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Exhibit 10.1
 
EXECUTIVE RESTRICTIVE COVENANT AND RETENTION AGREEMENT
 
This Executive Restrictive Covenant and Retention Agreement (this "Agreement")
is made this 16 th day of March 2012, by and between Heeling Sports Limited, its
shareholders, parents, subsidiaries and affiliates, including its/their
predecessors and successors ("Heelys"), and Craig D. Storey ("Executive").
 
WHEREAS, Executive is a senior executive of Heelys and has made and is expected
to continue to make major contributions to the profitability, growth and
financial strength of Heelys and its parents, subsidiaries and/or affiliates;
 
WHEREAS, Heelys and its parents, subsidiaries and affiliates desire to
incentivize Executive to remain with Heelys;
 
NOW, THEREFORE, in consideration of hire, continued employment, and the
remaining consideration and mutual covenants contained in this Agreement, the
parties agree as follows:
 
1.                Definitions. For purposes of this Agreement, the following
terms have the meanings specified below unless the terms or context hereof
otherwise require or provide:
 
   "Annual Pay" means an amount equal to the Executive's base annual salary in
effect at the time of the first to occur of one of the events specified in
clauses (a) or (b) of Section 2.
 
   "Cause" means (i)  that Executive has materially neglected, failed, or
refused to perform Executive’s duties or responsibilities as reasonably
requested (other than due to a Disability); (ii) that Executive has materially
violated Heelys’ policies regarding drugs and alcohol, discrimination,
harassment, retaliation, honesty, confidentiality, and/or other employee
misconduct, whether now in effect or subsequently promulgated or revised; (iii)
Executive’s conviction for, or entry of a plea of no contest with respect to,
any felony, crime of moral turpitude, or other crime that adversely affects or
(in Heelys’ reasonable judgment) may adversely affect Heelys or the ability of
Executive to perform his duties and responsibilities; (iv) any act or omission
of Executive involving fraud, theft, dishonesty, disloyalty, or illegality with
respect to, or that harms or embarrasses or (in Heelys’ reasonable judgment) may
harm or embarrass Heelys; or (v) any act or omission of Executive constituting
the knowing or intentional violation of applicable law with respect to, or that
harms or embarrasses or (in Heelys’ reasonable judgment) may harm or embarrass,
Heelys; provided, however, that with respect to clause (i) of this Section 1, if
such breach or violation is susceptible to cure, Heelys may not terminate
Executive’s employment for Cause unless it provides Executive with written
notice specifying such breach or violation, in reasonable detail, and Executive
fails to cure or remedy such breach or violation within fifteen (15) days after
receipt of such notice; provided further, that the Board of Heelys. Inc., parent
company of Heelys, shall have the sole discretion to determine whether such a
breach or violation is subject to cure, and if so, whether the Executive
successfully effected a cure following notice.
 
   "Disability" means the Executive's inability to perform the essential
functions of Executive's job, with reasonable accommodation, which continues for
a period of at least six (6) months or for an aggregate of one hundred eighty
(180) days within a twelve (12) month period.

 
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   "Resignation for Good Reason" means, in the absence of Executive’s
consent:  (A) the material breach by Heelys of any material compensation or
material benefit obligation to Executive under this Agreement; or (B) a material
reduction (20% or greater) in Executive’s Annual Pay; (C) a material diminution
in Executive’s authority, duties or responsibilities; or (D) a change in the
location of the headquarters of Heelys such that Executive’s current residence
in Dallas County, Texas would be more than 75 miles from such new headquarters;
provided, however, that Good Reason shall only exist if Heelys fails to correct
or cure the Good Reason condition within a period of forty-five (45) days, after
being provided with written notice (describing the Good Reason condition in
reasonable detail) by Executive within thirty (30) days of the initial existence
of the alleged Good Reason condition.
 
