Document:

Exhibit 10.1

 

FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

 

THIS FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
(this “Amendment”) is effective this 28th day of December, 2017, by and among GUARANTY BANK AND TRUST COMPANY, a Colorado
bank (“Bank”), and BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation (“Borrower”). Bank and
Borrower may sometimes be referred to herein as “Party” or, collectively, “Parties”.

 

RECITALS

 

A.          WHEREAS,
Borrower and Bank entered into a Loan and Security Agreement dated as of March 29, 2016, as amended by the Amendment to Loan and
Security Agreement dated July 29, 2016, the Second Amendment to Loan and Security Agreement dated November 14, 2016, the Third
Amendment to Loan and Security Agreement dated December 9, 2016, and the Fourth Amendment to Loan and Security Agreement and Forbearance
Agreement dated March 30, 2017 (together with all further amendments thereto, the “Loan Agreement”) pursuant to which
Bank made available to Borrower certain Revolving Loans and Term Loans;

 

B.          WHEREAS,
defaults have occurred under the Loan Agreement (collectively, the “Existing Defaults”), including by reason of Borrower’s
failure (i) to maintain a Maximum Total Cash Flow Leverage Ratio of not more than 3.15x as of December 31, 2016, as required by
Section 10.1 of the Loan Agreement, (ii) to maintain a Fixed Charge Coverage Ratio of at least 1.35 to 1.00 as of December 31,
2016, as required by Section 10.3 of the Loan Agreement, (iii) to produce EBITDA of at least $650,000 for the fourth quarter of
2016 and of at least $870,000 for the second quarter of 2017, as required by Section 10.4 of the Loan Agreement, (iv) to reduce
the principal amount of the outstanding Term Loans by at least $500,000 on June 30, 2017 and by at least $500,000 on September
30, 2017, as required under the Loan Agreement and (v) to pay the Obligations in full when Bank declared all Obligations of Borrower
to be immediately due and payable;

 

C.         WHEREAS,
as a result of the Existing Defaults, Bank (i) has declared its commitments to Borrower to be terminated, (ii) is entitled to charge
interest on all Obligations of Borrower at the Default Rate effective as of December 31, 2016, (iii) has declared all Obligations
of Borrower to be immediately due and payable and (iv) has terminated all of Bank’s obligations to Borrower under the Loan
Documents;

 

D.         WHEREAS,
Borrower and the Permitted Holders (as defined below) have agreed that the Permitted Holders will make an investment in Borrower
in a minimum amount of $5,000,000 in immediately available funds pursuant to the Palm Ventures Subordinated Debt Documents and
subject to the Palm Ventures Subordination Agreement (as each such term is defined below); and

 

E.          WHEREAS,
Borrower requested that, subject to certain conditions precedent including without limitation the consummation of the investment
described in Recital D hereof and execution and delivery of the Palm Ventures Subordination Agreement, Bank amend the Loan Agreement,
reinstate Bank’s obligations under the Loan Documents and waive the Existing Defaults, and the Bank is willing to do so in
accordance with and subject to the terms and conditions set forth in this Amendment.

 

    	 	 	 

     

    

 

AGREEMENT

 

NOW THEREFORE, in consideration of the mutual
promises, payments, amendments and modifications contained herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

 

1.          Definitions.
Capitalized terms used herein and in the recitals hereto, but not defined herein or therein, shall have the meaning given them
in the Loan Documents.

 

2.          Loan
Documents Effect; Conflicts; Affirmation. Except as otherwise provided in this Amendment or, as applicable, as amended (or
amended and restated) by a separate agreement or instrument in connection herewith, all other terms and conditions set forth in
the Loan Agreement, the Revolving Note, the Term Note and all other Loan Documents remain in full force and effect, with the same
effect as if all such terms and conditions were rewritten in full herein and each of them is hereby ratified and confirmed by Borrower
and Bank. In the event of any conflict or inconsistency between the provisions of this Amendment and the provisions of the Loan
Agreement, the Revolving Note, the Term Note or any other Loan Document, the provisions of this Amendment in each case shall govern
and control to the extent of such conflict or inconsistency. Borrower hereby affirms and ratifies the Loan Documents, acknowledges
that there is no defense to or offset against payment or performance of Borrower’s obligations under the Loan Documents,
and waives any and all defenses, counterclaims, offsets and any other matter of avoiding, reducing, or limiting the validity and
enforceability of the Loan Documents or any of Borrower’s obligations under the Loan Documents. All references in the Loan
Agreement to “this Agreement” shall be deemed to refer to the Loan Agreement as amended to date, including hereby;
and any and all references in the other Loan Documents to the Loan Agreement shall be deemed to refer to the Loan Agreement as
amended to date, including hereby. Borrower and Bank intend that this Amendment shall not in any manner (a) constitute the refinancing,
refunding, payment or extinguishment of the Obligations evidenced by the existing Loan Documents; (b) be deemed to evidence a novation
of the outstanding balance of the Obligations; or (c) affect, replace, impair, or extinguish the creation, attachment, perfection
or priority of the Liens on the Collateral granted pursuant to the Loan Agreement or any of the other Loan Documents evidencing,
governing or creating a Lien on the Collateral. Borrower hereby ratifies and reaffirms any and all grants of the Liens to Bank
on the Collateral as security for the Obligations, and acknowledges and confirms that the grants of the Liens to Bank on the Collateral:
(i) represent continuing Liens on all of the Collateral, (ii) secure all of the Obligations, and (iii) represent valid first Liens
on all of the Collateral, subject only to Permitted Liens. The Loan Agreement, as amended by this Amendment, will be construed
as one agreement.

 

3.          Waiver
of Defaults. Upon the effectiveness of this Amendment, and subject to the terms and conditions set forth in this Amendment,
Bank hereby waives the Existing Defaults. This waiver shall be effective only in this specific instance and for the specific purpose
for which it is given, and this waiver shall not entitle Borrower or any other Person to any other or further waiver in any similar
or other circumstances.

 

4.          Waiver
of Default Interest, Fees and Penalties. Upon the effectiveness of this Amendment, and subject to the terms and conditions
set forth in this Amendment, Bank hereby waives all unpaid interest accrued at the Default Rate as of the date hereof and all unpaid
late fees and penalties accrued as of the date hereof. This waiver shall be effective only with respect to the amount accrued as
of the date of this Amendment and only in this specific instance and for the specific purpose for which it is given, and this waiver
shall not entitle Borrower or any other Person to any other or further waiver in any similar or other circumstances in the future.

 

    	 	2	 

     

    

 

5.           Amendments
to Loan Agreement. The Loan Agreement is amended as follows:

 

5.1         Section
1.1 is hereby amended by replacing the interest rate table in the definition of Applicable Margin with the following:

 

	“Funded Debt / EBITDA	 	LIBOR SPREAD
	Greater than 3.0	 	LIBOR + 3.75%
	Less than or equal to 3.0 but greater than 2.5	 	LIBOR + 3.25%
	Less than or equal to 2.5 but greater than 2.0	 	LIBOR + 2.90%
	Less than or equal to 2.0	 	LIBOR + 2.50%”

 

5.2         Section
1.1 is hereby further amended by amending and restating the following definitions to read in their entirety as follows:

 

“Cash Available for Debt Service”
shall mean, for any period, an amount determined by reducing EBITDA by federal, state and local income taxes paid or payable in
cash and by Capital Expenditures (excluding Digitization Capital Expenditures).

 

“Capital Expenditures”
shall mean all unfinanced expenditures (including without limitation Digitization Capital Expenditures and Maintenance Capital
Expenditures) which, in accordance with GAAP, would be required to be capitalized and shown on the consolidated balance sheet of
the Borrower, but excluding expenditures made in connection with the replacement, substitution or restoration of assets to the
extent financed (i) from insurance proceeds (or other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation arising from the taking by eminent domain or condemnation of the
assets being replaced.

 

“Change in Control”
shall mean that the Borrower shall, directly or indirectly, in one or more related transactions, (i) consolidate or merge with
or into (whether or not the Borrower is the surviving corporation) another Person, or (ii) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of the properties or assets of the Borrower to another Person, or (iii) allow another Person
(other than a Permitted Holder) to make a purchase, a tender offer or an exchange offer that is accepted by such number of holders
of outstanding shares of common Capital Securities of the Borrower resulting in such Person (together with any Affiliates of such
Person) holding more than 50% of the outstanding common Capital Securities of the Borrower following such purchase, tender offer
or exchange offer, or (iv) consummate a stock purchase agreement or other business combination (including a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person (other than a Permitted Holder) resulting in such other Person (together
with any Affiliates of such Person) holding more than 50% of the outstanding common Capital Securities of the Borrower following
such stock purchase agreement or other business combination, or (v) reorganize, recapitalize or reclassify its common Capital Securities,
except for stock splits and stock dividends that do not affect the relative ownership of the shareholders of the Borrower and for
which adjustments are made under the conversion and other applicable provisions of the Palm Ventures Subordinated Debt Documents
to the extent permitted under the Palm Ventures Subordination Agreement, or an event (vi) where a Person (other than a Permitted
Holder), or a group of Persons (other than the Permitted Holders) acting together acquires more than 50% of the common Capital
Securities of the Borrower, measured by total voting power, or (vii) the Borrower is liquidated or dissolved, or (viii) during
any 12-month period, a majority of the board of directors of the Borrower ceases to be comprised of existing board members at the
beginning of the period and any new directors whose election was approved by at least two-thirds of the directors then still in
office.

 

    	 	3	 

     

    

 

“EBITDA” shall mean,
for any period, an amount equal to the sum of (a) consolidated Net Income for such period plus (b) the following to the
extent deducted in calculating such consolidated Net Income: (i) Interest Charges for such period, (ii) federal, state and local
income Taxes for such period, (iii) depreciation and amortization expense for such period, (iv) non-cash stock compensation expense
for such period, (v) all other non-recurring charges (including, without limitation, location closure costs, proxy contest costs
and legal costs) approved in advance by Bank, in its reasonable discretion, and (vi) losses for such period from the sale or other
disposition of property less (c) the following to the extent included in calculating such consolidated Net Income: (i) non-cash
gains for such period and (ii) gains for such period from the sale or other disposition of property.

 

“Fixed Charge Coverage Ratio”
or “FCCR” means, as of the end of any fiscal quarter, the quotient obtained by dividing Cash Available for Debt
Service over the preceding 12 months, by Total Debt Service for the same period; provided, that (i) FCCR for the period
ending June 30, 2016 shall be based on the prior six months and (ii) FCCR for the period ending September 30, 2016 shall be based
on the prior nine month period.

 

“Loan Documents”
shall mean each of the agreements, documents, instruments and certificates set forth in Section 3.1 hereof, and any and
all such other instruments, documents, certificates and agreements from time to time executed and delivered by the Borrower, any
guarantor or any of the Borrower’s Subsidiaries for the benefit of the Bank pursuant to any of the foregoing (including the
Palm Ventures Subordination Agreement), and all amendments, restatements, supplements and other modifications thereto.

