Document:

Exhibit 10.29

 

	
        RECORDATION REQUESTED BY:

        US Employment Development Lending Center,
        LLC

        1 World Trade Center, Suite 1870

        Long Beach, CA 90831

         

        WHEN RECORDED MAIL TO:

        US Employment Development Lending Center,
        LLC

        1 World Trade Center, Suite 1870

        Long Beach, CA 90831

         

        SEND TAX NOTICES TO:

        US Employment Development Lending Center,
        LLC

        1 World Trade Center, Suite 1870

        Long Beach, CA 90831
	FOR RECORDER’S USE ONLY

 

ASSIGNMENT OF RENTS

 

THIS ASSIGNMENT OF RENTS dated April
2, 2012, is made and executed between Superior Drilling Products of California, LLC, a California Limited Liability Company, whose
address is 19479 Creek Blvd., Bakersfield, CA 93314 (referred to below as “Grantor”) and US Employment Development
Lending Center, LLC, whose address is 1 World Trade Center, Suite 1870, Long Beach, CA 90831 (referred to below as “Lender”).

 

ASSIGNMENT. For valuable consideration,
Grantor hereby assigns, grants a continuing security interest in, and conveys to Lender all of Grantor’s right, title, and
interest in and to the Rents from the following described Property located in Kern County, State of California:

 

PARCEL 2 OF PARCEL MAP NO.
8961 IN THE UNINCORPORATED AREA OF THE COUNTY OF KERN, STATE OF CALIFORNIA, AS PER MAP RECORDED MAY 9, 1991, IN BOOK 42 OF PARCEL
MAPS, PAGE 25 IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

EXCEPTING THEREFROM 1/2
OF ALL OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES AS CONVEYED TO GERI BLOEMER COOPER IN DEED RECORDED OCTOBER 11, 1989,
IN BOOK 6301, PAGE 990 OF OFFICIAL RECORDS.

 

ALSO EXCEPEPTING THEREFROM
ALL REMAINING OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES WITHIN OR UNDERLYING SAID LAND AS RESERVED BY JACK M. HOOD AND
SHARON B. HOOD, AS TRUSTEES UNDER THE JACK M. HOOD AND SHARON B. HOOD LIVING TRUST DATED DECEMBER 27, 1991, AS TO AN UNDIVIDED
1/3 INTEREST; ROBERT A. HOOD AND MARY MARTHA HOOD AS CO-TRUSTEES OF THE ROBERT A. AND MARY MARTHA HOOD LIVING TRUST DATED JULY
2, 1992, AS TO AN UNDIVIDED 1/3 INTEREST AND HAZEL MARY HOBBA HENDERSON, TRUSTEE OF THE HAZEL MARY HOBBA HENDERSON REVOCABLE TRUST
DATED SEPTEMBER 18, 1987, AS TO AN UNDIVIDED 1/3 INTEREST IN DEED RECORDED MARCH 7, 2000, AS INSTRUMENT NO. 02-26223 OF OFFICIAL
RECORDS.

 

The Property or its address is commonly
known as 1140 Black Gold Road, Bakersfield, CA 93308. The Assessor’s Parcel Number for the Property is 481-200-22-00-9.

 

This is an absolute assignment of Rents
made in connection with an obligation secured by property pursuant to California Civil Code section 2938.

 

THIS ASSIGNMENT IS GIVEN TO SECURE
(1) PAYMENT OF THE INDEBTEDNESS AND (2) PERFORMANCE OF ANY AND ALL OBLIGATIONS OF GRANTOR UNDER THE NOTE, THIS ASSIGNMENT, AND
THE RELATED DOCUMENTS. THIS ASSIGNMENT IS GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:

 

PAYMENT AND PERFORMANCE. Except
as otherwise provided In this Assignment or any Related Documents, Grantor shall pay to Lender all amounts secured by this Assignment
as they become due, and shall strictly perform all of Grantor’s obligations under this Assignment. Unless and until Lender
exorcises its right to collect the Rents as provided below and so long as there is no default under this Assignment. Grantor may
remain in possession and control of and operate and manage the Property and collect the Rents, provided that the granting of the
right to collect the Rents shall not constitute Lender’s consent to the use of cash collateral in a bankruptcy proceeding.

 

GRANTOR’S REPRESENTATIONS AND
WARRANTIES. Grantor warrants that:

 

Ownership. Grantor is
entitled to receive the Rents free and clear of all rights, loans, liens, encumbrances, and claims except as disclosed to and accepted
by Lender in writing.

 

Right to Assign. Grantor
has the full right, power and authority to enter into this Assignment and to assign and convey the Rents to Lender.

 

    	 

    	 

    

 

	 	ASSIGNMENT OF RENTS	 
	 	(Continued)	Page 2
	 	 	 

 

No Prior Assignment.
Grantor has not previously assigned or conveyed the Rents to any other person by any instrument now in force.

 

No Further Transfer.
Grantor will not sell, assign, encumber, or otherwise dispose of any of Grantor’s rights in the Rents except as provided
in this Assignment.

 

LENDER’S RIGHT TO RECEIVE AND
COLLECT RENTS. Lender shall have the right at any time, and even though no default shall have occurred under this Assignment,
to collect and receive the Rents. For this purpose, Lender is hereby given and granted the following rights, powers and authority:

 

Notice to Tenants. Lender
may send notices to any and all tenants of the Property advising them of this Assignment and directing all Rents to be paid directly
to Lender or Lender’s agent.

 

Enter the Property. Lender
may enter upon and take possession of the Property; demand, collect and receive from the tenants or from any other persons liable
therefor, all of the Rents; institute and carry on all legal proceedings necessary for the protection of the Property, including
such proceedings as may be necessary to recover possession of the Property; collect the Rents and remove any tenant or tenants
or other persons from the Property.

 

Maintain the Property.
Lender may enter upon the Property to maintain the Property and keep the same in repair; to pay the costs thereof and of all services
of all employees, including their equipment, and of all continuing costs and expenses of maintaining the Property in proper repair
and condition, and also to pay all taxes, assessments and water utilities, and the premiums on fire and other insurance effected
by Lender on the Property.

 

Compliance with Laws.
Lender may do any and all things to execute and comply with the laws of the State of California and also all other laws, rules,
orders, ordinances and requirements of all other governmental agencies affecting the Property.

 

Lease the Property. Lender
may rent or lease the whole or any part of the Property for such term or terms and on such conditions as Lender may deem appropriate.

 

Employ Agents. Lender
may engage such agent or agents as Lender may deem appropriate, either in Lender’s name or in Grantor’s name, to rent
and manage the Property, including the collection and application of Rents.

 

Other Acts. Lender may
do all such other things and acts with respect to the Property as Lender may deem appropriate and may act exclusively and solely
in the place and stead of Grantor and to have all of the powers of Grantor for the purposes stated above.

 

No Requirement to Act.
Lender shall not be required to do any of the foregoing acts or things, and the fact that Lender shall have performed one or more
of the foregoing acts or things shall not require Lender to do any other specific act or thing.

