Exhibit 99.1

INTERCREDITOR AGREEMENT

THIS INTERCREDITOR AGREEMENT (this “Agreement”) is made and entered into as of June , 2020 by and between Crestmark, a division of MetaBanK, National Association having an address of 5480 Corporate Drive, Suite 350, Troy, Michigan 48098 (“Crestmark”), The Singing Machine Company, Inc. having its principal office at 6301 NW 5^th Way, Suite 2900, Fort Lauderdale, Florida 33309 (“Debtor”), and Iron Horse Credit LLC with its principal place of business located at 6620 Southpoint Drive South Suite 230 Jacksonville, FL 32216 (“Inventory Lender”).

Recitals

A. Pursuant to that certain Credit and Security Agreement, dated June , 2020, by and between Debtor and Inventory Lender (as amended, the “Inventory Loan Agreement”), Inventory Lender may make available to Debtor revolving inventory loans secured by, among other assets, all existing and future Inventory (as defined below) and Accounts (as defined below) of Debtor.

B. Pursuant to that certain Loan and Security Agreement and related Schedule dated as June , 2020, by and between Debtor and Crestmark (as amended, the “Crestmark Agreement”), Crestmark may from time to time provide financing to the Debtor and Debtor has granted to Crestmark a security interest in all personal property of Debtor, including all existing and future Accounts.

C. Inventory Lender and Crestmark desire to enter into this Agreement to clarify their respective priorities as secured parties in connection with the Inventory Loan Agreement and the Crestmark Agreement.

NOW THEREFORE, in consideration of the terms and conditions contained herein, the parties hereto mutually agree as follows:

1. Definitions.

Capitalized terms used herein and not otherwise defined herein shall have the meanings given to them in the UCC to the extent defined therein. As used in this Agreement, the following terms not otherwise defined herein shall have the meanings set forth below:

1.1 “Accounts” has the meaning ascribed to such term in Article 9 of the UCC.

1.2 “Assignment Notice” means a written notice by a Secured Party to an Account Debtor that all of the present and future Accounts of Debtor have been assigned to such Secured Party pursuant to the UCC and that all such Accounts should be paid directly to such Secured Party, or confirmation online of a remittance advice or its equivalent that payments are to be made to a Secured Party.

1.3 “Collateral” means all existing and future assets of Debtor in which Debtor has granted to a Secured Party, or Secured Party otherwise holds, a security interest or lien as security for the payment and performance of a Secured Obligation. Collateral includes, without limitation, all assets of Debtor which constitute Collateral and which arise during any bankruptcy, reorganization or similar insolvency proceeding of Debtor.

1.4 “Crestmark Documents” means the Crestmark Agreement and all written agreements, documents and instruments entered into by Debtor with or in favor of Crestmark in connection with the Crestmark Agreement, in each case, as amended.

1.5 “Crestmark Priority Collateral” means Qualified Accounts and Qualified Inventory.

1.6 “Crestmark Obligations” means any and all of Debtor’s present and future indebtedness, liabilities and obligations to Crestmark arising under or in connection with the Crestmark Documents.

1.7 “Inventory Lender Collateral Reserve Percentage” means 20% or such higher or other percentage as Inventory Lender may from time to time specify in a written notice to Crestmark.

1.8 “Inventory Lender Collateral Reserve” means, with respect to any Account, the Inventory Lender Collateral Reserve Percentage of such Account.

1.9 “Inventory Lender Obligations” means any and all of Debtor’s present and future indebtedness, liabilities and obligations to Inventory Lender arising under or in connection with the Inventory Loan Documents.

1.10 “Inventory Lender Priority Collateral” means all existing and future Inventory and Accounts of Debtor other than Qualified Accounts and Qualified Inventory, together with the Proceeds thereof.

1.11 “Inventory Loan Documents” means the Inventory Loan Agreement and all written agreements, documents and instruments entered into by Debtor with or in favor of Inventory Lender in connection with the Inventory Loan Agreement, in each case, as amended.

1.12 “Qualified Accounts” means all Accounts of Debtor, whether now existing or hereafter arising, including proceeds of Inventory sold in the ordinary course of business, for which Crestmark has made a cash payment to Inventory Lender or, in accordance with Section 4.1, at Inventory Lender’s instruction, to Debtor, of at least the Inventory Lender Collateral Reserve.

1.13 “Qualified Inventory” means all Inventory which has been sold by Debtor which has given rise to a Qualified Account, and which has been returned by the applicable Account Debtor with or without the express or implied consent of Debtor.

1.14 “Secured Obligations” means both the Crestmark Obligations and the Inventory Lender Obligations. In the event of any financing of Debtor by a Secured Party during any bankruptcy, arrangement, or reorganization of Debtor, each Secured Party agrees that the other Secured Party’s “Secured Obligations” shall include without limitation all indebtedness, liabilities and obligations incurred by Debtor in any such case or proceeding.

1.15 “Secured Party” means Inventory Lender and/or Crestmark.

1.16 “Shared Collateral” means all Collateral other than the Inventory Lender Priority Collateral and the Crestmark Priority Collateral.

1.17 “UCC” means the Uniform Commercial Code in effect in the State of Nevada and as may be amended from time to time, and all capitalized terms contained herein that are defined by the UCC shall have the meanings ascribed by the UCC.

2. Relative Priorities.

2.1 Subject to paragraphs 6.4 and 6.5 below, any security interest or claim of Crestmark that may now or hereafter have in the Crestmark Priority Collateral shall at all times be prior to and senior to any security interest or claim of Inventory Lender that may now or hereafter be attached to the Crestmark Priority Collateral.

2.2 Subject to paragraphs 6.4 and 6.5 below, any security interest or claim of Inventory Lender that may now or hereafter may have in the Inventory Lender Priority Collateral shall at all times be prior to and senior to any security interest or claim of Crestmark that may now or hereafter be attached to the Inventory Lender Priority Collateral.

2.3 The priorities specified in this Agreement shall be applicable irrespective of whether there is any attachment of a security interest in favor of either Inventory Lender or Crestmark, the time or order of attachment or perfection of any security interest or the time or order of filing of any financing statements or other documents, or the giving of any notices of purchase money security interests or other notices, or possession of any Collateral, or any statutes, rules or law, or court decisions to the contrary.

2.4 So long as the Crestmark Agreement and Inventory Loan Agreement are each in full force and effect, any security interest held by Crestmark and Inventory Lender in the Shared Collateral shall have equal priority.

3. Debtor Notification. Crestmark shall promptly send to or obtain from all Account Debtors of Debtor an Assignment Notice. Crestmark shall not terminate or rescind any Assignment Notice except with the prior written consent of Inventory Lender or upon five days’ prior written notice to Inventory Lender.

4. Qualified Accounts

4.1 Crestmark may, at its election, convert an Account to a Qualified Account by remitting to Inventory Lender, for the account of Debtor, the Inventory Lender Collateral Reserve for such Account. Upon payment by Crestmark to Inventory Lender of the Inventory Lender Collateral Reserve for an Account, such Account shall constitute a Qualified Account hereunder. For the avoidance of doubt, an Account shall not constitute a Qualified Account unless Crestmark remits to Inventory Lender, for the account of Debtor, the Inventory Lender Collateral Reserve for such Account. To the extent Crestmark elects to remit payment of the Inventory Lender Collateral Reserve for an Account, Crestmark may, with the prior email or other written consent of Inventory Lender, remit to Debtor such portion of such Inventory Lender Collateral Reserve as Inventory Lender may permit in its discretion.

4.2 Crestmark agrees that it will promptly notify Inventory Lender in the event Crestmark does not purchase or advance against an Account submitted by Debtor to Crestmark for purchase or financing under the Crestmark Documents.

5. Rights and Remedies.

5.1 Subject to the terms of this Agreement, each Secured Party may, at any time without the consent of the other Secured Party, renew or extend any of the Secured Obligations owing to it from the Debtor or that of any other person at any time directly or indirectly liable for the payment of any Secured Obligations; accept partial payments on account of such Secured Obligations; settle, release (by operation of law or otherwise), compound, compromise, collect or liquidate any of such Secured Obligations; change, alter or vary the interest charge on, or any other terms or provisions of such Secured Obligations owing to it or any present or future instrument, document or agreement with the Debtor; and take any other action or omit to take any other action with respect to such Secured Obligations as it deems necessary or advisable in its sole discretion; and each Secured Party waives any right to require the other to resort to any Collateral or other assets or funds in any particular order, including, without limitation, any order that would result in Inventory Lender or Crestmark, as the case may be, first resorting to Collateral, assets or funds to which the other has no recourse.

5.2 Except as otherwise expressly provided in Section 5.4 below, Inventory Lender shall not collect, take possession of, foreclose upon, or exercise any other rights or remedies with respect to Crestmark Priority Collateral, judicially or non-judicially, or attempt to do any of the foregoing prior to Crestmark filing duly authorized (or authorizing the filing of) UCC termination statements terminating all UCC filings made by Crestmark against Debtor; provided that in the event (i) Crestmark has commenced a judicial proceeding or nonjudicial action to collect or enforce the Crestmark Documents, the Crestmark Obligations or the Crestmark Priority Collateral, or (ii) a case or proceeding by or against Debtor is commenced under the United States Bankruptcy Code or any other insolvency law, then Inventory Lender, after first giving notice to Crestmark, may take such action in any such proceeding, action or case referred to in clause (i) or (ii) above as it deems necessary in its good faith judgment to protect its interests in any such proceeding, action or case so long as any such action taken does not adversely affect Crestmark’s rights in the Crestmark Priority Collateral or interfere with Crestmark’s right to recover the Crestmark Priority Collateral.

5.3 Except as otherwise expressly provided in Section 5.4 below, Crestmark shall not collect, take possession of, foreclose upon, or exercise any other rights or remedies with respect to Inventory Lender Priority Collateral, judicially or non-judicially, or attempt to do any of the foregoing prior to Inventory Lender filing duly authorized (or authorizing the filing of) UCC termination statements terminating all UCC filings made by Inventory Lender against Debtor; provided that in the event (i) Inventory Lender has commenced a judicial proceeding or nonjudicial action to collect or enforce the Inventory Loan Documents, the Inventory Lender Obligations or the Inventory Lender Priority Collateral, or (ii) a case or proceeding by or against Debtor is commenced under the United States Bankruptcy Code or any other insolvency law, then Crestmark, after first giving notice to Inventory Lender, may take such action in any such proceeding, action or case referred to in clause (i) or (ii) above as it deems necessary in its good faith judgment to protect its interests in any such proceeding, action or case so long as any such action taken does not adversely affect Inventory Lender’s rights in the Inventory Lender Priority Collateral or interfere with Inventory Lender’s right to recover the Inventory Lender Priority Collateral.

5.4 Each Secured Party agrees that all Accounts (including Accounts that are Inventory Lender Priority Collateral) shall be collected by Crestmark pursuant to Assignment Notice(s); provided, that, if for any reason Crestmark does not or elects not to send to or receive from an Account Debtor an Assignment Notice, Inventory Lender may, upon five business days prior written notice to Crestmark, send to or obtain from such Account Debtor an Assignment Notice and collect such Accounts from such Account Debtor. Accounts collected by Crestmark which are Inventory Lender Priority Collateral shall be immediately turned over to Inventory Lender by Crestmark and Accounts collected by Inventory Lender which are Crestmark Priority Collateral shall be immediately turned over to Crestmark by Inventory Lender.

5.5 Any proceeds of Inventory Lender Priority Collateral received by Inventory Lender after its Secured Obligations are paid in full and it has filed (or authorized the filing of) UCC termination statements with respect to all UCC filings made by it against Debtor, shall be turned over to Crestmark in the event that there are Secured Obligations owing to Crestmark. Any proceeds of Crestmark Priority Collateral received by Crestmark after its Secured Obligations are paid in full and it has filed (or authorized the filing of) UCC termination statements with respect to all UCC filings made by it against Debtor, shall be turned over to Inventory Lender in the event that there are Secured Obligations owing to Inventory Lender.

5.6 Either Secured Party may exercise its rights against the Shared Collateral after giving the other Secured Party prior written notice of its intention to exercise any such rights. The Secured Party receiving such notice will reasonably cooperate with the other Secured party in conducting a commercially reasonable disposition of the Shared Collateral, but such cooperating Secured Party shall not be required to incur any cost or expense in connection with such cooperation. Any proceeds of Shared Collateral shall be distributed to each Secured Party pro rata, based on the outstanding Secured Obligations owed to each Secured Party. In the event that either Secured Party collects proceeds of Shared Collateral, such party shall give the other Secured Party notice of the disposition of such Shared Collateral and the amount of proceeds collected. Notwithstanding the foregoing, Crestmark agrees that in order to obtain maximum value for the Inventory, the Inventory may be packaged with the Shared Collateral to one buyer and the Crestmark and Inventory Lender shall determine the value placed upon Inventory and the value placed upon the Shared Collateral jointly.

5.7 From and after receipt by Crestmark from Inventory Lender of a copy of a notice of default sent by Inventory Lender in respect of its Secured Obligations or in connection with the Inventory Loan Documents, (a) Debtor irrevocably authorizes and directs Crestmark to remit to Inventory Lender, and Crestmark agrees to remit to Inventory Lender, any and all amounts from time to time that Crestmark would have in its discretion advance to the Debtor under the Crestmark Documents and (b) Crestmark agrees that it shall not make any payments to Debtor or for Debtor’s account under the Crestmark Documents. Crestmark is not under any obligation to make advances to the Debtor or making any representations that any such advances will be made.

5.8 From and after receipt by Inventory Lender from Crestmark of a copy of a notice of default sent by Crestmark in respect of its Secured Obligations or in connection with the Crestmark Loan Documents, (a) Debtor irrevocably authorizes and directs Inventory Lender to remit to Crestmark, and Inventory Lender agrees to remit to Crestmark, any and all amounts from time to time that Inventory Lender would have in its discretion advance to the Debtor under the Inventory Lender Documents and (b) Inventory Lender agrees that it shall not make any payments to Debtor or for Debtor’s account under the Inventory Lender Documents. Inventory Lender is not under any obligation to make advances to the Debtor or making any representations that any such advances will be made.

6. General Covenants.

6.1 This Agreement shall not be construed as a commitment or agreement by Inventory Lender or Crestmark to provide financing to Debtor or continue financing arrangements with Debtor. Inventory Lender or Crestmark may terminate such arrangements at any time with no obligation, monetary or otherwise, to the other except as provided for in this Agreement.

6.2 The Secured Party having a senior security interest or lien in the Collateral in accordance with the priorities established by the Agreement shall, subject to such Secured Party’s rights under its agreements with Debtor, have the sole and exclusive right to adjust and settle any insurance policy in the event of any loss affecting such Collateral. Each Secured Party shall notify the other, in writing, of any action(s) taken by such Secured Party in connection with the terms of this Section and keep the other apprised as to the status of such action(s). All proceeds of such policy shall be paid to the Secured Party having the senior claim as set forth in this Agreement. Subject to applicable law, after payment of such senior Secured Party’s claim and all expenses of collection, including reasonable attorneys’ fees and other costs, fees and expenses, any remaining proceeds shall be promptly remitted to the other Secured Party for application to the Secured Obligations owing to it.

6.3 Each Secured Party shall give to the other copies of any written notice of the occurrence or existence of an event of default sent to Debtor, simultaneously with the sending of such notice to Debtor, but the failure to do so shall not affect the validity of such notice, nor shall it create any claim or right on behalf of the other party, the Debtor or any third party. The sending of such notice shall not give the recipient the obligation to cure such default or event of default. Pursuant to the UCC, each Secured Party hereby requests from the other Secured Party notice of the time and place of any public sale and of the time on or after which any private sale or other intended disposition of Collateral is to be made by the other Secured Party.

6.4 This Agreement shall constitute a continuing agreement of subordination, during which time (i) Crestmark may continue, without notice to Inventory Lender, to provide financial accommodations to or on behalf of Debtor and this Agreement shall continue until any and all obligations due Crestmark have been fully discharged and satisfied and an authorized representative of Crestmark has filed UCC termination statements terminating all UCC filings made by Crestmark on Debtor (which it will timely file after the Crestmark Obligations are paid in full in good funds); and (ii) Inventory Lender may continue, without notice to Crestmark, to provide financial accommodations to or on behalf of Debtor and this Agreement shall continue until any and all obligations due Inventory Lender have been fully discharged and satisfied and an authorized representative of Inventory Lender has filed UCC termination statements terminating all UCC filings made by Inventory Lender on Debtor (which it will timely file after the Inventory Lender Obligations are paid in full in good funds).

