Document:

Exhibit 10.21

 

XG SCIENCES, INC.

 

PURCHASE AGREEMENT

 

THIS PURCHASE AGREEMENT
(this “Agreement”), dated as of January 15, 2014 (the “Effective Date”), is entered into
by and between XG SCIENCES, INC., a Michigan corporation, with headquarters located at 3101 Grand Oak Drive, Lansing, Michigan
48911 (the “Company”), and SVIC No. 15 New Technology Business Investment L.L.P., whose principal address is
as set forth in Section 12 herein (the “Buyer”, and together with the Company, the “Parties”).

 

WITNESSETH:

 

WHEREAS, the
Buyer desires to provide $3,000,000 of new financing to the Company in exchange for the form of a secured convertible promissory
note attached as Annex I hereto (the “Note”), of which XG Sciences IP, LLC, the Company’s wholly-owned
Subsidiary (“XGS IP”), shall also be a maker;

 

WHEREAS, in
connection with the Buyer’s purchase of the Note, the Company has agreed to issue to the Buyer a warrant (the “Warrant”)
to purchase 100,000 shares of the Company’s Series A Convertible Preferred Stock (the “Series A Stock”),
with the Warrant being in the form attached hereto as Annex II;

 

WHEREAS, prior
to the Closing Date, the only secured indebtedness of the Company outstanding was held by: (i) Michael Knox (“Knox”),
(ii) Aspen Advanced Opportunity Fund, LP (“Aspen”), and (iii) XGS II, LLC (“XGS II” and collectively
with Knox and Aspen, the “Existing Creditors”), which was issued by the Company in the form of secured convertible
promissory notes (the “Prior Notes”) pursuant to those certain purchase agreements dated March 18, 2013 and
July 12, 2013 (the “Existing Creditor Original Purchase Agreements”), and each of Knox, Aspen and XGS II have
entered into that certain Amended and Restated Intercreditor Agreement effective as of July 12, 2013 (the “Original Intercreditor
Agreement”);

 

WHEREAS, the
Company issued certain warrants to Aspen and XGS II pursuant to the Existing Creditor Original Purchase Agreement (“Prior
Warrants”);

 

WHEREAS, in
connection with the transactions contemplated herein, the Prior Notes shall be consolidated and restated, the Prior Warrants shall
be amended and restated, and the Existing Creditor Original Purchase Agreements each shall be amended and restated (the “Restated
Purchase Agreements”);

 

WHEREAS, the
Existing Creditors have consented to the transactions contemplated herein pursuant to that certain Side Letter dated as of the
Closing Date;

 

WHEREAS, the
Company has granted to the Existing Creditors security interests in the Company’s assets as set forth in that certain amended
and restated security agreement dated as of July 12, 2013 and that certain amended and restated intellectual property security
agreement dated as of July 12, 2013, each of which are by and among the Company and the Existing Creditors (collectively, the “Prior
Security Agreements”);

 

WHEREAS, the
Company and the Buyer desire that the Buyer become a party to and beneficiary of each of the Prior Security Agreements by amending
and restating each of the Prior Security Agreements effective as of the Closing Date in the form of: (A) a Second Amended and Restated
Security Agreement in the form attached hereto as Annex III (the “Security Agreement”); and (B) a Second
Amended and Restated Intellectual Property Security Agreement in the form attached hereto as Annex IV (the “IP
Security Agreement”), each of which shall be by and among the Company, XGS IP, the Existing Creditors, and the Buyer;

 

WHEREAS, the
Company, the Existing Creditors, and the Buyer desire to amend and restate the Original Intercreditor Agreement and enter into
the Second Amended and Restated Intercreditor Agreement attached hereto as Annex VIII (the “Intercreditor Agreement”);
and

 

     

     

    

 

WHEREAS, 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, by Rule 506 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.

 

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.            GENERAL
AGREEMENTS.

 

a.           (i)         On
the Closing Date, the Buyer hereby agrees to purchase from the Company, and the Company hereby agrees to sell to the Buyer, the
Note with a principal amount of $3,000,000 upon and subject to the terms and conditions set forth herein. The Note issued to the
Buyer shall be secured pursuant to the terms of the Security Agreement and the IP Security Agreement.

 

(ii)         On
the Closing Date, the Company shall deliver the Warrant to purchase 100,000 shares of Series A Stock to the Buyer and take the
other actions set forth in Section 7.

 

(iii)        The
loan to be made by the Buyer through the Note and the issuance of the Note and the Warrant (the “Purchased Securities”)
to the Buyer are sometimes referred to herein and in the other Transaction Agreements as the purchase and sale of the Purchased
Securities.

 

b.           Delivery
of Transaction Agreements. Upon the Closing Date, the Company will deliver executed copies of the Transaction Agreements.

 

c.           Certain
Definitions. As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

 

“Affiliate”
means, as to any Person: (a) any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, such Person; (b) any other Person who is a director or officer: (i) of such Person, (ii) of
any subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect to such Person; (c) any other
Person which, directly or indirectly through one or more intermediaries, is the beneficial or record owner (as defined in Rule
13d-3 of the Securities Exchange Act of 1934, as amended (the “1934 Act”), as the same is in effect on the Effective
Date) of five percent (5%) or more of any class of the outstanding voting stock, securities or other equity or ownership interests
of such Person; and (d) in the case such Person is an individual, any other Person who is an immediate family member, spouse or
lineal descendant of individuals of such Person or any Affiliate of such Person. For purposes of this definition, the term “control”
(and the correlative terms, “controlled by” and “under common control with”) shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, whether through
ownership of securities or other interests, by contract or otherwise. “Affiliate” shall include any Subsidiary.

 

“Buyer Control
Person” means the Buyer and each 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.

 

“By-laws”
means the Amended and Restated By-laws of the Company (howsoever denominated), substantially in the form attached hereto as Annex
VI.

 

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

 

“Certificate
of Designations” means the Company’s Amended and Restated Certificate of Designations of Series A Convertible Preferred
Stock, as amended pursuant to this Agreement.

 

“Certificate
of Designations Amendment” means the amendment to the Certificate of Designations, in the form attached hereto as Annex
V.

 

“Closing”
means the closing of the transactions contemplated by this Agreement.

 

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“Closing Date”
means the date of the Closing; the Parties shall use their best efforts to close the transactions contemplated by this Agreement
on or before January 15, 2014.

 

“Common Stock”
means the Company’s common stock, no par value.

 

“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.

 

“Conversion
Shares” means: (i) the shares of Common Stock issued or issuable upon conversion of the Series A Stock (issued or issuable
pursuant to the Purchased Securities), (ii) the shares of Series A Stock issued or issuable upon conversion of the Note or exercise
of the Warrant, or (iii) any or all of them, as the context may require.

 

“Disclosure
Annex” means Annex VII to this Agreement; provided, however, that the Disclosure Annex shall be arranged in sections
corresponding to the identified Sections of this Agreement, but the disclosure in any such section of the Disclosure Annex shall
qualify other provisions in this Agreement to the extent that it would be readily apparent to an informed reader from a reading
of such section of the Disclosure Annex that it is also relevant to other provisions of this Agreement.

 

“Existing
Creditor Term Sheet” means the Summary Term Sheet dated November 20, 2013 between the Company, Aspen, Knox, and XGS II.

 

“Full Conversion”
means the deemed conversion of the Note into Series A Stock and then into Common Stock, the deemed conversion of any outstanding
Series A Stock into Common Stock, and the deemed conversion of all other outstanding convertible debt and convertible equity securities
of the Company into Common Stock.

 

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

 

“Last Audited
Date” means December 31, 2012.

 

“Material
Adverse Effect” means an event or combination of events, which individually or in the aggregate, would reasonably be
expected to: (x) adversely affect the legality, validity or enforceability of the Purchased Securities or any of the Transaction
Agreements, (y) 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 (z) adversely impair the Company’s ability to perform fully on a timely basis
its material obligations under any of the Transaction Agreements or the transactions contemplated thereby.

 

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

 

“Officer’s
Certificate” means the Officer’s Certificate substantially in the form attached hereto as Annex IX.

 

“Purchased
Securities” means the Note and the Warrant.

 

“Registrable
Securities” means shares of Common Stock issuable to the Holder: (x) on conversion of the Series A Stock (issued or issuable
pursuant to the Purchased Securities), or (y) pursuant to any other provision of the Transaction Agreements as of the date of the
filing of the Registration Statement or any amendment thereof.

 

“Registration
Rights Agreement” means the Second Amended and Restated Registration Rights Agreement substantially in the form attached
hereto as Annex X.

 

“Registration
Statement” means a registration statement covering the resale by the Holder of Registrable Securities, including the
S-l Registration Statement.

 

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

 

“Series A
Stock” means Series A Convertible Preferred Stock of the Company.

 

“Shareholder
Agreement” means the shareholder agreement in the form attached hereto as Annex XI. The Parties agree that the
reference to the “Convertible Notes” in the Shareholder Agreement shall be deemed to include the Note that is issued
pursuant to this Agreement.

 

“Shareholder
Stock” and “Shareholder’s Stock” mean the shares of Common Stock, Series A Stock, and other
capital stock of the Company that are now owned or are subsequently acquired by a shareholder by gift; conversion of the Note,
Series A Stock, or other convertible debt or convertible equity securities of the Company; purchase; dividend; exercise of the
Warrant or any other options, warrants or other security or right of any kind convertible into or exchangeable for Common Stock
issued by the Company; or any other means whether or not such securities are only registered in a shareholder’s name or beneficially
or are legally owned by such shareholder, including any interest of a spouse in any Shareholder Stock, whether that interest is
asserted pursuant to marital property laws or otherwise.

 

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

 

“Side Letter”
means the agreement in letter form that is attached as Annex XII.

 

“State of
Incorporation” means Michigan,

 

“Subsidiary”
means, as of the relevant date, any subsidiary of the Company whether now existing or hereafter acquired or created.

 

“Transaction
Agreements” means this Agreement, the Note, the Registration Rights Agreement, the Security Agreement, the IP Security
Agreement, the Warrant, the Certificate of Designations Amendment, the Intercreditor Agreement, the Voting Rights Agreement, the
Side Letter, and the Disclosure Annex and includes all ancillary documents referred to in those agreements, and each of those agreements
as may be amended.

 

“Voting Rights
Agreement” means the Voting Rights Agreement substantially in the form attached as Annex XIII.

 

“Warrant”
means the warrant to purchase Series A Stock, substantially in the form attached as Annex II.

 

2.            BUYER
REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION.

 

The Buyer represents
and warrants to, and covenants and agrees with, the Company, as of the Effective Date and as of the Closing Date, as follows:

 

a.           Without
limiting Buyer’s right to sell the Securities pursuant to an effective registration statement or otherwise in compliance
with the 1933 Act, the Buyer is purchasing the Securities for the Buyer’s own account for investment only and not with a
view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.

 

b.           The
Buyer is: (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under
the 1933 Act; (ii) experienced in making investments of the kind described in this Agreement and the other Transaction Agreements;
(iii) able, by reason of the business and financial experience of the Buyer and the Buyer’s professional advisors (who are
not affiliated with or compensated in any way by the Company or any of its Affiliates or selling agents), to protect the Buyer’s
own interests in connection with the transactions described in this Agreement and the other Transaction Agreements, and to evaluate
the merits and risks of an investment in the Securities; and (iv) able to afford the entire loss of its investment in the Securities.

 

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c.           All
subsequent offers and sales of the Securities by the Buyer shall be made pursuant to registration of the relevant Securities under
the 1933 Act or pursuant to an exemption from such registration.

 

d.           The
Buyer understands and agrees that the Securities have not been registered under the 1933 Act or any applicable state securities
laws, by reason of their issuance in a transaction that does not require registration under the 1933 Act (based in part on the
accuracy of the representations and warranties of the Buyer contained herein), and that such Securities must be held indefinitely
unless a subsequent disposition is registered under the 1933 Act or any applicable state securities laws or is exempt from such
registration. The Buyer understands that the Securities are being offered and sold to the Buyer in reliance on specific exemptions
from the registration requirements of the 1933 Act and state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings
of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire
the Securities.

 

e.           The
Buyer and the Buyer’s advisors, if any, have been furnished with or have been given access to all materials relating to the
business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been
requested by the Buyer, including those set forth in any annex attached hereto. The Buyer and the Buyer’s advisors, if any,
have been afforded the opportunity to ask questions of the Company and its management and have received complete and satisfactory
answers to any such inquiries.

 

f.            The
Buyer understands that its investment in the Securities involves a high degree of risk.

 

g.           The
Buyer hereby represents that, in connection with the Buyer’s investment or the Buyer’s decision to purchase the Securities,
the Buyer has not relied on any statement or representation of any Person, including any such statement or representation by the
Company or any of their respective controlling Persons, officers, directors, partners, agents and employees or any of their respective
attorneys, except as specifically set forth herein.

 

h.           The
Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities or the suitability of the investment in the Securities nor have any such
authorities passed upon or endorsed the merits of the offering of the Securities.

 

i.            This
Agreement and each of the other Transaction Agreements 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 Agreements 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 to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting
the enforcement of creditors’ rights generally.

 

j.            The
offer to sell the Securities was directly communicated to the Buyer by the Company. At no time was the Buyer presented with or
solicited by any leaflet, newspaper or magazine article, radio or television advertisement, or any other form of general advertising
or solicited or invited to attend a promotional meeting otherwise than in connection and concurrently with such communicated offer.

 

k.          The
execution, delivery and performance of this Agreement and the consummation by the Buyer of the transactions contemplated hereby
or relating hereto do not and will not conflict with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of any
agreement, indenture or instrument or obligation to which the Buyer is a party or by which its properties or assets are bound,
or result in a violation of any law, rule, or regulation, or any order, judgment or decree of any court or governmental agency
applicable to such Buyer or its properties (except for such conflicts, defaults and violations as would not, individually or in
the aggregate, have a material adverse effect on the Buyer’s ability to fulfill its obligations under this Agreement or the
other Transaction Agreements). The Buyer is not required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under
this Agreement or to purchase the Securities in accordance with the terms hereof, provided that for purposes of the representation
made in this sentence, the Buyer is assuming and relying upon the accuracy of the relevant representations and agreements of the
Company herein.

 

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l.            The
Buyer is a limited liability partnership under the Amended Korean Commercial Code duly organized, validly existing and in good
standing under the laws of the Republic of Korea and has the requisite power to own its properties and to carry on its business
as now being conducted.

 

m.           “Bad
Actor” Disqualification. The Buyer represents and warrants on behalf of itself and its Affiliates that neither: (x) such
Person; nor (y) any entity that controls such Person or is under the control of, or under common control with, such Person; nor
(z) any director of the Company that has been designated by such Person, if applicable; is subject to any Disqualification Event
(as defined in Section 3(k)(6) below), except for Disqualification Events covered by Rule 506(d)(2)(ii) or (iii) under the 1933
Act and disclosed in writing in reasonable detail to the Company. Buyer represents that it has exercised reasonable care to determine
the accuracy of the representation made by it this Section 2(m) and agrees to notify the Company if it becomes aware of any fact
that makes the representation given by it hereunder inaccurate.

 

3.            COMPANY
REPRESENTATIONS, WARRANTIES, ETC. The Company represents and warrants to the Buyer as of the Effective Date and as of the Closing
Date that, except as otherwise provided in the Disclosure Annex:

 

a.           Rights
of Others Affecting the Transactions. Except as set forth in the Disclosure Annex, there are no preemptive rights of any stockholder
of the Company to acquire the Securities that have not otherwise been waived or adjudicated with any stockholders of the Company.
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 Agreements. Except as set forth in the Disclosure Annex, no Person has, and as of the Closing Date, no Person
shall have, any demand, “piggy-back” or other rights to cause the Company to file any registration statement under
the 1933 Act relating to any of its securities or to participate in any such registration statement.

 

b.           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.

 

c.           Authorized
Shares.

 

(i)          The
capitalization of the Company (including the number of shares of each class of stock which is authorized and the number of such
shares which are outstanding) is as set forth in the Disclosure Annex.

 

(ii)         Except
as set forth in the Disclosure Annex, there are no outstanding securities which are exercisable for, exchangeable for or convertible
into shares of Common Stock or exercisable for, exchangeable for or convertible into instruments which are convertible into shares
of Common Stock, whether such exercise, exchange or conversion is currently exercisable or exercisable only upon some future date
or the occurrence of some event in the future. If any such securities are listed on the Disclosure Annex, the number or amount
of each such outstanding convertible security and the conversion terms are set forth in said Disclosure Annex.

 

(iii)        All
issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and non-assessable.
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 the Note fully converted on that date. In addition, the Company has sufficient authorized and unissued
shares of Common Stock as may be necessary to effect the issuance of any other shares of Common Stock in connection with any other
securities previously issued by the Company that are convertible or exchangeable into Common Stock including all such securities
listed in the Disclosure Annex.

 

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(iv)        The
Shares have been duly authorized by all necessary corporate action on the part of the Company, and, when issued on conversion of,
or in payment of interest on, the Note will have been duly and validly issued, fully paid and non-assessable and will not subject
the Holder thereof to personal liability by reason of being such Holder.

 

d.           Transaction
Agreements and Stock. This Agreement and each of the other Transaction Agreements, 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 and each of the other Transaction Agreements, when executed and delivered by the Company (if
necessary), will be valid and binding obligations of the Company enforceable in accordance with their respective terms, subject
as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting
the enforcement of creditors’ rights generally.

