<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
(Mark One)
[X] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15131
QUIKSILVER, INC.
(Exact name of registrant as specified in its charter)
Delaware 33-0199426
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1740 Monrovia Avenue
Costa Mesa, California 92627
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 645-1395
Securities registered pursuant to Section 12(b) of the Act:
Title of Name of each exchange
each class on which registered
---------- ---------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of Registrant's Common Stock, par
value $.01 per share, at April 30, 1996 was 6,947,513.
<PAGE> 2
QUIKSILVER, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I - FINANCIAL INFORMATION
- ------------------------------
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
April 30, 1996 (Unaudited) and October 31, 1995 ....... 2
Consolidated Statements of Income (Unaudited)
Three Months ended April 30, 1996 and 1995 ............ 3
Six Months ended April 30, 1996 and 1995 .............. 4
Consolidated Statements of Cash Flows (Unaudited)
Six Months ended April 30, 1996 and 1995 .............. 5
Notes to Consolidated Financial Statements ............... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............ 7
Part II - OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders ...... 10
Item 6. Exhibits and Reports on Form 8-K ......................... 10
SIGNATURES ........................................................ 11
- ----------
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
QUIKSILVER, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, October 31,
(Amounts in thousands except share data) 1996 1995
- ------------------------------------------------- --------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents .................... $ 3,794 $ 3,461
Trade accounts receivable, less allowance
for doubtful accounts of $3,200 (1996)
and $2,717 (1995) ......................... 48,449 38,308
Other receivables ............................ 2,118 1,471
Inventories - Note 3 ......................... 29,128 28,355
Prepaid expenses ............................. 918 2,240
--------- --------
Total current assets ...................... 84,407 73,835
Equipment, less accumulated depreciation
and amortization of $6,944 (1996) and
$6,982 (1995) ................................ 7,425 7,032
Trademark and consulting agreement, less
accumulated amortization of $1,411 (1996)
and $1,336 (1995) ............................ 1,607 1,682
Goodwill, less accumulated amortization
of $2,802 (1996) and $2,501 (1995) ........... 15,306 15,611
Other assets .................................... 2,205 1,008
--------- --------
$ 110,950 $ 99,168
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Lines of credit .............................. $ 9,592 $ 8,031
Accounts payable ............................. 9,558 9,257
Accrued liabilities .......................... 8,385 8,834
Current portion of notes payable ............. 229 233
Income taxes payable ......................... 2,276 578
--------- --------
Total current liabilities .............. 30,040 26,933
Notes payable ................................... 3,298 3,297
--------- --------
Total liabilities ...................... 33,338 30,230
Stockholders' equity
Preferred stock, $.01 par value, authorized
shares 5,000,000; issued and outstanding
shares - none ............................. -- --
Common stock, $.01 par value, authorized
shares 30,000,000; issued and outstanding
shares 6,947,513 (1996) and
6,775,605 (1995)........................... 70 68
Additional paid-in-capital ................... 17,639 15,118
Retained earnings ............................ 59,284 52,739
Cumulative foreign currency translation gain . 619 1,013
--------- --------
Total stockholders' equity ............. 77,612 68,938
--------- --------
$ 110,950 $ 99,168
========= ========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
QUIKSILVER, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended April 30,
-----------------------------
(Amounts in thousands except share data) 1996 1995
- ------------------------------------------ --------- ---------
<S> <C> <C>
Net sales ................................ $ 54,505 $ 47,311
Cost of goods sold ....................... 32,492 28,485
--------- ---------
Gross profit .......................... 22,013 18,826
--------- ---------
Operating expenses:
Selling, general and
administrative expenses ............ 13,918 12,110
Royalty income ........................ (186) (247)
Royalty expense ....................... 610 615
--------- ---------
Total operating expenses ........... 14,342 12,478
--------- ---------
Operating income ......................... 7,671 6,348
Interest income .......................... (2) (1)
Interest expense ......................... 230 398
Gain on foreign currency exchange ........ (56) (120)
Loss on foreign currency exchange ........ 81 90
Other expense ............................ 52 19
--------- ---------
Income before provision for income taxes . 7,366 5,962
Provision for income taxes ............... 2,947 2,339
--------- ---------
Net income ............................... $ 4,419 $ 3,623
========= =========
Primary net income per common share ...... $ .61 $ .52
========= =========
Fully diluted net income per common share. $ .61 $ .52
========= =========
Primary weighted average common shares
and equivalents outstanding - Note 2 .. 7,202,000 6,996,000
========= =========
Fully diluted weighted average
common shares and equivalents
outstanding - Note 2 .................. 7,251,000 7,000,000
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
QUIKSILVER, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six months ended April 30,
-----------------------------
(Amounts in thousands except share data) 1996 1995
- ------------------------------------------ --------- ---------
<S> <C> <C>
Net sales ................................ $ 94,992 $ 80,969
Cost of goods sold ....................... 57,384 49,254
--------- ---------
Gross profit .......................... 37,608 31,715
--------- ---------
Operating expenses:
Selling, general and
administrative expenses ............ 25,254 22,075
Royalty income ........................ (391) (455)
Royalty expense ....................... 1,175 1,037
--------- ---------
Total operating expenses ........... 26,038 22,657
--------- ---------
Operating income ......................... 11,570 9,058
Interest income .......................... (3) (7)
Interest expense ......................... 400 568
Gain on foreign currency exchange ........ (173) (355)
Loss on foreign currency exchange ........ 221 228
Other expense ............................ 153 97
--------- ---------
Income before provision for income taxes . 10,972 8,527
Provision for income taxes ............... 4,428 3,373
--------- ---------
Net income ............................... $ 6,544 $ 5,154
========= =========
Primary net income per common share ...... $ .91 $ .74
========= =========
Fully diluted net income per common share. $ .90 $ .74
========= =========
Primary weighted average common shares
and equivalents outstanding - Note 2 .. 7,188,000 6,974,000
========= =========
Fully diluted weighted average
common shares and equivalents
outstanding - Note 2 .................. 7,237,000 7,003,000
========= =========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 6
QUIKSILVER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended April 30,
--------------------------
(Amounts in thousands) 1996 1995
- ------------------------------------------------------ ------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................ $ 6,544 $ 5,154
Items in income not affecting cash:
Depreciation and amortization .................. 1,226 1,099
Provision for losses on accounts receivable .... 483 246
Net change due to sale of fixed assets ......... 33 25
Change in operating assets and liabilities:
Trade accounts receivable ...................... (10,624) (9,134)
Other receivables .............................. (647) (128)
Inventories .................................... (773) (3,668)
Prepaid expenses ............................... 233 (39)
Other assets ................................... (108) (35)
Accounts payable ............................... 301 1,100
Accrued liabilities ............................ (449) 1,935
Income taxes payable ........................... 1,699 (481)
------- -------
Net change in cash related to operating activities ... (2,082) (3,926)
Cash flows from investing activities:
Proceeds from sales of fixed assets ............... 20 (25)
Capital expenditures .............................. (1,293) (1,566)
Goodwill .......................................... -- (4)
------- -------
Net change in cash related to investing activities ... (1,273) (1,595)
Cash flows from financing activities:
Borrowings on lines of credit ..................... 13,390 23,522
Payments on lines of credit ....................... (11,829) (18,795)
Borrowings on long-term debt ...................... (131) 1,029
Payments on long-term debt ........................ 127 (223)
Proceeds from stock issued in connection with
exercise of stock options ...................... 2,524 1,623
------- -------
Net change in cash related to financing activities ... 4,081 7,156
Effect of exchange rate changes on cash .............. (393) 385
------- -------
Net change in cash ................................... 333 2,020
Cash at beginning of period .......................... 3,461 682
------- -------
Cash at end of period ................................ $ 3,794 $ 2,702
======= =======
Supplementary Cash Flow Information:
Cash paid during the period for:
Interest .......................................... $ 382 $ 627
======= =======
Income taxes ...................................... $ 3,668 $ 2,900
======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 7
QUIKSILVER, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statement
presentation.
The consolidated financial statements include the accounts of the
parent company and subsidiaries, which are wholly-owned.
The Company, in its opinion, has included all adjustments, consisting
only of normal recurring accruals, necessary for a fair presentation
of the results of operations for the quarters ended April 30, 1996 and
1995. The financial statements and notes thereto should be read in
conjunction with the audited financial statements and notes for the
years ended October 31, 1995 and 1994. Interim results are not
necessarily indicative of results for the full year due to seasonality
and other factors.
For foreign operations, local currencies are considered the functional
currencies. Assets and liabilities are translated using the exchange
rates in effect at the balance sheet date. Results of operations are
translated using the average exchange rates prevailing throughout the
period. Translation effects are accumulated as part of the cumulative
foreign currency translation gain section in stockholders' equity.
Gains and losses from foreign currency transactions are included in
operating results.
2. Net income per common share was computed based on the weighted average
number of shares actually outstanding plus the shares that would be
outstanding, using the treasury stock method, assuming the exercise of
all outstanding options and warrants which were considered to be
common stock equivalents.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
------------ ------------
<S> <C> <C>
Raw Materials $ 10,214,000 $ 10,875,000
Work-In-Process 3,445,000 4,104,000
Finished Goods 15,469,000 13,376,000
------------ ------------
$ 29,128,000 $ 28,355,000
============ ============
</TABLE>
Inventories are valued at the lower of cost (first in, first out) or
market.
6
<PAGE> 8
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS - Three Months Ended April 30, 1996 as Compared to Three
Months Ended April 30, 1995
Fiscal 1996 second quarter consolidated net sales increased 15.2% to
$54,505,000 as compared to $47,311,000 in the same period of the prior year.
Fiscal 1996 second quarter net sales, excluding European operations, increased
15.3% to $35,962,000 as compared to $31,187,000 in the same period of the prior
year. This increase was primarily due to a greater acceptance of the Company's
product lines. Fiscal 1996 second quarter net sales for European operations
increased 15.0% to $18,543,000 as compared to $16,124,000 in the same period
of the prior year. This increase was a result of a greater acceptance of the
Company's product lines in Europe.
Fiscal 1996 second quarter consolidated gross profit margin increased to 40.4%
as compared to 39.8% in the same period of the prior year. Fiscal 1996 second
quarter gross profit margin, excluding European operations, was unchanged at
36.4% compared to the same period of the prior year. Fiscal 1996 second quarter
gross profit margin for European operations increased to 48.1% as compared to
46.3% in the same quarter of the prior year. This increase was primarily due
to improved product forecasting and better sourcing.
