EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") made as of the 20th day of July 2006 by and
between THE SINGING MACHINE COMPANY INC. a Delaware corporation with its
principal offices at 0000 Xxxxx Xxxx, Xxxxxxx Xxxxx, XX 00000 (the "Company")
and Xx. Xxxxx Xxxxx whose residence address is 00000 XX 0xx Xxxxxx, Xxxxxxxx
Xxxxx, XX 00000 (the "Employee").
The Company and the Employee hereby agree as follows with respect to the
Employee's relationship with the Company.
1. Relationship Term:
The Company shall retain the Employee and the Employee shall be retained by the
Company, on the terms and conditions hereinafter set forth, as an Employee for a
period (the "Employment Period") commencing on July 18, 2006 (the Commencement
Date), and ending on July 17, 2008 (the "Termination Date"), unless terminated
sooner pursuant to the provisions hereof. During the entire term of this
Agreement, the Employee shall be the Company's Chief Financial Officer
2. Efforts on Company's Behalf:
The Employee shall devote all of his time and his best efforts, skills and
attention to the business and affairs of the Company, shall serve the Company
faithfully and competently and shall at all times act in the Company's best
interest. The services to be rendered by Employee during the term hereof shall
be as Chief Financial Officer, subject at all times to the direction and control
of the Chief Executive Officer. Nothing herein shall be construed to prevent
Employee from investing in or participating in the management of companies or
other entities, which do not compete with the Company or from serving on the
board of directors of any other company.
3. Compensation Package:
(a) The Company shall pay to the Employee, and the Employee agrees to accept,
base salary of one hundred and sixty thousand dollars ($160,000) per year,
payable in accordance with normal payroll policies of the Company and
shall be subject to all usual and customary payroll deductions including
all applicable withholding taxes.
(b) Any base salary increase during the term hereof should be the sole
discretion of the Company's Board of Directors based on Company and the
Employee's performance.
4. Bonus/Benefits Compensation:
(a) At the sole discretion of the Company's board of Directors, the Employee
may receive a bonus (the "profit Bonus") for each fiscal year of the
Company ("Fiscal year") during the employment period based on Company and
the Employee's performance.
(b) The Company shall pay to the employee a car allowance of $ 500 per month.
5. Benefit Plans:
(a) The Employee shall be entitled to participation in all Company-sponsored
benefit plans in accordance with terms, conditions and costs with usual or
customary Company policy.
(b) In the event that the Company purchases insurance on the life of Employee,
Employee shall be entitled to purchase said policy from the Company in the
event of his termination, pursuant to the terms hereof, for an amount
equal to the cash surrender value thereof.
6. Business Expenses:
The Employee shall be reimbursed for all usual and customary expenses incurred
on behalf of the Company, in accordance with Company practices and procedures;
provided that each such expense is of a nature qualifying it as a proper
deduction on the Federal income tax returns of the Company, exclusive of any
limitation rules as a business expense of the Company and not as compensation to
Employee, and Employee furnishes the Company with adequate documentary evidence
to substantiate such expenses.
7. Vacation:
Employee shall be entitled to a paid vacation of three weeks per each year of
this Agreement. Such vacation time allowance shall cumulatively accrue, and any
unused vacation time for each year can be used in the following year. The
Company shall make all reasonable efforts to enable Employee to use his vacation
leave each year. Employee shall also be entitled to all paid holidays made
generally available by the Company to its employees.
8. Death or Disability:
(a) Notwithstanding anything to the contrary contained in Paragraph 1 above
if, during the term hereof, the Employee suffers a disability (as defined
below) the Company shall, subject to the provisions of Paragraph 8 (c)
hereof, continue to pay Employee the compensation provided in Paragraph 3
hereof during the period of his disability; provided, however, that, in
the event Employee is disabled for a continuous period of ninety (90)
consecutive days or for shorter periods aggregating ninety (90) days in
any twelve-month period that the Employee is incapable of substantially
fulfilling the duties set forth in Section 2 or hereafter assigned to him
by the Chief Executive Officer or Board of Directors because of physical,
mental or emotional incapacity resulting from injury, sickness or disease
as determined by an independent physician agreed upon by both the Company
and the Employee, the Company may, at its election, terminate this
Agreement. In the event of such termination, the Company, shall continue
to be obligated to pay Employee his compensation earned up to the date of
termination.