 

APPLICATION OF RENTS. All costs
and expenses incurred by Lender in connection with the Property shall be for Grantor’s account and Lender may pay such costs
and expenses from the Rents. Lender, its sole discretion, shall determine the application of any and all Rents received by it;
however, any such Rents received by Lender which are not applied to such costs and expenses shall be applied to the Indebtedness.
All expenditures made by Lender under this Assignment and not reimbursed from the Rents shall become a part of the Indebtedness
secured by this Assignment, and shall be payable on demand, with interest at the Note rate from date of expenditure until paid.

 

FULL PERFORMANCE. If Grantor pays
all of the Indebtedness when due and otherwise performs all the obligations imposed upon Grantor under this Assignment, the Note,
and the Related Documents, Lender shall execute and deliver to Grantor a suitable satisfaction of this Assignment and suitable
statements of termination of any financing statement on file evidencing Lender’s security interest in the Rents and the Property.
Any termination fee required by law shall be paid by Grantor, if permitted by applicable law.

 

LENDER’S EXPENDITURES. If
any action or proceeding is commenced that would materially affect Lender’s interest in the Property or if Grantor falls
to comply with any provision of this Assignment 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 Assignment 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 Rents or the Property and paying all costs for insuring, maintaining and preserving the Property. 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 Assignment 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,
at Lender’s option, shall constitute an Event of Default under this Assignment:

 

Payment Default. Grantor
falls 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 Assignment 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 on Other Payments.
Failure of Grantor within the time required by this Assignment to make any payment for taxes or insurance, or any other payment
necessary to prevent filing of or to effect discharge of any lien.

 

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

 

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

 

    	 

    	 

    

 

	 	ASSIGNMENT OF RENTS	 
	 	(Continued)	Page 3
	 	 	 

 

Defective Collateralization.
This Assignment 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.

 

Death or Insolvency.
The dissolution of Grantor’s (regardless of whether election to continue is made), any member withdraws from the limited
liability company, or any other termination of Grantor’s existence as a going business or the death of any member, 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 the Rents or any property 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.

 

Property Damage or Loss.
The Property is lost, stolen, substantially damaged, sold, or borrowed against.

 

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

 

Adverse Change. A material
adverse change occurs in 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.

 

RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of
any Event of Default and at any time thereafter, Lender may exercise any one or more of the following rights and remedies, in addition
to any other rights or remedies provided by law:

 

Accelerate Indebtedness.
Lender shall have the right at its option without notice to Grantor to declare the entire Indebtedness immediately due and payable,
including any prepayment fee that Grantor would be required to pay.

 

Collect Rents. Lender
shall have the right, without notice to Grantor, to take possession of the Property and collect the Rents, including amounts past
due and unpaid, and apply the net proceeds, over and above Lender’s costs, against the Indebtedness. In furtherance of this
right, Lender shall have all the rights provided for in the Lender’s Right to Receive and Collect Rents Section, above. If
the Rents are collected by Lender, then Grantor irrevocably designates Lender as Grantor’s attorney-in-fact to endorse instruments
received in payment thereof in the name of Grantor and to negotiate the same and collect the proceeds. Payments by tenants or other
users to Lender in response to Lender’s demand shall satisfy the obligations for which the payments are made, whether or
not any proper grounds for the demand existed. Lender may exercise its rights under this subparagraph either in person, by agent,
or through a receiver.

 

Appoint Receiver. Lender
shall have the right to have a receiver appointed to take possession of all or any part of the Property, with the power to protect
and preserve the Property, to operate the Property preceding foreclosure or sale, and to collect the Rents from the Property 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
Property exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a
receiver.

 

Other Remedies. Lender
shall have all other rights and remedies provided in this Assignment or the Note or by law.

 

Election of Remedies.
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 Assignment, after Grantor’s failure to perform, shall not affect
Lender’s right to declare a default and exercise its remedies.

 

Attorneys’ Fees; Expenses.
If Lender institutes any suit or action to enforce any of the terms of this Assignment, Lender shall be entitled to recover such
sum as the court may adjudge reasonable as attorneys’ fees at trial and upon any appeal. Whether or not any court action
is involved, and to the extent not prohibited by law, all reasonable expenses Lender incurs that in Lender’s opinion are
necessary at any time for the protection of its interest or the enforcement of Its rights shall become a part of the Indebtedness
payable on demand and shall bear interest at the Note rate from the date of the expenditure until repaid. Expenses covered by
this paragraph include, without limitation, however subject to any limits Linder applicable law, Lender’s attorneys’
fees and Lender’s legal expenses, whether or not there is a lawsuit, including attorneys’ fees and expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services, the cost of searching records, obtaining title reports (including foreclosure reports), surveyors’
reports, and appraisal fees, title insurance, and fees for the Trustee, to the extent permitted by applicable law. Grantor also
will pay any court costs, in addition to all other sums provided by law.

 

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

 

Amendments. This Assignment,
together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth
in this Assignment No alteration of or amendment to this Assignment 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.

 

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

 

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

 

    	 

    	 

    

 

	 	ASSIGNMENT OF RENTS	 
	 	(Continued)	Page 4
	 	 	 

 

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

 

Merger. There shall be
no merger of the interest or estate created by this assignment with any other interest or estate in the Property at any time held
by or for the benefit of Lender in any capacity, without the written consent of Lender.

 

Interpretation. (1) In
all cases where there is more than one Borrower or Grantor, then all words used in this Assignment in the singular shall be deemed
to have been used in the plural where the context and construction so require. (2) If more than one person signs this Assignment
as “Grantor,” the obligations of each Grantor are joint and several. This means that if Lender brings a lawsuit, Lender
may sue any one or more of the Grantors. If Borrower and Grantor are not the same person, Lender need not sue Borrower first, and
that Borrower need not be joined in any lawsuit. (3) The names given to paragraphs or sections in this Assignment are for convenience
purposes only. They are not to be used to interpret or define the provisions of this Assignment.

 

No Waiver by Lender.
Lender shall not be deemed to have waived any rights under this Assignment 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 Assignment 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 Assignment. 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 Assignment, 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 Assignment 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 Assignment. Any party may change its address for notices under this Assignment 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.

 

Powers of Attorney. The
various agencies and powers of attorney conveyed on Lender under this Assignment are granted for purposes of security and may not
be revoked by Grantor until such time as the same are renounced by Lender.

 

Severability. If a court
of competent jurisdiction finds any provision of this Assignment 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 Assignment Unless otherwise required by law, the Illegality, invalidity,
or unenforceability of any provision of this Assignment shall not affect the legality, validity or enforceability of any other
provision of this Assignment.

 

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

 

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

 

Waiver of Right of Redemption.
NOTWITHSTANDING ANY OF THE PROVISIONS TO THE CONTRARY CONTAINED IN THIS ASSIGNMENT, GRANTOR HEREBY WAIVES ANY AND ALL RIGHTS OF
REDEMPTION FROM SALE UNDER ANY ORDER OR JUDGMENT OF FORECLOSURE ON GRANTOR’S BEHALF AND ON BEHALF OF EACH AND EVERY PERSON,
EXCEPT JUDGMENT CREDITORS OF GRANTOR, ACQUIRING ANY INTEREST IN OR TITLE TO THE PROPERTY SUBSEQUENT TO THE DATE OF THIS ASSIGNMENT.

