Exhibit 10.6

 

LOAN AND SECURITY AGREEMENT

(“Agreement”)

 

This Agreement dated June 3, 2019, is an agreement between NEWTON DORSETT
(“DORSETT”), and TRINITY SERVICES, LLC, a Louisiana limited liability company
(“Borrower”). In this Agreement, DORSETT and Borrower are collectively the
“Parties”. The Parties have the addresses shown on the schedule (“Schedule”)
which is attached to this Agreement. These are the addresses of the Parties for
all purposes and may be changed by one party giving notice to the other party in
writing of the new address.

 

1.                   PURPOSE. The purpose of this Agreement, including the
Schedule, is to set forth the terms and conditions of the loans from DORSETT to
Borrower (“Loans”) and the obligations of Borrower. The Schedule is part of this
Agreement. Any and all promissory notes, including for term loans and/or capital
expenditures (individually and collectively “Note”) to be signed by Borrower,
and any other documents now or hereafter signed by any of the Parties in
connection with this Agreement, the Loans or any document issued by DORSETT,
including subordination or intercreditor agreements, are also all part of this
Agreement. All of the documents together are referred to collectively as the
“Loan Documents”.

 

2.                   LOANS; LOAN ADVANCES.

 

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

 

B.                   The total amount Borrower owes to DORSETT will be the
aggregate of the Advances made by DORSETT, the expenses and fees set forth in
the Schedule, and interest at the rate set forth in the Note on all amounts and
all other obligations of Borrower under the Loan Documents (collectively, the
“Obligations” and/or “Indebtedness”).

 

C.                  Borrower must repay all Advances with respect to the Loans
with interest, which is due monthly as specified in the Note, along with all
other fees and expenses of DORSETT set forth herein or in the Schedule. DORSETT
may in its sole discretion collect any Obligations due DORSETT by (i) directly
applying any funds in the Lockbox Account, as defined in paragraph 5 below, to
the Obligations (ii) directly applying funds from any Reserve Account, as
defined in paragraph 3 below, to the Obligations, (iii) collecting the
Obligations directly from Borrower; or (iv) otherwise collecting the
Obligations. Borrower understands that all the Obligations are repayable at any
time in full or in part upon demand by DORSETT. DORSETT may make demand for
partial payments and such demand will not preclude DORSETT from demanding
payment in full at any time.

 

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

 

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

 

3.                   RESERVES. If DORSETT believes in its sole discretion that
the prospect for repayment of the Obligations is impaired or that its Collateral
margin is insufficient, DORSETT may establish cash reserves and credit balances
(collectively “Reserves”) to protect its interests and the repayment of the
Obligations. Reserves may be established by reducing the Advance Formula to
achieve the target reserve level, withholding monies due Borrower from any
payments DORSETT receives, from a cash payment from Borrower, or any other
method DORSETT chooses. DORSETT shall hold these Reserves in a “Reserve
Account”. Any money in a Reserve Account, whether or not it is a cash reserve,
will not earn interest for Borrower, and DORSETT may apply the funds in the
Reserve Account to reduce the Obligations at any time DORSETT elects.

 

4.                   FEES AND EXPENSES. In connection with the Loans there are
several types of fees that may be charged and Borrower may be required to
maintain a minimum loan balance. Such fees and requirements are set forth in the
Schedule. Borrower shall pay DORSETT a closing fee of $1,000 upon execution of
this Agreement and all expenses of every kind incurred by DORSETT in connection
with collection of the Obligations, inspection, and examination are to be paid
by Borrower.

 

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5.                   LOAN ACCOUNT. All of the Obligations which are owed by
Borrower will be shown in the Loan Account and Borrower will receive a monthly
statement either by mail or electronically at DORSETT’s sole discretion. The
statement is binding on Borrower, unless Borrower provides a written objection
to DORSETT that is actually received by DORSETT within fifteen (15) business
days of the time the statement is provided or made available to Borrower.

