<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
QUIKSILVER, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------------
(5) Total fee paid:
---------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
QUIKSILVER, INC.
1740 MONROVIA AVENUE
COSTA MESA, CALIFORNIA 92627
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 21, 1997
TO THE STOCKHOLDERS OF QUIKSILVER, INC.:
Please take notice that the Annual Meeting of Stockholders of Quiksilver,
Inc. (the "Company") will be held at the Newport Beach Marriott Hotel, located
at 900 Newport Center Drive, Newport Beach, California on Friday, March 21,
1997, at 10:00 a.m. local time, for the following purposes:
1. To elect a Board of seven Directors for the ensuing year; and
2. To transact such other business as may properly come before the meeting
or any adjournment thereof.
At the Annual Meeting, the Board of Directors intends to present William M.
Barnum, Jr., Charles E. Crowe, Michael H. Gray, Harry Hodge, Robert G. Kirby,
Robert B. McKnight, Jr. and Tom Roach, as nominees for election to the Board of
Directors.
Only stockholders of record on the books of the Company at the close of
business on January 28, 1997 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. A majority of the outstanding shares must be represented at the meeting
in order to transact business. Consequently, if you are unable to attend in
person, please execute the enclosed proxy and return it in the enclosed
addressed envelope. Your promptness in returning the proxy will assist in the
expeditious and orderly processing of the proxies. If you return your proxy, you
may nevertheless attend the meeting and vote your shares in person, if you wish.
By Order of the Board of Directors,
QUIKSILVER, INC.
ROBERT B. McKNIGHT, JR.
Chairman of the Board and
Chief Executive Officer
Costa Mesa, California
February 14, 1997
<PAGE> 3
QUIKSILVER, INC.
1740 MONROVIA AVENUE
COSTA MESA, CALIFORNIA 92627
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 21, 1997
PROXY STATEMENT
SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
Quiksilver, Inc. (the "Company") for use at the Company's Annual Meeting of
Stockholders to be held at the Newport Beach Marriott Hotel, located at 900
Newport Center Drive, Newport Beach, California, on Friday, March 21, 1997, at
10:00 a.m. local time, and any and all adjournments or postponements thereof.
All shares represented by each properly executed, unrevoked proxy received in
time for the Annual Meeting will be voted in the manner specified therein. If
the manner of voting is not specified in an executed proxy received by the
Company, the proxy holders will vote for the election of the nominees for
election to the Board of Directors listed in the proxy and, as to any other
business which may properly come before the meeting, in accordance with their
best judgment. Any stockholder has the power to revoke his or her proxy at any
time before it is voted. A proxy may be revoked by delivering a written notice
of revocation to the Secretary of the Company, by presenting at the meeting a
later-dated proxy executed by the person who executed the prior proxy, or by
attendance at the meeting and voting in person by the person who executed the
prior proxy. This Proxy Statement and form of Proxy are being mailed to the
Company's stockholders on or about February 14, 1997.
The Bylaws of the Company provide that the holders of a majority of the
shares of stock of the Company issued and outstanding and entitled to vote at
the Annual Meeting, present in person or represented by proxy, shall constitute
a quorum and that, except as otherwise provided by statute, the Certificate of
Incorporation of the Company or the Bylaws, all other matters coming before the
Annual Meeting shall be decided by the vote of the holders of a majority of the
stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat. Votes cast at the Annual Meeting will be tabulated by
the persons appointed by the Company to act as inspectors of election for the
Annual Meeting. The inspectors of election will treat shares of voting stock
represented by a properly signed and returned proxy as present at the Annual
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. Likewise, the inspectors of
election will treat shares of voting stock represented by "broker non-votes"
(i.e., shares of voting stock held in record name by brokers or nominees as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote; (ii) the broker or nominee does not have discretionary
voting power under applicable rules or the instrument under which it serves in
such capacity; or (iii) the recordholder has indicated on the proxy card or has
executed a proxy and otherwise notified the Company that it does not have
authority to vote such shares on that matter) as present for purposes of
determining a quorum. Directors will be elected by a favorable vote of a
plurality of the shares of voting stock present and entitled to vote, in person
or by proxy, at the Annual Meeting. Accordingly, abstentions or broker non-votes
as to the election of Directors will not affect the election of the candidates
receiving the plurality of votes.
