-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ngRKGvR2gZ471FOVSBjUVRmaobWMC4hCAOTMoA2jmlHKrlOZ45jDDdTW9ZV8NfXi REWMmdCQkoqPxIcUuJUodw== 0000892569-95-000287.txt : 19950615 0000892569-95-000287.hdr.sgml : 19950615 ACCESSION NUMBER: 0000892569-95-000287 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950614 SROS: NASD 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: 95546987 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 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q /x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1995 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:
Name of each exchange Title of 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, 1995 was 6,684,889. 2 QUIKSILVER, INC. FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION Page No. Item 1. Consolidated Financial Statements: Consolidated Balance Sheets April 30, 1995 (Unaudited) and October 31, 1994 .... 2 Consolidated Statements of Income (Unaudited) Three Months ended April 30, 1995 and 1994 Six Months ended April 30, 1995 and 1994 ........... 3 Consolidated Statements of Cash Flows (Unaudited) Six Months ended April 30, 1995 and 1994 ........... 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
1 3 PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements QUIKSILVER, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April 30, October 31, (Amounts in thousands except share data) 1995 1994 - ----------------------------------------------------------------- ------------ ASSETS Current assets Cash and cash equivalents ................ $ 2,702 $ 682 Trade accounts receivable, less allowance for doubtful accounts of $2,919 (1995) and $2,202 (1994) ...................... 38,862 29,974 Other receivables ........................ 1,676 1,548 Inventories - Note 3 ..................... 25,277 21,609 Prepaid expenses ......................... 956 917 ------- ------- Total current assets ................... 69,473 54,730 Equipment, less accumulated depreciation and amortization of $6,772 (1995) and $6,194 (1994) ................................... 6,976 6,133 Trademark and consulting agreement, less accumulated amortization of $1,235 (1995) and 1,185 (1994) ......................... 1,758 1,833 Goodwill, less accumulated amortization of $2,049 (1995) and $1,899 (1994) ................. 15,912 16,209 Other assets ...................................... 1,600 1,565 ------- ------- $95,719 $80,470 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Lines of credit .......................... $14,827 $10,100 Accounts payable ......................... 6,257 5,157 Accrued liabilities ...................... 6,959 5,024 Current portion of notes payable ......... 225 390 Income taxes payable ..................... 1,931 2,412 ------- ------- Total current liabilities .............. 30,199 23,083 Notes payable ..................................... 3,420 2,449 ------- ------- Total liabilities ...................... 33,619 25,532 Stockholders' equity Preferred stock, $.01 par value, authorized shares 5,000,000; issued and outstanding shares - none .......................... -- -- Common stock, $.01 par value, authorized shares 10,000,000; issued and outstanding shares 6,684,889 (1995) and 6,521,422 (1994) 67 65 Additional paid-in-capital ............... 13,170 11,551 Retained earnings ........................ 47,883 42,727 Cumulative foreign currency translation gain ............................... 980 595 ------- -------- Total stockholders' equity ............. 62,100 54,938 ------- -------- $95,719 $80,470 ======= ========
See accompanying 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) 1995 1994 - ---------------------------------------------------------------------------- Net sales ................................ $ 47,311 $ 36,468 Cost of goods sold ....................... 28,485 22,222 ---------- ---------- Gross profit .......................... 18,826 14,246 ---------- ---------- Operating expenses: Selling, general and administrative expenses .............. 12,110 9,555 Royalty income ......................... (247) (162) Royalty expense......................... 615 63 ---------- ---------- Total operating expenses.............. 12,478 9,456 ---------- ---------- Operating income.......................... 6,348 4,790 Interest income........................... (1) -- Interest expense.......................... 398 213 Gain on foreign currency exchange......... (120) (85) Loss on foreign currency exchange......... 90 28 Other expense............................. 19 42 ---------- ---------- Income before provision for income taxes........................... 5,962 4,592 Provision for income taxes - Note 4....... 2,339 1,832 ---------- ---------- Net income ............................... $ 3,623 $ 2,760 ========== ========== Net income per common share............... $ .52 $ .42 ========== ========== Weighted average common shares and equivalents outstanding - Note 2 ... 6,996,000 6,605,000 ========== ==========
See accompanying 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) 1995 1994 - ---------------------------------------------------------------------------- Net sales ................................ $ 80,969 $ 60,762 Cost of goods sold ....................... 49,254 37,665 ---------- ---------- Gross profit .......................... 31,715 23,097 ---------- ---------- Operating expenses: Selling, general and administrative expenses .............. 22,075 16,740 Royalty income ......................... (455) (421) Royalty expense......................... 1,037 328 ---------- ---------- Total operating expenses.............. 22,657 16,647 ---------- ---------- Operating income.......................... 9,058 6,450 Interest income........................... (7) (1) Interest expense.......................... 568 309 Gain on foreign currency exchange......... (355) (118) Loss on foreign currency exchange......... 228 98 Other expense............................. 97 80 ---------- ---------- Income before provision for income taxes and cumulative effect of change in accounting for income taxes 8,527 6,082 Provision for income taxes - Note 4....... 3,373 2,414 ---------- ---------- Income before cumulative effect of change in accounting for income taxes 5,154 3,668 Cumulative effect of change in accounting for income taxes........................ -- 600 ---------- ---------- Net income ............................... $ 5,154 $ 4,268 ========== ========== Income per common share before cumulative effect of change in accounting for income taxes............. $ .74 $ .56 Cumulative effect of change in accounting for income taxes........................ -- .09 ---------- ---------- Net income per common share............... $ .74 $ .65 ========== ========== Weighted average common shares and equivalents outstanding - Note 2 ... 6,974,000 6,587,000 ========== ==========
See accompanying notes to consolidated financial statements. 4 6 QUIKSILVER, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six months ended April 30, ------------------------------ (Amounts in thousands) 1995 1994 - -------------------------------------------------------------------------------- Cash flows from operating activities: Net income ........................................ $ 5,154 $ 4,268 Items in income not affecting cash: Depreciation and amortization .................. 1,099 990 Provision for losses on accounts receivable .... 246 453 Net loss on sale of fixed assets................ 25 49 Change in operating assets and liabilities: Trade accounts receivable ...................... (9,134) (13,966) Other receivables .............................. (128) (1,117) Inventories .................................... (3,668) (1,298) Prepaid expenses ............................... (39) 116 Other assets ................................... (35) 28 Accounts payable ............................... 1,100 1,812 Accrued liabilities ............................ 1,935 751 Income taxes payable ........................... (481) 178 ------- ------- Net cash used in operating activities................. (3,926) (7,736) Cash flows from investing activities: Proceeds from sales of fixed assets................. (25) (20) Capital expenditures................................ (1,566) (1,740) Goodwill............................................ (4) (3,791) -------- -------- Net cash used in financing activities ................ (1,595) (5,551) Cash flows from financing activities: Borrowings on lines of credit...................... 23,522 16,954 Payments on lines of credit........................ (18,795) (7,534) Borrowings on notes payable........................ 1,029 242 Payments on notes payable.......................... (223) (166) Proceeds from stock issued in connection with exercise of stock options ....................... 1,623 742 ------- ------- Net cash provided by financing activities............. 7,156 10,238 Effect of exchange rate changes on cash............... 385 471 ------- ------- Net increase (decrease) in cash....................... 2,020 (2,578) Cash at beginning of period .......................... 682 3,386 ------- ------- Cash at end of period ................................ $ 2,702 $ 808 ======= ======= Supplementary Cash Flow Information: Cash paid during the period for: Interest ....................................... $ 627 $ 365 Income taxes ................................... 2,900 1,885
See accompanying 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, 1995 and 1994. The financial statements and notes thereto should be read in conjunction with the audited financial statements and notes for the years ended October 31, 1994 and 1993. 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 currency. 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, 1995 1994 ------------ ----------- Raw Materials $10,207,000 $ 9,452,000 Work-In-Process 3,454,000 3,467,000 Finished Goods 11,616,000 8,690,000 ----------- ----------- $25,277,000 $21,609,000 =========== ===========
Inventories are valued at the lower of cost (first in, first out) or market. 4. Effective November 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This Statement changed the Company's method of accounting for income taxes from the deferred method to an asset and liability method. The cumulative effect at November 1, 1993 of adopting this new statement was the recording of a net deferred asset and an increase to net income of $600,000 for the three months ended April 30, 1994. 