2.2          Disclosed Previous Agreements .   Prior to the Effective Date, Executive has provided Company a true and correct copy of Executive’s employment agreement(s) with previous employer(s), and, as of the Effective Date, Executive has not violated any lawful obligations to any previous employer.  Executive acknowledges Company’s instructions not to breach any such lawful obligations.

2.3          No Use of Previous Employer Information .   During the Employment Term and thereafter, Executive will not use or disclose to Company, Parent, affiliate, subsidiary, investor, owner, shareholder, franchisee, franchisor or other related entity (each a “ Related Entity ”) of Company, or to any other Person (as defined below), any confidential or proprietary information or trade secrets of any of Executive’s previous employer(s) or any Related Entity of such employer(s), and will not bring onto Company’s premises, or access, such confidential or proprietary information or trade secrets, unless consented to in writing by such employer(s) or Related Entity and then only with the prior written authorization of Company.  For purposes of this Agreement, “ Person ” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, and/or a governmental entity or any department, agency, or political subdivision thereof.

2.4          Understands Agreement .   Executive acknowledges that Executive has read this Agreement before signing it, has consulted and been advised by counsel about it, and fully understands its purposes, terms, and provisions, which Executive hereby expressly acknowledges to be reasonable in all respects.

2.5          Material Breach .   Executive acknowledges that any breach of Section 2 (including subparts) by Executive will constitute a material breach of this Agreement.

3.             Duties and Responsibilities .

3.1          President and CEO .  During the Employment Term, Executive’s duties and responsibilities will be those typically performed by a President and CEO of a nationwide commercial enterprise in the Business, and otherwise as reasonably and lawfully directed by the Board, its designee, by the COB or the COB’s designee.  Company may adjust the duties and responsibilities of the Executive notwithstanding the specific title set forth in Section 1.1 , based upon Company’s needs from time to time; provided that such adjusted duties are consistent with duties and responsibilities of a senior executive officer of an enterprise of comparable size to the Company.  Executive will devote substantially all of Executive’s business time, energy, and skill to performing the Services and will perform all obligations hereunder diligently, faithfully, and to the best of Executive’s abilities, except during times of vacation, illness, incapacity, or other approved leave.  Executive shall strictly adhere to and obey all applicable policies and practices now in effect or subsequently promulgated or revised governing the conduct of employees of Company.  In the event of conflict or inconsistency between this Agreement and the employee policies and written manuals of Company, the terms of this Agreement shall govern.  Company will review Executive’s performance on an annual basis, through the COB or the COB’s designee.

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

4.                                       Employment Term; Termination .

4.1          Employment Term .  Subject to the terms and conditions of this Agreement, unless terminated earlier in accordance with the provisions of Section 4.2, Executive’s employment under this Agreement commences on the Effective Date and will continue through and until December 31, 2010 (the “ Initial Term ”) and shall automatically and repeatedly renew for successive periods of one (1) year each thereafter (each a “ Renewal Term ” and together with the Initial term, the “Employment Term”) The last date of Executive’s employment with Company is referred to herein as the “ Termination Date .”

4.2          Termination .

(a)           Death . This Agreement will automatically and immediately terminate upon the death of Executive, and Executive (e.g., Executive’s heirs or estate) will not be entitled to any Severance Benefits (as defined below).

