Document:

ASSET PURCHASE AGREEMENT

                                     between

                            SONOMAWEST HOLDINGS, INC.

                                       and

                       Commercial Sales and Leasing, Inc.

                                 October 3, 2002

<PAGE>

                            ASSET PURCHASE AGREEMENT

     THIS ASSET PURCHASE  AGREEMENT (this  "Agreement") is made as of October 3,
2002  by  and  between  SONOMAWEST  HOLDINGS,  INC.,  a  California  corporation
("Seller"),   and  Commercial  Sales  and  Leasing,  Inc.,  a  Utah  corporation
("Buyer").

                                R E C I T A L S:
                                ----------------

     WHEREAS,  Seller  owns  certain  assets  related to its former  business of
producing, packing and distributing low-moisture food products (the "Business");

     WHEREAS,  Seller no longer is engaged in the  Business and desires to sell,
and  Buyer  desires  to buy,  on the  terms  and  conditions  set  forth in this
Agreement, certain of Seller's assets relating to the Business.

     NOW,  THEREFORE,  in  consideration  of the mutual  covenants,  agreements,
representations and warranties contained in this Agreement, the parties agree as
follows:

                                   T E R M S :
                                   -----------

                                   ARTICLE 1

                           PURCHASE AND SALE OF ASSETS

     1.1 Transferred Assets.

     Subject  to and upon the terms and  conditions  of this  Agreement,  Seller
agrees to sell, assign, transfer,  convey and deliver to Buyer, and Buyer agrees
to purchase from Seller on the Closing Date (as defined in Section 11.1), all of
those  certain  assets of Seller  described  below  (all of which are  sometimes
collectively  referred to as the "Transferred  Assets").

          (a) Certain  equipment  owned by Seller which is used in the operation
of the Business, which is listed on Schedule 1.1(a) hereto (the "Equipment").

          (b) Certain inventory owned by the Seller, which is listed on Schedule
1.1(b)  hereto  (the  "Inventory"),   provided,   however,  that  there  may  be
non-material  variations  in the exact  amounts of the various  Inventory  items
listed on  Schedule  1.1(b) and such  non-material  variations  shall not affect
Buyer's obligation hereunder.

          (c) All of  Seller's  rights,  title and  interest  in the  trademarks
"Perma-Pak",  "Noah's Ark" and "Pantri Reserve" as currently owned by Seller and
as evidenced by the  following  registrations  with the United States Patent and
Trademark  Office (the  "USPTO")  and/or  common law rights (all these marks are
sometimes collectively referred to as the "Trademarks"):

             PERMA-PAK        --  Federal Registration Number 1124329 and common
                                  law rights.

             NOAH'S ARK       --  Federal Registration Numbers 1195824, 1208746
                                  and 1318399 and common law rights.

             PANTRI RESERVE   --  Common law rights.

Seller makes no  representations  or warranties as to (i) any potential  claims,
actions or  proceedings  by any other person or entity arising out of or related
to  Seller's,  Buyer's or any other  party's use of (or right to use) any of the
Trademarks,  (ii) the  right of any  other  person  or  entity to use any of the
Trademarks  or any  similar  mark or  (iii)  the  status  of the  aforementioned
trademark registrations with the USPTO. Seller has an abandoned application with
the USPTO to register  the mark  "Perma Pak"  evidenced  by  application  Serial
Number  76204492  (the  "Application")  for which Seller has filed a petition to
revive the Application.

          (d)  The  supplier  list  attached  hereto  as  Schedule  1.1(d)  (the
"Supplier  List")  which lists the  suppliers  for the  Business as last used by
Seller prior to when
it ceased operating the Business.

          (e) All  goodwill  related to the Business to the extent it relates to
the Trademarks (the "Goodwill").

     1.2  Transfer  of Title and Buyer  Taking  Possession; Security  Interest.
          ---------------------------------------------------------------------

     Title  and  risk of  loss to all the  Transferred  Assets  other  than  the
Trademarks  and Goodwill  shall pass to Buyer at the  Closing.  By no later than
November 30, 2002, Buyer shall, at its own expense,  remove all of the Equipment
and Inventory from Seller's premises. Buyer's obligation to remove the Equipment
and Inventory includes,  but is not limited to,  disassembling the Equipment for
removal.  If all or any portion of the  Equipment  and/or  Inventory  remains at
Seller's  premises after November 30, 2002,  Buyer shall pay Seller Five Hundred
Dollars  ($500.00) per day  thereafter  for the storage of the Equipment  and/or
Inventory, the same to be paid monthly in arrears.

     Buyer hereby grants Seller a security  interest in the  Transferred  Assets
and any and all accessions to, replacements of and proceeds from the Transferred
Assets  as  security  for the  payment  of any and all  amounts  due  under  the
Promissory  Note and for any and all  amounts  that may become due if Buyer does
not remove all the Equipment and  Inventory  from Seller's  premises by November
30, 2002. At the Closing (or at Seller's  discretion  after the Closing),  Buyer
shall execute a UCC-1 financing  statement and any other documents  Seller deems
necessary or  advisable  to perfect and  maintain  its security  interest in the
Transferred  Assets.  Upon any default of the  obligations  secured by the above
granted  security  interest,  Seller  shall  have all the  rights  of a  secured
creditor under the California Commercial Code.

     1.3 Cessation of Use of Trademarks.
         ------------------------------

     As of the Closing  Date,  Seller shall not use the  Trademarks in commerce.

                                   ARTICLE 2

                                 PURCHASE PRICE

     2.1 Purchase Price.
         --------------

     The purchase price to be paid by Buyer to Seller for the Transferred Assets
shall be Two Hundred and Forty  Thousand  Dollars  ($240,000.00)  (the "Purchase
Price").  Of the  Purchase  Price:  (i) One  Hundred and  Seventy-Five  Thousand
Dollars  ($175,000.00)  shall be paid at the  Closing in the form of one or more
cashier's checks of immediately  available U.S.  currency payable to Seller and;
and (ii) Sixty-Five  Thousand Dollars  ($65,000.00) shall be paid at the Closing
in the form of a promissory  note made by Buyer in the form  attached  hereto as
Exhibit A (the "Promissory Note").

     2.2 Liabilities Not Assumed.
         -----------------------

     Except for the sales tax payments  required in Section 2.3,  Buyer does not
assume any obligations, responsibilities, liabilities, or debts of Seller.

     2.3 Sales Taxes.
         -----------

     Buyer shall pay any and all sales taxes resulting from Buyer purchasing all
or any portion of the Transferred  Assets and shall reimburse Seller for any and
all sales taxes properly paid by Seller in connection therewith.

     As soon as  practicable  after the Closing but before taking  possession of
the Inventory,  Seller shall provide Buyer any resale use  certificates,  exempt
use certificates or any other exemption  certifications  held by Buyer which are
required  to  enable  Buyer to  benefit  from  any  sales  and use or other  tax
exemption.