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, 1995 as Compared to Three Months Ended April 30, 1994 Consolidated net sales for the second quarter increased 29.7% to $47,311,000 as compared to $36,468,000 in the same period of the prior year. Fiscal 1995 second quarter net sales, excluding Quiksilver Europe, increased 27.4% to $31,187,000 as compared to $24,482,000 in the same period of the prior year. This increase was primarily due to a greater acceptance of the Company's product lines. Fiscal 1995 second quarter net sales for Quiksilver Europe increased 34.5% to $16,124,000 as compared to $11,986,000 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 and a decrease in the French franc exchange rate. Consolidated gross profit margin for the second quarter increased to 39.8% as compared to 39.1% in the same period of the prior year. Fiscal 1995 second quarter gross profit margin, excluding Quiksilver Europe, increased to 36.4% as compared to 35.9% in the same period of the prior year. This increase was primarily due to cost reduction measures and improved product forecasting resulting in a reduction in closing out selected finished goods inventory at below wholesale prices. Fiscal 1995 second quarter gross profit margin for Quiksilver Europe increased to 46.3% as compared to 45.5% in the same period of the prior year. This increase was primarily due to better sourcing, lower levels of markdowns and selling directly to more accounts in selected countries as opposed to using distributors. Consolidated selling, general and administrative expense ("SG&A") for the second quarter increased 26.7% to $12,110,000 as compared to $9,555,000 in the same period of the prior year. Fiscal 1995 second quarter SG&A, excluding Quiksilver Europe, increased 19.8% to $7,798,000 as compared to $6,508,000 in the same period of the prior year. This increase was primarily due to increased sales volume. Fiscal 1995 second quarter SG&A expense for Quiksilver Europe increased 41.5% to $4,312,000 as compared to $3,047,000 in the same period of the prior year. This increase was primarily due to increased sales volume, direct selling and shipping into countries that were previously sold to by distributors and a decrease in the French franc exchange rate. Consolidated royalty income for the second quarter increased to $247,000 as compared to $162,000 in the same period of the prior year. This increase was due to increased sales of domestically licensed products. The Company receives royalty income from its Mexico, wetsuit, watch, sunglass, and outlet store licensees as well as Raisins international licensees. Consolidated royalty expense for the second quarter increased to $615,000 as compared to $63,000 in the same period of the prior year. This increase was due to increased sales by Quiksilver Europe, which, as a licensee of Quiksilver International, pay royalties pursuant to a license agreement, and to an agreement with Quiksilver International, whereby Quiksilver International provided Quiksilver Europe with a one-time reduction in royalties in the second quarter of fiscal 1994 due to the increase in sales volume and expenses from directly selling and shipping into countries which were previously sold to by distributors. Consolidated interest expense increased to $398,000 as compared to $213,000 in the same period of the prior year. This change was primarily due to a decrease in cash available for investment. Consolidated net income for the second quarter increased 31.3% to $3,623,000 or $0.52 per common share as compared to $2,760,000 or $0.42 per 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, royalty and interest expense. 7 9 RESULTS OF OPERATIONS - Six Months Ended April 30, 1995 as Compared to Six Months Ended April 30, 1994 Consolidated net sales for the six months increased 33.3% to $80,969,000 as compared to $60,762,000 in the same period of the prior year. Fiscal 1995 six month net sales, excluding Quiksilver Europe, increased 31.2% to $53,425,000 as compared to $40,730,000 in the same period of the prior year. This increase was primarily due to a greater acceptance of the Company's product lines. Fiscal 1995 six month net sales for Quiksilver Europe increased 37.5% to $27,544,000 as compared to $20,032,000 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 and a decrease in the French franc exchange rate. Consolidated gross profit margin for the six months increased to 39.2% as compared to 38.0% in the same period of the prior year. Fiscal 1995 six month gross profit margin, excluding Quiksilver Europe, increased to 36.0% as compared to 34.3% in the same period of the prior year. This increase was primarily due to cost reduction measures and improved product forecasting resulting in a reduction in closing out selected finished goods inventory at below wholesale prices. Fiscal 1995 six month gross profit margin for Quiksilver Europe decreased to 45.3% as compared to 45.6% in the same quarter of the prior year. This decrease was primarily due to higher levels of markdowns and a different mix of sales. Consolidated SG&A for the six months increased 31.9% to $22,075,000 as compared to $16,740,000 in the same period of the prior year. Fiscal 1995 six month SG&A, excluding Quiksilver Europe, increased 25.2% to $14,118,000 as compared to $11,279,000 in the same period of the prior year. This increase was primarily due to increased sales volume. Fiscal 1995 six month SG&A for Quiksilver Europe increased 45.7% to $7,957,000 as compared to $5,461,000 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 and a decrease in the French franc exchange rate. Consolidated royalty income for the six months increased to $455,000 as compared to $421,000 in the same period of the prior year. This increase was due to increased sales of domestically licensed products. Consolidated royalty expense for the six months increased to $1,037,000 as compared to $328,000 in the same period of the prior year. This increase was due to increased sales by Quiksilver Europe, and to an agreement with Quiksilver International, whereby Quiksilver International provided Quiksilver Europe with a one-time reduction in royalties in the second quarter of fiscal 1994 due to the increase in sale volume and expenses from directly selling and shipping into countries which were previously sold to by distributors. Consolidated interest expense increased to $568,000 as compared to $309,000 in the same period of the prior year. This change was primarily due to a decrease in cash available for investment. Consolidated income before cumulative effect of change in accounting for income taxes for the six months increased 40.5% to $5,154,000 or $0.74 per common share as compared to $3,668,000 or $0.56 per common share in the same period of the prior year. This increase in income was primarily due to increased sales and gross profit margin, partially offset by increased SG&A, royalty and interest expense. 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 to $39,274,000 at April 30, 1995 as compared to $31,647,000 at October 31, 1994. The increase is primarily due to increased operating income. Consolidated trade accounts receivable as of April 30, 1995 increased 29.7% to $38,862,000 from $29,974,000 at October 31, 1994. Trade accounts receivable, excluding Quiksilver Europe, increased 22.1% to $23,521,000 as compared to $19,270,000 at October 31, 1994. Quiksilver Europe's trade accounts receivable increased 43.3% to $15,341,000 from $10,704,000 at October 31, 1994. These increases are in line when compared to the same period of the prior year and to the 29.7% increase in sales for the quarter over last year. Consolidated inventories as of April 30, 1995 increased 17.0% to $25,277,000 from $21,609,000 at October 31, 1994. Inventories, excluding Quiksilver Europe, increased 19.6% to $22,265,000 from $18,619,000 at October 31, 1994. Quiksilver Europe's inventories increased .7% to $3,012,000 from $2,990,000 at October 31, 1994. These increases are primarily due to increased bookings for its lines, seasonal factors and the increase in new divisions and reorder business. As the Company uses independent contractors for cutting, sewing and all other manufacturing of the Company's products domestically, and intends to continue to use independent contractors in the future, the Company has avoided significant capital expenditures. Although Quiksilver Europe cuts a significant amount of their production garments, the majority of all other manufacturing is performed by independent contractors, which allows Quiksilver Europe to also avoid significant capital expenditures. Fiscal 1995 six month capital expenditures were $1,566,000 as compared to $897,000 for the same period of the prior year. Goodwill on the Company's balance sheets as of April 30, 1995 and October 31, 1994 consists primarily of the costs in excess over net assets acquired in the Quiksilver Europe and Raisins acquisitions. To finance the Company's domestic 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 $20,000,000. The line of credit bears interest at 0.5% below the bank's reference rate for the first $16,000,000 drawn and at the bank's reference rate on all amounts drawn over $16,000,000. The line of credit expires April 29, 1996. The European operation also has available lines of credit, both secured and unsecured, with banks which provide for maximum financing of approximately $13,000,000. The lines of credit bear interest at 0.8% to 1.5% 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 foreseeable future. Effective, November 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). This Statement changed the Company's method of accounting for income taxes from the deferred method to an asset and liability method. The effect of initially adopting SFAS 109 was accounted for as a cumulative effect of an accounting change and resulted in an increase in earnings for the first quarter of fiscal 1994 of $600,000. 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, 1995 are adequate, the Company continually 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 24, 1995. 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. 5,364,371 146,126 0 0 Randall L. Herrel, Sr. 5,364,971 146,126 0 0 William M. Barnum, Jr. 5,464,371 46,726 0 0 Charles E. Crowe 5,364,671 146,426 0 0 Michael H. Gray 5,466,771 44,326 0 0 Robert G. Kirby 5,466,671 44,426 0 0 Tom Roach 5,464,334 46,763 0 0
The Company's stockholders also approved a proposal to amend the Company's Stock Option Plan to increase the maximum aggregate number of shares of Common Stock available for issuance granted pursuant to the Plan from 1,100,000 shares to 1,420,000 shares. With respect to the proposal to amend the Company's Stock Option Plan, there were 5,115,800 votes cast for the proposal, 385,386 votes cast against the proposal, 9,911 abstentions and no broker no-votes. No other matters were voted on at the Annual Meeting. Item 6 Exhibits and Reports on Form 8K (a) Exhibits 10.1 Quiksilver Stock Option Plan, as amended March 24, 1995 10.2 Indemnity Agreement between William M. Barnum, Jr. and Registrant dated May 1, 1995 10.3 Indemnity Agreement between Michael H. Gray and Registrant dated May 1, 1995 10.4 Indemnity Agreement between Tom Roach and Registrant dated May 1, 1995 27.0 Financial Data Schedule (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter. 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 12, 1995 Randall L. Herrel, Sr. ----------------------------------------- Randall L. Herrel, Sr. President, Chief Operating Officer and Secretary June 12, 1995 Bert G. Fenenga ----------------------------------------- Bert G. Fenenga Senior Vice President, Chief Financial Officer and Treasurer 11 13 EXHIBIT INDEX
Exhibit Sequentially Number Description Numbered - ------- ----------- -------- 10.1 Quiksilver, Inc. Stock, Option Plan, as amended March 24, 1995 10.2 Indemnity Agreement between William M. Barnum, Jr. and Registrant dated May 1, 1995 10.3 Indemnity Agreement between Michael H. Gray and Registrant dated May 1, 1995 10.4 Indemnity Agreement between Tom Roach and Registrant dated May 1, 1995 27.0 Financial Data Schedule
