Document:

<PAGE>

                        THE SINGING MACHINE COMPANY, INC.
                               FACTORING AGREEMENT

Main Factors, Inc.
P.O. Box 50608
Dallas, TX 75250

Gentlemen:

The following is the agreement between us, effective the date of your
acceptance, by which you shall act as our sole factor.

1. We agree to sell to you as absolute owner and you agree to purchase from us
all accounts, notes, chattel paper, instruments, bills, acceptances or other
forms of obligation (hereinafter collectively referred to as "receivables")
arising out of the sale of merchandise and/or rendition of services (hereinafter
collectively referred to as "sales"). All of our sales shall be made in our
name, but the purchase price shall be paid only and directly to you and all of
our factored invoices to our customers shall clearly state on their face in form
and manner satisfactory to you that the receivables represented by such invoices
have been assigned and are payable only to you. Our sales of receivables to you
include all of our right, title, and interest in and to the merchandise
represented thereby, including such merchandise as may be returned by customers,
and all of our rights of stoppage in transit, replevin, and reclamation and as
unpaid seller and/or lienor. As our receivables are created, we shall execute
and deliver to you such further and confirmatory instruments of sales, on an
account by account basis, transfer and assignment thereof in such form and
manner as you may from time to time require together with a copy of each
invoice, all shipping or delivery receipts and such other proof of sale and
delivery or performance as you may from time to time require; and you shall not
be required to make advances upon or to remit to us any sums credited for the
purchase price of receivables until we provide you therewith as to such
receivables. We shall deliver to you copies of all credit memos issued by us. We
shall execute and deliver to you and/or file at such times and places as you may
designate such further instruments as you may from time to time require for the
protection of your rights hereunder. We shall notify you promptly of all
returned merchandise and shall set aside and mark and hold the same for your
account as owner.

2. The amount, delivery and terms of each sale shall be submitted to your credit
department for written approval before we accept or fill any of our customer's
orders and you shall have the right to withdraw such approval at any time prior
to delivery. Sales approved in writing and accepted by you (hereinafter referred
to as "approved receivables"), when purchased by you, shall be without recourse
to us except as hereinafter provided; sales made by us without such written
approval (hereinafter referred to as "non-approved receivables"), when purchased
by you, shall be with full recourse to us. Receivables for freight or samples
shall always be deemed to be non approved receivables notwithstanding any
written approval from you. In the event you decline to give your written
approval on any order received by us from a customer and, in advising us of such
decline, you furnish us with information as to the credit standing of the
customer, such information shall be deemed to have been requested of you by us
and your advice

FACTORING AGREEMENT                     PAGE 1                       INITIAL JK
                                                                             ---
<PAGE>

containing such information is recognized as a privileged communication. We
agree that the information furnished to us shall not be given to our customer or
to our salesman; if necessary, we shall merely advise our customer or our
salesman that credit has been declined on the account and that any questions
arising should be directed to you.

3. The purchase price of all receivables shall be the net amount thereof (net
amount of receivables wherever used herein being the gross amount less all
discounts - the net amount due on the shortest terms). Your charge for ledgering
receivables, checking the credit of our customers, bookkeeping, agings,
statements, supervising collection of receivables, assuming the credit risk on
approved receivables, and other services provided us hereunder shall be One and
one-half percent (1-1/2%) of the net amount of receivables purchased, on all
sales using our regular terms. Our regular terms of sale are net 20, net 30, net
45 and net 60. We understand that you will not purchase invoices with terms
greater than net 45. Should factored sales exceed three and one-half million
dollars ($3,500,000.00) in a calendar year, then you will reduce our factors
commission to 1.35% on all sales over $3,500,000. Should factored sales
exceed five and one-half million dollars ($5,500,000.00), you will reduce our
factors commission to 1.15% on all sales over $5,500,000.00. Should factored
sales exceed seven million five hundred thousand dollars ($7,500,000.00), you
will reduce our factors commission to 1.00% on all sales over $7,500,000.00. We
understand that the charge amount will be considered as an advance for purposes
of computing the interest charge. We shall have no right to vary the terms of
sale set forth in the invoice relating to any receivable, after such receivable
has been purchased by you, without your consent. If we require any such
variation in terms, it is recognized that you will incur the same bookkeeping
expense as if you had purchased a new and separate receivable, and you shall
therefore be entitled to receive, as a condition precedent to approving such
change, a sum equal to an additional charge calculated on the new amount
computed in the same manner as if the receivable had been newly purchased by you
on the date we requested a variation in the terms of sale.

The additional charge may be referred to in accounting records as a dating
charge, and may in your sole discretion, if in your opinion the circumstances
justify a reduction, be less than the full charge determined as if the
receivable had been newly purchased. The charges on all receivables purchased by
you during each month as well as all other additional charges hereunder shall be
debited to our account as of the fifteenth day of that calendar month. You shall
credit our account with the net amount of each receivable purchased by you three
(3) days after your receipt of payment thereof, or on the fourth month following
the month during which such receivable becomes due, whichever first occurs, and
upon such date you shall remit the same to us, less all sums previously
advanced, remitted, paid or otherwise charged or debited to or for our account.
All terms of sale which are less than thirty (30) days shall be deemed to be
thirty (30) day terms for the purpose of computing the due date. You shall, at
any time after assignment of receivables to you, at our request, advance to us
up to seventy-five percent (75%) of the purchase price thereof and charge our
account therewith, less your charge. We agree to pay any related wire charges if
funds are wired at our request. You shall not be required to make any advances
on or remit the purchase price of non approved receivables until actual receipt
by you of payment of such receivables from our customers, and the making of all
advances and remittances by you shall be subject to your right to maintain a
reasonable reserve if you deem your security to require it which reserve may be
revised, upward or downward, at any time, in your sole and absolute discretion.
We understand that you may, from time to time, request written verification from
our customers and/or the delivery company that the goods sold by us have been
delivered and/or services have been completed and accepted by our customer. We

FACTORING AGREEMENT                     PAGE 2                       INITIAL JK
                                                                             ---

<PAGE>

understand that you must be satisfied with such verification before you will
make any advances. We understand that you will not advance on sales to new
customers until you have received written acknowledgment from them that their
receivables have been assigned and are payable to you.

