Exhibit 10.1


 


AMENDED AND RESTATED DISTRIBUTION AGREEMENT


 


THIS AMENDED
AND RESTATED DISTRIBUTION AGREEMENT (this “Agreement”), made as of this 30th day of August,
2016 to be effective as of the 16th of July, 2016 (the “Effective Date”), is by and between
Hard Rock Solutions, LLC, a Utah limited liability company, whose address is 1583 East, 1700 South, Vernal, Utah 84078
(“Supplier”), and Drilling Tools International, Inc., a Louisiana Corporation, whose address is 3701
Briarpark Dr., Suite 150, Houston, TX 77042 (“Distributor”) (Supplier and Distributor being sometimes
hereinafter referred to individually as a “Party” and collectively as the
“Parties”).


 


WITNESSETH:


 


WHEREAS, Supplier has
developed and owns solely and exclusively a product more particularly described in Exhibit “A” hereto, referred
to as the “Drill N Ream” (the “DNR”);


 


WHEREAS, the Parties
previously entered into that certain Distribution Agreement dated as of May 12, 2016 (the “Original Agreement”)
by which Supplier engaged Distributor to distribute DNR units (“DNR Units”) in a certain area therein identified
and referred to therein as the “Territory”; and


 


WHEREAS, the Parties
desire herein to amend and restate the Original Agreement with respect to such engagement and rights, including redefining the
Territory in Exhibit “B” hereto.


 


NOW, THEREFORE, for
and in consideration of the foregoing premises and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Parties do hereby amend and restate the Original Agreement as follows:


 




     


     


    

 


		1.	Distribution.



 


a.           Supplier
hereby grants to Distributor, and, subject to the provisions set forth herein, Distributor hereby acquires from Supplier, the exclusive
right to distribute and market, by lease or rental, and to provide certain limited servicing thereof for, all DNR Units in the
Territory. For the avoidance of doubt, Distributor shall not have the right to sell the DNR Units within or outside the Territory,
except in connection with an assignment of this Agreement as allowed hereby. The rights granted herein shall apply to all future
enhancements, revisions, new versions and replacements of the DNR Units, all of which shall be deemed DNR and DNR Units herein.


 


b.           Distributor
shall use commercially reasonable efforts to lease or rent DNR Units in the Territory.


 


c.           Subject
to the provisions of this Agreement, Distributor may:


 


		i.	Market DNR Units in any manner it sees fit, within
its sole and absolute discretion;



 


		ii.	Invoice, collect and retain payments from its customers,
subject to obligations imposed hereby to pay Supplier a portion of same; and



 


		iii.	Use one or more agents or sub-distributors in the
exercise of its rights hereunder. All sub-agents, or sub-distributors, if utilized, will be required to adhere to the same quality
standards and deploy procedures as are required of Distributor by Supplier hereunder.



 




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d.           Upon
receipt by Supplier of written notice from Distributor of its desire to market and distribute any of Supplier’s products
other than the DNR (the “Other Products”), and provided there is not then an Event of Default by Distributor,
Supplier will provide Distributor with a period of six (6) months (the “Evaluation and Discussion Period”) in
which to evaluate the feasibility of distributing such Other Products, so long as the right to do so does not violate any other
agreement to which Supplier is then a party. Furthermore, in the event that Supplier in good faith believes it has one or more
Other Products that are commercially viable, then Supplier shall furnish written notice to Distributor and Distributor shall have
a time period of ten (10) days of receipt to determine whether it wants to trigger the Evaluation and Discussion Period; provided,
however, that there is not then an Event of Default by Distributor under this Agreement. If at any time during the Evaluation and
Discussion Period with respect to any Other Products, Distributor provides written notice to Supplier of its interest in entering
into an agreement for the distribution of any of such Other Products within the Territory, the Parties shall engage in good faith
negotiations with the desire of entering into a commercially reasonable agreement permitting Distributor to distribute such Other
Products within the Territory (the “Other Products Distribution Agreement”); provided, however, nothing contained
herein shall require Supplier to enter into an Other Products Distribution Agreement with Distributor. During the Discussion and
Evaluation Period, Supplier agrees that it shall not then enter into any agreement with any third party with respect to distributing
any of the Other Products within the Territory. Notwithstanding anything to the contrary contained herein, the Evaluation and Discussion
Period as to any applicable Other Products shall terminate upon the earlier to occur of: (i) there being an Event of Default by
Distributor of this Agreement, (ii) Distributor providing written notice that it no longer desires to pursue the evaluation of
the Other Products or discussion of entering into an Other Products Distribution Agreement, (iii) an Other Products Distribution
Agreement being entered into by the Parties, or (iv) the expiration of six (6) months from the commencement of the Evaluation and
Discussion Period. During such time that the Evaluation and Discussion Period is operative as to any Other Products, Supplier agrees
not to enter into any agreement with any third party with respect to distribution of the Other Products within the Territory; provided,
however that if an Other Products Distribution Agreement is not entered into and the Evaluation and Discussion Period is terminated
in accordance with the terms and provisions contained herein, then Supplier shall be permitted to enter into an agreement with
a third party for the distribution of the Other Products within or without the Territory.


 




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2.          Supply;
Minimum Requirement.


 


a.           Supplier
shall be obligated to sell to Distributor, and Distributor shall be obligated to purchase from Supplier, all DNR Units ordered
by Distributor subject to, and in accordance with, the terms of this Agreement necessary to fulfill its obligations hereunder.
Supplier shall also be obligated to sell to Distributor, and Distributor shall also be obligated to purchase DNR Units from Supplier,
as set forth in Section 1 of Exhibit “C” hereto.


