Exhibit 10.1

 

Execution Version 

 

PURCHASE AGREEMENT

 

PURCHASE AGREEMENT (the “Agreement”), dated as of September 22, 2014, by and
between xG TECHNOLOGY, INC., a Delaware corporation, (the “Company”), and
LINCOLN PARK CAPITAL FUND, LLC, an Illinois limited liability company (the
“Investor”).

 

WHEREAS:

 

Subject to the terms and conditions set forth in this Agreement, the Company
wishes to sell to the Investor, and the Investor wishes to buy from the Company,
One Million Dollars ($1,000,000) of the Company's common stock, $0.00001 par
value per share (the “Common Stock”). The shares of Common Stock to be purchased
hereunder are referred to herein as the “Purchase Shares.”

 

NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the Company and the Investor hereby
agree as follows:

 

1.           CERTAIN DEFINITIONS.

 

For purposes of this Agreement, the following terms shall have the following
meanings:

 

(a)          “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

 

(b)          “Base Prospectus” means the Company’s final base prospectus, dated
August 21, 2014, a preliminary form of which is included in the Registration
Statement, including the documents incorporated by reference therein.

 

(c)          “Business Day” means any day on which the Principal Market is open
for trading, including any day on which the Principal Market is open for trading
for a period of time less than the customary time.

 

(d)          “Confidential Information” means any information disclosed by
either party to the other party, either directly or indirectly, in writing,
orally or by inspection of tangible objects (including, without limitation,
documents, prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation. Information
communicated orally shall be considered Confidential Information if such
information is confirmed in writing as being Confidential Information within ten
(10) Business Days after the initial disclosure. Confidential Information may
also include information disclosed to a disclosing party by third parties.
Confidential Information shall not, however, include any information which (i)
was publicly known and made generally available in the public domain prior to
the time of disclosure by the disclosing party; (ii) becomes publicly known and
made generally available after disclosure by the disclosing party to the
receiving party through no action or inaction of the receiving party; (iii) is
already in the possession of the receiving party at the time of disclosure by
the disclosing party as shown by the receiving party’s files and records
immediately prior to the time of disclosure; (iv) is obtained by the receiving
party from a third party without a breach of such third party’s obligations of
confidentiality; (v) is independently developed by the receiving party without
use of or reference to the disclosing party’s Confidential Information, as shown
by documents and other competent evidence in the receiving party’s possession;
or (vi) is required by law to be disclosed by the receiving party, provided that
the receiving party gives the disclosing party prompt written notice of such
requirement prior to such disclosure and assistance in obtaining an order
protecting the information from public disclosure.

 

 

 

 

(e)          “Custodian” means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.

 

(f)          “DTC” means The Depository Trust Company, or any successor
performing substantially the same function for the Company.

 

(g)          “DWAC Shares” means shares of Common Stock that are (i) issued in
electronic form, (ii) freely tradable and transferable and without restriction
on resale and (iii) timely credited by the Company to the Investor’s or its
designee’s specified Deposit/Withdrawal at Custodian (DWAC) account with DTC
under its Fast Automated Securities Transfer (FAST) Program or any similar
program hereafter adopted by DTC performing substantially the same function.

 

(h)          “Exchange Act” means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

 

(i)          “Initial Prospectus Supplement” means the prospectus supplement to
the Base Prospectus complying with Rule 424(b) under the Securities Act that is
filed with the SEC and delivered by the Company to the Investor upon the
execution and delivery of this Agreement in accordance with Section 5(a),
including the documents incorporated by reference therein.

 

(j)          “Material Adverse Effect” means any material adverse effect on
(i) the enforceability of any Transaction Document, (ii) the results of
operations, assets, business or financial condition of the Company and its
Subsidiaries, taken as a whole, other than any material adverse effect that
resulted primarily from (A) any change in the United States or foreign economies
or securities or financial markets in general that does not have a
disproportionate effect on the Company and its Subsidiaries, taken as a whole,
(B) any change that generally affects the industry in which the Company and its
Subsidiaries operate that does not have a disproportionate effect on the Company
and its Subsidiaries, taken as a whole, (C) any change arising in connection
with earthquakes, hostilities, acts of war, sabotage or terrorism or military
actions or any escalation or material worsening of any such hostilities, acts of
war, sabotage or terrorism or military actions existing as of the date hereof,
(D) any action taken by the Investor, its affiliates or its or their successors
and assigns with respect to the transactions contemplated by this Agreement,
(E) the effect of any change in applicable laws or accounting rules that does
not have a disproportionate effect on the Company and its Subsidiaries, taken as
a whole, or (F) any change resulting from compliance with terms of this
Agreement or the consummation of the transactions contemplated by this
Agreement, or (iii) the Company’s ability to perform in any material respect on
a timely basis its obligations under any Transaction Document to be performed as
of the date of determination.

 

(k)          “Person” means an individual or entity including but not limited to
any limited liability company, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization and a government or any department or
agency thereof.

 

(l)           “Principal Market” means The NASDAQ Capital Market (or any
nationally recognized successor thereto).

 

(m)          “Prior Agreement” means that certain Purchase Agreement, dated as
of September 19, 2014, by and among the Company and the Investor, providing for
the sale by the Company to the Investor of up to Fifteen Million Dollars
($15,000,000) worth of Common Stock from time to time during the term thereof.

 

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(n)          “Prospectus” means the Base Prospectus, as supplemented by any
Prospectus Supplement (including the Initial Prospectus Supplement), including
the documents incorporated by reference therein.

 

(o)          “Prospectus Supplement” means any prospectus supplement to the Base
Prospectus (including the Initial Prospectus Supplement) filed with the SEC
pursuant to Rule 424(b) under the Securities Act in connection with the
transactions contemplated by this Agreement, including the documents
incorporated by reference therein.

 

(p)          “Registration Statement” means the effective registration statement
on Form S-3 (Commission File No. 333-197820) filed by the Company with the SEC
pursuant to the Securities Act for the registration of shares of its Common
Stock, including the Purchase Shares, and certain other securities, as such
Registration Statement has been or may be amended and supplemented from time to
time, including all documents filed as part thereof or incorporated by reference
therein, and including all information deemed to be a part thereof at the time
of effectiveness pursuant to Rule 430B of the Securities Act, including any
comparable successor registration statement filed by the Company with the SEC
pursuant to the Securities Act for the registration of shares of its Common
Stock, including the Purchase Shares.

 

(q)          “SEC” means the U.S. Securities and Exchange Commission.

 

(r)          “Securities Act” means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

 

(s)          “Subsidiary” means any Person the Company wholly-owns or controls,
or in which the Company, directly or indirectly, owns a majority of the voting
stock or similar voting interest, in each case that would be disclosable
pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities
Act.

 

(t)          “Transaction Documents” means, collectively, this Agreement and the
schedules and exhibits hereto, and each of the other agreements, documents,
certificates and instruments entered into or furnished by the parties hereto in
connection with the transactions contemplated hereby and thereby.

 

(u)          “Transfer Agent” means Continental Stock Transfer & Trust, or such
other Person who is then serving as the transfer agent for the Company in
respect of the Common Stock.

 

2. PURCHASE OF COMMON STOCK.

 

Subject to the terms and conditions set forth in this Agreement, the Company
desires to sell to the Investor, and the Investor desires to purchase from the
Company, the Purchase Shares as follows:

 

(a)          Purchase of Common Stock. Upon the satisfaction of the conditions
set forth in Sections 7 and 8 hereof (the “Closing” and the date of satisfaction
of such conditions the “Closing Date”), the Investor shall purchase 500,000
Purchase Shares at a price of $2.00 per Purchase Share.

 

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(b)           Payment for Purchase Shares. The Investor shall pay to the Company
a total of $1,000,000 in cash as full payment for such 500,000 Purchase Shares
via wire transfer of immediately available funds on the same Business Day that
the Investor receives such Purchase Shares, if such Purchase Shares are received
by the Investor before 1:00 p.m., Eastern time, or, if such Purchase Shares are
received by the Investor after 1:00 p.m., Eastern time, the next Business Day.
All payments made under this Agreement shall be made in lawful money of the
United States of America or wire transfer of immediately available funds to the
account designated by the Company by written notice to the Investor prior to the
date of this Agreement.

 

(c)          Compliance with Registration Statement Eligibility Requirements and
Rules of Principal Market. The Company hereby confirms that the issuance of the
Purchase Shares to the Investor pursuant to this Agreement shall not result in
the issuance of a number of shares of Common Stock that would exceed the lesser
of: (A) the maximum number of shares of Common Stock that the Company may issue
pursuant to this Agreement (taking into account all shares of Common Stock
issued or issuable pursuant to any transaction or series of transactions that
may be aggregated with the transactions contemplated by this Agreement under
applicable rules of The NASDAQ Stock Market, including, without limitation,
shares of Common Stock issued pursuant to the Prior Agreement) without (1)
breaching the Company’s obligations under the applicable rules of The NASDAQ
Stock Market or (2) obtaining stockholder approval under the applicable rules of
The NASDAQ Stock Market; and (B) the maximum number of shares of Common Stock
that the Company may issue pursuant to this Agreement without exceeding the
limitations set forth in General Instruction I.B.6. of Form S-3 (such lesser
amount, the “Maximum Share Cap”). The Company shall not issue any shares of
Common Stock pursuant to this Agreement if such issuance would reasonably be
expected to result in (i) a violation of the Securities Act (including, without
limitation, non-compliance with General Instruction I.B.6. of Form S-3) or (ii)
a breach of the rules and regulations of The NASDAQ Stock Market. The provisions
of this Section 2(c) shall be implemented in a manner otherwise than in strict
conformity with the terms hereof only if necessary to ensure compliance with the
Securities Act (including, without limitation, General Instruction I.B.6. of
Form S-3) and the rules and regulations of The NASDAQ Stock Market.