(b) As used in this Agreement, the term "disability" shall mean the
substantial inability of Employee to perform his duties under this
Agreement as determined by an independent physician agreed upon by both
the Company and the Employee.
(c) In the event that employment ceases prior to the end of a calendar month
as a result of his death or disability or in the event of a termination
described in Paragraph 10 below, the Company shall pay Employee or his
legal representatives, as the case may be, in addition to any other
amounts payable by the Company hereunder, a lump cash sum which shall in
no event be less than the salary plus any bonus to which Employee would
have been entitled, had he continued to be affiliated with the Company
until the end of the calendar month during which his affiliation
terminates.
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9. Termination:
(a) Termination Without Cause by the Company: The Company may terminate this
Agreement without cause at anytime upon written notice to the Employee,
whereupon this Agreement shall terminate on the date specified therein.
The Company shall pay the Employee a severance amount equal to the
remaining amount of Employee's Base Salary left on this agreement (the
"Severance Amount"), payable in full within thirty (30) days from the date
specified therein (hereinafter, the "Severance Payout Period") and shall
be subject to all usual and customary payroll deductions, including
applicable withholding taxes. At the same time, all the options granted to
Employee shall be vested immediately upon termination without causes.
(b) Termination Without Cause by the Employee: Employee may terminate this
agreement for any reason upon the giving of 60 days advance notice. Upon
termination by Employee, the Company shall be obligated only to continue
to pay to Employee his Base Salary earned up to the effective date of
termination. All of Employees unvested options shall be forfeited and
Employee shall abide by the termination Without Cause non-competition
agreements set forth herein.
(c) Termination for Cause: The Company may immediately terminate this
Agreement at any time during the Employment Period for "cause". In such an
event of termination, the Company shall be obligated only to continue to
pay to Employee his Base Salary earned up to the effective date of
termination. "Cause" for purposes hereof shall mean a breach of any of the
provisions of this Agreement by Employee, wilful misconduct or neglect of
duties, conviction of any criminal offence involving a felony, gross
negligence, refusal or failure to follow the legal and legitimate
directives of the Board of Directors, malfeasance or a crime of moral
turpitude.
(d) Continuing Effect: Notwithstanding any termination of the Employee as
provided in this Section 9 or otherwise, the provisions of Section 11 and
12 shall remain in full force and effect and shall be binding on the
Employee and his legal representatives, successors and assigns.
10. Consolidation, Merger or Sale of Assets:
Nothing in this Agreement shall preclude the Company from consolidating or
merging into or with, or transferring all or substantially all of its assets to,
another corporation, which assumes this Agreement, and all obligations of the
Company hereunder, in writing. Upon such consolidation, merger, or transfer of
assets and assumption, the term "the Company" as used herein, shall mean such
other corporation and this Agreement shall continue in full force and effect.
11. Restrictive Covenants:
(a) The Employee acknowledges that his services and responsibilities are
unique in character and are of particular significance to the Company,
that the Company is a competitive business and that the Employee's
continued and exclusive service to the Company under this Agreement is of
a high degree of importance to the Company. Therefore, during the
Employment Period and for the applicable periods specified below (each,
the "Noncompete Period"), the Employee shall not, directly or indirectly,
as owner, partner, joint venture, Employee, Broker, Corporate Officer,
Agent, Principal, Licensor, Shareholder unless as owner of no more than
five percent (5%) of the issued and outstanding capital stock of such
entity if such stock is traded on a major securities exchange, or in any
other his capacity whatsoever, engage in or have any connection with any
business which is competitive with the Company, and which operates
anywhere in the world on the effective date of termination of this
Agreement.
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Reason for Termination Non-compete Period
---------------------- ------------------
Termination without cause for balance of contract term
Termination for cause 2 years
(b) For the purposes of this Agreement, a business will be deemed to be
competitive with the Company if it is an importer/re-seller of consumer
products including hardware and/or software, which is in the same product
categories as those sold by the Company in the United States mass merchant
marketplace.
(c) In addition to the restrictions set forth in Section 11(a), during the
Noncompete period, the Employee shall not:
i. directly or indirectly, by initiating contact or otherwise, induce
influence, combine or conspire with, or attempt to induce, influence,
combine or conspire with, any of the officers, employees or agents of the
Company to terminate his, her or its employment or relationship with or to
compete against the company; or
ii. directly or indirectly, by initiating contact or otherwise, divert or
attempt to divert any or all of any customers' or suppliers' business with
the Company.
