Exhibit 10.7

 

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March 10, 2014                               

 

Dr. Zvi Yaniv

President and Chief Operating Officer

Applied Nanotech Holdings, Inc.

3006 Longhorn Boulevard, Suite 107

Austin, Texas 78758

 

Dear Zvi,

 

As you know, the Board of Applied Nanotech Holdings, Inc. (the “Company”) has
approved today the Agreement and Plan of Merger and Exchange (the “Merger
Agreement”) by and among the Company, NanoMerger Sub Inc., PEN Inc., NanoHolding
Inc. and Carl Zeiss, Inc.. If the transactions contemplated by that Merger
Agreement become effective with the Company merging into PEN, Inc. (“PEN”), you
agree that at the closing you and PEN and its subsidiaries, as applicable, will
execute and deliver the following documents:

 

1.Termination of Employment Agreement and Mutual Releases in the form attached
to this letter as Annex A;

2.Letter Agreement regarding continued employment attached as Annex B;

3.Restricted Stock Agreement attached as Annex C;

4.Piggyback Registration Rights Agreement attached as Annex D; and

5.Form of Confidentiality Agreement executed by all employees of PEN.

 

In addition, on the closing date, the Company (or its successor) will enter into
a Services Agreement in the form attached as Annex E with a service company that
you identify.

 

Your stock options, along with other options of the Company, will not be
affected by the Mergers. You will agree to amend your convertible note and
convert it to stock of PEN on terms substantially the same as those agreed to by
the other non-employee noteholders who hold similar notes.

 

You have indicated that you plan to continue to follow the direction of the
Company’s board of directors with respect to the transactions described in the
Merger Agreement and the implementation of any board approved budget and other
matters. However, you are authorized and requested to work with Scott Rickert
and any others associated with Nanofilm that he may identify in order to help
them better understand the technology of the Company and its subsidiaries and
potential applications of that technology to products that can be developed by
the Company following the Mergers.

 

 

 

 

 

In the event that the Mergers have not become effective, and the transactions
described in the Merger Agreement have not been closed on or before the first to
occur of (i) the “End Date” as defined in the Merger Agreement or (ii) September
30, 2014, this letter agreement shall terminate automatically and neither party
shall have any further obligations under it. Also, if the parties to the Merger
Agreement terminate that agreement, this letter agreement shall terminate
automatically and neither party shall have any further obligations under this
letter.

 

Please confirm your agreement with the matters described herein by your
signature below.

 

 

  Sincerely,           /s/ Robert Ronstadt   Robert Ronstadt   Chairman

 

 

Agreed:

 

 

/s/ Zvi Yaniv

Zvi Yaniv

 

 

 

 

 

 

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ANNEX A

 

TERMINATION OF EMPLOYMENT AGREEMENT

 

AND MUTUAL RELEASES

 

This Termination of Employment Agreement and Mutual Releases (this “Agreement”)
is entered into by and between PEN, Inc., a Delaware corporation (the
“Company”), and its subsidiaries, Applied Nanotech, Inc., E.B.T., Inc. and
EZDiagnostiX, Inc. (collectively, the “Subsidiaries”), and Zvi Yaniv, a resident
of Travis County, Texas (“Employee”), and the parties agree as follows:

 

1.Recitals.

 

(a)Employee entered into that certain Employment Agreement dated June 1, 1996
(the “Employment Agreement”) with SI Diamond Technology, Inc., a Texas
corporation (“SIDT”);

 

(b)SIDT changed its name to “Applied Nanotech Holdings, Inc.”;

 

(c)Applied Nanotech Holdings, Inc. has been a party to a merger (“Merger”) in
which the surviving company is the Company and as a result of which the Company
is the owner and holder of all rights of SIDT under the Employment Agreement;

 

(d)Applied Nanotech, Inc., E.B.T., Inc. and EZDiagnostiX, Inc. are wholly owned
subsidiaries of the Company;

 

(e)Employee has served as director, president and chief operating officer of
Applied Nanotech Holdings, Inc. and as CEO of Applied Nanotech, Inc.;

 

(f)Following the mergers, Employee shall continue his employment (on an “at
will” basis) with the Company but is resigning in all of his capacities as
executive officer and director of the Company and each of the Subsidiaries;

 

(g)Employee is the holder of certain shares of stock (“Company Stock”), stock
options issued by Applied Nanotech Holdings, Inc. (the “Options”), and such
Company Stock and Options are now Company Stock and Options of the Company;

 

(h)Prior to the closing of the Merger, Employee was the holder of certain
indebtedness of Applied Nanotech, Inc. incurred in connection with loans made by
Employee (the “Debt”);

 

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(i)The Company has granted to Employee 6,800,000 shares of the Class A common
stock of the Company (the “Restricted Stock”) subject to the terms, conditions
and restrictions set forth in that certain Restricted Stock Agreement of even
date with this Agreement (“Restricted Stock Agreement”);

 

(j)Company and Employee desire to terminate the Employment Agreement and to
release each other from all obligations and liabilities with respect to the same
as more particularly set forth below;

 

(k)Each of the Company and Employee acknowledges and agrees that each has given
and received good, present and sufficient consideration to support each of the
obligations of the Company and the Employee as set forth in this Agreement.

 

2.Termination of Employment Agreement. The Company and the Employee agree that
the Employment Agreement is hereby terminated and shall be of no force or effect
from and after the date of this Agreement.

