Document:

Exhibit
10.2

 

ICAGEN,
INC.

 

FORM
OF NOTICE OF STOCK OPTION AGREEMENT

 

(INCENTIVE
STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Icagen,
Inc. (the “Company”), pursuant to its 2015 Stock Incentive Plan (the “Plan”),
hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below.
This option is subject to all terms and conditions as set forth herein and in the related Stock Option Agreement, the Plan and
the Notice of Exercise, each of which are attached hereto and incorporated herein in their entirety.

 

	 	Optionholder:	  [                 ] 
	 	 	 
	 	Date
    of Grant:	  [                 ] 
	 	 	 
	 	Vesting
    Commencement Date:	  [                 ] 
	 	 	 
	 	Number
    of Shares Subject to Option:	  [                 ] 
	 	 	 
	 	Exercise
    Price (Per Share):	$[                 ] 
	 	 	 
	 	Expiration
    Date:	  [                 ] 

 

	Type
    of Grant:	☐	    Incentive
    Stock Option 1	☐	       Nonstatutory
    Stock Option

 

	Vesting
    Schedule:	[       ]
	 	 
	Payment:	By
    one or a combination of the following items (described in the Option Agreement):
	 	 
		☐     By
    certified check or bank check
	 	☐     By
    delivery of already owned shares
		☐     By
    Cashless Exercise 

 

Additional
Terms/Acknowledgements: The undersigned Optionholder acknowledges receipt of, and understands and agrees to, this Notice,
the Stock Option Agreement and the Plan. The undersigned Optionholder further acknowledges that as of the Date of Grant, this
Notice, the Stock Option Agreement and the Plan set forth the entire understanding between Optionholder and the Company regarding
the acquisition of stock in the Company referred to herein and supersede all prior oral and written agreements on that subject.

 

	ICAGEN,
    INC.	 	OPTIONHOLDER:
	 	 	 
	By:

        
	 	 	 

        

        
	 
	Name:	 	 	Name:	 
	Date:	 	 	Date:	 

 

ATTACHMENTS:
2015 Stock Incentive Plan, Stock Option Agreement and Notice of Exercise. 

 

 

1
If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable
for more than $100,000 in value (measured by exercise price) in any calendar year. Any excess over $100,000 is a Non-statutory
Stock Option. 

     

     

    

 

ICAGEN,
INC.

 

FORM
OF STOCK OPTION AGREEMENT

 

(INCENTIVE
STOCK OPTION OR NONSTATUTORY STOCK OPTION)

 

Pursuant
to your Notice of Stock Option (the “Notice”) and this Stock Option Agreement, Icagen, Inc. (the “Company”)
has granted you an option under its 2015 Stock Incentive Plan (the “Plan”) to purchase the
number of shares of the Company’s Common Stock indicated in the Notice at the exercise price indicated in the Notice. Defined
terms not explicitly defined in this Option Agreement but defined in the Plan shall have the same definitions as in the Plan.

 

The
details of your option are as follows:

 

1.                  
VESTING. Your Option shall fully vest and become exercisable with respect to all of your Option Shares as described in
your employment contract or other service agreement with the Company. For any shares not described in your employment or service
agreement or if you do not have an agreement with the Company, subject to the limitations contained herein, your option will vest
as provided in the Notice, provided that vesting will cease upon the termination of your employment, consulting arrangement or
provision of service for the Company, as applicable. Notwithstanding the foregoing, if you have been continuously employed by
the Company or an Affiliate or providing services to the Company or an Affiliate from the Date of Grant until a Change in Control
of the Company, the portion of your outstanding Option which has not become vested at the date of such event shall immediately
vest and become exercisable with respect to 100% of the Shares simultaneously with the consummation of the Change in Control of
the Company.

 

2.            
NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of common stock (the “Shares”) subject
to your Option and your exercise price per share referenced in the Notice may be adjusted from time to time for certain events,
including such as stock dividends, split ups, mergers, and the other events specified in the Plan. 

 

3.            
METHOD OF PAYMENT. Payment of the exercise price is due in full upon exercise of all or any part of your option. You may
elect to make payment of the exercise price in cash or by check or by delivery to the Company of certificates representing shares
of outstanding common stock of the Company already owned by you that are owned free and clear of any liens, claims, encumbrances
or security interests together with stock powers duly executed and with signature guaranteed. In addition, you may elect to make
payment through a “cashless exercise” such that, without the payment of any funds, you may exercise your Option and
receive the net number of Shares equal to (a) the number of Shares as to which the Option is being exercised, multiplied by (b)
a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Board or a Committee
thereof if a Committee is designated to administer the Plan) less the Exercise Price per Share, and the denominator of which is
such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of
Shares). In the event payment is made by delivery of such shares, said shares shall be deemed to have a per share value equal
to the per share market value of the shares on the date of exercise. Notwithstanding the foregoing, you may not exercise your
option by tender to the Company of common stock to the extent such tender would violate the provisions of any law, regulation
or agreement restricting the redemption of the Company’s stock. 

 

4.            
WHOLE SHARES. You may exercise your Option only for whole shares of common stock.

 

5.            SECURITIES
LAW COMPLIANCE. Notwithstanding anything to the contrary contained herein, you may not exercise your option unless the shares
of common stock issuable upon such exercise are then registered under the Securities Act or, if such shares of common stock are
not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements
of the Securities Act. The exercise of your option also must comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance
with such laws and regulations.

 

    	 	2	 

     

    

 

6.            TERM.
You may not exercise your Option before the commencement or after the expiration of its term. The term of your Option commences
on the Date of Grant and unless otherwise specified in the Notice expires upon the earliest of:

 

(a)            Immediately
upon the termination of your employment or consulting arrangement or other arrangement for the provision of services;

 

(b)            The
Expiration Date indicated in the Notice; or

 

(c)            The
day before the tenth (10th) anniversary of the Date of Grant.

 

If
your Option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock
Option, the Code requires that at all times beginning on the Date of Grant of your Option and ending on the day three (3) months
before the date of your Option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of
your death or Disability.

 

7.            EXERCISE.

 

(a)            You
may exercise the vested portion of your Option during its term by delivering a Notice of Exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate,
during regular business hours, together with such additional documents as the Company may then require. Each election to exercise
this Option shall be in writing, signed by you, and delivered or mailed to the Chief Financial Officer of the Company at its principal
office at 4222 Emperor Blvd., Suite 350, Research Triangle Park, Durham, NC 27703. In the event an Option is exercised by the
executor or administrator of your estate, or by the person or person to whom the Option has been transferred by your will or the
applicable laws of descent and distribution, the Company shall be under no obligation to deliver stock thereunder unless and until
the Company is satisfied that the person or person exercising the option is or are your duly appointed executor or administrator
or the person to whom the option has been transferred by your will or by the applicable laws of descent and distribution.

 

(b)            By
exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter into
an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason
of (1) the exercise of your Option; (2) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are
subject at the time of exercise; or (3) the disposition of shares of Common Stock acquired upon such exercise.

 

(c)            If
your Option is an Incentive Stock Option, by exercising your Option you agree that you will notify the Company in writing within
fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option
that occurs within two (2) years after the date of your option grant or within one (1) year after such shares of Common Stock
are transferred upon exercise of your Option.

 

8.            PAYMENT.

 

(a)            Payment
in full by a certified or bank check should be made for all the shares of which your option is exercised at the time of such exercise,
and no shares shall be delivered until such payment is made.

 

(b)            Alternatively,
payment may be made by delivering to the Company (i) shares of outstanding Common Stock of the Company together with stock powers
duly executed and with signature guaranteed. In the event payment is made in whole or in part by such shares, said shares shall
be deemed to have a per share value equal to the closing price of the shares on the last trading day immediately preceding the
date the shares are then being issued, or (ii) immediately tendering back to the Company sufficient shares of the Common Stock
acquired through exercise of the Option.

 

    	 	3	 

     

    

 

(c)            The
Company shall not be obligated to deliver any stock unless and until all applicable Federal and state laws and regulations have
been complied with; and all legal matters in connection with the issuance and delivery of the Shares have been approved by counsel
for the Company. You shall have no rights as a shareholder until the stock is actually delivered to you.

 

9.
            TRANSFERABILITY.

 

(a)
            If your Option is an Incentive Stock Option, your Option
is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.
Notwithstanding the foregoing, by delivering written notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to exercise your option.

 

(b)
            If your Option is a Nonstatutory Stock Option, your Option
is not transferable, except (i) by will or by the laws of descent and distribution; (ii) with the prior written approval of the
Company, by instrument to an inter vivos or testamentary trust, in a form accepted by the Company, in which the option
is to be passed to beneficiaries upon the death of the trustor (settlor); and (iii) with the prior written approval of the Company,
by gift, in a form accepted by the Company, to a permitted transferee under the Securities Act.

 

10.           TERMINATION.

 

Subject
to the terms of any separate employment agreement between you and the Company, if your employment terminates for any reason, your
Option shall terminate pursuant to the terms of the Plan.

 

11.           OPTION
NOT A SERVICE CONTRACT.

 

Your
Option is not an employment or service contract, and nothing in your Option shall be deemed to create in any way whatsoever any
obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue
your employment. In addition, nothing in your Option shall obligate the Company or an Affiliate, their respective stockholders,
Boards of Directors, officers or employees to continue any relationship that you might have as a Director or consultant for the
Company or an affiliate.

 

12.
            WITHHOLDING OBLIGATIONS.

 

(a)
            At the time you exercise your Option, in whole or in part,
or at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable
to you, and otherwise agree to make adequate provision for any sums required to satisfy the federal, state, local and foreign
tax withholding obligations of the Company or an affiliate, if any, which arise in connection with the exercise of your Option.

 

(b)            Upon
your request and subject to approval by the Company, in its sole discretion, and compliance with any applicable legal conditions
or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise
of your Option a number of whole shares of Common Stock having a fair market value, determined by the Company as of the date of
exercise based on the closing price of the shares on the last trading day immediately preceding the date the shares are then being
issued, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to
avoid classification of your Option as a liability for financial accounting purposes). If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of your Option, share withholding pursuant to the
preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering
the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise
deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your Option. Notwithstanding
the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined
as of the date of exercise of your Option that are otherwise issuable to you upon such exercise. Any adverse consequences to you
arising in connection with such share withholding procedure shall be your sole responsibility.

