SEPARATION AND RELEASE AGREEMENT
THIS
SEPARATION AND RELEASE AGREEMENT
(the
"Agreement") is effective as of December 8, 2006 by and between Yi ▇▇▇▇ ▇▇▇▇
(the "Employee") and The Singing Machine Company, Inc., a Delaware corporation
(the "Company").
WITNESSETH:
WHEREAS,
the
Employee was employed by the Company on various positions such as Interim CEO,
COO, and a member of the Board of Directors;
WHEREAS,
the
Company and the Employee have mutually decided that the Employee will resign
and
receive compensation pursuant to the terms and conditions contained
herein;
NOW,
THEREFORE,
the
Employee and the Company, intending to be legally bound hereby and in
consideration of the promises contained herein, do hereby agree as
follows:
1. Resignation.
The
Employee agrees to resign as (i) the Company's Interim CEO and COO and from
any
other positions that he holds with the Company and (ii) a director and from
any
other positions that he holds with any of the Company’s subsidiaries, if any,
effective as of the end of the business day on December 31, 2006 (the
"Resignation Date"). The Employee acknowledges and agrees that from the date
hereof until the Resignation Date, the Employee will have the authority to
represent or bind the Company or its subsidiaries as an officer or employee,
but
only with the requisite approval from the Board of Directors of the Company.
In
addition, the Employee acknowledges and agrees that after the Resignation Date,
he will not have the authority to represent or bind the Company or its
subsidiaries as an officer or employee.
2. Termination
of Employment and Options.
2.1
Employee
acknowledges and agrees that this Agreement shall serve to terminate his
employment and that this Agreement sets forth all the compensation that is
payable to him, effective as of the Resignation Date. The Employee will continue
to receive regular salary pursuant to the Company's normal payroll practices
through the Resignation Date.
2.2 The
Company agrees, and the Employee acknowledges, that any and all unvested options
(“Unvested Options”) that have been granted to him by the Company during the
term of his employment with the Company will immediately vest on the Resignation
Date. The Employee agrees that he will have until March 31, 2007 (“Expiration
Date”), to exercise any vested options (“Vested Options”), and any Unvested
Options that immediately vest on the Resignation Date, that have been granted
to
him by the Company during the term of his employment with the Company. The
Employee acknowledges and agrees that the only Unvested Options that he owns
as
of the date of this Agreement are as follows: (i) options to purchase 53,333
shares of the Company’s common stock at an exercise price of $0.60 per share,
(ii) options to purchase 120,000 shares at an exercise price of $0.33 per share.
The Employee acknowledges and agrees that the only Vested Options that he owns
as of the date of this Agreement are as follows: (i) options to purchase 52,800
shares of the Company’s common stock at an exercise price of $1.97 per share,
(ii) options to purchase 26,667 shares at an exercise price of $0.60 per share.
The Employee agrees that any of the Vested Options, and any Unvested Options
that immediately vest on the Resignation Date, which the Employee has not
exercised by the Expiration Date will be deemed to be cancelled, null and void
at the end of the business day on the Expiration Date.
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2.3 The
Employee agrees that he will be bound by the non-solicitation provisions set
forth in Section 3 of the Intellectual Property Right and Confidentiality
Agreement for a period of six months after the date of this Agreement.
3. Severance
Payments.
3.1 Severance
Payment.
In
consideration of the covenants set forth herein, the Company agrees to pay
the
Employee a severance payment equal to $72,916 in the aggregate, to be paid
through the regular payroll date beginning on January 18, 2007. In addition,
the
Company will pay to the Employee a relocation expense payment equal to $40,000
on January 4, 2007. The Company will make the salary payments in the amounts
and
on the dates set forth on Schedule 1 attached hereto.
3.2 Benefits.
The
Company will provide the Employee with information regarding any benefits which
may be converted to individual coverage and/or coverage which includes his
spouse in accordance with Consolidated Omnibus Budget Reconciliation Act (COBRA)
regulations. Employee acknowledges and agrees that he will not be entitled
to
any perquisites, benefits or other compensation whatsoever after the Resignation
Date, except as described in this Agreement.
3.3 Amounts
Stated Before Taxes.
All
amounts stated in this Agreement are prior to any deduction for applicable
withholding taxes and other amounts that are required to be withheld or deducted
by federal and Florida law
4. Waiver
and Release.
