Document:

EX. 10.1

ASSET PURCHASE AGREEMENT                   

THIS AGREEMENT made this 24th day of August, 2010.

BETWEEN:

GLOBAL TERRALENE INC., a company duly incorporated pursuant to the laws of the Province of British Columbia (Incorporation Number BC0882959), with a registered office located at 7th Floor, 1175 Douglas Street, Victoria, BC, V8W 2E1

(the “Vendor”)

AND:

GOLDEN SPIRIT ENTERPRISES LTD. a company duly incorporated pursuant to the laws of the State of Delaware, United States of America (Incorporation Number 2350791), with offices located at Suite 541-702 Kentucky Street, Bellingham, Washington, 98225

(the “Purchaser”)

BACKGROUND

A.

The Vendor owns certain assets, including patents and other intellectual property, which assets are more specifically described in this Agreement; and

B.

In accordance with this Agreement, the Vendor has agreed to sell, and the Purchaser has agreed to purchase, certain of the Vendor’s assets, on the terms and subject to the conditions provided in this Agreement.

TERMS OF AGREEMENT

In consideration of the premises and the covenants, agreements, representations, warranties and payments contained in this Agreement, the parties agree with the others as follows:

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1.

Definitions

The following words shall have the following meanings:

(a)                                                                                                                        

“Agreement” means this Asset Purchase Agreement;

(b)                                                                                                                        

“Assets” means the assets set out in section 3.1 and Schedule “A”;

(c)                                                                                                                        

“Closing Date” means November 30, 2010, or such other date as may be agreed to in writing between the Vendor and Purchaser; 

(d)                                                                                                                        

“Consideration” has the meaning set out in section 2;

(e)                                                                                                                        

“Schedule “A” ” means Schedule “A” attached to this Agreement; and

(f)                                                                                                                        

“Shares” means Restricted Rule 144 Common Shares of the Purchaser.

2.

Consideration

The consideration for the Purchaser’s purchase of the Assets will be the issuance to the Vendor of SEVEN MILLION Shares of the Purchaser, as follows:

(a)

FIVE MILLION Shares, issued and delivered to the Vendor on the Closing Date; and

(b)

TWO MILLION Shares, issued and delivered to the Vendor NINTEY (90) days after the Closing Date.

3.

Purchase and Sale of Assets

3.1

Description of Assets

Upon the terms and subject to the conditions of this Agreement, the Vendor agrees to sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase from the Vendor, the Assets described in Schedule “A” attached hereto.

3.2

Obligations Not Assumed

Except as provided in this Agreement, the Purchaser does not assume and shall not be liable for any obligations, commitments or liabilities of the Vendor or the Vendor’s business whatsoever including, without limiting the generality of the foregoing, any taxes under the Income Tax Act (Canada), amounts required by law to be withheld at source for Unemployment Insurance, Canada Pension Plan, Workers’ Compensation, or any other taxes whatsoever which may be or become payable by the Vendor including any income or corporation taxes resulting from or arising as a consequence of the sale by the Vendor to the Purchaser of the Assets herein contemplated.

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4.

Representations and Warranties of the Vendor

The Vendor represents and warrants to the Purchaser as follows, with the intent that the Purchaser will rely on these representations and warranties in entering into this Agreement, and in concluding the purchase and sale contemplated by this Agreement:

4.1

Capacity to Sell

The Vendor is a corporation duly incorporated, validly existing and in good standing under the British Columbia Business Corporations Act with respect to the filing of annual reports, and has the power and capacity to own and dispose of the Assets and to enter into this Agreement and carry out its terms to the full extent.

4.2

Sale Will Not Cause Default

Neither the execution and delivery of this Agreement nor the completion of the purchase and sale contemplated by this Agreement will:

(a)

violate any of the terms and provisions of the articles of the Vendor, or any order, decree, statute, by-law, regulation, covenant or restriction applicable to the Vendor or any of the Assets; or

(b)

give any person the right to terminate, cancel or remove any of the Assets.

4.3

Assets

The Vendor owns and possesses and has a good marketable title to the Assets free and clear of all mortgages, liens, charges, pledges, security interests, encumbrances and other claims except as provided in this Agreement.

4.4

Litigation

There is no litigation or administrative or governmental proceeding or inquiry pending, or to the knowledge of the Vendor, threatened against or relating to the Vendor, the Vendor’s business or any of the Assets, nor does the Vendor know of any reasonable basis for any such action, proceeding or inquiry.

4.5

Conformity with Laws

All governmental licenses and permits required for the conduct in the ordinary course of the operations of the Vendor’s business and the uses to which the Assets have been put, have been obtained and are in good standing and such conduct and uses are not in breach of any statute, by-law, regulation, covenant, restriction, plan or permit.

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4.6

Canadian Resident

The Vendor is not a non-resident of Canada within the meaning of the Income Tax Act.

4.7

Corporate Records

All material transactions to date to which the Vendor is or has been a party to, or in which it is or has been otherwise involved, have been fairly reflected in its corporate record books. 

4.8

Conduct of Business

Until the Closing Date, the Vendor shall conduct the Vendor’s business diligently and only in the ordinary course and will use its best efforts to preserve the Assets intact and to preserve for the Purchaser its relationship with its suppliers, customers and others having business relations with it.

