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xG Technology Inc. (XGT)

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Tuesday 08 February, 2011

xG Technology Inc.

Shareholder loans refinancing

RNS Number : 8349A
xG Technology Inc.
08 February 2011

February 8, 2011


Shareholder loans refinancing


xG Technology, Inc. (LSE-AIM: XGT, "xG" or the "Company"), the developer of a broad portfolio of wired and wireless communications intellectual property, including cognitive radio networks, announces that MB Technology Holdings, LLC ("MB Technology" or "MBTH", a company in which Richard Mooers, Executive Chairman, and Roger Branton, CFO, of the Company indirectly have family interests, and which is the holder of 39.72% of the shares of $0.01 each in the Common Stock of the Company, "Shares") has agreed on terms under which shareholder loans previously advanced by MBTH to the Company (for $1.5 million, as announced on July 8, 2010, and up to $3.5 million, as announced on October 8, 2010, together the "Original Shareholder Loans") will be refinanced by MB Technology.


As announced by MB Technology on December 2, 2010, MB Technology was contemplating investment in xG Shares of a total of up to $10 million pursuant to the additional shareholder loan facility announced by the Company on October 8, 2010. The intention of MB Technology was that any such investment would be made in such a way so as not to trigger the mandatory take-over provisions in the Company's Amended and Restated Certificate of Incorporation. MB Technology further announced that if it were "required to make a mandatory take-over offer to the holders of all of the xG Shares not held by MBTH then the offer price will be less than the latest closing mid-price of $0.16 per xG share since MBTH will have to offer to purchase more shares than under its contemplated investment in xG". Subsequently, MB Technology has sought to complete its contemplated investment without triggering such mandatory takeover provisions by obtaining a waiver by consent of shareholders. However, such waiver has not yet been obtained and MB Technology has informed the Company that it will not proceed with its investment in the Company on the terms and at the price originally contemplated.


Notwithstanding this, MB Technology further informed the Company that it still wishes to invest new capital in the Company and so has agreed to refinance the Original Shareholder Loans.


Under the refinancing agreement made between MB Technology and the Company, MB Technology will make available to the Company at its sole and absolute discretion an uncommitted convertible loan facility of up to $10 million, of which it is intended that approximately $5.2 million will be used in repaying the Original Shareholder Loans, together with accrued interest and fees. The balance will be used to assist the Company with its working capital, to fund additional planned trials of its xMax cognitive radio network system and to continue development along the Company's Technology Roadmap, including adding mobile data capabilities on top of mobile VoIP and text messaging functionality.


The terms on which MB Technology has agreed to refinance the Original Shareholder Loans are set out below:


Facility Amount:

Up to $10 million (or such increased amount as MBTH might agree), provided that if, in connection with its Conversions Rights (see below), MBTH is required to make a take-over offer to the holders of all of the xG Shares not held by it then the Facility Amount shall be reduced by such amount (if any) as it may be required to pay for such Shares pursuant to such take-over offer



18 months from the date of the loan documentation, giving a final maturity on August 7, 2012, or earlier demand



8 per cent. per annum, compounded monthly, payable at maturity (subject to a minimum of 12 months' interest)



Repayable on final maturity or earlier demand, if not converted


Conversion right:

Convertible, at MB Technology's option, into new Shares at any time prior to final maturity:


(i)   at $0.25 per new Share (representing a premium of approximately 47% based on the latest closing mid-price for the Shares), provided that shareholders not affiliated or acting in concert with MBTH who together hold Shares carrying the requisite majority of voting rights consent to the waiver of the mandatory take-over provisions in the Company's Amended and Restated Certificate of Incorporation within the next fifteen working days or, failing which


(ii)  at $0.10 per new Share (representing a discount of approximately 41% based on the latest closing mid-price for the Shares), subject to MB Technology making a take-over offer at $0.10 per Share to the holders of all of the xG Shares not held by it and to the extent that for the time being pre-emption rights are disapplied in respect of the allotment of such new Shares



The Company will grant to MB Technology options to subscribe for ten million new Shares at an exercise price of $0.50 per Share and an additional ten million new Shares at an exercise price of $1.00 per Share, subject to such grant and exercise of such options not triggering the mandatory take-over provisions in the Company's Amended and Restated Certificate of Incorporation and to the extent that for the time being pre-emption rights are disapplied in respect of such grant and exercise. The options are exercisable for a five year period following grant



A facility fee of 2 per cent. to be rolled up to maturity



The loan shall be secured against all assets of the Company


Given MB Technology's relationship with the Company, the new loan is considered to be a related party transaction pursuant to Rule 13 of the AIM Rules for Companies. The Company's directors (with the exception of Richard Mooers and Roger Branton), having consulted with the Company's nominated adviser, Allenby Capital Limited, consider that the terms of the transaction are fair and reasonable insofar as the Company's shareholders are concerned.




xG Technology, Inc.

John Coleman, Chief Executive Officer

+1 212 651 4219

Roger Branton, Chief Financial Officer

+1 212 651 4219

James Woodyatt, Investor Relations

+1 954 572 0395

Allenby Capital Limited (Nominated Adviser & Broker)

Brian Stockbridge

+44 (0) 20 3328 5656

Alex Price

+44 (0) 20 3328 5656


Fusion PR (Media and Analyst Relations)

Heather Lukens

+1 212 651 4227




xG Technology is a leading developer of innovative and disruptive communications technologies for both wired and wireless networks. Its extensive patented intellectual property portfolio covers a broad range of applications including cognitive radio networks. The Company has commercialized some of these technologies to create xMax, the world's first carrier-class cognitive radio network.


xMax's standards-based IP architecture minimizes network deployment, management and operational costs while simplifying the delivery of profitable fixed and mobile services. Using field-proven cognitive radio technology, xMax enables the delivery of these revenue-generating mobile services in both licensed and unlicensed bands.  In its initial commercial offering, the xMax cognitive radio system enables carriers and other operators to profitably monetize free unlicensed spectrum in the 900MHz ISM band.


xMax also offers unique capabilities to enterprises, utilities, government agencies and others who require advanced wireless communications to support business operations and mission critical applications.


xG Technology offers turnkey xMax network solutions including base stations, mobile switching centers, network management systems, deployment tools, handsets and customer support.


To demonstrate its products and technologies, xG has deployed a 32 square mile xMax network in Fort Lauderdale, Florida to showcase its cognitive radio, mobile VoIP, and dynamic interference mitigation capabilities. Based in Florida, United States, xG Technology has over 50 US and more than 100 international patents and pending patent applications. For more information, please visit

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