 

(d)          Beneficial Ownership Limitation. Notwithstanding anything to the
contrary contained in this Agreement, the Company shall not issue or sell, and
the Investor shall not purchase or acquire, any shares of Common Stock under
this Agreement which, when aggregated with all other shares of Common Stock then
beneficially owned by the Investor and its affiliates (as calculated pursuant to
Section 13(d) of the Exchange Act and Rule 13d-3 promulgated thereunder) would
result in the beneficial ownership by the Investor and its affiliates of more
than 9.99% of the then issued and outstanding shares of Common Stock (the
“Beneficial Ownership Limitation”).

 

3.          INVESTOR'S REPRESENTATIONS AND WARRANTIES.

 

The Investor represents and warrants to the Company that as of the date hereof
and as of the Closing Date:

 

(a)          Accredited Investor Status. The Investor is an “accredited
investor” as that term is defined in Rule 501(a)(3) of Regulation D promulgated
under the Securities Act.

 

(b)          Information. The Investor understands that its investment in the
Purchase Shares involves a high degree of risk. The Investor (i) is able to bear
the economic risk of an investment in the Purchase Shares including a total loss
thereof, (ii) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment in the Purchase Shares and (iii) has had an opportunity to ask
questions of and receive answers from the officers of the Company concerning the
financial condition and business of the Company and others matters related to an
investment in the Purchase Shares. Neither such inquiries nor any other due
diligence investigations conducted by the Investor or its representatives shall
modify, amend or affect the Investor's right to rely on the Company's
representations and warranties contained in Section 4 below. The Investor has
sought such accounting, legal and tax advice as it has considered necessary to
make an informed investment decision with respect to its acquisition of the
Purchase Shares.

 

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(c)          No Governmental Review. The Investor understands that no U.S.
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Purchase Shares or
the fairness or suitability of an investment in the Purchase Shares nor have
such authorities passed upon or endorsed the merits of the offering of the
Purchase Shares.

 

(d)          Validity; Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Investor and is a valid and
binding agreement of the Investor enforceable against the Investor in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.

 

(e)          Residency. The Investor is a resident of the State of Illinois.

 

(f)          No Short Selling. The Investor represents and warrants to the
Company that at no time prior to the date of this Agreement has any of the
Investor, its agents, representatives or affiliates engaged in or effected, in
any manner whatsoever, directly or indirectly, any (i) "short sale" (as such
term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common
Stock or (ii) hedging transaction, which establishes a net short position with
respect to the Common Stock.

 

4.          REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

 

The Company represents and warrants to the Investor that as of the date hereof
and as of the Closing Date:

 

(a)          Organization and Qualification. The Company and each of its
Subsidiaries is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted.  Neither the Company nor any of its Subsidiaries is in
violation or default of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter
documents.  Each of the Company and its Subsidiaries is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would result
in a Material Adverse Effect and no proceeding has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification. The Company has no
Subsidiaries except as set forth on Exhibit 21.1 to the Company’s Annual Report
on Form 10-K for the year ended December 31, 2013.

 

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(b)          Authorization; Enforcement; Validity. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and each of the other Transaction Documents,
and to issue the Purchase Shares in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation, the reservation for issuance and the
issuance of the Purchase Shares issuable under this Agreement, have been duly
authorized by the Company's Board of Directors and no further consent or
authorization is required by the Company, its Board of Directors or its
stockholders, (iii) this Agreement has been, and each other Transaction Document
shall be on the Closing Date, duly executed and delivered by the Company and
(iv) this Agreement constitutes, and each other Transaction Document upon its
execution on behalf of the Company, shall constitute, the valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except as such enforceability may be limited by general principles
of equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies. The Board of Directors of the Company has
approved the resolutions (the “Signing Resolutions”) to authorize this Agreement
and the transactions contemplated hereby. The Signing Resolutions are valid, in
full force and effect and have not been modified or supplemented in any respect.
The Company has delivered to the Investor a true and correct copy of a unanimous
written consent adopting the Signing Resolutions executed by all of the members
of the Board of Directors of the Company. Except as set forth in this Agreement,
no other approvals or consents of the Company’s Board of Directors, any
authorized committee thereof, and/or stockholders is necessary under applicable
laws and the Company’s Certificate of Incorporation and/or Bylaws to authorize
the execution and delivery of this Agreement or any of the transactions
contemplated hereby, including, but not limited to, the issuance of the Purchase
Shares.

 

(c)          Capitalization. As of the date hereof, the authorized capital stock
of the Company is set forth in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2013. Except as disclosed in the SEC Documents (as
defined below), (i) no shares of the Company's capital stock are subject to
preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) there are no outstanding debt
securities, (iii) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of its
Subsidiaries, (iv) there are no agreements or arrangements under which the
Company or any of its Subsidiaries is obligated to register the sale of any of
their securities under the Securities Act, (v) there are no outstanding
securities or instruments of the Company or any of its Subsidiaries which
contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Purchase Shares as described in this Agreement and (vii) the Company does
not have any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. The Company has furnished to the Investor true
and correct copies of the Company's Certificate of Incorporation, as amended and
as in effect on the date hereof (the "Certificate of Incorporation"), and the
Company's Bylaws, as amended and as in effect on the date hereof (the "Bylaws"),
and summaries of the terms of all securities convertible into or exercisable for
Common Stock, if any, and copies of any documents containing the material rights
of the holders thereof in respect thereto.

 

(d)          Issuance of Securities. Upon issuance and payment thereof in
accordance with the terms and conditions of this Agreement, the Purchase Shares
shall be validly issued, fully paid and nonassessable and free from all taxes,
liens, charges, restrictions, rights of first refusal and preemptive rights with
respect to the issue thereof, with the holders being entitled to all rights
accorded to a holder of Common Stock. 500,000 shares of Common Stock have been
duly authorized and reserved for issuance upon purchase under this Agreement as
Purchase Shares.

 

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(e)          No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without limitation, the
reservation for issuance and issuance of the Purchase Shares) will not (i)
result in a violation of the Certificate of Incorporation, any Certificate of
Designations, Preferences and Rights of any outstanding series of preferred
stock of the Company or the Bylaws or (ii) 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 to which
the Company or any of its Subsidiaries is a party, or result in a violation of
any law, rule, regulation, order, judgment or decree (including federal and
state securities laws and regulations and the rules and regulations of the
Principal Market applicable to the Company or any of its Subsidiaries) or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected, except in the case of conflicts, defaults, terminations,
amendments, accelerations, cancellations and violations under clause (ii), which
would not result in a Material Adverse Effect. Neither the Company nor its
Subsidiaries is in violation of any term of or in default under its Certificate
of Incorporation, any Certificate of Designation, Preferences and Rights of any
outstanding series of preferred stock of the Company or Bylaws or their
organizational charter or Bylaws, respectively. Neither the Company nor any of
its Subsidiaries is in violation of any term of or is in default under any
material contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable to the
Company or its Subsidiaries, except for possible conflicts, defaults,
terminations or amendments that would not have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and shall
not be conducted, in violation of any law, ordinance, regulation of any
governmental entity, except for possible violations, the sanctions for which
either individually or in the aggregate would not have a Material Adverse
Effect. Except as specifically contemplated by this Agreement and as required
under the Securities Act or applicable state securities laws and the rules and
regulations of the Principal Market and under the Corporate Financing Rule 5110
of the Financial Industry Regulatory Authority (FINRA), the Company is not
required to obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory or
self-regulatory agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Transaction Documents in accordance
with the terms hereof or thereof. Except as set forth elsewhere in this
Agreement, all consents, authorizations, orders, filings and registrations which
the Company is required to obtain pursuant to the preceding sentence shall be
obtained or effected on or prior to the Closing Date. Since one year prior to
the date hereof, the Company has not received nor delivered any notices or
correspondence from or to the Principal Market. The Principal Market has not
commenced any delisting proceedings against the Company.

 

(f)          SEC Documents; Financial Statements. The Company has filed all
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the twelve months preceding the date
hereof (or such shorter period as the Company was required by law or regulation
to file such material) (the foregoing materials, including the exhibits thereto
and documents incorporated by reference therein, being collectively referred to
herein as the “SEC Documents”) on a timely basis or has received a valid
extension of such time of filing and has filed any such SEC Documents prior to
the expiration of any such extension.  As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable. None of the SEC Documents,
when filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading. The financial statements of the Company included in
the SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing.  Such financial statements have been prepared in
accordance with United States generally accepted accounting principles applied
on a consistent basis during the periods involved (“GAAP”), except as may be
otherwise specified in such financial statements or the notes thereto and except
that unaudited financial statements may not contain all footnotes required by
GAAP, and fairly present in all material respects the financial position of the
Company and its consolidated Subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Except as set forth in the SEC Documents, the Company has received
no notices or correspondence from the SEC for the one year preceding the date
hereof. The SEC has not commenced any enforcement proceedings against the
Company or any of its Subsidiaries.

 

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(g)          Absence of Certain Changes. Except as disclosed in the SEC
Documents, since December 31, 2013, there has been no material adverse change in
the business, properties, operations, financial condition or results of
operations of the Company or its Subsidiaries. The Company has not taken any
steps, and does not currently expect to take any steps, to seek protection
pursuant to any Bankruptcy Law nor does the Company or any of its Subsidiaries
have any knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy or insolvency proceedings. The Company is financially
solvent and is generally able to pay its debts as they become due.

