Exhibit 10.11 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

5J Oilfield Services, LLC,

A Texas limited liability company

and

the Sole Member and Managing Member of

5J Oilfield Services, LLC listed herein,

on the one hand;

and

SMG Industries Inc.,

A Delaware corporation

February 27, 2020

TABLE OF CONTENTS

EXHIBITS AND SCHEDULES:

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement, dated as of February 27, 2020 (this “Agreement”), is made and entered into by and among 5J Oilfield Services, LLC, a Texas limited liability company (“5J”), and James E. Frye, Jr. an individual and the sole member and managing member of 5J (“5J Member”), on the one hand; and SMG Industries Inc., a Delaware corporation (“SMGI”). For purposes hereof each of 5J, the 5J Member and SMGI may be referred to as a “Party” and collectively as the “Parties”.

RECITALS

WHEREAS, the 5J Member owns 100% of the issued and outstanding membership interests of 5J (“5J Interests”) and the 5J Member desires to sell to SMGI its 5J Interests in exchange for the Purchase Price (defined below), pursuant to the terms and conditions of this Agreement;

WHEREAS, SMGI desires to acquire from the 5J Member, and the 5J Member desires to sell to SMGI, all of the 5J Interests in exchange for the Purchase Price (as hereinafter defined), making 5J upon the closing of the transaction herein contemplated (“Transaction”) a wholly-owned subsidiary of SMGI, on the terms and conditions set forth below; and

WHEREAS, SMGI will enter into this Agreement for the purpose of evidencing its consent to the consummation of the Transaction and for the purpose of making certain representations, warranties, covenants and agreements.

NOW, THEREFORE, the Parties hereto, intending to be legally bound, agree as follows:

ARTICLE 1
THE PURCHASE AND SALE OF 5J INTERESTS

1.1           Purchase of 5J Interests and Payment of the Purchase Price.  Upon the terms and subject to the conditions hereof, at the Closing the 5J Member will sell, convey, assign, transfer and deliver to SMGI, an assignment of 5J Member’s membership interest representing the 5J Interests in exchange for the payment of the Purchase Price of $22,900,000.00 (“Purchase Price”) by SMGI as follows: (i) SMGI shall issue to the 5J Member one or more stock certificates representing 6,000 shares of SMGI Series B Convertible Preferred Stock, with a stated value of $1,000 per share in accordance with the Certificate of Designation of Preferences, Rights and Limitations of 5% of Series B Convertible Preferred Stock dated effective January 1, 2020 ( “SMGI Preferred Shares”), (ii) SMGI shall pay cash consideration in the amount of $8,000,000 (“Cash Consideration”) to the 5J Member on the Closing Date, (iii) SMGI shall execute the installment note in the amount of $2,000,000 in the form of that certain 10% Secured Promissory Note attached hereto as Exhibit 1.1, and (iv) SMGI shall assume or refinance the obligation for notes owed by 5J and its affiliates in the principal amount of $1,400,000 (“Debt Assumption”) and pay off the VeraBank Line of Credit balance as of closing (“VeraBank Payoff”).

1.2           Issuance of Shares and Exemption. The issuance of the SMGI Preferred Shares shall be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on an exemption provided by Section 4(a)(2) of the Act and shall be “restricted securities” as that term is defined in Rule 144 promulgated under the Securities Act.

1.3           Closing. The closing of the Transaction (the “Closing”) shall take place at such location and as such time as the Parties mutually agree, on the date when all of the closing conditions set forth in Article 6 of this Agreement are either satisfied or waived, or on such other date as may be mutually agreed upon by the Parties but in no event later than February 27, 2020. Such date is referred to herein as the “Closing Date”.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF 5J AND THE 5J MEMBER

Except as otherwise set forth in a disclosure schedule of even date herewith which is executed and delivered by 5J (the “5J Disclosure Schedule”), 5J and the 5J Member hereby jointly and severally make the following representations and warranties to SMGI as of the date hereof and as of the Closing Date.  Nothing in the 5J Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, unless the 5J Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail.  The 5J Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Agreement.

2.1           Organization. 5J is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Texas, is qualified to conduct business and is in good standing under the laws of each jurisdiction in which the nature of its business requires such qualification, and has the requisite power to carry on its business as now conducted.

2.2           Capitalization of the Company and Subsidiaries. Immediately prior to the Closing, the outstanding membership interests of 5J shall consist solely of the 5J Interests being sold to SMGI. The 5J Interests are validly issued, fully paid and non-assessable. As of the Closing Date, there are no outstanding or authorized options, warrants, rights or convertible securities, or any other securities of 5J, or any agreements or commitments to which 5J or the 5J Member is a party or which are binding upon 5J or the 5J Member providing for the issuance or redemption of any of the 5J Interests.

2.3           Certain Corporate Matters. 5J is duly qualified to do business as a limited liability company and is in good standing in each jurisdiction in which the ownership of its properties, the employment of its personnel or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not have a material adverse effect on 5J's financial condition, results of operations or business. 5J has full corporate power and authority and all authorizations, licenses, leases and permits necessary to carry on the business in which it is engaged and to own or use the properties owned or used by it. 5J owns all of the assets in the spreadsheet lists previously provided to SMGI and on Schedule 2.3 attached hereto and ancillary office equipment, which are owned subject to the existing loans, security interests and liens secured by UCC financing statements filed of record or disclosed to SMGI.

2.4           Authority Relative to this Agreement. 5J has the requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement by 5J and the consummation by 5J of the transactions contemplated hereby have been duly authorized by the sole member and managing member of 5J and no other actions on the part of 5J are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by 5J and constitutes a valid and binding agreement of 5J, enforceable against 5J in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity.

2.5           Consents and Approvals; No Violations. Except for applicable requirements of federal securities laws, state securities laws and Lender consent as to the change in control relating to the Debt Assumption, no filing with, and no permit, authorization, consent or approval of, any third party, public body or authority is necessary for the consummation by 5J of the transactions contemplated by this Agreement. Neither the execution and delivery of this Agreement by 5J nor the consummation by 5J of the transactions contemplated hereby, nor compliance by 5J with any of the provisions hereof, will (i) conflict with or result in any breach of any provisions of the charter or Company Agreement of 5J, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which 5J is a party or by which it or any of its properties or assets may be bound or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to 5J, or any of its properties or assets, except in the case of clauses (ii) and (iii) for violations, breaches or defaults which are not individually or in the aggregate material to 5J.

2.6            Financial Statements.

(a)                5J has provided SMGI with a copy of the audited balance sheets of 5J as at December 31, 2018 and 2017, and the related statements of operations, member’s equity and cash flows for the two fiscal years then ended, together with the unqualified report thereon from Bolton, Sullivan, Taylor & Weber, L.L.P. (collectively, “5J’s Audited Financials”).

(b)                5J has provided SMGI with a copy of the unaudited balance sheet of 5J as of September 30, 2019, and the related statements of operations, member’s equity and cash flows for the three months then ended (“5J’s Interim Financials”).

(c)                5J’s Audited Financials and 5J’s Interim Financials (collectively “5J’s Financial Statements”) (i) are in accordance with the books and records of 5J, (ii) are correct and complete in all material respects, (iii) fairly present the financial position and results of operations of 5J as of the dates indicated, and (iv) are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) (except that (x) unaudited financial statements may not be in accordance with GAAP because of the absence of footnotes normally contained therein, and (y) the interim unaudited condensed financial statements included herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of the results of operations for the interim periods presented.

(d)                5J will cooperate with SMGI to provide the Financial Statements and partial year Financial Statements of 5J that SMGI advises are required to be included in the Form 8-K due to be filed with the SEC by SMGI within seventy days of the Closing Date.

2.7            Tax Matters.

(a)                 5J has filed on a timely basis all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes that it was required to file (collectively, “Tax Returns”), and all Tax Returns were complete and adequate in all material respects. “Taxes” means all taxes or levies or other similar assessments or liabilities in the nature of a tax, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.

(b)                5J or the 5J Member has paid on a timely basis, or adequately reserved against in 5J’s Financial Statements, all material Taxes due, or claimed by any taxing authority to be due, from or with respect to them.

(c)                 To the best knowledge of 5J, (i) no examination or audit of any Tax Return of 5J by any governmental entity is currently in progress or, to the knowledge of 5J, threatened or contemplated, (ii) 5J has not been informed by any jurisdiction that the jurisdiction believes that 5J was required to file any Tax Return that was not filed, and (iii) no material Tax issue has been raised, and no material adjustment has been proposed or is pending, by any governmental entity or taxing authority in connection with any of 5J’s Tax Returns.

(d)                No waiver or extension of any statute of limitations as to any material Tax matter has been given by or requested of 5J.

For the purposes of this Section 2.7, a Tax is due (and must therefore either be paid or adequately reserved against in 5J’s Financial Statements) only on the last date payment of such Tax can be made without interest or penalties, whether such payment is due in respect of estimated Taxes, withholding Taxes, required Tax credits or any other Tax.

2.8           Books and Records. The books and records of 5J delivered to SMGI prior to the Closing fully and fairly reflect the transactions to which 5J is a party or by which its properties are bound.

2.9           Questionable Payments. Neither 5J, nor any employee, agent, representative or any other person acting on behalf of 5J has, (i) directly or indirectly, made any bribes, kickbacks, illegal payments or unlawful contributions in connection with foreign or domestic political activity using 5J’s funds, (ii) or made any payments from 5J's funds to foreign or domestic governmental officials or employees, or to any foreign or domestic political parties or campaigns (iii) failed to disclose fully any contribution made by 5J (or anyone acting on 5J’s behalf of which 5J was aware) which is in violation of the law or (d) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

2.10         Intellectual Property.  5J is not infringing, and has never infringed, upon the intellectual property or proprietary rights of any other person, corporation or other entity. There are no claims pending or, to 5J’s knowledge, any claims threatened alleging that 5J is currently infringing upon, using in an unauthorized manner, or violating any trademarks, trade names, service marks, patents, copyrights or other proprietary rights of any person, corporation or other entity, and 5J is unaware of any facts which would form a reasonable basis for any such claim. 5J is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other agreement or contract relating to intellectual property.

2.11         Litigation. Except as disclosed on Schedule 2.11, 5J is not subject to any judgment or order of any court or quasi-judicial or administrative agency of any jurisdiction, domestic or foreign, nor is there any charge, complaint, lawsuit or governmental investigation pending against 5J. 5J is not a plaintiff in any action, domestic or foreign, judicial or administrative. Except as disclosed on Schedule 2.11, there are no existing actions, suits, proceedings against or investigations of 5J, and 5J knows of no basis for such actions, suits, proceedings or investigations. There are no unsatisfied judgments, orders, decrees or stipulations affecting 5J or to which 5J is a party.

2.12         Legal Compliance. To the best knowledge of 5J, after due investigation, no claim has been filed against 5J alleging a violation of any applicable laws or regulations of federal, state and local governments and all agencies thereof. 5J holds all of the material permits, licenses, certificates or other authorizations of federal, state or local governmental agencies required for the conduct of its business as presently conducted, all of which are listed on Schedule 2.12 hereto.

2.13         Employees.  Schedule 2.13 hereto sets forth the name, date of hire, period of continuous service, salary (or other remuneration), incentive compensation and other benefits of each employee of 5J. 5J is not a party to or bound by any collective bargaining, shop or similar agreements.  Except as set forth on Schedule 2.13 hereto, 5J does not have any “employee benefit plans” including, but not limited to, bonus, pension, profit sharing, deferred compensation, incentive compensation, excess benefit, stock, stock option, severance, termination pay, change in control or other employee benefit plans, programs or arrangements, whether written or unwritten, qualified or unqualified, funded or unfunded, currently maintained, or contributed to, or required to be maintained or contributed to, by 5J, other than the employment contracts, medical, dental, vision, disability, life insurance and or vacation benefits.  5J is in compliance with all applicable federal and state laws and regulations concerning the employer-employee relationship, including applicable wage and hour laws, worker compensation statutes, unemployment laws, and social security laws, except, in each case, where the failure to so comply could not, individually or in the aggregate, reasonably be expected to have a material adverse effect on 5J’s business.  Except as set forth on Schedule 2.13 hereof, there are no pending or, to 5J’s knowledge, threatened claims, investigations, charges, citations, hearings, consent decrees, or litigation concerning: wages, compensation, bonuses, commissions, awards, or payroll deductions; equal employment or human rights violations regarding race, color, religion, sex, national origin, age, handicap, veteran’s status, marital status, disability, or any other recognized class, status, or attribute under any federal or state equal employment law prohibiting discrimination; representation petitions or unfair labor practices; grievances or arbitrations pursuant to current or expired collective bargaining agreements; workers’ compensation; wrongful termination, negligent hiring, invasion of privacy or defamation; wage and hour laws; or immigration.  Except as set forth on Schedule 2.13 hereto, 5J is not liable for any unpaid wages, bonuses, or commissions (other than those not yet due) or any Taxes, penalty, assessment, or forfeiture for failure to timely pay any of the foregoing.

2.14         Insurance. 5J maintains the insurance against the risks listed on Schedule 2.14.  All such policies are in full force and effect, and 5J has not received any notice from any insurance company suspending, revoking, modifying or canceling (or threatening such action) any insurance policy issued to 5J.

2.15         Subsidiaries and Investments.  5J does not own any capital stock or membership interests, or have any interest of any kind whatsoever in any corporation, limited liability company, partnership, or other form of business organization.

2.16         Broker's Fees. Neither 5J, nor anyone on its behalf, has any liability to any broker, finder, investment banker or agent, or has agreed to pay any brokerage fees, finder’s fees or commissions, or to reimburse any expenses of any broker, finder, investment banker or agent in connection with this Agreement.

2.17         Leases. 5J does not own any real property but leases its administrative offices located at 4090 N. U.S. Hwy. 79, Palestine, Texas 75801 pursuant to the Lease with its affiliate 5J Properties LLC dated December 1, 2016 as amended effective February 1, 2020.

2.18         Disclosure. The representations and warranties and statements of fact made by 5J in this Agreement are, as applicable, accurate, correct and complete and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained herein not false or misleading.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

OF THE 5J MEMBER

The 5J Member hereby represents and warrants to SMGI as follows:

3.1           Ownership of the 5J Interests.  The 5J Member owns, beneficially and of record, good and marketable title to the 5J Interests which as of Closing will be free and clear of all security interests, liens, adverse claims, encumbrances, equities, proxies, options or members' agreements. At the Closing, the 5J Member will convey to SMGI good and marketable title to the 5J Interests, free and clear of any security interests, liens, adverse claims, encumbrances, equities, proxies, options, member agreements or restrictions.

3.2           Authority Relative to this Agreement.  This Agreement has been duly and validly executed and delivered by the 5J Member and constitutes a valid and binding agreement of the 5J Member, enforceable against the 5J Member in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity.

3.3           Restricted Securities. The 5J Member acknowledges that the SMGI Preferred Shares will not be registered pursuant to the Securities Act of 1933, as amended (the “Securities Act”) or any applicable state securities laws, that the SMGI Preferred Shares will be characterized as "restricted securities" under federal securities laws, and that under such laws and applicable regulations the SMGI Preferred Shares cannot be sold or otherwise disposed of without registration under the Securities Act or an exemption therefrom.  In this regard, the 5J Member is familiar with Rule 144 promulgated under the Securities Act, as currently in effect, and understands the resale limitations imposed thereby and by the Securities Act.

3.4           Legend. The 5J Member acknowledges that the certificate(s) representing the 5J Member’s SMGI Preferred Shares shall be conspicuously set forth on the face or back thereof a legend in substantially the following form:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR PURSUANT TO AN EXEMPTION FROM REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.”

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF

SMGI

SMGI hereby represents and warrants to 5J and the 5J Member as follows:

4.1           Organization. SMGI is a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the requisite corporate power to carry on its business as now conducted. Each of SMGI’s wholly-owned subsidiaries, MG Cleaners LLC (“MG Cleaners”), Trinity Services LLC (“Trinity”) and Momentum Water Transfer Services LLC (“Momentum”), are each limited liability companies duly organized, validly existing and in good standing under the laws of their respective states of organization, and each have the requisite corporate power to carry on their respective businesses as now conducted.

4.2            Capitalization.  SMGI's authorized capital stock consists of (i) 25,000,000 shares of Common Stock par value $.001, of which 15,881,372 shares are issued and outstanding, and (ii) 1,000,000 shares of preferred stock, par value $.001 (“Preferred Stock” and, together with the Common Stock, “Capital Stock”), 2,000 of which are designated as SMGI’s Series A Secured Convertible Preferred Stock (“Series A Preferred Stock”) and are issued and outstanding as of the date of this Agreement, and 6,000 of which are designated as SMGI’s Series B Convertible Preferred Stock, all of which will be issued to the 5J Member upon Closing.   All issued and outstanding shares of SMGI Capital Stock are duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights. When issued, the 6,000 SMGI Preferred Shares will be duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights.  Except for $300,000 in fixed price convertible notes with a conversion price of $0.50 per share, 1,563,000 options and warrants with an average exercise price of $0.42 per share of SMGI Common Stock with exercise prices ranging from $0.15 to $2.18 per share that are currently outstanding, 2,000 shares of Series A Preferred Stock which are convertible into 4,000,000 shares of SMGI Common Stock, and an aggregate of 350,000 stock options to be issued to members of the 5J management team upon completion of the Closing there are no other outstanding preferred stock series, or convertible securities to which SMGI is a party. To SMGI’s knowledge, there are no obligations of SMGI to repurchase, redeem or otherwise re-acquire any shares of its Capital Stock on or after the Closing.

4.3           Certain Corporate Matters. SMGI has full corporate power and authority and all authorizations, licenses and permits necessary to carry on the business in which it is engaged and to own and use the properties owned and used by it. SMGI has made available through the SEC’s EDGAR system to 5J true, accurate and complete copies of its certificate of incorporation and bylaws, which reflect all restatements of and amendments made thereto at any time prior to the date of this Agreement.  SMGI is not in default under or in violation of any provision of its certificate of incorporation or bylaws in any material respect.  SMGI is not in any material default or in violation of any restriction, lien, encumbrance, indenture, contract, lease, sublease, loan agreement, note or other obligation or liability by which it is bound or to which any of its assets is subject.

4.4           Authority Relative to this Agreement.  SMGI has the requisite power and authority to enter into this Agreement and carry out its respective obligations hereunder.  The execution, delivery and performance of this Agreement by SMGI and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of SMGI and no other actions on the part of SMGI are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by SMGI and constitutes a valid and binding obligation of SMGI, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity.

4.5           Consents and Approvals; No Violations. Except for applicable requirements of federal securities laws and state securities or blue-sky laws, no filing with, and no permit, authorization, consent or approval of, any third party, public body or authority is necessary for the consummation by SMGI of the transactions contemplated by this Agreement. Neither the execution and delivery of this Agreement by SMGI nor the consummation by SMGI of the transactions contemplated hereby, nor compliance by SMGI with any of the provisions hereof, will (i) conflict with or result in any breach of any provisions of the certificate of incorporation or bylaws of SMGI, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which SMGI is a party or by which it or any of its properties or assets may be bound or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to SMGI, or any of their respective properties or assets, except in the case of clauses (ii) and (iii) for violations, breaches or defaults which are not in the aggregate material to SMGI taken as a whole.

4.6           SEC Documents.  SMGI hereby makes reference to the following documents filed with the SEC, as posted on the SEC’s website, www.sec.gov: (collectively, the “SEC Documents”): (i) Annual Reports on Form 10-K for the year ended December 31, 2018; and (ii) Quarterly Reports on Form 10-Q for the period ended September 30, 2019. To SMGI’s knowledge, the SEC Documents constitute all of the annual and quarterly reports that SMGI was required to file with the SEC pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”) and the rules and regulations promulgated thereunder by the SEC for the year ended December 31, 2018 and the nine months ended September 30, 2019, respectively.  To SMGI’s knowledge, as of the filing dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and/or the Exchange Act, as the case may require, and the rules and regulations promulgated thereunder and none of the SEC Documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.7           Real Property.  SMGI does not own any real property.

4.8           Books and Records. The books and records of SMGI delivered to 5J prior to the Closing fully and fairly reflect the transactions to which SMGI is a party or by which its properties are bound.

4.9           Questionable Payments. To SMGI’s knowledge, neither SMGI, nor any employee, agent or representative of SMGI has, directly or indirectly, made any bribes, kickbacks, illegal payments or illegal political contributions using Company funds or made any payments from SMGI's funds to governmental officials for improper purposes or made any illegal payments from SMGI's funds to obtain or retain business.

4.10         Intellectual Property. SMGI does not own or use any trademarks, trade names, service marks, patents, copyrights or any applications with respect thereto. SMGI has no knowledge of any claim that, or inquiry as to whether, any product, activity or operation of SMGI infringes upon or involves, or has resulted in the infringement of, any trademarks, trade-names, service marks, patents, copyrights or other proprietary rights of any other person, corporation or other entity; and no such proceedings have been instituted, are pending or are threatened against SMGI.

4.11         Contracts. Except as disclosed in the SEC Documents, SMGI does not have any material contracts, leases, arrangements or commitments (whether oral or written). SMGI is not a party to or bound by or affected by any contract, lease, arrangement or commitment (whether oral or written) relating to: (i) the employment of any person; (ii) collective bargaining with, or any representation of any employees by, any labor union or association; (iii) the acquisition of services, supplies, equipment or other personal property; (iv) the purchase or sale of real property; (v) distribution, agency or construction; (vi) lease of real or personal property as lessor or lessee or sublessor or sublessee; (vii) lending or advancing of funds; (viii) borrowing of funds or receipt of credit; (ix) incurring any obligation or liability; or (x) the sale of personal property.

4.12         Litigation.   SMGI is not subject to any judgment or order of any court or quasi-judicial or administrative agency of any jurisdiction, domestic or foreign, nor is there any charge, complaint, lawsuit or governmental investigation pending against SMGI that would have a material adverse effect on SMGI’s business.  SMGI is not a plaintiff in any action, domestic or foreign, judicial or administrative. Except as disclosed in SMGI’s SEC Documents, there are no existing actions, suits, proceedings against or investigations of SMGI, and SMGI knows of no basis for such actions, suits, proceedings or investigations. There are no unsatisfied judgments, orders, decrees or stipulations affecting SMGI or to which SMGI is a party.

4.13         Employees.    Except as disclosed in the SEC Documents, SMGI does not have a written or oral employment agreement with any officer or director of SMGI.  SMGI is not a party to or bound by any collective bargaining agreement.  

4.14         Legal Compliance. To the best knowledge of SMGI, after due investigation, no claim has been filed against SMGI alleging a violation of any applicable laws or regulations of foreign, federal, state and local governments and all agencies thereof. SMGI holds all of the material permits, licenses, certificates or other authorizations of foreign, federal, state or local governmental agencies required for its business as presently conducted.

4.15         Subsidiaries and Investments.  Except as set forth in the SEC Documents, SMGI does not own any capital stock or have any interest of any kind whatsoever in any corporation, partnership, or other form of business organization.

4.16         Broker's Fees. Except for payments due to Chiron Financial LLC (“Chiron”) pursuant to the engagement letter entered into by and between SMGI and Chiron on May 23, 2019, neither SMGI, nor anyone on its behalf, has any liability to any broker, finder, investment banker or agent, or has agreed to pay any brokerage fees, finder’s fees or commissions, or to reimburse any expenses of any broker, finder, investment banker or agent in connection with this Agreement.

4.17         Listing and Maintenance Requirements.  SMGI’s Common Stock is currently quoted on the OTCQB.  SMGI has not, since the date its Common Stock began trading on the OTCQB, received any notice from OTC Markets or FINRA or any trading market on which SMGI’s Common Stock is or has been listed or quoted to the effect that SMGI is not in compliance with the quoting, listing or maintenance requirements of the OTCQB or such other trading market.  SMGI is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such quoting, listing and maintenance requirements.

4.18         Application of Takeover Protections.  SMGI and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under SMGI's certificate of incorporation or the laws of its state of incorporation that is or could become applicable to 5J or the 5J Member as a result of the Transaction or the exercise of any rights by 5J or the 5J Member pursuant to this Agreement.

4.19          No SEC or FINRA Inquiries.  To SMGI’s knowledge, neither SMGI nor any of its past or present officers or directors is, or has ever been, the subject of any formal or informal inquiry or investigation by the SEC or FINRA.

4.20         Depository Trust Company Notifications. SMGI has not received any notification from the Depository Trust Company (“DTC”) indicating that DTC intends to either: (i) limit any services available for SMGI’s Common Stock on deposit at DTC, or (ii) place a complete restriction on all DTC services for SMGI’s Common Stock on deposit at DTC.

4.21         Accredited Investor Status. SMGI is an “accredited investor” as such term is defined under Rule 501 of the Securities Act.

4.22         Disclosure. The representations and warranties and statements of fact made by SMGI in this Agreement are, as applicable, accurate, correct and complete and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained herein not false or misleading.

ARTICLE 5
COVENANTS AND AGREEMENTS OF THE PARTIES

EFFECTIVE PRIOR TO CLOSING

5.1           Corporate Examinations and Investigations.  Prior to the Closing, each Party shall be entitled, through its employees and representatives, to make such investigations and examinations of the books, records and financial condition of 5J and SMGI as each Party may request.  In order that each Party may have the full opportunity to do so, 5J and SMGI shall furnish each Party and its representatives during such period with all such information concerning the affairs of 5J or SMGI  as each Party or its representatives may reasonably request and cause 5J or SMGI and their respective officers, employees, consultants, agents, accountants and attorneys to cooperate fully with each Party's representatives in connection with such review and examination and to make full disclosure of all information and documents requested by each Party or its representatives.  Any such investigations and examinations shall be conducted at reasonable times and under reasonable circumstances, it being agreed that any examination of original documents will be at each Party's premises, with copies thereof to be provided to each Party or its representatives upon request.

5.2           Cooperation; Consents.  Prior to the Closing, each Party shall cooperate with the other Parties to the end that the Parties shall (i) in a timely manner make all necessary filings with, and conduct negotiations with, all authorities and other persons the consent or approval of which, or the license or permit from which is required for the consummation of the Transaction, and (ii) provide to the other Party such information as the other Party may reasonably request in order to enable it to prepare such filings and to conduct such negotiations.

5.3           Conduct of Business.  Subject to the provisions hereof, from the date hereof through the Closing, each Party hereto shall  (i) conduct its business in the ordinary course and in such a manner so that the representations and warranties contained herein shall continue to be true and correct in all material respects as of the Closing as if made at and as of the Closing and (ii) not enter into any material transactions or incur any material liability not required or specifically contemplated hereby, without first obtaining the written consent of 5J and the 5J Members on the one hand and SMGI on the other hand. Without the prior written consent of 5J, the 5J Members or SMGI, except as required or specifically contemplated hereby, each Party shall not undertake or fail to undertake any action if such action or failure would render any of said warranties and representations untrue in any material respect as of the Closing.

5.4           Litigation.    From the date hereof through the Closing, each Party hereto shall promptly notify the representative of the other Parties of any lawsuits, claims, proceedings or investigations which after the date hereof are threatened or commenced against such Party or any of its affiliates or any officer, director, manager, employee, consultant, agent, member or shareholder thereof, in their capacities as such, which, if decided adversely, could reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), assets, liabilities, business, operations or prospects of such Party or any of its subsidiaries.

5.5           Notice of Default.  From the date hereof through the Closing, each Party hereto shall give to the representative of the other Party or Parties prompt written notice of the occurrence or existence of any event, condition or circumstance occurring which would constitute a violation or breach of this Agreement by such Party or which would render inaccurate in any material respect any of each such Party's representations or warranties herein.

5.6           Confidentiality. From and after the Closing, each of SMGI and the 5J Member shall, and shall cause its or their Affiliates (defined below) to, hold, and shall use its or their reasonable best efforts to cause its or their respective representatives to hold, in confidence any and all information, whether written or oral, concerning SMGI, except to the extent that 5J and the 5J Member can show that such information (a) is generally available to and known by the public through no fault of 5J and/or the 5J Member, any of its or their Affiliates or their respective representatives; or (b) is lawfully acquired by 5J and/or the 5J Member, any of its or their Affiliates or their respective representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If 5J and/or the 5J Member or any of its or their Affiliates or their respective representatives are compelled to disclose any information by judicial or administrative process or by other requirements of law, 5J and/or the 5J Member shall promptly notify SMGI in writing and shall disclose only that portion of such information which 5J and/or the 5J Member is advised by its counsel in writing is legally required to be disclosed, provided that 5J and/or the 5J Member shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.

5.7           Closing Conditions. From the date hereof until the Closing, each Party hereto shall use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Article 6 hereof.

5.8           Further Assurances.  If, at any time after the Closing, the Parties shall consider or be advised that any further deeds, assignments or assurances in law or that any other things are necessary, desirable or proper to complete the transactions contemplated hereby in accordance with the terms of this Agreement or to vest, perfect or confirm, of record or otherwise, the title to any property or rights of the Parties hereto, the Parties agree that their proper representatives shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights and otherwise to carry out the purpose of this Agreement, and that the proper representatives of the Parties are fully authorized to take any and all such action.

5.9           Press Releases and Communications.  No press release or public announcement related to this Agreement or the transactions contemplated herein, shall be issued or made by any party hereto without the prior written approval of SMGI and 5J Member.  Neither 5J and/or the 5J Member shall have any communications with any third party, other than its own representatives, without the prior written consent of SMGI and the 5J Member.  Nothing herein shall prevent 5J from notifying its employees, customers or suppliers of the Transaction contemplated hereby as is necessary or desirable to facilitate the consummation of the Transaction; provided, however, that any such communication shall be previously approved by SMGI and may require any such third-parties to execute a confidentiality agreement, at SMGI’s sole discretion and shall constitute a “joint communication” if deemed appropriate by SMGI.

5.10         Excluded Assets. The Parties acknowledge that the following assets reflected on the 5J Interim Financials and the assets listed on Schedule 5.10 have been distributed to the 5J Member prior to the Effective Date:

(i)            5J has a secured claim for an account payable owed by MDC Texas Operator LLC (“MDC”) in the approximate amount of $500,000.00. On November 8, 2019, MDC filed a Chapter 11 Voluntary Petition in Lead Case 1:19-bk-12269 in the Delaware Bankruptcy Court. SMGI, 5J and the 5J Member have agreed that the 5J claim against MDC can be assigned to the 5J Member. 5J Member will have the sole authority and discretion to pursue any efforts to collect the MDC receivable in the bankruptcy proceeding at the 5J Member’s sole cost and expense. No adjustment to the Purchase Price will be required regardless of the outcome of the efforts to collect on the MDC claim; and

(ii)           the account receivable payable to 5J by Impetro Operating LLC in the amount of $224,500.00 that is more than 90 days from the date of the invoice.

ARTICLE 6
CONDITIONS TO CLOSING

6.1           Conditions to Obligations of 5J and the 5J Member.  The obligations of 5J and the 5J Member to consummate the transaction under this Agreement in accordance with Article 9 shall be subject to each of the following conditions:

(a)                Closing Deliveries.  At the Closing, SMGI shall have delivered or caused to be delivered to 5J and the 5J Member the following:

(i)       resolutions duly adopted by the board of directors of SMGI authorizing and approving the Transaction and the execution, delivery and performance of this Agreement;

(ii)      the SMGI Preferred Shares, the Cash Consideration, the 10% Secured Promissory Note and related Guaranty and all documents related to the Debt Assumption to the 5J Member;

(iii)     duly executed releases releasing the 5J Member from all personal guaranties relating to debts owed by 5J as of Closing; except as provided in the Letter Agreement between the Parties executed contemporaneously with this Agreement; and

(iv)     such other documents as 5J or the 5J Member may reasonably request in connection with the transactions contemplated hereby.

(b)                Representations and Warranties to be True.    The representations and warranties of SMGI herein contained shall be true in all material respects at the Closing with the same effect as though made at such time.  SMGI shall have performed in all material respects all obligations and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by them at or prior to the Closing.

(c)                 SMGI shall have received the opinion of SMGI counsel in form and substance reasonably satisfactory to 5J;

(d)                SEC Filings.  At the Closing, SMGI will be current in all SEC filings required by it to be filed.

(e)                 Purchaser Financing. SMGI shall have received financing sufficient to: (i) satisfy the Cash Consideration portion of the Purchase Price; and (ii) refinance or payoff the current 5J working capital line of credit and refinance the Debt Assumption amount.

(f)                 No Actions or Legal Proceedings. There shall be no pending or threatened litigation with respect to this Agreement or the transactions contemplated hereby, prior to the execution hereof.

(g)                No Material Adverse Change. There shall have been no material adverse change in SMGI’s business, financial condition, prospects, assets, or operations since September 30, 2019, except for such changes as may result from matters disclosed in writing by SMGI to 5J, prior to execution of this Agreement.

6.2           Conditions to Obligations of SMGI. The obligations of SMGI to consummate the transaction under this Agreement in accordance with Article 9 shall be subject to each of the following conditions:

(a)                 Closing Deliveries.    On the Closing Date, 5J or the 5J Member shall have delivered to SMGI the following:

(i)             an Assignment of Membership Interest representing the 5J Interests, duly executed effecting the transfer thereof to SMGI;

(ii)            this Agreement duly executed by 5J and the 5J Member;

(iii)          5J’s audited financial statements for the years ended December 31, 2018 and 2017, and unaudited financial statements for the nine-month period ended September 30, 2019, the cost of which shall be the responsibility of the 5J Member;

(iv)          a duly executed managing member certificate certifying that the representations and warranties of 5J and the 5J Member included herein are true and correct, in all material respects, as of the Closing Date;

(v)           SMGI shall have received the opinion of 5J’s counsel in form and substance reasonably satisfactory to SMGI;

(vi)          Employment agreements shall have been entered into between 5J and each of James E. Frye, Jr., Melissa Cox, Gena Lohmeyer and Jeffrey Schwab in the forms attached hereto as Exhibit 6.2(a)(vi);

(vii)         duly executed resignation letters of James E. Frye, Jr. as Manager and from all officer positions of 5J; and

(viii)        such other documents as SMGI may reasonably request in connection with the transactions contemplated hereby.