 

3.Release by Employee. The Employee releases, acquits and discharges the Company
and the Subsidiaries of and from any and all claims, demands, liabilities,
suits, causes of action or obligations whether arising under common law, statute
or contract (collectively, “Claims”) arising under or in connection with the
Employment Agreement as well as any Claims of the Employee arising in connection
with the employment relationship of Employee with, or service to, any of the
Company or any of the Subsidiaries to the date of this Agreement, including,
without limitation, all Claims relating to salary, bonus, benefits and
severance; provided, however, that this Agreement shall not release, limit or
impair any of the rights of Employee as the owner of Company Stock, the Stock
Options, the Restricted Stock, any of the Debt that for any reason has not been
converted into Company Stock in connection with the Merger, any obligations of
the Company or any of the Subsidiaries (under its bylaws or otherwise) to
indemnify, defend or hold Employee harmless from any claims that may be asserted
against him with respect to his service as an officer, director and/or employee
of the Company or any of the Subsidiaries through the date of this Agreement, or
any rights of Employee under any policy of insurance (including, without
limitation, directors and officers liability insurance).

 

4.Release by Company and the Subsidiaries of the Employee. Each of the Company
and the Subsidiaries releases, acquits and discharges Employee of and from any
and all Claims of any kind, including, without limitation, any and all Claims
arising out of or in connection with the Employment Agreement and Employee’s
prior service to the Company and/or any of the Subsidiaries as a director,
officer and/or employee.

 

5.Resignation. Employee hereby resigns in all of his capacities as a director
and executive officer of the Company and each of the Subsidiaries.

 

6.General Provisions.

 

(a)This Agreement constitutes the final agreement of the parties with respect to
the subject matter of the same and all prior discussions and negotiations are
merged in this Agreement;

 

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(b)This Agreement shall be governed by Texas law and any and all disputes with
respect to this Agreement shall be submitted to a court of competent
jurisdiction located in Travis County, Texas.

 

Executed to be effective _______________, 2014.

 

  COMPANY:       PEN, Inc., a Delaware corporation          
By:_____________________________   Name:   Scott E. Rickert   Title:  Chief
Executive Officer           SUBSIDIARIES:       Applied Nanotech, Inc., a
Delaware corporation           By: ____________________________   Name:
__________________________   Title: ___________________________          
E.B.T., Inc., a Delaware corporation           By: ____________________________
  Name: __________________________   Title: ___________________________        
  EZDiagnostiX, Inc., a Texas corporation           By:
____________________________   Name: __________________________   Title:
___________________________

 

 

 

 

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ANNEX C

 

RESTRICTED STOCK AGREEMENT

 

 

This Agreement is made and entered into as of the [Date of Merger becoming
effective] __, 2014 (the “Date of Grant”) by and between PEN, Inc., a Delaware
corporation (the “Company”), and Zvi Yaniv (“you”).

 

WHEREAS, the Company in order to induce you to continue and dedicate service to
the Company and to materially contribute to the success of the Company grants
you this restricted stock award (the “Award”); and

 

WHEREAS, you desire to accept the Award made pursuant to this Agreement.

 

NOW, THEREFORE, in consideration of and mutual covenants set forth herein and
for other valuable consideration hereinafter set forth, the parties agree as
follows:

 

1. The Grant. Subject to the conditions set forth below, the Company hereby
grants you effective as of the Date of Grant, as a matter of separate inducement
but not in lieu of any salary or other compensation for your services for the
Company, 6,800,000 shares (the “Restricted Shares”) of Class A Common Stock of
the Company (the “Company Stock”).

 

2. Escrow of Restricted Shares. The Restricted Shares shall be deemed issued to
you on the Date of Grant but shall be subject to the restrictions and risk of
forfeiture set forth in this Agreement. The Company shall cause you to be
entered on the register of stockholders of the Company as the holder of the
Restricted subject to the provisions of this Agreement until the Forfeiture
Restrictions (defined below) on such Restricted Shares expire as contemplated in
Sections 5 and 6 of this Agreement or the Restricted Shares are forfeited as
described in Sections 4 and 7 of this Agreement. You shall execute one or more
instructions or stock powers in blank for the Restricted Shares and deliver
those to the Company. The Company shall hold the Restricted Shares and the
related instructions or stock powers pursuant to the terms of this Agreement
until such time as (a) the Forfeiture Restrictions on the Restricted Shares
expire (in which event the Company shall promptly deliver to you stock
certificates or other instruments evidencing your ownership free of restrictions
as to the Restricted Shares for which the Forfeiture Restrictions have expired)
or (b) the Restricted Shares are canceled and forfeited pursuant to this
Agreement.

 

3. Ownership of Restricted Shares. From and after the Date of Grant, you will be
entitled to all the rights of absolute ownership of the Restricted Shares,
including the right to vote those shares and to receive dividends thereon if,
as, and when declared by the Board, subject to the terms, conditions and
restrictions set forth in this Agreement; except, that (i) any dividends that
are declared with respect to Restricted Shares for which the Forfeiture
Restrictions have not yet expired shall be subject to the same Forfeiture
Restrictions applicable to the Restricted Shares for which the dividend was paid
and (ii) that any such dividends shall be payable to you no later than 30 days
following the expiration of the Forfeiture Restrictions applicable to such
shares.