 

(h)          Absence of Litigation. There is no action, suit, proceeding,
inquiry or investigation before or by any court, public board, government
agency, self-regulatory organization or body pending or, to the knowledge of the
Company or any of its Subsidiaries, threatened against or affecting the Company,
the Common Stock or any of the Company's or its Subsidiaries' officers or
directors in their capacities as such, which would have a Material Adverse
Effect.

 

(i)          Acknowledgment Regarding Investor's Status. The Company
acknowledges and agrees that the Investor is acting solely in the capacity of
arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Investor is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to the Transaction Documents
and the transactions contemplated hereby and thereby and any advice given by the
Investor or any of its representatives or agents in connection with the
Transaction Documents and the transactions contemplated hereby and thereby is
merely incidental to the Investor's purchase of the Purchase Shares. The Company
further represents to the Investor that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and advisors.

 

(j)          No Integrated Offering. None the Company, any of its affiliates, or
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would cause this offering of the Purchase Shares to be
integrated with prior offerings by the Company in a manner that would require
stockholder approval pursuant to the rules of the Principal Market on which any
of the securities of the Company are listed or designated. The issuance and sale
of the Purchase Shares hereunder does not contravene the rules and regulations
of the Principal Market.

 

(k)          Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. None of the Company's material trademarks, trade
names, service marks, service mark registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, government authorizations,
trade secrets or other intellectual property rights have expired or terminated,
or, by the terms and conditions thereof, could expire or terminate within two
years from the date of this Agreement. The Company and its Subsidiaries do not
have any knowledge of any infringement by the Company or its Subsidiaries of any
material trademark, trade name rights, patents, patent rights, copyrights,
inventions, licenses, service names, service marks, service mark registrations,
trade secret or other similar rights of others, or of any such development of
similar or identical trade secrets or technical information by others, and there
is no claim, action or proceeding being made or brought against, or to the
Company's knowledge, being threatened against, the Company or its Subsidiaries
regarding trademark, trade name, patents, patent rights, invention, copyright,
license, service names, service marks, service mark registrations, trade secret
or other infringement, which would have a Material Adverse Effect.

 

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(l)          Environmental Laws. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply would not have, individually
or in the aggregate, a Material Adverse Effect.

 

(m)          Title. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable
title in all personal property owned by them that is material to the business of
the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects (“Liens”) and, except for Liens as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company and its
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties.  Any real
property and facilities held under lease by the Company and its Subsidiaries are
held by them under valid, subsisting and enforceable leases with which the
Company and its Subsidiaries are in compliance with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries.

 

(n)          Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.

 

(o)          Regulatory Permits. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.

 

-9-

 

 

(p)          Tax Status. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (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) and 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. 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)          Transactions With Affiliates.  Except as set forth in the SEC
Documents, none of the officers or directors of the Company and, to the
knowledge of the Company, none of the employees of the Company is presently a
party to any transaction with the Company or any Subsidiary (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner, in each case in excess of $120,000 other than for (i) payment of salary
or consulting fees for services rendered, (ii) reimbursement for expenses
incurred on behalf of the Company and (iii) other employee benefits, including
stock option agreements under any stock option plan of the Company.

 

(r)          Application of Takeover Protections. The Company and its board of
directors have taken or will take prior to the Closing Date all necessary
action, if any, in order to render inapplicable any control share acquisition,
business combination, poison pill (including any distribution under a rights
agreement) or other similar anti-takeover provision under the Certificate of
Incorporation or the laws of the state of its incorporation which is or could
become applicable to the Investor as a result of the transactions contemplated
by this Agreement, including, without limitation, the Company's issuance of the
Purchase Shares and the Investor's ownership of the Purchase Shares.

 

(s)           Disclosure.  Except with respect to the material terms and
conditions of the transactions contemplated by the Transaction Documents that
will be timely publicly disclosed by the Company, the Company confirms that
neither it nor any other Person acting on its behalf has provided the Investor
or its agents or counsel with any information that it believes constitutes or
might constitute material, non-public information which is not otherwise
disclosed in the Registration Statement or any Prospectus Supplements
thereto.   The Company understands and confirms that the Investor will rely on
the foregoing representation in effecting purchases and sales of securities of
the Company.  All of the disclosure furnished by or on behalf of the Company to
the Investor regarding the Company, its business and the transactions
contemplated hereby, including the disclosure schedules to this Agreement, is
true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. The press releases disseminated by the
Company during the twelve months preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made and
when made, not misleading.  The Company acknowledges and agrees that the
Investor neither makes nor has made any representations or warranties with
respect to the transactions contemplated hereby other than those specifically
set forth in Section 3 hereof.

 

-10-

 

 

(t)          Foreign Corrupt Practices.  Neither the Company, nor to the
knowledge of the Company, any agent or other Person acting on behalf of the
Company, has (i) directly or indirectly, used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses related to
foreign or domestic political activity, (ii) made any unlawful payment to
foreign or domestic government officials or employees or to any foreign or
domestic political parties or campaigns from corporate funds, (iii) failed to
disclose fully any contribution made by the Company (or made by any Person
acting on its behalf of which the Company is aware) which is in violation of
law, or (iv) violated in any material respect any provision of the Foreign
Corrupt Practices Act of 1977, as amended.

 

(u)          Registration Statement. The Company has prepared and filed with the
SEC in accordance with the provisions of the Securities Act the Registration
Statement. The Registration Statement was declared effective by order of the SEC
on August 21, 2014. The Registration Statement is effective pursuant to the
Securities Act and available for the issuance of the Purchase Shares thereunder,
and the Company has not received any written notice that the SEC has issued or
intends to issue a stop order or other similar order with respect to the
Registration Statement or the Prospectus or that the SEC otherwise has
(i) suspended or withdrawn the effectiveness of the Registration Statement or
(ii) issued any order preventing or suspending the use of the Prospectus or any
Prospectus Supplement, in either case, either temporarily or permanently or
intends or has threatened in writing to do so. The “Plan of Distribution”
section of the Prospectus permits the issuance of the Purchase Shares hereunder.
At the time the Registration Statement and any amendments thereto became
effective, at the date of this Agreement and at each deemed effective date
thereof pursuant to Rule 430B(f)(2) of the Securities Act, the Registration
Statement and any amendments thereto complied and will comply in all material
respects with the requirements of the Securities Act and did not and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and the Base Prospectus and any Prospectus Supplement thereto,
at the time such Base Prospectus or such Prospectus Supplement thereto was
issued and on the Closing Date, complied and will comply in all material
respects with the requirements of the Securities Act and did not and will not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided that this representation
and warranty does not apply to statements in or omissions from any Prospectus
Supplement made in reliance upon and in conformity with information relating to
the Investor furnished to the Company in writing by or on behalf of the Investor
expressly for use therein. The Company meets all of the requirements for the use
of a registration statement on Form S-3 pursuant to the Securities Act for the
offering and sale of the Purchase Shares contemplated by this Agreement in
reliance on General Instruction I.B.6. of Form S-3, and the SEC has not notified
the Company of any objection to the use of the form of the Registration
Statement pursuant to Rule 401(g)(1) of the Securities Act. The Company hereby
confirms that the issuance of the Purchase Shares to the Investor pursuant to
this Agreement would not result in non-compliance with General Instruction
I.B.6. of Form S-3. The Registration Statement, as of its effective date, meets
the requirements set forth in Rule 415(a)(1)(x) pursuant to the Securities Act.
At the earliest time after the filing of the Registration Statement that the
Company or another offering participant made a bona fide offer (within the
meaning of Rule 164(h)(2) of the Securities Act) relating to any of the Purchase
Shares, the Company was not and is not an Ineligible Issuer (as defined in Rule
405 of the Securities Act). The Company has not distributed any offering
material in connection with the offering and sale of any of the Purchase Shares,
and, until the Investor does not hold any of the Purchase Shares, shall not
distribute any offering material in connection with the offering and sale of any
of the Purchase Shares, to or by the Investor, in each case, other than the
Registration Statement or any amendment thereto, the Prospectus or any
Prospectus Supplement required pursuant to applicable law or the Transaction
Documents. The Company has not made, and agrees that unless it obtains the prior
written consent of the Investor it will not make, an offer relating to the
Purchase Shares that would constitute a “free writing prospectus” as defined in
Rule 405 under the Securities Act. The Company shall comply with the
requirements of Rules 164 and 433 under the Securities Act applicable to any
such free writing prospectus consented to by the Investor, including in respect
of timely filing with the SEC, legending and record keeping.

 

-11-

 

 

(v)          DTC Eligibility. The Company, through the Transfer Agent, currently
participates in the DTC Fast Automated Securities Transfer (FAST) Program and
the Common Stock can be transferred electronically to third parties via the DTC
Fast Automated Securities Transfer (FAST) Program.

 

(w)          Sarbanes-Oxley. The Company is in compliance with all provisions of
the Sarbanes-Oxley Act of 2002, as amended, which are applicable to it as of the
date hereof.

 

(x)          Certain Fees. Except as disclosed on Schedule 4(x), no brokerage or
finder’s fees or commissions are or will be payable by the Company to any
broker, financial advisor or consultant, finder, placement agent, investment
banker, bank or other Person with respect to the transactions contemplated by
the Transaction Documents. Except as disclosed on Schedule 4(x), the Investor
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section 4(x) that may be due in connection with the transactions contemplated by
the Transaction Documents.

