Exhibit 10.1

 

SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

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March 7, 2013

Hoby Darling

Dear Hoby,

Congratulations! We are thrilled to offer you the position of Chief Executive
Officer and Director at Skullcandy, Inc. This position holds a critical role for
the future success of the Brand and we are stoked to have you on board.

Effective Start Date: March 14, 2013, or a such date mutually agreed upon by you
and the Company

Base Salary: You will receive a bi-weekly payment of $17,307.69 (gross),
equivalent to $450,000.00 on an annual basis.

Bonus: Pursuant to the Company’s Bonus Incentive Plan, you may be eligible for a
discretionary year-end bonus at the Officer level based on hitting key revenue
and earnings metrics, or other metrics as determined by the Board of Directors.
The target amount of your discretionary bonus, if earned, will be up to 100% of
your base salary, with a maximum bonus of 150%, and will be based on the
performance of the Company achieving its target goals as well as department and
individual performance. The ability to earn a 2013 bonus will be contingent upon
your start date. In the event your 2013 bonus is not fully earned due to a start
date that the Board of Directors deems, in good faith, to be late in the year,
any unearned bonus up to the target level will be rolled into the 2014 bonus
target.

Equity Grant: You will be granted, subject to the ratification of the Company’s
Board of Directors, an equity grant equal to $2,000,000.00 in value, comprised
of approximately 400,000 Stock Options and 100,000 Restricted Stock Units
(RSU’s). The Stock Options will have a vesting commencement date of your start
date, have a strike price equal to the closing price of the Company’s common
stock on the date of grant and vest in four (4) equal yearly installments. The
RSU’s will have a vesting commencement date of your start date and vest annually
over a four (4) year period in yearly installments. This is a one-time grant.
Future grants will be decided by the Board of Directors, in accordance with the
Company’s Long Term Equity Incentive Plan.

Additional Benefits:

 

  •  

401k: All Full-Time Employees may elect to participate in the 401k retirement
plan, with 4% matching contributions by the 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,
which in accordance with Company practices, is three weeks of vacation per year.

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

 

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  •  

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!

 

  •  

Holidays: Skullcandy offers ten (10) paid holidays and two (2) half-day
holidays:

 

  •  

New Year’s Day

  •  

President’s Day

  •  

Memorial Day

  •  

Independence Day

  •  

Labor Day

  •  

Thanksgiving

  •  

Day after Thanksgiving

  •  

Christmas Eve

  •  

Christmas Day

  •  

Boxing Day

  •  

Pioneer Day (half day holiday)

  •  

New Year’s Eve (half day holiday)

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 General Counsel, Seo Salimi, seo@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
(in addition to the relocation allowance described above), 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 up to sixty (60) days of temporary housing,
should it be necessary for you to live at your new location prior to moving your
family, establishing a permanent residence, and/or you are unable to move into
your home or apartment at the time of arrival in your new location.

4. Skullcandy will reimburse you for two (2) home finding trip for you and your
spouse as well as reasonable and customary expenses including lodging,
transportation and meals.

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

 

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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), or your resign for “good reason”, you shall be entitled to an
amount in cash equal to twelve (12) months of your annual base pay at the rate
in effect immediately prior to the date of termination as well as your annual
target bonus for the year in which such termination occurred. This payment shall
be contingent upon your execution of a release of claims without revocation and
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.

Similarly, in the event of a termination of your employment other than for
Cause, death or disability, or if you resign for “good reason”, 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 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. All other awards shall
vest in accordance with the terms of the award agreement. 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, and such failure is not
cured, if curable, within sixty (60) days (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

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

 

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your consent, as established through written evidence), and such action is not
cured, if curable, within sixty (60) days of notice from the Board of Directors,
or (f) 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.

 

(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.

“Good Reason” shall mean the occurrence of any of the following without your
prior written consent:

 

  (i) A material diminution in your authority, duties or responsibilities, as in
effect immediately prior to the Change in Control;

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

 

   LOGO [g510091g61t02.jpg]

 

 

  (ii) A material diminution by the Company in your aggregate annualized base
compensation;

 

  (iii) The relocation of your principal place of employment immediately prior
to the Change in Control (the “Principal Location”) to a location which is more
than fifty (50) miles from such Principal Location; or

 

  (iv) Any other action by the Company that constitutes a material breach of any
material provision of this Agreement.

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,
subject to the Severance and Termination provisions described above. 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.

Indemnification

In addition to the right to be indemnified by the Company’s D&O policies, the
Company shall fully indemnify you, and advance any reasonable fees and costs
incurred, in the event you are not able to get a waiver to the non-compete
agreement with your former employer and such employer institutes legal action to
enforce the provisions of such agreement.

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

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SKULLCANDY

1441 WEST UTE BLVD SUITE 250

PARK CITY, UTAH 84098

435.940.1545

 

   LOGO [g510091g61t02.jpg]

 

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.

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.

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/ Jeff Kearl   Signature:    /s/ Hoby Darling   
Jeff Kearl   Print Name:    Hoby Darling    Chairman of the Board of Directors  

Date:

  

March 12, 2013

   Skullcandy, Inc.