Document:

EXHIBIT 10.3

                            DATED _____________, 2000

                        KOON WAH MIRROR HOLDINGS LIMITED

                                       and

                         INTERNATIONAL SMC (HK) LIMITED

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                                TENANCY AGREEMENT

                                       of

                 Units 2 and 3 on the Lower One Floor of Mirror
                 Tower, 61 Mody Road, Isimshatsui East, Kowloon

                which is situated on Kowloon Inland Lot No.10587.

               ---------------------------------------------------

                                BAKER & McKENZIE
                           14th Floor, Hutchison House

                                    Hong Kong

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AN AGREEMENT made this _______ day of August 2000

Parties            BETWEEN KOON WAH MIRROR HOLDINGS LIMITED whose registered
                   office is situate at 4th Floor, Koon Wah Mirror Group
                   Building, 2 Yuen Shun Circuit, Yuen Chau Kok, Shatin, New
                   Territories, Hong Kong ("the Landlord") of the one part and
                   the person, firm or company detailed in Part I of the First
                   Schedule hereto (the "Tenant") of the other part.

                   AGREED AS FOLLOWS:

                   1. PREMISES, TERM AND RENT

Premises           1.1 The Landlord hereby lets unto the Tenant ALL THOSE the
                   premises particularized in Part II of the First Schedule
                   hereto ("the Premises") TOGETHER with a right for the Tenant
                   its servants and licensees (in common with the Landlord and
                   all other tenants and occupiers of Mirror Tower, 61 Mody
                   Road, Tsimshatsui East, Kowloon, a building situated on
                   Kowloon Inland Lot No. 10587 ("the Building") and their
                   respective servants and licensees and all others having the
                   like right) to pass and repass upon down over and along the
                   ramps staircases landings passages entrances and means of
                   access in the Building at all times by day and by night with
                   or without vehicles for the purpose of access to and from the
                   Premises from and to the entrance to the Building AND
                   TOGETHER with the right in common with other tenants and
                   occupiers of the Building for the Tenant its servants and
                   licensees to use the passenger lifts for the purpose of
                   carrying passengers to and from the Premises (during such
                   hours as the same shall be working) AND TOGETHER with the
                   exclusive right for the Tenant its servants and licensees to
                   use the water closets, lavatories and conveniences located
                   within the Premises or allocated for use by the Tenant (if
                   any).

Term               1.2 This Agreement shall be for the term ("the Term") set
                   forth in Part III of the First Schedule hereto.

Rent and Service

Charges            1.3 Throughout the Term the rent and Service Charges as are
                   set out in Part I & Part II of the Second Schedule be payable
                   to the Landlord monthly in advance without deduction. The
                   first payment of rent shall be made on the signing of this
                   Agreement and subsequent payments shall be made in advance on
                   the first day of each calendar month.

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                   2. TENANT'S OBLIGATIONS AND RESTRICTIONS

                   The Tenant agrees with the Landlord as follows:

                   2.1 Rent and Other Charges

Rent               2.1.1 To pay the rent as set out in Part I of the Second
                   Schedule at the times and in manner aforesaid without
                   deduction;

Service Charges    2.1.2 To pay to the Landlord by way of further or
                   additional payments for the provision by the Landlord of the
                   maintenance and management of the Premises and the Building
                   and for the supply of air-conditioning services to the
                   Premises the sum specified in Part II of the Second Schedule
                   hereto ("the Service Charges") such sum to be paid monthly in
                   advance throughout the Term and on the days and in the manner
                   as the payment of rent hereinbefore mentioned which shall be
                   subject to increase at any time during the continuance of the
                   Term upon the Landlord giving to the Tenant not less than one
                   calendar month's notice in writing of such increase and upon
                   the expiration of the said period of one month the Service
                   Charges shall be increased by the amount specified in the
                   Landlord's notice. There shall be no restriction on the
                   number of occasions upon which the Landlord may call for an
                   increase in the Service Charges and the Landlord's assessment
                   of the increase shall be conclusive and binding on the
                   Tenant. Additional air-conditioning services may be provided
                   upon request by the Tenant at such adjusted rates as may from
                   time to time be charged by the Landlord at its absolute
                   discretion;

Water              2.1.3 To pay all charges for water as may be shown by the
                   separate meter installed upon or in relation to the Premises
                   or by accounts rendered to the Tenant in respect of such
                   amount of water consumed in the Premises;

Electricity        2.1.4 To pay all charges for electricity and gas as
and gas            may be shown by the separate meter installed upon or in
                   relation to the Premises or by accounts rendered to the
                   Tenant in respect of such amount of electricity and gas
                   consumed in the Premises;

Government Rent,
Rates, taxes etc,  2.1.5 To pay and discharge all Government Rent rates taxes
                   assessments duties charges impositions and outgoings
                   whatsoever now or hereafter to be imposed or charged by the
                   Government of Hong Kong or other lawful authority on the
                   Premises or upon the owner or occupier in respect thereof
                   (Property Tax alone excluded). Without

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                   prejudice to the generality of the sub-clause the Tenant
                   shall pay all Government Rent rates imposed on the Premises
                   in the first place to the Landlord who shall serve the same
                   with the Hong Kong Government. In the event that an
                   assessment to Government Rent rates in respect of the
                   Premises shall be raised directly upon the Landlord. The
                   Landlord shall during the month immediately preceding any
                   quarter in respect of which such Government Rent rates may
                   fall due be at liberty to debit the Tenant with the amount
                   thereof and the same shall forthwith be paid by the Tenant to
                   the Landlord whereupon the Landlord shall account for the
                   same to the Government of Hong Kong. The Landlord shall be
                   entitled to treat non-payment of any amount debited to the
                   Tenant in accordance with the foregoing provisions of this
                   Clause or any part thereof in all respects as non-payment of
                   rent under this Agreement;

Utility Deposits   2.1.6 To pay and discharge all deposits in respect
                   of electricity, gas, water and telephone in relation to the
                   Premises and to reimburse the Landlord for any sum paid by
                   the Landlord in respect of the same on behalf of the Tenant;

Directory Board    2.1.7 To pay to the Landlord on demand the costs of
                   affixing replacing or repairing the Tenant's name in
                   lettering to the directory boards within the Building;

                   2.2 Restrictions on Assignment, Subletting

Compliance with
Ordinances and
Regulations        2.2.1 To obey and comply with all Ordinances, regulations,
                   bylaws, rules and requirements of any Governmental or other
                   competent authority relating to the Premises the conduct and
                   carrying on of the Tenant's business on or in the Premises or
                   to any other act, deed, matter or thing done, permitted,
                   suffered or omitted therein or thereon by the Tenant or any
                   employee, agent of licensee of the Tenant and to notify the
                   Landlord forthwith in writing of any notice received from any
                   utility statutory or public authority concerning or in
                   respect of the Premises or any services supplied thereto and
                   in particular to observe at all times all statutory
                   regulations governing fire prevention within the Premises and
                   to observe perform and comply with all directions given by
                   the Fire Services Department Urban Council or other competent
                   authority in connection with the Premises or any part thereof
                   and the storage of goods therein and to indemnify the
                   Landlord against all actions costs claims and demands in
                   respect of any breach or non-observance of any of the
                   foregoing terms;

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Restrictions on
assignment,
subletting         2.2.2 Not to assign or transfer or sublet or share or part
                   with possession no the Premises or any part(s) thereof to or
                   with any person or persons or firm or body corporate whereby
                   any organization company firm or person not a party to this
                   Agreement obtains the use or possession of the Premises or
                   any part or parts thereof irrespective of whether any rental
                   or other consideration is given for such use or possession
                   and in the event of any such transfer subletting sharing
                   assignment or parting with the possession of the Premises or
                   any parts thereof (whether for monetary or other
                   consideration or not) this Agreement shall at the option of
                   the Landlord forthwith determine and the Tenant shall
                   forthwith surrender vacant possession of the Premises to the
                   Landlord. The tenancy shall be personal to the Tenant named
                   in this Agreement and without in any way limiting the
                   generality of the foregoing, the following acts and events
                   shall, unless approved in writing by the Landlord, be deemed
                   to be breaches of this clause:

                                    (a)     In the case of a Tenant which is a
                                            partnership, taking in of one or
                                            more new partners whether on the
                                            death or retirement of an existing
                                            partner or otherwise.

                                    (b)     In the cast of a Tenant who is an
                                            individual (including a sole
                                            surviving partner of a partnership
                                            Tenant) the death, insanity or other
                                            disability of that individual, to
                                            the intent that no right to use,
                                            possess, occupy or enjoy the
                                            Premises or any part thereof shall
                                            vest in the executors,
                                            administrators, personal
                                            representatives, next of kin,
                                            trustee or committee of any such
                                            individual.

                                    (c)     In the case of a Tenant which is a
                                            corporation, any takeover,
                                            reconstruction, amalgamation,
                                            merger, voluntary liquidation or
                                            change in the person or persons who
                                            owns or own a majority of its voting
                                            shares or who otherwise has or have
                                            effective control thereof.

                                    (d)     The giving by the Tenant of a power
                                            of attorney or similar authority
                                            whereby the donee of the power
                                            obtains the right to use, possess,
                                            occupy or enjoy the Premises or any
                                            part thereof or does in fact use,
                                            possess, occupy or enjoy the same.

                                    (e)     The change of the Tenant's business
                                            name without the previous written
                                            consent of the Landlord.

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                   2.3 User and Other Restrictions

User               2.3.1 To use the Premises only for the purpose as set forth
                   in Part IV of the First Schedule hereto and for no other
                   purpose whatsoever;

Breach of
Government Lease   2.3.2 Not to cause suffer or permit any contravention
                   of the provisions of the Government Lease under which the
                   Landlord holds the Premises and to indemnify the Landlord
                   against any such breach.