4.9

Indemnity

The Vendor shall indemnify and hold harmless the Purchaser from and against:

(a)

any and all liabilities, whether accrued, absolute, contingent or otherwise, existing at the Closing Date and which are not agreed to be assumed by the Purchaser under this Agreement;

(b)

any and all damage or deficiencies resulting from any misrepresentation, breach of warranty or non-fulfilment of any covenant on the part of the Vendor under this Agreement or from any misrepresentation in or omission from any instrument furnished to the Purchaser under this Agreement; and

(c)

any and all claims, actions, suits, demands, proceedings, assessments, judgments, costs and legal and other expenses incident to any of the foregoing.

5.

Representations and Warranties of the Purchaser

The Purchaser represents and warrants to the Vendor as follows, with the intent that the Vendor will rely on these representations and warranties in entering into this Agreement, and in concluding the purchase and sale contemplated by this Agreement:

5.1

Conduct of Business

Until the Closing Date, the Purchaser shall conduct the Purchaser’s business diligently and only in the ordinary course.

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5.2

Indemnity

The Purchaser shall indemnify and hold harmless the Vendor from and against:

(a)

any and all damage resulting from any misrepresentation, breach of warranty or non-fulfilment of any covenant on the part of the Purchaser under this Agreement or from any misrepresentation in or omission from any instrument furnished to the Vendor under this Agreement; and

(b)

any and all claims, actions, suits, assessments, judgments, costs and legal and other expenses incident to any of the foregoing.

5.3

Status of Purchaser

The Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware with respect to the filing of annual reports, and has the power and capacity to purchase the Assets and to enter into this Agreement and carry out its terms to the full extent.

5.4

Taxes

The Purchaser will be liable for and shall pay any all provincial and federal sales taxes, registration charges and transfer fees properly payable upon and in connection with the sale and transfer of the Assets by the Vendor to the Purchaser and shall be responsible for any tax or other filings related thereto.

6.

Survival of Representations & Warranties

All statements contained in any instrument delivered by or on behalf of a party under this Agreement or in connection with the transaction contemplated by this Agreement shall be deemed to be representations and warranties by that party and shall, unless otherwise expressly stated, survive the Closing Date for a period of two years.

7.

Conditions Precedent to the Obligations of the Purchaser

All obligations of the Purchaser under this Agreement are subject to the fulfilment at or before the Closing Date of the following conditions:

7.1

Vendor’s Authority to Sell

As at the Closing Date, the execution and delivery of this Agreement and the completion of the transaction contemplated by this Agreement will have been duly and validly authorized by all necessary corporate action on the part of the Vendor, and this Agreement will constitute a legal, valid and binding obligation of the Vendor enforceable against the Vendor in accordance with its terms except as may be limited by laws of general application affecting the rights of creditors.

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7.2

Vendor’s Representations and Warranties

The Vendor’s representations and warranties contained in this Agreement and in any document delivered under this Agreement or in connection with the transactions contemplated by this Agreement will be true at and as of the Closing Date as if such representations and warranties were made at and as of such time.

7.3

Vendor’s Conditions

The Vendor will have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it before or at the Closing Date.

7.4

Patent Registrations

As of the Closing Date, the Vendor will deliver to the Purchaser duly executed assignments and any other necessary documentation to transfer the patents into the name of the Purchaser.  The Purchaser shall be responsible for any cost associated with assigning the patents to the Purchaser.

8.

Conditions Precedent to the Obligations of the Vendor

All obligations of the Vendor under this Agreement are subject to the fulfilment, before or at the Closing Date, of the following conditions:

8.1

Purchaser’s Authority to Purchase and Issue Shares

As at the Closing Date, the execution and delivery of this Agreement and the completion of the transactions contemplated by this Agreement, including issuing Shares to the Vendor, will have been duly and validly authorized by all necessary corporate action on the part of the Purchaser, and this Agreement will constitute a legal, valid and binding obligation of the Purchaser enforceable against the Purchaser in accordance with its terms except as limited by laws of general application affecting the rights of creditors.

8.2

Purchaser’s Representations and Warranties

The Purchaser’s representations and warranties contained in this Agreement will be true at and as of the Closing Date as though such representations and warranties were made as of such time.

8.3

Purchaser’s Conditions

The Purchaser will have performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by it at or before the Closing Date.

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8.4

Board of Directors

(a)

The Purchaser will have prepared the necessary documents to permit the Vendor’s representative, Donald Gress, to be appointed to the board of directors of the Purchaser.  

(b)

The parties agree that, during the first TWO (2) years that the Vendor owns shares in the Purchaser, the Vendor shall be entitled to appoint one representative to the board of directors.

8.5

Shareholder’s Agreement

The Purchaser will have prepared a shareholder’s agreement, for the Vendor’s signature, outlining the Vendor’s rights and obligations as a shareholder of the Vendor, as well as the Vendor’s right to have its representative sit on the board of directors of the Purchaser.  The parties hereto agree to negotiate in good faith the terms of the shareholder’s agreement.

9.

Closing

9.1

Closing Date

The purchase and sale of the Assets will be completed on the Closing Date.

9.2

Documents to be Delivered by the Vendor

At the Closing Date the Vendor will deliver or cause to be delivered to the Purchaser;

(a)

copies of the Vendor’s corporate resolutions authorizing sale of the Assets;

(b)

duly executed patent assignment documents; and

(c)

any other Assets not transferred by way of section 9.2(a).

9.3

Documents to be Delivered by the Purchaser

At the Closing Date the Purchaser will deliver or cause to be delivered to the Vendor:

(d)

copies of the Purchaser’s corporate resolutions authorizing purchase of the Assets;

(e)

a share certificate evidencing the issuance to the Vendor of FIVE MILLION Shares, as provided in section 2(a); and

(f)

the Shareholder’s Agreement, in accordance with section 8.4, duly executed by the Purchaser.

