Exhibit 10.1


 


SOURCING AGREEMENT


 


THIS SOURCING AGREEMENT (this “Agreement”), dated effective as of May 1,
2010, is between TGB, LLC, a New Jersey  limited
liability company with its principal place of business at 1400 Broadway, Suite 1405,
New York, New York 10018 (“TGB”), and Heeling Sports Limited, a Texas limited
partnership, with its principal place of business at 3200 Belmeade, Suite 100,
Carrollton, Texas 75006 (“Company”).  TGB
and Company are collectively referred to herein as the “Parties” and individually,
as a “Party.”


 


WHEREAS, Company has manufactured certain Products (as defined below);
and


 


WHEREAS, except as otherwise provided in this Agreement, Company
desires to appoint TGB, and TGB desires to act, as Company’s exclusive sourcing
consultant for sourced Products.


 


IN CONSIDERATION of the mutual undertakings herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged by the parties, the parties agree as follows:


 


1                                          DEFINITIONS


 


1.1           “Company” shall mean Heeling Sports Limited, its
parent and affiliated entities and their respective employees, officers,
directors, shareholders, and authorized representatives.


 


1.2           “Confidential Information” means any designs, samples,
prints, silhouettes, patterns, fabrications, labels, findings, markers,
specification sheets, know-how, Subcontractors, Manufacturing Subcontractors,
drawings, plans, cost or pricing information, financial information, buying
habits, customer lists, merchandising or advertising strategies or plans, trade
secrets, trade dress, concepts or ideas related to the business of a party and
any information or know-how acquired from or through a party in connection with
this Agreement or the production or delivery of the Products, including
information related to products, processes or services, research, development,
inventions, marketing, manufacture, purchasing, accounting, engineering,
merchandising, selling, customer agreements, samples, prototypes and/or any
part thereof.  Confidential Information
shall not include any information which:


 


(i)            was publicly known and made generally
available in the public domain    prior
to the time of disclosure by the Disclosing Party;


 


(ii)           becomes publicly known and made generally
available in the public domain after disclosure by the Disclosing Party to the
Receiving Party through no action or inaction of the Receiving Party;


 


(iii)          was
known to the Receiving Party prior to its disclosure by the Disclosing Party or
is obtained by the Receiving Party from a third party without a breach of such
third party’s obligations of confidentiality; or


 


(iii)          is
required by law to be disclosed by the Receiving Party pursuant to court order
or other legal process, provided that the Receiving Party gives the Disclosing
Party prompt written notice of such requirement prior to such disclosure and
assistance, at the Disclosing Party’s expense, 
in obtaining an order protecting the information from public disclosure.


 


1.3           “Disclosing Party” shall have the meaning
set forth in Section 3.3.


 


1.4           “Existing Products” shall have the
meaning set forth in Section 2.1.


 


1.5           “Inventions” shall mean discoveries,
concepts, ideas, improvements, materials, substances and devices, whether
patentable or not, relating to any past, present, or prospective activities of
Company in the field of skates, wheels, footwear, apparel, grind shoes,
sporting goods and toys, and including but not limited to structures,
processes, methods, Products, formulae, techniques and improvements to the foregoing
and know-how conceived or developed (whether or not reduced to practice) by
TGB, its employees or its permitted Sub-contractors and Manufacturing
Subcontractors.


 


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1.6           “Manufacturing Subcontractors” shall mean
those subcontractors selected by TGB and approved by Company for purposes of
manufacturing Products or components of Products, in whole or in part.  Any additional Manufacturing Subcontractors
proposed by TGB shall be approved by Customs-Trade Partnership Against
Terrorism or an approved third party auditor such as Bureau Veritas or Intertek
(unless waived by Company in writing) and subject to the approval of the
Company, which shall not be unreasonably withheld, conditioned or delayed.


 


1.7           “Molds” shall mean all molds, dies,
tools, plates, silk screens, stamps, embroidery tooling, machinery, other
tooling and lasts used in the manufacture of Products or any Trim or component
thereof, and which bear a Trademark.


 


1.8           “Products” mean the range of products
that TGB is authorized to procure under this Agreement pursuant to one or more
valid written purchase orders from Company for same.  Without prior written approval from the
President of Company, Products shall include only Heelys-branded wheeled
footwear.


 


1.9           “Receiving Party” shall have the meaning
set forth in Section 3.3.


 


1.10         “Trademarks” shall mean and include those
trademarks, copyrights, trade names, trade dress, symbols, logos, slogans,
designs, design rights, style names and each component or components thereof,
owned by Company and set forth on Exhibit 4 and any other
intellectual property rights which are owned, developed on behalf of, developed
in connection with performing work for Company, or controlled by Company or
which Company has the right to use in connection with the manufacture, use and
sale of the Products.


 


1.11         “Trim” shall mean Product component and
accessory items that bear a full or partial Trademark or Product specific
indicia, including but not limited to studs, heel inserts, thread, zippers,
piping, closures, snaps, rivets, soles, midsoles, linings, laces, shoe boxes,
packaging materials, tags and labels and other devices used in the manufacture
or packaging of the Products.


 


2                                          AGREEMENT FOR SUPPLY


 


2.1           Subject to the terms of this Agreement, TGB, at
Company’s written purchase order only, shall secure from Manufacturing
Subcontractors approved by Company in writing, the manufacture of Products and
have such Manufacturing Subcontractors deliver such Products to Company in
strict accordance with the patterns, specifications, technical information,
drawings, samples, timing and quality standards that have been approved in
writing by Company and/or supplied to the TGB for such purpose.  TGB and Company acknowledge and agree that,
notwithstanding anything else herein or in any subsequent purchase order to the
contrary, (a) Company shall be responsible for ensuring that all Product
specifications shall fully and completely comply with all laws and regulations
of the United States of America, including, without limitation, regulations of
the Consumer Product Safety Commission and laws of the United States, and that
none of the materials or structures of the Products infringe the trademark,
trade dress, patent or design rights of any third party and (b) TGB shall
be responsible for ensuring that all manufacturing processes and operations
comply with all laws and regulations of the United States of America and of any
jurisdiction in which such manufacturing takes place.  Company shall indemnify and hold harmless TGB
with respect to  any noncompliance of the
Products’ specifications with all laws and regulations of the United States of
America and any infringement by the Products of any trademark, trade dress,
patent or design rights of any third party. 
TGB and Company acknowledge and agree that during the term of this
Agreement, with respect to Company’s currently existing product line of wheeled
footwear (as depicted on Exhibit 1, the “Existing Products”)
and all other Products, except for Products to be manufactured for any of
Company’s licensees, TGB’s relationship with Company is exclusive and that
Company shall not produce itself, purchase or contract for the purchase or
manufacture of, Products from persons or entities other than TGB.  Subject to TGB’s compliance with the terms
and provisions of this Agreement and the limitation in the preceding sentence
with respect to Company licensees, TGB shall have the right to be the sole
sourcer of Products for Company until the earlier of August 31, 2011 or
termination in accordance with Section 15.2 or 15.3.  Subject to the terms and provisions of this
Agreement, Company shall purchase a minimum of one million (1,000,000) pairs of
Products from TGB during the Initial Term of this Agreement.


 


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2.2           TGB shall have one or more
Company-approved Manufacturing Subcontractors produce and ship the quantity of
Products stipulated in the purchase order from Company or such other quantity
as may be previously agreed in writing by Company and TGB.  Except as set forth in the preceding
sentence, Manufacture of Products in excess of the amount ordered is expressly
prohibited, and any such excess or overrun Products shall be deemed
unauthorized and counterfeit regardless of the cause of the excess or
overruns.  At Company’s option, Company
may purchase overrun Products at an agreed upon price not to exceed 60% of the
price for the Products set forth on the relevant purchase order, otherwise such
products are to be delivered to Company and destroyed at TGB’s cost.


 


2.3           TGB shall not directly or indirectly
manufacture or supply (or assist others in manufacturing or supplying) any
products or goods whatsoever using any Confidential Information, patent rights
of the Company, or bearing any of the Trademarks for or to any person or entity
other than Company, or such other person or entity as Company may authorize in
writing.  TGB also shall not directly or
indirectly at any time manufacture or sell (or assist others in manufacturing
or selling) any products or other goods that bear a trademark, design, logo,
slogan, etc. that infringes or is confusingly or deceptively similar to any of
the Trademarks, or is likely to be confused or regarded as confusingly similar
to the Products.


 


2.4           TGB shall not, with the intent to derive
benefit from the designs of Company, directly or indirectly:  (i) produce (or assist others in
producing) other products which are similar to the Products in overall
commercial impression without the express written approval of Company; (ii) “knock
off” the Products or attempt to manufacture or sell (or assist others in
manufacturing or selling) any products similar to the Products, including,
without limitation, those that are covered by existing patent rights, involve
Confidential Information, or are the subject of pending patent applications;
nor (iii) take any action nor manufacture (or assist others in taking any
action or manufacturing) any product, which shall undermine or interfere with
the sale by Company of the Products.  In
determining if a product is a “knock off”, a broader standard than copyright
infringement standards shall be used. 
Company acknowledges that TGB and its affiliates are involved in the
manufacture and sale of footwear and related products for themselves and others
will continue to engage in such business and that the foregoing provisions of
this Section 2.4 are not intended to affect production by TGB of
non-wheeled, non-rolling footwear products.


 


2.5           Except as set forth in Section 2.1
above, TGB understands and agrees that Company makes no guarantees or
warranties concerning the amount or quantity of Products it intends at any time
to order or contract for TGB to source and that TGB has not relied on any such
guarantee or warranty in connection with its operations or expected overhead
and that Company may terminate its relationship with TGB as set forth more
fully in Sections 15 and 16 herein.


 


3                                          SAMPLES AND INSPECTION


 


3.1           Company shall have the right on reasonable
notice during business hours to visit any places under the control of TGB (or
any Manufacturing Subcontractor) in order to inspect and take a reasonable
amount of samples of approved Products then in production (“Production Samples”).  Such Production Samples are to be made
available to Company at the cost for such Production Samples.


 


3.2           Unless and until Company has given
written approval for shipment of the Products following their final
inspections, or in the event that Company has rejected such Products after such
inspections, neither TGB nor any Manufacturing Subcontractor will directly or
indirectly sell, ship or supply any of the rejected or unapproved Products to
any person or entity at any time.  With
regard to such rejected or unapproved Products, TGB agrees to follow, and to
require any Manufacturing Subcontractor to follow, the protocol set forth Section 6.2
herein for disposal of such Products.