4. All remittances received by us with respect to receivables purchased by you
shall be held in trust by us as your property, separate and apart from our own
properties and funds, and we will immediately deliver to you the identical
checks, monies or other forms of payment received and you shall have the right
to endorse our name on any and all checks or other forms of remittance received,
where such endorsement is required to effect collection, and we shall confirm
your title thereto by executing such instrument, as you may from time to time
require. In order to collect any receivable assigned to you, you have the right
to bring suit in your name or ours. In addition, we hereby constitute and
appoint you or such person as you may name, including substitution, as our
attorney-in-fact to exercise, and at our cost and expense, to execute all
necessary documents in our name and do all other things necessary to carry out
this agreement. We hereby ratify and approve all acts of the attorney and agree
that neither you nor the attorney will be liable for any acts of commission or
omission nor for any error of judgment or mistake of fact or law. This power
being coupled with an interest is irrevocable so long as any receivable assigned
and sold to you remains unpaid or we are indebted to you in any manner.

5. We make the following representations, warranties and agreements, in order to
induce you to enter into this agreement, which shall be deemed to be
incorporated by reference in each confirmatory schedule of receivables or other
form of assignment delivered to you from time to time by us, and shall be deemed
repeated and confirmed with respect to each receivable as it is created or
otherwise acquired by you and shall be deemed continuing:

(a) each and every factored receivable

     (i) will constitute a valid and legally enforceable indebtedness resulting
     from an actual sale and delivery to and acceptance by the customer of the
     goods sold or from the rendition of services in the ordinary course of our
     business, in full compliance and conformity with the specification of the
     customer, the amount represented as owing by the customer is the correct
     amount actually owing by such customer and the payment thereof is not
     contingent or conditioned on the fulfillment of any contract, condition or
     warranty, past or future, expressed or implied,

     (ii) will be subject to no dispute or claim by the customer as to price,
     terms, quality, quantity, delay in shipment, offsets, counterclaims, contra
     accounts or any other defense of any other kind and character,

     (iii) will be subject to no discounts, deduction, allowances, offsets,
     counterclaims, or other contra items or to no special terms of payment
     which are not shown on the face of the invoice thereof,

     (iv) will not represent a delivery of merchandise upon "consignment",
     "guaranteed sale", "sale or return", "payment on reorder" or similar terms,
     and

     (v) will not represent a "pack, bill and hold" transaction;

FACTORING AGREEMENT                     PAGE 3                       INITIAL JK
                                                                             ---

<PAGE>

(b) we will offer to you selected receivables created in the regular course of
business;

(c) all receivables and all goods giving rise thereto are, and for the duration
of our financing arrangements with you, will remain free of any liens, charges,
security interests, encumbrances and adverse claims, except for your benefit,
the original invoice with respect to each factored receivable bears notice of
its sale to you as required hereunder and we now have and will have absolute and
good title to said receivables and the right to sell the same to you, and has no
knowledge of any fact which would impair the validity thereof;

(d) we are duly organized, validly existing and in good standing under the laws
of the State of Delaware, are qualified to do business in every jurisdiction in
which such qualification is necessary, and have the power and authority to own
our properties and to carry on our business as now being conducted;

(e) we will not pledge, sell, assign, transfer, encumber or create a security
interest in any of our present or future accounts and other collateral in which
we have granted a security interest to you hereunder except for your benefit;

(f) our address as set forth below is our mailing address, our place of
business, our chief executive office and sole office at which our records
concerning the receivables are located and we shall not effect any change in
such address without first giving you ten (10) days prior written notice,
thereof; 6601 Lyons Road, Building A-7, Coconut Creek, FL 33073.

(g) the trade name or trade styles, if any, which are set forth below are the
only trade names or styles under which we transact business and the receivables
as may be sold to you hereunder on invoices of said trade names or styles are
wholly owned by us and all of the undertakings and liabilities held in
connection therewith under the terms of said trade names or styles shall be
identical and of the same force and effect as though those invoices bore our
name: None

(h) we shall neither pledge nor grant a security interest in any of our
inventory to another party unless prior written permission for such pledge is
given by you.

6. We shall immediately advise you of all disputes and claims and attempt to
adjust the same promptly at our expense. We agree that you may, with respect to
any receivable, deposit any and all remittances as received in payment of
receivables irrespective of any deductions shown in notations appearing on said
remittances and charge back to our account any deficiencies therein other than
deficiencies in the payment of approved receivables not subject to charge back
as hereinafter provided. You shall have the right at all times to charge to our
account all non approved receivables that have not been paid within fifty-eight
(58) days from due date for any reason. On approved receivables, you assume the
credit risk of the customer and have no recourse against us for non payment
thereof unless a claim or dispute is asserted as to any such receivable, or in
the event we breach any warranty relating to such a receivable, in which event,
you may charge such receivable to our account. The term "claim or dispute" shall
mean any claim or dispute, or assertion thereof, by a customer as to its
obligations to pay a receivable in full other than its financial inability to
pay, including, but not limited to, claims or disputes as to prices, terms,
quantity, quality, breach of contract or warranty, defense, setoff, deduction or
contra charge. In addition to your right of charge back and not in lieu thereof,
you shall have the right at all times of settling or of litigating any
receivables subject to a claim or dispute directly with our customer or other
claimant and/or to take possession of and to sell or cause to be sold

FACTORING AGREEMENT                     PAGE 4                       INITIAL JK
                                                                             ---

<PAGE>

without notice to us any rejected or returned merchandise at such prices, to
such purchasers and upon such terms as you in your sole discretion may deem
advisable, and to charge the deficiencies, costs and expenses, including legal
expenses, to us - or if you have charged back the receivables involved therein,
to credit us with the actual amount of cash received by you thereon less your
costs and expenses including legal expenses. The charge back of any receivables
shall not be deemed as a reassignment thereof, and title thereto and to the
merchandise represented thereby shall remain in you until you have been fully
reimbursed therefor.

