Exhibit 10.20


 


BUSINESS LOAN AGREEMENT


 





	Principal 

$650,000.00	Loan Date

04-02-2012	Maturity

04-01-2022	Loan No	Call / Coll	Account	Officer

CB	Initials
	References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.

Any item above containing “***” has been omitted due to text length limitations.







  


	Borrower:	Superior Drilling Products
     of California,  LLC	Lender:	US Employment Development
    Lending Center, LLC
	 	2221 North 3250 West	 	1 World Trade Center, Suite 1870
	 	Vernal, UT 84078	 	Long Beach, CA 90831
	 	 	 	 


 


THIS BUSINESS LOAN AGREEMENT
dated April 2, 2012, Is made and executed between Superior Drilling Products of California, LLC (“Borrower”) and US
Employment Development Lending Center, LLC (“Lender”) on the following terms and conditions. Borrower has received
prior commercial loans from Lender or has applied to Lender for a commercial loan or loans or other financial accommodations,
including those which may be described on any exhibit or Schedule attached to this Agreement. Borrower understands and agrees
that: (A) in granting, renewing, or extending any Loan, Lender is relying Upon Borrower’s representations, warranties, and
agreements as set forth in this Agreement; (B) the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subject to the terms and conditions
of this Agreement.


 


TERM. This Agreement shall
be effective as of April 2, 2012, and shall continue in full force and effect until such time as all of Borrower’s Loans
in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees
and charges, or until such time as the parties may agree in writing to terminate this Agreement.


 


CONDITIONS PRECEDENT TO EACH ADVANCE.
Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement shall be subject to the
fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents.


 


Loan Documents. Borrower
shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lender security
interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4)
evidence of insurance as required below; (5) guaranties; (6) together with all such Related Documents as Lender may require for
the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.


 


Borrower’s Authorization.
Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing
the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such
other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.


 


Payment of Fees and Expenses.
Borrower shall have paid to Lender all fees, charges, and other expanses which are then due and payable as specified in this
Agreement or any Related Document.


 


Representations and Warranties.
The representations and warranties set forth in this Agreement, in the Related Documents, and in any document or certificate
delivered to Lender under this Agreement are true and correct.


 


No Event of Default. There
shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement or under
any Related Document.


 


ADDITIONAL LOAN CONDITIONS.
The following terms and conditional are hereby made part of this Business Loan Agreement:


 


1.   All terms
and conditions as may be required by the United States Small Business Administration (“SBA”) as stated in the SBA
Loan Authorization and all amendments, attachments and modifications (“Loan Authorization”).


 


2.   Approval by
an SBA approved Pool Originator to facilitate the pooling of Loan in the SBA’s First Mortgage Lien Pool program may be required.


 


3.   Lender’s
satisfactory verification and documentation of the required equity as documented In the SBA Loan Authorization.


 


4.   Lender’s
receipt and satisfactory review of any additional or updated financial information required by Lender and/or SBA.


 


5.   Two months’
payments on first mortgage paid in advance to Lender may be required.


 


REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:


 


Organization. Borrower
is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good standing under
and by virtue of the laws of the State of California. Borrower is duly authorized to transact business in all other states in
which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals for each state in
which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a foreign limited liability
company in all states in which the failure to so qualify would have a material adverse effect on its business or financial condition.
Borrower has the full power and authority to own its properties and to transact the business in which it is presently engaged
or presently proposes to engage. Borrower maintains an office at 2221 North 3250 West, Vernal, UT 84078. Unless Borrower has designated
otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its records concerning
the Collateral. Borrower will notify Lender prior to any change in the location of Borrower’s state of organization or any
change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence,
rights and privileges; and shall comply with all regulations, rules, ordinances, statutes, orders and decrees of any governmental
or quasi governmental authority or court applicable to Borrower and Borrower’s business activities.


 


Assumed Business Names.
Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used by Borrower.
Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business:
None.


 


Authorization. Borrower’s
execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by all necessary
action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a)
Borrower’s articles of organization or membership agreements, or (b) any agreement or other instrument binding upon Borrower
or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.


