exv10w3



 







Exhibit 10.3




SENIOR EXECUTIVE

EMPLOYMENT AGREEMENT




     THIS SENIOR EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is to be effective as of
January 1, 2006 by and between DECKERS OUTDOOR CORPORATION, a Delaware corporation (the
“Company”), and PAT DEVANEY (the “Executive”).



ARTICLE I

DUTIES AND TERM




          1.1 EMPLOYMENT. In consideration of their mutual covenants, Executive’s continued
employment with the Company and other good and valuable consideration, the receipt, adequacy, and
sufficiency of which is hereby acknowledged, the Company agrees to enter into this Agreement with
the Executive, who is currently an employee of the Company on an “at will” basis, and the Executive
agrees to enter into this Agreement and remain in the employ of the Company upon the terms and
conditions herein provided and in accordance with all applicable employment rules of the Company.




          1.2 POSITION AND RESPONSIBILITIES. The Executive will continue to serve in the
Executive’s current position as Senior Vice President of Global Sourcing and Production, and
continue to report to the Executive’s current supervisor.




          1.3 TERM. The term of the Executive’s employment under this Agreement will commence
on the effective date of this Agreement as first written above and will continue, unless sooner
terminated, until December 31, 2007. Employment of the Executive is at will and will continue
until such time as written notice of termination is given by the Company or written notice is given
by the Executive.




          1.4 AT-WILL EMPLOYMENT. Executive will continue to be employed as an at-will employee
of the Company. Subject to the provisions of Articles III and IV, as an at-will employee,
Executive is free to terminate his/her employment with the Company at any time, for any reason, and
the Company has the similar right to terminate Executive’s employment at any time, for any reason.
Although the Company may choose to terminate Executive’s employment for cause, Executive’s
employment is at-will and cause is not required.




          1.5 REVIEW OF AGREEMENT. It is the parties intention that the terms of this Agreement
will be reviewed prior to December 31, 2007 to determine whether any modifications are appropriate.
This review of the Agreement terms may occur at an earlier or later date, is not mandatory and
does not impose any binding obligations on either party.




ARTICLE II

COMPENSATION




     For all services rendered by the Executive in any capacity during the Executive’s employment
under this Agreement, the Company will compensate the Executive as follows:



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          2.1 BASE SALARY. Effective as of January 1, 2006, and for a period of two (2) years
thereafter, the Company will pay to the Executive an annual base salary of TWO HUNDRED THOUSAND
DOLLARS ($200,000) to be paid in equal installments in accordance with the Company’s general
payment policies in effect during the term hereof (the “Base Salary”). Executive’s annual
base salary may be reviewed prior to December 31, 2007 and appropriate adjustments to salary
implemented. If Executive’s annual base salary is not revised effective January 1, 2008, his
existing salary will continue on a monthly basis until changed. This provision does not alter the
at-will nature of Executive’s employment or the provisions of Articles III and IV
below.




          2.2 INCENTIVE BONUS. The Executive shall be eligible to receive a targeted annual
bonus based on performance criteria established annually by the Compensation Committee (the
“Incentive Bonus”). The Incentive Bonus criteria for the year ending            December 31, 2006
is set forth on Exhibit A hereto.




          2.3 STOCK COMPENSATION. The Executive may be granted options to purchase shares of
Company Common Stock or Restricted Stock Units to purchase shares of Company Common Stock in
accordance with the Company’s Stock Option Plan. Any grants must be approved by the Compensation
Committee.




          2.4 ADDITIONAL BENEFITS. The Executive will be entitled to participate in all benefit
and welfare programs, plans, and arrangements that are from time to time made available to the
Company’s like-level executive employees.




ARTICLE III

TERMINATION OF EMPLOYMENT




          3.1 GENERAL. While Executive is an at-will employee as provided at Section 1.3 above,
the follow conditions for termination of employment are set forth in order to determine the nature
of Executive compensation entitlement upon termination of employment as discussed in Article IV
below. Neither the provisions of Article III or Article IV of this Agreement shall alter the
at-will nature of Executive’s employment with the Company.




          3.2 DEATH OR RETIREMENT OF EXECUTIVE. The Executive’s employment under this Agreement
will automatically terminate upon the death or Retirement (as defined in Section 6.1) of
the Executive.




          3.3 BY EXECUTIVE. The Executive may terminate the Executive’s employment under this
Agreement by giving Notice of Termination (as defined in Section 6.1 hereof) to the
Company:





               (a) for Good Reason (as defined in Section 6.1 hereof); and




               (b) at any time without Good Reason.



