Item 1.01.
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Entry into a Material Definitive Agreement.
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On May 19, 2017, xG Technology, Inc. (the
“Company”) entered into a purchase agreement (the “Purchase Agreement”) and a registration rights agreement
(the “Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC (“Lincoln Park”), an Illinois
limited liability company.
Under the terms and subject to the conditions
of the Purchase Agreement, the Company has the right to sell to Lincoln Park and Lincoln Park is obligated to purchase up to $15.0
million in amounts of shares, as described below, of the Company’s common stock (“Common Stock”), subject to
certain limitations, from time to time, over the 30-month period commencing on the date that a registration statement, which the
Company agreed to file with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights
Agreement, is declared effective by the SEC and a final prospectus in connection therewith is filed. The Company may, at its sole
discretion and subject to certain conditions, direct Lincoln Park to purchase up to 125,000 shares of Common Stock on any business
day (such purchases, “Regular Purchases”), provided that at least one (1) business day has passed since the most recent
Regular Purchase was completed, and in no event will the amount of a single Regular Purchase exceed $1.0 million. The purchase
price of Regular Purchases will be based on the prevailing market prices of shares of Common Stock, which shall be equal to the
lesser of the lowest sale price of the Common Stock during the purchase date and the average of the three (3) lowest closing sale
prices of the Common Stock during the ten (10) business days prior to the purchase date. The Company may also direct Lincoln Park
to purchase other amounts as accelerated purchases or additional purchases if the closing sale price of the Common Stock is not
below the threshold prices as set forth in the Purchase Agreement.
There is no upper limit on the price per
share that Lincoln Park must pay for Common Stock under a Regular Purchase or an accelerated purchase. Lincoln Park will not be
required to purchase any shares of Common Stock if such sale would result in Lincoln Park’s beneficial ownership exceeding
4.99% of the then outstanding shares of Common Stock.
On May 19, 2017, the Company issued to
Lincoln Park 192,431 shares of Common Stock as commitment shares in consideration for entering into the Purchase Agreement. Lincoln
Park represented to the Company, among other things, that it was an “accredited investor” (as such term is defined
in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “Securities Act”)), and the Company
sold the securities in reliance upon an exemption from registration contained in Section 4(a)(2) of the Securities Act. The securities
sold may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.
The Purchase Agreement and the Registration
Rights Agreement contain customary representations, warranties, agreements and conditions to completing future sale transactions,
indemnification rights and obligations of the parties. The Company has the right to terminate the Purchase Agreement at any time,
at no cost or penalty. Lincoln Park does not have the right to terminate the Purchase Agreement upon any of the events of default
as set forth in the Purchase Agreement; however, during an event of default, the Company may not deliver a notice directing Lincoln
Park to purchase shares of Common Stock under the Purchase Agreement. In addition, in the event of bankruptcy proceedings by or
against the Company, the Purchase Agreement will automatically terminate. Actual sales of shares of Common Stock to Lincoln Park
under the Purchase Agreement will depend on a variety of factors to be determined by the Company from time to time, including,
among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate
sources of funding for the Company and its operations. Lincoln Park has no right to require any sales by the Company, but is obligated
to make purchases from the Company as the Company directs in accordance with the Purchase Agreement. Lincoln Park has covenanted
not to cause or engage in any manner whatsoever, any direct or indirect short selling or hedging of the Company’s shares.
The net proceeds under the Purchase Agreement
to the Company will depend on the frequency and prices at which the Company sells shares of its stock to Lincoln Park. The Company
expects that any proceeds received by the Company from such sales to Lincoln Park under the Purchase Agreement will be used for
working capital and general corporate purposes.
This current report on Form 8-K shall not
constitute an offer to sell or a solicitation of an offer to buy any shares of Common Stock, nor shall there be any sale of shares
of Common Stock in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration
or qualification under the securities laws of any such state or other jurisdiction.
The foregoing descriptions of the Purchase
Agreement and the Registration Rights Agreement are qualified in their entirety by reference to the full text of the Purchase Agreement
and the Registration Rights Agreement, copies of which are attached hereto as Exhibit 10.1 and 10.2, respectively, and each of
which is incorporated herein in its entirety by reference. The representations, warranties and covenants contained in such agreements
were made only for purposes of such agreements and as of specific dates, were solely for the benefit of the parties to such agreements,
and may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures
exchanged between the parties in connection with execution of the agreements.