K-Swiss (KSWS)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant  x

Filed by a Party other than the Registrant  ¨

Check the appropriate box:

K-Swiss Inc.

(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

31248 Oak Crest Drive

Westlake Village, California 91361

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

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^® Corporate Office, 31248 Oak Crest Drive, Westlake Village, California 91361 on Thursday, May 19, 2005 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 five directors, in each case to serve one-year terms ending in 2006, or until their successors are elected and qualified.

(2)  To ratify the appointment of Grant Thornton LLP as the Company’s independent auditors for fiscal year 2005.

(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 March 29, 2005 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

Steven Nichols

Chairman of the Board and

    President

Westlake Village, California

April 11, 2005

K•SWISS INC.

31248 Oak Crest Drive

Westlake Village, California 91361

PROXY STATEMENT

FOR ANNUAL MEETING OF STOCKHOLDERS

May 19, 2005

This Proxy Statement is being mailed on or about April 11, 2005 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 19, 2005 at 10:00 a.m. at the K•Swiss^® 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.

Only stockholders of record at the close of business on March 29, 2005 are entitled to notice of and to vote at the meeting and at any adjournment or postponement thereof. As of March 29, 2005, 25,962,241 shares of Class A Common Stock and 8,380,128 shares of Class B Common Stock were outstanding, all of which shares are entitled to be voted at the meeting. As of March 29, 2005, 1,727,658 shares of Class A Common Stock were issued but held by the Company as treasury shares and are not entitled to vote 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 five members of the Company’s Board of Directors. 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. 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.

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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. The Company intends to disclose the results of the vote of the Annual Meeting by June 2, 2005.

PROPOSAL ONE

Under the Restated Certificate of Incorporation and the Restated Bylaws of the Company, two (2) directors out of a total of seven (7) are to be elected at the 2005 Annual Meeting of Stockholders by the holders of Class A Common Stock to serve one-year terms expiring at the 2006 Annual Meeting of Stockholders or until their successors are duly elected and qualified. The remaining five (5) directors are to be elected at the 2005 Annual Meeting of Stockholders by the holders of Class B Common Stock to serve one-year terms expiring at the 2006 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 David Lewin and Mark Louie, and the Class B Common Stock proxy will be voted to re-elect Steven Nichols, George Powlick, Lawrence Feldman, Stephen Fine and Martyn Wilford, in all cases to serve until the 2006 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.

The vote of a majority of the shares of Class A Common Stock voting at the Annual Meeting (with each share entitled to one vote) is required for the election of the two directors to be elected by the holders of Class A Common Stock. The vote of a majority of the shares of Class B Common Stock voting at the Annual Meeting (with each share entitled to ten votes) is required for the election of the five directors to be elected by the holders of Class B Common Stock.

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Steven Nichols has been President, Chief Executive Officer 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, Vice President—Finance, Chief Financial Officer and Secretary since January 1988, Director since 1990 and Chief Operating Officer since September 2004, 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 and Vice-President of Loom & Weave, LLC, a wholesaler of collectible antique textiles and rugs, since 2000. 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 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 was a Director of Maxwell Shoe Company Inc., a manufacturer of women’s casual and dress footwear from April 1994 to July 2004.

David Lewin, a Director of the Company, is the Neil Jacoby Professor of Management as well as Senior Associate Dean for the MBA Program at The John E. Anderson Graduate School of Management at the University of California at Los Angeles. Mr. Lewin has been a professor at UCLA since 1990. Since 2002, Mr. Lewin has also been a permanently associated consultant of LECG, LLC, an international consultancy providing expert testimony and analysis in wage and hour, antitrust, industrial organization and related litigation. Since 1992, Mr. Lewin has also been a General Partner with Competitive Advantage Partners, a consulting firm.

Mark Louie, a Director of the Company, is the Senior Vice President—Business Development and Strategy for C. M. Capital Corporation, an Advisor to a Hong Kong based family with investments in the U.S. and throughout the world. Beginning February 2000, Mr. Louie has been a Managing Member and Chief Financial Officer of TechFund Europe Management, LLC and affiliated entities (“TechFund”), an early stage venture capital investor. Beginning February 2004, Mr. Louie also provides financial consulting services to various businesses and companies, affiliated with or independent of C. M. Capital or TechFund. From 1983 to 2000, Mr. Louie was a Vice President in the Investment Banking Division of Goldman Sachs Group, Inc.