                                   ARTICLE 3

                    REPRESENTATIONS AND WARRANTIES OF SELLER

     Now, and at the time of Closing,  Seller hereby  represents and warrants to
Buyer as follows:

     3.1 Formation and Authority.
         -----------------------

     Seller is a corporation duly formed,  validly existing and in good standing
under the laws of the State of  California,  and on the Closing  Date shall have
full corporate power and authority to consummate the  transactions  contemplated
hereby.

     3.2 Non-Contravention.
         -----------------

     The execution,  delivery and performance of this Agreement (and each of the
Related Agreements defined in Section 3.5) by Seller and the consummation of the
transactions contemplated hereby do not and will not, with or without the giving
of notice or the lapse of time, or both,  violate,  conflict with, result in the
breach of or accelerate the performance required by any of the terms, conditions
or provisions of the charter  documents or by-laws or other governing  documents
of Seller or any covenant, agreement or understanding to which Seller is a party
or any order, ruling, decree,  judgment, or arbitration award to which Seller is
subject or constitute a default thereunder.

     3.3 Title to Assets.
         ---------------

     Seller has good and  marketable  title to the  Transferred  Assets.  On the
Closing Date, the Transferred  Assets shall be free and clear of restrictions on
or conditions to transfer or assignment, and free and clear of mortgages, liens,
security interests, tax liens, successor tax liability claims, pledges, charges,
encumbrances,  equities,  claims, covenants,  conditions,  or restrictions.  The
Transferred  Assets do not represent all or  substantially  all of the assets of
the Seller.

     3.4 Warranties.
         ----------

     THE TRANSFERRED ASSETS ARE TO BE SOLD ON AN "AS IS/WHERE IS" BASIS.  EXCEPT
AS EXPRESSLY SET FORTH IN SECTIONS 3.3 AND 3.7, SELLER MAKES NO  REPRESENTATIONS
OR  WARRANTIES,  EXPRESS OR IMPLIED,  WITH  RESPECT TO THE  TRANSFERRED  ASSETS,
INCLUDING WITHOUT  LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE.

3.5      Authorization.
         -------------

     The  execution  and  delivery  of this  Agreement  and the Bill of Sale (as
defined in Section 6.4), and all other  instruments and agreements  delivered or
to be delivered by Seller in connection  herewith  (collectively  referred to as
the "Related Agreements"), and the consummation of the transactions contemplated
hereby and  thereby,  have been duly and  validly  authorized  by all  necessary
corporate action on the part of Seller. This Agreement and the Related Documents
have been or shall be duly executed and delivered by Seller and shall constitute
legal,  valid and  binding  obligations  of  Seller,  enforceable  against it in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally and by general equitable principles. Seller is
neither  currently  engaged in nor  contemplating  any  bankruptcy or insolvency
proceeding.

     3.6 Consents.
         --------

     No consent,  license,  approval or  authorization  of, or  registration  or
declaration with, any governmental authority,  agency, bureau or commission,  or
any third party, is required to be obtained or made by Seller in connection with
the  execution,  delivery,  performance,  validity  or  enforceability  of  this
Agreement or the consummation of the transactions contemplated hereby.

     3.7 Trademarks.
         ----------

     Seller believes that it has rights to the Trademarks based on registrations
with the USPTO and/or prior use of the Trademarks in commerce.

     3.8 Brokers or Finders.
         ------------------

     Except for a fee payable to Gary L. Hess by Seller,  neither Seller nor any
of  its  agents  have  incurred  any  obligation  or  liability,  contingent  or
otherwise,  for  brokerage  or  finders'  fees or agents'  commissions  or other
similar  payment  in  connection   with  this  Agreement  or  the   transactions
contemplated by this Agreement.

     3.9 Litigation.
         ----------

     To Seller's actual knowledge,  there are no actions, suits,  proceedings or
investigations  pending or threatened or in prospect before any court, agency or
other  tribunal,  to which  Seller is a party  which may  adversely  affect  the
Transferred Assets;  provided,  however, that Seller makes no representations or
warranties as to the status of any trademark  registration or pending  trademark
application with the USPTO.

                                   ARTICLE 4

                     REPRESENTATIONS AND WARRANTIES OF BUYER

     Now, and at the time of Closing,  Buyer hereby  represents  and warrants to
Seller as follows:

     4.1 Formation and Authority.
         -----------------------

     Buyer is a corporation  duly formed,  validly existing and in good standing
under the laws of the State of Utah,  and on the  Closing  Date  shall have full
corporate  power and  authority  to  consummate  the  transactions  contemplated
hereby.

     4.2 Authorization.
         -------------

     The execution and delivery of this Agreement and all other  instruments and
agreements delivered or to be delivered by Buyer in connection herewith, and the
consummation of the transactions contemplated hereby and thereby, have been duly
and validly  authorized  by all necessary  company  action on the part of Buyer.
This Agreement and any other  instruments  and agreements  delivered to or to be
delivered  in  connection  herewith  have  been or  shall be duly  executed  and
delivered by Buyer and shall constitute legal, valid and binding  obligations of
Buyer enforceable  against it in accordance with their respective terms,  except
as  the  enforceability  thereof  may  be  limited  by  bankruptcy,  insolvency,
moratorium or other similar laws affecting the rights of creditors generally and
by  general  equitable  principles.  Buyer is neither  currently  engaged in nor
contemplating any bankruptcy or insolvency proceeding.

     4.3 Non-Contravention.
         -----------------

     The execution,  delivery and  performance of this Agreement and each of the
Related   Agreements  by  Buyer  and  the   consummation  of  the   transactions
contemplated  do not and will not,  with or without  the giving of notice or the
lapse of time,  or both,  violate,  conflict  with,  result in the  breach of or
accelerate  the  performance  required  by  any  of  the  terms,  conditions  or
provisions of any covenant, agreement or understanding to which Buyer is a party
or any order, ruling,  decree,  judgment, or arbitration award to which Buyer is
subject or constitute a default thereunder.

     4.4 Consents.
         --------

     No consent,  license,  approval or  authorization  of, or  registration  or
declaration with, any governmental authority,  agency, bureau or commission,  or
any third party,  is required to be obtained or made by Buyer in connection with
the  execution,  delivery,  performance,  validity  or  enforceability  of  this
Agreement or the consummation of the transactions contemplated hereby.

     4.5 Resale Certificate.
         ------------------

     Buyer will furnish any resale  certificate or other document related to the
purchase  of  Inventory  reasonably  requested  by  Seller  to  comply  with the
provisions of the sale and use tax laws of the State of California.

                                   ARTICLE 5

                           MUTUAL CONDITIONS PRECEDENT

     The respective obligations of each of the parties hereto at the Closing are
subject to the  fulfillment to their  reasonable  satisfaction  of the following
conditions precedent (or mutual written waiver thereof) on or before the Closing
Date:

          (a)  Consummation of the  transactions  contemplated  hereby shall not
have been  prohibited  by any order,  decree or  judgment  of any United  States
court,  governmental  agency,  or other regulatory  agency or commission  having
competent jurisdiction; and

          (b)  There  shall  not  have  been  promulgated,  entered,  issued  or
determined  to be  applicable  to this  Agreement  any law,  regulation,  order,
judgment  or decree  making the sale or purchase  of the  Transferred  Assets as
contemplated hereby illegal.

