Exhibit 10.1

 

MODIFICATION, CONSENT AND FORBEARANCE AGREEMENT

 

This Modification, Consent and Forbearance Agreement (“Agreement”) is entered
into as of this 16th day of August, 2016, by and among Superior Drilling
Products, Inc., a Utah corporation (“Superior”), Superior Drilling Solutions,
LLC, a Utah limited liability company (“Drilling”), Hard Rock Solutions, LLC, a
Utah limited liability company (“Hard Rock”), Extreme Technologies, LLC, a Utah
limited liability company (“Extreme”, and together with Superior, Drilling and
Hard Rock, “Borrower” or “Borrowers”), and FEDERAL NATIONAL PAYABLES, INC., a
Delaware corporation doing business as Federal National Commercial Credit
(“Lender”).

 

BACKGROUND

 

A.The Credit Facilities

 

On March 8, 2016, Borrower and Lender entered into a certain Loan and Security
Agreement (together with the following described Amendment and Second Amendment,
the “Loan Agreement”) and other Credit Documents, as that term is defined in the
Loan Agreement. On March 28, 2016, Borrower and Lender entered into a certain
Amendment to Loan and Security Agreement (“Amendment”). On May 12, 2016,
Borrower and Lender entered into a certain Second Amendment to Loan and Security
agreement (“Second Amendment”).

 

The Loan Agreement, together with all notes, amendments, modifications, addenda
and supplements, and all present and future instruments, documents and
agreements related thereto or executed in connection therewith and herewith, are
sometimes referred to herein collectively as the “Financing Agreements”. All
capitalized terms used herein and not defined herein shall have the meaning
ascribed to such terms in the Financing Agreements; and in case of any
conflicting definitions in the Financing Agreements, the terms of the Loan
Agreement a shall govern. The term “Agreement” shall refer to this Agreement, as
the same may be amended, supplemented, modified, renewed, extended, restated or
replaced from time to time.

 

B.Existing Defaults

 

Borrower is and remains in default under the terms and conditions of the
Financing Agreements by the failure to maintain the financial covenants as
required by Sections 7.15(a), 7.15 (b) and 7.15 (c) of the Loan Agreement (the
“Existing Defaults”). In addition, the Existing Defaults also consist of: (i)
incurring $1,000,000 of additional indebtedness pursuant to the Roth Capital
bridge loan financing dated August 5, 2016 which is prohibited by Section 8.2 of
the Loan Agreement, and (ii) the issuance of 700,000 unregistered shares of
common stock of the Company to WMAFC, INC. in connection with the restructuring
of the existing promissory note in the original principal amount of $9,500,000
due and owing by Hard Rock and Drilling to WMAFC, INC. without providing at
least fifteen (15) days prior written notice which is prohibited by Section 8.10
of the Loan Agreement.

 

 

 

 

 

 

Notwithstanding such Existing Defaults, Borrower has requested that Lender
agree, in consideration of the undertakings and obligations of Borrower set
forth herein, to make certain accommodations and to forbear for a specified
period from the exercise of Lender’s rights and remedies under the Financing
Agreements. Lender has agreed to make such accommodations as and only to the
extent set forth herein, and without waiving any of Lender’s rights and
remedies.

 

By reason of the Existing Defaults, Borrower acknowledges that Lender has the
full legal right to exercise its rights and remedies under the Financing
Agreements including, but not limited to, the right to enforce its remedies
under the Uniform Commercial Code and other applicable laws, and take possession
of and sell any Collateral described in the Financing Agreements.

 

NOW THEREFORE, with the foregoing Background deemed incorporated by reference
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
covenant and agree as follows:

 

Section 1. ACKNOWLEDGMENT OF INDEBTEDNESS, EVENTS OF DEFAULT, ETC.

 

1.1. Liabilities. Borrower confirms and acknowledges that as of the date hereof
the amount owed to Lender is $559,894.86 plus accruing and unpaid interest and
fees thereon (the “Obligations”) due and owing without any deduction, defense,
setoff, claim or counterclaim of any nature whatsoever.