 

e.           Non-contravention.
The execution and delivery of this Agreement and each of the other Transaction Agreements by the Company, the issuance of the Securities
in accordance with the terms hereof, and the consummation by the Company of the other transactions contemplated by this Agreement,
the Note, the Warrant and the other Transaction Agreements 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: (i) the Certificate of Incorporation or By-laws, each as currently
in effect and as amended, (ii) 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 (iii) to its 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 its properties or assets, except such conflict, breach or default which would not have
or result in a Material Adverse Effect. The timely payment of interest on the Note is not prohibited by the Certificate of Incorporation
or By-Laws, or any agreement, contract, document or other undertaking to which the Company is a party.

 

f.            Securities
Law Matters; Approvals.

 

(i)          No
authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange
or market or the stockholders 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.

 

(ii)         Assuming
the accuracy of the representations and warranties of the Buyer set forth in Section 2, the offer and sale by the Company of the
Purchased Securities is exempt from: (A) the registration and prospectus delivery requirements of the 1933 Act and the rules and
regulations of the SEC thereunder, and (B) the registration and/or qualification provisions of all applicable state and provincial
securities and “blue sky” laws.

 

g.           Absence
of Certain Changes. Since the Last Audited Date, there has been no Material Adverse Effect, except as disclosed in the Disclosure
Annex. Since the Last Audited Date, except as provided in the Disclosure Annex, the Company has not: (i) incurred or become subject
to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent
with past practices; (ii) 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,
(iii) 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; (iv) 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; (v) 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; (vi) made any increases in employee compensation, except in the ordinary course of business consistent with
past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions
of their employment.

 

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h.           Full
Disclosure. There is no fact known to the Company (other than conditions disclosed in the Disclosure Annex) that has not been
disclosed in writing to the Buyer that would reasonably be expected to have or result in a Material Adverse Effect.

 

i.            Absence
of Litigation. 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 Agreements. 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. Except as set forth in the Disclosure Annex, there
are no outstanding or unsatisfied judgments, orders, decrees, writs, injunctions or stipulations to which the Company is a party
or by which it or any of its properties is bound, that involve the transaction contemplated herein or that, alone or in the aggregate,
could reasonably be expect to have a Material Adverse Effect.

 

j.            Absence
of Events of Default. Except as set forth in Disclosure Annex, no event of default (or its equivalent term), as defined in
the respective agreement to which the Company or its Subsidiary is a party, and no event which, with the giving of notice or the
passage of time or both, would become an event of default (or its equivalent term) (as so defined in such agreement), has occurred
and is continuing, which would have a Material Adverse Effect.

 

k.          Absence
of Certain Company Control Person Actions or Events. To the Company’s knowledge, except as disclosed in the Disclosure
Annex, none of the following has occurred during the past two (2) years with respect to a Company Control Person:

 

(1) 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 was a general
partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive
officer at or within two years before the time of such filing;

 

(2) 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);

 

(3) 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 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;

 

(4) 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) days the right of such Company Control Person to engage
in any activity described in paragraph (3) of this item, or to be associated with Persons engaged in any such activity; or

 

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(5) 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.

 

(6) The Company has exercised
reasonable care to determine whether any Company Covered Person (as defined below) is subject to any of the “bad actor”
disqualifications described in Rule 506(d)(l)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under the 1933 Act
(“Disqualification Events”). To the Company’s knowledge, no Company Covered Person is subject to a Disqualification
Event. The Company has complied, to the extent required, with any disclosure obligations under Rule 506(e) under the 1933 Act.
For purposes of this Agreement, “Company Covered Persons” are those persons specified in Rule 506(d)(1) under the 1933
Act; provided, however, that Company Covered Persons do not include (a) the Buyer, (b) any person or entity that is deemed to be
an affiliated issuer of the Company solely as a result of the relationship between the Company and the Buyer, or (c) any director
of the Company that has been designated by the Buyer.

 

l.            No
Undisclosed Liabilities or Events. The Company has no liabilities or obligations other than those disclosed in the Transaction
Agreements 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 law, rule or regulation, requires public disclosure or announcement prior to the Effective Date 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,
other than as contemplated in the Transaction Agreements: (x) change the Certificate of Incorporation or the By-laws (except for
the By-law restatement contemplated in connection with the consummation of the transactions contemplated herein as set forth in
Annex VI), 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 (y) materially or substantially change the business,
assets or capital of the Company, including its interests in subsidiaries. All unsatisfied judgments against the Company are disclosed
in the Disclosure Annex.

 

m.           No
Integrated Offering. Neither the Company nor any of its Affiliates nor any Person acting on its or their behalf has, directly
or indirectly, at any time since January 1, 2007, made any offer or sales of any security or solicited any offers to buy any 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.

 

n.           Dilution.
Each of the Company and its executive officers and directors is aware that the number of Conversion Shares issuable on conversion
of the Note into Series A Stock, exercise of the Warrant for Series A Stock, or the conversion of Series A Stock into Common Stock,
or pursuant to the other terms of the Transaction Agreements 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
obligation to issue the Conversion Shares upon such instances is 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, but not necessarily limited to, honoring every notice of conversion (as contemplated by the Note or the Series A Stock)
or notice of exercise (as contemplated by the Warrant), unless the Company is subject to an injunction (which injunction was not
sought by the Company) prohibiting the Company from doing so.

 

o.           Fees
to Brokers, Finders and Others. 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 paragraph that may be due in connection with the transactions
contemplated hereby except such fees as set forth on the Disclosure Annex. The Company shall indemnify and hold harmless each of
Buyer, its employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims,
losses, damages, costs (including the costs of preparation and attorney’s fees) and expenses suffered in respect of any such
claimed or existing fees.

 

    	 	9	 

     

    

  

p.           Tax
Returns. The Company and each of its Subsidiaries has made and filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject and (unless and only to the extent that the Company
and each of its Subsidiaries has set aside on its books provisions reasonably adequate for the payment of all unpaid and unreported
taxes) has paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in good faith and has set aside on its books provision
reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations
apply. Except as disclosed on the Disclosure Annex, there are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of the Company know of no basis for any such claim.

 

q.           Disclosure.
All information relating to or concerning the Company set forth in the Transaction Agreements 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 or is about to occur
which has resulted in or would result in an Material Adverse Effect with respect to the Company or its business, properties, prospects,
operations or financial conditions, which has not been disclosed on the Disclosure Annex.

 

r.            Existence
of Other Secured Indebtedness. The Company represents and warrants that other than holders of Permitted Liens (as defined in
the Note) (a) there are no other secured creditors of the Company except for the Buyer, Aspen, Knox, and XGS II, and (b) all of
such other secured creditors have each executed the Security Agreement, the IP Security Agreement and the Intercreditor Agreement.

 

s.          Anti-Dilution
Rights of Holders of Convertible Debt and Other Equity-Linked Securities Issued by the Company. The Company represents and
warrants that, except as set forth in the Disclosure Annex, no convertible debt or other equity-linked securities, including, but
not limited to warrants to purchase common stock, containing any kind of anti-dilution or conversion price or exercise price reset
mechanism triggered by subsequent issuance of equity-linked securities to third parties have been previously issued to any parties.

 

t.            Shareholder
Agreement. The Company represents and warrants that at least ninety percent (90%) of its existing shareholders have executed
the Shareholder Agreement prior to the Closing Date.

 

u.           Certificate
of Designation. The Company represents and warrants that the Certificate of Designation Amendment has been approved by the
Board of Directors as of the Closing Date and will be filed with the State of Michigan as of the Closing Date.

 

4.            CERTAIN
COVENANTS AND ACKNOWLEDGMENTS.

 

a.           Transfer
Restrictions. The Buyer acknowledges that: (1) the Purchased Securities have not been and are not being registered under the
provisions of the 1933 Act and 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 such registration, (2) any sale of the Securities made in reliance on Rule 144 of
the 1933 Act may be made only in accordance with the terms of said rule and further, if said 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 (3) 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 except pursuant to this Agreement.

 

b.           Restrictive
Legend. The Buyer acknowledges and agrees that, until such time as the relevant Conversion Shares have been registered under
the 1933 Act and may be sold in accordance with an effective registration statement, or until such Conversion Shares can otherwise
be sold without restriction, whichever is earlier, the certificates and other instruments representing any of the Purchased 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):

 

    	 	10	 

     

    

 

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS IN ACCORDANCE WITH APPLICABLE REGISTRATION REQUIREMENTS OR AN EXEMPTION THEREFROM. THE ISSUER OF THESE SECURITIES
MAY REQUIRE AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER THAT SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THIS CERTIFICATE MUST BE SURRENDERED TO THE COMPANY OR
ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE, TRANSFER, PLEDGE OR HYPOTHECATION OF ANY INTEREST IN ANY OF THE SECURITIES
REPRESENTED HEREBY.

 

c.           Filings.
The Company undertakes and agrees to make all filings required to be made by it in connection with the sale of the Purchased Securities
to the Buyer under the 1933 Act, the 1934 Act or any United States state securities laws and regulations thereof applicable to
the Company or by the rules and regulations of any securities exchange on which its securities are listed.

 

d.           Use
of Proceeds. The Company will use the net proceeds received hereunder for general corporate purposes, including growth and
capital initiatives.

 

e.           Available
Shares. The Company shall have at all times authorized and reserved for issuance, free from preemptive rights, a number of
shares (the “Reserved Amount”) at least equal to the sum of: (y) one hundred ten percent (110%) of the Series
A Stock issuable upon conversion of the Note and exercise of the Warrant, and (z) one hundred ten percent (110%) of the number
of shares of Common Stock issuable upon conversion of the Series A Stock, at any time, to satisfy the rights of the Holders of
any of the Purchased Securities through the maturity date of each such security plus interest thereon through the maturity date
(in each case, whether any of such outstanding Purchased Securities were originally issued to the Holder, the Buyer or to any other
party and without regard to any restrictions which might limit any Holder’s right to convert any of the Purchased Securities
held by such Holder). The Company shall give written instructions to its transfer agent, if any, to reserve for issuance to the
Buyer the number of shares equal to the Reserved Amount. The Company will, at the request of the Buyer, provide written confirmation,
certified by an executive officer of the Company, of the number of shares then reserved for the Buyer and that the instructions
referred to in the preceding sentence have been given to the Company’s transfer agent, if any.

 

f.            Registration
Rights Agreement. The Company shall have entered into the Registration Rights Agreement with the Buyer and the Existing Creditors
effective as of the Closing Date.

 

g.           Publicity,
Filings, Releases, Etc. Each of the Parties agrees that it will not disseminate any information relating to the Transaction
Agreements 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.

 

h.           Keeping
of Records and Books of Account. The Company shall keep and cause each Subsidiary, if any, to maintain a standard and uniform
system of accounting and to keep adequate records and books of account, in which complete entries will be made in accordance with
GAAP consistently applied, reflecting ail 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.

 

    	 	11	 

     

    

 

i.            Transactions
with Affiliates. While the Note is outstanding, neither the Company nor any of its Subsidiaries shall, directly or indirectly,
enter into any material transaction or agreement with any stockholder, officer, director or Affiliate of the Company or family
member of any officer, director or Affiliate of the Company, unless the transaction or agreement is: (i) reviewed and approved
by a majority of Independent Directors (as such term is hereinafter defined), and (ii) on terms no less favorable to the Company
or the applicable Subsidiary than those obtainable from a non-affiliated person. The term “Independent Director”
means a director who is not an executive officer or employee of the Company and who does not have a relationship that, in the reasonable
opinion of the Company’s board of directors, would interfere with the person’s exercise of independent judgment in
carrying out his or her responsibilities as a director. A director nominated by the Buyer, Aspen, POSCO, or Hanwha Chemical Company
is not an Independent Director.

 

j.            Certain
Restrictions. While the Note is outstanding, without the consent of the Buyer no dividends shall be declared or paid or set
apart for payment nor shall any other distribution be declared or made upon any capital stock of the Company, nor shall any capital
stock of the Company be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of shares
of Common Stock made for purposes of an employee incentive or benefit plan (including a stock option plan) of the Company or pursuant
to the security agreements, if any, listed on the Disclosure Annex) for any consideration by the Company, directly or indirectly,
nor shall any moneys be paid to or made available for a sinking fund for the redemption of any Common Stock.

 

k.           Information
Rights. So long as the Buyer holds any Securities of the Company, the Company will deliver to the Buyer audited annual and
unaudited quarterly financial statements, annual budgets and other information reasonably requested by Buyer or any Affiliates
thereof. The Company shall also permit the Buyer or its authorized representatives, to visit and inspect the properties of the
Company, including its corporate and financial records, and to discuss its business and finances with officers of the Company and
make copies of any financial or other business records that the Buyer deems appropriate in its sole discretion, during normal business
hours following reasonable notice and as often as may be reasonably requested. Notwithstanding the forgoing, Buyer agrees that
it will enter into a mutually satisfactory form of confidentiality agreement prior to making any copies of records, if requested
by the Company.

 

l.            Expenses.
If the transactions contemplated herein close on the Closing Date, then the Company agrees that it will reimburse the Buyer for
all fees and expenses in connection with these transactions promptly upon submission of proof of such expenses but in no case later
than fifteen (15) business days after such submission. Such fees and expenses will include all legal and accounting fees, documentary
stamp taxes, UCC filing fees and such other out of pocket expenses; provided, however, that such reimbursements will not exceed
$65,000 in the aggregate.

 

m.          Preemptive
Rights. The Company agrees that it will open a new round of preemptive rights financing pursuant to which the Company’s
stockholders will be permitted to purchase one (1) share of Series A Stock at a purchase price of $12 per share (each a “Preemptive
Share”) for every two (2) shares of Series A Stock and/or Common Stock owned by such stockholder on the Closing Date.
Furthermore, for every two (2) Preemptive Shares purchased by a stockholder, the Company will issue that stockholder a warrant
to purchase one (1) additional share of Series A Stock substantially in the form attached hereto as Annex XIV (the “Preemptive
Warrants”). The preemptive rights granted in this section will expire on March 31, 2014. The Company shall also retroactively
issue Preemptive Warrants, on the same terms set forth herein, to those stockholders who participated in the preemptive rights
round expiring on October 31, 2013.

 

n.           Registration
Statement on Form S-l. The Company agrees to use its best efforts to complete and file an initial Registration Statement on
Form S-1 (the “S-1 Registration Statement”) with the U.S. Securities and Exchange Commission to register shares
of the Company’s Common Stock, consisting of such shares identified by and agreed to by the Buyer, before March 31, 2014
or such other date as may be mutually agreed upon by the Parties in writing. The Company further agrees that it will use commercially
reasonable efforts to clear any comments that the SEC may have during the registration process and have such S-1 Registration Statement
declared effective by June 30, 2014.

 

    	 	12	 

     

    

 

o.           Public
Listing of the Company’s Common Stock. Providing that the SEC has declared the S-1 Registration Statement effective by
such time, the Company agrees to use its best efforts to have its Common Stock become publicly-traded on the New York Stock Exchange,
the NYSE Amex, or the NASDAQ Capital Market, or become qualified by and quoted on the OTCQB, OTCQX, or OTC PINK marketplace operated
by the OTC Markets Group, Inc. or any successor thereto, before June 30, 2014 or such other date that as may be mutually agreed
upon.

 

p.           Access
to Monthly Financial Records. The Company agrees that it will provide its monthly unaudited financial statements to the Buyer
upon reasonable request therefore or enable a mechanism whereby representatives of the Buyer can remotely access the Company’s
general ledger accounting during all times that either: (a) the Note is outstanding, or (b) the Buyer and its Affiliates own ten
percent (10%) or more of the aggregate outstanding Shareholder Stock (calculated on a Full Conversion basis).

 

q.           Most
Favored Nation. If the Company sells or licenses the Company’s products, services, property, or technology (the “Company
Products”) to Samsung or an Affiliate of Samsung, then the terms and conditions of such sale or license, including price
and discounts, will be more favorable when taken as a whole than the terms and conditions that are provided under comparable business
conditions and purchase volumes to similarly situated customers or licensees of the Company that are purchasing or licensing, as
applicable, the same (in all material respects) Company Products. The right granted in this subparagraph q will expire on the earlier
of: (A) the fifth (5th) anniversary of the Closing Date of this Agreement, or (B) the date of the closing of: (y) the
sale, lease or other disposition of all or substantially all of the assets of the Company, or (z) a merger, acquisition, or other
similar transaction in which the holders of Shareholder Stock immediately before the closing of such transaction own less than
a majority of the voting power of the entity surviving such transaction.

 

r.            Merger
and Acquisition Notification. If the Company receives or initiates an Acquisition Proposal, then the Company must give written
notice of the Acquisition Proposal to the Buyer and Aspen within 48 hours after receiving or initiating the Acquisition Proposal
(the “M&A Notice”). The M&A Notice shall state: (i) the primary business of the Persons that would be
parties to the transaction contemplated in the Acquisition Proposal (but excluding the name of such business or Person), and (ii)
the implied value of the transaction contemplated in the Acquisition Proposal, plus or minus twenty percent (20%). “Acquisition
Proposal” means: (i) the receipt of a bona fide offer whereby the Company would: (y) be a party to a merger, consolidation,
or other business combination, whereby the holders of Shareholder Stock immediately prior to such transaction would have beneficial
ownership of less than a majority of the combined voting power of the surviving entity following such transaction, or (z) sell,
lease, or otherwise dispose of all or substantially all of its assets; or (ii) the approval by the Board of Directors of the making
of an offer to a Person, other than Aspen or any existing Company stockholder, to (y) sell forty percent (40%) or more of the total
voting power of the Company, or (ii) sell, lease, or otherwise dispose of all or substantially all of the Company’s assets.
The right of the Buyer and Aspen to receive an M&A Notice shall cease upon the earlier of: (i) the date of the listing of the
Company’s securities pursuant to a Registration Statement filed by the Company under the 1933 Act, or (ii) provided that
the Company has complied with the provisions of this subparagraph, the date of closing of any transaction contemplated in an Acquisition
Proposal.