2.                 Payments and Benefits to Executive.
 
(a)          Salary Continuation.  Effective upon the earliest to occur of (i)
termination by Heelys of Executive's employment with Heelys without Cause, (ii)
Executive’s Resignation for Good Reason, or (iii) Heelys’ termination of
Executive's employment as a result of Executive’s Disability, Heelys will pay to
Executive an amount equal to one (1) times Executive's Annual Pay. If one of the
events specified in clauses (i), (ii) or (iii) occurs, then, the payments
provided for in this Section 2 shall commence on the regular payroll date of
Heelys immediately following the first to occur of one of the events specified
in clauses (i), (ii) or (iii) or the effective date of Executive’s Release
(defined below), whichever is later, and shall continue thereafter on Heelys’
regular payroll dates for a period of twelve (12) consecutive months at which
time the obligations to make payments hereunder shall terminate and be of no
further legal force or effect. Heelys shall not be obligated to make the
payments provided for in this Section 2 in the event of termination of
Executive's employment at a time when circumstances constituting Cause exist or
if Executive engages in conduct prohibited by Sections 3(b), (c), (d) or (e),
below.
 
(b)           Executive’s Release of Claims.  Executive understands that the
severance benefits described in this Section 2 are the only severance benefits
to which Executive may be entitled following termination of Executive’s
employment under the circumstances described herein.  Executive acknowledges and
agrees that Executive shall not be eligible for the severance benefits described
in this Section 2 unless Executive signs and returns to Heelys a valid waiver
and global release of claims (“Release”) presented to him by Heelys in the form
requested by Heelys. The Release shall, among other things, release Heelys and
its shareholders, parents, subsidiaries and affiliates, and their/its current
and former employees, from all claims, known or unknown, arising prior to the
date Heelys presents Executive with the Release for Executive’s signature that
Executive asserted and/or could have asserted against any and all of them,
including but not limited to any claims arising out of Executive’s employment
with Heelys.
 
3.                Acknowledgement; Confidential Information; Competitive
Activity; Non-Solicitation.
 
(a) Executive acknowledges and agrees as follows:
 
 
(i)
Heelys is engaged in the business of designing, marketing and distributing
innovative, action sports-inspired products, including wheeled footwear
incorporating stealth, removable wheels in the heel.

 
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(ii)
Heelys has devoted significant resources to developing its goodwill, its brand,
and its relationships with its employees, its customers, and its vendors.  These
resources include, but are not limited to, financial investments, time,
training, team building, confidential information, trade secrets, marketing,
brand development, and other good and valuable resources.  Heelys wishes for
Executive to assist in maintaining and further developing its goodwill in the
course of Executive’s employment with Heelys.  One reason Heelys is willing to
invest in the development of its goodwill and allow executives to use it to the
mutual benefit of Heelys and its executives is because it has agreements with
executives to prevent them from using its goodwill against it in business
competition.  Because Heelys would suffer irreparable harm if Executive left
(voluntarily or involuntarily) its employ and used its goodwill against Heelys,
it is reasonable to protect Heelys against such activities by Executive.

 
 
(iii)
The business relationships of Heelys with its customers and employees are a
legitimate business interest of Heelys. Since Heelys would suffer irreparable
harm if the Executive left (voluntarily or involuntarily) Heelys’ employ and
solicited Heelys’ business and/or employees, or otherwise interfered with
Heelys’ business relationships, it is reasonable to protect Heelys against such
activities by Executive.

 
 
(iv)
Heelys shall provide Executive with its goodwill and Confidential Information
and access to Confidential Information (as defined below) so that Executive may
perform Executive’s duties. Since Heelys would suffer irreparable harm if
Executive misused its goodwill or disclosed such Confidential Information, it is
reasonable to protect Heelys against such misuse and disclosure by Executive.

 
 
(v)
Because Executive will have access to Confidential Information and will
establish, maintain and increase Heelys’ goodwill with its customers and others,
and because the services provided by Executive for Heelys are a significant
factor in the creation of valuable, special and unique assets which are expected
to provide Heelys with a competitive advantage, Heelys would suffer irreparable
harm if Executive competed with Heelys (as described more fully below).
Accordingly, it is reasonable to protect Heelys against such unfair competition
by Executive.