Domestic use       2.3.3 Not to use the Premises or any part thereof as
                   sleeping quarters or as domestic premises within the meaning
                   of any ordinance for the time being in force or to allow any
                   person to remain on the Premises overnight unless with the
                   Landlord's prior permission in writing, Such permission shall
                   only be given to enable the Tenant to post watchmen to look
                   after the Premises provided that the names of the watchmen
                   are first registered with the Landlord prior to its giving
                   such permission;

Illegal or immoral
use                2.3.4 Not to cause permit or suffer any part of the Premises
                   to use be used for Sampling or for any illegal immoral or
                   improper purposes;

Offensive trade    2.3.5 Not to cause permit or suffer any part of the
                   Premises to be used for any trade or business which is now or
                   may hereafter be declared to be an offensive trade under the
                   Public Health and Urban Services Ordinance or any enactment
                   amending the same or substituting therefor:

Storage of
hazardous goods    2.3.6 Not to keep or store or cause to be kept or
                   stored upon the Premises any hazardous or extra hazardous or
                   dangerous goods falling within the meaning of the Dangerous
                   Goods Ordinance and the Regulations thereunder or any
                   statutory modification or re-enactment thereof (except such
                   limited quantities as may from time to time be permitted by
                   the Landlord in writing) AND to indemnify the Landlord
                   against all actions costs demands and claims in respect of
                   any breach or non observance of this sub-clause;

Obstruction of
Common area        2.3.7 Not to put or place any refuse bin, box, carton,
                   container, furniture, chattels or refuse or store any goods
                   or any other things on the common loading and unloading space
                   (if any) on the ground floor or in any of the common entrance
                   halls, staircases, landings, passages,

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                   corridors, Ere escape ways, lifts and other common parts of
                   and in the Building and not to fix any fixed gates or fences
                   Which may in any Way block or obstruct any of the said fire
                   escape ways AND the Landlord, its servants or agents may
                   without any prior notice to the Tenant and without incurring
                   any liability therefor remove any such obstruction and
                   dispose of or remove the same as they may think fit and the
                   Tenant shall on demand pay to the Landlord all costs and
                   expenses incurred by the Landlord in connection with such
                   disposal or removal AND the Tenant shall indemnify the
                   Landlord for any loss or damage arising from the breach of
                   this Clause;

Nuisance           2.3.8 Not to cause or permit or suffer any part of the
                   Premises to be used in any way so as to cause nuisance
                   annoyance inconvenience damage or danger to the Landlord of
                   the tenants or occupiers of adjacent or neighboring Premises;

Noise              2.3.9 Not to cause or produce or suffer of permit to be
                   produced on or in the Premises any sound or noise (including
                   sound produced by broadcasting from Television, radio and any
                   apparatus of instrument capable of producing or reproducing
                   music and sound) or other acts or things in or on the
                   Premises which is or are or may be a nuisance or Annoyance to
                   the tenants or occupiers of adjacent or neighboring premises:

Animals, pets &
infestation        2.3.10 Not to keep or permit or suffer to be kept any animals
                   or infestation pets in the Premises and to take all steps and
                   precautions to the satisfaction of the Landlord to prevent
                   the Premises or any part thereof from becoming infested by
                   termites rats mice roaches or any other pests or vermin and
                   for the better observance hereof the Landlord may require the
                   Tenant to employ at the Tenant's cost such pest extermination
                   contractors as the Landlord may nominate and at such
                   intervals as the Landlord may direct,

Cooking and
prevention of
odors              2.3.11 Not to prepare or permit or suffer to be prepared any
                   prevention of food in the Premises or to cause or permit any
                   offensive odors or unusual odors to be produced upon or
                   emanate from the Premises;

Loading of lifts
and use of
passenger lifts    2.3.12 Not to load or permit or suffer to be loaded
                   into any lift in the Building any goods, persons or things
                   whatsoever lifts whereby the permitted capacity of the said
                   lift or lifts may be exceeded and not to

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                   use the passenger lift for the carriage of goods and to be
                   wholly responsible for any damage caused by any breach of
                   this sub-clause;

Floor loading      2.3.13 Not to store or place any goods machinery or
                   other things on or in any part of the Premises which exceed
                   the maximum floor loading of the Premises;

Removal of refuse  2.3.14 To be responsible for the removal of refuse
                   and garbage from the Premises to such location as shall be
                   specified by the Landlord from time to time and to use only
                   that type of refuse containers as is specified by the
                   Landlord from time to time aud to ensure that they are
                   properly scaled at all times. In the event of the Landlord
                   providing a collection service for refuse and garbage the
                   same shall be used by the Tenant to the exclusion of any
                   other similar service and the use of such service provided by
                   the Landlord shall bo at the sole cost of the Tenant. To
                   employ only cleaning contractor for the Premises as may be
                   nominated by the Landlord from time to time to the exclusion
                   of any other cleaning contractors;

Signs              2.3.15 Not to affix, erect, attach, exhibit, display or
                   permit or suffer so to do to be done upon any part within or
                   on the exterior of the Premises or to or through any windows
                   thereof any writing sign, decoration, signboard notice
                   advertisement placard neon light or other device whether
                   illuminated or not which may be visible from outside the
                   Premises except the display of nameplate or signboard of the
                   Tenant and their lawful subtenant or licensee at the entrance
                   to the Premises the size and position of such nameplate or
                   signboard shall be subject to the approval of the Landlord.
                   The Landlord or its authorized agents shall have absolute
                   discretion in granting or refusing such approval and any
                   approval to be granted shall be subject to such conditions as
                   the Landlord or its authorized agents may think fit. The
                   Landlord or its authorized agents &W have the right to remove
                   at the cost and expense of the Tenant any unauthorized
                   writing, sign, decoration signboard notice advertisement
                   placard neon light or device affixed or put up or displayed
                   without the proper approval of the Landlord or its agents,

                   2.4. Additions and Alterations to Premises

Installation &
alterations        2.4.1 Without prejudice to any of the following sub-clauses,
                   before carrying out any internal decorations partitioning
                   alterations and fittings (including but not limited to
                   electrical mechanical wiring,

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                   installations) to submit within 3 days from the commencement
                   of the Term details and plans thereof to the Landlord for its
                   prior approval and to re-submit for the Landlord's further
                   prior approval such amendments to the said details and plans
                   as may be desired by the Tenant or required by the relevant
                   government authorities and any costs incurred by the Landlord
                   in connection with such approval including architect's fees
                   shall be for account of the Tenant. The Tenant shall only
                   carry out such internal decorations partitioning alterations
                   and fittings and any amendments thereto by contractor(s)
                   approved by the Landlord in its absolute discretion and in
                   accordance with such approved details and plans and such
                   other directions and conditions as may be given and imposed
                   by the Landlord relating thereto in accordance with such
                   ordinances and other government rules and regulations as
                   shall from time to time be in force during the Term. Such
                   approval from the Landlord shall not relieve the Tenant from
                   the responsibility of obtaining all necessary permits
                   licences and approval pertaining to the proposed decoration
                   partitioning alteration or fitting works and the Tenant shall
                   submit all applications required and shall comply with all
                   government ordinances rules and regulations and bylaws of any
                   public utility company or authority having jurisdiction over
                   the said works. The Tenant shall not commence any such
                   internal decorations partitioning alterations and fitting
                   works unless and until all necessary approvals licences or
                   permits relating thereto have been obtained from the relevant
                   government department or authorities and if the Tenant shall
                   for any reason put in hand any such works as aforesaid prior
                   to obtaining the necessary approvals licenses or permits from
                   the relevant government authorities the Tenant shall be
                   solely responsible for the consequences of such unauthorized
                   works including but not limited to the costs of demolition,
                   addition and alteration required to comply with government
                   requirements and shall indemnify and keep the Landlord fully
                   indemnified against all losses claims costs actions and
                   proceedings arising from the Tenant's breach of the
                   provisions of this sub-clause. The Tenant shall at its own
                   costs and expenses make, good any default in complying with
                   this sub-clause notwithstanding that its fitting out
                   partitioning and decoration proposals may have been submitted
                   by the Landlord or the Landlord's agent to the relevant
                   government authorities on behalf of the Tenant and the Tenant
                   shall solely bear the consequences of any rejections or any
                   amendments required by the relevant government authorities of
                   the Tenant's proposals and of any delay or losses resulting
                   from such rejections or amendments. To secure the performance
                   of the Tenant's obligations hereunder, the Tenant shall on
                   the signing hereof deposit with the Landlord a fitting out
                   deposit in such sum as may be

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                   determined by the Landlord from time to time. The Landlord
                   shall be entitled to deduct from such fitting out deposit all
                   losses claims, costs actions and proceedings suffered or
                   incurred by the Landlord as a result of the Tenant's breach
                   of this clause. Such fitting out deposit (or the balance
                   thereof, after deduction as aforesaid) shall be refunded to
                   the Tenant within 14 days of completion of the fitting out:

Building services
and builders'
work               2.4.2 To employ at the Tenant's expense only such contractors
                   as may be nominated by the Landlord from time to time for the
                   purpose of designing and carrying out and installing all the
                   necessary building services and builders' work as hereinafter
                   defined in the Premises in manner as prescribed by the
                   Landlord or its nominated contractors and in particular to
                   pay the Landlord vetting and relating charges in accordance
                   with the Landlord's predetermined scales subject to
                   amendments/alterations from time to time and to such extent
                   as the Landlord shall in its absolute discretion deem
                   appropriate or necessary.

                                    (i)     The expression "building services"
                                            shall mean all mechanical and
                                            electrical engineering work and
                                            arrangement related to the Premises
                                            including but not limited to
                                            electrical security, sprinkler
                                            system, air-conditioning, plumbing,
                                            drainage, building automation and
                                            fire fighting installation.

                                    (ii)    The expression "builders' works"
                                            shall mean all renovation work not
                                            specified under "building services"
                                            including but not limited to light
                                            track, light trough and graphic
                                            panel.