 

s.          Joint
Development Agreements. The Buyer shall assist the Company in negotiating and entering into one or more Joint Development
Agreements (“JDA”) with Samsung SDI Co., Ltd. (“Samsung SDI”) or other Affiliates of the Buyer
on terms that are mutually acceptable and negotiated in good faith. Any JDA between the Company and Samsung SDI or other Affiliate
of the Buyer (each a “Samsung Affiliate”) shall include the terms set forth in 1. through 4. below:

 

1.          The
JDA will be governed by the laws of the United States of America.

 

2.          The
Company and the Samsung Affiliate will each retain sole ownership of their respective Background IP. “Background IP”
means any and all data, drawings, processes, materials, methods, know-how, inventions, discoveries, ideas and other technical
information which: (i) is developed before the effective date of the applicable JDA, and (ii) the Company or the Samsung Affiliate
has the right to disclose and grant licenses or sublicenses to the other party without any obligations.

 

    	 	13	 

     

    

 

3.          Sole
Foreground IP will be solely owned by the party who developed it and such party shall be solely responsible for determining whether
to make patent applications with respect thereto and shall bear the costs in respect thereof. “Sole Foreground IP”
means any Foreground IP that is separately conducted at one party’s own facilities without incorporating and/or embodying
proprietary and confidential information of the other party’s Background IP provided by the other party. “Foreground
IP” means any inventions, creations, modifications, derivatives, improvements, enhancements, know-how, idea, method or
other technology, including any and all intellectual property rights thereto, which arise out of development work under any JDA.

 

4.          Joint
Foreground IP will be co-owned by the Company and the Samsung Affiliate and such parties will negotiate the remaining rights and
terms governing the use of the Joint Foreground IP in good faith pursuant to the applicable JDA. “Joint Foreground IP”
means any Foreground IP that is conducted jointly at either party’s facilities, or conducted separately by one party at that
party’s own facilities but incorporating and/or embodying proprietary and confidential information of the other party’s
Background IP provided by the other party or contained in written information proven to be provided by the other party.

 

The covenants
set forth in this subparagraph 4.s. shall survive any conversion of the Note into Conversion Shares; provided that such survival
shall not affect the terms of any JDA between the Company and a Samsung Affiliate.

 

t.            JDA
Output Exclusivity. If Joint Foreground IP is developed under any JDA between the Company and a Samsung Affiliate, then the
Samsung Affiliate shall have the right of first refusal to commercialize any such JDA output on an exclusive basis for a period
equal to the lesser of: (a) two years from the date of the originally contemplated contractual end of the JDA, or (b) three years
from the date of the execution of the original JDA. If the Buyer or the Samsung Affiliate does not agree to “begin commercializing”
any such JDA output within six months of the date on which such JDA output has been finalized, then the Company will be free to
sell such JDA output to other third parties at its discretion. The Parties will negotiate a definition of the phrase “begin
commercializing” in good faith as part of the JDA, and such term will identify measurable criteria (e.g., size of orders
placed by the Samsung Affiliate with the Company) such that an independent third party could readily ascertain whether the Buyer
or the Samsung Affiliate has begun commercializing the JDA output.

 

u.           Board
Rights. If there is a vacancy on the Company’s board of directors on the Closing Date that may be filled by the members
of the board of directors, then the Company will use its best efforts to have appointed a person that is mutually acceptable to
Samsung and the Company to fill such vacancy until the next election of directors. If there is not a vacancy on the Company’s
board of directors on the Closing Date, then the Company will use its best efforts to cause shareholders owning a majority of the
aggregate outstanding Shareholder Stock to appoint a director for a term of one-year that is mutually acceptable to the Company
and Samsung.

 

The Company
will use its best efforts to cause shareholders owning a majority of aggregate outstanding Shareholder Stock to enter into the
Voting Agreement in the form attached as Annex XIII, granting Samsung the right to appoint one director in certain circumstances
(the “Samsung Director”). In any event, for so long as Samsung owns 5% or more of the aggregate
outstanding Shareholder Stock (assuming Full Conversion, but excluding Shareholder Stock issuable to Samsung pursuant to unexercised
warrants) but a Samsung Director has not been appointed, then Samsung will have the right to appoint one person to act as a non-voting
observer at all regular and special meetings of the Company’s Board of Directors. The observer will receive all the information
a director of the Company receives for any regular and special meetings of the Company’s Board of Directors or in connection
with any written consent to be executed by such Board of Directors. The observer shall execute a non-competition and non-disclosure
agreement in such form as is reasonably acceptable to the Company. The observer shall be automatically recused from discussions
by the Company’s Board of Directors that relate to customers or potential customers of the Company that are in competition
with Samsung or any projects relating to such competitive customers.

 

The covenants
set forth in this subparagraph 4.u. shall survive any conversion of the Note into Conversion Shares; provided that such survival
shall not affect the terms of the Voting Agreement.

 

5.           CONDITIONS
TO THE COMPANY’S OBLIGATION TO CLOSE.

 

The Buyer understands
that the Company’s obligation to consummate the transactions contemplated in this Agreement is conditioned upon the fulfillment
on or before Closing of each of the following conditions:

 

    	 	14	 

     

    

 

a.           The
execution of an amendment and restatement of the Purchase Agreement dated July 12, 2013 between the Company and XGS II, as contemplated
in principal in the Existing Creditor Term Sheet.

 

b.           The
execution of an amendment and restatement of the Amended and Restated Purchase Agreement dated July 12, 2013 between the Company
and Aspen, as contemplated in principal in the Existing Creditor Term Sheet.

 

c.           The
satisfaction or completion of all other actions in the Existing Creditor Term Sheet that are contemplated in principal to be satisfied
or completed on or before the Closing Date.

 

d.           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.

 

e.           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.

 

f.            The
execution and delivery of this Agreement and the other Transaction Agreements by the Buyer and the other necessary parties on or
before the Closing Date.

 

g.           Each
of the Transaction Agreements executed by the Buyer on or before the Closing Date shall, except for the Voting Rights Agreement,
be in full force and effect and the Buyer shall not be in default thereunder.

 

6.           CONDITIONS
TO THE BUYER’S OBLIGATION TO CLOSE.

 

The Company
understands that the Buyer’s obligation to consummate the transactions contemplated this Agreement is conditioned upon the
fulfillment on or before Closing of each of the following conditions:

 

a.           The
issuance of a restated Secured Convertible Promissory Note to Aspen by the Company that replaces all notes previously issued to
Aspen, including such notes dated March 18, 2013; April 3, 2013; April 12, 2013; April 26, 2013; July 29, 2013; September 30, 2013;
October 15, 2013; December 2, 2013; and January 7, 2014, as may be adjusted by the Second Amended and Restated Purchase Agreement
between the Company and Aspen dated January 15, 2014.

 

b.           The
issuance of a restated Secured Convertible Promissory Note to Knox by the Company that replaces the note dated March 18, 2013.

 

c.           The
issuance of a restated Secured Convertible Promissory Note to XGS II by the Company that replaces the note dated October 15, 2013,
as may be adjusted by the Second Amended and Restated Purchase Agreement between the Company and Aspen dated January 15, 2014.

 

d.           The
issuance, pursuant to the Existing Creditor Term Sheet, of a new warrant to Aspen for the purchase of up to 833,333 shares of Series
A Stock.

 

e.           The
issuance, pursuant to the Existing Creditor Term Sheet, of a new warrant to XGS II for the purchase of up to 83,333 shares of Series
A Stock.

 

f.            The
satisfaction or completion of all other actions in the Existing Creditor Term Sheet that are contemplated in principal to be satisfied
or completed on or before the Closing Date.

 

g.           The
execution and delivery of this Agreement and the other Transaction Agreements by the Company and the other necessary parties on
or before the Closing Date.

 

    	 	15	 

     

    

 

h.           Each
of the Transaction Agreements executed by the Company on or before the Closing Date shall, except for the Voting Rights Agreement,
be in full force and effect and the Company shall not be in default thereunder,

 

i.            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 Agreements, 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.

 

j.            The
Company shall have delivered to the Buyer an Officer’s Certificate similar in form and substance as that attached hereto
as Annex IX.

 

k.          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, including, but not limited to, any new regulations which may be promulgated
after the date of this Agreement under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

l.            The
Certificate of Designation Amendment shall have been filed with the State of Michigan.

 

7.           CLOSING
ACTIONS.

 

a.           Company’s
Closing Actions. At Closing, the Company shall execute and deliver to the Buyer the Note and Officer’s Certificate.

 

b.           Buyer’s
Closing Actions. At Closing, the Buyer will pay the Company $3,000,000 in exchange for the Note.

 

c.           Joint
Company’s and Buyer’s Closing Actions. At Closing, the Company and Buyer will execute and deliver: (i) this Agreement
if not already executed and delivered, (ii) the Warrant, (iii) the Intercreditor Agreement (along with the Existing Creditors),
(iv) the Security Agreement (along with the Existing Creditors), (v) the IP Security Agreement (along with the Existing Creditors),
(vi) the Registration Rights Agreement (along with the Existing Creditors), and (vii) the Side Letter (along with the Existing
Creditors). The Company will use its best efforts to have the Voting Rights Agreement executed by shareholders owning a majority
of aggregate outstanding Shareholder Stock as soon as practicable following Closing.

 

8.           INDEMNIFICATION
AND REIMBURSEMENT.

 

a.           (i)  The
Company agrees to indemnify and hold harmless the Buyer and its officers, directors, employees, and agents, and each Buyer Control
Person 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, its partners, Affiliates, officers, directors, employees,
and duly authorized agents, and any such Buyer Control Person becomes subject to, 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 Company
contained in this Agreement, as such Damages are incurred, except to the extent such Damages result primarily from Buyer’s failure
to perform any covenant or agreement contained in this Agreement or the Buyer’s or its officer’s, director’s, employee’s,
agent’s or Buyer Control Person’s illegal or willful misconduct, gross negligence, recklessness or bad faith (in each
case, as determined by a non-appealable judgment to such effect) in performing its obligations under this Agreement.

 

    	 	16	 

     

    

 

(ii)   The
Company hereby agrees that, if the Buyer, other than by reason of its gross negligence or willful misconduct (in each case, as
determined by a non-appealable judgment to such effect), (x) becomes involved in any capacity in any action, proceeding or investigation
brought by any stockholder of the Company, in connection with or as a result of the consummation of the transactions contemplated
by this Agreement or the other Transaction Agreements, or if the Buyer is impleaded in any such action, proceeding or investigation
by any Person, or (y) becomes involved in any capacity in any action, proceeding or investigation brought by the SEC, any self-regulatory
organization or other body having jurisdiction, against or involving the Company or in connection with or as a result of the consummation
of the transactions contemplated by this Agreement or the other Transaction Agreements, or (z) is impleaded in any such action,
proceeding or investigation by any Person, then in any such case, the Company shall indemnify, defend and hold harmless the Buyer
from and against and in respect of all losses, claims, liabilities, damages or expenses resulting from, imposed upon or incurred
by the Buyer, directly or indirectly, and reimburse such Buyer for its reasonable legal and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith, as such expenses are incurred. The indemnification and
reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise
have, shall extend upon the same terms and conditions to any Affiliates of the Buyer who are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees and Buyer Control Persons (if any), as the case may be, of the Buyer
and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives
of the Company, the Buyer, any such Affiliate and any such Person. The Company also agrees that neither the Buyer nor any such
Affiliate, partner, director, agent, employee or Buyer Control Person shall have any liability to the Company or any Person asserting
claims on behalf of or in right of the Company in connection with or as a result of the consummation of this Agreement or the other
Transaction Agreements, except as may be expressly and specifically provided in or contemplated by this Agreement.

 

b.           All
claims for indemnification by any Indemnified Party (as defined below) under this Section shall be asserted and resolved as follows:

 

(i)          In
the event any claim or demand in respect of which any Person claiming indemnification under any provision of this Section (an “Indemnified
Party”) might seek indemnity under paragraph (a) of this Section is asserted against or sought to be collected from such
Indemnified Party by a Person other than a Party hereto or an Affiliate thereof (a “Third Party Claim”), the
Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if any, and specifying the nature
of and basis for such Third Party Claim and for the Indemnified Party’s claim for indemnification that is being asserted under
any provision of this Section against any Person (the “Indemnifying Party”), together with the amount or, if
not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim (a “Claim
Notice”) within ten (10) days of receipt of the Third Party Claim to the Indemnifying Party. If the Indemnified Party
fails to provide the Claim Notice with within said period, the Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to such Third Party Claim to the extent that the Indemnifying Party’s ability to defend has been prejudiced
by such failure of the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party as soon as practicable within
the period ending thirty (30) calendar days following receipt by the Indemnifying Party of either a Claim Notice or an Indemnity
Notice (as defined below) (the “Dispute Period”) whether the Indemnifying Party disputes its liability or the
amount of its liability to the Indemnified Party under this Section and whether the Indemnifying Party desires, at its sole cost
and expense, to defend the Indemnified Party against such Third Party Claim. The following provisions shall also apply.

 

(x)  If the Indemnifying
Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party
with respect to the Third Party Claim pursuant to this paragraph (b) of this Section, then the Indemnifying Party shall have the
right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying
Party, such Third Party Claim by all appropriate proceedings, which proceedings shall be vigorously and diligently prosecuted by
the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the
consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary
damages or that provides for the payment of monetary damages as to which the Indemnified Party shall not be indemnified in full
pursuant to paragraph (a) of this Section). The Indemnifying Party shall have full control of such defense and proceedings, including
any compromise or settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified
Party, at any time prior to the Indemnifying Party’s delivery of the notice referred to in the first sentence of this subparagraph
(x), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary
or appropriate protect its interests; and provided further, that if requested by the Indemnifying Party, the Indemnified Party
will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting
any Third Party Claim that the Indemnifying Party
elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim
controlled by the Indemnifying Party pursuant to this subparagraph (x), and except as provided in the preceding sentence, the Indemnified
Party shall bear its own costs and expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified
Party may take over the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives its right
to indemnity under paragraph (a) of this Section with respect to such Third Party Claim.

 

    	 	17	 

     

    

  

(y)  If the Indemnifying
Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party
Claim pursuant to paragraph (b) of this Section, or if the Indemnifying Party gives such notice but fails to prosecute vigorously
and diligently or settle the Third Party Claim, each in a reasonable manner, or if the Indemnifying Party fails to give any notice
whatsoever within the Dispute Period, then the Indemnified Party shall have the right to defend, at the sole cost and expense of
the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings shall be prosecuted by the Indemnified
Party in a reasonable manner and in good faith or will be settled at the discretion of the Indemnified Party (with the consent
of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such
defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified
Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the
Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding
the foregoing provisions of this subparagraph (y), if the Indemnifying Party has notified the Indemnified Party within the Dispute
Period that the Indemnifying Party disputes its liability or the amount of its liability hereunder to the Indemnified Party with
respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in
subparagraph(z) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party’s defense
pursuant to this subparagraph (y) or of the Indemnifying Party’s participation therein at the Indemnified Party’s request, and
the Indemnified Party shall reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying
Party in connection with such litigation. The Indemnifying Party may participate in, but not control, any defense or settlement
controlled by the Indemnified Party pursuant to this subparagraph (y), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation.

 

(z)  If the Indemnifying
Party notifies the Indemnified Party that it does not dispute its liability or the amount of its liability to the Indemnified Party
with respect to the Third Party Claim under paragraph (a) of this Section or fails to notify the Indemnified Party within the Dispute
Period whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party with respect
to such Third Party Claim, the amount of Damages specified in the Claim Notice shall be conclusively deemed a liability of the
Indemnifying Party under paragraph (a) of this Section and the Indemnifying Party shall pay the amount of such Damages to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such
claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute;
provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall
be entitled to institute such legal action as it deems appropriate.

 

    	 	18	 

     

    

 

(ii)         In
the event any Indemnified Party should have a claim under paragraph (a) of this Section against the Indemnifying Party that does
not involve a Third Party Claim, the Indemnified Party shall deliver a written notification of a claim for indemnity under paragraph
(a) of this Section specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable,
the estimated amount, determined in good faith, of such claim (an “Indemnity Notice”) within 10 days of discovery
of said claim to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such
party’s rights hereunder except to the extent that the Indemnifying Party demonstrates that it has been irreparably prejudiced
thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim or the amount of the claim
described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying
Party disputes the claim or the amount of the claim described in such Indemnity Notice, the amount of Damages specified in the
Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under paragraph (a) of this Section and the
Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely
disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party
shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved within
thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.

 

c.           The
indemnity agreements contained herein shall be in addition to (i) any cause of action or similar rights of the Indemnified Party
against the Indemnifying Party or others, and (ii) any liabilities the Indemnifying Party may be subject to.

 

9.          JURY
TRIAL WAIVER. The Company and the Buyer hereby waive a trial by jury in any action, proceeding or counterclaim brought by either
of the Parties hereto against the other in respect of any matter arising out or in connection with the Transaction Agreements.