 

    	 	4	 

     

    

 

(c)            You
may not exercise your Option unless the tax withholding obligations of the Company and/or any affiliate are satisfied. Accordingly,
you may not be able to exercise your Option when desired even though your Option is vested, and the Company shall have no obligation
to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein
unless such obligations are satisfied.

 

13.            TAX
CONSEQUENCES.

 

You
hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner
that minimizes your tax liabilities. You shall not make any claim against the Company, or any of its Officers, Directors, Employees
or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that
this Option is exempt from Section 409A of the Code only if the exercise price per share specified in the Notice is at least equal
to the Fair Market Value per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation
associated with the Option.

 

14.            NOTICES.

 

Any
notices provided for in your Option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage
prepaid, addressed to you at the last address you provided to the Company.

 

15.           GOVERNING
PLAN DOCUMENT.

 

Your
Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, and is further
subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant
to the Plan. In the event of any conflict between the provisions of your Option and those of the Plan, the provisions of the Plan
shall control.

 

16.            RIGHTS
OF OPTIONEE. 

 

This
Agreement does not entitle you to any voting rights or, except for the foregoing notice provisions, any other rights as a shareholder
of the Company. No dividends are payable or will accrue on your Option or the Shares purchasable under this Agreement until, and
except to the extent that, your Option are exercised. Upon the surrender of your Option and payment of the Exercise Price as provided
above, the person or entity entitled to receive the shares of the Common Stock issuable upon such exercise shall be treated for
all purposes as the record holder of such shares as of the close of business on the date of the surrender of your Option for exercise
as provided above. Upon the exercise of your Option, you shall have all of the rights of a shareholder in the Company.

 

17.            GOVERNING
LAW. 

 

This
Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware without giving effect
to its principles governing conflicts of law.

 

    	 	5	 

     

    

 

NOTICE
OF EXERCISE

 

ICAGEN,
INC.

Date
of Exercise:                                           

 

Ladies
and Gentlemen:

 

This
constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.

 

	 	Type  of
option (check one):	Incentive    ☐	Nonstatutory    ☐

 

	 	Stock
    option dated:	 _____________________________
	 	 	 
	 	Number
    of shares as to which option is exercised:	 _____________________________
	 	 	 
	 	Certificates
    to be issued in name of:	 _____________________________
	 	 	 
	 	Total
    exercise price:	$_____________________________
	 	 	 
	 	Cash
    payment delivered herewith:	$_____________________________
	 	 	 
	 	Value
    of ___ shares of Icagen, Inc.2:	$_____________________________
	 	 	 
	 	Number
    of shares of Icagen, Inc.	 
	 	 	 
	 	Delivered
    via cashless exercise:	 _____________________________

 

By
this exercise, I agree: (i) to provide such additional documents as you may require pursuant to the terms of the 2015 Stock Incentive
Plan; (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating
to the exercise of this option; and (iii) if this exercise relates to an incentive stock option, to notify you in writing within
fifteen (15) days after the date of any disposition of any of the shares of Common Stock issued upon exercise of this option that
occurs within two (2) years after the Date of Grant of this option or within one (1) year after such shares of Common Stock are
issued upon exercise of this option.

 

	 	Sincerely,
	 	 
	 	
	 	(Signature)
	 	 
	 	
	 	(Print
    Name)

 

[Provision
for Community Property Jurisdiction]

 

 

2 Shares must be valued in accordance
with the terms of the option being exercised, and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed assignment separate from certificate.

 

    	 	6	 

     

    

 

CONSENT

 

The
undersigned spouse of ____________________ hereby acknowledges that I have read the foregoing Stock Option Agreement and that
I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse’s shares of Common Stock
under certain circumstances and imposes other restrictions on the Transfer of such Common Stock. I agree that my spouse’s
interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably
bound by this Agreement and further that the my community property interest, if any, shall be similarly bound by this Agreement.

 

I
am aware that the legal, financial and other matters contained in this Agreement are complex and I am free to seek advice with
respect thereto from independent counsel. I have either sought such advice or determined after carefully reviewing this Agreement
that I will waive such right.

 

	Date:	 	 	 

 

	 	 	 
	 	 	
	Witness		SpouseExhibit 10.6

 

BUSINESS
LOAN AGREEMENT (ASSET BASED)

 

	Principal

    $711,376.42	Loan
    Date 

    12-03-2015	Maturity

        12-03-2020
	Loan
    No 

    #0185000009	Call
    / Coll	Account	Officer

        * **
	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:	TX
    Holdings Incorporated	Lender:	Town
    Square Bank
	 	P. O. Box
    1425 	 	1500 Carter
    Avenue
	 	Ashland,
    KY 41105-1425	 	P.O. Box
    509
	 	 	 	Ashland,
    KY 41105-0509 
	 	 	 	(606) 324-7196
	 	 	 	 

 

THIS BUSINESS LOAN AGREEMENT (ASSET BASED)
dated December 3, 2015, is made and executed between TX Holdings Incorporated (“Borrower”) and Town Square Bank (“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 December 3, 2015, 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 December 3, 2020.

 

PRIMARY CREDIT
FACILITY. Lender agrees to make Advances to Borrower from the date of this Agreement to the Expiration Date, provided
the aggregate amount of such Advances does not exceed the Borrowing Base. This facility is not a revolving line of credit, and
thus, Borrower may not reborrow any amounts it pays or prepays under the credit facility.

 

Conditions
Precedent to Each Advance. Lender’s obligation to make any Advance to or for the account of Borrower under this Agreement
is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and other items required
under this Agreement to be in form and substance satisfactory to Lender:

 

(1)   Lender shall have received evidence that this Agreement
and all Related Documents have been duly authorized, executed, and delivered by Borrower to Lender.

 

(2)   Lender shall have received such opinions of counsel,
supplemental opinions, and documents as Lender may request.

 

(3)   The security interests in the Collateral shall have
been duly authorized, created, and perfected with first lien priority and shall be in full force and effect.

 

(4)   All guaranties required by Lender for the credit
facility(ies) shall have been executed by each Guarantor, delivered to Lender, and be in full force and effect.

 

(5)   Lender, at its option and for its sole benefit,
shall have conducted an audit of Borrower’s Accounts, Inventory, books, records, and operations, and Lender shall be satisfied
as to their condition.

 

(6)   Borrower shall have paid to Lender all fees, costs,
and expenses specified in this Agreement and the Related Documents as are then due and payable.

 

(7)   There shall not exist at the time of any Advance
a condition which would constitute an Event of Default under this Agreement, and Borrower shall have delivered to Lender the compliance
certificate called for in the paragraph below titled “Compliance Certificate.”

 

Making
Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower’s accounts, may
be requested orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed
in writing. Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (1) when
credited to any deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions of
an authorized person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having
been requested on the next succeeding Business Day.

 

Mandatory
Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable
Borrowing Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference
between the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to
Lender in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together
with all other applicable fees, costs and charges, if any, not yet paid.

 

Loan
Account. Lender shall maintain on its books a record of account in which Lender shall make entries for each Advance
and such other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower
with periodic statements of Borrower’s account, which statements shall be considered to be correct and conclusively binding on
Borrower unless Borrower notifies Lender to the contrary within thirty (30) days after Borrower’s receipt of any such statement
which Borrower deems to be incorrect.

 

COLLATERAL.
To secure payment of the Primary Credit Facility and performance of all other Loans, obligations and duties owed by
Borrower to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as
Lender may require. Lender’s Security Interests in the Collateral shall be continuing liens and shall include the proceeds and
products of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower
agrees and represents and warrants to Lender:

 

Perfection
of Security Interests. Borrower agrees to execute all documents perfecting Lender’s Security Interest and to take whatever
actions are requested by Lender to perfect and continue Lender’s Security Interests in the Collateral. Upon request of Lender,
Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note
Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender. Contemporaneous
with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as
may be required by applicable law, and Lender will file such financing statements and all such similar statements in the appropriate
location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue any Security Interest. Lender may at any time, and without further authorization from Borrower,
file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower
will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender’s security
interest in the Collateral. Borrower promptly will notify Lender before any change in Borrower’s name including any change to the
assumed business names of Borrower. Borrower also promptly
will notify Lender before any change in Borrower’s Social Security Number or Employer Identification Number. Borrower further agrees
to notify Lender in writing prior to any change in address or location of Borrower’s principal governance office or should Borrower
merge or consolidate with any other entity.

 

     

     

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No: #0185000009	(Continued)	Page 2
	 	 	 

 

Collateral
Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records
of the Collateral, all of which records shall be available to Lender or Lender’s representative upon demand for inspection and
copying at any reasonable time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require,
including without limitation information concerning Eligible Accounts and Account balances and agings. Records related to Accounts
(Receivables) are or will be located at 12080 Virginia Blvd Ashland KY 41102. With respect to the Inventory, Borrower agrees to
keep and maintain such records as Lender may require, including without limitation information concerning Eligible Inventory and
records itemizing and describing the kind, type, quality, and quantity of Inventory, Borrower’s Inventory costs and selling
prices, and the daily withdrawals and additions to Inventory. Records related to Inventory are or will be located at 12080 VIRGINIA
BLVD ASHLAND KY 41102. The above is an accurate and complete list of all locations at which Borrower keeps or maintains business
records concerning Borrower’s collateral.

 

Collateral
Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall
execute and deliver to Lender schedules of Accounts and Inventory and schedules of Eligible Accounts and Eligible Inventory in
form and substance satisfactory to the Lender. Thereafter supplemental schedules shall be delivered according to the following
schedule: With respect to Eligible Accounts, schedules shall be delivered quarterly . With respect to Eligible Inventory, schedules
shall be delivered QUARTERLY.

 

Representations
and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and
warrants to Lender: (1) Each Account represented by Borrower to be an Eligible Account for purposes of this Agreement conforms
to the requirements of the definition of an Eligible Account; (2) All Account information listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; and (3) Lender, its assigns, or agents shall have the right at any time
and at Borrower’s expense to inspect, examine, and audit Borrower’s records and to confirm with Account Debtors the accuracy of
such Accounts.