 

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

 

Assignment. The word
“Assignment” means this ASSIGNMENT OF RENTS, as this ASSIGNMENT OF RENTS may be amended or modified from time to time,
together with all exhibits and schedules attached to this ASSIGNMENT OF RENTS from time to time.

 

Borrower. The word ‘‘Borrower”
means Superior Drilling Products of California, LLC.

 

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

 

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

 

Grantor. The word “Grantor”
means Superior Drilling Products of California, LLC.

 

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.

 

Indebtedness. The word
“Indebtedness” means all principal, interest, and other amounts, costs and expenses payable under the Note or Related
Documents, together with all renewals of, extensions of, modifications of, consolidations of and substitutions for the Note or
Related Documents and any amounts expended or advanced by Lender to discharge Grantor’s obligations or expenses incurred
by Lender to enforce Grantor’s obligations under this Assignment, together with interest on such amounts as provided in this
Assignment.

 

    	 

    	 

    

 

	 	ASSIGNMENT OF RENTS	 
	 	(Continued)	Page 5
	 	 	 

 

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

 

Note. The word “Note”
means the promissory note dated April 2, 2012, in the original principal amount of $461,500.00 from Grantor to Lender,
together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the
promissory note or agreement.

 

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

 

Related Documents. The
words “Related Documents” mean all promissory notes, credit agreements, loan agreements, 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; except that the words do not mean any guaranty or environmental agreement,
whether now or hereafter existing, executed in connection with the Indebtedness.

 

Rents. The word “Rents”
means all of Grantor’s present and future rights, title and interest in, to and under any and all present and future leases,
including, without limitation, all rents, revenue, income, issues, royalties, bonuses, accounts receivable, cash or security deposits,
advance rentals, profits and proceeds from the Property, and other payments and benefits derived or to be derived from such leases
of every kind and nature, whether due now or later, including without limitation Grantor’s right to enforce such leases and
to receive and collect payment and proceeds thereunder.

 

THE UNDERSIGNED ACKNOWLEDGES HAVING
READ ALL THE PROVISIONS OF THIS ASSIGNMENT, AND NOT PERSONALLY BUT AS AN AUTHORIZED SIGNER, HAS CAUSED THIS ASSIGNMENT TO BE SIGNED
AND EXECUTED ON BEHALF OF GRANTOR ON APRIL 2, 2012.

 

GRANTOR:

 

SUPERIOR DRILLING PRODUCTS OF
CALIFORNIA, LLC

 

	By:	/s/ Annette D. Meier	 
	 	Annette D. Meier, Manager of Superior Drilling Products of California, LLC

 

	 
	CERTIFICATE OF ACKNOWLEDGMENT

 

	STATE OF 	Utah	)	 
	 	 	) SS	 
	COUNTY OF 	Salt Lake	)	 

 

	On April 9, 2012 before
    me. 	 	Rich Mahoney - Notary Public
	 	 	(here insert name and title of the officer)

 

personally appeared Annette D, Meier, who
proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

 

I certify under PENALTY OF PERJURY under the laws of the State
of California that the foregoing paragraph is true and correct.

 

	
         

         

         

         

        WITNESS my hand and official seal.

         
	 	
	Signature	[ILLEGIBLE]	 	(Seal)

  

LASER PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA C:\HARLANDLP\CFI\LPL\G14.FC
TR-113 PR-14Exhibit 10.31

 

CONSTRUCTION LOAN AGREEMENT

 

	
        Principal

        $1,350,000.00
	
        Loan Date

        05-11-2012
	
        Maturity

        05-01-2017
	
        Loan No

        5051014
	Call / Coll	Account	
        Officer

        CB
	Initials
	References
    in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan
    or item. Any item above containing “***” has been omitted due to text length limitations.

 

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

 

 

THIS CONSTRUCTION LOAN AGREEMENT dated
May 11, 2012, is made and executed between Superior Drilling Products of California, LLC (“Borrower”) and US Employment
Development Lending Center, LLC (“Lender”) on the following terms and conditions. Borrower has applied to Lender for
one or more loans for purposes of constructing the Improvements on the Real Property described below. Lender is willing to lend
the loan amount to Borrower solely under the terms and conditions specified in this Agreement and in the Related Documents, to
each of which Borrower agrees. 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, and (B) all such
Loans shall be and remain subject to the terms and conditions of this Agreement.

 

TERM. This Agreement shall be effective
as of May 11, 2012, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor of Lender
have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or
until such time as the parties may agree in writing to terminate this Agreement.

 

LOAN. The Loan shall be in an amount
not to exceed the principal sum of U.S. $1,350,000.00 and shall bear interest on so much of the principal sum as shall
be advanced pursuant to the terms of this Agreement and the Related Documents. The Loan shall bear interest on each Advance from
the date of the Advance in accordance with the terms of the Note. Borrower shall use the Loan Funds solely for the following specific
purposes: Loan Proceeds to be used as follows:

 

	$	417,325	 	 	for general construction costs
	$	610,961	 	 	for equipment purchases
	$	23,000	 	 	reserved for Interest on Loan
	$	20,000	 	 	for construction contingency
	$	38,714	 	 	for loan costs
	$	240,000	 	 	for working capital. 

 The Loan amount shall be subject
at all times to all maximum limits and conditions set forth in this Agreement or in any of the Related Documents, including without
limitation, any limits relating to loan to value ratios and acquisition and Project costs.

 

PROJECT DESCRIPTION. The word “Project”
as used in this Agreement means the construction and completion of all Improvements contemplated by this Agreement, including
without limitation the erection of the building or structure on the Real Property identified to this Agreement by Borrower and
Lender, Installation of equipment and fixtures, landscaping, and all other work necessary to make the Project usable and complete
for the intended purposes. The Project includes the following work:

 

To construct improvements
on the real property commonly known as 1140 Black Gold Road, Bakersfield, CA 93308.

 

The word “Property” as used
in this Agreement means the Real Property together with all Improvements, all equipment, fixtures, and other articles of personal
property now or subsequently attached or affixed to the Real Property, together with all accessions, parts, and additions to,
all replacements of, and all substitutions for any of such property, and all proceeds (including insurance proceeds and refunds
of premiums) from any sale or other disposition of such property. The real estate described below constitutes the Real Property
as used in this Agreement.

 

The real estate legally described
as:

THE LAND DESCRIBED HEREIN IS
SITUATED IN THE STATE OF CALIFORNIA, COUNTY OF KERN, UNINCORPORATED AREA, AND IS DESCRIBED AS FOLLOWS:

 

PARCEL 2 OF PARCEL MAP NO.
8961 IN THE UNINCORPORATED AREA OF THE COUNTY OF KERN, STATE OF CALIFORNIA, AS PER MAP RECORDED MAY 9, 1991, IN BOOK 42 OF PARCEL
MAPS, PAGE 25 IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

EXCEPTING THEREFROM 1/2 OF
ALL OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES AS CONVEYED TO GERI BLOEMER COOPER IN DEED RECORDED OCTOBER 11, 1989, IN
BOOK 6301, PAGE 990 OF OFFICIAL RECORDS.