7. You shall render an accounting to us at about the fifteenth day of each
calendar month in the form of month end statements including a summary sheet (a
gross summary of all activity), a "Monthly Reserve Sheet" (reflecting daily
activity and all credits and debits relating to receivables purchased by you)
and a "Net Cash Employed Charge Calculation" report (reflecting the sums
credited by us, the sums debited to us and the resulting balance) for the
preceding calendar month. All advances shall bear interest which shall be
charged and reflected in the "Net Cash Employed Charge Calculation" report as of
the end of each calendar month. A debit balance shown below on a "Net Cash
Employed Charge Calculation" report shall be payable by us on your demand.
Interest, wherever provided for in this agreement shall, except as otherwise
provided hereinafter, be at an annual rate equal to the lesser of (i) the
"Maximum Rate" or (ii) the "Formula Rate", as those terms are defined
hereinafter. If at any time hereafter the Formula Rate exceeds the Maximum Rate
the rate of interest shall be limited to the Maximum Rate but any subsequent
reduction in the Formula Rate shall not reduce the rate of interest below the
Maximum Rate until the total amount of interest accrued equals the amount of
interest which would have accrued if the Formula Rate had at all times been in
effect. Interest shall be calculated at a daily rate equal to 1/360th of the
annual rate stated, subject however to the limitation that the effective
interest rate may never exceed the Maximum Rate. Each account rendered shall be
deemed acceptable to and binding upon us unless we give you written notice of
any exception thereto within thirty (30) days after your rendition thereof.

The "Maximum Rate" shall mean at the particular time in question the highest
lawful rate of interest which, under the laws of the United States of America
applicable to contracts made or performed in the State of Texas, including,
without limitation, 12 U.S.C. 86(a), as amended to the date hereof and as the
same may be amended at any time and from time to time hereafter and any other
statute of the United States of America now or at any time hereafter prescribing
maximum rates of interest on loans and extensions of credit, and the laws of the
State of Texas, including without limitation, article 1.04 Title 79, Revised
Civil Statute of Texas, 1925, as amended to the date hereof by H.B. 1228 and as
the same may be amended at any time and from time to time hereafter ("Article
1.04") and any other statute of the State of Texas now or at any time hereafter
prescribing maximum rates of interest on loans and extensions of credit (all the
foregoing hereinafter referred to as the "Applicable Law"), you are then
permitted to charge us. If the highest lawful rate of interest which, under
Applicable Law, you are permitted to charge us shall change after the date
hereof, the Maximum Rate shall be automatically increased, as the case may be,
from time to time as of the effective time of each change in the Maximum Rate
without notice to us. For purposes of determining the Maximum Rate under the
Applicable Law of the State of Texas, the applicable rate ceiling shall be the
indicated rate ceiling described in and computed in accordance with the
provisions of Section (a)(1) of Article 1.04, provided, that at any time such
indicated rate ceiling shall be less than eighteen percent (18%) per annum or
more than twenty four percent (24%) per annum, the provisions of Sections (b)(1)
and (2) of Article 1.04 shall control for purposes of such determination, as
applicable.

FACTORING AGREEMENT                     PAGE 5                       INITIAL JK
                                                                             ---
<PAGE>

The "Formula Rate" shall mean a rate of interest two percent (2%) above the
Prime Rate charged by Bank One, Texas, N.A., or its successors, as announced or
published by the bank, or its successors, from time to time. If the Prime Rate
of said bank, or its successors, shall change after the date hereof, the Formula
Rate shall be automatically increased or decreased, as the case may be, from
time to time on the effective date of each change in the Prime Rate of said
bank, or its successors, without prior notice to us.

8. We hereby grant to you a general and continuing lien and security interest in
all of our accounts, instruments, documents, chattel paper, contract rights and
general intangibles, all of our present and future credit balances and reserves,
funds, monies and other properties coming into your hands, all monies payable by
us to you hereunder or otherwise, and all proceeds (including insurance
proceeds) and products of the foregoing as security for the payment and
satisfaction of any and all or our present and future liabilities, indebtedness
and obligations to you, whether absolute or contingent, liquidated or
unliquidated, arising under this agreement or otherwise, including any amounts
owing by us to you for merchandise purchased from any other concern factored or
financed by you or otherwise. Recourse to any of the foregoing collateral shall
not at any time be required and we hereby authorize you to charge our account
for the amounts of any or all of the liabilities, indebtedness and obligation
which are secured thereby. You may treat all indebtedness owed by us to you as
an entire single indebtedness for which we shall remain liable for full payment
without demand and you may, at your option, apply any funds, receivables,
credits or property of ours coming into your possession to any particular
portion of the indebtedness. We agree to pay all expenses (including reasonable
attorney fees) incurred by you in collecting any indebtedness owed by us to you
or in enforcing the terms of this agreement. We shall execute and deliver to you
and/or file at such places and at such times as you may designate such further
instruments as you may from time to time require for the protection of your
rights hereunder. We agree to pay all expenses related to all tax and lien
searches and filings you may perform related to our account.

9. We shall keep at our cost and expense proper books of account showing all
transactions relating to sales, and you may, at all reasonable times, inspect,
verify and check all of our books, accounts, records, orders and correspondence
and papers which you deem relevant to the receivables in which you have an
interest hereunder, and inspect and audit our books, records, accounts, files or
inventory and make extracts thereof. We will provide you promptly with such
signed financial statements and related information in such form, from time to
time, as requested by you. We will provide with at least thirty (30) days prior
written notice of any material change in our ownership, control or management.

10. This agreement shall become effective upon your acceptance hereof, shall be
deemed dated as of the date set forth hereinafter and shall continue in full
force and effect from month to month thereafter until terminated as to future
transactions by either party giving to the other not less than thirty (30) days
advance written notice by mail, but any such notice given by us shall not be
effective prior to the end of the first year or any succeeding year, as the case
may be. Of course, termination will not effect any of our obligations hereunder
to you of any kind prior to the effective date of termination, and pending final
accounting you may withhold any balance in our account unless you are supplied
with an indemnity satisfactory to you. In the event of such termination, all of
our obligations to you shall become due and payable on the effective date of
such termination, irrespective of any maturity dates established prior thereto.
You may, at your election, immediately terminate this agreement as to future
transactions, without notice, if we

FACTORING AGREEMENT                     PAGE 6                       INITIAL JK
                                                                             ---

<PAGE>

shall fail to perform any of our obligations hereunder or shall breach any
warranty contained herein, or if we shall become insolvent or suspend business
or if a petition under any chapter of the Federal Bankruptcy Act or any other
insolvency or debtor statute or receivership proceedings shall be filed by or
against us, or if any guaranty of our obligations hereunder shall be terminated
by the guarantor, or if you determine, in your sole discretion, that there has
been a material change in our ownership, control or management, or if you should
otherwise deem yourself insecure. We agree to reimburse you upon demand for all
attorney fees, court costs and other expenses incurred by you in enforcing any
of your rights against us under this agreement.

