EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (“Agreement”) made as of the 4th day of October 2006 by and
between THE SINGING MACHINE COMPANY INC. a Delaware corporation with its
principal offices at 6601 Lyons Road, Coconut Creek, FL 33073 (the “Company”)
and M. Alicia Haskamp whose residence address is 1000 Spanish River Road,
Apartment 2F, Boca Raton, Florida, 33432 (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 November 1, 2006 (the
Commencement Date), and ending on October 31, 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 Senior Vice
President Sales and Product Development.

2.
Efforts on Company’s Behalf:

 
The Employee shall devote all of her time and best efforts, skills and attention
to the business and affairs of the Company; she 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 Senior Vice President, Sales & Product Development, 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)
In addition, the Employee will be compensated based on the following performance
sales target starting April 1, 2007.

 
Sales bonus based on the hardware sales revenue (this will exclude music)
exceeding the net sales of US$30 million ending March 31, 2007, on the following
formula:
 

-
0.85% on net sales with the exception of sales generated and/or affiliated with
Rick Bond and Griffin International which will be at 0.15%.

 

-
Net sales shall be defined as gross sales revenue minus deductions for returns
and defective goods.

 

 
-
This sales bonus format will be calculated from April 1 to March 31 of each year
and will be paid on or before June 30 of each year for the previous year.

 

 
-
By way of example, the compensation which the employee shall receive is set
forth on Attachment A.

 
 
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(c)
Any base salary increase or bonus during the term hereof should be at the sole
discretion of the Company’s Board of Directors based on the Company’s and the
Employee’s performances

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’s and the
Employee’s performances

(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 participate 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 her 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 her 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 her 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.

 
 
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(b)
As used in this Agreement, the term “disability” shall mean the substantial
inability of Employee to perform her 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 death or disability or in the event of a termination described in
Paragraph 10 below, the Company shall pay Employee or her 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 she continued to be
affiliated with the Company until the end of the calendar month during which her
affiliation terminates.

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 giving 60 days advance notice. Upon termination by Employee,
all of Employees unvested options shall be forfeited and Employee shall abide by
the termination Without Cause non-competition agreements set forth herein. In
such an event of termination, the Company shall be obligated only to continue to
pay to Employee her Base Salary earned up to the effective date of termination.

(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
her 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 her legal
representatives, successors and assigns.

 
 
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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 her 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.

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.

 
 
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(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.

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.
 
 
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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.

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. By signing this agreement, both parties agree to terminate the
Employment Agreement dated November 1, 2000, any prior amendment agreed on by
the Employee with the Company in either orally or in writing regarding the
employment and compensation.
 
 
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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.

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.
 
 
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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.

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 Ping Chan      

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By:  Yi Ping Chan    
Interim Chief Executive Officer
   

 
EMPLOYEE
 

        /s/ Alicia Haskamp      

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M. Alicia Haskamp          

 
 
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