 

ALSO EXCEPTING THEREFROM ALL
REMAINING OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES WITHIN OR UNDERLYING SAID LAND AS RESERVED BY JACK M. HOOD AND SHARON
B. HOOD, AS TRUSTEES UNDER THE JACK M. HOOD AND SHARON B. HOOD LIVING TRUST DATED DECEMBER 27, 1991, AS TO AN UNDIVIDED 1/3 INTEREST;
ROBERT A HOOD AND MARY MARTHA HOOD AS CO-TRUSTEES OF THE ROBERT A. AND MARY MARTHA HOOD LIVING TRUST DATED JULY 2, 1992, AS TO
AN UNDIVIDED 1/3 INTEREST AND HAZEL MARY HOBBA HENDERSON, TRUSTEE OF THE HAZEL MARY HOBBA HENDERSON REVOCABLE TRUST DATED SEPTEMBER
18, 1987, AS TO AN UNDIVIDED 1/3 INTEREST IN DEED RECORDED MARCH 7, 2000, AS INSTRUMENT NO. 02-26223 OF OFFICIAL RECORDS.

Its address is commonly known
as:

Real Property located at 1140
Black Gold Road, Bakersfield, CA 93308.

 

FEES AND EXPENSES. As a condition
of Lender making the Loan, Borrower agrees to pay the following fees, charges, and expenses, in addition to all others set forth
in this Agreement: Borrower will pay all fees and costs incurred by Lender in connection with this Loan. Whether or not
the Project shall be consummated, Borrower shall assume and pay upon demand all out-of-pocket expenses incurred by Lender in connection
with the preparation of loan documents and the making of the Loan, including without limitation the following: (A) all closing
costs, loan fees, and disbursements; (B) all expenses of Lender’s legal counsel; and (C) all title examination fees, title
insurance premiums, appraisal fees, survey costs, required fees, and filing and recording fees.

 

NO CONSTRUCTION PRIOR TO RECORDING
OF SECURITY DOCUMENT. Borrower will not permit any work or materials to be furnished in connection with the Project until (A)
Borrower has signed the Related Documents; (B) Lender’s mortgage or deed of trust and other Security Interests in the Property
have been duly recorded and perfected; (C) Lender has been provided evidence, satisfactory to Lender, that Borrower has obtained
all insurance required under this Agreement or any Related Documents and that Lender’s liens on the Property and Improvements
are valid perfected first liens, subject only to such exceptions, if any, acceptable to Lender.

 

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:

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 2
	 	 	 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Title to Property. Borrower
has, or on the date of first disbursement of Loan proceeds will have, good and marketable title to the Collateral free and dear
of all defects, Hens, and encumbrances, excepting only liens for taxes, assessments, or governmental charges or levies not yet
delinquent or payable without penalty or interest, and such liens and encumbrances as may be approved in writing by the Lender.
The Collateral is contiguous to publicly dedicated streets, roads, or highways providing access to the Collateral.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 3
	 	 	 

 

Project Costs. The total
cost for the Project shall not exceed $1,500,000.00. The Project costs are true, and accurate estimates of the costs necessary
to complete the improvements in a good and workmanlike manner according to the Plans and Specifications presented by Borrower to
Lender, and Borrower shall take all steps necessary to prevent the actual cost of the Improvements from exceeding the Project
costs.

 

Utility Services. All
utility services, appropriate to the use of the Project after completion of construction are available at the boundaries of the
Collateral.

 

Assessment of Property.
The Collateral is and will continue to be assessed and taxed as an independent parcel by all governmental authorities.

 

Compliance with Governing
Authorities. Borrower has examined and is familiar with all the easements, covenants, conditions, restrictions, reservations,
building laws, regulations, zoning ordinances, and federal, state, and local requirements affecting the Project. The Project will,
at all times and in all respects conform to and comply with the requirements of such easements, covenants, conditions, restrictions,
reservations, building laws, regulations, zoning ordinances, and federal, state, and local requirements.

 

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 Borrowers Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.

 

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.

 

Equity Funds. Borrower
shall provide evidence of equity funds totaling $150,000.00 prior to the initial advance from the Loan Fund. Lender may, at Lender’s
option, require that the equity funds be deposited with Lender as a portion of the Loan Fund, which funds shall be disbursed prior
to any Loan proceeds.

 

Approval of Contractors, Subcontractors,
and Materialmen. Lender shall have approved a fist of all contractors employed in connection with the construction of the Improvements,
showing the name, address, and telephone number of each contractor, a general description of the nature of the work to be done,
the labor and materials to be supplied, the names of materialmen, if known, and the approximate dollar value of the labor, work,
or materials with respect to each contractor or materialman. Lender shall have the right to communicate with any person to verily
the facts disclosed by the list or by any application for any Advance, or for any other purpose.

 

Plans, Specifications, and
Permits. Lender shall have received and accepted a complete set of written Plans and Specifications setting forth all Improvements
for the Project, and Borrower shall have furnished to Lender copies of all permits and requisite approvals of any governmental
body necessary for the construction and use of the Project.

 

Architect’s and Construction
Contracts. Borrower shall have furnished in form and substance satisfactory to Lender an executed copy of the Architect’s
Contract and an executed copy of the Construction Contract.

 

Budget and Schedule of Estimated
Advances. Lender shall have approved detailed budget and cash flow projections of total Project costs and a schedule of the
estimated amount and time of disbursements of each Advance.

 

Borrower’s Authorization.
Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizing
the consummation of the Project and 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,
in their sole discretion, may require.

 

Bond. If requested by
Lender, Borrower shall have furnished a performance and payment bond in an amount equal to 100% of the amount of the Construction
Contract, as well as a materialmen’s and mechanics’ payment bond, with such riders and supplements as Lender may require,
each in form and substance satisfactory to Lender, naming the General Contractor as principal and Lender as an additional obligee.
For the Project to be constructed on the California Real Property, any required bonds and the contracts which they cover must
be duly recorded or filed in accordance with California Civil Code Section 3235, if required by Lender.

 

Appraisal. If required
by Lender, an appraisal shall be prepared for the Properly, at Borrower’s expense, which in form and substance shall be
satisfactory to Lender, in Lender’s sole discretion, including applicable regulatory requirements.

 

Plans and Specifications.
If requested by Lender, Borrower shall have assigned to Lender on Lender’s forms the Plans and Specifications for the Project.

 

Environmental Report.
If requested by Lender, Borrower shall have furnished to Lender, at Borrower’s expense, an environmental report and certificate
on the Property in form and substance satisfactory to Lender, prepared by an engineer or other expert satisfactory to Lender stating
that the Property complies with all applicable provisions and requirements of the “Hazardous Substances” paragraph
set forth in this Agreement.

 

Soil Report. If requested
by Lender, Borrower shall have furnished to Lender, at Borrower’s expenses, a soil report for the Property in form and substance
satisfactory to Lender, prepared by a registered engineer satisfactory to Lender stating that the Property is free from soil or
other geological conditions that would preclude its use or development as contemplated without extra expense for precautionary,
corrective or remedial measures.

 

Survey. If requested
by Lender, Borrower shall have furnished to Lender a survey of recent date, prepared and certified by a qualified surveyor and
providing that the Improvements, if constructed in accordance with the Plans and Specifications, shall lie wholly within the boundaries
of the Collateral without encroachment or violation of any zoning ordinances, building codes or regulations, or setback requirements,
together with such other information as Lender in its sole discretion may require.

