Document:

Exhibit 10.27

 

COMMERCIAL SECURITY AGREEMENT

  

	Principal	Loan
    Date	Maturity	Loan
    No	Call
    / Coll	Account	Officer	Initials
	$461,500.00	04-02-2012	10-01-2012	113	 	 	CB	 
	
        References in the boxes above are for
        Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item
        above containing “***” has been omitted due to text length limitations.

 

	Borrower:	Superior Drilling Products of California, LLC	 	Lender:	US Employment Development Lending Center, LLC
	 	19479 Creek Blvd.	 	 	1 World Trade Center, Suite 1870
	 	Bakersfield, CA 93314	 	 	Long Beach, CA 90831
	 	 	 	 	 

  

THIS COMMERCIAL SECURITY AGREEMENT
dated April 2, 2012, is made and executed between Superior Drilling Products of California, LLC (“Grantor”) and
US Employment Development Lending Center, LLC (“Lender”).

 

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

 

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

 

All equipment; all furniture;
all fixtures; all attachments, accessions, accessories, fittings, increases, tools, parts, repairs, supplies, and commingled goods
relating to the foregoing property, and all additions, replacements of and substitutions for all or any part of the foregoing
property; all insurance refunds relating to the foregoing property; all good will relating to the foregoing property; all records
and data and embedded software relating to the foregoing property, and all equipment, inventory and software to utilize, create,
maintain and process any such records and data on electronic media; and all supporting obligations relating to the foregoing property;
all whether now existing or hereafter arising, whether now owned or hereafter acquired or whether now or hereafter subject to
any rights in the foregoing property; and all products and proceeds (including but not limited to all insurance payments) of or
relating to the foregoing property.

 

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

 

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

 

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

 

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

 

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

 

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

 

Some or all of the Collateral may be located
on the following described real estate:

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

COMMERCIAL SECURITY AGREEMENT 

	 	(Continued)	Page 2
	 	 	 

 

Enforceability of Collateral.
To the extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the Uniform Commercial
Code, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and
regulations concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the
Collateral have authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. There shall
be no setoffs or counterclaims against any of the Collateral, and no agreement shall have been made under which any deductions
or discounts may be claimed concerning the Collateral except those disclosed to Lender in writing.  

 

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

 

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

 

Transactions Involving
Collateral. Except for inventory sold or accounts collected in the ordinary course of Grantor’s business, or as
otherwise provided for in this Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the
Collateral. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien,
security interest, encumbrance, or charge, other than the security interest provided for in this Agreement, without the prior
written consent of Lender. This includes security interests even if junior in right to the security interests granted under
this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be
held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall
not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall Immediately deliver any
such proceeds to Lender.  

 

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

 

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

 

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

 

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

 

Compliance with
Governmental Requirements. Grantor shall comply promptly with all laws, ordinances, rules and regulations of all
governmental authorities, including without limitation all environmental laws, ordinances, rules and regulations, now or
hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral, including all laws or
regulations relating to the undue erosion of highly-erodible land or relating to the conversion of wetlands for the
production of an agricultural product or commodity. Grantor may contest in good faith any such law, ordinance or regulation
and withhold compliance during any proceeding, including appropriate appeals, so long as Lender’s interest in the
Collateral, in Lender’s opinion, is not jeopardized.  

 

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

 

Maintenance of Casualty Insurance.
Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together
with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonably
acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations
that coverages will not be cancelled or diminished without at least ten (10) days’ prior written notice to Lender and not
including any disclaimer of the insurer’s liability for failure to give such a notice. Each insurance policy also shall include
an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor
or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest, Grantor
will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain
or maintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as
Lender deems appropriate, including if Lender so chooses “single interest insurance,” which will cover only Lender’s
interest in the Collateral.  

 

 

    	 

    	 

    

 

COMMERCIAL SECURITY AGREEMENT

	 	(Continued)	Page 3
	 	 	 

 

Application of Insurance
Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Collateral if the estimated cost of repair or
replacement exceeds $25,000.00, whether or not such casualty or loss is covered by insurance. Lender may make proof of loss if
Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of any insurance on the Collateral, including accrued
proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged
or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for the
reasonable cost of repair or restoration. If Lender does not consent to repair or replacement of the Collateral. Lender shall retain
a sufficient amount of the proceeds to pay all of the indebtedness, and shall pay the balance to Grantor. Any proceeds which have
not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair or restoration of
the Collateral shall be used to prepay the Indebtedness.

 

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

 

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

 

Financing Statements.
Grantor authorizes Lender to file a UCC financing statement, or alternatively, a copy of this Agreement to perfect Lender’s
security interest. At Lender’s request, Grantor additionally agrees to sign all other documents that are necessary to perfect,
protect, and continue Lender’s security interest in the Property. This includes making sure Lender is shown as the first
and only security interest holder on the title covering the Property. Grantor will pay all filing fees, title transfer fees, and
other fees and costs involved unless prohibited by law or unless Lender is required by law to pay such fees and costs. Grantor
irrevocably appoints Lender to execute documents necessary to transfer title if there is a default. Lender may file a copy of
this Agreement as a financing statement. If Grantor changes Grantor’s name or address, or the name or address of any person
granting a security interest under this Agreement changes, Grantor will promptly notify the Lender of such change.

 

GRANTOR’S RIGHT TO POSSESSION.
Until default, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use
it in any lawful manner not inconsistent with this Agreement or the Related Documents, provided that Grantor’s right to possession
and beneficial use shall not apply to any Collateral where possession of the Collateral by Lender is required by law to perfect
Lender’s security interest in such Collateral. If Lender at any time has possession of any Collateral, whether before or
after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral
if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender’s sole discretion, shall deem
appropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure
to exercise reasonable care. Lender shall not be required to take any steps necessary to preserve any rights in the Collateral
against prior parties, nor to protect, preserve or maintain any security interest given to secure the Indebtedness.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

COMMERCIAL SECURITY AGREEMENT

	 	(Continued)	Page 4
	 	 	 

 

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

 

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

 

Insecurity. Lender in
good faith believes itself insecure.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Election of Remedies.
Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement,
the Related Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action
to perform an obligation of Grantor under this Agreement, after Grantor’s failure to perform, shall not affect Lender’s
right to declare a default and exercise its remedies.

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

COMMERCIAL SECURITY AGREEMENT

	 	(Continued)	Page 5
	 	 	 

 

Preference Payments.
Any monies Lender pays because of an asserted preference claim in Grantor’s bankruptcy will become a part of the indebtedness
and, at Lender’s option, shall be payable by Grantor as provided in this Agreement.

 

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

 

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

 

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

 

Waiver of Co-Obligor’s
Rights. If more than one person is obligated for the Indebtedness, Grantor irrevocably waives, disclaims and relinquishes all
claims against such other person which Grantor has or would otherwise have by virtue of payment of the Indebtedness or any part
thereof, specifically including but not limited to all rights of indemnity, contribution or exoneration.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

    	 

    	 

    

 

COMMERCIAL SECURITY AGREEMENT

	 	(Continued)	Page 6
	 	 	 

 

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

 

Note. The word ‘‘Note”
means the Note executed by Superior Drilling Products of California, LLC in the principal amount of $461,500.00 dated April 2,
2012, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for
the note or credit agreement.

 

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

 

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

 

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS COMMERCIAL SECURITY AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED APRIL 2, 2012.

 

GRANTOR:

  

SUPERIOR DRILLING PRODUCTS OF CALIFORNIA, LLC

 

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

 

LASER PRO Lending, Ver. 5.60.00.005 Copr.
Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA C:\HARLANDLP\CFI\LPL\G14.FC TR-112 PR-14Exhibit 10.28

 

 

		
        OMB Control No. 3245-0367

        Expiration Date: 04/30/2010

 

FIRST LIEN POSITION 504 LOAN POOL GUARANTEE
AGREEMENT

 

This Agreement is entered
into as of _________________________________, among

______________________________________________________________
(Seller),

______________________________________________________________
(Pool Originator),

______________________________________________________________
(Pool Investor),

______________________________________________________________
(Pool Investor),

______________________________________________________________
(Pool Investor)*,

___________________________________________________
(Central Servicing Agent), and

______US Small Business Administration_______________________________
(SBA)

regarding the sale of the Pool Loan associated
with the SBA 504 Loan number

____________________________________.

 

* Add an attachment to this Agreement listing
additional Pool Investors with Tax Identification Numbers for such Pool Investors, and additional signature pages for such Pool
Investors, and such attachment is hereby incorporated into this Agreement by reference.

