Exhibit 10.1


 


EXECUTIVE
EMPLOYMENT AGREEMENT


 


THIS EXECUTIVE EMPLOYMENT AGREEMENT
(the “Agreement”), is entered into as of October 28, 2008 (the “Effective
Date”) by and between William D. Albers, a resident of the State of
California (“Executive”), and Heeling Sports Limited, a Texas limited
partnership (“Company”, and together with Executive, the “Parties”
and each a “Party”).


 


WHEREAS, Company is
engaged in the commercial enterprise of selling wheeled footwear, other
athletic footwear, and related products and services (the “Business”);


 


WHEREAS, Company
recognizes that Executive’s substantial skills and expertise will be useful to
the Business and desires to provide for the employment of Executive on the
terms and conditions provided in this Agreement;


 


WHEREAS, Executive
is willing to commit to serve Company in the capacity and on the terms and
conditions provided in this Agreement; and


 


WHEREAS, in order
to effect the foregoing, Company and Executive wish to enter into an employment
agreement on the terms and conditions set forth below;


 


NOW, THEREFORE, in
consideration of the premises and the mutual promises and agreements contained
herein, the Parties, intending to be legally bound, hereby agree as follows:


 


1.                                      Scope
of Employment.


 


1.1          Employment.  Subject to the
terms and conditions set forth herein, Company agrees to employ Executive
during the Employment Term (as defined below), and Executive hereby commits to
accept such employment as set forth in Section 4.1.  Executive will hold the office of “Vice
President of Sourcing” (“VP of Sourcing”) during the Employment Term,
and will perform the services described in Section 3 (the “Services”)
as assigned to Executive by the Board of Directors (the “Board”) of
Heelys, Inc., a Delaware corporation (“Parent”), its designee, the
Chief Executive Officer of Parent (“CEO”), or the CEO’s designee.


 


1.2          Place
of Performance. 
Executive will perform the Services based out of an office in China, but
Executive will be required to travel as reasonably required for performance of
the Services.


 


2.                                      Representations,
Warranties, Covenants, and Acknowledgements.  Executive hereby represents, warrants,
covenants, and acknowledges to Company as follows:


 


2.1          No Conflict or Breach.  The execution, delivery, and performance of this
Agreement by Executive does not and will not conflict with, breach, violate, or
cause a default under any contract, agreement, instrument, order, judgment, or
decree by which Executive is bound.


 


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2.2          Disclosed Previous Agreements.  As of the Effective Date, Executive has not
violated any lawful obligations to any previous employer.  Executive acknowledges Company’s instructions
not to breach any such lawful obligations.


 


2.3          No Use of Previous Employer Information.  During the Employment Term and thereafter,
Executive will not use or disclose to Company or Parent, or to any affiliate,
subsidiary, investor, owner, shareholder, franchisee, franchisor or other
related entity (each a “Related Entity”) of Company, or to any other
Person (as defined below), any confidential or proprietary information or trade
secrets of any of Executive’s previous employer(s) or any Related Entity
of such employer(s), and will not bring onto Company’s premises, or access,
such confidential or proprietary information or trade secrets, unless consented
to in writing by such employer(s) or Related Entity and then only with the
prior written authorization of Company. 
For purposes of this Agreement, “Person” means an individual, a partnership,
a limited liability company, a corporation, an association, a joint stock
company, a trust, a joint venture, an unincorporated organization, and/or a
governmental entity or any department, agency, or political subdivision
thereof.


 


2.4          Understands Agreement.  Executive acknowledges that Executive has
read this Agreement before signing it, has had the opportunity to consult with
and be advised by counsel about it, and fully understands its purposes, terms,
and provisions, which Executive hereby expressly acknowledges to be reasonable
in all respects.


 


2.5          Material Breach.  Executive acknowledges that any breach of Section 2
(including subparts) by Executive will constitute a material breach of this
Agreement.


 


3.                                      Duties
and Responsibilities.


 


3.1          VP
of Sourcing. During the Employment Term, Executive’s
duties and responsibilities will be those typically performed by a VP of
Sourcing of a nationwide commercial enterprise in the Business, and otherwise
as reasonably and lawfully directed by the Board, its designee, the CEO or the
CEO’s designee.  Company may adjust the
duties and responsibilities of the Executive notwithstanding the specific title
set forth in Section 1.1, based upon Company’s needs from time to
time.  Executive will devote substantially
all of Executive’s business time, energy, and skill to performing the Services
and will perform all obligations hereunder diligently, faithfully, and to the
best of Executive’s abilities, except during times of vacation, illness,
incapacity, or other approved leave.  It
shall not be a violation of this Agreement for the Executive to serve on
industry, civic, community, charitable, religious, educational or for-profit
boards so long as such service is with the approval of the Board or the CEO and
does not unreasonably interfere with the Executive’s performance of his duties
hereunder.  Executive shall strictly
adhere to and obey all applicable policies and practices now in effect or
subsequently promulgated or revised governing the conduct of employees of
Company.  In the event of conflict or
inconsistency between this Agreement and the employee policies and written
manuals of Company, the terms of this Agreement shall govern.


 


3.2          Board.  During the Employment Term,
Executive shall serve, if elected or appointed, as an officer of any subsidiary
or affiliate of Parent.


 


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4.                                      Employment
Term; Termination.


 


4.1          Employment Term.  Subject to the terms and conditions of this
Agreement, Executive’s employment under this Agreement commences on the
Effective Date, and will continue through and until December 31, 2009 (the
“Employment Term”), subject to prior termination pursuant to the
provisions of Section 4.2. 
The Employment Term will automatically renew for a period of one (1) year
(a “Renewal Term”) beginning on January 1, 2010, and thereafter on
each anniversary of such date, without the need for any action by either Party,
unless Executive’s employment is terminated in accordance with the provisions
of Section 4.2.  For the
purposes of this Agreement:  (a) the
term “Employment Term” includes any Renewal Term that has occurred or
that is in effect, as applicable according to the provisions of this Agreement;
and (b) the last date of Executive’s employment with Company is referred
to herein as the “Termination Date.”


 


4.2                               Termination.


 


(a)           Death.
This Agreement will automatically and immediately terminate upon the death of
Executive, and Executive (e.g., Executive’s heirs or estate) will be entitled
to limited Severance Benefits (as defined below).


 


(b)           Disability.  This Agreement may be terminated by either
Party upon written notice to the other in the event Executive becomes
unavailable to work due to a Disability (as defined in this Section).  As used herein, “Disability” means
Executive’s becoming incapacitated by accident, sickness, or other
circumstances that, in the reasonable judgment of Company, renders or is
expected to render Executive mentally or physically incapable of performing the
essential duties and services required hereunder, where (i) such
incapacity has been determined to exist by the disability insurance carrier for
Company, or (ii) Company has determined, based on competent professional
advice, that such incapacity has continued or will continue for at least ninety
(90) consecutive calendar days, or 180 non-consecutive calendar days, within a
calendar year.  If Executive’s employment
is terminated due to a Disability, Executive will not be entitled to any
Severance Benefits.  In conjunction with determining
mental and/or physical disability for purposes of this Agreement, the Executive
hereby consents to (x) any examinations that the Board or Compensation
Committee of Parent deems relevant to a determination of whether the Executive
is mentally and/or physically disabled, or are required by Company’s designated
physician, (y) furnish such medical information as may be reasonably
requested, and (z) waive any applicable privilege that may arise because
of such examination.