                                   ARTICLE 6

                    CONDITIONS PRECEDENT TO CLOSING BY BUYER

     The  obligation  of  Buyer  to  purchase  the  Transferred  Assets  and  to
consummate the  transactions  contemplated  hereby is subject to the fulfillment
and  satisfaction  by Seller or waiver in  writing  by Buyer  prior to or at the
Closing Date of each of the following conditions:

     6.1 Accuracy of Representations and Warranties.
         ------------------------------------------

     The  representations  and warranties of Seller  contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
with the same effect as though such representations and warranties had been made
on and as of such date.

6.2      Performance.
         ----------- -

     Each and all of the  actions  of Seller to be  performed  on or before  the
Closing Date pursuant to the terms hereof shall have been duly  performed in all
material respects.

6.3      Authorization.
         -------------

     All corporate  action  necessary to authorize the  execution,  delivery and
performance by Seller of this Agreement and the  transactions to be performed on
or before the Closing Date pursuant to the terms hereof shall have been duly and
validly taken.

     6.4 Bill of Sale.
         -------------

     On the Closing  Date,  Seller shall have  executed and delivered to Buyer a
bill of sale  conveying  to Buyer all of the tangible  and  intangible  personal
assets to be acquired by Buyer,  substantially  in the form  attached  hereto as
Exhibit B (the "Bill of Sale").

     6.5    Transfer of Trademarks; License to Use Trademarks.
            -------------------------------------------------

     Within three (3) business days after the  Promissory  Note is paid in full,
Seller  shall  execute and deliver to Buyer  documents  to assign,  transfer and
convey to Buyer, to the fullest extent permitted by the USPTO,  ownership of all
of  Seller's  right,  title  and  interest  in  and to the  four  (4)  trademark
registrations and one trademark application listed in Section 1.1(c), along with
all of Seller's  common law rights and all the  goodwill  associated  therewith.
Within three (3) business days after the Promissory Note is paid in full, Seller
shall also  execute and deliver to Buyer a document to assign  ownership  of all
Seller's  common  law  rights  to the  trademark  "Pantri  Reserve"  and all the
goodwill associated  therewith to Buyer. Seller hereby grants buyer an exclusive
license  to use the  Trademarks  from the  Closing  Date and  until the date the
Promissory  Note  is  paid in  full;  provided,  however,  that  Seller,  at its
discretion, may revoke such license for any material breach of this Agreement or
the Promissory Note by Buyer.

                                   ARTICLE 7

                    CONDITIONS PRECEDENT TO CLOSING BY SELLER

     The obligation of Seller to sell the  Transferred  Assets and to consummate
the  transactions   contemplated  hereby  is  subject  to  the  fulfillment  and
satisfaction  by Buyer or waiver in writing by Seller prior to or at the Closing
Date of each of the following conditions:

     7.1 Accuracy of Representations and Warranties.
         ------------------------------------------

     The  representations  and  warranties of Buyer  contained in this Agreement
shall be true and correct in all  material  respects as of the Closing Date with
the same effect as though such  representations  and warranties had been made on
and as of such date.

     7.2 Performance.
         ------------

     Each and all of the  actions  of Buyer to be  performed  on or  before  the
Closing Date pursuant to the terms hereof shall have been duly  performed in all
material respects.

                                   ARTICLE 8

                               FURTHER ASSURANCES

     8.1 Execution of Other Instruments.
         ------------------------------

     From time to time after the Closing, at Buyer's request and without further
consideration  or  additional  cost to Seller,  Seller shall execute and deliver
such other and further  instruments  of  conveyance,  assignment,  transfer  and
consent,  and take such other action,  as Buyer may  reasonably  request for the
more effective conveyance and transfer of ownership of the Transferred Assets.

                                   ARTICLE 9

           SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

     9.1   Survival of Representations, Warranties and Agreements.
           ------------------------------------------------------

     All representations of Seller and Buyer in this Agreement shall survive the
execution of this  Agreement  for three (3) months after the Closing  Date.  All
statements  contained  in any  schedule,  exhibit or any  document  delivered at
Closing shall be deemed representations within the meaning of this Section.

     9.2 Indemnification by Seller.
         -------------------------

     Seller agrees to defend with  competent  counsel,  indemnify and hold Buyer
and its agents, employees,  officers,  directors and stockholders  (collectively
referred  to  herein  as  "Buyer   Indemnitees")   harmless  from  any  and  all
Indemnifiable  Losses  arising  from  or  related  to  (i)  the  failure  of any
representation  or warranty made by Seller hereunder to be true when made and as
of the Closing or (ii) the nonfulfillment of any obligation of Seller under this
Agreement.  Provided,  however,  notwithstanding  any  other  provision  of this
Agreement,  in no event shall Seller's obligation to indemnify,  defend and hold
Buyer Indemnitees harmless from Indemnifiable Losses pursuant to the immediately
preceding  sentence  exceed,  in the  aggregate,  One Hundred  Thousand  Dollars
($100,000) in total costs and expenses to be borne by Seller.

     9.3 Indemnification by Buyer.
         ------------------------

     Buyer agrees to defend with  competent  counsel,  indemnify and hold Seller
and its agents, employees,  officers,  directors and stockholders  (collectively
referred  to  herein  as the  "Seller  Indemnitees")  harmless  from any and all
Indemnifiable  Losses  arising  from  or  related  to  (i)  the  failure  of any
representation  or warranty made by Buyer  hereunder to be true when made and as
of the Closing or (ii) any and all claims  (other  than claims  arising out of a
failure by Seller to perform its obligations under this Agreement) including but
not limited to business torts, breach of contract claims, indemnity or guarantee
claims,  malicious or intentional  misconduct,  fraud, personal injury, property
damage,  employment related claims and workers compensation claims, arising from
Buyer's  use or sale of all or any  portion of the  Transferred  Assets from and
after the Closing.

     9.4 Procedures.
         ----------

     When a  party  seeking  indemnification  under  Section  9.2  or  9.3  (the
"Indemnified  Party") receives notice of any action,  suit,  proceeding,  claim,
demand or assessment which is likely to give rise to a claim for indemnification
hereunder, the Indemnified Party shall give prompt written notice thereof to the
other party (the  "Indemnifying  Party")  reasonably  describing  (to the extent
known) the nature of such claim and the basis therefor. If the Indemnified Party
fails  to give  such  prompt  written  notice  to the  Indemnifying  Party,  the
Indemnified  Party  shall  not  forfeit  its  indemnification  claim,  but  such
indemnification  claim  shall be  reduced  by the  amount of any  additional  or
increased  liability,   cost  or  expense  (including  applicable  interest  and
penalties)  caused by the delay in giving notice.  If the  Indemnified  Party is
entitled to  indemnification  hereunder,  the  Indemnifying  Party shall, at its
expense,  assume the complete defense of the action,  suit,  proceeding,  claim,
demand or assessment  giving rise thereto,  with full  authority to conduct such
defense  and to settle or  otherwise  dispose  of the same,  except as set forth
below.  The  Indemnifying  Party  and the  Indemnified  Party  will  each  fully
cooperate  with the other in the  defense  of any claim  which is likely to give
rise to a claim for indemnification  hereunder or does present such a claim. The
Indemnifying  Party  will not,  except  with the prior  written  consent  of the
Indemnified Party (which consent shall not be unreasonably withheld), consent to
the entry of any judgment or enter into any  settlement in connection  with such
defense  which  does not  include a release  of the  Indemnified  Party from all
liability in respect  thereof or does include any undertaking or agreement which
causes the  Indemnified  Party to perform any act or to refrain from  performing
any act. The Indemnifying  Party will not, except with the prior written consent
of the  Indemnified  Party (which consent shall not be  unreasonably  withheld),
consent to the entry of any judgment or enter into any  settlement in connection
with such defense.