All notices provided herein shall be given at the addresses set forth:

Main Factors, Inc.                             The Singing Machine Company, Inc.
P.O. Box 50608                                 6601 Lyons Road, Building A-7
Dallas, TX 75250                               Coconut Creek, FL 33073

11. This agreement, when accepted by you, constitutes a security agreement under
the provisions of the Uniform Commercial Code then in effect in the State of
Texas and all of our obligations are performable and/or payable in the City of
Dallas, Dallas County, Texas, and we waive the right to be sued elsewhere on any
cause of action asserted by or against us. Your books and records showing the
account between us shall be admissible in evidence in any action or proceeding,
shall be binding upon us for the purpose establishing the items therein set
forth and also shall constitute prima facie proof thereof. This agreement may
only be changed, modified, supplemented or amended by written document signed by
you. This agreement shall be construed according to the laws of the State of
Texas. Should any paragraph, provision or clause of this agreement be found or
held contrary to, or unenforceable at law or in equity, such finding shall not
effect the others, which shall, notwithstanding, continue in all force and
effect, it being the express intention of the parties hereto that the invalidity
of any one or more paragraphs, provisions or clauses shall in no way affect the
others. This agreement represents the full agreement between us and shall be
binding upon both of us, our successors and assigns. No delay or failure on your
part in exercising of your rights, privileges or options hereunder shall operate
as a waiver of such rights, privileges or options and no waiver whatsoever shall
be valid unless it is in writing and signed by you and then only to the extent
set forth therein.

THE SINGING MACHINE COMPANY, INC.

By /s/ Edward Steele                        By /s/ John Klecha
  -----------------------------               ------------------------------
  Edward Steele, President                    John Klecha, Secretary

Main Factors, Inc.

Accepted in Dallas, Texas this 1st day of December, 1999

By /s/ Iain Michie
  -----------------------
  Iain Michie - President

FACTORING AGREEMENT                     PAGE 7                       INITIAL JK
                                                                             ---<PAGE>

                                MASTER AGREEMENT

         This Master Agreement dated as of July 31, 1999 is by and between The
Singing Machine Company, Inc. a Delaware corporation (the "Manager") and EPK
Financial Corporation, a Texas corporation ("EPK").

                               PRELIMINARY MATTERS

            A. The Manager may, from time to time, identify trading
opportunities involving the purchase and resale of goods.

            B. The Parties wish to set forth their agreement regarding the terms
upon which EPK may agree to purchase and resell such goods and the provision of
management services by, and compensation of, the Manager in connection
therewith.

                                    AGREEMENT

         In consideration of the premises, and of the representations,
warranties, covenants, agreements, and conditions contained herein, and for
other valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Manager and EPK hereby agree as follows:

                                    ARTICLE I
                                 INTERPRETATION

         1.1  Certain Definitions. As used in this Agreement, the following
terms have the meanings specified:

              "Affiliate" when used with respect to a Person, means any other
         Person whom directly or indirectly through one or more intermediaries
         controls, or is controlled by, or is under common control with, such
         Person. The term "control" (including the correlative term
         "controlled") means the possession, directly or indirectly, of the
         power to direct or cause the direction of the management and policies
         of a Person, whether through the ownership of voting stock, by contract
         or otherwise.

              "Agreement" has the meaning specified in Section 1.4.

              "Business Day" means any day which is not a Saturday, a Sunday or
         a day on which national banks in the State of Texas are authorized or
         required by law to be closed.

              "Confirmation" means a confirmation in the form of Exhibit A or
         such other form of written instrument as to which the Parties may
         agree.

              "Credit Enhancement," with respect to a Transaction and if
         applicable, means the letter of credit, guaranty, bond or other form of
         credit support with respect to the obligations of the Purchaser under
         such Transaction, provided by the Credit Enhancer for such Transaction.

                                        1

<PAGE>

              "Credit Enhancer" with respect to a Transaction, means the
         Person, if any, identified as such in the Confirmation with respect to
         such Transaction.

              "EPK" has the meaning specified in the preamble to this Agreement.

              "EPK Minimum Proceeds" with respect to a Transaction, has the
         meaning specified in the Confirmation for such Transaction.

              "EPK Purchase Price," with respect to a Transaction, means the
         aggregate purchase price payable to the Vendor for the Goods under such
         Transaction as set forth in the Vendor Invoice for such Transaction and
         the Confirmation with respect to such Transaction.

              "Event of Default" has the meaning specified in Section 4.1.

              "FCPA" means the U.S. Foreign Corrupt Practices Act, 15 U.S.C.
         78a, et seq., as amended, supplemented and replaced from time to time.

              "Governmental Authority" means any government or any political
         subdivision or agency, department or instrumentality thereof,
         including, without limitation any court or administrative body.

              "Goods," with respect to a Transaction, means the goods identified
         as such in the Confirmation with respect to such Transaction.

              "Guarantor" means Edward Steele and John Klecha. The Guarantor
         constitutes a Credit Enhancer with respect to all Transactions
         hereunder.

              "Guaranty" means the guaranty of the Guarantor, in form acceptable
         to EPK, delivered pursuant to Section 5.14. The Guaranty shall
         constitute Credit Enhancement with respect to all Transactions
         hereunder.

              "Manager's Compensation," with respect to a Transaction and
         subject to Section 2.5, the compensation of the Manager for performing
         his obligations in respect of such Transaction under the Agreement, as
         specified in the Confirmation with respect to such Transaction.

              "Party" means EPK or the Manager.

              "Person" means collectively, any individual, partnership,
         corporation, limited liability company, business trust, joint stock
         company, trust, unincorporated organization, joint venture, firm or
         other entity, or Governmental Authority.

                                        2

<PAGE>

              "Purchase Order" with respect to a Transaction, means the
         agreement referring to purchase orders from the Purchaser for the Goods
         with respect to such Transaction.