(b)                 Representations and Warranties to be True.    The representations and warranties of 5J and the 5J Member herein contained shall be true in all material respects at the Closing with the same effect as though made at such time.  5J and the 5J Member shall have performed in all material respects all obligations and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by them at or prior to the Closing

(c)                 No Material Adverse Change. There shall have been no material adverse change in 5J’s business, financial condition, prospects, assets, or operations since September 30, 2019, except for such changes as may result from matters disclosed in writing by 5J to SMGI, prior to execution of this Agreement.

(d)                No Liens or Encumbrances. There shall be no liens or encumbrances against 5J or the 5J Interests, other than those to which SMGI consents to in writing.

(e)                No Actions or Legal Proceedings. There shall be no pending or threatened litigation with respect to this Agreement or the transactions contemplated hereby, prior to the execution hereof.

ARTICLE 7
INDEMNIFICATION AND RELATED MATTERS

7.1           Survival of Representations and Warranties.  The representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement, including any disclosure schedule, shall survive until twelve (12) months after the Closing Date (except for with respect to Taxes, which shall survive for the applicable statute of limitations plus 90 days, and covenants that by their terms survive for a longer period). The right to any remedy based upon such representations and warranties shall not be affected by any investigation conducted with respect to, or any knowledge acquired at any time, whether before or after execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of any such representation or warranty.

7.2           Indemnification.

(a)                 SMGI shall indemnify and hold the 5J Member harmless for, from and against any and all liabilities, obligations, damages, losses, deficiencies, costs, penalties, interest and expenses (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever) (collectively, “Losses”) to which the 5J Member may become subject resulting from or arising out of: (i) any breach of a representation, warranty or covenant made by SMGI as set forth herein; or (ii) a third party demand that the 5J Member pay any obligation of 5J pursuant to a personal guarantee granted by the 5J Member prior to Closing.

(b)                The 5J Member shall indemnify and hold SMGI and SMGI’s officers and directors (“SMGI’s Representatives”) harmless for, from and against any and all Losses to which SMGI or SMGI’s Representatives may become subject resulting from or arising out of (1) any breach of a representation, warranty or covenant made by 5J or the 5J Member as set forth herein; or (2) any and all liabilities arising out of or in connection with: (A) any of the assets of 5J prior to the Closing; (B) the operations of 5J prior to the Closing; or (C) the 5J Interests.

7.3           Notice of Indemnification.  Promptly after the receipt by any indemnified party (the “Indemnitee”) of notice of the commencement of any action or proceeding against such Indemnitee, such Indemnitee shall, if a claim with respect thereto is or may be made against any indemnifying party (the “Indemnifying Party”) pursuant to this Article 7, give such Indemnifying Party written notice of the commencement of such action or proceeding and give such Indemnifying Party a copy of such claim and/or process and all legal pleadings in connection therewith. The failure to give such notice shall not relieve any Indemnifying Party of any of its indemnification obligations contained in this Article 7, except where, and solely to the extent that, such failure actually and materially prejudices the rights of such Indemnifying Party. Such Indemnifying Party shall have, upon request within thirty (30) days after receipt of such notice, but not in any event after the settlement or compromise of such claim, the right to defend, at its own expense and by its own counsel reasonably acceptable to the Indemnitee, any such matter involving the asserted liability of the Indemnitee; provided, however, that if the Indemnitee determines that there is a reasonable probability that a claim may materially and adversely affect it, other than solely as a result of money payments required to be reimbursed in full by such Indemnifying Party under this Article 7 or if a conflict of interest exists between Indemnitee and the Indemnifying Party, the Indemnitee shall have the right to defend, compromise or settle such claim or suit; and, provided, further, that such settlement or compromise shall not, unless consented to in writing by such Indemnifying Party, which shall not be unreasonably withheld, be conclusive as to the liability of such Indemnifying Party to the Indemnitee. In any event, the Indemnitee, such Indemnifying Party and its counsel shall cooperate in the defense against, or compromise of, any such asserted liability, and in cases where the Indemnifying Party shall have assumed the defense, the Indemnitee shall have the right to participate in the defense of such asserted liability at the Indemnitee’s own expense. In the event that such Indemnifying Party shall decline to participate in or assume the defense of such action, prior to paying or settling any claim against which such Indemnifying Party is, or may be, obligated under this Article 7 to indemnify an Indemnitee, the Indemnitee shall first supply such Indemnifying Party with a copy of a final court judgment or decree holding the Indemnitee liable on such claim or, failing such judgment or decree, the terms and conditions of the settlement or compromise of such claim. An Indemnitee’s failure to supply such final court judgment or decree or the terms and conditions of a settlement or compromise to such Indemnifying Party shall not relieve such Indemnifying Party of any of its indemnification obligations contained in this Article 7, except where, and solely to the extent that, such failure actually and materially prejudices the rights of such Indemnifying Party. If the Indemnifying Party is defending the claim as set forth above, the Indemnifying Party shall have the right to settle the claim only with the consent of the Indemnitee.

ARTICLE 8
COVENANT NOT TO COMPETE; NON-SOLICITATION.

In consideration of the transactions contemplated by this Agreement, and in order to protect and preserve the legitimate business interests of SMGI, the 5J Member has executed and agreed to be bound by that certain Noncompetition and Nonsolicitation Agreement by and between Employer, 5J Trucking, LLC, SMG Industries, Inc. and Employee (the “Noncompetition Agreement”). The terms and conditions of that Noncompetition Agreement are incorporated herein and made a part hereof by this reference.

ARTICLE 9
CONDITIONAL EXECUTION

9.1           The Parties agree to execute this Agreement and all ancillary documents necessary to consummate the transaction contemplated by this Agreement on or before February __, 2020; provided that the executed documents will not be delivered to the other Party or deemed to be effective unless and until all Lender consents, release of liens relating to existing 5J debt and other actions required by the ancillary documents executed by the Parties have been obtained by the applicable Party. All executed documents will be held in escrow by counsel for the applicable Party until such additional actions and documents have been obtained. Upon receipt of all necessary documents, the executed originals will be delivered to the other Party to consummate the transaction set forth in this Agreement (the “Closing”). At Closing SMGI will pay the cash portion of the Purchase Price to the 5J Member by wire transfer and SMGI will complete the payoffs contemplated by Section 1.1 of this Agreement.

9.2           The Parties acknowledge and agree that execution of the documents in advance of Closing will be to the mutual benefit of the Parties to enable the Parties to obtain all of the necessary consents and transfers relating to existing notes and, obtaining the necessary Department of Transportation permit and authorization transfers and other ancillary actions necessary for consummation of the intended transaction.

9.3           Notwithstanding the date in which Closing occurs, the transfer of ownership of 5J shall be effective as of the Closing Date.

ARTICLE 10
GENERAL PROVISIONS

10.1         Notices.  All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a .PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 12.2):

10.2         Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References to Sections and Articles refer to sections and articles of this Agreement unless otherwise stated.

10.3         Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated and the Parties shall negotiate in good faith to modify this Agreement to preserve each Party's anticipated benefits under this Agreement.

10.4        Miscellaneous. This Agreement (together with all schedules, documents and instruments referred to herein): (i) constitutes the entire agreement and supersedes all other prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof; (ii) except as expressly set forth herein, is not intended to confer upon any other person any rights or remedies hereunder; and (iii) shall not be assigned by operation of law or otherwise, except as may be mutually agreed upon by the Parties hereto.

10.5         Separate Counsel. Each Party hereby expressly acknowledges that it has been advised to seek its own separate legal counsel for advice with respect to this Agreement.

10.6         Governing Law; Venue. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas.  Any and all actions brought under this Agreement shall be brought in the state or federal courts of Texas, located in the city of Houston, and each Party hereby waives any right to object to the convenience of such venue.

10.7         Counterparts and Facsimile Signatures. This Agreement may be executed in two or more counterparts, which together shall constitute a single agreement.  This Agreement and any documents relating to it may be executed and transmitted to any other Party by facsimile or email as a .pdf copy, which facsimile or email shall be deemed to be, and utilized in all respects as, an original, wet-inked document.

10.8         Amendment. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by each of SMGI, 5J and the 5J Member.

10.9         Parties in Interest: No Third-Party Beneficiaries. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective heirs, legal representatives, successors and assigns of the Parties hereto. This Agreement shall not be deemed to confer upon any person not a party hereto any rights or remedies hereunder.

10.10       Waiver. No waiver by any party of any default or breach by another party of any representation, warranty, covenant or condition contained in this Agreement shall be deemed to be a waiver of any subsequent default or breach by such party of the same or any other representation, warranty, covenant or condition. No act, delay, omission or course of dealing on the part of any party in exercising any right, power or remedy under this Agreement or at law or in equity shall operate as a waiver thereof or otherwise prejudice any of such party's rights, powers and remedies. All remedies, whether at law or in equity, shall be cumulative and the election of any one or more shall not constitute a waiver of the right to pursue other available remedies.

10.11       Expenses.  At or prior to the Closing, the Parties hereto shall pay all of their own expenses relating to the transactions contemplated by this Agreement, including, without limitation, the fees and expenses of their respective counsel and financial advisers.

10.12        Recitals Incorporated.  The recitals of this Agreement are incorporated herein and made a part hereof.

[SIGNATURE PAGES FOLLOW]

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

[SIGNATURE PAGE OF SMGI FOLLOWS]

[SIGNATURE PAGE OF SMGI]

SCHEDULE 2.3

ASSETS

Schedule 2.3

SCHEDULE 2.11

LITIGATION

Schedule 2.11

SCHEDULE 2.12

LEGAL COMPLIANCE

Schedule 2.12

Page 1

Schedule 2.12
Page 2

Schedule 2.12
Page 3

SCHEDULE 2.13

EMPLOYEES

SCHEDULE 2.14

INSURANCE

Schedule 2.14

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Schedule 2.14

Page 8

Schedule 2.14

Page 9

Schedule 2.14

Page 10

Schedule 2.14

Page 11

Schedule 2.14

Page 12

Schedule 2.14

Page 13

Schedule 2.14

Page 14

Schedule 2.14

Page 15

Schedule 2.14

Page 16

Schedule 2.14

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Schedule 2.14

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Schedule 2.14

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Schedule 2.14

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Schedule 2.14

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Schedule 2.14

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SCHEDULE 5.10

EXCLUDED ASSETS

1.       5J has a secured claim for an account payable owed by MDC Texas Operator LLC (“MDC”) in the approximate amount of $500,000.00. On November 8, 2019, MDC filed a Chapter 11 Voluntary Petition in Lead Case 1:19-bk-12269 in the Delaware Bankruptcy Court. SMGI, 5J and the 5J Member have agreed that the 5J claim against MDC can be assigned to the 5J Member. 5J Member will have the sole authority and discretion to pursue any efforts to collect the MDC receivable in the bankruptcy proceeding at the 5J Member’s sole cost and expense. No adjustment to the Purchase Price will be required regardless of the outcome of the efforts to collect on the MDC claim; and

2.       the account receivable payable to 5J by Impetro Operating LLC in the amount of $224,500.00 that is more than 90 days from the date of the invoice.

Schedule 5.10

EXHIBIT 1.1

FORM OF $2,000,000 SELLER NOTE

THE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE OR UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE SECURITIES ARE RESTRICTED AND MAY NOT BE OFFERED, RESOLD, PLEDGED OR TRANSFERRED EXCEPT AS PERMITTED UNDER THE ACT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.

5J OILFIELD SERVICES, LLC

10% SECURED PROMISSORY NOTE

THIS PROMISSORY NOTE is issued by 5J Oilfield Services, LLC, a Texas limited liability (the “Company”), and is designated as its 10% Secured Promissory Note due on the Maturity Date, as defined below.

FOR VALUE RECEIVED, the Company hereby promises to pay to James E. Frye, Jr., or permitted assigns (the “Holder”), the principal sum of TWO MILLION DOLLARS (US $2,000,000) and to pay simple interest on the principal sum at a rate of ten percent (10%) per annum (the “Stated Rate”). Accrual of interest shall commence on the first business day to occur after the Effective Date and continue until payment in full of the principal sum has been made or duly provided for, in accordance with Section 2 below. All unpaid principal and accrued but unpaid interest shall be due and payable on February 1, 2023 (the “Maturity Date”), except as otherwise provided herein. If the Monthly Payment Date (defined below), Quarterly Payment Date (defined below) or Maturity Date is not a business day in the State of Texas, then such payment shall be made on the next succeeding business day. The Company will pay the principal of this Note on each Quarterly Payment Date or the Maturity Date, as applicable, and the interest accruing under this Note on each Monthly Payment Date, or as otherwise set forth below, by check or wire transfer to the person who is then the registered holder of this Note.

This Note is subject to the following additional provisions:

1.                  Purchase Agreement. This Note is issued pursuant to the Membership Interest Purchase Agreement (the “Purchase Agreement”), entered into by and between SMG Industries, Inc., a Delaware corporation (the “Guarantor”) and Holder (defined below) on February __, 2020 (the “Effective Date”) pursuant to which the Guarantor is acquiring from Holder, and Holder is selling to the Guarantor, the 5J Interests (as that term is defined in the Purchase Agreement) in exchange for the Purchase Price (as that term is defined in the Purchase Agreement), which includes, among other consideration, this Note. To the extent there is a conflict in the provisions set forth in the Purchase Agreement and this Note, the Purchase Agreement shall control.

2.                  Payment of Principal and Interest. Accrued interest shall be paid monthly beginning in March 2020 on or before the fifth (5^th) business day of each month for the interest due for the preceding calendar month (the “Monthly Payment Date”), regardless of Availability (as defined herein). Payments of principal under the Note shall be made commencing June 30, 2020, provided the requirements set forth below are satisfied. At the end of each calendar quarter, commencing with the quarterly period ended June 30, 2020, the Company shall make a principal payment to Holder, provided the borrowing base availability (“Availability” or “BBA”), as defined in the revolving accounts receivable assignment and term loan financing and security agreement entered into by and between the Company and Amerisource Funding Inc. (“Amerisource Agreement”) dated even date herewith, exceeds $1,500,000. Such quarterly principal payment shall be equal to the difference between the Availability and $1,500,000. For purposes of this Section 2, Availability shall be measured as an average of the daily Availability during the ten-day period prior to the end of the calendar quarter in which payment is being measured. Any such payment shall be applied first towards outstanding principal. Principal payments shall be made within ten (10) days of the end of each quarterly period (“Quarterly Payment Date”). All principal and accrued interest outstanding as of the Maturity Date shall be paid to Holder on the Maturity Date. In addition to the Company’s customary monthly operating expenses, the Company shall allocate $92,000 per month to capital expenditures (“Cap Ex Budget”). The Cap Ex Budget will remain at a minimum of $92,000 during the first twelve (12) months of the term of this Note. On each twelve-month anniversary of this Note the Cap Ex Budget will be reviewed by the Company’s management. After the end of the first twelve (12) months from the date of this Note, to the extent the capital expenditures will be paid out of Company cash that would reduce Availability rather than through Company debt, the cash expenditure shall require the prior written consent of Holder.

In determining the BBA, the monthly Cap Ex Budget shall be allocated towards the BBA whether or not it has actually been expended during any such quarterly period. Notwithstanding the foregoing, principal payments under the Note will not be made by the Company to Holder prior to the Maturity Date if the Company’s EBITDA for the trailing twelve (12) month period does not equal or exceed a 1-1 ratio to the Company’s debt service payments to Amerisource and Utica Leasco LLC (“Utica”) pursuant to the Amerisource Agreement and the Master Lease Agreement entered into by and between the Company and Utica dated even date herewith.

3.                  Computation of Interest. Interest on the outstanding principal balance of this Note shall be computed at the Stated Rate for the actual number of days elapsed in a year consisting of three hundred sixty-five (365) days, unless the maximum nonusurious rate of interest permitted by whichever of applicable federal or Texas laws permits the higher interest rate, stated as a rate per annum (the “Maximum Rate”) would thereby be exceeded, in which event, to the extent necessary to avoid exceeding the Maximum Rate, interest shall be computed on the basis of the actual number of days elapsed in the applicable calendar year in which accrued. Determination of the rate of interest for the purposes of determining whether this Note is usurious shall be made by amortizing, prorating, allocating and spreading during the time this Note is outstanding all interest or other sums deemed to be interest at any time contracted for, charged or received from the Company. Neither the Company, nor any other parties now or hereafter becoming liable for the payment of this Note shall ever be liable for interest in excess of the Maximum Rate and the provisions of this Section 3 and Section 4 shall control over all other provisions of this Note.

4.                  No Usury Intended. In no case or event shall the aggregate of all interest on the unpaid principal of this Note, accrued or paid from the date hereof ever exceed the Maximum Rate. The Company shall never be liable for interest in excess of the Maximum Rate. If, for any reason, the interest paid or received on this Note during its full term produces a rate which exceeds the Maximum Rate, the holder of this Note shall credit against the principal of this Note (or, if such indebtedness shall have been paid in full, shall refund to the payor of such interest) such portion of said interest as shall be necessary to cause the interest paid on this Note to produce a rate equal to the Maximum Rate. Notwithstanding anything herein to the contrary, the provisions of this Section 4 shall control all agreements, whether now or hereafter existing and whether written or oral, between the Company and the Holder.

5.                  Security and Subordination. This Note and the payment thereof shall be secured by all of the Company’s accounts receivable, subject to a prior security interest in the Company’s accounts receivable by Amerisource Funding, Inc. This note and payment thereof shall be guaranteed by the Guarantor pursuant to the terms of a guaranty executed by the Guarantor dated of even date herewith (the “Guaranty”). Pursuant to such Guaranty being executed contemporaneously with the execution of this Note, Holder is hereby authorized to file a UCC-1 Financing Statement and all additional filings necessary to perfect the security interest and guaranty hereby granted.

6.                  Tax Withholding. Holder shall deliver to the Company an IRS Form W-9 and the Company shall not be required to withhold from all payments of interest on this Note any amounts under the applicable provisions of the United States income tax laws or other applicable laws at the time of such payments. Holder shall be responsible for paying all taxes due on payments made pursuant to this Note and shall execute and deliver to the Company and any applicable taxing agency all required documentation in connection therewith.

7.                  Assignment and Transfer. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (the “Act”), and other applicable state and foreign securities laws. The Holder shall deliver written notice to the Company of any proposed transfer of this Note by the Holder. In the event of any proposed transfer of this Note by the Holder, the Company may require, prior to issuance of a new Note in the name of such other person, that it receive reasonable transfer documentation including legal opinions that the issuance of the Note in such other name does not and will not cause a violation of the Act or any applicable state or foreign securities laws. Prior to due presentment for transfer of this Note by the Holder, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s Note Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Note may be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. This Note and the obligations of the Company hereunder shall not be assigned or transferred by the Company (or by operation of law) without the prior written consent of the Holder.

8.                  Maturity Date. On the Maturity Date, the Company will pay any remaining principal and all accrued but unpaid interest due on this Note, less any amounts required by law to be deducted, to the registered holder of this Note and addressed to such holder at the last address appearing on the Note Register. The Company can prepay the Note, in whole or in part, without penalty at any time prior to the Maturity Date in its sole discretion, without the prior written consent of Holder. In the event the assets of the Guarantor are sold, foreclosed upon or otherwise transferred, in one or more transaction(s) such that (a) a change of control of the Company occurs in which the Guarantor no longer owns at least seventy-five percent (75%) of the membership interest in the Company or all or substantially all of the assets of the Company, or (b) a change of control of the Company’s affiliate 5J Trucking, LLC (“5J Trucking”) occurs in which the Guarantor no longer owns at least seventy-five percent (75%) of the membership interest in 5J Trucking or all or substantially all of the assets of 5J Trucking (each being a “Change In Control”), then all remaining principal and all accrued but unpaid interest shall be immediately due and payable on the date of closing of the transaction(s) that caused the Change In Control without presentment, demand or notice of any kind, all of which are hereby waived by the Company and by the Guarantor.

9.                  Company Obligation. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the coin or currency herein prescribed. This Note is a direct obligation of the Company.

10.              Successors and Assigns. No recourse shall be had for the payment of the principal of, or the interest on, this Note, or for any claim based hereon, or otherwise in respect hereof, against any incorporator, shareholder, employee, officer or director, as such, past, present or future, of the Company whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released. This Note and the Guaranty, and obligation of the Company and the Guarantor thereunder shall be pending upon the successors and assigns of the Company and the Guarantor.

11.              Investment Purposes. The Holder of the Note, by acceptance hereof, agrees that this Note is being issued by the Company as payment of a portion of the Purchase Price, that this Note is acquired to be held for investment and that such Holder will not offer, sell or otherwise dispose of this Note except under circumstances which will not result in a violation of the Act or any applicable state “Blue Sky” or foreign laws or similar laws relating to the sale of securities.

12.              Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Texas, without giving effect to provisions thereof regarding conflict of laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Texas for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending, through certified mail or overnight courier, a copy thereof to such party at the address for such notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

13.              Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing, shall be given in the manner and at the addresses set froth in the Purchase Agreement, and shall be deemed to have been given in accordance with the terms of the Purchase Agreement.

Then, or at any time thereafter, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon the occurrence of any Event of Default and during the continuance thereof, the then outstanding principal amount of this Note shall bear interest at a rate per annum (based on the actual number of days that principal is outstanding over a year of 360 days) of eighteen percent (18%) (the “Default Rate”). The Default Rate shall continue to apply whether or not judgment shall be entered on this Note. The Default Rate is imposed as liquidated damages for the purpose of defraying the Holder’s expenses incident to the handling of delinquent payments, but are in addition to, and not in lieu of, the Holder’s exercise of any rights and remedies hereunder, or under applicable law, and any fees and expenses of any agents or attorneys which the Holder may employ. In addition, the Default Rate reflects the increased credit risk to the Holder of carrying a loan that is in default. The Company agrees that the Default Rate is a reasonable forecast of just compensation for anticipated and actual harm incurred by the Holder, and that the actual harm incurred by the Holder cannot be estimated with certainty and without difficulty.

15.              Miscellaneous Provisions. Time is of the essence with respect to this Note. This Note may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. In the event any one or more provisions of this Note are determined to be unenforceable, the provisions in question shall be reformed so as to effect the intent of the parties and the remaining provisions shall be enforced.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized.

Dated: February __, 2020

The indebtedness evidenced hereby has been subordinated in favor of Utica Leaseco, LLC pursuant to the terms of a Subordination Agreement dated as of February ___, 2020 for so long as any of the Senior Indebtedness, as defined therein, remains unpaid.  The rights and interests of any holder, transferee, or party claiming any interest under or as a result of this instrument, are subject to all terms of the referenced agreement.

EXHIBIT 6.2(a)(vi)

FORM OF EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT ("Agreement") is made as of this __ day of February, 2020 (the “Effective Date”) by and between 5J Oilfield Services, LLC, a Texas limited liability company, having an office at 4090 US-79, Palestine, Texas 75801 (hereinafter referred to as “Employer” or “Company”) and James E. Frye, Jr. an individual, with an address at c/o 4090 US-79, Palestine, Texas 75801 (hereinafter referred to as “Employee”), each of Employer, Company and Employee may be referred to herein individually as a “Party” and collectively as the “Parties”.

W I T N E S S E T H:

WHEREAS, Employer desires to employ Employee as President of Employer; and

WHEREAS, Employee is willing to be employed as the President of Employer in the manner provided for herein, and to perform the duties of the President of Employer upon the terms and conditions herein set forth;

NOW, THEREFORE, in consideration of the promises and mutual covenants herein set forth it is agreed as follows:

1.       Employment of President of Employer. Employer hereby employs Employee as the Vice President of Employer.

2.       Term.

a.       Subject to Section 9 and Section 10 below, the term of this Agreement shall be for a period of thirty-six (36) months commencing on the Effective Date (the “Term”). The Term of this Agreement shall be automatically extended for additional one (1) year periods, unless either party notifies the other in writing at least ninety (90) days prior to the expiration of the then existing Term of its intention not to extend the Term. During the Term, Employee shall devote all of his business time and efforts to Employer and its subsidiaries and affiliates.

3.       Duties. The Employee shall have operational and managerial responsibility presently granted by Employer and shall perform those functions generally performed by persons of such title and position. Employee’s supervisor may change, add or subtract duties and responsibilities of Employee from time to time as needed. Employee shall report directly to the CEO of Employer unless another supervisor is appointed by the Company.

4.       Compensation.

a.       (i) Employee shall be paid a base pay of Seventy-Four Thousand Dollars and No/100 ($74,000.00) annually during the remaining Term of this Agreement (“Base Compensation”). Such Base Compensation shall be adjusted as soon as reasonably practicable after March 1, 2020, with such adjustment to be effective for all pay periods beginning on or after March 1, 2020, so that Base Compensation is equal to the amount which would cause Employee’s monthly net take home pay to be equal to Five Thousand ($5,000.00) per month, after giving effect to any change in the cost of required health insurance premiums. Employee shall be paid bi-weekly and in accordance with the policies of the Employer during the term of this Agreement, but not less than twice a month.

(ii) Employee is eligible for an annual performance bonus, if any, which Employee shall earn in the event that Employer attains certain performance milestones as established by the Company’s Compensation Committee (“Bonus”). The Compensation Committee shall review such performance milestones at least annually on the anniversary date of this Agreement, and shall in its sole discretion, authorize Employer to pay all of such annual or special bonuses earned promptly after its determination that the performance milestones have been met. Employee may also be entitled to option grants for the common stock of Employer’s parent company, SMG Industries Inc. (“Parent Company”), at the discretion of the Management Committee. The Management Committee may from time to time approve additional bonus plans, grants or awards for Employee, in each case as such committee deems appropriate in its sole discretion.

b.       Employer shall include Employee in its health insurance program, which shall include payment of premiums in accordance with the Company’s current policies.

c.        Employee shall have the right to participate in any other employee benefit plans established by Employer and maintained generally for other executives, including but not limited to any matching 401(k) plan.

d.       Employee shall be entitled to four (4) weeks of paid vacation per year. The Parties agree that the vacation is a ‘use it or lose it’ policy, as it does not carry over to other years and cannot be cashed in in lieu of use.

5.        Expenses. Employee shall be reimbursed for all of his actual out-of-pocket expenses incurred in the performance of his duties hereunder, provided such expenses are reasonably acceptable to Employer, which approval shall not be unreasonably withheld by Employer, for business related travel and entertainment expenses. Employee shall submit to Employer detailed receipts, according to IRS guidelines, with respect thereto. Employer shall also reimburse Employee for Employee’s monthly cell phone costs, all to be used for business purposes related to Employer.

6.       Secrecy. At no time shall Employee disclose to anyone any confidential or secret information (not already constituting information available to the public) concerning (a) internal affairs or proprietary business operations of Employer, or (b) any trade secrets, new product developments, patents, programs or programming, especially unique processes or methods.

7.        Withholding Taxes. All payments and benefits to Employee under the Agreement shall be subject to and reduced by any federal, state and / or local taxes or other amounts required to be withheld under any applicable law.

8.        Noncompetition and Nonsolicitation Agreement. Contemporaneously with execution of this Agreement, Employee has executed and agreed to be bound by that certain Noncompetition and Nonsolicitation Agreement by and between Employer, 5J Trucking, LLC, SMG Industries, Inc. and Employee dated even date herewith (the “Noncompetition Agreement”). The terms and conditions of that Noncompetition Agreement are incorporated herein and made a part hereof by this reference.

9. Termination.

a.       Termination by Employer: (i) Employer may terminate this Agreement upon written notice for Cause. For purposes hereof, "Cause" shall mean (A) Employee's misconduct as could reasonably be expected to have a material adverse effect on the business and affairs of Employer, (B) the Employee’s violation of either the Company’s Code of Ethics as then in effect, or any lawful Member or Managing Member imposed employee guidelines known to Employee, as determined by the Management Committee in its sole discretion from time to time, (C) the Employee's disregard of lawful instructions of Employer’s Management Committee consistent with Employee's position relating to the business of Employer or neglect of duties or failure to act, which, in each case, could reasonably be expected to have a material adverse effect on the business and affairs of Employer or Employer’s parent company, (D) if Employee should be unable or incapable of performing the essential functions of his job position for a period of thirty (30) consecutive days in any twelve (12) month period, or one hundred twenty (120) days during any twelve (12) month period, whether or not such days are consecutive (as used herein, “unable or incapable of performing essential job functions” shall mean the inability of Employee, on account of a mental, physical, or other condition, to perform his essential job functions as determined by at least two of three medical physicians or by agreement of the Company and Employee or his designee (if the determination is to be made by medical physicians, the Employee or his designee shall appoint one such physician, the Company shall appoint one, and the two so appointed shall appoint the third medical physician)) (E) engaging by the Employee in conduct that constitutes activity in violation of the Noncompetition Agreement with Employer or Employer’s parent company, ; (F) the conviction of Employee for the commission of a felony; and/or (G) the habitual abuse of controlled substances. Except with respect to (B), (C) and (D) above, notwithstanding anything to the contrary in this Section 9(a)(i), Employer may not terminate Employee's employment under this Agreement for Cause unless Employee shall have first received notice from his or her supervisor advising Employee of the specific acts or omissions alleged to constitute Cause, and such acts or omissions continue after Employee shall have had a reasonable opportunity (at least 10 days from the date Employee receives the notice from their supervisor) to correct the acts or omissions so complained of.

(ii)       This agreement automatically shall terminate upon the death of Employee, except that Employee's estate shall be entitled to receive any amounts that Employee would have been entitled to receive under Section 9(a)(iii) below if his employment had terminated pursuant to Section 9(a)(i) above.

(iii)       In the event that Employee’s employment is terminated pursuant to Section 9(a)(i) above, Employee shall be entitled to receive: (a) any owned or accrued past due Base Compensation, (b) unreimbursed business expenses, and (c) accrued/unused vacation time, if any, all of (a) – (c) shall be measured through the termination date in accordance with Section 9(a)(i) above. In addition to the immediately preceding sentence, if the Employee’s employment is terminated pursuant to Section 9(a)(i)(D) or 9(a)(ii) above, Employee and Employee’s dependents, as applicable, shall be entitled at Employee’s expense to the same level of health (i.e. medical, vision and dental) coverage and benefits as in effect for Employee on the day immediately preceding the day of termination of employment; provided, however that (A) Employee constitutes a qualified beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue Code of 1986, as amended; and (B) Employee elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), within the time period prescribed pursuant to COBRA, and the Company shall continue to provide Employee with such health coverage until the earlier of (i) the date Employee is no longer eligible to receive continuation coverage pursuant to COBRA, or (ii) twelve (12) months from the termination date. Additionally, Employee shall have ninety (90) days to exercise all vested options, which thereafter shall immediately expire.

b.       Termination by Employee:

(i)       Employee shall have the right to terminate his employment under this Agreement upon 30 days' notice to Employer given within 90 days following the occurrence of any of the following events (A) through (D):

(A)       Employer acts to change the geographic location of the performance of Employee’s duties from the East Texas area. For purposes of this Agreement, the East Texas area shall be deemed to be the area within a 70 mile radius of Palestine, Texas.

(B)       A Material Reduction (as hereinafter defined) in Employee's rate of Base Compensation, or Employee's other benefits. "Material Reduction" shall mean a cumulative twenty percent (20%) differential or more;

(C)       A failure by Employer to obtain the assumption of this Agreement by any successor;

(D)       A material breach of this Agreement by Employer, which is not cured within thirty (30) days of written notice of such breach by Employer;

(ii) Anything herein to the contrary notwithstanding, Employee may terminate this Agreement for any reason or no reason upon thirty (30) days written notice to Employer.

(iii) If Employee shall terminate this Agreement under Section 9(b)(i), Employee shall be entitled to receive: (a) one (1) month’s salary at Employee’s then current yearly salary rate, (the “Severance Payment”), (b) reimbursement by Employer of 50% of the C.O.B.R.A. premiums for three (3) months after such termination, (c) payment of all unpaid earned Base Compensation as of the date of termination, (d) payment of all unreimbursed business expenses incurred through the date of termination, (e) payment for all unused vacation time accrued through the date of termination, (f) payment of a pro rata portion of Employee’s annual bonus as of the date of termination for the termination year, if any, and (g) the right to exercise all vested options within 90 days of the date of termination, all of which shall expire thereafter. Other than the payments described in (a)-(g) of this section 9(b)(iii), Employer shall have no further obligation to compensate Employee pursuant to Section 4 above.

(iv) If Employee shall terminate this Agreement pursuant to Section 9(b)(ii), Employee shall only be entitled to receive the compensation set forth in 9(b)(iii)(c), (d), (f) and (g) above and Employer shall have no further obligation to compensate Employee pursuant to Section 4 above.

a. If the Employer shall terminate Employee's employment under this Agreement in any way that is a breach of this Agreement by Employer, the following shall apply:

(i)       Employee shall be entitled to receive the compensation set forth in Section 9(b)(iii) above and Employer shall have no further obligation to compensate Employee pursuant to Section(s) 4 or 9 above.

b.       In the event of termination of Employee's employment pursuant to Section 9(b)(ii) of this Agreement, the Noncompetition Agreement shall remain in full force and effect for twenty-four (24) months after such termination.