     9.5 Indemnifiable Losses.
         --------------------

     In determining the amount of Indemnifiable  Losses for which an Indemnified
Party is liable hereunder, amounts paid or recovered from or reimbursed by third
parties  and/or  under  insurance  policies,  contractual  or  other  rights  of
indemnification  or  contribution,  and the like,  which amounts are paid to the
Indemnified Party on behalf of the Indemnifying  Party,  shall reduce the amount
for which the  Indemnifying  Party shall  otherwise be liable  hereunder.  If an
Indemnified  Party receives payment from the Indemnifying  Party with respect to
an  indemnification  claim  made  hereunder,   and  the  amount  for  which  the
Indemnified  Party was  entitled to seek  indemnity  hereunder  is  subsequently
reduced  under  the terms of this  Section  9.5,  the  Indemnified  Party  shall
promptly refund to the Indemnifying Party the amount of such reduction.

     As used herein, the term "Indemnifiable  Losses" means all costs, expenses,
losses, claims, obligations,  liabilities,  damages,  deficiencies,  actions and
judgments,  or diminution in value, whether or not involving a third-party claim
together with all reasonable attorneys' fees and other costs and expenses of the
defense thereof  (including such fees, costs and expenses  incurred  pursuant to
Section 9.4);  provided,  however,  an  Indemnified  Party's  internal  expenses
(salaries, general and administrative costs, allocated corporate overhead, etc.)
incurred in  processing,  monitoring  and assisting in the defense of an action,
suit,  proceeding,  claim,  demand or assessment subject to indemnity  hereunder
shall  not be  considered  an  "Indemnifiable  Loss"  and  shall be borne by the
Indemnified Party.

                                   ARTICLE 10

                                   TERMINATION

     10.1 Termination.
          -----------

     This Agreement may be terminated and the transactions  contemplated  hereby
abandoned at any time prior to the Closing Date as follows:

          (a) by mutual written consent of Seller and Buyer;

          (b) by Buyer if any of the  conditions  set  forth in  Article 6 shall
have become impossible of fulfillment and shall not have been waived by Buyer;

          (c) by Seller if any of the  conditions  set forth in  Article 7 shall
have become  impossible of fulfillment and shall not have been waived by Seller;
or

          (d) by either Buyer or Seller if the transactions  contemplated hereby
are not  consummated  on or before October 4, 2002 for any reason other than the
failure of the party seeking  termination to fulfill the conditions set forth in
Article 6 if Seller, or Article 7 if Buyer.

     If this  Agreement is terminated  pursuant  hereto,  this  Agreement  shall
become  void and of no further  force and effect  except  that such  termination
shall  be  without  prejudice  to  the  rights  of  any  party  because  of  the
non-satisfaction  of conditions  set forth in Articles 6 and 7 hereof  resulting
from the  intentional  or willful  breach or violation  of the  representations,
warranties, covenants or agreements of another party under this Agreement.

     Sections  12.1,  13.1,  14.1,  14.2 and 15.1  through  15.9  shall  survive
termination of this Agreement.

                                   ARTICLE 11

                                     CLOSING

     11.1 Closing Date.
          ------------

     The closing of the purchase and sale of the  Transferred  Assets  hereunder
shall be held at the offices of Seller at 2064  Highway 116,  North  Sebastopol,
California  95472-2662 at 10:00 a.m., local time, on October 4, 2002, or at such
other date,  time and place as the parties may hereafter  agree in writing.  The
time and place of closing is herein referred to as the "Closing" and the date of
the Closing is referred to in this Agreement as the "Closing Date".

                                   ARTICLE 12

                             EXPENSES OF THE PARTIES

     12.1 Expenses of the Parties.
          -----------------------

     Each party shall pay its respective  expenses  incurred in connection  with
the negotiation, execution and performance of this Agreement.

                                   ARTICLE 13

                                     NOTICES

     13.1 Notices.
          -------

     All notices  hereunder must be in writing and shall be  sufficiently  given
for all purposes  hereunder if properly  addressed and  delivered  personally by
documented  overnight delivery service,  by certified or registered mail, return
receipt  requested,  or by facsimile at the address or facsimile  number, as the
case may be, set forth  below.  Any notice  given  personally  or by  documented
overnight  delivery  service is  effective  upon  receipt.  Any notice  given by
registered  mail is  effective  upon  receipt,  to the  extent  such  receipt is
confirmed  by return  receipt.  Any notice given by  facsimile  transmission  is
effective upon receipt, to the extent that receipt is confirmed, either verbally
or in writing  by the  recipient.  Any notice  which is  refused,  unclaimed  or
undeliverable because of an act or omission of the party to be notified, if such
notice was  correctly  addressed  to the party to be  notified,  shall be deemed
communicated  as of the first date that said notice was  refused,  unclaimed  or
deemed  undeliverable by the postal authorities,  or overnight delivery service.
Any "copy to" notice to be given as set forth below is a courtesy copy only; and
a notice given to such person is not sufficient to effect giving a notice to the
principal  party,  nor does a failure to give such a  courtesy  copy of a notice
constitute a failure to give notice to the principal party.

       if to Buyer:              Commercial Sales and Leasing, Inc.
                                 P.O. Box 171
                                 Lehigh, Utah  84043
                                 Attn:  Russ C. Schneider
                                 Telephone:  (801) 915-6181
                                 Facsimile:  (801) 756-0565

       if to Seller:             SonomaWest Holdings, Inc.
                                 2064 Highway 116 North
                                 Sebastopol, California  95472-2662
                                 Attn:  President
                                 Telephone:  (707) 824-2536
                                 Facsimile:  (707) 824-2545

       with a copy to:           Allen, Matkins, Leck, Gamble & Mallory LLP
                                 333 Bush Street, Suite 1700
                                 San Francisco, California 94104
                                 Attn:  Roger S. Mertz, Esq.
                                 Telephone:  (415) 837-1515
                                 Facsimile:  (415) 837-1516

Any such  address  may be changed  by any party by  written  notice to the other
party.