Fiscal 1996 second quarter consolidated selling, general and administrative
expense ("SG&A") increased 14.9% to $13,918,000 as compared to $12,110,000 in
the same period of the prior year. Fiscal 1996 second quarter SG&A, excluding
European operations, increased 9.7% to $8,557,000 as compared to $7,798,000 in
the same period of the prior year. This increase was primarily due to
increased sales volume. Fiscal 1996 second quarter SG&A expense for European
operations increased 24.3% to $5,361,000 as compared to $4,312,000 in the same
period of the prior year. This increase was primarily a result of increased
selling expense due to additional trade shows.
Fiscal 1996 second quarter consolidated royalty income decreased 24.7% to
$186,000 as compared to $247,000 in the same period of the prior year. This
decrease was due to decreased sales of internationally licensed products. The
Company receives royalty income from its Mexico, wetsuit, watch, sunglass, and
outlet store licensees as well as Raisins international licensees.
Fiscal 1996 second quarter consolidated royalty expense decreased slightly to
$610,000 as compared to $615,000 in the same period of the prior year. The
decrease was due to lower international sales.
Fiscal 1996 second quarter consolidated interest income increased to $2,000 as
compared to $1,000 in the same period of the prior year. Fiscal 1996 second
quarter consolidated interest expense decreased 42.2% to $230,000 as compared
to $398,000 in the same period of the prior year. This decrease was primarily
due to lower borrrowings resulting from profitable operations and proceeds from
common stock issued in connection with the exercise of stock options.
Fiscal 1996 second quarter consolidated net income increased 22.0% to
$4,419,000 or $0.61 per fully diluted common share as compared to $3,623,000 or
$0.52 per fully diluted common share in the same period of the prior year.
This increase was primarily due to increased sales and gross profit margin,
together with lower interest costs, partially offset by increased SG&A and
lower royalty income.
7
<PAGE> 9
RESULTS OF OPERATIONS - Six Months Ended April 30, 1996 as Compared to Six
Months Ended April 30, 1995
Consolidated net sales for the six months increased 17.3% to $94,992,000 as
compared to $80,969,000 in the same period of the prior year. Fiscal 1996 six
month net sales, excluding European operations, increased 13.8% to $60,814,000
as compared to $53,425,000 in the same period of the prior year. This
increase was primarily due to a greater acceptance of the Company's product
lines. Fiscal 1996 six month net sales for European operations increased 24.1%
to $34,178,000 as compared to $27,544,000 in the same period of the prior year.
This increase was a result of a greater acceptance of the Company's product
lines in Europe.
Consolidated gross profit margin for the six months increased to 39.6% as
compared to 39.2% in the same period of the prior year. Fiscal 1996 six month
gross profit margin, excluding European operations, increased slightly to 36.1%
as compared to 36.0% in the same period of the prior year. Fiscal 1996 six
month gross profit margin for European operations increased to 45.7% as
compared to 45.3% in the same quarter of the prior year. This increase was
primarily due to improved product forecasting and better sourcing.
Consolidated SG&A for the six months increased 14.4% to $25,254,000 as compared
to $22,075,000 in the same period of the prior year. Fiscal 1996 six month
SG&A, excluding European operations, increased 10.0% to $15,533,000 as compared
to $14,118,000 in the same period of the prior year. This increase was
primarily due to increased sales volume. Fiscal 1996 six month SG&A for
European operations increased 22.2% to $9,721,000 as compared to $7,957,000 in
the same period of the prior year. This increase was primarily a result of
increased sales volume and direct selling and shipping into countries that were
previously sold to by distributors.
Consolidated royalty income for the six months decreased 14.1% to $391,000 as
compared to $455,000 in the same period of the prior year. This decrease was
due to decreased sales of internationally licensed products.
Consolidated royalty expense for the six months increased 13.3% to $1,175,000
as compared to $1,037,000 in the same period of the prior year. This increase
was primarily due to increased sales by Quiksilver Europe.
Consolidated interest income for the six months decreased 57.1% to $3,000 as
compared to $7,000 in the same period of the prior year. Consolidated interest
expense for the six months decreased 29.6% to $400,000 as compared to $568,000
in the same period of the prior year. The changes were primarily due to
decreased borowings as a result of profitable operations and proceeds from
common stock issued in connection with the exercise of stock options.
Consolidated net income for the six months increased 27.0% to $6,544,000 or
$0.90 per fully diluted common share as compared to $5,154,000 or $0.74 per
fully diluted common share in the same period of the prior year. This increase
was primarily due to increased sales and gross profit margin, partially offset
by increased SG&A and lower royalty income.
8
<PAGE> 10
FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY
The Company finances its capital investments and seasonal working capital
requirements from funds generated by its operations and bank revolving lines of
credit.
Working capital increased 15.9% to $54,367,000 at April 30, 1996 as compared to
$46,902,000 at October 31, 1995. The increase is primarily due to increased
operating income and exercise of stock options.
Consolidated trade accounts receivable as of April 30, 1996 increased 26.5% to
$48,449,000 from $38,308,000 at October 31, 1995. Trade accounts receivable,
excluding European operations,increased 19.4% to $30,474,000 as compared to
$25,519,000 at October 31, 1995. European operations trade accounts receivable
increased 40.6% to $17,975,000 as compared to $12,789,000 at October 31, 1995.
These changes are in line when compared to the same period last year, the
increase in bookings and the 15.2% increase in sales for the quarter over the
same period of the prior year.
Consolidated inventories as of April 30, 1996 increased 2.7% to $29,128,000
from $28,355,000 at October 31, 1995. Inventories, excluding European
operations, increased 4.6% to $23,527,000 as compared to $22,496,000 at
October 31, 1995. European operations inventories decreased 4.4% to $5,601,000
from $5,859,000 at October 31, 1995. These changes are primarily due to
bookings as well as seasonal factors.
As the Company uses independent contractors for cutting, sewing and all other
manufacturing of the Company's products, and intends to continue to use
independent contractors in the future, the Company has avoided significant
capital expenditures. Fiscal 1996 six month capital expenditures were
$1,293,000 as compared to $1,566,000 for the same period of the prior year.
Goodwill on the Company's balance sheets as of April 30, 1996 and October 31,
1995 consists primarily of the costs in excess over net assets acquired in the
Quiksilver Europe and Raisins acquisitions.
To finance the Company's seasonal working capital needs, the Company has
available a revolving line of credit with a U.S. bank which is unsecured and
which provides for a maximum financing of $30,000,000. The line of credit
bears interest at 0.5% below the bank's reference rate. The line of credit
expires April 30, 1998. Quiksilver Europe also has available lines of credit,
both secured and unsecured, with banks which provide for maximum financing of
approximately $16,600,000. The lines of credit bear interest at 0.7% to 1.0%
above the banks reference rates. The Company believes its current cash balance
and current lines of credit are adequate to cover its seasonal working capital
requirements for the forseeable future.
In recent years, certain customers of the Company have experienced financial
difficulties, including the filing of reorganization proceedings under
bankruptcy laws. The Company has not incurred significant losses outside the
normal course of business as a result of the financial difficulties of these
customers. While management believes that allowances for doubtful accounts at
April 30, 1996 are adequate, the Company carefully monitors developments
regarding its major customers. Additional material financial difficulties
encountered by these or other significant customers could have an adverse
impact on the Company's financial position or results of operations. However,
in management's opinion, there are adequate alternative retail customers such
that the loss of any customer known to have financial difficulties will not
have a significant long-term negative impact on the Company's future
operations.
9
<PAGE> 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders
The Company's Annual Meeting of Stockholders was held on March 22, 1996. At
the Annual Meeting, the following directors were elected to serve on the
Company's Board of Directors until the next Annual Meeting and until their
respective successors are elected and qualified:
<TABLE>
<CAPTION>
Votes Votes Broker
For Against Abstentions No Votes
--------- ------- ----------- --------
<S> <C> <C> <C> <C>
Robert B. McKnight, Jr. 5,731,341 339,157 0 0
Randall L. Herrel, Sr. 5,731,316 339,182 0 0
William M. Barnum, Jr. 5,862,516 207,982 0 0
Charles E. Crowe 5,731,036 339,462 0 0
Michael H. Gray 5,862,516 207,982 0 0
Robert G. Kirby 5,862,661 207,837 0 0
Tom Roach 5,862,541 207,957 0 0
</TABLE>
The Company's Stockholders also approved a proposal for adoption of the 1996
Stock Option Plan which includes an aggregate number of shares of Common Stock
available for issuance granted pursuant to the 1996 Plan of 700,000 shares.
With respect to this proposal there were 2,929,452 votes cast for the proposal,
2,321,385 votes cast against the proposal, 28,920 abstentions and 29,000 broker
no-votes.
The Company's Stockholders also approved a proposal for adoption of the 1995
Nonemployee Directors' Stock Option Plan which includes an aggregate number of
shares of Common Stock available for issuance granted pursuant to the 1995 Plan
of 140,000 shares. With respect to this proposal there were 4,632,318 votes
cast for the proposal, 611,294 votes cast against the proposal, 36,145
abstentions and 29,000 broker no-votes.
The Company's Stockholders also approved a proposal to amend the Company's
Certificate of Incorporation to increase the total authorized shares of Common
Stock from 10,000,000 shares to 30,000,000 shares. With respect to this
proposal there were 3,944,857 votes cast for the proposal, 2,118,340 votes cast
against the proposal, 4,657 abstentions and 736,750 broker no-votes.
No other matters were voted on at the Annual Meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Quiksilver, Inc. 1996 Stock Option Plan
10.2 Quiksilver, Inc. 1995 Nonemployee Directors' Stock Option Plan
10.3 Restated Certificate of Incorporation of Quiksilver, Inc.
27.0 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April 30,
1996
10
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUIKSILVER, INC.,
a Delaware Corporation
June 10, 1996 Robert B. McKnight, Jr.
-----------------------------
Robert B. McKnight, Jr.
Chairman of the Board and
Chief Executive Officer
June 10, 1996 Randall L. Herrel, Sr.
-----------------------------
Randall L. Herrel, Sr.
President, Chief Operating
Officer and Secretary
11
<PAGE> 1
EXHIBIT 10.1
QUIKSILVER, INC.
1996 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT
NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
<PAGE> 2
QUIKSILVER, INC.
1996 STOCK OPTION PLAN
1. Purpose. The purposes of this Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to the Employees and Consultants of the Company and to
promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock
Options or Nonstatutory Stock Options, at the discretion of the Board and as
reflected in the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Committee appointed by the
Board of Directors in accordance with paragraph (b) of Section 3 of the Plan, if
one is appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Quiksilver, Inc., a Delaware
corporation.
(f) "Consultant" shall mean any person who is engaged by the
Company or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, including compensation through Options
granted under this Plan; provided that the term Consultant shall not include
Directors who are not compensated for their services or are paid only a
director's fee by the Company.
