Exhibit 10.6

 

Application for confidential treatment for a portion of this document has been
submitted to the Securities and Exchange Commission pursuant to Rule 24b-2 under
the Securities Exchange Act of 1934.  This document omits the information
subject to the confidentiality request.  Omissions are designated by the symbol
“**”.  A complete version of this document has been filed separately with the
Securities and Exchange Commission.

 

TERMINATION AGREEMENT

 

THIS TERMINATION AGREEMENT (the “Agreement”) is dated as of April 30, 2008 (the
“Effective Date”), by and between Heeling Sports Limited, a Texas limited
partnership (the “Company”), Trotwood Import/Export (the “Distributor”),
Trotwood Investments Ltd., a Monaco company and the sole owner of the
Distributor (“Shareholder”)  and David Stanley and Margarete Stanley, the sole
owners of the  Shareholder (the “Owners”).  The Company, Distributor,
Shareholder  and Owners are sometimes collectively referred to herein as the
“Parties” and individually as a “Party.”

 

WHEREAS, the Company and the Distributor entered into that certain International
Distributor Agreement, dated as of February 21, 2007 (the “Distributor
Agreement”); and

 

WHEREAS, the Parties desire to terminate the Distributor Agreement and to
evidence their agreement to certain other matters as set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parties hereby agree as follows:

 

1.                                       Defined Terms.  Capitalized terms used
but not defined herein and defined in the Distributor Agreement shall have the
meanings ascribed to such terms in the Distributor Agreement.

 

2.                                       Termination.

 

(a)                                  Subject to Section 2(b), the Distributor
Agreement shall terminate in all respects on the Effective Date and thereafter
have no further force and effect.

 

(b)                                 Notwithstanding Section 2(a):

 

(i)                                     the Parties agree that the covenants and
obligations set forth in Sections 3(f), 3(m), 3(n), 3(p), 3(s), 3(t), 3(u), 5,
6, 7, 8, 9, 10, 11, 12, 13 and 14 of the Distributor Agreement shall survive the
termination of the Distributor Agreement; and

 

(ii)                                  Distributor shall provide the Company with
Distributor’s current and prospective customer lists that would be useful to the
Company in developing the Heelys brand and distribution business in the
Territory.  It is expressly understood that the Company has declined to purchase
the Distributor as part of this Agreement

 

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and that Company consequently relinquishes all immaterial assets and goodwill
belonging to Distributor.

 

(c)                                  On the Effective Date, the Company shall
pay Distributor (or at Distributors election the Shareholder or the Owner) ** by
bank transfer to the account of designated by the Distributor.

 

3.                                       Product/Inventory Re-Purchase and
Payment.  Upon execution hereof, the Company shall purchase from Distributor,
and Distributor shall sell, assign, transfer, convey, and make available  to the
Company, free and clear of any and all liens, claims and encumbrances, all of
Distributor’s unsold Heelys Products, including those which may be in transit at
the “Effective Date” at Distributor’s “Landed Cost” (which means the
Distributor’s purchase price plus Distributor’s costs of transport and handling
from the Company’s factory to Distributor’s normal warehouse including all taxes
and customs duties where applicable) and the order books ( relating to sales of
Heelys products) and other incidental assets of Distributor related to the
distribution operations, all as described on Exhibit A attached hereto
(collectively, the “Purchase Items”).  The Company shall not assume any
liabilities of Distributor and Distributor shall indemnify, defend and hold
Company harmless from and against any such liabilities.

 

(a)                                  The Company shall pay Distributor in full
by May 16, 2008.  Payment shall be by means of a check or a wire transfer of
immediately available funds to a bank account of Distributor, specified in
writing to the Company.  The Parties agree that the Company shall acquire: 
(i) the unsold Products at their landed costs as set forth on Exhibit A;
(ii) Distributor’s order book at the value on Distributor’s books as of the
Effective Date and as set forth on Exhibit A; and (3) other incidental assets
related to the distribution operations as set forth on Exhibit A.

