SEPARATION AND RELEASE AGREEMENT
 
 THIS SEPARATION AND RELEASE AGREEMENT (the "Agreement") is effective as of
December 8, 2006 by and between Yi Ping Chan (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.

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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.   

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 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.

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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.

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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]
 

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IN WITNESS WHISEOF, the aforesaid parties have hereunto set their hands and
seals as of the day below written.
 
 
/s/ Yi Ping Chan                                    
Yi Ping Chan
Executed on December 8, 2006

The Singing Machine Company, Inc.
 
/s/ Danny Zheng                                 
Danny Zheng
Chief Financial Officer

Executed on December 8, 2006

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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
   

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