 


Financial Information.
Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition
as of the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent
to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except
as disclosed in such financial statements.


 




    	 



    	 



    

 


	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 2
	 	 	 


 


Legal Effect. This Agreement
constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered will constitute
legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms.


 


Properties. Except as
contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and
as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title
to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or
financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name,
and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.


 


Hazardous Substances.
Except for Collateral described in the Hazardous Substances Certificate and Indemnity Agreement executed in connection with the
Loan, and except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During the
period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower
has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any Use,
generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about
or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or
claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on,
under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender
and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance
of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense
and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender
to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence
in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future
claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any
such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the.
Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous
waste or substance on the Collateral, The provisions of this section of the Agreement, including the obligation to indemnify and
defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall
not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.


 


Litigation and Claims.
No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition
or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender
in writing.


 


Taxes. To the best of
Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed,
and all taxes, assessments and other governmental charges have been paid in full, except those presently being or to be contested
by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.


 


Lien Priority. Unless
otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment
of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s Security Interests
and rights in and to such Collateral.


 


Binding Effect. This
Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well
as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms.


 


AFFIRMATIVE COVENANTS. Borrower covenants and agrees
with Lender that, so long as this Agreement remains in effect, Borrower will;


 


Notices of Claims and Litigation.
Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) all
existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower
or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any Guarantor.


 


Financial Records. Maintain
its books and records in accordance with GAAP, applied on aconsistent basis,and permit Lender to examine and audit Borrower’s
books and records at all reasonable times.


 


Financial Statements.
Furnish Lender with the following;


 


Annual Statements. As
soon as available, but in no event later than one-hundred-twenty (120) days after the end of each fiscal year, Borrower’s
balance sheet and income statement for the year ended, compiled by a certified public accountant satisfactory to Lender.


 


Tax Returns. As soon as
available, but in no event later than 45 days after the applicable filing date for the tax reporting period ended, Borrower’s
Federal and other governmental tax returns, prepared by a certified public accountant satisfactory to Lender.


 


All financial reports
required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.


 


Additional Information.
Furnish such additional information and statements, as Lender may request from time to time.


 


Insurance. Maintain
fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect to Borrower’s
properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written notice
to Lender. Each Insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering assets in
which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s loss
payable or other endorsements as Lender may require.


 


Insurance Reports. Furnish
to Lender, upon request of Lender, reports on each existinginsurance policyshowing such information as Lender may reasonably
request, including without limitation the following; (1) the name of the insurer; (2) the risks insured; (3) the amount of the
policy; (4) the properties insured; (5) the then current property values on the basis of which insurance has been obtained, and
the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request of Lender (however
not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.


 




    	 



    	 



    

 


	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 3
	 	 	 


 


Guaranties. Prior to disbursement
of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantors named below, on
Lender’s forms, and in the amounts and under the conditions set forth in those guaranties.


 


	Names of Guarantors	 	Amounts	 
	 	 	 	 
	Superior Drilling Products, LLC	 	$	650,000.00	 
	Annette D. Meier	 	$	650,000.00	 
	Gilbert Troy Meler	 	$	650,000.00	 
	Gilbert Troy Meier Trust	 	$	650,000.00	 
	Annette Deuel Meier Trust	 	$	650,000.00	 



 


Other Agreements. Comply
with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any other party
and notify Lender immediately in writing of any default in connection with any other such agreements.


 


Loan Proceeds. Use all
Loan proceeds solely for the following specific purposes: Proceeds to be disbursed to acquire and improve the property commonly
known as 1140 Black Gold Road, Bakersfield, California and disbursements are in compliance with the United States Small Business
Loan 504 Loan Program.


 


Taxes, Charges and Liens.
Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if unpaid, might become a lion or charge upon any of Borrower’s
properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment, tax,
charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings,
and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment,
tax, charge, levy, lien, or claim in accordance with GAAP.


 


Performance. Perform and
comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related Documents,
and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in writing of
any default in connection with any agreement.


