Exhibit 4.2
THIS
WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”),
OR UNDER THE SECURITIES LAWS OF ANY STATE. 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, TRANSFER, PLEDGE OR HYPOTHECATION OTHERWISE COMPLIES WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS WARRANT 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.
WARRANT
TO PURCHASE SHARES OF SERIES A CONVERTIBLE PREFERRED STOCK
of
XG
SCIENCES, INC.
Dated
as of January 15, 2014
Void
after the date specified in Section 9
Warrant
to Purchase
833,333
Shares of
Series
A Convertible Preferred Stock
(subject
to adjustment)
THIS
CERTIFIES THAT, for value received, Aspen Advanced Opportunity Fund, LP, a Delaware limited partnership (“Aspen”),
or its registered assigns (Aspen or its assigns generally referred to herein as the “Holder”),
is entitled, subject to the provisions and upon the terms and conditions set forth herein, to purchase from XG Sciences, Inc.,
a Michigan corporation (the “Company”),
shares of the Company’s Series A Convertible Preferred Stock (the “Preferred
Stock”) (the “Shares”)
in the amounts, at such times and at the price per share set forth in Section
1. The term “Warrant”
as used herein shall include this Warrant and any warrants delivered in substitution or exchange therefor as provided herein. This
Warrant is issued in connection with the sale of certain securities pursuant to the Amended & Restated Purchase Agreement,
dated January 15, 2014, by and between the Holder and the Company (the “Purchase
Agreement”). This Warrant restates and consolidates the warrants issued by the Company to Aspen on March 18,
2013 and July 12, 2013, each for 208,333 shares, respectively (the “Prior
Warrants”). The Prior Warrants are hereby cancelled, and Aspen shall physically deliver the Prior Warrants
to the Company upon the execution of this Warrant.
The
following is a statement of the rights of the Holder and the conditions to which this Warrant is subject, and to which the Holder,
by acceptance of this Warrant, agrees:
(a) Number
of Shares. Subject to any previous exercise of this Warrant and the vesting provisions outlined in Section
4 hereof, the Holder shall have the right to purchase up to 833,333 Shares, as may be adjusted pursuant hereto,
prior to (or in connection with) the expiration of this Warrant as provided in Section
9.
(b) Exercise
Price. The exercise price per Share shall initially be equal to $12.00, subject to adjustment as provided in Section
7 (the “Exercise Price”).
(c) Exercise
Period. This Warrant shall be exercisable on or after the date of grant and prior to (or in connection with) the
expiration of this Warrant as set forth in Section
9.
2. Exercise
of the Warrant.
(a) Exercise.
Subject to the vesting provisions outlined in Section
4 hereof, the purchase rights represented by this Warrant may be exercised at the election of the Holder, in whole
or in part, but not for less than one hundred (100) Shares at a time (or such lesser number of shares which may then constitute
the maximum number purchasable pursuant to Section
1) (such number being subject to adjustment as provided in Section
7, in accordance with Section
1), by:
(i) the
tender to the Company at its principal office (or such other office or agency as the Company may designate) of a notice of exercise
in the form of Exhibit A
(the “Notice of Exercise”),
duly completed and executed by or on behalf of the Holder, together with the surrender of this Warrant; and
(ii) the
payment to the Company of an amount equal to (x) the Exercise Price multiplied by (y) the number of Shares being purchased, by
wire transfer or certified, cashier’s or other check acceptable to the Company and payable to the order of the Company; and
(iii) with
respect to the first exercise by the Holder of this Warrant, in whole or in part, delivery of counterpart signature pages to that
certain Shareholder Agreement, dated March 18, 2013, by and among the parties thereto and attached as Exhibit
B hereto (the “Shareholder
Agreement”), and any subsequent amendments thereto, such that as a condition to the first exercise by the
Holder of this Warrant, in whole or in part, the Holder shall become a party to, and bound by, the Shareholder Agreement as a “Stockholder”
thereunder; provided, however, that Holder will not be required to be bound to any provision of any such amendment to the Shareholder
Agreement that creates a material financial obligation for the Holder; it being understood that the Shareholder Agreement as currently
in effect does not create any such financial obligations.
(b) Net
Issue Exercise. In lieu of exercising this Warrant pursuant to Section
2(a)(ii), if the fair market value of one Share is greater than the Exercise Price (at the date of calculation as
set forth below), the Holder may elect to receive a number of Shares equal to the value of this Warrant (or of any portion of this
Warrant being canceled) by surrender of this Warrant at the principal office of the Company (or such other office or agency as
the Company may designate) together with a properly completed and executed Notice of Exercise reflecting such election, in which
event the Company shall issue to the Holder that number of Shares computed using the following formula:
Where:
| X |
= |
The number of Shares to be issued to the Holder |
| |
|
|
| Y |
= |
The number of Shares purchasable under this Warrant or, if only a portion of the Warrant is being exercised, the portion of the Warrant being exercised (at the date of such calculation) |
| A |
= |
The fair market value of one Share (at the date of such calculation) |
| |
|
|
| B |
= |
The Exercise Price (as adjusted to the date of such calculation) |
For
purposes of the calculation above, the fair market value of one Share shall be determined by the Board of Directors of the Company,
acting in good faith; provided, however;
that:
(i) where
a public market exists for the Common Stock at the time of such exercise, the fair market value per Share shall be based on the
average of the closing ask prices of the Common Stock underlying such Shares or the closing price quoted on the national securities
exchange on which the Common Stock is listed as published in the Wall
Street Journal, as applicable, for the ten (10) trading day period ending five (5) trading days prior to the date of
determination of fair market value; and
(ii) if
the Warrant is exercised in connection with the Company’s initial public offering of the Common Stock, the fair market value
per Share shall be based on the offering price per share of Common Stock to the public of the Company’s initial public offering.
