-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DbJHN9fcnEoxy1Xox1V67JJAvuU2moUkcT3cxRHci1YuNFvHAYjofAjj729uKTeq 7FeDWR3w8hsRdam2OGGbkA== 0000892569-96-000991.txt : 19960617 0000892569-96-000991.hdr.sgml : 19960617 ACCESSION NUMBER: 0000892569-96-000991 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960614 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUIKSILVER INC CENTRAL INDEX KEY: 0000805305 STANDARD INDUSTRIAL CLASSIFICATION: MEN'S & BOYS' FURNISHINGS, WORK CLOTHING, AND ALLIED GARMENTS [2320] IRS NUMBER: 330199426 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15131 FILM NUMBER: 96580745 BUSINESS ADDRESS: STREET 1: 1740 MONROVIA AVE CITY: COSTA MESA STATE: CA ZIP: 92627 BUSINESS PHONE: 7146451395 MAIL ADDRESS: STREET 1: 1740 MONROVIA AVE CITY: COSTA MESA STATE: CA ZIP: 92627 10-Q 1 FORM 10-Q FOR QUARTER ENDED APRIL 30, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington D.C. 20549 FORM 10-Q (Mark One) [X] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-15131 QUIKSILVER, INC. (Exact name of registrant as specified in its charter) Delaware 33-0199426 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1740 Monrovia Avenue Costa Mesa, California 92627 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (714) 645-1395 Securities registered pursuant to Section 12(b) of the Act: Title of Name of each exchange each class on which registered ---------- --------------------- None None Securities registered pursuant to Section 12(g) of the Act: Common Stock ------------ (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of Registrant's Common Stock, par value $.01 per share, at April 30, 1996 was 6,947,513. 2 QUIKSILVER, INC. FORM 10-Q INDEX
Page No. -------- PART I - FINANCIAL INFORMATION - ------------------------------ Item 1. Consolidated Financial Statements: Consolidated Balance Sheets April 30, 1996 (Unaudited) and October 31, 1995 ....... 2 Consolidated Statements of Income (Unaudited) Three Months ended April 30, 1996 and 1995 ............ 3 Six Months ended April 30, 1996 and 1995 .............. 4 Consolidated Statements of Cash Flows (Unaudited) Six Months ended April 30, 1996 and 1995 .............. 5 Notes to Consolidated Financial Statements ............... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ............ 7 Part II - OTHER INFORMATION - --------------------------- Item 4. Submission of Matters to a Vote of Security Holders ...... 10 Item 6. Exhibits and Reports on Form 8-K ......................... 10 SIGNATURES ........................................................ 11 - ----------
3 PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements QUIKSILVER, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)
April 30, October 31, (Amounts in thousands except share data) 1996 1995 - ------------------------------------------------- --------- ----------- ASSETS Current assets Cash and cash equivalents .................... $ 3,794 $ 3,461 Trade accounts receivable, less allowance for doubtful accounts of $3,200 (1996) and $2,717 (1995) ......................... 48,449 38,308 Other receivables ............................ 2,118 1,471 Inventories - Note 3 ......................... 29,128 28,355 Prepaid expenses ............................. 918 2,240 --------- -------- Total current assets ...................... 84,407 73,835 Equipment, less accumulated depreciation and amortization of $6,944 (1996) and $6,982 (1995) ................................ 7,425 7,032 Trademark and consulting agreement, less accumulated amortization of $1,411 (1996) and $1,336 (1995) ............................ 1,607 1,682 Goodwill, less accumulated amortization of $2,802 (1996) and $2,501 (1995) ........... 15,306 15,611 Other assets .................................... 2,205 1,008 --------- -------- $ 110,950 $ 99,168 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Lines of credit .............................. $ 9,592 $ 8,031 Accounts payable ............................. 9,558 9,257 Accrued liabilities .......................... 8,385 8,834 Current portion of notes payable ............. 229 233 Income taxes payable ......................... 2,276 578 --------- -------- Total current liabilities .............. 30,040 26,933 Notes payable ................................... 3,298 3,297 --------- -------- Total liabilities ...................... 33,338 30,230 Stockholders' equity Preferred stock, $.01 par value, authorized shares 5,000,000; issued and outstanding shares - none ............................. -- -- Common stock, $.01 par value, authorized shares 30,000,000; issued and outstanding shares 6,947,513 (1996) and 6,775,605 (1995)........................... 70 68 Additional paid-in-capital ................... 17,639 15,118 Retained earnings ............................ 59,284 52,739 Cumulative foreign currency translation gain . 619 1,013 --------- -------- Total stockholders' equity ............. 77,612 68,938 --------- -------- $ 110,950 $ 99,168 ========= ========
See notes to consolidated financial statements. 2 4 QUIKSILVER, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended April 30, ----------------------------- (Amounts in thousands except share data) 1996 1995 - ------------------------------------------ --------- --------- Net sales ................................ $ 54,505 $ 47,311 Cost of goods sold ....................... 32,492 28,485 --------- --------- Gross profit .......................... 22,013 18,826 --------- --------- Operating expenses: Selling, general and administrative expenses ............ 13,918 12,110 Royalty income ........................ (186) (247) Royalty expense ....................... 610 615 --------- --------- Total operating expenses ........... 14,342 12,478 --------- --------- Operating income ......................... 7,671 6,348 Interest income .......................... (2) (1) Interest expense ......................... 230 398 Gain on foreign currency exchange ........ (56) (120) Loss on foreign currency exchange ........ 81 90 Other expense ............................ 52 19 --------- --------- Income before provision for income taxes . 7,366 5,962 Provision for income taxes ............... 2,947 2,339 --------- --------- Net income ............................... $ 4,419 $ 3,623 ========= ========= Primary net income per common share ...... $ .61 $ .52 ========= ========= Fully diluted net income per common share. $ .61 $ .52 ========= ========= Primary weighted average common shares and equivalents outstanding - Note 2 .. 7,202,000 6,996,000 ========= ========= Fully diluted weighted average common shares and equivalents outstanding - Note 2 .................. 7,251,000 7,000,000 ========= =========
See notes to consolidated financial statements. 3 5 QUIKSILVER, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Six months ended April 30, ----------------------------- (Amounts in thousands except share data) 1996 1995 - ------------------------------------------ --------- --------- Net sales ................................ $ 94,992 $ 80,969 Cost of goods sold ....................... 57,384 49,254 --------- --------- Gross profit .......................... 37,608 31,715 --------- --------- Operating expenses: Selling, general and administrative expenses ............ 25,254 22,075 Royalty income ........................ (391) (455) Royalty expense ....................... 1,175 1,037 --------- --------- Total operating expenses ........... 26,038 22,657 --------- --------- Operating income ......................... 11,570 9,058 Interest income .......................... (3) (7) Interest expense ......................... 400 568 Gain on foreign currency exchange ........ (173) (355) Loss on foreign currency exchange ........ 221 228 Other expense ............................ 153 97 --------- --------- Income before provision for income taxes . 10,972 8,527 Provision for income taxes ............... 4,428 3,373 --------- --------- Net income ............................... $ 6,544 $ 5,154 ========= ========= Primary net income per common share ...... $ .91 $ .74 ========= ========= Fully diluted net income per common share. $ .90 $ .74 ========= ========= Primary weighted average common shares and equivalents outstanding - Note 2 .. 7,188,000 6,974,000 ========= ========= Fully diluted weighted average common shares and equivalents outstanding - Note 2 .................. 7,237,000 7,003,000 ========= =========
See notes to consolidated financial statements. 4 6 QUIKSILVER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended April 30, -------------------------- (Amounts in thousands) 1996 1995 - ------------------------------------------------------ ------- -------- Cash flows from operating activities: Net income ........................................ $ 6,544 $ 5,154 Items in income not affecting cash: Depreciation and amortization .................. 1,226 1,099 Provision for losses on accounts receivable .... 483 246 Net change due to sale of fixed assets ......... 33 25 Change in operating assets and liabilities: Trade accounts receivable ...................... (10,624) (9,134) Other receivables .............................. (647) (128) Inventories .................................... (773) (3,668) Prepaid expenses ............................... 233 (39) Other assets ................................... (108) (35) Accounts payable ............................... 301 1,100 Accrued liabilities ............................ (449) 1,935 Income taxes payable ........................... 1,699 (481) ------- ------- Net change in cash related to operating activities ... (2,082) (3,926) Cash flows from investing activities: Proceeds from sales of fixed assets ............... 20 (25) Capital expenditures .............................. (1,293) (1,566) Goodwill .......................................... -- (4) ------- ------- Net change in cash related to investing activities ... (1,273) (1,595) Cash flows from financing activities: Borrowings on lines of credit ..................... 13,390 23,522 Payments on lines of credit ....................... (11,829) (18,795) Borrowings on long-term debt ...................... (131) 1,029 Payments on long-term debt ........................ 127 (223) Proceeds from stock issued in connection with exercise of stock options ...................... 2,524 1,623 ------- ------- Net change in cash related to financing activities ... 4,081 7,156 Effect of exchange rate changes on cash .............. (393) 385 ------- ------- Net change in cash ................................... 333 2,020 Cash at beginning of period .......................... 3,461 682 ------- ------- Cash at end of period ................................ $ 3,794 $ 2,702 ======= ======= Supplementary Cash Flow Information: Cash paid during the period for: Interest .......................................... $ 382 $ 627 ======= ======= Income taxes ...................................... $ 3,668 $ 2,900 ======= =======
See notes to consolidated financial statements. 5 7 QUIKSILVER, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statement presentation. The consolidated financial statements include the accounts of the parent company and subsidiaries, which are wholly-owned. The Company, in its opinion, has included all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results of operations for the quarters ended April 30, 1996 and 1995. The financial statements and notes thereto should be read in conjunction with the audited financial statements and notes for the years ended October 31, 1995 and 1994. Interim results are not necessarily indicative of results for the full year due to seasonality and other factors. For foreign operations, local currencies are considered the functional currencies. Assets and liabilities are translated using the exchange rates in effect at the balance sheet date. Results of operations are translated using the average exchange rates prevailing throughout the period. Translation effects are accumulated as part of the cumulative foreign currency translation gain section in stockholders' equity. Gains and losses from foreign currency transactions are included in operating results. 2. Net income per common share was computed based on the weighted average number of shares actually outstanding plus the shares that would be outstanding, using the treasury stock method, assuming the exercise of all outstanding options and warrants which were considered to be common stock equivalents. 3. Inventories consist of the following:
April 30, October 31, 1996 1995 ------------ ------------ Raw Materials $ 10,214,000 $ 10,875,000 Work-In-Process 3,445,000 4,104,000 Finished Goods 15,469,000 13,376,000 ------------ ------------ $ 29,128,000 $ 28,355,000 ============ ============