 


b.           Supplier
shall deliver to Distributor the number of DNR Units within the time periods set forth below after an order is given by Distributor
to Supplier, subject to prior pending orders from Distributor to Supplier (the “Delivery Deadline”) based on
the size of the order as follows:


 


		i.	30 or less of the 475 DNR Units – 30-45 days;



 


		ii.	20 or less of the 675 DNR Units – 30-45 days;
and



 


		iii.	10 or less of the 800 DNR Units – 45-60 days.



 


If Supplier fails to deliver any number
of DNR Units specified above by the Delivery Deadline, the purchase price for each Unit shall be reduced by ten percent (10%) for
each week by which delivery of same is delayed beyond the deadline, except to the extent such delay is excused as the result of
an event of “Force Majeure,” as that term is hereinafter defined, as provided for hereinbelow. In the event Distributor
places an order for a number of DNR Units in excess of the amounts specified above, the Parties shall, in good faith, agree on
a reasonable delivery period. In the event Distributor markets any Other Products, the Parties shall, in good faith, agree on the
amount or amounts of each such Other Product to be delivered by Supplier by the Delivery Deadline.


 




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c.           Delivery
of all DNR Units, either to Distributor or Supplier, shall be at Distributor’s sole cost, risk and expense, F.O.B. (free
on board) the carrier of Distributor’s choosing. Title to and risk of loss of the DNR Units shall be Distributor’s
upon delivery of possession of the DNR Units to Distributor or Distributor’s common carrier, but otherwise on Supplier. Distributor
shall bear all expenses of demurrage, transportation and storage charges for the DNR Units from and after such delivery by Supplier,
including without limitation, expenses while awaiting loading at point of embarkation or debarkation.


 


d.           After
Distributor purchases DNR Units, Supplier shall provide additional Units (“Back-Up Units”) reasonably requested
by Distributor until such time as Supplier shall have provided to Distributor all Units ordered by Distributor for 2016. Notwithstanding
the foregoing to the contrary, Supplier shall only be required to provide Back-Up Units to the extent of any existing Supplier
Unit inventory, and Supplier’s obligation to provide Back-Up Units shall be subject to Supplier’s reasonable good faith
evaluation of Distributor’s need for such Back-Up Units. Back-Up Units shall initially be provided at no initial cost to
Distributor (other than the cost of shipping and delivery); provided, however, if a Back-Up Unit is used by Distributor
or an end user more than two times, Distributor shall purchase such Back-Up Unit at the stated prices for the applicable DNR Unit
less the prior Back-Up Unit Rental Payment, as such term is hereinafter defined. For the first two times a Back-Up Unit is rented
by Distributor, Distributor shall pay Supplier 50% of the rental fee that it has invoiced to its customer within the same time
frame as other Royalty Payments are made from Distributor to Supplier.


 


e.           In
order for Distributor to maintain the benefits of exclusivity conferred by this Agreement on the Distributor, Distributor must
achieve the Utilization Percentages set forth in Section 2 of Exhibit “C”.


 




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		3.	Pricing to Distributor and Terms.



 


a.           Distributor
shall pay Supplier the amounts provided for in Exhibit “D” hereto for the purchase of DNR Units from Supplier,
subject to possible adjustment based on Run Rates as set forth in Exhibit “E”. As used herein, “Run Rate”
shall mean the rental rate per foot drilled charged by Distributor for rental of the DNR Units. Distributor shall pay Supplier
the purchase price for each such Unit within thirty (30) days from invoice date.


 


b.           In
addition to the amounts to be paid by Distributor pursuant to 3.a. above, Distributor shall pay Supplier eight percent (8%) of
the gross rental revenues due to Distributor from its customers (the “Rental Revenue Percentage”), excluding
revenues attributable to service fees, repair fees and standby charges, taxes, and similar charges collected from such customers,
as provided for in Exhibit “E” hereto (the “Royalty Payments”).Distributor shall provide Supplier
at the time of invoicing, copies of every invoice and written statement of charges for DNR Units it sends to its customers plus
such other written evidence reasonably requested by Supplier as to the determination of the amount of Royalty Payments.


 


c.           Within
a reasonable time after invoicing its customers, but on a monthly basis and usually at the end of the monthly billing cycle, Distributor
shall issue a credit to Supplier equal to the Rental Revenue Percentage of the invoiced amount, less applicable taxes, as documented
by actual invoices. No sooner than the seventy-fifth (75th) day, but no later than the ninetieth (90th) day, after Distributor
invoices its customers, Distributor shall be obligated to pay Supplier by wire transfer or a mutually agreed alternative the amount
of the Royalty Payments for the related invoices.


 




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d.           In
the event Distributor does not collect, and elects to write off, any amounts invoiced to its customers, the amount of the Royalty
Payments associated with such written-off accounts receivable may be offset against future Royalty Payments due to Supplier hereunder
provided that Distributor provides bona fide written evidence of such amounts written off.


 


e.           In
the event any of Distributor’s customers should make payment to Supplier for the rental of any DNR Units by Distributor,
Supplier shall promptly deliver such funds to Distributor.


 


f.            Upon
at least seven (7) days prior written notice to Distributor, Supplier shall have the right, at its sole cost and expense, to audit
the books and records of Distributor to verify the amount of the Royalty Payments due to Supplier. In such event, Distributor shall
reasonably cooperate with Supplier and provide Supplier such information as is reasonably requested by Supplier. In the event any
such audit results in a determination of a shortfall or overage, as the case may be, in the correct amount of Royalty Payments
to be paid to Supplier, Distributor shall pay Supplier the amount of such shortfall, or Supplier shall pay to Distributor (or credit
against future payments due from Distributor) the amount of such overage.


 


4.          Pricing
to Distributor’s Customers. The range of daily rental, per foot, or per well amounts to be charged by Distributor to
its customers for lease or rental of DNR Units shall be determined by the size of the DNR tool, the conditions of the geographic
market where the tools are deployed, wear expectations and customer acceptance. Distributor may change the rental charges to its
customers from time to time. Distributor shall use commercially reasonable efforts to market the DNR Units at a reasonable price
to the customer taking into account prevailing market conditions and commercially appropriate discounts for volume or otherwise.
Distributor shall consult with Supplier regarding rates to be charged by Distributor to its customers, but Distributor shall make
the final determination on prices offered to Distributor’s customers, so long as such determination is reasonable.