 


(c)           Cause.  In addition to any other rights or remedies
available to Company during the Employment Term, in its sole discretion Company
may terminate Executive’s employment for Cause (as defined in this Section)
effective immediately upon delivery of written notice to Executive, and
Executive will not be entitled to any Severance Benefits.  As used herein, “Cause” means any of
the following:  (i) Company’s
determination that Executive has materially neglected, failed, or refused to
render the Services or perform any other material duties or obligations under
this Agreement; (ii) Company’s determination that Executive has otherwise
materially violated any provision of this Agreement, including, without
limitation, violation of Company policies regarding drugs and alcohol,
discrimination, harassment, retaliation, honesty, confidentiality, and/or other
employee misconduct, whether 


 


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now in effect or subsequently promulgated or revised; (iii) Executive’s
conviction for, or entry of a plea of no contest with respect to, any felony,
crime of moral turpitude, or other crime that adversely affects or (in Company’s
reasonable judgment) may adversely affect Company, the ability of Executive to
provide the Services, or any of the other Company Parties (as defined below); (iv) any
act or omission of Executive involving fraud, theft, dishonesty, disloyalty, or
illegality with respect to, or that harms or embarrasses or (in Company’s
reasonable judgment) may harm or embarrass, Company or any of the other Company
Parties; or (v) any act or omission of Executive constituting the knowing
or intentional violation of applicable law with respect to, or that harms or
embarrasses or (in Company’s reasonable judgment) may harm or embarrass,
Company or any of the other Company Parties; provided, however, that with respect to clauses (i) and
(ii) of this Section, if such breach or violation is susceptible to cure,
Company may not terminate Executive’s employment for Cause unless Company
provides Executive with written notice specifying such breach or violation, in
reasonable detail, and Executive fails to cure or remedy such breach or
violation within fifteen (15) days after receipt of such notice; provided
further, that the Board of Company shall have the sole discretion to
determine whether such a breach or violation is subject to cure, and if so,
whether the Executive successfully effected a cure following notice.


 


(d)           Good
Reason.  Executive may terminate
employment with Good Reason at any time upon notice to Company.  For the purpose of this Agreement, “Good
Reason” means, in the absence of Executive’s consent:  (A) the material breach by Company of
any material compensation or material benefit obligation to Executive under
this Agreement; or (B) a material reduction in Executive’s Base Salary
within one (1) year following a Change of Control (as defined below); or (C) a
material diminution in Executive’s job duties within one (1) year
following a Change of Control, provided, however, that Good Reason shall
only exist if the Company fails to correct or cure the Good Reason condition
within a period of forty-five (45) days, after being provided with written
notice (describing the Good Reason condition in reasonable detail) by Executive
within thirty (30) days of the initial existence of the alleged Good Reason
condition.  Should it be determined by
Company, by a court of competent jurisdiction, or by a duly authorized
arbitrator that Executive has resigned for Good Reason, Executive will
be entitled to the Severance Benefits provided in Section 7.2(a).


 


(i)           Change of Control.  For the purpose of this Agreement, “Change
of Control” means the occurrence of any of the following events: (w) any
“person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other
than one or more Permitted Holders (as defined below), is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Parent representing twenty-five percent (25%)
or more of the combined voting power of the Parent’s then outstanding
securities; (x) any change or changes are made in the composition of the
Parent’s Board of Directors within a two-year period as a result of which less
than a majority of the directors are (1) persons who were directors at the
beginning of that two-year period or (2) persons who were elected or
nominated for election as directors with the affirmative vote or consent of at
least a majority of the incumbent directors at the time of that election or
nomination, but not including any person whose election or nomination was or is
in connection with an actual or threatened proxy contest regarding the election
of the Parent’s directors; (y) the Parent is merged or consolidated with
another 


 


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corporation or
other entity (other than one or more Permitted Holders or any entity controlled
by one or more Permitted Holders) and, as a result of the merger or consolidation,
less than seventy-five percent (75%) of the outstanding voting securities of
the surviving or resulting corporation or other entity, as the case may be, are
“beneficially owned” (within the meaning of Rule 13d-3 under the Exchange
Act), directly or indirectly, immediately after the merger or consolidation by
persons who or which beneficially owned the outstanding voting securities of
the Parent immediately before the merger or consolidation; or (z) the
Parent transfers, sells or otherwise disposes of all or substantially all of
its assets to another corporation or other entity which is not an affiliate of
the Parent.  “Permitted Holders”
means Capital Southwest Venture Corporation and its affiliates and Roger R.
Adams and his affiliates.


 


(e)          Discretionary.


 


(i)            By Executive
Upon Notice.  Executive may terminate
his employment effective as of the end of the Employment Term, by providing
Company with a written notice of non-renewal at least ninety (90) days prior to
the end of the Employment Term, in which event Executive will not be
entitled to any Severance Benefits.  If
such a notice of non-renewal is given, then employment pursuant to this
Agreement will continue until the end of the Employment Term; provided,
however, that upon receipt of such a notice, Company may instruct Executive
in writing to cease work pursuant to this Agreement, not to report to Company’s
offices, and/or not to attend any Company business functions, ceasing Executive’s
compensation and benefits pursuant to this Agreement as of the effective date
of such instructions, and creating an earlier Termination Date than noticed by
Executive, without otherwise affecting the denial of Severance Benefits; provided
further, that Executive will receive compensation and benefits pursuant to
this Agreement for two (2) weeks following the effective date of such
instructions.


 


(ii)           By Executive
Without Notice.  Executive may
terminate employment at any time without Good Reason and without the formal
notice and completion of the Employment Term as provided in Section 4.2(e)(i),
in which event Executive will not be entitled to any Severance
Benefits.  In response to such a
termination by Executive, Company may instruct Executive to cease work pursuant
to this Agreement, not to report to Company’s offices, and/or not to attend any
Company business functions, ceasing Executive’s compensation and benefits
pursuant to this Agreement as of the effective date of such instructions, and
creating an earlier Termination Date than planned or noticed by Executive,
without otherwise affecting the denial of Severance Benefits.


 


(iii)          By Company Upon
Notice.  Company may terminate
Executive’s employment effective as of the end of the Employment Term, by
providing Executive with a written notice of non-renewal at least ninety (90)
days prior to the end of the Employment Term, in which event Executive will not
be entitled to any Severance Benefits. 
If such a notice of non-renewal is given, then employment pursuant to
this Agreement will continue until the end of the Employment Term, provided,
however, that upon or after delivery of such a notice, Company may instruct
Executive to cease work 


 


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pursuant to this
Agreement, not to report to Company’s offices, and/or not to attend any Company
business functions from the date of the notice of such non-renewal through the
end of the Employment Term, while continuing to pay compensation and benefits
to Executive pursuant to this Agreement, without otherwise affecting the denial
of Severance Benefits.


 


(iv)          By Company
Without Notice.  Company may
terminate Executive’s employment at any time without Cause and without the
notice and completion of the Employment Term as required by Section 4.2(e)(ii),
in which event Executive will be entitled to the Severance Benefits
provided in Section 7.2(a).


 


(f)            Change
of Control.  If Company terminates
Executive’s employment without Cause (with or without notice) within one (1) year
following a Change of Control, Executive will be entitled to the
Severance Benefits provided in Section 7.2(b).  If Company effectuates such a termination
upon delivery of an advance written notice, Company may instruct Executive to
cease work pursuant to this Agreement, not to report to Company’s offices,
and/or not to attend any Company business functions from the date of such
notice through the through the end of the notice period, while continuing to
pay Executive compensation and benefits pursuant to this Agreement during the
term of the notice period, without otherwise affecting the Executive’s right to
Severance Benefits.


 


5.                                      Salary,
Bonus, and Business Expenses.


 


5.1          Base
Salary.  During the
Term, Company will pay Executive a base salary at the rate of ONE HUNDRED
FORTY-FIVE THOUSAND DOLLARS AND NO/100 ($145,000.00) per annum (the “Base
Salary”), payable in regular installments in accordance with Company’s
general payroll practices and subject to all applicable deductions and
withholdings as allowed by law.  So long
as Executive is employed by Company or one of its affiliates and living in
China (or outside the United States, at the request of Company), Company will pay Executive an ex-patriot
adjustment of thirty-five percent (35%) of the Base Salary, payable in
equal semi-monthly installments in accordance with Company’s general payroll
practices and subject to all applicable deductions and withholdings as allowed
by law.  Executive’s Base Salary for any
partial year will be prorated based upon the number of days elapsed in such
year.  Executive’s pay may be changed by
Company from time to time, as Company deems appropriate in its sole discretion
(but may not be decreased without Executive’s consent), by way of an addendum
or other documentation, without otherwise affecting this Agreement (except as
may be set forth in such addendum or other documentation).  Notwithstanding any change in pay, the
employment of Executive will be construed as continuing under this Agreement,
without the necessity of Executive’s execution of any further instrument.


