Document:

Exhibit 10.2

 

Exhibit 10.2

May 25, 2005

PERSONAL AND CONFIDENTIAL

Bernard Mariette

Quiksilver, Inc.

15202 Graham Street

Huntington Beach, CA 92649

Re:     Employment at Quiksilver, Inc.

Dear Bernard:

     This letter (“Agreement”) will confirm our understanding and agreement regarding your
continued employment with Quiksilver, Inc. (“Quiksilver” or the “Company”). This Agreement is
effective May 25, 2005 and completely supersedes and replaces any existing or previous oral or
written understandings or agreements, express or implied, between you and the Company regarding
your employment, including, without limitation, the August 1, 2004 agreement.

	 	1.  	Position; Exclusivity. The Company hereby agrees to
employ you as its President, currently reporting to the Chief Executive
Officer. During your employment with Quiksilver, you will devote your full
professional and business time, interest, abilities and energies to the Company
and will not render any services to any other person or entity, whether for
compensation or otherwise, or engage in any business activities competitive
with or adverse to the Company’s business or welfare, whether alone, as an
employee, as a partner, as a member, or as a shareholder, officer or director
of any other corporation, or as a trustee, fiduciary or in any other similar
representative capacity of any other entity.
	 
	 	2.  	Base Salary. Your base salary, retroactive to November
1, 2004, will be $50,000 per month ($600,000 on an annualized basis), 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 $50,000 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.  	Bonus. For the fiscal year ending October 31, 2005 and
each fiscal year thereafter so long as such plans remain in effect and the
requisite stockholder approval of such plans under Section 162(m) of the
Internal Revenue Code has been obtained to ensure the deductibility of payments
made pursuant thereto, you shall be eligible to receive a bonus under the

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	 	   	Company’s stockholder approved Annual Incentive Plan and/or Long-Term
Incentive Plan of up to 300% of your original base salary hereunder based on
achievement of certain incentive goals established by the Compensation
Committee of the Board of Directors. Any bonus earned pursuant to the
Annual Incentive Plan shall be paid within thirty (30) days following the
date the Company publicly releases its annual audited financial statements
(the “Bonus Payment Date”). In the event that your employment with the
Company terminates prior to the end of the applicable fiscal year for any
reason other than termination for Cause (as defined in Paragraph 9(b), but
excluding subparagraphs (i) and (ii) thereof), you shall be entitled to
receive a pro rata portion of the bonus otherwise payable to you under the
Annual Incentive Plan based upon the actual number of days which you were
actively employed by the Company during the applicable fiscal year, which
shall be paid on the Bonus Payment Date. Payment of any bonus earned under
the Long-Term Incentive Plan and proration thereof on termination of your
employment shall be governed by the terms of the Long-Term Incentive Plan.
Any bonus payments shall be less applicable withholdings and deductions.
	 
	 	4.  	Vacation. Since Quiksilver does not have a vacation
policy for executives of your level, no vacation days will be treated as earned
or accrued.
	 
	 	5.  	Health and Disability Insurance. You (and any eligible
dependents you elect) will be covered by the Company’s group health insurance
programs on the same terms and conditions applicable to comparable employees.
You will also be covered by the long-term disability plan for senior
executives on the same terms and conditions applicable to comparable employees.
The Company reserves the right to change, modify, or eliminate such coverages
in its discretion.
	 
	 	6.  	Clothing Allowance. You will be provided a clothing
allowance of $4,000 per year at the Company’s wholesale prices.
	 
	 	7.  	Stock Options. You shall continue to be a participant
in Quiksilver’s Stock Incentive Plan, or any successor equity plan. The amount
and terms of any restricted stock, stock options, stock appreciation rights or
other interests to be granted to you will be determined by the Board of
Directors in its discretion and covered in separate agreements, but shall be
substantially similar to those granted to other senior executives of Quiksilver
of equivalent level. Stock options granted to you after the date hereof
through the termination of your employment shall provide that if you are
terminated by the Company without Cause (as hereinafter defined), as a result
of your death or permanent disability, or you terminate your employment for
Good Reason (as hereinafter defined), any such options outstanding will
automatically vest in full on an accelerated basis so that the options will
immediately prior to such termination become exercisable for all option shares
and remain exercisable until the earlier to occur of (i) the first anniversary
of such termination, (ii) the end of the option term, or (iii) termination
pursuant to other provisions of the applicable option plan or agreement (e.g.,
a corporate transaction).

