Document:

Exhibit 10.5

 

STOCK GRANT AGREEMENT

 

 

This Agreement is made
and entered into as of the March 10, 2014 by and between Applied Nanotech Holdings, Inc., a Texas corporation (the “Company”),
and Douglas P. Baker (“you”).

 

WHEREAS, the Company
in order to induce you to continue and dedicate service to the Company in a consulting role and to serve as Chief Financial Officer
for an additional period of time agrees to grant you shares of stock as set forth in this Agreement.

 

WHEREAS, you desire
to accept the stock on the terms and conditions of this Agreement.

 

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

 

 1. The Grant. Subject to the conditions set forth below, the Company hereby agrees to grant and deliver to you up to a total of 3,289,580 shares of Stock (the “Shares”) in three tranches to be granted on the dates set forth below and subsequently delivered as provided herein. 

 

	Grant Date	Number of Shares 
	September 1, 2014	1,200,000
	180 days after closing of merger with PEN	1,200,000
	January 31,2015	The remaining balance

 

2.Reservation
of Shares. You understand that (i) the Company does not have the power to issue or deliver the Shares until the number of shares
it is authorized to issue has been increased and its Certificate of Incorporation has been amended; (ii) the Company expects to
obtain that authorization from its stockholders in connection with their vote on the proposed merger of the Company with and into
PEN Inc., that will also involve a subsequent merger with Nanofilm. If and when the Company has sufficient authorized capital stock
to issue to you the Shares to be delivered hereunder and the stock that the Company can deliver under the Promissory Note being
delivered to you today, the Company will reserve and maintain a reserve of shares to satisfy these obligations to you. 

 

3.Payment
of Taxes. You are required to pay cash to the Company (or the Company’s Subsidiary if you are an employee of a Subsidiary
of the Company) for transmittal to the Internal Revenue Service in an amount equal to applicable income tax withholding plus all
payroll taxes required to be withheld with respect to a grant of Shares not later than 60 days after each grant date that falls
in 2014, and not later than 30 days after the grant date in 2015. The amount due is the amount that the Company deems necessary
to satisfy its (or its Subsidiary’s) obligation to pay or withhold federal, state or local income or other taxes that you
incur as a result of the Award. In making that calculation the Company will value the Shares based on the average of the closing
price for the Shares for the 5 most recent trading days up to and including the grant date.

 

4.Delivery
of Stock. Promptly following payment of the amount due under Section 3, the Company shall cause to be issued and delivered
to you a certificate or other evidence of the number of Shares to which you are entitled, bearing an appropriate restrictive legend
to reflect the fact that the Shares have been issued without registration under the Securities Act. 

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5.Forfeiture.
Any Shares with a grant date in 2014 under Section 1 for which the required payment has not been made under Section 3 within 60
days of the grant date, will be forfeited. If the payment required under Section 3 for Shares with a grant date in 2015 has not
been made within 30 days of the grant date those Shares will be forfeited. If one tranche of Shares is forfeited, it will not affect
the grant of any other tranche of Shares.

 

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

 

7.Compliance
with Securities Law. 

 

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

 

b.The
issuance of Shares will be subject to compliance with all applicable requirements of federal, state, or foreign law with respect
to such securities and with the requirements of any stock exchange or market system upon which the Shares may then be listed. No
Shares will be issued hereunder if such issuance would constitute a violation of any applicable federal, state, or foreign securities
laws or other law or regulations or the requirements of any stock exchange or market system upon which the Shares may then be listed.
In addition, Shares will not be issued hereunder unless (i) a registration statement under the Securities Act, is at the time
of issuance in effect with respect to the shares issued or (ii) in the opinion of legal counsel to the Company, the shares issued
may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Act. As a condition
to any issuance hereunder, the Company may require you to satisfy any qualifications that may be necessary or appropriate to evidence
compliance with any applicable law or regulation and to make any representation or warranty with respect to such compliance as
may be requested by the Company. 

 

8.Subdivision
or Consolidation; Recapitalization; Reorganization. 

 

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

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(b)The
Shares subject to grant and delivery under this Agreement shall be subject to adjustment from time to time, in accordance with
the following provisions:

 

(i)If
at any time, or from time to time, the Company shall subdivide as a whole (by reclassification, by a Stock split, by the
issuance of a distribution on Stock payable in Stock, or otherwise) the number of shares of Stock then outstanding into a
greater number of shares of Stock, then the number of shares of Stock (or other kind of shares or securities) to be granted
under Section 1 shall be increased proportionately. 

 

(ii)If
at any time, or from time to time, the Company shall consolidate as a whole (by reclassification, by reverse Stock split or otherwise)
the number of shares of Stock then outstanding into a lesser number of shares of Stock, then the number of shares of Stock (or
other kind of shares or securities) to be granted under Section 1 shall be decreased proportionately.

 

(iii)Adjustments
under Subsections 8(b)(i) and (ii) shall be made by the Company, and its determination as to what adjustments shall be made and
the extent thereof shall be final, binding, and conclusive. No fractional interest shall be issued on account of any such adjustments.