 


3.3           All Confidential Information delivered or
provided by one party (the “Disclosing Party”) to the other party ( the “Receiving
Party”) at any time is and shall remain at all times the sole property of the
Disclosing Party and shall be used by the Receiving Party exclusively for the
limited purposes set forth in this Agreement. 
In no event shall either party disclose to any third party any
Confidential Information of the other party or use Confidential Information of
the other party for any purpose other than performance under this
Agreement.  All copies of such
Confidential Information, including notes and related information, shall be
promptly, fully and completely returned to the Disclosing Party at the
termination and/or expiration of this Agreement, or at any other time when
requested by the Disclosing Party. 
Neither party shall retain any copies or access to the Confidential
Information, either in tangible,


 


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intangible form, including electronic, magnetic or optical copies of
the same.  TGB shall require all
Manufacturing Subcontractors and any other permitted Subcontractors to agree to
the same restrictions in favor of Company.


 


4                                          PLACING AND FILLING ORDERS


 


4.1           Neither TGB nor any Manufacturing
Subcontractor shall directly or indirectly manufacture, have manufactured,
sell, ship or supply the Products to any person or entity other than Company,
or its designee, as specifically directed by Company in writing.


 


4.2           Any and all orders for Products shall be
made by a written purchase order from Company to TGB.  In the event of any conflict between the
terms of any purchase order and this Agreement, the terms of this Agreement
shall govern.


 


4.3           Immediately upon receipt of a purchase
order or a proposed amendment thereto from Company, TGB shall acknowledge
receipt thereof by telefax notice to Company.


 


4.4           TGB shall accept or reject each Company
purchase order by telefax notice within fifteen (15) calendar days after its
receipt of such order, and failure to acknowledge receipt shall be deemed
acceptance.  Acceptance of any purchase
order by TGB shall be strictly limited to the terms specified in this Agreement
and the purchase order.  Any other terms
contained in TGB’s order confirmation or any other document used by TGB to
communicate its acceptance shall be void unless otherwise agreed to in writing
by an officer of Company.


 


4.5           Orders may be amended by Company by
telefax notice to TGB and Company may terminate any order in whole without any
further obligation to TGB if notice is provided within ten (10) days after
Company places such order.  Unless TGB
rejects any proposed amendment by telefax notice to Company dispatched within
seven (7) business days after receipt of the proposed amendment, such
purchase order shall be deemed amended as provided in Company’s proposed
amendment and TGB shall communicate the same to the Manufacturing
Subcontractor.


 


4.6           TGB understands that Company has made or
will make commitments to its customers for delivery of the completed lots or
Products on the basis of completion by TGB or its permitted Subcontractor
(including Manufacturing Subcontractors), as set forth in each accepted
purchase order.


 


5                                          PRICE, PAYMENT AND INVOICES


 


5.1           The price for any Product to be sourced
by TGB under this Agreement shall be agreed upon in writing by Company and TGB
prior to the issuance of any applicable purchase orders.  After such agreement, the price for that
particular style of such Product shall remain firm and unchanged, except as may
otherwise be agreed between Company and TGB in writing.  The price with respect to any of the Existing
Products shall be equal to or less than the current Free On Board (“FOB”)
prices being paid by Company for such Existing Products (excluding all
insurance, shipping cost and import duties on such Product).  TGB’s compensation for purposes of this
Agreement shall be the difference between the FOB prices paid to TGB by the
Company and the prices paid by TGB to its Manufacturing Subcontractors.


 


5.2           TGB will be price competitive and shall only engage in
arms-length transactions with its Manufacturing Subcontractors and
Subcontractors and hereby warrants that it is not related  (as defined under  the Customs laws of the United States, the
pertinent portions of which are set forth in the following sentence) to any of
the Manufacturing Subcontractors or Subcontractors  with 
whom  it  may 
place  orders for Products.   In the event that TGB is related to a
Manufacturing Subcontractor or Subcontractor, TGB must disclose the nature of
the relationship at the time it submits prices and samples to the Company. The
following persons are considered related: members of the same family, including
brothers and sisters, spouse, ancestors, and lineal descendants; any officer or
director of an organization and such organization; an office or director of an
organization and an officer or director of another organization, if each such
individual is also an officer or director in the other organization; partners,
employer and employee; any person directly or indirectly owning, controlling,
or holding with power to vote, 5 percent ore more of the outstanding voting
stock or shares of any organization and such organization; and, two or more
persons directly or indirectly controlling, controlled by, or under common
control with, any person.


 


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5.3           Company shall pay TGB in US Dollars
promptly (and in any event within three business days) after receipt of the
Products in the country of manufacture by Company’s agent (FOB) by wire
transfer from Company to TGB in accordance with wire transfer instructions to
be provided by TGB to Company.  Company
shall also pay TGB for all salesmen’s samples required by Company.  The Parties also agree to review payment
terms  after six (6) months from
commencement of this Agreement.


 


5.4           If any new Molds are required for the
manufacture of Product, the cost of such Molds shall be amortized into the cost
of the Product and TGB will maintain (or cause the applicable Manufacturing
Subcontractor to maintain) an amortization schedule so that once the cost of the
Molds is paid in full for a given model, the FOB price will be reduced to a
cost free of such Molds.  Company may
choose to pay off the balance of un-amortized Molds at any time and take
possession of such Molds.  Costs of new
Molds are not included in the covenant by TGB that FOB prices for Existing
Products will be less than currently paid by Company.


 


6                                          SHIPMENT, DELIVERY AND TITLE


 


6.1           TGB shall inspect, or cause the applicable
Manufacturing Subcontractor to inspect, all Products prior to shipment, in a
manner reasonably acceptable to Company. 
Unless otherwise specified in a particular purchase order, TGB shall
sell the Products to Company on FOB terms, as such term is defined by the
International Chamber of Commerce, Incoterms, 2000, at such location as is
designated by TGB.  TGB shall provide, or
require the applicable Manufacturing Subcontractor to provide, all customs and
export documentation for shipping and customs clearance, in a manner reasonably
acceptable to Company.  Unless otherwise
agreed to in writing by the Parties, all risk and title to all Products made
and purchased hereunder shall remain exclusively in TGB until delivery of same
to the carrier designated by Company in the relevant purchase order, and upon
such delivery, title shall then pass to and vest in Company.


 


6.2           TGB shall immediately notify Company of
any event that might delay delivery of the Products ordered beyond the delivery
or shipping date specified in the purchase order (Both parties acknowledge that
standard shipping times are as follows: (a) for Products made on existing
equipment and re-orders of Products, FOB within 90 days after confirmation
sample has been approved by Company and Manufacturing Subcontractor has
approved the proposed delivery date and (b) for any Products to be made on
new equipment, 120 days after confirmation sample has been approved by Company
and Manufacturing Subcontractor has approved the proposed delivery date), and
shall use its best efforts to avoid or minimize any such delay.  TGB acknowledges that time is of the essence
and that any delivery delay in excess of ten (10) calendar days shall
constitute a material breach of this Agreement unless Company waives TGB’s
default in writing.  Unless TGB’s default
is so waived, Company shall have the right to notify TGB of its rejection of
any delayed Products within ten (10) calendar days after being notified of
such delay, and may in its sole discretion, choose one of the following methods
of handling such delay:


 


(i)            cancel the purchase order for the delayed
Products.  Immediately upon receipt of
notice of cancellation, TGB at its own cost shall comply with any instructions
of Company mandating destruction or disposition of any components, Trim, or
Products bearing the Trademarks that were produced pursuant to the canceled
purchase order and Company may, in its sole discretion, witness such
destruction or require such proof of destruction as it deems necessary; or


 


(ii)           immediately on receipt of instructions
from Company, TGB shall deliver the delayed Products by air, and shall bear the
portion of the air freight in excess of the estimated normal ocean freight of
such Products.  “Normal ocean freight”
shall mean the rate per cubic meter charged on the most recent ocean shipment.


 


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7                                          INSPECTIONS AND DEFECTIVE PRODUCTS


 


7.1           Upon reasonable notice, TGB shall provide
Company with access to all parts of the factory, including access to all Molds,
and any other facilities used by TGB or any Manufacturing Subcontractor for
production of the Products, packaging, storage and delivery of Products to
enable Company to inspect and monitor the manufacture of the Products, provided
that any third party factory inspectors or auditors to be used by Company for
any purpose under this Agreement shall be subject to prior approval by TGB,
which approval will not be unreasonably withheld, conditioned or delayed.


 


7.2           Prior to any shipment of a particular
purchase order, TGB shall deliver or cause to be delivered to Company an inspection
certificate for each style of Product produced. 
Delivery of the inspection certificate to the Company shall not
constitute a waiver of any rights under this Agreement or provided by law, and
shall not bind Company should it subsequently determine that the Products do
not conform to the quality standards or other specifications of the Products
provided to TGB.


 


7.3           Immediately upon discovery of any defects
in the Products, TGB shall notify Company of such defects by facsimile and
electronic mail.  The defective Products
shall, at the option of Company, be:


 


(i)            Classified by Company as “cosmetically
flawed” or “B-grade” (as such terms are generally known in the relevant
industry) Products, and sold to Company for a price that shall not exceed 60% of
the price for the Products specified in the relevant purchase order; or,


 


(ii)           Classified by Company as “functionally
flawed” or “C-grade” (as such terms are generally known in the relevant
industry) Products, and so notified to TGB. 
Upon receipt of such notification from Company, TGB shall arrange for
all such “C-grade” Products to be destroyed at its own cost in a manner
approved in writing by Company and, if requested by Company, under the
supervision of Company; or,


 


(iii)          To
the extent rectification or correction is reasonably possible at a reasonable
cost, rectified or corrected in accordance with the written instructions of
Company to TGB.  Company shall have a
right to re-inspect the Products after the alterations or rectifications have
been completed by TGB, and to specify air shipment of the rectified Products at
TGB’s cost if necessary to meet the original delivery or shipment date.


 


The provisions of this Section 7.3 shall not be affected by any
prior inspection of the Products.  TGB
acknowledges that any breach of this Section 7.3 shall constitute a
material breach of this Agreement.


 


7.4           If rectification or correction is
reasonably possible at a reasonable cost and Company exercises option (iii) set
forth in Section 7.3 above, and TGB or Manufacturing Subcontractor is
unwilling or unable for any reason to make the corrections suggested by Company
within a reasonable time period stipulated by Company, Company reserves the
right to make such corrections itself and to set off the cost thereof, including
any air freight costs made necessary to meet the original delivery or shipping
date, against any outstanding payments for the defective Products or against
any existing or future orders for Products.


