EXHIBIT 4.6


 


 





Securities
Purchase Agreement


 


This
Securities Purchase Agreement, dated as of January 23, 2013 (this “Agreement”), is entered into by and
between Applied Nanotech Holdings, Inc., a Texas corporation (the “Company”),
and Tonaquint, Inc., a Utah corporation, its successors and/or assigns (“Buyer”).


 


RECITALS:


 


A.       The
Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration for
offers and sales to accredited investors afforded, inter alia, under Regulation D (“Regulation D”) as promulgated
by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended
(the “1933 Act”), and/or Section 4(2) of the 1933 Act.


 


B.       The
Buyer wishes to acquire from the Company, and the Company desires to issue and sell to the Buyer, the Note (as defined below),
which Note will be convertible into shares of common stock of the Company, par value $0.001 per share (the “Common Stock”);
and the Warrant (as defined below), upon the terms and subject to the conditions of the Note, the Warrant, this Agreement and the
other Transaction Documents (as defined below).


 


NOW THEREFORE, in consideration
of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:


 


1.       CERTAIN
DEFINITIONS. As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:


 


“Affiliate”
means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled
by or is under common control with such specified Person.


 


“Buyer’s
Counsel” means Hansen Black Anderson PLLC.


 


“Buyer Control
Person” means each manager, executive officer, promoter, and such other Persons as may be deemed in control of the Buyer
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act (as defined below).


 


“Certificate
of Incorporation” means the certificate of incorporation, articles of incorporation or other charter document (howsoever
denominated) of the Company, as amended to date.


 


“Closing Date”
means the date of the closing of the purchase and sale of the Securities.


 


“Company Control
Person” means each director, executive officer, promoter, and such other Persons as may be deemed in control of the Company
pursuant to Rule 405 under the 1933 Act or Section 20 of the 1934 Act.


 


“Company Counsel”
means Don Locke.


 


“Company’s
SEC Documents” means the Company’s filings on the SEC’s EDGAR system.


 


“Conversion
Date” means the date a Holder submits a Conversion Notice, as provided in the Note.


 




    	1



    	 



    

 


 


“Conversion
Notice” has the meaning ascribed to it in the Note.


 


“Conversion
Price” has the meaning ascribed to it in the Note.


 


“Conversion
Shares” has the meaning ascribed to it in the Note.


 


“Delivery
Date” means (a) the date that Conversion Shares are required to be delivered to Holder under Section 3 or Section 8 of
the Note, as applicable, or (b) the date Delivery Shares are required to be delivered to the Holder under the Warrant, as applicable.


 


“Delivery
Shares” has the meaning ascribed to it in the Warrant.


 


“DTC”
means the Depository Trust Company.


 


“DTC/FAST
Program” means the DTC’s Fast Automated Securities Transfer Program.


 


“DWAC”
means Deposit Withdrawal at Custodian as defined by the DTC.


 


“DWAC Eligible
Conditions” means that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational
Arrangements, including without limitation transfer through DTC’s DWAC system, (b) the Company has been approved (without
revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program,
(d) the Conversion Shares are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting
or limiting delivery of the Conversion Shares via DWAC.


 


“Exercise
Price” has the meaning ascribed to it in the Warrant.


 


“Holder”
means the Person holding the relevant Securities at the relevant time.


 


“Last Audited
Date” means December 31, 2011.


 


“Market Price”
has the meaning ascribed to it in the Note.


 


“Material
Adverse Effect” means an event or combination of events, which individually or in the aggregate, would reasonably be
expected to (a) adversely affect the legality, validity or enforceability of the Note, the Warrant, or any of the other Transaction
Documents, (b) have or result in a material adverse effect on the results of operations, assets, or financial condition of the
Company and its Subsidiaries, taken as a whole, or (c) adversely impair the Company’s ability to perform fully on a timely
basis its material obligations under any of the Transaction Documents or the transactions contemplated thereby.


 


“Maturity
Date” has the meaning ascribed to it in the Note.


 


“Notice of
Exercise” has the meaning ascribed to it in the Warrant.


 


“Outstanding
Balance” has the meaning ascribed to it in the Note.


 


“Permitted
Liens” means (a) any Lien (as defined herein) for taxes not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (b) any statutory Lien arising
in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (c) any Lien
created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the
ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith
by appropriate proceedings, and (d) any liens existing as of the Closing Date.


 




    	2



    	 



    

 


 


“Person”
means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.


 


“Principal
Trading Market” means (a) the NYSE Amex, (b) the New York Stock Exchange, (c) the Nasdaq Global Market, (d) the Nasdaq
Capital Market, (e) the OTC Bulletin Board, (f) the OTCQX or OTCQB, or (g) such other market on which the Common Stock is principally
traded at the relevant time, but shall not include OTC Pink (a.k.a., “pink sheets”).


 


“Purchase
Price” is defined in Section 2.1(a) hereof.


 


“Registration
Statement” means a registration statement of the Company under the 1933 Act covering securities of the Company (including
Common Stock) on Form S-3, if the Company is then eligible to file using such form, and if not eligible, on Form S-1 or other appropriate
form.


 


“Rule 144”
means (a) Rule 144 promulgated under the 1933 Act or (b) any other similar rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration under the 1933 Act.


 


“Securities”
means the Note, the Warrant and the Shares.       


 


“Shares”
means the shares of Common Stock representing any or all of the Conversion Shares and the Warrant Shares.


 


“State of
Incorporation” means Texas.


 


“Subsidiary”
or “Subsidiaries” means, as of the relevant date, any subsidiary or subsidiaries of the Company (whether or
not included in the Company’s SEC Documents) whether now existing or hereafter acquired or created.


 


“Trading Day”
means any day during which the Principal Trading Market shall be open for business.


 


“Transaction
Documents” means this Agreement, the Note, the Transfer Agent Letter (defined below), the Warrant, and all other certificates
(including without limitation the Secretary’s Certificate (defined below)), documents, agreements, resolutions and instruments
delivered to any party under or in connection with this Agreement, as the same may be amended from time to time.


 


“Transfer
Agent” means, at any time, the transfer agent for the Common Stock.


 


“Warrant Shares”
means the shares of Common Stock issuable upon exercise of the Warrant.


 


“Wire Instructions”
means the wire instructions for the Purchase Price, as provided by the Company, set forth on ANNEX I.


 




    	3



    	 



    

 


 


2.       AGREEMENT
TO PURCHASE; PURCHASE PRICE.


 


2.1.       Purchase.


 


(a)       Subject
to the terms and conditions of this Agreement and the other Transaction Documents, the undersigned Buyer hereby agrees
to purchase from the Company a Convertible Promissory Note in the principal amount of $225,000.00 substantially in the
form attached hereto as ANNEX II (the “Note”). In consideration thereof, the Buyer shall pay
$200,000.00 (the “Purchase Price”) to the Company. The Purchase Price shall be paid to the Company at
Closing (defined below) in accordance with the Wire Instructions.  


 


(b)       In
consideration for the Purchase Price, the Company shall, at the Closing (defined below):


 


(i)       execute
and deliver to the Buyer that certain Warrant to Purchase Shares of Common Stock substantially in the form attached hereto as
ANNEX III (the “Warrant”);


 


(ii)       execute
and deliver to the Transfer Agent, and the Transfer Agent shall execute to indicate its acceptance thereof, the irrevocable letter
of instructions to transfer agent substantially in the form attached hereto as ANNEX IV (the “Transfer Agent
Letter”);


 


(iii)       cause
to be executed and delivered to the Buyer a fully executed secretary’s certificate evidencing the Company’s
approval of the Transaction Documents substantially in the form attached hereto as ANNEX V (the
“Secretary’s Certificate”); and


 


(iv)       cause
to be executed and delivered to the Buyer a fully executed share issuance resolution to be delivered to the Transfer Agent substantially
in the form attached hereto as ANNEX VI (the “Share Issuance Resolution”).


 


(c)       At
the Closing, the Buyer shall deliver to the Company the Purchase Price.


 


2.2.       Form
of Payment; Delivery of Securities. The purchase and sale of the Securities shall take place at a closing (the “Closing”)
to be held at the offices of the Buyer on the Closing Date. At the Closing, the Company will deliver the Transaction Documents
to the Buyer against delivery by the Buyer to the Company of the Purchase Price.


 


2.3.       Purchase
Price. The Note carries an original issue discount of $20,000.00 (the “OID”). In addition, the Company agrees
to pay $7,500.00 to the Buyer to cover the Buyer’s legal fees, accounting costs, due diligence, monitoring and other transaction
costs incurred in connection with the purchase and sale of the Securities (the “Transaction Expense Amount”),
$2,500 of which has been previously paid to the Buyer and the remaining $5,000.00 of which is included in the initial principal
balance of the Note (the “Carried Transaction Expense Amount”). The Purchase Price, therefore, shall be $200,000.00,
computed as follows: $225,000.00 original principal balance, less the OID, less the Carried Transaction Expense Amount.