 

1.2. Existing Defaults. Borrower represents and warrants that as of the date
hereof, no Event(s) of Default or event(s) which with the passage of time or
giving of notice or both would constitute an Event of Default are outstanding
under the Financing Agreements and this Agreement, other than the Existing
Defaults.

 

1.3. Binding Effect of Documents. Borrower hereby acknowledges, confirms and
agrees that: (a) each of the Financing Agreements to which it is a party has
been duly executed and delivered to Lender by Borrower and each is in full force
and effect as of the date hereof, (b) the agreements and obligations of Borrower
contained in the Financing Agreements constitute the legal, valid and binding
obligations of Borrower and are enforceable against Borrower in accordance with
their respective terms, (c) Borrower has no valid defense, offset or
counterclaim to the enforcement of such obligations, and (d) Lender is and shall
be entitled to all of the rights, remedies and benefits provided for in the
Financing Agreements.

 

1.4. Advances. Borrower and Lender acknowledge that if Lender shall, in its sole
discretion, make loans, advances or other credit accommodations pursuant to the
Financing Agreements, such additional credit shall accrue fees and charges at
the rates set forth in the Financing Agreements, as amended by this Agreement.
All such additional credit, and all accrued and unpaid fees and charges, shall
constitute Obligations under the Financing Agreements and this Agreement, and
shall be secured by the Collateral.

 

 

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Section 2. FORBEARANCE

 

2.1 Grant of Forbearance. Subject to the terms and conditions, and satisfaction
of the Effectiveness Conditions of this Agreement, during the Forbearance Period
and through the Termination Date (both as defined below), Lender shall forbear
from taking any action or exercising any rights or remedies under the Financing
Agreements against Borrower, Borrower’s property, or the Collateral, due solely
to the Existing Defaults. On the Termination Date, all forbearance with respect
to the Existing Defaults shall cease and Lender may, in its discretion, and
apart from its rights as a result of any new Event of Default, exercise its
rights and remedies against Borrower, Borrower’s property, the Collateral and
any guarantees, pledges or undertakings of third parties with respect to the
Obligations. The ‘Termination Date” shall be the date that is the earliest to
occur of: (i) the occurrence of an Event of Default (other than the Existing
Defaults), (ii) the occurrence of any breach or default by Borrower or any
guarantor of any covenant or obligation under this Agreement or any of the
Financing Agreements, (iii) the failure or non-performance of any of the
Effectiveness Conditions, (iii) full and final payment of all Obligations, or
(v) September 30, 2016, subject to the right of Lender, in its sole and
exclusive discretion, to renew or extend the term of this Agreement. The term
“Forbearance Period” shall mean the period commencing the date of this Agreement
and expiring on the Termination Date. For the avoidance of doubt, all
Obligations (including, without limitation, the Termination Fee and all other
fees and expenses provided for under the Financing Agreements) shall be due and
payable on the Termination Date.

 

2.2 Preservation of Rights. By agreeing to forbear from the exercise of its
rights and remedies until the Termination Date, Lender does not waive the
Existing Defaults. The Existing Defaults are preserved, pending fulfillment of
Borrower’s obligations under this Agreement and under the Financing Agreements.
The granting of the accommodations of Lender hereunder shall not be deemed a
waiver of Lender’s rights and remedies or constitute a course of conduct or
dealing on behalf of Lender. Subject only to the agreements of Lender described
herein, Lender specifically reserves all rights and remedies available to it
under the Financing Agreements, any instrument, document or agreement related
thereto or otherwise available at law or equity, and expressly reserves its
rights, without notice to Borrower, to take any and all actions to preserve and
protect the Collateral and to accelerate payment of all amount outstanding under
the Financing Agreements upon the occurrence of an Event of Default other than
the Existing Defaults or a breach by Borrower of this Agreement.

