Document:

INTERCREDITOR
AND COLLATERAL AGENT AGREEMENT

 

THIS
INTERCREDITOR AND COLLATERAL AGENT AGREEMENT (this “Agreement”), is entered into as of June 8, 2016 by and among
QuantumSphere, Inc., a Nevada corporation (“Borrower”), FirstFire Global Opportunities Fund LLC (the
“Collateral Agent”), and each of the secured parties whose name appears on the signature pages to this
Agreement (individually, a “Secured Party” and, collectively, the “Secured
Parties”).

 

RECITALS

 

WHEREAS,
each of the Secured Parties has loaned, is loaning or will be loaning monies to Borrower, as evidenced by 5% Secured Promissory
Notes (collectively, the “Notes”) and as more particularly described in the Note Purchase Agreement entered
into or to be entered into by and between Borrower and each Secured Party; and

 

WHEREAS,
the Notes shall be secured by certain Collateral, as such term is defined in that certain Security Agreement dated of even date
herewith among Borrower and the Secured Parties (the “Security Agreement”) and Pledged Shares, as such term
is defined in that certain Pledge Agreement dated of even date herewith among the Pledgors (as defined therein) and the Secured
Parties; and

 

WHEREAS,
it is the intention of each of the Secured Parties that his, her or its security interests and liens against the Collateral and
Pledged Shares be of equal priority position, notwithstanding the different dates and times of his, her or its acquisition of
the Notes; and

 

WHEREAS,
it is desirable to provide for the orderly administration of the Collateral and Pledge Shares by requiring each Secured Party
to appoint the Collateral Agent, and the Collateral Agent has agreed to accept such appointment and to receive, hold and deliver
the Collateral and Pledged Shares, all upon the terms and subject to the conditions hereinafter set forth; and

 

WHEREAS,
it is desirable to allocate the enforcement of certain rights of the Secured Parties under the Notes for the orderly administration
thereof.

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are mutually acknowledged, each of the Secured
Parties hereby agree as follows:

 

1.
Definitions. All capitalized terms not otherwise defined herein shall the meanings ascribed to them in the Notes and the
Security Agreement, and the Pledge Agreement.

 

2.
Pari Passu Ranking. Notwithstanding the dates and times of perfection of the security interest issued in favor of each
Secured Party pursuant to the Security Agreement and Pledge Agreement, each Secured Party’s security interest in and lien
against the collateral referred to in Schedule A of the Notes (the “Collateral”) and the Pledged Shares shall
rank pari passu, and, accordingly, have the same and equal priority position.

 

    			 

    	 		 

    

 

	 	a.	Seniority.
    As of the date hereof, subject to subsection (b) below, the Notes and the Secured Obligations (as defined in the Security
    Agreement) shall be senior to all other obligations of Borrower.
	 	 	 
	 	b.	Subordination.
    The Collateral Agent and the Secured Parties expressly agree to the subordination of the Notes and the Secured Obligations
    (as defined in the Security Agreement) to (i) that certain financing secured by Borrower from Novus Capital Group, LLC, with
    outstanding principal and accrued interest in the collective amount of $386,701 as of May 31, 2016 (the “Novus Capital
    Financing”).

 

