<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:
[ ] Preliminary Proxy Statement Commission [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
sec. 240.14a-11(c) or sec. 240.14a-12
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:
-----------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------
<PAGE> 2
QUIKSILVER, INC.
15202 GRAHAM STREET
HUNTINGTON BEACH, CALIFORNIA 92649
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 2000
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 Company's headquarters, located at
15202 Graham Street, Huntington Beach, California, on Friday, March 31, 2000, at
10:00 a.m. local time, for the following purposes:
1. To elect a Board of seven Directors for the ensuing year;
2. To consider and vote upon a proposal to approve the Company's 2000
Stock Incentive Plan;
3. To consider and vote upon a proposal to approve the Company's
Employee Stock Purchase Plan;
4. To consider and vote upon a proposal to approve the Company's
Executive Officer Bonus Plan for purposes of Section 162(m) of the Internal
Revenue Code; and
5. 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 February 1, 2000 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
Huntington Beach, California
February 23, 2000
<PAGE> 3
QUIKSILVER, INC.
15202 GRAHAM STREET
HUNTINGTON BEACH, CALIFORNIA 92649
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 31, 2000
------------------------
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 Company's headquarters, located at 15202 Graham
Street, Huntington Beach, California, on Friday, March 31, 2000, 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, FOR approval of the 2000 Stock Incentive Plan,
FOR approval of the Employee Stock Purchase Plan, FOR approval of the Executive
Officer Bonus Plan 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 23,
2000.
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. All other matters to come before the Annual
Meeting require the approval of a majority of the shares of voting stock present
and entitled to vote thereat. Therefore, abstentions as to a particular proposal
will have the same effect as votes against such proposal. Broker non-votes as to
a particular proposal, however, will be deemed shares not entitled to vote on
such proposal, and will not be counted as votes for or against such proposal,
and will not be included in calculating the number of votes necessary for
approval of such proposal.
<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 22,400,739 shares of the Company's Common
Stock outstanding at the close of business on February 1, 2000 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 February 1,
2000.
2
<PAGE> 5
CERTAIN STOCKHOLDERS
Certain information with respect to (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the Company's Common
Stock, (ii) each of the current Directors and nominees for election as
Directors, (iii) each of the Executive Officers listed in the compensation
tables below, and (iv) 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, 1999, is set forth below:
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OF INDIVIDUAL OR IDENTITY OF GROUP(1) OWNED OWNED
------------------------------------------ ------------ ------------
<S> <C> <C>
Lord, Abbett & Co........................................... 2,673,502(2) 12.0%
767 Fifth Avenue
New York, NY 10153
AMVESCAP PLC................................................ 1,911,635(3) 8.5%
1315 Peachtree Street NE
c/o INVESCO
Atlanta, GA 30309
T. Rowe Price Associates, Inc............................... 1,902,750(4) 8.5%
100 E. Pratt Street
Baltimore, MD 21202
Wellington Management Company, LLP.......................... 1,016,400(5) 4.5%
75 State Street
Boston, MA 02109
William M. Barnum, Jr. ..................................... 93,000(6) (7)
Charles E. Crowe............................................ 115,500(8) (7)
Michael H. Gray............................................. 114,000(9) (7)
Robert G. Kirby............................................. 156,750(10) (7)
Robert B. McKnight, Jr...................................... 1,130,500(11) 5.0%
Tom Roach................................................... 98,700(12) (7)
Harry Hodge................................................. 26,500(13) (7)
Steven L. Brink............................................. 69,501(14) (7)
All Executive Officers and Directors as a Group (8
persons).................................................. 1,804,451(15) 7.7%
</TABLE>
- ---------------
(1) The address for each of the named individuals is c/o Quiksilver, Inc.,
15202 Graham Street, Huntington Beach, California 92649. 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 Lord, Abbet & Co. with the
Securities and Exchange Commission, Lord, Abbet & Co. has sole voting power
and investment power with respect to all 2,673,502 of the listed shares.
(3) According to the Schedule 13G filed by AMVESCAP PLC with the Securities and
Exchange Commission, voting and investment power is shared with various of
its subsidiaries with respect to all 1,911,635 of the listed shares.
(4) According to the Schedule 13G filed by T. Rowe Price Associates, Inc. ("T.
Rowe") with the Securities and Exchange Commission, T. Rowe has sole voting
power with respect to 424,550 of the listed shares and sole investment
power with respect to all 1,902,750 shares. T. Rowe Price New Horizons
Fund, Inc. has sole voting power with respect to 1,250,000 of the listed
shares.
(5) According to the Schedule 13G filed by Wellington Management Company, LLP
with the Securities and Exchange Commission, Wellington Management Company,
LLP has shared voting and investment power with respect to all 1,016,400 of
the listed shares.
3
<PAGE> 6
(6) Includes an aggregate of 90,000 shares which Mr. Barnum has, or will have
within 60 days after December 31, 1999, the right to acquire upon the
exercise of outstanding options.
(7) Less than 1% of the outstanding shares of Common Stock.
(8) Includes an aggregate of 15,000 shares which Mr. Crowe has, or will have
within 60 days after December 31, 1999, the right to acquire upon exercise
of outstanding options.
(9) Includes an aggregate of 90,000 shares which Mr. Gray has, or will have
within 60 days after December 31, 1999, the right to acquire upon exercise
of outstanding options.
(10) Includes an aggregate of 6,750 shares owned of record by Mr. Kirby's spouse
and 90,000 shares which Mr. Kirby has, or will have within 60 days after
December 31, 1999, the right to acquire upon exercise of outstanding
options.
(11) Includes an aggregate of 448,000 shares which Mr. McKnight has, or will
have within 60 days after December 31, 1999, the right to acquire upon the
exercise of outstanding options.
(12) Includes an aggregate of 2,800 shares owned of record by Mr. Roach's
children and 90,000 shares which Mr. Roach has, or will have within 60 days
after December 31, 1999, the right to acquire upon exercise of outstanding
options.
(13) Includes an aggregate of 26,500 shares which Mr. Hodge has, or will have
within 60 days after December 31, 1999, the right to acquire upon the
exercise of outstanding options.
(14) Includes an aggregate of 69,501 shares which Mr. Brink has, or will have
within 60 days after December 31, 1999, the right to acquire upon the
exercise of outstanding options.
(15) Includes an aggregate of 919,001 shares which the Executive Officers and
Directors as a Group have, or will have within 60 days after December 31,
1999, the right to acquire upon the exercise of outstanding options.
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 were elected to their present
terms of office by the stockholders at the 1999 Annual Meeting of Stockholders.
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 45, 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 44, 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
4
<PAGE> 7
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.
Mr. Michael H. Gray, age 47, 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 49, 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 St. Jean de Luz,
France. Following the acquisition of Quiksilver Europe by the Company, Mr. Hodge
remained as President Director Generale. 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 74, 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 46, 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 56, has been President and owner of Palm Springs Harley
Davidson, a motorcycle retail and specialty store, since 1990. Prior to 1990,
Mr. Roach spent over 20 years in the department store business with Federated
Department Stores and Associated Dry Goods. Mr. Roach served as Chairman of the
Board and Chief Executive Officer of J.W. Robinsons, Chairman of the Board and
Chief Executive Officer of Denver Dry Goods, and President and Chief Operating
Officer of Woodward and Lothrop/John Wannamaker. Mr. Roach also held executive
positions with Burdines, Rikes, Filenes, and Lord & Taylor during his retail
career. Mr. Roach received his M.B.A. from the University of Wyoming.
The Board of Directors held seven meetings during the fiscal year ended
October 31, 1999. Each incumbent Director, except Mr. Gray, 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. Mr. Gray attended 60% of such meetings.
Non-employee Directors received an annual retainer of $10,000. In addition, 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.
Non-employee Directors receive $1,000 for each Board meeting attended
telephonically.
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 comprises Messrs. Barnum, Gray, Kirby
and Roach. The Compensation Committee held two meetings during the fiscal year
ended October 31, 1999.
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
5
<PAGE> 8
control procedures recommended by the Company's independent auditors. The Audit
Committee comprises Messrs. Barnum, Crowe, Gray and Roach. During the fiscal
year ended October 31, 1999, the Audit Committee held one meeting.
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, 1999 all Section
16(a) filing requirements applicable to its Officers, Directors and greater-than
ten percent beneficial owners were satisfied, except that Michael Gray filed a
late Form 4 reporting the sale of stock and Harry Hodge filed a late Form 4
reporting the exercise of stock options.
PROPOSAL 2
APPROVAL OF QUIKSILVER, INC.
2000 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve the Quiksilver, Inc.
2000 Stock Incentive Plan (the "2000 Plan"), to serve as the successor to the
Company's existing 1996 Stock Option Plan, 1992 Nonemployee Directors' Stock
Option Plan, 1995 Nonemployee Directors' Stock Option Plan and 1998 Nonemployee
Directors' Stock Option Plan (together, the "Predecessor Plans"). The 2000 Plan
will become effective immediately upon stockholder approval at the Annual
Meeting, and all outstanding options under the Predecessor Plans will be
incorporated into the 2000 Plan at that time. The Predecessor Plans will
terminate, and no further option grants will be made under the Predecessor
Plans. However, all outstanding options under the Predecessor Plans will
continue to be governed by the terms and conditions of the existing option
agreements for those grants except to the extent the Board or Compensation
Committee elects to extend one or more features of the 2000 Plan to those
options.