(g) "Continuous Status as an Employee or Consultant" shall
mean the absence of any interruption or termination of service as an Employee or
Consultant (as the case may be). Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of sick leave, military leave,
or any other leave of absence approved by the Board; provided that such leave is
for a period of not more than 90 days or reemployment upon the expiration of
such leave is guaranteed by contract or statute.
(h) "Director" shall mean a member of the Board.
(i) "Disability" shall mean a total and permanent disability
as that term is defined in Section 22(e)(3) of the Code.
<PAGE> 3
(j) "Disinterested Person" shall have the meaning set forth in
Rule 16b-3 and shall mean a Director who has not, during the one-year period
prior to the date he or she is appointed to the Committee or during the period
he or she is on the Committee, received an option grant or stock issuance under
this Plan or any other stock plan of the Company or any Parent or Subsidiary of
the Company, other than as permitted by Rule 16b-3; provided, however, if Rule
16b-3 is amended after the effective date of this Plan, "Disinterested Person"
shall have the meaning set forth in such amended Rule 16b-3.
(k) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(m) "Fair Market Value" shall mean: (i) if Shares are
exchange-traded or traded on the NASDAQ National Market System ("NMS"), the
closing sale or last sale price per share of the Shares; (ii) if Shares are
regularly traded in any over-the-counter market other than NMS, the average of
the bid and asked prices per share of the Shares; and (iii) if Shares are not
traded as described in (i) and (ii) of this Section 2(m), the per share fair
market value of the Shares as determined in good faith by the Board on such
basis as the Board in its sole discretion shall choose. Fair Market Value as of
a given date with respect to subparagraphs (i), (ii) and (iii) shall be
determined as of the close of business on the day prior to the date of
determination, or if no trading in the Shares takes place on such date, on the
next preceding trading day on which there has been such trading.
(n) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422(b) of the
Code.
(o) "Nonstatutory Stock Option" shall mean an Option not
intended to qualify as an Incentive Stock Option.
(p) "Option" shall mean a stock option granted pursuant to the
Plan.
(q) "Optionee" shall mean an Employee or Consultant who
receives an Option.
(r) "Option Termination Date" shall mean the date of
expiration of the term of such Option as set forth in the written option
agreement.
(s) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "Plan" shall mean this Quiksilver, Inc. 1996 Stock Option
Plan.
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(u) "Restricted Stockholder" shall mean an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary of the Company.
(v) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act, as such rule may be
amended from time to time.
(w) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.
(x) "Subsidiary" shall mean a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of the Code.
(y) "Terminating Transaction" shall mean any of the following
events: (a) the dissolution or liquidation of the Company; (b) a reorganization,
merger or consolidation of the Company with one or more other corporations
(except with respect to a transaction, the purpose of which is to change the
domicile or name of the Company), as a result of which the Company goes out of
existence or becomes a subsidiary of another corporation (which shall be deemed
to have occurred if another corporation shall own, directly or indirectly, fifty
percent (50%) or more of the aggregate voting power of all outstanding equity
securities of the Company); or (c) a sale of all or substantially all of the
Company's assets.
3. Administration.
(a) The Plan shall be administered by the Board, which shall
have sole authority in its absolute discretion, subject to the terms of Section
3(b) herein, (i) to determine which Employees and Consultants shall receive
Options, (ii) subject to the express provisions of the Plan, to determine the
time when Options shall be granted, the number of Shares subject to the Options,
the exercise prices, and the terms and conditions of Options other than those
terms and conditions fixed under the Plan, and (iii) to interpret the provisions
of the Plan and any Option granted under the Plan. The Board shall adopt by
resolution such rules and regulations as may be required to carry out the
purposes of the Plan and shall have authority to do everything necessary or
appropriate to administer the Plan. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees.
(b) The Board may delegate administration of the Plan to a
Committee of no less than two Directors, each of which shall be Disinterested
Persons unless the Board expressly declares that it does not require the Plan to
comply with the requirements of Rule 16b-3. The Board may from time to time
remove members from, or add members to, the Committee, and vacancies on the
Committee shall be filled by the Board. Furthermore, the Board at any time by
resolution may abolish the Committee and revest in the Board the administration
of the Plan. (For purposes of this Plan document, the term "Board" shall mean
the Committee to the extent that the Board's powers have been delegated to the
Committee.)
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4. Eligibility.
(a) Incentive Stock Options may be granted only to Employees
who render services which contribute to the Company. Nonstatutory Stock Options
may be granted only to Employees or Consultants who render services which
contribute to the Company. Options may not be granted to Directors who are not
Employees of the Company.
(b) The Plan shall not confer upon any Optionee any right to
continue as an Employee or Consultant of the Company, nor shall it interfere in
any way with Optionee's right or the Company's right to terminate Optionee's
employment or relationship as a Consultant at any time, with or without cause.
(c) The determination as to whether an Employee or Consultant
is eligible to receive Options hereunder shall be made by the Board in its sole
discretion, and the decision of the Board shall be binding and final.
5. Number of Shares. The maximum aggregate number of Shares which may
be optioned and sold under this Plan is Seven Hundred Thousand (700,000) Shares
of authorized but unissued Common Stock of the Company. No Employee or
Consultant shall receive Options for more than 100,000 shares over any one-year
period. In the event that Options granted under the Plan shall terminate or
expire without being exercised, in whole or in part, the Shares subject to such
unexercised Options may again be optioned and sold under this Plan.
6. Term of the Plan. The Plan shall be effective as of March 22, 1996,
and shall continue in effect until March 21, 2006, unless terminated earlier.
7. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board in its sole discretion, but, in the case of Incentive Stock Options only,
shall be subject to the following:
(i) for an Incentive Stock Option granted to a
Restricted Stockholder, the per Share exercise price shall be no less
than 110% of the Fair Market Value per Share on the date of grant; and
(ii) for an Incentive Stock Option granted to any
Employee (other than a Restricted Stockholder), the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option shall consist of full payment in cash or cash
equivalents or, with the consent of the Board, one of the alternative forms
specified below:
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<PAGE> 6
(i) full payment in shares of Common Stock (duly
endorsed for transfer to the Company) held by the Optionee for the
requisite period necessary to avoid a charge to the Company's earnings
for financial reporting purposes and valued at Fair Market Value on the
date of delivery; or
(ii) full payment through a combination of cash or
cash equivalents and shares of Common Stock (duly endorsed for transfer
to the Company) held by the Optionee for the requisite period necessary
to avoid a charge to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the date of delivery; or
(iii) full payment effected through a broker-dealer
sale and remittance procedure pursuant to which the Optionee (A) shall
provide irrevocable written instructions to a designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate option price payable for the
purchased Shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Company by reason of
such purchase and (B) shall provide written directives to the Company
to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction; or
(iv) any other legal consideration that may be
acceptable to the Board.
8. Exercise of Options.
(a) Vesting of Options. Any Option granted hereunder shall be
exercisable at such times and under such conditions as determined by the Board,
including performance criteria with respect to the Company and/or the Optionee,
and as shall be permissible under the terms of the Plan.
(b) Procedure for Exercise. An Option may be exercised at any
time as to all or any portions of the Shares as to which it is then exercisable,
except that an Option may not be exercised for a fraction of a Share and shall
be subject to any provision in the written option agreement governing the
minimum number of Shares as to which the Option may be exercised. An Option
shall be deemed to be exercised when written notice of such exercise has been
given to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full payment
may, as authorized by the Board, consist of any consideration and method of
payment allowable under Section 7(b) of the Plan.
(c) Termination of Options. All installments of an Option
shall expire and terminate on such date(s) as the Board shall determine, but in
no event later than ten (10) years from the date such Option was granted (except
that an Incentive Stock Option granted to a Restricted Stockholder shall by its
terms not be exercisable after the expiration of five (5) years from the date
such Option was granted).
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<PAGE> 7
(d) Death or Termination of Service of Optionee. The following
provisions shall govern the exercise period applicable to any Options held by an
Optionee at the time of his or her death or termination of service with the
Company or any Parent or Subsidiary of the Company:
(i) Termination of Continuous Status as an Employee
or Consultant. In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant (as the case may be) for any reason
other than Optionee's death or Disability, such Optionee may only
exercise the Option within three (3) months (or such shorter period as
specified in the written option agreement) after the date of such
termination.
(ii) Disability of Optionee. In the event of
termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of the Optionee's Disability, the Optionee may
only exercise the Option within twelve (12) months (or such shorter
period as is specified in the written option agreement) from the date
of such termination.
(iii) Death of Optionee. In the event of termination
of an Optionee's Continuous Status as an Employee or Consultant as a
result of the Optionee's death, the Option may only be exercised any
time within twelve (12) months (or such shorter period as is specified
in the written option agreement) following the date of death by the
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance.
(iv) Limitations. Each Option shall, during the
limited exercise period under this Section 8(d), be exercisable only as
to the Shares for which the Option is exercisable on the date of the
Optionee's death or termination of service with the Company. Under no
circumstances shall any Option become exercisable under this Section
8(d) after the Option Termination Date. Upon the earlier of the
expiration of such limited exercise period or the Option Termination
Date, the Option shall terminate and cease to be exercisable.
(v) Immediate Termination. Should (A) the Optionee's
Continuous Status as an Employee or Consultant be terminated for
misconduct (including, but not limited to, any act of dishonesty,
willful misconduct, fraud or embezzlement) or (B) the Optionee make any
unauthorized use or disclosure of confidential information or trade
secrets of the Company or any Parent or Subsidiary, then in any such
event all outstanding Options granted to the Optionee under this Plan
shall terminate immediately and cease to be exercisable.
(vi) Board Discretion to Accelerate. The Board shall
have complete discretion, exercisable either at the time the Option is
granted or at any time the Option remains outstanding, to permit one or
more Options granted under this Plan to be exercised during the limited
exercise period applicable under this Section 8(d), not only for the
number of Shares for which each such Option is exercisable at the time
of the
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Optionee's death or termination of service but also for one or more
subsequent installments of Shares for which the Option would otherwise
have become exercisable had such death or termination of service not
occurred.
(e) Extensions. Notwithstanding the provisions covering the
exercisability of Options following death or termination of service, as
described in Section 8(d), the Board may, in its sole discretion, with the
consent of the Optionee or the Optionee's estate (in the case of the death of
Optionee), extend the period of time during which the Option shall remain
exercisable, provided that in no event shall such extension go beyond the Option
Termination Date. In the case of Incentive Stock Options, extensions under this
Section 8(e) may result in loss of the favorable treatment accorded to incentive
stock options under the Code.