 

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4. Restrictions; Forfeiture. The Restricted Shares are restricted in that they
may not be sold, transferred or otherwise alienated or hypothecated until the
Forfeiture Restrictions are removed or expire as contemplated in Sections 5 and
6 of this Agreement. The Restricted Shares are also restricted in the sense that
they may be forfeited to the Company in accordance with Section 7 below (the
“Forfeiture Restrictions”). You hereby agree that if the Restricted Shares are
forfeited, as provided in Section 7, the Company shall have the right to deliver
the Restricted Shares to the Company’s transfer agent for, at the Company’s
election, cancellation or transfer to the Company.

 

5. Expiration of Restrictions and Risk of Forfeiture. The Forfeiture
Restrictions on the Restricted Shares granted pursuant to this Agreement will
expire and, subject to, and conditioned upon, the payment required under Section
10, the Restricted Shares will become transferable and nonforfeitable upon the
first to occur of (i) a Change in Control of the Company (as defined in Section
26(ii)), (ii) the death of Zvi Yaniv, or (iii) Stock Price Vesting.

 

6. Stock Price Vesting. Stock Price Vesting will be effective upon the last to
occur of:

 

a. The day that is 180 days from Date of Grant;

 

b. The average stock price of PEN shares for ten consecutive Trading Days
reaching thresholds set forth below which will cause vesting of the number of
shares indicated:

 

Threshold Price: Number of Shares $.10 1,000,000 $.15 1,000,000 $.20 1,000,000
$.25 1,000,000 $.30 1,000,000 $.35 1,800,000

 

 

Trading Days does not include the 60 trading days following the Date of Grant.

 

7. Forfeiture. Any Restricted Shares with respect to which the Forfeited
Restrictions have not expired by the fifth anniversary of the date of grant will
be forfeited. If you fail to make the payment required under Section 10 for any
Restricted Shares (or dividends payable with respect to Restricted Shares) with
respect to which the Forfeiture Restrictions would otherwise expire, those
Restricted Shares (or dividends, as applicable) will be forfeited.

 

8. Beneficiary. You may designate a Beneficiary by notice to the Company.
“Beneficiary” means one or more persons, trusts or other entities which have
been designated by you, in your most recent written beneficiary designation
filed with the Company, to receive the benefits specified under this Agreement
upon your death. If, upon a your death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the persons,
trusts or other entities entitled by will or the laws of descent and
distribution to receive such benefits.

 

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9. Delivery of Stock. Promptly following the expiration of the Forfeiture
Restrictions on the Restricted Shares as contemplated in Section 5 of this
Agreement, the Company shall cause to be issued and delivered to you or your
designee a certificate or other evidence of the number of Restricted Shares as
to which restrictions have expired, free of any restrictive legend relating to
the lapsed restrictions, upon receipt by the Company of any tax withholding as
may be required pursuant to Section 10, subject to forfeiture for failure to pay
as set forth in Section 6. The value of such Restricted Shares shall not bear
any interest owing to the passage of time.

 

10. Payment of Taxes. As a condition to the expiration of the Forfeiture
Restrictions with respect to any of the Restricted Shares (with respect to which
such Forfeiture Restrictions would otherwise expire in accordance with Section
5), you are required to pay cash to the Company (or the Company’s Subsidiary if
you are an employee of a Subsidiary of the Company) for transmittal to the
Internal Revenue Service or other government authority in an amount that is
determined below not later than 60 days after the Company provides written
notice to you or after you provide written notice to the Company that one of the
conditions of Section 5 has been met. The amount due is the amount of all taxes
that the Company (or its Subsidiary’s) is required by law to withhold as a
result of the issuance and delivery of any Restricted Shares pursuant to Section
9 hereof. Such amount will be reasonably calculated by the Company (or its
Subsidiary). The Company will afford you a reasonable opportunity to review and
comment on the calculation by the Company (or its Subsidiary). For clarity, the
Company (or its Subsidiary) will not withhold and transmit to the Internal
Revenue Service or other government authority any amount with respect to
Restricted Shares other than the amount that you pay to the Company (or its
Subsidiary).

 

11. Compliance with Securities Law.

 

a. You acknowledge and agree that (i) you are not relying upon any determination
by the Company, its affiliates, or any of their respective employees, directors,
officers, attorneys or agents (collectively, the “Company Parties”) of the Fair
Market Value of the Company Stock on the Date of Grant, (ii) you are not relying
upon any written or oral statement or representation of the Company Parties
regarding the tax effects associated with your execution of this Agreement and
your receipt, holding and vesting of the Restricted Shares, and (iii) in
deciding to enter into this Agreement, you are relying on your own judgment and
the judgment of the professionals of your choice with whom you have consulted.
You hereby release, acquit and forever discharge the Company Parties from all
actions, causes of actions, suits, debts, obligations, liabilities, claims,
damages, losses, costs and expenses of any nature whatsoever, known or unknown,
on account of, arising out of, or in any way related to the tax effects
associated with your execution of the Agreement and your receipt, holding and
exercise of the Restricted Shares.

 

b. The issuance of Company Stock (including Restricted Shares) will be subject
to compliance with all applicable requirements of federal, state, or foreign law
with respect to such securities and with the requirements of any stock exchange
or market system upon which the Company Stock may then be listed. No Company
Stock will be issued hereunder if such issuance would constitute a violation of
any applicable federal, state, or foreign securities laws or other law or
regulations or the requirements of any stock exchange or market system upon
which the Company Stock may then be listed. In addition, Company Stock will not
be issued hereunder unless (i) a registration statement under the Securities
Act, is at the time of issuance in effect with respect to the shares issued or
(ii) in the opinion of legal counsel to the Company, the shares issued may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Act. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority, if any, deemed by
the Company’s legal counsel to be necessary to the lawful issuance and sale of
any shares subject to the Award will relieve the Company of any liability in
respect of the failure to issue such shares as to which such requisite authority
has not been obtained. As a condition to any issuance hereunder, the Company may
require you to satisfy any qualifications that may be necessary or appropriate
to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect to such compliance as may be requested
by the Company. From time to time, the Board and appropriate officers of the
Company are authorized to take the actions necessary and appropriate to file
required documents with governmental authorities, stock exchanges, and other
appropriate Persons to make shares of Company Stock available for issuance.