6.5 This Agreement shall remain in force and effect indefinitely until the earlier to occur of (i) the expiration of the term of the Crestmark Agreement, the full and indefeasible payment of the Crestmark Obligations and an authorized representative of Crestmark has filed UCC termination statements terminating all UCC filings made by Crestmark on Debtor or (ii) the expiration of the term of the Inventory Loan Agreement, the full and indefeasible repayment of the Inventory Lender Obligations and an authorized representative of Inventory Lender has filed UCC termination statements terminating all UCC filings made by Inventory Lender on Debtor. Notwithstanding the foregoing:

6.5.1 If, after repayment of Crestmark Obligations and termination of all UCC filings made by Crestmark on Debtor, Debtor thereafter becomes liable to Crestmark on account of the Crestmark Obligations, or any payment made on the Crestmark Obligations shall for any reason be required to be returned or refunded by Crestmark, this Agreement shall thereupon in all respects become effective with respect to such subsequent or reinstated Crestmark Obligations, without the necessity of any further act or agreement between Secured Parties.

6.5.2 If, after repayment of the Inventory Lender Obligations and termination of all UCC filings made by Inventory Lender on Debtor, Debtor thereafter becomes liable to Inventory Lender on account of the Inventory Lender Obligations, or any payment made on the Inventory Lender Obligations shall for any reason be required to be returned or refunded by Inventory Lender, this Agreement shall thereupon in all respects become effective with respect to such subsequent or reinstated Inventory Lender Obligations, without the necessity of any further act or agreement between Secured Parties.

6.6 The relationship between the Secured Parties is, and at all times shall remain solely that of creditors of Debtor. Secured Parties shall not under any circumstances be construed to be partners or joint venturers of one another; nor shall the Secured Parties under any circumstances be deemed to be in a fiduciary relationship with one another or to owe any fiduciary duty to one another outside the duties expressly provided in this Agreement. Secured Parties do not undertake or assume any responsibility or duty to one another to select, review, inspect, supervise, pass judgment upon or otherwise inform each other of any matter in connection with Debtor’s property, any Collateral held by any Secured Party or the operations of Debtor. Each Secured Party shall rely entirely on its own judgment with respect to such matters, and any review, inspection, supervision, exercise of judgment or supply of information undertaken or assumed by any Secured Party in connection with such matters is solely for the protection of such Secured Party. Neither Secured Party shall commit or perform any act and/or omission that in any way intentionally, fraudulently or maliciously hinders, impedes, interferes with or otherwise adversely impacts or affects the other Secured Party’s priority interest in any Collateral.

6.7 This Agreement is intended to define the rights and duties of Inventory Lender and Crestmark; and it is not intended that any third party shall benefit from this Agreement.

7. Post-Termination Collections. Upon satisfaction of the Crestmark Obligations, Crestmark may in its sole discretion, at Inventory Lender’s request, continue to collect Accounts for the benefit of Inventory Lender. To the extent that Crestmark collects Accounts for the benefit of Inventory Lender, Crestmark shall be entitled to charge to Inventory Lender one percent (1%) of the amount collected plus all direct costs incurred by Crestmark from third parties associated with such collection. Crestmark shall submit invoices and other proof of incurring of all such direct costs. The reimbursement of direct costs shall not include any labor or services of Crestmark or any of its employees, agents, affiliates, officers, directors or shareholders. Notwithstanding anything contained herein to the contrary, Crestmark shall at no time be obligated to pursue collection efforts for or on behalf of Inventory Lender, and Crestmark’s sole duty insofar as the receipt of Inventory Lender Priority Collateral is to forward such Inventory Lender Priority Collateral to Inventory Lender.

8. Exchange of Information. Upon request and reasonable advance notice, Inventory Lender shall provide Crestmark with access to any information related to the Inventory Lender Obligations, including but not limited to, weekly borrowing base certificates and audits and financial statements. Similarly, upon request and reasonable advance notice Crestmark shall provide Inventory Lender with access to any information related to the Crestmark Obligations. Access for Inventory Lender and Crestmark shall include the right, at the expense of the party seeking the information, to obtain duplicates of such information.

9. Miscellaneous.

9.1 Notices. Any notices and demands under or related to this Agreement shall be in writing and delivered to the intended party at its address stated herein or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand will be deemed given or made as follows: (a) if sent by hand delivery or overnight courier, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; (c) if sent by telecopy, upon receipt; and (d) if sent by electronic mail, upon sender’s receipt of an acknowledgment from the intended recipient (such as by “return receipt requested” function, as available, return email or other written acknowledgment).

9.2 Assignment. The terms of this Agreement shall be binding upon and inure to the benefit of each party and their respective heirs, executors, administrators, successors and assigns. Notwithstanding the foregoing, neither Secured Party will, at any time while this Agreement is in effect, assign the Crestmark Documents, the Inventory Loan Documents or any of the Secured Obligations unless the assignee or transferee thereof shall first agree in a writing, satisfactory in form and substance to the other Secured Party, to become a party and to succeed to the rights and to be bound by all of the obligations of the transferring Secured Party.

9.3 Insolvency. This Agreement shall be applicable both before and after the filing of any bankruptcy, insolvency, reorganization or similar proceeding by or against Debtor.

9.4 Applicable Law. The validity, construction and effect of this Agreement shall be governed by and construed in accordance with the laws of the State of Michigan, without regard to conflicts of laws principles.

9.5 Venue and Jurisdiction. Each party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts of Michigan sitting in Oakland County and of the United States District Court for the Eastern District of Michigan, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each party hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined in such state court or, to the fullest extent permitted by applicable law, in such federal court. Each party irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in this Section. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of inconvenient forum to the maintenance of such action or proceeding in any such court.

9.6 No Waiver. No failure on the part of either party to exercise, no delay in exercising, and no course of dealing with respect to any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

9.7 Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and all previous agreements or discussions between the parties relating to the subject matter hereof, written or oral, are hereby terminated and/or superseded by this Agreement. This Agreement may be amended or modified only by a written instrument signed by both parties. If any provision of this Agreement is held invalid, the validity of the remainder of this Agreement shall not be affected.

9.8 Counterparts and Electronic Transmission. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by facsimile, email or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by facsimile, email or other electronic transmission to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.

9.9 Construction. This Agreement has been negotiated by the parties and their respective counsel and will be interpreted fairly in accordance with its terms and without any strict construction in favor of or against either party. The headings and captions set forth herein are for convenience of reference only and shall not affect the construction or interpretation hereof. To the extent there is any conflict between the terms and provisions of this Agreement and those contained in the Crestmark Documents or the Inventory Loan Documents, the terms and provisions of this Agreement shall govern the relationship of the parties hereto.

9.10 Number and Gender. Whenever the singular number is used in this Agreement and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders.

9.11 Further Assurances. The Parties agree to do, take, execute, acknowledge if required and deliver such further and additional acts, actions, documents, instruments or writings not specifically referred to herein as may be necessary, required, proper, desirable or convenient for the purpose of fully effectuating the provisions hereof.

9.12 Indemnification. The Debtor agrees to defend, indemnify and hold harmless each Secured Party and their respective directors, officers, employees, attorneys, successors and assigns from and against any and all claims, losses, liabilities, costs, damages and expenses, including, without limitation, reasonable legal and accounting fees, arising out of or in any way related to this Agreement or any action or omission of the Secured Parties in complying with the terms of this Agreement.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have duly executed this Intercreditor Agreement the day and year first above written.

Exhibit 99.2

LOAN AND SECURITY AGREEMENT

(“Agreement”)

This Agreement dated , 2020, is an agreement between CRESTMARK, A DIVISION OF METABANK, NATIONAL ASSOCIATION (“Crestmark”), and THE SINGING MACHINE COMPANY, INC., a Delaware corporation (“Borrower”). In this Agreement, Crestmark and Borrower are collectively the “Parties”. Any person who guarantees the obligations of Borrower (each a “Guarantor”) is required to sign this Agreement. The Parties have the addresses shown on the schedule (“Schedule”) which is attached to this Agreement. These are the addresses of the Parties for all purposes (including the addresses for written notices relating to this Agreement) and may be changed by one party giving notice to the other party in writing of the new address.

1. PURPOSE. The purpose of this Agreement, including the Schedule, is to set forth the terms and conditions of Advances (as defined in Section 2A) made from time to time by Crestmark to Borrower (collectively, the “Loan”) and the obligations of Borrower. The Schedule is an integral part of this Agreement. Any and all promissory notes now or hereafter signed by Borrower pursuant to this Agreement, including the note for a line of credit and any term loans (individually and collectively referred to as the “Note”), any guaranty(s), and any other documents now or hereafter signed by any of the Parties in connection with this Agreement, the Loan or any document issued by Crestmark or the bank holding the lockbox (“Lockbox Bank”), including subordination agreements or intercreditor agreements, are also all part of the agreement between the Parties and, together with this Agreement, are referred to collectively as the “Loan Documents”.

2. LOAN; LOAN ADVANCES.

A. Any disbursement of money or advance of credit by Crestmark, including but not limited to amounts advanced for the payment of interest, fees, expenses and amounts necessary to protect, maintain and preserve Crestmark’s Collateral under the Loan Documents (“Protective Disbursements”), is referred to collectively as an “Advance”. Whether Crestmark makes an Advance is in Crestmark’s sole discretion. If an Advance is made, it will be made in accordance with the advance formula set forth in the Schedule (“Advance Formula”); but not at any time to exceed the maximum amount set forth on the Schedule (“Maximum Amount”), provided that Crestmark may choose to make Protective Disbursements in excess of the Maximum Amount or Advance Formula in its sole discretion. Each time Crestmark makes an Advance, including a Protective Disbursement, the Advance will be debited against an account in Borrower’s name on Crestmark’s books (“Loan Account”), and each payment will be credited against the Loan Account in the manner described in this Agreement.

B. The total amount Borrower owes to Crestmark will be the aggregate of the Advances made by Crestmark, the expenses and fees set forth in the Schedule and any and all costs incurred by Crestmark (including reasonable attorney’s fees), and interest at the rate set forth in the Note on all Advances (together with all other obligations of Borrower under the Loan Documents, the “Obligations” and/or “Indebtedness”).

C. Borrower must repay all Advances with respect to the Loan with interest, which is due monthly as specified in the Note, along with all other fees and expenses of Crestmark set forth herein or in the Schedule. Crestmark may in its sole discretion satisfy any Obligations due Crestmark by (i) directly applying any funds in the Lockbox Account, as defined in paragraph 5 below, to the Obligations, (ii) directly applying funds from any reserve to the Obligations, (iii) collecting the Obligations directly from Borrower, (iv) exercising its rights as a secured creditor upon any Collateral, or (e) by any other means lawfully available. Borrower understands that all the Obligations are repayable at any time in full or in part upon demand by Crestmark. Crestmark may make demand for partial payments and such demand will not preclude Crestmark from demanding payment in full at any time.

D. Borrower must comply with its representations, promises, covenants and reporting requirements set forth in this Agreement, in the Schedule and in the other Loan Documents. Borrower’s failure to do any of the foregoing and/or Guarantor’s failure to comply with the terms of its Guaranty are both a default under this Agreement (“Default”). The demand nature of the Obligations is not modified by reference to a Default in this Agreement or the other Loan Documents and any reference to a Default is for the purpose of permitting Crestmark to exercise it remedies for Default, including charging interest at the Extra Rate provided in the Note.

E. The aggregate amount of all Advances, plus the expenses and fees set forth in the Schedule, any and all costs incurred by Crestmark (including reasonable attorney’s fees), and interest at the rate set forth in the Note on all amounts advanced (the “Loan Amount”), may not, at any time, exceed the “Maximum Amount” or the Advance Formula, and Borrower understands that if at any time it should owe more to Crestmark than the lesser of the Maximum Amount or the Advance Formula it must repay that excess amount immediately, whether or not demand to repay the whole of the Obligations has been made. Protective Disbursements must be immediately repaid whether or not the lesser of the Maximum Amount or the Advance Formula has been exceeded.

3. RESERVES. If Crestmark believes in its sole discretion that the prospect for repayment of the Obligations is impaired or that its Collateral margin is insufficient, Crestmark may establish cash reserves and credit balances to protect its interests and the repayment of the Obligations. The reserve may be established by reducing the Advance Formula to achieve the target reserve level, withholding monies due Borrower from any payments Crestmark receives, from a cash payment from Borrower or any other method Crestmark chooses. Any money in a reserve account, whether or not it is a cash reserve, need not be segregated from Crestmark’s operating funds, and will not earn interest for Borrower, and Crestmark may apply the funds in the reserve account to reduce the Obligations at any time Crestmark elects.

4. FEES AND EXPENSES. In connection with the Loan there are several types of fees that may be charged and Borrower may be required to maintain a minimum Loan balance. Such fees and requirements are set forth in the Schedule. In addition, all expenses of every kind incurred by Crestmark in connection with the Loan, any Advance, collection of the Obligations, inspection, and examination are to be paid by Borrower.

5. LOCKBOX. Borrower must immediately notify all persons who are obligated on accounts (“Account Debtors”) and any other person or party that is liable to Borrower (collectively a “Debtor”) to remit all payments due Borrower to the lockbox address or pursuant to the wire transfer or ACH instructions set forth in the Schedule (the “Lockbox Account”). The remit to address on all documents related to the accounts, including invoices, purchase orders, or contracts (“Documents”) must be the Lockbox Account. At Crestmark’s request, all Documents must be marked by Borrower to show assignment to Crestmark, and Borrower must notify each Account Debtor by mail that the Account has been assigned to Crestmark and that all payments on the Account, whether made by mail or electronically or otherwise must be made payable to Borrower or Crestmark, at Crestmark’s sole discretion, to the Lockbox Account or other address provided by Crestmark in writing. The language used in such notices shall be approved by Crestmark in writing. Crestmark may at any time and from time to time, and at its sole discretion, notify any Debtor or third party payee to make payments payable directly to Crestmark or to notify Debtor of the assignment to Crestmark. All expenses for notification of each Account Debtor will be paid by Borrower.

If notwithstanding the notice to Debtors, Borrower receives any funds from a Debtor, including any cash, checks, drafts or wire transfers from the collection, enforcement, sale or other disposition of the Collateral (defined below), whether derived in the ordinary course of business or not, or if Borrower receives any proceeds of insurance, tax refunds or any and all other funds of any kind, Borrower shall hold such funds in trust for Crestmark, shall not mix such funds received with any other funds, and shall immediately deposit such funds in the Lockbox Account in the form received. That means if the funds are received by mail, the Debtor checks will be sent to the Lockbox Account uncashed, and if the funds are received electronically, the funds will be transferred immediately to the Lockbox Account electronically. Crestmark will have sole possession and control over the Lockbox Account. The Lockbox Bank will process all deposits and Borrower has no right to the Lockbox Account, it belongs to Crestmark. Crestmark is the owner of all deposits in the Lockbox Account, and has no duty as to collection or protection of funds as long as it is not grossly negligent or commits actual fraud. All expenses plus any applicable administration and servicing fees of the Lockbox Account will be paid by Borrower.

6. LOAN ACCOUNT. All of the Obligations which are owed by Borrower will be shown in the Loan Account and Borrower will receive a monthly statement either by mail, electronically or via access to the Crestmark online system at Crestmark’s sole discretion. The statement is binding on Borrower unless Borrower provides a written objection to Crestmark that is actually received by Crestmark within fifteen (15) business days of the time the statement is provided or made available to Borrower. Absent (a) timely objection on the part of Borrower under this Section or (b) manifest error, the calculations and amounts of outstanding Obligations set forth in the monthly statement shall be presumptively correct.

7. PAYMENTS. Should a check or other credit instrument not be collected after Borrower has been given credit for such payment, then the credit will be reversed and a fee charged at Crestmark’s then standard rate. Crestmark, at its sole discretion, may establish reserves as set forth above or not apply a payment that it reasonably believes may be returned unpaid for any reason or disgorged due to a preference claim or garnishment, and in such event the Maintenance Fee (as defined in the Schedule) will still be payable. In the event that any payment received by Crestmark is sought to be recovered by or on behalf of the payer (including a trustee in bankruptcy or assignee for the benefit of creditors), then Borrower agrees to immediately reimburse Crestmark on demand for any amount so recovered and all of Crestmark’s expenses in connection with any such proceeding, including reasonable attorneys fees. This provision shall survive termination of this Agreement. Any payments received by Crestmark shall be applied to the Obligations in whatever order Crestmark determines in its reasonable discretion.