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10.

Risk of Loss

Until 12:01 a.m. on the Closing Date, the Assets will be and remain at the risk of the Vendor. If any of the Assets are lost, damaged or destroyed before the Closing Date, the Purchaser may, in lieu of terminating this Agreement, elect by notice in writing to the Vendor to complete the purchase to the extent possible without reduction of the purchase price, in which event all proceeds of any insurance or compensation in respect of such loss, damage or destruction will be payable to the Purchaser and all right and claim of the Vendor to any such amounts not paid by the Closing Date will be assigned to the Purchaser.

11.

Further Assurances

The parties will execute such further and other documents and do such further and other things as may be necessary to carry out and give effect to the intent of this Agreement.

12.

Notice

All notices required or permitted to be given under this Agreement will be in writing and personally delivered to the address of the intended recipient set forth on the first page of this Agreement or at such other address as may from time to time be notified by any of the parties in the manner provided in this Agreement.

13.

Entire Agreement

This Agreement constitutes the entire agreement between the parties and there are no representations or warranties, express or implied, statutory or otherwise and no collateral agreements other than as expressly set forth or referred to in this Agreement.

14.

Amendment

No amendment of this Agreement will be binding unless made in writing by all the parties to this Agreement.

15.

Assignment

This Agreement may not be assigned by any party without the prior written consent of the other party, which consent may be arbitrarily withheld.

16.

Time of the Essence

Time will be of the essence of this Agreement.

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17.

Applicable Law

This Agreement will be governed by and interpreted in accordance with the laws of the State of Delaware, USA.

18.

Successors and Assigns

This Agreement will ensure to the benefit of and be binding upon the parties and their respective successors and permitted assigns.

19.

Headings

The headings appearing in this Agreement are inserted for convenience of reference only and will not affect the interpretation of this Agreement.

20.

Counterpart

This Agreement may be signed in counterparts and each such counterpart will constitute an original document and such counterparts, taken together, will constitute one and the same instrument. A counterpart may be delivered by fax or any other form of electronic transmission.

AS EVIDENCE OF THEIR AGREEMENT the parties have executed this Agreement as of the day and year first above written.

GLOBAL TERRALENE INC.

By its Authorized Signatory

this 24th day of August, 2010:

/s/: Don Gress

___________________________

DON GRESS, President

 

GOLDEN SPIRIT ENTERPRISES LTD. 

By its Authorized Signatory

this 24th day of August, 2010:

s/s: Jaclyn Cruz

___________________________

JACLYN CRUZ, President

SCHEDULE “A”

Subject to the terms of this Agreement, the Vendor agrees to sell, assign and transfer to the Purchaser, and the Purchaser agrees to purchase from the Vendor, the following of the Vendor’s assets relating to the Terralene fuel formulas, including:

(a)

patents, trademarks, copyrights, trade names, and all pending applications for and registrations of any of the foregoing;

(b)

formulas, patents, business plans, data reports, methods of doing business, contact persons, customer lists, studies, findings and ideas;

(c)

schematics, algorithms, processes, patented and unpatented technology and know-how, in process research and development, fuel formulas, trade secrets and any similar intellectual property or proprietary rights and tangible or intangible proprietary information or material; 

(d)

the website, www.terralenefuels.com; and

(e)

the name, “Terralene”; however, the Vendor may continue to use the name “Global Terralene” as its incorporated and business name

(collectively, the “Assets”).Exhibit 10.2

 

Award
Number:                     

 

HEELYS, INC. 2006 STOCK INCENTIVE PLAN

(As Amended and Restated Effective May 20, 2010)

 

STOCK OPTION AGREEMENT

 

	
  Optionee:

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Total Shares Subject to
  Option:

  	
   

  
	
   

  	
   

  
	
  Exercise Price Per Share:

  	
  $

  
	
   

  	
   

  
	
  Date of Grant:

  	
                ,
  20

  
	
   

  	
   

  
	
  Vesting Commencement Date:

  	
                ,
  20

  
	
   

  	
   

  
	
  Post-Termination Exercise
  Period:

  	
  three months

  
	
   

  	
   

  
	
  Expiration Date:

  	
                ,
  20

  
	
   

  	
   

  
	
  Type of Stock Option:

  	
  o     Incentive
  Stock Option

  
	
   

  	
  o     Non-Qualified
  Stock Option

  

 

1.             Grant
of Option.  Heelys, Inc., a
Delaware corporation (the “Company”), hereby grants to the Optionee named above
an option (the “Option”) to purchase the total number of shares of Common Stock
set forth above as the “Total Shares Subject to Option” (the “Shares”) at the “Exercise
Price Per Share” set forth above (the “Exercise Price”), in accordance with
this Option Agreement and subject to the terms and conditions of the Heelys, Inc.
2006 Stock Incentive Plan, as amended and restated effective May 20, 2010
and as amended from time to time (the “Plan”), which are incorporated herein by
reference.  If designated as an Incentive
Stock Option above, the Option is intended to qualify as an “incentive stock
option” within the meaning of Section 422 of the Code.  Unless otherwise defined herein, capitalized
terms used herein shall have the respective meanings ascribed to them in the
Plan.

 

2.             Vesting;
Time of Exercise.  The “Vesting
Commencement Date” set forth above is the date on which the vesting period for
the Option begins. Subject to the terms and conditions of the Plan and this
Option Agreement, the Option shall vest and become exercisable in accordance
with Exhibit A attached hereto.