11.       Remedies.

Employer recognizes that because of Employee's special talents, in the event of termination by Employer hereunder (except under Section 9(a)(i) or (iii)) or in the event of termination by Employee hereunder, before the end of the agreed Term, the Employer acknowledges and agrees that the provisions of this Agreement regarding further payments of base salary, bonuses and the exercisability of rights constitute fair and reasonable provisions for the consequences of such termination, do not constitute a penalty, and such payments and benefits shall not be limited or reduced by amounts Employee might earn or be able to earn from any other employment or ventures during the remainder of the agreed term of this Agreement.

12.       Excise Tax.   In the event that any payment or benefit received or to be received by Employee in connection with a termination of his employment with Employer would constitute a "parachute payment" within the meaning of Code Section 280G or any similar or successor provision to 280G and/or would be subject to any excise tax imposed by Code Section 4999 or any similar or successor provision then Employer shall assume all liability for the payment of any such tax and Employer shall immediately reimburse Employee on a "grossed-up" basis for any income taxes attributable to Employee by reason of such Employer payment and reimbursements.

13.       Attorneys' Fees and Costs. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which he may be entitled.

14.       Entire Agreement; Survival. This Agreement contains the entire agreement between the parties with respect to the transactions contemplated herein and supersedes, effective as of the date hereof any prior agreement or understanding between Employer and Employee with respect to Employee's employment by Employer. The unenforceability of any provision of this Agreement shall not affect the enforceability of any other provision. This Agreement may not be amended except by an agreement in writing signed by the Employee and the Employer, or any waiver, change, discharge or modification as sought. Waiver of or failure to exercise any rights provided by this Agreement and in any respect shall not be deemed a waiver of any further or future rights.

The provisions of Sections 4, 7, 8, 9(a)(ii), 9(a)(iii), 9(b)(iii), 10, 11, 12, 13, 14, 16, 17 and 18 shall survive the termination of this Agreement.

15.       Assignment. This Agreement shall not be assigned to other parties without the written consent of Employer and Employee, which may be withheld for any reason.

16.        Governing Law. This Agreement and all the amendments hereof, and waivers and consents with respect thereto shall be governed by the laws of the State of Texas, without regard to the conflicts of laws principles thereof.

17.       Notices. All notices, responses, demands or other communications under this Agreement shall be in writing and shall be deemed to have been given when

a.       delivered by hand;

b.       sent by telex or telefax, (with receipt confirmed), provided that a copy is mailed by registered or certified mail, return receipt requested; or

c.        received by the addressee as sent by express delivery service (receipt requested)

in each case to the appropriate addresses, telex numbers and telefax numbers indicated below or to such other address as such party may designate for itself by notice to the other parties; provided that any change of address furnished by Employee to Employer for purposes of updating Employer’s payroll records shall be deemed to constitute notice of address change under this Agreement unless otherwise specifically requested in writing by Employee:

(i) if to the Employer:

5 J Oilfield Services, LLC

4090 US-79

Palestine, Texas 75801

Telephone: 903.729.0969

Email: jimmy@5jtrucking.net

(ii) if to the Employee:

James E. Frye, Jr.

c/o 4090 US-79

Palestine, Texas 75801

Telephone: 903.729.0969

Email: jimmy@5jtrucking.net

18.       Severability of Agreement. Should any part of this Agreement for any reason be declared invalid by a court of competent jurisdiction, such decision shall not affect the validity of any remaining portion, which remaining provisions shall remain in full force and effect as if this Agreement had been executed with the invalid portion thereof eliminated, and it is hereby declared the intention of the parties that they would have executed the remaining portions of this Agreement without including any such part, parts or portions which may, for any reason, be hereafter declared invalid.

19.       Arbitration.

a.       If any dispute between the Company and Employee arises out of or is related to this Agreement, Employee’s employment, or Employee’s separation from employment with Company for any reason, and the parties to this Agreement cannot resolve the dispute, the Company and Employee shall submit the dispute to final and binding arbitration.  The arbitration shall be conducted in accordance with the JAMS Dallas Mediation, Arbitration and ADR Services (“JAMS”) Rules for the Resolution of Employment Disputes (“Rules”).  If the parties cannot agree to an arbitrator, an arbitrator will be selected through the JAMS’ standard procedures and Rules.  Company and Employee shall share the costs of arbitration, unless the arbitrator rules otherwise.  Company and Employee agree that the arbitration shall be held in Houston, Texas.   Arbitration of the parties’ disputes is mandatory, and in lieu of any and all civil causes of action or lawsuits either party may have against the other arising out of or related to this Agreement, Employee’s employment, or Employee’s separation from employment with Company, with the exception that Company alone may seek a temporary restraining order and temporary injunctive relief in a court to enforce the protective covenants as provided in Section 8(d).  Employee acknowledges that by agreeing to this provision, he knowingly and voluntarily waives any right he may have to a jury trial based on any claims he has, had, or may have against the Company, including any right to a jury trial under any local, municipal, state or federal law including, without limitation, claims under Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 1981, the Americans With Disabilities Act of 1990, the Age Discrimination In Employment Act of 1967, the Family Medical Leave Act, the Sarbanes-Oxley Act, the Older Workers Benefit Protection Act, the Texas Commission on Human Rights Act, claims of harassment, discrimination or wrongful termination, and any other statutory or common law claims.

b.       Before the arbitration hearing is conducted, the arbitrator shall have the authority to consider and grant a motion to dismiss and motion for summary judgment by applying the standards governing these motions under Federal Rules of Civil Procedure 12 and 56.  The arbitrator shall issue a written decision and award, which shall explain the basis of the decision.  The decision and award shall be exclusive, final, and binding on both Employee and the Company, and all heirs, executors, administrators, successors, and assigns.  

c.       Both Employee and the Company understand that, by agreeing to arbitration, they are agreeing to substitute one legitimate dispute resolution forum (arbitration) for another (litigation), and thereby are waiving the right to have disputes resolved in court.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the undersigned have executed this agreement as of the day and year first above written.

Employee

Printed Name: James E. Frye, Jr.

[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT DATED FEBRUARY __ , 2020]

Exhibit 10.12

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

5J Trucking, LLC,

A Texas limited liability company

and

the Members and Sole Manager of

5J Trucking, LLC listed herein,

on the one hand;

and

SMG Industries Inc.,

A Delaware corporation

February 27, 2020

TABLE OF CONTENTS

EXHIBITS AND SCHEDULES:

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement, dated as of February 27, 2020 (this “Agreement”), is made and entered into by and among (i) 5J Trucking, LLC, a Texas limited liability company (“5J”), (ii) Judy M. Frye as trustee of THE JUDY FRYE TRUST and James E. Frye, Jr. as trustee of THE JAMES FRYE, JR. TRUST (collectively, the “5J Members”), and (iii) James E. Frye, Jr. an individual and the sole manager of 5J (“5J Manager”), on the one hand; and SMG Industries Inc., a Delaware corporation (“SMGI”). For purposes hereof each of 5J, the 5J Members and SMGI may be referred to as a “Party” and collectively as the “Parties”.

RECITALS

WHEREAS, each of the 5J Members owns 50% of the issued and outstanding membership interests of 5J (“5J Interests”) and the 5J Members desire to sell to SMGI all of their 5J Interests in exchange for the Purchase Price (defined below), pursuant to the terms and conditions of this Agreement;

WHEREAS, SMGI desires to acquire from the 5J Members, and the 5J Members desire to sell to SMGI, all of the 5J Interests in exchange for the Purchase Price (as hereinafter defined), making 5J upon the closing of the transaction herein contemplated (“Transaction”) a wholly-owned subsidiary of SMGI, on the terms and conditions set forth below; and

WHEREAS, SMGI will enter into this Agreement for the purpose of evidencing its consent to the consummation of the Transaction and for the purpose of making certain representations, warranties, covenants and agreements.

NOW, THEREFORE, the Parties hereto, intending to be legally bound, agree as follows:

ARTICLE 1
THE PURCHASE AND SALE OF 5J INTERESTS

1.1                Purchase of 5J Interests and Payment of the Purchase Price.   Upon the terms and subject to the conditions hereof, at the Closing the 5J Members will sell, convey, assign, transfer and deliver to SMGI, an assignment of the 5J Members’ membership interests representing the 5J Interests in exchange for the payment of the Purchase Price of $6,000,000.00 (“Purchase Price”) by SMGI as follows: SMGI shall assume or refinance the obligation for notes owed by 5J and its affiliates in the principal amount of $6,000,000.00 (“Debt Assumption”).

1.2                Closing. The closing of the Transaction (the “Closing”) shall take place at such location and as such time as the Parties mutually agree, on the date when all of the closing conditions set forth in Article 6 of this Agreement are either satisfied or waived, or on such other date as may be mutually agreed upon by the Parties but in no event later than February 27, 2020. Such date is referred to herein as the “Closing Date”.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF 5J AND THE 5J MEMBER

Except as otherwise set forth in a disclosure schedule of even date herewith which is executed and delivered by 5J (the “5J Disclosure Schedule”), 5J and the 5J Members hereby jointly and severally make the following representations and warranties to SMGI as of the date hereof and as of the Closing Date.  Nothing in the 5J Disclosure Schedule shall be deemed adequate to disclose an exception to a representation or warranty made herein, unless the 5J Disclosure Schedule identifies the exception with reasonable particularity and describes the relevant facts in reasonable detail.  The 5J Disclosure Schedule will be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in this Agreement.

2.1                Organization. 5J is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Texas, is qualified to conduct business and is in good standing under the laws of each jurisdiction in which the nature of its business requires such qualification, and has the requisite power to carry on its business as now conducted.

2.2                Capitalization of the Company and Subsidiaries. Immediately prior to the Closing, the outstanding membership interests of 5J shall consist solely of the 5J Interests being sold to SMGI. The 5J Interests are validly issued, fully paid and non-assessable. As of the Closing Date, there are no outstanding or authorized options, warrants, rights or convertible securities, or any other securities of 5J, or any agreements or commitments to which 5J or the 5J Members are a party or which are binding upon 5J or the 5J Members providing for the issuance or redemption of any of the 5J Interests.

2.3                Certain Corporate Matters. 5J is duly qualified to do business as a limited liability company and is in good standing in each jurisdiction in which the ownership of its properties, the employment of its personnel or the conduct of its business requires it to be so qualified, except where the failure to be so qualified would not have a material adverse effect on 5J's financial condition, results of operations or business. 5J has full corporate power and authority and all authorizations, licenses, leases and permits necessary to carry on the business in which it is engaged and to own or use the properties owned or used by it. 5J owns all of the assets in the spreadsheet lists previously provided to SMGI submitted by email on December 30, 2019 and on Schedule 2.3 attached hereto, which are owned subject to the existing loans, security interests and liens secured by UCC financing statements filed of record or disclosed to SMGI.

2.4                Authority Relative to this Agreement. 5J has the requisite power and authority to enter into this Agreement and to carry out its obligations hereunder. The execution, delivery and performance of this Agreement by 5J and the consummation by 5J of the transactions contemplated hereby have been duly authorized by the 5J Members and the sole manager of 5J and no other actions on the part of 5J are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by 5J and constitutes a valid and binding agreement of 5J, enforceable against 5J in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity.

2.5                Consents and Approvals; No Violations. Except for applicable requirements of federal securities laws, state securities laws, the United States Department of Transportation qualification and permits, and Lender consent as to the change in control relating to the Debt Assumption, no filing with, and no permit, authorization, consent or approval of, any third party, public body or authority is necessary for the consummation by 5J of the transactions contemplated by this Agreement. Neither the execution and delivery of this Agreement by 5J nor the consummation by 5J of the transactions contemplated hereby, nor compliance by 5J with any of the provisions hereof, will (i) conflict with or result in any breach of any provisions of the charter or Company Agreement of 5J, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which 5J is a party or by which it or any of its properties or assets may be bound or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to 5J, or any of its properties or assets, except in the case of clauses (ii) and (iii) for violations, breaches or defaults which are not individually or in the aggregate material to 5J.

2.6                Financial Statements.

(a)                5J has provided SMGI with a copy of the audited balance sheets of 5J as at December 31, 2018 and 2017, and the related statements of operations, member’s equity and cash flows for the two fiscal years then ended, together with the unqualified report thereon from Bolton, Sullivan, Taylor & Weber, L.L.P. (collectively, “5J’s Audited Financials”).

(b)                5J has provided SMGI with a copy of the unaudited balance sheet of 5J as of September 30, 2019, and the related statements of operations, member’s equity and cash flows for the three months then ended (“5J’s Interim Financials”).

(c)                5J’s Audited Financials and 5J’s Interim Financials (collectively “5J’s Financial Statements”) (i) are in accordance with the books and records of 5J, (ii) are correct and complete in all material respects, (iii) fairly present the financial position and results of operations of 5J as of the dates indicated, and (iv) are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”) (except that (x) unaudited financial statements may not be in accordance with GAAP because of the absence of footnotes normally contained therein, and (y) the interim unaudited condensed financial statements included herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair presentation of the results of operations for the interim periods presented.

(d)                5J will cooperate with SMGI to provide the Financial Statements and partial year Financial Statements of 5J that SMGI advises are required to be included in the Form 8-K due to be filed with the SEC by SMGI within seventy days of the Closing Date.

2.7                Tax Matters.

(a)                5J has filed on a timely basis all reports, returns, declarations, statements or other information required to be supplied to a taxing authority in connection with Taxes that it was required to file (collectively, “Tax Returns”), and all Tax Returns were complete and adequate in all material respects. “Taxes” means all taxes or levies or other similar assessments or liabilities in the nature of a tax, including without limitation income, gross receipts, ad valorem, premium, value-added, excise, real property, personal property, sales, use, transfer, withholding, employment, unemployment insurance, social security, business license, business organization, environmental, workers compensation, payroll, profits, license, lease, service, service use, severance, stamp, occupation, windfall profits, customs, duties, franchise and other taxes imposed by the United States of America or any state, local or foreign government, or any agency thereof, or other political subdivision of the United States or any such government, and any interest, fines, penalties, assessments or additions to tax resulting from, attributable to or incurred in connection with any tax or any contest or dispute thereof.

(b)               5J or the 5J Members have paid on a timely basis, or adequately reserved against in 5J’s Financial Statements, all material Taxes due, or claimed by any taxing authority to be due, from or with respect to them.

(c)                To the best knowledge of 5J, (i) no examination or audit of any Tax Return of 5J by any governmental entity is currently in progress or, to the knowledge of 5J, threatened or contemplated, (ii) 5J has not been informed by any jurisdiction that the jurisdiction believes that 5J was required to file any Tax Return that was not filed, and (iii) no material Tax issue has been raised, and no material adjustment has been proposed or is pending, by any governmental entity or taxing authority in connection with any of 5J’s Tax Returns.

(d)                No waiver or extension of any statute of limitations as to any material Tax matter has been given by or requested of 5J.

For the purposes of this Section 2.7, a Tax is due (and must therefore either be paid or adequately reserved against in 5J’s Financial Statements) only on the last date payment of such Tax can be made without interest or penalties, whether such payment is due in respect of estimated Taxes, withholding Taxes, required Tax credits or any other Tax.

2.8                Books and Records. The books and records of 5J delivered to SMGI prior to the Closing fully and fairly reflect the transactions to which 5J is a party or by which its properties are bound.

2.9                Questionable Payments. Neither 5J, nor any employee, agent, representative or any other person acting on behalf of 5J has, (i) directly or indirectly, made any bribes, kickbacks, illegal payments or unlawful contributions in connection with foreign or domestic political activity using 5J’s funds, (ii) or made any payments from 5J's funds to foreign or domestic governmental officials or employees, or to any foreign or domestic political parties or campaigns (iii) failed to disclose fully any contribution made by 5J (or anyone acting on 5J’s behalf of which 5J was aware) which is in violation of the law or (d) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

2.10              Intellectual Property.  5J is not infringing, and has never infringed, upon the intellectual property or proprietary rights of any other person, corporation or other entity. There are no claims pending or, to 5J’s knowledge, any claims threatened alleging that 5J is currently infringing upon, using in an unauthorized manner, or violating any trademarks, trade names, service marks, patents, copyrights or other proprietary rights of any person, corporation or other entity, and 5J is unaware of any facts which would form a reasonable basis for any such claim. 5J is not, nor will it be as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other agreement or contract relating to intellectual property.

2.11              Litigation. Except as disclosed on Schedule 2.11, 5J is not subject to any judgment or order of any court or quasi-judicial or administrative agency of any jurisdiction, domestic or foreign, nor is there any charge, complaint, lawsuit or governmental investigation pending against 5J. 5J is not a plaintiff in any action, domestic or foreign, judicial or administrative. Except as disclosed on Schedule 2.11, there are no existing actions, suits, proceedings against or investigations of 5J, and 5J knows of no basis for such actions, suits, proceedings or investigations. There are no unsatisfied judgments, orders, decrees or stipulations affecting 5J or to which 5J is a party.

2.12              Legal Compliance. To the best knowledge of 5J, after due investigation, no claim has been filed against 5J alleging a violation of any applicable laws or regulations of federal, state and local governments and all agencies thereof. 5J holds all of the material permits, licenses, certificates or other authorizations of federal, state or local governmental agencies required for the conduct of its business as presently conducted, all of which are listed on Schedule 2.12 hereto.

2.13              Employees. 5J has no employees. All employees necessary for conducting 5J’s business are employed by 5J Oilfield Services, LLC (“5J Oilfield”).

2.14              Insurance. 5J or its affiliate, 5J Oilfield, maintains the insurance against the risks listed on Schedule 2.14 and 5J is listed as an additional insured.  All such policies are in full force and effect, and 5J has not received any notice from any insurance company suspending, revoking, modifying or canceling (or threatening such action) any insurance policy issued to 5J.

2.15              Subsidiaries and Investments.  5J does not own any capital stock or membership interests, or have any interest of any kind whatsoever in any corporation, limited liability company, partnership, or other form of business organization.

2.16              Broker's Fees. Neither 5J, nor anyone on its behalf, has any liability to any broker, finder, investment banker or agent, or has agreed to pay any brokerage fees, finder’s fees or commissions, or to reimburse any expenses of any broker, finder, investment banker or agent in connection with this Agreement.

2.17              Leases. 5J does not own any real property but 5J leases the necessary operating facilities and offices from various landlords pursuant to the Leases listed on Schedule 6.2(a)(iv).

2.18              Disclosure. The representations and warranties and statements of fact made by 5J in this Agreement are, as applicable, accurate, correct and complete and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained herein not false or misleading.

ARTICLE 3
REPRESENTATIONS AND WARRANTIES

OF THE 5J MEMBER

The 5J Members hereby represent and warrant to SMGI as follows:

3.1                Ownership of the 5J Interests.  The 5J Members own, beneficially and of record, good and marketable title to the 5J Interests which as of Closing will be free and clear of all security interests, liens, adverse claims, encumbrances, equities, proxies, options or members' agreements. At the Closing, the 5J Members will convey to SMGI good and marketable title to the 5J Interests, free and clear of any security interests, liens, adverse claims, encumbrances, equities, proxies, options, member agreements or restrictions.

3.2               Authority Relative to this Agreement.  This Agreement has been duly and validly executed and delivered by the 5J Members and constitutes a valid and binding agreement of the 5J Members, enforceable against the 5J Members in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF

SMGI

SMGI hereby represents and warrants to 5J and the 5J Members as follows:

4.1                Organization. SMGI is a Delaware corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has the requisite corporate power to carry on its business as now conducted. Each of SMGI’s wholly-owned subsidiaries, MG Cleaners LLC (“MG Cleaners”), Trinity Services LLC (“Trinity”) and Momentum Water Transfer Services LLC (“Momentum”), are each limited liability companies duly organized, validly existing and in good standing under the laws of their respective states of organization, and each have the requisite corporate power to carry on their respective businesses as now conducted.

4.2               Capitalization.  SMGI's authorized capital stock consists of (i) 25,000,000 shares of Common Stock par value $.001, of which 15,881,372 shares are issued and outstanding, and (ii) 1,000,000 shares of preferred stock, par value $.001 (“Preferred Stock” and, together with the Common Stock, “Capital Stock”), 2,000 of which are designated as the SMGI’s Series A Secured Convertible Preferred Stock (“Series A Preferred Stock”) and are issued and outstanding as of the date of this Agreement, and 6,000 of which are designated as SMGI’s Series B Convertible Preferred Stock, all of which will be issued to the sole member of 5J Oilfield Services LLC upon Closing .   All issued and outstanding shares of SMGI Capital Stock are duly authorized, validly issued, fully paid, non-assessable and free of preemptive rights.  Except for $300,000 in fixed price convertible notes with a conversion price of $0.50 per share, 1,563,000 options and warrants with an average exercise price of $0.42 per share of SMGI Common Stock with exercise prices ranging from $0.15 to $2.18 per share are currently outstanding, 2,000 shares of Series A Preferred Stock which are convertible into 4,000,000 shares of SMGI Common Stock, and an aggregate of 350,000 stock options to be issued to members of the 5J Oilfield Services, LLC management team upon completion of the Closing. There are no other outstanding preferred stock series, or convertible securities to which SMGI is a party. To SMGI’s knowledge, there are no obligations of SMGI to repurchase, redeem or otherwise re-acquire any shares of its Capital Stock on or after the Closing.

4.3                Certain Corporate Matters. SMGI has full corporate power and authority and all authorizations, licenses and permits necessary to carry on the business in which it is engaged and to own and use the properties owned and used by it. SMGI has made available through the SEC’s EDGAR system to 5J true, accurate and complete copies of its certificate of incorporation and bylaws, which reflect all restatements of and amendments made thereto at any time prior to the date of this Agreement.  SMGI is not in default under or in violation of any provision of its certificate of incorporation or bylaws in any material respect.  SMGI is not in any material default or in violation of any restriction, lien, encumbrance, indenture, contract, lease, sublease, loan agreement, note or other obligation or liability by which it is bound or to which any of its assets is subject.

4.4                Authority Relative to this Agreement.  SMGI has the requisite power and authority to enter into this Agreement and carry out its respective obligations hereunder.  The execution, delivery and performance of this Agreement by SMGI and the consummation of the transactions contemplated hereby have been duly authorized by the board of directors of SMGI and no other actions on the part of SMGI are necessary to authorize this Agreement or the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by SMGI and constitutes a valid and binding obligation of SMGI, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors' rights generally or by general principles of equity.

4.5                 Consents and Approvals; No Violations. Except for applicable requirements of federal securities laws and state securities or blue-sky laws, no filing with, and no permit, authorization, consent or approval of, any third party, public body or authority is necessary for the consummation by SMGI of the transactions contemplated by this Agreement. Neither the execution and delivery of this Agreement by SMGI nor the consummation by SMGI of the transactions contemplated hereby, nor compliance by SMGI with any of the provisions hereof, will (i) conflict with or result in any breach of any provisions of the certificate of incorporation or bylaws of SMGI, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation to which SMGI is a party or by which it or any of its properties or assets may be bound or (iii) violate any order, writ, injunction, decree, statute, rule or regulation applicable to SMGI, or any of their respective properties or assets, except in the case of clauses (ii) and (iii) for violations, breaches or defaults which are not in the aggregate material to SMGI taken as a whole.

4.6                SEC Documents.  SMGI hereby makes reference to the following documents filed with the SEC, as posted on the SEC’s website, www.sec.gov: (collectively, the “SEC Documents”): (i) Annual Reports on Form 10-K for the year ended December 31, 2018; and (ii) Quarterly Reports on Form 10-Q for the period ended September 30, 2019. To SMGI’s knowledge, the SEC Documents constitute all of the annual and quarterly reports that SMGI was required to file with the SEC pursuant to the Securities Exchange Act of 1934, as amended (“Exchange Act”) and the rules and regulations promulgated thereunder by the SEC for the year ended December 31, 2018 and the nine months ended September 30, 2019, respectively.  To SMGI’s knowledge, as of the filing dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and/or the Exchange Act, as the case may require, and the rules and regulations promulgated thereunder and none of the SEC Documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

4.7                 Real Property.  SMGI does not own any real property.

4.8                Books and Records. The books and records of SMGI delivered to 5J prior to the Closing fully and fairly reflect the transactions to which SMGI is a party or by which its properties are bound.

4.9               Questionable Payments. To SMGI’s knowledge, neither SMGI, nor any employee, agent or representative of SMGI has, directly or indirectly, made any bribes, kickbacks, illegal payments or illegal political contributions using Company funds or made any payments from SMGI's funds to governmental officials for improper purposes or made any illegal payments from SMGI's funds to obtain or retain business.

4.10              Intellectual Property. SMGI does not own or use any trademarks, trade names, service marks, patents, copyrights or any applications with respect thereto. SMGI has no knowledge of any claim that, or inquiry as to whether, any product, activity or operation of SMGI infringes upon or involves, or has resulted in the infringement of, any trademarks, trade-names, service marks, patents, copyrights or other proprietary rights of any other person, corporation or other entity; and no such proceedings have been instituted, are pending or are threatened against SMGI.

4.11             Contracts. Except as disclosed in the SEC Documents, SMGI does not have any material contracts, leases, arrangements or commitments (whether oral or written). SMGI is not a party to or bound by or affected by any contract, lease, arrangement or commitment (whether oral or written) relating to: (i) the employment of any person; (ii) collective bargaining with, or any representation of any employees by, any labor union or association; (iii) the acquisition of services, supplies, equipment or other personal property; (iv) the purchase or sale of real property; (v) distribution, agency or construction; (vi) lease of real or personal property as lessor or lessee or sublessor or sublessee; (vii) lending or advancing of funds; (viii) borrowing of funds or receipt of credit; (ix) incurring any obligation or liability; or (x) the sale of personal property.

4.12              Litigation.   SMGI is not subject to any judgment or order of any court or quasi-judicial or administrative agency of any jurisdiction, domestic or foreign, nor is there any charge, complaint, lawsuit or governmental investigation pending against SMGI that would have a material adverse effect on SMGI’s business.  SMGI is not a plaintiff in any action, domestic or foreign, judicial or administrative. Except as disclosed in SMGI’s SEC Documents, there are no existing actions, suits, proceedings against or investigations of SMGI, and SMGI knows of no basis for such actions, suits, proceedings or investigations. There are no unsatisfied judgments, orders, decrees or stipulations affecting SMGI or to which SMGI is a party.

4.13              Employees.    Except as disclosed in the SEC Documents, SMGI does not have a written or oral employment agreement with any officer or director of SMGI.  SMGI is not a party to or bound by any collective bargaining agreement.  

4.14              Legal Compliance. To the best knowledge of SMGI, after due investigation, no claim has been filed against SMGI alleging a violation of any applicable laws or regulations of foreign, federal, state and local governments and all agencies thereof. SMGI holds all of the material permits, licenses, certificates or other authorizations of foreign, federal, state or local governmental agencies required for its business as presently conducted.

4.15              Subsidiaries and Investments.  Except as set forth in the SEC Documents, SMGI does not own any capital stock or have any interest of any kind whatsoever in any corporation, partnership, or other form of business organization.

4.16              Broker's Fees. Except for payments due to Chiron Financial LLC (“Chiron”) pursuant to the engagement letter entered into by and between SMGI and Chiron on May 23, 2019, neither SMGI, nor anyone on its behalf, has any liability to any broker, finder, investment banker or agent, or has agreed to pay any brokerage fees, finder’s fees or commissions, or to reimburse any expenses of any broker, finder, investment banker or agent in connection with this Agreement.

4.17              Listing and Maintenance Requirements.  SMGI’s Common Stock is currently quoted on the OTCQB.  SMGI has not, since the date its Common Stock began trading on the OTCQB, received any notice from OTC Markets or FINRA or any trading market on which SMGI’s Common Stock is or has been listed or quoted to the effect that SMGI is not in compliance with the quoting, listing or maintenance requirements of the OTCQB or such other trading market.  SMGI is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such quoting, listing and maintenance requirements.

4.18             Application of Takeover Protections.  SMGI and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under SMGI's certificate of incorporation or the laws of its state of incorporation that is or could become applicable to 5J or the 5J Members as a result of the Transaction or the exercise of any rights by 5J or the 5J Members pursuant to this Agreement.

4.19              No SEC or FINRA Inquiries.  To SMGI’s knowledge, neither SMGI nor any of its past or present officers or directors is, or has ever been, the subject of any formal or informal inquiry or investigation by the SEC or FINRA.

4.20              Depository Trust Company Notifications. SMGI has not received any notification from the Depository Trust Company (“DTC”) indicating that DTC intends to either: (i) limit any services available for SMGI’s Common Stock on deposit at DTC, or (ii) place a complete restriction on all DTC services for SMGI’s Common Stock on deposit at DTC.

4.21              Accredited Investor Status. SMGI is an “accredited investor” as such term is defined under Rule 501 of the Securities Act.

4.22              Disclosure. The representations and warranties and statements of fact made by SMGI in this Agreement are, as applicable, accurate, correct and complete and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements and information contained herein not false or misleading.

ARTICLE 5
COVENANTS AND AGREEMENTS OF THE PARTIES

EFFECTIVE PRIOR TO CLOSING

5.1                Corporate Examinations and Investigations.  Prior to the Closing, each Party shall be entitled, through its employees and representatives, to make such investigations and examinations of the books, records and financial condition of 5J and SMGI as each Party may request.  In order that each Party may have the full opportunity to do so, 5J and SMGI shall furnish each Party and its representatives during such period with all such information concerning the affairs of 5J or SMGI  as each Party or its representatives may reasonably request and cause 5J or SMGI and their respective officers, employees, consultants, agents, accountants and attorneys to cooperate fully with each Party's representatives in connection with such review and examination and to make full disclosure of all information and documents requested by each Party or its representatives.  Any such investigations and examinations shall be conducted at reasonable times and under reasonable circumstances, it being agreed that any examination of original documents will be at each Party's premises, with copies thereof to be provided to each Party or its representatives upon request.

5.2                Cooperation; Consents.  Prior to the Closing, each Party shall cooperate with the other Parties to the end that the Parties shall (i) in a timely manner make all necessary filings with, and conduct negotiations with, all authorities and other persons the consent or approval of which, or the license or permit from which is required for the consummation of the Transaction, and (ii) provide to the other Party such information as the other Party may reasonably request in order to enable it to prepare such filings and to conduct such negotiations.

5.3                Conduct of Business.  Subject to the provisions hereof, from the date hereof through the Closing, each Party hereto shall  (i) conduct its business in the ordinary course and in such a manner so that the representations and warranties contained herein shall continue to be true and correct in all material respects as of the Closing as if made at and as of the Closing and (ii) not enter into any material transactions or incur any material liability not required or specifically contemplated hereby, without first obtaining the written consent of 5J and the 5J Members on the one hand and SMGI on the other hand. Without the prior written consent of 5J, the 5J Members or SMGI, except as required or specifically contemplated hereby, each Party shall not undertake or fail to undertake any action if such action or failure would render any of said warranties and representations untrue in any material respect as of the Closing.

5.4                Litigation.    From the date hereof through the Closing, each Party hereto shall promptly notify the representative of the other Parties of any lawsuits, claims, proceedings or investigations which after the date hereof are threatened or commenced against such Party or any of its affiliates or any officer, director, manager, employee, consultant, agent, member or shareholder thereof, in their capacities as such, which, if decided adversely, could reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), assets, liabilities, business, operations or prospects of such Party or any of its subsidiaries.

5.5                Notice of Default.  From the date hereof through the Closing, each Party hereto shall give to the representative of the other Party or Parties prompt written notice of the occurrence or existence of any event, condition or circumstance occurring which would constitute a violation or breach of this Agreement by such Party or which would render inaccurate in any material respect any of each such Party's representations or warranties herein.

5.6                Confidentiality. From and after the Closing, each of SMGI and the 5J Members shall, and shall cause its or their Affiliates (defined below) to, hold, and shall use its or their reasonable best efforts to cause its or their respective representatives to hold, in confidence any and all information, whether written or oral, concerning SMGI, except to the extent that 5J and the 5J Members can show that such information (a) is generally available to and known by the public through no fault of 5J and/or the 5J Members, any of its or their Affiliates or their respective representatives; or (b) is lawfully acquired by 5J and/or the 5J Members, any of its or their Affiliates or their respective representatives from and after the Closing from sources which are not prohibited from disclosing such information by a legal, contractual or fiduciary obligation. If 5J and/or the 5J Members or any of its or their Affiliates or their respective representatives are compelled to disclose any information by judicial or administrative process or by other requirements of law, 5J and/or the 5J Members shall promptly notify SMGI in writing and shall disclose only that portion of such information which 5J and/or the 5J Members is advised by its counsel in writing is legally required to be disclosed, provided that 5J and/or the 5J Members shall use reasonable best efforts to obtain an appropriate protective order or other reasonable assurance that confidential treatment will be accorded such information.

5.7                Closing Conditions. From the date hereof until the Closing, each Party hereto shall use reasonable best efforts to take such actions as are necessary to expeditiously satisfy the closing conditions set forth in Article 6 hereof.

5.8                Further Assurances.  If, at any time after the Closing, the Parties shall consider or be advised that any further deeds, assignments or assurances in law or that any other things are necessary, desirable or proper to complete the transactions contemplated hereby in accordance with the terms of this Agreement or to vest, perfect or confirm, of record or otherwise, the title to any property or rights of the Parties hereto, the Parties agree that their proper representatives shall execute and deliver all such proper deeds, assignments and assurances in law and do all things necessary, desirable or proper to vest, perfect or confirm title to such property or rights and otherwise to carry out the purpose of this Agreement, and that the proper representatives of the Parties are fully authorized to take any and all such action.