 

(For definitions of capitalized terms see
Appendix A)

 

WITNESSETH

 

WHEREAS, by entering into this Agreement,
the parties are participating in a secondary market program established pursuant to section 503 of the American Recovery and Reinvestment
Act of 2009 (Program);

 

WHEREAS, a Third Party Loan has been made
by a Third Party Lender under the Loan Program Requirements applicable to it pursuant to the Small Business Administration’s
504 Loan Program authorized by Title V of the Small Business Investment Act of 1958 (such Loan Program Requirements include the
regulations set forth in Part 120 of Title 13 of the Code of Federal Regulations and the Third Party Lender Agreement (SBA Form
2287));

 

WHEREAS, Pool Originator intends to Pool
the Third Party Loan, which Pool Originator represents is eligible to be Pooled pursuant to Program Rules and Regulations;

 

WHEREAS, the eligible Third Party Loan that
the Pool Originator either (i) purchases and Pools, or (ii) Pools pursuant to this Agreement is hereinafter referred to as the
Pool Loan;

 

WHEREAS, if Pool Originator does not own
the Pool Loan prior to executing this Agreement, Seller is selling, and Pool Originator is purchasing, an 85% or less Loan Interest
in the Pool Loan;

 

SBA Form 2401 (9-09)

 

    	1

    	 

    

 

WHEREAS, Central Servicing Agent (CSA) is
settling the purchase and sale of that Loan Interest and is acting as the agent for the Small Business Administration;

 

WHEREAS, if Pool Originator owns the Pool
Loan prior to executing this Agreement, the same entity that executes this Agreement as Pool Originator has executed this Agreement
as Seller, and that entity shall have all of the rights and responsibilities of both Pool Originator and Seller pursuant to this
Agreement;

 

WHEREAS, Pool Originator directs the division
and transfer of its Loan Interest into two portions of a single Pool;

 

WHEREAS, one portion of the Pool consists
of a percentage of the Pool Originator’s Loan Interest in the Pool Loan combined with Loan Interests in other eligible Third
Party Loans (also referred to herein as First Lien Position 504 Loans) that the Pool Originator will retain ownership in for the
life of the Pool and which is not guaranteed by SBA;

 

WHEREAS, the other portion of the Pool consists
of a percentage of the Pool Originator’s Loan Interest in the Pool Loan combined with Loan Interests in other First Lien
Position 504 Loans that the Pool Originator sells to Pool Investors and which SBA guarantees pursuant to this Agreement;

 

WHEREAS, CSA implements the formation of
the Pool;

 

WHEREAS, CSA issues Seller a Seller Receipt
for its retained Loan Interest which shall not equal less than 15% of the Pool Loan;

 

WHEREAS, CSA issues Pool Originator a Pool
Originator Receipt for its retained Loan Interests in the unguaranteed portion of the Pool which shall not equal less than 5% of
the aggregate of the total outstanding principal balance of the Pool Loan and each First Lien Position 504 Loan with a Loan Interest
in the Pool as calculated at the time of Pool formation;

 

WHEREAS, CSA issues to each Pool Investor
a Pool Certificate representing a beneficial fractional interest in the SBA-guaranteed portion of the Pool;

 

WHEREAS, all Loan Receivables from the Pool
Loan and the other First Lien Position 504 Loans with Loan Interests in the Pool, are to be forwarded to the CSA, whether or not
such payment is attributable to Loan Interests in the Pool;

 

WHEREAS, CSA distributes all Loan Receivables
on a pro rata basis based on the percentage of the Loan Interest backing the Seller Receipt, Pool Originator Receipt, and each
Pool Certiticate to the Seller, Pool Originator, and each Pool Investor, respectively, less applicable fees;

 

WHEREAS, As required by the Federal Credit
Reform Act, SBA receives from the payments directed by the CSA to Pool Investors the Ongoing Guarantee Fee equal to a certain percentage
of the Loan Interest of the Pool guaranteed by SBA to cover expected losses incurred by SBA in connection with its unconditional
timely payment guarantee of the Pool of Loan Interests backing the Pool Certificates and the operation of the Program;

 

    	2

    	 

    

 

WHEREAS, Seller services and liquidates
the Pool Loan pursuant to this Agreement;

 

WHEREAS, Seller has the obligation to reimburse
SBA for losses incurred relating to its guarantee based on Seller’s improper actions pursuant to this Agreement.

 

NOW, THEREFORE, in consideration of these
premises, the parties agree as follows;

 

1.          Definitions
and Use of Words and Phrases.  For all purposes of this Agreement, capitalized terms used herein shall have the meanings set
forth in Appendix A, unless the context clearly indicates otherwise. “Herein”, “hereby”, “hereunder”,
“hereof”, “hereinafter” and other equivalent words refer to this Agreement as a whole and not solely to
the particular paragraph or section of this Agreement in which any such word is used.

 

2. Seller.

 

(a) Seller certifies that the following
information regarding the Pool Loan is true and correct as of the date of Seller’s execution of this Agreement:

 

(1) Date of Pool Note___________________________

 

(2) Original Face
Amount $______________________

 

(3) Outstanding Principal Amount of Pool Loan
$___________________________________________________

 

(4) Seller’s retained Loan Interest in
the Pool Loan $________________________________________ which is___________ % of the Pool Loan (the amount listed must equal
15% or more of the Pool Loan)

 

(5) Date of first disbursement of Pool Loan        _____________________________________

 

Date of final disbursement of Pool
Loan_______________________________

 

(6) Pool Loan has a [     ]
fixed rate or [     ] variable rate (check one)

 

(7) Base rate if the Pool Loan has a variable interest
rate:________________

 

(8) Frequency of interest fluctuation: (e.g. monthly,
quarterly, etc):________________________________

 

(9) Base Rate plus Spread :________________ (Gross
Note Rate)

 

(10)         Lender/Servicing Fee:_________________

 

(11)          Net Note Rate:____________________ (Gross Rate
less Servicing Fee)

 

    	3

    	 

    

 

(12)          SBA Ongoing Fee:________ % (fee is 16.7 basis
points for pools formed between 10/1/09 and 9/30/10. Fee will be announced for pools formed after 9/30/10 at a later date.)

 

(13)          Investor Rate:_________________________(Net
Rate less Ongoing Fee)

 

(14)         Interest
is paid to, but not Including__________________________________________________.

 

(15)         Interest
is calculated on [    ] 30/360 or [    ] Actual Days/365 [    ]
Other: Specify___________

 

(16)          That the Pool Loan: (i) Is (A) a Third Party
Loan, (B) made by a private sector lender, and (C) secured by a first lien on the Project Property; (ii) Is part of a 504 financing
that is comprised of only one Third Party Loan and one CDC 504 loan which was funded by a Debenture sold on or after February 17,2009;
(iii) Is Current and has been Current for the six-month-period immediately prior to the date the Pool is formed or for the life
of the Pool Loan, whichever time period is shorter; (iv) Was made and closed in a commercially reasonable manner, consistent with
prudent lending standards (see also paragraph 2(a)((13)); (v) Is not (A) to a business deriving more than one-third of its gross
annual revenue from legal gambling activities; (B) to a casino, gambling establishment, or casino hotel; (C) for financing the
acquisition, construction or renovation of an aquarium, zoo, golf course, or swimming pool; or (D) to a business covered by a six-digit
North American Industry Classification System (NAICS) code for casinos — 713210 (“Casinos (Except Casino Hotels)”);
casino hotels — 721120 (“Casino Hotels”); other gambling institutions — 713290 (‘‘Other Gambling
Industries”); golf courses — 713910 (“Golf Courses and Country Clubs”); or aquariums and zoos — 712130
(“Zoos and Botanical Gardens’’);

 

(17) That the Pool Loan has been made and closed
in a commercially reasonable manner, consistent with prudent lending standards, and in accordance with applicable Program Rules
and Regulations, Loan Program Requirements applicable to the Third Party Lender that made the Pool Loan, and the Third Party Lender
Agreement executed by such Third Party Lender in connection with the Pool Loan;

 

(18) The original Pool Note has the following legend
at the top of its first page “_____________% percent of this Pool Loan has been sold for value”;

 

(19) Seller has delivered or hereby delivers to CSA
a photocopy of the Pool Note and any modifications thereto with additional legend language stating that the photocopy of the Pool
Note is a true and correct copy of the original Pool Note; and

 

(20) That Seller has obtained the “Authorization
Agreement for Preauthorization Payment (debit)” from Borrower directing Borrower payments due under the Pool Note to the
CSA by Automated Clearing House (ACH) or Federal Fund Wire transfer if ACH is not available, or as approved by the CSA in writing.