8. SECURITY INTEREST.

A. Borrower grants to Crestmark a security interest in all of its assets, now existing or hereafter arising, wherever located including all Accounts, Goods, Inventory, Equipment, Chattel Paper, Instruments, Investment Property, specifically identified Commercial Tort Claims, Documents, Deposit Accounts, Letter of Credit Rights, General Intangibles, Contract Rights, customer lists, furniture and fixtures, books and records and supporting obligations for any of the foregoing, and all Proceeds of the foregoing (the “Collateral”), to secure repayment of the Obligations (“Security Interest”). The Collateral also includes all monies on deposit with Crestmark, or on deposit in the Lockbox Account. All capitalized terms used in this Section 8A, which are not otherwise defined shall have the meanings assigned to them in the Uniform Commercial Code as adopted in the State of Michigan (the “UCC”). Without limiting the forgoing, “Accounts” will also mean and include any and all other forms of obligations now owed or hereafter arising or acquired by the Borrower evidencing any obligation for payment for goods of any kind, nature, or description sold or leased or services rendered, and all proceeds of any of the forgoing.

B. Crestmark shall have all of the rights of a secured party under the UCC with respect to the Collateral. Borrower grants Crestmark the authority to file all appropriate documentation for Crestmark to perfect its security interest in the Collateral, including a UCC- 1 financing statement listing the Collateral as “All assets of the Debtor, now existing and hereafter arising, wherever located,” or similar terms, as well as UCC-3 amendments as may be required from time to time. All expenses of Crestmark relating to searching, filing or protecting the Security Interest are part of the Obligations.

C. The Security Interest gives Crestmark rights with respect to the Collateral and the Security Interest and this Agreement imposes duties upon Borrower which relate to the Collateral. Some of such rights and duties are: (i) the right of Crestmark at any time to notify any persons who may hold any part of the Collateral, such as Account Debtors and other debtors, of Crestmark’s Security Interest. Borrower understands that Crestmark may verify Accounts with the Account Debtors; (ii) Borrower must cooperate with Crestmark in obtaining control of any Collateral in the possession of third persons, particularly Collateral consisting of deposit accounts, investment property, letter of credit rights or other Collateral which is evidenced by electronic entries; (iii) except for the right of Borrower to sell its inventory in the ordinary course of business, Borrower shall not sell or transfer any of the Collateral or grant any other security interest in the Collateral, except as Crestmark may specifically agree to in writing. Borrower remains liable to perform all of its obligations with respect to the Collateral such as the recognition of any warranties in inventory sold and Crestmark is under no responsibility to perform any of the obligations of Borrower; and (iv) Borrower must notify Crestmark immediately if it knows that any Account Debtor disputes an Account whether or not such disputes are deemed valid by Borrower.

9. POWER OF ATTORNEY. Borrower irrevocably appoints Crestmark, or any person(s) designated by Crestmark, as its attorney-in-fact, which appointment is coupled with an interest and shall remain in full force and effect until all Obligations of Borrower to Crestmark have been fully satisfied and discharged, with full power, at Borrower’s sole expense, to exercise at any time in Crestmark’s reasonable discretion all or any of the following powers:

A. Receive, take, endorse, assign, deliver, accept and deposit, in the name of Crestmark or Borrower, any and all cash, checks, commercial paper, drafts, remittances and other instruments and documents relating to the Collateral or the proceeds thereof.

B. Change Borrower’s address on all invoices and statements of Account mailed or to be mailed to Borrower’s customers and to substitute thereon the address designated by Crestmark, to place legends on all invoices and statements of Account mailed or to be mailed to Borrower’s customers, and to receive and open all mail addressed to Borrower, or to Borrower’s trade name at Crestmark’s address, or any other designated address.

C. Upon and after the occurrence of a Default, to change the address for delivery of Borrower’s mail to Crestmark’s or an address designated by Crestmark. Borrower specifically authorizes Crestmark to sign any forms on behalf of Borrower to affect this change with the United States Postal Service or any third party and requests such change to be accepted.

D. Upon and after the occurrence of a Default, to take or bring, in the name of Crestmark or Borrower, all steps, actions, suits or proceedings deemed by Crestmark necessary or desirable to effect collection of or other realization upon any Collateral.

E. Execute on behalf of Borrower any UCC-l and/or UCC-3 Financing Statement(s) and/or any notices or other documents necessary or desirable to carry out the purpose and intent of this Agreement, and to do any and all things reasonably necessary and proper to carry out the purpose and intent of this Agreement.

F. To transfer any lockboxes belonging to Borrower to Crestmark at Crestmark’s sole discretion.

G. To initiate ACH transfers from Borrower’s depository accounts.

H. To endorse and take any action with respect to bills of lading covering any inventory.

I. Upon and after a Default, or at any time in the event that Borrower fails to do so within a reasonable time, execute, file and serve, in its own name or in the name of Borrower, mechanics lien or similar notices, or claims under any payment or performance bond for the benefit of Borrower.

J. Upon and after a Default, or at any time in the event that Borrower fails to do so within a reasonable time, pay any sums necessary to discharge any lien or encumbrance on the Collateral, which sums shall be included as Obligations hereunder, and which sums shall accrue interest at the Extra Rate until paid in full.

10. REPRESENTATIONS. Borrower makes the following representations and warranties to Crestmark and such representations and warranties must be true at all times until the Obligations are paid in full. If Borrower learns that a representation and warranty once made is no longer true, it has the duty to immediately notify Crestmark in writing:

A. Borrower is in good standing under the laws of the state of its organization and is authorized to conduct business in any state that in conducts business. Borrower has the power and authority to enter into this Agreement, and the persons signing this Agreement and all persons who sign any documents with Crestmark have the appropriate authority. Borrower’s organization identification number, state of organization, and addresses where it conducts business is as shown on the Schedule.

B. Borrower’s entry into the Loan Documents do not violate any agreement which Borrower has or which binds Borrower.

C. The Loan Documents are fully enforceable against Borrower and the Collateral.

D. There are no litigation or criminal charges pending or threatened against Borrower or Guarantor and neither Borrower nor Guarantor are in default of any order or judgment of any court or any governmental agency of any kind. There are no unsatisfied liens or judgments pending against Borrower in any jurisdiction except as shown on the Schedule.

E. The financial information furnished by Borrower to Crestmark has been prepared in accordance with generally accepted accounting principles, all financial statements are true and correct, and any projections of the business operations of Borrower that have been given or will be given to Crestmark in the future will be based upon Borrower’s reasonable assumptions and estimates.

F. Borrower is the owner of all of the Collateral and there are no other liens or claims against the Collateral, except the Security Interest of Crestmark or as shown on the Schedule.

G. All of the Collateral is personal property and none of the Collateral will be permanently affixed to real estate.

H. Borrower has filed and will file all federal, state, local and foreign tax returns that it is required to file and has paid and will pay all taxes and all other governmental charges as they become due.

I. Borrower is able to pay its debts as they become due and has sufficient capital to carry on its business. Borrower’s obligations under this Agreement and the Loan Documents, including the obligation to repay the Loan and the grant of the Security Interest, do not render Borrower insolvent.

J. Borrower only uses the fictitious names, d/b/a’s, tradenames and tradestyles set forth on the Schedule (collectively the “Tradenames”), and Borrower certifies that all sales and any and all business done in the name of the Tradenames are the sales and business of Borrower. Any and all checks, remittances or other payments received in the name of any of the Tradenames are Borrower’s sole and exclusive property, and are subject to Crestmark’s security interest hereunder. Any and all authority given to Crestmark by Borrower in this Agreement or elsewhere to endorse Borrower’s name on any checks, negotiable instruments or other remittances extends with equal and full force and effect to any checks, negotiable instruments, and other remittances received in the name of any Tradename.

K. All Accounts assigned to Crestmark by Borrower are and will at all times be bonafide accounts arising from the sale of inventory or providing services, and are not subject to discounts, deductions, allowances, contra items, offset or counterclaim and are free and clear of all encumbrances of any kind whatsoever, except as disclosed to Crestmark in writing and approved by Crestmark in writing.

L. Borrower’s assignment of any Accounts to Crestmark pursuant to this Agreement will not at any time violate any federal, state and/or local law, rule or regulation, court or other governmental order or decree or terms of any contract relating to such Accounts.

M. Borrower possesses all necessary trademarks, trade names, copyrights, patents, patent rights and licenses to conduct its business as now operated, without any known conflict with any trademarks, trade names, copyrights, patents and license rights of any other person or entity.

N. Borrower’s legal name as of the date hereof as it appears in its official filing with its state of organization is as set forth in the opening paragraph of this Agreement. Borrower has not organized another entity or Tradename using Borrower’s name or Tradename as set forth herein in any other jurisdiction.

O. As to all of Borrower’s Inventory and Equipment:

i. The Inventory and Equipment are currently located only at the locations identified on the Schedule, or such other locations as consented to by Crestmark in writing;

ii. All Inventory is now and at all times hereafter shall be of good and merchantable quality, free from defects, except as disclosed to Crestmark in writing;

iii. The Inventory and Equipment are and shall remain free from all liens, claims, encumbrances, and security interests (except as held by Crestmark, and except as identified on the Schedule).

iv. The Inventory is not now stored with a bailee, warehouseman or similar party unless such party has entered into a waiver letter in form satisfactory to Crestmark.

11. BORROWER’S PROMISES. Borrower makes the following promises to Crestmark and these promises are effective until the Obligations are fully paid:

A. To pay all Obligations when due and perform all terms, conditions and obligations of the Loan Documents.

B. To permit Crestmark, or its representatives, access to the Collateral on Borrower’s premises and to Borrower’s computer systems, books of account and financial records. Borrower will pay the cost of Field Examinations as specified in the Schedule.

C. To notify Crestmark promptly of any litigation, administrative or tax proceeding or other action threatened or instituted against Borrower or Guarantor or its property, or of any other material matter which may adversely affect Borrower’s financial condition. The amount of claims as to which Borrower must notify Crestmark is specified in the Schedule as the “Borrower Claims Threshold”.

D. To pay when due all taxes, assessments and governmental charges, provided that Borrower has the right to contest the same as long as it has a cash reserve with Crestmark in an amount as determined by Crestmark in its sole discretion.

E. To comply with the Financial Covenants described in the Schedule (if applicable).

F. To maintain insurance on its business activities in such amount and in such form as Crestmark may from time to time require, and with respect to such insurance if so designated, Crestmark shall be named as “Lender Loss Payee” and/or “Additional Insured”, as applicable, under the policy and receive evidence of the insurance. All insurance which protects Crestmark shall have at least a 30-day notice to Crestmark prior to any cancellation. With respect to the insurance, Borrower appoints Crestmark as its attorney-in-fact to negotiate any and all claims under all insurance policies and Crestmark also has the power to negotiate any payments on the insurance policies.

G. To comply with all laws, ordinances and regulations or other requirements of any governmental authority or agency applicable to Borrower’s business.

H. To maintain and preserve all Collateral in good repair, working order and condition, and with respect to accounts, pursue collections thereof.

I. To provide Crestmark with evidence of ownership of any Collateral upon the request of Crestmark.

J. To maintain a Loan Amount balance which shall not exceed the sum of Eligible Collateral times the corresponding Advance Rate.

12. NEGATIVE COVENANTS. Borrower agrees until the Obligations are paid in full, it will not:

A. Change its state of organization or its name, or move its executive office or at any time adopt any assumed name without giving Crestmark at least 30 days prior written notice.

B. Declare or pay any dividend or make any other distribution with regard to its equity or purchase or retire any of its equity without Crestmark’s prior written consent, provided if it is taxed as an S Corporation or other “pass through” entity, Borrower may prior to a Default distribute profits to its equity holders in an amount necessary to enable such holders to pay personal, state and federal taxes directly attributable to the profits earned by Borrower for such year.

C. Obtain any loan or guaranty or assume any obligation or liability, whether as borrower, guarantor, surety, indemnitor or otherwise (a “Borrower Obligation”) (i) that would result in or create a Default, or (ii) that together with all other existing Borrower Obligations would exceed the “Borrower Obligation Threshold” set forth in the Schedule, without Crestmark’s prior written consent.

D. Enter into any transaction with its equity holders or any affiliates of Borrower except on terms at least as favorable as would be usual and customary in similar transactions if the person with whom the transaction is entered into was not related to Borrower.

E. Release, redeem, purchase, or acquire any of its equity interests without the prior written consent of Crestmark.

F. Default in the payment of any debt to any other person.

G. Suffer or permit any judgment, decree or order not fully covered by insurance to be entered against Borrower or a Guarantor in an aggregate amount in excess of the “Claims Threshold”, or permit or suffer any warrant or attachment to be filed against Borrower, any Guarantor, or against any property or asset of Borrower or Guarantor.

H. Transfer the ownership of any equity interest in Borrower without the prior written consent of Crestmark which shall not be unreasonably withheld.

I. Sell any of the Collateral outside the normal course of its business without the prior written consent of Crestmark.

J. Purchase the stock or assets of any other entity without the prior written consent of Crestmark.

13. FINANCIAL REPORTS. Borrower promises that until the Obligations are fully paid and this Agreement is terminated, it will keep its books and records in a manner satisfactory to Crestmark and Crestmark will have the right at any time to verify any of the Collateral, documentation or books and records of Borrower in whatever manner and as often as Crestmark deems necessary. Borrower will permit Crestmark, or its representatives, access to the Collateral and Borrower’s premises and to Borrower’s computer systems, books of account and financial records. Borrower will furnish to Crestmark the financial reports identified on the Schedule, certified to by the president or chief financial officer of Borrower and Borrower’s certified public accountant, if applicable. All financial reports will be prepared in accordance with generally acceptable accounting principles and will be true and accurate.

14. CRESTMARK’S REMEDIES. Crestmark has all the remedies available at law or in equity (including those under the UCC) in the event of a Default or if Borrower fails to pay the Obligations on demand, including but not limited to the following: to charge the Extra Rate; to notify Account Debtors to make the payments directly to Crestmark; to settle or compromise any disputed Account, sue on any Account and make any agreement to deal with the accounts as if it were the owner; to offset any of Borrower’s or Guarantor’s funds under the control of Crestmark against the Obligations; and to require Borrower to gather up the Collateral and make it available to Crestmark for Crestmark to conduct public or private UCC foreclosure sales. Borrower grants to Crestmark a license or other right to use, without charge, Borrower’s labels, patents, copyrights, trademarks, rights of use of any name, trade secrets, tradenames and advertising materials, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale and selling any Collateral, and Borrower’s rights under all licenses and franchise agreements shall inure to Crestmark’s benefit. If Crestmark should proceed against the Collateral and sell any of the Collateral on credit, Borrower will be credited on the Obligations only with the amount actually received by Crestmark and Borrower waives any and all provisions as to notice or a particular method of sale of any of the Collateral. Borrower will pay all expenses in connection with the assembly or sale of the Collateral. Crestmark does not have to incur its own expenses in realizing upon the Collateral, but all the expenses are for the account of Borrower. Borrower recognizes that at no time is Crestmark its agent in dealing with the Collateral, but Crestmark acts only in its own interest.

15. CUMULATIVE RIGHTS. Crestmark’s rights and remedies under this Agreement and all other agreements shall be cumulative. Crestmark shall have all other rights and remedies not inconsistent herewith as provided under the UCC, by law, or in equity. No exercise by Crestmark of one right or remedy shall be deemed an election, and no waiver by Crestmark of any Default on Borrower’s part shall be deemed a continuing waiver. No delay by Crestmark shall constitute a waiver, election or acquiescence by it.

16. LENDER ACTIONS. To the extent applicable law may impose duties on Crestmark to exercise remedies in a commercially reasonable manner, Borrower agrees that it is not commercially unreasonable for Crestmark: to fail to exercise remedies against any Collateral or any particular Account Debtor; to proceed against Account Debtors either directly or through collection agencies; to advertise disposition of Collateral through publications or media of general circulation; to hire professional auctioneers to dispose of Collateral; to dispose of Collateral in wholesale or retail markets; to disclaim warranties with respect to Collateral; or to obtain services of attorneys or other professionals. The foregoing is not an exhaustive list and nothing contained in the foregoing shall be construed to grant any rights to Borrower or to impose any duties on Crestmark that would not have been granted or imposed by this Agreement or by applicable law in the absence of this Section 16. Borrower agrees that under no circumstances is Crestmark the agent or representative of Borrower.