 


7.5           TGB shall provide to Company, on at least
a monthly basis, a written report (in a form approved by Company) describing
and quantifying the defective Products produced in each category thereof during
that month.


 


7.6           If any controversy or dispute between the
Parties or any third party arises concerning defective Products or other
property of Company that is in the possession of TGB, such Products or other
property shall, unless Company otherwise consents in writing, be stored by TGB
(with the cost of such storage being shared equally by both parties) pending
resolution of such controversy or until notification by Company.


 


7.7           TGB agrees that neither it nor any
Manufacturing Subcontractor will directly or indirectly sell, distribute or
dispose of any Products rejected by Company as defective or otherwise without
the express prior written consent of Company.


 


7.8           TGB acknowledges that certain
manufacturing defects cannot be detected until after the Products have been
delivered to Company and resold to consumers as components of finished
footwear.  Accordingly, the Parties agree
that if manufacturing defects are 1% or less of a production run, Company will
absorb the cost relating to such defects. 
If


 


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the defects are more than 1% of a production run, TGB agrees to pay
Company or its nominee an amount equal to the landed, FOB cost of all Products
manufactured by TGB or a Manufacturing Subcontractor for Company that have been
identified by Company or Company’s customers as defective and returned to
Company in excess of 1% of such production run. 
TGB shall have the right to inspect, within 30 days of receiving notice
from Company of such defect, at the Company facility or as otherwise agreed by
the Parties, any such returned Products to determine the nature of the defect.


 


8                                          MANUFACTURING AND INVENTORY DATA 
TGB shall at all times during the term of this Agreement and for six
years thereafter keep at its usual place of business, appropriate and accurate
records of the manufacture and inventory of the Products, including all
purchases by TGB of Products or any materials or components therefor and all
labor supplied or contracted for in connection with the manufacture of the
Products and to calculate the fees payable by Company to TGB hereunder.  Company shall have reasonable access to
review, audit and make extracts from TGB’s books of account, manufacturing,
inventory and purchases and other records and shall, at Company’s expense, be
allowed to make copies from such records. 
The cost of maintaining the records shall be borne by TGB, while the
cost of any review or audit by Company will be the responsibility of Company;
provided, however, that TGB shall reimburse Company for the reasonable costs of
any such review or audit if the fees charged by TGB exceeded the amount that
should have been charged under the terms of this Agreement.


 


9                                          WARRANTIES AND REMEDIES 
TGB represents and warrants to Company that all Products shall conform
in all material aspects with the specifications set forth in the applicable
purchase order (provided that Company shall be solely responsible for ensuring
that any and all such specifications comply with all requirements of United
States laws and regulations), and that such Products shall be free from defects
in materials and workmanship.  Company
may, without prejudice to any other of its remedies set forth in this
Agreement, return to TGB any Products produced by it that do not comply with
any warranty herein.  In the event of
such a return, Company shall be given full credit for the cost of the returned
Products, plus any applicable shipping costs, and duties.


 


EXCEPT AS SPECIFICALLY
SET FORTH IN THIS AGREEMENT, THERE ARE NO WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE PRODUCTS WHETHER PRODUCED
BY TGB, ANY MANUFACTURING SUBCONTRACTOR OR A THIRD PARTY.  THE REMEDIES SET FORTH IN SECTION 6 OF
THIS AGREEMENT ARE THE EXCLUSIVE REMEDIES AVAILABLE TO COMPANY WITH RESPECT TO
ANY DELIVERY DELAYS.  WITH RESPECT TO ANY
CLAIMS BY COMPANY FOR DEFECTIVE PRODUCTS, THE LIABILITY OF TGB SHALL BE LIMITED
TO THE LESSER OF THE AMOUNT OF THE ORDER IN QUESTION OR TWO HUNDRED THOUSAND
DOLLARS ($200,000) IN THE AGGREGATE FOR ALL CLAIMS RELATING TO SUCH ORDER.


 


EXCEPT IN CONNECTION WITH
ANY BREACH BY TGB OF SECTION 2.3, 2.4, 10.5, 11.1, 12.2 OR 13 OF THIS
AGREEMENT, WHICH BREACH(S) FOR PURPOSES OF THIS PARAGRAPH WILL NOT BE
DEEMED TO BE MADE BY ACTS, OUTSIDE OF TGB’S CONTROL, CONDUCTED BY ANY MANUFACTURING
SUBCONTRACTOR OR THIRD PARTY, IN NO EVENT WILL TGB BE RESPONSIBLE OR LIABLE IN
CONTRACT, TORT OR OTHERWISE FOR ANY LOST PROFITS OR ANY SPECIAL, INDIRECT,
CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES, WHICH COMPANY MAY INCUR OR
EXPERIENCE ON ACCOUNT OF ENTERING INTO OR RELYING ON THIS AGREEMENT OR THE
PERFORMANCE OR NONPERFORMANCE OF TGB OR ANY MANUFACTURING SUBCONTRACTOR OR
THIRD PARTY, EVEN IF SUCH DAMAGES ARE CAUSED BY TGB AND/OR TGB HAS BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES.


 


10                                    MANUFACTURING SUBCONTRACTING AND MOLDS


 


10.1         With respect to TGB’s manufacture or procurement of
Product (including the manufacture or procurement from a Manufacturing
Subcontractor), and in particular, any Product bearing the Trademarks, TGB
shall comply with the following conditions unless otherwise agreed in writing
by an officer of Company:


 


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(i)            TGB shall only utilize Manufacturing
Subcontractors and shall provide Company the names and addresses of each Manufacturing
Subcontractor; and


 


(ii)           TGB shall be responsible for obtaining
executed agreements from each Manufacturing Subcontractor in form acceptable to
Company and in addition a Manufacturing Agreement in the form attached as Exhibit 2.


 


10.2         All Products bearing the Trademarks are
and shall remain the exclusive property of Company.  TGB acknowledges that the loss of any Product
bearing the Trademarks would cause irreparable harm to Company, the amount of
which would be difficult and impractical to establish.  Therefore, in addition to any other remedy in
law or equity or set forth in this Agreement, TGB agrees to pay Company, or
cause the applicable Manufacturing Subcontractor to pay Company, an amount
agreed upon (which the parties agree shall not be less than 60% of the price
payable by Company) for each unaccounted for, lost or misplaced Product that is
demonstrated to have been produced by TGB or a Manufacturing Subcontractor
bearing the Trademarks or that is covered by one or more of the Company’s patents
anywhere in the world.  The Parties agree
that this sum is not a punitive amount and represents a fair and reasonable,
negotiated amount to be paid to Company by TGB based upon damages to Company.  Nothing herein shall be construed as an
implied license from Company to TGB in connection with any of Company’s
intellectual property, including, for example, the Trademarks, Company patents,
Inventions, or Confidential Information, or any intellectual property embodied
in the Products, Molds or Trim.


 


10.3         At such time as Company in its discretion
so requests, TGB and/or the Manufacturing Subcontractors, as directed by
Company, shall immediately deliver to Company or its designee any samples,
Molds, Trim or Products, or any component thereof, bearing the Trademarks.  Neither TGB nor any Manufacturing
Subcontractor shall be entitled under any circumstances to retain any such
items as a setoff against any monies due or to become due from Company or any
other authorized purchaser of Products. 
Company shall reimburse the relevant party for its reasonable costs
incurred in the production of such items and their delivery to it.


 


10.4         Company may, under certain conditions and
in its sole discretion, allow TGB or a Manufacturing Subcontractor to retain
ownership and/or possession of certain Molds; provided, however that in
such instances, TGB and such Manufacturing Subcontractor shall comply strictly
with Company’s instructions regarding removal of the Trademarks from the Molds,
and shall permit Company to supervise such removal.


 


10.5         TGB agrees (i) not to directly or
indirectly (and shall cause each Manufacturing Subcontractor to agree not to
directly or indirectly) sell, transfer possession or otherwise dispose of any
Mold bearing a Trademark without the prior written consent of Company, (ii) to
use (and shall cause each Manufacturing Subcontractor to agree to use) such
Molds solely for the manufacture of the Products, and (iii) not to
directly or indirectly (and shall cause each Manufacturing Subcontractor to
agree not to directly or indirectly) reproduce such Molds, in each case unless
so authorized in writing by Company.


 


10.6         TGB agrees that Company shall be entitled
to enter upon any premises of TGB (and shall require any Manufacturing
Subcontractor to allow Company to enter upon any of such Manufacturing
Subcontractor’s premises) where any samples, Molds, Trim or Products bearing
the Trademarks or other property of Company are known or reasonably thought to
be located, and may peaceably recover possession of any such items located
there, if, in Company’s reasonable opinion, TGB or such Manufacturing
Subcontractor is in breach of any of the terms of this Section 10.


 


11                                    TRADEMARKS


 


11.1         TGB hereby acknowledges (i) the validity of the
Trademarks, (ii) that Company has at all times had, and shall continue to
have, the exclusive right, title and interest in and to the Trademarks, (iii) that
neither this Agreement nor the performance of any services by TGB hereunder
shall confer on TGB any right, title or interest in or to the Trademarks, and (iv) that,
except as authorized herein, TGB does not have any permission to, and will not,
adopt, use, register, or attempt to register as a trademark, trade name,
business name or corporate name, Internet domain name, or part thereof, whether
during the continuance of this Agreement or after its termination, any word,
symbol, brand, logo, mark or other emblem or slogan identical or confusingly
similar to any of the Trademarks or raise or to cause to be


 


8

















 


raised any questions
concerning, or objections to the validity of, or the right to the use of, the
Trademarks or the rights of Company thereto, on any grounds whatsoever.


 


11.2         TGB agrees that any use whatsoever of the Trademarks
by TGB shall inure to the benefit of Company, and agrees to assist Company to
maintain, perfect and enhance its title and interest in relation to its
Trademarks.  TGB shall not do or cause to
be done any act or thing contesting or in any way impairing or likely to impair
any part of Company’s right, title and interest in and to the Trademarks, or
detrimental to the reputation and goodwill of Company or the Products.


 


11.3         TGB acknowledges that the sale and/or distribution of
the Products and/or use of any of the Trademarks except as herein agreed may
result in immediate irremediable damage to Company, and TGB further
acknowledges that Company may have no adequate remedy for such damage.  In the event of such failure, Company shall
be entitled to equitable relief by way of temporary, preliminary and/or
permanent injunction.