              "Purchaser" with respect to a Transaction, means the Person
         identified as such in the Confirmation with respect to such
         Transaction.

              "Purchaser Purchase Price," with respect to a Transaction, means
         the aggregate purchase price payable by the Purchaser for the Goods
         under such transaction as set forth in the Purchase Order for such
         Transaction and the Confirmation with respect to such Transaction.

              "Solvent," as to any Person, such Person (a) owns property whose
         fair salable value is greater than the amount required to pay all of
         such Person's indebtedness (including contingent debts), (b) is able to
         pay all of the indebtedness as such indebtedness matures and (c) has
         capital sufficient to carry on its business and transactions and all
         business and transactions in which it is about to engage.

              "Taxes" means all taxes, tariffs, duties, stamp taxes or fees of
         any description due any Governmental Authority arising out of or in
         connection with any Transaction, excepting only United States federal
         income taxation of EPK and any State of Texas tax based on the net
         income of EPK.

              "Transaction" means a particular transaction governed by the terms
         of this Agreement, including the terms set forth in the Confirmation
         with respect to such transaction.

              "Vendor" with respect to a Transaction, means the Person
         identified as such in the Confirmation with respect to such
         Transaction.

              "Vendor Pro Forma Invoice" with respect to a Transaction, means
         the contract from the Vendor for the Goods with respect to such
         Transaction.

         1.2  Other Definitional Provisions.

              a. Unless otherwise specified therein, all terms defined in this
Agreement have the above-defined meanings when used in any Confirmation,
certificate, amendment, report or other document made or delivered pursuant
hereto.

              b. Each term defined in the singular form in Section 1.1 shall
mean the plural thereof when the plural form of such term is used in this
Agreement or any Confirmation, certificate, amendment, report or other document
made or delivered pursuant hereto, and each term defined in the plural form in
Section 1.1 shall mean the singular thereof when the singular form of such term
is used herein or therein.

                                        3

<PAGE>

              c. The words "hereof," "herein," "hereunder" and similar terms
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section, schedule and exhibit
references herein are references to sections, schedules and exhibits to this
Agreement unless otherwise specified.

              d. The word "including" when used herein shall mean "including
without limitation."

              e. Unless otherwise specified herein, all times set forth herein
are Dallas, Texas time.

         1.3  Inconsistency. In the event of any inconsistency between the
provisions of any Confirmation and this Agreement, such Confirmation will
prevail for the purpose of (but only for the purpose of) the relevant
Transaction.

         1.4  Single Agreement. All Transactions are entered into in reliance on
the fact that this Master Agreement and all Confirmations form a single
agreement between the Parties (collectively referred to as this "Agreement"),
and the parties would not otherwise enter into any Transactions.

                                   ARTICLE II
                                  TRANSACTIONS

         2.1  Offer. The Manager may, from time to time propose a Transaction by
submitting to EPK a proposed Confirmation setting forth for such Transaction the
Goods, the EPK Minimum Proceeds, the Manager's Compensation, the EPK Purchase
Price, the Vendor, the Purchaser Purchase Price, the Purchaser, information
sufficient to enable to EPK to determine the relative credit worthiness of the
Purchaser, the Purchaser's terms and method of payment in the transaction, and,
if applicable, the Credit Enhancer, and attaching copies of the Vendor Invoice,
the Purchase Order and, if applicable, the Credit Enhancement (other than the
Guaranty) with respect to the proposed Transaction.

         2.2 Acceptance. EPK shall have no obligation to enter into any proposed
Transaction. In the event that EPK and the Manager agree upon a proposed
Transaction, such agreement shall be evidenced by the execution and delivery
(which may be by telecopy) of a Confirmation setting forth the terms of such
Transaction. The Confirmation with respect to a Transaction shall become
effective upon all of the following having occurred (i) execution and delivery
thereof by both of the Parties; (ii) assignment (or other means of transfer) to
EPK acceptable to EPK of any Credit Enhancement with respect to the Transaction;
(iii) if requested by EPK, deliver to EPK a letter from each and every creditor
of Manager that now or hereafter holds a security interest in or lien on any and
all of Manager's Inventory and Accounts whereunder each of them shall have
consented to the Transactions contemplated by this Agreement and shall have
acknowledged EPK's sole and exclusive ownership in the Goods and all proceeds
thereof, and (iv) if requested by EPK, the establishment of a lock box account
over which EPK shall have sole access, dominion and control at a state or
national bank located in Dallas, Texas acceptable to EPK (the "Lock Box") at the
sole cost and expense of Manager.

                                        4

<PAGE>

         2.3  Services of the Management. Unless otherwise specified in the
Confirmation relevant to a Transaction, the Manager shall: (a) cause the Goods
to be shipped to the Purchaser in accordance with the Purchase Order relevant to
such Transaction and bear all costs, including any shipping costs and messenger
expenses and legal costs, incidental to such Transaction; (b) indemnify and hold
EPK harmless from and against any loss caused by the failure of (i) the Vendor
or any shipper timely to deliver Goods which conform to the requirements of the
Vendor Invoice, the Purchase Order and applicable law, or (ii) the Manager to
truthfully represent the Purchaser's credit information or the terms and method
of payments in the transaction as contemplated in Section 3.1; (c) indemnify
and hold EPK harmless from and against any claim of or liability to any Person
arising out of the Transaction, including without limitation any claim of or
liability to the Purchaser or any other Person in respect of the Goods; (d) pay,
and indemnify and hold EPK harmless from and against, any Taxes due in
connection with such Transaction; and (e) be responsible for performing all
administrative and ministerial tasks relating to the collection of such invoices
to the Purchaser; provided, however, that the foregoing shall in no way limit
EPK's right at any time and from time to time to collect amounts owing under
such invoices directly; and provided, further, that the foregoing shall not
constitute a guaranty by Manager of the payment or collection of such invoices.

         2.4  Maximum EPK Purchase Price. Unless otherwise specified in the
Confirmation relevant to a Transaction, the maximum EPK Purchase Price shall be
$ 1,000,000.00.

