SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
Quicksilver, Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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QUIKSILVER, INC.
15202 GRAHAM STREET
HUNTINGTON BEACH, CALIFORNIA 92649
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 26, 2002
To The Stockholders of Quiksilver, Inc.:
Please take notice that the Annual Meeting of Stockholders of Quiksilver,
Inc. (the "Company") will be held at the Company's headquarters, located at
15202 Graham Street, Huntington Beach, California, on Tuesday, March 26, 2002,
at 10:00 a.m. local time, for the following purposes:
1. To elect a Board of eight Directors for the ensuing year;
2. To consider and vote upon a proposal to approve the amendment of
the Company's 2000 Stock Incentive Plan;
3. To consider and vote upon a proposal to approve the amendment of
the Company's Certificate of Incorporation to increase the total authorized
shares of Common Stock from 30,000,000 to 45,000,000; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
At the Annual Meeting, the Board of Directors intends to present William M.
Barnum, Jr., Charles E. Crowe, Michael H. Gray, Harry Hodge, Robert G. Kirby,
Bernard Mariette, Robert B. McKnight, Jr. and Tom Roach, as nominees for
election to the Board of Directors.
Only stockholders of record on the books of the Company at the close of
business on February 8, 2002 will be entitled to notice of and to vote at the
Annual Meeting or any adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting in
person. A majority of the outstanding shares must be represented at the meeting
in order to transact business. Consequently, if you are unable to attend in
person, please execute the enclosed proxy and return it in the enclosed
addressed envelope. Your promptness in returning the proxy will assist in the
expeditious and orderly processing of the proxies. If you return your proxy, you
may nevertheless attend the meeting and vote your shares in person, if you wish.
By Order of the Board of Directors,
QUIKSILVER, INC.
ROBERT B. MCKNIGHT, JR.
Chairman of the Board and Chief
Executive Officer
Huntington Beach, California
February 19, 2002
QUIKSILVER, INC.
15202 GRAHAM STREET
HUNTINGTON BEACH, CALIFORNIA 92649
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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 26, 2002
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PROXY STATEMENT
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SOLICITATION OF PROXIES
The accompanying proxy is solicited by the Board of Directors of
Quiksilver, Inc. (the "Company") for use at the Company's Annual Meeting of
Stockholders to be held at the Company's headquarters, located at 15202 Graham
Street, Huntington Beach, California, on Tuesday, March 26, 2002, at 10:00 a.m.
local time, and any and all adjournments or postponements thereof. All shares
represented by each properly executed, unrevoked proxy received in time for the
Annual Meeting will be voted in the manner specified therein. If the manner of
voting is not specified in an executed proxy received by the Company, the proxy
holders will vote FOR the election of the nominees for election to the Board of
Directors listed in the proxy, FOR approval of the amendment of the 2000 Stock
Incentive Plan, FOR approval of the amendment of the Certificate of
Incorporation and, as to any other business which may properly come before the
meeting, in accordance with their best judgment. Any stockholder has the power
to revoke his or her proxy at any time before it is voted. A proxy may be
revoked by delivering a written notice of revocation to the Secretary of the
Company, by presenting at the meeting a later-dated proxy executed by the person
who executed the prior proxy, or by attendance at the meeting and voting in
person by the person who executed the prior proxy. This Proxy Statement and form
of Proxy are being mailed to the Company's stockholders on or about February 19,
2002.
The Bylaws of the Company provide that the holders of a majority of the
shares of stock of the Company issued and outstanding and entitled to vote at
the Annual Meeting, present in person or represented by proxy, shall constitute
a quorum and that, except as otherwise provided by statute, the Certificate of
Incorporation of the Company or the Bylaws, all other matters coming before the
Annual Meeting shall be decided by the vote of the holders of a majority of the
stock present in person or represented by proxy at the Annual Meeting and
entitled to vote thereat. Votes cast at the Annual Meeting will be tabulated by
the persons appointed by the Company to act as inspectors of election for the
Annual Meeting. The inspectors of election will treat shares of voting stock
represented by a properly signed and returned proxy as present at the Annual
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. Likewise, the inspectors of
election will treat shares of voting stock represented by "broker non-votes"
(i.e., shares of voting stock held in record name by brokers or nominees as to
which (i) instructions have not been received from the beneficial owners or
persons entitled to vote; (ii) the broker or nominee does not have discretionary
voting power under applicable rules or the instrument under which it serves in
such capacity; or (iii) the recordholder has indicated on the proxy card or has
executed a proxy and otherwise notified the Company that it does not have
authority to vote such shares on that matter) as present for purposes of
determining a quorum.
Directors will be elected by a favorable vote of a plurality of the shares
of voting stock present and entitled to vote, in person or by proxy, at the
Annual Meeting. Accordingly, abstentions or broker non-votes as to the election
of Directors will not affect the election of the candidates receiving the
plurality of votes. Proposal 2 requires the approval of a majority of the shares
of voting stock present at the Annual Meeting and entitled to vote thereat.
Therefore, abstentions as to Proposal 2 will have the same effect as votes
against such proposal. Broker non-votes as to Proposal 2, however, will be
deemed shares not entitled to vote on such proposal, and will not be counted as
votes for or against such proposal, and will not be included in calculating the
number of votes necessary for approval of such proposal. Proposal 3 requires the
approval of a majority of
shares of the outstanding voting stock and therefore abstentions and broker
non-votes as to Proposal 3 will have the same effect as votes against such
proposal.
The cost of soliciting proxies will be borne by the Company. The
solicitation will be by mail. Expenses will include reimbursements paid to
brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the meeting to beneficial owners of the
Company's Common Stock. Further solicitation of proxies may be made by telephone
or oral communication with some stockholders by the Company's regular employees
who will not receive additional compensation for the solicitation. The Company
has no present plans to hire special employees or paid solicitors to assist in
obtaining proxies, but reserves the option of doing so if it should appear that
a quorum otherwise might not be obtained.
OUTSTANDING SHARES AND VOTING RIGHTS
Only holders of record of the 23,218,903 shares of the Company's Common
Stock outstanding at the close of business on February 8, 2002 will be entitled
to notice of and to vote at the meeting or any adjournment or postponement
thereof. On each matter to be considered at the Annual Meeting, stockholders
will be entitled to cast one vote for each share held of record on February 8,
2002.
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CERTAIN STOCKHOLDERS
Certain information with respect to (i) each stockholder known by the
Company to be the beneficial owner of more than 5% of the Company's Common
Stock, (ii) each of the current Directors and nominees for election as
Directors, (iii) each of the Executive Officers listed in the compensation
tables below, and (iv) all current Directors and Executive Officers as a group,
including the number of shares of the Company's Common Stock beneficially owned
by each of them as of December 31, 2001, is set forth below:
<Table>
<Caption>
PERCENT OF
SHARES OF OUTSTANDING
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
NAME OF INDIVIDUAL OR IDENTITY OF GROUP(1) OWNED OWNED
- ------------------------------------------ ------------ ------------
Lord, Abbett & Co. ...................................... 2,531,546(2) 10.9%
767 Fifth Avenue
New York, NY 10153
T. Rowe Price Associates, Inc. .......................... 2,279,550(3) 9.8%
100 E. Pratt Street
Baltimore, MD 21202
AIM Management Group Inc. ............................... 1,732,500(4) 7.5%
11 Greenway Plaza, Suite 100
Houston, TX 77046
Robert B. McKnight, Jr. ................................. 1,134,999(5) 4.8%
William M. Barnum, Jr. .................................. 133,000(6) (7)
Charles E. Crowe......................................... 104,500(8) (7)
Michael H. Gray.......................................... 44,000(9) (7)
Robert G. Kirby.......................................... 195,000(10) (7)
Bernard Mariette......................................... 204,998(11) (7)
Tom Roach................................................ 138,700(12) (7)
Harry Hodge.............................................. 131,933(13) (7)
Steven L. Brink.......................................... 132,833(14) (7)
Charles S. Exon.......................................... 10,000(15) (7)
All Executive Officers and Directors as a Group (10
persons)............................................... 2,229,963(16) 9.1%
</Table>
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(1) The address for each of the named individuals is c/o Quiksilver, Inc.,
15202 Graham Street, Huntington Beach, California 92649. Unless otherwise
indicated, the named persons possess sole voting and investment power with
respect to the shares listed (except to the extent such authority is shared
with spouses under applicable law).
(2) According to the Schedule 13G filed by Lord, Abbet & Co. with the
Securities and Exchange Commission, Lord, Abbet & Co. has sole voting power
and investment power with respect to all 2,531,546 of the listed shares.
(3) According to the Schedule 13G filed by T. Rowe Price Associates, Inc. ("T.
Rowe") with the Securities and Exchange Commission, T. Rowe has sole voting
power with respect to 514,600 of the listed shares and sole investment
power with respect to all 2,279,550 shares. T. Rowe Price New Horizons
Fund, Inc. has sole voting power with respect to 1,250,000 of the listed
shares.
(4) According to the Schedule 13G filed by AIM Management Group Inc. with the
Securities and Exchange Commission, AIM Management Group Inc. has sole
voting and investment power with respect to all 1,732,500 of the listed
shares.
(5) Includes an aggregate of 554,499 shares which Mr. McKnight has, or will
have within 60 days after December 31, 2001, the right to acquire upon the
exercise of outstanding options.
(6) Includes an aggregate of 130,000 shares which Mr. Barnum has, or will have
within 60 days after December 31, 2001, the right to acquire upon the
exercise of outstanding options.
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(7) Less than 1% of the outstanding shares of Common Stock.
(8) Includes an aggregate of 3,000 shares owned of record by Mr. Crowe's
children and 14,000 shares which Mr. Crowe has, or will have within 60 days
after December 31, 2001, the right to acquire upon exercise of outstanding
options.
(9) Includes an aggregate of 20,000 shares which Mr. Gray has, or will have
within 60 days after December 31, 2001, the right to acquire upon exercise
of outstanding options.
(10) Includes an aggregate of 6,000 shares owned of record by Mr. Kirby's spouse
and 130,000 shares which Mr. Kirby has, or will have within 60 days after
December 31, 2001, the right to acquire upon exercise of outstanding
options.
(11) Includes an aggregate of 204,998 shares which Mr. Mariette has, or will
have within 60 days after December 31, 2001, the right to acquire upon the
exercise of outstanding options.
(12) Includes an aggregate of 2,800 shares owned of record by Mr. Roach's
children and 130,000 shares which Mr. Roach has, or will have within 60
days after December 31, 2001, the right to acquire upon exercise of
outstanding options.
(13) Includes an aggregate of 106,333 shares which Mr. Hodge has, or will have
within 60 days after December 31, 2001, the right to acquire upon the
exercise of outstanding options.
(14) Includes an aggregate of 132,833 shares which Mr. Brink has, or will have
within 60 days after December 31, 2001, the right to acquire upon the
exercise of outstanding options.
(15) Includes an aggregate of 10,000 shares which Mr. Exon has, or will have
within 60 days after December 31, 2001, the right to acquire upon the
exercise of outstanding options.
(16) Includes an aggregate of 1,432,663 shares which the Executive Officers and
Directors as a Group have, or will have within 60 days after December 31,
2001, the right to acquire upon the exercise of outstanding options.
PROPOSAL 1
ELECTION OF DIRECTORS
Directors are elected at each Annual Meeting of Stockholders and hold
office until the next Annual Meeting of Stockholders when their respective
successors are duly elected and qualified. The Company's Bylaws authorize a
Board consisting of four to eight Directors, with the number of Directors
currently fixed at eight.