 




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		5.	Service. The DNR Units shall be serviced as
follows:



 


		a.	Distributor will have the right to provide only basic
inspection and connection repair (“Level 1 Service”); and



 


		b.	Supplier will provide cutter replacement (“Level
2 Service”) and refurbishing (“Level 3 Service”).



 


For Level 2 and Level 3 Service by Supplier,
Distributor shall ship Units to Supplier F.O.B. Supplier’s Vernal, Utah location at Distributor’s sole cost, risk and
expense, and Supplier shall ship tools back to Distributor’s locations, F.O.B. Distributor’s shipper at Supplier’s
location, thereafter at Distributor’s sole cost, risk and expense. Supplier shall return ship to Distributor all Units shipped
for Service no later than seven (7) days after receipt of such Units by Supplier. Notwithstanding the foregoing to the contrary,
Supplier shall not be obligated to return to Distributor more than ten (10) DNR Units shipped for Level 2 Service nor more than
five (5) DNR Units shipped for Level 3 Service in any consecutive seven (7) day period. In the event Distributor requests Supplier
to perform Level 2 Service or Level 3 Service in a greater amount of Units than set forth in the previous sentence during any particular
seven (7) day period, Supplier shall utilize commercially reasonable efforts to provide such Level 2 Service or Level 3 Service
as requested. Supplier shall return ship to Distributor by long-haul freight, unless Distributor gives Supplier a written directive
to ship by a more expeditious means, which Supplier shall accommodate. Supplier shall quote Level 2 Service and 3 Service charges
to Distributor for each Unit after the Unit is evaluated by Supplier at its location, which charge shall be ten percent (10%) of
the price of the DNR Unit to Distributor, unless exceptional wear is noted and Distributor is notified in advance of exceptional
service requirements. For 2017 and thereafter, prices for servicing by Supplier shall be reviewed from time to time but not more
often than semi-annually nor less often than annually, on a calendar basis, and the Parties shall conduct good faith discussions
and agree on a price taking into account direct labor and material costs as well as reasonable industry standards. If a DNR Unit
needs servicing, Distributor shall have the option to decline the servicing of any such DNR Unit after receiving a quote from Supplier
and in such event, the Unit shall, within Distributor’s sole and absolute discretion, either be returned to Supplier by Distributor
or destroyed by Distributor, in which event, Distributor shall send written notice and reasonable evidence thereof to Supplier.


 




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		6.	Term.



 


a.           Subject
to the Parties’ rights to terminate provided herein, this Agreement shall remain in effect for a period of five (5) years
commencing on the Effective Date. Provided there is not then an Event of Default by Distributor, Distributor may elect to extend
the Agreement for consecutive 5-year periods by giving Supplier written notice thereof no later than the thirtieth (30th) day before
the end of the initial 5-year term or 5-year extension then in effect. The initial 5-year term and each such extension of this
Agreement shall be collectively referred to hereinafter as the “Term.”


 


b.           Notwithstanding
the foregoing to the contrary, this Agreement may be terminated before the end of the Term, but only as expressly provided for
herein.


 


		7.	Intellectual Property.



 


a.           Supplier
grants to Distributor the exclusive right to use in the Territory in relation to the promotion and marketing of the DNR Units Supplier’s
trademarks, details of which are in Exhibit “F” hereto, and any other trademarks used by Supplier in relation
to the DNR Units at any time during the Term (the “Trademarks”) and any patent, copyright, design right or other
Intellectual Property rights of Supplier as more fully described in Exhibit “F” (collectively, including Trademarks,
“Intellectual Property”), to the extent reasonably beneficial to Distributor in connection with the performance
of its duties or the exercise of its rights under this Agreement. Notwithstanding the foregoing, Distributor shall procure Supplier’s
prior written consent, such consent not to be unreasonably withheld, as to any proposed use by Distributor of the Intellectual
Property in any of its promotion and marketing materials. Distributor furthermore covenants not to use any of such Intellectual
Property, except as allowed by this Agreement.


 




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b.           Distributor
shall not:


 


		i.	Modify the DNR Units or their packaging; or



 


		ii.	Apply for or register as a trademark or as a domain
name in the Territory or elsewhere any name or mark which is the same as or similar to any of the Trademarks or any domain name
of the Supplier.



 


Notwithstanding anything to the contrary
contained herein, Distributor shall have the right to market and advertise Units as Distributor’s Units or products, without
reference to Supplier other than as required by law or as necessary to protect Supplier’s Intellectual Property.


 


c.           Except
as provided in this Agreement, Distributor shall have no rights in respect of any trade names or Trademarks used by Supplier in
relation to the DNR Units or of the goodwill associated with them or any other Intellectual Property of Supplier in respect of
the DNR Units.


 


d.           Distributor
shall promptly notify Supplier of any actual or threatened infringement in the Territory of any of the Trademarks or any other
Intellectual Property of Supplier in respect of the DNR Units within Distributor’s knowledge, and of any claim or threatened
claim by any third party that the importation of the DNR Units into the Territory or their lease or rental in the Territory infringes
the trademark or other intellectual property rights of any other Person. “Person” means any natural person or any trust,
partnership, venture, corporation, limited liability company or other entity. In the event of any such infringement or claim, Distributor
shall at the request and expense of Supplier take all steps reasonably necessary to assist Supplier in taking or resisting any
proceedings in relation to the infringement or claim.


 




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e.           Supplier
shall take all steps necessary to maintain the validity of the United States patents relating to the DNR (the “Patents”)
and all claims thereunder and its other Intellectual Property related to the DNR and to fully protect and preserve all Supplier
Intellectual Property relating to the DNR.


