EXHIBIT 10.3
SEPARATION AND RELEASE AGREEMENT
THIS SEPARATION AND RELEASE AGREEMENT (the "Agreement") is entered
into on April 30, 2003 by and between Xxxx Xxxxxx (the "Employee") and The
Singing Machine Company, Inc., a Delaware corporation (the "Company").
WITNESSETH:
WHEREAS, the Employee was employed by the Company as its Chief
Operating Officer and President pursuant to an employment agreement dated June
1, 2000 (the "Employment Agreement");
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;
WHEREAS, the parties hereto desire to put to rest and settle all
controversies between them related to or arising out of Employee's employment
with, and resignation from, the Company and the facts and circumstances
underlying the same, and to settle and compromise any and all claims and
differences between them, of any sort, origin or description in order to avoid
the costs and uncertainties inherent in possible future litigation.
NOW, THEREFORE, 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
President, Chief Operating Officer, Treasurer, Secretary and from any other
officer positions that he holds with the Company and (ii) a director and from
any other positions that he holds with International SMC (HK) Ltd., the
Company's Hong Kong subsidiary, effective as of the end of the business day on
Friday, May 2, 2003 (the "Resignation Date"). 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.
2. TERMINATION OF EMPLOYMENT AGREEMENT AND OPTIONS.
2.1 Employee acknowledges and agrees that this Agreement shall serve to
terminate his Employment Agreement and that this Agreement sets forth all the
compensation that is payable to him, effective as of the date of this Agreement.
The Employee will continue to receive regular salary and auto allowance payments
pursuant to the Company's normal payroll practices through May 31, 2003, the
date on which the Employee's Employment Agreement would have expired, had it not
been terminated prior to such date, as described in this Agreement.
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2.2 The Employee agrees that he will have until December 31, 2003, to
exercise any vested options ("Vested Options") that have been granted to him by
the Company during the term of his employment with the Company. The Employee
acknowledge and agrees that the only Vested Options that he owns as of the date
of this Agreement are as follows: options to purchase 270,000 shares of the
Company's common stock at an exercise price of $2.04 per share, options to
purchase 15,000 shares of the Company's common stock at an exercise price of
$4.23 per share and options to purchase 24,000 shares of the Company's common
stock at an exercise price of $14.30 per share. The Employee agrees that any of
the Vested Options, listed in this Section 2.2, which the Employee has not
exercised by August 31, 2003 will be deemed to be cancelled, null and void at
the end of the business day on August 31, 2003.
2.3 The Company and the Employee acknowledge the termination of the
Employment Agreement and the survival and incorporation by reference herein of
the provisions, terms and conditions set forth in Sections 12, 13, 15, 25 and
26. The Employee also agrees that he will comply with the restrictive covenants
contained in Section 12 of the Employment Agreement for a period of four (4)
months after his Resignation Date and agrees to the enforcement provisions
contained in Section 12(d) of the Employment Agreement., except employment with
Xxxxxx Memcorp will be excepted from this requirement.
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
approximately $168,217.52, in the aggregate, which is comprised of (i) salary
and auto allowance payments made through May 31, 2003, as described in Section
2.1 of this Agreement, (ii) four weeks of accrued vacation time, (iii) four
months of the Employee's salary and automobile allowance payments and (iv) seven
months of COBRA reimbursement payments. 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.
During the period between the Resignation Date and May 31, 2003, the
Company will continue to provide the Employee with his salary and auto allowance
payments. The Company will provide the Employee with a check for his four weeks
of accrued vacation time on May 31, 2003. The severance payments for items (iii)
and four months of item (iv) will be paid to the Employee in accordance with the
normal payroll practices of the Company in eight (8) installments beginning on
June 7, 2003 and ending on September 13, 2003. During the period between
September 13, 2003 and ending on January 3, 2004, the Company will provide the
Employee with COBRA reimbursement payments equal to approximately $2,418.50. The
Company will make payments over this three month period in accordance with the
normal payroll practices of the Company beginning on September 13, 2003 and
ending on January 3, 2004.
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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.
4. WAIVER AND RELEASE. For good and valuable consideration, the receipt
and sufficiency of which is acknowledged by the Employee, including the payments
to the Employee as described in Section 3, Employee hereby agrees that
regardless of who assumes his duties, his separation of employment from the
Company was not due in any way to age or any other type of discrimination or any
wrongful act of the Company, and Employee and his Releasors do hereby
voluntarily and fully release and forever discharge the Company, together with
its past and current predecessors, successors, shareholders, officers,
directors, employees, attorneys, trustees, insurers, representatives,
contractors, representatives, related organizations and affiliates
(collectively, the "Released Parties"), jointly and individually, from any and
all claims, demands, debts, causes of action, claims for relief, and damages, of
whatever kind or nature, known or unknown, developed or undeveloped, which
Employee had, now has or may hereinafter have from the beginning of the world to
the date of these presents, including, without limitation, all claims and all
rights which the Employee may have under Title VII of the Civil Rights Act of
1964; the Equal Employment Opportunity Act of 1972; the Civil Rights Act of
1991; the Age Discrimination and Employment Act of 1967; the Employee Retirement
Security Act 42 U.S.C. ss. 1981; the Older Workers' Benefit Protection Act; the
Americans with Disabilities Act; the Family Medical Leave Act of 1993; the Equal
Pay Act; the Fair Labor Standards Act; the Broward County Equal Opportunity
Ordinance; and any and all other federal and state statutes which regulate
employment; and the laws of contracts, tort and other subjects.
5. RELEASED PARTIES AND NO ADMISSION OF LIABILITY. For purposes of
paragraph 4, "Releasors" shall mean, collectively, the spouse of the Employee
and the Employee's dependents, heirs, executors administrators and assigns, past
and present and each of them and their trustees, directors, officers, agents,
attorneys, insurers, employees, stockholders, representatives, successors,
assigns and all persons acting by, through, under or in connection with them,
past and present. Execution of this Agreement and payment of the payments
specified in paragraph 3 of this Agreement does not constitute an admission by
any Released Party 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. 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
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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.
7. CONFIDENTIALITY. The Employee agrees that he will keep confidential
all information regarding the Company, its business operations and this
Agreement, including, but not limited to, information about pricing, customers,
current and former employees and will not disclose such information to anyone
unless (i) such information is published and becomes public knowledge (other
than through or by the Employee on his behalf), (ii) required by legal process
in formal legal proceeding or (iii) to the extent necessary to report income to
the appropriate taxing authorities.
8. KNOWING AND VOLUNTARY SETTLEMENT. IN EXECUTING THIS AGREEMENT,
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 HIM 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 HIM. 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.
9. EFFECT OF SETTLEMENT AND INTERPRETATION. 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.
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10. ARBITRATION, SEVERABILITY AND JURY WAIVER. The arbitration clause
contained in Section 15 of the Employment Agreement is expressly incorporated
herein by reference and shall govern any dispute, controversy or claim arising
under, our of, in connection with, or in relation to this Agreement, or the
breach, termination, validity or enforceability of any provision of this
Agreement. 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 fall
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 paragraph 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 or the
Employment Agreement.
IN WITNESS WHEREOF, the aforesaid parties have hereunto set their hands
and seals as of the day below written.
/s/ Xxxx Xxxxxx
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Xxxx Xxxxxx
Executed on April 30, 2003
The Singing Machine Company, Inc.
/s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
Chief Executive Officer
Executed on April 30, 2003
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