Document:

Exhibit
10.4

 

Application
for confidential treatment for a portion of this document has been submitted to the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934.  This document omits the
information subject to the confidentiality request.  Omissions are
designated by the symbol “**”.  A complete version of this document has
been filed separately with the Securities and Exchange Commission.

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (the “Agreement”)
is entered into as of March 31, 2008 (the “Closing Date”), between Heeling
Sports EMEA, a Belgian company (SPRL) with a registered office of Avenue Van
Volxemlaan 79, B1190 Brussels, Belgium,
represented by its Vice President, John O’Neil, a citizen of the United States
of America (the “Company”) and The Sansean Group Limited, a company
incorporated and duly existing under the laws of Hong Kong with a registered
address at 5705, The Center, 99 Queen’s Road Central, Hong Kong, represented by
its Director Mr. Sven Heller,
a citizen of Switzerland (“Consultant”). 
The Company and Consultant are sometimes collectively referred to herein
as the “Parties” and individually as a “Party.”

 

WHEREAS, the Company wishes to enter into this
Agreement with Consultant for the provision of consulting services in Germany
and the European Union;

 

WHEREAS, the Company and its affiliates, in their
business, use confidential customer, dealer and supplier lists and other trade
secrets and confidential and proprietary information that will be communicated
to Consultant during its provision
of services to the Company and its affiliates, and the Company and its
affiliates have expended and will expend substantial time, effort, and money to
develop said customer, dealer and supplier lists, other trade secrets and
confidential and proprietary information, data, processes, business, patronage
and goodwill to promote and increase its business; and

 

WHEREAS, Consultant desires to perform services for
the Company, and the Company is desirous of having Consultant perform services
to the Company and its affiliates, provided that in so doing, the Company can
protect its customer, dealer and supplier lists, other trade secrets and
confidential and proprietary information, data, processes, business, patronage
and goodwill.

 

NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the Parties agree as follows:

 

1.                                       Consulting Term and
Services.  The Company hereby engages Consultant as an
independent contractor, and not as an employee, to render consulting services
to the Company.

 

(a)                                  Term.  Consultant hereby accepts such engagement for
a period commencing on the Closing Date and terminating automatically upon (i) the
date on which the Company pays Consultant for the 500,000th Net Pair Sold (as
defined in Section 2) of Heelys-branded footwear sold by the Company or
its affiliates in Germany or Austria (the “Products,” and each pair is a “Product”);
or (ii) Consultant’s dissolution or closing.

 

 

(b)                                 Termination.  The Company may terminate this Agreement at
any time without notice, for Cause.  For
the purpose of this paragraph, “Cause” shall mean (i) theft and/or
misappropriation and/or misdirection of Company funds, property, and/or
business opportunities by Consultant, its employees, affiliates or affiliate’s
employees; or (ii) Consultant’s material violation of this Agreement.  Termination of this Agreement for Cause shall
include the prospective termination of the consideration recited in Section 2
of this Agreement.

 

(c)                                  Services.  During the Term, Consultant shall use its
knowledge and contacts in order to render consulting services to the Company
and to assist the Company and its affiliates in Germany and Austria (the “Territory”).  The services rendered by Consultant hereunder
shall be provided by Consultant as a consultant, and not as an employee,
partner or joint venturer of the Company.

 

(i)                                     Throughout the Term, Consultant
shall:  (A) make available to the
Company all current and prospective customer lists and any other intangible
assets that would be useful to the Company in developing the brand and the
distribution business in the Territory; (B) act to preserve the goodwill
of all employees, customers, dealers, suppliers, and other persons having
business relations with the Company and its affiliates; (C) perform its
services in a business-like manner and in a manner that will not harm the
business reputation of the Company; (D) refer all inquiries
received for Products to the Company; (E) comply with good business practices and all applicable
laws and regulations; and (F) use its reasonable best efforts and
diligence to promote the sale and use of, and to stimulate interest in, the
Products in the Territory.  Consultant represents and warrants to the
Company that it has, and during the Term will continue to maintain, the capacity,
facilities and personnel necessary to carry out its obligations under this
Agreement.  Consultant acknowledges that
it has no authority to negotiate the sale or purchase of Products on behalf of
the Company or any of its affiliates or to negotiate or conclude such
transactions on behalf of or in the name of the Company or any of its
affiliates.

 

(ii)                                  Throughout the Term, Consultant shall
not, without prior written approval of the Company:  (A) encourage the sale of the Products
outside the Territory; (B) maintain or seek to establish any branch or
channel distribution inside the Territory; (C) engage in deceptive,
misleading or unethical practices detrimental to the Company or the Products, including,
but not limited to, disparagement of the Company or the Products; (D) make
representations, warranties or guarantees to customers or to the trade with
respect to the specifications, features or capabilities of the Products that
are inconsistent with the literature distributed by the Company; (E) market,
promote, sell, lease, solicit or procure orders for or otherwise represent any
product in competition with any of the Products in the Territory; or (F) engage
in conduct or business activities in violation of the terms set forth herein.