 

2.3. Acknowledgements and Waivers. Borrower acknowledges and agrees that Lender
is specifically and reasonably relying upon the representations, warranties, and
agreements contained herein, and that this Agreement is being executed by
Borrower and delivered to Lender as an inducement to Lender to forbear from
exercising contractual remedies available to Lender under the Financing
Agreements. Such forbearance by Lender is expressly conditioned on the accuracy
and reliability of the representations, warranties, and agreements of Borrower
that are set forth in this Agreement. Notwithstanding the foregoing, nothing in
this Agreement shall prevent Lender from immediately, and without further notice
or right of cure (all of which are hereby waived by Borrower), exercising its
rights and remedies under the Financing Agreements upon a subsequent Default,
Event of Default, or breach by Borrower of any of the terms and conditions set
forth therein, as such terms and conditions are modified and amended in this
Agreement. Borrower further waives, to the extent permitted by law, for the
Forbearance Period, any statute of limitations applicable to Lender’s interest
in the Obligations.

 

 

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Section 3. COLLATERAL

 

3.1. Affirmation of Existing Collateral. Borrower covenants, confirms and agrees
that as security for the repayment of the Obligations, Lender has and shall
continue to have, and is hereby granted a continuing lien on and security
interest in the Collateral, whether now owned or hereafter acquired, created or
arising, together with all proceeds, including insurance proceeds thereof.
Borrower acknowledges and agrees that nothing herein contained shall in any way
impair Lender’s rights and priority in the Collateral.

 

3.2. Further Assurances. Upon execution of this Agreement, and thereafter,
Borrower shall take all action requested by Lender to effectuate the terms and
intent of this Agreement and the Financing Agreements, and in assuring
continued, effective and proper perfection of the liens and security interests
in the Collateral.

 

Section 4. REAFFIRMATION

 

Except to the extent and for the period hereby modified, Borrower hereby
confirms and ratifies in all respects the Financing Agreements and the
Obligations outstanding thereunder, and acknowledges that the Financing
Agreements shall continue in full force and effect as therein written, and that
there exist no claims, counterclaims, offsets or defenses arising out of or with
respect to Borrower’s Obligations under the Financing Agreements. Borrower
reaffirms each of the representations and warranties under the Financing
Agreements made by it, as if said representations and warranties were made and
given on and as of the date hereof. Borrower hereby confirms its existing grant
to Lender of a security interest in the Collateral. Borrower hereby confirms
that all security interests at any time granted by it to Lender shall continue
in full force and effect and secure and shall continue to secure the liabilities
and Obligations of Borrower and any additional advances made pursuant to or in
reliance on this Agreement (including, without limitation, the Obligations), so
long as any such liabilities or Obligations remain outstanding and that all
property subject thereto remain free and clear of any liens or encumbrances
other than (i) those in favor of Lender, and (ii) liens expressly permitted in
the Financing Agreements and exhibits thereto.

 

Section 5. REPRESENTATIONS AND WARRANTIES

 

Borrower reaffirms, warrants and represents to Lender that:

 

5.1 Organization and Qualification. Each Borrower is duly organized and is a
validly existing corporation or limited liability company under the laws of the
state identified above, with full power and authority to own its properties and
to transact its business as now transacted. Borrower is qualified to transact
business in each jurisdiction where the ownership of its properties or the
transaction of its business requires such qualification.

 

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5.2 Authorization. The execution and delivery by Borrower of this Agreement and
the performance by Borrower of the transactions herein contemplated (i) are and
will be within its powers, (ii) have been authorized by all necessary corporate
action, and (iii) are not and will not be in contravention of any order of court
or other agency of government, of law or of any indenture, agreement or
undertaking to which Borrower is a party or by which the property of Borrower is
bound, or be in conflict with, result in a breach of or constitute (with due
notice and/or lapse of time) a default under any such indenture, agreement or
undertaking, or result in the imposition of any lien, charge or encumbrance of
any nature on any of the properties of Borrower.

 

5.3 Valid, Binding and Enforceable. This Agreement and any assignment or other
instrument, document or agreement executed and delivered in connection herewith,
will be a valid act of Borrower, and shall be binding on and enforceable against
Borrower in accordance with its respective terms.