 

    	 	4	 

     

    

 

“Permitted Liens”
shall mean (a) Liens for Taxes, assessments or other governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith by appropriate proceedings and, in each case, for which it maintains adequate reserves
in accordance with GAAP and in respect of which no Lien has been filed; (b) Liens arising in the ordinary course of business (such
as (i) Liens of carriers, warehousemen, mechanics and materialmen and other similar Liens imposed by law, and (ii) Liens in the
form of deposits or pledges incurred in connection with worker's compensation, unemployment compensation and other types of social
security (excluding Liens arising under ERISA) or in connection with surety bonds, bids, performance bonds and similar obligations)
for sums not overdue or being contested in good faith by appropriate proceedings and not involving any advances or borrowed money
or the deferred purchase price of property or services, which do not in the aggregate materially detract from the value of the
property or assets of the Borrower or materially impair the use thereof in the operation of the Borrower’s business and,
in each case, for which it maintains adequate reserves in accordance with GAAP and in respect of which no Lien has been filed;
(c) Liens that constitute purchase money security interests on any property securing Debt incurred for the purpose of financing
all or any part of the cost of acquiring such property, provided that any such Lien attaches to such property within twenty (20)
days of the acquisition thereof and attaches solely to the property so acquired; (d) Liens granted to the Bank hereunder and under
the other Loan Documents; (e) Liens securing other Debt not exceeding $100,000 and (f) Liens in favor of the Permitted Holders
under the Palm Ventures Subordinated Debt Documents.

 

“Revolving Loan Commitment”
shall mean the lesser of (a) Two Million and 00/100 Dollars ($2,000,000.00), or (b) eighty percent (80%) of the dollar amount of
outstanding Eligible Accounts.

 

“Revolving Loan Maturity Date”
shall mean March 31, 2023, unless extended by the Bank pursuant to any modification, extension or renewal note executed by Borrower
and accepted by Bank in its sole and absolute discretion in substitution for the Revolving Note.

 

“Subordinated Debt”
shall mean that portion of the Debt of the Borrower (including without limitation the Palm Ventures Subordinated Debt) which is
subordinated to the Obligations in a manner satisfactory to the Bank, including right and time of payment of principal and interest.

 

“Term Loan Commitment”
shall mean Six Million Five Hundred Thousand and 00/100 Dollars ($6,500,000.00).

 

“Term Loan Maturity Date”
shall mean March 31, 2023, unless extended by the Bank pursuant to any modification, extension or renewal note executed by Borrower
and accepted by Bank in its sole and absolute discretion in substitution for the Term Note.

 

“Total Debt Service”
shall mean, for any period, the sum of cash interest and mandatory principal payments on all Debt, including scheduled payments
representing the principal portion of rent under capital leases.

 

5.3         Section
1.1 is hereby further amended by adding the following new definitions in correct alphabetical order to read in their entirety as
follows:

 

“Blocked Account”
means a deposit account belonging to and under the control of the Borrower and maintained with the Bank (which may be non-interest
bearing as determined by the Bank) into which, once such deposit account is established, all amounts in the Lockbox and the Lockbox
Account shall be deposited on each Business Day; provided that, upon the occurrence and during the continuation of an Event
of Default, such deposit account (a) shall be under the sole dominion and control of the Bank and (b) shall not be subject to withdrawal
by the Borrower, with any amounts therein to be applied to the Obligations as the Bank may determine in its sole discretion.

 

    	 	5	 

     

    

 

“Borrower Instructions”
shall have the meaning set forth in Section 2.10 hereof.

 

“Cure Amount” shall
mean, with respect to a Failed Testing Period, the minimum dollar amount (but not in excess of the minimum dollar amount) that,
if added to the calculation of EBITDA for such Failed Testing Period, would have resulted in the Failed Financial Covenant (or
Failed Financial Covenants) being equal to the required financial covenant or covenants, as the case may be, applicable to such
Failed Testing Period, as set forth in Section 10 hereof.

 

“Digitization Capital Expenditures”
shall mean Capital Expenditures made or incurred to upgrade the systems and technology (including, without limitation, web site
upgrades) of the Borrower and its managed offices for the critical purpose of recruitment and retention.

 

“Excess Cash Flow Amount”
shall mean, for any applicable period, twenty-five percent (25%) of the sum of (without duplication) (a) EBITDA, minus (b)
the sum of (without duplication) (i) Taxes paid in cash, (ii) Maintenance Capital Expenditures made or incurred, (iii) cash Interest
Charges, and (iv) scheduled or required payments of principal on all Debt of Borrower (including capital lease obligations
but excluding Subordinated Debt), in each case determined for Borrower on a consolidated basis in accordance with GAAP.

 

“Failed Financial Covenant”
and “Failed Financial Covenants” shall have the meanings set forth in Section 10.5 hereof.

 

“Failed Testing Period”
shall have the meaning set forth in Section 10.5 hereof.

 

“Fifth Amendment”
shall mean that certain Fifth Amendment to Loan and Security Agreement, dated as of December 28, 2017, by and between Borrower
and Bank.

 

“Lockbox” shall have
the meaning set forth in Section 2.10 hereof.

 

“Lockbox Deposit Account”
shall have the meaning set forth in Section 2.10 hereof.

 

“Maintenance Capital Expenditures”
shall mean Capital Expenditures made or incurred in the ordinary course of business operations to maintain or replace existing
fixed assets used to support existing business operations and maintain or increase revenues, excluding Digitization Capital Expenditures
and other Capital Expenditures made to support new offices and new revenue initiatives.

 

    	 	6	 

     

    

 

“Palm Ventures Equity”
shall mean, collectively, (a) those certain shares of Series A Convertible Preferred Stock of Borrower issued to the Permitted
Holders on December 28, 2017 for consideration of $10,000 and (b) all other shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) of Borrower’s capital and all options, warrants and other rights to acquire
any of the foregoing at any time issued to or in favor of, or acquired by, any Subordinated Creditor (as defined in the Palm Ventures
Subordination Agreement), in each case, together with all modifications thereof and substitutions therefor.

 

“Palm Ventures Subordinated
Debt” shall mean, collectively, (a) the liabilities, obligations, and indebtedness evidenced by the Palm Ventures Subordinated
Debt Notes, in the original principal amount of $4,990,000, (b) the Palm Ventures Equity, (c) all of the other Obligations (as
defined in the Palm Ventures Subordinated Debt Notes), and (d) to the extent permitted under the Palm Ventures Subordination Agreement,
each and every other debt, liability and obligation of every type and description which Borrower may now or at any time hereafter
owe to any Subordinated Creditor (as defined in the Palm Ventures Subordination Agreement), whether such debt, liability or obligation
now exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute
or contingent, primary or secondary, liquidated or unliquidated, or joint, several or joint and several, in each case, as amended,
modified, supplemented or restated to the extent permitted by Section 9.14.

 

“Palm Ventures Subordinated
Debt Default” shall mean any of the following (or any combination of the following): (a) the occurrence and continuation
of a default or breach under any Palm Ventures Subordinated Debt Document, after the lapse of any applicable notice and cure periods,
or (b) any acceleration of the Palm Ventures Subordinated Debt in accordance with its terms which, for purposes of clarity, Borrower
agrees would constitute an Event of Default and a default under the Palm Ventures Subordination Agreement.

 

“Palm Ventures Subordinated
Debt Documents” shall mean, collectively, (a) each Palm Ventures Subordinated Debt Note, (b) all instruments, certificates
and other agreements and documents evidencing or directly related to the Palm Venture Equity, and (c) the other Subordinated Debt
Agreements (as defined in the Palm Ventures Subordination Agreement) and any documents, instruments, or agreements given, subject
to Section 9.14, in substitution of any of the foregoing, in each case, as otherwise amended, modified, supplemented or restated
to the extent permitted by Section 9.14.

 

“Palm Ventures Subordinated
Debt Notes” shall mean each Convertible Senior Subordinated Secured Loan Note, issued by Borrower in favor of a Permitted
Holder, as in effect on December 28, 2017 or issued thereafter pursuant to Section 10.5 hereof, and as otherwise amended,
modified, supplemented or restated to the extent permitted by Section 9.14 and each Convertible Senior Subordinated Secured
Loan Note issued by Borrower to a Permitted Holder in replacement or exchange for such note, as otherwise amended, modified, supplemented
or restated to the extent permitted by Section 9.14.

 

    	 	7	 

     

    

  

“Palm Ventures Subordination
Agreement” shall mean the Subordination Agreement by and among the Permitted Holders, Bank, and Borrower, dated as of
December 28, 2017.

 

“Permitted Holders”
shall mean Palm Global Small Cap Master Fund LP, a Cayman Islands limited partnership, and Palm Active Dental, LLC, a Delaware
limited liability company, and any fund or investment vehicle that is an Affiliate of the foregoing (and each, a “Permitted
Holder”).

 

“Total Cash Flow Leverage Ratio”
shall mean, for any applicable period, the ratio of Funded Debt to EBITDA, measured on a trailing twelve month basis, on a consolidated
basis in accordance with GAAP.

 

5.4         Section
2.2 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

 

“2.2       Term Loan.

 

(a)       Term
Loan Commitment. On or about March 29, 2016, Bank agreed to extend to Borrower, subject to the terms and conditions of this
Agreement and the other Loan Documents, and in reliance upon the representations and warranties of Borrower set forth herein and
in the other Loan Documents, a Term Loan in an amount not to exceed $10,000,000 in the aggregate at any time. As of December 28,
2017, after the application of the principal payments required under Paragraph 8.6 of the Fifth Amendment, the aggregate outstanding
principal balance of the Term Loan is equal to $6,500,000. The Term Loan was used by Borrower for working capital and general corporate
purposes. The Term Loan may be prepaid in whole or in part at any time without penalty, but shall be due in full on the Term Loan
Maturity Date, unless the credit extended under the Term Loan is otherwise accelerated, terminated or extended as provided in this
Agreement. The amounts drawn under the Term Loan may not be reborrowed.

 

    	 	8	 

     

    

 

(b)       Term
Loan Principal/Interest Payments. The principal amount of the Term Loan outstanding from time to time shall bear interest at
the applicable Term Interest Rate. Accrued and unpaid interest on the unpaid principal balance of the Term Loan outstanding from
time to time shall be due and payable monthly, in arrears, commencing on January 1, 2018 and continuing on the first day of each
calendar month thereafter. Borrower shall pay the unpaid principal balance of the Term Loan as follows: (i) a payment of $125,000
shall be made on the last day of each calendar quarter in 2018, (ii) a payment of $100,000 shall be made on or before the date
which is thirty (30) days after the date the Form 10-Q for the second fiscal quarter of 2018 is filed by Borrower with the Securities
and Exchange Commission, but only if EBITDA measured for the twelve (12) months ending June 30, 2018 is equal to or more than $2,400,000,
(iii) payments each in the amount of $175,000 shall be made on March 31, 2019 and June 30, 2019, (iv) a payment of $100,000 shall
be made on or before the date which is thirty (30) days after the date the Form 10-Q for the second fiscal quarter of 2019 is filed
by Borrower with the Securities and Exchange Commission, but only if EBITDA measured for the twelve (12) months ending June 30,
2019 is equal to or more than $3,000,000, (v) payments each in the amount of $200,000 shall be made on September 30, 2019 and December
31, 2019, and (vi) payments each in the amount of $250,000 shall be made on the last day of each calendar quarter thereafter, commencing
with March 31, 2020, with a final payment in an aggregate amount equal to the unpaid principal balance of the Term Loan on the
Term Loan Maturity Date; provided that, in any event, Borrower shall make additional payments of principal on the Term Loan
needed, if any, so that the outstanding principal balance of the Term Loan is no greater than (A) $5,750,000 as of December 31,
2018 and (B) $4,750,000 as of December 31, 2019. In addition to the foregoing, (I) commencing with the fiscal quarter ending September
30, 2019, Borrower shall make mandatory principal prepayments on the Term Loan, without penalty and until the Term Loan is paid
in full, equal to the Excess Cash Flow Amount for each fiscal quarter, and (II) commencing with the fiscal year ending December
31, 2020, Borrower shall make mandatory principal prepayments on the Term Loan, without penalty and until the Term Loan is paid
in full, equal to the amount, if any, by which the Excess Cash Flow Amount for each fiscal year (calculated based on Borrower’s
annual audited financial statements for such fiscal year provided pursuant to Section 8.8(a)) exceeds the aggregate quarterly
payments of the Excess Cash Flow Amount made for such fiscal year. Each such mandatory principal prepayment shall be due and payable
(y) quarterly, within five (5) days after Bank’s receipt of Borrower’s Compliance Certificate (including financial
statements (Form 10-Q or otherwise)) for such fiscal quarter provided pursuant to Section 8.8(c) and Section 8.11,
commencing with the financial statements for the fiscal quarter ending September 30, 2019, and (z) annually, within five (5) days
after Bank’s receipt of Borrower’s annual audited financial statements for such fiscal year provided pursuant to Section
8.8(a), commencing with the financial statements for the fiscal year ending December 31, 2020; provided that, in any
event, after giving effect to the payments of the Excess Cash Flow Amount in such fiscal year, Borrower shall make additional payments
of principal on the Term Loan needed, if any, so that the outstanding principal balance of the Term Loan is no greater than (1)
$3,600,000 as of December 31, 2020, (2) $2,100,000 as of December 31, 2021, and (3) $750,000 as of December 31, 2022. All such
payments shall be applied to reduce the unpaid principal amount of the Term Loan and be applied to installments thereof in inverse
order of their maturity. If not sooner paid, a final payment of all outstanding principal and accrued interest shall be due and
payable on the Term Loan Maturity Date. From and after maturity, or after the occurrence and during the continuation of an Event
of Default, interest on the outstanding principal balance of the Term Loan, at the option of Bank, may accrue at the Default Rate
and shall be payable upon demand from Bank.

