Exhibit 10.2

REVOLVING LINE OF CREDIT NOTE

$50,000,000
August 19, 2013

FOR VALUE RECEIVED, the undersigned SKULLCANDY, INC., a Delaware corporation
(“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL
ASSOCIATION (“Bank”) at its office at New York, New York, or at such other place
as the holder hereof may designate, in lawful money of the United States of
America and in immediately available funds, the principal sum of Fifty Million
Dollars ($50,000,000), or so much thereof as may be advanced and be outstanding,
with interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein.
DEFINITIONS:
Capitalized terms used but not otherwise defined herein have the meanings given
such terms in that certain Credit Agreement between Borrower, as borrower, and
Bank, as lender, dated as of August 19, 2013 (as amended, restated or otherwise
modified from time to time, the “Credit Agreement”). As used herein, the
following terms shall have the meanings set forth after each, and any other term
defined in this Note shall have the meaning set forth at the place defined:
(a)    “Business Day” means any day except a Saturday, Sunday or any other day
on which commercial banks in New York are authorized or required by law to
close.
(b)    “Daily Three Month LIBOR Rate” means for any day, the rate of interest
equal to LIBOR then in effect for delivery for a three (3) month period.
(c)    “Fixed Rate Term” means a period commencing on a Business Day and
continuing for one (1) or three (3) months, as designated by Borrower, during
which all or a portion of the outstanding principal balance of this Note bears
interest determined in relation to LIBOR; provided however, that no Fixed Rate
Term may be selected for a principal amount less than Five Hundred Thousand
Dollars ($500,000); and provided further, that no Fixed Rate Term shall extend
beyond the scheduled maturity date hereof. If any Fixed Rate Term would end on a
day which is not a Business Day, then such Fixed Rate Term shall be extended to
the next succeeding Business Day.
(d)    “LIBOR” means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR =
Base LIBOR
 
 
100% - LIBOR Reserve Percentage
 

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(i)    “Base LIBOR” means the rate per annum for United States dollar deposits
quoted by Bank (A) for the purpose of calculating effective rates of interest
for loans making reference to LIBOR, as the Inter-Bank Market Offered Rate, with
the understanding that such rate is quoted by Bank for the purpose of
calculating effective rates of interest for loans making reference thereto, on
the first day of a Fixed Rate Term for delivery of funds on said date for a
period of time approximately equal to the number of days in such Fixed Rate Term
and in an amount approximately equal to the principal amount to which such Fixed
Rate Term applies, or (B) for the purpose of calculating effective rates of
interest for loans making reference to the Daily Three Month LIBOR Rate, as the
Inter-Bank Market Offered Rate in effect from time to time for delivery of funds
for three (3) months in amounts approximately equal to the principal amount of
such loans. Borrower understands and agrees that Bank may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(ii)    “LIBOR Reserve Percentage” means the reserve percentage prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve
Board, as amended), adjusted by Bank for expected changes in such reserve
percentage during the applicable term of this Note.
INTEREST:
(a)    Interest. The “Margin” means a rate per annum, expressed as a percentage,
that is determined pursuant to this Section.
The outstanding principal balance of this Note shall bear interest (computed on
the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating
rate per annum determined by Bank to be equal to the sum of the Daily Three
Month LIBOR Rate in effect from time to time plus the Margin, or (ii) at a fixed
rate per annum determined by Bank to be equal to the sum of LIBOR in effect on
the first day of the applicable Fixed Rate Term plus the Margin. When interest
is determined in relation to the Daily Three Month LIBOR Rate, each change in
the interest rate shall become effective each Business Day that the Bank
determines that the Daily Three Month LIBOR Rate has changed. Bank is hereby
authorized to note the date, principal amount and interest rate applicable
thereto and any payments made thereon on Bank’s books and records (either
manually or by electronic entry) and/or on any schedule attached to this Note,
which notations shall be prima facie evidence of the accuracy of the information
noted.
Through and including December 1, 2013, and until the first adjustment occurs as
specified below, the Margin shall be one and one half of one percent (1.50%).
After December 1, 2013, the Margin shall be adjusted each fiscal quarter of
Borrower on the basis of the ratio of Total Liabilities to Tangible Net Worth of
Borrower, in each case, measured on a consolidated basis, as of the last day of
the previous fiscal quarter, as determined by Bank, in accordance with the
following table:

 
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Total Liabilities to Tangible Net Worth
Margin
< 0.25:1.00
1.30%
>0.25:1.00
1.50%