 

(b) Seller agrees to remain obligated for
servicing and liquidating the Pool Loan until the Pool Loan is repaid in full unless SBA provides written approval or notice to
the contrary.

 

    	4

    	 

    

 

(c) Seller agrees that SBA is entitled to
recover from Seller any losses incurred by SBA on its guarantee of a Pool if such losses resulted because the Third Party Lender
did not make or close the Pool Loan in a commercially reasonable manner, consistent with prudent lending standards, and in accordance
with applicable Program Rules and Regulations, Loan Program Requirements applicable to the Third Party Lender that originated the
Pool Loan, and the Third Party Lender Agreement executed by such Third Party Lender in connection with the Pool Loan (see also
paragraph 2(i)).

 

(d) Seller agrees that SBA is entitled to
recover from Seller any losses incurred by SBA on its guarantee of a Pool if such losses resulted because the Pool Loan was not
serviced or liquidated by the Seller or any other entity in a commercially reasonable manner, consistent with prudent lending standards,
and in accordance with applicable Program Rules and Regulations, Loan Program Requirements applicable to the Third Party Lender
that originated the Pool Loan, or any of its successors or assignees, and the Third Party Lender Agreement executed by such Third
Party Lender in connection with the Pool Loan (see also paragraph 2(i)) (nothing in this paragraph or Agreement shall waive, vacate
or release the Third Party Lender or any of its successors or assignees of any exiting liabilities or obligations).

 

(e) Subject to paragraph 2(h), the Seller
agrees that it must liquidate and conduct debt collection litigation for the Pool Loan in a prompt, cost-effective and commercially
reasonable manner, consistent with prudent lending standards, in accordance with applicable Program Rules and Regulations, and
with SBA approval of a liquidation plan and any litigation plan, and any amendment of either such a plan, if applicable (see also
paragraph 2(i)).

 

(f) Seller agrees that it must not, without
prior written consent of SBA, take the following actions with respect to the Pool Loan: (1) make or consent to any substantial
alteration in the terms (“substantial” includes, but is not limited to, any changes to the principal amount or interest
rate); (2) accelerate the maturity; (3) sue; (4) waive or release any claim; or (5) take any servicing action listed in the Guide
as a servicing action that requires SBA’s prior written consent.

 

(g) Seller agrees that, subject to paragraph
2(f), without the prior written consent if SBA, Seller, at the request of Borrower, may grant one deferment of such Borrower’s
scheduled payments for a continuous period not to exceed three months of past or future installments. Seller shall immediately
notify CSA of any payment deferment and that notification shall include (i) the SBALoan Number, (ii) the Borrower’s name,
(iii) the terms of such deferment, (iv) the date such Borrower is to resume payment and (v) reconfirmation of the basis of interest
 calculation (e.g. 30/360 or Actual Days/365). Seller shall notify CSA at least 15 business days prior to the end of the deferment
of a revised payment that will be collected on the first payment due date after the termination of the deferment. If Seller does
not notify CSA of a specific payment, CSA shall reamortize the loan over the remaining term and establish a new payment, and shall
add accrued interest to the loan balance for the purpose of determining a new payment

 

(h) Seller agrees that SBA may, in its sole
discretion, undertake the servicing, liquidation and/or litigation of the Pool Loan at any time and, in such event, Seller must
take any steps necessary to facilitate the assumption by SBA of such responsibilities, which can be transferred by SBA at its discretion
to a contractor, agent or other entity, and such steps shall include, among other things, providing to SBA any documents requested
by SBA within 15 calendar days of Seller’s receipt of such request.

 

    	5

    	 

    

 

(i) Seller agrees that SBA is entitled to
recover from Seller any monies paid on SBA’s guarantee of a Pool Certificate backed in part by the Pool Loan, plus interest,
if SBA in its sole discretion determines that any of the following events has occurred: (A) Seller’s improper action or inaction
has put SBA at risk; (B) Seller has failed to disclose a material fact to SBA regarding a the Pool Loan in a timely manner; (C)
Seller has misrepresented a material fact to SBA regarding the Pool Loan; (D) Seller has failed to comply materially with paragraph
2(j); (E) SBA has received a written request from Seller to terminate the SBA’s guarantee on the Loan Interest in the Pool
Loan; (F) Seller has failed to comply materially with Program Rules and Regulations; or (G) Seller has failed to make, close, service
or liquidate the Pool Loan in a prudent manner and in accordance with this Agreement.

 

(j) Seller agrees that, in the event that
SBA purchases a Loan Interest in the Pool Loan, Seller must provide to SBA copies of the Pool Loan collateral documents, Pool Loan
underwriting documents, and any other documents SBA may require in writing within 15 calendar days of a written request from SBA
(which SBA will review in connection with its efforts to determine if Seller is obligated to reimburse SBA pursuant to this subpart)
and that Seller’s failure to provide the requested documentation may: (A) constitute a material failure to comply with Program
Rules and Regulations and may lead to an action for recovery under paragraph 2(i), and/or (B) constitute sufficient grounds for
SB A to restrict further sales under the Program by Seller until SBA determines that the Seller has provided sufficient documentation.

 

(k) Seller agrees that SBA may undertake
such investigation as it deems necessary to determine whether it is entitled to seek recovery from the Seller and Seller agrees
to take whatever actions are necessary to facilitate such investigation, and therefore, Seller also agrees to retain all documentation
related to the Pool Loan until such time that the loan is fully paid off or, if the Borrower defaults, for a period of four years
after loan documents are provided to SBA in connection with its review under this paragraph.

 

(l) Seller agrees that SBA shall have the
right to set off any amount owed by SBA/CSA to Seller pursuant to this Agreement against any amount owed by Seller to SBA/CSA.

 

(m) Seller agrees that any Loan Receivables
received by Seller in connection with obligations under the Pool Loan must be forwarded by Seller to CSA within two business days
of receipt of collected funds.

 

(n) Seller agrees that all ordinary and
reasonable expenses of servicing and liquidating the Pool Loan shall be paid by, or be recoverable from, Borrower, and all such
ordinary and reasonable expenses incurred by Seller, or SBA which are not recoverable from Borrower shall be shared ratably by
Seller, SBA, and the Pool Originator pursuant to the applicable percentage of Loan Interest ownership in the Pool Loan of such
party as set forth in this Agreement.

 

(o) Seller agrees that Seller must not establish
a Preference,

 

(p) Seller agrees that neither a Seller,
nor any of its Associates or Affiliates, may purchase a Pool Certificate that is backed by a Loan Interest in a Pool Loan that
the Seller, or any of its Associates or Affiliates, originated or owned, and, in the event such purchase occurs, SBA’s guarantee
shall not be in effect with respect to any such Pool Certificate.

 

    	6

    	 

    

 

(q) Seller agrees that Seller: (1) must
retain a 35% or greater Loan Interest in the Pool Loan; (2) may not sell less than 100% of the Seller Receipt and Servicing Retention
Amount, and may not sell a participation interest in any portion of the Pool Loan; (3) may, with SBA’s written permission,
sell the Seller Receipt and Servicing Retention Amount in whole, but not in part, to a single entity at one time; and (4) must
have the purchaser of its rights to the Pool Loan execute this Agreement as Seller and deliver such original executed Agreement
to the CSA in order to complete a sale of the Seller Receipt or any interest therein.

 

(r) Seller agrees that (1) it must conform
with all applicable Program Rules and Regulations, Loan Program Requirements applicable to the Third Party Lender that originated
the Pool Loan, and the Third Party Lender Agreement executed by such Third Party Lender in connection with the Pool Loan, and (2)
as between Seller and SBA, Seller assumes all liabilities and obligations arising prior to the date of this Agreement of the Third
Party Lender that originally made the Pool Loan and/or any of such Third Party Lender’s successors or assignees and/or any
entity that has previously executed this Agreement as Seller to SBA with respect to the Pool Loan.

 

(s) ) Seller agrees CSA will offset funds
paid to Seller by CSA, where the borrower’s ACH or other payment is called back by the sender due to insufficent borrower funds
from any future payments to Seller related to a Pooled Loan. In the event that funds are not availble for offset, the Seller is
responsible to return funds to the CSA by wire.