(c) Automatic
Exercise. If any portion of this Warrant remains unexercised as of the Expiration Date of this Warrant as set forth
in Section 9 and the fair
market value per share of the Shares as of the Expiration Date is greater than the applicable Exercise Price as of the Expiration
Date, then, without further action by the Holder, this Warrant shall be deemed to have been exercised automatically on the date
(the “Automatic Exercise Date”)
which is the day immediately prior to the close of business on the Expiration Date (or, in the event that the Expiration Date is
not a Business Day, the immediately preceding Business Day) as if the Holder had duly given a Notice of Exercise for a Net Issue
Exercise as contemplated by Section 2(b) hereof, and the Holder (or such other person or persons as directed by the Holder) shall
be treated for all purposes as the holder of record of such Shares as of the close of business on such Automatic Exercise Date.
This Warrant shall be deemed to be surrendered to the Company on the Automatic Exercise
Date by virtue of
this Section 2(c) without
any action by
the Holder
(d) Stock
Certificates. The rights under this Warrant shall be deemed to have been exercised and the Shares issuable upon
such exercise shall be deemed to have been issued immediately prior to the close of business on the date this Warrant is exercised
in accordance with its terms, and the person entitled to receive the Shares issuable upon such exercise shall be treated for all
purposes as the holder of record of such Shares as of the close of business on such date. As promptly as reasonably practicable
on or after such date, and in any event within thirty (30) days thereafter, the Company shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for that number of shares issuable upon such exercise. In the
event that the rights under this Warrant are exercised in part and have not expired, the Company shall execute and deliver a new
Warrant reflecting the number of Shares that remain subject to this Warrant.
(e) No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the
exercise of the rights under this Warrant. In lieu of such fractional share to which the Holder would otherwise be entitled, the
Company shall make a cash payment equal to the Exercise Price multiplied by such fraction.
(f) Reservation
of Stock. The Company agrees during the term the rights under this Warrant are exercisable to take all reasonable
action to reserve and keep available from its authorized and unissued shares of Preferred Stock, and the Common Stock into which
such shares of Preferred Stock are convertible, for the purpose of effecting the exercise of this Warrant such number of shares
as shall from time to time be sufficient to effect the exercise of the rights under this Warrant; and if at any time the number
of authorized but unissued shares of Preferred Stock, and the Common Stock into which such shares of Preferred Stock are convertible,
shall not be sufficient for purposes of the exercise of this Warrant in accordance with its terms, without limitation of such other
remedies as may be available to the Holder, the Company will use all reasonable efforts to take such corporate action as may, in
the opinion of counsel, be necessary to increase its authorized and unissued shares of its Preferred Stock, and the Common Stock
into which shares of Preferred Stock are convertible, to a number of shares as shall be sufficient for such purposes. The Company
represents and warrants that all shares that may be issued upon the exercise of this Warrant will, when issued in accordance with
the terms hereof, be validly issued, fully paid and nonassessable.
3. Replacement
of the Warrant. Subject to the receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of loss, theft or destruction, on delivery of an indemnity agreement reasonably satisfactory
in form and substance to the Company or, in the case of mutilation, on surrender and cancellation of this Warrant, the Company
at the expense of the Holder shall execute and deliver, in lieu of this Warrant, a new warrant of like tenor and amount.
4. Vesting
of the Warrant. The Shares subject to this Warrant shall vest according to the following schedule:
(a) 378,766
Shares, as described in Section 1,
shall be deemed to have vested as of January 15, 2014 in consideration for Aspen having advanced on or before such date (i) $3,909,425.00
of initial principal of Convertible Secured Notes pursuant to the transaction documents referenced in the Purchase Agreement (such
documents collectively the “Transaction
Documents”), and (ii) $635,769.73 of funding to certain vendors of the Company pursuant to Lease Schedules
#1 and #2 of that certain Master Lease Agreement between the Aspen and the Company, dated March 18, 2013 (the “Master
Lease”).
(b) 454,567
warrants shall vest according to the following schedule. For every $12 of new capital advanced to the Company in cash by Aspen
over and above the amounts referenced in Section 4(a) above under any of the Transaction Documents after January 15, 2014, one
Share, as described in Section 1,
shall be deemed to be vested. For the purposes of this Warrant, any funds advanced to vendors of the Company by Aspen pursuant
to the Master Lease Agreement between the parties, dated March 18, 2013, shall not be deemed to have been advanced to the Company
until the earlier to occur of (i) the date on which a completed lease schedule is executed between the parties covering the funds
advanced to vendors of the Company on the Company’s behalf; or (ii) the date which is six months from the date on which any
advance is made by Aspen to a vendor of the Company pursuant to a signed certificate of understanding between Aspen and the Company.
(c) In
the event there is a Default or Event of Default (as such terms are defined in the Transaction Documents) by the Company under
any of the Transaction Documents and such Default or Event of Default continues uncured for a period of thirty (30) days after
the Company’s receipt of written notice of the Event of Default, then all remaining unvested Shares subject to this Warrant
will be deemed to have immediately vested.
(d) In
the event there is a Change of Control of the Company as provided in Section
9 hereof, all remaining unvested Shares subject to this Warrant will be deemed to have immediately vested on the
Business Day prior to such Change of Control.