                                   ARTICLE 14

                               DISPUTE RESOLUTION

     14.1 Mandatory Arbitration.
          ---------------------

     Any  controversy  or claim  between  or among the  parties,  their  agents,
employees and  affiliates,  arising out of or relating to this  Agreement or the
Related  Agreements,  including without limitation any claim based on or arising
from an alleged tort,  shall,  at the option of any party,  be resolved  through
mandatory and binding arbitration in accordance with the rules then in effect of
the  American  Arbitration   Association  ("AAA")  for  commercial  arbitration,
notwithstanding  any  other  choice of law  provision  in the  Agreement  or the
Related Agreements.  All statutes of limitations or any waivers contained herein
that would  otherwise be applicable  shall apply to any  arbitration  proceeding
under this Section 14.1. The parties agree that related arbitration  proceedings
may be consolidated. The arbitrator shall prepare written reasons for the award.
The  location of the  arbitration  shall be in San  Francisco,  California.  The
arbitrator or arbitrators  shall be generally  skilled in the legal and business
aspects  of the  subject  matter at issue.  If the  parties  so agree,  a single
arbitrator  shall be selected jointly by Buyer and Seller to settle the dispute.
If the parties  cannot agree upon the selection of an arbitrator  within fifteen
(15)  days  after  the  receipt  by one  party  from the  other  of a notice  of
arbitration, then each party shall within fifteen (15) days after the expiration
of said fifteen (15) day period select one arbitrator.  If either party fails to
appoint an arbitrator within that fifteen (15) days period,  the other party may
designate an arbitrator for the party who failed to make such  appointment.  The
two arbitrators  shall select a third arbitrator  within fifteen (15) days after
their appointment;  if the two arbitrators  selected by the parties cannot agree
upon a third arbitrator, the third arbitrator shall be appointed by the AAA. The
arbitrators shall promptly determine whether and in what amount a payment should
be made to the  prevailing  party  and shall  submit a  written  report of their
decision to Buyer and Seller.  The decision of the  majority of the  arbitrators
shall be binding  upon all  parties.  The  arbitrators  shall not be entitled to
award punitive  damages.  Judgment upon the award rendered may be entered in any
court having jurisdiction.

     14.2 Provisional Remedies and Self Help.
          ----------------------------------

     No provision  of, or the exercise of any rights  under,  Section 14.1 shall
limit the right of any party to exercise self help remedies such as set-off,  or
to obtain  provisional  or ancillary  remedies such as injunctive  relief or the
appointment  of a receiver from a court having  jurisdiction  before,  during or
after the pendency of any arbitration.

                                   ARTICLE 15

                                  MISCELLANEOUS

     15.1 Disclosure.
          ----------

     Neither  party  shall  reveal to the  general  public  the  details of this
Agreement or the transactions  contemplated by this Agreement or make any public
or  private   announcement   concerning  this  Agreement  or  the   transactions
contemplated by this Agreement  without first obtaining the written  approval of
the other party hereto.  Nothing  contained  herein shall be deemed to prevent a
party from making such  disclosures  as may be (a)  required to be filed with or
submitted to regulatory  agencies or bodies, or (b) otherwise permitted by other
provisions of this Agreement.

      15.2 Entire Agreement; Waivers.
           -------------------------

     This Agreement  (including  all  attachments  hereto)  comprises the entire
agreement  between  the  parties  hereto as to the  subject  matter  hereof  and
supersedes  all  prior  agreements  and  understandings  between  them  relating
thereto. Each party may extend the time for, or waive the performance of, any of
the obligations of the other,  waive any inaccuracies in the  representations or
warranties  of the  other,  or waive  compliance  by the  other  with any of the
covenants or conditions  contained in this Agreement,  but only by an instrument
in writing signed by the party granting such extension or waiver.

     15.3 Attorneys Fees.
          --------------

     If any legal action, arbitration,  mediation or other proceeding is brought
for the enforcement of this Agreement or the Related  Agreements,  or because of
an alleged dispute, breach, default, or misrepresentation in connection with any
of the  provisions of this Agreement or the Related  Agreements,  the prevailing
party (as  "prevailing  party" is defined in California  Code of Civil Procedure
Section  1032(a)(4),  interpreted  to apply to  arbitration  as well as judicial
proceedings) or parties shall be entitled to recover reasonable  attorneys' fees
and other costs incurred in that action or proceeding,  in addition to any other
relief to which it or they may be entitled.

     15.4 Governing Law.
          -------------

     This  Agreement  and any and all matters  related to or arising  under this
Agreement  shall be construed in accordance  with the internal laws of the State
of  California,  regardless  of any choice or conflicts of law  provision of any
jurisdiction.

     15.5 Successors and Assigns.
          ----------------------

     This  Agreement  shall  inure to the  benefit  of, and be binding  upon and
enforceable against, the respective successors and assigns of the parties hereto
but may not be assigned by any party  without the prior  written  consent of the
other parties.

     15.6 Captions.
          --------

     Captions are supplied herein for convenience only and shall not be deemed a
part of this Agreement for any purpose.

     15.7 Counterparts; Facsimile Signatures.
          ----------------------------------

     This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original for all purposes.  This Agreement may be executed by
a  party's  signature  transmitted  by  facsimile  ("fax"),  and  copies of this
Agreement  executed and  delivered by means of faxed  signatures  shall have the
same force and effect as copies  hereof  executed and  delivered  with  original
signatures.  All  parties  hereto  may rely  upon  faxed  signatures  as if such
signatures were originals.  Any party executing and delivering this Agreement by
fax shall  promptly  thereafter  deliver a  counterpart  signature  page of this
Agreement  containing said party's original signature.  All parties hereto agree
that a faxed  signature  page may be introduced  into evidence in any proceeding
arising out of or related to this Agreement as if it were an original  signature
page.

     15.8 Severability.
          ------------

     If any term or provision of this  Agreement or the  application  thereof to
any person or circumstances shall to any extent be invalid or unenforceable, the
remainder of this  Agreement or the  application  of such terms or provisions to
persons  or  circumstances  other  than  those  as to  which  it is  invalid  or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.

     15.9 Time is of the Essence.
          ----------------------

     Time  is of  the  essence  with  respect  to  all  obligations  under  this
Agreement.

                       [Signature page follows this page.]

<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have executed this Agreement as of
the date first written above.

                             Seller:

                             SONOMAWEST HOLDINGS, INC., a California corporation

                             By: /s/  Roger S. Mertz
                               ----------------------------------------
                               Roger S. Mertz, Chairman of the Board

                             Buyer:

                             Commercial Sales and Leasing, Inc., a
                             Utah corporation

                             By:  /s/  Russ Schneider
                               ----------------------------------------
                               Print Name: Russ Schneider
                                         ------------------------------
                               Title:  President
                                     ----------------------------------

<PAGE>

                         LIST OF SCHEDULES AND EXHIBITS

                                    SCHEDULES

                Schedule 1.1(a)*                       Equipment

                Schedule 1.1(b)*                       Inventory

                Schedule 1.1(d)*                       Suppliers

           *Schedules omitted in accordance with Item 601(b)(2) of
            Regulation S-K.