12 EX-10.1 2 STOCK OPTION PLAN (AS AMENDED) 1 EXHIBIT 10.1 QUIKSILVER, INC. STOCK OPTION PLAN (AS AMENDED THROUGH MARCH 24, 1995) Quiksilver, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), hereby adopts this Quiksilver, Inc. Stock Option Plan (the "Plan"). The purposes of this Plan are as follows: (1) To further the growth, development and financial success of the Company by providing additional incentives to certain of its Directors and Employees who have been or will be given responsibility for the management or administration of the Company's business affairs, by assisting them to become owners of capital stock of the Company and thus to benefit directly from its growth, development and financial success. (2) To enable the Company to obtain and retain the services of the type of professional, technical and managerial employees considered essential to the long-range success of the Company by providing and offering them an opportunity to become owners of capital stock of the Company under options, including options that are intended to qualify as "incentive stock options" under Section 422 of the Internal Revenue Code of 1986, as amended. ARTICLE I DEFINITIONS Whenever the following terms are used in this Plan, they shall have the meaning specified below unless the context clearly indicates to the contrary. The masculine pronoun shall include the feminine and neuter and the singular shall include the plural, where the context so indicates. Section 1.1 - Board "Board" shall mean the Board of Directors of the Company. Section 1.2 - Code "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. Section 1.3 - Committee "Committee" shall mean the Compensation Committee of the Board, appointed as provided in Section 6.1. 2 Section 1.4 - Company "Company" shall mean Quiksilver, Inc., a Delaware corporation. In addition, "Company" shall mean any corporation assuming, or issuing new employee stock options in substitution for, Incentive Stock Options outstanding under the Plan in a transaction to which Section 424(a) of the Code applies. Section 1.5 - Director "Director" shall mean a member of the Board. Section 1.6 - Employee "Employee" shall mean any employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company, or of any corporation which is then a Parent Corporation or Subsidiary, whether such employee is so employed at the time this Plan is adopted or becomes so employed subsequent to the adoption of this Plan. Section 1.7 - Incentive Stock Option "Incentive Stock Option" shall mean an Option which qualifies as an "incentive stock option" under Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee. Section 1.8 - Non-Qualified Option "Non-Qualified Option" shall mean an Option which is not an Incentive Stock Option and which is designated as a Non-Qualified Option by the Committee. Section 1.9 - Officer "Officer" shall mean an officer of the Company, any Parent Corporation or any Subsidiary. Section 1.10 - Option "Option" shall mean an option to purchase capital stock of the Company granted under the Plan. "Options" includes both Incentive Stock Options and Non-Qualified Options. Section 1.11 - Optionee "Optionee" shall mean a Director or Employee to whom an Option is granted under the Plan. 2 3 Section 1.12 - Parent Corporation "Parent Corporation" shall mean any corporation in an unbroken chain of corporations ending with the Company if each of the corporations other than the Company then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.13 - Plan "Plan" shall mean this Quiksilver, Inc. Stock Option Plan. Section 1.14 - Secretary "Secretary" shall mean the Secretary of the Company. Section 1.15 - Securities Act "Securities Act" shall mean the Securities Act of 1933, as amended. Section 1.16 - Subsidiary "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.17 - Termination of Employment "Termination of Employment" shall mean the time when the employee-employer relationship between the Optionee and the Company, a Parent Corporation or a Subsidiary is terminated for any reason, or the time when the service of a Director (who is not an Employee) as a member of the Board is terminated, in each case with or without cause, including, but not by way of limitation, a termination by resignation, discharge, removal, death or retirement, but excluding terminations where there is a simultaneous reemployment of the Employee by the Company, a Parent Corporation or a Subsidiary. The Committee, in its absolute discretion, shall determine the effect of all other matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether particular leaves of absence constitute Terminations of Employment; provided, however, that, with respect to Incentive Stock Options, a leave of absence shall constitute a Termination of Employment if, and to the extent that, such leave of absence interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable Regulations and Revenue Rulings under said Section. 3 4 ARTICLE II SHARES SUBJECT TO PLAN Section 2.1 - Shares Subject to Plan The shares of stock subject to Options shall be shares of the Company's $.01 par value Common Stock. The aggregate number of such shares which may be issued upon exercise of Options shall not exceed 1,420,000. Section 2.2 - Unexercised Options If any Option expires or is cancelled without having been fully exercised, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration or cancellation may again be subject to Options granted hereunder, subject to the limitations of Section 2.1. Section 2.3 - Changes in Company's Shares In the event that the outstanding shares of stock subject to Options to be granted hereunder are hereafter 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 reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, appropriate adjustments shall be made by the Committee in the number and kind of shares for the purchase of which Options may be granted, including adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued on exercise of Options. ARTICLE III GRANTING OF OPTIONS Section 3.1 - Eligibility Except as provided in Section 3.2, any Employee of the Company (including any Employee of the Company who is also a Director) or of any corporation which is then a Parent Corporation or a Subsidiary shall be eligible to be granted Options, and any Director who is not an Employee shall be eligible to receive Non-Qualified Options. Section 3.2 - Qualification of Incentive Stock Options No Incentive Stock Option shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under Section 422 of the Code. 4 5 Section 3.3 - Granting of Options (a) The Committee shall from time to time, in its absolute discretion: (i) Select from among the Employees and Directors (including those to whom Options have been previously granted under the Plan) such of them as shall be granted Options; and (ii) Determine the number of shares to be subject to such Options granted to such Employees or Directors, and, in the case of Employees, determine whether such Options are to be Incentive Stock Options or Non-Qualified Options; and (iii) Determine the terms and conditions of such Options, consistent with the Plan. (b) Upon the selection of a Director or Employee to be granted an Option, the Committee shall instruct the Secretary to issue such Option and may impose such conditions on the grant of such Option as it deems appropriate. Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an Option to a Director or Employee, that the Director or Employee surrender for cancellation some or all of any unexercised Options which have been previously granted to the Director or Employee. An Option the grant of which is conditioned upon such surrender may have an option price lower (or higher) than the option price of the surrendered Option, may cover the same (or a lesser or greater) number of shares as the surrendered Option, may contain such other terms as the Committee deems appropriate and shall be exercisable in accordance with its terms, without regard to the number of shares, price, option period or any other term or condition of the surrendered Option. ARTICLE IV TERMS OF OPTIONS Section 4.1 - Option Agreement Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee shall determine, consistent with the Plan. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to qualify such Options as "incentive stock options" under Section 422 of the Code. 5 6 Section 4.2 - Option Price (a) The price of the shares subject to each Option shall be set by the Committee; provided, however, that the price per share shall be not less than 100% of the fair market value of such shares on the date such Option is granted; and provided further, that in the case of an Incentive Stock Option, the price per share shall not be less than 110% of the fair market value of such shares on the date such Option is granted in the event such Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation. (b) For purposes of the Plan, the fair market value of a share of the Company's stock as of a given date shall be: (i) the closing price of a share of the Company's stock 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 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. Section 4.3 - Commencement of Exercisability (a) Except as the Committee may otherwise provide, no Option may be exercised in whole or in part during the first year after such Option is granted. (b) Subject to the provisions of Sections 4.3(a), 4.3(c), 4.3(d) and 7.3, Options shall become exercisable at such times and in such installments (which may be cumulative) as the Committee shall provide in the terms of each individual Option; provided, however, that by a resolution adopted after an Option is granted the Committee may, on such terms and conditions as it may determine to be appropriate and subject to Sections 4.3(a), 4.3(c), 4.3(d) and 7.3, accelerate the time at which such Option or any portion thereof may be exercised. (c) No portion of an Option which is unexercisable at an Employee's or Director's Termination of Employment shall thereafter become exercisable. (d) Notwithstanding any other provision of this Plan, in the case of an Incentive Stock Option, the aggregate fair market value (determined at the time the Incentive Stock Option is granted) of the shares of the Company's stock with respect to which "incentive 6 7 stock options" (within the meaning of Section 422 of the Code) are exercisable for the first time by the Optionee during any calendar year (under the Plan and all other incentive stock option plans of the Company, any Subsidiary and any Parent Corporation) shall not exceed $100,000. Section 4.4 - Expiration of Options (a) No Incentive Stock 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) In the case of an Optionee owning (within the meaning of Section 424(d) of the Code), at the time the Option was granted, more than 10% of the total combined voting power of all classes of stock of the Company, any Subsidiary or any Parent Corporation, the expiration of five years from the date the Option was granted; or (iii) 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 Optionee's Termination of Employment for any reason other than such Optionee's death unless the Optionee dies within said three-month period; or (iv) 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 Optionee's Termination of Employment for any reason other than such Optionee's death unless the Optionee dies within said one-year period; or (v) The expiration of one year from the date of the Optionee's death. No Non-Qualified Option may be exercised to any extent by anyone after the expiration of ten years and one day from the date the Option was granted. (b) Subject to the provisions of Section 4.4(a), the Committee shall provide, in the terms of each individual Option, when such Option expires and becomes unexercisable; and (without limiting the generality of the foregoing) the Committee may provide in the terms of individual Options that said Options expire immediately upon a Termination of Employment for any reason. Section 4.5 - Consideration In consideration of the granting of the Option, the Optionee shall agree, in the written Stock Option Agreement, (a) if the Optionee is an Employee, to remain in the employ of the Company, a Parent Corporation or a Subsidiary for a period of at least one year after the 7 8 Option is granted, or (b) if the Optionee is a Director who is not also an Employee, to remain as a Director of the Company for a period of at least one year after the Option is granted, unless the shareholders 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 Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of the Company, any Parent Corporation or any Subsidiary or shall interfere with or restrict in any way the rights of the Company, its Parent Corporations and its Subsidiaries, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without cause. Section 4.6 - Adjustments in Outstanding Options In the event that the outstanding shares of the stock subject to Options 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 reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend or combination of shares, the Committee shall make an appropriate and equitable adjustment in the number and kind of shares as to which all outstanding Options, or portions thereof then unexercised, shall be exercisable, to the end that after such event the Optionee's proportionate interest shall be maintained as before the occurrence of such event. Such adjustment in an outstanding Option shall be made without change in the total price applicable to the Option or the unexercised portion of the Option (except for any change in the aggregate price resulting from rounding-off of share quantities or prices) and with any necessary corresponding adjustment in Option price per share; provided, however, that, in the case of Incentive Stock Options, each such adjustment shall be made in such manner as not to constitute a "modification" within the meaning of Section 424(h)(3) of the Code. Any such adjustment made by the Committee shall be final and binding upon all Optionees, the Company and all other interested persons. Section 4.7 - Merger, Consolidation, Acquisition, Liquidation or Dissolution In its absolute discretion, and on such terms and conditions as it deems appropriate, the Committee 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 Committee 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 4.3(a), Section 4.3(b) or any installment provisions of such Option, but subject to Section 4.3(d). 