9. Restrictions on Grants of Options and Issuance of Shares.
(a) Regulatory Approvals. No Shares shall be issued or
delivered upon exercise of an Option unless and until there shall have been
compliance with all applicable requirements of the Securities Act of 1933, as
amended, (the "1933 Act"), and any other requirement of law or of any regulatory
body having jurisdiction over such issuance and delivery. The inability of the
Company to obtain any required permits, authorizations or approvals necessary
for the lawful issuance and sale of any Shares hereunder on terms deemed
reasonable by the Board shall relieve the Company, the Board, and any Committee
of any liability in respect of the non-issuance or sale of such Shares as to
which such requisite permits, authorizations, or approvals shall not have been
obtained.
(b) Representations and Warranties. As a condition to the
granting or exercise of any Option, the Board may require the person receiving
or exercising such Option to make any representation and/or warranty to the
Company as may be required (or deemed appropriate by the Board, in its
discretion) under any applicable law or regulation, including but not limited to
a representation that the Option and/or Shares are being acquired only for
investment and without any present intention to sell or distribute such Option
and/or Shares, if such a representation is required under the 1933 Act or any
other applicable law, rule, or regulation.
(c) Stockholder Approval. The exercise of Options under the
Plan also is conditioned on approval of the Plan by the Company's Stockholders,
and no Option shall be exercisable hereunder unless and until the Plan has been
so approved.
10. Option Adjustments.
(a) Change in Capitalization. If the outstanding shares of
Common Stock of the Company are increased, decreased, changed into or exchanged
for a different number or kind of shares of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse stock
split, upon authorization by the Board an appropriate and proportionate
adjustment shall be made in the number or kind of shares, and the per-share
option price thereof, which may be issued in the aggregate and to any individual
Optionees under the Plan upon exercise of Options granted under the Plan;
provided, however, that no such
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<PAGE> 9
adjustment need be made if, upon the advice of counsel, the Board determines
that such adjustment may result in the receipt of federal taxable income to
holders of Options granted under the Plan or the holders of Common Stock or
other classes of the Company's securities.
(b) Corporate Reorganizations. Upon the occurrence of a
Terminating Transaction, as of the effective date of such Terminating
Transaction, the Plan and any then outstanding Options (whether or not vested)
shall terminate unless (i) provision is made in writing in connection with such
transaction for the continuance of the Plan and for the assumption of such
Options, or for the substitution for such Options of new options covering the
securities of a successor corporation or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices, in
which event the Plan and such outstanding Options shall continue or be replaced,
as the case may be, in the manner and under the terms so provided; or (ii) the
Board otherwise shall provide in writing for such adjustments as it deems
appropriate in the terms and conditions of the then-outstanding Options (whether
or not vested), including without limitation (A) accelerating the vesting of
outstanding Options, and/or (B) providing for the cancellation of Options and
their automatic conversion into the right to receive the securities or other
properties which a holder of the Shares underlying such Options would have been
entitled to receive upon such Terminating Transaction had such Shares been
issued and outstanding (net of the appropriate option exercise prices). If,
pursuant to the foregoing provisions of this paragraph (b), the Plan and the
Options shall terminate by reason of the occurrence of a Terminating Transaction
without provision for any of the action(s) described in clause (i) or (ii)
hereof, then any Optionee holding outstanding Options shall have the right, at
such time immediately prior to the consummation of the Terminating Transaction
as the Board shall designate, to exercise his or her Options to the full extent
not theretofore exercised, including any portion which has not yet become
exercisable.
11. Option Agreement. The terms and conditions of Options granted under
the Plan shall be evidenced by a written option agreement executed by the
Company and the person to whom the Option is granted. Each option agreement
shall incorporate the Plan by reference and shall include such provisions as are
determined to be necessary or appropriate by the Board.
12. Limitations on Incentive Stock Options. In the event that the
aggregate Fair Market Value of Shares (determined as of the date of grant of the
Option covering such Shares) with respect to which Incentive Stock Options are
exercisable for the first time by an Employee during any calendar year under
this Plan and any other plan of the Company exceeds $100,000, Options with
respect to and to the extent of such excess shall be treated as Nonstatutory
Stock Options. This Section 12 shall be applied by taking Options which are
intended to be Incentive Stock Options into account in the order in which they
were granted.
13. Amendment or Termination of the Plans.
(a) Board Authority. The Board may amend, suspend, alter, or
terminate the Plan at any time. To the extent necessary or desirable to comply
with Rule 16b-3 of the Exchange Act, the Code or any other applicable law or
regulation, the Company may obtain
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<PAGE> 10
stockholder approval of any amendment to the Plan only in such a manner and to
such a degree as required under applicable law.
(b) Limitation on Board Authority. Furthermore, the Plan may
not, without the approval of the stockholders, be amended in any manner that
would cause Incentive Stock Options issued hereunder to fail to qualify as
Incentive Stock Options as defined in Section 422(b) of the Code.
Notwithstanding the foregoing, no amendment, suspension or termination of the
Plan shall adversely affect Options granted on or prior to the date thereof, as
evidenced by the execution of an option agreement by both the Company and the
Optionee, without the consent of such Optionee.
(c) Contingent Grants Based on Amendments. Options may be
granted in reliance on and consistent with any amendment adopted by the Board
and which is necessary to enable such Options to be granted under the Plan, even
though such amendment requires future stockholder approval; provided, however,
that any such contingent Option by its terms may not be exercised prior to
stockholder approval of such amendment, and provided further, that in the event
stockholder approval is not obtained within twelve months of the date of grant
of such contingent Option, then such contingent Option shall be deemed cancelled
and no longer outstanding.
14. Options Not Transferable. Options granted under this Plan may not
be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise
transferred or alienated in any manner, either voluntarily or involuntarily by
operation of law, other than by will or the laws of descent or distribution, and
may be exercised during the lifetime of an Optionee only by such Optionee.
15. No Rights in Shares Before Issuance and Delivery. Neither the
Optionee, his or her estate nor his or her transferees by will or the laws of
descent and distribution shall be, or have any rights or privileges of, a
stockholder of the Company with respect to any Shares issuable upon exercise of
the Option unless and until certificates representing such Shares shall have
been issued and delivered notwithstanding exercise of the Option. No adjustment
will be made for a dividend or other rights where the record date is prior to
the date such stock certificates are issued, except as provided in Section 10.
16. Taxes. The Board shall make such provisions and take such steps as
it deems necessary or appropriate for the withholding of any federal, state,
local and other tax required by law to be withheld with respect to the grant or
exercise of an Option under the Plan, including, without limitation, the
deduction of the amount of any such withholding tax from any compensation or
other amounts payable to an Optionee by the Company, or requiring an Optionee
(or the Optionee's beneficiary or legal representative) as a condition of
granting or exercising an Option to pay to the Company any amount required to be
withheld, or to execute such other documents as the Board deems necessary or
desirable in connection with the satisfaction of any applicable withholding
obligation. In the discretion of the Board, upon exercise of a Nonstatutory
Stock Option, the Optionee may request the Company to withhold from the Shares
to be issued upon such exercise that number of Shares (based on the Fair
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<PAGE> 11
Market Value of the Shares as of the day notice of exercise is received by the
Company) that would satisfy any tax withholding requirement.
17. Legends on Options and Stock Certificates. Each option agreement
and each certificate representing Shares acquired upon exercise of an Option
shall be endorsed with all legends, if any, required by applicable federal and
state securities laws to be placed on the option agreement and/or the
certificate. The determination of which legends, if any, shall be placed upon
option agreements and/or the certificates representing Shares shall be made by
the Board in its sole discretion and such decision shall be final and binding.
18. Availability of Plan. A copy of this Plan shall be delivered to the
Secretary of the Company and shall be shown by the Secretary to any eligible
person making reasonable inquiry concerning the Plan.
19. Applicable Law. This Plan shall be governed by and construed in
accordance with the laws of the State of California.
Date Plan approved by Board: January 26, 1996
Date Plan approved by Shareholders: March 22, 1996
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NONSTATUTORY STOCK OPTION AGREEMENT
On this ___ day of __________, ____, ("Grant Date"),
QUIKSILVER, INC., a Delaware corporation (the "Company"), hereby grants to
____________________ (the "Optionee") an Option to purchase a total of
__________ shares of Common Stock (the "Shares"), on the terms and conditions
set forth below, and in all respects subject to the terms, definitions and
provisions of the Quiksilver, Inc. 1996 Stock Option Plan (the "Plan") adopted
by the Company, which is incorporated herein by reference. Unless otherwise
defined in this Option, the terms defined in the Plan shall have the same
defined meanings in this Option. In the event of any conflict between the
provisions of this Option and those of the Plan, the Plan shall control.
1. NATURE OF THE OPTION. This Option is intended to qualify as a
Nonstatutory Stock Option.
2. EXERCISE PRICE. The exercise price is $____ for each share of Common
Stock.
3. VESTING AND EXERCISE OF OPTION. This Option shall be exercisable
during its term in accordance with the provisions of Section 8 of the Plan as
follows:
(a) VESTING. Subject to the limitations contained in this
Option and the Plan, this Option shall become exercisable in installments as
follows:
Number of Shares Date of Earliest Exercise
(Installment) (Vesting)
The installments provided for in this Section 3(a) are cumulative. Each such
installment which becomes exercisable pursuant to this Section shall remain
exercisable until expiration or earlier termination of this Option.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
written notice (in a form designated by the Company) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and warranties of
Optionee as may be required by the Company pursuant to Section 9(b) of the Plan.
Such written notice shall be signed by Optionee and shall be delivered in person
or by certified mail to the President, Secretary or Chief Financial Officer of
the Company. The written notice shall be accompanied by payment of the exercise
price.
<PAGE> 13
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
(c) MINIMUM EXERCISE. The minimum number of Shares with
respect to which this Option may be exercised at any one time is One Hundred
(100) Shares, and this Option shall be exercised for whole Shares only.
4. CERTAIN REPRESENTATIONS AND WARRANTIES.
(a) Optionee represents to the Company the following:
(i) that Optionee has read and
understands the terms and provisions of the Plan, and hereby accepts
this Agreement subject to all the terms and provisions of the Plan;
(ii) that Optionee shall accept as
binding and final all decisions or interpretations of the Board or of
the Committee upon any questions arising under the Plan; and
(iii) Optionee understands that, unless at
the time of exercise of this Option a registration statement under the
Securities Act of 1933, as amended, is in effect covering the Shares,
as a condition to the exercise of the Option the Company may require
Optionee to represent that Optionee is acquiring the Shares for
Optionee's own account only and not with a view to, or for sale in
connection with, any distribution of the Shares.