4.1 Employees
Waiver and Release. The
Employee waives, acquits, forever discharges and hereby releases the Company,
and its directors, officers, agents and advisors, from any and all claims,
demands, actions, or causes of action, whether known or unknown, arising from
or
related in any way to any employment of or past or future failure or refusal
to
employ the Employee by the Company, or any other past or future claim (except
as
reserved by this Agreement or where expressly prohibited by law) that relates
in
any way to the Employee’s employment, employment contract, any termination,
compensation, benefits, reemployment or application for employment, with the
exception of any claim either party may have for enforcement of this Agreement.
This release includes any and all claims, direct or indirect, which might
otherwise be made under any applicable local, state or federal authority,
including but not limited to any claim arising under the state or local statutes
where the Employee was employed by the Company dealing with employment,
discrimination in employment, Title VII of the Civil Rights Act of 1964, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and
Medical Leave Act of 1993, the Equal Pay Act of 1963, Executive Order 11246,
the
Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment
Rights Act of 1994, the Age Discrimination in Employment Act, the Older Workers
Benefit Protection Act, the Fair Labor Standards Act, wage and hour statutes
of
the state where employed, all as amended, any regulations under such
authorities, or any other applicable statutory contract, tort, or common law
theories, except that the Employee does not release the Company from its
obligations under this Agreement, its contribution and indemnification
obligations, if any, or from any coverage under any policy of insurance
providing indemnity and related costs for the benefit of the
Employee.
2
4.2 The
Company’s Waiver and Release.
The
Company waives, acquits, forever discharges and hereby releases the Employee
from any and all claims, demands, actions, or causes of action, whether known
or
unknown, arising from or related in any way to any employment of the Employee
by
the Company, or any other past or future claim (except as reserved by this
Agreement or where expressly prohibited by law) that relates in any way to
the
Employee’s employment, Employment Agreement, with the exception of any claim the
Company may have for enforcement of this Agreement. This release includes any
and all claims, direct or indirect, which might otherwise be made under any
applicable local, state or federal authority, including but not limited to
any
claim arising under the state or local statutes where the Employee was employed
by the Company dealing with employment, or any other applicable statutory
contract, tort, or common law theories, except that the Company does not release
the Employee from his obligations under this Agreement.
5. No
Admission of Liability.
Execution of this Agreement and payment of the payments specified in Section
3
of this Agreement does not constitute an admission by the Employee or the
Company, as applicable, of any violation of any civil rights or other employment
discrimination statute, or any other legal statute, provision, regulation,
ordinance, order or action under common law. Rather, this Agreement expresses
the intention of the parties to resolve all issues and other claims related
to
or arising out of Employee's employment by the Company without the time and
expense of litigation.
6. No
Complaints or Litigation.
The
Employee represents and warrants that he has not filed against the Company
or
any of its subsidiaries, affiliates or any Released Parties, any complaints,
charges or law suits arising out of his employment by the Company, or any other
matter arising on or prior to the date hereof. The Employee covenants and agrees
that he has completely and fully released the Company from any and all
liability, as set forth in Section 4 of this Agreement.
3
7. Governing
Law.
The law
of the State of Florida shall govern the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties of
the
parties. This Agreement constitutes the entire agreement and understanding
between the Employee and the Company regarding the Employee's resignation from
employment with the Company. This Agreement totally replaces and supersedes
any
and all prior agreements, arrangements, representations and understandings
between the Employee and the Company, including but not limited to the
Employment Agreement and agreements in which the Employee was granted options
to
purchase the Company’s common stock, except for certain sections of the
Employment Agreement which have been incorporated herein by reference. Any
agreement to amend or modify the terms and conditions of this Agreement must
be
in writing and executed by the parties hereto. This Agreement may be
specifically enforced in judicial proceedings and may be used as evidence in
a
subsequent proceeding in which a breach is alleged. Headings are for convenience
only and should not be used in interpreting this Agreement.
8. Non
Disparaging Remarks.
The
Employee and the Company agree that they will not directly or indirectly,
individually or in concert with others for a period of five years from the
date
of this Agreement, (i) disparage, interfere with or attempt to interfere with,
the Employee’s or the Company’s, as applicable, reputation, goodwill, services,
business and/or the Company’s stockholders, directors, officers, employees,
agents, representatives and any affiliates or (2) engage in any conduct, take
any actions or make any statements (oral or written) to the public, future
employers, customers, vendors, the investment community, the media, current,
former or future Company employees, or any other third party whatsoever that
is
calculated to have, or reasonably likely or possibly having, the effect of
undermining, disparaging or otherwise reflecting negatively or could reasonably
be considered to undermine, disparage or reflect negatively, on the Company,
its
reputation, goodwill, services, business and/or stockholders, directors,
officers, employees, agents, representatives and its affiliates.