The 2000 Plan was adopted by the Board on February 15, 2000 and is designed
to serve as a comprehensive equity incentive program to attract and retain the
services of individuals essential to the Company's long-term growth and
financial success. Accordingly, officers and other key employees, non-employee
Board members, consultants and other advisors in the service of the Company or
any parent or subsidiary corporation will have the opportunity to acquire a
meaningful equity interest in the Company through their participation in the
2000 Plan.
The following is a summary of the principal features of the 2000 Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the 2000 Plan. Any stockholder of the Company who wishes to obtain
a copy of the actual plan document may do so without charge upon written request
to the Corporate Secretary at the Company's principal executive offices in
Huntington Beach, California.
EQUITY INCENTIVE PROGRAMS
The 2000 Plan contains four (4) separate equity incentive programs: (i) a
Discretionary Option Grant Program; (ii) a Salary Investment Option Grant
Program; (iii) an Automatic Option Grant Program; and (iv) a Director Fee Option
Grant Program. The principal features of these programs are described below. The
2000 Plan (other than the Automatic Option Grant Program and Director Fee Option
Grant Program) will be administered by the Compensation Committee of the Board.
This committee (the "Plan Administrator") will have complete discretion (subject
to the provisions of the 2000 Plan) to authorize option grants under the
6
<PAGE> 9
2000 Plan, except that the exercise price of outstanding options may not be
reset and new grants may not be made in exchange for the cancellation of
outstanding options without stockholder approval. The Board may also appoint a
secondary committee of one or more Board members, including employee directors,
to authorize option grants to eligible persons other than executive officers and
Board members subject to the short-swing liability provisions of the federal
securities laws. All grants under the Automatic Option Grant Program and
Director Fee Option Grant Program will be made in strict compliance with the
provisions of those programs, and no administrative discretion will be exercised
by the Plan Administrator with respect to the grants made thereunder.
SHARE RESERVE
A total of 3,736,209 shares of Common Stock have been authorized for
issuance over the term of the 2000 Plan. Such share reserve consists of (i) the
number of shares that remain available for issuance under the Predecessor Plans
(including shares subject to outstanding options) and (ii) an additional
increase of 500,000 shares.
As of February 15, 2000, options for 3,115,252 shares of Common Stock were
outstanding under the Predecessor Plans and 120,957 shares of Common Stock
remained available for future option grants.
No participant in the 2000 Plan may receive option grants, or separately
exercisable stock appreciation rights for more than 200,000 shares of Common
Stock in the aggregate per calendar year, subject to adjustment for subsequent
stock splits, stock dividends and similar transactions. Stockholder approval of
this proposal will also constitute approval of the 200,000-share limitation for
purposes of Internal Revenue Code Section 162(m).
The shares of Common Stock issuable under the 2000 Plan may be drawn from
shares of the Company's authorized but unissued Common Stock or from shares of
Common Stock reacquired by the Company, including shares repurchased on the open
market.
Shares subject to any outstanding options under the 2000 Plan (including
options incorporated from the Predecessor Plans) which expire or otherwise
terminate prior to exercise will be available for subsequent issuance. Unvested
shares issued under the 2000 Plan and subsequently repurchased by the Company
pursuant to its repurchase rights under the 2000 Plan will also be available for
subsequent issuance.
ELIGIBILITY
Employees, non-employee Board members and independent advisors and
consultants in the service of the Company or its parent and subsidiaries
(whether now existing or subsequently established) will be eligible to
participate in the Discretionary Option Grant Program. The Company's executive
officers and other highly paid employees will also be eligible to participate in
the Salary Investment Option Grant Program, and non-employee members of the
Board will be eligible to participate in the Automatic Option Grant and Director
Fee Option Grant Programs.
As of February 15, 2000, three executive officers, five non-employee Board
members and approximately 1,200 other employees and consultants were eligible to
participate in the Discretionary Option Grant Program. The three executive
officers and approximately ten other individuals were eligible to participate in
the Salary Investment Option Grant Program, and the five non-employee Board
members were also eligible to participate in the Automatic Option Grant and
Director Fee Option Grant Programs.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 2000 Plan will be the closing selling price per share on that date on the
New York Stock Exchange. On February 15, 2000, the closing selling price per
share was $11.9375.
7
<PAGE> 10
DISCRETIONARY OPTION GRANT PROGRAM
The options granted under the Discretionary Option Grant Program may be
either incentive stock options under the federal tax laws or non-statutory
options. Each granted option will have an exercise price per share not less than
the fair market value per share of Common Stock on the option grant date, and no
granted option will have a term in excess of ten years. The shares subject to
each option will generally vest in one or more installments over a specified
period of service measured from the grant date. Historically, the Company has
granted options vesting over a three year period from the date of grant.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for vested
shares. The Plan Administrator will have complete discretion to extend the
period following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights, which provide the holders with the right
to surrender their options for an appreciation distribution from the
Company equal in amount to the excess of (a) the fair market value of the
vested shares of Common Stock subject to the surrendered option over (b)
the aggregate exercise price payable for such shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
Limited stock appreciation rights, which may be granted to officers of the
Company as part of their option grants. Any option with such a limited
stock appreciation right may (whether or not the option is at the time
exercisable for vested shares) be surrendered to the Company upon the
successful completion of a hostile tender offer for more than fifty percent
(50%) of the Company's outstanding voting securities. In return for the
surrendered option, the officer will be entitled to a cash distribution
from the Company in an amount per surrendered option share equal to the
excess of (a) the tender offer price paid per share over (b) the exercise
price payable per share under such option.
SALARY INVESTMENT OPTION GRANT PROGRAM
The Plan Administrator will have complete discretion in implementing the
Salary Investment Option Grant Program for one or more calendar years and in
selecting the executive officers and other eligible individuals who are to
participate in the program for those years. As a condition to such
participation, each selected individual must, prior to the start of the calendar
year of participation, file with the Plan Administrator an irrevocable
authorization directing the Company to reduce his or her base salary for the
upcoming calendar year by a specified dollar amount not less than $10,000 nor
more than $50,000 and apply that amount to the acquisition of a special option
grant under the program.
Each selected individual who files such a timely election will
automatically be granted, on the first trading day in January of the calendar
year for which that salary reduction is to be in effect, a non-statutory option
to purchase that number of shares of Common Stock determined by dividing the
salary reduction amount by two-thirds of the fair market value per share of
Common Stock on the grant date. The option will be exercisable at a price per
share equal to one-third of the fair market value of the option shares on the
grant date. As a result, the total spread on the option shares at the time of
grant (the fair market value of the option shares on the grant date less the
aggregate exercise price payable for those shares) will be equal to the salary
reduction amount. The option will become exercisable in a series of twelve (12)
equal monthly installments over the calendar year for which the salary reduction
is to be in effect and will become exercisable in full on an accelerated basis
upon certain changes in the ownership or control of the Company. Each option
will remain exercisable for any vested shares subject to the option until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the end
of the three (3)-year period measured from the date of the optionee's cessation
of service.
8
<PAGE> 11
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who first becomes
a non-employee Board member on or after the date of the 2000 Annual Meeting,
will automatically be granted at that time a non-statutory option to purchase
15,000 shares of Common Stock, provided such individual has not previously been
in the Company's employ. In addition, on the date of each Annual Stockholders
Meeting, beginning with the 2000 Annual Meeting, each individual who is to
continue to serve as a non-employee Board member after such meeting will
automatically be granted a non-statutory option to purchase 5,000 shares of
Common Stock, provided such individual has served as a non-employee Board member
for at least six months. There will be no limit on the number of such
5,000-share options which any one non-employee Board member may receive over the
period of Board service and non-employee Board members who have previously
served in the Company's employ will be eligible for one or more 5,000-share
option grants. Stockholder approval of this proposal will also constitute
approval of each option grant made under the Automatic Option Grant Program and
the subsequent exercise of that option in accordance with the terms of the
program.
Each option will have an exercise price per share equal to the fair market
value per share of Common Stock on the option grant date and a maximum term of
ten years measured from the option grant date. Each option will be immediately
exercisable for all the option shares, but any purchased shares will be subject
to repurchase by the Company, at the exercise price paid per share, upon the
optionee's cessation of Board service. Each initial 15,000-share option grant
will vest (and the Company's repurchase rights will lapse) in three equal annual
installments over the optionee's period of Board service, with the first such
installment to vest upon the optionee's completion of one year of Board service
measured from the option grant date. Each annual 5,000-share option grant will
vest (and the Company's repurchase rights will lapse) upon the optionee's
completion of one year of Board service measured from the option grant date.
The shares subject to each automatic option grant will immediately vest
upon the optionee's death or permanent disability or an acquisition of the
Company (whether by merger, asset sale or sale of stock by the stockholders).
Each automatic option grant held by an optionee upon his or her termination of
Board service will remain exercisable, for any or all of the option shares in
which the optionee is vested at the time of such termination, for up to a twelve
(12)-month period following such termination date.
Each option granted under the program will have a limited stock
appreciation right which will allow the optionee to surrender that option to the
Company upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting securities. In return
for the surrendered option, the optionee will be entitled to a cash distribution
from the Company in an amount per surrendered option share equal to the excess
of (a) the tender offer price paid per share over (b) the exercise price payable
per share under such option. Stockholder approval of this proposal will also
constitute pre-approval of the grant of each such limited stock appreciation
right and the subsequent exercise of that right in accordance with the foregoing
provisions.