                                    EXHIBITS

                Exhibit A                              Promissory Note

                Exhibit B                              Bill of Sale

<PAGE>

                                    EXHIBIT A

                             SECURED PROMISSORY NOTE
                             -----------------------

$65,000.00                                                      October 4, 2002

     1.  FOR  VALUE  RECEIVED,  COMMERCIAL  SALES  AND  LEASING,  INC.,  a  Utah
corporation ("Maker") promises to pay to SONOMAWEST HOLDINGS, INC., a California
corporation  ("Payee"),  or holder of this Note, the principal sum of Sixty-Five
Thousand Dollars ($65,000.00) ("Principal").

     2. Maker shall pay Twenty Thousand Dollars ($20,000.00) of the Principal on
or before October 25, 2002. Maker shall pay Thirty Thousand Dollars ($30,000.00)
of the  Principal  on or before  April 4, 2003.  Maker  shall pay the  remaining
Fifteen  Thousand  Dollars  ($15,000.00)  of the  Principal on or before July 4,
2003. All payments shall be made by immediately  available U.S.  currency in the
form of either a wire transfer or cashier's check.

     3. Any amounts not paid when due shall thereafter bear interest at the rate
of  eighteen  percent  (18%)  per  annum or the  highest  rate  permitted  under
applicable law,  whichever is lower,  and shall be compounded daily and computed
on the basis of a 365 day year.

     4. At its option,  the holder of this Note may  determine  that Maker is in
default and may, consequently,  accelerate the unpaid balance, making the unpaid
balance  of the  Note  (the  total  of the  unpaid  balance  and any  applicable
interest) due immediately  without presentment for payment or any notice, if any
of the following occur:

          (a) Maker fails to make payment when due.

          (b) Maker:

               (i) Fails,  after  demand by the holder of this Note,  to furnish
          financial information or to permit inspection of any books or records;

               (ii) Suspends business;

               (iii) Becomes insolvent or offers settlement to any creditor;

               (iv)  Files  a  petition  in  bankruptcy,   either  voluntary  or
          involuntary;

               (v) Institutes any proceeding  under any bankruptcy or insolvency
          laws relating to the relief of debtors;

               (vi) Gives notice of any intended bulk sale or completes any bulk
          sale;

               (vii) Makes an assignment for the benefit of creditors;

               (viii)  Mortgages,  pledges,  assigns,  or transfers any accounts
          receivable  or other  property,  in trust or  otherwise,  without  the
          written consent of the holder of this Note;

               (ix) Makes any false  statement  or  representation  orally or in
          writing to Payee or any subsequent holder of this Note;

               (x) Fails to pay any obligation when due; or

               (xi) Is dissolved or its capital becomes impaired.

          (c) Payee or any  subsequent  holder of this Note  discovers  that any
misrepresentation  was made to Payee or any such  holder  on  behalf of Maker to
obtain credit or an extension of credit.

          (d) Any  legal  action is  commenced  against  Maker or any  endorser,
surety, or guarantor, including, but not limited to, the following:

               (i) Entry of judgment; or

               (ii)  Issuance  of a writ of  attachment,  order of  garnishment,
          order or subpoena in supplementary proceedings,  execution, or similar
          process.

          (e) A  receiver  is  appointed  for Maker or any  endorser,  surety or
guarantor.

          (f) Maker defaults in any of the  obligations due under Asset Purchase
Agreement  between  Maker  and  Payee  dated  October  3,  2002  (the  "Purchase
Agreement") or otherwise breaches the Purchase Agreement.

     5. All  payments  under  this Note  shall be made in the form of  cashier's
check or wire transfer to Payee or holder of this Note.

     6.  This  Note may be  prepaid  in full or in part,  at any  time,  without
penalty.

     7. Maker  waives  diligence,  presentment,  protest  and notice of protest,
dishonor and  nonpayment of this Note,  and expressly  agrees that this Note, or
any payment under it, may be extended and any security may be accepted, released
or  substituted  by the holder of this Note from time to time without in any way
affecting the liability of Maker.

     8. As collateral security for the payment of this Note, Maker hereby grants
the holder of this Note a security  interest in and right of offset  against the
Transferred  Assets and any and all accessions to,  replacements of and proceeds
from the Transferred Assets (as "Transferred  Assets" is defined in the Purchase
Agreement which is incorporated  herein by this reference).  Upon any default of
the  obligations   secured  by  the  above  granted  security  interest  or  the
obligations  secured by the security  interest  granted to Payee in the Purchase
Agreement,  Seller  shall  have all the rights of a secured  creditor  under the
California Commercial Code.

     9.  Maker  agrees  to  reimburse  the  holder of this Note for all costs of
collection or enforcement of this Note, whether or not suit is filed (including,
but not limited to, actual legal fees), incurred by the holder of this Note.

     10. Maker,  Payee and any subsequent holder of this Note waive the right to
trial by jury in any action  arising under or related to this Note.  Any dispute
arising  under or  related  to this  Note  shall  be  resolved  pursuant  to the
arbitration  terms  set  forth  in  Article  14 of the  Purchase  Agreement  and
incorporated herein by reference. Costs of any such dispute shall be recoverable
as provided in Section 15.3 of the Purchase Agreement.

     11. This Note shall be governed by and  construed  in  accordance  with the
laws of the State of  California,  regardless of any laws on choice or conflicts
of law of any jurisdiction.

                                     MAKER:

                                     COMMERCIAL SALES AND LEASING, INC.,
                                     a Utah corporation

                                     By: /s/  Russ Schneider
                                        --------------------------------------
                                     Name:  Russ Schneider
                                         -------------------------------------
                                     Title: President
                                          ------------------------------------

<PAGE>

                                    EXHIBIT B

                                  BILL OF SALE
                                  ------------

     This Bill of Sale ("Bill of Sale") is made and  entered  into as of October
4, 2002,  by and between  SONOMAWEST  HOLDINGS,  INC., a California  corporation
("Seller"),   and  Commercial  Sales  and  Leasing,  Inc.,  a  Utah  corporation
("Buyer"), with reference to the following facts.

                                R E C I T A L S :
                                 - - - - - - - -

     A. Seller and Buyer are parties to that certain Asset  Purchase  Agreement,
made and entered into as of October 3, 2002 (the "Purchase Agreement"), pursuant
to which  Seller,  subject to certain terms and  conditions,  agreed to sell and
convey to Buyer,  and Buyer  agreed to  purchase  from  Seller,  certain  assets
related to the business of producing,  packing and distributing by-moisture food
products.

     B.  Seller now  desires to assign and  transfer  to Buyer all of the assets
listed on Schedule 1 attached to this Bill of Sale (the "Assets").

     NOW,  THEREFORE,  for valuable  consideration,  the receipt and adequacy of
which is hereby acknowledged, the parties hereto agree as follows:

                               A G R E E M E N T :
                                - - - - - - - - -

     1. Defined Terms. All capitalized  terms used and not otherwise  defined in
this Bill of Sale, but defined in the Purchase Agreement, shall have the meaning
set forth in the Purchase Agreement.