 




    	4



    	 



    

 


 


3.       BUYER
REPRESENTATIONS AND WARRANTIES. The Buyer represents and warrants to, and covenants and agrees with, the Company, as of the
date hereof and as of the Closing Date, as follows:


 


3.1.       Binding
Obligation. The Transaction Documents to which the Buyer is a party, and the transactions contemplated hereby and thereby,
have been duly and validly authorized by the Buyer. This Agreement has been executed and delivered by the Buyer, and this Agreement
is, and each of the other Transaction Documents to which the Buyer is a party, when executed and delivered by the Buyer (if necessary),
will be valid and binding obligations of the Buyer enforceable in accordance with their respective terms, subject as to enforceability
only to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement
of creditors’ rights generally.


 


3.2.       Accredited
Investor Status. The Buyer is an “accredited investor” as that term is defined in Regulation D.


 


4.       COMPANY
REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Buyer as of the date hereof and as of the Closing
Date that:


 


4.1.       Rights
of Others Affecting the Transactions. There are no preemptive rights of any stockholder of the Company, as such, to acquire
the Securities. No other party has a currently exercisable right of first refusal which would be applicable to any or all of the
transactions contemplated by the Transaction Documents.


 


4.2.       Status.
The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Incorporation
and has the requisite corporate power to own its properties and to carry on its business as now being conducted. The Company is
duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction where the nature of the business
conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so
qualify would not have or result in a Material Adverse Effect. The Company has registered its stock under Section 12(g) of
the Securities Exchange Act of 1934, as amended (the “1934 Act”), and is obligated to file reports pursuant
to Section 13 or Section 15(d) of the 1934 Act. The Company has not taken and will not take any action designed to terminate,
or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the 1934 Act,
nor has the Company received any notification that the SEC is contemplating terminating such registration. The Common Stock is
quoted on the Principal Trading Market. The Company has received no notice, either oral or written, with respect to the continued
eligibility of the Common Stock for quotation on the Principal Trading Market, and the Company has maintained all requirements
on its part for the continuation of such quotation. The Company has not, in the twelve (12) months preceding the date hereof, received
notice from the Principal Trading Market on which the Common Stock is or has been listed or quoted to the effect that the Company
is not in compliance with the listing or maintenance requirements of such Principal Trading Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance
requirements.


 


4.3.       Authorized
Shares.


 


(a)       The
authorized capital stock of the Company consists of 2,000,000 shares of preferred stock, $1 par value per share, no shares of which
have been issued, and 160,000,000 shares of Common Stock, $0.001 par value per share, of which approximately 119,675,372 are outstanding
as of October 31, 2012. Of the outstanding shares of Common Stock, approximately 7.4 million shares are beneficially owned by Affiliates
of the Company.


 


(b)       Other
than as set forth in the Company’s SEC Documents, there are no outstanding securities which are convertible into or exchangeable
for shares of Common Stock, whether such conversion is currently exercisable or exercisable only upon some future date or the occurrence
of some event in the future.


 




    	5



    	 



    

 


 


(c)       All
issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable.
After considering all other commitments that may require the issuance of Common Stock, the Company has sufficient authorized and
unissued shares of Common Stock as may be necessary to effect the issuance of the Shares on the Closing Date, were (i) the Note
issued and fully converted on that date and (ii) the Warrant issued and fully exercised on that date.


 


(d)       The
Shares have been duly authorized by all necessary corporate action on the part of the Company as of or prior to the Closing in
accordance with the terms of this Agreement, and, when issued on conversion of, or in payment of interest on the Note in accordance
with the terms thereof, or upon exercise of the Warrant in accordance with the terms thereof, as applicable, will have been duly
and validly issued, fully paid and non-assessable, free from all taxes, liens, claims, pledges, mortgages, restrictions, obligations,
security interests and encumbrances of any kind, nature and description, and will not subject the Holder thereof to personal liability
by reason of being a Holder.


 


(e)       The
Conversion Shares and Warrant Shares are enforceable against the Company and the Company presently has no claims or defenses of
any nature whatsoever with respect to the Conversion Shares or the Warrant Shares.


 


4.4.       Transaction
Documents and Stock. This Agreement and each of the other Transaction Documents, and the transactions contemplated hereby and
thereby, have been duly and validly authorized by the Company. This Agreement has been duly executed and delivered by the Company
and this Agreement is, and the Note, the Warrant, and each of the other Transaction Documents, when executed and delivered by the
Company, will be, valid and binding obligations of the Company enforceable in accordance with their respective terms, subject as
to enforceability only to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting
the enforcement of creditors’ rights generally.


 


4.5.       Non-contravention.
The execution and delivery of this Agreement and each of the other Transaction Documents by the Company, the issuance of the Securities
in accordance with the terms hereof and thereof, and the consummation by the Company of the other transactions contemplated by
this Agreement, the Note, the Warrant, and the other Transaction Documents do not and will not conflict with or result in a breach
by the Company of any of the terms or provisions of, or constitute a default under (a) the Certificate of Incorporation or bylaws
of the Company, each as currently in effect, (b) any indenture, mortgage, deed of trust, or other material agreement or instrument
to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for
the Common Stock except as herein set forth, or (c) to the Company’s knowledge, any existing applicable law, rule, or regulation
or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency,
or other governmental body having jurisdiction over the Company or any of the Company’s properties or assets, except such
conflict, breach or default which would not have or result in a Material Adverse Effect.


 


4.6.       Approvals.
No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock
exchange or market or the stockholders or any lender of the Company is required to be obtained by the Company for the issuance
and sale of the Securities to the Buyer as contemplated by this Agreement, except such authorizations, approvals and consents that
have been obtained.


 




    	6



    	 



    

 


 


4.7.       Filings;
Financial Statements. None of the Company’s SEC Documents contained, at the time they were filed, any untrue statement
of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not misleading. The Company has filed all reports, schedules,
forms, statements and other documents required to be filed by the Company with the SEC under the 1934 Act on a timely basis or
has received a valid extension of such time of filing and has filed any such report, schedule, form, statement or other document
prior to the expiration of any such extension. As of their respective dates, the financial statements of the Company included in
the Company’s SEC Documents complied as to form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the periods involved (except (a) as may be otherwise indicated
in such financial statements or the notes thereto, or (b) in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to
the Buyer which is not included in the Company’s SEC Documents, including, without limitation, information referred to in
this Agreement, contains any untrue statement of a material fact or omits to state any material fact necessary in order to make
the statements therein, in the light of the circumstance under which they are or were made, not misleading.


 


4.8.       Absence
of Certain Changes. Since the Last Audited Date, there has been no Material Adverse Effect. Since the Last Audited Date, the
Company has not (a) incurred or become subject to any material liabilities (absolute or contingent) except liabilities incurred
in the ordinary course of business consistent with past practices; (b) discharged or satisfied any material lien or encumbrance
or paid any material obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course
of business consistent with past practices; (c) declared or made any payment or distribution of cash or other property to stockholders
with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital
stock; (d) sold, assigned or transferred any other material tangible assets, or canceled any material debts owed to the Company
by any third party or material claims of the Company against any third party, except in the ordinary course of business consistent
with past practices; (e) waived any rights of material value, whether or not in the ordinary course of business, or suffered the
loss of any material amount of existing business; (f) made any increases in employee compensation, except in the ordinary course
of business consistent with past practices; or (g) experienced any material problems with labor or management in connection with
the terms and conditions of their employment.


 


4.9.       Full
Disclosure. There is no fact known to the Company or that the Company should know after having made all reasonable inquiries
(other than conditions known to the public generally or as disclosed in the Company’s SEC Documents since the Last Audited
Date) that has not been disclosed in writing to the Buyer that would reasonably be expected to have or result in a Material Adverse
Effect.


 


4.10.       Absence
of Litigation. Unless disclosed in the Company’s SEC Documents, there is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company
before or by any governmental authority or non-governmental department, commission, board, bureau, agency or instrumentality or
any other person, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely
affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the
Transaction Documents. The Company is not aware of any valid basis for any such claim that (either individually or in the aggregate
with all other such events and circumstances) could reasonably be expected to have a Material Adverse Effect. There are no outstanding
or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to which the Company is a party or by which the Company
or any of its properties is bound, that involve the transactions contemplated herein or that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect.


 




    	7



    	 



    

 


 


4.11.       Absence
of Events of Default. Neither the Company nor any of its Subsidiaries is in violation of or in default with respect to (a)
its Certificate of Incorporation or bylaws or other organizational documents, each as currently in effect, or any material judgment,
order, writ, decree, statute, rule or regulation applicable to such entity; or (b) any material mortgage, indenture, agreement,
instrument or contract to which such entity is a party or by which it or any of its properties or assets are bound (nor is there
any waiver in effect which, if not in effect, would result in such a violation or default), except such breach or default which
would not have or result in a Material Adverse Effect.