 
 
(vi)
The covenants contained in Sections 3(b), (c), (d) and (e) are reasonably
necessary for Heelys’ protection and are reasonably limited with respect to the
activities they prohibit, their duration, their geographical scope and their
effect on Executive and the public.

 
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(b)           To assist Executive in the performance of Executive’s job duties,
Heelys agrees to provide and shall provide Confidential Information and
materials to Executive solely as a result of Executive’s signing this Agreement,
with such Confidential Information being in addition to any such information
Executive received prior to signing this Agreement.  For purposes of this
Agreement, all confidential or proprietary information concerning the business
and affairs of Heelys, including without limitation, all trade secrets, know how
and other information generally retained on a confidential basis by Heelys
concerning its products, methods, know-how, techniques, systems, software codes
and specifications, formulae, inventions and discoveries, business plans,
pricing, product plans and the identities of and the nature of Heelys’ dealings
with its employees, suppliers and customers, whether or not such information
shall, in whole or in part, be subject to or capable of being protected by
patent, copyright or trademark laws, shall constitute "Confidential
Information."  Executive acknowledges that Executive’s improper use or
revelation of Confidential Information by Executive, during or after the
termination of Executive’s employment by Heelys could cause serious injury to
Heelys’ business. Accordingly, Executive agrees that, unless otherwise required
by law, Executive will forever keep secret and inviolate all Confidential
Information which shall have come or shall hereafter come into Executive's
possession, and Executive will not use the same for Executive’s own private
benefit, or directly or indirectly for the benefit of others, and Executive will
not disclose such Confidential Information to any other person. If Executive is
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or similar process) to disclose any
Confidential Information, Executive shall provide Heelys with prompt prior
written notice of such legal requirement so that Heelys may seek a protective
order or other appropriate remedy and/or waive compliance with the terms of this
Section 3(b). In any event, Executive may furnish only that portion of the
Confidential Information which Executive is advised by legal counsel is
required, and Executive shall exercise Executive's best efforts to obtain an
order or assurance that confidential treatment will be accorded such
Confidential Information that is disclosed. Notwithstanding anything contained
herein which may be to the contrary, the term "Confidential Information" does
not include any information which at the time of disclosure or thereafter (i) is
generally available to and known by the public, other than as a result of a
disclosure directly or indirectly by Executive, (ii) is widely known within the
industry in which Heelys operates, or Executive can demonstrate was otherwise
known to Executive prior to becoming an employee of Heelys, or (iii) becomes
available to Executive on a non-confidential basis from a source (other than
Heelys or a Heelys employee) that is not prohibited from disclosing such
information to Executive by a legal, contractual or fiduciary obligation to
Heelys.

(c)           Executive covenants and agrees that during Executive’s employment
and for a period of one (1) year following the termination of Executive’s
employment, whether such termination occurs at the insistence of Heelys or
Executive (for whatever reason), Executive (whether as an employee, officer,
director, partner, proprietor, investor, associate, consultant, advisor or
otherwise) will not, either directly or indirectly, for Executive or any third
party, engage or invest in any business or activity which is directly or
indirectly in competition with any business or activity engaged in by Heelys or
business or activity in which Heelys planned or proposed, to the knowledge of
Executive, to become engaged including but not limited to the business
activities described in Section 3(a)(i) (provided that Executive shall not be
restricted hereby from owning or acquiring 5% or less of the outstanding voting
securities of a public company). The geographic scope of the restriction
contained in this Section 3(c) is limited to the states in which Executive (i)
provided services on behalf of Heelys (or in which Executive supervised
directly, indirectly, in whole or in part, the servicing activities), and/or
(ii) solicited customers or sold services on behalf of Heelys (or in which
Executive supervised directly, indirectly, in whole or in part, the solicitation
or servicing activities related to such customers), during the twenty-four (24)
months prior to the termination of Executive’s employment.