17. APPLICATION OF PROCEEDS. Once collection efforts are commenced by Crestmark, any proceeds of sale or disposition of Collateral may be applied by Crestmark first to expenses authorized by this Agreement, including Crestmark’s reasonable attorneys’ fees, which Borrower must pay, and the balance to payment of the Obligations in such manner as Crestmark may elect. Borrower and Guarantor remain liable for any deficiency.

18. NOTICES. Any notice is effective by either party if sent in writing or facsimile with confirmation of receipt or by certified mail or personal delivery or expedited mail services to the addresses shown on the Schedule.

19. MISCELLANEOUS PROVISIONS.

A. This Agreement is binding upon and is for the benefit of Borrower and Crestmark, and their respective successors and assigns. However, under no circumstances may Borrower assign this Agreement or its rights and duties hereunder. Crestmark may assign this Agreement and its rights under the Loan Documents and Borrower will make payments to any such assignee if so directed.

B. Crestmark has the right at any time to assign, transfer, negotiate or sell participations in this Agreement or the Obligations or the rights of Crestmark hereunder. In connection with any assignment, Borrower consents to disclosure of any and all books, records, files, Loan Documents and all other documents in the possession or under the control of Crestmark.

C. No delay or failure of Crestmark in exercising any right or remedy will affect such right or remedy. No delay or failure of Crestmark to demand strict adherence to the terms of this Agreement will be deemed to waive Crestmark’s rights to demand such adherence at any time in the future.

D. The term “including” means “including, without limitation”, and the term “includes” means “includes, without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The definitions of terms in this Agreement shall apply equally to the singular and plural forms of the terms defined.

E. This Agreement and the other Loan Documents will be interpreted and determined under the laws of the State of Michigan without any regard to any conflict of laws provisions.

F. Borrower, at Crestmark’s request, will make, execute and acknowledge any and all further instruments or agreements necessary to carry out the intent of this Agreement and the other Loan Documents.

G. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if all signatures were upon the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by facsimile or electronic mail shall be effective as delivery of a manually executed counterpart of this Agreement, and any party delivering such an executed counterpart of the signature page to this Agreement by facsimile or electronic mail to any other party shall thereafter also promptly deliver a manually executed counterpart of this Agreement to such other party, provided that the failure to deliver such manually executed counterpart shall not affect the validity, enforceability, or binding effect of this Agreement.

H. Neither Crestmark nor its affiliates directors, officers, agents, attorneys or employees are liable to Borrower or Guarantor or affiliates for any action taken or omitted by it or any of them under the Loan Documents except for such liability as may be imposed by law for gross negligence or actual fraud, and no claim shall be made by Borrower or Guarantor or any of Borrower’s affiliates, directors, officers, agents, employees for any special or consequential damages or punitive damages arising out of, or related to the Loan Documents or the transactions between the Parties.

I. This Agreement and the other Loan Documents represent the complete Agreement between the parties with respect to the subject matter of this Agreement, and there are no promises, undertakings, representations or warranties by Crestmark relative to the subject matter of this Agreement not expressly set forth in this Agreement or the other Loan Documents. This Agreement and the other Loan Documents may be amended only in writing.

J. If any provision of this Agreement is in conflict with any law or statute or is otherwise unenforceable, then the provision will be deemed null and void only to the extent of such provision and the provision will be deemed severable and the remainder of this Agreement shall be in full force and effect.

K. Any payment made to Crestmark by either Borrower or Guarantor which is subsequently invalidated, declared fraudulent or preferential or otherwise set aside under any bankruptcy, state, federal or equitable law, then to the extent of such invalidity such payment will be deemed not to have been made and the obligation will continue in full force and effect. This provision shall survive termination of this Agreement.

L. No Lien Termination Without Release - In recognition of among other things, Borrower’s indemnification obligations and Crestmark’s right to have its attorneys’ fees and other expenses incurred in connection with this Agreement secured by the Collateral, notwithstanding payment in full of all Obligations by Borrower, Crestmark shall not be required to record any terminations or satisfactions of any of its liens on the Collateral unless and until Borrower and all guarantors of its Obligations have executed and delivered to Crestmark a general release in a form acceptable to Crestmark in its sole discretion. Borrower understands that this provision constitutes a waiver of its rights Borrower may have under §9- 513 of the UCC.

M. USA Patriot Act Notification – The following notification is provided to Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan or other extension of credit. Crestmark may ask for the name, address, date of birth, and other information that will allow us to identify all Borrowers, principals and owners. Crestmark may also ask to see your driver’s license or other identifying documents.

20. RIGHT OF FIRST REFUSAL. In consideration of Crestmark entering into this Agreement and making advances to Borrower, Borrower hereby agrees that it will, within five (5) days of receipt, provide a copy of any proposal letter, term sheet, letter of intent or commitment letter from any lender offering to Borrower a refinance of the Obligations. Crestmark shall have the right of first refusal to match the offer(s) of such other lender(s), and if Crestmark advises Borrower that it intends to meet the financial and operational terms set forth in such offers, Borrower will be obligated to enter into an amendment to this Agreement extending the terms of this Agreement for at least the term proposed in such other offer(s), and amending the financial and operational terms as set forth in this Agreement. Notwithstanding the foregoing, Borrower recognizes that this Agreement can only be terminated as provided herein. Failure of Crestmark to meet the terms set forth in such letter of interest or commitment letter does not relieve the Borrower from its obligations hereunder.

21. INDEMNIFICATION. Borrower hereby agrees to indemnify, defend and hold Crestmark and its executive committees, parent affiliates, subsidiaries, agents, directors, officers, participants, employees, agents and their successors and assigns (collectively “Indemnified Parties”) harmless against any and all liabilities of any kind, nature or description and damages whether they are direct, indirect or consequential, including attorney’s fees and other professionals and experts incurred or suffered directly or indirectly by Indemnified Parties or asserted against Indemnified Parties by anyone whosoever, including Borrower or Guarantor, which arise out of the Loan Documents or the relationship and transaction between the Parties. This provision shall survive the termination of this Agreement.

22. JOINT AND SEVERAL OBLIGATIONS. If more than one person or entity is named as Borrower in this Agreement, all Obligations, representations, warranties, covenants and indemnities of Borrower set forth herein and in the other Loan Documents shall be the joint and several obligations of such persons and/or entities. Each Borrower hereby appoints each other Borrower as its true and lawful attorney-in-fact, with full right and power, for purposes of exercising all rights of such person under this Agreement and applicable law with regard to the transactions contemplated under this Agreement. The foregoing is a material inducement to the agreement of Crestmark to enter into this Agreement and to consummate the transactions contemplated under this Agreement. Each Borrower represents that all Borrowers are operated as part of one consolidated business entity and are directly dependent upon each other for, and in connection with, their respective business activities and financial resources. Each Borrower will receive a direct economic and financial benefit from the obligations incurred under this Agreement and the incurrence of such obligations is in the best interest of each Borrower.

23. JURISDICTION. BORROWER AND GUARANTOR AGREE THAT ANY ACTION TO ENFORCE BORROWER’S OR GUARANTOR’S OBLIGATIONS TO CRESTMARK SHALL BE PROSECUTED EITHER IN THE CIRCUIT COURT OF OAKLAND COUNTY MICHIGAN OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN (UNLESS CRESTMARK, IN ITS SOLE DISCRETION, ELECTS SOME OTHER JURISDICTION), AND BORROWER AND GUARANTOR SUBMIT TO THE JURISDICTION OF ANY SUCH COURT SELECTED BY CRESTMARK. BORROWER AND GUARANTOR WAIVE ANY AND ALL RIGHTS TO CONTEST THE JURISDICTION AND VENUE OF ANY ACTION BROUGHT IN THIS MATTER AND BORROWER AND GUARANTOR MAY BRING ANY ACTION AGAINST CRESTMARK ONLY IN THE CIRCUIT COURT FOR THE COUNTY OF OAKLAND OR THE FEDERAL COURT OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN.

24. WAIVER. ALL PARTIES, INCLUDING BORROWER AND GUARANTOR EACH KNOWINGLY AND VOLUNTARILY WAIVE ANY CONSTITUTIONAL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY CLAIM, DISPUTE OR CONFLICT BETWEEN THE PARTIES OR UNDER THE LOAN DOCUMENTS AND AGREE THAT ANY LITIGATION SHALL BE HEARD BY A COURT OF COMPETENT JURISDICTION SITTING WITHOUT A JURY. BORROWER AND GUARANTOR ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO REVIEW THE EFFECT OF THIS PROVISION WITH COUNSEL OF THEIR CHOICE.

25. RELEASE. BORROWER AND GUARANTOR RELEASE AND FOREVER DISCHARGE CRESTMARK, ITS AFFILIATES, OFFICERS, AGENTS, EMPLOYEES AND DIRECTORS FROM ANY AND ALL CLAIMS OF ANY KIND WHATSOEVER FROM THE BEGINNING OF TIME TO DATE OF THIS AGREEMENT.

The parties have executed this Agreement as of the date and year first written above.

Exhibit 99.3

SCHEDULE TO LOAN AND SECURITY AGREEMENT

This Schedule is part of the Loan and Security Agreement dated __________________, 2020 between:

CRESTMARK, A DIVISION OF METABANK, NATIONAL

ASSOCIATION (“CRESTMARK”)

5480 CORPORATE DRIVE

SUITE 350

TROY, MICHIGAN 48098

AND

THE SINGING MACHINE COMPANY, INC (“BORROWER”)

6301 N.W. 5TH WAY, SUITE 2900

FT. LAUDERDALE, FL 33309

The following paragraph numbers correspond to paragraph numbers contained in the Agreement.

2. LOAN; LOAN ADVANCES.

Advance Formula: Advances of the Loan may be measured against a percentage of Eligible Accounts. The Loan Amount may not exceed an amount which is the lesser of:

Crestmark in its sole discretion may raise or lower any percentage advance rate with respect to the Advance Formula.

Crestmark may, among other reserves, include a “Dilution Reserve” which is the Dilution Percentage less the Base Dilution. “Dilution Percentage” means: (i) all sales which have not been collected and have been removed from Borrower’s accounts receivable aging plus all sales that may not be collectable but not yet removed from the accounts receivable aging (as determined by Crestmark in its sole discretion) divided by (ii) total sales and (iii) stated as a percentage, as determined by Crestmark. “Base Dilution” means fifteen percent (15%). Crestmark shall reserve against the advance rate for Eligible Accounts by one percent (1.00%) for each percentage point or portion thereof that the Dilution Percentage exceeds Base Dilution.

Eligible Accounts means and includes those Accounts which:

Eligible Accounts shall not include the following:

Crestmark will determine in its sole discretion whether any Collateral is eligible for an Advance, but no Collateral will be considered eligible unless the requirements set forth above are met. Regardless of whether any Collateral is eligible, it is still part of the Collateral securing the Obligations.

Prior to any request for an Advance, Borrower must furnish to Crestmark invoices, credit memos, purchase orders, evidence of delivery, proof of shipment, timesheets or any other documents Crestmark requests, in its sole discretion, with respect to the Accounts that Borrower is tendering to Crestmark to support the Advance (“Account Documents”). Crestmark will endeavor to provide the requested Advance by the end of the day on the date it receives the request as long as the complete package of information for the request has been received by Crestmark by 10:30 a.m. Eastern Time on the date of the request for the Advance. All requests for funding will be subject to Crestmark’s then standard fees for electronic funds transfer, wire transfers and check services.

Each time an Advance is made, the amount of the Obligations will be increased by the amount of the Advance. Three (3) business days (“Clearance Days”) after checks, ACH or wire transfers or other credit instruments are applied to a specific invoice, Crestmark will credit the Loan Account with the net amount actually received, whereupon interest and the Maintenance Fee will no longer be charged. On the date a collection is applied to a specific invoice, Borrower will receive immediate credit on such funds in determining availability for Advances.

When Crestmark receives a payment from an Account Debtor, it will attempt to apply it against the appropriate Account Debtor and invoice according to the Account Debtor’s remittance advice. If it is not clear which Account Debtor or invoice the payment is to be applied against, Crestmark may contact Borrower or the payor for assistance. Unless there is clear error, the application of payments by Crestmark is final.

4. FEES AND EXPENSES. The following fees will be paid by Borrower:

Loan Fee: Waived.

Late Reporting Fee: Borrower will pay Crestmark a Late Reporting Fee in an amount equal to One Hundred Fifty ($ 150.00) Dollars per document per business day for any day in which any report, financial statement or schedule required by the Agreement is delivered late.

Lockbox Fee: Each month Borrower will pay all costs in connection with the Lockbox and the Lockbox Account, as determined by Crestmark from time to time.

Documentation Fee: In consideration of the extension of the Loan and the execution of this Agreement, Borrower will pay Crestmark a documentation fee of $750.00, which fee is fully earned as of the date hereof and is non-refundable.

Maintenance Fee: Waived.

Exit Fee. Borrower may elect to prepay the Obligations and/or terminate this Agreement during the first 2 years following the date of this Agreement, but only upon the payment of all Obligations including the following exit fee (“Exit Fee”), as liquidated damages and not as a penalty: prior to the two year anniversary date of the Agreement, the exit fee will be two (2.00%) percent of the Maximum Amount, together with all unpaid Loan Fees and Maintenance Fees due under the Agreement. No partial prepayment will affect the Borrower’s obligation to continue the regular payments due under the Note. In the event that a Default has occurred and is continuing at the time Crestmark demands payment of the Obligations, the Exit Fee will be due and payable by Borrower.

The Exit Fee shall automatically renew on each anniversary date beginning on the 2^nd anniversary date of this Agreement for an additional twelve (12) month period unless (i) Borrower notifies Crestmark in writing within sixty (60) days before such anniversary date of Borrower’s intention to terminate the Agreement and (ii) the Obligations are paid in full by such anniversary date.

Minimum Loan Balance. Borrower shall maintain an average outstanding principal balance of the Loan for each month in the amount of Two Million Dollars ($2,000,00.00) (“Minimum Loan Balance”). If the actual average outstanding principal balance of the Loan in any month is less than the Minimum Loan Amount, Borrower must pay interest and Maintenance Fees for such month calculated on the Minimum Loan Balance.

5. LOCKBOX.

The Lockbox Account means:

Drawer #1764

PO Box 5935

Troy, MI 48007-5935

10. REPRESENTATIONS.

(A) Borrower is a Delaware corporation.

(D) List pending and threatened litigation and unsatisfied judgments:

(F) List Security Interests in the Collateral held by creditors other than Crestmark as Permitted Encumbrances:

Liens held by the Secured Parties named below, as reflected by the following financing statements filed with the Delaware Secretary of State:

NOTE: The listing of the interests noted above shall not, in any manner whatsoever, be deemed to be an acknowledgement by Crestmark as to the perfection, priority, validity or enforceability thereof.

(J) List Borrower’s Trade names: None.

11. BORROWER’S PROMISES:

C. BORROWER CLAIMS THRESHOLD: $20,000.00.

E. FINANCIAL COVENANTS: At no time shall Borrower make any loans, advances, intercompany transfers or cash flow between Borrower and any subsidiary, related entity or affiliate of Borrower or with any company that has common shareholders, officers or directors with Borrower except in the normal course of business.

All of the financial covenants in this Agreement shall be determined in accordance with GAAP, unless otherwise provided. “GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board that are applicable to the circumstances as of the date of determination and applied on a consistent basis.

F. REQUIRED INSURANCE. Without limiting Crestmark’s requirement for insurance coverage, which may change from time to time, the following is/are the minimum insurance requirements:

General and Professional Liability: “Crestmark, a division of MetaBank, National Association, ISAOA” named as Additional Insured for an amount not less than the smallest amount required under any contract with any Account Debtor.

12. C. OBLIGATION THRESHOLD: $20,000.00.

13. FINANCIAL REPORTS.

Management Prepared Financial Statements: Borrower will deliver to Crestmark monthly management prepared financial statements, balance sheets, and profit and loss statements for the month then ended, certified to by the president or chief financial officer of Borrower. Such reports will set forth the financial affairs and true condition of Borrower for such time period and will be delivered to Crestmark no later than thirty (30) days after the end of each month.

Projections: Borrower shall deliver to Crestmark, within thirty (30) days prior to each year-end, an annual financial projection including balance sheet, income statements, and statement of cash flows together with assumptions for the following year, broken down monthly.

Annual Financial Statements: Each year Borrower will deliver to Crestmark annual reviewed financial statements, cash flow statements, balance sheets, and profit and loss statements prepared by a certified public accountant acceptable to Crestmark, all without exceptions. Such reports will set forth in detail Borrower’s true condition as of the end of Borrower’s fiscal year no later than one hundred twenty (120) days after the end of Borrower’s fiscal years.