 


4.12.       Absence
of Certain Company Control Person Actions or Events. Except as set forth on SCHEDULE 4.12 attached hereto, none of the following
has occurred during the past five (5) years with respect to a Company Control Person:


 


(a)       A
petition under the federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or
similar officer was appointed by a court for the business or property of such Company Control Person, or any partnership in which
he or she was a general partner at or within two (2) years before the time of such filing, or any corporation or business association
of which he or she was an executive officer at or within two (2) years before the time of such filing;


 


(b)       Such
Company Control Person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding
traffic violations and other minor offenses);


 


(c)       Such
Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any
court of competent jurisdiction, permanently or temporarily enjoining him or her from, or otherwise limiting, the following activities:


 


(i)       acting,
as an investment advisor, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, as a futures commission merchant, introducing broker,
commodity trading advisor, commodity pool operator, floor broker, any other Person regulated by the Commodity Futures Trading Commission
(“CFTC”) or engaging in or continuing any conduct or practice in connection with such activity;


 


(ii)       engaging
in any type of business practice; or


 


(iii)       engaging
in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of federal
or state securities laws or federal commodities laws;


 


(d)       Such
Company Control Person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any
federal or state authority barring, suspending or otherwise limiting for more than sixty (60) calendar days the right of such Company
Control Person to engage in any activity described in Section Error! Reference source not found. above, or to be associated
with Persons engaged in any such activity; or


 




    	8



    	 



    

 


 


(e)       Such
Company Control Person was found by a court of competent jurisdiction in a civil action or by the CFTC or SEC to have violated
any federal or state securities law, and the judgment in such civil action or finding by the CFTC or SEC has not been subsequently
reversed, suspended, or vacated.


 


4.13.       No
Undisclosed Liabilities or Events. The Company has no liabilities or obligations other than those disclosed in the Transaction
Documents or the Company’s most recently filed SEC Documents (Form 10-K or 10-Q) or those incurred in the ordinary course
of the Company’s business since the Last Audited Date, or which individually or in the aggregate, do not or would not have
a Material Adverse Effect. No event or circumstance has occurred or exists with respect to the Company or its properties, business,
operations, condition (financial or otherwise), or results of operations, which, under applicable laws, rules or regulations, requires
public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed.
There are no proposals currently under consideration or currently anticipated to be under consideration by the Board of Directors
or the executive officers of the Company which proposal would (a) change the Certificate of Incorporation or bylaws of the Company,
each as currently in effect, with or without stockholder approval, which change would reduce or otherwise adversely affect the
rights and powers of the stockholders of the Common Stock, or (b) materially or substantially change the business, assets or capital
of the Company, including its interests in Subsidiaries, other than as publicly disclosed.


 


4.14.       No
Integrated Offering. Neither the Company nor any of its Affiliates nor any Person acting on its or their behalf has, directly
or indirectly, made any offer or sale of any security of the Company or solicited any offer to buy any such security under circumstances
that would eliminate the availability of the exemption from registration under Regulation D in connection with the offer and sale
of the Securities as contemplated hereby.


 


4.15.       Dilution.
Each of the Company and its executive officers and directors is aware that the number of shares of Common Stock issuable upon the
execution of this Agreement, the conversion of the Note and exercise of the Warrant, or pursuant to the other terms of the Transaction
Documents may have a dilutive effect on the ownership interests of the other stockholders (and Persons having the right to become
stockholders) of the Company. The Company specifically acknowledges that its obligations to issue (a) the Conversion Shares upon
a conversion of the Note, and (b) the Warrant Shares upon an exercise of the Warrant, are binding upon the Company and enforceable
regardless of the dilution such issuances may have on the ownership interests of other stockholders of the Company, and the Company
will honor such obligations, including honoring every Conversion Notice and Notice of Exercise, unless the Company is subject to
an injunction (which injunction was not sought by the Company or any of its directors or executive officers) prohibiting the Company
from doing so.


 


4.16.       Fees
to Brokers, Placement Agents and Others. The Company is solely responsible for paying all amounts required to be paid to LMN
Ventures, Inc. and Echelon Growth Partners, LLC in connection with the execution of this Agreement and the consummation of the
transactions contemplated hereby (the “Commission”). The Company has taken no action which would give rise to
any claim by any Person for a brokerage commission, placement agent or finder’s fees or similar payments by the Buyer relating
to this Agreement or the transactions contemplated hereby. Except for such fees arising as a result of any agreement or arrangement
entered into by the Buyer without the knowledge of the Company (a “Buyer’s Fee”), the Buyer shall have
no obligation with respect to such fees or with respect to any claims made by or on behalf of other Persons for fees of a type
contemplated in this subsection that may be due in connection with the transactions contemplated hereby. The Company shall indemnify
and hold harmless each of the Buyer, Buyer’s employees, officers, directors, stockholders, managers, agents, and partners,
and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorneys’
fees) and expenses suffered in respect of any such claimed or existing fees (other than a Buyer’s Fee, if any).


 




    	9



    	 



    

 


 


4.17.       Disclosure.
All information relating to or concerning the Company or its Subsidiaries set forth in the Transaction Documents or in the Company’s
SEC Documents or other public filings provided by or on behalf of the Company to the Buyer is true and correct in all material
respects and the Company has not omitted to state any material fact necessary in order to make the statements made, in light of
the circumstances under which they were made, not misleading. No event or circumstance has occurred or exists with respect to the
Company or its Subsidiaries or any of their business, properties, prospects, operations or financial conditions, which under applicable
laws, rules or regulations, requires public disclosure or announcement by the Company or any such Subsidiary.


 


4.18.       Confirmation.
The Company agrees that, if, to the knowledge of the Company, any events occur or circumstances exist prior to the payment of the
Purchase Price by the Buyer to the Company which would make any of the Company’s representations or warranties set forth
herein materially untrue or materially inaccurate as of such date, the Company shall immediately notify the Buyer in writing prior
to such date of such events or circumstances, specifying which representations or warranties are affected and the reasons therefor.


 


4.19.       Title.
The Company and the Subsidiaries, if applicable, own and have good and marketable title in fee simple absolute to, or a valid leasehold
interest in, all their respective real properties and good title to their other respective assets and properties, subject to no
liens, claims or encumbrances except as have been disclosed to the Buyer, or in the Company’s SEC Documents.


 


4.20.       Intellectual
Property.


 


(a)       Ownership.
The Company owns or possesses or can obtain on commercially reasonable terms sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses (software or otherwise), information, know-how, inventions, discoveries,
published and unpublished works of authorship, processes and any and all other proprietary rights (“Intellectual Property”)
necessary to the business of the Company as presently conducted, the lack of which could reasonably be expected to have a Material
Adverse Effect. The Company has not received any written communication alleging that the Company has violated or, by conducting
its business as currently conducted, would violate any of the Intellectual Property of any other person or entity, nor is the Company
aware of any basis therefor.


 


(b)       No
Breach by Employees. The Company is not aware that any of its employees is obligated under any contract or other agreement,
or subject to any judgment, decree or order of any court or administrative agency, that would materially interfere with the use
of his or her efforts to promote the interests of the Company or that would conflict with the Company’s business as presently
conducted. Neither the execution nor delivery of this Agreement, nor the carrying on of the Company’s business by the employees
of the Company, nor the conduct of the Company’s business as presently conducted, will, to the Company’s knowledge,
conflict with or result in a breach of the terms, conditions or provisions of, or constitute a default under, any contract, covenant
or instrument under which any such employee is now obligated. The Company does not believe it is or will be necessary to use any
inventions of any of its employees made prior to their employment by the Company of which it is aware.


 




    	10



    	 



    

 


 


4.21.       No
Shell Company. The Company is not, nor has it ever been, the type of “issuer” defined in Rule 144(i)(1) under the
1933 Act (a “Shell Company”). The Company acknowledges and agrees that (a) it is essential to the Buyer that
the Buyer be able to sell Common Stock the Buyer receives under the Note or Warrant in reliance on Rule 144, (b) if the Company
were or ever had been a Shell Company, any Common Stock received by the Buyer under the Note or Warrant could not be sold in reliance
on Rule 144 (at least without satisfying additional conditions), and (c) Buyer is relying on the truth and accuracy of the Company’s
representation in the foregoing sentence and the availability of Rule 144 with respect to Buyer’s selling of Common Stock
in entering into this Agreement, purchasing the Note and receiving the Warrant.


 


4.22.       Environmental
Matters.


 


(a)       No
Violation. There are, to the Company’s knowledge, with respect to the Company or any of its Subsidiaries or any predecessor
of the Company, no past or present violations of Environmental Laws (as defined below), releases of any material into the environment,
actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common
law environmental liability or any liability under the Comprehensive Environmental Response, Compensation and Liability Act of
1980 or similar federal, state, local or foreign laws and neither the Company nor any of its Subsidiaries has received any notice
with respect to any of the foregoing, nor is any action pending or, to the Company’s knowledge, threatened in connection
with any of the foregoing. The term “Environmental Laws” means all federal, state, local or foreign laws relating
to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”)
into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.


 


(b)       No
Hazardous Materials. Other than those that are or were stored, used or disposed of in compliance with applicable law, no Hazardous
Materials are contained on or about any real property currently owned, leased or used by the Company or any of its Subsidiaries,
and no Hazardous Materials were released on or about any real property previously owned, leased or used by the Company or any
of its Subsidiaries during the period the property was owned, leased or used by the Company or any of its Subsidiaries, except
in the normal course of the Company’s or any of its Subsidiaries’ business.