(a) Warrant
Register. The Company shall maintain a register (the “Warrant
Register”) containing the name and address of the Holder or Holders. Until this Warrant is transferred
on the Warrant Register in accordance herewith, the Company may treat the Holder as shown on the Warrant Register as the absolute
owner of this Warrant for all purposes, notwithstanding any notice to the contrary. Any Holder of this Warrant (or of any portion
of this Warrant) may change its address as shown on the Warrant Register by written notice to the Company requesting a change.
(b) Warrant
Agent. The Company may appoint an agent for the purpose of maintaining the Warrant Register referred to in
Section 5(a), issuing the
Shares or other securities then issuable upon the exercise of the rights under this Warrant, exchanging this Warrant, replacing
this Warrant or conducting related activities.
(c) Transferability
of the Warrant. Subject to the provisions of this Warrant with respect to compliance with the Securities Act of
1933, as amended (the “Securities
Act”) and limitations on assignments and transfers, including without limitation compliance with the restrictions
on transfer set forth in Section 6,
title to this Warrant may be transferred by endorsement (by the transferor and the transferee executing the assignment form attached
as Exhibit C (the “Assignment
Form”) and delivery in the same manner as a negotiable instrument transferable by endorsement and delivery.
(d) Exchange
of the Warrant upon a Transfer. On surrender of this Warrant (and a properly endorsed Assignment Form) for exchange,
subject to the provisions of this Warrant with respect to compliance with the Securities Act and limitations on assignments and
transfers, the Company shall issue to or on the order of the Holder a new warrant or warrants of like tenor, in the name of the
Holder or as the Holder (on payment by the Holder of any applicable transfer taxes) may direct for the number of shares issuable
upon exercise hereof, and the Company shall register any such transfer upon the Warrant Register. This Warrant (and the securities
issuable upon exercise of the rights under this Warrant) must be surrendered to the Company or its warrant or transfer agent, as
applicable, as a condition precedent to the sale, pledge, hypothecation or other transfer of any interest in any of the securities
represented hereby.
(e) Minimum
Transfer. This Warrant may not be transferred in part unless such transfer is to a transferee who, pursuant to
such transfer, receives the right to purchase at least one hundred (100) Shares hereunder (as adjusted from time to time in accordance
with Section 7).
(f) Taxes.
In no event shall the Company be required to pay any tax which may be payable in respect of any transfer involved in the issue
and delivery of any certificate in a name other than that of the Holder, and the Company shall not be required to issue or deliver
any such certificate unless and until the person or persons requesting the issue thereof shall have paid to the Company the amount
of such tax or shall have established to the satisfaction of the Company that such tax has been paid or is not payable.
6. Restrictions
on Transfer of the Warrant and Shares; Compliance with Securities Laws. By acceptance of this
Warrant, the Holder agrees to comply with the following:
(a) Restrictions
on Transfers. Any transfer of the Shares or the Common Stock issuable upon conversion of the Shares (collectively
the “Securities”)
must be in compliance with all applicable federal and state securities laws. The Holder agrees not to make any sale, assignment,
transfer, pledge or other disposition of all or any portion of the Securities, or any beneficial interest therein, unless and until
the transferee thereof has agreed in writing for the benefit of the Company to take and hold such Securities subject to, and to
be bound by, the terms and conditions set forth in this Warrant to the same extent as if the transferee were the original Holder
hereunder, and
(i) there
is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement, or
(ii) (A)
such Holder shall have given prior written notice to the Company of such Holder’s intention to make such disposition and
shall have furnished the Company with a detailed description of the manner and circumstances of the proposed disposition, (B) the
transferee shall have confirmed to the satisfaction of the Company in writing, substantially in the form of Exhibit
A-1, that the Securities are being acquired (i) solely for the transferee’s own account and not as a nominee
for any other party, (ii) for investment and (iii) not with a view toward distribution or resale, and shall have confirmed such
other matters related thereto as may be reasonably requested by the Company, and (C) such Holder shall have furnished the Company,
at the Holder’s expense, with (i) an opinion of counsel, reasonably satisfactory to the Company, to the effect that such
disposition will not require registration of such Securities under the Securities Act or (ii) a “no action” letter
from the Securities and Exchange Commission to the effect that the transfer of such Securities without registration will not result
in a recommendation by the staff of the Securities and Exchange Commission that action be taken with respect thereto, whereupon
such Holder shall be entitled to transfer such Securities in accordance with the terms of the notice delivered by the Holder to
the Company; provided, that the
requirements of Section 6(a)(ii)(C)
shall not apply in the case of permitted transfers under Section
6(b).
(b) Permitted
Transfers. Permitted transfers include (i) a transfer not involving a change in beneficial ownership, or
(ii) transactions involving the distribution without consideration of Securities by any Holder to a parent or majority owned subsidiary
of the Holder that is a corporation; provided,
in each case, that the Holder shall give written notice to the Company of the Holder’s intention to effect such disposition
and shall have furnished the Company with a detailed description of the manner and circumstances of the proposed disposition.
(c) Securities
Law Legend. The Securities shall (unless otherwise permitted by the provisions of this Warrant) be stamped or imprinted
with a legend substantially similar to the following (in addition to any legend required by state securities laws):
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.
(d) Shareholder
Agreement Legend. The Shares issued upon exercise hereof shall also be stamped or imprinted with any and all legends
described in the Company’s Shareholder Agreement.
(e) Instructions
Regarding Transfer Restrictions. The Holder consents to the Company making a notation on its records and giving
instructions to any transfer agent in order to implement the restrictions on transfer established in Sections
5 and 6.