 

(b)                                 The Company shall collect from the
Distributor  the Purchase Items to the Company on or before May 16, 2008. Any
orders from the factory in transit as of this date shall be made available to
the Company on receipt by the Distributor.

 

4.                                       Re-Purchase of Distributor’s Unshipped
Orders.   Unshipped orders on Distributor’s order book as of the Effective Date
(the “Unshipped Orders”) as set forth in Exhibit B shall where possible be
novated to an affiliate of the Company designated in writing by the Company. 
The Company shall pay, or cause one of its affiliates to pay, Distributor the
net wholesale margin on the Unshipped Orders within ten (10) days following the
receipt of the original payment for the Unshipped Orders.  Net wholesale margin
being calculated as the sales price as noted in the contract/order by the client
exclusive of tax less the Landed Cost of goods (and if any such costs are in US
Dollars, they will converted to Euro at a rate of US$1.56 to €1.00).

 

In the event that a customer does not wish or agree to the novation of their
order then the Company will supply the Distributor with the goods in a timely
fashion to meet the order and permit the Distributor to supply and invoice the
customer in order to fulfill the order.

 

In the event that a novated order is subsequently cancelled or partly cancelled
by a customer as a result of the Company or its affiliate not complying with the
customer’s “General Terms and

 

2

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Conditions of sale and delivery” and the pre agreed commercial order conditions
between the customer and the Distributor (all of which have been previously
delivered by Distributor to Company), then the Company shall pay the Distributor
in full the net wholesale margin as defined above on the unfulfilled part of the
order. In this event the net wholesale margin will be paid within 30 days of the
cancellation.

 

Distributor shall be responsible for the payment of all commissions, bonuses and
any other amounts payable to or to be paid to the Distributor’s sales agents or
any other person or entity relating directly or indirectly to Unshipped Orders
and the sales contemplated in this Section 4.  Distributor will indemnify,
defend and hold the Company harmless from and against any such commissions,
bonuses and all other amounts payable or to be paid and any liability arising
therefrom.

 

5.                                       Contingent Compensation.

 

(a)                                  Subject to the limitations set forth in
Section 5(b), the Company shall pay Distributor (or at Distributor’s election,
Shareholder or the Owners) ** per Net Pair Sold (“Contingent Compensation”). 
“Net Pair Sold” means the gross sales of pairs of Heelys-branded footwear by the
Company or its affiliates (but not any Product sold by the Distributor) in
France, Monaco and Andorra less the aggregate of all pairs of Heelys-branded
footwear returned.  Contingent Compensation shall be paid within thirty (30)
days following each month-end commencing with the first month following the
Effective Date.  The Company will provide Distributor a list of Products sold in
France, Monaco and Andorra by model during the previous month.  The Company
warrants that it shall not change or entice customers to change the place of
delivery of goods to outside the Territory to avoid paying the Contingent
Compensation.

 

(b)                                 The Company’s obligation to pay Distributor
Contingent Compensation shall terminate upon the earlier of (i) the third
anniversary from the Effective Date or (ii) when Distributor has been paid ** of
Contingent Compensation.

 

6.                                       Covenant Not to Compete.  During the
Restriction Period (defined below), Owners and Distributor:  (a) shall not
directly or indirectly engage in any manner (including, without limitation, as a
principal, owner, agent, associate, consultant, employee, investor, equity
holder, lender, partner or board member) in a Competing Business (as defined
below) anywhere in the Territory (as defined below); and (b) shall not enter
into any employment, consulting, advisory, lending or other business
relationship with any person, firm, entity, company or business organization
that is engaged in a Competing Business anywhere in the Territory. 
Notwithstanding the foregoing sentence, Owners and Distributor shall not be
restricted from directly or indirectly owning or acquiring an equity interest of
less than five percent (5%) of a publicly-traded entity.