 


(c)       No
Storage Tanks. There are no underground storage tanks on or under any real property owned, leased or used by the Company or
any of its Subsidiaries that are not in compliance with applicable law.


 


5.       CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.


 


5.1.       Covenants
and Acknowledgements of the Buyer.


 


(a)       Transfer
Restrictions. The Buyer acknowledges that (i) the Securities have not been and are not being registered under the provisions
of the 1933 Act and, except as included in an effective Registration Statement, the Shares have not been and are not being registered
under the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder, or (B) the Buyer shall have delivered
to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an exemption from registration under the 1933 Act;
(ii) any sale of the Securities made in reliance on Rule 144 may be made only in accordance with the terms of such Rule and further,
if such Rule is not applicable, any resale of such Securities under circumstances in which the seller, or the Person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other
exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) except as otherwise provided herein,
neither the Company nor any other Person is under any obligation to register the Securities under the 1933 Act or to comply with
the terms and conditions of any exemption thereunder.


 




    	11



    	 



    

 


 


(b)       Restrictive
Legend. The Buyer acknowledges and agrees that, until such time as the relevant Securities have been registered under the 1933
Act, and may be sold in accordance with an effective Registration Statement, or until such Securities can otherwise be sold without
restriction, whichever is earlier, the certificates and other instruments representing any of the Securities shall bear a restrictive
legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):


 


THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE CUSTOMARY
FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS OR OTHER EVIDENCE ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED,
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT. 


 





5.2.       Covenants,
Acknowledgements and Agreements of the Company. As a condition to the Buyer’s obligation to purchase the Securities contemplated
by this Agreement, and as a material inducement for the Buyer to enter into this Agreement and the other Transaction Documents,
until all of the Company’s obligations hereunder and the Note are paid and performed in full, or within the timeframes otherwise
specifically set forth below, the Company shall comply with the following covenants:


 


(a)       Filings.
From the date hereof until the date that is six (6) months after the Note is paid in full, the Company shall timely make all filings
required to be made by it under the 1933 Act, the 1934 Act, Rule 144 or any United States state securities laws and regulations
thereof applicable to the Company or by the rules and regulations of the Principal Trading Market, and such filings shall conform
to the requirements of applicable laws, regulations and government agencies, and, unless such filings are publicly available on
the SEC’s EDGAR system (via the SEC’s web site at no additional charge), the Company shall provide a copy thereof to
the Buyer promptly after such filings. To the extent required by applicable law, within four (4) Trading Days following the date
of this Agreement, the Company shall file a current report on Form 8-K describing the terms of the transactions contemplated by
the Transaction Documents in the form required by the 1934 Act and approved by the Buyer and attaching the material Transaction
Documents as exhibits to such filing. The Company shall further redact all confidential information from such Form 8-K. Additionally,
the Company shall furnish to the Buyer, so long as the Buyer owns any Securities, promptly upon request, (i) a written statement
by the Company that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of
the most recent annual or quarterly report of the Company, and (iii) such other information as may be reasonably requested to permit
the Buyer to sell such Securities pursuant to Rule 144 without registration.


 




    	12



    	 



    

 


 


(b)       Reporting
Status. So long as the Note is outstanding and for at least twenty (20) Trading Days thereafter, the Company shall file all
reports required to be filed with the SEC pursuant to Sections 13 or 15(d) of the 1934 Act, and shall take all reasonable
action under its control to ensure that adequate current public information with respect to the Company, as required in accordance
with Rule 144, is publicly available, and shall not terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such termination.


 


(c)       Listing.
The Common Stock shall be listed or quoted for trading on any of (i) the NYSE Amex, (ii) the New York Stock Exchange, (iii) the
Nasdaq Global Market, (iv) the Nasdaq Capital Market, (v) the OTC Bulletin Board, (vi) the OTCQX or (vii) the OTCQB. The Company
shall promptly secure the listing of all of the Conversion Shares and Warrant Shares upon each national securities exchange and
automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance) and shall
maintain such listing of all securities from time to time issuable under the terms of the Transaction Documents. The Company shall
comply in all material respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the
Principal Trading Market and/or the Financial Industry Regulatory Authority, Inc. (“FINRA”) or any successor
thereto, as the case may be, applicable to it at least through the date which is sixty (60) calendar days after the date on which
the Note has been converted or paid in full.


 


(d)       Use
of Proceeds. The Company shall use the net proceeds received hereunder only for working capital and general corporate purposes,
including without limitation payment of the Commission.


 


(e)       Publicity,
Filings, Releases, Etc. Neither party shall disseminate any information relating to the Transaction Documents or the transactions
contemplated thereby, including issuing any press releases, holding any press conferences or other forums, or filing any reports
(collectively, “Publicity”), without giving the other party reasonable advance notice and an opportunity to
comment on the contents thereof. Neither party will include in any such Publicity any statement or statements or other material
to which the other party reasonably objects, unless in the reasonable opinion of counsel to the party proposing such statement,
such statement is legally required to be included. In furtherance of the foregoing, the Company shall provide to the Buyer’s
Counsel a draft of the first current report on Form 8-K or a quarterly or annual report on Form 10-Q or 10-K, as the case may be,
intended to be made with the SEC which refers to the Transaction Documents or the transactions contemplated thereby as soon as
practicable (but at least two (2) Trading Days before such filing will be made) and shall not include in such filing (or any other
filing filed before then) any statement or statements or other material to which the Buyer reasonably objects, unless in the reasonable
opinion of counsel to the Company such statement is legally required to be included. Notwithstanding the foregoing, each of the
parties hereby consents to the inclusion of the text of the Transaction Documents in filings made with the SEC (but any descriptive
text accompanying or part of such filing shall be subject to the other provisions of this subsection).


 


(f)       FINRA
Rule 5110. In the event that the Corporate Financing Rule 5110 of FINRA is or becomes applicable to the transactions contemplated
by the Transaction Documents or to the sale by a Holder of any of the Securities, then the Company shall, to the extent required
by such rule, timely make any filings and cooperate with any broker or selling stockholder in respect of any consents, authorizations
or approvals that may be necessary for FINRA to timely and expeditiously permit the Holder to sell the Securities.


 




    	13



    	 



    

 


 


(g)       Keeping
of Records and Books of Account. The Company shall keep and cause each Subsidiary to keep adequate records and books of account,
in which complete entries shall be made in accordance with GAAP consistently applied, reflecting all financial transactions of
the Company and such Subsidiaries, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence,
amortization, taxes, bad debts and other purposes in connection with its business shall be made.


 


(h)       Corporate
Existence. The Company shall (i) do all things necessary to remain duly qualified and in good standing in each jurisdiction
in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification
necessary; (ii) preserve and keep in full force and effect all licenses or similar qualifications required by it to engage in its
business in all jurisdictions in which it is at the time so engaged; (iii) continue to engage in business of the same general type
as conducted as of the date hereof; and (iv) continue to conduct its business substantially as now conducted or as otherwise permitted
hereunder.


 


(i)       Taxes.
The Company shall pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits or in respect of its property before the same shall become delinquent or in default, which, if unpaid,
might reasonably be expected to give rise to liens or charges upon such properties or any part thereof, unless, in each case, the
validity or amount thereof is being contested in good faith by appropriate proceedings and the Company has maintained adequate
reserves with respect thereto in accordance with GAAP.


 


(j)       Compliance.
The Company shall comply in all material respects with all federal, state and local laws and regulations, orders, judgments, decrees,
injunctions, rules, regulations, permits, licenses, authorizations and requirements (collectively, “Requirements”)
of all governmental bodies, insurers, departments, commissions, boards, courts, authorities, officials or officers which are applicable
to the Company, its business, operations, or any of its properties, except where the failure to so comply would not have a Material
Adverse Effect; provided, however, that nothing provided herein shall prevent the Company from contesting in good faith
the validity or the application of any Requirements.


 


(k)       Litigation.
From and after the date hereof and until all of the Company’s obligations hereunder and the Note are paid and performed in
full, the Company shall notify the Buyer in writing, promptly upon learning thereof, of any litigation or administrative proceeding
commenced or threatened against the Company involving a claim in excess of $100,000.00.


 


(l)       Performance
of Obligations. The Company shall promptly and in a timely fashion perform and honor all demands, notices, requests and obligations
that exist or may arise under the Transaction Documents.


 


(m)       Failure
to Make Timely Filings. The Company agrees that if the Company fails to timely file on the SEC’s EDGAR system any information
required to be filed by it, whether on a Form 10-K, Form 10-Q, Form 8-K, Proxy Statement or otherwise so as to be deemed a “reporting
issuer” with current public information under the 1934 Act (such obligation to last only from the Closing Date through
the date that is the one-year anniversary thereof so long as the Company has never been a Shell Company), the Company shall be
liable to pay to the Holder, in addition to any other available remedies in the Transaction Documents or at law or in equity, an
amount based on the following schedule (where, for purposes of this subsection, “No. Trading Days Late” refers
to each Trading Day after the latest due date for the relevant filing):


 




    	14



    	 



    

 


 


 


 


	 	Late Filing Payment For 
	 	Each $10,000.00 of
	No. Trading Days Late	Outstanding Principal of the Note 
	 	 
	1	$100.00
	2	$200.00
	3	$300.00
	4	$400.00
	5	$500.00
	6	$600.00
	7	$700.00
	8	$800.00
	9	$900.00
	10	$1,000.00
	>10	$1,000.00 + $200.00 for each Trading Day late beyond 10


 





The Company shall pay any payments incurred
under this subsection in immediately available funds upon demand by the Holder; provided, however, that the Holder making
the demand may specify that the payment shall be made in shares of Common Stock at the Conversion Price applicable to the date
of such demand. If the payment is to be made in shares of Common Stock, such shares shall be considered Conversion Shares under
the Note, with the “Delivery Date” for such shares being determined from the date of such demand. The demand
for payment of such amount in shares of Common Stock shall be considered a “Conversion Notice” under the Note
(but the delivery of such shares shall be in payment of the amount contemplated by this subsection and not in payment of any principal
or interest on the Note).