 

(t) Seller agrees that if the borrower’s
ACH returns that CSA shall determine the payment amount necessary to bring the loan current on the next installment due date. CSA
shall notifity lender of the new payment amount at least five business days prior to the next installment due date. If the Seller
does not provide an alternative payment amount prior to three business days before the next installment due date, CSA shall debit
the amount it calculated from the borrower’s account using an ACH transaction.

 

3.          Pool
Originator.

 

(a)          Pool
Originator certifies that as of the date of its execution of this Agreement that it is an Approved Pool Assembler or it:

 

(1) Is regulated by the appropriate agency as defined in section
3(a)(34)(G) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(34)(G));

 

(2) Meets all financial and other applicable requirements of
its regulatory authority and the Government Securities Act of 1986, as amended (Pub. L. 99-571, 100 Stat. 3208);

 

(3) Has the financial capability, to originate acceptable pools
consisting of eligible First Lien Position 504 Loans in sufficient quantity to support the issuance of Pool Certificates;

 

(4) Is in good standing with SBA (as the SBA determines), the
Office of the Comptroller of the Currency (OCC) if it is a national bank, the Federal Deposit Insurance Corporation if it is a
bank not regulated by the OCC, the Financial Institutions Regulatory Authority, if it is a member, the National Credit Union Administration
if it is a credit union, and, for any Pool Originator that is an SBA Lender as defined in 13 CFR § 120.10, that the SBA Lender
has satisfactory SBA performance, as determined by SBA in its sole discretion;

 

    	7

    	 

    

 

(5) It has neither participated in nor
been aware of any negligence, fraud or misrepresentation by Seller or Borrower with respect to any Pool Loan agreement or document;
and

 

(6) Under the penalties of perjury, Pool Originator certifies
that its Taxpayer Identification Number is______________________________________________ and that it is not subject
to backup withholding because : (a) it is exempt from backup withholding, or (b) it has not been notified by the Internal Revenue
Service (IRS) that it is subject to backup withholding as a result of a failure to report all interest or dividends, or (c) it
has been notified by the IRS that it is no longer subject to backup withholding. Failure to provide a Taxpayer Identification Number
will subject interest earned to backup withholding.

 

(b) Pool Originator agrees to conform to
all applicable Program Rules and Regulations.

 

(c) Pool Originator agrees that (1) it must retain an ownership
interest in the Pool that is evidenced by its Pool Originator Receipt equal to at least 5% of the aggregate of the total outstanding
principal balance of each Loan Interest in the Pool as calculated at the time of Pool formation, (2) it must not sell, pledge,
participate, or otherwise transfer its Pool Originator Receipt, or any interest therein for the life of the Pool, and (3) it is
obligated to share ratably in liquidation expenses.

 

(d) Pool Originator agrees that it is subject to termination
or suspension from the Program by SBA for Pool Originator’s material violation of any of the terms of this Agreement and/or
pursuant to applicable Program Rules and Regulations.

 

(e) Pool Originator agrees that it has
no rights or authority regarding the Pool Loan, including how the Pool Loan is serviced or liquidated, except that Pool Originator
is entitled to payments attributable to its Pool Originator Receipt in accordance with this Agreement.

 

(f) Pool Originator agrees that it has
no authority pursuant to this Agreement to repurchase the Loan Interest in the SBA-guaranteed portion of the Pool backing Pool
Certificates.

 

(g) Pool Originator agrees that its right to Loan Receivables
applicable to the Pool Loan shall be equal to the CSA’s obligations to pay the Pool Originator pursuant to the terms of its
Pool Origination Receipt and this Agreement unless otherwise agreed to in writing by SBA.

 

(h) Pool Originator agrees that the Pool must conform to Program
Rules and Regulations including the formation requirements and pool-characteristic requirements set forth in the Guide.

 

(i) Pool Originator agrees that it must
not establish a Preference.

 

(j) Pool Originator agrees that SBA shall have the right to
set off any amount owed by SBA/CSA to Pool Originator pursuant to this Agreement against any amount owed by Pool Originator to
SBA/CSA.

 

    	8

    	 

    

 

(k) Pool Originator agrees that an amount shall be deducted
from the interest payments due on the Loan Interest backing the Pool Originator Receipt to cover a portion of the Servicing Retention
Amount pursuant to paragraph 5 of this Agreement.

 

(l) Pool Originator agrees to use an electronic mechanism supplied
by the Central Servicing Agent to submit the information identified in Appendix B.

 

(m) Pool Originator agrees CSA will offset fuds paid to pool
originator by CSA, where the borrower’s ACH or other payment is called back by the sender due to insufficent borrower funds
from any future payments to Pool Originator related to a Pooled Loan. In the event that funds are not availble for offset, the
Pool Orignator is responsible to return funds to the CSA by wire.

 

(n) Pool Originator’s retained interest in the Pool Loan
is $________________which is________% of the Pooled Loan

 

4.          Pool
Investor

 

(a)          Pool
Investor certifies;

 

(1) That, subject to the provisions of 18 U.S.C. §1001
(relating among other things to false claims) Pool Investor, and any person or entity having the beneficial interest therein, hereby
warrants that it was not the Borrower, Seller, the Third Party Lender that made the Pool Loan if other than Seller, an owner of
the Pool Loan or any interest therein except pursuant to Pool Certificate ownership, or an Associate or Affiliate of Seller, or
anyone standing in the same relationship to Borrower;

 

(2) That, to the best of its knowledge, Pool Investor has no,
and so long as it is a Pool Investor will have no, interest in the Borrower, the Pool Note, or the collateral hypothecated to the
Pool Loan except as provided pursuant to this Agreement;

 

(3) That it had neither participated in nor been aware of any
negligence, fraud or misrepresentation by Seller, Pool Originator or Borrower with respect to any Pool Loan agreement or document;

 

(4) If Pool Investor is not the person or entity having the
beneficial interest in the Pool Certificate, then Pool Investor has obtained authorization from such holder of beneficial interest
appointing Pool Investor as agent for such person or entity with respect to all transactions arising out of the respective obligations
under this Agreement; and

 

(5) Under the penalties of perjury, Pool Investor certifies
that its Taxpayer Identification Number is__________________________________________________and that it is not subject
to backup withholding because: (a) it is exempt from backup withholding, or (b) it has not been notified by the Internal Revenue
Service (IRS) that it is subject to backup withholding as a result of a failure to report all interest or dividends, or (c) it
has been notified by the IRS that it is no longer subject to backup withholding. Failure to provide a Taxpayer Identification Number
will subject interest earned to backup withholding. Use additional sheets if there is more than one Pool Investor.

 

    	9

    	 

    

 

(b)          Pool
Investor agrees:

 

		(1)	That Pool Investor is subject to suspension or termination
of its privilege to participate in the Program for material violation of Program Rules and Regulations;

 

		(2)	That Pool Investor shall not service or attempt to service
the Pool Loan, or secure or attempt to secure additional collateral from Borrower;

 

		(3)	That Pool Investor has no rights or authority regarding
when SBA purchases a Loan Interest from the Pool backing a Pool Certificate except as set forth in this Agreement;

 

		(4)	That neither execution of this Agreement by SBA, nor
purchase by SBA from the Pool Investor shall constitute any waiver by SBA of any right of recovery against Pool Investor;

 

		(5)	To acknowledge and accept (for itself and each subsequent
Pool Investor) that the Loan Interest backing a Pool Certificate may be terminated on a date other than its maturity date and
the Pool will cease to accrue interest related to the Pool Certificate as of the date of such termination;

 

		(6)	That Pool Investor’s rights to any payments under
a Pool Certificate, including any and all payments and collections made pursuant to any Pool Loan agreement or document, shall
be equal to the CSA’s obligations to pay the Pool Investor pursuant to the terms of the Pool Certificate and this Agreement;

 

		(7)	That an amount shall be deducted from the interest payments
due on the Loan Interest backing the Pool Certificates to cover a portion of the Servicing Retention Amount pursuant to paragraph
5 of this Agreement; and

 

		(8)	That an amount shall be deducted from the interest payments
due on the Loan Interest backing the Pool Certificates to cover the Ongoing Guarantee Fee pursuant to paragraph 6 of this Agreement.

 

5.          Seller
Servicing. The Seller shall receive the Servicing Retention Amount for servicing the Pool Loan. The Servicing Retention Amount,
paid by the Pool Originator and the Pool Investor, shall be equal to________% per annum or the applicable minimum percentage
as published by SBA from time to time in the Federal Register, whichever is greater, of the outstanding principal balance
of the Loan Interest backing the Pool Originator Receipt and the Loan Interest backing the Pool Certificates, respectively. The
minimum Servicing Retention Amount as of the date of publication of this form is 0.5% per annum.

