of the named individuals in K2's Employee Stock Ownership Plan: Mr. Rodstein ($1,180 in 1999, $6,400 in 1998 and $7,700 in 1997), Mr. Rangel ($1,028 in 1999, $3,500 in 1998 and $4,800 in 1997), Mr. Herzberg ($1,180 in 1999, $2,500 in 1998 and $8,000 in 1997), and Mr. Merck ($892 in 1999, $900 in 1998 and $2,300 in 1997); and K2's matching contribution to the accounts of the named individuals in K2's 401(k) Retirement Savings Plan: Mr. Rodstein ($5,000 in 1999, $5,000 in 1998 and $4,800 in 1997), Mr. Rangel ($5,000 in 1999, $5,000 in 1998 and $4,700 in 1997), Mr. Herzberg ($2,300 in 1999, $2,500 in 1998 and $2,100 in 1997) and Mr. Merck ($1000 in 1999, $1,000 in 1998 and $1,000 in 1997). (b) Dollar value of allocation to Mr. Cook's account in K2's Employee Stock Ownership Plan ($930 in 1999, $1,800 in 1998 and $3,400 in 1997) and K2's matching contribution to the Stearns 401(k) Payroll Savings and Profit Sharing Plan ($3,200 in 1999, $3,300 in 1998 and $1,700 and $3,000 in 1996). 7 The following table summarizes the number of shares and the terms and conditions of stock options granted to the named executive officers in 1999. OPTION GRANTS IN 1999
POTENTIAL REALIZABLE % OF TOTAL VALUE AT ASSUMED ANNUAL OPTIONS RATES OF STOCK PRICE GRANTED APPRECIATION FOR OPTION EMPLOYEES EXERCISE TERM (D) OPTIONS DURING PRICE PER EXPIRATION ----------------------- NAME GRANTED (A) 1999 SHARE (B) DATE (C) 5% 10% ---- ----------- ---------- --------- ---------- --------- ----------- R. M. Rodstein................. 150,000 66.7% $7.500 12/20/09 $707,500 $1,793,000 J. J. Rangel................... 75,000 33.3% $7.500 12/20/09 $353,800 $ 896,500 D. H. Herzberg................. -- -- -- -- -- -- J.W. Merck..................... -- -- -- -- -- -- D. G. Cook..................... -- -- -- -- -- --
- ------------------------ (a) All options granted to the named individuals for 1999 are exercisable as to 20% after one year from date of grant, an additional 30% after two years and an additional 50% after three years. During 1999, stock option awards were granted only to Mr. Rodstein and Mr. Rangel shown on the schedule above. In early 2000, awards were made to the named individuals as follows: Mr. Rodstein (150,000), Mr. Rangel (75,000), Mr. Herzberg (25,000), Mr. Merck (25,000) and Mr. Cook (22,000). These grants were more than the customary annual grant and were intended to be the only grants to these recipients for three years in the absence of promotions or other special circumstances. (b) The exercise price is the closing price of K2's common stock on December 20, 1999, the date of grant. (c) All options granted to the named individuals for 1999 expire on the tenth anniversary of the date of grant, subject to earlier expiration in the event of the officer's termination of employment with K2. (d) In order for the named individuals to realize these potential values, the closing price of K2's common stock on December 20, 2009 would have to be $12.22 and $19.45 per share, respectively. 8 The following table summarizes exercises of stock options in 1999 which were previously granted to the President and Chief Executive Officer and the other named executive officers, as well as the number of all unexercised options held by them at the end of 1999, and their value at that date if they were in-the- money. AGGREGATED STOCK OPTION EXERCISES IN 1999 AND YEAR-END OPTION VALUES
VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS AT 12/31/99 NUMBER OF UNEXERCISED ----------------------------------------- SHARES OPTIONS AT 12/31/99 EXERCISABLE UNEXERCISABLE ACQUIRED ON VALUE --------------------------- ------------------- ------------------- NAME EXERCISE (A) REALIZED EXERCISABLE UNEXERCISABLE SHARES TOTAL $ SHARES TOTAL $ ---- ------------ -------- ----------- ------------- -------- -------- -------- -------- R. M. Rodstein....... -- -- 160,920 207,500 -- -- 150,000 18,750 J. J. Rangel......... -- -- 88,575 113,000 -- -- 75,000 9,375 D. H. Herzberg....... -- -- 36,908 13,600 -- -- -- -- J. W. Merck.......... -- -- 11,400 13,600 -- -- -- -- D. G. Cook........... -- -- 36,254 13,600 -- -- -- --