 

6.                   PAYMENTS. In the event that any payment received by DORSETT
is sought to be recovered by or on behalf of the payer (including a trustee in
bankruptcy or assignee for the benefit of creditors), then Borrower agrees to
immediately reimburse DORSETT on demand for any amount so recovered and all of
DORSETT’s expenses in connection with any such proceeding, including reasonable
attorney’s fees. This provision shall survive termination of this Agreement. Any
payments received by DORSETT shall be applied to the Obligations in whatever
order DORSETT determines in its reasonable discretion.

 

7.                    SECURITY INTEREST.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

C.                 To notify DORSETT promptly of any litigation, administrative
or tax proceeding or other action threatened or instituted against Borrower or
Guarantor or its property, or of any other material matter which may adversely
affect Borrower’s financial condition.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

C.                  Obtain any loan or guaranty or assume any obligation or
liability, whether as borrower, guarantor, surety, indemnitor or otherwise that
would result in or create a Default, without DORSETT’s prior written consent.

 

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

 

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

 

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

 

G.                  Suffer or permit any judgment, decree or order not fully
covered by insurance to be entered against Borrower or a Guarantor, or permit or
suffer any warrant or attachment to be filed against Borrower, any Guarantor, or
against any property or asset of Borrower or Guarantor.

 

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

 

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

 

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

 

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

 

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

 

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

 

15.                LENDER ACTIONS. To the extent applicable law may impose
duties on DORSETT to exercise remedies in a commercially reasonable manner,
Borrower agrees that it is not commercially unreasonable for DORSETT: to fail to
exercise remedies against any Collateral or any particular Account Debtor; to
proceed against Account Debtors either directly or through collection agencies;
to advertise disposition of Collateral through publications or media of general
circulation; to hire professional auctioneers to dispose of Collateral; to
dispose of Collateral in wholesale or retail markets; to disclaim warranties
with respect to Collateral; or to obtain services of attorneys or other
professionals. The foregoing is not an exhaustive list and nothing contained in
the foregoing shall be construed to grant any rights to Borrower or to impose
any duties on DORSETT that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this Section 15. Borrower
agrees that under no circumstances is DORSETT the agent or representative of
Borrower.

 

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

 

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

 

18.                 MISCELLANEOUS PROVISIONS.

 

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

 

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

 

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

 

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

 

E.                   This Agreement and the other Loan Documents will be
interpreted and determined under the laws of the state of Texas without any
regard to any conflict of law’s provisions.

 

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

 

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

 

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

 

I.                    This Agreement and the other Loan Documents represent the
complete Agreement between the Parties with respect to the subject matter of
this Agreement, and there are no promises, undertakings, representations or
warranties by DORSETT relative to the subject matter of this Agreement not
expressly set forth in this Agreement or the other Loan Documents, and this
Agreement supersedes all prior negotiations, agreements and understandings, oral
or written. This Agreement and the other Loan Documents may be amended only in
writing.

 

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

 

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

 

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

 

M.                 Small Business Jobs Act Certification. Pursuant to Section
4107(d) (2) (the “Section”) of the Small Business Jobs Act of 2010,
certification is required from any business receiving a loan using funds
received by the institution under the Small Business Lending Act. As required by
the Section, the Borrower hereby certifies to DORSETT that the principals of
Borrower and its affiliates have not been convicted of, or pleaded nolo
contendere to, a sex offense against a minor (as such terms are defined in
section 111 of the Sex Offender Registration and Notification Act (42 U.S.C.
16911)).

 

The term “principals” is defined as follows: if a sole proprietorship, the
proprietor; if a partnership, each managing partner and each partner who is a
natural person and holds a twenty percent (20%) or more ownership interest in
the partnership; and if a corporation, limited liability company, association or
a development company, each director, each of the five (5) most highly
compensated executives or officers of the entity, and each natural person who is
a direct or indirect holder of twenty percent (20%) or more of the ownership
stock or stock equivalent of the entity.

 

N.                  USA Patriot Act Notification. The following notification is
provided to Borrower pursuant to Section 3265 of the USA Patriot Act of 2001, 31
U.S.C. Section 5318:

 

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

 

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

 

20.                JOINT AND SEVERAL OBLIGATIONS. If more than one person or
entity is named as Borrower in this Agreement, all Obligations, representations,
warranties, covenants and indemnities of Borrower set forth herein and in the
other Loan Documents shall be the joint and several obligations of such persons
and/or entities.