 


		8.	Warranties.



 


		a.	Each Party warrants to the other that:



 


		i.	It has the authority to enter into this Agreement;



 


		ii.	The signatory to this Agreement for and on behalf
of the warranting Party is authorized and fully empowered to execute this Agreement on the Party’s behalf;



 


		iii.	The entry into and performance of this Agreement by
the warranting Party will not breach any contractual or other obligation owed by the warranting Party to any other Person, any
rights of any other Person or any other legal provision;



 


		iv.	The entry into and performance of this Agreement by
the warranting Party require no governmental or other approval, or if any such approval is required, it has been obtained; and



 


		v.	The warranting Party will at all times during the
Term comply with the terms of, and maintain in force, any necessary governmental or other approvals, consents, notifications,
registrations or other legal requirements for the performance by that Party of its obligations under this Agreement.



 


		b.	Supplier warrants to Distributor the following:



 


		i.	Supplier has, and will maintain, the manufacturing
capacity to meet the supply needs of Distributor under this Agreement.



 




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		ii.	Supplier at the time of delivery will have good title
to the DNR Units to be supplied under this Agreement.



 


		iii.	The DNR Units provided by Supplier under this Agreement
will comply with all specifications in Exhibit “A” hereto or as otherwise provided herein.



 


		iv.	The DNR Units provided by Supplier under this Agreement
shall be free from defects in material and workmanship and comply with all health, safety and other legal requirements.



 


		v.	All servicing of Units by Supplier shall be performed
in a good and workmanlike manner.



 


		vi.	To Supplier’s knowledge, neither the acquisition,
importation, nor distribution by Distributor of the DNR Units acquired from Supplier under this Agreement will infringe the patent,
design, copyright, trademark or other intellectual property right of any other Person.



 


		vii.	The Patents have not been nor are they now involved
in any interference, reissue, reexamination, or opposition proceeding.



 


		viii.	All of the Patents are currently in compliance with
formal legal requirements (including payment of filing, examination and maintenance fees and proofs of working or use) and are
valid and enforceable.



 


		ix.	To Supplier’s knowledge, there is no patent
that potentially interferes with any of the Patents nor any application for a patent that would potentially interfere with any
of the Patents.



 


		x.	To Supplier’s knowledge, no Patent is infringed
or has been challenged or threatened in any way, and none of the products manufactured or sold, nor any process or know-how used,
by Supplier infringes or is alleged to infringe any patent or other proprietary right of any other Person.



 


		xi.	All products made, used or sold under the Patents
have been marked with the proper patent notice.



 


		xii.	To the best of Supplier’s knowledge, there are
no products that compete with the DNR that Supplier is aware of or that Supplier has reason to be aware of except those identified
in Exhibit “G” hereto.



 


		xiii.	Supplier has previously disclosed to Distributor its
Run Rate history utilizing DNR Units from the period of June 2014 to April 2016.



 




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		9.	Support and Training.



 


a.           In
order to assist Distributor with the development of its promotion and marketing materials, Supplier shall initially provide to
Distributor (for a reasonable period of time as determined in Supplier’s sole discretion), free of charge, such data and
information for Distributor’s brochures, catalogs, manuals and current promotional and advertising information concerning
the DNR Units. Supplier will promptly provide to Distributor free of charge all subsequent information, data, and operational knowledge
for the DNR that becomes available.


 


b.           For
a period of sixty (60) days following the Effective Date, Supplier shall provide Distributor with reasonable technical support
for the DNR Units at no charge. Following expiration of the sixty (60) day period, Supplier shall have personnel available to answer
technical inquiries concerning the DNR Units, but if Distributor requests that Supplier’s technical support personnel travel,
Distributor shall pay Supplier a day rate plus reasonable out of pocket expenses incurred by Supplier for such services.


 


c.           Distributor
shall provide all field sales, city sales, local distribution and handling facilities in the Territory. On the Effective Date,
Supplier shall provide Distributor with a list of Supplier employees that Supplier deems eligible for hire by Distributor within
Distributor’s sole and absolute discretion as sales engineers, city sales and field sales representatives, and any other
employee that Supplier designates or recommends. Supplier may submit additional lists of Supplier employees which Supplier deems
appropriate for hire by Distributor within Distributor’s sole and absolute discretion. Any hiring of Supplier employees included
on any such list or lists shall not be considered a violation of the provisions of Paragraph 14.d of this Agreement.


 




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		10.	Default.



 


a.           Each
of the following shall be considered an “Event of Default” by Supplier:


 


		i.	The breach by Supplier of any material provision of
this Agreement, which is not remedied by Supplier within thirty (30) days after Distributor gives Supplier notice of the breach
or failure; and



 


		ii.	The insolvency or bankruptcy of Supplier.



 


b.           Each
of the following shall be considered an “Event of Default” by Distributor:


 


		i.	The breach by Distributor of any material provision
of this Agreement, which is not remedied by Distributor within thirty (30) days after Supplier gives Distributor notice of the
breach or failure; and



 


		ii.	The insolvency or bankruptcy of Distributor.



 


c.           Notwithstanding
the foregoing provisions of this Section 10, if the addressee of a notice of breach or failure is not reasonably able to remedy
any breach or failure which is identified in such notice within such thirty (30) days through no fault of the addressee, the breach
or failure shall not be considered an Event of Default unless the addressee shall have failed to remedy such breach or failure
within a reasonable time for same.


 


d.           In
case of an Event of Default by a Party (the “Defaulting Party”), the other Party, in addition to any and all
other rights and remedies such other Party may have, either at law or in equity, against the Defaulting Party, may terminate this
Agreement by giving written notice to the Defaulting Party, indicating the notifying Party’s intent to terminate, stating
the effective date of the termination (which must be at least thirty (30) days after the giving of such notice) and identifying
the grounds for termination.