8 9 ARTICLE V EXERCISE OF OPTIONS Section 5.1 - Person Eligible to Exercise During the lifetime of the Optionee, only he may exercise an Option granted to him, or any portion thereof. After the death of the Optionee, any exercisable portion of an Option may, prior to the time when such portion becomes unexercisable under Section 4.4 or Section 4.7, be exercised by the Optionee's personal representative or by any person empowered to do so under the deceased Optionee's will or under the then applicable laws of descent and distribution. Section 5.2 - Partial Exercise At any time and from time to time prior to the time when any exercisable Option or exercisable portion thereof becomes unexercisable under Section 4.4 or Section 4.7, such exercisable Option or portion thereof may be exercised in whole or in part; provided, however, that the Company shall not be required to issue fractional shares and the Committee may, by the terms of the Option, require any partial exercise to be with respect to a specified minimum number of shares. Section 5.3 - Manner of Exercise An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary or the Secretary's office of all of the following prior to the time when such exercisable Option or portion thereof becomes unexercisable under Section 4.4 or Section 4.7: (a) Notice in writing signed by the Optionee or other person then entitled to exercise such Option or portion, stating that such Option or portion is exercised, such notice complying with all applicable rules established by the Committee; and (b) (i) Full payment (in cash or by check) for the shares with respect to which such Option or portion is thereby exercised; or (ii) With the consent of the Committee, shares of the Company's Common Stock owned by the Optionee, duly endorsed for transfer to the Company, with a fair market value (as determinable under Section 4.2(b)) on the date of delivery equal to the aggregate purchase price of the shares with respect to which such Option or portion is thereby exercised; or 9 10 (iii) With the consent of the Committee, a full recourse promissory note bearing interest (at at least such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee. The Committee may also prescribe the form of such note and the security to be given for such note. No Option may, however, be exercised by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law; or (iv) Any combination of the consideration provided in the foregoing subsections (i), (ii) and (iii); and (c) Such representations and documents as the Committee, in its absolute discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act and any other federal or state securities laws or regulations. The Committee may, in its absolute discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer orders to transfer agents and registrars; and (d) In the event that the Option or portion thereof shall be exercised pursuant to Section 5.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option or portion thereof. Section 5.4 - Conditions to Issuance of Stock Certificates The shares of stock issuable and deliverable upon the exercise of an Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any 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 (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 Committee 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 Committee shall, in its absolute discretion, determine to be necessary or advisable; and 10 11 (d) The payment to the Company of all amounts which it is required to withhold under federal, state or local law in connection with the exercise of the Option; and (e) The lapse of such reasonable period of time following the exercise of the Option as the Committee may establish from time to time for reasons of administrative convenience. Section 5.5 - Rights of Shareholders The holder of an Option or Options shall not be, nor shall such holder have any of the rights or privileges of, a shareholder of the Company in respect of any shares purchasable upon the exercise of any part of the Option or Options unless and until a certificate or certificates representing such shares have been issued by the Company to such holder. Section 5.6 - Transfer Restrictions The Committee, in its absolute discretion, may impose such restrictions on the transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement and may be referred to on the certificates evidencing such shares. The Committee may require the Employee or Director to give the Company prompt notice of any disposition of shares of stock acquired by exercise of an Incentive Stock Option within two years from the date of grant of such Option or one year after the issuance of such shares to such Employee or Director. The Committee may direct that the certificates evidencing shares acquired upon exercise of an Incentive Stock Option refer to such requirement to give prompt notice of disposition. ARTICLE VI ADMINISTRATION Section 6.1 - Compensation Committee The Compensation Committee shall consist of at least two Directors appointed by and holding office at the pleasure of the Board. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice of resignation to the Board. Vacancies in the Committee shall be filled by the Board. Section 6.2 - Duties and Powers of Committee It shall be the duty of the Committee to conduct the general administration of the Plan in accordance with its provisions. The Committee shall have the power to interpret the Plan and the Options and to adopt such rules for the administration, interpretation and 11 12 application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. Any such interpretations and rules in regard to Incentive Stock Options shall be consistent with the basic purpose of the Plan to grant "incentive stock options" within the meaning of Section 422 of the Code. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan. Section 6.3 - Majority Rule The Committee shall act by a majority of its members in office. The Committee may act either by vote at a meeting or by a memorandum or other written instrument signed by a majority of the Committee. Section 6.4 - Compensation; Professional Assistance; Good Faith Actions Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities incurred by members of the Committee in connection with the administration of the Plan shall be borne by the Company. The Committee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and its Officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon all Optionees, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Committee shall be fully protected by the Company in respect to any such action, determination or interpretation. ARTICLE VII OTHER PROVISIONS Section 7.1 - Options Not Transferable No Option or interest or right therein or part thereof shall be subject to or liable for the debts, contracts or engagements of the Optionee 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 and of no effect; provided, however, that nothing in this Section 7.1 shall prevent transfers by will or by the applicable laws of descent and distribution. 12 13 Section 7.2 - Amendment, Suspension or Termination of the Plan 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. 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 shareholder 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. No Option may be granted during any period of suspension nor after termination of the Plan, and in no event may any Option be granted under this Plan after the first to occur of the following events: (a) The expiration of ten years from the date the Plan is adopted by the Board; or (b) The expiration of ten years from the date the Plan is approved by the Company's shareholders under Section 7.3. Section 7.3 - Approval of Plan by Shareholders This Plan will be submitted for the approval of the Company's shareholders within 12 months after the date of the Board's initial adoption of the Plan. Options may be granted prior to such shareholder approval; provided, however, that such Options shall not be exercisable prior to the time when the Plan is approved by the shareholders; and provided further, that if such approval has not been obtained at the end of said 12-month period, all Incentive Stock Options previously granted under the Plan shall thereupon become Non-Qualified Options. Section 7.4 - Effect of Plan Upon Other Option and Compensation Plans The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company, any Parent Corporation or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company, any Parent Corporation or any Subsidiary (a) to establish any other forms of incentives or compensation for employees of the Company, any Parent Corporation or any Subsidiary or (b) to grant or assume options otherwise than under this Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association. Section 7.5 - Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of the Plan. 13 14 IN WITNESS WHEREOF, pursuant to the due authorization and adoption of the Plan by the Board on July 17, 1987, amended effective April 4, 1991, March 26, 1993, March 18, 1994 and March 24, 1995, the Company has caused this Plan to be duly executed by its duly authorized officers. QUIKSILVER, INC. By: ------------------------------------ Robert B. McKnight, Jr. Chairman of the Board and Chief Executive Officer Date Plan approved by Stockholders: March 29, 1988 Date Plan amendments approved by Stockholders: April 4, 1991, March 26, 1993, March 18, 1994 and March 24, 1995 14 EX-10.2 3 INDEMNITY AGREEMENT WILLIAM BARNUM 1 EXHIBIT 10.2 QUIKSILVER, INC. INDEMNITY AGREEMENT THIS INDEMNITY AGREEMENT (the "Agreement") is made as of this 1st day of May 1995, by and between QUIKSILVER, INC., a Delaware corporation (the "Company"), and WILLIAM M. BARNUM, JR. (the "Indemnitee"), a director of the Company. A. The Indemnitee is currently serving as a director of the Company and in such capacity renders valuable services to the Company. B. The Company has investigated whether additional protective measures are warranted to protect adequately its directors and officers against various legal risks and potential liabilities to which such individuals are subject due to their position with the Company and has concluded that additional protective measures are warranted. C. In order to induce and encourage highly experienced and capable persons such as the Indemnitee to continue to serve as officers and directors, the Board of Directors has determined, after due consideration, that