 

(a)                                  Compensation.  This covenant not to compete
is for the benefit of the Company and its affiliates.  In consideration thereof,
the Company shall pay Distributor (or at Distributor’s election, Shareholder or
Owners) ** on each the first and second anniversary of the Effective Date. 
Distributor, Shareholder and Owners acknowledge and agree that they have
received additional consideration in support of the covenants contained in this
Section 6 pursuant to a

 

3

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consulting agreement between the Company or its affiliates and Mrs. Stanley or
her respective affiliates.

 

(b)                                 Definitions of Territory, Competing Business
and Restriction Period.

 

(i)                                     “Territory” means France, Monaco and
Andorra.

 

(ii)                                  “Competing Business” means using,
importing, distributing, selling, or manufacturing any product that is identical
or similar to the Heelys Products that could be viewed as competitive with any
of the Heelys Products.

 

(iii)                               “Restriction Period” means the period
extending through the second anniversary following the date the last payment is
received by Distributor or Owners pursuant to this Agreement.

 

(c)                                  Injunctive Relief.  It is hereby understood
and agreed that damages shall be an inadequate remedy in the event of a breach
by Distributor, Shareholder or Owners of any of said covenants and that any such
breach by Distributor, Shareholder  or Owners will cause the Company great and
irreparable injury and damage.  Accordingly, Distributor, Shareholder  and
Owners agree that the Company shall be entitled, without waiving any additional
rights or remedies otherwise available to the Company at law or in equity or by
statute, to injunctive and other equitable relief in the event of a breach or
intended or threatened breach by Distributor, Shareholder or Owners of any of
said covenants.

 

7.                                       Indemnification.  Distributor,
Shareholder and Owners hereby agree to jointly and severally indemnify and hold
harmless the Company and its current and former parent, subsidiary and
affiliated entities, their successors and assigns, and the current and former
owners, shareholders, members, managers, partners, directors, officers,
employees, agents, attorneys, representatives and insurers (collectively, the
“Company Parties”) from and against any and all claims, actions liabilities,
losses, damages and expenses, including reasonable attorneys’ fees and such fees
on appeal, incurred by any of them in investigating and/or defending against any
claims, actions or liabilities for which indemnification is provided in the
Distributor Agreement, arising out of or in connection with:  (a) the sale,
license, servicing and related activities pursuant to the Distributor Agreement
with respect to the Heelys Products by Distributor; (b) the failure of
Distributor to comply with any laws, rules and/or regulations; (c) Distributor’s
attachment to the products of any trade name, trademark or log that is
challenged as an infringement of the proprietary rights of any third party;
(d) any warranties granted under the laws of the Territory in excess of those
warranties contained in Sections 3 and 11 of the Distributor Agreement; or
(e) the failure of Distributor to comply with each and every term of the
Distributor Agreement.  Shareholder, Owners and Distributor hereby release all
Company Parties from any duty, obligation or requirement to make any indemnity
payments to Shareholder and/or Owners and/or Distributor and/or any of
Distributor’s sales agents.  Distributor agrees to pay any and all such
indemnity payments and shall hold the Company Parties harmless from and against
same.  Distributor shall be responsible for paying any and all taxes in the
Territory relating directly or indirectly to this Agreement or the performance
hereof.

 

4

--------------------------------------------------------------------------------

 

Distributor shall give written notice to the Company within ten (10) days of
learning of any such claim, action or liability for which indemnification is
provided in the Distributor Agreement.  Distributor agrees that any Company
Party may employ an attorney of its own selection to defend and/or appeal the
claim or action on behalf of such Company Party, at the expense of Distributor. 
Distributor further agrees that such Company Party may elect to allow
Distributor, at Distributor’s expense, to employ an attorney reasonably
satisfactory to such Company Party to defend the indemnified party; provided,
however, that such Company Party reserves the right reasonably to disapprove of
any such attorney.