 


11.4         TGB agrees to use its best efforts to notify Company
in the event that TGB has knowledge of any infringement of the Trademarks.  If any of the Trademarks is infringed,
Company may take such action as Company may deem appropriate, and upon request,
TGB shall, at Company’s expense, cooperate fully with it in any such
action.  TGB further agrees to notify
Company immediately of any instance in which any person other than Company
requests TGB to manufacture Products using any of the Trademarks or any name,
trademark, logo or design identical to or confusingly similar to those used by
Company, and of any other facts or circumstances that suggests that any other
person may be wrongfully using any such name, trademark, logo or design; provided,
however, that TGB shall not take any action with respect to any such request or
use unless requested to do so by Company in writing.


 


12                                    INVENTIONS


 


12.1         TGB shall inform Company promptly and fully of all Inventions
made or developed by it in the course of or in connection with TGB’s or any of
its permitted Subcontractors (including Manufacturing Subcontractors)
performance of services under this Agreement and/or on Company’s behalf.  Upon request by Company, such information
shall be in the form of a written report, setting forth in detail the
structures, procedures, processes, compositions and methodology employed
therein, as well as the results achieved thereby.


 


12.2         TGB hereby assigns to Company all of TGB’s
rights in and to such Inventions, including all improvements, and in and to any
applications for United States or foreign letters patent and copyrights and to
any resulting letters patent and copyright registrations thereof.  TGB warrants to Company that it shall secure
such agreements with its employees and/or permitted Sub-contractors (including
Manufacturing Subcontractors) as are necessary to carry out the provisions of
this Section.  TGB shall execute all documents,
or cause such documents to be executed, when reasonably called upon by Company
to do so in order to perfect Company’s title and interest to all
Inventions.  TGB further agrees to
execute any and all powers of attorney, applications, assignments,
declarations, affidavits, and any other papers in connection therewith
necessary to perfect such right, title and interest in Inventions, including
related patent applications and patents, in Company.  Notwithstanding the preceding provisions of
this Section 12.2, to the extent an Invention (i) relates solely to
footwear, (ii) does not have any application to skates, wheels or footwear
for rolling or grinding, and (iii) is invented solely by TGB without
material input from Company and is not based upon or related to the Company’s
Confidential Information, then Company is hereby granted a non-exclusive,
royalty free license to fully use and disclose any such Inventions (hereinafter
“TGB Footwear Only Inventions”) during the term of this Agreement and extending
for one year after the termination or expiration of this Agreement.  TGB shall own the TGB Footwear Only
Inventions.  Upon termination or
expiration of this Agreement, TGB and Company agree to enter good faith
negotiations for TGB to grant Company a non-exclusive license to continue to
use the TGB Footwear Only Inventions, subject to reasonable royalties and
commercially reasonable terms and conditions acceptable to both parties, and at
terms at least as favorable to any other licensee of the TGB Footwear Only
Inventions.  Notwithstanding the forgoing,
this provision shall not preclude, limit or prevent the use by TGB and its
affiliates of the TGB Footwear Only Inventions.


 


13                                    CONFIDENTIAL INFORMATION,
NON-CIRCUMVENTION AND NON-DISCLOSURE


 


13.1         Each party acknowledges that it will receive Confidential
Information from the other party in connection with the


 


9

















 


sourcing and manufacture
of the Products.  Each Receiving Party
agrees that it shall use such Confidential Information solely for the purpose
of the sourcing and manufacture of Products in accordance with this Agreement.
Each Receiving Party shall not at any time disclose, appropriate or use, and
shall at all times prevent its directors, officers, employees, agents,
independent contractors and Subcontractors (including Manufacturing
Subcontractors) from disclosing, appropriating or using Confidential
Information of the Disclosing Party on their own behalf or on behalf of
others.  In addition, Company (on behalf
of itself and its affiliates), agrees that it will not enter into or seek to
enter into any agreement, understanding, arrangement or transaction of any kind
with any of TGB’s Manufacturing Subcontractors or Subcontractors (or any
affiliates or subsidiaries of such Manufacturing Subcontractors or
Subcontractors) during the term of this Agreement and, except for any
Manufacturing Subcontractors or Subcontractors previously used by Company and
designated in writing and delivered to TGB as soon as practicable upon the
execution hereof, for a period of three (3) years thereafter, unless
Company obtains TGB’s prior written consent. 
Notwithstanding the foregoing, if Company terminates this Agreement
pursuant to 15.3(ii) because TGB has failed to comply with any applicable
laws or TGB engaged in any unethical practices (e.g., any violation by TGB of
Sections 2.3 or 2.4 or TGB directly or indirectly diverts and/or sells Products
to third parties without the prior written approval of Company) or Company
terminates this Agreement pursuant to Section 15.3(iii), Company may
continue to use TGB Manufacturing Subcontractors.  Each party hereby consents to injunctive
relief in the case of any violation of this Section 13.1.


 


13.2         Each Receiving Party acknowledges that the Disclosing
Party has at all times had, and shall continue to have title to all of such
Disclosing Party’s Confidential Information. 
Each Receiving Party shall restrict the circulation of the Disclosing
Party’s Confidential Information to such persons who must have access to such
Confidential Information in order for the Receiving Party or its permitted
Subcontractors (including Manufacturing Subcontractors) to perform its
obligations under this Agreement.  Except
as necessary to perform its obligations under this Agreement, no Receiving
Party shall make or permit to be made by its directors, officers, employees,
agents, independent contractors or Subcontractors (including Manufacturing
Subcontractors) any copies, abstracts, or summaries of any Confidential
Information.  Each Receiving Party shall
immediately, upon a Disclosing Party’s request, or upon termination of this
Agreement for any reason whatsoever, promptly return all Confidential
Information, including all copies, abstracts, or summaries made, whether or not
authorized, to  the Disclosing Party or,
at the Disclosing Party’s election, destroy the same in the presence of the
Disclosing Party’s authorized representative. 
Each Receiving Party shall obtain from its personnel and Subcontractors
(including Manufacturing Subcontractors) separate undertakings with respect to
the restriction of circulation, the making of any copies, abstracts or
summaries, and the return, as aforesaid, of any Confidential Information.  Neither Receiving Party nor its permitted
Subcontractors (including Manufacturing Subcontractors) shall retain any copies
or access to the Disclosing Party’s Confidential Information, either in
tangible, intangible form, including electronic, magnetic or optical copies of
the same.


 


14                                    FORCE MAJEURE. 
If TGB is materially inhibited from performing any of its obligations
under this Agreement by an act of God or governmental action, TGB shall
immediately notify Company thereof, giving full particulars of the
circumstances in question.  TGB shall then
be relieved of liability to Company for failure to perform such obligations,
but shall nevertheless use its best efforts to resume full performance and if
any such circumstances caused by act of God or governmental action exceed 30
days, Company may cancel any pending purchase order and source the Product the
subject of such purchase order from any person or entity without any liability
or otherwise being in breach of this Agreement.


 


15                                    TERM AND TERMINATION


 


15.1         This Agreement and each term thereof shall govern,
apply to and be binding upon TGB and Company as material terms and express
conditions of any commercial or contractual relationship between the Parties as
of or after the effective date hereof and this Agreement and each term hereof
is hereby integrated, included and made a material part of any purchase order
or contract for the purchase or manufacture of Products by Company made
hereafter.


 


15.2         This Agreement shall commence on the Effective Date
and shall continue through and until August 31, 2011 (the “Initial Term”),
and shall automatically and repeatedly renew for additional periods of one year
each (each, an “Extended Term”) until a Party provides written notice of
termination to the other Party at least 90 days’ prior to the end of the then
applicable term.   Upon termination, each
term, condition, and provision of this Agreement shall


 


10
















 


survive with regard to
any Products ordered, manufactured or shipped as of the date of termination or
any proprietary material or Confidential Information of Company.


 


15.3         In addition, this Agreement may be terminated prior to
the expiration of the Initial Term or any Extended Term as follows:


 


(i)            If TGB cannot provide Existing Product to Company at a
price equal to or less than the current FOB price of such Existing Product
(excluding all insurance, shipping cost and import duties on such Product),
Company may terminate this Agreement solely to such Existing Product, by giving
written notice of such termination to TGB and the effective date of such
termination shall be the date specified in such notice, or if no such date is
specified in such notice, the date of such notice;


 


(ii)           If either Party defaults in the performance of any of
its obligations under this Agreement and, if such default can reasonably be
cured, does not cure such default within thirty (30) days in the case of
non-monetary defaults and five (5) days in the event of monetary defaults,
in each case after receiving written notice of such default from the
non-defaulting Party, then the non-defaulting Party may immediately terminate
this Agreement by providing written notice of termination to the defaulting
Party; or


 


(iii)          Either Party may immediately terminate this Agreement
by written notice to the other Party, if the other Party (A) applies for
or consents to the appointment of a receiver, trustee or liquidator for all or
a substantial part of its assets; (B) admits in writing its inability to
pay its debts as they come due; (C) makes a general assignment for the
benefit of creditors; (D) files a petition or an answer seeking
reorganization or an arrangement with creditors under, or otherwise takes
advantage of, any bankruptcy or insolvency law; (E) files an answer
admitting the general material allegations, or consents to, or is in default in
answering, a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding; (F) has an order, judgment or decree entered by any
court of competent jurisdiction approving a petition seeking its reorganization
or an arrangement with its creditors (or any class of creditors) or appointing
a receiver, trustee or liquidator of all or a substantial part of its assets,
and such order, judgment or decree continues unstayed and in effect for a
period of 60 consecutive days; or (G) is dissolved or liquidated.


 


(iv)          Either Party may terminate this Agreement for any
reason without cause by giving the other Party one hundred eighty (180) days
prior written notice of the effective date of termination, provided that during
the Initial Term Company shall not have the right to terminate this Agreement
Term pursuant to this Section 15.3(iv) until it has met the one
million (1,000,000) pair of Products minimum purchase requirement set forth in Section 2.1
above.