(b)           Disability .  This Agreement may be terminated by either Party upon written notice to the other in the event Executive becomes unavailable to work due to a Disability (as defined in this Section).  As used herein, “ Disability ” means Executive’s becoming incapacitated by accident, sickness, or other circumstances that, in the reasonable judgment of Company, renders or is expected to render Executive mentally or physically incapable of performing the essential duties and services required hereunder, where (i) such incapacity has been determined to exist by the disability insurance carrier for Company, or (ii) a written determination by a physician mutually agreeable to the Company and Executive (or, in the event of Executive’s total physical or mental incapacity, Executive’s legal representative) that such incapacity has continued or will continue for at least ninety (90) consecutive calendar days, or 180 non-consecutive calendar days, within a calendar year, or in the absence of agreement by the Company and Executive (or his legal representative), each party shall designate a physician and the two physicians will select a third physician who will make the determination as to Executive’s incapacity.  If Executive’s employment is terminated due to a Disability, Executive will not be entitled to any Severance Benefits.  In conjunction with determining mental and/or physical disability for purposes of this Agreement, the Executive hereby consents to (x) any examinations that the Board or Compensation Committee of Parent deems relevant to a determination of whether the Executive is mentally and/or physically disabled, or are required by any such designated physician, (y) furnish such medical information as may be reasonably requested, and (z) waive any applicable privilege that may arise because of such examination.

(c)           Cause .  In addition to any other rights or remedies available to Company during the Employment Term, in its sole discretion Company may terminate Executive’s employment for Cause (as defined in this Section) effective immediately upon delivery of written notice to Executive, and Executive will not be entitled to any Severance Benefits.  As used herein, “ Cause ” means any of the following:  (i)  that Executive has materially

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neglected, failed, or refused to render the Services or perform any other material duties or obligations under this Agreement; (ii) that Executive has otherwise materially violated any provision of this Agreement, including, without limitation, violation of Company policies regarding drugs and alcohol, discrimination, harassment, retaliation, honesty, confidentiality, and/or other employee misconduct, whether now in effect or subsequently promulgated or revised; (iii) Executive’s conviction for, or entry of a plea of no contest with respect to, any felony, crime of moral turpitude, or other crime that adversely affects or (in Company’s reasonable judgment) may adversely affect Company, the ability of Executive to provide the Services, or any of the other Company Parties (as defined below); (iv) any act or omission of Executive involving fraud, theft, dishonesty, disloyalty, or illegality with respect to, or that harms or embarrasses or (in Company’s reasonable judgment) may harm or embarrass, Company or any of the other Company Parties; or (v) any act or omission of Executive constituting the knowing or intentional violation of applicable law with respect to, or that harms or embarrasses or (in Company’s reasonable judgment) may harm or embarrass, Company or any of the other Company Parties; provided, however , that with respect to clauses (i) and (ii) of this Section, if such breach or violation is susceptible to cure, Company may not terminate Executive’s employment for Cause unless Company provides Executive with written notice specifying such breach or violation, in reasonable detail, and Executive fails to cure or remedy such breach or violation within fifteen (15) days after receipt of such notice; provided further , that the Board of Company shall have the sole discretion to determine whether such a breach or violation is subject to cure, and if so, whether the Executive successfully effected a cure following notice.

(d)           Good Reason .  Executive may terminate employment with Good Reason at any time upon notice to Company.  For the purpose of this Agreement, “ Good Reason ” means, in the absence of Executive’s consent:  (A) the material breach by Company of any material compensation or material benefit obligation to Executive under this Agreement; or (B) a material reduction in Executive’s Base Salary; (C) a material diminution in Executive’s authority, duties or responsibilities; or (D) a change in the location of the headquarters of the Company such that Executive’s current residence in Dallas County, Texas would be more than 75 miles from such new headquarters; provided, however , that Good Reason shall only exist if the Company fails to correct or cure the Good Reason condition within a period of forty-five (45) days, after being provided with written notice (describing the Good Reason condition in reasonable detail) by Executive within thirty (30) days of the initial existence of the alleged Good Reason condition.   If Executive has resigned for Good Reason in accordance with this paragraph, then Executive will be entitled to the Severance Benefits provided in Section 7.2(a) .

(e)           Discretionary .