- ------------------------ (a) Optionees, in the discretion of the Compensation Committee, may be granted the right to borrow money from K2 in connection with the exercise of options under the 1994 and 1988 Incentive Stock Option Plans. Each currently outstanding loan bears interest, payable quarterly, at a fixed rate equal to the applicable federal rate, as published by the Internal Revenue Service, for the period during which the loan was made. At December 31, 1999, the aggregate loans outstanding to executive officers in connection with the exercise of stock options and the weighted average Applicable Federal Rate at which they bear interest were: Mr. Doyle ($128,400, 5.57%), Mr. Herzberg ($46,100, 5.89%) and Mr. Merck ($43,800, 5.97%). PENSION PLANS K2 maintains several defined benefit pension plans for the benefit of eligible K2. employees and employees of its Shakespeare and Stearns business units. The plans are tax-qualified, K2-funded plans subject to the provisions of ERISA. Contributions to the plans, which are made solely by K2, are actuarially determined. Benefits under the plans are based on years of service and remuneration. The table below illustrates approximate annual benefits under the Pension Plan of K2 Inc. (the "K2 Plan"), based on the indicated assumptions. For 1999, the Internal Revenue Code (the "Code") limits the K2 Plan's covered compensation to $160,000.
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65 (A) YEARS OF SERVICE --------------------------------------------------------- COVERED COMPENSATION 15 20 25 30 35 -------------------- --------- --------- --------- --------- --------- $125,000....................... $18,750 $25,000 $31,250 $37,500 $43,750 $150,000....................... 22,500 30,000 37,500 45,000 52,500 $175,000....................... 24,000 32,000 40,000 48,000 56,000
- ------------------------ (a) An individual retiring at age 65 earns his maximum pension (as a percentage of covered compensation) at 35 years of service. 9 The K2 Plan defines remuneration on which annual benefits are based as the average of the participant's highest five consecutive years' earnings. Earnings include salary, wages, overtime pay, commissions, bonuses, and similar forms of incentive compensation actually paid during the year not exceeding certain amounts for sales personnel and subject to the $160,000 Code Limit in 1999 for all personnel. Compensation for 1999 that would be included in the calculation of covered compensation and credited years of service at December 31, 1999 is shown below for the individuals named in the Summary Compensation Table who are participants in the plan.
COVERED YEARS OF NAME COMPENSATION SERVICE ---- ------------ -------- Richard M. Rodstein.................................... $160,000 16 John J. Rangel......................................... 160,000 15
The Salaried Employees' Pension Plan of Shakespeare Company (the "Shakespeare Plan") defines remuneration upon which annual benefits are based as the average of the employee's highest five consecutive years' earnings. Earnings include the employee's regular basic monthly earnings excluding commissions, bonuses, maintenance, overtime and other extra compensation, not exceeding certain amounts for field sales personnel and subject to the $160,000 Code Limit in 1999 for all personnel. The table below illustrates approximate annual benefits under the Shakespeare pension plan based on the indicated assumptions.
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65 (A) ----------------------------------------- YEARS OF SERVICE ---------------- COVERED COMPENSATION 15 20 25 45 -------------------- -------- -------- -------- -------- $125,000................................ $26,300 $43,800 $61,300 $75,000 $150,000................................ 31,500 52,500 73,500 90,000 $175,000................................ 33,600 56,000 78,400 96,000
- ------------------------ (a) An individual retiring at age 65 earns his maximum pension (as a percentage of covered compensation) after approximately 43 years of service. Compensation for 1999 that would be included in the calculation of covered compensation and credited years of service at December 31, 1999 is shown below for the individuals named in the Summary Compensation Table who are participants in the Shakespeare Plan.