<PAGE> 4
The cost of soliciting proxies will be borne by the Company. The
solicitation will be by mail. Expenses will include reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the meeting to beneficial owners of the
Company's Common Stock. Further solicitation of proxies may be made by telephone
or oral communication with some stockholders by the Company's regular employees
who will not receive additional compensation for the solicitation. The Company
has no present plans to hire special employees or paid solicitors to assist in
obtaining proxies, but reserves the option of doing so if it should appear that
a quorum otherwise might not be obtained.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 7,020,830 shares of the Company's Common
Stock outstanding at the close of business on January 28, 1997 will be entitled
to notice of and to vote at the meeting or any adjournment or postponement
thereof. On each matter to be considered at the Annual Meeting, stockholders
will be entitled to cast one vote for each share held of record on January 28,
1997.
CERTAIN STOCKHOLDERS
Certain information with respect to (i) each of the current Directors and
nominees for election as Directors, (ii) each of the four Executive Officers
listed in the compensation tables below, and all current Directors and Executive
Officers as a group, including the number of shares of the Company's Common
Stock beneficially owned by each of them as of December 31, 1996, is set forth
below:
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
NAME OF INDIVIDUAL BENEFICIALLY BENEFICIALLY
OR IDENTITY OF GROUP(1) OWNED OWNED
------------------------------------------------ ------------ ------------
<S> <C> <C>
Mellon Bank Corporation......................... 365,000(2) 5.3%
One Mellon Bank Center
Pittsburgh, PA 15258
William M. Barnum, Jr. ......................... 10,000(4) (3)
Charles E. Crowe................................ 73,000(5) 1.1%
Michael H. Gray................................. 17,000(4) (3)
Randall L. Herrel, Sr. ......................... --(6) --
Robert G. Kirby................................. 33,250(7) (3)
Robert B. McKnight, Jr. ........................ 318,000(8) 4.6%
Tom Roach....................................... 11,900(9) (3)
Harry Hodge..................................... -- --
Steven L. Brink................................. -- --
All Executive Officers and Directors
as a Group (8 persons)........................ 463,150(10) 6.6%
</TABLE>
- ---------------
(1) The address for each of the named individuals is c/o Quiksilver, Inc., 1740
Monrovia Avenue, Costa Mesa, California 92627. Unless otherwise indicated,
the named persons possess sole voting and investment power with respect to
the shares listed (except to the extent such authority is shared with
spouses under applicable law).
(2) According to the Schedule 13G filed by Mellon Bank Corporation ("MBC") with
the Securities and Exchange Commission, MBC is a parent holding company
which, through its direct and indirect subsidiaries Mellon Bank, N.A.,
Franklin Portfolio Associates Trust, Mellon Capital Management Corporation
and The Dreyfus Corporation, has sole voting power with respect to all
365,000 shares, sole dispositive power with respect to 255,000 shares and
share dispositive power with respect to 110,000 shares.
(3) Less than 1% of the outstanding shares of Common Stock.
2
<PAGE> 5
(4) Includes an aggregate of 9,000 shares which the Director has, or will have
within 60 days after December 31, 1996, the right to acquire upon the
exercise of outstanding options.
(5) Includes an aggregate of 8,000 shares which the Director has, or will have
within 60 days after December 31, 1996, the right to acquire upon exercise
of outstanding options.
(6) Mr. Herrel resigned as a Director of the Company on October 24, 1996 and as
an Executive Officer on November 20, 1996.
(7) Includes an aggregate of 2,000 shares owned of record by Mr. Robert Kirby's
spouse and 9,000 shares which Mr. Kirby has, or will have within 60 days
after December 31, 1996, the right to acquire upon exercise of outstanding
options.
(8) Includes an aggregate of 65,000 shares which Mr. McKnight has, or will have
within 60 days after December 31, 1996, the right to acquire upon the
exercise of outstanding options.
(9) Includes an aggregate of 1,400 shares owned of record by Mr. Tom Roach's
children and 9,000 shares which Mr. Roach has, or will have within 60 days
after December 31, 1996, the right to acquire upon exercise of outstanding
options.
(10) Includes an aggregate of 109,000 shares which the Executive Officers and
Directors as a Group have, or will have within 60 days after December 31,
1996, the right to acquire upon the exercise of outstanding options and
warrants.
PROPOSAL 1
ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of Stockholders and hold
office until the next Annual Meeting of Stockholders when their respective
successors are duly elected and qualified. The Company's Bylaws authorize a
Board consisting of four to eight Directors, with the number of Directors
currently fixed at seven.
