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EXHIBIT 10.38
LIMITED RECOURSE SECURED PROMISSORY NOTE
$624,000.00 Goleta, California
April 18, 1997
FOR VALUE RECEIVED, Diana M. Wilson, an individual ("Payor"),
hereby promises to pay to Deckers Outdoor Corporation, a Delaware corporation,
or order ("Payee"), the principal sum of Six Hundred Twenty-Four Thousand and
no/100 Dollars ($624,000.00), together with interest from the date hereof on the
unpaid principal balance hereunder at the rate of six and thirty-nine one
hundredths percent (6.39%) (the "Rate") per annum, on the earlier to occur of
(i) the fifth anniversary of the date hereof (the "Maturity Date"), (ii) within
ten (10) days following written demand by Payee if Payor's employment with Payee
is terminated by Payee For Cause (as defined below) or (iii) within ten (10)
days following written demand by Payee if Payor voluntary terminates her
employment with Payee other than for Just Cause (as defined below). Interest
hereunder shall be calculated on the basis of a 360-day year consisting of
twelve 30-day months. All payments of principal and interest under this Note are
payable only in lawful money of the United States at 495A South Fairview,
Goleta, California, 93117, or such other location as Payee may designate in
writing. This Note may be prepaid in whole or in part at any time or from time
to time at the option of Payor without any premium or penalty whatsoever. All
prepayments shall be first applied to accrued interest on the date of such
prepayment. The amount of any prepayment in excess of the accrued interest on
the date of such prepayment shall be applied to reduce the principal balance due
hereunder.
This Note and the obligations of Payor hereunder shall be
secured by the One Hundred Thousand Shares (100,000) of Common Stock of Payee
(the "Pledged Shares") pledged by Payor to Payee pursuant to that certain Stock
Pledge Agreement of even date herewith between Payor and Payee. In the event
that (a) Payor's employment is terminated by Payee For Cause or (b) Payor
voluntarily terminates her employment other than for Just Cause, this Note and
the obligations of Payor hereunder shall also be secured by any and all accrued
and unpaid bonus and severance payments payable to Payor by Payee upon such
termination of Payor's employment (the "Post-Termination Payments"). THE
OBLIGATIONS OF PAYOR UNDER THIS NOTE ARE SECURED SOLELY BY THE PLEDGED SHARES
AND, IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PRECEDING SENTENCE, THE
POST-TERMINATION PAYMENTS. THIS NOTE AND THE OBLIGATIONS OF PAYOR HEREUNDER ARE
NON-RECOURSE. For purposes of this agreement, (a) "Just Cause" means, without
Payor's written consent, (i) any material diminution of Payor's duties,
authority, responsibility, compensation or benefits (other than any reduction in
benefits applicable to similarly situated executives as a group) including,
without limitation, the removal of Payor's title as Chief Operating Officer and
Vice President of Payee, any material reduction of Payor's authority to act in a
capacity commensurate with such positions or any failure to provide or make
available to Payor any material benefit provided or made available to similarly
situated executives of Payee, or (ii) any relocation of Payor's principal place
of employment to a location more than twenty-five (25) miles from Santa
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Barbara, California and (b) "For Cause" means the occurrence or existence of any
of the following, as determined by a majority of the disinterested directors of
Payee's Board: (i) a material breach by Payor of Payor's duty not to engage in
any transaction that represents self-dealing with Payee or any of Payee's
affiliates that has not been approved by a majority of the disinterested
directors of Payee's Board, if in any such case such material breach remains
uncured after the lapse of fifteen (15) days following the date that Payee has
given Payor written notice thereof; (ii) any material act of dishonesty,
misappropriation, embezzlement, intentional fraud or similar conduct by Payor
involving Payee or any of its affiliates; (iii) Payor's conviction or plea of
nolo contendere or the equivalent in respect of a felony involving moral
turpitude (other than driving while intoxicated); (iv) any damage of a material
nature to any property of Payee or any of its affiliates caused by Payor's
willful or grossly negligent conduct; (v) the repeated non-prescription use of
any controlled substance or the repeated use of alcohol or any other
non-controlled substance that renders Payor materially unfit to serve in Payor's
capacity as an officer or employee of Payee or its affiliates; (vi) Payor's
wilful failure to comply with the reasonable instructions of the Board of
Directors after written notice to do so; or (vii) gross insubordination. For
purposes of this Note, termination of Payor's employment as a result of Payor's
death or disability shall not constitute termination "For Cause" but shall
constitute termination by Payor for "Just Cause."
To the extent permitted by law, Payor agrees to pay interest
on any interest payment due but unpaid on the unpaid principal balance hereof at
the Rate, plus two percent (2%) per annum. Payor agrees to pay all costs and
expenses, including reasonable attorneys' fees, incurred by Payee upon the
failure by Payor to make any payment hereunder when due.
Nothing contained in this Note or in any agreements between
Payor and Payee shall be deemed to require the payment by Payor of interest on
the indebtedness evidenced by this Note in excess of the amount that Payee may
lawfully contract to charge under applicable usury and other laws (the "Maximum
Legal Rate"). All agreements between Payor and Payee deemed to pertain to this
Note are expressly limited so that in no contingency or event shall the amount
paid or agreed to be paid to Payee for the use, forbearance, or detention of
money to be loaned hereunder exceed the Maximum Legal Rate. If, under any
circumstance whatsoever, the fulfillment of any obligation under this Note or
any other agreement between Payee and Payor deemed to pertain to this Note shall
involve exceeding the Maximum Legal Rate, then the obligation to be fulfilled by
Payor shall be reduced the minimum amount required so that such obligation shall
not exceed the Maximum Legal Rate.
Payor hereby waives presentment for payment, demand, notice of
demand, notice of nonpayment or dishonor, protest and notice of protest. No
failure to exercise and no delay in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other right,
power or privilege. The rights and remedies herein provided are cumulative and
not exclusive of any rights or remedies provided by law.
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Payee agrees that this Note shall not be transferred without
the prior written consent of Payor, which consent shall not be unreasonably
withheld.
This Note is being delivered in connection with the loan by
Payee to Payor of the principal amount hereunder, which Payor has used to
purchase the Pledged Shares from Payee pursuant to an "Award" made by Payee to
Payor within the meaning of Section 3 of Payee's 1993 Employee Stock Incentive
Plan.
This Note has been executed and delivered in the State of
California and shall be governed by and construed in accordance with the laws
thereof without regard to its laws regarding choice of law or conflict of laws.
/s/ Diana M. Wilson
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Diana M. Wilson
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