3.
Appointment of the Collateral Agent. The Secured Parties hereby appoint the Collateral Agent (and the Collateral Agent
hereby accepts such appointment) to take any action including, without limitation, the registration of any Collateral and Pledged
Shares in the name of the Collateral Agent or its nominees prior to or during the continuance of an Event of Default (as defined
in the Notes), the exercise of rights upon the occurrence and during the continuance of an Event of Default, the application of
any cash collateral received by the Collateral Agent to the payment of the Notes, the making of any demand under the Notes or
the Security Agreement or Pledge Agreement, the exercise of any remedies given to the Secured Parties pursuant to the Notes and
the exercise of any authority pursuant to the appointment of the Collateral Agent as an attorney-in-fact pursuant to the Notes
that the Collateral Agent deems necessary or proper for the administration of the Collateral or the Pledged Shares pursuant to
the Notes. The Collateral Agent may also exercise in respect of the Collateral and Pledged Shares, in addition to other rights
and remedies provided for in the Notes and the Security Agreement or otherwise available to it, all the rights and remedies of
a secured party under applicable law. Upon disposition of the Collateral or the proceeds of the Pledged Shares in accordance with
the Notes and the Security Agreement or Pledge Agreement, the Collateral Agent shall promptly distribute any cash or Collateral
or Pledged Shares in accordance with the Notes. Borrower must notify the Collateral Agent in writing of the issuance of Notes
to the Secured Parties. The Collateral Agent will not be required to act hereunder in connection with Notes the issuance of which
was not disclosed in writing to the Collateral Agent nor will the Collateral Agent be required to act on behalf of any assignee
of Notes without the written consent of the Collateral Agent. The foregoing grant of rights to the Collateral Agent shall in no
way limit each Noteholder’s ability to exercise rights granted to it pursuant to the Note or other agreements entered into
in connection therewith on its own behalf without any action being taken by the Collateral Agent.

 

    			 

    	 		 

    

 

4.
Actions by Secured Parties.

 

	 	a.	Certain
    Actions. Each of the Secured Parties covenants and agrees that each Noteholder shall have the right, but not the obligation,
    to undertake the following actions:

 

	 	(i)	Acceleration.
    If an Event of Default occurs, after the applicable cure period, if any, each Noteholder may, or may instruct the Collateral
    Agent to, provide to Borrower notice to cure such default and/or declare the unpaid principal amount of its Note to be due
    and payable, together with any and all accrued interest thereon and all costs payable pursuant to such Notes;
	 	 	 
	 	(ii)	Enforcement.
    Upon the occurrence of any Event of Default after the applicable cure period, if any, each Noteholder may on its own behalf
    or a Majority in Interest may instruct the Collateral Agent to proceed to protect, exercise and enforce, on behalf of itself
    or all the Secured Parties, their rights and remedies under the Notes , Security Agreement and Pledge Agreement against Borrower,
    and such other rights and remedies as are provided by law or equity;

 

	 	b.	Further
    Actions. A Majority in Interest may instruct the Collateral Agent to take any action that it may take under this Agreement
    by instructing the Collateral Agent in writing to take such action on behalf of all the Secured Parties.
	 	 	 
	 	c.	Majority
    in Interest. For so long as any obligations remain outstanding on the Notes, Majority in Interest for the purposes of
    this Agreement and the Notes , Security Agreement and Pledge Agreement shall mean Secured Parties who hold not less than fifty
    and one-tenth percent (50.1%) of the outstanding principal amount of the Notes, excluding any principal amount of Notes held
    beneficially or of record by Borrower.
	 	 	 
	 	d.	Effect
    of Instruction. The Collateral Agent shall be bound by, and subject to, any limitation or restrictions on the exercise
    of its rights, powers or discretion set forth in any instruction it receives from a Majority in Interest (it being understood
    that each Noteholder on behalf of itself shall have the right to direct and control the election, exercise and enforcement
    of its rights and remedies under the Notes and the Security Agreement and Pledge Agreement against Borrower (including without
    limitation the commencement, conduct or settlement of any litigation, foreclosure or other action or proceeding, and the voting
    of any securities) without unduly restricting the Collateral Agent’s ability, if so instructed, to conduct the orderly
    marketing and sale of any assets or securities of Borrower that may be subject to sale upon foreclosure, settlement or otherwise.

 

5.
Power of Attorney.

 

	 	a.	To
    effectuate the terms and provisions hereof, the Secured Parties hereby appoint the Collateral Agent as their attorney-in-fact
    (and the Collateral Agent hereby accepts such appointment) for the purpose of carrying out the provisions of this Agreement
	 	 	 
	 	b.	All
    acts done under the foregoing authorization are hereby ratified and approved and neither the Collateral Agent nor any designee
    nor agent thereof shall be liable for any acts of commission or omission, for any error of judgment, for any mistake of fact
    or law except for acts of gross negligence or willful misconduct.