5. METHOD OF PAYMENT.
(a) The consideration to be paid for the Shares to be issued
upon exercise of the Option shall consist of full payment in cash or cash
equivalents or, with the consent of the Board or the Committee, one of the
alternative forms specified below:
(i) full payment in shares of Common
Stock (duly endorsed for transfer to the Company) held by the Optionee
for the requisite period necessary to avoid a charge to the Company's
earnings for financial reporting purposes and valued at Fair Market
Value on the date of delivery; or
(ii) full payment through a combination
of cash or cash equivalents and shares of Common Stock (duly endorsed
for transfer to the Company) held by the Optionee for the requisite
period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and valued at Fair Market Value on the
date of delivery; or
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<PAGE> 14
(iii) full payment effected through a
broker-dealer sale and remittance procedure pursuant to which the
Optionee (A) shall provide irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate option
price payable for the purchased Shares plus all applicable Federal and
State income and employment taxes required to be withheld by the
Company by reason of such purchase and (B) shall provide written
directives to the Company to deliver the certificates for the purchased
Shares directly to such brokerage firm in order to complete the sale
transaction; or
(iv) any other legal consideration that
may be acceptable to the Board or the Committee.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
federal or state securities or other law or regulation. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
7. TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the event of
termination of Optionee's Continuous Status as an Employee or Consultant,
Optionee may, but only within three (3) months after the date of such
termination (but in no event later than the date of expiration of the term of
this Option as set forth in Section 11 below), exercise this Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise this
Option at the date of such termination, or if Optionee does not exercise this
Option within the time specified herein, this Option shall terminate.
8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant as a result of Optionee's permanent and total disability
(as defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve (12) months from the date of termination of employment or relationship as
director or consultant (but in no event later than the date of expiration of the
term of this Option as set forth in Section 11 below), exercise this Option to
the extent Optionee was entitled to exercise it at the date of such termination.
To the extent that Optionee was not entitled to exercise this Option at the date
of termination, or if Optionee does not exercise such Option (which Optionee was
entitled to exercise) within the time specified herein, this Option shall
terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee during the
term of this Option while an Employee or Consultant of the Company and having
been in Continuous Status as an Employee or Consultant since the date of grant
of this Option, this Option may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
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Optionee's estate or by a person who acquired the right to exercise this Option
by bequest or inheritance, but only to the extent Optionee was entitled to
exercise this Option on the date of death.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
11. TERM OF OPTION. In no event may this Option be exercised after
__________, 200_ (which date shall be no more than ten (10) years from the date
this Option was granted).
12. NO EMPLOYMENT RIGHTS. Optionee acknowledges and agrees that the
vesting of Shares pursuant to Section 3 hereof is earned only through Optionee's
Continuous Status as an Employee or Consultant (not through the act of being
hired or engaged, being granted this Option or acquiring Shares hereunder).
Optionee further acknowledges and agrees that this Option, the Company's Plan
which is incorporated herein by reference, the transactions contemplated
hereunder and the vesting schedule set forth herein do not constitute an express
or implied promise of continued engagement as an Employee or Consultant for the
vesting period, for any period, or at all, and shall not interfere with
Optionee's right or the Company's right to terminate Optionee's employment or
consulting relationship at any time, with or without cause.
13. WITHHOLDING OF TAXES. Optionee authorizes the Company to withhold,
in accordance with any applicable law, from any compensation payable to him any
taxes required to be withheld by federal, state, or foreign law as a result of
the grant of the Option or the issuance of stock pursuant to the exercise of the
Option.
14. NOTICES. Any notice to be given to the Company shall be addressed
to the Company in care of its Secretary at its principal office, and any notice
to be given to Optionee shall be addressed to Optionee at the address given
below or at such other address as the Optionee may hereafter designate in
writing to the Company. Any such notice shall be deemed duly given upon personal
delivery or three business days after deposit in the United States mail,
registered or certified, postage prepaid.
4
<PAGE> 16
15. GOVERNING LAW. This Option shall be governed by and construed in
accordance with the internal laws of the State of California.
QUIKSILVER, INC.
By:___________________________________
Title:________________________________
______________________________________
_________________, Optionee
Address:______________________________
______________________________________
5
<PAGE> 17
INCENTIVE STOCK OPTION AGREEMENT
On this ___ day of __________, ____, ("Grant Date"),
QUIKSILVER, INC., a Delaware corporation (the "Company"), hereby grants to
____________________ (the "Optionee") an Option to purchase a total of
__________ shares of Common Stock (the "Shares"), on the terms and conditions
set forth below, and in all respects subject to the terms, definitions and
provisions of the Quiksilver, Inc. 1996 Stock Option Plan (the "Plan") adopted
by the Company, which is incorporated herein by reference. Unless otherwise
defined in this Option, the terms defined in the Plan shall have the same
defined meanings in this Option. In the event of any conflict between the
provisions of this Option and those of the Plan, the Plan shall control.
1. NATURE OF THE OPTION. This Option is intended to qualify as an
Incentive Stock Option.
2. EXERCISE PRICE. The exercise price is $___ for each share of Common
Stock, which price is not less than the fair market value per share of Common
Stock on the date of grant, as determined by the Board or the Committee.
3. VESTING AND EXERCISE OF OPTION. This Option shall be exercisable
during its term in accordance with the provisions of Section 8 of the Plan as
follows:
(a) VESTING. Subject to the limitations contained in this
Option and the Plan, this Option shall become exercisable in installments as
follows:
Number of Shares Date of Earliest Exercise
(Installment) (Vesting)
The installments provided for in this Section 3(a) are cumulative. Each such
installment which becomes exercisable pursuant to this Section shall remain
exercisable until expiration or earlier termination of this Option.
(b) METHOD OF EXERCISE. This Option shall be exercisable by
written notice (in a form designated by the Company) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and warranties of
Optionee as may be required by the Company pursuant to Section 9(b) of the Plan.
Such written notice shall be signed by Optionee and shall be delivered in person
or by certified mail to the President, Secretary or Chief Financial Officer of
the Company. The written notice shall be accompanied by payment of the exercise
price.
<PAGE> 18
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
(c) MINIMUM EXERCISE. The minimum number of Shares with
respect to which this Option may be exercised at any one time is One Hundred
(100) Shares, and this Option shall be exercised for whole Shares only.
4. CERTAIN REPRESENTATIONS AND WARRANTIES.
(a) Optionee represents to the Company the following:
(i) that Optionee has read and understands the terms
and provisions of the Plan, and hereby accepts this Agreement subject
to all the terms and provisions of the Plan;
(ii) that Optionee shall accept as binding and final
all decisions or interpretations of the Board or of the Committee upon
any questions arising under the Plan;
(iii) Optionee understands that the existence of the
Plan and the execution of this Option are not sufficient by themselves
to cause any exercise of any Incentive Stock Options granted under the
Plan and this Option to qualify for favorable tax treatment through the
application of Section 422(a) of the Code; and that Optionee must, in
order to so qualify, individually meet by Optionee's own action all
applicable requirements of Section 422, including without limitation,
the requirement that no disposition of Shares may be made by Optionee
within two (2) years from the date of the granting of the Option nor
within one (1) year after the transfer of such Shares to Optionee; and
(iv) Optionee understands that, unless at the time of
exercise of this Option a registration statement under the Securities
Act of 1933, as amended, is in effect covering the Shares, as a
condition to the exercise of the Option the Company may require
Optionee to represent that Optionee is acquiring the Shares for
Optionee's own account only and not with a view to, or for sale in
connection with, any distribution of the Shares.
5. METHOD OF PAYMENT.
(a) The consideration to be paid for the Shares to be issued
upon exercise of the Option shall consist of full payment in cash or cash
equivalents or, with the consent of the Board or the Committee, one of the
alternative forms specified below:
2
<PAGE> 19
(i) full payment in shares of Common Stock (duly
endorsed for transfer to the Company) held by the Optionee for the
requisite period necessary to avoid a charge to the Company's earnings
for financial reporting purposes and valued at Fair Market Value on the
date of delivery; or
(ii) full payment through a combination of cash or
cash equivalents and shares of Common Stock (duly endorsed for transfer
to the Company) held by the Optionee for the requisite period necessary
to avoid a charge to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the date of delivery; or
(iii) full payment effected through a broker-dealer
sale and remittance procedure pursuant to which the Optionee (A) shall
provide irrevocable written instructions to a designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate option price payable for the
purchased Shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Company by reason of
such purchase and (B) shall provide written directives to the Company
to deliver the certificates for the purchased Shares directly to such
brokerage firm in order to complete the sale transaction; or
(iv) any other legal consideration that may be
acceptable to the Board or the Committee.
6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such Shares would constitute a violation of any applicable
federal or state securities or other law or regulation. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
7. TERMINATION OF STATUS AS AN EMPLOYEE. In the event of termination of
Optionee's Continuous Status as an Employee, Optionee may, but only within three
(3) months after the date of such termination (but in no event later than the
date of expiration of the term of this Option as set forth in Section 11 below),
exercise this Option to the extent that Optionee was entitled to exercise it at
the date of such termination. To the extent that Optionee was not entitled to
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, this Option shall
terminate.
8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7
above, in the event of termination of Optionee's Continuous Status as an
Employee, as a result of Optionee's permanent and total disability (as defined
in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12)
months from the date of termination of employment (but in no event later than
the date of expiration of the term of this Option as set forth in Section 11
below), exercise this Option to the extent Optionee was entitled to exercise it
at the date of such
3
<PAGE> 20
termination. To the extent that Optionee was not entitled to exercise this
Option at the date of termination, or if Optionee does not exercise such Option
(which Optionee was entitled to exercise) within the time specified herein, this
Option shall terminate.
9. DEATH OF OPTIONEE. In the event of the death of Optionee during the
term of this Option while an Employee of the Company and having been in
Continuous Status as an Employee since the date of grant of this Option, this
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the date of expiration of the term of
this Option as set forth in Section 11 below), by Optionee's estate or by a
person who acquired the right to exercise this Option by bequest or inheritance,
but only to the extent Optionee was entitled to exercise this Option on the date
of death.
10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
11. TERM OF OPTION. In no event may this Option be exercised after
_______, ____ (which date shall be no more than ten (10) years from the date
this Option was granted).
12. NO EMPLOYMENT RIGHTS. Optionee acknowledges and agrees that the
vesting of Shares pursuant to Section 3 hereof is earned only by continuing
service as an employee at the will of the Company (not through the act of being
hired, being granted this Option or acquiring Shares hereunder). Optionee
further acknowledges and agrees that this Option, the Company's Plan which is
incorporated herein by reference, the transactions contemplated hereunder and
the vesting schedule set forth herein do not constitute an express or implied
promise of continued engagement as an employee for the vesting period, for any
period, or at all, and shall not interfere with Optionee's right or the
Company's right to terminate Optionee's employment relationship at any time,
with or without cause.
13. WITHHOLDING OF TAXES. Optionee authorizes the Company to withhold,
in accordance with any applicable law, from any compensation payable to him any
taxes required to be withheld by federal, state, or foreign law as a result of
the grant of the Option or the issuance of stock pursuant to the exercise of the
Option.