 

(c)       Term
Loan Optional Prepayments. Borrower may voluntarily prepay the principal balance of the Term Loan, in whole or in part, without
any prepayment penalty whatsoever; provided that any prepayment of the entire principal balance of the Term Loan shall include
all accrued interest on the Term Loan to the date of such prepayment.”

 

    	 	9	 

     

    

 

5.5         Section
2 of the Loan Agreement is hereby amended by adding a new Section 2.8, a new Section 2.9 and a new Section 2.10 to the end thereof
to read in their entirety as follows:

 

“2.8       Unused Line Fee.
Borrower shall pay to Bank an unused line fee, effective as of January 1, 2018 and payable quarterly, in the amount of one quarter
of one percent (0.25%) per annum, calculated on the average of the daily unused portion of the Revolving Loan Commitment as set
forth in clause (a) of the definition of Revolving Loan Commitment. The unused line fee shall be payable quarterly in arrears on
the first Business Day of each quarter, commencing on April 1, 2018, and on the date on which the Obligations are paid in full.

 

2.9         Maximum
Outstanding Balance. If, in any trailing four quarter period, commencing with the period ending December 31, 2018, the Borrower’s
Capital Expenditures exceed $2,000,000, then the Borrower shall, within the next 120 days, reduce the outstanding balance under
the Revolving Loan Commitment to less than $100,000 for thirty consecutive days.

 

2.10       Lockbox;
Payment of Accounts by the Borrower’s Account Debtors. The Borrower shall instruct and direct all account debtors and
other obligors to make payments directly (i) to a post office box or lock box as the Bank may establish or designate to the Borrower
(the “Lockbox”) for deposit by a depository bank acceptable to the Bank in its discretion into a deposit account maintained
by such depository bank (the “Lockbox Deposit Account”), or (ii) to such depository bank by wire transfer, ACH, or
other means as the Bank may direct for deposit into the Lockbox Deposit Account as determined by the Bank in its discretion. The
Lockbox and the Lockbox Deposit Account shall be under the sole control of the Borrower; provided, that (A) at all times before
the Blocked Account is established, the Borrower shall authorize, direct and instruct such depository bank to remit all funds received
or deposited into the Lockbox or the Lockbox Deposit Account on a daily basis to a deposit account maintained by the Borrower with
the Bank, and (B) at all times after the Blocked Account is established, the Borrower shall authorize, direct and instruct such
depository bank to remit all funds received or deposited into the Lockbox or the Lockbox Deposit Account on a daily basis to the
Blocked Account (the remittance authorizations, directions and instructions set forth in this proviso are referred to in this Agreement
as the “Borrower Instructions”), which Borrower Instructions may only be changed by the Borrower after not less than
three (3) Business Days’ prior written notice to the Bank. If the Borrower receives a payment by check or similar instrument,
such instrument shall be immediately delivered to such depository bank in the form received without negotiation for deposit into
the Lockbox Deposit Account. If the Borrower otherwise receives a payment or proceeds of Collateral directly, the Borrower will
immediately deposit such payment or proceeds into the Lockbox Deposit Account. Until deposited, the Borrower shall hold all payments
and proceeds without commingling them with other funds or property. All deposits held in the Blocked Account shall constitute proceeds
of Collateral and shall not constitute the payment of Obligations. The Bank and such depository bank are hereby authorized to receive
and open all payments and items remitted to the Lockbox and the Borrower authorizes the Bank and such depository bank to accept,
endorse and deposit on behalf of the Borrower any checks tendered by an account debtor or any other Person “in full payment”
of its obligation to the Borrower. The Borrower shall not assert against the Bank or such depository bank any claim arising therefrom
or from any other acceptance, endorsement or deposit permitted under this Section 2.10, irrespective of whether such action by
the Bank or such depository bank effects an accord and satisfaction of the Borrower’s claims under Section 3-311 of the UCC
or otherwise. Upon the occurrence and during the continuation of an Event of Default, all payments made to the Blocked Account
will be the sole and exclusive property of the Bank and may be applied by the Bank in its sole discretion on account of the Obligations
and the Borrower waives any right it may have to require the Bank to pursue any third Person for any of the Obligations. Unless
the Borrower and the Bank agree otherwise in writing, the lockbox maintained by the Borrower at Wells Fargo Bank, N.A. as of December
28, 2017 shall constitute the Lockbox and the Borrower’s deposit account maintained by the Borrower at Wells Fargo Bank.
N.A. as of December 28, 2017 (or any successor account thereto) shall constitute the Lockbox Deposit Account.”

 

    	 	10	 

     

    

 

5.6         Section
8 of the Loan Agreement is hereby amended by adding a new Section 8.22 to the end thereof to read in its entirety as follows:

 

“8.22     Post-Closing Deliverables.
The Borrower shall satisfy each of the following requirements on or before the date specified for such requirement (or such later
date as agreed by Bank in writing in its sole discretion), in each case in form and substance acceptable to Bank in its sole discretion:

 

(a)         On
or before January 31, 2018, the Borrower shall deliver to the Bank a fully executed landlord’s waiver and related memorandum
for the lease entered into by the Borrower with respect to its chief executive office and principal place of business; and

 

(b)         On
or before January 31, 2018, the Borrower shall establish the Blocked Account and shall maintain the Blocked Account until the Obligations
are fully satisfied and paid in full in cash.”

 

5.7         Section
9.5 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

 

“9.5       Issuance of Capital
Securities. Borrower shall not issue or accept any Capital Securities other than (a) any issuance of shares of Borrower’s
common Capital Securities, (b) any issuance of Capital Securities by Borrower to the Permitted Holders pursuant to the Palm Ventures
Subordinated Debt Documents or (c) any issuance of Capital Securities by a Subsidiary to Borrower or another Subsidiary in accordance
with Section 9.6. Except as expressly permitted by this Agreement, Borrower shall not enter into any new debt obligations,
convertible debt, mezzanine financing or other financing transactions which result in contractual or required payment obligations.”

 

5.8         Section
9.6 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

 

    	 	11	 

     

    

 

“9.6       Distributions.
Except to the extent otherwise permitted pursuant to the Palm Ventures Subordination Agreement, Borrower shall not (a) make any
distribution or dividend (other than stock dividends), whether in cash or otherwise, to any of its equity holders, (b) purchase
or redeem any of its equity interests or any warrants, options or other rights in respect thereof, (c) pay any management fees
or similar fees to any of its equity holders or any Affiliate thereof, (d) pay or prepay (i) interest on, principal of, or premium,
if any, (ii) amounts related to redemption, conversion, exchange, purchase, retirement, defeasance, or sinking funds, or (iii)
any other payment in respect of any Subordinated Debt and any convertible Debt, or (e) set aside funds for any of the foregoing.”

 

5.9         Section
9.11 of the Loan Agreement is hereby amended by adding a new sentence to the end thereof to read in its entirety as follows:

 

“Borrower shall use a portion of the Palm Ventures
Subordinated Debt proceeds to pay in full (a) accounts payable (including lease payments for rent) that are critically overdue
as of December 31, 2017 (with such payments expected to total approximately $1,000,000 in the aggregate) and (b) past due payroll
Taxes in order to bring such Taxes current. Borrower shall provide to Bank, on or before January 31, 2018, a written certification
from an officer of Borrower, in form and substance acceptable to Bank in its reasonable discretion, certifying that such payments
have been made, together with an accounts payable aging report that demonstrates such payment and evidence of such Tax payments.”

 

5.10       Section
9 of the Loan Agreement is hereby amended by adding a new Section 9.14 to the end thereof to read in its entirety as follows:

 

“9.14     Palm Ventures Subordinated
Debt. Except, in each instance, to the extent, and in the manner, expressly permitted by the Palm Ventures Subordination Agreement,
Borrower will not: (a) make any payment (including any principal, premium, interest, fee or charge) with respect to any of the
Palm Ventures Subordinated Debt; or (b) repurchase, redeem, defease, acquire or reacquire for value any of the Palm Ventures Subordinated
Debt. Other than as expressly set forth in the Palm Ventures Subordination Agreement, Borrower will not seek, agree to or permit,
directly or indirectly, the amendment, waiver or other change to any provision of any Palm Ventures Subordinated Debt Document.”

 

5.11       Section
10 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

 

“10.1     Maximum Total Cash
Flow Leverage Ratio. Borrower shall not permit its Total Cash Flow Leverage Ratio to exceed the ratio set forth in the table
below, determined as of the end of the applicable fiscal quarter set forth opposite thereto:

 

    	 	12	 

     

    

 

	Fiscal Quarter	 	
        Maximum 

        Total Cash 

        Flow Leverage 

        Ratio

	The fiscal quarters ending December 31, 2018 and March 31, 2019	 	4.50:1.00
	The fiscal quarters ending June 30, 2019 and September 30, 2019	 	4.00:1.00
	The fiscal quarters ending December 31, 2019, March 31, 2020, June 30, 2020 and September 30, 2020	 	3.50:1.00
	The fiscal quarter ending December 31, 2020 and each fiscal quarter thereafter	 	3.00:1.00

 

10.2       Maximum
Capital Expenditures. Borrower shall not permit the aggregate amount of (a) Maintenance Capital Expenditures made or incurred
by Borrower, as determined for Borrower in accordance with GAAP, to exceed (i) $200,000 per fiscal quarter in 2018 and (ii) $250,000
per fiscal quarter thereafter, commencing with the fiscal quarter ending March 31, 2019; and (b) Digitization Capital Expenditures
made or incurred by Borrower, as determined for Borrower in accordance with GAAP, to exceed $1,000,000 per fiscal year, commencing
with the fiscal year ending December 31, 2018.

 

10.3       Minimum
Fixed Charge Coverage Ratio. Borrower shall maintain a Fixed Charge Coverage Ratio of not less than (a) 1.10:1.00 for the fiscal
quarter ending March 31, 2019, (b) 1.10:1.00 for the fiscal quarter ending June 30, 2019, and (c) 1.25:1.00 for the fiscal quarter
ending September 30, 2019 and each fiscal quarter thereafter.