(d) If, in any judicial proceedings, a court shall refuse to enforce any of
the covenants included in this Section 11 due to extent, geographic scope
or duration thereof, or otherwise, then such unenforceable covenant shall
be amended to relate to such lesser extent, geographic scope or duration
and this Section 11 shall be enforceable, as amended. In the event the
Company should bring any legal action or other proceeding against Employee
for enforcement of this Agreement, the calculation of the Noncompete
Period shall not include the period of time commencing with the filing of
legal action or other proceeding to enforce this Agreement through the
date of final judgement or final resolution, including all appeals, if any
of such legal action or other proceeding unless the Company is receiving
the practical benefits of this Section 11 during such time. The existence
of any claim or cause of action by the Employee against the Company
predicated on this Agreement or otherwise shall not constitute a defence
to the enforcement by the Company of these covenants.
(e) The Employee has carefully considered the nature and extent of the
restrictions upon the Employee and the rights and remedies conferred upon
the Company under this Section 11, and the Employee hereby acknowledges
that the restrictions on his activity as contained herein are reasonably
required for the Company's protection, would not operate as a bar to the
Employee's sole means of support, are fully required to protect the
legitimate interests of the Company, do not confer a benefit on the
Company disproportionate to the detriment to the Employee and are material
inducements to the Company to enter into this Agreement. The Employee
hereby agrees that in the event of a violation by his of any of the
provisions of this Agreement, the Company will be entitled to institute
and prosecute proceedings at law or in equity to obtain damages with
respect to such violation or to enforce the specific performance of this
Agreement by the Employee or to enjoin the Employee from engaging in any
activity in violation hereof.
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12. Treatment and Ownership of Confidential Information:
The Employee acknowledges that during his employment he will learn and will have
access to Confidential Information regarding the Company. For purposes of this
Agreement, the term "Confidential" acquires or develops or has made use of,
acquires or develops or has made use of, acquires or develops or has made use
of, acquired or developed in whole or in part in connection with Employee's
employment with the Company (whether before or after the date of this
Agreement), including any financial data, client names and addresses, employee
data, discoveries, processes, formulas, inventions, know-how, techniques and any
other materials or information related to the business or activities of the
Company which are not generally known to others engaged in similar businesses or
activities. The Employee acknowledges that such Confidential Information as is
acquired and used by the Company or its affiliates is a special, valuable and
unique asset. The Employee will not, except in connection with and as required
by his performance of his duties under this Agreement, for any reason use for
his own benefit, or the benefit of any person or entity with which she may be
associated, or disclose any such Confidential Information to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever
without the prior written consent of the Company's Board of Directors, unless
such Confidential Information previously shall be and shall remain the exclusive
property of the Company. The Employee agrees to promptly disclose to the Company
all Confidential Information developed in whole or in part by the Employee
within the scope of this Agreement and to assign to the Company any right,
title, or interest the Employee may have in such Confidential Information. The
Employee agrees to turn over to the Company all physical manifestations of the
Confidential Information in his possession or under his control at the request
of the Company.
13. Employee Representations and Warranties:
The Employee represents and warrants that he is not a party to, or bound by, any
other his employment agreements. The Employee further represents and warrants to
the Company that he is free of known physical and mental disabilities that
would, with or without reasonable accommodations that would create an undue
hardship for the Company, impair his performance hereunder and he is fully
empowered to enter and perform his obligations under this Agreement. Without
limiting the generality of the foregoing, the Employee represents and warrants
that he is under no restrictive covenants to any person or entity that will be
violated by his entering into and performing this Agreement.
14. Arbitration:
Except as provided in sections 11 and 24 hereof, any dispute, controversy or
claim arising under, out of, in connection with, or in relation to this
Agreement, or the breach, termination, validity or enforceability of any
provision of this Agreement, will be settled arbitrator (the "Arbitrator")
chosen according to the rules of the American Arbitration Association's National
Rules for Resolution of Employment Disputes, with the additional proviso that
all steps necessary to insure the confidentiality of the proceedings will be
added to the basic rules. Unless otherwise mutually agreed upon by the parties,
the arbitration hearings shall be held in the Broward County, Florida. The
parties hereby agree that the Arbitrator has full power and authority to hear
and determine the controversy and make and award in writing in the form of a
reasoned judicial opinion. The parties hereby stipulate in advance that the
award is binding and final. The parties hereto also agree that judgement upon
the arbitration award may be entered in any federal or state court having
jurisdiction thereof. Each party is responsible for their own legal fees and
out-of-pocket expenses.