Work by

the Tenant         2.4.3 To construct at the Tenant's own expense within
                   the Premises or furnish items to the Premises as follows:

                                    (i)     a ceiling of non-combustible
                                            material approved by the Landlord.
                                            No combustible materials will be
                                            permitted above the ceiling. Any
                                            work relating to the extension or
                                            relocation of the sprinkler heads
                                            and/or the smoke detectors and other
                                            fire fighting equipment installed by
                                            the Landlord shall be carried out by
                                            the Landlord's nominated contractors
                                            but the costs thereof shall be borne
                                            by the Tenant;

                                    (ii)    paint and decorate the interior of
                                            the Premises;

                                    (iii)   furnish aud install floor fill and
                                            floor finishes. PVC tiles shall
                                            not be used unless approved by the
                                            Landlord;

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                                    (iv)    subject to the relevant plan showing
                                            all the details including but not
                                            limiting to the gauge of wire, etc.
                                            duly approved in writing in advance
                                            by the Landlord, complete all
                                            electrical and mechanical
                                            installations (heating, ventilation
                                            and air- conditioning, plumbing and
                                            drainage, fire fighting) for the
                                            purposes of providing electrical and
                                            mechanical services to the premises
                                            provided that the reinstatement of
                                            the ceiling or any part of the
                                            common area damaged by or removed in
                                            relation to the connection of
                                            electricity to the Premises shall be
                                            carried out by the Landlord's
                                            nominated contractor. The
                                            workmanship and materials shall be
                                            of a standard to be approved by the
                                            Landlord;

                                    (v)     furnish and install or arrange for
                                            the installation of all utilities
                                            such as gas and telephones as well
                                            as other Tenant's requirements
                                            within the Premises together with
                                            such meters as are necessary to
                                            measure the Tenant's consumption
                                            thereof and to employ only the
                                            contractors nominated or approved by
                                            the Landlord for such purposes;

                                    (vi)    furnish, install, support and
                                            connect all lighting fixtures,
                                            including lamps, switches and
                                            wiring, save that in the case of
                                            support involving cutting into
                                            structure prior written approval of
                                            the Landlord will be required and in
                                            all instances only the contractor
                                            designated by the Landlord will be
                                            used;

                                    (vii)   furnish design of signs for the
                                            approval of the Landlord but
                                            acceptance of such design is at the
                                            sole discretion of the Landlord; and

                                    (viii)  install such fire extinguishers or
                                            other means of fire-fighting
                                            equipment inside tho Premises as may
                                            be required from time to time by all
                                            relevant Ordinances and regulations
                                            of the Honk Kong Government.

Submission of
information        2.4.4            (i)     To furnish at the time of the
                                            submission of the fitting out
                                            details and plans, the Landlord with
                                            the following information and items:

                                            (a)      the name and address of the
                                                     appointed designer/agent
                                                     for the Premises:

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                                            (b)      the name(s) and address(es)
                                                     of the contractor(s) the
                                                     Tenant intends to engage in
                                                     the construction of
                                                     Tenant's work Provided that
                                                     the Landlord shall have the
                                                     absolute discretion to
                                                     reject any such
                                                     contractor(s);

                                            (c)      the name and address of the
                                                     Tenant's authorized
                                                     agent/representative, if
                                                     any; and

                                            (d)      the actual commencement
                                                     date of interior decoration
                                                     and the estimated date of
                                                     completion of decoration
                                                     work, fixturing work, and
                                                     date of projected opening.

                                    (ii)    To provide the Landlord the
                                            following plans to enable the
                                            nominated mechanical and electrical
                                            contractors to prepare the
                                            corresponding designs and drawings:

                                            (a)      three copies of the
                                                     reflected ceiling plan with
                                                     schedule on voltage, type,
                                                     wattage, quantity and
                                                     location of outlets for all
                                                     light fittings and
                                                     air-conditioning;

                                            (b)      three copies of the floor
                                                     plan with partitions;

                                            (c)      three shop layout prints of
                                                     all case work including the
                                                     location of all sockets,
                                                     switches, fuse boxes,
                                                     telephone points, size,
                                                     weight and location of
                                                     outlets for all light
                                                     fittings and
                                                     air-conditioning; and

                                            (d)      three sets of elevations to
                                                     describe the space with all
                                                     electric outlets and detail
                                                     of show case at shopfront.

                                    (iii)   To forward to the Landlord any
                                            elevation of the leased space that
                                            way affect the appearance of the
                                            shopping center together with the
                                            shop layout drawing submission for
                                            approval prior to any construction
                                            work. The Landlord shall have the
                                            absolute right to demolish any
                                            construction work by the Tenant
                                            which in its opinion affects the
                                            appearance of the shopping center
                                            and the Tenant shall pay for all
                                            costs therefor.

Inspection by
Landlord           2.4.5 All Tenant's work shall be subject to the inspection of
                   Landlord, the Landlord architect and Landlord's general
                   contractor from time to time during the period in which
                   Tenant's work aforesaid is being performed.

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Reimbursement to
Landlord           2.4.6 The Landlord shall have the right to perform on behalf
                   of and for the account of the Tenant, subject to the
                   reimbursement by the Tenant, any of the Tenant's work which
                   the Landlord deems necessary to be done on an emergency
                   basis, work caused by the Tenant's fault, and work which
                   pertains to structural components, the general utility
                   systems for the Building and the erection of temporary safety
                   barricades and temporary signs during construction.

Lighting Panel
Boards             2.4.7 To provide a lighting panel within the Premises which
                   panel will:

                                    (i)     include circuits to all receptacles
                                            serving accent, case, valence
                                            and other lightings; and

                                    (ii)    with boards of 28-220 volt and 220
                                            volt of the circuit breaker type all
                                            utilizing bolted on type breaker.

Emergency Lighting
and Exit Signs     2.4.8 To provide battery operated type emergency
                   lighting and exit signs in location within the Premises as
                   required by any law and regulations, and as deemed necessary
                   by the Landlord.

Earthing           2.4.9 To provide earthing within the Premises.

Telephone System   2.4.10 To install at the Tenant's own expense empty
                   conduits for telephone service to the Premises. Telephone
                   service to the Premises shall only be installed by the
                   licensed fixed Telecommunication Network Service Operators
                   and the Tenant shall leave pull wire in all conduits. The
                   Landlord will for facilitating construction purposes install
                   telephone jacks and conduits to the Premises at the Tenant's
                   expense.

Electrical
Testing            2.4.31 To test all circuits for shorts and ground and to
                   balance loads on all panels.

Exterior
fittings           2.4.12 Not to install any supports or erect any iron brackets
                   or install any wires, aerials, fittings, plant, equipment,
                   signs, advertisements or blinds on or protruding from the
                   windows or any part of the exterior walls or windows of the
                   Building or any exterior part of the Premises for any purpose
                   including the installation of air-conditioners;

Injury to main
walls              2.4.11 Not without the prior written consent of the Landlord
                   to cut main or injure or permit or suffer to be cut maimed or
                   injured any doors

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                   window walls beams structural members or other part of the
                   fabric of the Premises;

Fixtures
interior           2.4.14 Not to affix anything to the columns, floors, ceilings
                   or interior walls or windows of the Building that could maim
                   or interfere with the same or that might in any way affect
                   the structural stability of the Building or any part thereof
                   without the prior written consent of the Landlord;

Shelters           2.4.15 Not to erect any shelters or coverings on any part of
                   the flat roofs or roof of the Building;

Smoke-lobbies and
fire escape        2.4.16 Not to alter the position of any smoke lobby or
                   fire escape doors or to make any additions to or in any way
                   amend such doors without the prior written consent of the
                   Landlord;

Locks              2.4.17 Not without the written consent of the Landlord (such
                   consent not to be unreasonably withheld) to install
                   additional locks bolts security fitments or systems or other
                   fittings to the entrance doors of the Premises or to the
                   Premises or in any way to change or alter those already
                   installed;

                   2.5 Repair Obligation

Repair of interior
fixtures and
fittings           2.5.1 To keep all the interior of the Premises including the
                   flooring partitions and interior plaster or other finishing
                   materials or rendering to walls floors and ceilings and the
                   Tenant's and the Landlord's fixtures and fittings therein
                   including all doors, windows and fire fighting apparatus,
                   locks, security fittings and any additions made by the Tenant
                   to the Premises in a good clean tenantable substantial and
                   proper repair and condition and as may be appropriate from
                   time to time painted and decorated (damage or destruction due
                   to any of the causes mentioned in Clause 5 hereof excepted)
                   and so to maintain the same at the expense of the Tenant and
                   to pay or reimburse to the Landlord the cost of replacing all
                   broken and damaged windows whether the same be broken or
                   damaged by the negligence of the Tenant or owing to
                   circumstances beyond the control of the Tenant;

Repair of sprinkler
system electrical
installations      2.5.2 To repair or replace if so required by the appropriate
                   system Company or authority under the terms of the
                   Electricity Supply

                                       14

<PAGE>

                   Regulations or any Statutory modification or re-enactment
                   thereof or any Orders in Council or Regulations made
                   thereunder by contractor(s) nominated by the Landlord all the
                   sprinkler system electrical wiring installations and fittings
                   including the wall ventilation fans within the Premises and
                   the wiring from the Tenant's meter or meters to and within
                   the same and to carry out any periodic testing of electrical
                   installations at the Premises required by regulations made
                   under the Electricity Ordinance (Cap.406);

Repair of toilets
andwater apparatus
and cleansing
drains             2.5.3 To maintain all such toilets and water apparatus
                   (located within the Premises or elsewhere if used exclusively
                   by the Tenant its employees invitees and licensees) in good
                   clean and tenantable state and in proper repair and condition
                   at all times during the Term to the satisfaction of the
                   Landlord and in accordance with the Regulations of the Public
                   Health or other Governmental Authority concerned and to pay
                   on demand to the Landlord the cost incurred by the Landlord
                   in cleansing and cleaning any of the drains choked or stopped
                   up owing to negligence or careless use by the Tenant or its
                   employees invitees or licensees;

Protection from
typhoon            2.5.4 To take all reasonable precautions to protect the
                   interior of the Premises from storm or typhoon damage;