Inventories are valued at the lower of cost (first in, first out) or market. 6 8 PART I - FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS - Three Months Ended April 30, 1996 as Compared to Three Months Ended April 30, 1995 Fiscal 1996 second quarter consolidated net sales increased 15.2% to $54,505,000 as compared to $47,311,000 in the same period of the prior year. Fiscal 1996 second quarter net sales, excluding European operations, increased 15.3% to $35,962,000 as compared to $31,187,000 in the same period of the prior year. This increase was primarily due to a greater acceptance of the Company's product lines. Fiscal 1996 second quarter net sales for European operations increased 15.0% to $18,543,000 as compared to $16,124,000 in the same period of the prior year. This increase was a result of a greater acceptance of the Company's product lines in Europe. Fiscal 1996 second quarter consolidated gross profit margin increased to 40.4% as compared to 39.8% in the same period of the prior year. Fiscal 1996 second quarter gross profit margin, excluding European operations, was unchanged at 36.4% compared to the same period of the prior year. Fiscal 1996 second quarter gross profit margin for European operations increased to 48.1% as compared to 46.3% in the same quarter of the prior year. This increase was primarily due to improved product forecasting and better sourcing. Fiscal 1996 second quarter consolidated selling, general and administrative expense ("SG&A") increased 14.9% to $13,918,000 as compared to $12,110,000 in the same period of the prior year. Fiscal 1996 second quarter SG&A, excluding European operations, increased 9.7% to $8,557,000 as compared to $7,798,000 in the same period of the prior year. This increase was primarily due to increased sales volume. Fiscal 1996 second quarter SG&A expense for European operations increased 24.3% to $5,361,000 as compared to $4,312,000 in the same period of the prior year. This increase was primarily a result of increased selling expense due to additional trade shows. Fiscal 1996 second quarter consolidated royalty income decreased 24.7% to $186,000 as compared to $247,000 in the same period of the prior year. This decrease was due to decreased sales of internationally licensed products. The Company receives royalty income from its Mexico, wetsuit, watch, sunglass, and outlet store licensees as well as Raisins international licensees. Fiscal 1996 second quarter consolidated royalty expense decreased slightly to $610,000 as compared to $615,000 in the same period of the prior year. The decrease was due to lower international sales. Fiscal 1996 second quarter consolidated interest income increased to $2,000 as compared to $1,000 in the same period of the prior year. Fiscal 1996 second quarter consolidated interest expense decreased 42.2% to $230,000 as compared to $398,000 in the same period of the prior year. This decrease was primarily due to lower borrrowings resulting from profitable operations and proceeds from common stock issued in connection with the exercise of stock options. Fiscal 1996 second quarter consolidated net income increased 22.0% to $4,419,000 or $0.61 per fully diluted common share as compared to $3,623,000 or $0.52 per fully diluted common share in the same period of the prior year. This increase was primarily due to increased sales and gross profit margin, together with lower interest costs, partially offset by increased SG&A and lower royalty income. 7 9 RESULTS OF OPERATIONS - Six Months Ended April 30, 1996 as Compared to Six Months Ended April 30, 1995 Consolidated net sales for the six months increased 17.3% to $94,992,000 as compared to $80,969,000 in the same period of the prior year. Fiscal 1996 six month net sales, excluding European operations, increased 13.8% to $60,814,000 as compared to $53,425,000 in the same period of the prior year. This increase was primarily due to a greater acceptance of the Company's product lines. Fiscal 1996 six month net sales for European operations increased 24.1% to $34,178,000 as compared to $27,544,000 in the same period of the prior year. This increase was a result of a greater acceptance of the Company's product lines in Europe. Consolidated gross profit margin for the six months increased to 39.6% as compared to 39.2% in the same period of the prior year. Fiscal 1996 six month gross profit margin, excluding European operations, increased slightly to 36.1% as compared to 36.0% in the same period of the prior year. Fiscal 1996 six month gross profit margin for European operations increased to 45.7% as compared to 45.3% in the same quarter of the prior year. This increase was primarily due to improved product forecasting and better sourcing. Consolidated SG&A for the six months increased 14.4% to $25,254,000 as compared to $22,075,000 in the same period of the prior year. Fiscal 1996 six month SG&A, excluding European operations, increased 10.0% to $15,533,000 as compared to $14,118,000 in the same period of the prior year. This increase was primarily due to increased sales volume. Fiscal 1996 six month SG&A for European operations increased 22.2% to $9,721,000 as compared to $7,957,000 in the same period of the prior year. This increase was primarily a result of increased sales volume and direct selling and shipping into countries that were previously sold to by distributors. Consolidated royalty income for the six months decreased 14.1% to $391,000 as compared to $455,000 in the same period of the prior year. This decrease was due to decreased sales of internationally licensed products. Consolidated royalty expense for the six months increased 13.3% to $1,175,000 as compared to $1,037,000 in the same period of the prior year. This increase was primarily due to increased sales by Quiksilver Europe. Consolidated interest income for the six months decreased 57.1% to $3,000 as compared to $7,000 in the same period of the prior year. Consolidated interest expense for the six months decreased 29.6% to $400,000 as compared to $568,000 in the same period of the prior year. The changes were primarily due to decreased borowings as a result of profitable operations and proceeds from common stock issued in connection with the exercise of stock options. Consolidated net income for the six months increased 27.0% to $6,544,000 or $0.90 per fully diluted common share as compared to $5,154,000 or $0.74 per fully diluted common share in the same period of the prior year. This increase was primarily due to increased sales and gross profit margin, partially offset by increased SG&A and lower royalty income. 8 10 FINANCIAL POSITION, CAPITAL RESOURCES AND LIQUIDITY The Company finances its capital investments and seasonal working capital requirements from funds generated by its operations and bank revolving lines of credit. Working capital increased 15.9% to $54,367,000 at April 30, 1996 as compared to $46,902,000 at October 31, 1995. The increase is primarily due to increased operating income and exercise of stock options. Consolidated trade accounts receivable as of April 30, 1996 increased 26.5% to $48,449,000 from $38,308,000 at October 31, 1995. Trade accounts receivable, excluding European operations,increased 19.4% to $30,474,000 as compared to $25,519,000 at October 31, 1995. European operations trade accounts receivable increased 40.6% to $17,975,000 as compared to $12,789,000 at October 31, 1995. These changes are in line when compared to the same period last year, the increase in bookings and the 15.2% increase in sales for the quarter over the same period of the prior year. Consolidated inventories as of April 30, 1996 increased 2.7% to $29,128,000 from $28,355,000 at October 31, 1995. Inventories, excluding European operations, increased 4.6% to $23,527,000 as compared to $22,496,000 at October 31, 1995. European operations inventories decreased 4.4% to $5,601,000 from $5,859,000 at October 31, 1995. These changes are primarily due to bookings as well as seasonal factors. As the Company uses independent contractors for cutting, sewing and all other manufacturing of the Company's products, and intends to continue to use independent contractors in the future, the Company has avoided significant capital expenditures. Fiscal 1996 six month capital expenditures were $1,293,000 as compared to $1,566,000 for the same period of the prior year. Goodwill on the Company's balance sheets as of April 30, 1996 and October 31, 1995 consists primarily of the costs in excess over net assets acquired in the Quiksilver Europe and Raisins acquisitions. To finance the Company's seasonal working capital needs, the Company has available a revolving line of credit with a U.S. bank which is unsecured and which provides for a maximum financing of $30,000,000. The line of credit bears interest at 0.5% below the bank's reference rate. The line of credit expires April 30, 1998. Quiksilver Europe also has available lines of credit, both secured and unsecured, with banks which provide for maximum financing of approximately $16,600,000. The lines of credit bear interest at 0.7% to 1.0% above the banks reference rates. The Company believes its current cash balance and current lines of credit are adequate to cover its seasonal working capital requirements for the forseeable future. In recent years, certain customers of the Company have experienced financial difficulties, including the filing of reorganization proceedings under bankruptcy laws. The Company has not incurred significant losses outside the normal course of business as a result of the financial difficulties of these customers. While management believes that allowances for doubtful accounts at April 30, 1996 are adequate, the Company carefully monitors developments regarding its major customers. Additional material financial difficulties encountered by these or other significant customers could have an adverse impact on the Company's financial position or results of operations. However, in management's opinion, there are adequate alternative retail customers such that the loss of any customer known to have financial difficulties will not have a significant long-term negative impact on the Company's future operations. 9 11 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security-Holders The Company's Annual Meeting of Stockholders was held on March 22, 1996. At the Annual Meeting, the following directors were elected to serve on the Company's Board of Directors until the next Annual Meeting and until their respective successors are elected and qualified:
Votes Votes Broker For Against Abstentions No Votes --------- ------- ----------- -------- Robert B. McKnight, Jr. 5,731,341 339,157 0 0 Randall L. Herrel, Sr. 5,731,316 339,182 0 0 William M. Barnum, Jr. 5,862,516 207,982 0 0 Charles E. Crowe 5,731,036 339,462 0 0 Michael H. Gray 5,862,516 207,982 0 0 Robert G. Kirby 5,862,661 207,837 0 0 Tom Roach 5,862,541 207,957 0 0
The Company's Stockholders also approved a proposal for adoption of the 1996 Stock Option Plan which includes an aggregate number of shares of Common Stock available for issuance granted pursuant to the 1996 Plan of 700,000 shares. With respect to this proposal there were 2,929,452 votes cast for the proposal, 2,321,385 votes cast against the proposal, 28,920 abstentions and 29,000 broker no-votes. The Company's Stockholders also approved a proposal for adoption of the 1995 Nonemployee Directors' Stock Option Plan which includes an aggregate number of shares of Common Stock available for issuance granted pursuant to the 1995 Plan of 140,000 shares. With respect to this proposal there were 4,632,318 votes cast for the proposal, 611,294 votes cast against the proposal, 36,145 abstentions and 29,000 broker no-votes. The Company's Stockholders also approved a proposal to amend the Company's Certificate of Incorporation to increase the total authorized shares of Common Stock from 10,000,000 shares to 30,000,000 shares. With respect to this proposal there were 3,944,857 votes cast for the proposal, 2,118,340 votes cast against the proposal, 4,657 abstentions and 736,750 broker no-votes. No other matters were voted on at the Annual Meeting. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Quiksilver, Inc. 1996 Stock Option Plan 10.2 Quiksilver, Inc. 1995 Nonemployee Directors' Stock Option Plan 10.3 Restated Certificate of Incorporation of Quiksilver, Inc. 27.0 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended April 30, 1996 10 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. QUIKSILVER, INC., a Delaware Corporation June 10, 1996 Robert B. McKnight, Jr. ----------------------------- Robert B. McKnight, Jr. Chairman of the Board and Chief Executive Officer June 10, 1996 Randall L. Herrel, Sr. ----------------------------- Randall L. Herrel, Sr. President, Chief Operating Officer and Secretary 11 EX-10.1 2 1996 QUIKSILVER STOCK OPTION PLAN 1 EXHIBIT 10.1 QUIKSILVER, INC. 1996 STOCK OPTION PLAN NONSTATUTORY STOCK OPTION AGREEMENT INCENTIVE STOCK OPTION AGREEMENT NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION 2 QUIKSILVER, INC. 1996 STOCK OPTION PLAN 1. Purpose. The purposes of this Plan are to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to the Employees and Consultants of the Company and to promote the success of the Company's business. Options granted hereunder may be either Incentive Stock Options or Nonstatutory Stock Options, at the discretion of the Board and as reflected in the terms of the written option agreement. 