 

    			 

    	 		 

    

 

	 	c.	This
    power of attorney, being coupled with an interest, is irrevocable while this Agreement remains in effect.

 

6.
Reliance on Documents and Experts. The Collateral Agent shall be entitled to rely upon any notice, consent, certificate,
affidavit, statement, paper, document, writing or communication (which may be by telegram, cable, telex, telecopier, or telephone)
reasonably believed by it to be genuine and to have been signed, sent or made by the proper person or persons, and upon opinions
and advice of its own legal counsel, independent public accountants and other experts selected by the Collateral Agent.

 

7.
Actions.

 

	 	a.	The
    Secured Parties agree (which agreement shall survive any termination of this Agreement) to indemnify the Collateral Agent,
    from and against any and all liabilities, obligations, losses, damages, claims, penalties, actions, judgments, suits, costs,
    expenses or disbursements of any kind or nature whatsoever which may at any time be imposed on, incurred by, or asserted against
    the Collateral Agent in any way relating to or arising out of this Agreement, the Notes and any other agreement relating thereto,
    including the reimbursement of the Collateral Agent for all reasonable out-of-pocket expenses (including attorneys’
    fees and expenses) incurred by the Collateral Agent hereunder or in connection herewith or in enforcing the obligations of
    Borrower under this Agreement and the Notes, in all cases as to which the Collateral Agent is not reimbursed by Borrower;
    provided, that none of the Secured Parties, expressly excluding the Collateral Agent, shall be liable for the payment
    of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
    disbursements determined by a court of competent jurisdiction in a final proceeding to have resulted solely from the Collateral
    Agent’s gross negligence or willful misconduct. The Collateral Agent shall not be required to take or omit to take any
    action hereunder or under the Notes, or to prosecute or defend any suit in respect of this Agreement or any of the Notes,
    or any other agreement relating thereto, unless indemnified to its reasonable satisfaction by the Secured Parties against
    loss, costs, liability, and expense. The Collateral Agent may delegate its duties hereunder to affiliates, agents, attorneys-in-fact
    and receivers (which term includes receivers as managers) selected in good faith by the Collateral Agent.

 

    			 

    	 		 

    

 

	 	b.	Exculpation.

 

	 	(i)	The
    Collateral Agent shall have no duties or responsibilities except those expressly set forth in this Agreement, and the Collateral
    Agent shall not by reason of this Agreement or any of the Notes (or otherwise) be a trustee for any Secured Party or have
    any fiduciary obligation to any Secured Party or any of their affiliates. Neither the Collateral Agent nor any of its directors,
    partners, members, managers, officers, employees or agents (collectively, the “Related Parties”) shall be liable
    to any Secured Party for any action taken or omitted to be taken by it under this Agreement and the Notes, or in any agreements
    delivered in connection therewith, or in connection herewith or therewith, except for its own willful misconduct or gross
    negligence, nor shall the Collateral Agent or any Related Parties be responsible for any recitals or representations or warranties
    herein or therein or in any other agreement delivered in connection therewith, or for the effectiveness, enforceability, validity
    or due execution of any of this Agreement, the Notes or in any other agreement delivered in connection therewith, nor for
    the creation, perfection or priority of any security interests purported to be created under any of the Notes or the validity,
    genuineness, enforceability, existence, value or sufficiency of any Collateral or Pledged Shares, nor shall the Collateral
    Agent or any Related Parties be obligated to make any inquiry respecting the performance by Borrower of its obligations hereunder
    or thereunder or in any other agreement delivered in connection therewith. Any such inquiry by the Collateral Agent shall
    not obligate it to make any further inquiry or to take any action. The Collateral Agent shall be entitled to rely upon advice
    of counsel concerning legal matters and upon any notice, consent, certificate, statement, or writing which they believe to
    be genuine and to have been presented by a proper Person. The Collateral Agent shall not be responsible for the negligence
    or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care.
	 	 	 