 

Zoning. Borrower shall
have furnished evidence satisfactory to Lender that the Collateral is duly and validly zoned for the construction, maintenance,
and operation of the Project.

 

Title Insurance. Borrower
shall have provided to Lender an ALTA Lender’s extended coverage policy of title insurance with such endorsements as Lender
may require, issued by a title insurance company acceptable to Lender and in a form, amount, and content satisfactory to Lender,
insuring or agreeing to insure that Lender’s security agreement or other security document on the Property is or will be
upon recordation a valid first lien on the Property free and clear of all defects, liens, encumbrances, and exceptions except
those as specifically accepted by Lender in writing. If requested by Lender, Borrower shall provide to Lender, at Borrower’s
expense, a foundation endorsement (CLTA 102.5 or its equivalent) to the title policy upon the completion of each foundation for
the Improvements, showing no encroachments, and upon completion an endorsement which insures the lien-free completion of the Improvements
(CLTA 101 series, as required by Lender). Specifically, Borrower shad provide to Lender the following title insurance endorsements:
Title Escrow to be established for all advances.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 4
	 	 	 

 

Insurance. Unless waived
by Lender in writing, Borrower shall have delivered to Lender the following insurance policies or evidence thereof: (a) an all
risks course of construction insurance policy (builder’s risk), with extended coverage covering the Improvements issued.
In an amount and by a company acceptable to Lender, containing a loss payable or other endorsement satisfactory to Lender insuring
Lender as mortgagee, together with such other endorsements as may be required by Lender, including stipulations that coverages
will not be cancelled or diminished without at least ten (10) days prior written notice to Lender; (b) owners and General Contractor
general liability insurance, public liability and workmen’s compensation insurance; (c) flood insurance if required by Lender
or applicable law; and (d) all other insurance required by this Agreement or by the Related Documents.

 

Workers’ Compensation
Coverage. Provide to Lender proof of the General Contractor’s  compliance with all applicable workers’ compensation
laws and regulations with regard to all work performed on the Project.

 

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

 

Satisfactory Construction.
All work usually done at the stage of construction for which disbursement is requested shall have been done in a good and
workmanlike manner and all materials and fixtures usually furnished and installed at that stage of construction shall have been
furnished and installed, all in compliance With the Plans and Specifications. Borrower shall also have furnished to Lender such
proofs as Lender may require to establish the progress of the work, compliance with applicable laws, freedom of the Property from
liens, and the basis for the requested disbursement.

 

Certification. Borrower
shall have furnished to Lender a certification by an engineer, architect, or other qualified inspector acceptable to Lender that
the construction of the Improvements has complied and will continue to comply with all applicable statutes, ordinances, codes,
regulations, and similar requirements,

 

Lion Waivers. Borrower
shall have obtained and attached to each application for an Advance, including the Advance to cover final payment to the General
Contractor, executed acknowledgments of payments of all sums due and releases of mechanic’s and materialmen’s liens,
satisfactory to Lender, from any party having lien rights, which acknowledgments of payment and releases of liens shall cover
all work, labor, equipment, materials done, supplied, performed, or furnished prior to such application for an Advance.

 

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.

 

INTEREST ONLY PERIOD.
Notwithstanding anything to the contrary, it is understood by Borrower and Guarantor that on November 1, 2012, the interest only
period ends and any remaining loan funds under the Note dated May 11, 2012 will be fully disbursed to the established fund
control account and/or Borrower as determined by Lender regardless of the completion stage of the Project.

 

DISBURSEMENT OF LOAN FUNDS.
The following provisions relate to the disbursement of funds from the Loan Fund.

 

Application for Advances.
Borrower shall apply for Advances from the Loan Fund according to the following disbursement schedule: Borrower is limited
to one advance per month.

 

Each application shall be stated on a standard
AIA payment request form or other form approved by Lender, executed by Borrower, and supported by such evidence as Lender shall
reasonably require. Borrower shall apply only for disbursement with respect to work actually done by the General Contractor and
for materials and equipment actually incorporated into the Project. Each application for an Advance shall be deemed a certification
of Borrower that as of the date of such application, all representations and warranties contained in the Agreement are true and
correct, and that Borrower is in compliance with all of the provisions of this Agreement. Under no circumstances shall Lender be
required to make any Loan Advance in an amount less than $5,000.00.

 

Loan to Value. Unless
waived by Lender in writing, the ratio of the amount of the Loan to the Value of the Property as completed shall not exceed 90.000%.

 

Payments. At the sole
option of Lender, Advances may be paid in the joint names of Borrower and the General Contractor, subcontractor(s), or supplier(s)
in payment of sums due under the Construction Contract. At its. sole option, Lender may directly pay the General Contractor and
any subcontractors or other parties the sums due under the Construction Contract. Borrower appoints Lender as its attorney-in-fact
to make such payments. This power shall be deemed coupled with an interest, shall be irrevocable, and shall survive an Event of
Default under this Agreement.

 

Projected Cost Overruns.
If Lender at any time determines in its sole discretion that the amount in the Loan Fund is insufficient, or will be insufficient,
to complete fully and to pay for the Project, then within ten (10) days after receipt of a written request from Lender, Borrower
shall deposit in the Loan Fund an amount equal to the deficiency as determined by Lender. The judgment and determination of Lender
under this section shall be final and conclusive. Any such amounts deposited by Borrower shall be disbursed prior to any Loan
proceeds.

 

Final Payment to General
Contractor. Upon completion of the Project and fulfillment of the Construction Contract to the satisfaction of Lender and
provided sufficient Loan Funds are available, Lender shall make an Advance to cover the final payment due to the General Contractor
upon delivery to Lender of endorsements to the ALTA title insurance policy following the posting of the completion notice, as
provided under applicable law. Construction shall not be deemed complete for purposes of final disbursement unless and until Lender
shall have received all of the following:

 

(1)  Evidence satisfactory
to Lender that all work under the Construction Contract requiring inspection by any governmental authority with jurisdiction has
been duly inspected and approved by such authority, that a certificate of occupancy has been issued, and that all parties performing
work have been paid, or will be paid, for such work;

 

(2)  A certification
by an engineer, architect, or other qualified inspector acceptable to Lender that the improvements have been completed substantially
in accordance with the Plans and Specifications and the Construction Contract, that direct connection has been made to all utilities
set forth in the Plans and Specifications, and that the Project is ready for occupancy; and

 

(3)  Acceptance of
the completed improvements by Lender and Borrower.

 

Construction
Default. If Borrower fails in any respect to comply with the provisions of this Agreement or if construction ceases
before completion regardless of the reason, Lender, at its option, may refuse to make further Advances, may accelerate the
indebtedness under the terms of the Note, and without thereby impairing any of its rights, powers, or privileges, may enter
into possession of the construction site and perform or cause to be performed any and all work and labor necessary to
complete the improvements, substantially in accordance with the Plans and Specifications.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 5
	 	 	 

 

Damage or Destruction.
If any of the Collateral or improvements is damaged or destroyed by casualty of any nature, within sixty (60) days thereafter
Borrower shall restore the Collateral and improvements to the condition in which they were before such damage or destruction with
funds other than those in the Loan Fund. Lender shall not be obligated to make disbursements under this Agreement until such restoration
has been accomplished.