5.9               Press Releases and Communications.  No press release or public announcement related to this Agreement or the transactions contemplated herein, shall be issued or made by any party hereto without the prior written approval of SMGI and the 5J Manager.  Neither 5J and/or the 5J Members shall have any communications with any third party, other than its own representatives, without the prior written consent of SMGI and the 5J Manager.  Nothing herein shall prevent 5J from notifying its employees, customers or suppliers of the Transaction contemplated hereby as is necessary or desirable to facilitate the consummation of the Transaction; provided, however, that any such communication shall be previously approved by SMGI and may require any such third-parties to execute a confidentiality agreement, at SMGI’s sole discretion and shall constitute a “joint communication” if deemed appropriate by SMGI.

5.10              Excluded Assets. The Parties acknowledge that the following assets reflected on the 5J Interim Financials have been distributed to the 5J Members, as applicable prior to the Effective Date:

(i)                  the trailer equipment listed on Schedule 5.10 will have been distributed to the 5J Members, as applicable along with the note payable relating to such equipment.

ARTICLE 6
CONDITIONS TO CLOSING

6.1                Conditions to Obligations of 5J and the 5J Member.  The obligations of 5J and the 5J Members to consummate the transaction under this Agreement in accordance with Article 9 shall be subject to each of the following conditions:

(a)                 Closing Deliveries.  At the Closing, SMGI shall have delivered or caused to be delivered to 5J and the 5J Members the following:

(i)                  resolutions duly adopted by the board of directors of SMGI authorizing and approving the Transaction and the execution, delivery and performance of this Agreement;

(ii)                 all documents related to the Debt Assumption to the 5J Members;

(iii)                duly executed releases releasing the 5J Members and the 5J Manager from all personal guaranties relating to debts owed by 5J as of Closing; except as provided in the Letter Agreement between the Parties executed contemporaneously with this Agreement; and

(iv)               such other documents as 5J or the 5J Members may reasonably request in connection with the transactions contemplated hereby.

(b)                Representations and Warranties to be True.    The representations and warranties of SMGI herein contained shall be true in all material respects at the Closing with the same effect as though made at such time.  SMGI shall have performed in all material respects all obligations and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by them at or prior to the Closing.

(c)                 SMGI shall have received the opinion of SMGI counsel in form and substance reasonably satisfactory to 5J;

(d)                 SEC Filings.  At the Closing, SMGI will be current in all SEC filings required by it to be filed.

(e)                 Purchaser Financing. SMGI shall have received financing sufficient to refinance the Debt Assumption amount.

(f)                 No Actions or Legal Proceedings. There shall be no pending or threatened litigation with respect to this Agreement or the transactions contemplated hereby, prior to the execution hereof.

(g)                No Material Adverse Change. There shall have been no material adverse change in SMGI’s business, financial condition, prospects, assets, or operations since September 30, 2019, except for such changes as may result from matters disclosed in writing by SMGI to 5J, prior to execution of this Agreement.

6.2                Conditions to Obligations of SMGI. The obligations of SMGI to consummate the transaction under this Agreement in accordance with Article 9 shall be subject to each of the following conditions:

(a)                 Closing Deliveries.    On the Closing Date, 5J or the 5J Members or Manager, as applicable, shall have delivered to SMGI the following:

(i)                  an Assignment of Membership Interest representing the 5J Interests, duly executed effecting the transfer thereof to SMGI;

(ii)                this Agreement duly executed by 5J and the 5J Member;

(iii)                5J’s audited financial statements for the years ended December 31, 2018 and 2017, and unaudited financial statements for the nine-month period ended September 30, 2019, the cost of which shall be the responsibility of the 5J Members;

(iv)               the lease agreements between 5J and 5J Properties, LLC, as landlord, for the real property described on Schedule 6.2(a)(iv), along with the improvements related thereto (collectively, the “Land and Building”) for the period of years and rates per month, described on the Schedule;

(v)                SMGI shall have received the opinion of 5J’s counsel in form and substance reasonably satisfactory to SMGI;

(vi)               duly executed resignation letters of James E. Frye, Jr. as Manager and from all officer positions of 5J; and

(viii)             such other documents as SMGI may reasonably request in connection with the transactions contemplated hereby.

(b)                 Representations and Warranties to be True.    The representations and warranties of 5J and the 5J Members herein contained shall be true in all material respects at the Closing with the same effect as though made at such time.  5J and the 5J Members shall have performed in all material respects all obligations and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by them at or prior to the Closing

(c)                No Material Adverse Change. There shall have been no material adverse change in 5J’s business, financial condition, prospects, assets, or operations since September 30, 2019, except for such changes as may result from matters disclosed in writing by 5J to SMGI, prior to execution of this Agreement.

(d)                No Liens or Encumbrances. There shall be no liens or encumbrances against 5J or the 5J Interests, other than those to which SMGI consents to in writing.

(e)                No Actions or Legal Proceedings. There shall be no pending or threatened litigation with respect to this Agreement or the transactions contemplated hereby, prior to the execution hereof.

ARTICLE 7
INDEMNIFICATION AND RELATED MATTERS

7.1                Survival of Representations and Warranties.  The representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement, including any disclosure schedule, shall survive until twelve (12) months after the Closing Date (except for with respect to Taxes, which shall survive for the applicable statute of limitations plus 90 days, and covenants that by their terms survive for a longer period). The right to any remedy based upon such representations and warranties shall not be affected by any investigation conducted with respect to, or any knowledge acquired at any time, whether before or after execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of any such representation or warranty.

7.2                 Indemnification.

(a)                SMGI shall indemnify and hold the 5J Members harmless for, from and against any and all liabilities, obligations, damages, losses, deficiencies, costs, penalties, interest and expenses (including, but not limited to, any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever) (collectively, “Losses”) to which the 5J Members may become subject resulting from or arising out of: (i) any breach of a representation, warranty or covenant made by SMGI as set forth herein; or (ii) a third party demand that the 5J Members pay any obligation of 5J pursuant to a personal guarantee granted by the 5J Members prior to Closing.

(b)                The 5J Members shall indemnify and hold SMGI and SMGI’s officers and directors (“SMGI’s Representatives”) harmless for, from and against any and all Losses to which SMGI or SMGI’s Representatives may become subject resulting from or arising out of (1) any breach of a representation, warranty or covenant made by 5J or the 5J Members as set forth herein; or (2) any and all liabilities arising out of or in connection with: (A) any of the assets of 5J prior to the Closing; (B) the operations of 5J prior to the Closing; or (C) the 5J Interests.

7.3                Notice of Indemnification.  Promptly after the receipt by any indemnified party (the “Indemnitee”) of notice of the commencement of any action or proceeding against such Indemnitee, such Indemnitee shall, if a claim with respect thereto is or may be made against any indemnifying party (the “Indemnifying Party”) pursuant to this Article 7, give such Indemnifying Party written notice of the commencement of such action or proceeding and give such Indemnifying Party a copy of such claim and/or process and all legal pleadings in connection therewith. The failure to give such notice shall not relieve any Indemnifying Party of any of its indemnification obligations contained in this Article 7, except where, and solely to the extent that, such failure actually and materially prejudices the rights of such Indemnifying Party. Such Indemnifying Party shall have, upon request within thirty (30) days after receipt of such notice, but not in any event after the settlement or compromise of such claim, the right to defend, at its own expense and by its own counsel reasonably acceptable to the Indemnitee, any such matter involving the asserted liability of the Indemnitee; provided, however, that if the Indemnitee determines that there is a reasonable probability that a claim may materially and adversely affect it, other than solely as a result of money payments required to be reimbursed in full by such Indemnifying Party under this Article 7 or if a conflict of interest exists between Indemnitee and the Indemnifying Party, the Indemnitee shall have the right to defend, compromise or settle such claim or suit; and, provided, further, that such settlement or compromise shall not, unless consented to in writing by such Indemnifying Party, which shall not be unreasonably withheld, be conclusive as to the liability of such Indemnifying Party to the Indemnitee. In any event, the Indemnitee, such Indemnifying Party and its counsel shall cooperate in the defense against, or compromise of, any such asserted liability, and in cases where the Indemnifying Party shall have assumed the defense, the Indemnitee shall have the right to participate in the defense of such asserted liability at the Indemnitee’s own expense. In the event that such Indemnifying Party shall decline to participate in or assume the defense of such action, prior to paying or settling any claim against which such Indemnifying Party is, or may be, obligated under this Article 7 to indemnify an Indemnitee, the Indemnitee shall first supply such Indemnifying Party with a copy of a final court judgment or decree holding the Indemnitee liable on such claim or, failing such judgment or decree, the terms and conditions of the settlement or compromise of such claim. An Indemnitee’s failure to supply such final court judgment or decree or the terms and conditions of a settlement or compromise to such Indemnifying Party shall not relieve such Indemnifying Party of any of its indemnification obligations contained in this Article 7, except where, and solely to the extent that, such failure actually and materially prejudices the rights of such Indemnifying Party. If the Indemnifying Party is defending the claim as set forth above, the Indemnifying Party shall have the right to settle the claim only with the consent of the Indemnitee.

ARTICLE 8
COVENANT NOT TO COMPETE; NON-SOLICITATION.

In consideration of the transactions contemplated by this Agreement, and in order to protect and preserve the legitimate business interests of SMGI, the 5J Manager has executed and agreed to be bound by that certain Noncompetition and Nonsolicitation Agreement by and between Employer, 5J Trucking, LLC, SMG Industries, Inc. and Employee (the “Noncompetition Agreement”). The terms and conditions of that Noncompetition Agreement are incorporated herein and made a part hereof by this reference.

ARTICLE 9
CONDITIONAL EXECUTION

9.1                The Parties agree to execute this Agreement and all ancillary documents necessary to consummate the transaction contemplated by this Agreement on or before February __, 2020; provided that the executed documents will not be delivered to the other Party or deemed to be effective unless and until all Lender consents, release of liens relating to existing 5J debt and other actions required by the ancillary documents executed by the Parties have been obtained by the applicable Party. All executed documents will be held in escrow by counsel for the applicable Party until such additional actions and documents have been obtained. Upon receipt of all necessary documents, the executed originals will be delivered to the other Party to consummate the transaction set forth in this Agreement (the “Closing”). At Closing SMGI will complete the payoffs contemplated by Section 1.1 of this Agreement.

9.2                The Parties acknowledge and agree that execution of the documents in advance of Closing will be to the mutual benefit of the Parties to enable the Parties to obtain all of the necessary consents and transfers relating to existing notes and, obtaining the necessary Department of Transportation permit and authorization transfers and other ancillary actions necessary for consummation of the intended transaction.

9.3                Notwithstanding the date in which Closing occurs, the transfer of ownership of 5J shall be effective as of the Closing date.

ARTICLE 10
GENERAL PROVISIONS

10.1              Notices.  All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a .PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 12.2):

10.2              Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. References to Sections and Articles refer to sections and articles of this Agreement unless otherwise stated.

10.3              Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated and the Parties shall negotiate in good faith to modify this Agreement to preserve each Party's anticipated benefits under this Agreement.

10.4              Miscellaneous. This Agreement (together with all schedules, documents and instruments referred to herein): (i) constitutes the entire agreement and supersedes all other prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof; (ii) except as expressly set forth herein, is not intended to confer upon any other person any rights or remedies hereunder; and (iii) shall not be assigned by operation of law or otherwise, except as may be mutually agreed upon by the Parties hereto.

10.5              Separate Counsel. Each Party hereby expressly acknowledges that it has been advised to seek its own separate legal counsel for advice with respect to this Agreement.

10.6              Governing Law; Venue. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Texas.  Any and all actions brought under this Agreement shall be brought in the state or federal courts of Texas, located in the city of Houston, and each Party hereby waives any right to object to the convenience of such venue.

10.7              Counterparts and Facsimile Signatures. This Agreement may be executed in two or more counterparts, which together shall constitute a single agreement.  This Agreement and any documents relating to it may be executed and transmitted to any other Party by facsimile or email as a .pdf copy, which facsimile or email shall be deemed to be, and utilized in all respects as, an original, wet-inked document.

10.8              Amendment. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by each of SMGI, 5J and the 5J Members.

10.9              Parties in Interest: No Third-Party Beneficiaries. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective heirs, legal representatives, successors and assigns of the Parties hereto. This Agreement shall not be deemed to confer upon any person not a party hereto any rights or remedies hereunder.

10.10            Waiver. No waiver by any party of any default or breach by another party of any representation, warranty, covenant or condition contained in this Agreement shall be deemed to be a waiver of any subsequent default or breach by such party of the same or any other representation, warranty, covenant or condition. No act, delay, omission or course of dealing on the part of any party in exercising any right, power or remedy under this Agreement or at law or in equity shall operate as a waiver thereof or otherwise prejudice any of such party's rights, powers and remedies. All remedies, whether at law or in equity, shall be cumulative and the election of any one or more shall not constitute a waiver of the right to pursue other available remedies.

10.11            Expenses.  At or prior to the Closing, the Parties hereto shall pay all of their own expenses relating to the transactions contemplated by this Agreement, including, without limitation, the fees and expenses of their respective counsel and financial advisers.

10.12            Recitals Incorporated.  The recitals of this Agreement are incorporated herein and made a part hereof.

[SIGNATURE PAGES FOLLOW]

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

5J TRUCKING, LLC,

A Texas limited liability company

MEMBERS:

THE JAMES FRYE, JR. TRUST

THE JUDY FRYE TRUST

[SIGNATURE PAGE OF SMGI FOLLOWS]

[SIGNATURE PAGE OF SMGI]

SMG INDUSTRIES, INC., a Delaware corporation

SCHEDULE 2.3

ASSETS

Schedule 2.3

SCHEDULE 2.11

LITIGATION

Schedule 2.11

SCHEDULE 2.12

LEGAL COMPLIANCE

All permits, licenses and certificates are listed under 5J Oilfield Services, LLC.

Schedule 2.12

SCHEDULE 2.14

INSURANCE

Schedule 2.14

SCHEDULE 5.10

EXCLUDED ASSETS

Two (2) Etnyre trailers financed by VeraBank for $260,000.00 as described in further detail in the title documents attached.

Exhibit 6.2(a)(iv)

SCHEDULE 6.2(a)(iv)

LEASES

Exhibit 10.13

MASTER LEASE AGREEMENT

THIS MASTER LEASE AGREEMENT (this "Lease") is made as of February 27, 2020, between UTICA LEASECO, LLC, its successors and assigns ("Lessor"), 5J TRUCKING, a Texas limited liability company, d/b/a 5J and 5J Trucking, LLC (“5J Trucking”), its successors and permitted assigns, and 5J OILFIELD SERVICES, LLC, a Texas limited liability company (“5J Oil”), its successors and permitted assigns (hereafter referred to both individually, and collectively (if more than one), as "Lessee"). Each duty, obligation, representation, warranty, covenant, and agreement of Lessee under this Lease, or any document, exhibit, schedule, rider, or other instrument incorporated herein by reference, is made jointly and severally by each party comprising Lessee, and their respective permitted successors and assigns.

Lessee desires to lease from Lessor the equipment and other property (collectively, the "Equipment") described in each Equipment Schedule executed pursuant to this Lease (each, a "Schedule"), with each Schedule incorporating by reference the terms and conditions of this Lease. The term “Lease” shall also incorporate by reference all Schedules and any Riders entered into with respect to such Schedules. Certain definitions and construction of certain of the terms used in this Lease are provided in Section 19 hereof.

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Lease agree as follows:

1.      AGREEMENT TO LEASE; TERM. This Lease is effective as of the date specified above. By entering into a Schedule, Lessor leases the Equipment described therein to Lessee, and Lessee leases such Equipment from Lessor, in each case, subject to the terms and conditions in this Lease and such Schedule and all other Schedules, Riders, Exhibits and all of the other documents and agreements executed in connection herewith (collectively, the “Lease Documents”). Each Schedule, incorporating the terms and conditions of this Lease, will, at Lessor’s option, constitute a separate instrument of lease. The term of lease with respect to each item of Equipment leased under a Schedule shall commence on the date of execution of such Schedule and continue for the term provided in that Schedule.

2.       RENT. Lessee shall pay Lessor (a) the rental installments (“Basic Rent”) as and when specified in each Schedule, without demand, and (b) all of the other amounts payable in accordance with this Lease, such Schedule and/or any of the other Lease Documents (“Other Payments”, and together with the Basic Rent, collectively, the "Rent"). Upon Lessee’s execution thereof, the related Schedule shall constitute a non-cancelable net lease, and Lessee's obligation to pay Rent, and otherwise to perform its obligations under or with respect to such Schedule and all of the other Lease Documents, are and shall be absolute and unconditional and shall not be affected by any circumstances whatsoever, including any right of setoff, counterclaim, recoupment, deduction, defense or other right which Lessee may have against Lessor, the manufacturer or vendor of the Equipment (the "Suppliers"), or anyone else, for any reason whatsoever (each, an “Abatement”). Lessee agrees that all Rent shall be paid in accordance with Lessor’s or Assignee’s written direction. Time is of the essence. If any Rent is not received by Lessor within five (5) business days of the due date (or the next business day if the 5^th day of such grace period is a Saturday, Sunday, or legal holiday for commercial banks under the laws of the state of the Lessor’s notice address), Lessee shall pay a late charge equal to ten (10%) percent of the amount (the “Late Fee”). In addition, in the event that any payment or any other amount due hereunder is not processed or is returned on the basis of insufficient funds, upon demand, Lessee shall pay Lessor a charge equal to five (5%) percent of the amount of such payment. Basic Rent shall be adjusted periodically based on fluctuations of the Comerica Prime Rate (defined below), as set forth in this paragraph.  Commencing on July 1, 2020 and on each July 1 and January 1 thereafter (each a “Determinate Date”), Lessor shall determine the current prime rate publicly announced by Comerica Bank (the “Comerica Prime Rate”).  If on any such Determination Date, the Comerica Prime Rate has increased .25% in excess of 4.75% (“Surcharge Base Rate”), Lessor will increase the Basic Rent by $3,310.65 per month for each .25% increase in the Surcharge Base Rate (the “Surcharge Amount”).  At each Determination Date following the initial application of the Surcharge Amount, Lessor shall thereafter adjust the Basic Rent in the amount of the Surcharge Amount for each .25% fluctuation in the Surcharge Base Rate.  The Surcharge Amount addition (or reduction, if applicable), will be added to (or decreased from, if applicable) the monthly Basic Rent due under the Lease, and will be due and payable with the next regularly scheduled Basic Rent payment under such Schedule and on each payment date thereafter, until it is recalculated on each January 1 or July 1 thereafter, as applicable.  In the event that there are no Surcharge Base Rate increases in excess of .25%, the Surcharge will not be applicable.  In no event shall the Basic Rent payment reduce below the amount set forth in the Schedule. 

.   This surcharge will be added to the monthly Basic Rent due under the Lease, and be due and payable with the next regularly scheduled Basic Rent payment under such Schedule and on each payment date thereafter.

3.       REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LESSEE. Lessee represents, warrants and agrees that, as of the effective date of this Lease and of each Schedule: (a) Lessee has the form of business organization indicated, and is and will remain duly organized and existing in good standing under the laws of the place of organization specified, under Lessee’s signature and is duly qualified to do business wherever necessary to perform its obligations under the Lease Documents, including each jurisdiction in which the Equipment is or will be located. Lessee’s legal name is as shown in the preamble of this Lease; and Lessee’s Federal Employer Identification Number and organizational number are as set forth under Lessee’s signature. Within the previous six (6) years, Lessee has not changed its name, done business under any other name, or merged or been the surviving entity of any merger, except as disclosed to Lessor in writing. Lessee covenants that it will inform Lessor in writing prior to any changes in ownership or management of Lessee. (b) The Lease Documents (1) have been duly authorized by all necessary action consistent with Lessee’s form of organization, (2) do not require the approval of, or giving notice to, any governmental authority, (3) do not contravene or constitute a default under any applicable law, Lessee’s organizational documents, or any agreement, indenture, or other instrument to which Lessee is a party or by which it may be bound, and (4) constitute legal, valid and binding obligations of Lessee enforceable against Lessee, in accordance with the terms thereof. (c) There are no pending actions or proceedings to which Lessee is a party, and there are no other pending or threatened actions or proceedings of which Lessee has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would have a Material Adverse Effect. As used herein, "Material Adverse Effect" shall mean (i) a materially adverse effect on the business, condition (financial or otherwise), operations, performance or properties of Lessee, or on Lessor’s rights and remedies under this Lease, or (ii) a material impairment of the ability of Lessee to perform its obligations under or remain in compliance with such Schedule or any of the other Lease Documents. Further, Lessee is not in default under any financial or other material agreement that, either individually, or in the aggregate, would have a Material Adverse Effect. (d) All of the Equipment covered by such Schedule is located solely in the jurisdiction(s) specified in such Schedule. (e) Under the applicable laws of each such jurisdiction, such Equipment consists (and shall continue to consist) solely of personal property and not fixtures. Such Equipment is removable from and is not essential to the premises at which it is located. (f) The financial statements of Lessee (copies of which have been furnished to Lessor) have been prepared in accordance with generally accepted accounting principles consistently applied ("GAAP"), and fairly present Lessee's financial condition and the results of its operations as of the date of and for the period covered by such statements, and since the date of such statements there has been no material adverse change in such conditions or operations. (g) With respect to any Collateral, Lessee has good and marketable title to, rights in, and/or power to transfer a security interest therein in accordance with this Agreement. (h) The prior owner of the Equipment is not an affiliate of Lessee. (i) The purchase of the Equipment represented an arms’ length transaction and the purchase price for the Equipment specified therein is the amount obtainable in an arms’ length transaction between a willing and informed buyer and a willing and informed seller under no compulsion to sell.

4.       FURTHER ASSURANCES AND OTHER COVENANTS. Lessee agrees as follows: (a) Upon Lessor’s request, Lessee will furnish Lessor with (1) Lessee's balance sheet, statement of income and statement of retained earnings, prepared in accordance with GAAP, certified by a recognized firm of certified public accountants, within one hundred twenty (120) days of the close of each fiscal year of Lessee, (2) Lessee’s quarterly financial report certified by the chief financial officer of Lessee, within sixty (60) days of the close of each fiscal quarter of Lessee, and (3) all of Lessee’s Forms 10-K and 10-Q, if any, filed with the Securities and Exchange Commission (“SEC”) as and when filed (by furnishing these SEC forms, or making them publicly available in electronic form, in each case, within the time periods set forth in clauses (1) and (2), Lessee shall be deemed to have satisfied the requirements of clauses (1), (2) and (3)). (b) Lessee shall obtain and deliver to Lessor and/or promptly execute or otherwise authenticate any documents, filings, waivers (including any landlord and mortgagee waivers and/or subordination and lien waiver agreements), releases and other records, and will take such further action as Lessor may request in furtherance of Lessor’s rights under any of the Lease Documents. Lessee covenants that there are currently no mortgages on the premises on which the Equipment is located, and that in the event any mortgages are granted on such premises, Lessee shall immediately obtain mortgagee waivers in form and substance satisfactory to Lessor from any such mortgagees. Lessee will deliver to Lessor any additional information reasonably requested by Lessor relating to the Equipment and/or the general financial condition of Lessee. Lessee irrevocably authorizes Lessor to file Uniform Commercial Code financing statements (“UCCs“), and other filings with respect to the Equipment, including a registration of lien in the lien registry of any appropriate government agency and, to the extent any of the Equipment constitutes a motor vehicle(s), certificates of title or other similar documentation naming Lessor as first lienholder, with the titling agency in the appropriate jurisdiction. Without Lessor’s prior written consent, Lessee agrees not to file any corrective or termination statements or partial releases with respect to any UCCs filed by Lessor pursuant to this Lease. (c) Lessee shall provide written notice to Lessor: (1) thirty (30) days prior to any change in Lessee’s name or jurisdiction or form of organization or any change of ownership or management of Lessee; (2) promptly upon the occurrence of any Event of Default (as defined in Section 15) or event which, with the lapse of time or the giving of notice, or both, would become an Event of Default (a "Default"); and (3) promptly upon Lessee becoming aware of any alleged violation of applicable law relating to the Equipment or this Lease. (d) Lessee has been advised by Lessor that the USA Patriot Act establishes minimum standards of account information to be collected and maintained by Lessor, and that to help the government fight the funding of terrorism and money laundering activities, Federal law requires (to the extent applicable) all financial institutions to obtain, verify and record information that identifies each person who opens an account; and specifically, this means that when Lessee executes this Lease, Lessor may ask for Lessee’s name and address, the date of birth of the officers executing this Lease, and other information that will allow Lessor to identify Lessee; and that Lessor may also ask to see the driver’s license or other identifying documents of the officers of Lessee executing this Lease. (e) Lessee is and will remain in full compliance with all applicable laws including, without limitation, (i) ensuring that no person who owns a controlling interest in or otherwise controls Lessee is or shall be (A) listed on the Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets Control (“OFAC”), Department of the Treasury, and/or any other similar lists maintained by OFAC pursuant to any authorizing statute, Executive Order or regulation, or (B) a person designated under Sections 1(b), (c) or (d) of Executive Order No. 13224 (September 23, 2001), any related enabling legislation or any other similar Executive Orders, and (ii) compliance with all applicable Bank Secrecy Act (“BSA”) laws, regulations and government guidance on BSA compliance and on the prevention and detection of money laundering violations. (f) on the first day of each month, Lessee shall furnish to Lessor a location report listing all locations on which Equipment is located, in form and substance satisfactory to Lessor. (g) within 30 days of delivery of all Equipment, install on and provide Lessor access to GPS on all Equipment, as satisfactory to Lessor in its sole discretion. (h) Lessee will not pay any dividend, or make any other distribution on account of any shares of any class of its equity interests, or redeem, purchase, or otherwise acquire directly or indirectly, any shares of any class of its equity interests. (i) Lessee will not pay salaries, bonuses, profit sharing payments or any other compensation of any kind to any shareholders, guarantors, affiliates, managers, officers, management level employee, or directors, whether as officers, directors, employees, shareholders, managers or otherwise, in excess of 110% of that paid in the prior fiscal year. Lessee may not pay any consulting or management fees to shareholders, subsidiaries, affiliates, managers, officers or directors without the prior written consent of the Lessee. (j) Lessee will not enter into, or permit or suffer to exist, any transaction or arrangement with any shareholder, employee, director, officer, affiliate, or shareholder of management, except on terms that are the same as to what that shareholder, employee, director, officer, affiliate, or shareholder of management could obtain in arm’s-length transactions, with persons who have no relationship with any such shareholder, employee, director, officer, affiliate, or shareholder of management.

5.       CONDITIONS PRECEDENT TO THIS LEASE. On the terms and conditions contained herein, Lessor hereby agrees to lease any Equipment under a Schedule, upon Lessor's determination that all of the following have been satisfied: (a) Lessor having received the following, in form and substance satisfactory to Lessor: (1) evidence as to due compliance with the insurance provisions of Section 11; (2) UCCs, real property waivers and all other filings required by Lessor; (3) a certificate of an appropriate officer of Lessee certifying (A) resolutions duly authorizing the transactions contemplated in the applicable Lease Documents, and (B) the incumbency and signature of the officers of Lessee authorized to execute such documents; (4) the only manually executed original of the Schedule, and counterpart originals of all other Lease Documents; (5) evidence satisfactory to Lessor of the ownership and title to the Equipment, including, without limitation, certifications of the same; and (6) such other documents, agreements, instruments, certificates, opinions, and assurances, as Lessor may require. (b) All representations and warranties provided by Lessee in favor of Lessor in any of the Lease Documents shall be true and correct on the effective date of the related Schedule (Lessee's execution and delivery of the Schedule shall constitute Lessee’s acknowledgment of the same). (c) There shall be no Default or Event of Default under the Schedule or any other Lease Documents. The Equipment shall be at the locations disclosed in writing to Lessor by Lessee, as evidenced by the Schedule or location report, and shall be in the condition and repair required hereby; and on the effective date of such Schedule Lessee shall have good and marketable title to the Equipment described therein, free and clear of any claims, liens, attachments, rights of others and legal processes ("Liens").

6.       ACCEPTANCE UNDER LEASE. Lessee covenants and agrees that Lessee is already in possession of the Equipment and that Lessee’s possession of the Equipment shall be deemed acceptance of the Equipment, even if Lessee fails to execute and deliver a Schedule describing such Equipment. Each Schedule will evidence Lessee's unconditional and irrevocable acceptance under the Schedule of the Equipment described therein.

7.       USE AND MAINTENANCE. Except as may be otherwise specified on any Schedule, (a) Lessee shall (1) use the Equipment solely in the continental United States and in the conduct of its business, for the purpose for which the Equipment was designed, in a careful and proper manner, and shall not permanently discontinue use of the Equipment; (2) operate, maintain, service and repair the Equipment, and maintain all records and other materials relating thereto, (A) in accordance and consistent with (i) all maintenance and operating manuals or service agreements, whenever furnished or entered into, including any subsequent amendments or replacements thereof, issued by the supplier or service provider, (ii) the requirements of all applicable insurance policies, (iii) manufacturer’s recommendations, (iv) the original purchase agreement under which such Equipment was acquired, so as to preserve all of Lessee’s and Lessor’s rights thereunder, including all rights to any warranties, indemnities or other rights or remedies, as and if applicable, (v) all applicable laws, and (vi) the prudent practice of other similar companies in the same business as Lessee, but in any event, to no lesser standard than that employed by Lessee for comparable equipment owned or leased by it; and (B) without limiting the foregoing, so as to cause the Equipment to be in good repair and operating condition and in at least the same condition as when delivered to Lessee hereunder, except for ordinary wear and tear resulting despite Lessee's full compliance with the terms hereof; (3) provide written notice to Lessor not less than thirty (30) days after any change of the location of any Equipment (or the location of the principal garage of any Equipment, to the extent that such Equipment is mobile equipment) as specified in the Schedule; and (4) not attach or incorporate the Equipment into any property except for other Equipment in such a manner that the Equipment may be deemed to have become an accession to or a part of such other property. (b) Within a reasonable time, Lessee will replace any parts of the Equipment which become worn out, lost, destroyed, damaged beyond repair or otherwise unfit for use, by new or reconditioned replacement parts which are free and clear of all Liens and have a value, utility and remaining useful life at least equal to the parts replaced (assuming that they were in the condition required by this Lease). Any modification or addition to the Equipment that is required by this Lease shall be made by Lessee. An interest in all such parts, modifications and additions to the Equipment immediately shall vest in Lessor, without any further action by Lessor or any other person, and they shall be deemed incorporated in the Equipment for all purposes of the related Schedule. Unless replaced in accordance with this Section, Lessee shall not remove any parts originally or from time to time attached to the Equipment, if such parts are essential to the operation of the Equipment, are required by any other provision of this Lease or cannot be detached from the Equipment without interfering with the operation of the Equipment or adversely affecting the value, utility and remaining useful life which the Equipment would have had without the addition of such parts. Except as permitted in this Section, Lessee shall not make any material alterations to the Equipment. (c) Lessee shall afford Lessor and/or its designated representatives immediate access to the premises where the Equipment is located for the purpose of inspecting and appraising such Equipment and all applicable maintenance or other records relating thereto at any time during normal business hours, at Lessee’s sole cost and expense. If any discrepancies are found as they pertain to the general condition of the Equipment, Lessor will communicate these discrepancies to Lessee in writing. Lessee shall then have thirty (30) days to rectify these discrepancies at its sole expense. Lessee shall pay all expenses of a re-inspection by Lessor’s appointed representative, including travel costs.

8.       DISCLAIMER; QUIET ENJOYMENT. (a) THE EQUIPMENT IS LEASED HEREUNDER “AS IS, WHERE IS”. LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND HEREBY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE EQUIPMENT, INCLUDING ANY PART, OR ANY MATTER WHATSOEVER, INCLUDING, AS TO EACH ITEM OF EQUIPMENT, ITS DESIGN, CONDITION, MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, TITLE, ABSENCE OF ANY PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT (WHETHER OR NOT DISCOVERABLE BY LESSEE), COMPLIANCE OF SUCH ITEM WITH ANY APPLICABLE LAW, CONFORMITY OF SUCH ITEM TO THE PROVISIONS AND SPECIFICATIONS OF ANY PURCHASE DOCUMENT OR TO THE DESCRIPTION SET FORTH IN THE RELATED SCHEDULE OR ANY OF THE OTHER LEASE DOCUMENTS, OR ANY INTERFERENCE OR INFRINGEMENT (EXCEPT AS EXPRESSLY PROVIDED IN SECTION 8(b)), OR ARISING FROM ANY COURSE OF DEALING OR USAGE OF TRADE, NOR SHALL LESSOR BE LIABLE, FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT; AND LESSEE HEREBY WAIVES ANY CLAIMS ARISING OUT OF ANY OF THE FOREGOING. Without limiting the foregoing, Lessor will not be responsible to Lessee or any other person with respect to, and Lessee agrees to bear sole responsibility for, any risk or other matter that is the subject of Lessor’s disclaimer; and Lessor's agreement to enter into this Lease and any Schedule is in reliance upon the freedom from and complete negation of liability or responsibility for the matters so waived or disclaimed herein or covered by the indemnity in this Lease. So long as no Event of Default has occurred and is continuing, Lessee may exercise Lessor’s rights, if any, under any warranty with respect to the Equipment. Lessee’s exercise of such rights shall be at its sole risk, shall not result in any prejudice to Lessor, and may be exercised only during the term of the related Schedule. Lessee shall not attempt to enforce any such warranty by legal proceeding without Lessor's prior written approval. Lessee hereby agrees to indemnify, defend and hold Lessor harmless for any and all losses, claims or damages suffered by Lessor as a result of warranty claims brought or threatened by Lessee. (b) Lessor warrants that during the term of each Schedule, so long as no Event of Default has occurred and is continuing, Lessee's possession and use of the Equipment leased thereunder shall not be interfered with by Lessor or anyone rightfully claiming an interest through Lessor. The preceding warranty is in lieu of all other warranties by Lessor, whether written, oral or implied, with respect to this Lease or the Equipment. Any actual or purported breach of this warranty shall not give rise to any Abatement, but Lessee may bring a direct cause of action against Lessor for any actual damages directly resulting from any such breach.