 

5.4 Litigation. There is no pending or threatened proceeding by or before any
court or governmental agency against or affecting Borrower which, if adversely
decided, would have a material adverse effect on the business, operations or
financial condition of Borrower or on the ability of Borrower to perform its
obligations under this Agreement or the other Financing Agreements.

 

5.5 Title to Property. Borrower has good title to all property owned by it,
including all properties reflected in the most recent audited balance sheet
delivered to Lender (except as sold or otherwise disposed of in the ordinary
course of business).

 

5.6 Taxes. Except solely with respect to the Existing Defaults, all tax returns
required to be filed by Borrower have been properly prepared, executed and
filed. All taxes, assessments, fees and other governmental charges upon Borrower
or upon any of its properties, incomes, sales or franchises which are due and
payable have been paid.

 

5.7 Financial Accounting Practice. Borrower makes and keeps its books, records
and accounts which, in reasonable detail, accurately and fairly reflect
Borrower’s transactions and dispositions of its assets.

 

5.8 Power To Carry On Business. Borrower has all requisite power and authority
to own and operate its properties and to carry on its business as now conducted
and as presently planned to be conducted.

 

5.9 Compliance with Laws. Borrower is not in violation of any law, except for
violations which in the aggregate do not have a material adverse effect on its
business, operations or financial condition.

 

 

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Section 6. COVENANTS, AMENDMENTS, AND EFFECTIVENESS CONDITIONS

 

6.1 Existing Covenants. Borrower covenants and agrees that on and after the date
of execution of this Agreement and until the Obligations are indefeasibly paid
and satisfied in full, except as expressly modified hereby and except for the
provisions of Section 7.15 of the Loan Agreement, Borrower shall continue to
observe and maintain compliance with all covenants, representations and
warranties arising in this Agreement and the Financing Agreements.

 

6.2 Availability Reserve. Pursuant to Section 2.3 of the Loan Agreement and as a
condition to the forbearance provided herein, Lender hereby establishes an
availability reserve under the Credit Facility in the amount of One Hundred
Thousand Dollars ($100,000.00) for the duration of the Forbearance Period.

 

6.3 Additional Covenants. The Loan Agreement is hereby amended by the addition
of the following covenants, effective the date hereof:

 

(a) Company shall make no Restricted Distributions during the Forbearance
Period.

 

(b) At all times during and after expiration of the Forbearance Period, Company
shall take no action to dispose of, liquidate, or assign for the benefit of any
creditor, any inventory or other assets of Borrower other than in the normal
course of business.

 

(c) Borrower shall pay or reimburse Lender for its attorneys' fees and expenses
in connection with the enforcement of Lender’s rights under the Financing
Agreements, and the fees and expenses incurred in the preparation, negotiation
and execution of this Agreement and the documents provided for herein or related
hereto, and the same shall be included within the Obligations.

 

(d) Borrower hereby agrees to take all such actions and to execute and/or
deliver to Lender all such documents, assignments, financing statements and
other documents, as Lender may reasonably require from time to time to
effectuate and implement the purposes of this Agreement.

 

6.4 Effectiveness Conditions. The agreements and forbearance by Lender hereunder
are subject to satisfactory completion, as determined by Lender in its sole
discretion, (all documents to be in form and substance satisfactory to Lender
and its counsel) of the following conditions (“Effectiveness Conditions”):

 

(a) Payment of a $35,000 Forbearance Fee, all of which shall be fully earned and
unconditional as of the date hereof.

 

 

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(b) Execution and delivery to Lender of an absolute and unconditional joint and
several Guaranty in form and substance acceptable to Lender by G. Troy Meier and
Annette Meier.

 

(c) Delivery to Lender of current statements of financial condition of G. Troy
Meier and Annette Meier.

 

(d) Payment to Lender in the amount of not less than One Hundred Thousand
Dollars ($100,000.00) for application to the Term Loan.

 

(e) Delivery to Lender of all documents, agreements and other writings relating
to or evidencing an unsecured loan from a related party in the amount of not
less than One Million Dollars ($1,000,000.00) on or immediately prior to the
date hereof (the “Bridge Loan”) including, without limitation, evidence that the
full amount of the Bridge Loan has been advanced to and received by Borrower.