COVERED YEARS OF NAME COMPENSATION SERVICE ---- ------------ -------- David H. Herzberg...................................... $160,000 20 J. Wayne Merck......................................... $160,000 9
The Stearns Manufacturing Company Salaried, Administrative and Clerical Employees' Pension Plan (the "Stearns Plan") defines remuneration on which annual benefits are based as the average of the participant's highest 60 months' compensation. Compensation includes salary, wages, overtime pay, bonuses, and commissions, subject to the $160,000 Code limit for 1999. The 1999 covered compensation of 10 Mr. Cook, the only individual named in the Summary Compensation Table who participates in the Stearns Plan, was $160,000, and he had 20 years of service as of December 31, 1999. The table below illustrates approximate annual benefits under the Stearns Plan based on the indicated assumptions.
APPROXIMATE ANNUAL PENSION UPON RETIREMENT AT AGE 65 (A) ----------------------------------------- YEARS OF SERVICE ---------------- COVERED COMPENSATION 15 20 25 30 -------------------- -------- -------- -------- -------- $125,000................................ $26,700 $34,200 $42,800 $51,300 $150,000................................ 31,300 41,700 52,100 62,600 $175,000................................ 33,500 44,700 55,900 67,000
- ------------------------ (a) An individual retiring at age 65 earns his maximum pension (as a percentage of covered compensation) at 30 years of service. EMPLOYMENT AGREEMENTS Messr's Rodstein and Rangel are employed pursuant to employment agreements which expire May 7, 2001 and November 7, 2000, respectively. Mr. Rodstein's agreement calls for base salary at the annual rate of $325,000, subject to such increases as the Board may approve, and participation in K2's incentive compensation and benefit programs on a basis which is appropriate in light of his position. Mr. Rangel's agreement calls for base salary at the annual rate of $210,000 and is otherwise similar to Mr. Rodstein's. Each of the agreements provides for severance benefits payable following a change in control, based upon 299% of the employee's total compensation prior to the termination, and accelerated vesting of outstanding stock options. DIRECTORS' COMPENSATION In 1999 directors who were not salaried officers of K2 were paid $1,500 per calendar quarter for their services as directors, $1,000 per calendar quarter for each committee position held by them and $1,000 per meeting day for each meeting of the Board of Directors and of any committee which they attended. They were also reimbursed for out-of-pocket expenses. Directors may elect to defer the receipt of fees. Interest on deferred fees is accrued quarterly based on the average interest rate paid by K2 in the preceding quarter on its short-term borrowings. Under K2's Directors' Medical Expense Reimbursement Plan, non- employee directors are reimbursed at the rate of 185% for up to $10,000 of medical and dental expenses not covered under other health insurance plans. For 1999 an aggregate of $94,644 was paid under such plan. Under the 1994 Incentive Stock Option Plan, nonemployee directors receive an initial grant of 1,000 stock options on the first grant date after their election and annual grants thereafter of 500 stock options. All grants to nonemployee directors are at fair market value on date of grant and are exercisable as to 20% after one year from date of grant, an additional 30% after two years and an additional 50% after three years, all exercisable amounts being cumulative. In 1999, an initial grant of 1,000 stock options was made to Wilford D. Godbold, Jr. and grants of 500 stock options each were made to Susan E. Engel, Bernard I. Forester, Jerry E. Goldress, Richard J. Heckmann, Stewart M. Kasen and John H. Offermans. Each stock option granted had an exercise price of $10.63 per share, the closing price on the January 4, 1999 grant date, and each was for a ten-year term. 11 During 1999, K2 maintained a Non-Employee Directors' Benefit Plan, payable out of the general funds of K2, under which a non-employee director who is vested (at least ten years of service as a director) is entitled to receive, in general, an annual retirement benefit during the period commencing upon the later of age 55 and the date the director retires from the Board of Directors and ending upon the earlier of the director's death or the number of years equal to the director's years of service as a non-employee director. Under the Plan, the annual retirement benefit is the product of (i) the director's average annual fees (based on the three-year period immediately preceding retirement from the Board of Directors) and (ii) the sum of .55 plus an additional .05 for each full year of service in excess of 11 years of service and up to 20 years. A director may make an irrevocable election so that, in lieu of the retirement benefit described above, the director's beneficiary would instead receive, on the director's postretirement death, the discounted value of such benefit. In the event of a change in control, as defined in the Plan, a vested director would receive on retirement an actuarially reduced lump sum payment in lieu of installment payments. Under the terms of a retirement agreement between Mr. Forester and K2, Mr. Forester has waived any right to a retirement benefit under this Plan. Mr. Forester receives supplemental retirement benefits of approximately $319,300 each year during his lifetime under a retirement agreement with K2. The supplemental retirement benefit is funded through a trust that has Wells Fargo Bank as its trustee. The retirement agreement also provides for the continuation of a pre-existing, split- dollar life insurance policy on Mr. Forester's life. For 1999, the dollar value to Mr. Forester of the premiums paid by K2 on this policy was $22,800. COMPENSATION COMMITTEE REPORT COMPENSATION OBJECTIVES AND PRACTICES The compensation committee is comprised of directors who are not employees or former employees of K2. K2's executive compensation program is designed to help K2 attract, motivate and appropriately reward management who are responsible for K2's short-term and long-term profitability, growth