EX-10.1



 Exhibit 10.1 

 

			
	 SKULLCANDY
 1441 WEST
UTE BLVD SUITE 250
 PARK CITY, UTAH 84098
 435.940.1545
	  	





  
  

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. 










			
	 SKULLCANDY
 1441 WEST UTE BLVD SUITE 250
 PARK CITY, UTAH 84098

435.940.1545
  
	  	





  

	 	•	 	 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. 








			
	 SKULLCANDY
 1441 WEST UTE BLVD SUITE 250
 PARK CITY, UTAH 84098

435.940.1545
  
	  	





  
 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 








			
	 SKULLCANDY
 1441 WEST UTE BLVD SUITE 250
 PARK CITY, UTAH 84098

435.940.1545
  
	  	





  
 
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; 









			
	 SKULLCANDY
 1441 WEST UTE BLVD SUITE 250
 PARK CITY, UTAH 84098

435.940.1545
  
	  	





  
  

	 	(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 








			
	 SKULLCANDY
 1441 WEST UTE BLVD SUITE 250
 PARK CITY, UTAH 84098

435.940.1545
  
	  	





  
 
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.