this Agreement is not only reasonable and prudent, but necessary to promote and ensure the best interests of the Company and its stockholders. NOW, THEREFORE, in consideration of the continued services of the Indemnitee and as an inducement to the Indemnitee to continue to serve as a director of the Company, the Company and the Indemnitee do hereby agree as follows: 2 1. DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth below: (a) "Proceeding" shall mean any threatened, pending or completed action, suit or proceeding, whether brought in the name of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, by reason of the fact that the Indemnitee is or was an officer and/or a director of the Company, or is or was serving at the request of the Company as director, officer, employee or agent of another enterprise, whether or not he is serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of Expenses is to be provided under this Agreement. (b) "Expenses" means, all costs, charges and expenses incurred in connection with a Proceeding, including, without limitation, attorneys' fees, disbursements and retainers, accounting and witness fees, travel and deposition costs, expenses of investigations, judicial or administrative proceedings or appeals, and any expenses of establishing a right to indemnification pursuant to this Agreement or otherwise, including reasonable compensation for time spent by the Indemnitee in connection with the investigation, defense or appeal of a Proceeding or action for indemnification for which he is not otherwise compensated by the Company or any third party; provided, however, that the term "Expenses" includes only those costs, charges and expenses incurred with the Company's consent, which consent shall not be unreasonably withheld; and provided further, that the term "Expenses" does not include the amount of damages, judgments, amounts paid in settlement, fines, penalties or excise taxes under the Employee Retirement Income 2 3 Security Act of 1974, as amended ("ERISA"), actually levied against the Indemnitee or paid by or on behalf of the Indemnitee. 2. AGREEMENT TO SERVE. The Indemnitee agrees to continue to serve as an officer of the Company at the will of the Company for so long as Indemnitee is duly elected or appointed or until such time as Indemnitee tenders a resignation in writing or is terminated, as an officer by the Company. Nothing in this Agreement shall be construed to create any right in Indemnitee to continued service as an officer of the Company. 3. INDEMNIFICATION IN THIRD PARTY ACTIONS. The Company shall indemnify the Indemnitee in accordance with the provisions of this Section 3 if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Company to procure a judgment in its favor), by reason of the fact that the Indemnitee is or was an officer and/or a director of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, against all Expenses, damages, judgments, amounts paid in settlement, fines, penalties and ERISA excise taxes actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law; provided that any settlement shall be approved in writing by the Company. 4. INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall indemnify the Indemnitee in accordance with the provisions of this Section 4 if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an officer and/or a director of the 3 4 Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, against all Expenses actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law. 5. CONCLUSIVE PRESUMPTION REGARDING STANDARD OF CONDUCT. The Indemnitee shall be conclusively presumed to have met the relevant standards of conduct required by Delaware law for indemnification pursuant to this Agreement, unless a determination is made that the Indemnitee has not met such standards by (i) the Board of Directors of the Company by a majority vote of a quorum thereof consisting of directors who were not parties to such Proceeding, (ii) the stockholders of the Company by majority vote, or (iii) in a written opinion of independent legal counsel, the selection of whom has been approved by the Indemnitee in writing. 6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee has been successful on the merits or otherwise in defense of any Proceeding or in defense of any claim, issue or matter therein, including the dismissal of a Proceeding without prejudice, the Indemnitee shall be indemnified against all Expenses incurred in connection therewith to the fullest extent permitted by Delaware law. 7. ADVANCES OF EXPENSES. The Expenses incurred by the Indemnitee in any Proceeding shall be paid promptly by the Company in advance of the final disposition of the Proceeding at the written request of the Indemnitee to the fullest extent permitted by Delaware law; provided that the Indemnitee shall undertake in writing to repay such amount 4 5 to the extent that it is ultimately determined that the Indemnitee is not entitled to indemnification by the Company. 8. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes actually and reasonably incurred by Indemnitee in the investigation, defense, appeal or settlement of any Proceeding but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes to which the Indemnitee is entitled. 9. INDEMNIFICATION PROCEDURE; DETERMINATION OF RIGHT TO INDEMNIFICATION. (a) Promptly after receipt by the Indemnitee of notice of the commencement of any Proceeding with respect to which the Indemnitee intends to claim indemnification pursuant to this Agreement, the Indemnitee will notify the Company of the commencement thereof. The omission to so notify the Company will not relieve the Company from any liability which it may have to the Indemnitee under this Agreement or otherwise. (b) If a claim under this Agreement is not paid by or on behalf of the Company within 30 days of receipt of written notice thereof, Indemnitee may at any time thereafter bring suit in any court of competent jurisdiction against the Company to enforce the right to indemnification provided by this Agreement. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in defending 5 6 any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Company) that the Indemnitee has failed to meet the standard of conduct that makes it permissible under Delaware law for the Company to indemnify the Indemnitee for the amount claimed. The burden of proving by clear and convincing evidence that indemnification or advancement of Expenses are not appropriate shall be on the Company. The failure of the directors or stockholders of the Company or independent legal counsel to have made a determination prior to the commencement of such Proceeding that indemnification or advancement of Expenses are proper in the circumstances because the Indemnitee has met the applicable standard of conduct shall not be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. (c) The Indemnitee's Expenses incurred in connection with any action concerning Indemnitee's right to indemnification or advancement of Expenses in whole or in part pursuant to this Agreement shall also be indemnified by the Company regardless of the outcome of such action, unless a court of competent jurisdiction determines that each of the material claims made by the Indemnitee in such action was not made in good faith or was frivolous. (d) With respect to any Proceeding for which indemnification is requested, the Company will be entitled to participate therein at its own expense and, except as otherwise provided below, to the extent that it may wish, the Company may assume the defense thereof, with counsel satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of a Proceeding, the Company will not be liable to the Indemnitee under this Agreement for any Expenses subsequently incurred by 6 7 the Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below. The Company shall not settle any Proceeding in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee's written consent. The Indemnitee shall have the right to employ counsel in any Proceeding, but the Expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of a Proceeding, or (iii) the Company shall not in fact have employed counsel to assume the defense of a Proceeding, in each of which cases the Expenses of the Indemnitee's counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which the Indemnitee has concluded that there may be a conflict of interest between the Company and the Indemnitee. 10. LIMITATIONS ON INDEMNIFICATION. No payments pursuant to this Agreement shall be made by the Company: (a) to indemnify or advance Expenses to the Indemnitee with respect to actions initiated or brought voluntarily by the Indemnitee and not by way of defense except with respect to actions brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Delaware law, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if approved by the Board of Directors by a majority vote of a quorum thereof consisting of directors who are not parties to such action; 7 8 (b) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes for which payment is actually made to the Indemnitee under a valid and collectible insurance policy, except in respect of any excess beyond the amount paid under such insurance; (c) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes for which the Indemnitee has been or is indemnified by the Company otherwise than pursuant to this Agreement; (d) indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines or penalties sustained in any Proceeding for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder or similar provisions of any federal, state or local statutory law; (e) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes resulting from Indemnitee's conduct which is finally adjudicated by a court of competent jurisdiction (i) to have been knowingly fraudulent, a knowing violation of law, deliberately dishonest or in violation of Indemnitee's duty of loyalty to the Company or (ii) to have involved willful misconduct on the part of the Indemnitee; or (f) if a court of competent jurisdiction shall enter a final order, decree or judgment to the effect that such indemnification or advancement of Expenses hereunder is unlawful under the circumstances. 8 9 11. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification and advancement of Expenses provided by this Agreement shall not be deemed to limit or preclude any other rights to which the Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any agreement, any vote of stockholders or disinterested directors, Delaware law, or otherwise, both as to action in Indemnitee's official capacity and as to action in any other capacity on behalf of the Company while holding such office. 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and shall inure to the benefit of (i) the Indemnitee and Indemnitee's heirs, personal representatives, executors, administrators and assigns and (ii) the Company and its successors and assigns, including any transferee of all or substantially all of the Company's assets and any successor or assign of the Company by merger or by operation of law. 13. SEPARABILITY. Each provision of this Agreement is a separate and distinct agreement and independent of the other, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. To the extent required, any provision of this Agreement may be modified by a court of competent jurisdiction to preserve its validity and to provide the Indemnitee with the broadest possible indemnification and advancement of Expenses permitted under Delaware law. If this Agreement or any portion thereof is invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee as to Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall 9 10 not have been invalidated or by any applicable provision of Delaware law or the law of any other jurisdiction. 14. HEADINGS. The Headings used herein are for convenience only and shall not be used in construing or interpreting any provision of the Agreement. 