2. Definitions. As used herein, the following definitions shall apply: (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Committee" shall mean the Committee appointed by the Board of Directors in accordance with paragraph (b) of Section 3 of the Plan, if one is appointed. (d) "Common Stock" shall mean the Common Stock of the Company. (e) "Company" shall mean Quiksilver, Inc., a Delaware corporation. (f) "Consultant" shall mean any person who is engaged by the Company or any Parent or Subsidiary to render consulting services and is compensated for such consulting services, including compensation through Options granted under this Plan; provided that the term Consultant shall not include Directors who are not compensated for their services or are paid only a director's fee by the Company. (g) "Continuous Status as an Employee or Consultant" shall mean the absence of any interruption or termination of service as an Employee or Consultant (as the case may be). Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of sick leave, military leave, or any other leave of absence approved by the Board; provided that such leave is for a period of not more than 90 days or reemployment upon the expiration of such leave is guaranteed by contract or statute. (h) "Director" shall mean a member of the Board. (i) "Disability" shall mean a total and permanent disability as that term is defined in Section 22(e)(3) of the Code. 3 (j) "Disinterested Person" shall have the meaning set forth in Rule 16b-3 and shall mean a Director who has not, during the one-year period prior to the date he or she is appointed to the Committee or during the period he or she is on the Committee, received an option grant or stock issuance under this Plan or any other stock plan of the Company or any Parent or Subsidiary of the Company, other than as permitted by Rule 16b-3; provided, however, if Rule 16b-3 is amended after the effective date of this Plan, "Disinterested Person" shall have the meaning set forth in such amended Rule 16b-3. (k) "Employee" shall mean any person, including officers and directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (m) "Fair Market Value" shall mean: (i) if Shares are exchange-traded or traded on the NASDAQ National Market System ("NMS"), the closing sale or last sale price per share of the Shares; (ii) if Shares are regularly traded in any over-the-counter market other than NMS, the average of the bid and asked prices per share of the Shares; and (iii) if Shares are not traded as described in (i) and (ii) of this Section 2(m), the per share fair market value of the Shares as determined in good faith by the Board on such basis as the Board in its sole discretion shall choose. Fair Market Value as of a given date with respect to subparagraphs (i), (ii) and (iii) shall be determined as of the close of business on the day prior to the date of determination, or if no trading in the Shares takes place on such date, on the next preceding trading day on which there has been such trading. (n) "Incentive Stock Option" shall mean an Option intended to qualify as an incentive stock option within the meaning of Section 422(b) of the Code. (o) "Nonstatutory Stock Option" shall mean an Option not intended to qualify as an Incentive Stock Option. (p) "Option" shall mean a stock option granted pursuant to the Plan. (q) "Optionee" shall mean an Employee or Consultant who receives an Option. (r) "Option Termination Date" shall mean the date of expiration of the term of such Option as set forth in the written option agreement. (s) "Parent" shall mean a "parent corporation", whether now or hereafter existing, as defined in Section 424(e) of the Code. (t) "Plan" shall mean this Quiksilver, Inc. 1996 Stock Option Plan. 2 4 (u) "Restricted Stockholder" shall mean an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company. (v) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and Exchange Commission under the Exchange Act, as such rule may be amended from time to time. (w) "Share" shall mean a share of the Common Stock, as adjusted in accordance with Section 10 of the Plan. (x) "Subsidiary" shall mean a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code. (y) "Terminating Transaction" shall mean any of the following events: (a) the dissolution or liquidation of the Company; (b) a reorganization, merger or consolidation of the Company with one or more other corporations (except with respect to a transaction, the purpose of which is to change the domicile or name of the Company), as a result of which the Company goes out of existence or becomes a subsidiary of another corporation (which shall be deemed to have occurred if another corporation shall own, directly or indirectly, fifty percent (50%) or more of the aggregate voting power of all outstanding equity securities of the Company); or (c) a sale of all or substantially all of the Company's assets. 3. Administration. (a) The Plan shall be administered by the Board, which shall have sole authority in its absolute discretion, subject to the terms of Section 3(b) herein, (i) to determine which Employees and Consultants shall receive Options, (ii) subject to the express provisions of the Plan, to determine the time when Options shall be granted, the number of Shares subject to the Options, the exercise prices, and the terms and conditions of Options other than those terms and conditions fixed under the Plan, and (iii) to interpret the provisions of the Plan and any Option granted under the Plan. The Board shall adopt by resolution such rules and regulations as may be required to carry out the purposes of the Plan and shall have authority to do everything necessary or appropriate to administer the Plan. All decisions, determinations and interpretations of the Board shall be final and binding on all Optionees. (b) The Board may delegate administration of the Plan to a Committee of no less than two Directors, each of which shall be Disinterested Persons unless the Board expressly declares that it does not require the Plan to comply with the requirements of Rule 16b-3. The Board may from time to time remove members from, or add members to, the Committee, and vacancies on the Committee shall be filled by the Board. Furthermore, the Board at any time by resolution may abolish the Committee and revest in the Board the administration of the Plan. (For purposes of this Plan document, the term "Board" shall mean the Committee to the extent that the Board's powers have been delegated to the Committee.) 3 5 4. Eligibility. (a) Incentive Stock Options may be granted only to Employees who render services which contribute to the Company. Nonstatutory Stock Options may be granted only to Employees or Consultants who render services which contribute to the Company. Options may not be granted to Directors who are not Employees of the Company. (b) The Plan shall not confer upon any Optionee any right to continue as an Employee or Consultant of the Company, nor shall it interfere in any way with Optionee's right or the Company's right to terminate Optionee's employment or relationship as a Consultant at any time, with or without cause. (c) The determination as to whether an Employee or Consultant is eligible to receive Options hereunder shall be made by the Board in its sole discretion, and the decision of the Board shall be binding and final. 5. Number of Shares. The maximum aggregate number of Shares which may be optioned and sold under this Plan is Seven Hundred Thousand (700,000) Shares of authorized but unissued Common Stock of the Company. No Employee or Consultant shall receive Options for more than 100,000 shares over any one-year period. In the event that Options granted under the Plan shall terminate or expire without being exercised, in whole or in part, the Shares subject to such unexercised Options may again be optioned and sold under this Plan. 6. Term of the Plan. The Plan shall be effective as of March 22, 1996, and shall continue in effect until March 21, 2006, unless terminated earlier. 7. Exercise Price and Consideration. (a) The per Share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board in its sole discretion, but, in the case of Incentive Stock Options only, shall be subject to the following: (i) for an Incentive Stock Option granted to a Restricted Stockholder, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant; and (ii) for an Incentive Stock Option granted to any Employee (other than a Restricted Stockholder), the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (b) The consideration to be paid for the Shares to be issued upon exercise of an Option shall consist of full payment in cash or cash equivalents or, with the consent of the Board, one of the alternative forms specified below: 4 6 (i) full payment in shares of Common Stock (duly endorsed for transfer to the Company) held by the Optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the date of delivery; or (ii) full payment through a combination of cash or cash equivalents and shares of Common Stock (duly endorsed for transfer to the Company) held by the Optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the date of delivery; or (iii) full payment effected through a broker-dealer sale and remittance procedure pursuant to which the Optionee (A) shall provide irrevocable written instructions to a designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price payable for the purchased Shares plus all applicable Federal and State income and employment taxes required to be withheld by the Company by reason of such purchase and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or (iv) any other legal consideration that may be acceptable to the Board. 8. Exercise of Options. (a) Vesting of Options. Any Option granted hereunder shall be exercisable at such times and under such conditions as determined by the Board, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan. (b) Procedure for Exercise. An Option may be exercised at any time as to all or any portions of the Shares as to which it is then exercisable, except that an Option may not be exercised for a fraction of a Share and shall be subject to any provision in the written option agreement governing the minimum number of Shares as to which the Option may be exercised. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and full payment for the Shares with respect to which the Option is exercised has been received by the Company. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 7(b) of the Plan. (c) Termination of Options. All installments of an Option shall expire and terminate on such date(s) as the Board shall determine, but in no event later than ten (10) years from the date such Option was granted (except that an Incentive Stock Option granted to a Restricted Stockholder shall by its terms not be exercisable after the expiration of five (5) years from the date such Option was granted). 5 7 (d) Death or Termination of Service of Optionee. The following provisions shall govern the exercise period applicable to any Options held by an Optionee at the time of his or her death or termination of service with the Company or any Parent or Subsidiary of the Company: (i) Termination of Continuous Status as an Employee or Consultant. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant (as the case may be) for any reason other than Optionee's death or Disability, such Optionee may only exercise the Option within three (3) months (or such shorter period as specified in the written option agreement) after the date of such termination. (ii) Disability of Optionee. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of the Optionee's Disability, the Optionee may only exercise the Option within twelve (12) months (or such shorter period as is specified in the written option agreement) from the date of such termination. (iii) Death of Optionee. In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of the Optionee's death, the Option may only be exercised any time within twelve (12) months (or such shorter period as is specified in the written option agreement) following the date of death by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance. (iv) Limitations. Each Option shall, during the limited exercise period under this Section 8(d), be exercisable only as to the Shares for which the Option is exercisable on the date of the Optionee's death or termination of service with the Company. Under no circumstances shall any Option become exercisable under this Section 8(d) after the Option Termination Date. Upon the earlier of the expiration of such limited exercise period or the Option Termination Date, the Option shall terminate and cease to be exercisable. (v) Immediate Termination. Should (A) the Optionee's Continuous Status as an Employee or Consultant be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement) or (B) the Optionee make any unauthorized use or disclosure of confidential information or trade secrets of the Company or any Parent or Subsidiary, then in any such event all outstanding Options granted to the Optionee under this Plan shall terminate immediately and cease to be exercisable. (vi) Board Discretion to Accelerate. The Board shall have complete discretion, exercisable either at the time the Option is granted or at any time the Option remains outstanding, to permit one or more Options granted under this Plan to be exercised during the limited exercise period applicable under this Section 8(d), not only for the number of Shares for which each such Option is exercisable at the time of the 6 8 Optionee's death or termination of service but also for one or more subsequent installments of Shares for which the Option would otherwise have become exercisable had such death or termination of service not occurred. (e) Extensions. Notwithstanding the provisions covering the exercisability of Options following death or termination of service, as described in Section 8(d), the Board may, in its sole discretion, with the consent of the Optionee or the Optionee's estate (in the case of the death of Optionee), extend the period of time during which the Option shall remain exercisable, provided that in no event shall such extension go beyond the Option Termination Date. In the case of Incentive Stock Options, extensions under this Section 8(e) may result in loss of the favorable treatment accorded to incentive stock options under the Code. 9. Restrictions on Grants of Options and Issuance of Shares. (a) Regulatory Approvals. No Shares shall be issued or delivered upon exercise of an Option unless and until there shall have been compliance with all applicable requirements of the Securities Act of 1933, as amended, (the "1933 Act"), and any other requirement of law or of any regulatory body having jurisdiction over such issuance and delivery. The inability of the Company to obtain any required permits, authorizations or approvals necessary for the lawful issuance and sale of any Shares hereunder on terms deemed reasonable by the Board shall relieve the Company, the Board, and any Committee of any liability in respect of the non-issuance or sale of such Shares as to which such requisite permits, authorizations, or approvals shall not have been obtained. (b) Representations and Warranties. As a condition to the granting or exercise of any Option, the Board may require the person receiving or exercising such Option to make any representation and/or warranty to the Company as may be required (or deemed appropriate by the Board, in its discretion) under any applicable law or regulation, including but not limited to a representation that the Option and/or Shares are being acquired only for investment and without any present intention to sell or distribute such Option and/or Shares, if such a representation is required under the 1933 Act or any other applicable law, rule, or regulation. (c) Stockholder Approval. The exercise of Options under the Plan also is conditioned on approval of the Plan by the Company's Stockholders, and no Option shall be exercisable hereunder unless and until the Plan has been so approved. 10. Option Adjustments. (a) Change in Capitalization. If the outstanding shares of Common Stock of the Company are increased, decreased, changed into or exchanged for a different number or kind of shares of the Company through reorganization, recapitalization, reclassification, stock dividend, stock split or reverse stock split, upon authorization by the Board an appropriate and proportionate adjustment shall be made in the number or kind of shares, and the per-share option price thereof, which may be issued in the aggregate and to any individual Optionees under the Plan upon exercise of Options granted under the Plan; provided, however, that no such 7 9 adjustment need be made if, upon the advice of counsel, the Board determines that such adjustment may result in the receipt of federal taxable income to holders of Options granted under the Plan or the holders of Common Stock or other classes of the Company's securities. (b) Corporate Reorganizations. Upon the occurrence of a Terminating Transaction, as of the effective date of such Terminating Transaction, the Plan and any then outstanding Options (whether or not vested) shall terminate unless (i) provision is made in writing in connection with such transaction for the continuance of the Plan and for the assumption of such Options, or for the substitution for such Options of new options covering the securities of a successor corporation or an affiliate thereof, with appropriate adjustments as to the number and kind of securities and exercise prices, in which event the Plan and such outstanding Options shall continue or be replaced, as the case may be, in the manner and under the terms so provided; or (ii) the Board otherwise shall provide in writing for such adjustments as it deems appropriate in the terms and conditions of the then-outstanding Options (whether or not vested), including without limitation (A) accelerating the vesting of outstanding Options, and/or (B) providing for the cancellation of Options and their automatic conversion into the right to receive the securities or other properties which a holder of the Shares underlying such Options would have been entitled to receive upon such Terminating Transaction had such Shares been issued and outstanding (net of the appropriate option exercise prices). If, pursuant to the foregoing provisions of this paragraph (b), the Plan and the Options shall terminate by reason of the occurrence of a Terminating Transaction without provision for any of the action(s) described in clause (i) or (ii) hereof, then any Optionee holding outstanding Options shall have the right, at such time immediately prior to the consummation of the Terminating Transaction as the Board shall designate, to exercise his or her Options to the full extent not theretofore exercised, including any portion which has not yet become exercisable. 11. Option Agreement. The terms and conditions of Options granted under the Plan shall be evidenced by a written option agreement executed by the Company and the person to whom the Option is granted. Each option agreement shall incorporate the Plan by reference and shall include such provisions as are determined to be necessary or appropriate by the Board. 12. Limitations on Incentive Stock Options. In the event that the aggregate Fair Market Value of Shares (determined as of the date of grant of the Option covering such Shares) with respect to which Incentive Stock Options are exercisable for the first time by an Employee during any calendar year under this Plan and any other plan of the Company exceeds $100,000, Options with respect to and to the extent of such excess shall be treated as Nonstatutory Stock Options. This Section 12 shall be applied by taking Options which are intended to be Incentive Stock Options into account in the order in which they were granted. 13. Amendment or Termination of the Plans. (a) Board Authority. The Board may amend, suspend, alter, or terminate the Plan at any time. To the extent necessary or desirable to comply with Rule 16b-3 of the Exchange Act, the Code or any other applicable law or regulation, the Company may obtain 8 10 stockholder approval of any amendment to the Plan only in such a manner and to such a degree as required under applicable law. (b) Limitation on Board Authority. Furthermore, the Plan may not, without the approval of the stockholders, be amended in any manner that would cause Incentive Stock Options issued hereunder to fail to qualify as Incentive Stock Options as defined in Section 422(b) of the Code. Notwithstanding the foregoing, no amendment, suspension or termination of the Plan shall adversely affect Options granted on or prior to the date thereof, as evidenced by the execution of an option agreement by both the Company and the Optionee, without the consent of such Optionee. (c) Contingent Grants Based on Amendments. Options may be granted in reliance on and consistent with any amendment adopted by the Board and which is necessary to enable such Options to be granted under the Plan, even though such amendment requires future stockholder approval; provided, however, that any such contingent Option by its terms may not be exercised prior to stockholder approval of such amendment, and provided further, that in the event stockholder approval is not obtained within twelve months of the date of grant of such contingent Option, then such contingent Option shall be deemed cancelled and no longer outstanding. 14. Options Not Transferable. Options granted under this Plan may not be sold, pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred or alienated in any manner, either voluntarily or involuntarily by operation of law, other than by will or the laws of descent or distribution, and may be exercised during the lifetime of an Optionee only by such Optionee. 15. No Rights in Shares Before Issuance and Delivery. Neither the Optionee, his or her estate nor his or her transferees by will or the laws of descent and distribution shall be, or have any rights or privileges of, a stockholder of the Company with respect to any Shares issuable upon exercise of the Option unless and until certificates representing such Shares shall have been issued and delivered notwithstanding exercise of the Option. No adjustment will be made for a dividend or other rights where the record date is prior to the date such stock certificates are issued, except as provided in Section 10. 16. Taxes. The Board shall make such provisions and take such steps as it deems necessary or appropriate for the withholding of any federal, state, local and other tax required by law to be withheld with respect to the grant or exercise of an Option under the Plan, including, without limitation, the deduction of the amount of any such withholding tax from any compensation or other amounts payable to an Optionee by the Company, or requiring an Optionee (or the Optionee's beneficiary or legal representative) as a condition of granting or exercising an Option to pay to the Company any amount required to be withheld, or to execute such other documents as the Board deems necessary or desirable in connection with the satisfaction of any applicable withholding obligation. In the discretion of the Board, upon exercise of a Nonstatutory Stock Option, the Optionee may request the Company to withhold from the Shares to be issued upon such exercise that number of Shares (based on the Fair 9 11 Market Value of the Shares as of the day notice of exercise is received by the Company) that would satisfy any tax withholding requirement. 17. Legends on Options and Stock Certificates. Each option agreement and each certificate representing Shares acquired upon exercise of an Option shall be endorsed with all legends, if any, required by applicable federal and state securities laws to be placed on the option agreement and/or the certificate. The determination of which legends, if any, shall be placed upon option agreements and/or the certificates representing Shares shall be made by the Board in its sole discretion and such decision shall be final and binding. 18. Availability of Plan. A copy of this Plan shall be delivered to the Secretary of the Company and shall be shown by the Secretary to any eligible person making reasonable inquiry concerning the Plan. 19. Applicable Law. This Plan shall be governed by and construed in accordance with the laws of the State of California. Date Plan approved by Board: January 26, 1996 Date Plan approved by Shareholders: March 22, 1996 10 12 NONSTATUTORY STOCK OPTION AGREEMENT On this ___ day of __________, ____, ("Grant Date"), QUIKSILVER, INC., a Delaware corporation (the "Company"), hereby grants to ____________________ (the "Optionee") an Option to purchase a total of __________ shares of Common Stock (the "Shares"), on the terms and conditions set forth below, and in all respects subject to the terms, definitions and provisions of the Quiksilver, Inc. 1996 Stock Option Plan (the "Plan") adopted by the Company, which is incorporated herein by reference. Unless otherwise defined in this Option, the terms defined in the Plan shall have the same defined meanings in this Option. In the event of any conflict between the provisions of this Option and those of the Plan, the Plan shall control. 1. NATURE OF THE OPTION. This Option is intended to qualify as a Nonstatutory Stock Option. 2. EXERCISE PRICE. The exercise price is $____ for each share of Common Stock. 