The Company will not be required to (i) transfer on its books or in its Warrant Register any Securities that have been transferred
in violation of any provisions of this Warrant or (ii) to treat as owner of such Securities, or accord the right to vote or pay
dividends to any purchaser, donee or other transferee to whom such Securities may have been so transferred.
(f) Removal
of Legend. The legend referring to federal and state securities laws identified in Section
6(d) stamped on a certificate evidencing the Shares and the stock transfer instructions and record notations with
respect to such securities shall be removed and the Company shall issue a certificate without such legend to the holder of such
securities if (i) such securities are registered under the Securities Act, or (ii) such holder provides the Company with an opinion
of counsel reasonably acceptable to the Company to the effect that a sale or transfer of such securities may be made without registration
or qualification.
7. Adjustments.
Subject to the expiration of this Warrant pursuant to Section
9, the number and kind of shares purchasable hereunder and the Exercise Price therefor are subject to adjustment
from time to time after the date first stated herein, as follows:
(a) Merger
or Reorganization. If at any time there shall be any reorganization, recapitalization, merger or consolidation
(a “Reorganization”)
involving the Company (other than as otherwise provided for herein or as would cause the expiration of this Warrant under Section
9) in which the Preferred Stock are converted into
or exchanged for securities, cash or other property, then, as a part of such Reorganization, lawful provision shall be made so
that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, the kind and amount of securities, cash
or other property of the successor corporation resulting from such Reorganization, equivalent in value to that which a holder
of the Shares deliverable upon exercise of this Warrant would have been entitled in such Reorganization if the right to purchase
the Shares hereunder had been exercised immediately prior to such Reorganization. In any such case, appropriate adjustment (as
determined in good faith by the Board of Directors of the successor corporation) shall be made in the application of the provisions
of this Warrant with respect to the rights and interests of the Holder after such Reorganization to the end that the provisions
of this Warrant shall be applicable after the event, as near as reasonably may be, in relation to any shares or other securities
deliverable after that event upon the exercise of this Warrant.
(b) Reclassification
of Shares. If the securities issuable upon exercise of this Warrant are changed into the same or a different
number of securities of any other class or classes by reclassification, capital reorganization or otherwise (other than as otherwise
provided for herein) (a “Reclassification”),
then, in any such event, in lieu of the number of Shares which the Holder would otherwise have been entitled to receive, the Holder
shall have the right thereafter to exercise this Warrant for a number of shares of such other class or classes of stock that a
holder of the number of securities deliverable upon exercise of this Warrant immediately before that change would have been entitled
to receive in such Reclassification, all subject to further adjustment as provided herein with respect to such other shares.
(c) Subdivisions
and Combinations. In the event that the outstanding shares of the Preferred Stock are subdivided (by stock split,
by payment of a stock dividend or otherwise) into a greater number of shares of such securities, the number of Shares issuable
upon exercise of the rights under this Warrant immediately prior to such subdivision shall, concurrently with the effectiveness
of such subdivision, be proportionately increased, and the Exercise Price shall be proportionately decreased, and in the event
that the outstanding shares of the Preferred Stock are combined (by reclassification or otherwise) into a lesser number of shares
of such securities, the number of Shares issuable upon exercise of the rights under this Warrant immediately prior to such combination
shall, concurrently with the effectiveness of such combination, be proportionately decreased, and the Exercise Price shall be proportionately
increased.
(d) Notice
of Adjustments. Upon any adjustment in accordance with this Section
7, the Company shall give notice thereof to the Holder, which notice shall state the event giving rise to the adjustment,
the Exercise Price as adjusted and the number of securities or other property purchasable upon the exercise of the rights under
this Warrant, setting forth in reasonable detail the method of calculation of each. The Company shall, upon the written request
of any Holder, furnish or cause to be furnished to such Holder a certificate setting forth (i) such adjustments, (ii) the Exercise
Price at the time in effect and (iii) the number of securities and the amount, if any, of other property that at the time would
be received upon exercise of this Warrant
8. Notification
of Certain Events. Prior to the expiration of this Warrant pursuant to Section
9, in the event that the Company shall authorize:
(a) the
voluntary liquidation, dissolution or winding up of the Company;
(b) any
transaction resulting in the expiration of this Warrant pursuant to Section
9(b); or
(c) any
cash dividend, stock dividend, property dividend or any other distribution of the Company;
the
Company shall send to the Holder of this Warrant at least fifteen (15) days prior written notice of the date on which a record
shall be taken for any such action, dividend or distribution specified in clause (a) or (c) or the expected effective date of any
such other event specified in clause (b) or (c), as applicable. The notice provisions set forth in this section may be shortened
or waived prospectively or retrospectively by the consent of the Holder of this Warrant.
9. Expiration
of the Warrant. This Warrant shall expire and shall no longer be exercisable as of the earlier of (such date, the “Expiration
Date”):
(a) 5:00
p.m., Eastern time, on January 15, 2024;
(b) (i)
the acquisition of the Company by another entity by means of any transaction or series of related transactions to which the Company
is a party (including, without limitation, any stock acquisition, reorganization, merger or consolidation, but excluding any sale
of stock for capital raising purposes and any transaction effected primarily for purposes of changing the Company’s jurisdiction
of incorporation) other than a transaction or series of related transactions in which the holders of the voting securities of
the Company outstanding immediately prior to such transaction or series of related transactions retain, immediately after such
transaction or series of transactions, as a result of shares in the Company held by such holders prior to such transaction or
series of transactions, at least a majority of the total voting power represented by the outstanding voting securities of the
Company or such other surviving or resulting entity (or if the Company or such other surviving or resulting entity is a wholly-owned
subsidiary immediately following such acquisition, its parent), or (ii) a sale, lease or other disposition of all or substantially
all of the assets of the Company and its subsidiaries taken as a whole by means of any transaction or series of related transactions,
except where such sale, lease or other disposition is to a wholly-owned subsidiary of the Company (any of the foregoing events
specified in this Section 9(b), referred to generally as a “Change
of Control”).
