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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