EXHIBIT
NO.: 10.12


To
Form S-1 Registration Statement


 


EXHIBIT
H


 


SECURITY
AND PLEDGE AGREEMENT


 


THIS SECURITY AGREEMENT-PLEDGE
(this “Agreement”) is executed as of ________ ___, 2014, by Hard Rock Solutions, LLC, a Utah limited
liability company (“Pledgor”) in favor of Hard Rock Solutions, Inc., a Texas corporation (“Secured
Party”).


 


RECITALS:


 


WHEREAS, Pledgor, Secured
Party, James D. Isenhour (“Stockholder”) and Superior Drilling Products, LLC, a Utah limited liability
company (“Buyer”) entered into a Membership Interest Purchase Agreement on January 28, 2014 (“Purchase
Agreement”) to evidence, among other things, the purchase and sale of the Interests (as defined below). All capitalized
terms not otherwise defined herein shall have the same meaning ascribed to such term in the Purchase Agreement;


 


WHEREAS, Stockholder
owns one hundred percent (100%) of the issued and outstanding common stock, no par value, of Secured Party;


 


WHEREAS, Secured Party
is the sole member of Pledgor and owner of all of the issued and outstanding membership interests of Pledgor (“Interests”);


 


WHEREAS, at Closing,
Buyer will purchase all of the Interests from Secured Party, and in connection therewith, Buyer and Pledgor have executed a promissory
note in the principal amount of Twelve Million Five Hundred Thousand and No/00 Dollars ($12,500,000.00) (the “Note”)
for the benefit of Secured Party (the “Purchase”);


 


WHEREAS, pursuant to
the Purchase, Buyer will become the sole member of Pledgor and owner of all of the Interests;


 


WHEREAS, upon or immediately
after Closing, Pledgor will acquire all of the rights to the Collateral (hereinafter defined);


 


WHEREAS, after consummation
of the foregoing, Buyer, as new owner of Pledgor, will agree to the grant by Pledgor to Secured Party of a security interest in
the Collateral (hereinafter defined) to secure the payment of the Note and satisfaction of the other Secured Obligations.


 


NOW, THEREFORE, for
good and valuable consideration, the sufficiency of which is hereby acknowledged and agreed, the parties hereto agree as follows:


 


Article
I

definitions


 


Section 1.1           Defined
Terms. As used in this Agreement, the following terms shall have the following meanings.


 


(a)          “Collateral”
shall have the meaning ascribed such term in Section 2.1.


 




    	 



    	 



    

  


(b)          “Event
of Default” shall have the meaning ascribed such term in Section 5.1 hereof.


 


(c)          “Secured
Obligations” shall have the meaning ascribed such term in Section 3.1.


 


(d)          “UCC”
means the uniform commercial code as adopted in Colorado.


 


Article
II

GrantS of Security InterestS


 


Section 2.1           Pledge
by Pledgor. To secure the full and prompt payment and performance of the Secured Obligations, Pledgor hereby pledges and assigns
to Secured Party, and grants to Secured Party, a security interest in, and a lien upon, all of Pledgor’s right, title and
interest in and to (i) the trademarks, trademark registrations, trademark applications, and any and all goodwill associated
therewith (the “Marks”) set forth on Schedule A attached hereto, (ii) the patents and
patent applications (the “Patents”) set forth on Schedule A attached hereto, in each case together
with (iii) all proceeds of the Marks and Patents, (iv) all of the goodwill of the businesses with which the Marks and
Patents are associated, and (v) all causes of action, past, present and future, for infringement, misappropriation, or dilution
of any of the Marks and/or Patents or unfair competition regarding the same (collectively, the “Collateral”).


 


Section 2.2           Perfection
of Security Interests. Pledgor hereby agrees to sign any documents reasonably necessary to evidence, perfect or realize upon
the security interest and obligations created by this Agreement including but not limited to a UCC-1 financing statement.