 

Section 7. DEFAULTS

 

7.1 Events of Default. The occurrence of one or more of the following described
events is an Event of Default:

 

(a) The occurrence of any Event of Default (except an Existing Defaults) under
any Financing Agreement;

 

(b) Failure of Borrower to comply with, or the breach of, any of its
representations, warranties, covenants, agreements or other undertakings under
this Agreement; or

 

(c) Failure or nonperformance of any of the Effectiveness Conditions.

 

7.2 Upon the occurrence of an Event of Default, Lender’s undertakings under this
Agreement may without notice to Borrower, immediately terminate and Lender may
immediately proceed to enforce all rights and remedies under or in accordance
with the Financing Agreements and this Agreement, by contract or applicable law,
without further notice to Borrower.

 

Section 8. MISCELLANEOUS

 

8.1 Counterparts. This Agreement may be executed in any number of counterparts,
each of which will constitute an original and all of which together shall
constitute one instrument. Signature by facsimile shall bind the parties hereto.

 

8.2 Third-Party Rights. No rights are intended to be created hereunder for the
benefit of any third-party donee, creditor, or incidental beneficiary.

 

8.3 Modifications. No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed on behalf of the
party against whom enforcement is sought.

 

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8.4 Indemnity. Borrower hereby agrees to indemnify Lender from and against all
losses, costs, expense, demands and damages whatsoever which Lender may suffer
or incur in respect of any claims which have or may be brought by any third
party relating to this Agreement, the Financing Agreements, or the transactions
contemplated hereby or thereby. This indemnity shall continue in full force and
effect after the Termination Date and notwithstanding the completion of the
other matters referred to in this Agreement. This indemnification is in addition
to and shall not limit any other indemnification agreement between Borrower and
Lender, and shall be included within the Obligations.

 

8.5 Integrated Agreement. This Agreement shall be deemed incorporated into and
made a part of the Financing Agreements. Except as expressly set forth herein,
all of the terms, conditions and agreements of the Financing Agreements are
ratified and confirmed. The Financing Agreements and this Agreement shall be
construed as integrated and complementary of each other, and as augmenting and
not restricting Lender’s rights, remedies and security. If, after applying the
foregoing, an inconsistency still exists, the provisions of this Agreement shall
control.

 

8.6 Non-Waiver. No omission or delay by Lender in exercising any right or power
under this Agreement, the Financing Agreements or any related agreement will
impair such right or power or be construed to be a waiver of any default or
Event of Default or an acquiescence therein, and any single or partial exercise
of any such right or power will not preclude other or further exercise thereof
or the exercise of any other right, and no waiver will be valid unless in
writing and then only to the extent specified. Lender’s rights and remedies are
cumulative and concurrent and may be pursued singly, successively or together.

 

8.7 Headings. The headings of any paragraph of this Agreement are for
convenience only and shall not be used to interpret any provision of this
Agreement.

 

8.8 Survival. All warranties, representations and covenants made by Borrower
herein, or in any agreement referred to herein or on any certificate, document
or other instrument delivered by them or on their behalf under this Agreement,
shall be considered to have been relied upon by Lender. All statements in any
such certificate or other instrument shall constitute warranties and
representations by Borrower hereunder. All warranties, representations,
indemnities and covenants made by Borrower hereunder or under any other
agreement or instrument shall be deemed continuing until the Obligations are
indefeasibly paid and satisfied in full.

 

8.9 Successors and Assigns. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each of the parties hereto. No
delegation by Borrower of any duty or obligation of performance may be made or
is intended to be made to Lender. No rights are intended to be created hereunder
or under any related instruments, documents or agreements for the benefit of any
third party donee, creditor, incidental beneficiary or affiliate of Borrower.

 

 

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8.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland. The provisions of this
Agreement are to be deemed severable, and the invalidity or unenforceability of
any provision shall not affect or impair the remaining provisions which shall
continue in full force and effect.