Martyn Wilford, a Director of the Company, has been Chairman of the Board and Chief Executive Officer of Joseph Clark & Sons (Soho) Limited, a real estate holding company, since 1986. Mr. Wilford joined Joseph Clark & Sons in 1974. He is a chartered accountant.

The Board of Directors held six formal meetings during fiscal 2004 and took action on numerous matters by unanimous written consent. Each Director attended at least 75% of the meetings of the Board of Directors and the Board Committees of which he was a member, except for Mr. David Lewin who attended fewer than 75% of meetings of a Board Committee of which he was a member.

The Board of Directors has the following standing committees: Compensation and Stock Option Committee, Audit Committee and Corporate Governance and Nominating Committee.

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The Compensation and Stock Option Committee is composed of Messrs. Lawrence Feldman, Stephen Fine (Chairman) and David Lewin. The Board of Directors has determined that Messrs. Feldman, Fine and Lewin are “independent directors” within the meaning of the National Association of Securities Dealers listing standards. This Committee met six times during fiscal 2004.

The Audit Committee is composed of Messrs. Feldman (Chairman), Fine and Mark Louie. The Board of Directors has determined that Messrs. Feldman, Fine and Louie are “independent directors” within the meaning of the National Association of Securities Dealers listing standards and meet the requirements set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as Amended. The Board of Directors has determined that Mr. Louie qualifies as the “audit committee financial expert” as that term is defined in Item 401(h)(2) of Regulation S-K in the Securities Exchange Act of 1934. This committee met seven times during fiscal 2004.

The Corporate Governance and Nominating Committee is composed of Messrs Feldman (Chairman), Fine and Lewin. The Board of Directors has determined that Messrs. Feldman, Fine and Lewin are “independent directors” within the meaning of the National Association of Securities Dealers listing standards. Because the Corporate Governance and Nominating Committee was formed in March 2004, it held one meeting during fiscal 2004. The Corporate Governance and Nominating Committee is in the process of developing corporate governance guidelines for adoption.

During fiscal 2004, the Company’s non-management directors met regularly in executive sessions outside the presence of management and intend to do so in fiscal 2005 as well. Such executive sessions are generally held in conjunction with each regularly scheduled meeting of the Board of Directors. Non-management directors are directors who are not officers of the Company but could otherwise include directors, if any, who are not “independent” by virtue of the existence of a material relationship with the Company. The Board of Directors has not formally appointed a single director to preside as lead director of these executive sessions. Instead, various non-management directors preside at such sessions from time to time depending on the nature of the topics discussed. The non-management directors have discussed the issue of executive management succession planning. Communications to the non-employee directors may be sent to non-employee directors c/o Corporate Secretary, K•Swiss Inc., 31248 Oak Crest Drive, Westlake Village, California 91361.

Pursuant to the terms of their charters, both the Audit Committee and the Corporate Governance and Nominating Committee evaluate their performance and assess the adequacy of their respective charters annually. Additionally, the Company’s policy is to provide an orientation process for new directors, including a review of background material on the Company, meetings with senior management and a briefing on key issues facing the Company. The Company provided such an orientation process for its newest director, Mark Louie.

During 2004, all directors who are not employees were paid a lump-sum of $2,000, plus $3,000 for each committee served on and $2,000 per regular Board of Directors meeting attended, and normal and necessary expenses for attending all such meetings. The Company also pays non-employee directors of its subsidiaries similar amounts.

Any stockholder interested in communicating with members of the Board of Directors may send written communications to the Board of Directors or any of the Directors to K•Swiss Inc., 31248 Oak Crest Drive, Westlake Village, California 91361, Attention: George Powlick, Secretary. Communications received in writing are forwarded to the Board of Directors or to any individual director or directors to whom the communication is directed, unless the communication is unduly hostile, threatening, illegal, does not reasonably relate to the

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Company or its business, or is similarly inappropriate. The Secretary has the authority to discard or disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications. Directors are expected to attend the annual meetings of stockholders. Last year all directors attended this meeting.

The affirmative vote of a majority of the votes cast is required to elect the Board of Directors. In addition, the affirmative votes must represent at least a majority of the required quorum. The Board of Directors unanimously recommends a vote “FOR” the election of each of the nominated directors.