 


5.2          Annual
Bonus.  During the
Employment Term, Executive will be eligible for an annual incentive bonus
consisting of up to 25% of annual Base Salary, as determined by the Board or
Compensation Committee of Parent in its sole discretion (collectively, “Annual
Bonus”).  The opportunity to earn an
Annual Bonus and the amount of any Annual Bonus will be determined in
accordance with criteria (“Bonus Criteria”) established by the Board or
Compensation Committee of Parent. 
Executive acknowledges that application of the Bonus Criteria will be
discretionary, with discretion resting with the Board or Compensation Committee



 


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of Parent.  Payment of the Annual
Bonus, if any, will be made in a single sum cash payment between January 1
and March 15 of the calendar year following the calendar year in which the
Annual Bonus is earned.  The amount
and/or basis for earning the Annual Bonus may be changed by Company from time
to time, as Company deems appropriate in its sole discretion, by way of an
addendum or other documentation, without otherwise affecting this Agreement
(except as may be set forth in such addendum or other documentation).  Notwithstanding any such change in the Annual
Bonus, the employment of Executive will be construed as continuing under this
Agreement, without the necessity of Executive’s execution of any further
instrument.


 


5.3          Business
and Other Expenses. 
Subject to Executive’s compliance with all applicable expense policies
and procedures, Company will reimburse Executive for all reasonable travel,
lodging, long distance telephone, and other business costs and expenses
reasonably incurred by Executive to render Services pursuant to this
Agreement.  In addition, Executive shall
be entitled to receive those certain reimbursements and benefits to the extent
set forth on Annex A, which Company and Executive shall update
annually.  Notwithstanding the preceding
sentences, or any provision in the applicable expense reimbursement policy or
procedure to the contrary, if an expense reimbursement would constitute taxable
income to Executive:  (a) the amount
of expenses eligible for reimbursement during any calendar year shall not
affect the amount of expenses eligible for reimbursement in any other calendar
year; (b) the reimbursement by Company of an eligible expense shall be
made on or before December 31 of the calendar year following the calendar
year in which the expense is incurred; and (c) the right to reimbursement
for expenses shall not be subject to liquidation or exchange for another
benefit.


 


5.4          Tax
Withholding; Offsets.  Company may deduct from any compensation or
other amount payable to Executive under this Agreement, social security (FICA)
taxes and all federal, state, municipal, or other such taxes or governmental
charges as may now be in effect or that may hereafter be enacted or
required.  Executive further authorizes
Company to make deductions from Executive’s compensation, including, without
limitation, Executive’s final paycheck, that are necessary for Company to
recover for property damages or property not returned by Executive, and/or to
recover overpayments, improper expenses, loans, and/or advances paid to
Executive.


 


6.                                      Benefits.


 


6.1          Benefit
Plans.  During the
Employment Term, Executive will be entitled to participate in all employee
benefit plans and programs and to receive all benefits for which similarly
situated executives within Company generally are eligible under any plan or
program now in place or established later by Company, on the same basis as such
executives.  Executive’s benefits may be
changed by Company from time to time, as Company deems appropriate in its sole
discretion, without otherwise affecting this Agreement.  Nothing in this Agreement will preclude
Company from amending or terminating any of the benefit plans or programs
applicable to Executive as long as such amendment or termination is applicable
to all similarly situated employees. 
Notwithstanding any change in benefits, the employment of Executive will
be construed as continuing under this Agreement, without the necessity of
Executive’s execution of any further instrument.


 


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6.2          Vacation.  While employed by Company,
Executive will be entitled to  four (4) weeks
of paid vacation per calendar year, to be accrued and taken in accordance with
Company’s normal vacation policy applicable to senior executives.  Executive’s vacation term for any partial
year will be prorated based upon the number of days of Executive’s employment
in such year.  Accumulation and payment
of vacation benefits, and loss of unused vacation time, if any, shall be
determined and governed in accordance with Company policy and procedure.  Nothing in this Agreement will preclude
Company from amending the vacation policy applicable to Executive as long as
such amendment is applicable to all similarly situated employees.  Notwithstanding any change in vacation
policy, the employment of Executive will be construed as continuing under this
Agreement, without the necessity of Executive’s execution of any further
instrument.


 


7.                                      Rights
On Termination.


 


7.1          Without
Severance Benefits. 
If Executive’s employment under this Agreement is terminated by reason
of Executive’s death or Disability pursuant to Sections 4.2(a) or 4.2(b),
by Company for Cause pursuant to Section 4.2(c), by Executive
without Good Reason pursuant to Sections 4.2(e)(i) or 4.2(e)(ii),
or by Company for non-renewal pursuant to Section 4.2(e)(iii), then
all further rights of Executive (or as applicable, of Executive’s heirs or
estate) to employment and/or compensation and benefits from Company under this
Agreement shall cease as of the Termination Date, except that Company will pay
Executive (or as applicable, Executive’s heirs or estate) the following:


 


(a)           any
amount of unpaid Base Salary earned by Executive through the Termination Date,
paid in the same manner and on the same date as would have occurred if
Executive’s employment under this Agreement had not ceased;


 


(b)           any
amount of unpaid Annual Bonus or other bonus that Company in its sole
discretion may deem to be earned by Executive through the Termination Date,
paid in the same manner and on the same date as would have occurred if
Executive’s employment under this Agreement had not ceased; provided, however,
that no Annual Bonus will be paid for any partial year of work (i.e. for any
year during which the Executive was not employed with Company throughout that
year, through and including the last day of the year);


 


(c)           all
unpaid reimbursable expenses due to Executive under this Agreement as of the
Termination Date, subject to Executive’s compliance with Company’s expense
reimbursement policies, paid in accordance with the terms of Company’s
policies, practices, and procedures regarding reimbursable expenses, and
subject to the provisions in Section 5.3 as applicable to
reimbursements of expenses that constitute taxable income to Executive;


 


(d)           all
unpaid benefits that have been earned by or vested in Executive under, and
subject to the terms of, the employee benefit plans, insurance policies, or
arrangements of Company in which Executive participated through the Termination
Date, paid in accordance with the terms of the employee benefit plans,
insurance policies, or arrangements under which such amounts are due to
Executive; and


 


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(e)           an
amount equal to all accrued and unused vacation pay, calculated in accordance
with Company’s vacation policies, practices, and procedures, earned by
Executive through the Termination Date, paid in accordance with the terms of
Company’s policies, practices, and procedures regarding vacation pay; provided, however, that such
payment will be made in a single sum cash payment within sixty (60) days after
the Termination Date.


 


7.2          With
Severance Benefits.  Subject to the requirements of Section 7.3,  if Executive’s employment under
this Agreement is terminated by reason of Executive’s death pursuant to Section 4.2(a),
by Executive for Good Reason pursuant to Section 4.2(d) within
ninety (90) days of the initial existence of the Good Reason condition, by
Company without Cause pursuant to Section 4.2(e)(iv), or by Company
without Cause following a Change of Control pursuant to Section 4.2(f),
then all further rights of Executive (or as applicable, of Executive’s heirs or
estate) to employment and/or compensation and benefits from Company under this
Agreement shall cease as of the Termination Date, except that Company will pay
Executive (or as applicable, Executive’s heirs or estate) the following
severance benefits (“Severance Benefits”), as applicable:


 


(a)           If Executive’s employment under this Agreement is
terminated by Executive for Good Reason pursuant to Section 4.2(d),
or by Company without Cause pursuant to Section 4.2(e)(iv), then
Company will not pay any amounts pursuant to Sections 7.2(b) or
7.2(c), but will pay Executive (or as applicable, Executive’s heirs
or estate) the following severance benefits:


 


(i)            all payments and
compensation pursuant to Section 7.1;


 