 


16            ADDITIONAL COVENANTS UPON TERMINATION


 


16.1         Upon the termination of this Agreement pursuant to any
term herein, each party shall:


 


(i)            Immediately cease (and cause any permitted
Subcontractors, including Manufacturing Subcontractors, to cease) using all
Confidential Information and Inventions of the other party, and TGB shall cease
all manufacturing, distributing, selling, or in any way dealing with, any
Products or Trim bearing the Trademarks, or any carton, container, box, packing
or wrapping material, or advertising, promotional, or display material
pertaining thereto, except as consented to by Company in writing; and


 


(ii)           Upon receipt of a written request from Company
thereof,  promptly: (a) sell to
Company, at TGB’s direct  cost (and
cause any Manufacturing Subcontractor to sell, at such subcontractor’s cost),
all raw materials, packaging materials or components, work in process and semi-finished
Products (collectively the “Company Materials”) held by or on behalf of TGB or
under the control of TGB or its permitted Subcontractors as of the date of
termination or (b) destroy, at its own expense, the Company Materials, in
such manner as requested by Company, with proof of such destruction furnished
to Company in such form as is requested by Company.


 


11

















 


16.2         No later than 15 days following receipt of notice of
termination, TGB shall furnish Company with a statement showing the number and
description of the Products, Trim and work in process that is/are in its
possession, under its control or at the facilities of permitted
Subcontractors.  Company reserves the
right to take a physical inventory during regular business hours of the
Products, Trim and work in process to verify such figures, and TGB agrees to
allow Company’s authorized representatives into its premises or that of its
permitted Subcontractors to carry out the physical inventory.


 


17            COMPLIANCE WITH LAWS AND ADDITIONAL COVENANTS


 


17.1         Company warrants that all Products specifications
shall be in full compliance with all applicable laws and regulations then in
force, provided that TGB warrants compliance with all labor and other laws
governing workers’ rights and workplace safety in the country or territory in
which the Products are manufactured by TGB or its Manufacturing Subcontractors
or other Subcontractors.


 


17.2         Whenever registration of this Agreement with relevant
governmental authorities is necessary to preserve Company’s rights under this
Agreement and TGB has knowledge of such registration requirement, TGB shall
give prompt written notice to Company thereof so that Company may preserve its
rights herein.


 


17.3         TGB shall at all times comply with, and
shall cause all permitted Subcontractors (including Manufacturing
Subcontractors) to comply with, all applicable laws applicable to their
respective actions.  TGB further agrees
to comply and to require all Subcontractors (including Manufacturing
Subcontractors) to company with the United States Foreign Corrupt Practices
Act, generally codified in 15 U.S.C. 78 (the “FCPA”), as the FCPA may hereafter
be amended, and/or its successor statutes, and all other applicable laws.  Each party represents and warrants that
neither it nor any persons working on its behalf have or will directly or
indirectly pay money or give, offer or promise to give anything of value
directly or indirectly to any representative or employee of any government (or
subdivision thereof), to any political party or candidate for political office,
or to any customer or supplier of Company or potential customer or supplier if
such payment was or would be contrary to any law or regulation applicable to
this Agreement, Company or TGB.  Each
party further represents and warrants that neither this Agreement nor such
party’s actions (or actions of those working on its behalf) with respect to
this Agreement are or will be in contravention of any law or regulation of the
jurisdiction in which such party acts. 
Each party (“Indemnifying Party”) agrees to protect, defend and hold the
other party harmless from any claim, expenses, costs, losses, damages,
liability or the like stemming from Indemnifying Party’s (and those of persons
working on its behalf, including Subcontractors and Manufacturing
Subcontractors) acts or omissions in contravention of any law or regulation.


 


17.4         TGB will inspect raw materials and
components to assure specified and quality-tested raw materials and components
are being utilized in production and TGB will be responsible for all testing of
raw materials and components required to ensure that the finished Product
complies with applicable lead-content requirements of the Consumer Product
Safety Improvement Act (the “CPSIA”; and Company is responsible for testing of
the final finished Product for lead content and other required testing under
the CPSIA); provided that Company will be responsible for choosing the
Manufacturing Subcontractor for wheels and wheel housings (TGB will only be
responsible for ensuring that the manufactured wheels and wheel housings meet
Company-provided specifications).  TGB
will inspect and assure that finished Product is shipped to the specifications
and quality standards established by Company. 
TGB will provide Company with written test results of all quality tests
conducted on raw materials, components and finished goods on a regular
basis.  TGB will coordinate additional
testing required by Company, at Company’s expense.  TGB will, at its sole expense, provide
technical support in developing new product and “commercializing” (developing
lateral sizes assuring consistent fit and quality throughout size range)
approved Product and will secure and provide to Company reasonable quantities
of development samples free of charge under this Agreement, as well as assign
all related intellectual property rights to Company.  TGB will provide logistical expertise in
moving goods from factory to port of embarkation.  TGB will provide necessary US Customs and
exporting country documentation for shipping and Customs clearance.


 


17.5         Each party will not, and will not permit
any of its affiliates, during the term of this Agreement and for a period of
one year thereafter, solicit or engage for employment or consulting activities
any person or entity that has acted as an 


 


12

















 


employee or consultant of the other party at any time during the term
of this Agreement or during such one year period thereafter.


 


17.6         TGB will not alter any Company product or
any part or component contained therein without the prior written consent of
Company.  TGB acknowledges that Company,
in its sole discretion, may alter Company products or any part or component
contained therein.


 


17.7         During the term of this Agreement and for
a period of 10 years after the expiration or termination of this Agreement,
neither TGB nor any of its affiliates shall, directly or indirectly, commence,
render advice in connection with or otherwise encourage any action, suit or
proceeding (whether in court or before any other person having or asserting
jurisdiction with respect thereto), which challenges, or subjects to question
or doubt, the validity, scope or effectiveness of any of Company’s intellectual
property rights, including, for example, patent and trademark rights, relating
to any Product anywhere in the world.


 


17.8         TGB will provide Company with new
materials, new manufacturing processes and new components on a regular basis
for Company’s new product development consideration and will work with
factories and samples rooms to provide new prototype samples, based on Company’s
requested design, for Company’s consideration, use and ownership.


 


18            NOTICES  All notices to
be sent to any Party shall either be (i) dispatched by telefax with
confirmed answer received by the sending Party by return telefax, or (ii) mailed
by first class prepaid air mail, return receipt requested, to the parties at
the following addresses:


 


	
  If to TGB:

  	
  1400 Broadway,
  Suite 1405

  
	
   

  	
  New York, New
  York 10018

  
	
   

  	
  Telefax: (212)
  386-7662

  
	
   

  	
   

  
	
  With a copy to:

  	
  William H.
  Cox, Esq.

  
	
   

  	
  Gordon,
  Herlands, Randolph & Cox LLP

  
	
   

  	
  355 Lexington
  Avenue

  
	
   

  	
  New York, NY
  10017

  
	
   

  	
  Telefax: 212-983-0772

  
	
   

  	
   

  
	
  With a copy to:

  	
  Anthony
  Siniscalchi, CPA

  
	
   

  	
  A.
  Uzzo & Company, C.P.A.’s, P.C.

  
	
   

  	
  287 Bowman
  Avenue

  
	
   

  	
  Purchase, NY
  10577

  
	
   

  	
  Telefax: (914)
  694-9017

  
	
   

  	
   

  
	
  If to Company:

  	
  3200 Belmeade,
  Suite 100

  
	
   

  	
  Carrollton, TX
  75006

  
	
   

  	
  Telefax:
  214-390-1661

  
	
   

  	
  Attn: President
  and Chief Executive Officer

  
	
   

  	
   

  
	
  With a copy to:

  	
  Robert Ward /
  Robert Sarfatis

  
	
   

  	
  Gardere Wynne
  Sewell LLP

  
	
   

  	
  1601 Elm Street,
  Suite 3000

  
	
   

  	
  Dallas, TX
  75201-4761

  
	
   

  	
  Telefax: 214.999.4667

  



 


or to such other address
as may have been notified in writing by one Party to the other in accordance
with this paragraph.  Any notice sent by
telefax shall be deemed received on the following business day in the location
of the recipient.  Any notice sent by air
mail shall be deemed to have been received five days after mailing.


 


13

















 


19            ASSIGNMENT  Company may
assign in whole or in part its rights and obligations hereunder at any
time.  This Agreement is personal to
TGB.  Without the prior written consent
of Company, TGB shall not transfer or assign this Agreement or any rights or
obligations hereunder, except that TGB may assign its rights or obligations to
any affiliate or subsidiary of TGB, provided, however that TGB shall remain
jointly and severally liable for all obligations under this Agreement.  Any assignment or purported assignment in
violation of this Agreement shall be void ab
initio.


 


20            NO PARTNERSHIP OR AGENCY 
Nothing in this Agreement shall be deemed to constitute a partnership,
joint venture, license or franchising relationship between the parties or to
make either party an agent of the other party for any purpose.  Neither party shall have any authority to
bind the other party or to contract in the name of or create any liability for
or on behalf of the other party and each party shall indemnify and hold harmless
the other party for any breach thereof.


 


21            NO ASSIGNMENT OR SUBCONTRACTORS 
TGB shall not, without the prior written consent of Company, authorize
or permit any portion of any of the Products bearing the Trademarks to be
produced or manufactured by any person or entity other than TGB or
Manufacturing Subcontractors.  TGB agrees
that it shall be responsible for the actions or omissions to act of any
subcontractor used by it in connection with any of the Products or with
satisfying any of TGB’s responsibilities under this Agreement.


 


22            WAIVER  The failure of
any Party to enforce any term or provision hereof shall not be construed as a
waiver of such term or provision and shall in no way affect the right of such
Party thereafter to enforce such term or provision or any other term or
provision hereof.


 


23            GOVERNING LAW  This Agreement
shall be governed by and construed in accordance with the laws of the State of
Delaware, United States of America (regardless of any jurisdiction’s choice of
law principles, laws or regulations that would result in the application of
another jurisdiction’s laws).  However,
if any law in the Territory requires terms other than or in addition to those
contained herein, then this Agreement shall be deemed modified so as to comply
with such laws, but only to the extent necessary to prevent the invalidity of
this Agreement or any material provision hereof, the imposition of fines or
penalties, or the creation of civil or criminal liability as a result thereof.  The exclusive venue and forum for the
resolution of any dispute related to this Agreement, or between the parties to
this Agreement, whether sounding in tort, contract or equity, or based upon
federal or state statute or regulation, shall be the State of Delaware.  Both parties waive any objection to (1) jurisdiction;
(2) venue, including but not limited to the doctrine of forum non
conveniens; and (3) service of process of any federal or state court in
the State of Delaware.  Company and TGB
each agrees that service of process upon it if given in every respect effective
service of process shall be deemed in every respect effective service of
process upon it if given in every respect effective service of process upon it
if given in the manner set forth in Section 18.