PROPOSAL TWO

Grant Thornton LLP was the Company’s certified public accountant for fiscal 2004. During fiscal 2004, the Company also engaged Grant Thornton LLP to render certain non-audit professional services involving general consultations, as further described below.

The appointment of auditors is approved annually by the Audit Committee of the Board of Directors. In making its appointment, the Audit Committee reviewed both the audit scope and estimated audit fees for the coming year. Grant Thornton LLP has been selected by the Audit Committee for the current year. Each professional service performed by Grant Thornton LLP during fiscal 2004 was reviewed, and the possible effect of such service on the independence of the firm was considered, by the Audit Committee. Additionally, the Audit Committee requires the rotation of its outside auditor’s audit partners as required by the Sarbanes-Oxley Act and the related rules of the Securities and Exchange Commission. Representatives of Grant Thornton LLP 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.

The Audit Committee has adopted policies and procedures for pre-approving all audit services, audit-related services, tax services and non-audit services performed by Grant Thornton LLP. Specifically, the Audit Committee has pre-approved the use of Grant Thornton LLP for detailed, specific types of services within the following categories: annual audits, quarterly reviews and statutory audits, preparation of certain international corporate tax returns, regulatory implementation and compliance and risk assessment guidance. In each case, the Audit Committee has also set specific annual ranges or limits on the amount of each category of services which the Company would obtain from Grant Thornton LLP, which limits and amounts are established annually by the Audit Committee. Any proposed services exceeding these levels or amounts require specific pre-approval by the Audit Committee. The Audit Committee has designated the Company’s Corporate Controller to monitor the performance of all services provided by the independent auditor, to determine whether such services are in compliance with the Company’s pre-approval policies and procedures and to report to the Audit Committee on a periodic basis on the results of its monitoring.

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The following table sets forth fees for services Grant Thornton LLP provided during fiscal years 2004 and 2003:

The Company’s Audit Committee of the Board of Directors has selected Grant Thornton LLP, independent auditors, to audit the Company’s consolidated financial statements for the fiscal year ending December 31, 2005, and the Audit Committee recommends that the stockholders vote for ratification of that appointment. The Company’s Audit Committee has reviewed each professional service described above, has considered the possible effect of such service on the independence of the firm, and has determined that such services have not affected Grant Thornton LLP’s independence. Notwithstanding this selection, the Audit Committee of the Board of Directors, in its discretion, may direct the appointment of new independent auditors at any time during the year if the Audit Committee believes such a change would be in the best interest of the Company and its stockholders. If there is a negative vote on ratification, the Audit Committee of the Board of Directors will reconsider its selection.

The affirmative vote of a majority of the votes cast is required to ratify the Audit Committee’s selection. In addition, the affirmative votes must represent at least a majority of the required quorum. If the stockholders reject the nomination, the Audit Committee will reconsider its selection. The Board of Directors unanimously recommends a vote “FOR” the ratification of the appointment of Grant Thornton LLP as independent auditors.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information known to the Company as of March 29, 2005 with respect to the beneficial ownership of the Company’s Common Stock by (i) each stockholder known by the Company to own beneficially more than 5% of the outstanding shares of any class of Common Stock, (ii) each director of the Company, (iii) each of the Named Officers (as defined in the “Executive Compensation” section, below) appearing in the Summary Compensation Table below, and (iv) all directors and officers as a group:

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The following table sets forth information with respect to the compensation paid by the Company during the years ended December 31, 2004, 2003 and 2002 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 2004.

SUMMARY COMPENSATION TABLE

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 balance accrued in notional EVA bank accounts at the end of 2001 for the Named Officers are as follows: Steven Nichols—$1,085,326, Deborah Mitchell—$192,632, George Powlick—$296,755 and Peter Worley—$79,964.

The balance accrued in notional EVA bank accounts at the end of 2002 (excluding amounts disclosed above as “Bonus” but including balances carried forward from 2001) for the Named Officers are as follows: Steven Nichols—$835,255, Deborah Mitchell—$256,215, George Powlick—$229,663 and Peter Worley—$151,450.