 

10.4       Minimum
EBITDA. Borrower shall achieve EBITDA of at least: (a) $400,000 for the fiscal quarter ending March 31, 2018; (b) $900,000
for the two consecutive fiscal quarters ending June 30, 2018; (c) $1,400,000 for the three consecutive fiscal quarters ending September
30, 2018; and (d) $1,850,000 for the four consecutive fiscal quarters ending December 31, 2018.

 

10.5       Financial
Covenant Cure Provision. To the extent that Borrower is not in compliance with a financial covenant set forth in this Section
10 (the “Failed Financial Covenant” or if Borrower is not in compliance with more than one financial covenant for
the same period, the “Failed Financial Covenants”) for any applicable testing period (a “Failed Testing Period”),
subject to receipt of the Cure Amount in immediately available funds pursuant to the terms of this Section 10.5, Borrower
shall have the opportunity to recalculate the Failed Financial Covenant (or Failed Financial Covenants) for such Failed Testing
Period by increasing the amount used for the EBITDA calculation for such Failed Testing Period by the Cure Amount. Each Cure Amount
shall consist of net proceeds in cash from new equity contributions by equity holders of Borrower or from indebtedness advanced
by one or more Permitted Holders evidenced by Palm Ventures Subordinated Debt Notes; provided that such Palm Ventures Subordinated
Debt Notes shall provide that all payments of interest on such Palm Ventures Subordinated Debt are made in kind, and not in cash,
by capitalizing such interest as principal of such Palm Ventures Subordinated Debt Notes. The applicable Cure Amount must be received
by Borrower by no later than fifteen (15) Business Days after the date upon which Bank should have received, pursuant to Section
8.11 hereof, the Compliance Certificate for the fiscal quarter that corresponds to the last day of the applicable Failed Testing
Period. A recalculation of a Failed Financial Covenant (or Failed Financial Covenants) pursuant to this Section 10.5 shall
be deemed to render Borrower in compliance with such Failed Financial Covenant (or Failed Financial Covenants) for such Failed
Testing Period for purposes of calculating the applicable financial covenant(s). Under no circumstances shall any Cure Amount be
included for purposes of determining any baskets or thresholds regarding reference to, or based on, the financial covenants. Any
application of a Cure Amount as set forth above shall be deemed to have occurred during the last fiscal quarter of such Failed
Testing Period and shall continue to be in effect (for such fiscal quarter) for so long as such fiscal quarter continues to be
part of the financial covenant calculations. Notwithstanding anything in this Section 10.5 to the contrary, Borrower shall
not be permitted to cure a Failed Financial Covenant (or Failed Financial Covenants) (a) for two consecutive fiscal quarters or
(b) for more than three Failed Testing Periods.”

 

    	 	13	 

     

    

 

5.12       Section
11.12 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

 

“11.12   Subordinated Debt.
The subordination provisions of any material Subordinated Debt shall for any reason be revoked or invalid or otherwise cease to
be in full force and effect or there occurs a Palm Ventures Subordinated Debt Default.”

 

5.13       Section
11 of the Loan Agreement is hereby amended by adding a new Section 11.14 to the end thereof to read in their entirety as follows:

 

“11.14   Borrower Instructions.
Any change in the Borrower Instructions (whether or not the Bank has prior notice thereof) occurs without the prior written consent
of the Bank.”

 

5.14       Section
12 of the Loan Agreement is hereby amended to delete the phrase “In addition to the foregoing:” at the end of the first
paragraph thereof, and to insert in place thereof: “In addition to the foregoing, upon the occurrence of an Event of Default:”.

 

5.15       Section
12.5(c) of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

 

“(c)       take possession or control
of any proceeds and products of any of the Collateral, including the proceeds of insurance thereon and/or in the Bank’s name
or in the Borrower’s name, to notify the U.S. Postal Service to change the address for delivery of the Borrower’s mail
to any address designated by the Bank, to intercept the Borrower’s mail, to access any lockbox (including any Lockbox) or
postal box into which the Borrower’s mail is deposited, and to receive, open and dispose of all mail addressed to the Borrower,
applying all Collateral as permitted under this Agreement and holding all other mail for the Borrower’s account or forwarding
such mail to the Borrower’s last known address;”

 

    	 	14	 

     

    

 

5.16       Section
12.5(d) of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

 

“(d)       (i) extend, renew or modify
for one or more periods (whether or not longer than the original period) any Note, any other of the Obligations, any obligation
of any nature of any other obligor with respect to any Note or any of the Obligations and/or (ii) draw upon the Revolving Loan
to pay any payments not timely delivered when due and owing under Section 2.2;”

 

6.          Representations
and Warranties. Borrower hereby remakes each of the representations and warranties contained in Section 7 of the Loan Agreement
as of the date of this Amendment, as if made in connection with this Amendment and the Loan Agreement. In addition, Borrower represents
and warrants to Bank that:

 

6.1         Except
as otherwise disclosed to Bank in writing or by Borrower in its filings with the Securities and Exchange Commission, there has
been no material adverse change in the financial condition of Borrower since September 30, 2017.

 

6.2         Borrower,
as of the date hereof, does not have any claims, counterclaims, defenses, or set-offs with respect to the Loan Documents, as modified
herein.

 

6.3         This
Amendment and the other Loan Documents are the legal, valid and binding obligation of Borrower and enforceable against Borrower
in accordance with their terms, subject to applicable bankruptcy, insolvency and other similar laws affecting creditor’s
rights and remedies.

 

6.4         The
execution and delivery of this Amendment and the performance of the Loan Documents have been duly authorized by all requisite action
by or on behalf of Borrower.

 

6.5         Immediately
after giving effect to this Amendment, to Borrower’s knowledge, no Event of Default has occurred and is continuing.

 

6.6         The
execution, delivery and performance of this Amendment does not and will not (a) require any consent, approval, authorization of,
or filings with, notice to or other act by or in respect of, any governmental authority or any other Person (other than any consent
or approval which has been obtained and is in full force and effect); (b) conflict with (i) any provision of law or any applicable
regulation, order, writ, injunction or decree of any court or governmental authority, (ii) the articles of incorporation or bylaws
of Borrower, or (iii) any material agreement, indenture, instrument or other document, or any judgment, order or decree, which
is binding upon Borrower or any of its properties or assets; or (c) except as contemplated by this Amendment, require, or result
in, the creation or imposition of any Lien on any asset of Borrower.

 

6.7         As
of the date hereof, Borrower has no present intention of commencing a case under any chapter of the United States Bankruptcy Code,
nor does Borrower intend to incur obligations in excess of its ability to pay or discharge.

 

    	 	15	 

     

    

 

7.          Release
and Waiver. Borrower fully, finally, and forever releases, waives and forever discharges Bank, and its successors, assigns,
directors, officers, employees, agents, attorneys and representatives from any and all actions, causes of action, claims, debts,
demands, liabilities, obligations, and suits of whatever kind or nature, in law or in equity, whether known or unknown, whether
absolute or contingent, whether or not accrued or presently existing, arising out of or in any way relating to the Loan Documents,
the balance owing on the Revolving Loan or the Term Loan, or this Amendment or any negotiations, course of conduct related hereto
or to the other Loan Documents or the actions or omissions of Bank or its representatives with respect to the Loan Documents as
of the date of this Amendment. Borrower acknowledges that it has been advised by legal counsel, or has made a reasoned and fully
informed decision not to be so represented by counsel, and understands the significance and consequence of this release and waiver,
and Borrower expressly consents and agrees that the releases and waivers contained herein shall be given full force and effect
according to each and all of their express terms and provisions including those relating to demands and causes of action, if any,
as well as those relating to any other claims.

 

8.          Conditions
Precedent. This Amendment, and the waiver set forth in Paragraph 3 hereof, shall be effective when Bank shall have received
an executed original hereof, together with each of the following, each in substance and form acceptable to Bank in its sole discretion:

 

8.1         Evidence
that the Permitted Holders have made an investment in Borrower in a minimum amount of $5,000,000 in immediately available funds
pursuant to the Palm Ventures Subordinated Debt Documents, and subject to the Palm Ventures Subordination Agreement;

 

8.2         An
Officer’s Certificate regarding Palm Ventures Subordinated Debt Documents, duly executed by an officer of Borrower;

 

8.3         The
Palm Ventures Subordination Agreement, duly executed by each party thereto;

 

8.4         Evidence
that Borrower has filed UCC-1 financing statements regarding purchased accounts receivable;

 

8.5         A
current list of equipment;

 

8.6         Receipt
by Bank of $945,239.05 to repay past due principal payments on the Term Loan and $500,000 to prepay the Term Loan;

 

8.7         Receipt
by Bank of all costs and expenses as described in Paragraph 20 hereof; and

 

8.8         Such
other matters as Bank may require.

 

9.          Counterparts;
Facsimile Signatures. This Amendment may be executed in any number of counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but
one and the same agreement. Receipt of an executed signature page to this Amendment by facsimile or other electronic transmission
shall constitute effective delivery thereof. Electronic records of executed Loan Documents maintained by Bank shall deemed to be
originals thereof.

 

    	 	16	 

     

    

 

10.        No
Release; No Implied Waivers. No maker of the Revolving Note or the Term Note or any other Loan Document executed in conjunction
therewith shall be released by execution and delivery of this Amendment. Except as otherwise provided in Paragraph 3 hereof, the
execution of this Amendment and the acceptance of all other agreements and instruments related hereto shall not be deemed to be
a waiver of any Event of Default under the Loan Agreement or a waiver of any breach, default or event of default under any other
Loan Document or other document held by Bank, whether or not known to Bank and whether or not existing on the date of this Amendment.

 

11.        Entire
Agreement. This Amendment, the Loan Agreement, the other Loan Documents and the other documents delivered in connection herewith
and therewith contain the entire agreement of the parties concerning the subject matter hereof and thereof. No promise, representation
or understanding which is not expressly set forth in, or incorporated into, the Loan Agreement, this Amendment or the other Loan
Documents shall be enforceable by any party. All prior and contemporaneous understandings and agreements, written or oral, express
or implied, shall be of no further force and effect to the extent inconsistent herewith.

 

12.        Continuing
Effect and Conflict. To the extent there is a conflict between this Amendment and the Loan Agreement or the other Loan Documents,
the provisions of this Amendment shall control.

 

13.        Execution
of Documents. Borrower shall execute and deliver to Bank this Amendment and Borrower shall execute any other documents reasonably
requested by Bank simultaneously with the execution of this Amendment. All of the Loan Documents and other materials described
in this paragraph shall be acceptable in form and substance to Bank in its sole reasonable discretion.

 

14.        Successor
and Assigns. This Amendment and any related documents shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto.

 

15.        Governing
Law. This Amendment shall be governed by the laws of the State of Colorado.

 

16.        Jurisdiction
and Venue. The parties hereto consent to the jurisdiction and venue of any court located in the City and County of Denver,
State of Colorado, in the event of any litigation pertaining to this Amendment or any other Loan Document or the enforcement of
any liability, obligation, right or remedy described therein.

 

17.        Liens
on Collateral. Borrower hereby represents and warrants to and covenants with Bank that Bank’s liens, security interests,
encumbrances and claims against the Collateral described in the Loan Agreement and the other Loan Documents shall continue to be
prior and superior to any other liens, security interests, encumbrances or claims of any kind except for those specifically provided
otherwise in the Loan Documents.

 

18.        Severable
Provisions. Any provision of this Amendment which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction
only, be unenforceable without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

    	 	17	 

     

    

 

19.        Headings;
Interpretation. The headings of subdivisions in this Amendment are for convenience of reference only, and shall not govern
the interpretation of any of the provisions of this Amendment. Unless the context in which used clearly requires otherwise, “or”
has the inclusive meaning represented by the phrase “and/or”.