          3.4 BY COMPANY. The Company may terminate the Executive’s employment under this
Agreement by giving Notice of Termination to the Executive:




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               (a) in the event of Executive’s Total Disability (as defined in Section 6.1
hereof);




               (b) for Cause (as defined in Section 6.1 hereof); and




               (c) at any time without Cause.



ARTICLE IV

COMPENSATION UPON TERMINATION OF EMPLOYMENT




     If the Executive’s employment hereunder is terminated, in accordance with the provisions of
Article III hereof, and except for any other rights or benefits specifically provided for
herein to be effective following the Executive’s period of employment, the Company will provide
compensation and benefits to the Executive only as follows:



          4.1 UPON TERMINATION FOR DEATH OR DISABILITY. If the Executive’s employment hereunder
is terminated by reason of the Executive’s death or Total Disability, the Company will:





               (a) pay the Executive (or the Executive’s estate) or beneficiaries any Base Salary that
has accrued but was not paid as of the termination date (the “Accrued Base Salary”);




               (b) pay the Executive (or the Executive’s estate) or beneficiaries for unused vacation
days accrued as of the termination date in an amount equal to the Executive’s Base Salary
multiplied by a fraction the numerator of which is the number of accrued unused vacation
days and the denominator of which is 260 (the “Accrued Vacation Payment”);




               (c) reimburse the Executive (or the Executive’s estate) or beneficiaries for expenses
incurred by him prior to the date of termination that are subject to reimbursement pursuant
to this Agreement (the “Accrued Reimbursable Expenses”);




               (d) provide to the Executive (or the Executive’s estate) or beneficiaries any accrued
and vested benefits required to be provided by the terms of any Company-sponsored benefit
plans or programs (the “Accrued Benefits”), together with any benefits required to
be paid or provided in the event of the Executive’s death or Total Disability under
applicable law;




               (e) pay the Executive (or the Executive’s estate) or beneficiaries any Incentive Bonus
with respect to a prior fiscal year that has accrued but has not been paid together with any
Accrued Incentive Bonus for the current fiscal year based upon actual performance (the
“Accrued Incentive Bonus”); and




               (f) the Executive (or the Executive’s estate) or beneficiaries shall have the right to
exercise all vested unexercised stock options and warrants outstanding at the termination
date in accordance with terms of the plans and agreements pursuant to which such options or
warrants were issued.



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          4.2 UPON TERMINATION BY COMPANY FOR CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON. If the
Executive’s employment is terminated by the Company for Cause, or if the Executive terminates the
Executive’s employment with the Company other than (x) upon the Executive’s death or Total
Disability or (y) for Good Reason, the Company will:





               (a) pay the Executive the Accrued Base Salary;




               (b) pay the Executive the Accrued Vacation Payment;




               (c) pay the Executive the Accrued Reimbursable Expenses;




               (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;




               (e) pay the Executive any earned Accrued Incentive Bonus, but excluding any Accrued
Incentive Bonus for the year of termination; and




               (f) the Executive will have the right to exercise vested options and warrants in
accordance with Section 4.1(f) hereof.



          4.3 UPON TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR GOOD REASON. If
the Executive’s employment is terminated by the Company without Cause or by the Executive for Good
Reason, the Company will:





               (a) pay the Executive the Accrued Base Salary;




               (b) pay the Executive the Accrued Vacation Payment;




               (c) pay the Executive the Accrued Reimbursable Expenses;




               (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;




               (e) pay the Executive any earned Accrued Incentive Bonus;




               (f) pay the Executive severance, commencing on the thirtieth (30th) day
following the termination date, of six (6) monthly payments equal to one-twelfth
(1/12th) of the Executive’s Annual Base Salary in effect immediately prior to the
time such termination occurs. Severance will be mitigated on a dollar for dollar basis for
any income received by Executive for duties performed for Company or any third party during
the six (6) months following termination. The severance payment required under this
subsection shall be conditioned upon the Executive confirming the release in Section
5.2 hereof; and




               (g) maintain in full force and effect, for the Executive’s and the Executive’s
eligible beneficiaries, until the first to occur of (x) the Executive’s attainment of
alternative employment if such employment includes health insurance benefits or (y)



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the six (6) month anniversary of termination of employment, the benefits provided
pursuant to Company-sponsored benefit plans, programs, or other arrangements in which the
Executive was entitled to participate as a full-time employee immediately prior to such
termination in accordance with Section 2.4 hereof, subject to the terms and
conditions of participation as provided under the general terms and provisions of such
plans, programs, and arrangements, or in the alternate, the Company will arrange to provide
the Executive with continued benefits substantially similar to those which the Executive
would have been entitled to receive under such plans, programs, and arrangements;




               (h) the Executive shall have the right to exercise vested options and warrants in
accordance with Section 4.1(f).



