Document:

Exhibit
10.6

 

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.

 

TERMINATION
AGREEMENT

 

THIS TERMINATION AGREEMENT (the “Agreement”) is dated as of April 30,
2008 (the “Effective Date”), by and between Heeling
Sports Limited, a Texas limited partnership (the “Company”), Trotwood Import/Export (the “Distributor”), Trotwood Investments Ltd., a Monaco company and the sole
owner of the Distributor (“Shareholder”) 
and David Stanley and Margarete Stanley,
the sole owners of the  Shareholder (the “Owners”).  The Company, Distributor, Shareholder  and Owners are sometimes collectively
referred to herein as the “Parties” and individually as a “Party.”

 

WHEREAS, the
Company and the Distributor entered into that certain International Distributor
Agreement, dated as of February 21, 2007 (the “Distributor Agreement”);
and

 

WHEREAS, the
Parties desire to terminate the Distributor Agreement and to evidence their
agreement to certain other matters as set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing
premises and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Parties hereby agree as follows:

 

1.                                       Defined Terms.  Capitalized terms used but not
defined herein and defined in the Distributor Agreement shall have the meanings
ascribed to such terms in the Distributor Agreement.

 

2.                                       Termination.

 

(a)                                  Subject to Section 2(b), the Distributor Agreement shall terminate in all respects on the Effective Date and thereafter
have no further force and effect.

 

(b)                                 Notwithstanding Section 2(a):

 

(i)                                     the Parties agree that the covenants and obligations set forth in
Sections 3(f), 3(m), 3(n), 3(p), 3(s), 3(t), 3(u), 5, 6, 7, 8, 9, 10, 11, 12,
13 and 14 of the Distributor Agreement shall survive the termination of the
Distributor Agreement; and

 

(ii)                                  Distributor shall provide the Company with Distributor’s current and
prospective customer lists that would be useful to the Company in developing
the Heelys brand and distribution business in the Territory.  It is expressly understood that the Company
has declined to purchase the Distributor as part of this Agreement 

 

 

and that Company
consequently relinquishes all immaterial assets and goodwill belonging to
Distributor.

 

(c)                                  On the
Effective Date, the Company shall pay Distributor (or at Distributors election
the Shareholder or the Owner) ** by bank transfer to the account of designated by the
Distributor.

 

3.                                       Product/Inventory Re-Purchase and Payment.  Upon
execution hereof, the Company shall purchase from Distributor, and Distributor
shall sell, assign, transfer, convey, and make available  to the Company, free and clear of any and all
liens, claims and encumbrances, all of Distributor’s unsold Heelys Products,
including those which may be in transit at the “Effective Date” at Distributor’s
“Landed Cost” (which means the Distributor’s purchase price plus Distributor’s
costs of transport and handling from the Company’s factory to Distributor’s
normal warehouse including all taxes and customs duties where applicable) and
the order books ( relating to sales of Heelys products) and other incidental
assets of Distributor related to the distribution operations, all as described
on Exhibit A attached hereto (collectively, the “Purchase Items”).  The Company shall not assume any liabilities
of Distributor and Distributor shall indemnify, defend and hold Company
harmless from and against any such liabilities.

 

(a)                                  The Company
shall pay Distributor in full by  May 16, 2008.  Payment shall be by means of a
check or a wire transfer of immediately available funds to a bank account of
Distributor, specified in writing to the Company.  The Parties agree that the Company shall
acquire:  (i) the unsold Products at
their landed costs as set forth on Exhibit A; (ii) Distributor’s
order book at the value on Distributor’s books as of the Effective Date and as
set forth on Exhibit A; and (3) other incidental assets
related to the distribution operations as set forth on Exhibit A.

 

(b)                                 The Company
shall collect from the Distributor  the
Purchase Items to the Company on or before  May 16,  2008. Any orders from the factory in transit as of this
date shall be made available to the Company on receipt by the Distributor.

 

4.                                       Re-Purchase of Distributor’s Unshipped Orders.   Unshipped orders on
Distributor’s order book as of the Effective Date (the “Unshipped Orders”) as
set forth in Exhibit B shall where possible be novated to an affiliate of
the Company designated in writing by the Company.  The Company shall pay, or cause one of its
affiliates to pay, Distributor the net wholesale margin on the Unshipped Orders
within ten (10) days following the receipt of the original payment for the
Unshipped Orders.  Net wholesale margin
being calculated as the sales price as noted in the contract/order by the
client exclusive of tax less the Landed Cost of goods (and if any such costs
are in US Dollars, they will converted to Euro at a rate of US$1.56 to €1.00).