 

8.                                       Release by Distributor, Shareholder and
Owners.  Distributor, Shareholder and Owners hereby fully, unconditionally and
irrevocably release and discharge the Company Parties from any and all actions,
causes of action, suits, debts, liens, contracts, injuries, agreements,
obligations, promises, liabilities, claims, rights, demands, damages,
controversies, losses, costs, and expenses (including, but not limited to, court
costs and attorneys’ fees) of any and all kinds, whether known or unknown,
suspected or unsuspected, fixed or contingent, in law or in equity, which
Distributor, Shareholder or Owners have, own, hold, or claim to have, own, or
hold, or at any time heretofore had, owned, held, or claimed to have, own, or
hold, against any Company Party, in any way arising with respect to periods and
events up to and including the Effective Date.

 

9.                                       Waiver of Legal Rights.  Distributor,
Shareholder and Owners acknowledge and agree that the waivers and releases set
forth in this Agreement are in exchange for valuable consideration which
Distributor, Shareholder and Owners would not otherwise be entitled to receive. 
In entering into this Agreement, Distributor, Shareholder  and Owners expressly
waive any and all rights either of them have under any laws, rules, statutes or
any common law principle of similar effect that provides that their respective
waivers and releases do not extend to claims that Distributor and /or
Shareholder and/or Owners do not know or suspect to exist in their favor at the
time of execution and delivery of this Agreement, which if known by Distributor
and/or Shareholder and/or Owners would have materially affected their decision
to execute and deliver this Agreement.  The consequences of the foregoing waiver
have been explained by legal counsel to Distributor, Shareholder and Owners. 
Each of Parties acknowledge that it may hereafter discover facts different from,
or in addition to, those which it knows or believes to be true with respect to
the claims released pursuant to this Agreement, and all Parties that this
Agreement and the provisions contained herein shall be and remain effective in
all respects notwithstanding such different or additional facts or the discovery
thereof.

 

10.                                 Protection of Confidential Information. 
Distributor, Shareholder and Owners acknowledge and agree that they have had
access to certain confidential information and trade secrets (“Trade Secrets”)
of the Company pursuant to the Distributor Agreement.  Distributor, Shareholder 
and Owners agree not to disclose to any party or use any of the Trade Secrets
for any purpose and to keep the Trade Secrets confidential.

 

11.                                 Confidentiality Covenant and Litigation
Assistance.

 

(a)                                              Distributor, Shareholder and
Owners hereby agree to keep confidential and not divulge, disseminate, deliver,
publish, describe or communicate the terms and conditions of this

 

5

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Agreement or any part hereof, specifically or in general, in qualitative or
descriptive terms, to any other person, except to their attorneys and
accountants, without the prior written consent of the Company, unless ordered by
a court or governmental authority, provided that reasonable written notice is
given to the Company prior to any such disclosure compelled by court order or
governmental authority.  Shareholder, Distributor and Owners understand that
disclosure of any portion of this Agreement will constitute a breach of its
terms and will entitle the Company to  injunctive relief and damages.

 

(b)                                             For a period of three (3) years
after the Effective Date, Distributor and Owners shall, upon reasonable notice,
furnish such information and proper assistance to the Company as may reasonably
be required by the Company in connection with any litigation or administrative
proceeding in which the Company or any of its subsidiaries or affiliates is, or
may become, a party in the Territory or involving any issues or events connected
to the Territory.  The Company shall reimburse the Distributor, Shareholder and
Owners for all reasonable out-of-pocket expenses incurred by the Distributor,
Shareholder and Owners in rendering such assistance and, after the first
anniversary of the Effective Date, for assistance that is pre-approved by
Company in writing a rate of €125 per hour for each hour Distributor,
Shareholder and Owner render assistance.  The provisions of this
Paragraph 11(b) shall continue in effect notwithstanding expiration or
termination of this Agreement for any reason, and Distributor, Shareholder and
Owners agree to keep all such information regarding any such litigation or
administrative proceeding as strictly confidential.

