Exhibit 10.1

 

SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

  

 

LOGO [g350624g17c72.jpg]

  

July 16, 2012

Dear Sam,

Congratulations! We are thrilled to offer you the position of Executive Vice
President, Product Development and Merchandising at Skullcandy, Inc., reporting
to Jeremy Andrus, President and CEO. You will also have significant interaction
with key players within the Company to support you in your new role. This
position holds a critical role for the future success of the Brand and we are
stoked to have you on board.

Position – Executive Vice President, Product Design and Merchandising

Critical components of success in your position will include, but are not
limited to, executing the following strategic functions:

 

  •  

Understand and respond to challenges from core customer, competitive landscape
and global distribution model.

  •  

Identify and implement a technology and product roadmap to manage
commercialization of new products.

  •  

Identify and develop new categories for business, leading business plans and
executing product launches alongside sales and marketing teams.

  •  

Lead development of product merchandising strategy and growth plans.

  •  

Work with CEO and CFO on long-term target margin and financial objectives.

  •  

Drive rigid calendar management and process philosophy across all teams.

  •  

Supervise the Category Management, Industrial Design, Product Engineering &
Development, Product Art/Design, Sourcing and Quality teams.

Effective Start Date:

  •  

You will start with the Company on a part-time basis (50%) effective Friday,
September 14, 2012. During this time, you will travel to our Corporate
Headquarters in Park City, UT, as you feel necessary, to engage in key personnel
and organizational issues and strategies. During this time, you will receive a
bi-weekly payment of $4,615.38 (gross), equivalent to $120,000.00 on an annual
basis. Should you incur an average worked over 50% during this time, Skullcandy
will adjust the base salary accordingly, pursuant to conversation with your
manager.

 

  •  

You will start with the Company on a full-time basis (100%) effective Wednesday,
January 2, 2013 at our Corporate Headquarters in Park City, UT. At this time,
you will receive the base salary as indicated below.

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

   LOGO [g350624g17c72.jpg]   

 

Base Salary: You will receive a bi-weekly payment of $9,230.77 (gross),
equivalent to $240,000.00 on an annual basis effective January 1, 2012.

Bonus: You may be eligible for a discretionary year-end bonus at the Officer
level based on hitting key performance and revenue metrics. The amount of your
discretionary bonus, if earned, will be up to 25%-100% of your base salary, and
will be based on the performance of the Company achieving its target goals as
well as department and individual performance. Your 2012 bonus will be pro-rated
to your effective start date of approximately September 14, 2012.

Signing Bonus: You will receive a signing bonus in the amount of $60,750.00 upon
your full time start date on January 2, 2013. This amount will be added to your
paycheck and will be included on your W-2, subject to taxes.

Long Term Incentive Program (LTIP): You will be granted, subject to the approval
of the Company’s Board of Directors, an annual equity grant valued at
$150,000.00 for 2012. For 2012, the equity grant will be in the form of
Non-Qualified Stock Options and have a vesting commencement date of your start
date and vest annually over a four (4) year period. You will receive the full
equity grant valued at $150,000.00 and it will not be pro-rated based on your
effective start date of September 14, 2012.

In following years, we expect your equity grant will be comprised solely of
performance share units (PSU’s). The PSU’s will vest upon the achievement of
performance metrics specified in the grant agreement at the end of three
(3) years.

Additional Benefits:

  •  

401k: All Full-Time Employees may elect to participate in the 401k retirement
plan, with 4% matching contributions by company, effective the 1st of the month
following your date of hire.

 

  •  

Health Care Plan: Skullcandy offers group health care through United Health
Care. You will be eligible to participate in our group health care plan
effective the 1st of the month following your date of hire.

 

  •  

Flex Scheduling: Flex scheduling encompasses sick, vacation, and personal time.
Flex Time is approved by your manager.

 

  •  

Product Discounts: All Skullcandy employees may purchase products for a
significant discount.

 

  •  

Subsidized Season Pass: All Skullcandy employees are eligible to purchase a
subsidized season pass to either Canyons Ski Resort or Park City Mountain
Resort, in addition to ‘Powder Day’ benefits, which provides you the opportunity
to ski or ride as much as possible. At Skullcandy, it’s all about the fresh POW!

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

   LOGO [g350624g17c72.jpg]   

 

After you agree to the terms of our offer, a New Hire packet will be emailed to
you. You will be required to return all enrollment forms prior to the above
mentioned benefits effective date in order to ensure you are properly enrolled
in Skullcandy’s benefit plans.