 

Representations
and Warranties Concerning Inventory. With respect to the Inventory, Borrower represents
and warrants to Lender: (1) All Inventory represented by Borrower to be Eligible Inventory for purposes of this Agreement
conforms to the requirements of the definition of Eligible Inventory; (2) All Inventory values listed on schedules delivered
to Lender will be true and correct, subject to immaterial variance; (3) The
value of the Inventory will be determined on a consistent accounting basis; (4) Except as agreed to the contrary by Lender in
writing, all Eligible Inventory is now and at all times hereafter will be in Borrower’s physical possession and shall
not be held by others on consignment, sale on approval, or sale or return; (5) Except as reflected in the Inventory schedules
delivered to Lender, all Eligible Inventory is now and at all times hereafter will be of good and merchantable quality, free
from defects; (6) Eligible Inventory is not now and will not at any time hereafter be stored with a bailee, warehouseman, or
similar party without Lender’s prior written consent, and, in such event, Borrower will concurrently at the time of
bailment cause any such bailee, warehouseman, or similar party to issue and deliver to
Lender, in form acceptable to Lender, warehouse receipts in Lender name evidencing the storage of Inventory; and (7) Lender,
its assigns, or agents shall have the right at any time and at Borrower’s expense to inspect and examine the Inventory
and to check and test the same as to quality, quantity, value, and condition.

 

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.

 

Fees
and Expenses Under This Agreement. Borrower shall have paid to Lender all fees, costs, and
expenses specified in this Agreement and the Related Documents as are then due and payable.

 

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.

 

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 corporation for profit 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 Georgia. 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 corporation
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 12070 Virginia, Ashland, KY 41102. 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 incorporation or organization, or bylaws, 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 (ASSET BASED)	 
	Loan No: #0185000009	(Continued)	Page 3
	 	 	 

 

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 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 a
consistent 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 after the end of each fiscal year,
Borrower’s balance sheet and income statement  for the year ended, prepared by Borrower in form
satisfactory to Lender.

 

Interim
Statements. As soon as available after the end of each fiscal quarter, Borrower’s
balance sheet and profit and loss statement for the period ended, prepared by Borrower in form satisfactory to Lender.

 

Tax
Returns. As soon as available after the applicable filing date for the tax reporting period
ended, Borrower’s Federal and other governmental tax returns, prepared by a tax professional 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 thirty (30) 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.

 

     

     

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No: #0185000009	(Continued)	Page 4
	 	 	 

 

Insurance
Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy
showing 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.

 

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

 

	Name
    of Guarantor	Amount
	William
    L. Shrewsbury	100.000%
    of $711,376.42

 

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 Borrower’s business operations, unless specifically
consented to the contrary by Lender in writing.

 

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 lien 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
and 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 sole 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 Environmental
Laws; 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, lien, 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.

 

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:

 

     

     

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No: #0185000009	(Continued)	Page 5
	 	 	 

 

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) pay any dividends on Borrower’s stock (other than
dividends payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the payment of dividends, if Borrower is a “Subchapter S
Corporation” (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its
stock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make
estimated income tax payments to satisfy their liabilities under federal and state law which arise solely from their status
as Shareholders of a Subchapter S Corporation because of their ownership of shares of Borrower’s stock, or purchase or
retire any of Borrower’s outstanding shares or alter or amend Borrower’s capital structure.

 

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.

 

RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in
all Borrower’s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds
jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts,
or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable
law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender’s option, to administratively
freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

 

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.

 

Default
in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that
may materially affect any of Borrower’s or any Grantor’s property or Borrower’s or any Grantor’s ability to repay the Loans
or perform their respective obligations under this Agreement or any of the Related Documents.

 

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.

 

Insolvency.
The dissolution or termination of Borrower’s existence as a going business, 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.

 

Change
in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common
stock of Borrower.

 

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.

 

Right
to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower
or Grantor, as the case may be, has not been given a notice of a similar default within the preceding twelve (12) months, it may
be cured if Borrower or Grantor, as the case may be, after Lender sends written notice to Borrower or Grantor, as the case may
be, demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen
(15) days, immediately initiate steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter
continue and complete all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

  

     

     

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No: #0185000009	(Continued)	Page 6
	 	 	 

 

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.

 

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 reasonable 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 reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including
reasonable 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 Commonwealth of Kentucky without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in
the Commonwealth of Kentucky.

 

Choice
of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction
of the courts of BOYD County, Commonwealth of Kentucky.

 

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 mail 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, if 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.

 

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.

 

     

     

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan
    No: #0185000009	(Continued)	Page
    7
	 	 	 

 

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

 

Waive
Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought
by any party against any other party.

 

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:

 

Account.
The word “Account” means a trade account, account receivable, other receivable, or other right to payment
for goods sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender).

 

Account
Debtor. The words “Account Debtor” mean the person or entity obligated upon an Account.

 

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

 

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

 

Borrower.
The word “Borrower” means TX Holdings Incorporated and includes all co-signers and co-makers signing the Note
and all their successors and assigns.

 

Borrowing
Base. The words “Borrowing Base” mean, as determined by Lender from time to time, the lesser of (1) $_________________
or (2) the sum of (a) 80.000% of the aggregate amount of Eligible
Accounts (not to exceed in corresponding Loan amount based on Eligible Accounts $711,376.42),
plus (b) 50.000% of the aggregate amount of Eligible Inventory
(not to exceed in corresponding Loan amount based on Eligible Inventory $711,376.42).

 

Business
Day. The words “Business Day” mean a day on which commercial banks are open in the Commonwealth of Kentucky.

 

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. The word Collateral also includes without limitation all collateral described in the Collateral
section of this Agreement.

 

Eligible
Accounts. The words “Eligible Accounts” mean at any time, all of Borrower’s Accounts which contain selling
terms and conditions acceptable to Lender. The net amount of any Eligible Account against which Borrower may borrow shall exclude
all returns, discounts, credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts
do not include:

 

(1)   Accounts with respect to which the Account Debtor
is employee or agent of Borrower.

 

(2)   Accounts with respect to which the Account Debtor
is a subsidiary of, or affiliated with Borrower or its shareholders, officers, or directors.

 

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

 

(4)   Accounts with respect to which Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by the Account Debtor to Borrower.

 

(5)   Accounts which are subject to dispute, counterclaim,
or setoff.

 

(6)   Accounts with respect to which the goods have not
been shipped or delivered, or the services have not been rendered, to the Account Debtor.

 

(7)   Accounts with respect to which Lender, in its sole
discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory.

 

(8)   Accounts of any Account Debtor who has filed or
has had filed against it a petition in bankruptcy or an application for relief under any provision of any state or federal bankruptcy,
insolvency, or debtor-in-relief acts; or who has had appointed a trustee, custodian, or receiver for the assets of such Account
Debtor; or who has made an assignment for the benefit of creditors or has become insolvent or fails generally to pay its debts
(including its payrolls) as such debts become due.

 

(9)   Accounts which have not been paid in full within
90 days or older from the invoice date.

 

Eligible
Inventory. The words “Eligible Inventory” mean, at any time, all of Borrower’s Inventory as defined below,
except:

 

(1)   Inventory which is not owned by Borrower free and
clear of all security interests, liens, encumbrances, and claims of third parties.

 

(2)   Inventory which Lender, in its sole discretion,
deems to be obsolete, unsalable, damaged, defective, or unfit for further processing.

 

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., 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.

 

Expiration
Date. The words “Expiration Date” mean the date of termination of Lender’s commitment to lend under this Agreement.

 

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

 

     

     

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No: #0185000009	(Continued)	Page 8
	 	 	 

 

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.

 

Inventory.
The word “Inventory” means all of Borrower’s raw materials, work in process, finished
goods, merchandise, parts and supplies, of every kind and description, and goods held for sale or lease or furnished under contracts
of service in which Borrower now has or hereafter acquires any right, whether held by Borrower or others, and all documents of
title, warehouse receipts, bills of lading, and all other documents of every type covering all or any part of the foregoing. Inventory
includes inventory temporarily out of Borrower’s custody or possession and all returns on Accounts.

 

Lender.
The word “Lender” means Town Square Bank, 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 dated December 3, 2015 and executed by TX Holdings
Incorporated in the principal amount of $711,376.42, 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.

 

Primary
Credit Facility. The words “Primary Credit Facility” mean the credit facility described
in the Primary Credit Facility section of this Agreement.

 

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.

 

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 (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED DECEMBER 3, 2015.

 

BORROWER:

 

	TX
    HOLDINGS INCORPORATED	 
	 	 
	By:	/s/
    William L. Shrewsbury	 
	 	William
    L. Shrewsbury, Chairman of TX Holdings Incorporated	 

 

     

     

    

 

	 	BUSINESS
    LOAN AGREEMENT (ASSET BASED)	 
	Loan No: #0185000009	(Continued)	Page 9
	 	 	 

 

	LENDER:	 
	 	 	 
	TOWN
    SQUARE BANK	 
	 	 	 
	By:	/s/ Josh Daniel	 
	 	Josh
    Daniel, Loan Officer	 

 

	LaserPro,
Ver. 15.4.20.033 Copr. D + H USA Corporation 1997, 2015. All Rights Reserved. - KY c:\CFI\LPL\C40.FC TR-9236 PR-199

 

     

     

    

  

PROMISSORY
NOTE

 

	Principal

        $711,376.42
	Loan
    Date

    12-03-2015	Maturity

        12-03-2020
	Loan
    No

    #0185000009	Call
    / Coll	Account	Officer

        * *
        *
	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:
    	TX
    Holdings Incorporated	Lender:	Town
    Square Bank
	 	P.
    O. Box 1425	 	1500
    Carter Avenue
	 	Ashland,
    KY 41105-1425	 	P.O.
    Box 509
	 	 	 	Ashland,
    KY 41105-0509
	 	 	 	(606)
    324-7196
	 	 	 	 

 

	Principal
    Amount: $711,376.42	Date
    of Note: December 3, 2015

 

PROMISE
TO PAY. TX Holdings Incorporated (“Borrower”) promises to pay to Town Square Bank (“Lender”), or order,
in lawful money of the United States of America, the principal amount of Seven Hundred Eleven Thousand Three Hundred Seventy-six
& 42/100 Dollars ($711,376.42), together with interest on the unpaid principal balance from December 3, 2015, until paid in
full.

 

PAYMENT.
Subject to any payment changes resulting from changes in the Index, Borrower will pay this loan in 59 regular payments of $6,967.37
each and one irregular last payment estimated at $391,896.72. Borrower’s first payment is due January 3, 2016, and all subsequent
payments are due on the same day of each month after that. Borrower’s final payment will be due on December 3, 2020, and
will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwise agreed
or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any late
charges; and then to any unpaid collection costs. Borrower will pay Lender at Lender’s address shown above or at such other
place as Lender may designate in writing.