 

(y)          Investment Company. The Company is not, and immediately after
receipt of payment for the Purchase Shares will not be, an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

(z)          Listing and Maintenance Requirements. The Common Stock is
registered pursuant to Section 12(b) of the Exchange Act, and the Company has
taken no action designed to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock pursuant to the
Exchange Act nor has the Company received any notification that the SEC is
currently contemplating terminating such registration. The Company has not, in
the twelve (12) months preceding the date hereof, received any notice from any
Person to the effect that the Company is not in compliance with the listing or
maintenance requirements of the Principal Market. The Company is, and has no
reason to believe that it will not in the foreseeable future continue to be, in
compliance with all such listing and maintenance requirements.

 

(aa)         Accountants. The Company’s accountants are set forth in the SEC
Documents and, to the knowledge of the Company, such accountants are an
independent registered public accounting firm as required by the Securities Act.

 

(bb)         No Market Manipulation. The Company has not, and to its knowledge
no Person acting on its behalf has, (i) taken, directly or indirectly, any
action designed to cause or to result in the stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of any
of the Purchase Shares, (ii) sold, bid for, purchased, or, paid any compensation
for soliciting purchases of, any of the Purchase Shares, or (iii) paid or agreed
to pay to any Person any compensation for soliciting another to purchase any
other securities of the Company.

 

(cc)         Shell Company Status. The Company is not currently, and has never
been, an issuer identified in Rule 144(i)(1) under the Securities Act.

 

-12-

 

 

5.          COVENANTS.

 

(a)          Filing of Current Report and Initial Prospectus Supplement. The
Company agrees that it shall, within the time required under the Exchange Act,
file with the SEC a report on Form 8-K relating to the transactions contemplated
by, and describing the material terms and conditions of, the Transaction
Documents (the “Current Report”). The Company further agrees that it shall,
within the time required under Rule 424(b) under the Securities Act, file with
the SEC the Initial Prospectus Supplement pursuant to Rule 424(b) under the
Securities Act specifically relating to the transactions contemplated by, and
describing the material terms and conditions of, the Transaction Documents,
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430B under the Securities Act, and
disclosing all information relating to the transactions contemplated hereby
required to be disclosed in the Registration Statement and the Prospectus as of
the date of the Initial Prospectus Supplement, including, without limitation,
information required to be disclosed in the section captioned “Plan of
Distribution” in the Prospectus. The Company shall permit the Investor to review
and comment upon the Current Report and the Initial Prospectus Supplement at
least two (2) Business Days prior to their filing with the SEC, the Company
shall give reasonable consideration to all such comments, and the Company shall
not file the Current Report or the Initial Prospectus Supplement with the SEC in
a form to which the Investor reasonably objects. The Investor shall use its
reasonable best efforts to comment upon the Current Report and the Initial
Prospectus Supplement within one (1) Business Day from the date the Investor
receives the final pre-filing draft version thereof from the Company. The
Investor shall furnish to the Company such information regarding itself, the
Purchase Shares held by it and the intended method of distribution thereof,
including any arrangement between the Investor and any other Person relating to
the sale or distribution of the Purchase Shares, as shall be reasonably
requested by the Company in connection with the preparation and filing of the
Current Report and the Initial Prospectus Supplement, and shall otherwise
cooperate with the Company as reasonably requested by the Company in connection
with the preparation and filing of the Current Report and the Initial Prospectus
Supplement with the SEC.

 

(b)          Blue Sky. The Company shall take all such action, if any, as is
reasonably necessary in order to obtain an exemption for or to register or
qualify (i) the sale of the Purchase Shares to the Investor under this Agreement
and (ii) any subsequent resale of all Purchase Shares by the Investor, in each
case, under applicable securities or “Blue Sky” laws of the states of the United
States in such states as is reasonably requested by the Investor from time to
time, and shall provide evidence of any such action so taken to the Investor.

 

(c)          Listing/DTC. The Company shall promptly secure the listing of all
of the Purchase Shares to be issued to the Investor hereunder on the Principal
Market (subject to official notice of issuance) and upon each other national
securities exchange or automated quotation system, if any, upon which the Common
Stock is then listed, and shall use commercially reasonable best efforts to
maintain, so long as any shares of Common Stock shall be so listed, such listing
of all such Purchase Shares from time to time issuable hereunder. The Company
shall use commercially reasonable best efforts to maintain the listing of the
Common Stock on the Principal Market and shall comply in all respects with the
Company’s reporting, filing and other obligations under the bylaws or rules and
regulations of the Principal Market. Neither the Company nor any of its
Subsidiaries shall take any action that would reasonably be expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall promptly, and in no event later than the following Business Day,
provide to the Investor copies of any notices it receives from any Person
regarding the continued eligibility of the Common Stock for listing on the
Principal Market. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 5(c). The Company shall take all
action necessary to ensure that its Common Stock can be transferred
electronically as DWAC Shares.

 

(d)          Prohibition of Short Sales and Hedging Transactions. During the
term of this Agreement, the Investor and its agents, representatives and
affiliates shall not in any manner whatsoever enter into or effect, directly or
indirectly, any (i) “short sale” (as such term is defined in Rule 200 of
Regulation SHO of the Exchange Act) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock.

 

-13-

 

 

(e)          Reserved.

 

(f)          Non-Public Information. Each party hereto agrees not to disclose
any Confidential Information of the other party to any third party and shall not
use the Confidential Information for any purpose other than in connection with,
or in furtherance of, the transactions contemplated hereby. Each party hereto
acknowledges that the Confidential Information shall remain the property of the
disclosing party and agrees that it shall take all reasonable measures to
protect the secrecy of any Confidential Information disclosed by the other
party. The Company confirms that neither it nor any other Person acting on its
behalf shall provide the Investor or its agents or counsel with any information
that constitutes or might constitute material, non-public information, unless a
simultaneous public announcement thereof is made by the Company in the manner
contemplated by Regulation FD. In the event of a breach of the foregoing
covenant by the Company or any Person acting on its behalf (as determined in the
reasonable good faith judgment of the Investor), in addition to any other remedy
provided herein or in the other Transaction Documents, if the Investor is
holding Purchase Shares at the time of the disclosure of material, non-public
information, the Investor shall have the right to make a public disclosure, in
the form of a press release, public advertisement or otherwise, of such
material, non-public information without the prior approval by the Company;
provided the Investor shall have first provided notice to the Company that it
believes it has received information that constitutes material, non-public
information, the Company shall have at least 48 hours to publicly disclose such
material, non-public information prior to any such disclosure by the Investor or
demonstrate to the Investor in writing why such information does not constitute
material, non-public information, and (assuming the Investor and Investor’s
counsel disagree with the Company’s determination) the Company shall have failed
to publicly disclose such material, non-public information within such time
period. The Investor shall not have any liability to the Company, any of its
Subsidiaries, or any of their respective directors, officers, employees,
stockholders or agents, for any such disclosure. The Company understands and
confirms that the Investor shall be relying on the foregoing covenants in
effecting transactions in securities of the Company.

 

(g)          Reserved.

 

(h)          Taxes. The Company shall pay any and all transfer, stamp or similar
taxes that may be payable with respect to the issuance and delivery of any
shares of Common Stock to the Investor made under this Agreement.

 

(i)          Securities Law Compliance. The Company shall use its reasonable
best efforts to keep the Registration Statement effective pursuant to Rule 415
promulgated under the Securities Act, and to keep the Registration Statement and
the Prospectus current and available for issuances and sales of all of the
Purchase Shares by the Company to the Investor, and for the resale by the
Investor, at all times until the date on which the Investor shall have sold all
the Purchase Shares (the "Registration Period"). Without limiting the generality
of the foregoing, during the Registration Period, the Company shall (a) take all
action necessary to cause the Common Stock to continue to be registered as a
class of securities under Sections 12(b) of the Exchange Act, shall comply with
its reporting and filing obligations under the Exchange Act, and shall not take
any action or file any document (whether or not permitted by the Exchange Act)
to terminate or suspend such registration or to terminate or suspend its
reporting and filing obligations under the Exchange Act, and (b) prepare and
file with the SEC, at the Company’s expense, such amendments (including, without
limitation, post-effective amendments) to the Registration Statement and such
Prospectus Supplements pursuant to Rule 424(b) under the Securities Act, in each
case, as may be necessary to keep the Registration Statement effective pursuant
to Rule 415 promulgated under the Securities Act, and to keep the Registration
Statement and the Prospectus current and available for issuances and sales of
all of the Purchase Shares by the Company to the Investor, and for the resale of
all of the Purchase Shares by the Investor, at all times during the Registration
Period. The Investor shall furnish to the Company such information regarding
itself, the Purchase Shares held by it and the intended method of distribution
thereof as shall be reasonably requested by the Company in connection with the
preparation and filing of any such amendment to the Registration Statement or
any such Prospectus Supplement, and shall otherwise cooperate with the Company
as reasonably requested by the Company in connection with the preparation and
filing of any such amendment to the Registration Statement or any such
Prospectus Supplement. The Company shall comply with all applicable federal,
state and foreign securities laws in connection with the offer, issuance and
sale of the Purchase Shares contemplated by the Transaction Documents. Without
limiting the generality of the foregoing, neither the Company nor any of its
officers, directors or affiliates will take, directly or indirectly, any action
designed or intended to stabilize or manipulate the price of any security of the
Company, or which would reasonably be expected to cause or result in,
stabilization or manipulation of the price of any security of the Company.