Of the eight nominees for election to the Board of Directors, all are
currently serving as Directors of the Company and, except for Mr. Mariette, were
elected to their present terms of office by the stockholders at the 2001 Annual
Meeting of Stockholders. Mr. Mariette was elected to his present term by the
Board in December 2001. Unless instructed to the contrary, the shares
represented by the proxies will be voted in favor of the election of the
nominees named below as Directors. Although it is anticipated that each nominee
will be able to serve as a Director, should any nominee become unavailable to
serve, the proxies will be voted for such other person or persons as may be
designated by the Company's Board of Directors. The nominees receiving the
highest number of votes, up to the number of Directors to be elected, will be
elected as Directors.
The following sets forth certain biographical information for each of the
nominees.
Mr. William M. Barnum, Jr., age 47, has served as a Director of the Company
since November 1991. Mr. Barnum also currently serves as a director of several
private companies, and has been a Managing Member of Brentwood Associates, a Los
Angeles based venture capital and private equity investment firm since 1986.
Prior to that, Mr. Barnum held several positions at Morgan Stanley & Co. Mr.
Barnum graduated from Stanford University in 1976 with a B.A. in Economics and
from the Stanford Graduate School of Business and Stanford Law School in 1981
with M.B.A. and J.D. degrees.
Mr. Charles E. Crowe, age 46, has served as a Director of the Company since
December 1980. Mr. Crowe also served as a Vice President of the Company until
his leave of absence in fiscal 1992 and
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subsequent resignation on February 5, 1993. Prior to 1981, Mr. Crowe was
employed by Bateman Eichler, Hill Richards, Incorporated. Mr. Crowe graduated
from the University of California, Santa Barbara, with a B.A. degree in
Economics. Mr. Crowe is the step son-in-law of Mr. Kirby.
Mr. Michael H. Gray, age 49, has served as a Director of the Company since
November 1991. He is currently President of Sweet Life Restaurants, a specialty
baked goods and food services company, and was formerly President of St. John
Knits, Inc., a women's clothing company, from 1986 to 1991, where he was
employed beginning in 1971. Mr. Gray graduated from Long Beach State University
with a degree in Business Administration.
Mr. Harry Hodge, age 51, has served as a Director of the Company since
December 1996. Mr. Hodge co-founded Na Pali, S.A. ("Quiksilver Europe"), the
European licensee of Quiksilver International, in 1984 in St. Jean de Luz,
France. Following the acquisition of Quiksilver Europe by the Company, Mr. Hodge
remained as President Director Generale. In March 2000 he became Chairman of the
Board, Quiksilver Europe, and in September 2000 he was also appointed President
of Quiksilver International Operations. From 1981 to 1983, he was the Marketing
Director for Quiksilver International, in Torquay, Australia. Prior to his
experience with Quiksilver International, Mr. Hodge was a journalist in
Australia.
Mr. Robert G. Kirby, age 77, has served as a Director of the Company since
October 1986. Mr. Kirby is a Senior Partner of the Capital Group Partners L.P.
and former Chairman of the Board of Capital Guardian Trust Company, a
wholly-owned subsidiary of The Capital Group, Inc. Capital Guardian Trust
Company is an institutional portfolio manager for pension funds. Mr. Kirby has
also been a Director of The Capital Group, Inc., from 1978 to 1991. Mr. Kirby is
a graduate of Stanford University and Harvard University Graduate School of
Business Administration. Mr. Kirby is the step father-in-law of Mr. Crowe.
Mr. Bernard Mariette, age 39, has served as a Director of the Company since
December 2001. Mr. Mariette has served as President Director Generale,
Quiksilver Europe since March 2000. He joined the Company as Vice President
Director Generale, Quiksilver Europe in 1994. Prior to joining the Company, he
was Deputy General Manager of Timberland, France and Spain, and held various
senior management positions with Loreal. Mr. Mariette has a B.S. degree in
Accounting and an M.A. degree in Marketing and Finance from Montpellier
University (France) and an M.B.A. in International Business from Bradford
University (UK).
Mr. Robert B. McKnight, Jr., age 48, was a co-founder of the Company in
1976, served as President from 1979 through July 1991 and has served as Chairman
of the Board and Chief Executive Officer since August 1991 and a Director of the
Company since its inception. Mr. McKnight received a B.S. degree in Business
Administration from the University of Southern California.
Mr. Tom Roach, age 58, has been President and owner of Palm Springs Harley
Davidson, a motorcycle retail and specialty store, since 1990. Prior to 1990,
Mr. Roach spent over 20 years in the department store business with Federated
Department Stores and Associated Dry Goods. Mr. Roach served as Chairman of the
Board and Chief Executive Officer of J.W. Robinsons, Chairman of the Board and
Chief Executive Officer of Denver Dry Goods, and President and Chief Operating
Officer of Woodward and Lothrop/John Wannamaker. Mr. Roach also held executive
positions with Burdines, Rikes, Filenes, and Lord & Taylor during his retail
career. Mr. Roach received his M.B.A. from the University of Wyoming.
The Board of Directors held 5 meetings during the fiscal year ended October
31, 2001. Each incumbent Director attended at least 75% of the total number of
meetings of the Board of Directors and of Board of Director committees on which
that Director served which were held during the period for which he was a
Director. Non-employee Directors received an annual retainer of $10,000, a
clothing allowance of $2,000 and an annual grant of options to purchase 5,000
shares of the Company's Common Stock exercisable at the fair market value of the
stock on the date of grant. In addition, each Director who is not an employee of
the Company receives an attendance fee of $2,000 for each meeting of the Board
of Directors he personally attends and for each meeting of a committee of the
Board of Directors he personally attends which is not held on the same day as a
meeting of the Board of Directors. Non-employee Directors receive $1,000 for
each Board meeting attended telephonically.
5
The Board of Directors has a standing Compensation and Audit Committee, but
does not have a Nominating Committee.
The Compensation Committee is responsible for making recommendations to the
Board of Directors concerning the annual compensation for all executive officers
and key employees of the Company, as well as administering the Company's Stock
Option Plans. The Compensation Committee comprises Messrs. Barnum, Gray, Kirby
and Roach. The Compensation Committee held two meetings during the fiscal year
ended October 31, 2001.
The Audit Committee is responsible for recommending independent public
accountants for the Company, as well as acting on behalf of the Board of
Directors in the oversight of all material aspects of the Company's reporting,
internal control and audit functions. The Company's Board of Directors has
adopted a written charter for the Audit Committee. The Audit Committee comprises
Messrs. Barnum, Gray and Roach, each of whom is "independent" under the New York
Stock Exchange listing standards. During the fiscal year ended October 31, 2001,
the Audit Committee held three meetings.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and Executive Officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
Directors and greater-than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended October 31, 2001 all Section
16(a) filing requirements applicable to its Officers, Directors and greater-than
ten percent beneficial owners were satisfied, except that Robert Kirby filed a
late Form 4 reporting a donation of stock, and Harry Hodge filed a late Form 4
reporting the purchase of stock.
PROPOSAL 2
APPROVAL OF AMENDMENT OF
QUIKSILVER, INC. 2000 STOCK INCENTIVE PLAN
The Company's stockholders are being asked to approve an amendment of the
Quiksilver, Inc. 2000 Stock Incentive Plan (the "2000 Plan"), to increase the
number of shares of the Company's Common Stock reserved for issuance under the
2000 Plan by 600,000 shares. The Board of Directors unanimously adopted this
amendment on January 28, 2002, subject to stockholder approval at the Annual
Meeting.
The proposed amendment will assure that a sufficient reserve of Common
Stock remains available for issuance under the 2000 Plan in order to allow the
Company to continue to utilize equity incentives to attract and retain the
services of key individuals and other personnel essential to the Company's
long-term growth and financial success. The Company relies significantly on
equity incentives in the form of stock option grants in order to attract and
retain key employees and other personnel and believes such equity incentives are
necessary for the Company to remain competitive in the marketplace for executive
talent and other key employees. Option grants made to newly-hired or continuing
employees will be based on both competitive market conditions and individual
performance.
The following is a summary of the principal features of the 2000 Plan. The
summary, however, does not purport to be a complete description of all the
provisions of the 2000 Plan. Any stockholder of the Company who wishes to obtain
a copy of the actual plan document may do so without charge upon written request
to the Corporate Secretary at the Company's principal executive offices in
Huntington Beach, California. The 2000 Plan serves as the successor to the
Company's 1996 Stock Option Plan, 1992 Nonemployee Directors' Stock
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Option Plan, 1995 Nonemployee Directors' Stock Option Plan and 1998 Nonemployee
Directors' Stock Option Plan (together, the "Predecessor Plans").
EQUITY INCENTIVE PROGRAMS
The 2000 Plan consists of four (4) separate equity incentive programs: (i)
a Discretionary Option Grant Program; (ii) a Salary Investment Option Grant
Program; (iii) an Automatic Option Grant Program; and (iv) a Director Fee Option
Grant Program. The principal features of these programs are described below. The
2000 Plan (other than the Automatic Option Grant Program and Director Fee Option
Grant Program) are administered by the Compensation Committee of the Board. This
committee (the "Plan Administrator") has complete discretion (subject to the
provisions of the 2000 Plan) to authorize option grants under the 2000 Plan,
except that the exercise price of outstanding options may not be reset and new
grants may not be made in exchange for the cancellation of outstanding options
without stockholder approval. The Board may also appoint a secondary committee
of one or more Board members, including employee directors, to authorize option
grants to eligible persons other than executive officers and Board members
subject to the short-swing liability provisions of the federal securities laws.
All grants under the Automatic Option Grant Program and Director Fee Option
Grant Program are made in strict compliance with the provisions of those
programs, and no administrative discretion is exercised by the Plan
Administrator with respect to the grants made thereunder.
As of the date of this Proxy Statement, the Company has only implemented
the Discretionary Option Grant Program and Automatic Option Grant Program and
has not issued any shares or granted any options under the Salary Investment
Option Grant Program or Director Fee Option Grant Program. The Board of
Directors may determine to implement such programs in the future.
SHARE RESERVE
A total of 5,036,209 shares of Common Stock have been authorized for
issuance over the term of the 2000 Plan. The foregoing share reserve includes
the additional increase of 600,000 shares for which stockholder approval is
sought under this Proposal. Stockholder approval is required for any increase in
the number of shares authorized for issuance under the Plan.
As of January 31, 2002, options for 3,428,789 shares of Common Stock were
outstanding under the 2000 Plan and 149,478 shares of Common Stock remained
available for future option grants. Approval of this Proposal will increase the
shares of Common Stock available for future option grants to 749,478 shares.
No participant in the 2000 Plan may receive option grants, or separately
exercisable stock appreciation rights for more than 200,000 shares of Common
Stock in the aggregate per calendar year, subject to adjustment for subsequent
stock splits, stock dividends and similar transactions.
The shares of Common Stock issuable under the 2000 Plan may be drawn from
shares of the Company's authorized but unissued Common Stock or from shares of
Common Stock reacquired by the Company, including shares repurchased on the open
market.
Shares subject to any outstanding options under the 2000 Plan (including
options incorporated from the Predecessor Plans) which expire or otherwise
terminate prior to exercise will be available for subsequent issuance. Unvested
shares issued under the 2000 Plan and subsequently repurchased by the Company
pursuant to its repurchase rights under the 2000 Plan will also be available for
subsequent issuance.
ELIGIBILITY
Employees, non-employee Board members and independent advisors and
consultants in the service of the Company or its parent and subsidiaries
(whether now existing or subsequently established) will be eligible to
participate in the Discretionary Option Grant Program. The Company's executive
officers and other highly paid employees will also be eligible to participate in
the Salary Investment Option Grant Program, and non-employee members of the
Board will be eligible to participate in the Automatic Option Grant and Director
Fee Option Grant Programs.
7
As of January 31, 2002, five executive officers, five non-employee Board
members and approximately 2,000 other employees and consultants were eligible to
participate in the Discretionary Option Grant Program. The five executive
officers and approximately ten other individuals were eligible to participate in
the Salary Investment Option Grant Program, and the five non-employee Board
members were also eligible to participate in the Automatic Option Grant and
Director Fee Option Grant Programs.