 

10.         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 Agreements 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
(except as specified below) the necessity to post a bond, to prevent or cure breaches of the provisions of this Agreement or such
other Transaction Agreement 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 notice
of conversion or a notice of exercise, may not fail or refuse to deliver the stock certificates and the related legal opinions,
if any, or if there is a claim for a breach by the Company of any other provision of this Agreement or any of the other Transaction
Agreements, the Company shall not raise as a legal defense, based on any claim that the Holder or anyone associated or affiliated
with the Holder has violated any provision hereof or any other Transaction Agreement, has engaged in any violation of law or for
any other reason, 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 said stock certificates to the Holder. The proceeds
of such bond shall be payable to the Holder to the extent that the Holder obtains judgment or its 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 Agreements as if set forth therein
in full.

 

11.         GOVERNING
LAW: MISCELLANEOUS.

 

a.           This
Agreement shall be governed by and interpreted in accordance with the laws of the State of Michigan for contracts to be wholly
performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the Parties
consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of Ingham County or the state courts
of the State of Michigan sitting in Ingham County in connection with any dispute arising under this Agreement or any of the other
Transaction Agreements and hereby waives, to the maximum extent permitted by law, any objection, including any objection based
on forum non conveniens, 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. To the extent determined by such court, the Company shall reimburse the Buyer for any
reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under any of
the Transaction Agreements. Nothing in this Section shall affect or limit any right to serve process in any other manner permitted
by law.

 

b.           Failure
of any Party to exercise any right or remedy under this Agreement or otherwise, or delay by a Party in exercising such right or
remedy, shall not operate as a waiver thereof.

 

    	 	19	 

     

    

 

c.           This
Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the Parties hereto. The Buyer
shall have the right to assign all or any portion of this Agreement, the Note, the Warrant, any Conversion Shares, the Registration
Rights Agreement, and (only with the written consent of the Company except with respect to an assignment to an Affiliate of the
Buyer) the Voting Rights Agreement to: (a) any Affiliate of the Buyer, (b) any investors in the Buyer or its direct assignees,
or (c) any other “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under
the 1933 Act.

 

d.           All
pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

 

e.           This
Agreement may be signed in one or more counterparts, each of which shall be deemed an original.

 

f.            A
facsimile or other electronic transmission of this signed Agreement shall be legal and binding on all Parties hereto.

 

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

 

h.           If
any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, 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.

 

i.            This
Agreement may be amended only by an instrument in writing signed by the Party to be charged with enforcement thereof.

 

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

 

12.         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 confirmed facsimile transmission,

 

b.           the
fifth (5th) calendar day after deposit, postage prepaid, in the United StatesPostal Service by registered or certified
mail, or

 

c.           the
third calendar day after mailing by domestic or international express courier, with delivery costs and fees prepaid,

 

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 ten
(10) days’ advance written notice similarly given to each of the other Parties hereto):

 

	COMPANY:	XG Sciences, Inc.
	 	Attn: Chief Executive Officer
	 	3101 Grand Oak Drive
	 	Lansing, MI 48911
	 	Telephone:            517.703.1110
	 	Facsimile:             517.703.1113

 

    	 	20	 

     

    

 

	with a copy to :	Matt G. Hrebec
	 	Foster Swift Collins & Smith PC
	 	313 South Washington Square
	 	Lansing, MI 48933-2193
	 	Telephone:        517.371.8256
	 	Facsimile:          517.367.7356
	 	 
	BUYER:	SVIC No.15 New Technology Business Investment L.L.P.
	 	c/o Samsung Venture Investment Corporation
	 	29th Fl., Samsung Electronics Bldg.
	 	1320-10, Seocho2-dong, Seocho-gu
	 	Seoul, Korea 137-857
	 	Fax: 82.2.2255.0288
	with a copy to:	 

 

13.            SURVIVAL OF REPRESENTATIONS
AND WARRANTIES. The Company’s and the Buyer’s representations and warranties herein shall survive the execution
and delivery of this Agreement and the delivery of the Purchased Securities and the payment of the purchase price, for a period
of two (2) years after the Closing Date hereunder and shall inure to the benefit of the Buyer and the Company and their respective
successors and assigns.

 

**BALANCE OF PAGE INTENTIONALLY LEFT BLANK**

 

    	 	21	 

     

    

  

PURCHASE AGREEMENT

 

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

 

	 	BUYER:
	 	 
	 	SVIC NO.I5
    NEW TECHNOLOGY BUSINESS INVESTMENT L.L.P.
	 	 
	 	By:
    Samsung Venture Investment Corporation, its Partner
	 	 
	 	By:	/s/
    SEONJONG  LEE
	 	Name :	SEONJONG  LEE
	 	Title:	C.E.O
	 	 	 
	 	COMPANY:
	 	 
	 	XG
    SCIENCES, INC.
	 	 	 
	 	By:	/s/
Michael R. Knox
	 	Name:	Michael R. Knox
	 	Title:	Chief Executive Officer

  

     

     

    

  

	ANNEX I	FORM OF SECURED CONVERTIBLE PROMISSORY NOTE
	 	 
	ANNEX II	FORM OF WARRANT
	 	 
	ANNEX III	FORM OF SECOND AMENDED & RESTATED SECURITY AGREEMENT
	 	 
	ANNEX IV	FORM OF SECOND AMENDED & RESTATED INTELLECTUAL PROPERTY SECURITY AGREEMENT
	 	 
	ANNEX V	FORM OF SERIES A CERTIFICATE OF DESIGNATION AMENDMENT
	 	 
	ANNEX VI	AMENDED AND RESTATED BY-LAWS
	 	 
	ANNEX VII	DISCLOSURE ANNEX
	 	 
	ANNEX VIII	FORM OF SECOND AMENDED & RESTATED INTERCREDITOR AGREEMENT
	 	 
	ANNEX IX	FORM OF OFFICER’S CERTIFICATE
	 	 
	ANNEX X	FORM OF AMENDED & RESTATED REGISTRATION RIGHTS AGREEMENT
	 	 
	ANNEX XI	FORM OF SHAREHOLDER AGREEMENT
	 	 
	ANNEX XII	FORM OF SIDE LETTER
	 	 
	ANNEX XIII	VOTING RIGHTS AGREEMENT
	 	 
	ANNEX XIV	FORM OF PREEMPTIVE WARRANT

  

     

     

    

  

XG SCIENCES, INC.

 

PURCHASE AGREEMENT

 

BETWEEN

XG SCIENCES, INC.

AND 

SVIC NO. 15 NEW TECHNOLOGY BUSINESS INVESTMENT
L.L.P.

 

ANNEX VII

 

DISCLOSURE ANNEX 

 

January 15, 2014

 

This Disclosure Annex is arranged
in sections corresponding to the identified Sections of the Purchase Agreement between XG Sciences, Inc. and SVIC No. 15 New Technology
Business Investments L.L.P. to which it is attached as Annex VII (the “Agreement”), but the disclosure in any
such Section shall qualify other provisions in the Agreement, as well as all disclosures in any of the other Transaction Agreements,
to the extent that it would be readily apparent to an informed reader from a reading of such Section and the other Transaction
Agreements that such disclosure is also relevant to other provisions of the Agreement or any of the other Transaction Agreements.

 

Capitalized terms that are used
but not defined in this Disclosure Annex shall have the meanings set forth in the Agreement.

 

Section 3.a.

 

The following agreements grant
preemptive rights to stockholders of the Company with respect to the Company’s Common Stock: (1) Stock Redemption Agreement
dated July 15, 2006 (superseded by Shareholder Agreement); (2) Stock Redemption Agreement dated December 1, 2010 with Hanwha Chemical
Corporation (superseded by Shareholder Agreement); (3) Stock Redemption Agreement dated June 8, 2011 with POSCO (superseded by
Shareholder Agreement); (4) the Shareholder Agreement; (5) Section 4.n of the Amended and Restated Purchase Agreement dated July
12, 2013 between the Company and Aspen Advanced Opportunity Fund, LP, as amended on the Closing Date; (6) Section 4.n of the Purchase
Agreement dated July 12, 2013 between the Company and XGS II, LLC, as amended on the Closing Date; and (7) Section 4.m. of the
Agreement.

 

Michigan State University has tag-along
and “piggy-back” registration rights under the Restated and Amended Exclusive License Agreement between MSU and the
Company.

 

Section 3.c.(i).

Outstanding Common Stock

 

	Name of Holder of Common Stock	 	 	Shares of Common Stock	 
	Michael R. Knox (and Linn Van Dyne)	 	 	127,047.0	 
	Lawrence T. Drzal, Trustee of Drzal Revocable Trust	 	 	50,550.0	 
	Hiroyuki Fukushima	 	 	50,000.0	 
	Inhwan Do	 	 	50,000.0	 
	Ann Arbor SPARK	 	 	36,257.0	 
	Robert Skandalaris	 	 	34,977.0	 
	Edward J. Demmer	 	 	30,000.0	 
	Mark S. Kerrins & Rosemary Kerrins (JTWROS)	 	 	32,500.0	 
	David J. Donovan	 	 	16,257.0	 
	Michigan State University Foundation	 	 	9,543.0	 
	W. D. Hamilton and S.M Heathfield	 	 	7,251.0	 
	Paul Nordstrom	 	 	3,637.0	 
	Colin D. Cronin	 	 	2,803.0	 
	Stephen J. Linder trust No 1	 	 	5,251.0	 
	Matthew H. Frisch	 	 	2,087.5	 
	Jeffery A. Wesley	 	 	9,005.0	 
	Mark E. Hooper Revocable Living Trust	 	 	3,625.0	 
	Peter S. Bosanic & Lisa Kendzioski Bosanic (JTWROS)	 	 	1,925.0	 
	Kevin B. Miller	 	 	2,400.0	 
	William G. Lutz	 	 	1,653.0	 
	John W. Dourjalian	 	 	1,649.0	 
	Reed Shick	 	 	880.0	 
	Gary Griffin	 	 	1,500.0	 
	Robert L. McKellar	 	 	592.0	 
	Hanwha Chemical	 	 	150,000.0	 
	POSCO	 	 	200,000.0	 
	Marjorie E. Frisch	 	 	2,087.5	 
	Total Common Stock Issued and Outstanding	 	 	833,477.0	 

  

     

     

    

  

Outstanding Series A Convertible Preferred
Stock

 

	Name of Holder of Series A Convertible Preferred Stock	 	 	Shares of Series A
 Convertible Preferred Stock	 
	Paul Nordstrom	 	 	6,363.0	 
	Colin D. Cronin	 	 	5,300.0	 
	Peter S. Bosanic & Lisa Kendzioski Bosanic (JTWROS)	 	 	1,875.0	 
	John W. Dourjalian	 	 	3,123.0	 
	Dave and Vicky Pendell	 	 	3,157.0	 
	ASC-XGS, LLC	 	 	166,023.0	 
	Total Series A Convertible Preferred Stock Issued and Outstanding	 	 	185,841.0	 
	 	 	 	 	 
	Total Common Stock and Series A Convertible Preferred Stock Issued and Outstanding	 	 	1,019,318	 

 

Note: The Corporation
is authorized to issue: (A) 25,000,000 shares of Common Stock, and (B) 8,000,000 shares of Series A Convertible Preferred Stock.

 

	Outstanding Warrants and Options	 
	Holder	 	Issue Date	 	Shares
 Subject to
 Warrant*	 	 	Shares
 Subject to 
 Option	 	 	Expiration
 Date	 	Exercise
 Price	 
	Scott Murray	 	12/1/2007	 	 	0	 	 	 	10,000	 	 	12/1/2017	 	$	8.00	 
	William Lutz	 	7/31/2009	 	 	1,650	 	 	 	0	 	 	7/31/2014	 	$	15.00	 
	Michael R. Knox	 	3/15/2009	 	 	0	 	 	 	12,500	 	 	3/15/2014	 	$	12.00	 
	Michael R. Knox	 	7/1/2009	 	 	6,000	 	 	 	0	 	 	7/1/2019	 	$	8.00	 
	William Lutz	 	4/1/2010	 	 	5,000	 	 	 	0	 	 	4/1/2015	 	$	10.00	 
	ASC-XGS LLC	 	7/16/2010	 	 	21,044	 	 	 	0	 	 	7/16/2014	 	$	10.00	 
	Jihyun Chung	 	7/12/2011	 	 	4,000	 	 	 	0	 	 	7/31/2015	 	$	20.00	 
	Michael R. Knox	 	10/8/2012	 	 	5,000	 	 	 	0	 	 	10/8/2027	 	$	12.00	 
	Aspen Advanced Opportunity Fund, LP	 	3/18/2013	 	 	208,333	 	 	 	0	 	 	3/18/2023	 	$	12,00	 
	Arnold Allemang	 	6/1/2013	 	 	0	 	 	 	3,750	 	 	6/1/2021	 	$	12.00	 
	Iris Linder	 	6/1/2013	 	 	0	 	 	 	3,750	 	 	6/1/2021	 	$	12.00	 
	Steven Jones	 	6/1/2013	 	 	0	 	 	 	2,500	 	 	6/1/2021	 	$	12.00	 
	Scott Murray	 	6/1/2013	 	 	0	 	 	 	10,000	 	 	6/1/2021	 	$	12.00	 
	Robert Privette	 	6/1/2013	 	 	0	 	 	 	20,000	 	 	6/1/2021	 	$	12.00	 
	Liya Wang	 	6/1/2013	 	 	0	 	 	 	30,000	 	 	6/1/2021	 	$	12.00	 
	Michael R. Knox	 	6/1/2013	 	 	0	 	 	 	50,000	 	 	6/1/2021	 	$	13.20	 
	Corinne Lyon	 	6/1/2013	 	 	0	 	 	 	10,000	 	 	6/1/2021	 	$	12.00	 
	Aspen Advanced Opportunity Fund, LP	 	7/12/2013	 	 	208,333	*	 	 	0	 	 	7/12/2023	 	$	12.00	 
	XGS II, LLC	 	7/12/2013	 	 	31,250	*	 	 	0	 	 	7/12/2023	 	$	12.00	 
	 	 	 	 	 	490,610	*	 	 	152,500	 	 	 	 	 	 	 

 

     

     

    

  

*On the Closing Date, the Company will cancel the warrants issued
to each of Aspen Advanced Opportunity Fund, LP and XGS II, LLC; issue a restated warrant to Aspen Advanced Opportunity Fund, LP
for 833,333 shares; issue a restated warrant to XGS II, LLC for 83,333 shares; issue a warrant to SVIC No. 15 New Technology Business
Investment L.L.P. for 100,000; and issue warrants to each of the shareholders who participated in the preemptive rights offering
that ended October 31, 2013 (2,121 to Paul Nordstrom, 1,767 to Colin D. Cronin, 625 to Peter S. Bosanic & Lisa Kendzioski Bosanic
(JTWROS), and 1,041 to John W. Dourjalian).

 

Section 3.c.(ii).

 

		•	The $603,846,58 secured convertible promissory note dated March 18, 2013 to Aspen Advanced Opportunity Fund, LP.** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $250,000.00 secured convertible promissory note dated
April 3, 2013 to Aspen Advanced Opportunity Fund, LP.** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $250,000.00 secured convertible promissory note dated April 12, 2013 to
                                                                                      Aspen Advanced Opportunity Fund, LP.** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $1,400,000.00 secured convertible promissory note dated April 26, 2013 to
                                                                                      Aspen Advanced Opportunity Fund, LP.** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $800,000.00 secured convertible promissory note dated July 29, 2013 to Aspen Advanced Opportunity
Fund, LP, of which $490,575 will be transferred to the benefit of XGS II, LLC on the Closing Date .** The note is convertible into
Series A Stock and then Common Stock.

 

		•	The $200,000.00 secured convertible promissory note dated September 30, 2013 to Aspen Advanced
Opportunity Fund, LP.** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $300,000.00 secured convertible promissory note dated October 15, 2013 to Aspen Advanced Opportunity
Fund, LP.** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $500,000.00 secured convertible promissory note dated December 2, 2013 to Aspen Advanced Opportunity
Fund, LP.** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $100,000.00 secured convertible promissory note dated January 7, 2014 to Aspen Advanced Opportunity
Fund, LP.** The note is convertible into Series A Stock and then Common Stock,

 

		•	The $700,000.00 secured convertible promissory note dated
March 18, 2013 to Michael Knox. *** The note is convertible into Series A Stock and then Common Stock.

 

		•	The $200,000.00 secured convertible promissory note dated October 15, 2013 to XGS II, LLC, to which
$490,575 will be transferred to the benefit of XGS II, LLC on the Closing Date.*** The note is convertible into Series A Stock
and then Common Stock.

 

		•	The Options and Warrants set forth in Section 3.c.(i) of
this Disclosure Annex.

 

     

     

    

  

**  On the Closing Date, this note
will be restated and consolidated with all other notes issued by the Company to Aspen Advanced Opportunity Fund, LP. The restated
note will include capitalized interest through the Closing Date.

 

***  On the Closing Date, this note
will be restated. The restated note will include capitalized interest through the Closing Date.

 

Section 3.g.(i).

 

The Company issued the secured
convertible promissory notes that are described above to and entered into the related transaction documents with each of Aspen
Advanced Opportunity Fund, LP, Michael Knox, and XGS II, LLC.

 

Section 3.g.(vii).