Landlord's right
to enter and view  2.5.5 To permit the duly authorized agents or servants
                   of the Landlord and any other persons duly authorized by the
                   Landlord at any time to enter the Premises (and by force if
                   necessary) for the purposes of security, and/or fire fighting
                   and inspecting or carrying out routine and essential or
                   emergency repairs or alterations or additions to or
                   maintenance or renewal of the Building and the Landlord's
                   services and fixtures and fittings within the Building and
                   any other services or fixtures and fittings which may be
                   supplied or provided to or installed in the Building by third
                   parties including, without limitation to the generality of
                   the foregoing, telephone and other communication services and
                   fixtures and fittings installed in connection, therewith, and
                   of making good on behalf of the Tenant any defects or
                   effecting any repairs which the Tenant has failed to do under
                   the terms of this Agreement;

                                       15

<PAGE>
Obligation to
execute repairs
on receipt of
notice             2.5.6 To proceed to make good all defects and wants of repair
                   therein found for which the Tenant may be liable within
                   receipt of notice the space of one calendar month from the
                   receipt of written notice from the Landlord to amend and make
                   good the same and if the Tenant shall fail to proceed to
                   execute such works or repairs as aforementioned to permit the
                   Landlord to enter upon the Premises and execute the same and
                   the cost thereof shall be a debt due from the Tenant to the
                   Landlord and recoverable forthwith by action;

To inform
Landlord of
damage             2.5.7 To give notice to the Landlord or its agent of any
                   damage that may be suffered to the Premises and of any
                   accident to or defects in the water and gas pipes; electrical
                   wiring or fittings, fittings fixtures or other facilities
                   provided by the Landlord as shall be known or reasonably
                   ought to be known to the Tenant;

                   2.6 Insurance Liabilities and Indemnities

Indemnity against
Loss/Damage from
Interior           2.6.3 To be wholly responsible for any damage or injury
                   caused to any other person whomsoever directly or indirectly
                   through the defective or damaged condition of any part of
                   interior of the Premises or of any of the fixtures and
                   fittings therein or in any way owing to the spread of fire or
                   smoke or the overflow of water from the Premises or any part
                   thereof or through the act default or neglect of the Tenant
                   its servants agents licensees or contractors and to make good
                   the same by payment or otherwise and to indemnify the
                   Landlord against all costs claims demands actions and legal
                   proceedings whatsoever made upon the Landlord by any person
                   in respect of any such loss damage or injury and all costs
                   and expenses incidental thereto and to keep the Premises
                   insured against third party liabilities and in particular the
                   matters aforesaid with a reputable insurance, office PROVIDED
                   ALWAYS that if the Tenant shall at any time fail to keep the
                   Premises insured as aforesaid the Landlord may do all things
                   necessary to effect aud maintain such insurance and any
                   monies expended by it for that purpose shall be repayable by
                   the Tenant on demand and be recoverable forthwith by action;

Breach of
insurance
policy             2.6.2 Not to cause or suffer or permit to be done any act or
                   thing whereby the policy or policies of insurance on the
                   Building or anything within the Building against damage by
                   fire or liability to third parties for the time being
                   subsisting may become void or voidable or whereby the

                                       16

<PAGE>

                   rate of premium or premia thereon may be increased, and to
                   repay to the Landlord on demand all sums paid by the Landlord
                   by way of increased premium or premia thereon and all
                   expenses incurred by the Landlord in and about any renewal of
                   such policy or policies arising from or tendered necessary by
                   a breach of this Sub-clause;

Indemnity against
overflow of water  2.6. To be wholly responsible for any loss or damage
                   caused to any, person or property caused by or through or in
                   any way owing to the escape or overflow of water front the
                   Premises and to make good the same by payment or otherwise
                   and to indemnify the Landlord against all costs claims
                   demands actions and legal proceedings whatsoever made upon
                   the Landlord by any person in respect of such loss damage or
                   injury and costs and expenses incidental thereto;

Liable for
employee's
negligence         2.6.4 To be liable for any act default or negligence of the
                   Tenant's contractors, employees, invitees, visitors or
                   licensees in respect of the use of the Premises and the
                   common areas and facilities of the Building and to indemnify
                   the Landlord against all costs claims demands expenses or
                   liability to any third party in connection therewith;

                   2.7 Yielding Up

Yield up
premises           To yield up the Premises with all fixtures and fittings and
                   additions therein and thereto (save and except trade fixtures
                   and fittings) at the expiration or sooner determination of
                   this Agreement in good clean and tenantable repair and
                   condition (fair wear and tear and damage or destruction due
                   to any of the causes mentioned in Clause 5 hereof excepted)
                   Provided That where the Tenant has altered erected or
                   installed any fixtures fittings partitioning or additions in
                   or to the Premises with or without the Landlord's written
                   consent the Landlord may at its absolute discretion require
                   the Tenant to reinstate remove or do away with such
                   alterations fixtures fittings partitioning or additions or
                   any part or portion thereof and make good and repair in a
                   proper and workmanlike manner any damage to the Premises and
                   the Landlord's fixtures and fittings therein as a result
                   thereof before delivering up the Premises to the Landlord
                   Provided further that in the event that the Tenant has prior
                   to the date of this Agreement whether pursuant to the terms
                   of any earlier Agreement or Lease or otherwise, made
                   alterations or additions to the Premises or if the Premises
                   shall not for any reason be handed over to the Tenant as a
                   "shell" at the commencement of the term hereby created the
                   Landlord

                                       17

<PAGE>

                   reserves the right to require the Tenant at the sole expense
                   of the Tenant to remove any or all of such alterations or
                   additions so made prior to the date of this Agreement or to
                   reinstate the premises as a "shell" as the case may be and to
                   make good any damage to the Premises caused thereby;

                   3. Landlord's Obligations

                   The Landlord agrees with the Tenant as follows:

Property Tax       3.1 To pay the Property Tax attributable to or in respect
                   of the Premises;

Exterior and

structure          3.2 To maintain the exterior and structure of the Premises in
                   structure good and substantial repair and condition
                   throughout the Term at the expense of the Landlord Provided
                   That the Landlord shall not be liable for breach of this
                   Clause (so far as it relates to the Premises) unless and
                   until written notice of any defect or want of repair has been
                   given to the Landlord by the Tenant and the Landlord has
                   failed to take reasonable steps to repair or remedy the same
                   within a reasonable time;

Quiet enjoyment    3.3 To permit the Tenant (duly paying the rent and Government
                   Rent and rates and Service Charges hereby agreed to be paid
                   on the days and in manner herein provided for payment of the
                   same and observing and performing the agreements stipulations
                   terms conditions and obligations herein contained) to have
                   quiet possession and enjoyment (subject to the provisions
                   hereof) of the Premises, during the Term without any
                   interruption by the Landlord of any person lawfully claiming
                   under or through or in trust for the Landlord.

Air-conditioning
Services           3.4 To provide and maintain lifts, escalators
                   air-conditioning service from 8.00 aan. to 6:00 p.m. on
                   weekdays and 8:00 a.m. to 2:00 p.m. on Saturdays (excluding
                   Sundays and public holidays). The supply of air-conditioning
                   shall be controlled and regulated by the Landlord at its sole
                   discretion, and also such electricity as is attributable to
                   lights of the entrances, passages, corridors, staircases,
                   landings and lavatories PROVIDED however the Landlord shall
                   neither be liable to pay compensation to the Tenant in
                   respect of any period during which due to circumstances
                   beyond the control of the Landlord the proper operation of
                   the said lifts or central air-conditioning plant shall be
                   interrupted as the result of defects, mechanical failure or
                   breakdown or need for repair or overhaul, nor shall the
                   Landlord be

                                       18

<PAGE>

                   liable thereby to grant any abatement of rent and/or Service
                   Charges in respect of such interruption;

                   4. Exclusions Exceptions and Reservations

                   IT IS HEREBY FURTHER EXPRESSLY AGREED that the Landlord shall
                   not in any circumstances be liable to the Tenant or any other
                   person whatsoever;

Insurance          4.1 In respect of any loss or damage sustained by the Tenant
                   as a result of the letting or leasing of any part of the
                   Building to any person or company for any purpose whatsoever
                   permitted by the Government Lease and in particular, but
                   without limiting the generality of the foregoing, in respect
                   of any increase in premium under all or any insurance
                   policies taken out by the Tenant relating to the Premises or
                   any part thereof or the content therein and/or all premium
                   required to be paid by virtue of any insurance policies taken
                   out by the Tenant relating to the Premises or any part
                   thereof or the contents therein being avoided as a result of
                   the matters aforesaid or in respect of any loss damage or
                   injury sustained by the Tenant, its servants agents licensees
                   and contractors as a result of any accident in the Building;

Lifts
utilities, etc.    4.2 In respect of any loss or damage to person or
                   property sustained by the Tenant or any such person caused by
                   or through or in any way owing to any defect in or breakdown
                   of the lifts, electric power and water supplies, or any other
                   building service provided in the Building;

Fire and overflow  4.3 In respect of any loss or damage to person or property of
                   water sustained by the Tenant or any other person caused by
                   or through or in any way owing to the escape of fumes smoke
                   fire or any other substance or thing or the overflow of water
                   from anywhere within the Building.