 

If
an installment covers a fractional Share, such installment will be rounded to
the next lowest Share, except the final installment, which will be for the
balance of the total Shares;

 

1

 

provided, that the Optionee
shall in no event be entitled under the Option to purchase a number of shares
of the Common Stock greater than the Total Shares Subject to Option.  Notwithstanding anything to the contrary
herein, the Option shall expire on the “Expiration Date” set forth on the first
page of this Option Agreement and must be exercised, if at all, on or
before 5:00 p.m. central standard time on the Expiration Date.  If the Optionee’s Continuous Service is
terminated, the Option shall be exercisable only to the extent that the
Optionee could have exercised it on the date of the Optionee’s termination of
Continuous Service.  Notwithstanding
anything to the contrary herein, the Option may become exercisable earlier than
the time stated above in connection with a Change in Control as provided in Section 14(c) of
the Plan.  The Optionee shall forfeit his
right to exercise the Option if the Optionee’s Continuous Service is terminated
for Cause.

 

3.             Exercise
of Option.

 

(a)           Right to Exercise.  The Option shall be exercisable in accordance
with the vesting provisions contained in Section 2 of this Option
Agreement and with the other applicable provisions of the Plan and this Option
Agreement.

 

(b)           Method of Exercise.  The Option shall be exercisable only by
delivery to the Company of an executed Stock Option Exercise Agreement (the “Exercise
Agreement”) in the form attached hereto as Exhibit B, or in such other
form approved by the Committee, which shall state the Optionee’s election to
exercise the Option, the whole number of Shares in respect of which the Option
is being exercised, and such other provisions as may be required by the
Committee or necessary to comply with securities and other applicable
laws.  The Exercise Agreement shall be
signed by the Optionee and, if married, by his spouse and shall be delivered to
the Company in person or by courier, by certified mail, or by such other method
as may be permitted by the Committee, accompanied (in any case) by payment of
the Exercise Price for each Share covered by the Exercise Agreement, as
described in Section 4 of this Option Agreement.  The Option shall be deemed to be exercised
upon receipt by the Company of such written Exercise Agreement accompanied by
the Exercise Price and, if deemed necessary by the Company, execution of such other
documents or the taking of other actions by the Optionee to comply with
applicable state or federal securities laws.

 

(c)           Issuance of Shares.  If the Exercise Agreement and payment are in
form and substance satisfactory to the Company (or its counsel), and Optionee
or any other person permitted to exercise the Option has complied with Section 5
of this Option Agreement, the Company shall issue or cause the issuance of, in
the name of the Optionee or Optionee’s legal representative, the Shares
purchased by such exercise of the Option.

 

4.             Method
of Payment. The Optionee’s delivery of the signed Exercise Agreement to
exercise the Option (in whole or in part) shall be accompanied by full payment
of the Exercise Price for the Shares being purchased.  Payment for the Shares may be made in cash (by
check) or, at the election of the Optionee and where permitted by law and
approved by the Committee, in one or more of the following methods: (i) if
the Common Stock has an established market as described in clause (i) of Section 3(s) of
the Plan, through a “same day sale” arrangement between the Optionee and a
FINRA Dealer whereby the Optionee irrevocably elects to exercise the Option and
to sell a portion of the Shares so purchased to pay for the exercise price and 

 

2

 

whereby
the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; (ii) if the Common Stock has an
established market as described in clause (i) of Section 3(s) of
the Plan, through a “margin” commitment from the Optionee and a FINRA Dealer
whereby the Optionee irrevocably elects to exercise the Option and to pledge
the Shares so purchased to the FINRA Dealer in a margin account as security for
a loan from the FINRA Dealer in the amount of the exercise price, and whereby
the FINRA Dealer irrevocably commits upon receipt of such Shares to forward the
exercise price directly to the Company; (iii) by surrender for
cancellation of Qualifying Shares at the Fair Market Value per share at the
time of exercise (provided that the surrender does not result in an accounting
charge for the Company); or (iv) any combination of the foregoing.

 

5.             Tax
Withholding Obligations.  No Shares
shall be delivered to the Optionee or any other person permitted to exercise
the Option pursuant to the exercise of the Option until the Optionee or such
other person has made arrangements acceptable to the Committee for the
satisfaction of applicable Federal, state or local income tax, employment tax,
and social security tax withholding obligations, including obligations incident
to the receipt of Shares.  Upon exercise
of the Option, the Company or the Optionee’s employer may offset or withhold
(from any amount owed by the Company or the Optionee’s employer to the Optionee)
or collect from the Optionee or such other person an amount sufficient to
satisfy such tax obligations and/or the employer’s withholding obligations.

 

6.             Termination
or Change of Continuous Service.

 

(a)           Post-Termination Exercise.  Subject to the provisions of Sections 7 and 8
of this Option Agreement, if the Optionee’s Continuous Service terminates,
other than as described in Section 6(b) of this Option Agreement, the
Optionee may, to the extent otherwise so entitled at the date of such
termination of the Optionee’s Continuous Service (the “Termination Date”),
exercise the Option during the “Post-Termination Exercise Period” set forth on
the first page of this Option Agreement. 
In no event may the Option be exercised later than 5:00 p.m.
central standard time on the Expiration Date. 
In the event of the Optionee’s change in status from Employee, Director
or Consultant to any other status of Employee, Director or Consultant, the
Option shall remain in effect and, except to the extent otherwise determined by
the Committee, continue to vest; provided, however, that (i) any change in
status from Employee or non-employee Director to Consultant will be considered
to be an interruption or termination of his Continuous Service unless
determined otherwise by the Company, and (ii) with respect to any
Incentive Stock Option that shall remain in effect after a change in status
from Employee to non-employee Director or Consultant, such Incentive Stock
Option shall cease to be treated as an Incentive Stock Option and shall be
treated as a Non-Qualified Stock Option on the day that is three (3) months
and one (1) day following such change in status.  Except as provided in Sections 7 and 8 of
this Option Agreement, to the extent that the Optionee is not entitled to exercise
the Option on the Termination Date, or if the Optionee does not exercise the
Option within the Post-Termination Exercise Period, the Option shall terminate.