 

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12. Subdivision or Consolidation; Recapitalization; Reorganization.

 

a. The existence of this Agreement and the Award shall not affect in any way the
right or power of the Board or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other change in
the Company’s capital structure or its business, any merger or consolidation of
the Company, any issue of debt or equity securities ahead of or affecting
Company Stock or the rights thereof, the dissolution or liquidation of the
Company or any sale, lease, exchange or other disposition of all or any part of
its assets or business or any other corporate act or proceeding. In no event
will any action taken by the Company pursuant to this Section 12 result in the
creation of deferred compensation within the meaning of the Nonqualified
Deferred Compensation Rules.

 

b. The Award and the number of Restricted Shares subject to the Award shall be
subject to adjustment from time to time, in accordance with the following
provisions:

 

(i) If at any time, or from time to time, the Company shall subdivide as a whole
(by reclassification, by a stock split, by the issuance of a distribution on
Company Stock payable in Company Stock, or otherwise) the number of Restricted
Shares of Company Stock then outstanding into a greater number of shares of
Company Stock, then the number of Restricted Shares shall be increased
proportionately and the Threshold Price under Section 6b shall be decreased
proportionately.

 

(ii) If at any time, or from time to time, the Company shall consolidate as a
whole (by reclassification, by reverse stock split or otherwise) the number of
shares of Company Stock then outstanding into a lesser number of shares of
Company Stock, then the number of Restricted Shares shall be decreased
proportionately and the Threshold Price under Section 6b shall be increased
proportionately.

 

(iii) Whenever the number of Restricted Shares and the Threshold Price are
required to be adjusted as provided in this Subsection 12b, the Company shall
promptly prepare, and deliver to you, a notice setting forth, in reasonable
detail, the event requiring adjustment, the amount of the adjustment, the method
by which such adjustment was calculated, and the Threshold Price after giving
effect to the adjustments.

 

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(iv) Adjustments under Subsections 12b(i) and (ii) shall be made by the Company,
and its reasonable determination as to what adjustments shall be made and the
extent thereof shall be final, binding, and conclusive. No fractional interest
shall be issued on account of any such adjustments.

 

c. The issuance by the Company of shares of stock of any class or securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, and in any case whether or not for fair
value, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Company Stock subject to the Award or the
Threshold Price.

 

13. Legends. The Company may at any time place legends referencing any
restrictions imposed on the shares pursuant to this Agreement on all
certificates or other evidence of ownership representing shares issued with
respect to this Award.

 

14. Right of the Company and Subsidiaries to Terminate Services. Nothing in this
Agreement confers upon you the right to continue in the employ of or performing
services for the Company or any Subsidiary. Termination of your employment
relationship with the Company shall have no effect on your rights under this
Agreement.

 

15. Furnish Information. You agree to furnish to the Company all information
requested by the Company to enable it to comply with any reporting or other
requirements imposed upon the Company by or under any applicable statute or
regulation.

 

16. No Guarantee of Value. Neither the Company nor the Board guarantee the
Company Stock from loss or depreciation.

 

17. Tax Advice, Section 83(b) Election. You understand and acknowledge that you
should consult and have consulted with your tax advisor regarding the tax
consequences of this Agreement and the advisability of filing with the Internal
Revenue Service an election under section 83(b) of the Code with respect to the
Restricted Shares for which the restrictions have not lapsed. You confirm that
you have consulted with your own tax advisor regarding the tax consequences of
this Agreement (and related transactions) and that you will not make any
election under section 83(b) of the Code with respect to any portion of the
Award.

 

18. Notices. All notices required or permitted under this Agreement must be in
writing and either personally delivered or sent by mail or recognized national
or international courier service with confirming phone call or e-mail. Notices
are delivered for purposes of this Agreement on the date on which it is actually
received by the person to whom it is properly addressed or, if earlier seven
business days after the date it is sent by United States mail or by recognized
national or international courier.

 

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19. Waiver of Notice. Any person entitled to notice hereunder may waive such
notice in writing.

 

20. Transfer, Assignment, Successors. Prior to the expiration of Forfeiture
Restrictions on Restricted Shares such Restricted Shares may not be transferred.
You may not assign your rights under this Agreement except by will and the laws
of descent and distribution. This Agreement shall be binding upon you, your
legal representatives, heirs, legatees and distributees, and upon the Company,
its successors and assigns.

 

21. Entire Agreement, Severability. This Agreement and the Piggyback
Registration Rights Agreement of even date are the entire agreement between you
and the Company with respect to the Award and the Restricted Shares issued under
this Agreement. If any provision of this Agreement is held to be illegal or
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and
this Agreement shall be construed and enforced as if the illegal or invalid
provision had never been included herein.

 

22. Company Action. Any action required of the Company shall be by resolution of
the Board or by a person or entity authorized to act by resolution of the Board.

 

23. Governing Law. All questions arising with respect to the provisions of this
Agreement shall be determined by application of the laws of Texas, without
giving any effect to any conflict of law provisions thereof, except to the
extent Texas state law is preempted by federal law.