 




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		11.	Effect of Termination.



 


a.           The
provisions of this Section 11 shall take effect upon the earlier of the end of the Term or other termination of this Agreement
as provided for herein.


 


b.           Supplier
shall have the option to repurchase from Distributor, subject to all existing customer obligations, all, but not less than all,
of the DNR Units then owned by Distributor at their current fair market value (the “FMV”), subject to the following
provisions:


 


		i.	Transportation shall be at Supplier’s sole cost,
risk and expense; and



 


		ii.	Distributor may rent or lease Units to the extent
it has accepted orders from customers prior to the date of termination, or in respect of which the Supplier does not exercise
its option to repurchase.



 


Supplier may exercise its option to repurchase
only by giving Distributor written notice of such exercise no later than thirty (30) days after termination. If the Parties cannot
agree on the FMV of the DNR Units to be repurchased within thirty (30) days, they shall designate an appraiser (the “Appraiser”)
to determine the FMV. Such Appraiser shall be designated within thirty (30) days following the expiration of the initial thirty
(30) day period. If the Parties cannot agree on an Appraiser within the second thirty (30) day period, the Parties shall contact
the American Arbitration Association which shall, after meeting with the Parties, and pursuant to reasonable judgment and its rules
of Arbitration, appoint the Appraiser. The Appraiser selected pursuant to the provisions hereof shall be a qualified person with
prior experience in the valuation of energy services equipment and that is not an affiliate of either Party. No later than ten
(10) days after the determination of the Appraiser, the Distributor shall submit its proposed FMV (the “Distributor’s
Value”) and the Supplier shall submit its proposed FMV (the “Supplier’s Value”). The Appraiser
shall submit its determination of the FMV to the Parties within thirty (30) days after the deadline for their submissions; provided,
however, that the Appraiser must select either the Distributor’s Value or the Supplier’s Value as the final FMV.
The determination of the FMV in accordance with the foregoing procedure shall be final and binding upon the Parties. If Supplier
does not exercise the option provided for in this paragraph, Distributor shall be entitled to continue the lease or rental of the
DNR Units which it then owns, or sell the DNR Units in connection with an assignment of this Agreement as allowed hereby.


 




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c.           Outstanding
unpaid invoices rendered by Supplier and invoices in respect of goods ordered prior to termination, but for which an invoice has
not been submitted, shall remain payable as provided for herein.


 


d.           Distributor
shall cease to promote, market or advertise Units or to make any use of the Trademarks or any other Intellectual Property of Supplier
except for the purpose of selling, renting or leasing any DNR Units then in Distributor’s inventory.


 


e.           Termination
shall not affect either Party’s accrued rights, remedies or liabilities under this Agreement or the coming into effect or
continuation of any provision of this Agreement that is expressly or by implication intended to come into effect or continue after
termination, including but not limited to Sections 13, 14 (for the time set forth specifically therein), 19, 20 and 22, such provisions
surviving the termination of this Agreement for a period of five (5) years. If Supplier elects to purchase the DNR Units as provided
for hereinabove, the provisions of Section 11.d. shall apply. If Supplier does not elect to repurchase the DNR Units, the provisions
hereof facilitating the lease, rental or sale of such Units, including but not limited to provisions pertaining to servicing and
intellectual property, shall continue in force and effect with respect to such Units.


 




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12.         Force
Majeure.


 


a.           “Force
Majeure,” with respect to a Party, means war, fire, earthquake, flood, storm, industrial strike or other impediment (i) which
is beyond the Party’s control and (ii) which the Party could not reasonably be expected to have avoided or overcome.


 


b.           Subject
to the Party’s compliance with the notice requirements of paragraph c. immediately below, other than each Party’s payment
obligations hereunder, a Party shall not be in breach of this Agreement or otherwise liable to the other Party by reason of any
delay in performance or any non-performance of any of its obligations under this Agreement to the extent that the delay or non-performance
is due to any Force Majeure, and the time for performance of such obligation shall be extended by the duration of the event of
Force Majeure.


 


c.           If
an event of Force Majeure occurs which has affected or may affect the performance of a Party’s obligation under this Agreement,
such Party shall notify the other Party within a reasonable time as to the nature and extent of the circumstances in question and
their effect on the notifying party’s ability to perform.


 


d.           If
the performance by either Party of any of its material obligations under this Agreement is prevented or delayed by Force Majeure
for a continuous period in excess of four (4) months, the other Party may terminate this Agreement by giving written notice to
the Party affected by the Force Majeure, such termination to be effective on a date stated in such notice no earlier that the (30th)
days after the date such notice is given.


 




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13.         Indemnity;
No Exemplary Damages.


 


a.           Distributor
hereby releases Supplier and its Affiliates, owners, officers, directors, managers, employees, agents, contractors (other than
Distributor), subcontractors and attorneys (collectively, the “Supplier Group”) and shall indemnify the Supplier
Group, hold the Supplier Group harmless, and defend the Supplier Group against any claim, injury, action, loss, liability, penalty,
charge or damage, and all costs and expenses of all actions, suits, proceedings, demands, assessments, claims and judgments (including
without limitation reasonable attorney, accountant, engineer, consulting and expert fees), whether direct, pending, threatened,
contingent or otherwise, suffered or incurred by any of the Supplier Group or any other party, including the “Distributor
Group,” as that term is hereinafter defined, arising out of, relating to, or resulting in whole or in part from, (i) the
breach of any warranty herein by Distributor; (ii) the failure by Distributor to perform, either in whole or in part, any of its
obligations hereunder, or (iii) any breach of duty by any of the Distributor Group, regardless of whether they arise either
in


whole or in part out of the indemnitee's own
negligence.