15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. 16. AMENDMENTS AND WAIVERS. No amendment, waiver, modification, termination or cancellation of this Agreement shall be effective unless in writing and signed by the party against whom enforcement is sought. The indemnification rights afforded to the Indemnitee hereby are contract rights and may not be diminished, eliminated or otherwise affected by amendments to the Company's Certificate of Incorporation, Bylaws or agreements, including any directors' and officers' liability insurance policies, whether the alleged actions or conduct giving rise to indemnification hereunder arose before or after any such amendment. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof, whether or not similar, nor shall any waiver constitute a continuing waiver. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other. 18. NOTICES. All notices and communications shall be in writing and shall be deemed duly given on the date of delivery if personally delivered or the date of receipt or refusal indicated on the return receipt if sent by first class mail, postage prepaid, registered 10 11 or certified, return receipt requested, to the following addresses, unless notice of a change of address in duly given by one party to the other, in which case notices shall be sent to such changed address: If to the Company: Quiksilver, Inc. 1740 Monrovia Costa Mesa, CA 92627 Attention: Secretary If to Indemnitee: Mr. William M. Barnum, Jr. c/o Brentwood Associates 11150 Santa Monica Boulevard, #1200 Los Angeles, CA 90025 19. SUBROGATION. In the event of any payment under this Agreement to or on behalf of the Indemnitee, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee against any person, firm, corporation or other entity (other than the Company) and the Indemnitee shall execute all papers requested by the Company and shall do any and all things that may be necessary or desirable to secure such rights for the Company, including the execution of such documents necessary or desirable to enable the Company to effectively bring suit to enforce such rights. 20. SUBJECT MATTER AND PARTIES. The intended purpose of this Agreement is to provide for indemnification and advancement of Expenses, and this Agreement is not intended to affect any other aspect of any relationship between the Indemnitee and the Company and is not intended to and shall not create any rights in any person as a third party beneficiary hereunder. 11 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "INDEMNITEE" --------------------------------------- WILLIAM M. BARNUM, JR. "COMPANY" QUIKSILVER, INC., a Delaware corporation By: ----------------------------------- Its: ----------------------------------- 12 EX-10.3 4 INDEMNITY AGREEMENT -MICHAEL GRAY 1 EXHIBIT 10.3 QUIKSILVER, INC. INDEMNITY AGREEMENT THIS INDEMNITY AGREEMENT (the "Agreement") is made as of this 1st day of May 1995, by and between QUIKSILVER, INC., a Delaware corporation (the "Company"), and MICHAEL H. GRAY (the "Indemnitee"), a director of the Company. A. The Indemnitee is currently serving as a director of the Company and in such capacity renders valuable services to the Company. B. The Company has investigated whether additional protective measures are warranted to protect adequately its directors and officers against various legal risks and potential liabilities to which such individuals are subject due to their position with the Company and has concluded that additional protective measures are warranted. C. In order to induce and encourage highly experienced and capable persons such as the Indemnitee to continue to serve as officers and directors, the Board of Directors has determined, after due consideration, that this Agreement is not only reasonable and prudent, but necessary to promote and ensure the best interests of the Company and its stockholders. NOW, THEREFORE, in consideration of the continued services of the Indemnitee and as an inducement to the Indemnitee to continue to serve as a director of the Company, the Company and the Indemnitee do hereby agree as follows: 2 1. DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth below: (a) "Proceeding" shall mean any threatened, pending or completed action, suit or proceeding, whether brought in the name of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, by reason of the fact that the Indemnitee is or was an officer and/or a director of the Company, or is or was serving at the request of the Company as director, officer, employee or agent of another enterprise, whether or not he is serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of Expenses is to be provided under this Agreement. (b) "Expenses" means, all costs, charges and expenses incurred in connection with a Proceeding, including, without limitation, attorneys' fees, disbursements and retainers, accounting and witness fees, travel and deposition costs, expenses of investigations, judicial or administrative proceedings or appeals, and any expenses of establishing a right to indemnification pursuant to this Agreement or otherwise, including reasonable compensation for time spent by the Indemnitee in connection with the investigation, defense or appeal of a Proceeding or action for indemnification for which he is not otherwise compensated by the Company or any third party; provided, however, that the term "Expenses" includes only those costs, charges and expenses incurred with the Company's consent, which consent shall not be unreasonably withheld; and provided further, that the term "Expenses" does not include the amount of damages, judgments, amounts paid in settlement, fines, penalties or excise taxes under the Employee Retirement Income 2 3 Security Act of 1974, as amended ("ERISA"), actually levied against the Indemnitee or paid by or on behalf of the Indemnitee. 2. AGREEMENT TO SERVE. The Indemnitee agrees to continue to serve as an officer of the Company at the will of the Company for so long as Indemnitee is duly elected or appointed or until such time as Indemnitee tenders a resignation in writing or is terminated, as an officer by the Company. Nothing in this Agreement shall be construed to create any right in Indemnitee to continued service as an officer of the Company. 3. INDEMNIFICATION IN THIRD PARTY ACTIONS. The Company shall indemnify the Indemnitee in accordance with the provisions of this Section 3 if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Company to procure a judgment in its favor), by reason of the fact that the Indemnitee is or was an officer and/or a director of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, against all Expenses, damages, judgments, amounts paid in settlement, fines, penalties and ERISA excise taxes actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law; provided that any settlement shall be approved in writing by the Company. 4. INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall indemnify the Indemnitee in accordance with the provisions of this Section 4 if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an officer and/or a director of the 3 4 Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, against all Expenses actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law. 5. CONCLUSIVE PRESUMPTION REGARDING STANDARD OF CONDUCT. The Indemnitee shall be conclusively presumed to have met the relevant standards of conduct required by Delaware law for indemnification pursuant to this Agreement, unless a determination is made that the Indemnitee has not met such standards by (i) the Board of Directors of the Company by a majority vote of a quorum thereof consisting of directors who were not parties to such Proceeding, (ii) the stockholders of the Company by majority vote, or (iii) in a written opinion of independent legal counsel, the selection of whom has been approved by the Indemnitee in writing. 6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee has been successful on the merits or otherwise in defense of any Proceeding or in defense of any claim, issue or matter therein, including the dismissal of a Proceeding without prejudice, the Indemnitee shall be indemnified against all Expenses incurred in connection therewith to the fullest extent permitted by Delaware law. 7. ADVANCES OF EXPENSES. The Expenses incurred by the Indemnitee in any Proceeding shall be paid promptly by the Company in advance of the final disposition of the Proceeding at the written request of the Indemnitee to the fullest extent permitted by Delaware law; provided that the Indemnitee shall undertake in writing to repay such amount 4 5 to the extent that it is ultimately determined that the Indemnitee is not entitled to indemnification by the Company. 8. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes actually and reasonably incurred by Indemnitee in the investigation, defense, appeal or settlement of any Proceeding but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes to which the Indemnitee is entitled. 9. INDEMNIFICATION PROCEDURE; DETERMINATION OF RIGHT TO INDEMNIFICATION. (a) Promptly after receipt by the Indemnitee of notice of the commencement of any Proceeding with respect to which the Indemnitee intends to claim indemnification pursuant to this Agreement, the Indemnitee will notify the Company of the commencement thereof. The omission to so notify the Company will not relieve the Company from any liability which it may have to the Indemnitee under this Agreement or otherwise. (b) If a claim under this Agreement is not paid by or on behalf of the Company within 30 days of receipt of written notice thereof, Indemnitee may at any time thereafter bring suit in any court of competent jurisdiction against the Company to enforce the right to indemnification provided by this Agreement. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in defending 5 6 any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Company) that the Indemnitee has failed to meet the standard of conduct that makes it permissible under Delaware law for the Company to indemnify the Indemnitee for the amount claimed. The burden of proving by clear and convincing evidence that indemnification or advancement of Expenses are not appropriate shall be on the Company. The failure of the directors or stockholders of the Company or independent legal counsel to have made a determination prior to the commencement of such Proceeding that indemnification or advancement of Expenses are proper in the circumstances because the Indemnitee has met the applicable standard of conduct shall not be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. (c) The Indemnitee's Expenses incurred in connection with any action concerning Indemnitee's right to indemnification or advancement of Expenses in whole or in part pursuant to this Agreement shall also be indemnified by the Company regardless of the outcome of such action, unless a court of competent jurisdiction determines that each of the material claims made by the Indemnitee in such action was not made in good faith or was frivolous. (d) With respect to any Proceeding for which indemnification is requested, the Company will be entitled to participate therein at its own expense and, except as otherwise provided below, to the extent that it may wish, the Company may assume the defense thereof, with counsel satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of a Proceeding, the Company will not be liable to the Indemnitee under this Agreement for any Expenses subsequently incurred by 6 7 the Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below. The Company shall not settle any Proceeding in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee's written consent. The Indemnitee shall have the right to employ counsel in any Proceeding, but the Expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of a Proceeding, or (iii) the Company shall not in fact have employed counsel to assume the defense of a Proceeding, in each of which cases the Expenses of the Indemnitee's counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which the Indemnitee has concluded that there may be a conflict of interest between the Company and the Indemnitee. 