 

6.          Ongoing
Guarantee Fee. SBA shall receive the Ongoing Guarantee Fee. The Ongoing Guarantee Fee shall be equal to the applicable Ongoing
Guarantee Fee annual percentage, as published by SBA in the Federal Register in effect as of the delivery of this fully
executed Agreement to the CSA, of the outstanding principal balance of the Loan Interest backing the Pool Certificates.

 

    	10

    	 

    

 

7.          Evidence
of Ownership Interest.

 

(a)          SBA,
Seller, Pool Originator, and Pool Investor (for itself and each subsequent Pool Investor) agree that an ownership interest in the
Pool Loan or a Pool shall be evidenced by a Participation Certificate issued by SBA. SBA shall issue such Participation Certificate
by designating and authorizing such issuance by CSA, or through its own facilities.

 

(b)          Seller
Receipt Seller requests CSA to issue a Seller Receipt evidencing Seller’s retained ownership in the Pool Loan.

 

(c)          Pool
Originator Receipt. Pool Originator requests CSA to issue a Pool Originator Receipt evidencing Pool Originator’s retained
ownership in the Pool.

 

(d)          Pool
Certificates. Each Pool Investor requests CSA to issue it a Pool Certificate evidencing its ownership interest in the Pool.

 

8. Pool Certificate Characteristics. SBA, CSA, and Program
Participants, and their successors or assignees, agree that Pool Certificates shall have the following characteristics:

 

(1) SBA guarantees to a Pool Investor
the timely payment of principal and interest installments and any prepayment or other recovery of principal to which the Pool
Investor is entitled. If a Borrower misses a scheduled payment pursuant to the terms of the Pool Note underlying a Loan
Interest backing a Pool Certificate, SBA, through the CSA, will make advances to maintain the schedule of interest and
principal payments to the Pool Investor, If SBA makes such payments, it is subrogated fully to the rights satisfied by such
payment. No Federal, State or local law can preclude or limit the exercise by SBA of any ownership rights in the Pool Loan
relating to its purchase of a Loan Interest pursuant to its guarantee of a Pool.

 

(2) SBA’s guarantee of the Pool Certificate is backed
by the full faith and credit of the United States.

 

(3) SBA will determine whether to purchase a Loan Interest backing
a Pool Certificate with an underlying Pool Note that is 60 days or more in arrears. SBA reserves the right to purchase a Loan Interest
from a Pool at any time.

 

(4) A Pool Certificate represents a fractional beneficial interest
in a Pool that is self-liquidating by Loan Receivables and/or SBA Loan Interest payment or redemption.

 

(5) SBA must approve the form and terms of the Pool Certificate.

 

(6) A Pool Certificate must be registered with the CSA.

 

(7) The face amount of a Pool Certificate cannot be less than
a minimum amount as specified in the Guide, and the dollar amount of Pool Certificates must be in increments which SBA will specify
in the Guide (except for one Pool Certificate for each Pool). SBA may change these requirements based upon an analysis of market
conditions and program experience, and will publish any such change in the Federal Register.

 

(8) All payments on a Pool Certificate are due pursuant to terms,
conditions, and percentages set forth thereon or referenced therein and are based on the unpaid principal balance of the Pool represented
by the Pool Certificate. Any Loan Receivables applicable to a Loan Interest in the SBA-guaranteed portion of a Pool will be passed
through to the appropriate Pool Investors with the regularly scheduled payments to such Pool Investors with the exception of late
payment penalties. Late payment penalties will be retained by the Seller as compensation for additional collection efforts. Prepayment
penalties received by the CSA shall be distributed to the Investor on a pro rata basis.

 

    	11

    	 

    

 

(9) A Pool Certificate must have a Weighted Average Interest
Rate.

 

(10) A Pool Certificate must have a Maturity and a Weighted
Average Maturity.

 

(11) SBA, or the CSA on behalf of SBA, may redeem a Pool Certificate
prior to its Maturity because of prepayment and/or default of all Pool Loans with a Loan Interest in the Pool backing the Pool
Certificate.

 

(12) A Pool Certificate is transferable.

 

9.          Transfers
of Pool Certificates.

 

(a) Transfer of Pool Certificate. A transfer of a Pool Certificate
must comply with Article 8 of the Uniform Commercial Code of the State of New York. The seller may use any form of assignment acceptable
to SBA and the CSA. The CSA may refuse to issue a Pool Certificate until it is satisfied that the documents of transfer are complete.

 

(b) Transfer on CSA records. In order for the transfer
of a Pool Certificate to be effective, the CSA must reflect the transfer on its records.

 

(c) Contents of letter of transmittal for Pool Certificate.
A letter of transmittal must accompany each Pool Certificate which a Pool Investor submits to the CSA for transfer, The Pool Investor
must supply the following information in the letter:

 

(1) Pool number;

 

(2) Pool Certificate number;

 

(3) Name of purchaser of Pool Certificate;

 

(4) Address and tax identification number of the purchaser;

 

(5) Name, e-mail address and telephone number of the person
handling or facilitating the transfer; and

 

(6) Instructions for the delivery of the new Pool Certificate.

 

(7) CSA transfer cost reimbursement. At the same time
a Pool Investor submits a letter of transmittal for a Pool Certificate pursuant to this paragraph, it must send the reimbursement
amount due to the CSA for providing this service as calculated by the CSA. The CSA will supply the transfer fee information to
the Pool Investor.

 

10.         Custodian
of this Agreement. CSA shall be the custodian of the executed original of this Agreement. The Agreement shall be delivered
to CSA immediately after execution by Seller, Pool Originator and Pool Investor.

 

    	12

    	 

    

 

11.         SBA
Right to Prohibit Inclusion of Pool Loan into Pool. SBA has the right to review any Pool Loan before a Loan Interest in
it is added to a Pool, and SBA may prohibit the Pool’s formation as proposed based on SBA’s review in SBA’s sole
discretion. In the event SBA decides to review Pool Loan documents related to a Loan Interest prior to the requested Pool formation,
that Loan Interest may not be added to the Pool until SBA reviews and approves the Pool Loan for such purpose. Copies of Pool Loan
documents related to underwriting and origination, and any other Pool Loan-related documents SBA may, in its sole discretion, request
to review in writing, must be sent to SBA’s Sacramento Loan Processing Center, Attention: Director, Sacramento Loan Processing
Center. SBA must review Pool Loan documents before a Loan Interest is added to a Pool if:

 

(a) The Pool Loan is to a business within NAICS code 713940
covering Fitness and Recreational Spoils Centers; (If SBA determines that a Pool Loan has had any of its proceeds used for any
of the restricted purposes listed above, the Pool Loan will be prohibited from being part of a Pool.)

 

(b) The Pool Loan was part of a 504 financing involving a 504
loan that was processed under SBA’s Premier Certified Lenders Program; or

 

(c) The Project the Pool Loan financed included the refinancing
of existing debt owed to the Seller or Third Party Lender (not including interim financing associated with the Project).

 

12.         Obligations
of CSA.

 

(a)          CSA
shall have the obligation to remit payments received by Borrower (or Seller on behalf of Borrower) or advances made by SBA pursuant
to this Agreement and to the Seller, Pool Originator and Pool Investor as follows:

 

(1)         Payment
date will be the fifteenth of the month or next business day if the fifteenth is not a business day. The portion of the payment
applicable to the Pooled Interest and received by the CSA up to the second business day prior to the payment date will be sent
to the Pool Investor on the payment date (less the Ongoing Guarantee Fee and the Servicing Retention Amount). Any payment related
to the Seller Receipt received by the CSA up to the second business day prior to the payment date will be sent to the Seller on
the payment date. Any payment related to the Pool Originator Receipt received by the CSA up to the second business day prior to
the payment date will be sent to the Pool Originator on the payment date (less the Servicing Retention Amount). The portion of
the payment related to the Servicing Retention Amount received by the CSA up to the second business day prior to the payment date
will be sent to the Seller on the payment date.

 

(2)         Any
scheduled Pool Investor payment not received from the Borrower by the date that is two business days prior to payout will be forwarded
by SBA to the CSA for disbursement to the Pool Investor.

 

(3)         The
portion of the payment applicable to the Loan Interest in the SBA-guaranteed portion of the Pool received by CSA on or after the
second business day prior to the Pool Investor payment date of the month following Borrower’s scheduled payment will be remitted
to SBA to replace funds advanced to the Pool Investor. Such remittance shall be sent within two (2) business days of receipt of
immediately available funds by CSA. Any excess will be distributed by the CSA to the Seller and Pool Originator based on their
proportionate interests.