         2.5  Compensation of the Manager. The compensation of the Manager in
respect of its services in connection with a particular Transaction shall be the
Manager's Compensation set forth in the Confirmation with respect to such
Transaction; provided, that unless otherwise specified in the Confirmation with
respect to such Transaction, the compensation of the Manager in respect of a
particular Transaction shall be payable solely from the proceeds received by EPK
from the Purchaser and, if applicable, the Credit Enhancer with respect to such
Transaction and only to the extent that such proceeds exceed the EPK Minimum
Proceeds for such Transaction.

         2.6  Further Assurances. The Manager hereby agrees that at any time and
from time to time after the execution of this Agreement, Manager shall, upon
request of EPK, execute and deliver such further acts and things as EPK may
request in order to fully effect the purposes of this Agreement and to protect
EPK's interests in the Goods and/or Credit Enhancements, including, but not
limited to, furnishing any and all documents necessary to enable EPK or its
insurer to defend itself in any litigation arising in connection herewith.
Manager shall give EPK written notice of any action known by Manager to have
been taken by a third party which may jeopardize EPK's rights in the Goods
and/or Credit Enhancement promptly after Manager becomes aware of the same.
Manager hereby agrees to reimburse EPK for all out-of-pocket costs and expenses
(including but not limited to reasonable attorneys fees) incurred by EPK in
connection with (i) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by EPK, the Vendor, the Purchaser, Manager or any other
person) in any way relating to the Goods, the transactions or this Agreement,
(ii) any attempt to enforce any of EPK's rights in the Goods or Credit

                                       5

<PAGE>

Enhancements in the transactions or under this Agreement against Manager, the
Vendor, the Purchaser or any other person, and/or (iii) any attempt to verify,
protect, sell, liquidate or otherwise dispose of the Goods and/or Credit
Enhancements.

         2.7  Title. All Goods shall at all times be and remain the sole and
exclusive property of EPK and titled in the name of EPK or such tradestyle as
may be acceptable to EPK.

         2.8  Insurance on Goods. Manager shall obtain insurance on behalf of
EPK which insures the Goods against all risks or physical loss or damage with
warehouse to warehouse coverage. All such policies of insurance shall name EPK
as the sole insured party and as exclusive loss-payee thereunder.

         2.9  Collection of Purchaser Purchase Price. All invoices shall
instruct the Purchaser to remit their payments directly to the Lock Box. Without
limiting the foregoing, in the event that Manager shall receive any remittances
from any Purchaser from time-to-time on account of transactions, such
remittances shall be and remain EPK's property and Manager shall hold such
remittances as trustee of an express trust for EPK's benefit and immediately
deliver over to EPK for deposit or cause to be deposited the same in the Lock
Box or to EPK or to such other account designated by EPK. Manager acknowledges
that such remittances are the sole and exclusive property of EPK. All payments
of the Purchaser's Purchase Price which are made through presentment of a letter
of credit shall instruct the collecting or paying bank of said letter of credit
to make payment by wire transfer of immediately available funds to the Lock Box,
to EPK or to such other account designated by EPK. All funds deposited in said
special account are the sole and exclusive property of EPK. EPK and its
directors, officers and agents shall have the right to sign and endorse on
behalf of Manager all checks, drafts and other forms of payment received by EPK
in connection with the payment of any account. Manager appoints EPK or any other
person EPK may from time to time designate, as Manager's attorney-in-fact with
power to:

              (a) endorse Manager's name on any checks, drafts or other forms of
                  payment or security that may come into possession;

              (b) sign Manager's name on notices of assignment, financing
                  statements, verifications of Accounts and notices to Account
                  Debtors;

              (c) receive, open and dispose of all mail addressed to Manager and
                  received by EPK;

              (d) send requests for verification of Contracts/Purchase Orders,
                  Accounts to current and/or potential future Accounts Debtors;
                  and

              (e) do all things necessary to carry out the terms of this
                  agreement.

         2.10 Access to Information and Control Over Goods. Manager shall
provide EPK with any and all information which EPK may reasonably request
concerning the Goods, the Purchaser, the Vendors, Manager, and/or any other

                                       6

<PAGE>

parties involved with the Goods, including, but not limited to, the inspection
of the books and records of Manager by EPK and its representatives. Manager
shall provide EPK with immediate access to any and all Goods in Manager's
possession, actual or constructive, upon request by EPK. In the event that EPK
determines in good faith that it is necessary for EPK to assert or enforce its
rights as owner of the Goods in order to adequately protect its interests, EPK
shall be permitted to take, and Manager shall assist EPK in taking any and all
action as EPK deems necessary, including, but not limited to, (i) notifying
freight forwarders, the Purchasers, the Vendors and other third parties of EPK's
interest in the Goods, and (ii) taking immediate and complete physical control
over the Goods as the proceeds thereof

         2.11 NO WARRANTIES ON GOODS. ALL GOODS COVERED BY THE AGREEMENT ARE
RESOLD BY EPK "AS IS" AND "WITH ALL FAULTS," AND MANAGER ACKNOWLEDGES THAT NO
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE ARE TO BE
IMPLIED IN THE AGREEMENT. EPK GIVES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE
DESCRIPTION, QUALITY, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE,
PRODUCTIVENESS, OR ANY OTHER MATTER OF ANY OF THE GOODS. EPK SHALL BE IN NO WAY
RESPONSIBLE FOR THE PROPER USE OR SERVICE OF THE GOODS.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         3.1  The Manager. The Manager hereby represents and warrants, and the
delivery by the Manager of each Confirmation shall constitute the further
representation and warranty of the Manager, that:

              (a) The Manager is a corporation duly organized and validly
         existing and in good standing under the laws of Delaware.