 

2.                                       Compensation.  In
consideration of Consultant’s consulting services set forth in Section 1
above, the Company will compensate Consultant as follows:

 

2

 

(a)                                  The
Company shall pay Consultant **, as follows: ** payable on the Closing
Date and ** shall be made ten
days after the Closing Date.

 

(b)                                 Further
payment will be based on Net Pairs Sold by the Company as of December 31,
the end of the financial year.  “Net Pairs
Sold” shall equal gross sales in pairs in the Territory less all pair
returns.  Payments shall be made to
Consultant within sixty (60) days after the financial year-end.  Consultant shall have the right to see the
relevant documents and/or financial statements necessary to verify the
calculation of Net Pairs Sold (but such information shall be held confidential
pursuant to the provisions of Section 4).

 

(c)                                  In
addition, for each Product sold by the Company (but not any Product sold by The
Distributor GmbH), the Company shall pay Consultant (i) ** for each
Product sold (for the first 200,000 (Two Hundred Thousand)  Net Pairs Sold); and (ii) ** (for
200,001 (Two Hundred Thousand One) to 500,000 (Five Hundred Thousand) Net Pairs
Sold).  After payment associated with the
500,000th Net Pair Sold is made, this Agreement and the Term shall terminate.

 

3.                                       Relationship of the
Parties; Independent Contractor; No Employee Benefits. 
Notwithstanding any provision hereof, Consultant is an independent
contractor and not an employee, agent, partner or joint venturer of the Company
and shall not bind nor attempt to bind the Company to any contract.  Consultant shall accept any directions issued
by the Company pertaining to the goals to be attained and the results to be achieved
but shall be solely responsible for the manner and hours in which Services are
performed under this Agreement. 
Consultant shall not be eligible to participate in any of the Company’s
employee benefit plans, fringe benefit programs, group insurance arrangements
or similar programs.  The Company shall
not provide workers’ compensation, disability insurance, social security or
unemployment compensation coverage or any other statutory benefit to
Consultant.  Consultant shall comply at
Consultant’s expense with all applicable provisions of workers’ compensation
laws, unemployment compensation laws, federal, state and local income tax laws,
and all other applicable federal, state and local laws, regulations and codes
relating to terms and conditions of employment required to be fulfilled by
employers or independent contractors.

 

4.                                       Nondisclosure Agreement.  Consultant
acknowledges that the information, observations and data obtained by it while
engaged as a consultant by the Company are the property of the Company and that
during the Term, it will have access to and become familiar with various trade
secrets, consisting of information, records, specifications, sales procedures,
customer requirements, customer, dealer and supplier lists, methods of doing business,
and other confidential information (all of which are hereinafter referred to as
“Trade Secrets”), which are owned by the Company and its Affiliates and which
are regularly used in the operation of the business of the Company and its
Affiliates.  “Affiliates” shall mean
entities and natural persons controlling, controlled by, or under common
control with the Company.  Consultant
shall not disclose any of the Trade Secrets, directly or indirectly, or use
them in any way, either during the Term or at any time thereafter, except as
required in the course of Services under this Agreement.  All files, records, documents, drawings,
specifications, information, data, customer lists, customer information, dealer
and supplier lists, dealer and supplier information, compilations of
information, and similar items relating to the business of the Company and its
Affiliates, whether prepared by the Consultant or otherwise coming into its
possession, shall 

 

3

 

remain the exclusive property of the Company and shall not be
disseminated, communicated or otherwise removed from the premises of the
Company under any circumstances, without the prior written consent of the
Company, and in any event shall be promptly delivered to the Company upon
termination of the Term or at any time the Company may request.  It is understood and agreed to by the Parties
that all customer, dealer and supplier lists (among other items) are deemed to
be Trade Secrets and shall remain the exclusive property of the Company and its
Affiliates.  The existence of any claim
or cause of action of the Consultant against the Company, whether or not
predicated on this Agreement, shall not constitute a defense to the enforcement
by the Company of the covenants and agreements of the Consultant contained in
this Section 4.

 

5.                                       Consultant’s
Representations.  Consultant hereby represents and warrants to
the Company that:  (a) the
execution, delivery and performance of this Agreement by Consultant shall not
conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which Consultant is a party
or by which it is bound; (b) Consultant is not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement with
any other person or entity involved in or related to the business of the
Company or any of its affiliates; (c) Consultant shall not use any
confidential information or trade secrets of any third party in connection with
the performance of its duties hereunder; and (d) this Agreement
constitutes the valid and binding obligation of Consultant, enforceable against
Consultant in accordance with its terms. 
Consultant hereby acknowledges and represents that it has consulted with
independent legal counsel regarding Consultant’s rights and obligations under
this Agreement and that it fully understands the terms and conditions contained
herein.