DIRECTOR FEE OPTION GRANT PROGRAM
For each calendar year that the Director Fee Option Grant Program is in
effect, as determined by the Plan Administrator, each non-employee Board member
may elect to apply all or a portion of his or her annual retainer fee otherwise
payable in cash that year (currently $10,000) to the acquisition of a special
option grant under the Director Fee Option Grant Program. The election must be
made prior to the start of the calendar year for which such election will be in
effect, and the grant will automatically be made on the first trading day in
January following the filing of such election. The option will have an exercise
price per share equal to one-third of the fair market value of the option shares
on the grant date, and the number of option shares will be determined by
dividing the dollar amount of the retainer fee subject to the election by
two-thirds of the fair market value per share of Common Stock on the option
grant date. As a result, the total spread on the option (the fair market value
of the option shares on the grant date less the aggregate exercise price payable
for those shares) will be equal to the portion of the retainer fee subject to
the non-employee Board member's election. Stockholder approval of this proposal
will also constitute approval of each option grant made pursuant to the
9
<PAGE> 12
provisions of the Director Fee Option Grant Program and the subsequent exercise
of that option in accordance with the terms of such program.
Each option granted under the program will become exercisable for the
option shares in a series of twelve (12) successive equal monthly installments
upon the optionee's completion of each month of Board service during the
calendar year of the option grant. In the event the optionee ceases Board
service for any reason (other than death or permanent disability), the option
will immediately terminate with respect to any option shares for which the
option is not otherwise at that time exercisable. Should the optionee's service
as a Board member cease by reason of death or permanent disability, then the
option will immediately become exercisable for all the shares of Common Stock
subject to the option. Each option may be exercised, for any or all of the
shares for which that option is at the time exercisable, until the earlier of
(i) the expiration of the ten (10)-year option term or (ii) the end of the three
(3)-year period measured from the date of the optionee's cessation of Board
service.
Each option granted under the program will have a limited stock
appreciation right which will allow the optionee to surrender that option to the
Company upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting securities. In return
for the surrendered option, the optionee will be entitled to a cash distribution
from the Company in an amount per surrendered option share equal to the excess
of (a) the tender offer price paid per share over (b) the exercise price payable
per share under such option. Stockholder approval of this proposal will also
constitute pre-approval of the grant of each such limited stock appreciation
right and the subsequent exercise of that right in accordance with the foregoing
provisions.
GENERAL PROVISIONS
Acceleration
In the event of an acquisition of the Company, whether by merger or asset
sale or a sale of stock by the stockholders, each outstanding option under the
Discretionary Option Grant Program which is not to be assumed by the successor
corporation or otherwise continued in effect will automatically accelerate in
full, and all unvested shares under the Discretionary Option Grant Program will
immediately vest, except to the extent the Company's repurchase rights with
respect to those shares are to be assigned to the successor corporation or
otherwise continued in effect. The Plan Administrator will have the authority
under the Discretionary Option Grant Program to provide that the shares subject
to options granted under that program will automatically vest (i) upon an
acquisition of the Company, whether or not those options are assumed or
continued, or (ii) in the event the individual's service is terminated, whether
involuntarily or through a resignation for good reason, within a designated
period (not to exceed eighteen (18) months) following an acquisition in which
those options are assumed or otherwise continued in effect.
Each option outstanding under the Salary Investment Option Grant, Automatic
Option Grant and Director Fee Option Grant Programs will also automatically
accelerate in the event the Company should be acquired or other change in
control of the Company occur.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
Financial Assistance
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options under the 2000 Plan by delivering a
promissory note payable in installments. The Plan Administrator will determine
the terms of any such promissory note. However, the maximum amount of financing
provided any participant may not exceed the cash consideration payable for the
issued shares plus all applicable taxes incurred in connection with the
acquisition of the shares.
10
<PAGE> 13
Special Tax Election
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the withholding
tax liability incurred by such individuals in connection with the exercise of
those options or the vesting of those shares. Alternatively, the Plan
Administrator may allow such individuals to deliver previously acquired shares
of Common Stock in payment of such tax liability.
Changes in Capitalization
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
2000 Plan, (ii) the number and/or class of securities for which any one person
may be granted stock options and separately exercisable stock appreciation
rights under the 2000 Plan per calendar year, (iii) the maximum number and/or
class of securities by which the share reserve is to increase each calendar year
by reason of the automatic share increase provisions of the 2000 Plan, (iv) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members and (v) the number and/or class of securities and the exercise
price per share in effect under each outstanding option (including the options
incorporated from the Predecessor Plans) in order to prevent the dilution or
enlargement of benefits thereunder.
Amendment and Termination
The Board may amend or modify the 2000 Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the 2000 Plan at any time, and the 2000 Plan will in all events terminate on
December 31, 2009.
11
<PAGE> 14
STOCK AWARDS
No options have been granted under the 2000 Plan. The table below shows, as
to each of the Company's executive officers named in the Summary Compensation
Table and the various indicated individuals and groups, the number of shares of
Common Stock subject to options granted between November 1, 1998 and October 31,
1999 under the Predecessor Plans, together with the weighted average exercise
price payable per shares.
OPTION TRANSACTIONS
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
NAME OPTION SHARES EXERCISE PRICE
---- ------------- ----------------
<S> <C> <C>
Robert B. McKnight, Jr...................................... 30,000 $15.71
Chairman of the Board and Chief Executive Officer
Harry Hodge................................................. 30,000 15.71
President Director Generale, Quiksilver Europe
Steven L. Brink............................................. 22,500 15.71
Chief Financial Officer, Secretary and Treasurer
All Executive Officers as a group (3 persons)............... 82,500 15.71
All Nonemployee Directors as a group (5 persons)............ -- --
All employees, including current officers who are not
Executive Officers as a group (approximately 1,200
persons).................................................. 407,798 16.12
</TABLE>
FEDERAL INCOME TAX CONSEQUENCES
Option Grants
Options granted under the 2000 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the
exercise date over (ii) the exercise price paid for the shares will be taxable
as ordinary income to the optionee. Any additional gain or loss recognized upon
the disposition will be recognized as a capital gain or loss by the optionee.
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
12
<PAGE> 15
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
Stock Appreciation Rights
No taxable income is recognized upon receipt of an SAR. The holder will
recognize ordinary income, in the year in which the SAR is exercised, in an
amount equal to the excess of the fair market value of the underlying shares of
Common Stock on the exercise date over the base price in effect for the
exercised right, and the holder will be required to satisfy the tax withholding
requirements applicable to such income.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the holder in connection with the exercise of
an SAR. The deduction will be allowed for the taxable year in which such
ordinary income is recognized.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per covered officer
in any fiscal year. The limitation applies only to compensation which is not
considered to be performance-based. Compensation deemed paid by the Company in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory stock options granted under the 2000 Plan qualifies
as performance-based compensation for purposes of Section 162(m) if such plan is
administered by a committee of "outside directors" as defined under Section
162(m). The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options will qualify as performance-based
compensation for purposes of Code Section 162(m) and will not have to be taken
into account for purposes of the $1 million limitation per covered individual on
the deductibility of the compensation paid to certain executive officers of the
Company. Accordingly, all compensation deemed paid with respect to those options
will remain deductible by the Company without limitation under Code Section
162(m).
ACCOUNTING TREATMENT
Option grants made to employees under the 2000 Plan will generally not
result in any charge to the Company's earnings. However, the Company must
disclose in footnotes and pro-forma statements to the Company's financial
statements, the impact those options would have upon the Company's reported
earnings were the value of those options at the time of grant treated as a
compensation expense. The number of outstanding options may be a factor in
determining the Company's earnings per share on a fully-diluted basis.
13
<PAGE> 16
Should one or more optionees be granted stock appreciation rights under the
2000 Plan that have no conditions upon exercisability other than a service or
employment requirement, then such rights would result in a compensation expense
to be charged against the Company's reported earnings. Accordingly, at the end
of each fiscal quarter, the amount (if any) by which the fair market value of
the shares of Common Stock subject to such outstanding stock appreciation rights
has increased from the prior quarter-end would be accrued as compensation
expense, to the extent such fair market value is in excess of the aggregate
exercise price in effect for those rights.
NEW PLAN BENEFITS
No options may be granted under the 2000 Plan until it has been approved by
the stockholders. Assuming such stockholder approval is obtained at the Annual
Meeting, each of the Company's Directors, other than Messrs. McKnight and Hodge,
will receive an option on March 31, 2000 to purchase 5,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock on
that date.
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the 2000 Plan.
Such approval will require the affirmative vote of a majority of the voting
power of all outstanding shares of the Company's Common stock present or
represented and entitled to vote at the Annual Meeting. Should such stockholder
approval not be obtained, then the 2000 Plan will not be implemented. The
Company's 1996 Stock Option Plan and 1998 Nonemployee Directors' Stock Option
Plan will, however, continue to remain in effect, and option grants may be made
pursuant to the provisions of those plans until the available reserve of Common
Stock under each such plan is issued. The Board of Directors recommends a vote
"FOR" the proposal.
PROPOSAL 3
APPROVAL OF QUIKSILVER, INC.
EMPLOYEE STOCK PURCHASE PLAN
The Company's stockholders are being asked to approve the Quiksilver, Inc.
Employee Stock Purchase Plan (the "Purchase Plan"). The purpose of the Purchase
Plan is to provide eligible employees of the Company and its participating
affiliates with the opportunity to acquire a proprietary interest in the Company
through participation in a payroll-deduction based employee stock purchase
program designed to operate in compliance with Section 423 of the Internal
Revenue Code.
The following is a summary of the principal features of the Purchase Plan.
The summary, however, does not purport to be a complete description of all the
provisions of the Purchase Plan. Any stockholder of the Company who wishes to
obtain a copy of the actual plan document may do so without charge upon written
request to the Corporate Secretary at the Company's principal executive offices
in Huntington Beach, California.
SHARE RESERVE
A total of 200,000 shares of Common Stock have been authorized for issuance
over the term of the Purchase Plan.