10. LIMITATIONS ON INDEMNIFICATION. No payments pursuant to this Agreement shall be made by the Company: (a) to indemnify or advance Expenses to the Indemnitee with respect to actions initiated or brought voluntarily by the Indemnitee and not by way of defense except with respect to actions brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Delaware law, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if approved by the Board of Directors by a majority vote of a quorum thereof consisting of directors who are not parties to such action; 7 8 (b) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes for which payment is actually made to the Indemnitee under a valid and collectible insurance policy, except in respect of any excess beyond the amount paid under such insurance; (c) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes for which the Indemnitee has been or is indemnified by the Company otherwise than pursuant to this Agreement; (d) indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines or penalties sustained in any Proceeding for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder or similar provisions of any federal, state or local statutory law; (e) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes resulting from Indemnitee's conduct which is finally adjudicated by a court of competent jurisdiction (i) to have been knowingly fraudulent, a knowing violation of law, deliberately dishonest or in violation of Indemnitee's duty of loyalty to the Company or (ii) to have involved willful misconduct on the part of the Indemnitee; or (f) if a court of competent jurisdiction shall enter a final order, decree or judgment to the effect that such indemnification or advancement of Expenses hereunder is unlawful under the circumstances. 8 9 11. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification and advancement of Expenses provided by this Agreement shall not be deemed to limit or preclude any other rights to which the Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any agreement, any vote of stockholders or disinterested directors, Delaware law, or otherwise, both as to action in Indemnitee's official capacity and as to action in any other capacity on behalf of the Company while holding such office. 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and shall inure to the benefit of (i) the Indemnitee and Indemnitee's heirs, personal representatives, executors, administrators and assigns and (ii) the Company and its successors and assigns, including any transferee of all or substantially all of the Company's assets and any successor or assign of the Company by merger or by operation of law. 13. SEPARABILITY. Each provision of this Agreement is a separate and distinct agreement and independent of the other, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. To the extent required, any provision of this Agreement may be modified by a court of competent jurisdiction to preserve its validity and to provide the Indemnitee with the broadest possible indemnification and advancement of Expenses permitted under Delaware law. If this Agreement or any portion thereof is invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee as to Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall 9 10 not have been invalidated or by any applicable provision of Delaware law or the law of any other jurisdiction. 14. HEADINGS. The Headings used herein are for convenience only and shall not be used in construing or interpreting any provision of the Agreement. 15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. 16. AMENDMENTS AND WAIVERS. No amendment, waiver, modification, termination or cancellation of this Agreement shall be effective unless in writing and signed by the party against whom enforcement is sought. The indemnification rights afforded to the Indemnitee hereby are contract rights and may not be diminished, eliminated or otherwise affected by amendments to the Company's Certificate of Incorporation, Bylaws or agreements, including any directors' and officers' liability insurance policies, whether the alleged actions or conduct giving rise to indemnification hereunder arose before or after any such amendment. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof, whether or not similar, nor shall any waiver constitute a continuing waiver. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other. 18. NOTICES. All notices and communications shall be in writing and shall be deemed duly given on the date of delivery if personally delivered or the date of receipt or refusal indicated on the return receipt if sent by first class mail, postage prepaid, registered 10 11 or certified, return receipt requested, to the following addresses, unless notice of a change of address in duly given by one party to the other, in which case notices shall be sent to such changed address: If to the Company: Quiksilver, Inc. 1740 Monrovia Costa Mesa, CA 92627 Attention: Secretary If to Indemnitee: Mr. Michael H. Gray c/o The Sweet Life 17711 Mitchell North, Suite B Irvine, CA 92714 19. SUBROGATION. In the event of any payment under this Agreement to or on behalf of the Indemnitee, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee against any person, firm, corporation or other entity (other than the Company) and the Indemnitee shall execute all papers requested by the Company and shall do any and all things that may be necessary or desirable to secure such rights for the Company, including the execution of such documents necessary or desirable to enable the Company to effectively bring suit to enforce such rights. 20. SUBJECT MATTER AND PARTIES. The intended purpose of this Agreement is to provide for indemnification and advancement of Expenses, and this Agreement is not intended to affect any other aspect of any relationship between the Indemnitee and the Company and is not intended to and shall not create any rights in any person as a third party beneficiary hereunder. 11 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "INDEMNITEE" --------------------------------------- MICHAEL H. GRAY "COMPANY" QUIKSILVER, INC., a Delaware corporation By: ---------------------------------- Its: ---------------------------------- 12 EX-10.4 5 INDEMNITY AGREEMENT TOM ROACH 1 EXHIBIT 10.4 QUIKSILVER, INC. INDEMNITY AGREEMENT THIS INDEMNITY AGREEMENT (the "Agreement") is made as of this 1st day of May 1995, by and between QUIKSILVER, INC., a Delaware corporation (the "Company"), and TOM ROACH (the "Indemnitee"), a director of the Company. A. The Indemnitee is currently serving as a director of the Company and in such capacity renders valuable services to the Company. B. The Company has investigated whether additional protective measures are warranted to protect adequately its directors and officers against various legal risks and potential liabilities to which such individuals are subject due to their position with the Company and has concluded that additional protective measures are warranted. C. In order to induce and encourage highly experienced and capable persons such as the Indemnitee to continue to serve as officers and directors, the Board of Directors has determined, after due consideration, that this Agreement is not only reasonable and prudent, but necessary to promote and ensure the best interests of the Company and its stockholders. NOW, THEREFORE, in consideration of the continued services of the Indemnitee and as an inducement to the Indemnitee to continue to serve as a director of the Company, the Company and the Indemnitee do hereby agree as follows: 2 1. DEFINITIONS. As used in this Agreement, the following terms shall have the meanings set forth below: (a) "Proceeding" shall mean any threatened, pending or completed action, suit or proceeding, whether brought in the name of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, by reason of the fact that the Indemnitee is or was an officer and/or a director of the Company, or is or was serving at the request of the Company as director, officer, employee or agent of another enterprise, whether or not he is serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of Expenses is to be provided under this Agreement. (b) "Expenses" means, all costs, charges and expenses incurred in connection with a Proceeding, including, without limitation, attorneys' fees, disbursements and retainers, accounting and witness fees, travel and deposition costs, expenses of investigations, judicial or administrative proceedings or appeals, and any expenses of establishing a right to indemnification pursuant to this Agreement or otherwise, including reasonable compensation for time spent by the Indemnitee in connection with the investigation, defense or appeal of a Proceeding or action for indemnification for which he is not otherwise compensated by the Company or any third party; provided, however, that the term "Expenses" includes only those costs, charges and expenses incurred with the Company's consent, which consent shall not be unreasonably withheld; and provided further, that the term "Expenses" does not include the amount of damages, judgments, amounts paid in settlement, fines, penalties or excise taxes under the Employee Retirement Income 2 3 Security Act of 1974, as amended ("ERISA"), actually levied against the Indemnitee or paid by or on behalf of the Indemnitee. 2. AGREEMENT TO SERVE. The Indemnitee agrees to continue to serve as an officer of the Company at the will of the Company for so long as Indemnitee is duly elected or appointed or until such time as Indemnitee tenders a resignation in writing or is terminated, as an officer by the Company. Nothing in this Agreement shall be construed to create any right in Indemnitee to continued service as an officer of the Company. 3. INDEMNIFICATION IN THIRD PARTY ACTIONS. The Company shall indemnify the Indemnitee in accordance with the provisions of this Section 3 if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding (other than a Proceeding by or in the right of the Company to procure a judgment in its favor), by reason of the fact that the Indemnitee is or was an officer and/or a director of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, against all Expenses, damages, judgments, amounts paid in settlement, fines, penalties and ERISA excise taxes actually and reasonably incurred by the Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law; provided that any settlement shall be approved in writing by the Company. 4. INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall indemnify the Indemnitee in accordance with the provisions of this Section 4 if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any Proceeding by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an officer and/or a director of the 3 4 Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another enterprise, against all Expenses actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such Proceeding, to the fullest extent permitted by Delaware law. 5. CONCLUSIVE PRESUMPTION REGARDING STANDARD OF CONDUCT. The Indemnitee shall be conclusively presumed to have met the relevant standards of conduct required by Delaware law for indemnification pursuant to this Agreement, unless a determination is made that the Indemnitee has not met such standards by (i) the Board of Directors of the Company by a majority vote of a quorum thereof consisting of directors who were not parties to such Proceeding, (ii) the stockholders of the Company by majority vote, or (iii) in a written opinion of independent legal counsel, the selection of whom has been approved by the Indemnitee in writing. 