14. NOTICES. Any notice to be given to the Company shall be addressed
to the Company in care of its Secretary at its principal office, and any notice
to be given to Optionee shall be addressed to Optionee at the address given
below or at such other address as the Optionee may hereafter designate in
writing to the Company. Any such notice shall be deemed duly given upon personal
delivery or three business days after deposit in the United States mail,
registered or certified, postage prepaid.
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<PAGE> 21
15. GOVERNING LAW. This Option shall be governed by and construed in
accordance with the internal laws of the State of California.
QUIKSILVER, INC.
By:___________________________________
Title:________________________________
______________________________________
_________________, Optionee
Address:______________________________
______________________________________
5
<PAGE> 22
NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION
Quiksilver, Inc.
1740 Monrovia Avenue
Costa Mesa, CA 92627
Gentlemen:
In accordance with the terms of the Quiksilver, Inc. 1996
Stock Option Plan (the "Plan"), and the related Incentive Stock Option Agreement
dated as of ________________, 199_ between me and Quiksilver, Inc. (the
"Company"), I hereby give notice of exercise of my option (the "Option") as to
___________ shares of Company Common Stock (the "Shares") at a purchase price of
$______________ per share, or $__________________ in the aggregate.
By this exercise, I agree (i) to provide such additional
documents as you may require pursuant to the terms of the Plan, and (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of the Option.
Unless a registration statement covering the Shares is
currently in effect under the Securities Act of 1933, as amended (the "Act"), I
hereby make the following certifications and representations with respect to the
Shares:
(1) I acknowledge that the Shares have not been registered
under the Act and are deemed to constitute "restricted securities" under Rule
144 promulgated under the Act. I represent and warrant to the Company that I am
acquiring the Shares for my own account and for investment purposes only and I
have no present intention of distributing or selling the Shares, except as
permitted under the Act and any applicable state securities laws; and
(2) I further acknowledge that all certificates representing
any of the Shares subject to the provisions of the Option shall have endorsed
thereon appropriate legends reflecting the foregoing limitations, as well as any
legends reflecting restrictions pursuant to applicable securities laws.
<PAGE> 23
There accompanies this Notice payment in full for the
aggregate purchase price for the Shares as follows (check applicable method of
payment):
/ / Check in the amount of $___________________
/ / If authorized by the Plan and the Board, shares of
the Company's Stock currently owned by me as follows:
Certificate Number(s) Number of Shares
--------------------- ----------------
__________ __________
__________ __________
Please mail the certificate representing the Shares to the following address:
__________________________
__________________________
__________________________
Dated: ________________, 199_ ____________________________________
Signature
____________________________________
Type or Print Name
2
<PAGE> 24
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
Quiksilver, Inc.
1740 Monrovia Avenue
Costa Mesa, CA 92627
Gentlemen:
In accordance with the terms of the Quiksilver, Inc. 1996
Stock Option Plan (the "Plan"), and the related Incentive Stock Option Agreement
dated as of ________________, 199_ between me and Quiksilver, Inc. (the
"Company"), I hereby give notice of exercise of my option (the "Option") as to
___________ shares of Company Common Stock (the "Shares") at a purchase price of
$______________ per share, or $__________________ in the aggregate.
By this exercise, I agree (i) to provide such additional
documents as you may require pursuant to the terms of the Plan, and (ii) to
notify you in writing within fifteen (15) days after the date of any disposition
of any of the shares of Common Stock issued upon exercise of the Option that
occurs within two (2) years after the date of grant of the Option or within one
(1) year after such shares of Common Stock are issued upon exercise of the
Option.
Unless a registration statement covering the Shares is
currently in effect under the Securities Act of 1933, as amended (the "Act"), I
hereby make the following certifications and representations with respect to the
Shares:
(3) I acknowledge that the Shares have not been registered
under the Act and are deemed to constitute "restricted securities" under Rule
144 promulgated under the Act. I represent and warrant to the Company that I am
acquiring the Shares for my own account and for investment purposes only and I
have no present intention of distributing or selling the Shares, except as
permitted under the Act and any applicable state securities laws; and
(4) I further acknowledge that all certificates representing
any of the Shares subject to the provisions of the Option shall have endorsed
thereon appropriate legends reflecting the foregoing limitations, as well as any
legends reflecting restrictions pursuant to applicable securities laws.
<PAGE> 25
There accompanies this Notice payment in full for the
aggregate purchase price for the Shares as follows (check applicable method of
payment):
/ / Check in the amount of $___________________
/ / If authorized by the Plan and the Board, shares of
the Company's Stock currently owned by me as follows:
Certificate Number(s) Number of Shares
--------------------- ----------------
__________ __________
__________ __________
Please mail the certificate representing the Shares to the following address:
__________________________
__________________________
__________________________
Dated: ________________, 199_ ____________________________________
Signature
____________________________________
Type or Print Name
2
<PAGE> 1
EXHIBIT 10.2
QUIKSILVER, INC.
1995 NONEMPLOYEE DIRECTORS'
STOCK OPTION PLAN
Quiksilver, Inc., a corporation organized under the laws of the State
of Delaware (the "Company"), hereby adopts this Quiksilver, Inc. 1995
Nonemployee Directors' Stock Option Plan (the "Plan"). The purpose of this Plan
is to advance the interests of the Company by enhancing its ability to attract
and retain qualified persons who are neither employees nor officers of the
Company to serve as members of the Company's Board of Directors. This Plan
provides such persons with the opportunity to become owners of capital stock of
the Company by the grant of Options to purchase Shares. Options granted
hereunder shall be "nonstatutory options," and shall not include "incentive
stock options" intended to qualify for treatment under Sections 421 and 422A of
the Internal Revenue Code of 1986, as amended.
Section 1. Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" shall mean the entity, whether the Board
or the Committee, responsible for administering this Plan, as provided in
Section 2.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(d) "Committee" shall mean the committee, if any, appointed by
the Board in accordance with Section 3(c) to administer this Plan.
(e) "Company" shall mean Quiksilver, Inc., a Delaware
corporation.
(f) "Common Stock" shall mean the Company's $.01 par value
Common Stock.
(g) "Expiration Date" shall mean the last day of the term of
an Option established under Section 5(b).
(h) "Fair Market Value" shall mean, as of the date in
question: (i) the closing price of a Share on the principal exchange on which
Shares of the Company's stock are then trading, if any, on the day previous to
such date, or, if shares were not traded on the day previous to such date, then
on the next preceding trading day during which a sale occurred; or (ii) if such
stock is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, (1) the last sales price (if the stock is then listed as a
National Market Issue under the NASD National Market System) or (2) the mean
between the closing representative
<PAGE> 2
bid and asked prices (in all other cases) for the stock on the day previous to
such date as reported by NASDAQ or such successor quotation system; or (iii) if
such stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the mean between the closing bid and asked prices
for the stock, on the day previous to such date, as determined in good faith by
the Committee; or (iv) if the Company's stock is not publicly traded, the fair
market value established by the Committee acting in good faith. Such
determination shall be conclusive and binding on all persons.
(i) "Nonemployee Director" shall mean any person who is a
member of the Board but is not an employee or officer of the Company or any
Parent or Subsidiary of the Company and, if such person has been an employee or
officer of the Company or any Parent or Subsidiary of the Company during the
preceding twelve months, such person has not been granted or awarded any equity
securities of the Company pursuant to any other plan of the Company or any
Parent or Subsidiary during such twelve month period. Service as a director does
not in itself constitute employment for purposes of this definition.
(j) "Option" shall mean a stock option granted pursuant to
this Plan. Each Option shall be a nonstatutory option not intended to qualify as
an incentive stock option within the meaning of Section 422A of the Code.
(k) "Option Agreement" shall mean the written agreement
described in Section 5 evidencing the grant of an Option to a Nonemployee
Director and containing the terms, conditions and restrictions pertaining to
such Option.
(l) "Option Shares" shall mean the Shares subject to an Option
granted under this Plan.
(m) "Optionee" shall mean a Nonemployee Director who holds an
Option.
(n) "Plan" shall mean this Quiksilver, Inc. 1995 Nonemployee
Directors' Stock Option Plan, as it may be amended from time to time.
(o) "Section," unless the context clearly indicates otherwise,
shall refer to a Section of this Plan.
(p) "Share" shall mean a share of Common Stock, as adjusted in
accordance with Section 7.
(q) "Subsidiary" shall mean a "subsidiary corporation" of the
Company, whether now or hereafter existing, within the meaning of Section 425(f)
of the Code, but only for so long as it is a "subsidiary corporation."
2
<PAGE> 3
Section 2. Administration.
(a) The Board shall administer this Plan, including
implementing and overseeing (i) all necessary actions in connection with the
delivery of Option Agreements evidencing Option grants under this Plan, (ii) the
exercise or termination of Options pursuant to the terms of this Plan, and (iii)
the interpretation of the provisions of this Plan and any Option granted under
this Plan. The Board shall adopt by resolution such rules and regulations as may
be required to carry out the purposes of this Plan and shall have authority to
do everything necessary or appropriate to administer this Plan. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees.
(b) The Board may delegate administration of the Plan to a
Committee of no less than two directors appointed by the Board. The Board may
from time to time remove members from, or add members to, the Committee, and
vacancies on the Committee shall be filled by the Board. Furthermore, the Board
at any time by resolution may abolish the Committee and revest in the Board the
administration of this Plan. (For purposes of this Plan document, the term
"Administrator" shall mean the Board or, to the extent that the Board's powers
have been delegated to the Committee, the Committee.)
(c) All decisions, interpretations and other actions of the
Administrator shall be final and binding on all persons. No member of the
Committee or Board shall be liable for any action that he or she has taken or
failed to take in good faith with respect to this Plan or any Option.
Section 3. Eligibility and Consideration. Only Nonemployee Directors
may receive Options under this Plan. In consideration of the granting of the
Option, the Optionee shall agree in the written Option Agreement to remain as a
director of the Company for a period of at least one year after the Option is
granted, unless the stockholders of the Company fail to reelect the director
upon expiration of the director's term of office prior to the expiration of the
one year period.
Section 4. Shares Subject to Plan.
(a) Aggregate Number. Subject to Section 7 (relating to
adjustments upon changes in Shares), the Shares which may be issued upon
exercise of Options shall not exceed in the aggregate 140,000 Shares. Shares
issued under this Plan may be unissued Shares or reacquired Shares. The number
of Shares that are subject to Options at any time under the Plan shall not
exceed the number of Shares that then remain available for issuance under the
Plan. The Company, during the term of the Plan, shall at all times reserve and
keep available sufficient Shares to satisfy the requirements of the Plan. If any
Option shall for any reason terminate or expire without having been exercised in
full, the Shares allocable to the unexercised portion of such option shall be
available again for the purpose of this Plan.