 


b.           Supplier
hereby releases Distributor and its Affiliates, owners, officers, directors, managers, employees, agents, contractors (other
than Supplier), subcontractors and attorneys (collectively, the “Distributor Group”) and shall indemnify
the Distributor Group, hold the Distributor Group harmless, and defend the Distributor Group, against any claim, injury,
action, loss, liability, penalty, charge or damage, and all costs and expenses of all actions, suits, proceedings, demands,
assessments, claims and judgments (including without limitation reasonable attorney, accountant, engineer, consulting and
expert fees), whether direct, pending, threatened, contingent or otherwise, suffered or incurred by any of the Distributor
Group or any other party, including the Supplier Group, arising out of, relating to, or resulting in whole or in part from,
(i) the breach of any warranty herein by Supplier; (ii) the failure by Supplier to perform, either in whole or in part, any
of its obligations hereunder, or (iii) any breach of duty by any of the Supplier Group, regardless of whether they
arise either in whole or in part out of the indemnitee's own negligence.


 




    	 	18	 



     


    

 


c.           “Affiliates”
means, with respect to any legal entity, any other entity that is a direct or indirect parent or subsidiary of such legal entity
or which directly or indirectly (i) owns or controls such legal entity, (ii) is owned or controlled by such legal entity or (iii)
is under common ownership or control of such legal entity. For purposes of this definition, “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the management or policies of such entity, whether through
the ownership of fifty percent (50%) or more of the voting securities, by contract or otherwise.


 


d.           Neither
Party shall be liable for exemplary damages.


 


14.         Non-Disclosure,
Non-Compete, and Non-Solicitation.


 


a.           Distributor
understands and agrees that the DNR Units and accompanying technology constitute highly sensitive, confidential, trade-secret technology
and information of a proprietary nature, owned and claimed exclusively by Supplier, and that the disclosure or dissemination of
such information reasonably designated in writing by Supplier to be confidential (“Confidential Information”)
to any Person other than the Distributor Group would result in irreparable injury, loss, and damage to Supplier. Distributor will
keep inviolate and secret and will not directly, indirectly, or otherwise use, disseminate, disclose, publish or make known in
any other manner to any Person any Confidential Information, without the written consent of Supplier, except as is consistent with
the exercise of its rights as otherwise provided for in this Agreement. Should any Person seek to legally compel disclosure of
Confidential Information by Distributor, or by anyone to whom Distributor has transmitted any Confidential Information, by oral
question, interrogatory, request for information or documents, subpoena, civil investigative demand or otherwise, Distributor shall
provide Supplier with prompt written notice sufficient to enable a reasonable attempt by Supplier to obtain a protective order
or other appropriate remedy, including participation in any proceeding to the extent necessary to protect the Confidential Information,
which at Supplier’s request Distributor will use its best efforts to permit. In any event, Distributor shall furnish only
that portion of the Confidential Information which is legally required and will use its best efforts to obtain reliable assurance
that confidential treatment will be accorded the Confidential Information.


 




    	 	19	 



     


    

 


		b.	Other than as set forth below, Supplier shall not:



 


		i.	engage any Person other than Distributor in the sale,
lease, rental or service of DNR Units in the Territory; or



 


		ii.	Supply (either by itself or through an agent) any
DNR Units to any Person in the Territory other than Distributor;



 


		iii.	Supply any DNR Units to any Person other than Distributor
within the Territory or outside the Territory if Supplier knows, or has reason to believe, that such Units are intended for sale,
lease, rental or other distribution in the Territory; or



 


		iv.	Develop or market any product which competes with,
or makes obsolete, the DNR tool without offering these products to Distributor as provided for herein.



 


		c.	Distributor shall not:



 


		i.	Seek customers for, establish a warehouse or distribution
outlet for, or actively market, the sale, lease, rental or other distribution of any DNR Units outside the Territory;



 


		ii.	Sell, lease, rent or otherwise distribute to any Person
in the Territory (either by itself or through an agent) any products that compete with the DNR Units, except Other Products as
provided for herein; or



 


		iii.	Sell, lease, rent or otherwise distribute (either
by itself or through an agent) any DNR Units to any Person outside the Territory or to any Person in the Territory if Distributor
knows or has reason to believe that the Person intends to sell, lease, rent or otherwise distribute the Units outside the Territory.



 




    	 	20	 



     


    

 


The Parties understand, acknowledge
and agree that (x) Supplier has and will continue to have a contractual obligation with QEP Resources, Inc. (“QEP”),
which may include the sale by Supplier to QEP of DNR Units for use by QEP as limited below in this subparagraph c.; and (y) the
sale by Supplier of DNR Units will not constitute a breach of this Agreement; provided, however that any future sales by Supplier
to QEP of DNR Units are required to be solely for the use by QEP on its own drilling rigs or drilling rigs for which it is the
record operator.


 


d.           Subject
to the provisions of Paragraph 9.c of this Agreement, each Party shall not, and shall cause its respective Affiliates not to, directly
or indirectly, hire or cause to be hired, recruit, solicit for employment or otherwise contract for the services of an employee
of the other Party; provided, however, that general solicitations, including solicitations by search firms, recruiters or
other placement specialists (in each case that are not specifically directed at the employees of the Parties) shall not constitute
solicitations for employment in violation hereof, so long as the Party does not hire any employee of the other Party so solicited;
provided, further, that the foregoing restrictions shall not apply with respect to any such employee that is no longer,
and has not been within the prior six (6) months, an employee of the other Party at the time of hire, recruitment or solicitation.


 


e.           The
provisions of this Section 14 shall be binding not only on the Parties, but also on their Affiliates and the owners, officers,
directors, managers, employees, agents, contractors, subcontractors of the Parties and their Affiliates.


 


f.            The
obligations imposed by this Section 14 shall survive the termination of this Agreement for two (2) years; provided, Section 14(a)
shall survive the termination of this Agreement for five (5) years.