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	 	8.  	Life Insurance. The Company will pay the premium on a
term life insurance policy on your life with a company and policy of our
choice, and a beneficiary of your choice, in the face amount determined by the
Company of not less than $2,000,000. Our obligation to obtain and maintain
this insurance is contingent upon your establishing and maintaining
insurability, and we are not required to pay premiums for such a policy in
excess of $5,000 annually.
	 
	 	9.  	Unspecified Term; At Will Employment; Termination.
	 
	 	   	(a) Notwithstanding anything to the contrary in this Agreement or in your
prior employment relationship with the Company, express or implied, your
employment is for an unspecified term and either you or Quiksilver may
terminate your employment at will and with or without Cause (as defined
below) or notice at any time for any reason; provided, however, that you
agree to provide the Company with thirty (30) days advance written notice of
your resignation (during which time the Company may elect, in its
discretion, to relieve you of all duties and responsibilities). This
at-will aspect of your employment relationship can only be changed by an
individualized written agreement signed by both you and an authorized
officer of the Company.
	 
	 	   	(b) The Company may also terminate your employment immediately, without
notice, for Cause, which shall include, but not be limited to, (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)
commission of a felony or violation of law involving moral turpitude or
dishonesty, (v) self-dealing, (vi) willful breach of duty, (vii) habitual
neglect of duty, or (viii) a material breach by you of your obligations
under 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 and, in the case of a termination
pursuant to subparagraphs (i) or (ii) only, a pro rata portion of your
bonus, if any, as provided in Paragraph 3 for the fiscal year in which such
termination occurs, less applicable withholdings and deductions, and you
shall have no further rights to any other compensation or benefits hereunder
on or after the termination of your employment.
	 
	 	   	(c) 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 of eighteen (18) months, (ii) pay you a
pro rata portion of your bonus, if any, as provided by Paragraph 3 for the
fiscal year in which such termination occurs, less applicable

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	 	   	withholdings and deductions and (iii) pay you an amount equal to two (2)
times the average annual bonus earned by you pursuant to Paragraph 3 during
the two (2) most recently completed fiscal years of the Company payable over
a two-year period following termination in equal installments on the
Company’s regular payroll dates, less applicable withholdings and
deductions. Notwithstanding the foregoing, if such termination without
Cause or for Good Reason occurs within twelve (12) months immediately
following a Change of Control (as defined in Addendum “A”) the Company will
instead (i) continue to pay your base salary (but not any employment
benefits) on its regular payroll dates for a period of thirty (30) months,
(ii) pay you a pro rata portion of your bonus, if any, as provided by
Paragraph 3 for the fiscal year in which such termination occurs, less
applicable withholdings and deductions, and (iii) pay you an amount equal to
two and one-half (21/2) times the average annual bonus earned by you pursuant
to Paragraph 3 during the two (2) most recently completed fiscal years of
the Company payable over a thirty (30) month 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
payments specified in this Paragraph 9(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 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 of
France or the Southern California area without your consent.
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:

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	 	   	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.
	 
	 	10.  	Trade Secrets; Confidential and/or Proprietary
Information. The Company 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,
sales and marketing strategies, sales commission formulae, 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 the Company, including, but not limited to, those
items specifically mentioned above.
	 
	 	11.  	Expense Reimbursement. 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.
	 
	 	12.  	Compliance With Business Policies. You will devote
your full business time and attention to Quiksilver and will not be involved in
other business ventures without written authorization from the Company’s Board
of Directors. 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.

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	 	13.  	Entire Agreement. This Agreement, its addenda, and any
stock option agreements the Company may enter into with you contain the entire
integrated agreement between us regarding these issues, and no modification or
amendment to this Agreement will be valid unless set forth in writing and
signed by both you and an authorized officer of the Company.
	 