(ii)           Executive’s Base
Salary for a period of six (6) months, plus an additional period
equivalent to four (4) weeks for every year of Executive’s employment with
the Company in excess of five (5) years, including any years of such
employment prior to the Effective Date, prorated for partial years of such
employment (collectively referred to as the “Severance Period”), as
severance pay, capped at a total combined maximum of seventy-eight (78) weeks
of Base Salary severance, based upon Executive’s Base Salary as of the Termination
Date, and paid in equal installments in accordance with the normal payroll
policies of Company, less applicable taxes, commencing on the first regular
payroll date of Company following the Release Date (as defined below); provided, however, that in the event Executive enters
into business or accepts employment with another employer following the
Termination Date, the severance payments pursuant to this Section shall be
reduced to the difference (if any) between Executive’s Base Salary as of the Termination
Date and Executive’s base compensation with such new business or employer, paid
in equal installments during the remainder of the Severance Period; and


 


(iii)          if Executive elects
continuation coverage (with respect to Executive’s coverage and/or any eligible
dependent coverage) (“COBRA Continuation Coverage”) under the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) with
respect to Company’s group health insurance plan, Executive will be responsible
for payment of the monthly cost of such COBRA Continuation Coverage; provided, however, that
commencing on the first regular payroll date of Company 


 


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following the
Release Date, to the extent allowed by applicable law, Company will reimburse
Executive for the monthly premium cost for all COBRA Continuation Coverage
(including the premium cost for the period between the Termination Date and the
Release Date) net of all premium cost (if any) Executive would have paid had
Executive’s employment under this Agreement continued through the Severance
Period, within thirty (30) days of each payment of such cost by the Executive, provided
further, that such COBRA Continuation Coverage reimbursement payments by
Company shall terminate upon the earlier of: (A) the expiration of the
maximum period required under COBRA for COBRA Continuation Coverage, (B) the
completion of the Severance Period, or (C) the date Executive becomes
eligible for benefits coverage through a new business or employer.


 


(b)         If Executive’s employment under
this Agreement is terminated by Company without Cause following a Change of
Control pursuant to Section 4.2(f), then Company will not
pay any amounts pursuant to Sections 7.2(a) or 7.2(c), but will
pay Executive (or as applicable, Executive’s heirs or estate) the following
severance benefits:


 


(i)            all payments and
compensation pursuant to Section 7.1;


 


(ii)           Executive’s Base
Salary for a period of one (1) year plus a period equivalent to one (1) month
for every year of Executive’s service to Company in excess of five (5) years
as an employee and/or Director, including any years of such service prior to
the Effective Date, prorated for partial years of such service, as severance
pay, based upon Executive’s Base Salary as of the Termination Date, and paid in
equal installments in accordance with the normal payroll policies of Company,
less applicable taxes, commencing on the first regular payroll date of Company
following the Release Date; and


 


(iii)          if Executive elects
COBRA Continuation Coverage (with respect to Executive’s coverage and/or any
eligible dependent coverage) with respect to Company’s group health insurance
plan, Executive will be responsible for payment of the monthly cost of such
COBRA Continuation Coverage; provided,
however, that commencing on the first regular payroll date of
Company following the Release Date, to the extent allowed by applicable law,
Company will reimburse Executive for the monthly premium cost for all COBRA
Continuation Coverage (including the premium cost for the period between the
Termination Date and the Release Date) for the maximum period required under
COBRA for COBRA Continuation Coverage, within five (5) days of each
payment of such cost by the Executive.


 


(c)          If Executive’s employment under this
Agreement is terminated by reason of Executive’s death pursuant to Section 4.2(a),
then Company will not pay any amounts pursuant to Sections 7.2(a) or
7.2(b), but will pay Executive (e.g., Executive’s heirs or estate)
the following severance benefits:


 


(i)            all payments and
compensation pursuant to Section 7.1; and


 


10
















 


(ii)           Executive’s
Base Salary for a period equivalent to nine (9) weeks, paid in
installments in accordance with the normal payroll policies of Company, less
applicable taxes, commencing on the first regular payroll date of Company
following the Release Date (as defined below).


 


7.3          General Release
Requirement. As a condition precedent to Executive’s entitlement to any
Severance Benefits, Executive (or as applicable, Executive’s heirs or estate)
must execute and effectuate a general release agreement (“General Release
Agreement”) satisfactory to Company, within forty-five (45) days of the
Termination Date, that may include without limitation, terms (as applicable) of
(a) Executive’s (or as applicable, Executive’s heirs’ or estate’s) general
release of Company (with a broad definition of claims released); (b) understanding
of General Release Agreement; (c) no Company admission of liability; (d) Executive
revocation rights (only if required by law); (e) confidentiality of
General Release Agreement; (f) severance payments and benefits contingent
on Executive compliance with Sections 8 and 9 of this Agreement; (g) return
of Company property; and (h) liquidated damages in the amount of ninety
percent (90%) of Severance Benefits actually paid, in the event of Executive’s
breach of the terms of Sections 8 and/or 9 of this Agreement. For
purposes of this Agreement, the “Release Date” shall be defined as the
date that is sixty (60) days from the Termination Date.


 


7.4          Section 409A:
Separation From Service; Delay of Payments. Notwithstanding any
provision to the contrary in this Agreement, no payment or benefit shall be
paid pursuant to Section 7 (including subparts) that would be
considered “deferred compensation” under Section 409A of the Internal
Revenue Code of 1986, as amended (the “Code”), or the Treasury
regulations or other guidance issued thereunder (“Section 409A”)
until Executive has incurred a “separation from service” (as such term is
defined under Section 409A). Further, no payments contemplated by Section 7.2
of this Agreement will be paid during the six-month period following Executive’s
Termination Date unless the Company determines that Executive is not a “specified
employee” (as that term is defined under Section 409A), or if the Company
determines that Executive is a “specified employee,” that paying such amounts
would not cause the Executive to incur an additional tax under Section 409A.
The six-month delay described in the preceding sentence shall not apply to the
extent (a) the amount of such payment, or any portion thereof, constitutes
a “short-term deferral” within the meaning of Section 409A, and (b) to
the extent the amount of such payment does not constitute a “short-term
deferral,” the amount of such payment, or any portion thereof, does not exceed
two times the lesser of (i) the Executive’s annualized compensation based
upon the Executive’s annual rate of pay for services provided to the Company
for the taxable year of the Executive preceding the taxable year in which the
Termination Date occurs (adjusted for any increase during that year that was
expected to continue indefinitely had no separation from service occurred), or (ii) the
maximum amount of compensation that may be taken into account under a qualified
plan pursuant to Section 401(a)(17) of the Code for the year in which the
Termination Date occurs. If the payment of any amount under Section 7.2
is delayed as a result of this Section, on the first regularly scheduled
payroll date following the end of the six-month delay period, the Company will
pay the Executive a single lump-sum amount in cash equal to the cumulative
amounts that would have otherwise been previously paid to Executive under this
Agreement during such six-month period, without interest. Thereafter, payments
will resume in accordance with this Agreement. The
provisions of this Section shall apply only to the minimum extent
necessary, after 


 


11

















 


application of Section 409A, to avoid the
Executive’s incurrence of any additional taxes or penalties under Section 409A.
Notwithstanding anything to the contrary contained herein,
the Company shall not be responsible for, or have any obligation to reimburse
or pay (as damages or otherwise) any taxes or interest charges imposed on the Executive
pursuant to Section 409A.


 


7.5          Limitation on
Payments. If any Severance Benefits or any other of the Total Severance
Benefits (as defined in this Section) constitute “parachute payments” within
the meaning of Section 280G of the Code and would be subject to the excise
tax imposed by Section 4999 of the Code (the “Excise Tax”), then
Executive’s payments and benefits under Section 7.2 of this
Agreement shall be either (i) paid in full, or (ii) paid as to such
lesser extent which would result in no portion of such payments or benefits
being subject to the Excise Tax, whichever of the foregoing amounts, taking
into account the applicable federal, state and local income and payroll taxes
and the Excise Tax, results in the receipt by Executive on an after-tax basis,
of the greatest amount of Total Severance Benefits, notwithstanding that all or
some portion of such benefits may be subject to the Excise Tax under Section 4999
of the Code, and further notwithstanding the fact that the Severance Benefits
may be reduced to zero after the application of this Section. For purposes of
this Agreement, “Total Severance Benefits” means the severance payments
and benefits under Section 7.2 of this Agreement and all other
payments and benefits received or to be received by Executive under this
Agreement and all payments and benefits (if any) to which Executive may be
entitled under any plan, agreement or otherwise upon or as the result of a
Change of Control or the termination of his employment with Company, or both. This
Section is not intended to prevent and shall not result in the prevention
of the acceleration and full vesting of any outstanding stock option,
restricted stock or stock appreciation right held by Executive if any such
acceleration is provided for under the terms of the award or grant agreement
related to such stock option, restricted stock or stock appreciation right. Any
determination required under this Section shall be made in writing by
Company’s independent public accountants (the “Accountants”), whose
determination shall be conclusive and binding upon Executive and Company for
all purposes. For purposes of making the calculations required by this Section,
the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. Company and
Executive shall furnish to the Accountants such information and documents as
the Accountants may reasonably request in order to make a determination under
this Section. Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section.