All financial statements are and will be prepared in accordance with GAAP applied on a consistent basis.

Accounts Receivable, Accounts Payable Aging and Inventory Reports: Borrower will furnish to Crestmark the following certified to by the president or chief financial officer of Borrower within the time periods set forth:

Tax Returns: Upon request, Guarantor and Borrower will each provide Crestmark with current annual tax returns prior to April 15 of each year or if an extension is filed, at the earlier of (a) filing, or (b) the extension deadline.

Field Examinations: Borrower will reimburse Crestmark for the costs to perform two (2) field examinations per year of Borrower’s books and records, assets and liabilities, to be performed by Crestmark’s inspector, whether a Crestmark officer or an independent party with all expenses, (whether for a Crestmark employee or otherwise), including all out of pocket expenses including, but not limited to, transportation, hotel, parking, and meals paid by Borrower. Upon Default, the number of field examinations to be reimbursed by Borrower may be increased in Crestmark’s sole discretion. Field examinations are performed for Crestmark’s internal use and Crestmark has no obligation to provide Borrower or Guarantor with the results of the examination or copies of any reports or work papers in whole or in part.

Tax Deposit Evidence: Upon request, submit weekly payroll summaries and evidence of tax payments together with copies of bank statements from which the tunds are impounded.

Customer Lists: Upon Crestmark’s request, Borrower will deliver to Crestmark detailed customer lists showing the customer’s name, address, phone number and any other information Crestmark reasonably requests.

Other Information: Borrower and Guarantor will also deliver to Crestmark such other financial statements, financial reports, documentation, tax returns and other information as Crestmark requests from time to time.

18. NOTICES. Addresses for Notices are as set forth at the beginning of this Schedule.

Exhibit 99.4

Exhibit 99.5

CREDIT AND SECURITY AGREEMENT

THIS CREDIT AND SECURITY AGREEMENT (this “Agreement”) is by and among THE SINGING MACHINE COMPANY, INC., a Delaware corporation (“Singing Machine”), SMC LOGISTICS, INC., a California corporation (“SMC” and, together with Singing Machine, individually and collectively, jointly and severally, the “Borrower”), and IRON HORSE CREDIT LLC, a Delaware limited liability company (“Lender”). Capitalized terms used and not otherwise defined in this Agreement shall have the meanings given to them in Schedule A annexed hereto.

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound, the parties hereby agree as follows:

ARTICLE I

CREDIT TERMS

Section 1.1 Line of Credit.

(a) Advances. Subject to the terms and conditions of this Agreement, Lender may in its discretion, from time to time at the request of Borrower, make Advances to Borrower in a total amount at any time outstanding not to exceed the Availability. The Availability will be determined by Lender upon receipt and review of all borrowing base certificates and other collateral reports required or requested by Lender hereunder.

(b) Borrowing Procedures. Each request by Borrower for an Advance initiated by Borrower and must be received by Lender no later than 1:00 p.m. (Central time) on the Business Day immediately preceding the Business Day that funding is requested. No request for an Advance will be deemed received until Lender acknowledges the request. All Advances will be repaid by Borrower even if the Person requesting the Advance on behalf of Borrower lacks authorization.

(c) Protective Advances: Advances to Pay Obligations Due. Lender may and Borrower authorizes Lender to, at any time without the request of Borrower, make (i) Advances to protect Lender’s interest in the Collateral or to perform any of Borrower’s obligations under this Agreement and (ii) Advances to pay (and apply the proceeds of such Advances to) any Obligations then due and payable.

(d) Amounts Due From Crestmark. Borrower shall, at the request of Lender, authorize and direct Crestmark to, pursuant to an agreement executed by Borrower and Crestmark to Lender in form and substance satisfactory to Lender (a “Direction Letter”, remit to Lender for application to the Obligations, any or all amounts at any time available or owed to Borrower under the Crestmark Agreement, including any purchase price or advances of the purchase price payable to Borrower thereunder in respect of Accounts factored or purchased by Lender thereunder.

(e) Payments, Collections and Clearance Charge.

(i) Borrower shall cause all payments of Accounts and other Collateral to be remitted, and Borrower shall instruct and cause all Account Debtors obligated in respect of Accounts to remit all payments, to the Lender’s Account or, with the prior written consent of Lender which may be revoked at any time, to the Borrower’s Account so long as such Borrower’s Account is subject to a Deposit Account Control Agreement under which all funds on deposit or deposited into such Borrower’s Account are remitted, on a daily basis, to the Lender’s Account or as otherwise as directed by Lender; provided, that, compliance by Borrower with the foregoing shall not be required (a) in the event Lender has received from Crestmark and Borrower an executed Direction Letter and an intercreditor agreement in form and substance satisfactory to Lender, Borrower, and (b) all payments of Accounts are remitted to Crestmark subject to the terms of such Direction Letter and intercreditor agreement. Without limiting the foregoing, Lender may, at any time, notify Account Debtors of the interest of Lender in the Accounts and to remit all payments of such Accounts to the Lender’s Account or, as applicable, to the Borrower’s Account.

(ii) If any Obligor receives payment or the proceeds of Collateral directly, Borrower shall cause such Obligor to promptly deposit such payment or proceeds into the Lender’s Account or, as applicable, the Borrower’s Account, and shall cause such Obligor to hold, all such payments and proceeds in trust for Lender without commingling with other funds or property.

(iii) All payments by Borrower will be made to Lender without setoff, counterclaim or defense. All payments of and proceeds of Collateral received by Lender, in immediately available funds, will be applied to reduce outstanding Obligations in such manner as Lender determines in its sole discretion; provided, that, in the event Lender receives a duplicate payment with respect to an Account or other payment which is not identified as applicable to an outstanding Account, Lender, at its election, may account for such payment as an open item, return such payment to the sender thereof or apply such payment to the Obligations. For purposes of calculating Availability, each payment will be applied to the Obligations as of the first Business Day following the Business Day of receipt by Lender of such payment in immediately available funds. Any payment received by Lender that is not a transfer of immediately available funds will be considered provisional until the item or items representing such payment have been finally paid under applicable law. Should any payment item not be honored when presented for payment, then Borrower will be deemed not to have made such payment, and that portion of Borrower’s outstanding Obligations corresponding to the amount of such dishonored payment item will be deemed to bear interest as if the dishonored payment item had never been received by Lender.

(iv) Collections received by Lender shall be applied as provided hereunder but the Obligations paid with such Collections will continue to accrue interest at the rate then applicable to Advances for the number of Settlement Days following the Business Day that such Collections were applied to the Obligations in accordance with the terms hereof. Such clearance charge on Collections is acknowledged by the parties to constitute an integral aspect of the pricing of the financing of Borrower. The parties acknowledge and agree that the economic benefit of these provisions will accrue exclusively to Lender.

(f) Charges to Loan Account; Lender will record in the Loan Account all Advances made by Lender and all other payment Obligations. Borrower authorizes Lender to collect all principal, interest and fees due under the Loan Documents by charging the Loan Account. Should there be insufficient funds in the Loan Account or any such other account to pay all such sums when due, the full amount of such deficiency will be immediately due and payable by Borrower. Any credit balance in the Loan Account shall, provided no Event of Default exists and subject to all applicable law, be paid to Borrower upon written request by Borrower to Lender therefor.

(g) Maintenance of Loan Account. Each monthly statements posted to the Loan Account or otherwise received by Borrower from or on behalf of Lender shall be subject to subsequent adjustment by Lender but shall, absent manifest error, be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and Lender unless Borrower delivers to Lender a written objection to such monthly statement, describing the error or errors allegedly contained therein, within 30 days after the earlier of the posting of such monthly statement to the Loan Account or such other receipt by Borrower thereof.

(h) Mandatory Payment of Advances. If at any time Availability is less than zero, Borrower shall, immediately upon demand by Lender therefor, repay the Obligations in an aggregate amount necessary to eliminate in full such deficiency.

Section 1.2 Interest and Fees.

(a) Interest. Except as provided in Section 1.2(b), the outstanding Advances will bear interest on the greater of (a) One Million Dollars ($1,000,000) or (b) the Daily Balance of such Advances at a variable per annum rate equal to the Contract Rate. Such interest will be payable monthly in arrears on the first day of each month and on the Termination Date.

(b) Default Rate. After the occurrence and during the continuance of an Event of Default, the outstanding Advances will, at the sole discretion of Lender, bear interest on the Daily Balance of such Advances at the Default Rate and such interest shall be payable on demand. Lender may assess the Default Rate commencing as of the date of the occurrence of an Event of Default or as of any date after the occurrence of an Event of Default regardless of the date of reporting or declaration of such Event of Default.

(c) Payment of Fees. Borrower will pay to Lender the fees set forth on Schedule B-2. Such fees shall be fully earned, and may be charged by Lender to the Loan Account, when due in accordance with such Schedule B-2 and shall not be subject to refund of any kind or pro-rated upon any termination of this Agreement.

(d) Computation of Interest and Fees. Interest and fees will be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed.

Section 1.3 Term and Termination.

(a) Termination by Borrower. Borrower may terminate the Line of Credit at any time by delivering to Lender written notice of termination at least thirty (30) days prior to the proposed termination date. Any such notice of termination will be irrevocable.

(b) Termination by Lender. Lender may terminate the Line of Credit and this Agreement at any time by delivering to Borrower written notice of termination at least thirty (30) days prior to the proposed termination date if no Event of Default exists or without any advance notice if an Event of Default exists.

(c) Termination Date. From and after the Termination Date, Borrower shall have no right to request further Advances or other extensions of credit under this Agreement. On the Termination Date, all of the Obligations, including any Termination Fee required hereunder, are immediately due and payable by Borrower, and Borrower will immediately repay all of the Obligations in full, in each case without notice or demand.

ARTICLE II

SECURITY INTERESTS

Section 2.1 Grant of Security Interest. As security for the Obligations, Borrower hereby grants to Lender a continuing security interest in and Lien upon all of the Collateral.

Section 2.2 Perfection. Borrower shall take, and shall cause each Obligor to take, all actions requested by Lender from time to time to cause the attachment, perfection and, subject to Permitted Liens, first priority of Lender’s security interest in and Lien upon the Collateral. Borrower irrevocably and unconditionally authorizes Lender (or Lender’s agent) to complete and file, and Borrower ratifies such filing, at any time and from time to time, without notice to Borrower, such financing statements with respect to the Collateral naming Lender as the secured party and Borrower as debtor, as Lender may require, together with all amendments and continuations with respect thereto. Any such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Lender’s discretion.

Section 2.3 Attorney-In-Fact. Borrower hereby appoints Lender its attorney-in-fact, with full power and authority in the place and instead of Borrower and in the name of Borrower, or otherwise, from time to time in Lender’s discretion to take any action and to execute any instrument consistent with the terms of this Agreement and the other Loan Documents which Lender may deem necessary or advisable to accomplish the purposes hereof (but Lender shall not be obligated to and shall have no liability to Borrower or any third party for failure to so or take action). The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term hereof. Borrower hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue hereof.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Lender, which representations and warranties will survive the execution of this Agreement and will continue in full force and effect until satisfaction of the Lien Release Conditions:

Section 3.1 Legal Status. Each Corporate Obligor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization. Each Corporate Obligor is qualified or licensed to transact business in, and is in good standing in, all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could reasonably be expected to cause a Material Adverse Change. Each Corporate Obligor possesses all permits, consents, approvals, franchises and licenses required, and rights to all trademarks, trade names, patents and fictitious names necessary to enable it, to conduct the business in which it is now engaged in compliance with applicable law.

Section 3.2 Authorization, Validity, Consents. The Loan Documents have been duly authorized, executed and delivered by each Obligor party thereto, and such Loan Documents constitute legal, valid and binding agreements and obligations of each such Obligor, enforceable against each such Obligor in accordance with the terms thereof. The execution, delivery and performance by each Obligor of the Loan Documents to which it is party do not violate any provision of law or any provision of any Corporate Obligor’s formation documents, including, without limitation, articles of incorporation or organization or any operating, partnership or trust agreement, or result in a breach of, or constitute a default under, any agreement, indenture, or other instrument to which an Obligor is a party or by which an Obligor may be bound. No consent, approval or authorization of, or registration or filing with any governmental body or authority, or any other person, firm or entity not a party hereto, is or will be required as a condition to the valid execution, delivery, performance, or enforceability of the Loan Documents, or the transactions contemplated hereby or thereby, or to the conduct of any Corporate Obligor’s business.

Section 3.3 Litigation. Except as set forth on Schedule 3.3, there are no pending, or to the best of Borrower’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any Governmental Authority which constitutes or is reasonably likely to cause a Material Adverse Change.

Section 3.4 Financial Statements. The annual financial statements of Borrower dated for such Borrower’s most recent fiscal year ended, and all interim financial statements delivered to Lender since such date and prior to the date of this Agreement (a) are complete and correct and present fairly the financial condition of Borrower, (b) disclose all liabilities of Borrower that are required to be reflected or reserved against GAAP, whether liquidated or unliquidated, fixed or contingent, and (c) have been prepared in accordance with GAAP consistently applied. Since the dates of such financial statements there has been no Material Adverse Change.

Section 3.5 Taxes. Each Obligor has timely filed all tax returns and reports of such Obligor required to be filed by it, and paid when due all taxes (including payroll taxes) shown on such tax returns to be due and payable and all assessments, fees and other governmental charges upon such Obligor and its assets, income, businesses and franchises that are due and payable. The Borrower is not aware of any unpaid tax (including payroll tax) or assessment or proposed tax or assessment against any Obligor except taxes (including payroll taxes) owing for current or future periods that are not yet due and payable.

Section 3.6 Solvency. Each Obligor is solvent, is able to pay its debts as they mature, has capital sufficient to carry on its business and all businesses in which it is about to engage and the fair saleable value of its assets (calculated on a going concern basis) is in excess of its liabilities.

Section 3.7 Compliance with Laws. Each Obligor operates its business in material compliance with all applicable local, state and federal laws.

Section 3.8 Accuracy of Information. All of the information submitted by the Obligors to Lender is shall be true, complete, correct and accurate.

Section 3.9 No Default or Material Adverse Change. The representations and warranties of the Obligors contained in this Agreement and in the other Loan Documents shall be true and correct on and as of the date of each request by Borrower for any Advance hereunder. No Default or Event of Default shall exist on the date of any request by Borrower for an Advance or the issuance of any such letter of credit. There has been no Material Adverse Change since the Closing Date.

Section 3.10 Title; No Other Liens. Each Obligor has good and marketable title to the Collateral that is pledged by it pursuant to this Agreement or the Loan Documents and has the exclusive right to grant a security interest in such Collateral. No Obligor has mortgaged, pledged, granted a security interest in any such Collateral except for Permitted Liens. No Obligor holds any Commercial Tort Claim except as disclosed to Lender in writing.

Section 3.11 Accounts. All invoices evidencing an Account of Borrower, and all other documents delivered to Lender in connection therewith, are genuine and valid and are not mistaken, misleading, fraudulent, incorrect, incomplete or erroneous in any respect. Each such invoice is issued in the name of Borrower or a trade style of Borrower specifically disclosed by Borrower in writing and acknowledged by Lender in writing.

Section 3.12 Inventory. All Inventory of the Borrower is located at, or is in transit to, a location owned by Borrower or a location leased by Borrower for which Lender has received, if requested by Lender, a collateral access or similar agreement, in form and substance satisfactory to Lender, executed by Borrower and the lessor of such location. Except as set forth on Schedule 3.12, no Inventory of Borrower is subject to any licensing, patent, royalty, trademark, trade name or copyright agreements with any third parties which would require any consent of any third party upon sale or disposition of that Inventory or the payment of any monies to any third party upon such sale or other disposition.

ARTICLE IV

AFFIRMATIVE COVENANTS

Borrower covenants that, at all times prior to satisfaction of the Lien Release Conditions:

Section 4.1 Financial Statements. Borrower shall provide to Lender (a) within 30 days after the end of each fiscal quarter, internally financial prepared financial statements of Borrower for such fiscal month then ended, (b) within 90 days after the end of each year, the internally prepared annual financial statements of Borrower for such year then ended, prepared in accordance with GAAP and (c) such other information as Lender may request from time to time.