	 	14.  	Arbitration as Exclusive Remedy. To the fullest extent
allowed by law, any controversy, claim or dispute between you and the Company
(and/or any of its affiliates, owners, shareholders, directors, officers,
employees, volunteers or agents) relating to or arising out of your employment
or the cessation of that employment will be submitted to final and binding
arbitration in Orange County, California, for determination in accordance with
the American Arbitration Association’s (“AAA”) National Rules for the
Resolution of Employment Disputes, as the exclusive remedy for such
controversy, claim or dispute. In any such arbitration, the parties may
conduct discovery to the same extent as would be permitted in a court of law.
The arbitrator shall issue a written decision, and shall have full authority to
award all remedies which would be available in court. The Company shall pay
the arbitrator’s fees and any AAA administrative expenses. Any judgment upon
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Possible disputes covered by the above include (but are
not limited to) unpaid wages, breach of contract, torts, violation of public
policy, discrimination, harassment, or any other employment-related claims
under laws including but not limited to, Title VII of the Civil Rights Act of
1964, the Americans With Disabilities Act, the Age Discrimination in Employment
Act, the California Fair Employment and Housing Act, the California Labor Code
and any other statutes or laws relating to an employee’s relationship with
his/her employer, regardless of whether such dispute is initiated by the
employee or the Company. Thus, this bilateral arbitration agreement fully
applies to any and all claims that the Company may have against you, including
(but not limited to) claims for misappropriation of Company property,
disclosure of proprietary information or trade secrets, interference with
contract, trade libel, gross negligence, or any other claim for alleged
wrongful conduct or breach of the duty of loyalty. Nevertheless, claims for
workers’ compensation benefits or unemployment insurance, those arising under
the National Labor Relations Act, and any other claims where mandatory
arbitration is prohibited by law, are not covered by this arbitration
agreement, and such claims may be presented by either the Company or you to the
appropriate court or government agency. BY AGREEING TO THIS BINDING
ARBITRATION PROVISION, BOTH YOU AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY
JURY. This mutual arbitration agreement is to be construed as broadly as is
permissible under applicable law.

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	 	15.  	Successors and Assigns. 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.

Please sign and return the enclosed copy of this letter to me for our files to acknowledge your
agreement with the above.

	 	 	 
	 

	 	Very truly yours,
	 
	 
	 	 
	

	 	/s/ Robert B. McKnight, Jr.
	

	 	Robert B. McKnight, Jr.
	

	 	Chief Executive Officer

Enclosure

ACKNOWLEDGED AND AGREED:

	 	 	 
	/s/ Bernard Mariette

	 	 
	Bernard Mariette
	 	 

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ADDENDUM A

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.

-Addendum A-Exhibit 10.3

 

Exhibit 10.3

May 25, 2005

PERSONAL AND CONFIDENTIAL

Charles S. Exon, Esq.

c/o Quiksilver, Inc.

15202 Graham Street

Huntington Beach, California 92649

Re:     Employment at Quiksilver, Inc.

Dear Charlie:

     This letter (“Agreement”) will confirm our understanding and agreement regarding your
continued employment with Quiksilver, Inc. (“Quiksilver” or the “Company”). This Agreement is
effective May 25, 2005, and completely supersedes and replaces any existing or previous oral or
written understandings or agreements, express or implied, between you and the Company regarding
your employment, including, without limitation, the August 1, 2004 agreement.

	 	1.  	Position; Exclusivity. The Company hereby agrees to
employ you as its Executive Vice President, Business and Legal
Affairs-International, reporting to the President or Chief Executive Officer.
During your employment with Quiksilver, you will devote your full professional
and business time, interest, abilities and energies to the Company and will not
render any services to any other person or entity, whether for compensation or
otherwise, or engage in any business activities competitive with or adverse to
the Company’s business or welfare, whether alone, as an employee, as an
attorney, as a partner, as a member, or as a shareholder, officer or director
of any other corporation, or as a trustee, fiduciary or in any other similar
representative capacity of any other entity. The Company agrees that you will
be insured against, indemnified or otherwise covered for legal malpractice or
similar claims that may arise out of your carrying out your duties and
responsibilities hereunder.
	 
	 	2.  	Base Salary. Your base salary, retroactive to November
1, 2004, will be $33,333.33 per month ($400,000 on an annualized basis), 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 $33,333.33 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.