 

6.                                       Indemnification. 
Consultant hereby agrees to indemnify and hold harmless the Company and
its current and former parent, subsidiary and affiliated entities, their
successors and assigns, and the current and former owners, shareholders,
members, managers, partners, directors, officers, employees, agents, attorneys,
representatives and insurers (collectively, the “Company Parties”) from and
against any and all claims, actions liabilities, losses, damages and expenses,
including reasonable attorneys’ fees and such fees on appeal, incurred by any
of them in investigating and/or defending against any claims, actions or
liabilities arising out of or in connection with:  (a) services rendered pursuant to this
Agreement; (b) the failure of Consultant to comply with any laws, rules and/or
regulations; (c) Consultant’s attachment to the products of any trade
name, trademark or log that is challenged as an infringement of the proprietary
rights of any third party; or (d) the failure of Consultant to comply with
each and every term of the this Agreement. 
Consultant hereby releases all Company Parties from any duty, obligation
or requirement to make any indemnity payments to Consultant and/or any of
Consultant’s sales agents.  Consultant
agrees to pay any and all such indemnity payments and shall hold the Company
Parties harmless from and against same.  Consultant shall be responsible for paying any
indemnity payments pursuant to the law. 
Consultant shall also be responsible for paying any and all taxes
relating directly or indirectly to this Agreement or the performance hereof.

 

Consultant shall
give written notice to the Company within ten (10) days of learning of any
such claim, action or liability for which indemnification is provided in this
Agreement.  Consultant agrees that any
Company Party may employ an attorney of its own selection to defend and/or
appeal the claim or action on behalf of such Company Party, at the expense of
Consultant.  Consultant further agrees
that such Company Party may elect to allow Consultant, at 

 

4

 

Consultant’s expense, to employ an attorney
reasonably satisfactory to such Company Party to defend the indemnified party;
provided, however, that such Company Party reserves the right reasonably to
disapprove of any such attorney.

 

7.                                       Survival.  Sections 3, 4,
6, 8, 9, 10, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 and 23 shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Term.

 

8.                                       Non-Solicitation.  Consultant
agrees that during the Term and for a period of one year thereafter, Consultant
and its affiliates shall not solicit or engage for employment or consulting
activities any person or entity that has acted as an employee or consultant of
the Company at any time during the Term.

 

9.                                       Attorneys’ Fees.  If any action,
suit or other proceeding is instituted concerning or arising out of this
Agreement, the prevailing Party shall recover all of such Party’s costs and
attorneys’ fees incurred in each and every such action, suit or other
proceeding, including any and all appeals or petitions there from.

 

10.                                 Entire Agreement.  This Agreement
embodies the complete agreement and understanding among the Parties and
supersedes and preempts any prior understandings, agreements or representations
by or among the Parties, written or oral, which may have related to the subject
matter hereof in any way.  No amendment
or waiver to this Agreement shall be effective unless stated in writing and
signed by the Parties.

 

11.                                 Counterparts.  This Agreement
may be executed in separate counterparts, each of which is deemed to be an
original and all of which taken together constitute one and the same agreement.

 

12.                                 Assignment.  Consultant
shall not assign this Agreement without the prior written consent of the
Company.  The Company may assign its
rights and obligations under this Agreement in whole or part.

 

13.                                 Injunction.  In the event
of a breach or a threatened breach of this Agreement by Consultant or its
employees or affiliates, or the affiliate’s employees, the Company shall be
entitled to the injunctive relief determined appropriate by a court of
competent jurisdiction.  In the event of
a breach or a threatened breach of this Agreement by the Company or its
employees or affiliates, or the affiliate’s employees, Consultant shall be
entitled to the injunctive relief determined appropriate by a court of
competent jurisdiction.

 

14.                                 Governing Law and Language. 
This Agreement shall be governed by, and construed in accordance with,
the laws of the U.S. and the state of Texas (without regard to conflicts of
laws principles), including the Uniform Commercial Code as enacted in the state
of Texas.  The United Nations Convention
on Contracts for the International Sale of Goods shall not apply to this
Agreement (or the rights or obligations of the Parties) and is disclaimed.  The governing language of this Agreement
shall be English as spoken in the U.S., which shall control the interpretation
of this Agreement in the event this Agreement is translated into a language other
than English as spoken in the U.S.

 

5

 

15.                                 Submission to Jurisdiction. 
By its
signature to this Agreement, each Party hereunder irrevocably submits to the
exclusive jurisdiction and venue of the state or federal courts located in
Dallas County, State of Texas as to any disputes between the Parties and/or
this Agreement.  Each of the Parties
hereto agrees that any judgment (i) rendered either by a court of
competent jurisdiction in accordance with this Agreement; and (ii) entered
in any court of record of the United States, in Dallas, Texas may be executed
against the assets of such party in any jurisdiction or country.  By its signature to this Agreement, each
Party hereunder irrevocably submits to the exclusive jurisdiction and venue of
any of the state or federal courts in Dallas County, State of Texas in any
legal action or proceeding relating to such execution.

 

16.                                 Waiver of Immunity and
Inconvenient Forum.  Each Party irrevocably waives all immunity
from jurisdiction, attachment and execution, whether on the basis of
sovereignty or otherwise, to which it might otherwise be entitled in any legal
action or proceeding in any state or federal court of competent jurisdiction,
including such courts located in Dallas County, State of Texas, arising out of
this Agreement.  The Parties each
represent that its obligations hereunder are commercial activities.  Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter
have to any suit, action or proceeding arising out of or relating to this
Agreement being brought in the federal or state courts of competent
jurisdiction located in Dallas County, State of Texas, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.