If you have any questions regarding these programs, or for more information
please contact our HR Coordinator Angela Grzelak, angela.grzelak@skullcandy.com.

Relocation:

1. Skullcandy will provide you with a $20,000.00 relocation allowance; this
amount will be added to your paycheck and will be included on your W-2, subject
to taxes. This allowance is to be used for all relocation-related expenses that
are not covered in this letter.

2. Skullcandy will provide you with a full pack and move of your household
goods, provided by Allied Moving Company. An Allied Moving Company consultant
will contact you shortly, should you have urgent needs, please contact Dusty
Whitney at 801-296-7457 or dustyw@baileysallied.com.

3. Skullcandy will provide you with a temporary housing allowance capped at
$3,000.00 net per month for up to six (6) months, beginning December 1, 2012 or
your official move-in date, whichever comes first. You may choose your own
housing accommodations to suit your personal needs.

4. Skullcandy will reimburse you for one home finding trip for you and your
spouse as well as reasonable and customary expenses including lodging,
transportation and meals.

5. If your employment ends within 365 days of your effective date of transfer or
hire, you will be required to reimburse Skullcandy the cost of your Relocation
Benefits, prorated for the time you worked for Skullcandy at the destination
location.

Some or all of the employee benefits described above are subject to the terms of
plan documents. The Company reserves the right to modify or change any of its
employee benefit plans and in the event of a conflict between the descriptions
of the plans contained in this letter and the plan documents, the terms of the
plan documents shall control.

Severance and Termination:

In the event of a Termination of your Employment other than for Cause (as
defined below), death or disability, within twelve (12) months following a
change of control or within three months preceding a change of control, and
contingent upon your execution of a release of claims without revocation, you
shall be entitled to an amount in cash equal to six (6) months of your annual
base pay at the rate in effect immediately prior to the date of
termination. This payment shall be subject to all relevant and necessary
withholdings and/or offsets. You will be also entitled to extend coverage under
any group health plan in which you and your dependents are enrolled at the time
of termination of employment under the COBRA continuation laws for the 18-month
statutory period, or so long as you remain eligible under COBRA.

All stock options granted to you under any equity plan shall become immediately
exercisable in full in accordance with the applicable provisions of the relevant
option agreement and plan upon your Termination, and such stock options that are
not Incentive Stock Options under the Internal Revenue

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

   LOGO [g350624g17c72.jpg]   

 

Code or 1986, as amended, shall also be amended to permit you to exercise such
stock options for a period of 90 days after the effective date of your
termination. Notwithstanding the foregoing, if the total payments and benefits
to be paid to you or for your benefit under this Agreement would cause any
portion of those payments and benefits to be “parachute payments” as defined in
section 280G(b)(2) of the Internal Revenue Code of 1986, as amended, or any
successor provision, the total payments and benefits to be paid to you or for
your benefit under this Agreement shall be reduced to an amount that would not
cause any portion of those payments and benefits to constitute “parachute
payments.”

Termination of your employment for “Cause” shall mean termination upon
(a) willful and continued failure by you to perform substantially your
reasonably assigned duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to you by the Board of Directors, the
Chief Executive Officer or other Office of the Company which specifically
identifies the manner in which the Board of Directors or the Company believes
that you have not substantially performed your duties, (b) willful engaging in
illegal conduct which is materially and demonstrably injurious to the Company,
(c) engaging in fraudulent conduct, as evidenced by a determination in a binding
and final judgment, order or decree of a court or administrative agency of
competent jurisdiction, (d) conviction of a felony, as evidenced by a
determination in a binding and final judgment, order or decree of a court or
administrative agency of competent jurisdiction, (e) gross negligence in the
performance of your duties or responsibilities (unless significantly changed
without your consent, as established through written evidence), or (d) a
significant violation of the Company’s material, written policies and
procedures. No act, or failure to act, on your part shall be considered
“willful” unless done, or omitted to be done without reasonable belief that your
action or omission was in, or not opposed to, the best interests of the
Company. Any act, or failure to act, specifically based upon authority given
pursuant to a resolution duly adopted by the Board of Directors shall be
conclusively presumed to be done, or omitted to be done, by you in the best
interests of the Company.