3. VESTING AND EXERCISE OF OPTION. This Option shall be exercisable during its term in accordance with the provisions of Section 8 of the Plan as follows: (a) VESTING. Subject to the limitations contained in this Option and the Plan, this Option shall become exercisable in installments as follows: Number of Shares Date of Earliest Exercise (Installment) (Vesting) The installments provided for in this Section 3(a) are cumulative. Each such installment which becomes exercisable pursuant to this Section shall remain exercisable until expiration or earlier termination of this Option. (b) METHOD OF EXERCISE. This Option shall be exercisable by written notice (in a form designated by the Company) which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and warranties of Optionee as may be required by the Company pursuant to Section 9(b) of the Plan. Such written notice shall be signed by Optionee and shall be delivered in person or by certified mail to the President, Secretary or Chief Financial Officer of the Company. The written notice shall be accompanied by payment of the exercise price. 13 No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. (c) MINIMUM EXERCISE. The minimum number of Shares with respect to which this Option may be exercised at any one time is One Hundred (100) Shares, and this Option shall be exercised for whole Shares only. 4. CERTAIN REPRESENTATIONS AND WARRANTIES. (a) Optionee represents to the Company the following: (i) that Optionee has read and understands the terms and provisions of the Plan, and hereby accepts this Agreement subject to all the terms and provisions of the Plan; (ii) that Optionee shall accept as binding and final all decisions or interpretations of the Board or of the Committee upon any questions arising under the Plan; and (iii) Optionee understands that, unless at the time of exercise of this Option a registration statement under the Securities Act of 1933, as amended, is in effect covering the Shares, as a condition to the exercise of the Option the Company may require Optionee to represent that Optionee is acquiring the Shares for Optionee's own account only and not with a view to, or for sale in connection with, any distribution of the Shares. 5. METHOD OF PAYMENT. (a) The consideration to be paid for the Shares to be issued upon exercise of the Option shall consist of full payment in cash or cash equivalents or, with the consent of the Board or the Committee, one of the alternative forms specified below: (i) full payment in shares of Common Stock (duly endorsed for transfer to the Company) held by the Optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the date of delivery; or (ii) full payment through a combination of cash or cash equivalents and shares of Common Stock (duly endorsed for transfer to the Company) held by the Optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the date of delivery; or 2 14 (iii) full payment effected through a broker-dealer sale and remittance procedure pursuant to which the Optionee (A) shall provide irrevocable written instructions to a designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price payable for the purchased Shares plus all applicable Federal and State income and employment taxes required to be withheld by the Company by reason of such purchase and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or (iv) any other legal consideration that may be acceptable to the Board or the Committee. 6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities or other law or regulation. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 7. TERMINATION OF STATUS AS AN EMPLOYEE OR CONSULTANT. In the event of termination of Optionee's Continuous Status as an Employee or Consultant, Optionee may, but only within three (3) months after the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise this Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise this Option at the date of such termination, or if Optionee does not exercise this Option within the time specified herein, this Option shall terminate. 8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7 above, in the event of termination of Optionee's Continuous Status as an Employee or Consultant as a result of Optionee's permanent and total disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of termination of employment or relationship as director or consultant (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise this Option to the extent Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise this Option at the date of termination, or if Optionee does not exercise such Option (which Optionee was entitled to exercise) within the time specified herein, this Option shall terminate. 9. DEATH OF OPTIONEE. In the event of the death of Optionee during the term of this Option while an Employee or Consultant of the Company and having been in Continuous Status as an Employee or Consultant since the date of grant of this Option, this Option may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), by 3 15 Optionee's estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent Optionee was entitled to exercise this Option on the date of death. 10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee. 11. TERM OF OPTION. In no event may this Option be exercised after __________, 200_ (which date shall be no more than ten (10) years from the date this Option was granted). 12. NO EMPLOYMENT RIGHTS. Optionee acknowledges and agrees that the vesting of Shares pursuant to Section 3 hereof is earned only through Optionee's Continuous Status as an Employee or Consultant (not through the act of being hired or engaged, being granted this Option or acquiring Shares hereunder). Optionee further acknowledges and agrees that this Option, the Company's Plan which is incorporated herein by reference, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an Employee or Consultant for the vesting period, for any period, or at all, and shall not interfere with Optionee's right or the Company's right to terminate Optionee's employment or consulting relationship at any time, with or without cause. 13. WITHHOLDING OF TAXES. Optionee authorizes the Company to withhold, in accordance with any applicable law, from any compensation payable to him any taxes required to be withheld by federal, state, or foreign law as a result of the grant of the Option or the issuance of stock pursuant to the exercise of the Option. 14. NOTICES. Any notice to be given to the Company shall be addressed to the Company in care of its Secretary at its principal office, and any notice to be given to Optionee shall be addressed to Optionee at the address given below or at such other address as the Optionee may hereafter designate in writing to the Company. Any such notice shall be deemed duly given upon personal delivery or three business days after deposit in the United States mail, registered or certified, postage prepaid. 4 16 15. GOVERNING LAW. This Option shall be governed by and construed in accordance with the internal laws of the State of California. QUIKSILVER, INC. By:___________________________________ Title:________________________________ ______________________________________ _________________, Optionee Address:______________________________ ______________________________________ 5 17 INCENTIVE STOCK OPTION AGREEMENT On this ___ day of __________, ____, ("Grant Date"), QUIKSILVER, INC., a Delaware corporation (the "Company"), hereby grants to ____________________ (the "Optionee") an Option to purchase a total of __________ shares of Common Stock (the "Shares"), on the terms and conditions set forth below, and in all respects subject to the terms, definitions and provisions of the Quiksilver, Inc. 1996 Stock Option Plan (the "Plan") adopted by the Company, which is incorporated herein by reference. Unless otherwise defined in this Option, the terms defined in the Plan shall have the same defined meanings in this Option. In the event of any conflict between the provisions of this Option and those of the Plan, the Plan shall control. 1. NATURE OF THE OPTION. This Option is intended to qualify as an Incentive Stock Option. 2. EXERCISE PRICE. The exercise price is $___ for each share of Common Stock, which price is not less than the fair market value per share of Common Stock on the date of grant, as determined by the Board or the Committee. 3. VESTING AND EXERCISE OF OPTION. This Option shall be exercisable during its term in accordance with the provisions of Section 8 of the Plan as follows: (a) VESTING. Subject to the limitations contained in this Option and the Plan, this Option shall become exercisable in installments as follows: Number of Shares Date of Earliest Exercise (Installment) (Vesting) The installments provided for in this Section 3(a) are cumulative. Each such installment which becomes exercisable pursuant to this Section shall remain exercisable until expiration or earlier termination of this Option. (b) METHOD OF EXERCISE. This Option shall be exercisable by written notice (in a form designated by the Company) which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and warranties of Optionee as may be required by the Company pursuant to Section 9(b) of the Plan. Such written notice shall be signed by Optionee and shall be delivered in person or by certified mail to the President, Secretary or Chief Financial Officer of the Company. The written notice shall be accompanied by payment of the exercise price. 18 No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. (c) MINIMUM EXERCISE. The minimum number of Shares with respect to which this Option may be exercised at any one time is One Hundred (100) Shares, and this Option shall be exercised for whole Shares only. 4. CERTAIN REPRESENTATIONS AND WARRANTIES. (a) Optionee represents to the Company the following: (i) that Optionee has read and understands the terms and provisions of the Plan, and hereby accepts this Agreement subject to all the terms and provisions of the Plan; (ii) that Optionee shall accept as binding and final all decisions or interpretations of the Board or of the Committee upon any questions arising under the Plan; (iii) Optionee understands that the existence of the Plan and the execution of this Option are not sufficient by themselves to cause any exercise of any Incentive Stock Options granted under the Plan and this Option to qualify for favorable tax treatment through the application of Section 422(a) of the Code; and that Optionee must, in order to so qualify, individually meet by Optionee's own action all applicable requirements of Section 422, including without limitation, the requirement that no disposition of Shares may be made by Optionee within two (2) years from the date of the granting of the Option nor within one (1) year after the transfer of such Shares to Optionee; and (iv) Optionee understands that, unless at the time of exercise of this Option a registration statement under the Securities Act of 1933, as amended, is in effect covering the Shares, as a condition to the exercise of the Option the Company may require Optionee to represent that Optionee is acquiring the Shares for Optionee's own account only and not with a view to, or for sale in connection with, any distribution of the Shares. 5. METHOD OF PAYMENT. (a) The consideration to be paid for the Shares to be issued upon exercise of the Option shall consist of full payment in cash or cash equivalents or, with the consent of the Board or the Committee, one of the alternative forms specified below: 2 19 (i) full payment in shares of Common Stock (duly endorsed for transfer to the Company) held by the Optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the date of delivery; or (ii) full payment through a combination of cash or cash equivalents and shares of Common Stock (duly endorsed for transfer to the Company) held by the Optionee for the requisite period necessary to avoid a charge to the Company's earnings for financial reporting purposes and valued at Fair Market Value on the date of delivery; or (iii) full payment effected through a broker-dealer sale and remittance procedure pursuant to which the Optionee (A) shall provide irrevocable written instructions to a designated brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate option price payable for the purchased Shares plus all applicable Federal and State income and employment taxes required to be withheld by the Company by reason of such purchase and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction; or (iv) any other legal consideration that may be acceptable to the Board or the Committee. 6. RESTRICTIONS ON EXERCISE. This Option may not be exercised if the issuance of such Shares upon such exercise or the method of payment of consideration for such Shares would constitute a violation of any applicable federal or state securities or other law or regulation. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 7. TERMINATION OF STATUS AS AN EMPLOYEE. In the event of termination of Optionee's Continuous Status as an Employee, Optionee may, but only within three (3) months after the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise this Option to the extent that Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise this Option at the date of such termination, or if Optionee does not exercise this Option within the time specified herein, this Option shall terminate. 8. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 7 above, in the event of termination of Optionee's Continuous Status as an Employee, as a result of Optionee's permanent and total disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of termination of employment (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), exercise this Option to the extent Optionee was entitled to exercise it at the date of such 3 20 termination. To the extent that Optionee was not entitled to exercise this Option at the date of termination, or if Optionee does not exercise such Option (which Optionee was entitled to exercise) within the time specified herein, this Option shall terminate. 9. DEATH OF OPTIONEE. In the event of the death of Optionee during the term of this Option while an Employee of the Company and having been in Continuous Status as an Employee since the date of grant of this Option, this Option may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 11 below), by Optionee's estate or by a person who acquired the right to exercise this Option by bequest or inheritance, but only to the extent Optionee was entitled to exercise this Option on the date of death. 10. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by Optionee. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of Optionee. 11. TERM OF OPTION. In no event may this Option be exercised after _______, ____ (which date shall be no more than ten (10) years from the date this Option was granted). 12. NO EMPLOYMENT RIGHTS. Optionee acknowledges and agrees that the vesting of Shares pursuant to Section 3 hereof is earned only by continuing service as an employee at the will of the Company (not through the act of being hired, being granted this Option or acquiring Shares hereunder). Optionee further acknowledges and agrees that this Option, the Company's Plan which is incorporated herein by reference, the transactions contemplated hereunder and the vesting schedule set forth herein do not constitute an express or implied promise of continued engagement as an employee for the vesting period, for any period, or at all, and shall not interfere with Optionee's right or the Company's right to terminate Optionee's employment relationship at any time, with or without cause. 13. WITHHOLDING OF TAXES. Optionee authorizes the Company to withhold, in accordance with any applicable law, from any compensation payable to him any taxes required to be withheld by federal, state, or foreign law as a result of the grant of the Option or the issuance of stock pursuant to the exercise of the Option. 14. NOTICES. Any notice to be given to the Company shall be addressed to the Company in care of its Secretary at its principal office, and any notice to be given to Optionee shall be addressed to Optionee at the address given below or at such other address as the Optionee may hereafter designate in writing to the Company. Any such notice shall be deemed duly given upon personal delivery or three business days after deposit in the United States mail, registered or certified, postage prepaid. 4 21 15. GOVERNING LAW. This Option shall be governed by and construed in accordance with the internal laws of the State of California. QUIKSILVER, INC. By:___________________________________ Title:________________________________ ______________________________________ _________________, Optionee Address:______________________________ ______________________________________ 5 22 NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION Quiksilver, Inc. 1740 Monrovia Avenue Costa Mesa, CA 92627 Gentlemen: In accordance with the terms of the Quiksilver, Inc. 1996 Stock Option Plan (the "Plan"), and the related Incentive Stock Option Agreement dated as of ________________, 199_ between me and Quiksilver, Inc. (the "Company"), I hereby give notice of exercise of my option (the "Option") as to ___________ shares of Company Common Stock (the "Shares") at a purchase price of $______________ per share, or $__________________ in the aggregate. By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Plan, and (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of the Option. Unless a registration statement covering the Shares is currently in effect under the Securities Act of 1933, as amended (the "Act"), I hereby make the following certifications and representations with respect to the Shares: (1) I acknowledge that the Shares have not been registered under the Act and are deemed to constitute "restricted securities" under Rule 144 promulgated under the Act. I represent and warrant to the Company that I am acquiring the Shares for my own account and for investment purposes only and I have no present intention of distributing or selling the Shares, except as permitted under the Act and any applicable state securities laws; and (2) I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to applicable securities laws. 23 There accompanies this Notice payment in full for the aggregate purchase price for the Shares as follows (check applicable method of payment): / / Check in the amount of $___________________ / / If authorized by the Plan and the Board, shares of the Company's Stock currently owned by me as follows: Certificate Number(s) Number of Shares --------------------- ---------------- __________ __________ __________ __________ Please mail the certificate representing the Shares to the following address: __________________________ __________________________ __________________________ Dated: ________________, 199_ ____________________________________ Signature ____________________________________ Type or Print Name 2 24 NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION Quiksilver, Inc. 1740 Monrovia Avenue Costa Mesa, CA 92627 Gentlemen: In accordance with the terms of the Quiksilver, Inc. 1996 Stock Option Plan (the "Plan"), and the related Incentive Stock Option Agreement dated as of ________________, 199_ between me and Quiksilver, Inc. (the "Company"), I hereby give notice of exercise of my option (the "Option") as to ___________ shares of Company Common Stock (the "Shares") at a purchase price of $______________ per share, or $__________________ in the aggregate. By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Plan, and (ii) to notify you in writing within fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of the Option that occurs within two (2) years after the date of grant of the Option or within one (1) year after such shares of Common Stock are issued upon exercise of the Option. Unless a registration statement covering the Shares is currently in effect under the Securities Act of 1933, as amended (the "Act"), I hereby make the following certifications and representations with respect to the Shares: (3) I acknowledge that the Shares have not been registered under the Act and are deemed to constitute "restricted securities" under Rule 144 promulgated under the Act. I represent and warrant to the Company that I am acquiring the Shares for my own account and for investment purposes only and I have no present intention of distributing or selling the Shares, except as permitted under the Act and any applicable state securities laws; and (4) I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to applicable securities laws. 25 There accompanies this Notice payment in full for the aggregate purchase price for the Shares as follows (check applicable method of payment): / / Check in the amount of $___________________ / / If authorized by the Plan and the Board, shares of the Company's Stock currently owned by me as follows: Certificate Number(s) Number of Shares --------------------- ---------------- __________ __________ __________ __________ Please mail the certificate representing the Shares to the following address: __________________________ __________________________ __________________________ Dated: ________________, 199_ ____________________________________ Signature ____________________________________ Type or Print Name 2 EX-10.2 3 1995 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN 1 EXHIBIT 10.2 QUIKSILVER, INC. 1995 NONEMPLOYEE DIRECTORS' STOCK OPTION PLAN Quiksilver, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), hereby adopts this Quiksilver, Inc. 1995 Nonemployee Directors' Stock Option Plan (the "Plan"). The purpose of this Plan is to advance the interests of the Company by enhancing its ability to attract and retain qualified persons who are neither employees nor officers of the Company to serve as members of the Company's Board of Directors. This Plan provides such persons with the opportunity to become owners of capital stock of the Company by the grant of Options to purchase Shares. Options granted hereunder shall be "nonstatutory options," and shall not include "incentive stock options" intended to qualify for treatment under Sections 421 and 422A of the Internal Revenue Code of 1986, as amended. Section 1. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" shall mean the entity, whether the Board or the Committee, responsible for administering this Plan, as provided in Section 2. (b) "Board" shall mean the Board of Directors of the Company. (c) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" shall mean the committee, if any, appointed by the Board in accordance with Section 3(c) to administer this Plan. (e) "Company" shall mean Quiksilver, Inc., a Delaware corporation. (f) "Common Stock" shall mean the Company's $.01 par value Common Stock. (g) "Expiration Date" shall mean the last day of the term of an Option established under Section 5(b). (h) "Fair Market Value" shall mean, as of the date in question: (i) the closing price of a Share on the principal exchange on which Shares of the Company's stock are then trading, if any, on the day previous to such date, or, if shares were not traded on the day previous to such date, then on the next preceding trading day during which a sale occurred; or (ii) if such stock is not traded on an exchange but is quoted on NASDAQ or a successor quotation system, (1) the last sales price (if the stock is then listed as a National Market Issue under the NASD National Market System) or (2) the mean between the closing representative 2 bid and asked prices (in all other cases) for the stock on the day previous to such date as reported by NASDAQ or such successor quotation system; or (iii) if such stock is not publicly traded on an exchange and not quoted on NASDAQ or a successor quotation system, the mean between the closing bid and asked prices for the stock, on the day previous to such date, as determined in good faith by the Committee; or (iv) if the Company's stock is not publicly traded, the fair market value established by the Committee acting in good faith. Such determination shall be conclusive and binding on all persons. (i) "Nonemployee Director" shall mean any person who is a member of the Board but is not an employee or officer of the Company or any Parent or Subsidiary of the Company and, if such person has been an employee or officer of the Company or any Parent or Subsidiary of the Company during the preceding twelve months, such person has not been granted or awarded any equity securities of the Company pursuant to any other plan of the Company or any Parent or Subsidiary during such twelve month period. Service as a director does not in itself constitute employment for purposes of this definition. (j) "Option" shall mean a stock option granted pursuant to this Plan. Each Option shall be a nonstatutory option not intended to qualify as an incentive stock option within the meaning of Section 422A of the Code. (k) "Option Agreement" shall mean the written agreement described in Section 5 evidencing the grant of an Option to a Nonemployee Director and containing the terms, conditions and restrictions pertaining to such Option. (l) "Option Shares" shall mean the Shares subject to an Option granted under this Plan. (m) "Optionee" shall mean a Nonemployee Director who holds an Option. (n) "Plan" shall mean this Quiksilver, Inc. 1995 Nonemployee Directors' Stock Option Plan, as it may be amended from time to time. (o) "Section," unless the context clearly indicates otherwise, shall refer to a Section of this Plan. (p) "Share" shall mean a share of Common Stock, as adjusted in accordance with Section 7. (q) "Subsidiary" shall mean a "subsidiary corporation" of the Company, whether now or hereafter existing, within the meaning of Section 425(f) of the Code, but only for so long as it is a "subsidiary corporation." 