and return to shareholders. The key elements of the program consist of base salary, annual performance-based cash rewards and long-term incentive awards. The committee utilizes the services of an independent executive compensation consulting firm in evaluating awards. BASE SALARY. Base salaries are generally established by evaluating the responsibilities of the position, the experience of the individual and salaries for comparable positions in the marketplace based on survey data provided by the compensation consultant. Depending on the overall financial performance of K2, salaries are adjusted from time to time to reflect increased responsibilities, to keep pace with competitive practices and to reflect the performance of individual executives. The program has been designed to place a significant amount of compensation at risk by setting annual base salaries at levels just below the 50th percentile of the marketplace for similar positions based on the survey data obtained. ANNUAL CASH INCENTIVES. The amount of the annual performance-based cash incentive available for allocation to the executive officers who participated in the plan is based on a formula adopted pursuant to the Executive Officers' Incentive Compensation Plan. The formula makes available for allocation a percentage of K2's incentive compensation income in excess of a required minimum return on average shareholders' equity. Performance criteria were also adopted for the plan participants to assist the compensation committee in determining the allocation of any bonus pool generated. The performance criteria were designed to create value for K2 and its shareholders. The individual's performance is subjectively evaluated against their criteria. The targeted annual incentive award is meant to bring total annual cash compensation (base salary plus annual incentive award) to above the average, as defined by 12 survey data provided by the compensation consultant for comparable positions at similar-sized companies, when superior performance levels are achieved. LONG-TERM STOCK INCENTIVES. Stock incentives are provided to encourage management to take actions that will maximize long-term stockholder value, and to link their interests to those of K2's stockholders. All stock options have an exercise price equal to the market price of K2's stock on the date of grant and vest over three years. By utilizing such pricing and vesting, the compensation committee intended that the full benefit would be realized only if stock price appreciation occurs and if the key employee does not leave K2 during that period. In determining the number of options awarded to executive officers, the compensation committee considered information provided by K2's independent compensation consultants, which included, among other things, market studies of annual stock option grants as a percentage of shares outstanding and individual grants as a percentage of compensation utilizing the Black-Scholes formula. During 1999, stock option awards were granted only to the Chief Executive Officer and the Senior Vice President Finance. In early 2000, however, stock options were granted to a broad group of executives, including Mr. Rodstein and Mr. Rangel. These grants were greater than the customary annual grants and were intended to be the only grants to these recipients for three years in the absence of promotions or special circumstances. CHIEF EXECUTIVE COMPENSATION The compensation committee held the salary of the chief executive officer for 1999 constant with the prior year at $325,000. Consequently, Mr. Rodstein's base salary was 40% below the 50th percentile of the marketplace for similar positions, according to survey data. In determining the Chief Executive Officer's incentive compensation award for 1999, the Committee considered K2's performance for the year in meeting sales and earnings targets, stock price performance, innovating new products and generating sales from such new products, completion of strategic acquisitions, implementation of cost reduction programs, improving key quality and process improvement measures and augmenting K2's long-term strategic plan for sustainable growth. The Committee noted that while K2 exceeded published earnings targets for 1999, its stock price declined 25% for the year. The committee, on the other hand, noted that K2's peer group index declined 28% in the same period. The Committee also noted that recent product introductions and strategic acquisitions allowed K2 to extend its major brands into new categories and geographic segments, and that sales of its sporting goods products increased 17% over the prior year. Finally, the committee considered the announcement and implementation of a strategic cost reduction program. Taking all of these factors into consideration, an award of $202,000 was granted to the Chief Executive Officer compared to no award a year ago. The 1999 total compensation for the Chief Executive Officer, including the award represents a 35% shortfall from the 50th percentile for total compensation of the marketplace for similar positions, according to survey data. On December 20, 1999, Mr. Rodstein was granted options to purchase 150,000 shares of K2 common stock at $7.50 per share, the market price at the date of grant. An additional grant of options to purchase 150,000 shares of K2 common stock was awarded on January 4, 2000, with an exercise price of $7.125 per share, the market price on the date of grant. Jerry E. Goldress, Chairman Richard J. Heckmann Stewart M. Kasen 13 COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Messrs. Goldress, Heckmann and Kasen served on the compensation committee of K2 during the year 1999. No member of the compensation committee was, during the year 1999, either an officer or employee or a former officer or employee of K2 or any of its subsidiaries, nor did any member have any relationship with K2 which would be required to be disclosed. STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS Set forth below is the name, address and number of shares of Common Stock beneficially owned as of March 24, 2000 by each person known to K2 to own 5% or more of the outstanding shares of Common Stock.