 


Article
III

SECURED OBLIGATIONS


 


Section 3.1           Indebtedness
and Obligations Secured. The pledge, security interest and assignment of rights contained herein is granted to secure the payment
and performance of the following (collectively, the “Secured Obligations”):


 


(a)          any
and all indebtedness of the Buyer and Pledgor to Secured Party evidenced by the Note (the “Indebtedness”);


 


(b)          all
costs and expenses reasonably incurred by Secured Party to obtain, preserve and perfect and enforce the security interests granted
hereby and all other liens and security interests securing payment of the Indebtedness, to collect the Indebtedness and to maintain,
preserve and collect the Collateral, as applicable, including, but not limited to, taxes, assessments, insurance premiums, reasonable
attorneys’ fees and legal expenses, advertising costs, brokerage fees and expenses of sale; and


 


(c)          all
renewals, extensions and modifications of the Indebtedness.


 




    	 



    	 



    

 


 


Article
IV

REPRESENTATIONS AND WARRANTIES


 


Section 4.1           Pledgor’s
Representations and Warranties. Pledgor represents and warrants to Secured Party that:


 


(a)          except
for the security interests granted by this Agreement, Pledgor is the record and beneficial owner of the Collateral free and clear
of any lien or any other right, title or interest of any other person.


 


(b)          the
liens granted pursuant to this Agreement constitute perfected liens on the Collateral in favor of Secured Party, and such liens
are prior to all other liens on the Collateral created by Pledgor and in existence on the date hereof and which are enforceable
as such against all creditors of and purchasers from Pledgor and against any owner or purchaser of any of the Collateral where
any of the Collateral is located and any present or future creditor obtaining a lien thereon.


 


(c)          no
consent or authorization of, filing with, or other act by or in respect of, any arbitrator or any governmental body, agency or
official or any other person (including, without limitation, any creditor of Pledgor), is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement.


 


(d)          this
Agreement constitutes a legal, valid and binding obligation of Pledgor enforceable against it in accordance with the terms hereof,
except as such enforceability may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally.


 


(e)          the
execution, delivery and performance of this Agreement will not violate any provision of any applicable law, rule, regulation or
contractual obligations of Pledgor and will not result in the creation or imposition of any lien on any of the properties or revenues
of Pledgor pursuant to any applicable law, rule, regulation or contractual obligations of Pledgor, except as contemplated hereby.


 


Article
V

Events of Default


 


Section 5.1           Events
of Default. The occurrence or happening, at any time and from time to time, of any one or more of the following, after any
applicable notice or right to cure period has passed, shall immediately constitute an “Event of Default”
under this Agreement:


 


(a)          Buyer
shall fail to pay the obligations evidenced by the Note, or any part thereof, when it becomes due, whether at the stated maturity,
by acceleration or otherwise; or


 


(b)          Pledgor
shall fail to observe or perform any of the Secured Obligations or covenants contained or referred to in this Agreement.


 


Section 5.2           Remedies.
If any Event of Default shall occur and be continuing, then Secured Party has the right, in any order, in Secured Party’s
sole discretion:


 




    	 



    	 



    

 


 (a)          to
declare the obligations evidenced by the Note immediately due and payable and may proceed to enforce payment of the same and,
in addition to any other rights and remedies provided for under this Agreement or under the Note, or otherwise available at law
or in equity, to exercise with respect to any of the Collateral all the rights and remedies of a secured party under the UCC;


 


(b)          with
respect to the Marks and Patents, subject to any restrictions thereto, to elect to sell, assign, deliver, or otherwise dispose
of all or any part of the Marks and Patents at any public or private sale, or to accept and take title to the Marks and Patents
in satisfaction of the Secured Obligations.


 


All net cash proceeds received by Secured
Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied
by Secured Party against the Secured Obligations in such manner as determined by Secured Party in its sole discretion. Any surplus
of such cash or cash proceeds held by Secured Party and remaining after payment in full of all the Note and performance of all
the Secured Obligations shall be paid over to Pledgor or to whomsoever may be lawfully entitled to receive such surplus.