9. Knowing
and Voluntary Settlement.
9.1
BECAUSE
THE EMPLOYEE IS OVER FORTY (4O) YEARS OF AGE, HE HAS SPECIFIC RIGHTS UNDER
THE
OLDER WORKERS BENEFITS PROTECTION ACT (“OWBPA”) WHICH PROHIBITS DISCRIMINATION
ON THE BASIS OF AGE, AND HE ACKNOWLEDGES THAT THE RELEASES SET FORTH IN THIS
AGREEMENT ARE INTENDED TO RELEASE ANY RIGHT THAT THE EMPLOYEE MAY HAVE TO FILE
A
CLAIM AGAINST THE COMPANY ON THE BASIS OF AGE.
9.2
IN
EXECUTING THIS AGREEMENT, THE EMPLOYEE HEREBY REPRESENTS THAT HE HAS BEEN
AFFORDED A REASONABLE OPPORTUNITY TO CONSIDER THIS AGREEMENT; THAT HE HAS
COMPLETELY AND CAREFULLY READ THIS AGREEMENT; THAT HE HAS BEEN ADVISED BY THE
COMPANY TO CONSULT WITH AN ATTORNEY OF HIS OWN CHOICE PRIOR TO EXECUTING THIS
AGREEMENT, AND RELIED ON THE LEGAL ADVICE OF HIS ATTORNEY; THAT HE HAD THE
OPPORTUNITY TO HAVE AN ATTORNEY EXPLAIN TO HIS THE TERMS OF THIS AGREEMENT;
THAT
HE KNOWS AND UNDERSTANDS THE CONTENTS OF THIS AGREEMENT; THAT THE TERMS OF
THIS
AGREEMENT ARE TOTALLY SATISFACTORY TO AND FULLY UNDERSTOOD AND VOLUNTARILY
ACCEPTED BY HIS. THE EMPLOYEE ALSO AGREES THAT HE HAS BEEN PROVIDED WITH AT
LEAST TWENTY-ONE (21) DAYS TO CONSIDER THIS AGREEMENT AND VOLUNTARILY AGREES
TO
BE BOUND BY IT, AND THAT HE UNDERSTANDS THAT HE MAY REVOKE THIS AGREEMENT WITHIN
SEVEN DAYS AFTER ITS EXECUTION AND THAT THIS AGREEMENT WILL NOT BECOME EFFECTIVE
OR ENFORCEABLE UNTIL THE EXPIRATION OF SEVEN DAYS AFTER ITS
EXECUTION.
4
10. Future
Cooperation.
The
Employee agrees to cooperate fully with the Company in connection with any
management transitional period, provided, however, that the Employee is not
required to perform work from the Company’s principal executive offices
beginning on December 11, 2006. In addition, the Employee agrees to cooperate
fully with the Company in connection with any matter or event relating to his
employment or events that occurred during his employment, including, without
limitation, in the defense or prosecution of any claims or actions not in
existence or which may be brought or threatened in the future against the
Company, including, but not limited to any claims or actions against its
officers, directors and employees. The Employee’s cooperation in connection with
such matters, actions and claims shall include, without limitation, being
available, after reasonable notice to meet with the Company regarding matters
in
which the Employee was involved; to prepare for any proceeding (including
without limitation, depositions, consultations, discover or trial); to provide
affidavits; to assist with any audits or reviews of the Company’s financial
statements; to assist with any legal proceeding or other inquiry and to act
as a
witness in connection with any litigation or other legal proceeding affecting
the Company. The Employee shall be reimbursed for any reasonable out-of-pocket
expenses incurred in connection with providing such cooperation under this
Section 10. The Employee further agrees that should he be contacted (directly
or
indirectly) by any person or entity adverse to the Company, the Employee shall
promptly notify an executive officer of the Company in writing.
11. Effect
of Settlement, Interpretation and Schedules.
The
Company and Employee intend this Agreement to be legally binding upon and inure
to the benefit of each of them and their respective heirs, administrators,
executors, successors and assigns. The language of this Agreement shall be
construed as a whole, according to its fair meaning and intent and not strictly
for or against any party hereto, regardless of who drafted or was principally
responsible for drafting this Agreement. The recitals contained at the beginning
of this Agreement are expressly made a part of this Agreement. All Schedules
identified in this Agreement (Schedule 2.3, Schedule 3.1 and Schedule 6) are
incorporated herein by reference and made a part hereof.