 

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21.                JURISDICTION. BORROWER AGREES THAT ANY ACTION TO ENFORCE
BORROWER’S OBLIGATIONS TO DORSETT SHALL BE PROSECUTED EITHER IN THE CIRCUIT
COURT OF HARRIS COUNTY TEXAS OR THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF TEXAS (UNLESS DORSETT, IN ITS SOLE DISCRETION, ELECTS SOME
OTHER JURISDICTION), AND BORROWER SUBMITS TO THE JURISDICTION OF ANY SUCH COURT
SELECTED BY DORSETT. BORROWER WAIVES ANY AND ALL RIGHTS TO CONTEST THE
JURISDICTION AND VENUE OF ANY ACTION BROUGHT IN THIS MATTER AND BORROWER MAY
BRING ANY ACTION AGAINST DORSETT ONLY IN THE CIRCUIT COURT FOR THE COUNTY OF
HARRIS OR THE FEDERAL COURT OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF TEXAS.

 

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

 

23.                RELEASE. BORROWER RELEASES AND FOREVER DISCHARGES DORSETT,
ITS AFFILIATES, OFFICERS, AGENTS, EMPLOYEES AND DIRECTORS FROM ANY AND ALL
CLAIMS OF ANY KIND WHATSOEVER FROM THE BEGINNING OF TIME TO DATE OF THIS
AGREEMENT.

 

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

 

DORSETT: BORROWER:     NEWTON DORSETT TRINITY SERVICES, LLC   a Louisiana
limited liability company     By: /s/ Newton Dorsett   By:   /s/ Matthew C.
Flemming   Newton Dorsett     Matthew C. Flemming, as President of SMG        
Industries, Inc., Its parent company and sole shareholder

 

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SCHEDULE TO LOAN AND SECURITY AGREEMENT

Dated: June 3, 2019

 

This Schedule is part of the Agreement between:

 

  NEWTON DORSETT (“Dorsett")   220 Travis St   Shreveport, Louisiana 71101  
Email: AND     TRINITY SERVICES, LLC ("BORROWER")   710 N. Post oak Road, suite
315   HOUSTON, TEXAS 77024   Email: matt@smgindustries.com

 

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

 

2.LOAN: LOAN ADVANCES.

 

Advance Formula: Advances of the Loan may be measured against a percentage of
Eligible Accounts.

 

The Loan Amount may not exceed an amount which is the lesser of:

 

(a)One Million and no/ 1OO Dollars ($1,000,000.00) ("Maximum Amount"); or

 

(b)Ninety percent (90%) of Eligible Accounts (the "Advance Formula").

 

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

 

“Eligible Account” means and includes those Accounts:

 

(i)which have been validly assigned to DORSETT;

(ii)strictly comply with all of Borrower's promises, warranties and
representations to DORSETT;

(iii)contain payment terms of not greater than ninety (90) days from the date of
invoice;

(iv)are not past due more than ninety (90) days past the date of invoice, with
the exception of Tanos Exploration II, which shall not be past due more than
one-hundred five (105) days past the date of invoice; and

(v)          are invoiced not later than ten (10) days from the date of service
or sale.

 

Eligible Accounts shall not include the following:

 

(a)Accounts with respect to which the Account Debtor is an officer, employee or
agent of Borrower;

(b)Accounts with respect to which services or goods are placed on consignment,
guaranteed sale, or other terms by reason of which the payment by the Account
Debtor may be conditional;

(c)Accounts with respect to which the Account Debtor is not a resident of the
United States;

(d)Accounts with respect to which the Account Debtor is the United States or any
department, agency or instrumentality of the United States; provided, however,
that an Account shall not be deemed ineligible by reason of this clause (d) if
the Borrower has completed all of the steps necessary, in the sole opinion of
DORSETT, to comply with the Federal Assignment of Claims Act of 1940 (31 U.S.C.
Section 3727) with respect to such Account;

(e)Accounts with respect to which the Account Debtor is any state of the United
States or any city, town , municipality, county or division thereof;