(b) No Rights as a Stockholder. An Optionee shall have no
rights as a stockholder with respect to any Shares covered by his or her Option
until the issuance (as
3
<PAGE> 4
evidenced by the appropriate entry on the books of the Company or its duly
authorized transfer agent) of a stock certificate evidencing such Shares.
Subject to Section 7, no adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property), distributions, or
other rights for which the record date is prior to the date the certificate is
issued.
Section 5. Grant of Options.
(a) Option Grants Upon Election to the Board. Each Nonemployee
Director on the date the Plan is approved by the Board of Directors and each
Nonemployee Director who is first elected to the Board of Directors thereafter
shall be automatically granted on such date, an Option to purchase 20,000 shares
at an exercise price per share equal to the Fair Market Value of the Shares as
of such date of approval or election, as applicable; provided, however, that all
such grants made prior to approval of the Plan by the stockholders of the
Company shall be subject to and conditioned upon obtaining such stockholder
approval.
(b) Terms; Vesting. Subject to the other provisions of this
Plan, each Option granted pursuant to this Plan shall be for a term of ten
years. Each Option granted under this Section 5 shall become exercisable with
respect to one-fourth of the number of Shares covered by such Option on the
first, second, third and fourth anniversary of the date such Option was granted,
so that such Option shall be fully exercisable beginning on such fourth
anniversary of the date the Option was granted.
(c) Limitation on Other Grants. The Administrator shall have
no discretion to grant Options under this Plan other than as set forth in
Section 5(a).
(d) Option Agreement. As soon as practicable after the grant
of an Option, the Optionee and the Company shall enter into a written Option
Agreement which specifies the date of grant, the number of Option Shares, the
option price, and the other terms and conditions applicable to the Option.
(e) Transferability. No Option shall be transferable otherwise
than by will or the laws of descent and distribution, and an Option shall be
exercisable during the Optionee's lifetime only by the Optionee.
(f) Limits on Exercise. Subject to the other provisions of
this Plan, an Option shall be exercisable in such amounts as are specified in
the Option Agreement.
(g) Exercise Procedures. To the extent the right to purchase
Shares has accrued, Options may be exercised, in whole or in part, from time to
time, by written notice from the Optionee to the Company stating the number of
Shares being purchased, accompanied by payment of the exercise price for the
Shares, and other applicable amounts, as provided in Section 6.
4
<PAGE> 5
(h) Expiration of Options. No Option may be exercised to any
extent by anyone after the first to occur of the following events:
(i) The expiration of ten years from the date the
Option was granted; or
(ii) Except in the case of any Optionee who is
disabled (within the meaning of Section 22(e)(3) of the Code),
the expiration of three months from the date of the
termination of service by Optionee as a director of the
Company for any reason other than such Optionee's death unless
the Optionee dies within said three-month period; or
(iii) In the case of an Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the
expiration of one year from the date of the termination of
service by Optionee as a director of the Company for any
reason other than such Optionee's death unless the Optionee
dies within said one-year period; or
(iv) The expiration of one year from the date of
Optionee's death.
Section 6. Payment upon Exercise of Options.
(a) Purchase Price. The purchase price of Shares issued under
this Plan shall be paid in full at the time an Option is exercised.
(b) Form of Consideration. Optionees may make all or any
portion of any payment due to the Company upon exercise of an Option by delivery
of cash or any Shares or other securities of the Company, so long as such Shares
or other securities constitute valid consideration for the stock under
applicable law and are surrendered in good form for transfer; provided, however,
that Options may not be exercised by the delivery of Shares or other securities
of the Company more frequently than at six-month intervals. Shares or other
securities delivered upon exercise shall be valued at their Fair Market Value on
the delivery date.
(c) Taxes. Irrespective of the form of payment made for
exercise of an Option, exercise shall be conditioned upon payment in cash to the
Company by the Optionee of all local, state and federal withholding taxes
applicable, in the Administrator's judgment, to the exercise of the Option.
Section 7. Adjustment of Shares.
(a) Changes in Capital Structure. Subject to Section 7(b), if
the outstanding Shares are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation, by
reason of a reorganization, merger, consolidation, recapitalization,
reclassification, stock split, combination of securities or stock dividend, the
total
5
<PAGE> 6
number and/or kind of securities for the purchase of which Options may be
granted under this Plan, and the number and/or kind of securities as to which
Options (or portions thereof) are outstanding, shall be adjusted proportionately
by the Administrator. Any adjustment in an outstanding Option shall be made
without change in the total exercise price applicable to the unexercised portion
of such Option and with a corresponding adjustment in the exercise price per
Share. Any adjustment under this Section 7(a) shall be subject to the provisions
of the Company's Certificate of Incorporation, as amended, and applicable law.
Any such adjustment shall be final and binding upon all Optionees, the Company
and all other interested persons.
(b) Reorganization and Other Transactions. In its absolute
discretion, and on such terms and conditions as it deems appropriate, the
Administrator may provide by the terms of any Option that such Option cannot be
exercised after the merger or consolidation of the Company with or into another
corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock or the liquidation or dissolution of the Company; and
if the Administrator so provides, it may, in its absolute discretion and on such
terms and conditions as it deems appropriate, also provide, either by the terms
of such Option or by a resolution adopted prior to the occurrence of such
merger, consolidation, acquisition, liquidation or dissolution, that, for some
period of time prior to such event, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in Section 5.
Section 8. No Right to Directorship. Neither, this Plan nor any Option
granted hereunder shall confer upon any Optionee any right with respect to
continuation of the Optionee's membership on the Board or shall interfere in any
way with provisions in the Company's Certificate of Incorporation and Bylaws
relating to the election, appointment, terms of office, and removal of members
of the Board.
Section 9. Legal Requirements. The Company shall not be obligated to
offer or sell any Shares upon exercise of any Option unless the Shares are at
that time effectively registered or exempt from registration under the federal
securities laws and the offer and sale of the Shares are otherwise in compliance
with all applicable securities laws and the regulations of any stock exchange on
which the Company's securities may then be listed. The Company shall have no
obligation to register the securities covered by this Plan under the federal
securities laws or take any other steps as may be necessary to enable the
securities covered by this Plan to be offered and sold under federal or other
securities laws. Upon exercising all or any portion of an Option, an Optionee
may be required to furnish representations or undertakings deemed appropriate by
the Company to enable the offer and sale of the Shares or subsequent transfers
of any interest in the Shares to comply with applicable securities laws.
Certificates evidencing Shares acquired upon exercise of Options shall bear any
legend required by, or useful for purposes of compliance with, applicable
securities laws, this Plan or the Option Agreements.
Section 10. Duration and Amendments.
(a) Duration. This Plan shall become effective on March 24,
1995, subject to the approval of the Company's stockholders. This Plan and any
Options granted hereunder
6
<PAGE> 7
shall be null and void if such approval is not obtained. This Plan shall
terminate automatically on March 23, 2005, and may be terminated on any earlier
date pursuant to Section 10(b).
(b) Amendment; Termination. The Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time or
from time to time by the Board or the Committee; provided, however, that the
provisions of this Plan shall not be amended more than once every six months,
other than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder. To the extent necessary or desirable to
comply with Rule 16b-3, the Code or any other applicable law or regulation, the
Company shall obtain stockholder approval of any amendment to the Plan in such a
manner and to such a degree as required. Neither the amendment, suspension nor
termination of the Plan shall, without the consent of the holder of the Option,
alter or impair any rights or obligations under any Option theretofore granted.
(c) Effect of Amendment or Termination. No Shares shall be
issued or sold under this Plan after the termination hereof, except upon
exercise of an Option granted before termination. Termination or amendment of
this Plan shall not affect any Shares previously issued and sold or any Option
previously granted under this Plan.
Date Plan approved by Board: March 24, 1995
Date Plan approved by Shareholders: March 22, 1996
7
<PAGE> 8
NON-EMPLOYEE DIRECTOR
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated __________________ , 199__, is made
by and between Quiksilver, Inc., a Delaware corporation (the "Company"),
and __________________________ a non-employee director of the Company
(the "Director").
WHEREAS, the Company wishes to afford the Director the
opportunity to purchase shares of its Common Stock; and
WHEREAS, the Company wishes to carry out the Quiksilver, Inc.
1995 Nonemployee Directors' Stock Option Plan (the "Plan") a copy of which is
delivered herewith and the terms of which are hereby incorporated by reference
and made a part of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Capitalized terms used but not defined herein shall have the
meaning specified in the Plan. The masculine pronoun shall include the feminine
and neuter, and the singular the plural, where the context so indicates.
ARTICLE II
GRANT OF OPTION
Section 2.1 - Grant of Option
In consideration of the Director's agreement to continue in
his service to the Company, and for other good and valuable consideration, on
the date hereof the Company irrevocably grants to the Director the option to
purchase any part or all of an aggregate of 20,000 Shares of its Common Stock
upon the terms and conditions set forth in this Agreement; provided, however,
that the grant of this Option is subject to and conditioned upon stockholder
approval of the Plan. The Plan and this Option shall be null and void if such
approval is not obtained.
<PAGE> 9
Section 2.2 - Purchase Price
The purchase price of the Shares of Common Stock covered by
the Option shall be $ _________ per share without commission or other charge.
Section 2.3 - Consideration to Company
In consideration of the granting of this Option by the
Company, the Director agrees to render faithful and efficient services to the
Company, with such duties and responsibilities as the Board of Directors shall
from time to time prescribe, for a period of at least one year from the date
this Option is granted, unless the stockholders of the Company fail to reelect
the Director upon expiration of the Director's term of office prior to the
expiration of the one year period. Nothing in this Agreement or in the Plan
shall confer upon the Director any right to continue serving in a directorship
position of the Company or shall interfere with or restrict in any way the
rights of the stockholders of the Company, which are hereby expressly reserved,
to remove the Director pursuant to provisions therefor in the charter or bylaws
of the Company.
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
The Option shall become exercisable in four cumulative
installments as follows:
(a) The first installment shall consist of twenty
percent (25%) of the Shares covered by the Option and shall become
exercisable on the first anniversary of the date the Option is granted.
(b) The second installment shall consist of twenty
percent (25%) of the Shares covered by the Option and shall become
exercisable on the second anniversary of the date the Option is
granted.
(c) The third installment shall consist of twenty
percent (25%) of the Shares covered by the Option and shall become
exercisable on the third anniversary of the date the Option is granted.
(d) The fourth installment shall consist of twenty
percent (25%) of the Shares covered by the Option and shall become
exercisable on the fourth anniversary of the date the Option is
granted.