(i)            By Executive Upon Notice .  Executive may terminate his employment effective as of the end of the Employment Term, by providing Company with a written notice of non-renewal at least ninety (90) days prior to the end of the Employment Term, in which event Executive will not be entitled to any Severance Benefits.  If such a notice of non-renewal is given, then employment pursuant to this Agreement will continue until the end of the Employment Term; provided, however , that upon receipt of such a notice, Company may instruct Executive in writing to cease work pursuant to this Agreement, not to report to Company’s offices, and/or not to attend any Company business functions, ceasing Executive’s compensation and benefits pursuant to

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this Agreement as of the effective date of such instructions, and creating an earlier Termination Date than noticed by Executive, without otherwise affecting the denial of Severance Benefits; provided further , that Executive will receive compensation and benefits pursuant to this Agreement for two (2) weeks following the effective date of such instructions.

(ii)           By Executive Without Notice .  Executive may terminate employment at any time without Good Reason and without the formal notice and completion of the Employment Term as provided in Section 4.2(e)(i) , in which event Executive will not be entitled to any Severance Benefits.  In response to such a termination by Executive, Company may instruct Executive to cease work pursuant to this Agreement, not to report to Company’s offices, and/or not to attend any Company business functions, ceasing Executive’s compensation and benefits pursuant to this Agreement as of the effective date of such instructions, and creating an earlier Termination Date than planned or noticed by Executive, without otherwise affecting the denial of Severance Benefits.

(iii)          By Company Without Notice .  Company may terminate Executive’s employment at any time without Cause upon written notice to Executive in which event Executive will be entitled to the Severance Benefits provided in Section 7.2(a) .

5.                                       Salary, Bonus, and Business Expenses .

5.1          Base Salary .  During the Employment Term, Company will pay Executive a base salary at the rate of FOUR HUNDRED THIRTY THOUSAND DOLLARS AND NO/100 ($430,000.00) per annum (the “ Base Salary ”), payable in regular installments in accordance with Company’s general payroll practices and subject to all applicable deductions and withholdings as allowed by law.  Executive’s Base Salary for any partial year will be prorated based upon the number of days elapsed in such year.  Executive’s pay may be changed by Company from time to time, as Company deems appropriate in its sole discretion (but may not be decreased without Executive’s consent), by way of an addendum or other documentation, without otherwise affecting this Agreement (except as may be set forth in such addendum or other documentation).  Notwithstanding any change in pay, the employment of Executive will be construed as continuing under this Agreement, without the necessity of Executive’s execution of any further instrument.

5.2          2009 Bonus .  If Executive remains continuously employed pursuant to this Agreement through December 31, 2009, then Company will pay Executive a one-time bonus of SEVENTY-FIVE THOUSAND DOLLARS AND NO/100 ($75,000.00) to be made in a single sum cash payment on or before March 15, 2010 (the “Guaranteed Bonus”).

5.3          Annual Bonus .   During the Employment Term (beginning with the 2010 calendar year and thereafter), Executive will be eligible for an annual incentive bonus (the “ Annual Bonus ”).  The opportunity to earn an Annual Bonus and the amount of any Annual Bonus will be determined in accordance with criteria (“ Bonus Criteria ”) established by the Board or Compensation Committee of Parent.  Executive acknowledges that application of the Bonus

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Criteria will be discretionary, with discretion resting with the Board or Compensation Committee of Parent.  Payment of the Annual Bonus, if any, will be made in a single sum cash payment between January 1 and March 15 of the calendar year following the calendar year in which the Annual Bonus is earned.  The amount and/or basis for earning the Annual Bonus may be changed by Company from time to time, as Company deems appropriate in its sole discretion, by way of an addendum or other documentation, without otherwise affecting this Agreement (except as may be set forth in such addendum or other documentation).  Notwithstanding any such change in the Annual Bonus, the employment of Executive will be construed as continuing under this Agreement, without the necessity of Executive’s execution of any further instrument.