2 3 Section 2. Administration. (a) The Board shall administer this Plan, including implementing and overseeing (i) all necessary actions in connection with the delivery of Option Agreements evidencing Option grants under this Plan, (ii) the exercise or termination of Options pursuant to the terms of this Plan, and (iii) the interpretation of the provisions of this Plan and any Option granted under this Plan. The Board shall adopt by resolution such rules and regulations as may be required to carry out the purposes of this Plan and shall have authority to do everything necessary or appropriate to administer this Plan. All decisions, determinations and interpretations of the Board shall be final and binding on all Optionees. (b) The Board may delegate administration of the Plan to a Committee of no less than two directors appointed by the Board. The Board may from time to time remove members from, or add members to, the Committee, and vacancies on the Committee shall be filled by the Board. Furthermore, the Board at any time by resolution may abolish the Committee and revest in the Board the administration of this Plan. (For purposes of this Plan document, the term "Administrator" shall mean the Board or, to the extent that the Board's powers have been delegated to the Committee, the Committee.) (c) All decisions, interpretations and other actions of the Administrator shall be final and binding on all persons. No member of the Committee or Board shall be liable for any action that he or she has taken or failed to take in good faith with respect to this Plan or any Option. Section 3. Eligibility and Consideration. Only Nonemployee Directors may receive Options under this Plan. In consideration of the granting of the Option, the Optionee shall agree in the written Option Agreement to remain as a director of the Company for a period of at least one year after the Option is granted, unless the stockholders of the Company fail to reelect the director upon expiration of the director's term of office prior to the expiration of the one year period. Section 4. Shares Subject to Plan. (a) Aggregate Number. Subject to Section 7 (relating to adjustments upon changes in Shares), the Shares which may be issued upon exercise of Options shall not exceed in the aggregate 140,000 Shares. Shares issued under this Plan may be unissued Shares or reacquired Shares. The number of Shares that are subject to Options at any time under the Plan shall not exceed the number of Shares that then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. If any Option shall for any reason terminate or expire without having been exercised in full, the Shares allocable to the unexercised portion of such option shall be available again for the purpose of this Plan. (b) No Rights as a Stockholder. An Optionee shall have no rights as a stockholder with respect to any Shares covered by his or her Option until the issuance (as 3 4 evidenced by the appropriate entry on the books of the Company or its duly authorized transfer agent) of a stock certificate evidencing such Shares. Subject to Section 7, no adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions, or other rights for which the record date is prior to the date the certificate is issued. Section 5. Grant of Options. (a) Option Grants Upon Election to the Board. Each Nonemployee Director on the date the Plan is approved by the Board of Directors and each Nonemployee Director who is first elected to the Board of Directors thereafter shall be automatically granted on such date, an Option to purchase 20,000 shares at an exercise price per share equal to the Fair Market Value of the Shares as of such date of approval or election, as applicable; provided, however, that all such grants made prior to approval of the Plan by the stockholders of the Company shall be subject to and conditioned upon obtaining such stockholder approval. (b) Terms; Vesting. Subject to the other provisions of this Plan, each Option granted pursuant to this Plan shall be for a term of ten years. Each Option granted under this Section 5 shall become exercisable with respect to one-fourth of the number of Shares covered by such Option on the first, second, third and fourth anniversary of the date such Option was granted, so that such Option shall be fully exercisable beginning on such fourth anniversary of the date the Option was granted. (c) Limitation on Other Grants. The Administrator shall have no discretion to grant Options under this Plan other than as set forth in Section 5(a). (d) Option Agreement. As soon as practicable after the grant of an Option, the Optionee and the Company shall enter into a written Option Agreement which specifies the date of grant, the number of Option Shares, the option price, and the other terms and conditions applicable to the Option. (e) Transferability. No Option shall be transferable otherwise than by will or the laws of descent and distribution, and an Option shall be exercisable during the Optionee's lifetime only by the Optionee. (f) Limits on Exercise. Subject to the other provisions of this Plan, an Option shall be exercisable in such amounts as are specified in the Option Agreement. (g) Exercise Procedures. To the extent the right to purchase Shares has accrued, Options may be exercised, in whole or in part, from time to time, by written notice from the Optionee to the Company stating the number of Shares being purchased, accompanied by payment of the exercise price for the Shares, and other applicable amounts, as provided in Section 6. 4 5 (h) Expiration of Options. No Option may be exercised to any extent by anyone after the first to occur of the following events: (i) The expiration of ten years from the date the Option was granted; or (ii) Except in the case of any Optionee who is disabled (within the meaning of Section 22(e)(3) of the Code), the expiration of three months from the date of the termination of service by Optionee as a director of the Company for any reason other than such Optionee's death unless the Optionee dies within said three-month period; or (iii) In the case of an Optionee who is disabled (within the meaning of Section 22(e)(3) of the Code), the expiration of one year from the date of the termination of service by Optionee as a director of the Company for any reason other than such Optionee's death unless the Optionee dies within said one-year period; or (iv) The expiration of one year from the date of Optionee's death. Section 6. Payment upon Exercise of Options. (a) Purchase Price. The purchase price of Shares issued under this Plan shall be paid in full at the time an Option is exercised. (b) Form of Consideration. Optionees may make all or any portion of any payment due to the Company upon exercise of an Option by delivery of cash or any Shares or other securities of the Company, so long as such Shares or other securities constitute valid consideration for the stock under applicable law and are surrendered in good form for transfer; provided, however, that Options may not be exercised by the delivery of Shares or other securities of the Company more frequently than at six-month intervals. Shares or other securities delivered upon exercise shall be valued at their Fair Market Value on the delivery date. (c) Taxes. Irrespective of the form of payment made for exercise of an Option, exercise shall be conditioned upon payment in cash to the Company by the Optionee of all local, state and federal withholding taxes applicable, in the Administrator's judgment, to the exercise of the Option. Section 7. Adjustment of Shares. (a) Changes in Capital Structure. Subject to Section 7(b), if the outstanding Shares are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another corporation, by reason of a reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of securities or stock dividend, the total 5 6 number and/or kind of securities for the purchase of which Options may be granted under this Plan, and the number and/or kind of securities as to which Options (or portions thereof) are outstanding, shall be adjusted proportionately by the Administrator. Any adjustment in an outstanding Option shall be made without change in the total exercise price applicable to the unexercised portion of such Option and with a corresponding adjustment in the exercise price per Share. Any adjustment under this Section 7(a) shall be subject to the provisions of the Company's Certificate of Incorporation, as amended, and applicable law. Any such adjustment shall be final and binding upon all Optionees, the Company and all other interested persons. (b) Reorganization and Other Transactions. In its absolute discretion, and on such terms and conditions as it deems appropriate, the Administrator may provide by the terms of any Option that such Option cannot be exercised after the merger or consolidation of the Company with or into another corporation, the acquisition by another corporation or person of all or substantially all of the Company's assets or 80% or more of the Company's then outstanding voting stock or the liquidation or dissolution of the Company; and if the Administrator so provides, it may, in its absolute discretion and on such terms and conditions as it deems appropriate, also provide, either by the terms of such Option or by a resolution adopted prior to the occurrence of such merger, consolidation, acquisition, liquidation or dissolution, that, for some period of time prior to such event, such Option shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in Section 5. Section 8. No Right to Directorship. Neither, this Plan nor any Option granted hereunder shall confer upon any Optionee any right with respect to continuation of the Optionee's membership on the Board or shall interfere in any way with provisions in the Company's Certificate of Incorporation and Bylaws relating to the election, appointment, terms of office, and removal of members of the Board. Section 9. Legal Requirements. The Company shall not be obligated to offer or sell any Shares upon exercise of any Option unless the Shares are at that time effectively registered or exempt from registration under the federal securities laws and the offer and sale of the Shares are otherwise in compliance with all applicable securities laws and the regulations of any stock exchange on which the Company's securities may then be listed. The Company shall have no obligation to register the securities covered by this Plan under the federal securities laws or take any other steps as may be necessary to enable the securities covered by this Plan to be offered and sold under federal or other securities laws. Upon exercising all or any portion of an Option, an Optionee may be required to furnish representations or undertakings deemed appropriate by the Company to enable the offer and sale of the Shares or subsequent transfers of any interest in the Shares to comply with applicable securities laws. Certificates evidencing Shares acquired upon exercise of Options shall bear any legend required by, or useful for purposes of compliance with, applicable securities laws, this Plan or the Option Agreements. Section 10. Duration and Amendments. (a) Duration. This Plan shall become effective on March 24, 1995, subject to the approval of the Company's stockholders. This Plan and any Options granted hereunder 6 7 shall be null and void if such approval is not obtained. This Plan shall terminate automatically on March 23, 2005, and may be terminated on any earlier date pursuant to Section 10(b). (b) Amendment; Termination. The Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee; provided, however, that the provisions of this Plan shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or the rules thereunder. To the extent necessary or desirable to comply with Rule 16b-3, the Code or any other applicable law or regulation, the Company shall obtain stockholder approval of any amendment to the Plan in such a manner and to such a degree as required. Neither the amendment, suspension nor termination of the Plan shall, without the consent of the holder of the Option, alter or impair any rights or obligations under any Option theretofore granted. (c) Effect of Amendment or Termination. No Shares shall be issued or sold under this Plan after the termination hereof, except upon exercise of an Option granted before termination. Termination or amendment of this Plan shall not affect any Shares previously issued and sold or any Option previously granted under this Plan. Date Plan approved by Board: March 24, 1995 Date Plan approved by Shareholders: March 22, 1996 7 8 NON-EMPLOYEE DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT, dated __________________ , 199__, is made by and between Quiksilver, Inc., a Delaware corporation (the "Company"), and __________________________ a non-employee director of the Company (the "Director"). WHEREAS, the Company wishes to afford the Director the opportunity to purchase shares of its Common Stock; and WHEREAS, the Company wishes to carry out the Quiksilver, Inc. 1995 Nonemployee Directors' Stock Option Plan (the "Plan") a copy of which is delivered herewith and the terms of which are hereby incorporated by reference and made a part of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows: ARTICLE I DEFINITIONS Capitalized terms used but not defined herein shall have the meaning specified in the Plan. The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates. ARTICLE II GRANT OF OPTION Section 2.1 - Grant of Option In consideration of the Director's agreement to continue in his service to the Company, and for other good and valuable consideration, on the date hereof the Company irrevocably grants to the Director the option to purchase any part or all of an aggregate of 20,000 Shares of its Common Stock upon the terms and conditions set forth in this Agreement; provided, however, that the grant of this Option is subject to and conditioned upon stockholder approval of the Plan. The Plan and this Option shall be null and void if such approval is not obtained. 