9.      FEES AND TAXES. Lessee agrees to: (a) (1) if permitted by law, file in Lessee’s own name or on Lessor’s behalf, directly with all appropriate taxing authorities all declarations, returns, inventories and other documentation with respect to any personal property taxes (or any other taxes in the nature of or imposed in lieu of property taxes) due or to become due with respect to the Equipment, and if not so permitted by law, to promptly notify Lessor and provide it with all information required in order for Lessor to timely file all such declarations, returns, inventories, or other documentation, and (2) pay on or before the date when due all such taxes assessed, billed or otherwise payable with respect to the Equipment directly to the appropriate taxing authorities; (b) (1) pay when due as requested by Lessor, and (2) defend and indemnify Lessor on a net after-tax basis against liability for all license and/or registration fees, assessments, and sales, use, property, excise, privilege, value added and other taxes or other charges or fees now or hereafter imposed by any governmental body or agency upon the Equipment or with respect to the manufacture, shipment, purchase, ownership, delivery, installation, leasing, operation, possession, use, return, or other disposition thereof or the Rent hereunder (other than taxes on or measured solely by the net income of Lessor); and (c) indemnify Lessor against any penalties, charges, interest or costs imposed with respect to any items referred to in clauses (a) and (b) above (the items referred to in clauses (a), (b), and (c) above being referred to herein as “Impositions”). Any Impositions which are not paid when due and which are paid by Lessor shall, at Lessor's option, become immediately due from Lessee to Lessor, together with interest thereon at the Default Rate. Lessee also agrees to make and cooperate with Lessor with any filings or registrations in any foreign jurisdiction as requested by Lessor.

10.     INTENT; GRANTING CLAUSE. (a) Lessee and Lessor intend that each Schedule, referencing or incorporating by reference the terms of this Lease, qualifies as a statutory finance lease under Article 2A of the UCC. To the extent permitted by applicable law, LESSEE WAIVES ANY RIGHT IT MAY HAVE UNDER SECTIONS 2A-303 AND 2A-508 THROUGH 2A-522 OF THE UCC. To the extent that this Lease may be construed as a security agreement, Article 2A of the UCC does not apply, and each Schedule constitutes the retention of a security interest by Lessor in the Equipment described therein. Lessee hereby authorizes Lessor to file one or more UCC-1 financing statements as a “notice filing” with the Secretary of State of Lessee’s state of incorporation or formation (as the case may be) and to file any continuation or amendment statements deemed necessary by Lessor to maintain the effectiveness of such filings. To the extent any of the Equipment constitutes a motor vehicle(s), Lessee hereby authorizes Lessor to file certificates of title, naming Lessor as first lienholder, with the titling agency in the appropriate jurisdiction. (b) In order to secure: (A) the prompt payment of the Rent and all of the other amounts from time to time outstanding with respect hereto and to each Schedule, and the performance and observance by Lessee of all of the provisions hereof and thereof and of all of the other Lease Documents; and (B) the prompt payment, performance and observance by Lessee of all other obligations of Lessee to Lessor under any other agreement or instrument, both now in existence and hereafter created (as the same may be renewed, extended or modified), including (without limitation) any other Master Lease Agreements and all Schedules now or hereafter executed pursuant thereto (collectively, the “Related Lease”); Lessee hereby collaterally assigns, grants, and conveys to Lessor, a first priority security interest in and lien on all of Lessee’s right, title and interest in and to all of the following (whether now existing or hereafter created, and including any other collateral described on any rider hereto; collectively, the “Collateral”; all terms used in this sentence but not otherwise defined in the Schedules or this Agreement shall have meanings given in the UCC): (1) the Lessee's Equipment financed hereunder (to the extent this Lease is construed as a security agreement), Equipment described in the attached Schedules or otherwise covered thereby (including all inventory, fixtures or other property comprising the Equipment), together with all related software (embedded therein or otherwise) and general intangibles, all additions, attachments, accessories and accessions thereto whether or not furnished or financed by the Lessor; (2) all subleases, chattel paper, accounts, accounts receivable, security deposits, medallions, general intangibles, deposit accounts, documents, other equipment, instruments, inventory, investment property, letter of credit rights and any supporting obligations related to any of the foregoing relating thereto, and any and all substitutions, replacements or exchanges for any such item of Equipment or other collateral, in each such case in which Lessee shall from time to time acquire an interest; (3) all books and records pertaining to the foregoing; (4) all property of Lessee held by Lessor, including all property of every description, in the custody of or in transit to Lessor for any purpose, including safekeeping, collection or pledge, for the account of Lessee or as to which Lessee may have any right or power, including but not limited to cash and (5) to the extent not otherwise included, all insurance, substitutions, replacements, exchanges, accessions, proceeds and products of the foregoing, including without limitation, insurance proceeds. The collateral assignment, security interest and lien granted herein shall survive the termination, cancellation or expiration of this Agreement or a particular Schedule until such time as Lessee’s obligations hereunder, thereunder and under the other Lease Documents are fully and indefeasibly discharged. The conveyance contemplated hereby is solely for the purpose of granting to Lessor a security interest in the Equipment. All Equipment in which an interest is conveyed hereby shall remain in the possession of Lessee pursuant to the Lease, unless prior written consent is obtained from Lessor permitting otherwise. (c) If a court of competent jurisdiction concludes that any amounts hereunder constitute the payment of interest, it shall be at an interest rate that is equal to the lesser of the maximum lawful rate permitted by applicable law or the effective interest rate used by Lessor in calculating such amounts. To that end, it is agreed that the rate of interest hereunder shall not, at any time, exceed any applicable lawful limitation on the rate or amount of interest that may be chargeable hereunder (the “Interest Rate Limitation”). In the event that the rate of interest otherwise applicable hereunder (including any sums paid independent of this Lease and properly determined under applicable law to be interest) shall exceed the Interest Rate Limitation, the interest rate applicable to this Lease shall automatically be reduced to the maximum interest rate which does not exceed the Interest Rate Limitation, and sums paid as interest which would cause the effective rate of interest hereunder to exceed the Interest Rate Limitation shall be applied to reduce the principal balance due hereunder, if any, or otherwise refunded to Lessee. (d) Lessee hereby acknowledges and agrees that, to the extent that Lessor’s participation in any purchase and lease of an item or items of Equipment pursuant to this Lease constitutes a financing of Lessee’s acquisition of such item or items of Equipment, Lessee’s repayment of the amounts of such financing shall apply on a “first-in/first-out” basis so that portions of the amounts of such financing used to purchase such item or items of Equipment shall be deemed repaid in the chronological order of the use of such amounts to purchase the same.

11.     INSURANCE. Upon acceptance under a Schedule, Lessee shall maintain all-risk insurance coverage with respect to the Equipment insuring against, among other things: (a) any casualty to the Equipment (or any portion thereof), including loss or damage due to fire and the risks normally included in extended coverage, malicious mischief and vandalism, for not less than the greater of full replacement value of the Equipment or the Stipulated Loss Value thereof (as the same may be adjusted pursuant to Section 16 below); and (b) any commercial liability arising in connection with the Equipment, including both bodily injury and property damage with a combined single limit per occurrence of not less than the amount specified in the Schedule; having a deductible reasonably satisfactory to Lessor. Lessor shall have the right to contact Lessee’s insurance provider at any time. Lessee covenants to provide Lessor prior written notice of any changes to the insurance coverage required hereunder. Lessee shall cause to be provided to Lessor, not less than fifteen (15) days prior to the scheduled expiration or lapse of such insurance coverage, evidence satisfactory to Lessor of renewal or replacement coverage. The required insurance policies (including endorsements) shall (i) be in form and amount reasonably satisfactory to Lessor, and written by insurers of recognized reputation and responsibility satisfactory to Lessor (but such insurer shall carry a current rating by A.M. Best Company of at least "A" for a general policyholder and a financial rating of at least "VIII"), (ii) be endorsed to name Lessor and Comerica Bank, N.A. as an additional insured (but without responsibility for premiums) and lender’s loss payee (although in this instance, “lender” is the Lessor) and loss payee, (iii) provide that any amount payable under the required casualty coverage shall be paid directly to Lessor as sole loss payee, and (iv) provide for thirty (30) days’ written notice by such insurer of cancellation, material change, or non-renewal. In the event Lessee fails to maintain insurance for the Equipment as required hereunder, upon Lessor’s receipt of notice of or otherwise knowledge: (i) of an unpaid insurance premium; (ii) of a termination or cancellation of any required insurance policy; or (iii) that a required insurance policy is not to be renewed and Lessee fails to provide replacement coverage at least fifteen (15) days prior to the termination of existing coverage, Lessor may, at its option, procure and substitute another policy of insurance in the amount required pursuant to the foregoing terms of this Lease with such companies as Lessor may select, the cost of which shall be paid by Lessee upon demand. All sums paid by Lessor in procuring said insurance that are not promptly reimbursed by Lessee shall be added to Rent due under the Lease, and shall be immediately due and payable without notice, with interest thereon at the Default Rate.

12.    LOSS AND DAMAGE. (a) At all times during the term of this Lease, Lessee shall indemnify and hold Lessor harmless for losses arising from the loss, theft, confiscation, taking, unavailability, damage or partial destruction of the Equipment and Lessee shall not be released from its obligations under any Schedule or other Lease Document in any such event. (b) Lessee shall provide prompt written notice to Lessor of any Total Loss or any material damage to the Equipment. Any such notice must be provided together with any damage reports provided to any governmental authority, the insurer, and any documents pertaining to the repair of such damage, including copies of work orders, and all invoices for related charges. (c) Without limiting any other provision hereof, Lessee shall repair all damage to any item of Equipment from any and all causes, other than a Total Loss, so as to cause it to be in the condition and repair required by this Lease. (d) A “Total Loss” shall be deemed to have occurred to an item of Equipment upon: (1) the actual or constructive total loss of any item of the Equipment, (2) the loss, disappearance, theft or destruction of any item of the Equipment, or damage to any item of the Equipment that is uneconomical to repair or renders it unfit for normal use, or (3) the condemnation, confiscation, requisition, seizure, forfeiture or other taking of title to or use of any item of the Equipment or the imposition of any Lien thereon by any governmental authority. On the next rent payment date following a Total Loss (a “Loss Payment Date”), Lessee shall pay to Lessor the Basic Rent due on that date plus the greater of the (i) Stipulated Loss Value of or (ii) the entire amount of insurance proceeds received by Lessee in connection with any Total Loss or other loss or damage to the item or items of the Equipment with respect to which the Total Loss has occurred (the “Lost Equipment”), together with any Other Payments due hereunder with respect to the Lost Equipment. Notwithstanding anything to the contrary provided herein, to the extent any insurance proceeds are received by Lessee in connection with the Equipment, such proceeds shall be immediately remitted to Lessor to be credited against the amounts owed under this Lease, as determined by Lessor in its sole an absolute discretion. Upon making such payment, (i) the balance owed under the Lease shall not be re-amortized; rather, the payment shall be applied to amounts due under the Lease in inverse chronological order of the Lease termination date, commencing first with the Termination Value (defined below); (ii) Lessee shall remain liable for, and pay as and when due, all future Basic Rent and all Other Payments until paid in full in accordance with the terms of this Lease, and (iii) Lessor shall terminate its interest in any Lost Equipment to the extent it is paid off in full as determined by Lessor, "AS IS WHERE IS", and “WITH ALL FAULTS”, but subject to the requirements of any third party insurance carrier in order to settle an insurance claim. As used in this Lease, "Stipulated Loss Value" shall mean the product of the portion of the Funding Amount allocated to the Lost Equipment as determined by Lessor in its sole discretion, times the percentage factor applicable to the Loss Payment Date, as set forth in the Schedule of Stipulated Loss Values incorporated in such Schedule. After the final rent payment date of the original term or any renewal term of a Schedule, the Stipulated Loss Value shall be determined as of the last rent payment date during the applicable term of such Schedule, and the applicable percentage factor shall be the last percentage factor set forth in the Schedule of Stipulated Loss Values incorporated in such Schedule. (e) Lessor shall be under no duty to Lessee to pursue any claim against any person in connection with a Total Loss or other loss or damage. (f) If Lessor receives a payment under an insurance policy required under this Lease in connection with any Total Loss or other loss of or damage to an item of Equipment, and such payment is both unconditional and indefeasible, then provided Lessee shall have complied with the applicable provisions of this Section, Lessor shall either (1) credit such proceeds against any amounts owed by Lessee under the Lease in inverse chronological order of the Lease termination date, commencing first with the Termination Value (defined below), or (2) if received with respect to repairs made pursuant to Section 12(c), remit such proceeds to Lessee up to an amount equal to the amount of the costs of repair actually incurred by Lessee, as established to Lessor’s satisfaction.

13.    REDELIVERY. (a) If (i) an Event of Default occurs, and is continuing, with respect to a Schedule and Lessee is required to surrender or return the Equipment described on such Schedule to Lessor, or (ii) this Lease expires and Lessee does not purchase the Equipment pursuant to Rider No. 1 to the Equipment Schedule, Lessee shall, at Lessor’s option, deliver such Equipment to Lessor, at Lessee’s sole cost and expense, free and clear of all Liens whatsoever, to such place(s) within the continental United States as Lessor shall specify. Lessee shall provide, at its expense, transit insurance for the delivery period in an amount equal to the replacement value of such Equipment and Lessor shall be named as the loss payee on all such policies of insurance. Lessee shall cause: (1) the Supplier’s representative or other qualified person acceptable to Lessor (the “Designated Person”) to de-install such Equipment in accordance with the Supplier’s specifications (as applicable) and pack such Equipment properly and in accordance with the Supplier’s recommendations (as applicable); and (2) such Equipment to be transported in a manner consistent with the Supplier’s recommendations and practices (as applicable), at Lessee’s sole cost and expense. Upon surrender or delivery, as applicable, such Equipment shall be: (i) in the same condition as when the related Schedule was executed, ordinary wear and tear excepted; (ii) mechanically and structurally sound, capable of performing the functions for which such Equipment was originally designed, in accordance with the Supplier’s published and recommended specifications (as applicable); (iii) delivered or surrendered, as applicable, with all component parts in good operating condition (and all components must meet or exceed the Supplier’s minimum recommended specifications, unless otherwise agreed by Lessor in writing); (iv) delivered or surrendered, as applicable, with all software and documentation necessary for the operation of such Equipment for the performance of the functions for which such Equipment was originally designed (whether or not such software is embedded in or otherwise is a part of such Equipment); and (v) cleaned and cosmetically acceptable, with all Lessee-installed markings removed and all rust, corrosion or other contamination having been removed or properly treated, and in such condition so that it may be immediately installed and placed in service by a third party. Upon delivery, Lessee shall ensure that such Equipment shall be in compliance with all applicable Federal, state and local laws, and health and safety guidelines. Lessee shall be responsible for the cost of all repairs, alterations, inspections, appraisals, storage charges, insurance costs, demonstration costs and other related costs necessary to cause such Equipment to be in full compliance with the terms of this Lease. (b) If requested by Lessor, Lessee shall also deliver all related records and other data to Lessor, including all drawings, records of maintenance, modifications, additions and major repairs, computerized maintenance history, and any maintenance and repair manuals, if any (collectively, the “Records”). All drawings, manuals or other documents delivered to Lessor that are subject to periodic revision will be fully up-to-date and current to the latest revision standard of any particular manual or document. In the event any such Records are missing or incomplete, Lessor shall have the right to cause the same to be reconstructed at Lessee’s expense. (c) In addition to Lessor's other rights and remedies hereunder, if such Equipment and the related Records are not returned in a timely fashion, or if repairs are necessary to place any item of Equipment in the condition required in this Section, Lessee shall (i) continue to pay to Lessor per diem rent at the last prevailing lease rate under the applicable Schedule with respect to such item of Equipment, for the period of delay in redelivery, and/or for the period of time reasonably necessary to accomplish such repairs, and (ii) pay to Lessor an amount equal to the aggregate cost of any such repairs. Lessor's acceptance of such rent on account of such delay and/or repair does not constitute an extension or renewal of the term of the related Schedule or a waiver of Lessor's right to prompt return of such Equipment in proper condition. Such amount shall be payable upon the earlier of Lessor’s demand or the return of such Equipment in accordance with this Lease. (d) Without limiting any other terms or conditions of this Lease, the provisions of this Section are of the essence of each Schedule, and upon application to any court of equity having jurisdiction, Lessor shall be entitled to a decree against Lessee requiring Lessee’s specific performance of its agreements in this Section.

14.     INDEMNITY. Lessee shall indemnify, defend and keep harmless Lessor and any Assignee (as defined in Section 17), and their respective members, managers, officers agents and employees (each, an "Indemnitee"), from and against any and all Claims (other than such as may directly and proximately result from the actual, but not imputed, gross negligence or willful misconduct of such Indemnitee), by paying or otherwise discharging same, when and as such Claims shall become due. Lessee agrees that the indemnity provided for in this Section includes the agreement by Lessee to indemnify each Indemnitee from the consequences of its own simple negligence, whether that negligence is the sole or concurring cause of the Claims, and to further indemnify each such Indemnitee with respect to Claims for which such Indemnitee is strictly liable. Lessor shall give Lessee prompt notice of any Claim hereby indemnified against and Lessee shall be entitled to control the defense of and/or to settle any Claim, in each case, so long as (1) no Default or Event of Default has occurred and is then continuing, (2) Lessee confirms, in writing, its unconditional and irrevocable commitment to indemnify each Indemnitee with respect to such Claim, (3) Lessee is financially capable of satisfying its obligations under this Section, (4) Lessor approves the defense counsel selected by Lessee, and (5) there is no reasonable risk of criminal liability being imposed on Lessor or any of its Indemnitees as a result of such Claim. The term "Claims" shall mean all claims, allegations, harms, judgments, settlements, suits, actions, debts, obligations, damages (whether incidental, consequential or direct), demands (for compensation, indemnification, reimbursement or otherwise), losses, penalties, fines, liabilities (including strict liability), financing or securitization losses or charges, other charges that Lessor (or any of its affiliates) has incurred or for which it is responsible, in the nature of interest, Liens, financing charges and any other costs (including attorneys' fees and disbursements and any other legal or non-legal expenses of investigation or defense of any Claim, whether or not such Claim is ultimately defeated or enforcing the rights, remedies or indemnities provided for hereunder, or otherwise available at law or equity to Lessor), of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, by or against any person, arising on account of (A) any Lease Document, including the performance, breach (including any Default or Event of Default) or enforcement of any of the terms thereof, or any early repayment of Lessee’s obligations under the Lease Documents (whether pursuant to acceleration, liquidation or otherwise) or any early termination of the Lease, or (B) the Equipment, or any part or other contents thereof, any substance at any time contained therein or emitted therefrom, including any hazardous substances, or the premises at which the Equipment may be located from time to time, or (C) the ordering, acquisition, delivery, installation or rejection of the Equipment, the possession of any property to which it may be attached from time to time, maintenance, use, condition, ownership or operation of any item of Equipment, and by whomsoever owned, used, possessed or operated, during the term of any Schedule with respect to that item of Equipment, the existence of latent and other defects (whether or not discoverable by Lessor or Lessee) any claim in tort for negligence or strict liability, and any claim for patent, trademark or copyright infringement, or the loss, damage, destruction, theft, removal, return, surrender, sale or other disposition of the Equipment, or any item thereof, including Claims involving or alleging environmental damage, or any criminal or terrorist act, or for whatever other reason whatsoever. If any Claim is made against Lessee or an Indemnitee, the party receiving notice of such Claim shall promptly notify the other, but the failure of the party receiving notice to so notify the other shall not relieve Lessee of any obligation hereunder.

15.    DEFAULT. A default shall be deemed to have occurred hereunder and under a Schedule upon the occurrence of any of the following (each, an "Event of Default"): (a) non-payment of Basic Rent within five (5) days of the applicable rent payment date; (b) non-payment of any Other Payment within five (5) days after it is due; (c) failure to maintain, use or operate the Equipment in compliance with applicable law; (d) breach by Lessee of its covenants pursuant to Section 4(e) hereof; (e) failure to obtain, maintain and comply with all of the insurance coverages required under this Lease that is not cured within five (5) days after notice thereof; (f) any transfer or encumbrance, or the existence of any Lien, except for Permitted Liens; (g) a payment or other default by Lessee under any loan, lease, guaranty or other financial obligation to Lessor (including, without limitation, the Related Lease) or its affiliates which default entitles the other party to such obligation to exercise remedies; (h) a payment or other default by Lessee under any material loan, lease, guaranty or other material financial obligation to any third party which default has been declared; (i) an inaccuracy in any representation or breach of warranty by Lessee (including any false or misleading representation or warranty) in any financial statement or Lease Document, including any omission of any substantial contingent or unliquidated liability or claim against Lessee; (j) the commencement of any bankruptcy, insolvency, receivership or similar proceeding by or against Lessee or any of its properties or business (unless, if involuntary, the proceeding is dismissed within sixty (60) days of the filing thereof) or the rejection of this Lease or any other Lease Document in any such proceeding; (k) the failure by Lessee generally to pay its debts as they become due or its admission in writing of its inability to pay the same; (l) Lessee shall (1) enter into any transaction of merger or consolidation, unless Lessee shall be the surviving entity (such actions being referred to as an "Event"), unless the surviving entity is organized and existing under the laws of the United States or any state, and prior to such Event: (A) such person executes and delivers to Lessor (x) an agreement satisfactory to Lessor, in its sole discretion, containing such person's effective assumption, and its agreement to pay, perform, comply with and otherwise be liable for, in a due and punctual manner, all of Lessee's obligations having previously arisen, or then or thereafter arising, under any and all of the Lease Documents, and (y) any and all other documents, agreements, instruments, certificates, opinions and filings requested by Lessor; and (B) Lessor is satisfied as to the creditworthiness of such person, and as to such person's conformance to the other standard criteria then used by Lessor when approving transactions similar to the transactions contemplated in this Lease; (2) cease to do business as a going concern, liquidate, or dissolve; or (3) sell, transfer, or otherwise dispose of all or substantially all of its assets or property; (m) if Lessee is privately held and effective control of Lessee's voting capital stock/membership interests/partnership interests, issued and outstanding from time to time, is not retained by the present holders (unless Lessee shall have provided thirty (30) days' prior written notice to Lessor of the proposed disposition and Lessor shall have consented thereto in writing); (n) if Lessee is a publicly held corporation and there is a material change in the ownership of Lessee’s capital stock, unless Lessor is satisfied as to the creditworthiness of Lessee and as to Lessee's conformance to the other standard criteria then used by Lessor for such purpose immediately thereafter; (o) there occurs a default or anticipatory repudiation under or termination of any guaranty executed in connection with this Lease; (p) failure to satisfy the requirements of any financial covenants set forth herein, or in any rider to this Lease or any Schedule; or (q) failure to timely pay any material suppliers and mechanics for work or repairs to the Equipment; or (r) breach by Lessee of any other covenant, condition or agreement (other than those in items (a)-(q)) under this Lease or any of the other Lease Documents that continues for thirty (30) days after Lessor’s written notice to Lessee (but such notice and cure period will not be applicable unless such breach is curable by practical means within such notice period). The occurrence of an Event of Default with respect to any Schedule shall, at the sole discretion of Lessor, constitute an Event of Default with respect to any or all Schedules to which it is then a party. Notwithstanding anything to the contrary set forth herein, Lessor may exercise all rights and remedies hereunder independently with respect to each Schedule and the Equipment covered by such Schedule.

16.    REMEDIES. (a) If an Event of Default occurs, and is then continuing, with respect to any Schedule, the Lessor thereunder may (in its sole discretion) exercise any one or more of the following remedies with respect to such Schedule and any or all other Schedules to which such Lessor is then a party: (1) proceed at law or in equity, to enforce specifically Lessee’s performance or to recover damages; (2) declare each such Schedule in default, and terminate each such Schedule or otherwise terminate Lessee’s right to use the Equipment and Lessee’s other rights, but not its obligations, thereunder and Lessee shall immediately assemble, make available and, if Lessor requests, return the Equipment to Lessor in accordance with the terms of Section 13 of this Lease; (3) enter any premises, without prior notice, where any item of Equipment is located and take immediate possession of and remove (or disable in place) such item (and/or any unattached parts) by self-help, summary proceedings or otherwise without liability; (4) use the premises where the Equipment is located to store, repair, assemble, auction, sell or otherwise deal with the Equipment, without cost or liability to Lessor; (5) sell, re-lease or otherwise dispose of any or all of the Equipment, whether or not in Lessor's possession, at public or private sale, with or without notice to Lessee, and apply or retain the net proceeds of such disposition, with Lessee remaining liable for any deficiency and with any excess being for the account of Lessee; (6) enforce any or all of the preceding remedies with respect to any Equipment, and apply any deposit or other cash collateral, or any proceeds of any such Equipment, at any time to reduce any amounts due to Lessor; (7) demand and recover from Lessee all Liquidated Damages and all Other Payments whenever the same shall be due; and (8) exercise any and all other remedies allowed by applicable law, including the UCC. As used herein, “Liquidated Damages” shall mean the liquidated damages (all of which, Lessee hereby acknowledges, are damages to be paid in lieu of future Basic Rent and are reasonable in light of the anticipated harm arising by reason of an Event of Default, and are not a penalty) described in the first sentence of Section 16(b). Upon the occurrence of the Event of Default described in Section 15(j) hereof, the remedy provided in Clause (8) above shall be automatically exercised without the requirement of prior written notice to Lessee or of any other act or declaration by Lessor, and the Liquidated Damages described therein shall be immediately due and payable. For the avoidance of doubt, if Lessor or any of its affiliates has entered into a securitization or similar financing transaction of which the Lease Documents are a part, the Basic Rent, the Liquidated Damages and the Stipulated Loss Value shall be increased to an amount necessary to repay in full Lessor’s (or any of its affiliates’) outstanding balance under such securitization or similar financing transaction documents in respect of the Lease Documents in the case of any early repayment of Lessee’s obligations under the Lease Documents (whether pursuant to acceleration, liquidation or otherwise) or any early termination of the Lease.

If at any time after the occurrence of an Event of Default, that is then continuing, Lessor determines that the cost of maintaining the Lease or otherwise extending credit to Lessee has increased because such Event of Default has the effect of reducing the rate of return on Lessor’s capital or increasing the cost of Lessor’s capital, then the Basic Rent, the Liquidated Damages and the Stipulated Loss Value shall be increased to compensate Lessor for such increased cost and reduction in such rate of return.

(b) If an Event of Default occurs with respect to any Schedule and/or the Equipment covered thereby, and such Event of Default has not been cured, upon demand by Lessor, Lessee shall pay to Lessor an amount calculated as the Stipulated Loss Value of the Equipment (determined as of the next rent payment date after the date of the occurrence of the subject Event of Default), together with all other Rent due with respect to the related Schedule as of such determination date, and all Enforcement Costs (defined in Section 16(c)), less a credit for any disposition proceeds, if applicable pursuant to the application provisions in the next sentence. If Lessor demands the Liquidated Damages under this Section 16(b), and recovers and sells the Equipment, any proceeds received in good and indefeasible funds shall be applied by Lessor, with respect to the related Schedule: first, to pay all Enforcement Costs, to the extent not previously paid; second, to pay to Lessor an amount equal to any unpaid Rent due and payable, together with the Liquidated Damage amounts specified in this Section 16(b), to the extent not previously paid; third, to pay to Lessor any interest accruing on the amounts covered by the preceding clauses, at the Default Rate, from and after the date the same becomes due, through the date of payment; and fourth, (A) if the Lessor under such Schedule is also the Lessor under any other Schedules (whether by retaining the same, or as Assignee), to satisfy any remaining obligations under any or all such other Schedules, or (B) if such Lessor is not the Lessor under any other Schedule, or if Lessee’s obligations to such Lessor under such other Schedules have been fully and indefeasibly satisfied, to reimburse Lessee for such amounts to the extent paid by Lessee as Liquidated Damages pursuant to this Section 16(b).

(c) Unless already specifically provided for in Section 16(b), if an Event of Default occurs and is then continuing with respect to any Schedule, Lessee shall also be liable for all of the following (“Enforcement Costs”): (1) all unpaid Rent due before, during or after exercise of any of the foregoing remedies, and (2) all reasonable legal fees (including consultation, drafting notices or other documents, expert witness fees, sending notices or instituting, prosecuting or defending litigation or arbitration) and other enforcement costs and expenses incurred by reason of any Default or Event of Default or the exercise of Lessor's rights or remedies, including all expenses incurred in connection with the return or other recovery of any Equipment in accordance with the terms of this Lease or in placing such Equipment in the condition required hereby, or the sale, re-lease or other disposition (including but not limited to costs of transportation, possession, storage, insurance, taxes, lien removal, repair, refurbishing, advertising and brokers’ fees, and reasonable legal fees and costs for inside and outside counsel), and sales or use taxes incurred by Lessor in connection with any disposition of the Equipment after the occurrence of an Event of Default, and all other pre-judgment and post-judgment enforcement related actions taken by Lessor or any actions taken by Lessor in any bankruptcy case involving Lessee, the Equipment, or any other person. From and after the date on which an Event of Default occurs, Lessee shall pay interest to Lessor with respect to all amounts due hereunder until such amounts are received by Lessor in good funds at a per annum interest rate that is the lesser of eighteen (18) percent or the maximum rate permitted by applicable law (the “Default Rate”). No right or remedy is exclusive and each may be used successively and cumulatively. Any failure to exercise the rights granted hereunder upon any Default or Event of Default shall not constitute a waiver of any such right. No extension of time for payment or performance of any of Lessee’s obligations hereunder shall operate to release, discharge, modify, change or affect the original liability of Lessee for such obligations, either in whole or in part. In any action to repossess any Equipment or other Collateral, Lessee waives any bonds and any surety or security required by any applicable laws as an incident to such repossession. Notices of Lessor’s intention to accelerate, acceleration, nonpayment, presentment, protest, dishonor or any other notice whatsoever (other than as expressly set forth herein) are waived by Lessee. Any notice given by Lessor of any disposition of the Equipment or any Collateral or other intended action of Lessor which is given in accordance with this Lease at least five (5) business days prior to such action, shall constitute fair and reasonable notice of such action. The execution or acceptance of a Schedule shall not constitute a waiver by Lessor of any pre-existing Default or Event of Default. With respect to any disposition of any Equipment or Collateral pursuant to this Section, (i) Lessor shall have no obligation, subject to the requirements of commercial reasonableness, to clean-up or otherwise prepare the same for disposition, (ii) Lessor may comply with any applicable law in connection with any such disposition, and any actions taken in connection therewith shall not be deemed to have adversely affected the commercial reasonableness of any disposition thereof, (iii) Lessor may disclaim any title or other warranties in connection with any such disposition, (iv) if Lessor purchases any of the Equipment or Collateral at a public or private sale pursuant hereto, Lessor may pay for the same by crediting some or all of Lessee’s obligations under any Schedule, and (v) Lessee shall remain responsible for any deficiency remaining after Lessor’s exercise of its remedies and application of any funds or credits against Lessee’s obligations under any Schedule, and Lessee shall be entitled to any excess after such application.

17.     ASSIGNMENT. (a) LESSEE SHALL NOT ASSIGN, DELEGATE, TRANSFER OR ENCUMBER ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER OR UNDER ANY SCHEDULE, OR ITS LEASEHOLD INTEREST OR ANY COLLATERAL, SUBLET THE EQUIPMENT OR OTHERWISE PERMIT THE EQUIPMENT TO BE OPERATED OR USED BY, OR TO COME INTO OR REMAIN IN THE POSSESSION OF, ANYONE BUT LESSEE, WITHOUT LESSOR’S PRIOR WRITTEN CONSENT. Without limiting the foregoing, (1) Lessee may not attempt to dispose of any of the Equipment, and (2) Lessee shall (A) maintain the Equipment free from all Liens, other than Permitted Liens, (B) notify Lessor immediately upon receipt of notice of any Lien affecting the Equipment, and (C) defend Lessor's interest in the Equipment. A “Permitted Lien” shall mean any Lien for Impositions, Liens of mechanics, materialmen, or suppliers and similar Liens arising by operation of law, provided that any such Lien is incurred by Lessee in the ordinary course of business, for sums that are not yet delinquent or are being contested in good faith and with due diligence, by negotiations or by appropriate proceedings which suspend the collection thereof and, in Lessor's sole discretion, (i) do not involve any substantial danger of the sale, forfeiture or loss of the Equipment or any interest therein, and (ii) for the payment of which adequate assurances or security have been provided to Lessor. No disposition referred to in this Section shall relieve Lessee of its obligations, and Lessee shall remain primarily liable under each Schedule and all of the other Lease Documents. (b) Lessor may at any time with or without notice to Lessee grant a security interest in, sell, assign, delegate or otherwise transfer (an “Assignment”) all or any part of its interest in the Equipment, this Lease or any Schedule and any related Lease Documents or any Rent thereunder, or the right to enter into any Schedule, and Lessee shall perform all of its obligations thereunder, to the extent so transferred, for the benefit of the beneficiary of such Assignment (such beneficiary, including any successors and assigns, an “Assignee”). Lessee agrees not to assert against any Assignee any Abatement (without limiting the provisions of Section 2) or Claim that Lessee may have against Lessor, and Assignee shall not be bound by, or otherwise required to perform any of Lessor’s obligations, unless expressly assumed by such Assignee. Lessor shall be relieved of any such assumed obligations. If so directed in writing, Lessee shall pay all Rent and all other sums that become due under the assigned Schedule and other Lease Documents directly to the Assignee or any other party designated in writing by Lessor or such Assignee. Lessee acknowledges that Lessor’s right to enter into an Assignment is essential to Lessor and, accordingly, waives any restrictions under applicable law with respect to an Assignment and any related remedies. Upon the request of Lessor or any Assignee, Lessee also agrees (i) to promptly execute and deliver to Lessor or to such Assignee an acknowledgment of the Assignment in form and substance satisfactory to the requesting party, an insurance certificate and such other documents and assurances reasonably requested by Lessor or Assignee, and (ii) to comply with all other reasonable requirements of any such Assignee in connection with any such Assignment. Upon such Assignment and except as may otherwise be provided herein, all references in this Lease to “Lessor” shall include such Assignee. (c) Subject always to the foregoing, this Lease and each Schedule shall inure to the benefit of, and are binding upon, Lessee’s and Lessor’s respective successors and permitted assigns (and, without limiting the foregoing, shall bind all persons who become bound as a “new debtor” to this Lease and any Schedule, as set forth in UCC Section 9-203(e)).