 

    	13

    	 

    

 

(4)         Other
amounts received from Borrower or Seller by CSA will be held and applied as directed by SBA.

 

(5)         With
the prior written consent of SBA, CSA may offset from payments due to Pool Investor any prior overpayments made to Pool Investor,

 

(6)         With
the prior written consent of SBA, CSA may offset from payments due to Seller any amounts owed to SBA.

 

(7)         With
the prior written consent of SBA, CSA may offset from payments due to Pool Originator any amounts owed to SBA.

 

(b)          Borrower
prepayments or full redemption payments received by CSA from Seller or SBA shall be remitted by CSA to Pool Investor, Pool Originator,
and Seller at the time of the next monthly pool payout. Payment on full redemption of the Participation Certificate will be made
only after presentation of the Participation Certificate to CSA by the Program Participant. CSA may retain or recover reasonable
costs associated with the final transfer upon redemption from the Program Participant.

 

(c)          Each
remittance by CSA to Program Participant shall be accompanied by a statement of (i) the
amount allocable to interest, (h) the amount allocable to principal, and (iii) the remaining principal balance as of the date on
which such allocations were calculated.

 

(d)          If
CSA fails to make timely remittance to Program Participant in accordance with this Agreement, CSA shall pay to Program Participant
(i) interest on the unremitted amount at the rate provided in the Pool Note less applicable fees, plus (ii) a late payment penalty
calculated at a rate of 12% per annum on the amount of such payment

 

(e)          CSA
agrees to notify SBA of any borrower that did not make a payment in a given month. Such report shall be received by SBA by the
10th of the month or next business day. The report shall include the borrower name, loan number, payment amount, and
principal and interest breakdown for the loan. SBA will forward funds necessary to make payments that are allocable to the Loan
Interest in the SBA-guaranteed portion of the Pool.

 

(f)          Within
two business days of receipt by the CSA of this executed Agreement, CSA shall, in accordance with paragraph 7 of this Agreement,
issue and deliver: (1) to Seller a Seiler Receipt evidencing Seller’s retained ownership interest in the Pool Loan; (2) to
Pool Originator a Pool Originator Receipt evidencing Pool Originator’s retained interest in the Pool Loan; to Pool Investors
Pool Certificates evidencing the applicable ownership interest in the Pool.

 

(g)          CSA
agrees to issue Pool Certificates within two business days of settlement or receipt of Form of Detached Assignment for U .S. Small
Business Administration Pool Certificate for The First Lien Position 504 Loan Pools (SBA Form 2402).

 

    	14

    	 

    

 

(h)          CSA
agrees to acknowledge any request from Pool Investor for late payment claims within ten (10) business days of receipt.

 

(i)          CSA
agrees to forward to SBA, within five (5) business days of receipt, any servicing request requiring concurrence of SBA. CSA agrees
to forward SBA’s response to Seller within five (5) business days of receipt.
If CSA does not receive a response from SBA within thirty (30) calendar days from the date of the request, SBA will be deemed to
have submitted a response of nonconsent.

 

(j)          CSA
agrees to pay accrued interest for any loan which CSA fails to include in the late payment report. CSA shall be responsible
for interest beginning 90 days after the interest paid to date of the loan and continuing until 30 days after the SBA
receives notification of the arrearage.

 

(k)          Liquidation
Proceeds shall be paid to the Program Participant pursuant to this Agreement and as set forth in the Guide, or as directed by
SBA within two business days of receipt of funds.

 

(l)          CSA
agrees to perform its duties under this Agreement in accordance with the Statement of Work related to the Program in its [procurement
amendment dated XXX] with SBA.

 

13.         CSA
and SBA Role Concerning Transferability of Participation Certificates.

 

(a)   SBA
and CSA establish the form of assignment of a Seller Receipt. A transfer of a Pool Certificate requires use of the Form of Detached
Assignment for U.S. Small Business Administration Pool Certificate for The First Lien Position 504 Loan Pools (SBA Form XXXX).
The effective date of any transfer of the Pool Certificate shall be the date on which such transfer is registered on the books
of CSA. Any payment or action by CSA or SBA to the transferor Pool Investor prior to the effective date of the transfer of the
Pool Certificate shall be final and fully effective. Neither SBA nor CSA shall have any further obligation to the transferee Pool
Investor with respect to such payment or action, and any adjustment between the transferor and transferee resulting from such payment
or action by SBA or CSA shall be the responsibility and obligation solely of the transferor and transferee.

 

(b)   CSA
will make payments on payment date to the person or entity that on the books of CSA is the Pool Investor as of the close of business
on the applicable Record Date. The Record Date is the last business day of the prior month. Any other adjustment between transferee
and transferor is their responsibility and obligation. Although pools may have multiple owners, each Pool Certificate shall only
have one owner at any given time that is entitled to the benefits of ownership of the Pool Certificate. Upon transfer of the Pool
Certificate, the transferor shall cease to have any right in the Pool Certificate or any Obligation or commitment under this Agreement.

 

(c)          The
Seller Receipt may be transferred on the records of the CSA after written permission for the sale is provided by SBA.

 

(d)          The
Pool Originator Receipt may not be transferred.

 

(e)          CSA
shall serve as the central registry of Participation Certificate ownership.

 

    	15

    	 

    

 

14.         Submitting
a claim to CSA by Program Participant to replace a Program Participant Certificate.

 

(a)          To
replace a Participation Certificate because of loss, theft, destruction, mutilation, or defacement, the Program Participant must:

 

(1)         Give
the CSA information about the Participation Certificate and the facts relating to the claim;

 

(2)         File
an indemnity bond acceptable to SBA and the CSA with a surety to protect the interests of SBA and the CSA;

 

(3)         Reimburse
CSA for reasonable costs related to replacing the Participation Certificate; “and

 

(4)         Use
an affidavit of loss (form available from the CSA) to report:

 

(i) The name and address of the Program Participant
(and the name and capacity of any representative actually filing the claim);

 

(ii) The Program Participant Certificate by pool number,
if applicable;

 

(iii) The Program Participant Certificate number;

 

(iv) The original principal amount;

 

(v) The name in which the Program Participant Certificate
was registered;

 

(vi) Any assignment, endorsement or other writing
on the Program Participant Certificate; and

 

(vii) A statement of the circumstances of the theft
or loss.

 

(b)          When
the CSA receives notice of the theft or loss, it will stop any transfer of the Participation Certificate. The Program Participant
must send to the CSA all available portions of a mutilated or defaced Participation Certificate. When the Program Participant completes
these steps, the CSA will replace the Program Participant Certificate.

 

15.         Purchase
by SBA.

 

(a)          Written
notices will be given to Seller and CSA whenSBA is to purchase the Loan Interest 10 days prior to purchase.

 

(b)          On
the purchase date, SBA will arrange to have fundswired to CSA. CSA will forward funds received with the next scheduled pool
payment. The payoff amount will include the outstanding principal balance of the Loan Interest in the SBA-guaranteed portion of
the Pool plus interest through the date immediately preceding the date of SBA purchase, less any funds previously advanced. The
CSA transcript of account will be used to determine the payment amount.

 

(c)          Upon
purchase of the Loan Interest by SBA pursuant to this paragraph, the rights and obligations of each Program Participant shall be
governed by this Agreement. SBA shall be deemed a transferee of the Loan Interest in the SBA-guaranteed portion of a Pool and the
final Pool Investor thereof with all the rights and privileges of such Pool Investor under this Agreement.

 

    	16

    	 

    

 

16.         Default
by Borrower

 

(a)          CSA
shall notify SBA of those loans that are in payment default.

 

(b)          When
SBA determines that the Borrower has failed for any reason to remit the payments required pursuant to the Pool Note, SBA may purchase
the pooled portion of the Pool Loan under the provisions of this Agreement, provided, however, under no circumstances shall SBA
be liable for any amount attributable to any late payment charge as described in more detail in paragraph 16(e).

 

(c)          Pursuant
to the Third Party Lender Agreement, Seller shall not be entitled to receive any prepayment penalties, late fees, other default
charges, or escalated interest after default from Liquidation Proceeds obtained directly or indirectly from Project Properly until
all Loan Receivables payable on the GDC 504 loan with a subordinate lien on the Project Property have been received by the CDC
or SBA.