 
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(d)           Executive covenants and agrees that, for a period of one (1) year
after the termination of Executive’s employment with Heelys, whether such
termination occurs at the insistence of Heelys or Executive (for whatever
reason), Executive shall not, individually or jointly with others, directly or
indirectly recruit, hire, encourage, or attempt to recruit or hire, or by
assisting others, any employees of Heelys or former employees of Heelys, nor
shall Executive contact or communicate with same for the purpose of inducing,
assisting, encouraging and/or facilitating Heelys’ employees or former employees
to terminate their employment with Heelys or find employment or work with
another person or entity.  Additionally, Executive shall not provide or pass
along to any person or entity the name, contact and/or background information
about any of Heelys’ employees or former employees or provide references or any
other information about them.  Additionally, Executive shall not provide or pass
along to Heelys’ employees or former employees any information regarding
potential jobs or entities or persons to work for, including but not limited to,
job openings, job postings, or the names or contact information of individuals
or companies hiring people or accepting job applications.  Further, Executive
shall not offer employment to or work to any employees or former employees of
Heelys.  For purposes of this covenant, “former employees” shall refer to
employees who are not employed by Heelys at the time of the attempted recruiting
or hiring, but were employed by, or working for the Heelys in the six (6) months
prior to the time of the attempted recruiting or hiring and/or interference.

(e)           Executive further covenants and agrees that during Executive’s
employment and for a period of six (6) months following the termination of
Executive’s employment, whether such termination occurs at the insistence of
Heelys or Executive (for whatever reason) Executive shall not individually, or
by assisting any other person to, directly or indirectly, (i) solicit, contact,
or communicate with any person or company, for the purpose of engaging in a
business that is the same or similar to Heelys’ business at the time Executive’s
employment with Heelys ends, who was a customer of Heelys during the twenty-four
(24) months preceding the termination of Executive’s employment, (ii) solicit,
contact, or communicate with any person or company, for the purpose of engaging
in a business that is the same or similar to Heelys’ business at the time
Executive’s employment with Heelys ends, that Executive contacted, solicited,
serviced, or sold services to as an employee of Heelys (either directly or that
Executive supervised directly, indirectly, in whole or in part, the solicitation
or servicing activities related to such person or company) at any time during
the twenty-four (24) months preceding the termination of Executive’s employment;
(iii) induce any customer, supplier or other person with whom Heelys engaged in
business, or to the knowledge of Executive planned or proposed to engage in
business, to terminate any commercial relationship with Heelys or cease to
accept or issue its products and/or service, or (iv) transact business (relating
to the business of producing and/or distributing wheeled footwear) with any
customer, supplier or other person with whom Heelys engaged in business, or to
the knowledge of Executive planned or proposed to engage in business, except
with the expressed written consent of Heelys. The restrictions set forth in
Section3.e.(iv) apply to customers, suppliers or other persons with whom Heelys
engaged in business, or to the knowledge of the Executive planned or proposed to
engage in business and apply even in those circumstances in which Executive was
responsible for initiating or developing the business relationship with such
customer, supplier or other person.

 
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(f)           Executive promises, warrants and represents that in the event
Executive’s employment ends, whether at the insistence of Executive or Heelys
(for whatever reason), Executive will return to Heelys on Executive’s last day
of employment, all of Heelys’ property including, but not limited to, all sales
aids, computer data, laptops, motor vehicles, computers, client lists, access
databases, client contact information, reports, price lists, cell phones, PDAs,
computers, pagers, electronic devices, equipment, supplies, access cards and
keys.  The property that shall be returned includes, but is not limited to, all
equipment, literature, documents, data, information, order forms, memoranda,
correspondence, customer and prospective customer lists, customer’s orders,
contracts and fee agreements, advertisements, customer profiles, manuals,
activity reports, reference materials, records, cards, or notes acquired,
compiled, or coming into Executive’s knowledge, possession, or control in
connection with Executive’s activities and work for Heelys, as well as all
machines, parts, equipment, or other materials received from Heelys, or from any
of its customers, agents, or suppliers, in connection with such activities.