VALUATION
The fair market value per share of Common Stock on any relevant date under
the 2000 Plan will be the closing selling price per share on that date on the
New York Stock Exchange. On January 31, 2002, the closing selling price per
share was $18.36.
DISCRETIONARY OPTION GRANT PROGRAM
The options granted under the Discretionary Option Grant Program may be
either incentive stock options under the federal tax laws or non-statutory
options. Each granted option will have an exercise price per share not less than
the fair market value per share of Common Stock on the option grant date, and no
granted option will have a term in excess of ten years. The shares subject to
each option will generally vest in one or more installments over a specified
period of service measured from the grant date. Historically, the Company has
granted options vesting over a three year period from the date of grant.
Upon cessation of service, the optionee will have a limited period of time
in which to exercise any outstanding option to the extent exercisable for vested
shares. The Plan Administrator has complete discretion to extend the period
following the optionee's cessation of service during which his or her
outstanding options may be exercised and/or to accelerate the exercisability or
vesting of such options in whole or in part. Such discretion may be exercised at
any time while the options remain outstanding, whether before or after the
optionee's actual cessation of service.
The Plan Administrator is authorized to issue two types of stock
appreciation rights in connection with option grants made under the
Discretionary Option Grant Program:
Tandem stock appreciation rights, which provide the holders with the
right to surrender their options for an appreciation distribution from the
Company equal in amount to the excess of (a) the fair market value of the
vested shares of Common Stock subject to the surrendered option over (b)
the aggregate exercise price payable for such shares. Such appreciation
distribution may, at the discretion of the Plan Administrator, be made in
cash or in shares of Common Stock.
Limited stock appreciation rights, which may be granted to officers of
the Company as part of their option grants. Any option with such a limited
stock appreciation right may (whether or not the option is at the time
exercisable for vested shares) be surrendered to the Company upon the
successful completion of a hostile tender offer for more than fifty percent
(50%) of the Company's outstanding voting securities. In return for the
surrendered option, the officer will be entitled to a cash distribution
from the Company in an amount per surrendered option share equal to the
excess of (a) the tender offer price paid per share over (b) the exercise
price payable per share under such option.
SALARY INVESTMENT OPTION GRANT PROGRAM
The Plan Administrator has complete discretion in implementing the Salary
Investment Option Grant Program for one or more calendar years and in selecting
the executive officers and other eligible individuals who are to participate in
the program for those years. As a condition to such participation, each selected
individual must, prior to the start of the calendar year of participation, file
with the Plan Administrator an irrevocable authorization directing the Company
to reduce his or her base salary for the upcoming calendar year by a specified
dollar amount not less than $10,000 nor more than $50,000 and apply that amount
to the acquisition of a special option grant under the program.
Each selected individual who files such a timely election will
automatically be granted, on the first trading day in January of the calendar
year for which that salary reduction is to be in effect, a non-statutory option
to
8
purchase that number of shares of Common Stock determined by dividing the salary
reduction amount by two-thirds of the fair market value per share of Common
Stock on the grant date. The option will be exercisable at a price per share
equal to one-third of the fair market value of the option shares on the grant
date. As a result, the total spread on the option shares at the time of grant
(the fair market value of the option shares on the grant date less the aggregate
exercise price payable for those shares) will be equal to the salary reduction
amount. The option will become exercisable in a series of twelve (12) equal
monthly installments over the calendar year for which the salary reduction is to
be in effect and will become exercisable in full on an accelerated basis upon
certain changes in the ownership or control of the Company. Each option will
remain exercisable for any vested shares subject to the option until the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the end of the
three (3)-year period measured from the date of the optionee's cessation of
service.
AUTOMATIC OPTION GRANT PROGRAM
Under the Automatic Option Grant Program, each individual who becomes a
non-employee Board member is automatically granted at that time a non-statutory
option to purchase 15,000 shares of Common Stock, provided such individual has
not previously been in the Company's employ. In addition, on the date of each
Annual Stockholders Meeting, each individual who is to continue to serve as a
non-employee Board member after such meeting will automatically be granted a
non-statutory option to purchase 5,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six months.
There will be no limit on the number of such 5,000-share options which any one
non-employee Board member may receive over the period of Board service and
non-employee Board members who have previously served in the Company's employ
will be eligible for one or more 5,000-share option grants.
Each option will have an exercise price per share equal to the fair market
value per share of Common Stock on the option grant date and a maximum term of
ten years measured from the option grant date. Each option will be immediately
exercisable for all the option shares, but any purchased shares will be subject
to repurchase by the Company, at the exercise price paid per share, upon the
optionee's cessation of Board service. Each initial 15,000-share option grant
will vest (and the Company's repurchase rights will lapse) in three equal annual
installments over the optionee's period of Board service, with the first such
installment to vest upon the optionee's completion of one year of Board service
measured from the option grant date. Each annual 5,000-share option grant will
vest (and the Company's repurchase rights will lapse) upon the optionee's
completion of one year of Board service measured from the option grant date.
The shares subject to each automatic option grant will immediately vest
upon the optionee's death or permanent disability or an acquisition of the
Company (whether by merger, asset sale or sale of stock by the stockholders).
Each automatic option grant held by an optionee upon his or her termination of
Board service will remain exercisable, for any or all of the option shares in
which the optionee is vested at the time of such termination, for up to a twelve
(12)-month period following such termination date.
Each option granted under the program will have a limited stock
appreciation right which will allow the optionee to surrender that option to the
Company upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting securities. In return
for the surrendered option, the optionee will be entitled to a cash distribution
from the Company in an amount per surrendered option share equal to the excess
of (a) the tender offer price paid per share over (b) the exercise price payable
per share under such option.
DIRECTOR FEE OPTION GRANT PROGRAM
For each calendar year that the Director Fee Option Grant Program is in
effect, as determined by the Plan Administrator, each non-employee Board member
may elect to apply all or a portion of his or her annual retainer fee otherwise
payable in cash that year (currently $10,000) to the acquisition of a special
option grant under the Director Fee Option Grant Program. The election must be
made prior to the start of the calendar year for which such election will be in
effect, and the grant will automatically be made on the first trading day in
January following the filing of such election. The option will have an exercise
price per share equal to one-
9
third of the fair market value of the option shares on the grant date, and the
number of option shares will be determined by dividing the dollar amount of the
retainer fee subject to the election by two-thirds of the fair market value per
share of Common Stock on the option grant date. As a result, the total spread on
the option (the fair market value of the option shares on the grant date less
the aggregate exercise price payable for those shares) will be equal to the
portion of the retainer fee subject to the non-employee Board member's election.
Stockholder approval of this proposal will also constitute approval of each
option grant made pursuant to the provisions of the Director Fee Option Grant
Program and the subsequent exercise of that option in accordance with the terms
of such program.
Each option granted under the program will become exercisable for the
option shares in a series of twelve (12) successive equal monthly installments
upon the optionee's completion of each month of Board service during the
calendar year of the option grant. In the event the optionee ceases Board
service for any reason (other than death or permanent disability), the option
will immediately terminate with respect to any option shares for which the
option is not otherwise at that time exercisable. Should the optionee's service
as a Board member cease by reason of death or permanent disability, then the
option will immediately become exercisable for all the shares of Common Stock
subject to the option. Each option may be exercised, for any or all of the
shares for which that option is at the time exercisable, until the earlier of
(i) the expiration of the ten (10)-year option term or (ii) the end of the three
(3)-year period measured from the date of the optionee's cessation of Board
service.
Each option granted under the program will have a limited stock
appreciation right which will allow the optionee to surrender that option to the
Company upon the successful completion of a hostile tender offer for more than
fifty percent (50%) of the Company's outstanding voting securities. In return
for the surrendered option, the optionee will be entitled to a cash distribution
from the Company in an amount per surrendered option share equal to the excess
of (a) the tender offer price paid per share over (b) the exercise price payable
per share under such option.
GENERAL PROVISIONS
ACCELERATION
In the event of an acquisition of the Company, whether by merger or asset
sale or a sale of stock by the stockholders, each outstanding option under the
Discretionary Option Grant Program which is not to be assumed by the successor
corporation or otherwise continued in effect will automatically accelerate in
full, and all unvested shares under the Discretionary Option Grant Program will
immediately vest, except to the extent the Company's repurchase rights with
respect to those shares are to be assigned to the successor corporation or
otherwise continued in effect. The Plan Administrator has the authority under
the Discretionary Option Grant Program to provide that the shares subject to
options granted under that program will automatically vest (i) upon an
acquisition of the Company, whether or not those options are assumed or
continued, or (ii) in the event the individual's service is terminated, whether
involuntarily or through a resignation for good reason, within a designated
period (not to exceed eighteen (18) months) following an acquisition in which
those options are assumed or otherwise continued in effect.
Each option outstanding under the Salary Investment Option Grant, Automatic
Option Grant and Director Fee Option Grant Programs will also automatically
accelerate in the event the Company should be acquired or other change in
control of the Company occur.
The acceleration of vesting in the event of a change in the ownership or
control of the Company may be seen as an anti-takeover provision and may have
the effect of discouraging a merger proposal, a takeover attempt or other
efforts to gain control of the Company.
FINANCIAL ASSISTANCE
The Plan Administrator may permit one or more participants to pay the
exercise price of outstanding options under the 2000 Plan by delivering a
promissory note payable in installments. The Plan Administrator will determine
the terms of any such promissory note. However, the maximum amount of financing
provided
10
any participant may not exceed the cash consideration payable for the issued
shares plus all applicable taxes incurred in connection with the acquisition of
the shares.
SPECIAL TAX ELECTION
The Plan Administrator may provide one or more holders of options or
unvested shares with the right to have the Company withhold a portion of the
shares otherwise issuable to such individuals in satisfaction of the withholding
tax liability incurred by such individuals in connection with the exercise of
those options or the vesting of those shares. Alternatively, the Plan
Administrator may allow such individuals to deliver previously acquired shares
of Common Stock in payment of such tax liability.
CHANGES IN CAPITALIZATION
In the event any change is made to the outstanding shares of Common Stock
by reason of any recapitalization, stock dividend, stock split, combination of
shares, exchange of shares or other change in corporate structure effected
without the Company's receipt of consideration, appropriate adjustments will be
made to (i) the maximum number and/or class of securities issuable under the
2000 Plan, (ii) the number and/or class of securities for which any one person
may be granted stock options and separately exercisable stock appreciation
rights under the 2000 Plan per calendar year, (iii) the maximum number and/or
class of securities by which the share reserve is to increase each calendar year
by reason of the automatic share increase provisions of the 2000 Plan, (iv) the
number and/or class of securities for which grants are subsequently to be made
under the Automatic Option Grant Program to new and continuing non-employee
Board members and (v) the number and/or class of securities and the exercise
price per share in effect under each outstanding option (including the options
incorporated from the Predecessor Plans) in order to prevent the dilution or
enlargement of benefits thereunder.
AMENDMENT AND TERMINATION
The Board may amend or modify the 2000 Plan in any or all respects
whatsoever subject to any required stockholder approval. The Board may terminate
the 2000 Plan at any time, and the 2000 Plan will in all events terminate on
December 31, 2009.
11
STOCK AWARDS
The table below shows, as to each of the Company's executive officers named
in the Summary Compensation Table and the various indicated individuals and
groups, the number of shares of Common Stock subject to options granted between
November 1, 2000 and October 31, 2001 under the 2000 Plan and the Predecessor
Plans, together with the weighted average exercise price payable per shares.