10. No
Rights as a Stockholder. Nothing contained herein shall entitle the Holder to any rights as a stockholder of the Company or
to be deemed the holder of any securities that may at any time be issuable on the exercise of the rights hereunder for any purpose
nor shall anything contained herein be construed to confer upon the Holder, as such, any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action (whether
upon any recapitalization, issuance of stock, reclassification of stock, change of par value or change of stock to no par value,
consolidation, merger, conveyance or otherwise) or to receive notice of meetings, or to receive dividends or subscription rights
or any other rights of a stockholder of the Company until the rights under the Warrant shall have been exercised and the Shares
purchasable upon exercise of the rights hereunder shall have become deliverable as provided herein.
11. Representations
and Warranties of the Holder. By acceptance of this Warrant, the Holder represents and warrants to the Company as follows:
(a) No
Registration. The Holder understands that the Securities have not been, and will not be, registered under
the Securities Act by reason of a specific exemption from the registration provisions of the Securities Act, the availability of
which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of the Holder’s representations as expressed herein or otherwise
made pursuant hereto.
(b) Investment
Intent. The Holder is acquiring the Securities for investment for its own account, not as a nominee or agent, and
not with a view to, or for resale in connection with, any distribution thereof. The Holder has no present intention of selling,
granting any participation in, or otherwise distributing the Securities, nor does it have any contract, undertaking, agreement
or arrangement for the same.
(c) Investment
Experience. The Holder has substantial experience in evaluating and investing in private placement transactions
of securities in companies similar to the Company, and has such knowledge and experience in financial or business matters so that
it is capable of evaluating the merits and risks of its investment in the Company and protecting its own interests.
(d) Speculative
Nature of Investment. The Holder understands and acknowledges that the Company has a limited financial and
operating history and that its investment in the Company is highly speculative and involves substantial risks. The Holder can bear
the economic risk of its investment and is able, without impairing its financial condition, to hold the Securities for an indefinite
period of time and to suffer a complete loss of its investment.
(e) Access
to Data. The Holder has had an opportunity to ask questions of officers of the Company, which questions were answered
to its satisfaction. The Holder believes that it has received all the information that it considers necessary or appropriate for
deciding whether to acquire the Securities. The Holder understands that any such discussions, as well as any information issued
by the Company, were intended to describe certain aspects of the Company’s business and prospects, but were not necessarily a thorough
or exhaustive description. The Holder acknowledges that any business plans prepared by the Company have been, and continue to be,
subject to change and that any projections included in such business plans or otherwise are necessarily speculative in nature,
and it can be expected that some or all of the assumptions underlying the projections will not materialize or will vary significantly
from actual results.
(f) Accredited
Investor. The Holder is an “accredited investor” within the meaning of Regulation D, Rule 501(a),
promulgated by the Securities and Exchange Commission and agrees to submit to the Company such further assurances of such status
as may be reasonably requested by the Company.
(g) Residency.
The residency of the Holder (or, in the case of a partnership or corporation, such entity’s principal place of business)
is correctly set forth on the signature page hereto.
(h) Restrictions
on Resales. The Holder acknowledges that the Securities must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available. The Holder is aware of the provisions of Rule 144
promulgated under the Securities Act, which permit resale of shares purchased in a private placement subject to the satisfaction
of certain conditions, which may include, among other things, the availability of certain current public information about the
Company; the resale occurring not less than a specified period after a party has purchased and paid for the security to be sold;
the number of shares being sold during any three-month period not exceeding specified limitations; the sale being effected through
a “broker’s transaction,” a transaction directly with a “market maker” or a “riskless principal
transaction” (as those terms are defined in the Securities Act or the Exchange Act, as amended, and the rules and regulations
promulgated thereunder); and the filing of a Form 144 notice, if applicable. The Holder acknowledges and understands that the Company
may not be satisfying the current public information requirement of Rule 144 at the time the Holder wishes to sell the Securities
and that, in such event, the Holder may be precluded from selling the Securities under Rule 144 even if the other applicable requirements
of Rule 144 have been satisfied. The Holder acknowledges that, in the event the applicable requirements of Rule 144 are not met,
registration under the Securities Act or an exemption from registration will be required for any disposition of the Securities.
The Holder understands that, although Rule 144 is not exclusive, the Securities and Exchange Commission has expressed its opinion
that persons proposing to sell restricted securities received in a private offering other than in a registered offering or pursuant
to Rule 144 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers
or sales and that such persons and the brokers who participate in the transactions do so at their own risk.
(i) No
Public Market. The Holder understands and acknowledges that no public market now exists for any of the securities
issued by the Company and that the Company has made no assurances that a public market will ever exist for the Company’s
securities.
(j) Brokers
and Finders. The Holder has not engaged any brokers, finders or agents in connection with the Securities, and the
Company has not incurred nor will incur, directly or indirectly, as a result of any action taken by the Holder, any liability for
brokerage or finders’ fees or agents’ commissions or any similar charges in connection with the Securities.
(k) Legal
Counsel. The Holder has had the opportunity to review this Warrant, the exhibits and schedules attached hereto and
the transactions contemplated by this Warrant with its own legal counsel. The Holder is not relying on any statements or representations
of the Company or its agents for legal advice with respect to this investment or the transactions contemplated by this Warrant.