 


(n)       Share
Reserve. In order to allow for, as of the relevant date of determination, the conversion of the entire Outstanding Balance
into Common Stock and the delivery of Warrant Shares necessary for a complete exercise of the Warrant, the Company shall take all
action necessary from time to time to reserve for the benefit of the Holder the number of authorized but unissued shares of Common
Stock equal to the amount calculated as follows (such calculated amount is referred to as the “Share Reserve”):
(i) three times the higher of (A) the Outstanding Balance divided by the Conversion Price, and (B) the Outstanding Balance divided
by the Market Price, plus (ii) the number of Delivery Shares that would be required to be delivered to the Holder in order to effect
a complete exercise of the Warrant pursuant to the terms thereof; provided, however, that in no case at any given time shall
the Share Reserve be greater than twenty percent (20%) of the aggregate number of the Company’s then issued and outstanding
Common Stock. If at any time the Share Reserve is less than required herein, the Company shall immediately increase the Share Reserve
in an amount equal to no less than the deficiency. If the Company does not have sufficient authorized and unissued shares of Common
Stock available to increase the Share Reserve, the Company shall call a special meeting of the stockholders as soon as practicable
after such occurrence, but in no event later than thirty (30) calendar days after such occurrence, and hold such meeting as soon
as practicable thereafter, but in no event later than sixty (60) calendar days after such occurrence, for the sole purpose of increasing
the number of authorized shares of Common Stock. The Company’s management shall recommend to the Company’s stockholders
to vote in favor of increasing the number of authorized shares of Common Stock. Management shall also vote all of its shares in
favor of increasing the number of authorized shares of Common Stock. The Company shall use its best efforts to cause such additional
shares of Common Stock to be authorized so as to comply with the requirements of this subsection. All calculations with respect
to determining the Share Reserve shall be made without regard to any limitations on conversion of the Note or exercise of the Warrant.


 




    	15



    	 



    

 


 


(o)       DWAC
Eligibility. At all times during which any portion of the Note remains outstanding, or any portion of the Warrant remains unexercised,
the Company shall use its best efforts to cause all DWAC Eligible Conditions to be satisfied.


 


(p)       Anti-Dilution
Certification. For so long as any portion of the Note remains outstanding, the Company shall deliver to the Buyer, on or before
the 10th day of each month a certification in the form attached hereto as ANNEX VII whereby the Company shall notify the Buyer
of a Dilutive Issuance (as defined in the Note) or any other event(s) that occurred during the previous month that triggers anti-dilution
protection or other adjustments to the applicable Conversion Price or Exercise Price (each an “Anti-Dilution Event”);
provided, however, that if no certificate is provided, it will be deemed that no Anti-Dilution Event occurred during the
previous month.


 


(q)       Change
in Nature of Business. Without prior notification to the Buyer, the Company shall not directly or indirectly engage in any
material line of business substantially different from those lines of business conducted by or publicly contemplated to be conducted
by the Company on the date of this Agreement or any business substantially related or incidental thereto. The Company shall not,
and the Company shall cause each of its Subsidiaries to not, directly or indirectly, modify its or their corporate structure or
purpose if such modification may have a material adverse effect on any rights of, or benefits to, the Holder under any of the Transaction
Documents.


 


(r)       Maintenance
of Properties, Etc. The Company shall maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all
of its properties which are necessary or useful in the proper conduct of its business, in good working order and condition, ordinary
wear and tear excepted, and comply, and cause each of its Subsidiaries to comply, at all times with the provisions of all leases
to which it is a party as lessee or under which it occupies property, so as to prevent any loss or forfeiture thereof or thereunder.


 


(s)       Maintenance
of Insurance. The Company shall maintain, and cause each of its Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations (including, without limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real properties leased or owned by it) and business, in such
amounts and covering such risks as is required by any governmental authority having jurisdiction with respect thereto or as is
carried generally in accordance with sound business practice by companies in similar businesses similarly situated.


 


(t)       Restriction
on Redemption. The Company shall not, directly or indirectly, redeem or repurchase its capital stock without the prior express
written consent of the Holder.


 


(u)       Restriction
on Transfer of Assets. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly,
sell, lease, license, assign, transfer, convey or otherwise dispose of any assets or rights of the Company or any Subsidiary owned
or hereafter acquired, whether in a single transaction or a series of related transactions, other than (i) sales, leases, licenses,
assignments, transfers, conveyances and other dispositions of such assets or rights supported by fair market value consideration
as determined in the reasonable discretion of the board of directors or the Chief Executive Officer of the Company or its Subsidiary,
as the case may be, or (ii) sales of inventory in the ordinary course of business.


 


(v)       Existence
of Liens. The Company shall not, and the Company shall cause each of its Subsidiaries to not, directly or indirectly, allow,
grant, or suffer to exist any mortgage, lien, pledge, charge, security interest, tax lien, judgment, or other encumbrance (collectively,
“Liens”), upon the property or assets (including accounts and contract rights) owned by the Company or any of
its Subsidiaries, other than Permitted Liens.


 




    	16



    	 



    

 


 


(w)       [intentionally
omitted]


 


(x)       Transactions
with Affiliates. The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party
to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange
of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of
business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its
business, for fair consideration and on terms no less favorable to it or its Subsidiaries than would be obtainable in a comparable
arm’s length transaction with a person that is not an Affiliate thereof.


 


(y)       Certain
Negative Covenants of the Company. From and after the date hereof and until all of the Company’s obligations hereunder
and the Note are paid and performed in full, the Company shall not:


 


(i)       Enter
into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any
service, with any Affiliate of the Company, or amend or modify any agreement related to any of the foregoing, except on terms that
are no less favorable, in any material respect, than those obtainable from any person or entity who is not an Affiliate of the
Company.


 


(ii)       So
long as the Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or
indirectly, pay cash dividends or distributions on any equity securities of the Company or of its Subsidiaries.


 


(z)       Piggyback
Registrations. Until all of the Company’s obligations hereunder and the Note are paid and performed in full and the Warrant
is exercised in full (or otherwise expired), the Company shall notify the Buyer in writing at least fifteen (15) Trading Days prior
to the filing of any Registration Statement for purposes of a public offering of securities of the Company (including, but not
limited to, Registration Statements relating to secondary offerings of securities of the Company) and will afford the Buyer an
opportunity to include in such Registration Statement all or part of the Shares it holds. If the Buyer desires to include in any
such Registration Statement all or any part of the Shares held by it, the Buyer shall, within fifteen (15) Trading Days after the
above-described notice from the Company, so notify the Company in writing. Such notice shall state the intended method of disposition
of the Shares by the Buyer. In the event the Buyer desires to include less than all of its Shares in any Registration Statement
it shall continue to have the right to include any Shares in any subsequent Registration Statement or Registration Statements as
may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.


 


(aa)       Rule
144 Opinion. Either counsel to the Company has delivered to the Buyer an opinion letter, or the Company shall accept, in its
reasonable discretion, an opinion letter prepared by legal counsel of Buyer’s choosing (in either case, the “Opinion
Letter”), stating that (i) the Company is not a shell company or the type of “issuer” defined in Rule 144(i)(1)
under the 1933 Act (a “Shell Company”), (ii) the Company has never been a Shell Company, (iii) the Company is
in compliance with all filing requirements under Rule 144 as of the date hereof, and (iv) the Shares may be sold by the Buyer without
any restrictions pursuant to Rule 144, so long as the applicable holding period specified by Rule 144 is satisfied, and, as applicable,
the Company shall give instructions to its Transfer Agent to issue shares of Common Stock upon conversion of the Note based upon
or otherwise consistent with such Opinion Letter.