 

The Company is engaged in litigation
with a former employee, Heather Sommers. Heather Sommers signed a separation agreement with the Company on July 27, 2012. On October
22, 2012, the Company received a complaint and demand for jury trial alleging wrongful termination, breach of implied employment
contract, discharge against public policy, violations of civil rights laws, violations of the whistleblower protection act, and
other claims. The Company’s insurer has reviewed the claim and advised the Company that the claim is covered by the Company’s
standard officers and directors’ insurance policy. The insurer has assumed the defense of the claim. On September 24, 2013,
the Circuit Court for the County of Ingham granted Defendant’s Motion for Summary Disposition, resolving all pending claims
and closing the case. On October 30, 2013 the same court denied Plaintiffs Motion for Reconsideration.

 

Section 3.h.

 

In November of 2011, the Company
entered into a license agreement between the Company and Cabot Corporation (“Cabot”), a copy of which has been
supplied to the Buyer (the “License Agreement”). Subsequent to the execution of the License Agreement, Michigan
State University (“MSU”) expressed concern regarding the form of the License Agreement, including whether any MSU technology
might have been included in the License Agreement. After discussions among Cabot, MSU, and the Company, Cabot drafted a First Amendment
to the License Agreement Between Cabot and the Company (the “Amendment”). The Amendment contains warranties,
attested by both the Company and its Chief Scientist, Dr. Lawrence Drzal, asserting that no MSU technology had been improperly
transferred to Cabot. The Company executed the Amendment on January 29, 2013, and has provided a copy to the Buyer. The Company
understood that this matter was closed when it provided the Amendment to the Buyer. However, the Company subsequently learned that
Cabot has not yet signed the Amendment because a new Vice President had been appointed. Additionally, the Company received a letter
from MSU dated March 20, 2013 stating that MSU wanted to review this issue. The Company, Cabot, and MSU have been renegotiating
the Amendment. MSU is currently engaged in an audit of the technology transfer package associated with the Cabot License Agreement.

 

Section 3.i.

 

The Company is engaged in litigation
with a former employee, Heather Sommers. Heather Sommers signed a separation agreement with the Company on July 27, 2012. On October
22, 2012, the Company received a complaint and demand for jury trial alleging wrongful termination, breach of implied employment
contract, discharge against public policy, violations of civil rights laws, violations of the whistleblower protection act, and
other claims. The Company’s insurer has reviewed the claim and advised the Company that the claim is covered by the Company’s
standard officers and directors’ insurance policy. The insurer has assumed the defense of the claim. On September 24, 2013,
the Circuit Court for the County of Ingham granted Defendant’s Motion for Summary Disposition, resolving all pending claims
and closing the case. On October 30, 2013, the same court denied Plaintiff’s Motion for Reconsideration.

 

     

     

    

  

Section 3.o.

 

The Company is obligated to pay
Buyer’s transaction fees, up to $65,000, in connection with the transactions contemplated by the Agreement.

 

The Company is obligated to pay
Aspen Advanced Opportunity Fund and XGS II, LLC’s transaction fees, up to $150,000 and $25,000, respectively, in connection
with the transactions contemplated by the purchase agreements between each of them and the Company, as amended effective as of
the Closing Date.

 

Section 3.s.

 

The warrant to purchase 5,000 shares
issued to Michael R. Knox contains an exercise price reset mechanism triggered by subsequent offerings of Common Stock. Pursuant
to that mechanism, the price was reset from $20 to $12 on August 21, 2013.

 

The Company’s options and
warrants contain anti-dilution protection with respect to stock splits, stock dividends, and other recapitalizations.Exhibit 10.22

 

NEITHER THIS NOTE NOR THE SECURITIES INTO
WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF
ANY STATE, IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.

 

	No. 13	3,000,000.00

 

XG SCIENCES, INC.

 

Secured Convertible Promissory Note

 

Due March 18, 2018

 

This Secured Convertible
Promissory Note (this “Note”) is issued this 15th day of January 2014, jointly and severally
by XG Sciences, Inc. (“XGS”), a Michigan corporation, and XG Sciences IP, LLC, a Michigan limited
liability company (collectively the “Borrower” or the “Company”), to SVIC
No. _15 New Technology Business Investment L.L.P. (“Samsung”) (“Samsung” or the “Holder”),
pursuant to that certain Purchase Agreement, dated January 15, 2014, between the parties and any amendments thereto (the “Purchase
Agreement”).

 

FOR VALUE RECEIVED,
the Borrower hereby promises to pay to the Holder or his, her or its successors and assigns the principal sum of THREE
MILLION AND xx/100 DOLLARS ($3,000,000.00) on or before March 18, 2018 (the “Maturity Date”)
and to pay interest on the principal sum outstanding from time to time in arrears at the rate of 12.0% per annum, accruing
from the Original Issue Date (as defined in Section 7 hereof) until the date (each, an “Interest Payment
Date”) which is the earlier of (i) the next Conversion Date (as defined below), (ii) the date which is the last
day of the month of the first month after the Original Issue Date and the last day of every month thereafter, or (iii) the
Maturity Date, as the case may be. Interest shall accrue monthly (pro-rated on a daily basis for any period longer or shorter
than a month) from the later of the Original Issue Date or the previous Interest Payment Date and shall be payable in cash.
If not paid in full on an Interest Payment Date, interest shall be fully cumulative and shall accrue on a daily basis, based
on a 360-day year, and compound monthly on the last day of each month beginning on the last day of the first full month after
the Original Issue Date, until paid.

 

Interest payable in cash
hereunder shall be paid on or before each Interest Payment Date in US Dollars to the Holder (such reference and all subsequent
references to the “Holder” shall include his, her or its permitted and recognized successors
and assigns) at the address last appearing on the Note register of the Borrower or as designated in writing by the Holder from
time to time. Notwithstanding the foregoing, at the Company’s option, interest payable hereunder may as it accrues be added
to the principal amount of this Note until December 31, 2014. After December 31, 2014, the Holder, at its option and upon written
notice to the Company, shall have the right to a) receive any interest payments currently due and payable in cash, or b) receive
all or a portion of such currently due interest in the form of Series A Convertible Preferred Stock of XGS (“Series
A Stock”) at a price per share equal to the then effective Series A Original Issue Price (as defined in the
XGS’s Certificate of Designations of Series A Convertible Stock), or c) receive all or a portion of such currently due interest
in the form of any other series of Preferred Stock which may be outstanding at the time such interest is due pursuant to the provision
of Section 4 hereof, or d) elect to accrue such interest payment and add it to the balance of the Note.

 

    	 	1	 

     

    

  

In the event that the entire
principal amount of this Note is converted to XGS’s Preferred Stock pursuant to Section 4 below, all accrued interest and
other amounts due and owing under this Note shall be due immediately and shall be added to the principal amount hereof to determine
the total amount of indebtedness hereunder being converted to Preferred Stock. In the event that less than all of the principal
amount of this Note is converted to Preferred Stock, a pro rata portion of the accrued interest (based on the percentage of this
Note converted) shall be due immediately and shall be added to the portion of the principal amount of this Note being converted
to the Preferred Stock.

 

This Note is subject to the following additional
provisions (including the defined terms in Section 6 below that are spelled in title case letters — i.e. initial capital
letters):

 

Section
1.          Right of Redemption. The
Borrower at its option shall have the right, by giving fifteen (15) Business Days advance written notice (the “Redemption
Notice”) to the Holder, to redeem a portion or all amounts outstanding under this Note prior to the
Maturity Date. In such event, the Borrower shall pay an amount equal to the principal amount being redeemed plus a pro rata
portion (based upon the percentage of this Note being redeemed) of accrued interest and any other amounts due and owing under
this Note (collectively referred to as the “Redemption Amount”). The Borrower shall deliver to the
Holder the Redemption Amount on the fifteenth (15th) Business Day after the Redemption Notice unless the Holder
has elected to convert the Redemption Amount into Preferred Stock pursuant to Section 4 hereof.

 

Section 2.        
Covenants.

 

(a)         Affirmative
Covenants. The Borrower covenants and agrees that, unless otherwise indicated in the Transaction Documents, until all
of the Obligations under the Transaction Documents have been fully performed and either Paid in Full in cash or converted into
shares of Preferred Stock of XGS pursuant to Section 4 hereof and this Note has been terminated, it will abide by the following
affirmative covenants and any other affirmative covenants that may be listed in any of the other Transaction Documents:

 

(1)         Financial
Reports, Notices and Other Information.

 

(A)         Financial
Reports. Borrower shall furnish to Holder (i) as soon as available, an in any event when submitted to the Securities and
Exchange Commission (“SEC”) if required to be so submitted, but no later than one hundred and
five (105) calendar days after the end of each fiscal year, audited annual consolidated financial statements, including the notes
thereto, consisting of a consolidated balance sheet at the end of such completed fiscal year and the related consolidated statements
of income, retained earnings, cash flows and owners’ equity for such completed fiscal year, which financial statements shall
be prepared by an independent certified public accounting firm, (ii) as soon as available and in any event within forty five (45)
calendar days after the end of each fiscal quarter (60 calendar days after the end of any quarter which coincides with the end
of a fiscal year provided that such unaudited quarterly financials may be subject to further audit adjustment), unaudited financial
statements consisting of a balance sheet and statements of income and cash flows as of the end of the immediately preceding calendar
quarter, and (iii) as soon as available and in any event within thirty (30) calendar days after the end of each fiscal month (45
calendar days after the end of any month which coincides with the end of a fiscal quarter provided that such unaudited monthly
financials may be subject to further audit adjustment), unaudited financial statements consisting of a balance sheet and statements
of income and cash flows as of the end of the immediately preceding calendar month. All such financial statements shall be prepared
in accordance with GAAP consistently applied with prior periods except for any normal quarter and year-end adjustments which may
be applied in future periods and for any changes in accounting methodology that may have been applied since any prior period and
except for the absence of footnotes for unaudited financial statements.

 

    	 	2	 

     

    

  

(B)         Notices. Borrower
shall promptly, and in any event within four (4) Business Days after it or any authorized officer of Borrower obtains
knowledge thereof, notify Holder in writing of (i) any pending or threatened litigation, suit, investigation, arbitration,
dispute resolution proceeding or administrative proceeding brought against or initiated by Borrower or otherwise affecting or
involving or relating to Borrower or any of its property or assets to the extent the amount in controversy exceeds
$50,000.00, or to the extent any of the foregoing seeks injunctive relief, (ii) any Default or Event of Default, which notice
shall specify the nature and status thereof the period of existence thereof and what action is proposed to be taken with
respect thereto, (iii) any other development, event, fact, circumstance or condition that would reasonably be expected to
result in a Material Adverse Change, in each case describing the nature and status thereof and the action proposed to be
taken with respect thereto, (iv) any notice received by Borrower from any payor of a claim, suit or other action such payor
has, claims or has filed against Borrower (v) any matter(s) affecting the value, enforceability or collectability of any of
the Collateral, including, without limitation, claims or disputes in the amount of $50,000.00 or more, singly or in the
aggregate, in existence at any one time, (vi) any notice given by Borrower to any other lender or any notice received by
Borrower from any other lender and shall furnish to Holder a copy of such notice, (vii) receipt of any notice or request from
any Governmental Authority regarding any liability or claim of liability in excess of $50,000.00 singly or in the aggregate,
(viii) Borrower being served with or receiving any search warrant, subpoena, civil investigative demand or contact letter by
or from any federal or state enforcement agency relating to an investigation, (ix) Borrower becoming subject to any written
complaint filed with or submitted to any Governmental Authority having jurisdiction over Borrower or filed with or submitted
to Borrower pursuant to Borrower’s policies relating to the filing or submissions of such types of complaints, from
employees, independent contractors, vendors, or any other person that would indicate that Borrower has violated any law,
regulation or law, or (x) any other event occurs that would require Borrower to file a Form 8K disclosure with the SEC, to
the extent Borrower is publicly-traded at such time, in which case Borrower shall either furnish a copy of such Form 8K
filing or, otherwise provide a description of the facts and circumstances around the event or events giving rise to the need
to file such Form 8K.

 

(C)         Ancillary
Materials to be Furnished Upon Request. Upon written request by Holder, Borrower shall use its best efforts to furnish to
Holder within ten (10) Business Days after the request therefore the following kinds of information: (i) any other reports,
materials or other information regarding or otherwise relating to the current or future business of the Borrower prepared by,
for, or on behalf of, Borrower or any of its subsidiaries, including, without limitation, operating budgets, sales and
marketing plans, new product development plans, staffing plans, current or future agreements of a material nature with other
third parties, fundraising plans and strategies, and plans for mergers and acquisitions, (ii) copies of material licenses and
Permits required by applicable federal, state, foreign or local law, statute, ordinance or regulation or Governmental
Authority for the operation of Borrower’s business and (iii) such other information as may be reasonably requested by
Holder. Holder agrees that to the extent requested by Borrower, it will execute a mutually agreeable form of confidentiality
agreement with Borrower as part of any such request. Borrower agrees that any information requested by and delivered to any
Holder will be delivered to all Holders.

 

(2)         Conduct
of Business and Maintenance of Existence and Assets. Borrower shall (i) conduct its business in accordance with good business
practices customary to the industry, (ii) engage principally in the same or similar lines of business substantially as heretofore
conducted, (iii) collect its Accounts in the ordinary course of business, (iv) maintain all of its material properties, assets
and equipment used or useful in its business in good repair, working order and condition (normal wear and tear excepted and except
as may be disposed of in the ordinary course of business and in accordance with the terms of the Transaction Documents and otherwise
as determined by such Borrower using commercially reasonable business judgment), (v) from time to time to make all necessary or
desirable repairs, renewals and replacements thereof, as determined by such Borrower using commercially reasonable business judgment,
(vi) maintain and keep in full force and effect its existence and all material Permits and qualifications to do business and good
standing in each jurisdiction in which the ownership or lease of property or the nature of its business makes such Permits or qualification
necessary and in which failure to maintain such Permits or qualification could reasonably be expected to result in a Material Adverse
Change; and (vii) remain in good standing and maintain operations in all jurisdictions in which currently located.

 

    	 	3	 

     

    

  

(3)         Compliance
with Legal and Other Obligations. Borrower shall (i) comply with all laws, statutes, rules, regulations, ordinances and
tariffs of all Governmental Authorities applicable to it or its business, assets or operations (ii) pay all taxes, assessments,
fees, governmental charges, claims for labor, supplies, rent and all other obligations or liabilities of any kind, except liabilities
being contested in good faith and against which adequate reserves have been established, (iii) perform in accordance with its
terms each contract, agreement or other arrangement to which it is a party or by which it or any of the Collateral
is bound, except where the failure to comply, pay or perform could not reasonably be expected to result in a Material Adverse
Change, and (iv) maintain and comply with all Permits necessary to conduct its business and comply with any new or additional
requirements that may be imposed on it or its business.

 

(4)         Insurance.
Borrower shall keep (i) all of its insurable properties, Collateral and assets adequately insured in all material respects
against losses, damages and hazards as are customarily insured against by businesses engaging in similar activities or owning
similar assets or properties and at least the minimum amount required by applicable law; (ii) maintain general public
liability insurance at all times against liability on account of damage to persons and property having such
limits, deductibles, exclusions and co-insurance and other provisions as are customary for a business engaged in activities
similar to those of Borrower; and (iii) maintain insurance under all applicable workers’ compensation laws; all of the
foregoing insurance policies to be satisfactory in form and substance to Holders. With respect to property
insurance covering business interruption, accounts receivable and the books and records in connection therewith, Holder shall
be named as loss payee and additional insured and with respect to general liability insurance Holder shall be named as
additional insured.

 

(5)         Inspections;
Periodic Audits And Reappraisals. Borrower shall permit the representatives of any Holder, at the expense of
the Holder, from time to time during normal business hours, but no more frequently than two times per year so long as no
Default or Event of Default occurs and is continuing, upon reasonable notice, to (i) visit and inspect any of its offices
or properties or any other place where Collateral is located inspect the Collateral and/or to examine or audit all
of Borrower’s books of account, records, reports and other papers, (ii) make copies and extracts therefrom, and
(iii) discuss its business, operations, prospects, properties, assets, liabilities, condition and/or Accounts with its
officers and independent public accountants (and by this provision such officers and accountants are authorized to discuss
the foregoing) upon seven (7) Business Days prior written notice; provided, however, that no notice shall be required to do
any of the foregoing if any Event of Default has occurred and is continuing.

 

    	 	4	 

     

    

  

(6)         Further
Assurances; Post-Closing. At Borrower’s cost and expense, Borrower shall (i) within five (5) Business Days after Holder’s
request, take such further actions, obtain such consents and approvals and duly execute and deliver such further agreements, assignments,
instructions or documents as Holder may deem necessary in its Permitted Discretion with respect to furtherance of the purposes,
terms and conditions of the Transaction Documents and the consummation of the transactions contemplated thereby, whether before,
at or after the performance or consummation of the transactions contemplated hereby or the occurrence of a Default or Event of
Default, (ii) without limiting and notwithstanding any other provision of any Transaction Document, execute and deliver, or cause
to be executed and delivered, such agreements and documents, and take or cause to be taken such actions, and otherwise perform,
observe and comply with such obligations, as are set forth on Schedule 2(a)(6) attached hereto (if any so listed), and (iii)
upon the exercise by Holder or any of its Affiliates of any power, right, privilege or remedy pursuant to any Transaction Document
or under applicable law or at equity which requires any consent, approval, registration, qualification or authorization of any
Governmental Authority, execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments
and other documents requested by Holder in its Permitted Discretion that may be so required for such consent, approval, registration,
qualification or authorization. Without limiting the foregoing, upon the exercise by Holder or any of its Affiliates of any right
or remedy under any Transaction Document which requires any consent, approval or registration with, consent, qualification or authorization
by, any Person, Borrower shall execute and deliver, or cause the execution and delivery of, all applications, certificates, instruments
and other documents that Holder or its Affiliate may be required to obtain for such consent, approval, registration, qualification
or authorization.