 


Operations. Maintain executive
and management personnel with substantially the same qualifications and experience as the present executive arid management personnel;
provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in a reasonable
and prudent manner.


 


Environmental Studies.
Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may be
requested by Lender or any governmental authority relative to any substance, or any waste or by product of any substance defined
as toxic or a hazardous substance under, applicable federal, state, or local law, rule, regulation, order or directive, at or
affecting any property or any facility owned, leased or used by Borrower.


 


Compliance with Governmental
Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral,
including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance,
or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender
in writing prior to doing so and so long as, in Lender’s solo opinion, Lender’s interests in the Collateral are not
jeopardized. Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect
Lender’s interest.


 


Inspection. Permit employees
or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s other
properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s
books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrower’s expense.


 


Compliance Certificates.
Unless waived in writing by Lender, provide Lender at least annually, with a certificate executed by Borrower’s chief financial
officer, or other officer or person acceptable to Lender, certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and further certifying that, as of the date of the certificate,
no Event of Default exists under this Agreement.


 


Environmental Compliance and
Reports. Borrower shall: comply in all respects with any and all covenants, terms, conditions and provisions set forth in
the Hazardous Substances Certificate and Indemnity Agreement executed in connection with the Loan; comply in all respects with
any and all Environmental Laws; except as otherwise provided by the Hazardous Substances Certificate and Indemnity Agreement,
not cause or permit to exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on
the part of any third party, on property owned and/or occupied by Borrower, any environmental activity where damage may result
to the environment, unless such environmental activity is pursuant to and in compliance with the conditions of a permit issued
by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptly and in any event within
thirty (30) days after receipt thereof a copy of any notice, summons, lion, citation, directive, letter or other communication
from any governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s
part in connection with any environmental activity whether or not there is damage to the environment and/or other natural resources.


 


Additional Assurances.
Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure
the Loans and to perfect all Security Interests.


 


JOB CREATION INTEREST RATE PROVISION.
Borrower acknowledges that Lender agreed to make the Loan(s) in reliance on Operating Company’s business growth plan
that provides for the creation and maintenance of new jobs. Borrower further acknowledges that the creation of new jobs by Operating
Company is a primary consideration of Lender in agreeing to make the Loan(s) to Borrower. During the first five (5) years of loan
life, Borrower covenants and agrees that the Operating Company shall have created new full-time employment positions with Operating
Company, for which Operating Company has hired and continues to employ as part of Operating Company’s business growth plan.
Borrower further covenants and agrees to provide, or to cause Operating Company to provide, to Lender from time-to-time upon request
all reports and documentation required by Lender to evidence and report the results of any job creation by Operating Company.
Such reports arid documentation may consist of one or more of the following: a) Quarterly Employment Update; b) Completed 1-9
form and the supporting identification documents; c) Annual Tax Return; d) Quarterly Financial Statement, and/or e) other evidence
which may be required. Borrower further agrees to submit any required reports and documentation in its best effort and in a timely
manner upon reasonable request from Lender. For purposes of this provision, the term “full-time employment position”
shall refer to any employee of Operating Company who regularly works at least thirty-five (35) hours in a workweek and is compensated
by wages paid by Operating Company and reported for federal tax purposes on 1RS Form W-2.


 




    	 



    	 



    

 


	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 4
	 	 	 


 


LENDER’S EXPENDITURES.
If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower
fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure
to discharge or pay When due any amounts Borrower is required to discharge or pay under this Agreement or any Related Documents,
Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including
but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied
or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred
or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s
option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any
installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of
the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.


 


NEGATIVE COVENANTS. Borrower
covenants and agrees With Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:


 


Indebtedness and Liens.
(1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3)
sell with recourse any of Borrower’s accounts, except to Lender.


 


Continuity of Operations.
(1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its; name, dissolve or transfer or
sell Collateral out of the ordinary course of business, or (3) make any distribution with respect to any capital account, whether
by reduction of capital or otherwise.


 


Loans, Acquisitions and Guaranties.
(1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create or acquire
any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary
course of business.


 


Agreements. Enter into
any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations
under this Agreement or in connection herewith.