Of the seven nominees for election to the Board of Directors, all are
currently serving as Directors of the Company and, except for Mr. Hodge, were
elected to their present terms of office by the stockholders at the 1996 Annual
Meeting of Stockholders. Mr. Hodge was elected a Director by the Board in
December 1996 to fill the vacancy created by the resignation of Randall L.
Herrel, Sr. Unless instructed to the contrary, the shares represented by the
proxies will be voted in favor of the election of the nominees named below as
Directors. Although it is anticipated that each nominee will be able to serve as
a Director, should any nominee become unavailable to serve, the proxies will be
voted for such other person or persons as may be designated by the Company's
Board of Directors. The nominees receiving the highest number of votes, up to
the number of Directors to be elected, will be elected as Directors.
The following sets forth certain biographical information for each of the
nominees.
Mr. William M. Barnum, Jr., age 42, has served as a Director of the Company
since November 1991. Mr. Barnum also currently serves as a director of several
private companies, and has been a general partner of Brentwood Associates, a Los
Angeles based venture capital and private equity investment firm since 1986.
Prior to that, Mr. Barnum held several positions at Morgan Stanley & Co. Mr.
Barnum graduated from Stanford University in 1976 with a B.A. in Economics and
from the Stanford Graduate School of Business and Stanford Law School in 1981
with M.B.A. and J.D. degrees. Mr. Barnum is a Director of Rental Service
Corporation.
Mr. Charles E. Crowe, age 41, has served as a Director of the Company since
December 1980. Mr. Crowe also served as a Vice President of the Company until
his leave of absence in fiscal 1992 and subsequent resignation on February 5,
1993. Prior to 1981, Mr. Crowe was employed by Bateman Eichler, Hill Richards,
Incorporated. Mr. Crowe graduated from the University of California, Santa
Barbara, with a B.A. degree in Economics. Mr. Crowe is the step son-in-law of
Mr. Kirby.
3
<PAGE> 6
Mr. Michael H. Gray, age 44, has served as a Director of the Company since
November 1991. He is currently President of Sweet Life Restaurants, a specialty
baked goods and food services company, and was formerly President of St. John
Knits, Inc., a women's clothing company, from 1986 to 1991, where he was
employed beginning in 1971. Mr. Gray graduated from Long Beach State University
with a degree in Business Administration.
Mr. Harry Hodge, age 46, has served as a Director of the Company since
December 1996. Mr. Hodge co-founded Na Pali, S.A. ("Quiksilver Europe"), the
European licensee of Quiksilver International, in 1984 in Biarritz, France.
Following the acquisition of Quiksilver Europe by the Company, Mr. Hodge
remained as President Director General. From 1981 to 1983, he was the Marketing
Director for Quiksilver International, in Torquay, Australia. Prior to his
experience with Quiksilver International, Mr. Hodge was a journalist in
Australia.
Mr. Robert G. Kirby, age 71, has served as a Director of the Company since
October 1986. Mr. Kirby is a Senior Partner of the Capital Group Partners L.P.
and former Chairman of the Board of Capital Guardian Trust Company, a
wholly-owned subsidiary of The Capital Group, Inc. Capital Guardian Trust
Company is an institutional portfolio manager for pension funds. Mr. Kirby has
also been a Director of The Capital Group, Inc., from 1978 to 1991. Mr. Kirby is
a graduate of Stanford University and Harvard University Graduate School of
Business Administration. Mr. Kirby is the step father-in-law of Mr. Crowe.
Mr. Robert B. McKnight, Jr., age 43, was a co-founder of the Company in
1976, served as President from 1979 through July 1991 and has served as Chairman
of the Board and Chief Executive Officer since August 1991 and a Director of the
Company since its inception. Mr. McKnight received a B.S. degree in Business
Administration from the University of Southern California.
Mr. Tom Roach, age 53, has been President and owner of Palm Springs Harley
Davidson, a motorcycle retail and specialty store, since 1990, and is also
co-owner and co-founder of Sweetwater Ranch, a high-end western furniture
manufacturer. Prior to 1990, Mr. Roach was President and Chief Operating Officer
of Woodward and Lothrop from 1987 through 1989 and JW Robinson's during 1986.
Mr. Roach received an M.S. degree in Marketing and an M.B.A. from the University
of Wyoming.
The Board of Directors held seven meetings during the fiscal year ended
October 31, 1996. Each incumbent Director attended at least 75% of the total
number of meetings of the Board of Directors and of Board of Director committees
on which that Director served which were held during the period for which he was
a Director. Each Director who is not an employee of the Company receives an
attendance fee of $2,000 for each meeting of the Board of Directors he
personally attends and for each meeting of a committee of the Board of Directors
he personally attends which is not held on the same day as a meeting of the
Board of Directors. Nonemployee Directors receive $1,000 for each Board meeting
attended telephonically. In addition, nonemployee Directors received an annual
retainer of $10,000. There was also an arrangement between the Company and Mr.