 

-14-

 

 

(j)          Stop Orders. The Company shall advise the Investor promptly (but in
no event later than 24 hours) and shall confirm such advice in writing: (i) of
the Company’s receipt of notice of any request by the SEC for amendment of or a
supplement to the Registration Statement, the Prospectus, any Prospectus
Supplement or for any additional information; (ii) of the Company’s receipt of
notice of the issuance by the SEC of any stop order suspending the effectiveness
of the Registration Statement or prohibiting or suspending the use of the
Prospectus or any Prospectus Supplement, or of the Company’s receipt of any
notification of the suspension of qualification of the Purchase Shares for
offering or sale in any jurisdiction or the initiation or contemplated
initiation of any proceeding for such purpose; and (iii) of the Company becoming
aware of the happening of any event, which makes any statement of a material
fact made in the Registration Statement, the Prospectus or any Prospectus
Supplement untrue or which requires the making of any additions to or changes to
the statements then made in the Registration Statement, the Prospectus or any
Prospectus Supplement in order to state a material fact required by the
Securities Act to be stated therein or necessary in order to make the statements
then made therein (in the case of the Prospectus or any Prospectus Supplement,
in light of the circumstances under which they were made) not misleading, or of
the necessity to amend the Registration Statement or supplement the Prospectus
or any Prospectus Supplement to comply with the Securities Act or any other law.
The Company shall not be required to disclose to the Investor the substance or
specific reasons of any of the events set forth in clauses (i) through (iii) of
the immediately preceding sentence, but rather, shall only be required to
disclose that the event has occurred. If at any time the SEC shall issue any
stop order suspending the effectiveness of the Registration Statement or
prohibiting or suspending the use of the Prospectus or any Prospectus
Supplement, the Company shall use its reasonable best efforts to obtain the
withdrawal of such order at the earliest possible time. The Company shall
furnish to the Investor, without charge, a copy of any correspondence from the
SEC or the staff of the SEC to the Company or its representatives relating to
the Registration Statement or the Prospectus, as the case may be.

 

(k)          Amendments to Registration Statement; Prospectus Supplements.
Except as provided in this Agreement and other than periodic and current reports
required to be filed pursuant to the Exchange Act, the Company shall not file
with the SEC any amendment to the Registration Statement or any supplement to
the Base Prospectus that refers to the Investor, the Transaction Documents or
the transactions contemplated thereby (including, without limitation, any
Prospectus Supplement filed in connection with the transactions contemplated by
the Transaction Documents), in each case with respect to which (a) the Investor
shall not previously have been advised and afforded the opportunity to review
and comment thereon at least two (2) Business Days prior to filing with the SEC,
as the case may be, (b) the Company shall not have given due consideration to
any comments thereon received from the Investor or its counsel, or (c) the
Investor shall reasonably object, unless the Company reasonably has determined
that it is necessary to amend the Registration Statement or make any supplement
to the Prospectus to comply with the Securities Act or any other applicable law
or regulation, in which case the Company shall promptly (but in no event later
than 24 hours) so inform the Investor, the Investor shall be provided with a
reasonable opportunity to review and comment upon any disclosure referring to
the Investor, the Transaction Documents or the transactions contemplated
thereby, as applicable, and the Company shall expeditiously furnish to the
Investor a copy thereof. In addition, for so long as, in the reasonable opinion
of counsel for the Investor, a Prospectus is required to be delivered in
connection with any acquisition or sale of Purchase Shares by the Investor, the
Company shall not file any Prospectus Supplement with respect to the Purchase
Shares without furnishing to the Investor as many copies of such Prospectus
Supplement, together with the Prospectus, as the Investor may reasonably
request.

 

-15-

 

 

(l)          Prospectus Delivery. The Company consents to the use of the
Prospectus (and of each Prospectus Supplement thereto) in accordance with the
provisions of the Securities Act and with the securities or “blue sky” laws of
the jurisdictions in which the Purchase Shares may be sold by the Investor, in
connection with the offering and sale of the Purchase Shares and for such period
of time thereafter as a Prospectus is required by the Securities Act to be
delivered in connection with sales of the Purchase Shares. The Company will make
available to the Investor upon request, and thereafter from time to time will
furnish to the Investor, as many copies of the Prospectus (and each Prospectus
Supplement thereto) as the Investor may reasonably request for the purposes
contemplated by the Securities Act within the time during which the Prospectus
is required by the Securities Act to be delivered in connection with sales of
the Purchase Shares. If during such period of time any event shall occur that in
the reasonable judgment of the Company and its counsel, or in the reasonable
judgment of the Investor and its counsel, is required to be set forth in the
Registration Statement, the Prospectus or any Prospectus Supplement or should be
set forth therein in order to make the statements made therein (in the case of
the Prospectus or any Prospectus Supplement, in light of the circumstances under
which they were made) not misleading, or if in the reasonable judgment of the
Company and its counsel, or in the reasonable judgment of the Investor and its
counsel, it is otherwise necessary to amend the Registration Statement or
supplement the Prospectus or any Prospectus Supplement to comply with the
Securities Act or any other applicable law or regulation, the Company shall
forthwith prepare and, subject to Section 5(k) above, file with the SEC an
appropriate amendment to the Registration Statement or an appropriate Prospectus
Supplement and in each case shall expeditiously furnish to the Investor, at the
Company’s expense, such amendment to the Registration Statement or such
Prospectus Supplement, as applicable, as may be necessary to reflect any such
change or to effect such compliance. The Company shall have no obligation to
separately advise the Investor of, or deliver copies to the Investor of, the SEC
Documents, all of which the Investor shall be deemed to have notice of.

 

(m)          Integration. From and after the date of this Agreement, neither the
Company, nor or any of its affiliates will, and the Company shall use its
reasonable best efforts to ensure that no Person acting on their behalf will,
directly or indirectly, make any offers or sales of any security or solicit any
offers to buy any security, under circumstances that would cause this offering
of the Purchase Shares to be integrated with other offerings by the Company in a
manner that would require stockholder approval pursuant to the rules of the
Principal Market on which any of the securities of the Company are listed or
designated, unless stockholder approval is obtained before the closing of such
subsequent transaction in accordance with the rules of such Principal Market.

 

(n)          Use of Proceeds. The Company will use the net proceeds from the
offering as described in the Prospectus.

 

(o)          Other Transactions. The Company shall not enter into, announce or
recommend to its stockholders any agreement, plan, arrangement or transaction in
or of which the terms thereof would restrict, materially delay, conflict with or
impair the ability or right of the Company to perform its obligations under the
Transaction Documents, including, without limitation, the obligation of the
Company to deliver the Purchase Shares to the Investor in accordance with the
terms of the Transaction Documents.

 

-16-

 

 

6.          TRANSFER AGENT INSTRUCTIONS.

 

On the Closing Date, the Company shall issue to the Transfer Agent irrevocable
instructions, in the form substantially similar to those used by the Investor in
substantially similar transactions, to issue the Purchase Shares in accordance
with the terms of this Agreement (the “Irrevocable Transfer Agent
Instructions”). All Purchase Shares to be issued to or for the benefit of the
Investor pursuant to this Agreement shall be issued as DWAC Shares. The Company
warrants to the Investor that no instruction other than the Irrevocable Transfer
Agent Instructions referred to in this Section 6 will be given by the Company to
the Transfer Agent with respect to the Purchase Shares, and the Purchase Shares
shall otherwise be freely transferable on the books and records of the Company.

 

7.          CONDITIONS TO THE COMPANY'S RIGHT TO COMMENCE

SALES OF SHARES OF COMMON STOCK.

 

The obligation of the Company hereunder to issue the Purchase Shares on the
Closing Date is subject to the satisfaction or, where legally permissible, the
waiver of each of the following conditions:

 

(a)          The Investor shall have executed each of the Transaction Documents
and delivered the same to the Company;

 

(b)          No stop order with respect to the Registration Statement shall be
pending or threatened by the SEC; and

 

(c)          The representations and warranties of the Investor shall be true
and correct in all material respects as of the date hereof and as of the Closing
Date as though made at that time.

 

8.          CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE SHARES OF COMMON
STOCK.

 

The obligation of the Investor to purchase the Purchase Shares under this
Agreement is subject to the satisfaction or, where legally permissible, the
waiver of each of the following conditions:

 

(a)          The Company shall have executed each of the Transaction Documents
and delivered the same to the Investor;

 

(b)          The Common Stock shall be listed on the Principal Market, trading
in the Common Stock shall not have been within the last 365 days suspended by
the SEC or the Principal Market, and all Purchase Shares to be issued by the
Company to the Investor pursuant to this Agreement shall have been approved for
listing or quotation on the Principal Market in accordance with the applicable
rules and regulations of the Principal Market, subject only to official notice
of issuance;

 

(c)          The Investor shall have received the opinions of the Company's
legal counsel dated as of the Closing Date substantially in the form of Exhibit
A attached hereto;

 

-17-

 

 

(d)          The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
4 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date hereof and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such date) and the Company shall have performed, satisfied and complied with
the covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by the Company at or prior to the
Closing Date. The Investor shall have received a certificate, executed by the
CEO, President or CFO of the Company, dated as of the Closing Date, to the
foregoing effect in the form attached hereto as Exhibit B;

 

(e)          The Board of Directors of the Company shall have adopted the
Signing Resolutions which shall be in full force and effect without any
amendment or supplement thereto as of the Closing Date;

 

(f)          The Irrevocable Transfer Agent Instructions shall have been
delivered to and acknowledged in writing by the Company and the Company's
Transfer Agent;

 

(g)          The Company shall have delivered to the Investor a certificate
evidencing the incorporation and good standing of the Company in the State of
Delaware issued by the Secretary of State of the State of Delaware as of a date
within ten (10) Business Days of the Closing Date;

 