(l) Tax
Advisors. The Holder has reviewed with its own tax advisors the U.S. federal, state and local and non-U.S. tax consequences
of this investment and the transactions contemplated by this Warrant. With respect to such matters, the Holder relies solely on
any such advisors and not on any statements or representations of the Company or any of its agents, written or oral. The Holder
understands that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment
and the transactions contemplated by this Warrant.
12. Miscellaneous.
(a) Amendments.
Except as expressly provided herein, neither this Warrant nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument referencing this Warrant and signed by the Company and the Holder. Any amendment, waiver, discharge
or termination effected in accordance with this Section
12(a) shall be binding upon the Holder, each future holder of such Warrants and the Company.
(b) Waivers.
No waiver of any single breach or default shall be deemed a waiver of any other breach or default theretofore or thereafter occurring.
(c) Notices.
All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, sent by facsimile or electronic mail (if to the Holder) or otherwise delivered by hand, messenger or courier
service addressed:
(i) if
to the Holder, to the Holder at the Holder’s address, facsimile number or electronic mail address as shown in the Company’s
records, as may be updated in accordance with the provisions hereof, or until any such Holder so furnishes an address, facsimile
number or electronic mail address to the Company, then to and at the address, facsimile number or electronic mail address of the
last holder of this Warrant for which the Company has contact information in its records; or
(ii) if
to the Company, to the attention of the Chief Executive Officer of the Company at the Company’s address as shown on the
signature page hereto, or at such other address as the Company shall have furnished to the Holder.
Each
such notice or other communication shall for all purposes of this Warrant be treated as effective or having been given (i) if delivered
by hand, messenger or courier service, when delivered, or (ii) if sent by mail, at the earlier of its receipt or 72 hours after
the same has been deposited in a regularly maintained receptacle for the deposit of the United States mail, addressed and mailed
as aforesaid, or (iii) if sent by facsimile, upon confirmation of facsimile transfer or, if sent by electronic mail, upon confirmation
of delivery when directed to the relevant electronic mail address. In the event of any conflict between the Company’s books
and records and this Warrant or any notice delivered hereunder, the Company’s books and records will control absent fraud
or error.
(d) Governing
Law. This Warrant and all actions arising out of or in connection with this Warrant shall be governed by and construed
in accordance with the laws of the State of Michigan, without regard to the conflicts of law provisions of any other state.
(e) Jurisdiction
and Venue. Each of the Holder and the Company irrevocably consents to the exclusive jurisdiction and venue of any
court within the Xxxxxx County, State of Michigan, in connection with any matter based upon or arising out of this Warrant or the
matters contemplated herein, and agrees that process may be served upon them in any manner authorized by the laws of the State
of Florida for such persons.
(f) Titles
and Subtitles. The titles and subtitles used in this Warrant are used for convenience only and are not to be considered
in construing or interpreting this Warrant. All references in this Warrant to sections, paragraphs and exhibits shall, unless otherwise
provided, refer to sections and paragraphs hereof and exhibits attached hereto.
(g) Severability.
If any provision of this Warrant becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void,
portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Warrant, and
such illegal, unenforceable or void provision shall be replaced with a valid and enforceable provision that will achieve, to the
extent possible, the same economic, business and other purposes of the illegal, unenforceable or void provision. The balance of
this Warrant shall be enforceable in accordance with its terms.
(h) Waiver
of Jury Trial. EACH OF THE HOLDER AND THE COMPANY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATED TO THIS
WARRANT. If the waiver of jury trial set forth in this paragraph is not enforceable, then any claim or cause of action arising
out of or relating to this Warrant shall be settled by judicial reference pursuant to the laws of the State of Michigan before
a referee sitting without a jury, such referee to be mutually acceptable to the parties or, if no agreement is reached, by a referee
appointed by the state courts of Michigan. This paragraph shall not restrict the Holder or the Company from exercising remedies
under the Uniform Commercial Code or from exercising pre- judgment remedies under applicable law.
(i) Saturdays,
Sundays and Holidays. If the last or appointed day for the taking of any action or the expiration of any
right required or granted herein shall be a Saturday, Sunday or U.S. federal holiday, then such action may be taken or such right
may be exercised on the next succeeding day that is not a Saturday, Sunday or U.S. federal holiday (such day a “Business
Day”).
(j) Rights
and Obligations Survive Exercise of the Warrant. Except as otherwise provided herein, the rights and obligations
of the Company and the Holder under this Warrant shall survive exercise of this Warrant.
(k) Entire
Agreement. Except as expressly set forth herein, this Warrant (including the exhibits attached hereto) constitutes
the entire agreement and understanding of the Company and the Holder with respect to the subject matter hereof and supersedes all
prior agreements and understandings relating to the subject matter hereof, including the Prior Warrants.