 

17.                                 Legal Construction.  Regardless of
which Party may have drafted this Agreement, or any portion thereof, no rule of
strict construction shall be applied against either Party. Except as expressly
provided in this Agreement, all rights and remedies conferred under this
Agreement or by any other instrument or law shall be cumulative and may be
exercised singularly or concurrently.  In
the interpretation of this Agreement, except where the context otherwise
requires, “including” or “include” does not denote or imply any limitation; “or”
has the inclusive meaning “and/or”; “and/or” means “or” and is used for
emphasis only; the singular includes the plural, and vice versa, and each gender
includes each of the others; captions or headings are only for reference and
are not to be considered in interpreting the Agreement; “Section” refers to a Section of
this Agreement, unless otherwise stated in this Agreement; and all times set
forth herein are deemed to be the time in Dallas, Texas.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, such
provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof, the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision, there shall be added automatically as a
part of this Agreement, a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible,
and the Parties request the court to whom disputes relating to this Agreement
are submitted to reform the otherwise illegal, invalid or unenforceable
provision in accordance with this Section.

 

18.                                 Waiver.  Any waiver by
any Party of any provision of this Agreement must be in writing from the
waiving Party and shall not imply a subsequent waiver of the same provision or
any other provision.

 

6

 

19.                                 Expenses. 
Each Party
shall pay its own expenses, including, but not limited to, travel,
administration, compensation of employees, the fees and disbursements of its
counsel in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated herein, except
as otherwise provided herein.

 

20.                                 Expenses for Enforcement.  In the event
either Party is required to employ an attorney to enforce the provisions of
this Agreement or is required to commence legal proceedings to enforce the
provisions of this Agreement, the prevailing Party shall be entitled to recover
from the other Party reasonable attorney’s fees and court costs incurred in
connection with such enforcement, including collection agency fees, attorney
litigation fees, suit fees, and costs of investigation and litigation.

 

21.                                 Business Days.  If any time
period for giving notice or taking action hereunder expires on a day that is a
Saturday, Sunday or legal holiday in the state in which the Company’s chief
executive office is located, the time period shall be automatically extended to
the business day immediately following such Saturday, Sunday or holiday.

 

22.                                 Headings.  The section
and subsection headings contained in this Agreement are included for
convenience only, and shall not limit or otherwise affect the terms hereof.

 

23.                                 Miscellaneous.

 

(a)                                  If
any provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future law, such provision shall be fully separable, and
this Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part thereof, the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance there from, and in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement, a
legal valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and the Parties hereto
request the court or arbitrator to whom disputes relating to this Agreement are
submitted to reform the otherwise legal, invalid or unenforceable provision in
accordance with this Section.

 

(b)                                 The
waiver by any Party hereto of any breach or default shall not constitute a
waiver of any different or subsequent breach or default.

 

(c)                                  No
Party shall be liable for failure to perform or delay in performing any
obligation (other than the payment of money) under this Agreement or any
individual contract of sale hereunder if such failure or delay is due to fire,
flood, earthquake, strike, labor trouble or other industrial disturbance, war
(declared or undeclared), embargo, blockade, shortage of labor materials or
equipment, legal prohibition, governmental action, riot, insurrection, damage,
destruction or any other cause beyond the control of such defaulting Party
preventing or delaying the performance.

 

(d)                                 All
notices, requests, consents and other communications that are required or
permitted under this Agreement shall be in writing, and shall be delivered
personally or mailed by certified or registered mail, postage prepaid, return
receipt requested (in which case it 

 

7

 

shall be deemed given one week after mailing), or sent
by fax, with a confirmation copy simultaneously mailed (in which case it shall
be deemed given when transmitted), at the following addresses:

 

To the Company:

 

Heeling Sports EMEA

Avenue Van Volxemlaan 79

B1190 Brussels, Belgium

Attention: Vice President

 

with copies (which shall not
constitute notice) to:

 

Heelys, Inc.

3200 Belmeade Drive, Suite 100

Carrollton, Texas  75006

Attention: President

Telecopy: (214) 390-1661

 

Gardere Wynne Sewell LLP

1601 Elm Street, Suite 3000

Dallas, Texas  75201-4761

Attention:  Robert J. Ward, Esq.

Telecopy:  (214) 999-3266

 

To
Consultant:

 

The Sansean Group Limited

5705, The Center

99 Queen’s Road Central

Hong Kong

Attention: Sven Heller

Telecopy: +41 41 3910405/+852 28685820

 

with a copy (which shall not
constitute notice) to:

 

Heller Anwaltskanzlei

Freidheimweg 14

6353 Weggis, Schweiz

Attention:  Sven Heller

Telecopy:  +41 413910405

 

Or to such other address as
to which any Party hereto may notify the other Party hereto as aforesaid.  All communications shall be in the English
language.

 

[signature page follows]

 

8

 

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.