 

20.        Costs
and Expenses. Borrower hereby reaffirms its agreement under the Loan Agreement to pay or reimburse Bank on demand for all costs
and expenses incurred by Bank in connection with the Loan Documents, including without limitation all reasonable attorneys’
fees and other legal expenses. Without limiting the generality of the foregoing, Borrower specifically agrees to pay all fees and
disbursements of counsel to Bank for the services performed by such counsel in connection with the forbearance agreement and collection
of debt, together with the preparation of this Amendment and the documents and instruments incidental hereto.

 

21.        JURY
TRIAL WAIVER. BANK AND BORROWER EACH IRREVOCABLY WAIVE ITS RIGHT TO A JURY TRIAL IN ANY ACTION OR PROCEEDING OF ANY ISSUE,
CLAIM, COUNTERCLAIM OR OTHER CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT, BASED UPON OR ARISING OUT OF THIS AMENDMENT OR THE LOAN
AGREEMENT OR ANY OTHER AGREEMENT OR DEALINGS RELATING TO THE SUBJECT MATTER OF THIS AMENDMENT OR THE LOAN AGREEMENT.

 

[The remainder of this
page intentionally left blank.]

 

    	 	18	 

     

    

 

IN WITNESS WHEREOF, Borrower and Bank have caused
this Amendment to be executed as of the date first set forth above.

 

	 	BIRNER DENTAL MANAGEMENT SERVICES, INC.
	 	 	 
	 	By:	/s/ Dennis N. Genty
	 	Name:  Dennis N. Genty
	 	Title:  Chief Financial Officer
	 	 
	 	GUARANTY BANK AND TRUST COMPANY
	 	 	 
	 	By:	/s/ Brad Schwindt
	 	Name:  Brad Schwindt
	 	Title:  Senior Vice President

 

Signature Page to Fifth Amendment to Loan and
Security AgreementExhibit 10.2

 

SUBORDINATION AGREEMENT

 

THIS SUBORDINATION AGREEMENT (this “Agreement”)
is made and entered into as of December 28, 2017, by Birner Dental Management Services, Inc., a Colorado corporation (“Borrower”),
Palm Global Small Cap Master Fund LP, a Cayman Islands limited partnership (“PV”), and Palm Active Dental, LLC, a Delaware
limited liability company (“Palm Dental” and together with PV, and each of their successors and permitted assigns,
“Subordinated Creditors” and each, a “Subordinated Creditor”), and Guaranty Bank and Trust Company, a Colorado
bank (together with its participants, successors and assigns, “Bank”).

 

WITNESSETH:

 

WHEREAS, Borrower and Bank have entered into
the Senior Financing Agreement (as defined below);

 

WHEREAS, Borrower has issued to each Subordinated
Creditor (a) those certain Convertible Senior Subordinated Secured Loan Notes in the original aggregate principal amount of $4,990,000,
each dated December 28, 2017 (as amended, modified, supplemented or restated, collectively the “2017 Subordinated Notes”),
and (b) those certain shares of Series A Convertible Preferred Stock of Borrower issued on the date hereof for consideration of
$10,000 (as amended, modified, supplemented or restated in accordance with the terms hereof, collectively, the “2017 Equity”);

 

WHEREAS, Borrower and each Subordinated Creditor
are entering into this Agreement in order to induce Bank to consent to the Subordinated Debt (as defined below);

 

NOW THEREFORE, in consideration of these premises
and the terms and conditions set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

1.           Definitions.
Except as otherwise provided in this Agreement, capitalized terms used herein shall have the meanings set forth in the Senior Financing
Agreement.

 

“Collateral” means all collateral
now or hereafter securing payment of Senior Debt, including, without limitation, all proceeds thereof.

 

“Insolvency or Liquidation Proceeding”
shall mean the sale of all or substantially all of the assets of Borrower, any receivership, conservatorship, general meeting of
creditors, reorganization or arrangement with creditors, marshaling of assets or liabilities, insolvency or bankruptcy proceeding,
assignment for the benefit of creditors or any proceeding or action by or against Borrower for any relief under any bankruptcy
or insolvency law or other laws relating to the relief of debtors, readjustment of indebtedness, reorganizations, dissolution,
liquidation, compositions or extensions, or the appointment of any receiver, intervenor or conservator of, or trustee, or similar
officer for Borrower or any substantial part of its properties or assets, including, without limitation, proceedings under the
Bankruptcy Code, or under other federal, state or local statute, laws, rules and regulations, all whether now or hereafter in effect.

 

“Lien” shall mean, with respect
to any Person, any interest granted by such Person in any real or personal property, asset or other right owned or being purchased
or acquired by such Person which secures payment or performance of any obligation and shall include any mortgage, lien, encumbrance,
title retention lien, charge or other security interest of any kind, whether arising by contract, as a matter of law, by judicial
process or otherwise.

 

    	 	 

     

    

 

“Paid in Full” shall mean,
with respect to the Senior Debt, such time when the aggregate amount of all Senior Debt has been indefeasibly paid in full in cash
and all commitments and obligations of Bank to make loans or advances under any Senior Debt Agreement have been terminated. “Payment
in Full” and “Pay in Full” shall have the correlative meanings.

 

“Permitted Payments” shall
mean (a) as and when permitted under Section 3 and Section 4, all regularly scheduled payments of cash interest on the Subordinated
Debt (such interest is referred to in this Agreement as “Cash Interest”), (b) at any time, all regularly scheduled
payments of interest on the Subordinated Debt that are made in kind, and not in cash, by capitalizing such interest as principal
of the Subordinated Notes (as in effect on the date hereof) (such interest is referred to in this Agreement as “PIK Interest”)
and (c) solely as permitted in Bank’s sole discretion by prior written consent, dividends or distributions declared on any
class of Subordinated Equity, purchases, redemptions or retirements of any Subordinated Equity and any other payments related to
or arising as a result of any Subordinated Equity (such dividends, distributions, purchases, redemptions, retirements and payments
are referred to in this Agreement, collectively, as “Equity Payments”), in the case of clauses (a), (b) and (c) hereof,
in accordance with the terms of the Subordinated Debt Agreements, in each case as provided in and as when due in accordance with
the Subordinated Notes or Subordinated Equity, as the case may be, before giving effect to any acceleration, any required prepayments
or balloon payments, or any increase in the rate of interest or application of the default rate of interest.

 

“Post Petition Interest”
shall mean interest that accrues after the commencement of an Insolvency or Liquidation Proceeding with respect to Borrower, whether
or not allowed or allowable as a claim in any such Insolvency or Liquidation Proceeding.

 

“Reorganization Securities”
shall mean unsecured (a) securities of Borrower or any of its successors as reorganized in an Insolvency or Liquidation Proceeding,
and (b) other securities of Borrower or any other Person provided for by a plan of reorganization, in each case the payment on,
of or with respect to which is subordinated (including, without limitation, all provisions relating to amortization and prepayment
or, if applicable, redemption or repurchase) in right of payment and in all other respects to all Senior Debt to the same or greater
extent than the Subordinated Debt is subordinated to the Senior Debt under this Agreement.

 

“Senior Debt” shall mean
all existing and future (a) indebtedness and other obligations of Borrower under the Senior Financing Agreement (including without
limitation the Obligations), (b) principal of and interest (including, without limitation, Post Petition Interest) on the loans,
letter of credit obligations, bankers acceptances, interest rate swap, cap, floor or collar agreements, overdraft obligations,
currency agreements, currency spot, foreign exchange and forward contracts or similar arrangements or agreements providing for
the transfer or mitigation of interest or currency risks either generally or under specific contingencies, and other extensions
of credit under the Senior Debt Agreements and (c) any and all other costs, fees, indemnifications, damage claims, expenses (including,
without limitation, reasonable attorneys’ fees and expenses) and other amounts payable by Borrower under the Senior Debt
Agreements.

 

    	 	2	 

     

    

 

“Senior Debt Agreements”
shall mean, collectively, the Senior Financing Agreement and each and every note, instrument, security agreement, pledge agreement,
guaranty agreement, mortgage, deed of trust, indemnity deed of trust, loan agreement, forbearance agreement, hypothecation agreement,
indemnity agreement, letter of credit application, assignment, bankers acceptance, interest rate swap, cap, floor or collar agreement,
overdraft obligation, currency agreement, currency spot, foreign exchange and forward contract or similar arrangement or agreements
providing for the transfer or mitigation of interest or currency risks either generally or under specific contingencies, or any
other document (whether similar or dissimilar to any of the foregoing) heretofore, now or hereafter executed and delivered by Borrower
or any of its Subsidiaries, singly or jointly with such Person or Persons, in connection with any of the Senior Debt, including,
without limitation, the “Loan Documents” as defined in the Senior Financing Agreement, all as originally executed and
as amended, restated, extended, renewed, refinanced, replaced or otherwise modified (including, without limitation, by forbearance
provisions) from time to time, and any agreements, documents and/or instruments entered into in connection with a refunding, refinancing
or replacement of all or any portion of the Senior Debt, whether by the same or any other group of lenders, as such agreements
have been or may hereafter be amended, restated, renewed, refinanced, replaced or otherwise modified from time to time.

 

“Senior Financing Agreement”
shall mean that certain Loan and Security Agreement dated as of March 29, 2016, by and between Borrower and Bank, as it has been
or may hereafter be amended, restated, renewed, refinanced, replaced or otherwise modified from time to time, and any successor
to or replacement of such agreement or the credit facilities evidenced thereby by Bank or any other lender or group of lenders,
as each such successor or replacement may from time to time be entered into, amended, restated, renewed, refinanced, replaced or
otherwise modified (including, without limitation, by forbearance provisions) from time to time.

 

“Subordinated Creditor Agent”
shall mean PV, solely as agent for Subordinated Creditors under this Agreement, or, upon written notice from each Subordinated
Creditor to Bank, any other Person appointed by Subordinated Creditors as agent for Subordinated Creditors under this Agreement.

 

“Subordinated Debt” shall
mean, collectively, all principal, interest (including, without limitation, Post Petition Interest) and premium (if any), dividends,
distributions, purchase payments, redemptions, retirements, fees, expenses and other amounts owing by Borrower to any Subordinated
Creditor under the Subordinated Debt Agreements and each and every other debt, liability and obligation of every type and description
which Borrower may now or at any time hereafter owe to any Subordinated Creditor, whether such debt, liability or obligation now
exists or is hereafter created or incurred, and whether it is or may be direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, or joint, several or joint and several.

 

“Subordinated Debt Agreements”
shall mean (a) the Subordinated Notes, (b) the Subordinated Equity, (c) that certain Securities Purchase Agreement, dated December
28, 2017, by and among Borrower, PV and Palm Dental, (d) that certain Security Agreement dated December 28, 2017, by and among
Borrower, PV and Palm Dental, and (e) all other agreements, documents and instruments entered into, and/or delivered, by any of
the parties thereto in connection therewith, all as originally executed and as amended, restated, extended, renewed, refinanced,
replaced or otherwise modified from time to time to the extent permitted hereunder.

 

    	 	3	 

     

    

 

“Subordinated Equity” shall
mean, collectively, the 2017 Equity and all other shares, interests, participations or other equivalents (however designated, whether
voting or non-voting) of Borrower’s capital and all options, warrants and other rights to acquire any of the foregoing at
any time issued to or in favor of, or acquired by, any Subordinated Creditor, in each case, together with all modifications thereof
and substitutions therefor.

 

“Subordinated Notes” shall
mean, collectively, the 2017 Subordinated Notes and all other promissory notes issued at any time by Borrower in favor of any Subordinated
Creditor, in each case, together with all renewals, extensions and modifications thereof and any note, notes or other instruments
issued in substitution therefor.