(t)Accounts with respect to which the Account Debtor is a subsidiary of, related
to, affiliated with, or has common shareholders, officers or directors with
Borrower;

(g)Accounts with respect to which Borrower is or becomes liable to the Account
Debtor for goods sold or service rendered by the Account Debtor to Borrower;

(h)Accounts where DORSETT has notified Borrower that, in DORSETT's sole
discretion, the Account or Account Debtor is not acceptable to DORSETT;

(i)All of the Accounts owed by an Account Debtor who is the subject of a
bankruptcy, receivership or similar proceeding;

 

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(j)All of the Accounts owed by an Account Debtor where thirty (30%) percent or
more of all of the Account owed by that Account Debtor are more than ninety (90)
days from the invoice date;

(k)Accounts for which the services have not yet been rendered to the Account
Debtor or the goods sold have not yet been delivered to the Account Debtor
(commonly referred to as "pre-billed accounts");

(I)COD, credit card sales and cash sales; and

(m)Accounts which are disputed.

 

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

 

Prior to any request for an Advance Borrower must furnish to DORSETT invoices,
credit memos, purchase orders, evidence of delivery, proof of shipment,
timesheets or any other documents DORSETT requests, in its sole discretion, with
respect to the Accounts that Borrower is tendering to DORSETT to support the
Advance ("Account Documents"). DORSETT will endeavor to provide the requested
Advance by the end of the next business day following the date it receives the
request as long as the complete package or in formation for the request has been
received by DORSETT by 3:00 p.m. Central Time on the date of the request for the
Advance. All requests for funding will be subject to DORSETT's then standard
fees for electronic funds transfer, wire transfers and check services.

 

Each time an Advance is made, the amount of the Obligations will be increased by
the amount of the Advance. Three (3) business days ("Clearance Days") after
checks, ACH or wire transfers or other credit instruments are applied to a
specific invoice, DORSETT will credit the Loan Account with the net amount
actually received. On the date a collection is applied to a specific invoice
Bo1rnwcr will receive immediate credit on such funds in determining availability
for Advances.

 

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

 

9.         REPRESENTATIONS.

 

(A)Borrower is a Louisiana limited liability company, with a EIN of 62-1680382.

 

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

 

(F)List Security Interests in the Collateral held by creditors other than
DORSETT as permitted encumbrances:

 

(J)List Borrower's Tradenames: None.

 

(O)As to Inventory and Equipment - List Security Interests held by creditors
other than DORSETT as permitted encumbrances:

 

10.       BORROWER'S PROMISES:

 

E.FINANCIAL COVENANTS: None.

 

12.       FINANCIAL REPORTS.

 

Annual Management Prepared Financial Statements: Each fiscal year, Borrower will
deliver to DORSETT management prepared financial statements, cash flow
statements, balance sheets, and profit and loss statements for the fiscal year
then ended, certified to by the president or chief financial officer of
Borrower. Such reports will set forth in detail Borrower's true condition for
the fiscal year then ended, and will be delivered to DORSETT no later than
ninety (90) days after the end of each fiscal year.

 

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

 

10 

 

 

Accounts Receivable Aging and Accounts Payable Aging Reports: Upon DORSETT's
request, Borrower will furnish to DORSETT the following certified to by the
president or chief financial officer of Borrower within the time periods set
forth:

 

(a)Accounts Receivable Reports: Annual detailed Accounts Receivable Aging
Reports no later than thirty (30) days after the end of each fiscal year.

 

(b)Accounts Payable Reports: Monthly summary Accounts Payable Aging Reports no
later than fifteen (15) days after the end of each month.

 

 

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

 

Tax Deposit Evidence: Upon DORSETT's request, Borrower will submit weekly
payroll summaries and evidence of tax payments together with copies of bank
statements from which the funds are impounded.

 

Tax Returns: Upon DORSETT's request, Guarantor and Borrower will each provide
DORSETT with annual tax returns.

 

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

 

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

 

NEWTON DORSETT:   BORROWER:             TRINITY SERVICES, LLC     a Louisiana
Limited Liability Company                 By: /s/ Newton Dorsett   By: /s/
Matthew Flemming   Newton Dorsett   Name: Matthew Flemming     Title: President

 

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