18.    LESSEE REPRESENTATIVE; JOINT AND SEVERAL OBLIGATIONS

18.1      Appointment; Nature of Relationship. Each Lessee is appointing 5J Trucking as its contractual representative hereunder and under each other Lease Document, and each Lessee irrevocably authorizes 5J Trucking to act as each Lessee’s contractual representative with the rights and duties set forth in this Lease and in the other Lease Documents. 5J Trucking agrees to act as such contractual representative for the other Lessee. Lessor and its officers, directors, agents, or employees are not liable to 5J Trucking or any Lessee for any action taken or omitted to be taken by 5J Trucking or Lessee under this Section or this Lease.

18.2      Notices to Lessee Representative. Each Lessee must immediately notify 5J Trucking of the occurrence of any Default or Event of Default. If 5J Trucking receives such a notice, 5J Trucking must give prompt notice thereof to Lessor. Any notice provided to 5J Trucking under this Lease or any Lease Document constitutes notice to Lessee on the date received or deemed receives by 5J Trucking.

18.3      Waivers. Each Lessee expressly waives (a) any and all rights of subrogation, reimbursement, indemnity, exoneration, contribution, or any other claim that any Lessee may now or hereafter have against the other Lessee or other person directly or contingently liable for Lessee’s obligations under the Lease Documents, or against or with respect to the other Lessee’s property (including, any property that is Collateral for Lessee’s obligations under the Lease Documents), arising from the existence or performance of this Lease, until termination of this Lease and repayment in full of Lessee’s obligations under the Lease Documents and (b) any defense it may otherwise have to the payment and performance of Lessee’s obligations under the Lease Documents based on any contention that its liability hereunder and under the Lease Documents is limited and not joint and several. Each Lessee acknowledges and agrees that the foregoing waivers serve as a material inducement to Lessor’s agreement to enter into this Lease, and that Lessor is relying on each specific waiver and all such waivers in entering into this Lease.

18.4      Joint and Several Obligations.

(a)        All of Lessee’s obligations under the Lease Documents are the joint and several obligations under the Lease Documents of each Lessee, and each Lessee must make payment upon the maturity of all obligations under the Lease Documents by acceleration or otherwise, and this obligation and liability on the part of Lessee is not affected by any extensions, renewals, and forbearance granted by Lessor to any Lessee, Lessor’s failure to give any Lessee notice, Lessor’s failure to pursue or preserve its rights against any Lessee, the release by Lessor of any Collateral now or hereafter acquired from any Lessee, and any agreement by Lessee to pay upon any notice issued pursuant thereto is unconditional and unaffected by prior recourse by Lessor to the other Lessee or any Collateral for Lessee’s obligations or the lack thereof. Each Lessee waives all suretyship defenses. Without limiting the generality of the foregoing, each Lessee acknowledges and agrees that any and all actions, inactions, or omissions by any one or more, or all, of the Lessee in connection with, related to, or otherwise affecting this Lease or any of the other Lease Documents are the obligations of, and inure to and are binding upon, each and all of the Lessee, jointly and severally.

(b)        Each covenant, agreement, obligation, representation and warranty of the Lessee contained in this Lease is the joint and several undertaking of Lessee. Each Lessee acknowledges that its obligations undertaken herein might be construed to consist, at least in part, of the guarantee of Lessee’s obligations under the Lease Documents of the other Lessee and, in full recognition of that fact, Lessee consents and agrees that Lessor may, at any time and from time-to-time without notice or demand, whether before or after any actual or purported termination, repudiation, or revocation of this Lease by any Lessee, and without affecting the enforceability or continuing effectiveness of this Lease as to any Lessee but subject to the Lessees’ written consent with respect to clauses (i) and (ii) of this subsection to the extent Lessor does not have the unilateral right to make such changes under the terms of the Lease Documents as the result of the occurrence of an Event of Default or otherwise: (i) supplement, restate, modify, amend, increase, decrease, extend, renew, or otherwise change the time for payment or the terms of this Lease or any part thereof, including any increase or decrease of the rate(s) of interest thereon; (ii) supplement, restate, modify, amend, increase, decrease or waive, or enter into or give any agreement, approval or consent with respect to, this Lease or any part thereof, or any of the Lease Documents, or any condition, covenant, default, remedy, right, representation, or term thereof or thereunder; (iii) accept partial payments; (iv) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer or enforce any security or guarantees, and apply any security and direct the order or manner of sale thereof as Lessor, in its discretion determines; (v) release any person or entity from any personal liability with respect to this Lease or any part thereof; (vi) settle, release on terms satisfactory to Lessor or by operation of applicable law or otherwise liquidate or enforce any security or guaranty in any manner, consent to the transfer of any security and bid and purchase at any sale; or (vii) consent to the merger, change or any other restructuring or termination of the corporate or partnership existence of any Lessee, or any other person, and correspondingly restructure Lessee’s obligations under the Lease Documents, and any merger, change, restructuring or termination does not affect the liability of any Lessee or the continuing effectiveness of this Lease, or the enforceability of this Lease with respect to all or any part of Lessee’s obligations under the Lease Documents.

(c)        Each Lessee represents that: (i) under this Lease, the Lessee desire to utilize their potential to receive financial accommodations on a consolidated basis to the same extent possible as if they were merged into a single corporate entity and that this Lease reflects the establishment of lease arrangements that would not otherwise be available to the Lessee if Lessee were not jointly and severally liable for payment of Lessee’s obligations under the Lease Documents; (ii) it has determined that it will benefit specifically and materially from the leasing terms contemplated by this Lease; (iii) it is both a condition precedent to Lessor’s obligations hereunder and a desire of the Lessee that Lessee execute and deliver to Lessor this Lease; and (iv) the Lessee have requested and bargained for the structure and security for the terms contemplated by this Lease. Lessee agrees if its joint and several liability hereunder, or if any security interests securing the joint and several liability, would, but for the application of this Section, be unenforceable under applicable law, then the joint and several liability and each security interests is valid and enforceable to the maximum extent that would not cause the joint and several liability or security interests to be unenforceable under applicable law, and the joint and several liability and the security interest is treated as having been automatically amended accordingly at all relevant times.

(d)        To the extent that any Lessee, under this Lease as a joint and several obligor or a Guarantor under this Section, repays any of Lessee’s obligations under the Lease Documents constituting obligations owing by another Lessee or other obligations under the Lease Documents incurred directly and primarily by any other Lessee (an “Accommodation Payment”), then the Lessee making an Accommodation Payment is entitled to contribution and indemnification from, and, be reimbursed by, each of the other Lessee in an amount, for each of the other Lessee, equal to a fraction of the Accommodation Payment, the numerator of which fraction is the other Lessee’s “Allocable Amount” (as defined below) and the denominator of which is the sum of the Allocable Amounts of all of the Lessee. As of any date of determination, the “Allocable Amount” of each Lessee is equal to the maximum amount of liability for Accommodation Payments that could be asserted against that Lessee hereunder without (i) rendering that Lessee “insolvent” within the meaning of Section 101(31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (ii) leaving that Lessee with unreasonably small capital or assets, within the meaning of Section 548 of the United States Bankruptcy Code, Section 4 of the UFTA, or (iii) leaving that Lessee unable to pay its debts as they become due within the meaning of Section 548 of the United States Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution, indemnification, and reimbursement under this Section are subordinate in right of payment to the prior payment in full of Lessee’s obligations under the Lease Documents. The provisions of this Section, to the extent expressly inconsistent with any provision in any Lease Document, supersede the inconsistent provision.

18.5       Cross-Guaranty.

(a)        Notwithstanding the fact that the parties agreed that the Lessee are jointly and severally liable for all of Lessee’s obligations under the Lease Documents, if for any reason the Lessee are found in a final order by a court of competent jurisdiction to not be jointly and severally liable for all of Lessee’s obligations under the Lease Documents, the provisions of this Section 18.5 will apply and Lessee absolutely and unconditionally guarantees to Lessor and its successors and assigns, the full and prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of, all of Lessee’s obligations under the Lease Documents owed or hereafter owing to Lessor by the other Lessee. Each Lessee agrees that its guaranty obligation hereunder is in addition to all other guaranty obligations and is a guaranty of payment and performance and not of collection, and that its obligations under this Section are absolute and unconditional, irrespective of, and unaffected by:

(i)         The genuineness, validity, regularity, enforceability or any future amendment of, or change in, this Lease, any other Lease Document or any other agreement, document or instrument to which the other Lessee are or may become a party.

(ii)        The absence of any action to enforce this Lease (including this Section) or any other Lease Document or the waiver or consent by Lessor with respect to any of the provisions thereof.

(iii)       The existence, value or condition of, or failure to perfect its Lien against, any security for Lessee’s obligations under the Lease Documents or any action, or the absence of any action, by Lessor in respect thereof (including, without limitation, the release of any such security).

(iv)       Any other action or circumstances that might otherwise constitute a legal or equitable discharge or defense of a surety or guarantor (other than payment in full).

(b)        Each Lessee agrees that its obligations under this Section 18.5 are not discharged until the payment and performance, in full, of Lessee’s obligations under the Lease Documents has occurred (other than contingent indemnification obligations for which no claim has been threatened or asserted). Each Lessee is treated, and will be in the same position, as a principal obligor with respect to Lessee’s obligations under the Lease Documents guaranteed hereunder. Each Lessee expressly waives all rights it may have now or in the future under any statute, or at common law, or at law or in equity, or otherwise, to compel Lessor to proceed in respect of Lessee’s obligations under the Lease Documents guaranteed hereunder against the other Lessee or any other party or against any security for the payment and performance of Lessee’s obligations under the Lease Documents before proceeding against, or as a condition to proceeding against, that Lessee. Each Lessee agrees that any notice or directive given at any time to Lessor that is inconsistent with the waiver in the immediately preceding sentence will be null and void and may be ignored by Lessor, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to this Lease (including this Section 18.5) for the reason that such pleading or introduction would be at variance with the written terms of this Lease (including this Section 18.5), unless Lessor has specifically agreed otherwise in writing. It is agreed among the Lessee and Lessor that the foregoing waivers are of the essence of the transaction contemplated by this Lease and the other Lease Documents and that, but for the provisions of this Section and the waivers, Lessor would decline to enter into this Lease.

(c)        Each Lessee agrees that in no event does Lessor have any obligation (although it may be entitled, at its option) to proceed against the other Lessee or any other person or any real or personal property pledged to secure Lessee’s obligations under the Lease Documents before seeking satisfaction from that Lessee, and Lessor may proceed, prior or subsequent to, or simultaneously with, the enforcement of Lessor’s rights under this Section, to exercise any right or remedy that it may have against any property, real or personal, as a result of any Lien it may have as security for all or any portion of Lessee’s obligations under the Lease Documents.

(d)        In addition to the waivers contained elsewhere in this Section, Lessee waives, and agrees that it may not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshaling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, that may delay, prevent or otherwise affect the performance by that Lessee of the obligations under the Lease Documents guaranteed under, or the enforcement by Lessor of, this Section. Each Lessee waives diligence, presentment, and demand (whether for non-payment or protest or of acceptance, maturity, extension of time, change in nature or form of Lessee’s obligations under the Lease Documents, acceptance of further security, release of further security, composition or agreement arrived at as to the amount of, or the terms of, Lessee’s obligations under the Lease Documents, notice of adverse change in the other Lessee’ financial condition or any other fact that might increase the risk to that Lessee) with respect to any of Lessee’s obligations under the Lease Documents guaranteed hereunder or all other demands whatsoever and waives the benefit of all provisions of law that are or might be in conflict with the terms of this Section. Each Lessee represents, warrants and agrees that, as of the effective date of this Lease, its obligations under this Section are not subject to any offsets or defenses against Lessor or any other Lessee of any kind. Each Lessee further agrees that its obligations under this Section are not be subject to any counterclaims, offsets or defenses against Lessor or against the other Lessee of any kind that may arise in the future.

(e)        Notwithstanding anything to the contrary in this Lease or in any other Lease Document, and except as set forth in this Section, Lessee:

(i)         Subordinates and defers, to the fullest extent possible at all times before the payment in full of Lessee’s obligations under the Lease Documents (other than contingent indemnification obligations for which no claim has been threatened or asserted), on behalf of itself and its successors and assigns (including any surety) and any other person, any and all rights at law or in equity to subrogation, reimbursement, exoneration, contribution, indemnification, set off, or any other rights that could accrue to a surety against a principal, to a guarantor against a principal, to a guarantor against a maker or obligor, to an accommodation party against the party accommodated, to a holder or transferee against a maker, or to the holder of any claim against any person, and that a Lessee may have or hereafter acquire against the other Lessee or any person in connection with or as a result of Lessee’s performance of this Section, or any other documents to which that Lessee is a party or otherwise.

(ii)        Expressly and irrevocably subordinates and defers any “claim” (as that term is defined in the Bankruptcy Code) of any kind against the Lessee before the payment in full of Lessee’s obligations under the Lease Documents (other than contingent indemnification obligations for which no claim has been threatened or asserted), and further agrees that it may not have or assert any such rights against any person (including any surety), either directly or as an attempted set off to any action commenced against the other Lessee by Lessor or any other person before the payment in full of Lessee’s obligations under the Lease Documents (other than contingent indemnification obligations for which no claim has been threatened or asserted).

(iii)       Acknowledges and agrees (x) that this subordination and deferral is intended to benefit Lessor and does not limit or otherwise effect that Lessee’s liability hereunder or the enforceability of this Section, and (y) that Lessor and its respective successors and assigns are intended third party beneficiaries of the waivers and agreements set forth in this Section.

(f)         If Lessor proceeds to realize its benefits under any of the Lease Documents giving or creating a Lien upon any Collateral or any real estate collateral (whether owned by a Lessee or by any other person), either by judicial foreclosure or by non-judicial sale or enforcement, Lessor may, at its sole option, determine which of its remedies or rights it may pursue without affecting any of its rights and remedies under this Section. If, in the exercise of any of its rights and remedies, Lessor forfeits any of its rights or remedies, including its right to enter a deficiency judgment against any Lessee or any other person, whether because of any applicable laws pertaining to “election of remedies” or the like, the Lessee consent to such action by Lessor and waive any claim based upon such action, even if such action by Lessor results in a full or partial loss of any rights of subrogation that a Lessee might otherwise have had but for such action by Lessor. Any election of remedies that results in the denial or impairment of Lessor’s right to seek a deficiency judgment against a Lessee does not impair the other Lessee’ obligation to pay the full amount of Lessee’s obligations under the Lease Documents. If Lessor bids at any foreclosure or trustee’s sale or at any private sale permitted by law or the Lease Documents, Lessor may bid all or less than the amount of Lessee’s obligations under the Lease Documents and the amount of such bid need not be paid by Lessor but will be credited against Lessee’s obligations under the Lease Documents. The amount of the successful bid at any such sale, whether by Lessor or any other successful bidder, are conclusively treated as be the fair market value of the Collateral and the difference between such bid amount and the remaining balance of Lessee’s obligations under the Lease Documents is conclusively treated as the amount of Lessee’s obligations under the Lease Documents guaranteed under this Section, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which Lessor might otherwise be entitled but for such bidding at any such sale.

(g)        The Lessee agree that the guaranty set forth in this Section 18.5 is a continuing guaranty that remains in full force and effect until the payment and performance in full of Lessee’s obligations under the Lease Documents (other than contingent indemnification obligations for which no claim has been threatened or asserted).

(h)        Each Lessee’s liability under this Section is limited to an amount not to exceed as of any date of determination the greater of:

(i)         the net amount of all obligations incurred by the other Lessee under this Lease and transferred to or directly benefiting the subject Lessee; or

(ii)        the Lessee’s Allocable Amount, after taking into account, among other things, that Lessee’s right of contribution and indemnification from the other Lessee under Section 18.4.

19.        MISCELLANEOUS.

(a)       This Lease, each Schedule and any Riders hereto or thereto, constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and shall not be amended or modified in any manner except by a document in writing executed by both parties.

(b)      This Lease has been negotiated at arm’s length between persons knowledgeable in the matters dealt with herein. In addition, each party to this Lease has been represented by independent legal counsel of such party’s own choice. Accordingly, any rule of law or any other statute, legal decision or common law principle of similar effect that would require interpretation of any uncertainty or ambiguity in this Lease against the party that drafted it, is of no application and is hereby expressly waived. This Lease shall be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish the purposes and intentions of the parties and this Lease.

(c)       If any provision of this Lease, as applied to any party or to any circumstance, shall be found by a court of competent jurisdiction to be void, invalid or unenforceable, the same shall in no way affect any other provision of this Lease, the application of any such provision in any other circumstance, or the validity or enforceability of this Lease, and any provision which is found to be void, invalid or unenforceable shall be curtailed and limited only to the extent necessary to bring such provision within the requirements of the law.

(d)       Each party to this Lease warrants, represents and agrees that, in executing this Lease, such party (i) does so with knowledge of any and all rights that such party may have with respect to the provisions of this Lease, (ii) has carefully read and considered this Lease and fully understands its contents and the significance of its contents, (iii) is entering into this Lease of such party’s own informed and free will, based upon such party’s own judgment and without any coercion or fear of retaliation, and (iv) has obtained independent legal advice with respect to this Lease.

(e)       Lessee hereby waives presentment for payment, protest and demand, notice of protest, demand, dishonor and nonpayment under this Lease, notice of acceleration, notice of intent to accelerate, and any and all other notices or matters of a like nature, and consent to any and all renewals and extensions of the time of payment hereof, including, but not limited to, any notice required under the Civil Code of any applicable jurisdiction(s).

(f)        The representations, warranties and agreements of Lessee herein shall be deemed to be continuing and to survive the execution and delivery of this Lease, each Schedule and any other Lease Documents. With respect to any of Lessee's obligations under the other provisions of this Lease which have accrued but not been fully satisfied, performed or complied with prior to the expiration or earlier cancellation or termination of such Schedule, shall survive the expiration or earlier cancellation or termination thereof.

(g)       All of Lessee’s obligations hereunder and under any Schedule shall be performed at Lessee’s sole expense. Lessee shall reimburse Lessor promptly upon demand for all reasonable expenses incurred by Lessor in connection with (1) any action taken by Lessor at Lessee’s request, or in connection with any option, (2) the filing or recording of real property waivers and UCCs, (3) any Enforcement Costs not recovered pursuant to Section 16, (4) all inspections and appraisals, and (5) all lien search reports (and copies of filings) requested by Lessor. If Lessee fails to perform any of its obligations with respect to a Schedule, Lessor shall have the right, but shall not be obligated, to effect such performance, and Lessee shall reimburse Lessor, upon demand, for all expenses incurred by Lessor in connection with such performance. Lessor's effecting such compliance shall not be a waiver of Lessee's default. All amounts payable under this Section, if not paid when due, shall be paid to Lessor together with interest thereon at the Default Rate.

(h)       Lessee irrevocably appoints Lessor as Lessee's attorney-in-fact (which power shall be deemed coupled with an interest) to: (1) make minor corrections to manifest errors in factual data in any Schedule and/or any addenda, attachments, exhibits and/or riders to this Lease or any Schedule; and (2) execute, endorse and deliver any documents and checks or drafts relating to or received in payment for any loss or damage under the policies of insurance required by this Lease, but only to the extent that the same relates to the Equipment, or are required by titling agencies in order to reflect Lessor as the lienholder with respect to certificates of title pertaining to motor vehicles (if any) comprising the Equipment.

(i)        Lessee agrees to execute, acknowledge, deliver and record or file such further instruments (including, without limitation, further deeds of trust, security agreements, financing statements, continuation statements and assignments of rents or leases) and do such further acts as may be necessary, desirable or proper to implement the provisions of the immediately preceding subparagraph or to carry out more effectively the purposes of this Lease.

(j)        LESSOR AND LESSEE HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH LESSEE AND/OR LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS LEASE.

(k)      All notices (excluding billings and communications in the ordinary course of business) hereunder shall be in writing, personally delivered, delivered by overnight courier service, or sent by certified mail, return receipt requested, addressed to the other party at its respective address stated below the signature of such party or at such other address as such party shall from time to time designate in writing to the other party; and shall be effective from the date of receipt.

(l)        During the term of this Lease, Lessee shall not prepay any indebtedness owning to any person (other than Lessor) if such prepayment impairs Lessee’s ability to fulfill its obligations hereunder on a timely basis.

(m)      During the term of this Lease, Lessee shall not enter into any acquisition, merger, consolidation, reorganization, or recapitalization, or reclassify its capital, or liquidate, wind up, or dissolve (or suffer any liquidation or dissolution), or convey, sell, assign, lease, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its business, property, or assets, whether now owned or hereafter acquired, or acquire by purchase or otherwise all or substantially all of the properties, assets, or other evidence of beneficial ownership of any person or entity, or commit to do any of the foregoing.

(n)      During the term of this Lease, Lessee shall not guarantee or otherwise become in any way liable with respect to any obligation of any person or entity except by endorsement of instruments or items of payment for deposit to the account of Lessee which are transmitted or turned over to Lessor.

(o)       During the term of this Lease, Lessee shall not take any action concerning or with respect to the Equipment that is inconsistent with the provisions or purposes of this Lease or that would otherwise impair or threaten to impair Lessor’s interest in the Equipment or Lessor’s rights under the Lease.

(p)       This Lease shall not be effective unless and until accepted by execution by an officer of Lessor at the address as set forth below the signature of Lessor. THIS LEASE AND ALL OF THE OTHER LEASE DOCUMENTS, AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER, SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MICHIGAN (THE “STATE”) (WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF THE STATE, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, REGARDLESS OF THE LOCATION OF THE EQUIPMENT). Lessee hereby irrevocably consents and agrees that any legal action, suit, or proceeding arising out of or in any way in connection with this Lease may be instituted or brought in the courts of the State of Michigan or any U.S. District Court in the State of Michigan, as Lessor may elect. Lessee hereby irrevocably accepts and submits to, for itself and in respect of its property, generally and unconditionally, the non-exclusive jurisdiction of any such court, and to all proceedings in such courts if the action is commenced by Lessor and to the exclusive jurisdiction of such courts if commenced by Lessee. The parties agree that a summons and complaint commencing an action or proceeding in any such court shall be properly served and shall confer personal jurisdiction if served personally or by certified mail to it at the mailing address below Lessee’s signature, or as it may provide in writing from time to time, or as otherwise provided under the laws of the State.

(q)       In the event of any litigation between or among the parties hereto respecting or arising out of this Lease, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs in connection therewith, including any attorneys’ fees incurred after a judgment has been rendered by a court of competent jurisdiction. Any judgment shall include an attorneys’ fees clause which shall entitle the judgment creditor to recover reasonable attorneys’ fees incurred to enforce a judgment hereon, which attorneys’ fees shall be an element of post-judgment costs. The parties agree that this attorneys’ fee provision shall not merge into any judgment.

(r)       All amounts payable hereunder are payable in lawful money of the United States. Lessee agrees to pay all costs of collection when incurred, including reasonable attorneys’ fees and costs, whether or not a suit or action is instituted to enforce this Lease, including but not limited to court costs, appraisal fees, the cost of searching records, obtaining title reports and title insurance and trustee’s fees, to the extent permitted by applicable law.

(s)       This Lease and all of the other Lease Documents may be executed in counterparts. Photocopies, email or facsimile transmissions of signatures shall be deemed original signatures and shall be fully binding on the parties to the same extent as original signatures. The transfer or possession of the “Original” of this Lease shall be irrelevant to the full or collateral assignment of, or grant of security interest in, any Schedule; provided, however, no security interest in any Schedule may be created through the transfer, possession or control, as applicable, of any counterpart of such Schedule other than the original thereof, which shall be identified as the document or record (as applicable) marked "Original" and all other counterparts shall be marked "Duplicate".

(t)        Each right, power and remedy given to Lessor by this Lease or any Rider shall be in addition to all other rights, powers, and remedies given to Lessor by this Lease or any Rider or by virtue of any statute, rule of law, or any other agreement between Lessee and Lessor. Any forbearance or failure or delay by Lessor in exercising any right, power, or remedy hereunder shall not preclude the further exercise thereof. Every right, power, and remedy of Lessor shall continue in full force and effect until such right, power, or remedy is specifically waived by an instrument in writing signed by Lessor.

(u)       If Lessor is required by the terms hereof to pay to or for the benefit of Lessee any amount received as a refund of an Imposition or as insurance proceeds, Lessor shall not be required to pay such amount, if any Default has occurred and not been cured or any Event of Default shall have occurred and not been waived by Lessor. In addition, if Lessor is required by the terms hereof to cooperate with Lessee in connection with certain matters, such cooperation shall not be required if a Default or Event of Default has then occurred and is continuing.

(v)       To the extent Lessor’s consent is requested or required with respect to any matter, the reasonableness of Lessor's withholding of such consent shall be determined based on the then existing circumstances; provided, that Lessor's withholding of its consent shall be deemed reasonable for all purposes if (i) the taking of the action that is the subject of such request, might result (in Lessor's discretion), in (A) an impairment of Lessor's rights, title or interests hereunder or under any Schedule or other Lease Document, or to the Equipment, or (B) expose Lessor to any Claims or Impositions, or (ii) Lessee fails to provide promptly to Lessor any filings, certificates, opinions or indemnities required by Lessor as a condition to such consent. Neither Lessee nor any of its affiliates will in the future issue any press release or other public disclosure using the name of Lessor or its affiliates or referring to this Agreement or the other Lease Documents without at least five (5) business days' prior notice to Lessor and without the prior written consent of Lessor unless (and only to the extent that) such Lessee or affiliate is required to do so under applicable law and then, in any event, such Lessee or affiliate will consult with Lessor before issuing such press release or other public disclosure. Notwithstanding the foregoing, any Lessee may make such public disclosures with respect to the transactions contemplated by the Lease Documents in connection with all regular and periodic reports (including without limitation any Form 8-Ks) and all registration statements and prospectuses, if any, filed by Lessee with any securities exchange or with the Securities and Exchange Commission or any governmental or private regulatory authority. Lessee hereby authorizes Lessor and its affiliates to make mention of Lessor’s participation in this transaction in its marketing, sales materials, printed media, tombstones or web-based material.

(w)      The recitals set forth above are incorporated herein by reference.

20.        DEFINITIONS AND RULES OF CONSTRUCTION. (a) The following terms when used in this Lease or in any of the Schedules have the following meanings: (1) “affiliate”: with respect to any given person, shall mean (i) each person that directly or indirectly owns or controls, whether beneficially or as a trustee, guardian or other fiduciary, five (5) percent or more of the voting stock, membership interest or similar equity interest having ordinary voting power in the election of directors or managers of such person, (ii) each person that controls, is controlled by, or is under common control with, such person, or (iii) each of such person’s officers, directors, members, joint venturers and partners. For the purposes of this definition, “control” of a person means the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise; (2) "applicable law" or "law": any law, rule, regulation, ordinance, order, code, common law, interpretation, judgment, directive, decree, treaty, injunction, writ, determination, award, permit or similar norm or decision of any governmental authority; (3) “AS IS, WHERE IS”: AS IS, WHERE IS, without warranty, express or implied, with respect to any matter whatsoever; (4) "business day": any day, other than a Saturday, Sunday, or legal holiday for commercial banks under the laws of the state of the Lessor’s notice address; (5) "governmental authority": any federal, state, county, municipal, regional or other governmental authority, agency, board, body, instrumentality or court, in each case, whether domestic or foreign; (6) "person": any individual, corporation, limited liability entity, partnership, joint venture, or other legal entity or a governmental authority, whether employed, hired, affiliated, owned, contracted with, or otherwise related or unrelated to Lessee or Lessor; and (7) "UCC" or "Uniform Commercial Code": the Uniform Commercial Code as in effect in the State or in any other applicable jurisdiction; and any reference to an article (including Article 2A) or section thereof shall mean the corresponding article or section (however termed) of any such applicable version of the Uniform Commercial Code. (b) The following terms when used herein or in any of the Schedules shall be construed as follows: (1) "herein," "hereof," "hereunder," etc.: in, of, under, etc. this Lease or such other Lease Document in which such term appears (and not merely in, of, under, etc. the section or provision where the reference occurs); (2) "including": means including without limitation unless such term is followed by the words "and limited to," or similar words; and (3) "or": at least one, but not necessarily only one, of the alternatives enumerated. Any defined term used in the singular preceded by "any" indicates any number of the members of the relevant class. Any Lease Document or other agreement or instrument referred to herein means such agreement or instrument as supplemented and amended from time to time. Any reference to Lessor or Lessee shall include their permitted successors and assigns. Any reference to an applicable law shall also mean such law as amended, superseded or replaced from time to time.

21.        RIDERS. Riders Nos. 1 through 2 attached hereto are incorporated in this Lease.

22.       CROSS-COLLATERALIZATION AND CROSS-DEFAULT. Notwithstanding anything to the contrary provided herein or any other document, this Lease and any Schedules, the Equipment and the Collateral in which Lessor now or hereafter has an interest or are now or hereafter executed in connection herewith are cross-collateralized and cross-defaulted with all other agreements between Lessor and Lessee such that the Equipment and Collateral identified on each Schedule or described herein, stand as security for all obligations of Lessee to Lessor.

signatures on following page

IN WITNESS WHEREOF, the parties hereto have caused this Master Lease Agreement to be duly executed as of the day and year first above set forth.

RIDER NO. 1 TO MASTER LEASE AGREEMENT

To and part of Master Lease Agreement dated as of the 27th day of February, 2020 (the "Lease"), between UTICA LEASECO, LLC, its successors and assigns ("Lessor"), 5J TRUCKING, a Texas limited liability company, d/b/a 5J and 5J Trucking, LLC (“5J Trucking”), its successors and permitted assigns, and 5J OILFIELD SERVICES, LLC, a Texas limited liability company (“5J Oil”), its successors and permitted assigns, (hereafter referred to both individually, and collectively (if more than one), as "Lessee").

AUTOMATED CLEARING HOUSE PAYMENTS.

All payments of Basic Rent pursuant to Section 2 of the Lease shall be paid by automatic debit from Lessee’s bank account (the “Bank Account”) specified on the Authorization for Pre-Arranged Payments attached hereto as Exhibit No. 1 (the “Authorization”).

In addition to the conditions precedent specified in Section 5 of the Lease, Lessor’s agreement to purchase and lease Equipment under a Schedule is conditioned upon Lessor having received the Authorization duly executed by Lessee, in form and substance satisfactory to Lessor.

In addition to the representations and warranties made by Lessee in Section 3 of this Lease, Lessee represents, warrants and agrees that, as of the effective date of this Lease and of each Schedule: (a) the Bank Account is Lessee’s primary operating account as of the date of this Lease, and any additional bank accounts specified on Exhibit No. 2 attached hereto constitute all other bank accounts maintained by Lessee as of the date of this Lease; and (b) Lessee shall provide to Lessor prior written notice if at any time the Bank Account ceases to be Lessee’s primary operating account or if Lessee establishes other bank accounts in addition to those specified on Exhibit No. 2 attached hereto.

In addition to the Events of Default specified in Section 15 of this Lease, Lessee’s failure to maintain the Bank Account as its primary operating account, without (a) prior notice to Lessor, (b) the designation of a replacement primary operating account, and (c) execution and delivery to Lessor of an Authorization with respect to such replacement account, shall constitute an Event of Default.

If any payment of Basic Rent or any other amount due under the Lease intended to be paid by automated clearing house debit is not processed or returned on the basis of insufficient funds in the designated bank account, upon demand, Lessee shall pay Lessor a charge equal to five (5) percent of the amount of such payment.

Exhibit 1

Exhibit 2

Bank Account Information of Lessee

RIDER NO. 2 TO MASTER LEASE AGREEMENT

To and part of Master Lease Agreement dated as of the 27th day of February, 2020 (the "Lease"), between UTICA LEASECO, LLC, its successors and assigns ("Lessor"), 5J TRUCKING, a Texas limited liability company, d/b/a 5J and 5J Trucking, LLC (“5J Trucking”), its successors and permitted assigns, and 5J OILFIELD SERVICES, LLC, a Texas limited liability company (“5J Oil”), its successors and permitted assigns, (hereafter referred to both individually, and collectively (if more than one), as "Lessee").

ADDITIONAL CONDITIONS PRECEDENT. In addition to the conditions precedent specified in Section 5 of the Lease, Lessor’s agreement to purchase and lease any Equipment under a Schedule is conditioned upon Lessor having received the following, in form and substance reasonably satisfactory to Lessor: The Master Lease Guaranty (the “Guaranty”), in form and substance satisfactory to Lessor, duly executed by

SMG Industries, Inc.