 

Adequate Security. When
any event occurs that Lender determines may endanger completion of the Project or the fulfillment of any condition or covenant
in this Agreement, Lender may require Borrower to furnish, within ten (10) days after delivery of a written request, adequate
security to eliminate, reduce, or indemnify Lender against, such danger. In addition, Upon such occurrence, Lender in its sole
discretion may advance funds or agree to undertake to advance funds to any party to eliminate, reduce, or indemnify Lender against,
such danger or to complete the Project. All sums paid by Lender pursuant to such agreements or undertakings shall be for Borrower’s
account and shall be without prejudice to Borrower’s rights, if any, to receive such funds from the party to whom paid.
All sums expended by Lender in the exercise of its option to complete the Project or protect Lender’s interests shall be
payable to Lender on demand together with interest from the date of the Advance at the rate applicable to the Loan. In addition,
any Advance of funds under this Agreement, including without limitation direct disbursements to the General Contractor or other
parties in payment of sums due under the Construction Contract, shall be deemed to have been expended by or on behalf of Borrower
and to have been secured by Lender’s Deed of Trust, if any, on the  Collateral.

 

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.

 

LIMITATION OF RESPONSIBILITY.
The making of any Advance by Lender shall not constitute or be interpreted as either (A) an approval or acceptance by Lender
of the work done through the date of the Advance, or (B) a representation or indemnity by Lender to any party against any deficiency
or defect in the work or against any breach of any contract. Inspections and approvals of the Plans and Specifications, the Improvements,
the workmanship and materials used in the Improvements, and the exercise of any other right of inspection, approval, or inquiry
granted to Lender in this Agreement are acknowledged to be solely for the protection of Lender’s interests, and under no
circumstances shall they be construed to impose any responsibility or liability of any nature whatsoever on Lender to any party.
Neither Borrower nor any contractor, subcontractor, materialman, laborer, or any other person shall rely, or have any right to
rely, upon Lender’s determination of the appropriateness of any Advance.. No disbursement or approval by Lender shall constitute
a representation by Lender as to the nature of the Project, its construction, or its intended use for Borrower or for any other
person, nor shall it constitute an indemnity by Lender to Borrower or to any other person against any deficiency or defects in
the Project or against any breach of any contract

 

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

 

Tax Returns. As soon
as available, but in no event later than one hundred-twenty (120) days after the applicable filing date for the tax reporting
period ended, Borrower’s Federal and other governmental tax returns, prepared by a certified public accountant satisfactory
to Lender.

 

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

 

Additional Information.
Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables, inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower’s financial condition and business
operations as Lender may request from time to time.

 

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.

 

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

 

Insurance Reports. Furnish
to Lender, upon request of Lender, reports on each 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 guarantors named
below, on Lender’s forms, and in the amounts and under the conditions set forth in those guaranties.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 6
	 	 	 

 

	Names of Guarantors	 	Amounts	 
	 	 	 	 
	Superior Drilling Products, LLC	 	$	1,350,000.00	 
	Annette D. Meier	 	$	1,350,000.00	 
	Gilbert Troy Meier	 	$	1,350,000.00	 

 

Loan Fees, Charges and Expenses.
Whether or not the Project is completed. Borrower also shall pay upon demand all out-of-pocket expenses incurred by Lender
in connection with the preparation of loan documents and the making of the Loan, including, without limitation, all closing costs,
fees, and disbursements, all expenses of Lender’s legal counsel, and all title examination fees, title insurance premiums,
appraisal fees, survey costs, required fees, and filing and recording fees.

 

Loan Proceeds. Use all
Loan proceeds solely for the following specific purposes; Loan Proceeds to be used as follows: 

	$	417,325	 	 	for general construction costs
	$	610,961	 	 	for equipment purchases
	$	23,000	 	 	reserved for interest on Loan
	$	20,000	 	 	for construction contingency
	$	38,714	 	 	for loan costs
	$	240,000	 	 	for working capital.

 

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.

 

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.

 

Construction of the Project. Commence
construction of the Project no later than May 11, 2012, and cause the Improvements to be constructed and equipped in a diligent
and orderly manner and in strict accordance with the Plans and Specifications approved by Lender, the Construction Contract, and
all applicable laws, ordinances, codes, regulations, and rights of adjoining or concurrent property owners. Borrower agrees to
complete the. Project for purposes of final payment to the General Contractor on or before November 1, 2012, regardless of the
reason for any delay.

 

Defects. Upon demand of Lender,
promptly correct any defect in the Improvements or any departure from the Plans and Specifications not approved by Lender in writing
before further work shall be done upon the portion of the Improvements affected.

 

Project Claims and Litigation.
Promptly inform Lender of (1) all material adverse changes in the financial condition of the General Contractor; (2) any litigation
and claims, actual Or threatened, affecting the Project or the General Contractor, which could, materially affect the successful
completion of the Project or the ability of the General Contractor to complete the Project as agreed; and (3) any condition or
event which constitutes a breach or default under any of the Related Documents or any contract related to the Project.

 

Payment of Claims and Removal
of Liens. (1) Cause all claims for labor done and materials and services furnished in connection with the Improvements to
be fully paid and discharged in a timely manner, (2) diligently file or procure the filing of a valid notice of completion of
the Improvements, or such comparable document as may be permitted under applicable lien laws, (3) diligently file or procure the
filing of a notice of cessation, or such comparable document as may be permitted under applicable lien laws, upon the happening
of cessation of labor on the Improvements for a continuous period of thirty (30) days or more, and (4) take all reasonable steps
necessary to remove all claims of lions against the Collateral, the Improvements or any part of the Collateral or Improvements,
or any rights or interests appurtenant to the Collateral or Improvements. Upon Lender’s request, Borrower shall make such
demands or claims upon or against laborers, materialmen, subcontractors, or other persons who have furnished or claim to have
furnished labor, services, or materials in connection with the. Improvements, which demands or claims shall under the laws of
the states where the Improvements are located require diligent assertions of lien claims upon penalty of loss or waiver thereof.
Borrower shall, within ten (10) days after the filing of any claim of lien that is disputed or contested by Borrower, provide
Lender with a surety bond issued by a surety acceptable to Lender sufficient to release the claim of lien or deposit with Lender
an amount satisfactory to Lender for the possibility that the contest will be unsuccessful. For the Improvements to be constructed
on the California Real Property, Borrower shall, within ten (10) days after the filing of any claim of lien that is disputed or
contested by Borrower, record, or cause the General Contractor for the construction of the Improvements to record in the Office
of the Kern County Recorder, a surety bond pursuant to California law sufficient to release the claim of lien and, within five
(5) days of Lender’s demand, make suitable provision by deposit of funds with Lender in an amount satisfactory to Lender
or by bond satisfactory to Lender for the possibility that the contest will be unsuccessful. If Borrower fails to remove any lien
on the Collateral or Improvements or provide a bond or deposit pursuant to this provision, Lender may pay such lien, or may contest
the validity of the lien, and Borrower shall pay all costs and expenses of such contest, including Lender’s reasonable attorneys’
fees.