 

2.           Subordination.
The payment of all of the Subordinated Debt is hereby made expressly subordinate and junior to the Payment in Full of the Senior
Debt to the extent and in the manner set forth in this Agreement. The Subordinated Debt shall continue to be subordinated to the
Senior Debt even if the Senior Debt is deemed unsecured, under secured, subordinated, avoided or disallowed under the Bankruptcy
Code or other applicable law. Regardless of any priority otherwise available to any Subordinated Creditor by law or by agreement,
all Liens and security interests of any Subordinated Creditor, whether now or hereafter arising and howsoever existing, in any
Collateral or any other assets securing any of the Subordinated Debt shall be and hereby are subordinated in all respects to the
rights and interests of Bank in those assets. Without limiting the foregoing, each Subordinated Creditor hereby acknowledges and
agrees that any and all security interests, Liens, rights and interests of any Subordinated Creditor, whether now existing or hereafter
arising, in or on any or all of the Collateral, shall be and hereby are subordinated for all purposes and in all respects to any
and all security interests, Liens, rights and interests of Bank in or on any or all of the Collateral, whether now existing or
hereafter arising, irrespective of: (a) the date, time, order, manner or method of creation, grant, attachment or perfection of
the respective security interests or Liens granted to any Subordinated Creditor or Bank in or on any or all of the Collateral;
(b) the time or manner of the recording or filing of their respective financing statements, deeds of trust, mortgages or other
security documents; (c) the possession of any of the Collateral; (d) the dating, execution or delivery of any agreement granting
any Subordinated Creditor or Bank security interests in or Liens upon any of the Collateral; or (e) any provision of the Uniform
Commercial Code(s) of the applicable jurisdictions or other applicable law or decision to the contrary. No Subordinated Creditor
shall have any right to possession of any Collateral or other assets of Borrower, if any, or to foreclose upon any such Collateral
or assets, whether by judicial action or otherwise, unless and until the Senior Debt is Paid in Full. Without limiting the foregoing,
each Subordinated Creditor hereby further acknowledges and agrees that, other than Permitted Payments, until the Senior Debt is
Paid in Full, all payments, collections, dividends, distributions or other amounts (whether consisting of cash, securities (other
than Reorganization Securities) or other property) directly or indirectly received by any Subordinated Creditor by set-off, recoupment
or otherwise on account of any Subordinated Debt or at law or in equity (including, without limitation, any amounts received in
connection with any Insolvency or Liquidation Proceeding or any judgment or settlement with respect to any suit filed by any Subordinated
Creditor against Borrower or by any other action permitted hereunder) or otherwise, shall (i) not be commingled with any other
property or assets of any Subordinated Creditor; (ii) be held in trust by such Subordinated Creditor for the benefit of Bank; and
(iii) be paid over and delivered promptly to Bank in precisely the form received, with any necessary endorsement of such Subordinated
Creditor, as a payment on the Senior Debt (or, at Bank’s option, as collateral for any outstanding Senior Debt which is contingent
or is otherwise not then due and payable).

 

    	 	4	 

     

    

 

3.           Payment
Limitations; No Setoff.

 

(a)         No
Subordinated Creditor will, directly or indirectly, ask, demand, sue for, take or receive from Borrower, and Borrower shall not
remit, make or pay, directly or indirectly, in any manner, any payment of all or any part of the Subordinated Debt (whether such
amounts represent principal or interest, or obligations which are due or not due, direct or indirect, absolute or contingent),
including, without limitation, the taking of any negotiable instruments evidencing any of the Subordinated Debt. Notwithstanding
the foregoing sentence, Borrower may pay to Subordinated Creditors, and Subordinated Creditors may accept from Borrower, (i) except
as expressly prohibited in Section 4, Permitted Payments consisting of Cash Interest, so long as Borrower’s Total Cash Flow
Leverage Ratio, measured as of the last day of any calendar quarter ending after the date hereof, is less than 2.0:1.0 and so long
as no “Event of Default” (as defined in the Senior Financing Agreement) has occurred and is continuing or would occur
as a result thereof, (ii) Permitted Payments consisting of Equity Payments, (iii) Permitted Payments consisting of PIK Interest,
and (iv) Reorganization Securities. Each Subordinated Creditor represents and warrants to Bank that, as of the date hereof, the
entire indebtedness of Borrower to the Subordinated Creditors is evidenced by the 2017 Subordinated Notes.

 

(b)         Neither
Borrower nor any Subordinated Creditor shall exercise any right of or permit any setoff in respect of the Subordinated Debt. In
addition, and without limiting the generality of the foregoing, in the event any Subordinated Creditor at any time purchases goods
or services from Borrower, such Subordinated Creditor hereby irrevocably agrees that it shall pay for such goods or services in
cash or cash equivalents in accordance with the terms of such purchases and shall not deduct from or setoff against any amounts
billed to any Subordinated Creditor by Borrower in connection with such purchases any amounts any Subordinated Creditor claims
are due to it with respect to the Subordinated Debt.

 

4.           Payments
on Insolvency or Liquidation Proceeding.

 

(a)          Upon
the occurrence of any Insolvency or Liquidation Proceeding:

 

(i)          the
Senior Debt shall first be Paid in Full before any payment, dividend or distribution shall be made on account of or applied with
respect to any Subordinated Debt;

 

(ii)         any
payment, dividend or distribution received by any Subordinated Creditor which would otherwise (but for this clause (ii)) be payable
or deliverable with respect to any Subordinated Debt shall be promptly paid or delivered directly to Bank with respect to the Senior
Debt, until all Senior Debt has been Paid in Full (after giving effect to any concurrent payment to Bank with respect to the Senior
Debt); and

 

    	 	5	 

     

    

 

(iii)        Each
Subordinated Creditor hereby authorizes and empowers Bank, at its election and in its name or the name of such Subordinated Creditor,
as attorney in fact for such Subordinated Creditor (each Subordinated Creditor, by its execution of this Agreement, hereby irrevocably
appoints Bank, or any of its officers, employees or agents on behalf of Bank, as its attorney in fact (which appointment is coupled
with an interest) with the power but not the duty to take the actions as provided in this Section 4(a)(iii)), (x) to execute and
file any claim, proof of claim and/or other instrument of similar character to protect completely the interest of Bank in the applicable
Subordinated Debt if any Subordinated Creditor fails to file any such claim, proof of claim or other instrument on or before the
third day next preceding the last day permitted for such filing or, if there is no such deadline, within ten (10) days of the written
request of Bank that such claim, proof of claim or instrument be filed, (y) to vote such proofs of claim in any such Insolvency
or Liquidation Proceeding if any Subordinated Creditor fails to vote any such proofs of claim within ten (10) days prior to any
deadline therefor and (z) to vote claims comprising Subordinated Debt, to accept or reject any plan of partial or complete liquidation,
reorganization, arrangement, composition or extension, and to take such other action in Bank’s own name or in the name of
any Subordinated Creditor as Bank may deem necessary or advisable for the enforcement of the agreements contained herein.

 

(b)          Each
Subordinated Creditor will execute and deliver to Bank such further powers of attorney or instruments as Bank may request in order
to accomplish the foregoing.

 

(c)          Notwithstanding
the foregoing provisions of this Section 4, Borrower may pay and deliver to any Subordinated Creditor, and such Subordinated Creditor
shall be entitled to receive and retain, any Permitted Payments consisting of PIK Interest and any Reorganization Securities.

 

(d)          If
Bank desires to permit the use of cash collateral or to provide post-petition financing to Borrower, no Subordinated Creditor shall
object to the same or assert that its interests are not being adequately protected.

 

5.           Limitation
on Right of Action. Without implying any limitation on the obligation of each Subordinated Creditor to turn over to Bank all
payments on any Subordinated Debt (other than, to the extent such payments are permitted by this Agreement, Permitted Payments
and Reorganization Securities) until the Senior Debt has been Paid in Full, each Subordinated Creditor agrees to refrain in all
aspects from: (a) accelerating, or taking any action to accelerate, the payment of any Subordinated Debt, (b) filing or otherwise
bringing (or joining with any other creditor (unless Bank shall so join) in filing or otherwise bringing) any Insolvency or Liquidation
Proceeding, (c) taking (or joining with any other creditor (unless Bank shall so join) in taking) any action to institute any legal
or equitable proceeding or take any other action to enforce any right to payment with respect to, or collect upon, any Subordinated
Debt, and (d) taking possession of, selling or otherwise disposing of any Collateral.

 

6.           Action
Concerning Collateral.

 

(a)          Notwithstanding
any Lien now held or hereafter acquired by any Subordinated Creditor, Bank may take possession of, sell, dispose of, and otherwise
deal with all or any part of the Collateral, and may enforce any right or remedy available to it with respect to Borrower or the
Collateral, all without notice to or consent of any Subordinated Creditor except as specifically required by applicable law.

 

    	 	6	 

     

    

 

(b)          In
addition, and without limiting the generality of the foregoing, if (i) an “Event of Default” (as defined in the Senior
Financing Agreement) has occurred and is continuing, and (ii) Borrower or Bank intends to sell or otherwise dispose of any Collateral
outside the ordinary course of business, each Subordinated Creditor shall be deemed to have consented to such sale or disposition,
to have released any Lien it may have in such Collateral and to have authorized Bank or its agents to file partial releases (and
any related financing statements) with respect to such Collateral. Bank, or any of its officers, employees or agents on behalf
of Bank, is hereby irrevocably appointed as the attorney in fact (which appointment is coupled with an interest) for each Subordinated
Creditor to file such partial releases (and any related financing statements) with respect to such Collateral. In the event, at
the request of Borrower, Bank otherwise releases any of its security for the Senior Debt which constitutes part or all of the security
for any or all of the Subordinated Debt, each Subordinated Creditor shall thereupon promptly execute and deliver to Borrower such
termination statements and releases as Bank shall request to release such Subordinated Creditor’s Lien against such property
of Borrower.

 

(c)          Bank
shall have no duty to preserve, protect, care for, insure, take possession of, collect, dispose of, or otherwise realize upon any
of the Collateral, and in no event shall Bank be deemed any Subordinated Creditor’s agent with respect to the Collateral.
All proceeds received by Bank with respect to any Collateral may be applied to the existing Senior Debt in such manner of application
as Bank may deem appropriate in its sole discretion. Each Subordinated Creditor acknowledges and agrees that: (i) Bank makes no
representation or warranty whatsoever as to the nature, extent, description, validity or priority of any Collateral or the Liens
upon any Collateral; (ii) in no event shall Bank be liable for its actions with respect to the Collateral, and Bank shall not have
any liability to any Subordinated Creditor for any losses, damages, claims, or liability of any kind to the extent arising out
of the holding of Collateral; (iii) Bank is not acting as a pledgeholder for any Subordinated Creditor with respect to any Collateral;
and (iv) each Subordinated Creditor shall promptly deliver to Bank any Collateral that is now in, or in the future comes into,
its possession or control other than to the extent constituting Reorganization Securities or Permitted Payments (unless otherwise
prohibited under this Agreement). No Subordinated Creditor will oppose, interfere with or otherwise attempt to prevent Bank from
enforcing its security interests in or Liens on any of the Collateral or otherwise realizing upon any of the Collateral to the
extent such actions are not inconsistent with the terms of this Agreement. Each Subordinated Creditor hereby assumes responsibility
for keeping itself informed of the financial condition of Borrower and of all other circumstances bearing upon the risk of nonpayment
of the Subordinated Debt, and each Subordinated Creditor hereby agrees that Bank shall have no duty to advise any Subordinated
Creditor of any information regarding such condition or any such circumstances.