OPTION TRANSACTIONS
<Table>
<Caption>
NUMBER OF WEIGHTED AVERAGE
NAME OPTION SHARES EXERCISE PRICE
- ---- ------------- ----------------
Robert B. McKnight, Jr. ................................ 50,000 $18.44
Chairman of the Board and Chief Executive Officer
Harry Hodge............................................. 30,000 18.44
Chairman of the Board, Quiksilver Europe and
President of Quiksilver International Operations
Bernard Mariette........................................ 20,000 18.44
President Director Generale, Quiksilver Europe
Steven L. Brink......................................... 20,000 18.44
Chief Financial Officer and Treasurer
Charles S. Exon......................................... -- --
Executive Vice President, Business & Legal Affairs,
Secretary and General Counsel
All Executive Officers as a group (5 persons)........... 120,000 18.44
All Nonemployee Directors as a group (5 persons)........ 25,000 26.55
All employees, including current officers who are not
Executive Officers as a group (approximately 2,000
persons).............................................. 497,100 16.55
</Table>
OPTION GRANTS AND ISSUANCES OF SHARES UNDER THE AMENDMENT
As of January 31, 2001, no stock options had been granted and no shares had
been issued under the 2000 Plan on the basis of the share increase that will
result from the amendment to the 2000 Plan for which stockholder approval is
sought at the Annual Meeting.
FEDERAL INCOME TAX CONSEQUENCES
OPTION GRANTS
Options granted under the 2000 Plan may be either incentive stock options
which satisfy the requirements of Section 422 of the Internal Revenue Code or
non-statutory options which are not intended to meet such requirements. The
Federal income tax treatment for the two types of options differs as follows:
Incentive Options. No taxable income is recognized by the optionee at the
time of the option grant, and no taxable income is generally recognized at the
time the option is exercised. The optionee will, however, recognize taxable
income in the year in which the purchased shares are sold or otherwise disposed
of. For Federal tax purposes, dispositions are divided into two categories: (i)
qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale
or other disposition is made after the optionee has held the shares for more
than two years after the option grant date and more than one year after the
exercise date. If either of these two holding periods is not satisfied, then a
disqualifying disposition will result.
Upon a qualifying disposition, the optionee will recognize long-term
capital gain in an amount equal to the excess of (i) the amount realized upon
the sale or other disposition of the purchased shares over (ii) the exercise
price paid for the shares. If there is a disqualifying disposition of the
shares, then the excess of (i) the fair market value of those shares on the
exercise date over (ii) the exercise price paid for the shares will be taxable
as ordinary income to the optionee. Any additional gain or loss recognized upon
the disposition will be recognized as a capital gain or loss by the optionee.
12
If the optionee makes a disqualifying disposition of the purchased shares,
then the Company will be entitled to an income tax deduction, for the taxable
year in which such disposition occurs, equal to the excess of (i) the fair
market value of such shares on the option exercise date over (ii) the exercise
price paid for the shares. In no other instance will the Company be allowed a
deduction with respect to the optionee's disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by an optionee upon
the grant of a non-statutory option. The optionee will in general recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the optionee will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the non-statutory option are
unvested and subject to repurchase by the Company in the event of the optionee's
termination of service prior to vesting in those shares, then the optionee will
not recognize any taxable income at the time of exercise but will have to report
as ordinary income, as and when the Company's repurchase right lapses, an amount
equal to the excess of (i) the fair market value of the shares on the date the
repurchase right lapses over (ii) the exercise price paid for the shares. The
optionee may, however, elect under Section 83(b) of the Internal Revenue Code to
include as ordinary income in the year of exercise of the option an amount equal
to the excess of (i) the fair market value of the purchased shares on the
exercise date over (ii) the exercise price paid for such shares. If the Section
83(b) election is made, the optionee will not recognize any additional income as
and when the repurchase right lapses.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the optionee with respect to the exercised
non-statutory option. The deduction will in general be allowed for the taxable
year of the Company in which such ordinary income is recognized by the optionee.
STOCK APPRECIATION RIGHTS
No taxable income is recognized upon receipt of an SAR. The holder will
recognize ordinary income, in the year in which the SAR is exercised, in an
amount equal to the excess of the fair market value of the underlying shares of
Common Stock on the exercise date over the base price in effect for the
exercised right, and the holder will be required to satisfy the tax withholding
requirements applicable to such income.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the holder in connection with the exercise of
an SAR. The deduction will be allowed for the taxable year in which such
ordinary income is recognized.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code disallows a tax deduction to
publicly held companies for compensation paid to certain of their executive
officers, to the extent that compensation exceeds $1 million per covered officer
in any fiscal year. The limitation applies only to compensation which is not
considered to be performance-based. Compensation deemed paid by the Company in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory stock options granted under the 2000 Plan qualifies
as performance-based compensation for purposes of Section 162(m) if such plan is
administered by a committee of "outside directors" as defined under Section
162(m). The Company anticipates that any compensation deemed paid by it in
connection with disqualifying dispositions of incentive stock option shares or
exercises of non-statutory options will qualify as performance-based
compensation for purposes of Code Section 162(m) and will not have to be taken
into account for purposes of the $1 million limitation per covered individual on
the deductibility of the compensation paid to certain executive officers of the
Company. Accordingly, all compensation deemed paid with respect to those options
will remain deductible by the Company without limitation under Code Section
162(m).
13
ACCOUNTING TREATMENT
Option grants made to employees under the 2000 Plan will generally not
result in any charge to the Company's earnings. However, the Company must
disclose in footnotes and pro-forma statements to the Company's financial
statements, the impact those options would have upon the Company's reported
earnings were the value of those options at the time of grant treated as a
compensation expense. The number of outstanding options may be a factor in
determining the Company's earnings per share on a fully-diluted basis.
Should one or more optionees be granted stock appreciation rights under the
2000 Plan that have no conditions upon exercisability other than a service or
employment requirement, then such rights would result in a compensation expense
to be charged against the Company's reported earnings. Accordingly, at the end
of each fiscal quarter, the amount (if any) by which the fair market value of
the shares of Common Stock subject to such outstanding stock appreciation rights
has increased from the prior quarter-end would be accrued as compensation
expense, to the extent such fair market value is in excess of the aggregate
exercise price in effect for those rights.
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the amendment
of the 2000 Plan to increase the number of shares of Common Stock reserved for
issuance under the 2000 Plan by 600,000 shares. Such approval will require the
affirmative vote of a majority of the voting power of all outstanding shares of
the Company's Common stock present or represented and entitled to vote at the
Annual Meeting. The Board of Directors recommends a vote "FOR" the Proposal.
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE
THE TOTAL AUTHORIZED SHARES OF COMMON STOCK
GENERAL
On February 7, 2002, the Board of Directors of the Company adopted, subject
to stockholder approval, an amendment to the Company's Certificate of
Incorporation (the "Certificate") to increase the total authorized shares of
Common Stock of the Company from 30,000,000 to 45,000,000. Such increase in the
number of authorized shares of Common Stock of the Company would be effected by
restating the first paragraph of current Article Fourth of the Certificate to
read as follows:
"A. The total number of shares of all classes of stock that the
Company shall have authority to issue is fifty million (50,000,000),
consisting of:
(1) Forty-five million (45,000,000) shares of Common Stock, with a
par value of $0.01 per share; and
(2) Five million (5,000,000) shares of Preferred Stock, with a par
value of $.01 per share."
(Italics added to show revision.) The additional shares of Common Stock for
which authorization is sought herein would be part of the existing class of
Common Stock and, if and when issued, would have the same rights and privileges
as the shares of Common Stock presently outstanding. Holders of Common Stock
have no preemptive or other subscription rights.
As of January 31, 2002, 23,218,903 shares of Common Stock were issued and
outstanding, 4,164,933 shares were reserved for issuance pursuant to outstanding
options under the Company's stock option plans and 149,478 shares were reserved
and available for future option grants under the Company's stock option plans.
Therefore, of the 30,000,000 shares currently authorized by the Certificate,
approximately 2,500,000 shares are presently available for general corporate
purposes. Assuming Proposal 2 is approved by the stockholders, a total of
approximately 28,100,000 shares of Common Stock will be outstanding or reserved
for issuance on
14
exercise of options outstanding or to be granted under the Company's stock
option plans, and approximately 1,900,000 shares will be available for general
corporate purposes.
PURPOSES AND EFFECTS OF THE AUTHORIZED SHARES AMENDMENT
The increase in authorized shares of Common Stock is recommended by the
Board of Directors in order to provide a sufficient reserve of such shares for
the present and future needs and growth of the Company. In 1996, the Company
increased its authorized Common Stock from 10,000,000 shares to 30,000,000
shares and since that time has utilized that increase in authorized shares
primarily to effect a two-for-one stock split in 1998 and a three-for-two stock
split in 1999. The number of authorized shares currently available for issuance
would not be sufficient to implement another such stock split. Such additional
authorized shares would be available for issuance at the discretion of the Board
of Directors without further stockholder approval (subject to certain provisions
of state law) to take advantage of future opportunities for equity financing, to
improve the Company's capital structure, in connection with possible
acquisitions, in connection with stock dividends or stock splits, and for other
corporate purposes.
The Board of Directors does not intend to issue any Common Stock or
securities convertible into Common Stock except on terms that the Board deems to
be in the best interests of the Company and its stockholders. The Company's
management has no arrangements, agreements, understandings or plans at the
present time for the issuance or use of the additional shares of Common Stock to
be authorized by the proposed amendment to the Certificate.
Although an increase in the authorized shares of Common Stock could, under
certain circumstances, have an antitakeover effect (for example, by diluting the
stock of a person seeking to effect a change in the composition of the Board of
Directors or contemplating a tender offer or other transaction for a combination
of the Company with another company), this proposal to amend the Certificate is
not in response to any effort of which the Company is aware to accumulate the
Company's stock or obtain control of the Company, nor is it part of a plan by
management to recommend a series of similar amendments to the Board of Directors
and stockholders.
PROPOSAL
At the Annual Meeting, stockholders will be asked to approve the amendment
to the Certificate of Incorporation to increase the total authorized shares of
Common Stock of the Company from 30,000,000 shares to 45,000,000 shares. Such
approval will require the affirmative vote of a majority of the voting power of
all outstanding shares of the Company's Common Stock. The Board of Directors
recommends a vote "FOR" the Proposal.
EXECUTIVE OFFICERS
The current Executive Officers of the Company are as follows:
<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------
Robert B. McKnight, Jr. ............. 48 Chairman of the Board and Chief Executive
Officer
Harry Hodge.......................... 51 Chairman of the Board, Quiksilver Europe and
President of Quiksilver International
Operations
Bernard Mariette..................... 39 President Director Generale, Quiksilver Europe
Steven L. Brink...................... 40 Chief Financial Officer and Treasurer
Charles S. Exon...................... 52 Executive Vice President, Business & Legal
Affairs, Secretary and General Counsel
</Table>
For additional information with respect to Messrs. McKnight, Hodge and
Mariette who are also nominees as Directors of the Company, see "Election of
Directors."
Mr. Steven L. Brink has served as Secretary, Treasurer and Chief Financial
Officer since October 1996. He joined the Company in July 1996 as Vice President
of Finance. Mr. Brink previously served as Senior
15
Manager in the TRADE Group with Deloitte & Touche, LLP, where he was employed
from 1985 through 1996. He is a Certified Public Accountant and holds a B.S.
degree in Business Administration from California State University at Los
Angeles, graduating summa cum laude.
Mr. Charles S. Exon has served as Executive Vice President, Business &
Legal Affairs, Secretary and General Counsel since August 2000. Prior to joining
the Company, Mr. Exon practiced law, the last seven years as a partner with the
firm of Hewitt & McGuire, LLP. Mr. Exon received a B.A. degree in English from
the University of Missouri, a M.A. degree in Communications from Stanford and a
J.D. degree from the University of Southern California.