Crowe pursuant to which he provided consulting services to the Company for the
period from April 1995 to January 1996 for which he was paid $30,000.
The Board of Directors has a standing Compensation and Audit Committee, but
does not have a Nominating Committee.
The Compensation Committee is responsible for making recommendations to the
Board of Directors concerning the annual compensation for all executive officers
and key employees of the Company, as well as administering the Company's Stock
Option Plans. The Compensation Committee is comprised of Messrs. Barnum, Gray,
Kirby and Roach. The Compensation Committee held four meetings during the fiscal
year ended October 31, 1996.
The principal duties of the Audit Committee are to approve the selection of
the Company's independent auditors, to discuss and review the Company's
accounting policies and to review the accounting and internal control procedures
recommended by the Company's independent auditors. The Audit Committee is
comprised of Messrs. Crowe, Barnum, Gray and Roach. During the fiscal year ended
October 31, 1996, the Audit Committee held two meetings.
4
<PAGE> 7
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
Directors and greater-than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended October 31, 1996 all Section
16(a) filing requirements applicable to its Officers, Directors and greater-than
ten percent beneficial owners were satisfied except that Tom Roach inadvertently
failed to file a Form 4 upon acquiring shares in September 1996 and failed to
file a Form 5 at year end reporting such delinquency. Mr. Roach subsequently
filed this report.
5
<PAGE> 8
EXECUTIVE OFFICERS
The current Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ---------------------------------------------
<S> <C> <C>
Robert B. McKnight, Jr. 43 Chairman of the Board and Chief Executive
Officer
Harry Hodge 46 President Director General, Quiksilver Europe
Steven L. Brink 35 Chief Financial Officer, Secretary and
Treasurer
</TABLE>
For additional information with respect to Messrs., McKnight and Hodge who
are also nominees as Directors of the Company, see "Election of Directors."
Mr. Steven L. Brink has served as Vice President, Secretary, Treasurer and
Chief Financial Officer since October 1996. He joined the Company in July 1996
as Vice President of Finance. Mr. Brink previously served as Senior Manager in
the TRADE Group with Deloitte & Touche, LLP, where he was employed from 1985
through 1996. He is a Certified Public Accountant and holds a B.S. Degree in
Business Administration from California State University at Los Angeles,
graduating summa cum laude.
SUMMARY COMPENSATION TABLE
The following sets forth certain summary compensation information
concerning the named Executive Officers for each of the Company's last three
fiscal years:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND FISCAL --------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS# COMPENSATION(1)
---------------------------- ------ --------- --------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert B. McKnight, Jr. 1996 $347,000 $589,000 50,000 $4,500
Chairman of the Board 1995 342,000 910,000 30,000 5,000
and Chief Executive 1994 317,000 584,000 15,000 3,500
Officer
Randall L. Herrel, Sr.(2) 1996 $296,000 $581,000 50,000 $2,400
President, Chief 1995 279,000 910,000 30,000 4,500
Operating Officer and 1994 240,000 584,000 15,000 3,500
Secretary
Harry Hodge 1996 $294,000 $378,000 50,000 $1,000
President Director 1995 248,000 133,000 30,000 1,000
General, Quiksilver Europe 1994 206,000 35,000 15,000 --
</TABLE>
- ---------------
(1) The amounts disclosed in this column include premiums for personal life
insurance policies for Messrs. McKnight, Herrel and Hodge for the fiscal
year ended October 31, 1996 of $2,200, $2,400 and $1,000, respectively, and
for the fiscal years ended October 31, 1995 and 1994 of $2,500, $2,500 and
$1,000, respectively. The amounts disclosed in this column also include the
Company's matching 401(k) employer contribution for Mr. McKnight of $2,300,
$2,500 and $1,000 for the fiscal years ended 1996, 1995 and 1994,
respectively.