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	 	3.  	Bonus. For the fiscal year ending October 31, 2005 and
each fiscal year thereafter, you shall be eligible to receive a discretionary
bonus under the terms approved by the Board of Directors for such bonus. Any
such bonus shall be paid within thirty (30) days following the date the Company
publicly releases its annual audited financial statements (the “Bonus Payment
Date”). In the event that your employment with the Company terminates prior to
the end of the applicable fiscal year, your eligibility to receive a pro rata
portion of the bonus is governed by Paragraph 9 below. Any bonus payments
shall be less applicable withholdings and deductions.
	 
	 	4.  	Vacation. Since Quiksilver does not have a vacation
policy for executives of your level, no vacation days will be treated as earned
or accrued.
	 
	 	5.  	Health and Disability Insurance. You (and any eligible
dependents you elect) will be covered by the Company’s group health insurance
programs on the same terms and conditions applicable to comparable employees.
You will also be covered by the long-term disability plan for senior
executives on the same terms and conditions applicable to comparable employees.
The Company reserves the right to change, modify, or eliminate such coverages
in its discretion.
	 
	 	6.  	Clothing Allowance. You will be provided a clothing
allowance of $4,000 per year at the Company’s wholesale prices.
	 
	 	7.  	Stock Options. You shall continue to be a participant
in Quiksilver’s Stock Incentive Plan, or any successor equity plan. The amount
and terms of any restricted stock, stock options, stock appreciation rights or
other interests to be granted to you will be determined by the Board of
Directors in its discretion and covered in separate agreements, but shall be
substantially similar to those granted to other senior executives of Quiksilver
of equivalent level. Stock options granted to you after the date hereof
through the termination of your employment shall provide that if you are
terminated by the Company without Cause (as hereinafter defined), as a result
of your death or permanent disability, or you terminate your employment for
Good Reason (as hereinafter defined), any such options outstanding will
automatically vest in full on an accelerated basis so that the options will
immediately prior to such termination become exercisable for all option shares
and remain exercisable until the earlier to occur of (i) the first anniversary
of such termination, (ii) the end of the option term, or (iii) termination
pursuant to other provisions of the applicable option plan or agreement (e.g.,
a corporate transaction).
	 
	 	8.  	Life Insurance. The Company will pay the premium on a
term life insurance policy on your life with a company and policy of our
choice, and a beneficiary of your choice, in the face amount determined by the

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	 	   	Company of not less than $2,000,000. Our obligation to obtain and maintain
this insurance is contingent upon your establishing and maintaining
insurability, and we are not required to pay premiums for such a policy in
excess of $5,000 annually.
	 
	 	9.  	Unspecified Term; At Will Employment; Termination.
	 
	 	   	(a) Notwithstanding anything to the contrary in this Agreement or in your
prior employment relationship with the Company, express or implied, your
employment is for an unspecified term and either you or Quiksilver may
terminate your employment at will and with or without Cause (as defined
below) or notice at any time for any reason; provided, however, that
you agree to provide the Company with thirty (30) days advance written
notice of your resignation (during which time the Company may elect, in its
discretion, to relieve you of all duties and responsibilities). This
at-will aspect of your employment relationship can only be changed by an
individualized written agreement signed by both you and an authorized
officer of the Company.
	 
	 	   	(b) The Company may also terminate your employment immediately, without
notice, for Cause, which shall include, but not be limited to, (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)
commission of a felony or violation of law involving moral turpitude or
dishonesty, (v) self-dealing, (vi) willful breach of duty, (vii) habitual
neglect of duty, or (viii) a material breach by you of your obligations
under 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 and, in the case of a termination
pursuant to subparagraphs (i) or (ii) only, a pro rata portion of your
bonus, if any, as provided in Paragraph 3 for the fiscal year in which such
termination occurs, less applicable withholdings and deductions, and you
shall have no further rights to any other compensation or benefits hereunder
on or after the termination of your employment.
	 