5.4          Business Expenses .   Subject to Executive’s compliance with all applicable expense policies and procedures, Company will reimburse Executive for all reasonable travel, lodging, long distance telephone, and other business costs and expenses reasonably incurred by Executive to render Services pursuant to this Agreement.  Notwithstanding the preceding sentence, or any provision in the applicable expense reimbursement policy or procedure to the contrary, if an expense reimbursement would constitute taxable income to Executive:  (a) the amount of expenses eligible for reimbursement during any calendar year shall not affect the amount of expenses eligible for reimbursement in any other calendar year; (b) the reimbursement by Company of an eligible expense shall be made on or before December 31 of the calendar year following the calendar year in which the expense is incurred; and (c) the right to reimbursement for expenses shall not be subject to liquidation or exchange for another benefit.

5.5          Tax Withholding; Offsets .  Company may deduct from any compensation or other amount payable to Executive under this Agreement, social security (FICA) taxes and all federal, state, municipal, or other such taxes or governmental charges as may now be in effect or that may hereafter be enacted or required.  Executive further authorizes Company to make deductions from Executive’s compensation, including, without limitation, Executive’s final paycheck, that are necessary for Company to recover for property damages or property not returned by Executive, and/or to recover overpayments, improper expenses, loans, and/or advances paid to Executive.

6.                                       Benefits .

6.1          Benefit Plans .  During the Employment Term, Executive will be entitled to participate in all employee benefit plans and programs and to receive all benefits for which similarly situated executives within Company generally are eligible under any plan or program now in place or established later by Company, on the same basis as such executives.  Executive’s benefits may be changed by Company from time to time, as Company deems appropriate in its sole discretion, without otherwise affecting this Agreement.  Nothing in this Agreement will preclude Company from amending or terminating any of the benefit plans or programs applicable to Executive as long as such amendment or termination is applicable to all similarly situated employees.  Notwithstanding any change in benefits, the employment of Executive will be construed as continuing under this Agreement, without the necessity of Executive’s execution of any further instrument.

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6.2          Vacation .  While employed by Company, Executive will be entitled to four (4) weeks of paid vacation per calendar year, to be accrued and taken in accordance with Company’s normal vacation policy applicable to senior executives.  Executive’s vacation term for any partial year will be prorated based upon the number of days of Executive’s employment in such year.  Accumulation and payment of vacation benefits, and loss of unused vacation time, if any, shall be determined and governed in accordance with Company policy and procedure.

6.3          Stock Options, Restricted Stock Award or Stock Appreciation Rights .   Within 180 days of the date of this Agreement, Company shall grant to Executive pursuant to the terms of the Heelys, Inc. 2006 Stock Incentive Plan an option to purchase 350,000 shares of Parent’s common stock, at a purchase price per share equal to 100% of the fair market value per share of common stock on the date of such grant, such options shall vest and become exercisable in four equal cumulative annual installments of one-fourth (1/4 th ) each on each successive anniversary of the Effective Date and shall contain such other vesting provisions as are provided in the option agreements, which shall be in a form substantially the same as the form of option agreement previously provided to Executive.

7.                                       Rights On Termination .

7.1          Without Severance Benefits .   If Executive’s employment under this Agreement is terminated by reason of Executive’s death or Disability pursuant to Sections 4.2(a)  or 4.2(b) , by Company for Cause pursuant to Section 4.2(c) , by Executive without Good Reason pursuant to Sections 4.2(e)(i)  or 4.2(e)(ii) , then all further rights of Executive (or as applicable, of Executive’s heirs or estate) to employment and/or compensation and benefits from Company under this Agreement shall cease as of the Termination Date, except that Company will pay Executive (or as applicable, Executive’s heirs or estate) the following:

(a)           any amount of unpaid Base Salary earned by Executive through the Termination Date, paid in the same manner and on the same date as would have occurred if Executive’s employment under this Agreement had not ceased;