SUMMARY COMPENSATION TABLE
The following sets forth certain summary compensation information
concerning the named Executive Officers for each of the Company's last three
fiscal years:
<Table>
<Caption>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL --------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS# COMPENSATION(1)
- --------------------------- ------ -------- ---------- ------------ ---------------
Robert B. McKnight, Jr. ........... 2001 $600,000 $ -- 50,000 $6,200
Chairman of the Board 2000 550,000 770,000 110,000 5,600
and Chief Executive Officer 1999 400,000 1,200,000 30,000 6,400
Harry Hodge(2)..................... 2001 $307,000 $ 692,000 30,000 --
Chairman of the Board, 2000 267,000 603,000 50,000 --
Quiksilver Europe and 1999 273,000 769,000 30,000 --
President of Quiksilver
International Operations
Bernard Mariette(3)................ 2001 $261,000 $ 587,000 20,000 --
President Director Generale, 2000 222,000 503,000 40,000 --
Quiksilver Europe
Steven L. Brink.................... 2001 $240,000 $ 20,000 20,000 $2,900
Chief Financial Officer and 2000 232,000 348,000 40,000 1,100
Treasurer 1999 208,000 624,000 22,500 1,100
Charles S. Exon(4)................. 2001 $300,000 $ 100,000 -- $2,900
Executive Vice President, 2000 75,000 16,000 30,000 --
Business & Legal Affairs,
Secretary and General Counsel
</Table>
- ---------------
(1) The amounts disclosed in this column for Mr. Brink include the Company's
matching 401(k) employee contribution of $2,400, $600 and $600 for the
fiscal years ended October 31, 2001, 2000 and 1999, respectively, and the
balance for each year is for personal life insurance policy premiums. For
Mr. McKnight they include the Company's matching 401(k) employer
contribution of $4,200, $3,200 and $4,000 for the fiscal years ended October
31, 2001, 2000 and 1999, respectively, and the balance for each year is for
personal life insurance policy premiums. For Mr. Exon, it includes only a
personal life insurance policy premium.
(2) The amounts for Mr. Hodge are converted from French francs into U.S. dollars
at the average exchange rate for each respective year. Mr. Hodge became
Chairman of the Board, Quiksilver Europe in March 2000 and President of
Quiksilver International Operations in September 2000. Prior to that, he
served as President Director Generale, Quiksilver Europe.
(3) The amounts for Mr. Mariette are converted from French francs into U.S.
dollars at the average exchange rate for each year. Mr. Mariette became an
executive officer of the Company in March 2000.
(4) Mr. Exon became an executive officer of the Company in August 2000.
16
OPTION GRANTS IN LAST FISCAL YEAR
The following sets forth certain information concerning individual grants
of stock options during the fiscal year ended October 31, 2001 to each of the
named Executive Officers:
<Table>
<Caption>
INDIVIDUAL GRANTS
-------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE VALUE($)(3)
- ---- ---------- ------------ ------------ ---------- -----------
Robert B. McKnight, Jr. ........... 50,000 7.8% $18.44 12/23/10 $521,000
Harry Hodge........................ 30,000 4.7% $18.44 12/23/10 $313,000
Bernard Mariette................... 20,000 3.1% $18.44 12/23/10 $208,000
Steven L. Brink.................... 20,000 3.1% $18.44 12/23/10 $208,000
Charles S. Exon.................... -- -- -- -- --
</Table>
- ---------------
(1) The options were granted under the Quiksilver, Inc. 2000 Stock Incentive
Plan for a term of 10 years, subject to earlier termination in certain
events related to termination of employment. The options become exercisable
33.3% per year beginning one year from the date of grant. To the extent not
already exercisable, the options generally become exercisable upon a sale of
assets, a merger or consolidation of the Company with or into another
corporation or the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's
outstanding voting stock, unless the option is assumed or replaced with a
comparable option by the surviving entity.
(2) All options were granted at fair market value (the last sales price for the
Company's Common Stock on the day previous to the date of grant as reported
by the NYSE).
(3) The indicated present value amounts are based on a variation of the
Black-Scholes option pricing model. For purposes of the Black-Scholes model,
the Company assumed a volatility of 64.8%, a risk free rate of return of
4.9%, a dividend yield of 0%, and a time of exercise of 4.7 years. Actual
gains, if any, on exercise will be dependent on a number of factors,
including future performance of the Company and the Common Stock, and
overall market conditions as well as the holders' continued employment
through the vesting period. As a result, the indicated present values may
vary substantially from actual realized values.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following sets forth certain information concerning each exercise of
stock options during the fiscal year ended October 31, 2001 by each of the named
Executive Officers and the aggregated fiscal year-end value of the unexercised
options of each such Executive Officer:
<Table>
<Caption>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END($)(1)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
Robert B. McKnight,
Jr. ................... -- -- 511,166 133,334 $3,029,000 $41,000
Harry Hodge.............. -- -- 69,666 73,334 175,000 41,000
Bernard Mariette......... -- -- 176,666 58,334 892,000 41,000
Steven L. Brink.......... -- -- 105,334 54,167 396,000 33,000
Charles S. Exon.......... -- -- 10,000 20,000 -- --
</Table>
- ---------------
(1) Market value of underlying securities at exercise date or year-end, as the
case may be, minus the exercise or base price of "in-the-money" options.
17
EMPLOYMENT ARRANGEMENTS
The Company has entered into executive employment agreements with each of
Messrs. McKnight, Brink, Hodge, Mariette and Exon. Pursuant to the terms of
these employment agreements, Mr. McKnight is to receive a base salary of
$600,000, Mr. Brink a base salary of $240,000, Mr. Hodge a base salary of
2,244,000 French francs (approximately $310,000 as of October 31, 2001), Mr.
Mariette a base salary of 1,904,000 French francs (approximately $260,000 as of
October 31, 2001) and Mr. Exon a base salary of $300,000. These base salaries
are subject to periodic review by the Company and may be adjusted either up or
down, based on the Company's performance, the individual's performance, market
conditions or such other factors as are deemed relevant by the Company,
provided, however, that the base salaries may not be adjusted below the initial
base salaries.
The employment agreements provide that each employee is eligible for a
bonus based on growth in the Company's pretax income in the case of Messrs.
McKnight, Brink and Exon, and based on growth in pretax income of Quiksilver
Europe in the case of Messrs. Hodge and Mariette, along with an evaluation of
performance not otherwise reflected in pretax income growth calculations. For
the fiscal year ended October 31, 2001, Messrs. Brink, Exon, Hodge and Mariette
earned $20,000, $100,000, $692,000 and $587,000, respectively, pursuant to this
bonus plan. Mr. McKnight's, Mr. Brink's and Mr. Exon's employment agreements
require that the Company maintain a $1,000,000, $500,000 and $1,000,000 term
life insurance policy on their lives, respectively, payable to their designees;
provided, however, that the Company is not required to pay annual premiums for
such policies in excess of $2,500, $1,250 and $2,500, respectively.
Each of the employment agreements continues for an unspecified term and may
be terminated by the Company or the executive without cause at any time for any
reason, subject to the payment of certain amounts as set forth below. If the
Company terminates an executive's employment without cause, or if the executive
terminates his employment for "good reason" following a change in control of the
Company, the Company will continue to pay the executive's base salary for a
period of twelve months. For purposes of the executive employment agreements,
"good reason" is defined as (i) the assignment to executive of duties materially
inconsistent with his position, as set forth in the agreement, without
executive's consent, (ii) a material diminution in executive's authority,
without executive's consent, (iii) a material breach by the Company of its
obligations under the agreement, or (iv) the failure by the Company to obtain
from any successor, before the succession takes place, an agreement to assume
and perform the obligations of the Company under the employment agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company during
the last fiscal year consisted of William M. Barnum, Jr., Michael H. Gray,
Robert G. Kirby and Tom Roach, each of whom was a non-employee director of the
Company.
COMPENSATION COMMITTEE REPORT
The report of the Compensation Committee which follows shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933 or under
the Securities Exchange Act of 1934, except to the extent that the Company
specifically incorporates this information by reference.
As members of the Compensation Committee, it is our duty to administer the
Company's various executive compensation plans. In addition, we review
compensation levels of members of management, evaluate the performance of
management, consider management succession and related matters. The Committee
reviews with the Board in detail all aspects of compensation for the Company's
executive officers.
The Committee annually reevaluates the Company's executive compensation
structure in light of the Company's philosophy of linking compensation with
enhancement of shareholder value. The principles followed by the Committee are
(i) to provide a cash compensation package consisting of competitive base
18
salary levels and incentive opportunities linked to corresponding levels of
Company performance and (ii) to grant stock option incentives which require
increases in the Company's stock price in order for executives to realize value
and, thus, tie them to the Company's long-term stock performance. The result is
a total compensation opportunity significantly dependent upon the Company's
performance.
Congress has enacted tax legislation that, among other things, places a
ceiling of $1 million on the amount of an executive officer's annual
compensation that may be deducted for federal income tax purposes in any year
(the "Deductibility Cap"). The legislation provides that compensation paid under
certain incentive compensation plans may be excluded from the calculation of
compensation that is subject to the Deductibility Cap, provided the plans meet
certain conditions, which are contained in regulations that have been adopted by
the Internal Revenue Service.
The Committee believes that no executive officer's compensation will exceed
the Deductibility Cap thereby preserving the deductibility of all executive
compensation paid by the Company.
EXECUTIVE COMPENSATION COMPONENTS
The Company's executive compensation program is currently based on three
principal components, each of which is intended to support the overall
compensation philosophy. The three principal components are:
- Base Salary: Base salary ranges are reviewed and established annually.
The Company tries to ensure that the base salary ranges reflect
competitive job market conditions for similarly related companies in
terms of sales, employees and related factors. Adjustments to actual base
salaries are made pursuant to job performance in relationship to the
midpoint of the salary range for the position and level of
responsibilities. The Company's philosophy generally is to provide a base
salary that is at or above the midpoint of the applicable salary range,
particularly in light of the Company's decision to operate with a minimal
number of executive officers by assigning each executive officer multiple
functions.
- Incentive Compensation: The incentive compensation opportunity under the
Company's Executive Officer Incentive Plan is based on the growth in the
Company's pretax income over the prior year, in the case of officers of
the Company, and growth in Quiksilver Europe's pretax income, in the case
of officers of Quiksilver Europe, along with an evaluation of performance
not otherwise reflected in pretax income growth calculations. Under the
Plan, each executive officer receives a bonus equal to a percentage of
such executive officer's base salary, ranging from 0% up to a maximum of
300% for pretax income growth over the prior year.
- Stock Options: Executive officers are eligible to receive annual grants
of stock options, which have historically been granted as nonqualified
stock options. The awards are intended to retain and motivate executive
officers to improve stock market performance. Awards are granted at the
fair market value of the Company's Common Stock at the date of grant.
Awards are based on an evaluation of past granting practices, Company
performance and the individual executive's performance and
responsibilities.
CEO COMPENSATION
The Committee has established Mr. McKnight's annual base salary at
$600,000, a level the Committee believes is at or above the midpoint of base
salaries for Chief Executives at similarly situated companies, given the
multiple functions performed by Mr. McKnight and the Committee's assessment of
his performance.
19
For fiscal 2001, Mr. McKnight did not earn incentive compensation under the
Company's Executive Officer Incentive Plan because the Company's performance did
not result in the benchmark growth in pretax income in fiscal 2001 over fiscal
2000.
The Compensation Committee of the Board
of Directors
William M. Barnum, Jr.
Michael H. Gray
Robert G. Kirby
Tom Roach
January 28, 2002
AUDIT COMMITTEE REPORT
The Audit Committee role is to act on behalf of the Board of Directors in
the oversight of all aspects of the Company's financial reporting, internal
control and audit functions. Management has the primary responsibility for the
financial statements and the reporting process, including the systems of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed and discussed the audited financial statements in the Annual
Report for fiscal year 2001 with management.