ADMINISTRATION
The Purchase Plan will be administered by the Compensation Committee of the
Board of Directors. Such committee, as Plan Administrator, has full authority to
adopt such rules and procedures as it may deem
14
<PAGE> 17
necessary for proper plan administration and to interpret the provisions of the
Purchase Plan. The Board of Directors may exercise the Committee's powers and
duties under the Purchase Plan.
OFFERING PERIODS
Shares will be issued through a series of successive offering periods, each
of approximately six (6) months duration. The initial offering period will begin
on July 3, 2000. Each participant will be granted a separate option to purchase
shares of Common Stock for each offering period in which he or she participates.
Options under the Purchase Plan will be granted on the first business day in
July and January of each year and will be automatically exercised on the last
business day in the immediately succeeding December and June, respectively, of
each year. Each option entitles the participant to purchase the whole number of
shares of Common Stock obtained by dividing the participant's payroll deductions
for the offering period by the purchase price in effect for such period.
ELIGIBILITY
Any individual who customarily works for more than twenty (20) hours per
week for more than five (5) months per calendar year in the employ of the
Company or any participating affiliate will be eligible to participate in one or
more offering periods. An eligible employee may only join an offering period on
the start date of that period.
Participating affiliates include any parent or subsidiary corporations of
the Company, whether now existing or hereafter organized, which elect, with the
approval of the Plan Administrator, to extend the benefits of the Purchase Plan
to their eligible employees.
As of February 15, 2000, approximately 1,200 employees, including three
executive officers, were eligible to participate in the Purchase Plan.
PURCHASE PROVISIONS
Each participant may authorize periodic payroll deductions in any multiple
of one percent (1%) of his or her cash earnings, up to a maximum of fifteen
percent (15%). A participant may not increase his or her rate of payroll
deduction for an offering period after the start of that period, but he or she
may decrease the rate once per offering period.
On the last business day of each offering period, the accumulated payroll
deductions of each participant will automatically be applied to the purchase of
whole shares of Common Stock at the purchase price in effect for that period.
PURCHASE PRICE
The purchase price per share at which Common Stock will be purchased on the
participant's behalf for each offering period will be equal to eighty-five
percent (85%) of the lower of (i) the fair market value per share of Common
Stock on the start date of that offering period or (ii) the fair market value
per share of Common Stock on the last day of that offering period.
VALUATION
The fair market value per share of Common Stock on any relevant date will
be the closing selling price per share on such date on the New York Stock
Exchange. On February 15, 2000, the fair market value per share determined on
such basis was $11.9375.
15
<PAGE> 18
SPECIAL LIMITATIONS
The Purchase Plan imposes certain limitations upon a participant's rights
to acquire Common Stock, including the following limitations:
- No purchase right may be granted to any individual who owns stock
(including stock purchasable under any outstanding options or purchase
rights) possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or any of its
affiliates.
- No purchase right granted to a participant may permit such individual to
purchase Common Stock at a rate greater than $25,000 worth of such Common
Stock (valued at the time such purchase right is granted) for each
calendar year the purchase right remains outstanding at any time.
- No participant may purchase more than 1,000 shares of Common Stock on any
one purchase date.
- No more than 100,000 shares of Common Stock may be purchased in the
aggregate by all participants on any one purchase date.
The Plan Administrator will have the discretionary authority, exercisable
prior to the start of any offering period, to increase or decrease the
1,000-share and 100,000-share limitations to be in effect for the number of
shares purchasable per participant or in the aggregate by all participants on
each purchase date during that offering period.
TERMINATION OF PURCHASE RIGHTS
A participant's purchase right will immediately terminate upon such
participant's loss of eligible employee status, and his or her accumulated
payroll deductions for the offering period in which the purchase right
terminates will be promptly refunded. A participant may withdraw from an
offering period at any time prior to the end of that period and elect to have
his or her accumulated payroll deductions for the offering period in which such
withdrawal occurs either refunded or applied to the purchase of shares of Common
Stock on the next purchase date.
STOCKHOLDER RIGHTS
No participant will have any stockholder rights with respect to the shares
of Common Stock covered by his or her purchase right until the shares are
actually purchased on the participant's behalf. No adjustment will be made for
dividends, distributions or other rights for which the record date is prior to
the date of such purchase.
ASSIGNABILITY
No purchase right will be assignable or transferable and will be
exercisable only by the participant.
ACQUISITION
Should the Company be acquired by merger or asset sale during an offering
period, all outstanding purchase rights will automatically be exercised
immediately prior to the effective date of such acquisition. The purchase price
will be equal to eighty-five (85%) of the lower of (i) the fair market value per
share of Common Stock on the start date of that offering period or (ii) the fair
market value per share of Common Stock immediately prior to such acquisition.
The limitation on the maximum number of shares purchasable in the aggregate on
any one purchase date will not apply to the share purchases effected in
connection with such acquisition.
CHANGES IN CAPITALIZATION
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
16
<PAGE> 19
made to (i) the class and maximum number of securities issuable under the
Purchase Plan, including the class and maximum number of securities issuable per
participant or in the aggregate on any one purchase date, and (ii) the class and
maximum number of securities subject to each outstanding purchase right and the
purchase price payable per share thereunder.
AMENDMENT AND TERMINATION
The Purchase Plan will terminate upon the earliest to occur of (i) December
31, 2009, (ii) the date on which all available shares are issued or (iii) the
date on which all outstanding purchase rights are exercised in connection with
an acquisition of the Company.
The Board of Directors may at any time alter, suspend or discontinue the
Purchase Plan. However, the Board of Directors may not, without stockholder
approval, (i) increase the number of shares issuable under the Purchase Plan,
except in connection with certain changes in the Company's capital structure,
(ii) alter the purchase price formula so as to reduce the purchase price or
(iii) modify the requirements for eligibility to participate in the Purchase
Plan.
FEDERAL TAX CONSEQUENCES
The Purchase Plan is intended to be an "employee stock purchase plan"
within the meaning of Section 423 of the Internal Revenue Code. Under a plan
which so qualifies, no taxable income will be recognized by a participant, and
no deductions will be allowable to the Company, in connection with the grant or
the exercise of an outstanding purchase right.
Taxable income will not be recognized until there is a sale or other
disposition of the shares acquired under the Purchase Plan or in the event the
participant should die while still owning the purchased shares.
If the participant sells or otherwise disposes of the purchased shares
within two (2) years after the start date of the offering period in which such
shares were acquired or within one (1) one year after the actual purchase date
of those shares, then the participant will recognize ordinary income in the year
of sale or disposition equal to the amount by which the fair market value of the
shares on the purchase date exceeded the purchase price paid for those shares,
and the Company will be entitled to an income tax deduction, for the taxable
year in which such sale or disposition occurs, equal in amount to such excess.
If the participant sells or disposes of the purchased shares more than two
(2) years after the start date of the offering period in which such shares were
acquired and more than one (1) one year after the actual purchase date of those
shares, then the participant will recognize ordinary income in the year of sale
or disposition equal to the lesser of (i) the amount by which the fair market
value of the shares on the sale or disposition date exceeded the purchase price
paid for those shares or (ii) fifteen percent (15%) of the fair market value of
the shares on the start date of the offering period, and any additional gain
upon the disposition will be taxed as a long-term capital gain. The Company will
not be entitled to any income tax deduction with respect to such sale or
disposition.
If the participant still owns the purchased shares at the time of death,
the lesser of (i) the amount by which the fair market value of the shares on the
date of death exceeds the purchase price or (ii) fifteen percent (15%) of the
fair market value of the shares on his or her entry date into the offering
period in which those shares were acquired will constitute ordinary income in
the year of death.
ACCOUNTING TREATMENT
Under current accounting rules, the issuance of Common Stock under the
Purchase Plan will not result in a direct charge to the Company's reported
earnings. However, the Company must disclose, in footnotes and pro-forma
statements to the Company's financial statements, the impact the purchase rights
granted under the Purchase Plan would have upon the Company's reported earnings
were the fair value of those purchase rights treated as compensation expense.
17
<PAGE> 20
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the Purchase
Plan. Such approval will require the affirmative vote of a majority of the
voting power of all outstanding shares of the Company's Common Stock present or
represented and entitled to vote at the Annual Meeting. The Board of Directors
recommends a vote "FOR" the proposal.
PROPOSAL 4
APPROVAL OF QUIKSILVER, INC.
EXECUTIVE OFFICER BONUS PLAN FOR PURPOSES OF SECTION 162(m)
OF THE INTERNAL REVENUE CODE
The Company's stockholders are being asked to approve the Executive Officer
Bonus Plan ("Bonus Plan") in order to enable the Company to qualify payments
made to executives pursuant to the Bonus Plan as deductible for federal income
tax purposes in accordance with Section 162(m) of the Internal Revenue Code of
1986, as amended. Section 162(m) limits the Company's deduction for federal
income tax purposes of compensation in excess of $1,000,000 paid to certain
executive officers of the Company unless the plan under which the compensation
was paid meets the requirements of Section 162(m). A compensation plan which is
performance based and approved by the Company's stockholders at least once every
five (5) years will not be subject to the deduction limit. Therefore, in order
to fully deduct payments made under the Bonus Plan, the Board of Directors of
the Company is requesting that stockholders approve the Bonus Plan at the Annual
Meeting.
PURPOSE
The Bonus Plan is designed to promote the interests of the Company and its
stockholders by stimulating the efforts of the executive officers on behalf of
the Company by establishing a direct relationship between the payment of cash
bonuses to such executive officers and the profitability of the Company.