 

In the event that a customer does not wish or
agree to the novation of their order then the Company will supply the
Distributor with the goods in a timely fashion to meet the order and permit the
Distributor to supply and invoice the customer in order to fulfill the order.

 

In the event that a novated order is
subsequently cancelled or partly cancelled by a customer as a result of the
Company or its affiliate not complying with the customer’s “General Terms and 

 

2

 

Conditions
of sale and delivery” and the pre agreed commercial order conditions between
the customer and the Distributor (all of which have been previously delivered
by Distributor to Company), then the Company shall pay the Distributor in full
the net wholesale margin as defined above on the unfulfilled part of the order.
In this event the net wholesale margin will be paid within 30 days of the
cancellation.

 

Distributor shall be responsible for the
payment of all commissions, bonuses and any other amounts payable to or to be
paid to the Distributor’s sales agents or any other person or entity relating
directly or indirectly to Unshipped Orders and the sales contemplated in this Section 4.  Distributor will indemnify, defend and hold
the Company harmless from and against any such commissions, bonuses and all
other amounts payable or to be paid and any liability arising therefrom.

 

5.                                       Contingent Compensation.

 

(a)                                  Subject to
the limitations set forth in Section 5(b), the Company shall pay Distributor
(or at Distributor’s election, Shareholder or the Owners) ** per Net Pair Sold
(“Contingent Compensation”).  “Net Pair
Sold” means the gross sales of pairs of Heelys-branded footwear by the Company
or its affiliates (but not any Product sold by the Distributor) in France,
Monaco and Andorra less the aggregate of all pairs of Heelys-branded footwear
returned.  Contingent Compensation shall
be paid within thirty (30) days following each month-end commencing with the
first month following the Effective Date. 
The Company will provide Distributor a list of Products sold in France,
Monaco and Andorra by model during the previous month.  The Company warrants that it shall not change
or entice customers to change the place of delivery of goods to outside the
Territory to avoid paying the Contingent Compensation.

 

(b)                                 The Company’s
obligation to pay Distributor Contingent Compensation shall terminate upon the
earlier of (i) the third anniversary from the Effective Date or (ii) when
Distributor has been paid ** of Contingent Compensation.

 

6.                                       Covenant Not to Compete.  During the Restriction Period (defined
below), Owners and Distributor:  (a) shall not directly or indirectly
engage in any manner
(including, without limitation, as a principal, owner, agent, associate,
consultant, employee, investor, equity holder, lender, partner or board member)
in a Competing Business (as defined below) anywhere in the Territory (as
defined below); and (b) shall not enter into any employment, consulting,
advisory, lending or other business relationship with any person, firm, entity,
company or business organization that is engaged in a Competing Business
anywhere in the Territory. 
Notwithstanding the foregoing sentence, Owners and Distributor shall not
be restricted from directly or indirectly owning or acquiring an equity
interest of less than five percent (5%) of a publicly-traded entity.

 

(a)                                  Compensation.  This covenant not to compete is for the
benefit of the Company and its affiliates. 
In consideration thereof, the Company shall pay Distributor (or at
Distributor’s election, Shareholder or Owners) ** on each the first and second
anniversary of the Effective Date. 
Distributor, Shareholder and Owners acknowledge and agree that they have
received additional consideration in support of the covenants contained in this
Section 6 pursuant to a 

 

3

 

consulting
agreement between the Company or its affiliates and Mrs. Stanley or her
respective affiliates.

 

(b)                                 Definitions
of Territory, Competing Business and Restriction Period.

 

(i)                                     “Territory”
means France, Monaco and Andorra.

 

(ii)                                  “Competing
Business” means using, importing, distributing, selling, or manufacturing any
product that is identical or similar to the Heelys Products that could be
viewed as competitive with any of the Heelys Products.

 

(iii)                               “Restriction
Period” means the period extending through the second anniversary following the
date the last payment is received by Distributor or Owners pursuant to this
Agreement.

 

(c)                                  Injunctive
Relief.  It is hereby understood and agreed that
damages shall be an inadequate remedy in the event of a breach by Distributor,
Shareholder or Owners of any of said covenants and that any such breach by
Distributor, Shareholder  or Owners will
cause the Company great and irreparable injury and damage.  Accordingly, Distributor, Shareholder  and Owners agree that the Company shall be
entitled, without waiving any additional rights or remedies otherwise available
to the Company at law or in equity or by statute, to injunctive and other
equitable relief in the event of a breach or intended or threatened breach by
Distributor, Shareholder or Owners of any of said covenants.

