[QUIKSILVER LOGO]
, 2002
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PERSONAL AND CONFIDENTIAL
Xxxxxx XxXxxxxx, Xx.
Quiksilver, Inc.
00000 Xxxxxx Xxxxxx
Xxxxxxxxxx Xxxxx, XX 00000
Re: Employment at Quiksilver
Dear Xxx:
This letter ("Agreement") will confirm our understanding and agreement
regarding your continued employment at Quiksilver, Inc. ("Quiksilver" or the
"Company"), and completely supersedes and replaces any existing or previous oral
or written understandings or agreements, express or implied, we have had. The
terms contained in this letter are effective on and after November 1, 2001.
1. The Company hereby agrees to employ you as its Chief Executive
Officer for a term commencing November 1, 2001 and ending on
the third anniversary of such date, unless sooner terminated
in accordance with Paragraph 8.
2. Your base salary while employed hereunder, retroactive to
January 1, 2002, will be $62,500 per month, less applicable
withholdings and deductions, paid on the Company's regular
payroll dates. Your salary will be reviewed at the time
management salaries are reviewed periodically and may be
adjusted (but not below $62,500 per month) at the Company's
discretion in light of the Company's performance, your
performance, market conditions and other factors deemed
relevant by the Company.
3. For the fiscal year ending October 31, 2002 and each fiscal
year thereafter, you shall be eligible to receive a bonus
under the Company's stockholder approved Executive Officer
Bonus Plan based on the criteria set forth on Addendum "A"
attached hereto. In addition, you shall also be eligible to
receive an annual bonus of up to 25% of your base salary based
on the achievement of other goals or objectives established by
the Compensation Committee for each fiscal year that you are
employed hereunder. Any bonus earned pursuant to this
Paragraph 3 shall be paid within ten (10) days following the
date the Company publicly releases its annual audited
financial statements (the "Bonus Payment Date"). Any bonus
payment shall be less applicable withholdings and deductions.
In the event that your employment with the Company is
terminated prior to the
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end of any fiscal year (for any reason), you shall be entitled
to receive a pro rata portion of the bonus otherwise payable
to you based upon the actual number of days which you were
employed by the Company during the applicable fiscal year,
which shall be paid on the Bonus Payment Date.
4. Since Quiksilver does not have a vacation policy for
executives of your level, no vacation days will be treated as
earned or accrued.
5. While you are employed hereunder, Quiksilver will pay the
premium on a term life insurance policy on your life with a
company of our choice in the face amount determined by the
Company of not less than $2,000,000 payable to the beneficiary
or beneficiaries of your choice. Quiksilver's obligation to
obtain and maintain this insurance is contingent upon your
establishing and maintaining insurability, and it is not
required to pay premiums for such a policy in excess of $5,000
annually.
6. Provided you are then serving as the Company's Chief Executive
Officer hereunder and that a sufficient number of authorized
but unissued shares are available under the Company's
stockholder approved plan, the Company will grant you options
to acquire 100,000 shares of the Company's Common Stock
(subject to appropriate adjustment for any stock split, stock
dividend, recapitalization, combination of shares, exchange of
shares or other change effecting the outstanding Common Stock
as a class without the Company's receipt of consideration)
annually on the date the Company grants options to its
employees generally. The options shall be granted pursuant to
the Company's stock incentive plan with an exercise price
equal to the fair market value on the date of grant, a maximum
term of 10 years and vesting in equal annual installments over
three years. The remaining terms of such options shall be
consistent with those of options generally granted to other
employees and shall be set forth in separate agreements.
7. (a) Notwithstanding anything to the contrary in this Agreement
or in your prior employment relationship with the Company,
express or implied, either you or Quiksilver may terminate
your employment at will and with or without Cause (as defined
below) at any time for any reason. This aspect of your
employment relationship can only be changed by an
individualized written agreement signed by both you and the
Company.
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(b) The Company may terminate your employment immediately,
without notice, for Cause, which shall be defined as (i) your
death, (ii) your permanent disability which renders you unable
to perform your duties and responsibilities for a period in
excess of three consecutive months, (iii) willful misconduct
in the performance of your duties, (iv) violation of law, (v)
self-dealing, (vi) willful breach of duty, or (vii) habitual
neglect of duty, (viii) a material breach by you of your
obligations under Paragraphs 8 or 10 of this Agreement. If the
Company terminates your employment for Cause, or you terminate
your employment other than for Good Reason (as defined below),
you (or your estate or beneficiaries in the case of your
death) shall receive your base salary and other benefits
earned and accrued prior to the termination of your employment
as well as a pro rata portion of your bonus, if any, as
provided in Paragraph 3 for the fiscal year in which such
termination occurs, and you shall have no further rights to
any other compensation or benefits hereunder on or after the
termination of your employment.