12. Arbitration.
Any
dispute or controversy between the Company and the Employee, whether arising
out
of or relating to this Agreement, the breach of this Agreement, or otherwise,
shall be settled by arbitration in Florida administered by the American
Arbitration Association, with any such dispute or controversy arising under
this
Agreement being so administered in accordance with its Commercial Rules then
in
effect, and judgment on the award rendered by the arbitrator may be entered
in
any court having jurisdiction thereof. The arbitrator shall have the authority
to award any remedy or relief that a court of competent jurisdiction could
order
or grant, including, without limitation, the issuance of an injunction. However,
either party may, without inconsistency with this arbitration provision, apply
to any court having jurisdiction over such dispute or controversy and seek
interim provisional, injunctive or other equitable relief until the arbitration
award is rendered or the controversy is otherwise resolved. Except as necessary
in court proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Company. The parties agree that any arbitration
proceedings shall be held in Broward County, Florida, unless mutually agreed
by
both parties in writing.
5
13. Enforcement.
13.1 The
Employee agrees that the Company, its subsidiaries and affiliated parties,
would
be damaged irreparably in the event that any provision of this Agreement were
not performed in accordance with its terms or were otherwise breached and that
money damages would be an inadequate remedy for any such nonperformance or
breach. Accordingly, the Company and its successors and permitted assigns shall
be entitled, in addition to other rights and remedies existing in their favor,
to an injunction or injunctions to prevent any breach or threatened breach
of
any of such provisions and to enforce such provisions specifically (without
posting a bond or other security). The Employee agrees that He will submit
himself to the personal jurisdiction of the courts of the State of Florida
in
Broward County in any action by the Company to enforce an arbitration award
against his or to obtain interim injunctive or other relief pending an
arbitration decision.
13.2 The
Employee acknowledges and agrees that in the event that he breaches any of
the
provisions of this Agreement or has made any false representations to the
Company, the Company will be (i) entitled to apply for and receive an injunction
to restrain any violation of this Agreement, (ii) seek return of any and all
compensation paid to the Employee pursuant to Section 3 of this Agreement and
(iii) the Employee will be obligated to pay the Company its costs and expenses
in obtaining such injunction and/of enforcing this Agreement (including, but
not
limited to courts costs, expenses and reasonable legal fees) and the foregoing
shall in affect the validity of this Agreement and such relief does not
constitute in any way a penalty or forfeiture.
14. Severability
and Waiver of Jury Trial.
Should
any provision of this Agreement be declared illegal or unenforceable by any
court of competent jurisdiction and cannot be modified to be enforceable,
including the general release language, such provision shall immediately become
null and void, leaving the remainder of the Agreement in full force and effect.
However, if any portion of the general release language is ruled to be
unenforceable for any reason, Employee shall return the consideration paid
to
him pursuant to Section 3 of this Agreement to the Company. The Company and
the
Employee each knowingly, intentionally, and irrevocably waive any and all rights
to a jury trial for any litigation or legal proceeding in any way relating
to or
arising out of this Agreement.
[Signatures
on following page]
6
IN
WITNESS WHISEOF,
the
aforesaid parties have hereunto set their hands and seals as of the day below
written.
/s/
Yi
▇▇▇▇
▇▇▇▇
Yi
▇▇▇▇
▇▇▇▇
Executed
on December 8, 2006
The
Singing Machine Company, Inc.
/s/
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇
Chief
Financial Officer
Executed
on December 8, 2006
7
Schedule
1
|
Pay
Date
|
Moving
Allowance
|
Accrued
Vacation*
|
Severance
|
Total
|
|
1/4/2007
|
40,000.00
|
|
|
40,000.00
|
|
01/18/07
|
|
—
|
9,615.38
|
9,615.38
|
|
02/01/07
|
|
—
|
9,615.38
|
9,615.38
|
|
02/15/07
|
|
—
|
9,615.38
|
9,615.38
|
|
03/01/07
|
|
|
9,615.38
|
9,615.38
|
|
03/15/07
|
|
|
9,615.38
|
9,615.38
|
|
03/29/07
|
|
|
9,615.38
|
9,615.38
|
|
04/12/07
|
|
|
9,615.38
|
9,615.38
|
|
04/26/07
|
|
|
5,609.00
|
5,609.00
|
|
|
|
|
|
|
|
Total
|
40,000.00
|
—
|
72,916.66
|
112,916.66
|
|
Severance
date started
|
1/1/2007
|
|||
|
*
All accrued vacation has been used
|
||||
8