 

VARIABLE
INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index
which is the Wall Street Journal Prime Rate, as published in the Money Rates Column of the Wall Street Journal (the “Index”).
The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index
rate upon Borrower’s request. The interest rate change will not occur more often than each day. Borrower understands that
Lender may make loans based on other rates as well. The Index currently is 3.250% per annum. Interest on the unpaid principal
balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate equal
to the Index, adjusted if necessary for any minimum and maximum rate limitations described below, resulting in an initial rate
of 3.250% per annum based on a year of 360 days. NOTICE: Under no circumstances will the interest rate on this Note be less than
3.250% per annum or more than the maximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender,
at its option, may do one or more of the following: (A) increase Borrower’s payments to ensure Borrower’s loan will
pay off by its original final maturity date, (B) increase Borrower’s payments to cover accruing interest, (C) increase the
number of Borrower’s payments, and (D) continue Borrower’s payments at the same amount and increase Borrower’s
final payment.

 

INTEREST
CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate
over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal
balance is outstanding. All interest payable under this Note is computed using this method.

 

PREPAYMENT;
MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date
of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise
required by law. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum
interest charge of $10.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing,
relieve Borrower of Borrower’s obligation to continue to make payments under the payment schedule. Rather, early payments
will reduce the principal balance due and may result in Borrower’s making fewer payments. Borrower agrees not to send Lender
payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment,
Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any
further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment
instrument that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with
other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Town Square Bank,
1500 Carter Avenue, P.O. Box 509, Ashland, KY 41105-0509.

 

LATE CHARGE.
If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment or $50.00, whichever
is greater.

 

INTEREST
AFTER DEFAULT. Upon default, at Lender’s option, and if permitted by applicable law, Lender may add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid at the rate provided in this Note (including any increased
rate). Upon default, the interest rate on this Note shall be increased by adding an additional 2.000 percentage point margin (“Default
Rate Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied
had there been no default. However, in no event will the interest rate exceed the maximum interest rate limitations under applicable
law.

 

DEFAULT.
Each of the following shall constitute an event of default (“Event of Default”) under this Note:

 

Payment
Default. Borrower fails to make any payment when due under this Note.

 

Other Defaults.
Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note 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.

 

Default
in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase
or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s
property or Borrower’s ability to repay this Note or perform Borrower’s obligations under this Note or any of the
related documents.

 

False Statements.
Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this
Note 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.

 

Insolvency.
The dissolution or termination of Borrower’s existence as a going business, 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.

 

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 evidenced
by this Note.

 

Change In
Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower.

 

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

 

Insecurity.
Lender in good faith believes itself insecure.

 

Cure Provisions.
If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the
same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after Lender sends written notice
to Borrower demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than
fifteen (15) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the
default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.

 

LENDER’S
RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

 

     

     

    

  

	PROMISSORY
    NOTE
	Loan
    No: #0185000009	(Continued)	Page
    2
	 	 	 

 

ATTORNEYS’
FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay
Lender that amount. This includes, subject to any limits under applicable law, Lender’s reasonable attorneys’ fees
and Lender’s legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited
by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law.

 

JURY WAIVER.
Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender
or Borrower against the other.

 

GOVERNING
LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws
of the Commonwealth of Kentucky without regard to its conflicts of law provisions. This Note has been accepted by Lender in the
Commonwealth of Kentucky.

 

CHOICE OF
VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of BOYD
County, Commonwealth of Kentucky.

 

DISHONORED
ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower makes a payment on Borrower’s loan and the check or
preauthorized charge with which Borrower pays is later dishonored.

 

RIGHT OF
SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with
Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else
and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts
for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender’s option, to administratively
freeze all such accounts to allow Lender to protect Lender’s charge and setoff rights provided in this paragraph.

 

COLLATERAL.
Borrower acknowledges this Note is secured by UCC FILING WITH THE KY SOS DATED 11/7/2012 FILE#2012-2609277-28 AND A UCC FILIING
WITH GA SOS.

 

FINANCIAL
INFORMATION. Borrower covenants and agrees to provide Lender, upon request, any financial statement or information deemed
necessary. Borrower further covenants and agrees that any financial statements or information provided to lender will be accurate,
correct and complete. .

 

PARTICIPATION
CLAUSE. Borrower hereby authorizes Bank to share all information, including, without limitation, all credit and financial
information, and all loan applications and information provided in connection therewith, pertaining or relating to Borrower, with
Bank’s parent company, with any subsidiary or affiliate of Bank or of Bank’s parent company, with any actual or proposed
participant in or assignee of all or any part of Bank’s interest in or rights under this note, or with any other person
or entity reasonably deemed incidental by Bank to the administration of the indebtedness evidenced hereby. Borrower expressly
waives, releases and relinquishes any and all claims, demands and/or causes of action against Bank, Bank’s parent company,
their subsidiaries and affiliates, and all participants, successors and/or assigns arising from or pertaining in any such disclosure
of information.

 

SUCCESSOR
INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives,
successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

 

NOTIFY US
OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Borrower may notify Lender if Lender reports any inaccurate
information about Borrower’s account(s) to a consumer reporting agency. Borrower’s written notice describing the specific
inaccuracy(ies) should be sent to Lender at the following address: Town Square Bank, 1500 Carter Avenue, P.O. Box 509, Ashland,
KY 41105-0509.

 

GENERAL
PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay
or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether
as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may
renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint
and several.

 

PRIOR TO
SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE.

 

BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

 

BORROWER:

 

	TX
    HOLDINGS INCORPORATED	 
	 	 	 
	By:	/s/
    William L. Shrewsbury	 
	 	William
    L. Shrewsbury, Chairman of TX Holdings Incorporated 	 

 

	LaserPro,
    Ver. 15.4.20.033 Copr. D + H USA Corporation 1997, 2015. All Rights Reserved. - KY c:\CFI\LPL\D20.FC TR-9236 PR-199

 

 

     

     

    

  

COMMERCIAL
SECURITY AGREEMENT

 

	Principal

        $711,376.42
	Loan
        Date

        12-03-2015
	Maturity

        12-03-2020
	Loan
        No

        #0185000009
	Call
    / Coll	Account	Officer

        ***
	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.

 

	Grantor:	TX Holdings Incorporated	Lender:	Town Square Bank
	 	P. O. Box 1425 	 	1500 Carter Avenue
	 	Ashland, KY 41105-1425	 	P.O. Box 509
	 	 	 	Ashland, KY 41105-0509
	 	 	 	(606) 324-7196
	 	 	 	 

 

THIS COMMERCIAL SECURITY AGREEMENT dated
December 3, 2015, is made and executed between TX Holdings Incorporated (“Grantor”) and Town Square Bank (“Lender”).

 

GRANT OF SECURITY INTEREST. For valuable
consideration, Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees that Lender
shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may
have by law.

 

COLLATERAL DESCRIPTION. The word
“Collateral” as used in this Agreement means the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the
payment of the Indebtedness and performance of all other obligations under the Note and this Agreement:

 

All Inventory and Accounts

 

In addition, the word “Collateral”
also includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever
located:

 

(A)    All accessions,
attachments, accessories, tools, parts, supplies, replacements of and additions to any of the collateral described herein, whether
added now or later.

 

(B)    All products
and produce of any of the property described in this Collateral section.

 

(C)    All accounts,
general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, consignment or other
disposition of any of the property described in this Collateral section.

 

(D)    All proceeds
(including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this
Collateral section, and sums due from a third party who has damaged or destroyed the Collateral or from that party’s insurer, whether
due to judgment, settlement or other process.

 

(E)    All records
and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor’s right, title, and interest in and to all computer software required
to utilize, create, maintain, and process any such records or data on electronic media.

 

RIGHT OF SETOFF. To the extent permitted
by applicable law, Lender reserves a right of setoff in all Grantor’s accounts with Lender (whether checking, savings, or some
other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Grantor
authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any
and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.

 

GRANTOR’S REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantor represents and promises to Lender that:

 

Perfection of Security Interest. Grantor
agrees to take whatever actions are requested by Lender to perfect and continue Lender’s security interest in the Collateral. Upon
request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor
will note Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender.

 

Notices to Lender. Grantor will
promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to
time) prior to any (1) change in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change in the management
of the Corporation Grantor; (4) change in the authorized signer(s); (5) change in Grantor’s principal office address; (6) change
in Grantor’s state of organization; (7) conversion of Grantor to a new or different type of business entity; or (8) change in any
other aspect of Grantor that directly or indirectly relates to any agreements between Grantor and Lender. No change in Grantor’s
name or state of organization will take effect until after Lender has received notice.

 

No Violation. The execution and
delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its certificate
or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement.

 

Enforceability of Collateral. To
the extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the Uniform Commercial Code,
the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and regulations
concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. At the time any account becomes
subject to a security interest in favor of Lender, the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject to delivery instructions or previously shipped or
delivered pursuant to a contract of sale, or for services previously performed by Grantor with or for the account debtor. So long
as this Agreement remains in effect, Grantor shall not, without Lender’s prior written consent, compromise, settle, adjust, or
extend payment under or with regard to any such Accounts. There shall be no setoffs or counterclaims against any of the Collateral,
and no agreement shall have been made under which any deductions or discounts may be claimed concerning the Collateral except those
disclosed to Lender in writing.

 

Location of the Collateral. Except
in the ordinary course of Grantor’s business, Grantor agrees to keep the Collateral (or to the extent the Collateral consists of
intangible property such as accounts or general intangibles, the records concerning the Collateral) at Grantor’s address shown
above or at such other locations as are acceptable to Lender. Upon Lender’s request, Grantor will deliver to Lender in form
satisfactory to Lender a schedule of real properties and Collateral locations relating to Grantor’s operations, including
without limitation the following: (1) all real property Grantor owns or is purchasing; (2) all real property Grantor is renting
or leasing; (3) all storage facilities Grantor owns, rents, leases, or uses; and (4) all other properties where Collateral is or
may be located.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 2
	 	 	 

 

Removal of the Collateral. Except
in the ordinary course of Grantor’s business, including the sales of inventory, Grantor shall not remove the Collateral from its
existing location without Lender’s prior written consent. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require application for certificates of title for the vehicles
outside the Commonwealth of Kentucky, without Lender’s prior written consent. Grantor shall, whenever requested, advise Lender
of the exact location of the Collateral.

 

Transactions Involving Collateral.
Except for inventory sold or accounts collected in the ordinary course of Grantor’s business, or as otherwise provided for
in this Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is
not in default under this Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers
who qualify as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor’s business does not include
a transfer in partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided
for in this Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to
the security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral
(for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this
requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver
any such proceeds to Lender.