 

(b)           No Post-Termination Exercise.  Unless the Committee otherwise determines, if
the Optionee’s Continuous Service is terminated either (i) by the Company
or an Affiliate for Cause, or (ii) if Optionee’s employment is subject to
the terms of a then-effective written employment agreement between the Optionee
and the Company or an Affiliate, by the Optionee 

 

3

 

without compliance with, or without having any
right to do so under, the terms of any such employment agreement, then the
Optionee’s right to exercise the Option shall immediately terminate.  The Committee shall have discretion for the
purposes of this Option Agreement to determine whether any termination of
Continuous Service by the Optionee is in compliance with, or is in accordance
with any right to terminate, under the terms of a then-effective written
employment agreement.

 

7.             Disability
of Optionee.  If the Optionee’s
Continuous Service terminates as a result of his Disability, or in the event of
the Optionee’s Disability during the Post-Termination Exercise Period, the
Optionee may, but only within twelve (12) months from the Termination Date (and
in no event later than the Expiration Date), exercise the Option to the extent
he was otherwise entitled to exercise it on the Termination Date.  To the extent that the Optionee is not
entitled to exercise the Option on the Termination Date, or if the Optionee
does not exercise the Option to the extent so entitled within the time period
specified in this Section 7, the Option shall terminate.

 

8.             Death
of Optionee.  In the event of the
termination of the Optionee’s Continuous Service as a result of his death, or
in the event of the Optionee’s death during the Post-Termination Exercise
Period or during the twelve (12)-month period following the Optionee’s
termination of Continuous Service as a result of his Disability, the Optionee’s
estate, or a person who acquired the right to exercise the Option by bequest or
inheritance, may exercise the Option, but only to the extent the Optionee could
have exercised the Option at the date of his death, within twelve (12) months
from the date of death (but in no event later than the Expiration Date).  To the extent that the Optionee is not
entitled to exercise the Option on the date of death, or if the Option is not
exercised to the extent so entitled within the time period specified in this Section 8,
the Option shall terminate.

 

9.             Notice
of Disqualifying Disposition.  If the
Option is an Incentive Stock Option, and if the Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to exercise of the Incentive
Stock Option on or before the later of (i) the date that is two (2) years
after the “Date of Grant” set forth on the first page of this Option
Agreement, or (ii) the date that is one (1) year after exercise of
the Incentive Stock Option with respect to the Shares to be sold or disposed
of, then the Optionee shall immediately notify the Company in writing of such
sale or other disposition.  The Optionee
acknowledges and agrees that he may be subject to income tax withholding by the
Company on the compensation income recognized by him from any such early sale
or other disposition by payment in cash or out of the current wages or other
earnings payable to the Optionee.

 

10.           Nontransferability
of Option.  Neither the Option nor
any of the Optionee’s rights under this Option Agreement may be transferred or
assigned in any manner other than by will or by the law of descent and
distribution; the Option and the Optionee’s rights under this Option Agreement
may be exercised during the lifetime of the Optionee only by the Optionee.  Notwithstanding the preceding sentence, the
Optionee may transfer a Non-Qualified Stock Option to such family members,
family member trusts, family limited partnerships, and other family member
entities as the Company, in its sole discretion, may approve prior to any such
transfer.  No such transfer shall be
approved by the Company unless the transferee agrees in writing, in favor of
the Company, that the Shares acquired pursuant to the exercise of the Non-

 

4

 

Qualified
Stock Option shall be held subject to the provisions of the Exercise
Agreement.  No such transfer will be
approved by the Company if the Common Stock issuable under such transferred
Option would not be eligible to be registered on Form S-8 promulgated
under the Securities Act.

 

11.           Tax
Consequences.  Set forth below is a
brief summary, as of the Date of Grant, of some of the federal tax consequences
of exercise of the Option and disposition of the Shares.  THIS SUMMARY IS NECESSARILY INCOMPLETE, AND
THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.  THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES.

 

(a)           Exercise of Incentive Stock Option.  If the Option qualifies as an Incentive Stock
Option,  there will be no regular federal income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to alternative minimum taxable income for
federal income tax purposes and may subject the Optionee to an alternative
minimum tax liability in the year of exercise.

 

(b)           Exercise of Non-Qualified Stock
Option.  If the Option does not
qualify as an Incentive Stock Option, there may be a regular federal income tax
liability upon the exercise of the Option. 
The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise
Price.  If the Optionee is an Employee or
former Employee, the Company will be required to withhold from the Optionee’s
compensation or collect from the Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.

 

(c)           Disposition of Shares.  In the case of a Non-Qualified Stock Option,
if the Shares are held for at least one (1) year before disposition, any
gain upon disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes.  In the
case of an Incentive Stock Option, if Shares are held for at least one (1) year
after the date of exercise and at least two 
(2) years after the Date of Grant, any gain upon disposition on the
Shares will be treated as long-term capital gain for federal income tax
purposes.  If the Shares acquired
pursuant to an Incentive Stock Option  are disposed of within such one (1)-year or
two (2)-year periods (a “Disqualifying Disposition”), the gain on such
Disqualifying Disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the Exercise Price (the “Spread”),
or, if less, the difference between the amount realized on the sale of such
Shares and the Exercise Price.  Any gain
in excess of the Spread shall be treated as capital gain.