 

24. Consent to Jurisdiction and Venue. You hereby consent and agree that any
disposition arising under this Agreement shall be submitted to a court having
jurisdiction and located in Travis County, Texas and each party submits to the
jurisdiction of such courts. In any dispute with the Company, you will not
raise, and you hereby expressly waive, any objection or defense to any such
jurisdiction and venue as an inconvenient forum.

 

25. Amendment. This Agreement may only be amended by a writing signed by both
you and the Company.

 

26. Definitions. As used in this Agreement the terms below have the meaning
indicated.

 

(i) “Board” means the Company’s Board of Directors.

 

(ii) “Change in Control” means (i) a sale of all or substantially all of the
Company’s assets other than to an Excluded Entity (as defined below), (ii) a
merger, consolidation or other capital reorganization or business combination
transaction of the Company with or into another corporation, limited liability
company or other entity other than an Excluded Entity, or (iii) the consummation
of a transaction, or series of related transactions, in which any “person” (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the
“beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of all of the Company’s then outstanding voting securities.
Notwithstanding the foregoing, a transaction shall not constitute a Change in
Control if its purpose is solely to (A) change the jurisdiction of the Company’s
incorporation, (B) create a holding company that will be owned in substantially
the same proportions by the persons who hold the Company’s securities
immediately before such transaction, or (C) obtain funding for the Company in a
financing that is approved by the Company’s Board. An “Excluded Entity” means a
corporation or other entity of which the holders of voting capital stock of the
Company outstanding immediately prior to such transaction are the direct or
indirect holders of voting securities representing at least a majority of the
votes entitled to be cast by all of such corporation’s or other entity’s voting
securities outstanding immediately after such transaction.

 

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(iii) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, including regulations thereunder and successor provisions and regulations
thereto.

 

(iv) “Exchange Act” means the Securities Exchange Act of 1934, as amended from
time to time, including rules thereunder and successor provisions and rules
thereto.

 

(v) “Person” means any person or entity of any nature whatsoever, specifically
including an individual, a firm, a company, an entity, a partnership, a limited
liability company, a trust or other entity; a Person, together with that
Person’s Affiliates and Associates (as those terms are defined in Rule 12b-2
under the Exchange Act, provided that “registrant” as used in Rule 12b-2 shall
mean the Company), and any Persons acting as a partnership, limited partnership,
joint venture, association, syndicate or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting or disposing of securities of the
Company with such Person, shall be deemed a single “Person.”

 

(vi) “Securities Act” means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as it may be amended
from time to time.

 

(vii) “Subsidiary” means with respect to the Company, any corporation or other
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by the Company.

 

 

 

[ADD closing, sig blocks and notice addresses (including phone and e-mail to
confirm notices as required for notices delivered by mail or courier under
Section 18.]

 

 

 

 

 

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ANNEX D

 

Piggyback Registration Rights Agreement

 

 

This is the Piggyback Registration Rights Agreement (this “Agreement”) dated
[Effective Date of Merger]________, 2014 by and between PEN, Inc., a Delaware
corporation (the “Company”) and Zvi Yaniv, an individual (together with his
heirs “Holder”). Terms used with initial capital letters are used as defined in
Section 7 of this Agreement.

 

Background

 

Holder is acquiring on the date of this Agreement 6,800,000 shares of restricted
Company Common Stock (the “Holder Stock”) under a Restricted Stock Agreement of
even date with this Agreement (the “Restricted Stock Agreement”). The Company is
granting Holder certain rights to register Holder Stock that are no longer
subject to risk of forfeiture when the Company is registering shares with the
Securities Exchange Commission (“SEC”).

 

Agreement

 

Yaniv and the Company agree:

 

1. Registration Rights.

 

(a) Right to Piggyback. Whenever the Company proposes to register any of its
equity securities under the Securities Act (excluding registrations on Forms S-4
or S-8) and the registration form to be used may be used for the registration of
Qualifying Shares, whether a sale for the Company’s own account or for selling
security holders (a “Piggyback Registration”), the Company will give written
notice to the Holders’ Representative prior to the filing of the registration
statement of the Company’s intention to effect such a registration and, subject
to Section 1(b) below, will include in such registration all Qualifying Shares
with respect to which the Company has received written request for inclusion for
Holder within 10 days after the sending of the Company's notice.

 

(b) Priority. If a Piggyback Registration is an underwritten registration, and
the managing underwriters advise the Company that, in their opinion, the number
of securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the
marketability, proposed offering price, timing, distribution method or
probability of success of such offering, then the Company will include in such
registration (i) first, the securities that the Company proposes to sell, (ii)
second, securities the Company is required to register under agreements entered
into in 2013 (or earlier) that are not subject to cutback, and (iii) third,
Qualifying Shares requested to be included either by Holder or other Company
securities requested to be included by other holders that have registration
rights which in the opinion of such underwriters can be sold without adverse
effect, pro rata among the holders of such securities on the basis of the number
of such securities owned by each such holder. To facilitate the allocation of
shares in accordance with the above provisions, the underwriters may round the
number of shares allocated to any holder to the nearest 100 shares.

 

D-1

 

 

 

(c) Selection of Underwriters. If any Piggyback Registration is an underwritten
offering, the selection of the investment banker(s) and manager(s) for the
offering will be made by the Company, in its sole and absolute discretion.