 

Taxes and Claims. Pay
and discharge when due all of Borrower’s indebtedness, obligations, and claims that, if unpaid, might become a lien or charge
upon, the Collateral or Improvements; provided, however, that Borrower shall not be required to pay and discharge any such indebtedness,
obligation, or claim so long as (1) its legality shall be contested in good faith by appropriate proceedings, (2) the indebtedness,
obligation, or claim does not become a lien or charge upon the Collateral or Improvements, and (3) Borrower shall have established
on its books adequate reserves with respect to the amount contested in accordance with GAAP. If the indebtedness, obligation,
or claim does become a lien or charge upon the Collateral or Improvements, Borrower shall remove the lien or charge as provided
in the preceding paragraph.

 

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.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 7
	 	 	 

 

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 in the Collateral and Improvements.

 

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

 

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 dale incurred
or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s
option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any
installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of
the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.

 

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

 

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

 

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

 

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

 

Modification of Contract. Make
or permit to be made any modification of the Construction Contract.

 

Liens. Create or allow to be created
any lien or charge upon the Collateral or the Improvements.

 

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.

 

GENERAL PROJECT PROVISIONS. The
following provisions relate to the construction and completion of the Project:

 

Change Orders. All requests for
changes in the Plans and Specifications, other than minor changes involving no extra cost, must be in writing, signed by Borrower
and the architect, and delivered to Lender for its approval. Borrower will not permit the performance of any work pursuant to
any change order or modification of the Construction Contract or any subcontract without the written approval of Lender. Borrower
will obtain any required permits or authorizations from governmental authorities having jurisdiction before approving or requesting
a new change order.

 

Purchase of Materials; Conditional
Sales Contracts. No materials, equipment, fixtures, or articles of personal property placed in or incorporated into the Project
shall be purchased or installed under any Security Agreement or other agreement whereby the seller reserves or purports to reserve
title or the right of removal or repossession, or the right to consider such items as personal property after their incorporation
into the Project, unless otherwise authorized by Lender in writing.

 

Lender’s Right of Entry and Inspection.
Lender and its agents shall have at all times the right of entry and free access to the Properly and the right to inspect
all work done, labor performed, and materials furnished with respect to the Project. Lender shall have unrestricted access to
and the right to copy all records, accounting books, contracts, subcontracts, bills, statements, vouchers, and supporting documents
of Borrower relating in any way to the Project.

 

Lender’s Right to Stop Work.
If Lender in good faith determines that any work or materials do not conform to the approved Plans and Specifications or sound
building practices, or otherwise depart from any of the requirements of this Agreement, Lender may require the work to be stopped
and withhold disbursements until the matter is corrected. In such event, Borrower will promptly correct the work to Lender’s
satisfaction. No such action by Lender will affect Borrower’s obligation to complete the Improvements on or before the
Completion Date. Lender is under no duty to supervise or inspect the construction or examine any books and records. Any inspection
or examination by Lender is for the sole purpose of protecting Lender’s security and preserving Lender’s rights under
this Agreement No default of Borrower will be waived by any inspection by Lender, in no event will any inspection by Lender be
a representation that there has been or will be compliance with the Plans and Specifications or that the construction is free
from defective materials or workmanship.

 

Indemnity. Borrower shall indemnify,
defend, and hold Lender harmless from any and all claims asserted against Lender or the Property by any person, entity, or governmental
body, or arising out of or in connection with the Property, Improvements, or Project. Lender shall be entitled to appear in any
proceedings to defend itself against such claims, and all costs and expenses attorneys’ fees incurred by Lender in connection
with such defense shall be paid by Borrower to Lender. Lender shall, in its sole discretion, be entitled to settle or compromise
any asserted claims against it, and such settlement shall be binding upon Borrower for purposes of this indemnification. All amounts
paid by Lender under this paragraph shall be secured by Lenders security agreement or Deed of Trust, if any, on the Property,
shall be deemed an additional principal Advance under the Loan, payable upon demand, and shall bear interest at the rate applicable
to the Loan.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 8
	 	 	 

 

Publicity. Lender may display a
Sign at the construction site informing the public that Lender is the construction lender for the Project. Lender may obtain other
publicity in connection with the Project through press releases and participation in ground-breaking and opening ceremonies and
similar events.

 

Actions. Lender shall have the
right to commence, appear in, or defend any action or proceeding purporting to affect the rights, duties, or liabilities of the
parties to this Agreement, or the disbursement of funds from the Loan Fund. In connection with this right, Lender may incur and
pay reasonable costs, expenses and attorneys’ fees. Borrower covenants to pay to Lender on demand all such expenses, together
with interest from the date Lender incurs the expense at the rate specified in the Note, and Lender is authorized to disburse
funds from the Loan Fund for such purposes.

 

CONSTRUCTION LOAN COMMITMENT. Lender
has issued a construction loan commitment letter for the Loan to Borrower with an acceptance date of April 26, 2012 and with a
closing date of May 11, 2012.

 

RELATIONSHIP TO THIS AGREEMENT.
The terms and provisions of this Agreement, the Note and the Related Documents supersede any inconsistent terms and conditions
of Lender’s construction loan commitment letter to Borrower, provided that all obligations of Borrower under the commitment
to pay any fees to Lender or any costs and expenses relating to the Loan or the commitment shall survive the execution and delivery
of this Agreement, the Note and the Related Documents. Any failure of Borrower to perform any such obligation shall constitute
a default under this Agreement.

 

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

 

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

 

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

 

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

 

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

 

Death or Insolvency. The dissolution
of Borrower (regardless of whether, election to continue is made), any member withdraws from. Borrower, or any other termination
of Borrower’s existence as a going business or the death of any member, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of creditors,anytypeof 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 monles 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.

 

Breach of Construction Contract.
The improvements are not constructed in accordance with the Plans and Specifications or in accordance with the terms of the Construction
Contract.

 

Cessation of Construction. Prior
to the completion of construction of the Improvements and equipping of the Project, the construction of the Improvements or the
equipping of the Project is abandoned or work thereon ceases for a period of more than ten (10) days for any reason, or the Improvements
are not completed for purposes of final payment to the General Contractor prior to November 1, 2012, regardless of the reason
for the delay.

 

Transfer of Property. Sale, transfer,
hypothecation, assignment, or conveyance of the Property or the Improvements or any portion thereof or interest therein by Borrower
or any Borrower without Lender’s prior written consent.

 

Condemnation. All or any material
portion of the Collateral is condemned, seized, or appropriated without compensation, and Borrower does not within thirty (30)
days after such condemnation, seizure, or appropriation, initiate and diligently prosecute appropriate action to contest in good
faith the validity of such condemnation, seizure, or appropriation.

 

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

 

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

 

Insecurity. Lender in good faith
believes itself insecure.

 

EFFECT OF AN EVENT OF DEFAULT; REMEDIES.
Upon the occurrence of any Event of Default and at any time thereafter, Lender may. at its option, but without any obligation
to do so, and in addition to any other right Lender without notice to Borrower may have, do any one or more of the following without
notice to Borrower: (a) Cancel this Agreement; (b) Institute appropriate proceedings to enforce the performance of this Agreement;
(c) Withhold further disbursement of Loan Funds; (d) Expend funds necessary to remedy the default;; (e) Take possession of the
Property and continue construction of the Project; (f) Accelerate maturity of the Note and/or Indebtedness and demand payment
of all sums due under the Note and/or Indebtedness; (g) Bring an action on the Note and/or Indebtedness; (h) Foreclose Lender’s
security agreement or Deed of Trust, if any, on the Property in any manner available under law; and (i) Exercise any other right
or remedy which it has under the Note or Related Documents, or which is otherwise available at law or in equity or by statute.