SHARES OF PERCENT SHAREHOLDER COMMON STOCK OF CLASS ----------- ------------ -------- ICM Asset Management, Inc. ................................. 1,839,023(a) 10.2 601 West Main Avenue, Suite 600 Spokane, WA 99201 Trust under Company's Employee Stock Ownership Plan ........ 1,724,593(b) 9.6 4900 South Eastern Avenue Los Angeles, CA 90040 Dimensional Fund Advisors .................................. 1,081,429(c) 6.0 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 Heartland Advisors, Inc. ................................... 1,054,500(d) 5.9 789 North Water Street Milwaukee, WI 53202 The Anthony Family Trust ................................... 1,001,249(e) 5.6 65 Park Lane Concord, MA 01742
- ------------------------ (a) Based on the most recently filed Form 13G of ICM Asset Management, Inc. dated February 8, 2000. (b) Includes shares allocated to the accounts of participants in the ESOP, the voting of which is directed by such participants. Until shares are allocated to the accounts of participants in the ESOP, the terms of the Trust require the Trustee to vote those shares in the same proportion as the allocated shares are voted. (c) Based on the most recently filed Form 13G of Dimensional Fund Advisors dated February 4, 2000. (d) Based on the most recently filed Form 13G of Heartland Advisors, Inc. dated January 20, 2000. (e) Based on the most recently filed Form 13D of The Anthony Family Trust dated May 22, 1996. 14 STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
SHARES OF COMMON STOCK BENEFICIALLY OWNED ON NAME MARCH 24, 2000 (A) PERCENT OF CLASS (B) ---- ---------------------- --------------------- Directors and Nominees for Director Susan E. Engel....................................... 11,350 * Bernard I. Forester.................................. 377,363 2.1% Wilford D. Godbold, Jr............................... 11,200 * Jerry E. Goldress.................................... 12,850 * Richard J. Heckmann.................................. 65,100 .4% Robin E. Hernreich................................... 7,500 * Stewart M. Kasen..................................... 12,100 * John H. Offermans.................................... 3,107 * Alfred E. Osborne, Jr................................ 15,000 * Richard M. Rodstein.................................. 305,165 1.7% Executive Officers (c)................................. John J. Rangel....................................... 140,433 .8% David H. Herzberg.................................... 79,037 .4% J. Wayne Merck....................................... 19,219 .1% David G. Cook........................................ 79,254 .4% All Directors and Executive Officers as a group (19)... 1,347,019 7.3%
- ------------------------ (a) Includes the following shares subject to options exercisable within 60 days of the date of this Proxy Statement: Susan E. Engel-11,350 shares; Bernard I. Forester-1,850 shares; Wilford D. Godbold, Jr.-10,200 shares; Jerry E. Goldress-11,350 shares; Richard J. Heckmann-10,600 shares; Stewart M. Kasen-10,600 shares; John H. Offermans-2,900 shares; Alfred E. Osborne, Jr.-10,000 shares; Richard M. Rodstein-160,920 shares; John J. Rangel-88,575 shares; David H. Herzberg-36,908 shares; J. Wayne Merck-11,400 shares; David G. Cook-36,254 shares; and all directors and officers as a group-503,365 shares. The above include options granted on January 4, 2000 to Ms. Engel, Mr. Godbold, Mr. Goldress, Mr. Heckmann, Mr. Kasen and Dr. Osborne under a new directors compensation plan which was effective as of January 1, 2000. These options, which are exercisable at the market price at the date of grant, vest immediately. With the exception of the shares referred to in the preceding sentence and the shares allocated to the accounts of Mr. Rodstein (15,076 shares), Mr. Rangel (7,943 shares), Mr. Herzberg (15,031 shares), Mr. Merck (1,519 shares), Mr. Cook (3,356 shares), and all directors and officers as a group (80,630 shares), under K2's ESOP, each of the named persons has sole voting and investment power with respect to the shares beneficially owned by him. (b) The shares subject to options described in note (a) for each individual were deemed to be outstanding for purposes of calculating the percentage owned by such individual. (c) Executive officers named in the Summary Compensation Table (other than Mr. Rodstein, whose securities holdings are listed above). * Less than .1%. 