 

17.         Default
by Central Servicing Agent

 

(a)          If
CSA receives any payment from Borrower, Seller or SBA and fails to remit to the Program Participant pursuant this Agreement, the
Program Participant shall have the right to make written demand on CSA for any payment not remitted by CSA.

 

(b)          If
CSA fails to remit any such payment within ten (10) business days of such demand, Program Participant shall have the right to make
written demand on the SBA Servicing Office identified in this Agreement.

 

(c)          Upon
receipt of written demand from Program Participant, SBA will verity non-payment by CSA. SBA, within thirty (30) days of verification
of non-payment by CSA, will (i) make payment directly to Program Participant of the amount of the unremitted payment plus interest
at Program Participant Certificate rate to day of payment by SB A, or (ii) purchase the Program Participant Certificate.

 

(d)          CSA
shall repay SBA within ten (10) business days after receipt of written demand from SBA an amount equal to the unremitted amount
plus interest computed at the interest rate on the Program Participant Certificate on the unpaid balance of the Loan Interest backing
such Participation Certificate from the date of the failure of CSA to remit to the Program Participant to the date of CSA’s
repayment to SBA. Such payment will not affect CSA’s liability for a late payment charge under this Agreement.

 

18.         Prepayment
or Refinancing by Borrower.

 

(a)          This
paragraph applies if the Borrower notifies Seller that it intends to make a partial or total prepayment of the Pool Loan.

 

    	17

    	 

    

 

(b)          Seller
shall transmit written notice to CSA of Borrower’s intent to make a partial or total prepayment of principal. Such prepayment
can be by refinancing or otherwise. The prepayment date must be a date that is two business days prior to a monthly payment date
that is established with the CSA, and on which immediately available funds shall be delivered to CSA. The written notice shall
be received by the CSA at least ten (10) business days prior to the prepayment date, and it shall be Seller’s responsibility
to verify receipt of such notice by CSA. Seller’s notice to CSA shall include:

 

(1)         The
SBA loan number and Borrower name

 

(2)         The
prepayment date

 

(3)         The
principal amount being prepaid

 

(4)         The
accrued interest due the CSA as of prepayment date (interest shall accrue through and including the calendar day immediately preceding
the prepayment date)

 

(5)         A certification
from an officer of the Seller that the prepayment is in accordance with the terms of this Agreement, the Pool Note and applicable
law

 

(6)         (The
above certifications are intended to guard against Seller’s unilateral repurchase of the pooled portion of the Pool Loan
from the Pool Investor without prior written consent of SBA.)

 

(c)          On
the prepayment date. Borrower will wire the amount due to CSA without notification from CSA. If funds are not received by CSA on
the prepayment date, the prepayment shall be cancelled or rescheduled for the day prior to the next monthly payment date. The Pool
Loan will accrue interest through the day immediately prior to the date payment is received by CSA.

 

(d)          CSA
shall, upon receipt of notice pursuant to paragraph 18(b), advise the Seller in writing of any discrepancy between the prepayment
information supplied by the Seller and the CSA’s current records. Seller agrees to work with CSA to resolve errors or miscalculations.

 

(e)          CSA
will remit the prepayment amount to Program Participant in accordance with this Agreement.

 

(f)          Any
amount received by CSA above expected principal and interest will be distributed pro-rata to Program Participants.

 

(g)          Prepayment
penalties received by the CSA shall be distributed to the Investor, Seller and Pool Originator on a pro rata basis.

 

19.         Option
to Purchase by SBA. SBA shall at any time have the option to purchase from the Pool Investor the Loan Interest in the SBA-guaranteed
portion of a Pool backing the Pool Certificate less the Servicing Retention Amount and other applicable fees. Failure of the Pool
Investor to submit the Pool Certificate to CSA for redemption on the date of prepayment if the prepaid loan is the last loan in
the pool specified by SBA or CSA will not entitle the Pool Investor to accrued interest beyond such date.

 

    	18

    	 

    

 

20.         Side
Agreements. SBA’s obligation to make payments under this Agreement is not affected by the Third Party Lender Agreement
or any side agreement between the parties unless SBA is a signatory to such agreement.

 

21.         Indemnity
and Force Majeure. Each party to this Agreement (including CSA) for itself and its successors and assigns, agrees to indemnify
and hold harmless any other party (including CSA) from and against any costs, liabilities, and related expenses arising from the
performance of its duties or otherwise arising under this Agreement; provided that no indemnification shall be provided under this
Agreement for action or failure to act which constitutes negligence, breach of authority, or bad faith.

 

If any party hereto (including CSA) is in doubt as to the applicability
of this Agreement to a communication it has received, it may refer the matter to SBA for an opinion as to whether it may take,
suffer or omit any action pursuant to such communications.

 

Under no circumstances shall any party hereto (including CSA)
be held liable to any person or entity for special or consequential damages or for attorneys’ fees or expenses in connection
with its performance under this Agreement.

 

If any party hereto (including CSA) shall be delayed in its
performance hereunder or prevented entirely or in part from completing such performance due to causes or events beyond its control,
such delay or non-performance shall be excused and the reasonable time for performance in connection with this Agreement shall
be extended to include the period of such delay or non-performance. Causes or events include but are not limited to: (i) Act of
God; (ii) postal malfunction; (iii) interruption of power or other utility, transportation, or communication service; (iv) act
of civil or military authority; (v) sabotage; (vi) national emergency; (vii) war; (viii) explosion, flood, accident, earthquake
or other catastrophe; (ix) fire; (x) strike or other labor problem; (xi) legal action; (xii) present or future law, government
order, rule or regulation; or (xiii) shortage of suitable parts, materials, labor or transportation. In disputes between CSA and
Seller, CSA and Pool Originator, or between CSA and Pool Investor, SBA reserves the right to require CSA to take appropriate action
as SBA determines, and if legal action is required, SBA will pay reasonable attorney’s fees incurred by CSA in talking such
action.

 

22.         Emergency
Repurchase Authority by Seller. In certain critical situations in which the Borrower’s ability to remain in business
is directly dependent on a change in the provisions relating to the installment payments by Borrower, SBA may permit Seller to
repurchase the Pool Loan portions held by the Pool Originator and Pool Investor. Seller must submit to the SBA servicing center
a written request, which includes the following:

 

A.           Current
financial statements of the Borrower,

 

B.           A
statement that the proposed change in the. terms and conditions of the Pool Loan is solely for the benefit of Borrower, and

 

    	19

    	 

    

 

C.           A
certification by Seller that it will make the requested change in the terms and conditions if repurchase is approved by SBA.

 

The SBA servicing center must review the financial statements
of Borrower and any other appropriate information and conclude that (i) a situation exists that Borrower’s business will
probably fail if the change is not approved, and (ii) that it is probable that the business wil l survive and resume payment if
the change is approved. If all conditions are met, the SBA servicing center may approve the purchase of the Pool Loan portions
by Seller.

 

Loan Interests purchased pursuant to this paragraph may not
be resold unless the Borrower has made all payments as scheduled in the Pool Note for a period of twelve (12) months.

 

23.         Inconsistent
Provisions and Caption Headings. Any inconsistency between this Agreement and Title 13, Code of Federal Regulations, shall
be resolved in favor of Title 13. Program Rules and Regulations in effect on the Settlement Date, and as may be amended from time
to time in the Federal Register, apply to this Agreement unless explicitly stated to be inapplicable. The caption headings for
the various paragraphs herein are for case of reference only and are not to be deemed part of the terms and conditions of this
Agreement.

 

In consideration of the mutual promises herein contained, the
parties agree to all the provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this multi-page Agreement
this__________day of __________________ 20__________ in New York State.

 

By signing below, each party (1) certifies that it has reviewed
all certifications made on such party’s behalf in this Agreement and that all of these certifications are true and correct,
and (2) acknowledges that SBA is relying on these certifications in order to issue a Federal guarantee, and that false statements
are punishable under Federal Law including 18 U.S.C. 1001 and 31 U.S.C. 3729-3733.

 

	 	 	 	SMALL BUSINESS ADMINISTRATION
	(Pool Investor)	 	
	 	 	 	 	 
	By:	 	 	By: 	Administrator,
	 	 	 	 	 
	Title:	 	 	 	Small Business Administration
	 	 	 	 	 
	Date:	 	 	 	 
	 	 	 	 	 
	 	 	 	Examined and Accepted by
	(Seller)	 	Fiscal and Transfer Agent
	 	 	 	 	 
	By:	 	 	By:	 
	 	 	 	 	 
	Title:	 	 	COLSON SERVICES CORP.
	 	 	 	 