 

Title. Grantor represents and warrants
to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens and encumbrances except for
the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend
Lender’s rights in the Collateral against the claims and demands of all other persons.

 

Repairs and Maintenance. Grantor
agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair and condition at all
times while this Agreement remains in effect. Grantor further agrees to pay when due all claims for work done on, or services rendered
or material furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the
Collateral.

 

Inspection of Collateral. Lender
and Lender’s designated representatives and agents shall have the right at all reasonable times to examine and inspect the Collateral
wherever located.

 

Taxes, Assessments and Liens.
Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon this Agreement,
upon any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold
any such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest
the obligation to pay and so long as Lender’s interest in the Collateral is not jeopardized in Lender’s sole opinion.
If the Collateral is subjected to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash,
a sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate to provide for the discharge
of the lien plus any interest, costs, reasonable attorneys’ fees or other charges that could accrue as a result of foreclosure
or sale of the Collateral. In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse judgment
before enforcement against the Collateral. Grantor shall name Lender as an additional obligee under any surety bond furnished
in the contest proceedings. Grantor further agrees to furnish Lender with evidence that such taxes, assessments, and governmental
and other charges have been paid in full and in a timely manner. Grantor may withhold any such payment or may elect to contest
any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long as Lender’s
interest in the Collateral is not jeopardized.

 

Compliance with Governmental Requirements.
Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter
in effect, applicable to the ownership, production, disposition, or use of the Collateral, including all laws or regulations relating
to the undue erosion of highly-erodible land or relating to the conversion of wetlands for the production of an agricultural product
or commodity. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Lender’s interest in the Collateral, in Lender’s opinion, is not jeopardized.

 

Hazardous Substances. Grantor represents
and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lien on the Collateral,
used in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment, disposal, release
or threatened release of any Hazardous Substance. The representations and warranties contained herein are based on Grantor’s due
diligence in investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any Environmental Laws,
and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify and defend shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.

 

Maintenance of Casualty Insurance.
Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together
with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, 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 thirty (30) days’ prior written notice to Lender and not including
any disclaimer of the insurer’s liability for failure to give such a notice. 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 Grantor or any other
person. In connection with all policies covering assets in which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate,
including if Lender so chooses “single interest insurance,” which will cover only Lender’s interest in the Collateral.

 

Application of Insurance Proceeds.
Grantor shall promptly notify Lender of any loss or damage to the Collateral, whether or not such casualty or loss is covered by
insurance. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of any
insurance on the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents
to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse
Grantor from the proceeds for the reasonable cost of repair or restoration. If Lender does not consent to repair or replacement
of the Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall pay the balance
to Grantor. Any proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed
to the repair or restoration of the Collateral shall be used to prepay the Indebtedness.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 3
	 	 	 

 

Insurance Reserves. Lender may require
Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be created by monthly payments
from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium due date,
amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit
and shall constitute a non-interest-bearing account which Lender may satisfy by payment of the insurance premiums required to be
paid by Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums required to be paid by Grantor. The responsibility for the payment of premiums shall
remain Grantor’s sole responsibility.

 

Insurance Reports. Grantor, upon
request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information as Lender may
reasonably request including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4)
the property insured; (5) the then current value on the basis of which insurance has been obtained and the manner of determining
that value; and (6) the expiration date of the policy. In addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost
of the Collateral.

 

Financing Statements. Grantor authorizes
Lender to file a UCC financing statement, or alternatively, a copy of this Agreement to perfect Lender’s security interest. At
Lender’s request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue
Lender’s security interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved
unless prohibited by law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to
execute documents necessary to transfer title if there is a default. Lender may file a copy of this Agreement as a financing statement.

 

GRANTOR’S RIGHT TO POSSESSION
AND TO COLLECT ACCOUNTS. Until default and except as otherwise provided below with respect to accounts, Grantor may have possession
of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent
with this Agreement or the Related Documents, provided that Grantor’s right to possession and beneficial use shall not apply
to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender’s security interest in such
Collateral. Until otherwise notified by Lender, Grantor may collect any of the Collateral consisting of accounts. At any time and
even though no Event of Default exists, Lender may exercise its rights to collect the accounts and to notify account debtors to
make payments directly to Lender for application to the Indebtedness. If Lender at any time has possession of any Collateral, whether
before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of
the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender’s sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be
a failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness.

 

LENDER’S EXPENDITURES. If any action
or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Grantor fails to comply with
any provision of this Agreement or any Related Documents, including but not limited to Grantor’s failure to discharge or pay when
due any amounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor’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 the Collateral and
paying all costs for insuring, maintaining and preserving the 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 Grantor. 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. The Agreement also will secure payment of these amounts.
Such right shall be in addition to all other rights andremedies to which Lender may be entitled upon Default.

 

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

 

Payment Default. Grantor fails to
make any payment when due under the Indebtedness.

 

Other Defaults. Grantor 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 Grantor.

 

Default in Favor of Third Parties.
Any guarantor or Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially affect any of any guarantor’s or Grantor’s
property or ability to perform their respective obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty,
representation or statement made or furnished to Lender by Grantor or on Grantor’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.

 

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.

 

Insolvency. The dissolution or termination
of Grantor’s existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor’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 Grantor.

 

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 Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes a garnishment
of any of Grantor’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there
is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Grantor 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 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 Grantor’s financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is
impaired.

 

Insecurity. Lender in good faith
believes itself insecure.

 

     

     

    

 

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 4
	 	 	 

 

Cure Provisions. If any default,
other than a default in payment, is curable and if Grantor has not been given a notice of a breach of the same provision of this
Agreement within the preceding twelve (12) months, it may be cured if Grantor, after Lender sends written notice to Grantor demanding
cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

 

RIGHTS AND REMEDIES ON DEFAULT. If
an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party under
the Kentucky Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the following
rights and remedies:

 

Accelerate Indebtedness. Lender
may declare the entire Indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and
payable, without notice of any kind to Grantor.

 

Assemble Collateral. Lender may
require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents
relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to
be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove
the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession.

 

Sell the Collateral. Lender shall
have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s own name or that
of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily
in value or is of a type customarily sold on a recognized market, Lender will give Grantor, and other persons as required by law,
reasonable notice of the time and place of any public sale, or the time after which any private sale or any other disposition of
the Collateral is to be made. However, no notice need be provided to any person who, after Event of Default occurs, enters into
and authenticates an agreement waiving that person’s right to notification of sale. The requirements of reasonable notice shall
be met if such notice is given at least ten (10) days before the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and
selling the Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.

 

Appoint Receiver. Lender shall have
the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect and preserve
the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the rents from the Collateral and apply
the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted
by law. Lender’s right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds
the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver.

 

Collect Revenues, Apply Accounts. Lender,
either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any
time in Lender’s discretion transfer any Collateral into Lender’s own name or that of Lender’s nominee and receive the payments,
rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness
in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance
policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise,
adjust, sue for, foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness or Collateral is
then due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of mail addressed
to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents
of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate collection, Lender
may notify account debtors and obligors on any Collateral to make payments directly to Lender.

 

Obtain Deficiency. If Lender chooses
to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining on the Indebtedness
due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper.

 

Other Rights and Remedies. Lender
shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended
from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.

 

Election of Remedies. Except as
may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement, the Related Documents,
or by any other writing, 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 Grantor under this Agreement, after Grantor’s failure to perform, shall not affect Lender’s right to declare a default and exercise
its remedies.

 

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. Grantor
agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable 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 Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s reasonable
attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable 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. Grantor 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.

 

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 Commonwealth of Kentucky
without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the Commonwealth of Kentucky.

 

Choice of Venue. If there is a lawsuit,
Grantor agrees upon Lender’s request to submit to the jurisdiction of the courts of BOYD County, Commonwealth of Kentucky.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 5
	 	 	 

 

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 Grantor, shall constitute a waiver of any of Lender’s rights or of any of 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 mail 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,
Grantor agrees to keep Lender informed at all times of Grantor’s current address. Unless otherwise provided or required by law,
if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors.

 

Power of Attorney. Grantor hereby
appoints Lender as Grantor’s irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect, amend,
or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties. Lender
may at any time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection
and the continuation of the perfection of Lender’s security interest in the Collateral.

 

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.

 

Successors and Assigns. Subject
to any limitations stated in this Agreement on transfer of Grantor’s interest, this Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than
Grantor, Lender, without notice to Grantor, may deal with Grantor’s successors with reference to this Agreement and the Indebtedness
by way of forbearance or extension without releasing Grantor from the obligations of this Agreement or liability under the Indebtedness.

 

Survival of Representations and Warranties.
All representations, warranties, and agreements made by Grantor in this Agreement shall survive the execution and delivery of this
Agreement, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor’s Indebtedness shall
be paid in full.

 

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

 

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:

 

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

 

Borrower. The word “Borrower”
means TX Holdings Incorporated and includes all co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. The word “Collateral”
means all of Grantor’s right, title and interest in and to all the Collateral as described in the Collateral Description section
of this Agreement.

 

Default. The word “Default”
means the Default set forth in this Agreement in the section titled “Default”.

 

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., 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.

 

Grantor. The word “Grantor”
means TX Holdings Incorporated.

 

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

 

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 Grantor is responsible under this Agreement or under any of the Related Documents.

 

Lender. The word “Lender”
means Town Square Bank, its successors and assigns.

 

Note. The word “Note”
means the Note dated December 3, 2015 and executed by TX Holdings Incorporated in the principal amount of $711,376.42, together
with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit
agreement.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 6
	 	 	 

 

Property. The word “Property”
means all of Grantor’s right, title and interest in and to all the Property as described in the “Collateral Description”
section of this Agreement.

 

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 Indebtedness.

 

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS
COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 3, 2015.

 

GRANTOR:

 

	TX HOLDINGS INCORPORATED	 
	 	 	 
	By: 	/s/ William L. Shrewsbury	 
	 	William
L. Shrewsbury, Chairman of TX  Holdings

Incorporated	 
	 	 	 
	LENDER:

 

	TOWN SQUARE BANK	 
	 	 	 
	X	/s/ Josh Daniel	 
	 	Josh Daniel, Loan Officer	 

 

	LaserPro,
    Ver. 15.4.20.033 Copr. D + H USA Corporation 1997, 2015. All Rights Reserved. - KY c:\CFI\LPL\E40.FC TR-9236 PR-199

 

     

     

    

  

COMMERCIAL
SECURITY AGREEMENT

 

	Principal	Loan Date	Maturity	Loan No	Call / Coll	Account	Officer	Initials
	$711,376.42	12-03-2015	12-03-2020	#0185000009	 	 	***	 
	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.