(g)           Executive acknowledges that any violation by Executive of the
provisions of Sections 3(b), (c), (d) or (e) would cause serious and irreparable
damage to Heelys. Executive further acknowledges that it might not be possible
to measure such damage in money. Accordingly, the Executive agrees that, in the
event of a breach or threatened breach by the Executive of the provisions of
Sections 3(b), (c), (d) or (e), Heelys may seek, in addition to any other rights
or remedies, including money damages for specific performance, an injunction or
restraining order, without the need to post any bond or other security,
prohibiting the Executive from doing or continuing to do any acts constituting
such breach or threatened breach.

(h)           Heelys and Executive have attempted to limit the restrictive
covenants in Sections 3(b), (c), (d) and (e) as reasonably necessary to the
extent permitted by law. In the event a court of competent jurisdiction
determines the restrictions contained in this Sections 3(b), (c), (d) or (e) are
unreasonable in geographic scope, duration, or activity prohibited, then the
parties agree that the court shall amend such provision, but only so much as
shall be necessary for the restrictions to be enforceable.

(i)           As noted above, Executive shall not solicit Heelys’ customers or
prospective customers.  In the event of any such solicitation, Executive agrees
to notify Heelys of such solicitation and contact within one (1) business day of
any such solicitation.

(j)             Executive’s agreements in Sections 3(b), (c), (d), or (e) shall
be extended for the period of time which Executive violates one or more of these
agreements and/or during any period during which Heelys appeals from an order
refusing to enforce any of these agreements or covenants.  The tolling or
extension period shall not exceed twelve (12) months under any circumstances.

 
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4.           Termination of Payments and Return of Monies Paid. If Executive
engages in any of the conduct prohibited by Sections 3(b), (c), (d), (e), or (f)
above, Heelys (i) shall be relieved of making any payments to Executive provided
in Section 2, and (ii) Executive shall reimburse Heelys for any payments
previously made by Heelys to Executive pursuant to Section 2.  If upon challenge
by Executive or upon initiative of Heelys a court enforces the covenant
contained in Sections 3(c) above, and if Executive no longer violates the
covenant, a court has the discretion to determine if Heelys shall resume making
some or all of the payments set forth in Section 2, taking into account the
conduct of Executive and any damage or injury suffered by Heelys.
 
5.           Notice and Transition of Duties.  If Executive intends to leave the
employment of Heelys for any reason, Executive agrees, prior to leaving, to give
Heelys thirty (30) days written notice of Executive’s intent to leave the
employment of Heelys.  Executive agrees to provide transition assistance to
Heelys and whomever Heelys assigns to handle the work that Executive was
handling prior to the time Executive gave said written notice.  This transition
assistance includes, but is not limited to, updating Heelys on:  Executive’s
activities, requests by Heelys’ customers, work in progress and work that needs
to be done in the future to take good care of Heelys’ business and
customers.  Executive agrees that this notice and orderly transition is
important to protect the interests of Heelys and Heelys’ customers.
 
6.           Notification to Prospective Employers.  For one (1) year following
the end of Executive’s employment with Heelys, Executive promises and agrees to
provide a copy of this Agreement to any headhunter, person or entity from whom
Executive seeks a job or work, including but not limited to, applying for work
as an employee, consultant, temporary worker, owner and/or independent
contractor.  Further, if Heelys learns the identity of any headhunter or person
or entity to whom Executive applies for work in the one (1) year following the
date Employee’s employment with Heelys ends, Executive authorizes Heelys to
provide a copy of this Agreement to said person or entity and discuss the
provisions and ramifications of this Agreement with said person or entity
 
7.           Governing Law/Venue. This Agreement shall be construed and enforced
in accordance with the laws of the State of Texas without reference to
principles of conflicts of laws. In the event of any dispute between them,
including, but not limited to any disputes arising out of this Agreement,
Executive’s employment with Heelys and work for Heelys and any issues involving
Executive’s competition against Heelys, Executive and Heelys agree to exclusive,
mandatory and sole jurisdiction and venue in Dallas, Texas.  Heelys and
Executive agree and consent to have all such disputes resolved in the courts of
Dallas County, Texas.  Heelys and Executive hereby consent to the exclusive
jurisdiction and venue in said courts.  Heelys and Executive hereby waive all
challenges to personal jurisdiction and venue of such courts, including, but not
limited to, the claim or defense that such courts constitute an inconvenient
forum.