                   5. Suspension of Rent and Other Charges

Suspension of
rent and other
charges            If the Premises or any part thereof shall at any time during
                   the Term be destroyed or damaged or become inaccessible owing
                   to fire water storm wind typhoon defective construction white
                   ants earthquake subsidence of the ground or any calamity
                   beyond the control of the Landlord and not due to the default
                   of the Tenant so as to render the Premises or any part
                   thereof unfit for use or inaccessible and the policy or
                   policies of insurance effected by the Landlord shall not have
                   been vitiated or Payment of the policy monies

                                       19

<PAGE>

                   refused in whole or in part in consequence of any act or
                   default of the Tenant or if at any time during the
                   continuance of the Term the Premises or any part thereof
                   shall be condemned as a dangerous structure or a demolition
                   order or closure order shall become operative in respect of
                   the Premises or any part thereof then the rent and other
                   charges hereby reserved or a fair proportion thereof (such
                   proportion to be determined by the Landlord whose decision
                   shall be final and binding) according to the nature and
                   extent of the damage sustained or order made shall from that
                   occurrence of such event be suspended until the Premises or
                   the part thereof affected shall again be rendered accessible
                   and fit for habitation and use Provided Always that the
                   Landlord shall be under no obligation to reinstate and repair
                   the Premises if in its opinion it is not economical or
                   practicable to do so and Provided that if the Premises or the
                   part thereof affected shall not have been reinstated or
                   rendered accessible or such closure order be uplifted in the
                   meantime either the Landlord or the Tenant may at any time
                   after three months from the occurrence of such damage or
                   destruction or order or inaccessibility give to the other of
                   them notice in writing to determine this Agreement and
                   thereupon the same and everything herein contained shall
                   cease and be void as from the date of the occurrence of such
                   destruction or drainage or order or inaccessibility of the
                   Premises or any part thereof but without prejudice to the
                   rights and remedies of either party against the other in
                   respect of any antecedent claim or breach of the covenants,
                   stipulations terms and condition herein contained or of the
                   Landlord in respect of the rent and other charges payable
                   hereunder prior to the coming into effect of the
                   determination of the Agreement;

                   6. Default in Payments

                   It is hereby expressly agreed and declared as follows:

Default            6.1 If the rent and/or the monthly Service Charges and any
                   other charges, payable hereunder or any part thereof shall be
                   in arrears for fifteen (15) days after the same shall have
                   become payable (whether formally demanded or not) or if there
                   shall be any breach or non-performance of any of the
                   stipulations conditions or agreements herein contained and on
                   the part of the Tenant to be observed or performed or if the
                   Tenant shall become, bankrupt or being a corporation go into
                   liquidation (save for the purposes of amalgamation or
                   reconstruction) or if the Tenant shall suffer execution to be
                   levied upon the Premises an the Tenant's goods then and in
                   any such case it shall be lawful for the Landlord at any time
                   thereafter to re-enter on and upon the Premises or any part
                   thereof in the name of the whole and thereupon this Agreement
                   shall absolutely determine but without prejudice to any right
                   of action by the Landlord in respect of any outstanding

                                       20

<PAGE>

                   breach non-observance or non-performance by the Tenant of any
                   of the terms of this Agreement all costs and expenses
                   incurred by the Landlord in demanding payment of the rent and
                   other charges aforesaid (if the Landlord elects to demand)
                   arising out of this Clause shall be paid by the Tenant and sw
                   be recoverable from the Tenant as a debt or be deductible by
                   the Landlord from any deposit held by the Landlord hereunder.
                   Notwithstanding anything herein contained in the event of
                   default in payment of the Service Charges on the date an
                   which the same falls due for payment or any interest thereon
                   the Landlord shall in addition to its other rights under the
                   terms of this Agreement be entitled to disconnect the supply
                   of air-conditioning to the Premises until the amount in
                   arrears shall have been fully paid by the Tenant without
                   incurring any liability to the Tenant for any loss or damages
                   suffered by the Tenant as a result thereof;

Overdue interest   6.2 Without prejudice to any other right or action by the
                   Landlord provided in this Agreement, if the rent and/or
                   Government Rent and/or rates and/or the Service Charges (if
                   any) and/or any other charges payable hereunder or any part
                   thereof shall be in arrears, it is hereby expressly agreed
                   and declared that the Landlord hereby reserves the right to
                   charge the Tenant overdue interest on the amount in arrears
                   at the rate of 2% per month for each month or part thereof
                   that the amount remains in arrears.

Acceptance of
rent               6.3 The acceptance of any rent and other charges by the
                   Landlord hereunder shall not be deemed to operate as a waiver
                   by the Landlord of any rights to proceed against the Tenant
                   in respect of any breach non-observance or non-performance by
                   the Tenant of any of the covenants stipulations terms and
                   conditions herein contained and on the part of the Tenant to
                   be observed and performed.

Acts of
employees          6.4 For the purpose of these presents any act default neglect
                   or invitees and omission of any guest visitor servant
                   contractor employee licensees agent invitee or license of the
                   Tenant shall be deemed to be the act default neglect or
                   omission of the Tenant.

Distraint          6.5 For the purposes of Part III of the Landlord and Tenant
                   (Consolidation) Ordinance (Chapter 7) and of these presents,
                   the rent payable in respect of the Premises shall be and be
                   deemed to be in arrears if not paid in advance at the time
                   and in the manner hereinbefore provided for Payment thereof.

                                       21

<PAGE>

                   7. Deposit

Deposit            7.1 The Tenant shall on the signing hereof deposit and at all
                   times during the said term maintain with the Landlord a total
                   sum of HK$104,792.00 consisting of a sum equivalent to 3
                   months' rental and Service Charges and 3 months' rates
                   payable in respect of the Premises, to secure the due
                   observance and performance by the Tenant of the agreements
                   stipulations terms and conditions herein contained and on the
                   part of the Tenant to be observed and performed which said
                   deposit shall be held by the Landlord throughout this
                   Agreement free of any interest to the Tenant with the right
                   for the Landlord (without prejudice to any other right or
                   remedy hereunder) to deduct therefrom the amount of any rent
                   Service Charges Government Rent rates and other charges
                   payable hereunder and any costs expenses loss or damage
                   sustained by the Landlord as the result of any non-observance
                   or non-performance by the Tenant of any of the said
                   agreements, Stipulations terms or conditions. In the event of
                   the monthly rent and Service Charges being increased during
                   the Term and the renewal period (if any) the deposit shall
                   forthwith be increased in like proportion to the increase in
                   the monthly rent and Service Charges and the provisions of
                   this Clause shall apply to the deposit as so increased. In
                   the event of any deduction being made by the Landlord from
                   the said deposit in accordance herewith the Tenant shall
                   forthwith on demand by the Landlord make a further deposit
                   equal to the amount so dedicated and failure by the Tenant so
                   to do shall entitle the Landlord forthwith to re-enter upon
                   the Premises and to determine this Agreement.

Repayment of
deposit            7.2 Subject as aforesaid the said deposit shall be refunded
                   to the Tenant by the Landlord without interest within 14 days
                   after the expiration or sooner determination of this
                   Agreement and delivery of vacant possession of the Premises
                   to the Landlord in accordance with Clause 2.7 hereof and
                   after settlement of the list outstanding claim by the
                   Landlord against the Tenant for any arrears of rent. Service
                   Charges Government Rent rates and other charges and for any
                   breach non-observance, or nonperformance of any of the
                   agreements stipulations; obligations or conditions herein
                   contained and on the part of the Tenant to be observed or
                   performed whichever shall be the later.

                                       22

<PAGE>

                   8. Landlord's Regulations

Introduction of
Regulations        8.1 The Landlord reserves the right from time to time and by
                   regulations notice in writing to the Tenant to make introduce
                   and subsequently amend adopt or abolish if necessary such
                   Regulations as it may consider necessary for the proper
                   operation and maintenance of the Building.

Conflict           8.2 Such Regulations shall be supplementary to the terms and
                   conditions contained in this Agreement and shall not in any
                   way derogate from such text and conditions, In the event of
                   conflict between such regulations and the terms and
                   conditions of this Agreement the terms and conditions of this
                   Agreement shall prevail.

                   9. Interpretation and Miscellaneous

Marginal notes     9.1 The Marginal Notes are intended for guidance only and do
                   not form a part of this Agreement nor shall any of the
                   provisions of this Agreement be construed or interpreted by
                   reference thereto or in any way affected or limited thereby.

Landlord and
Tenant
legislation        9.2 The Tenant hereby expressly agrees to deprive itself of
                   any and all rights to protection against eviction provided by
                   any existing legislation or by any future enactment in
                   substitution or amendment thereof or addition thereto to the
                   intent that the Tenant shall deliver up vacant possession of
                   the Premises to the Landlord at the expiration or sooner
                   determination of the tenancy hereby created.

Condonation not
a waiver           9.3 No condoning, excusing of overlooking by the Landlord a
                   waiver of any default, breach or non-observance or non
                   performance by the Tenant at any time or times of any of the
                   agreements stipulations terms and conditions herein contained
                   shall operate as a waiver of the Landlord's rights hereunder
                   in respect of any continuing or subsequent default, breach or
                   non-observance or non performance or so as to defeat or
                   affect in any way the rights and remedies of the Landlord
                   hereunder in respect of any such continuing or subsequent
                   default or breach and no waiver by the Landlord shall be
                   inferred from or implied by anything done or omitted by the
                   Landlord, unless expressed in writing and signed by the
                   Landlord. Any consent only for the particular matter to which
                   it relates and in no way shall be considered as a waiver or
                   release of any of the provisions hereof nor

                                       23

<PAGE>

                   shall it be construed as dispensing with the necessity of
                   obtaining the specific written consent of the Landlord in the
                   future, unless expressly so provided.

Letting notices
and entry          9.4 During the Term the Landlord shall be at liberty to affix
                   and maintain without interference upon any external part of
                   the Premises a notice stating that the Premises are to be let
                   or sold and such other information in connection therewith as
                   the Landlord shall reasonably require and the Tenant shall
                   permit persons authorized by the Landlord to enter and view
                   the Premises at reasonable times by prior appointment with
                   the Tenant.

Service of
notice             9.5 Any notice required to be served on the Tenant shall be
                   sufficiently served if delivered to or dispatched by
                   registered post or left at the Premises or at the last known
                   address of the Tenant. A notice sent by registered post shall
                   be deemed to be given at the time and date of posting.

Name of
Building           9.6 The Landlord reserves the right to rename the Building
                   with any such name or style as in its sole discretion may
                   determine and at any time and from time to time to change,
                   alter, substitute or abandon any such name and the Landlord
                   shall not be liable in damages to the Tenant or be made a
                   party to any other proceedings or for costs or expenses of
                   whatsoever nature incurred by the Tenant as a result of such
                   change.