The balance accrued in notional EVA bank accounts at the end of 2003 (excluding amounts disclosed above as “Bonus” but including balances carried forward from 2002) for the Named Officers are as follows: Steven Nichols—$4,029,237, Deborah Mitchell—$755,366, David Nichols—$501,874 (joined the program in 2003), George Powlick—$1,137,409 and Peter Worley—$587,615.

The balance accrued in notional EVA bank accounts at the end of 2004 (excluding amounts disclosed above as “Bonus” but including balances carried forward from 2003) for the Named Officers are as follows:

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Steven Nichols—$4,242,878, Deborah Mitchell—$642,422, David Nichols—$529,739, George Powlick—$1,187,515 and Peter Worley—$488,923. 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.”

The following table sets forth information with respect to options to purchase the Company’s Class A Common Stock granted in 2004 to the Named Officers.

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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

The following table sets forth information with respect to options exercised during 2004, unexercised options, and year end values, in each case with respect to options to purchase the Company’s Class A Common Stock granted in 2004 and prior years under the 1990 and 1999 Stock Incentive Plans to the Named Officers and held by them at December 31, 2004.

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, 2001 and ending December 31, 2005 (the “Current Agreement”). Under the Current Agreement, Mr. Nichols is receiving an annual base salary of $863,750 during 2004 and will receive the same amount (plus an adjustment for cost of living increases) during 2005. Mr. Nichols is also eligible to receive a cash bonus award, if any, each year, payable pursuant to the Company’s Economic Value Added bonus plan, depending upon the financial performance of the Company as compared to the prior year. See “Compensation and Stock Option Committee Report.” The Current 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, 2005, if Mr. Nichols remains employed by the Company on or after that date. The Current 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.

On August 2, 2004, the Board of Directors of the Company approved an employment agreement with Mr. Nichols, commencing January 1, 2006 and ending December 31, 2010 (the “2006 Agreement”). Under the 2006 Agreement, Mr. Nichols will receive an annual base salary of $915,000 during 2006 and will receive the same amount (plus adjustments for cost of living increases) during 2007, 2008, 2009 and 2010. The remainder of the terms of the 2006 Agreement are substantially similar to those of the Current Agreement, including eligibility to receive cash bonus awards, existence of a non-competition period (except the restriction is not applicable beyond December 2010 under the 2006 Agreement), and termination rights for both Mr. Nichols and the Company.

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In addition, 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.

BOARD OF DIRECTORS COMMITTEES

The Board of Directors adopted a written charter for the Corporate Governance and Nominating Committee (“Governance Committee”) in March 2004, which is available on the Company’s website at www.kswiss.com. The purpose of the Governance Committee is to identify individuals qualified to become the directors elected by the holders of Class A Common Stock (consistent with criteria approved by the Board of Directors), recommend to the Board of Directors director candidates to be elected by the holders of Class A Common Stock for election at the annual meeting of stockholders, develop and recommend to the Board of Directors a set of corporate governance principles and perform a leadership role in shaping the Company’s corporate governance.

The Governance Committee has the authority to obtain advice and assistance from, and receive appropriate funding from the Company for outside counsel, experts and other advisors as the Governance Committee deems appropriate to assist it in the performance of its functions.

The Governance Committee utilizes a variety of methods for identifying and evaluating nominees. Its general policy is to assess the appropriate size of the Board of Directors, and whether any vacancies are expected due to retirement or otherwise. In the event that vacancies of the directors to be elected by the holders of Class A Common Stock are anticipated, or otherwise arise, the Governance Committee considers various potential candidates to fill such vacancies. Candidates may come to the attention of the Governance Committee through its current members, stockholders or other persons. These candidates are evaluated at regular or special meetings, and may be considered at any point during the year. The Board of Directors considers properly submitted stockholder nominations for candidacy.

In evaluating such nominations, like all nominations, the Governance Committee considers a variety of criteria, including business experience and skills, independence, judgment, integrity, the ability to commit sufficient time and attention to Board of Directors activities and the absence of potential conflicts with K•Swiss’ interests. Any stockholder nominations proposed for consideration by the Governance Committee should include the nominee’s name and qualifications for Board of Director membership and should be addressed to Corporate Governance and Nominating Committee, c/o K•Swiss Inc., 31248 Oak Crest Drive, Westlake Village, California 91361, Attention: George Powlick, Secretary. Following verification of the stockholder status of persons recommending candidates to the Governance Committee, recommendations are aggregated and considered by the Governance Committee at a regularly scheduled or special meeting. If any materials are provided by a stockholder in connection with the nomination of a director candidate, such materials are forwarded to the Governance Committee.