(h)          The Company shall have delivered to the Investor a certified copy
of the Certificate of Incorporation as certified by the Secretary of State of
the State of Delaware within ten (10) Business Days of the Closing Date;

 

(i)          The Company shall have delivered to the Investor a secretary's
certificate executed by the Secretary of the Company, dated as of the Closing
Date, in the form attached hereto as Exhibit C;

 

(j)          The Registration Statement shall be effective and no stop order
with respect to the Registration Statement shall be pending or threatened by the
SEC. The Company shall have a maximum dollar amount certain of Common Stock
registered under the Registration Statement which is sufficient to issue to the
Investor not less than all of the Purchase Shares to be purchased hereunder. The
Current Report and the Initial Prospectus Supplement each shall have been filed
with the SEC, as required pursuant to Section 5(a), and copies of the Prospectus
shall have been delivered to the Investor in accordance with Section 5(l)
hereof. The Prospectus shall be current and available for the issuance and sale
of all of the Purchase Shares by the Company to the Investor, and for the resale
of all of the Purchase Shares by the Investor. Any other Prospectus Supplements
required to have been filed by the Company with the SEC under the Securities Act
at or prior to the Closing Date shall have been filed with the SEC within the
applicable time periods prescribed for such filings under the Securities Act.
All reports, schedules, registrations, forms, statements, information and other
documents required to have been filed by the Company with the SEC at or prior to
the Closing Date pursuant to the reporting requirements of the Exchange Act
shall have been filed with the SEC within the applicable time periods prescribed
for such filings under the Exchange Act;

 

(k)          The Company shall be eligible to transfer its Common Stock
electronically as DWAC Shares;

 

-18-

 

 

(l)          All federal, state and local governmental laws, rules and
regulations applicable to the transactions contemplated by the Transaction
Documents and necessary for the execution, delivery and performance of the
Transaction Documents and the consummation of the transactions contemplated
thereby in accordance with the terms thereof shall have been complied with, and
all consents, authorizations and orders of, and all filings and registrations
with, all federal, state and local courts or governmental agencies and all
federal, state and local regulatory or self-regulatory agencies necessary for
the execution, delivery and performance of the Transaction Documents and the
consummation of the transactions contemplated thereby in accordance with the
terms thereof shall have been obtained or made, including, without limitation,
in each case those required under the Securities Act, the Exchange Act,
applicable state securities or “Blue Sky” laws or applicable rules and
regulations of the Principal Market, or otherwise required by the SEC, the
Principal Market or any state securities regulators;

 

(m)          No statute, regulation, order, decree, writ, ruling or injunction
shall have been enacted, entered, promulgated, threatened or endorsed by any
federal, state, local or foreign court or governmental authority of competent
jurisdiction which prohibits the consummation of or which would materially
modify or delay any of the transactions contemplated by the Transaction
Documents;

 

(n)          No action, suit or proceeding before any federal, state, local or
foreign arbitrator or any court or governmental authority of competent
jurisdiction shall have been commenced or threatened, and no inquiry or
investigation by any federal, state, local or foreign governmental authority of
competent jurisdiction shall have been commenced or threatened, against the
Company, or any of the officers, directors or affiliates of the Company, seeking
to restrain, prevent or change the transactions contemplated by the Transaction
Documents, or seeking material damages in connection with such transactions;

 

(o)          No Person shall have commenced a proceeding against the Company
pursuant to or within the meaning of any Bankruptcy Law;

 

(p)          The Company, pursuant to or within the meaning of any Bankruptcy
Law, shall not have (i) commenced a voluntary case, (ii) consented to the entry
of an order for relief against it in an involuntary case, (iii) consented to the
appointment of a Custodian of it or for all or substantially all of its
property, or (iv) made a general assignment for the benefit of its creditors or
is generally unable to pay its debts as the same become due;

 

(q)          A court of competent jurisdiction shall not have entered an order
or decree under any Bankruptcy Law that (i) is for relief against the Company in
an involuntary case, (ii) appoints a Custodian of the Company or for all or
substantially all of its property, or (iii) orders the liquidation of the
Company or any Subsidiary; and

 

(r)          The issuance of the Purchase Shares shall not cause the Company to
exceed the Maximum Share Cap.

 

-19-

 

 

9.          INDEMNIFICATION.

 

In consideration of the Investor's execution and delivery of the Transaction
Documents and acquiring the Purchase Shares hereunder and in addition to all of
the Company's other obligations under the Transaction Documents, the Company
shall defend, protect, indemnify and hold harmless the Investor and all of its
affiliates, stockholders, officers, directors, employees and direct or indirect
investors and any of the foregoing Person's agents or other representatives
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the “Indemnified Liabilities”), incurred by
any Indemnitee as a result of, or arising out of, or relating to: (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(c) any cause of action, suit or claim brought or made against such Indemnitee
and arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (d) any violation of the Securities
Act, the Exchange Act, state securities or “Blue Sky” laws, or the rules and
regulations of the Principal Market in connection with the transactions
contemplated by the Transaction Documents by the Company or any of its
Subsidiaries, affiliates, officers, directors or employees, (e) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Registration Statement or any amendment
thereto or any omission or alleged omission to state therein, or in any document
incorporated by reference therein, a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (f) any untrue
statement or alleged untrue statement of a material fact contained, or
incorporated by reference, in the Prospectus, or any omission or alleged
omission to state therein, or in any document incorporated by reference therein,
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided, however, that (I) the indemnity contained in clause
(c) of this Section 9 shall not apply to any Indemnified Liabilities which
directly and primarily result from the fraud, gross negligence or willful
misconduct of an Indemnitee, (II) the indemnity contained in clauses (d), (e)
and (f) of this Section 9 shall not apply to any Indemnified Liabilities to the
extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of the Investor expressly for use in any Prospectus
Supplement (it being hereby acknowledged and agreed that the written information
set forth on Exhibit D attached hereto is the only written information furnished
to the Company by or on behalf of the Investor expressly for use in the Initial
Prospectus Supplement), if the Prospectus was timely made available by the
Company to the Investor pursuant to Section 5(l), (III) the indemnity contained
in clauses (d), (e) and (f) of this Section 9 shall not inure to the benefit of
the Investor to the extent such Indemnified Liabilities are based on a failure
of the Investor to deliver or to cause to be delivered the Prospectus made
available by the Company, if such Prospectus was timely made available by the
Company pursuant to Section 5(l), and if delivery of the Prospectus would have
cured the defect giving rise to such Indemnified Liabilities, and (IV) the
indemnity in this Section 9 shall not apply to amounts paid in settlement of any
claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld, conditioned or
delayed. To the extent that the foregoing undertaking by the Company may be
unenforceable for any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Payment under this indemnification shall be
made within thirty (30) days from the date Investor makes written request for
it. A certificate containing reasonable detail as to the amount of such
indemnification submitted to the Company by Investor shall be conclusive
evidence, absent manifest error, of the amount due from the Company to Investor.
If any action shall be brought against any Indemnitee in respect of which
indemnity may be sought pursuant to this Agreement, such Indemnitee shall
promptly notify the Company in writing, and the Company shall have the right to
assume the defense thereof with counsel of its own choosing reasonably
acceptable to the Indemnitee. Any Indemnitee shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnitee, except to the extent that (i) the employment thereof has been
specifically authorized by the Company in writing, (ii) the Company has failed
after a reasonable period of time to assume such defense and to employ counsel
or (iii) in such action there is, in the reasonable opinion of such separate
counsel, a material conflict on any material issue between the position of the
Company and the position of such Indemnitee, in which case the Company shall be
responsible for the reasonable fees and expenses of no more than one such
separate counsel.

 

-20-

 

 

10.         RESERVED.

 

11.         TERMINATION

 

This Agreement may be terminated only as follows:

 

(a)          If pursuant to or within the meaning of any Bankruptcy Law, the
Company commences a voluntary case or any Person commences a proceeding against
the Company, a Custodian is appointed for the Company or for all or
substantially all of its property, or the Company makes a general assignment for
the benefit of its creditors, this Agreement shall automatically terminate
without any liability or payment to the Company (except as set forth below)
without further action or notice by any Person.

 

(b)          In the event that the Closing shall not have occurred on or before
September 30, 2014, due to the failure to satisfy the conditions set forth in
Sections 7 and 8 above with respect to the Closing, either the Company or the
Investor shall have the option to terminate this Agreement at the close of
business on such date or thereafter without liability of any party to any other
party (except as set forth below); provided, however, that the right to
terminate this Agreement under this Section 11(b) shall not be available to any
party if such party is then in breach of any covenant or agreement contained in
this Agreement or any representation or warranty of such party contained in this
Agreement fails to be true and correct such that the conditions set forth in
Section 7(c) or Section 8(d), as applicable, could not then be satisfied. Any
termination of this Agreement pursuant to this Section 11(b) shall be effected
by written notice from the Company to the Investor, or the Investor to the
Company, as the case may be, setting forth the basis for the termination hereof.

 

The representations and warranties and covenants of the Company and the Investor
contained in Sections 3, 4, 5, and 6 hereof, the indemnification provisions set
forth in Section 9 hereof and the agreements and covenants set forth in Sections
10, 11 and 12, shall survive the Closing and any termination of this Agreement.
No termination of this Agreement shall be deemed to release the Company or the
Investor from any liability for intentional misrepresentation or willful breach
of any of the Transaction Documents.