 

(7)         Subsidiaries
and New Subsidiaries. As of the date of the Closing, Borrower has no subsidiaries other than those listed on Schedule
2(a)(7) hereof (if any). If at any time after the Closing Date, Borrower shall form or acquire any new Subsidiary, Borrower
shall promptly, and in any event not later than fifteen (15) Business Days after the creation or acquisition of such Subsidiary
or such longer period as Holder may determine in writing, execute, and cause such new Subsidiary to execute, and deliver to Holder
such joinder agreements and amendments to this Agreement and the other Transaction Documents, in form and substance satisfactory
to Holder, and providing such other documentation as Holder may reasonably request, including, without limitation, UCC searches,
as applicable, and filings, legal opinions and corporate authorization documentation, and to take such other actions in each
case as Holder deems necessary or advisable to (a) join and make such new Subsidiary a co-Borrower hereunder and thereunder,
subject to all the rights and benefits and obligations and burdens of a Borrower hereunder, (b) grant to Holder a perfected first
priority security interest in the Collateral of such new Subsidiary subject to no Liens other than the Permitted Liens.

 

(b)          Negative
Covenants. The Borrower covenants and agrees that, until all of the Obligations under the Transaction Documents have
been fully performed and either Paid in Full in cash or converted into shares of Preferred Stock of XGS pursuant to Section 4
hereof and this Note has been terminated, it will abide by the following negative covenants and any other negative
covenants that may be listed in any of the other Transaction Documents:

 

(1)         Permitted
Payments. The Borrower shall not make any principal or interest payment on any Indebtedness other than Permitted Payments,
prior to the repayment or conversion of all of the principal amount outstanding under this Note without first obtaining the prior
written consent of the Holder.

 

(2)         Permitted
Indebtedness. The Borrower shall not create, incur, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness,
prior to the repayment or conversion of all the Obligations outstanding under this Note without first obtaining the prior written
consent of the Holder.

 

(3)         Permitted
Liens. The Borrower shall not create, incur assume or suffer to exist any Lien upon, in or against, or pledge of any of
the Collateral or any of its properties or assets, whether now owned or hereafter acquired, except for Permitted Liens, without
first obtaining the prior written consent of the Holder.

 

    	 	5	 

     

    

 

(4)         Location
of Collateral; Investments; New Facilities or Collateral; Subsidiaries. Borrower maintains its places of business only
at the locations listed on Schedule 2(b)(4), and all Accounts of Borrower arise, originate and are located, and
all of the Collateral and all books and records in connection therewith or in any way relating thereto or evidence of the Collateral
are located and shall be only, in and at such locations. Except as set forth on Schedule 2(b)(4), Borrower shall not, directly
or indirectly, enter into any agreement to, (i) purchase, own, hold, invest in or otherwise acquire obligations or stock or securities
of, or any other interest in, or all or substantially all of the assets of, any Person or any joint venture, or (ii) make or permit
to exist any loans, advances or guarantees to or for the benefit of any Person or assume, guarantee, endorse, contingently agree
to purchase or otherwise become liable for or upon or incur any obligation of any Person (other than those created by the Transaction
Documents and Permitted Indebtedness and other than (A) trade credit extended in the ordinary course of business, (B) advances
for business travel and similar temporary advances made in the ordinary course of business to officers, directors and employees,
(C) investments in cash equivalents and (D) the endorsement of negotiable instruments for deposit or collection or similar transactions
in the ordinary course of business). Borrower shall not, directly or indirectly, purchase, own, operate, hold, invest in or otherwise
acquire any facility, property or assets or any Collateral that is not located at the locations set forth on Schedule 2(b)(4) unless
Borrower shall provide to Holder at least ten (10) Business Days prior written notice. Borrower shall not have any Subsidiaries
Other than those Subsidiaries set forth on Schedule 2(a)(7) hereof.

 

Notwithstanding the foregoing,
Borrower shall be permitted to make Permitted Acquisitions with Holder’s prior written consent; provided, however,
that the consent of Holder shall not be required if the cash consideration paid in respect of the Permitted Acquisition does not
exceed $250,000 and Borrower fully complies with Section 2(a)(7) hereof.

 

(5)         Dividends;
Redemptions. Borrower shall not (i) declare, pay or make any Distribution, (ii) apply any of its funds, property
or assets to the acquisition, redemption or other retirement of any Capital Stock, (iii) otherwise make any payments or
Distributions to any stockholder, member, partner or other equity owner in such Person’s capacity as such, or (iv) make
any payment of any Management or Service Fee; provided however, that absent the occurrence and continuation of a Default or
Event of Default, and if a Default or Event of Default would not arise therefrom, Borrower may: (x) declare, pay or make
Distributions payable in its stock, or split-ups or reclassifications of its stock; and (y) redeem its Capital Stock from
terminated employees pursuant to, but only to the extent required under the terms of the related employment agreements.

 

(6)         Transactions
With Affiliates. Except as set forth on Schedule 2(b)(6) or as contemplated in the Aspen Transaction
Documents, Borrower shall not enter into or consummate any transaction of any kind with any of its Affiliates other than: (i) salary,
bonus, severance, employee stock option and other compensation, consulting and employment arrangements with directors or officers
in the ordinary course of business, provided, that, no payment of any cash bonus or severance shall be permitted
if a Default or Event of Default has occurred and remains in effect or would be caused by or result from such payment, and no payment
of any severance shall be made, individually or in the aggregate, in excess of $250,000 in any twelve (12) month period, (ii) Distributions
permitted pursuant to Section 2(b)(5), and (iii) the making of payments permitted under and pursuant to a written agreement entered
into by and between Borrower and one or more of its Affiliates that both (A) reflects and constitutes a transaction on overall
terms at least as favorable to Borrower as would be the case in an arm’s-length transaction between unrelated parties of equal
bargaining power; provided, that, notwithstanding the foregoing Borrower shall not (Y) enter into or consummate
any transaction or agreement pursuant to which it becomes a party to any mortgage, Debenture, indenture or guarantee evidencing
any Indebtedness of any of its Affiliates or otherwise to become responsible or liable, as a guarantor, surety or otherwise, pursuant
to agreement for any Indebtedness of any such Affiliate, or (Z) make any payments to any of its Affiliates in
excess of $50,000 in the aggregate during any consecutive twelve calendar month period without the prior written consent of Holder
(other than payments permitted pursuant to clause (i) or (ii) above).

 

    	 	6	 

     

    

  

(7)         Charter
Documents; Fiscal Year; Dissolution; Use of Proceeds. Except as contemplated in the Aspen Transaction Documents, Borrower
shall not (i) amend, modify, restate or change its certificate of incorporation or formation or bylaws or similar charter documents
without the prior written consent of the Holder, which consent shall not be unreasonably withheld, (ii) amend, alter or suspend
or terminate or make provisional in any material way, any material Permit without the prior written consent of Holder, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, the Holder acknowledges that the following will not be deemed
to be a violation of this covenant: any amendment of a license or Permit in the ordinary course of business to enable Borrower
to pursue additional opportunities; (iii) wind up, liquidate or dissolve (voluntarily or involuntarily) or commence or suffer any
proceedings seeking or that would result in any of the foregoing, or (iv) without providing at least thirty (30) calendar days
prior written notice to Holder, change its name or organizational identification number, if it has one.

 

(8)         Truth
of Statements. Borrower shall not (a) furnish to Holder any certificate or other document created or produced by Borrower
that contains any untrue statement of a material fact or that omits to state a material fact necessary to make it not misleading
in light of the circumstances under which it was furnished as of the date it was provided to Holder; and (b) furnish any document
created or produced by a third party that Borrower knows (A) contains any untrue statement of a material fact or (B) omits to
state a material fact necessary to make it not misleading in light of the circumstances under which it was furnished.

 

(9)         Transfer
of Assets. Notwithstanding any other provision of this Agreement or any other Transaction Document, Borrower shall not,
nor shall it permit any of its Subsidiaries to, sell, lease, transfer, assign, spin-off or otherwise dispose of any interest in
any properties or assets (other than the assignment of intellectual property by XG Sciences, Inc. to XG Sciences IP, LLC as
contemplated in the Transaction Documents and the Aspen Transaction Documents, other than obsolete fixed assets or excess fixed
assets no longer needed in the conduct of the business in the ordinary course of business and sales of inventory in the ordinary
course of business), or agree to do any of the foregoing at any future time, without the written consent of the Holder, except
that:

 

(A)         Borrower
may lease or sublease (as lessor or sub-lessor) real or personal property pursuant to a true lease not constituting Indebtedness
and not entered into as part of a sale and leaseback transaction, in each case in the ordinary course of business and which could
not reasonably be expected to result in a Material Adverse Effect.

 

(B)         Borrower
may arrange for warehousing, fulfillment or storage of inventory at locations not owned or leased by Borrower, in each case in
the ordinary course of business;

 

(C)         Borrower
may license or sublicense Intellectual Property to third parties in the ordinary course of business; provided, that,
such licenses or sublicenses shall not interfere with the business or other operations of Borrower; and

 

(D)         Borrower
may consummate such other sales or dispositions of property or assets in excess of $50,000 (including any sale or transfer or disposition
of all or any part of its assets and thereupon and within one year thereafter rent or lease the assets so sold or transferred)
only to the extent prior written notice has been given to Holder and to the extent Holder has given its prior written consent thereto,
subject in each case to such conditions as may be set forth in such consent.

 

    	 	7	 

     

    

  

Section 3.          Events
of Default.

 

(a)          An
“Event of Default”, wherever used herein, means any one of the following events (whatever the
reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or
order of any court, or any order, rule or regulation of any administrative or governmental body):

 

(i)          Any
default in the payment of the principal of, interest on, or other charges in respect of this Note, free of any claim of subordination,
as and when the same shall become due and payable (whether on an Interest Payment Date, a Conversion Date or the Maturity Date
or by Acceleration or otherwise);

 

(ii)         The
Borrower shall fail to observe or perform any other covenant, term, condition, agreement or obligation contained in, or otherwise
commit any breach or default of any provision of this Note (except as may be covered by Section 3(a)(i) hereof) or any Transaction
Document (as defined in Section 7 below) and such failure is not cured within (A) the time prescribed or (B) if no time is prescribed,
such failure is not cured within thirty (30) days after the Borrower’s receipt of written notice from the Holder of such
failure; or

 

(iii)       Any
of the representations or warranties made by the Borrower herein, in any of the other Transaction Documents or in any other
written or  financial statements hereafter furnished by the Borrower to the Holder shall be false or misleading in any
material respect at the time made; or

 

(iv)        The
Borrower (A) fails to authorize and issue or the cause its Transfer Agent to issue shares of Preferred Stock upon the exercise
by the Holder of the conversion rights of the Holder in accordance with the terms of this Note (provided, however, that for purposes
of this provision, such failure to issue or cause the Transfer Agent to issue such shares shall not be deemed to occur until Five
(5) Business Days after the Conversion Date), (B) fails to transfer or to cause its Transfer Agent to transfer any certificate
for shares of Preferred Stock issued upon conversion of this Note and when required by this Note, and such transfer is otherwise
lawful, or (C) fails to remove a restrictive legend or cause its Transfer Agent to remove a restrictive legend on any share certificate,
in each case where such removal is lawful, and any such failure of A, B or C above shall continue uncured for ten (10) days; or

 

(v)         The
Borrower shall make any principal or interest payment on any unsecured indebtedness prior to the repayment or conversion of all
of the principal amount outstanding under this Note without first obtaining the prior written consent of the Holder; or

 

(vi)       The
Borrower shall default on any other indebtedness or material obligation to which it is a party and any other party to any
such indebtedness or material agreement with the Company in default exercises any material remedies which it may be
entitled; or

 

(vii)     The
Borrower or any Subsidiary of the Borrower shall commence, or there shall be commenced against the Borrower or any Subsidiary of
the Borrower, a proceeding under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto,
or the Borrower or any Subsidiary of the Borrower shall commence any other proceeding under any reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction, whether now or hereafter
in effect, relating to the Borrower or any Subsidiary of the Borrower; or there is commenced against the Borrower or any Subsidiary
of the Borrower any such bankruptcy, insolvency or other proceeding which remains un-dismissed for a period of sixty-one (61) days;
or the Borrower or any Subsidiary of the Borrower is adjudicated insolvent or bankrupt; or any order of relief or other order approving
any such case or proceeding is entered; or the Borrower or any Subsidiary of the Borrower suffers any appointment of any custodian,
private or court appointed receiver or the like for it or any substantial part of its property, which continues un-discharged or
un-stayed for a period of sixty one (61) days; or the Borrower or any Subsidiary of the Borrower makes a general assignment for
the benefit of creditors; or the Borrower or any Subsidiary of the Borrower shall fail to pay, or shall state that it is unable
to pay, or shall be unable to pay, its debts generally as they become due; or the Borrower or any Subsidiary of the Borrower shall
by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate
or other action is taken by the Borrower or any Subsidiary of the Borrower for the purpose of effecting any of the foregoing; or

 

    	 	8	 

     

    

 

(viii)    In
the event that the Borrower shall experience a Change of Control at any time while the Note is outstanding.

 

(b)          If
an Event of Default shall have occurred and is continuing, then, unless and until such Event of Default shall have been cured
or waived in writing by the Holder (which waiver shall not be deemed to be waiver of any subsequent default), at the option of
the Holder and in the Holder’s sole discretion, but without further notice from the Holder, the unpaid amount of this Note,
computed as of the date on which the Event of Default was first deemed to have occurred, will bear interest at the rate (the “Default
Rate”) equal to fifteen percent (15%) per annum or the highest rate allowed by law, whichever is lower, from the
date of the Event of Default until and including the date actually paid; and any partial payments shall be applied in the order
provided in Section 16 hereof.

 

(c)          During
the time that any portion of this Note is outstanding, if any Event of Default has occurred and any applicable cure period
has expired, the Holder, at its option, may declare that the full principal amount of this Note, together with any accrued
interest and other amounts owed pursuant to any other provision of this Note or any other Transaction Document are
immediately due and payable in cash (an “Acceleration”). In addition to any other remedies, the
Holder shall have the right (but not the obligation) to convert this Note at any time after an Event of Default at the Note
Conversion Price (as defined in Section 4(b)(i) below). The Holder need not provide and the Borrower hereby waives any
presentment, demand, protest or other notice of any kind; and immediately and without expiration of any grace period, the
Holder may enforce any and all rights and remedies hereunder and all other remedies available under the Security Agreement or
under applicable law. Furthermore, a declaration of an Event of Default may be rescinded and annulled by the Holder at any
time prior to payment hereunder. No such rescission or annulment shall affect or impair any of the Holder’s rights with
respect to any subsequent Event of Default.

 

Section 4.          Conversion.

 

(a)          Conversion
at Option of Holder.  Any principal, currently due interest, accrued interest, or other amounts due
and payable under this Note at any time (collectively, the “Outstanding Amount” as of such time)
shall be convertible into shares of Preferred Stock (as defined below) of XGS at the option of the Holder, in whole or in
part at any time and from time to time, after the Original Issue Date so long as this Note is outstanding; provided that if
more than one series of convertible preferred stock is outstanding on a Conversion Date, the Holder, in its sole discretion,
shall be entitled to elect to convert such amounts due and payable hereunder into any such series; or if no such convertible
preferred stock has been issued as of a Conversion Date, then shares of Series A Stock. The number of shares of Preferred
Stock that may be issued upon a conversion hereunder equals the quotient obtained by dividing (x) the Outstanding
Amount of this Note, or any portion thereof, to be converted as of the Conversion Date (as defined in Section 4(c)) by (y)
the Note Conversion Price (as defined in Section 4(d) below). For the purposes of this Note, “Preferred
Stock” shall mean any series of convertible preferred stock issued by XGS which may be outstanding on any date
on which a Holder Notice of Conversion (as defined in Section 4(c) below) is delivered to the Company.

 

    	 	9	 

     

    

 

(b)          Conversion
at Option of Borrower. Upon the Equity Threshold being reached, the Outstanding Amount due and payable under this Note
as of the Conversion Date may, at the option of the Borrower, be converted into Series A Stock (the “Borrower Option”)
upon written notice delivered to the Holder fifteen (15) Business Days prior to the date on which such Borrower Option will become
effective. The number of shares of Series A Stock that shall be issued to the Holder upon an exercise of the Borrower Option equals
the quotient obtained by dividing (x) the Outstanding Amount of this Note as of the Conversion Date by (y) the Note
Conversion Price.