(Signature
Page Follows)
The
Company and the Holder sign this Warrant as of the date stated on the first page.
| |
XG SCIENCES, INC. |
| |
a Michigan corporation |
| |
|
|
| |
By: |
/s/ Xxxxxxx X. Xxxx |
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Name: |
Xxxxxxx X. Xxxx |
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Title: |
Chief Executive Officer |
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|
|
| |
Address: |
| |
0000 Xxxxx Xxx Xxxxx |
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Xxxxxxx, XX 00000 |
| |
|
| |
Telephone: 000.000.0000 |
| |
Facsimile: 517.703.1113 |
| AGREED AND ACKNOWLEDGED: |
|
| |
|
| ASPEN ADVANCED OPPORTUNITY FUND, LP, |
|
| a Delaware limited partnership |
|
| |
|
|
| By: |
AA XGS, LLC |
|
| Its: |
General Partner |
|
| |
|
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| By: |
/s/ Xxxxxx X. Xxxxx |
|
| Name: |
Xxxxxx X. Xxxxx |
|
| Title: |
Managing Member |
|
| |
|
|
| Address: |
|
| 0000 Xxxxxxxxx Xxxxx, Xxxxx 000 |
|
| Xxxxxx, XX 00000 |
|
| |
|
| Telephone: 000.000.0000 |
|
| Facsimile: 239.325.2004 |
|
EXHIBIT
A
NOTICE
OF EXERCISE
| TO: | XG Sciences, Inc.
(the “Company”) |
| Attention: | Chief Executive Officer |
| (1) | Exercise. The undersigned elects to purchase the
following pursuant to the terms of the attached warrant: |
| |
Number of shares: |
|
| |
|
|
| |
Type of security: |
|
| ¨ | A cash payment, and tenders herewith payment of the purchase price for such shares in full, together
with all applicable transfer taxes, if any. |
| ¨ | The net issue exercise provisions of Section
2(b) of the attached warrant. |
| (3) | Stock
Certificate. Please issue a certificate or certificates representing the shares in the name of: |
| |
¨ |
The undersigned |
|
| |
|
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|
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¨ |
Other—Name: |
|
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|
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|
Address: |
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¨ |
Not applicable |
|
| (5) | Investment Intent. The undersigned represents and
warrants that the aforesaid shares are being acquired for investment for its own account, not as a nominee or agent, and not with
a view to, or for resale in connection with, the distribution thereof, and that the undersigned has no present intention of selling,
granting any participation in, or otherwise distributing the shares, nor does it have any contract, undertaking, agreement or
arrangement for the same, and all representations and warranties of the undersigned set forth in Section
11 of the attached warrant are true and correct as of the date hereof. |
(Signature
page to the Notice of Exercise)
| (6) | Investment
Representation Statement. The undersigned has executed, and delivers herewith, an
Investment Representation Statement in a form substantially similar to the form attached
to the warrant as Exhibit
A-1. |
| |
|
| |
(Print
name of the warrant holder) |
| |
|
| |
|
| |
(Signature) |
| |
|
| |
|
| |
(Name
and title of signatory, if applicable) |
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|
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|
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(Date) |
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|
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|
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(Fax
number) |
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|
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|
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(Email
address) |
(Signature
page to the Notice of Exercise)
EXHIBIT
A-1
INVESTMENT
REPRESENTATION STATEMENT
| INVESTOR: |
|
|
| |
|
| COMPANY: |
XG Sciences, Inc., a Michigan corporation |
| |
|
| SECURITIES: |
THE WARRANT ISSUED ON JANUARY 15, 2014 (THE “WARRANT”)
AND THE SECURITIES ISSUED OR ISSUABLE UPON EXERCISE THEREOF |
| |
|
| DATE: |
|
|
In
connection with the purchase or acquisition of the above-listed Securities, the undersigned Investor represents and warrants to,
and agrees with, the Company as follows:
1. No
Registration. The Investor understands that the Securities have not been, and will not be, registered under the Securities
Act of 1933, as amended (the “Securities
Act”), by reason of a specific exemption from the registration provisions of the Securities Act, the availability
of which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of the Investor’s representations as expressed herein or
otherwise made pursuant hereto.
2. Investment
Intent. The Investor is acquiring the Securities for investment for its own account, not as a nominee or agent, and not with
a view to, or for resale in connection with, any distribution thereof. The Investor has no present intention of selling, granting
any participation in, or otherwise distributing the Securities, nor does it have any contract, undertaking, agreement or arrangement
for the same.
3. Investment
Experience. The Investor has substantial experience in evaluating and investing in private placement transactions of securities
in companies similar to the Company, and has such knowledge and experience in financial or business matters so that it is capable
of evaluating the merits and risks of its investment in the Company and protecting its own interests.
4. Speculative
Nature of Investment. The Investor understands and acknowledges that its investment in the Company is highly speculative and
involves substantial risks. The Investor can bear the economic risk of its investment and is able, without impairing its financial
condition, to hold the Securities for an indefinite period of time and to suffer a complete loss of its investment.
5. Access
to Data. The Investor has had an opportunity to ask questions of officers of the Company, which questions were answered to
its satisfaction. The Investor understands that any such discussions, as well as any information issued by the Company, were intended
to describe certain aspects of the Company’s business and prospects, but were not necessarily a thorough or exhaustive description.
The Investor acknowledges that any business plans prepared by the Company have been, and continue to be, subject to change and
that any projections included in such business plans or otherwise are necessarily speculative in nature, and it can be expected
that some or all of the assumptions underlying the projections will not materialize or will vary significantly from actual results.
6. Accredited
Investor. The Investor is an “accredited investor” within the meaning of Regulation D, Rule 501(a), promulgated
by the Securities and Exchange Commission and agrees to submit to the Company such further assurances of such status as may be
reasonably requested by the Company.
7. Residency.
The residency of the Investor (or, in the case of a partnership or corporation, such entity’s principal place of business)
is correctly set forth on the signature page hereto.