 

(d) Withdrawal by Company. If, at any time after giving notice of its intention
to register any of its securities as set forth in Section 1(a) and before the
effective date of the registration statement filed in connection with such
registration, the Company determines, for any reason, not to register such
securities, the Company will give written notice of its determination to the
Holder’s Representative and will promptly return any materials provided by the
Holders to the Company in connection with such registration.

 

2. Holdback Agreements.

 

(a) No Participating Holder will make any public sale or distribution (including
sales pursuant to Rule 144) of equity securities of the Company, or any
securities, options, or rights convertible into or exchangeable or exercisable
for such securities, during the Applicable Period (except as part of such
underwritten registration), unless the underwriters managing the registered
public offering otherwise agree. If requested by the Company, each Participating
Holder agrees to execute customary lock-up agreements with the managing
underwriter(s) of an underwritten offering with a duration not to exceed the
Applicable Period in such form as agreed to by the Holders. The “Applicable
Period” will begin ten days before and continue for 180 days following the
effective date of the registration statement for the first public offering of
the Company's equity securities after the date of this Agreement and will begin
ten days before and continue for 90 days following the effective date of the
registration statement for any other underwritten public offering of the
Company's equity securities, subject to extension as required by FINRA rules. If
requested by the underwriter(s), each Participating Holder will reconfirm this
commitment in writing prior to any such offering.

 

(b) The Company will not make any public sale or distribution of its equity
securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the Applicable Period (except as part of such
underwritten registration or pursuant to registrations on Form S-4 or S-8 or any
successor form), unless the underwriters managing the registered public offering
otherwise agree.

 

3. Registration Procedures.

 

(a) The Company will use commercially reasonable efforts to effect the
registration and the sale of all Qualifying Shares in accordance with the
requirements of Section 1 and the Company will:

 

(i) prepare and file with the Securities and Exchange Commission a registration
statement with respect to the Qualifying Shares that are to be included in the
offering and thereafter use commercially reasonable efforts to cause such
registration statement to become effective;

 

(ii) prepare and file with the Securities and Exchange Commission such
amendments and supplements or take such other action to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for such period as will terminate
when all of the securities covered by such registration statement during such
period have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement (but, in any event, not before the expiration of any longer period
required under the Securities Act, or, if such registration statement relates to
an underwritten offering, such longer period as in the opinion of counsel for
the underwriters a prospectus is required by law to be delivered in connection
with the sale of Qualifying Shares by an underwriter or dealer), and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement;

 

D-2

 

 

 

(iii) furnish to the Participating Holders such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus),
and such other documents as the Participating Holders may reasonably request in
order to facilitate the disposition of the Qualifying Shares included in the
registration statement;

 

(iv) use commercially reasonable efforts to register or qualify such
Participating Holders’ Qualifying Shares under such other securities or blue sky
laws of such jurisdictions as the Holders reasonably requests and do any and all
other acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Qualifying Shares owned by the Participating Holders, except that the Company
will not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify, (ii) subject itself to
taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction;

 

(v) unless the Company has suspended the offering under Section 3(b), notify the
Holders’ Representative, at any time when a prospectus relating to any
Qualifying Shares is required to be delivered under the Securities Act, upon
discovery that, or upon the discovery of the happening of any event as a result
of which, the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and, at the request of the Holders’ Representative, the Company
will prepare and furnish to the Participating Holders a reasonable number of
copies of a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Qualifying Shares, such prospectus will not
contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;

 

(vi) use commercially reasonable efforts to cause Qualifying Shares covered by
such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Qualifying Shares; and

 

D-3

 

 

 

(vii) cooperate with the Participating Holders and each underwriter or agent
participating in the disposition of Qualifying Shares and their respective
counsel in connection with any filings required to be made with the FINRA.

 

(b) At any time, if the Company reasonably believes that there is or may be in
existence material nonpublic information or events involving the Company, the
failure of which to be disclosed in the prospectus included in the registration
statement could constitute a material misstatement or omission, then, upon
written notice to the Holder’s Representative and until the Holders receive
copies of the supplemented or amended prospectus, such period not to exceed 60
days (the “Suspension Period”), the Company may suspend the use or effectiveness
of any registration statement (and the Holders each hereby agree not to offer or
sell any Qualifying Shares pursuant to such registration statement during the
Suspension Period). If the Company exercises its right to delay or suspend the
use or effectiveness of a registration hereunder, the applicable time period
during which the registration statement is to remain effective will be extended
by a period of time equal to the duration of the Suspension Period. The Company
may extend the Suspension Period for an additional consecutive 60 days with the
consent of the Holders, which will not be unreasonably withheld. If so directed
by the Company, the Holders will (i) not offer to sell any Qualifying Shares
pursuant to the registration statement during the period in which the delay or
suspension is in effect after receiving notice of such delay or suspension and
(ii) use commercially reasonable efforts to deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in the
Participating Holders' possession, of the prospectus relating to Qualifying
Shares current at the time of receipt of such notice

 

4. Registration Expenses. All expenses incident to the filing of any Piggyback
Registration and to the Company's performance of or compliance with this
Agreement (all such expenses being herein called “Registration Expenses”) will
be borne or paid by the Company, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, printing expenses, messenger and delivery expenses, fees and disbursements
of custodians, fees and disbursements of counsel for the Company, and all
independent certified public accountants, underwriters (excluding discounts and
commissions), and other Persons retained by the Company, including, without
limitation, the Company's internal expenses (e.g., salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or, if none are so listed, on a
securities exchange. The Company will not be responsible for any discounts,
commissions, transfer taxes or other similar fees incurred by the Holders in
connection with the sale of the Qualifying Shares.