          4.4 UPON CHANGE OF CONTROL AND TERMINATION BY THE COMPANY WITHOUT CAUSE OR BY EXECUTIVE
FOR GOOD REASON. If the Executive’s employment is terminated within two (2) years of a Change
of Control by the Company without Cause or by the Executive for Good Reason, the Company will:





               (a) pay the Executive the Accrued Base Salary;




               (b) pay the Executive the Accrued Vacation Payment;




               (c) pay the Executive the Accrued Reimbursable Expenses;




               (d) pay the Executive the Accrued Benefits, together with any benefits required to be
paid or provided under applicable law;




               (e) pay the Executive any Accrued Incentive Bonus; plus the pro rata Incentive Bonus
based on actual performance for the year of termination.




               (f) pay the Executive severance of one and one-half (1.5) times Executive’s Annual Base
Salary in effect immediately prior to the time such termination occurs plus the greater of
(x) one and one-half (1.5) times the targeted Incentive Bonus immediately prior to the time
such termination occurs or (y) one and one-half (1.5) times the average actual Incentive
Bonus for the previous three (3) years, whichever is greater. The severance payment
required under this subsection shall be conditioned upon the Executive confirming the
release in Section 5.2 hereof;




               (g) maintain in full force and effect, for the Executive’s and the Executive’s
eligible beneficiaries, until the first to occur of (x) the Executive’s attainment of
alternative employment if such employment includes health insurance benefits or (y) the
eighteen (18) month anniversary of termination, the benefits provided pursuant to
Company-sponsored benefit plans, programs, or other arrangements in which the Executive was
entitled to participate as a full-time employee immediately prior to such termination in
accordance with Section 2.4 hereof, subject to the terms and conditions of
participation as provided under the general terms and provisions of such plans, programs,
and arrangements, or in the alternate, the Company will arrange to provide the Executive



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with continued benefits substantially similar to those which the Executive would have
been entitled to receive under such plans, programs, and arrangements;




               (h) any payments will be grossed up for Internal Revenue Code Section 280G excise tax
penalty on “excess parachute payments;” and




               (i) the Executive shall have the right to exercise vested options and warrants in
accordance with Section 4.1(f).



ARTICLE V

ADDITIONAL AGREEMENTS




          5.1 OTHER AGREEMENTS. As further material consideration for the Company entering into
this Agreement, the Executive will also execute the Company’s standard employee confidentially
agreement, inventions assignment agreement, and any other agreements required to be executed by all
like level executives of the Company.




          5.2 EMPLOYEE’S RESTRICTIVE COVENANTS UPON TERMINATION. If the Executive’s employment
is terminated for any reason, Executive agrees:





               (a) To keep all of the Company’s Confidential Information confidential in perpetuity in
accordance with the Company’s policy;




               (b) To not hire or solicit for hire or consultation employees of the Company for a
period of one and one-half (1 1/2) years after termination of employment; and




               (c) To release the Company from any and all claims, whether known or unknown, except
for those based upon this Agreement. Such release shall include the rights of Section 1542
of the California Civil Code, which provides:




“A general release does not extend to claims which the creditor does not know or
suspect to exist in the Executive’s favor at the time of executing the release,
which if known by him must have materially affected the Executive’s settlement with
the debtor.”



ARTICLE VI

MISCELLANEOUS




          6.1 DEFINITIONS. For purposes of this Agreement, the following terms will have the
following meanings:





               (a) “Accrued Base Salary” — as defined in Section 4.1(a) hereof.




               (b) “Accrued Benefits” — as defined in Section 4.1(d) hereof.




               (c) “Accrued Incentive Bonus” — as defined in Section 4.1(e) hereof.



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               (d) “Accrued Reimbursable Expenses” — as defined in Section 4.1(c)
hereof.




               (e) “Accrued Vacation Payment” — as defined in Section 4.1(b) hereof.




               (f) “Affiliate” of a Person means a Person that directly or indirectly through
one or more intermediaries, controls, is controlled by, or is under common control with, the
first Person. “Control” (including the terms “controlled by” and “under common
control with”) means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or executor, or otherwise.




               (g) “Incentive Bonus” as defined in Section 2.2 hereof.




               (h) “Base Salary” as defined in Section 2.1 hereof.