	 	(ii)	The
    Collateral Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by
    email, telex, telecopy, telegram or cable) reasonably believed by it to be genuine and correct and to have been signed or
    sent by or on behalf of the proper person or persons, and upon advice and statements of legal counsel (including counsel to
    Borrower), independent accountants and other experts selected by the Collateral Agent with reasonable care. As to any matters
    not expressly provided for by this Agreement, the Collateral Agent shall in all cases be fully protected in acting, or in
    refraining from acting, hereunder in accordance with instructions signed by all Secured Parties, in its capacity as agent
    of the Secured Parties, and any action taken or failure to act pursuant thereto, shall be binding on all of the Secured Parties.
	 	 	 
	 	(iii)	The
    Collateral Agent shall not be required to take any action that is in its opinion contrary to law or to the terms of this Agreement
    and the Notes, or which would in its opinion subject it or any of its Related Parties to liability. The Collateral Agent shall,
    in all cases, be fully justified in failing or refusing to act hereunder and under the Notes unless it shall be fully indemnified
    to its reasonable satisfaction against any and all liability and expense which may be incurred by it by reason of taking or
    continuing to take any such action.
	 	 	 
	 	(iv)	The
    Collateral Agent may deem and treat the payee of any promissory note or other evidence of indebtedness relating to the Notes
    as the owner thereof for all purposes hereof unless and until a written notice of the assignment or transfer thereof, signed
    by such payee and in form reasonably satisfactory to the Collateral Agent, shall have been filed with the Collateral Agent.
    Any request, authority or consent of any Person who at the time of making such request or giving such authority or consent
    is the holder of any such note or other evidence of indebtedness shall be conclusive and binding on any subsequent holder,
    transferee or assignee of such note or other evidence of indebtedness and of any note or notes or other evidences of indebtedness
    issued in exchange therefor.

 

    			 

    	 		 

    

 

	 	c.	Successor.
    The Collateral Agent may resign at any time upon at least 30 days’ notice to the Secured Parties. If the Collateral
    Agent at any time shall resign, the Secured Parties, by majority consent, may appoint another mutually agreed Secured Party
    as a successor to the Collateral Agent. If the Secured Parties do not make such appointment within ten (10) business days
    prior to the scheduled resignation date of the Collateral Agent, the retiring Collateral Agent shall appoint a new Collateral
    Agent from the Secured Parties or, if no Secured Party accepts such appointment, from among commercial banking institutions
    or trust institutions generally. In furtherance of the foregoing, upon the announcement that the Collateral Agent will resign
    in its capacity as the Collateral Agent, each of the Secured Parties agrees to use its best efforts to promptly appoint another
    Collateral Agent. Upon the acceptance of any appointment as the Collateral Agent hereunder, such successor Collateral Agent
    shall be entitled to receive from the retiring Collateral Agent such documents of transfer and assignment as such successor
    Collateral Agent may reasonably request, and shall thereupon succeed to and become vested with all rights, powers, privileges
    and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations
    under this Agreement and the Notes. After the retiring Collateral Agent’s resignation hereunder as the Collateral Agent,
    the provisions of this Section 3 shall inure to its benefit as to any actions taken or omitted to be taken by it while it
    was the Collateral Agent under this Agreement and the Notes, and any other agreement relating thereto.

 

8.
Application of Proceeds.

 

	 	a.	Any
    and all amounts actually received by the Collateral Agent in connection with the enforcement of the Notes, shall, promptly
    upon receipt by the Collateral Agent, be applied:

 

	 	(i)	First,
    to the payment in full of all amounts owing to the Collateral Agent in respect of any fees and expenses (including attorneys’
    fees and expenses and fees and expenses of its agents) incurred by or on behalf of the Collateral Agent as a result of administering
    this Agreement or the Collateral or exercising any rights (including foreclosure of the Collateral) in its capacity as Collateral
    Agent;
	 	 	 
	 	(ii)	Second,
    following payment of all obligations under clause (i), between and among each of the Secured Parties on a pro rata basis,
    computed using the then outstanding indebtedness, of both principal and accrued interest, of Borrower to each of the Secured
    Parties, as of the date of such distribution. Until the proceeds are so distributed, the Collateral Agent shall hold the proceeds
    in trust for the benefit of each of the Secured Parties; and
	 	 	 
	 	(iii)	Third,
    to Borrower unless otherwise directed by a court of competent jurisdiction.