              (b) the Manager has all requisite authority to enter into this
         Agreement and to perform all the obligations required to be performed
         by it hereunder;

              (c) neither the execution and delivery by the Manager of this
         Agreement, nor the consummation of any of the Transactions herein
         contemplated, nor compliance with the terms and provisions hereof, will
         (i) materially contravene or conflict with the articles of
         incorporation or bylaws of the Manager, any requirement of law to which
         the Manager is subject, or any indenture, mortgage, deed of trust, or
         other agreement or instrument to which the Manager is a party or by
         which the Manager may be bound, or to which the property of the Manager
         may be subject, or (ii) result in the creation or imposition of any
         lien on the property of the Manager;

                                        7

<PAGE>

              (d) this Agreement is the legal, valid and binding obligation of
         the Manager, enforceable against the Manager in accordance with its
         terms;

              (e) there is no material fact relevant to the transactions
         contemplated by this Agreement (and in the case of each Confirmation,
         there is no material fact relevant to the Transaction set forth in such
         Confirmation) known to the Manager that the Manager has not disclosed
         to EPK;

              (f) the Manager is not (and in the case of each Confirmation, to
         the knowledge of the Manager after due inquiry, neither the Purchaser
         nor the Vendor thereunder is) in default under any loan agreement,
         mortgage, security agreement or other material agreement or obligation
         to which it is a party or by which any of its property is bound;

              (g) there are no material actions, suits or legal, equitable,
         arbitration or administrative proceedings pending, or to the knowledge
         of the Manager threatened, against the Manager (and in the case of each
         Confirmation, to the knowledge of the Manager after due inquiry, there
         are no material actions, suits or legal, equitable, arbitration or
         administrative proceedings pending, or threatened, against the
         Purchaser or the Vendor thereunder);

              (h) all tax returns required to be filed by the Manager in any
         jurisdiction have been filed and all taxes, assessments, fees and other
         governmental charges upon the Manager or upon any of its properties,
         income or franchises have been paid prior to the time that such taxes
         could give rise to a lien thereon;

              (i) neither the execution and delivery of this Agreement nor the
         consummation of any of the transactions contemplated hereby requires
         the consent or approval of, the giving of notice to, or the
         registration, recording or filing by the Manager or any other Person of
         any document with, or the taking of any other action in respect of, any
         Governmental Authority which has jurisdiction over the Manager (or, in
         the case of each Confirmation, the Purchaser or the Vendor thereunder)
         or any of its property;

              j) the Manager has delivered to EPK a list of all creditors of the
         Manager, copies of the income statement and balance sheet of the
         Manager as of December 31, 1997, the balance sheet of the Manager as
         of February 28, 1998 and the US Federal income tax returns of the
         Manager for the years 1995 and 1996, such lists, statements, balance
         sheets and tax returns are accurate in all material respects;

              (k) the Manager (and, in the case of each Confirmation, to the
         best knowledge of the Manager, the Purchaser and the Vendor thereunder)
         is Solvent;

              (1) none of the Purchaser, the Vendor or the Credit Enhancer with
         respect to any Transaction is an Affiliate of the Manager; and

                                       8

<PAGE>

              (m) all information furnished by the Manager in each Confirmation
         is true and correct.

All representations and warranties by the Manager herein shall survive until all
obligations of the Manager under this Agreement have been irrevocably paid in
full, and any investigation at any time made by or on behalf of EPK shall not
diminish the right of EPK to rely thereon.

                                   ARTICLE IV
                                DEFAULT; REMEDIES

         4.1  Event of Default. An Event of Default shall exist if any one or
more of the following occurs:

              (a) The Manager fails to make any payment due hereunder on the
         date that such payment is due;

              (b) the Manager fails to observe or perform any other term,
         covenant or agreement set forth in this Agreement on its part to be
         performed or observed and such failure continues unremedied for five
         (5) Business Days past the date when such observance or performance is
         due;

              (c) any material statement, warranty or representation by or on
         behalf of the Manager contained this Agreement, (including any
         Confirmation or other writing furnished in connection with this
         Agreement) proves to have been incorrect or misleading in any material
         respect when made or deemed made;

              (d) any provision of this Agreement shall for any reason cease to
         be in full force and effect, or be declared null and void or
         unenforceable in whole or in part, or the validity or enforceability of
         any such document shall be challenged or denied; or

              (e) (i) the commencement by the Manager or any Credit Enhancer as
         debtor of any case or proceeding under any bankruptcy, insolvency,
         reorganization, liquidation, dissolution or similar law, or the seeking
         by the Manager or any Credit Enhancer of the appointment of a receiver,
         trustee, custodian or similar official for such Person or any
         substantial part of its property, (ii) the commencement of any such
         case or proceeding against the Manager, (iii) the making by the Manager
         or any Credit Enhancer of a general assignment for the benefit of its
         creditors, or (iv) the admission in writing by the Manager or any
         Credit Enhancer that it is unable to pay its debts as they become due.

         4.2  Remedies. Upon the occurrence of an Event of Default, all
obligations of EPK hereunder shall be suspended and EPK may exercise all rights
and remedies granted in this Agreement in any Credit Enhancement and/or under
applicable law, and may offset all Manager's compensation then due against any
sums due EPK.

                                        9

<PAGE>

                                    ARTICLE V
                                  MISCELLANEOUS

         5.1  Term. This Agreement may be terminated by EPK immediately upon
written notice to the Manager or by the Manager upon 30 days after Manager
delivers written notice to EPK and shall terminate without notice by either
Party on July 31, 2001; provided, that notwithstanding the termination of this
Agreement, this Agreement shall continue in full force and effect with respect
to any Transactions with respect to which Manager has not fully performed its
obligations hereunder until such time as such performance is completed.

         5.2  Entire Agreement. Amendments. etc. This Agreement constitutes the
entire agreement and understanding of the Manager with respect to its subject
matter and supersedes all oral communications and prior writings with respect
thereto. No amendment or waiver of any provision of this Agreement nor any
consent to any departure by either Party herefrom shall in any event be
effective unless the same shall be in writing and signed by the Party against
whom enforcement of such amendment, waiver or consent is sought, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

         5.3  No Waiver, Remedies. No failure on the part of EPK to exercise,
and no delay on the part of EPK in exercising, any right hereunder shall operate
as a waiver of such right; nor shall any single or partial exercise of any right
by EPK preclude any further or subsequent exercise of the same or any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

         5.4  Notices. etc. Any notice or other communication in respect of this
Agreement may be given in any form set forth below to the address or number or
in accordance with the electronic messaging system details provided on Schedule
I and will be deemed effective as indicated:

              (i) If in writing and delivered in person or by courier, on the
         date it is delivered;

              (ii) if sent by facsimile transmission, on the date that
         transmission is received by a responsible employee of the recipient in
         legible form (it being agreed that the burden of proving receipt will
         be on the sender and will not be met by a transmission report generated
         by the sender's facsimile machine); or

              (iii) if sent by certified or registered mail or the equivalent
         (return receipt requested) on the date it is delivered.