Gender             9.7 In this Agreement if the context permits or requires
                   words importing the singular number shall include the plural
                   number and vice versa and words importing the masculine
                   feminine or neuter gender shall include the other of them.

Stamp duty and
legal costs        9.8 Each party shall pay its own solicitors' costs and legal
                   costs disbursements of and incidental to this Agreement. The
                   Stamp Duty payable on this Agreement and its counterpart
                   shall be borne by the Landlord and the Tenant in equal
                   shares. The Land Registry registration fees of this Agreement
                   shall be borne by the Tenant solely.

Definition of      9.9 Where more than one person is included under the Tenant
                   designation of the Tenant all such persons shall be jointly
                   and severally liable for the performance and observance of
                   the terms, agreements and obligations herein contained and on
                   the Tenant's part to be performed

                                       24

<PAGE>

                   and observed whether such persons hold as Tenants in Common,
                   Joint Tenants or otherwise.

Sale and
Redevelopment      9.10 If the Landlord resolves to sell, redevelop, rebuild or
                   refurbish the Premises of a substantial part thereof (which
                   intention shall be sufficiently evidenced by a copy of the
                   resolution of its Board of Directors certified by its
                   Secretary to be a true and correct copy) then in such event
                   the Landlord shall be entitled to give not less than 6 clear
                   calendar months' notice in writing to expire at any time to
                   terminate this Agreement, and immediately upon the expiration
                   of such notice this Agreement shall terminate but without
                   prejudice to the rights and remedies of either party against
                   the other in respect of any antecedent claim or breach of any
                   of the covenants restrictions stipulations or conditions
                   herein contained. Redevelopment and/or refurbishing for the
                   purpose of this Clause shall mean the demolition of the whole
                   Premises or a substantial part or parts (but not necessarily
                   a major part) thereof whether or not including any main walls
                   exterior walls or roof of the Premises and whether or not any
                   part thereof is to be rebuilt or reconstructed in the same or
                   any other manner.

Landlord's right
to carry out
renovation         9.11 The Tenant acknowledges that the Landlord will carry out
                   renovation works to the Building and for this purpose the
                   Landlord reserves the right for its servants agents
                   contractors and their respective employees to enter upon the
                   Premises and any part of the Building with all necessary
                   equipment plant and materials for the purpose of carrying out
                   such renovation works and under no circumstances whatsoever
                   shall the Tenant be entitled to claim any damages or
                   compensation from the Landlord for any inconvenience noise or
                   disturbance caused by such renovation works.

Exclusion of
warranties         9.12 The Landlord does not represent or warrant that the
                   Premises are suitable for the use or purposes specified in
                   Part IV of the First Schedule hereto and the Tenant shall
                   satisfy itself or shall be deemed to have satisfied itself
                   that the Premises are suitable for the purposes for which
                   they are to be used and the Tenant hereby agrees that it will
                   at its own expense apply for any requisite license or permit
                   from the Government or Public Authorities in respect of the
                   carrying on of the Tenant's business therein and shall comply
                   with all Ordinances, Regulations, Orders, Notices or Rules
                   made by the Government or Public Authorities in connection
                   with the conduct of such business by

                                       25

<PAGE>

                   the Tenant in the Premises and the Tenant shall indemnify the
                   Landlord in respect of any breach by the Tenant of this
                   Clause.

Landlord not
bound              9.13 The Landlord shall not be bound by any oral by oral
                   representation representations or oral promises with respect
                   to the Building and its appurtenances or in respect of the
                   Premises except as herein expressly set forth with the object
                   and intention that the whole of the agreement between the
                   Landlord and the Tenant shall be set forth herein and in no
                   way modified by any oral discussions which may have preceded
                   the signing of this Agreement.

Approval of
Landlord           9.14 No approval by the Landlord is valid unless it is in
                   writing and signed by the Landlord or its authorized agents.

                                       26

<PAGE>

                      THE FIRST SCHEDULE ABOVE REFERRED TO

                                     PART I

Tenant:            INTERNATIONAL SMC (HK) LIMITED whose registered office is
                   situate at Unit 519, Vanta Industrial Centre, 21-33 Tai Lin
                   Pai Road, Kwai Chung, New Territories.

                                     PART II

Premises:          All Those Units 2 and 3 on the Lower One Floor or the
                   building known as MIRROR TOWER, 61 MODY ROAD, TSIMSHATUI
                   EAST, KOWLOON erected on All That piece or parcel of ground
                   registered in the Land Registry as KOWLOON INLAND LOT NO.
                   10587 (which Units are more particularly delineated and
                   coloured Pink on the plan annexed hereto).

                                    PART III

Term:              Two years commencing on 1st September 2000 and expiring on
                   31st August 2002 (both days inclusive).

                                     PART IV

User:              The Premises shall be used as an office only.

                                       27

<PAGE>

                      THE SECOND SCHEDULE ABOVE REFERRED TO

                                     PART I

                                      RENT
<TABLE>
<CAPTION>

Period                                                                 Amount
<S>                                                           <C>

From 1st September 2000 to 30th September 2000                Rent-free. The Tenant shall be
  (both days inclusive) and                                   responsible for payment of Government
From 1st September 2001 to 30th September 2001                Rent, rates and Service Charges and
  (both days inclusive)                                       other outgoings during the rent-free
                                                              periods.

From 1st October 2000 to 31st August 2001                     HK$25,000.00 per month (exclusive
  (both days inclusive) and                                   of Government Rent, rates and Service
From 1st October 2001 to 31st August 2002                     Charges).
  (both days inclusive)
</TABLE>

                                     PART II

                                 SERVICE CHARGES

HK$8,718.00 per calendar month subject to increase as provided in Clause 2.1.2.

                                       28

<PAGE>

         AS WITNESS whereof the said parties have executed this Agreement the
day and year first above written.

SIGNED by                           )
                                    )
for and on behalf of the Landlord   )
whose signature is verified by:     )

SIGNED by                           )
                                    )
for and on behalf of the Tenant in  )
the presence of:                    )

         RECEIVED on or before the day             )
and year first abovewritten of and from            )
the Tenant the sum of HONGKONG DOLLARS             )
ONE HUNDRED AND FOUR THOUSAND SEVEN                ) HK$104,792.00
HUNDRED NINETY-TWO ONLY                            ) -------------
being the deposit.                                 )

                                       29EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

         EMPLOYMENT AGREEMENT ("Agreement") made as of the lst day of June 2000
by and between THE SINGING MACHINE COMPANY, INC., a Delaware corporation with
its principal office at 6601 Lyons Road, Coconut creek, FL 33073 (the "Company")
and John Klecha whose residence address is 6004 North Golden Beauty Lane,
Tamarac, FL 33321 (the "Employee").

         The Company and the Executive hereby agree as follows with respect to
the Employee's relationship with the Company:

         1. Relationship; Term. The Company shall retain the Executive and the
Executive shall be retained by the Company, on the terms and conditions
hereinafter set forth, as an Employee for a period (the "Employment Period")
commencing on June 1, 2000 (the "Commencement Date"), and ending on May 31, 2003
(the "Termination Date"), unless terminated sooner pursuant to the provisions
hereof. Such period of employment shall be automatically extended for one (1)
one-year term unless either the Company or the Executive notifies the other in
writing at least sixty (60) days prior to the end of the then current term that
it or he does not intend to renew such employment, in which case such employment
will expire at the end of the then current term. During the entire term of this
Agreement, the Executive shall be the Company's Chief Operating Officer,
Treasurer and Financial Officer, subject to the direction of the Company's Board
of Directors.

         2. Efforts on Company's Behalf. The Executive shall devote all of his
time, and his best efforts, skills and attention to the business and affairs of
the Company, shall serve the Company faithfully and competently and shall at all
times act in the Company's best interest. The services to be rendered by
Executive during the term hereof shall be as Chief Financial Officer/Treasurer,
subject at all times to the direction and control of the Company's Board of
Directors. Nothing herein shall be construed to prevent Executive from investing
in or participating in the management of companies or other entities which do
not compete with the Company or from serving on the board of directors of any
other company.

         3.       Base Compensation.

                  (a) The Company shall pay to the Executive, and the Executive
agrees to accept, minimum base compensation of two hundred seventy-five thousand
dollars ($275,000.00) per year (the "Base Compensation"), payable in accordance
with normal payroll policies of the Company and shall be subject to all usual
and customary payroll deductions including all applicable withholding taxes.

                  (b) Executive's Base Compensation shall automatically increase
over the prior year's Base Compensation each year during the term hereof by not
less than the greater of:

                           (i) Five percent (5%); or

                           (ii) An amount calculated by multiplying the prior
                  year's Base Compensation by a fraction, the numerator of which
                  shall be the consumer price index ("Consumer

                                        1

<PAGE>

                  Price Index"), as hereafter defined, for the month of January
                  in the year of adjustment and the denominator of which shall
                  be the Consumer Price Index for the month of January in the
                  prior year. The "Consumer Price Index" shall mean the Consumer
                  Price Index for All Urban Consumers, U.S. City Average
                  (1982-84=100) All Items, Bureau of Labor Statistics of the
                  United States Department of Labor.

         4.       Bonus Compensation.

                  A. Executive shall be entitled to receive a bonus (the "Profit
Bonus") for each fiscal year of the Company ("Fiscal Year") during the
Employment Period based on a percentage of a bonus pool (the "Bonus Pool"). The
Bonus Pool shall be equal to ten percent (10%) of the fiscal year-end profit of
the Company (net income before taxes and interest as listed in the Company's
audited year end financial statements).

                  B. Executive's Profit Bonus shall be equal to forty percent
(40%) of the Bonus Pool, unless modified by the Company's Board of Directors
in its sole and absolute discretion.