 

    			 

    	 		 

    

 

	 	b.	The
    priorities of allocation set forth in Section 7-(a) above shall apply in all circumstances, including with respect to any
    distribution made in any case or proceeding under any bankruptcy law or insolvency law involving creditors’ rights generally.
	 	 	 
	 	c.	If
    any Secured Party (an “Excess Party”) shall obtain any payment or other recovery (whether voluntary, involuntary,
    by application of setoff, or otherwise) as a result of the realization, sale or other remedial disposition of, or foreclosure
    on, any Collateral or Pledged Shares in excess of the amount it is then entitled to receive under the terms of this Agreement,
    such Excess Party shall hold such amount in trust for the ratable benefit of the other Secured Parties in accordance with
    the terms of this Agreement and shall pay an amount equal to such excess to the Collateral Agent for distribution to the Secured
    Parties in accordance with the terms of this Agreement.

 

9.

 

	 	a.	In
    the event of any ambiguity or uncertainty hereunder or in any notice, certificate, instruction or other communication received
    by the Collateral Agent hereunder, the Collateral Agent may, in its sole discretion, refrain from taking any action other
    than retain possession of the Collateral and Pledged Shares , unless the Collateral Agent receives written instructions, signed
    by the Majority in Interest, or an opinion of counsel of Borrower reasonably satisfactory to it, which eliminates such ambiguity
    or uncertainty.

 

    			 

    	 		 

    

 

	 	b.	In
    the event of any dispute between or conflicting claims by or among Borrower, the Secured Parties and/or the Collateral Agent
    and/or any other person or entity with respect to any Collateral or Pledged Shares , the Collateral Agent shall be entitled,
    in its sole discretion, to refuse to comply with any and all claims, demands or instructions with respect to such Collateral
    or Pledged Shares so long as such dispute or conflict shall continue, and Collateral Agent shall not be or become liable in
    any way to Borrower or the Secured Parties for failure or refusal to comply with such conflicting claims, demands or instructions.
    The Collateral Agent shall be entitled to refuse to act until, in its sole discretion, such conflicting or adverse claims
    or demands shall have been determined by a final order, judgment or decree of a court of competent jurisdiction, which order,
    judgment or decree is not subject to appeal, or settled by agreement between the conflicting parties as evidenced in a writing
    satisfactory to Collateral Agent. The Collateral Agent may, in addition, elect, in its sole discretion, to commence an interpleader
    action or seek other judicial relief or orders as it may deem, in its sole discretion, necessary. The costs and expenses (including
    reasonable attorneys’ fees and expenses) incurred in connection with such proceeding shall be paid by, and shall be
    deemed an obligation of Borrower.

 

10.
Further Assurances. Each party agrees to execute such other documents, instruments, agreements and consents, and take such
other actions as may be reasonably requested by the other parties hereto to effectuate the purposes of this Agreement.

 

11.
Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party to be notified, (b) when sent by confirmed telex, e-mail or facsimile if sent during normal business
hours of the recipient, if not, then on the next business day, (c) five (5) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:

 

	 	If
    to the Collateral Agent:	FirstFire
    Global Opportunities Fund LLC
	 	 	1040
    First Avenue, Suite 190 
	 	 	New
    York, New York 10022
	 	 	 
	 	If
    to Borrower:	QuantumSphere,
    Inc.
	 	 	2905
    Tech Center Dr.
	 	 	Santa
    Ana, CA 92705 
	 	 	Facsimile:
    714-545-6265

 

or
to such other address or telecopy number as the party to whom notice is to be given may have furnished to the other party in writing
in accordance herewith.

 

12.
Amendments and Waivers. No modification, amendment or waiver of any provision of, or consent required by, this Agreement,
nor any consent to any departure herefrom, shall be effective unless it is in writing and signed by each of the parties hereto.
Such modification, amendment, waiver or consent shall be effective only in the specific instance and for the purpose for which
given.