CALCULATION OF BONUS AMOUNT
Under the Bonus Plan, an annual cash bonus is paid to participants only if
a targeted increase in pre-tax income over the prior year has been met for the
year. In the case of officers of the Company, such bonus is based on the
Company's pre-tax income. In the case of officers of Quiksilver Europe, such
bonus is based on Quiksilver Europe's pre-tax income. Each participant receives
a cash bonus equal to a percentage of such participant's base salary, ranging
from 0% to 300% of base salary. The maximum amount payable to any officer in any
fiscal year is $2,400,000. Prior to the beginning of each fiscal year, the
Compensation Committee must establish (i) the pre-tax income growth goals for
the upcoming year, (ii) the bonus, as a percentage of base salary, payable upon
achievement of these goals and (iii) the executives eligible to participate. At
the end of the year, the Committee must certify in writing whether the pre-tax
income growth goals have been met for the year and that the amount of bonus to
be paid to each participant was correct. The Compensation Committee does not
have the discretion to increase the maximum bonus percentage of 300% of base
salary or the $2,400,000 maximum bonus payable to any one participating
executive for any fiscal year.
ELIGIBLE PARTICIPANTS
Individuals who are eligible to participate in the Bonus Plan include the
executive officers and certain other key employees of the Company as may be
determined by the Compensation Committee of the Board of Directors. As of
February 15, 2000, three executive officers were eligible to participate in the
Bonus Plan.
ADMINISTRATION
The Bonus Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. The present members of the Committee are
William M. Barnum, Michael H. Gray, Robert G. Kirby and Tom Roach, all of whom
are deemed to be outside directors of the Company, as defined under
18
<PAGE> 21
Section 162(m). None of the members receive compensation from the Company in any
capacity other than as a director of the Company.
The Bonus Plan will continue in effect until terminated by the Committee.
The Committee may amend, modify, suspend, or terminate the Bonus Plan for the
purpose of meeting or addressing any changes in legal requirements or for any
other purpose permitted by law. The Committee will seek stockholder approval of
any amendment determined to require stockholder approval or advisable under the
regulations of the Internal Revenue Service or other applicable laws or
regulations.
BONUS PLAN BENEFITS
The amount of bonuses to be paid in the future pursuant to the Bonus Plan
are dependent on the Company's future profitability and are undeterminable. The
following table shows the amounts which will be paid for fiscal 1999 pursuant to
the Bonus Plan to each of the Company's Executive Officers named in the Summary
Compensation Table and the various indicated groups.
<TABLE>
<CAPTION>
CASH BONUS
NAME AND POSITION FISCAL 1999
----------------- -----------
<S> <C>
Robert B. McKnight, Jr...................................... $1,200,000
Chairman of the Board and Chief Executive Officer
Harry Hodge................................................. 769,000
President Director Generale, Quiksilver Europe
Steven L. Brink............................................. 624,000
Secretary, Treasurer and Chief Financial Officer
All Executive Officers as a group (3 persons)............... 2,593,000
All Nonemployee Directors as a group (5 persons)............ --
All Employees, including current officers who are not
Executive Officers as a group (1,200 persons)............. 601,000
</TABLE>
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the Bonus
Plan. Such approval will require the affirmative vote of a majority of the
voting power of all outstanding shares of the Company's Common Stock present or
represented and entitled to vote at the Annual Meeting. IF THE BONUS PLAN IS NOT
APPROVED BY THE STOCKHOLDERS, BONUSES PAID UNDER THE BONUS PLAN, OR A PORTION
THEREOF, MAY NOT BE FULLY DEDUCTIBLE FOR FEDERAL INCOME TAX PURPOSES. The Board
of Directors recommends a vote "FOR" the proposal.
EXECUTIVE OFFICERS
The current Executive Officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Robert B. McKnight, Jr................. 46 Chairman of the Board and Chief
Executive Officer
Harry Hodge............................ 49 President Director Generale,
Quiksilver, Europe
Steven L. Brink........................ 38 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 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.
19
<PAGE> 22
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
FISCAL --------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS# COMPENSATION(1)
--------------------------- ------ -------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Robert B. McKnight, Jr................. 1999 $400,000 $1,200,000 30,000 $6,400
Chairman of the Board 1998 382,000 1,200,000 33,000 6,400
and Chief Executive Officer 1997 364,000 168,000 -- 5,200
Harry Hodge(2)......................... 1999 $273,000 $ 769,000 30,000 --
President Director 1998 276,000 861,619 33,000 --
Generale, Quiksilver Europe 1997 262,000 370,000 -- --
Steven L. Brink........................ 1999 $208,000 $ 624,000 22,500 $1,100
Chief Financial Officer, 1998 199,000 495,040 30,000 500
Secretary and Treasurer 1997 176,000 36,000 -- 500
</TABLE>
- ---------------
(1) The amounts disclosed in this column for Mr. Brink include the Company's
matching 401(k) employee contribution of $600 for the fiscal year ended
October 31, 1999, and premiums for personal life insurance policies. For Mr.
McKnight they include the Company's matching 401(k) employer contribution of
$4,000, $3,200 and $3,000 for the fiscal years ended October 31, 1999, 1998
and 1997, respectively, and premiums for personal life insurance policies of
$2,400, $3,200 and $2,200 for the fiscal years ended October 31, 1999, 1998
and 1997, respectively.
(2) The amounts for Mr. Hodge are converted from French francs into U.S. dollars
at the average exchange rate for each respective year.
OPTION GRANTS IN LAST FISCAL YEAR
The following sets forth certain information concerning individual grants
of stock options during the fiscal year ended October 31, 1999 to each of the
named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE VALUE($)(3)
---- ---------- ------------ ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Robert B. McKnight, Jr................. 30,000 6.1% $15.71 12/14/08 $219,900
Harry Hodge............................ 30,000 6.1% $15.71 12/14/08 $219,900
Steven L. Brink........................ 22,500 4.6% $15.71 12/14/08 $164,925
</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 33.3%
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 the NYSE).
(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 57.0%, a risk free rate of return of
6.2%, a dividend yield of 0%, and a time of exercise of 2.9 years. Actual
gains, if any, on exercise
20
<PAGE> 23
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 holders' continued employment through the vesting period. As a result,
the indicated present values may vary substantially from actual realized
values.
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, 1999 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 OPTIONS IN-THE-MONEY OPTIONS AT
SHARES VALUE 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.................... -- $ -- 421,500 63,000 $3,257,187 $185,625
Harry Hodge............. 196,500 2,356,069 -- 63,000 -- 185,625
Steven L. Brink......... 8,001 97,012 47,001 52,500 284,381 168,750
</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.
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 $400,000, Mr. Brink a
base salary of $208,000 and Mr. Hodge a base salary of 1,650,000 French francs
(approximately $266,000 as of October 31, 1999). 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 initial base salaries
established in 1996.
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 pretax
income 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, 1999, Messrs. McKnight, Brink and Hodge earned $1,200,000, $624,000
and $769,000, 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.
21
<PAGE> 24
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 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 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, and assuming stockholder approval of the
Executive Officer Bonus Plan, 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% up to a maximum of 300% for pretax income growth
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
22
<PAGE> 25
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.
CEO COMPENSATION
The Committee increased Mr. McKnight's annual base salary from $400,000 to
$600,000 effective February 1, 2000, 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.
For fiscal 1999, Mr. McKnight was paid $1,200,000 of incentive compensation
under the Company's Executive Officer Incentive Plan. This award was due to the
Company's performance which resulted in 45.8% growth in pretax income in fiscal
1999 over fiscal 1998.
Compensation Committee
William M. Barnum, Jr.
Michael H. Gray
Robert G. Kirby
Tom Roach
February 15, 2000
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.
23
<PAGE> 26
COMPANY STOCK PRICE PERFORMANCE
The following graph compares from October 31, 1994 to October 31, 1999 the
yearly percentage change in the Company's cumulative total stockholder return on
its Common Stock with the cumulative total return of (i) the NYSE 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 $315,000,000 at
October 31, 1999 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 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.
NYSE MARKET INDEX, & SIMILAR MARKET CAPITALIZATION PEER GROUP
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
SIMILAR MARKET
QUIKSILVER, INC. NYSE CAPITALIZATIONS
---------------- ---- ---------------
<S> <C> <C> <C>
10/1994 100 100 100
10/1995 177.14 117.39 121.26
10/1996 121.43 143.35 166.44
10/1997 175.71 186.51 167.35
10/1998 236.43 215.13 111.96
10/1999 242.02 249.59 99.92
</TABLE>
- ---------------
Note: Past or present performance is not necessarily indicative of future
performance.
24
<PAGE> 27
The following public companies are those which were used in the above
graph:
American Insured Mortgage
Investors Fund
Auburn National Bancorporation, Inc.
The Bon-Ton Stores, Inc.
BWAY Corporation
Center Bancorp Inc.
Credit Suisse Asset Management
Strategic Global Income Fund, Inc.
Data Race, Inc.
Datum Inc.
Eastern Company
Ellsworth Convertible Growth and Income Fund
ENCAD, Inc.
Equitex, Inc.
First Mutual Bancshares
GameTech International, Inc.
Greater Community Bancorp
Griffin Land & Nurseries
HF Financial Corporation
Highway Master
Communications, Inc.
IIC Industries, Inc.
Input Software, Inc.
IRIDEX Corporation
Middleby Corporation
Minnesota Municipal Term
Trust Inc.
Omega Worldwide, Inc.
OYO Geospace Corporation
Pennichuck Corporation
Percon Incorporated
Putnam California Investment
Grade Municipal Trust
Q-Med Inc.
Signal Technology Corporation
Simula, Inc.
Storage Computer Corporation
Swiss Army Brands, Inc.
United Investors Realty Trust
York Research Corporation
CERTAIN TRANSACTIONS
In January of 2000, the Company made a $200,000 unsecured, non-interest
bearing loan to Steven L. Brink, an executive officer of the Company. The loan
is payable on demand.