(2) Mr. Herrel resigned as an Executive Officer of the Company effective
November 20, 1996.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following sets forth certain information concerning individual grants
of stock options during the fiscal year ended October 31, 1996 to each of the
named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ---------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT
UNDERLYING GRANTED TO EXERCISE OR DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE VALUE($)(3)
- -------------------------------------- ---------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Robert B. McKnight, Jr................ 50,000 6.7% $30.25 03/26/06 $810,000
Randall L. Herrel, Sr.(4)............. 50,000 6.7% 30.25 03/26/06 810,000
Harry Hodge........................... 50,000 6.7% 30.25 03/26/06 810,000
</TABLE>
- ---------------
(1) The options were granted under the Quiksilver Inc. 1996 Stock Option Plan
for a term of 10 years, subject to earlier termination in certain events
related to termination of employment. The options become exercisable 33 1/3%
per year beginning one year from the date of grant. To the extent not
already exercisable, the options generally become exercisable upon a sale of
assets, a merger or consolidation of the Company with or into another
corporation or 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
outstanding voting stock, unless the option is assumed or replaced with a
comparable option by the surviving entity.
(2) All options were granted at fair market value (the last sales price for the
Company's Common Stock on the day previous to the date of grant as reported
by NASDAQ).
(3) The indicated present value amounts are based on a variation of the
Black-Scholes option pricing model. For purposes of the Black-Scholes model,
the Company assumed a volatility of 53.79%, a risk free rate of return of
6.3%, a dividend yield of 0%, and a time of exercise of five years. Actual
gains, if any, on exercise will be dependent on a number of factors
including future performance of the Company and the Common Stock, and
overall market conditions as well as the holder's continued employment
through the vesting period. As a result, the indicated present values may
vary substantially from actual realized values.
(4) Mr. Herrel resigned as a Director of the Company on October 22, 1996 and as
an Executive Officer on November 20, 1996. All of the options granted to him
during fiscal 1996 expired by their terms upon his resignation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following sets forth certain information concerning each exercise of
stock options during the fiscal year ended October 31, 1996 by each of the named
Executive Officers and the aggregated fiscal year-end value of the unexercised
options of each such Executive Officer:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES VALUE OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END ($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert B. McKnight, Jr....... -- -- 65,000 70,000 $715,000 $48,000
Randall L. Herrel, Sr........ 35,000 $658,000 -- 72,000 -- 68,000
Harry Hodge.................. 10,000 118,000 -- 70,000 -- 48,000
</TABLE>
- ---------------
(1) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise or base price of "in-the-money" options.
7
<PAGE> 10
EMPLOYMENT ARRANGEMENTS
The Company has entered into executive employment agreements with each of
Messrs. McKnight, Brink and Hodge. Pursuant to the terms of these employment
agreements, Mr. McKnight is to receive a base salary of $364,000, Mr. Brink a
base salary of $150,000 and Mr. Hodge a base salary of 1,200,000 French francs
(approximately $235,000 as of October 31, 1996). These base salaries are subject
to periodic review by the Company and may be adjusted either up or down, based
on the Company's performance, the individual's performance, market conditions or
such other factors as are deemed relevant by the Company, provided, however,
that the base salaries may not be adjusted below the amounts set forth above
prior to March 31, 1999.
The employment agreements of Messrs. McKnight and Hodge provide that they
were eligible for a bonus for the fiscal year ended October 31, 1996 only, based
on the Company, in the case of Mr. McKnight and based on Quiksilver Europe, in
the case of Mr. Hodge, achieving certain pre-tax return on equity goals for the
fiscal year. For the fiscal year ended October 31, 1996, Messrs. McKnight and
Hodge received $533,000 and $254,000, respectively, pursuant to this bonus plan.
In addition, the employment agreements of Messrs. McKnight, Brink and Hodge
provide that each of them is eligible for a bonus based on growth in the
Company's operating income for the fiscal year ended October 31, 1996 and growth
in pretax income for the years thereafter in the case of Messrs. McKnight and
Brink, and based on growth in pretax income of Quiksilver Europe in the case of
Mr. Hodge. For the fiscal year ended October 31, 1996, Messrs. McKnight, and
Hodge received $56,000, and $124,000, respectively, pursuant to this bonus plan.
Mr. McKnight's and Mr. Brink's employment agreements require that the Company
maintain a $1,000,000 and $500,000 term life insurance policy on their lives,
respectively, payable to their designees; provided, however, that the Company is
not required to pay premiums for such policies in excess of $2,500 and $1,250,
respectively, annually.