 


CESSATION OF ADVANCES.
If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under
the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender;
(B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings,
or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition, in the financial
condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor-seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender in
good faith deems itself insecure, even though no Event of Default shall have occurred.


 


DEFAULT. Each of the following
shall constitute an Event of Default under this Agreement:


 


Payment Default. Borrower
fails to make any payment when due under the Loan.


 


Other Defaults. Borrower
fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of
the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement
between Lender and Borrower.


 


Environmental Default.
Failure of any party to comply with or perform when due any term, obligation, covenant or condition contained in any environmental
agreement executed in connection with any Loan.


 


False Statements. Any
warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement
or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes
false or misleading at any time thereafter.


 


Death or Insolvency. The
dissolution of Borrower (regardless of whether election to continue is made), any member withdraws from Borrower, or any other
termination of Borrower’s existence as a going business or the death of any member, the insolvency of Borrower, the appointment
of a receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout,
or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.


 


Defective Collateralization.
This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time and for any reason.


 


Creditor or Forfeiture Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by Judicial proceeding, self-help, repossession or any other
method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment
of any of Borrower’s accounts, including deposit accounts, with Lender, However, this Event of Default shall not apply if
there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor
or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with
Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion,
as being an adequate reserve or bond for the dispute.


 


Events Affecting Guarantor.
Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.


 


Adverse Change. A material
adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the
Loan is impaired.


 


Insecurity. Lender in
good faith believes itself insecure.


 


FAILURE OF THE DEBENTURE TO
FUND. Notwithstanding anything to the contrary herein, in the event that the Debenture as defined in the SBA 504 Loan Program
does not close or otherwise fund pursuant to the terms of the SBA Authorization within six (6) months of the Closing Date, then
Lender shall, at its option, have the right to declare the entire principal amount of the Loan plus any accrued interest due and
payable in full upon thirty (30) days written notice to Borrower.


 




    	 



    	 



    

 


	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 5
	 	 	 


 


EFFECT OF AN EVENT OF DEFAULT.
If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate (including
any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will
become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type
described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In addition,
Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election
to make expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender’s
right to declare a default and to exercise its rights and remedies.


 


U.S. SMALL BUSINESS ADMINISTRATION
LOAN AUTHORIZATION. The Loan Authorization for Debenture Guarantee (SBA 504 Loan) and all its amendments, additions, and modifications,
issued by the U.S. Small Business Administration (“SBA”) is hereby made part of the Loan Documents of the Loan.


 


MISCELLANEOUS PROVISIONS.
The following miscellaneous provisions are a part of this Agreement:


 


Amendments. This Agreement,
together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration or amendment.


 


Attorneys’ Fees; Expenses.
Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees
and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone
else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include
Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit, including attorneys’ fees and
legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and
any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may be
directed by the court.


 


Caption Headings. Caption
headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this
Agreement.


 


Consent to Loan Participation.
Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests
in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation Whatsoever,
to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or
about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect to
such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of any
repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will
be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation
agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim
that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees
that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender


 


Governing Law. This Agreement
will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of
California without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State of California.


 


Choice of Venue. If there
is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of Los Angeles County County,
State of California.


 


No Waiver by Lender. Lender
shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right.
A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise
to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course
of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a waiver of any of Lender’s
rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever the consent of
Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing
consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the
sole discretion of Lender.


 


Notices. Any notice required
to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed,
when deposited in the United States mail, as first class, certified or registered mall postage prepaid, directed to the addresses
shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal
written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless otherwise provided
or required by law, it there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice given
to all Borrowers.


 


Severability. If a court
of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance,
that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible,
the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision
cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity,
or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of any other
provision of this Agreement.


 


Subsidiaries and Affiliates
of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all of Borrower’s
subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.


 


Successors and Assigns.
All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bind Borrower’s
successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have
the right to assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent
of Lender. 





 




    	 



    	 



    

 


	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 6
	 	 	 


 


Survival of
Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all
representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument
delivered by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any
Investigation made by Lender, all such representations, warranties and covenants will survive the making of the Loan and
delivery to Lender of the Related Documents, shall be continuing in nature, and shall remain in full force and effect until
such time as Borrower’s Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.