 


Article
VI

COVENANTS


 


Section 6.1           Secured
Party’s Right to Cure. If Pledgor fails to perform any agreement or undertaking contained herein, after ten (10) days
written notice and a failure to cure, Secured Party may perform, or cause the performance of, such agreement or undertaking, and
the expenses of Secured Party or its designees incurred in connection therewith, including attorneys’ fees shall be paid
by Pledgor.


 


Section 6.2           Further
Assurances. At any time from time to time, at the request of Secured Party, Pledgor shall (a) execute, acknowledge, deliver,
record and/or file (or cause to be executed, acknowledged, delivered, recorded and/or filed) such further documents and instruments
and perform such further acts and provide such further assurances as may be reasonably necessary, desirable, or proper, in Secured
Party’s good faith opinion, (i) to perfect its security interest in the Collateral and carry out the provisions and
purposes of this Agreement including but not limited to the execution and filing of such financing statements as Secured Party
may require, (ii) to confirm the rights created under this Agreement, (iii) to protect the validity, priority and enforceability
of this Agreement and the liens and security interests created herein, and (iv) subject any property of Pledgor intended by the
terms of this Agreement to be encumbered; and (b) pay all reasonable costs in connection with any of the foregoing.


 


Section 6.3           Encumbrances.
Pledgor shall not create, permit, or suffer to exist, and shall defend the Collateral against, and will take such action as is
necessary to remove, any lien or encumbrance on the Collateral except the currently existing security interest of Secured Party
hereunder, and shall defend Pledgor’s and Secured Party’s rights, title and interest in and to the Collateral against
the claims and demands of all persons. Pledgor shall promptly notify Secured Party of (i) any lien, security interest, encumbrance,
or claim made or threatened against the Collateral, and (ii) any material change in the Collateral.


 




    	 



    	 



    

 


 


Section 6.4           Rights
to Collateral. Pledgor shall not sell or otherwise dispose of the Collateral or any part thereof without the prior written
consent of Secured Party nor take any action to impair the rights of Secured Party in the Collateral.


 


Article
VII


Miscellaneous


 


Section 7.1           Governing
Law; Submission to Jurisdiction. This Agreement and the legal relations between the parties hereto shall be governed by and
construed in accordance with the laws of the state of Colorado, excluding any choice of law rules which may direct the application
of the laws of another jurisdiction. Pledgor hereby submits to the jurisdiction of any Colorado state or federal court sitting
in Denver County, Colorado.


 


Section 7.2           Successors
and Assigns. The terms and provisions hereof shall be binding upon and inure to the benefit of Pledgor and Secured Party and
their respective successors and assigns.


 


Section 7.3           Notices.
All notices or communications permitted or required under this Agreement shall be given as set forth in the Purchase Agreement.


 


Section 7.4           Entire
Agreement; Amendment. This Agreement, together with the Note and the Purchase Agreement, embodies the entire agreement and
understanding of the parties with respect to the subject matter contained herein and supersedes all prior agreements and understandings
between the parties with respect to such subject matter. This Agreement may not be amended except by a written agreement executed
by all of the parties hereto.


 


Section 7.5           Severability.
If any provision of this Agreement would, under applicable law, be invalid or unenforceable in any respect, such provision shall
(to the extent permitted by applicable law) be construed by modifying or limiting it so as to be valid and enforceable to the maximum
extent compatible with, and possible under, applicable law. The provisions hereof are severable, and in the event any provision
hereof should be held invalid or unenforceable in any respect, it shall not invalidate, render unenforceable or otherwise affect
any other provision of this Agreement.


 


Section 7.6           Headings.
 Headings in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.


 


Section 7.7           Drafting.
Each of the parties hereto acknowledge that each party was actively involved in the negotiation and drafting of this Agreement
and that no law or rule of construction shall be raised or used in which the provisions of this Agreement shall be construed in
favor or against any party hereto because one is deemed to be the author thereof.