 

 

	
   

  	
  HEELING
  SPORTS EMEA

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  John O’Neil

  
	
   

  	
  Name:

  	
      John
  O’Neil

  
	
   

  	
  Title:

  	
      Vice
  President

  

 

 

	
   

  	
  THE
  SANSEAN GROUP LIMITED

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  Sven Heller

  
	
   

  	
  Name:

  	
        Sven
  Heller

  
	
   

  	
  Title:

  	
      Director

  

 

 

9Exhibit
10.5

 

Application
for confidential treatment for a portion of this document has been submitted to the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934.  This document omits the
information subject to the confidentiality request.  Omissions are
designated by the symbol “**”.  A complete version of this document has
been filed separately with the Securities and Exchange Commission.

 

CONSULTING AGREEMENT

 

THIS CONSULTING AGREEMENT (the “Agreement”) is entered into as of March 31,
2008 (the “Closing Date”), between Heeling Sports EMEA, a Belgian
company (SPRL) with a registered office of Avenue Van Volxemlaan 79, B1190 Brussels, Belgium, represented by its
Vice President, John O’Neil, a citizen of the United States of America (the “Company”)
and Achim Lippoth (“Consultant”).  The
Company and Consultant are sometimes collectively referred to herein as the “Parties”
and individually as a “Party.”

 

WHEREAS, the Company wishes to enter into this
Agreement with Consultant for the provision of consulting services in Germany
and the European Union;

 

WHEREAS, the Company and its affiliates, in their
business, use confidential customer, dealer and supplier lists and other trade
secrets and confidential and proprietary information that will be communicated
to Consultant during his provision
of services to the Company and its affiliates, and the Company and its
affiliates have expended and will expend substantial time, effort, and money to
develop said customer, dealer and supplier lists, other trade secrets and
confidential and proprietary information, data, processes, business, patronage
and goodwill to promote and increase its business; and

 

WHEREAS, Consultant desires to perform services for
the Company, and the Company is desirous of having Consultant perform services
to the Company and its affiliates, provided that in so doing, the Company can
protect its customer, dealer and supplier lists, other trade secrets and
confidential and proprietary information, data, processes, business, patronage
and goodwill.

 

NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the Parties agree as follows:

 

1.                                       Consulting Term and
Services.  The Company hereby engages Consultant as an
independent contractor, and not as an employee, to render consulting services
to the Company.

 

(a)                                  Term.  The term of
this Agreement is twelve (12) months form the Closing Date (the “Term”).  This Agreement will terminate of its own
accord at the conclusion of the Term without any further action required by any
Party, unless terminated earlier as set forth herein, or unless the Parties
renew or extend this Agreement by separate written addendum.

 

(b)                                 Termination. 
The Company may terminate this Agreement at any time without notice, for
Cause.  For the purpose of this
paragraph, “Cause” shall mean (i) Consultant’s felony conviction; (ii) Consultant’s
theft and/or misappropriation and/or misdirection of Company funds, property,
and/or business opportunities; (iii) Consultant’s 

 

 

material violation of this Agreement; and/or (iv) Consultant’s or
his affiliate’s violation of the terms of the Termination Agreement by and
between the Company and Consultant, dated as of March 31, 2008.  Termination of this Agreement for Cause shall
include the prospective termination of the consideration recited in Section 2
of this Agreement.

 

(c)                                  Services.  During the
Term, Consultant shall use his knowledge and contacts in order to render
consulting services to the Company and to assist the Company and its affiliates
in Germany and the European Union (the “Territory”).  The services rendered by Consultant hereunder
shall be provided by Consultant as a consultant, and not as an employee,
partner or joint venturer of the Company.

 

(i)                                     Throughout the Term, Consultant
shall:  (A) make available to the
Company all current and prospective customer lists and any other intangible
assets that would be useful to the Company in developing the brand and the
distribution business in the Territory; (B) act to preserve the goodwill
of all employees, customers, dealers, suppliers, and other persons having
business relations with the Company and its affiliates; (C) perform his
services in a business-like manner and in a manner that will not harm the
business reputation of the Company; (D) refer all inquiries
received for Products to the Company; (E) comply with good business practices and all applicable
laws and regulations; and (F) use his reasonable best efforts and
diligence to promote the sale and use of, and to stimulate interest in,
Heelys-branded footwear and other products (collectively with all of the
Company’s other products that become subject to this Agreement, the “Products”)
in the Territory.  Consultant represents and warrants to the
Company that he has, and during the Term will continue to maintain, the
capacity, facilities and personnel necessary to carry out his obligations under
this Agreement.  Consultant acknowledges
that he has no authority to negotiate the sale or purchase of Products on behalf
of the Company or any of its affiliates or to negotiate or conclude such
transactions on behalf of or in the name of the Company or any of its
affiliates.

 

(ii)                                  Throughout the Term, Consultant shall
not, without prior written approval of the Company:  (A) encourage the sale of the Products
outside the Territory; (B) maintain or seek to establish any branch or
channel distribution inside the Territory; (C) engage in deceptive,
misleading or unethical practices detrimental to the Company or the Products,
including, but not limited to, disparagement of the Company or the Products; (D) make
representations, warranties or guarantees to customers or to the trade with
respect to the specifications, features or capabilities of the Products that
are inconsistent with the literature distributed by the Company; (E) market,
promote, sell, lease, solicit or procure orders for or otherwise represent any
product in competition with any of the Products in the Territory; or (F) engage
in conduct or business activities in violation of the terms set forth herein.