	Date:	 	 	New York. NY 11217

 

    	20

    	 

    

 

Pool Originator

 

	By:	 
	 	 
	Title:	 
	 	 
	Date:	 

 

    	21

    	 

    

 

APPENDIX A

 

DEFINITIONS AND USAGE

 

Usage

 

The following rules of construction and
usage shall be applicable to this Agreement and to any Pool Certificate, Pool Certificate transfer document, Seller Receipt, or
Pool Originator Receipt issued pursuant to this Agreement:

 

(a) All terms defined in this Appendix shall
have the defined meanings when used in any instrument governed hereby and in any certificate or other document made or delivered
pursuant thereto unless otherwise defined therein.

 

(b) As used herein, in any instrument governed
hereby and in any certificate or other document made or delivered pursuant thereto, accounting terms not defined in this Appendix
or in any such instrument, certificate or other document, and accounting terms partly defined in this Appendix or in any such instrument,
certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted
accounting principles as in effect on the date of such instrument. To the extent that the definitions of accounting terms in this
Appendix or in any such instrument, certificate or other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Appendix or in any such instrument, certificate or other document
shall control.

 

(c) The words “hereof”,
“herein”, “‘hereunder” and words of similar import when used in an instrument refer to such
instrument as a whole and not to any particular provision or subdivision thereof; references in an instrument to article,
section, paragraph or another subdivision or to an attachment are, unless the context otherwise requires, to an article,
section, paragraph or subdivision of or an attachment to such instrument; and the term “including” means
“including without limitation”.

 

(d) The definitions contained in this Appendix
are equally applicable to both the singular and plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such terms.

 

(e) Any agreement, instrument or statute
defined or referred to below or in any agreement or instrument that is governed by this Appendix means such agreement or instrument
or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver
or consent and (in the case of statutes) by succession of comparable successor statutes and includes (in the case of agreements
or instruments) references to all attachments thereto and instruments incorporated therein. References to a Person are also to
its permitted successors and assigns.

 

    	22

    	 

    

 

Definitions

 

504 financing.   The loans made to a small business to
fund a Project under the SBA’s development company program authorized by Title V of the Small Business Investment Act of
1958.

 

504 loan. A loan as defined in 13 CFR § 120.2(c).

 

Affiliate. A person or entity SBA determines to be an
affiliate of a Program Participant pursuant to the application of the principals and guidelines set forth in 13 CFR § 120.103.

 

Associate. An associate defined in 13 CFR § 120.10
for a Lender or CDC as applied to Program Participants pursuant to this Agreement.

 

Borrower. The obligor under the Pool Note.

 

Certified Development Company or CDC. An entity that
meets the definition of a Certified Development Company as defined in 13 CFR § 120.10.

 

Central Servicing Agent or CSA. The entity serving as
SBA’s central servicing agent for the Program.

 

Current. That no scheduled payment owed by the Borrower
is over 29 days past due.

 

First Lien Position 504 Loan. A Third Party Loan meeting
the eligibility requirements set forth in 13 CFR § 120.1704.

 

Guide. The First Lien Position 504 Loan Pooling Program
Guide published by SBA which provides information applicable to the Program including, among other things, requirements relating
to the formation of a Pool, available at sba.gov/_____.

 

Liquidation Proceeds. Cash, including insurance proceeds,
proceeds of any foreclosed-on property disposition, revenues received with respect to the conservation and disposition of a foreclosed-on
property or repossessed collateral, including any real property securing the Pool Loan, consisting of a commercial property or
residential property and any improvements thereon, and any other amounts received in connection with the liquidation of the Pool
Loan, whether through Seller’s sale, foreclosure sale, any offset or workout, or otherwise.

 

Loan Interest. The right to receive the owned portion
of the principal balance of the Pool Loan together with interest thereon at a per annum rate in effect from time to time in accordance
with this Agreement.

 

Loan Program Requirements. The applicable requirements
as defined in 13 CFR § 120.10.

 

Loan Receivables. Pool Loan payments, prepayments, or
collections made in connection with the Pool Loan by the any obligor under the Pool Loan or by another person or entity made on
behalf of any such obligor, and Liquidation Proceeds.

 

    	23

    	 

    

 

Maturity. The maturity of the Loan Interest in the Pool
that has the longest remaining term of any Loan Interest in the Pool. The maturity will change from time to time due to prepayment
or default on Loan Interests in the Pool.

 

Ongoing Guarantee Fee. The fee set forth in paragraph
6 of this Agreement.

 

Participation Certificate. A Seller Receipt, Pool Originator
Receipt, and/or Pool Certificate.

 

Pool. The aggregate of Loan Interests formed into a single
pool by the Pool Originator in accordance with the Program and this Agreement.

 

Pool Assembler. An entity that meets the qualifications
set forth in 13 CFR § 120.630 and has been approved as such by SBA.

 

Pool Certificate. A document representing a beneficial
fractional interest in the SBA-guaranteed portion of the Pool.

 

Pooled. When one or more Loan Interests in a Pool Loan
has been put into a Pool.

 

Pooling. The transfer of one or more Loan Interests in
a Pool Loan into a Pool.

 

Pool Investor. An entity which holds a Pool Certificate
in accordance with Program Rules and Regulations.

 

Pool Loan. The loan Pooled pursuant to this Agreement.

 

Pool Note. The document evidencing the Pool Loan.

 

Pool Originator. The entity that is pooling a Loan Interest
pursuant to this Agreement that has signed this Agreement as Pool Originator.

 

Pool Originator Receipt. The document evidencing the
Pool Originator’s retained ownership in a Pool it has formed under the Program.

 

Preference. A preference as defined in 13 CFR §
120.10.

 

Premier Certified Lenders Program. The program defined
in 13 CFR § 120.845.

 

Program. The program authorized by section 503 of the
American Recovery and Reinvestment Act of 2009.

 

Program Participant. An entity that executes this Agreement
as Seller, Pool Originator, or Pool Investor, and any successors or assignees thereof.

 

Program Rules and Regulations. Subpart J, Part 120, of
Title 13 of the Code of Federal Regulations (CFR) (13 CFR § 120.1700-1726) as may be amended from time to time by SBA, this
Agreement any other Program agreements signed by a Program Participant, if applicable, the Guide, the American Recovery and Reinvestment
Act of 2009, and the provisions of subpart H, V Part 120, of Title 13 of the CFR governing Third Party Loans and Third Party Lenders.

 

    	24

    	 

    

 

Project.   A project as defined in 13 CFR § 120.802.

 

Project Property. Project properly as defined in 13 CFR
§ 120,802.

 

SBA. The United States Small Business Administration,
an agency of the United States Government.

 

Seller. The entity that has sold the Pool Loan pursuant
to this Agreement and/or has executed this Agreement as Seller.

 

Seller Receipt. The document that evidences a Seller’s
Loan Interest.

 

Servicing Retention Amount. The amount set forth in paragraph
5 of this Agreement.

 

Third Party Lender. The lender that has made the Third
Party Loan that is the Pool Loan pursuant to this Agreement.

 

Third Party Lender Agreement. The SBA Form 2287 agreement
executed by the Third Party Lender that governs the Third Party Loan.

 

Third Party Loan. The loan as defined in 13 CFR §
120.801 that is the Pool Loan pursuant to this Agreement..

 

Weighted Average Interest Rate. The dollar-weighted average
interest rate of a Pool Certificate calculated by multiplying the interest rate of each Loan Interest in the Pool by the ratio
of that Loan Interest’s current outstanding principal in the SBA-guaranteed portion of the Pool (that is, the portion of
the Pool Loan backing the Pool Certificates) to the current aggregate or outstanding principal of each Loan Interest in the SBA-guaranteed
portion of the Pool, and adding the sum of the resulting products. The Pool Certificate interest rate will fluctuate over the life
of the Pool as defaults, prepayments and normal repayments applicable to Loan Interests in the Pool occur.

 

Weighted Average Maturity. The weighted average maturity
of a Pool Certificate is a dollar weighted average maturity that is calculated by multiplying the remaining term, in months, of
each Loan Interest in a Pool by the ratio of that Loan Interest’s current outstanding pooled principal to the current aggregate
outstanding pooled principal of all Loan Interests in the Pool, and adding the sum of the resulting products. The weighted average
maturity of a Pool Certificate will fluctuate over the life of the Pool as Loan Interest defaults, prepayments and normal Loan
Interest repayments occur.

 

    	25

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