 


24            REPRESENTATION AND WARRANTIES 
Each Party represents and warrants to the others that: (a) it has
full power and authority to enter into and to discharge its responsibilities
under this Agreement, and (b) the making and performance of this Agreement
does not violate any applicable provision of law or violate any other agreement
to which it is a party.


 


25            ENTIRE AGREEMENT  This Agreement
and the Exhibits attached hereto contain the entire understanding of the
parties and supersede all prior written and oral agreements, understandings or
commitments made by the parties with respect to the subject matter hereof.  If any provision of this Agreement shall be
found void or unenforceable under the laws of any jurisdiction, such invalidity
or unenforceability shall not affect the remaining provisions of this Agreement
or the interpretation of this Agreement under the laws of any other
jurisdiction.


 


26            AMENDMENT  This Agreement
may be amended only in a writing signed by all parties.


 


27            EFFECTIVENESS  The submission
of this Agreement does not constitute an offer. 
This Agreement shall become effective only upon execution thereof by
each Party.


 


28            AUTHORITY  Each signatory
hereto personally represents and warrants that he or she has the legal
authority, right and power to execute this Agreement on behalf of the Party on
whose behalf he or she is signing, and personally 


 


14

















 


represents and warrants
that such Party has the legal authority, right and power to grant the rights
and undertake the duties provided for in this Agreement.


 


29            MANUFACTURING ENVIRONMENT 
TGB shall provide, and shall cause all permitted Subcontractors
(including Manufacturing Subcontractors) to provide, a safe working environment
for all of its employees and any other persons performing services.  TGB and its permitted Subcontractors
(including Manufacturing Subcontractors), shall comply with all applicable laws
and regulations.  TGB and its permitted
Subcontractors (including Manufacturing Subcontractors) shall meet or exceed
the labor standards as established by the United Nations and the jurisdiction
in which it performs its obligations under this Agreement and shall operate and
maintain the manufacturing facilities in compliance with the standards, rules,
and regulations established by the Fair Labor Association, including, without
limitation, the Workplace Code of Conduct set forth on Exhibit 3
attached hereto and incorporated herein by this reference.  In connection with the foregoing, in the
event that the standards, rules and regulations established by the Fair
Labor Association with respect to the Footwear and Textile Industries are
subsequently changed substantially from such current standards, rules and
regulations, the Parties agree to review such changes and negotiate in good
faith which changes shall be deemed applicable to this Agreement.  TGB shall make its manufacturing facilities,
and the facilities of any Subcontractors (including Manufacturing Subcontractors)
performing services hereunder or in connection herewith, available to Company
and Company’s authorized representatives for inspection, during normal business
hours and upon 24 hours prior written notice (or less in the event that Company
has a good faith belief, e.g., based on news reports or press inquiries, that
any such facilities are operating in violation of the terms and conditions of
this Section 29), and shall allow Company and Company’s authorized
representatives that opportunity to meet with and interview employees and any
other persons performing services for the purpose of determining the quality of
working conditions and compliance with the terms of this Agreement.  TGB shall post, and shall cause its
Subcontractors (including Manufacturing Subcontractors) to post, in a clearly
visible, legible and readily understandable manner, a list of worker’s rights,
which rights will be clearly explained to all employees and any other persons
providing services in their own respective languages.


 


30            BINDING EFFECT  This Agreement
and the terms and conditions set forth herein shall bind and inure to the
benefit of each Party and such Party’s successors and permitted assigns.


 


31            HEADINGS  Paragraph or
section headings contained herein are solely for the purpose of aiding in
speedy location of subject matter and are not in any sense to be given weight
in the construction of this Agreement. 
Accordingly, in case of any question with respect to the construction of
this Agreement, it is to be construed as though such paragraph and section
headings had been omitted.


 


32            LIMITATION ON DAMAGES  Except in
connection with any breach by Company of Section 13, Company shall not be
liable to TGB in contract, tort or otherwise for any lost profits or any
indirect, consequential, special, exemplary or incidental damages, whether in
contract, tort or otherwise, arising from or relating to this Agreement or any
breach thereof.  If, for any reason other
than as set forth in Section 15.3(ii) or (iii) of this
Agreement, Company terminates this Agreement and has not purchased at least one
million (1,000,000) pairs of Products from TGB prior to the date of such
termination, Company shall pay TGB an amount equal the product obtained by
multiplying (a) the amount determined by subtracting the average FOB price
charged to TGB by its Manufacturing Subcontractors on orders placed by Company
with TGB from the average FOB price charged by TGB to Company on orders placed
by Company with TGB  by (b) the
amount determined by subtracting from one million (1,000,000), the number of
pairs of Products purchased by Company from TGB and the number of pairs of
Products on order and to be purchased by Company from TGB under this Agreement
as of the date Company terminates this Agreement for any reason other than as
set forth in Section 15.3(ii) or (iii).  Notwithstanding the foregoing, the parties
agree that if Company breaches this Agreement by not paying to TGB the full
amount of the purchase order relating to Products tendered to Company’s agent
in accordance with Section 5.3 above, the amount determined by subtracting
the FOB price charged to TGB by its Manufacturing Subcontractors on such order
from the FOB price charged by TGB to Company on such order are not
consequential damages or lost profits for any purpose, including, but not limited
to, the exclusions or limitations set forth in this Section 32.


 


33            INJUNCTIVE RELIEF  Each party
acknowledges that its breach of any of the provisions contained in
Sections/Paragraphs 2, 3, 4, 5, 6, 7, 8, 10, 11, 12, 13, 16, 19, 21, and 29 of
this Agreement, and/or each subsection 


 


15

















 


thereof, would cause
irreparable injury to the other party, that damages as a matter of law would be
inadequate to remedy such injury, and that the other party, in addition to any
other remedies available, shall be entitled to seek and obtain injunctive
relief.


 


[SIGNATURE PAGE FOLLOWS]


 


16

















 


IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective, duly authorized representatives effective as of
the date first written above.


 


 




	
  TGB:

  	
   

  	
  COMPANY:

  
	
   

  	
   

  	
   

  
	
  TGB, LLC

  	
   

  	
  HEELING SPORTS
  LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By: Heeling
  Management Corp.

  
	
   

  	
   

  	
  Its sole general partner

  






 


 




	
  By:

  	
  /s/ Anthony
  Loconte

  	
   

  	
  By:

  	
  /s/ Thomas C. Hansen

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Anthony Loconte

  	
   

  	
  Name:

  	
  Thomas C. Hansen

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief Executive
  Officer

  	
   

  	
  Title:

  	
  President &
  Chief Executive Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  April 21, 2010

  	
   

  	
  Date:

  	
  April, 21, 2010

  






 


17

















 


EXHIBIT 1


 


EXISTING PRODUCTS


 


Heelys Spring/Summer 2010 SMU’s


 


Project Numbers


 


RW-001


TX2159G3


TX2159E2


TX2215D3


 


Heelys Spring/Summer 2010


 


Project Numbers


 


	
  TX2205A3

  	
  TX2209F2

  	
  TX2197B2

  
	
  TX2205B

  	
  TX2169E2

  	
  TX2197C2

  
	
  TX2205C2

  	
  TX2169F2

  	
  TX2210C1

  
	
  TX2205A3

  	
  TX2209A2

  	
  TX2210C2

  
	
  TX2205B

  	
  TX2209B

  	
  TX2197B2

  
	
  TX2205C2

  	
  TX2209D2

  	
  TX2197C2

  
	
  TX2205A3

  	
  TX2209E2

  	
  TX2210C1

  
	
  TX2205B

  	
  TX2209F2

  	
  TX2210C2

  
	
  TX2205C2

  	
  TX2169E2

  	
  TX2197B2

  
	
  TX2205A3

  	
  TX2169F2

  	
  TX2197C2

  
	
  TX2205B

  	
  TX2209A2

  	
  TX2210C1

  
	
  TX2205C2

  	
  TX2209B

  	
  TX2210C2

  
	
  TX2205A3

  	
  TX2209D2

  	
  TX2197B2

  
	
  TX2205B

  	
  TX2209E2

  	
  TX2197C2

  
	
  TX2205C2

  	
  TX2209F2

  	
  TX2207A2

  
	
  TX2169E2

  	
  TX2169E2

  	
  TX2207B2

  
	
  TX2169F2

  	
  TX2169F2

  	
  TX2207C4

  
	
  TX2169E3

  	
  TX2209A2

  	
  TX2207A2

  
	
  TX2209A2

  	
  TX2209B

  	
  TX2207B2

  
	
  TX2209B

  	
  TX2209D2

  	
  TX2207C4

  
	
  TX2209D2

  	
  TX2209E2

  	
  TX2207A2

  
	
  TX2209E2

  	
  TX2209F2

  	
  TX2207B2

  
	
  TX2209F2

  	
  TX2210C1

  	
  TX2207C4

  
	
  TX2169E2

  	
  TX2210C2

  	
  TX2207A2

  
	
  TX2169F2

  	
  TX2197B2

  	
  TX2207B2

  
	
  TX2209A2

  	
  TX2197C4

  	
  TX2207C4

  
	
  TX2209B

  	
  TX2197C2

  	
  TX2207A2

  
	
  TX2209D2

  	
  TX2210C1

  	
  TX2207B2

  
	
  TX2209E2

  	
  TX2210C2

  	
  TX2207C4

  



 


1

















 


	
  TX2212A2

  	
  TX2215A2

  	
  TX2206C2

  
	
  TX2212C2

  	
  TX2215B2

  	
  TX2206D2

  
	
  TX2212A2

  	
  TX2215C2

  	
  TX2190 B

  
	
  TX2212C2

  	
  TX2215D2

  	
  TX2190C

  
	
  TX2212A2

  	
  TX2213B

  	
  TX2190D

  
	
  TX2212C2

  	
  TX2213C

  	
  TX2190WHT

  
	
  TX2212A2

  	
  TX2213D

  	
  TX2190 B

  
	
  TX2212C2

  	
  TX2213E2

  	
  TX2190C

  
	
  TX2212A2

  	
  TX2213H

  	
  TX2190D

  
	
  TX2212C2

  	
  TX2213F2

  	
  TX2190WHT

  
	
  TX2170C

  	
  TX2213A2

  	
  TX2190 B

  
	
  TX2191F

  	
  TX2213B

  	
  TX2190C

  
	
  TX2170C

  	
  TX2213C

  	
  TX2190D

  
	
  TX2191F

  	
  TX2213D

  	
  TX2190WHT

  
	