 

12.         MISCELLANEOUS.

 

(a)          Governing Law; Jurisdiction; Jury Trial. The corporate laws of the
State of Delaware shall govern all issues concerning the relative rights of the
Company and its stockholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the State of Illinois,
County of Cook, for the adjudication of any dispute hereunder or under the other
Transaction Documents or in connection herewith or therewith, or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY
WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT
OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

-21-

 

 

(b)          Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature or
signature delivered by e-mail in a “.pdf” format data file shall be considered
due execution and shall be binding upon the signatory thereto with the same
force and effect as if the signature were an original signature.

 

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

 

(d)          Severability. 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 in
that jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.

 

(e)          Entire Agreement; Amendment. This Agreement supersedes all other
prior oral or written agreements between the Investor, the Company, their
affiliates and Persons acting on their behalf with respect to the subject matter
hereof, and this Agreement, the other Transaction Documents and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor the Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
The Company acknowledges and agrees that is has not relied on, in any manner
whatsoever, any representations or statements, written or oral, other than as
expressly set forth in the Transaction Documents. No provision of this Agreement
may be amended other than by a written instrument signed by both parties hereto.

 

(f)          Notices. Any notices, consents or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt when delivered
personally; (ii) upon receipt when sent by facsimile or email (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Business Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses for such
communications shall be:

 

-22-

 

 

If to the Company:

xG Technology, Inc.

240 S. Pineapple Avenue, Suite 701

Sarasota, Florida 34236

Telephone: (941) 953-9035

Facsimile:

E-mail:

Attention:

 

With a copy to (which shall not constitute notice or service of process):

Robinson Brog Leinwand Greene Genovese & Gluck, P.C.

875 Third Avenue

New York, NY 10022

Telephone: (212) 603-6391 Facsimile: (212) 956-2164 E-mail: ded@robinsonbrog.com
Attention: David E. Danovich, Esq.

 

If to the Investor:

Lincoln Park Capital Fund, LLC

440 North Wells, Suite 410

Chicago, IL 60654

Telephone: 312-822-9300 Facsimile: 312-822-9301 E-mail:
jscheinfeld@lpcfunds.com/jcope@lpcfunds.com Attention: Josh Scheinfeld/Jonathan
Cope

 

With a copy to (which shall not constitute notice or service of process):

Greenberg Traurig, LLP

The MetLife Building

200 Park Avenue

New York, NY 10166

Telephone: (212) 801-9200 Facsimile: (212) 801-6400 E-mail: marsicoa@gtlaw.com
Attention: Anthony J. Marsico, Esq.

 

If to the Transfer Agent:

Continental Stock Transfer & Trust

17 Battery Place, 8th Floor

New York, NY 10004

Telephone: (212) 845-3285 Facsimile: (212) 616-7608 Attention: Richard Viscovich

 

or at such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party three (3) Business Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine or email account containing the
time, date, and recipient facsimile number or email address, as applicable, and
an image of the first page of such transmission or (C) provided by a nationally
recognized overnight delivery service, shall be rebuttable evidence of personal
service, receipt by facsimile or receipt from a nationally recognized overnight
delivery service in accordance with clause (i), (ii) or (iii) above,
respectively.

 

-23-

 

 

(g)          Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
The Company shall not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Investor, including by merger
or consolidation. The Investor may not assign its rights or obligations under
this Agreement.

 

(h)          No Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.

 

(i)          Publicity. The Company shall afford the Investor and its counsel
with the opportunity to review and comment upon the form and substance of, and
shall give reasonable consideration to all such comments from the Investor or
its counsel on, any press release, SEC filing or any other public disclosure by
or on behalf of the Company relating to the Investor, its purchases hereunder or
any aspect of the Transaction Documents or the transactions contemplated
thereby, not less than 24 hours prior to the issuance, filing or public
disclosure thereof. The Investor must be provided with a final version of any
such press release, SEC filing or other public disclosure at least 24 hours
prior to any release, filing or use by the Company thereof. The Company agrees
and acknowledges that its failure to fully comply with this provision
constitutes a Material Adverse Effect.

 

(j)          Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

 

(k)          No Financial Advisor, Placement Agent, Broker or Finder. The
Company represents and warrants to the Investor that, except as disclosed in
Schedule 4(x), it has not engaged any financial advisor, placement agent, broker
or finder in connection with the transactions contemplated hereby. The Investor
represents and warrants to the Company that it has not engaged any financial
advisor, placement agent, broker or finder in connection with the transactions
contemplated hereby. The Company shall be responsible for the payment of any
fees or commissions, if any, of any financial advisor, placement agent, broker
or finder relating to or arising out of the transactions contemplated hereby.
The Company shall pay, and hold the Investor harmless against, any liability,
loss or expense (including, without limitation, attorneys' fees and out of
pocket expenses) arising in connection with any such claim.

 

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

 

-24-

 

 

(m)          Remedies, Other Obligations, Breaches and Injunctive Relief. The
Investor’s remedies provided in this Agreement, including, without limitation,
the Investor’s remedies provided in Section 9, shall be cumulative and in
addition to all other remedies available to the Investor under this Agreement,
at law or in equity (including a decree of specific performance and/or other
injunctive relief), no remedy of the Investor contained herein shall be deemed a
waiver of compliance with the provisions giving rise to such remedy and nothing
herein shall limit the Investor's right to pursue actual damages for any failure
by the Company to comply with the terms of this Agreement. The Company
acknowledges that a breach by it of its obligations hereunder will cause
irreparable harm to the Investor and that the remedy at law for any such breach
may be inadequate. The Company therefore agrees that, in the event of any such
breach or threatened breach, the Investor shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach, without the
necessity of showing economic loss and without any bond or other security being
required.

 

(n)          Enforcement Costs. If: (i) this Agreement is placed by the Investor
in the hands of an attorney for enforcement or is enforced by the Investor
through any legal proceeding; (ii) an attorney is retained to represent the
Investor in any bankruptcy, reorganization, receivership or other proceedings
affecting creditors' rights and involving a claim under this Agreement; or (iii)
an attorney is retained to represent the Investor in any other proceedings
whatsoever in connection with this Agreement, then the Company shall pay to the
Investor, as incurred by the Investor, all reasonable costs and expenses
including attorneys' fees incurred in connection therewith, in addition to all
other amounts due hereunder.

 

(o)          Waivers. No provision of this Agreement may be waived other than in
a written instrument signed by the party against whom enforcement of such waiver
is sought. No failure or delay in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

 

*        *        *         *         *

 

-25-

 

 

IN WITNESS WHEREOF, the Investor and the Company have caused this Agreement to
be duly executed as of the date first written above.

 

  THE COMPANY:       xG TECHNOLOGY, INC.       By:     Name:   Title:      
INVESTOR:       LINCOLN PARK CAPITAL FUND, LLC   BY: LINCOLN PARK CAPITAL, LLC  
BY: ROCKLEDGE CAPITAL CORPORATION       By:     Name: Josh Scheinfeld   Title:
President

 

-26-

 

 

SCHEDULES

 

Schedule 4(x) Agent Fees

 

EXHIBITS

 

Exhibit A Form of Company Counsel Opinion Exhibit B Form of Officer’s
Certificate Exhibit C Form of Secretary’s Certificate Exhibit D Information
About Investor Furnished to the Company

 

 

 

 

DISCLOSURE SCHEDULES

 

Schedule 4(x) – Agent Fees

 

None.

 

 

 

 

EXHIBIT A

 

FORM OF COMPANY COUNSEL OPINION

 

Capitalized terms used herein but not defined herein, have the meaning set forth
in the Purchase Agreement. Based on the foregoing, and subject to the
assumptions and qualifications set forth herein, we are of the opinion that:

 

1.          The Company is a corporation existing and in good standing under the
laws of the State of Delaware. The Company is qualified to do business as a
foreign corporation and is in good standing in the State of Florida.

 

2.          The Company has the corporate power to execute and deliver, and
perform its obligations under, the Purchase Agreement. The Company has the
corporate power to conduct its business as, to the best of our knowledge, it is
now conducted, and to own and use the properties owned and used by it.

 

3.          The execution, delivery and performance by the Company of the
Purchase Agreement have been duly authorized by all necessary corporate action
on the part of the Company. The execution and delivery of the Purchase Agreement
by the Company, the performance of the obligations of the Company thereunder and
the consummation by it of the transactions contemplated therein have been duly
authorized and approved by the Company's Board of Directors and no further
consent, approval or authorization of the Company, its Board of Directors or its
stockholders is required. The Purchase Agreement has been duly executed and
delivered by the Company and is the valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting creditor’s rights and remedies.

 

4.          The execution, delivery and performance by the Company of the
Purchase Agreement, the consummation by the Company of the transactions
contemplated thereby including the offering, sale and issuance of the Purchase
Shares in accordance with the terms and conditions of the Purchase Agreement,
and fulfillment and compliance with terms of the Purchase Agreement, does not
and shall not: (i) conflict with, constitute a breach of or default (or an event
which, with the giving of notice or lapse of time or both, constitutes or could
constitute a breach or a default), under (a) the Certificate of Incorporation or
the Bylaws of the Company, (b) any material agreement, note, lease, mortgage,
deed or other material instrument to which to our knowledge the Company is a
party or by which the Company or any of its assets are bound (“Material
Agreements”), (ii) result in any violation of any statute, law, rule or
regulation applicable to the Company, or (iii) to our knowledge, violate any
order, writ, injunction or decree applicable to the Company or any of its
subsidiaries.

 

5.          The issuance of the Purchase Shares pursuant to the terms and
conditions of the Purchase Agreement has been duly authorized by all necessary
corporate action on the part of the Company. When issued and paid for in
accordance with the Purchase Agreement, the Purchase Shares shall be validly
issued, fully paid and non-assessable, to our knowledge, free of all taxes,
liens, charges, restrictions, rights of first refusal and preemptive rights.