 




    	17



    	 



    

 


 


(bb)       Transfer
Agent Reserve. From and after the date hereof and until all of the Company’s obligations hereunder and the Note are paid
and performed in full and the Warrant is exercised in full (or otherwise expired):


 


(i)       the
Company shall at all times require its Transfer Agent to establish a reserve of shares of authorized but unissued Common Stock
in an amount not less than the Share Reserve (the “Transfer Agent Reserve”);


 


(ii)       the
Company shall require its Transfer Agent to hold the Transfer Agent Reserve for the exclusive benefit of the Holder and shall authorize
the Transfer Agent to issue the shares of Common Stock held in the Transfer Agent Reserve to the Holder only (subject to subsection
(iii) immediately below);


 


(iii)       when
the Transfer Agent issues shares of Common Stock to the Holder pursuant to the Transaction Documents, the Transfer Agent shall
be permitted to reduce the Transfer Agent Reserve accordingly, unless (1) the Company fails to comply with subsection (v) immediately
below, (2) an Event of Default (as defined in the Note) has otherwise occurred, or (3) the Holder in good faith deems itself insecure
with respect to (A) the Company’s performance under any of the Transaction Documents or (B) the Company’s financial
condition, business prospects and/or performance, in which case the Transfer Agent shall not issue such shares from the Transfer
Agent Reserve, and the Company shall not enter into any agreement with the Transfer Agent that is contrary to, and shall only provide
instructions to the Transfer Agent in accordance with, this subsection (iii);


 


(iv)       the
Company shall cause the Transfer Agent to agree that it will not reduce the Transfer Agent Reserve under any circumstances other
than the issuance of shares pursuant to subsection (iii) immediately above, unless such reduction is pre-approved in writing by
both the Company and the Holder;


 


(v)       no
less frequently than at the end of each calendar month, the Company shall recalculate the Transfer Agent Reserve as of such time
(each a “Transfer Agent Reserve Calculation”), and if additional shares of Common Stock are required to be added
to the Transfer Agent Reserve pursuant to subsection (i) immediately above, the Company shall immediately give written instructions
to the Transfer Agent to cause the Transfer Agent to set aside and increase the Transfer Agent Reserve by the necessary number
of shares of Common Stock; and


 


(vi)       no
less frequently than monthly, the Company shall certify in writing to the Holder (A) the correctness of the Company’s Transfer
Agent Reserve Calculation and (B) that either (1) the Company has instructed the Transfer Agent to increase the Transfer Agent
Reserve in accordance with the terms hereof, or (2) there was no need to increase the Transfer Agent Reserve, in either case consistent
with the Transfer Agent Reserve Calculation.


 


For the avoidance
of any doubt, the requirements of this Section 5.2 are material to this Agreement and any violation or breach thereof by the
Company shall constitute a default under this Agreement; provided, however, that the Company shall have ten (10) days
after written notice thereof from the Holder to cure any breach of Section 5.2(bb).


 




    	18



    	 



    

 


 


6.       TRANSFER
AGENT.


 


6.1.       Instructions.
The Company covenants that, with respect to the Securities, other than the stop transfer instructions to give effect to
Section 5.1(a) hereof, the Company will give the Transfer Agent no instructions inconsistent with the Transfer Agent
Letter. Except as required by Sections 5.1(a) and 5.1(b) of this Agreement and the Transfer Agent Letter, the Shares shall
otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and
the other Transaction Documents. Nothing in this subsection shall affect in any way the Buyer’s obligations and
agreement to comply with all applicable securities laws upon resale of the Securities. If the Buyer provides the Company with
an opinion of counsel reasonably satisfactory to the Company that registration of a resale by the Buyer of any of the
Securities in accordance with clause (i)(B) of Section 5.1(a) of this Agreement is not required under the 1933 Act or upon
request from a Holder while an applicable Registration Statement is effective, the Company shall (except as provided in
clause (ii) of Section 5.1(a) of this Agreement) permit the transfer of the Securities and, in the case of the Conversion
Shares or the Warrant Shares, as may be applicable, use its best efforts to cause the Transfer Agent to promptly deliver to
the Holder or the Holder’s broker, as applicable, such Conversion Shares or Warrant Shares by way of the DWAC
system.


 


6.2.       DWAC
Eligible. The Company specifically covenants that, as of the Closing Date, all DWAC Eligible Conditions are satisfied. The
Company shall notify the Buyer in writing if the Company at any time while the Holder holds Securities becomes aware of any plans
of the Transfer Agent to voluntarily or involuntarily terminate its participation in the DTC/FAST Program. While Holder holds Securities,
the Company shall at all times after the Closing Date maintain a transfer agent which participates in the DTC/FAST Program, and
the Company shall not appoint any transfer agent which does not participate in the DTC/FAST Program. Nevertheless, if at any time
the Company receives a Conversion Notice or Notice of Exercise and all DWAC Eligible Conditions are not then satisfied (including
without limitation because the Transfer Agent is not then participating in the DTC/FAST Program or the Conversion Shares or Warrant
Shares are not otherwise transferable via the DWAC system), then the Company shall instruct the Transfer Agent to immediately issue
one or more certificates for Common Stock without legend in such name and in such denominations as specified by the Holder and
consistent with the terms and conditions of the Transaction Documents.


 


6.3.       Transfer
Fees. The Company shall assume any fees or charges of the Transfer Agent or Company Counsel regarding (a) the removal of a
legend or stop transfer instructions with respect to the Securities, and (b) the issuance of certificates or DWAC registration
to or in the name of the Holder or the Holder’s designee or to a transferee as contemplated by an effective Registration
Statement.


 


7.       DELIVERY
OF SHARES.


 


7.1.       Delay
in Issuing Shares. The Company understands that a delay in the delivery of Conversion Shares, whether on conversion of all
or any portion of the Note and/or in payment of accrued interest, or a delay in the delivery of Warrant Shares, whether on exercise
of all or any portion of the Warrant, beyond the relevant Delivery Date could result in economic loss to the Holder. As compensation
to the Holder for such loss, in addition to any other available remedies in the Transaction Documents or at law or in equity, the
Company shall pay late payments to the Holder for late delivery of the Conversion Shares or Warrant Shares in accordance with the
following schedule (where, for purposes of this subsection, “No. Trading Days Late” is defined as the number
of Trading Days beyond three (3) Trading Days after the applicable Delivery Date):


 




    	19



    	 



    

 


 


 


 


	 	Late Payment for Each $10,000.00
	No. Trading Days Late	of Principal or Interest Being Converted under the Note
	 	or Aggregate Exercise Price under the Warrant
	1	$100.00
	2	$200.00
	3	$300.00
	4	$400.00
	5	$500.00
	6	$600.00
	7	$700.00
	8	$800.00
	9	$900.00
	10	$1,000.00
	>10	$1,000.00 + $200.00 for each Trading Day Late beyond 10


 


 


As elected by the
Holder, the amount of any payments incurred under this Section 7.1 shall either be automatically added to the principal
balance of the Note (without the need to provide any notice to the Company) or otherwise paid by the Company in immediately
available funds upon demand. Nothing herein shall limit the Holder’s right to pursue additional damages for the
Company’s failure to issue and deliver the Conversion Shares or Warrant Shares, as applicable, to the Holder within a
reasonable time. The Company acknowledges that if the Company fails to effect delivery of the Conversion Shares or the
Warrant Shares as and when required, the Holder may revoke the Conversion Notice or Notice of Exercise pursuant to the terms
set forth in the Note or Warrant, as applicable. Notwithstanding any such revocation, the charges described in this Section
7.1  which have accrued through the date of such revocation shall remain due and owing to the Holder.


 


7.2.       Bankruptcy.
The Holder of the Note shall be entitled to exercise the Holder’s conversion privilege with respect to such Note, and exercise
privilege with respect to the Warrant, notwithstanding the commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy
Code”). In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest extent
permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of such Holder’s exercise privileges. The
Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of
the conversion of the Note or exercise of the Warrant. The Company agrees, without cost or expense to such Holder, to take or to
consent to any and all action necessary to effectuate relief under 11 U.S.C. §362.


 


8.       CLOSING
DATE.


 


8.1.       The
Closing Date shall occur on the date which is the first Trading Day after each of the conditions contemplated by Sections 9
and 10 hereof shall have either been satisfied or been waived by the party in whose favor such conditions run.


 


8.2.       Closing
of the purchase and sale of the Securities, which the parties anticipate shall occur concurrently with the execution of this Agreement,
shall occur at the offices of the Buyer and shall take place no later than 3:00 P.M., Eastern Time, or on such day or such other
time as is mutually agreed upon by the Company and the Buyer.


 


9.       CONDITIONS
TO THE COMPANY’S OBLIGATION TO SELL. The Company’s obligation to sell the Securities to the Buyer pursuant to this
Agreement on the Closing Date is conditioned upon and subject to the fulfillment, on or prior to the Closing Date, of all of the
following conditions, any of which may be waived in whole or in part by the Company:


 


9.1.       The
execution and delivery of this Agreement and, as applicable, the other Transaction Documents by the Buyer.


 


9.2.       Delivery
by the Buyer of good funds as payment in full of an amount equal to the Purchase Price in accordance with this Agreement.


 


9.3.       The
accuracy on the Closing Date of the representations and warranties of the Buyer contained in this Agreement, each as if made on
such date, and the performance by the Buyer on or before such date of all covenants and agreements of the Buyer required to be
performed on or before such date.


 




    	20



    	 



    

 


 


9.4.       There
shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.


 


10.       CONDITIONS
TO THE BUYER’S OBLIGATION TO PURCHASE. The Buyer’s obligation to purchase the Securities from the Company pursuant
to this Agreement on the Closing Date is conditioned upon and subject to the fulfillment, on or prior to the Closing Date, of all
of the following conditions, any of which may be waived in whole or in part by the Buyer:


 


10.1.       The
execution and delivery of this Agreement, the Transfer Agent Letter, the Secretary’s Certificate, and, as applicable, the
other Transaction Documents by the Company.