 

(c)          Exercise
of Conversion Options. The: (i) Holder shall effect conversions in Section 4(a) by delivering to the Borrower a
completed notice in the form attached hereto as Exhibit “A” (a “Holder Notice of
Conversion”), and (ii) Borrower shall effect the conversion in Section 4(b) by delivering written notice to the
Holder (a “Borrower Notice of Conversion”). The “Conversion Date” shall
be (A) if the Holder delivers a Holder Notice of Conversion, the date on which a Holder Notice of Conversion is delivered, or
(B) if the Borrower delivers a Borrower Notice of Conversion, the date which is fifteen (15) Business Days from the date such
notice is deemed to have been delivered pursuant to Section 19 hereof. The Borrower shall deliver the applicable stock
certificate to the Holder prior to the close of the fifth (5th) Business Day after a Conversion Date. The Holder
shall physically surrender this Note to the Borrower in connection with a conversion, whether a partial conversion or a total
conversion. In the event of a partial conversion, in order to reflect the reduction in the outstanding principal amount of
this Note and the reduction in the accrued and unpaid interest, the Borrower shall prepare and deliver to the Holder a new
Note, identical in all respects to the surrendered Note except for the principal amount outstanding reflected on the first
page hereof. Such replacement Note (resulting from the partial conversion) shall be delivered to the Holder prior to the
close of the fifth (5th) Business Day after the applicable Conversion Date. The Holder and the Borrower shall
maintain records showing the principal amount converted and the date of such conversions. In the event of any dispute or
discrepancy, the records of the Borrower shall be controlling and determinative in the absence of manifest error; provided,
however, that if the Borrower has not kept records or there is manifest error in the Borrower’s records, then the
records of the Holder shall be controlling and determinative.

 

(d)          Note
Conversion Price and Adjustments to Note Conversion Price.

 

(i)          The
conversion price in effect on any Conversion Date shall (i) if the conversion is into Series A Stock, then the conversion price
shall be the Series A Original Issue Price (as defined in the Series A Certificate of Designation); or (ii) if the conversion is
into any other series of convertible preferred stock which may be outstanding on a Conversion Date, then the conversion price shall
be the price per share at which such other series of convertible preferred stock is then being issued or was most recently issued
(such conversion price as may be in effect on a Conversion Date, herein generally referred to as the “Note Conversion
Price”).

 

(ii)         The
Borrower agrees to provide notice to the Holders of any event or issuance that would result in any adjustment to the Conversion
Price pursuant to this Section 4(d) and such notice shall specify the new Note Conversion Price in effect.

 

(e)          No
Taxes on Certificates.  The issuance of certificates for shares of the Preferred Stock on conversion of this
Note shall be made without charge to the Holder thereof for any documentary stamp or similar taxes that may be payable in respect
of the issue or delivery of such certificate.

 

    	 	10	 

     

    

 

Section
5.        Exchange into New Securities Issued to Third Parties.
After the Original Issue Date, in the event that the Borrower consummates any financing transaction with any other third
party using any form of debt, equity or equity-linked security that has terms deemed to be more favorable, in the
Holder’s sole discretion, than the terms of this Note (any such security used in such new financing hereinafter
referred to as a “New Security”), then the Holder shall have the option, in its
sole discretion, to exchange all or any portion of the Obligations outstanding under this Note into such New Security on the
same terms as such New Security was offered to third parties (an “Exchange”). Upon an
Exchange, the Holder also shall be assigned all rights (and assume all obligations other than obligations to provide any
incremental amounts of financing to the Company) provided in the definitive agreements pursuant to which the New Security was
sold. The Borrower covenants and agrees that so long as all or any portion of this Note is outstanding, it will notify in
writing any Holder of this Note promptly within ten (10) Business Days of the issuance of any New Security and such notice
will contain: (a) the names and contact information for any holders of the New Security, (b) the aggregate dollar amount or
principal amount of such New Securities being issued to each new holder of such securities, and (c) a copy of all transaction
documentation for such New Security. So long as this Note remains outstanding, the Holder shall have the right to exchange
all or any portion of the Obligations outstanding under this Note for up to one hundred eighty (180) days after any such New
Security is sold to any other third party upon written notice to the Borrower.

 

Section 6.        Security
Agreement. This Note is secured by a Security Agreement of even date herewith (the “Security Agreement”)
and an Intellectual Property Security Agreement of even date herewith (the “IP Security Agreement”)
between the Borrower, the Holder, XGS II, LLC, a Florida limited liability company (“XGS II”), Mr.
Michael R. Knox (“Knox”), Aspen Advanced Opportunity Fund, L.P., a Delaware limited partnership
(“Aspen” and together with XGS II and Knox, the “Other Secured Parties”),
and the Agent specified in such Security Agreement and IP Security Agreement. The Holder understands and acknowledges that
the Borrower has issued secured indebtedness to Knox secured by the Collateral (as defined in the Security Agreement) as more
fully described on Exhibit B and intends to issue either simultaneously with this Note or at a subsequent time, additional Notes
or other similar securities to the Holder and Other Secured Parties and consents to such additional secured indebtedness so long
as all of the following conditions are met:

 

		(a)	no
more than $14,800,000 in the aggregate (as measured by the initial principal amount outstanding before adding in capitalized interest
which may be part of the principal balance of this Note or any other similar notes held by the Other Secured Parties) of
secured Indebtedness which is secured by the Collateral defined in the Security Agreement has been or will be issued by the Borrower
to the Holder or the Other Secured Parties at any time while this Note is outstanding; and

 

		(b)	no other secured Indebtedness matures prior to the Maturity Date of this Note, except for
                                                                                   the Indebtedness described on paragraph 4 of Exhibit B, without the prior written consent of the Holder; and

 

		(c)	no other secured Indebtedness has any more favorable economic terms than the Note; and

 

		(d)	no other secured Indebtedness is issued in a manner that would result in such Indebtedness being
senior to this Note; and

 

		(e)	no other secured Indebtedness will be issued to any Other Secured Parties until such Other Secured
Parties have agreed to be bound by the terms of the Intercreditor Agreement, the Security Agreement, and the IP Security Agreement
and have executed copies of such documents; and

 

    	 	11	 

     

    

 

		(f)	all other secured Indebtedness issued by the Borrower pursuant to this exception is issued in exchange
for cash consideration or as a replacement to the form of note previously issued in exchange
for cash consideration.

 

Section 7.        Definitions.
For the purposes hereof, the following terms shall have the following meanings:

 

“Accounts” shall
mean “accounts” as defined in Section 9-102 of the UCC.

 

“Affiliate” shall
mean, as to any Person (a) any other Person that, directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such Person, (b) any other Person who is a director or officer (i) of
such Person, (ii) of any Subsidiary of such Person, or (iii) of any Person described in clause (a) above with respect
to such Person, (c) any other Person which, directly or indirectly through one or more intermediaries, is the beneficial or
record owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended, as the same is in effect on the
date hereof) of five percent (5%) or more of any class of the outstanding voting stock, securities or other
equity or ownership interests of such Person and (d) in the case such Person is an individual, any other Person who is an
immediate family member, spouse or lineal descendant of individuals of such Person or any Affiliate of such Person. For
purpose of this definition, the term “control” (and the correlative terms, “controlled by” and
“under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies, whether through ownership of securities or other interests, bycontract or
otherwise. “Affiliate” shall include any Subsidiary.

 

“Aspen
Transaction Documents” means the purchase agreements between the Company and Aspen, on the one hand, and the Company
and XGS II, on the other hand, as amended and restated, and any other agreements delivered in connection with such agreements.

 

“Business
Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United
States or a day on which banking institutions are authorized or required by law or other government action to close.

 

“Capital
Lease” shall mean, as to any Person, a lease of any interest in any kind of property
or asset by that Person as lessee that is, should be or should have been recorded as a “capital lease” in
accordance with GAAP.

 

“Capitalized
Lease Obligations” shall mean all obligations of any Person under Capital Leases, in each case, taken at
the amount thereof accounted for as a liability in accordance with GAAP.

 

“Capital
Stock” shall mean any and all shares, interests, participations or other equivalents (however designated)
of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and
all warrants, rights or options to purchase any of the foregoing.

 

“Change
of Control” means the occurrence of any of the following events after the Original Issue Date: (i) any “person”
or “group” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) together with their affiliates become the ultimate “beneficial owner” (as defined in Rule 13d-3 of the Exchange
Act) of voting stock of the Borrower representing more than 50% of the voting power of the total voting stock of the Borrower;
(ii) the Stockholders of the Borrower approve a merger or consolidation of the Borrower with any other Corporation or entity regardless
of which entity is the survivor, other than a merger or a consolidation which would result in the voting stock of the Borrower
outstanding immediately prior thereto continuing to represent (either by remaining outstanding or being converted into voting securities
of the surviving entity or the parent thereof) at least 50% of the combined voting power of the voting securities of the Borrower
or such surviving entity or the parent thereof, outstanding immediately after such merger or consolidation; or (iii) the stockholders
of the Borrower approve a plan of complete liquidation or winding up of the Borrower or an agreement for the sale or disposition
by the Borrower of all or substantially all of the Borrower’s assets.

 

    	 	12	 

     

    

 

“Closing” shall mean
the date on which this Note is issued by the Company to the Holder.

 

“Closing Date” shall
mean the date upon which the Closing occurs.

 

“Collateral”
shall have the meaning set forth in  the Security Agreement and IP Security Agreement.

 

“Common Stock”
means the common stock, no par value, of the Borrower and stock of any other class into which such shares may hereafter be
changed or reclassified.

 

“Conversion Date” shall
have the meaning set forth in Section 4(c).

 

“Debtor
Relief Law” shall mean, collectively, the Bankruptcy Code of the United States of America and all other applicable
federal and state liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization
or similar debtor relief laws from time to time in effect affecting the rights of creditors generally, as amended and in
effect from time to time.

 

“Default”
shall mean any event, fact, circumstance or condition that, with the giving of applicable notice or passage of time or both,
would constitute or be or result in an Event of Default.

 

“Default Rate” shall
have the meaning set forth in Section 3(b).

 

“Deposit Accounts”  shall
mean “deposit accounts” as defined in Section 9-102 of the UCC.

 

“Distribution”
shall mean any direct or indirect dividend, distribution or other payment of any kind or character (whether in cash, securities
or other property) in respect of any equity interests.

 

“Equity
Threshold” shall mean that XGS has received an aggregate of $15 million in cash
consideration (excluding amounts received from Samsung, XGS II, Aspen, and Knox) after the Original Issue Date from
XGS’s sale or  issuance of: (i) Common Stock, (ii) Preferred Stock, (iii) other equity-linked securities, (iv)
rights, options, or warrants to purchase equity securities of XGS, and (v) securities of any type whatsoever, including
convertible debt, that are or may become convertible into, exchange into, or exercisable for, equity securities of XGS.

 

“Event of Default”
shall mean the occurrence of any event set forth in Section 3(a).

 

“Existing
Indebtedness” shall mean any existing Indebtedness of the Borrower as of the Original Issue Date as set forth
on Exhibit B and Exhibit D hereto.

 

“GAAP”
shall mean generally accepted accounting principles in the United States as in effect on the Closing Date.

 

    	 	13	 

     

    

 

“Governmental
Authority” shall mean any federal, state, municipal, national, local or other governmental department, court, commission,
board, bureau, agency or instrumentality or political subdivision thereof, or any entity or officer exercising executive, legislative
or judicial, regulatory or administrative functions of or pertaining to any government or any court, in each case, whether of the
United States or a state, territory or possession thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.

 

“Indebtedness”
of any Person shall mean, without duplication, (a) all obligations for borrowed money, (b) all obligations evidenced by
bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of
credit or bankers acceptances, (c) all Capitalized Lease Obligations, (d) all obligations or liabilities of others secured by
a Lien on any asset of such Person or its Subsidiaries, irrespective of whether such obligation or liability is assumed,
(e) all obligations to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary
course of business and not outstanding more than one hundred twenty (120) calendar days after the date such payable was
created) or such longer period as shall be agreed in writing by Holder and Borrower, (f) all net obligations owing
to counterparties under hedging agreements, (g) all obligations with respect to redeemable Capital Stock or
repurchase obligations under any Capital Stock issued by such Person, (h) the present value of future rental payments under
all synthetic leases (excluding specifically any operating leases or real estate leases) and (i) any obligation guaranteeing
or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse)
any obligation of any other Person that constitutes Indebtedness under any of clauses (a) through (h) above.

 

“Investment
Property” shall mean “investment property” as defined in Section 9-102 of the UCC.

 

“Landlord
Waiver and Consent” shall mean a waiver/consent from the owner/lessor/mortgagee of any premises either owned or
occupied by Borrower at which any of the Collateral is now or hereafter located for the purpose of providing Holder access to
such Collateral, in each case as such may be modified, amended, or supplemented from time to time.

 

“Lien”
shall mean any mortgage, pledge, security interest, encumbrance, restriction, lien or charge of any kind (including any
agreement to give any of the foregoing, any conditional sale or other title retention agreement or any lease in the nature thereof),
or any other arrangement pursuant to which title to the property is retained by or vested in some other Person for security purposes.

 

“Management
or Service Fee” shall mean any management, service or related or similar fee paid by Borrower to any Person with
respect to any facility owned, operated or leased by Borrower.

 

“Material Adverse
Change” shall mean any event, condition or circumstance or set of events, conditions or circumstances or any change(s)
which (i) has, had or would reasonably be likely to have any material adverse effect upon or change in the validity or enforceability
of any Transaction Document, (ii) has been or would reasonably be expected to be adverse to the value of any material portion of
the Collateral, or to the priority of Holder’s security interest in any portion of the Collateral, (iii) has been or would
reasonably be expected to be materially adverse to the business, operations, prospects, properties, assets, liabilities or financial
condition of the Borrower, either individually or taken as a whole, or (iv) has materially impaired or would reasonably be likely
to materially impair the ability of any Borrower to pay any portion of the Obligations or otherwise perform the Obligations or
to consummate the transactions under the Transaction Documents executed by such Person.

 

“Note Conversion
Price” shall have the meaning set forth in Section 4(d) hereof.

 

    	 	14	 

     

    

  

“Obligations”
shall mean all present and future obligations, Indebtedness and liabilities of Borrower to Holder at any time and from time to
time of every kind, nature and description, direct or indirect, secured or unsecured, joint and several, absolute or contingent,
due or to become due, matured or unmatured, now existing or hereafter arising, contractual or tortious, liquidated or unliquidated,
(whether or not evidenced by a note or debenture), including, without limitation, all principal, interest, applicable fees, charges
and expenses and all amounts paid or advanced by Holder on behalf of or for the benefit of Borrower for any reason at any time,
including in each case obligations of performance as well as obligations of payment and interest that accrue after the commencement
of any proceeding under any Debtor Relief Law by or against any such Person.

 

“Original Issue
Date” shall mean the date of the first issuance of this Note regardless of the number of transfers and regardless
of the number of instruments, which may be issued to evidence such Note.

 

“Paid in
Full” and “Payment in Full” mean, with respect to the Obligations, all amounts owing
with respect thereto (including any interest accruing thereon after the commencement of any proceeding under any Debtor
Relief Law by or against Borrower, whether or not allowed as a claim against such Borrower in such proceeding, but excluding
as yet unasserted contingent obligations), have been fully, finally and completely paid in cash.

 

“Permit”
shall mean collectively all licenses, leases, powers, permits, franchises, certificates, authorizations, approvals, certificates
of need, provider numbers and other right.

 

“Permitted
Acquisition” shall mean any acquisition by Borrower, whether through a purchase of stock, membership interests
or otherwise or the purchase of assets or through a merger, consolidation or amalgamation, of another Person, or the
assets constituting an entire or any portion of any business or operating business unit or division of another person or
securities of such other Person that satisfies the requirements set forth in Sections 2(a)(7) and 2(b)(4)
hereof.

 

“Permitted
Discretion” shall mean a determination or judgment made by Holder in good faith in the exercise of reasonable (from
perspective of a secured lender) business judgment.

 

“Permitted
Indebtedness” shall mean any of the following: (i) any current or future Indebtedness contemplated under the Transaction
Documents or the Aspen Transaction Documents, (ii) any Existing Indebtedness, (iii) Capitalized Lease Obligations incurred after
the Closing Date and Indebtedness incurred to purchase capital equipment and secured by purchase money Liens constituting Permitted
Liens in an aggregate amount outstanding at any time not to exceed $2,000,000, provided, that, the debt service
for such Indebtedness shall not exceed $600,000 for any twelve (12) month period, (iv) accounts payable to trade creditors and
current operating expenses (other than for borrowed money) which are not aged more than one hundred twenty (120) calendar days
from the date such payable was created or such longer period as shall be agreed in writing by Holder, except, in each case incurred
in the ordinary course of business and paid within such time period, unless the same are being contested in good faith and by
appropriate and lawful proceedings and such reserves, if any, with respect thereto as are required by GAAP shall have been reserved,
and (v) new unsecured Indebtedness incurred in the ordinary course of business and not exceeding $2,000,000 individually or in
the aggregate outstanding at any one time when considered collectively with any Existing Indebtedness; provided, however,
that such new Indebtedness (A) shall not be secured by Collateral, any cash, money, Investment Property or Deposit Accounts; (B)
the debt service for such new Indebtedness and any remaining Existing Indebtedness shall not exceed $400,000 for any twelve (12)
month period; (C) upon the incurrence of such new Indebtedness and after giving effect thereto no Default or Event of Default
shall exist and be continuing, and (D) such new Indebtedness shall be subordinated in right of repayment and remedies to all of
the Obligations and to all of Holder’s rights pursuant to a written agreement among Holder, Borrower and the lender with
respect to such new Indebtedness, in form and substance satisfactory to Holder.