(if more than one, collectively, the “Guarantor”).

If applicable, Lessee shall also deliver all original subleases for all or any part of the Equipment or Collateral, together with an assignment of all rights (but no obligations) by Lessee to Lessor thereunder.

MASTER LEASE GUARANTY

THIS MASTER LEASE GUARANTY (this "Guaranty") is executed and delivered by

SMG Industries, Inc.

(if more than one, collectively, "Guarantor") in favor of UTICA LEASECO, LLC, its successors and assigns ("Lessor"), in connection with that certain Master Lease Agreement dated as of the 27th day of February, 2020, together with all Equipment Schedules executed or to be executed pursuant thereto (the "Lease"), between Lessor, 5J TRUCKING, a Texas limited liability company, d/b/a 5J and 5J Trucking, LLC (“5J Trucking”), its successors and permitted assigns, and 5J OILFIELD SERVICES, LLC, a Texas limited liability company (“5J Oil”), its successors and permitted assigns, (hereafter referred to both individually, and collectively (if more than one), as "Lessee"). All capitalized terms shall have the meanings defined in the Lease Documents (as such term is defined in the Lease).

In order to induce Lessor to enter into the Lease (execution and delivery hereof being a condition precedent to Lessor’s obligations under the Lease), and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor hereby UNCONDITIONALLY GUARANTEES (a) to pay Lessor in lawful money of the United States all Rents and other sums due under the Lease Documents or otherwise, or any substitutions therefor, in the amounts, at the times and in the manner set forth in the Lease Documents, plus all costs and expenses; and (b) to perform, at the time and in the manner set forth in the Lease Documents, all of the terms, covenants and conditions therein required to be kept, observed or performed by Lessee (collectively, the “Obligations”). If there is more than one guarantor of the Obligations, the obligations of each guarantor are joint and several.

1.       This Guaranty is a continuing one and shall terminate only upon full payment of all rents and all other sums due under the Lease Documents and the performance of all of the terms, covenants and conditions therein required to be kept, observed or performed by Lessee, including such payment and performance under all schedules made a part of said Lease Documents, whether to be performed before or after the last rent payment has been made under the Lease Documents. Guarantor expressly waives the right to revoke or terminate this Guaranty, including any statutory right of revocation under the laws of any state. This Guaranty is a guaranty of prompt payment and performance (and not merely a guaranty of collection).

2.       Guarantor authorizes Lessor, with Lessee’s consent where required, without notice or demand, and without affecting his liability hereunder, from time to time to: (a) change the amount, time or manner of payment of rent or other sums reserved in the Lease Documents; (b) change any of the terms, covenants, conditions or provisions of the Lease Documents; (c) amend, modify, change or supplement the Lease Documents; (d) consent to Lessee’s assignment of the Lease Documents or to the sublease of all, or any portion, of the equipment covered by the Lease Documents; (e) receive and hold security for the payment of this Guaranty or the performance of the Lease Documents, and exchange, enforce, waive and release any such security; and (f) apply such security and direct the order or manner of sale thereof as Lessor in its discretion may determine.

3.       Guarantor waives any right to require Lessor to: (a) proceed against Lessee, any other guarantor or any other person directly or contingently liable for the payment of any of the Obligations; (b) proceed against or exhaust any security held from Lessee, any other guarantor or any other person directly or contingently liable for the payment of any of the Obligations; (c) pursue any other remedy in Lessor’s power whatsoever; or (d) notify Guarantor of any adverse change in Lessee’s financial condition or of any default by Lessee in the payment of any rent or other sums reserved in the Lease Documents or in the performance of any term, covenant or condition therein required to be kept, observed or performed by Lessee. Guarantor waives any defense arising by reason of any disability or other defense of Lessee (except to the extent the Obligations have been paid), any lack of authority of Lessee with respect to the Lease Documents, the invalidity, illegality or lack of enforceability of the Lease Documents from any cause whatsoever, the failure of Lessor to acquire title to the equipment (if applicable) subject to the Lease Documents or to perfect or maintain perfection of any interest therein or the cessation from any cause whatsoever of the liability of Lessee (including, without limitation, discharge in bankruptcy), and any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety, or that might otherwise limit recourse against Guarantor; provided, however, that Guarantor does not waive any defense arising from the due performance by Lessee of the terms and conditions of the Lease Documents. Lessor may, at Lessor’s election, foreclose on any security held by Lessor and sell, lease, transfer or otherwise deal with such Equipment, by one or more judicial or nonjudicial sales, without affecting or impairing in any way the liability of Guarantor. Guarantor waives any defense arising out of any such election by Lessor, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Lessor against Lessee or any security. In the absence of agreeing to the waivers contained in this paragraph, Guarantor may have the right of subrogation or reimbursement against Lessee. For example, if Lessor elects to take back and sell the Equipment through a nonjudicial sale, Guarantor gives up any potential defenses by agreeing to the foregoing waivers. Guarantor also expressly waives any defense or benefit that may be derived from any “one form of action” rule or anti-deficiency statute he would otherwise have under the laws of any state. Upon demand, Guarantor agrees to pay and perform the Obligations regardless of any existing or future offset or claim which may be asserted by Guarantor. This Guaranty and Guarantor’s payment obligations hereunder shall continue to be effective or be reinstated, as the case may be, if at any time payment of any of the Obligations is rescinded or must otherwise be restored or returned by Lessor, all as though such payment had not been made. Lessor’s good faith determination as to whether a payment must be restored or returned shall be binding on Guarantor. Until the payment and performance of all Obligations due or to be performed by Lessee, Guarantor shall have no right of subrogation against Lessee, and waives any right to enforce any remedy which Lessor now has or hereafter may have against Lessee, and waives any benefit of, and any right to participate in, any security now or hereafter held by Lessor. Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of dishonor, and notices of acceptance of this Guaranty. Guarantor also waives notice of and hereby consents to any amendment, modification, supplement, extension, renewal or restatement of the Lease Documents.

4.       Guarantor represents and warrants to Lessor that:

(a)       (1) The execution, delivery and performance hereof by Guarantor do not contravene any law, governmental rule, regulation or order now binding on Guarantor, or contravene the provisions of, or constitute a default under, or result in the creation of any lien or encumbrances upon the property of Guarantor under, any material agreement, indenture or other instrument to which Guarantor is a party or by which he or his property is bound. (2) The financial statements of Guarantor (copies of which have been furnished to Lessor) fairly present Guarantor’s financial condition as of the date of such statements, and since the date of such statements there has been no material adverse change in such condition.

(b)       This Guaranty constitutes the legal, valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with the terms hereof, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally, and by applicable laws (including any applicable common law and equity) and judicial decisions which may affect the remedies provided herein.

(c)       There are no pending actions or proceedings to which Guarantor is a party, and there are no other pending or threatened actions or proceedings of which Guarantor has knowledge, before any court, arbitrator or administrative agency, which, either individually or in the aggregate, would have a Material Adverse Effect. As used herein, “Material Adverse Effect” shall mean (1) a materially adverse effect on the business, condition (financial or otherwise), operations, performance or properties of Guarantor, or (2) a material impairment of the ability of Guarantor to perform his obligations under or to remain in compliance with this Guaranty or of Lessor’s rights and remedies under this Guaranty. Further, Guarantor is not in default under any financial or other material agreement which, either individually or in the aggregate, would have a Material Adverse Effect.

(d)       Guarantor acknowledges and agrees that Guarantor will enjoy a substantial economic benefit by virtue of the extension of credit by Lessor to Lessee pursuant to the Lease Documents.

5.       Guarantor covenants and agrees as follows: (a) Guarantor will provide to Lessor on or before March 31 and August 31 of each year, financial statements of Guarantor as of the immediately preceding December 31 and June 30, respectively, prepared in reasonable detail and certified as true and correct by Guarantor (Guarantor’s filing of its Form 10-K and 10-Q with the Securities and Exchange Commission for the required reporting periods shall satisfy Guarantor’s delivery obligations hereunder). (b) Guarantor will promptly execute and deliver to Lessor such further documents, instruments and assurances and take such further action as Lessor from time to time may request in order to carry out the intent and purpose of this Guaranty and to establish and protect the rights and remedies created or intended to be created in favor of Lessor hereunder. (c) Guarantor has been advised by Lessor that the USA Patriot Act establishes minimum standards of account information to be collected and maintained by Lessor, and that 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 who opens an account; and specifically, this means that when Guarantor executes this Guaranty, Lessor may ask for Guarantor’s name and address, date of birth, and other information that will allow Lessor to identify Guarantor; and that Lessor may also ask to see the driver’s license or other identifying documents of Guarantor.

6.       A default shall be deemed to have occurred under this Guaranty upon the occurrence of any of the following (each, an “Event of Default”): (a) Guarantor shall fail to perform or observe any covenant, condition or agreement to be performed or observed by him hereunder and such failure shall continue unremedied for a period of ten (10) days after the earlier of the actual knowledge of Guarantor or written notice thereof to Guarantor by Lessor; or (b) Guarantor shall (1) be generally not paying his debts as they become due, (2) take action for the purpose of invoking the protection of any bankruptcy or insolvency law, or any such law is invoked against or with respect to Guarantor or his property, and such petition filed against Guarantor is not dismissed within sixty (60) days; or (c) there is an anticipatory repudiation of Guarantor’s obligations pursuant to this Guaranty; or (d) any certificate, statement, representation, warranty or audit contained herein or furnished with respect to this Guaranty by or on behalf of Guarantor proving to have been false in any material respect at the time as of which the facts therein set forth were stated or certified, or having omitted any substantial contingent or unliquidated liability or claim against Guarantor; or (e) a payment or other default by Guarantor under any loan, lease, guaranty or other financial obligation to Lessor or its affiliates which default entitles the other party to such obligation to exercise remedies; or (f) a payment or other default by Guarantor under any material loan, lease, guaranty or other material financial obligation to any third party which default has been declared; (g) Guarantor dies and his obligations in connection with this Guaranty are not assumed by a person reasonably satisfactory to Lessor; or (h) an Event of Default shall have occurred under, and as defined in, the Lease.

Upon an Event of Default hereunder, Lessor may, at its option (without election of remedies), do any one or more of the following, all of which are hereby authorized by Guarantor:

A.       declare this Guaranty and the other Lease Documents to be in default and thereafter sue for and recover from the Guarantor and/or Lessee all liquidated damages, accelerated rentals and/or other sums otherwise recoverable from the Guarantor and/or Lessee under this Guaranty and the other Lease Documents; and/or

B.        sue for and recover all damages then or thereafter incurred by Lessor as a result of such Event of Default; and/or

C.        seek specific performance of Guarantor’s obligations hereunder.

In addition, Guarantor shall be liable for all reasonable attorneys’ fees and other costs and expenses incurred by reason of any Event of Default or the exercise of Lessor’s remedies hereunder and/or under the Lease Documents, whether or not a lawsuit is filed. No right or remedy referred to in this Section is intended to be exclusive, but each shall be cumulative, and shall be in addition to any other remedy referred to above or otherwise available at law or in equity, and may be exercised concurrently or separately from time to time.

The failure of Lessor to exercise the rights granted hereunder upon any Event of Default shall not constitute a waiver of any such right upon the continuation or reoccurrence of any such Event of Default.

The obligations of Guarantor hereunder are independent of the obligations of Lessee. A separate action or actions may be brought and prosecuted against Guarantor (or any thereof) whether an action is brought against Lessee or whether Lessee be joined in any such action or actions.

7.       GUARANTOR AGREES THAT THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF LESSOR AND GUARANTOR HEREUNDER SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MICHIGAN, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. Guarantor agrees that any action or proceeding arising out of or relating to this Guaranty may be commenced in any state or Federal court in the State of Michigan, and agrees that a summons and complaint commencing an action or proceeding in any such court shall be properly served and shall confer personal jurisdiction if served personally or by certified mail to him at his address hereinbelow set forth, or as he may provide in writing from time to time, or as otherwise provided under the laws of the State of Michigan.

8.       GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH GUARANTOR AND LESSOR MAY BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS GUARANTY OR THE LEASE DOCUMENTS. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY GUARANTOR AND GUARANTOR HEREBY ACKNOWLEDGES THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. GUARANTOR FURTHER ACKNOWLEDGES THAT HE HAS BEEN REPRESENTED IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF HIS OWN FREE WILL, AND THAT HE HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

9.       This Guaranty shall inure to the benefit of Lessor, its successors and assigns, and shall be binding upon the personal representatives, heirs and permitted assigns of Guarantor. The obligations of Guarantor hereunder may not be assigned or delegated without the prior written consent of Lessor.

10.     All notices hereunder shall be in writing, personally delivered, delivered by overnight courier service, sent by certified mail, return receipt requested, addressed as follows:

or to such other address as such party shall from time to time designate in writing to the other party; and shall be effective from the date of receipt.

11.     This Guaranty constitutes the entire agreement between the parties with respect to the subject matter hereof and shall not be rescinded, amended or modified in any manner except by a document in writing executed by both parties. Any provision of this Guaranty which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

12.      This Guaranty may be executed in counterparts. Photocopies or facsimile transmissions of signatures shall be deemed original signatures and shall be fully binding on the parties to the same extent as original signatures.

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IN WITNESS WHEREOF, Guarantor has caused this Master Lease Guaranty to be duly executed as of the 27th day of February, 2020.

The foregoing instrument was acknowledged before me _____ day of February, 2020, by ___________, the _____________ of SMG Industries, Inc., a Delaware corporation, on behalf of said corporation.

EQUIPMENT SCHEDULE 5J-0001

This Equipment Schedule 5J-0001 is executed pursuant to that certain Master Lease Agreement dated as of the 27th day of February, 2020 (the "Lease"; which is incorporated herein by reference). This Equipment Schedule, together with the Lease and all other schedules and riders thereto, shall constitute one document. To the extent of any conflict or inconsistency between the terms of this Equipment Schedule and the Lease, the terms of this Equipment Schedule shall prevail. Capitalized terms not defined herein shall have the meanings ascribed to them in the Lease

1.       LEASE OF EQUIPMENT. Pursuant to Section 5 of the Lease, the Lessor shall lease to Lessee, and the Lessee shall lease from the Lessor, the Equipment set forth in the schedule attached hereto.

FUNDING AMOUNT: $11,950,000.00

2.       TERM. Upon and after the date of execution hereof, the Equipment shall be subject to the terms and conditions provided herein and in the Lease.

A full term of lease with respect to said Equipment shall commence on the date hereof and shall extend for forty-eight (48) months after May 27, 2020 (the "Base Lease Commencement Date").

4.       LESSEE'S CONFIRMATION. Lessee hereby confirms and warrants to Lessor that the Equipment: (a) will be inspected and determined to be in compliance with all applicable specifications and that the Equipment is hereby accepted for all purposes of the Lease; and (b) is at all times, including while in progress, a part of the "Equipment" referred to in the Lease and is taken subject to all terms and conditions therein and herein provided. Lessee hereby represents and warrants to Lessor that, as of the date hereof, there is no Default or Event of Default under any Schedule or any other Lease Document (as such terms are defined in the Lease).

5.       LOCATION OF EQUIPMENT. The location of, and place where the Equipment will be kept and maintained once delivered to Lessee, is at the locations listed on Exhibit A to the Schedule of Equipment attached to this Schedule (the “Equipment Locations”). Lessee agrees and acknowledges that the Equipment shall not be removed from any of the Equipment Locations until all payments, including all fees, charges, monthly payments, and the final payment, have been indefeasibly paid in full to Lessor.

6.       COMMERCIAL LIABILITY INSURANCE. The amount of commercial liability insurance referenced in Section 11 of the Lease is $2,000,000.00.

7.       PERSONAL PROPERTY TAXES. Lessee agrees that it will (a) list all such Equipment, (b) report all property taxes assessed against such Equipment, and (c) pay all such taxes when due directly to the appropriate taxing authority until Lessor shall otherwise direct in writing.

8.       SCHEDULE OF STIPULATED LOSS VALUES. Exhibit A contains a Schedule of Stipulated Loss Values which shall be applicable solely to the Equipment described in this Equipment Schedule.

9. NO SETOFFS OR COUNTERCLAIMS. All payments under the Lease made by or on behalf of Lessee shall be made without setoff or counterclaim and free and clear of, and without deduction or withholding for or on account of, any federal, state, or local taxes.

10.     RIDERS. Rider No. 1 attached hereto is incorporated in this Equipment Schedule.

11.    INSERTION OF INFORMATION. Lessor is hereby authorized to insert such factually correct information as is necessary to complete this Equipment Schedule, including (without limitation) the date of execution, and the rental payment amount(s) and factor(s).

12.     SECURITY INTEREST. In order to secure: (A) the prompt payment of the Rent and all of the other amounts from time to time outstanding with respect hereto and to each Schedule, and the performance and observance by Lessee of all of the provisions hereof and thereof and of all of the other Lease Documents; and (B) the prompt payment, performance and observance by Lessee of all other obligations of Lessee to Lessor under any other agreement or instrument, both now in existence and hereafter created (as the same may be renewed, extended or modified), including (without limitation) any other Master Lease Agreements and all Schedules now or hereafter executed pursuant thereto; Lessee hereby collaterally assigns, grants, and conveys to Lessor, a first priority security interest in and lien on all of Lessee’s right, title and interest in and to all of the following (whether now existing or hereafter created, and including any other collateral described on any rider hereto; collectively, the “Collateral”; all terms used in this sentence but not otherwise defined in this Schedule or the Lease shall have meanings given in the UCC): (1) the Lessee's Equipment financed hereunder (to the extent this Lease is construed as a security agreement), Equipment described in any Schedule or otherwise covered thereby (including all inventory, fixtures or other property comprising the Equipment), together with all related software (embedded therein or otherwise) and general intangibles, all additions, attachments, accessories and accessions thereto whether or not furnished or financed by the Lessor; (2) all subleases, chattel paper, accounts, accounts receivable, security deposits, medallions, general intangibles, deposit accounts, documents, other equipment, instruments, inventory, investment property, letter of credit rights and any supporting obligations related to any of the foregoing relating thereto, and any and all substitutions, replacements or exchanges for any such item of Equipment or other collateral, in each such case in which Lessee shall from time to time acquire an interest; (3) all books and records pertaining to the foregoing; (4) all property of Lessee held by Lessor, including all property of every description, in the custody of or in transit to Lessor for any purpose, including safekeeping, collection or pledge, for the account of Lessee or as to which Lessee may have any right or power, including but not limited to cash and (5) to the extent not otherwise included, all insurance, substitutions, replacements, exchanges, accessions, proceeds and products of the foregoing, including without limitation, insurance proceeds. The collateral assignment, security interest and lien granted herein shall survive the termination, cancellation or expiration of the Lease or a particular Schedule until such time as Lessee’s obligations hereunder, thereunder and under the Lease Documents are fully and indefeasibly discharged. The conveyance contemplated hereby is solely for the purpose of granting to Lessor a security interest in the Equipment. All Equipment in which an interest is conveyed hereby shall remain in the possession of Lessee pursuant to the Lease, unless prior written consent is obtained from Lessor permitting otherwise.

13.      FEES. Prior to or contemporaneously with the payment of the Funding Amount by Lessor to Lessee (unless otherwise stated below), Lessee shall pay to Lessor (a) any fees contemplated by any confidential fee letter between Lessor and Lessee; (b) a security deposit equal to Three Hundred Thirty-One Thousand Sixty-Five and 02/100 ($331,065.02) Dollars and (c) the cost of any reasonable attorney fees incurred by Lessor in connection with the Lease or this Schedule of Equipment, less all amounts previously paid to Lessor.

14.     SURCHARGE. Basic Rent shall be adjusted periodically based on fluctuations of the Comerica Prime Rate (defined below), as set forth in this paragraph.  Commencing on July 1, 2020 and on each July 1 and January 1 thereafter (each a “Determinate Date”), Lessor shall determine the current prime rate publicly announced by Comerica Bank (the “Comerica Prime Rate”).  If on any such Determination Date, the Comerica Prime Rate has increased .25% in excess of 4.75% (“Surcharge Base Rate”), Lessor will increase the Basic Rent by $3,310.65 per month for each .25% increase in the Surcharge Base Rate (the “Surcharge Amount”).  At each Determination Date following the initial application of the Surcharge Amount, Lessor shall thereafter adjust the Basic Rent in the amount of the Surcharge Amount for each .25% fluctuation in the Surcharge Base Rate.  The Surcharge Amount addition (or reduction, if applicable), will be added to (or decreased from, if applicable) the monthly Basic Rent due under the Lease, and will be due and payable with the next regularly scheduled Basic Rent payment under such Schedule and on each payment date thereafter, until it is recalculated on each January 1 or July 1 thereafter, as applicable.  In the event that there are no Surcharge Base Rate increases in excess of .25%, the Surcharge will not be applicable.  In no event shall the Basic Rent payment reduce below the amount set forth in the Schedule.     

15.     REPRESENTATIONS AND WARRANTIES. In addition to the other representations and warranties in this schedule and the other Lease Documents, to induce Lessor to enter into this Schedule, Lessee represents and warrants as follows:

A.     All of the representations and warranties in the Lease, unless they relate specifically to a particular date, are true and accurate in all material respects as of the date of this Schedule and are hereby reaffirmed, ratified and remade.

B.       Lessee has disclosed to Lessor all agreements, instruments and organizational or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of Lessee in connection with the preparation and negotiation of this Schedule or any other Lease Document, when taken as a whole, contains any misstatement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading.

16.    EARLY TERMINATION OPTION. Provided that no default has occurred and is continuing under the Lease, Lessee will have the following buy-out options (the “Termination Value”) upon a minimum of thirty (30) days’ prior written notice: (i) during the fifteenth (15th) month, twenty-fifth (25th) month, and the thirty-seventh (37th) month of the Lease, Lessee shall have an early buy-out option with respect to all but not less than all of the Equipment upon the payment of (a) the amount listed on Exhibit B attached hereto for the applicable time period when the buy-out option is to be exercised, plus (b) all other fees, costs and sums due at such time in accordance with this Lease. In addition to the Termination Value, the Lessee shall pay to Lessor an administrative charge to be determined by Lessor to cover its time and expenses incurred in connection with the exercise of the option to purchase, including, but not limited to, reasonable attorney fees and costs. Furthermore, upon the exercise by the Lessee of the option to purchase any of the Equipment, Lessee shall pay all applicable sales and transfer taxes and all applicable fees payable to any governmental authority as a result of the transaction contemplated by this Schedule. In such event, the Termination Value shall be increased by any sales and transfer taxes. If Lessee desires to exercise this option it shall provide Lessor with at least thirty (30) days prior written notice of such intention. Partial prepayments or payoffs may be permitted at Lessor's sole and absolute discretion subject to a Termination Value determined by Lessor, provided that such prepayment or payoff amounts shall be applied to amounts due under the Lease in inverse chronological order of the Lease termination date, commencing first with the End of Term Buyout Price and then the Termination Value. The Termination Value is presumed to be a reasonable estimate of the amount of damages sustained by Lessor as a result of the early termination of this Lease and Lessee agrees that the amount is reasonable under the circumstances currently existing.

signatures on following page

DATE OF EXECUTION: the 27th day of February, 2020

UTICA LEASECO, LLC

Lessor

5J TRUCKING

Lessee

5J OILFIELD SERVICES, LLC

Lessee

RIDER NO. 1 TO EQUIPMENT SCHEDULE 5J-0001

To and part of Equipment Schedule 5J-0001 dated as of the 27th day of February, 2020 (the “Schedule”) executed pursuant to that certain Master Lease Agreement dated as of the 27th day of February, 2020 (the "Lease"), each between UTICA LEASECO, LLC, its successors and assigns ("Lessor"), 5J TRUCKING, a Texas limited liability company, d/b/a 5J and 5J Trucking, LLC (“5J Trucking”), its successors and permitted assigns, and 5J OILFIELD SERVICES, LLC, a Texas limited liability company (“5J Oil”), its successors and permitted assigns, (hereafter referred to both individually, and collectively (if more than one), as "Lessee").

END OF TERM BUYOUT PRICE. Upon the expiration of the term of the Schedule, Lessee promptly shall pay to Lessor without notice or demand therefor and together with all other amounts then due and payable under the Lease, in cash, an End of Term Buyout Price equal to $831,880.00; provided that the End of Term Buyout Price will be reduced by any amounts received by Utica from the effective date of the Lease through the receipt of the End of Term Buyout Price, for Equipment that was sold during the term of the Lease (but only to the extent that the sale was consented to in writing by Utica during the term of the Lease). Upon receipt by Lessor of the End of Term Buyout Price, Lessor shall release its interest in the Equipment covered by this Schedule.

As used herein, “Equipment” shall mean the Equipment described in this Schedule.

UTICA LEASECO, LLC

Lessor

5J TRUCKING,

Lessee

5J OILFIELD SERVICES, LLC

Lessee

SCHEDULE OF EQUIPMENT

Lessee:               5J TRUCKING and 5J OILFIELD SERVICES, LLC

Attached to Equipment Schedule No. 5J-0001

Location of Equipment:

SEE EXHIBIT A ATTACHED

Exhibit 10.14

REVOLVING ACCOUNTS RECEIVABLE ASSIGNMENT AND TERM LOAN

FINANCING AND SECURITY AGREEMENT

THIS REVOLVING ACCOUNTS RECEIVABLE ASSIGNMENT AND TERM LOAN FINANCING AND SECURITY AGREEMENT (the “Agreement”) is made as of February 27, 2020 by and between 5J Oil Field Services, LLC and 5J Trucking, LLC whose address are 710 N. Post Oak Rd., Suite 315, Houston, Texas 77024, together with SMG Industries, Inc. whose address is 710 N. Post Oak Rd., Suite 315, Houston, Texas 77024 and each other Person who from time to time may become a Party hereto or an affiliate (individually and collectively herein “Client” or the “Company”, and Amerisource Funding, Inc., a Texas Corporation (together with its successors and assigns, “Amerisource”), as lender (each a “Party” and, collectively herein, the “Parties”).

RECITALS

WHEREAS, the Client has asked Amerisource to make advances to the Client against clients Accounts Receivable in an aggregate principal amount outstanding at any time not to exceed Ten Million Dollars ($10,000,000.00) (the "Maximum Account Limit"); and

WHEREAS, the Client has asked Amerisource to make advances to the Client under an equipment term loan facility in an aggregate principal amount outstanding at any time not to exceed One Million Four Hundred and SIXTY-FOUR Thousand, One Hundred and Fifty-Three Dollars ($1,464,153.00) (the "Maximum Equipment Term Limit"); and

WHEREAS, the Client has asked Amerisource to make advances to the Client under a bridge term loan facility in an aggregate principal amount outstanding at any time not to exceed Ten Percent (10%) of the net availability under the Revolving Credit Facility (the "Maximum Bridge Term Limit"); and

WHEREAS, Amerisource is willing, on the terms and subject to the conditions set forth in this Agreement and the other Credit Documents, to make advances to the Client;

NOW, THEREFORE, in consideration of the foregoing recitals, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

Article I.                       DEFINITIONS

1. Definitions. The following terms used herein shall have the following meaning. All capitalized terms not herein defined shall have the meaning set forth in the Uniform Commercial Code:

1.1. “Advance Rate” - Up to eighty five percent (85%) of Eligible Accounts Receivable

1.2. “Availability” - A calculation on a Daily Availability Report which reflects the total amount of Client’s Reserve Account which is available for disbursement to Client at a given point in time; equal to the Face Amount of all Purchased Accounts, plus funds available against Client’s Inventory (if any), less the Required Reserve Amount, as more fully illustrated in Exhibit “A”.

1.3. “Closed” - A Purchased Account is closed upon the first to occur of: (a) receipt of full payment by Amerisource, or (b) the unpaid Face Amount has been charged to the Reserve Account by Amerisource pursuant to the terms hereof.

1.4. “Credit Documents” – This Agreement, the term loan Promissory Notes, any or all related note(s), the UCC-1 or any other form of security agreement, the Guaranty Agreement, and each and every other document or instrument executed or delivered, or to be executed or delivered, by the Client and/or Guarantor in connection herewith, in each case as amended and/or restated from time to time.

1.5. “Daily Availability Report” - A report, a sample of which appears in Exhibit “A”, prepared by Amerisource from time to time reflecting a calculation of the portion of Client’s Reserve Account which is available for disbursement at a given point in time.

1.6. “Face Amount” - The face amount due on an Account at the time of purchase of such Account.

1.7. “Guarantor” – Matthew Flemming, whether one or more.

1.8. “Guaranty Agreement” – Any guaranty agreement (whether one or more) executed by Guarantor in connection with the Obligations.

1.9. “Invoice” - The document that evidences or is intended to evidence an Account. Where the context so requires, reference to an Invoice shall be deemed to refer to the Account to which it relates.

1.10. “Invoice Transmittal” - A form wherein Client lists such of its Accounts as it requests that Amerisource purchase under the terms of this Agreement. For Accounts submitted by Client electronically to Amerisource, an Electronic Transfer of Sales document may serve as an Invoice Transmittal.

1.11. “Maximum Account Limit” - Ten Million Dollars ($10,000,000). The Maximum Account Limit may be reviewed and amended by Amerisource from time to time as necessary to accommodate Client’s growth in working capital needs.

1.12. “Maximum Bridge Term Limit” – An aggregate principal amount outstanding at any time not to exceed Ten Percent (10%) of the net availability under the Revolving Credit Facility The maximum amount made available under an optional term loan facility made available to Client within the first 12 months of the Term.

1.13. “Maximum Equipment Term Limit” - One Million Four Hundred and Sixty-Four Thousand One Hundred and Fifty-Three Dollars ($1,464,153). The maximum amount made available under an equipment term loan facility made available to Client at execution of this Agreement in order to refinance the existing Citizens Bank Debt and/or subsequent equipment lender debt. The Maximum Equipment Term Limit may be reviewed and amended by Amerisource from time to time as necessary to accommodate Client’s growth in working capital needs.

1.14. “Obligations” - Any and all present or future obligations, liabilities or indebtedness of Client to Amerisource arising hereunder or otherwise, of any and every kind and nature, however created, arising or evidenced and howsoever owned, held or acquired, direct or indirect and whether arising or existing under written or oral agreement or by operation of law, and including all future advances made by Amerisource for the potential protection of Amerisource’s rights and interest in the Collateral, to pay or discharge existing or potential liens, levies or other claims against the Collateral, and whether arising before, during or after the commencement of any Bankruptcy Case in which Client is a Debtor, and all costs and expenses, including without limitation reasonable attorney’s fees, incurred by Amerisource in connection with or arising out of the administration, protection, enforcement or collection of the Obligations or disposition, liquidation or realization of the Collateral, and expenses incurred in answering general legal issues involving Client

1.15. “Purchased Accounts” - Accounts purchased by Amerisource from Client hereunder which have not been Closed.

1.16. “Repurchased” - An Account has been repurchased when Client has paid to Amerisource the then unpaid Face Amount.

1.17. “Required Reserve Amount” - The amount required to be held in Client’s Reserve Account to ensure Client’s performance with the provisions hereof, including but not limited to, anticipated amounts to be paid monthly on the Equipment Term Facility and the Bridge Term Facility.

1.18. “Reserve Account” - A bookkeeping account on the books of Amerisource where the Face Amount of all Purchased Accounts is initially credited, a portion of which is maintained by Amerisource to ensure Client's performance with the provisions hereof.

1.19. “Reserve Shortfall” - The amount by which the Reserve Account is less than the Required Reserve Amount.

2. Sale; Purchase Price; Reserve.

2.1. Assignment and Sale.

2.1.1. Client shall submit to Amerisource each day a sales ledger in electronic format, which shall be a complete and accurate detailed listing of all sales completed by the Client for that given date. All Invoices listed on each daily sales ledger shall represent Invoices billed in accordance with Generally Accepted Accounting Principles (“GAAP”) for goods delivered or services rendered and completed by Client for such day. Though an Invoice Transmittal may be included with each daily sales ledger, Client’s electronic submission of a sales ledger to Amerisource shall be effective as an Invoice Transmittal and shall automatically constitute the assignment and sale to Amerisource of any and all Invoices and Accounts included on such sales ledger, and all such Invoices and Accounts shall immediately become Purchased Accounts. Client shall also submit to Amerisource such reporting on its Inventory as may be agreed upon by Client and Amerisource from time to time.

2.1.2. Each Invoice Transmittal shall be accompanied by such documentation supporting and evidencing the Accounts listed thereon as Amerisource shall from time to time request.

2.1.3. Amerisource’s initial payment of the Face Amount purchase price shall be applied and credited to Client’s Reserve Account.

2.2. Daily Availability Report; Reserve Account.

2.2.1. Client’s withdrawals, advances and disbursements from the Reserve Account shall be governed by a calculation of Availability, as determined by a Daily Availability Report to be prepared or modified by Amerisource from time to time and in its sole discretion, a sample of which appears in Exhibit “A”.