Either Party may by written notice to the other change the address or facsimile
number or electronic messaging system details at which notices are to be given
to it.

                                       10

<PAGE>

         5.5 Captions. The captions in this Agreement are for convenience of
reference only and are not to be given any substantive meaning or significance
whatever in construing the terms and provisions of this Agreement.

         5.6 Transfer. Neither this Agreement nor any interest or obligation in
or under this Agreement may be transferred (whether by way of security or
otherwise) by the Manager without the prior written consent EPK. EPK may, with
written notice to the Manager, assign or transfer all or any part of its
interests and obligations herein to any other Person, and such other Person
shall thereupon become vested with all rights and obligations in respect thereof
granted to and assumed by EPK herein or otherwise.

         5.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF TEXAS.

         5.8 GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
DALLAS COUNTY, TEXAS. AS PART OF THE CONSIDERATION FOR NEW VALUE RECEIVED, AND
REGARDLESS OF ANY PRESENT OR FUTURE DOMICILE OR OTHER PRINCIPAL PLACE OF
BUSINESS OF MANAGER OR EPK, MANAGER HEREBY CONSENTS AND AGREES THAT THE DISTRICT
COURT OF DALLAS COUNTY, TEXAS, OR, AT EPK'S OPTION, THE UNITED STATES DISTRICT
COURT FOR THE NORTHERN DISTRICT OF TEXAS, DALLAS DIVISION, SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN MANAGER AND
EPK PERTAINING TO THIS AGREEMENT OR TO ANY OTHER MATTER ARISING OUT OF OR
RELATED TO THIS AGREEMENT. MANAGER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND MANAGER
HEREBY WAIVES ANY OBJECTION WHICH MANAGER MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE
GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH
COURT. MANAGER HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND
OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO MANAGER AT THE ADDRESS LAST KNOWN TO EPK AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF MANAGER'S ACTUAL RECEIPT THEREOF
OR 3 DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID. NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT OF EPK TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW, OR TO PRECLUDE THE
ENFORCEMENT BY MANAGER OF ANY JUDGMENT OR ORDER OBTAINED IN SUCH FORUM OR THE

                                       11

<PAGE>

TAKING OF ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY OTHER
APPROPRIATE FORUM OR JURISDICTION.

         5.9  JURY TRIAL; DAMAGES. THE MANAGER AND EPK HEREBY (a) IRREVOCABLY
AND UNCONDITIONALLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY
IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY
COUNTERCLAIM THEREIN; (b) IRREVOCABLY WAIVES, TO THE EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT THEY MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY
SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR
IN ADDITION TO, ACTUAL DAMAGES; (c) CERTIFY THAT NO PARTY HERETO NOR ANY
REPRESENTATIVE OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVERS; AND (d) ACKNOWLEDGE THAT THEY ENTERED
INTO THE AGREEMENT, AND THE TRANSACTIONS CONTEMPLATED HEREBY, BASED UPON, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION.

         5.10 Attorneys' Fees. Each Party agrees that in the event of any
litigation concerning this Agreement, the non-prevailing Party shall pay the
fees and expenses of the prevailing Party. Except as set forth in the preceding
sentence, and subject to Sections 2.3 and 2.6, each Party shall pay its own
legal fees and expenses in connection herewith.

         5.11 No Rights Conferred Upon Third Parties. This Agreement is for
the benefit of the Parties hereto and nothing contained herein shall be
construed to give any third party any benefits or rights hereunder.

         5.12 Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original but all of which together shall constitute one and
the same instrument.

         5.13 COMPLIANCE WITH LAWS. MANAGER SHALL STRICTLY OBSERVE AND COMPLY
WITH ALL FEDERAL, STATE AND LOCAL LAWS AND REGULATIONS WHICH GOVERN THE
MANUFACTURE, SALE, HANDLING AND DISPOSAL OF ANY PRODUCTS HEREIN SPECIFIED.
MANAGER ALSO AGREES TO COMPLY WITH THE PROVISIONS RELATING TO THE FCCA SET FORTH
IN EXHIBIT B. IF MANAGER VIOLATES ANY OF SUCH LAWS OR REGULATIONS OR IS
OFFICIALLY CHARGED WITH SUCH VIOLATIONS, EPK IN ITS SOLE DISCRETION MAY TREAT
THIS CONDUCT AS A BREACH OF THIS WHOLE AGREEMENT AND IN ADDITION TO ANY OTHER
REMEDIES, MAY IMMEDIATELY TERMINATE THIS AGREEMENT.

                                       12

<PAGE>

         5.14 Guaranty. The Manager shall cause the Guarantor to execute and
deliver the Guaranty and take all actions reasonably requested by EPK to cause
the Guarantor to perform its obligations under the Guaranty.

                     [REMAINDER OF PAGE INTENTIONALLY BLANK]

                                       13

<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.

                                               MANAGER:

                                               THE SINGING MACHINE COMPANY, INC.

                                               By: /s/ John Klecha
                                                   -----------------------------
                                                   John Klecha
                                                   Title: Secretary/Treasurer

                                               EPK:

                                               EPK FINANCIAL CORPORATION

                                               By: /s/ Edward P. King
                                                   -----------------------------
                                                   Edward P. King
                                                   Title: President

                                       14

<PAGE>

                                   SCHEDULE I
                                       TO
                                MASTER AGREEMENT
            EXECUTED AND DELIVERED AS OF ______________ 1999 BETWEEN
                THE SINGING MACHINE COMPANY, INC. (the "Manager")
                                       AND
                        EPK FINANCIAL CORPORATION ("EPK")

                              ADDRESSES FOR NOTICES

Address for notices to the Manager:

         Address: 6601 Lyons Road, Building A-7 Coconut Creek, FL 33073

         Attention: John Klecha

         Facsimile (954) 596-2000  Phone: (954) 596-1000

Address for notices to EPK:

         Address: 2711 Cedar Springs Dallas, TX 75201

         Attention: Edward P. King

         Facsimile: 214/999-0289   Phone: 214/871-0055

                                       1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00002-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00002-of-00352.parquet"}]]