 

7.                                       Indemnification.  Distributor, Shareholder and
Owners hereby agree to jointly and severally 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 for which indemnification is provided in the Distributor Agreement,
arising out of or in connection with:  (a) the
sale, license, servicing and related activities pursuant to the Distributor
Agreement with respect to the Heelys Products by Distributor; (b) the
failure of Distributor to comply with any laws, rules and/or regulations; (c) Distributor’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; (d) any
warranties granted under the laws of the Territory in excess of those
warranties contained in Sections 3 and 11 of the Distributor Agreement; or (e) the
failure of Distributor to comply with each and every term of the Distributor
Agreement.  Shareholder, Owners and
Distributor hereby release all Company Parties from any duty, obligation or
requirement to make any indemnity payments to Shareholder and/or Owners and/or
Distributor and/or any of Distributor’s sales agents.  Distributor agrees to pay any and all such
indemnity payments and shall hold the Company Parties harmless from and against
same.  Distributor shall be responsible
for paying any and all taxes in the Territory relating directly or indirectly
to this Agreement or the performance hereof.

 

4

 

Distributor 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 the
Distributor Agreement.  Distributor
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 Distributor.  Distributor
further agrees that such Company Party may elect to allow Distributor, at
Distributor’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.

 

8.                                       Release by
Distributor, Shareholder and Owners.  Distributor, Shareholder and
Owners hereby fully, unconditionally and irrevocably release and discharge the
Company Parties from any and all actions, causes of
action, suits, debts, liens, contracts, injuries, agreements, obligations,
promises, liabilities, claims, rights, demands, damages, controversies, losses,
costs, and expenses (including, but not limited to, court costs and attorneys’
fees) of any and all kinds, whether known or unknown, suspected or unsuspected,
fixed or contingent, in law or in equity, which Distributor, Shareholder or
Owners have, own, hold, or claim to have, own, or hold, or at any time
heretofore had, owned, held, or claimed to have, own, or hold, against any Company Party, in any way arising
with respect to periods and events up to and including the Effective Date.

 

9.                                       Waiver of
Legal Rights.  Distributor, Shareholder and
Owners acknowledge and agree that the waivers and releases set forth in this
Agreement are in exchange for valuable consideration which Distributor,
Shareholder and Owners would not otherwise be entitled to receive.  In entering into this Agreement, Distributor,
Shareholder  and Owners expressly waive
any and all rights either of them have under any laws, rules, statutes or any
common law principle of similar effect that provides that their respective
waivers and releases do not extend to claims that Distributor and /or
Shareholder and/or Owners do not know or suspect to exist in their favor at the
time of execution and delivery of this Agreement, which if known by Distributor
and/or Shareholder and/or Owners would have materially affected their decision
to execute and deliver this Agreement. 
The consequences of the foregoing waiver have been explained by legal
counsel to Distributor, Shareholder and Owners. 
Each of Parties acknowledge that it may hereafter discover facts
different from, or in addition to, those which it knows or believes to be true
with respect to the claims released pursuant to this Agreement, and all Parties
that this Agreement and the provisions contained herein shall be and remain
effective in all respects notwithstanding such different or additional facts or
the discovery thereof.

 

10.                                 Protection
of Confidential Information.  Distributor, Shareholder and
Owners acknowledge and agree that they have had access to certain confidential
information and trade secrets (“Trade Secrets”) of the Company pursuant to the
Distributor Agreement.  Distributor,
Shareholder  and Owners agree not to
disclose to any party or use any of the Trade Secrets for any purpose and to
keep the Trade Secrets confidential.

 

11.                                 Confidentiality
Covenant and Litigation Assistance.

 

(a)                                              Distributor, Shareholder and Owners hereby agree to keep confidential
and not divulge, disseminate, deliver, publish, describe or communicate the
terms and conditions of this 

 

5

 

Agreement or any
part hereof, specifically or in general, in qualitative or descriptive terms,
to any other person, except to their attorneys and accountants, without the
prior written consent of the Company, unless ordered by a court or governmental
authority, provided that reasonable written notice is given to the Company
prior to any such disclosure compelled by court order or governmental
authority.  Shareholder, Distributor and
Owners understand that disclosure of any portion of this Agreement will constitute
a breach of its terms and will entitle the Company to  injunctive relief and damages.