15 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires K2's directors and executive officers to file initial reports of ownership and reports of changes of ownership of K2's Common Stock with the Securities and Exchange Commission. Executive officers and directors are required to furnish K2 with copies of all Section 16(a) forms that they file. Based upon a review of these filings and written representations from certain of K2's directors and executive officers that no other reports were required, all such Forms were filed on a timely basis by reporting persons, exept two Form 4's reporting single transactions were filed late by Richard J. Heckmann; and a Form 3 reporting a single transaction was filed late by Alfred E. Osborne, Jr. EMPLOYMENT OF INDEPENDENT AUDITORS Upon the recommendation of the Audit Committee, the Board of Directors has chosen the firm of Ernst & Young LLP as independent auditors to examine the consolidated financial statements of K2 for the year 2000. A representative of Ernst & Young LLP is expected to be present at the annual meeting with the opportunity to make a statement, if he so desires, and to be available to respond to appropriate questions. SHAREHOLDER PROPOSALS Any proposal by a shareholder intended to be presented at K2's 2001 annual meeting of shareholders must be received by K2 no later than November 30, 2000 for inclusion in the proxy statement and form of proxy for that meeting. OTHER MATTERS The Board of Directors knows of no other business to be presented at the meeting. If other matters do properly come before the meeting, the persons acting pursuant to the proxy will vote on them in their discretion. A copy of the 1999 Annual Report to shareholders is being mailed with this Proxy Statement. UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER OF RECORD AS OF MARCH 24, 2000, A COPY OF K2'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1999 (EXCLUDING EXHIBITS) AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL BE SUPPLIED WITHOUT CHARGE. REQUESTS SHOULD BE DIRECTED TO THE SECRETARY OF K2 INC., 4900 SOUTH EASTERN AVENUE, LOS ANGELES, CALIFORNIA 90040. [SIGNATURE] RICHARD M. RODSTEIN PRESIDENT AND CHIEF EXECUTIVE OFFICER LOS ANGELES, CALIFORNIA MARCH 29, 2000 16 K2, INC. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS RICHARD M. RODSTEIN, BERNARD I. FORESTER and SUSAN E. McCONNELL, and each of them, with full power of substitution, are hereby authorized to represent and to vote the stock of the undersigned in K2, INC. at the Annual Meeting of Shareholders to be held on April 28, 2000 and at any adjournment thereof as set forth below: (Continued and to be signed on reverse side) - FOLD AND DETACH HERE - K2, INC. PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /X/ For Withheld For All All All Except 1. ELECTION OF DIRECTORS 01 Richard J. Heckmann, 02 Robin E. Hernreich, / / / / / / 03 Stewart M. Kasen (INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.) _________________________________________________ For Against Abstain 2. PROPOSAL TO RATIFY THE SELECTION OF ERNST & YOUNG LLP as independent auditors for 2000. / / / / / / 3. Upon or in connection with the transaction of such other business as may properly come before / / / / / / the meeting or any ajournment thereof. THIS PROXY WILL BE VOTED AS SPECIFIED AND, UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL 2. Dated _______________________________, 2000 _____________________________________ Signature _____________________________________ Signature if held jointly Please sign exactly as name appears at left. When shares are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President of other authorized officer. If a partnership, please sign in partnership name by authorized person. - FOLD AND DETACH HERE - PLEASE MARK, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. -----END PRIVACY-ENHANCED MESSAGE-----