 

6.          As of the date hereof, the authorized capital stock of the Company
consists of __,___,___ shares of common stock, par value $0.00001 per share, of
which to our knowledge __________ shares are issued and outstanding.

 

 

 

 

7.          Other than that which has been obtained and completed prior to the
date hereof, no authorization, approval, consent, filing or other order of any
federal or state governmental body, regulatory agency, or stock exchange or
market, or any court, or, to our knowledge, any third party is required to be
obtained by the Company to enter into and perform its obligations under the
Purchase Agreement or for the Company to issue and sell the Purchase Shares as
contemplated by the Purchase Agreement.

 

9.   The Common Stock is registered pursuant to Section 12(b) of the Exchange
Act. To our knowledge, since one year preceding the date of the Purchase
Agreement, the Company has been in compliance with the reporting requirements of
the Exchange Act applicable to it. To our knowledge, since one year preceding
the date of the Purchase Agreement, the Company has not received any written
notice from any Person stating that the Company has not been in compliance with
any of the rules and regulations (including the requirements for continued
listing) of the Principal Market.

 

10.   Any required filing of the Prospectus Supplement pursuant to Rule 424(b)
under the Securities Act has been made in the manner and within the time period
required by such Rule.

 

11.   The statements in the Base Prospectus under the captions “Description of
Capital Stock”, “Description of Warrants”, “Description of Debt Securities”,
“Description of Convertible Debt Securities”, “Description of Global
Securities”, “Description of Rights”, “Description of Units”, “Legal Matters”,
and the statements in the Registration Statement under Part II, Item 15, insofar
as such statements contain descriptions of laws, rules or regulations, and
insofar as they describe the terms of agreements or the Company’s Certificate of
Incorporation or Bylaws, are correct in all material respects.

 

12.   The Company is not, and after giving effect to the issuance of the
Purchase Shares and the application of the proceeds as described in the Base
Prospectus and Prospectus Supplement, will not be, an “investment company,” as
that term is defined in the Investment Company Act of 1940, as amended.

 

13.   Except as described in the Registration Statement, the Base Prospectus and
the Prospectus Supplement, none of the Material Agreements grants to any person
the right to require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company owned or to be
owned by such person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or in any
securities being registered pursuant to any other registration statement filed
by the Company under the Securities Act.

 

[THE FOLLOWING MAY BE MADE IN A SEPARATE NEGATIVE ASSURANCES LETTER]

 

As counsel to the Company, we reviewed the Registration Statement, the Base
Prospectus and the Prospectus Supplement, and participated in discussions with
your representatives and those of the Company, at which the contents of the
Registration Statement, the Base Prospectus and the Prospectus Supplement were
discussed. Between the date of the Purchase Agreement and the time of the
delivery of this letter, we participated in further discussions with your
representatives and those of the Company, and we reviewed certain certificates
of officers of the Company and public officials delivered to you today.

 

 

 

 

The purpose of our engagement was not to establish or to confirm factual matters
set forth in the Registration Statement, the Base Prospectus and the Prospectus
Supplement, and we have not undertaken any obligation to verify independently
any of the factual matters set forth in the Registration Statement, the Base
Prospectus and the Prospectus Supplement. Moreover, many of the determinations
required to be made in the preparation of the Registration Statement, the Base
Prospectus and the Prospectus Supplement involve matters of a non-legal nature.

 

Subject to the foregoing, we confirm to you that, on the basis of the
information that we gained in the course of performing the services referred to
above, nothing came to our attention that caused us to believe that: (a) the
Registration Statement, as of its most recent effective date, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
(b) the Base Prospectus, as of its date, contained an untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or (c) the Prospectus Supplement, as of its date and as of the
date and time of delivery of this letter, contained or contains any untrue
statement of a material fact or omitted or omits to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that we do not assume
any responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement, the Base Prospectus or the Prospectus
Supplement, and we do not express any belief as to the financial statements and
related notes, financial statement schedules or financial statistics or other
financial or accounting data and information contained in or omitted from the
Registration Statement, the Base Prospectus or the Prospectus Supplement.

 

We inform you that the Registration Statement became effective under the
Securities Act on August 21, 2014 and that no stop order suspending the
effectiveness of the Registration Statement has been issued under the Securities
Act.

 

We are not representing the Company in any pending litigation in which it is a
named defendant that challenges the validity or enforceability of, or seeks to
enjoin the performance of, the Purchase Agreement.

 

Further, we confirm to you that the Registration Statement, as of its effective
date, and the Prospectus Supplement, as of its date, appeared to us on their
face to respond in all material respects to the requirements of Form S-3, except
that the foregoing statement does not address any requirement relating to
financial statements, notes or schedules and financial and accounting data or
information contained in or omitted from the Registration Statement or the
Prospectus Supplement.

 

 

 

 

EXHIBIT B

 

FORM OF OFFICER’S CERTIFICATE

 

This Officer’s Certificate (“Certificate”) is being delivered pursuant to
Section 8(d) of that certain Purchase Agreement dated as of September 22, 2014,
(“Purchase Agreement”), by and between xG TECHNOLOGY, INC., a Delaware
corporation (the “Company”), and LINCOLN PARK CAPITAL FUND, LLC (the
“Investor”). Terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Purchase Agreement.

 

The undersigned, ___________, ______________ of the Company, hereby certifies as
follows:

 

1.          I am the _____________ of the Company and make the statements
contained in this Certificate;

 

2.          The representations and warranties of the Company are true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
4 of the Purchase Agreement, in which case, such representations and warranties
are true and correct without further qualification) as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date, in which case such
representations and warranties are true and correct as of such date);

 

3.          The Company has performed, satisfied and complied in all material
respects with covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at or prior
to the Closing Date.

 

4.         The Company has not taken any steps, and does not currently expect to
take any steps, to seek protection pursuant to any Bankruptcy Law nor does the
Company or any of its Subsidiaries have any knowledge or reason to believe that
its creditors intend to initiate involuntary bankruptcy or insolvency
proceedings. The Company is financially solvent and is generally able to pay its
debts as they become due.

 

IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
___________.

 

            Name:         Title:  

 

The undersigned as Secretary of xG TECHNOLOGY, INC., a Delaware corporation,
hereby certifies that ___________ is the duly elected, appointed, qualified and
acting ________ of _________ and that the signature appearing above is his
genuine signature.

 

          Secretary  

 

 

 

 

EXHIBIT C

 

FORM OF SECRETARY’S CERTIFICATE

 

This Secretary’s Certificate (“Certificate”) is being delivered pursuant to
Section 8(i) of that certain Purchase Agreement dated as of September 22, 2014
(“Purchase Agreement”), by and between xG TECHNOLOGY, INC., a Delaware
corporation (the “Company”) and LINCOLN PARK CAPITAL FUND, LLC (the “Investor”),
pursuant to which the Company may sell to the Investor up to Five Million
Dollars ($1,000,000) of the Company's Common Stock, $0.00001 par value per share
(the "Common Stock"). Terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Purchase Agreement.

 

The undersigned, ____________, Secretary of the Company, hereby certifies as
follows:

 

1.          I am the Secretary of the Company and make the statements contained
in this Secretary’s Certificate.

 

2.          Attached hereto as Exhibit A and Exhibit B are true, correct and
complete copies of the Company’s bylaws (“Bylaws”) and Certificate of
Incorporation (“Charter”), in each case, as amended through the date hereof, and
no action has been taken by the Company, its directors, officers or
stockholders, in contemplation of the filing of any further amendment relating
to or affecting the Bylaws or Charter.

 

3.          Attached hereto as Exhibit C are true, correct and complete copies
of the resolutions duly adopted by the Board of Directors of the Company on
_____________, at which a quorum was present and acting throughout. Such
resolutions have not been amended, modified or rescinded and remain in full
force and effect and such resolutions are the only resolutions adopted by the
Company’s Board of Directors, or any committee thereof, or the stockholders of
the Company relating to or affecting (i) the entering into and performance of
the Purchase Agreement, or the issuance, offering and sale of the Purchase
Shares and (ii) and the performance of the Company of its obligation under the
Transaction Documents as contemplated therein.

 

4.          As of the date hereof, the authorized, issued and reserved capital
stock of the Company is as set forth on Exhibit D hereto.

 

IN WITNESS WHEREOF, I have hereunder signed my name on this ___ day of
____________.

 

        Secretary  

 

The undersigned as ___________ of xG TECHNOLOGY, INC., a Delaware corporation,
hereby certifies that ____________ is the duly elected, appointed, qualified and
acting Secretary of _________, and that the signature appearing above is his
genuine signature.

 

     

 

 

 

 

EXHIBIT D

 

Information About The Investor Furnished To The Company By The Investor

Expressly For Use In Connection With The Initial Prospectus Supplement

 

Information With Respect to Lincoln Park Capital

 

As of the date of the Purchase Agreement, Lincoln Park Capital Fund, LLC,
beneficially owned 675,000 shares of our common stock. Josh Scheinfeld and
Jonathan Cope, the Managing Members of Lincoln Park Capital, LLC, the manager of
Lincoln Park Capital Fund, LLC, are deemed to be beneficial owners of all of the
shares of common stock owned by Lincoln Park Capital Fund, LLC. Messrs. Cope and
Scheinfeld have shared voting and investment power over the shares being offered
under the prospectus supplement filed with the SEC in connection with the
transactions contemplated under the Purchase Agreement. Lincoln Park Capital,
LLC is not a licensed broker dealer or an affiliate of a licensed broker dealer.