Section 4.2 Collateral Reporting and Records. Borrower shall maintain, and cause each Obligor to maintain, complete and accurate records regarding the Collateral. Borrower shall provide to Lender (a) weekly, (i) a borrowing base certificate, in form and substance acceptable to Lender, prepared as of the immediately preceding week, (ii) a report showing the type, Value and location of the inventory of Borrower as at the end of the immediately preceding week and the aggregate Dollar amount of all returns, repossessions or discounts with respect to inventory of Borrower, and (iii) a detailed aged trial balance of all Accounts of Borrower existing as of the last day of the preceding week or such other date reasonably required by the Lender, specifying the names, and face value for each Account Debtor obligated on an Account of Borrower, (b) weekly, (i) a report of sales (by item and customer), collections, debit and credit adjustments, (ii) new inbound inventory of the Borrower, and (iii) a detailed aged trial balance of all accounts payable of Borrower, and (c) promptly upon the request of Lender, such other information and reports as to the Collateral as Lender may request.

Section 4.3 Financial Covenants. Borrower shall comply with the Financial Covenants.

Section 4.4 Accounting Records; Inspections; Verifications. Borrower shall maintain a system of accounting that enables Borrower to produce financial statements in accordance with GAAP. Borrower shall, and Borrower shall cause each Corporate Obligor to, permit Lender or any Person designated by Lender, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, to inspect and appraise the Collateral and the other assets and properties of Corporate Obligors. Borrower authorizes Lender to, in the name of Lender or in the name of a nominee of Lender, communicate with any Account Debtor of Borrower to verify the validity, amount or other matter relating to Accounts of Borrower.

Section 4.5 Bank Accounts. Borrower shall (a) maintain, and cause each Corporate Obligor to maintain, all of its Deposit Accounts at financial institutions acceptable to Lender, (b) provide Lender with not less than ten (10) Business Days prior written notice before Borrower or any Corporate Obligor opens a new Deposit Account and (c) deliver to Lender, and cause each Corporate Obligor to deliver to Lender, a Deposit Account Control Agreement with respect to such Deposit Account(s) of Borrower or Corporate Obligors as to which Lender may request a Deposit Account Control Agreement; provided, that no Corporate Obligor shall be required to deliver a Deposit Account Control Agreement for any Deposit Account that is used solely and exclusively for payroll. Lender may, at any time, issue instructions or notices pursuant to such Deposit Account Control Agreements directing the disposition, to Lender on a daily basis, of all funds in the Deposit Accounts subject thereto. Upon request of Lender therefor, Borrower shall provide Lender with copies of Borrower’s bank statements, together with a detailed list of transactions with respect to Borrower’s lockbox maintained at Crestmark.

Section 4.6 Compliance. Borrower shall preserve and maintain, and cause each Corporate Obligor to preserve and maintain, all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of its business; and comply with the provisions of all documents under which such Borrower or Corporate Obligor is organized and/or which govern such Borrower or Corporate Obligor’s continued existence, and with the requirements of all laws, rules, regulations and orders of any Governmental Authority applicable to each such Borrower or Corporate Obligor and/or its business, the failure to maintain or comply with which could reasonably be expected to cause a Material Adverse Change.

Section 4.7 Anti-Money Laundering And Anti-Corruption. Borrower shall maintain and comply at all times, and cause each Person within the Obligor Group to maintain and comply at all times, with (a) policies, procedures and controls reasonably designed to comply with all Anti-Corruption Laws and Anti-Money Laundering Laws; and (b) all Anti- Corruption Laws and Anti-Money Laundering Laws.

Section 4.8 Maintenance Of Properties. Borrower shall cause each Corporate Obligor to keep all properties useful or necessary to such Corporate Obligor’s business in good repair and condition, and from time to time make necessary repairs, renewals and replacements so that such properties will be fully and efficiently preserved and maintained.

Section 4.9 Taxes And Other Liabilities. Borrower shall pay and discharge when due, and Borrower shall cause each Obligor to pay and discharge when due, any and all indebtedness, obligations, assessments and taxes of such Borrower or Obligor, both real or personal, including without limitation federal and state income taxes, and state and local property taxes and assessments, and payroll taxes. Without limiting the foregoing, Borrower shall, and shall cause each Obligor to, deliver to Lender, from time to time at the request of Lender, an Internal Revenue Service form 8821.

Section 4.10 Notice To Lender. Borrower shall promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Lender in reasonable detail of: (a) the occurrence of any Default or Event of Default; (b) any material or commercial dispute between an Account Debtor and Borrower, or of the return by or repossession of Goods or services by Borrower from any Account Debtor; (c) the assertion, filing, recording or perfection by any means of any Lien against any of the Collateral other than Permitted Liens; (d) the commencement of an Insolvency Proceeding with respect to any Account Debtor of Borrower.

Section 4.11 Insurance. Borrower shall maintain, and Borrower shall cause each Corporate Obligor to maintain, insurance customary for the business in which it is engaged and maintain all risk property insurance coverage covering the full replacement cost of the Collateral, together with general liability insurance, in each case, in form, substance, amounts, under agreements and with insurers acceptable to Lender. The insurance policies must be issued by an insurance company acceptable to Lender and contain a lender loss payable endorsement acceptable to Lender naming Lender as lender loss payee with regard to property coverage and as additional insured with regard to liability coverage.

Section 4.12 Cooperation. Borrower shall, and Borrower shall cause each Obligor to, make, execute, and deliver all such additional and further acts, things, deeds, and instruments as Lender may reasonably require to document and consummate the transactions contemplated hereby and to vest completely in and ensure Lender its rights under this Agreement.

ARTICLE V

NEGATIVE COVENANTS

Borrower covenants that, prior to satisfaction of the Lien Release Conditions:

Section 5.1 Use of Funds. No Obligor will use the proceeds of any Advance or any other credit extended under this Agreement for purposes other than (a) to repay in full any indebtedness under any credit facility existing immediately prior to the Closing Date, (b) to pay Lender Expenses incurred in connection with this Agreement and the other Loan Documents and (c) for working capital and other business purposes of Borrower. The Obligors will not use the proceeds of any extension of credit to purchase or carry margin stock or for any other purpose that violates the terms of Regulation T, U, or X of the Board of Governors of the Federal Reserve System.

Section 5.2 Mergers, Dispositions; Non-Ordinary Course Transactions. No Corporate Obligor will (a) merge with or consolidate with any other Person (except that a Corporate Obligor may merge with and into a Borrower provided such Borrower is the surviving entity); (b) make any substantial change in the nature of any of its business as conducted as of the Closing Date; (c) sell, lease, transfer or otherwise dispose of any of any of its assets, except for the sale of Inventory or dispositions of obsolete Equipment, in each case, in the ordinary course of its business; (d) enter into any transaction outside the ordinary course of business (including any sale and leaseback transaction) other than as expressly permitted hereunder; or (e) liquidate, wind up, or dissolve itself or suspend or cease operation of a substantial portion of its business.

Section 5.3 Investments. No Corporate Obligor will purchase, otherwise acquire or own, directly or indirectly, (a) any Stock in any Person or joint venture (including the creation or capitalization of any Subsidiary) other than Subsidiaries of such Corporate Obligor existing as of the Closing Date; (b) any evidence of indebtedness of another Person; or (c) all or substantially all of the assets or Stock of any other Person (or any division, business unit or line of business of any other entity). No Corporate Obligor will make or permit to exist, directly or indirectly, any loans, advances or other extensions of credit to any Person, or any investment in cash or by delivery of property in any Person, other than (d) the extension of trade credit in the ordinary course of business and consistent with past practices; (e) deposits with banks or other financial institutions acceptable to Lender; (f) advances to employees for travel and entertainment expenses in the ordinary course of business or (g) as otherwise expressly permitted hereunder.

Section 5.4 Indebtedness and Liens. No Corporate Obligor will (a) incur or become liable for any indebtedness for borrowed money other than Permitted Debt or (b) grant or permit to exist on any of its assets or properties any Lien other than Permitted Liens and the Liens granted to Lender.

Section 5.5 Affiliate Transactions. No Corporate Obligor will, directly or indirectly, enter into any transaction with any affiliate of such Corporate Obligor, except for (a) transactions in the ordinary course of such Corporate Obligor’s business (specifically excluding loans to or from such Corporate Obligor) on fair and reasonable terms that are no less favorable to such Corporate Obligor than would be obtained in an arm’s length transaction with a non-affiliated Person; (b) the payment of reasonable compensation, severance and employee benefits to employees, officers, and directors of such Corporate Obligor in the ordinary course of such Corporate Obligor’s business consistent and commensurate with industry custom and practices for the services provided by such Person; (c) loans or advances to such Corporate Obligor from an affiliate that is not a Borrower so long as such loans or advances constitute Subordinated Debt and (d) transactions expressly permitted by this Agreement.

Section 5.6 Organizational Changes. Without giving Lender at least 30 days prior written notice, (a) no Corporate Obligor shall change its name, chief executive office, principal residence, organizational documents, organizational identification number, state of organization, organizational identity, “location” as defined in Section 9-307 of the Code and (b) no Obligor that is a natural Person shall change his or her name as set forth on such Obligor’s driver’s license or other special identification card issued by any state. No Corporate Obligor shall change its chief executive officer, chief financial officer or chief operating officer, or any officer of similar title or authority, without giving Lender prompt notice of (but in any event within 10 days after) such change.

Section 5.7 Restricted Payments. No Corporate Obligor will make any Restricted Payment except to the extent such Restricted Payment satisfies the Restricted Payment Conditions.

ARTICLE VI

EVENTS OF DEFAULT

Section 6.1 Events of Default. The occurrence of one or more of the following events shall constitute an “Event of Default” under this Agreement.

(a) Borrower fails to pay when due any Obligation.

(b) Any financial statement or certificate furnished by an Obligor to Lender in connection with, or any representation or warranty made or deemed made by an Obligor under, this Agreement or any other Loan Document shall be incorrect, false or misleading in any material respect when furnished, made or deemed made.

(c) Any default or breach by an Obligor of any obligation, covenant or condition in this Agreement or in any other Loan Document.

(d) Any breach or default by an Obligor under any document, instrument or agreement to which it is a party or by which such Obligor or any of its properties are bound, if the maturity of or any payment with respect to indebtedness of any Obligor for borrowed money may be accelerated or demanded due to such breach or default.

(e) There shall be issued or filed against an Obligor, or with respect to any of its respective assets, any judgment, order or award for the payment of money involving unless the same is (i) fully covered by insurance (subject to a customary deductible) pursuant to which the insurer has not denied coverage and (ii) discharged, satisfied, vacated or bonded pending appeal within fourteen (14) days of the entry thereof; or enforcement proceedings are commenced upon any such judgment, order or award.

(f) Any Obligor is enjoined, restrained or in any way prevented by any Governmental Authority from conducting any material part of its business.

(g) Any Obligor becomes insolvent or the subject of an Insolvency Proceeding (“Specified Default”), or suspends or ceases operation of all or a material portion or line of its business.

(h) The death or incapacity of any Obligor that is a natural Person unless, within thirty (30) days of such death or declaration of incapacity, a Person, acceptable to Lender, becomes an Obligor by executing and delivering to Lender a Guaranty.

(i) the sale, transfer or exchange, either directly or indirectly, of more than 10% in the aggregate of the Stock in any Corporate Obligor.

(j) Any Obligor repudiates or revokes or purports to repudiate or revoke any obligation under its Guaranty or under any other Loan Document to which it is a party.

(k) If any Obligor makes any payment on account of any indebtedness or obligation which have been contractually subordinated to the Obligations other than as expressly allowed hereunder or under the applicable subordination provisions pertaining thereto, or if any Person who has subordinated such Indebtedness or obligations attempts to limit or terminate any applicable subordination provisions pertaining thereto.

(l) The occurrence of a default or event of default under the Crestmark Agreement.

Section 6.2 Remedies.

(a) At any time after the occurrence of an Event of Default, Lender may: (i) declare the Obligations to be immediately due and payable, at which time such Obligations shall be immediately due and payable and Borrower shall be obligated to immediately repay all of such Obligations in full; (ii) terminate the Line of Credit; (iii) notify Account Debtors of the interest of Lender in the Accounts and that payment is to be made directly to Lender; (iv) apply for the appointment of a receiver, ex parte without notice, of the Collateral (to which appointment Borrower hereby consents) without the necessity of posting a bond or other form of security (which Borrower hereby waives); (v) set off against, and appropriate and apply to the payment of the Obligations, any and all amounts owing by Lender to any Borrower and (vi) exercise any or all rights, powers and remedies available hereunder and under each of the other Loan Documents, or accorded by law or equity, in each case, without presentment, demand, protest, notice of dishonor, or other notice of any kind, all of which are hereby expressly waived by Borrower. Notwithstanding the foregoing or anything to the contrary herein, immediately upon the occurrence of a Specified Default, all Obligations shall be automatically accelerated and this Agreement shall be automatically terminated, without notice or further action of any kind.

(b) Without limiting the generality of the foregoing, at any time after the occurrence of an Event of Default, Lender shall have all the rights and remedies of a secured party under the Code and other applicable laws with respect to all Collateral, including the right to sell or cause to be sold any or all of such Collateral, in one or more sales or parcels, at such prices and upon such terms as Lender shall elect, for cash or on credit or for future delivery, without assumption of any credit risk, and at a public or private sale as Lender may deem appropriate. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender will give the applicable Corporate Obligor reasonable notice of the time and place of any public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made. At any such sale, Lender may disclaim warranties of title, possession, quiet enjoyment, merchantability and the like and any such disclaimer shall not affect the commercial reasonableness of the sale. The requirements of reasonable notice shall be met if any such notice is mailed, postage prepaid, to the applicable Corporate Obligor’s address set forth on the signature page hereto (or, with respect to Corporate Obligors not party hereto, to such other address as such Corporate Obligor shall have given to Lender for notice purposes), at least ten (10) days before the time of the sale or disposition thereof. Lender may be the purchaser at any such public sale and thereafter hold the property so sold at public sale, absolutely, free from any claim or right of any kind, including any equity of redemption. The proceeds of sale shall be applied first to all costs and expenses of, and incident to, such sale, (including attorneys’ costs, fees and expenses), and then to the payment (in such order as Lender may elect in its sole discretion) of all other Obligations. After application of the proceeds of any Collateral to the Obligations, any remaining proceeds shall be paid to Borrower or such other Person entitled thereto under applicable law. Obligors shall remain liable for any deficiency.

ARTICLE VII

CONDITIONS PRECEDENT

Section 7.1 Conditions Precedent. The effectiveness of this Agreement is subject to the prior fulfillment of each of the Borrowers of the terms and conditions as may be specified by Lender.

ARTICLE VIII

MISCELLANEOUS

Section 8.1 No Waiver by Lender. No delay, failure or discontinuance of Lender in exercising any right, power or remedy under any of the Loan Documents will affect or operate as a waiver of such right, power or remedy; nor will any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Lender of any breach of or default (including any Default or Event of Default) under any of the Loan Documents must be in writing and will be effective only to the extent set forth in such writing.

Section 8.2 Notices. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the address for such party set forth below each party’s name on the signature pages of this Agreement or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand will be deemed given or made as follows: (a) if sent by hand delivery or overnight courier, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; (c) if sent by telecopy, upon receipt; and (d) if sent by electronic mail, upon sender’s receipt of an acknowledgment from the intended recipient (such as by “return receipt requested” function, as available, return email or other written acknowledgment).

Section 8.3 Costs, Expenses and Attorneys’ Fees. Borrower will pay to Lender all Lender Expenses. All Lender Expenses shall be payable on demand by Lender therefor and may be charged by Lender to the Loan Account. Borrower’s obligations set forth in this Section will survive any termination of this Agreement or repayment of the Obligations and will for all purposes continue in full force and effect.

Section 8.4 Taxes. All payments made by any Obligor hereunder or under any note or other Loan Document will be made without setoff, counterclaim, or other defense. In addition, all such payments will be made free and clear of, and without deduction or withholding for, any present or future taxes, and in the event any deduction or withholding of such taxes is required, Borrower agrees to pay the full amount of such taxes.

Section 8.5 Subrogation. Until all Obligations shall have been paid in full and this Agreement shall be terminated on terms acceptable to Lender, no Borrower shall have any right of subrogation, contribution or similar right, and each Borrower waives any benefit of or right to participate in any of the Collateral or any other security now or subsequently held by Lender.

Section 8.6 Waivers by Borrower. Borrower waives any right to require Lender to (a) proceed against any Obligor or any other Person, (b) marshal assets or proceed against or exhaust any security from any Obligor or any other Person, (c) perform any obligation of any Obligor with respect to any Collateral; and (d) make any presentment or demand, or give any notice of nonpayment or nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any Collateral. Borrower further waives any right to direct the application of payments or security for any Obligations of any Obligor or indebtedness of customers of any Obligor.