 

    	 	15	 

     

    

  

“Permitted
Liens” shall mean with respect to the Borrower any of the following: (i) Liens under the Transaction Documents,
the Aspen Transaction Documents or otherwise arising in favor of any Holder of Indebtedness, (ii) Liens imposed by law for taxes,
assessments or charges of any Governmental Authority for claims not yet due or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained by such Person in
accordance with GAAP to the satisfaction of Holder in its Permitted Discretion, (iii) (A) statutory Liens of landlords (provided,
 that, with respect to Required Locations any such landlord has executed a Landlord Waiver and Consent in form and
substance satisfactory to Holder) and of carriers, warehousemen, mechanics, materialmen, and (B) other Liens imposed by law or
that arise by operation of law in the ordinary course of business from the date of creation thereof, in each case only for amounts
not yet due or which are being contested in good faith by appropriate proceedings and with respect to which adequate reserves
or other appropriate provisions are being maintained by such Person in accordance with GAAP to the satisfaction of Holder in its
Permitted Discretion, (iv) Liens (A) incurred or deposits made in the ordinary course of business (including, without limitation,
surety bonds and appeal bonds) in connection with workers’ compensation, unemployment insurance and other types of social
security benefits or to secure the performance of tenders, bids, leases, contracts (other than for the repayment of Indebtedness),
statutory obligations and other similar obligations, or (B) arising as a result of progress payments under government contracts,
(v) purchase money Liens (A) securing the type of Permitted Indebtedness set forth under clause (iii) of the definition of “Permitted
Indebtedness”, or (B) in connection with the purchase by such Person of equipment in the normal course of business, provided,
that, such payables shall not exceed any limits on Indebtedness provided for herein and shall otherwise be Permitted Indebtedness
hereunder; (vi) any existing Liens disclosed in the Security Agreement.

 

“Permitted
Payments” shall mean (a) any payments of principal, interest or accrued fees and expenses due and owing on this Note,
and (b), plus any payments to holders of Indebtedness of the Company as outlined Exhibit C hereof.

 

“Person” means
a corporation, an association, a partnership, organization, a business, an individual, a government or political
subdivision thereof a governmental agency.

 

“Required
Locations” shall mean collectively: (a) the leased premises located at, (i) 3101 Grand Oak Drive, Lansing, MI
48911, (ii) 4055 English Oak, Suite B, Lansing, MI 48911, and (iii) 2100 S. Washington Avenue, Lansing MI 48910; and (b) any
location leased by Borrower at which books and records relating to Accounts are kept of which duplicates are not kept at the
location identified in (a) above.

 

“Subsidiary”
shall mean, (i) as to Borrower, any Person in which more than fifty percent (50%) of all equity, membership, partnership or other
ownership interests is owned directly or indirectly by such Borrower or one or more of its Subsidiaries, and (ii) as to any other
Person, any Person in which more than fifty percent (50%) of all equity, membership, partnership or other ownership interests is
owned directly or indirectly by such Person or by one or more of such Person’s Subsidiaries.

 

“Transaction
Documents” means the Purchase Agreement and any other agreement delivered in connection with the Purchase Agreement,
including, without limitation, this Note, the Security Agreement and the IP Security Agreement.

 

“Transfer Agent”
means any stock transfer agent that the Borrower may appoint from time to time or if no such transfer agent has been appointed,
then the Borrower.

 

    	 	16	 

     

    

  

“UCC”
shall mean the Uniform Commercial Code as in effect in the State of Michigan from time to time.

 

Section 8.          
No Stockholder Rights. Except to the extent provided for in the Transaction Documents, this Note shall not entitle
the Holder to any of the rights of a stockholder of the Borrower, including without limitation, the right to vote, to receive dividends
and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Borrower,
unless and to the extent converted into shares of Preferred Stock in accordance with the terms hereof.

 

Section 9.
           Spin-offs. If, at any time while any portion of this
Note remains outstanding, the Borrower spins off or otherwise divests itself of a part of its business or operations or disposes
of all or of a part of its assets in a transaction (the “Spin Off”) in which the Borrower, in addition
to or in lieu of any other compensation received and retained by the Borrower for such business, operations or assets, causes
securities of another entity (the “Spin Off Securities”) to be issued to security holders of the Borrower,
the Borrower shall cause (i) to be reserved Spin Off Securities equal to the number thereof which would have been issued to the
Holder had all of the Holder’s Notes outstanding on the record date (the “Record Date”) for determining
the amount and number of Spin Off Securities to be issued to security holders of the Borrower (the “Outstanding Notes”)
been converted as of the close of business on the Business Day immediately before the Record Date (the “Reserved Spin
Off Shares”), and (ii) to be issued to the Holder on the conversion of all or any of the Outstanding Notes, such
amount of the Reserved Spin Off Shares equal to (x) the Reserved Spin Off Shares multiplied by (y) a fraction, of which (I) the
numerator is the principal amount of the Outstanding Notes then being converted, and (II) the denominator is the principal amount
of the Outstanding Notes.

 

Section
10.             Ranking; Seniority. This Note is
a direct obligation of the Borrower. This Note ranks pari passu with all other Indebtedness listed on Exhibit
B hereto issued by the Borrower prior to or simultaneously with the Notes on the Original Issue Date and senior to
all other indebtedness of the Borrower issued after the Original Issue Date. No Indebtedness of the Borrower, either now or
hereafter while this Note is outstanding, is or will be senior to this Note in right of payment, whether with respect to
interest; damages or upon liquidation or dissolution or otherwise, with respect to the assets of the Borrower. Without the
Holder’s consent, the Borrower shall not and shall not permit any of its Subsidiaries to, directly or indirectly,
enter into, create, incur, assume or suffer to exist any indebtedness of any kind, on or with respect to any of its property
or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom that is senior in
any respect to the obligations of the Borrower under this Note.

 

Section 11.           
Transferability. This Note has been issued subject to investment representations of the original Holder hereof and
may be transferred to a) any entity controlled by the Holder, b) any investors in the Holder or their direct assignees or c) any
other accredited investors or exchanged only in compliance with the Securities Act of 1933, as amended (the “Act”),
and other applicable state and foreign securities laws. In the event of any proposed transfer of this Note, the Borrower may require,
prior to issuance of a new Note in the name of such other person, that it receive reasonable transfer documentation that is sufficient
to evidence that such proposed transfer complies with the Act and other applicable state and foreign securities laws. Prior to
due presentment for transfer of this Note, the Borrower and any agent of the Borrower may treat the person in whose name this Note
is duly registered on the Borrower’s Note register as the owner hereof for the purpose of receiving payment as herein provided
and for all other purposes, whether or not this Note be overdue, and neither the Borrower nor any such agent shall be affected
by notice to the contrary. Subject to the foregoing, this Note may be transferred or assigned, in whole or in part, by the Holder
at any time. The Notes will initially be issued in denominations determined by the Borrower, but are exchangeable for an equal
aggregate principal amount of Notes of different denominations, as requested by the Holder surrendering the same. No service charge
will be made for such registration or transfer or exchange.

  

    	 	17	 

     

    

 

Section 12.        Replacement.
If this Note is mutilated, lost, stolen or destroyed, the Borrower shall execute and deliver, in exchange and substitution
for and upon cancellation of the mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed Note, a new
Note for the principal amount of this Note so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss,
theft or destruction of such Note, and of the ownership hereof, and an agreement to indemnify Borrower for any resulting claims,
all reasonably satisfactory to the Borrower.

 

Section 13.        Enforcement
Expenses. If the Borrower fails to strictly comply with the terms of this Note, then the Borrower shall reimburse
the Holder promptly for all reasonable fees, costs and expenses, including, without limitation, reasonable attorneys’ fees
and expenses of the Holder in any action in connection with this Note that are incurred: (a) during any workout, attempted
workout, and in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations; (b)
collecting any sums which become due to the Holder, (c) defending or prosecuting any proceeding or any counterclaim
to any proceeding or appeal; or (d) the protection, preservation or enforcement of any rights or remedies of the Holder
under this Note or any of the Transaction Documents.

 

Section 14.        Waiver.
Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any
other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon
strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.

 

Section 15.         Severability.
If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and
if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and
circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws
governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate
of interest. The Borrower covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would
prohibit or forgive the Borrower from paying all or any portion of the principal of or interest on this Note as contemplated herein,
wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Note.

 

Section 16.         Payment
Dates; Payment Order of Priority. Whenever any payment or other obligation hereunder shall be due on a day other than
a Business Day, such payment shall be made on the next succeeding Business Day. All payments received shall be applied in the following
order of priority: (i) first to any amounts due to the Holder for the reimbursement of any expenses or fees under any provision
of this Note or the Transaction Documents, all of which shall be provided to the Borrower in writing in sufficient detail prior
the application of any payments for this purpose; and (ii) then amounts due to the Holder for accrued but unpaid interest on this
Note; and (iii) then, to principal of this Note.

 

Section
17.        WAIVER OF TRIAL BY JURY. THE PARTIES HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DOCUMENT OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PARTIES’ ACCEPTANCE OF THIS AGREEMENT.

 

    	 	18	 

     

    

  

Section 18.         Governing
Law. This Note shall be governed by and construed in accordance with the laws of the State of Michigan, without
giving effect to conflicts of laws thereof. Each of the parties consents to the jurisdiction of the state courts of the State
of Michigan sitting in Ingham County, Michigan and the U.S. District Court for the Western District of Michigan in connection
with any dispute arising under this Note and hereby waives, to the maximum extent permitted by law, any objection, including any
objection based on forum non conveniens to the bringing of any such proceeding in such jurisdictions.

 

Section
19.         Notices. Any notices, consents, waivers or
other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have
been delivered: (a) upon receipt, when delivered personally; (b) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); (c)
on the next Business Day following deposit of such notice with a nationally recognized overnight delivery service; and (d)
on the third Business Day following deposit of such notice with the U.S. Postal Service in an envelope mailed Certified Mail.
The address and facsimile numbers for such communications shall be:

 

	If to the Borrower, to:	XG Sciences, Inc.
	 	3101 Grand Oak Drive
	 	Lansing,
    MI 48911
	 	Attn: Chief Executive Officer
	 	Telephone: 	(517) 703-1110, ext. 5445
	 	Facsimile: 	(517) 703-1113
	 	 
	With a copy to:	Matt G. Hrebec
	 	Attorney
	 	Foster
    Swift Collins & Smith PC
	 	313 South Washington Square
	 	Lansing, MI 48933-2193
	 	Telephone: 517.371.8256
	 	Facsimile: 517.367.7356
	 	 
	If to the Holder:	SVIC No.15 New Technology Business Investment L.L.P.
	 	29th Fl., Samsung Electronics Bldg.
	 	1320-10, Seocho2-dong, Seocho-gu
	 	Seoul, Korea 137-857
	 	Fax: 82.2.2255.0288

 

Such address and facsimile
number and persons to receive notice may be changed from time to time by either party providing written notice to the other party
three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient
of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s
facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission, (iii)
provided by a nationally recognized overnight delivery service, and (iv) the Certified Mail records of the U.S. Postal Service
shall constitute rebuttable evidence of personal receipt in accordance with this Section 19.

 

    	 	19	 

     

    

  

Section 20.        Entire
Agreement. This Note constitutes and contains the entire agreement of the Borrower and the Holder with respect to
the matters addressed herein and supersedes any and all prior negotiations, correspondence, understandings and agreements between
the Borrower and Holder respecting the subject matter hereof.

 

[The Remainder of
this Page Intentionally Left Blank.]

 

    	 	20	 

     

    

  

IN WITNESS WHEREOF, the
Borrower has caused this Note to be duly executed by a duly authorized officer as of the date set forth above.

 

	 	XG SCIENCES, INC.
	 	 
	 	By:	  /s/ Michael R. Knox
	 	Name:   Michael R. Knox
	 	Title:    Chief Executive Officer
	 	 
	 	XG SCIENCES IP, LLC
	 	 
	 	By:	  /s/ Michael R. Knox
	 	Name:  Michael R. Knox
	 	Title:    Manager

 

     

     

    

  

EXHIBIT “A”

 

NOTICE OF CONVERSION

 

(To be executed by the Holder in order to
convert this Note)

 

To:

XG Sciences, Inc.

3101 Grand Oak Drive

Lansing, MI 48911

Attn: Chief Executive Officer

 

The undersigned hereby
irrevocably elects to convert $______________________ of the outstanding principal and/or accrued interest of the above Note into
shares of Series A Convertible Preferred Stock of XG Sciences, Inc., according to the conditions stated therein, as of the Conversion
Date written below.

 

	Conversion Date:	 
	 	 
	Applicable Note Conversion Price:	 
	 	 
	Signature:	 
	 	 
	Name:	 
	 	 
	Address:	 
	 	 
	Amount to be converted:	$	 
	 	 	 
	Amount of Note unconverted:	$	 
	 	 	 
	Note Conversion Price per share:	$	 
	 	 
	Number of shares of Common Stock to be issued:	 
	 	 
	Please
    issue the shares of Common Stock in  the following name and to the following address:	 
	 	 
	Issue to:	 
	 	 
	Authorized Signature:	 
	 	 
	Name:	 
	 	 
	Title:	 
	 	 
	Phone Number:	 

 

     

     

    

  

EXHIBIT “B”

 

EXISTING INDEBTEDNESS OF BORROWER
WHICH RANKS PARI PASSU TO THE NOTE

 

		1.	$4,178,330.92 Amended and Restated Secured Convertible Promissory Note issued on January 15, 2014
by the Borrower to Aspen Advanced Opportunity Fund.

 

		2.	$772,998.15 Amended and Restated Secured Convertible Promissory Note issued on January 15, 2014
by the Borrower to Michael R. Knox.

 

		3.	$739,349.83 Amended and Restated Secured Convertible Promissory Note issued on January 15, 2014 by
the Borrower to XGS II, LLC.

 

		4.	$300,000.00 Line of Credit Note, dated March 18, 2013, by and between XG Sciences, Inc. as the
“Borrower” and Michael R. Knox as the “Lender” thereunder, of which $100,000 of principal remained outstanding
as of January 15, 2014.

 

     

     

    

  

EXHIBIT “C”

 

PERMITTED PAYMENTS TO HOLDERS OF EXISTING
INDEBTEDNESS

 

		1)	TRADE ACCOUNT PAYABLES

 

		a)	100% of trade payables incurred in the ordinary course of business including unpaid employee compensation
and authorized compensation payable to Affiliates

 

		2)	ACCRUED LIABILITIES

 

		a)	100% of accrued liabilities incurred in the ordinary course of business including payroll, tax,
and other liabilities.

 

		3)	SECURED NOTES PAYABLE DESCRIBED ON EXHIBIT B

 

		a)	All interest payments relating to the Indebtedness listed on Exhibit B hereof to the extent such
interest payments are paid in cash.

 

		b)	Principal payments relating to that Indebtedness listed on Exhibit B, #4, provided, that such principal
payments will only be made in the amounts and after the dates indicated below:

 

		-	$100,000 after the date on which Aspen and its Affiliates have provided $4.0. million of aggregate
funding to the Company pursuant to the Transaction Documents

 

		c)	Principal payments relating to that Existing Indebtedness listed on Exhibit B, #1, #2, and #3,
pursuant to the terms thereof, and subject to the terms of the Transaction Documents or the Aspen Transaction Documents, provided
that such principal payments are made pro rata to the holders thereof in proportion to the aggregate principal amount of all such
notes that may be outstanding as of the date of any such principal payments.

 

		4)	UNSECURED NOTES PAYABLE

 

		a)	Interest on the unsecured notes payable listed on Exhibit D hereof or any other amounts of Permitted
Indebtedness subject to any limitations established in the definition of Permitted Indebtedness.

 

     

     

    

  

EXHIBIT “D”

 

EXISTING INDEBTEDNESS

 

UNSECURED NOTES PAYABLE

 

None

 

     

     

    

  

SCHEDULES

 

Schedule 2(a)(6) – Post Closing
Obligations

 

Borrower shall direct
the Collateral Agent specified in the Security Agreement to file a UCC-1 Statement evidencing Holder’s security interest
in the Collateral within ten (10) days after the Closing Date.

 

Schedule 2(a)(7) – Subsidiaries
of Borrower

 

XG Sciences IP, LLC
(wholly owned subsidiary of XG Sciences, Inc.)

 

Schedule 2(b)(4) – Location of
Collateral

 

(Headquarters)

3101 Grand Oak Drive

Lansing, MI 48911

 

(R&D Facility)

4055 English Oak

Suite B

Lansing, MI 48911

 

(Pilot Plant)

2100 S. Washington
Ave.

Lansing, MI 48910

 

Schedule 2(b)(4) – Securities

 

100% of the membership
interests of XG Sciences IP, LLC is owned by XG Sciences, Inc.

 

Schedule 2(b)(6) – Transactions
with Affiliates

 

		1.	$4,178,330.92 Amended and Restated Secured Convertible Promissory Note issued on January 15, 2014
by the Borrower to Aspen Advanced Opportunity Fund.

 

		2.	$772,998.15 Amended and Restated Secured Convertible Promissory Note issued on January 15, 2014
by the Borrower to Michael R. Knox.

 

		3.	$739,349.83 Amended and Restated Secured Convertible Promissory Note issued on January 15, 2014
by the Borrower to XGS II, LLC.

 

		4.	$300,000.00 Line of Credit Note, dated March 18, 2013, by and between XG Sciences, Inc. as the
“Borrower” and Michael R. Knox as the “Lender” thereunder, of which $100,000 of principal remained outstanding
as of January 15, 2014.

 

		5.	One or more joint development agreements with Samsung or any of its affiliates as contemplated
in the Transaction Documents.

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