 


7.6          Position Resignations.
Upon cessation or termination of employment hereunder (unless Executive
continues otherwise to be employed by Company or one of its Related Entities),
Executive will resign or will be deemed to have resigned from any and all
positions as an officer or director, or both, of Company and each of its Related
Entities, unless otherwise agreed by the Parties. If for any reason this Section is
deemed to be insufficient to effectuate such resignations, then Executive will,
upon Company’s request, execute any documents or instruments that Company may
deem necessary or desirable to effectuate such resignations.


 


12

















 


8.                                      Non-Disclosure,
Non-Competition and Non-Solicitation Covenants.


 


8.1          Confidential
Information.


 


(a)           Definition. As used herein, “Confidential
Information” means any and all material, data, ideas, inventions, formulae,
patterns, compilations, programs, devices, methods, techniques, processes, know
how, plans (marketing, business, strategic, technical, or otherwise),
arrangements, pricing, and/or other information of, or relating to Company or
any of its Related Entities, as well as any of their Customers (collectively
including Company, the “Company Parties”), that is confidential,
proprietary, and/or a trade secret (i) by its nature, (ii) based on
how it is treated or designated by any of the Company Parties (including
without limitation, designation in this Agreement), (iii) such that its
appropriation, use, or disclosure would have a material adverse effect on the
business or planned business of any of the Company Parties, and/or (iv) as
a matter of law. All Confidential Information is the property of the respective
Company Parties, as applicable, the appropriation, use, and/or disclosure of
which is governed and restricted by this Agreement.


 


(b)           Exclusions. Confidential Information does
not include material, data, and/or information: 
(i) that any of the Company Parties has voluntarily placed in the
public domain; (ii) that has been lawfully and independently developed and
publicly disclosed by third parties; (iii) that constitutes the general
non-specialized knowledge and skills gained by Executive during the Employment
Term; or (iv) that otherwise enters the public domain through lawful
means; provided, however,
that the unauthorized appropriation, use, or disclosure of Confidential
Information by Executive, directly or indirectly, will not affect the
protection and relief afforded by this Agreement regarding such information.


 


(c)           Examples. Examples of Confidential
Information include, without limitation, the following information (including,
without limitation, compilations or collections of such information) relating
or belonging to any of the Company Parties: 
(i) product and manufacturing information, such as manufacturing
processes; (ii) scientific and technical information, such as research and
development, tests and test results, formulas and formulations, and studies and
analysis; (iii) financial and cost information, such as operating and
production costs, costs of goods sold, costs of supplies and manufacturing
materials, non-public financial statements and reports, profit and loss
information, margin information, and financial performance information; (iv) Customer
related information, such as contracts, engagement and scope of work letters,
proposals and presentations, contacts, lists, identities, and prospects,
practices, plans, histories, requirements, and needs, price information and
formulae, and information concerning Customer products, services, businesses,
or equipment specifications;  (v) sales,
marketing, and price information, such as marketing and sales programs and
related data, sales and marketing strategies and plans, sales and marketing
procedures and processes, pricing methods, practices, and techniques, and
pricing schedules and lists; (vi) database, software, and other computer
related information, such as computer programs, data, compilations of
information and records, software and computer files, presentation software,
and computer-stored or backed-up information including, but not limited to,
e-mails, databases, word processed documents, spreadsheets, notes, schedules,
task lists, images, and video; (vii) employee related information, such as
lists or directories identifying employees, representatives and contractors,
and information regarding the competencies (knowledge, skill, abilities, and
experience), 


 


13

















 


compensation and needs of employees, representatives,
and contractors, and training methods; (viii) business and operations
related information, such as operating methods, procedures, techniques,
practices and processes, information about acquisition(s), corporate or
business opportunities, information about partners and potential investors,
strategies, projections and related documents, contracts and licenses, and
business records, files, equipment, notebooks, documents, memoranda, reports,
notes, sample books, correspondence, lists, and other written and graphic
business records; and (ix) Work Product (as defined below).


 


(d)           Provision. In consideration of Executive’s
obligations and promises in this Agreement, including without limitation Section 8.1(e),
Company promises to provide Executive access to Confidential Information as
reasonably necessary for the performance of the Services, during the Employment
Term.


 


(e)           Protection. Both during and after the
Employment Term, Executive will not, in any manner, directly or
indirectly:  (i) appropriate,
download, print, copy, remove, use, disclose, divulge, and/or communicate any
Confidential Information to any Person, including (without limitation)
originals or copies of any Confidential Information, in any media or format,
except for the benefit of the Company Parties within the course and scope of
Executive’s employment; or (ii) take or encourage any action which would
circumvent, interfere with, or otherwise diminish the value or benefit of
Confidential Information to any of the Company Parties. Executive will use
utmost diligence to protect and safeguard the Confidential Information as
prescribed in Section 8.1 (including subparts).


 


(f)            Return and
Review.


 


(i)            At
Any Time. All Confidential Information, and all other information and
property affecting or relating to the business of Company and/or other Company
Parties, within Executive’s possession, custody, or control, regardless of form
or format, will remain, at all times, the property of the applicable Company
Parties. At any time Company may request, during or after the Employment Term,
Executive will deliver to Company all originals and copies of Confidential
Information, and all other information and property affecting or relating to
the business of any of the Company Parties, within Executive’s possession,
custody, or control, regardless of form or format. Both during and after the
Employment Term, Company will have the right of reasonable access to review,
inspect, copy, and/or confiscate any Confidential Information, and any other
information and property affecting or relating to the business of any of the
Company Parties, which is within Executive’s possession, custody, or control.


 


(ii)           Upon
Termination. Upon the Termination Date, Executive shall not retain, and
shall immediately return to Company, any and all originals and copies of
Confidential Information, and all other information and property affecting or
relating to the businesses of other Company Parties, within Executive’s
possession, custody, or control, regardless of form or format, without the
necessity of a prior Company request.


 


(iii)          Response to Third Party Requests. Upon
receipt of any formal or informal request, by legal process or otherwise,
seeking Executive’s direct or 


 


14

















 


indirect disclosure or production of any Confidential Information to
any Person, Executive will promptly and timely notify Company and provide a
description and, if applicable, deliver a copy of such request to Company. Executive
irrevocably nominates and appoints Company as Executive’s true and lawful
attorney-in-fact, to act in Executive’s name, place, and stead to perform any
act that Executive might perform to defend and protect against any disclosure
or production of Confidential Information.


 


8.2          Work
Product/Intellectual Property.


 


(a)           Definition. As used in this Agreement, the
term “Work Product” means all patents and patent applications, all
inventions, innovations, improvements, developments, methods, designs,
analyses, drawings, reports, creative works, discoveries, software, computer
programs, modifications, enhancements, know-how, formulations, concepts and
ideas, all similar or related information (in each case whether patentable or
not), all copyrights and copyrightable works, all trade secrets, confidential
information, and all other intellectual property and intellectual property
rights, that are written, conceived, reduced to practice, developed, and/or
made by Executive, either alone or with others in the course of Executive’s
employment with or other services to Company (including employment or services
prior to the Effective Date).


 


(b)           Assignment. Subject to the terms of Section 8.2(d),
Executive hereby assigns to Company all right, title, and interest to all Work
Product that (i) relates to any of the Company Parties’ actual or
anticipated Business, research and development, or existing or future products
or services, or (ii) is conceived, reduced to practice, developed, or made
using any equipment, supplies, facilities, assets, information, or resources of
any of the Company Parties (including, without limitation, any intellectual
property rights).