 

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

 

9.Right
of the Company and Subsidiaries to Terminate Services. Nothing in this Agreement confers upon you the right to continue in
the employ of or performing services for the Company or any Subsidiary, or interfere in any way with the rights of the Company
or any Subsidiary to terminate your employment or service relationship at any time. Termination of your consulting relationship
with the Company shall have no effect on your rights under this Agreement.

 

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

 

11.Remedies.
The Company shall be entitled to recover from you reasonable attorneys’ fees incurred in connection with the successful enforcement
of the terms and provisions of this Agreement whether by an action to enforce specific performance or for damages for its breach
or otherwise.

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12.No
Liability for Good Faith Determinations. The Company and the members of the Board shall not be liable for any act, omission
or determination taken or made in good faith with respect to this Agreement or the Shares granted hereunder.

 

13.Execution
of Receipts and Releases. Any payment of cash or any issuance or transfer of shares of Stock or Shares to you, or to your legal
representative, heir, legatee or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such Persons hereunder. The Company may require you or your legal representative, heir, legatee or
distributee, as a condition precedent to such payment or issuance, to execute a release and receipt therefor in such form as it
shall determine.

 

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

 

15.Tax
and Legal Advice. You understand and acknowledge that you should consult and have consulted with your tax and legal advisor
regarding the tax and legal consequences of this Agreement. The Company has not provided tax or legal advice to you with respect
to your personal tax situation or the tax or legal consequences of this Agreement.

 

16.Notices.
All notices required or permitted under this Agreement must be in writing and either personally delivered or sent by e-mail or
recognized national or international courier service with signature required. Notices are delivered for purposes of this Agreement
on the date on which it is actually received by the person to whom it is properly addressed or, if by courier, two days after the
delivery is made and acknowledged. 

 

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

 

18.Transfer,
Assignment, Successors. The Award shall not be transferable other than by will or the laws of descent and distribution. You
may not assign your rights under this Agreement. This Agreement shall be binding upon you, your legal representatives, heirs, legatees
and distributees, and upon the Company, its successors and assigns.

 

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

 

20.Governing
Law. All questions arising with respect to the provisions of this Agreement shall be determined by application of the laws
of Delaware, without giving any effect to any conflict of law provisions thereof, except to the extent Delaware state law is preempted
by federal law. The obligation of the Company to sell and deliver Stock hereunder is subject to applicable laws and to the approval
of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Stock.

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21.Consent
to Jurisdiction and Venue. You hereby consent and agree that courts located in, or having jurisdiction over, Austin, Texas
each shall have personal jurisdiction and proper venue with respect to any dispute between you and the Company arising in connection
with the Restricted Shares or this Agreement. In any dispute with the Company, you will not raise, and you hereby expressly waive,
any objection or defense to any such jurisdiction as an inconvenient forum. 

 

22.Amendment.
This Agreement may only be amended by a writing signed by both you and the Company. If the Company advises that amendment is necessary
or advisable in light of any addition to or change in any federal or state, tax or securities law or other law or regulation, which
change occurs after the date of this Agreement and by its terms applies to the grants of Shares, you will not unreasonably withhold,
delay or condition your consent to the amendment. 

 

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

 

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

 

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

 

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

 

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

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

 

(vi)“Stock”
means the Company’s Common Stock, par value .01 per share, and after the merger with PEN means Class A Common Stock, par
value $0.001 per share, of PEN and such other securities as may be substituted (or resubstituted) for Stock under Section 8.

 

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

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In witness whereof,
the parties have executed this Agreement, or caused it to be duly executed by its authorized representative, on the date first
written above.

 

	 	APPLIED NANOTECH HOLDINGS, INC.
	 	 
	 	 
	 	By: /s/ Robert Ronstadt
	 	Robert Ronstadt, Chairman
	 	 
	 	 
	 	/s/
    Douglas P. Baker
	 	Douglas P. Baker

 

 

 

 

 

 

 

    	6Exhibit 10.5

 

Piggyback Registration
Rights Agreement

 

 

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

 

Background

 

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

 

Agreement

 

Baker and the Company agree:

 

1.Registration
Rights.

 

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

 

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

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

 

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

 

2.Holdback
Agreements.

 

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

 

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

 

3.Registration
Procedures. 

 

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

 

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

 

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

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.Indemnification.

 

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

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

 

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

 

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

 

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

 

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

 

6.Participation
in Underwritten Registrations.

 

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

 

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

    	6

    	 

    

7.Definitions.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8.Miscellaneous.

 

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

 

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

 

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

 

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

    	7

    	 

    

 

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

 

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

 

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

 

If to the Holders, to:

Douglas P. Baker

5154 Springdale Court

Clarkston, MI 48348

 

If to the Company, to:

 

Applied Nanotech Holdings, Inc.

c/o PEN Inc.

9 Diamond Drive

Key West, FL 33040

Attn: Jeanne Rickert, General Counsel

 

With a copy to:

 

Laura Anthony, Esq.

Legal & Compliance, LLC

330 Clematis Street, Suite 217

West Palm Beach, FL 33401

 

 

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

    	8

    	 

    

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

 

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

 

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

 

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

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

    	9

    	 

    

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

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Registration Rights Agreement]

 

    	10

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