 

	Grantor:	TX Holdings Incorporated	Lender:	Town Square Bank
	 	P.
    O. Box 1425	 	1500 Carter Avenue
	 	Ashland, KY 41105-1425	 	P.O. Box 509
	 	 	 	Ashland, KY 41105-0509
	 	 	 	(606) 324-7196
	 	 	 	 

 

THIS COMMERCIAL SECURITY AGREEMENT dated December 3, 2015,
is made and executed between TX Holdings Incorporated (“Grantor”) and Town Square Bank (“Lender”).

 

GRANT OF SECURITY INTEREST. For valuable consideration,
Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees that Lender shall have the
rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law.

 

COLLATERAL DESCRIPTION. The word
“Collateral” as used in this Agreement means the following described property, whether now owned or hereafter acquired,
whether now existing or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the
payment of the Indebtedness and performance of all other obligations under the Note and this Agreement:

 

All Inventory and Accounts

 

In addition, the word “Collateral”
also includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, and wherever
located:

 

(A)     All accessions,
attachments, accessories, tools, parts, supplies, replacements of and additions to any of the collateral described herein, whether
added now or later.

 

(B)     All products
and produce of any of the property described in this Collateral section.

 

(C)     All accounts,
general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, consignment or other
disposition of any of the property described in this Collateral section.

 

(D)     All proceeds
(including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this
Collateral section, and sums due from a third party who has damaged or destroyed the Collateral or from that party’s insurer, whether
due to judgment, settlement or other process.

 

(E)     All records
and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantor’s right, title, and interest in and to all computer software required
to utilize, create, maintain, and process any such records or data on electronic media.

 

CROSS-COLLATERALIZATION. In addition
to the Note, this Agreement secures all obligations, debts and liabilities, plus interest thereon, of Grantor to Lender, or any
one or more of them, as well as all claims by Lender against Grantor or any one or more of them, whether now existing or hereafter
arising, whether related or unrelated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct
or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated, whether Grantor may be liable individually
or jointly with others, whether obligated as guarantor, surety, accommodation party or otherwise, and whether recovery upon such
amounts may be or hereafter may become barred by any statute of limitations, and whether the obligation to repay such amounts may
be or hereafter may become otherwise unenforceable.

 

RIGHT OF SETOFF. To the extent permitted
by applicable law, Lender reserves a right of setoff in all Grantor’s accounts with Lender (whether checking, savings, or some
other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Grantor
authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any
and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.

 

GRANTOR’S REPRESENTATIONS AND WARRANTIES
WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantor represents and promises to Lender that:

 

Perfection of Security Interest. Grantor
agrees to take whatever actions are requested by Lender to perfect and continue Lender’s security interest in the Collateral.
Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral,
and Grantor will note Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession
by Lender. This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness
is paid in full and even though for a period of time Grantor may not be indebted to Lender.

 

Notices to Lender. Grantor will
promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designate from time to
time) prior to any (1) change in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change in the management
of the Corporation Grantor; (4) change in the authorized signer(s); (5) change in Grantor’s principal office address; (6)
change in Grantor’s state of organization; (7) conversion of Grantor to a new or different type of business entity; or (8) change
in any other aspect of Grantor that directly or indirectly relates to any agreements between Grantor and Lender. No change in Grantor’s
name or state of organization will take effect until after Lender has received notice.

 

No Violation. The execution and
delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its certificate
or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement.

 

Enforceability of Collateral. To
the extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the Uniform Commercial Code,
the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and regulations
concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have
authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. At the time any account becomes
subject to a security interest in favor of Lender, the account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject to delivery instructions or previously shipped or
delivered pursuant to a contract of sale, or for services previously performed by Grantor with or for the account debtor. So long
as this Agreement remains in effect, Grantor shall not, without Lender’s prior written consent, compromise, settle, adjust,
or extend payment under or with regard to any such Accounts. There shall be no setoffs or counterclaims against any of the Collateral,
and no agreement shall have been made under which any deductions or discounts may be claimed concerning the Collateral except those
disclosed to Lender in writing.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 2
	 	 	 

 

Location of the Collateral. Except
in the ordinary course of Grantor’s business, Grantor agrees to keep the Collateral (or to the extent the Collateral consists of
intangible property such as accounts or general intangibles, the records concerning the Collateral) at Grantor’s address shown
above or at such other locations as are acceptable to Lender. Upon Lender’s request, Grantor will deliver to Lender in form satisfactory
to Lender a schedule of real properties and Collateral locations relating to Grantor’s operations, including without limitation
the following: (1) all real property Grantor owns or is purchasing; (2) all real property Grantor is renting or leasing; (3) all
storage facilities Grantor owns, rents, leases, or uses; and (4) all other properties where Collateral is or may be located.

 

Removal of the Collateral. Except
in the ordinary course of Grantor’s business, including the sales of inventory, Grantor shall not remove the Collateral from its
existing location without Lender’s prior written consent. To the extent that the Collateral consists of vehicles, or other titled
property, Grantor shall not take or permit any action which would require application for certificates of title for the vehicles
outside the State of Georgia, without Lender’s prior written consent. Grantor shall, whenever requested, advise Lender of the exact
location of the Collateral.

 

Transactions Involving Collateral.
Except for inventory sold or accounts collected in the ordinary course of Grantor’s business, or as otherwise provided for in this
Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default
under this Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who qualify
as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor’s business does not include a transfer
in partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the
Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided for
in this Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to the
security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for
whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such
proceeds to Lender.

 

Title. Grantor represents and warrants
to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens and encumbrances except for
the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend
Lender’s rights in the Collateral against the claims and demands of all other persons.

 

Repairs and Maintenance. Grantor
agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair and condition at all
times while this Agreement remains in effect. Grantor further agrees to pay when due all claims for work done on, or services rendered
or material furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the
Collateral.

 

Inspection of Collateral. Lender
and Lender’s designated representatives and agents shall have the right at all reasonable times to examine and inspect the Collateral
wherever located.

 

Taxes, Assessments and Liens. Grantor
will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon this Agreement, upon any promissory
note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any such payment or
may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay
and so long as Lender’s interest in the Collateral is not jeopardized in Lender’s sole opinion. If the Collateral is subjected
to a lien which is not discharged within fifteen (15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety
bond or other security satisfactory to Lender in an amount adequate to provide for the discharge of the lien plus any interest,
costs, attorneys’ fees or other charges that could accrue as a result of foreclosure or sale of the Collateral. In any contest
Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral.
Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Grantor further
agrees to furnish Lender with evidence that such taxes, assessments, and governmental and other charges have been paid in full
and in a timely manner. Grantor may withhold any such payment or may elect to contest any lien if Grantor is in good faith conducting
an appropriate proceeding to contest the obligation to pay and so long as Lender’s interest in the Collateral is not jeopardized.

 

Compliance with Governmental Requirements.
Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter
in effect, applicable to the ownership, production, disposition, or use of the Collateral, including all laws or regulations relating
to the undue erosion of highly-erodible land or relating to the conversion of wetlands for the production of an agricultural product
or commodity. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Lender’s interest in the Collateral, in Lender’s opinion, is not jeopardized.

 

Hazardous Substances. Grantor represents
and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lien on the Collateral,
used in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment, disposal, release
or threatened release of any Hazardous Substance. The representations and warranties contained herein are based on Grantor’s due
diligence in investigating the Collateral for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any Environmental Laws,
and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims and losses resulting from a breach of
this provision of this Agreement. This obligation to indemnify and defend shall survive the payment of the Indebtedness and the
satisfaction of this Agreement.

 

Maintenance of Casualty Insurance.
Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together
with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, 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 thirty (30) days’ prior written notice to Lender and not including
any disclaimer of the insurer’s liability for failure to give such a notice. 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 Grantor or any other
person. In connection with all policies covering assets in which Lender holds or is offered a security interest, Grantor will provide
Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain or maintain any
insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate,
including if Lender so chooses “single interest insurance,” which will cover only Lender’s interest in the Collateral.

 

Application of Insurance Proceeds.
Grantor shall promptly notify Lender of any loss or damage to the Collateral, whether or not such casualty or loss is covered by
insurance. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 3
	 	 	 

 

All proceeds of any insurance on the Collateral,
including accrued proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or replacement
of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the
proceeds for the reasonable cost of repair or restoration. If Lender does not consent to repair or replacement of the Collateral,
Lender shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall pay the balance to Grantor. Any
proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair
or restoration of the Collateral shall be used to prepay the Indebtedness.

 

Insurance Reserves. Lender may require
Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be created by monthly payments
from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium due date,
amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are
insufficient, Grantor shall upon demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit
and shall constitute a non-interest-bearing account which Lender may satisfy by payment of the insurance premiums required to be
paid by Grantor as they become due. Lender does not hold the reserve funds in trust for Grantor, and Lender is not the agent of
Grantor for payment of the insurance premiums required to be paid by Grantor. The responsibility for the payment of premiums shall
remain Grantor’s sole responsibility.

 

Insurance Reports. Grantor, upon
request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information as Lender may
reasonably request including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4)
the property insured; (5) the then current value on the basis of which insurance has been obtained and the manner of determining
that value; and (6) the expiration date of the policy. In addition, Grantor shall upon request by Lender (however not more often
than annually) have an independent appraiser satisfactory to Lender determine, as applicable, the cash value or replacement cost
of the Collateral.

 

Financing Statements. Grantor authorizes
Lender to file a UCC financing statement, or alternatively, a copy of this Agreement to perfect Lender’s security interest. At
Lender’s request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue
Lender’s security interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved
unless prohibited by law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to
execute documents necessary to transfer title if there is a default. Lender may file a copy of this Agreement as a financing statement.

 

GRANTOR’S RIGHT TO POSSESSION
AND TO COLLECT ACCOUNTS. Until default and except as otherwise provided below with respect to accounts, Grantor may have possession
of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent
with this Agreement or the Related Documents, provided that Grantor’s right to possession and beneficial use shall not apply
to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender’s security interest in such
Collateral. Until otherwise notified by Lender, Grantor may collect any of the Collateral consisting of accounts. At any time and
even though no Event of Default exists Lender may exercise its rights to collect the accounts and to notify account debtors to
make payments directly to Lender for application to the Indebtedness. If Lender at any time has possession of any Collateral, whether
before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of
the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender’s sole discretion,
shall deem appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be
a failure to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness.