 

8.11 Right of Setoff. In addition to all liens upon and rights of setoff against
the money, securities or other property of Borrower given to Lender by law,
Lender shall have, with respect to the Obligations, whether under the Financing
Agreements or otherwise and to the extent permitted by law, a contractual
possessory security interest in and a right of setoff against, and Borrower
hereby assigns, conveys, delivers, pledges and transfers to Lender all of
Borrower’s right, title and interest in and to, all deposits, moneys, securities
and other property of Borrower now or hereafter in the possession of or on
deposit with Lender, whether held in a general or special account or deposit,
whether held jointly with someone else, or whether held for safekeeping or
otherwise. Every such security interest and right of setoff may be exercised
without demand upon or notice to Borrower.

 

8.12 Waiver of Jury Trial. Borrower and Lender each hereby waives any and all
rights any of them may have to a jury trial in connection with any litigation
commenced by or against any of the parties to this Agreement with respect to
rights and obligations of the parties hereto under this Agreement or under the
Financing Agreements.

 

8.13 Exclusive Jurisdiction. Borrower and Lender each irrevocably consent to the
non-exclusive jurisdiction of the State of Maryland and the United States
District Court for the District of Maryland, in any and all actions and
proceedings whether arising hereunder or under the Financing Agreements.
Borrower irrevocably agrees to service of process by certified mail return
receipt requested to the address currently contained in Lender’s records.

 

8.14 Release. As a material inducement to Lender to enter into this Agreement,
Borrower (i) does hereby remise, release, acquit, satisfy and forever discharge
Lender and all of its past, present and future officers, directors, employees,
agents, attorneys, representatives, participants, heirs, successors and assigns,
from any and all manner of debts, accounting, bonds, warranties,
representations, covenants, promises, contracts, controversies, agreements,
liabilities, obligations, expenses, damages, judgments, executions, actions,
claims, demands and causes of action of any nature whatsoever, whether at law or
in equity, which Borrower has by reason of any matter, cause or thing, from the
beginning of the world to and including the date of this Agreement with respect
to any matters, transactions, occurrences, agreement, actions, or events arising
out of, in connection with or relating to the Financing Agreements; and (ii)
does hereby covenant and agree never to institute or cause to be instituted or
continue prosecution of any suit or other form of action or proceeding of any
kind or nature whatsoever against Lender, or any or its past, present or future
officers, directors, employees, agents, attorneys, representatives,
participants, heirs, successors or assigns, by reason of or in connection with
any of the foregoing matters, claims or causes of action. Borrower expressly
acknowledges and agrees that the forbearances and other indulgences contained in
this Agreement shall not be construed as an admission of wrongdoing, liability
or culpability on the part of Lender or the existence of any claims of Borrower
against Lender.

 

 

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8.15 Advice of Counsel. Borrower acknowledges that it has an opportunity to
consult with independent legal counsel concerning this Agreement, and Borrower
knowingly and voluntarily hereby waives the rights described therein or affected
thereby.

 

8.16 Charges and Fees. Nothing contained in this Agreement shall be deemed to
limit, affect or impair the imposition of or provision for late charges, default
charges and default interest as provided in the Financing Agreements.

 

Section 9. SPECIAL BANKRUPTCY PROVISIONS. Borrower hereby agrees that if
Borrower shall:

 

(a) file, or be the subject of, any petition under Title 11 of the U.S. Code, as
amended, filed with any bankruptcy court;

 

(b) be the subject of any order for relief issued under such Title 11 of the
U.S. Code, as amended;

 

(c) file or be the subject of any petition seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or similar
relief under any present or future federal or state act or law relating to
bankruptcy, insolvency, or other relief for debtors;

 

(d) seek, consent to, or acquiesce in the appointment of any trustee, receiver,
conservator, or liquidator; or

 

(e) be the subject of any order, judgment, or decree entered by any court of
competent jurisdiction approving a petition filed against Borrower for any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or relief for debtors,

