SMGI SMG Industries Inc (CE)

On September 7, 2021, 5J Trucking LLC (“5J Trucking”), 5J Oilfield Services LLC (“5J Oilfield”), 5J Transportation LLC (“5J Transportation”), 5J Brokerage LLC (“5J Brokerage”) and 5J Specialized LLC (“5J Specialized”) (each of 5J Trucking, 5J Oilfield, 5J Transportation, 5J Brokerage and 5J Specialized, shall be referred to herein as the “5J Entities”) entered into a loan agreement (“Loan Agreement”) and security agreement (“Security Agreement”) with Amerisource Funding Inc. (“Amerisource”) in the total amount of $12,740,000. Pursuant to the terms of the Loan Agreement, $6,400,000 was initially funded on September 7, 2021 and the remaining $6,340,000 is to be funded on or before October 31, 2021. In connection with the Loan Agreement, the 5J Entities issued a commercial promissory note to Amerisource (“Note”) in the initial principal amount of $6,400,000. Pursuant to the terms of the Note, the 5J Entities will pay interest only on a monthly basis through October 1, 2022 and principal and interest thereafter over the remaining term through September 7, 2026 (the “Maturity Date”). The Note bears interest at a rate of 12.0% per annum and may be prepaid early at any time without penalty. The 5J Entities will also pay an annual collateral management fee to Amerisource in the amount of 0.40% of the total loan amount. The Amerisource Loan Agreement is attached hereto as Exhibit 10.21.

Pursuant to the terms of the Security Agreement, the 5J Entities granted a security interest in all of their assets to Amerisource as collateral for the repayment of the Amerisource loan, however, until such time as Utica Leaseco LLC (“Utica”) has been paid in full pursuant to the master lease agreement entered into by and between 5J Trucking and 5J Oilfield with Utica on February 27, 2020, Utica will continue to have a priority security interest in a significant portion of the 5J Entities assets. A copy of the Security Agreement is attached hereto as Exhibit 10.22.

In connection with the Loan Agreement, SMG Industries Inc. (“Company”), the parent company of each of the 5J Entities, entered into a pledge agreement (“Pledge Agreement”) pursuant to which the Company has granted a security interest in all of its assets to Amerisource and a guaranty agreement (“Guaranty Agreement”) pursuant to which the Company has guaranteed the timely payment of all amounts due under the Loan Agreement, each of which are attached hereto as Exhibits 10.23 and 10.24, respectively.

The proceeds from the issuance of the Note were used to pay down $6.4 million of the outstanding balance owed to Utica pursuant to a Second Forbearance Agreement entered into by and between 5J Trucking and 5J Oilfield with Utica on September 7, 2021 (“Forbearance Agreement”). Pursuant to the terms of the Forbearance Agreement, 5J Trucking and 5J Oilfield have the right to prepay the entire remaining balance due to Utica at a reduced amount of $6.34 million on or before November 1, 2021.