 


10.2.       The
delivery by the Company to the Buyer of the Note and the Warrant, each in original form, duly executed by the Company, in accordance
with this Agreement.


 


10.3.       On
the Closing Date, each of the Transaction Documents executed by the Company on or before such date shall be in full force and effect
and the Company shall not be in default thereunder.


 


10.4.       The
Company shall have authorized and reserved for the purpose of issuance under the Transaction Documents shares of Common Stock in
an amount no less than the Share Reserve as of the Closing Date.


 


10.5.       The
accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement
and the other Transaction Documents, each as if made on such date, and the performance by the Company on or before such date of
all covenants and agreements of the Company required to be performed on or before such date.


 


10.6.       There
shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.


 


10.7.       From
and after the date hereof up to and including the Closing Date, each of the following conditions will remain in effect: (a) the
trading of the Common Stock shall not have been suspended by the SEC or on the Principal Trading Market; (b) trading in securities
generally on the Principal Trading Market shall not have been suspended or limited; (c) no minimum prices shall have been established
for securities traded on the Principal Trading Market; (d) there shall not have been any material adverse change in any financial
market; and (e) there shall not have occurred any Material Adverse Effect.


 


10.8.       Except
for any notices required or permitted to be filed after the Closing Date with certain federal and state securities commissions,
the Company shall have obtained (a) all governmental approvals required in connection with the lawful sale and issuance of the
Securities, and (b) all third party approvals required to be obtained by the Company in connection with the execution and delivery
of the Transaction Documents by the Company or the performance of the Company’s obligations thereunder.


 


10.9.       All
corporate and other proceedings in connection with the transactions contemplated at the Closing and all documents and instruments
incident to such transactions shall be reasonably satisfactory in substance and form to the Buyer.


 




    	21



    	 



    

 


 


11.       INDEMNIFICATION.


 


11.1.       The
Company agrees to defend, indemnify and forever hold harmless the Buyer and the Buyer’s stockholders, directors, officers,
managers, members, partners, Affiliates, employees, attorneys, and agents, and each Buyer Control Person (collectively, the “Buyer
Parties”) from and against any losses, claims, damages, liabilities or expenses incurred (collectively, “Damages”),
joint or several, and any action in respect thereof to which the Buyer or any of the other Buyer Parties becomes subject, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant
or agreement on the part of the Company contained in this Agreement or any of the other Transaction Documents, as such Damages
are incurred. The Buyer Parties with the right to be indemnified under this subsection (the “Indemnified Parties”)
shall have the right to defend any such action or proceeding with attorneys of their own selection, and the Company shall be solely
responsible for all costs and expenses related thereto. If the Indemnified Parties opt not to retain their own counsel, the Company
shall defend any such action or proceeding with attorneys of its choosing at its sole cost and expense, provided that such attorneys
have been pre-approved by the Indemnified Parties, which approval shall not be unreasonably withheld, and provided further that
the Company may not settle any such action or proceeding without first obtaining the written consent of the Indemnified Parties.


 


11.2.       The
indemnity contained in this Agreement shall be in addition to (a) any cause of action or similar rights of the Buyer Parties against
the Company or others, and (b) any other liabilities the Company may be subject to.


 


12.       SPECIFIC
PERFORMANCE. The Company and the Buyer acknowledge and agree that irreparable damage would occur in the event that any provision
of this Agreement or any of the other Transaction Documents were not performed in accordance with its specific terms or were otherwise
breached. It is accordingly agreed that the parties (including any Holder) shall be entitled to an injunction or injunctions, without
the necessity to post a bond (except as specified below), to prevent or cure breaches of the provisions of this Agreement or any
of the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity; provided, however, that the Company, upon receipt
of a Conversion Notice or a Notice of Exercise, (a) may not fail or refuse to deliver shares or certificates representing shares
of Common Stock in accordance with the terms and conditions of the Transaction Documents, or (b) if there is a claim for a breach
by the Company of any other provision of this Agreement or any of the other Transaction Documents, the Company shall not raise
as a legal defense to performance any claim that the Holder or anyone associated or affiliated with the Holder has violated any
provision hereof or any of the other Transaction Documents or has engaged in any violation of law or any other claim or defense,
in either case unless the Company has first posted a bond for one hundred fifty percent (150%) of the principal amount and, if
relevant, then obtained a court order specifically directing it not to deliver such shares or certificates to the Holder. The proceeds
of such bond shall be payable to the Holder to the extent that the Holder obtains judgment or the Holder’s defense is recognized.
Such bond shall remain in effect until the completion of the relevant proceeding and, if the Holder appeals therefrom, until all
such appeals are exhausted. This provision is deemed incorporated by reference into each of the Transaction Documents as if set
forth therein in full.


 




    	22



    	 



    

 


 


13.       OWNERSHIP
LIMITATION. If at any time after the Closing, the Buyer shall or would receive shares of Common Stock in payment of
interest or principal under the Note or upon conversion of the Note or exercise of the Warrant, so that the Buyer would,
together with other shares of Common Stock held by it or its Affiliates, hold by virtue of such action or receipt of
additional shares of Common Stock a number of shares exceeding the Maximum Percentage (as defined in the Note), the Company
shall not be obligated and shall not issue to the Buyer shares of Common Stock which would exceed the Maximum Percentage, but
only until such time as the Maximum Percentage would no longer be exceeded by any such receipt of shares of Common Stock by
the Buyer. The foregoing limitations regarding the Maximum Percentage are enforceable, unconditional and non-waivable and
shall apply to all Affiliates and assigns of the Buyer. Additionally, if at any time after the Closing the Market
Capitalization of the Common Stock (as defined in the Note) falls below $3,000,000, then from that point on, for so long as
the Buyer or the Buyer’s Affiliate owns Common Stock or rights to acquire Common Stock, the Company shall post (or
cause to be posted) from time to time promptly after receipt of written request from the Holder, and in any case no later
than three days after receipt of such written request, the then-current number of issued and outstanding shares of its
capital stock to the Company’s website located at appliednanotech.net, or to the Company’s web page located at
OTCmarkets.com (or such other web page approved by the Holder). The Company understands that its failure to so post its
shares outstanding could result in economic loss to the Holder. As compensation to the Holder for such loss, in addition to
any other available remedies in the Transaction Documents or at law or in equity, the Company shall pay the Holder a late
fee of $500.00 per calendar day for each calendar day that the Company fails to comply with the foregoing obligation to post
its shares outstanding pursuant to the Holder’s written request. As elected by the Holder, the amount of any late fees
incurred under this Section 13 shall either be automatically added to the principal balance of the Note (without the need to
provide any notice to the Company) or otherwise paid by the Company in immediately available funds upon demand.


 


14.       MISCELLANEOUS.


 


14.1.       Governing
Law; Venue. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Utah for contracts
to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each party
hereto hereby (a) consents to and expressly submits to the exclusive personal jurisdiction of any state or federal court sitting
in Salt Lake County, Utah in connection with any dispute or proceeding arising out of or relating to this Agreement, (b) agrees
that all claims in respect of any such dispute or proceeding may only be heard and determined in any such court, (c) expressly
submits to the venue of any such court for the purposes hereof, and (d) waives any claim of improper venue and any claim or objection
that such courts are an inconvenient forum or any other claim or objection to the bringing of any such proceeding in such jurisdictions
or to any claim that such venue of the suit, action or proceeding is improper. Each party hereto hereby irrevocably consents to
the service of process of any of the aforementioned courts in any such proceeding by the mailing of copies thereof by reputable
overnight courier (e.g., FedEx) or certified mail, postage prepaid, to such party’s address as set forth herein, such service
to become effective ten (10) calendar days after such mailing.


 


14.2.       Successors
and Assigns; Third Party Beneficiaries. This Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Except as otherwise expressly provided herein, no Person other than the parties hereto
and their successors and permitted assigns is intended to be a beneficiary of this Agreement.


 


14.3.       Pronouns.
All pronouns and any variations thereof in this Agreement refer to the masculine, feminine or neuter, singular or plural, as the
context may permit or require.


 


14.4.       Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together
shall constitute one instrument. The parties hereto confirm that any electronic copy of another party’s executed counterpart
of this Agreement (or such party’s signature page thereof) will be deemed to be an executed original thereof.


 




    	23



    	 



    

 


 


14.5.       Headings.
The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this
Agreement.


 


14.6.       Severability.
Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable
law, but if any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such provision shall be modified
to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability shall not affect
the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other
jurisdiction.


 


14.7.       Entire
Agreement. This Agreement, together with the other Transaction Documents, constitutes and contains the entire agreement and
understanding between the parties hereto, and supersedes all prior oral or written agreements and understandings between Buyer,
Company, their Affiliates and Persons acting on their behalf with respect to the matters discussed herein and therein, and, except
as specifically set forth herein or therein, neither Company nor Buyer makes any representation, warranty, covenant or undertaking
with respect to such matters.