APPOINTMENT OF INDEPENDENT AUDITORS
The Company has not yet selected its independent public auditors for the
year ending October 31, 2000. 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, 1999. 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.
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
2001 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
25, 2000.
25
<PAGE> 28
ANNUAL REPORT
The Company's Annual Report containing audited financial statements for the
fiscal year ended October 31, 1999 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, 1999,
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.
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
Huntington Beach, California
February 23, 2000
26
<PAGE> 29
APPENDIX A
QUIKSILVER, INC. 2000 STOCK INCENTIVE PLAN
<PAGE> 30
D R A F T
QUIKSILVER, INC.
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
1.1 PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the
interests of Quiksilver, Inc., a Delaware corporation, by providing eligible
persons in the Corporation's service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such terms
in the attached Appendix.
1.2 STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity programs:
- the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
- the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,
- the Automatic Option Grant Program under which eligible
non- employee Board members shall automatically receive option grants at
designated intervals over their period of continued Board service, and
- the Director Fee Option Grant Program under which
non-employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special stock option grant.
A-1
<PAGE> 31
B. The provisions of Articles One and Six shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
1.3 ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant Program with respect to Section 16
Insiders. Administration of the Discretionary Option Grant Program with respect
to all other persons eligible to participate in that program may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer that program with respect to all such
persons. However, any discretionary option grants for members of the Primary
Committee shall be made by a disinterested majority of the Board.
B. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant
Program and to make such determinations under, and issue such interpretations
of, the provisions of that program and any outstanding options thereunder as it
may deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant Program
under its jurisdiction or any option or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive
authority to determine which Section 16 Insiders and other highly compensated
Employees shall be eligible for participation in the Salary Investment Option
Grant Program for one or more calendar years. However, all option grants under
the Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan
A-2
<PAGE> 32
Administrator shall exercise any discretionary functions with respect to any
option grants made under those programs.
1.4 ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant Program are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding.
D. The Plan Administrator shall have the absolute discretion to
grant options in accordance with the Discretionary Option Grant Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Plan Effective Date who have not previously
received an option grant from the Corporation in connection with their Board
service, (ii) those individuals who first become non-employee Board members
after the Plan Effective Date, whether through appointment by the Board or
election by the Corporation's stockholders, and (iii) those individuals who
continue to serve as non-employee Board members at one or more Annual
Stockholders Meetings held after the Plan Effective Date. A non- employee Board
member who has previously been in the employ of the Corporation (or any Parent
or Subsidiary) shall not be eligible to receive an option grant under the
Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to
A-3
<PAGE> 33
receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-employee Board member.
F. All non-employee Board members shall be eligible to
participate in the Director Fee Option Grant Program.
1.5 STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall not exceed
3,736,209 shares. Such reserve shall consist of (i) the number of shares
estimated to remain available for issuance, as of the Plan Effective Date, under
the Predecessor Plans as last approved by the Corporation's stockholders,
including the shares subject to outstanding options under those Predecessor
Plans, (ii) plus an additional increase of approximately 500,000 shares to be
approved by the Corporation's stockholders in connection with the adoption of
this Plan.
B. No one person participating in the Plan may receive options
and separately exercisable stock appreciation rights for more than 200,000
shares of Common Stock in the aggregate per calendar year.
C. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plans) shall
be available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii) the
options are canceled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently canceled or
repurchased by the Corporation at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the holder of such option. Shares of Common Stock underlying one
or more stock appreciation rights exercised under Section 2.4 of Article Two,
Section 3.3 of Article Three, Section 4.2 of Article Four
A-4
<PAGE> 34
or Section 5.3 of Article Five of the Plan shall NOT be available for subsequent
issuance under the Plan.
D. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made by the Plan Administrator to (i) the maximum number and/or class
of securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted stock options and separately
exercisable stock appreciation rights under the Plan per calendar year, (iii)
the number and/or class of securities for which grants are subsequently to be
made under the Automatic Option Grant Program to new and continuing non-employee
Board members, (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option under the Plan, and (v) the
number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plans. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
A-5
<PAGE> 35
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
2.1 OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date. The Plan
Administrator may not reset the exercise price of outstanding options and may
not grant new options in exchange for the cancellation of outstanding options
with a higher exercise price.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section 6.1 of
Article Six and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
A-6
<PAGE> 36
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option held by the Optionee at the time of
death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or the laws of inheritance or by the
Optionee's designated beneficiary or beneficiaries of that option.
(iii) Should the Optionee's Service be terminated
for Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the
applicable post- Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
A-7
<PAGE> 37
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
2.2 INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section 2.2, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section 2.2.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the
A-8
<PAGE> 38
same calendar year, the foregoing limitation on the exercisability of such
options as Incentive Options shall be applied on the basis of the order in which
such options are granted.
C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
2.3 CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for the total number of shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, an outstanding option shall NOT
become exercisable on such an accelerated basis if and to the extent: (i) such
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on any shares for which
the option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year and
A-9
<PAGE> 39
(iv) the maximum number and/or class of securities by which the share reserve is
to increase automatically each calendar year.
E. The Plan Administrator shall have the discretionary authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall, immediately prior to the effect date
of such Corporate Transaction, become fully exercisable for the total number of
shares of Common Stock at the time subject to those options and may be exercised
for any or all of those shares as fully vested shares of Common Stock, whether
or not those options are to be assumed in the Corporate Transaction. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall become fully exercisable for the total
number of shares of Common Stock at the time subject to those options in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may structure one or more of the Corporation's repurchase
rights so that those rights shall immediately terminate with respect to any
shares held by the Optionee at the time of such Involuntary Termination, and the
shares subject to those terminated repurchase rights shall accordingly vest in
full at that time.
G. The Plan Administrator shall have the discretionary authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall, immediately prior to the effect date
of a Change in Control, become fully exercisable for the total number of shares
of Common Stock at the time subject to those options and may be exercised for
any or all of those shares as fully vested shares of Common Stock. In addition,
the Plan Administrator shall have the discretionary authority to structure one
or more of the Corporation's repurchase rights under the Discretionary Option
Grant Program so that those rights shall terminate automatically upon the
consummation of such Change in Control, and the shares subject to those
terminated rights shall thereupon vest in full. Alternatively, the Plan
Administrator may condition the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program and the
termination of one or more of the Corporation's outstanding repurchase rights
under such program upon the subsequent termination of the Optionee's Service by
reason of an Involuntary Termination within a designated period (not to exceed
eighteen (18) months) following the effective date of such Change in Control.
Each option so accelerated shall remain exercisable for fully vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1) year period measured from the effective date of
Optionee's cessation of Service.
A-10
<PAGE> 40
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
2.4 STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (a) the Fair
Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so
approved, then the distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may
A-11
<PAGE> 41
exercise such rights at any time prior to the later of (a) five (5)
business days after the receipt of the rejection notice or (b) the last
day on which the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant
date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender
each such option to the Corporation. In return for the surrendered
option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price
of the shares of Common Stock at the time subject to such option
(whether or not the Optionee is otherwise vested in those shares) over
(B) the aggregate exercise price payable for those shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
(iii) At the time such limited stock appreciation right is
granted, the Plan Administrator shall pre-approve any subsequent
exercise of that right in accordance with the terms of this Paragraph C.
Accordingly, no further approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution.
A-12
<PAGE> 42
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
3.1 OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority
to determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.
3.2 OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or
more documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A divided by (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the reduction in the
Optionee's base salary for the calendar year to be
in effect pursuant to this program, and B is the
Fair Market Value per share of Common Stock on the
option grant date.
A-13
<PAGE> 43
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or the laws of inheritance or by the designated beneficiary
or beneficiaries of such option. Such right of exercise shall lapse, and the
option shall terminate, upon the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the three (3)- year period measured from the date
of the Optionee's cessation of Service. However, the option shall, immediately
upon the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
3.3 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable for the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
ten (10)-year option term, (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation
A-14
<PAGE> 44
of Service, (iii) the termination of the option in connection with a Corporate
Transaction or (iv) the surrender of the option in connection with a Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Salary Investment Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. The Primary Committee shall, at the time the option
with such limited stock appreciation right is granted under the Salary
Investment Option Grant Program, pre-approve any subsequent exercise of that
right in accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Primary Committee or the Board shall be required at the time of
the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
3.4 REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
A-15
<PAGE> 45
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
4.1 OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Plan Effective Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 15,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting,
beginning with the Annual Stockholders Meeting coinciding with the Plan
Effective Date, each individual who is to continue to serve as a non-employee
Board member, whether or not that individual is standing for re-election to the
Board at that particular Annual Meeting, shall automatically be granted a Non-
Statutory Option to purchase 5,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 5,000-share option grants
any one non-employee Board member may receive over his or her period of Board
service, and non-employee Board members who have previously been in the employ
of the Corporation (or any Parent or Subsidiary) or who have previously received
stock options in connection with their Board service prior to the Plan Effective
Date shall be eligible to receive one or more such annual option grants over
their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more of
the alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any
unvested shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. The shares subject to each
initial 15,000-share grant shall vest, and the Corporation's repurchase right
shall lapse, in a series of three (3) successive equal annual installments upon
the Optionee's completion of each year of
A-16
<PAGE> 46
service as a Board member over the three (3) year period measured from the
option grant date. The shares subject to each annual 5,000-share option grant
shall be fully vested as of the grant date.
E. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
F. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or the laws of inheritance or the designated beneficiary or
beneficiaries of such option) shall have a twelve (12)-month period
following the date of such cessation of Board service in which to
exercise each such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member
by reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the twelve
(12)-month exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Board
service for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
A-17
<PAGE> 47
4.2 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the option shares as fully-vested shares of Common
Stock and may be exercised for all or any portion of those vested shares.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the option shares as fully-vested shares of Common Stock and may be
exercised for all or any portion of those vested shares. Each such option shall
remain exercisable for such fully-vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction or
Change in Control.
D. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or consent
of the Board or any Plan Administrator shall be required at the time of the
actual option surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital
A-18
<PAGE> 48
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
4.3 REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
A-19
<PAGE> 49
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
5.1 OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority
to determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the program is in
effect, each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board for that year to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.
5.2 OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms
and conditions specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A divided by (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject
to the non-employee Board member's election, and
A-20
<PAGE> 50
B is the Fair Market Value per share of Common
Stock on the option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) equal monthly installments upon the
Optionee's completion of each month of Board service over the twelve (12)-month
period measured from the grant date. Each option shall have a maximum term of
ten (10) years measured from the option grant date.
D. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
E. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each such
option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Board service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Board service. However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
F. DEATH OR PERMANENT DISABILITY. Should the Optionee's service
as a Board member cease by reason of death or Permanent Disability, then each
option held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service. Should the Optionee
die while holding such option, then the option may be exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or the laws of inheritance
or by the designated beneficiary or beneficiaries of that option.
A-21
<PAGE> 51
Should the Optionee die after cessation of Board service
but while holding one or more options under this Director Fee Option Grant
Program, then each such option may be exercised, for any or all of the shares
for which the option is exercisable at the time of the Optionee's cessation of
Board service (less any shares subsequently purchased by Optionee prior to
death), by the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's will or
the laws of inheritance or by the designated beneficiary or beneficiaries of
such option. Such right of exercise shall lapse, and the option shall terminate,
upon the earlier of (i) the expiration of the ten (10)-year option term or (ii)
the three (3)- year period measured from the date of the Optionee's cessation of
Board service.
5.3 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable for the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
ten (10)-year option term, (ii) the expiration of the two (2)-year period
measured from the date of the Optionee's cessation of Board service, (iii) the
termination of the option in connection with a Corporate Transaction or (iv) the
surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Director Fee Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to each surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. No approval or consent of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and
cash distribution.
A-22
<PAGE> 52
D. The grant of options under the Director Fee Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
5.4 REMAINING TERMS
The remaining terms of each option granted under this Director
Fee Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
A-23
<PAGE> 53
ARTICLE SIX
MISCELLANEOUS
6.1 FINANCING
The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price (less the par value of those shares) plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise.
6.2 TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options under the Plan shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options under the Plan (other than the options
granted or the shares issued under the Automatic Option Grant or Director Fee
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Withholding Taxes to which such holders may
become subject in connection with the exercise of their options. Such right may
be provided to any such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option, a portion of those shares with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.
A-24
<PAGE> 54
6.3 EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan
Effective Date. However, the Salary Investment Option Grant Program and the
Director Fee Option Grant Program shall not be implemented until such time as
the Primary Committee may deem appropriate. Options may be granted under the
Discretionary Option Grant at any time on or after the Plan Effective Date, and
the initial option grants under the Automatic Option Grant Program shall also be
made on the Plan Effective Date to any non-employee Board members eligible for
such a grant at that time. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to each of the
Predecessor Plans, and no further option grants shall be made under the
Predecessor Plans after the Plan Effective Date. All options outstanding under
the Predecessor Plans on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions, may, in the Plan Administrator's discretion, be
extended to one or more options incorporated from the Predecessor Plans which do
not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest to occur of (i)
March 31, 2010, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully- vested shares or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Should
the Plan terminate on March 31, 2010, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
6.4 AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall (i) adversely affect the rights and obligations
with respect to stock options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee consents to such amendment or
modification or (ii) unless approved by the stockholders, permit the Plan
Administrator to reset the exercise price of outstanding options or grant new
options in exchange for the cancellation of outstanding options with a higher
exercise price. In addition, certain other amendments may require stockholder
approval pursuant to applicable laws or regulations.
A-25
<PAGE> 55
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs
that are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
6.5 USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
6.6 REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock upon the
exercise of any granted option shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the stock options granted under it and the shares of
Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
6.7 NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
A-26
<PAGE> 56
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under Article Four of the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of
such period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder- approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Quiksilver, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Quiksilver, Inc. which shall by appropriate action
adopt the Plan.
A-27
<PAGE> 57
H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock
option grant in effect for non-employee Board members under Article Five of the
Plan.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
J. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Articles One and Four.
K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
M. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as such
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
N. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
A-28
<PAGE> 58
O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A)
a change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and target
bonus under any corporate-performance based bonus or incentive programs)
by more than twenty percent (20%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
Q. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
S. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
T. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant, Salary Investment Option Grant, Automatic
Option Grant or Director Fee Option Grant Program.
U. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
A-29
<PAGE> 59
V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
W. PLAN shall mean the Corporation's 2000 Stock Incentive Plan,
as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean March 31, 2000.
Z. PREDECESSOR PLANS shall mean the Corporation's (i) 1996 Stock
Option Plan, (ii) the 1998 Nonemployee Directors' Stock Option Plan, (iii) the
1995 Nonemployee Directors' Stock Option Plan and (iv) the 1992 Nonemployee
Directors' Stock Option Plan, as each of those plans is in effect immediately
prior to the Plan Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non- employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders and to
administer the Salary Investment Option Grant Program solely with respect to the
selection of the eligible individuals who may participate in such program.
BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under Article Three of the Plan.
CC. SECONDARY COMMITTEE shall mean a committee of one or more
Board members appointed by the Board to administer the Discretionary Option
Grant Program with respect to eligible persons other than Section 16 Insiders.
DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
EE. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
A-30
<PAGE> 60
FF. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
GG. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
HH. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
II. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
JJ. WITHHOLDING TAXES shall mean the Federal, state and local
income and employment withholding taxes to which the holder of Non-Statutory
Options may become subject in connection with the exercise of those options.
A-31
<PAGE> 61
APPENDIX B
Quiksilver, Inc. Employee Stock Purchase Plan
<PAGE> 62
D R A F T
QUIKSILVER, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the
interests of Quiksilver, Inc., a Delaware corporation, by providing eligible
employees with the opportunity to acquire a proprietary interest in the
Corporation through participation in a payroll-deduction based employee stock
purchase plan designed to qualify under Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
2. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
3. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of Common
Stock purchased on the open market. The number of shares of Common Stock
initially reserved for issuance over the term of the Plan shall be limited to
Two Hundred Thousand (200,000) shares.
B. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable by all Participants in the aggregate on any one Purchase
Date, and (iv) the number and class of securities and the price per share in
effect under each outstanding purchase right in order to prevent the dilution or
enlargement of benefits thereunder.
B-1
<PAGE> 63
4. PURCHASE PERIODS
Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive Purchase Periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
5. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date
of any Purchase Period under the Plan may enter that Purchase Period on such
start date.
B. To participate in the Plan for a particular Purchase Period,
the Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) in advance of that Purchase Period and in accordance with such terms
and conditions as the Plan Administrator may impose.
6. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock during a Purchase Period may be any
multiple of one percent (1%) of the Base Salary paid to the Participant during
the Purchase Period, up to a maximum of fifteen percent (15%). The deduction
rate so authorized shall continue in effect, except to the extent such rate is
changed in accordance with the following guidelines:
(i) The Participant may, at any time during the Purchase
Period, reduce his or her rate of payroll deduction to become effective
as soon as possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one
(1) such reduction per Purchase Period.
(ii) The Participant may, prior to the commencement of any
new Purchase Period, increase the rate of his or her payroll deduction
by filing the appropriate form with the Plan Administrator. The new rate
(which may not exceed the fifteen percent (15%) maximum) shall become
effective on the start date of the first Purchase Period following the
filing of such form.
B. Payroll deductions shall begin on the first pay day
administratively feasible following the beginning of the Purchase Period and
shall (unless sooner terminated by the Participant) continue through the pay day
ending with or immediately prior to the last day of that Purchase Period. The
amounts so collected shall be credited to the Participant's book account under
the Plan, but no interest shall be paid on the balance from time to time
outstanding in such account. The amounts collected from the Participant shall
not be required to be held in any segregated account or trust fund and may be
commingled with the general assets of the Corporation and used for general
corporate purposes.
B-2
<PAGE> 64
C. Payroll deductions shall automatically cease upon the
termination of the Participant's purchase right in accordance with the
provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan
on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date.
7. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a
separate purchase right for each Purchase Period in which he or she
participates. The purchase right shall be granted on the first business day of
the Purchase Period and shall provide the Participant with the right to purchase
shares of Common Stock upon the terms set forth below. The Participant shall
execute a stock purchase agreement embodying such terms and such other
provisions (not inconsistent with the Plan) as the Plan Administrator may deem
advisable.
Under no circumstances shall purchase rights be granted under the
Plan to any Eligible Employee if such individual would, immediately after the
grant, own (within the meaning of Code Section 424(d)) or hold outstanding
options or other rights to purchase, stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Corporation or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised on each successive Purchase Date, and shares of Common
Stock shall accordingly be purchased on behalf of each Participant on each such
Purchase Date. The purchase shall be effected by applying the Participant's
payroll deductions for the Purchase Period ending on such Purchase Date to the
purchase of whole shares of Common Stock at the purchase price in effect for the
Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common
Stock will be purchased on the Participant's behalf on each Purchase Date shall
be equal to eighty-five percent (85%) of the lower of (i) the Fair Market Value
per share of Common Stock on the first business day of the Purchase Period or
(ii) the Fair Market Value per share of Common Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common
Stock purchasable by a Participant on each Purchase Date shall be the number of
whole shares obtained by dividing the amount collected from the Participant
through payroll deductions during the Purchase Period ending with that Purchase
Date by the purchase price in effect for the Participant for that Purchase Date.