 


[Signature page
follows]


 







    	 



    	 



    




 


The parties have executed
this Agreement to be effective as of the date and year first above written.







 


	 	PLEDGOR:
	 	 
	 	Hard Rock Solutions, LLC
	 	a Utah limited liability company
	 	 
	 	By Its Manager:
	 	 	Superior Drilling Products, LLC
	 	 	a Utah limited liability company
	 	 	 	 
	 	 	By:	/s/ Troy Meier
	 	 	 	Troy Meier, President
	 	 	 	 
	 	SECURED PARTY:
	 	 
	 	Hard Rock Solutions, Inc.
	 	a Texas corporation
	 	 	 	 
	 	By:	/s/ James
    D. Isenhour
	 	 	James D. Isenhour, President


 


This Agreement is ACKNOWLEDGED AND AGREED to by:


 


	BUYER:	 
	 	 
	Superior Drilling Products, LLC	 
	a Utah limited liability company	 
	 	 	 
	By:	/s/ Troy Meier	 
	 	Troy Meier, President	 


 




    	 



    	 



    

 


SCHEDULE A


 


Patent Applications


 





	Country/Pledgor	 	 	 	Application No.	 	Filing Date (Priority
	Reference No.	 	Application Title	 	(Priority No.)	 	Date)
	 	 	 	 	 	 	 
	
        USA

        3039.002.US
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	
        13/442,316

        (61/437,587)
	 	
        04/09/12

        (04/08/11)

	 	 	 	 	 	 	 
	
        International (National Stage applications filed in AU, CA,
        CN, EP, MX)

        3039.002.PCT
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	
        12/32714

        (61/437,587)
	 	
        04/09/12

        (04/08/11)

	 	 	 	 	 	 	 
	
        Australia

        3039.002.AU
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	TBA	 	10/03/13
	 	 	 	 	 	 	 
	
        Canada

        3039.002.CA
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	TBA	 	 
	 	 	 	 	 	 	 
	
        China

        3039.002.CN
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	TBA	 	 
	 	 	 	 	 	 	 
	
        Europe

        3039.002.EP
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	TBA	 	 
	 	 	 	 	 	 	 
	
        Mexico.MX

        3039.002
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	TBA	 	 
	 	 	 	 	 	 	 
	
        USA

        3039.003.US
	 	Well Bore Conditioning System	 	
        13/644,218

        (61/566,079)

        (61/542,601)
	 	
        10/03/12

        (12/02/12)

        (10/03/11)

	 	 	 	 	 	 	 
	
        International

        3039.003.PCT
	 	Well Bore Conditioning System	 	
        12/58573

        (61/566,079)

        (61/542,601)
	 	
        10/03/12

        (12/02/12)

        (10/03/11)

	 	 	 	 	 	 	 
	
        Argentina

        3039.003.AR
	 	Well Bore Conditioning System	 	
        2012 01 03695

        (61/566,079)

        (61/542,601)
	 	
        10/03/12

        (12/02/12)

        (10/03/11)

	 	 	 	 	 	 	 
	
        USA

        3039.006.US
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	
        13/411,230

        (61/437,587)
	 	
        04/06/12

        (04/08/11)

	 	 	 	 	 	 	 
	
        USA

        3039.006.USCN
	 	Method and Apparatus for Reaming Well-Bore Surfaces Nearer the Center of Drift	 	
        13/517,870

        (61/437,587)
	 	
        06/14/12

        (04/08/11)








 




    	 



    	 



    




 


Trademarks


 





	 	 	 	 	 	 	Application 
	Country/Pledgor 	 	 	 	Registration & 	 	No. & Filing 
	Reference No.	 	Mark	 	Goods/Services Class	 	Date
	 	 	 	 	 	 	 
	
        USA

        3039.003 USTM
	 	Drill-n-Ream	 	
        U.S. Reg. No. 4,207,933

        Sept 11, 2012

        Supplemental Register

        & International Class 7
	 	
        85/386,210

        &

        08/01/11