 


Time is of the Essence.
Time in of the essence in the performance of this Agreement.


 


SITE INSPECTION. At Lender’s
Request, Borrower must allow and assist Lender in inspecting Collateral at all locations wherever located. Lender’s inspection
must be satisfactory and complete in order for Lender to prepare an internal site inspection memorandum.


 


DEFINITIONS. The following
capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary,
all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not
otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code, Accounting
words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance with generally
accepted accounting principles as in effect on the date of this Agreement:


 


Advance. The word “Advance”
means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line of credit or multiple
advance basis under the terms and conditions of this Agreement.


 


Agreement. The word “Agreement”
means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time to time, together with
all exhibits and schedules attached to this Business Loan Agreement from time to time.


 


Borrower. The word “Borrower”
means Superior Drilling Products of California, LLC and includes all co-signers and co-makers signing the Note and all their successors
and assigns.


 


Collateral. The word “Collateral”
means all property and assets granted as collateral security for a Loan, whether real or personal property, whether granted directly
or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s
lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.


 


Environmental Laws. The
words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating
to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization
Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.,
the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California
Health and Safety Code, Section 25100, et seq., or other applicable state or federal laws, rules, or regulations adopted pursuant
thereto.


 


Event of Default. The
words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this
Agreement.


 


GAAP. The word “GAAP”
means generally accepted accounting principles.


 


Grantor. The word “Grantor”
means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including without limitation
all Borrowers granting such a Security Interest.


 


Guarantor. The word “Guarantor”
means any guarantor, surety, or accommodation party of any or all of the Loan.


 


Guaranty. The word “Guaranty”
means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note.


 


Hazardous Substances.
The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical
or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly
used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances”
are used in their very broadest sense and include without limitation any and all hazardous or toxic substances, materials or waste
as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes, without limitation,
petroleum and petroleum by-products or any fraction thereof and asbestos.


 


Indebtedness. The word
“Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interest
together with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any
of the Related Documents.


 


Lender. The word “Lender”
means US Employment Development Lending Center, LLC, its successors and assigns.


 


Loan. The word “Loan”
means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial accommodations described herein or described on any exhibit or schedule
attached to this Agreement from time to time.


 


Note. The word “Note”
means the Note executed by Superior Drilling Products of California, LLC in the principal amount of $650,000.00 dated April 2,
2012, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for
the note or credit agreement.


 


Permitted Liens. The words
“Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower to Lender; (2) liens
for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics.
Warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing obligations which are not
yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property acquired or held by Borrower
in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement or permitted to be incurred
under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security interests which, as
of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens and security
interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower’s
assets.


 


Related Documents. The
words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements
and documents, whether now or hereafter existing, ‘executed in connection with the Loan.


 


Security Agreement. The
words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating
a Security Interest.


 




    	 



    	 



    

 


	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 7
	 	 	 


 


Security Interest. The
words “Security Interest” mean, without limitation, any and all types of collateral security, present and future,
whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop pledge, chattel
mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien
or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever
whether created by law, contract, or otherwise.


 


BORROWER ACKNOWLEDGES HAVING READ ALL
THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED APRIL 2,
2012.


 


BORROWER:


 


	SUPERIOR DRILLING PRODUCTS OF CALIFORNIA, LLC	 
	 	 	 
	By:	/s/ Annette D. Meier	 
	 	Annette D. Meier, Manager of Superior Drilling Products of California, LLC	 
	 	 	 
	LENDER:	 	 
	 	 	 
	US EMPLOYMENT DEVELOPMENT LENDING CENTER, LLC	 
	 	 	 
	By:	 	 
	 	Authorized Signer	 


 


	 
	LASER PRO Lending, Ver. 5.50.00.005 Copr. Harland Financial Solutions,
    Inc. 1997, 2012. All Rights Reserved. - CA C:\HARLANDLP\CFILPL\G140.FO TR-112 PR-14