	 	   	(c) 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 of eighteen (18) months, (ii) pay you a
pro rata portion of a bonus adopted pursuant to Paragraph 3, if any, for the
fiscal year in which such termination occurs, less applicable

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	 	   	withholdings and deductions, and (iii) pay you an amount equal to two (2)
times the average annual bonus earned by you pursuant to Paragraph 3 during
the two (2) most recently completed fiscal years of the Company, payable
over an eighteen (18) month period following termination in equal
installments on the Company’s regular payroll dates, less applicable
withholdings and deductions. Notwithstanding the foregoing, if such
termination without Cause or for Good Reason occurs within twelve (12)
months immediately following a Change of Control (as defined in Addendum
“A”), the Company will instead (i) continue to pay your base salary (but
not any employment benefits) on its regular payroll dates for a period of
twenty-four (24) months, (ii) pay you a pro rata portion of a bonus, if any,
for the fiscal year in which such termination occurs, less applicable
withholdings and deductions, and (iii) pay you an amount equal to two (2)
times the average annual bonus earned by you pursuant to Paragraph 3 during
the two (2) most recently completed fiscal years of the Company, payable
over a twenty-four (24) month 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
payments specified in this Paragraph 9(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 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 of
the Southern California area without your consent. 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

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	 	   	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.
	 
	 	10.  	Trade Secrets; Confidential and/or Proprietary
Information. The Company 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,
sales and marketing strategies, sales commission formulae, 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 the Company, including, but not limited to, those
items specifically mentioned above.
	 
	 	11.  	Expense Reimbursement. 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.

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	 	12.  	Compliance With Business Policies. You will devote
your full business time and attention to Quiksilver and will not be involved in
other business ventures without written authorization from the Company’s Board
of Directors. 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.
	 
	 	13.  	Entire Agreement. This Agreement, its addenda, and any
stock option agreements the Company may enter into with you contain the entire
integrated agreement between us regarding these issues, and no modification or
amendment to this Agreement will be valid unless set forth in writing and
signed by both you and an authorized officer of the Company.
	 
	 	14.  	Arbitration as Exclusive Remedy. To the fullest extent
allowed by law, any controversy, claim or dispute between you and the Company
(and/or any of its affiliates, owners, shareholders, directors, officers,
employees, volunteers or agents) relating to or arising out of your employment
or the cessation of that employment will be submitted to final and binding
arbitration in Orange County, California, for determination in accordance with
the American Arbitration Association’s (“AAA”) National Rules for the
Resolution of Employment Disputes, as the exclusive remedy for such
controversy, claim or dispute. In any such arbitration, the parties may
conduct discovery to the same extent as would be permitted in a court of law.
The arbitrator shall issue a written decision, and shall have full authority to
award all remedies which would be available in court. The Company shall pay
the arbitrator’s fees and any AAA administrative expenses. Any judgment upon
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Possible disputes covered by the above include (but are
not limited to) unpaid wages, breach of contract, torts, violation of public
policy, discrimination, harassment, or any other employment-related claims
under laws including but not limited to, Title VII of the Civil Rights Act of
1964, the Americans With Disabilities Act, the Age Discrimination in Employment
Act, the California Fair Employment and Housing Act, the California Labor Code
and any other statutes or laws relating to an employee’s relationship with
his/her employer, regardless of whether such dispute is initiated by the
employee or the Company. Thus, this bilateral arbitration agreement fully
applies to any and all claims that the Company may have against you, including
(but not limited to) claims for misappropriation of Company property,
disclosure of proprietary information or trade secrets, interference with
contract, trade libel, gross negligence, or any other claim for alleged
wrongful conduct or breach of the duty of loyalty. Nevertheless, claims for
workers’ compensation benefits or unemployment insurance, those arising under
the National Labor Relations Act, and any other claims where mandatory
arbitration is prohibited by law, are not covered by this arbitration

-6-

 

	 	   	agreement, and such claims may be presented by either the Company or you to
the appropriate court or government agency. BY AGREEING TO THIS BINDING
ARBITRATION PROVISION, BOTH YOU AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL
BY JURY. This mutual arbitration agreement is to be construed as broadly as
is permissible under applicable law.
	 
	 	15.  	Successors and Assigns. 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.

Please sign and return the enclosed copy of this letter to me for our files to acknowledge your
agreement with the above.

	 	 	 
	 

	 	Very truly yours,
	 
	 
	 	 
	

	 	/s/ Robert B. McKnight, Jr.
	

	 	Robert B. McKnight, Jr.
	

	 	Chief Executive Officer
	 
	 
	 	 
	

	 	/s/ Bernard Mariette
	

	 	Bernard Mariette
	

	 	President

Enclosure

ACKNOWLEDGED AND AGREED:

	 	 	 
	/s/ Charles S. Exon

	 	 
	Charles S. Exon
	 	 

-7-

 

ADDENDUM A

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.

-Addendum A-

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