(c) The Company may terminate your employment without Cause
and you may terminate your employment with the Company for
Good Reason, upon thirty (30) days' advance written notice.
If Quiksilver elects to terminate your employment without
Cause, or if you terminate your employment with the Company
for Good Reason within six (6) months of the action
constituting Good Reason, the Company will (i) continue to pay
your base salary (but not any employment benefits) on its
regular payroll dates for a period equal to the greater of
eighteen (18) months or the remaining term of this Agreement,
and (ii) pay you a pro rata portion of your bonus, if any, as
provided by Paragraph 3 for the year in which such termination
occurs, less applicable withholdings and deductions.
Notwithstanding the foregoing, if such termination without
Cause or for Good Reason occurs within six (6) months
immediately following a Change of Control (as defined in
Addendum "B") the Company will instead (i) continue to pay
your base salary (but not any employment benefits) on it's
regular payroll date for a period of thirty-six (36) months,
(ii) pay you a pro rata portion of your bonus, if any, as
provided by Paragraph 3 for the year in which such termination
occurs, and (iii) pay you an amount equal to three (3) times
the average annual bonus earned by you pursuant to Paragraph 3
during the two (2) most recently completed fiscal years of the
Company (or such shorter period that this Agreement has been
in effect) payable over a three year period following
termination in equal installments on the Company's regular
payroll dates, less applicable withholdings and deductions. In
order for you to be eligible to receive the benefits specified
in this Paragraph 7(c), you must execute a general release of
claims in a form reasonably acceptable to the Company. You
shall have no further rights to any other compensation or
benefits hereunder on or after the termination of your
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employment. You shall not have a duty to seek substitute
employment and the Company shall not have the right to offset
any compensation due you against any compensation or income
received by you after the date of such termination.
"Good Reason" for you to terminate employment means a
voluntary termination as a result of (i) the assignment to you
of duties materially inconsistent with your position as set
forth above without your consent, (ii) a material change in
your reporting level from that set forth in this Agreement
without your consent, (iii) a material diminution of your
authority without your consent, (iv) a material breach by the
Company of its obligations under this agreement, (v) a failure
by the Company to obtain from any successor, before the
succession takes place, an agreement to assume and perform the
obligations contained in this Agreement, or (vi) the Company
requiring you to be based (other than temporarily) at any
office or location outside the Orange County, California area.
Notwithstanding the foregoing, Good Reason shall not exist
unless you provide the Company notice of termination on
account thereof and, if such event or condition is curable,
the Company fails to cure such event or condition within
thirty (30) days of such notice.
(d) In the event that any payment or benefit received or to be
received by you (collectively, the "Payments") would
constitute a parachute payment within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the
"Code"), then the following limitation shall apply:
The aggregate present value of those Payments shall be limited
in amount to the greater of the following dollar amounts (the
"Benefit Limit"):
(i) 2.99 times your Average Compensation (as defined below),
or
(ii) the amount which yields you the greatest after-tax amount
of Payments under this Agreement after taking into account any
excise tax imposed under Code Section 4999 on those Payments.
The present value of the Payments will be measured as of the
date of the Change in Control and determined in accordance
with the provisions of Code Section 280G(d)(4).
Average Compensation means the average of your W-2 wages from
the Company for the five (5) calendar years completed
immediately prior to the calendar year in which the Change in
Control is effected. Any W-2 wages for a partial year of
employment will be annualized, in accordance with the
frequency which such wages are paid during such partial year,
before inclusion in Average Compensation.
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8. Quiksilver owns certain trade secrets and other confidential
and/or proprietary information which constitute valuable
property rights, which it has developed through a substantial
expenditure of time and money, which are and will continue to
be utilized in the Company's business and which are not
generally known in the trade. This proprietary information
includes the list of names of the customers and suppliers of
Quiksilver, and other particularized information concerning
the products, finances, processes, material preferences,
fabrics, designs, material sources, pricing information,
production schedules, marketing strategies, merchandising
strategies, order forms and other types of proprietary
information relating to our products, customers and suppliers.