  TX2170C

  	
  TX2213E2

  	
  TX2190 B

  
	
  TX2191F

  	
  TX2213F2

  	
  TX2190C

  
	
  TX2170C

  	
  TX2213A2

  	
  TX2190D

  
	
  TX2191F

  	
  TX2213B

  	
  TX2190WHT

  
	
  TX2170C

  	
  TX2213C

  	
  TX2190 B

  
	
  TX2191F

  	
  TX2213D

  	
  TX2190C

  
	
  TX2214A2

  	
  TX2213E2

  	
  TX2190D

  
	
  TX2214B

  	
  TX2213F2

  	
  TX2190WHT

  
	
  TX2214A2

  	
  TX2213A2

  	
  TX2221A

  
	
  TX2214B

  	
  TX2213B

  	
  TX2221B

  
	
  TX2214A2

  	
  TX2213C

  	
  TX2221C

  
	
  TX2214B

  	
  TX2213D

  	
  TX2186A2

  
	
  TX2214A2

  	
  TX2213E2

  	
  TX2186B

  
	
  TX2214B

  	
  TX2213F2

  	
  TX2187B2

  
	
  TX2214A2

  	
  TX2213A2

  	
  TX2187C2

  
	
  TX2214B

  	
  TX2213B

  	
  TX2186A2

  
	
  TX2215A2

  	
  TX2213C

  	
  TX2186B

  
	
  TX2215B2

  	
  TX2213D

  	
  TX2187A

  
	
  TX2215C2

  	
  TX2213E2

  	
  TX2187B2

  
	
  TX2215E

  	
  TX2213F2

  	
  TX2187C2

  
	
  TX2215D2

  	
  TX2206A2

  	
  TX2186A2

  
	
  TX2215A2

  	
  TX2206C2

  	
  TX2186B

  
	
  TX2215B2

  	
  TX2206D2

  	
  TX2187B2

  
	
  TX2215C2

  	
  TX2206A2

  	
  TX2187C2

  
	
  TX2215D2

  	
  TX2206C2

  	
  TX2186A2

  
	
  TX2215A2

  	
  TX2206D2

  	
  TX2186B

  
	
  TX2215B2

  	
  TX2206A2

  	
  TX2187B2

  
	
  TX2215C2

  	
  TX2206C2

  	
  TX2187C2

  
	
  TX2215D2

  	
  TX2206D2

  	
  TX2186A2

  
	
  TX2215A2

  	
  TX2206A2

  	
  TX2186B

  
	
  TX2215B2

  	
  TX2206C2

  	
  TX2187A

  
	
  TX2215C2

  	
  TX2206D2

  	
  TX2187B2

  
	
  TX2215D2

  	
  TX2206A2

  	
  TX2187C2

  



 


2

















 


Heelys Fall/Winter 2010


 


Project #


 


	
  TX2222B

  	
  TX2226C2

  	
  TX2220A

  
	
  TX2222C2

  	
  TX2180A1

  	
  TX2220B

  
	
  TX2222D

  	
  TX2227A

  	
  TX2220A

  
	
  TX2222B

  	
  TX2227C

  	
  TX2220B

  
	
  TX2222C2

  	
  TX2226A2

  	
  TX2220A

  
	
  TX2222D

  	
  TX2226C2

  	
  TX2220B

  
	
  TX2222B

  	
  TX2227A

  	
  TX2220A

  
	
  TX2222C2

  	
  TX2227C

  	
  TX2220B

  
	
  TX2222D

  	
  TX2226A2

  	
  TX2215D2

  
	
  TX2222B

  	
  TX2226C2

  	
  TX2215F

  
	
  TX2222C2

  	
  TX2227A

  	
  TX2213G

  
	
  TX2222D

  	
  TX2227B

  	
  TX2215D2

  
	
  TX2222A2

  	
  TX2227C

  	
  TX2215F

  
	
  TX2222B

  	
  TX2226A2

  	
  TX2213G

  
	
  TX2222C2

  	
  TX2226C2

  	
  TX2215D2

  
	
  TX2222D

  	
  TX2227A

  	
  TX2215F

  
	
  TX2224A3

  	
  TX2227C

  	
  TX2213G

  
	
  TX2224C3

  	
  TX2226A2

  	
  TX2215D2

  
	
  TX2218E2

  	
  TX2226C2

  	
  TX2215F

  
	
  TX2218A2

  	
  TX2229B

  	
  TX2213G

  
	
  TX2218B

  	
  TX2229B

  	
  TX2215D2

  
	
  TX2224A3

  	
  TX2229B

  	
  TX2215F

  
	
  TX2224C3

  	
  TX2229B

  	
  TX2213G

  
	
  TX2218E2

  	
  TX2229B

  	
  TX2208B2

  
	
  TX2218A2

  	
  TX2228A

  	
  TX2208C

  
	
  TX2218B

  	
  TX2228C

  	
  TX2208F

  
	
  TX2224A3

  	
  TX2228A

  	
  TX2208B2

  
	
  TX2224C3

  	
  TX2228C

  	
  TX2208C

  
	
  TX2218E2

  	
  TX2228A

  	
  TX2208F

  
	
  TX2218A2

  	
  TX2228C

  	
  TX2208B2

  
	
  TX2218B

  	
  TX2228A

  	
  TX2208C

  
	
  TX2224A3

  	
  TX2228C

  	
  TX2208F

  
	
  TX2224C3

  	
  TX2228A

  	
  TX2208B2

  
	
  TX2223A2

  	
  TX2228B

  	
  TX2208C

  
	
  TX2223C2

  	
  TX2219A

  	
  TX2208F

  
	
  TX2218E2

  	
  TX2219B

  	
  TX2221D

  
	
  TX2218A2

  	
  TX2219A

  	
  TX2221E

  
	
  TX2218B

  	
  TX2219B

  	
  TX2221F

  
	
  TX2218D

  	
  TX2219A

  	
  TX2221D

  
	
  TX2224A3

  	
  TX2219B

  	
  TX2221E

  
	
  TX2224C3

  	
  TX2219A

  	
  TX2221F

  
	
  TX2218E2

  	
  TX2219B

  	
  TX2221D

  
	
  TX2218A2

  	
  TX2219C

  	
  TX2221E

  
	
  TX2218B

  	
  TX2219A

  	
  TX2221F

  
	
  TX2227A

  	
  TX2219B

  	
  TX2221D

  
	
  TX2227C

  	
  TX2220A

  	
  TX2221E

  
	
  TX2226A2

  	
  TX2220B

  	
  TX2221F

  



 


3

















 


	
  TX2221D

  	
   

  	
   

  
	
  TX2221E

  	
   

  	
   

  
	
  TX2221F

  	
   

  	
   

  
	
  TX2221A

  	
   

  	
   

  
	
  TX2221B

  	
   

  	
   

  
	
  TX2221C

  	
   

  	
   

  
	
  TX2186A2

  	
   

  	
   

  
	
  TX2186B

  	
   

  	
   

  
	
  TX2187B2

  	
   

  	
   

  
	
  TX2187C2

  	
   

  	
   

  
	
  TX2186A2

  	
   

  	
   

  
	
  TX2186B

  	
   

  	
   

  
	
  TX2187A

  	
   

  	
   

  
	
  TX2187B2

  	
   

  	
   

  
	
  TX2187C2

  	
   

  	
   

  
	
  TX2186A2

  	
   

  	
   

  
	
  TX2186B

  	
   

  	
   

  
	
  TX2187B2

  	
   

  	
   

  
	
  TX2187C2

  	
   

  	
   

  
	
  TX2186A2

  	
   

  	
   

  
	
  TX2186B

  	
   

  	
   

  
	
  TX2187B2

  	
   

  	
   

  
	
  TX2187C2

  	
   

  	
   

  
	
  TX2186A2

  	
   

  	
   

  
	
  TX2186B

  	
   

  	
   

  
	
  TX2187A

  	
   

  	
   

  
	
  TX2187B2

  	
   

  	
   

  
	
  TX2187C2

  	
   

  	
   

  
	
  TX2159F

  	
   

  	
   

  
	
  TX2159G3

  	
   

  	
   

  
	
  TX2159A3

  	
   

  	
   

  



 


4
















 


EXHIBIT 2


 


MANUFACTURING AGREEMENT


 


WHEREAS, Heelys, Inc.,
including its affiliate Heeling Sports Limited, is the owner of the certain
trademarks, including the brand HEELYS, the brand SOAP and related logos and
other valuable trademarks (collectively the “Trademarks”);


 


WHEREAS, TGB, LLC (“TGB”),
has entered into a Sourcing Agreement (the “Sourcing Agreement”) with Heeling
Sports Limited (“Company”) wherein TGB is authorized to procure certain
products (“Products”) for Company according to its order and the Sourcing
Agreement; and


 


WHEREAS, TGB now desires
to contract with                                                                                            (“Subcontractor”),
to make or otherwise supply TGB with Products bearing the Trademarks to be used
in the production of the Products;


 


WHEREAS, as a material
condition precedent to TGB’s contracting with Subcontractor to make or
otherwise supply TGB with accessory items bearing the Trademarks and/or patents
of the Company to be used in the production of the Products, TGB and Company
jointly require Subcontractor to execute this agreement (the “Agreement”);


 


NOW THEREFORE, for the
benefit of the signatories below and Company, as an express third party
beneficiary of this Agreement, the parties hereby agree as follows:


 


1.                                       That all full or partial
Trademark-bearing components or accessory items, including but not limited to,
wheeled footwear, insoles, midsoles, outsoles, linings or inserts; inflation,
rebound or other devices; thread, closures, snaps, zippers, piping, studs,
rivets, fasteners, and laces; boxes, packaging, materials, tags and labels;
computer chips, data storage devices, PROMS, cams, Gross tapes and Jacquard
tapes; and any other materials in any way featuring, storing or bearing the Trademarks
of Company or incorporating patent rights of the Company (hereinafter
collectively the “Products”) are the property of Company, and that the
misappropriation of such items is theft and may be prosecuted.


 


2.                                       That said Products items have a
substantially greater value in the marketplace than like items not bearing such
Trademarks and/or incorporating patent rights of the Company.


 


3.                                       That the above mentioned Trademarks have
substantial goodwill and have come to represent and connote quality goods and their
authenticity.


 


4.                                       That diversion, loss, misappropriation or
theft of any Products items or any other items in any way featuring or bearing
the Trademarks by anyone will have a substantial negative impact on the Company
if such items subsequently become incorporated into counterfeit or infringing
goods or are otherwise used in a manner that has not been expressly authorized
by Company.