               (i) “Cause” will mean any willful breach of duty by the Executive in the course
of the Executive’s employment, continued violation of written Company employment policies
after written notice of such violation, violation of the Company’s Insider Trading Policies,
conviction of a felony or any crime involving fraud, theft, embezzlement, dishonesty or
moral turpitude, engaging in activities which materially defame the Company, engaging in
conduct which is material injurious to the Company or its Affiliates, or any of their
respective customer or supplier relationships, financially or otherwise, or the Executive’s
gross negligence or continued failure to perform Executive’s duties or his/her continued
incapacity to perform such duties.




               (j) “Change of Control” will mean if there is a merger, consolidation, sale of
all or a major portion of the assets of the Company (or a successor organization) or similar
transaction or circumstance where any person or group (other than Douglas B. Otto) acquires
or obtains the right to acquire, in one or more transactions, beneficial ownership of more
than Fifty Percent (50%) of the outstanding shares of any class of voting stock of the
Company (or a successor organization).




               (k) “Compensation Committee” means the Compensation Committee of the Company’s
Board of Directors.




               (l) “Continued Benefits” as defined in Section 4.3(g) hereof.




               (m) “Good Reason” will mean (1) the occurrence of material breach of this
Agreement by the Company, which breach is not cured within fifteen (15) calendar days after
written notice thereof is received by the Company, or (2) if within two (2) years of a
Change of Control, there is a reduction of the Employee’s total compensation, benefits, and
perquisites, the Company’s relocation is greater than fifty (50) miles further from the
Employee’s home, or a material change in the Employee’s position or duties.




               (n) “Notice of Termination” will mean a notice which shall indicate the
specific termination provision of this Agreement relied upon and shall generally set



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forth the basis for termination of the Executive’s employment under the provision so
indicated.




               (o) “Person” means any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership, trust, business trust,
governmental authority, or other entity.




               (p) “Retirement” will mean normal retirement at age 65.




               (q) “Severance” will mean payments after termination of Executive’s employment.




               (r) “Total Disability” will mean the Executive’s failure substantially to
perform the Executive’s duties hereunder on a full-time basis for a period exceeding one
hundred eighty (180) consecutive days or for periods aggregating more than one hundred
eighty (180) days during any twelve (12) month period as a result of incapacity due to
physical or mental illness. If there is a dispute as to whether the Executive is or was
physically or mentally unable to perform the Executive’s duties under this Agreement, such
dispute will be submitted for resolution to a licensed physician agreed upon by the Company
and the Executive, or if an agreement cannot be promptly reached, the Company and the
Executive will promptly each select a physician, and if these physicians cannot agree, the
physicians will promptly select a third physician whose decision will be binding on all
parties. If such a dispute arises, the Executive will submit to such examinations and will
provide such information as such physician(s) may request, and the determination of the
physician(s) as to the Executive’s physical or mental condition will be binding and
conclusive. Notwithstanding the foregoing, if the Executive participates in any group
disability plan provided by the Company, which offers long-term disability benefits,
“Total Disability” will mean total disability as defined therein.



          6.2 KEY MAN INSURANCE. The Company will have the right, in its sole discretion, to
purchase “key man” insurance on the life of the Executive. The Company shall be the owner and
beneficiary of any such policy. If the Company elects to purchase such a policy, the Executive
will take such physical examinations and supply such information as may be reasonably requested by
the insurer.




          6.3 SUCCESSORS; BINDING AGREEMENT. This Agreement will be binding upon any successor
to the Company and will inure to the benefit of and be enforceable by the Executive’s personal or
legal representatives, beneficiaries, designees, executors, administrators, heirs, distributees,
devisees and legatees.




          6.4 MODIFICATION; NO WAIVER. This Agreement may not be modified or amended except by
an instrument in writing signed by the parties hereto. No term or condition of this Agreement will
be deemed to have been waived, nor will there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver will be deemed a continuing waiver unless specifically stated
therein, and each such waiver will operate only as to the specific


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           term or condition waived and will not constitute a waiver of such term or condition for the
future or as to any other term or condition.




          6.5 SEVERABILITY. The covenants and agreements contained herein are separate and
severable and the invalidity or unenforceability of any one or more of such covenants or
agreements, if not material to the employment arrangement that is the basis for this Agreement,
will not affect the validity or enforceability of any other covenant or agreement contained herein.