2
<PAGE> 10
Section 3.2 - Expiration of Option
The Option may not be exercised to any extent by the Director
after the first to occur of the events set forth in Section 5(h) of the Plan.
ARTICLE IV
EXERCISE OF OPTION
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Director, only he may exercise the
Option or any portion thereof. After the death of the Director, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable, be exercised by the Director's personal representative or by any
person empowered to do so under the Director's will or under the then applicable
laws of descent and distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or portion thereof becomes unexercisable; provided,
however, that each partial exercise shall be for not less than 100 Shares.
Section 4.3 - Manner of Exercise
The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or the Secretary's
office of all of the following prior to the time when the exercisable Option or
portion thereof becomes unexercisable:
(a) Notice in writing signed by the Director or such
other person then entitled to exercise the Option or portion thereof,
stating that the Option or portion thereof is thereby exercised, such
notice complying with all applicable rules established by the
Administrator; and
(b) (i) Full payment (in cash or by check) for
the Shares with respect to which such Option or portion is exercised;
or
(ii) With the consent of the Administrator,
Shares of the Company's Common Stock owned by the Director duly
endorsed for transfer to the Company with a Fair Market Value on the
date of delivery equal to the aggregate purchase price of the Shares
with respect to which such Option or portion is exercised; or
3
<PAGE> 11
(iii) Any combination of the consideration
provided in the foregoing subparagraphs (i) and (ii); and
(c) A bona fide written representation and agreement,
in a form satisfactory to the Administrator, signed by the Director or
other person then entitled to exercise such Option or portion thereof,
stating that the Shares of stock are being acquired for his or her own
account, for investment and without any present intention of
distributing or reselling said Shares or any of them except as may be
permitted under the Securities Act of 1933, as amended (the "Securities
Act"), and then applicable rules and regulations thereunder, and that
the Director or other person then entitled to exercise such Option or
portion thereof will indemnify the Company against and hold it free and
harmless from any loss, damage, expense or liability resulting to the
Company if any sale or distribution of the Shares by such person is
contrary to the representation and agreement referred to above. The
Administrator may, in its absolute discretion, take whatever additional
actions it deems appropriate to insure the observance and performance
of such representation and agreement and to effect compliance with the
Securities Act and any other federal or state securities laws or
regulations. Without limiting the generality of the foregoing, the
Administrator may require an opinion of counsel acceptable to it to the
effect that any subsequent transfer of Shares acquired on an Option
exercise does not violate the Securities Act, and may issue
stop-transfer orders covering such shares. Share certificates
evidencing stock issued on exercise of this Option shall bear an
appropriate legend referring to the provisions of this subsection (c)
and the agreements herein. The written representation and agreement
referred to in the first sentence of this subsection (c) shall,
however, not be required if the Shares to be issued pursuant to such
exercise have been registered under the Securities Act, and such
registration is then effective in respect of such Shares; and
(d) Full payment to the Company of all amounts which
it is required to withhold under federal, state or local law upon
exercise of the Option; and
(e) In the event the Option or portion shall be
exercised pursuant to Section 4.1 by any person or persons other than
the Director, appropriate proof of the right of such person or persons
to exercise the Option or portion thereof.
Section 4.4 - Conditions to Issuance of Stock Certificates
The Shares deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such Shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for Shares purchased upon the exercise
of the Option or portion thereof prior to fulfillment of all of the following
conditions:
(a) The admission of such Shares to listing on all
stock exchanges, if any, on which such class of stock is then listed;
and
4
<PAGE> 12
(b) The completion of any registration or other
qualification of such Shares under any state or federal law or under
the rulings or regulations of the Securities and Exchange Commission or
any other governmental regulatory body, which the Administrator shall,
in its absolute discretion, deem necessary or advisable; and
(c) The obtaining of any approval or other clearance
from any state or federal governmental agency which the Administrator
shall, in its absolute discretion, determine to be necessary or
advisable; and
(d) The payment to the Company of all amounts which
it is required to withhold under federal, state or local law upon
exercise of the Option; and
(e) The lapse of such reasonable period of time
following the exercise of the Option as the Administrator may from time
to time establish for reasons of administrative convenience.
Section 4.5 - Rights as Shareholder
The holder of the Option shall not be, nor shall such holder
have any of the rights of privileges of, a stockholder of the Company in respect
of any Shares purchasable upon the exercise of any part of the Option unless and
until a certificate or certificates representing such Shares shall have been
issued by the Company to such holder.
ARTICLE V
OTHER PROVISIONS
Section 5.1 - Administration
The Administrator shall have the power to interpret the Plan
and this Agreement and to adopt such rules for the administration,
interpretation and application of the Plan as are consistent therewith and to
interpret, amend or revoke any such rules. All actions taken and all
interpretations and determinations made by the Administrator in good faith shall
be final and binding upon the Director, the Company and all other interested
persons.
Section 5.2 - Option Not Transferable
Neither the Option nor any interest or right therein or part
thereof shall be subject to or liable for the debts, contracts or engagements of
the Director or his successors in interest or shall be subject to disposition by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of
law by judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void
5
<PAGE> 13
and of no effect; provided, however, that this Section 5.2 shall not prevent
transfers by will or by the applicable laws of descent and distribution.
Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of this Agreement.
Section 5.4 - Notices
Any notice to be given under the terms of this Agreement to
the Company shall be addressed to the Company in care of its Secretary, and any
notice to be given to the Director shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Director shall, if
the Director is then deceased, be given to the Director's personal
representative if such representative has previously informed the Company of his
status and address by written notice under this Section 5.4. Any notice shall be
deemed duly given when enclosed in a properly sealed envelope or wrapper
addressed as aforesaid, deposited (with postage prepaid) in a post office or
branch post office regularly maintained by the United States Postal Service.
Section 5.5 - Titles
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Agreement.
Section 5.6 - Construction
This Agreement shall be administered, interpreted and enforced
under the laws of the State of California.
Section 5.7 - The Plan
A copy of the Plan has been delivered to the Director, and
receipt of such copy is hereby expressly acknowledged by the Director. This
Agreement hereby incorporates by reference said Plan document and all of the
terms and conditions of the Plan as the same may be amended from time to time
hereafter in accordance with the terms thereof. The terms of this Agreement
shall in no manner limit or modify the controlling provisions of the Plan, and
in the
6
<PAGE> 14
case of any conflict between the provisions of the Plan and this Agreement, the
provisions of the Plan shall be controlling and binding upon the parties hereto.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered by the parties hereto.
QUIKSILVER, INC.
By
---------------------------------------
Chief Executive Officer
By
---------------------------------------
Secretary
- -----------------------------------
Director
- -----------------------------------
- -----------------------------------
Address
7
<PAGE> 1
EXHIBIT 10.3
RESTATED
CERTIFICATE OF INCORPORATION
OF
QUIKSILVER, INC.
The undersigned, Robert B. McKnight, Jr. and Randall L. Herrel, Sr.,
certify that they are the Chief Executive Officer and Secretary, respectively,
of Quiksilver, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Company"), and do hereby further certify as follows:
A. The name of the Company is QUIKSILVER, INC.
B. The original Certificate of Incorporation of the Company was filed
in the office of the Delaware Secretary of State on October 24, 1986.
C. This Restated Certificate of Incorporation has been duly adopted by
the Board of Directors and by the Stockholders of the Company in accordance with
the applicable provisions of Section 242 and 245 of the General Corporation Law
of the State of Delaware.
D. The text of the Certificate of Incorporation of the Company is
hereby amended and restated to read in its entirety as follows:
FIRST: The name of this corporation is Quiksilver, Inc.
(hereinafter referred to as the "Company").
SECOND: The address of the Company's registered office in the
State of Delaware is 32 Loockerman Square, Suite L-100, Dover, County
of Kent, Delaware. The name of the Company's registered agent at that
address is United States Corporation Company.
THIRD: The purpose of the Company is to engage in any lawful
act or activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH:
A. The total number of shares of all classes of stock that the
Company shall have authority to issue is thirty-five million
(35,000,000), consisting of:
<PAGE> 2
(1) thirty million (30,000,000) shares of
Common Stock, with a par value of $.01 per share; and
(2) five million (5,000,000) shares of
Preferred Stock, with a par value of $.01 per share.
B. The shares of Preferred Stock may be issued from
time to time in one or more series. The Board of Directors is
authorized to fix the number of shares of any series of Preferred Stock
and to determine the designation of any such series. The Board of
Directors is also authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any
series, to increase or decrease (but not below the number of shares of
such series then outstanding) the number of shares of any such series
subsequent to the issuance of shares of that series.
FIFTH: A director of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware General Corporation Law, or (iv) for
any transaction from which the director derived an improper personal
benefit.
If the Delaware General Corporation Law is
hereafter amended to authorize the further elimination or limitation of
the liability of a director, then the liability of a director of the
Company shall be eliminated or limited to the fullest extent permitted
by the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing
provisions of this Article FIFTH by the stockholders of the Company
shall not adversely affect any right or protection of a director of the
Company existing at the time of such repeal or modification.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to
make, alter or repeal the bylaws of the Company.
SEVENTH: Election of directors need not be by written ballot
unless the bylaws of the Company shall so provide.
2
<PAGE> 3
E. The undersigned further declare under penalty of perjury under the
laws of the State of Delaware that this Restated Certificate of Incorporation is
the act and deed of the Company and that the facts stated herein are true.
DATED: April __, 1996 QUIKSILVER, INC.
--------------------------------------
Robert B. McKnight, Jr.
Chief Executive Officer
ATTEST:
- -----------------------------------
Randall L. Herrel, Sr., Secretary
3
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUIKSILVER,
INC'S APRIL 30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> APR-30-1996
<CASH> 3,794,000
<SECURITIES> 0
<RECEIVABLES> 51,649,000
<ALLOWANCES> 3,200,000
<INVENTORY> 29,128,000
<CURRENT-ASSETS> 84,407,000
<PP&E> 14,369,000
<DEPRECIATION> 6,944,000
<TOTAL-ASSETS> 110,950,000
<CURRENT-LIABILITIES> 30,040,000
<BONDS> 3,298,000
0
0
<COMMON> 70,000
<OTHER-SE> 77,542,000
<TOTAL-LIABILITY-AND-EQUITY> 110,950,000
<SALES> 94,992,000
<TOTAL-REVENUES> 94,992,000
<CGS> 57,384,000
<TOTAL-COSTS> 57,384,000
<OTHER-EXPENSES> 25,386,000
<LOSS-PROVISION> 850,000
<INTEREST-EXPENSE> 400,000
<INCOME-PRETAX> 10,972,000
<INCOME-TAX> 4,428,000
<INCOME-CONTINUING> 6,544,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,544,000
<EPS-PRIMARY> .91
<EPS-DILUTED> .90
</TABLE>