The Audit Committee also reviewed and discussed with Deloitte & Touche LLP,
the Company's independent auditors, who are responsible for expressing an
opinion on the conformity of those audited financial statements with generally
accepted accounting principles, the matters required to be discussed with the
Audit Committee under generally accepted auditing standards (including Statement
on Auditing Standards No. 61). In addition, the Audit Committee has discussed
with the independent auditors the auditors' independence from management and the
Company, including the matters in the written disclosures required by the
Independence Standards Board Standard No. 1. The Audit Committee has also
considered whether the provision of non-audit services by Deloitte & Touche LLP
is compatible with their independence.
The Audit Committee discussed with the Company's independent auditors the
overall scope and plans for their audit. The Audit Committee met with the
independent auditors, with and without management present, to discuss the
results of their examinations, their evaluations of the Company's internal
controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Annual Report on Form 10-K for the year ended
October 31, 2001 for filing with the Securities and Exchange Commission.
The Audit Committee of the Board of
Directors
William M. Barnum, Jr.
Michael H. Gray
Tom Roach
January 28, 2002
20
FEES PAID TO INDEPENDENT AUDITORS
AUDIT FEES
The aggregate fees billed for professional services rendered by Deloitte &
Touche LLP for the audit of the Company's annual financial statements for the
fiscal year ended October 31, 2001 and the reviews of the financial statements
included in the Company's Form 10-Qs for such fiscal year were approximately
$300,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No fees were billed for professional services rendered by Deloitte & Touche
LLP for financial information systems design and implementation services for the
fiscal year ended October 31, 2001.
ALL OTHER FEES
The aggregate fees billed for services rendered by Deloitte & Touche LLP,
other than the services referred to above, for the fiscal year ended October 31,
2001 were approximately $55,000.
21
COMPANY STOCK PRICE PERFORMANCE
The following graph compares from October 31, 1996 to October 31, 2001 the
yearly percentage change in the Company's cumulative total stockholder return on
its Common Stock with the cumulative total return of (i) the NYSE Market Index
and (ii) selected public companies with similar market capitalizations. The
yearly percentage change has been measured by dividing (i) the sum of (A) the
cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the price of the stock at the end
and the beginning of the measurement period; by (ii) the stock price at the
beginning of the measurement period. The Company has chosen to compare its stock
performance with that of issuers with similar market capitalizations since the
Company does not have a published industry or line-of-business index and does
not believe any comparison with "peer" issuers within the SEC rules governing
presentation of this graph can be made. Market capitalization is the dollar
figure obtained by multiplying the per share stock price on a given date by the
total number of outstanding shares. Approximately forty-five companies with a
market capitalization closest to the Company's market capitalization of
$310,000,000 at October 31, 2001 were selected from the Standard & Poor's
Compustat Industrial Database at such date. The selected companies also had the
five-year market capitalization histories necessary for the comparative purposes
of the graph. Although the Company believes a comparison with a peer group would
more adequately measure the Company's stock performance, the Company is unaware
of any comparable public beachwear and casual clothing manufacturers which serve
the Company's market. As a result, the group market capitalization may not be
meaningful. In addition, the historical stock performance shown on the graph is
not intended to and may not be indicative of future stock performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG QUIKSILVER, INC.
NYSE MARKET INDEX, & SIMILAR MARKET CAPITALIZATION PEER GROUP
(PERFORMANCE GRAPH)
<Table>
<Caption>
- --------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
- --------------------------------------------------------------------------------
Quiksilver, Inc. 100.00 144.71 194.71 199.41 270.00 185.93
NYSE 100.00 128.48 145.09 167.01 177.84 145.89
Similar Market
Capitalizations 100.00 126.12 108.91 140.58 131.77 81.42
</Table>
- ---------------
Note: Past or present performance is not necessarily indicative of future
performance.
22
The following public companies are those which were used in the above
graph:
<Table>
1st Source Corp. Farmer Bros. Co. Movie Gallery Inc.
Airtran Holdings, Inc. Frontier Airlines Inc. Nautica Enterprises Inc.
Apogee Enterprises Inc. FTI Consulting Inc. Neose Technologies Inc.
Bowne & Co. Inc. Harleysville National Corp. On Assignment, Inc.
Boyds Collection Ltd. Homestore.com Inc. Plug Power Inc.
Chesapeake Corp. Hugoton Royalty Trust Rare Hospitality International
Cke Restaurants Inc. Hydril Co. Inc.
Commercial Metals Co. Inter-Tel Inc. Sola International Inc.
Cost Plus Inc. International Mutlifoods SPS Technologies Inc.
CTS Corp. Corp. Supergen Inc.
Cumulus Media Inc. Interpool Inc. Sykes Enterprises Inc.
Curtiss-Wright Corp. Kansas City Life Ins. Co. Trimble Navigation Ltd.
DeCODE genetics Inc. Lance Inc. Trust Company of New Jersey
Dime Community Bancshares Inc. Landry's Restaurants Inc. Unit Corp.
Diversa Corp. Martek Biosciences Corp. United Natural Foods Inc.
Dress Barn Inc. Metromedia Fiber Network Inc. URS Corp. New
Micros Systems Inc. Wellman Inc.
</Table>
APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has not yet selected the Company's independent
auditors for the year ending October 31, 2002. The Board of Directors will make
its selection after the Audit Committee has reviewed the audit proposal for the
year. After its review, the Audit Committee will recommend independent auditors
for fiscal 2002 to the Board, which will make the final selection.
The Audit Committee is expected to make a recommendation in the near
future. Deloitte & Touche LLP was the independent public auditor for the Company
for the fiscal year ended October 31, 2001. Representatives of Deloitte & Touche
are expected to be present at the Annual Meeting and will be available to
respond to appropriate questions and to make such statements as they may desire.
NOMINATIONS AND STOCKHOLDER PROPOSALS
The Bylaws of the Company require that all nominations for persons to be
elected Directors, other than those made by the Board of Directors, be made
pursuant to written notice to the Secretary of the Company. The notice must be
received not less than 30 nor more than 60 days prior to the meeting at which
the election will take place (or not later than 10 days after notice of public
disclosure of such meeting date if such disclosure occurs less than 40 days
prior to the date of such meeting). The notice must set forth all information
relating to each nominee that is required to be disclosed in solicitations of
proxies for election of Directors, or is otherwise required pursuant to the
Securities Exchange Act of 1934, as amended. The notice must also include the
stockholder's name and address as they appear on the Company's books and the
class and number of shares of stock beneficially owned by such stockholder.
In addition, the Bylaws require that for business to be properly brought
before an annual meeting by a stockholder, the Secretary of the Company must
have received written notice thereof not less than 30 nor more than 60 days
prior to the meeting (or not later than 10 days after a notice or public
disclosure of such meeting date if such disclosure occurs less than 40 days
prior to the date of the meeting). The notice must set forth (i) a brief
description of the business desired to be brought before the meeting; (ii) the
stockholder's name and address as they appear on the Company's books; (iii) the
class and number of shares of stock beneficially owned by the stockholder; and
(iv) any material interest of the stockholder in such business.
Any proposal of a stockholder intended to be presented at the Company's
2003 Annual Meeting of Stockholders and included in the proxy statement and form
of proxy for that meeting must be received by the Company no later than October
22, 2002.
23
ANNUAL REPORT
The Company's Annual Report containing audited financial statements for the
fiscal year ended October 31, 2001 accompanies this Proxy Statement. THE COMPANY
WILL SEND A STOCKHOLDER UPON REQUEST, WITHOUT CHARGE, A COPY OF THE ANNUAL
REPORT ON FORM 10-K (WITHOUT EXHIBITS) FOR THE YEAR ENDED OCTOBER 31, 2001,
INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, WHICH THE COMPANY HAS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THE REQUEST MUST BE DIRECTED
TO THE ATTENTION OF STEVEN L. BRINK, SECRETARY, AT THE ADDRESS OF THE COMPANY
SET FORTH ON THE FIRST PAGE OF THIS PROXY STATEMENT.
OTHER MATTERS
At the time of the preparation of this Proxy Statement, the Board of
Directors knows of no other matter which will be acted upon at the Annual
Meeting. If any other matter is presented properly for action at the Annual
Meeting or at any adjournment or postponement thereof, it is intended that the
proxies will be voted with respect thereto in accordance with the best judgment
and in the discretion of the proxy holders.
By Order of the Board of Directors,
QUIKSILVER, INC.
ROBERT B. MCKNIGHT, JR.
Chairman of the Board and Chief
Executive Officer
Huntington Beach, California
February 19, 2002
24
APPENDIX A
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
1.1 PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the
interests of Quiksilver, Inc., a Delaware corporation, by providing eligible
persons in the Corporation's service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such terms
in the attached Appendix.
1.2 STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity programs:
- the Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
- the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants,
- the Automatic Option Grant Program under which eligible
non- employee Board members shall automatically receive option grants at
designated intervals over their period of continued Board service, and
- the Director Fee Option Grant Program under which
non-employee Board members may elect to have all or any portion of their annual
retainer fee otherwise payable in cash applied to a special stock option grant.
A-1
B. The provisions of Articles One and Six shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
1.3 ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant Program with respect to Section 16
Insiders. Administration of the Discretionary Option Grant Program with respect
to all other persons eligible to participate in that program may, at the Board's
discretion, be vested in the Primary Committee or a Secondary Committee, or the
Board may retain the power to administer that program with respect to all such
persons. However, any discretionary option grants for members of the Primary
Committee shall be made by a disinterested majority of the Board.
B. Members of the Primary Committee or any Secondary Committee
shall serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for proper administration of the Discretionary Option Grant
Program and to make such determinations under, and issue such interpretations
of, the provisions of that program and any outstanding options thereunder as it
may deem necessary or advisable. Decisions of the Plan Administrator within the
scope of its administrative functions under the Plan shall be final and binding
on all parties who have an interest in the Discretionary Option Grant Program
under its jurisdiction or any option or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive
authority to determine which Section 16 Insiders and other highly compensated
Employees shall be eligible for participation in the Salary Investment Option
Grant Program for one or more calendar years. However, all option grants under
the Salary Investment Option Grant Program shall be made in accordance with the
express terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
E. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants or stock issuances under the
Plan.
F. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance with the terms of
those programs, and no Plan
A-2
Administrator shall exercise any discretionary functions with respect to any
option grants made under those programs.
1.4 ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant Program are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of
directors of any Parent or Subsidiary, and
(iii) consultants and other independent advisors who
provide services to the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly
compensated individuals shall be eligible to participate in the Salary
Investment Option Grant Program.
C. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive such grants, the time or times
when those grants are to be made, the number of shares to be covered by each
such grant, the status of the granted option as either an Incentive Option or a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding.
D. The Plan Administrator shall have the absolute discretion to
grant options in accordance with the Discretionary Option Grant Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Plan Effective Date who have not previously
received an option grant from the Corporation in connection with their Board
service, (ii) those individuals who first become non-employee Board members
after the Plan Effective Date, whether through appointment by the Board or
election by the Corporation's stockholders, and (iii) those individuals who
continue to serve as non-employee Board members at one or more Annual
Stockholders Meetings held after the Plan Effective Date. A non-employee Board
member who has previously been in the employ of the Corporation (or any Parent
or Subsidiary) shall not be eligible to receive an option grant under the
Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to
A-3
receive periodic option grants under the Automatic Option Grant Program while he
or she continues to serve as a non-employee Board member.
F. All non-employee Board members shall be eligible to
participate in the Director Fee Option Grant Program.
1.5 STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares repurchased
by the Corporation on the open market. The number of shares of Common Stock
reserved for issuance over the term of the Plan shall not exceed 5,036,209
shares. Such reserve consists of (i) the number of shares estimated to remain
available for issuance, as of the Plan Effective Date, under the Predecessor
Plans as last approved by the Corporation's stockholders, including the shares
subject to outstanding options under those Predecessor Plans, (ii) plus an
increase of approximately 500,000 shares in connection with the adoption of
this Plan and an increase of 700,000 shares and 600,000 shares in 2001 and 2002
respectively.