Each of the employment agreements continues for an unspecified term and may
be terminated by the Company or the executive without cause at any time for any
reason, subject to the payment of certain amounts as set forth below. If the
Company terminates an executive's employment without cause, or if the executive
terminates his employment for "good reason" following a change in control of the
Company, the Company will continue to pay the executive's base salary for a
period of twelve months. For purposes of the executive employment agreements,
"good reason" is defined as (i) the assignment to executive of duties materially
inconsistent with his position, as set forth in the agreement, without
executive's consent, (ii) a material diminution in executives's authority,
without executive's consent, (iii) a material breach by the Company of its
obligations under the agreement, or (iv) the failure by the Company to obtain
from any successor, before the succession takes place, an agreement to assume
and perform the obligations of the Company under the employment agreement.
COMPENSATION COMMITTEE REPORT
The report of the Compensation Committee which follows shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference.
As members of the Compensation Committee, it is our duty to administer the
Company's various executive compensation plans. In addition, we review
compensation levels of members of management, evaluate the performance of
management, consider management succession and related matters. The Committee
reviews with the Board in detail all aspects of compensation for the Company's
executive officers.
In fiscal 1996, the Committee reevaluated the Company's executive
compensation structure in light of the Company's philosophy of linking
compensation with enhancement of shareholder value. As a result of this
reevaluation, the Company revised its compensation program for its executive
officers. The principles followed by the Committee were (i) to provide a cash
compensation package consisting of competitive base salary levels and incentive
opportunities
8
<PAGE> 11
linked to corresponding levels of Company performance and (ii) to grant stock
option incentives which require increases in the Company's stock price in order
for executives to realize value and, thus, tie them to the Company's long-term
stock performance. The result was a total compensation opportunity significantly
dependent upon the Company's performance.
In August 1993, Congress enacted tax legislation that, among other things,
places a ceiling of $1 million on the amount of an executive officer's annual
compensation that may be deducted for federal income tax purposes in any year
(the "Deductibility Cap"). The legislation provides that compensation paid under
certain incentive compensation plans may be excluded from the calculation of
compensation that is subject to the Deductibility Cap, provided the plans meet
certain conditions, which are contained in regulations that have recently been
adopted by the Internal Revenue Service.
As a result of the revisions made by the Committee to the Company's
compensation program during 1996, the Committee believes that no executive
officer's compensation will exceed the Deductibility Cap thereby preserving the
deductibility of all executive compensation paid by the Company.
EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation program is currently based on three
principal components, each of which is intended to support the overall
compensation philosophy. The three principal components are:
- BASE SALARY: Base salary ranges are reviewed and established annually.
The Company tries to ensure that the base salary ranges reflect
competitive job market conditions for similarly related companies in
terms of sales, employees and related factors. Adjustments to actual base
salaries are made pursuant to job performance in relationship to the
midpoint of the salary range for the position and level of
responsibilities. The Company's philosophy generally is to provide a base
salary that is at or above the midpoint of the applicable salary range,
particularly in light of the Company's decision to operate with a minimal
number of executive officers by assigning each executive officer multiple
functions.
- INCENTIVE COMPENSATION: The incentive compensation opportunity under the
Company's Executive Officer Incentive Plan is based on the growth in the
Company's pretax income over the prior year, in the case of officers of
the Company, and growth in Quiksilver Europe's pretax income, in the case
of officers of Quiksilver Europe. Under the Plan, each executive officer
receives a bonus equal to a percentage of such executive officer's base
salary, ranging from 0% for pretax income growth under 10% over the prior
year up to a maximum of 200% for pretax income growth of 40% or more over
the prior year.
- STOCK OPTIONS: Executive officers are eligible to receive annual grants
of stock options, which have historically been granted as nonqualified
stock options. The awards are intended to retain and motivate executive
officers to improve stock market performance. Awards are granted at the
fair market value of the Company's Common Stock at the date of grant.
Awards are based on an evaluation of past granting practices, Company
performance and the individual executive's performance and
responsibilities.
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<PAGE> 12
CEO COMPENSATION
In April 1996, the Committee increased Mr. McKnight's annual base
salary to $364,000 to cover the increased cost of living and to keep Mr.
McKnight's base salary at a level the Committee believes is at or above the
midpoint of base salaries for Chief Executives at similarly situated
companies, given the multiple functions performed by Mr. McKnight and the
Committee's assessment of his performance. He was also awarded options to
acquire 50,000 shares of nonqualified stock options during fiscal 1996 at
an exercise price of $30.25 per share, which was the price of the Company's
stock on the date of the grant. The options vest 33 1/3% per year beginning
one year after the date of grant and have a term of ten years. The increase
in base salary and the award of options was based on Mr. McKnight's
responsibilities and performance as they relate to the Company's increased
volume from worldwide operations, the expansion of new territories,
principally in Central and South America, and increased operating
efficiencies.