 

12.           Term
of Option.  The Option may be exercised
no later than the Expiration Date or such earlier date as otherwise provided in
this Option Agreement.

 

13.           Entire
Agreement; Governing Law.  The Plan
and this Option Agreement (with the Exercise Agreement, if the Option is
exercised) constitute the entire agreement of the Company and the Optionee
(collectively the “Parties”) with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Parties with respect 

 

5

 

to
the subject matter hereof, and may not be modified adversely to the Optionee’s
interest except by means of a writing signed by the Parties.  Nothing in the Plan and this Option Agreement
(except as expressly provided therein or herein) is intended to confer any
rights or remedies on any person other than the Parties.  The Plan and this Option Agreement are to be
construed in accordance with and governed by the internal laws of the State of
Texas without giving effect to any choice-of-law rule that would cause the
application of the laws of any jurisdiction other than the internal laws of the
State of Texas to the rights and duties of the Parties.

 

14.           Severability
and Reformation.  The Company and the
Optionee intend all provisions of the Plan and this Option Agreement to be
enforced to the fullest extent permitted by law.  Accordingly, should a court of competent
jurisdiction determine that the scope of any provision of the Plan or this
Option Agreement is too broad to be enforced as written, the court should
reform the provision to such narrower scope as it determines to be
enforceable.  If, however, any provision
of the Plan or this Option Agreement is held to be wholly illegal, invalid, or
unenforceable under present or future laws, such provision shall be fully
severable and severed, and the Plan and this Option Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
were never a part thereof or hereof, and the remaining provisions of the Plan and
this Option Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its
severance.

 

15.           Interpretive
Matters.  Whenever required by the
context, pronouns and any variation thereof shall be deemed to refer to the
masculine, feminine, or neuter, and the singular shall include the plural, and
vice versa.  The term “include” or “including”
does not denote or imply any limitation. 
The term “business day” means any Monday through Friday other than such
a day on which banks are authorized to be closed in the State of Texas.  The captions and headings used in this Option
Agreement are inserted for convenience and shall not be deemed a part of the
Option or this Option Agreement for construction or interpretation.

 

16.           Dispute
Resolution.  Unless provided
otherwise in a then-effective written employment agreement, the provisions of
this Section 16 shall be the exclusive means of resolving disputes of the
Parties (including any other persons claiming any rights or having any
obligations through the Company or the Optionee) arising out of or relating to
the Plan and this Option Agreement (including the Exercise Agreement, if the
Option is exercised).  The Parties shall
attempt in good faith to resolve any disputes arising out of or relating to the
Plan and this Option Agreement (including the Exercise Agreement, if the Option
is exercised) by negotiation between individuals who have authority to settle
the controversy.  Negotiations shall be
commenced by either Party by a written statement of the Party’s position and
the name and title of the individual who will represent the Party.  Within thirty (30) days of the written
notification, the Parties shall meet at a mutually acceptable time and place,
and thereafter as often as they reasonably deem necessary, to resolve the
dispute.  If either Party determines that
the dispute cannot be resolved by negotiation, such Party shall notify the
other Party and the Parties agree that any suit, action, or proceeding arising
out of or relating to the Plan or this Option Agreement shall be brought in the
United States District Court for the Northern District of Texas (or should such
court lack jurisdiction to hear such action, suit or proceeding, in a Texas state
court in Dallas County, Texas) and that the Parties shall submit to the
jurisdiction of such court.  The Parties
irrevocably waive, to the fullest extent permitted by law, any objection a
Party may have to the laying of venue for any such suit, action or proceeding
brought in such court.  THE 

 

6

 

PARTIES
ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF
ANY SUCH SUIT, ACTION OR PROCEEDING.  If
any one or more provisions of this Section 16 shall for any reason be held
invalid or unenforceable, it is the specific intent of the Parties that such
provisions shall be modified to the minimum extent necessary to make it or its
application valid and enforceable.

 

17.           Notice.  Any notice or other communication required or
permitted hereunder shall be given in writing and shall be deemed given,
effective, and received upon prepaid delivery in person or by courier or upon
the earliest of delivery or the third business day after deposit in the United
States mail if sent by certified mail, with postage and fees prepaid, addressed
to the other Party at its address as shown beneath its signature in this Option
Agreement, or to such other address as such Party may designate in writing from
time to time by notice to the other Party in accordance with this Section 17.

 

	
   

  	
  HEELYS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
  3200 Belmeade Drive, Suite 100

  
	
   

  	
   

  	
  Carrollton, Texas 75006

  
				

 

7

 

THE
OPTIONEE ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED OTHERWISE
HEREIN, THE SHARES SUBJECT TO THE OPTION SHALL VEST, IF AT ALL, ONLY
DURING THE PERIOD OF THE OPTIONEE’S CONTINUOUS SERVICE (NOT THROUGH THE ACT OF
BEING HIRED, BEING GRANTED THE OPTION OR ACQUIRING SHARES HEREUNDER).  THE OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS OPTION AGREEMENT OR THE PLAN SHALL CONFER UPON THE
OPTIONEE ANY RIGHT WITH RESPECT TO FUTURE AWARDS OR CONTINUATION OF THE
OPTIONEE’S CONTINUOUS SERVICE, NOR SHALL IT INTERFERE IN ANY WAY WITH THE
OPTIONEE’S RIGHT OR THE RIGHT OF THE COMPANY OR ANY AFFILIATE (OR THE OPTIONEE’S
EMPLOYER) TO TERMINATE OPTIONEE’S CONTINUOUS SERVICE, WITH OR WITHOUT CAUSE,
AND WITH OR WITHOUT NOTICE.  THE OPTIONEE
ACKNOWLEDGES THAT UNLESS THE OPTIONEE HAS A WRITTEN EMPLOYMENT AGREEMENT WITH
THE COMPANY TO THE CONTRARY, THE OPTIONEE’S EMPLOYMENT STATUS IS “AT WILL.”