                  C. For purposes of this Paragraph 4, PTNI shall be based on
the Company's year end audited financial statements as determined in the course
of the Company's normal audit for the Fiscal Years ending during the Employment
Period increased by any amounts payable for, or expenses associated with, the
Bonus Pool for any Fiscal Year; provided, however, that in no event shall PTNI
include: 1) income from extra ordinary gains as set forth in the Financial
Statements, 2) expenses related to the provision of key man life insurance
acquired during the lives of Executive or other key executive employees. The
Company undertakes to use its best efforts to cause the preparation and
completion of the audited financial statements for all Fiscal Years within
ninety (90) days of the end of such Fiscal Year. Executive shall not have any
right to complain or contest any failure by the Company to complete such audited
Financial Statements within such time frame. The determination of PTNI by the
Company's independent certified public accountants shall be conclusive and
binding upon the Company and Executive.

                  D. The Profit Bonus due Executive, if any, with respect to a
particular Fiscal Year shall be payable by check within thirty (30) days after
receipt by the Company of the Financial Statements for said Fiscal Year by the
Company's independent certified public accountants, however the Executive shall
have the right to draw up to fifty percent (50%) of such Profit Bonus 60 days
after the close of the Company's Fiscal Year based upon the Company's internal
Financial Statements and completion of the field work portion of the Fiscal Year
Audit by the Company's independent certified public accountants. If Executive's
employment is terminated for any reason (including expiration of the term of
this Agreement) prior to the end of any Fiscal Year during the Employment
Period, the Profit Bonus due the Executive for such Fiscal Year shall be for the
entire Fiscal Year.

                  E. In consideration of Executive's services hereunder, the
Executive shall be granted the option to purchase shares of common stock of the
Company in accordance with the terms

                                        2

<PAGE>

of a stock option agreement to be executed between the Company and Executive
after the effective date of this agreement.

         5.       Benefit Plans.

                  (a) The Executive shall be entitled to participation in all
Company-sponsored benefit plans in accordance with terms, conditions and costs
with usual or customary Company policy.

                  (b) An automobile allowance of $500 per month, which allowance
shall automatically increase by five percent (5%) over the prior year's base
allowance each year during the term hereof, and reimbursement for all automobile
expenses including, but not limited to, insurance, gasoline, oil and repairs;

                  (c) In the event that the Company purchases insurance on the
life of Executive, Executive shall be entitled to purchase said policy from the
Company in the event of his termination, pursuant to the terms hereof, for an
amount equal to the cash surrender value thereof.

         6. Business Expenses. The Executive shall be reimbursed for all usual
and customary expenses incurred on behalf of the Company, in accordance with
Company practices and procedures; provided that each such expense is of a nature
qualifying it as a proper deduction on the Federal income tax returns of the
Company, exclusive of any limitation rules as a business expense of the Company
and not as compensation to Executive, and Executive furnishes the Company with
adequate documentary evidence to substantiate such expenses.

         7. Vacation. Executive shall be entitled to a paid vacation of four (4)
weeks for the first year of this Agreement. Such vacation time allowance shall
cumulatively accrue, and any unused vacation time for each year can be used in
the following year or paid to the Executive at the Executive's sole discretion.
The Company shall make all reasonable efforts to enable Executive to use his
vacation leave each year. Employee shall also be entitled to all paid holidays
made generally available by the Company to its executive officers.

         8.       Death or Disability.

                  (a) Notwithstanding anything to the contrary contained in
Paragraph 1 above if, during the term hereof, the Executive suffers a disability
(as defined below) the Company shall, subject to the provisions of Paragraph
8(c) hereof, continue to pay Executive the compensation provided in Paragraph 3
hereof during the period of his disability; provided, however, that, in the
event Executive is disabled for a continuous period of ninety (90) consecutive
days or for shorter periods aggregating ninety (90) days in any twelve-month
period that the Executive is incapable of substantially fulfilling the duties
set forth in Section 2 or hereafter assigned to him by the Chief Executive
Officer/President or Board of Directors because of physical, mental or emotional
incapacity resulting from injury, sickness or disease as determined by an
independent physician agreed upon by both the Company and the Executive, the
Company may, at its election, terminate

                                        3

<PAGE>

this Agreement. In the event of such termination, the Company shall continue to
be obligated to pay Executive his compensation earned up to the date of
termination.

                  (b) As used in this Agreement, the term "disability" shall
mean the substantial inability of Executive to perform his duties under this
Agreement as determined by an independent physician agreed upon by both the
Company and the Executive.

                  (c) In the event that Executive's employment ceases prior to
the end of a calendar month as a result of his death or disability or in the
event of a termination described in Paragraph 10 below, the Company shall pay
Executive or his legal representatives, as the case may be, in addition to any
other amounts payable by the Company hereunder, a lump cash sum which shall in
no event be less than the salary plus any bonus to which Executive would have
been entitled, had he continued to be affiliated with the Company until the end
of the calendar month during which his affiliation terminates.

         9.       Change of Control.

                  (a) For the purposes of this Agreement, a "Change of Control"
shall be deemed to have taken place if: (i) any person, including a "group" as
defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended,
becomes the owner or beneficial owner of Company securities, after the date of
this Agreement, having 30% or more of the combined voting power of the then
outstanding securities of the Company that may be cast for the election of
directors of the Company (other than as a result of an issuance of securities
initiated by the Company, or open market purchases approved by the Board, as
long as the majority of the Board approving the purchases is the majority at the
time the purchases are made), or (ii) the persons who were directors of the
Company before such transactions shall cease to constitute a majority of the
Board of the Company, or any successor to the Company, as the direct or indirect
result of, or in connection with, any cash tender or exchange offer, merger or
other business combination, sale of assets or contested election, or any
combination of the foregoing transactions.

                  (b) The Company and Executive hereby agree that, if Executive
is affiliated with the Company on the date on which a Change of Control occurs
(the "Change of Control Date") the Company (or, if Executive is affiliated with
a subsidiary, the subsidiary) will continue to retain Executive and Executive
will remain affiliated with the Company (or subsidiary), for the period
commencing on the Chanqe of Control Date and ending on the first anniversary of
such date, to exercise such authority and perform such Executive duties as are
commensurate with the authority being exercised and duties being performed by
the Executive immediately prior to the Change of Control Date.

                  (c) During the remaining term hereof after the Change of
Control Date, the Company (or subsidiary) will (i) continue to pay Executive a
salary at not less than the level applicable to Executive on the Change of
Control Date, (ii) pay Executive bonuses in amounts not less in amount than
those paid during the twelve month period preceding the Change of Control Date,
and (iii) continue employee benefit programs as to Executive at levels in effect
on the Change

                                        4

<PAGE>

of Control Date (but subject to such reductions as may be required to maintain
such plans in compliance with applicable federal law regulating employee benefit
programs).

                  (d) If during the remaining term hereof after the Change of
Control Date (i) Executive's employment is terminated by the Company (or
subsidiary), or (ii) there shall have occurred a material reduction in
Executive's compensation or employment related benefits, or a material change in
Executive's status, working conditions, management responsibilities or titles,
and Executive voluntarily terminates his relationship with the Company within
sixty (60) days of any such occurrence, or the last in a series of occurrences,
then Executive shall be entitled to receive, subject to the provisions of
subparagraphs (e) and (f) below, a lump sum payment equal to 200% of Executive's
"base period income" as determined under (e) below. Such amount will be paid to
Executive within thirty (30) business days after his termination of affiliation
with the Company.

                  (e) The Executive's "base period income" shall be his base
salary and annual incentive bonuses paid or payable to him during or with
respect to the twelve month period preceding the date of his termination of
affiliation.

                  (f) The amounts payable to Executive under any other
compensation arrangement maintained by the Company (or a subsidiary) which
became payable after payment of the lump sum provided for in (a), upon or as a
result of the exercise by Executive of rights which are contingent on a Change
of Control (and would be considered a "parachute payment" under Internal Revenue
Code ss.280G and regulations thereunder), shall be increased by an additional
amount representing a gross-up of any federal income tax liability arising from
an excess parachute payment or otherwise.

         10.      Termination.

                  (a) Termination Without Cause. The Company may terminate this
Agreement without cause at any time upon written notice to the Executive,
whereupon this Agreement shall terminate on the date specified therein. The
Company shall pay the Employee a severance amount equal to six months, of
Executive's Base Compensation, (the "Severance Amount"), payable in full within
five (5) days from the date specified therein (hereinafter, the "Severance
Payout Period") and shall be subject to all usual and customary payroll
deductions, including applicable withholding taxes. After the first year of this
Agreement, the Severance Amount shall be increased to three (3) years of
Executive's Base Compensation.

                  (b) Termination For Cause. This Agreement may be immediately
terminated by the Company at any time during the Employment Period for "cause".
In such an event of termination, the Company shall be obligated only to continue
to pay to Executive his Base Salary earned up to the effective date of
termination. "Cause" for purposes hereof shall mean a breach of any of the
provisions of this Agreement by Executive, unsatisfactory performance of
Executive's duties hereunder as reasonably determined by the Company's Board of
Directors, willful misconduct or neglect of duties, conviction of any criminal
offense involving a felony, gross negligence, malfeasance or a crime of moral
turpitude.

                                        5

<PAGE>

                  (c) Continuing Effect. Notwithstanding any termination of the
Executive as provided in this Section 10 or otherwise, the provisions of Section
12 and 13 shall remain in full force and effect and shall be binding on the
Executive and his legal representatives, successors and assigns.

         11. Consolidation, Merger or Sale of Assets. Nothing in this Agreement
shall preclude the Company from consolidating or merging into or with, or
transferring all or substantially all of its assets to, another corporation,
which assumes this Agreement, and all obligations of the Company hereunder, in
writing. Upon such consolidation, merger, or transfer of assets and assumption,
the term "the Company" as used herein, shall mean such other corporation and
this Agreement shall continue in full force and effect.

