Exhibit 10.13
(QUIKSILVER LOGO)
December 22, 2006
PERSONAL AND CONFIDENTIAL
David Morgan
Executive Vice President, Global Finance and Operations
c/o Quiksilver, Inc.
15202 Graham Street
Huntington Beach, California 92649
Re: Employment at Quiksilver, Inc.
Dear David:
This letter ("Agreement") will confirm our understanding and agreement
regarding your continued employment with Quiksilver, Inc. ("Quiksilver" or the
"Company"). This Agreement is effective as of November 1, 2006, 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.
1. Position; Exclusivity. The Company hereby agrees to employ you as
its Executive Vice President, Global Finance and Operations,
reporting to the President or Chief Executive Officer, or their
designee. 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 will be $39,583 per month ($475,000
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 $39,583
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, 2007 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 Company of not less than $2,000,000. Our
obligation to obtain and maintain this insurance is
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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
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
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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 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
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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.
(e) Notwithstanding the foregoing, to the extent the Company
reasonably determines that any payment or benefit under this
Agreement is subject to Section 409A of the Code, such payment or
benefit shall be made at such times and in such forms as the
Company reasonably determines are required to comply with Code
Section 409A (including, without limitation, in the case of a
"specified employee" within the meaning of Code Section 409A, any
payments that would otherwise be made during the six-month period
following separation of service will be paid in a lump sum after
the end of the six-month period) and the Treasury Regulations and
the transitional relief thereunder; provided, however, that in no
event will the Company be required to provide you with any
additional payment or benefit in the event that any of your
payments or benefits trigger additional income tax under Code
Section 409A or in the event that the Company changes the time or
form of your payments or benefits in accordance with this
paragraph.
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
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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.
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") Employment
Arbitration Rules, 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
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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.
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, 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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Charles Exon
Executive Vice President, General
Counsel and Secretary
Enclosure
ACKNOWLEDGED AND AGREED:
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David Morgan
Date Effective: December 22, 2006
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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.
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