 

    	 

    	 

    

 

	 	CONSTRUCTION
    LOAN AGREEMENT	 
	 	(Continued)	Page 9
	 	 	 

 

COMPLETION OF IMPROVEMENTS BY LENDER.
If Lender takes possession of the Collateral, it may take any and all actions necessary in its judgment to complete construction
of the improvements, including but not limited to making changes in the Plans and Specifications, work, or materials and entering
into, modifying or terminating any contractual arrangements, subject to Lender’s right at any time to discontinue any work
without liability. If Lender elects to complete the improvements, it will not assume any liability to Borrower or to any other
person for completing the improvements or for the manner or quality of construction of the improvements, and Borrower expressly
waives any such liability, Borrower irrevocably appoints Lender as its attorney-in-fact, with full power of substitution, to complete
the Improvements, at Lender’s option, either in Borrower’s name or in its own name. In any event, all sums expended
by Lender in completing the construction of the Improvements will be considered to have been disbursed to Borrower and will be
secured by the Collateral for the Loan. Any such sums that cause the principal amount of the Loan to exceed the face amount of
the Note will be considered to be an additional Loan to Borrower, bearing interest at the Note rate and being secured by the Collateral.
For these purposes, Borrower assigns to Lender all of its right, title and interest in and to the Project Documents; however Lender
will not have any obligation under the Project Documents unless Lender expressly hereafter agrees to assume such obligations
in writing. Lender will have the right to exercise any rights of Borrower under the Project Documents upon the occurrence of an
Event of Default. Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced
by this Agreement or by any other writing, shall be cumulative and may be exercised singularly or concurrently.

 

ADDITIONAL DOCUMENTS. Borrower
shall provide Lender with the following additional documents:

 

Articles of Organization
and Company Resolutions. Borrower has provided or will provide Lender with a certified copy of Borrower’s Articles of
Organization, together with a certified copy of resolutions properly adopted by the members of the company, under which the members
authorized one or more designated members or employees to execute this Agreement, the Note and any and all Security Agreements
directly or indirectly securing repayment of the same, and to consummate the borrowings and other transactions as contemplated
under this Agreement, and to consent to the remedies following any default by Borrower as provided in this Agreement and in any
Security Agreements.

 

Opinion of Counsel.
When required by Lender, Borrower has provided or will provide Lender with an opinion of Borrower’s counsel certifying to
and that; (1) Borrower’s Note, any Security Agreements and this Agreement constitute valid and binding obligations on Borrower’s
part that are enforceable in accordance with their respective terms; (2) Borrower is validly existing and in good standing; (3)
Borrower has authority to enter into this Agreement and to consummate the transactions contemplated under this Agreement; and
(4) such other matters as may have been requested by Lender or by Lender’s counsel.

 

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 beeffective unlessgiven Inwriting and signed
by the party or parties sought to be charged or bound by the alteration or amendment.

 

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

 

Authority to File Notices.
Borrower appoints and designates Lender as its attorney-in-fact to fife for the record any notice that Lender deems necessary
to protect its interest under this Agreement. This power shall be deemed coupled with an interest and shall be irrevocable while
any sum or performance remains due and owing under any of the Related Documents.

 

Caption Headings. Caption
headings in this Agreement are for convenience purposes only and are not tobeusedtointerpret or define the provisions
of this Agreement.

 

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

 

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

 

Indemnification of Lender.
Borrower agrees to indemnify, to defend and to save and hold Lender harmless from any and all claims, suits, obligations,
damages, losses, costs and expenses (including, without limitation, Lender’s attorneys fees, as well as Lender’s architect’s
and engineering fees), demands, liabilities, penalties, fines and forfeitures of any nature whatsoever that may be asserted against
or incurred by Lender, its officers, directors, employees, and agents arising out of, relating to, or in any manner occasioned
by this Agreement and the exercise of the rights and remedies granted Lender under this. The foregoing indemnity provisions shall
survive the cancellation of this Agreement as to all matters arising or accruing prior to such cancellation and the foregoing
indemnity shall survive in the event that Lender elects to exercise any of the remedies as provided under this Agreement following
default hereunder.

 

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.

 

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.

 

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.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 10
	 	 	 

 

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.

 

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

 

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

 

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

 

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

 

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

 

Architect’s Contract. The
words “Architect’s Contract” mean the architect’s contract between Borrower and the architect for the
Project.

 

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

 

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

 

Completion Date. The words “Completion
Date” mean November 1, 2012.

 

Construction Contract. The words
“Construction Contract” mean the contract between Borrower and Superior Drilling Products of California, LLC, the
general contractor for the Project, and any subcontracts with subcontractors, materialmen, laborers, or any other person or entity
for performance of work on the Project or the delivery of materials to the Project.

 

Contractor. The word
“Contractor” means Superior Drilling Products of California, LLC, the general contractor for the Project.

 

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

 

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

 

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

 

Guarantor. The word
“Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan and any guarantor under
a completion guaranty agreement

 

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.

 

Improvements. The word
‘‘Improvements’’ means all existing and future buildings, structures, facilities, fixtures, additions,
and similar construction on the Collateral.

 

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

 

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

 

Loan. The word “Loan”
means the loan or loans made to Borrower under this Agreement and the Related Documents as described.

 

Loan Fund. The words
“Loan Fund” mean the undisbursed proceeds of the Loan under this Agreement together with any equity funds or other
deposits required from Borrower under this Agreement.

 

    	 

    	 

    

 

	 	CONSTRUCTION LOAN AGREEMENT	 
	 	(Continued)	Page 11
	 	 	 

 

Note. The word “Note”
means the promissory note dated May 11, 2012, in the original principal amount of $1,350,000.00 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.

 

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.

 

Plans and Specifications.
The words “Plans and Specifications” mean the plans and specifications for the Project which have been submitted
to and initialed by Lender, together with such changes and additions as may be approved by Lender in writing.

 

Project. The word “Project”
means the construction project as described In the “Project Description” section of this Agreement.

 

Project Documents. The
words “Project Documents” mean the Plans and Specifications, all studies, data and drawings relating to the Project,
whether prepared by or for Borrower, the Construction Contract, the Architect’s Contract, and all other contracts and agreements
relating to the Project or the construction of the improvements.

 

Property. The word “Property”
means the property as described in the “Project Description” section of this Agreement.

 

Real Property. The words
“Real Property” mean the real property, interests and rights, as further described in the “Project Description”
section of this Agreement.

 

Related Documents. The
words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,
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.

 

Value. The word “Value”
means such amount or worth as defined and determined by Lender in its sole discretion unless agreed to the contrary by Lender
in writing.

 

BORROWER ACKNOWLEDGES HAVING READ ALL
THE PROVISIONS OF THIS CONSTRUCTION LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS CONSTRUCTION LOAN AGREEMENT IS DATED
MAY 11, 2012.

 

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

 

	 
	LASER
    PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA C:\HARLANDLP\CFI\LPL\G14.FC
    TR-112 PR-14

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00229-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00229-of-00352.parquet"}]]