 


(c)           Disclosure. Subject to the terms of Section 8.2(d),
Executive will promptly disclose all Work Product to Company and perform all
actions reasonably requested by Company (whether during or after the Employment
Term) to establish and confirm the ownership and proprietary interest of any of
the Company Parties, as applicable, in any Work Product (including, without
limitation, the execution of assignments, consents, powers of attorney,
applications, and other instruments). Executive will not file any patent or
copyright applications related to any Work Product except with the written
consent of Company.


 


(d)           Exclusions. Except for any matter(s) listed in the following table, there
is no Work Product in existence that Executive claims to be excluded from this
Agreement, whether from prior employment with or service to Company, or
otherwise.


 


	
  DATE

  	
   

  	
  DESCRIPTION

  	
   

  
	
    

  	
   

  	
   

  	
   

  
	
    

  	
   

  	
   

  	
   

  
	
    

  	
   

  	
   

  	
   

  



 


15

















 


8.3          Restrictive Covenants.
The restrictive covenants stated in this Section 8.3 (including
subparts) are independent of and severable from one another.


 


(a)           Non-Competition During Employment. During
the Employment Term, Executive will not, in any Capacity (as defined below),
directly or indirectly, on Executive’s own behalf or on behalf of any other
Person, (i) engage in any activity, business, or employment which may
detract from Executive’s full performance of the Services or the duties
hereunder, or which compete in any manner with Company, or (ii) render any
services of a business, commercial, or professional nature, to any other
Person, without the prior written consent of the Board or CEO of Company. Notwithstanding
the previous sentence, it shall not be a violation of this Agreement for the Executive
to serve on industry, civic, community, charitable, religious, educational or
for-profit boards so long as such service is with the approval of the Board or
the CEO and does not unreasonably interfere with the Executive’s performance of
his duties hereunder.


 


(b)           Non-Competition Post-Employment. During
Restricted Period A (as defined below), Executive will not directly or
indirectly, in any Capacity, on Executive’s own behalf or on behalf of any
other Person, engage in Restricted Activities (as defined below) for a
Competing Business (as defined below) within the Geographic Area (as defined
below).


 


(c)           Customer/Other Non-Solicitation. During
Restricted Period A, Executive will not directly or indirectly, in any
Capacity, on Executive’s own behalf or on behalf of any other Person, induce,
or attempt to induce, any Customer (i) to do business with a Competing
Business, regardless of whether Executive initiates contact for such purposes,
or (ii) to reduce, cease, restrict, terminate, or otherwise adversely
alter business or business relationships with any of the Company Parties,
regardless of whether Executive initiates contact for such purposes.


 


(d)           Executive Non-Solicitation and No-Hire. During
the Employment Term (except to the extent consistent with performance of the
Services) and otherwise during Restricted Period B (as defined below),
Executive will not directly or indirectly, in any Capacity, on Executive’s own
behalf or on behalf of any other Person, (i) solicit, recruit, persuade,
influence, or induce, or attempt to solicit, recruit, persuade, influence, or
induce, any Person employed or otherwise retained by any of the Company Parties
(including any independent contractor or consultant) to cease or leave their
employment, contractual, or consulting relationship with any Company Party,
regardless of whether Executive initiates contact for such purposes, or (ii) hire,
employ, or otherwise attempt to establish any employment, agency, consulting,
independent contractor, or other business relationship with, any individual who
is or was employed or otherwise retained by any of the Company Parties
(including any independent contractor or consultant) at any time during the
Reference Period.


 


8.4          Definitions. The
following definitions are for the purposes of this Agreement, including without
limitation, Section 8 (including subparts).


 


(a)           The term “Assigned
Offices” means all offices of Company and/or other Company Parties where
Executive worked, was based, was supported, and/or for which Executive was responsible
during the Reference Period.


 


16

















 


(b)           The term “Capacity”
means and includes, without limitation, owning, taking a financial interest in,
managing, operating, controlling, being employed by, being associated or
affiliated with, providing services as a consultant or independent contractor
to, or participating in the ownership, management, operation, or control
of;  provided, however, that this definition does not preclude
ownership of less than 5% of the outstanding equity securities of any publicly
reporting company.


 


(c)           The term “Competing
Business” means the business of providing, selling, manufacturing,
producing, and/or marketing products and/or services that are the same or
substantially similar to the products and/or services that Company and/or any
of its Related Entities provided, sold, manufactured, produced, and/or marketed
during the Reference Period.


 


(d)           The term “Customer”
means any client, customer, contractor, sub-contractor, vendor, supplier,
dealer, franchisee, licensor, investor, or other Person in a business
relationship with Company (a) for which Executive, or any employees or
contractors working under Executive’s supervision, had any direct or indirect
responsibility during the Employment Term, or (b) about which Executive
learned Confidential Information, or for which Executive had access to
Confidential Information, during the Employment Term.


 


(e)           The term “Geographic
Area” means the geographic area encompassed by Executive’s job duties and
actual job activities for the Company Parties during the Reference Period. The
term Geographic Area includes, without limitation, (i) the counties
encompassing the Assigned Offices, and (ii) any place in the world the
Company engages in the Business.


 


(f)            The term “Reference
Period” means the lesser of (a) the Employment Term, or (b) the
eighteen (18) months prior to the Termination Date.


 


(g)           The term “Restricted
Activities” means work activities and/or duties that are or include
activities or duties that are the same or substantially similar to Executive’s
work activities and/or duties for Company and/or any of the other Company
Parties during the Reference Period.


 


(h)           The term “Restricted
Period A” means the Employment Term and the twelve (12) month period
commencing on the Termination Date. Restricted Period A will be extended by one
day for each day that Executive is determined to be in violation of any
restrictive covenant stated in Section 8.3(b) or (c), as
determined by a court or arbitrator of competent jurisdiction.


 


(i)            The term “Restricted
Period B” means the Employment Term and the eighteen (18) month period
commencing on the Termination Date. Restricted Period B will be extended by one
day for each day that Executive is determined to be in violation of any
restrictive covenant stated in Section 8.3(d), as determined by a
court or arbitrator of competent jurisdiction.


 


(j)            The term “indirect,”
in reference to the Executive’s actions, includes without limitation, any act
by Executive’s spouse, ancestor, lineal descendant, lineal descendant’s spouse,
sibling, or other member of Executive’s family.


 


17

















 


8.5          Continuous
Application. The restrictive covenants set forth in this Agreement will
continue in force even in the event of change in Executive’s job title,
position, or duties, unless a new agreement is signed to replace this
Agreement.


 


8.6          Remedies. Because
Executive’s services are unique and Executive has and will have access to
Confidential Information, money damages would be an inadequate remedy for any
breach of this Agreement. The restrictive covenants stated in the provisions of
Section 8 (including subparts) are without prejudice to Company’s
other rights and causes of action at law. In the event of a breach of this
Agreement by Executive, Company will be entitled to all appropriate equitable
and legal relief, including, but not limited to: (i) injunctive or other
equitable relief to enforce this Agreement or prevent conduct in violation of
this Agreement, without the necessity of posting bond or other security (unless
otherwise required by applicable law), and (ii) compensatory relief
including damages incurred as a result of the breach. Further, without
prejudice to any of Company’s rights or remedies stated herein, in the event of
Executive’s breach of any of the covenants stated in Section 8
(including subparts), Company may suspend or terminate payment or other
provision of Severance Benefits, and recover as damages the value of all
Severance Benefits previously paid or otherwise provided.


 


9.                                      Statements.


 


9.1          Media Nondisclosure.
The Executive agrees that during and after the Employment Term, except as
may be authorized in writing by Company, the Executive will not directly or indirectly
disclose or release to the Media (as defined below) any information concerning
or relating to any aspect of the Executive’s employment or termination from
employment with Company, any non-public information  related to the business of Company or the
other Company Parties, and/or any aspect of any dispute that is the subject of
this Agreement. For the purposes of this Agreement, the term “Media”
includes, without limitation, any news organization, station, publication,
show, website, web log (blog), bulletin board, chat room and/or program (past,
present and/or future), whether published through the means of print, radio,
television and/or the Internet or otherwise, and any member, representative,
agent and/or employee of the same.