         12.      Restrictive Covenants.

                  (a) The Executive acknowledges that his services and
responsibilities are unique in character and are of particular significance to
the Company, that the Company is a competitive business and that the Executive's
continued and exclusive service to the Company under this Agreement is of a high
degree of importance to the Company. Therefore, during the Employment Period and
for the applicable periods specified below (each, the "Noncompete Period"), the
Executive shall not, directly or indirectly, as owner, partner, joint venturer,
Employee, broker, agent, corporate officer, principal, licensor, shareholder
(unless as owner of no more than five percent (5%) of the issued and outstanding
capital stock of such entity if such stock is traded on a major securities
exchange, or in any other capacity whatsoever, engage in or have any connection
with any business which is competitive with the Company, and which operates
anywhere in the [United States] on the effective date of termination of this
Agreement:

                  Reason for Termination          Noncompete Period
                  ----------------------          -----------------
                  Termination without cause       Severance Payout Period
                  Termination for cause           1 year

For purposes of this Agreement, a business will be deemed to be competitive with
the Company if it is an importer/re-seller of Karaoke hardware and/or software
specializing in the United States mass merchant marketplace.

                  (b)      In addition to the restrictions set forth in Section
12(a), during the Noncompete Period, the Executive shall not:

                           (i) directly or indirectly, by initiating contact or
                  otherwise, induce influence, combine or conspire with, or
                  attempt to induce, influence, combine or conspire with, any of
                  the officers, Employees or agents of the Company to terminate
                  his, her or its employment or relationship with or to compete
                  against the Company; or

                                        6

<PAGE>

                           (ii) directly or indirectly, by initiating contact or
                  otherwise, divert or attempt to divert any or all of any
                  customers' or suppliers' business with the Company.

                  (c) If, in any judicial proceedings, a court shall refuse to
enforce any of the covenants included in this Section 12 due to extent,
geographic scope or duration thereof, or otherwise, then such unenforceable
covenant shall be amended to relate to such lesser extent, geographic scope or
duration and this Section 12 shall be enforceable, as amended. In the event the
Company should bring any legal action or other proceeding against Executive for
enforcement of this Agreement, the calculation of the Noncompete Period shall
not include the period of time commencing with the filing of legal action or
other proceeding to enforce this Agreement through the date of final judgment or
final resolution, including all appeals, if any, of such legal action or other
proceeding unless the Company is receiving the practical benefits of this
Section 12 during such time. The existence of any claim or cause of action by
the Employee against the Company predicated on this Agreement or otherwise shall
not constitute a defense to the enforcement by the Company of these covenants.

                  (d) The Executive has carefully considered the nature and
extent of the restrictions upon the Executive and the rights and remedies
conferred upon the Company under this Section 12, and the Executive hereby
acknowledges that the restrictions on his activity as contained herein are
reasonably required for the Company's protection, would not operate as a bar to
the Executive's sole means of support, are fully required to protect the
legitimate interests of the Company, do not confer a benefit on the Company
disproportionate to the detriment to the Executive and are material inducements
to the Company to enter into this Agreement. The Executive hereby agrees that in
the event of a violation by him of any of the provisions of this Agreement, the
Company will be entitled to institute and prosecute proceedings at law or in
equity to obtain damages with respect to such violation or to enforce the
specific performance of this Agreement by the Executive or to enjoin the
Executive from engaging in any activity in violation hereof.

         13. Treatment and Ownership of Confidential Information. The Executive
acknowledges that during his employment he will learn and will have access to
Confidential Information regarding the Company. For purposes of this Agreement,
the term "Confidential acquires or develops or has made use of, acquires or
develops or has made use of, acquires or develops or has made use of, acquired
or developed in whole or in part in connection with Executive's employment with
the Company (whether before or after the date of this Agreement), including any
financial data, client names and addresses, Employee data, discoveries,
processes, formulas, inventions, know-how, techniques and any other materials or
information related to the business or activities of the Company which are not
generally known to others engaged in similar businesses or activities. The
Executive acknowledges that such Confidential Information as is acquired and
used by the Company or its affiliates is a special, valuable and unique asset.
The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit, or the benefit of any person or entity with which he may be associated,
or disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the Company's Board of

                                        7

<PAGE>

Directors, unless such Confidential Information previously shall have become
public knowledge through no action by or omission of the Executive. The
Executive covenants and agrees that all right, title and interest in any
Confidential Information shall be and shall remain the exclusive property of the
Company. The Executive agrees to promptly disclose to the Company all
Confidential Information developed in whole or in part by the Executive within
the scope of this Agreement and to assign to the Company any right, title, or
interest the Executive may have in such Confidential Information. The Executive
agrees to turn over to the Company all physical manifestations of the
Confidential Information in his possession or under his control at the request
of the Company.

         14. Executive Representations and Warranties. The Executive represents
and warrants that he is not a party to, or bound by, any other employment
agreements. The Executive further represents and warrants to the Company that he
is free of known physical and mental disabilities that would, with or without
reasonable accommodations that would create an undue hardship for the Company,
impair his performance hereunder and he is fully empowered to enter and perform
his obligations under this Agreement. Without limiting the generality of the
foregoing, the Executive represents and warrants that he is under no restrictive
covenants to any person or entity that will be violated by his entering into and
performing this Agreement.

         15. Arbitration. Except as provided in sections 12 and 25 hereof, any
dispute, controversy or claim arising under, out of, in connection with, or in
relation to this Agreement, or the breach, termination, validity or
enforceability of any provision of this Agreement, will be settled arbitrator
(the "Arbitrator") chosen according to, the rules of the American Arbitration
Association's National Rules for Resolution of Employment Disputes, with the
additional proviso that all steps necessary to insure the confidentiality of the
proceedings will be added to the basic rules. Unless otherwise mutually agreed
upon by the parties, the arbitration hearings shall be held in the Broward
County, Florida. The parties hereby agree that the Arbitrator has full power and
authority to hear and determine the controversy and make an award in writing in
the form of a reasoned judicial opinion. The parties hereby agree that the
Arbitrator has full power and authority to hear and determine the controversy
and make and award in writing in the form of a reasoned judicial opinion. The
parties hereby stipulate in advance that the award is binding and final. The
parties hereto also agree that judgment upon the arbitration award may be
entered in any federal or state court having jurisdiction thereof. Each party is
responsible for their own legal fees and out-of-pocket expenses.

         16.      Binding Effect. Except as herein otherwise provided. This
Agreement shall inure to the benefit of and shall be binding upon the parties
hereto, their personal representatives, successors, heirs and assigns.

         17.      Severability. Invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provisions.

         18.      Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural and vice versa. Titles of
Paragraphs are for convenience only, and neither limit nor amplify the
provisions of the Agreement itself.

                                        8

<PAGE>

         19.      Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Florida.

         20.      Entire Agreement. This Agreement contains the entire
understanding between the parties and may not be changed or modified except by
an Agreement in writing signed by all the parties.

         21. Notice. Any notice required or permitted to be delivered hereunder
shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the parties at the addresses first stated herein, or to such other
address as either party hereto shall from time to time designate to the other
party by notice in writing as provided herein.

         22.      No Publicity. The Executive agrees that he will not engage in
any conduct that is injurious to the Company's reputation and interests,
including, but not limited to, publicly disparaging (or inducing or encouraging
others to publicly disparage) the Company or any of the Company's directors,
officers, employees or agents.

         23. Cooperation. Executive agrees to cooperate fully with the Company
by providing information to the Company and its representatives, agents or
advisors regarding any business matters with which the Executive may become
involved with during the terms of this Agreement and to cooperate fully in the
event of any litigation or legal, administrative or regulatory proceeding by
providing information, including but not limited to, providing truthful
testimony at any legal, administrative or regulatory proceeding, regarding any
facts or information of which Executive has knowledge and/or any business
matters of which Executive has or had knowledge.

         24. Assignability. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company, provided that such successor or assign shall acquire all
or substantially all of the assets and business of the Company and, further
provided that any such assignment shall not release the Company from its
obligations to the Executive hereunder. The Executive's rights and obligations
hereunder may not be assigned or alienated without the prior written consent of
the Company and any attempt to do so by the Executive will be void.

         25. Attorneys' Fees. If any legal action or other proceeding is brought
by the Company for the enforcement of Section 12 of this Agreement, or because
of an alleged dispute, breach, default or misrepresentation by the Executive in
connection with any provision of this Agreement, the Company or the Executive in
such legal action or other proceeding, shall be responsible for its own
attorneys' fees, sales and use taxes, court costs and other expenses incurred in
that action or proceeding.

         26.      Injunctive Relief. The Executive acknowledges and agrees that
in the event Executive violates any term, covenant or provision of Section 12 of
this Agreement, the Company will suffer irreparable harm for which the Company
will have no adequate remedy at law. The Executive agrees

                                        9

<PAGE>

that the Company shall be entitled to injunctive relief for any breach or
violation of Section 12 of this Agreement, including but not limited to the
issuance of an ex parte preliminary injunction, in addition to and not in
limitation of any and all other remedies available to the Company at law or in
equity.

         27.      No Offsets. The existence of any claim or cause of action of
the Executive against the Company, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the Company of
this Agreement.

         28.      Executive Acknowledgment. The Executive acknowledges and
agrees that Executive has read and understands the terms set forth in this
Agreement and has been given a reasonable opportunity to consult with an
attorney prior to execution of this Agreement.

         29.      Other Instruments. The parties hereby covenant and agree that
they will execute such other and further instruments and documents as are or may
become necessary or convenient to effectuate and carry out the terms of this
Agreement.

         30.      Counterparts. This Agreement may be executed in any number of
counterparts and each such counterpart shall for all purposes be deemed an
original.

         31.      Assignability. This Agreement shall not be assigned by either
party, except with the written consent of the other.

                          [SIGNATURE PAGE ON NEXT PAGE]

                                       10

<PAGE>

         IN WITNESS WHEREOF, this Agreement has been duly signed by the
Executive and on behalf of the Company on the day and year first above written.

                                          THE SINGING MACHINE COMPANY. INC.

                                          By:     /s/ Eddie Steele - C.E.O.
                                             ------------------------------
                                                   Edward Steele, President

                                                /s/ John Klecha
                                          ---------------------------------
                                          John F. Klecha

                                       11

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