Section 8.7 Choice of Law, Venue; Waiver of Jury Trial

(a) Governing Law. The validity, construction and effect of this Agreement and, except as otherwise expressly stated therein, of the other Loan Documents shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflicts of laws principles.

(b) WAIVER OF JURY TRIAL. THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THE PARTIES HERETO MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF THE PARTIES HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT WITH THE OTHERS.

(c) Submission to Jurisdiction; Venue. Each of Borrower and Lender hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state courts of Delaware sitting in New Castle county and of the United States District Court for the District of Delaware, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of Borrower and Lender hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined in such state court or, to the fullest extent permitted by applicable law, in such federal court; except that Lender may bring any action or proceeding against any Obligor relating to this Agreement, the Loan Documents or the Collateral in the courts of any jurisdiction. Each of Borrower and Lender agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each of Borrower and Lender irrevocably and unconditionally waives, to the fullest extent permitted by applicable law, any objection that it may now or hereafter have to the laying of venue of any action or proceeding arising out of or relating to this Agreement in any court referred to in this Section. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, the defense of inconvenient forum to the maintenance of such action or proceeding in any such court.

Section 8.8 Indemnity. Borrower indemnifies Lender and its affiliates, Subsidiaries, directors, officers, employees, representatives, agents, and attorneys, and holds them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties, costs and expenses (including reasonable attorneys’ fees), of every kind, which they may sustain or incur based upon or arising out of any of the Obligations, this Agreement, any of the Loan Documents, or the Collateral or any relationship or agreement between Lender and the Obligors, or any other matter, relating to any Obligor, the Obligations or the Collateral; provided that this indemnity will not extend to damages that a court of competent jurisdiction finally determines in a non-appealable judgment to have been caused by the indemnitee’s own gross negligence or willful misconduct. Regardless of any provision in this Agreement to the contrary, the indemnity agreement set forth in this Section will survive any termination of this Agreement or repayment of the Obligations and will for all purposes continue in full force and effect. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

Section 8.9 Consequential Damages. No claim may be made by any Obligor against Lender, or any affiliate, Subsidiary, director, officer, employee, representative, agent, attorney or attorney-in-fact of any of them for any special, indirect, consequential, or punitive damages in respect of any claim for breach of contract or other theory of liability arising out of or related to the transactions contemplated by this Agreement or any other Loan Document or any related act, omission, or event, and Borrower waives, releases, and agrees not to sue upon any claim for such damages, whether or not accrued and whether or not known or suspected to exist in its favor.

Section 8.10 Savings Clause.

(a) No provision of this Agreement or of any other Loan Document shall require the payment or the collection of interest in excess of the maximum amount permitted by applicable law. If any excess of interest in such respect is hereby provided for, or shall be adjudicated to be so provided, in this Agreement or any other Loan Document or otherwise in connection with this Agreement, the provisions of this Section shall govern and prevail and neither Borrower nor the sureties, guarantors, successors, or assigns of Borrower shall be obligated to pay the excess amount of such interest or any other excess sum paid for the use, forbearance, or detention of sums owed pursuant hereto. In the event Lender ever receives, collects, or applies as interest any such sum, such amount which would be in excess of the maximum amount permitted by applicable law shall be applied as a payment and reduction of the principal of the Obligations of Borrower hereunder; and, if the principal of such Obligations has been paid in full, any remaining excess shall forthwith be paid to Borrower. In determining whether or not the interest paid or payable exceeds the maximum rate permitted by applicable law, Borrower and Lender shall, to the extent permitted by applicable law, (i) characterize any non-principal payment as an expense, fee, or premium rather than as interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the entire contemplated term of this Agreement so that interest for the entire term does not exceed the maximum rate permitted by law.

(b) If at any time the rate of interest applicable to the Obligations of Borrower hereunder, together with any other fees and other amounts payable pursuant to this Agreement and the other Loan Documents and deemed interest under applicable law, exceeds that amount that would have accrued at the maximum rate permitted by applicable law, then the amount of interest and any such fees and other amounts to accrue to Lender pursuant to this Agreement and the other Loan Documents shall be limited, notwithstanding anything to the contrary in this Agreement or any other Loan Document, to that amount that would have accrued at the maximum rate permitted by applicable law, but to the extent permitted by applicable law, any subsequent reductions, as applicable, shall not reduce the interest to accrue to Lender pursuant to this Agreement and the other Loan Documents below the maximum rate permitted by applicable law until the total amount of interest accrued pursuant to this Agreement and the other Loan Documents and such fees and other amounts deemed to be interest equals the amount of interest, fees and other amounts that would have accrued to Lender but for the effect of this Section.

Section 8.11 Data Transmission. Lender assumes no responsibility for privacy or security risks as a result of the method of data transmission selected by Borrower or any other Obligor.

Section 8.12 Patriot Act Notice. Lender hereby notifies each Obligor that pursuant to the requirements of the Patriot Act, Lender may be required to obtain, verify and record information that identifies such Obligor, which information includes the name and address of such Obligor and other information that will allow Lender to identify each Obligor in accordance with the Patriot Act. In addition, if Lender is required by law or regulation or internal policies to do so, it shall have the right to periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and customary individual background checks for each Obligor, and (b) OFAC/PEP searches and customary individual background checks of each Corporate Obligor’s senior management and key principals, and Borrower agrees to cooperate, and to cause each Obligor to cooperate, in respect of the conduct of such searches and further agree that the reasonable costs and charges for such searches shall constitute Lender Expenses.

Section 8.13 General. This Agreement will be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided that no Borrower may assign or transfer any of its interests, rights or obligations under this Agreement without Lender’s prior written consent. Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, Lender’s rights and benefits under this Agreement and the other Loan Documents. This Agreement and the other Loan Documents constitute the entire agreement between Borrower and Lender with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter of this Agreement. This Agreement may be amended or modified only in writing signed by each party to this Agreement. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other Person will be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents. If any provision of this Agreement or any other Loan Document will be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement or the other Loan Documents. This Agreement may be executed in any number of counterparts, each of which when executed and delivered will be deemed to be an original, and all of which when taken together will constitute one and the same Agreement. Delivery of an executed counterpart of this Agreement by facsimile or other electronic method of transmission shall be equally as effective as delivery of an original executed counterpart of this Agreement and any party’s failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

Section 8.14 Multiple Borrowers.

(a) Joint and Several Liability. Each Borrower agrees that it is jointly and severally liable for, and absolutely and unconditionally guarantees to Lender the prompt payment and performance of, all Obligations. Each Borrower agrees that its guaranty obligations hereunder constitute a continuing guaranty of payment and not of collection, that such obligations shall not be discharged until cash payment in full of the Obligations, and that such obligations are absolute and unconditional, irrespective of (i) the genuineness, validity, regularity, enforceability, subordination or any future modification of, or change in, any Obligations or Loan Document, or any other document, instrument or agreement to which any Borrower is or may become a party or be bound; (ii) the absence of any action to enforce this Agreement or any other Loan Document, or any waiver, consent or indulgence of any kind by Lender; (iii) the existence, value or condition of, or failure to perfect any of Lender’s Liens or to preserve rights against, any security or guaranty for the Obligations or any action, or the absence of any action, by Lender in respect thereof (including the release of any security or guaranty); (iv) the insolvency of any Borrower; (v) any election by Lender in an Insolvency Proceeding for the application of Section 1111(b)(2) of the Bankruptcy Code; (vi) any borrowing or grant of a Lien by any other Borrower, as debtor-in-possession under Section 364 of the Bankruptcy Code or otherwise; (vii) the disallowance of any claims of Lender against any Borrower for the repayment of any Obligations under Section 502 of the Bankruptcy Code or otherwise; or (viii) any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor, except cash payment in full of all Obligations.

(b) Contribution. Each Borrower hereby agrees that it will not enforce any of its rights of contribution or subrogation against any other Borrower with respect to any liability incurred by it hereunder or under any of the other Loan Documents, any payments made by it to Lender with respect to any of the Obligations or any collateral security until such time as all of the Obligations have been paid in full in cash. Any claim which any Borrower may have against any other Borrower with respect to any payments to Lender are hereby expressly made subordinate and junior in right of payment, including, without limitation as to any increases in the Obligations arising under this Agreement, to the prior payment in full in cash of the Obligations and, in the event of any insolvency, bankruptcy, receivership, liquidation, reorganization or other similar proceeding under the laws of any jurisdiction relating to any Borrower, its debts or its assets, whether voluntary or involuntary, all such Obligations shall be paid in full in cash before any payment or distribution of any character, whether in cash, securities or other property, shall be made to any other Borrower.

(c) Common Enterprise. The successful operation and condition of the Borrower, individually and collectively, is dependent on the continued successful performance of the functions of Borrower collectively as a whole and of each Borrower individually. Each Borrower expects to derive benefit (and its respective board of directors or other governing body have determined that such Borrower may reasonably be expected to derive benefit), directly and indirectly, from (a) successful operations of each other Borrower and (b) any financial accommodation extended by Lender to the Borrower, both in their separate individual capacities as a Borrower and in their collective capacity as the Borrower. Each Borrower has determined that execution, delivery, and performance of this Agreement and any other Loan Document to be executed by it is within its purpose, in furtherance of its direct and/or indirect business interests, will be of direct and indirect benefit to it, and is in its best interest.

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The parties have caused this Agreement to be executed effective as of the Closing Date.

Schedule A

to

Credit and Security Agreement

DEFINITIONS

Unless otherwise defined herein, the following terms are used herein as defined in the UCC: Accounts, Account Debtor, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, General Intangibles, Goods, Instruments, Inventory, Investment Property, Letter-of-Credit Rights, Proceeds, and Supporting Obligations.

As used in this Agreement, the following terms have the following meanings:

“Advances” means advances made or deemed made by Lender under this Agreement.

“Anti-Corruption Laws” means: (a) the U.S. Foreign Corrupt Practices Act of 1977, as amended; and (b) any anti-bribery or anti-corruption laws or regulations in any jurisdiction where any member of the Obligor Group is located or doing business.

“Anti-Money Laundering Laws” means applicable laws or regulations in any jurisdiction in which any member of the Obligor Group is located or doing business that relates to money laundering, any predicate crime to money laundering, or any financial record keeping and reporting requirements related thereto.

“Availability” means, as of any date of determination, the amount by which the lesser of (a) the Borrowing Base and the Maximum Revolver Amount, exceeds (b) the then outstanding Advances. Lender may, in its discretion in the event there is more than one Borrower, determine Availability for each Borrower separately.

“Bankruptcy Code” means Title 11 of the United States Code as in effect from time to time.

“Borrower’s Account” means such bank accounts and/or lockboxes, owned and maintained by Borrower in its name at financial institutions acceptable to Lender, designated from time to time by Borrower to Lender, and accepted by Lender in writing, as the Borrower’s Account hereunder.

“Borrowing Base” has the meaning set forth in Schedule B-1.

“Business Day” means any day that is not a Saturday, Sunday, or other day on which banks are authorized or required to close under to the rules and regulations of the Federal Reserve System.

“Closing Date” means the date on which Lender executes this Agreement as set forth below Lender’s signature block on the signature page of this Agreement.

“Code” means the Uniform Commercial Code, as in effect from time to time in the State of Nevada.

“Collateral” means all of Borrower’s now existing and hereafter acquired (a) Accounts, (b) Chattel Paper (including Electronic Chattel Paper), (c) Commercial Tort Claims, (d) Deposit Accounts, (e) Documents, (f) General Intangibles, (g) Goods, (h) Inventory (including all merchandise and other Goods, and all additions, substitutions and replacements thereof, together with all Goods and materials used or usable in manufacturing, processing, packaging or shipping such Inventory), (i) Equipment, (j) Instruments, (k) Investment Property, (l) Letter-of-Credit Rights, (m) Supporting Obligations; (n) reserves, matured funds, credit balances and other property in Lender’s possession; (o) Records; (p) all insurance policies and (q) all Proceeds of any and all of the foregoing.

“Collections” means cash, checks, notes, instruments, and other items of payment (including insurance proceeds, cash proceeds of asset sales, rental proceeds, and tax refunds) received by Lender in respect of Collateral.

“Contract Rate” has the meaning set forth in Schedule B-1.

“Corporate Obligor” means an Obligor that is not a natural Person.

“Crestmark” means Crestmark, a division of MetaBanK, National Association

“Crestmark Agreement” means Loan and Security Agreement and related Schedule dated as June      , 2020, by and between Borrower and Crestmark, as amended.

“Daily Balance” means, as of any date of determination and with respect to any Obligation, the amount of such Obligation owed at the end of such day.

“Default” means an event, condition or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.

“Default Rate” means the Default Rate set forth on Schedule B-1 annexed hereto.

“Deposit Account Control Agreement” means an agreement among Borrower, a depository institution at which Borrower maintains a depository account and Lender, in form and substance satisfactory to Lender, which provides Lender with “control” (as such term is used in Article 9 of the Code) of over the deposit account(s) described therein, as amended from time to time.

“Eligible Inventory” means Inventory of Borrower which Lender, in its sole discretion, deems to be eligible for borrowing purposes based on such considerations as Lender may from time to time deem appropriate. Without limiting the generality of the foregoing, no Inventory shall be Eligible Inventory unless, in Lender’s sole discretion, such Inventory (a) consists of finished goods, in good, new and salable condition which are not obsolete or un-merchantable, and are not comprised of, work in process, packaging materials or supplies; (c) is at all times subject to Lender’s duly perfected, first priority Lien; and (d) is situated at a location owned by Borrower or a location leased by Borrower for which Lender has received, if requested by Lender, a collateral access or similar agreement, in form and substance satisfactory to Lender, executed by Borrower and the lessor of such location.

“Event of Default” has the meaning set forth in Section 6.1.

“Financial Covenants” mean the financial covenants set forth in Schedule B-3 hereto.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States of America, consistently applied.

“Governmental Authority” means any federal, state, local, or other governmental or administrative body, instrumentality, board, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

“Guarantor” means any Person that now or hereafter executes a Guaranty in favor of Lender.

“Guaranty” means each guaranty of payment of the Obligations executed by any Person for the benefit of Lender, as amended, restated, renewed, replaced, substituted, supplemented or otherwise modified.

“Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, receiverships, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“Lender Expenses” means, collectively, all fees, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses, appraisal fees, consultant fees, audit fees and exam fees required on a quarterly basis at Lender’s discretion)) expended or incurred by Lender in connection with (a) the negotiation or preparation of this Agreement or the other Loan Documents, the perfection of Lender’s Liens in the Collateral, Lender’s continued administration of this Agreement or the other Loan Documents, or the preparation of any amendments, waivers or other agreements, instruments or documents relating to this Agreement or the other Loan Documents, or in connection with any “workout” or restructuring, (b) the enforcement of Lender’s rights and/or the collection of any amounts which become due to Lender under any of the Loan Documents, (c) the prosecution or defense of any action in any way related to any of the Obligors or any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the above incurred in connection with any Insolvency Proceeding relating to any of the Obligors or any other Person and (d) all examinations, appraisals, evaluations, audits or inspections of the Collateral or other properties of the Obligors. Such collateral examinations shall be charged to Borrower at the rates established from to time to time by Lender as its fee for such examinations or inspections plus all out-of-pocket costs and expenses incurred in connection therewith.

“Lender’s Account” means such bank accounts and/or lockboxes, owned and maintained by Lender in its name and for its benefit, designated from time to time by Lender as the Lender’s Account hereunder.

“Lien” means, with respect to any property, any security interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such property or its income, including, without limitation, the interest of a vendor or lessor under a conditional sale agreement, capital lease or other title retention agreement, or any agreement to provide any of the above, and the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any jurisdiction.

“Lien Release Conditions” means Lender’s receipt of each of the following, in form and content satisfactory to Lender: (a) cash payment in full of all Obligations and completed performance by Obligors with respect to their obligations under this Agreement and the other Loan Documents, (b) termination of the Line of Credit and this Agreement in accordance with the terms hereof, (c) a general release by Obligors of all claims against Lender and its affiliates relating to the Line of Credit and Lender’s performance and obligations under the Loan Documents.

“Line of Credit” means the line of credit provided under this Agreement.

“Loan Account” means one or more account maintained by Lender on its books and records in the name of Borrower.

“Loan Documents” means this Agreement, each Guaranty, any and all letter of credit agreements and each contract, instrument, agreement and other document required by this Agreement or at any time entered into or delivered to Lender in connection with this Agreement and the Line of Credit.