 

that any such event shall constitute an incurable Event of Default hereunder,
the Forbearance Period shall terminate automatically, and Borrower: (i) agrees
that it will not contest, object to, or interpose any defense, all of which are
waived, with respect to any motion by Lender seeking relief from any automatic
stay imposed by Section 362 of Title 11 of the U.S. Code, as amended, or from
any other stay or suspension of remedies imposed in any other manner with
respect to the exercise of the rights and remedies otherwise available to Lender
with respect to the Collateral under the Financing Agreements, and (ii)
acknowledges and stipulates that Borrower cannot provide Lender with adequate
protection (as that term is defined in Section 361 of the Bankruptcy Code) and
therefore it will not use or seek approval for continued use of, any of Lender’s
cash collateral (as that term is defined in Section 363 of the Bankruptcy Code),
including any of the Collateral. The provisions of this section shall survive
the Termination Date or other expiration of the Forbearance Period.

 

 

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Section 10. CONSENTS. Lender hereby agrees and consents to the following
proposed transactions so long as such transactions are consummated by Borrower
on or before September 30, 2016:

 

(a) consummation of the sale of Borrower’s common stock pursuant to a public
offering of Borrower’s common stock which is not otherwise permitted pursuant to
Section 8.10 of the Loan Agreement; and

 

(b) an amendment to that certain existing Distribution Agreement dated May 12,
2016 by and between Hard Rock and Drilling Tools International, Inc. (“DTI”)
pursuant to which DTI will be granted a larger exclusive territory to distribute
certain of Hard Rock’s products which is not otherwise permitted pursuant to
Section 8.11 of the Loan Agreement.

 

[signatures continue on next page]

 

 

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

 

 

BORROWERS: SUPERIOR DRILLING PRODUCTS, INC.          
By:  _________________________________   Name:   Title:       Address: 1583
South 1700 East   Vernal, UT  84078       SUPERIOR DRILLING SOLUTIONS, LLC      
    By:  _________________________________   Name:   Title:       Address: 1583
South 1700 East   Vernal, UT  84078       HARDROCK SOLUTIONS, LLC            
By:  _________________________________   Name:   Title:       Address: 1583
South 1700 East   Vernal, UT  84078       EXTREME TECHNOLOGIES, LLC          
By:  _________________________________   Name:   Title:       Address: 1583
South 1700 East   Vernal, UT  84078

 

 

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        LENDER: FEDERAL NATIONAL PAYABLES, INC.      
By:  _________________________________   Name:   William Seibold  
Title:     Chief Credit Officer       Address: 7315 Wisconsin Avenue, Suite 600W
  Bethesda, MD  20814 Acceptance Date: ______________  

  

ACKNOWLEDGMENT AND CONSENT OF VALIDITY GUARANTOR

 

The undersigned guarantor hereby acknowledges and consents to the provisions of
the foregoing Agreement and agrees that the each of the undersigned’s
obligations under the Validity Guaranty executed in accordance with the Loan
Agreement and the Credit Documents shall be unimpaired by the said Agreement and
that the undersigned has no defenses or set offs against Lender, its officers,
directors, employees, agents or attorneys, with respect to such Validity
Guaranty, and that all of the terms, conditions and covenants in such Validity
Guaranty remain unaltered and in full force and effect and are hereby ratified
and confirmed. The undersigned hereby certifies that the representations and
warranties made in the Validity Guaranty are true and correct as of the date
hereof. The undersigned hereby ratifies and confirms the waiver of jury trial
provision (if applicable) contained in the Validity Guaranty.

 

WITNESS the due execution hereof as a document under seal, as of August__, 2016,
intending to be legally bound hereby.

 

 

  _________________________________________ (SEAL)   G. Troy Meier  

 

STATE OF TEXAS :     : ss COUNTY OF HARRIS :  

 

On this, the _____ day of August, 2016, before me, the undersigned Notary
Public, personally appeared G. Troy Meier, known to me (or satisfactorily
proven) to be the individual described in and who executed the foregoing,
instrument and he duly acknowledged to me that he executed the same for the
purposes therein contained.

 

WITNESS my hand and seal the day and year aforesaid.

 

 

  _________________________________________   Notary Public My Commission
Expires: ________________  

 

 

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