9 Section 2.2 - Purchase Price The purchase price of the Shares of Common Stock covered by the Option shall be $ _________ per share without commission or other charge. Section 2.3 - Consideration to Company In consideration of the granting of this Option by the Company, the Director agrees to render faithful and efficient services to the Company, with such duties and responsibilities as the Board of Directors shall from time to time prescribe, for a period of at least one year from the date this Option is granted, unless the stockholders of the Company fail to reelect the Director upon expiration of the Director's term of office prior to the expiration of the one year period. Nothing in this Agreement or in the Plan shall confer upon the Director any right to continue serving in a directorship position of the Company or shall interfere with or restrict in any way the rights of the stockholders of the Company, which are hereby expressly reserved, to remove the Director pursuant to provisions therefor in the charter or bylaws of the Company. ARTICLE III PERIOD OF EXERCISABILITY Section 3.1 - Commencement of Exercisability The Option shall become exercisable in four cumulative installments as follows: (a) The first installment shall consist of twenty percent (25%) of the Shares covered by the Option and shall become exercisable on the first anniversary of the date the Option is granted. (b) The second installment shall consist of twenty percent (25%) of the Shares covered by the Option and shall become exercisable on the second anniversary of the date the Option is granted. (c) The third installment shall consist of twenty percent (25%) of the Shares covered by the Option and shall become exercisable on the third anniversary of the date the Option is granted. (d) The fourth installment shall consist of twenty percent (25%) of the Shares covered by the Option and shall become exercisable on the fourth anniversary of the date the Option is granted. 2 10 Section 3.2 - Expiration of Option The Option may not be exercised to any extent by the Director after the first to occur of the events set forth in Section 5(h) of the Plan. ARTICLE IV EXERCISE OF OPTION Section 4.1 - Person Eligible to Exercise During the lifetime of the Director, only he may exercise the Option or any portion thereof. After the death of the Director, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable, be exercised by the Director's personal representative or by any person empowered to do so under the Director's will or under the then applicable laws of descent and distribution. Section 4.2 - Partial Exercise Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable; provided, however, that each partial exercise shall be for not less than 100 Shares. Section 4.3 - Manner of Exercise The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company or the Secretary's office of all of the following prior to the time when the exercisable Option or portion thereof becomes unexercisable: (a) Notice in writing signed by the Director or such other person then entitled to exercise the Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator; and (b) (i) Full payment (in cash or by check) for the Shares with respect to which such Option or portion is exercised; or (ii) With the consent of the Administrator, Shares of the Company's Common Stock owned by the Director duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate purchase price of the Shares with respect to which such Option or portion is exercised; or 3 11 (iii) Any combination of the consideration provided in the foregoing subparagraphs (i) and (ii); and (c) A bona fide written representation and agreement, in a form satisfactory to the Administrator, signed by the Director or other person then entitled to exercise such Option or portion thereof, stating that the Shares of stock are being acquired for his or her own account, for investment and without any present intention of distributing or reselling said Shares or any of them except as may be permitted under the Securities Act of 1933, as amended (the "Securities Act"), and then applicable rules and regulations thereunder, and that the Director or other person then entitled to exercise such Option or portion thereof will indemnify the Company against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the Shares by such person is contrary to the representation and agreement referred to above. The Administrator may, in its absolute discretion, take whatever additional actions it deems appropriate to insure the observance and performance of such representation and agreement and to effect compliance with the Securities Act and any other federal or state securities laws or regulations. Without limiting the generality of the foregoing, the Administrator may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of Shares acquired on an Option exercise does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend referring to the provisions of this subsection (c) and the agreements herein. The written representation and agreement referred to in the first sentence of this subsection (c) shall, however, not be required if the Shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration is then effective in respect of such Shares; and (d) Full payment to the Company of all amounts which it is required to withhold under federal, state or local law upon exercise of the Option; and (e) In the event the Option or portion shall be exercised pursuant to Section 4.1 by any person or persons other than the Director, appropriate proof of the right of such person or persons to exercise the Option or portion thereof. Section 4.4 - Conditions to Issuance of Stock Certificates The Shares deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for Shares purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such Shares to listing on all stock exchanges, if any, on which such class of stock is then listed; and 4 12 (b) The completion of any registration or other qualification of such Shares under any state or federal law or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable; and (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable; and (d) The payment to the Company of all amounts which it is required to withhold under federal, state or local law upon exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience. Section 4.5 - Rights as Shareholder The holder of the Option shall not be, nor shall such holder have any of the rights of privileges of, a stockholder of the Company in respect of any Shares purchasable upon the exercise of any part of the Option unless and until a certificate or certificates representing such Shares shall have been issued by the Company to such holder. ARTICLE V OTHER PROVISIONS Section 5.1 - Administration The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Director, the Company and all other interested persons. Section 5.2 - Option Not Transferable Neither the Option nor any interest or right therein or part thereof shall be subject to or liable for the debts, contracts or engagements of the Director or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void 5 13 and of no effect; provided, however, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution. Section 5.3 - Shares to Be Reserved The Company shall at all times during the term of the Option reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of this Agreement. Section 5.4 - Notices Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Director shall be addressed to him at the address given beneath his signature hereto. By a notice given pursuant to this Section 5.4, either party may hereafter designate a different address for notices to be given to him. Any notice which is required to be given to the Director shall, if the Director is then deceased, be given to the Director's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.4. Any notice shall be deemed duly given when enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service. Section 5.5 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. Section 5.6 - Construction This Agreement shall be administered, interpreted and enforced under the laws of the State of California. Section 5.7 - The Plan A copy of the Plan has been delivered to the Director, and receipt of such copy is hereby expressly acknowledged by the Director. This Agreement hereby incorporates by reference said Plan document and all of the terms and conditions of the Plan as the same may be amended from time to time hereafter in accordance with the terms thereof. The terms of this Agreement shall in no manner limit or modify the controlling provisions of the Plan, and in the 6 14 case of any conflict between the provisions of the Plan and this Agreement, the provisions of the Plan shall be controlling and binding upon the parties hereto. IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto. QUIKSILVER, INC. By --------------------------------------- Chief Executive Officer By --------------------------------------- Secretary - ----------------------------------- Director - ----------------------------------- - ----------------------------------- Address 7 EX-10.3 4 PROPOSAL TO AMEND THE CO.'S CERTIFICATE OF INCORPO 1 EXHIBIT 10.3 RESTATED CERTIFICATE OF INCORPORATION OF QUIKSILVER, INC. The undersigned, Robert B. McKnight, Jr. and Randall L. Herrel, Sr., certify that they are the Chief Executive Officer and Secretary, respectively, of Quiksilver, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Company"), and do hereby further certify as follows: A. The name of the Company is QUIKSILVER, INC. B. The original Certificate of Incorporation of the Company was filed in the office of the Delaware Secretary of State on October 24, 1986. C. This Restated Certificate of Incorporation has been duly adopted by the Board of Directors and by the Stockholders of the Company in accordance with the applicable provisions of Section 242 and 245 of the General Corporation Law of the State of Delaware. D. The text of the Certificate of Incorporation of the Company is hereby amended and restated to read in its entirety as follows: FIRST: The name of this corporation is Quiksilver, Inc. (hereinafter referred to as the "Company"). SECOND: The address of the Company's registered office in the State of Delaware is 32 Loockerman Square, Suite L-100, Dover, County of Kent, Delaware. The name of the Company's registered agent at that address is United States Corporation Company. THIRD: The purpose of the Company is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. FOURTH: A. The total number of shares of all classes of stock that the Company shall have authority to issue is thirty-five million (35,000,000), consisting of: 2 (1) thirty million (30,000,000) shares of Common Stock, with a par value of $.01 per share; and (2) five million (5,000,000) shares of Preferred Stock, with a par value of $.01 per share. B. The shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors is authorized to fix the number of shares of any series of Preferred Stock and to determine the designation of any such series. The Board of Directors is also authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issuance of shares of that series. FIFTH: A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is hereafter amended to authorize the further elimination or limitation of the liability of a director, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing provisions of this Article FIFTH by the stockholders of the Company shall not adversely affect any right or protection of a director of the Company existing at the time of such repeal or modification. SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the bylaws of the Company. SEVENTH: Election of directors need not be by written ballot unless the bylaws of the Company shall so provide. 2 3 E. The undersigned further declare under penalty of perjury under the laws of the State of Delaware that this Restated Certificate of Incorporation is the act and deed of the Company and that the facts stated herein are true. DATED: April __, 1996 QUIKSILVER, INC. -------------------------------------- Robert B. McKnight, Jr. Chief Executive Officer ATTEST: - ----------------------------------- Randall L. Herrel, Sr., Secretary 3 EX-27 5 QUICKSILVER FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUIKSILVER, INC'S APRIL 30, 1996 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q. 6-MOS OCT-31-1996 APR-30-1996 3,794,000 0 51,649,000 3,200,000 29,128,000 84,407,000 14,369,000 6,944,000 110,950,000 30,040,000 3,298,000 0 0 70,000 77,542,000 110,950,000 94,992,000 94,992,000 57,384,000 57,384,000 25,386,000 850,000 400,000 10,972,000 4,428,000 6,544,000 0 0 0 6,544,000 .91 .90
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