Sunbeam 2007 Annual Report Download - page 95

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Sale of K2 Inc. to Jarden Corporation
City of Roseville Employees’ Retirement System v. K2 Inc., et al.
This case was filed on May 4, 2007 by a shareholder of K2 on behalf of itself and a putative class of
shareholders against K2 and the members of its Board of Directors seeking to enjoin the merger transaction (the
“Merger”) between K2 and a wholly owned subsidiary of the Company on the purported grounds that the
members of the Board of Directors of K2 allegedly breached fiduciary duties to the K2 shareholders in
connection with the negotiation and structure of the Merger as well as the disclosures made by K2 to
shareholders in its proxy. On July 30, 2007, K2 announced that it and the City of Roseville Employees’
Retirement System agreed to a settlement in principle of the pending litigation pursuant to which K2 made
certain disclosures regarding the transaction in its proxy materials sent to shareholders and reports filed with the
SEC and amended the merger agreement to reduce from $27.5 million to$24 million the termination fee that
would have been payable by K2 to the Company under certain circumstances in the event that the merger
agreement had been terminated. The settlement includes full releases of all the defendants as well as the
Company. The settlement was approved preliminarily by the California Superior Court on February 8, 2008 and
a hearing on final approval is scheduled for April 9, 2008. A companion case brought by Steamfitters Local 449
Pension & Retirement Security Funds has been dismissed.
Other
In connection with the sale of its Anthony Pools Division, K2 received certain distributions in 1997 and
1998 from a corporation in which it held a minority interest. On March 30, 2007, K2 received a notice of liability
from the Internal Revenue Service asserting transferee liability for federal income taxes of this corporation
totaling $16.5 million. K2 has contested the notice of liability by filing a petition in United States Tax Court and
intends to defend itself, by among other things, seeking contribution from other shareholders of this corporation.
At this time, K2 is continuing to gather information related to this matter.
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