 

LENDER’S EXPENDITURES. If any action
or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Grantor fails to comply with
any provision of this Agreement or any Related Documents, including but not limited to Grantor’s failure to discharge or
pay when due any amounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor’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 the Collateral and
paying all costs for insuring, maintaining and preserving the 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 Grantor. 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. The Agreement also will secure payment of these amounts.
Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default.

 

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

 

Payment Default. Grantor fails to
make any payment when due under the Indebtedness.

 

Other Defaults. Grantor 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 Grantor.

 

Default in Favor of Third Parties.
Any guarantor or Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any
other agreement, in favor of any other creditor or person that may materially affect any of any guarantor’s or Grantor’s
property or ability to perform their respective obligations under this Agreement or any of the Related Documents.

 

False Statements. Any warranty,
representation or statement made or furnished to Lender by Grantor or on Grantor’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.

 

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.

 

Insolvency. The dissolution or termination
of Grantor’s existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor’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 Grantor.

 

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 Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes a garnishment
of any of Grantor’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there
is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Grantor 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.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 4
	 	 	 

 

Events Affecting Guarantor. Any
of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or 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 Grantor’s financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is
impaired.

 

Insecurity. Lender in good faith
believes itself insecure.

 

Cure Provisions. If any default,
other than a default in payment, is curable and if Grantor has not been given a notice of a breach of the same provision of this
Agreement within the preceding twelve (12) months, it may be cured if Grantor, after Lender sends written notice to Grantor demanding
cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter
continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

 

RIGHTS AND REMEDIES ON DEFAULT.
If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights of a secured party
under the Georgia Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the following
rights and remedies:

 

Accelerate Indebtedness. Lender
may declare the entire Indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and
payable, without notice of any kind to Grantor.

 

Assemble Collateral. Lender may
require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and other documents
relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to
be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove
the Collateral. If the Collateral contains other goods not covered by this Agreement at the time of repossession, Grantor agrees
Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession.

 

Sell the Collateral. Lender shall
have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s own name
or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline
speedily in value or is of a type customarily sold on a recognized market, Lender will give Grantor, and other persons as required
by law, reasonable notice of the time and place of any public sale, or the time after which any private sale or any other disposition
of the Collateral is to be made. However, no notice need be provided to any person who, after Event of Default occurs, enters into
and authenticates an agreement waiving that person’s right to notification of sale. The requirements of reasonable notice shall
be met if such notice is given at least ten (10) days before the time of the sale or disposition. All expenses relating to the
disposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and
selling the Collateral, shall become a part of the Indebtedness secured by this Agreement and shall be payable on demand, with
interest at the Note rate from date of expenditure until repaid.

 

Appoint Receiver. Lender shall have
the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect and preserve
the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the rents from the Collateral and apply
the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted
by law. Lender’s right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds
the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver.

 

Collect Revenues, Apply Accounts.
Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender
may at any time in Lender’s discretion transfer any Collateral into Lender’s own name or that of Lender’s nominee and receive the
payments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the
Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles,
insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for,
settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as Lender may determine, whether or not Indebtedness
or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of
mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money
orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate
collection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender.

 

Obtain Deficiency. If Lender chooses
to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining on the Indebtedness
due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall
be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper.

 

Other Rights and Remedies. Lender
shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended
from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at
law, in equity, or otherwise.

 

Election of Remedies. Except as
may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement, the Related Documents,
or by any other writing, 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 Grantor under this Agreement, after Grantor’s failure to perform, shall not affect Lender’s right to declare a default
and exercise its remedies.

 

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. Grantor
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 Grantor shall pay the costs and expenses of such enforcement. Subject to any limits under applicable law, costs and expenses
include fifteen percent (15%) of the principal plus accrued interest collected as Lender’s attorneys’ fees and Lender’s legal expenses
whether or not there is a lawsuit, including legal expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Grantor 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.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 5
	 	 	 

 

Governing Law. With respect
to procedural matters related to the perfection and enforcement of Lender’s rights against the Collateral, 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
Georgia. In all other respects, this Agreement will be governed by federal law applicable to Lender and, to the extent not preempted
by federal law, the laws of the Commonwealth of Kentucky without regard to its conflicts of law provisions. However, if there
ever is a question about whether any provision of this Agreement is valid or enforceable, the provision that is questioned will
be governed by whichever state or federal law would find the provision to be valid and enforceable. The loan transaction that
is evidenced by the Note and this Agreement has been applied for, considered, approved and made, and all necessary loan documents
have been accepted by Lender in the Commonwealth of Kentucky.

 

Choice of Venue. If there is a lawsuit,
Grantor agrees upon Lender’s request to submit to the jurisdiction of the courts of BOYD County, Commonwealth of Kentucky.

 

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 Grantor, shall constitute a waiver of any of Lender’s rights or of any of 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 mail 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,
Grantor agrees to keep Lender informed at all times of Grantor’s current address. Unless otherwise provided or required by law,
if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors.

 

Power of Attorney. Grantor hereby
appoints Lender as Grantor’s irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect, amend,
or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties. Lender
may at any time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing
statement or of this Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection
and the continuation of the perfection of Lender’s security interest in the Collateral.

 

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.

 

Successors and Assigns. Subject
to any limitations stated in this Agreement on transfer of Grantor’s interest, this Agreement shall be binding upon and inure to
the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than
Grantor, Lender, without notice to Grantor, may deal with Grantor’s successors with reference to this Agreement and the Indebtedness
by way of forbearance or extension without releasing Grantor from the obligations of this Agreement or liability under the Indebtedness.

 

Survival of Representations and Warranties.
All representations, warranties, and agreements made by Grantor in this Agreement shall survive the execution and delivery of this
Agreement, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor’s Indebtedness shall
be paid in full.

 

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

 

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:

 

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

 

Borrower. The word “Borrower”
means TX Holdings Incorporated and includes all co-signers and co-makers signing the Note and all their successors and assigns.

 

Collateral. The word “Collateral”
means all of Grantor’s right, title and interest in and to all the Collateral as described in the Collateral Description section
of this Agreement.

 

Default. The word “Default”
means the Default set forth in this Agreement in the section titled “Default”.

 

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., 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.

 

Grantor. The word “Grantor”
means TX Holdings Incorporated.

 

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

 

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.

 

     

     

    

  

	COMMERCIAL
    SECURITY AGREEMENT
	Loan No: #0185000009	(Continued)	Page 6
	 	 	 

 

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 Grantor is responsible under this Agreement or under any of the Related Documents.
Specifically, without limitation, Indebtedness includes all amounts that may be indirectly secured by the Cross-Collateralization
provision of this Agreement.

 

Lender. The word “Lender”
means Town Square Bank, its successors and assigns.

 

Note. The word “Note”
means the Note dated December 3, 2015 and executed by TX Holdings Incorporated in the principal amount of $711,376.42, together
with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit
agreement.

 

Property. The word “Property”
means all of Grantor’s right, title and interest in and to all the Property as described in the “Collateral Description”
section of this Agreement.

 

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 Indebtedness.

 

GRANTOR HAS READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 3, 2015.

 

THIS AGREEMENT IS GIVEN UNDER SEAL AND
IT IS INTENDED THAT THIS AGREEMENT IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO LAW.

 

GRANTOR:

 

	TX HOLDINGS INCORPORATED		 
	 	 	 	 
	By:	/s/ William L. Shrewsbury	 (Seal)	 
	 	William L. Shrewsbury, Chairman of TX Holdings	 	 
	 	Incorporated	 	 
	 	 	 	 
	LENDER:	 	 

 

	TOWN SQUARE BANK	 
	 	 	 
	X	/s/ Josh Daniel	 
	 	Josh Daniel, Loan Officer	 

 

	LaserPro,
    Ver. 15.4.20.033 Copr. D + H USA Corporation 1997, 2015. All Rights Reserved. - GA/KY c:\CFI\LPL\E40.FC TR-9236 PR-199

 

     

     

    

  

COMMERCIAL
GUARANTY

 

	Principal	Loan Date	Maturity	Loan No	Call
    / Coll	Account	Officer

***	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:	TX
    Holdings Incorporated	Lender:	Town
    Square Bank
	 	P.
    O. Box 1425	 	1500
    Carter Avenue
	 	Ashland,
    KY 41105-1425	 	P.O.
    Box 509
	 	 	 	Ashland,
    KY 41105-0509
	 	 	 	(606)
    324-7196
	 	 	 	 
	Guarantor:	William
    L. Shrewsbury 	 	 
	 	9413
    Collier Road 	 	 
	 	Ashland,
    KY 41101	 	 
	 	 	 	 

 

GUARANTEE
OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely and unconditionally guarantees full
and punctual payment and satisfaction of Guarantor’s Share of the Indebtedness of Borrower to Lender, and the performance
and discharge of all Borrower’s obligations under the Note and the Related Documents. This is a guaranty of payment and
performance and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s
remedies against anyone else obligated to pay the Indebtedness or against any collateral securing the Indebtedness, this Guaranty
or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or its order, on demand, in legal tender
of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise perform Borrower’s
obligations under the Note and Related Documents.

 

INDEBTEDNESS.
The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time
and at any one or more times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted
by law, reasonable attorneys’ fees, arising from any and all debts, liabilities and obligations that Borrower individually
or collectively or interchangeably with others, owes or will owe Lender under the Note and Related Documents and any renewals,
extensions, modifications, refinancings, consolidations and substitutions of the Note and Related Documents.

 

If
Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights
under all guaranties shall be cumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect
or invalidate any such other guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms
of this Guaranty and any such other unterminated guaranties.

 

GUARANTOR’S
SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in this Guaranty mean
Guarantor’s maximum aggregate liability that is 100.000% of all the principal amount, interest thereon to the extent not
prohibited by law, and all collection costs, expenses and reasonable attorneys’ fees whether or not there is a lawsuit,
and if there is a lawsuit, any fees and costs for trial and appeals.

 

Lender
shall determine Guarantor’s Share of the Indebtedness when Lender makes demand on Guarantor. After a determination, Guarantor’s
Share of the Indebtedness will only be reduced by sums actually paid by Guarantor under this Guaranty, but will not be reduced
by sums from any other source including, but not limited to, sums realized from any collateral securing the Indebtedness or this
Guaranty, or payments by anyone other than Guarantor, or reductions by operation of law, judicial order or equitable principles.
Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties of the Indebtedness.