However, the maximum number of shares of Common Stock purchasable per
Participant on any one Purchase Date shall not exceed 1,000 shares, subject to
periodic adjustments in the event of certain changes in the Corporation's
capitalization. In addition, the maximum number of shares of Common Stock
purchasable in the aggregate by all Participants on any one Purchase Date shall
not exceed 100,000 shares, subject to periodic adjustments in the event of
certain changes in the Corporation's capitalization. However, the Plan
Administrator shall have the discretionary authority, exercisable prior to the
start of any Purchase Period under the Plan, to
B-3
<PAGE> 65
increase or decrease the limitations to be in effect for the number of shares
purchasable per Participant and in the aggregate by all Participants on each
Purchase Date.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied
to the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in the
aggregate on the Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall
govern the termination of outstanding purchase rights:
A. A Participant may, at any time prior to the next
scheduled Purchase Date, terminate his or her outstanding purchase right
by filing the appropriate form with the Plan Administrator (or its
designate), and no further payroll deductions shall be collected from
the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Period in which such
termination occurs shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the next Purchase Date.
If no such election is made at the time such purchase right is
terminated, then the payroll deductions collected with respect to the
terminated right shall be refunded as soon as possible.
B. The termination of such purchase right shall be
irrevocable, and the Participant may not subsequently rejoin the
Purchase Period for which the terminated purchase right was granted. In
order to resume participation in any subsequent Purchase Period, such
individual must re-enroll in the Plan (by making a timely filing of the
prescribed enrollment forms).
C. Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in
status) while his or her purchase right remains outstanding, then that
purchase right shall immediately terminate, and all of the Participant's
payroll deductions for the Purchase Period in which the purchase right
so terminates shall be immediately refunded. However, should the
Participant cease to remain in active service by reason of an approved
unpaid leave of absence, then the Participant shall have the right,
exercisable up until the last business day of the Purchase Period in
which such leave commences, to (a) withdraw all the payroll deductions
collected to date on his or her behalf for that Purchase Period or (b)
have such funds held for the purchase of shares on his or her behalf on
the next scheduled Purchase Date. In no event, however, shall any
further payroll deductions be collected on the Participant's behalf
during such leave. Upon the Participant's return to active service (x)
within ninety (90) days following the commencement of such leave or (y)
prior to the expiration of any longer period for which such
Participant's right to reemployment with the Corporation is guaranteed
by statute or contract, his or her payroll deductions under the Plan
shall automatically resume at the rate in effect at the time the leave
began, unless the Participant withdraws from the Plan prior to his or
her return. An individual who returns to active employment following a
leave of absence which exceeds in duration the applicable (x) or (y)
time period will be treated as a
B-4
<PAGE> 66
new Employee for purposes of subsequent participation in the Plan and
must accordingly re- enroll in the Plan (by making a timely filing of
the prescribed enrollment forms).
G. CHANGE IN CONTROL. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Period in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the first business day of the Purchase Period in which such Change in
Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in the
aggregate by all participants.
The Corporation shall use its best efforts to provide at least
ten (10)-days prior written notice of the occurrence of any Change in Control,
and Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock to be purchased pursuant to outstanding purchase rights
on any particular date exceed the number of shares then available for issuance
under the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by
the Participant and shall not be assignable or transferable by the Participant.
J. STOCKHOLDER RIGHTS. A Participant shall have no stockholder
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.
8. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans (within the
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000.00) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B-5
<PAGE> 67
B. For purposes of applying such accrual limitations to the
purchase rights granted under the Plan, the following provisions shall be in
effect:
(i) The right to acquire Common Stock under each
outstanding purchase right shall accrue on each successive Purchase Date
on which such right remains outstanding.
(ii) No right to acquire Common Stock under any
outstanding purchase right shall accrue to the extent the Participant
has already accrued in the same calendar year the right to acquire
Common Stock under one or more other purchase rights at a rate equal to
Twenty-Five Thousand Dollars ($25,000.00) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.
C. If by reason of such accrual limitations, any purchase right
of a Participant does not accrue for a particular Purchase Period, then the
payroll deductions which the Participant made during that Purchase Period with
respect to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of
this Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
9. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on February 15, 2000 and
shall become effective at the Effective Time, provided no purchase rights
granted under the Plan shall be exercised, and no shares of Common Stock shall
be issued hereunder, until (i) the Plan shall have been approved by the
stockholders of the Corporation and (ii) the Corporation shall have complied
with all applicable requirements of the 1933 Act (including the registration of
the shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation. In the event such
stockholder approval is not obtained, or such compliance is not effected, within
twelve (12) months after the date on which the Plan is adopted by the Board, the
Plan shall terminate and have no further force or effect, and all sums collected
from Participants during the initial Purchase Period hereunder shall be
refunded.
B. Unless sooner terminated by the Board, the Plan shall
terminate upon the earliest of (i) the last business day in December 2009, (ii)
the date on which all shares available for issuance under the Plan shall have
been sold pursuant to purchase rights exercised under the Plan or (iii) the date
on which all purchase rights are exercised in connection with a Change in
Control. No further purchase rights shall be granted or exercised, and no
further payroll deductions shall be collected, under the Plan following such
termination.
10. AMENDMENT OF THE PLAN
A. The Board may alter, amend, suspend or terminate the Plan at
any time to become effective immediately following the close of any Purchase
Period. In addition, the Plan may
B-6
<PAGE> 68
be amended or terminated immediately upon Board action, if and to the extent
necessary to assure that the Corporation will not recognize, for financial
reporting purposes, any compensation expense in connection with the shares of
Common Stock offered for purchase under the Plan, should the financial
accounting rules applicable to the Plan at the Effective Time be subsequently
revised so as to require the Corporation's recognition of compensation expense
in the absence of such amendment or termination.
B. In no event may the Board effect any of the following
amendments or revisions to the Plan without the approval of the Corporation's
stockholders: (i) increase the number of shares of Common Stock issuable under
the Plan, except for permissible adjustments in the event of certain changes in
the Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify the eligibility requirements for participation in
the Plan.
11. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the
Plan shall be paid by the Corporation; however, each Plan Participant shall bear
all costs and expenses incurred by such individual in the sale or other
disposition of any shares purchased under the Plan.
B. Nothing in the Plan shall confer upon the Participant any
right to continue in the employ of the Corporation or any Corporate Affiliate
for any period of specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Corporate Affiliate employing such
person) or of the Participant, which rights are hereby expressly reserved by
each, to terminate such person's employment at any time for any reason, with or
without cause.
C. The provisions of the Plan shall be governed by the laws of
the State of California without resort to that State's conflict-of-laws rules.
B-7
<PAGE> 69
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Quiksilver, Inc.
Na Pali S.A.
QS Retail, Inc.
Mervin Manufacturing, Inc.
Mt. Waimea, Inc.
Quiksilver Wetsuits, Inc.
B-8
<PAGE> 70
APPENDIX
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the regular base salary paid to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more Purchase Periods under the Plan. Base
Salary shall be calculated before deduction of (A) any income or employment tax
withholdings or (B) any and all contributions made by the Participant to any
Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit
program now or hereafter established by the Corporation or any Corporate
Affiliate. Base Salary shall NOT include (i) any overtime payments, bonuses,
commissions, profit-sharing distributions and other incentive- type payments
received during the period of participation in the Plan and (ii) any
contributions made on the Participant's behalf by the Corporation or any
Corporate Affiliate to any employee benefit or welfare plan now or hereafter
established (other than Code Section 401(k) or Code Section 125 contributions
deducted from Base Salary).
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership of the
Corporation pursuant to any of the following transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly by an person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common
control with the Corporation) of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.
G. CORPORATION shall mean Quiksilver, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Quiksilver, Inc. which shall by appropriate action
adopt the Plan.
B-9
<PAGE> 71
H. EFFECTIVE TIME shall mean July 1, 2000. Any Corporate
Affiliate which becomes a Participating Corporation after such Effective Time
shall designate a subsequent Effective Time with respect to its
employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as such
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
K. 1933 ACT shall mean the Securities Act of 1933, as amended.
L. PARTICIPANT shall mean any Eligible Employee of a
Participating Corporation who is actively participating in the Plan.
M. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
N. PLAN shall mean the Corporation's Employee Stock Purchase
Plan, as set forth in this document.
O. PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Board members appointed by the Board to administer the Plan.
P. PURCHASE DATE shall mean the last business day of each
Purchase Period. The initial Purchase Date shall be December 29, 2000.
B-10
<PAGE> 72
Q. PURCHASE PERIOD shall mean each successive approximate six
(6)-month period, beginning on the first business day in each of July and
January and ending on the last business day in each of June and December of each
year, at the end of which there shall be purchased shares of Common Stock on
behalf of each Participant.
R. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
B-11
<PAGE> 73
QUIKSILVER, INC.
15202 GRAHAM STREET
HUNTINGTON BEACH, CA 92649
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
February 1, 2000, at the Annual Meeting of Stockholders to be held on March 31,
2000 and at any adjournment or postponement thereof.
<TABLE>
<S> <C> <C>
1. Election of Directors: [ ] FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated to the contrary below) for all nominees listed below
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. Approval of the Company's 2000 Stock Incentive Plan described in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the Company's Employee Stock Purchase Plan described in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Approval of the Company's Executive Officer Bonus Plan described in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. 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)
</TABLE>
<PAGE> 74
(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 PROPOSALS 1, 2, 3 AND 4.
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: , 2000
----------------------
----------------------------------------
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.