 

2.                                       Compensation.  In
consideration of Consultant’s consulting services set forth in Section 1
above, the Company shall pay Consultant **
per month during the Term.  Payment 

 

2

 

shall
be made on or before the last day of each month.  The Company shall also reimburse Consultant
for his reasonable and pre-approved business and travel expenses during the
Term.

 

3.                                       Relationship of the
Parties; Independent Contractors; No Employee Benefits. 
Notwithstanding any provision hereof, Consultant is an independent
contractor and not  an employee, agent,
partner or joint venturer of the Company and shall neither bind nor attempt to
bind the Company to any contract. 
Consultant shall accept any directions issued by the Company pertaining
to the goals to be attained and the results to be achieved but shall be solely
responsible for the manner and hours in which Services are performed under this
Agreement.  Consultant shall not be eligible
to participate in any of the Company’s employee benefit plans, fringe benefit
programs, group insurance arrangements or similar programs.  The Company shall not provide workers’
compensation, disability insurance, Social Security or unemployment compensation
coverage or any other statutory benefit to Consultant.  Consultant shall comply at Consultant’s
expense with all applicable provisions of workers’ compensation laws,
unemployment compensation laws, federal Social Security law, the Fair Labor Standards
Act, federal, state and local income tax laws, and all other applicable
federal, state and local laws, regulations and codes relating to terms and
conditions of employment required to be fulfilled by employers or independent
contractors.

 

4.                                       Nondisclosure Agreement.  Consultant
acknowledges that the information, observations and data obtained by him while
engaged as Consultant by the Company are the property of the Company and that
during the Term, Consultant will have access to and become familiar with
various trade secrets, consisting of information, records, specifications,
sales procedures, customer requirements, customer, dealer and supplier lists,
methods of doing business, and other confidential information (all of which are
hereinafter referred to as “Trade Secrets”), which are owned by the Company and
its Affiliates and which are regularly used in the operation of the business of
the Company and its Affiliates.  “Affiliates”
shall mean entities and natural persons controlling, controlled by, or under
common control with the Company. 
Consultant shall not disclose any of the Trade Secrets, directly or
indirectly, or use them in any way, either during the Term or at any time
thereafter, except as required in the course of Services under this Agreement.  All files, records, documents, drawings,
specifications, information, data, customer lists, customer information, dealer
and supplier lists, dealer and supplier information, compilations of
information, and similar items relating to the business of the Company and its
Affiliates, whether prepared by Consultant or otherwise coming into his
possession, shall remain the exclusive property of the Company and shall not be
disseminated, communicated or otherwise removed from the premises of the
Company under any circumstances, without the prior written consent of the
Company, and in any event shall be promptly delivered to the Company upon
termination of the Term or at any time the Company may request.  It is understood and agreed to by the Parties
that all customer, dealer and supplier lists (among other items) are deemed to
be Trade Secrets and shall remain the exclusive property of the Company and its
Affiliates.  Consultant agrees that each
of the nondisclosure agreements set forth herein are reasonable, supported by
good and valuable consideration and that it shall survive the termination of
this Agreement.  The existence of any
claim or cause of action of the Consultant against the Company, whether or not
predicated on this Agreement, shall not constitute a defense to the enforcement
by the Company of the covenants and agreements of the Consultant contained in
this Section 4.

 

3

 

5.                                       Consultant’s
Representations.  Consultant hereby represents and warrants to
the Company that:  (a) the
execution, delivery and performance of this Agreement by Consultant shall not
conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which Consultant is a party
or by which it is bound; (b) Consultant is not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement with
any other person or entity involved in or related to the business of the
Company or any of its affiliates; (c) Consultant shall not use any
confidential information or trade secrets of any third party in connection with
the performance of its duties hereunder; and (d) this Agreement
constitutes the valid and binding obligation of Consultant, enforceable against
Consultant in accordance with its terms. 
Consultant hereby acknowledges and represents that he has consulted with
independent legal counsel regarding Consultant’s rights and obligations under
this Agreement and that he fully understands the terms and conditions contained
herein.

 

6.                                       Indemnification. 
Consultant hereby agrees to indemnify and hold harmless the Company and
its current and former parent, subsidiary and affiliated entities, their
successors and assigns, and the current and former owners, shareholders,
members, managers, partners, directors, officers, employees, agents, attorneys,
representatives and insurers (collectively, the “Company Parties”) from and
against any and all claims, actions liabilities, losses, damages and expenses,
including reasonable attorneys’ fees and such fees on appeal, incurred by any
of them in investigating and/or defending against any claims, actions or
liabilities arising out of or in connection with:  (a) services rendered pursuant to this
Agreement; (b) the failure of Consultant to comply with any laws, rules and/or
regulations; (c) Consultant’s attachment to the products of any trade
name, trademark or log that is challenged as an infringement of the proprietary
rights of any third party; or (d) the failure of Consultant to comply with
each and every term of the this Agreement. 
Consultant hereby releases all Company Parties from any duty, obligation
or requirement to make any indemnity payments to Consultant and/or any of Consultant’s
sales agents.  Consultant agrees to pay
any and all such indemnity payments and shall hold the Company Parties harmless
from and against same.  Consultant shall
be responsible for paying any indemnity payments pursuant to the law,
including, but not limited to, payments pursuant to Section 89 b of the
German Commercial Code.  Consultant shall
also be responsible for paying any and all taxes relating directly or
indirectly to this Agreement or the performance hereof.

