Exhibit 10.2


 


EXECUTIVE EMPLOYMENT AGREEMENT


 


THIS
EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”), is
entered into as of October 28, 2008 (the “Effective Date”) by and
between John W. O’Neil, a resident of the State of Massachusetts (“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 International Sales” (“VP of International
Sales”) 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 Belgium, 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 International Sales. During
the Employment Term, Executive’s duties and responsibilities will be those
typically performed by a VP of International Sales 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, in United States Dollars, a base salary of ONE
HUNDRED FORTY-FIVE THOUSAND DOLLARS ($145,000) (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. 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 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 


 


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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.


 


6.2          Vacation. While employed by
Company, Executive will be entitled to 
three (3) 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, 


 


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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


 


(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.


 


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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 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, 


 


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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


 


(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)


 


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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 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 


 


11

















 


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.


 


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 


 


12

















 


“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), 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).


 


13

















 


(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 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.


 


14

















 


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

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


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 


 


15

















 


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.


 


(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 


 


16

















 


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.


 


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 


 


17

















 


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 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 


 


18

















 


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
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 


 


19

















 


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.


 


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 


 


20

















 


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:


 


John O’Neil


c/o Heeling Sports EMEA (Sprl)


Lasne Office Park


Chaussée de Louvain 431A


B-1380 Lasne


Belguim


 


(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
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.


 


21
















 


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.


 


(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.


 


22

















 


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”

  
	
   

  	
   

  
	
   

  	
  John
  W. O’Neil

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ John W.
  O’Neil

  



 


24

















 


ANNEX A


 


1.               So
long as Executive is employed by Company or one of its affiliates and living in
Belgium, Company will pay, or reimburse Executive, for one roundtrip ticket to
the United States for each of Executive and his wife, subject to the provisions
of Section 5.3 of the Agreement as applicable to reimbursement of expenses
that constitute taxable income to Executive.


 


2.               So
long as Executive is employed by Company or one of its affiliates and living in
Belgium, Company will pay for the business and personal use by Executive of an
automobile in the monthly amount of 810.85 Euro (Executive will be responsible
for any maintenance and repair costs resulting from his misuse or neglect of such
automobile).


 


3.               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 (A) reimburse
Executive for airfare for Executive and any of his immediate family living in
Belgium 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), and
such reimbursement shall to be made to Executive upon presentation of proper
receipts within 60 days of termination and (B) pay, or reimburse
Executive, for the lease on his personal residence in Belgium, in either case
for the lesser of one year or the remainder of the then current term on such
lease; and subject to the provisions of Section 5.3 of the Agreement as
applicable to reimbursement of expenses that constitute taxable income to
Executive.


 


4.               Company
will pay up to $500 per month for storage rental for the Executive’s personal
belongings in the United States.


 


5.               Executive
shall pay all applicable Belgian income taxes on Executive’s earnings from
Company (for purposes of this Annex A, Executive’s “earnings from Company”
shall not include any vesting on stock options or other deferred compensation
arrangements) up to the equivalent of the United States federal income taxes
and FICA deducted from Executive’s earnings from Company, and Company shall
pay, or cause to be paid, any Belgian income taxes on Executive’s earnings from
Company in excess of the amount of United States federal income taxes and FICA
deducted or that should have been deducted from Executive’s earnings from Company
based upon a claim of two dependents on a properly completed Form W-4 (and
any amounts paid by Company will be deemed additional compensation to Executive
by Company and will be reflected accordingly). 
If there are additional income taxes on Executive’s earnings from
Company (in excess of the United States federal income taxes and FICA deducted
from Executive’s earnings from Company based upon a claim of two dependents on
a properly completed Form W-4) that are due to be paid by Executive in the
United States, the Company is responsible for the payment of such additional
income tax amounts due.  Any payments
required to be made by Company under this Section 5 will be made within
the periods required by the applicable taxing authorities, if made directly to
the taxing authorities, or if paid to 


 

















 


Executive will be
made upon proof of payment by Executive to the taxing authorities, but no later
than the last day of the calendar year following the calendar year in which the
tax was paid.