“Material Adverse Change” means (a) any event or condition that Lender in good faith believes impairs, or is likely to impair, the prospect of payment or performance by any Obligor of any of the Obligations, or (b) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of any Corporate Obligor, or (c) a material impairment of the ability of any Obligor to perform its obligations under the Loan Documents or of Lender’s ability to enforce the Obligations or realize upon any of the Collateral;

“Maturity Date” has the meaning set forth in Schedule B-1.

“Maximum Revolver Amount” has the meaning set forth in Schedule B-1.

“NOLV” means, as to any particular category of asset, the value that is estimated to be recoverable in an orderly liquidation thereof, as determined from time to time by the Lender in its sole discretion based, in part, on one or more appraisals provided by a qualified appraiser selected by the Lender, net of all liquidation costs and expenses for such category of assets.

“Obligations” means all loans (including the Advances), debts, principal, interest (including any interest that accrues after the beginning of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), reimbursement or indemnification obligations with respect to any letters of credit issued hereunder or in connection herewith (irrespective of whether contingent), premiums, liabilities (including all amounts charged to the Loan Account), obligations (including indemnification obligations), fees, Lender Expenses (including any fees or expenses that accrue after the commencement of an Insolvency Proceeding, regardless of whether allowed or allowable in whole or in part as a claim in any such Insolvency Proceeding), guaranties, and all covenants and duties of any other kind and description owing by Borrower under or evidenced by this Agreement or any of the other Loan Documents or otherwise owing to Lender under any other present or future document, instrument or agreement, and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, liquidated or unliquidated, determined or undetermined, voluntary or involuntary, due, not due or to become due, sole, joint, several or joint and several, incurred in the past or now existing or hereafter arising, however arising, and including all interest not paid when due, and all other expenses or other amounts that Borrower is required to pay or reimburse by the Loan Documents or by law or otherwise in connection with the Loan Documents. Any reference in this Agreement or in the Loan Documents to the Obligations will include all or any portion of the Obligations and any extensions, modifications, renewals, or alterations of the Obligations, both prior and subsequent to any Insolvency Proceeding.

“Obligor” means, individually and collectively, Borrower, Guarantors and all other Persons obligated in respect of the Obligations or whose assets are security for the Obligations.

“Obligor Group” means, individually and collectively: (a) any Obligor, (b) any affiliate or Subsidiary of an Obligor, (c) any officer, director or other person or entity acting on behalf of any of the foregoing, including without limitation, any Obligor with respect to the advances of credit or this Agreement.

“Permitted Debt” means (a) trade debt incurred in the ordinary course of its business; (b) the Obligations; and purchase money indebtedness incurred in connection with the financing of the purchase of fixed assets (including capitalized leases).

“Permitted Lien” means (a) Liens in favor of Lender, (b) Liens for unpaid taxes, assessments, or other governmental charges or levies that are not yet delinquent; (c) the interests of lessors under operating leases and non-exclusive licensors under license agreements; (d) and Liens subject to an intercreditor agreement, in form and substance satisfactory to Lender, duly executed by the holder(s) of such Liens; and (e) purchase-money Liens or the interests of lessors under capital leases to the extent that such Liens or interests secure purchase-money indebtedness and so long as (i) such Lien attaches only to the asset purchased or acquired and the cash proceeds, and (ii) such Lien only secures the purchase-money indebtedness that was incurred to acquire the asset purchased or acquired.

“Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and their political subdivisions.

“Reserves” means, as of any date of determination, the amount, determined by Lender from time to time, as Lender deems reasonably necessary as security for the Obligations or to reflect events, conditions, contingencies or risks which might adversely affect the Collateral, the business or prospects of the Corporate Obligors, or the enforceability, perfection or priority of Lender’s Lien upon the Collateral.

“Restricted Payment” means any of the following (a) the payment by a Corporate Obligor in cash of any dividend or distribution in respect of any Stock of such Corporate Obligor, other than a Tax Distribution, (b) the payment by a Corporate Obligor of cash to redeem or retire any Stock of a Corporate Obligor, (c) the payment by a Corporate Obligor in cash of any principal, interest or other amount due in respect of any loan or advance to a Corporate Obligor from any affiliate of any Corporate Obligor, or in respect of any Subordinated Debt, unless in either case such payment is expressly permitted under any subordination agreement executed by the holder of such indebtedness in favor of Lender in form and substance satisfactory to Lender, (d) any loan or advance by a Corporate Obligor to any officer, shareholder or other affiliate other than any such loan or advance that is to Borrower and constitutes Subordinated Debt, (e) without duplication of any of the foregoing, any other payment or transfer by a Corporate Obligor to which the Restricted Payment Conditions are expressly applicable pursuant to the terms of this Agreement.

“Restricted Payment Conditions” mean that (a) as of the date of such Restricted Payment and after giving effect thereto, no Default or Event of Default exists, and (b) Borrower would be in compliance with all Financial Covenants, determined as of the most recent test date and calculated on a pro forma basis as if such Restricted Payment were made immediately prior to such test date.

“Sanction” or “Sanctions” means individually and collectively, respectively, any and all economic or financial sanctions, sectoral sanctions, secondary sanctions, trade embargoes and anti-terrorism laws, including but not limited to those imposed, administered or enforced from time to time by: (a) the United States of America, including those administered by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”), the U.S. State Department, the U.S. Department of Commerce, or through any existing or future Executive Order, or (b) any other governmental authorities with jurisdiction over Lender, Obligor or any member of the Obligor Group.

“Sanctioned Person” means any Person that is a target of Sanctions, including without limitation, a Person that is: (a) listed on OFAC’s Specially Designated Nationals and Blocked Persons List; (b) listed on OFAC’s Consolidated Non-SDN List; (c) a legal entity that is deemed by OFAC to be a Sanctions target based on the ownership of such legal entity by Sanctioned Peron(s); or (d) a Person that is a Sanctions target pursuant to any territorial or country-based Sanctions program.

“Settlement Days” means the number of settlement days set forth on Schedule B-1 hereto.

“Starlight Debt” means all liabilities, indebtedness and obligations owing by Borrower to Starlight Marketing Development Ltd, including, without limitation all liabilities, indebtedness and obligations owing under, or pursuant to, the Starlight Promissory Note.

“Starlight Promissory Note” means that certain Promissory Note, dated on or about the date hereof, made by Singing Machine in favor of Starlight Marketing Development Ltd which, as of the Closing Date, is in the approximate principal amount of Eight Hundred Two Thousand Six Hundred and Fifty Nine Dollars ($802,659).

“Stock” means all shares, options, warrants, interests, participations, or other equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other equity security.

“Subordinated Debt” means indebtedness, the repayment of which is subordinate to the Obligations on terms and conditions, and pursuant to an agreement, reasonably acceptable to Lender. Subordinated Debt includes, without limitation, the Starlight Debt.

“Subsidiary” means any corporation or other entity of which a Person owns, directly or indirectly, through one or more intermediaries, more than 50% of the equity interests at the time of determination.

“Tax Distributions” means, with respect to any Person that is a “pass-through” tax entity for United States federal income tax purposes, dividends or distributions by such Person to its stockholders (or equity holders) in an amount not to exceed the potential federal and state income tax liability of such stockholders that is directly attributable to such Person’s operations and financial, net of any prior loss carry-forwards.

“Termination Date” means the earliest of the following: (a) the Maturity Date; (b) the date the Line of Credit is terminated by Borrower in accordance with the terms hereof; (c) the date this Agreement is terminated by Lender in accordance with the terms hereof; or (d) any date that Lender demands payment in full of the Obligations, or that the Obligations are accelerated, in accordance with the terms hereof.

“Termination Fee” has the meaning set forth in Schedule B-2.

“Value” means, as determined by Lender with respect to any item Inventory based on the most recent appraisal of such Inventory accepted by Lender, the lower of (a) cost computed on a first-in, first-out basis in accordance with GAAP, or (b) market value.

SCHEDULE B-1

to

CREDIT AND SECURITY AGREEMENT

SCHEDULE B-2

to

CREDIT AND SECURITY AGREEMENT

FEES

SCHEDULE B-3 to

CREDIT AND SECURITY AGREEMENT

FINANCIAL COVENANTS

1. Fixed Charge Coverage Ratio. Borrower shall maintain a Fixed Charge Coverage Ratio of not less than 1.0 to 1.0, measured on a monthly basis, as of the last day of each such month, in each case for the 12-month period then ended starting with the month ending December 30, 2020.

2. Positive Cash Flow from Operating Activities. Borrower shall maintain positive Cash Flow from Operating Activities, measured on a monthly basis, as of the last day of each such month, in each case for the 12-month period then ended.

As used in this Schedule B-3 and in the Agreement, the following terms shall have the following meanings:

“Positive Cash Flow from Operating Activities” means, with respect to any Person for any period, means the Borrower’s sum of Net Income plus depreciation and amortization less capital expenditures plus changes in working capital comprised of accounts receivable, inventories, other current assets, trade accounts payable, accrued expenses, product warranty, advance payments from customers and long-term accrued expenses, determined in accordance with generally acceptable accounting principles.

“Fixed Charge Coverage Ratio” shall mean, with respect to any fiscal period, the ratio of (a) EBITDA, minus Unfunded Capital Expenditures made during such period, minus cash distributions (including tax distributions) and cash dividends made during such period, minus cash taxes paid during such period, to (b) all Debt Payments made during such period.

SCHEDULE 3.3

TO

CREDIT AND SECURITY AGREEMENT

LITIGATION

SCHEDULE 3.12

TO

CREDIT AND SECURITY AGREEMENT

Inventory licenses

1. CBS Consumer Products Inc.

Exhibit 99.7

SUBORDINATION AGREEMENT

This Subordination Agreement (“Agreement”), dated as of ___________, 2020, is by and among THE SINGING

MACHINE COMPANY, INC., a Delaware corporation whose address is 6301 N.W. 5^th Way, Suite 2900, Ft. Lauderdale, Florida 33309 (“Borrower”), STARLIGHT MARKETING DEVELOPMENT LTD., a foreign entity, organized under the laws of Hong Kong Special Administrative Region of the People’s Republic of China (“Subordinating Creditor”) and CRESTMARK, A DIVISION OF METABANK, NATIONAL ASSOCIATION (“Crestmark”).

Background

Agreement

In consideration of the mutual promises and covenants in this Agreement, the parties agree as follows:

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

Principal Amount Due Under the Junior Indebtedness: $802,659.00

Crestmark, a division of MetaBank, National Association

Exhibit 99.8

THIS NOTE HAS BEEN ISSUED WITHOUT REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF WITHOUT SUCH REGISTRATION AND QUALIFICATION, OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER IN FORM AND SUBSTANCE THAT SUCH SALE, TRANSFER, OR DISPOSITION MAY LAWFULLY BE MADE WITHOUT REGISTRATION OR QUALIFICATION.

PROMISSORY NOTE

FOR VALUE RECEIVED, The Singing Machine Company, Inc., a Delaware Corporation (the “Maker”), promises to pay to Starlight Marketing Development Ltd. a Hong Kong Company (the “Payee”), in the manner hereinafter specified, the principal sum of Eight hundred and two thousand six hundred and fifty nine dollars ($802,659), together with interest from the date hereof at a rate of 6 % per annum on the principal balance from time to time outstanding. Principal and interest due under this Note shall be due and payable in lawful money of the United States. Payments hereunder shall be made via wire transfer or mail, and for purposes of mailed payments shall be deemed made when deposited in the United States mail, postage prepaid, to Payee, or to such other address as Payee may hereafter designate by written notice to Maker. All terms not otherwise defined herein shall have the meaning set forth in the Credit Agreements (defined below).

1. Payments.

a. Regular Payments. Subject to Section 1(b), this Note shall be payable in consecutive equal quarterly installments of principal and interest in the amount of _One Hundred and Fifty Thousand Dollars ($150,000.00), commencing on December 31, 2020, and continuing on the same day of each of the following quarters, with a final payment to Payee in the amount of all principal and interest then outstanding under this Note.

b. Conditions to Installment Payment. Notwithstanding any provision of this Note to the contrary, Maker may make regular installment payments provided that: (a) as of the date of such payment and after giving effect thereto, no Default or Event of Default exists, and (b) Maker would be in compliance with all Financial Covenants, determined as of the most recent test date and calculated on a pro forma basis as if such Restricted Payment were made immediately prior to such test date. Payments under this Note that cannot be made as a result of the foregoing prohibition shall not be deemed an Event of Default hereunder and will not cumulate with the next payment that can be made, but rather will be payable on the Maturity Date together with any additional interest that has accrued thereon.

c. Interest Payments. Notwithstanding Section 1(b), Maker may make regular interest payments, commencing on June 1, 2020 in the amount of $4,013.29 per month (or approximately $12,039 per quarter). Such payments will be paid quarterly at the end of Maker’s fiscal quarter ends.

d. Prepayment. Principal and accrued interest due hereunder may be prepaid or paid in advance, in whole or in part, without premium or penalty, at any time after all obligations of Payee and Payee’s affiliates to Crestmark, a division of Meta Bank, National Association (“Crestmark”) and Iron Horse Credit LLC (“Iron Horse”) under the respective Credit and Security Agreements dated on or around herewith (the “Credit Agreements”) are paid in full.

2. Security. Maker’s obligations under this Note are unsecured.

3. Default. The occurrence of any one or more of the following events with respect to Maker will constitute an event of default under this Note (an “Event of Default”): (i) if Maker fails to pay when permissible under Section 1(b) any payment of principal or interest on this Note or otherwise breaches any term of this Note; (ii) if, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal, state, or foreign law relating to insolvency or relief of debtors (the “Code”), Maker (A) commences a voluntary case or proceeding; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a trustee, receiver, assignee, liquidator, or similar official; or (D) makes an assignment for the benefit of its creditors; or (iii) if a court of competent jurisdiction enters an order or decree under the Code that (A) is for relief against Maker in an involuntary case; (B) appoints a trustee, receiver, assignee, liquidator, or similar official for Maker or substantially all of Maker’s assets; or (C) orders the liquidation of Maker, and in each case the order or decree is not dismissed within sixty (60) days.

4. Miscellaneous.

a. Modifications and Amendments. The terms and provisions of this Note may be modified or amended only by written agreement executed by the parties hereto.

b. Assignment/Binding Effect. Neither this Note, nor any right hereunder, may be assigned by any of the parties hereto without the prior written consent of the other party hereto. This Note shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, personal representatives, successors and permitted assigns.

c. Severability. In the event that any court of competent jurisdiction shall finally determine that any provision, or any portion thereof, contained in this Note shall be void or unenforceable in any respect, then such provision shall be deemed limited to the extent that such arbitral tribunal determines it enforceable, and as so limited shall remain in full force and effect. In the event that such court shall determine any such provision, or portion thereof, wholly unenforceable, the remaining provisions of this Note shall nevertheless remain in full force and effect.

d. Interpretation. The parties hereto acknowledge and agree that: (i) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Note, and (ii) the terms and provisions of this Note shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Note.

e. Headings and Captions. The headings and captions of the various subdivisions of this Note are for convenience of reference only and shall in no way modify, or affect, or be considered in construing or interpreting the meaning or construction of any of the terms or provisions hereof.

f. Applicable Law; Consent to Jurisdiction; Waiver of Jury Trial. THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF FLORIDA WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OR CHOICE OF LAWS. EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT IN THE STATE OF FLORIDA, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND RELATED TO OR IN CONNECTION WITH THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY WAIVES AND AGREES NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS NOTE OR ANY DOCUMENT OR ANY INSTRUMENT REFERRED TO HEREIN OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS. EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR NOTICES SET FORTH IN THIS NOTE OR ANY METHOD AUTHORIZED BY THE LAWS OF FLORIDA. EACH PARTY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS NOTE, ANY OTHER DOCUMENT BETWEEN THE PARTIES OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

g. Notice. Notices and all other communications provided for in this Note shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):

h. Waivers. The Maker severally waives presentment and protest and also notice of protest, notice of dishonor and notice of maturity. Any delay by the Payee hereof in exercising any power or right hereunder shall not operate as a waiver thereof, nor shall the exercise of any single or partial right hereunder create any other or further exercise thereof or exercise of any other power or right, nor shall the Payee hereof be liable for exercising or failing to exercise any such power or right. The rights, remedies and benefits herein specified are cumulative and not exclusive of any rights, remedies or benefits which the Payee hereof otherwise may have.

i. Amendment. This Note may not be amended or modified prior to payment in full of the Credit Agreements without the prior written consent of Crestmark and Iron Horse.

IN WITNESS WHEREOF, Maker has executed this Note effective as of the date first above written.