Any reductions or increases in the Margin will be made following receipt of
Borrower’s financial statements, together with the related Compliance
Certificate, as required under the Credit Agreement. Each Margin change shall
become effective on the first day of the month following the date on which such
financial statements are due under Section 4.3 of the Credit Agreement, as Bank
in its sole discretion deems appropriate. Notwithstanding the foregoing, (A) if
Borrower fails to deliver any financial statements, together with the related
Compliance Certificate, in a timely manner as required under the Credit
Agreement, Bank may increase any Margin to the highest Margin set forth above,
in addition to imposing the default interest rate applicable under the terms of
this Note, and (B) no reduction in any Margin will be made if an Event of
Default has occurred and is continuing at the time that such reduction would
otherwise be made.
If amended or restated financial statements would change previously calculated
Margin, or if Bank determines in its reasonable discretion that any financial
statements have materially misstated Borrower’s financial condition, then Bank
may, using the most accurate information available to it, recalculate the
financial test or tests governing the Margin and retroactively reduce or
increase the Margin from the date of receipt of such amended or restated
financial statements and charge Borrower additional interest, which may be
imposed from the beginning of the appropriate fiscal quarter to which the
restated statements or recalculated financial tests relate or to the beginning
of the fiscal quarter in which any Event of Default has occurred, as Bank in its
sole discretion deems appropriate.
(b)    Selection of Interest Rate Options. At any time any portion of this Note
bears interest determined in relation to LIBOR for a Fixed Rate Term, it may be
continued by Borrower at the end of the Fixed Rate Term applicable thereto so
that all or a portion thereof bears interest determined in relation to the Daily
Three Month LIBOR Rate or to LIBOR for a new Fixed Rate Term designated by
Borrower. At any time any portion of this Note bears interest determined in
relation to the Daily Three Month LIBOR Rate, Borrower may at any time convert
all or a portion thereof so that it bears interest determined in relation to
LIBOR for a Fixed Rate Term designated by Borrower. At such time as Borrower
requests an advance hereunder or wishes to select an interest rate determined in
relation to the Daily Three Month LIBOR Rate or a Fixed Rate Term for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest
rate option selected by Borrower; (ii) the principal amount subject thereto; and
(iii) for each LIBOR selection for a Fixed Rate Term, the length of the
applicable Fixed Rate Term. Any such notice may be given by telephone (or such
other electronic method as Bank may permit) so long as, with respect to each
LIBOR selection for a Fixed Rate Term, (A) if requested by Bank, Borrower
provides to Bank written confirmation thereof not later than three (3) Business
Days after such notice is given, and (B) such notice is given to Bank prior to
10:00 a.m.

 
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Salt Lake City, Utah time on the first day of the Fixed Rate Term, or at a later
time during any Business Day if Bank, at its sole option but without obligation
to do so, accepts Borrower’s notice and quotes a fixed rate to Borrower. If
Borrower does not immediately accept a fixed rate when quoted by Bank, the
quoted rate shall expire and any subsequent LIBOR request from Borrower shall be
subject to a redetermination by Bank of the applicable fixed rate. If no
specific designation of interest is made at the time any advance is requested
hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have
made a Daily Three Month LIBOR Rate interest selection for such advance or the
principal amount to which such Fixed Rate Term applied.
(c)    Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon
demand, in addition to any other amounts due or to become due hereunder, any and
all (i) withholdings, interest equalization taxes, stamp taxes or other taxes
(except income and franchise taxes) imposed by any domestic or foreign
governmental authority and related in any manner to LIBOR, and (ii) future,
supplemental, emergency or other changes in the LIBOR Reserve Percentage,
assessment rates imposed by the Federal Deposit Insurance Corporation, or
similar requirements or costs imposed by any domestic or foreign governmental
authority or resulting from compliance by Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority and related in any manner to LIBOR to the extent they are
not included in the calculation of LIBOR. In determining which of the foregoing
are attributable to any LIBOR option available to Borrower hereunder, any
reasonable allocation made by Bank among its operations shall be conclusive and
binding upon Borrower.
(d)    Payment of Interest. Interest accrued on this Note shall be due and
payable on the first day of each month, commencing October 1, 2013, and on
August 19, 2018, or if any such day is not a Business Day, on the next
succeeding Business Day.
(e)    Default Interest. From and after the maturity date of this Note, or such
earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Bank’s option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Note shall bear interest at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to two percent (2.00%) above
the rate of interest from time to time applicable to this Note.
BORROWING AND REPAYMENT:
(a)    Borrowing and Repayment. Borrower may from time to time during the term
of this Note borrow, partially or wholly repay its outstanding borrowings, and
reborrow, subject to all of the limitations, terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on August 19, 2018.