 


5.                                       That in order to protect the value of the
above Trademarks and patent rights of the Company, and in consideration of the
selection of Subcontractor to perform labor and work for TGB, Subcontractor
will maintain a strict accounting for, and inventory of, all items of
Products.  Further, and in consideration
of the selection of Subcontractor to perform labor and work for TGB on behalf
of Company, Subcontractor hereby assigns its complete right, title, and
interest to Company in all intellectual property rights, including inventions,
improvements and patent rights, conceived or developed by Subcontractor and its
agents and employees that are related to or based in any manner on (i) the
Products or other items being made for Company or TGB on behalf of Company, or (ii) the
confidential information of Company. 
Nothing herein shall be construed as an implied license from Company or
TGB to Subcontractor in connection with any of Company’s intellectual property
rights, including, for example, the Trademarks, patent rights, inventions, 


 


1

















 


or confidential information embodied in the Products or items made on
behalf of Company, and including rights in the intellectual property assigned
from Subcontractor to Company as provided in this paragraph.


 


6.                                       Subcontractor agrees to supply the
Products which are the subject of this Agreement only to Company or its
designee.  Subcontractor further agrees
to supply Company periodically and upon request with an accounting of the
quantity of Products ordered by TGB, work in process or those units that have
been shipped.


 


7.                                       Subcontractor shall not be permitted to
dispose of any Products or items bearing the Trademarks or incorporating
features covered by patent rights of the Company, whether such items are first
quality, defective or scrap, and whether such items were within quantities
ordered or are excess or overruns, and Subcontractor agrees to return each and
every such item, as directed, to Company or its designee.  Subcontractor acknowledges its duties of
strict accountability for all items bearing or featuring the Trademarks or
patent rights of Company.


 


8.                                       Failure of the Subcontractor to furnish a
strict accounting and inventory of Products to Company or TGB that is
acceptable to Company, will result in Subcontractor’s liability to Company and
TGB for damages, as well as potential criminal liability.


 


9.                                       Subcontractor agrees to be subject to
inspection by representatives of Company or TGB.  Subcontractor further agrees that, with
respect to Quality Control and intellectual property, it shall be bound by the
same provisions as those that bind TGB in the Sourcing Agreement with Company.


 


10.                                 Subcontractor agrees to allow access to
its premises and physical inventory of all Products, Trademark-bearing goods,
or other goods incorporating full or partial patent features of Company at any
reasonable time by Company, TGB or the agents or designees of such parties.


 


11.                                 The parties hereto acknowledge that
Subcontractor may have need for computer chips, PROMs, cams, Jacquard tapes,
Gross tapes, dies, molds, or other materials to accurately reproduce the
Trademarks.  Subcontractor acknowledges
that said items are the property of Company, and that, immediately on demand or
upon termination of any contractual relationship, it shall immediately deliver
said items, together with any other full or partial Products, to Company.  Subcontractor further acknowledges its
liability for any unauthorized reproduction of the Trademarks and, in addition
to any actual damages for violation of this Agreement, Subcontractor agrees to
pay reasonable attorneys fees and costs necessary to enforce this Agreement
with or without litigation.


 


12.                                 In the event that, prior to the execution
of this Agreement, Subcontractor possessed any above mentioned Trademarked
items, said items shall be subject to this Agreement.  This Agreement shall cover all Trademarked
items in the possession of the Subcontractor as of the date hereof and
hereafter.


 


13.                                 This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas United States of
America (regardless of any jurisdiction’s choice of law principles).  The failure of any party to enforce any term
or provision hereof shall not be construed as a waiver of such term or
provision and shall in no way affect the right of such party thereafter to
enforce such term or provision or any other term or provision hereof.   This Agreement contains the entire
understanding of the parties and supersedes all prior written and oral
agreements, understandings or commitments made by the parties with respect to
the specific subject matter hereof.  If
any provision of this Agreement shall be found void or unenforceable under the
laws of any jurisdiction, such invalidity or unenforceability shall not affect
the remaining provisions of this Agreement or the interpretation of this Agreement
under the laws of any other jurisdiction.  
This Agreement may be amended only in a writing signed by all parties
and by Company.


 


14.                                 Subcontractor acknowledges that its
breach of any of the provisions contained in this Agreement would cause irreparable
injury to Company and/or TGB, that damages as a matter of law would be
inadequate to 


 


2

















 


remedy such injury, and that Company and/or TGB, in addition to any
other remedies available, shall be entitled to seek and obtain injunctive
relief.


 


[SIGNATURE PAGE FOLLOWS]


 


3

















 


	
  TGB

  	
   

  	
  SUBCONTRACTOR

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  



 


4

















 


EXHIBIT 3


 


WORKPLACE CODE OF CONDUCT


 


Heelys, Inc.,
including its affiliates (collectively “HEELYS”) is committed to ensuring that
working conditions in HEELYS’ supply chain are safe, that workers are treated
with respect and dignity, and that manufacturing processes are environmentally
responsible.  HEELYS’ suppliers are
obligated, in all of their activities, to operate in full compliance with the
laws, rules and regulations of the countries in which they operate.  This Supplier Code of Conduct goes further,
drawing upon internationally recognized standards, in order to advance social
and environmental responsibility.  HEELYS
requires that its first tier suppliers implement this Code using the management
systems described below.


 


1.              Compliance with Laws, Regulations,
and Published Standards.  HEELYS’ Suppliers must comply with all
applicable laws, codes, or regulations of the countries, states, and localities
in which they operate.  This includes,
but is not limited to, laws and regulations relating to environmental,
occupational health and safety, and labor practices.


 


2.               Environmental Practices.  HEELYS suppliers shall comply with all environmental
laws and regulations applicable to their operations worldwide.  Such compliance shall include, among other
things, the following items:


 


a.                                       Obtaining and maintaining environmental
permits and timely filing of required reports.


b.                                      Proper handling and disposition of
hazardous materials.


c.                                       Monitoring, controlling, and treating
discharges generated from operations.


 


3.              Occupational Health and Safety
Practices.  HEELYS suppliers shall provide their
employees with a safe and healthy working environment in order to prevent
accidents and injury to health arising out of, linked with, or occurring in the
course of work or as a result of the operation of the supplier.  Suppliers shall, among other things, provide


 


a.                                       Occupational health and safety training;


b.                                      A system for injury and illness
reporting;


c.                                       Medical treatment and/or compensation to
injured/ill workers arising as a result of


d.                                      Machine safeguarding and other protective
measures to prevent injuries/illnesses to workers;


e.                                       Clean and safe facilities.


 


4.              Labor Practices.  HEELYS expects its suppliers to adopt sound labor
practices and treat their workers fairly in accordance with local laws and
regulations.  In addition, suppliers must
comply with the following standards:


 


a.                                       Freely Chosen Employment.  There shall not be any use of forced labor,
whether in the form of prison labor, indentured labor, bonded labor, or otherwise.  There shall be no penalties or fines for
declining overtime. Workers shall not be locked inside of factory premises for
any reason. Workers must not be required to hand over any government-issued
identification, passports, or work permits as a condition of employment.


 


b.                                      No Child Labor.  Suppliers may not use child labor at any
stage of manufacturing.  Workers must be
at least the minimum age for employment in that country or the age for completing
compulsory education in that country, whichever is higher.  In no event may a worker be less than 15
years old (except as permitted by ILO Minimum Age Convention No. 138).
Workers under 18 years of age may not perform work likely to jeopardize the
health, safety or morals of young persons, consistent with ILO Minimum Age
Convention No 138. This Code does not prohibit participation in legitimate
workplace apprenticeship programs that are consistent with Article 6 of
ILO Minimum Age Convention No 138.


 


c.                                       Minimum Wages. Suppliers shall pay
workers for all work completed and shall pay at least the minimum wage required
by law of the prevailing industry wage, consistent with the local area
statistics, whichever is higher, and shall provide legally mandated benefits.
There shall be no deductions of wages for disciplinary purposes. The suppliers
shall not engage in false apprenticeship practices that are used to avoid
payment of compensation.


 


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d.                                      Working Hours.  As part of normal business operations including
those countries where domestic law does not limit work hours, suppliers shall
not require an excess of a 60-hour workweek on a regularly scheduled basis.
Workers shall be entitled to one full day off out of each seven-day week.
Workers shall not be asked or required to take work home or off premises. All
hours worked must be documented in writing and made available to HEELYS’ staff,
upon request.


 


e.                                       No Harsh, Inhumane Treatment or
Abuse.  Suppliers shall treat each
employee with dignity and respect.  Suppliers
must be committed to a workplace free of harassment. Suppliers may not threaten
workers with or subject them to harsh or inhumane treatment, including sexual
harassment, sexual abuse, corporal punishment, mental coercion, physical
coercion, or verbal abuse.


 


f.                                         No Discrimination.  Suppliers may not discriminate against any
worker based on race, color, age, gender, sexual orientation, ethnicity,
disability, religion, political affiliation, union membership, or marital
status in hiring and employment practices such as promotions, rewards, access
to training, job assignments, wages, benefits, discipline, termination and
retirement.  Suppliers may not require a
pregnancy test except where required by applicable laws or regulations.


 


g.                                      Freedom of Association.  Suppliers shall recognize and respect the
right of its workers to organize in labor unions in accordance with local labor
laws and established practices.


 


h.                                      Overtime. 
Exceptional business circumstances requiring a workweek in excess of the
local official workweek (or a 48-hour workweek, whichever is lower) shall be
subject to the laws regarding the payment of overtime in addition to
compensation for regular hours of work. 
In countries where there is no legal standard regarding overtime
premiums, industry standards shall be the model.  In no event shall this be at a rate less than
the regular hourly rate. Factories shall carry out operations in ways that
limit overtime to a level that complies with national labor laws and ensures
productive and humane working conditions.


 


5.              Compliance.  In the event of any non-compliance with the Code of
Conduct, HEELYS may terminate or refuse to renew our supply agreement.


 


ACKNOWLEDGEMENT


 


By signing below, I, [name of person] the [title], of [name of
company], do hereby agree and acknowledge that [name of company] has received
and reviewed the attached Heelys, Inc., Supplier Code of Conduct and
agrees to be bound by and subject to the terms and conditions thereof.


 


 


	
  BY:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ITS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  DATED:

  	
   

  	
   

  



 


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EXHIBIT 4


 


TRADEMARKS


 





 


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