Corporate Governance and Nominating Committee

Lawrence Feldman, Chairman

Stephen Fine

David Lewin

Dated: March 29, 2005

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COMPENSATION AND STOCK OPTION COMMITTEE REPORT

The Compensation and Stock Option Committee (the “Compensation 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 further align executive officer and stockholder economic interests.

The Compensation 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, 2005 (the “Current Agreement”). On August 2, 2004, the Board of Directors of the Company approved an employment agreement with Mr. Nichols, commencing January 1, 2006 and ending December 31, 2010 (the “2006 Agreement”). See “Employment Agreements.” The Chief Executive Officer received an annual base salary of $863,750 during 2004 and will receive the same amount plus an adjustment for cost of living increases during each subsequent year thereafter. 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 this bonus program, the Chief Executive Officer received bonus payments of $906,128, $998,312 and $998,719 for the years ending December 31, 2002, 2003 and 2004, respectively. The Compensation Committee believes this arrangement provides the Chief Executive Officer significant incentive and aligns what could amount to (as in 2002, 2003 and 2004) a bonus equal to a substantial percentage of his annual salary directly to the Company’s economic improvement.

In February 2000, Mr. Nichols received a grant of 200,000 options to purchase shares of Class A Common Stock at an exercise price of $2.53 per share. In addition, the Current Agreement provided for the grant by the Company of options to purchase 200,000 shares of Class A Common Stock which options were granted in May 2000 at an exercise price of $3.19 per share. In August 2004, in accordance with the 2006 Agreement, Mr. Nichols received a grant of 50,000 options to purchase shares of Class A Common Stock at an exercise price of $18.18 per share. All exercise prices were not less than the fair market value of such shares at the time of grant. The Compensation 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 further aligned with the economic interests of the Company’s stockholders.

The Compensation 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 2004 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

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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) have been established after assessing recommendations of management and outside consultants. 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 his or her target bonus multiplied by the applicable 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 paid up to the notional bank balance or one full bonus target, whichever is smaller 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 executive leaves the Company or the subsequent years’ change in EVA does not achieve plan performance parameters.

During 2004, all Named Officers earned at least one target bonus. The Compensation Committee believes that EVA represents a key financial indicator of stockholder value and is an appropriate measure of Company financial performance. On December 15, 2004, the shareholders approved an amendment to the EVA Plan so it would comply with Section 162(m) of the Internal Revenue Code.

The Compensation 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 “Equity Compensation Plan Information.” Options are generally (but not always) granted at current market values and generally (but not always) vest over a five-year period or longer after the date of option grant. In some cases, the Compensation 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 Compensation 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 Compensation 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 Compensation Committee believes stock options are effective incentives for management to create value for stockholders. Consequently, the Compensation Committee believes stock options are a critical component of its long-term, performance-based compensation philosophy.

Under Section 162(m) of the Internal Revenue Code 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 that 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, among other requirements, 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.

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The Compensation Committee intends to design the Company’s compensation programs to conform with Section 162(m) 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 that qualify as “performance-based.” However, the Company may pay compensation which is not deductible in limited circumstances when the Compensation Committee or the Board of Directors determines it is in the best interests of the Company to do so.

Compensation and Stock Option Committee

Stephen Fine, Chairman

Lawrence Feldman

David Lewin

Dated: March 29, 2005

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, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent that the Company specifically incorporates same by reference.

Directors Feldman, Fine, and Lewin comprise the Compensation and Stock Option Committee and are “independent directors” within the meaning of the National Association of Securities Dealers listing standards.

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The Board of Directors adopted a written charter for the Audit Committee in 2003. The Audit Committee oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process including the internal control system. The Audit Committee has reviewed and discussed with management the audited financial statements.

The Audit Committee reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of the Company’s audited financial statements with generally accepted accounting principles, and the matters required to be discussed with the independent auditors by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees” including their judgments as to the quality, not just the acceptability, of the Company’s accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards. In addition, the Audit Committee has reviewed with the independent auditors the auditors’ independence from management and the Company including the matters in the written disclosures required by the Independence Standards Board.

