Document:

Exhibit 10.25

 

BUSINESS
LOAN AGREEMENT

 

	Principal	Loan
    Date	Maturity	Loan
    No	Call
    / Coll	Account	Officer	Initials
	$650,000.00	04-02-2012	04-01-2022	 	 	 	CB	 
	References
    in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan
    or item.

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 2
	 	 	 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Financial
Records. Maintain its books and records in accordance with GAAP, applied on 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 45 days after the applicable filing date for the tax reporting period
ended, Borrower’s Federal and other governmental tax returns, prepared by a certified public accountant satisfactory to
Lender.

 

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

 

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

 

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

 

Insurance
Reports. Furnish to Lender, upon request of Lender, reports on each 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.

 

    	 

    	 

    

 

	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 3
	 	 	 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

JOB
CREATION INTEREST RATE PROVISION. Borrower acknowledges that Lender agreed to make the Loan(s) in reliance on Operating Company’s
business growth plan that provides for the creation and maintenance of new jobs. Borrower further acknowledges that the creation
of new jobs by Operating Company is a primary consideration of Lender in agreeing to make the Loan(s) to Borrower. During the
first five (5) years of loan life, Borrower covenants and agrees that the Operating Company shall have created new full-time employment
positions with Operating Company, for which Operating Company has hired and continues to employ as part of Operating Company’s
business growth plan. Borrower further covenants and agrees to provide, or to cause Operating Company to provide, to Lender from
time-to-time upon request all reports and documentation required by Lender to evidence and report the results of any job creation
by Operating Company. Such reports 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.

 

    	 

    	 

    

 

	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 4
	 	 	 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Insecurity.
Lender in good faith believes itself insecure.

 

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

 

    	 

    	 

    

 

	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 5
	 	 	 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 6
	 	 	 

 

Survival
of Representations and Warranties. Borrower understands and agrees that in making the Loan, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to
Lender under this Agreement or the Rotated 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 Business Loan Agreement, as this Business Loan Agreement may be amended or modified
from time to time, together with all exhibits and schedules attached to this Business Loan Agreement from time to time.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

	 	BUSINESS LOAN AGREEMENT	 
	 	(Continued)	Page 7
	 	 	 

 

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

 

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

 

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

 

	 
	LASER PRO Lending, Ver. 5.60.00.005 Copr.
    Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA C:\HARLANDLP\CFI\LPL\G14 FO TR-112 PR-14Exhibit 10.26

 

PROMISSORY NOTE

 

	Principal	Loan Date	Maturity	Loan No	Call / Coll	Account	Officer	Initials
	$461,500,00	04-02-2012	10-01-2012	113	 	 	CB	 
	
        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
	 	19479 Creek Blvd.	 	 	1 World Trade Center, Suite 1870
	 	Bakersfield, CA 93314	 	 	Long Beach, CA 90831
	 	 	 	 	 

 

	Principal Amount: $461,500.00	Initial Rate: 6.250%	Date of Note: April 2, 2012

 

PROMISE TO PAY. Superior Drilling
Products of California, LLC (“Borrower”) promises to pay to US Employment Development Lending Center, LLC (“Lender”),
or order, in lawful money of the United States of America, the principal amount of Four Hundred Sixty-one Thousand Five Hundred
& 00/100 Dollars ($461,500.00), together with interest on the unpaid principal balance from April 2, 2012, until paid in full.

 

PAYMENT. Borrower will pay this
loan in one principal payment of $461,500.00 plus interest on October 1, 2012. This payment due on October 1, 2012, will be for
all principal and all accrued interest not yet paid. In addition, Borrower will pay regular monthly payments of all accrued unpaid
interest due as of each payment date, beginning May 1, 2012, with all subsequent interest payments to be due on the same day of
each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid
interest; then to principal; then to any late charges; and then to any unpaid collection costs. Borrower will pay Lender at Lender’s
address shown above or at such other place as Lender may designate in writing.

 

VARIABLE INTEREST RATE. The interest
rate on this Note is subject to change from time to time based on changes in an independent index which is the prime rate as published
in the Wall Street Journal (the “Index”). The Index is not necessarily the lowest rate charged by Lender on its loans,
if the index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower.
Lender will tell Borrower the current index rate upon Borrower’s request. The interest rate change will not occur more often
than each day. Borrower understands that Lender may make loans based on other rates as well. The index currently is 3.250% per
annum. Interest on the unpaid principal balance of this Note will be calculated as described in the “INTEREST CALCULATION
METHOD” paragraph using a rate of 3.000 percentage points over the index, adjusted if necessary for any minimum and maximum
rate limitations described below, resulting in an initial rate of 6.250%. NOTICE: Under no circumstances will the interest rate
on this Note be less than 6.250% per annum or more than the maximum rate allowed by applicable law.

 

INTEREST CALCULATION METHOD. Interest
on this Note is computed on a 30/360 simple interest basis; that is, with the exception of odd days before the first full payment
cycle, monthly interest is calculated by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by a month of 30 days. Interest for the odd days before the first full month is calculated on the
basis of the actual days and a 360-day year. All interest payable under this Note is computed using this method.