For fiscal 1996, Mr. McKnight was paid $589,000 of incentive
compensation under the Company's Executive Officer Incentive Plan. The
Executive Officer Incentive Plan was revised during fiscal 1996 from being
based on a return on stockholders' equity over target returns established
by the Committee to being based on growth in operating or pretax income
over the prior year. During fiscal 1996, Mr. McKnight's incentive
compensation was determined using both of these methods and their taking a
fraction of the result. This award was principally due to the Company's
performance which resulted in a return on stockholders' equity
significantly in excess of the target return established by the Committee.
Compensation Committee
William M. Barnum, Jr.
Michael H. Gray
Robert G. Kirby
Tom Roach
January 28, 1997
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company during
the last fiscal year consisted of William M. Barnum, Jr., Michael H. Gray,
Robert G. Kirby and Tom Roach, each of whom was a non-employee director of the
Company.
COMPANY STOCK PRICE PERFORMANCE
The following graph compares from October 31, 1991 to October 31, 1996 the
yearly percentage change in the Company's cumulative total stockholder return on
its Common Stock with the cumulative total return of (i) the NASDAQ Market Index
and (ii) selected public companies with similar market capitalizations. The
yearly percentage change has been measured by dividing (i) the sum of (A) the
cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the price of the stock at the end
and the beginning of the measurement period; by (ii) the stock price at the
beginning of the measurement period. The Company has chosen to compare its stock
performance with that of issuers with similar market capitalizations since the
Company does not have a published industry or line-of-business index and does
not believe any comparison with "peer" issuers within the SEC rules governing
presentation of this graph can be made. Market capitalization is the dollar
figure obtained by multiplying the per share stock price on a given date by the
total number of outstanding shares. The thirty-five companies with a market
capitalization closest to the Company's market capitalization of $145,000,000 at
October 31, 1996 were selected from the Standard & Poor's Compustat Industrial
Database at such date. The selected companies also had the five-year market
capitalization histories necessary for the comparative purposes of the graph.
Although the Company believes a comparison with a peer group would more
adequately measure the Company's stock performance, the Company is unaware of
any comparable public beachwear and casual clothing manufacturers which serve
the Company's market. As a result, the group market capitalization may
10
<PAGE> 13
not be meaningful. In addition, the historical stock performance shown on the
graph is not intended to and may not be indicative of future stock performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG QUIKSILVER, INC.
NASDAQ MARKET INDEX, & SIMILAR MARKET CAPITALIZATION PEER GROUP
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SIMILAR MARKET
(FISCAL YEAR COVERED) QUIKSILVER, INC. NASDAQ CAPITALIZATIONS
<S> <C> <C> <C>
10/1991 100 100 100
10/1992 62.12 96.87 110.27
10/1993 139.39 127.13 130.86
10/1994 212.12 135.16 126.93
10/1995 375.76 160.32 127.03
10/1996 257.58 188.27 133.42
</TABLE>
Note: Past or present performance is not necessarily indicative of future
performance.
The following public companies are those which were used in the above
graph: Allied Bankshares GA, Arrow Bank Corp, BHI Corp, BMC West Corp, BSB
Bankcorp Inc, BTG Inc, Cell Genesys Inc, Central Tractor Farm, Central Vermont
Pub Svc, Chad Therapeutics A, Chateau Properties, Computer Learning Center, Emco
Ltd, Evengreen Bancorp Inc, First Financial Holdings, Marcam Corp, Mattson
Technology Inc, Medarex Inc, Midwest Grain Products, National Energy Group,
Peoples Holding Co, Quaker Chemical Corp, Rainbow Technologies Inc, Right Mgmt
Consultants, Ross Systems Inc, Semtech Corp, SJW Corp, State of the Art Inc,
Teltrend Inc, Vidamed Inc, Vitro Sociedad Anonima, Wall Data Inc, World
Acceptance Corp, Worldtex Inc, WSFS Financial Corp.
CERTAIN TRANSACTIONS
The Company and Mr. Crowe, who is a former officer and current Director of
the Company, entered into an arrangement pursuant to which he provided
consulting services to the Company for the period from April 1995 to January
1996 for which he was paid $30,000.
APPOINTMENT OF INDEPENDENT AUDITORS
The Company has not yet selected its independent public auditors for the
year ending October 31, 1997. The Audit Committee is expected to make a decision
in the near future. Deloitte & Touche LLP were the independent public auditors
for the Company for the fiscal year ended October 31, 1996. Representatives of
Deloitte & Touche are expected to be present at the Annual Meeting and will be
available to respond to appropriate questions and to make such statements as
they may desire.