 

    			 

    	 		 

    

 

13.
Exclusivity and Waiver of Rights. No failure to exercise and no delay in exercising on the part of any party, any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive
of any other rights or remedies provided by law.

 

14.
Invalidity. Any term or provision of this Agreement shall be ineffective to the extent it is declared invalid or unenforceable,
without rendering invalid or enforceable the remaining terms and provisions of this Agreement.

 

15.
Headings. Headings used in this Agreement are inserted for convenience only and shall not affect the meaning of any term
or provision of this Agreement.

 

16.
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original instrument,
but all of which collectively shall constitute one and the same agreement.

 

17.
Assignment. This Agreement and the rights and obligations hereunder shall not be assignable or transferable by the any
of the parties without the prior written consent of the other parties.

 

18.
Survival. Unless otherwise expressly provided herein, all representations warranties, agreements and covenants contained
in this Agreement shall survive the execution hereof and shall remain in full force and effect until the earliest to occur of
(a) the payment in full of the Notes, and (b) the conversion of the principal and accrued and unpaid interest and all other amounts
owing under the Notes into equity securities of Borrower.

 

19.
Miscellaneous. This Agreement shall inure to the benefit of each of the parties hereto and all their respective successors
and permitted assigns. Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation
any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained.

 

20.
GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).

 

21. CONSENT
TO JURISDICTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO AGREES THAT ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY MUST BE LITIGATED
EXCLUSIVELY IN ANY SUCH STATE OR FEDERAL COURT, AND ACCORDINGLY, EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH LITIGATION IN ANY SUCH COURT.

 

    			 

    	 		 

    

 

22.
WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT. EACH OF THE PARTIES HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND EACH OF THE OTHER PARTIES HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 22.

 

23.
Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the
prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing
any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.

 

24.
Entire Agreement. This Agreement contains the entire agreement among the parties with respect to the transactions contemplated
by this Agreement and supersedes all prior agreements or understandings among the parties.

 

[SIGNATURE
PAGE(S) FOLLOW]

 

    			 

    	 		 

    

 

IN
WITNESS WHEREOF, this Intercreditor Agreement has been executed as of the date first set written above.

 

	“SECURED
    PARTIES”	 
	 	 	 
	FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title:	 	 
	 	 	 
	PURITAN PARTNERS, LLC	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title:	 	 
	 	 	 
	ROCKWELL CAPITAL PARTNERS, INC.	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title:	 	 
	 	 	 
	 	 	 
	By: TOMER COHEN	 
	 	 	 
	 	 	 
	By: FRANCIS POLI	 
	 	 	 
	“COLLATERAL
    AGENT”	 
	 	 	 
	FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title:	 	 
	 	 	 
	“BORROWER”	 
	 	 	 
	QUANTUMSPHERE, INC.,	 
	a Nevada corporation	 
	 	 	 
	By:	Kevin
    D. Maloney	 
	Title:	Chief
    Executive Officer & PresidentINTELLECTUAL
PROPERTY SECURITY AGREEMENT

 

 

This
Intellectual Property Security Agreement (“IP Security Agreement”), is entered into this 8th day of June, 2016 (the
“IP Security Agreement”) by and between QUANTUMSPHERE, INC., a Nevada corporation with its address at 2905
Tech Center Dr., Santa Ana, CA 92705 (the “Borrower”) and FIRSTFIRE GLOBAL OPPORTUNITIES FUND, LLC, a Delaware
limited liability company, with its address at 1040 First Avenue, Suite 190, New York, NY 10022 (“Collateral Agent”),
on behalf of each of the secured parties listed on the signature page hereto (collectively, the “Secured Parties”).