 

The
above limitation on liability is not a restriction on the amount of the Note of Borrower to Lender either in the aggregate or
at any one time.

 

DURATION
OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or
any notice to Guarantor or to Borrower, and will continue in full force until all the Indebtedness shall have been fully and finally
paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. Release
of any other guarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under
this Guaranty. A revocation Lender receives from any one or more Guarantors shall not affect the liability of any remaining Guarantors
under this Guaranty.

 

GUARANTOR’S
AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice or demand
and without lessening Guarantor’s liability under this Guaranty, from time to time: (A)
to make one or more additional secured or unsecured loans to Borrower, to
lease equipment or other goods to Borrower, or otherwise to extend additional credit to
Borrower; (B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other
terms of the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness;
extensions may be repeated and may be for longer than the original loan term; (C) to take and hold security for the payment of
this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal with any one
or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine
how, when and what application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct
the order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by the terms of the controlling
security agreement or deed of trust, as Lender in its discretion may determine; (G) to sell, transfer, assign or grant participations
in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.

 

GUARANTOR’S
REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreements of any
kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed
at Borrower’s request and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into
this Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any agreement or other instrument
binding upon Guarantor and do not result in a violation of any law, regulation, court decree or order applicable to Guarantor;
(E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s
request, Guarantor will provide to Lender financial and credit information in form acceptable to Lender, and all such financial
information which currently has been, and all future financial information which will be provided to Lender is and will be true
and correct in all material respects and fairly present Guarantor’s financial condition as of the dates the financial information
is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the most recent
financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial
condition; (H) no litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes)
against Guarantor is pending or threatened; (I) Lender has made no representation to Guarantor as to the creditworthiness of Borrower;
and (J) Guarantor has established adequate means of obtaining from Borrower on a continuing basis information regarding Borrower’s
financial condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or circumstances which
might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request for information,
Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its
relationship with Borrower.

 

     

     

    

 

	 	COMMERCIAL GUARANTY	 
	Loan No: #0185000009	(Continued)	Page 2
	 	 	 

 

GUARANTOR’S
FINANCIAL STATEMENTS. Guarantor agrees to furnish Lender with the following:

 

Annual
Statements. As soon as available after the end of each fiscal year, Guarantor’s balance sheet and income statement for
the year ended, prepared by Guarantor in form satisfactory to Lender.

 

Tax
Returns. As soon as available after the applicable filing date for the tax reporting period ended, Guarantor’s Federal
and other governmental tax returns, prepared by a tax professional satisfactory to Lender.

 

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

 

GUARANTOR’S
WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender (A) to continue lending money
or to extend other credit to Borrower; (B) to make any presentment, protest, demand, or notice of any kind, including notice of
any nonpayment of the Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction on the
part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the Indebtedness or in connection with the
creation of new or additional loans or obligations; (C) to resort for payment or to proceed directly or at once against any person,
including Borrower or any other guarantor; (D) to proceed directly against or exhaust any collateral held by Lender from Borrower,
any other guarantor, or any other person; (E) to give notice of the terms, time, and place of any public or private sale of personal
property security held by Lender from Borrower or to comply with any other applicable provisions of the Uniform Commercial Code;
(F) to pursue any other remedy within Lender’s power; or (G) to commit any act or omission of any kind, or at any time,
with respect to any matter whatsoever.

 

Guarantor
also waives any and all rights or defenses based on suretyship or impairment of collateral including, but not limited to, any
rights or defenses arising by reason of (A) any “one action” or “anti-deficiency” law or any other law
which may prevent Lender from bringing any action, including a claim for deficiency, against Guarantor, before or after Lender’s
commencement or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B) any election of
remedies by Lender which destroys or otherwise adversely affects Guarantor’s subrogation rights or Guarantor’s rights
to proceed against Borrower for reimbursement, including without limitation, any loss of rights Guarantor may suffer by reason
of any law limiting, qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of any other
guarantor, or of any other person, or by reason of the cessation of Borrower’s liability from any cause whatsoever, other
than payment in full in legal tender, of the Indebtedness; (D) any right to claim discharge of the Indebtedness on the basis of
unjustified impairment of any collateral for the Indebtedness; (E) any statute of limitations, if at any time any action or suit
brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not barred by any applicable statute
of limitations; or (F) any defenses given to guarantors at law or in equity other than actual payment and performance of the Indebtedness.
If payment is made by Borrower, whether voluntarily or otherwise, or by any third party, on the Indebtedness and thereafter Lender
is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy or to any similar person under any federal
or state bankruptcy law or law for the relief of debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement
of this Guaranty.

 

Guarantor
further waives and agrees not to assert or claim at any time any deductions to the amount guaranteed under this Guaranty for any
claim of setoff, counterclaim, counter demand, recoupment or similar right, whether such claim, demand or right may be asserted
by the Borrower, the Guarantor, or both.

 

GUARANTOR’S
UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above is made with
Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable
and not contrary to public policy or law. If any such waiver is determined to be contrary to any applicable law or public policy,
such waiver shall be effective only to the extent permitted by law or public policy.

 

RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Guarantor’s accounts
with Lender (whether checking, savings, or some other account). This includes all accounts Guarantor holds jointly with someone
else and all accounts Guarantor may open in the future. However, this does not include any IRA or Keogh accounts, or any trust
accounts for which setoff would be prohibited by law. Guarantor authorizes Lender, to the extent permitted by applicable law,
to hold these funds if there is a default, and Lender may apply the funds in these accounts to pay what Guarantor owes under the
terms of this Guaranty.

 

SUBORDINATION
OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness, whether now existing or hereafter created,
shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes
insolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever,
to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of
the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors, by voluntary liquidation, or otherwise,
the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall
be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire
against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be
effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests,
any notes or credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with
a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized,
in the name of Guarantor, from time to time to file financing statements and continuation statements and to execute documents
and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this
Guaranty.

 

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

 

Amendments.
This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Guaranty. No alteration of or amendment to this Guaranty 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. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable
attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender
may hire or pay someone else to help enforce this Guaranty, and Guarantor shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender’s reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit,
including reasonable 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. Guarantor also shall pay all
court costs and such additional fees as may be directed by the court.

 

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

 

Governing
Law. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws
of the Commonwealth of Kentucky without regard to its conflicts of law provisions.

 

Choice
of Venue. If there is a lawsuit, Guarantor agrees upon Lender’s request to submit to the jurisdiction of the courts
of BOYD County, Commonwealth of Kentucky.

 

     

     

    

 

	 	COMMERCIAL GUARANTY	 
	Loan No: #0185000009	(Continued)	Page 3
	 	 	 

  

Integration.
Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity
to be advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions
and parol evidence is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless
from all losses, claims, damages, and costs (including Lender’s attorneys’ fees) suffered or incurred by Lender as
a result of any breach by Guarantor of the warranties, representations and agreements of this paragraph.

 

Interpretation.
In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall
be deemed to have been used in the plural where the context and construction so require; and where there is more than one Borrower
named in this Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor”
respectively shall mean all and any one or more of them. The words “Guarantor,” “Borrower,” and “Lender”
include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision of this Guaranty
is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or
enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may
be found to be invalid or unenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability
companies, or similar entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers,
directors, partners, managers, or other agents acting or purporting to act on their behalf, and any indebtedness made or created
in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty.

 

Notices.
Any notice required to be given under this Guaranty 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 mail postage prepaid,
directed to the addresses shown near the beginning of this Guaranty. Any party may change its address for notices under this Guaranty
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, Guarantor agrees to keep Lender informed at all times of Guarantor’s current address. Unless
otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to any Guarantor is deemed
to be notice given to all Guarantors.

 

No
Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty 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 Guaranty 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 Guaranty. No prior
waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’s rights
or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this
Guaranty, 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.

 

Successors
and Assigns. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall
be binding upon and inure to the benefit of the parties, their successors and assigns.

 

DEFINITIONS.
The following capitalized words and terms shall have the following meanings when used in this Guaranty. 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 Guaranty shall have the meanings attributed to such terms in the Uniform Commercial
Code:

 

Borrower.
The word “Borrower” means TX Holdings Incorporated and includes all co-signers and co-makers signing the Note
and all their successors and assigns.

 

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

 

Guarantor.
The word “Guarantor” means everyone signing this Guaranty, including without limitation William L. Shrewsbury,
and in each case, any signer’s successors and assigns.

 

Guarantor’s
Share of the Indebtedness. The words “Guarantor’s Share of the Indebtedness” mean Guarantor’s indebtedness
to Lender as more particularly described in this Guaranty.

 

Guaranty.
The word “Guaranty” means this guaranty from Guarantor to Lender.

 

Indebtedness.
The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty.

 

Lender.
The word “Lender” means Town Square Bank, its successors and assigns.

 

Note.
The word “Note” means the promissory note dated December 3, 2015, in the original principal amount of $711,376.42
from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of,
and substitutions for the promissory note or agreement.

 

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 Indebtedness.

 

EACH
UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES TO ITS TERMS. IN ADDITION, EACH
GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER
AND THAT THE GUARANTY WILL CONTINUE UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”.
NO FORMAL ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED DECEMBER 3, 2015.

 

	 	GUARANTOR:	 
	 	 	 	 
	 	X	/s/
    William L. Shrewsbury	 
	 	 	William
    L. Shrewsbury	 

 

     

     

    

 

	 	COMMERCIAL GUARANTY	 
	Loan No: #0185000009	(Continued)	Page 4
	 	 	 

 

 

INDIVIDUAL
ACKNOWLEDGMENT

 

	COMMONWEALTH
    OF KENTUCKY	)
	 	) SS
	COUNTY
    OF 	BOYD	)

 

The foregoing instrument was acknowledged before me this 3 day
of December, 2015 by William L. Shrewsbury.

 

	 	/s/
    Josh Daniel
	 	(Signature of Person Taking Acknowledgement) 
	 	 
	 	Notary
	 	(Title or Rank)
	 	 
	 	517655	8/19/18
	 	(Serial
Number, if any)	(My commission expires)

 

	LaserPro,
                                         Ver. 15.4.20.033 Copr. D + H USA Corporation 1997, 2015. All Rights Reserved. - KY c:\CFI\LPL\E20.FC
                                         TR-9236 PR-199

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