2.2.2. Each Daily Availability Report shall set forth a calculation of the amount available for withdrawal by Client, as well as the amounts which must be held in the Client’s Reserve Account as the Required Reserve Amount. Amounts may be held in the Reserve Account as Required Reserve Amount to ensure Client’s performance with the provisions hereof, as well as to secure Obligations and the Repurchase or anticipated Repurchase of the following ineligible or impaired Accounts: (a) Accounts, the payment of which has been disputed by the Account Debtor obligated thereon, Amerisource being under no obligation to determine the bona fides of such dispute, (b) any Account for which Client has breached its obligation under Section 14 herein, (c) any Account owing from an Account Debtor which in Amerisource’s reasonable credit judgment has become insolvent, (d) any Accounts owing from an Account Debtor in excess of the credit limit established by Amerisource for such Account Debtor, (e) all or any Purchased Accounts upon the occurrence of an Event of Default or upon the termination date of this Agreement, (f) Accounts over ninety (90) days from original invoice date, (g) Accounts owing by an Account Debtor in excess of 15% of Client’s total eligible Purchased Accounts outstanding, (h) Accounts owing by entities related to Client by common ownership or control, (i) all Accounts owing by a given Account Debtor if at least 15% of such Account Debtor’s outstanding Accounts are deemed ineligible or impaired by Amerisource, (j) Accounts owing by Account Debtors domiciled outside of the United States of America or for which Client has accepted deposits or billed in advance, and (k) other Accounts or amounts which Amerisource determines from time to time in its sole credit or business judgment. Without regard to the provision in Section 2.2.2 (f), Amerisource shall provide for eligibility of Patterson-UTI Accounts Receivable after Notice of Assignment has been confirmed by the Patterson-UTI Account Debtor and verification satisfactory to Amerisource has been confirmed.

2.2.3. Amerisource may require that Client Repurchase, by payment of the then unpaid Face Amount thereof or, at Amerisource’s option, by Amerisource’s adjustment to the Reserve Account any of the Accounts described in Section 2.2.2 above which are deemed uncollectible in Amerisource’s sole credit or business judgment. Any such Repurchase by Client shall not constitute reassignment of such Account.

2.2.4. Client shall pay to Amerisource on demand the amount of any Reserve Shortfall.

2.2.5. Amerisource may charge the Reserve Account with any Obligation. The Reserve Account, or any portion thereof, may also be held to secure the Obligations.

2.2.6. Amerisource may pay any amounts due Client hereunder by a credit to the Reserve Account.

2.2.7. Upon termination of this Agreement, Amerisource may retain the Reserve Account (i) sufficient to cover any Obligations that were either known or unknown to Amerisource at the time of termination, and (ii) unless and until Client has executed and delivered to Amerisource a general indemnity and mutual release in a form acceptable to Amerisource.

3. Authorization for Purchases. Subject to the terms and conditions of this Agreement, Amerisource is authorized to purchase Accounts and/or approve and release disbursement requests upon telephonic, facsimile or other instructions received from anyone purporting to be an officer, employee or representative of Client.

4. Revolving Accounts Receivable Interest Rate. Client shall pay to Amerisource on a monthly basis an interest rate equal to the prime rate plus four and one-half percent (4.500%) per annum, to be calculated and charged monthly by Amerisource based on the average outstanding balance of all funds employed for all Accounts Receivable Obligations. The prime rate of interest shall be determined as published and updated from time to time in the Wall Street Journal.

5. Collateral Management Fee. Client shall pay to Amerisource a Collateral Management Fee of seventy-five hundredths percent (0.750%), of the Maximum Account Limit to be charged annually in advance. This fee is reduced from 1.0% contingent upon Client funding an additional credit facility with Amerisource within 6 months of initial funding of this Client facility. In the event an additional facility is not funded within the 6-month period, the CMF will be adjusted to 1.0% and the 0.25% will be assessed in arrears.

6. Non-Usage Fee. A fee of thirty-five hundredths percent (0.350%) will be assessed quarterly in arrears based on the shortfall between Client’s average daily revolving loan balance outstanding and the Maximum Account Limit.

7. Commitment Fee. Client shall pay to Amerisource an up-front fee equal to 1.000% of the Maximum Account Limit. This fee is fully earned at the time of Amerisource approval and commitment to Client; however, as an accommodation to Client, the fee will be deducted from the initial funding proceeds (the “Commitment Fee”).

8. Over-Advances. As inducement to Client to maintain the Reserve Account at required levels to secure the Repurchase or anticipated Repurchase of ineligible or impaired Accounts, Client agrees to pay Amerisource on demand a per diem penalty of 0.2 percent (0.2%) of the amount of any Reserve Shortfall.

9. Equipment Term Loan Facility. Contemporaneous with the execution of this Agreement, Client shall execute the attached Commercial Promissory Note provided in Exhibit ‘B’ (the “Equipment Term Note”) and incorporated herein for all purposes that shall provide for a term loan facility in the amount of the Maximum Equipment Term Limit, under the following terms and conditions:

9.1. Term: Three years, fully amortizing over 36 months with equal principal and interest payments;

9.2. Interest Rate: Client shall pay to Amerisource an interest rate equal to the prime rate plus five and one-quarter percent (5.250%) per annum, to be calculated and charged monthly with equal principal and interest payments;

9.3. Origination Fee: Client shall pay to Amerisource an up-front fee equal to 1.500% of the Maximum Equipment Term Limit. This fee is fully earned at the time of Amerisource approval and commitment to Client; however, as an accommodation to Client, the fee will be deducted from the initial funding proceeds (the “Origination Fee”).

9.4. Purchase Money Security Interest: In addition to the Security Interest provided for in Section 10, Client shall specifically provide, represent and warrant that Client shall provide a first priority lien and a Purchase Money Security Interest in the Equipment described on Exhibit ‘B’, on the filing of a UCC 1 Financing Statement and Client’s grant of such lien to Amerisource does not constitute a fraudulent conveyance under any applicable law. Any landlord’s lien and other lien in favor of Client shall be subordinated pursuant to a separate subordination agreement reasonably acceptable to Amerisource and executed contemporaneously herewith (if any) and, except as otherwise disclosed by Client to Amerisource prior to the date hereof, Client is the owner of all right, title, and interest in the Equipment described on Exhibit ‘B’ free and clear of all liens, encumbrances, and security interests, except the security interest created by this Agreement and statutory and contractual landlord’s liens.

10. Optional Bridge Term Loan Facility. Upon the execution of this Agreement and for a period of 12 months from the initial funding, Amerisource shall make available at Client’s option, a Bridge Term Loan Facility under the following terms and conditions:

10.1. Bridge Term Amount: Client shall provide Amerisource written notice of its election to enter into the Bridge term Loan Facility and the amount of such term loan, said amount not to exceed the Maximum Bridge Term Limit;

10.2. Term: 6 months, fully amortizing with equal principal and interest payments beginning at initial funding for a period of 26 weeks;

10.3. Bridge Facility Fee: A flat fee of 5.00% of the Bridge Term Amount shall be collected at initial funding of the Bridge Term Amount.

10.4. Security: Client shall enter into such additional promissory notes or other Credit Documents as Amerisource shall require to document the amount of the Bridge Term Loan Facility and the requirements to for repayment

11. Security Interest.

11.1. As collateral securing the Obligations, Client grants and assigns to Amerisource a continuing security interest in and to all of its now owned and hereafter acquired personal property and fixtures, and all direct and indirect proceeds thereof (including proceeds of proceeds), including without limitation Accounts, Chattel Paper, Goods (including Inventory and Equipment), Instruments, Investment Property, Documents, General Intangibles, monies, deposit accounts, claims and credit balances, and all Intellectual Property (including Trademarks, Patents and Copyrights, Licenses, Brands), Goodwill, tax refunds, Judgments, claims under Chapter 5 of the Bankruptcy Code, and all other property (real, personal, tangible, intangible, or any combination thereof (the “Collateral”).

11.2. Notwithstanding the creation of the above security interest, the relationship of the Parties as to Client’s Accounts shall be that of purchaser and seller of accounts, and not that of lender and Client.

12. Maintenance of Accounts, Authorization and Dominion of Funds to Amerisource.

12.1  Amerisource requires dominion of funds, and Client shall maintain its primary operating account with [______________________] Bank, or another institution approved by Amerisource, into which the proceeds of all advances will be disbursed. Client shall direct all payments from its Account Debtors to a P.O. address controlled or managed by Amerisource (“Lockbox”) or to a bank account controlled by Amerisource or governed by a Deposit Account Control Agreement in favor of Amerisource (“Blocked Account”). Amerisource shall send notice of assignment letters to all Account Debtors on Client’s letterhead affirming these payment instructions. Payments received by Amerisource, whether such payments are received at a Lockbox, a Blocked Account, forwarded to Amerisource by Client, or otherwise, shall be applied to reduce the Client’s outstanding Obligations to Amerisource with a maximum of three days for check clearance. Client shall provide to Amerisource viewing rights to all bank accounts maintained by Client. Any and all charges and expenses relating to an Amerisource Lockbox shall be for Amerisource’s account. Any and all charges and expenses relating to a Blocked Account shall be for Client’s account.

12.2  Client hereby irrevocably authorizes Amerisource at Client's expense, to exercise at any time any of the following powers until all of the Obligations have been paid in full: (a) receive, take, endorse, assign, deliver, accept and deposit, in the name of Amerisource or Client, any and all cash, checks, commercial paper, drafts, remittances and other instruments and documents relating to the Collateral or the proceeds thereof, (b) take or bring, in the name of Amerisource or Client, all steps, actions, suits or proceedings deemed by Amerisource necessary or desirable to effect collection of or other realization upon the Accounts and other Collateral, (c) after an Event of Default, that has not been cured within any applicable cure period, change the address for delivery of mail to Client and to receive and open mail addressed to Client, (d) after an Event of Default, extend the time of payment of, compromise or settle for cash, credit, return of merchandise, and upon any terms or conditions, any and all Accounts or other Collateral which includes a monetary obligation and discharge or release any account debtor or other obligor (including filing of any public record releasing any lien or security interest granted to Client by such account debtor), without affecting any of the Obligations, (e) pay any sums necessary to discharge any lien, security interest or encumbrance which is senior to or impairs Amerisource's security interest in the Collateral, which sums shall be included as Obligations hereunder, and in connection with which sums the Delinquency Charge shall accrue and shall be due and payable, (f) in order to complete funding transfers or disbursements, or to satisfy any of the Obligations, initiate electronic debit or credit entries through the Automated Clearinghouse system to any deposit account maintained by Client wherever located, (g) file in the name of Client or Amerisource, or both, mechanic’s or materialman’s liens or related notices, or claims under any payment bond, in connection with goods or services sold by Client in connection with the improvement of realty, (h) notify any Account Debtor obligated with respect to any Account that the underlying Account has been assigned to Amerisource by Client and that payment thereof is to be made to the order of and paid directly and solely to Amerisource, and (i) communicate directly with Client’s Account Debtors to verify the amount and validity of any Account created by Client.

13. Covenants By Client.

13.1. Client shall deliver to Amerisource such documentation as may be requested by Amerisource from time to time, including but not limited to: (a) monthly internally-prepared financial statements, accounts receivable aging and accounts payable aging and detailed inventory reports, to be delivered to Amerisource within 30 days of month-end for the six months after the date hereof, and within 21 days of month-end thereafter; (b) quarterly 941 payroll tax filings and proof of payment; (c) annual CPA-prepared (reviewed or audited) financial statements, federal 1120 tax return, and updated personal or corporate financial statements for each personal or corporate guarantor respectively, to be delivered to Amerisource within 110 days of year-end; and (d) any other report or documentation reasonably requested by Amerisource.

13.2. Client shall direct all payments for Client’s Accounts to Amerisource’s                               via a Notice of Assignment to be sent to all of Client’s Account Debtors on Client’s letterhead. Client shall imprint this P.O. Box address as the sole remittance address on each and every Invoice and communication to all of its Account Debtors, without exception. Payments received by Amerisource shall be applied against the corresponding open Invoices purchased and ledgered by Amerisource and shall be applied to reduce the Client’s outstanding Obligations to Amerisource with a maximum of three days for check clearance.

13.3. Any and all checks or other payments received by Client from its Account Debtors or obligors shall be held in trust for Amerisource and shall not constitute the property of Client, and Client shall deliver such instruments in kind to Amerisource within two banking days following the date of receipt by Client. Client shall pay to Amerisource fifteen percent (15%) of the amount of any payment received by Client and not delivered in kind to Amerisource within two banking days following the date of receipt by Client.

13.4. Client shall notify Amerisource promptly of and, if requested by Amerisource, will settle all disputes concerning any Purchased Account, at Client's sole cost and expense.

13.5. After written notice by Amerisource to Client, and automatically, without notice, after an Event of Default that has not been cured within any applicable cure period, Client shall not, without the prior written consent of Amerisource in each instance, (a) grant any extension of time for payment of any of the Accounts, (b) compromise or settle any of the Accounts for less than the full amount thereof, (c) release in whole or in part any Account Debtor, or (d) grant any credits, discounts, allowances, deductions, return authorizations or the like with respect to any of the Accounts.

13.6. From time to time as requested by Amerisource, at the sole expense of Client, Amerisource or its designees shall have access, during reasonable business hours if prior to an Event of Default and at any time if after an Event of Default that has not been cured within any applicable cure period, to all premises where Collateral is located for the purposes of inspecting (and removing, if after the occurrence of an Event of Default that has not been cured within any applicable cure period) any of the Collateral, including Client's books and records, and Client shall permit Amerisource or its designees to make copies of such books and records or extracts therefrom as Amerisource may request.

13.7. Client shall reimburse Amerisource for any reasonable out-of-pocket expenses directly incurred by Amerisource in the administration of this Agreement, including fees for periodic field exams, lien searches or other expenses.

13.8. Client shall pay when due all payroll and other taxes, and shall provide proof thereof to Amerisource in such form as Amerisource shall reasonably require.

13.9. Client shall not create, incur, assume or permit to exist any lien or security interest upon or with respect to any Collateral now owned or hereafter acquired by Client, other than with respect to financing secured by Client from or through Utica Leaseco LLC, Daimler-Benz, Volvo Financial, TBK Bank, Scott Equipment, James E. Frye, or any capital equipment financing secured by such equipment.

13.10. Client shall advise Amerisource in writing if it reschedules or extends the due date of any amounts owing from its account debtors.

13.11. Client shall indemnify Amerisource from any loss arising out of the assertion of any claim that any payment received by Amerisource from or for the account of an Account Debtor is avoidable under the Bankruptcy Code or any other debtor relief statute (“Avoidance Claim”). Client shall notify Amerisource within two business days of it becoming aware of the assertion of any Avoidance Claim. The provisions of this Section 13.11 shall survive termination of this Agreement.

14. Representation and Warranty. Client represents and warrants that:

14.1. Client is fully authorized to enter into this Agreement and to perform hereunder.

14.2. This Agreement constitutes its legal, valid and binding obligation.

14.3. Client is solvent and in good standing in the State of its organization.

14.4. The Purchased Accounts are and will remain:

14.4.1. Bona fide existing obligations created by the sale and delivery of goods or the rendition of services in the ordinary course of Client’s business.

14.4.2. Unconditionally owed and will be paid to Amerisource without defenses, disputes, offsets, counterclaims, or rights of return or cancellation.

14.4.3. Not sales to any entity which is affiliated with Client or in any way not an “arms length” transaction.

14.5. Client has not rescheduled or extended the due date of any amounts owing by its account debtors during the past twelve (12) months from the date hereof.

14.6. Client has not received notice nor does Client have knowledge of actual or imminent bankruptcy, insolvency, or material impairment of the financial condition of any account debtor.

15. Default.

15.1. Events of Default. Any of the following events will constitute an Event of Default hereunder: (a) Client defaults in the payment of any Obligations or in the performance of any covenant herein or provision hereof or of any other agreement now or hereafter entered into with Amerisource, or any warranty or representation contained herein proves to be false in any way, howsoever minor, (b) Client or any guarantor of all or any part of the Obligations becomes subject to any debtor-relief proceedings, (c) any guarantor fails to perform or observe any of such guarantor's obligations to Amerisource or shall notify Amerisource of its intention to rescind, modify, terminate or revoke any guaranty of the Obligations, or any such guaranty shall cease to be in full force and effect for any reason whatever, (d) Amerisource for any reason, in good faith, deems itself insecure with respect to the prospect of repayment or performance of all or any part of the Obligations.

15.2. Notice and Cure Period. Amerisource shall promptly notify Client of the occurrence of any Event of Default. In regards to an Event of Default concerning Section 9 (the Equipment Term Loan Facility) or Section 10 (the Optional Bridge Term Loan Facility) Client shall have ten (10) days to cure after receipt of notice thereof. In regards to any other Event of Default, Client waives any requirement that Amerisource inform Client by affirmative act or otherwise of any Event of Default hereunder. Further, Amerisource’s failure to charge or accrue interest or fees at any “Penalty”, “Default”, or “Past Due” rate shall not be deemed a waiver by Amerisource of its claim thereto.

15.3. Effect of Default. Upon the occurrence of any Event of Default that has not been cured within any applicable cure period, in addition to any rights Amerisource has under this Agreement or applicable law, Amerisource may immediately terminate this Agreement without notice, at which time all Obligations shall immediately become due and payable without notice.

16. Account Stated. Amerisource shall render to Client from time to time a statement setting forth the transactions arising hereunder. Each statement shall be considered correct and binding upon Client as an account stated, except to the extent that Amerisource receives, within sixty (60) days after the mailing of such statement, written notice from Client of any specific exceptions by Client to that statement, and then it shall be binding against Client as to any items to which it has not objected.

17. Waiver. No failure to exercise and no delay in exercising any right, power, or remedy hereunder shall impair any right, power, or remedy which Amerisource may have, nor shall any such delay be construed to be a waiver of any of such rights, powers, or remedies, or any acquiescence in any breach or default hereunder; nor shall any waiver by Amerisource of any breach or default by Client hereunder be deemed a waiver of any default or breach subsequently occurring. All rights and remedies granted to Amerisource hereunder shall remain in full force and effect notwithstanding any single or partial exercise of, or any discontinuance of action begun to enforce, any such right or remedy. The rights and remedies specified herein are cumulative and not exclusive of each other or of any rights or remedies that Amerisource would otherwise have. Any waiver, permit, consent or approval by Amerisource of any breach or default hereunder must be in writing and shall be effective only to the extent set forth in such writing and only as to that specific instance.

18. Termination. This term of this Agreement shall expire thirty-six (36) months from the date of initial funding (the “Maturity Date”). Client may terminate the Agreement by giving Amerisource sixty (60) days written notice of termination prior to each Maturity Date. Otherwise, the Maturity Date shall be automatically extended for an additional twelve (12) months from the most recent Maturity Date. Upon termination, Client shall pay the Obligations to Amerisource, including, but not limited to, all Obligations under the Equipment Term Facility and the Bridge Term Facility. In the event of termination of the Agreement prior to Maturity Date, an Early Termination Fee equal to two percent (2.00%) of the Maximum Account Limit shall apply if there are more than twelve months remaining until Maturity Date at the time of termination; otherwise an Early Termination Fee equal to one percent (1.00%) of the Maximum Account Limit shall apply. Upon termination of this Agreement, Amerisource may retain amounts (i) sufficient to cover any Obligations that were either known or unknown to Amerisource at the time of termination, and (ii) until Client has executed and delivered to Amerisource a general indemnity and mutual release in a form acceptable to Amerisource.

19. Amendment. Neither this Agreement nor any provisions hereof may be changed, waived, discharged or terminated, nor may any consent to the departure from the terms hereof be given orally (even if supported by new consideration), but only by an instrument in writing signed by all parties to this Agreement. Any waiver or consent so given shall be effective only in the specific instance and for the specific purpose for which given.

20. Lien Termination. In recognition of Amerisource's right to have its legal fees and other expenses incurred in connection with this Agreement secured by the Collateral, notwithstanding satisfaction in full of all other Obligations by Client, Amerisource shall not be required to record any terminations or satisfactions of any of Amerisource's liens or security interests on the Collateral unless and until Client has executed and delivered to Amerisource a general indemnity and mutual release in a form acceptable to Amerisource. Client understands that this provision constitutes a waiver of its rights under §9-513 of the UCC.

21. Conflict. Unless otherwise expressly stated in any other agreement between Amerisource and Client, if a conflict exists between the provisions of this Agreement and the provisions of such other agreement, the provisions of this Agreement shall control.

22. Severability. In the event any one or more of the provisions contained in this Agreement is held to be invalid, illegal or unenforceable in any respect, then such provision shall be ineffective only to the extent of such prohibition or invalidity, and the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

23. Relationship of Parties. The relationship of the Parties hereto shall be that of seller and purchaser of Accounts, and Amerisource shall not be a fiduciary of the Client, although Client may be a fiduciary of Amerisource. The Parties have, for the purposes of Chapter 306 of the Texas Finance Code, characterized the sale of accounts receivable pursuant to this Agreement as a purchase and sale transaction, and not a loan or other transaction for the use, forbearance or detention of money.

24. Legal Fees. Client agrees to reimburse Amerisource on demand for the actual amount of all costs and expenses, including reasonable attorneys' fees and other legal fees, which Amerisource has incurred or may incur in: (a) negotiating, preparing, or administering this Agreement and any documents prepared in connection herewith or in any way arising out of this Agreement, which shall not exceed $15,000; (b) protecting, preserving or enforcing any lien, security interest or other right granted by Client to Amerisource or arising under applicable law, whether or not suit is brought, including but not limited to the defense of any Avoidance Claims; (c) complying with any subpoena or other legal process attendant to any litigation in which Client is a party; including photocopying, travel, and attorneys' fees and expenses; (d) the actual amount of all costs and expenses, including reasonable attorneys' fees, which Amerisource may incur in enforcing this Agreement and any documents prepared in connection herewith, or in connection with any federal or state insolvency proceeding commenced by or against Client, including those (i) arising out of the automatic stay, (ii) seeking dismissal or conversion of the bankruptcy proceeding, or (iii) opposing confirmation of Client's plan thereunder.

25. Entire Agreement. This Agreement supersedes all other agreements and understandings between the Parties hereto, verbal or written, express or implied, relating to the subject matter hereof. No promises of any kind have been made by Amerisource or any third party to induce Client to execute this Agreement. No course of dealing, course of performance or trade usage, and no parole evidence of any nature, shall be used to supplement or modify any terms of this Agreement.

26. Choice of Law. This Agreement and all transactions contemplated hereunder and/or evidenced hereby shall be governed by, construed under, and enforced in accordance with the internal laws of the State of Texas.

27. Jury Trial Waiver. In recognition of the higher costs and delay which may result from a jury trial, the Parties hereto waive any right to trial by jury of any claim, demand, action or cause of action (a) arising hereunder, or (b) in any way connected with or related or incidental to the dealings of the Parties hereto or any of them with respect hereto, in each case whether now existing or hereafter arising, and whether sounding in contract or tort or otherwise; and each Party further waives any right to consolidate any such action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived; and each Party hereby agrees and consents that any such claim, demand, action or cause of action shall be decided by court trial without a jury, and that any Party hereto may file an original counterpart or a copy of this section with any court as written evidence of the consent of the Parties hereto to the waiver of their right to trial by jury.

28. Venue; Jurisdiction. The Parties agree that any suit, action or proceeding arising out of the subject matter hereof, or the interpretation, performance or breach of this Agreement, shall, if Amerisource so elects, be instituted in any court sitting in the State of Texas (the “Acceptable Forums”). Each party agrees that the Acceptable Forums are convenient to it, and each party irrevocably submits to the jurisdiction of the Acceptable Forums, irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement, and waives any and all objections to jurisdiction or venue that it may have under the laws of the State of Texas or otherwise in those courts in any such suit, action or proceeding. Should such proceeding be initiated in any other forum, Client waives any right to oppose any motion or application made by Amerisource as a consequence of such proceeding having been commenced in a forum other than an Acceptable Forum.

29. Notice. All notices to Amerisource hereunder shall be deemed given upon actual receipt by a responsible officer of Amerisource.

30. Counterparts. 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 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.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the day and year first above written.

Exhibit “A”

SMG Inc, Daily Availability Report – SAMPLE

Exhibit ‘B’

COMMERCIAL PROMISSORY NOTE
(Equipment Loan; Purchase Money)

FOR VALUE RECEIVED and WITHOUT GRACE, on the dates, and in the amounts so herein stipulated, the undersigned, 5J Oil Field Services, LLC and 5J Trucking, LLC whose address are , together with SMG Industries, Inc. whose address is (hereinafter called “Maker”), promises to pay to the order of AMERISOURCE FUNDING, INC (“Lender”) at its principal office located at 7225 Langtry, Houston, Texas 77040, in coin or currency of the United States of America, which at the time of payment is legal tender for the payment of public and private debts, the principal sum of ONE MILLION FOUR HUNDRED AND ONE THOUSAND AND FIVE HUNDRED FIFTY-EIGHT AND 91/100 DOLLARS ($1,401,558.91), together with accrued interest on the principal amount hereof remaining unpaid from time to time, computed from the date hereof until maturity at a per annum rate, calculated on the basis of a three hundred sixty (360) day year [except for calculation of the Maximum Rate, which will be calculated on the basis of a three hundred sixty five (365) or three hundred sixty six (366) day year, as the case may be] determined on a fixed per annum basis, equal to the lesser of (i) or (ii) as follows:

(i)        The prime rate plus five and one-quarter percent (5.250%) per annum as determined from time to time in the Wall Street Journal (currently 10.00%) (the “Applicable Rate”); or

(ii)       the Maximum Rate (as hereinafter defined),

which interest rate is further limited and controlled by the provisions of this Note hereinafter set forth. The term “Maximum Rate”, as used herein, shall mean, on any day, the highest non-usurious rate of interest (if any) permitted by applicable law on such day. For purposes of the Texas Finance Code, as it may from time to time be amended, the Maximum Rate shall be referred to in and determined under the Texas Finance Code, from time to time in effect; provided, however, that to the extent permitted by applicable law, Lender reserves the right to change, from time to time by further notice and disclosure to Maker, the ceiling on which the Maximum Rate is based under the Texas Finance Code; and, provided further, that the “highest non-usurious rate of interest permitted by applicable law” for purposes of this Note shall not be limited to the applicable rate ceiling under the Texas Finance Code if federal laws or other state laws now or hereafter in effect and applicable to this Note (and the interest contracted for, charged and collected hereunder) shall permit a higher rate of interest. In no event shall the Applicable Rate herein exceed the Maximum Rate.

This Note is payable as follows, to-wit:

(a)    Accrued and unpaid interest on this Note shall be payable monthly, commencing one calendar month from the date hereof, and continuing thereafter on the same day of each succeeding calendar month, and ending upon the maturity of this Note, however such maturity may be brought about; and

(b)    All outstanding principal of this Note and all accrued and unpaid interest hereon shall be due and payable on or before December____, 2022 (the “Maturity Date.

Upon execution hereof, Maker shall pay an origination fee equal to $21,962.30. Said fees shall not be construed as interest.

THE WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

It is especially agreed that if default shall be made in any payment due hereon, either principal or interest, or if there is a default in any of the terms, covenants or provisions set forth in that certain Security Agreement, as hereinafter defined, or any other document given to secure this Note or any Guaranty executed to support Lender’s entering into the Note or Security Agreement (collectively, the “Security Instruments”) or in any other note or obligation of Maker to Lender (including guaranty agreements), then, in any such event, at the option of Lender or any other holder hereof at any time thereafter without notice of intent to accelerate, notice of acceleration, or any other demand or notice, the unpaid principal balance of this Note and all accrued interest shall at once become due and payable. Any sum, principal or interest, payable under this Note which is not paid when due shall bear interest from the date such payment is due until paid at the Maximum Rate, or if no Maximum Rate is established by applicable law, then at the Applicable Rate plus five percent (5%) per annum. If default is made in the prompt payment of this Note when due or declared due and the same is placed in the hands of an attorney for collection, or suit is brought on same, or the same is collected through probate, bankruptcy or other judicial proceedings, then Maker agrees and promises to pay to Lender its reasonable and necessary attorney’s fees and court costs.

If Lender or its successor has not received the full amount of any installment payment at the end of the 10th day after it is due, Maker agrees to pay a late charge to Lender. The amount of the late charge will be five percent (5%) of the amount of the overdue installment payment. Maker agrees to pay the late charge promptly. The late charge will be charged only one time with respect to any late installment payment.

It is agreed that time is of the essence of this agreement. Upon the occurrence of an event of default (as such term is defined in the herein defined Security Agreement), Lender may accelerate and declare this Note immediately due and payable without notice. Any failure to exercise this option shall not constitute a waiver by Lender of the right to exercise the same at any other time.

All payments under the Security Instruments received by Lender during the existence of any event of default may be applied by Lender against the indebtedness (herein due Lender) in any manner and in such priority as Lender may specify, including without limitation, in accordance with the provisions of any of the Security Instruments.

Maker and any and all endorsers, guarantors and sureties severally waive all notices, demands for payment, presentment for payment, protest and notice of protest, notice of intent to accelerate, notice of acceleration, any other notices of any kind, the filing of suit hereon for the purpose of fixing liability and diligence in taking any action to collect amounts called for hereunder and in the handling of collateral or securities at any time existing in connection herewith, and consent that the time of payment hereof may be extended and re-extended from time to time without notice to any of them.

In addition to any other security interests granted but Maker in the Security Instruments, Maker specifically provides, represents and warrants a first priority lien and a Purchase Money Security Interest in the Equipment described on the attached Equipment Schedule and that Maker’s grant of such lien hereunder does not constitute a fraudulent conveyance under any applicable law or contract and that Maker is the owner of all right, title, and interest in the equipment free and clear of all liens, encumbrances, and security interests.

It is further agreed that Maker grants to Lender or any other holder hereof a first lien and security interest on (and the express right of setoff against) all deposits and other sums at any time credited by or due from Lender or any other holder hereof to Maker, or any endorser, surety or guarantor hereof as collateral security for the payment of this Note, and Lender or other holder hereof, at its option, may at any time, without notice and without any liability, hold all or any part of any such deposits or other sums until all sums owing on this Note have been paid in full and/or apply or set off all or any part of any such deposits or other sums credited by or due from Lender or any other holder hereof to or against any sums due on this Note in any manner and in any order of preference which Lender or other holder hereof, at its sole discretion, chooses.

It is the intention of the parties hereto to comply with the usury laws of the State of Texas and of the United States of America. The parties hereto do not intend to contract for, charge or receive any interest or other charge that is usurious, and by execution of this Note, Maker agrees that Lender has no such intent. This Note, the hereinafter mentioned Security Agreement and Security Instruments, and all other agreements between Maker and Lender or any other holder hereof, which are now existing or hereafter arising, whether written or oral, are hereby expressly limited so that in no event whatsoever, whether by reason of acceleration of maturity hereof, or otherwise, shall the amount paid, or agreed to be paid, to Lender or any other holder hereof for the use, forbearance or detention of the money to be due hereunder or otherwise, or for the payment or performance of any covenant or obligation contained herein or in any other document evidencing, securing, or pertaining to the indebtedness evidenced hereby, exceed the Maximum Rate. If from any circumstance whatsoever fulfillment of any provisions hereof or other document, at the time performance of such provisions shall be due, shall involve transcending the valid limits prescribed by law, then, ipso facto, the obligation to be fulfilled shall be reduced to the Maximum Rate, and if from any such circumstance Lender or any other holder shall ever receive as interest or otherwise an amount which will exceed the Maximum Rate, such amount which would be excessive interest shall be applied to the reduction of the principal amount owing hereunder or on account of any other principal indebtedness of Maker to the holder and not to the payment of interest, or if such excessive interest exceeds the unpaid balance of principal hereof and such other indebtedness, such excess shall be refunded to Maker. All sums paid and agreed to be paid to Lender or any other holder for use, forbearance or detention of the indebtedness of Maker shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the periods until payment in full of this Note (or any renewals, extensions and rearrangements hereof) so that the actual rate of interest on account of this indebtedness evidenced by this Note is uniform throughout the term of this Note (and all renewals, extensions and rearrangements hereof) and does not exceed the Maximum Rate. The terms and provisions of this paragraph shall control and supersede any other provisions of this Note.

Except as otherwise stated herein, all payments under this Note shall be applied first against the accrued and unpaid interest and the remainder against the principal balance hereof. All partial prepayments shall be applied toward the payment of principal installments in the inverse order of maturity. Lender’s records shall constitute prima facie evidence of the amount of funds advanced hereunder.

If at any time the Applicable Rate exceed the Maximum Rate, then interest hereon shall accrue at the Maximum Rate. If the Applicable Rate should then subsequently decrease to a level less than the Maximum Rate or if the Maximum Rate applicable to this Note should then subsequently be increased to a level which would be greater than the Applicable Rate, then, in either case, the interest hereon shall thereafter accrue at a rate equal to the applicable Maximum Rate until the aggregate amount of interest accrued through the term of this Note equals the aggregate amount of interest which would have accrued at the Applicable Rate without regard to any usury limit, at which time interest hereon shall again accrue at the Applicable Rate.

If at maturity or final payment of this Note the total amount of interest accrued under the foregoing provisions is less than the total amount of interest which would have accrued if the Applicable Rate had at all times been in effect, then Maker shall pay Lender the amount by which (i) the lesser of (a) the amount of interest which would have accrued on this Note if the Maximum Rate had at all times been in effect or (b) the amount of interest which would have accrued if the Applicable Rate had at all times been in effect, exceeds (ii) the amount of interest paid by Maker to Lender in accordance with the other provisions of this Note.

Any check, draft, money order or other instrument given in payment of all or any part hereof or on any part of the indebtedness may be accepted by the holder hereof and handled in collection in a customary manner, but same shall not constitute payment hereof or of the indebtedness or diminish any rights of Lender, except to the extent that actual cash proceeds of such instrument are unconditionally received by Lender.

The individual signing below warrants and represents that s/he has the requisite authority to bind the entity on whose behalf s/he signs.

Without being limited thereto or thereby, this Note is secured by that certain REVOLVING ACCOUNTS RECEIVABLE ASSIGNMENT AND TERM LOAN FINANCING AND SECURITY AGREEMENT (the “Security Agreement”) executed by Maker for the benefit of Lender, covering all assets of Maker, including the Collateral more fully described in the Security Agreement.