 

(b)                                             For a period of three (3) years after the Effective Date,
Distributor and Owners shall, upon reasonable notice, furnish such information
and proper assistance to the Company as may reasonably be required by the
Company in connection with any litigation or administrative proceeding in which
the Company or any of its subsidiaries or affiliates is, or may become, a party
in the Territory or involving any issues or events connected to the Territory.  The Company shall reimburse the Distributor,
Shareholder and Owners for all reasonable out-of-pocket expenses incurred by
the Distributor, Shareholder and Owners in rendering such assistance and, after
the first anniversary of the Effective Date, for assistance that is
pre-approved by Company in writing a rate of €125 per hour for each hour
Distributor, Shareholder and Owner render assistance.  The provisions of this Paragraph 11(b) shall
continue in effect notwithstanding expiration or termination of this Agreement
for any reason, and Distributor, Shareholder and Owners agree to keep all such
information regarding any such litigation or administrative proceeding as
strictly confidential.

 

12.                                 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.

 

13.                                 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.

 

14.                                 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 

 

6

 

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.

 

15.                                 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.

 

16.                                 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.

 

17.                                 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.

 

18.                                 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.

 

19.                                 Entire Agreement.  This Agreement and the Exhibit(s) to
this Agreement embody the entire agreement of the Parties in relation to the
subject matter in this Agreement, supersedes all 

 

7

 

prior
understandings or agreements with respect to the subject matter in this
Agreement, and there is no other oral or written agreement or understanding
between the Parties at the time of execution under this Agreement.  Further, this Agreement cannot be modified
except by the written agreement of all Parties.

 

20.                                 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.

 

21.                                 Notices.  Any notice provided for in this Agreement
must be in writing and must be either personally delivered, mailed by first
class mail (postage prepaid and return receipt requested), sent by reputable
overnight courier service (charges prepaid), or faxed to the recipient at the
address below indicated:

 

To the Company:

 

Heeling Sports Limited

3200 Belmeade Drive, Suite 100

Carrollton, Texas  75006

Attention:  John O’Neil

Telecopy:  (214) 390-1661

 

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

 

Gardere Wynne Sewell LLP

1601 Elm Street, Suite 3000

Dallas, Texas  75201-4761

Attention:  Robert J. Ward, Esq.

Telecopy:  (214) 999-3266

 

To
Distributor Shareholder or Owners:

 

c/o Trotwood Import/Export

38 Boulevard des Moulins

Monaco, MC 98000

Attn:  David or Margarete Stanley

Telecopy:  (377) 97 70 68 31

 

or such other address or to the attention of such other person as the
recipient Party shall have specified by prior written notice to the sending
Party.  Any notice under this Agreement
shall be deemed given if delivered in writing to the intended recipient in
person, transmitted by mail (and will be deemed given one week after the date
transmitted), or by recognized international delivery service to the intended
recipient at the address set forth in this Section or such other address
as such intended recipient may give notice from time to time or by fax to the
fax number set forth in this Section (with a confirmation copy
simultaneously mailed and will be deemed given when transmitted).

 

8

 

22.                                 Counterparts.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute a single agreement.

 

[signature page follows]

 

9

 

IN WITNESS WHEREOF, each of the Parties has executed this
Agreement as of the date first written above.

 

 

	
   

  	
  HEELING SPORTS LIMITED

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Heeling Management Corporation

  
	
   

  	
   

  	
  Its sole general partner

  

 

 

	
   

  	
  By:

  	
    /s/
  John O’Neil

  
	
   

  	
  Name:

  	
     John
  O’Neil

  
	
   

  	
  Title:

  	
     Vice
  President

  

 

 

	
   

  	
  TROTWOOD IMPORT/EXPORT

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/

  	
  David P. Stanley

  
	
   

  	
  Name:

  	
   

  	
  David P. Stanley

  
	
   

  	
  Title:

  	
   

  	
  Gerant

  

 

 

	
   

  	
  TROTWOOD INVESTMENTS LTD

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/

  	
  David P. Stanley

  
	
   

  	
  Name:

  	
   

  	
  David P. Stanley

  
	
   

  	
  Title:

  	
   

  	
  Director

  
					

 

 

	
   

  	
  DAVID STANLEY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/ David P.
  Stanley

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MARGARETE STANLEY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
    /s/ Margarete
  Stanley

  

 

10

 

EXHIBIT A

 

PURCHASE ITEMS

 

All
patents, trademarks, service marks, trade names, copyrights, designs, “doing
business as” names, Internet domain names and other intellectual property
rights being used and/or registered by Distributor and relating to “Heeling,” “Heelys”
or the Products.