 

Consultant shall
give written notice to the Company within ten (10) days of learning of any
such claim, action or liability for which indemnification is provided in this
Agreement.  Consultant agrees that any
Company Party may employ an attorney of its own selection to defend and/or appeal
the claim or action on behalf of such Company Party, at the expense of
Consultant.  Consultant further agrees
that such Company Party may elect to allow Consultant, at Consultant’s expense,
to employ an attorney reasonably satisfactory to such Company Party to defend
the indemnified party; provided, however, that such Company Party reserves the
right reasonably to disapprove of any such attorney.

 

7.                                       Survival.  Sections 3, 4,
6, 8, 9, 10, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 and 23 shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Term.

 

4

 

8.                                       Non-Solicitation.  Consultant
agrees that during the Term and for a period of one year thereafter, Consultant
and his affiliates shall not solicit or engage for employment or consulting
activities any person or entity that has acted as an employee or consultant of
the Company at any time during the Term.

 

9.                                       Attorneys’ Fees.  If any action,
suit or other proceeding is instituted concerning or arising out of this
Agreement, the prevailing Party shall recover all of such Party’s costs and
attorneys’ fees incurred in each and every such action, suit or other
proceeding, including any and all appeals or petitions there from.

 

10.                                 Entire Agreement.  This Agreement
embodies the complete agreement and understanding among the Parties and
supersedes and preempts any prior understandings, agreements or representations
by or among the Parties, written or oral, which may have related to the subject
matter hereof in any way.  No amendment
or waiver to this Agreement shall be effective unless stated in writing and
signed by the Parties.

 

11.                                 Counterparts.  This Agreement
may be executed in separate counterparts, each of which is deemed to be an
original and all of which taken together constitute one and the same agreement.

 

12.                                 Assignment.  Consultant
shall not assign this Agreement without the prior written consent of the
Company.  The Company may assign its
rights and obligations under this Agreement in whole or part.

 

13.                                 Injunction.  In the event
of a breach or a threatened breach of this Agreement by Consultant, the Company
shall be entitled to the injunctive relief determined appropriate by a court of
competent jurisdiction.  In the event of
a breach or a threatened breach of this Agreement by the Company or its
employees or affiliates, or the affiliate’s employees, Consultant shall be
entitled to the injunctive relief determined appropriate by a court of
competent jurisdiction.

 

14.                                 Governing Law and Language. 
This Agreement shall be governed by, and construed in accordance with,
the laws of the U.S. and the state of Texas (without regard to conflicts of
laws principles), including the Uniform Commercial Code as enacted in the state
of Texas.  The United Nations Convention
on Contracts for the International Sale of Goods shall not apply to this
Agreement (or the rights or obligations of the Parties) and is disclaimed.  The governing language of this Agreement
shall be English as spoken in the U.S., which shall control the interpretation
of this Agreement in the event this Agreement is translated into a language
other than English as spoken in the U.S.

 

15.                                 Submission to Jurisdiction. 
By its
signature to this Agreement, each Party hereunder irrevocably submits to the
exclusive jurisdiction and venue of the state or federal courts located in
Dallas County, State of Texas as to any disputes between the Parties and/or
this Agreement.  Each of the Parties
hereto agrees that any judgment (i) rendered either by a court of
competent jurisdiction in accordance with this Agreement; and (ii) entered
in any court of record of the United States, in Dallas, Texas may be executed
against the assets of such party in any jurisdiction or country.  By its signature to this Agreement, each
Party hereunder irrevocably 

 

5

 

submits to the exclusive jurisdiction and venue of any of the state or
federal courts in Dallas County, State of Texas in any legal action or
proceeding relating to such execution.

 

16.                                 Waiver of Immunity and
Inconvenient Forum.  Each Party irrevocably waives all immunity
from jurisdiction, attachment and execution, whether on the basis of
sovereignty or otherwise, to which it might otherwise be entitled in any legal
action or proceeding in any state or federal court of competent jurisdiction,
including such courts located in Dallas County, State of Texas, arising out of
this Agreement.  The Parties each
represent that its obligations hereunder are commercial activities.  Each Party hereby irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter
have to any suit, action or proceeding arising out of or relating to this
Agreement being brought in the federal or state courts of competent
jurisdiction located in Dallas County, State of Texas, and hereby further
irrevocably waives any claim that any such suit, action or proceeding brought
in any such court has been brought in an inconvenient forum.