 

RECITALS

 

WHEREAS,
this IP Security Agreement is a supplement to that certain Security Agreement and Intercreditor and Collateral Agent Agreement,
dated as of even date herewith, by and between the Borrower and the Secured Parties (collectively, the “Agreement”);

 

WHEREAS,
all capitalized terms not defined herein shall have the definitions ascribed to them in the Agreement, and are incorporated herein
by reference. If there is a conflict between the definitions, terms or provisions of this IP Security Agreement and the Agreement,
the definitions, terms or provisions of the Agreement shall control; and

 

WHEREAS,
this IP Security Agreement is executed for the purpose of filing a short form security agreement in the United States Patent and
Trademark Office (the “USPTO”), which sets forth the Borrower’s pledge of its intellectual property as security
for the indebtedness, represented by the Secured Promissory Notes (collectively, “Notes”), issued by Borrower in favor
of the Secured Parties.

 

		1.	GRANT
                                         OF SECURITY INTEREST

 

The
Borrower hereby grants to the Lender a security interest in and lien on all of the intellectual property assets owned by the Borrower,
including without limitation all patents and trademarks set forth in Exhibit A, attached hereto and incorporated herein
by reference, wherever located and whether now owned or hereafter acquired, all goodwill of the business of the Borrower connected
with the use of, or otherwise symbolized by, such intellectual property, all rights to sue for infringement of such intellectual
property, and all parts, replacements, substitutions, profits, products, amendments, updates and cash and non-cash proceeds of
any of the foregoing (including insurance proceeds, of any kind, including those payable by reason of loss or damage thereto)
in any form and wherever located, and all written or electronically recorded books and records relating to any such assets and
other rights relating thereto, wherever located and whether now owned or hereafter acquired (collectively the “IP Collateral”).

 

		2.	REPRESENTATIONS,
                                         WARRANTIES, COVENANTS AND MISCELLANEOUS

 

All
other terms, conditions, agreements, obligations, representations, warranties, covenants, definitions, exhibits and miscellaneous
terms, conditions, agreements and obligations set forth in the Agreement are restated and incorporated herein by reference.

 

[Signatures
appear on the following page]

 

    	 

    	 

    

 

IN
WITNESS WHEREOF, the parties hereto have caused this Intellectual Property Security Agreement to be duly executed as of the
day and year first above written.

 

	QUANTUMSPHERE,
    INC. (BORROWER)	 
	 	 	 
	By:	 	 
	 	Kevin
    Maloney	 
	 	Chief
    Executive Officer & President	 
	 	 	 
	FIRSTFIRE
    GLOBAL OPPORTUNITIES 	 
	FUND,
    LLC (COLLATERAL AGENT),	 
	on
    behalf of the Secured Parties listed below 	 
	 	 	 
	By:	 	 
	Name:	 	 
	Title:
    	 	 
	 	 	 
	SECURED
    PARTIES	 
	 	 	 
	FIRSTFIRE
    GLOBAL OPPORTUNITIES FUND, LLC	 
	 	 	 
	By:
    	 	 
	Name:	 	 
	Title:	 	 
	 	 	 
	PURITAN
    PARTNERS, LLC	 
	 	 	 
	By:
    	 	 
	Name:	 	 
	Title:	 	 
	 	 	 
	ROCKWELL
    CAPITAL PARTNERS, INC.	 
	 	 	 
	By:
    	 	 
	Name:	 	 
	Title:	 	 
	 	 	 
	 	 	 
	By:
    TOMER COHEN	 
	 	 
	 	 	 
	By:
    FRANCIS POLI	 

 

    	 

    	 

    

 

EXHIBIT
A

 

QUANTUMSPHERE,
INC. - IP PORTFOLIO

 

	IP	 	Case
    No.	 	Title
    of Invention	 	Document
    No.	 	Document
    Date	 	Inventors	 	Status
	 	 	 	 	 	 	 	 	 	 	 	 	 