You agree that you will not disclose and will keep strictly
secret and confidential all trade secrets and proprietary
information of Quiksilver, including, but not limited to,
those items specifically mentioned above.
9. The Company will reimburse you for documented reasonable and
necessary business expenses incurred by you while engaged in
business activities for the Company's benefit on such terms
and conditions as shall be generally available to other
executives of the Company.
10. You will be required to observe the Company's personnel and
business policies and procedures as they are in effect from
time to time. In the event of any conflicts, the terms of this
Agreement will control.
11. This Agreement, its addenda, and any stock option agreements
Quiksilver may enter into with you contain the entire
integrated agreement between us regarding these issues, and no
modification to this letter will be valid unless set forth in
writing and signed by both you and the Company. To the fullest
extent allowed by law, any dispute, controversy or claim
arising out of or relating to this Agreement, the breach
thereof, or any aspect of your employment or the cessation
thereof must be settled exclusively by final and binding
arbitration before a single arbitrator administered by
JAMS/Endispute in Orange County, California, whose fees and
costs shall be evenly divided by the parties. Judgment upon
the award rendered by the arbitrator may be entered in any
court having jurisdiction thereof. The Company reserves the
right, however, to seek judicial provisional remedies and
equitable relief regarding any breach or threatened breach of
your obligations regarding trade secrets and proprietary
information.
12. This Agreement will be assignable by the Company to any
successor or to any other company owned or controlled by the
Company, and will be binding upon any successor to the
business of the Company, whether direct or indirect, by
purchase of securities, merger, consolidation, purchase of all
or substantially all of the assets of the Company or
otherwise.
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Please sign, date and return the enclosed copy of this letter to me for
our files to acknowledge your agreement with the above.
Very truly yours,
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Enclosures
ACKNOWLEDGED AND AGREED:
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Xxxxxx XxXxxxxx, Xx.
Date Effective: , 2003
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ADDENDUM A
EXECUTIVE OFFICER BONUS PLAN
In the event that the Company achieves percentage growth in its "Earnings
Before Taxes" (as defined below) in the amounts set forth in the table below,
then each participant in the Executive Officer Bonus Plan (the "Plan") shall be
entitled to receive a cash bonus in an amount equal to 75% of the percentage of
such participant's base salary earned during the applicable fiscal year set
forth in the table below opposite the respective Earnings Before Taxes Growth
percentage.
Earnings Before Taxes Growth Percentage of Base Salary
---------------------------- -------------------------
Below 10% 0%
10% 25%
12% 75%
16% 100%
20% 150%
24% 200%
28% 250%
32% or more 300%
In the event that Earnings Before Taxes Growth is in an amount between any
of the benchmarks set forth above (but above ten percent (10 %)), then the
amount of any bonus payable to a participant shall be calculated on the basis of
a straight line interpolation between the two closest points.
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For purposes of the foregoing table, "Earnings Before Taxes" shall mean
the Company's income before provision for income taxes for each fiscal year of
the Company as reflected in the Company's audited financial statements for such
fiscal year determined in accordance with generally accepted accounting
principles consistently applied. In addition, income before income taxes shall
exclude all non-recurring or extraordinary items (whether constituting loss or
gain) which, in the sole and absolute discretion of the Board of Directors or
the Compensation Committee of the Company, did not arise in the ordinary course
of business. The computation of income before income taxes and of the dollar
amount of the bonus, if any, payable to any participant under this Plan shall be
approved by the Company's Compensation Committee and shall be final and
conclusive on the Company and each participant.
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ADDENDUM B
DEFINITION OF CHANGE IN CONTROL
"Change in Control" means the occurrence of one or more of the following
events: (i) any corporation, partnership, person, other entity, or group (as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
(collectively, a "Person") acquires shares of capital stock of the Company
representing more than 50% of the total number of shares of capital stock that
may be voted for the election of directors of the Company, (ii) a merger,
consolidation, or other business combination of the Company with or into another
Person is consummated, or all or substantially all of the assets of the Company
are acquired by another Person, as a result of which the stockholders of the
Company immediately prior to the consummation of such transaction own,
immediately after consummation of such transaction equity securities possessing
less than 50% of the voting power of the surviving or acquiring Person (or any
Person in control of the surviving or acquiring Person, the equity securities of
which are issued or transferred in such transaction), or (iii) the stockholders
of the Company approve a plan of complete liquidation, dissolution or winding up
of the Company.
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