The Audit Committee discussed with the Company’s independent auditors the overall scope and plans for their audits. The Audit Committee meets with the independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.

In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board of Directors has approved) that the audited financial statements be included in the Annual Report on Form 10-K for the year ended December 31, 2004, for filing with the Securities and Exchange Commission.

Audit Committee

Lawrence Feldman, Chairman

Stephen Fine

Mark Louie

Dated: March 29, 2005

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STOCK PRICE PERFORMANCE GRAPH

Compare 5-Year Cumulative Total Return

Among K•Swiss Inc. Class A Common Stock,

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 or under the Exchange Act, except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

ASSUMES $100 INVESTED ON JANUARY 1, 2000

ASSUMES DIVIDENDS REINVESTED

FISCAL YEARS ENDING DECEMBER 31

17

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 4,200,000 shares of Class A Common Stock, subject to adjustments under certain circumstances. As amended, the aggregate number of shares issuable upon options and other awards under this plan is 6,600,000 shares of Class A Common Stock. Any person who was employed by the Company on a salaried basis was eligible to participate in the 1990 Plan. As of January 9, 2000, awards were no longer permitted to 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 the Compensation Committee of the Board of Directors of the Company, which has full power to construe the 1990 Plan. The 1990 Plan authorized the Compensation 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.

As of March 29, 2005, there were 9,141,144 options granted, 5,884,004 options exercised, 2,877,674 options cancelled and 379,466 options outstanding under the 1990 Plan. Such options are exercisable at prices ranging from $0.13 to $8.75 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”) which plan provides that the number of shares that may be issued pursuant to all awards shall not exceed 2,400,000. On May 23, 2002 and December 15, 2004, the stockholders approved an increase in the number of shares that may be issued pursuant to all awards in the 1999 Plan by 1,200,000 and 1,000,000, respectively. As amended and restated, the aggregate number of shares that may be issued pursuant to all awards shall not exceed 4,600,000. The purpose of the 1999 Plan is to enable the Company to attract, retain and motivate its employees and consultants, and to attract, retain and motivate its non-employee directors and further align their interest with those of the stockholders of the Company by providing for or increasing the proprietary interest of such persons in the Company. 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 the Compensation Committee of the Board of Directors of the Company, which has full power to construe the 1999 Plan. The 1999 Plan authorizes the Compensation 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 March 29, 2005, 489 persons were eligible to so participate.

During the year ended December 31, 2004 six current executive officers (out of 10 persons) were granted options to acquire an aggregate of 115,000 shares of Class A Common Stock at an average exercise price of $18.92 per share. During the year ended December 31, 2004, other employees were granted options to acquire an aggregate of 206,799 shares of Class A Common Stock at an average exercise price of $19.69 per share. As of March 29, 2005, there were 4,097,765 options granted, 711,095 options exercised, 552,327 options cancelled, 2,834,343 options outstanding and 1,054,562 options available for future grant under the 1999 Plan. Such options are exercisable at prices ranging from $0.25 to $31.51 per share.

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The following table provides information with respect to compensation plans (including individual compensation arrangements) under which equity securities of K•Swiss are authorized for issuance to employees or non-employees (such as directors, consultants, advisors, vendors, customers, suppliers or lenders), as of December 31, 2004:

K•Swiss has adopted a “Code of Ethics,” which is applicable to K•Swiss directors, chief executive officer and senior financial officers, including the principal accounting officer. K•Swiss has also adopted a “Code of Ethics” which is applicable to directors, officers and employees. Both “Codes of Ethics” are available on K•Swiss’ website at www.kswiss.com. K•Swiss intends to post amendments to or waivers under the Codes of Ethics at this location on its website. Upon written request, K•Swiss will provide a copy of the “Codes of Ethics” free of charge. Requests should be directed to K•Swiss Inc., 31248 Oak Crest Drive, Westlake Village, California 91361, Attention: George Powlick, Secretary.

David Nichols, Executive Vice President, is the son of Steven Nichols, the Chairman, Chief Executive Officer and President of the Company. David Nichols has held various other positions with the Company since 1995, including Executive Vice President of K•Swiss Sales Corp., President of KS Amsterdam BV and President of K•Swiss Direct Inc. The Company provided housing to David Nichols from July 2000 through November 2002 when he temporarily relocated to Amsterdam, the Netherlands to become Managing Director of the Company’s European office.