 


9.2          Non-Disparagement.
The Executive agrees that during and after the Employment Term, the
Executive will not make any statements, comments or communications in any form,
oral, written or electronic to any Media or any Customer, which would
constitute libel, slander or disparagement of Company or any other Company
Party; provided, however, that the terms of this Section shall not
apply to communications between the Executive and, as applicable, the Executive’s
attorneys or other persons with whom communications would be subject to a claim
of privilege existing under common law, statute or rule of procedure. The
Executive further agrees that the Executive will not in any way solicit any
such statements, comments or communications from others.


 


10.                               Miscellaneous.


 


10.1        Binding Effect. This
Agreement will be binding upon and will inure to the benefit of the Parties and
their respective successors, representatives, heirs, and permitted assigns,
except that Executive’s rights, benefits, duties, and responsibilities
hereunder are of a 


 


18

















 


personal nature and shall not be assignable in whole
or in part by Executive. Executive
specifically acknowledges that Company shall have the right to assign this
Agreement to Company’s successors or assigns, and hereby consents to such
assignment with the need for further execution of any instrument.


 


10.2        DISPUTES. SUBJECT
TO THE TERMS OF, AND ANY EXCEPTIONS PROVIDED IN, THIS AGREEMENT, ANY AND ALL
DISPUTES (AS DEFINED BELOW) WILL BE RESOLVED EXCLUSIVELY THROUGH BINDING
ARBITRATION. THE PARTIES HERETO EACH WAIVE THE RIGHT TO A JURY TRIAL AND EACH
WAIVE THE RIGHT TO ADJUDICATE THEIR DISPUTES OUTSIDE THE ARBITRATION FORUM
PROVIDED FOR IN THIS AGREEMENT, EXCEPT AS OTHERWISE PROVIDED IN THIS AGREEMENT
OR REQUIRED BY APPLICABLE LAW. For the purposes of this Agreement, “Disputes”
means any controversy or claim (including without limitation all claims
pursuant to common and statutory law) between Executive and Company or any
other Company Party, including without limitation, all controversies and claims
relating to this Agreement or arising out of or relating to the subject matter
of this Agreement, Executive’s employment with Company, and/or Executive’s
termination or resignation from employment with Company, regardless of whether
the employment termination or resignation is voluntary, involuntary, for Cause,
or not for Cause. The consideration for this Agreement includes the Parties’
mutual agreement to arbitrate their Disputes. Section 10.2
(including sub-parts) shall be construed and enforced under the Federal
Arbitration Act, 9 U.S.C. §§ 1 et seq.


 


(a)           In addition to other
remedies available at law, injunctive relief may be sought in arbitration. However,
as a narrow exception to binding arbitration under this Agreement, the
Executive and Company shall each have the right to initiate an action in a
court of competent jurisdiction in the Agreed Venue (as defined below) to
request injunctive or other equitable relief regarding the terms of this
Agreement. Evidence adduced in such a proceeding may be used in arbitration as
well. The following claims are excluded from binding arbitration under
this Agreement:  claims for workers’
compensation benefits or unemployment benefits; claims for replevin; claims
arising under the National Labor Relations Act, 29 U.S.C. §§ 151-169, including
but not limited to 29 U.S.C. § 157; and claims for which a binding arbitration
agreement is invalid as a matter of law.


 


(b)           The arbitration shall
be administered by a single local arbitrator with JAMS in accordance with its
then-current applicable rules and procedures for employment disputes. If
for any reason JAMS cannot serve as the arbitration administrator, then the
American Arbitration Association (AAA) shall serve as arbitration administrator
under all applicable terms of this Agreement. Subject to the procedures of the
arbitration administrator, the arbitrator shall render a decision in
arbitration strictly in accordance with applicable law.


 


(c)           The fees charged by the
arbitration administrator and/or the individual arbitrator shall be borne by
Company, except for any initial registration fee, which the Executive and
Company shall bear equally. Otherwise, subject to the terms of this Section and
Section 10.13(c) the Executive and Company shall each bear
their own costs, expenses, and attorneys’ fees incurred in arbitration. Executive
may but is not required to have the representation of counsel in arbitration. Within
the arbitrator’s discretion, the Party that prevails in arbitration may recover
its arbitration expenses, its portion of the fees and costs charged by the 


 


19

















 


arbitration administrator, and the fees of the
arbitrator, as applicable, no matter which Party made the initial complaint.


 


(d)           Both during and after
the entire arbitration process as contemplated herein, the arbitration itself
and information and discovery disclosed in the arbitration process (“Arbitration
Information”) shall be maintained in strictest confidence by the Parties
and their counsel and by any authorized party to whom Arbitration Information
is disclosed. Arbitration Information may be used, possessed, and disclosed
only as allowed in this Agreement, and only for the purposes of arbitration and
related proceedings pursuant to this Agreement, and for no other purpose
whatsoever. Accordingly, without limitation, Arbitration Information may not be
disclosed:  (1) to any judicial,
governmental, regulatory, administrative, arbitral, corporate, or other entity
not administering arbitration under this Agreement or hearing a review of the
arbitration decision (to the extent such review is allowed by applicable law); (2) to
any member of the general public; or (3) to the Media; provided,
however, that Arbitration Information may be disclosed:  (A) to the Parties and their respective
advisors, consultants and experts (and such Parties’ authorized employees and
agents); (B) to the arbitrator and arbitration administrator (and their
authorized staffs); (C) to fact witnesses reasonably expected to offer
relevant evidence in an arbitration proceeding; (D) as ordered by or for
the purpose of an arbitration appeal to a court of competent jurisdiction; and (E) to
any Person by Company or any of its Related Entities, to the extent required by
law or the rules and regulations of the Securities and Exchange Commission
or any applicable stock exchange. The arbitrator shall, upon request, issue all
prescriptive orders as may be required to enforce and maintain this covenant of
confidentiality during the course of the arbitration and after the conclusion
of same.


 


10.3        Settlement of Existing
Rights. In exchange for the other terms of this Agreement, Executive
acknowledges and agrees that: (a) Executive’s entry into this Agreement is
a condition of employment with Company; (b) except as otherwise provided
herein, this Agreement will replace any existing similar or overlapping
agreement between the Parties and thereby act as a novation, if applicable; (c) in
consideration for this Agreement, Executive will be provided with access to
proprietary information, trade secrets, and other Confidential Information to
which Executive has not previously had access; (d) all Work Product
developed by Executive during any past employment with Company, and all
goodwill developed with the Customers and/or other business contacts by
Executive during any past employment with Company is the exclusive property of
Company; and (e) all Company information and/or specialized training
accessed, created, received, or utilized by Executive during any past
employment with Company, will be subject to the restrictions on Confidential
Information described in this Agreement, as applicable, whether previously so
agreed or not.


 


10.4        Section 409A
Compliance. If Company or Executive reasonably determines that any
compensation or benefits payable under this Agreement may be subject to Section 409A,
Company and Executive shall work together to adopt such amendments to this
Agreement or adopt other policies or procedures (including amendments, policies
and procedures with retroactive effect), or take any other commercially
reasonable actions necessary or appropriate to (i) exempt the compensation
and benefits payable under this Agreement from Section 409A and/or to preserve
the intended tax treatment of the compensation and benefits provided with
respect to this Agreement or (ii) comply with the requirements of Section 409A.


 


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10.5        Headings. The
titles, captions and headings contained in this Agreement are inserted for
convenience of reference only and are not intended to be a part of or to affect
in any way the meaning or interpretation of this Agreement.