 


15.         Notice.
Any notice or payment provided for in this Agreement shall be deemed given only when actually delivered by courier receipted delivery
at the recipient's addresses provided in the first Paragraph of this Agreement. Either Party may change its address for notice
or payment by giving notice of such change in accordance with this Agreement, which change shall become effective thirty (30) days
after such notice is given.


 




    	 	21	 



     


    

 


16.         No
Partnership or Agency.         Nothing in this Agreement shall (i) be deemed
to constitute a partnership between the Parties, (ii) constitute either Party the agent of the other for any purpose, or (iii)
entitle either Party to commit or bind the other in any manner.


 


17.         Non-Assignability;
Binding Effect. Without the consent of the non-assigning Party, which consent may be withheld by the non-assigning Party in
its sole and absolute discretion, the rights and obligations under this Agreement may not be assigned or otherwise transferred.
Notwithstanding the foregoing, the rights and obligations under this Agreement may be assigned or otherwise transferred in connection
with: (i) the sale of all or substantially all of the assets of the assignor, (ii) as collateral for financing, or (iii) to an
Affiliate. This Agreement shall inure to the benefit of the Parties and, except to the extent assignment is prohibited, their successors
and assigns.


 


18.         Entire
Agreement; Modification. This Agreement and the Exhibits attached hereto constitute the entire and fully integrated agreement
between the Parties with respect to the subject matter hereof and supersedes and replaces all prior agreements regarding such subject
matter. This Agreement may not be modified or amended except by a writing signed by the Party against whom such modification or
amendment is to be enforced.


 


19.         Choice
of Law and Venue. This Agreement shall be governed and construed in accordance with the laws of the State of Texas, without
regard to any conflicts-of-law rule or principle that would require application of the laws of another jurisdiction. Venue for
any dispute or controversy under this agreement shall be mandatory in Harris County, Texas.


 


20.         Attorneys’
Fees. Should any litigation be commenced between the Parties arising out of this Agreement, the transactions contemplated hereby,
or the rights and duties in relation thereto, the Party prevailing in such litigation shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum as and for its reasonable attorneys’ fees in such litigation, which sum shall
be determined by the court in such litigation.


 




    	 	22	 



     


    

 


21.         Caption
Headings.         All captions set forth in this Agreement are inserted for convenience
of reference only and shall not be deemed a part of this Agreement, nor shall they control or in any way affect the construction,
interpretation, or enforcement of this Agreement or any provision hereof or be deemed indicative of the intent of either Party.


 


22.         Severability.
Any provision of this Agreement prohibited or rendered unenforceable by any applicable law or court of 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 such jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.


 


23.         Ethics;
Conflicts of Interest.         Distributor hereby agrees not to engage in any
conduct, which would constitute a violation of any Federal law of the United States or any law applicable in the Territory, including,
but not limited to, the Anti-Bribery and Books & Records Provision of The Foreign Corrupt Practices Act 15 U.S.C. §§
78m, 78dd, and 78ff. Distributor further agrees that it will not, in the course of fulfilling its duties under this Agreement,
engage in any conduct which would violate or contradict any state or local law, including, but not limited to, any law applicable
to the Territory.


 


24.         Exhibits.
Attached hereto and incorporated herein by reference are the following Exhibits:


 


Exhibit “A” – DNR Description


Exhibit
“B” – Definition of Territory


Exhibit “C” – Purchase of DNR Units


Exhibit “D” –
Transfer/Sale Pricing


 




    	 	23	 



     


    

 


Exhibit “E” – Run Rate and Rental
Revenue Percentage


Exhibit “F” – Trademarks


Exhibit “G” – Owners and Competing
Products


 


25.         Signatures.
This Agreement may be executed in multiple counterparts, which when taken together shall constitute a single agreement. Facsimile,
PDF, .jpeg and other electronic representations of signatures shall have the dignity, force and effect of an original. This Agreement
shall not be binding on any Party signing same unless and until all Parties named herein have signed same.


 


26.         RELIANCE
DISCLAIMER. EACH PARTY CONFIRMS AND AGREES THAT, IN DECIDING WHETHER TO SIGN THIS AGREEMENT, IT HAS NOT RELIED ON ANY STATEMENT
OR REPRESENTATION BY THE OTHER PARTY OR ANYONE ACTING ON BEHALF OF SUCH OTHER PARTY RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT
THAT IS NOT IN THIS AGREEMENT.


 


27.         Distributor
Commissions. In the event Distributor refers a customer or potential customer to Supplier and Supplier is able to sell or rent
DNR Units to such customer outside the Territory, then in such event, Supplier shall pay Distributor 8% of the gross rental revenues
due to Supplier from such customer (the “Supplier Rental Revenue Percentage”) excluding revenues attributable
to service and repair fees from Supplier and any standby charges (the “Supplier Royalty Payments”). Supplier
shall provide Distributor with written evidence as to the determination of the amount of Supplier Royalty Payments and such other
evidence as Distributor reasonably requests. The Parties agree that the procedures described in Section 3(c), 3(d), and 3(e) with
respect to credits from paid invoices and refunds thereof shall apply to the Supplier Royalty Payments.


 




    	 	24	 



     


    

 


28.         Replacement
of Original Agreement. This Agreement shall replace and supersede the Original Agreement in its entirety effective as of the
Effective Date, the Original Agreement continuing to control the relationship between the Parties with respect to the subject matter
hereof prior to the Effective Date, except with respect to any conflict between the terms thereof and the terms hereof with respect
to the period of time commencing with the Effective Date.


 


EXECUTED effective as of the Effective Date.


 


	 	SUPPLIER:
	 	 
	 	HARD ROCK SOLUTIONS, LLC
	 	 
	 	 
	 	Troy Meier, President and CEO
	 	 
	 	DISTRIBUTOR:
	 	 
	 	DRILLING TOOLS INTERNATIONAL, INC.
	 	 