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15. Severability:
Invalidity or unenforceability of any provisions hereof shall in no way affect
the validity or enforceability of any other provisions.
16. Terminology:
All personal pronouns used in this Agreement, whether used in the masculine,
feminine or neuter gender, shall include all other genders; the singular shall
include the plural and vice versa. Titles of Paragraphs are for convenience
only, and neither limit nor amplify the provisions of the Agreement itself.
17. Governing Law:
This Agreement shall be governed and construed in accordance with the laws of
the State of Florida.
18. Entire Agreement:
This Agreement contains the entire understanding between the parties and may not
be changed or modified except by an Agreement in writing signed by all the
parties.
19. Notice:
Any notice required or permitted to be delivered hereunder shall be deemed to be
delivered when deposited in the United States mail, postage prepaid, registered
or certified mail, return receipt requested, addressed to the parties at the
addresses first stated herein, or to such other address as either party hereto
shall from time to time designate to the other party by notice in writing as
provided herein.
20. No Publicity:
The Employee agrees that she will not engage in any conduct that is injurious to
the Company's reputation and interests, including, but not limited to, publicly
disparaging (or inducing or encouraging others to publicly disparage) the
Company or any of the Company's directors, officers, employees or agent.
21. Co-operation:
Employee agrees to co-operate fully with the Company by providing information to
the Company and its representatives, agents or advisors regarding any business
matters with which the Employee may become involved with during the terms of
this Agreement and to co-operate fully in the event of any litigation or legal,
administrative or regulatory proceeding by providing information, including but
not limited to, providing truthful testimony at any legal, administrative or
regulatory proceeding, regarding any facts or information of which Employee has
knowledge and/or any business matters of which Employee has or had knowledge.
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22. Assign ability:
The rights and obligations of the Company under this Agreement shall insure the
benefit of and be binding upon the successors and assigns of the Company,
provided that such successor or assign shall acquire all or substantially all of
the assets and business of the Company and, further provided that any such
assignment shall not release the Company from its obligations to the Employee
hereunder. The employee's rights and obligations hereunder may not be assigned
or alienated without the prior written consent of the Company and any attempt to
do so by the Employee will be void.
23. Injunctive Relief:
The Employee acknowledges and agrees that in the event Employee violates any
term, covenant or provision of Section 11 of this Agreement, the Company will
suffer irreparable harm for which the Company will have no adequate remedy at
law. The Employee agrees that the Company shall be entitled to injunctive relief
for any breach or violation of Section 11 of this Agreement, including but not
limited to the issuance of an ex-parte preliminary injunction, in addition to
and not in limitation of any and all other remedies available to the Company at
law or in equity.
24. Indemnification/Offsets:
The Company agrees that the Employee shall be covered under applicable Directors
and Officers insurance policies as may be purchased from time to time. As such
the Company agrees to indemnify and hold Employee harmless from any and all
claims that arise as a result of the dutiful performance by Employee of his
obligations hereunder. Further, the Employee agrees to hold the Company harmless
and indemnify the Company from and against any claims that may be made against
Company as a result of the Employee's negligent or wilful conduct. The existence
of any claim or cause of action of the Employee against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defence to the
enforcement by the Company of this Agreement.
25. Employee Acknowledgement:
The Employee acknowledges and agrees that Employee has read and understands the
terms set forth in this Agreement and has been given a reasonable opportunity to
consult with an attorney prior to execution of this Agreement.
26. Other Instruments:
The parties hereby covenant and agree that they will execute such other and
further instruments and documents as are or may become necessary or convenient
to effectuate and carry out the terms of this Agreement.
27. Counterparts:
This Agreement may be executed in any number of counterparts and each such
counterpart shall for all purposes be deemed an original.
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IN WITNESS WHEREOF, this Agreement has been duly signed by the Employee and on
behalf of the Company on the day and year first above written.
THE SINGING MACHINE COMPANY INC
/s/ Yi Xxxx Xxxx
--------------------------------
By: Yi Xxxx Xxxx
Interim Chief Executive Officer
EMPLOYEE
/s/ Xxxxx Xxxxx
--------------------------------
Xxxxx Xxxxx
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