 


10.6        Notices.


 


(a)           All notices, consents,
requests and other communications hereunder will be in writing and will be sent
by hand delivery or by FedEx or another recognized national overnight courier
service as set forth below:


 


If to Company:


 


Heeling Sports Limited


c/o Chief Executive Officer


3200 Belmeade Drive, Suite 100


Carrollton, TX 75006


 


with a copy to:


 


Heelys, Inc.


c/o Chief Executive Officer


3200 Belmeade Drive


Suite 100


Carrollton TX 75006


 


If to Executive:


 


Will Albers


c/o Heeling Sports Limited Representative Office


16A, Donghai West Road


Qingdao, China


 


(b)           Notices delivered
pursuant to Section 10.6 (including subparts) will be deemed given:  (i) at the time delivered, if personally
delivered; and (ii) one (1) business day after timely delivery to the
courier, if sent overnight (next day) by FedEx or other overnight courier
service. Any Party may change the address to which notice is to be sent by
written notice to the other Party in accordance with Section 10.6.


 


10.7        Counterparts; Fax
Signatures. This Agreement may be executed in one or more counterparts,
each of which will be deemed to be an original, but all of which together will
constitute the same Agreement. Any signature page of any such counterpart,
or any electronic facsimile thereof, may be attached or appended to any other
counterpart to complete a fully executed counterpart of this Agreement, and any
telecopy or other facsimile transmission of any signature will be deemed an
original and will bind such Party.


 


10.8        Entire Agreement. This
Agreement and all other agreements specifically incorporated herein are
intended by the Parties to be the final and complete expression of their 


 


21

















 


agreement with respect to the subject matter hereof
and are the complete and exclusive statement of the terms and conditions
thereof, notwithstanding any representations, statements, or agreements to the
contrary heretofore or simultaneously made. This Agreement may be modified only
by a written instrument signed by each of the Parties.


 


10.9        Severability. The
unenforceability or invalidity of any provision of this Agreement will not
affect the validity or enforceability of any remaining provisions hereof, but
such remaining provisions will be construed and interpreted in such a manner as
to carry out fully the intent of the Parties hereto; provided, however, that should any judicial or arbitral
authority interpreting this Agreement deem any provision hereof to be
unreasonably broad in time, territory, scope, or otherwise, it is the intent
and desire of the Parties that such judicial or arbitral authority reduce the
breadth of such provision to the maximum legally allowable parameters rather
than deeming such provision totally unenforceable or invalid. A determination
that any provision of this Agreement is unenforceable or invalid in one
jurisdiction will not affect the enforceability or validity of such provision
in another jurisdiction.


 


10.10      Waiver. No
waiver, termination, or discharge of this Agreement, or any of the terms or
provisions hereof, will be binding upon either Party unless confirmed in
writing. No waiver by either Party of any term or provision of this Agreement
or of any default hereunder will affect such Party’s right thereafter to
enforce such term or provision or to exercise any right or remedy in the event
of any other default, whether or not similar.


 


10.11      Interpretation. Should
a provision of this Agreement require judicial or arbitral interpretation, the
judicial or arbitral authority interpreting or construing the Agreement will
not apply the assumption that the terms hereof will be more strictly construed
against one Party by reason of the rule of construction that an instrument
is to be construed more strictly against the Party which itself or through its
agents prepared this Agreement, it being agreed that both Parties and/or their
attorneys and other agents have participated in the preparation of this
Agreement equally.


 


10.12      Applicable Law.


 


(a)           Choice
of Law. All questions concerning the construction, validity, and
interpretation of this Agreement will be governed by and construed in
accordance with the domestic laws of the State of Texas without giving effect
to any choice of law or conflict of law provision or rule (whether of the
State of Texas or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Texas. Should any
provision of this Agreement, including, without limitation, any provision
relating to compensation, be found to be in violation of any applicable law,
rule, or regulation, the Parties will execute an amendment to this Agreement to
bring such provision into compliance with any such law, rule or
regulation, as the case may be.


 


(b)           EXCLUSIVE VENUE.
THE PARTIES CONSENT AND STIPULATE THAT THE EXCLUSIVE VENUE OF ANY ARBITRATION
PROCEEDING AND OF ANY OTHER PROCEEDING, INCLUDING ANY COURT PROCEEDING, UNDER
THIS AGREEMENT SHALL BE DALLAS COUNTY, TEXAS (the “Agreed Venue”). For
this purpose, the Parties also expressly consent to personal jurisdiction in
the Agreed Venue.


 


22

















 


(c)           Attorneys’ Fees and
Costs. If either party hereto brings any action in arbitration or in court
to enforce any rights hereunder, the prevailing party shall be entitled to
receive from the non-prevailing party in any such action its costs and
reasonable attorneys fees incurred in connection with such action, including
any appeals.


 


10.13      No Third Party
Beneficiaries. Notwithstanding any other term or provision of this
Agreement, there are no third party beneficiaries to this Agreement, and none
are intended. No third party has standing to enforce this Agreement.


 


10.14      Survival. The
terms of this Agreement, to the extent that they apply post-employment, shall
survive the termination of this Agreement (regardless of the basis for
termination), and remain in full force and effect based on the terms as stated.


 


[Intentionally Blank;
Continue to Signature Page]


 


23

















 


THIS AGREEMENT INCLUDES
PROVISIONS FOR BINDING ARBITRATION AND RESTRICTIVE NON-COMPETE COVENANTS.


 


IN
WITNESS WHEREOF, the Parties have executed this Agreement to
be effective as of the date first above written.


 


	
   

  	
  “Company”

  
	
   

  	
   

  
	
   

  	
  Heeling Sports Limited, a Texas limited
  partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  Heeling Management Corp.,

  
	
   

  	
   

  	
  its Sole General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald K. Carroll

  
	
   

  	
   

  	
  Name:

  	
  Donald K. Carroll

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  *************************

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “Executive”

  
	
   

  	
   

  
	
   

  	
  William D. Albers

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ William D. Albers

  
					



 


24

















 


ANNEX A


 


•                  So long as Executive is employed by
Company or one of its affiliates and living in China, Company will pay, or
reimburse Executive, for travel of up to TWENTY THOUSAND DOLLARS AND NO/100
($20,000.00) to be used for home leave and family visits, subject to the
provisions of Section 5.3 of the Agreement, as applicable to
reimbursements of expenses that constitute taxable income to executive.


 


•                  So long as Executive is employed by
Company or one of its affiliates and living in China, Company will provide
Executive with a car and driver, to be used for personal and business purposes.


 


•                  So long as Executive is employed by
Company or one of its affiliates and living in China, Company will pay, or
cause to be paid, Executive’s Chinese local income tax payments, subject to the
provisions of Section 5.3 of the Agreement, as applicable to
reimbursements of expenses that constitute taxable income to executive.


 


•                  So long as Executive is employed by
Company or one of its affiliates and living in China, Company shall pay for, or
cause to be paid for, a tax assessment and preparation of Executive’s tax
returns, subject to the provisions of Section 5.3 of the Agreement, as
applicable to reimbursements of expenses that constitute taxable income to
executive.


 


•                  So long as Executive is employed by
Company or one of its affiliates and living in China, Company shall pay for, or
cause to be paid for, Executive’s visa and other resident permit fees in China,
subject to the provisions of Section 5.3 of the Agreement, as applicable
to reimbursements of expenses that constitute taxable income to executive.


 


•                  So long as Executive is employed by
Company or one of its affiliates and living in China, Company shall pay for, or
cause to be paid for, school tuition for Executive’s children at an
international school, should the need arise, subject to the provisions of Section 5.3
of the Agreement, as applicable to reimbursements of expenses that constitute
taxable income to executive.


 


•                  So long as Executive is employed by
Company or one of its affiliates and living in China, Company will pay, or
cause the representative office in China to pay, Executive a monthly housing
allowance of 26,250 RMB, subject to the provisions of Section 5.3 of the
Agreement, as applicable to reimbursements of expenses that constitute taxable
income to executive.


 


•                  If Executive’s employment under the
Agreement to which this Annex A is attached is terminated by Executive for Good
Reason (as defined in the Agreement to which this Annex A is attached) or by
Company for any reason other than Cause (as defined in the Agreement to which
this Annex A is attached), then Company will reimburse Executive for airfare
for Executive and any of his immediate family living in China back to the
United States and reasonable relocation expenses back to the United States up
to FIFTEEN THOUSAND DOLLARS AND NO/100 ($15,000.00). Reimbursement shall 


 

















 


to be made to Executive upon presentation of proper
receipts within 60 days of termination.