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,
manager
| 