          6.6 FORM OF NOTICE TO PARTIES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be in writing and shall
be deemed to have been duly given if (a) delivered personally, (b) mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or (c) sent by next-day or
overnight mail or delivery or (d) sent by telecopy or telegram, to the following address:




	 	 	 	 	 
	 

	 	If to Executive:
	 	Pat Devaney
	 

	 	 	 	4523 Vieja Drive
	 

	 	 	 	Santa Barbara, CA 93110
	 
	 	 	 	 
	 

	 	If to Company:
	 	Deckers Outdoor Corporation
	 

	 	 	 	495-A South Fairview Avenue
	 

	 	 	 	Goleta, CA 93117
	 

	 	 	 	Attn: Angel Martinez
	 

	 	 	 	Facsimile #805-681-9886





or, in each case, at such other address as may be specified in writing to the other parties hereto.




     All such notices, requests, demands, waivers and other communications shall be deemed to have
been received (w) if by personal delivery on the day after such delivery, (x) if by certified or
registered mail, on the seventh business day after the mailing thereof, (y) if by next-day or
overnight mail or delivery, on the day delivered, (z) if by telecopy or telegram, on the next day
following the day on which such telecopy or telegram was sent, provided that a copy is also sent by
certified or registered mail.



          6.7 ASSIGNMENT. This Agreement and any rights hereunder will not be assignable by
either party without the prior written consent of the other party except as otherwise specifically
provided for herein.




          6.8 ENTIRE UNDERSTANDING. This Agreement constitutes the entire understanding between
the parties hereto and no agreement, representation, warranty or covenant has been made by either
party except as expressly set forth herein.




          6.9 EXECUTIVE’S REPRESENTATIONS. The Executive represents and warrants that neither
the execution and delivery of this Agreement nor the performance of the Executive’s duties
hereunder violates the provisions of any other agreement to which he is a party or by which he is
bound.




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          6.10 GOVERNING LAW. This Agreement will be construed in accordance with the laws of
the State of California, without regard to the conflict of laws provisions thereof, with venue
proper only in the County of Santa Barbara, California.




          6.11 ARBITRATION.




          (a) Except as provided in Section 6.11(c) below, the parties hereto agree that any
dispute or controversy arising out of, relating to, or in connection with this Agreement, or the
interpretation, validity, construction, performance, breach, or termination thereof, shall be
finally settled by binding arbitration, unless otherwise required by law, to be held in Santa
Barbara, California under the National Rules for the Resolution of Employment Disputes of the
American Arbitration Association as then in effect (the “Rules”). The arbitrator(s) may grant
injunctions or other relief in such dispute or controversy. The decision of the arbitrator(s) shall
be final, conclusive and binding on the parties to the arbitration, and judgment may be entered on
the decision of the arbitrator(s) in any court having jurisdiction.




          (b) The arbitrator(s) shall apply California law to the merits of any dispute or claim,
without reference to rules of conflicts of law.




          (c) The parties may apply to any court of competent jurisdiction for a temporary restraining
order, preliminary injunction, or other interim or conservatory relief, as necessary, without
breach of this arbitration agreement and without abridgement of the powers of the arbitrator.




          (d) EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EMPLOYEE
UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EMPLOYEE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, UNLESS OTHERWISE REQUIRED BY
LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EMPLOYEE’S RIGHT TO A JURY TRIAL AND
RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO EMPLOYEE’S RELATIONSHIP WITH THE COMPANY,
INCLUDING BUT NOT LIMITED TO, CLAIMS OF HARASSMENT, DISCRIMINATION, WRONGFUL TERMINATION AND ANY
STATUTORY CLAIMS.




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     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and
year first above written.



	 	 	 	 	 	 	 
	 	 	COMPANY:	 	 
	 
	 	 	 	 	 	 
	 	 	DECKERS OUTDOOR CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Angel Martinez	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Angel Martinez                      Date: April 3, 2006	 	 
	 

	 	Title:
	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE:	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Patrick Devaney	 	 
	 	 	 	 	 
	 	 	Name: Pat Devaney                      Date: April 3, 2006	 	 
	 	 	Title: Senior Vice President of Global Sourcing and	 	 
	 	 	          Production	 	 






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EXHIBIT A




TO




SENIOR EXECUTIVE EMPLOYMENT AGREEMENT




2006 Incentive Bonus Criteria




Executive:                    Pat Devaney




Target bonus:                     Potential 67% of base salary @ 100% level




Incentive Bonus Allocation:



60% Company Profit Component

40% Management Business Objective (MBO) Component

100%



Incentive bonus to be calculated and paid in accordance with the attached Exhibit B.




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EXHIBIT B




TO




SENIOR EXECUTIVE EMPLOYMENT AGREEMENT





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