A Change of Control shall mean that one of the following events has taken place:

 

(a) The shareholders of the Company approve one of the following:

(i) Any merger or statutory plan of exchange involving the Company (“Merger”) in
which the Company is not the continuing or surviving corporation or pursuant to
which Common Stock would be converted into cash, securities or other property,
other than a Merger involving the Company in which the holders of Common Stock
immediately prior to the Merger continue to represent more than 50 percent of
the voting securities of the surviving corporation after the Merger; or

(ii) Any sale, lease, exchange, or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company.

 

(b) A tender or exchange offer, other than one made by the Company, is made for
Common Stock (or securities convertible into Common Stock) and such offer
results in a portion of those securities being purchased and the offer or after
the consummation of the offer is the beneficial owner (as determined pursuant to
Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), directly or indirectly, of securities representing more than 50 percent
of the voting power of outstanding securities of the Company.

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

   LOGO [g350624g17c72.jpg]   

 

 

(c) The Company receives a report on Schedule 13D of the Exchange Act reporting
the beneficial ownership by any person of securities representing more than 50
percent of the voting power of outstanding securities of the Company, except
that if such receipt shall occur during a tender offer or exchange offer
described in (b) above, a Change of Control shall not take place until the
conclusion of such offer.

Notwithstanding anything in the foregoing to the contrary, no Change of Control
shall be deemed to have occurred for purposes of this Agreement by virtue of any
transaction which results you, or a group of persons which includes you,
acquiring, directly or indirectly, securities representing 20 percent or more of
the voting power of outstanding securities of the Company.

At-Will Employment

The Company is excited about your joining and looks forward to a beneficial and
fruitful relationship. Nevertheless, you should be aware that your employment
with the Company is for no specified period and constitutes at-will employment.
As a result, you are free to resign at any time, for any reason or for no
reason. Similarly, the Company is free to conclude its employment relationship
with you at any time, with or without cause, and with or without notice. We
request that, in the event of resignation, you give the Company at least two
weeks’ notice.

Conflicts and Confidential Information

We also ask that, if you have not already done so, you disclose to the Company
any and all agreements relating to your prior employment that may affect your
eligibility to be employed by the Company or limit the manner in which you may
be employed (such as confidentiality or non-compete agreements that may be in
conflict with your duties at Skullcandy). It is the Company’s understanding that
any such agreements will not prevent you from performing the duties of your
position and you represent that such is the case. Moreover, you agree that,
during the term of your employment with the Company, you will not engage in any
other employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes involved
during the term of your employment, nor will you engage in any other activities
that conflict with your obligations to the Company. Similarly, you agree not to
bring any third party confidential information to the Company, and that in
performing your duties for the Company you will not in any way utilize any such
information.

As a condition of your employment, you will also be required to sign and comply
with an Employment, Confidential Information, Invention Assignment,
Non-Competition and Arbitration Agreement which requires, among other
provisions, the assignment of patent rights to any invention made during your
employment at the Company, non-disclosure of Company proprietary information and
specified prohibited employment activities after your employment with the
Company. In the event of any dispute or claim relating to or arising out of our
employment relationship, you and the Company agree that (i) any and all disputes
between you and the Company shall be fully and finally resolved by binding
arbitration, (ii) you are waiving any and all rights to a jury trial but all
court remedies will be available in arbitration, (iii) all disputes shall be
resolved by a neutral arbitrator who shall issue a written opinion, and (iv) the
arbitration shall provide for adequate discovery.

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

  

LOGO [g350624g17c72.jpg]

 

  

 

To indicate your acceptance of Skullcandy’s offer, please sign and date this
letter in the space provided below. This letter, along with any agreements
relating to proprietary rights between you and the Company, set forth the terms
of your employment with the Company and supersede any prior representations or
agreements including, but not limited to, any representations made during your
interviews or relocation negotiations, whether written or oral. This letter,
including, but not limited to, its at-will employment provision, may not be
modified or amended except by a written agreement signed by the President of the
Company and you. This offer of employment will terminate if it is not accepted,
signed and returned by July 31, 2012.

We expect you to be an integral part of the Skullcandy team and look forward to
the opportunity to work with you.

 

Sincerely,     Agreed to and accepted:

/s/ Jeremy Andrus

Jeremy Andrus

President and CEO

Skullcandy, Inc.

   

 

Signature:    

 

 

/s/ Sam Paschel

   

 

Print Name:    

 

 

Sam Paschel

   

 

Date:

 

 

July 25, 2012