 

D-4

 

 

 

5. Indemnification.

 

(a) The Company agrees to indemnify and hold harmless, to the full extent
permitted by law, each of the Participating Holders, severally and not jointly,
their respective officers, directors, members, agents, and employees and each
Person who controls the Holders (within the meaning of the Securities Act)
against any and all losses, claims, damages, liabilities, joint or several,
together with reasonable costs and expenses (including reasonable attorney's
fees), to which such indemnified party may become subject under the Securities
Act or otherwise, insofar as such losses, claims, damages, or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof)
arise out of, are based upon, are caused by, or result from (i) any untrue or
alleged untrue statement of material fact contained (A) in any registration
statement, prospectus, or preliminary prospectus or any amendment thereof or
supplement thereto, or (B) in any application or other document or communication
(in this Section 5 collectively called an “application”) executed by or on
behalf of the Company or based upon written information furnished by or on
behalf of the Company filed in any jurisdiction in order to qualify any
securities covered by such registration statement under the “blue sky” or
securities laws thereof, or (ii) any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and the Company will reimburse the Holders and each such
director, officer, member, agent and employee for any legal or any other
expenses incurred by them in connection with investigating or defending any such
loss, claim, liability, action, or proceeding; except that the Company will not
be liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof), or expense arises out
of, is based upon, is caused by, or results from an untrue statement or alleged
untrue statement, or omission or alleged omission, made in such registration
statement, any such prospectus or preliminary prospectus or any amendment or
supplement thereto, or in any application, in reliance upon, and in conformity
with, written information prepared and furnished to the Company by a
Participating Holder or other indemnified party expressly for use therein or by
any Participating Holder’s failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto after the
Company has furnished the Holders with a sufficient number of copies of the
same.

 

(b) In connection with any registration statement in which the Participating
Holders are participating, each Participating Holder will furnish to the Company
in writing such information and affidavits as the Company reasonably requests
for use in connection with any such registration statement or prospectus and, to
the full extent permitted by law, will, severally and not jointly, indemnify and
hold harmless the Company, and its directors, officers, members, agents, and
employees and each other Person who controls the Company (within the meaning of
the Securities Act) against any losses, claims, damages, liabilities, together
with reasonable costs and expenses (including reasonable attorneys’ fees), to
which such indemnified party may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
or proceedings, whether commenced or threatened, in respect thereof) arise out
of, are based upon, are caused by, or result from (i) any untrue or alleged
untrue statement of material fact contained in the registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto or in any application, or (ii) any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but only to the extent that such untrue statement or
omission is made in such registration statement, any such prospectus or
preliminary prospectus or any amendment or supplement thereto, or in any
application, in reliance upon and in conformity with written information
prepared and furnished to the Company by such Holder expressly for use therein.
Any Person entitled to indemnification hereunder will (i) give prompt written
notice to the indemnifying party of any claim with respect to which it seeks
indemnification (except that the failure to give prompt notice will not impair
any Person's right to indemnification hereunder to the extent such failure has
not prejudiced the indemnifying party), and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld, conditioned or delayed). An indemnifying party who is not
entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim.

 

D-5

 

 

 

(c) The indemnifying party will not, except with the approval of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to each indemnified party of a release from all liability
in respect to such claim or litigation without any payment or consideration
provided by such indemnified party.

 

(d) If the indemnification provided for in this Section 5 is unavailable to, or
is insufficient to hold harmless, an indemnified party under the provisions
above in respect to any losses, claims, damages, or liabilities referred to
therein, then each indemnifying party will contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
or liabilities in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and of the Holder and any other sellers
participating in the registration statement on the other hand in connection with
the registration statement on the other in connection with the statement or
omissions which resulted in such losses, claims, damages, or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the Holder and any other sellers participating in
the registration statement on the other hand will be determined by reference to,
among other things, whether the untrue or alleged omission to state a material
fact relates to information supplied by or relating to the Company or whether it
relates to information supplied by or relating to the Holder or other sellers
participating in the registration statement and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.

 

(e) The Company and the Participating Holders agree that it would not be just
and equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, and liabilities referred to in the immediately
preceding paragraph will be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) will be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.

 

(f) The indemnification and contribution by any such party provided for under
this Agreement will be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or contract
and will remain in full force and effect regardless of any investigation made or
omitted by or on behalf of the indemnified party or any officer, director,
employee or controlling Person of such indemnified party and will survive the
transfer of securities.

 

D-6

 

 

 

6. Participation in Underwritten Registrations.

 

(a) No Person may participate in any registration hereunder which is
underwritten unless such Person (i) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements (including, without
limitation, pursuant to the terms of any over-allotment or “green shoe” option
requested by the managing underwriter(s); except that a Participating Holder
will not be required to sell more than the number of Qualifying Shares that the
Participating Holder has requested the Company to include in any registration),
and (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements, and other documents reasonably required
under the terms of such underwriting arrangements.

 

(b) Each Person that is participating in any registration hereunder agrees that,
upon receipt of any notice from the Company of the initiation of a Suspension
Period, such Person will forthwith discontinue the disposition of its Qualifying
Shares pursuant to the registration statement until such Person's receipt of the
copies of a supplemented or amended prospectus.

 

7. Definitions.

 

“Board” means the board of directors of the Company.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any
successor federal statute, and the rules and regulations promulgated thereunder,
all as amended, modified or supplemented from time to time.