	 	 
	 	Wayne Prejean, President/CEO


 




    	 	25	 



     


    

 


Exhibit “A”


TO


DISTRIBUTION AGREEMENT


 


Description of DNR


 





 




    	 	26	 



     


    

 





 




    	 	27	 



     


    

 


EXHIBIT “B”


TO


DISTRIBUTION AGREEMENT


 


Definition of Territory


 


The “Territory”
is defined as Canada -Land and Offshore, United States- Land and Offshore and all Offshore operations in North America (including,
but not limited to the North Pacific, North Atlantic, Gulf of Mexico and the Caribbean).


 




    	 	28	 



     


    

 


EXHIBIT “C”


TO


DISTRIBUTION AGREEMENT


 


Required Purchase of DNR Units and Requirement
for Exclusivity


 


		1.	Required Purchase of DNR Units



 


Distributor shall be obligated
to purchase the Minimum Amount of DNR Units provided for in this Section 1, but shall otherwise have no obligation to purchase
DNR Units except those ordered by and delivered to Distributor. The minimum amount to be purchased by Distributor for 2016 shall
be an aggregate of $1,500,000 (the “Minimum Amount”), as follows:


 


First Order.   Within seven (7) days of execution
of the Agreement, at least one-third (1/3) of the Minimum Amount of DNR Units.


 


Second Order.   On
or before July 31, 2016, at least one-third (1/3) of the Minimum Amount of DNR Units.


 


Third Order.    On or before September 30, 2016,
at least one-third (1/3) of the Minimum Amount of DNR Units.


 


		2.	Requirement for Exclusivity



 


For Distributor to maintain the
benefits of exclusivity, the “Utilization Percentage,” as that term is hereinafter defined, must be equal to or greater
than:


 


10.0% of the Horizontal Rig Count in the Territory
on June 30, 2017


12.5% of the Horizontal Rig Count in the Territory on the last day of 2017


17.5% of the Horizontal Rig Count in
the Territory on the last day of 2018


22.5% of the Horizontal Rig Count in the Territory on the last day of 2019


25.0% of the Horizontal Rig Count on the last day of
2020 and each year thereafter


 


(each date identified in the above
list being hereinafter referred to as a “Determination Date”). The “Horizontal Rig Count” for the Territory
on a Determination Date is defined as the average of the number of drilling rigs performing horizontal drilling operations (“Horizontal
Rigs”) in the Territory reflected in the weekly reports for each week ending during the month ending on such Determination
Date as published by Baker Hughes or, if such Report is no longer available, the Rig Locations Report (the “Reports”).
“Utilization Percentage” with respect to a Determination Date means the percentage equal to the number of Horizontal
Rigs in the Territory as reflected by the Reports using one or more DNR Units divided by the Horizontal Rig Count for such Determination
Date. For example, if the Horizontal Rig Count, as defined above, for the Territory on June 30, 2017 is 500, Distributor will maintain
exclusivity through the last day of 2017 if one or more DNR Units were used on at least 50 Horizontal Rigs in the Territory.


 




    	 	29	 



     


    

 


Notwithstanding the foregoing provisions
of this Section 2 to the contrary, if Distributor fails on a particular Determination Date to meet any Utilization Percentage required
above in this Section 2 to maintain exclusivity due in whole or substantially in part to any one or more of the following:


 


		a.	the existence and continuation of an Event of Default
by Supplier;



 


		b.	Supplier’s failure to provide the number of
DNR Units provided for in this Agreement within the time provided for in this Agreement; or



 


		c.	Force Majeure,



 


Distributor shall not lose exclusivity
as a result of such failure.


 




    	 	30	 



     


    

 


EXHIBIT “D”


TO


DISTRIBUTION AGREEMENT


 


As contained in the Original Agreement.


 




    	 	31	 



     


    

 


EXHIBIT “E”


TO


DISTRIBUTION AGREEMENT


 


As contained in the Original Agreement.


 




    	 	32	 



     


    

 


EXHIBIT “F”


TO


DISTRIBUTION AGREEMENT


 


Trademarks


 


Registered Trademarks:


 


	Ref No.	 	Mark	 	Registration	 	Goods/Services

Class	 	Appln No

Filing Date

&

Country
	 	 	 	 	 	 	 	 	 
	
        3039.003.USTM

         

        United States
	 	Drill-n-Ream	 	
        U.S.
        Reg.  No. 4,207,933 Sept 11, 2012 

         

        Supplemental Register
	 	International Class 7	 	85/386,210 08/01/2011 US


 


Registered Patents:


 


	Ref No./Patent No.	 	Country
	 	 	 
	3039.002.US	 	United States
	 	 	 
	3039.002.PCT	 	International
	 	 	 
	3039.002.AU	 	Australia
	 	 	 
	3039.002.CA	 	Canada
	 	 	 
	3039.002.CN	 	China
	 	 	 
	339.002.EP	 	Europe
	 	 	 
	3039.002.MX	 	Mexico
	 	 	 
	3039.003.US	 	United States
	 	 	 
	3039.003.PCT	 	International
	 	 	 
	3039.003.AR	 	Argentina
	 	 	 
	3039.006.US	 	United States
	 	 	 
	3039.006.USCN	 	United States
	 	 	 
	8,752,649	 	United States
	 	 	 
	8,813,877	 	United States
	 	 	 
	8,851,205	 	United States
	 	 	 
	9,163,460	 	United States
	 	 	 
	10458AU1	 	Australia


 




    	 	33	 



     


    

 


EXHIBIT “G”


TO


DISTRIBUTION AGREEMENT


 


Owners and Competing Products


 


	Company	 	Product
	 	 	 
	Baker Hughes	 	LedgeX
	National Oilwell Varco	 	Dogleg Reamer
	Stabildrill	 	Ghost Reamer


 




    	 	34