8. Restrictions
on Resales. The Investor acknowledges that the Securities must be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available. The Investor is aware of the provisions of Rule 144 promulgated
under the Securities Act, which permit resale of shares purchased in a private placement subject to the satisfaction of certain
conditions, which may include, among other things, the availability of certain current public information about the Company; the
resale occurring not less than a specified period after a party has purchased and paid for the security to be sold; the number
of shares being sold during any three-month period not exceeding specified limitations; the sale being effected through a “broker’s
transaction,” a transaction directly with a “market maker” or a “riskless principal transaction”
(as those terms are defined in the Securities Act or the Exchange Act (as defined below), as amended, and the rules and regulations
promulgated thereunder); and the filing of a Form 144 notice, if applicable. The Investor acknowledges and understands that the
Company may not be satisfying the current public information requirement of Rule 144 at the time the Investor wishes to sell the
Securities and that, in such event, the Investor may be precluded from selling the Securities under Rule 144 even if the other
applicable requirements of Rule 144 have been satisfied. The Investor understands and acknowledges that, in the event the applicable
requirements of Rule 144 are not met, registration under the Securities Act or an exemption from registration will be required
for any disposition of the Securities. The Investor understands that, although Rule 144 is not exclusive, the Securities and Exchange
Commission has expressed its opinion that persons proposing to sell restricted securities received in a private offering other
than in a registered offering or pursuant to Rule 144 will have a substantial burden of proof in establishing that an exemption
from registration is available for those offers or sales and that those persons and the brokers who participate in the transactions
do so at their own risk.
9. No
Public Market. The Investor understands and acknowledges that no public market now exists for any of the securities issued
by the Company and that the Company has made no assurances that a public market will ever exist for the Company’s securities.
10. Brokers
and Finders. The Investor has not engaged any brokers, finders or agents in connection with the Securities, and the Company
has not incurred nor will incur, directly or indirectly, as a result of any action taken by the Investor, any liability for brokerage
or finders’ fees or agents’ commissions or any similar charges in connection with the Securities.
11. Legal
Counsel. The Investor has had the opportunity to review the Warrant, the exhibits and schedules attached thereto and the transactions
contemplated by the Warrant with its own legal counsel. The Investor is not relying on any statements or representations of the
Company or its agents for legal advice with respect to this investment or the transactions contemplated by the Warrant.
12. Tax
Advisors. The Investor has reviewed with its own tax advisors the U.S. federal, state and local and non-U.S. tax consequences
of this investment and the transactions contemplated by the Warrant. With respect to such matters, the Investor relies solely on
such advisors and not on any statements or representations of the Company or any of its agents, written or oral. The Investor understands
that it (and not the Company) shall be responsible for its own tax liability that may arise as a result of this investment or the
transactions contemplated by the Warrant.
The
Investor is signing this Investment Representation Statement on the date first written above.
| |
INVESTOR |
| |
|
| |
[_________________] |
| |
|
| |
|
| |
(Print
name of the investor) |
| |
|
| |
|
| |
(Signature) |
| |
|
| |
|
| |
(Name
and title of signatory, if applicable) |
| |
|
| |
|
| |
(Street
address) |
| |
|
| |
|
| |
(City,
state and ZIP) |
EXHIBIT
B
[Shareholder
Agreement]
EXHIBIT
C
ASSIGNMENT
FORM
| ASSIGNOR: |
|
| |
|
| COMPANY: |
XG SCIENCES, INC. |
| |
|
| WARRANT: |
THE WARRANT TO PURCHASE SHARES. OF SERIES A CONVERTIBLE PREFERRED STOCK
ISSUED ON JANUARY 15, 2014 (THE “WARRANT”) |
| |
|
| DATE: |
|
|
| (1) | Assignment. The undersigned registered holder of
the Warrant (“Assignor”)
assigns and transfers to the assignee named below (“Assignee”)
all of the rights of Assignor under the Warrant, with respect to the number of shares set forth below: |
| Number of Shares Assigned: |
|
and
does irrevocably constitute and appoint ____________________ as attorney to make such transfer on the books of XG Sciences, Inc.,
maintained for the purpose, with full
power of substitution in the premises.
| (2) | Obligations of Assignee. Assignee agrees to take
and hold the Warrant and any shares of stock to be issued upon exercise of the rights thereunder (the “Securities”)
subject to, and to be bound by, the terms and conditions set forth in the Warrant to the same extent as if Assignee were the original
holder thereof. |
| (3) | Investment Intent. Assignee represents and warrants
that the Securities are being acquired for investment for its own account, not as a nominee or agent, and not with a view to,
or for resale in connection with, the distribution thereof, and that Assignee has no present intention of selling, granting any
participation in, or otherwise distributing the shares, nor does it have any contract, undertaking, agreement or arrangement for
the same, and all representations and warranties set forth in Section
11 of the Warrant are true and correct as to Assignee as of the date hereof. |
| (4) | Investment Representation Statement. Assignee has
executed, and delivers herewith, an Investment Representation Statement in a form substantially similar to the form attached to
the Warrant as Exhibit A-1. |
Assignor
and Assignee are signing this Assignment Form on the date first set forth above.
| ASSIGNOR |
|
ASSIGNEE |
| |
|
|
| |
|
|
| (Print
name of Assignor) |
|
(Print
name of Assignee) |
| |
|
|
| |
|
|
| (Signature
of Assignor) |
|
(Signature
of Assignee) |
| |
|
|
| |
|
|
| (Print
name of signatory, if applicable) |
|
(Print
name of signatory, if applicable) |
| |
|
|
| |
|
|
| (Print
title of signatory, if applicable) |
|
(Print
title of signatory, if applicable) |
| |
|
|
| Address: |
|
Address: |
| |
|
|
| |
|
|
| |
|
|
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|
|