	PATENT	 	QSINC.002A	 	METHOD
    AND APPARATUS FOR FORMING NANO-PARTICLES	 	App.
    No. 10/840409

    Patent No. 7,282,167	 	Filed:
    5/06/04

    Patented: 10/16/07	 	Carpenter	 	Issued
	PATENT	 	QSINC.003A	 	NANO-MATERIAL
    CATALYST DEVICE	 	App.
    No. 10/983993 Patent No. 7,897,294	 	Filed:
    11/8/2004 Patented: 3/1/2011	 	Carpenter	 	Issued
	PATENT	 	QSINC.007A	 	METHOD
    AND APPARATUS FOR FORMING NANO-PARTICLES	 	App.
    No. 11/591787 Patent No. 7,803,295	 	Filed:
    11/2/2006 Patented: 9/28/2010 	 	Carpenter	 	Issued
	PATENT	 	QSINC.007C1	 	 	App.
    No. 12/924136 Patent No. 8,500,427	 	Filed:
    09/21/2010 Patented: 08/06/13	 	Carpenter	 	Issued
	PATENT	 	QSINC.011CP1	 	COMPOSITIONS
    OF NANOMETAL PARTICLES CONTAINING A METAL OR ALLOY AND PLATINUM PARTICLES FOR USE IN FUEL CELLS	 	App.
    No. 11/781909 Patent No. 7,955,755	 	Filed:
    07/23/2007 Patented:06/07/2011	 	McGrath,
    Carpenter	 	Issued
	PATENT	 	QSINC.011CP1C1	 	 	App.
    No. 13/110841 Patent No. 8,211,594	 	Filed:
    05/18/2011 Patented: 07/3/2012	 	McGrath,
    Carpenter	 	Issued
	PATENT	 	QSINC.013A	 	APPARATUS
    FOR UNIFORM FEEDING OF POWDERS	 	App.
    No. 11/254627 Patent No. 7,713,043 	 	Filed:
    10/20/2005 Patented:05/11/2010	 	Dopp,
    Nettleton	 	Issued
	PATENT	 	QSINC.018A	 	ELECTRO-CATALYTIC
    RECHARGING COMPOSITION	 	App.
    No. 11/745957 Patent No. 7,709,127 	 	Filed:
    5/8/2007 Patented: 5/4/2010 	 	Maloney,
    Dopp	 	Issued
	PATENT	 	QSINC.024P2C4	 	SYSTEM
    AND METHOD FOR AMMONIA SYNTHESIS	 	App.
    No. 14/085,500 Patent No. 9,272,920	 	Filed:
    11/20/2013 Patented:03/01/2016	 	Carpenter,
    Maloney	 	Issued
	PATENT	 	QSINC.036A	 	A
    METAL HYDRIDE FUEL CELL CARTRIDGE AND ELECTROLYZER ELECTRODE	 	App.
    No. 12/624,864 Patent No. 7,700,214	 	Filed:
    11/24/2009 Patented:04/20/2010 	 	Iyer,
    Canuso	 	Issued
	PATENT	 	QSINC.044PR	 	IMPROVED
    CHEMICAL SYNTHESIS USING HIGHLY REACTIVE, NANO-SIZED, CATALYTIC MATERIALS	 	App.
    No. 62343749 	 	Filed:
    05/31/2016 	 	Maloney,
    Griffith, Rodriguez	 	Pending
	TRADEMARK	 	QSINC.003T	 	QSI-NANO	 	App.
    No. 78/476053 Reg. No. 3160151	 	Filed:
                                         8/30/2004 Registered:

        10/17/2006
	 	N/A	 	Registered
	TRADEMARK	 	QSINC.004T	 	QUANTUMSPHERE	 	App.
    No. 78/476063 Reg. No. 3072883	 	Filed:
    8/30/2004 Registered: 3/28/2006	 	N/A	 	Registered
	TRADEMARK	 	QSINC.005T	 	QUANTUMSPHERE

        (stylized
        C3with design)
	 	App.
    No. 78/476060 Reg. No. 3072882	 	Filed:
    8/30/2004 Registered: 3/28/06	 	N/A	 	Registered
	TRADEMARK	 	QSINC.041T	 	METAIR	 	App.
    No. 85/659,672 Reg. No. 4,429,611	 	Filed:
    06/22/2012 Registered: 11/05/2013	 	N/A	 	Registered

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