 

	
  Inventory
  (attached physical inventory list)

  	
   

  	
  €

  	
  **

  	
   

  
	
  Internet Domain
  Registration

  	
   

  	
  €

  	
  **

  	
   

  
	
  Internet Web
  site

  	
   

  	
  €

  	
  **

  	
   

  
	
  Translated &
  dubbed “How to Heel Video”

  	
   

  	
  €

  	
  **

  	
   

  
	
  Approved Heelys
  TV advert for French Television

  	
   

  	
  €

  	
  **

  	
   

  
	
  TV &
  DVD player at customer premises

  	
   

  	
  €

  	
  **

  	
   

  
	
  DVD’s in French

  	
   

  	
  €

  	
  **

  	
   

  

 

	
  See attached for
  other Purchase Items.

  	
   

  	
   

  	
   

  

 

1

 

Exhibit B

 

PURCHASED ORDER BOOK

 

	
  Customer Name

  	
   

  	
  Quantity

  	
   

  	
  Unit Sales Price

  	
   

  	
  Order Value

  
	
   

  	
   

  	
   

  	
   

  	
  €

  	
   

  	
  €

  
	
  **

  	
   

  	
  **

  	
   

  	
  **

  	
   

  	
  **

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2Exhibit
10.7

 

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 April 30,
2008 (the “Effective  Date”), between
Heeling Sports EMEA (the “Company”) and Trotwood Investments Ltd represented by
Margarete Stanley (“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 France,
Monaco and Andorra;

 

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.  The term of this Agreement is twelve (12)
months from the Effective 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 by mutual
agreement this Agreement by separate written addendum within 30 days after the
expiration of the Term.

 

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

 

 

violation of this Agreement; and/or (iv) the
other Party’s violation of the terms of the Termination Agreement by and
between the Company and Consultant, dated as of April 30, 2008 (the “Termination
Agreement”).  Termination of this
Agreement for Cause shall include the prospective termination of the
consideration recited in Section 2 of this Agreement. In the event that
termination is for Cause relating to the Company then the Company shall pay
within 30 days the unpaid outstanding consideration through the termination
date to the Consultant.

 

(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 France, Monaco and Andorra (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 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 Heelys Products to the
Company; and (E) comply with good business practices and all applicable
laws in the Territory and regulations (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 it has, and during the Term will continue to
maintain the capacity 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 Heelys
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
Heelys 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.

 

(iii)                               During the Term and
for a period of three (3) years thereafter, Consultant shall, upon
reasonable notice, furnish such information and proper assistance to the
Company as may reasonably be required by the Company in connection with any
litigation or administrative proceeding in which the 

 

2

 

Company or any of its subsidiaries or affiliates
is, or may become, a party in the Territory or involving any issues or events
connected to the Territory.  The Company
shall reimburse the Consultant for all reasonable out-of-pocket expenses
incurred by the Consultant in rendering such assistance and, after the first
anniversary of the Effective Date, to the extent not otherwise paid under the
Termination Agreement, for assistance that is pre-approved by Company in
writing a rate of €125 per hour for each hour Consultant renders
assistance.  The provisions of this
Paragraph 1(c)(iii) shall continue in effect notwithstanding
expiration or termination of this Agreement for any reason, and Consultant
agrees to keep all such information regarding any such litigation or
administrative proceeding as strictly confidential.

 

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 shall be made on or before
the last day of each month.  The Company
shall also reimburse Consultant for its 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 with reasonable
notice any directions within reason, which are reasonable and lawful, 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, social security, 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 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 

 

3

 

Affiliates, whether prepared by Consultant or
otherwise coming into its 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 they 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.

 

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 she has consulted
with independent legal counsel regarding Consultant’s rights and obligations
under this Agreement and that she 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 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 and all taxes in the Territory 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 

 

4

 

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 respective 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 therefrom.

 

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.  Neither Party shall assign this Agreement
without the prior written consent of the other Party.

 

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 

 

5

 

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 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
or arbitrator to whom disputes relating to this Agreement are submitted to
reform the otherwise illegal, invalid or unenforceable provision in accordance
with this Section.

 

6

 

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

 

(b)                                 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.

 

(c)                                  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:

 

Trotwood Investments Ltd

 

Attention Margarete Stanley

38 Boulevard des Moulins

Monaco, MC 98000

Attn:  Margarete Stanley

Telecopy:  (377)  97
70 6831

 

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

  

 

 

	
   

  	
  TROTWOOD
  INVESTMENTS LTD

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  David P. Stanley

  
	
   

  	
   

  	
  /s/
  Margarete Stanley

  
	
   

  	
  Name:

  	
   David
  P. Stanley

  
	
   

  	
  Title:

  	
   Director

  
					

 

9

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