 

“Holder” means Zvi Yaniv and/or his heirs or personal representatives.

 

“Holders’ Representative” means the person designated from time to time by the
Participating Holders or, as to a particular registration statement, the person
designated by those Participating Holders. The Company will only recognize one
Holders’ Representative at any time. Until the Company is notified otherwise,
the Holders Representative is Yaniv.

 

“Participating Holder” means any Holder who has elected to have Qualified Shares
included in any registration under this Agreement.

 

“Person” means an individual, a corporation, a limited liability company, an
association, a joint-stock company, a business trust or other similar
organization, a partnership, a joint venture, a trust, an unincorporated
organization or a government or any agency, instrumentality or political
subdivision thereof.

 

D-7

 

 

 

“Qualifying Shares” means any of the Holder Stock with respect to which all
forfeiture restrictions have expired in accordance with the applicable
Restricted Stock Agreement.

 

“Securities Act” means the Securities Act of 1933, as amended, or any successor
federal statute, and the rules and regulations promulgated thereunder, all as
amended, modified or supplemented from time to time.

 

“Suspension Period” has the meaning set forth in Section 3(b).

 

8. Miscellaneous.

 

(a) Amendment and Waiver. No modification, amendment, or waiver of any provision
of this Agreement will be effective unless such modification, amendment, or
waiver is approved in writing by the parties. The failure of any party to
enforce any of the provisions of this Agreement will in no way be construed as a
waiver of such provisions and will not affect the right of such party thereafter
to enforce each and every provision of this Agreement in accordance with its
terms.

 

(b) Severability. Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal, or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed, and enforced in such jurisdiction as if such invalid,
illegal, or unenforceable provision had never been contained herein.

 

(c) Entire Agreement. Except as otherwise expressly set forth herein, this
Agreement is the complete agreement and understanding among the parties related
to the subject matter hereof.

 

(d) Successors and Assigns. Neither party may assign this Agreement without the
consent of the other party. Subject to the foregoing, all of the terms and
provisions of this Agreement will inure to the benefit of and be binding upon
the parties hereto and their respective executors, heirs, personal
representatives, successors and assigns.

 

(e) Counterparts. This Agreement may be executed in any number of counterparts
and delivered via facsimile or attachment to electronic mail, each of which when
executed and delivered will be deemed to be an original and all of which
counterparts taken together will constitute but one and the same instrument.

 

(f) Remedies. Any Person having rights under any provision of this Agreement
will be entitled to enforce their rights under this Agreement specifically to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights existing in their favor; except that the parties
hereto stipulate that the remedies at law of any party hereto in the event of
any default or threatened default by any other party hereto in the performance
of or compliance with the terms hereof are not and will not be adequate and
that, to the fullest extent permitted by law, such terms may be specifically
enforced (without posting a bond or other security) by a decree for the specific
performance thereof, whether by an injunction against violation thereof or
otherwise.

 

D-8

 

 

 

(g) Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder will be in writing and
will be deemed given (i) on the date established by the sender as having been
delivered personally, (ii) on the date delivered by a private courier as
established by the sender by evidence obtained from the courier, or (iii) on the
seventh day after the date mailed return receipt requested, postage prepaid with
a confirming e-mail or phone call made when the notice is sent. Such
communications, to be valid, must be addressed as follows:

 

If to the Holders, to:

 

_________________________

 

_________________________

 

_________________________

 

 

If to the Company, to:

 

 

PEN, Inc.

9 Diamond Drive

Key West, FL 33040

Attn: Jeanne Rickert, General Counsel

 

 

With a copy to:

 

 

Laura Anthony, Esq.

Legal & Compliance LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

 

 

or to such other address or to the attention of such person or persons as the
recipient party has specified by prior written notice to the sending party (or
in the case of counsel, to such other readily ascertainable business address as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above will control.

 

(h) Governing Law. This Agreement will be governed by and interpreted and
enforced in accordance with the Laws of the State of New York, without giving
effect to any choice of Law or conflict of Laws rules or provisions that would
cause the application of the Laws of any jurisdiction other than the State of
New York.

 

(i) Consent to Jurisdiction. Each party irrevocably submits to the jurisdiction
of (i) the State of New York, and (ii) the United States District Court for the
Eastern District of New York, for the purposes of any action arising out of this
Agreement or any transaction contemplated hereby. Each party agrees to commence
any such action either in the United States District Court for the Eastern
District of New York or, if such action may not be brought in such court for
jurisdictional reasons, in the state courts of the State of New York. Each party
further agrees that service of any process, summons, notice or document by U.S.
registered mail to such party’s respective address set forth above will be
effective service of process for any action in the State of New York with
respect to any matters to which it has submitted to jurisdiction in this Section
8(i). Each party irrevocably and unconditionally waives any objection to the
laying of venue of any action arising out of this Agreement or the transactions
contemplated hereby in New York, New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action brought in any such court has been brought in an inconvenient
forum. EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF AND THEREOF.

 

D-9

 

 

 

(j) No Strict Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties hereto to express their mutual intent,
and no rule of strict construction will be applied against any party.

 

(k) Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or legal holiday in the
state in which the Company's chief executive office is located, the time period
will automatically be extended to the business day immediately following such
Saturday, Sunday or legal holiday.

 

 

 

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D-10

 

IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights
Agreement on the day and year first above written.

 

 

PEN Inc.

 

By: ______________________

     Scott E Rickert, Chief Executive Officer

 

 

 

 

 

Zvi Yaniv

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D-11