Exhibit 10.1


 


EXECUTIVE
EMPLOYMENT AGREEMENT


 


THIS EXECUTIVE EMPLOYMENT AGREEMENT
(the “Agreement”), is entered into as of July 17, 2008 (the “Effective
Date”) by and between DON CARROLL, a resident of the State of Texas (“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 “President
and Chief Executive Officer” (“President and CEO”) 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
Chairman of the Board (“COB”), or the COB’s designee.


 


1.2          Place of Performance.  Executive will perform the Services based out
of an office at Company headquarters (currently in Carrollton, Texas), 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. 
Prior to the Effective Date, Executive has provided Company a true and
correct copy of Executive’s employment agreement(s) with previous
employer(s), and, 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, Parent, 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
consulted and been 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          President and CEO.  During the Employment Term, Executive’s
duties and responsibilities will be those typically performed by a President
and CEO of a nationwide commercial enterprise in the Business, and otherwise as
reasonably and lawfully directed by the Board, its designee, by the COB or the
COB’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. 
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.  Company will review Executive’s
performance on an annual basis, through the COB or the COB’s designee.


 


3.2          Board.  During
the Employment Term, Executive shall serve, if elected or appointed, as a
director of Parent, as a director and officer of any subsidiary or affiliate of
Parent, and as a member of any committee of the Board or any committee of the
board of directors of 


 


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any of Parent’s subsidiaries or affiliates.  If Executive is employed by Company on January 1,
2009, Company shall cause Executive to be elected to the Board.


 


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 


 


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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 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 


 


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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 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 


 


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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 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 THREE HUNDRED
THOUSAND DOLLARS AND NO/100 ($300,000.00) 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.  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          2008 Mid-Year Bonus. 
If Executive remains continuously employed pursuant to
this Agreement through at least July 1, 2008, then Company will pay
Executive a one-time bonus of SIXTY-FIVE THOUSAND DOLLARS AND NO/100
($65,000.00) (the “2008 Mid-Year Bonus”).  Payment of the 2008 Mid-Year Bonus will be
made in a single sum cash payment on or before July 31, 2008.


 


5.3          2008
Year-End Discretionary Bonus.  If Executive remains continuously employed
pursuant to this Agreement through at least December 31, 2008, then
Executive will 


 


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be eligible for a one-time discretionary bonus, at a level commensurate
with the responsibilities of the President and CEO position (the “2008
Year-End Discretionary Bonus”). 
Executive acknowledges that the payment and amount of the 2008 Year-End
Discretionary Bonus will be discretionary, with sole discretion resting with
the Board or Compensation Committee of Parent. 
Payment of the 2008 Year-End Discretionary Bonus, if any, will be made
in a single sum cash payment between January 1 and March 15, 2009.


 


5.4          Annual
Bonus.  During the
Employment Term (beginning with the 2009 calendar year and thereafter),
Executive will be eligible for an annual incentive bonus consisting of up to
fifty percent (50%) 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 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.


 


5.5          Business
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.  Notwithstanding the preceding sentence, 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.


 


5.6          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.


 


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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 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.


 


6.3          Stock
Options, Restricted Stock Award or Stock Appreciation Rights.  On or before January 31, 2009, Company
shall grant to Executive, as determined in the sole discretion of the Board or
the Compensation Committee of Parent, pursuant to the terms of the Heelys, Inc.
2006 Stock Incentive Plan (a) an option to purchase 100,000 shares of
Parent’s common stock, at a purchase price per share equal to 100% of the fair
market value per share of common stock on the date of such grant, such options
shall vest and become exercisable in four equal cumulative annual installments
of one-fourth (1/4th) each on each successive anniversary of the
date of such grant, or (b) 100,000 restricted shares of Parent’s common
stock, and the restrictions relating thereto shall lapse in four equal
cumulative annual installments of one-fourth (1/4th) each on each
successive anniversary of the date of such grant, or (c) stock
appreciation rights equivalent to 100,000 shares of Parent’s common stock,
which will vest in four equal cumulative annual installments of one-fourth (1/4th)
each on each successive anniversary of the date of such grant.


 


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:


 


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(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 5.5 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.


 


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:


 


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


 


(ii)           Executive’s Base
Salary for a period of one (1) year, 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, 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 


 


10

















 


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) 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; (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 


 


11

















 


“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 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 


 


12

















 


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 “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.


 


13
















 


(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).


 


(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).


 


14

















 


(f)                                     Return and Review.


 


(i)            At
Any Time.  All Confidential
Information, and all other information and property affecting or relating to
the businesses 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.


 


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 


 


15

















 


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.


 


(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.


 


16

















 


(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 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) the area described in Exhibit 1 to this Agreement.


 


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


 


17

















 


(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 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.  


 


18

















 


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 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 


 


19

















 


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 the 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 


 


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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.


 


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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:


 


 


(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 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.


 


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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.


 


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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]


 


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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/ Gary L.
  Martin

  
	
   

  	
   

  	
  Name: Gary
  L. Martin

  
	
   

  	
   

  	
  Title:   Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  “Executive”

  
	
   

  	
   

  
	
   

  	
  Donald
  K. Carroll

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald K.
  Carroll

  
				



 


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