Steven Nichols is a Director and the Chairman, President and sole member of the 324 Foundation, a California nonprofit public benefit corporation, which makes contributions to Section 501(c)(3) educational and charitable organizations. George Powlick and David Nichols, are also directors of the 324 Foundation. K•Swiss Inc. contributed $150,000, $300,000 and $137,500 to the 324 Foundation for the years ended December 31, 2004, 2003 and 2002, respectively.

The Audit Committee, among its other duties and responsibilities, reviews and monitors all related party transactions as defined in the applicable National Association of Securities Dealers listing standards. During 2004, there were no related party transactions between K•Swiss and its executive officers and directors.

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Section 16(a) of the Exchange Act requires that the Company’s directors, executive officers and persons who own more than 10 percent of the outstanding Class A Common Stock to file with the Securities and Exchange Commission and the Company reports of Form 4 and Form 5 reflecting transactions affecting beneficial ownership. Based solely upon the Company’s review of the information received, the Company believes that, during the year ended December 31, 2004, all persons complied with such filing requirements, except as set forth below. David Nichols, an executive officer of the Company, inadvertently failed to timely file with the Securities and Exchange Commission a Form 3 reporting his initial statement of beneficial ownership on May 6, 2004. A Form 3 was filed on March 3, 2005. Mr. David Nichols inadvertently failed to timely file with the Securities and Exchange Commission a Form 4 reporting the May 26, 2004 sale of Class A Common Stock, the November 2, 2004 sale of Class A Common Stock and the November 26, 2004 sale of Class A Common Stock. A Form 4 reporting such transactions was filed on March 3, 2005.

Proposals of stockholders intended to be presented at the 2006 annual meeting of stockholders, pursuant to Rule 14a-8 under the Exchange Act, must be received by the Company no later than December 6, 2005 in order to be considered for inclusion in the Company’s proxy materials for that meeting. Proposals should be submitted in writing to the Secretary of the Company at the address set forth on the first page of this Proxy Statement. In addition, the Company’s Restated Bylaws require that the Company be given advance written notice of stockholder nominations for election to the Company’s Board of Directors and of other matters which stockholders wish to present for action at an annual meeting of stockholders (other than matters included in the Company’s proxy materials in accordance with Rule 14a-8 under the Exchange Act). The Secretary must receive such notice at the address noted above not less than 90 days in advance of such meeting or, if later, the seventh day following the first public announcement of the date of the meeting. If the stockholder does not also comply with the requirements of Rule 14a-4 under the Securities Exchange Act of 1934, the Company may exercise discretionary voting authority under proxies it solicits to vote in accordance with its best judgment on any such stockholder proposal or nomination.

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, 2004, including financial statements, is being mailed under the same cover to each person who was a stockholder of record on March 29, 2005. The Company will deliver only one Proxy Statement to multiple stockholders sharing an address unless the Company has received contrary instructions from one or more of the stockholders. The Company will undertake to deliver promptly, upon written or oral request, a separate copy of the Proxy Statement to a stockholder at a shared address to which a single copy of the Information Statement is delivered. A stockholder can notify the Company that the stockholder wishes to receive a separate copy of the Proxy Statement by contacting the Company at the address set forth below or at (818) 706-5100.

The Company will furnish without charge a copy of its Annual Report on Form 10-K for the fiscal year ended December 31, 2004, 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 to receive a copy.

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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

Steven Nichols

Chairman of the Board and

Westlake Village, California

April 11, 2005

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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS for the Annual Meeting of Stockholders to be held on May 19, 2005 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 2005 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 19, 2005, and any adjournments or postponements thereof upon the following matters and in the manner designated on the reverse side hereof.

(Continued and to be signed on reverse side.)

K-SWISS INC.

P.O. BOX 11251

NEW YORK, N.Y. 10203-0251

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS for the Annual Meeting of Stockholders to be held on May 19, 2005 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 2005 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 19, 2005, and any adjournments or postponements thereof upon the following matters and in the manner designated on the reverse side hereof.

(Continued and to be signed on reverse side.)

K-SWISS INC.

P.O. BOX 11251

NEW YORK, N.Y. 10203-0251