 

The
Optionee acknowledges receipt of a copy of the Plan, represents that he is
familiar with the terms and provisions thereof, and hereby accepts this Option
subject to all of the terms and provisions hereof and thereof.  The Optionee has reviewed this Option
Agreement, the Plan, and the Exercise Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement, and fully understands all provisions of this Option Agreement, the
Plan and the Exercise Agreement.  The
Optionee hereby agrees that all disputes arising out of or relating to this
Option Agreement, the Plan and the Exercise Agreement shall be resolved in
accordance with Section 16 of this Option Agreement.  The Optionee further agrees to notify the
Company upon any change in the address for notice indicated in this Option
Agreement.

 

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
                                          ,
  Optionee

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

8

 

 

EXHIBIT A

 

HEELYS, INC. 2006 STOCK INCENTIVE PLAN

(As Amended and Restated Effective May 20, 2010)

 

STOCK OPTION AGREEMENT

 

Subject to the terms and
conditions of the Plan and this Option Agreement, the Option shall vest and
become exercisable in          equal
cumulative annual installments of
                          
(   ) of the Shares subject to Award
Number      any time on or after each successive
anniversary of the Vesting Commencement Date. 
The Option shall be fully vested and exercisable on the
                  
(    ) anniversary of the Vesting Commencement Date.

 

9

 

EXHIBIT B

 

HEELYS, INC. 2006 STOCK INCENTIVE PLAN

(As Amended and Restated Effective May 20, 2010)

 

STOCK OPTION EXERCISE AGREEMENT

 

This Exercise Agreement is
made this         day of
                        ,
20     between Heelys, Inc. (the “Company”), and the
optionee named below (the “Optionee”) pursuant to the Heelys, Inc. 2006 Stock
Incentive Plan (the “Plan”), as amended and restated effective May 20,
2010.  Unless otherwise defined herein,
the capitalized terms used in this Exercise Agreement shall have the meanings
ascribed to them in the Plan and in the Option Agreement to which this Exercise
Agreement relates.

 

	
  Award Number:

  	
   

  
	
   

  	
   

  
	
  Optionee:

  	
   

  
	
   

  	
   

  
	
  Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Number of Shares
  Purchased:

  	
   

  
	
   

  	
   

  
	
  Price Per Share:

  	
  $

  
	
   

  	
   

  
	
  Aggregate Purchase Price:

  	
   

  
	
   

  	
   

  
	
  Date of Grant:

  	
                     ,
  20

  
	
   

  	
   

  
	
  Vesting Commencement Date:

  	
                     ,
  20

  
	
   

  	
   

  
	
  Type of Stock Option:

  	
  o     Incentive
  Stock Option

  
	
   

  	
  o     Non-Qualified
  Stock Option

  

 

The Optionee hereby delivers
to the Company the “Aggregate Purchase Price” set forth above in cash as
indicated below, or to the extent provided for in the Option Agreement and
approved by the Committee by accepting this Exercise Agreement, as follows (as
applicable, check and complete):

 

o                                    in cash in the
amount of
$                        ,
receipt of which is acknowledged by the Company;

 

o                                    by delivery of
                      
Qualifying Shares, owned free and clear of all liens, claims, encumbrances or
security interests, and valued at the current Fair Market

 

1

 

Value
at the time of exercise of
$                  
per share (provided that the delivery does not result in an accounting charge
for the Company);

 

o                                    through a “same-day-sale”
commitment, delivered herewith, from the Optionee and the FINRA Dealer named
therein in the amount of
$                                      ;
and/or

 

o                                    through a “margin”
commitment, delivered herewith, from the Optionee and the FINRA Dealer named
therein in the amount of
$                                    .

 

The Company and the Optionee
(the “Parties”) hereby agree as follows:

 

1.                                       Purchase of Shares.  On this date and subject to the terms and
conditions of this Exercise Agreement, the Optionee hereby exercises the Option
granted in the Option Agreement between the Parties, dated as of the “Date of
Grant” set forth on the first page of this Exercise Agreement, with respect to
the “Number of Shares Purchased” of the Common Stock set forth on the first
page of this Exercise Agreement (the “Shares”) at the “Aggregate Purchase Price”
set forth on the first page of this Exercise Agreement (the “Aggregate Purchase
Price”) and equal to the “Price Per Share” set forth on the first page of this
Exercise Agreement multiplied by the Number of Shares Purchased.  The term “Shares” refers to the Shares
purchased under this Exercise Agreement and includes all securities received (a)
in replacement of the Shares, and (b) as a result of stock dividends or
stock splits in respect of the Shares.

 

2.                                       Representations of the Optionee.  The Optionee represents and warrants to the
Company that the Optionee has received, read and understood the Plan, the
Option Agreement and this Exercise Agreement and agrees to abide by and be
bound by their terms and conditions.