B. No one person participating in the Plan may receive options
and separately exercisable stock appreciation rights for more than 200,000
shares of Common Stock in the aggregate per calendar year.
C. Shares of Common Stock subject to outstanding options
(including options incorporated into this Plan from the Predecessor Plans) shall
be available for subsequent issuance under the Plan to the extent (i) those
options expire or terminate for any reason prior to exercise in full or (ii) the
options are canceled in accordance with the cancellation-regrant provisions of
Article Two. Unvested shares issued under the Plan and subsequently canceled or
repurchased by the Corporation at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants under the Plan. However, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the holder of such option. Shares of Common Stock underlying one
or more stock appreciation rights exercised under Section 2.4 of Article Two,
Section 3.3 of Article Three, Section 4.2 of Article Four
A-4
or Section 5.3 of Article Five of the Plan shall NOT be available for subsequent
issuance under the Plan.
D. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made by the Plan Administrator to (i) the maximum number and/or class
of securities issuable under the Plan, (ii) the number and/or class of
securities for which any one person may be granted stock options and separately
exercisable stock appreciation rights under the Plan per calendar year, (iii)
the number and/or class of securities for which grants are subsequently to be
made under the Automatic Option Grant Program to new and continuing non-employee
Board members, (iv) the number and/or class of securities and the exercise price
per share in effect under each outstanding option under the Plan, and (v) the
number and/or class of securities and price per share in effect under each
outstanding option incorporated into this Plan from the Predecessor Plans. Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
A-5
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
2.1 OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms specified below. Each document evidencing
an Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the option grant date. The Plan
Administrator may not reset the exercise price of outstanding options and may
not grant new options in exchange for the cancellation of outstanding options
with a higher exercise price.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section 6.1 of
Article Six and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for
vested shares, through a special sale and remittance procedure pursuant
to which the Optionee shall concurrently provide irrevocable
instructions to (a) a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of
such exercise and (b) the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to
complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.
A-6
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of
any options held by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable
for such period of time thereafter as shall be determined by the Plan
Administrator and set forth in the documents evidencing the option, but
no such option shall be exercisable after the expiration of the option
term.
(ii) Any option held by the Optionee at the time of
death and exercisable in whole or in part at that time may be
subsequently exercised by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or the laws of inheritance or by the
Optionee's designated beneficiary or beneficiaries of that option.
(iii) Should the Optionee's Service be terminated
for Misconduct, then all outstanding options held by the Optionee shall
terminate immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:
(i) extend the period of time for which the option
is to remain exercisable following the Optionee's cessation of Service
from the limited exercise period otherwise in effect for that option to
such greater period of time as the Plan Administrator shall deem
appropriate, but in no event beyond the expiration of the option term,
and/or
(ii) permit the option to be exercised, during the
applicable post-Service exercise period, not only with respect to the
number of vested shares of Common Stock for which such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more additional installments in which the
Optionee would have vested had the Optionee continued in Service.
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D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
E. REPURCHASE RIGHTS. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, Incentive Options shall be exercisable only by the Optionee and shall
not be assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.
2.2 INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section 2.2, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options when
issued under the Plan shall not be subject to the terms of this Section 2.2.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
B. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the
A-8
same calendar year, the foregoing limitation on the exercisability of such
options as Incentive Options shall be applied on the basis of the order in which
such options are granted.
C. 10% STOCKHOLDER. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the option grant date, and the option term shall not exceed five
(5) years measured from the option grant date.
2.3 CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for the total number of shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, an outstanding option shall NOT
become exercisable on such an accelerated basis if and to the extent: (i) such
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on any shares for which
the option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
the same, (ii) the maximum number and/or class of securities available for
issuance over the remaining term of the Plan and (iii) the maximum number and/or
class of securities for which any one person may be granted stock options,
separately exercisable stock appreciation rights and direct stock issuances
under the Plan per calendar year and
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(iv) the maximum number and/or class of securities by which the share reserve is
to increase automatically each calendar year.
E. The Plan Administrator shall have the discretionary authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall, immediately prior to the effect date
of such Corporate Transaction, become fully exercisable for the total number of
shares of Common Stock at the time subject to those options and may be exercised
for any or all of those shares as fully vested shares of Common Stock, whether
or not those options are to be assumed in the Corporate Transaction. In
addition, the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be assignable
in connection with such Corporate Transaction and shall accordingly terminate
upon the consummation of such Corporate Transaction, and the shares subject to
those terminated rights shall thereupon vest in full.
F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the Discretionary Option Grant
Program so that those options shall become fully exercisable for the total
number of shares of Common Stock at the time subject to those options in the
event the Optionee's Service is subsequently terminated by reason of an
Involuntary Termination within a designated period (not to exceed eighteen (18)
months) following the effective date of any Corporate Transaction in which those
options are assumed and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the earlier of (i) the
expiration of the option term or (ii) the expiration of the one (1) year period
measured from the effective date of the Involuntary Termination. In addition,
the Plan Administrator may structure one or more of the Corporation's repurchase
rights so that those rights shall immediately terminate with respect to any
shares held by the Optionee at the time of such Involuntary Termination, and the
shares subject to those terminated repurchase rights shall accordingly vest in
full at that time.
G. The Plan Administrator shall have the discretionary authority
to structure one or more outstanding options under the Discretionary Option
Grant Program so that those options shall, immediately prior to the effect date
of a Change in Control, become fully exercisable for the total number of shares
of Common Stock at the time subject to those options and may be exercised for
any or all of those shares as fully vested shares of Common Stock. In addition,
the Plan Administrator shall have the discretionary authority to structure one
or more of the Corporation's repurchase rights under the Discretionary Option
Grant Program so that those rights shall terminate automatically upon the
consummation of such Change in Control, and the shares subject to those
terminated rights shall thereupon vest in full. Alternatively, the Plan
Administrator may condition the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program and the
termination of one or more of the Corporation's outstanding repurchase rights
under such program upon the subsequent termination of the Optionee's Service by
reason of an Involuntary Termination within a designated period (not to exceed
eighteen (18) months) following the effective date of such Change in Control.
Each option so accelerated shall remain exercisable for fully vested shares
until the earlier of (i) the expiration of the option term or (ii) the
expiration of the one (1) year period measured from the effective date of
Optionee's cessation of Service.
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H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
2.4 STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights and/or limited
stock appreciation rights.
B. The following terms shall govern the grant and exercise of
tandem stock appreciation rights:
(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (a) the Fair
Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the time of the actual
option surrender or at any earlier time. If the surrender is so
approved, then the distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may
A-11
exercise such rights at any time prior to the later of (a) five (5)
business days after the receipt of the rejection notice or (b) the last
day on which the option is otherwise exercisable in accordance with the
terms of the documents evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the option grant
date.
C. The following terms shall govern the grant and exercise of
limited stock appreciation rights:
(i) One or more Section 16 Insiders may be granted limited
stock appreciation rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a limited stock
appreciation right shall have the unconditional right (exercisable for a
thirty (30)-day period following such Hostile Take-Over) to surrender
each such option to the Corporation. In return for the surrendered
option, the Optionee shall receive a cash distribution from the
Corporation in an amount equal to the excess of (A) the Take-Over Price
of the shares of Common Stock at the time subject to such option
(whether or not the Optionee is otherwise vested in those shares) over
(B) the aggregate exercise price payable for those shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
(iii) At the time such limited stock appreciation right is
granted, the Plan Administrator shall pre-approve any subsequent
exercise of that right in accordance with the terms of this Paragraph C.
Accordingly, no further approval of the Plan Administrator or the Board
shall be required at the time of the actual option surrender and cash
distribution.
A-12
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
3.1 OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority
to determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.
3.2 OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or
more documents in the form approved by the Plan Administrator; provided,
however, that each such document shall comply with the terms specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A divided by (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount of the reduction in the
Optionee's base salary for the calendar year to be
in effect pursuant to this program, and B is the
Fair Market Value per share of Common Stock on the
option grant date.
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C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. EFFECT OF TERMINATION OF SERVICE. Should the Optionee cease
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or the laws of inheritance or by the designated beneficiary
or beneficiaries of such option. Such right of exercise shall lapse, and the
option shall terminate, upon the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the three (3)-year period measured from the date
of the Optionee's cessation of Service. However, the option shall, immediately
upon the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
3.3 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable for the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
ten (10)-year option term, (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation
A-14
of Service, (iii) the termination of the option in connection with a Corporate
Transaction or (iv) the surrender of the option in connection with a Hostile
Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Salary Investment Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to the surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. The Primary Committee shall, at the time the option
with such limited stock appreciation right is granted under the Salary
Investment Option Grant Program, pre-approve any subsequent exercise of that
right in accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Primary Committee or the Board shall be required at the time of
the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
3.4 REMAINING TERMS
The remaining terms of each option granted under the Salary
Investment Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
A-15
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
4.1 OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates
specified below:
1. Each individual who is first elected or appointed as a
non-employee Board member at any time after the Plan Effective Date shall
automatically be granted, on the date of such initial election or appointment, a
Non-Statutory Option to purchase 15,000 shares of Common Stock, provided that
individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting,
beginning with the Annual Stockholders Meeting coinciding with the Plan
Effective Date, each individual who is to continue to serve as a non-employee
Board member, whether or not that individual is standing for re-election to the
Board at that particular Annual Meeting, shall automatically be granted a Non-
Statutory Option to purchase 5,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 5,000-share option grants
any one non-employee Board member may receive over his or her period of Board
service, and non-employee Board members who have previously been in the employ
of the Corporation (or any Parent or Subsidiary) or who have previously received
stock options in connection with their Board service prior to the Plan Effective
Date shall be eligible to receive one or more such annual option grants over
their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
option grant date.
2. The exercise price shall be payable in one or more of
the alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
C. OPTION TERM. Each option shall have a term of ten (10) years
measured from the option grant date.
D. EXERCISE AND VESTING OF OPTIONS. Each option shall be
immediately exercisable for any or all of the option shares. However, any
unvested shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. The shares subject to each
initial 15,000-share grant shall vest, and the Corporation's repurchase right
shall lapse, in a series of three (3) successive equal annual installments upon
the Optionee's completion of each year of
A-16
service as a Board member over the three (3) year period measured from the
option grant date. The shares subject to each annual 5,000-share option grant
shall be fully vested as of the grant date.
E. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
F. TERMINATION OF BOARD SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate or the person or
persons to whom the option is transferred pursuant to the Optionee's
will or the laws of inheritance or the designated beneficiary or
beneficiaries of such option) shall have a twelve (12)-month period
following the date of such cessation of Board service in which to
exercise each such option.
(ii) During the twelve (12)-month exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member
by reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after
the expiration of the option term. Upon the expiration of the twelve
(12)-month exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Board
service for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not
otherwise at that time exercisable for vested shares.
A-17
4.2 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the option shares as fully-vested shares of Common
Stock and may be exercised for all or any portion of those vested shares.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the option shares as fully-vested shares of Common Stock and may be
exercised for all or any portion of those vested shares. Each such option shall
remain exercisable for such fully-vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction or
Change in Control.
D. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each of
his or her outstanding automatic option grants. The Optionee shall in return be
entitled to a cash distribution from the Corporation in an amount equal to the
excess of (i) the Take-Over Price of the shares of Common Stock at the time
subject to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over (ii) the aggregate exercise price payable
for such shares. Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. No approval or consent
of the Board or any Plan Administrator shall be required at the time of the
actual option surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
payable for such securities shall remain the same.
F. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital
A-18
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
4.3 REMAINING TERMS
The remaining terms of each option granted under the Automatic
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
A-19
ARTICLE FIVE
DIRECTOR FEE OPTION GRANT PROGRAM
5.1 OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority
to determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the program is in
effect, each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board for that year to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.
5.2 OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms
and conditions specified below.
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. NUMBER OF OPTION SHARES. The number of shares of Common Stock
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A divided by (B x 66-2/3%), where
X is the number of option shares,
A is the portion of the annual retainer fee subject
to the non-employee Board member's election, and
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B is the Fair Market Value per share of Common
Stock on the option grant date.
C. EXERCISE AND TERM OF OPTIONS. The option shall become
exercisable in a series of twelve (12) equal monthly installments upon the
Optionee's completion of each month of Board service over the twelve (12)-month
period measured from the grant date. Each option shall have a maximum term of
ten (10) years measured from the option grant date.
D. LIMITED TRANSFERABILITY OF OPTIONS. Each option under this
Article Five may, in connection with the Optionee's estate plan, be assigned in
whole or in part during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established exclusively for one or
more such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
E. TERMINATION OF BOARD SERVICE. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Director Fee Option Grant Program, then each such
option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Board service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Board service. However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation of Board service
shall immediately terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
F. DEATH OR PERMANENT DISABILITY. Should the Optionee's service
as a Board member cease by reason of death or Permanent Disability, then each
option held by such Optionee under this Director Fee Option Grant Program shall
immediately become exercisable for all the shares of Common Stock at the time
subject to that option, and the option may be exercised for any or all of those
shares as fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of such cessation of Board service. Should the Optionee
die while holding such option, then the option may be exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or the laws of inheritance
or by the designated beneficiary or beneficiaries of that option.
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Should the Optionee die after cessation of Board service
but while holding one or more options under this Director Fee Option Grant
Program, then each such option may be exercised, for any or all of the shares
for which the option is exercisable at the time of the Optionee's cessation of
Board service (less any shares subsequently purchased by Optionee prior to
death), by the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's will or
the laws of inheritance or by the designated beneficiary or beneficiaries of
such option. Such right of exercise shall lapse, and the option shall terminate,
upon the earlier of (i) the expiration of the ten (10)-year option term or (ii)
the three (3)- year period measured from the date of the Optionee's cessation of
Board service.
5.3 CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee
remains a Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall terminate immediately following the Corporate Transaction, except
to the extent assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain exercisable for
the fully-vested shares until the earlier of (i) the expiration of the ten
(10)-year option term or (ii) the expiration of the three (3)-year period
measured from the date of the Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable for the total number of shares of
Common Stock at the time subject to such option and may be exercised for any or
all of those shares as fully-vested shares of Common Stock. The option shall
remain so exercisable until the earliest to occur of (i) the expiration of the
ten (10)-year option term, (ii) the expiration of the two (2)-year period
measured from the date of the Optionee's cessation of Board service, (iii) the
termination of the option in connection with a Corporate Transaction or (iv) the
surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
outstanding option granted him or her under the Director Fee Option Grant
Program. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the shares of Common Stock at the time subject to each surrendered option
(whether or not the Optionee is otherwise at the time vested in those shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation. No approval or consent of the Board or any Plan
Administrator shall be required at the time of the actual option surrender and
cash distribution.
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D. The grant of options under the Director Fee Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
5.4 REMAINING TERMS
The remaining terms of each option granted under this Director
Fee Option Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
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ARTICLE SIX
MISCELLANEOUS
6.1 FINANCING
The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program by
delivering a full-recourse, interest bearing promissory note payable in one or
more installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price (less the par value of those shares) plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise.
6.2 TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options under the Plan shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options under the Plan (other than the options
granted or the shares issued under the Automatic Option Grant or Director Fee
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Withholding Taxes to which such holders may
become subject in connection with the exercise of their options. Such right may
be provided to any such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option, a portion of those shares with an aggregate Fair
Market Value equal to the percentage of the Withholding Taxes (not to exceed one
hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.
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6.3 EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan
Effective Date. However, the Salary Investment Option Grant Program and the
Director Fee Option Grant Program shall not be implemented until such time as
the Primary Committee may deem appropriate. Options may be granted under the
Discretionary Option Grant at any time on or after the Plan Effective Date, and
the initial option grants under the Automatic Option Grant Program shall also be
made on the Plan Effective Date to any non-employee Board members eligible for
such a grant at that time. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan is
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B. The Plan shall serve as the successor to each of the
Predecessor Plans, and no further option grants shall be made under the
Predecessor Plans after the Plan Effective Date. All options outstanding under
the Predecessor Plans on the Plan Effective Date shall be incorporated into the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.
C. One or more provisions of the Plan, including (without
limitation) the option/vesting acceleration provisions of Article Two relating
to Corporate Transactions, may, in the Plan Administrator's discretion, be
extended to one or more options incorporated from the Predecessor Plans which do
not otherwise contain such provisions.
D. The Plan shall terminate upon the earliest to occur of (i)
March 31, 2010, (ii) the date on which all shares available for issuance under
the Plan shall have been issued as fully- vested shares or (iii) the termination
of all outstanding options in connection with a Corporate Transaction. Should
the Plan terminate on March 31, 2010, then all option grants and unvested stock
issuances outstanding at that time shall continue to have force and effect in
accordance with the provisions of the documents evidencing such grants or
issuances.
6.4 AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall (i) adversely affect the rights and obligations
with respect to stock options or unvested stock issuances at the time
outstanding under the Plan unless the Optionee consents to such amendment or
modification or (ii) unless approved by the stockholders, permit the Plan
Administrator to reset the exercise price of outstanding options or grant new
options in exchange for the cancellation of outstanding options with a higher
exercise price. In addition, certain other amendments may require stockholder
approval pursuant to applicable laws or regulations.
A-25
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment Option Grant Programs
that are in each instance in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under those
programs shall be held in escrow until there is obtained stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
available for issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
6.5 USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
6.6 REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common Stock upon the
exercise of any granted option shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the stock options granted under it and the shares of
Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have been compliance with
all applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
6.7 NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option
grant program in effect under Article Four of the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control
of the Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person
or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's stockholders, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more contested
elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of
such period or (B) have been elected or nominated for election as Board
members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board
approved such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Quiksilver, Inc., a Delaware
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Quiksilver, Inc. which shall by appropriate action
adopt the Plan.
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H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock
option grant in effect for non-employee Board members under Article Five of the
Plan.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the
discretionary option grant program in effect under the Plan.
J. ELIGIBLE DIRECTOR shall mean a non-employee Board member
eligible to participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Articles One and Four.
K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. EXERCISE DATE shall mean the date on which the Corporation
shall have received written notice of the option exercise.
M. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the
Nasdaq National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as such
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
N. HOSTILE TAKE-OVER shall mean the acquisition, directly or
indirectly, by any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders which the Board does not recommend such
stockholders to accept.
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O. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of the
Service of any individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A)
a change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of
management to which he or she reports, (B) a reduction in his or her
level of compensation (including base salary, fringe benefits and target
bonus under any corporate-performance based bonus or incentive programs)
by more than twenty percent (20%) or (C) a relocation of such
individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
Q. MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee or Participant, any unauthorized use
or disclosure by such person of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional misconduct
by such person adversely affecting the business or affairs of the Corporation
(or any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as
amended.
S. NON-STATUTORY OPTION shall mean an option not intended to
satisfy the requirements of Code Section 422.
T. OPTIONEE shall mean any person to whom an option is granted
under the Discretionary Option Grant, Salary Investment Option Grant, Automatic
Option Grant or Director Fee Option Grant Program.
U. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
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V. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the
inability of the Optionee or the Participant to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) months or more. However, solely for purposes of the Automatic Option Grant
and Director Fee Option Grant Programs, Permanent Disability or Permanently
Disabled shall mean the inability of the non-employee Board member to perform
his or her usual duties as a Board member by reason of any medically
determinable physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.
W. PLAN shall mean the Corporation's 2000 Stock Incentive Plan,
as set forth in this document.
X. PLAN ADMINISTRATOR shall mean the particular entity, whether
the Primary Committee, the Board or the Secondary Committee, which is authorized
to administer the Discretionary Option Grant Program with respect to one or more
classes of eligible persons, to the extent such entity is carrying out its
administrative functions under those programs with respect to the persons under
its jurisdiction.
Y. PLAN EFFECTIVE DATE shall mean March 31, 2000.
Z. PREDECESSOR PLANS shall mean the Corporation's (i) 1996 Stock
Option Plan, (ii) the 1998 Nonemployee Directors' Stock Option Plan, (iii) the
1995 Nonemployee Directors' Stock Option Plan and (iv) the 1992 Nonemployee
Directors' Stock Option Plan, as each of those plans is in effect immediately
prior to the Plan Effective Date hereunder.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non- employee Board members appointed by the Board to administer the
Discretionary Option Grant Program with respect to Section 16 Insiders and to
administer the Salary Investment Option Grant Program solely with respect to the
selection of the eligible individuals who may participate in such program.
BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary
investment option grant program in effect under Article Three of the Plan.
CC. SECONDARY COMMITTEE shall mean a committee of one or more
Board members appointed by the Board to administer the Discretionary Option
Grant Program with respect to eligible persons other than Section 16 Insiders.
DD. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.
EE. SERVICE shall mean the performance of services for the
Corporation (or any Parent or Subsidiary) by a person in the capacity of an
Employee, a non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically provided in the
documents evidencing the option grant.
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FF. STOCK EXCHANGE shall mean either the American Stock Exchange
or the New York Stock Exchange.
GG. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
HH. TAKE-OVER PRICE shall mean the greater of (i) the Fair Market
Value per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
II. 10% STOCKHOLDER shall mean the owner of stock (as determined
under Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
JJ. WITHHOLDING TAXES shall mean the Federal, state and local
income and employment withholding taxes to which the holder of Non-Statutory
Options may become subject in connection with the exercise of those options.
A-31
QUIKSILVER, INC.
15202 GRAHAM STREET
HUNTINGTON BEACH, CA 92649
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert B. McKnight, Jr. and Steven L.
Brink as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of Common Stock of Quiksilver, Inc. held of record by the undersigned on
February 8, 2002, at the Annual Meeting of Stockholders to be held on March 26,
2002 and at any adjournment or postponement thereof.
1. Election of [ ] FOR ALL nominees listed below [ ] WITHHOLD AUTHORITY
Directors: (except as indicated to the contrary for all nominees listed
below) below
William M. Barnum, Jr., Charles E. Crowe, Michael H. Gray, Harry Hodge,
Robert G. Kirby, Bernard Mariette, Robert B. McKnight, Jr. and Tom Roach
INSTRUCTION: To withhold authority to vote for an individual nominee, write that
nominee's name in the space provided below:
- --------------------------------------------------------------------------------
2. Approval of the amendment of the Company's 2000 Stock Incentive Plan
as described in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the amendment of the Company's Certificate of Incorporation
as described in the accompanying proxy statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
(Continued on reverse side)
(Continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
All other proxies heretofore given by the undersigned to vote shares of
stock of Quiksilver, Inc., which the undersigned would be entitled to vote if
personally present at the Annual Meeting or any adjournment or postponement
thereof, are hereby expressly revoked.
Date: , 2002
-------------------------
----------------------------------
Signature
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Signature
Please date this Proxy and sign it exactly as your name or names appear
below. When shares are held by joint tenants, both should sign. When signing as
an attorney, executor, administrator, trustee or guardian, please give full
title as such. If shares are held by a corporation, please sign in full
corporate name by the President or other authorized officer. If shares are held
by a partnership, please sign in partnership name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. IF YOUR ADDRESS IS INCORRECTLY SHOWN, PLEASE PRINT CHANGES.
2