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<PAGE> 14
NOMINATIONS AND STOCKHOLDER PROPOSALS
The Bylaws of the Company require that all nominations for persons to be
elected Directors, other than those made by the Board of Directors, be made
pursuant to written notice to the Secretary of the Company. The notice must be
received not less than 30 nor more than 60 days prior to the meeting at which
the election will take place (or not later than 10 days after notice of public
disclosure of such meeting date if such disclosure occurs less than 40 days
prior to the date of such meeting). The notice must set forth all information
relating to each nominee that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required pursuant to the
Securities Exchange Act of 1934, as amended. The notice must also include the
stockholder's name and address as they appear on the Company's books and the
class and number of shares of stock beneficially owned by such stockholder.
In addition, the Bylaws require that for business to be properly brought
before an annual meeting by a stockholder, the Secretary of the Company must
have received written notice thereof not less than 30 nor more than 60 days
prior to the meeting (or not later than 10 days after a notice or public
disclosure of such meeting date if such disclosure occurs less than 40 days
prior to the date of the meeting). The notice must set forth (i) a brief
description of the business desired to be brought before the meeting; (ii) the
stockholder's name and address as they appear on the Company's books; (iii) the
class and number of shares of stock beneficially owned by the stockholder; and
(iv) any material interest of the stockholder in such business.
Any proposal of a stockholder intended to be presented at the Company's
1998 Annual Meeting of Stockholders and included in the proxy statement and form
of proxy for that meeting must be received by the Company no later than November
21, 1997.
ANNUAL REPORT
The Company's Annual Report containing audited financial statements for the
fiscal years ended October 31, 1996 and 1995 accompanies this Proxy Statement.
THE COMPANY WILL SEND A STOCKHOLDER UPON REQUEST, WITHOUT CHARGE, A COPY OF THE
ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED OCTOBER 31,
1996, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, WHICH THE COMPANY
HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REQUEST MUST BE
DIRECTED TO THE ATTENTION OF STEVEN L. BRINK, SECRETARY, AT THE ADDRESS OF THE
COMPANY SET FORTH ON THE FIRST PAGE OF THIS PROXY STATEMENT.
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<PAGE> 15
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matter which will be acted upon at the Annual
Meeting. If any other matter is presented properly for action at the Annual
Meeting or at any adjournment or postponement thereof, it is intended that the
proxies will be voted with respect thereto in accordance with the best judgment
and in the discretion of the proxy holders.
By Order of the Board of Directors,
QUIKSILVER, INC.
ROBERT B. McKNIGHT, JR.
Chairman of the Board and
Chief Executive Officer
Costa Mesa, California
February 14, 1997
13
<PAGE> 16
QUIKSILVER, INC.
1740 MONROVIA AVENUE
COSTA MESA, CA 92627
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert B. McKnight, Jr. and Steven L. Brink
as Proxies, each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated below, all the shares of
Common Stock of Quiksilver, Inc. held of record by the undersigned on January
28, 1997, at the Annual Meeting of Stockholders to be held on March 21, 1997 and
at any adjournment or postponement thereof.
<TABLE>
<S> <C> <C>
1. Election of Directors: [ ] FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY for all
(except as indicated to the contrary below) nominees listed below
</TABLE>
William M. Barnum, Jr., Charles E. Crowe, Michael H. Gray, Harry Hodge,
Robert G. Kirby, Robert B. McKnight, Jr. and Tom Roach.
INSTRUCTION: To withhold authority to vote for an individual nominee, write that
nominee's name in the space provided below:
- --------------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment or
postponement thereof.
(Continued on reverse side)
<PAGE> 17
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
All other proxies heretofore given by the undersigned to vote shares of
stock of Quiksilver, Inc., which the undersigned would be entitled to vote if
personally present at the Annual Meeting or any adjournment or postponement
thereof, are hereby expressly revoked.
Date: ______________________, 1997
----------------------------------
(Signature)
----------------------------------
(Signature)
Please date this Proxy and sign
it exactly as your name or names
appear below. When shares are held
by joint tenants, both should
sign. When signing as an attorney,
executor, administrator, trustee
or guardian, please give full
title as such. If shares are held
by a corporation, please sign in
full corporate name by the
President or other authorized
officer. If shares are held by a
partnership, please sign in
partnership name by an authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