 

3.                                       Rights as Stockholder.  Until the stock certificate evidencing the
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Shares, notwithstanding the exercise of the Option.  The Company shall issue (or cause to be
issued) such stock certificate promptly after the Option is exercised.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued.

 

4.                                       Tax Withholding Obligations.  The Optionee agrees to satisfy all applicable
federal, state and local income, employment and other tax withholding
obligations and herewith delivers to the Company the amount necessary, or has
made arrangements acceptable to the Company, to satisfy such obligations as
provided in the Plan and the Option Agreement.

 

5.                                       Tax Consequences.  The Optionee understands that he may suffer
adverse tax consequences as a result of the Optionee’s purchase or disposition
of the Shares.  The Optionee represents
that the Optionee has consulted with any tax consultant(s) he deems advisable
in connection with the purchase or disposition of the Shares and that Optionee
is not relying on the Company for any tax advice.

 

6.                                       Successors and Assigns.  The Company may assign any of its rights
under this Exercise Agreement and this Exercise Agreement shall inure to the
benefit of the successors and 

 

2

 

assigns of the Company.  Subject to the restrictions on transfer
herein set forth, this Exercise Agreement shall be binding upon the Optionee
and his heirs, executors, administrators, successors and permitted assigns.

 

7.                                       Entire Agreement; Governing Law.  This Exercise Agreement, together with the
Plan and the Option Agreement, constitute the entire agreement of the Parties
with respect to the subject matter hereof and supersede in their entirety all
prior undertakings and agreements of the Parties with respect to the subject
matter hereof, and may not be modified adversely to the Optionee’s interest
except by means of a writing signed by the Parties.  Nothing in this Exercise Agreement or in the
Plan or the Option Agreement (except as expressly provided herein or therein)
is intended to confer any rights or remedies on any person other than the
Parties.  The Plan and this Exercise
Agreement are to be construed in accordance with and governed by the internal
laws of the State of Texas without giving effect to any choice-of-law rule that
would cause the application of the laws of any jurisdiction other than the
internal laws of the State of Texas to the rights and duties of the Parties.

 

8.                                       Severability and Reformation.  The Company and the Optionee intend all
provisions of the Plan and this Exercise Agreement to be enforced to the
fullest extent permitted by law. 
Accordingly, should a court of competent jurisdiction determine that the
scope of any provision of the Plan or this Exercise Agreement is too broad to
be enforced as written, the court should reform the provision to such narrower
scope as it determines to be enforceable. 
If, however, any provision of the Plan or this Exercise Agreement is
held to be wholly illegal, invalid or unenforceable under present or future
law, such provision shall be fully severable and severed, and the Plan and this
Exercise Agreement shall be construed and enforced as if such illegal, invalid
or unenforceable provision were never a part thereof or hereof, and the
remaining provisions of the Plan and this Exercise Agreement shall remain in
full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance.

 

9.                                       Interpretive Matters.  Whenever required by the context, pronouns
and any variation thereof shall be deemed to refer to the masculine, feminine,
or neuter, and the singular shall include the plural, and vice versa.  The term “include” or “including” does not
denote or imply any limitation.  The term
“business day” means any Monday through Friday other than such a day on which
banks are authorized to be closed in the State of Texas.  The captions and headings used in this
Exercise Agreement are inserted for convenience and shall not be deemed a part
of this Exercise Agreement for construction or interpretation.

 

10.                                 Dispute Resolution.  The provisions of Section 16 of the Option
Agreement shall be the exclusive means of resolving disputes arising out of or
relating to this Exercise Agreement.

 

11.                                 Notice.  Any notice or other communication required or
permitted hereunder shall be given in writing and shall be deemed given,
effective, and received upon prepaid delivery in person or by courier or upon
the earlier of delivery or the third business day after deposit in the United
States mail if sent by certified mail, with postage and fees prepaid, addressed
to the other Party at its address as shown beneath its signature in the Option
Agreement, or to such other address as such Party may designate in writing from
time to time by notice to the other Party in accordance with this
Section 11.

 

3

 

12.                                 Further Instruments.  Each Party agrees to execute such further
instruments and to take such further action as may be necessary or reasonably
appropriate to carry out the purposes and intent of this Exercise Agreement.  If the Optionee is married, the Parties agree
that this Exercise Agreement shall not be effective until the Optionee’s spouse
executes the Consent of Spouse in the form attached hereto as Attachment 1.

 

	
  Submitted by:

  	
   

  	
  Accepted by:

  
	
   

  	
   

  	
   

  
	
  OPTIONEE:

  	
   

  	
   

  	
  HEELYS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  (Signature)

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
   

  
						

 

4

 

ATTACHMENT 1

 

HEELYS, INC. 2006 STOCK INCENTIVE PLAN

(As Amended and Restated Effective May 20, 2010)

 

STOCK OPTION EXERCISE AGREEMENT

 

CONSENT OF SPOUSE

 

I,
                                                                  ,
spouse of
                                              ,
have read and approve the foregoing Stock Option Exercise Agreement (the “Agreement”).
In consideration of the issuance of shares of Common Stock by Heelys, Inc. (the
“Company”) to my spouse, as set forth in the Agreement, I hereby appoint my
spouse as my attorney-in-fact in respect to the exercise of any and all rights
under the Agreement and agree to be bound by the provisions of the Agreement,
insofar as I may have any rights in the Agreement or any of the shares of
Common Stock issued pursuant thereto under the community property laws or
similar laws relating to marital property in effect in the state of our
residence as of the date of the Agreement.

 

 

	
  Dated:
                                           ,
  20      .

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature of Spouse

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Please print name)

  

 

5

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