 


6.               Each
calendar quarter during the Employment Term, Company will calculate the Base
Salary payments made to Executive during such quarter and adjust his
compensation based on the exchange rate of Euro to US Dollars as of the end of
such quarter as reasonably determined by Company to ensure that Executive has
received in Base Salary the Euro net equivalent of US$6,625.46 per month, after
the following deductions (calculated on an assumption of deductions totaling
$2,437.04 per month, excluding U.S. taxes and FICA), 401(k) contributions,
life, accidental death and dismemberment, health flex spending account, vision
and dental insurance amounts deducted from Executive’s Base Salary, applicable
United States federal taxes and FICA (based on W-2 filing status “married
claiming 2” of the net amount of Executive’s Base Salary after taking into
consideration all deductions other than United States federal taxes and FICA),
life insurance on Executive’s spouse and long term disability.  Any amount payable to Executive under this Section 6
shall be paid semi-monthly in accordance with Company’s normal payroll
practice.


 


7.               Executive’s
Base Salary will be reduced by the amount of any housing allowance that Company
pays or has paid on behalf of Executive.


 


An example of the
calculation required by item 6 above for a month is set forth below:


 


	
  Base
  Salary

  	
   

  	
  US$

  	
  12,083.33

  	
   

  
	
  Less
  Deductions:

  	
   

  	
   

  	
   

  
	
  Dental

  	
   

  	
  82.02

  	
   

  
	
  Health FSA

  	
   

  	
  111.16

  	
   

  
	
  Life and ADD

  	
   

  	
  219.60

  	
   

  
	
  Medical

  	
   

  	
  67.00

  	
   

  
	
  Vision

  	
   

  	
  10.90

  	
   

  
	
  401(k)

  	
   

  	
  1,791.66

  	
   

  
	
  Total

  	
   

  	
  2,282.34

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Pretax and
  FICA

  	
   

  	
  9,800.99

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less U.S. Taxes
  and FICA (based on M-2 filing status)

  	
   

  	
  3,020.82

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total After Tax

  	
   

  	
  6,780.17

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less

  	
  Life Spouse

  	
   

  	
  17.26

  	
   

  
	
   

  	
  Long term
  disability

  	
   

  	
  137.44

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net US$ After
  Tax before but before Exchange Rate

  	
   

  	
  6,625.47

  	
   

  



 


Exchange Rate:      1.4295
Euro = 1 US Dollar


 

















 


In order to
provide Executive with Euro net equivalent to US$6,625.46, Executive would have
to receive an additional US$4,455.77 – calculated as follows:


 


	
  Base
  Salary

  	
   

  	
  US$

  	
  16,539.10

  	
   

  
	
  Less
  Deductions:

  	
   

  	
   

  	
   

  
	
  Dental

  	
   

  	
  82.02

  	
   

  
	
  Health FSA

  	
   

  	
  111.16

  	
   

  
	
  Life and ADD

  	
   

  	
  219.60

  	
   

  
	
  Medical

  	
   

  	
  67.00

  	
   

  
	
  Vision

  	
   

  	
  10.90

  	
   

  
	
  401(k)

  	
   

  	
  1,791.66

  	
   

  
	
  Total

  	
   

  	
  2,282.34

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Pretax and
  FICA

  	
   

  	
  14,256.76

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less U.S. Taxes
  and FICA (based on M-2 filing status)

  	
   

  	
  4,630.95

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total After Tax

  	
   

  	
  9,625.81

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Less 

  	
  Life - Spouse

  	
   

  	
  17.26

  	
   

  
	
   

  	
  Long term
  disability

  	
   

  	
  137.44

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Net US$ After
  Tax before but before Exchange Rate

  	
   

  	
  9,471.11

  	
   

  



 


Euro Equivalent of
Total Net After Tax = 9,471.11/1.4295 = 6,625.47