 

(d)          The
parties hereto agree that it is their intention that the Collateral and the collateral pledged to each Subordinated Creditor by
Borrower be identical and each Subordinated Creditor agrees not to take a Lien on the property of Borrower if Bank does not have
a Lien on such property. In furtherance of the foregoing and Section 26, each Subordinated Creditor shall, subject to the other
terms and conditions of this Agreement, upon request by Bank, cooperate in good faith from time to time in order to determine the
specific items included in the Collateral and the collateral pledged to any Subordinated Creditor by Borrower and the steps taken
or to be taken to perfect their respective Liens thereon and the identity of the respective parties obligated under the Senior
Debt Agreements and the Subordinated Debt Agreements. During the term of this Agreement, whether or not any Insolvency or Liquidation
Proceeding has been commenced by or against Borrower, the parties hereto agree that Borrower shall not grant or suffer to exist
any additional Liens on any asset to secure any Subordinated Debt unless Borrower also offers to grant, and, at the option of Bank,
grants a Lien on such asset to secure the Senior Debt concurrently with the grant of a Lien thereon in favor of any Subordinated
Creditor in accordance with the priorities set forth in this Agreement. To the extent that the foregoing terms and conditions are
not complied with for any reason, without limiting any other rights and remedies available to Bank, each Subordinated Creditor
agrees that any amounts received by or distributed to it pursuant to or as a result of Liens granted in contravention of this Section
6(d) shall be subject to the other terms and conditions of this Agreement.

 

    	 	7	 

     

    

 

(e)          In
the event of the occurrence of any casualty with respect to any of the Collateral, each Subordinated Creditor agrees that Bank
shall have the sole and exclusive right to adjust, compromise or settle any such loss with the insurer thereof, and to collect
and receive the proceeds from such insurer and apply such proceeds as set forth in the Senior Debt Agreements. Any insurer shall
be fully protected if it acts in reliance on the terms of this Section 6(e).

 

7.           Payments
in Contravention of this Agreement. Any payment made by Borrower and received by any Subordinated Creditor in violation of
any provision of this Agreement (without the written consent of Bank) shall be held in trust by such Subordinated Creditor for
Bank and shall be promptly delivered, in the form received (except for endorsement of such Subordinated Creditor where necessary),
to Bank to the extent necessary to Pay in Full the Senior Debt in accordance with its terms and after giving effect to any concurrent
payment or distribution to Bank, which payments shall be applied to then existing Senior Debt (whether or not due) in such manner
of application as Bank may deem appropriate in its sole discretion. If any Subordinated Creditor exercises any right of setoff
which such Subordinated Creditor is not permitted to exercise under the provisions of this Agreement, such Subordinated Creditor
will promptly pay over to Bank, in immediately available funds, an amount equal to the amount of the claims or obligations offset.
If any Subordinated Creditor fails to make any endorsement required under this Agreement, Bank, or any of its officers, employees
or agents on behalf of Bank, is hereby irrevocably appointed as the attorney in fact (which appointment is coupled with an interest)
for such Subordinated Creditor to make such endorsement in such Subordinated Creditor’s name.

 

8.           Subrogation.
Unless and until the Senior Debt is Paid in Full, no Subordinated Creditor shall have any right of subrogation. Thereafter, with
respect to the value of any payments, dividends or distributions in cash, property or other assets that any Subordinated Creditor
paid over to Bank under the terms of this Agreement, such Subordinated Creditor shall be subrogated to the rights of Bank. Borrower
acknowledges and agrees that, to the extent permitted by applicable law, the value of any payments, dividends or distributions
in cash, property or other assets received by any Subordinated Creditor that are paid over to Bank pursuant to this Agreement shall
not reduce any of the Subordinated Debt.

 

9.           Default
Notices. Each Subordinated Creditor shall (a) promptly give Bank written notice (and if any notices are sent to Borrower, contemporaneously
with such sending) of its actual knowledge of the occurrence of any breach or event of default with respect to any Subordinated
Debt and (b) give Bank prior written notice of the acceleration of all or any portion of any Subordinated Debt.

 

    	 	8	 

     

    

 

10.         Legend;
Transfer of Subordinated Debt.

 

(a)          Until
the Senior Debt has been Paid in Full, Borrower shall cause each Subordinated Note and each Subordinated Equity to be conspicuously
marked with the following legend:

 

“THIS INSTRUMENT IS SUBJECT TO THE TERMS OF A SUBORDINATION
AGREEMENT DATED AS OF DECEMBER 28, 2017, IN FAVOR OF GUARANTY BANK AND TRUST COMPANY, A COLORADO BANK, WHICH AGREEMENT (AS AMENDED
IN ACCORDANCE WITH ITS TERMS) IS INCORPORATED HEREIN BY REFERENCE.”

 

(b)          Each
Subordinated Creditor will mark its books conspicuously to evidence the subordination effected hereby. At the request of Bank from
time to time, each Subordinated Creditor shall promptly deliver to Bank a copy of each Subordinated Note, each Subordinated Equity
and each other Subordinated Debt Agreement.

 

11.         No
Impairment of Obligation. Except as otherwise expressly provided herein, nothing contained in this Agreement shall (a) impair,
as between any Subordinated Creditor and Borrower, the obligation of Borrower, which is unconditional and absolute, to pay any
Subordinated Debt to such Subordinated Creditor as and when all or any portion thereof shall become due and payable in accordance
with its terms or (b) prevent any Subordinated Creditor, upon any default under any Subordinated Debt, from exercising all rights,
powers and remedies otherwise provided therein or by applicable law (except as expressly limited hereby).

 

12.         Remedies;
Enforcement. The rights and remedies of Bank hereunder are cumulative and shall be in addition to any other rights and remedies
of Bank under the Senior Debt Agreements or any other agreements or which may now or hereafter exist in law or at equity. No postponement
or delay by Bank in the enforcement of any right hereunder shall constitute a waiver thereof. No waiver shall be deemed to be made
by Bank of any of its rights hereunder unless the same shall be in writing signed on behalf of Bank, and each such waiver, if any,
shall be a waiver only with respect to the specific matter or matters to which the waiver relates and shall in no way impair the
rights of Bank or the obligations of any Subordinated Creditor to Bank in any other respect at any time.

 

13.         Representations
and Warranties of Borrower and Subordinated Creditors.

 

(a)          Borrower
hereby represents and warrants to Bank as follows:

 

(i)          Borrower
is a duly organized Colorado corporation, validly existing under the laws of the state of its organization and has the full power
and authority to execute and deliver, and to perform all of its obligations under, this Agreement, and this Agreement has been
duly executed and delivered by Borrower and constitutes the legal, valid and binding agreement and obligation of Borrower, enforceable
against Borrower in accordance with its respective terms.

 

(ii)         The
execution, delivery and performance by Borrower of this Agreement have been duly authorized by all necessary action on the part
of Borrower and do not (A) require the consent or approval of Borrower’s shareholders, general partners, limited partners,
members or any other Person, (B) violate Borrower’s organizational documents or any resolution of Borrower’s governing
body, persons, or authority, where applicable, or (C) violate any provision of any law, rule or regulation or of any order,
writ, injunction or decree presently in effect having applicability to Borrower.

 

    	 	9	 

     

    

 

(iii)        No
consent or authorization by, approval of, giving of notice to, registration, declaration or filing with, or taking of any other
action with respect to or by any federal, state, or local governmental authority or organization or any other Person is required
for Borrower’s execution, delivery, or performance of this Agreement, except to the extent obtained, accomplished or given
prior to the date of this Agreement.

 

(b)          Each
Subordinated Creditor hereby represents and warrants to Bank as follows:

 

(i)          Such
Subordinated Creditor is duly organized, validly existing under the laws of the state of its organization and has the full power
and authority to execute and deliver, and to perform all of its obligations under, this Agreement, and this Agreement has been
duly executed and delivered by such Subordinated Creditor and constitutes the legal, valid and binding agreement and obligation
of such Subordinated Creditor, enforceable against such Subordinated Creditor in accordance with its respective terms.

 

(ii)         The
execution, delivery and performance by such Subordinated Creditor of this Agreement have been duly authorized by all necessary
action on the part of such Subordinated Creditor and do not (A) require the consent or approval of such Subordinated Creditor’s
shareholders, general partners, limited partners, members or any other Person, (B) violate such Subordinated Creditor’s organizational
documents or any resolution of such Subordinated Creditor’s governing body, persons, or authority, where applicable, or (C)
violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect having applicability
to such Subordinated Creditor.

 

(iii)        No
consent or authorization by, approval of, giving of notice to, registration, declaration or filing with, or taking of any other
action with respect to or by any federal, state, or local governmental authority or organization or any other Person is required
for such Subordinated Creditor’s execution, delivery, or performance of this Agreement, except to the extent obtained, accomplished
or given prior to the date of this Agreement.

 

14.         Duration.
This Agreement is of a continuing nature, and it shall continue in force until all the Senior Debt is Paid in Full.

 

15.         Senior
Debt Agreements Amendments. This Agreement shall constitute a continuing agreement of subordination. Bank may, without notice
to or consent by any Subordinated Creditor, modify any term of Senior Debt in reliance upon this Agreement. Without limiting the
generality of the foregoing, each Subordinated Creditor hereby acknowledges that at any time and from time to time and with or
without consideration, Bank may, without further consent of or notice to any Subordinated Creditor and without in any manner affecting,
impairing, lessening or releasing any of the provisions of this Agreement, renew, extend, increase, decrease, change the manner,
time, place and terms of payment of, sell, exchange, release, substitute, surrender, realize upon, modify, waive, grant indulgences
with respect to and otherwise deal with in any manner: (a) all or any part of the Senior Debt; (b) all or any of the Senior Debt
Agreements; (c) all or any part of any property at any time securing all or any part of the Senior Debt (including, without limitation,
the Collateral); or (d) any Person at any time primarily or secondarily liable for all or any part of the Senior Debt and/or any
Collateral or other security therefor, all as if this Agreement and any interest which any Subordinated Creditor has in such property
did not exist.

 

    	 	10	 

     

    

 

16.         Subordinated
Debt Agreements Amendments. Notwithstanding anything contained in any Subordinated Debt Agreement or any Senior Debt Agreement
to the contrary, no Subordinated Creditor shall, without the prior written consent of Bank (which consent shall not be unreasonably
withheld, conditioned or delayed), agree to any amendment, modification or supplement to any Subordinated Debt Agreement. Subordinated
Creditors shall deliver to Bank copies of any new, amended or otherwise modified Subordinated Debt Documents within ten days after
the execution thereof. In addition, no Subordinated Creditor shall loan or advance any funds to Borrower without the prior written
consent of Bank, other than (a) the loans made by each Subordinated Creditor to Borrower as evidenced by the 2017 Subordinated
Notes as in effect on the date hereof and (b) the loans made by any Subordinated Creditor to Borrower as evidenced by Subordinated
Notes the proceeds of which are used by Borrower as a Cure Amount as set forth in Section 10.5 of the Senior Debt Agreement and
which Subordinated Notes shall be in form and substance substantially similar to the Subordinated Notes issued on December 28,
2017, with a maturity date of September 30, 2023 or later, but shall provide that all payments of interest on such Subordinated
Debt are made in kind, and not in cash, by capitalizing such interest as principal of such Subordinated Notes.