 
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(b)    Advances. Advances hereunder, to the total amount of the principal sum
stated above, may be made by the holder at the oral or written request of (i)
Chief Financial Officer, Chief Executive Officer or Corporate Controller, any
one acting alone, who are authorized to request advances and direct the
disposition of any advances until written notice of the revocation of such
authority is received by the holder at the office designated above, or (ii) any
person, with respect to advances deposited to the credit of any deposit account
of Borrower, which advances, when so deposited, shall be conclusively presumed
to have been made to or for the benefit of Borrower regardless of the fact that
persons other than those authorized to request advances may have authority to
draw against such account. The holder shall have no obligation to determine
whether any person requesting an advance is or has been authorized by Borrower.
(c)    Application of Payments. Each payment made on this Note shall be credited
first, to any interest then due and second, to the outstanding principal balance
hereof. All payments credited to principal shall be applied first, to the
outstanding principal balance of this Note which bears interest determined in
relation to the Daily Three Month LIBOR Rate, if any, and second, to the
outstanding principal balance of this Note which bears interest determined in
relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.
PREPAYMENT:
(a)    Daily Three Month LIBOR Rate. Borrower may prepay principal on any
portion of this Note which bears interest determined in relation to the Daily
Three Month LIBOR Rate at any time, in any amount and without penalty.
(b)    LIBOR. Borrower may prepay principal on any portion of this Note which
bears interest determined in relation to LIBOR at any time and in the minimum
amount of Five Hundred Thousand Dollars ($500,000); provided however, that if
the outstanding principal balance of such portion of this Note is less than said
amount, the minimum prepayment amount shall be the entire outstanding principal
balance thereof. In consideration of Bank providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto by
acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a
fee which is the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed Rate Term matures,
calculated as follows for each such month:
(i)    Determine the amount of interest which would have accrued each month on
the amount prepaid at the interest rate applicable to such amount had it
remained outstanding until the last day of the Fixed Rate Term applicable
thereto.
(ii)    Subtract from the amount determined in (i) above the amount of interest
which would have accrued for the same month on the amount prepaid for the
remaining term of such Fixed Rate Term at LIBOR in effect on the date of
prepayment for new loans made for such term and in a principal amount equal to
the amount prepaid.
(iii)    If the result obtained in (ii) for any month is greater than zero,
discount that difference by LIBOR used in (ii) above.

 
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Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum two percent (2.00%) above the Daily
Three Month LIBOR Rate in effect from time to time (computed on the basis of a
360-day year, actual days elapsed).
EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of the
Credit Agreement. Any default in the payment or performance of any obligation
under this Note, or any defined event of default under the Credit Agreement,
shall constitute an “Event of Default” under this Note.
MISCELLANEOUS:
(a)    Remedies. Upon the occurrence of any Event of Default, the holder of this
Note, at the holder’s option, may declare all sums of principal and interest
outstanding hereunder to be immediately due and payable without presentment,
demand, notice of nonperformance, notice of protest, protest or notice of
dishonor, all of which are expressly waived by Borrower, and the obligation, if
any, of the holder to extend any further credit hereunder shall immediately
cease and terminate. Borrower shall pay to the holder immediately upon demand
the full amount of all payments, advances, charges, costs and expenses,
including reasonable attorneys’ fees (to include outside counsel fees and all
allocated costs of the holder’s in-house counsel), expended or incurred by the
holder in connection with the enforcement of the holder’s rights and/or the
collection of any amounts which become due to the holder under this Note, and
the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, whether
incurred at the trial or appellate level, in an arbitration proceeding or
otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to
Borrower or any other person or entity.
(b)    Governing Law. This Note shall be governed by and construed in accordance
with the laws of the State of New York.
(c)    Savings Clause. If at any time the interest rate set forth in this Note
exceeds the maximum interest rate allowable under applicable law, the interest
rate shall be deemed to be such maximum interest rate allowable under applicable
law.
(d)    Right of Setoff; Deposit Accounts. Upon and after the occurrence of an
Event of Default, (i) Borrower hereby authorizes Bank, at any time and from time
to time, without notice, which is hereby expressly waived by Borrower, and
whether or not Bank shall have declared this Note to be due and payable in
accordance with the terms hereof, to set off against, and to appropriate and
apply to the payment of, Borrower’s obligations and liabilities under this Note

 
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(whether matured or unmatured, fixed or contingent, liquidated or unliquidated),
any and all amounts owing by Bank to Borrower (whether payable in U.S. dollars
or any other currency, whether matured or unmatured, and in the case of
deposits, whether general or special (except trust and escrow accounts), time or
demand and however evidenced), and (ii) pending any such action, to the extent
necessary, to hold such amounts as collateral to secure such obligations and
liabilities and to return as unpaid for insufficient funds any and all checks
and other items drawn against any deposits so held as Bank, in its sole
discretion, may elect. Borrower hereby grants to Bank a security interest in all
deposits and accounts maintained with Bank to secure the payment of all
obligations and liabilities of Borrower to Bank under this Note.
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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first
written above.
SKULLCANDY, INC.

By: /s/ Kyle Wescoat            
Name: Kyle Wescoat
Title: Chief Financial Officer

Signature Page to Revolving Line of Credit Note
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