 
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8.           Entire Agreement; Modification. This Agreement incorporates the
complete understanding and agreement between the parties with respect to the
subject matter hereof and supersedes any and all other prior or contemporaneous
agreements, written or oral, between Executive and Heelys with respect to such
subject matter. No provision hereof may be modified or waived except by a duly
written instrument duly executed by Executive and Heelys.  Furthermore, the
Heelys and Executive agree that the failure of any party to enforce any
provision of this Agreement shall not constitute a waiver of that particular
provision, or of any other provisions of this Agreement.
 
9.           Employment Rights. Nothing expressed or implied in this Agreement
will create any right of Executive to remain in the employment of Heelys.
 
10.         Applicable Taxes.   Heelys may deduct and withhold from all
compensation payable to Executive pursuant to this Agreement all amounts
required to be deducted and withheld therefrom pursuant to any present or future
law, regulation or ordinance of the United States of America or any state or
local jurisdiction therein.
 
11.        Successors; Binding Affect. This Agreement will inure to the benefit
of and be binding upon Heelys and any successors and assigns. Following a Change
in Control (defined below), Heelys will require any successor by agreement and
in such form as is reasonably satisfactory to Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent Heelys
would be required to perform if no such Change in Control had taken place (an
"Assumption"). Executive shall be bound by any Assumption of this Agreement and
any Assumption shall not be deemed to be a termination of Executive's employment
or by itself to constitute Good Reason. This Agreement shall inure to the
benefit of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors and heirs.
 
“Change in Control” means: (a) any person or group within the meaning of the
Exchange Act (excluding any employee benefit plan, or related trust, sponsored
or maintained by Heelys or any of its affiliates), other than Capital Southwest
Venture Corporation and its affiliates, acquires beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or
indirectly, of 50.1% or more of the combined voting power of Heelys’ then
outstanding securities; (b) any change or changes in the composition of Heelys’
Board within any two-year period as a result of which less than a majority of
Heelys’ directors are persons who were directors at the beginning of that
two-year period or persons who were elected or nominated for election as its
directors with the affirmative vote or consent of at least a majority of Heelys’
incumbent directors at the time of that election or nomination, but not
including any person whose election or nomination as a director was or is in
connection with an actual or threatened proxy contest regarding the election of
Heelys’ directors; (c) Heelys is merged or consolidated with another corporation
or other entity (other than Capital Southwest Venture Corporation, any of its
affiliates or an entity controlled by it or its affiliates) and, as a result of
the merger or consolidation, less than 75% of the outstanding voting securities
of the surviving or resulting corporation or other entity, as the case may be,
are "beneficially owned" (within the meaning of Rule 13d-3 under the Exchange
Act), directly or indirectly, immediately after the merger or consolidation by
persons who or which beneficially owned our outstanding voting securities
immediately before the merger or consolidation; or (d) all or substantially all
of Heelys’ assets are transferred, sold or otherwise disposed of to another
unrelated corporation or entity.

 
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12.           Captions.  The captions contained in this Agreement are for
convenience only, and shall not be construed to limit, define or modify the
substantive terms contained in this Agreement.
 
13.           Execution.  This Agreement is effective once signed by all the
parties and can be executed in multiple identical counterparts and via email and
fax.
 
    IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
 

 
HEELING SPORTS LIMITED
     
By:  
Heeling Management Corp., its Sole General Partner
             
By:  
/s/ Thomas C. Hansen
   
      Name: Thomas C. Hansen
   
      Title:    Chief Executive Officer
             
EXECUTIVE
             
By:  
/s/ Craig D. Storey­­­­­­­­­­­­­­
   
      Name:  Craig D. Storey
   
      Title:    Chief Operating Officer and Chief Financial Officer

 
 
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