6. INDEMNIFICATION OF EXPENSES OF SUCCESSFUL PARTY. Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee has been successful on the merits or otherwise in defense of any Proceeding or in defense of any claim, issue or matter therein, including the dismissal of a Proceeding without prejudice, the Indemnitee shall be indemnified against all Expenses incurred in connection therewith to the fullest extent permitted by Delaware law. 7. ADVANCES OF EXPENSES. The Expenses incurred by the Indemnitee in any Proceeding shall be paid promptly by the Company in advance of the final disposition of the Proceeding at the written request of the Indemnitee to the fullest extent permitted by Delaware law; provided that the Indemnitee shall undertake in writing to repay such amount 4 5 to the extent that it is ultimately determined that the Indemnitee is not entitled to indemnification by the Company. 8. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes actually and reasonably incurred by Indemnitee in the investigation, defense, appeal or settlement of any Proceeding but not, however, for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion of such Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes to which the Indemnitee is entitled. 9. INDEMNIFICATION PROCEDURE; DETERMINATION OF RIGHT TO INDEMNIFICATION. (a) Promptly after receipt by the Indemnitee of notice of the commencement of any Proceeding with respect to which the Indemnitee intends to claim indemnification pursuant to this Agreement, the Indemnitee will notify the Company of the commencement thereof. The omission to so notify the Company will not relieve the Company from any liability which it may have to the Indemnitee under this Agreement or otherwise. (b) If a claim under this Agreement is not paid by or on behalf of the Company within 30 days of receipt of written notice thereof, Indemnitee may at any time thereafter bring suit in any court of competent jurisdiction against the Company to enforce the right to indemnification provided by this Agreement. It shall be a defense to any such action (other than an action brought to enforce a claim for Expenses incurred in defending 5 6 any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Company) that the Indemnitee has failed to meet the standard of conduct that makes it permissible under Delaware law for the Company to indemnify the Indemnitee for the amount claimed. The burden of proving by clear and convincing evidence that indemnification or advancement of Expenses are not appropriate shall be on the Company. The failure of the directors or stockholders of the Company or independent legal counsel to have made a determination prior to the commencement of such Proceeding that indemnification or advancement of Expenses are proper in the circumstances because the Indemnitee has met the applicable standard of conduct shall not be a defense to the action or create a presumption that the Indemnitee has not met the applicable standard of conduct. (c) The Indemnitee's Expenses incurred in connection with any action concerning Indemnitee's right to indemnification or advancement of Expenses in whole or in part pursuant to this Agreement shall also be indemnified by the Company regardless of the outcome of such action, unless a court of competent jurisdiction determines that each of the material claims made by the Indemnitee in such action was not made in good faith or was frivolous. (d) With respect to any Proceeding for which indemnification is requested, the Company will be entitled to participate therein at its own expense and, except as otherwise provided below, to the extent that it may wish, the Company may assume the defense thereof, with counsel satisfactory to the Indemnitee. After notice from the Company to the Indemnitee of its election to assume the defense of a Proceeding, the Company will not be liable to the Indemnitee under this Agreement for any Expenses subsequently incurred by 6 7 the Indemnitee in connection with the defense thereof, other than reasonable costs of investigation or as otherwise provided below. The Company shall not settle any Proceeding in any manner which would impose any penalty or limitation on the Indemnitee without the Indemnitee's written consent. The Indemnitee shall have the right to employ counsel in any Proceeding, but the Expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of the Indemnitee, unless (i) the employment of counsel by the Indemnitee has been authorized by the Company, (ii) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of the defense of a Proceeding, or (iii) the Company shall not in fact have employed counsel to assume the defense of a Proceeding, in each of which cases the Expenses of the Indemnitee's counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Company or as to which the Indemnitee has concluded that there may be a conflict of interest between the Company and the Indemnitee. 10. LIMITATIONS ON INDEMNIFICATION. No payments pursuant to this Agreement shall be made by the Company: (a) to indemnify or advance Expenses to the Indemnitee with respect to actions initiated or brought voluntarily by the Indemnitee and not by way of defense except with respect to actions brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Delaware law, but such indemnification or advancement of Expenses may be provided by the Company in specific cases if approved by the Board of Directors by a majority vote of a quorum thereof consisting of directors who are not parties to such action; 7 8 (b) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes for which payment is actually made to the Indemnitee under a valid and collectible insurance policy, except in respect of any excess beyond the amount paid under such insurance; (c) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes for which the Indemnitee has been or is indemnified by the Company otherwise than pursuant to this Agreement; (d) indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines or penalties sustained in any Proceeding for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder or similar provisions of any federal, state or local statutory law; (e) to indemnify the Indemnitee for any Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes resulting from Indemnitee's conduct which is finally adjudicated by a court of competent jurisdiction (i) to have been knowingly fraudulent, a knowing violation of law, deliberately dishonest or in violation of Indemnitee's duty of loyalty to the Company or (ii) to have involved willful misconduct on the part of the Indemnitee; or (f) if a court of competent jurisdiction shall enter a final order, decree or judgment to the effect that such indemnification or advancement of Expenses hereunder is unlawful under the circumstances. 8 9 11. INDEMNIFICATION HEREUNDER NOT EXCLUSIVE. The indemnification and advancement of Expenses provided by this Agreement shall not be deemed to limit or preclude any other rights to which the Indemnitee may be entitled under the Certificate of Incorporation, the Bylaws, any agreement, any vote of stockholders or disinterested directors, Delaware law, or otherwise, both as to action in Indemnitee's official capacity and as to action in any other capacity on behalf of the Company while holding such office. 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and shall inure to the benefit of (i) the Indemnitee and Indemnitee's heirs, personal representatives, executors, administrators and assigns and (ii) the Company and its successors and assigns, including any transferee of all or substantially all of the Company's assets and any successor or assign of the Company by merger or by operation of law. 13. SEPARABILITY. Each provision of this Agreement is a separate and distinct agreement and independent of the other, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. To the extent required, any provision of this Agreement may be modified by a court of competent jurisdiction to preserve its validity and to provide the Indemnitee with the broadest possible indemnification and advancement of Expenses permitted under Delaware law. If this Agreement or any portion thereof is invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee as to Expenses, damages, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes with respect to any Proceeding to the full extent permitted by any applicable portion of this Agreement that shall 9 10 not have been invalidated or by any applicable provision of Delaware law or the law of any other jurisdiction. 14. HEADINGS. The Headings used herein are for convenience only and shall not be used in construing or interpreting any provision of the Agreement. 15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. 16. AMENDMENTS AND WAIVERS. No amendment, waiver, modification, termination or cancellation of this Agreement shall be effective unless in writing and signed by the party against whom enforcement is sought. The indemnification rights afforded to the Indemnitee hereby are contract rights and may not be diminished, eliminated or otherwise affected by amendments to the Company's Certificate of Incorporation, Bylaws or agreements, including any directors' and officers' liability insurance policies, whether the alleged actions or conduct giving rise to indemnification hereunder arose before or after any such amendment. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof, whether or not similar, nor shall any waiver constitute a continuing waiver. 17. COUNTERPARTS. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party and delivered to the other. 18. NOTICES. All notices and communications shall be in writing and shall be deemed duly given on the date of delivery if personally delivered or the date of receipt or refusal indicated on the return receipt if sent by first class mail, postage prepaid, registered 10 11 or certified, return receipt requested, to the following addresses, unless notice of a change of address in duly given by one party to the other, in which case notices shall be sent to such changed address: If to the Company: Quiksilver, Inc. 1740 Monrovia Costa Mesa, CA 92627 Attention: Secretary If to Indemnitee: Mr. Tom Roach c/o Palm Springs Harley Davidson 19465 N. Indian Avenue P.O. Box 915 Palm Springs, CA 92258 19. SUBROGATION. In the event of any payment under this Agreement to or on behalf of the Indemnitee, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee against any person, firm, corporation or other entity (other than the Company) and the Indemnitee shall execute all papers requested by the Company and shall do any and all things that may be necessary or desirable to secure such rights for the Company, including the execution of such documents necessary or desirable to enable the Company to effectively bring suit to enforce such rights. 20. SUBJECT MATTER AND PARTIES. The intended purpose of this Agreement is to provide for indemnification and advancement of Expenses, and this Agreement is not intended to affect any other aspect of any relationship between the Indemnitee and the Company and is not intended to and shall not create any rights in any person as a third party beneficiary hereunder. 11 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. "INDEMNITEE" --------------------------------------- TOM ROACH "COMPANY" QUIKSILVER, INC., a Delaware corporation By: ---------------------------------- Its: ---------------------------------- 12 EX-27 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM QUIKSILVER, INC'S APRIL 30, 1995 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q 6-MOS OCT-31-1994 APR-30-1995 2,702,000 0 38,862,000 2,919,000 25,277,000 69,473,000 6,976,000 0 95,719,000 30,199,000 3,420,000 67,000 0 0 62,033,000 95,719,000 47,311,000 47,311,000 28,485,000 28,485,000 12,478,000 0 398,000 5,962,000 2,339,000 3,623,000 0 0 0 3,623,000 .52 0
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