 

17.                                 Legal Construction.  Regardless of
which Party may have drafted this Agreement, or any portion thereof, no rule of
strict construction shall be applied against either Party. Except as expressly
provided in this Agreement, all rights and remedies conferred under this
Agreement or by any other instrument or law shall be cumulative and may be
exercised singularly or concurrently.  In
the interpretation of this Agreement, except where the context otherwise
requires, “including” or “include” does not denote or imply any limitation; “or”
has the inclusive meaning “and/or”; “and/or” means “or” and is used for
emphasis only; the singular includes the plural, and vice versa, and each
gender includes each of the others; captions or headings are only for reference
and are not to be considered in interpreting the Agreement; “Section” refers to
a Section of this Agreement, unless otherwise stated in this Agreement;
and all times set forth herein are deemed to be the time in Dallas, Texas.  If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, such
provision shall be fully severable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof, the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision, there shall be added automatically as a
part of this Agreement, a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible,
and the Parties request the court to whom disputes relating to this Agreement
are submitted to reform the otherwise illegal, invalid or unenforceable
provision in accordance with this Section.

 

18.                                 Waiver.  Any waiver by
any Party of any provision of this Agreement must be in writing from the
waiving Party and shall not imply a subsequent waiver of the same provision or
any other provision.

 

19.                                 Expenses. 
Each Party
shall pay its own expenses, including, but not limited to, travel,
administration, compensation of employees, the fees and disbursements of its
counsel in connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated herein, except
as otherwise provided herein.

 

20.                                 Expenses for Enforcement.  In the event
either Party is required to employ an attorney to enforce the provisions of
this Agreement or is required to commence legal 

 

6

 

proceedings to enforce the provisions of this Agreement, the prevailing
Party shall be entitled to recover from the other Party reasonable attorney’s
fees and court costs incurred in connection with such enforcement, including
collection agency fees, attorney litigation fees, suit fees, and costs of
investigation and litigation.

 

21.                                 Business Days.  If any time
period for giving notice or taking action hereunder expires on a day that is a
Saturday, Sunday or legal holiday in the state in which the Company’s chief
executive office is located, the time period shall be automatically extended to
the business day immediately following such Saturday, Sunday or holiday.

 

22.                                 Headings.  The section
and subsection headings contained in this Agreement are included for
convenience only, and shall not limit or otherwise affect the terms hereof.

 

23.                                 Miscellaneous.

 

(a)                                  If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law, such
provision shall be fully separable, and this Agreement shall be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part thereof, the remaining provisions of this Agreement shall
remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance there from, and in lieu
of such illegal, invalid or unenforceable provision, there shall be added
automatically as a part of this Agreement, a legal valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible, and the Parties hereto request the court or
arbitrator to whom disputes relating to this Agreement are submitted to reform
the otherwise legal, invalid or unenforceable provision in accordance with this
Section.

 

(b)                                 The waiver by any Party hereto of any breach or
default shall not constitute a waiver of any different or subsequent breach or
default.

 

(c)                                  No Party shall be liable for failure to
perform or delay in performing any obligation (other than the payment of money)
under this Agreement or any individual contract of sale hereunder if such
failure or delay is due to fire, flood, earthquake, strike, labor trouble or
other industrial disturbance, war (declared or undeclared), embargo, blockade,
shortage of labor materials or equipment, legal prohibition, governmental
action, riot, insurrection, damage, destruction or any other cause beyond the
control of such defaulting Party preventing
or delaying the performance.

 

(d)                                 All notices, requests, consents and other
communications that are required or permitted under this Agreement shall be in
writing, and shall be delivered personally or mailed by certified or registered
mail, postage prepaid, return receipt requested (in which case it shall be
deemed given one week after mailing), or sent by fax, with a confirmation copy
simultaneously mailed (in which case it shall be deemed given when
transmitted), at the following addresses:

 

7

 

To the Company:

 

Heeling Sports EMEA

Avenue Van Volxemlaan 79

B1190 Brussels, Belgium

Attention: Vice President

 

with copies (which shall not
constitute notice) to:

 

Heelys, Inc.

3200 Belmeade Drive, Suite 100

Carrollton, Texas  75006

Attention: President

Telecopy: (214) 390-1661

 

Gardere Wynne Sewell LLP

1601 Elm Street, Suite 3000

Dallas, Texas  75201-4761

Attention:  Robert J. Ward, Esq.

Telecopy:  (214) 999-3266

 

To
Consultant:

 

c/o Achim Lippoth

Pasteurstrasse la

D 50735 Köln, Germany

Attn:  Achim Lippoth

Telecopy:  49-221-294-3821

 

with a copy (which shall not
constitute notice) to:

 

Heller Anwaltskanzlei

Freidheimweg 14

6353 Weggis, Schweiz

Attention:  Sven Heller

Telecopy:  +41 413910405

 

Or to such other address as to which any
Party hereto may notify the other Party hereto as aforesaid.  All communications shall be in the English
language.

[signature page follows]

 

8

 

IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.

 

 

	
   

  	
  HEELING
  SPORTS EMEA

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/
  John O’Neil

  
	
   

  	
  Name:

  	
     John
  O’Neil

  
	
   

  	
  Title:

  	
     Vice
  President

  

 

 

	
   

  	
  ACHIM
  LIPPOTH

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/
  Achim Lippoth

  
	
   

  	
  Name:

  	
         Achim
  Lippoth

  

 

9

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