(b)           any amount of unpaid Guaranteed Bonus, Annual Bonus or other bonus that Company in its sole discretion may deem to be earned by Executive through the Termination Date, paid in the same manner and on the same date as would have occurred if Executive’s employment under this Agreement had not ceased; provided, however , that no Annual Bonus will be paid for any partial year of work (i.e. for any year during which the Executive was not employed with Company throughout that year, through and including the last day of the year);

(c)           all unpaid reimbursable expenses due to Executive under this Agreement as of the Termination Date, subject to Executive’s compliance with Company’s expense reimbursement policies, paid in accordance with the terms of Company’s policies, practices, and procedures regarding reimbursable expenses, and subject to the provisions in Section 5.4 as applicable to reimbursements of expenses that constitute taxable income to Executive;

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(d)           all unpaid benefits that have been earned by or vested in Executive under, and subject to the terms of, the employee benefit plans, insurance policies, or arrangements of Company in which Executive participated through the Termination Date, paid in accordance with the terms of the employee benefit plans, insurance policies, or arrangements under which such amounts are due to Executive; and

(e)           an amount equal to all accrued and unused vacation pay, calculated in accordance with Company’s vacation policies, practices, and procedures, earned by Executive through the Termination Date, paid in accordance with the terms of Company’s policies, practices, and procedures regarding vacation pay; provided, however , that such payment will be made in a single sum cash payment within sixty (60) days after the Termination Date.

7.2          With Severance Benefits .  Subject to the requirements of Section 7.3 , if Executive’s employment under this Agreement is terminated by Executive for Good Reason pursuant to Section 4.2(d)  within ninety (90) days of the initial existence of the Good Reason condition, or by Company without Cause, then all further rights of Executive (or as applicable, of Executive’s heirs or estate) to employment and/or compensation and benefits from Company under this Agreement shall cease as of the Termination Date, except that Company will pay Executive (or as applicable, Executive’s heirs or estate) the following severance benefits (“ Severance Benefits ”), as applicable:

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

(b)           Executive’s Base Salary for a period of one (1) year, plus an additional period equivalent to four (4) weeks for every year of Executive’s employment with the Company in excess of five (5) years, prorated for partial years of such employment (collectively referred to as the “ Severance Period ”), as severance pay, capped at a total combined maximum of seventy-eight (78) weeks of Base Salary severance, based upon Executive’s Base Salary as of the Termination Date, and paid in equal installments in accordance with the normal payroll policies of Company, less applicable taxes, payable over the Severance Period commencing on the first regular payroll date of Company following the Release Date (as defined below), without any obligation of Executive to mitigate damages and, no subsequent employment of Executive shall reduce the amount of Severance Benefits provided hereunder; and

(c)           if Executive elects continuation coverage (with respect to Executive’s coverage and/or any eligible dependent coverage) (“ COBRA Continuation Coverage ”) under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”) with respect to Company’s group health insurance plan, Executive will be responsible for payment of the monthly cost of such COBRA Continuation Coverage; provided, however , that commencing on the first regular payroll date of Company following the Release Date, to the extent allowed by applicable law, Company will reimburse Executive for the monthly premium cost for all COBRA Continuation Coverage (including the premium cost for the period between the Termination Date and the Release Date) net of all premium cost (if any) Executive would have paid had Executive’s employment under this Agreement continued through the Severance Period, within thirty (30) days of each payment of such cost by the Executive, provided further , that such COBRA Continuation Coverage reimbursement payments by Company shall terminate upon the earlier of: (A) the expiration of the maximum period required under COBRA for

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COBRA Continuation Coverage, (B) the completion of the Severance Period, or (C) the date Executive becomes eligible for benefits coverage through a new business or employer.

7.3          General Release Requirement .   As a condition precedent to Executive’s entitlement to any Severance Benefits, Executive (or as applicable, Executive’s heirs or estate) must execute and effectuate a general release agreement (“ General Release Agreement ”) satisfactory to Company, within forty-five (45) days of the Termination Date, that may include without limitatio