 

17.         Payment
Set Aside. To the extent the Senior Debt was deemed Paid in Full, if, after receipt of any payment or application of the proceeds
of any Collateral to payment of all or any part of the Senior Debt, Bank is compelled to surrender or voluntarily surrenders such
payment or proceeds to any Person, because such payment or application of proceeds is or may be avoided, invalidated, declared
fraudulent, set aside, declared to be void or voidable as a preference, fraudulent conveyance, fraudulent transfer, impermissible
setoff, diversion of trust funds, or any other void or voidable transfer or payment, or because of any settlement or compromise
of such claim, then this Agreement shall be reinstated and shall continue to be in full force and effect, as if such payment or
proceeds had not been received by Bank, notwithstanding any revocation thereof, or the surrender of any promissory note, or the
return or cancellation of any instrument or document relating to any Senior Debt Agreement. This Section 17 shall survive the termination
of this Agreement.

 

    	 	11	 

     

    

 

18.         Waivers.
Other than with respect to matters determined by a court of competent jurisdiction by final and nonappealable judgment to have
been caused by or result from the willful misconduct or gross negligence of Bank, Bank shall not have any liability to any Subordinated
Creditor for, and each Subordinated Creditor waives any claim which any Subordinated Creditor may now or hereafter have against,
Bank arising out of (a) any and all actions which Bank takes or omits to take (including, without limitation, actions with respect
to the creation, perfection or continuation of Liens on the Collateral and other security for the Senior Debt, actions with respect
to the occurrence of any default, actions with respect to the foreclosure upon, sale, release, or depreciation of, or failure to
realize upon, any of the Collateral and actions with respect to the collection of any claim for all or any part of the Senior Debt
from any account debtor, guarantor or any other party) with respect to any Senior Debt Agreement or to the collection of the Senior
Debt or the valuation, use, protection or release of the Collateral and/or other security for the Senior Debt, (b) Bank’s
election, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the Bankruptcy Code,
and/or (c) any borrowing or grant of a Lien under Section 364 of the Bankruptcy Code by Borrower, as debtor in possession.
Each Subordinated Creditor hereby waives notice of acceptance hereof, notice of the creation of any of the Senior Debt, notice
of the giving or extension of credit by Bank to Borrower or the taking or releasing of guarantees, collateral or other security
for the payment thereof, and hereby waives presentment, demand, protest, notice of protest or default and all other notices to
which any Subordinated Creditor might otherwise be entitled. Each Subordinated Creditor hereby waives any and all rights to, and
agrees not to bring, prosecute or voluntarily participate in any claim, action or proceeding to avoid, or to contest or challenge
(i) the extent, validity, legality, enforceability, perfection or priority of any of the Senior Debt, the Senior Debt Agreements,
any other agreements, documents or instruments evidencing, securing, guaranteeing the payment of or otherwise relating to any of
the Senior Debt or any of the security interests or Liens of Bank in or on any of the Collateral, (ii) the relative rights and
duties of any holders of any Senior Debt established in any instruments or agreements creating or evidencing any of the Senior
Debt with respect to any such security interests, Liens or guaranties, or (iii) such Subordinated Creditor’s obligations
and agreements set forth in this Agreement.

 

19.         Subordinated
Debt Owed Only to Subordinated Creditors and Permitted Holders. Each Subordinated Creditor represents and warrants, until Senior
Debt is Paid in Full, that (a) it has not transferred or assigned any interest in any Subordinated Debt or any Lien in connection
therewith other than to another Subordinated Creditor or to a Permitted Holder as permitted under Section 21, (b) no other party
owns an interest in any Subordinated Debt or security therefor other than Subordinated Creditors and Permitted Holders to the extent
permitted under Section 21, and (c) the entire Subordinated Debt is owing only to Subordinated Creditors and Permitted Holders
to the extent permitted under Section 21.

 

20.         No
Commitment; Marshalling. None of the provisions of this Agreement shall be deemed or construed to constitute or imply any commitment
or obligation on the part of Bank to make any future loans or other extensions of credit or financial accommodations to Borrower.
Each Subordinated Creditor hereby waives any and all right to require the marshalling of assets in connection with the exercise
of any of Bank’s remedies permitted by applicable law or agreement. Each Subordinated Creditor hereby waives any and all
rights to, and agrees not to require Bank to enforce any guaranty or any security interest or Lien given by any Person other than
Borrower to secure the payment of any or all of the Senior Debt as a condition precedent or concurrent to taking any action against
or with respect to Borrower or any of the Collateral owned by any Person.

 

    	 	12	 

     

    

 

21.         Successors
and Assigns. This Agreement shall be binding upon Borrower, each Subordinated Creditor and their respective successors and
assigns, and shall be binding upon and inure to the benefit of Bank and its participants, successors and assigns irrespective of
whether this or any similar agreement is executed by any other creditor of Borrower. This Agreement shall be freely assignable
at any time by Bank; provided that any such assignment is in conjunction with the assignment of the related Senior Debt and that
such assignee signs a counterpart hereof and agrees to be bound by the terms hereof. Each Subordinated Creditor agrees not to sell,
assign, pledge, dispose of or otherwise transfer all or any portion of the Subordinated Debt or any Subordinated Debt Agreement
other than to another Subordinated Creditor that is party to this Agreement on the date hereof or to a Permitted Holder, and then,
only after giving prior written notice of such action to Bank. Each Subordinated Creditor shall cause each Permitted Holder that
holds any interest in any Subordinated Debt or security therefor or any Subordinated Debt Agreement after the date hereof (a) to
promptly join this Agreement as a Subordinated Creditor by executing and delivering a joinder to this Agreement in a form acceptable
to Bank in its reasonable discretion and (b) to designate in such joinder Subordinated Creditor Agent as its designee with the
power to execute any amendments or other modifications hereof. The subordination effected hereby shall survive any sale, assignment,
pledge, disposition or other transfer of all or any portion of the Subordinated Debt, and the terms of this Agreement shall be
binding upon all of the successors and assigns of each Subordinated Creditor. Neither any Subordinated Creditor nor Borrower may
assign any of its rights or obligations under this Agreement without the prior written consent of Bank. This Agreement shall also
be binding upon and inure to the benefit of each other holder of Senior Debt that exists as a result of a refinancing of Senior
Debt so long as each such other holder of Senior Debt signs a counterpart hereof and agrees to be bound by the terms hereof. Upon
such event, each such other holder of Senior Debt shall be deemed to be a holder of Senior Debt and have all rights of Bank for
all purposes hereunder.

 

22.         Amendments.
This Agreement may be amended, changed or modified only by a writing signed by Subordinated Creditor Agent, on behalf of each Subordinated
Creditor, and Bank.

 

23.         Notices.
All notices to be given under this Agreement must be in writing and shall be effective only when given at the addresses and to
the attention of the Persons stated on the signature pages hereto below, or at such other address or to the attention of such other
Person as the recipient has designated after the date hereof in writing to the sending party. No party is obligated to give any
other party any notices under this Agreement except as expressly set forth herein. Any notice given under this Agreement shall
be deemed to have been validly given (a) if served in person, upon acceptance or refusal of delivery; (b) if mailed by certified
or registered mail, return receipt requested, postage prepaid, on the third (3rd) day following the day such notice is deposited
in any post office station or letter box; or (c) if sent by recognized overnight courier, on the first (1st) day following the
day such notice is delivered to such carrier.

 

24.         Counterparts;
Headings. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. Delivery of an executed counterpart of this Agreement by telefacsimile or other electronic
means shall be equally as effective as delivery of an original executed counterpart of this Agreement. The paragraph headings herein
are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.

 

25.         Severability.
In the event that any provision of this Agreement is deemed to be invalid by reason of the operation of any law or by reason of
the interpretation placed thereon by any court or governmental authority, this Agreement shall be construed as not containing such
provision and the invalidity of such provision shall not affect the validity of any other provisions hereof, and any and all other
provisions hereof which otherwise are lawful and valid shall remain in full force and effect.

 

    	 	13	 

     

    

 

26.         Further
Assurances. Each Subordinated Creditor agrees to do such further acts and things and to execute and deliver such additional
agreements, documents, instruments and consents as may be necessary or as Bank may from time to time reasonably request to effect
the purposes of this Agreement, including, without limitation, the subordinations contemplated by this Agreement.

 

27.         Conflict.
In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any
Subordinated Debt Agreement, the provisions of this Agreement shall control and govern. For the purposes of this Section 27, to
the extent that any provisions of any Subordinated Debt Agreement provides rights, remedies and benefits to Bank that exceed the
rights, remedies and benefits provided to Bank under this Agreement, such provisions of the applicable Subordinated Debt Agreement
shall be deemed to supplement (and not to conflict with) the provisions hereof.

 

28.         Governing
Law; Remedies. This Agreement shall be delivered and accepted in and shall be deemed to be a contract made under and governed
by the internal laws of the State of Colorado (but giving effect to federal laws applicable to national banks) applicable to contracts
made and to be performed entirely within such state, without regard to conflict of laws principles. In furtherance of the foregoing,
the internal law of the State of Colorado shall control the interpretation and construction of this Agreement, even though under
that jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily
apply. The parties hereto acknowledge that the provisions of this Agreement are unique and money damages may not provide an adequate
remedy for any breach thereof, and each party may seek specific performance and other equitable remedies for any breaches under
this Agreement.

 

29.         FORUM
SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT
SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF COLORADO OR IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF COLORADO; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE BANK FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. EACH OF EACH SUBORDINATED CREDITOR AND BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF COLORADO AND OF THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
COLORADO FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF EACH SUBORDINATED CREDITOR AND BORROWER FURTHER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF COLORADO.
EACH OF EACH SUBORDINATED CREDITOR AND BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED
TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

    	 	14	 

     

    

 

30.         WAIVER
OF JURY TRIAL. BANK, EACH SUBORDINATED CREDITOR AND BORROWER, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH
COUNSEL, EACH KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING
TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, THE COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED
OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH ANY
OF THE FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH BANK, ANY SUBORDINATED CREDITOR AND/OR BORROWER ARE ADVERSE
PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR BANK ENTERING INTO THIS AGREEMENT.

 

[The remainder of this page intentionally
left blank.]

 

    	 	15	 

     

    

IN WITNESS WHEREOF, the parties hereto have
executed this Subordination Agreement as of the day and year first above written.

 

	BORROWER:	 	BANK:	 
	 	 	 	 
	BIRNER DENTAL MANAGEMENT SERVICES, INC.	 	GUARANTY BANK AND TRUST COMPANY	 
	 	 	 	 	 	 
	By:	/s/ Dennis N. Genty	 	By:	/s/ Brad Schwindt	 
	Name:  Dennis N. Genty	 	Name: Brad Schwindt	 
	Title:  Chief Financial Officer	 	Title:  Senior Vice President	 
	Address:  1777 South Harrison St., Suite 1400	 	Address:  1331 17th Street	 
	  Denver, Colorado  80210	 	  Denver, Colorado  80202	 
	  Attn:  Chief Financial Officer	 	  Attn:  Brad Schwindt	 

 

    	Signature Page to Subordination Agreement - 1

     

    

 

	SUBORDINATED CREDITOR:	 
	 	 
	PALM GLOBAL SMALL CAP MASTER FUND LP	 
	 	 	 
	By:	/s/ Jason Woody	 
	Name:  Jason Woody	 
	Title:  Director	 
	Address:  c/o Palm Management (US) LLC	 
	  19 West Elm Street	 
	  Greenwich, CT  06830	 
	  Attn:  Craig Connors	 

  

    	Signature Page to Subordination Agreement - 2

     

    

 

	SUBORDINATED CREDITOR:	 
	 	 
	PALM ACTIVE DENTAL, LLC	 
	 	 	 
	By:	/s/ Jason Woody	 
	Name:	Jason Woody	 
	Title:	 	 
	Address: c/o Palm Management (US) LLC	 
	 19 West Elm Street	 
	 Greenwich, CT 06830	 
	 Attn: Craig Connors	 

  

    	Signature Page to Subordination Agreement - 3

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