 

12.                                 Governing Law and Language.  This Agreement
shall be governed by, and construed in accordance with, the laws of the U.S. and
the state of Texas (without regard to conflicts of laws principles), including
the Uniform Commercial Code as enacted in the state of Texas.  The United
Nations Convention on Contracts for the International Sale of Goods shall not
apply to this Agreement (or the rights or obligations of the Parties) and is
disclaimed.  The governing language of this Agreement shall be English as spoken
in the U.S., which shall control the interpretation of this Agreement in the
event this Agreement is translated into a language other than English as spoken
in the U.S.

 

13.                                 Submission to Jurisdiction.  By its
signature to this Agreement, each Party hereunder irrevocably submits to the
exclusive jurisdiction and venue of the state or federal courts located in
Dallas County, State of Texas as to any disputes between the Parties and/or this
Agreement.  Each of the Parties hereto agrees that any judgment (i) rendered
either by a court of competent jurisdiction in accordance with this Agreement;
and (ii) entered in any court of record of the United States, in Dallas, Texas
may be executed against the assets of such party in any jurisdiction or
country.  By its signature to this Agreement, each Party hereunder irrevocably
submits to the exclusive jurisdiction and venue of any of the state or federal
courts in Dallas County, State of Texas in any legal action or proceeding
relating to such execution.

 

14.                                 Waiver of Immunity and Inconvenient Forum. 
Each Party irrevocably waives all immunity from jurisdiction, attachment and
execution, whether on the basis of sovereignty or otherwise, to which it might
otherwise be entitled in any legal action or proceeding in any state or federal
court of competent jurisdiction, including such courts located in Dallas County,
State of Texas, arising out of this Agreement.  The Parties each represent that
its obligations hereunder are

 

6

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commercial activities.  Each Party hereby irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to any
suit, action or proceeding arising out of or relating to this Agreement being
brought in the federal or state courts of competent jurisdiction located in
Dallas County, State of Texas, and hereby further irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum.

 

15.                                 Legal Construction.  Regardless of which
Party may have drafted this Agreement, or any portion thereof, no rule of strict
construction shall be applied against either Party.  Except as expressly
provided in this Agreement, all rights and remedies conferred under this
Agreement or by any other instrument or law shall be cumulative and may be
exercised singularly or concurrently.  In the interpretation of this Agreement,
except where the context otherwise requires, “including” or “include” does not
denote or imply any limitation; “or” has the inclusive meaning “and/or”;
“and/or” means “or” and is used for emphasis only; the singular includes the
plural, and vice versa, and each gender includes each of the others; captions or
headings are only for reference and are not to be considered in interpreting the
Agreement; “Section” refers to a Section of this Agreement, unless otherwise
stated in this Agreement; and all times set forth herein are deemed to be the
time in Dallas, Texas.  If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, such
provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof, the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision, there shall be added automatically as a part
of this Agreement, a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible, and the
Parties request the court to whom disputes relating to this Agreement are
submitted to reform the otherwise illegal, invalid or unenforceable provision in
accordance with this Section.

 

16.                                 Waiver.  Any waiver by any Party of any
provision of this Agreement must be in writing from the waiving Party and shall
not imply a subsequent waiver of the same provision or any other provision.

 

17.                                 Expenses.  Each Party shall pay its own
expenses, including, but not limited to, travel, administration, compensation of
employees, the fees and disbursements of its counsel in connection with the
negotiation, preparation and execution of this Agreement and the consummation of
the transactions contemplated herein, except as otherwise provided herein.

 

18.                                 Expenses for Enforcement.  In the event
either Party is required to employ an attorney to enforce the provisions of this
Agreement or is required to commence legal proceedings to enforce the provisions
of this Agreement, the prevailing Party shall be entitled to recover from the
other Party reasonable attorney’s fees and court costs incurred in connection
with such enforcement, including collection agency fees, attorney litigation
fees, suit fees, and costs of investigation and litigation.