 


14.8.       Amendment.
Any amendment, supplement or modification of or to any provision of this Agreement, shall be effective only if it is made or given
by an instrument in writing (excluding any email message) and signed by Company and Buyer.


 


14.9.       No
Waiver. No forbearance, failure or delay on the part of a party hereto in exercising any right, power or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy. Any waiver of any provision of this Agreement shall
be effective (a) only if it is made or given in writing (including an email message) and (b) only in the specific instance and
for the specific purpose for which made or given.


 


14.10.       Currency.
All dollar amounts referred to or contemplated by this Agreement or any other Transaction Documents shall be deemed to refer to
US Dollars, unless otherwise explicitly stated to the contrary.


 


14.11.       Assignment.
Notwithstanding anything to the contrary herein, the rights, interests or obligations of the Company hereunder may not be assigned,
by operation of law or otherwise, in whole or in part, by the Company without the prior written consent of the Buyer, which consent
may be withheld at the sole discretion of the Buyer; provided, however, that in the case of a merger, sale of substantially
all of the Company’s assets or other corporate reorganization, the Buyer shall not unreasonably withhold, condition or delay
such consent. This Agreement or any of the severable rights and obligations inuring to the benefit of or to be performed by Buyer
hereunder may be assigned by Buyer to a third party, including the Buyer’s financing sources, in whole or in part, without
the need to obtain the Company’s consent thereto.


 


14.12.       Advice
of Counsel. In connection with the preparation of this Agreement and all other Transaction Documents, the Company, for itself
and on behalf of its stockholders, officers, agents, and representatives acknowledges and agrees that Buyer’s Counsel prepared
initial drafts of this Agreement and all of the other Transaction Documents and acted as legal counsel to the Buyer only. The Company,
for itself and on behalf of its stockholders, officers, agents, and representatives, (a) hereby acknowledges that he/she/it has
been, and hereby is, advised to seek legal counsel and to review this Agreement and all of the other Transaction Documents with
legal counsel of his/her/its choice, and (b) either has sought such legal counsel or hereby waives the right to do so.


 




    	24



    	 



    

 


 


14.13.       No
Strict Construction. The language used in this Agreement is the language chosen mutually by the parties hereto and no doctrine
of construction shall be applied for or against any party.


 


14.14.       Attorney’s
Fees. In the event of any action at law or in equity to enforce or interpret the terms of this Agreement or any of the other
Transaction Documents, the parties agree that the party who is awarded the most money shall be deemed the prevailing party for
all purposes and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses
paid by such prevailing party in connection with the litigation and/or dispute without reduction or apportionment based upon the
individual claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair a court’s power
to award fees and expenses for frivolous or bad faith pleading.


 


14.15.       Waiver
of Jury Trial. EACH PARTY TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO DEMAND THAT ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE
TRIED BY JURY. THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE,
LAW, RULE OR REGULATION. FURTHER, EACH PARTY HERETO ACKNOWLEDGES THAT SUCH PARTY IS KNOWINGLY AND VOLUNTARILY WAIVING SUCH PARTY’S
RIGHT TO DEMAND TRIAL BY JURY.


 


14.16.       Rights
and Remedies Cumulative. All rights, remedies, and powers conferred in this Agreement and the Transaction Documents are cumulative
and not exclusive of any other rights or remedies, and shall be in addition to every other right, power, and remedy that Buyer
may have, whether specifically granted in this Agreement or any other Transaction Document, or existing at law, in equity, or by
statute; and any and all such rights and remedies may be exercised from time to time and as often and in such order as the Buyer
may deem expedient.


 


14.17.       Further
Assurances. Each party shall do and perform or cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request
in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated
hereby.


 


14.18.       Notices.
Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of:


 


(a)       the
date delivered, if delivered by personal delivery as against written receipt therefor or by email to an executive officer, or by
facsimile (with successful transmission confirmation),


 


(b)       the
fifth Trading Day after deposit, postage prepaid, in the United States Postal Service (with delivery confirmation or by certified
mail), or


 


(c)       the
second Trading Day after mailing by domestic or international express courier (e.g., FedEx), with delivery costs and fees prepaid,


 




    	25



    	 



    

 


 


in each case, addressed to each of the
other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by five (5)
Trading Days’ advance written notice similarly given to each of the other parties hereto): 





 


       If
to the Company:








 


              Applied
Nanotech Holdings, Inc.





              Attn:
Doug Baker





              3006
Longhorn Boulevard, Suite 107





              Austin,
Texas 78758


   


       with
a copy to (which shall not constitute notice):  


 


              Don
Locke





              10505
Byrum Woods Drive





              Raleigh,
North Carolina 27613


               





       If
to the Buyer:     


 


              Tonaquint,
Inc.





              Attn:
John M. Fife





              303
East Wacker Drive, Suite 1200





              Chicago,
Illinois 60601


              





       with
a copy to (which shall not constitute notice):


 








              Hansen
Black Anderson PLLC





              Attn:
Jonathan K. Hansen





              2940
West Maple Loop Drive, Suite 103





              Lehi,
Utah 84043





              Telephone:
801.922.5000





              Email:
jhansen@HBAfirm.com





 


14.19.       Cross
Default. Any Event of Default (as defined in the Note) shall be deemed a default under this Agreement. Upon such a default
of this Agreement by the Company, the Buyer shall have all those rights and remedies available at law or in equity, including without
limitation those remedies set forth in the Note.


 


14.20.       Expenses.
Except as provided in Section 14.14 , and except for the Transaction Expense Amount required to be paid by the Company to
the Buyer pursuant to Section 2.3 , the Company and the Buyer shall be responsible for paying such party’s own fees and
expenses (including legal expenses) incurred in connection with the preparation and negotiation of this Agreement and the
other Transaction Documents and the closing of the transactions contemplated hereby and thereby.


 




    	26



    	 



    

 


 


14.21.       Replacement
of the Note. Subject to any restrictions on or conditions to transfer set forth in the Note, the Holder of the Note, at such
Holder’s option, may in person or by duly authorized attorney surrender the same for exchange at the Company’s principal
corporate office, and promptly thereafter and at the Holder’s reasonable expense, except as provided below, receive in exchange
therefor one or more new convertible promissory note(s), each in the principal amount requested by such Holder, dated the date
to which interest shall have been paid on the Note so surrendered or, if no interest shall have yet been so paid, dated the date
of the Note so surrendered and registered in the name of such person or persons as shall have been designated in writing by such
Holder or such Holder’s attorney for the same principal amount as the then unpaid principal amount of the Note so surrendered.
As applicable, upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction
or mutilation of the Note and (a) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it; or (b)
in the case of mutilation, upon surrender thereof, the Company, at its expense, will execute and deliver in lieu thereof a new
convertible promissory note executed in the same manner as the Note being replaced, in the same principal amount as the unpaid
principal amount of such Note and dated the date to which interest shall have been paid on the Note or, if no interest shall have
yet been so paid, dated the date of the Note.


 


15.       SURVIVAL
OF COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company’s and the Buyer’s covenants, agreements, representations
and warranties contained herein shall survive the execution and delivery of this Agreement and the other Transaction Documents
and the Closing hereunder for the maximum time allowed by applicable law, and shall inure to the benefit of the Buyer and the Company
and their respective successors and permitted assigns.


 


[Remainder of the page intentionally
left blank; signature page to follow]


 


 


 


 


 


 


 


 


 


 


 


 


 




    	27



    	 



    

 


 


       IN
WITNESS WHEREOF, each of the undersigned parties represents that the foregoing statements made by such party above are true and
correct and that such party has caused this Agreement to be duly executed (if an entity, on such party’s behalf by one of
its officers thereunto duly authorized) as of the date first above written.


 


 


 


	PURCHASE PRICE:	$200,000.00
	 	 
	 	 
	 	THE BUYER:
	 	 
	 	Tonaquint, Inc.
	 	 
	 	 
	 	By: /s/ John M. Fife
	 	John M. Fife, President
	 	 
	 	 
	 	 
	 	THE COMPANY:
	 	 
	 	Applied Nanotech Holdings, Inc.
	 	 
	 	 
	 	By: /s/ Douglas P. Baker
	 	Printed Name: Douglas P. Baker
	 	Title:    Chief Executive Officer


 


 


[Signature page
to Securities Purchase Agreement]


 




    	 



    	 



    

 


 


 


 


ATTACHMENTS:


 


 


 


	ANNEX I		WIRE INSTRUCTIONS






	ANNEX II		NOTE






	ANNEX III		WARRANT



	ANNEX IV		TRANSFER AGENT LETTER






	ANNEX V		SECRETARY’S CERTIFICATE






	ANNEX VI		SHARE ISSUANCE RESOLUTION






	ANNEX VII		FORM OF ANTI-DILUTION CERTIFICATION



 


 





	SCHEDULE 4.12		COMPANY CONTROL PERSON ACTIONS OR EVENTS



 


 


 


 


 


 


 


 




    	 



    	 



    

 


 


SCHEDULE 4.12





 


Company Control Person Actions or Events


 





 


As disclosed in the Company’s 2011
Form 10-K, Ronald J. Berman, one of the Company’s directors, filed for bankruptcy in 2011.