     2. Sale. Seller hereby grants,  sells,  conveys,  transfers and delivers to
Buyer any and all of Seller's  rights,  title and interests in and to the Assets
set forth on Schedule 1 attached hereto; provided,  however, that Seller retains
a security interest in the Assets as provided in the Purchase Agreement.

     3. Rights to Tangible Assets. From and after the date of this Bill of Sale,
it is intended by the parties that Buyer and its  successors  and assigns  shall
have the right to use, have, hold and own the Assets forever.

     4. As Is. Buyer hereby  acknowledges,  covenants,  represents  and warrants
that the only  representations or warranties made by Seller regarding the Assets
are those expressly  stated in the Purchase  Agreement.  This Bill of Sale shall
not be construed as a  representation  or warranty by Seller as to the condition
of the Assets.

     5. Dispute  Resolution.  Any dispute between Seller and Buyer arising under
or related to this Bill of Sale shall be resolved  pursuant  to the  arbitration
terms set forth in Article 14 of the Purchase  Agreement  which is  incorporated
herein by reference.  Costs of any such dispute shall be recoverable as provided
in Section 15.3 of the Purchase Agreement.

     6. Counterparts; Facsimile Signatures. This Bill of Sale may be executed in
multiple  counterparts,  each of  which  shall be  deemed  an  original  for all
purposes. This Bill of Sale and any other document or instrument relating hereto
may be executed by a party's  signature  transmitted by facsimile  ("fax"),  and
copies of this Bill of Sale and any such  document or  instrument  executed  and
delivered by means of faxed  signatures  shall have the same force and effect as
copies hereof  executed and  delivered  with  original  signatures.  All parties
hereto may rely upon faxed signatures as if such signatures were originals.  Any
party  executing  and  delivering  this  Bill of Sale and any such  document  or
instrument by fax shall promptly thereafter deliver a counterpart signature page
of this Bill of Sale and the fully executed original or counterpart  original of
any such document or instrument containing said party's original signature.  All
parties hereto agree that a faxed  signature may be introduced  into evidence in
any  proceeding  arising  out of or  related  to this  Bill of Sale or any  such
document or instrument as if it were an original signature.

     7.  Limited  Liability.  Buyer  on its  own  behalf  and on  behalf  of its
shareholders,   directors,   officers,   employees,   representatives,   agents,
successors and assigns hereby agrees that in no event or circumstance  shall any
of  Seller's  shareholders,  directors,  officers,  employees,  representatives,
agents,  successor,  assigns,  affiliated or related entities of Seller have any
personal liability under this Bill of Sale, or to any of Buyer's  creditors,  or
to any other party in connection  with the Assets.  Seller on its own behalf and
on behalf of its shareholders,  directors, officers, employees, representatives,
agents,  successors and assigns  hereby agrees that in no event or  circumstance
shall   any   of   Buyer's   shareholders,   directors,   officers,   employees,
representatives,  agents, successor,  assigns, affiliated or related entities of
Buyer have any personal liability under this Bill of Sale, or to any of Seller's
creditors, or to any other party in connection with the Assets.

     8. No Third Party Beneficiaries. The execution and delivery of this Bill of
Sale shall not be deemed to confer  any rights  upon,  nor  obligate  any of the
parties hereto, to any person or entity other than the parties hereto.

     9. Governing  Law. This Bill of Sale and any and all matters  arising under
or  related  to this Bill of Sale  shall be  construed  in  accordance  with the
internal laws of the State of California,  regardless of any choice or conflicts
of law provision of any jurisdiction.

     10.  Captions.  Captions are supplied herein for convenience only and shall
not be deemed a part of this Agreement for any purpose.

     11. Successor and Assigns. This Bill of Sale shall inure to the benefit of,
and be binding upon and  enforceable  against,  the  respective  successors  and
assigns of the parties hereto,  but may not be assigned by any party without the
prior written consent of the other party.

     12.  Notice.  All notices or other  communications  required  or  permitted
hereunder  shall be transmitted by one or more of the means permitted in Section
13.1 of the Purchase  Agreement  and shall be deemed  received  according to the
provisions of that Paragraph.

     13.  Severability.  If any term or  provision  of this  Bill of Sale or the
application  thereof  to any  person  or  circumstances  shall to any  extent be
invalid or unenforceable,  the remainder of this Bill of Sale or the application
of such terms or provisions to persons or  circumstances  other than those as to
which it is invalid or  unenforceable,  shall not be  affected  thereby and each
term and  provision  of this  Bill of Sale  shall be valid and  enforced  to the
fullest extent permitted by law.

     IN WITNESS  WHEREOF,  the parties hereto have executed this Bill of Sale as
of the date first written above. Seller:

                                   SONOMAWEST HOLDINGS, INC., a California
                                   corporation

                                    By:  /s/  Roger S. Mertz
                                      ---------------------------------------
                                      Roger S. Mertz, Chairman of the Board

                                     Buyer:

                                     Commercial Sales and Leasing, Inc., a Utah
                                     corporation

                                     By:  /s/  Russ Schneider
                                       --------------------------------------
                                       Print Name:  Russ Schneider
                                                 ----------------------------
                                       Title:  President
                                            ---------------------------------

<PAGE>

                                   SCHEDULE 1

    The Equipment listed in Schedule 1.1(a) attached to the Purchase Agreement.*

    The Inventory listed in Schedule 1.1(b) attached to the Purchase Agreement.*

    The Trademarks listed in Section 1.1(c) of the Purchase Agreement.*

    The Supplier List attached as Schedule 1.1(d) to the Purchase Agreement.*

    All  goodwill  related  to the  Business  to the  extent it  relates to the
    Trademarks.

     * Schedules omitted in accordance with Item 601(b)(2) of Regulation S-K.EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP

135 South LaSalle Street
Suite 425                                    December 27, 2002
Chicago, Illinois 60603
(312) 904-8490

The Singing Machine Company, Inc.
6601 Lyons Road
Suite A-7
Coconut Creek, Florida 33073

         RE:  SIXTH AMENDMENT

Gentlemen:

     THE SINGING MACHINE COMPANY, INC., a Delaware corporation ("BORROWER") and
LASALLE BUSINESS CREDIT, INC., a Delaware corporation ("LENDER") have entered
into that certain Loan and Security Agreement dated April 26, 2001 (the
"SECURITY AGREEMENT"). From time to time thereafter, Borrower and Bank may have
executed various amendments (each an "AMENDMENT" and collectively the
"AMENDMENTS") to the Security Agreement (the Security Agreement and the
Amendments hereinafter are referred to, collectively, as the "AGREEMENT").
Borrower and Lender now desire to further amend the Agreement as provided
herein, subject to the terms and conditions hereinafter set forth.

     NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants and agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

     1.   The Agreement hereby is amended as follows:

          (a) Paragraph (1) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:

               (i)  LOANS: Subject to the terms and conditions of the Agreement
                    and the Other Agreements, Lender shall, absent the
                    occurrence of an Event of Default, advance an amount up to
                    the sum of the following sublimits (the "LOAN LIMIT"):

                    (a)  Up to seventy percent (70%), or such lesser percentage
                         as determined by Lender in its sole discretion
                         exercised in good faith, of the face amount (less
                         maximum discounts,

<PAGE>

                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP

The Singing Machine Company, Inc.
December 27, 2002
Page 2

                         credits and allowances which may be taken by or granted
                         to Account Debtors in connection therewith in the
                         ordinary course of Borrower's business) of Borrower's
                         Eligible Accounts; plus

                    (b)  Subject to subparagraph (3)(a) of this Exhibit A, the
                         lesser of: up to forty percent (40%), or such lesser
                         percentage as determined by Lender in its sole
                         discretion exercised in good faith, of the lower of the
                         cost or market value of Borrower's Eligible Inventory
                         or (I) Two Million Five Hundred Thousand and No/100
                         Dollars ($2,500,000.00) during the period of May 1st
                         through July 31st of each calendar year; (II) Five
                         Million and No/100 Dollars ($5,000,000.00) during the
                         period of August 1st through November 30th of each
                         calendar year; provided, that commencing on December
                         1st of each calendar year, said sublimit shall reduce
                         by One Million Five Hundred Thousand and No/100 Dollars
                         ($1,500,000.00) per week and shall continue to reduce
                         on the same day of each week until December 15th of
                         each calendar year, on which date said advance rate
                         shall reduce to zero percent (0%) during the period of
                         December 15th of each calendar year through April 30th
                         of each following calendar year;

                         provided, however the following advance rates and
                         amounts shall apply during the following periods:
                         subject to subparagraph (3)(a) of this Exhibit A, the
                         lesser of: A) up to twenty percent (20%), or such
                         lesser percentage as determined by Lender in its sole
                         discretion exercised in good faith, of the lower of
                         the cost or market value of Borrower's Eligible
                         Inventory or Two Million Five Hundred Thousand and
                         No/100 Dollars ($2,500,00000) during the period of
                         December 16, 2002 through January 15, 2003; and B) up
                         to ten percent (10%), or such lesser percentage as
                         determined by Lender in its sole discretion exercised
                         in good faith, of the lower of the cost or market
                         value of Borrower's Eligible Inventory or Two Million
                         and No/100 Dollars ($2,000,000.00) during the period
                         of January 16, 2003 through February 10, 2003; and

<PAGE>

                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP

The Singing Machine Company, Inc.
December 27, 2002
Page 3

                         commencing on February 11, 2003 through April 30,
                         2003, said sublimit shall reduce to Zero and No/100
                         Dollars ($0.00), and during which time said advance
                         rate shall reduce to zero percent (0%); plus

                    (c)  Subject to subparagraph (3)(a) of this Exhibit A, the
                         lesser of: up to forty percent (40%), or such lesser
                         percentage as determined by Lender in its sole
                         discretion exercised in good faith, against the face
                         amount of commercial Letters of Credit issued or
                         guaranteed by Lender for the purpose of purchasing
                         Eligible Inventory; provided, that such commercial
                         Letters of Credit are in form and substance
                         satisfactory to Lender or Two Million Five Hundred
                         Thousand and No/100 Dollars ($2,500,000.00); provided,
                         that said advance rate shall reduce to zero percent
                         (0%) during the period of December 1st of each calendar
                         year through April 30th of each following calendar
                         year; minus

                    (d)  Such reserves, as Lender elects, in its sole discretion
                         exercised in good faith, to establish from time to
                         time, including without limitation, (I) a seasonal
                         dilution reserve in the amount of One Million and
                         No/100 Dollars ($1,000,000.00) against Borrower's
                         "Eligible Accounts" during the periods of October 1,
                         2002 until March 15, 2003 and October 1st of each
                         subsequent calendar year until the "Clean Up Period"
                         (as defined below), and (II) to the extent that the
                         ratio of Free on Board sales to domestic sales
                         increases, Lender in its sole discretion may create a
                         reserve to account for the additional dilution;

                         provided, that the Loan Limit shall in no event
                         exceed (I) Twenty-Five Million and No/100 Dollars
                         ($25,000,000.00) during the period of August 1st
                         through December 15th of each calendar year; (II)
                         Twenty Million and No/100 Dollars ($20,000,000.00)
                         during the period of December 16th through December
                         31st of each calendar year; and (III) Ten Million and
                         No/100 Dollars ($10,000,000.00) during the period of
                         January 1st through July 31st of each calendar year;
                         and (IV) zero ($0) during any consecutive ninety (90)
                         day

<PAGE>

                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP

The Singing Machine Company, Inc.
December 27, 2002
Page 4

                         period between December 15th of each year through
                         April 30th of each following year (the "Clean Up
                         Period") as determined by Borrower (the "Maximum Loan
                         Limit"), except as such amount may be increased or,
                         following the occurrence of an Event of Default,
                         decreased by Lender, in its sole discretion,
                         exercised in good faith, from time to time;

                         provided further, however, that the following Maximum
                         Loan Limits shall apply during the following time
                         periods: the Loan Limit shall in no event exceed (I)
                         Fifteen Million and No/100 Dollars ($15,000,000.00)
                         during the period of December 16, 2002 through
                         December 31, 2002; (III) Twelve Million Five Hundred
                         Thousand and No/100 Dollars ($12,500,000.00) during
                         the period of January 1, 2003 through January 14,
                         2003; (IV) Ten Million and No/100 Dollars
                         ($10,000,000.00) during the period of January 15,
                         2003 through July 31, 2003; and (V) zero ($0) during
                         the consecutive forty-five (45) day period between
                         March 15, 2003 through April 30, 2003, except as such
                         amount may be increased or, following the occurrence
                         of an Event of Default, decreased by Lender, in its
                         sole discretion, exercised in good faith, from time
                         to time.

          (a) Paragraph (5)(c) of Exhibit A of the Agreement is deleted in its
entirety and the following is substituted in its place:

                    (c)  ONE-TIME AMENDMENT FEES: Borrower shall pay to Bank a
                         one-time amendment fee of Twenty-five Thousand and
                         No/100 Dollars ($25,000.00), which fee shall be deemed
                         fully earned on the date of this Amendment and payable
                         on January 31, 2003.

     2. This Amendment shall not become effective until fully executed by all
parties hereto.

     3. Except as expressly amended hereby and by any other supplemental
documents or instruments executed by either party hereto in order to effectuate
the transactions contemplated hereby, the Agreement and Exhibit A thereto hereby
are ratified and confirmed by the parties hereto and remain in full force and
effect in accordance with the terms thereof.

<PAGE>

                                  EXHIBIT 10.1

LASALLE BUSINESS CREDIT, INC.
                                                           MEMBER ABN AMRO GROUP

The Singing Machine Company, Inc.
December 27, 2002
Page 5

                                               LASALLE BUSINESS CREDIT, INC.

                                               By /s/ Casey Orlowski
                                                  ---------------------------

                                               Title Vice President
                                                  ---------------------------

ACKNOWLEDGED AND AGREED TO
this 27th day of December, 2002.

THE SINGING MACHINE COMPANY, INC.

By /s/ John F. Klecha
   -------------------------------
         JOHN F. KLECHA
Title    PRESIDENT/SECRETARY

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