 

19.                                 Entire Agreement.  This Agreement and the
Exhibit(s) to this Agreement embody the entire agreement of the Parties in
relation to the subject matter in this Agreement, supersedes all

 

7

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prior understandings or agreements with respect to the subject matter in this
Agreement, and there is no other oral or written agreement or understanding
between the Parties at the time of execution under this Agreement.  Further,
this Agreement cannot be modified except by the written agreement of all
Parties.

 

20.                                 Headings.  The section and subsection
headings contained in this Agreement are included for convenience only, and
shall not limit or otherwise affect the terms hereof.

 

21.                                 Notices.  Any notice provided for in this
Agreement must be in writing and must be either personally delivered, mailed by
first class mail (postage prepaid and return receipt requested), sent by
reputable overnight courier service (charges prepaid), or faxed to the recipient
at the address below indicated:

 

To the Company:

 

Heeling Sports Limited

3200 Belmeade Drive, Suite 100

Carrollton, Texas  75006
Attention:  John O’Neil

Telecopy:  (214) 390-1661

 

with a copy (which shall not constitute notice) to:

 

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas  75201-4761
Attention:  Robert J. Ward, Esq.
Telecopy:  (214) 999-3266

 

To Distributor Shareholder or Owners:

 

c/o Trotwood Import/Export
38 Boulevard des Moulins
Monaco, MC 98000
Attn:  David or Margarete Stanley
Telecopy:  (377) 97 70 68 31

 

or such other address or to the attention of such other person as the recipient
Party shall have specified by prior written notice to the sending Party.  Any
notice under this Agreement shall be deemed given if delivered in writing to the
intended recipient in person, transmitted by mail (and will be deemed given one
week after the date transmitted), or by recognized international delivery
service to the intended recipient at the address set forth in this Section or
such other address as such intended recipient may give notice from time to time
or by fax to the fax number set forth in this Section (with a confirmation copy
simultaneously mailed and will be deemed given when transmitted).

 

8

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22.                                 Counterparts.  This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute a single
agreement.

 

[SIGNATURE PAGE FOLLOWS]

 

9

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IN WITNESS WHEREOF, each of the Parties has executed this Agreement as of the
date first written above.

 

 

 

HEELING SPORTS LIMITED

 

 

 

 

By:

Heeling Management Corporation

 

 

Its sole general partner

 

 

 

By:

  /s/ John O’Neil

 

Name:

   John O’Neil

 

Title:

   Vice President

 

 

 

TROTWOOD IMPORT/EXPORT

 

 

 

 

 

 

By:

  /s/

David P. Stanley

 

Name:

 

David P. Stanley

 

Title:

 

Gerant

 

 

 

TROTWOOD INVESTMENTS LTD

 

 

 

 

 

 

By:

  /s/

David P. Stanley

 

Name:

 

David P. Stanley

 

Title:

 

Director

 

 

 

DAVID STANLEY

 

 

 

 

 

  /s/ David P. Stanley

 

 

 

 

 

MARGARETE STANLEY

 

 

 

 

 

  /s/ Margarete Stanley

 

10

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EXHIBIT A

 

PURCHASE ITEMS

 

All patents, trademarks, service marks, trade names, copyrights, designs, “doing
business as” names, Internet domain names and other intellectual property rights
being used and/or registered by Distributor and relating to “Heeling,” “Heelys”
or the Products.

 

Inventory (attached physical inventory list)

 

€

**

 

Internet Domain Registration

 

€

**

 

Internet Web site

 

€

**

 

Translated & dubbed “How to Heel Video”

 

€

**

 

Approved Heelys TV advert for French Television

 

€

**

 

TV & DVD player at customer premises

 

€

**

 

DVD’s in French

 

€

**

 

 

See attached for other Purchase Items.

 

 

 

 

1

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Exhibit B

 

PURCHASED ORDER BOOK

 

Customer Name

 

Quantity

 

Unit Sales Price

 

Order Value

 

 

 

 

€

 

€

**

 

**

 

**

 

**

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

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