Exhibit 10.5

 

Piggyback Registration Rights Agreement

 

 

This is the Piggyback Registration Rights Agreement dated March 10, 2014 by and
between Applied Nanotech Holdings, Inc., a Texas corporation (the “Company”) and
Douglas Baker, an individual. Terms used with initial capital letters are used
as defined in Section 7 of this Agreement.

 

Background

 

Baker is acquiring on the date of this Agreement a Promissory Note that APNT
may, at its option pay in stock, and he is entering into a Stock Grant Agreement
under which he can receive additional shares of stock. The Company is granting
him certain rights to register stock received under the Promissory Note or the
Stock Grant Agreement (“Qualifying Shares”) when the Company is registering
shares with the Securities Exchange Commission (“SEC”).

 

Agreement

 

Baker 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
therein 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 Qualified Holders and 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.

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(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 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 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
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 such 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 sales 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;

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(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 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

 

(vii) cooperate with the 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.

 

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(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
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.

 

5. Indemnification.

 

(a) The Company agrees to indemnify and hold harmless, to the full extent
permitted by law, each of the 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 Holder or other
indemnified party expressly for use therein or by any 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.

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(b) In connection with any registration statement in which the Holders are
participating, each 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, 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 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.

 

(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.

 

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(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 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.

 

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 Holder will not be
required to sell more than the number of Holders Qualifying Shares that the
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.

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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.

 

“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.

 

“Qualifying Shares” has the meaning set forth in the Background section

 

“Holders’ Representative” means the person designated from time to time by the
Holders of Qualifying Shares or, as to a particular registration statement that
includes Qualifying Shares, the person designated by those Holders who have
Qualifying Shares included in the registration statement. The Company will only
recognize one Holders’ Representative at any time. Until the Company is notified
otherwise, the Holders Representative is Baker.

 

“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.

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(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.

 

(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:

Douglas P. Baker

5154 Springdale Court

Clarkston, MI 48348

 

If to the Company, to:

 

Applied Nanotech Holdings, Inc.

c/o 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.

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(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
Southern 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
Southern 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 the State of 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.

 

(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.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

 

 

  Applied Nanotech Holdings Inc.       By: /s/ Robert Ronstadt        Robert
Ronstadt, Chairman       /s/ Doug Baker   Doug Baker

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Registration Rights Agreement]

 

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