 

JOB CREATION INTEREST RATE PROVISION.
Notwithstanding anything contained in this Note to the contrary: (i) if, on the first anniversary of the date of this Note, the
total number of employees employed by Borrower has increased over the number of employees employed by Borrower as of the date of
this Note by less than five (5) full time positions, or if, during the first twelve (12) months of the term of this Note, Borrower
fails to provide such reports and documentation required by Lender to evidence and report the results of any job creation by Borrower,
then the Interest Rate shall automatically increase, without notice, during the calendar year form the first anniversary of this
Note to the second anniversary of this Note to a rate equal to the “Wall Street Journal Prime” (as defined herein)
plus six percent (6.00%); and (ii) if, on the second anniversary of the date of this Note, the number of employees employed by
Borrower has increased by less than (12) full-time positions, of if, during the second twelve (12) months of the term of this Note,
Borrower fails to provide such reports and documentation required by Lender to evidence and report the results of any job creation
by Borrower, or if, Borrower fails to sustain a minimum of twelve new (12) full-time positions over the number of employees employed
by Borrower as of the time of this Note at all times during the period between the second and third anniversary of this Note, then
the interest Rate shall be increased for the remaining term of the Loan to a rate equal to the Wall street Journal Prime plus six
percent (6.00%). For purposes of this provision: (i) the term “full-time position” shall refer to an employee of Borrower
who regularly works at least thirty-five (35) hours in a workweek and is compensated by wages paid by Borrower and reported for
federal tax purposes on IRS Form W-2, and (ii) Borrower and Lender acknowledge that, as of the date of this Note, the number of
employees currently employed by Borrower in connection with its business is 24. The term “Wall Street Journal Prime”
shall mean the rate from time to time published in the Wall Street Journal and referred to therein as “Prime Rate,”
provided that if the Prime Rate should cease to be published in the Wall Street Journal, or if the Wall Street Journal should cease
to be published, then Lender shall select an alternate base rate (for purposes of this provision) that, in the judgment of Lendor
is likely to result in a base rate being substantially similar to the Prime Rate previously published.

 

PREPAYMENT; MINIMUM INTEREST
CHARGE. In any event, even upon full prepayment of this Note, Borrower understands that, Lender is entitled to a minimum
interest charge of $50.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay
without penally all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments under the payment schedule.
Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid
in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it
without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount
owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that
indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other
conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: US Employment
Development Lending Center, LLC, 1 World Trade Center, Suite 1870 Long Beach, CA 90831.

 

LATE CHARGE. If a payment is 10
days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment.

 

INTEREST AFTER DEFAULT. Upon default,
the interest rate on this Note shall, if permitted under applicable law, immediately increase by adding an additional 5.000 percentage
point margin (“Default Rate Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change
that would have applied had there been no default.

 

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

 

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

 

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

 

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.

 

    	 

    	 

    

 

	 	PROMISSORY NOTE	 
	 	(Continued)	Page
    2

 

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

 

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

 

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

 

Events Affecting Guarantor.
Any of the preceding events occurs with respect to any Guarantor of any of the indebtedness or any Guarantor dies or becomes incompetent,
or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note.

 

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

 

Insecurity. Lender in
good faith believes itself insecure.

 

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

 

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

 

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

 

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

 

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

 

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

 

COLLATERAL. Borrower acknowledges
this Note is secured by the following collateral described in the security instruments listed herein:

 

(A)  a Deed of Trust
dated April 2, 2012, to a trustee in favor of Lender on real property located in Kern County, State of California. That agreement
contains the following due on sale provision: Lender may, at Lender’s option, declare immediately due and payable all sums
secured by the Deed of Trust upon the sale or transfer, without Lender’s prior written consent, of all or any part of the
Real Property, or any interest in the Real Property. A “sale or transfer” means the conveyance of Real property or
any right, title or interest in the Real Property; whether legal, beneficial or equitable; whether voluntary or involuntary; whether
by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than
three (3) years, lease-option contract, or by sale, assignment, or transfer of any beneficial interest in or to any land trust
holding title to the Real Property, or by any other method of conveyance of an interest in the Real Property. If any Borrower is
a corporation, partnership or limited liability company, transfer also includes any change in ownership of more than twenty-five
percent (25%) of the voting stock, partnership interests or limited liability company interests, as the case may be, of such Borrower.
However, this option shall not be exercised by Lender if such exercise is prohibited by applicable law.

 

(B)  an Assignment
of All Rents to Lender on real property located in Kern County, State of California.

 

(C)  equipment, fixtures
and mineral, oil and gas described in a Commercial Security Agreement dated April 2, 2012.

 

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

 

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

 

    	 

    	 

    

 

	 	PROMISSORY NOTE	 
	 	(Continued)	Page
    3

 

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

 

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

 

BORROWER:

 

SUPERIOR DRILLING PRODUCTS OF CALIFORNIA,
LLC

 

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

 

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-14

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